Chongqing Changan Automobile
Company Limited
Semi-annual report 20091
I. Important notes, Explaination and Catalogue
i. Important Notes
The Board of Directors& Supervisors of Chongqing Changan Automobile Co., Ltd. (hereinafter
referred to as “the Company”) , the directors, supervisors and senior management guarantee that the
information contained in the report is free of false records, misguiding statements or significant
omissions, and assume individual and joint liabilities for the truthfulness, accuracy and integrity of the
report.
No director, supervisor or senior management have raised any disagreement with regard to the
truthfulness, accuracy and completeness of the semi-annual report..
Directors Mr. Deng Zhiyou were absent due to buiseness，Mr. Deng Zhiyou entrust Director Mr. Wang
Xiaoxiang to participate the meeting and take a vote.
The financial report in this reporting period is unaudited.
Chairman Mr. Xu Liuping, General Manager Mr. Zhang Baolin, Chief Accountant Mr. Cui Yunjiang,
and the Chief of Accountant department, Mr. Ni Erke, herein guarantee: the truthfulness and
completeness of the financial statements of this semi-annual report.
ⅱContents
I Important notes and contents 1
II General introduction of the Company 2
III Change in shares and information about shareholders 5
IV Information on directors, supervisors, senior executives and staffs 8
V Report by Board of Directors 10
VI Important Issues 13
VII Financial Statements 20
VIII Document for future reference 822
II.General Introduction of the Company
1. The Company’s legal Chinese name: 重庆长安汽车股份有限公司
The Company’s legal English name: Chongqing Changan Automobile Company
Limited
2. Place of listing: Shenzhen Stock Exchange
Abbreviated name of the stock: Changan Automobile Changan B
Stock Code: 000625 200625
3. Registered address: No. 260, Jian Xin East Road, J iang Bei District, Chongqing
Post code: 400023
Office Address: No. 260, Jian Xin East Road, Jiang Bei Distr ict, Chongqing
Post code: 400023
Internet Websi te of the Company: http://www.changan.com.cn
Email Address of the Company: cazqc@changan.com.cn
4. Legal representative of the Company: Mr. Xu Liuping
5. Secretaries of the Board: Mr. Cui Yunjiang, Ms. Li Jun
Address: No. 260, Jian Xin East Road, Jiang Bei District, Chongqing
Telephone: (023) 67594009
Fax: (023) 67866055
Email address: cazqc@changan.com.cn
6. Publications for information disclosure of the Company: China Securities,
Securities Times and Hong Kong Commercial Daily
Website for information disclosure of the Company: http://www.cninfo.com.cn
Filing Location of Semiannual Report: Office of the Board of Directors
7. Key accounting data and financial indicators
Unit：（RMB）Yuan
This reporting
period end as on
30 June 2009
Last reporting
period end as on
31 December
2008
Increase/Decrease
(%)
Total assets 18,552,799,327 15,367,824,845 20.72%
Owner’s equity(or shareholder’s equity) 8,071,964,540 7,596,524,813 6.26%3
share capital 2,334,022,848 2,334,022,848 0.00%
Net assets per share 3.46 3.25 6.46%
Reporting period
(January-June)
Corresponding
period of previous
year
Increase/Decrease
(%)
operation total income 11,282,706,557 7,879,649,185 43.19%
Operation profit 499,571,315 445,547,520 12.13%
Gross profit 498,132,565 442,569,289 12.55%
Net profit of shareholder 532,801,780 450,187,557 18.35%
Net profit except non-recurring loss and
profit 534,211,783 453,916,815 17.69%
Basic earnings per share 0.23 0.19 21.05%
Diluted earning per share 0.23 0.19 21.05%
Return rate on net assets 6.60% 5.93% 0.67%
Net cash flow from operating activities 1,303,517,504 -109,701,368 1288.24%
Net cash flow from operating activities
per share 0.56 -0.05 1288.24%
Note: deduction from non-recurring profit and loss project and cash
Non-recurring profit and loss project Amount
Profit and loss arising from the disposal of non-current assets -839,063
Government grants 2,041,200
Donation expenditure on public welfare 859,303
The other -2,640,886
Non-recurring profit and loss effect on income tax -201,271
Net effect on the non-recurring profit and loss attributable to
minority shareholders -629,286
total -1,410,003
8. Net asset profit rate and profit index per share
Net asset profit rate Profit per share (yuan per share)
Profit in the reporting period Apportion Average Basic profit per
share
Diluted profit
per share
Net profit attributed to listed
company shareholders 6.60% 6.78% 0.23 0.23
Net profit attributed to listed
company shareholder except
non-recurring loss and profit
6.62% 6.79% 0.23 0.23
9. Reconciliation of the net prof its presented under the PRC accounting standards
and International Financial Reporting Standards
Unit：（RMB）Yuan
Account report difference adjustment chart Jun.30,2009 Jan.—Jun., 2009
net assest net profit
Account report according to the enterprise accounting rule
and system under the P.R.C. 8,071,964,540 532,801,780
Adjustment in accordance with international accounting
rules4
1. Corporation income tax reduction on the basis of
purchasing domestic equipments -92,268,223 5,119,725
2. Payment in cash price to shareholders of A share -71,284,065
Workout accountant report according to the international
finance repot rules 7,908,412,252 537,921,5055
Ⅲ. Change in shareholdings and information about main shareholders
ⅰChange in shareholdings
Balance before
current change
Addition and deduction（+，-） during
change
Balance after current
change
Quantity Ratio
Addi
tiona
l
issu
ed
Bo
nus
sha
re
Transf
erred
from
accum
ulated
fund
other subtotal quantity ratio
Ⅰ.Non-circulated
shares 946,403,112 40.55% -116,698,747 -116,698,747 829,704,365 35.55%
1、State-owned
shares
2、State-owned
legal person shares 946,386,346 40.55% -116,701,142 -116,701,142 829,685,204 35.55%
3、Other domestic
holding shares
including:
domestic non-state
legal person shares
Domestic natural
person shares
4、Foreign-hold
shares
including:
foreign legal
person shares
foreign natural
person shares
5、share of senior
management 16,766 0.00% 2,395 2,395 19,161 0.00%
Ⅱ.Circulated
shares 1,387,619,736 59.45% 111,241,314 111,241,314 1,498,861,050 64.22%
1、Domestic listed
RMB shares 782,819,736 33.54% 116,698,747 116,698,747 899,518,483 38.54%
2、Domestic listed
foreign shares 604,800,000 25.91% -5,457,433 -5,457,433 599,342,567 25.68%
3、Oversea listed
foreign shares
4、Others
Ⅲ.Stock share(B
share) 5,457,433 5,457,433 5,457,433 0.23%
IV.Total shares 2,334,022,848 100.00% 2,334,022,848 100.00%
Note
（1）During the reporting period, the Company’s non-circulated shares decreased and the
circulated shares increased because non-circulated shares are released from
on-circulation.
（2）According to the second temporary sharehold meeting hold on 3,Mar,2009 agreed
proposal of re-purchase some inner listing foreign capital share(B share), by the end of
30,June,2009, Company accumulative re-purchase B share is 5,457,433 share, to occupy6
the total share percentage is 0.2338％, at present it is not transact the re-purchase share
cancel procedure due to the re-purchase proposal is not finished.
ⅱ. The information on top 10 shareholders
Unit: share
Total shareholders
number
Persons in total 255,492, among of which A shareholder is 217,497, B
shareholder is 37,995.
The top ten shareholders
Name of shareholders Nature of
Shareholders
Ratio of total
share
Total number of
shares
Total number of
non-circulated
shares
Pledged/ Frozen
shares number
China South Automobile
Co., Ltd
State-owned
legal person 45.55% 1,063,087,489 829,685,204 0
BONJOUR CHINA FUND
2
Foreign legal
person 1.23% 28,772,296 0 0
HOLY TIME GROUP
LIMITED
Foreign legal
person 0.44% 10,300,000 0 0
MANULIFE GLOBAL
FUND
Foreign legal
person 0.40% 9,309,933 0 0
ICBC-Nuoan Appraciation
stock securities fund
Domestic
non-state
legal person
0.34% 8,000,000 0 0
GUOTAI JUNAN
SECURITIES(HONGKON
G) LIMITED
Foreign legal
person 0.31% 7,330,413 0 0
ICBC-Rongtong Shenzhen
securities 100 index fund
Domestic
non-state
legal pe
0.30% 7,115,615 0 0
JPMBLSA RE FTIF
TEMPLETON CHINA
FUND GTI 5497
Foreign legal
person 0.26% 5,977,900 0 0
TEMPLETON DRAGON
FUND,INC.
Foreign legal
person 0.23% 5,435,602 0 0
Naito Securities Co.,
Ltd.
Foreign legal
person 0.22% 5,234,455 0 0
The top 10 holders of circulated shares
Name of shareholders Total number of circulated shares Share type
China South Automobile Co., Ltd 233,402,285 RMB ordinary share
BONJOUR CHINA FUND 2 28,772,296 Foreign capital stock listed
within China
HOLY TIME GROUP LIMITED 10,300,000 Foreign capital stock listed
within China
MANULIFE GLOBAL FUND 9,309,933 Foreign capital stock listed
within China
ICBC-Nuoan Appraciation stock securities
fund 8,000,000 RMB ordinary share
GUOTAI JUNAN
SECURITIES(HONGKONG) LIMITED 7,330,413 Foreign capital stock listed
within China
ICBC-Rongtong Shenzhen securities 100
index fund 7,115,615 ordinary share
JPMBLSA RE FTIF TEMPLETON CHINA
FUND GTI 5497 5,977,900 Foreign capital stock listed
within China
TEMPLETON DRAGON FUND,INC. 5,435,602 Foreign capital stock listed
within China
Naito Securities Co., Ltd. 5,234,455 Foreign capital stock listed
within China
Related partner
relationship of the ten
largest shareholders and
their consistant act
Among the top ten shareholders, the state-owned legal person shareholder-China South
Industries Automobile Co., Ltd. has no associated relationship with the other
shareholders in the table above, and nor is the party who agrees to act alike as stipulated
in Administrative Measures on Information Disclosure Concerning Changes in7
Shareholdings of Listed Companies; the Company does not know whether there is
associated relationship among the other shareholders, and nor knows whether they are
the parties who agree to act alike as stipulated in Administrative Measures on
Information Disclosure Concerning Changes in Shareholdings of Listed Companies.
ⅲ. The top 10 holders of non-circulated shares and condition of limited sale
unit: Share
N
o.
Name of
shareholder
with the
condition of
limited sale
The number of
shares with the
condition of
limited sale
Available time for
listing and
transaction
The number of
the newly
added stock
available for
listing an
conditions of limited sale
May 26,2008 116,701,143
May 11,2009 116,701,142
1
China
South
Automobile
Co., Ltd
1,063,087,489
May 11,2010 829,685,204
The non-circulating shares should
not be listed or transferred within
at least 24 months from the date of
having the right of listing; after
the above mentioned 24 months,
its shareholders can sell the share
through listing in Stock exchange.
The number of share for sale
should not be more than 5% of the
total within 12 months and not
more than 10% of the total within
24 months.
ⅳ. Change of controlling shareholder and actual controllers.
During the report period, there’s no change in controlling shareholder and actual
controllers.
The other item: on 5th ,July,2009, Company received the notice from control
shareholder China South Motor Co.ltd: through approved by State Administration
for Industrry and Commmerce of the P.R.c, the name of ”China South Motor
Co.LTD” changed into “China Changan Auto.CO.LTD”, after change the name, the
character of company,owenership, control share percentage and control relationship
never been changed.8
Ⅳ Information on Directors, Supervisors and Senior Executives
ⅰDuring the report period, there’s no change in shareholding for directors, supervisors and senior
executives.
ⅱ.In the report period, there are new employment or dismiss in directors, supervisors and senior
executives.
（一）Through a vote-taking and common agreement on the 23rd meeting of the
fourth-session Board of Director’s on January 6th 2009, pass the proposal of following
directors, supervisors and senior executives.
1、The proposal of change directors
According to the opinion of big shareholder of company, Mr Yin Jiaxue was no
longer the director due to the work arrangement , elect Mr.Zhu Huarong as the director.
2、The proposal of elect chairman
According to the opinion of big shareholder of Company, Mr Mr Yin Jiaxu was no
longer the director and chairman due to the work arrangement, elect Mr.Xu Liuping as
the chairman
3、The proposal of senior executives
Mr.Wang Chongsheng, Mr.Zou Wenchao,Mr.Majun and Mr.Wu Xuesong were
appointed as the senior vice general manager of company,Mr.Zhang Zhao was no longer
the vice general manger.
（ 二） Through a vote-take and common agreement on the 1st temporary
shareholder conference, elect Mr.Zhu Huarong as the director of Company.
（三）General election of directors ,supervisors
1、General election of directors of board
The term of member of forth directors of board at the expiration,
（ 2006.05-2009.05） according to the nomination of big shareholder of Company,
throught the agreement of 25th conference of fourth session Board of Director on
23,Apr.2009,choose Mr.Xu Liuping,Mr.Deng Zhiyou, Mr.Zhao Luchuan,Mr.Wang
Xiaoxiang,Mr.Zhao Baolin, Mr.Cui Yunjiang, Mr.Wang Chongsheng,Mr.Ma Jun, Mr.Zou
Wenchao, Mr.Zhu Huarong as the directors candidate of fifths session Board of Director;
while, Board of Director nominated Mr.Ouyang Minggao, Mr.Dong Yang, Mr.Chen9
Chong, Mr.Wang Zhixiong, Mr.Peng Shaobing as the independent directors candidate of
fifths session Board of Directors
2、General election of board of supervisors
The fourth session supervisors of Company is at the expiration（2006.05-2009.05）,
according to the big shareholder nominated, through the agreement of 25th conference
of fourth session board of supervisors on 23,Apr.2009, choose Mr. Liu Zhiyan,
Mr.Caiyong, Mr.Fu Liping and Ms.Zhang Jingjing as the the directors candidate of fifths
session supervisors; According to the recommend of employees representative
conference, the employee supervisors of fifth session board of supervisors are: Mr.Shen
Mingquan,Mr.Hua Zhanbiao and Ms.Wang Lijun.
All above proposal of fifth session BOD , board of supervisors delivered and
approved by 2008 year shareholder meeting on 15,May,2009.
（四）The following proposal has been approved on the fifth session BOD on
19,May,2009
1、Concerning the proposal of chairman of fifth session BOD
According the recommend opinion of big shareholder , BOD choose Mr.Xu Liuping
as the chairman of fifth session BOD
2、Concerning proposal of appointed senior manager and secretary of BOD
Through Chairman nomination, BOD appointed Mr.Zhang Baolin as the General
Manger of Company.
Through General manger nomination, BOD appointed Mr.Wang Chongsheng,Mr.Cui
Yunjiang, Mr. Zou Wenchao, Mr.Ma Jun,Mr.Ying Zhanwang, Mr.Zhu Huarong, Mr, Hang
Zhongqiang, Mr.Ren Qiang, Mr.Song Jia, Mr.Luo Minggang, Mr.Wu Xuesong as the
Vice General manger.
Due to the demands of business, BOD appointed Mr.Cui Yunjiang and Ms. Li Jun as
the secretary of BOD.
（五）Through agreement of first meeting of fifth seesion of board of supervisors
on 19,May,2009, Mr.Liu Zhiyai was appointed as the chairman of supervisors.10
Ⅴ The Report from Board of Directors
ⅠThe operation of the Company during the reporting period
㈠The main business of the company
The Company is mainly engaged in the development, manufacturing and sales of
passenger cars and commercial cars while manufacturing and sales a lot of kind of
engines. During the reporting period, a series of new cars put into market to meet the
different demands by Changan an JV company, including Volvos S80 , New Fesita,
1.6Litre Mazada 3, Changan Yue Xiang ,1.6 Litre Zhi Xiang, 1.8Litre SX4 Passenger
Car. In the future, Company will engage in the development of the small displacement
produce which more safety, save energy, environment protection
㈡The operation of the Company during the reporting period
In the first half year of 2009, facing the continuously influence of global finance
crisis , leading by the business , fully use the policy and chance of State expands inner
consume demands and<>,
change the risk into chance, economic scale and business quality significantly increase.
In the first half year, Company sales cars 660,219 unit breaking down sales record,
comparing with last same period increasing 34.80%, higher than automobile industry
increasing rate17.69%( 17.11% higher), sales volume is continuously No.4 of China
automobile industry, in China market, Company gained the 11.13% market share,
increasing 1.36% comparing with last same period.(data from <> of CAIA)
The reason of increasing sales volume is because of the chance of industry policy,
industry increase and Company make great efforts of products optimize, structure
adjustment and strengthen sales 。
ⅡCompany’s operation harvest and finace status during the reporting period
㈠Chart of the industry or main products that account for over 10%
Unit: (RMB) Yuan
The Line of Main Business
Industry/Product Revenue Operation Cost
Gross Margin
Ratio（ %）11
sum Increase/
Decrease
than last
year
sum Increase/
Decrease
than last
year
precen
tage
Increase/
Decrease
than last
year
Automobile
Manufacture 11,282,706,557 43.19% 9,003,091,851 37.34% 20.20% increase
3.4%
The Line of Main Business
complete
vehicle 10,880,132,187 46.45% 8,693,844,062 39.04% 20.09% increase
4.26%
other 402,574,370 -10.60% 309,247,789 2.24% 23.18% Decrease
9.65%
㈡Notes for the significant change in profit components, main business or its structure and
profit in the main business during the report period
In the first half year, profit structural has been great change. Local brand
passenger car realized the profit 23,000 ten thousand Yuan due to the continuously cost
control and produce structural optimize, it occupied the whole profit is 43%.
㈢The share holding corporation whose investment income reach over 10%
(including 10%) of the Company’s net profit
Unit: RMB Ten Thousand Yuan
Corporation name Main product Revenue Net profit
Changan Ford Mazda
Corporation
Mondeo, Focus, New fiesta ,Mazda 3, Mazda
2, SMAX and Volvo S40 and S80 sedan 1,638,079 62,550
㈣Operation Result and Financial Analysis
Due to the expansion the produce and sale, by the end of reporting period, the total
asset of Company is 185.53 hundred million, compareing with beginning of this year
increasing 20.72%,. Total liability 103.64 hundred million, compareing with beginning
of this year increasing 35.32%, liability rate is 55.86%, it is in the reasonable status.
Currency capital is 15.39%, higher 4.82% than the beginning of this year, receiveable
note receivable is 22.53%, higher 9.94% than the beginning of this year, stock is 6.75%,
decreased4.07% than the beginning of this year, fixed asset is 17.79%, decreased
1%than the beginning of this year, total asset structural is more reasonable.
In the fist half year of 2009, Company realize the cash and cash equivalent increase
12.32 hundred million, increasing 65.78% comparing with last same period, among12
which the cash flow net is 13.04 hundred million, increasing 1288.24% comparing with
last same period, increasing the cash and cash equivalent comes from business, express
the great change of Company business.
Ⅲ The problems ,troubles and solutions of operation
The State macro economy is better but it is not stabilizaition since this year,
automobile industy is resuscitate however is faced a lot of incertitude, the disbennifit
influence of global finance crisis is not completely letdown, this is big challenge of
Company business. Under the economic fluctuation, the produce capability of
Company express bolttle-neck,espically mini vehicle produce capability can not meet
the demands of market so that loss part chance and part market, industy competition is
more excited, new competitor is coming, all these make high pressure of Company
business.
In order to keep the steady increase, the most important work of next half year of
Company are: the first is try best to build the strategy research and management system
which is suitable with the first class automobile companyin the world, the second is
kept 11% market percentage, try to realize higher breach. The third is promotion the
produce capability to avoid the bottle –neck. The fouth is collect resource to rapid
promote the new produce research. The fifth is continuously reduce cost.
Ⅳ Investment of the company during the reporting period
㈠No usage information on raised money is available during the reporting period
㈡Usage information on non-raised money during the reporting period was as follows (Unit:
RMB ten thousand Yuan)：
NO. Investment
project
Invested capital in
Reporting period Schedule Anticipated profit
1 Vehicle project 24,790.09 Under construction
2 Engine project 24,760.93 Under construction
3 Technical center 3,035.46 Under construction
4 Others 6,602.63 Under construction
Total 59,189.10
Included in the total
profit of the Company13
VI. Important Issues
Ⅰ. Corporate Governance
The Company has been strictly complying with the relevant laws and regulations,
including the Company Law, the Securities Law, the Regulations for the Governance of
Listed Companies, the Regulations for Information Disclosure of Listed Companies, the
Regulations for Stock Listing in Shenzhen stock exchange, the Guidelines for Internal
Control Listed Companies’ in Shenzhen stock exchange and continuously improving the
corporate governance structure of the Company, adopting modern best practices and
standardizing the management and operations of the Company. The Company drew up and
executed a series of disciplines, including Articles of Association, Regulations on
Shareholders’ general meeting, Regulations on Board of Directors, Regulations on Board
of Supervisors, Regulations on Guarantee, Management Regulations on Investment
Relationship and regulations on Information Disclose.
In the report period, the company will continue to promote corporate governance, to
further improve the internal control system, to strengthen the management of related party
transactions, to raise the level of normal operation of the company, and effectively protect
the interests of small and medium-sized shareholders and promote rapid and healthy
development of the company. The actual conditions of the Company’s corporate
governance do not differ substantially from those stipulated by the regulations on
corporate governance of listed companies issued by China Securities Regulatory
Commission.
Ⅱ.The implementation situation of the annual distribution of profits in 2008 and the
semi-annual distribution plan of profits in 2009
1.The implementation situation of the annual distribution of profits in 2008
The profit distribution plan of 2008 is made in the company’s 2008 annual
shareholders’ meeting which was held on May 15th, 2009.The plan is as follow: The basis
of total shares 2,334,022,848 at the end of 2008, donating 10 shares, giving interest 0.18
RMB. A share interest rights registration date is 16th Jun.2009, Ex. Right and ex. dividend
date is 17th Jun.2009. B share final dealing date is 16th Jun.2009, ex dividend date
is17th Jun.2009, registry date is19th Jun.2009.
2. The semi-annual distribution plan of profits in 2009: non-distributed and no
transformation from provident fund to stock shares
3. In the report period, the company did not implement the equity incentive program
III. In the report period, the company did not have any significant litigation and
arbitration matters
IV. In the report period, the company did not have any significant matters related of
the acquisitions, sale and restructuring of the asset.
V. Significant related party transactions issues14
1. Related party transactions execution regarding to the daily operation
In the period, the company’s transaction issues related to the daily operation such as,
the transaction parties, the transaction content, the pricing basis and the transaction price
etc. has been published in , and on May, 16th, 2009, according to the pre-arranged plan approved in the
2008 annual shareholders’ meeting. Until the end of this report period, related parties
purchasing volume amounted to 1,964,100,000 RMB, sales volume amounted to
1,919,470,000 RMB, general service volume amounted to 138,720,000 RMB, respectively
accounted for 74.72%, 62.98%, and 70.75% of the predicted total volume of 2009.
In the first half year, the performance of the Company exceeds the expectation. The
content of related-party transaction fulfils the estimation.
The transaction content has no significant change compared to the predicted one.
2. During the reporting period, significant related party transactions issues, see the
financial report noted as transaction parties’ relationship and the transactions
VI. Major contracts and their fulfillment
1. There were no major entrustment, contracting by the Company of the assets of
other companies and there were no major entrustment, contracting of the Company’s assets
by other companies. The lease of the assets of other companies by the Company and lease
of the assets of the Company was shown as follows:
According to the production needs, the Company rented the office building of
Changan Automobile Group Company, the total area is 4,560 square meters, the monthly
rental is RMB 40 per sq. m., the remaining building is 34,147 square meters and monthly
rental is RMB 35 per sq. m. The Company rented land of CAC of 405,152 square meters,
monthly rental is RMB 33 per sq. m. The Company rented the production and office
buildings of Cuntan Distribution Centre of Changan Automobile Group Company, the area
is 3,523.99 square meters and monthly rental is RMB 35 per sq. m. The Company rented
the Da Shiba production and office buildings of Changan Automobile Group Company, the
area is 4,863 square meters and monthly rental is RMB 33 per sq. m. The Company rented
the land of Cuntan of Changan Automobile Group Company, the area is 216,005 square
meters and monthly rental is RMB 15 per sq. m. The Company rented land of Changan
Real Estate Company, the area is 5,400 square meters, monthly rental is RMB 48 per sq. m.
Changan Sales Company rented land of Changan Real Estate Company, the area is 1,800
square meters, monthly rental is RMB 48 per sq. m. CAC rented the offices of 5th, 8th, 9th
and 10th floors of the Science and Technology Building of the Company due to office
needs, the area is 9,056 square meters and monthly rental is RMB 40 per sq. m. The rent
term lasts till the end of June, 2009.
2. Major guarantee
In order to support the development of the dealers, better make use of the financial
tools offered by the banks, expand the financing channels, strengthen the ability of the
dealers and promote the sales of the Company, the company signs the Auto Sales Finance15
Service Network Protocol with China Everbright Bank, Citic Bank and Agriculture Bank.
The banks mentioned above grant the company with stated credit ability amounted to 2.95
billion RMB that is used only for opening accepted document for the dealers. In order to
promote the sales of Hebei Changan and Nanjing Changan, the company authorizes Hebei
Changan and Nanjing Changan to use part of the credit ability. The dealers of Hebei
Changan and Nanjing Changan can use the acceptance opened under the protocol
mentioned above to buy the vehicles of Hebei Changan and Nanjing Changan. When the
acceptance period expire, if the dealers of Hebei Changan or Nanjing Changan cannot hand
in the amount of money got from the bank, the company will buy the vehicles according to
the repurchase price and deposit enough money to the designated account of the bank in
time. Hebei Changan and Nanjing Changan promise that if they should take the
re-purchase responsibility under the protocol, they would hand the amount of money the
company deposit to designated account of the bank within three days and deal with the
problems arising from the delay.
The amount of credit ability used by Hebei Changan and Nanjing Changan: during the
reporting period, the dealers of Heibei Changan drawn RMB 912 million bank acceptance;
the dealers of Nanjing Changan drawn RMB 432 million bank acceptance. By the end of
the reporting period, the unsettle acceptance of the Hebei Changan’s dealers is RMB 585
million while that of Nanjing’s dealers is RMB 292 million.
3. Asset entrustment matters
During the reporting period, except for the loan-related entrustment issues, there is no
entrustment of cash management occurred in the reporting period or one, which occurred
in the previous years and last in the reporting period.
According to the board meeting of Hebei Changan held on Nov,3rd, 2007, as the
principal, issued entrusted loans of 23.5 million RMB to Lishui state-owned asset
management (holdings) limited through the Lishui branch of Bank of China. The three
parties signed the entrustment contract on Nov, 28th, 2007, the contract period is 24
months, interest was accounted from Nov, 29th, 2007 and the annual rate of the
entrustment loan is 7.2%.
VII. Commitment
Commitment of the controlling shareholder (China South Industries Motor) in the
non-tradable shares reform:
1. Comply with laws, rules and regulations, and perform legal duty of commitment.
2. Since the non-circulated shares are entitled to be circulated, they can’t be dealt
with or transfer it within 24 months. At the expiration of 24 months, the shareholders of
non-circulated shares can sell the shares in exchange in amount of no more than 5% of
total within 12 month, and no more than 10% of total within 24 months.
3. After the reform of non-tradable shares, perform the scheme of incentive share
awards for the management according to government regulation.16
VIII. Share status held by the Company in other listed companies, unlisted financial firms
and the companies planning to list
1. By the end of the reporting period, the Company held 5.33% shares of Weaponry
Equipment Group Accounting Ltd, with initial capital cost RMB80 million and book value
RMB80 million.
2. In the end of reporting period, the Company held 17.75 million shares, which
accounted for 0.932% shares of the whole shares of South-western Securities Co., Ltd., the
sales period is during the 36 months since February 17, 2009. According to the
requirement of Chongqing municipal government on the Southwest Securities’ reform and
recombination, the Company signed Share Entrustment Agreement with Chongqing Yufu
Asset Management Co. Ltd that is a state-owned company under the Chongqing municipal
government, entrusting Chongqing Yufu Asset Management Co. Ltd to manage the shares
held by Changan in Southwest Securities.
IX. The independent directors’ special notes and independent advices towards the funds
transaction between the related parties and external security issue
The company’s five independent directors, Mr. Ouyang Gaoming, Mr. Dong Yang, Mr.
Chen Zhong Mr. Wang Zhixiong and Mr. Peng Shaobing have given some special advices
towards the funds transaction between the related parties and external guarantee as
followissue related to the issues mentioned above according to the specified regulation
made by the China Securities such as, Norms of Financial Transactions and External
Security Notice With Related Parties and Listed Companies ([2003]56); Norms of Listed
Company’s External Security ([2005]120); Advisory Norm of Establishing Independent
Director Regulation in Listed Company and Governance Notice of Listed Company, their
advices are as follow:
1. The company has strictly controlled the external security risk and has no
law-violated security matter during the reporting period.
2. During the reporting period, all the transaction funds between the related parties
are related to the normal operational funds. There’s no shareholder or subsidiary that has
held the company’s fund.
X. The Semi-Annual financial report of 2009 is unaudited
XI. Other important issues
1. During the reporting period, the company and its directors, supervisors, senior
management, the actual controller is not subject to the right authorities or judicial
discipline inspection departments to investigate, or be held criminally responsible by the
china securities regulatory commission for inappropriate candidates, or got punishment
from other administrative departments and stock exchange.
2. According to the company’s second provisional shareholders’ meeting held on
March 3, 2009, the company decided to buy back part of the general domestic listed17
foreign shares (b shares) .During the reporting period, the company has completed all the
examination and approval procedures towards the repurchase of b shares. On June 23, the
company’s nominated information disclosure media published the B share repurchase
report, which announced the repurchase program into effect. Till June 30, 2009, the
company has accumulatively bought back a total volume of b shares of 5,457,433 shares,
accounting for 0.2338% of the company’s total capital ratio.
3.The research and interview reception during the reporting period
During the reporting period, the Company received the research and production line
visit from domestic and overseas fund management company, Securities Company,
investment institute and so on. During the communication with the investors, related
personnel of the company strictly followed the regulation of Shenzhen Stock and
Exchange’s instruction for Information Fair Release for Listed Companies and Investors
Relationship Management System of the company, did not selectively or privately release,
reveal or disclose non-published important information to special persons or companies,
guaranteeing the fairness of information release.
Registration form of research, communication and interview reception etc. during
the reporting period
Date Location manner Reception object Content discussed and material
offered
Jan. 16, 2009 conference room
of the Company field research UBS Industry development and
Company business situation
Feb. 16, 2009 conference room
of the Company field research GF Securities Industry development and
Company business situation
Feb. 20, 2009 conference room
of the Company field research Ziff Brothers
Investments
Industry development and
Company business situation
Feb. 23, 2009 conference room
of the Company field research UBS Securities
Company Limited
Industry development and
Company business situation
Feb. 23, 2009 conference room
of the Company field research Marsico Capital
Management
Industry development and
Company business situation
Mar. 03, 2009 conference room
of the Company field research citic securities, etc. Industry development and
Company business situation
Mar. 04, 2009 conference room
of the Company field research Piperjaffray Asia Industry development and
Company business situation
Mar. 04, 2009 conference room
of the Company
field research
field research Ping An securities Industry development and
Company business situation
Mar. 12, 2009 conference room
of the Company field research
united securities;
Fortune SGAM
Fund Management
CO.LTD;
AIG-Huatai Fund
Management Co.,
Ltd
Industry development and
Company business situation
Mar. 17, 2009 conference room
of the Company field research
Blackstone Fund
Management
Company
Industry development and
Company business situation
Mar. 18, 2009 conference room
of the Company field research Goldman Sachs Industry development and
Company business situation
Mar. 25, 2009 conference room
of the Company field research Marvin & Palmer Industry development and
Company business situation18
Apr. 16, 2009 conference room
of the Company field research SMC China Fund Industry development and
Company business situation
May. 06, 2009 conference room
of the Company field research
Geosphere Fund
Management
Company
Industry development and
Company business situation
May. 13, 2009 conference room
of the Company field research Capital International Industry development and
Company business situation
May. 15, 2009 conference room
of the Company field research
Haitong Securities;
CICC;
China Merchants
Securities; Shenyin &
Wanguo Securities;
Orient Securities
Company; GF Fund
Management CO.LTD;
Fullgoal Fund
Management Co., Ltd;
BOC International;
Huaxia Funds; China
Universal Asset
Management;
Evergreen Funds;
Guotai Junan Allianz;
ABC-CA Fund
Management Co., Ltd
Industry development and
Company business situation
June. 09,
2009
conference room
of the Company field research
PengHua
Management Co.,
Ltd
Industry development and
Company business situation
June.15, 2009 conference room
of the Company field research South Korea
Shinhan Securities
Industry development and
Company business situation
June.30, 2009 conference room
of the Company field research
Guosen Securities;
Wanlian Securities
Company Limited
Industry development and
Company business situation
4. Other Information Notice Index
The company’s notice is published in China Securities, Securities Times and
Hongkong Commercial Newspaper, the online disclosure address is http://www.cninfo.com.cn
1. Suspension progress notice of the significant unprecedented matters published on
Jan 5th, 2009; Notice No.: 2009-1
2. The production and sales express of Dec, 2008 published on Jan 6th, 2009; Notice
No.: 2009-2
3. The 23rd meeting decision of the fourth board meeting published on Jan 7th, 2009.
Notice No: 2009-3; 2009-4.
⒋suspension progress notice of the significant unprecedented matters published on
Jan 12th, 2009; Notice No.: 2009-5
5. Suspension progress notice of the significant unprecedented matters published on
Jan 19th, 2009; Notice No.: 2009-6
6. The first shareholder meeting; 2008 progress report and suspension progress notice
of the significant unprecedented matters published on Jan 23rd,; Notice No.: 2009.
2009-7、2009-8、2009-9。
7. suspension progress notice of the significant unprecedented matters and the
production and sales express of Jan, 2009 published on Feb, 9th, 2009; Notice No.:
2009-10、2009-1119
8. The 24th meeting decision of the fourth board meeting published on Feb 16th, 2009;
Notice No.: 2009-12、2009-13。
9. Notice of the unusual fluctuations on stock published on Feb 18th, 2009. Notice
No.: 2009-14
10. Notice of the unusual fluctuations on stock published on Feb 20th, 2009. Notice
No.: 2009-15
11. Notice of the unusual fluctuations on stock published on Feb 25th, 2009. Notice
No.: 2009-16
12. Verification notice of the unusual fluctuations on stock published on Feb 27th,
2009. Notice No.: 2009-17
13. The share holding situation of the top ten shareholders published on Feb 28th,
2009. Notice No.: 2009-18
14. The resolution of the second shareholders meeting of 2009 published on Mar 4th,
2009. Notice No.: 2009-19, Notice No.: 2009-20.
15. The production and sales express of Feb, 2009 published on Mar 5th, 2009; Notice
No.: 2009-21
16. The production and sales express of Mar, 2009 published on Apr 4th, 2009;
Notice No.: 2009-22
17. The 2008 year report, the 25th meeting resolution of the fourth board meeting
published on Apr 25th, 2009. Notice No.: 2009-23、2009-24、2009-25、2009-26、2009-27.
18. The 1st quarter report of 2009 published on Apr 30th, 2009. Notice No.: 2009-28.
19. The production and sales express of Apr, 2009 published on May 6th, 2009;
Notice No.: 2009-29.
20. The clarification notice of the board of directors published on May 7th, 2009.
Notice No.: 2009-29.
21. The resolution notice of 2008 shareholders meeting published on May 16th, 2009.
Notice No.: 2009-31.
22. The resolution of the 1st meeting of the 5th board meeting, the resolution of the
1st meeting of the 5th supervisor meeting published on May 20th, 2009. Notice No.:
2009-32.
23. The restriction notice of the share sale published on May 26th, 2009. Notice No.:
2009-33.
24. The Notice of important matters published on June 3rd, 2009; Notice No.:
2009-34.
25. The production and sales express of May, 2009 published on June 4th, 2009;
Notice No.: 2009-35.
26. 2008 dividend notice published on June 9th, 2009. Notice No.: 2009-36.
The notice of repurchasing B shares published on June 23rd, 2009. Notice No.:
2009-37.
28. The implementation situation of repurchasing B shares published on June 24th,
2009. Notice No.: 2009-38.20
VII. Financial Report (Unaudited)
i Financial statements
Chongqing Changan Automobile Company Limited
30, June 2009 Assets Balance Sheet
( Expressed in RMB Yuan )
At the end of term Beginning of term
Items Note
Consolidated Parent
company Consolidated Parent
company
Current asset:
Monetary fund （V）1 2,855,391,556 1,603,575,871 1,624,164,159 1,166,965,438
Notes receivable （V）2 4,179,934,482 3,086,707,648 1,934,083,075 1,257,028,330
Account receivable
（V）3
（VI）1 442,208,686 1,020,358,378 398,665,914 959,777,773
Prepayment （V）4 185,087,969 185,458,561 264,265,866 202,933,850
Other account
receivable
（V）3
（VI）1 71,113,013 117,562,393 94,522,596 166,274,867
Inventories
（V）5
（VI）2 1,252,207,035 582,281,373 1,662,215,301 867,644,237
Other current asset 21,051 29,914
Total of current
asset 8,985,963,792 6,595,944,224 5,977,946,825 4,620,624,495
Non-current assets
Long-term share
equity investment
（V）6
（VI）3 4,329,480,308 5,241,006,419 4,556,089,383 5,459,914,322
Property
investment 67,499,011 68,646,801
Fixed assets
（V）7
（VI）4 3,299,728,961 2,792,799,839 3,333,111,102 2,805,942,755
Construction in
process
（V）8
（VI）5 1,148,880,718 1,047,370,654 851,287,528 805,436,097
Engineering
material 1,303,902 1,303,902 3,147,070 3,147,070
Fixed asset
disposal 59,528
Intangible assets （V）9 289,481,631 211,914,862 114,867,135 34,930,695
R&D expense （V）10 211,213,027 209,866,782 308,158,911 308,158,911
Goodwill 9,804,394 9,804,394
Long-term prepaid
expenses 3,464,839 1,350,600 5,232,238 1,440,640
Differed income
tax asset （V）11 205,919,216 146,420,925 139,533,458 97,843,265
Total of
non-current assets 9,566,835,535 9,652,033,983 9,389,878,020 9,516,813,755
Total of assets 18,552,799,327 16,247,978,207 15,367,824,845 14,137,438,250
Current liabilities
Short-term loans （V）12 648,849,590 420,000,000 1,093,749,195 875,241,710
Trade off financial
liabilities 8,914,105 9,773,408
Notes payable （V）13 1,844,079,919 1,817,357,219 2,196,879,137 2,117,879,137
Account payable （V）14 4,859,034,583 2,918,827,962 2,275,651,448 1,327,279,901
Prepayment
received （V）15 598,878,640 381,496,574 909,476,065 383,616,593
Employees’ wage
payable （V）16 156,153,616 129,049,447 110,874,454 85,737,76021
Tax payable （V）17 178,440,458 199,830,801 58,456,823 138,292,989
Interest payable 1,477,000 910,000 1,200,000 1,200,000
Dividend payable 83,148 83,148
Other account
payable （V）18 334,164,389 229,648,334 367,301,503 259,745,444
Non-current
liability due in 1
year
781,717,526 451,897,209 345,932,573 224,241,972
Other current
liability
Total of current
liability 9,411,792,974 6,549,017,546 7,369,377,754 5,413,235,506
Non-current
liabilities
Long-term
borrowings 542,000,000 400,000,000
Special payable （V）20 53,378,615 53,378,615 37,939,993 37,939,993
Expected liabilities （V）19 319,473,031 201,338,567 213,392,485 156,363,111
Differed income
tax liability
Other
non-recurring
liabilities
37,501,362 25,735,362 38,493,000 26,727,000
Total of
non-current
liabilities
952,353,008 680,452,544 289,825,478 221,030,104
Total of liability 10,364,145,982 7,229,470,090 7,659,203,232 5,634,265,610
Owners’ equity (or
shareholders’
equity)
Practical capital
collected (or share
capital)
2,334,022,848 2,334,022,848 2,334,022,848 2,334,022,848
Capital reserves 1,500,338,576 1,676,606,317 1,499,260,948 1,675,528,689
Less: Shares in
stock 17,600,394 17,600,394
Surplus reserves 1,042,968,948 1,042,968,948 1,042,968,948 1,042,968,948
Common risk
provision
Attributable profit 3,212,234,562 3,982,510,398 2,720,272,069 3,450,652,155
Different of
foreign currency
translation
Total of owner’s
equity belong to
the parent
company
8,071,964,540 9,018,508,117 7,596,524,813 8,503,172,640
Minor
shareholders’
equity
116,688,805 112,096,800
Total of owners’
equity 8,188,653,345 9,018,508,117 7,708,621,613 8,503,172,640
Total of liabilities
and owners’ equity 18,552,799,327 16,247,978,207 15,367,824,845 14,137,438,250
Legal representative: Mr. Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke22
Chongqing Changan Automobile Company Limited
From January to June, 2009 PROFIT STATEMENT
(Expressed in RMB Yuan)
Current term Same period last year
Items Note
Consolidated Parent
company Consolidated Parent
company
I. Total business income 11,282,706,557 7,459,190,468 7,879,649,185 5,192,654,188
Incl. Business income
（五）21
（六）6
11,282,706,557 7,459,190,468 7,879,649,185 5,192,654,188
II. Total business cost 11,121,641,200 7,276,568,173 8,048,947,687 5,233,141,323
Incl. Business cost
（五）21
（六）6
9,003,091,851 5,886,190,296 6,555,249,331 4,292,742,336
Business tax and
surcharge
（五）22
229,700,133 161,801,779 193,107,497 133,129,256
Sales expense 1,140,027,608 605,248,449 710,970,120 437,044,014
Administrative expense 531,940,775 425,752,699 431,036,001 362,161,377
Financial expenses （五）23 -1,309,678 -21,570,630 39,898,085 7,746,904
Asset impairment loss （五）24 218,190,512 219,145,580 118,686,653 317,436
Plus: Gains from change
of fair value (“-“ for loss)
859,303
Investment gain (“-“ for
loss)
337,646,655 344,993,270 614,846,022 594,596,101
Incl. Investment gains
from affiliates
330,792,097 330,792,097 599,092,097 598,854,649
Gains from currency
exchange (“-“ for loss)
III. Operational profit
(“-“ for loss)
499,571,315 527,615,565 445,547,520 554,108,966
Plus: Non business
income
5,865,036 2,584,498 7,659,498 6,762,704
Less: Non-business
expenses
7,303,786 6,080,193 10,637,729 9,594,549
Incl. Loss from disposal
of non-current assets
1,056,225 931,000 473,695 473,695
IV. Gross profit (“-“ for
loss)
498,132,565 524,119,870 442,569,289 551,277,121
Less: Income tax
expenses
-39,261,220 -48,577,661 -1,873,719 -13,361,396
V. Net profit (“-“ for net
loss)
537,393,785 572,697,531 444,443,008 564,638,517
Net profit attributable to
the owners of parent
company
532,801,780 572,697,531 450,187,557 564,638,517
Minor shareholders’
equity
4,592,005 -5,744,549
VI. Earnings per share:
(I) Basic earnings per
share
0.23 0.25 0.19 0.24
(II) Diluted earnings per
share
0.23 0.25 0.19 0.24
VII.Other comprehensive
income
1,077,628 1,077,628 0 023
VIII.Total comprehensive
income
538,471,414 573,775,160 444,443,008 564,638,517
Total comprehensive
incometo the owners of
parent company
533,879,409 573,775,160 450,187,557 564,638,517
Minor shareholders’ total
comprehensive incometo
4,592,005 0 -5,744,549 0
Legal representative: Mr. Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke
Chongqing Changan Automobile Company Limited
From January to June, 2009
CASH FLOW STATEMENT
(Expressed in RMB Yuan)
Current term Same period last year
Items
Consolidated
Parent
company Consolidated
Parent
company
I. Net cash flow from business operation
Cash received from sales of products
and providing of services 6,908,062,228 5,067,535,402 4,854,185,996 3,548,503,015
Tax returned 25,630,623 61,007,583 5,820,000
Other cash received from business
operation 131,239,164 89,819,373 97,899,914 20,723,078
Sub-total of cash inflow from business
activities 7,064,932,015 5,157,354,775 5,013,093,493 3,575,046,093
Cash paid for purchasing of merchandise
and services 3,882,824,504 3,178,516,505 3,602,435,593 2,534,106,130
Cash paid to staffs or paid for staffs 367,533,932 294,924,179 311,612,340 259,358,672
Taxes paid 764,791,755 516,319,520 497,879,063 341,574,768
Other cash paid for business activities 746,264,320 629,286,182 710,867,865 547,301,166
Sub-total of cash outflow from business
activities 5,761,414,511 4,619,046,386 5,122,794,861 3,682,340,736
Cash flow generated by business
operation, net 1,303,517,504 538,308,389 -109,701,368 -107,294,643
II. Cash flow generated by investing
Cash received from investment
retrieving 5,637,000 5,068,403
Cash received as investment gains 553,796,025 564,201,173 851,924,680 860,547,648
Net cash retrieved from disposal of
fixed assets, intangible assets, and other
long-term assets
340,602 74,598 789,017 526,846
Net cash received from disposal of
subsidiaries or other operational units
Other investment-related cash received 90,000 13,124,422
Sub-total of cash inflow due to
investment activities 554,226,627 564,275,771 871,475,119 866,142,897
Cash paid for construction of fixed
assets, intangible assets and other
long-term assets
589,625,373 531,254,217 287,897,553 271,189,494
Cash paid as investment 1,896,370 1,896,370 716,980,800 754,462,600
Net increase of loan against pledge
Net cash received from subsidiaries and
other operational units24
Other cash paid for investment activities
Sub-total of cash outflow due to
investment activities 591,521,743 533,150,587 1,004,878,353 1,025,652,094
Net cash flow generated by investment -37,295,116 31,125,184 -133,403,234 -159,509,197
III. Cash flow generated by financing
Cash received as investment
Incl. Cash received as investment from
minor shareholders
Cash received as loans 900,547,854 400,000,000 1,965,897,688 1,670,000,000
Cash received from bond placing
Other financing-related cash received 2,286,219 626,297
Subtotal of cash inflow from financing
activities 902,834,073 400,626,297 1,965,897,688 1,670,000,000
Cash to repay debts 853,232,086 455,026,516 927,178,892 600,000,000
Cash paid as dividend, profit, or
interests 63,486,017 60,664,990 52,397,491 50,270,017
Incl. Dividend and profit paid by
subsidiaries to minor shareholders
Other cash paid for financing activities 20,056,427 17,757,931
Subtotal of cash outflow due to
financing activities 936,774,530 533,449,437 979,576,383 650,270,017
Net cash flow generated by financing -33,940,457 -132,823,140 986,321,305 1,019,729,983
IV. Influence of exchange rate
alternation on cash and cash equivalents -195,231
V. Net increase of cash and cash
equivalents 1,232,086,700 436,610,433 743,216,703 752,926,143
Plus: Balance of cash and cash
equivalents at the beginning of term 1,614,390,751 1,166,965,438 1,583,706,500 1,169,325,053
VI. Balance of cash and cash
equivalents at the end of term 2,846,477,451 1,603,575,871 2,326,923,203 1,922,251,196
Legal representative: Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke25
Consolidated Statement of Change in Owners’ Equity
Chongqing Changan Automobile Company Limited
30 June 2009 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in Renminbi Yuan)
current balance
Stockholders Equity of the holding company
Item
Paid-up
capital(or
stock)
capital
surplus
less: stock
unit
special
reserve
Surplus
reserves
General
Risk
Provisions
Undistributed
profit Others
minority
interests Total equity
1. the end balance of last
year 2,334,022,848 1,499,260,948 1,042,968,948 2,720,272,069 112,096,800 7,708,621,613
add: changes in
accounting policies
Corrections of Prior
Period Errors
Others
2.The balance of early
this year 2,334,022,848 1,499,260,948 1,042,968,948 2,720,272,069 112,096,800 7,708,621,613
3. changes in the amount
of increase or decrease
this year 1,077,628 17,600,394 491,962,493 4,592,005 480,031,732
1.net profit 532,801,780 4,592,005 537,393,785
2. the profit and loss
directly goes to the
shareholders 1,077,628 1,077,628
1. net changes in fair
value of financial
assets,available-for-sale26
2．The influence
from other investment
organization under the
equity regulation
3．The income tax
effect related to the
owner’s equity issue
4．Others 1,077,628 1,077,628
Total volume of item
1and item 2 mentioned
above 1,077,628 532,801,780 4,592,005 538,471,413
3.the investment and
reduce capital of the
owners 17,600,394 -17,600,394
1> the owners’
investment capital
2> share paid 17,600,394 -17,600,394
3> others
4. profit distribution -40,839,287 -40,839,287
1>Withdrawal legal
surplus
2> extraction for
general risk
3> the distribution
towards to the owner (or
shareholder0 -40,839,287 -40,839,287
4> others
5. the internal
carry-over of the
owner’s equity
1>capital surplus to
paid-in capital
2> reserve capital to
paid-in capital27
3> reserve to make
up for losses
4> others
4、current balance 2,334,022,848 1,500,338,576 17,600,394 1,042,968,948 3,212,234,562 116,688,805 8,188,653,345
Legal representative: Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke
Chongqing Changan Automobile Company Limited
30 June 2009 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in Renminbi Yuan)
the amount of the previous year
Stockholders Equity of the holding company
Item
Paid-up
capital(or
stock)
capital
surplus
less:
stock unit
special
reserve
Surplus
reserves
General
Risk
Provisions
Undistributed
profit v
minority
interests Total equity
1. the end balance of last
year 1,945,019,040 1,889,189,593 1,018,281,748 2,720,578,308 114,647,251 7,687,715,940
add: changes in
accounting policies
Corrections of Prior
Period Errors
Others
2.The balance of early
this year 1,945,019,040 1,889,189,593 1,018,281,748 2,720,578,308 114,647,251 7,687,715,940
3. changes in the amount
of increase or decrease
this year 389,003,808 -389,928,645 24,687,200 -306,239 -2,550,452 20,905,672
1.net profit 24,380,961 -6,449,900 17,931,061
2. the profit and loss
directly goes to the
shareholders -2,188,727 -2,188,727
1. net changes in fair
value of financial28
assets,available-for-sale
2．The influence
from other investment
organization under the
equity regulation 200,000 200,000
3．The income tax
effect related to the
owner’s equity issue
4．Others -2,388,727 -2,388,727
Total volume of item
1and item 2 mentioned
above -2,188,727 24,380,961 -6,449,900 15,742,334
3.the investment and
reduce capital of the
owners 1,263,890 6,506,108 7,769,998
1> the owners’
investment capital 10,150,000 10,150,000
2> share paid 1,263,890 -3,643,892 -2,380,002
3> others
4. profit distribution 24,687,200 -24,687,200 -2,606,660 -2,606,660
1>Withdrawal legal
surplus 24,687,200 -24,687,200
2> extraction for
general risk
3> the distribution
towards to the owner (or
shareholder0
4> others -2,606,660 -2,606,660
5. the internal
carry-over of the owner’s
equity 389,003,808 -389,003,808
1>capital surplus to
paid-in capital 389,003,808 -389,003,80829
2> reserve capital to
paid-in capital
3> reserve to make
up for losses
4> others
4、current balance 2,334,022,848 1,499,260,948 1,042,968,948 2,720,272,069 112,096,799 7,708,621,612
Legal representative: Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke
Statement of Change in Owners’ Equity
Chongqing Changan Automobile Company Limited
30 June 2009 STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in Renminbi Yuan)
current balance
Stockholders Equity of the holding company
Item
Paid-up
capital(or stock) capital surplus less: stock
unit
special
reserve Surplus reserves Undistributed
profit Total equity
1. the end balance of last year 2,334,022,848 1,675,528,689 1,042,968,948 3,450,652,155 8,503,172,640
add: changes in accounting policies
Corrections of Prior Period Errors
Others
2.The balance of early this year 2,334,022,848 1,675,528,689 1,042,968,948 3,450,652,155 8,503,172,640
3. changes in the amount of increase or
decrease this year 1,077,628 17,600,394 531,858,244 515,335,478
(1)net profit 572,697,531 572,697,531
(2)the profit and loss directly goes to the
shareholders 1,077,628 1,077,628
1>net changes in fair value of
financial assets,available-for-sale
2>The influence from other investment
organization under the equity regulation
3>The income tax effect related to the30
owner’s equity issue
4> Others 1,077,628 1,077,628
Total volume of item 1and item 2
mentioned above 1,077,628 572,697,531 573,775,159
3.the investment and reduce capital of the
owners 17,600,394 -17,600,394
1> the owners’ investment capital
2> share paid 17,600,394 -17,600,394
3> others
4. profit distribution -40,839,287 -40,839,287
1>Withdrawal legal surplus
2> the distribution towards to the
owner (or shareholder0 -40,839,287 -40,839,287
3> others
5. the internal carry-over of the owner’s
equity
1>capital surplus to paid-in capital
2> reserve capital to paid-in capital
3> reserve to make up for losses
4> others
4、current balance 2,334,022,848 1,676,606,317 17,600,394 1,042,968,948 3,982,510,399 9,018,508,118
Legal representative: Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke
Chongqing Changan Automobile Company Limited
30 June 2009 STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in Renminbi Yuan)
the amount of the previous year
Stockholders Equity of the holding company
Item Paid-up
capital(or
stock)
capital
surplus
less:
stock
unit
special
reserve
Surplus
reserves
Undistributed
profit Total equity31
1. the end balance of last year 1,945,019,040 2,066,721,224 1,018,281,748 3,228,467,354 8,258,489,366
add: changes in accounting policies
Corrections of Prior Period Errors
Others
2.The balance of early this year 1,945,019,040 2,066,721,224 1,018,281,748 3,228,467,354 8,258,489,366
3. changes in the amount of increase or
decrease this year 389,003,808 -391,192,535 24,687,200 222,184,801 244,683,274
(1)net profit 246,872,001 246,872,001
(2)the profit and loss directly goes to
the shareholders -2,188,727 -2,188,727
1>net changes in fair value of
financial assets,available-for-sale
2>The influence from other
investment organization under the equity
regulation 200,000 200,000
3>The income tax effect related to
the owner’s equity issue
4> Others -2,388,727 -2,388,727
Total volume of item 1and item 2
mentioned above -2,188,727 246,872,001 244,683,274
3.the investment and reduce capital of
the owners
1> the owners’ investment capital
2> share paid
3> others
4. profit distribution 24,687,200 -24,687,200
1>Withdrawal legal surplus 24,687,200 -24,687,200
2> the distribution towards to the
owner (or shareholder0
3> others
5. the internal carry-over of the
owner’s equity 389,003,808 -389,003,80832
1>capital surplus to paid-in capital 389,003,808 -389,003,808
2> reserve capital to paid-in capital
3> reserve to make up for losses
4> others
4、current balance 2,334,022,848 1,675,528,689 1,042,968,948 3,450,652,155 8,503,172,640
Legal representative: Xu Liuping Principal in Charge of Accountancy：Cui Yunjiang Chief Accountant: Ni Erke33
ⅱNotes to financial statements
I. Corporate information
Chongqing Changan Automobile Co., Ltd. (hereafter abbreviated as the “Company”or
“Parent Company”) taking Changan Automobile (Group) Liability Co. Ltd. (hereinafter
abbreviated as “Changan Group”) as individual initiator, with its business net asset related
to mini-vehicle & engine production and its share equity of Changan Suzuki Automobile
Co. Ltd. as converted into506,190,000 shares (B share) for investment, was established on
October 31, 1996 by issuing 250,000,000 oversea shares domestically listed for abroard
investors in the form of money-collecting. Its total share capital is RMB 756,190,000
Yuan.The Legal Representative’s Operating License issued by Chongqing Industrial and
Commercial Administrative Bureau is Yu-Jing No. 28546236-3.
Under the approval of China Securities Regulatary Committes, the Company publicly
issued 120,000,000 RMB ordinary shares (share A) on May 19, 1997. The total share
capital increased to RMB 876,190,000 Yuan.
On June 26th 1998, based on the total capital stock of 876,190,000 shares for the end
of 1997, the capital reserve is transferred into share capital, and the bonus share is 4shares
per 10 shares, then the total capital increases toRMB 1,226,666,000 Yuan.
On May 26th 2004, based on the total capital stock of 1,226,666,000 shares for the
end of 2003, 2 shares per 10 sharesare donated, and then the total capital increases to RMB
1,471,999,200 Yuan.
Under the assent of China Securities Regulatary Committes, the Company publicly
issued the 148,850,000 RMB ordinary shares (A share) on May 19, 1997. The total share
capital increases to RMB 1,620,849,200 Yuan.
The Company’s 850,399,200 ordinary shares (state-owned share, 52.47% of its total
share) held by its final control company: China South Industry Group Corporation and its
complete subsidy-Changan Automobile (Group) Liability Co. Ltd. was taken as part of
investment into China South Industry Autmobile Co. Ltd. (hereinafter abbreviated as
“China South Automobile”). On March 30, 2006 registered and acknowledged by34
Shenzhen Branch Company of China Security Register and Settlement Co Ltd. The
mentioned above 850,399,200 shares of state-owned stocks held by Changan Automobile
(Group) Liability Co. Ltd. had been transferred to China South Automobile and China
South Automobile therefore became the parent company of the Company. On May 11,
2006, the company implemented the plan of share equity restructing. As the share equity
restructing implementation ends the Company’s 738,255,200 ordinary shares held by
China South Automobile accounts for 45.55% of the Company’s total equity share.
The Company, its subsidiaries and jointly cooperated entities (hereafter abbreviated
as the “Group”) are principally engaged in the manufacture and sail of automobiles
(including sedan), the engine series and parts& components.
On May 15th, 2007, based on the total capital stock of 1,620,849,200 shares for the
end of 2006, 2 shares per 10 sharesare are donated, and then the total capital increases to
RMB 1, 945,019,040 Yuan. On April 20th 2006, the Company fetched the enterprise legal
person’s license with the registration mark of Yuzhi No 5000001805570.
On April 15th, 2008, based on the total capital stock of 1,945,019,040 shares for the
end of 2006, the capital reserve is transferred into share capital, and the bonus share is 2
shares per 10 shares, and then the total capital increases to RMB 2,334,022,848 Yuan. Up
to the end of reporting period, capital reserve had already been transferred into share
capital.
The Company and its subsidiaries and jointly controlled entities (hereafter
collectively referred to as the “Group”) are principally engaged in the manufacture and sail
of automobiles (including sedan), the engine series and parts& components.
II. Representation regarding the preparation basis and compliance with the Accounting Standards for
Business Enterprises
The financial statements have been prepared, in accordance with the Accounting
Standards for Business Enterprises (including basic standards, specific standards,
implementation guidance and other relevant provisions; the same below) promulgated by35
the MOF in 2006.
According to the Notice of the Ministry of Finance on Publishing the “Accounting
Standard for Business Enterprises No. 1- Inventory” and other 38 Specific Standards (Cai
Kuai [2006] No. 3), the Company applied the Accounting Standards for Business
Enterprises promulgated by the Ministry of Finance in 2006 commencing from 1 January
2007.
The financial statements are presented on a going concern basis.
Ⅲ.Significant accounting policies and estimates
The financial statements of the Company and its subsidiaries (collectively “the
Group”) for the year ended 31 December 2007, are prepared based on the following
significant accounting policies and estimates set out by the Accounting Standards for
Business Enterprises.
1. Accounting year
The accounting year of the Group is from 1 January to 31 December of each calendar
year.
2. Functional currency
The Group’s functional and reporting currency is the Renminbi (“RMB”). Unless
otherwise stated, the unit of the currency is Yuan.
3． Basis of accounting and measurement basis
The Group maintains its accounting records on an accrual basis. Except for certain
financial instruments, assets are recorded at actual cost when they are acquired.
Subsequently, if the assets are impaired, the corresponding provisions should be made
accordingly. The assets invested during the restructuring of the Company, should be
recorded at the appraisal price determined by the National Assets Management
Department.
4. Business combinations
A business combination is a transaction or event that brings together two or more
separate entities into one reporting entity. Business combinations are classified into
business combinations involving entities under common control and business combinations36
involving entities not under common control.
Business combination involving entities under common control
A business combination involving entities under common control is a business
combination in which all of the combining entities are ultimately controlled by the same
party or parties both before and after the combination, and that control is not transitory.
For a business combination involving entitites under common control, the party that, on
the combination date, obtains control of another entity participating in the combination is
the acquiring party, while that other entity participating in the combination is a party being
acquired. Combination date is the date on which the acquiring party effectively obtains
control of the party being acquired.
Assets and liabilities that are obtained by the acquiring party in a business
combination shall be measured at their carrying amounts at the combination date as
recorded by the party being acquired. The difference between the carrying amount of the
net assets obtained and the carrying amount of the consideration paid for the combination
(or the aggregate face value of shareds issued as consideration) shall be adjusted to capital
reserve. If the capital reserve is not sufficient to absorb the difference, any excess shall
be adjusted against retained earnings.
The cost of a combination incurred by the acquiring party includes any costs directly
attributable to the combination, which shall be expensed when incurred.
Business combination involving entities not under common control
A business combination involving entities not under common control is a business
combination in which all of the combining entities are not ultimately controlled by the
same party or parties both before and after the combination. For a business combination
involving entitites not under common control, the party that, on the acquisition date,
obtains control of another entity participating in the combination is the acquirer, while that
other entity participating in the combination is the acquiree. Acquisition date is the date on
which the acquirer effectively obtains control of the acquiree.37
For a business combination that involves one single exchange transaction, the cost of
combination is the aggregate of the fair values, at the acquisition date, of the assets given,
liabilities incurred or assumed, and equity securities issued by the acquirer, in exchange
for control of the acquiree. For a business combination achieved in stages that involves
multiple exchange transactions, the cost of combination is the aggregate of the costs of
individual transactions. When a business combination contract provides for an
adjustment to the cost of combination contingent on a future event, the acquirer shall
include the amount of that adjustment in the cost of the combination if it is expected on the
acquisition date that the occurrence of the future event is probable and the amount
affecting the cost of combination can be measured reliably.
The acquirer shall measure the acquiree’s identifiable assets, liabilities and contingent
liabilities acquired in the business combination at their fair values on the acquisition date.
Where the cost of a business combination exceeds the acquirer’s interest in the fair
value of the acquiree’s identifiable net assets, the difference shall be recognized as
goodwill. Where the cost of combination is less than the acquirer’s interest in the fair
value of the acquiree’s identifiable net assets, the difference shall be accounted for
according to the following requirements: (i) the acquirer shall reassess the measurement of
the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities and
measurement of the cost of combination; (ii) if after that reassessment, the cost of
combination is still less than the acquirer’s interest in the fair values of the acquiree’s
identifiable net assets, the acquirer shall recognize the remaining difference immediately
in the income statement for the current period.
5. Consolidated financial statements
The scope of consolidation of consolidated financial statements is determined based
on control, and includes the financial statements of the Company and its subsidiaries for
the year ended 31 December 2007. A subsidiary is an entity that is controlled by the
Group.
Consolidated financial statements are prepared using uniform reporting dates and38
accounting policies. All significant intercompany transactions and balances within the
Group are eliminated on consolidation.
For any subsidiary consolidated by the Group, the portion of the profit or loss and net
assets of such a subsidiary attributable to equity interests that are not owned, directly or
indirectly by the Group is separately presented as minority interest in the consolidated
financial statements.
With respect to subsidiaries acquired through business combinations involving
entities not under common control, the operating results and cash flows of the acquiree
should be included in the consolidated financial statements, from the day that the Group
gains control, till the Group ceases the control of it. While preparing the consolidated
financial statements, the acquirer should adjust the subsidiary’s financial statements, on
the basis of the fair values of the identifiable assets, liabilities and contingent liabilities
recognized on the acquisition date.
With respect to subsidiaries acquired through business combinations involving
entities under common control, the operating results and cash flows of the acquiree should
be included in the consolidated financial statements from the beginning of the period in
which the combination occurs.
6. Cash equivalents
Cash equivalents represent short-term, highly liquid investments which are readily
convertible into known amounts of cash, and which are subject to an insignificant risk of
changes in value.
7. Foreign currency conversion
foreign currency transactions
The amount of foreign currency transactions occurred in the reporting year is
converted into functional currency.
The foreign currency transactions are recorded, on initial recognition in the functional
currency, by applying to the foreign currency amount at the spot exchange rate as at the
transaction dates. Foreign currency monetary items are translated using the spot exchange39
rate quoted by the People’s Bank of China at the balance sheet date. The exchange gains or
losses arising from occurrence of transactions and exchange of currencies, except for those
relating to foreign currency borrowings specifically for construction and acquisition of
fixed assets capitalized, are dealt with in the profit and loss accounts. Non-monetary
foreign currency items measured at historical cost remain to be translated at the spot
exchange rate prevailing on the transaction date, and the amount denominated in the
functional currency should not be changed. Non-monetary foreign currency items
measured at fair value should be translated at the spot exchange rate prevailing on the date
when the fair values are determined. The exchange difference thus resulted should be
charged to the current income or capital surplus account of the current period.
settlement of oversea transaction
When preparing consolidated financial statements, the financial statements of the
subsidiaries presented in foreign currencies are translated into Renminbi as follows: asset
and liability accounts are translated into Renminbi at exchange rates ruling at the balance
sheet date; shareholders’ equity accounts other than retained profits are translated into
Renminbi at the applicable exchange rates ruling at the transaction dates; items in income
statement other than profit appropriation statement are translated into Renminbi at spot
exchange rates on transaction occurrence; total difference between translated assets and
translated liabilities and shareholders’ equity is separately listed as “foreign currency
exchange differences” below retained profits. The translation difference arising from the
settlement of oversea subsidiaries is charged to the current liquidation profit and loss in
proportion to the settlement ratio of the assets concerned.
Foreign currency cash flows and the cash flows of foreign subsidiaries should be
translated using the average exchange rate prevailing on the transaction month during
which the cash flows occur. The amount of the effect on the cash arising from the change
in the exchange rate should be separately presented as an adjustment item in the cash flow
statement.40
8. Inventory
Inventory includes raw materials, goods in transit, work in progress,
finished goods, consigned processing materials, packaging materials and
low-value consumables. Inventories are assets (a) held for sales in the
ordinary course of business (b) in the process of production for such sale (c)
in the form of materials or supplies to be consumed in the production process
or in the rendering of services.
Inventory is initially carried at the actual cost. Inventory costs comprise all costs of
purchase, costs of conversion and other costs incurred in bringing the inventory to its
present location and condition.
Weighted average method is assigned to the determination of actual costs of
inventories.
The Group applies a perpetual inventory system.
One-off writing off method is adopted in amortization of packaging materials and
low-value consumables.
At the balance sheet date, the inventory is stated at the lower of cost and net
realizable value. If the cost is higher than the net realizable value, provision for the
inventory should be made through profit or loss. If factors that resulted in the provision
for the inventory have disappeared and made the net realizable value higher than their
book value, the amount of the write-down should be reversed, to the extent of the amount
of the provision for the inventory, and the reversed amount should be recognized in the
income statement for the current period.
Net realizable value is the estimated selling price in the ordinary course of business
less the estimated costs of completion and the estimated costs necessary to make the sale.
The impairment provision should be made on a basis of each item of finished goods
according to the difference between cost and net realizeable value. For large numbers of
inventories at relatively low unit prices, the provision for loss on decline in value of41
inventories should be made by category.
9. Long-term equity investments
Long-term equity investments include investments in subsidiaries, joint ventures and
associates. The long-term investments are initially recorded at cost on acquisition. It is
accounted for using either the cost method or the equity method as appropriate under the
following circumstances.
ost method is applied to account for long-term equity investments, when the Group
has control of the investee enterprise, or does not have jointly control or significant
influence on the investee enterprise, the fair value of which cannot be reliably measured
due to the fact they are not quoted in an active market.
Under cost method, the long-term equity investment is valued at the cost of the initial
investment. Profit or cash dividends declared by the invested enterprise are recognized as
investment income for the current period. The amount of investment income recognized
is limited to the amount distributed out of accumulated net profit of the invested enterprise
that arises after the investment is made. The amount of profit or cash dividends declared
by the invested enterprise in excess of the above threshold is treated as return on
investment cost, and netted against the carrying amount of investments.
The equity method is applied to account for long-term equity investments, when the
Group has jointly control, or significant influence on the investee companies.
Under equity method, when the initial investment cost of a long-term equity
investment exceeds the investing enterprise’s interest in the fair values of the investee’s
identifiable net assets at the acquisition date, the difference between them is accounted for
as an initial cost. As to the initial investment cost is less than the investing enterprise’s
interest in the fair values of the investee’s identifiable net assets at the acquisition date, the
difference shall be charged to the income statement for the current period, and the cost of
the long-term equity investment shall be adjusted accordingly.
Under equity method, the Group recognizes its share of post-acquisition equity in the42
investee enterprise for the current period as a gain or loss on investment, and also
increases or decreases the carrying amount of the investment. When recognizing its share
in the net profit or loss of the investee entities, the Group should, based on the fair values
of the identifiable assets of the investee entity when the investment is acquired, in
accordance with the Group’s accounting policies and periods, after eliminating the portion
of the profits or losses, arising from internal transactions with joint ventures and associates,
attributable to the investing entity according to the share ratio (but losses arising from
internal transactions that belong to losses on the impairment of assets, should be
recognized in full), recognize the net profit of the investee entity after making appropriate
adjustments. The book value of the investment is reduced to the extent that the Group’s
share of the profit or cash dividend declared to be distributed by the investee enterprise.
However, the share of net loss is only recognized to the extent that the book value of
the investment is reduced to zero, except to the extent that the Group has incurred
obligations to assume additional losses. The Group shall adjust the carrying amount of
the long-term equity investment for other changes in owners’ equity of the investee
enterprise (other than net profits or losses), and include the corresponding adjustments in
equity, which should be realized thourgh profit or loss in subsequent settlement of the
respective long-term investment.
On settlement of a long-term equity investment, the difference between the proceeds
actually received and the carrying amount shall be recognized in the income statement for
the current period.
10. Fixed assets
Fixed assets are tangible assets held by: (a) for use in production or supply of goods
or services, for rental to others or for administrative purposes; (b) have useful life of more
than one year.
A fixed asset shall be recognized only when the economic benefits associated with the
asset will flow to the Group and the cost of the asset can be measured reliably. Subsequent43
expenditure incurred for a fixed asset that meet the recognition criterial shall be included
in the cost of the fixed asset, and the book value of the component of the fixed asset that is
replaced shall be derecognized. Otherwise, such expenditure shall be recognized in the
income statement in the period in which they are incurred.
Fixed assets are initially measured at actual cost on acquisition. The cost of a
purchased fixed asset comprises the purchase price, relevant taxes and any directly
attributable expenditure for bringing the asset to working condition for its intended use,
such as delivery and handling costs, installation costs and other surcharges.
Fixed assets are depreciated on straight-line basis. The estimated useful lives,
estimated residual values and annual depreciation rates for each category of fixed assets
are as follows:
Usage life Estimated Residual Rate Annual Depreciation Rate
Buildings 20~40 years 3% 2.43%~4.85%
Machinery 10~20 years 3% 4.85%~9.7%
Vehicles 5~8 years 3% 12.13%~19.4%
Others 5 years 3% 19.4%
Note: the mould tools in machinery should be depreciated in proportionate to the
estimated production.
The Group reviews the useful life and estimated net residual value of a fixed asset
and the depreciation method applied at least at the end of each year and makes adjustments
if necessary.
11. Construction in progress
The cost of construction in progress is determined according to the actual expenditure
for the construction, including all necessary construction expenditure incurred during the
construction period, borrowing costs that should be capitalized before the construction
reaches the condition for intended use and other relevant expenses.
Construction in progress is transferred to fixed assets when the asset is ready for its
intended use.44
12. Intangible assets
Intangible assets of the Group are recorded at actual cost on acquisition.
The useful life of the intangible assets shall be assessed according to the estimated
beneficial period expected to generate economic benefits. An intangible asset shall be
regarded as having an indefinite useful life when there is no foreseeable limit to the period
over which the asset is expected to generate economic benefits for the Group.
The useful lives of the intangible assets are as follow:
Useage life
Land use right 25~61 years
Software 2 years
Trademark 15 years
Land use rights that are purchased or acquired through the payment of land use fees
are accounted for as intangible assets. With respect to Self-developed properties, the
corresponding land use right and buildings should be recorded as intangible and fixed
assets separately. As to the purchased properties, if encountered the reasonable allocation
of outlays between land and buildings, all assets purchased will be recorded as fixed
assets.
The cost of a finite useful life intangible asset is amortized using the straight-line
method during the estimated useful life. For an intangible asset with a finite useful life, the
Group reviews the estimated useful life and amortization method at least at the end of each
year and adjusts if necessary.
13. Research and development exenditures
The Group classified the internal research and development expenditures as follows:
research expenditures and development cost.
The expenditures in research stage are charged to the current income on occurrence.
The expenditures in development stage are capitalized that meet all the conditions of
(a) it is feasible technically to finish intangible assets for use or sale; (b) it is intended to
finish and use or sell the intangible assets; (c) the usefulness of methods for intangible
assets to generate economic benefits shall be proved, including being able to prove that45
there is a potential market for the products manufactured by applying the intangible assets
or there is a potential market for the intangible assets itself or the intangible assets will be
used internally; (d) 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; and The development expenditures of the intangible assets
can be reliably measured. Expenses incurred that don’t meet the above requirements
unanimously should be expensed in the income statement of the reporting period.
The Company discriminates between research and development stage with the
condition that the project research comes into project-determination stage ,in which the
relevant research complete all the fractionization of products measurements and final
product scheme under final approval of management. The expenditures incurred in and
before project-determination stage is charged to the current income, otherwise it is
recorded as development cost.
14. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity
and a financial liability or equity instrument of another entity.
Recognition and derecognition of financial instruments
The Group recognizes a financial asset or a financial liability on its balance sheet,
when the Group becomes a party to the contractural provision of the instrument.
The Group derecognizes a financial asset when:
1) The contractual rights to the cash flows from the financial asset expire;
2) It transfers the financial asset and the transfer qualifies for derecognition as set out
below.
If the obligation relating to a financial liability has been discharged or cancelled or
has expired, the financial liability is derecognized. If the existing financial liaibility is
replaced by the same creditor, with another financial liability that has terms with an almost
completely different nature, or if almost all the terms of the existing liability are46
substantially revised, such replacement or revision is accounted for as the derecognition of
the original liability and the recognition of a new liability, and the difference thus resulted
is recognized in the income statement of the current period.
Classification and measurement of financial assets
Financial assets are, on initial recognition, classified into the following four
categories: financial assets at fair value through profit or loss, held-to-maturity
investments, loans and receivables and available-for-sale financial assets. When financial
assets are recognized initially, they are measured at fair value. In the case of financial
assets at fair value through profit or loss, relevant transaction costs are directly charged to
the profit and loss of the current period; transaction costs relating to financial assets of
other categories are included in the amount initially recognized.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading
and financial assets designated upon initial recognition as at fair value through profit or loss. A
financial asset held for trading is the financial asset that meets one of the following conditions: 1)
the financial asset is acquired for the purpose of selling in a short term; 2) the financial asset is a
part of a portfolio of identifiable financial instruments that are collectively managed, and there is
objective evidence indicating that the enterprise recently manages this portfolio for the purpose of
short-term profits; 3) the financial asset is a derivative financial instrument. For such kind of
financial assets, fair values are adopted for subsequent measurement. All the realized or
unrealized gains or losses on these financial assets are recognized in the income statement of the
current period.
Financial assets may be designated upon initial recognition as at fair value through profit or
loss if one of the following criteria is met:
1) The designation eliminates or significantly reduces the inconsistency in the measurement
or recognition of relevant gains or losses that would otherwise arise from measuring the financial
instruments on a different basis.47
2) A group of financial instruments is managed and its performance is evaluated on a fair
value basis, in accordance wih a documented risk management or investment strategy, and
information about the group is provided internally on that basis to the key management personnel.
3) The financial asset involves a hybrid instrument that contains one or more embedded
derivatives, except where the embedded derivative does not significantly modify the cash flows or
it is clear that separation of the embedded derivative is prohibited.
4) The financial asset contains an embedded derivative that would need to be separately
recorded and cannot be separately measured when acquired or at the subsequent balance sheet
date.
Investments in equity instruments, which have no quoted market price in active
markets and whose fair values cannot be reliably measured, should not be designated as
financial assets at fair value through profit or loss.
If the financial assets are, on initial recognition, classified into financial assets at fair
value through profit or loss, it couldn’t be reclassified into other categories; and other
categories couldn’t be classified into financial assets at fair value through profit or loss.
There are no financial assets at fair value through profit or loss in the reporting period
of the Group.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or
determineable payments and fixed maturity that an entity has the positive intention and
ability to hold to maturity. Held-to-maturity investments shall be measured at amortized
cost using the effective interest method. Gains or losses arising from derecognition,
impairment or amortization are recognized in current profit or loss.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Loans and receivables shall be measured
at amortized cost using the effective interest method. Gains or losses arising from48
derecognition, impairment or amortization are recognized in the income statement.
Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are
designated as available for sale or are not classified as (a) loans and receivables, (b)
held-to-maturity investments or (c) financial assets at fair value through profit or loss.
After initial recognition, available-for-sale financial assets are measured at fair value. The
premium/ discount is amortized using effective interest method and recognized as interest
income or expense. A gain or loss arising from a change in the fair value of an
available-for-sale financial asse is recognized in a separate component of capital reserve,
except for impairment losses and foreign exchange gains and losses resulted from
monetary financial assets, until the financial asset is derecognized or determined to be
impaired, at which time the cumulative gain or loss previously recognized in capital
reserve shall be removed from capital reserve and recognized in the income statement.
Interests and dividends relating to an available-for-sale financial asset are recognized in
the income statement for the period they relate to.
Classification and measurement of financial liabilities
The financial liabilities are, upon initial recognition, classified as financial liabilities
at fair value through profit or loss and other financial liabilities. For financial liabilities
at fair value through profit or loss, relevant transaction costs are directly recognized in the
income statement of the current period, and transaction costs relating to other financial
liabilities are included in the initially recognized amount.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities
held for trading and those designated as at fair value through profit or loss. A financial
liability held for trading is the financial liability that meets one of the following
conditions:
1) the financial liability is assumed for the purpose of repurchasing in a short term;49
2) the financial liability is a part of a portfolio of identifiable financial instruments
that are collectively managed, and there is objective evidence indicating that the enterprise
recently manages this portfolio for the purpose of short-term profits;
3) the financial liability is a derivative financial instrument.
For such kind of financial liabilities, fair values are adopted for subsequent
measurement. All the realized or unrealized gains or losses on these financial liabilities
are recognized in the income statement of the current period.
Financial liabilities may be designated upon initial recognition as at fair value
through profit or loss only when one of the following criteria is met:
1) The designation eliminates or significantly reduces the inconsistency in the measurement
or recognition of relevant gains or losses that would otherwise arise from measuring the financial
instruments on a different basis.
2) A group of financial instruments is managed and its performance is evaluated on a
fair value basis, in accordance wih a documented risk management or investment strategy,
and information about the group is provided internally on that basis to the key
management personnel.
3) The financial liability involves a hybrid instrument that contains one or more
embedded derivatives, except where the embedded derivative does not significantly
modify the cash flows or it is clear that separation of the embedded derivative is prohibited.
The financial liability contains an embedded derivative that would need to be separately
recorded and cannot be separately measured when acquired or at the subsequent balance
sheet date.
If an enterprise has classified a financial liability as financial liability at fair value
through profit or loss, the financial liability cannot be reclassified into other financial
liabilities; other financial liabilities cannot be reclassified into financial liability at fair
value through profit or loss, either.
The Group holds no financial liabilities at fair value through profit or loss at its
initial recognition in the reporting period.50
Other financial liabilities
After initial recognition, these financial liabilities are measured at amortized cost using the
effective interest method.
Derivative financial instruments
Derivative financial instruments are initially recognized at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are
carried as assets when the fair value is positive and as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives that do not
qualify for hedge accounting are directly recognized in the income statement.
Fair value of financial instruments
If there is an active market for a financial asset or financial liability, the Group determines the
fair value bu using the quoted prices. If no active market exits for a financial instrument, the Group
establishes fair value by using a valuation technique. Valuation techniques include using recent
arm’s length market transactions between knowledgeable, willing parties reference to the current
fair value of another instrument that is substantially the same, discounted cash flow analysis and
option pricing models.
Impairment of financial assets
The Group assesses the carrying amount of a financial asset, at the balance sheet date.
If there is objective evidence that the financial asset is impaired, the Group makes
provision for the impairment loss. Objective evidence that a financial asset is impaired is
evidence arising from one or more events that occurred after the initial recognition of the
asset and that event has an impact on the estimated future cash flows of the financial asset
which can be reliably estimated.
Financial assets carried at amortized cost
If objective evidence shows that the financial assets carried at amortized cost are impaired,
the carrying amount of the financial asset shall be reduced to the present value of the estimated
future cash flow (excluding future credit losses that have not been incurred). The amount of51
reduction is recognized as an impairment loss in the income statement. Present value of estimated
future cash flow is discounted at the financial asset’s original effective interest rate and includes
the value of any related collateral.
If a financial asset is individually significant, the Group assesses the asset individually for
impairment, and recognizes the amount of impairment in the income statement if there is objective
evidence of impairment. For a financial asset that is not individually significant, the Group can
include the asset in a group of financial assets with similar credit risk characteristics and
collectively assess them for impairment [or assess the asset individually for impairment]. For
financial assets that are not impaired upon individual tests (including financial assets that are
individually significant or insignificant), impairment tests should be conducted on them again by
including them in the group of financial assets. Assets for which an impairment loss is
individually recognized will not be included in a collective assessment of impairment.
If, subsequent to the recognition of an impairment loss on a financial asset carried at
amortized cost, there is objective evidence of a recovery in value of the financial asset which can
be related ovjectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed and recongised in the income statement. However, the
reversal shall not result in a carrying amount of the financial asset that exceeds what the amortized
cost would have been had the impairment not been recognized at the date the impairment is
reversed.
Financial assets carried at cost
If objective evidence shows that the financial assets carried at cost are impaired, the
difference between the present value discounted at the prevailing rate of return of similar financial
assets and the book value of the financial asset are provided as a provision. The impairment loss
recognized cannot be reversed.
For long-term equity investments, which are accounted for according to the cost
method set out by Accounting Standards for Business Enterprises No. 2 – Long-term
Equity Investments and has no quoted market price in active markets, and whose fair52
values cannot be reliably measured, their impairment should also be treated in accordance
with the above principle.
Available-for-sale financial assets
When there is objective evidence that the asset is impaired, the cumulative loss from declines
in fair value that had been recognized directly in capital reserve are removed from equity and
recognized in the income statement. The amount of the cumulateive loss that is removed from
capital reserves and recognized in the income statement (net of any principal repayment and
amortization) and current fair value, less any impairment loss on that financial asset previously
recognized in the income statement.
If, in a subsequent period, the fair value of a debt instrument classified as available for sale
increases and the increase can be related objectively to an event occurring after the impairment
was recognized in the income statement, the previously recognized imapairment loss shall be
reversed with the amount of the reversal recognized in the income statement. Impairment losses
recognized in the income statement for a debt instrument investment shall not be reversed through
proit or loss.
Transfer of financial assets
Transfer of a financial asset is a transaction whereby the Group assigns or conveys a financial
asset to another party (the transferee).
If the Group transfers substantially all the risks and rewards of ownership of the financial
asset, the Group derecognizes the financial asset; and if the Group retains substantially all the risks
and rewards of the financial asset, the Group does not derecognize the financial asset.
If the Group neither transfers nor retains substantially all the risks and rewards of
ownership of the financial asset, the Group determines whether it has retained control of
the financial asset. In this case: (i) it the Group has not retained control, it derecognizes
the financial asset and recognize separately as assets or liabilities any rights and
obligations created not retained in the transfer; (ii) if the Group has retained control, it
continues to recognize the financial asset to the extent of its continuing involvement in the53
transferred financial asset and recognizes an associated liability.
15． Borrowing costs
Borrowing costs are interest and other costs incurred by the Group in connection with the
borrowing of the funds. Borrowing costs include interest, amortization of discounts or premiums
related to borrowings, ancillary costs incurred in connection with the arrangement of borrowings,
and exchange differences arising from foreign currency borrowings.
The borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset are capitalized. A qualifying asset is an asset (an item of property,
plant and equipment and inventory etc.) that necessarily takes a substantial period of time to get
ready for its intended use of sale.
The capitalization of borrowing costs are as part of the cost of a qualifying asset shall
commence when:
1) Expenditure for the asset is being incurred;
2) Borrowing costs are being incurred;
3) Activities that are necessary to prepare the asset for its intended use or sale are in
progress.
Capitalization of borrowing costs shall cease when substantially all the activities
necessary to prepare the qualifying asset for its intended use or sale. And subsequent
borrowing costs are recognized in the income statement.
During the capitalization period, the amount of interest to be capitalized for each
accounting period shall be determined as follows:
1) where funds are borrowed for a specific-purpose, the amount of interest to be capitalized
is the actual interest expense incurred on that borrowing for the period less any bank interest
earned form depositing the borrowed funds before being used on the asset or any investment
income on the temporary investment of those funds;
2) Where funds are borrowed for a general-purpose, the amount of interest to be capitalized
on such borrowings is determined by applying a weighted average interest rate to the weighted
average of the excess amounts of cumulative expenditure on the asset over and above the amounts54
of specific-purpose borrowings.
During the construction or manufacture of assets that are qualified for capitalization,
if abnormal discontinuance, other than procedures necessary for their reaching the
expected useful conditions, happens, and the duration of the discontinuance is over three
months, the capitalization of the borrowing costs is suspended. Borrowing costs incurred
during the discontinuance are recognized as expense and charged to the income statement
of the current period, till the construction or manufacture of the assets resumes.
16． Impairment of assets
The Group determines the impairment of assets, other than the impairment of inventory,
deferred income taxes, financeial assets, and long-term equity investment which is measured by
employing the cost method, for which there is no offer in the active market and of which the fair
value cannot be reliably measured, using the following methods:
The Group assesses at the balance sheet date whether there is any indication that an
asset may be impaired. If any indication exists that an asset may be impaired, the Group
estimates the recoverable amount of the asset and performs impairment tests. Goodwill
arising from a businesss combination and an intangible asset with an indefinite usefull life
are tested for impairment at least at the end of every year, irrespective of whether there is
any indication that the asset may be impaird.
The recoverable amount of an asset is the higher of its fair value less costs to sell and the
present value of the future cash flow expected to be derived from the asset. The Group estimates
the recoverable amount on an individual basis. If it is not possible to estimate the recoverable
amount of the individual asset, the Group determines the recoverable amount of the asset group to
which the asset belongs. Identification of an asset group is based on whether major cash flows
generated by the asset group are largely independent of the cah flows from other assets or asset
groups.
When the recoverable amount of an asset or asset group is less than its carrying
amount, the carrying amount is reduced to the recoverable amount. The impairment of55
asset is provided for and the impairment loss is reconised in the income statement for the
current period.
For the purpose of impairment testing, the carrying amount of goodwill acquired in a
business combination is allocated, on a reasonable basis, to related asset groups; if it is impossible
to allocate to the related asset groups, it is allocated to each of the related sets of asset groups.
Each of the related asset groups or related sets of asset groups is an group or set of asset group that
is able to benefit from the synergies of the business combination and shall not be larger than a
reportable segment determined by the Group.
When an impairment test is conducted on an asset group or a set of asset groups that contains
goodwill, if there is any indication of impairment, the Group firstly tests the asset group or the set
of asset groups excluding the amount of goodwill allocated for impairment, i.e., it determines and
compares the recoverable amount with the related carrying amount and then recognize impairment
loss if any. Whereafter, the Group tests the asset group or set of asset groups including goodwill
for impairment, the carrying amount (including the portion of the carrying amount of goodwill
allocated) of the related asset group or set of asset groups is compared to its recoverable amount. If
the carrying amount of the asset group or set of asset groups is higher than its recoverable amount,
the amount of the impairment loss is firstly eliminated by and amortized to the book value of the
goodwill included in the asset group or set of asset groups, and then eliminated by the book value
of other assets according to the proportion of the book values of assets other than the goodwill in
the asset group or set of asset groups.
Once the above impairment loss is recognized, it cannot be reversed in subsequent
periods.
17. Estimated liabilities
The Group recognizes an estimated liability when the obligation arising from a
contingency meets the following conditions:
1) the obligation is a present obligation of the Group;
2) it is probable that an outflow of economic benefits from the Group will be required to
settle the obligation;56
3) a reliable estimate can be made of the amount of the obligation.
18. Revenue
Revenue is recognized only when an inflow of economic benefits is probable, the
amount of which can be reliably measured, and all of the following conditions are
qualified.
Revenue from the sale of goods
The Group has transferred to the buyer the significant risks and rewards of ownership
of the goods; the Group retains neither continuing management involvement to the degree
usually associated with ownership nor effective control over the goods sold; the amount of
revenue can be measured reliably.
Revenue from the rendering of services
When the outcome of a transaction involving the rendering of services can be
estimated reliably at the balance sheet date, revenue associated with the transaction is
recognized using the percentage of completion method, or otherwise, the revenue is
recognized to the extent of costs incurred that are expected to be recoverable. The outcome
of a transaction involving rendering of services can be estimated reliably when all of the
following conditions are satisfied: the amount of revenue can be measured reliably; it is
probable that the associated economic benefits will flow to the Group; the stage of
completion of the transaction can be measured reliably; the costs incurred and to be
incurred for the transaction can be measured reliably. The Group determines the stage of
completion of a transaction involving the rendering of services by using the proportion of
services performed to date to the total services to be performed.
Interest income
It should be measured based on the length of time for which the Group’s cash is used
by others and the applicable effective interest rate.
Rental income
Rental income from operating leases is recognized by the lessor in the income
statement on a straight-line basis over the lease term.57
19. Leases
A finance lease is a lease that transfers in substance all the risks and benefits incident
to ownership of an asset. An operating lease is a lease other than a finance lease.
The Group recording the operating lease as a lessee
Lease payments under an operating lease are recognized by a lessee on a straight-line
basis over the lease term, and either included in the cost of another related asset or charged
to the income statement for the current period.
The Group recording the operating lease as a lessor
Rental income under a finance lease is recognized by a lessor on a straight-line basis
over the lease term, through profit or loss.
20. Employee benefits
Employee benefits are all forms of consideration given and other relevant expenditure
incurred by the Group in exchange for service rendered by employees. During the accounting
period that the employees render services to the Group, the employee benefits payable is
recognized as a liability. When the termination benefits fall due more than 1 year after the balance
sheet date, if the discounted value is material, it is reflected in present value.
The employees of the Group participate in social insurance, such as pension insurance,
medical insurance, non-employment insurance, etc., and housing accumulation fund, which
is managed by local government and the relevant expenditure, is recognized, when
incurred, in the costs of relevant assets or the profit and loss for the current period.
When the Group terminates the employment relationship with employees before the
end of the employment contracts or provides compensation as an offer to encourage
employees to accept voluntary redundancy, a provision shall be recognized for the
compensation arising from termination of employment relationship with employees, with a
corresponding charge to the income statement for the current period, when both of the
following conditions are satisfied: (a) the Group has a formal plan for termination of
employment relationship, or has made an offer for voluntary redundancy, which will be
implemented immediately; (b) the Group cannot unilaterally withdraw from the58
termination plan or the redundancy offer.
The same principle is applied to the early retirement plan, as it is for the
above-mentioned termination benefits. The salaries, social insurance premiums, etc., to be
paid for the early retired employees, during the period from the date when the employees
stop rendering service to the normal retirement date, should be recognized as employee
benefits payable and charged to the income statement of the current period, when the
above conditions for recognising the termination benefit plan are satisfied.
21. Income taxes
Income tax comprises current and deferred tax. Income tax is recognized as an income
or an expense and include in the income statement for the current period, except to the
extent that the tax arises from a business combination or if it relates to a transaction or
event which is recognized directly in equity.
Current tax is the amount of income tax payable in respect of the taxable profit for the current
period. Taxable profit is the profit for current period, which is determined in accordance with rules
established by the taxation authorities.
At the balance sheet date, current income tax liabilities (or assets) for the current and
prior periods are measured at the amount expected to be paid to (or recovered from) the tax
authorities according to the requirements of the tax laws.
For temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their book values, and temporary differences between the book values
and the tax bases of items, the tax bases of which can be determined for tax purposes, but
which have not been recognized as assets and liabilities, deferred taxes are provided using
the liability method.
A deferred tax liability is recognized for all taxable temporary differences, except:
1) to the extent that the deferred tax liability arises from the initial recognition of
goodwill or the initial recognition of an asset or liability in a transaction which contains
both of the following characteristics: (i) the transaction is not a business combination; and
(ii) at the time of the transaction, it affects neither the accounting profit nor taxable profit59
or loss.
2) In respect of taxable temporary differences associated with investments in
subsidiaries, associates and interests in jointly-controlled enterprises, where the timing of
the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
A deferred tax asset is recognized for deductible temporary differences, carryforward
of unused tax credits and unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences, and the
carryforward of unused tax credits and unused tax losses can be utilized except:
1) where the deferred tax asset relating to the deductible temporary differences arises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss;
2) in respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred tax assets are only
recognized to the extent that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against which the temporary
differences can be utilized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is realized or the liability is
settled, according to the requirements of tax laws. The measurement of deferred tax assets
and deferred tax liabilities reflects the tax consequences that would follow from the
manner in which the Group expects at the balance sheet date, to recover the assets or settle
the liabilities.
At the balance sheet date, the Group reviews the book value of diferred tax assets. If
it is probable that sufficient taxable income cannot be generated to use the tax benefits of
deferred tax assets, the book value of deferred tax assets should be reduced. When it is60
probable that sufficient taxable income can be generated, the amount of such reduction
should be reversed.
22． Significant accounting judgements and estimates
Judgements
When applying the accouoting policies of the Group, except for accounting estimates,
management will make accounting judgements which have significant effects on the
financial statements:
The Group makes a judgment on whether there is any sign of possible assets
impairment on the day of balance sheet date at least. If there is any sign of possible assets
impairment, the assets concerned should be subject to impairment test based on the
estimated recoverable amount. The recoverable amount shall be determined in light of the
higher one of the net amount of the fair value of the assets minus the disposal expenses
and the current value of the expected future cash flow of the assets. When making an
estimate of the present value of the future cash flow of an asset, the Group should estimate
the future cash flows of the asset or the relevant assets group, with the appropriate
discount rate selected to reflect the repsent value of the future cash flows.
Uncertainty of accouting estimates
The crucial assumptions of significant accounting estimates in future and other
crucial sources of estimated uncertainty, which may result in the significant adjustments to
the book value of the subsequent accouting period, are as the following:
Impairment of goodwill
Goodwill is subject to the impairment test yearly at least, which brings the estimates
of the use value of the assets group that is allocated in goodwill. When making an estimate
of the use value of the assets concerning goodwill, the Group should estimate the future
cash flows of the assets group concerned, with the approriate discount rate to reflect the
present value of the cash flows.
23. Other changes in Accounting Policies and Accounting Estimates
There are no other changes in accounting policies and accounting estimates.
Ⅲ Taxes
The major categories of taxes and surcharges with the respective tax rates applicable61
to the Group are as follows:
Value added tax (“VAT”) – In accordance with the relevant tax laws in the PRC,
the VAT rate for domestic sales is 17%. VAT is levied at 17%
on the invoiced value of sales of goods and rendering of srvices,
and is payable by the purchaser. The Group is required to pay
the VAT it collects to the tax authority, but may deduct the VAT
it has paid on eligible purchases.
Business tax – In accordance with the relevant tax laws in the PRC, Business
Tax is levied at 5% on the relevant revenue.
City maintenance and construction surtax
– In accordance with the relevant tax laws in the PRC, it is levied at
7% on the turnover taxes paid.
Educational surcharge – In accordance with the relevant tax laws in the PRC, it is levied
at 3% on the turnover taxes paid.
Corporate income tax – In accordance with the relevant tax laws in the PRC, the Group is
subject to a corporate income tax rate of 15%~33% on its taxable
income. The Company is subject to the PRC EIT and local income
tax. As the Company is qualified as a domestic enterprise in
encouraged industries, the Company is entitled to a preferential
EIT rate of 15% from 2001 to 2010, in accordance to Circular on
the Issue of Preferential Taxation Policies for Western
Development Program (Paragragh 1, Article 2, No 202-2001)
collectively issued by the Ministry of Finance, the National
Taxation Bureau and the Customs General Administration of PRC
and also approved by the Guo Shui Han-Yu (2002) No 186. And it
is exempted from local income tax.to a corporate income tax rate
of 15%~33% on its taxable income. The EIT rate for other
companies of the Group is 33%.
The Entreprise income tax law of the People’s Republic of
China(hereafter as “New EIT Law”) approved by the Fifth Session
of The Tenth National People’s Congress, ended on March 16 2007,
will be enforced as of 1st January 2008. In accordance to the New
EIT law, the domestic and foreign enterprises will be subject to
25% unanimously.Whereas the Company keeps a preferential tax
rate of 15% in conforms to the relevant tax policies, and the
subisidiaries are subject to 25%. The Group has been made
respective adjustments due to the reversal of taxable temporary
time difference and deductible temporary time difference,
according to new applicable tax rates in effect as of 1st January
2008.
Ⅳ Consolidation scope
On 30 June 2009, the main subsidiaries of the Group are as follows:62
Total proportion of shares heldTotalproportion
Company
Name of Subsidiaries Registration Nature of BusinessRegisteredInvestment Direct(%) Indirect(%) of voting sharesCode
Place Capitalof the Group
(RMB 10,000)(RMB 10,000)
Nanjing Changan Auto-NanjingManufacturer, development and 60,181 47,308 73.60 - 83.2275410659-X
Mobile Co., Ltd seller of mini cars and spare parts
Hebei Changan Auto- DingzhouManufacturer, development and 26,469 21,249 80.11 - 93.4573872432-0
Mobile Co., Ltd seller of mini cars and spare parts
Chongqing Changan InternationalChongqingSeller and agent of import / export1,376 1,307 95.00 - 100.00 20282099-8
Automobile Sales Co., Ltd services of commodities and tech niques
Chongqing Changan Auto-ChongqingSeller of cars and spare parts4,850 4,850 100.00 - 100.0020289809-0
Mobile Sales Co., Ltd
Chongqing Anfu Auto-ChongqingSeller of cars and spare parts 4,200 2,100 50.00 - 50.0073657088-2
Mobile Co., Ltd.
Chongqing Changan SpecialChongqingSeller of special cars and spare parts 500 250 50.00 - 50.00 74534852-X
Automobile Co., Ltd and vehicles maintainance
Chongqing Changan Auto- ChinaSeller of Changan series cars and 1,900 1,900 90 -100 20.0 100.00
Mobile sales subsidiaries spare parts
Chongqing Changan Auto-ChongqingSeller of cars and spare parts 3,000 3,000 99.00 1.00 99.0075308943-3
Mobile supporting service Co., Ltd.
Chongqing Changan Auto-ChongqingManufacturer and seller of Car 11,550 11,616 100.00 - 100.0066089542-8
Mobile Mould Co. Ltd moulds and car spare parts
Chongqing Changan EuropeTurin, Research and development ofEUR 10 97 100.00 - 100.0009372440017
Design Academy Co. Ltd.Italy vehicles
Although the Group owns more than half of the voting power of the following investees, it
does not have control over the investees as:
Name of Subsidiaries Registration Nature of Business Registered Investment Direct(%) Indirect(%) of voting shares Code
Place Capital of the Group
(RMB 10,000) (RMB 10,000)
Changan Ford Mazda Auto- Chongqing Manufacturer and seller of cars USD35,144 139,510 50.00 - 50.00 70937510-9
Mobile Co., Ltd. and spare parts
Changan Ford Mazda Engine Nanjing Manufacturer and seller of automobile USD 13,920 55,729 50.00 - 50.00 71785962-1
Co., Ltd enegine and spare parts
Chongqing Changan Suziki Chongqing Manufacturer and seller of cars USD19,000 23,991 51.00 - 51.00 62190016-7
Automobile Co., Ltd. and spare parts
Jiangling Holding Co., Ltd. Nanchang Manufacturers and seller of cars 200,000 100,000 50.00 - 50.00 76703230-7
and spare parts
The company does not have control over the four joint-ventures above, and their main
finance and management decision were controlled by the company
and other shareholders. Therefore, it is not included in scope of
consolidated financial statements, and the retrospective63
adjustments have been made.
四、 合并财务报表主要项目注释
Ⅴ Notes to the consolidated financial statements
⒈Monetary capital
30 June 2009 31 December 2008
Cash 29,091 66,535
Deposit in bank 2,400,432,294 1,538,113,598
Other monetary capital 454,930,171 85,984,026
Total 2,855,391,556 1,624,164,159
⒉Notes receivable
30 June 2009 31 December 2008
Trade acceptance 634,859,036 241,420,000
Bank acceptance 3,545,075,446 1,692,663,075
4,179,934,482 1,934,083,075
⒊Accounts receivable and others
⑴Accounts receivable
The credit period is generally one month, extending up to three months for major customers.
Trade receivables are non-interest-bearing.
An aged analysis of the accounts receivable as at the balance sheet date is as follows:
30 June 2009 31 December 2008
Within 1 year 403,228,713 365,641,255
1 to 2 years 39,692,376 34,180,592
2 to 3 years 2,298,785 2,395,786
Over 3 years 67,175,609 67,137,517
Less:Bad debt Provision 70,186,797 70,689,236
442,208,686 398,665,914
Provisions for bad debts are as follows：
30 June 2009
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 279,502,101 54.55 21,657,004 7.75
individual insignificant
items with similar credit
risk characteristics, that
has significant risk
57,564,765 11.23 48,449,980 84.17
Other insignificant items 175,328,617 34.22 79,813 0.05
512,395,483 100 70,186,797
31 December 2008
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 229,756,748 48.95 21,860,665 9.51
individual insignificant
items with similar credit
risk characteristics, that
has significant risk
126,427,272 26.94 48,828,571 38.62
Other insignificant items 113,171,130 24.11
469,355,150 100 70,689,23664
⑵other receivables
An aged analysis of other accounts receivable as at the balance sheet date is as follows
30 June 2009 31 December 2008
Within 1 year 46,879,117 61,232,048
1 to 2 years 27,160,573 33,598,221
2 to 3 years 294,632 3,959,184
Over 3 years 5,609,412 4,822,390
Less:Bad debt Provision 8,830,721 9,089,247
71,113,013 94,522,596
Provisions for bad debts drawing are as follows
30 June 2009
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 45,150,000 56.48
individual insignificant
item with similar credit
risk characteristics, that
has significant risk
8,830,721 11.05 8,830,721 100.00
Other insignificant items 25,963,013 32.47
79,943,734 100 8,830,721
31 December 2008
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 64,699,000 62.45
individual insignificant
items with similar credit
risk characteristics, that
has significant risk
6,634,213 6.40 6,634,213 100.00
Other insignificant items 32,278,629 31.15 2,455,034 7.61
103,611,842 100 9,089,247
⒋Prepayments
30 June 2009 31 December 2008
Amount Percentage(%) Amount Percentage(%)
Within 1 year 184,177,100 99.51 262,501,911 99.33
1 to 2 years 910,869 0.49 1,692,087 0.64
2 to 3 years 71,868 0.03
over 3years
total 185,087,969 100 264,265,866 100
⒌Inventory
30, June 2009 31, December 2008
Raw materials 427,820,028 414,930,917
Materials in transit 42,169,948 43,257,642
Work in progress 164,192,620 221,768,842
Commodity stock 719,200,958 1,003,235,235
Consigned processed
material 3,537,991 5,193,083
Low-value
Consumables 41,647,528 43,263,063
Less: provision for
value decline of 146,362,038 69,433,48165
inventory
Inventory net value 1,252,207,035 1,662,215,301
Changes in provision for value decline of inventory:
provision for value
decline of
inventory:
31 December 2008 Increase charge off 30 June 2009
Raw materials 4,320,568 116,858,062 121,178,630
work in progress 235,570 235,571
finished goods 64,877,343 18,785,689 58,715,194 24,947,837
Low-
ValueConsumables
69,433,481 135,643,751 58,715,194 146,362,038
⒍Long-term equity investments
31, December
2008 Increase Decrease Incl:cash
dividend 30, June 2009
Cost method 148,609,274 148,609,274
Equity method 4,434,600,109 323,390,925 550,000,000 550,000,000 4,207,991,034
Less:
impairment
for long-term
equity
investments
27,120,000 27,120,000
Net value for
long-term equity
investments
4,556,089,383 323,390,925 550,000,000 550,000,000 4,329,480,308
On 30 June 2009, Equity method of Long-term equity investments is listed as follows:
31 December
2008 Increase Decrease 30 June 2009
South-western Securities Co., Ltd 50,000,000 50,000,000
Chongqing Changan Jinling
Vehicles Parts Co., Ltd. 2,900,000 2,900,000
Chongqing International Golf Club
Co., Ltd. 4,900,000 4,900,000
China South Industry Group
Finance Co., Ltd. 80,000,000 80,000,000
Sichuan Glass Co., Ltd. 1,809,274 1,809,274
Chongqing ANTE co., Ltd 3,000,000 3,000,000
zhongfalian investment co., Ltd 6,000,000 6,000,000
total 148,609,274 148,609,274
On 30 June 2009, Equity method of Long-term equity investments is listed as follows:
Equity adjustment Provision
Initial
Amount
Accumulate
Additional
Investment
Changes
in
curernt
year
profit/loss
Cash
dividend
received
in
current
year
Accumulate
d
profit/loss
changes in
Current Accumulated
additions Year end
balance
Joint
venture：
Chongqing
Changan
Suzuki
239,905,266 13,001,872 936,001,243 1,175,906,50966
Automobile
Co., Ltd.
Jiangling
Holding
Co., Ltd.
50,000,000 950,000,000 26,388,167 65,988,187 2,669,322 1,068,657,509
Changan Ford
Mazda
Automobile
Co., Ltd.
210,901,925 1,184,208,792 299,159,602 550,000,000 357,256,309 19,575,055 1,771,942,081
Changan Ford
Mazda
Engine Co.,
Ltd.
242,568,000 314,724,960 -16,420,282 -374,850,063 182,442,897
Associates：
Chongqing
HelpGo
Information
Technology
Co., Ltd.
4,500,000 1,261,566 4,542,038 9,042,038
Total 747,875,191 2,448,933,752 323,390,924 550,000,000 988,937,713 22,244,377 4,207,991,034
Impairment provision for long-term equity investment:
Impairment provision: for long
–term equity investment 31December 2008 Increase Decrease 30 June 2009
South-western Securities Co.,
Ltd. 27,120,000 27,120,000
⒎Fixed assets
Buildings Machinery Vehicles other
equipments Total
original price
31 December 2008 1,038,049,825 3,150,813,129 43,462,039 1,357,460,922 5,589,785,914
Acquisition
Transferred from
construction in
progress 2,031,572 73,599,785 3,111,348 235,428,159 314,170,864
Disposal and write-off
2,363,942 3,957,326 2,237,748 650,870 9,209,886
30 June 2009 1,037,717,456 3,220,455,588 44,335,638 1,592,238,210 5,894,746,892
Accumulated
depreciation
31 December 2008 144,149,774 1,445,903,819 18,989,865 536,364,415 2,145,407,873
Provision 19,061,565 100,325,426 2,715,861 77,678,626 199,781,478
Write-off 443,646 1,456,929 1,137,988 422,716 3,461,279
30,June 2009 162,767,693 1,544,772,317 20,567,737 613,620,325 2,341,728,072
Impairment provision
31 December 2008 110,614,721 652,218 111,266,939
Provision 82,584,520 59,438,400 142,022,920
Write-off
30 June 2009 193,199,241 60,090,617 253,289,859
book value
31 December 2008 893,900,050 1,594,294,589 24,472,174 820,444,289 3,333,111,102
30 June 2009 874,949,762 1,482,484,030 23,767,901 918,527,268 3,299,728,96167
⒏Construction in progress
Budget 31
December
2008
Increase Decrease Transferr
ed to
Fixed
assets
30 June
2009
Equipment
for Mini
Vehicle
Production
51,163,130 13,496,938 29,155,895 29,155,895 35,504,173
Changan
Industrial
Zone
Project
531,037,799 157,385,317 161,155,602 161,155,602 527,267,513
Engine
Plant
73,639,990 247,609,271 14,701,349 14,701,349 306,547,912
Equipment
for Sedan
Production
35,228,514 42,132,499 37,084,505 37,084,505 40,276,507
Projects
of Changan
Engineerin
g
Institute
45,807,273 30,354,566 23,616,141 23,616,141 52,545,698
Vehicle
Dies
40,097,774 22,183,619 8,785,792 8,785,792 53,495,602
Hebei
Changan
weld and
Paint Base
12,702,549 12,192,549 11,893,455 299,094 510,000
Others 74,313,049 66,026,266 7,606,002 7,529,017 76,985 132,733,313
Total 851,287,528 591,891,02
4 294,297,835 293,921,756 376,079 1,148,880,71
8
⒐Intangible assets
Land use rights Software userights Trademark rights Capitalisation
expenditure
Total
original price
31 December 2008 81,957,279 33,241,729 36,770,000 13,272,910 165,241,919
Additions 13,885,569 183,917,744 197,803,313
Deductions 77,400 77,400
30 June 2009 81,957,279 47,049,898 36,770,000 197,190,654 362,967,831
Accumulated amortization
31 December 2008 10,316,985 10,326,250 21,040,612 1,990,937 43,674,784
Provision 2,356,925 7,322,089 1,225,667 12,284,135 23,188,816
Write-off 77,400 77,400
30 June 2009 12,673,911 17,570,939 22,266,278 14,275,072 66,786,200
Impairment provision
31 December 2008 6,700,000 6,700,000
Provision
Write-off
30 June 2009 6,700,000 6,700,00068
Book value
31 December 2008 64,940,294 22,915,479 15,729,388 11,281,973 114,867,135
30 June 2009 62,583,369 29,478,959 14,503,722 182,915,582 289,481,631
⒑Development expenditure
31 December 2008 30 June 2009
Automobile Development 308,158,911 211,213,027
⒒Deferred tax assets
Provision
for the
assets
impairment
Accrued
expenses and
contingent
liabilities
Unpaid Tech
develop.
Expense and
ad Expense
Unpaid
Salary and
bonus
Total
31 December 2008 26,254,707 88,956,647 1,833,276 22,488,827 139,533,458
Charged to the
income statement
3,048,933 55,508,214 1,896,801 5,931,811 66,385,759
30 June 2009 29,303,640 144,464,861 3,730,077 28,420,638 205,919,216
⒓Short-term loans
31, December 2008 30, June 2009
Mortgage loans 128,000,000 193,300,000
Pledge loans 53,236,904 17,249,590
Credit loans 870,000,000 438,300,000
Bill purchased 19,662,291
Bill discounted 22,850,000
Total 1,093,749,195 648,849,590
⒔Notes payable
31, December 2008 30 June 2009
Trade acceptance
Bank acceptance 2,196,879,137 1,844,079,919
Total 2,196,879,137 1,844,079,919
⒕Acounts payable
Accounts payable bear no interest, and are normally repaid in four months.
On 30 June 2009, the accounts payable to units that hold 5% or more of the
Company’s voting shares or to related parties included in this account balance is
RMB206,275,969 Yuan (31 December 2008: RMB38,276,662 Yuan).
On 30 June 2009 and 31 December 2008, there is no significant accounts payable of
over one year.
⒖Advances receipts
On 30 June 2009, within the aforesaid balance, there is no amount due to shareholders that
hold 5% or more of the Company’s voting shares. (31 December 2008: nil)
On 30 June 2009 and 31 December 2008, there are no significant advances receipts of over
one year.
⒗Employee compensation payable
31 December 2008 Additions Payments 30 June 200969
Salary, bonus, allowance and subsidy 72,916,437 353,036,292 309,510,713 116,442,016
Employee salary 543,411 13,356,782 12,788,112 1,112,081
Labour fund 6,389,323 9,866,546 9,413,097 6,842,772
Social insurance premium 20,237,610 56,775,626 56,416,967 20,596,269
Housing accumulation fund 10,787,673 16,676,757 16,303,951 11,160,479
Total 110,874,454 449,712,002 404,432,840 156,153,616
⒘Taxes payable
31 December 2008 30 June 2009
Corporate income tax 8,577,435 25,943,612
Business tax 3,279,247 1,365,012
Value-added tax -72,464,680 10,840,375
City maintenance and construction tax 6,355,335 8,854,353
Income tax 172,688 250,055
Consumption tax 109,753,108 127,831,632
Additional education expenses 2,177,808 4,024,196
Others 605,881 -668,777
Total 58,456,823 178,440,458
⒙Other payables
31 December 2008 30 June 2009
Dealer earnest money 16,334,249 23,225,213
Warrenty 36,449,174 25,402,181
Repair fees 32,756,418 47,596,289
Rental fees 187,680 337,681
Advertisment fees 18,940,841 8,322,680
Sales bonus 1,291,775 906,005
Discount transfer 0 3,879,483
Technical assignment fees 0 0
Warehousing and transport fees 101,061,859 96,732,022
Loans temporarily 9,424,467 13,013,749
Information technology expense 3,181,927 0
Project funds 72,159,775 33,735,433
Project earnest money 14,076,410 254,000
Others 61,436,928 80,759,654
Total 367,301,503 334,164,389
⒚Anticipated liabilities
Categoris of
Expenses 31 December 2008 Additions
Deduction 30 June 2009
Reasons for
year-end cash
in hand
Warranty
expenses
213,392,485 222,225,452 116,144,906 319,473,031
maintenance
expense drew
beforehand
213,392,485 222,225,452 116,144,906 319,473,031
⒛Specialised item payable
Deduction Categoris of expenses 31 December 2008 Additions Carry-forward Others 30 June 2009
Project 863 25,202,235 8,650,000 5,266,684 28,585,551
Check 6,537,774 2,000,000 341,101 8,196,67370
For HEV key technology
Development of
internal conbustion
hydrogen engine
685,381 450,000 475,792 659,589
Complete
region-platform key
technology
600,000 204,072 395,928
New vehicle product
development
830,893 1,000,000 34,909 1,795,984
Automobile industry
chain Collaborative
Platform
1,000,000 36,849 963,151
Others 3,683,710 9,540,000 441,971 12,781,739
Total 37,939,993 22,240,000 6,801,378 53,378,615
21. Operatiing revenue and expenses
From January to June 2009
From January to June 2008
Catogories of business Operating revenue Operating cost Operating revenue Operating cost
Major business 10,880,132,187 8,693,844,062 7,429,333,038 6,252,791,186
Others 402,574,370 309,247,789 450,316,148 302,458,145
Total 11,282,706,557 9,003,091,851 7,879,649,185 6,555,249,330
22. Business tax and surcharges
From January to June 2009 From January to June 2008
Business tax 1,639,833 16,547
Consumption tax 154,636,512 155,884,685
City maintenance and construction tax 49,796,259 25,284,182
Additional education expenses 23,627,529 11,600,993
Others 0 321,090
Total 229,700,133 193,107,497
23. Financial expenses
From January to June 2009 From January to June 2008
Interest expense 25,357,851 42,869,610
Deduction: the amount of
capitalized interest 13,629,491 886,906
Deduction: interest income 14,358,694 11,291,589
Exchange gain or loss 1,261,412 3,545,998
Others 59,244 5,660,972
Total -1,309,678 39,898,085
24. Impairment on assets
From January to June 2009 From January to June 2008
Bad debt loss -760,965 -13,576,288
Loss due to the market price
decline of inventory 76,928,557 5,992,973
Impairment on fixed assets 142,022,920 126,269,969
Total 218,190,512 118,686,65371
VI. Notes to the financial statements of parent company
⒈Accounts receivable and others
⑴Accounts receivable
30 June 2009 31 December 2008
Within 1 year 959,055,252 332,734,003
1 to 2 years 24,231,033 171,503,791
2 to 3 years 20,053,730 94,326,605
Over 3 years 85,912,947 430,610,395
Provisions for bad debts
drawing 68,894,583 69,397,022
1,020,358,378 959,777,773
Provisions for bad debts drawing are as follows：
30 June 2009
Sum Percentage（%） debt Provision provision rate（%）
Individual significant item 879,502,101 80.74 21,657,004 2.46
individual insignificant
item with similar credit
risk characteristics, that
has significant risk
49,273,579 4.52 47,237,579 95.87
Other insignificant items 160,477,281 14.73
1,089,252,961 100 68,894,583
31 December 2008
Sum Percentage（%） debt Provision provision rate（%）
Individual significant item 885,565,594 86.05 21,860,665 2.47
individual insignificant
item with similar credit
risk characteristics, that
has significant risk
101,674,465 9.88 47,536,357 46.75
Other insignificant items 41,934,736 4.07
1,029,174,795 100 69,397,022
⑵Other receivables
An analysis of other accounts receivable as at the balance sheet date is as follows:
30 June 2009 31 December 2008
Within 1 year 116,432,300 164,319,684
within 1 to 2 years 769,926 1,852,537
within 2 to 3 years 215,763 3,875,614
Over 3 years 5,590,912 1,932,065
Deduct:Provisions for other bad debts 5,446,508 5,705,033
117,562,393 166,274,867
Provisions for bad debts drawing are as follows
30 June 2009
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 100,000,000 81.3
individual insignificant
item with similar credit
risk characteristics, that
has significant risk
9,205,469 7.48 5,446,508 59.1772
Other insignificant items 13,803,432 11.22
123,008,901 100 5,446,508
31 December 2008
Amount Percentage（%） Bad debt
Provision
provision rate(%)
Individual significant item 150,000,000 87.22
individual insignificant
items with similar credit
risk characteristics, that
has significant risk
10,731,497 6.24 5,705,033 53.16
Other insignificant items 11,248,404 6.54
171,979,901 100 5,705,033
⒉Inventory
30, June 2009 31, December 2008
Raw materials 176,261,428 172,870,589
Materials in transit 32,169,948 37,877,242
Work in progress 86,538,548 72,135,750
Commodity stock 390,847,698 605,070,557
Consigned processed material
Low-value Consumables 37,759,740 39,377,715
Less: provision for value
decline of inventory 141,295,989 59,687,616
Inventory net value 582,281,373 867,644,237
Changes in provision for value decline of inventory:
provision for value
decline of
inventory:
31 December 2008 Increase charge off 30 June 2009
Raw materials 4,320,568 116,858,063 121,178,630
work in progress
finished goods 235,571 235,571
Low-
ValueConsumables 55,131,477
18,343,977
53,593,667 19,881,788
59,687,616 135,202,040 53,593,667 141,295,989
⒊Long-term equity investments
31, December
2008 Increase Decrease Incl:cash
dividend 30, June 2009
Cost method 1,025,014,110 300,000 1,025,314,110
Equity method 4,462,020,212 330,792,097 550,000,000 550,000,000 4,242,812,309
Less:
impairment
for long-term
equity
investments
27,120,000 27,120,000
Net value for
long-term equity
investments
5,459,914,322 331,092,097 550,000,000 550,000,000 5,241,006,419
As of June 30, 2009, cost method long term equity investment list as follow:
Dec.31, 2009 current
increase
current
decrease
including: cash
bonus received
Nanjing Changan Automobile Co., Ltd 399,615,259 399,615,259
Hebei changan Automobile Co., Ltd 212,487,236 300,000 212,787,23673
Chongqing Changan International
Automobile Sales Co., Ltd 13,068,580 13,068,580
Chongqing Changan Automobile
Customer Service Co., Ltd 29,700,000 29,700,000
Chongqing Anfu Sales Co., Ltd 16,000,000 16,000,000
Chongqing Changan Automobile Sales
Co., Ltd 48,500,000 48,500,000
Chongqing Changan Automobile Sales
Subsidiary 18,550,000 18,550,000
Chongqing Changan Special
Automobile Co., Ltd 2,500,000 2,500,000
Changan Automobile European
Designing Center 974,020 974,020
Chongqing Changan Automobile Mould
Co., Ltd 116,159,741 116,159,741
Southwest Securities Co., Ltd 50,000,000 50,000,000
Chongqing Changan Jinling Automobile
Parts Co., Ltd 2,900,000 2,900,000
Chongqing International Golf Club 4,900,000 4,900,000
Chian South Financing Co., Ltd 80,000,000 80,000,000
Chongqing Ante Imp.& Exp. Co., Ltd 3,000,000 3,000,000
Sichuan Glass Co., Ltd 1,809,274 1,809,274
Chongqing Changan New Energy
Automobile Co., Ltd 18,850,000 18,850,000
Zhongfalian Investment Co., Ltd 6,000,000 6,000,000
1,025,014,110 300,000 1,025,314,110
As of June 30, 2009, Equity method of Long-term equity investments is list as follows:
equity adjustment Provision
initial
Amount
Accumulated
additional
investment
profit/loss
changes in
current
year
cash bonus
received
accumulated
profit/loss
changes
curren
t year
addtio
ns
accumulate
d
additions
year end
balance
joint
venture
Chongqing
Changan
Suzuki
Automobile
Co., Ltd
239,905,266 13,001,872 936,001,243 1,175,906,509
Jiangling
Holding
Co., Ltd
50,000,000 950,000,000 26,388,167 97,057,723 2,669,322 1,099,727,045
Changan
Ford Mazda
Automobile
Co., Ltd
210,901,925 1,184,208,792 306,560,775 550,000,000 361,008,047 19,575,055 1,775,693,820
Changan
Ford Mazda
Engine Co.,
Ltd
242,568,000 314,724,960 -16,420,282 -374,850,063 182,442,897
Associates
Chongqing
HelpGo
Information
4,500,000 1,261,566 4,542,038 9,042,03874
Technology
Co., Ltd
Total 747,875,191 2,448,933,752 330,792,097 550,000,000 1,023,758,989 22,244,377 4,242,812,309
long term equity investment impairment provision
long term equity investment
impairment provision Dec.31, 2008 current
increase
current
decrease June 30, 2009
Southwest Securities Co., Ltd 27,120,000 27,120,000
⒋Fixed assets
Buildings Machinery Vehicles other
equipments Total
original price
31 December 2008 924,637,602 1,911,586,081 29,200,701 1,724,975,200 4,590,399,583
Acquisition
Transferred from
construction in
progress 2,031,572 60,827,622 2,999,382 223,912,205 289,770,781
Disposal and write-off
993,129 2,208,275 103,179 3,304,583
30 June 2009 925,676,045 1,970,205,428 32,096,904 1,948,887,405 4,876,865,782
Accumulated
depreciation
31 December 2008 224,264,303 922,909,881 11,273,164 625,357,262 1,783,804,610
Provision 14,261,376 67,163,361 1,627,769 75,316,431 158,368,936
Write-off 682,657 100,083 782,741
30,June 2009 238,525,679 989,390,584 12,800,850 700,673,693 1,941,390,806
Impairment provision
31 December 2008 652,217 652,217
Provision 82,584,520 59,438,400 142,022,920
Write-off
30 June 2009 83,236,738 59,438,400 142,675,137
83,236,738 83,236,738
book value
31 December 2008 700,373,299 988,023,982 17,927,536 1,099,617,938 2,805,942,755
30 June 2009 687,150,367 897,578,106 19,296,054 1,188,775,312 2,792,799,839
⒌construction in process
item Dec.31, 2008
current
increase
current
decrease
current
transfer
from fixed
asset
other
decrease
June 30, 2009
mini-van
production
equipment
51,163,130 13,496,938 29,155,895 29,155,895 35,504,173
Chang Industrial
Zone project
531,037,799 157,385,317 161,155,602 161,155,602 527,267,513
engine plant 73,639,990 247,609,271 14,701,349 14,701,349 306,547,912
sedan production
equipment
35,228,514 42,132,499 37,084,505 37,084,505 40,276,507
Automotive
Engineering
Institute project
45,807,273 30,354,566 23,616,141 23,616,141 52,545,698
vehicle moulds 40,097,774 22,183,619 8,785,792 8,785,792 53,495,60275
others 28,461,618 7,740,316 4,468,684 4,468,684 31,733,250
total 805,436,097 520,902,526 278,967,968 278,967,968 1,047,370,654
⒍operation income, operation cost
Jan. to June 2009 Jan. to June 2008
type of business operation income operation cost operation
income operation cost
primary business 7,041,468, 826 5,555,206,850 4,688,465,786 3,929,722,739
other business 417,721,642 330,983,446 504,188,403 363,019,597
total 7,459,190,468 5,886,190,296 5,192,654,188 4,292,742,336
Ⅶ Related party relationships and transactions
1． Criteria for the identification of related parties
If a party has the power to control, jointly control or exercise significant influence over
another party, they are regarded as related parties. Two or more parties are also regarded
as related parties if they are subject to control, joint control or significant influence from the
same party.
The following are related parties of the Group:
1) Parent company of the Group;
2) Subsidiaries of the Group;
3) Other enterprises that are controlled by the parent company as the Group;
4) Investors who have joint control over the Group;
5) Investors who can exercise significant influence over the Group;
6) Joint ventures of the Group ;
7) Associates of the Group;
8) Principal individual investors of the Group, and close family members of such
individuals;
9) Key management personnel of the Group or its parent, and close family members of such
individuals;
10) Other enterprises that are controlled, jointly controlled, or significantly influenced by
the Group’s principal individual investors, key management personnel, or close
family members of such individuals.
Enterprises are not regarded as related parties simply because they are under the
common control from the State, if no other related party relationships exist between them.
2． Parents Company and subsidiaries
Name of the Place of Main Proportion of shares Corporate Legal
Parent Company registration business in the Company type representative
China South Industries Beijing Manufacture and sale of 45.548% Stock Company Limited Xu Bin
Automobile Company automobiles, engine,
Limited and comporents
Notes: On July 3, 2009, apporved by SAIC, China South Industries Motor Company Limited
is changed into China Changan Automobile Group Company Limited.
Refer to Note Ⅳ “Scope of consolidation for consolidated financial statements” for the
Group’s subsidiaries.76
3. Other related parties
Name of the related parties Relationship with related
parties
China South Industries Automobile Co., Ltd – Chongqing
Tsingshan Transmission Branch Company (hereafter abbreviated
as “CSIA-Chongqing Tsingshan Transmission Branch”)
Branch of parent company
China South Industries Automobile Co., Ltd - Sichuan Ningjiang
Shock-absorber Branch (hereafter referred to as “CSIA-Ningjiang
Shock-absorber Branch”)
Branch of parent company
China South Industries Automobile Co., Ltd - Jian'an Automobile
Axle Branch (hereafter abbreviated as “CSIA-Jian'an Automobile
Axle Branch”)
Branch of parent company
Chongqing Automobile Air-conditioner Co., Ltd under control of CSIA
Chongqing Changfeng Jiquan Machinery Co., Ltd under control of CSIA
Chongqing Changan Jinling Vehicles Parts Co., Ltd under control of CSIA
Changan Ford Mazda Engine Co., Ltd Joint ventures
Changan Ford Mazda Automobile Co., Ltd Joint ventures
Chongqing Changan Suzuki Automobile Co., Ltd Joint ventures
Jiangling Holding Co., Ltd Joint ventures
Chongqing HelpGo Information Technology Co., Ltd Associate of the Group
Chongqing Shangfang Automobile Fittings Co., Ltd under control of CSIA
Chongqing Dajiang Xinda Vehicles Shares Co., Ltd under control of CSIA
Chengdu Tianxing Instrument and Meter Co., Ltd under control of CSIA
Chengdu Lingchuan Vehicle Fuel Tank Co., Ltd under control of CSIA
China South Industry Group Finance Co., Ltd under control of CSIA
Chongqing Wanbing Material Co., Ltd under control of CSIA
Sichuan Hongguang Machinery and Electrics Co., Ltd under control of CSIA
Chengdu Lingchuan Special Industry Co., Ltd under control of CSIA
Chongqing Yihong Engineering Plastic Products Co., Ltd under control of CSIA
Hubei Xiaogan Huazhong Automobile Lamp Co., Ltd under control of CSIA
Yunnan Xiyi Industries Co., Ltd under control of CSIA
司Longchang Shanchuan Shock-absorber Industries Co., Ltd under control of CSIA
Chongqing Jianshe Automobile Air-conditioner Co., Ltd under control of CSIA
Southwest Industries Corporation under control of CSIA
Chongqing Wanyou Economic Development Co., Ltd under control of CSIA
Chengdu Wanyou Economic Technological Development Co., Ltd under control of CSIA
Chongqing Jiangling Construction Co., Ltd under control of CSIA
Baoding Changan Bus Manufacturing Co., Ltd under control of CSIA
Chongqing Changan Construction Co., Ltd under control of CSIA
Changan Automobile (Group) Liability Co. Ltd under control of CSIA
Chengdu Ningxing Automobile Spring Co., Ltd under control of CSIA
South Yingte Air-conditioner Co, .Ltd under control of CSIA
South Tianhe Chassis System Co., Ltd under control of CSIA
Chongqing Changan Lingyun Automobile Components Co., Ltd under control of CSIA
Chongqing Shanrui Automobile Components Co., Ltd Associate of CSIA
Chongqing Xiyi Automobile Connecting Rod Co., Ltd Associate of CSIA
Beijing Beiji Mechanical and Electrical Industry Co., Ltd under control of CSIA
Chengdu Wanyou Filter Co., Ltd under control of CSIA
Chongqing Changan Kuayue Automobile Co., Ltd under control of CSIA
Chongqing Dajiang Millison Die-Casting Co., Ltd under control of CSIA77
Chongqing Dajiang Yuqiang Plastic Co., Ltd under control of CSIA
Congqing Jiangda Aluminium Alloy Wheel Co., Ltd under control of CSIA
Chongqing Jinhai Standard Parts Co., Ltd under control of CSIA
Chongqing Qingshan Sales Co., Ltd under control of CSIA
Chongqing Wanyou Auto Sales and Service Corporation under control of CSIA
Chongqing Changrong Machinery Co., Ltd under control of CSIA
Chongqing Changan Minsheng Logistics Co., Ltd
Under singificant influence
from manager
4. Major transactions between the Group and its related parties
⑴Selling goods to related parties(the transactions below not including tax )
Selling goods to related parties
From January to
June 2009
From January
to June 2008
Total 1,964,097,594 1,168,271,170
⑵Purchases of goods from related parties
Purchases of goods from related parties
From January to
June 2009
From January
to June 2008
Total 1,374,118,701 1,513,657,884
⑶Other major related-party transactions
Payment for comprehensive service charges
Name of related parties Content of
transaction
From January to
June 2009
From January
to June 2008
Changan Industry (Group) Liability Co. Ltd
Payment for trademark
royalties 8,530,980 5,713,980
Changan Industry (Group) Liability Co. Ltd
Payment for land
rental fees 10,249,095 1,620,040
Changan Industry (Group) Liability Co. Ltd
Payment for building
rental fees 11,278,345 12,682,950
Changan Industry (Group) Liability Co. Ltd
Payment for water,
electricity and gas
expenses 82,947,241 45,765,198
Changan Industry (Group) Liability Co. Ltd
Payment for social
welfare expenses 15,704,488 12,336,066
Changan Industry (Group) Liability Co. Ltd
Payment for education
expense 0 1,157,974
Changan Industry (Group) Liability Co. Ltd
Payment for police
security &fire fighting
expense 5,500,078 7,443,810
Changan Industry (Group) Liability Co. Ltd
Payment for labour
union expense 0 1,562,792
Changan Industry (Group) Liability Co.
Ltd Others 4,510,590 3,444,516
Total 138,720,817 91,727,326
Engineering procurement
Name of related parties From January to
June 2009
From January
to June 2008
Changan Industry (Group) Liability Co. Ltd 2,479,887 078
Chongqing Changan Construction Co., Ltd 96,352,297 47,554,742
Chongqing HelpGo Information Technology Co., Ltd 12,741,526 7,688,086
Total 111,573,710 55,242,828
other
Name of related parties Content of
transaction
From January
to June 2008
From January to
June 2007
Chongqing HelpGo Information
Technology Co., Ltd
development and
maintenance of
information system 17,696,304 25,111,650
Changan Industry (Group) Liability Co.
Ltd
Housing rental
revenue 2,173,400 1,086,720
Chongqing Changan Minsheng Logistics
Co., Ltd Logistic Storage 354,926,715 342,001,000
China South Industry Group Finance
Co., Ltd revenue 354,926,715 342,001,000
⑸balance of related-party receivable and payable
notes receivable
notes receivable June 30, 2009 Dec. 31, 2008
Total 633,602,075 220,870,000
Accounts receivable
Accounts receivable June 30, 2009 Dec. 31, 2008
Total 131,130,930 164,348,535
other accounts receivable
other accounts receivable June 30, 2009 Dec. 31, 2008
Changan Ford Mazda Automobile Co., Ltd 73,034 0
Notes payable
Notes payable June 30, 2009 Dec. 31, 2008
Total 253,218,781 100,810,000
accounts payable
accounts payable June 30, 2009 31, 2008
Total 566,114,592 396,751,378
Advances receipts
Advances receipts June 30, 2009 Dec. 31, 2008
Total 13,885,657 27,355,677
Other payables
Other payables June 30, 2009 Dec. 31, 2008
Total 60,986,360 48,624,64979
⑹Cash saved in related parties
Cash in bank
June 30, 2009 Dec. 31, 2008
China South Industry Group Finance Co.,
Ltd 581,879,526 299,091,595
⑺Loans
Short-term loans June 30, 2009 Dec. 31, 2008
China South Industry Group Finance Co.,
Ltd 85,649,590 78,418,796
China South Industries Automobile Co., Ltd 100,000,000 0
Ⅷ Contingencies
As on 30 June 2008, the Group has no important events or contingencies.
Ⅸ Fututre matters on banlance sheet
As on 30 June 2008, the Group has no future matters on the balance sheet.
Ⅹ Provision for the impairment of assets
Deductions
Items
Opening balance at
the beginning of the
year
Provision Reversal Write-off
Closing balance at
the end of the year
1.Bad debt provision 79,778,483 760,965 79,017,518
2.Provision for obsolete inventory 69,433,481 135,643,752 58,715,194 146,362,038
3. Provision for the impairment of
available-for-sale financial assets
4.Provision for the impairment of
held-to-maturity investments
5.Provision for the impairment of long-term
equity investments 27,120,000 27,120,000
6.Provision for the impairment of investmental
realty
7.Provision for the impairment of fixed assets 111,266,939 142,022,920 253,289,859
8.Provision for the impairment of
constructional materials
9.Provision for the impairment of
Construction in progress
10.Provision for the impairment of productive
assets
11.Provision for the impairment of oil gas
assets
12.Provision for the impairment of intangible
assets 6,700,000 6,700,000
13.Provision for the impairment of goodwill 73,465,335 73,465,335
14.others
Total 367,764,238 277,666,671 59,476,159 585,954,750
Ⅺ Net profit except non-recurring profit and loss
Non-recurring gain and loss items Amount Note (if
applicable)
Profit and loss arising from the disposal of non-current assets -839,063.00
Government grants 2,041,200.0080
Donation expenditure on public welfare 859,303.00
The other -2,640,886.00
Non-recurring profit and loss effect on income tax -201,271.00
Net effect on the non-recurring profit and loss attributable to minority
shareholders -629,286.00
Total -1,410,003.00 -
Ⅻ Reconciliation of the net profits presented under the PRC accounting
standards and International Financial Reporting Standards (“IFRS”)
30 June 2008 From Januray t
Account difference adjustment list o June 2008
Net assets Net profits
Workout accountant according to the enterprise
accounting rule and system under the PRC
8,071,964,540 532,801,780
Adjustment according to international accounting rules
1. Corporation income tax reduction on the basis of
purchasing domestic equipments -92,268,223 5,119,725
2. payment in cash price to shareholders of A share -71,284,065
Workout accountant according to the international
accounting rules 7,908,412,252 537,921,50581
VIII Documents for Future Reference
1. semi-annual report with the signature of chairman
2. Financial reports with signatures and stamps of the legal representative, the chief
accountant and the chief of accounting organization.
3. All the original documents and manuscripts of the Company which has been disclosed
in the reporting period in the newspapers designated by China Securities Regulatory
Commission
4. Article of Association
5. Semi-annual reports disclosed in other securities markets.
6. Other relevant document.
Chairman of BOD: Xu Liuping General Manager: Zhang Baolin
Chongqing Changan Automobile Co., Ltd
Aug.28, 2009
