##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 20-F
 
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 Commission file number 1-13522
 
 China Yuchai International Limited
 (Exact Name of Registrant as Specified in Its Charter)
 
 Not Applicable
(Translation of Registrants Name 
Into English)
    
    Bermuda
(Jurisdiction of Incorporation or
Organization)
 16
Raffles Quay #39-01A
Hong Leong Building
Singapore 048581
65-6220-8411
(Address and Telephone Number of Principal Executive Offices)
 Hoh Weng Ming
Chief Financial Officer
16 Raffles Quay
#39-01A Hong Leong Building
Singapore 048581
Tel: +65 6220 8411
Fax: +65 6221 1172
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Name of Each Exchange on WhichTitle of Each Class
    
    RegisteredCommon Stock, par value US$0.10 per Share
    
    The New York Stock Exchange
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act
None
(Title of Class)
 
    o þ
 o þ
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer
þ
    
    Non-accelerated filer o
  U.S. GAAP o
    
    International Financial Reporting Standards as issued þ
    
    Other oby the International Accounting Standards Board
 o o
 o þ
   o o




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##### 



TABLE OF CONTENTS
 CHINA YUCHAI INTERNATIONAL LIMITED
 PageCertain Definitions and Supplemental InformationCautionary Statements with respect to Forward-Looking StatementsPart I
    
    
    
    
    4Item 1.
    
    Identity of Directors, Senior Management and Advisers
    
    
    4Item 2.
    
    Offer Statistics and Expected Timetable
    
    
    4Item 3.
    
    Key Information
    
    
    4Item 4.
    
    Information on the Company
    
    
    22Item 4A.
    
    Unresolved Staff Comments
    
    
    42Item 5.
    
    Operating and Financial Review and Prospects
    
    
    42Item 6.
    
    Directors, Senior Management and Employees
    
    
    58Item 7.
    
    Major Shareholders and Related Party Transactions
    
    
    66Item 8.
    
    Financial Information
    
    
    71Item 9.
    
    The Offer and Listing
    
    
    72Item 10.
    
    Additional Information
    
    
    73Item 11.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    86Item 12.
    
    Description of Securities Other Than Equity Securities
    
    
    89Part II
    
    
    
    
    89Item 13.
    
    Defaults, Dividend Arrearages and Delinquencies
    
    
    89Item 14.
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    89Item 15.
    
    Controls and Procedures
    
    
    89Item 16A.
    
    Audit Committee Financial Expert
    
    
    93Item 16B.
    
    Code of Ethics
    
    
    93Item 16C.
    
    Principal Accountants Fees and Services
    
    
    93Item 16D.
    
    Exemptions from the Listing Standards for Audit Committees
    
    
    94Item 16E.
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    94Item 16F.
    
    Change in Registrants Certifying Accountant
    
    
    94Item 16G.
    
    Corporate Governance
    
    
    95Part III
    
    
    
    
    95Item 17.
    
    Financial Statements
    
    
    95Item 18.
    
    Financial Statements
    
    
    95Item 19.
    
    Exhibits
    
    
    96Signatures
    
    
    98Exhibit Index
    
    
    99Consolidated Financial Statements
    
    
    F-1EX-8.1 Subsidiaries of the Registrant.EX-12.1 Certifications furnished pursuant to Section 302 of the Sarbanes-Oxley Act.EX-13.1 Certifications furnished pursuant to Section 906 of the Sarbanes-Oxley Act.EX-15.1 Letter from KPMG LLP to the Securities and Exchange Commission dated April 30, 2010
  1




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##### Table of Contents



Certain Definitions and Supplemental Information
      Cautionary Statements with Respect to Forward-Looking Statements
  
    
    political, economic and social conditions in China, including the Chinese governments
specific policies with respect to foreign investment, economic growth, inflation and the
availability of credit, particularly to the extent such current or future conditions and
policies affect the truck and diesel engine industries and markets in China, our diesel engine
customers, the demand, sales volume and sales prices for our diesel engines and our levels of
accounts receivable;
    
    the effects of an uneven economic recovery, concerns over the premature withdrawal of
stimulus measures and continuing current volatility in stock markets around the world on our
business, operating results and growth rates;
    
    the effects of competition in the diesel engine market on the demand, sales volume and sales
prices for our diesel engines;
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
    
    the effects of existing material weaknesses in our internal control over financial reporting
and our ability to implement and maintain effective internal control over financial reporting;
    
    our ability to collect and control our levels of accounts receivable;
    
    our dependence on the Dongfeng Automobile Company and other major diesel truck manufacturers
controlled by or affiliated with the Dongfeng Automobile Company;
    
    our ability to successfully manufacture and sell our 4108, 4110, 4112, 4F, 4G, 6105, 6108,
6112, 6L/6M (formerly referred to as 6113) heavy-duty diesel engines and any new products;
    
    our ability to finance our working capital and capital expenditure requirements, including
obtaining any required external debt or other financing;
    
    the effects of inflation on our financial condition and results of operations, including the
effects on Yuchais costs of raw materials and parts and labor costs;
    
    our ability to successfully implement the Reorganization Agreement, as amended by the
Cooperation Agreement (both as defined in Item 4. Information on the Company  History and
Development  Reorganization Agreement) (See Item 4. Information on the Company  History
and Development  Cooperation Agreement);
    
    our ability to control Yuchai and consolidate Yuchais financial results;
    
    the effects of Chinas political, economic and social conditions on our financial condition,
results of operations, business or prospects;
    
    the effects of uncertainties in the Chinese legal system, which could limit the legal
protection available to foreign investors, including with respect to the enforcement of
foreign judgments in China;
    
    the effects of adverse economic conditions in consumer spending patterns and its impact on
the demand for the TCL groups consumer electronics products;
    
    the effects of our disagreement with the other major shareholders of TCL over the running of
TCL groups operations;
    
    the ability of TCL to obtain approval from the legal and
regulatory authorities in Singapore for
the return of surplus capital through a proposed capital reduction and cash distribution
exercise as announced by TCL on December 1, 2009. Our proposed placement of 550,000,000 shares
of TCL owned by us is conditional upon such approval;
    
    the ability of HLGE to repay their debt obligations to us;
    
    the effects of changes to the international, regional and economic climate and market
conditions in countries where the HLGE groups hospitality operations are located, as well as
related global economic trends that adversely impact the travel and tourism industries;
    
    the outbreak of communicable diseases, such as the recent Influenza A (H1N1) virus and the
Avian flu, if not contained, and its potential effects on the operations of the HLGE group and
its business in the hospitality industry; and
    
    the impact of terrorism, terrorist events, airline strikes, hostilities between countries or
increased risk of natural disasters or viral epidemics that may affect travel patterns and
reduce the number of travelers and tourists to the HLGE groups hospitality operations.
  3




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PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.
  
 ITEM 3. KEY INFORMATION.
 Selected Financial Data
       4




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Amount in
conformity with IFRS:
 IFRSYear ended December 31,2008
    
    2009
    
    2009Rmb
    
    Rmb
    
    US$Selected Consolidated Statement of Income Data:Revenues, net
    
    
    10,404,788
    
    
    
    13,175,903
    
    
    
    1,930,054Gross profit
    
    
    2,049,136
    
    
    
    2,545,818
    
    
    
    372,921Research and development costs
    
    
    (184,794
    )
    
    
    (297,259
    )
    
    
    (43,544
    )Provision for uncollectible loans to a related party
    
    
    
    
    
    
    
    
    
    
    Operating income
    
    
    615,742
    
    
    
    854,257
    
    
    
    125,135Other income, Net
    
    
    19,460
    
    
    
    77,555
    
    
    
    11,361Equity in income/(loss), net of affiliates
    
    
    16,409
    
    
    
    (13,046
    )
    
    
    (1,911
    )Profit before tax from continuing operations
    
    
    481,742
    
    
    
    966,668
    
    
    
    141,601Income taxes
        
    (110,526
    )
    
    
    (147,223
    )
    
    
    (21,565
    )Profit from continuing operations
    
    
    371,216
    
    
    
    819,445
    
    
    
    120,036(Loss) / Profit after tax for the year from discontinued operations
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    1,907Profit for the year
    
    
    337,231
    
    
    
    832,467
    
    
    
    121,943Attributable to equity holders of the Parent
    
    
    240,036
    
    
    
    628,331
    
    
    
    92,040Minority Interest
    
    
    97,195
    
    
    
    204,136
    
    
    
    29,903Basic and diluted earnings/(loss) per common share attributable to
ordinary equity holders of the Parent
    
    
    6.44
    
    
    
    16.86
    
    
    
    2.47Profit from
continuing operations per share
    
    
    9.96
    
    
    
    21.99
    
    
    
    3.22Profit for
the year per share
    
    
    9.05
    
    
    
    22.34
    
    
    
    3.27Weighted average number of shares
    
    
    37,268
    
    
    
    37,268
    
    
    
    37,268
 Year ended December 31,2008
    
    2009
    
    2009Rmb
    
    Rmb
    
    US$ (1)(in thousands)Selected Consolidated Balance Sheet Data:Working capital(2)
    
    
    977,190
    
    
    
    1,642,392
    
    
    
    240,584Property, plant and equipment, net
    
    
    2,719,773
    
    
    
    3,146,206
    
    
    
    460,867Trade accounts and bills receivable, net
    
    
    2,538,135
    
    
    
    2,506,701
    
    
    
    367,191Short-term bank loans
    
    
    1,148,732
    
    
    
    453,792
    
    
    
    66,473Trade and
other payables
    
    
    3,604,128
    
    
    
    6,190,246
    
    
    
    906,770
 Year ended December 31,2008
    
    2009
    
    2009Rmb
    
    Rmb
    
    US$ (1)(in thousands)Total assets
    
    
    9,967,644
    
    
    
    13,305,911
    
    
    
    1,949,098Long-term bank loans
    
    
    176,756
    
    
    
    625,256
    
    
    
    91,590Minority interests
    
    
    1,169,779
    
    
    
    1,360,459
    
    
    
    199,285Equity attributable to equity holders
of the Parent
    
    
    3,445,180
    
    
    
    4,049,331
    
    
    
    593,161
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Year ended December 31,2008
    
    2009
    
    2009Rmb
    
    Rmb
    
    US$ (1)(in thousands)Selected Consolidated Statement of Cash Flows Data:Net cash provided by operating activities
    
    
    697,180
    
    
    
    3,969,358
    
    
    
    581,446Capital
expenditures(3)
    
    
    376,440
    
    
    
    780,836
    
    
    
    114,380
 Amount in
conformity with US GAAP:
 US GaapYear ended December 31,2005
    
    2006
    
    2007Rmb
    
    Rmb
    
    RmbSelected Consolidated Statement of Income Data:Revenues, net
    
    
    5,816,740
    
    
    
    6,920,528
    
    
    
    9,556,303Gross profit
    
    
    1,143,383
    
    
    
    1,272,121
    
    
    
    1,944,718Research and development costs
    
    
    (123,793
    )
    
    
    (167,653
    )
    
    
    (153,146
    )Provision for uncollectible loans to a related party
    
    
    (202,950
    )
    
    
    
    
    
    
    Operating income
    
    
    26,020
    
    
    
    304,479
    
    
    
    841,556Other income/(expense), Net
    
    
    25,449
    
    
    
    38,856
    
    
    
    53,554Equity in
(loss)/income, net of affiliates
    
    
    (6,032
    )
    
    
    (22,449
    )
    
    
    14,048(Loss)/earnings before income taxes and minority interests
    
    
    (25,090
    )
    
    
    203,395
    
    
    
    783,914Income taxes
    
    
    (10,148
    )
    
    
    (30,466
    )
    
    
    (68,518
    )(Loss)/income
before minority interests
    
    
    (35,238
    )
    
    
    172,929
    
    
    
    715,396Minority
interests in (income)/losses of consolidated subsidiaries
    
    
    2,947
    
    
    
    (61,645
    )
    
    
    (189,927
    )Net
(loss)/income
    
    
    (32,291
    )
    
    
    111,284
    
    
    
    525,469Basic and diluted (loss)/earnings per common share
    
    
    (0.89
    )
    
    
    2.99
    
    
    
    14.10Weighted average number of shares
    
    
    36,460
    
    
    
    37,268
    
    
    
    37,268
 Year ended December 31,2005
    
    2006
    
    2007Rmb
    
    Rmb
    
    Rmb(in thousands)Selected Consolidated Balance Sheet Data:Working capital(2)
    
    
    823,324
    
    
    
    457,449
    
    
    
    1,028,732Property, plant and equipment, net
    
    
    1,440,712
    
    
    
    1,795,405
    
    
    
    2,158,246Trade accounts and bills receivable, net
    
    
    1,178,853
    
    
    
    1,480,918
    
    
    
    3,107,785Short-term bank loans
    
    
    812,835
    
    
    
    1,009,134
    
    
    
    819,164Trade
accounts payables
    
    
    1,800,443
    
    
    
    2,132,798
    
    
    
    2,509,962
 Year ended December 31,2005
    
    2006
    
    2007Rmb
    
    Rmb
    
    Rmb(in thousands)Total assets
    
    
    6,679,630
    
    
    
    7,961,357
    
    
    
    9,579,184Long-term bank loans
    
    
    50,000
    
    
    
    675,454
    
    
    
    767,929Minority interests
    
    
    654,687
    
    
    
    693,296
    
    
    
    849,527Total Shareholders equity
    
    
    2,566,263
    
    
    
    2,728,399
    
    
    
    3,294,465
 Year ended December 31,2005
    
    2006
    
    2007Rmb
    
    Rmb
    
    Rmb(in thousands)Selected Consolidated Statement of Cash Flows Data:Net cash provided by operating activities
    
    
    234,770
    
    
    
    634,146
    
    
    
    84,554Capital
expenditures(3)
    
    
    515,359
    
    
    
    323,781
    
    
    
    265,258
 
 (1)
    
    The Companys functional currency is the U.S. dollar and its reporting currency is Renminbi.
The functional currency of Yuchai is Renminbi. Translation of amounts from Renminbi to U.S.
dollars is solely for the convenience of the reader. Translation of amounts from Renminbi to
U.S. dollars has been made at the rate of Rmb 6.8267 = US$1.00, the rate quoted by the
Peoples Bank of China at the close of business on March 1, 2010. No representation is made
that the Renminbi amounts could have been, or could be, converted into U.S. dollars at that
rate or at any other rate prevailing on March 1, 2010 or any other date. The rate quoted by
the Peoples Bank of China at the close of business on December 31, 2009 was Rmb 6.8282 =
US$1.00.(2)
    
    Current assets less current liabilities.(3)
    
    Purchase of property, plant and equipment and payment for construction in progress. Dividends
      Dividend paid by YuchaiDividend paid by the Company
    
    to the
Company(1)Financial
    
    to its shareholders in the financial year
    
    for the financial year / in the financial yearYear
    
    (per share)
    
    (in thousands)2006
    

US$0.02(2)
    
    Rmb 72,284
(US$9,598)(3)2007
    

US$0.10(4)
    
    Rmb 108,313
(US$15,811)(5)2008
    

US$0.10(6)
    
    Rmb 72,284
(US$10,564)(7)2009
    
    US$0.10(8)
    
    Pending Shareholders Approval(9)2010
    
    US$0.25(10)
    
    Not yet declared
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(1)
    
    Dividends paid by Yuchai to us, as well as to other shareholders of Yuchai, were declared in
Renminbi and paid in US dollars (as shown in parentheses) based on the exchange rates at local
designated foreign exchange banks on the respective payment dates. For dividends paid for
2006, 2007, 2008 and 2009, the exchange rate used was Rmb 7.5310 = US$1.00, Rmb 6.8357 =
US$1.00, Rmb 6,8343 = US$1.00 and Rmb 6.8282 = US$1.00 respectively.(2)
    
    On December 4, 2006, we declared an interim dividend of US$0.02 per ordinary share to all
shareholders in respect of the fiscal year ended December 31, 2006. This dividend was paid to
the shareholders on December 28, 2006.(3)
    
    The dividend declared for 2006 by Yuchai was paid to us on September 17, 2007.(4)
    
    On September 28, 2007, we declared a second interim dividend of US$0.10 per ordinary share
amounting to US$3.7 million to all shareholders in respect of the fiscal year ended December
31, 2006. This dividend was paid to the shareholders on October 24, 2007.(5)
    
    The dividend declared for 2007 by Yuchai was paid to us on August 22, 2008.(6)
    
    On August 25, 2008, we declared an interim dividend of US$0.10 per ordinary share amounting
to US$3.7 million to all shareholders in respect of the fiscal year ended December 31, 2007.
This dividend was paid to the shareholders on September 19, 2008.(7)
    
    The dividend declared by Yuchai for fiscal year 2008 was paid
to us on November 12, 2009.(8)
    
    On September 24, 2009, we declared a dividend of US$0.10 per ordinary share to all
shareholders in respect of the fiscal year ended December 31, 2008. This dividend was paid to
the shareholders on October 16, 2009.(9)
    
    Pending Shareholders approval at Yuchai Shareholders
meeting, scheduled for May 7, 2010.(10)
    
    On March 5, 2010, we announced that a cash dividend of US$0.25 per ordinary share for the
year ended December 31, 2009 had been declared by our Board of Directors and this dividend
was paid on March 30, 2010 to shareholders of record as at March 19, 2010. Historical Exchange Rate Information
    7




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Noon Buying Rate(1)(Rmb per US$1.00)Period
    
    High
    
    LowSeptember 2009
    
    
    6.8303
    
    
    
    6.8247October 2009
    
    
    6.8292
    
    
    
    6.8248November 2009
    
    
    6.8300
    
    
    
    6.8255December 2009
    
    
    6.8299
    
    
    
    6.8244January 2010
    
    
    6.8295
    
    
    
    6.8258February 2010
    
    
    6.8330
    
    
    
    6.8258March 2010 (through March 1, 2010 )
    
    
    6.8263
    
    
    
    6.8263
 Noon Buying Rate(1)(Rmb per US$1.00)Period
    
    Period End
    
    Average(2)
    
    High
    
    Low2005
    
    
    8.0702
    
    
    
    8.1734
    
    
    
    8.2765
    
    
    
    8.07022006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.8225
    
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8259
    
    
    
    6.8307
    
    
    
    6.8470
    
    
    
    6.81762010 (through March 1, 2010 )
    
    
    6.8265
    
    
    
    6.8272
    
    
    
    6.8330
    
    
    
    6.8254
 
 (1)
    
    The noon buying rate in New York for cable transfers payable in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York. Since April 1994, the
noon buying rate has been based on the rate quoted by the PBOC. As a result, since April 1994,
the noon buying rate and the PBOC rate have been substantially similar. The PBOC rate at the
end of December 31, 2009 was Rmb 6.8282, compared with Rmb 6.8259 for the noon buying rate
(average) for the year ended December 31, 2009.(2)
    
    Determined by averaging the rates on the last business day of each month during the relevant
period. Risk Factors
 Risks relating to our shares and share ownership
 Our controlling shareholders interests may differ from those of our other shareholders.
  8




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We may experience a change of control as a result of sale or disposal of shares of our Common Stock
by our controlling shareholders.
   The market price for our Common Stock may be volatile.
  
    
    our interim operating results;
    
    the availability of raw materials used in our engine production, particularly steel and cast
iron;
    
    the publics reaction to our press releases and announcements and our filings with the
Securities and Exchange Commission;
    
    changes in financial estimates or recommendations by stock market analysts regarding us, our
competitors or other companies that investors may deem comparable;
    
    operating and stock price performance of our competitors or other companies that investors
may deem comparable;
    
    changes in general economic conditions, especially the sustainability of the global recovery;
    
    future sales of our Common Stock in the public market, or the perception that such sales
could occur; or
    
    the announcement by us or our competitors of a significant acquisition.
  We may be classified as a passive foreign investment
company, which could result in adverse United States federal income tax consequences to US Holders.
  Risks relating to our company and our business
 The diesel engine business in China is dependent in large part on the performance of the Chinese
and the global economy, as well as Chinese government policy. As a result, our financial condition,
results of operations, business and prospects could be adversely affected by slowdowns in the
Chinese and the global economy, as well as Chinese government policies affecting our business.
  9




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(Source: China Automotive Industry Newsletter for 2007) (Source: China Automotive Industry Newsletter for 2008)
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Source: China Automotive Industry
Newsletter for 2009
 Our financial condition, results of operations, business and prospects may be adversely affected if
we are unable to implement the Reorganization Agreement and the Cooperation Agreement.
   We have and may continue to experience disagreements and difficulties with the Chinese shareholders
in Yuchai.
  11




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We have identified material weaknesses in our internal control over financial reporting and cannot
assure you that additional material weaknesses will not be identified in the future. Our failure to
implement and maintain effective internal control over financial reporting could result in material
misstatements in our financial statements which could require us to restate financial statements in
the future, or cause us not to be able to provide timely financial information, which may cause
investors to lose confidence in our reported financial information and have a negative effect on
our stock price.
   Our exposure to the Dongfeng Group has had, and could continue to have, a material adverse effect
on our business, financial condition and results of operation.
  12




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Competition in China from other diesel engine manufacturers may adversely affect our financial
condition, results of operations, business or prospects.
  
    
    improvements in competitors products;
    
    increased production capacity of competitors;
    
    increased utilization of unused capacity by competitors; and
    
    price competition.
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Our financial condition, results of operations, business or prospects may be adversely affected to
the extent we are unable to continue our sales growth.
   
    
    obtaining the necessary supplies, including the availability of raw materials;
    
    hiring and training skilled production workers and management personnel;
    
    manufacturing and delivering products for increased orders in a timely manner;
    
    maintaining quality standards and prices;
    
    controlling production costs; and
    
    obtaining adequate funding on commercially reasonable terms for future growth.
  If we are not able to continuously improve our existing engine products and develop new diesel
engine products or successfully enter into other market segments, we may become less competitive,
and our financial condition, results of operations, business and prospects will be adversely
affected.
  14




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##### Table of Contents



We may be unable to obtain sufficient financing to fund our capital requirements which could limit
our growth potential.
  We could be exposed to the impact of interest rates and foreign currency movements with respect to
our future borrowings. In addition, a devaluation of the Renminbi will increase the Renminbi cost
of repaying our foreign currency denominated indebtedness and, therefore, could adversely affect
our financial condition, results of operations, business or prospects.
   15




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##### Table of Contents



If Chinas inflation increases or the prices of energy or raw materials increase, we may not be
able to pass the resulting increased costs to our customers and this may adversely affect our
profitability or cause us to suffer operating losses.
  We may be adversely affected by environmental regulations.
   Our insurance coverage may not be adequate to cover risks related to our production and other
operations.
  Risks relating to Mainland China
  16




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##### Table of Contents



Adverse changes in the economic policies of the Chinese government could have a material adverse
effect on the overall economic growth of Mainland China, which could reduce the demand for our
products and adversely affect our competitive position.
  Adverse economic developments in China or elsewhere in the Asian region could have a material
adverse effect on our financial condition, results of operations, business or prospects.
  The Chinese legal system embodies uncertainties which could limit the legal protection available to
foreign investors.
   17




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##### Table of Contents



We may not freely convert Renminbi into foreign currency, which could limit our ability to obtain
sufficient foreign currency to satisfy our foreign currency requirements or to pay dividends to
shareholders.
   Outbreaks of infectious diseases, such as the recent Influenza A (H1N1) virus, severe acute
respiratory syndrome (SARS) and the Avian flu, in various parts of China and other countries may
materially and adversely affect our business and operations, as well as our financial condition and
results of operations.
  Risks relating to our investments in HLGE and TCL
  18




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##### Table of Contents



The HLGE groups hotel ownership and management business may be adversely affected by risks
inherent in the hotel industry.
  
    
    changes to the international, regional and local economic climate and market conditions
(including, but not limited to; changes to regional and local populations, changes in travel
patterns and preferences, and oversupply of or reduced demand for hotel rooms that may result
in reduced occupancy levels and performance for the hotels it operates);
    
    changes to the political, economic, legal or social environments of the countries in which
the HLGE group operates (including developments with respect to inflation, interest rates,
currency fluctuations, governmental policies, real estate laws and regulations, taxation, fuel
costs, expropriation, including the impact of the current global financial crisis);
    
    increased threat of terrorism, terrorist events, airline strikes, hostilities between
countries or increased risk of natural disasters or viral epidemics that may affect travel
patterns and reduce the number of travelers and tourists;
    
    changes in laws and governmental regulations (including those relating to the operation of
hotels, preparation and sale of food and beverages, occupational health and safety working
conditions and laws and regulations governing its relationship with employees);
    
    competition from other international, regional and independent hotel companies, some of which
may have greater name recognition and financial resources than the HLGE group (including
competition in relation to hotel room rates, convenience, services or amenities offered);
    
    losses arising out of damage to the HLGE groups hotels, where such losses may not be covered
by the insurance policies maintained by the HLGE group;
    
    increases in operating costs due to inflation, labor costs (including the impact of
unionization), workers compensation and health-care related costs, utility costs, insurance
and unanticipated costs such as acts of nature and their consequences;
    
    fluctuations in foreign currencies arising from the HLGE groups various currency exposures;
    
    dependence on leisure travel and tourism;
    
    the outbreak of communicable diseases, such as the Influenza A (H1N1) virus and the Avian
flu, which if not contained, could potentially adversely affect the operations of the HLGE
group and its business in the hospitality industry; and
    
    adverse effects of a downturn in the hospitality industry.
  The hospitality business is a regulated business.
  19




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##### Table of Contents



TCL groups proposed new strategy of repositioning its principal business from consumer electronics
distribution to real estate and related infrastructure investment in pan-Asian region may not be
successful.
  The TCL groups principal business involves the distribution of third party branded and proprietary
branded consumer electronic products with operations mainly in the PRC (including Hong Kong). This
business is highly competitive and faces significant competition from other renowned brands.
     20




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##### Table of Contents



The HLGE group may need to raise additional capital.
  The HLGE group may be unable to raise sufficient funds to pay their debt obligations to us.
  Our
conversion of all our existing Series B redeemable convertible preference shares in HLGE may
not be successful or may result in increased costs.
  21




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##### Table of Contents



ITEM 4. INFORMATION ON THE COMPANY.
 History and Development
 The Company
         
    
    Through our 76.4% interest in Yuchai, we primarily conduct our manufacturing and sale of
diesel engines which are mainly distributed in the PRC market;
 
    
    As of March 1, 2010, we had a 45.4% equity interest in HLGE. On March 24, 2010, our equity
interest in HLGE increased to 46.4% as a result of the conversion of a certain number of
Series B redeemable convertible preference shares held by us into
 22




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##### Table of Contents



HLGE ordinary shares.The
HLGE group is engaged in hospitality and property development activities conducted mainly in
the PRC and Malaysia; and
 
    
    As of March 1, 2010, we had a 34.4% equity interest in TCL.
    Yuchai
      23




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##### Table of Contents



Reorganization Agreement
   24




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##### Table of Contents



Cooperation Agreement
       25




---



##### Table of Contents



Products and Product Development-Yuchai
   Emission Standards
  New Products
             26




---



##### Table of Contents



YC6T, YC6C
        27




---



##### Table of Contents



SeriesTrucks
    
    YC4D, YC4E, YC4F, YC4G, YC6A, YC6KBus
    
    YC6M Mono-fuel, YC6M, YC6L, YC6J, YC6J mono-fuel, YC6G, YG6A,4G, 4E, 4D, 4FA, 4FConstruction
    
    YC4B, YC4F, YC6J125G, YC6M, YC4108G/ZG, YC6108G/ZG, YC6ATAgriculture
    
    YC4AT, YC4BT, YC6AT, YC6BT, YC4BT, YC4DMarine
    
    YC6112, YC6015/08, YC4108C, YC6M, YC6A/6B, 6T, 6CGenerator-Drive
    
    YC4D, YC4F, YC6B180D, YC6B150D, YC6A, YC6G, YC6M, YC6T600L, 6C
 28




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##### Table of Contents



Light-Duty Diesel Engines
  4-Series Light-Duty Diesel Engines
  
    
    The 4108 engine was launched in the market in 2001 based on 6108 engines. The 4108 engine is
designed for light trucks and passenger vehicles and commercial production of the 4108 engine
began in 2001.
    
    The 4112 engine was primarily based on the 6112 engine and is designed for use in light to
medium-duty cargo trucks and buses. The 4112 engine also features low
emission characteristics level.
Commercial production of the 4112 engine began in late 2001.
    
    The YC4F/YC4G engine is a four-cylinder, four-stroke engine with a rated power ranging from
90 to 115 PS. The 4F/4G diesel engines were developed based on technologies from Germany and
Japan for mini buses, trucks and passenger cars. Trial production of 4F engines commenced in
mid-2004.
    
    The YC4D/YC4E engine is a four-cylinder, four-stroke engine with a rated power ranging from
120 to 180 PS. The YC4D diesel engine was co-developed by Yuchai and Germany FEV, and features
lower emission, lower fuel & oil consumption, lower noise, higher reliability, lower price and
better upgrading potential. TheYC4E series diesel engine was developed on the basis of the
YC6G series diesel engine with a displacement of 7.8 liters through stroke-shortening and
bore-reducing which maintains advantages over the YC6G series diesel
engines and features higher dynamic characteristics, easier operation
and maintenance, and is used in
high-speed and light-duty vehicles.
  YC4W Passenger Car Diesel Engine
  Medium-Duty Diesel Engines
 6105 Medium-Duty Diesel Engines
  6108 Medium-Duty Diesel Engines
  29




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##### Table of Contents



YC6A
  YC6J
  YC6J/LPG
  Heavy-Duty Diesel Engines
 6112 Heavy-Duty Diesel Engines
   6L Heavy-Duty Diesel Engines
  6M Heavy-Duty Diesel Engines
  30




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##### Table of Contents



Industrial Engines
  Other Products
 Diesel Power Generators
  Special Vehicles
  Diesel Engine Parts
  Sales
   31




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##### Table of Contents



2008
    
    2009% of
    
    
    
    
    
    
    
    
    
    % ofRevenues,
    
    Revenues,
    
    Units
    
    Revenues,
    
    Revenues,
    
    Unitsnet
    
    net
    
    Sold
    
    net
    
    net
    
    SoldRmb (inthousands)Diesel engines6105
    
    
    2,202,856
    
    
    
    21.2
    %
    
    
    75,633
    
    
    
    2,886,987
    
    
    
    21.9
    %
    
    
    96,4866108
    
    
    1,491,211
    
    
    
    14.3
    %
    
    
    61,734
    
    
    
    1,677,095
    
    
    
    12.7
    %
    
    
    65,8346112
    
    
    623,459
    
    
    
    6.0
    %
    
    
    11,830
    
    
    
    514,273
    
    
    
    3.9
    %
    
    
    8,4556L
    
    
    579,568
    
    
    
    5.6
    %
    
    
    8,904
    
    
    
    593,829
    
    
    
    4.5
    %
    
    
    11,1566M
    
    
    452,397
    
    
    
    4.3
    %
    
    
    11,235
    
    
    
    756,701
    
    
    
    5.8
    %
    
    
    17,4834-Series
    
    
    3,534,245
    
    
    
    34.0
    %
    
    
    202,798
    
    
    
    4,891,482
    
    
    
    37.2
    %
    
    
    268,430Diesel power
generators &
others(1)
    
    
    1,500,286
    
    
    
    14.6
    %
    
    
    146
    
    
    
    1,840,720
    
    
    
    14.0
    %
    
    
    5510,384,022
    
    
    
    100.0
    %
    
    
    372,280
    
    
    
    13,161,087
    
    
    
    100.0
    %
    
    
    467,899
 
 (1)
    
    Others mainly represent the revenues earned through engine parts sales, hotel incomes, guarantee
fees and diesel power generators. Production
    2005
    
    2006
    
    2007
    
    2008
    
    2009% of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % oftotal
    
    
    
    
    
    total
    
    
    
    
    
    total
    
    
    
    
    
    total
    
    
    
    
    
    totalUnits
    
    units
    
    Units
    
    units
    
    Units
    
    units
    
    Units
    
    units
    
    Units
    
    unitsDiesel Engines:6105
    
    
    70,052
    
    
    
    29.2
    %
    
    
    66,439
    
    
    
    23.9
    %
    
    
    82,345
    
    
    
    21.4
    %
    
    
    72,779
    
    
    
    21.8
    %
    
    
    104,814
    
    
    
    22.9
    %6108
    
    
    35,627
    
    
    
    14.8
    %
    
    
    39,057
    
    
    
    14.1
    %
    
    
    66,526
    
    
    
    17.3
    %
    
    
    61,169
    
    
    
    18.3
    %
    
    
    66,941
    
    
    
    14.6
    %6112
    
    
    15,990
    
    
    
    6.7
    %
    
    
    14,358
    
    
    
    5.2
    %
    
    
    12,996
    
    
    
    3.4
    %
    
    
    11,954
    
    
    
    3.6
    %
    
    
    8,909
    
    
    
    1.9
    %6L
    
    
    1,008
    
    
    
    0.4
    %
    
    
    1,366
    
    
    
    0.5
    %
    
    
    5,618
    
    
    
    1.5
    %
    
    
    9,025
    
    
    
    2.7
    %
    
    
    11,483
    
    
    
    2.5
    %6M
    
    
    5,991
    
    
    
    2.5
    %
    
    
    7,331
    
    
    
    2.6
    %
    
    
    15,830
    
    
    
    4.1
    %
    
    
    11,492
    
    
    
    3.4
    %
    
    
    20,122
    
    
    
    4.4
    %4-Series
    
    
    111,393
    
    
    
    46.4
    %
    
    
    149,347
    
    
    
    53.7
    %
    
    
    201,204
    
    
    
    52.3
    %
    
    
    168,058
    
    
    
    50.2
    %
    
    
    245,953
    
    
    
    53.7
    %Total
    
    
    240,061
    
    
    
    100.0
    %
    
    
    277,898
    
    
    
    100.0
    %
    
    
    384,519
    
    
    
    100.0
    %
    
    
    334,477
    
    
    
    100.0
    %
    
    
    458,222
    
    
    
    100.0
    %
 Procurement
  Engine Block
  Pump
  32




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##### Table of Contents



Raw Materials
  Imports
  Quality Assurance, Control & Safety
  Manufacturing Capacity Expansions
  Research and Development
  Future Products
  33




---



##### Table of Contents



Sales, Marketing and Services
 Sales and Marketing
     Export Sales
  2008
    
    2009% of
    
    
    
    
    
    
    
    
    
    % ofSales
    
    Sales
    
    Unit
    
    Sales
    
    Sales
    
    UnitRevenue
    
    Revenue
    
    Sales
    
    Revenue
    
    Revenue
    
    SalesRmb
    
    
    
    
    
    
    
    
    
    Rmb(in thousands)
    
    
    
    
    
    
    
    
    
    (in thousands)Total Domestic Sales
    
    
    10,352,114
    
    
    
    99.7
    %
    
    
    371,243
    
    
    
    13,138,630
    
    
    
    99.8
    %
    
    
    467,377Total Export Sales
    
    
    31,908
    
    
    
    0.3
    %
    
    
    1,037
    
    
    
    22,457
    
    
    
    0.2
    %
    
    
    52210,384,022
    
    
    
    100.0
    %
    
    
    372,280
    
    
    
    13,161,087
    
    
    
    100.0
    %
    
    
    467,899
  34




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##### Table of Contents



Customer Service
    Trademarks
  Competition
  35




---



##### Table of Contents



36




---



##### Table of Contents



The HLGE group
   Investment holding activities
  Hospitality operations
  
    
    Hotel Equatorial Shanghai
 Hotel Equatorial Shanghai is located in the heart of Shanghai. The property has more than 500
saleable guest rooms which have all been fully refurbished over the last 18 months and a new
lounge. Other facilities comprise six food and beverage outlets, ballroom space and a health
club.
 
    
    Copthorne Hotel Qingdao
 The property is located in the commercial district of Qingdao. The property has approximately 450
saleable guest rooms, and has restaurants and bars, ballrooms and function rooms, entertainment
facilities, offices and retail space.
 
    
    Elite Residences (formerly known as Changning Equatorial
Serviced Apartments)
 The property comprises a 16-storey building located in the downtown Shanghai. The property has
approximately 125 apartment units, a self-service launderette, meeting rooms and a business
centre. In September 2008, operations were temporarily closed for major renovations which were
completed at the end of January 2010 with modern rooms and new facilities. Operations have
resumed under the new brand name Elite Residences.
 37




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##### Table of Contents




    
    Hotel Equatorial Cameron
 The property is a tudor styled resort comprising more than 100 self-contained low-rise and
high-rise units. Each suite is equipped with a living room, a kitchenette and a balcony. The hotel
tower comprises 270 saleable guest rooms.
 Renovation
and maintenance
 The TCL group
  Third party branded products
  Proprietary branded products
  Distribution network
  38




---



##### Table of Contents



Competition
  Other businesses
  Organizational Structure
   39




---



##### Table of Contents



40




---



##### Table of Contents



Regulatory and Related Matters
 Governance, Operation and Dissolution of Yuchai
  force majeure
  Property, Plant and Equipment
  Environmental Matters
  41




---



##### Table of Contents



ITEM 4A. UNRESOLVED STAFF COMMENTS.
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
   Business Expansion and Diversification Plan
  Thakral Corporation Ltd (TCL)
 
    
    The first step in implementing this plan occurred in March 2005 when through our wholly-owned
subsidiary, Venture Delta, we acquired a 15.0% equity interest in TCL for a consideration of
approximately S$30.9 million. In September 2005, Venture Delta acquired an additional 1.0%
equity interest in TCL for a consideration of S$1.4 million. As a result, we held a 16.0%
stake in TCL as of December 31, 2005.
    
    In February 2006, we increased our interest in TCL to 19.4% through an acquisition by Venture
Delta of ordinary shares and convertible bonds of TCL pursuant to a rights issue by TCL for an
aggregate cash consideration of approximately S$49.4 million (approximately US$36.3 million).
Venture Delta converted all of its TCL convertible bonds into TCL ordinary shares in August
2006 and, as a result of the conversion, triggered the mandatory conditional cash offers under
The Singapore Code on Take-over and Mergers for all of the TCL ordinary shares and TCL bonds
which Venture Delta did not already own, control or agree to acquire. The mandatory offers
lapsed on October 20, 2006 and no securities were purchased by Venture Delta.
 42




---



##### Table of Contents




    
    As of December 31, 2006, our interest in TCL was 36.6% of TCLs outstanding ordinary shares
and our aggregate investment in TCL amounted to approximately S$81.7 million (approximately
US$60.0 million), before taking into account dividends and interest income of approximately
S$1.9 million (approximately US$1.4 million), in the aggregate, earned from these investments.
    
    On September 2, 2008, Venture Delta transferred 1,000,000 ordinary shares, representing 0.04%
interest in TCL to Grace Star.
    
    As of December 31, 2009, our interest in TCL was 34.4% of TCLs outstanding ordinary shares
and our aggregate investment in TCL amounted to approximately S$81.7 million (approximately
US$60.0 million), before taking into account dividends and interest income of approximately
S$1.9 million (approximately US$1.4 million), in the aggregate, earned from these investments.
As of March 1, 2010, our interest in TCL remained unchanged.
    
    We accounted for our investment in TCL using the
equity method for 11 months only and we have
reflected
our proportionate share of the TCL groups results in our consolidated
statement of operations since March 2005.
 HL Global Enterprises Limited (formerly known as HLG Enterprise Limited) (HLGE)
 
    
    In February 2006, through the following wholly-owned subsidiaries, we also acquired debt and
equity securities in HLGE for an aggregate consideration of approximately S$132.0 million
(approximately US$96.7 million):(a)
    
    Grace Star acquired
 i.
    
    191,413,465 ordinary shares representing approximately 29.1% of the total number of HLGEs
ordinary shares at that time,ii.
    
    15,376,318 Series A redeemable convertible preference shares in the capital of HLGE, or the
Existing HLGE RCPS A. The Existing HLGE RCPS A is mandatorily redeemable by HLGE upon the
disposal of certain properties and upon any new issue of HLGE ordinary shares with the purpose
of raising funds for the redemption of Existing HLGE RCPS A. Any outstanding Existing HLGE
RCPS A will be mandatorily redeemed in March 2015. The Existing HLGE RCPS A can also be
converted into ordinary shares at the conversion ratio of 1:1 upon the passing of a special
resolution at a meeting of the holders of Existing HLGE RCPS A at any time prior to March
2015.iii.
    
    107,634,237 Series B redeemable convertible preference shares in the capital of HLGE, or the
Existing HLGE RCPS B (and together with the Existing HLGE RCPS A, the Existing HLGE RCPS). The
Existing HLGE RCPS B is neither mandatorily redeemable nor redeemable at the option of the
Company. Any Existing HLGE RCPS B, which are not redeemed prior to March 2010, are mandatorily
converted to ordinary shares at the conversion ratio of 1:1 in March 2010. The Existing HLGE
RCPS B are redeemable upon the disposal of certain properties and upon any new issue of HLGE
ordinary shares with the purpose of raising funds for the redemption of Existing HLGE RCPS B.
The Existing HLGE RCPS B can also be converted into ordinary shares at the conversion ratio of
1:1 upon the passing of a special resolution at a meeting of the holders of Existing HLGE RCPS
B at any time prior to March 2010.
 (b)
    
    Venture Lewis acquired approximately S$129.4 million (approximately US$95.1 million) in
principal amount of outstanding secured non-convertible bonds issued by HLGE, or the Existing
HLGE Bonds.
    
    In June and December of 2006, HLGE partially redeemed a portion of Existing HLGE RCPS A and
Existing HLGE RCPS B as required by the terms of the preference share agreement as a result of
the disposals of certain assets. The proceeds from the partial redemptions amounted to
approximately S$2.4 million (approximately US$1.6 million) and resulted in a reduction in the
number of Existing HLGE RCPS that we held through Grace Star from 123,010,555 to 113,159,191.
    
    In July 2006, pursuant to a rights issue by HLGE, through Grace Star and Venture Lewis,
respectively, we were allotted 196,201,374 non-redeemable convertible
cumulative preference shares, or the New HLGE NCCPS, and S$130,800,917 in principal amount of zero coupon unsecured
non-convertible bonds due 2009 in HLGE, or the New HLGE Bonds, for an aggregate consideration
of approximately S$135.0 million (approximately US$99.0 million). In conjunction with the
allotment, the Existing HLGE Bonds were redeemed by HLGE at their principal value of S$129.4
million. At settlement, the aggregate consideration payable by the Company to HLGE of S$134.7
million was partially offset against S$129.4 million payable by HLGE to the Company, and the
balance of S$5.3 million (approximately US$3.9 million) was paid by the Company in cash.
 43




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##### Table of Contents




    
    In November 2006, Grace Star converted all of its 196,201,374 New HLGE NCCPS into HLGE
ordinary shares resulting in an increase in its equity interest in HLGE from 29.1% to 45.4%
thereby triggering the mandatory conditional cash offers under The Singapore Code on Take-over
and Mergers for all the HLGE ordinary shares, the Existing HLGE RCPS and the New HLGE NCCPS
which Grace Star did not already own, control or agree to acquire. The mandatory offers lapsed
on December 27, 2006 and no securities were purchased by Grace Star.
    
    As of December 31, 2006, we held through Grace Star (i) 387,614,839 HLGE ordinary shares,
representing approximately 45.4% of the total number of HLGE ordinary shares; (ii) 113,159,191
Existing HLGE RCPS; and through Venture Lewis (iii) S$130,800,917 in principal amount of the
New HLGE Bonds. Our aggregate investment in HLGE to-date amounted to approximately S$136.9
million (approximately US$100.6 million), before taking into account previous interest income
earned from these investments and partial redemption of the Existing HLGE RCPS of
approximately S$6.7 million (approximately US$4.9 million) in aggregate.
    
    On June 19, 2007, HLGE made a partial redemption of the New HLGE Bonds. The principal amount
redeemed was approximately S$17.9 million (approximately US$13.2 million) and resulted in a
reduction in the principal amount of the New HLGE Bonds that we held through Venture Lewis
from S$130,800,917 to S$112,886,727. The Company had engaged an independent professional
valuer, to value the financial instruments acquired as at June 19, 2007 (before redemption)
and as at December 31, 2007. The fair value is determined by discounting the expected payments
to the valuation date using a discount rate commensurate with the risk of the payments.
    
    As of December 31, 2007, we held through Grace Star (i) 387,614,839 HLGE ordinary shares,
representing approximately 45.4% of the total number of HLGE ordinary shares; (ii) 13,957,233
Existing HLGE RCPS A; (iii) 99,201,958 Existing HLGE RCPS B; and through Venture Lewis (iv)
S$112,886,727 in principal amount of the New HLGE Bonds. Our aggregate investment in HLGE
to-date amounted to approximately S$136.5 million (approximately US$100.6 million), before
taking into account previous interest income earned from these investments and partial
redemption of the Existing HLGE RCPS of approximately S$6.7 million (approximately US$4.9
million) in aggregate.
    
    In April 2008, HLGE made an additional partial redemption of the Existing HLGE RCPS B. The
redemption amount we received amounted to approximately S$0.98 million (approximately US$0.7
million) on April 30, 2008 and resulted in a reduction in the number of Existing HLGE RCPS
that we held through Grace Star from 113,159,191 to 107,186,403.
    
    In June 2008, HLGE made another partial redemption of the New HLGE Bonds. The principal amount
redeemed was approximately S$25.9 million (approximately US$17.7 million) and resulted in a
reduction in the principal amount of the New HLGE Bonds that we held through Venture Lewis from
S$112,886,727 to S$87,010,673. We account for our investment in HLGE
as a subsidiary upon adoption of IFRS.
    
    On February 3, 2010, we announced the extension for another year of the S$93,000,000 loan
granted to HLGE by our wholly-owned subsidiary, Venture Lewis to HLGE to refinance the New
HLGE Bonds which matured on July 3, 2009. Under the terms of the original loan agreement, on
the maturity date of the New HLGE Bonds, HLGE will fully redeem the New HLGE Bonds held by all
minority New HLGE Bondholders and pay to Venture Lewis a portion of the principal and gross
redemption yield. The remaining amount due to Venture Lewis on the maturity date would be
refinanced through an unsecured loan arrangement with a one-year term, renewable by mutual
agreement between the parties on an annual basis. An option for HLGE to undertake a partial
redemption of the New HLGE Bonds on a pro-rata basis prior to the maturity date was included
in the loan agreement. On February 19, 2009, HLGE announced an early partial redemption of the
new HLGE Bonds on a pro-rata basis of up to S$9.0 million in principal amount of the
outstanding New HLGE Bonds and on March 23, 2009, HLGE effected payment to all bondholders.
The principal amount redeemed of approximately S$8.96 million (approximately US$6.1 million)
to us had resulted in a reduction in the principal amount of the New HLGE Bonds that we held
through Venture Lewis from S$87,010,673 to S$78,053,577.
    
    On February 12, 2010, HLGE announced the mandatory conversion of an aggregate of 18,935,883
Existing HLGE RCPS B into 18,935,883 ordinary shares in the capital of HLGE on March 18, 2010
(Mandatory Conversion Date). As of February 12, 2010, Grace Star held 93,229,170 Existing
HLGE RCPS B representing approximately 98.28% of the existing total number of Existing HLGE
RCPS B. By a written notice to HLGE on February 11, 2010, Grace Star notified HLGE that
pursuant to HLGEs Articles of Association, it will be converting only 17,300,000 out of the
93,229,170 Existing HLGE RCPS B it held into HLGE ordinary shares so as not to trigger a
take-over obligation under The Singapore Code on Take-overs and Mergers on the Mandatory
Conversion Date. Grace Star has an option under HLGEs Articles of Association to convert the
remaining 75,929,170 Existing HLGE RCPS B into HLGE ordinary shares over a period of
twenty-two months after the Mandatory Conversion Date. With the
 44




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conversion of 17,300,000 Existing HLGE RCPS B into HLGE ordinary shares on the Mandatory
Conversion Date, Grace Stars shareholding interest in HLGE increased from 45.4% to 46.4% with
effect from March 24, 2010 upon receipt of regulatory approval. See Item 3. Key Information 
Risk Factors  Risks relating to our investments in HLGE and TCL  The HLGE Group may be unable
to raise sufficient funds to pay their debt obligations to us and our
conversion of all our existing Series B redeemable convertible
preference shares in HLGE may not be successful or may result in
increased costs.
 Overview
       45




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47




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Critical Accounting Policies
    
    
    allowances for doubtful accounts and loans receivable;
    
    realization of the carrying value of inventories;
    
    product warranty obligations;
    
    recoverability of the carrying values of equity method investments and other investments;
    
    realization of deferred tax assets; and
    
    impairment of long-lived assets.
 Allowances for doubtful accounts
   December 31,2008
    
    2009
    
    2009Rmb
    
    Rmb
    
    US$(in thousands)Balance at beginning of year
    
    
    65,013
    
    
    
    96,147
    
    
    
    14,083Add: Charge/(credit) to consolidated
statements of operations
    
    
    32,943
    
    
    
    (15,552
    )
    
    
    (2,278
    )Less: Written off
    
    
    (1,802
    )
    
    
    (3,947
    )
    
    
    (578
    )Translation differences
    
    
    (7
    )
    
    
    (2
    )
    
    
    Balance at end of Year
    
    
    96,147
    
    
    
    76,646
    
    
    
    11,227
 48




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##### Table of Contents



Realization of the carrying value of inventories
   Product warranty obligations
   December 31,2008
    
    2009
    
    2009Rmb000
    
    Rmb000
    
    US$(in thousands)Balance at beginning of year
    
    
    194,898
    
    
    
    188,599
    
    
    
    27,626Add: Provision charged to consolidated statements of operations
    
    
    215,544
    
    
    
    368,284
    
    
    
    53,948Less: Amounts utilized
    
    
    (221,843
    )
    
    
    (297,349
    )
    
    
    (43,557
    )Balance at end of year
    
    
    188,599
    
    
    
    259,534
    
    
    
    38,017
  Recoverability of carrying values of equity method investments and other investments
  49




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Realization of deferred tax
       50




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Impairment of long-lived assets, other than goodwill
    
    
    Property, plants and equipments Rmb 7.8 million (US$1.1
million) (2008: Rmb 43.7 million)
    
    Prepaid operating leases Rmb nil (US$ nil)
(2008: Rmb 26.3 million)
  Results of Operations
  Percentage of Net RevenuesYear Ended December 31,2008
    
    2009Revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    -80.3
    %
    
    
    -80.7
    %Gross profit
    
    
    19.7
    %
    
    
    19.3
    %Other income
    
    
    0.2
    %
    
    
    0.6
    %Research & development costs
    
    
    -1.8
    %
    
    
    -2.3
    %Selling, distribution and administrative costs
    
    
    -12.2
    %
    
    
    -11.2
    %Operating profit
    
    
    5.9
    %
    
    
    6.5
    %Finance costs
    
    
    -1.4
    %
    
    
    -0.6
    %Share of profit of associates
    
    
    0.0
    %
    
    
    0.0
    %Share of joint ventures
    
    
    0.1
    %
    
    
    -0.1
    %
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Percentage of Net RevenuesYear Ended December 31,2008
    
    2009Gain on acquisition of Guangxi Yulin Hotel Co in settlement of past loan
    
    
    0.0
    %
    
    
    1.5
    %Profit before tax from continuing operations
    
    
    4.6
    %
    
    
    7.3
    %Income tax expense
    
    
    -1.1
    %
    
    
    -1.1
    %Profit for the year from continuing operations
    
    
    3.5
    %
    
    
    6.2
    %Profit/loss
after tax from discontinued operations
    
    
    -0.3
    %
    
    
    0.1
    %Profit for the year
    
    
    3.2
    %
    
    
    6.3
    %Attributable to :Equity Holders of the Parent
    
    
    2.3
    %
    
    
    4.8
    %Minority interest
    
    
    0.9
    %
    
    
    1.5
    %
 2009 Compared to 2008
        52




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Inflation
  Seasonality
  53




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Liquidity and Capital Resources
      For Year ended December 31,2008
    

2009
    

2009Rmb
    
    Rmb
    
    US $(in thousands)Net cash provided by operating activities
    
    
    697,180
    
    
    
    3,969,358
    
    
    
    581,446Net cash used in investing activities
    
    
    (218,427
    )
    
    
    (800,445
    )
    
    
    (117,252
    )Net cash provided/(used in) financing activities
    
    
    (398,571
    )
    
    
    (332,725
    )
    
    
    (48,739
    )Effect of foreign currency exchange on cash and cash equivalents
    
    
    (16,324
    )
    
    
    (1,902
    )
    
    
    (279
    )Net increase/(decrease) in cash and cash equivalents
    
    
    63,858
    
    
    
    2,834,286
    
    
    
    415,176
   54




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55




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Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    5 YearsRmb
    
    Rmb
    
    Rmb
    
    Rmb
    
    Rmb(in millions)Short-term debt(1)
    
    
    459.0
    
    
    
    459.0
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt(1)
    
    
    646.5
    
    
    
    479.4
    
    
    
    167.1
    
    
    
    
    
    
    
    Purchase obligations regarding capital expenditures
    
    
    781.3
    
    
    
    781.3
    
    
    
    
    
    
    
    
    
    
    
    Operating lease commitments
    
    
    17.0
    
    
    
    9.0
    
    
    
    8.0
    
    
    
    
    
    
    
    Total
    
    
    1,903.8
    
    
    
    1,728.7
    
    
    
    175.1
    
    
    
    
    
    
    
    
 
 (1)
    
    Includes contractual interest payments Capital Expenditures
   56




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Off-Balance Sheet Arrangements
   Research and Development
  Recently Issued Accounting Standards 
  
    
    IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial
Statements (Amended) effective July 1, 2009 including consequential amendments to IFRS 7, IAS
21, IAS 28, IAS 31 and IAS 39
 
    
    IFRS 9 Financial Instruments effective for annual periods beginning on or after January 1,
2013
 
    
    IAS 39 Financial Instruments: Recognition and Measurement  Eligible Hedged Items effective
July 1, 2009
 
    
    IFRIC 17 Distributions of Non-cash Assets to Owners effective for annual periods beginning on
or after July 1, 2009
 
    
    IFRIC 18 Transfers of Assets from Customers effective July 1, 2009
 
    
    Improvements to IFRSs (April 2009) effective for periods beginning on or after January 1,
2010, unless stated otherwise
 IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements
(Amended)
  IFRS 9 Financial Instruments
  (a)
    
    classified on the basis of the entitys business model for managing the financial assets and
the contractual cash flow characteristics of the financial asset.(b)
    
    initially measured at fair value plus, in the case of a financial asset not at fair value
through profit or loss, particular transaction costs.(c)
    
    subsequently measured at amortised cost or fair value.
  IAS 39 Financial Instruments: Recognition and Measurement  Eligible Hedged Items
  IFRIC 17 Distributions of Non-cash Assets to Owners
  Improvements to IFRSs (April 2009)
  
    
    IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that the
disclosures required in respect of non-current assets and disposal groups classified as held
for sale or discontinued operations are only those set out in IFRS 5. The disclosure
requirements of other IFRSs only apply if specifically required for such non-current assets or
discontinued operations.
    
    IFRS 8 Operating Segment Information: clarifies that segment assets and liabilities need only
be reported when those assets and liabilities are included in measures that are used by the
chief operating decision maker.
    
    IAS 1 Presentation of Financial Statements: Assets and liabilities classified as held for
trading in accordance with IAS 39 Financial Instruments: Recognition and Measurement are not
automatically classified as current in the statement of financial position.
    
    IAS 7 Statement of Cash Flows: Explicitly states that only expenditure that results in
recognising an asset can be classified as a cash flow from investing activities.
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4.
    
    Standards issued but not yet effective (contd)Improvements to IFRSs (April 2009) (contd)
 
    
    IAS 17 Leases: The specific guidance on classifying land as a lease has been removed so that
only the general guidance remains.
    
    IAS 36 Impairment of Assets: The amendment clarified that the largest unit permitted for
allocating goodwill, acquired in a business combination, is the operating segment as defined
in IFRS 8 before aggregation for reporting purposes.
 
    
    IAS 38 Intangible Assets: If an intangible acquired in a business combination is identifiable
only with another intangible asset, the acquirer may recognize the group of intangibles as a
single asset provided the individual assets have similar useful lives. In addition, the
valuation techniques presented for determining the fair value of intangible assets acquired in
a business combination are only examples and are not restrictive on the methods that can be
used.
    
    IAS 39 Financial Instruments: Recognition and Measurement: When assessing loan prepayment
penalties as embedded derivatives, a prepayment option is considered closely related to the
host contract when the exercise price reimburses the lender up to the approximate present
value of lost interest for the remaining term of the host contract.In addition, the scope exemption for contracts between an acquirer and a vendor in a business
combination to buy or sell an acquiree at a future date applies only to binding forward
contracts, not derivative contracts where further actions are still to be taken.Gains or losses on cash flow hedges of a forecast transaction that subsequently results in the
recognition of a financial instrument or on cash flow hedges or recognised financial
instruments should be reclassified in the period that the hedged forecast cash flows affect
profit or loss.
    
    IFRIC 9 Reassessment of Embedded Derivatives: IFRIC 9 does not apply to possible reassessment
at the date of acquisition to embedded derivatives in contracts acquired in a combination
between entities or businesses under common control or the formation or a joint venture.
    
    IFRIC 16 Hedges of a Net Investment in A Foreign Operation: Qualifying hedging instruments
may be held by any entity within the group, provided the designation, documentation and
effectiveness requirements of IAS 39 are met.
  
 ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.
 Directors and Executive Officers of the Company
   Year First Elected orAppointed DirectorName
    
    Position
    
    or OfficerSAW Boo
Guan(1)
    
    President and Director
    
    
    2009TEO Tong
Kooi
(1)(2)(5)
    
    Director
    
    
    2004GAN Khai
Choon
(1)(5)
    
    Director
    
    
    1995KWEK Leng
Peck(1)(3)
    
    Director
    
    
    1994TAN Eng Kwee
    
    Director
    
    
    2010NEO Poh Kiat
(1)(3)(4)
    
    Director
    
    
    2005TAN
Aik-Leang(1)(4)
    
    Director
    
    
    2005Matthew
RICHARDS(3)(4)
    
    Director
    
    
    2006
 58




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Year First Elected orAppointed DirectorName
    
    Position
    
    or OfficerCHING Yew Chye
    
    Director
    
    
    2010YAN
Ping(1)
    
    Director
    
    
    2007ZHANG Shi
Yong(1)
    
    Director
    
    
    2007
 Year First Elected orAppointed DirectorName
    
    Position
    
    or OfficerHOH Weng
Ming(6)
    
    Chief Financial Officer
    
    
    2008FOO Shing Mei Deborah
    
    General Counsel
    
    
    2007Ira Stuart OUTERBRIDGE III
    
    Secretary
    
    
    2001
 
 (1)
    
    Also a Director of Yuchai.(2)
    
    Also a Director of TCL.(3)
    
    Member of the Compensation Committee.(4)
    
    Member of the Audit Committee.(5)
    
    Also a Director of HLGE.(6)
    
    Also a Director of Yuchai as well as alternate Director to Mr. Teo Tong Kooi in TCL.     59




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Audit Committee
  Compensation Committee
  Directors and Executive Officers of Yuchai
   Year First Elected orAppointed DirectorName
    
    Position
    
    Position or OfficerYAN
Ping(1)
    
    Chairman of the Board of Directors
    
    
    2005SAW Boo Guan (1)
    
    Deputy Chairman of the Board of
Directors
    
    
    2009LI Tiansheng
    
    Director and General Manager
    
    
    2001GAN Khai Choon(1)(4)
    
    Director
    
    
    2007KWEK Leng Peck(1)
    
    Director
    
    
    2005NEO Poh Kiat(1)
    
    Director
    
    
    2008TAN Aik-Leang(1)
    
    Director
    
    
    2005TEO Tong Kooi(1)(2)(4)
    
    Director
    
    
    2004HOH Weng Ming (7)
    
    Director
    
    
    2008YUAN Xucheng
    
    Director
    
    
    2003GU Tangsheng
    
    Assistant to Chairman and Director
    
    
    2005ZHANG Shi Yong(1) (3)
    
    Director
    
    
    2007ZENG Shi Qiang
    
    Assistant Director
    
    
    1999HAN Yi Yong (5)
    
    Company Secretary
    
    
    2010TAY Hui Boon Kelly(6)
    
    Financial Controller
    
    
    2008LEE See Bee Patrick (6)
    
    Vice President, International Sales
    
    
    2009WU Qiwei
    
    Deputy General Manager
    
    
    2006ZHONG Yu Wei
    
    Deputy General Manager
    
    
    2010NING
Xingyong
    
    Deputy General Manager
    
    
    2009LIANG
Qinyan
    
    Deputy General Manager
    
    
    2009QIN Xiaohong
    
    Chief Accountant
    
    
    2007SHEN Jie
    
    General Engineer
    
    
    2002
 62




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(1)
    
    Also a Director of the Company.(2)
    
    Also a Director of TCL.(3)
    
    Resigned as Company Secretary of Yuchai on March 18, 2009.(4)
    
    Also a Director of HLGE.(5)
    
    Appointed Company Secretary of Yuchai on February 1, 2010 to replace Mr. Cooper Su who
resigned as Company Secretary of Yuchai on February 1, 2010.(6)
    
    Secondees of the Company, whose salaries and expenses are paid by the Company.(7)
    
    Also an alternate Director to Mr. Teo Tong Kooi in TCL.             63




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Yuchai
     64




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Compensation
 Company
  65




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Yuchai
   Employees
    
 ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
 Major Shareholders
   Identity of Person or Group
    
    Number
    
    Percentage (%)Hong Leong
Asia
Ltd(1)
    
    
    10,248,014
    
    
    
    27.5
    %The Yulin City Government(2)
    
    
    6,709,322
    
    
    
    18.0
    %Shah Capital Management (3)
    
    
    2,127,461
    
    
    
    5.7
    %
 
 (1)
    
    Information based upon a report on Schedule 13D jointly filed by Hong Leong Asia and its
wholly-owned subsidiaries, Hong Leong China, HL Technology, Flite Technology Industries Pte
Ltd and Lydale Pte Ltd, with the SEC on July 19, 2002, as amended on September 10, 2003,
October 7, 2003, October 15, 2003 December 1, 2003,
October 27, 2009 and October 28, 2009 and an announcement
released by Hong Leong Asia to the Singapore Exchange on
March 31, 2010. Hong Leong Asia is the
beneficial owner of and exercises control over the 10,248,014 shares of Common Stock or
approximately 27.5% of the total number of shares of Common Stock 66




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##### Table of Contents



held by its wholly-owned
subsidiaries, HL Technology and Well Summit Investments Limited and the special share. See
also  Related Party Transactions  Shareholders Agreement. Other than as described under
Item 3. Key Information  Risk Factors  Risks relating to our company and our business  We
may experience a change of control as a result of offerings of shares by our controlling
shareholders and   The Special Share, we are not aware of any arrangement which may, at a
subsequent date, result in a change of control of the Company.(2)
    
    Information based on a report on Schedule 13D filed by Coomber, Goldman, Zhong Lin and the
State Holding Company, with the SEC on December 16, 2002, as amended on June 23, 2003, July 9,
2003, December 23, 2003, March 15, 2004, February 15, 2005, April 18, 2005, August 9, 2006 and
September 29, 2006. Based on Amendment No. 4 to the Schedule 13D filed by Coomber and others
with the SEC on December 23, 2003, Coomber is a wholly-owned subsidiary of Goldman, which is
indirectly owned and controlled by Yulin City Municipal Government, or Yulin City Government,
in Guangxi Zhuang Autonomous Region, PRC. Accordingly, the Yulin City Government is the
ultimate beneficial owner of the 6,709,322 shares of the Companys Common Stock held of record
by Coomber.(3)
    
    Information based on a report on Schedule 13D filed by Shah Capital Management with the SEC
on November 24, 2008 as amended on December 31, 2008 and November 27, 2009 as amended on
December 3, 2009.  The Special Share
    Related Party Transactions
 Shareholders Agreement
  67




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Registration Rights Agreement
  Reorganization Agreement and Cooperation Agreement
   68




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Other Transactions
       70




---



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ITEM 8.
    
    FINANCIAL INFORMATION.
 Consolidated Financial Statements
  Legal Proceedings
  Proceedings with Yuchai
    71




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##### Table of Contents



Other Legal Proceedings
   
 ITEM 9.
    
    THE OFFER AND LISTING.
   US$
    
    US$Period
    
    High
    
    Low2005
    
    
    14.47
    
    
    
    7.022006
    
    
    10.00
    
    
    
    4.532007
    
    
    13.85
    
    
    
    6.872008
    
    
    11.98
    
    
    
    2.492009
    
    
    17.37
    
    
    
    3.172010 (through March 31, 2010)
    
    
    19.92
    
    
    
    12.30
 US$
    
    US$Period
    
    High
    
    Low2008 First Quarter
    
    
    10.22
    
    
    
    7.072008 Second Quarter
    
    
    11.98
    
    
    
    8.282008 Third Quarter
    
    
    11.66
    
    
    
    7.112008 Fourth Quarter
    
    
    7.69
    
    
    
    2.492009 First Quarter
    
    
    5.49
    
    
    
    3.172009 Second Quarter
    
    
    8.89
    
    
    
    4.482009 Third Quarter
    
    
    10.50
    
    
    
    6.602009 Fourth Quarter
    
    
    17.37
    
    
    
    8.602010 (through March 31, 2010)
    
    
    19.92
    
    
    
    12.30
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##### Table of Contents



US$
    
    US$Period
    
    High
    
    LowAugust 2009
    
    
    8.46
    
    
    
    6.60September 2009
    
    
    9.97
    
    
    
    8.16October 2009
    
    
    12.19
    
    
    
    8.60November 2009
    
    
    16.85
    
    
    
    10.49December 2009
    
    
    17.37
    
    
    
    14.68January 2010
    
    
    19.92
    
    
    
    13.21February 2010
    
    
    15.18
    
    
    
    12.30March 2010 (through March 31, 2010)
    
    
    18.67
    
    
    
    14.09
 
 ITEM 10.
    
    ADDITIONAL INFORMATION.
  Memorandum of Association and Bye-Laws
 Corporate Governance
    Standard for US Domestic Listed
    
    China Yuchai International LimitedsCompanies
    
    PracticeDirector IndependenceA majority of the board must consist of independent directors.
Independence is defined by various criteria including the absence of a material relationship between director and the listed company. Directors who are employees, are immediate family of the chief executive officer or receive over $120,000 per year in direct compensation from the listed company are not independent.
    
    Four of our eleven directors, Messrs. Neo Poh Kiat, Tan Aik-Leang, Matthew Richards and Ching Yew Chye are independent within the meaning of the NYSE standards.
 73




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##### Table of Contents



Standard for US Domestic Listed
    
    China Yuchai International LimitedsCompanies
    
    PracticeDirectors who are employees of or otherwise affiliated through immediate family with the listed companys independent auditor are also not independent.The non-management directors of each company must meet at regularly scheduled executive sessions without management.
    
    Our non-management directors do not meet periodically without management directors.Audit CommitteeListed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act. The rule requires that the audit committee (i) be comprised entirely of independent directors; (ii) be directly responsible for the appointment, compensation, retention and oversight of the independent auditor; (iii) adopt procedures for the receipt and treatment of complaints with resp
ect to accounting, internal accounting controls or auditing
matters; (iv) be authorized to engage independent counsel and other advisors it deems necessary in performing its duties; and (v) be given sufficient funding by the company to compensate the independent auditors and other advisors as well as for the payment of ordinary administrative expenses incurred by the committee.
    
    Our audit committee meets the requirements of Rule 10A-3 under the Exchange Act.The audit committee must consist of at least three members, and each member meets the independence requirements of both the NYSE rules and Rule 10A-3 under the Exchange Act.
    
    Our audit committee currently consists of three members, each of whom meets the independence requirements of both the NYSE rules and Rule 10A-3 under the Exchange Act.The audit committee must have a written charter that addresses the committees purpose and responsibilities.
    
    Our audit committee has a charter outlining the committees purpose and responsibilities, which are similar in scope to those required of US companies.
 Standard for US Domestic Listed
    
    China Yuchai International LimitedsCompanies
    
    PracticeAt a minimum, the committees purpose
must be to assist the board in the
oversight of the integrity of the
companys financial statements, the
companys compliance with legal and
regulatory requirements, the
independent auditors qualifications
and independence and the performance
of the companys internal audit
function and independent auditors.
The audit committee is also required
to review the independent auditing
firms annual report describing the
firms internal quality control
procedures, any material issues
raised by the most recent internal
quality control review or peer review
of the firm, or by any recent
governmental inquiry or
investigation, and any steps taken to
address such issues.
 Standard for US Domestic Listed
    
    China Yuchai International LimitedsCompanies
    
    PracticeThe audit committee is also required to assess the auditors independence by reviewing all relationships between the company and its auditor. It must establish the companys hiring guidelines for employees and former employees of the
independent auditor. The committee must also discuss the companys annual audited financial statements and quarterly financial statements with management and the independent auditors, the companys earnings press releases, as well as
financial information and earnings guidance provided to analysts and rating agencies, and policies with respect to risk assessment and risk management. It must also meet separately, periodically, with management, the
 74




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Standard for US Domestic Listed
    
    China Yuchai International LimitedsCompanies
    
    Practiceinternal auditors and
the independent auditors.Each listed company must disclose whether its board of directors has identified an Audit Committee Financial Expert, and if not the reasons why the board has not done so.
    
    The Board of Directors has identified Mr. Tan Aik-Leang as our Audit Committee Financial Expert.Each listed company must have an internal audit function.
    
    We are a holding company and the majority of business is done at our main subsidiary, Guangxi Yuchai Machinery Company Limited (Yuchai). Our group transactions, fees and expenses are reviewed by the Internal Audit Department of Hong Leong Asia. In addition, Yuchai maintains an independent internal audit function, headed by an internal
audit manager who reports to the Audit Committee of Yuchais Board which approves the audit plans, reviews significant audit issues and monitors corrective actions taken by management.Compensation CommitteeListed companies must have a compensation committee composed entirely of independent board members as defined by the NYSE listing standards.
    
    Our compensation committee currently has three members, two of whom are independent within the meaning of the NYSE standards.The committee must have a written charter that addresses its purpose and responsibilities.These responsibilities include (i) reviewing and approving corporate goals and objectives relevant to CEO compensation; (ii) evaluating CEO performance and compensation in light of such goals and objectives for the CEO; (iii) based on such evaluation, reviewing and approving CEO compensation levels; (iv) recommending to the board non-CEO compensation, incentive compensation plans and
equity-based plans; and (v) producing a report on executive compensation as required
by the SEC to be included in the companys annual proxy statement or annual report. The committee must also conduct an annual performance self-evaluation.
    
    Our compensation committee reviews among other things the Companys general compensation structure, and reviews, recommends or approves executive appointments, compensation and benefits of directors and executive officers,
subject to ratification by the Board of Directors, and supervises the administration of our employee benefit plans, if any.Nominating/Corporate Governance CommitteeListed companies must have a nominating/corporate governance committee composed entirely of independent board members.
    
    We do not have a nominating/corporate governance committee. However, certain responsibilities of this committee are undertaken by our Compensation Committee, such as the review and approval of executive appointments and all other functions are performed by the Board of Directors.The committee must have a written charter that addresses its purpose and responsibilities, which include (i) identifying qualified individuals to become board members; (ii) selecting, or recommending that the board select, the director
nominees for the next annual meeting of shareholders; (iii) developing and recommending to the board a set of corporate governance principles applicable to the company; (iv) overseeing the evaluation of the board and management; and (v)
conducting an annual performance evaluation of the committee.Equity-Compensation PlansShareholders must be given the opportunity to vote on all equity-
    
    We intend to have our shareholders approve equity-
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Standard for US Domestic Listed
    
    China Yuchai International LimitedsCompanies
    
    Practicecompensation plans and material revisions thereto, with limited exceptions.
    
    compensation plans.Corporate Governance GuidelinesListed companies must adopt and disclose corporate governance guidelines.
    
    We have formally adopted various corporate governance guidelines, including Code of Business Conduct and Ethics (described below); Audit Committee Charter; Whistle-blowing Policy; Insider Trading Policy; and Disclosure Controls and Procedures.Code of Business Conduct and EthicsAll listed companies, US and foreign, must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any amendment to or waivers of the code for directors or executive officers.
    
    We adopted a Code of Business Conduct and Ethics Policy in May 2004, which was revised on December 9, 2008. The text of the Code is posted on our internet website at http://www.cyilimited.com/invest_govt.asp. We intend to promptly disclose any amendment to or waivers of the Code for directors or executive officers.
 Directors
 Director Interests and Voting
  (a)
    
    a resolution regarding granting any security or indemnity for any money lent or obligation
incurred by such Director at the request, or for the benefit, of the Company or any of our
subsidiaries (or a company of which we are a beneficially wholly-owned subsidiary);(b)
    
    a resolution regarding granting any security or indemnity to any third party for a debt or
obligation which is owed by the Company or any of our subsidiaries (or a company of which we
are a beneficially wholly-owned subsidiary) to the third party, for which such Director has
assumed responsibility in whole or in part under a guarantee or indemnity;(c)
    
    a resolution about an offer of shares, debentures or other securities of the Company or any
of its subsidiaries (or a company of which we are a beneficially wholly-owned subsidiary) for
subscription or purchase in which such Director is to be a participant in the underwriting or
sub-underwriting of the offer;(d)
    
    a resolution about any proposal involving any other company in which such Director is
interested, whether directly or indirectly and whether as an officer or shareholder or
otherwise, provided that such Director is not the holder of, or directly or indirectly
beneficially interested in, 5% or more of (i) any class of the equity share capital of such
company or in any third company through which such Directors interest is derived or (ii) the
voting rights in that company;(e)
    
    any contract, arrangement or proposal for the benefit of our employees under which such
Director benefits in a similar manner as the employees and does not receive any privileges or
advantages not provided to the employees; or(f)
    
    any proposal in which such Director is interested in the same manner as other holders of our
shares or our debentures or our other securities or any of our subsidiaries by virtue only of
such Directors interest in our shares or our debentures or our other securities or any of our
subsidiaries.
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Remuneration and Pensions
    Borrowing Powers
  Qualification of Directors
  Rights of Holders of shares of Common Stock
  
    
    be entitled, on a show of hands, to one vote and, on a poll, to one vote per share;
    
    be entitled to such dividends as the Board of Directors of the Company may from time to time
declare;
    
    in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary
or for the purpose of the reorganization or otherwise or upon any distribution of capital, be
entitled to a return of the amount paid up on the Common Stock and thereafter to the surplus
assets of the Company; and
    
    generally, be entitled to enjoy all the rights attaching to shares.
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Rights of Holder of the Special Share
  
    
    to elect six Directors of the Company and to remove Directors so appointed; and
    
    no shareholder resolution, whether ordinary or special resolution, may be passed without the
affirmative vote of the holder of the Special Share.
   Modification of Shareholders Rights
 pari passu
 Annual General and Special General Meetings
   78




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Limitations on Rights to Own Securities
  inter alia
  Exchange Controls
 Bermuda Exchange Controls
   China Exchange Controls
  79




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Taxation
 Bermuda Taxation
  80




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Peoples Republic of China Taxation
  Taxation of Dividends from Yuchai
  Taxation of Disposition of Yuchai Shares
    Income Tax
  81




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82




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Value-Added Tax
   United
States Federal Income Taxation
  83




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
    
    a financial institution,
    
    a dealer in securities,
    
    a trader in securities that elects to use a mark-to-market method of accounting for its
securities holdings,
    
    a tax-exempt organization,
    
    an insurance company,
    
    a person liable for alternative minimum tax,
    
    a person that actually or constructively owns 10% or more of the voting stock of the Company,
    
    a person that owns shares through a partnership or other pass-through entity,
    
    a person that holds shares as part of a straddle or a hedging or conversion transaction, or
    
    a person whose functional currency is not the US dollar.
   
    
    a citizen or resident of the United States,
    
    a US domestic corporation,
    
    an estate the income of which is subject to United States federal income tax regardless of
its source, or
    
    a trust, if a United States court can exercise primary supervision over the trusts
administration and one or more United States persons are authorized to control all substantial
decisions of the trust.
 US Holders should consult their own tax advisor regarding the United States federal, state and
local and other tax consequences of owning and disposing of shares in their particular
circumstances.
 Taxation of Dividends
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Taxation of Capital Gains
  PFIC
Rules
  
    
    at least 75% of its gross income is passive income, or
    
    at least 50% of the value of its assets (based on an average of the quarterly values of the
assets during a taxable year) is attributable to assets that produce or are held for the
production of passive income (the asset test).
   
    
    the excess distribution or gain will be allocated ratably over the US Holders holding period
for the shares;
    
    the amount allocated to the current taxable year, and any taxable year prior to the first
taxable year in which the Company is treated as a PFIC, will be treated as ordinary income;
and
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
    
    the amount allocated to each other year will be subject to tax at the highest tax rate in
effect for that year and the interest charge generally applicable to underpayments of tax will
be imposed on the resulting tax attributable to each such year.
   New Legislation
  Documents on Display
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
   Market risk
  Interest rate risk
   86




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Interest rate sensitivity
   Foreign currency risk
    December 31, 2008UnitedSingapore
    
    Euro
    
    States
    
    ChineseGroup
    
    Dollar
    
    Dollars
    
    Dollar
    
    Renminbi
    
    OthersRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000Other investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other receivables
    
    
    
    
    
    
    11
    
    
    
    119,155
    
    
    
    33,613
    
    
    
    Cash and cash equivalents
    
    
    758
    
    
    
    
    
    
    
    6,047
    
    
    
    
    
    
    
    Financial liabilities
    
    
    (491,725
    )
    
    
    
    
    
    
    
    
    
    
    Trade and other payables
    
    
    (72,433
    )
    
    
    (908
    )
    
    
    (98,711
    )
    
    
    (1,418
    )
    
    
    (2,827
    )In Rmb000
    
    
    (563,400
    )
    
    
    (897
    )
    
    
    26,491
    
    
    
    32,195
    
    
    
    (2,827
    )In US$000
    
    
    (82,529
    )
    
    
    (131
    )
    
    
    3,880
    
    
    
    4,716
    
    
    
    (414
    )
 December 31, 2009UnitedSingapore
    
    Euro
    
    States
    
    ChineseGroup
    
    Dollar
    
    Dollars
    
    Dollar
    
    Renminbi
    
    OthersRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000Other investments
    
    
    326,058
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other receivables
    
    
    374
    
    
    
    9,171
    
    
    
    135,981
    
    
    
    32,464
    
    
    
    Cash and cash equivalents
    
    
    78,372
    
    
    
    253
    
    
    
    2,636
    
    
    
    
    
    
    
    22Financial liabilities
    
    
    (492,752
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other payables
    
    
    (66,889
    )
    
    
    
    
    
    
    (55,095
    )
    
    
    (1,446
    )
    
    
    (19
    )In Rmb000
    
    
    (154,837
    )
    
    
    9,424
    
    
    
    83,522
    
    
    
    31,018
    
    
    
    3In US$000
    
    
    (22,681
    )
    
    
    1,380
    
    
    
    12,235
    
    
    
    4,544
    
    
    
    
   2008
    
    2009
    
    2009Rmb000
    
    Rmb000
    
    US$000Profit before tax
    
    Profit before tax
    
    Profit before taxSingapore dollar
    
    
    (56,340
    )
    
    
    (15,484
    )
    
    
    (2,268
    )Euro dollar
    
    
    (90
    )
    
    
    942
    
    
    
    138United
States dollar
    
    
    2,649
    
    
    
    8,352
    
    
    
    1,224Chinese Renminbi
    
    
    3,220
    
    
    
    3,102
    
    
    
    454
 87




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Equity price risk
    2008
    
    2009
    
    2009Rmb000
    
    Rmb000
    
    US$000Equity
    
    
    
    
    
    
    907
    
    
    
    133
  Value as atNumber of
    
    31 Decembershares
    
    2008
    

Value
as at 31 December 2009Rmb
    
    Rmb
    
    US$(in millions)
    
    (in millions)
    
    (in millions)TCL
    
    
    898,990,352
    

    
    
    265.8
    

    
    
    327.5
    

    
    
    48.0
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##### Table of Contents



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.
  
 ITEM 15. CONTROLS AND PROCEDURES
 A. Evaluation of Disclosure Controls and Procedures
   B. Managements Assessment of Internal Control over Financial Reporting
  
    
    pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with IFRS;
    
    provide reasonable assurance that receipts and expenditures are being made only in
accordance with our managements and/or our Board of Directors authorization; and
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
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect on our
consolidated financial statements.
   Financial statement closing process
   C. Remediation Measures to address Material Weaknesses identified in 2009
   90




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Financial statement closing process
  D. Remediation Measures to address Material Weaknesses identified in 2008
   91




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##### Table of Contents



Insufficient knowledge and resources on U.S. generally accepted accounting principles
 First Time Adoption of International Financial Reporting Standards
 Financial statement closing process
  Segregation of Duties in BOKE system
  92




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E. Report of Independent Registered Public Accounting Firm on internal Controls
  F. Changes in Internal Control over Financial Reporting
  
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.
  
 ITEM 16B. CODE OF ETHICS.
 http://www.cyilimited.com/invest_govt.asp
 
 ITEM 16C. PRINCIPAL ACCOUNTANTS FEES AND SERVICES.
  Audit fees
    
    Audit-related fees
    
    Tax fees
    
    Others
    
    TotalRmb
    
    Rmb
    
    Rmb
    
    Rmb
    
    Rmb(in thousands)2008
    
    
    29,008
    (1)
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    29,062
    (1)2009
    
    
    7,333
    
    
    
    
    
    
    
    
    
    
    
    717
    
    
    
    8,050
 
 (1)
    
    Included fees billed by KPMG for the years 2006 and 2007 Audit fees
  93




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##### Table of Contents



Audit-related fees
   
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
  
 ITEM
16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
          94




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ITEM 16G. CORPORATE GOVERNANCE
  
 PART III
 
 ITEM 17. FINANCIAL STATEMENTS.
  
 ITEM 18. FINANCIAL STATEMENTS.
 Index to Financial Statements
 China Yuchai International Limited
 Reports of Independent Registered Public Accounting Firms
    
    
    F-2Consolidated Statements of Income for years ended December 31, 2008 and 2009
    
    
    F-4Consolidated Balance Sheets as of December 31, 2008 and 2009
    
    
    F-7Consolidated Statements of Shareholders Equity and Comprehensive Income/(Loss) for
years ended December 31, 2008 and 2009
    
    
    F-9Consolidated Statements of Cash Flows for years ended December 31, 2008 and 2009
    
    
    F-11Notes to the Consolidated Financial Statements for years ended December 31, 2008 and 2009
    
    
    F-13
 95




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##### Table of Contents



ITEM 19. EXHIBITS.
  1.1
    
    Memorandum of Association of China Yuchai International Limited or the Registrant
(incorporated herein by reference to Amendment No. 1 to the Registration Statement on Form
F-1, filed by the Registrant on December 8, 1994 (File No. 33-86162), or the Form F-1).1.2
    
    Bye-laws of the Registrant (incorporated herein by reference to the Form F-1).3.1
    
    Subscription and Shareholders Agreement of Diesel Machinery (BVI) Limited, dated November 9,
1994, among Diesel Machinery (BVI) Limited, Hong Leong Asia Ltd., or Hong Leong Asia, and
China Everbright Holdings Company Limited, or China Everbright Holdings (incorporated herein
by reference to Amendment no. 2 to the Registration Statement on Form F-1, filed by the
Registrant on December 14, 1994 (File No. 33-86162)).3.2
    
    Supplemental Subscription and Shareholders Agreement, dated January 21, 2002, between China
Everbright Holdings and Hong Leong Asia (incorporated herein by reference to the Annual Report
on Form 20-F for fiscal year ended December 31, 2001, filed by the Registrant on June 25, 2002
(File No. 001-013522), or Form 20-F FY2001).3.3
    
    Second Supplemental Subscription and Shareholders Agreement, dated May 17, 2002, between
China Everbright Holdings and Hong Leong Asia (incorporated herein by reference to the Form
20-F FY2001).4.1
    
    Contract for the Subscription of Foreign Common shares in Guangxi Yuchai Machinery Company
Limited, or Yuchai, and Conversion from a Joint Stock Limited Company into a Sino-Foreign
Joint Stock Limited Company, dated April 1, 1993, among Yuchai, Guangxi Yuchai Machinery
Holdings Company, Hong Leong Technology Systems (BVI) Ltd., Cathay Clemente Diesel Holdings
Limited, Goldman Sachs Guangxi Holdings (BVI) Ltd., Tsang & Ong Nominees (BVI) Ltd. and
Youngstar Holdings Limited with amendments, dated May 27, 1994 and October 10, 1994
(incorporated herein by reference to the Form F-1).4.2
    
    Subscription and Transfer Agreement (with Shareholders Agreement), dated April 1993, among
Cathay Clemente (Holdings) Limited, GS Capital Partners L.P., Sun Yuan Overseas Pte Ltd., HL
Technology Systems Pte Ltd and Coomber Investments Limited (incorporated herein by reference
to the Registration Statement on Form F-1, filed by the Registrant on November 9, 1994 (File
No. 33-86162)).4.3
    
    Amended and Restated Shareholders Agreement, dated as of November 9, 1994 among The Cathay
Investment Fund, Limited, GS Capital Partners L.P., HL Technology Systems Pte Ltd, Hong Leong
Asia Ltd., Coomber Investments Limited, China Everbright Holdings Company Limited, Diesel
Machinery (BVI) Limited, owners of shares formerly held by Sun Yuan Overseas (BVI) Ltd. and
the Registrant (incorporated herein by reference to the Form F-1).4.4
    
    Form of Amended and Restated Registration Right Agreement, dated as of November 9, 1994,
among The Cathay Investment Fund, Limited, GS Capital Partners L.P., HL Technology Systems Pte
Ltd, Coomber Investments Limited, owners of shares formerly held by Sun Yuan Overseas (BVI)
Ltd. and the Registrant (incorporated herein by reference to Amendment No. 3 to the
Registration Statement on Form F-1, filed by the Registrant on December 15, 1994 (File No.
33-86162)).4.5
    
    Form of Subscription Agreement between the Registrant and its wholly-owned subsidiaries named
therein and Yuchai (incorporated herein by reference to Amendment No. 2 to the Registration
Statement on Form F-1, filed by the Registrant on December 14, 1994 (File no. 33-86162)).4.6
    
    Form of Term Loan Agreement between the Registrant and Yuchai (incorporated herein by
reference to Amendment No. 2 to the Registration Statement on Form F-1, filed by the
Registrant on December 14, 1994 (File No. 33-86162)).4.7
    
    Share Purchase and Subscription Agreement, dated as of November 9, 1994, between the
Registrant, China Everbright Holdings Company Limited and Coomber Investments Limited
(incorporated herein by reference to the Form F-1).
 96




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##### Table of Contents



4.8
    
    Form of indemnification agreement entered into by the Registrant with its officers and
directors (incorporated herein by reference to the Annual Report on Form 20-F for fiscal year
ended December 31, 2003, filed by the Registrant on June 29, 2004, or Form 20-F FY2003).4.9
    
    Agreement between the Registrant and Yuchai, dated July 19, 2003 (incorporated herein by
reference to the Form 20-F FY2003).4.10
    
    Reorganization Agreement between the Company, Coomber and Yuchai, dated April 7, 2005
(incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant on
April 7, 2005 (File No. 001-13522)).4.11
    
    Reorganization Agreement Amendment (No. 1) between the Registrant, Coomber and Yuchai, dated
December 2, 2005 (incorporated herein by reference to the Current Report on Form 6-K filed by
the Registrant on December 6, 2005 (File No. 001-13522)).4.12
    
    Reorganization Agreement Amendment (No. 2) between the Registrant, Coomber and Yuchai, dated
November 30, 2006 (incorporated herein by reference to the Current Report on Form 6-K filed by
the Registrant on November 30, 2006 (File No. 001-13522)).4.13
    
    Cooperation Agreement among the Registrant, Yuchai, Coomber and Guangxi Yuchai Machinery
Group Company Limited, dated June 30, 2007 (incorporated herein by reference to the Current
Report on Form 6-K filed by the Registrant on July 5, 2007 (File No. 001-13522)).8.1
    
    Subsidiaries of the Registrant. (Filed herewith)12.1
    
    Certifications furnished pursuant to Section 302 of the Sarbanes-Oxley Act. (Filed herewith)13.1
    
    Certifications furnished pursuant to Section 906 of the Sarbanes-Oxley Act. (Filed herewith)15.1
    
    Letter from KPMG LLP to the Securities and Exchange Commission dated April 30, 2010.
  97




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##### Table of Contents



SIGNATURES
  CHINA YUCHAI INTERNATIONAL LIMITEDBy:
    /s/  Saw Boo GuanName:  Saw Boo GuanTitle:  President and Director  98




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Description of Exhibit1.1
    
    Memorandum of Association of China Yuchai International Limited or the Registrant
(incorporated herein by reference to Amendment No. 1 to the Registration Statement on Form
F-1, filed by the Registrant on December 8, 1994 (File No. 33-86162), or the Form F-1).1.2
    
    Bye-laws of the Registrant (incorporated herein by reference to the Form F-1).3.1
    
    Subscription and Shareholders Agreement of Diesel Machinery (BVI) Limited, dated November
9, 1994, among Diesel Machinery (BVI) Limited, Hong Leong Asia Ltd., or Hong Leong Asia,
and China Everbright Holdings Company Limited, or China Everbright Holdings (incorporated
herein by reference to Amendment no. 2 to the Registration Statement on Form F-1, filed by
the Registrant on December 14, 1994 (File No. 33-86162)).3.2
    
    Supplemental Subscription and Shareholders Agreement, dated January 21, 2002, between China
Everbright Holdings and Hong Leong Asia (incorporated herein by reference to the Annual
Report on Form 20-F for fiscal year ended December 31, 2001, filed by the Registrant on
June 25, 2002 (File No. 001-013522), or Form 20-F FY2001).3.3
    
    Second Supplemental Subscription and Shareholders Agreement, dated May 17, 2002, between
China Everbright Holdings and Hong Leong Asia (incorporated herein by reference to the Form
20-F FY2001).4.1
    
    Contract for the Subscription of Foreign Common shares in Guangxi Yuchai Machinery Company
Limited, or Yuchai, and Conversion from a Joint Stock Limited Company into a Sino-Foreign
Joint Stock Limited Company, dated April 1, 1993, among Yuchai, Guangxi Yuchai Machinery
Holdings Company, Hong Leong Technology Systems (BVI) Ltd., Cathay Clemente Diesel Holdings
Limited, Goldman Sachs Guangxi Holdings (BVI) Ltd., Tsang & Ong Nominees (BVI) Ltd. and
Youngstar Holdings Limited with amendments, dated May 27, 1994 and October 10, 1994
(incorporated herein by reference to the Form F-1).4.2
    
    Subscription and Transfer Agreement (with Shareholders Agreement), dated April 1993, among
Cathay Clemente (Holdings) Limited, GS Capital Partners L.P., Sun Yuan Overseas Pte Ltd.,
HL Technology Systems Pte Ltd and Coomber Investments Limited (incorporated herein by
reference to the Registration Statement on Form F-1, filed by the Registrant on November 9,
1994 (File No. 33-86162)).4.3
    
    Amended and Restated Shareholders Agreement, dated as of November 9, 1994 among The Cathay
Investment Fund, Limited, GS Capital Partners L.P., HL Technology Systems Pte Ltd, Hong
Leong Asia Ltd., Coomber Investments Limited, China Everbright Holdings Company Limited,
Diesel Machinery (BVI) Limited, owners of shares formerly held by Sun Yuan Overseas (BVI)
Ltd. and the Registrant (incorporated herein by reference to the Form F-1).4.4
    
    Form of Amended and Restated Registration Right Agreement, dated as of November 9, 1994,
among The Cathay Investment Fund, Limited, GS Capital Partners L.P., HL Technology Systems
Pte Ltd, Coomber Investments Limited, owners of shares formerly held by Sun Yuan Overseas
(BVI) Ltd. and the Registrant (incorporated herein by reference to Amendment No. 3 to the
Registration Statement on Form F-1, filed by the Registrant on December 15, 1994 (File No.
33-86162)).4.5
    
    Form of Subscription Agreement between the Registrant and its wholly-owned subsidiaries
named therein and Yuchai (incorporated herein by reference to Amendment No. 2 to the
Registration Statement on Form F-1, filed by the Registrant on December 14, 1994 (File no.
33-86162)).4.6
    
    Form of Term Loan Agreement between the Registrant and Yuchai (incorporated herein by
reference to Amendment No. 2 to the Registration Statement on Form F-1, filed by the
Registrant on December 14, 1994 (File No. 33-86162)).4.7
    
    Share Purchase and Subscription Agreement, dated as of November 9, 1994, between the
Registrant, China Everbright Holdings Company Limited and Coomber Investments Limited
(incorporated herein by reference to the Form F-1).4.8
    
    Form of indemnification agreement entered into by the Registrant with its officers and
directors (incorporated herein by reference to the Annual Report on Form 20-F for fiscal
year ended December 31, 2003, filed by the Registrant on June 29, 2004, or Form 20-F
FY2003).4.9
    
    Agreement between the Registrant and Yuchai, dated July 19, 2003 (incorporated herein by
reference to the Form 20-F FY2003).4.10
    
    Reorganization Agreement between the Company, Coomber and Yuchai, dated April 7, 2005
(incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant
on April 7, 2005 (File No. 001-13522)).4.11
    
    Reorganization Agreement Amendment (No. 1) between the Registrant, Coomber and Yuchai,
dated December 2, 2005 (incorporated herein by reference to the Current Report on Form 6-K
filed by the Registrant on December 6, 2005 (File No. 001-13522)).
 99




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit4.12
    
    Reorganization Agreement Amendment (No. 2) between the Registrant, Coomber and Yuchai,
dated November 30, 2006 (incorporated herein by reference to the Current Report on Form 6-K
filed by the Registrant on November 30, 2006 (File No. 001-13522)).4.13
    
    Cooperation Agreement among the Registrant, Yuchai, Coomber and Guangxi Yuchai Machinery
Group Company Limited, dated June 30, 2007 (incorporated herein by reference to the Current
Report on Form 6-K filed by the Registrant on July 5, 2007 (File No. 001-13522)).8.1
    
    Subsidiaries of the Registrant. (Filed herewith)12.1
    
    Certifications furnished pursuant to Section 302 of the Sarbanes-Oxley Act. (Filed herewith)13.1
    
    Certifications furnished pursuant to Section 906 of the Sarbanes-Oxley Act. (Filed herewith)15.1
    
    Letter from KPMG LLP to the Securities and Exchange Commission dated April 30, 2010
  100




---



##### 



China Yuchai International Limited
  
 Index
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Income Statements
    
    
    F-4Consolidated Statements of Comprehensive Income
    
    
    F-6Consolidated Statements of Financial Position
    
    
    F-7Consolidated Statements of Changes in Equity
    
    
    F-9Consolidated Statements of Cash Flow
    
    
    F-11Notes to the Financial Statements
    
    
    F-13
  F-1




---



##### Table of Contents



China Yuchai International Limited
 
 Report of Independent Registered Public Accounting Firm
 The Board of Directors and Shareholders of China Yuchai International Limited
        
 F-2




---



##### Table of Contents



China Yuchai International Limited
 Report of Independent Registered Public Accounting Firm
 The Board of Directors and Shareholders of China Yuchai International Limited
    Internal Control  Integrated
Framework
 
 F-3




---



##### Table of Contents



China Yuchai International Limited
 
 Consolidated Income Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 Note
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Continuing operationsSales of goods
    
    
    9
    
    
    
    10,358,124
    
    
    
    13,139,578
    
    
    
    1,924,733Rendering of services
    
    
    9
    
    
    
    46,664
    
    
    
    36,325
    
    
    
    5,321Revenue
    
    
    9
    
    
    
    10,404,788
    
    
    
    13,175,903
    
    
    
    1,930,054Cost of sales (goods)
    
    
    10.1
    
    
    
    (8,328,058
    )
    
    
    (10,612,260
    )
    
    
    (1,554,522
    )Cost of sales (services)
    
    
    10.1
    
    
    
    (27,594
    )
    
    
    (17,825
    )
    
    
    (2,611
    )Gross profit
    
    
    
    
    
    
    2,049,136
    
    
    
    2,545,818
    
    
    
    372,921Other income
    
    
    10.2
    
    
    
    19,460
    
    
    
    77,555
    
    
    
    11,361Research and development costs
    
    
    10.1, 10.3
    
    
    
    (184,794
    )
    
    
    (297,259
    )
    
    
    (43,544
    )Selling, distribution and
administrative costs
    
    
    10.1
    
    
    
    (1,268,060
    )
    
    
    (1,471,857
    )
    
    
    (215,603
    )Operating profit
    
    
    
    
    
    
    615,742
    
    
    
    854,257
    
    
    
    125,135Finance costs
    
    
    10.4
    
    
    
    (150,409
    )
    
    
    (77,493
    )
    
    
    (11,352
    )Share of profit of an associate
    
    
    7
    
    
    
    2,717
    
    
    
    2,954
    
    
    
    433Share of results of joint ventures
    
    
    8
    
    
    
    13,692
    
    
    
    (16,000
    )
    
    
    (2,344
    )Gain on acquisition of Guangxi Yulin
Hotel Company in settlement of past
loan
    
    
    31
    
    
    
    
    
    
    
    202,950
    
    
    
    29,729Profit before tax from continuing
operations
    
    
    
    
    
    
    481,742
    
    
    
    966,668
    
    
    
    141,601Income tax expense
    
    
    11
    
    
    
    (110,526
    )
    
    
    (147,223
    )
    
    
    (21,565
    )Profit for the year from continuing
operations
    
    
    
    
    
    
    371,216
    
    
    
    819,445
    
    
    
    120,036Discontinued operations(Loss)/Profit after tax for the year
from discontinued operations
    
    
    12
    
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    1,907Profit for the year
    
    
    
    
    
    
    337,231
    
    
    
    832,467
    
    
    
    121,943Attributable to: Equity Holders of the Parent
    
    
    
    
    
    
    240,036
    
    
    
    628,331
    
    
    
    92,040Minority interest
    
    
    
    
    
    
    97,195
    
    
    
    204,136
    
    
    
    29,903337,231
    
    
    
    832,467
    
    
    
    121,943Earnings per share
    
    
    13For profit from continuing operations: basic, profit for the year
attributable to ordinary equity
holders of the Parent
    
    
    
    
    
    
    7.35
    
    
    
    16.51
    
    
    
    2.42 diluted, profit for the year
attributable to ordinary equity
holders of the Parent
    
    
    
    
    
    
    7.35
    
    
    
    16.51
    
    
    
    2.42
 F-4




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##### Table of Contents



China Yuchai International Limited
 Consolidated Income Statements (contd)
 (Rmb and US$ amounts expressed in thousands, except per share data)
 Note
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Earnings per share (contd)For profit for the year: basic, profit for the year
attributable to ordinary equity
holders of the Parent
    
    
    
    
    
    
    6.44
    
    
    
    16.86
    
    
    
    2.47 diluted, profit for the year
attributable to ordinary equity
holders of the Parent
    
    
    
    
    
    
    6.44
    
    
    
    16.86
    
    
    
    2.47Weighted average number of shares Basic
    
    
    
    
    
    
    37,267,673
    
    
    
    37,267,673
    
    
    
    37,267,673 Diluted
    
    
    
    
    
    
    37,267,673
    
    
    
    37,267,673
    
    
    
    37,267,673
 F-5




---



##### Table of Contents



China Yuchai International Limited
 
 Consolidated Statements of Comprehensive Income
 (Rmb and US$ amounts expressed in thousands, except per share data)
 Note
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Profit for the year
    
    
    
    
    
    
    337,231
    
    
    
    832,467
    
    
    
    121,943Other comprehensive (loss)/incomeForeign currency translation
    
    
    
    
    
    
    10,343
    
    
    
    (11,201
    )
    
    
    (1,641
    )Share of other comprehensive
(loss)/income of associates
    
    
    
    
    
    
    (90,265
    )
    
    
    21,038
    
    
    
    3,082Others
    
    
    
    
    
    
    4,740
    
    
    
    (647
    )
    
    
    (95
    )Other comprehensive
(loss)/income for the year, net
of tax
    
    
    
    
    
    
    (75,182
    )
    
    
    9,190
    
    
    
    1,346Total comprehensive income for
the year, net of tax
    
    
    
    
    
    
    262,049
    
    
    
    841,657
    
    
    
    123,289Attributable to:Equity holders of the Parent
    
    
    
    
    
    
    151,984
    
    
    
    640,908
    
    
    
    93,883Minority interest
    
    
    
    
    
    
    110,065
    
    
    
    200,749
    
    
    
    29,406262,049
    
    
    
    841,657
    
    
    
    123,289
 F-6




---



##### Table of Contents



China Yuchai International Limited
 
 Consolidated Statements of Financial Position
 (Rmb and US$ amounts expressed in thousands, except per share data)
 Note
    
    1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000AssetsNon-current assetsProperty, plant and equipment
    
    
    14
    
    
    
    2,662,370
    
    
    
    2,719,773
    
    
    
    3,146,206
    
    
    
    460,867Investment properties
    
    
    15
    
    
    
    39,137
    
    
    
    34,146
    
    
    
    33,852
    
    
    
    4,959Prepaid operating leases
    
    
    16
    
    
    
    162,235
    
    
    
    159,156
    
    
    
    355,931
    
    
    
    52,138Goodwill
    
    
    17
    
    
    
    218,311
    
    
    
    212,636
    
    
    
    212,636
    
    
    
    31,148Investment in associates
    
    
    7
    
    
    
    452,767
    
    
    
    328,600
    
    
    
    39,644
    
    
    
    5,807Investment in joint ventures
    
    
    8
    
    
    
    160,125
    
    
    
    164,979
    
    
    
    196,988
    
    
    
    28,856Other receivables
    
    
    18
    
    
    
    65,223
    
    
    
    61,475
    
    
    
    72,183
    
    
    
    10,574Deferred tax asset
    
    
    11
    
    
    
    147,860
    
    
    
    145,233
    
    
    
    241,718
    
    
    
    35,408Other investments
    
    
    
    
    
    
    7,007
    
    
    
    6,765
    
    
    
    6,761
    
    
    
    9903,915,035
    
    
    
    3,832,763
    
    
    
    4,305,919
    
    
    
    630,747Current assetsInventories
    
    
    21
    
    
    
    1,647,075
    
    
    
    2,250,044
    
    
    
    2,130,026
    
    
    
    312,014Trade and bills receivables
    
    
    23
    
    
    
    3,109,244
    
    
    
    2,538,135
    
    
    
    2,506,701
    
    
    
    367,191Prepayments
    
    
    
    
    
    
    54,057
    
    
    
    150,581
    
    
    
    97,092
    
    
    
    14,222Other receivables
    
    
    24
    
    
    
    203,290
    
    
    
    223,686
    
    
    
    181,550
    
    
    
    26,594Income tax recoverable
    
    
    
    
    
    
    27,990
    
    
    
    46,296
    
    
    
    6,680
    
    
    
    979Prepaid operating leases
    
    
    16
    
    
    
    5,767
    
    
    
    6,151
    
    
    
    7,273
    
    
    
    1,065Other current financial assets
    
    
    22
    
    
    
    110,344
    
    
    
    96,293
    
    
    
    91,202
    
    
    
    13,360Cash and cash equivalents
    
    
    25
    
    
    
    759,837
    
    
    
    823,695
    
    
    
    3,657,981
    
    
    
    535,8345,917,604
    
    
    
    6,134,881
    
    
    
    8,678,505
    
    
    
    1,271,259Assets classified as held for
sale
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    321,487
    
    
    
    47,0925,917,604
    
    
    
    6,134,881
    
    
    
    8,999,992
    
    
    
    1,318,351Total assets
    
    
    
    
    
    
    9,832,639
    
    
    
    9,967,644
    
    
    
    13,305,911
    
    
    
    1,949,098Equity and liabilitiesEquity attributable to equity
holders of the ParentIssued capital
    
    
    26
    
    
    
    1,724,196
    
    
    
    1,724,196
    
    
    
    1,724,196
    
    
    
    252,567Preference shares
    
    
    26
    
    
    
    36
    
    
    
    36
    
    
    
    36
    
    
    
    5Statutory reserves
    
    
    28
    
    
    
    270,339
    
    
    
    287,473
    
    
    
    291,686
    
    
    
    42,727Capital reserves
    
    
    
    
    
    
    3,297
    
    
    
    2,942
    
    
    
    2,942
    
    
    
    431Retained earnings
    
    
    
    
    
    
    1,314,591
    
    
    
    1,527,006
    
    
    
    2,125,059
    
    
    
    311,287Reserve of asset classified
as held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,661
    )
    
    
    (1,416
    )Other components of equity
    
    
    
    
    
    
    (8,418
    )
    
    
    (96,473
    )
    
    
    (84,927
    )
    
    
    (12,440
    )Equity attributable to equity
holders of the Parent
    
    
    
    
    
    
    3,304,041
    
    
    
    3,445,180
    
    
    
    4,049,331
    
    
    
    593,161Minority interests
    
    
    
    
    
    
    1,035,833
    
    
    
    1,169,779
    
    
    
    1,360,459
    
    
    
    199,285Total equity
    
    
    
    
    
    
    4,339,874
    
    
    
    4,614,959
    
    
    
    5,409,790
    
    
    
    792,446
 F-7




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##### Table of Contents



China Yuchai International Limited
 Consolidated Statements of Financial Position (contd)
 (Rmb and US$ amounts expressed in thousands, except per share data)
 Note
    
    1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Non-current liabilitiesInterest-bearing loans and
borrowings
    
    
    19
    
    
    
    313,102
    
    
    
    176,756
    
    
    
    625,256
    
    
    
    91,590Other liabilities
    
    
    19
    
    
    
    2,296
    
    
    
    2,080
    
    
    
    26,877
    
    
    
    3,937Deferred tax liability
    
    
    11
    
    
    
    466
    
    
    
    16,158
    
    
    
    31,840
    
    
    
    4,664Deferred
grants
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    176,035
    
    
    
    25,786315,864
    
    
    
    194,994
    
    
    
    860,008
    
    
    
    125,977Current liabilitiesTrade and other payables
    
    
    29
    
    
    
    3,693,444
    
    
    
    3,604,128
    
    
    
    6,190,246
    
    
    
    906,770Interest-bearing loans and
borrowings
    
    
    19
    
    
    
    1,276,951
    
    
    
    1,148,732
    
    
    
    453,792
    
    
    
    66,473Provision for taxation
    
    
    
    
    
    
    11,603
    
    
    
    13,277
    
    
    
    122,308
    
    
    
    17,916Other liabilities
    
    
    19
    
    
    
    5
    
    
    
    5
    
    
    
    10,233
    
    
    
    1,499Provision for product warranty
    
    
    30
    
    
    
    194,898
    
    
    
    188,599
    
    
    
    259,534
    
    
    
    38,017Deferred gain
    
    
    31
    
    
    
    
    
    
    
    202,950
    
    
    
    
    
    
    
    5,176,901
    
    
    
    5,157,691
    
    
    
    7,036,113
    
    
    
    1,030,675Total liabilities
    
    
    
    
    
    
    5,492,765
    
    
    
    5,352,685
    
    
    
    7,896,121
    
    
    
    1,156,652Total equity and liabilities
    
    
    
    
    
    
    9,832,639
    
    
    
    9,967,644
    
    
    
    13,305,911
    
    
    
    1,949,098
 F-8




---



##### Table of Contents



China Yuchai International Limited
 
 Consolidated Statements of Changes in Equity
 (Rmb and US$ amounts expressed in thousands, except per share data)
 Other components of equityForeign
    
    
    
    
    
    Per-Issued
    
    Preference
    
    Statutory
    
    
    
    
    
    
    
    
    
    currency
    
    Revaluation
    
    formancecapital
    
    shares
    
    reserves
    
    Capital
    
    Retained
    
    translation
    
    reserve
    
    shares
    
    
    
    
    
    Minority
    
    Total(Note 26)
    
    (Note 26)
    
    (Note 28)
    
    reserves
    
    earnings
    
    reserve
    
    (Note i)
    
    reserve
    
    Total
    
    interest
    
    equityRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000At January 1, 2008
    
    
    1,724,196
    
    
    
    36
    
    
    
    270,339
    
    
    
    3,297
    
    
    
    1,314,591
    
    
    
    (65,915
    )
    
    
    54,950
    
    
    
    2,547
    
    
    
    3,304,041
    
    
    
    1,035,833
    
    
    
    4,339,874Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240,036
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240,036
    
    
    
    97,195
    
    
    
    337,231Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (355
    )
    
    
    358
    
    
    
    (9,302
    )
    
    
    (78,767
    )
    
    
    14
    
    
    
    (88,052
    )
    
    
    12,870
    
    
    
    (75,182
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (355
    )
    
    
    240,394
    
    
    
    (9,302
    )
    
    
    (78,767
    )
    
    
    14
    
    
    
    151,984
    
    
    
    110,065
    
    
    
    262,049Transfer to statutory reserves
    
    
    
    
    
    
    
    
    
    
    17,134
    
    
    
    
    
    
    
    (2,093
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,041
    
    
    
    
    
    
    
    15,041Dividends paid to minority
interests of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,473
    )
    
    
    (33,473
    )Dividends declared (US$0.10
per share) (Note 27)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,886
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,886
    )
    
    
    
    
    
    
    (25,886
    )Minority interests arising
from incorporation of new
subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,354
    
    
    
    57,354At December 31,2008
    
    
    1,724,196
    
    
    
    36
    
    
    
    287,473
    
    
    
    2,942
    
    
    
    1,527,006
    
    
    
    (75,217
    )
    
    
    (23,817
    )
    
    
    2,561
    
    
    
    3,445,180
    
    
    
    1,169,779
    
    
    
    4,614,959
 F-9




---



##### Table of Contents



China Yuchai International Limited
 Consolidated Statements of Changes in Equity (contd)
 (Rmb and US$ amounts expressed in thousands, except per share data)
 Other components of equityPremiumReserve of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    paid forasset
    
    
    Foreign
    
    
    
    
    
    
    Per-
    
    
    acquisitionIssued
    
    
    Preference
    
    
    Statutory
    
    
    
    
    
    
    
    
    
    
    classified as
    
    
    currency
    
    
    Revaluation
    
    
    formance
    
    
    of minoritycapital
    
    
    shares
    
    
    reserves
    
    
    Capital
    
    
    Retained
    
    
    held for sale
    
    
    translation
    
    
    reserve
    
    
    shares
    
    
    interest
    
    
    
    
    
    
    Minority
    
    
    Total(Note 26)
    
    
    (Note 26)
    
    
    (Note 28)
    
    
    reserves
    
    
    earnings
    
    
    (Note 12)
    
    
    reserve
    
    
    (Note i)
    
    
    reserve
    
    
    (Note ii)
    
    
    Total
    
    
    interest
    
    
    equityRmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000At January 1, 2009
    
    
    1,724,196
    
    
    
    36
    
    
    
    287,473
    
    
    
    2,942
    
    
    
    1,527,006
    
    
    
    
    
    
    
    (75,217
    )
    
    
    (23,817
    )
    
    
    2,561
    
    
    
    
    
    
    
    3,445,180
    
    
    
    1,169,779
    
    
    
    4,614,959Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    628,331
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    628,331
    
    
    
    204,136
    
    
    
    832,467Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,870
    )
    
    
    23,447
    
    
    
    
    
    
    
    
    
    
    
    12,577
    
    
    
    (3,387
    )
    
    
    9,190Total comprehensive income
for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    628,331
    
    
    
    
    
    
    
    (10,870
    )
    
    
    23,447
    
    
    
    
    
    
    
    
    
    
    
    640,908
    
    
    
    200,749
    
    
    
    841,657Transfer to statutory
reserves
    
    
    
    
    
    
    
    
    
    
    4,821
    
    
    
    
    
    
    
    (4,821
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends paid to minority
interests of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,988
    )
    
    
    (27,988
    )Dividends declared
(US$0.10 per share) (Note
27)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,457
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,457
    )
    
    
    
    
    
    
    (25,457
    )Liquidation of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (608
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (608
    )
    
    
    
    
    
    
    (608
    )Minority interests arising
from increase in share capital of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,225
    
    
    
    37,225Acquisition of minority
interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,306
    )
    
    
    (19,306
    )Premium paid on acquisition
of minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,692
    )
    
    
    (10,692
    )
    
    
    
    
    
    
    (10,692
    )Reserve attributable to
asset classified as held
for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,661
    )
    
    
    11,937
    
    
    
    370
    
    
    
    (2,646
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    At December 31,2009
    
    
    1,724,196
    
    
    
    36
    
    
    
    291,686
    
    
    
    2,942
    
    
    
    2,125,059
    
    
    
    (9,661
    )
    
    
    (74,150
    )
    
    
    
    
    
    
    (85
    )
    
    
    (10,692
    )
    
    
    4,049,331
    
    
    
    1,360,459
    
    
    
    5,409,790US$
    
    
    252,567
    
    
    
    5
    
    
    
    42,727
    
    
    
    431
    
    
    
    311,287
    
    
    
    (1,416
    )
    
    
    (10,862
    )
    
    
    
    
    
    
    (12
    )
    
    
    (1,566
    )
    
    
    593,161
    
    
    
    199,285
    
    
    
    792,446
 Note:(i)
    
    The revaluation reserve arises from the changes in the net fair value of investment in
Thakral Corporation Limited (an associate of the Group).(ii)
    
    In March 2009, the Company acquired an additional 23.08% equity interest in YEGCL from its
minority interests for a cash consideration of Rmb 30,000k. As a result of this acquisition,
YEGCL became a wholly-owned subsidiary of the Company. On the date of acquisition, the book
value of the additional interest acquired was Rmb 19,308k. The difference between the
consideration and the book value of the interest acquired of Rmb 10,692k is reflected in
equity as premium paid on acquisition of minority interests. F-10




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##### Table of Contents



China Yuchai International Limited
 
 Consolidated Statements of Cash Flows
 (Rmb and US$ amounts expressed in thousands, except per share data)
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Operating activitiesProfit before tax from continuing
operations
    
    
    481,742
    
    
    
    966,668
    
    
    
    141,601Loss before tax from discontinued
operations
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    1,907Profit before tax, total
    
    
    447,757
    
    
    
    979,690
    
    
    
    143,508Adjustments for:Gain on acquisition of Guangxi Yulin
Hotel Company in settlement of past
loan
    
    
    
    
    
    
    (202,950
    )
    
    
    (29,729
    )Allowance for doubtful debts
made/(written back) (net)
    
    
    25,349
    
    
    
    (41,162
    )
    
    
    (6,029
    )Allowance for stock obsolescence
    
    
    52,747
    
    
    
    154,700
    
    
    
    22,661Depreciation of property, plant and
equipment and investment properties
    
    
    265,834
    
    
    
    277,332
    
    
    
    40,625Amortization of intangible assets
    
    
    6,794
    
    
    
    7,982
    
    
    
    1,169Dividend income from associates
    
    
    
    
    
    
    (11,162
    )
    
    
    (1,635
    )Impairment of property, plant and
equipment and prepaid operating leases
    
    
    69,930
    
    
    
    7,785
    
    
    
    1,140Write off of property, plant & equipment
    
    
    912
    
    
    
    5,723
    
    
    
    838Write back of trade and other payables
    
    
    (869
    )
    
    
    (23,649
    )
    
    
    (3,464
    )Write back of provision for impairment
of receivables-Malkn
    
    
    
    
    
    
    (4,895
    )
    
    
    (717
    )Impairment of goodwill
    
    
    5,675
    
    
    
    
    
    
    
    Share of net (profit)/loss of associates and
joint ventures
    
    
    (16,409
    )
    
    
    13,046
    
    
    
    1,911Loss on other investments
    
    
    153
    
    
    
    
    
    
    
    Negative goodwill recognized
    
    
    (12,368
    )
    
    
    
    
    
    
    Exchange loss on financing activities
    
    
    3,172
    
    
    
    6,543
    
    
    
    958Loss on disposal of property, plant and
equipment
    
    
    3,525
    
    
    
    8,618
    
    
    
    1,262Gain on disposal of associates
    
    
    
    
    
    
    (1,906
    )
    
    
    (279
    )Tax refund on reinvestment of net
foreign dividend
    
    
    (2,440
    )
    
    
    
    
    
    
    Finance costs
    
    
    150,409
    
    
    
    77,493
    
    
    
    11,352Interest income
    
    
    (15,228
    )
    
    
    (31,576
    )
    
    
    (4,625
    )Loss/(profit) from discontinued operations
    
    
    33,985
    
    
    
    (13,022
    )
    
    
    (1,907
    )Changes in working capitalIncrease in inventories
    
    
    (653,827
    )
    
    
    (49,006
    )
    
    
    (7,179
    )Decrease in trade and other receivables
    
    
    338,716
    
    
    
    290,601
    
    
    
    42,568Increase in trade and other payables
    
    
    3,064
    
    
    
    2,565,933
    
    
    
    375,867Decrease in balances with related
corporations
    
    
    89,591
    
    
    
    24,953
    
    
    
    3,655(Increase)/decrease in balances with
holding company
    
    
    (3,577
    )
    
    
    2,022
    
    
    
    296Decrease in development properties
    
    
    4,816
    
    
    
    5,393
    
    
    
    790Income taxes paid
    
    
    (100,531
    )
    
    
    (79,128
    )
    
    
    (11,590
    )Net cash flows from operating activities
    
    
    697,180
    
    
    
    3,969,358
    
    
    
    581,446
 F-11




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##### Table of Contents



China Yuchai International Limited
 Consolidated Statements of Cash Flows (contd)
 (Rmb and US$ amounts expressed in thousands, except per share data)
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb$000
    
    Rmb000
    
    US$000Investing activitiesAcquisition/additional investment in
subsidiaries, net of cash acquired
    
    
    (11,624
    )
    
    
    
    
    
    
    Acquisition/additional investment in
associates & joint ventures
    
    
    (1,069
    )
    
    
    (69,400
    )
    
    
    (10,166
    )Dividends received from associates
    
    
    
    
    
    
    16,931
    
    
    
    2,480Dividends received from joint ventures
    
    
    10,476
    
    
    
    19,122
    
    
    
    2,801Interest received
    
    
    88,487
    
    
    
    31,578
    
    
    
    4,625Purchase of other investments
    
    
    
    
    
    
    (82
    )
    
    
    (12
    )Payment for prepaid operating leases
    
    
    
    
    
    
    (205,879
    )
    
    
    (30,157
    )Proceeds from sale of property, plant and
equipment
    
    
    37,789
    
    
    
    64,745
    
    
    
    9,484Purchase of property, plant and equipment and
construction in progress (includes interest
capitalized)
    
    
    (376,440
    )
    
    
    (780,836
    )
    
    
    (114,380
    )Tax refund on reinvestment of net foreign
dividend
    
    
    2,440
    
    
    
    
    
    
    
    Proceeds from disposal of associates
    
    
    
    
    
    
    1,906
    
    
    
    279Acquisition of a minority interests
    
    
    
    
    
    
    (29,998
    )
    
    
    (4,394
    )Proceeds from redemption of preference shares
in an associated company
    
    
    
    
    
    
    551
    
    
    
    81Proceeds from government grants
    
    
    31,514
    
    
    
    150,917
    
    
    
    22,107Net cash flows used in investing activities
    
    
    (218,427
    )
    
    
    (800,445
    )
    
    
    (117,252
    )Financing activitiesDividends paid to minority interests
    
    
    (33,473
    )
    
    
    (27,988
    )
    
    
    (4,100
    )Dividends paid to equity holders of the parent
    
    
    (25,886
    )
    
    
    (25,457
    )
    
    
    (3,729
    )Interest paid
    
    
    (194,579
    )
    
    
    (93,433
    )
    
    
    (13,686
    )Payment of finance lease liabilities
    
    
    
    
    
    
    (5,014
    )
    
    
    (735
    )Proceeds from borrowings
    
    
    1,093,528
    
    
    
    998,402
    
    
    
    146,250Repayment of borrowings
    
    
    (1,287,397
    )
    
    
    (1,256,441
    )
    
    
    (184,048
    )Capital contributions from minority interests
    
    
    49,231
    
    
    
    37,225
    
    
    
    5,453Fixed deposits pledged with banks for banking
facilities
    
    
    5
    
    
    
    (19
    )
    
    
    (3
    )Redemption of preference shares
    
    
    
    
    
    
    
    
    
    
    Proceeds from sale and leaseback arrangement
    
    
    
    
    
    
    40,000
    
    
    
    5,859Net cash flows used in financing activities
    
    
    (398,571
    )
    
    
    (332,725
    )
    
    
    (48,739
    )Net increase in cash and cash equivalents
    
    
    80,182
    
    
    
    2,836,188
    
    
    
    415,455Cash and cash equivalents at 1 January
    
    
    759,837
    
    
    
    823,695
    
    
    
    120,658Effect of exchange rate changes on balances
in foreign currencies
    
    
    (16,324
    )
    
    
    (1,902
    )
    
    
    (279
    )Cash and cash equivalents at 31 December
    
    
    823,695
    
    
    
    3,657,981
    
    
    
    535,834
 Significant non-cash investing and financing transactions
   F-12




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##### Table of Contents



China Yuchai International Limited
 
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 1.
    
    Corporate information
 The consolidated financial statements of China Yuchai International Limited and its subsidiaries
(the Group) for the years ended December 31, 2008 and 2009 were authorized for issue in
accordance with a resolution of the directors April 30, 2010. China Yuchai International Limited is
a limited company incorporated under the laws of Bermuda whose shares are publicly traded. The
registered office located at 16 Raffles Quay #26-00, Hong Leong Building, Singapore 048581.China Yuchai International Limited (the Company) was incorporated under the laws of Bermuda on
April 29, 1993. The Company was established to acquire a controlling financial interest in Guangxi
Yuchai Machinery Company Limited (Yuchai), a Sino-foreign joint stock company which manufactures,
assembles and sells diesel engines in the Peoples Republic of China (the PRC). The principal
markets for Yuchais diesel engines are truck manufacturers in the PRC.The Company owns, through six wholly-owned subsidiaries, 361,420,150 shares or 76.41% of the issued
share capital of Yuchai (Foreign Shares of Yuchai). Guangxi Yuchai Machinery Group Company
Limited (State Holding Company), a state-owned enterprise, owns 22.09% of the issued share
capital of Yuchai (State Shares of Yuchai).In December 1994, the Company issued a special share (the Special Share) at par value of US$0.10
to Diesel Machinery (BVI) Limited (DML), a company controlled by Hong Leong Corporation Limited,
now known as Hong Leong (China) Limited (HLC). The Special Share entitles its holder to designate
the majority of the Companys Board of Directors (six of eleven). The Special Share is not
transferable except to Hong Leong Asia Ltd. (HLA), the holding company of HLC, or any of its
affiliates. During 2002, DML transferred the Special Share to HL Technology Systems Pte Ltd
(HLT), a subsidiary of HLC.Yuchai established three direct subsidiaries, Yuchai Machinery Monopoly Company Limited (YMMC),
Guangxi Yulin Yuchai Accessories Manufacturing Company Limited (YAMC) (previously known Guangxi
Yulin Yuchai Machinery Spare Parts Manufacturing Company Limited) and Yuchai Express Guarantee Co.,
Ltd (YEGCL). YMMC and YAMC were established in 2000, and are involved in the manufacture and sale
of spare parts and components for diesel engines in the PRC. YEGCL was established in 2004, and is
involved in the provision of financial guarantees to mortgage loan applicants in favor of banks in
connection with the applicants purchase of automobiles equipped with diesel engines produced by
Yuchai. In 2006, YEGCL ceased granting new guarantees with the aim of servicing the remaining
outstanding guarantee commitments to completion. YEGCL has no more guarantee commitments remaining
at the end of 2009. As at December 31, 2009, Yuchai held an equity interest of 71.83%, 97.14% and
100.0% respectively in these companies. As at January 1, 2008, December 31, 2008 and 2009, YMMC had
direct controlling interests in twenty five, thirty and thirty one subsidiaries respectively, which
are involved in the trading and distribution of spare parts of diesel engines and automobiles, all
of which are established in the PRC. In December 2006, Yuchai established a wholly-owned subsidiary
called Xiamen Yuchai. Diesel Engines Co., Ltd. This new subsidiary was established to facilitate
the construction of a new diesel engine assembly factory in Xiamen Fujian province in China.
 F-13




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 1.
    
    Corporate information (contd)
 On April 10, 2007, Yuchai signed a Cooperation Framework Agreement with Zhejiang Geely Holding
Group Co., Ltd or Geely and Zhejiang Yilun Machinery Company Limited or Yinlun to consider
establishing a proposed company to develop diesel engines for passenger cars in China. Yuchai was
to be the largest shareholder followed by Geely as the second largest shareholder. In December
2007, further to the Cooperation Framework Agreement, Yuchai entered into an Equity Joint Venture
Agreement with Geely and Yinlun, to form two joint entities in Tiantai, Zhejiang Province and
Jining, Shandong Province. The entities will be primarily engaged in the development, production
and sales of a proprietary diesel engine and its parts for passenger vehicles. Yuchai will be the
controlling shareholder with 52% with Geely and Yinlun holding 30 % and 18 % shareholding
respectively in both entities. These two entities have been duly incorporated.In December 2007, Yuchai purchased a subsidiary, Guangxi Yulin Hotel Company Ltd (Yulin Hotel
Company).On December 17, 2009, Yuchai, pursuant to a Framework Agreement entered into with Jirui United
Heavy Industry Co., Ltd. (Jirui United), a company jointly established by China International
Marine Containers Group Ltd (CIMC) and Chery Automobile Co., Ltd. (Chery) (collectively
referred to as CIMC-Chery), and Shenzhen City Jiusi Investment Management Co., Ltd (Jiusi)
incorporated Y & C Engine Co., Ltd. in Wuhu City, Anhui Province (the JV Company) to produce
heavy-duty vehicle engines with the displacement range from 10.5L to 14L including the engines of
YC6K series. The registered capital of the JV Company is Rmb 500,000,000. Yuchai and Jirui United
each hold 45% in the joint venture with Jiusi holding the remaining 10%.In March 2005, the Company through Venture Delta Limited or Venture Delta acquired 14.99% of the
ordinary shares of Thakral Corporation Ltd (TCL). TCL is a company listed on the main board of
the Singapore Exchange Securities Trading Limited (the Singapore Exchange) and is involved in the
manufacture, assembly and distribution of high-end consumer electronic products and home
entertainment products in the PRC. Three directors out of eleven directors on the board of TCL are
appointed by the Company. Based on the Companys shareholdings and representation in the board of
directors of TCL, management has concluded that the Company has the ability to exercise significant
influence over the operating and financial policies of TCL. Consequently, the Companys
consolidated financial statements include the Companys share of the results of TCL, accounted for
under the equity method. The Company acquired an additional 1% of the ordinary shares of TCL in
September 2005. As a result of the rights issue of 87,260,288 rights shares on February 16, 2006,
the Companys equity interest in TCL increased to 19.4%. On August 15, 2006, the Company exercised
its right to convert all of its 52,933,440 convertible bonds into 529,334,400 new
ordinary shares in the capital of TCL. Upon the issue of the new shares, the Companys interest in
TCL has increased to 36.6% of the total issued and outstanding ordinary shares. During the year
ended December 31, 2007, the Company did not acquire new shares in TCL. However, as a result of
conversion of convertible bonds into new ordinary shares by TCLs third party bondholders, the
Companys interest in TCL was diluted to 34.4%. On September 2, 2008, Venture Delta transferred
1,000,000 ordinary shares, representing 0.04% interest in TCL to Grace Star Services Ltd (GSS).
 F-14




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 1.
    
    Corporate information (contd)
 On December 1, 2009, TCL announced its plan to return surplus capital of approximately S$130.6
million to shareholders by way of the Capital Reduction Exercise. Concurrently with the Capital
Reduction Exercise, VDL and GSS intend to appoint a broker to sell 550,000,000 shares out of their
898,990,352 shares in TCL at a price of S$0.03 per share on an ex-distribution basis (Placement).
As of December 1, 2009, from the date that an associate is classified as held for sale, the Group
ceased to apply the equity method and the investment in TCL is measured at the lower of the
carrying amount and fair value less cost to sell and classified as held-for-sale.On February 7, 2006, the Company acquired 29.1% of the ordinary shares of HL Global Enterprises
Limited (formerly known as HLG Enterprise Limited (HLGE). HLGE is a public company listed on the
main board of the Singapore Exchange. HLGE is primarily engaged in investment holding, and through
its group companies, invests in rental property, hospitality and property developments in Asia. On
November 15, 2006, the Company exercised its right to convert all of its 196,201,374 non-redeemable
convertible cumulative preference shares (NCCPS) into 196,201,374 new ordinary shares in the
capital of HLGE. Upon the issue of the new shares, the Companys equity interest in HLGE has
increased to 45.4% of the enlarged total number of ordinary shares in issue.The Company considers its ability to exercise the potential voting privileges in the RCPS
instruments in HLGE when assessing the entitys power to govern the financial and operating
policies of HLGE and concluded that the Company has the ability to control HLGE. Consequently, the
Company consolidated HLGE with effect from November 15, 2006. During the year ended December 31,
2007, the Company did not acquire new shares in HLGE. However, new ordinary shares were issued by
HLGE arising from the third partys conversion of non-redeemable convertible cumulative preference
shares, and the Companys interest in HLGE was diluted to 45.4%. With the conversion of 17,300,000
Existing HLGE RCPS B into HLGE ordinary shares on the Mandatory Conversion Date, the Companys
shareholding interest in HLGE increased from 45.4% to 46.4% with effect from March 24, 2010 upon
receipt of regulatory approval. If all the RCPS were fully converted to ordinary shares, the
Companys interest in HLGE would exceed 50%.As at January 1, 2008 and December 31, 2008, three directors out of seven directors on the board of
HLGE were appointed by the Company. Four directors out of eight directors on the board of HLGE were
appointed by the Company as at December 31, 2009.
 F-15




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies
 2.1
    
    Basis of preparation
 The consolidated financial statements have been prepared on a historical cost basis, except for
derivative financial instruments and available-for-sale financial assets that have been measured at
fair value. The consolidated financial statements are presented in Renminbi (RMB) and all values in
the tables are rounded to the nearest thousand ($000) except when otherwise indicated.Statement of complianceThe consolidated financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).For all periods up to and including the year ended December 31, 2008, the Group prepared its
financial statements in accordance with generally accepted accounting principles in the United
States (US GAAP). These financial statements, for the year ended December 31, 2009, are the first
the Group has prepared in accordance with IFRS.Accordingly, the Group has prepared financial statements which comply with IFRS applicable for
periods beginning on or after January 1, 2009 as described in the accounting policies. In preparing
these financial statements, the Groups opening statement of financial position was prepared as at
January 1, 2008, the Groups date of transition to IFRS. This note explains the principal
adjustments made by the Group in restating its US GAAP statement of financial position as at
January 1, 2008 and its previously published US GAAP financial statements for the year ended
December 31, 2008.IFRS 1 First Time Adoption of International Financial Reporting Standards allows first-time
adopters certain exemptions from the retrospective application of certain IFRSs effective for
December 2009 year ends. The Group has applied the following exemption: IFRS 3 Business Combinations has not been applied to acquisitions of subsidiaries or of interests
in associates and joint ventures that occurred before January 1, 2008.
 F-16




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of reconciliation of the accounts presented in accordance with US GAAP and IFRSConsolidated Income Statement for the year ended December 31, 2008
 Consolidation
    
    Amortisation
    
    NegativeUS GAAP
    
    of HLGE
    
    of gains
    
    Goodwill
    
    Others
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.3)
    
    (Note 2.1.2)
    
    (Note 2.1.6)Continuing operationsTurnoverSales of goods
    
    
    10,384,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,898
    )
    
    
    10,358,124Rendering of services
    
    
    
    
    
    
    20,766
    
    
    
    
    
    
    
    
    
    
    
    25,898
    
    
    
    46,664Cost of sales (goods)
    
    
    (8,561,520
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    233,462
    
    
    
    (8,328,058
    )Cost of sales (services)
    
    
    
    
    
    
    (9,676
    )
    
    
    
    
    
    
    
    
    
    
    (17,918
    )
    
    
    (27,594
    )Gross profit
    
    
    1,822,502
    
    
    
    11,090
    
    
    
    
    
    
    
    
    
    
    
    215,544
    
    
    
    2,049,136Other income
    
    
    43,261
    
    
    
    (32,161
    )
    
    
    
    
    
    
    12,368
    
    
    
    (4,008
    )
    
    
    19,460Research and development costs
    
    
    (177,370
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,424
    )
    
    
    (184,794
    )Selling, distribution and administrative costs
    
    
    (1,041,225
    )
    
    
    (24,009
    )
    
    
    
    
    
    
    
    
    
    
    (202,826
    )
    
    
    (1,268,060
    )Profit from operations
    
    
    647,168
    
    
    
    (45,080
    )
    
    
    
    
    
    
    12,368
    
    
    
    1,286
    
    
    
    615,742Interest expenses
    
    
    (146,973
    )
    
    
    (2,150
    )
    
    
    
    
    
    
    
    
    
    
    (1,286
    )
    
    
    (150,409
    )Share of results of associates
    
    
    (36,573
    )
    
    
    7,502
    
    
    
    (1,348
    )
    
    
    (849
    )
    
    
    33,985
    
    
    
    2,717Share of results of joint ventures
    
    
    
    
    
    
    13,692
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,692
 F-17




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of reconciliation of the accounts presented in accordance with US GAAP and IFRS (contd)Consolidated Income Statement for the year ended December 31, 2008 (contd)
 Consolidation
    
    Amortisation
    
    NegativeUS GAAP
    
    of HLGE
    
    of gains
    
    goodwill
    
    Others
    
    Reclassifications
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.3)
    
    (Note 2.1.2)
    
    (Note 2.1.6)
    
    (Note 2.1.5)Profit from ordinary operations before tax
    
    
    463,622
    
    
    
    (26,036
    )
    
    
    (1,348
    )
    
    
    11,519
    
    
    
    33,985
    
    
    
    
    
    
    
    481,742Income tax expense
    
    
    (110,531
    )
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110,526
    )Profit from ordinary operations after tax
    
    
    353,091
    
    
    
    (26,031
    )
    
    
    (1,348
    )
    
    
    11,519
    
    
    
    33,985
    
    
    
    
    
    
    
    371,216Discontinued operationsLoss after tax for the year from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,985
    )
    
    
    
    
    
    
    (33,985
    )Profit after tax for the year
    
    
    353,091
    
    
    
    (26,031
    )
    
    
    (1,348
    )
    
    
    11,519
    
    
    
    
    
    
    
    
    
    
    
    337,231Minority interest
    
    
    (100,641
    )
    
    
    9,026
    
    
    
    
    
    
    
    (5,580
    )
    
    
    
    
    
    
    97,195
    
    
    
    Net income
    
    
    252,450
    
    
    
    (17,005
    )
    
    
    (1,348
    )
    
    
    5,939
    
    
    
    
    
    
    
    97,195
    
    
    
    337,231Other
comprehensive (loss)/incomeForeign
currency translation
    
    
    1,647
    
    
    
    8,696
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,343Share of
other comprehensive loss of associates
    
    
    (80,196
    )
    
    
    (10,072
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (90,265
    )Net
unrealized loss on investment securities, net of tax
    
    
    (26,696
    )
    
    
    26,696
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    4,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,740Other
comprehensive (loss)/income, net of tax
    
    
    (105,245
    )
    
    
    30,060
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75,182
    )Total
comprehensive income for the year, net of tax
    
    
    147,205
    
    
    
    13,055
    
    
    
    (1,348
    )
    
    
    5,939
    
    
    
    
    
    
    
    97,195
    
    
    
    262,049
 F-18




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of Reconciliation of the accounts presented in accordance with US GAAP and IFRS (contd)Consolidated Statement of Financial Position as at January 1, 2008 (date of transition to IFRS)
 Consolidation
    
    Negative
    
    Amortisation
    
    
    
    
    
    Reclassifi-US GAAP
    
    of HLGE
    
    goodwill
    
    of gains
    
    Borrowings
    
    cations
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.2)
    
    (Note 2.1.3)
    
    (Note 2.1.4)
    
    (Note 2.1.5)ASSETSCurrent assetsCash and cash equivalents
    
    
    520,945
    
    
    
    238,892
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    759,837Trade receivables and bills receivable, net
    
    
    3,107,785
    
    
    
    1,459
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,109,244Amounts due from related parties
    
    
    143,652
    
    
    
    17,373
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,025Loans receivable from a related party, net
    
    
    2,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,050Loans to customers
    
    
    3,361
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,361Inventories
    
    
    1,647,025
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,647,075Lease prepayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,767
    
    
    
    5,767Prepayments
    
    
    31,752
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,227
    
    
    
    54,057Other receivables
    
    
    97,074
    
    
    
    (37,993
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,227
    )
    
    
    36,854Income tax recoverable
    
    
    27,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,990Deferred income taxes
    
    
    114,361
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (114,361
    )
    
    
    Development properties
    
    
    
    
    
    
    110,344
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,344Total current assets
    
    
    5,695,995
    
    
    
    330,203
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108,594
    )
    
    
    5,917,604
 F-19




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of Reconciliation of the accounts presented in accordance with US GAAP and IFRS (contd)Consolidated Statement of Financial Position as at January 1, 2008 (date of transition to IFRS) (contd)
 Consolidation
    
    Negative
    
    AmortisationUS GAAP
    
    of HLGE
    
    goodwill
    
    of Gains
    
    Borrowings
    
    Reclassifications
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.2)
    
    (Note 2.1.3)
    
    (Note 2.1.4)
    
    (Note 2.1.5)AssetsNon-current assetsProperty, plant and equipment
    
    
    2,158,246
    
    
    
    319,203
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,477,449Construction in progress
    
    
    184,921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184,921Lease prepayments
    
    
    168,002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,767
    )
    
    
    162,235Investments in associated corporations
    
    
    505,009
    
    
    
    (75,888
    )
    
    
    10,573
    
    
    
    13,073
    
    
    
    
    
    
    
    
    
    
    
    452,767Investments in joint ventures
    
    
    
    
    
    
    160,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,125Other investments
    
    
    615,201
    
    
    
    (608,194
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,007Investment properties
    
    
    
    
    
    
    39,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,137Goodwill
    
    
    218,311
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218,311Deferred income taxes
    
    
    33,499
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,361
    
    
    
    147,860Amount due from associate
    
    
    
    
    
    
    65,223
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,223Total non-current assets
    
    
    3,883,189
    
    
    
    (100,394
    )
    
    
    10,573
    
    
    
    13,073
    
    
    
    
    
    
    
    108,594
    
    
    
    3,915,035TOTAL ASSETS
    
    
    9,579,184
    
    
    
    229,809
    
    
    
    10,573
    
    
    
    13,073
    
    
    
    
    
    
    
    
    
    
    
    9,832,639
 F-20




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of Reconciliation of the accounts presented in accordance with US GAAP and IFRS (contd)Consolidated Statement of Financial Position as at January 1, 2008 (date of transition to IFRS) (contd)
 Consolidation
    
    Negative
    
    AmortisationUS GAAP
    
    of HLGE
    
    goodwill
    
    of
    
    Borrowings
    
    Reclassifications
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.2)
    
    (Note 2.1.3)
    
    (Note 2.1.4)
    
    (Note 2.1.5)LiabilitiesCurrent liabilitiesShort-term bank loans
    
    
    819,164
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    457,787
    
    
    
    
    
    
    
    1,276,951Amount due to holding company
    
    
    380,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    380,521Amount due to related parties
    
    
    5,278
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,278Trade payables
    
    
    2,509,962
    
    
    
    7,940
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,517,902Income taxes payable
    
    
    5,663
    
    
    
    5,940
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,603Accrued expenses and other liabilities
    
    
    946,675
    
    
    
    37,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (194,898
    )
    
    
    789,743Other liabilities
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Provision for product warranty
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,898
    
    
    
    194,898Total current liabilities
    
    
    4,667,263
    
    
    
    51,851
    
    
    
    
    
    
    
    
    
    
    
    457,787
    
    
    
    
    
    
    
    5,176,901Non-current liabilitiesLong-term liabilities
    
    
    767,929
    
    
    
    2,960
    
    
    
    
    
    
    
    
    
    
    
    (457,787
    )
    
    
    
    
    
    
    313,102Other liabilities
    
    
    
    
    
    
    2,296
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,296Deferred tax liability
    
    
    
    
    
    
    466
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    466Total non-current liabilities
    
    
    767,929
    
    
    
    5,722
    
    
    
    
    
    
    
    
    
    
    
    (457,787
    )
    
    
    
    
    
    
    315,864TOTAL LIABILITIES
    
    
    5,435,192
    
    
    
    57,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,492,765
 F-21




---



##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of Reconciliation of the accounts presented in accordance with US GAAP and IFRS (contd)Consolidated Statement of Financial Position as at January 1, 2008 (date of transition to IFRS) (contd)
 Consolidation
    
    Negative
    
    AmortisationUS GAAP
    
    of HLGE
    
    goodwill
    
    of gains
    
    Borrowings
    
    Reclassifications
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.2)
    
    (Note 2.1.3)
    
    (Note 2.1.4)
    
    (Note 2.1.5)Equity attributable to
equity holders of the
parentIssued capital
    
    
    1,724,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,724,196Preference shares
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36Statutory reserves
    
    
    270,339
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    270,339Capital reserves
    
    
    
    
    
    
    3,297
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,297Retained earnings
    
    
    1,145,350
    
    
    
    145,595
    
    
    
    10,573
    
    
    
    13,073
    
    
    
    
    
    
    
    
    
    
    
    1,314,591Other components of equity
    
    
    154,580
    
    
    
    (162,998
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,418
    )Equity attributable to
equity holders of the
parent
    
    
    3,294,465
    
    
    
    (14,070
    )
    
    
    10,573
    
    
    
    13,073
    
    
    
    
    
    
    
    
    
    
    
    3,304,041Minority interests
    
    
    849,527
    
    
    
    186,306
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,035,833Total equity
    
    
    4,143,992
    
    
    
    172,236
    
    
    
    10,573
    
    
    
    13,073
    
    
    
    
    
    
    
    
    
    
    
    4,339,874TOTAL EQUITY AND LIABILITIES
    
    
    9,579,184
    
    
    
    229,809
    
    
    
    10,573
    
    
    
    13,073
    
    
    
    
    
    
    
    
    
    
    
    9,832,639
 F-22




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of Reconciliation of the accounts presented in accordance with US GAAP and IFRS (contd)Consolidated Statement of Financial Position as at December 31, 2008
 Consolidation
    
    Negative
    
    AmortisationUS GAAP
    
    of HLGE
    
    goodwill
    
    of gains
    
    Borrowings
    
    Reclassifications
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.2)
    
    (Note 2.1.3)
    
    (Note 2.1.4)
    
    (Note 2.1.5)ASSETSCurrent assetsCash and cash equivalents
    
    
    693,436
    
    
    
    130,259
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    823,695Trade receivables and bills receivable, net
    
    
    2,537,681
    
    
    
    454
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,538,135Amounts due from related parties
    
    
    139,267
    
    
    
    5,655
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144,922Loans to customers
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156Inventories
    
    
    2,250,030
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,250,044Lease prepayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,151
    
    
    
    6,151Prepayments
    
    
    106,585
    
    
    
    903
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,093
    
    
    
    150,581Other receivables
    
    
    181,699
    
    
    
    (59,998
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,093
    )
    
    
    78,608Deferred income taxes
    
    
    125,788
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (125,788
    )
    
    
    Income tax recoverable
    
    
    46,296
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,296Development properties
    
    
    
    
    
    
    96,293
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,293Total current assets
    
    
    6,080,938
    
    
    
    173,580
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (119,637
    )
    
    
    6,134,881
 F-23




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of Reconciliation of the accounts presented in accordance with US GAAP and IFRS (contd)Consolidated Statement of Financial Position as at December 31, 2008 (contd)
 Consolidation
    
    Negative
    
    AmortisationUS GAAP
    
    of HLGE
    
    goodwill
    
    of Gains
    
    Borrowings
    
    Reclassifications
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.2)
    
    (Note 2.1.3)
    
    (Note 2.1.4)
    
    (Note 2.1.5)AssetsNon-current assetsProperty, plant and equipment
    
    
    2,149,290
    
    
    
    311,869
    
    
    
    5,742
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,466,901Construction in progress
    
    
    252,872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    252,872Lease prepayments
    
    
    158,681
    
    
    
    
    
    
    
    6,626
    
    
    
    
    
    
    
    
    
    
    
    (6,151
    )
    
    
    159,156Investments in associated corporations
    
    
    392,386
    
    
    
    (85,317
    )
    
    
    9,724
    
    
    
    11,807
    
    
    
    
    
    
    
    
    
    
    
    328,600Investments in joint ventures
    
    
    
    
    
    
    164,979
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164,979Other investments
    
    
    446,430
    
    
    
    (439,665
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,765Investment properties
    
    
    
    
    
    
    34,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,146Goodwill
    
    
    212,636
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    212,636Amount due from associate
    
    
    
    
    
    
    61,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,475Deferred income taxes
    
    
    19,445
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,788
    
    
    
    145,233Total non-current assets
    
    
    3,631,740
    
    
    
    47,487
    
    
    
    22,092
    
    
    
    11,807
    
    
    
    
    
    
    
    119,637
    
    
    
    3,832,763TOTAL ASSETS
    
    
    9,712,678
    
    
    
    221,067
    
    
    
    22,092
    
    
    
    11,807
    
    
    
    
    
    
    
    
    
    
    
    9,967,644
 F-24




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of Reconciliation of the accounts presented in accordance with US GAAP and IFRS (contd)Consolidated Statement of Financial Position as at December 31, 2008 (date of transition to IFRS) (contd)
 Consolidation
    
    Negative
    
    AmortisationUS GAAP
    
    of HLGE
    
    goodwill
    
    of
    
    Borrowings
    
    Reclassifications
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.2)
    
    (Note 2.1.3)
    
    (Note 2.1.4)
    
    (Note 2.1.5)LiabilitiesCurrent liabilitiesShort-term bank loans
    
    
    1,068,675
    
    
    
    2,284
    
    
    
    
    
    
    
    
    
    
    
    77,773
    
    
    
    
    
    
    
    1,148,732Amount due to holding company
    
    
    451
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    451Amount due to related parties
    
    
    204,910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    204,910Trade payables
    
    
    2,612,928
    
    
    
    6,208
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,619,136Income taxes payable
    
    
    10,998
    
    
    
    2,279
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,277Accrued expenses and other liabilities
    
    
    937,084
    
    
    
    31,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (188,599
    )
    
    
    779,631Other liabilities
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Provision for product warranty
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188,599
    
    
    
    188,599Deferred income taxes
    
    
    15,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,282
    )
    
    
    Deferred gain
    
    
    202,950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202,950Total current liabilities
    
    
    5,053,278
    
    
    
    41,922
    
    
    
    
    
    
    
    
    
    
    
    77,773
    
    
    
    (15,282
    )
    
    
    5,157,691Non-current liabilitiesLong-term liabilities
    
    
    254,529
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77,773
    )
    
    
    
    
    
    
    176,756Other liabilities
    
    
    
    
    
    
    2,080
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,080Deferred tax liability
    
    
    
    
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,282
    
    
    
    16,158Total non-current liabilities
    
    
    254,529
    
    
    
    2,956
    
    
    
    
    
    
    
    
    
    
    
    (77,773
    )
    
    
    15,282
    
    
    
    194,994TOTAL LIABILITIES
    
    
    5,307,807
    
    
    
    44,878
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,352,685
 F-25




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)Statement of Reconciliation of the accounts presented in accordance with US GAAP and IFRS (contd)Consolidated Statement of Financial Position as at December 31, 2008 (date of transition to IFRS) (contd)
 Consolidation
    
    Negative
    
    AmortisationUS GAAP
    
    of HLGE
    
    goodwill
    
    of
    
    Borrowings
    
    Reclassifications
    
    IFRSRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000(Note 2.1.1)
    
    (Note 2.1.2)
    
    (Note 2.1.3)
    
    (Note 2.1.4)
    
    (Note 2.1.5)Equity attributable to
equity holders of the
parentIssued capital
    
    
    1,724,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,724,196Preference shares
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36Statutory reserves
    
    
    287,473
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287,473Capital reserves
    
    
    
    
    
    
    2,942
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,942Retained earnings
    
    
    1,369,821
    
    
    
    128,866
    
    
    
    16,512
    
    
    
    11,807
    
    
    
    
    
    
    
    
    
    
    
    1,527,006Other components of equity
    
    
    49,335
    
    
    
    (145,808
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96,473
    )Equity attributable to
equity holders of the
parent
    
    
    3,430,825
    
    
    
    (13,964
    )
    
    
    16,512
    
    
    
    11,807
    
    
    
    
    
    
    
    
    
    
    
    3,445,180Minority interests
    
    
    974,046
    
    
    
    190,153
    
    
    
    5,580
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,169,779Total equity
    
    
    4,404,871
    
    
    
    176,189
    
    
    
    22,092
    
    
    
    11,807
    
    
    
    
    
    
    
    
    
    
    
    4,614,959TOTAL EQUITY AND LIABILITIES
    
    
    9,712,678
    
    
    
    221,067
    
    
    
    22,092
    
    
    
    11,807
    
    
    
    
    
    
    
    
    
    
    
    9,967,644
 F-26




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)2.1.1
    
    Consolidation of HL Global Enterprises Limited (HLGE)Upon the conversion of unsecured non-redeemable convertible cumulative preference shares on
November 15, 2006, the Companys interest in HLGE increased from 29.1% to 45.4%. The Group also
owned 98.8% interest of redeemable convertible preference shares series A (RCPS A) and redeemable
convertible preference shares series B (RCPS B) in HLGE.Under US GAAP, the Company consolidates majority-owned subsidiaries and those entities that the
Company has determined that it has a direct or indirect controlling financial interest in. HLGE was
not consolidated under US GAAP as the Company holds less than 50% of the voting rights. HLGE was
also assessed not to be a variable interest entity under US GAAP.IAS 27 focuses on the consolidation model based on the concept of the power to control, with
control being the ability to govern the financial and operating policies of an entity to obtain
benefits. Control is presumed to exist when there is majority voting interest, and potential voting
rights are considered. Should the conversion of RCPS A and B be exercised, the Group would have the
potential to increase its ownership interest in HLGE to 51 %. The Group therefore believes that it
is appropriate to consolidate HLGE under IFRS since November 15, 2006, and for the financial
periods ended December 31, 2007, 2008 and 2009 based on the potential voting rights in RCPS A and
RCPS B.
 2.1.2
    
    Negative goodwill
 As a result of the rights issue of 87,260,288 rights shares on February 16, 2006, the Companys
equity interest in TCL increased to 19.4%. On August 15, 2006, the Company exercised its right to
convert all of its 52,933,440 convertible bonds into 529,334,400 new ordinary shares in the capital
of TCL. There is negative goodwill arising from acquisition of TCL from the above transactions.
As of January 1, 2008 and December 31, 2008, the Group recorded a negative goodwill of Rmb 10,573
and Rmb 9,724.During the year ended December 31, 2008, YMMC acquired 75% in Guangxi Yuchai Anda Gearbox Company
Limited (Anda) which gave rise to a negative goodwill of Rmb 12,368. Please refer to Note 5 for
details of acquisition.Under IFRS, any excess of the Groups share in the net fair value of the acquired entitys
identifiable assets, liabilities and contingent liabilities over the cost of business combination
is recognised as income in profit or loss on the date of acquisition. US GAAP requires such excess
to be allocated to the sum of the amounts assigned to assets acquired and liabilities assumed over
the cost of acquiring entity, as a pro-rata reduction of the amounts that otherwise would have been
assigned to all of the acquired assets. Annual amortization of the negative goodwill will then be
the allocated negative goodwill over the remaining useful lives of the qualifying acquired assets.
 2.1.3
    
    Share of results of associate  Thakral Corporation Limited (TCL)
 On August 15, 2006, the Group exercised its rights to convert all its convertible bonds issued by
TCL into new ordinary shares in the capital of TCL. Upon the issuance of the new shares, the
Groups interest in TCL increased to 36.6% of the total issued and outstanding shares and equity
accounted TCL as its associated company. Under IFRS, the Group reversed its fair value loss in the
convertible bond previously recorded under US GAAP as part of the cost of associate company.
 F-27




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)2.1.4
    
    Bank borrowingsUnder US GAAP, the Group had breached a provision of a long-term loan arrangement but classified it as current as it has received a waiver
before the authorization of the financial statements.Under IAS 1, the Group reclassified its non-current interest-bearings loans and borrowings as
current liabilities as it has breached a provision of a long-term loan arrangement. The agreement
from the lender to not demand payment as a consequence of the breach was only obtained after the
reporting period but before the authorization of the financial statements.
 2.1.5
    
    ReclassificationsPresentation of deferred tax assets and liabilitiesUnder US GAAP Accounting Standards Codification No. 740 Income Taxes, deferred tax liabilities and
assets are classified as current or non-current based on the classification of the related asset or
liability for financial reporting. However, IAS 1 Presentation of Financial Statements prohibit
recognition of deferred tax assets (liabilities) as current assets (liabilities). Hence, management
has reclassified deferred tax assets and liabilities as non-current assets and liabilities.Presentation of current and non-current prepaid operating leasesUnder IAS 17, the Group is required to disclose the carrying amount of current and non-current
prepaid operating leases. There is no specific guidance and requirement under US GAAP.Minority interestsUnder IFRS, all minority interest balances are classified as a component of equity. Under US GAAP
for years prior to the adoption of Accounting Standards Codification No. 810-10-65 Consolidation minority
interest balances were classified as a liability.
 2.1.6
    
    Others
 Presentation of warranty costsWe have previously presented the warranty cost as a part of cost of sales. It has now being
presented as a part of selling, general and administrative expenses as the directors are of the
opinion that selling expenses are more representative of the nature
of the after sales services. This will also align the companys
classification with that of its parent company.Presentation of share of results of associates / discontinued operationsOn December 1, 2009, we announced that concurrently with the capital reduction and cash
distribution exercise to be undertaken by TCL, we intend to appoint a broker to sell 550,000,000
shares in TCL at a price of S$0.03 per share on an ex-distribution basis (Placement). As of
December 31, 2009, a total of 536,000,000 shares out of 550,000,000 shares available in the
Placement have been taken up. The Placement is conditional upon the completion of the capital
reduction and cash distribution exercise and subject to all the shares in the Placement being sold,
our total shareholding in TCL will decrease from 34.4% to 13.4%. The investment in TCL was
classified as a disposal group held for sale and as a discontinued operation as at December 31,
2009.The results of TCL for the year are equity accounted and presented as discontinued operations for
the year ended December 31, 2009 and December 31, 2008.
 F-28




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.1
    
    Basis of preparation (contd)2.1.7
    
    Cash flow statementThe effects of transition from US GAAP to IFRS are due mainly to the consolidation of HLGE.
Operating, investing and financing cash flows of the Company changed under IFRS as a result of
incorporating the cash flow of HLGE. The income from interest that was earned by the Company from
its holding in the zero coupon bonds and the partial redemption of the zero coupon bonds were eliminated under IFRS.
 2.2
    
    Summary of significant accounting policies
 Basis of consolidationThe consolidated financial statements comprise the financial statements of China Yuchai
International Limited and its subsidiaries as at January 1, 2008, December 31, 2008 and December
31, 2009.Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group
obtains control, and continue to be consolidated until the date that such control ceases.The financial statements of the subsidiaries are prepared for the same reporting period as the
parent company, using consistent accounting policies.All intra-group balances, income and expenses and unrealized gains and losses resulting from
intra-group transactions are eliminated in full.Minority interests represent the portion of profit or loss and net assets that is not held by the
Group and are presented separately in the consolidated income statements and within equity in the
consolidated balance sheets, separately from parent shareholders equity. Transactions with minority interests are
accounted for using the entity concept method whereby, transactions with minority interests are accounted for as transactions with owners.
Gain or loss on disposal to minority interests is recognized directly in equity.
 (a)
    
    Business combinations and goodwillBusiness combinations are accounted for using the acquisition method. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at fair
values at the date of acquisition, irrespective of the extent of any minority interest.Goodwill is initially measured at cost being the excess of the cost of the business
combination over the Groups share in the net fair value of the acquirees identifiable
assets, liabilities and contingent liabilities. If the cost of acquisition is less than the
fair value of the net assets of the subsidiary acquired, the difference is recognized
directly in the income statement.After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill acquired in a business combination
is, from the acquisition date, allocated to each of the Groups cash generating units that
are expected to benefit from the synergies of the combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those
units.
 F-29




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (a)
    
    Business combinations and goodwill (contd)Where goodwill forms part of a cash-generating unit and part of the operation within that
unit is disposed of, the goodwill associated with the operation disposed of is included in
the carrying amount of the operation when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this circumstance is measured based on the relative
values of the operation disposed of and the portion of the cash-generating unit retained.When the Group acquires a business, embedded derivatives separated from the host contract
by the acquiree are not reassessed on acquisition unless the business combination results
in a change in the terms of the contract that significantly modifies the cash flows that
would otherwise be required under the contract.When a business combination agreement provides for an adjustment to the cost of the
combination contingent on future events, the Group shall include the amount of that
adjustment in the cost of the combination at the acquisition date if the adjustment is
probable and can be measured reliably.(b)
    
    Investments in associatesThe Groups investments in its associates are accounted for using the equity method. An
associate is an entity in which the Group has significant influence. Significant influence
is presumed to exist when the Group holds between 20% and 50% of the voting power of
another entity.Under the equity method, the investment in the associate is carried in the statement of
financial position at cost plus post acquisition changes in the Groups share of net assets
of the associate. Goodwill relating to the associate is included in the carrying amount of
the investment and is neither amortised nor individually tested for impairment.The income statement reflects the share of the results of operations of the associate.
Where there has been a change recognised directly in the other comprehensive income of the
associate, the Group recognises its share of any changes and discloses this, when
applicable, in the statement of changes in equity. Unrealised gains and losses resulting
from transactions between the Group and the associate are eliminated to the extent of the
interest in the associate.When the Groups share of losses exceeds the carrying amount of the associate, the carrying
amount is eliminated and recognition of further losses is discontinued except to the extent
that the Group has incurred obligations in respect of the associate.The share of profit of associates is shown on the face of the income statement. This is the
profit attributable to equity holders of the associate and therefore is profit after tax
and minority interests in the subsidiaries of the associates.The financial statements of the associate are prepared for the same reporting period as the
parent company. Where necessary, adjustments are made to bring the accounting policies in
line with those of the Group.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (b)
    
    Investments in associates (contd)After application of the equity method, the Group determines whether it is necessary to
recognise an additional impairment loss on the Groups investment in its associates. The
Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired. If this is the case the Group calculates the
amount of impairment as the difference between the recoverable amount of the associate and
its carrying value and recognises the amount in the income statement.Upon loss of significant influence over the associate, the Group measures and recognises
any retaining investment at its fair value. Any difference between the carrying amount of
the associate upon loss of significant influence and the fair value of the retaining
investment and proceeds from disposal are recognised in profit or loss.(c)
    
    Investments in joint venturesThe Group has an interest in joint ventures which are jointly controlled entities, whereby
the venturers have a contractual arrangement that establishes joint control over the
economic activities of the entity. The Group recognises its interest in the joint venture
using the equity method.Under the equity method, the investment in the joint venture is carried in the statement of
financial position at cost plus post acquisition changes in the Groups share of net assets
of the joint venture. Goodwill relating to the joint venture is included in the carrying
amount of the investment and is neither amortised nor individually tested for impairment.The income statement reflects the share of the results of operations of the joint venture.
Where there has been a change recognised directly in the equity of the joint venture, the
Group recognises its share of any changes and discloses this, when applicable, in the
statement of changes in equity. Unrealised gains and losses resulting from transactions
between the Group and the joint venture are eliminated to the extent of the interest in the
joint ventures.The share of profit of joint venture is shown on the face of the income statement. This is
the profit attributable to equity holders of the joint venture and therefore is profit
after tax and minority interests in the subsidiaries of the joint venture.The financial statements of the joint venture are prepared for the same reporting period as
the parent company. Where necessary, adjustments are made to bring the accounting policies
in line with those of the Group.After application of the equity method, the Group determines whether it is necessary to
recognise an additional impairment loss on the Groups investment in its joint ventures.
The Group determines at each reporting date whether there is any objective evidence that
the investment in the joint venture is impaired. If this is the case the Group calculates
the amount of impairment as the difference between the recoverable amount of the joint
venture and its carrying value and recognises the amount in the income statement.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (c)
    
    Investments in joint ventures (contd)Upon loss of joint control and provided the former joint control entity does not become a
subsidiary or associate, the Group measures and recognises its remaining investment at its
fair value. Any differences between the carrying amount of the former joint controlled
entity upon loss of joint control and the fair value of the remaining investment and
proceeds from disposal are recognised in profit or loss. When the remaining investment
constitutes significant influence, it is accounted for as investment in an associate.(d)
    
    Non-current assets held for sale and discontinued operationsNon-current assets and disposal groups classified as held for sale are measured at the
lower of carrying amount and fair value less costs to sell. Non-current assets are
classified as held for sale if their carrying amounts will be recovered through a sale
transaction rather than through continuing use. This condition is regarded as met only when
the sale is highly probable and the asset or disposal group is available for immediate sale
in its present condition. Management must be committed to the sale, which should be
expected to qualify for recognition as a completed sale within one year from the date of
classification.In the consolidated income statement of the reporting period, and of the comparable period
of the previous year, income and expenses from discontinued operations are reported
separate from income and expenses from continuing activities, down to the level of profit
after taxes even when the Group retains a non-controlling interest after the sale. The
resulting profit or loss (after taxes) is reported separately in the income statement.(e)
    
    Foreign currency translationThe Companys functional currency is the US dollar. The Groups consolidated financial
statements are presented in Renminbi (RMB), the presentation currency, as it is the same
currency as the functional currency of Yuchai, the largest operating segment of the Group.Each entity in the Group determines its own functional currency and items included in the
financial statements of each entity are measured using that functional currency.Transactions and balancesTransactions in foreign currencies are initially recorded by the Group entities at their
respective functional currency rates prevailing at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies are translated into the
functional currency using the applicable exchange rates at the balance sheet dates. The
resulting exchange differences are recorded in the consolidated statements of operations as
part of Other income, net.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (e)
    
    Foreign currency translation (contd)The Companys reporting currency is the Renminbi. Assets and liabilities of the Company and
its subsidiaries whose functional currency is not the Renminbi are translated into Renminbi
using the exchange rate on the balance sheet date. Revenues and expenses are translated at
average rates prevailing during the year which approximates the actual exchange rates. The
gains and losses resulting from translation of financial statements are recorded in
accumulated other comprehensive income/(loss), a separate component within equity.
Cumulative translation adjustments are recognized as income or expenses upon disposal or
liquidation of foreign subsidiaries and affiliates.For the US dollar convenience translation amounts included in the accompanying consolidated
financial statements, the Renminbi equivalent amounts have been translated into U.S.
dollars at the rate of Rmb 6.8267= US$1.00, the rate quoted by the Peoples Bank of China
(PBOC) at the close of business on March 1, 2010. No representation is made that the
Renminbi amounts could have been, or could be, converted into U.S. dollars at that rate or
at any other rate prevailing on March 1, 2010 or any other date.(f)
    
    Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefits will
flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair
value of the consideration received, excluding discounts, rebates, and sales taxes or duty.
The following specific recognition criteria must also be met before revenue is recognised:Sale of goodsRevenue from the sale of goods is measured at the fair value of the consideration received
or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue
is recognised when the significant risks and rewards of ownership have been transferred to
the buyer, recovery of the consideration is probable, the associated costs and possible
return of goods can be estimated reliably, and there is no continuing management
involvement with the goods and the amount of revenue can be measured reliably.Sale of development propertiesRevenue from property development is recognised on a percentage of completion basis only in
respect of units sold, when construction of the property is at an advanced stage and
aggregate sales proceeds and costs can be reasonably estimated.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)2.2
    
    Summary of significant accounting policies (contd)
 (f)
    
    Revenue recognition (contd)Rendering of servicesRevenue from rendering of services relates to project management contracts and hotel room
and restaurant operations. Revenue is recognised over the period in which the services are
rendered, by reference to completion of the specific transaction assessed on the basis of
the actual service provided as a proportion of the total services to be performed.Guarantee fee incomeGuarantee fees received or receivable for a guarantee issued are recorded in Accrued
expenses and other liabilities based upon the estimated fair value at the inception of
such guarantee obligations, and are recognized as revenue on a straight line basis over the
respective terms of the guarantees.Interest incomeInterest income is recognized as it accrues, using effective interest method.Rental incomeRental income receivable under operating leases is recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives granted are recognised as
an integral part of the total rental income to be received. Contingent rentals are
recognised as income in the accounting period in which they are earned.DividendsDividend income from unquoted investments is recognised when the shareholders right to
receive payment is established.Dividend income from quoted investments is recognised when dividends are received.(g)
    
    TaxesCurrent income taxCurrent income tax assets and liabilities for the current and prior periods are measured at
the amount expected to be recovered from or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are those that are enacted or substantively
enacted, by the reporting date, in the countries where the Group operates and generates
taxable income.Current income tax relating to items recognized directly in consolidated statement of
comprehensive income is recognized in consolidated statement of comprehensive income and
not in the income statement. Management periodically evaluates positions taken in the tax
returns with respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)2.2
    
    Summary of significant accounting policies (contd)
 (g)
    
    Taxes (contd)Deferred taxDeferred tax is recognised using the balance sheet method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the
following temporary differences: the initial recognition of goodwill, the initial
recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit, and differences relating to
investments in subsidiaries and joint ventures to the extent that it is probable that they
will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that
are expected to be applied to the temporary differences when they reverse, based on the
laws that have been enacted or substantively enacted by the reporting date. Deferred tax
assets and liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets and they relate to income taxes levied by the same tax authority
on the same taxable entity, or on different tax entities, but they intend to settle current
tax liabilities and assets on a net basis or their tax assets and liabilities will be
realised simultaneously.A deferred tax asset is recognised to the extent that it is probable that future taxable
profits will be available against which temporary differences can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.Deferred tax relating to items recognised outside profit or loss is recognised outside
profit or loss. Deferred tax items are recognised in correlation to the underlying
transaction either in other comprehensive income or directly in equity.Sales taxRevenues, expenses and assets are recognised net of the amount of sales tax except:
 
    
    where the sales tax incurred on a purchase of assets or services is not recoverable
from the taxation authority, in which case the sales tax is recognised as part of the
cost of acquisition of the asset or as part of the expense item as applicable; and
    
    receivables and payables that are stated with the amount of sales tax included.
 The net amount of sales tax recoverable from, or payable to, the taxation authority is
included as part of receivables or payables in the statement of financial position.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)2.2
    
    Summary of significant accounting policies (contd)
 (h)
    
    Government grantsGovernment grants are recognized where there is reasonable assurance that the grant will be
received and all attached conditions will be complied with. When the grant relates to an
expense item, it is recognized as income over the period necessary to match the grant on a
systematic basis to the costs that it is intended to compensate. Where the grant relates to
an asset, it is recognized as deferred income and released to income in equal amounts over
the expected useful life of the related asset.Where the Group receives non-monetary grants, the asset and the grant are recorded at
nominal amounts and released to the income statement over the expected useful life of the
relevant asset by equal annual installments.(i)
    
    Pensions and other post employment benefitsThe Group participates in and makes contributions to the national pension schemes as
defined by the laws of the countries in which it has operations. The contributions are at a
fixed proportion of the basic salary of the staff. Contributions are recognised as
compensation expense in the period in which the related services are performed.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)2.2
    
    Summary of significant accounting policies (contd)
 (j)
    
    Financial instruments  initial recognition and subsequent measurementFinancial assetsInitial recognition and measurementFinancial assets within the scope of IAS 39 are classified as financial assets at fair
value through profit or loss, loans and receivables, held-to-maturity investments,
available-for-sale financial assets, or as derivatives designated as hedging instruments in
an effective hedge, as appropriate. The Group determines the classification of its
financial assets at initial recognition.All financial assets are recognised initially at fair value plus, in the case of
investments not at fair value through profit or loss, directly attributable transaction
costs.Purchases or sales of financial assets that require delivery of assets within a time frame
established by regulation or convention in the marketplace (regular way trades) are
recognised on the trade date, i.e., the date that the Group commits to purchase or sell the
asset.The Groups financial assets include cash and short-term deposits, trade and other
receivables, loan and other receivables, quoted and unquoted financial instruments, and
derivative financial instruments.Subsequent measurementThe subsequent measurement of financial assets depends on their classification as follows:Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss includes financial assets held for
trading and financial assets designated upon initial recognition at fair value through
profit or loss. Financial assets are classified as held for trading if they are acquired
for the purpose of selling or repurchasing in the near term. This category includes
derivative financial instruments entered into by the Group that are not designated as
hedging instruments in hedge relationships as defined by IAS 39. Derivatives, including
separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets at fair value through profit
and loss are carried in the statement of financial position at fair value with changes in
fair value recognised in finance income or finance cost in the income statement.The Group has not designated any financial assets upon initial recognition as at fair value
through profit or loss.Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. After initial measurement, such financial
assets are subsequently measured at amortised cost using the effective interest rate method
(EIR), less impairment. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fee or costs that are an integral part
of the EIR.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (j)
    
    Financial instruments  initial recognition and subsequent measurement (contd)Financial assets (contd)Loans and receivables (contd)The EIR amortisation is included in finance income in the income statement. The losses
arising from impairment are recognised in the income statement in finance costs.Held-to-maturity investmentsNon-derivative financial assets with fixed or determinable payments and fixed maturities
are classified as held-to-maturity when the Group has the positive intention and ability to
hold it to maturity. After initial measurement held-to-maturity investments are measured at
amortised cost using the effective interest method, less impairment. Amortised cost is
calculated by taking into account any discount or premium on acquisition and fee or costs
that are an integral part of the EIR. The EIR amortisation is included in finance income in
the income statement. The losses arising from impairment are recognised in the income
statement in finance costs.The Group did not have any held-to-maturity investments during the years ended December 31,
2009, December 31, 2008 and January 1, 2008.Available-for-sale financial investmentsAvailable-for-sale financial investments include equity and debt securities. Equity
investments classified as available-for sale are those, which are neither classified as
held for trading nor designated at fair value through profit or loss. Debt securities in
this category are those which are intended to be held for an indefinite period of time and
which may be sold in response to needs for liquidity or in response to changes in the
market conditions.After initial measurement, available-for-sale financial investments are subsequently
measured at fair value with unrealised gains or losses recognised as other comprehensive
income in the available-for-sale reserve until the investment is derecognised, at which
time the cumulative gain or loss is recognised in other operating income, or determined to
be impaired, at which time the cumulative loss is recognised in the income statement in
finance costs and removed from the available-for-sale reserve.The Group evaluated its available-for-sale financial assets whether the ability and
intention to sell them in the near term is still appropriate. When the Group is unable to
trade these financial assets due to inactive markets and managements intent
significantly changes to do so in the foreseeable future, the Group may elect to reclassify
these financial assets in rare circumstances. Reclassification to loans and receivables is
permitted when the financial asset meets the definition of loans and receivables and has
the intent and ability to hold these assets for the foreseeable future or maturity. The
reclassification to held to maturity is permitted only when the entity has the ability and
intent to hold until the financial asset accordingly.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)2.2
    
    Summary of significant accounting policies (contd)
 (j)
    
    Financial instruments  initial recognition and subsequent measurement (contd)Financial assets (contd)Available-for-sale financial investments (contd)For a financial asset reclassified out of the available-for-sale category, any previous
gain or loss on that asset that has been recognised in equity is amortised to profit or
loss over the remaining life of the investment using the EIR. Any difference between the
new amortised cost and the expected cash flows is also amortised over the remaining life of
the asset using the EIR. If the asset is subsequently determined to be impaired then the
amount recorded in equity is reclassified to the income statement.DerecognitionA financial asset (or, where applicable a part of a financial asset or part of a group of
similar financial assets) is derecognised when:
 
    
    The rights to receive cash flows from the asset have expired
    
    The Group has transferred its rights to receive cash flows from the asset or
has assumed an obligation to pay the received cash flows in full without material
delay to a third party under a pass-through arrangement; and either (a) the Group
has transferred substantially all the risks and rewards of the asset, or (b) the Group
has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
 When the Group has transferred its rights to receive cash flows from an asset or has
entered into a pass-through arrangement, and has neither transferred nor retained
substantially all the risks and rewards of the asset nor transferred control of the asset,
the asset is recognised to the extent of the Groups continuing involvement in the asset.In that case, the Group also recognises an associated liability. The transferred asset
and the associated liability are measured on a basis that reflects the rights and
obligations that the Group has retained.Continuing involvement that takes the form of a guarantee over the transferred asset,
is measured at the lower of the original carrying amount of the asset and the maximum
amount of consideration that the Group could be required to repay.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)2.2
    
    Summary of significant accounting policies (contd)
 (j)
    
    Financial instruments  initial recognition and subsequent measurement (contd)Impairment of financial assetsThe Group assesses at each reporting date whether there is any objective evidence that a
financial asset or a group of financial assets is impaired. A financial asset or a group of
financial assets is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more events that has occurred after the initial
recognition of the asset (an incurred loss event) and that loss event has an impact on
the estimated future cash flows of the financial asset or the group of financial assets
that can be reliably estimated. Evidence of impairment may include indications that the
debtors or a group of debtors is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganisation and where observable data indicate that there
is a measurable decrease in the estimated future cash flows, such as changes in arrears or
economic conditions that correlate with defaults.Financial assets carried at amortised costFor financial assets carried at amortised cost the Group first assesses individually
whether objective evidence of impairment exists individually for financial assets that are
individually significant, or collectively for financial assets that are not individually
significant. If the Group determines that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, it includes the asset in
a group of financial assets with similar credit risk characteristics and collectively
assesses them for impairment. Assets that are individually assessed for impairment and for
which an impairment loss is, or continues to be, recognised are not included in a
collective assessment of impairment.If there is objective evidence that an impairment loss has incurred, the amount of the loss
is measured as the difference between the assets carrying amount and the present value of
estimated future cash flows (excluding future expected credit losses that have not yet been
incurred). The present value of the estimated future cash flows is discounted at the
financial assets original effective interest rate. If a loan has a variable interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate.The carrying amount of the asset is reduced through the use of an allowance account and the
amount of the loss is recognised in the income statement. Interest income continues to be
accrued on the reduced carrying amount and is accrued using the rate of interest used to
discount the future cash flows for the purpose of measuring the impairment loss. The
interest income is recorded as part of finance income in the income statement. Loans
together with the associated allowance are written off when there is no realistic prospect
of future recovery and all collateral has been realised or has been transferred to the
Group. If, in a subsequent year, the amount of the estimated impairment loss increases or
decreases because of an event occurring after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by adjusting the allowance account. If a
future write-off is later recovered, the recovery is credited to finance costs in the
income statement.The present value of the estimated future cash flows is discounted at the financial assets
original effective interest rate. If a loan has a variable interest rate, the discount rate
for measuring any impairment loss is the current effective interest rate.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (j)
    
    Financial instruments  initial recognition and subsequent measurement (contd)Impairment of financial assets (contd)Available-for-sale financial investmentsFor available-for-sale financial investments, the Group assesses at each reporting date
whether there is objective evidence that an investment or a group of investments is
impaired.In the case of equity investments classified as available-for-sale, objective evidence
would include a significant or prolonged decline in the fair value of the investment below
its cost. Significant is to be evaluated against the original cost of the investment and
prolonged against the period in which the fair value has been below its original cost.
Where there is evidence of impairment, the cumulative loss  measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that
investment previously recognised in the income statement  is removed from other
comprehensive income and recognised in the income statement. Impairment losses on equity
investments are not reversed through the income statement; increases in their fair value
after impairment are recognised directly in other comprehensive income.In the case of debt instruments classified as available-for-sale, impairment is assessed
based on the same criteria as financial assets carried at amortised cost. However, the
amount recorded for impairment is the cumulative loss measured as the difference between
the amortised cost and the current fair value, less any impairment loss on that investment
previously recognised in the income statement.Future interest income continues to be accrued based on the reduced carrying amount of the
asset and is accrued using the rate of interest used to discount the future cash flows for
the purpose of measuring the impairment loss. The interest income is recorded as part of
finance income. If, in a subsequent year, the fair value of a debt instrument increases and
the increase can be objectively related to an event occurring after the impairment loss was
recognised in the income statement, the impairment loss is reversed through the income
statement.Financial liabilitiesInitial recognition and measurementFinancial liabilities within the scope of IAS 39 are classified as financial liabilities at
fair value through profit or loss, loans and borrowings, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate. The Group determines the
classification of its financial liabilities at initial recognition.All financial liabilities are recognised initially at fair value and in the case of loans
and borrowings, plus directly attributable transaction costs.The Groups financial liabilities include trade and other payables, loans and borrowings
and financial guarantee contracts.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (j)
    
    Financial instruments  initial recognition and subsequent measurement (contd)Financial liabilities (contd)Subsequent measurementThe measurement of financial liabilities depends on their classification as follows:Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss includes financial liabilities
held for trading and financial liabilities designated upon initial recognition as at fair
value through profit or loss.Financial liabilities are classified as held for trading if they are acquired for the
purpose of selling in the near term. This category includes derivative financial
instruments entered into by the Group that are not designated as hedging instruments in
hedge relationships as defined by IAS 39. Separated embedded derivatives are also
classified as held for trading unless they are designated as effective hedging instruments.Gains or losses on liabilities held for trading are recognised in the income statement.The Group has not designated any financial liabilities upon initial recognition as at fair
value through profit or loss.Loans and borrowingsAfter initial recognition, interest bearing loans and borrowings are subsequently measured
at amortised cost using the effective interest rate method. Gains and losses are recognised
in the income statement when the liabilities are derecognised as well as through the
effective interest rate method (EIR) amortisation process.Amortised cost is calculated by taking into account any discount or premium on acquisition
and fee or costs that are an integral part of the EIR. The EIR amortisation is included in
finance cost in the income statement.Intra-group financial guaranteesFinancial guarantees are financial instruments issued by the Group that requires the issuer
to make specified payments to reimburse the holder for the loss it incurs because a
specified debtor fails to meet payment when due in accordance with the original or modified
terms of a debt instrument.Financial guarantees are recognised initially at fair value and are classified as financial
liabilities. Subsequent to initial measurement, the financial guarantees are stated at the
higher of the initial fair value less cumulative amortisation and the amount that would be
recognised if they were accounted for as contingent liabilities. When financial guarantees
are terminated before their original expiry date, the carrying amount of the financial
guarantees is transferred to the income statement.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (j)
    
    Financial instruments  initial recognition and subsequent measurement (contd)Financial liabilities (contd)DerecognitionA financial liability is derecognised when the obligation under the liability is discharged
or cancelled or expires.When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognised in the income statement.Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the
consolidated statement of financial position if, and only if, there is a currently
enforceable legal right to offset the recognised amounts and there is an intention to
settle on a net basis, or to realise the assets and settle the liabilities simultaneously.Fair value of financial instrumentsThe fair value of financial instruments that are traded in active markets at each reporting
date is determined by reference to quoted market prices or dealer price quotations (bid
price for long positions and ask price for short positions), without any deduction for
transaction costs.For financial instruments not traded in an active market, the fair value is determined
using appropriate valuation techniques. Such techniques may include using recent arms
length market transactions; reference to the current fair value of another instrument that
is substantially the same; discounted cash flow analysis or other valuation models.An analysis of fair values of financial instruments and further details as to how they are
measured are provided in Note 37.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (k)
    
    Property, plant and equipmentPlant and equipment is stated at cost, net of accumulated depreciation and/or accumulated
impairment losses, if any.Cost includes expenditure that is directly attributable to the acquisition of the asset.
The cost of self-constructed assets includes the cost of materials and direct labour, any
other costs directly attributable to bringing the asset to a working condition for its
intended use, and the cost of dismantling and removing the items and restoring the site on
which they are located. Purchased software that is integral to the functionality of the
related equipment is capitalised as part of that equipment.When significant parts of property, plant and equipment are required to be replaced in
intervals, the Group recognises such parts as individual assets with specific useful lives
and depreciation, respectively. Likewise, when a major inspection is performed, its cost is
recognised in the carrying amount of the plant and equipment as a replacement if the
recognition criteria are satisfied. All other repair and maintenance costs are recognised
in the income statement as incurred. The present value of the expected cost for the
decommissioning of the asset after its use is included in the cost of the respective asset
if the recognition criteria for a provision are met.No depreciation is provided on freehold land. Construction-in-progress is not depreciated
until it is ready for its intended use. Depreciation is calculated on a straight-line basis
over the estimated useful life of the asset as follows:
 Freehold buildings
    
    :
    
    50 yearsLeasehold land buildings &
improvements
    
    :
    
    Shorter of 15 to 50 years or lease termPlant & machinery
    
    :
    
    3 to 20 yearsOffice furniture, fittings
and computer equipment
    
    :
    
    3 to 20 yearsMotor and transport vehicles
    
    :
    
    3.5 to 6 years
 An item of property, plant and equipment and any significant part initially recognised is
derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is
included in the income statement when the asset is derecognised.The assets residual values, useful lives and methods of depreciation are reviewed at each
financial year end, and adjusted prospectively, if appropriate.The Group capitalizes interest with respect to major assets under installation or
construction based on the average cost of the Groups borrowings. Repairs and maintenance
of a routine nature are expensed while those that extend the life of
assets are capitalized. Upon retirement or disposal of assets, the cost and related
accumulated depreciation are removed from the consolidated balance sheets and any gain or
loss is included in the consolidated statements of operations.Construction in progress represents factories under construction and machinery and
equipment pending installation. All direct costs relating to the acquisition or
construction of buildings and machinery and equipment, including interest charges on
borrowings, are capitalized as construction in progress.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (l)
    
    LeasesThe determination of whether an arrangement is, or contains, a lease is based on the
substance of the arrangement at inception date: whether fulfilment of the arrangement is
dependent on the use of a specific asset or assets or the arrangement conveys a right to
use the asset.Prepaid operating leaseLease prepayments represent payments to the PRC land bureau for land use rights, which are
charged to expense on a straight-line basis over the respective periods of the rights which
are in the range of 15 to 50 years.Group as a lesseeFinance leases, which transfer to the Group substantially all the risks and benefits
incidental to ownership of the leased item, are capitalised at the commencement of the
lease at the fair value of the leased property or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between finance charges and
reduction of the lease liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are recognised in the income statement.Leased assets are depreciated over the useful life of the asset. However, if there is no
reasonable certainty that the Group will obtain ownership by the end of the lease term, the
asset is depreciated over the shorter of the estimated useful life of the asset and the
lease term.Operating lease payments are recognised as an expense in the income statement on a straight
line basis over the lease term.Sale and leasebackIn accordance with IAS 17, Leases, the gain or loss on sale and operating leaseback
transactions is recognized in the consolidated income statement immediately if (i) the
Group does not maintain or maintains only minor continuing involvement in these properties,
other than the required lease payments and (ii) these transactions occur at fair value. Any
gain or loss on sale and finance leaseback transactions is deferred and amortized over the
term of the lease.Group as a lessorLeases where the Group does not transfer substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Initial direct costs incurred in
negotiating an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same bases as rental income. Contingent rents are
recognised as revenue in the period in which they are earned.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (m)
    
    Borrowing costsThe Group capitalized specific and general borrowing costs that are directly attributable
to the acquisition, construction or production of a qualifying asset as part of the cost of
that asset when they are incurred. In order to present consistent financial policies during
the period of initial adoption of IFRS, the Group adopted the Standard beginning 1 January
2008.A qualifying asset is one that necessarily takes a substantial period of time to get ready
for its intended use or sale. To the extent that funds are borrowed specifically for the
purpose of obtaining the asset, the amount of borrowing costs eligible for capitalization
should be determined as the actual borrowing costs incurred less any investment income on
the temporary investment of those borrowings. To the extent that funds are borrowed
generally and used for the purpose of obtaining the asset, the amount of borrowing costs
eligible for capitalization is by applying a capitalization rate to the expenditures on
that asset. The capitalization rate should be the weighted average of the borrowing costs
applicable to the borrowings of the enterprise that are outstanding during the period,
other than borrowings made specifically for the purpose of obtaining a qualifying asset.
The amount of borrowing costs capitalized during a period should not exceed the amount of
borrowing costs incurred during that period.All other borrowing costs are expensed in the period they occur. Borrowing costs consist of
interest and other costs that an entity incurs in connection with the borrowing of funds.(n)
    
    Research and development expensesResearch and development costs are expensed as incurred. The Group received research and
development subsidies of Rmb 32,653 and Rmb 43,610 (US$6,388) for the years ended December
31, 2008 and December 31, 2009 respectively.The subsidies received are recognised as deferred income and net off against research and
development expenses when earned.(o)
    
    InventoriesInventories are valued at the lower of cost and net realisable value. Cost is calculated
using the weighted average cost formula and comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their present location
and condition. In the case of manufactured inventories and work-in-progress, cost includes
an appropriate share of production overheads based on normal operating capacity. Net
realisable value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and selling expenses.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (p)
    
    Impairment of non-financial assetsThe Group assesses at each reporting date whether there is an indication that an asset may
be impaired. If any indication exists, or when annual impairment testing for an asset is
required, the Group estimates the assets recoverable amount. An assets recoverable amount
is the higher of an assets or cash-generating units (CGU) fair value less costs to sell
and its value in use and is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of
assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable amount. In assessing
value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. In determining fair value less costs to sell, an
appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or other available fair
value indicators.Impairment losses of continuing operations are recognised in the income statement in those
expense categories consistent with the function of the impaired asset.For assets excluding goodwill, an assessment is made at each reporting date as to whether
there is any indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the Group estimates the assets or
cash-generating units recoverable amount. A previously recognised impairment loss is
reversed only if there has been a change in the assumptions used to determine the assets
recoverable amount since the last impairment loss was recognised. The reversal is limited
so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed
the carrying amount that would have been determined, net of depreciation, had no impairment
loss been recognised for the asset in prior years. Such reversal is recognised in the
income statement unless the asset is carried at a revalued amount, in which case the
reversal is treated as a revaluation increase.The following criteria are also applied in assessing impairment of specific assets:GoodwillGoodwill is tested for impairment annually (as at 31 December) and when circumstances
indicate that the carrying value may be impaired.Impairment is determined for goodwill by assessing the recoverable amount of each
cash-generating unit (or group of cash-generating units) to which the goodwill relates.
Where the recoverable amount of the cash-generating unit is less than their carrying amount
an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed
in future periods.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (q)
    
    Cash and cash equivalentsCash and cash equivalents in the balance sheet comprise cash at banks and on hand and
short-term deposits with an original maturity of three months or less.For the purpose of the consolidated cash flow statement, cash and cash equivalents consist
of cash and short- term deposits as defined above, net of outstanding bank overdrafts.(r)
    
    ProvisionsGeneralProvisions are recognised when the Group has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of
the amount of the obligation. Where the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually certain. The expense relating
to any provision is presented in the income statement net of any reimbursement. If the
effect of the time value of money is material, provisions are discounted using a current
pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time is recognised
as a finance cost.Product warrantyThe Group recognizes a liability at the time the product is sold, for the estimated future
costs to be incurred under the lower of a warranty period or warranty mileage on various
engine models, on which the Group provides free repair and replacement. Warranties extend
for a duration (generally 12 months to 24 months) or mileage (generally 80,000 kilometers
to 250,000 kilometers), whichever is the lower. Provisions for warranty are primarily
determined based on historical warranty cost per unit of engines sold adjusted for specific
conditions that may arise and the number of engines under warranty at each financial year.
In previous years, warranty claims have typically not been higher than the relevant
provisions made in our consolidated balance sheet. If the nature, frequency and average
cost of warranty claims change, the accrued liability for product warranty will be adjusted
accordingly.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 2.
    
    Basis of preparation and accounting policies (contd)
 2.2
    
    Summary of significant accounting policies (contd)
 (s)
    
    Convertible preference sharesConvertible preference shares are separated into liability and equity components based on
the terms of the contract.On issuance of the convertible preference shares, the fair value of the liability component
is determined using a market rate for an equivalent non-convertible bond. This amount is
classified as a financial liability measured at amortised cost (net of transaction costs)
until it is extinguished on conversion or redemption.The remainder of the proceeds is allocated to the conversion option that is recognised and
included in shareholders equity, net of transaction costs. The carrying amount of the
conversion option is not remeasured in subsequent years.Transaction costs are apportioned between the liability and equity components of the
convertible preference shares based on the allocation of proceeds to the liability and
equity components when the instruments are initially recognised.(t)
    
    Investment propertiesInvestment properties are measured initially at cost, including transaction costs. The
carrying amount includes the cost of replacing part of an existing investment property at
the time that cost is incurred if the recognition criteria are met; and excludes the costs
of day to day servicing of an investment property. Subsequent to initial recognition,
investment properties are stated at historic cost less provisions for depreciation and
impairment. Disclosures about the cost basis and depreciation rates are disclosed in Note
2.2 (k).Investment properties are derecognised when either they have been disposed off or when the
investment property is permanently withdrawn from use and no future economic benefit is
expected from its disposal.The difference between the net disposal proceeds and the carrying amount of the asset is
recognised in the income statement in the period of derecognition.Transfers are made to or from investment property only when there is a change in use.(u)
    
    Development propertiesDevelopment properties are those properties which are held with the intention of
development and sale in the ordinary course of business. They are stated at the lower of
cost plus, where appropriate, apportion of attributable profit, and estimated net
realizable value, net of progress billings. Net realizable value represents the estimated
selling price less costs to be incurred in the selling the properties.The cost of properties under development comprise specifically identified costs, including
acquisition costs, development expenditure, borrowing costs and other
related expenditure. Borrowing costs payable on loans funding a development property are
also capitalized, on a specific identification basis, as part of the costs of the
development property until the completion of development.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 3.
    
    Significant accounting judgments, estimates and assumptions
 3.1
    
    JudgmentsThe preparation of the Groups consolidated financial statements requires management to make
judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period.
However, uncertainty about these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of the asset or liability affected in future periods.In the process of applying the Groups accounting policies, management has made the following
judgments which have the most significant effect on the amounts recognised in the consolidated
financial statements:Operating lease commitments Group as lessorThe Group has entered into commercial property leases on its investment property portfolio. The
Group has determined, based on an evaluation of the terms and conditions of the arrangements, that
it retains all the significant risks and rewards of ownership of these properties and accounts for
the contracts as operating leases.3.2
    
    Estimates and assumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.Impairment of non-financial assetsThe Groups impairment test for goodwill is based on value in use calculations that use a
discounted cash flow model. The cash flows are derived from the budget for the next five years and
do not include restructuring activities that the Group is not yet committed to or significant
future investments that will enhance the asset base of the cash generating unit being tested. The
recoverable amount is most sensitive to the discount rate used for the discounted cash flow model
as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.
The key assumptions used to determine the recoverable amount for the different cash generating
units, including a sensitivity analysis, are further explained in Note 17.Impairment of property, plant and equipmentLong-lived assets to be held and used, such as property, plant and equipment and construction in
progress are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the sum of the undiscounted cash
flows expected to result from its use and eventual disposition. An impairment charge is recognised
in the amount by which the carrying amount of the asset exceeds the fair value of the asset, if the
carrying value is not recoverable from the expected future cash flows or fair value less costs to
sell.Assets to be disposed off would be separately presented in the consolidated balance sheets and
reported at the lower of the carrying amount or fair value less costs to sell, and are no longer
depreciated. The carrying amounts of property, plant and equipment as of January 1, 2008, December
31, 2008 and December 31, 2009 are Rmb 2,662,370, Rmb 2,719,773 and Rmb 3,146,206 (US$460,867)
respectively.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 3.
    
    Significant accounting judgments, estimates and assumptions (contd)
 3.2
    
    Estimates and assumptionsImpairment of property, plant and equipment (contd)The Group periodically conducts an impairment review on the conditions of our property, plant and
equipment.An impairment loss of Rmb 7,785 (US$1,140) (2008: Rmb 69,930) was charged to the consolidated income
statement under selling, general and administrative expense. The 2009 impairment charges were as
follows:
 
    
    Property, plants and equipments Rmb 7,785 (US$1,140) (2008: Rmb 43,664)
    
    Prepaid operating leases Rmb nil (US$nil) (2008: Rmb 26,266)
 The economic slowdown in late 2008 resulted in lower hotel utilization and reduced building
tenancy. As a result, the Group concluded that future cash flows from the hotel and office building
were not as originally anticipated, leading to the impairment charge for the hotel and office
building in the fiscal year 2008. The impairment for 2009 was due to assets that were not in use.Deferred tax assetsDeferred tax assets are recognised for all unused tax losses to the extent that it is probable that
taxable profit will be available against which the losses can be utilised. Significant management
judgment is required to determine the amount of deferred tax assets that can be recognised, based
upon the likely timing and the level of future taxable profits together with future tax planning
strategies. The carrying amounts of deferred tax assets as of January 1, 2008, December 31, 2008
and December 31, 2009 are Rmb 147,860, Rmb 145,233 and Rmb 241,718 (US$35,408) respectively.The Group has unrecognized tax loss carried forward amounting to Rmb 4,608, Rmb 1,362, Rmb 1,362 (US$200) as of
January 1, 2008, December 31, 2008 and December 31, 2009 respectively. These losses relate to
subsidiaries that have a history of losses, do not expire and may not be used to offset taxable
income elsewhere in the Group. The subsidiary has no temporary taxable differences nor any tax
planning opportunities available that could partly support the recognition of these losses as
deferred tax assets. If the Group was able to recognise all unrecognised deferred tax assets,
profit would increase by Rmb 340 (US$50) for year ended December 31, 2009.Fair value of financial instrumentsWhere the fair value of financial assets and financial liabilities recorded in the statement of
financial position cannot be derived from active markets, they are determined using valuation
techniques including the discounted cash flows model. The inputs to
these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is
required in establishing fair values. The judgments include considerations of inputs such as
liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect
the reported fair value of financial instruments.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 3.
    
    Significant accounting judgments, estimates and assumptions (contd)
 3.2
    
    Estimates and assumptions (contd)Provision for product warrantyThe Group recognises a provision for product warranty in accordance with the accounting policy
stated on Note 2.2 (r). The Group has made assumptions in relation to historical warranty cost per
unit of engines sold. The carrying amounts of the provision of product warranty as at January 1,
2008, December 31, 2008 and December 31, 2009 were Rmb 194,898, Rmb 188,599, and Rmb 259,534
(US$38,017) respectively.Withholding taxThe Chinas Unified Enterprise Income Tax Law
(CIT)  also provides for a tax of 10% to be withheld from dividends paid to foreign investors
of PRC enterprises. This withholding tax provision does not apply to dividends paid out of profits
earned prior to January 1, 2008. Beginning on January 1, 2008, a 10% withholding tax will be
imposed on dividends paid to us, as a non-resident enterprise, unless an applicable tax treaty
provides for a lower tax rate and the Company will recognize a provision for withholding tax
payable for profits accumulated after December 31, 2007 for the earnings that we do not plan to
indefinitely reinvest in the PRC enterprises. The carrying amounts of withholding tax provision as
of January 1, 2008, December 31, 2008 and December 31, 2009 are Rmb nil, Rmb 15,282 and Rmb 30,946
(US$4,533) respectively.The Company estimated the withholding tax by taking into consideration the dividend payment history
of Yuchai and the operating cash flows needs of the Company.Derecognition of bills receivableThe Group sells bills receivables to banks on an ongoing basis. The buyer is responsible for
servicing the receivables upon maturity of the bills receivable. This involves management
assumptions relating to the transfer of risks and rewards of the bills receivables when discounted.
At the time of sale of the bills receivable to the banks, the risks and rewards relating to the
bills receivables are substantially transferred to the banks. Accordingly, bills receivable are
derecognized, and a discount equal to the difference between the carrying value of the bills
receivable and cash received is recorded. The carrying amounts of the bills receivables as at
January 1, 2008, December 31, 2008 and December 31, 2009 were Rmb 2,392,744, Rmb 2,140,839 and
Rmb 2,117,042 (US$310,112) respectively.Inventory provisionManagement reviews the inventory listing on a periodic basis. This review involves comparison of
the carrying value of the inventory items with the respective net realisable value. The purpose is
to ascertain whether an allowance is required to be made in the financial statements for any
obsolete and slow-moving items. The carrying amounts of inventory provision as at January 1, 2008,
December 31, 2008 and December 31, 2009 were Rmb 88,439, Rmb 136,256 and Rmb 286,947 (US$42,033)
respectively.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 3.
    
    Significant accounting judgments, estimates and assumptions (contd)
 3.2
    
    Estimates and assumptions (contd)Accounts receivable provisionsThe Group makes allowances for bad and doubtful debts based on an assessment of the recoverability
of trade and other receivables. Allowances are applied to trade and other receivables where events
or changes in circumstances indicate that the balances may not be collectible. The identification
of bad and doubtful debts requires the use of judgment and estimates. Judgment is required in
assessing the ultimate realisation of these receivables, including the current creditworthiness,
past collection history of each customer and on-going dealings with them. Where the expectation is
different from the original estimate, such difference will impact the carrying value of trade and
other receivables and doubtful debts expenses in the period in which such estimate has been
changed. The carrying amounts of allowance for doubtful accounts as of January 1, 2008, December
31, 2008 and 2009 were Rmb 65,013, Rmb 96,147 and Rmb 76,646 (US$11,227) respectively.
 4.
    
    Standards issued but not yet effective
 Standards issued but not yet effective up to the date of issuance of the Groups financial
statements are listed below. The Group will adopt the Standards when they are effective.
 
    
    IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial
Statements (Amended) effective July 1, 2009 including consequential amendments to IFRS 7, IAS
21, IAS 28, IAS 31 and IAS 39
    
    IFRS 9 Financial Instruments effective for annual periods beginning on or after January 1,
2013
    
    IAS 39 Financial Instruments: Recognition and Measurement  Eligible Hedged Items effective
July 1, 2009
    
    IFRIC 17 Distributions of Non-cash Assets to Owners effective for annual periods beginning on
or after July 1, 2009
    
    IFRIC 18 Transfers of Assets from Customers effective July 1, 2009
    
    Improvements to IFRSs (April 2009) effective for periods beginning on or after January 1,
2010, unless stated otherwise
 IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended)IFRS 3 (Revised) introduces significant changes in the accounting for business combinations
occurring. Changes affect the valuation of non-controlling interest, the accounting for
transaction costs, the initial recognition and subsequent measurement of a contingent consideration
and business combinations achieved in stages. These changes will impact the amount of goodwill
recognized, the reported results in the period that an acquisition occurs and future reported
results. IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary
(without loss of control) is accounted for as a transaction with owners in their capacity as
owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise
to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by
the subsidiary as well as the loss of control of a subsidiary. The changes by IFRS 3 (Revised) and
IAS 27 (Amended) will affect future acquisitions or loss of control of subsidiaries and
transactions with non-controlling interests. The adoption of these changes will not have a material effect on the consolidated financial
statements as of January 1, 2008, December 31, 2008 and December 31, 2009.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 4.
    
    Standards issued but not yet effective (contd)
 IFRS 9 Financial InstrumentsIFRS 9 specifies how an entity should classify and measure financial assets, including some hybrid
contracts. It requires all financial assets to be:
 (a)
    
    classified on the basis of the entitys business model for managing the financial assets and
the contractual cash flow characteristics of the financial asset.(b)
    
    initially measured at fair value plus, in the case of a financial asset not at fair value
through profit or loss, particular transaction costs.(c)
    
    subsequently measured at amortised cost or fair value.
 The Group is evaluating the impact of the adoption of IFRS 9.IAS 39 Financial Instruments: Recognition and Measurement  Eligible Hedged ItemsThe amendment clarifies that an entity is permitted to designate a portion of the fair value
changes or cash flow variability of a financial instrument as a hedged item. This also covers the
designation of inflation as a hedged risk or portion in particular situations. The Group has
concluded that the amendment will have no impact on the financial position or performance of the
Group, as the Group has not entered into any such hedges.IFRIC 17 Distributions of Non-cash Assets to OwnersThis interpretation is effective for annual periods beginning on or after July 1, 2009 with early
application permitted. It provides guidance on how to account for non-cash distributions to owners.
The interpretation clarifies when to recognise a liability, how to measure it and the associated
assets, and when to derecognise the asset and liability. The Group does not expect IFRIC 17 to have
an impact on the consolidated financial statements as the Group has not made non-cash distributions
to shareholders in the past.Improvements to IFRSs (April 2009)In April 2009, the IASB issued omnibus of amendments to its standards, primarily with a view to
removing inconsistencies and clarifying wording. There are separate transitional provisions for
each standard. Management will evaluate the impact of this amendment to the consolidated financial
statements if it applies.
 
    
    IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that the
disclosures required in respect of non-current assets and disposal groups classified as held
for sale or discontinued operations are only those set out in IFRS 5. The disclosure
requirements of other IFRSs only apply if specifically required for such non-current assets or
discontinued operations.
    
    IFRS 8 Operating Segment Information: clarifies that segment assets and liabilities need only
be reported when those assets and liabilities are included in measures that are used by the
chief operating decision maker.
    
    IAS 1 Presentation of Financial Statements: Assets and liabilities classified as held for
trading in accordance with IAS 39 Financial Instruments: Recognition and Measurement are not
automatically classified as current in the statement of financial position.
    
    IAS 7 Statement of Cash Flows: Explicitly states that only expenditure that results in
recognising an asset can be classified as a cash flow from investing activities.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 4.
    
    Standards issued but not yet effective (contd)
 Improvements to IFRSs (April 2009) (contd)
 
    
    IAS 17 Leases: The specific guidance on classifying land as a lease has been removed so that
only the general guidance remains.
    
    IAS 36 Impairment of Assets: The amendment clarified that the largest unit permitted for
allocating goodwill, acquired in a business combination, is the operating segment as defined
in IFRS 8 before aggregation for reporting purposes.
    
    IAS 38 Intangible Assets: If an intangible acquired in a business combination is identifiable
only with another intangible asset, the acquirer may recognize the group of intangibles as a
single asset provided the individual assets have similar useful lives. In addition, the
valuation techniques presented for determining the fair value of intangible assets acquired in
a business combination are only examples and are not restrictive on the methods that can be
used.
    
    IAS 39 Financial Instruments: Recognition and Measurement: When assessing loan prepayment
penalties as embedded derivatives, a prepayment option is considered closely related to the
host contract when the exercise price reimburses the lender up to the approximate present
value of lost interest for the remaining term of the host contract.In addition, the scope exemption for contracts between an acquirer and a vendor in a business
combination to buy or sell an acquiree at a future date applies only to binding forward
contracts, not derivative contracts where further actions are still to be taken.Gains or losses on cash flow hedges of a forecast transaction that subsequently results in the
recognition of a financial instrument or on cash flow hedges or recognised financial
instruments should be reclassified in the period that the hedged forecast cash flows affect
profit or loss.
    
    IFRIC 9 Reassessment of Embedded Derivatives: IFRIC 9 does not apply to possible reassessment
at the date of acquisition to embedded derivatives in contracts acquired in a combination
between entities or businesses under common control or the formation or a joint venture.
    
    IFRIC 16 Hedges of a Net Investment in A Foreign Operation: Qualifying hedging instruments
may be held by any entity within the group, provided the designation, documentation and
effectiveness requirements of IAS 39 are met.
 Management will evaluate the impact of this amendment to the consolidated financial statements if
it applies.
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 5.
    
    Business combinations and acquisition of subsidiaries
 Acquisitions in 2008Acquisition of Guangxi Yuchai Anda Gearbox Company Limited (Anda)Anda was established by Yuchai Group Company and Guangzhou Anda Crankshaft Company Limited
(Guangzhou Anda) on July 2005 as a limited liability company in Yulin with a registered capital
of Rmb 20 million. It was mainly engaged in the manufacturing and sales of automobile accessories.
Upon establishment, Yuchai Group Company and Guangzhou Anda held 25% and 75% interests in Anda,
respectively. In 2008, to expand the business, YMMC entered into an agreement with Guangzhou Anda
to acquire 75% interests in Anda at a consideration of Rmb 12 million (US$1.8 million). The
consideration was paid to Guangzhou Anda in June 2008. On May 6, 2008, YMMC appointed the executive
director and general manager to take over the operations of Anda. Anda has been included in the
Yuchais operating segment since 2008.The fair value of the identifiable assets and liabilities of Anda, as at the date of acquisition:
 Fair valuerecognised
    
    Previouson acquisition
    
    carrying valueRmb000
    
    Rmb000Property, plant and equipment
    
    
    24,455
    
    
    
    19,207Intangible assets
    
    
    28,216
    
    
    
    8,352Cash and cash equivalents
    
    
    176
    
    
    
    176Trade receivables
    
    
    213
    
    
    
    213Inventories
    
    
    1,890
    
    
    
    1,890Other current assets
    
    
    1,870
    
    
    
    1,870Tax recoverable
    
    
    53
    
    
    
    5356,873
    
    
    
    31,761Trade PayablesTrade payables
    
    
    (8,634
    )
    
    
    (8,634
    )Other payables
    
    
    (9,470
    )
    
    
    (9,470
    )Deferred tax liability
    
    
    (6,278
    )
    
    
    (24,382
    )
    
    
    (18,104
    )Net assets
    
    
    32,491
    
    
    
    13,657Cash flow on acquisition:Net cash acquired with the subsidiary
    
    
    
    
    
    
    176Cash paid
    
    
    
    
    
    
    (12,000
    )Net cash outflow
    
    
    
    
    
    
    (11,824
    )
 The net assets of Anda acquired as at May 6, 2008 were Rmb 32.5 million (US$4.8 million). A negative
goodwill amounting to Rmb 12.4 million (US$1.8 million)
arose as a result of the difference between the net assets acquired and the cost of acquisition. The negative goodwill was
recognised in the income statement for the financial year ended December 31, 2008.From the date of acquisition, Anda has contributed a net loss of Rmb 1.3 million to the profit for
the year from continuing operations of the Group. If the combination has taken place at the
beginning of the year, the loss for continuing operations for the Group would have been reduced by
Rmb 2.3 million and there is no impact on the revenue of the Group.
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 6.
    
    Investments in subsidiaries
 Details of significantsubsidiaries of the Group are as follows:
 Place ofName of significant
    
    incorporation/subsidiary
    
    Business
    

Groups effective equity interest1.1.2008
    
    31.12.2008
    
    31.12.2009%
    
    %
    
    %Guangxi Yuchai Machinery Company Limited
    
    Republic of China
    
    
    76.4
    
    
    
    76.4
    
    
    
    76.4Guangxi Yulin Yuchai Accessories Manufacturing Company Limited (formerly known as Guangxi Yulin
Yuchai Machinery Spare Parts Manufacturing Company Limited)
    
    Republic of China
    
    
    74.2
    
    
    
    74.2
    
    
    
    74.2Guangxi Yuchai
Machinery Monopoly
Development Co. Ltd
    
    Republic of China
    
    
    54.9
    
    
    
    54.9
    
    
    
    54.9Xiamen Yuchai Diesel
Engines Co. Ltd
    
    Republic of China
    
    
    76.4
    
    
    
    76.4
    
    
    
    76.4Guangxi Yulin Hotel Company Limited
    
    Republic of China
    
    
    76.4
    
    
    
    76.4
    
    
    
    76.4Jining Yuchai Engine Company Limited(1)
    
    Republic of China
    
    
    
    
    
    
    39.8
    
    
    
    39.8Zhejiang Yuchai Sanli Engine Company Limited(1)
    
    Republic of China
    
    
    
    
    
    
    39.7
    
    
    
    39.7HL Global Enterprises Limited (formerly known as HLG Enterprises Limited)(2)
    
    Singapore
    
    
    45.4
    
    
    
    45.4
    
    
    
    45.4
 
 (1)
    
    The Group considers these companies as subsidiaries as it is able to govern the
financial and operating policies of these companies through Yuchais equity interest and its
ability to control the companies equity interest.(2)
    
    Having regard to the potential voting rights attributable to the RCPS in HLGE, the
Group considers HLGE a subsidiary as it is able to govern the financial and operating policies
of HLGE. F-57




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 7.
    
    Investment in associates
 Movement in the Groups share of the associates post acquisition retained earnings is as follows:
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Initial cost
    
    
    436,817
    
    
    
    437,886
    
    
    
    439,335
    
    
    
    64,355At 1 January
    
    
    (7,678
    )
    
    
    (7,678
    )
    
    
    (40,099
    )
    
    
    (5,874
    )Share of results after tax
    
    
    
    
    
    
    (31,268
    )
    
    
    15,976
    
    
    
    2,340Dividend received
    
    
    
    
    
    
    
    
    
    
    (6,038
    )
    
    
    (884
    )Translation adjustment
    
    
    
    
    
    
    (1,153
    )
    
    
    110
    
    
    
    16At
1 January/31 December
    
    
    (7,678
    )
    
    
    (40,099
    )
    
    
    (30,051
    )
    
    
    (4,402
    )Share of post acquisition
reserves
    
    
    23,628
    
    
    
    (69,187
    )
    
    
    (48,153
    )
    
    
    (7,054
    )Reclassification to assets
held for sale
    
    
    
    
    
    
    
    
    
    
    (321,487
    )
    
    
    (47,092
    )452,767
    
    
    
    328,600
    
    
    
    39,644
    
    
    
    5,807
 The Groups fair values of investment in an associate for which there is a published price
quotation as of January 1, 2008, December 31, 2008 and December 31, 2009 were Rmb 405,560,
Rmb 235,047 and Rmb nil (US$ nil) respectively.Details of the associates are as follows:
 F-58




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 7.
    
    Investment in associates (contd)
 Place ofincorporation/Name of company
    
    Principal activities
    
    Business
    
    Groups effective equity interest1.1.2008
    
    31.12.2008
    
    31.12.2009%
    
    %
    
    %Thakral Corporation
Limited (TCL)(1)
    
    Investment holding
    
    Singapore
    
    
    36.6
    
    
    
    34.4
    
    
    
    34.4Held by subsidiaries:Scientex Park (M) Sdn Bhd(2)
    
    Property investment
and development
    
    Malaysia
    
    
    12.7
    
    
    
    12.7
    
    
    
    12.7Sinjori Sdn Bhd(2)
    
    Property investment
and development
    
    Malaysia
    
    
    12.7
    
    
    
    12.7
    
    
    
    12.7Guangxi Yuchai
Automobile Spare
parts Manufacturing
Co., Ltd
    
    Manufacture spare
part and sales of
Auto spare part,
Diesel engine &
spare part,
Metallic materials,
Generator & spare
part, Chemical
products (exclude
Dangerous Goods),
lubricating oil.
    
    Republic of China
    
    
    20.0
    
    
    
    20.0
    
    
    
    20.0Yuchai Quan Xing
Co., Ltd
    
    Manufacture spare
part and sales of
Auto spare part,
Diesel engine &
spare part,
Metallic materials,
Generator & spare
part, Chemical
products (exclude
Dangerous Goods),
lubricating oil.
    
    Republic of China
    
    
    
    
    
    
    
    
    
    
    20.0Yuchai Property
Management Co., Ltd
    
    Property management
    
    Republic of China
    
    
    
    
    
    
    30.0
    
    
    
    30.0
 
 (1)
    
    Reclassified to assets held for sale in 2009 (See Note 12).(2)
    
    The Company has significant influence in these entities through
HLGE who held direct equity interests of 28% interest in these entities. F-59




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 7.
    
    Investment in associates (contd)
 The summarised financial information on the Groups associates, which is not adjusted for the
percentage of ownership held by the Group, is as follows:
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Assets and liabilitiesTotal assets
    
    
    1,688,810
    
    
    
    1,411,790
    
    
    
    282,365
    
    
    
    41,362Total liabilities
    
    
    167,817
    
    
    
    260,840
    
    
    
    107,379
    
    
    
    15,729Net assets
    
    
    1,520,993
    
    
    
    1,150,950
    
    
    
    174,986
    
    
    
    25,633ResultsRevenue
    
    
    
    
    
    
    2,274,869
    
    
    
    163,716
    
    
    
    23,982(Loss)/profit after taxation
    
    
    
    
    
    
    (91,192
    )
    
    
    2,236
    
    
    
    328
 8.
    
    Investment in joint ventures
 Movement in the Groups share of the joint ventures post acquisition retained earnings is as
follows:
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Unquoted equity shares,
at cost
    
    
    235,304
    
    
    
    220,398
    
    
    
    287,510
    
    
    
    42,116At 1 January
    
    
    (54,683
    )
    
    
    (54,683
    )
    
    
    (46,907
    )
    
    
    (6,871
    )Share of results after Tax
    
    
    
    
    
    
    13,692
    
    
    
    (16,000
    )
    
    
    (2,344
    )Dividend received
    
    
    
    
    
    
    (10,476
    )
    
    
    (19,122
    )
    
    
    (2,801
    )Translation adjustment
    
    
    
    
    
    
    4,560
    
    
    
    (1,551
    )
    
    
    (228
    )At
1 January/31 December
    
    
    (54,683
    )
    
    
    (46,907
    )
    
    
    (83,580
    )
    
    
    (12,244
    )Share of post acquisition
retained earnings
    
    
    (20,496
    )
    
    
    (8,512
    )
    
    
    (6,942
    )
    
    
    (1,016
    )160,125
    
    
    
    164,979
    
    
    
    196,988
    
    
    
    28,856
 F-60




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 8.
    
    Investment in joint ventures (contd)
 The Group has interests in the following joint ventures:
 Name of company
    
    Percentage of interest held
    
    Principal activities1.1.2008
    
    31.12.2008
    
    31.12.2009%
    
    %
    
    %Held by subsidiary:Augustland Hotel
Sdn Bhd
    
    
    45
    
    
    
    45
    
    
    
    45
    
    
    Hotel development and operationCopthorne Hotel
Qingdao Co., Ltd
(formerly known as
Hotel Equatorial
Qingdao Co., Ltd)
    
    
    60
    
    
    
    60
    
    
    
    60
    
    
    Owns and operates a hotel in
Qingdao, Peoples Republic of ChinaShanghai Equatorial
Hotel Management
Co., Ltd
    
    
    49
    
    
    
    49
    
    
    
    49
    
    
    Hotel management and hotel consultancyShanghai
International
Equatorial Hotel
Co., Ltd
    
    
    50
    
    
    
    50
    
    
    
    50
    
    
    Owns and operates a hotel and
club in Shanghai, Peoples Republic of ChinaY&C Engine Co., Ltd
    
    
    
    
    
    
    
    
    
    
    45
    
    
    Heavy duty diesel engine
 The Group has included in its consolidated financial statements its share of assets and liabilities
incurred by the joint ventures and its share of the results of the joint ventures using equity
method.
 F-61




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 8.
    
    Investment in joint ventures (contd)
 The summarised financial information on the Groups
share of the joint ventures  is as follows:
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Assets and liabilitiesCurrent assets
    
    
    66,657
    
    
    
    64,270
    
    
    
    114,502
    
    
    
    16,773Non-current assets
    
    
    275,624
    
    
    
    258,496
    
    
    
    237,352
    
    
    
    34,768Current liabilities
    
    
    47,338
    
    
    
    43,428
    
    
    
    96,003
    
    
    
    14,063Non-current liabilities
    
    
    88,065
    
    
    
    89,409
    
    
    
    27,382
    
    
    
    4,011Net assets
    
    
    206,878
    
    
    
    189,929
    
    
    
    228,469
    
    
    
    33,467ResultsRevenue
    
    
    142,927
    
    
    
    135,488
    
    
    
    107,229
    
    
    
    15,707Profit/(loss) after
Taxation
    
    
    24,857
    
    
    
    7,509
    
    
    
    (12,795
    )
    
    
    (1,874
    )
 9.
    
    Revenue
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Sale of goods
    
    
    10,358,124
    
    
    
    13,139,578
    
    
    
    1,924,733Revenue from hotel and
restaurant operations
    
    
    37,618
    
    
    
    26,268
    
    
    
    3,848Revenue from sale of
development properties
    
    
    4,962
    
    
    
    6,744
    
    
    
    988Rental income
    
    
    4,084
    
    
    
    3,313
    
    
    
    48510,404,788
    
    
    
    13,175,903
    
    
    
    1,930,054
 10.1
    
    Depreciation and amortization, sales commissions and shipping and handling expenses
 Depreciation and amortization of property, plant and equipment are included in the following
captions.
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Cost of goods sold
    
    
    182,473
    
    
    
    180,043
    
    
    
    26,374Research and development expenses
    
    
    18,144
    
    
    
    22,175
    
    
    
    3,248Selling, general and
administrative expenses
    
    
    72,011
    
    
    
    83,096
    
    
    
    12,172272,628
    
    
    
    285,314
    
    
    
    41,794
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 10.1
    
    Depreciation and amortization, sales commissions and shipping and handling expenses (contd)
 Sales commissions to sales agents are included in the following caption:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Selling, general and
administrative expenses
    
    
    59,129
    
    
    
    79,129
    
    
    
    11,591
 Sales related shipping and handling expenses not separately billed to customers are included in the
following caption:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Selling, general and
administrative expenses
    
    
    164,364
    
    
    
    215,621
    
    
    
    31,585
 10.2
    
    Other income
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2009Rmb000
    
    
    Rmb000
    
    
    US$000Interest income
    
    
    15,228
    
    
    
    31,576
    
    
    
    4,625Foreign exchange loss, net
    
    
    (3,172
    )
    
    
    (6,543
    )
    
    
    (958
    )Dividend income from associates
    
    
    
    
    
    
    11,162
    
    
    
    1,635Loss on disposal of property, plant and
equipment
    
    
    (3,525
    )
    
    
    (8,618
    )
    
    
    (1,262
    )Gain on disposal of associates
    
    
    
    
    
    
    1,906
    
    
    
    279Negative goodwill
    
    
    12,368
    
    
    
    
    
    
    
    Gain on assignment of debts (i)
    
    
    
    
    
    
    5,657
    
    
    
    829Write-back of impairment of receivables (i)
    
    
    
    
    
    
    4,895
    
    
    
    717Write-back of trade and other payables (i)
    
    
    869
    
    
    
    23,649
    
    
    
    3,464Government grant income
    
    
    
    
    
    
    14,823
    
    
    
    2,171Others, net
    
    
    (2,308
    )
    
    
    (952
    )
    
    
    (139
    )19,460
    
    
    
    77,555
    
    
    
    11,361
 
 Note:(i)
    
    These are largely due to the write-back of trade and other payables, gains attributed to the debts settlement arrangement with the official assignee of Malkn Sdn.Bhd., a subsidiary of
HLGE, which is currently under creditors liquidation. 10.3
    
    Research and development costs
 Research and development costs recognized as an expense in the income statement amount to Rmb
297,259 (US$43,544) (2008: Rmb 184,794).
 F-63




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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 10.4
    
    Finance costs
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Interest expense for:Bank term loans
    
    
    66,765
    
    
    
    32,619
    
    
    
    4,778Bills discounting
    
    
    90,809
    
    
    
    60,723
    
    
    
    8,895Corporate bonds
    
    
    2,991
    
    
    
    (3,332
    )
    
    
    (488
    )Bank charges
    
    
    1,344
    
    
    
    2,401
    
    
    
    352Less:Borrowing costs capitalized
    
    
    (11,500
    )
    
    
    (14,918
    )
    
    
    (2,185
    )150,409
    
    
    
    77,493
    
    
    
    11,352
 The rate used to determine the amount of borrowing costs eligible for capitalization was 4.56%
(2008:5.95%), which is the effective interest rate of the borrowings.
 10.5
    
    Staff costs
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Wages and salaries (ii)
    
    
    644,330
    
    
    
    763,483
    
    
    
    111,838Contribution to defined contribution plans (i)
    
    
    116,379
    
    
    
    134,017
    
    
    
    19,631Retrenchment costs
    
    
    7,097
    
    
    
    38
    
    
    
    5Executive bonuses
    
    
    34,818
    
    
    
    45,182
    
    
    
    6,618Staff welfare
    
    
    63,243
    
    
    
    47,439
    
    
    
    6,949Others
    
    
    5,992
    
    
    
    5,369
    
    
    
    787871,859
    
    
    
    995,528
    
    
    
    145,828
 
 Note:(i)
    
    As stipulated by the regulations of the PRC, Yuchai and its subsidiaries participate in
defined contribution retirement plans organized by the Guangxi Regional Government and Beijing City
Government for its staff. All staff are entitled to an annual pension equal to a fixed proportion
of their final basic salary amount at their retirement date. For the years ended December 31, 2009
and 2008, Yuchai and its subsidiaries were required to make contributions to the retirement plan at
a rate of 20.0% of the basic salary of their staff. Expenses incurred in connection with the plan were Rmb 124,257 (2008: Rmb 106,062).Yuchai and its subsidiaries have no obligation for the payment of pension benefits or any other
post retirement benefits beyond the annual contributions described above.(ii)
    
    In 2008, certain employees of Yuchai were eligible for early retirement. As part of this
plan, Yuchai will compensate these employees with a base salary and the relevant social
insurances, until they formally retire according to the statutory retirement age. Yuchai
accrued the statutory termination benefits at the time management determined it was probable
that benefits would be paid and the amount was reasonably estimated. The liability of
Rmb 10,800 was measured based on the fair value of the liability as of the respective
termination dates, taking into consideration the impact of discounting and interest premiums. F-64




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 11.
    
    Income tax
 Income tax expense in the consolidated statements of operations consists of:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Current income tax:Current income tax charge
    
    
    87,676
    
    
    
    222,047
    
    
    
    32,526Adjustments in respect of
current income tax of previous
year
    
    
    4,942
    
    
    
    5,999
    
    
    
    879Deferred tax:Relating to origination and
reversal of temporary
differences
    
    
    17,908
    
    
    
    (79,632
    )
    
    
    (11,665
    )Adjustments in respect deferred tax of previous year
    
    
    
    
    
    
    (1,191
    )
    
    
    (175
    )Income tax expense reported in
the income statement
    
    
    110,526
    
    
    
    147,223
    
    
    
    21,565
 Income tax expense reported in the consolidated statements of income differs from the amount
computed by applying the PRC income tax rate of 15% (being tax rate of Yuchai) for the three years
ended December 31, 2009 for the following reasons:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Computed tax expense
    
    
    72,261
    
    
    
    145,000
    
    
    
    21,240Adjustments resulting from:Non-deductible expenses
    
    
    19,326
    
    
    
    808
    
    
    
    118Tax-exempt income
    
    
    
    
    
    
    (43,143
    )
    
    
    (6,320
    )Utilisation of deferred
tax benefits previously
not recognised
    
    
    858
    
    
    
    165
    
    
    
    24Deferred tax benefits not
recognised
    
    
    10,491
    
    
    
    4,968
    
    
    
    728Tax credits for R&D expense
    
    
    (10,169
    )
    
    
    (14,563
    )
    
    
    (2,133
    )Tax rate differential
    
    
    (2,017
    )
    
    
    33,516
    
    
    
    4,910Underprovision in respect
of prior years current
    
    
    4,942
    
    
    
    5,999
    
    
    
    879 deferred
    
    
    
    
    
    
    (1,191
    )
    
    
    (175
    )Withholding tax expense
    
    
    15,282
    
    
    
    15,664
    
    
    
    2,294Other
    
    
    (448
    )
    
    
    
    
    
    
    Total
    
    
    110,526
    
    
    
    147,223
    
    
    
    21,565
 F-65




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 11.
    
    Income tax (contd)
 Deferred taxDeferred tax relates to the following:
 Consolidated statement of financial position
    
    Consolidated income statement1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    US
    
    31.12.2008
    
    31.12.2009
    
    US$Deferred
income tax
liabilitiesAccelerated tax
depreciation
    
    
    (366
    )
    
    
    (776
    )
    
    
    (354
    )
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    Unremitted earnings
from overseas
source income
    
    
    
    
    
    
    
    
    
    
    (440
    )
    
    
    (64
    )
    
    
    
    
    
    
    
    
    
    
    Expenditure
currently deferred
for tax purpose
    
    
    (100
    )
    
    
    (100
    )
    
    
    (100
    )
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    PRC withholding tax
on dividend income
    
    
    
    
    
    
    (15,282
    )
    
    
    (30,946
    )
    
    
    (4,533
    )
    
    
    (15,282
    )
    
    
    (15,664
    )
    
    
    (2,295
    )(466
    )
    
    
    (16,158
    )
    
    
    (31,840
    )
    
    
    (4,664
    )
    
    
    (15,282
    )
    
    
    (15,664
    )
    
    
    (2,295
    )Deferred income tax
assetsAccelerated
accounting
depreciation
    
    
    31,264
    
    
    
    8,483
    
    
    
    9,508
    
    
    
    1,392
    
    
    
    (22,781
    )
    
    
    1,025
    
    
    
    150Write down of
inventory
    
    
    19,124
    
    
    
    30,203
    
    
    
    45,190
    
    
    
    6,620
    
    
    
    11,079
    
    
    
    14,987
    
    
    
    2,195Allowance for
doubtful debts
    
    
    29,332
    
    
    
    20,901
    
    
    
    15,040
    
    
    
    2,203
    
    
    
    (8,431
    )
    
    
    (5,861
    )
    
    
    (859
    )Accruals
    
    
    68,022
    
    
    
    75,405
    
    
    
    120,931
    
    
    
    17,714
    
    
    
    7,383
    
    
    
    45,526
    
    
    
    6,669Tax value of loss
carried forward
    
    
    
    
    
    
    2,323
    
    
    
    1,191
    
    
    
    175
    
    
    
    2,323
    
    
    
    (1,132
    )
    
    
    (166
    )Deferred income
    
    
    
    
    
    
    7,918
    
    
    
    41,312
    
    
    
    6,052
    
    
    
    7,918
    
    
    
    33,395
    
    
    
    4,892Others
    
    
    118
    
    
    
    
    
    
    
    8,546
    
    
    
    1,252
    
    
    
    (117
    )
    
    
    8,547
    
    
    
    1,254147,860
    
    
    
    145,233
    
    
    
    241,718
    
    
    
    35,408
    
    
    
    (2,626
    )
    
    
    96,487
    
    
    
    14,135
 F-66




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 11.
    
    Income tax (contd)
 Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets
and liabilities are measured using enacted or substantially enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates, if any, is recognized in the
statements of operations in the period that includes the enactment date.The Group has been granted tax credits in relation to approved research and development costs.
According to the relevant laws and regulations in the PRC prior to the new CIT law, the amount of
credits relating to the purchase of certain domestic equipment entitled for deduction each year is
limited to the incremental current income tax expense of the subsidiary for the year compared to
the income tax expense of the subsidiary in the year immediately prior to the year the credit was
approved.The CIT law also provides for a tax of 10% to be withheld from dividends paid to foreign investors
of PRC enterprises. This withholding tax provision does not apply to dividends paid out of profits
earned prior to January 1, 2008. Beginning on January 1, 2008, a 10% withholding tax will be
imposed on dividends paid to us, as a non-resident enterprise, unless an applicable tax treaty
provides for a lower tax rate and the Company will recognize a provision for withholding tax
payable for profits accumulated after December 31, 2007 for the earnings that we do not plan to
indefinitely reinvest in the PRC enterprises. As at December 31, 2009, the provision for
withholding tax payable was Rmb 30,946 (2008: Rmb 15,282).
 The following table represents the classification of the Groups net deferred tax assets:
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Deferred tax assets
    
    
    147,860
    
    
    
    145,233
    
    
    
    241,718
    
    
    
    35,408Deferred tax liabilities
    
    
    (466
    )
    
    
    (16,158
    )
    
    
    (31,840
    )
    
    
    (4,664
    )147,394
    
    
    
    129,075
    
    
    
    209,878
    
    
    
    30,744
 F-67




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 12.
    
    Discontinued operations
 On December 1, 2009, we announced that concurrently with the capital reduction and cash
distribution exercise to be undertaken by TCL, we intend to appoint a broker to sell 550,000,000
shares in TCL at a price of S$0.03 per share on an ex-distribution basis (Placement). As of
December 31, 2009, a total of 536,000,000 shares out of 550,000,000 shares available in the
Placement have been taken up. The Placement is conditional upon the completion of the capital
reduction and cash distribution exercise and subject to all the shares in the Placement being sold,
our total shareholding in TCL will decrease from 34.4% to 13.4%. The Company equity accounted for
the result of TCL for 11 months in 2009. The investment in TCL was classified as a disposal group
held for sale and as a discontinued operation as at December 31, 2009.The results of TCL for the year are equity accounted for
11 months ended November 30, 2009 and presented as discontinued operations for
the year ended December 31, 2009 and December 31, 2008. The
related reserves of TCL have been classified to Reserve of
asset classified as held for sale on the statement of changes
in equity as of December 31, 2009.
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Share of
results of an associate:
Profit before tax
    
    
    (33,731
    )
    
    
    14,321
    
    
    
    2,097 Taxation
    
    
    (254
    )
    
    
    (1,299
    )
    
    
    (190
    )(33,985
    )
    
    
    13,022
    
    
    
    1,907
 There are no net cash flows attributable to the discontinued operation.
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000(Loss)/Earnings per share:Basic, from discontinued operation
    
    
    (0.91
    )
    
    
    0.35
    
    
    
    0.05Diluted, from discontinued operation
    
    
    (0.91
    )
    
    
    0.35
    
    
    
    0.05
 F-68




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 13.
    
    Earnings per share
 Basic earnings per share amounts are calculated by dividing net profit for the year attributable to
ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding
during the year.Diluted earnings per share amounts are calculated by dividing the net profit attributable to
ordinary equity holders of the Parent (after adjusting for interest on the convertible preference
shares) by the weighted average number of ordinary shares outstanding during the year plus the
weighted average number of ordinary shares that would be issued on conversion of all the dilutive
potential ordinary shares into ordinary shares.The following reflects the income and share data used in the basic and diluted earnings per share
computations:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Net profit
attributable to
ordinary equity
holders of the
Parent from
continuing
operations
    
    
    274,021
    
    
    
    615,309
    
    
    
    90,133(Loss)/profit
attributable to
ordinary equity
holders of the
Parent from a
discontinued
operation
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    1,907Net profit
attributable to
ordinary equity
holders of the
Parent for basic
earnings
    
    
    240,036
    
    
    
    628,331
    
    
    
    92,040
 31.12.2008
    
    31.12.2009
    
    31.12.2009Weighted average number of
ordinary shares for basic
earnings per share
    
    
    37,267
    
    
    
    37,267
    
    
    
    37,267
 There were no potentially dilutive common shares in any of the years ended December 31, 2009 and
2008.To calculate earnings per share amounts for the discontinued operation (see Note 12), the weighted
average number of ordinary shares for both basic and diluted amounts is as per the table above. The
following table provides the profit figure used:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Net (loss)/profit attributable
to ordinary equity holders of
the Parent from discontinued
operation for basic and diluted
earnings per share calculations
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    1,907
 F-69




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 14.
    
    Property, plant and equipment
 Leasehold
    
    
    
    
    
    
    
    
    
    Office
    
    Motorland,
    
    
    
    
    
    
    
    
    
    furniture,
    
    andFreehold
    
    buildings &
    
    Construction-
    
    Plant and
    
    fittings and
    
    transportland
    
    improvements
    
    in-progress
    
    machinery
    
    equipment
    
    vehicles
    
    TotalRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000Cost:At January 1, 2008
    
    
    662
    
    
    
    1,414,464
    
    
    
    184,791
    
    
    
    2,407,075
    
    
    
    112,138
    
    
    
    71,415
    
    
    
    4,190,545Additions
    
    
    
    
    
    
    9,214
    
    
    
    277,469
    
    
    
    46,084
    
    
    
    14,007
    
    
    
    15,553
    
    
    
    362,327Disposals
    
    
    
    
    
    
    (49,314
    )
    
    
    
    
    
    
    (33,529
    )
    
    
    (15,447
    )
    
    
    (14,934
    )
    
    
    (113,224
    )Acquisition of subsidiary
    
    
    
    
    
    
    17,394
    
    
    
    
    
    
    
    6,891
    
    
    
    
    
    
    
    170
    
    
    
    24,455Transfers
    
    
    
    
    
    
    106,661
    
    
    
    (186,612
    )
    
    
    79,951
    
    
    
    
    
    
    
    
    
    
    
    Write-off
    
    
    
    
    
    
    (2,308
    )
    
    
    
    
    
    
    (112
    )
    
    
    (78
    )
    
    
    
    
    
    
    (2,498
    )Translation difference
    
    
    (71
    )
    
    
    832
    
    
    
    (56
    )
    
    
    (459
    )
    
    
    (385
    )
    
    
    (32
    )
    
    
    (171
    )At December 31, 2008 and January 1, 2009
    
    
    591
    
    
    
    1,496,943
    
    
    
    275,592
    
    
    
    2,505,901
    
    
    
    110,235
    
    
    
    72,172
    
    
    
    4,461,434Additions
    
    
    
    
    
    
    44,847
    
    
    
    641,010
    
    
    
    72,098
    
    
    
    12,185
    
    
    
    18,796
    
    
    
    788,936Disposals
    
    
    
    
    
    
    (9,501
    )
    
    
    
    
    
    
    (135,295
    )
    
    
    (12,057
    )
    
    
    (6,676
    )
    
    
    (163,529
    )Transfers
    
    
    
    
    
    
    24,436
    
    
    
    (307,337
    )
    
    
    282,497
    
    
    
    (108
    )
    
    
    512
    
    
    
    Write-off
    
    
    
    
    
    
    (6,283
    )
    
    
    
    
    
    
    (2,217
    )
    
    
    (1,275
    )
    
    
    
    
    
    
    (9,775
    )Translation difference
    
    
    3
    
    
    
    (50
    )
    
    
    1,196
    
    
    
    47
    
    
    
    (20
    )
    
    
    (3
    )
    
    
    1,173At December 31, 2009
    
    
    594
    
    
    
    1,550,392
    
    
    
    610,461
    
    
    
    2,723,031
    
    
    
    108,960
    
    
    
    84,801
    
    
    
    5,078,239
 F-70




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 14.
    
    Property, plant and equipment
 Leasehold
    
    
    
    
    
    
    
    
    
    Office
    
    Motorland,
    
    
    
    
    
    
    
    
    
    furniture,
    
    andFreehold
    
    buildings &
    
    Construction-
    
    Plant and
    
    fittings and
    
    transportland
    
    improvements
    
    in-progress
    
    machinery
    
    equipment
    
    vehicles
    
    TotalRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000Depreciation and impairment:At January 1, 2008
    
    
    
    
    
    
    662
    
    
    
    260,274
    
    
    
    
    
    
    
    1,163,589
    
    
    
    71,671
    
    
    
    31,979
    
    
    
    1,528,175Charge for the year
    
    
    
    
    
    
    
    
    
    
    54,387
    
    
    
    
    
    
    
    188,727
    
    
    
    12,494
    
    
    
    9,491
    
    
    
    265,099Disposals
    
    
    
    
    
    
    
    
    
    
    (31,880
    )
    
    
    
    
    
    
    (23,390
    )
    
    
    (8,577
    )
    
    
    (8,063
    )
    
    
    (71,910
    )Transfers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Write-off
    
    
    
    
    
    
    
    
    
    
    (1,474
    )
    
    
    
    
    
    
    (39
    )
    
    
    (73
    )
    
    
    
    
    
    
    (1,586
    )Impairment loss
    
    
    
    
    
    
    
    
    
    
    19,771
    
    
    
    20,975
    
    
    
    2,918
    
    
    
    
    
    
    
    
    
    
    
    43,664Reversal of impairment loss
    
    
    
    
    
    
    
    
    
    
    (5,182
    )
    
    
    
    
    
    
    (15,639
    )
    
    
    
    
    
    
    (18
    )
    
    
    (20,839
    )Translation difference
    
    
    
    
    
    
    (71
    )
    
    
    191
    
    
    
    
    
    
    
    (693
    )
    
    
    (367
    )
    
    
    (2
    )
    
    
    (942
    )At December 31, 2008 and
January 1, 2009
    
    
    
    
    
    
    591
    
    
    
    296,087
    
    
    
    20,975
    
    
    
    1,315,473
    
    
    
    75,148
    
    
    
    33,387
    
    
    
    1,741,661Charge for the year
    
    
    
    
    
    
    
    
    
    
    45,435
    
    
    
    
    
    
    
    204,360
    
    
    
    12,018
    
    
    
    14,867
    
    
    
    276,680Disposals
    
    
    
    
    
    
    
    
    
    
    (2,830
    )
    
    
    
    
    
    
    (73,445
    )
    
    
    (10,112
    )
    
    
    (3,779
    )
    
    
    (90,166
    )Transfers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    (36
    )
    
    
    
    
    
    
    Write-off
    
    
    
    
    
    
    
    
    
    
    (2,259
    )
    
    
    
    
    
    
    (518
    )
    
    
    (1,275
    )
    
    
    
    
    
    
    (4,052
    )Impairment loss
    
    
    
    
    
    
    
    
    
    
    816
    
    
    
    6,376
    
    
    
    5,054
    
    
    
    
    
    
    
    
    
    
    
    12,246Reversal of impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,252
    )
    
    
    
    
    
    
    (209
    )
    
    
    (4,461
    )Translation difference
    
    
    
    
    
    
    3
    
    
    
    (1
    )
    
    
    
    
    
    
    75
    
    
    
    48
    
    
    
    
    
    
    
    125At December 31, 2009
    
    
    
    
    
    
    594
    
    
    
    337,248
    
    
    
    27,351
    
    
    
    1,446,783
    
    
    
    75,791
    
    
    
    44,266
    
    
    
    1,932,033Net book value:At January 1, 2008
    
    
    
    
    
    
    
    
    
    
    1,154,190
    
    
    
    184,791
    
    
    
    1,243,486
    
    
    
    40,467
    
    
    
    39,436
    
    
    
    2,662,370At December 31, 2008
    
    
    
    
    
    
    
    
    
    
    1,200,856
    
    
    
    254,617
    
    
    
    1,190,428
    
    
    
    35,087
    
    
    
    38,785
    
    
    
    2,719,773At December 31, 2009
    
    
    
    
    
    
    
    
    
    
    1,213,144
    
    
    
    583,110
    
    
    
    1,276,248
    
    
    
    33,169
    
    
    
    40,535
    
    
    
    3,146,206US$
    
    
    
    
    
    
    177,705
    
    
    
    85,416
    
    
    
    186,949
    
    
    
    4,859
    
    
    
    5,938
    
    
    
    460,867
 F-71




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  14.
    
    Property, plant and equipment (contd)
 In 2008, the Rmb 43,664 (US$6,396) of impairment loss represented the write down of certain
property, plant and equipment to the recoverable amount. This has been recognized in the income
statement in the line item Selling, distribution and administrative costs. The recoverable amount
was based on fair value less cost to sell and was determined at the level of the cash generating
unit.The impairment loss includes impairment of buildings in Yulin
Hotel and Guilin office building. The recoverable amounts of
these buildings have been determined based on fair value less cost to
sell. Fair values are determined using discounted cash flow and a market comparison
approach respectively. Please refer to Note 17 for more details.Finance leases and assets under constructionThe carrying value of plant and equipment held under finance leases at January 1, 2008, December
31, 2008 and December 31, 2009 were Rmb 15 (US $2), Rmb 10 (US $1), and Rmb 36,818 (US $5,393)
respectively. Leased assets are pledged as security for the related finance lease.Land and buildings with a carrying amount at January 1, 2008, December 31, 2008 and December 31,
2009 of Rmb nil, Rmb nil, and Rmb 36,813 (US$5,393) are subject to a first charge to secure two of
the Groups bank loans (Note 19).
 15.
    
    Investment properties
 Rmb000
    
    US$000Cost:As at January 1, 2008
    
    
    39,876
    
    
    
    5,841Translation during the year
    
    
    (4,256
    )
    
    
    (623
    )As at December 31, 2008
    
    
    35,620
    
    
    
    5,218Translation during the year
    
    
    358
    
    
    
    52As at December 31, 2009
    
    
    35,978
    
    
    
    5,270Accumulated depreciation:As at January 1, 2008
    
    
    739
    
    
    
    108Charge during the year
    
    
    735
    
    
    
    108As at December 31, 2008
    
    
    1,474
    
    
    
    216Charge during the year
    
    
    652
    
    
    
    95As at December 31, 2009
    
    
    2,126
    
    
    
    311Net book value:As at January 1, 2008
    
    
    39,137
    
    
    
    5,733As at December 31, 2008
    
    
    34,146
    
    
    
    5,002As at December 31, 2009
    
    
    33,852
    
    
    
    4,959
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  15.
    
    Investment properties (contd)
 Details of the investment property (non-current) as at December 31, 2009 are as follows:
 Land
    
    Floorarea
    
    areaLocation
    
    Description
    
    Tenure
    
    (m2)
    
    (m2)
    
    Owned by49 Jalan Wong Ah
Fook, Johor Bahru,
Malaysia (Wisma LKN)
    
    18-storey office block
    
    Freehold
    
    
    1,133.1
    
    
    
    6,948.02
    
    
    LKN Development Pte Ltd
 The commercial property is leased to external customers. Each of the lease is for periods of one
to three years. Subsequent renewals are negotiated with the lessee.Investment property is stated at cost. The Company estimated the fair value of the investment
property by obtaining an independent valuation from a professional appraiser. The fair values of
the property being valued as at January 1, 2008, December 31, 2008 and December 31, 2009 were
Rmb 42,521, Rmb 38,265 and Rmb 38,623 (US$5,658) respectively. The fair value is based on market
value, being the estimated amount for which a property could be exchanged on the date of the
valuation between a willing buyer and a willing seller in an arms length transaction after
property marketing wherein the parties had each acted knowledgeably, prudently and without
compulsion.The direct operating expenses (including repairs and maintenance) arising from investment property
that generated rental income during the period ended December 31, 2008 and December 31, 2009 are
Rmb 2,241 and Rmb 179 (US$26).
 16.
    
    Prepaid operating leases
 Yuchai and its subsidiaries are granted the land use rights of 15 to 50 years in respect of such
land. Prepaid operating leases represent those amounts paid for land use rights to the PRC
government. The prepaid operating leases charged to expense were Rmb 6,794 and Rmb 7,982 (US$1,169)
for the year ended December 31, 2008 and 2009, respectively.
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Current
    
    
    5,767
    
    
    
    6,151
    
    
    
    7,273
    
    
    
    1,065Non-current
    
    
    162,235
    
    
    
    159,156
    
    
    
    355,931
    
    
    
    52,138Total
    
    
    168,002
    
    
    
    165,307
    
    
    
    363,204
    
    
    
    53,203
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Gross payments for
prepaid operating
leases
    
    
    203,127
    
    
    
    235,346
    
    
    
    414,979
    
    
    
    60,787Less: Amounts
charged to expense
    
    
    (35,125
    )
    
    
    (43,773
    )
    
    
    (51,775
    )
    
    
    (7,584
    )Less: Impairment loss
    
    
    
    
    
    
    (26,266
    )
    
    
    
    
    
    
    Total
    
    
    168,002
    
    
    
    165,307
    
    
    
    363,204
    
    
    
    53,203
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  17.
    
    Goodwill
 Goodwill
    
    GoodwillRmb000
    
    US$000Cost:At January 1, 2008, December 31, 2008
and December 31, 2009
    
    
    218,311
    
    
    
    31,979Impairment:At January 1, 2008
    
    
    
    
    
    
    Impairment
    
    
    5,675
    
    
    
    831At December 31, 2008 and December 31, 2009
    
    
    5,675
    
    
    
    831Net book value:At January 1, 2008
    
    
    218,311
    
    
    
    31,979At December 31, 2008
    
    
    212,636
    
    
    
    31,148At December 31, 2009
    
    
    212,636
    
    
    
    31,148
 Goodwill represents the excess of costs over fair value of net assets of businesses acquired.Goodwill acquired through business combinations have been allocated to two cash-generating units
for impairment testing as follows:
 
    
    Yuchai
    
    Yulin Hotel
 Carrying amount of goodwill allocated to each of the cash-generating units:
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Yuchai
    
    
    212,636
    
    
    
    212,636
    
    
    
    212,636
    
    
    
    31,148Yulin Hotel
    
    
    5,675
    
    
    
    
    
    
    
    
    
    
    
    218,311
    
    
    
    212,636
    
    
    
    212,636
    
    
    
    31,148
 Yuchai unitThe Group performed its annual impairment test as at December 31, 2009, December 31, 2008 and
January 1, 2008. The recoverable amount of the unit is determined based on a value in use
calculation using cash flow projections from financial budgets approved by senior management
covering a ten year period. The business of Yuchai is stable since the Group had control since 1994
and the business model of Yuchai is unlikely to change in the foreseeable future. The pre-tax
discount rate applied to the cash flow projections is 16.98% (31.12.2008: 15.01%, 1.1.2008:
14.68%). No impairment was identified for this unit.
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  17.
    
    Goodwill (contd)
 Yulin Hotel unitIn 2008, the goodwill of Rmb 5,675 pertaining to the Yulin Hotel acquisition was fully impaired
because the carrying amount is not recoverable from the expected future cash flows. The economic
slowdown in late 2008 resulted in lower hotel utilization and reduced building tenancy. As a
result, the Group concluded that future cash flows from Yulin Hotel were not as originally
anticipated, leading to the impairment charge for the goodwill in the year ended December 31, 2008.Key assumptions used in value in use calculationsThe calculation of value in use for the cash generating units is most sensitive to the following
assumptions:
 
    
    Gross margin
    
    Discount rates
    
    Growth rate estimates
 Gross margin  Gross margin is based on estimated margins in the budget period.Discount rates  Discount rates reflect managements estimate of the risks specific to the cash
generating unit and was estimated based on Weighted Average Cost of Capital (WACC). This rate
was weighted according to the optimal debt/equity structure arrived on the basis of the
capitalization structure of the peer group.Growth rate estimates  Growth rates are based on
managements estimate. The long term rates used to extrapolate
the budget for Yuchai are 12.64% and 21.06% for 2009 and 2008
respectively.Sensitivity to changes in assumptionsWith regard to the assessment of value in use of the Yuchai cash generating unit, the Company
believes that no reasonably possible change in any of the above key assumptions would cause the
carrying value of the unit to materially exceed its recoverable amount.For the Yulin Hotel cash generating unit, the goodwill is already fully impaired in 2008, and
consequently, any adverse change in a key assumption will not result in a further impairment loss.
 18.
    
    Other Receivables
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Amount due from
joint ventures (i)
    
    
    65,223
    
    
    
    61,475
    
    
    
    61,222
    
    
    
    8,968Deposits
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    293Lease receivable
    
    
    
    
    
    
    
    
    
    
    8,961
    
    
    
    1,31365,223
    
    
    
    61,475
    
    
    
    72,183
    
    
    
    10,574
 
 Note:(i)
    
    The non-current non-trade amounts due from joint venture partners are unsecured, with
interest bearing at 1.719% (2008: 4.202%) per annum and are not expected to repay within 12 months
from the financial year end. F-75




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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  19.
    
    Other financial liabilities
 (a)
    
    Other liabilities (current and non-current)
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Preference shares
    
    
    2,286
    
    
    
    2,075
    
    
    
    2,119
    
    
    
    311Finance lease
liabilities (Note 33)
    
    
    15
    
    
    
    10
    
    
    
    34,991
    
    
    
    5,1252,301
    
    
    
    2,085
    
    
    
    37,110
    
    
    
    5,436
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Current
    
    
    5
    
    
    
    5
    
    
    
    10,233
    
    
    
    1,499Non-current
    
    
    2,296
    
    
    
    2,080
    
    
    
    26,877
    
    
    
    3,937Total
    
    
    2,301
    
    
    
    2,085
    
    
    
    37,110
    
    
    
    5,436
 Redeemable convertible preference shares (RCPS)The Series A RCPS issued have the following key terms and conditions:
 (a)
    
    Non-cumulative dividend which shall accrue for each Series A RCPS on a daily
basis at 0.1% per annum of the amount equivalent to $0.69 per outstanding Series A RCPS.
Series A RCPS rank pari passu with the Series B RCPS and in priority to all other
classes of equity securities;(b)
    
    The Company shall redeem all or part of the Series A RCPS upon the occurrence of
any of the relevant redemption events as defined in the debt restructuring agreement
(DRA) entered into by the Company and certain of its subsidiaries with certain of
their bankers and other financial lenders on March 16, 2001;(c)
    
    Upon the passing of a special resolution at a meeting of the holders of the
Series A RCPS convened during the conversion period commencing from the date of issue
(March 17, 2005) of such Series A RCPS and expiring 10 years thereafter to approve the
conversion of all outstanding Series A RCPS, the Company shall convert all (but not some
only) of the outstanding Series A RCPS at the conversion ratio of 1:1 and rounded down
to the nearest whole number for fractions upon conversion subject to adjustments
pursuant to the DRA; and
 F-76




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  19.
    
    Other financial liabilities (contd)
 (a)
    
    Other liabilities (current and non-current) (contd)
 (d)
    
    The Company shall redeem all the outstanding Series A RCPS on the tenth
anniversary of the issue date of the Series A RCPS.
 The Series B RCPS issued have the following key terms and conditions:
 (a)
    
    Non-cumulative dividend which shall accrue for each Series B RCPS on a daily
basis at 0.1% per annum of the amount equivalent to $0.16 per outstanding Series B RCPS.
Series B RCPS rank pari passu with the Series A RCPS and in priority to all other
classes of equity securities;(b)
    
    The Company shall redeem all or part of the Series B RCPS upon the occurrence of
any of the relevant redemption events as defined in the DRA;(c)
    
    Upon the passing of a special resolution at a meeting of the holders of the
Series B RCPS convened during the conversion period commencing from the date of issue
(March 17, 2005) of such Series B preference shares and expiring 5 years thereafter to
approve the conversion of all outstanding Series B RCPS, the Company shall convert all
(but not some only) of the outstanding Series B RCPS at the conversion ratio of 1:1 and
rounded down to the nearest whole number for fractions upon conversion subject to
adjustments pursuant to the DRA; and(d)
    
    On the market day immediately following the fifth anniversary of the date of
issue of the Series B RCPS, all Series B RCPS which remain unconverted or unredeemed
shall be mandatorily converted into ordinary shares of the Company at conversion ratio
of 1:1 and rounded down to the nearest whole number for fractions upon conversion
subject to adjustments pursuant to the DRA.
 F-77




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  19.
    
    Other financial liabilities (contd)
 (b)
    
    Interest-bearing loans and borrowings
 Effectiveinterest rate
    
    Maturity
    
    1.1.2008%
    
    
    
    
    
    Rmb000Current:Renminbi denominated loans
    
    
    4.08
    
    
    
    2008
    
    
    
    819,164US$ denominated loans
    
    
    3.01 - 3.24
    
    
    
    2008
    
    
    
    457,7871,276,951Non-Current:Renminbi denominated loans
    
    
    5.85
    
    
    
    2010
    
    
    
    85,000US$ denominated loans
    
    
    2.68 - 3.01
    
    
    
    2010
    
    
    
    225,142Zero coupon bonds
    
    
    6.00
    
    
    
    2009
    
    
    
    2,960313,102
 Effectiveinterest rate
    
    Maturity
    
    31.12.2008%
    
    
    
    
    
    Rmb000Current:Renminbi denominated loans
    
    
    4.95
    
    
    
    2009
    
    
    
    833,000Singapore dollars
denominated loans
    
    
    2.15
    
    
    
    2009
    
    
    
    313,448Zero coupon bonds
    
    
    6.00
    
    
    
    2009
    
    
    
    2,2841,148,732Non-Current:US$ denominated loans
    
    
    1.38
    
    
    
    2010
    
    
    
    176,756176,756
 Effectiveinterest rate
    
    Maturity
    
    31.12.2009
    
    31.12.2009%
    
    
    
    
    
    Rmb000
    
    US$000Current:Renminbi denominated loans
    
    
    3.81
    
    
    
    2010
    
    
    
    434,393
    
    
    
    63,631Singapore dollars
denominated loans
    
    
    2.22
    
    
    
    2010
    
    
    
    19,399
    
    
    
    2,842453,792
    
    
    
    66,473Non-Current:Renminbi denominated loans
    
    
    4.86
    
    
    
    2012
    
    
    
    150,000
    
    
    
    21,973Singapore dollars
denominated loans
    
    
    2.15
    
    
    
    2010
    
    
    
    293,397
    
    
    
    42,978US$ denominated loans
    
    
    1.35
    
    
    
    2010
    
    
    
    181,859
    
    
    
    26,639625,256
    
    
    
    91,590
 F-78




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  19.
    
    Other financial liabilities (contd)
 (b)
    
    Interest-bearing loans and borrowings (contd)Note: The Company has the discretion to refinance or rollover the obligations for at least 12
months after the reporting period for the existing loan facilities.US$50.0 million credit facility with Sumitomo Mitsui Banking Corporation, Singapore Branch
(Sumitomo):On September 7, 2005, in order to fund its business expansion plans, the Company entered into
a revolving credit facility agreement with Sumitomo with a committed aggregate value of
US$50.0 million for a three years duration. Among other things, the terms of the facility
require that Hong Leong Asia Ltd. (HLA) retains ownership of the Companys special share
and that the Company remains a consolidated subsidiary of HLA. The terms of the facility also
include certain financial covenants with respect to the Companys tangible net worth (as
defined in the agreement) as at 30 June and 31 December of each year not being less than
US$120,000 and the ratio of the Companys total net debt (as defined in the agreement) to
tangible net worth as at 30 June and 31 December of each year not exceeding 2.0 times, as
well as negative pledge provisions and customary drawdown requirements. At all times during
the year ended December 31, 2007, the Company was in compliance with these financial
covenants. The Company has also undertaken to make available to Sumitomo, within 180 days
after the end of its financial year (beginning with financial year 2005), copies of its
audited consolidated accounts as at the end of and for that financial year. A waiver from
compliance with this undertaking in relation to the production of the 2006 and 2007 audited
consolidated accounts has been received from Sumitomo granting an extension of time until
July 18, 2008 and September 30, 2008 respectively. On September 6, 2008, this credit facility
with Sumitomo expired and the bridging loan as stated in note below was used to partially
refinance this facility which was fully repaid.DBS S$50.0 million bridging loan:On August 28, 2008, the Company entered into a bridging loan agreement of up to S$50 million
for a 12 months duration, with DBS Bank Ltd., (DBS) of Singapore, to partially re-finance
the US$50m revolving credit facility with Sumitomo Mitsui Banking Corporation, Singapore
Branch which expired on September 6, 2008. The new facility will also be used to finance the
Companys long-term general working capital requirements. The terms of the facility include
certain financial covenants as well as negative pledge and default provisions. The Company
has also undertaken to make available to DBS, within 180 days after the end of its financial
year, copies of its audited consolidated accounts as at the end of each financial year. A
waiver from compliance with this undertaking in relation to the production of 2008 audited
consolidated accounts has been received from the bank in 2009, granting an extension of time until
August 31, 2009.On August 21, 2009, we entered into a new short-term loan agreement for up to S$50 million
for a12 months duration with DBS Bank Ltd., (DBS) of Singapore, to re-finance our existing
bridging credit facility with DBS which expired on September 4, 2009. The new facility will
be used to finance the Companys long-term general working capital requirements. The terms of
the facility include certain financial covenants as well as negative pledge and default
provisions. There is an undertaking by the Company to repay S$2 million every quarter.
 F-79




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  19.
    
    Other financial liabilities (contd)
 (b)
    
    Interest-bearing loans and borrowings (contd)S$21.5 million credit facility with Bank of Tokyo-Mitsubishi, UFJ Ltd, Singapore Branch
(BOTM):On March 20, 2008, the Company entered into a new facility agreement with BOTM to re-finance
the existing revolving credit facility. The new unsecured, multi-currency revolving credit
facility has a committed aggregated value of S$21.5 million with a one year duration. The new
facility will be used to finance the Companys long-term general working capital
requirements. Among other things, the terms of the facility require that Hong Leong Asia Ltd.
(HLA) retains ownership of the Companys special share and that the Company remains a
consolidated subsidiary of HLA. The terms of the facility also include certain financial
covenants with respect to the Companys tangible net worth (as defined in the agreement) as
at 30 June and 31 December of each year not being less than US$120 million and the ratio of
the Companys total net debt (as defined in the agreement) to tangible net worth as at 30
June and 31 December of each year not exceeding 2.0 times, as well as negative pledge
provisions and customary drawdown requirements. On March 19, 2009, this credit facility
expired and the new facility with same bank was used to refinance this facility which was
fully repaid. The Company has also undertaken to make available to the bank, within 180 days
after the end of its financial year, copies of its audited consolidated accounts as at the
end of and for that financial year. A waiver from compliance with this undertaking in
relation to the production of the 2008 audited consolidated accounts has been received from
the bank granting an extension of time until August 31, 2009. On March 17, 2010, the credit
facility expired and was refinanced in full with the bank (see Note 38(a)).US$40.0 million credit facility with Sumitomo:On March 30, 2007, the Company entered into an unsecured multi-currency revolving credit
facility agreement with Sumitomo for an aggregate of US$40.0 million to refinance the S$60.0
million facility with Oversea  Chinese Banking Corporation Limited (OCBC) that was due to
mature on July 26, 2007. The facility is available for three years from the date of the
facility agreement and will be utilized by the Company to finance its long-term general
working capital requirements. The terms of the facility require, among other things, that HLA
retains ownership of the special share and that the Company remains a principal subsidiary
(as defined in the facility agreement) of HLA. The terms of the facility also include certain
financial covenants with respect to the Companys tangible net worth (as defined in the
agreement) as at 30 June and 31 December of each year not being less than US$120 million and
the ratio of our total net debt (as defined in the agreement) to tangible net worth as at 30
June and 31 December of each year not exceeding 2.0 times, as well as negative pledge
provisions and customary drawdown requirements. The Company has also undertaken to make
available to the bank, within 180 days after the end of its financial year (beginning with
financial year 2007), copies of its audited consolidated accounts as at the end of and for
that financial year. A waiver from compliance with this undertaking in relation to the
production of the 2008 audited consolidated accounts has been received from the bank granting
an extension of time until August 31, 2009. The credit facility expired on March 30, 2010
and was refinanced for USD30.0 million with the same bank (see
Note 38(b)).
 F-80




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  20.
    
    Deferred grants
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Balance at beginning of year
    
    
    
    
    
    
    
    
    
    
    31,514
    
    
    
    4,616Received
during the year
    
    
    
    
    
    
    31,514
    
    
    
    150,917
    
    
    
    22,107Released to
the income statement
    
    
    
    
    
    
    
    
    
    
    (3,198
    )
    
    
    (468
    )Balance at end of year
    
    
    
    
    
    
    31,514
    
    
    
    179,233
    
    
    
    26,255Current
    
    
    
    
    
    
    31,514
    
    
    
    3,198
    
    
    
    469Non-current
    
    
    
    
    
    
    
    
    
    
    176,035
    
    
    
    25,786Total
    
    
    
    
    
    
    31,514
    
    
    
    179,233
    
    
    
    26,255
 Government grants have been received for the purchase of
certain items of property, plant and equipments.
 21.
    
    Inventories
 Inventories are comprised of:
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Raw materials
    
    
    942,849
    
    
    
    1,653,281
    
    
    
    1,056,581
    
    
    
    154,771Work in progress
    
    
    17,647
    
    
    
    17,072
    
    
    
    21,481
    
    
    
    3,147Finished goods
    
    
    686,579
    
    
    
    579,691
    
    
    
    1,051,964
    
    
    
    154,096Total inventories at the
lower of cost and net
realisable value
    
    
    1,647,075
    
    
    
    2,250,044
    
    
    
    2,130,026
    
    
    
    312,014
 Inventories
recognized as an expense in cost of sales amounted to
Rmb 7,490,254 and Rmb 9,567,280 (US$1,401,450) in the year
ended December 31, 2008 and December 31, 2009 respectively.
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Balance at beginning of year
    
    
    88,439
    
    
    
    136,256
    
    
    
    19,959Charge to consolidated statements of
income
    
    
    52,747
    
    
    
    154,700
    
    
    
    22,661Written off
    
    
    (4,930
    )
    
    
    (4,009
    )
    
    
    (587
    )136,256
    
    
    
    286,947
    
    
    
    42,033
 The amount of write-down of inventories recognized as an expense and included in cost of sales
amounted to Rmb 52,747 and Rmb 154,700 (US$22,661) in year ended December 31, 2008 and December 31,
2009 respectively.As at December 31, 2009, YMMC had consigned finished goods inventory balance of Rmb nil (US$ nil)
(2008: Rmb 3,627) with the customers.
 22.
    
    Other current financial assets
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Properties held for sale
    
    
    110,344
    
    
    
    96,293
    
    
    
    91,202
    
    
    
    13,360
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  23.
    
    Trade and bills receivables
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb'000
    
    Rmb'000
    
    Rmb'000
    
    US$'000Trade receivables (net)
    
    
    716,500
    
    
    
    397,296
    
    
    
    389,659
    
    
    
    57,079Bills receivables
    
    
    2,392,744
    
    
    
    2,140,839
    
    
    
    2,117,042
    
    
    
    310,1123,109,244
    
    
    
    2,538,135
    
    
    
    2,506,701
    
    
    
    367,191
 Trade receivables (net) are non-interest bearing and are
generally on 60 days terms. They are recognised at their
original invoice amounts which represent their fair values on initial
recognition.As of January 1, 2008, December 31, 2008 and December 31, 2009, outstanding bills receivable
discounted with banks for which the Group retained a recourse obligation totaled Rmb 171,221, Rmb
1,214,497 and Rmb 3,179,737 (US$465,780) respectively.An analysis of the allowance for doubtful accounts is as follows:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Balance at beginning of year
    
    
    65,013
    
    
    
    96,147
    
    
    
    14,083Add:Charge (credit) to consolidated
statements of income
    
    
    32,943
    
    
    
    (15,552
    )
    
    
    (2,278
    )Less:Written off
    
    
    (1,802
    )
    
    
    (3,947
    )
    
    
    (578
    )Translation differences
    
    
    (7
    )
    
    
    (2
    )
    
    
    96,147
    
    
    
    76,646
    
    
    
    11,227
 At December 31, 2008 and 2009, gross trade accounts receivable due from a major customer, Dongfeng
Automobile Company and its affiliates (the Dongfeng companies) were Rmb 119,513 and Rmb 271,209
(US $39,728), respectively. See Note 35 for further discussion of customer concentration risk.
 Neitherpast duenor
    
    0-90
    
    91-180
    
    181-365
    
    >365Total
    
    impaired
    
    days
    
    days
    
    days
    
    daysRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000As at 31.12.2009
    
    
    2,506,701
    
    
    
    2,438,348
    
    
    
    66,888
    
    
    
    19
    
    
    
    168
    
    
    
    1,278As at 31.12.2008
    
    
    2,538,135
    
    
    
    2,530,044
    
    
    
    6,898
    
    
    
    707
    
    
    
    50
    
    
    
    436As at 1.1.2008
    
    
    3,109,244
    
    
    
    2,559,389
    
    
    
    275,060
    
    
    
    184,530
    
    
    
    10,838
    
    
    
    79,427
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  24.
    
    Other receivables (current)
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000GST/VAT Recoverable
    
    
    8,178
    
    
    
    70,910
    
    
    
    83,825
    
    
    
    12,279Staff advances
    
    
    8,071
    
    
    
    1,590
    
    
    
    7,394
    
    
    
    1,083Amounts due under
guarantee contracts,
net (see Note 33)
    
    
    20,162
    
    
    
    15,382
    
    
    
    12,557
    
    
    
    1,839Land deposit
    
    
    5,000
    
    
    
    5,000
    
    
    
    5,000
    
    
    
    733Recoverable from
Malkn Sdn Bhd (i)
    
    
    35,122
    
    
    
    22,671
    
    
    
    
    
    
    
    Associates
    
    
    17,373
    
    
    
    91,027
    
    
    
    44,662
    
    
    
    6,542Other related parties
    
    
    145,702
    
    
    
    53,894
    
    
    
    20,310
    
    
    
    2,975Other deposits
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    Loan to customers
    
    
    3,361
    
    
    
    
    
    
    
    
    
    
    
    Interest receivables
    
    
    
    
    
    
    
    
    
    
    5,176
    
    
    
    758Custom tax refund
    
    
    
    
    
    
    2,057
    
    
    
    11,018
    
    
    
    1,614Others
    
    
    17,357
    
    
    
    30,781
    
    
    
    23,921
    
    
    
    3,504Impairment losses 
other receivables
(ii)
    
    
    (57,036
    )
    
    
    (79,626
    )
    
    
    (32,313
    )
    
    
    (4,733
    )203,290
    
    
    
    223,686
    
    
    
    181,550
    
    
    
    26,594
 
 Note:(i)
    
    Recoverable from Malkn Sdn Bhd., a subsidiary of HLGE, which is currently under creditors
liquidation.(ii)
    
    An analysis of the impairment losses  other receivables is as follows: 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Balance at beginning
of year
    
    
    94,177
    
    
    
    79,626
    
    
    
    11,664Add:Charge (credit) to
consolidated
statements of income
    
    
    (7,598
    )
    
    
    (28,506
    )
    
    
    (4,176
    )Less:Written off
    
    
    (5,332
    )
    
    
    (19,314
    )
    
    
    (2,829
    )Translation differences
    
    
    (1,621
    )
    
    
    507
    
    
    
    7479,626
    
    
    
    32,313
    
    
    
    4,733
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  25.
    
    Cash and cash equivalents
 For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the
following at 31 December:
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Cash at banks and on hand
    
    
    759,837
    
    
    
    823,695
    
    
    
    3,657,981
    
    
    
    535,834
 Cash at banks earn interest at floating rates based on daily bank deposit rates. Cash and cash
equivalents denominated in various currencies are held in bank accounts in the Singapore and
China.At January 1, 2008, December 31, 2008 and December 31, 2009, the Group had available Rmb 2,658,071,
Rmb 3,639,724 and Rmb 3,875,020 respectively (US$567,627) of undrawn committed borrowing facilities
in respect of which all conditions precedent had been met. The commitment fees incurred for 2008
and 2009 were Rmb 138 and Rmb 104 (US$15) respectively.
 26.
    
    Issued capital and reserves
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009thousands
    
    thousands
    
    thousands
    
    thousandsAuthorised sharesOrdinary shares of US$0.10 each
    
    
    100,000
    
    
    
    100,000
    
    
    
    100,000
    
    
    
    100,000
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Ordinary shares issued and fully paid37,267,673 ordinary shares issued and fully paid at US$0.10 per share
    
    
    1,724,196
    
    
    
    1,724,196
    
    
    
    1,724,196
    
    
    
    252,567
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Non-redeemable
convertible
cumulative
preference shares
(NCCPS)
    
    
    36
    
    
    
    36
    
    
    
    36
    
    
    
    5
 HLGE issued 197,141,190 NCCPS at an issue price of S$0.02 each on July 4, 2006, expiring on the
10th anniversary of the NCCPs issue date.The NCCPS shall, subject to the terms and conditions thereof, carry the right to receive, out of
the profits of HLGE available for payment of dividends, a fixed cumulative preferential dividend of
10% per annum of the issue price for each NCCPS (the Preference Dividend).Other than the Preference Dividend, the NCCPS holders shall have no further right to participate in
the profits or assets of HLGE.NCCPS holders shall have no voting rights except under certain circumstances referred to in the
Companies Act, Chapter 50 of Singapore set out in the terms of the NCCPS.The NCCPS are not listed and quoted on the Official List of the Singapore Exchange Securities
Trading Limited (the SGX-ST). However, the holders of the NCCPs are able to exercise their
rights to convert the NCCPS into new ordinary shares at a 1 for 1 ratio, subject to the terms and
conditions of the NCCPS. Such new ordinary shares will be listed and quoted on the Official List
of the SGX-ST when issued.
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  27.
    
    Dividends paid and proposed
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Declared and paid during the year:Dividends on ordinary shares:Interim
dividend for 2008 US$0.10 cents
(2007: US$0.10 cents)
    
    
    25,886
    
    
    
    
    
    
    
    Interim dividend for 2009: US$0.10cents
(2008:US$0.10 cents)
    
    
    
    
    
    
    25,457
    
    
    
    3,72925,886
    
    
    
    25,457
    
    
    
    3,729
 On March 5, 2010, the Company declared a dividend of US$0.25 per share or US$9.3 million in total
dividend, payable on March 30, 2010.
 28.
    
    Statutory reserves
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Statutory general
reserve(see Note
(ii))Balance at January 1
    
    
    171,280
    
    
    
    174,033
    
    
    
    176,126
    
    
    
    25,800Transfer from retained
earnings
    
    
    2,753
    
    
    
    2,093
    
    
    
    4,213
    
    
    
    617Balance at end of year
    
    
    174,033
    
    
    
    176,126
    
    
    
    180,339
    
    
    
    26,417Statutory public
welfare fund(see Note
(iii))Balance at January 1
    
    
    70,600
    
    
    
    70,600
    
    
    
    85,641
    
    
    
    12,545Transfer from retained
earnings (see Note
(iv))
    
    
    
    
    
    
    15,041
    
    
    
    
    
    
    
    Balance at end of year
    
    
    70,600
    
    
    
    85,641
    
    
    
    85,641
    
    
    
    12,545General surplus reserveBalance at January 1
and December 31
    
    
    25,706
    
    
    
    25,706
    
    
    
    25,706
    
    
    
    3,765Balance at end of year
    
    
    270,339
    
    
    
    287,473
    
    
    
    291,686
    
    
    
    42,727
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  28.
    
    Statutory reserves (contd)
 
 Notes:(i)
    
    In accordance with the relevant regulations in the PRC, Yuchai and its subsidiaries are
required to provide certain statutory reserves which are designated for specific purposes
based on the net income reported in the PRC GAAP financial statements. The reserves are not
distributable in the form of cash dividends.(ii)
    
    In accordance with the relevant regulations in the PRC, a 10% appropriation to the statutory
general reserve based on the net income reported in the PRC financial statements is required
until the balance reaches 50% of the authorized share capital of Yuchai and its subsidiaries.
Statutory general reserve can be used to make good previous years losses, if any, and may be
converted into share capital by the issue of new shares to stockholders in proportion to their
existing shareholdings, or by increasing the par value of the shares currently held by them,
provided that the reserve balance after such issue is not less than 25% of the authorized
share capital.(iii)
    
    Yuchai and its subsidiaries shall determine to transfer 5% to 10% of its net income reported
in the PRC financial statements to the statutory public welfare fund. There is no limit on the
amount that may be allocated to this fund. This fund can only be utilized on capital
expenditure for the collective welfare of Yuchai and its subsidiaries employees, such as the
construction of dormitories, canteen and other welfare facilities, and cannot be utilized to
pay staff welfare expenses. The transfer to this fund must be made before the distribution of
a dividend to stockholders. Since January 1, 2006, in accordance with the
amended Companys policy, the contribution to the fund ceased.(iv)
    
    In 2008, an amount of Rmb 15,041 was transferred back to the Statutory Public Welfare Fund as
the payable was no longer required. 29.
    
    Trade and other payables (current)
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Trade payables
    
    
    2,517,902
    
    
    
    2,619,136
    
    
    
    4,749,651
    
    
    
    695,746Other payables
    
    
    789,743
    
    
    
    746,286
    
    
    
    1,284,645
    
    
    
    188,180Deferred
income
    
    
    
    
    
    
    31,514
    
    
    
    3,198
    
    
    
    468Interest payable
    
    
    
    
    
    
    1,831
    
    
    
    2,498
    
    
    
    366Immediate holding company
    
    
    5,278
    
    
    
    451
    
    
    
    362
    
    
    
    53Associates
    
    
    
    
    
    
    43,861
    
    
    
    
    
    
    
    Other related parties
    
    
    380,521
    
    
    
    161,049
    
    
    
    149,892
    
    
    
    21,957Balance at end of year
    
    
    3,693,444
    
    
    
    3,604,128
    
    
    
    6,190,246
    
    
    
    906,770
 Terms and conditions of the above financial liabilities:
 4
    
    Trade payables are non-interest bearing and are normally settled on 60-day terms.4
    
    Other payables are non-interest bearing and have an average term of six months.4
    
    Interest payable is normally settled throughout the financial year.4
    
    For terms and conditions relating to related parties, refer
to Note 32
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  30.
    
    Provision for product warranty
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Balance at beginning of year
    
    
    163,701
    
    
    
    194,898
    
    
    
    188,599
    
    
    
    27,626Provision made
    
    
    233,838
    
    
    
    215,544
    
    
    
    368,284
    
    
    
    53,948Less: Provision utilised
    
    
    (202,641
    )
    
    
    (221,843
    )
    
    
    (297,349
    )
    
    
    (43,557
    )Balance at end of year
    
    
    194,898
    
    
    
    188,599
    
    
    
    259,534
    
    
    
    38,017
 31.
    
    Deferred gain and gain on acquisition of Guangxi Yulin Hotel Company Ltd in settlement of past loan
 The amount represents the recognition of specific impairment provisions totaling Rmb 202,950 on the
loans with an aggregate principal amount of Rmb 205 million due from Yuchai Marketing Company
Limited (YMCL) as of December 31, 2005. YMCL is wholly owned by Coomber Investment Limited
(Coomber), a shareholder of the Company and State Holding Company (collectively, the Chinese
Shareholders).In March and May 2004, Yuchai granted interest-free advances to YMCL at the request of Yuchais PRC
directors to provide YMCL with initial working capital for its start-up activities. YMCL was set up
with the intention of offering a complementary range of services including spare parts
distribution, insurance, vehicle financing and warranty servicing. These advances were provided
with the approval of the previous Chairman of Yuchai but without prior approval by the majority of
the shareholders of Yuchai.On December 2, 2004, these advances were converted into formal loans and written agreements and
were executed between Yuchai and YMCL through an authorized financial institution in the PRC. Under
the terms of the loan agreements, the loans were payable in their entirety on December 2, 2005 and
interest, at the rate of 5.58% per annum, was payable on a monthly basis. Further, the loans were
secured by guarantees given by the Chinese Shareholders. Interest income of Rmb 10,512, Rmb 11,548
and Rmb 4,224 (US$618) was received and recognised in 2006, 2007 and 2008, respectively.Because the loans had already been disbursed, the Chinese Shareholders had issued guarantees for
these loans, and the Companys relationship with the Chinese Shareholders was improving, the
Directors of Yuchai believed that it was in the Companys and Yuchais best interest to ratify the
loans. Consequently, the loans were ratified by the Board of Directors of Yuchai in April 2005.In 2005, the Company discussed with the Chinese Shareholders the possibility of converting the
loans into an equity investment in YMCL, subject to the Yuchai boards approval. This potential
alternative was incorporated within the terms of the reorganization agreement entered into by the
Company with Yuchai and Coomber on April 7, 2005 (Reorganization Agreement).
 F-87




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  31.
    
    Deferred gain and gain on acquisition of Guangxi Yulin
Hotel Company Ltd in settlement of past loan (contd)
 When the loans became due in December 2005, Yuchai was requested to extend the maturity date for
the loans. However, the Company and Yuchai had been unable to access the financial statements of
YMCL. Consequently, the Directors from the Companys and Yuchais boards had doubts about YMCLs
ability to repay the loans. However, the Companys and Yuchais board of directors considered the
request to extend the loans based on representations received from the Chinese Shareholders and
management of YMCL concerning their respective abilities and intentions to repay the loans and
honor their guarantees, and therefore agreed to extend the repayment date of the loans for an
additional year. The extension of the loans was approved by the Board of Directors of Yuchai on
December 2, 2005. An agency bank was appointed under PRC requirements to administer the Rmb 205
million loans and the legal method requires such loans to be repaid and the funds re-disbursed. The
new loans carry the same terms, including scheduled maturity on December 1, 2006. New guarantees
were also granted by the Chinese Shareholders for these loans. The maturity date of the loans was
subsequently extended to June 1, 2007 and further extended to May 30, 2008.The Company discussed this matter with the Chinese Shareholders and management of YMCL and also
considered the financial position and financial resources of the State Holding Company and Coomber.
CYI management made an assessment of the future cash flows of the State Holding Company and Coomber
and concluded that it was likely they will not be able to honor their respective guarantees in the
event YMCL is unable to repay the loans when they become due.Consequently, at that time, CYI management identified a number of possible courses of action in the
event YMCL is unable to repay the loans when they become due. These actions included:
 
    
    Taking actions to force YMCL to liquidate;
    
    Retaining portions of future dividends declared by Yuchai and payable to State Holding
Company until the guarantee obligations are fulfilled; and
    
    Commencing legal action against YMCL and possibly the Chinese Shareholders.
 The Companys management ruled out any form of legal or other enforcement action against the
Chinese Shareholders as management believed that Yuchai may not be the first preferred creditor
entitled to receive payment of the judgment debt. Moreover, management believed that the process
for enforcement of a judgment in China is complex and not as effective when compared with other
jurisdictions. In addition, management believed that the commencement of legal or other enforcement
actions would likely lead to a deterioration in relations with the Chinese Shareholders which could
have a materially adverse impact on the Companys investment in Yuchai and could lead to the
impairment of shareholder value of the Company. Consequently, management believed that it was
beneficial to the Companys shareholders for management to continue their dialogue and seek other
possible arrangements with YMCL, Coomber and State Holding Company to resolve the repayment of the
Rmb 205 million loans rather than for it to resort to legal and enforcement actions described
above.
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  31.
    
    Deferred gain and gain on acquisition of Guangxi Yulin Hotel Company Ltd in settlement of past loan (contd)
 In July 2007, Yuchais Board of Directors agreed in principle to a proposal by the State Holding
Company to settle the loans due from YMCL, along with various other accounts receivable from YMCL
(collectively, the receivables), by forgiving the receivables in exchange for the transfer of
100% of the equity ownership in a hotel in Yulin, PRC and YMCLs central office building in Guilin,
PRC. On December 25, 2007, Yuchai, pursuant to the execution of a share transfer contract with
YMCL, Coomber and State Holding Company, acquired all the outstanding share capital of Guangxi
Yulin Hotel Company Ltd (Yulin Hotel Company) for Rmb 245.6 million. As of January 1, 2008, the
purchase consideration for this acquisition had not been settled and is included in Amounts due to
related parties on the consolidated balance sheet. Agreements were entered into by Yuchai on March
31, 2008 to effect the repayment of the Rmb 205 million loans against the liability of Rmb 245.6
million arising from the purchase of 100% equity interest in Yulin Hotel Company with the balance
settled through offset of certain trade receivables due from YMCL, the Guarantors and other related
parties. Under the terms of these agreements, Yuchais purchase price obligation of Rmb 245.6
million was legally extinguished through the offsetting of this liability.As of January 1, 2008 and December 31, 2008, the transfer of the 100% equity interest in Yulin
Hotel Company was subject to approval from the provincial government regulatory agency in charge of
state-owned assets administration in China. Yuchais Board of Directors and shareholders had
approved an extension of time for obtaining of approval from November 30, 2008 to June 30, 2009
failing which, Yuchai would have had the right to sell to the State Holding Company, who would have
been obligated to buy, 100% of the equity in Yulin Hotel Company at the original purchase price of
Rmb 245.6 million. This condition is contained in a guarantee letter provided by the original
shareholders of Yulin Hotel Company. However, management of the Company was uncertain whether State
Holding Company had the financial ability to purchase Yulin Hotel Company for the full contractual
amount of Rmb 245.6 million. Consequently, no recovery of the previously recorded impairment loss
on the loans due from YMCL was recognized in the Companys consolidated financial statements as of
December 31, 2008 and the provision against the loan was reclassified as a deferred gain in the
balance sheet. Such recovery was recognized in the Companys consolidated financial statements on
January 13, 2009, when Yuchai received approval from the provincial government regulatory agency in
charge of state-owned assets administration in China for its acquisition of the 100% equity
interest in Yulin Hotel Company. Upon receipt of approval from the provincial government, the gain
was recognized in the Statement of Income in 2009.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  32.
    
    Related party disclosures
 The ultimate parentOur controlling shareholder, HLA, indirectly owns 10,248,013,
or 27.5%, of the outstanding shares of our Common Stock, as well as a special share that entitles
it to elect a majority of our directors. HLA controls us through its wholly-owned
subsidiary, Hong Leong (China) Limited, or Hong Leong China, and through HL Technology Systems Pte
Ltd, or HL Technology, a wholly-owned subsidiary of Hong Leong China. HL Technology owns
approximately 21.0% of the outstanding shares of our Common Stock and is, and has since August 2002
been, the registered holder of the special share. HLA also owns, through another
wholly-owned subsidiary, Well Summit Investments Limited, approximately 6.48% of the outstanding
shares of our Common Stock. HLA is a member of the Hong Leong Investment Holdings Pte
Ltd., or Hong Leong Investment, group of companies. Prior to August 2002, we were controlled by
Diesel Machinery (BVI) Limited, or Diesel Machinery, which, until its dissolution, was a holding
company controlled by Hong Leong China and was the prior owner of the special share. Through HL
Technologys stock ownership and the rights accorded to the Special Share under our bye-laws and
various agreements among shareholders, HLA is able to effectively approve and effect
most corporate transactions.There were transactions other than dividends paid, between the Group and HLA of
Rmb 470 (US$69) and Rmb 6,414 during the financial years ended December 31, 2009 and December 31,
2008 respectively.
 Entity with significant influence over the Group
 The Yulin City Government through Coomber Investment Ltd owns 18% of the ordinary shares in the
Company (2008: 18%).The following provides the total amount of transactions that have been entered into with related
parties for the relevant financial year (for information regarding outstanding balances at December
31, 2009 and 2008, refer to Notes 24 and 29):
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Sales of diesel engines to State Holding
Company, its subsidiaries and affiliates (See
Note (i))
    
    
    196,997
    
    
    
    338,094
    
    
    
    49,525Sales of raw materials to YMCL (See Note (i))
    
    
    
    
    
    
    232,560
    
    
    
    34,066Sales to affiliates (See Note (i))
    
    
    18,067
    
    
    
    61,521
    
    
    
    9,012Purchase of raw materials and supplies from
subsidiaries and affiliates of State Holding
Company (see Note (i))
    
    
    (1,013,106
    )
    
    
    (1,509,950
    )
    
    
    (221,183
    )Purchases of raw materials and supplies from
affiliates (see Note (i))
    
    
    (17,781
    )
    
    
    (94,236
    )
    
    
    (13,804
    )Delivery expense charged by a subsidiary of YMCL
(See Note (ii))
    
    
    (161,036
    )
    
    
    (210,129
    )
    
    
    (30,780
    )Storage expense charged by a subsidiary of SHC
(See Note (iii))
    
    
    
    
    
    
    (58,667
    )
    
    
    (8,594
    )General and administrative expenses
charged by State Holding Company (see Note (iv))
    
    
    (34,934
    )
    
    
    (35,857
    )
    
    
    (5,252
    )
charged by HLA (see Note (v))
    
    
    (6,758
    )
    
    
    (6,828
    )
    
    
    (1,000
    )
charged by an affiliate of HLA (see Note (vi))
    
    
    (6,760
    )
    
    
    (8,124
    )
    
    
    (1,190
    )
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  32.
    
    Related party disclosures (contd)
 Note:
 (i)
    
    Sale and purchase of raw materials, supplies, scraps and diesel engines to/from State Holding
Company, its subsidiaries and affiliates. Certain subsidiaries and affiliates of State Holding
Company have acted as suppliers of raw materials and supplies to the Company and certain
subsidiaries of State Holding Company have acted as sales agents of the Group. The State
Holding Company also purchased scraps from the Group. State Holding Companys subsidiaries and
affiliates include YMCL. Management considers that these transactions were entered into in the
normal course of business and expects that these transactions will continue on normal
commercial terms.(ii)
    
    Delivery expense charged by YMCL and its subsidiaries. The fee is for the delivery of spare
parts charged by YMCL, which were recorded in Cost of goods sold and Selling, general and
administrative expenses respectively. Management considers that these transactions were
entered into in the normal course of business and these transactions continued on normal
commercial terms.(iii)
    
    Storage expenses charged by subsidiary of SHC for the storage
of engines components and parts for Yuchai and delivery to the
production facilities as required.(iv)
    
    General and administrative expenses charged by State Holding Company State Holding Company
charges Yuchai for certain general and administrative expenses in respect of rental of certain
office premises, property management services rendered by State Holding Company. The expenses
are charged to Yuchai and its subsidiaries by State Holding Company on an actual incurred
basis. Management believes that the expenses charged to Yuchai by State Holding Company would
not have been materially different on a stand-alone basis because Yuchai could provide these
services for itself at approximately the same amount.(v)
    
    Management fees, general and administrative expenses charged by HLA.(vi)
    
    General and administrative expenses charged by affiliates of HLA. The fees mainly relate to
office rental, secretarial fees, insurance fees, professional and consultancy fees, and
miscellaneous office expenses.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  32.
    
    Related party disclosures (contd)
 Entity with significant influence over the Group (contd)In addition to the above, Yuchai also entered into transactions with other PRC Government owned
enterprises. Management considers that these transactions were entered into in the normal course of
business and expects that these transactions will continue on normal commercial terms. Balances
with other PRC entities are excluded from this caption.Amounts due to the holding company comprise mainly general and administrative expenses charged by
the holding company in relation to the management, financial planning and control and other
services provided to Yuchai. The balance is unsecured, interest free and repayable on demand.
 Compensation of key management personnel of the Group
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Short term employee benefits
    
    
    24,773
    
    
    
    25,992
    
    
    
    3,807
 The non-executive directors do not receive pension entitlements from the Group.
 33.
    
    Commitments and contingencies
 Operating lease commitments  Group as lesseeThe Group has entered into commercial leases on certain motor vehicles and items of machinery.
These leases have an average life of between three and five years with no renewal option included
in the contracts. There are no restrictions placed upon the Group by entering into these leases.Future minimum rentals payable under non-cancellable operating leases as at 31 December are as
follows:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Within one year
    
    
    10,538
    
    
    
    9,007
    
    
    
    1,319After one year but not more
than five years
    
    
    12,122
    
    
    
    7,968
    
    
    
    1,16822,660
    
    
    
    16,975
    
    
    
    2,487
 The minimum lease payments recognized as an expense in the period ended December 31, 2008 and
December 31, 2009 respectively amounted to Rmb 24,306 and Rmb 46,092 (US$6,752).
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  33.
    
    Commitments and contingencies (contd)
 Operating lease commitments  Group as lessorThe Group has entered into commercial property leases on its investment property portfolio,
consisting of the Groups surplus office and manufacturing buildings. These non-cancellable leases
have remaining terms of between 6 and 50 years. All leases include a clause to enable upward
revision of the rental charge on an annual basis according to prevailing market conditions.Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as
follows:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Within one year
    
    
    3,106
    
    
    
    5,998
    
    
    
    879After one year but not more
than five years
    
    
    7,921
    
    
    
    16,522
    
    
    
    2,420More than five years
    
    
    843
    
    
    
    515
    
    
    
    7511,870
    
    
    
    23,035
    
    
    
    3,374
 Finance lease commitmentsThe Group has finance leases for various items of plant and machinery. Except for leases under
sale and leaseback arrangement described below, these leases have terms of renewal but no
purchase options and escalation clauses. Renewals are at the option of the specific entity that
holds the lease. Future minimum lease payments under finance leases with the present value of the
net minimum lease payments are as follows:
 31.12.2009Minimum
    
    Present valuepayments
    
    of paymentsWithin one year
    
    
    11,397
    
    
    
    9,748After one year but not more than five years
    
    
    30,604
    
    
    
    25,243Total minimum lease payments
    
    
    42,001
    
    
    
    34,991Less amounts representing finance charges
    
    
    7,010
    
    
    
    Present value of minimum lease payments
    
    
    34,991
    
    
    
    34,991
 There were no material finance leases as at January 1, 2008 and December 31, 2008. The finance
lease was entered into by Yuchais subsidiary, YAMC during the year.
 Letter of creditsAs of December 31, 2008 and 2009, Yuchai had issued
irrevocable letter of credits of Rmb 64.9 million and Rmb
60.9 (US$8.9 million), respectively.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  33.
    
    Commitments and contingencies (contd)
 Sale and leasebackDuring the year ended December 31, 2009, in order to fund its business expansion plan in the
current year, YAMC sold 912 equipments to CBD Leasing Company Limited for Rmb 40 million. These
equipments were the major production machinery of YAMC. The lease agreements include a buy back
provision which allows YAMC to purchase the assets at the end of the lease term. The equipments
were leased back for approximately Rmb 48,672 and accounted for as the assets owned by
YAMC at the present value of the minimum lease payment of Rmb 40,058. Depreciation was provided by
the management on a straight-line basis over the useful life of the assets.
 Product liabilityThe General Principles of the Civil Law of China and the Industrial Product Quality Liability
Regulations imposes that manufacturers and sellers are liable for loss and injury caused by
defective products. Yuchai and its subsidiaries do not carry product liability insurance. Yuchai
and its subsidiaries have not had any significant product liability claims brought against them.
 Environmental liabilityChina adopted its Environmental Protection Law in 1989, and the State Council and the State
Environmental Protection Agency promulgate regulations as required from time to time. The
Environmental Protection Law addresses issues relating to environmental quality, waste disposal and
emissions, including air, water and noise emissions. Environmental regulations have not had a
material impact on Yuchais results of operations. Yuchai delivers, on a regular basis, burned sand
and certain other waste products to a waste disposal site approved by the local government and
makes payments in respect thereof. Yuchai expects that environmental standards and their
enforcement in China will, as in many other countries, become more stringent over time, especially
as technical advances make achievement of higher standards more feasible. Yuchai has built an air
filter system to reduce the level of dust and fumes resulting from its production of diesel
engines. The PRC emission standard equivalent to Euro III is implemented throughout China from
2008.In addition, emission standard equivalent to Euro I was implemented on August 31, 2004. After that
date, the engines equipped with Euro I engines cannot be sold and used in major urban area. The
manufacture and sale of Euro II engines is expected to be progressively phased out starting June
30, 2008 and the PRC emission standard equivalent to Euro III has been implemented progressively
throughout China from July 1, 2008. There can be no assurance that Yuchai will be able to comply
with these emission standards or that the introduction of these and other environmental regulations
will not result in a material adverse effect on our business, financial condition and results of
operations.Yuchai is subject to Chinese national and local environmental protection regulations which
currently impose fees for the discharge of waste substances, require the payment of fines for
pollution, and provide for the closure by the Chinese government of any facility that fails to
comply with orders requiring Yuchai to cease or improve upon certain activities causing
environmental damage. Due to the nature of its business, Yuchai produces certain amounts of waste
water, gas, and solid waste materials during the course of its production. Yuchai believes its
environmental protection facilities and systems are adequate for it to comply with the existing
national, provincial and local environmental protection regulations. However, Chinese national,
provincial or local authorities may impose additional or more stringent regulations which would
require additional expenditure on environmental matters or changes in our processes or systems.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  33.
    
    Commitments and contingencies (contd)
 Dispute with Bank of ChinaIn 2003, the Yulin Branch of Bank of China (BOC) initiated legal proceedings to recover Rmb 6,603
from Yuchai based on an irrevocable letter of guarantee issued by Yuchai to the BOC in 1993 to
secure a loan of US$550 to Great Wall Machinery Plant (Great Wall). At trial, a Yulin court ruled
that if Great Wall could not pay the loan, Yuchai would be liable to pay the guaranteed sum to the
BOC. Yuchai appealed unsuccessfully.In January 2004, the State Holding Company issued a letter of commitment confirming that it would
reimburse Yuchai in the event that Yuchai was required to pay on this guarantee.Based on the advice from the Companys Legal Counsel, the Company has recorded a loss contingency
equal to the amount of the claim. The amounts due to the BOC and from the State Holding Company
have been recorded in Accrued expenses and other liabilities and Amounts due from related
parties, respectively.In 2008 and 2009, there was no new development in this case.
 GuaranteesYEGCL provides guarantees of loans granted by commercial banks in the PRC to unrelated third-party
individuals who have obtained the loans to purchase automobiles equipped with diesel engines
produced by Yuchai. During the years ended December 31, 2005 and 2006, YEGCL guaranteed new
borrowings of Rmb 153,538 and Rmb 88,991, respectively. YEGCL ceased issuing guarantees on new
borrowings from late 2006. The guarantees cover the entire principal amount of the loan, which
generally has a term of one to two years with equal monthly or quarterly installment payments by
the borrower. The guarantees are secured by cash deposits from the individual to YEGCL and by the
automobile. In the event of defaults on payment, YEGCL would be required under its guarantee to
make payments to the banks on behalf of the borrowers.In return for issuing the guarantee, YEGCL receives a premium fee ranging from 1% to 3% of the loan
amount for the years ending December 31, 2008 and 2009, respectively, which is considered to be the
fair value of YEGCLs guarantee at its inception and is recorded as a liability in accordance with
the provisions of IAS 39. The Group received Rmb nil of premium fees in 2008 and 2009,
respectively, which are included in Accrued expenses and other liabilities and recognized as
revenue on a straight line basis over the terms of the respective guarantee. Guarantee fees
recognized as revenue in 2008 and 2009 amounted to Rmb 628 and Rmb 54 (US$8), respectively. As of
January 1, 2008, December 31, 2008 and December 31, 2009, deferred guarantee fee revenue amounted
to Rmb 682, Rmb 54 and Rmb nil (US$nil), respectively.Subsequent to initial measurement and recognition of the liability for YEGCLs obligations under
with these loan guarantees, management evaluates YEGCLs guarantee portfolio and accounts for
potential loss contingencies associated with the guarantees based on the estimated losses resulting
from known and expected defaults. Each guarantee is secured by a cash deposit from the borrower and
a security interest in the automobile purchased by the borrower. As of December 31, 2008 and 2009,
YEGCL had gross receivables of Rmb 15,382 and Rmb 12,557 (US$1,839), respectively, relating to
payments made by YEGCL to the banks in conjunction with loans that had been defaulted and to be
recovered from the individual borrowers. YEGCL recorded a bad debt allowance in the amount of Rmb 12,209 and Rmb 12,273 (US$1,798) for other receivables, and Rmb 1,409 and Rmb 236 for potential
losses associated with the guarantee at December 31, 2008 and 2009 respectively. The net receivables
amount of Rmb 3,173 and Rmb 284 (US$42), is included in Other receivables, net in the
accompanying consolidated balance sheets (See Note 24).
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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  33.
    
    Commitments and contingencies (contd)
 Guarantees (contd)As of December 31, 2008 and 2009, the maximum potential amount of future undiscounted payments
YEGCL could be required to make under the guarantees was Rmb 16,643 and Rmb 12,050 (US$1,765),
respectively. YEGCL held cash deposits of Rmb 2,596 and Rmb 1,237 (US$181) as of December 31, 2008
and 2009 and security interests in automobiles with an aggregate initial purchase value of Rmb 351,566 and
Rmb 181,164 (US$26,538) as of December 31, 2008 and 2009, respectively. If, in the
event of default the cash deposits and the amount of recoveries, if any, from repossession of the
automobiles may not entirely mitigate YEGCLs losses then, YEGCL accumulates the total expected
risk against the total expected recoverable amount and provides for any expected shortfall.
Accordingly, management recorded an accrual for potential losses associated with the guarantees in
the amount of Rmb 1,409 and Rmb 236 (US$35) as of December 31, 2008 and 2009, respectively,
included in Accrued expenses and other liabilities.
 34.
    
    Segment information
 For management purposes, the group is organised into business units based on their products and
services, and has three reportable operating segments as follows:
    
    Yuchai primarily conducts manufacturing and sale of diesel engines which are mainly distributed in
the PRC market.
    
    The TCL group primarily conducts distribution of consumer electronic products with operations
mainly in the PRC (including Hong Kong). TCL also has other business activities relating to
contract manufacturing, property development and investment in the PRC. This segment has been
classified as a discontinued operation during the financial year.
    
    The HLGE group is engaged in hospitality and property development activities conducted mainly in
the PRC and Malaysia.HLGE and TCL are each listed on the Main Board of the Singapore Exchange Securities Trading
Limited.Management monitors the operating results of its business units separately for the purpose of
making decisions about resource allocation and performance assessment. Segment performance is
evaluated based on operating profit or loss which in certain respects, as explained in the table
below, is measured differently from operating profit or loss in the consolidated financial
statements. Group financing (including finance costs) and income taxes are managed on a group basis
and are not allocated to operating segments.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  34.
    
    Segment information (contd)
 Adjustments
    
    ConsolidatedYear ended
    
    
    
    
    
    
    
    
    
    TCL
    
    and
    
    financialDecember 31, 2009
    
    Yuchai
    
    HLGE
    
    (Discontinued)
    
    eliminations
    
    statementsRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000RevenueExternal customers
    
    
    13,161,087
    
    
    
    14,816
    
    
    
    
    
    
    
    
    
    
    
    13,175,903Inter-segment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    13,161,087
    
    
    
    14,816
    
    
    
    
    
    
    
    
    
    
    
    13,175,903ResultsInterest income
    
    
    29,674
    
    
    
    1,788
    
    
    
    
    
    
    
    107
    1
    
    
    31,569Interest expense
    
    
    (72,069
    )
    
    
    (21,160
    )
    
    
    
    
    
    
    15,736
    1
    
    
    (77,493
    )Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impairment of property,
plant and equipment
    
    
    (7,785
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,785
    )Depreciation and
amortisation
    
    
    (275,240
    )
    
    
    (2,659
    )
    
    
    
    
    
    
    (7,415
    )2
    
    
    (285,314
    )Share of profits of
associates
    
    
    2,714
    
    
    
    240
    
    
    
    
    
    
    
    
    
    
    
    2,954Share of losses of joint
ventures
    
    
    (83
    )
    
    
    (15,917
    )
    
    
    
    
    
    
    
    
    
    
    (16,000
    )Income tax
(expense)/credit
    
    
    (130,430
    )
    
    
    702
    
    
    
    
    
    
    
    (17,495
    )3
    
    
    (147,223
    )Segment profit
    
    
    1,027,837
    
    
    
    (24,323
    )
    
    
    
    
    
    
    (36,846
    )4
    
    
    966,668Total assets
    
    
    11,905,224
    
    
    
    521,469
    
    
    
    321,487
    
    
    
    557,731
    5
    
    
    13,305,911Total liabilities
    
    
    7,333,157
    
    
    
    596,377
    
    
    
    
    
    
    
    (33,413
    )6
    
    
    7,896,121Other disclosuresInvestment in associates
    
    
    5,615
    
    
    
    34,029
    
    
    
    
    
    
    
    
    
    
    
    39,644Investment in joint
ventures
    
    
    67,418
    
    
    
    129,570
    
    
    
    
    
    
    
    
    
    
    
    196,988Capital expenditure
    
    
    734,555
    
    
    
    46,778
    
    
    
    
    
    
    
    
    
    
    
    781,333
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  34.
    
    Segment information (contd)
 Adjustments
    
    ConsolidatedYear ended
    
    
    
    
    
    
    
    
    
    TCL
    
    and
    
    financialDecember 31, 2008
    
    Yuchai
    
    HLGE
    
    (Discontinued)
    
    eliminations
    
    statementsRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000RevenueExternal customers
    
    
    10,384,022
    
    
    
    20,766
    
    
    
    
    
    
    
    
    
    
    
    10,404,788Inter-segment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    10,384,022
    
    
    
    20,766
    
    
    
    
    
    
    
    
    
    
    
    10,404,788ResultsInterest income
    
    
    8,623
    
    
    
    5,153
    
    
    
    
    
    
    
    1,452
    1
    
    
    15,228Interest expense
    
    
    (134,245
    )
    
    
    (36,497
    )
    
    
    
    
    
    
    20,333
    1
    
    
    (150,409
    )Goodwill impairment
    
    
    (5,675
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,675
    )Impairment of property,
plant and equipment and
prepaid operating assets
    
    
    (69,930
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69,930
    )Depreciation and
amortisation
    
    
    (262,633
    )
    
    
    (2,381
    )
    
    
    
    
    
    
    (7,614
    )2
    
    
    (272,628
    )Share of profits of
associates
    
    
    1,761
    
    
    
    956
    
    
    
    
    
    
    
    
    
    
    
    2,717Share of profits of
joint ventures
    
    
    
    
    
    
    13,692
    
    
    
    
    
    
    
    
    
    
    
    13,692Income tax
(expense)/credit
    
    
    (95,249
    )
    
    
    5
    
    
    
    
    
    
    
    (15,282
    )3
    
    
    (110,526
    )Segment profit
    
    
    507,777
    
    
    
    (4,388
    )
    
    
    
    
    
    
    (21,647
    )4
    
    
    481,742Total assets
    
    
    8,539,153
    
    
    
    595,329
    
    
    
    
    
    
    
    833,162
    5
    
    
    9,967,644Total liabilities
    
    
    4,770,199
    
    
    
    639,874
    
    
    
    
    
    
    
    (57,388
    )6
    
    
    5,352,685Other disclosuresInvestment in associates
    
    
    7,261
    
    
    
    33,896
    
    
    
    287,443
    
    
    
    
    
    
    
    328,600Investment in joint
ventures
    
    
    
    
    
    
    164,979
    
    
    
    
    
    
    
    
    
    
    
    164,979Capital expenditure
    
    
    728,572
    
    
    
    2,099
    
    
    
    
    
    
    
    
    
    
    
    730,671
 Adjustments
    
    ConsolidatedTCL
    
    and
    
    financialAs at January 1, 2008
    
    Yuchai
    
    HLGE
    
    (Discontinued)
    
    eliminations
    
    statementsRmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000Total assets
    
    
    7,845,506
    
    
    
    747,744
    
    
    
    
    
    
    
    1,239,389
    5
    
    
    9,832,639Total liabilities
    
    
    4,419,576
    
    
    
    805,789
    
    
    
    
    
    
    
    267,400
    6
    
    
    5,492,765Other disclosuresInvestment
in associates
    
    
    4,431
    
    
    
    36,657
    
    
    
    411,679
    
    
    
    
    
    
    
    452,767Investment
in joint ventures
    
    
    
    
    
    
    160,125
    
    
    
    
    
    
    
    
    
    
    
    160,125
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  34.
    
    Segment information (contd)
 1.
    
    Included here are interest income and expense of the holding
entitys interest income and expense and inter-segment interest income and expense are eliminated on consolidation.2.
    
    Included here are the depreciation of the holding entitys fixed assets and additional
depreciation on HLGEs investment property and property, plant and equipments valued at fair
value in excess of costs.3.
    
    This relates mainly to the withholding tax provisions for dividends that are expected to be
paid from income earned after December 31, 2007 by Yuchai that has not been remitted.4.
    
    Profit for each operating segment does not include income tax expense and (loss)/profit after
tax for the year from discontinued operations.5.
    
    Segment assets included goodwill and other assets of holding entity and increase in value of
HLGEs property, plant and equipment based on fair value in excess of costs.6.
    
    Segment liabilities consist of the liabilities of the holding entity.
 Geographic informationRevenues from external customers:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000China
    
    
    10,359,511
    
    
    
    13,162,087
    
    
    
    1,928,030Other countries
    
    
    45,277
    
    
    
    13,816
    
    
    
    2,024Total
    
    
    10,404,788
    
    
    
    13,175,903
    
    
    
    1,930,054
 The revenue information above is based on the location of the customer.Revenue from one customer group amounted to Rmb 2,496,199 (US$365,652) (2008: Rmb 1,941,102),
arising from sales by Yuchai segment.
 Non-current assets
 1.1.2008
    
    31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000China
    
    
    1,498,696
    
    
    
    1,563,006
    
    
    
    2,224,210
    
    
    
    325,810Other countries
    
    
    1,743,482
    
    
    
    1,727,684
    
    
    
    1,721,403
    
    
    
    252,158Total
    
    
    3,242,178
    
    
    
    3,290,690
    
    
    
    3,945,613
    
    
    
    577,968
 Non-current assets for this purpose consist of property, plant & equipment, prepaid operating
leases, investment joint ventures, investment properties and goodwill.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  35.
    
    Financial risk management objectives and policies
 The Groups principal financial liabilities comprise loans and borrowings, trade and other
payables, and financial guarantee contracts. The main purpose of these financial liabilities is to
raise finance for the Groups operations. The Group has loan, trade and other receivables, and cash
and short-term deposits that derive directly from its operations. The Group also holds
available-for-sale investments.The Group is exposed to market risk, credit risk and liquidity risk.
 Market riskMarket risk is the risk that changes in market prices, such as interest rates, foreign exchange
rates and equity prices will affect the Groups income or the value of its holdings of financial
instruments. The objective of the market risk management is to manage and control market risk
exposures within acceptable parameters while optimizing the return on risk.
 Interest rate riskThe primary source of the Groups interest rate risk relates to interest bearing bank deposits and
its borrowings from banks and financial institutions. The interest bearing borrowings of the
Group are disclosed in Note 19 to the financial statements. As certain rates are based on
interbank offer rates, the Group is exposed to cash flow interest rate risk. This risk is not
hedged. Interest bearing bank deposits are short to medium-term in nature but given the
significant cash and bank balances held by the Group, any variation in the interest rates may have
a material impact on the results of the Group.The Group manages its interest rate risk by having a mixture of fixed and variable rates for its
deposits and borrowings.
 Interest rate sensitivityThe sensitivity analyses below have been determined based on the exposure to interest rates for
bank deposits and interest bearing financial liabilities at the end of the reporting period and the
stipulated change taking place at the beginning of the year and held constant throughout the
reporting period in the case of instruments that have floating rates. A 50 basis point increase or
decrease is used and represents managements assessment of the possible change in interest rates.If interest rate had been 50 basis points higher or lower and all other variables were held
constant, the profit for the year ended December 31, 2009 of the Group would increase/decrease by
Rmb 12.9 million (US$1.9 million) (2008 : profit decrease/increase by Rmb 2.5 million).
 Foreign currency riskThe Group is exposed to foreign currency risk on sales, purchases and borrowings that are
denominated in currencies other than the respective functional currencies of entities within the
Group. The currencies giving rise to this risk are primarily the Singapore dollar, Ringgit
Malaysia, Chinese Renminbi and United States dollar.Foreign currency translation exposure is managed by incurring debt in the operating currency so
that where possible operating cash flows can be primarily used to repay obligations in the local
currency. This also has the effect of minimising the exchange differences recorded against
income, as the exchange differences on the net investment are recorded directly against equity.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  35.
    
    Financial risk management objectives and policies (contd)
 The Groups exposures to foreign currency are as follows:
 December 31, 2008UnitedSingapore
    
    Euro
    
    States
    
    ChineseGroup
    
    Dollar
    
    Dollars
    
    Dollar
    
    Renminbi
    
    OthersRMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000Other investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other receivables
    
    
    
    
    
    
    11
    
    
    
    119,155
    
    
    
    33,613
    
    
    
    Cash and cash equivalents
    
    
    758
    
    
    
    
    
    
    
    6,047
    
    
    
    
    
    
    
    Financial liabilities
    
    
    (491,725
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other payables
    
    
    (72,433
    )
    
    
    (908
    )
    
    
    (98,711
    )
    
    
    (1,418
    )
    
    
    (2,827
    )In RMB000
    
    
    (563,400
    )
    
    
    (897
    )
    
    
    26,491
    
    
    
    32,195
    
    
    
    (2,827
    )In US$000
    
    
    (82,529
    )
    
    
    (131
    )
    
    
    3,880
    
    
    
    4,716
    
    
    
    (414
    )
 December 31, 2009UnitedSingapore
    
    Euro
    
    States
    
    ChineseGroup
    
    Dollar
    
    Dollars
    
    Dollar
    
    Renminbi
    
    OthersRMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000Other investments
    
    
    326,058
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other receivables
    
    
    374
    
    
    
    9,171
    
    
    
    135,981
    
    
    
    32,464
    
    
    
    Cash and cash equivalents
    
    
    78,372
    
    
    
    253
    
    
    
    2,636
    
    
    
    
    
    
    
    22Financial liabilities
    
    
    (492,752
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other payables
    
    
    (66,889
    )
    
    
    
    
    
    
    (55,095
    )
    
    
    (1,446
    )
    
    
    (19
    )In RMB000
    
    
    (154,837
    )
    
    
    9,424
    
    
    
    83,522
    
    
    
    31,018
    
    
    
    3In US$000
    
    
    (22,681
    )
    
    
    1,380
    
    
    
    12,235
    
    
    
    4,544
    
    
    
    
 Foreign currency risk sensitivityA 10% strengthening of the following major currencies against the functional currency of each of
the Groups entities at the reporting date would increase/(decrease) profit or loss by the amounts
shown below. This analysis assumes that all other variables, in particular interest rates, remain
constant.
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Profit before tax
    
    Profit before tax
    
    Profit before taxSingapore dollar
    
    
    (56,340
    )
    
    
    (15,484
    )
    
    
    (2,268
    )Euro dollar
    
    
    (90
    )
    
    
    942
    
    
    
    138United
States dollar
    
    
    2,649
    
    
    
    8,352
    
    
    
    1,224Chinese Renminbi
    
    
    3,220
    
    
    
    3,102
    
    
    
    454
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  35.
    
    Financial risk management objectives and policies (contd)
 Equity price riskThe Group has investment in TCL which is quoted.Equity price risk sensitivityA 10% increase/(decrease) in the underlying prices at the reporting date would increase/(decrease)
equity by the following amount:
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Equity
    
    
    
    
    
    
    907
    
    
    
    133
 Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial
instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk
from its operating activities (primarily for trade receivables and loan notes) and from its
financing activities, including deposits with banks and financial institutions, foreign exchange
transactions and other financial instruments.Credit risks related to receivables: Customer credit risk is managed by each business unit subject
to the Groups established policy, procedures and control relating to customer credit risk
management. Credit limits are established for all customers based on internal rating criteria.Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing
basis. Credit evaluations are performed for all customers requiring credit over a certain amount.The Group establishes an allowance for impairment that represents its estimate of incurred losses
in respect of trade and other receivables. The main components of this allowance are a specific
loss component that relates to individually significant exposures, and a collective loss component
established for groups of similar assets in respect of losses that have been incurred but not yet
identified. The collective loss allowance is determined based on historical data of payment
statistic for similar financial assets.The allowance account in respect of trade and other receivables is used to record impairment losses
unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the
financial asset is considered irrecoverable and the amount charged to the allowance account is
written off against the carrying amount of the impaired financial asset.At December 31, 2009, the Group had approximately top 20 customers (2008: top 20 customers) that
owed the Group more than Rmb 273 million (US$40 million) and accounted for approximately 70% (2008: 56%) of accounts receivables (excluding bills receivables) owing respectively. These customers are
located in the PRC. There were 22 customers (2008: 35 customers) with balances greater than Rmb 1
million (US$0.1 million) accounting for just over 81.0% (2008: 79.9%) of total accounts receivable
(excluding bills receivables). The maximum exposure to credit risk at the reporting date is the
carrying value of each class of financial assets mentioned in Note 23. The Group does not hold
collateral as security.Cash and fixed deposits are placed with banks and financial institutions which are regulated.
 F-102




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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  35.
    
    Financial risk management objectives and policies (contd)
 Liquidity riskThe Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed
adequate by management to finance the Groups operations and to mitigate the effects of
fluctuations in cash flows, and having adequate amounts of committed credit facilities.The table below summarises the maturity profile of the Groups financial liabilities based on
contractual undiscounted payments.
 One year
    
    One to fiveAs at December 31, 2009
    
    or less
    
    years
    
    TotalRmb000
    
    Rmb000
    
    Rmb000Financial assets:Trade and bill receivables
    
    
    2,506,701
    
    
    
    
    
    
    
    2,506,701Other receivables:
    
    
    
    
    
    
    
    
    
    
    Staff advances
    
    
    7,394
    
    
    
    
    
    
    
    7,394Amounts due under
guarantee contracts,
net
    
    
    12,557
    
    
    
    
    
    
    
    12,557Land deposits
    
    
    5,000
    
    
    
    
    
    
    
    5,000Associates
    
    
    44,662
    
    
    
    
    
    
    
    44,662Other related parties
    
    
    20,310
    
    
    
    61,222
    
    
    
    81,532Others
    
    
    91,627
    
    
    
    
    
    
    
    91,627Cash and cash equivalents
    
    
    3,657,981
    
    
    
    
    
    
    
    3,657,9816,346,232
    
    
    
    61,222
    
    
    
    6,407,454Financial liabilities:Interest-bearing loans and borrowings
    
    
    479,322
    
    
    
    641,324
    
    
    
    1,120,646Preference shares
    
    
    485
    
    
    
    1,634
    
    
    
    2,119Trade and other payables
    
    
    6,187,048
    
    
    
    
    
    
    
    6,187,048Finance lease liabilities
    
    
    
    
    
    
    34,991
    
    
    
    34,9916,666,855
    
    
    
    677,949
    
    
    
    7,344,804
 F-103




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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  35.
    
    Financial risk management objectives and policies (contd)
 Liquidity risk (contd)
 One year
    
    One to fiveAs at December 31, 2008
    
    or less
    
    years
    
    TotalRmb000
    
    Rmb000
    
    Rmb000Financial assets:Trade and bill receivables
    
    
    2,538,135
    
    
    
    
    
    
    
    2,538,135Other receivables:Staff advances
    
    
    1,590
    
    
    
    
    
    
    
    1,590Amounts due under guarantee
contracts, net
    
    
    15,382
    
    
    
    
    
    
    
    15,382Land deposits
    
    
    5,000
    
    
    
    
    
    
    
    5,000Recoverable from Malkn Sdn Bhd
    
    
    22,671
    
    
    
    
    
    
    
    22,671Associates
    
    
    91,027
    
    
    
    
    
    
    
    91,027Other related parties
    
    
    53,894
    
    
    
    61,475
    
    
    
    115,369Others
    
    
    34,122
    
    
    
    
    
    
    
    34,122Cash and cash equivalents
    
    
    823,695
    
    
    
    
    
    
    
    823,6953,585,516
    
    
    
    61,475
    
    
    
    3,646,991Financial liabilities:Interest-bearing loans and borrowings
    
    
    1,194,444
    
    
    
    179,198
    
    
    
    1,373,642Preference shares
    
    
    
    
    
    
    2,075
    
    
    
    2,075Trade and other payables
    
    
    3,572,614
    
    
    
    
    
    
    
    3,572,614Finance lease liabilities
    
    
    5
    
    
    
    5
    
    
    
    104,767,063
    
    
    
    181,278
    
    
    
    4,948,341
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  35.
    
    Financial risk management objectives and policies (contd)
 Liquidity risk (contd)
 One year
    
    One to fiveAs at January 1, 2008
    
    or less
    
    years
    
    TotalRmb000
    
    Rmb000
    
    Rmb000Financial assets:Trade and bill receivables
    
    
    3,109,244
    
    
    
    
    
    
    
    3,109,244Other receivables:Staff advances
    
    
    8,071
    
    
    
    
    
    
    
    8,071Amounts due under guarantee
contracts, net
    
    
    20,162
    
    
    
    
    
    
    
    20,162Land deposits
    
    
    5,000
    
    
    
    
    
    
    
    5,000Recoverable from Malkn Sdn Bhd
    
    
    35,122
    
    
    
    
    
    
    
    35,122Associates
    
    
    17,373
    
    
    
    
    
    
    
    17,373Other related parties
    
    
    145,702
    
    
    
    65,223
    
    
    
    210,925Others
    
    
    (28,140
    )
    
    
    
    
    
    
    (28,140
    )Cash and cash equivalents
    
    
    759,837
    
    
    
    
    
    
    
    759,8374,072,371
    
    
    
    65,223
    
    
    
    4,137,594Financial liabilities:Interest-bearing loans and borrowings
    
    
    1,325,206
    
    
    
    322,409
    
    
    
    1,647,615Preference shares
    
    
    
    
    
    
    2,286
    
    
    
    2,286Trade and other payables
    
    
    3,693,444
    
    
    
    
    
    
    
    3,693,444Finance lease liabilities
    
    
    5
    
    
    
    10
    
    
    
    155,018,655
    
    
    
    324,705
    
    
    
    5,343,360
 F-105




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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  36.
    
    Capital management
 The Group manages its capital to ensure that entities in the Group will be able to continue as a
going concern while maximising the return to stakeholders through the optimisation of the debt and
equity balance except where decisions are made to exit businesses or close companies.The capital structure of the Group consists of debts (which includes the borrowings and trade and
other payables, less cash and cash equivalents) and equity attributable to owners of the Group
(comprising issued capital and reserves).
 31.12.2008
    
    31.12.2009
    
    31.12.2009Rmb000
    
    Rmb000
    
    US$000Interest-bearing loans and
    
    
    1,325,488
    
    
    
    1,079,048
    
    
    
    158,063borrowings (Note 19)Trade and other payables (Note
29)
    
    
    3,604,128
    
    
    
    6,190,246
    
    
    
    906,770Less cash and cash equivalents
(Note 25)
    
    
    (823,695
    )
    
    
    (3,657,981
    )
    
    
    (535,834
    )Net debt
    
    
    4,105,921
    
    
    
    3,611,313
    
    
    
    528,999Equity
    
    
    4,614,959
    
    
    
    5,409,790
    
    
    
    792,446Total capital and net debt
    
    
    8,720,880
    
    
    
    9,021,103
    
    
    
    1,321,445
 The Group manages its capital structure and makes adjustments to it, in light of changes in
economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares.No changes were made in the objectives, policies or processes during the years ending December 31,
2009 and 2008.
 37.
    
    Fair values of financial instruments
 The carrying amounts of trade and bills receivables, other receivables, cash and cash equivalents,
interest-bearing loans and borrowings, preference shares, trade and other payables and finance
lease liabilities approximate their fair value due to their short term nature.The carrying amount of other receivables (long term)
and interest bearing loans and borrowings (long-term) approximate their fair value as their interest rates approximate the
market lending rate.
 F-106




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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  38.
    
    Events after the balance sheet date
 (a)
    
    S$16.5 million credit facility with Bank of Tokyo-Mitsubishi, UFJ Ltd, Singapore Branch (BOTM)On March 17, 2010, the Company entered into a new facility agreement with BOTM to re-finance
the existing revolving credit facility. The new unsecured, multi-currency revolving credit
facility has a committed aggregated value of S$16.5 million with one year duration. The new
facility will be used to finance the Companys long-term general working capital
requirements. Among other things, the terms of the facility require that Hong Leong Asia Ltd.
(HLA) retains ownership of the Companys special share and that the Company remains a
consolidated subsidiary of HLA. The terms of the facility also include certain financial
covenants with respect to the Companys tangible net worth (as defined in the agreement) as
at 30 June and 31 December of each year not being less than US$120 million and the ratio of
the Companys total net debt (as defined in the agreement) to tangible net worth as at 30
June and 31 December of each year not exceeding 2.0 times, as well as negative pledge
provisions and customary drawdown requirements.(b)
    
    US$30.0 million credit facility with SumitomoOn March 30, 2010, the Company entered into an unsecured multi-currency revolving credit
facility agreement with Sumitomo for an aggregate of US$30.0 million to refinance the US$40.0
million facility that was due to mature on March 30, 2010. The facility is available for one
year from the date of the facility agreement and will be utilized by the Company to finance
its long-term general working capital requirements. The terms of the facility require, among
other things, that HLA retains ownership of the special share and that the Company remains a
principal subsidiary (as defined in the facility agreement) of HLA. The terms of the facility
also include certain financial covenants with respect to the Companys consolidated tangible
net worth (as defined in the agreement) as at 30 June and 31 December of each year not less
than US$200 million and the ratio of our total consolidated net debt (as defined in the
agreement) to tangible net worth as at 30 June and 31 December of each year not exceeding 2.0
times, as well as negative pledge provisions and customary drawdown requirements. The
Company has also undertaken to make available to the bank within 180 days after the end of
its financial year (beginning with financial year 2007), copies of its audited consolidated
accounts as at the end of and for that financial year.(c)
    
    HLGE S$93 million Loan AgreementOn February 3, 2010, Venture Lewis has agreed to extend the 2009 loan by extending the grant
of the S$93 million unsecured loan for a further term of one year from July 3, 2010 to July
3, 2011, upon the terms and conditions of the loan agreement dated February 3, 2010. The
terms of the 2010 loan are substantially similar to those of the 2009 loan. The 2010 loan
carries interest at the rate of 3.42% per annum, being aggregate of the margin of 2.5% per
annum and the SIBOR rate of 0.92% per annum, and is renewable by mutual agreement on an
annual basis.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  38.
    
    Events after the balance sheet date (contd)
 (d)
    
    Mandatory conversion of series B redeemable convertible preference shares
(Series B Preference Shares)As announced by HLGE on February 12, 2010, an aggregate of 18,935,883 Series B Preference
Shares in the capital of HLGE shall be mandatorily converted into an aggregate of 18,935,883
Ordinary Shares on March 18, 2010, being the Market Day immediately following the fifth
(5th) anniversary of the date of issue of the Series B Preference Shares.Article 8B(6) of the Articles provides that if the conversion of all or any part of the
Series B Preference Shares held by any holder of Series B Preference Shares (a) is not
permitted by law or regulations or (b) will trigger any obligation to make a general offer by
such holder or its concert parties under the Singapore Code on Take-overs and Mergers, such
holder will be permitted to convert only such number of Series B Preference Shares held by it
as will not (i) result in the breach of such law or regulations or (ii) trigger any take-over
obligation on the Mandatory Conversion Date. Such holder will have the option to convert the
remaining number of Series B Preference Shares at the Series B Preference Share Conversion
Ratio into Ordinary Shares (subject to the adjustment provisions under Article 8B(7) of the
Articles) over a period of twenty-two (22) months commencing after the Mandatory Conversion
Date (the Extension Period), without the requirement of the passing of a Series B
Preference Share Special Resolution, by giving a notice in writing to HLGE.So as not to trigger a take-over obligation on the Mandatory Conversion Date, Grace Star
Services Ltd. (Grace Star), a substantial shareholder of HLGE, has given written notice to
HLGE dated February 11, 2010 informed that pursuant to Article 8B(6) of the Articles, Grace
Star will only be converting 17,300,000 out of the 93,229,170 Series B Preference Shares held
by it under the Mandatory Conversion, with an option to convert the remaining 75,929,170
Series B Preference Shares held by it into Ordinary Shares during the Extension Period.Following the Mandatory Conversion, the total number of Ordinary Shares will increase to
872,901,230 Ordinary Shares and 75,929,170 Series B Preference Shares will remain in issue.
HLGE also has 14,202,139 Series A Redeemable Convertible Preference Shares and 313,152
Non-Redeemable Convertible Cumulative Preference Shares in issue as at the date hereof.On February 10, 2010, the Group has indicated that it has no objections to the use of the
proceeds from disposal of certain assets of HLGE to meet HLGEs debts as and when they are
due.(e)
    
    Changes in shareholding of HLGEWith the conversion of 17,300,000 Existing HLGE RCPS B into HLGE ordinary shares on the
Mandatory Conversion Date, the Companys shareholding interest in HLGE increased from 45.4%
to 46.4% with effect from March 24, 2010 upon receipt of regulatory approval.
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