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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, 2010
 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
    
    Bermuda(Translation of Registrants Name
    
    (Jurisdiction of Incorporation orInto English)
    
    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 Information
    
    3Cautionary Statements with respect to Forward-Looking Statements
    
    4Part IItem 1. Identity of Directors, Senior Management and Advisers
    
    5Item 2. Offer Statistics and Expected Timetable
    
    5Item 3. Key Information
    
    5Item 4. Information on the Company
    
    30Item 4A. Unresolved Staff Comments
    
    53Item 5. Operating and Financial Review and Prospects
    
    53Item 6. Directors, Senior Management and Employees
    
    76Item 7. Major Shareholders and Related Party Transactions
    
    86Item 8. Financial Information
    
    91Item 9. The Offer and Listing
    
    93Item 10. Additional Information
    
    94Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    110Item 12. Description of Securities Other Than Equity Securities
    
    114Part IIItem 13. Defaults, Dividend Arrearages and Delinquencies
    
    114Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    114Item 15. Controls and Procedures
    
    114Item 16A. Audit Committee Financial Expert
    
    117Item 16B. Code of Ethics
    
    117Item 16C. Principal Accountants Fees and Services
    
    118Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    118Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    118Item 16F. Change in Registrants Certifying Accountant
    
    118Item 16G. Corporate Governance
    
    119Part IIIItem 17. Financial Statements
    
    119Item 18. Financial Statements
    
    120Item 19. Exhibits
    
    121Signatures
    
    123Exhibit Index
    
    124Consolidated Financial Statements
    
    F-1EX-8.1 Subsidiaries of the RegistrantEX 12.1 Certifications furnished pursuant to Section 302 of the Sarbanes-Oxley ActEX-13.1 Certifications furnished pursuant to Section 906 of the Sarbanes-Oxley Act
   2




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Certain Definitions and Supplemental Information
       3




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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 and current volatility in stock markets around the
world caused by various factors, including the growing geopolitical unrest in the Middle East,
United Nations approved military action against Libya and the natural disasters and nuclear
crisis occurring in Japan, 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;
 
    
    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 (YC4D), 4110 (YC4E), 4112 (YC4G),
4F, 4G, 6105 (YC6J), 6108 (YC6A and YC6B), 6112 (YC6G), 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;
  4




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
    
    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 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.
  
 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
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Amount in conformity with IFRS:
 IFRSYear ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    US$(in thousands)Selected Consolidated Statement of Income Data:Revenues, net
    
    
    10,404,788
    
    
    
    13,175,903
    
    
    
    16,208,184
    
    
    
    2,472,116Gross profit
    
    
    2,049,136
    
    
    
    2,545,818
    
    
    
    4,008,931
    
    
    
    611,453Research and development costs
    
    
    (184,794
    )
    
    
    (297,259
    )
    
    
    (324,123
    )
    
    
    (49,436
    )Operating profit
    
    
    615,742
    
    
    
    854,257
    
    
    
    1,949,672
    
    
    
    297,369Other income, net
    
    
    19,460
    
    
    
    77,555
    
    
    
    87,628
    
    
    
    13,365Equity in income/(loss), net of affiliates
    
    
    16,409
    
    
    
    (13,046
    )
    
    
    (54,023
    )
    
    
    (8,239
    )Profit before tax from continuing operations
    
    
    481,742
    
    
    
    966,668
    
    
    
    1,765,203
    
    
    
    269,234Income tax expenses
    
    
    (110,526
    )
    
    
    (147,223
    )
    
    
    (327,946
    )
    
    
    (50,019
    )Profit from continuing operations
    
    
    371,216
    
    
    
    819,445
    
    
    
    1,437,257
    
    
    
    219,215(Loss)/profit after tax for the year from discontinued operations
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    12,655
    
    
    
    1,930Profit for the year
    
    
    337,231
    
    
    
    832,467
    
    
    
    1,449,912
    
    
    
    221,145Attributable to owners of the Parent
    
    
    240,036
    
    
    
    628,331
    
    
    
    1,117,297
    
    
    
    170,413Non-controlling interests
    
    
    97,195
    
    
    
    204,136
    
    
    
    332,615
    
    
    
    50,732Basic and diluted earnings per common share attributable to
ordinary equity holders of the Parent
    
    
    6.44
    
    
    
    16.86
    
    
    
    29.98
    
    
    
    4.57Profit from continuing operations per share
    
    
    9.96
    
    
    
    21.99
    
    
    
    38.57
    
    
    
    5.88Profit for the year per share
    
    
    9.05
    
    
    
    22.34
    
    
    
    38.91
    
    
    
    5.93Weighted average number of shares
    
    
    37,268
    
    
    
    37,268
    
    
    
    37,268
    
    
    
    37,268
  7




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As of December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010Rmb
    
    
    Rmb
    
    
    Rmb
    
    

US$ (1)(in thousands)Selected Consolidated Balance Sheet Data:Working capital (2)
    
    
    977,190
    
    
    
    1,429,011
    
    
    
    2,488,296
    
    
    
    379,521Property, plant and equipment, net
    
    
    2,548,736
    
    
    
    2,975,169
    
    
    
    3,276,302
    
    
    
    499,711Trade accounts and bills receivable, net
    
    
    2,538,135
    
    
    
    2,506,701
    
    
    
    4,234,475
    
    
    
    645,854Short-term bank loans
    
    
    1,148,732
    
    
    
    667,173
    
    
    
    423,543
    
    
    
    64,600Trade and other payables
    
    
    3,604,128
    
    
    
    6,190,246
    
    
    
    7,902,317
    
    
    
    1,205,283Total assets
    
    
    9,967,644
    
    
    
    13,305,911
    
    
    
    16,246,263
    
    
    
    2,477,924Long-term bank loans
    
    
    176,756
    
    
    
    411,875
    
    
    
    201,850
    
    
    
    30,787Non-controlling interests
    
    
    1,169,779
    
    
    
    1,360,459
    
    
    
    1,687,980
    
    
    
    257,455Equity attributable to owners of the Parent
    
    
    3,445,180
    
    
    
    4,049,331
    
    
    
    5,097,947
    
    
    
    777,552
 Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010Rmb
    
    
    Rmb
    
    
    Rmb
    
    

US$ (1)(in thousands)Selected Consolidated Statement of Cash
Flows Data:Net cash provided by operating activities
    
    
    697,180
    
    
    
    3,969,358
    
    
    
    1,464,964
    
    
    
    223,440Capital expenditures (3)
    
    
    376,440
    
    
    
    780,836
    
    
    
    629,626
    
    
    
    96,032
 Amount in conformity with US GAAP:
 US GAAPYear ended December 31,2006
    
    
    2007Rmb
    
    
    Rmb(in thousands)Selected Consolidated Statement of Income Data:Revenues, net
    
    
    6,920,528
    
    
    
    9,556,303Gross profit
    
    
    1,272,121
    
    
    
    1,944,718Research and development costs
    
    
    (167,653
    )
    
    
    (153,146
    )Operating profit
    
    
    304,479
    
    
    
    841,556Other income, net
    
    
    38,856
    
    
    
    53,554Equity in (loss)/income, net of affiliates
    
    
    (22,449
    )
    
    
    14,048Earnings before income taxes and non-controlling interests
    
    
    203,395
    
    
    
    783,914Income tax expenses
    
    
    (30,466
    )
    
    
    (68,518
    )Income before non-controlling interests
    
    
    172,929
    
    
    
    715,396Non-controlling interests in income of consolidated subsidiaries
    
    
    (61,645
    )
    
    
    (189,927
    )Net income
    
    
    111,284
    
    
    
    525,469Basic and diluted earnings per common share
    
    
    2.99
    
    
    
    14.10Weighted average number of shares
    
    
    37,268
    
    
    
    37,268
  8




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As of December 31,2006
    
    
    2007Rmb
    
    
    Rmb(in thousands)Selected Consolidated Balance Sheet Data:Working capital (2)
    
    
    457,449
    
    
    
    1,028,732Property, plant and equipment, net
    
    
    1,795,405
    
    
    
    2,158,246Trade accounts and bills receivable, net
    
    
    1,480,918
    
    
    
    3,107,785Short-term bank loans
    
    
    1,009,134
    
    
    
    819,164Trade accounts payables
    
    
    2,132,798
    
    
    
    2,509,962Total assets
    
    
    7,961,357
    
    
    
    9,579,184Long-term bank loans
    
    
    675,454
    
    
    
    767,929Non-controlling interests
    
    
    693,296
    
    
    
    849,527Total Shareholders equity
    
    
    2,728,399
    
    
    
    3,294,465
 Year ended December 31,2006
    
    
    2007Rmb
    
    
    Rmb(in thousands)Selected Consolidated Statement of Cash Flows Data:Net cash provided by operating activities
    
    
    634,146
    
    
    
    84,554Capital expenditures (3)
    
    
    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 6.5564 = US$1.00, the rate quoted by
the Peoples Bank of China at the close of business on March 31, 2011. 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 31, 2011 or any other date. The rate quoted
by the Peoples Bank of China at the close of business on December 31, 2010 was Rmb 6.6227 =
US$1.00.(2)
    
    Current assets less current liabilities.(3)
    
    Purchase of property, plant and equipment and payment for construction in progress.  9




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Dividends
      10




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Dividend paid by YuchaiDividend paid by the Company
    
    to the Company(1)to its shareholders for the
    
    for the financial year / in the financialFinancial
    
    financial year / in the financial year
    
    yearYear
    
    (per share)
    
    (in thousands)2007
    
    US$0.10 (2)
    
    Rmb 108,313 (US$15,811) (3)2008
    
    US$0.10 (4)
    
    Rmb 72,284 (US$10,564) (5)2009
    
    US$0.10 (6)
    
    Rmb 144,565 (US$21,130) (7)2010
    
    US$0.25 (8)
    
    Rmb 451,775 (US$69,213)(9)2011
    
    Not yet declared
 
 (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 2007, 2008, 2009 and 2010, the exchange rate used was
Rmb 6.8505 = US$1.00,  Rmb 6.8425 = US$1.00,  Rmb 6.8417 = US$1.00
and Rmb 6.5273 = US$1.00 respectively.(2)
    
    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.(3)
    
    The dividend declared for the fiscal year ended December 31, 2007 by Yuchai was paid
to us on August 22, 2008.(4)
    
    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.(5)
    
    The dividend declared by Yuchai for fiscal year ended December 31, 2008 was paid to
us on November 12, 2009.(6)
    
    On September 24, 2009, we declared a 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, 2008. This dividend was paid to the shareholders on October 16, 2009.(7)
    
    The dividend declared by Yuchai for fiscal year ended December 31, 2009 was paid to
us on May 14, 2010.(8)
    
    On March 5, 2010, we declared a dividend of US$0.25 per ordinary share amounting
to US$9.3 million to all shareholders in respect of the fiscal year ended December 31, 2009.
This dividend was paid to the shareholders on March 30, 2010.(9)
    
    The dividend  declared by Yuchai for fiscal year ended December 31,
2010 was paid to us on May 5, 2011.  11




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Historical Exchange Rate Information
    Noon Buying Rate (1)(Rmb per US$1.00)Period
    
    High
    
    
    LowSeptember 2010
    
    
    6.8102
    
    
    
    6.6869October 2010
    
    
    6.6912
    
    
    
    6.6397November 2010
    
    
    6.6892
    
    
    
    6.6330December 2010
    
    
    6.6745
    
    
    
    6.6000January 2011
    
    
    6.6364
    
    
    
    6.5809February 2011
    
    
    6.5965
    
    
    
    6.5520March 2011
    
    
    6.5743
    
    
    
    6.5483
 Noon Buying Rate (1)(Rmb per US$1.00)PeriodPeriod
    
    End
    
    
    Average (2)
    
    
    High
    
    
    Low2006
    
    
    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
    
    
    6.6000
    
    
    
    6.7696
    
    
    
    6.8330
    
    
    
    6.60002011 (through March 31, 2011)
    
    
    6.5483
    
    
    
    6.5783
    
    
    
    6.6364
    
    
    
    6.5483
 
 (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, 2010 was Rmb 6.6227 compared with Rmb 6.7696 for the noon buying rate
(average) for the year ended December 31, 2010.(2)
    
    Determined by averaging the rates on each business day of each month during the
relevant period.  12




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Risk Factors
 Risks relating to our shares and share ownership
 Our controlling shareholders interests may differ from those of our other shareholders.
  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 SEC;
 
    
    changes in financial estimates or recommendations by stock market analysts regarding us, our
competitors or other companies that investors may deem comparable;
  13




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
    
    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
in view of the growing geopolitical unrest in the Middle East which has led to the United
Nations approving of military action against Libya, the renewal of concerns over the sovereign
debt crisis in Europe and the economic impact of the natural disasters and nuclear crisis
occurring in Japan;
 
    
    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.
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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.
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(Source: China Automotive Industry Newsletter for 2007) (Source: China
Automotive Industry Newsletter for 2008). Source: China Association of Automobile Manufacturers
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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.
    17




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We have and may continue to experience disagreements and difficulties with the Chinese shareholders
in Yuchai.
  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.
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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.
    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.
 th
  
    
    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.
   21




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nd
 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 and business.
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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.
   23




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Our insurance coverage may not be adequate to cover risks related to our production and other
operations.
  Risks relating to Mainland China
  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.
   24




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##### Table of Contents



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.
    25




---



##### 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.
   26




---



##### Table of Contents



Risks relating to our investment in HLGE
  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);
  27




---



##### Table of Contents




    
    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.
  The HLGE group may need to raise additional capital.
   28




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##### Table of Contents



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.
   29




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##### Table of Contents



ITEM 4.
    
    INFORMATION ON THE COMPANY.
 History and Development
 The Company
      30




---



##### Table of Contents




    
    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 15, 2011, we had a 47.4% equity interest in HLGE. On March 24, 2011, our equity
interest in HLGE increased to 48.4% as a result of the conversion of a certain number of
Series B redeemable convertible preference shares held by us into 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 15, 2011, we had a 12.2% equity interest in TCL.
     31




---



##### Table of Contents



Yuchai
       32




---



##### Table of Contents



Reorganization Agreement
   33




---



##### Table of Contents



Cooperation Agreement
       34




---



##### Table of Contents



Products and Product Development-Yuchai
   Emission Standards
  New and Enhanced Diesel Engine Products
      35




---



##### Table of Contents



YC6T, YC6C
    36




---



##### Table of Contents



YC8C, YC12VT
    nd
  37




---



##### Table of Contents



SeriesTrucks
    
    YC4BJ, YC4D, YC4E, YC4F, YC4FA, YC4G, YC6A, YC6B, YC6G, YC6J, YC6K, YC6L, YC6M, YC6MKBus
    
    YC6MK, YC6M(CNG), YC6M, YC6L, YC6J, YC6J(CNG), YC6G, YC6G(CNG), YG6A, 4G, 4E, 4D, 4FA, 4FConstruction
    
    YC4A, YC4B, YC4D, YC4F, YC6B, YC6J, YC6M, YC6AAgriculture
    
    YC4A, YC4B, YC6B, YC4D, YC6JMarine
    
    YC4D, YC6M, YC6A/6B, 6T, 6CGenerator-Drive
    
    YC4D, YC6B, YC6A, YC6G, YC6M, YC6MK, YC6T, 6C
 Light-Duty Diesel Engines
  4-Series Light-Duty Diesel Engines
  
    
    The 4108 (YC4D) engine was launched in the market in 2001 based on 6108 (YC6A and YC6B)
engines. The 4108 (YC4D) engine is designed for light trucks and passenger vehicles and
commercial production began in 2001.
 
    
    The 4112 (YC4G) engine was primarily based on the 6112 (YC6G) engine and is designed for use
in light to medium-duty cargo trucks and buses. The 4112 (YC4G) engine also features low
emission characteristics. Commercial production of the engine began in late 2001.
 
    
    The YC4F/YC4FA/YC4G engine is a four-cylinder, four-stroke engine with a rated power ranging
from 90 to 115 PS. The 4F/4FA/4G diesel engines were developed based on technologies from
Germany and Japan for mini buses, trucks and passenger cars. Trial production of the 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.
 
    
    The YC4G was also further developed to be used in hybrid buses. This relatively small diesel
engine coupled with a motor will enable the hybrid bus to power medium to large buses and at
the same time reduce fuel consumption and reduce emissions. The YC4G
is rated at 170-220PS.
  38




---



##### Table of Contents



YC4W Passenger Car Diesel Engine
  Medium-Duty Diesel Engines
 6105 (YC6J) Medium-Duty Diesel Engines
  6108 (YC6A and YC6B) Medium-Duty Diesel Engines
    39




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##### Table of Contents



YC6J
  YC6J/LPG/CNG/Hybrid
  Heavy-Duty Diesel Engines
 6112 (YC6G) Heavy-Duty Diesel Engines
   6L Heavy-Duty Diesel Engines
  6M Heavy-Duty Diesel Engines
   40




---



##### Table of Contents



YC6L/YC6M  CNG
  Industrial Engines
  Other Products
 Diesel Power Generators
  Special Vehicles
  Diesel Engine Parts
  Sales
   41




---



##### Table of Contents



2008
    
    
    2009
    
    
    2010% of
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    % ofRevenues,
    
    
    Revenues,
    
    
    Units
    
    
    Revenues,
    
    
    Revenues,
    
    
    Units
    
    
    Revenues,
    
    
    Revenues,
    
    
    Unitsnet
    
    
    net
    
    
    Sold
    
    
    net
    
    
    net
    
    
    Sold
    
    
    net
    
    
    net
    
    
    SoldRmb (in thousands)Diesel engines6105 (YC6J)
    
    
    2,202,856
    
    
    
    21.2
    %
    
    
    75,633
    
    
    
    2,886,987
    
    
    
    21.9
    %
    
    
    96,486
    
    
    
    3,496,149
    
    
    
    21.6
    %
    
    
    114,8446108 (YC6A and YC6B)
    
    
    1,491,211
    
    
    
    14.3
    %
    
    
    61,734
    
    
    
    1,677,095
    
    
    
    12.7
    %
    
    
    65,834
    
    
    
    2,625,278
    
    
    
    16.3
    %
    
    
    103,5006112 (YC6G)
    
    
    623,459
    
    
    
    6.0
    %
    
    
    11,830
    
    
    
    514,273
    
    
    
    3.9
    %
    
    
    8,455
    
    
    
    715,451
    
    
    
    4.4
    %
    
    
    12,1866L
    
    
    579,568
    
    
    
    5.6
    %
    
    
    8,904
    
    
    
    593,829
    
    
    
    4.5
    %
    
    
    11,156
    
    
    
    1,039,345
    
    
    
    6.4
    %
    
    
    19,0996M
    
    
    452,397
    
    
    
    4.3
    %
    
    
    11,235
    
    
    
    756,701
    
    
    
    5.8
    %
    
    
    17,483
    
    
    
    1,413,696
    
    
    
    8.8
    %
    
    
    32,8624-Series
    
    
    3,534,245
    
    
    
    34.0
    %
    
    
    202,798
    
    
    
    4,891,482
    
    
    
    37.2
    %
    
    
    268,430
    
    
    
    4,780,971
    
    
    
    29.6
    %
    
    
    269,031Diesel power
generators &
others(1)
    
    
    1,500,286
    
    
    
    14.6
    %
    
    
    146
    
    
    
    1,840,720
    
    
    
    14.0
    %
    
    
    55
    
    
    
    2,087,525
    
    
    
    12.9
    %
    
    
    7010,384,022
    
    
    
    100.0
    %
    
    
    372,280
    
    
    
    13,161,087
    
    
    
    100.0
    %
    
    
    467,899
    
    
    
    16,158,415
    
    
    
    100.0
    %
    
    
    551,592
 
 (1)
    
    Others mainly represent the revenues earned through engine parts sales, hotel
incomes, guarantee fees and diesel power generators. Production
    42




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##### Table of Contents



2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % oftotal
    
    
    
    
    
    
    total
    
    
    
    
    
    
    total
    
    
    
    
    
    
    total
    
    
    
    
    
    
    totalUnits
    
    
    Units
    
    
    Units
    
    
    Units
    
    
    Units
    
    
    Units
    
    
    Units
    
    
    Units
    
    
    Units
    
    
    unitsDiesel Engines:6105 (YC6J)
    
    
    66,439
    
    
    
    23.9
    %
    
    
    82,345
    
    
    
    21.4
    %
    
    
    72,779
    
    
    
    21.8
    %
    
    
    104,814
    
    
    
    22.9
    %
    
    
    97,462
    
    
    
    20.9
    %6108 (YC6A and YC6B)
    
    
    39,057
    
    
    
    14.1
    %
    
    
    66,526
    
    
    
    17.3
    %
    
    
    61,169
    
    
    
    18.3
    %
    
    
    66,941
    
    
    
    14.6
    %
    
    
    89,922
    
    
    
    19.3
    %6112 (YC6G)
    
    
    14,358
    
    
    
    5.2
    %
    
    
    12,996
    
    
    
    3.4
    %
    
    
    11,954
    
    
    
    3.6
    %
    
    
    8,909
    
    
    
    1.9
    %
    
    
    12,725
    
    
    
    2.7
    %6L
    
    
    1,366
    
    
    
    0.5
    %
    
    
    5,618
    
    
    
    1.5
    %
    
    
    9,025
    
    
    
    2.7
    %
    
    
    11,483
    
    
    
    2.5
    %
    
    
    17,863
    
    
    
    3.9
    %6M
    
    
    7,331
    
    
    
    2.6
    %
    
    
    15,830
    
    
    
    4.1
    %
    
    
    11,492
    
    
    
    3.4
    %
    
    
    20,122
    
    
    
    4.4
    %
    
    
    35,330
    
    
    
    7.6
    %4-Series
    
    
    149,347
    
    
    
    53.7
    %
    
    
    201,204
    
    
    
    52.3
    %
    
    
    168,058
    
    
    
    50.2
    %
    
    
    245,953
    
    
    
    53.7
    %
    
    
    212,388
    
    
    
    45.6
    %Total
    
    
    277,898
    
    
    
    100.0
    %
    
    
    384,519
    
    
    
    100.0
    %
    
    
    334,477
    
    
    
    100.0
    %
    
    
    458,222
    
    
    
    100.0
    %
    
    
    465,690
    
    
    
    100.0
    %
 Procurement
  Engine Block
  Pump
  Raw Materials
   43




---



##### Table of Contents



Imports
  Quality Assurance, Control & Safety
  Manufacturing Capacity Expansions
  Research and Development
   44




---



##### Table of Contents



Future Products
   Sales, Marketing and Services
 Sales and Marketing
      45




---



##### Table of Contents



Export Sales
  2008
    
    
    2009
    
    
    2010% of
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    % ofSales
    
    
    Sales
    
    
    Unit
    
    
    Sales
    
    
    Sales
    
    
    Unit
    
    
    Sales
    
    
    Sales
    
    
    UnitRevenue
    
    
    Revenue
    
    
    Sales
    
    
    Revenue
    
    
    Revenue
    
    
    Sales
    
    
    Revenue
    
    
    Revenue
    
    
    SalesRmb
    
    
    
    
    
    
    
    
    
    
    Rmb
    
    
    
    
    
    
    
    
    
    
    Rmb(in thousands)
    
    
    
    
    
    
    
    
    
    
    (in thousands)
    
    
    
    
    
    
    
    
    
    
    (in thousands)Total Domestic Sales
    
    
    10,352,114
    
    
    
    99.7
    %
    
    
    371,243
    
    
    
    13,138,630
    
    
    
    99.8
    %
    
    
    467,377
    
    
    
    16,125,550
    
    
    
    99.8
    %
    
    
    550,865Total Export Sales
    
    
    31,908
    
    
    
    0.3
    %
    
    
    1,037
    
    
    
    22,457
    
    
    
    0.2
    %
    
    
    522
    
    
    
    32,865
    
    
    
    0.2
    %
    
    
    72710,384,022
    
    
    
    100.0
    %
    
    
    372,280
    
    
    
    13,161,087
    
    
    
    100.0
    %
    
    
    467,899
    
    
    
    16,158,415
    
    
    
    100.0
    %
    
    
    551,592
     Customer Service
    46




---



##### Table of Contents



Trademarks
  Competition
     47




---



##### Table of Contents



.
      48




---



##### 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 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
 The property comprises a 16-storey building is located in the downtown Shanghai. The property has
119 saleable newly renovated apartment units, meeting rooms and a business centre.
    
    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.
   49




---



##### Table of Contents



The TCL group
      50




---



##### Table of Contents



Organizational Structure
   
  51




---



##### Table of Contents



Regulatory and Related Matters
 Governance, Operation and Dissolution of Yuchai
  force majeure
  Property, Plant and Equipment
   52




---



##### Table of Contents



Environmental Matters
   
 ITEM 4A.
    
    UNRESOLVED STAFF COMMENTS.
  
 ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
   53




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##### Table of Contents



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. 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$64.8 million),
before taking into account dividends and interest income of approximately S$1.9 million
(approximately US$1.5 million), in the aggregate, earned from these investments.
 
    
    As of December 31, 2010, following the completion of the capital reduction and cash
distribution exercise undertaken by TCL and completion of the sale of a total of 536,000,000
shares in TCL at a price of S$0.03 per share on an ex-distribution basis to various purchasers
through a placement exercise, our shareholding interest in TCL was 12.2% and our aggregate
investment in TCL amounted to approximately S$11.2 million (US$8.9 million).
 
    
    As of March 15, 2011, our interest in TCL remained unchanged.
 
    
    We previously accounted for our investment in TCL using the equity method and we have
accordingly classified our investment in TCL as held for trading for the fiscal year ended
December 31, 2010 following the above disposal.
 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$104.8 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.
  54




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##### Table of Contents



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$102.7 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$1.9 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$107.1 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$4.2 million) was paid by the Company in cash.
 
    
    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$108.7 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$5.3 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$14.2 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.
  55




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##### Table of Contents




    
    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$108.3 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$5.3
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$20.6 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$7.1 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 January 31, 2011, we announced the
extension for another one year of the S$93,000,000 loan from July 2011 July 2012. The terms
of the new loan agreement are substantially similar to the previous loan agreement except that
the interest payable has been reduced from 3.42% per annum to 2.52% per annum. On February 16,
2011, HLGE effected a partial prepayment of S$10 million towards the loan to us resulting in a
reduction in the principal amount of the loan from S$93,000,000 to S$83,000,000.
 
    
    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 (Extension Period). With the
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. On September 20, 2010, Grace
Star notified HLGE that it would be converting 16,591,000 Existing HLGE RCPS B into HLGE
ordinary shares and on September 23, 2010, Grace Stars shareholding interest in HLGE
increased from 46.4% to 47.4%. On March 21, 2011, Grace Star notified HLGE that it would be
converting 17,234,000 Existing HLGE RCPS B into HLGE ordinary shares on March 24, 2011, Grace
Stars shareholding interest in HLGE increased from 47.4% to 48.4%. See Item 3. Key
Information  Risk Factors  Risks relating to our investment in HLGE   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.
  56




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Overview
     57




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58




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59




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Critical Accounting Policies
    60




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
    
    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 31,2009
    
    
    2010
    
    
    2010Rmb
    
    
    Rmb
    
    
    US$(in thousands)Balance at beginning of year
    
    
    96,147
    
    
    
    76,646
    
    
    
    11,690Credit to consolidated statements of operations
    
    
    (15,552
    )
    
    
    (15,491
    )
    
    
    (2,363
    )Written off
    
    
    (3,947
    )
    
    
    
    
    
    
    Translation differences
    
    
    (2
    )
    
    
    6
    
    
    
    1Balance at end of Year
    
    
    76,646
    
    
    
    61,161
    
    
    
    9,328
   61




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Realization of the carrying value of inventories
   Product warranty obligations
   62




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December 31,2009
    
    
    2010
    
    
    2010Rmb
    
    
    Rmb
    
    
    US$(in thousands)Balance at beginning of year
    
    
    188,599
    
    
    
    259,534
    
    
    
    39,585Provision charged to consolidated statements of
operations
    
    
    368,284
    
    
    
    498,767
    
    
    
    76,073Amounts utilized
    
    
    (297,349
    )
    
    
    (406,147
    )
    
    
    (61,947
    )Balance at end of year
    
    
    259,534
    
    
    
    352,154
    
    
    
    53,711
  Recoverability of carrying values of equity method investments and other investments
     63




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Realization of deferred tax
       64




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Impairment of long-lived assets, other than goodwill
    
    
    Property, plants and equipments Rmb 1.4 million (US$0.2 million) (2009: Rmb 7.8
million)
    
    Prepaid operating leases Rmb nil (US$ nil) (2009: Rmb nil)
   65




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Results of Operations
  Percentage of Net RevenuesYear Ended December 31,2008
    
    
    2009
    
    
    2010Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    -80.3
    %
    
    
    -80.7
    %
    
    
    -75.3
    %Gross profit
    
    
    19.7
    %
    
    
    19.3
    %
    
    
    24.7
    %Other income
    
    
    0.2
    %
    
    
    0.7
    %
    
    
    0.5
    %Research & development costs
    
    
    -1.8
    %
    
    
    -2.3
    %
    
    
    -2.0
    %Selling, distribution and administrative costs
    
    
    -12.2
    %
    
    
    -11.2
    %
    
    
    -11.2
    %Operating profit
    
    
    5.9
    %
    
    
    6.5
    %
    
    
    12.0
    %Finance costs
    
    
    -1.4
    %
    
    
    -0.6
    %
    
    
    -0.8
    %Share of profit of associates
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Share of results of joint ventures
    
    
    0.1
    %
    
    
    -0.1
    %
    
    
    -0.3
    %Gain on acquisition of Guangxi Yulin Hotel Co in settlement of past loan
    
    
    0.0
    %
    
    
    1.5
    %
    
    
    0.0
    %Profit before tax from continuing operations
    
    
    4.6
    %
    
    
    7.3
    %
    
    
    10.9
    %Income tax expense
    
    
    -1.1
    %
    
    
    -1.1
    %
    
    
    -2.0
    %Profit for the year from continuing operations
    
    
    3.5
    %
    
    
    6.2
    %
    
    
    8.9
    %(Loss)/profit after tax from discontinued operations
    
    
    -0.3
    %
    
    
    0.1
    %
    
    
    0.1
    %Profit for the year
    
    
    3.2
    %
    
    
    6.3
    %
    
    
    9.0
    %Attributable to:Owners of the Parent
    
    
    2.3
    %
    
    
    4.8
    %
    
    
    6.9
    %Non-controlling interest
    
    
    0.9
    %
    
    
    1.5
    %
    
    
    2.1
    %
 2010 compared to 2009
     66




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2009 Compared to 2008
       68




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69




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Inflation
  Seasonality
  Liquidity and Capital Resources
     70




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For Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    US$(in thousands)Net cash provided by operating activities
    
    
    697,180
    
    
    
    3,969,358
    
    
    
    1,464,964
    
    
    
    223,440Net cash used in investing activities
    
    
    (218,427
    )
    
    
    (800,445
    )
    
    
    (386,041
    )
    
    
    (58,880
    )Net cash used in financing activities
    
    
    (398,571
    )
    
    
    (332,725
    )
    
    
    (666,628
    )
    
    
    (101,676
    )Effect of foreign currency exchange on
cash and cash equivalents
    
    
    (16,324
    )
    
    
    (1,902
    )
    
    
    (9,286
    )
    
    
    (1,416
    )Net increase in cash and cash equivalents
    
    
    63,858
    
    
    
    2,834,286
    
    
    
    403,009
    
    
    
    61,468
      71




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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)
    
    
    429.1
    
    
    
    429.1
    
    
    
    
    
    
    
    
    
    
    
    Long-term
debt (1)
    
    
    213.5
    
    
    
    
    
    
    
    213.5
    
    
    
    
    
    
    
    Purchase obligations regarding capital expenditures
    
    
    629.6
    
    
    
    629.6
    
    
    
    
    
    
    
    
    
    
    
    Operating lease commitments
    
    
    36.8
    
    
    
    16.3
    
    
    
    20.5
    
    
    
    
    
    
    
    Total
    
    
    1,309.0
    
    
    
    1,075.0
    
    
    
    234.0
    
    
    
    
    
    
    
    
 
 (1)
    
    Includes contractual interest payments  73




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Capital Expenditures   Off-Balance Sheet Arrangements
   Research and Development
  Recently Issued Accounting Standards
  IAS 24 Related Party Disclosures (Amendment)
   74




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IAS 32 Financial Instruments: Presentation  Classification of Rights Issues (Amendment)
  IFRS 9 Financial Instruments: Classification and Measurement
  IFRIC 14 Prepayments of a minimum funding requirement (Amendment)
  IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
  Improvements to IFRSs (issued in May 2010)
 Improvements to IFRSs
 
    
    IFRS 3 Business Combinations
    
    IFRS 7 Financial Instruments: Disclosures
    
    IAS 1 Presentation of Financial Statements
    
    IAS 27 Consolidated and Separate Financial Statements
    
    IFRIC 13 Customer Loyalty Programmes
   75




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ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.
 Directors and Executive Officers of the Company
   76




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Year First Elected orAppointed DirectorName
    
    Position
    
    or OfficerSAW Boo Guan(1)
    
    President and Director
    
    
    2009GAN Khai Choon (1)(4)
    
    Director
    
    
    1995KWEK Leng Peck(1)(2)
    
    Director
    
    
    1994TAN Eng Kwee(3)
    
    Director
    
    
    2010NEO Poh Kiat (1)(2)(3)
    
    Director
    
    
    2005TAN Aik-Leang(1)(3)
    
    Director
    
    
    2005Matthew RICHARDS(2)(3)
    
    Director
    
    
    2006CHING Yew Chye
    
    Director
    
    
    2010ZHANG Shi Yong(1)
    
    Director
    
    
    2007HAN Yi Yong(1)
    
    Director
    
    
    2010
 Year First Elected orAppointed DirectorName
    
    Position
    
    or OfficerHOH Weng Ming(1) (4)
    
    Chief Financial Officer
    
    
    2008FOO Shing Mei Deborah
    
    General Counsel
    
    
    2007Ira Stuart OUTERBRIDGE III
    
    Secretary
    
    
    2001
  
 (1)
    
    Also a Director of Yuchai.(2)
    
    Member of the Compensation Committee.(3)
    
    Member of the Audit Committee.(4)
    
    Also a Director of HLGE.   77




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79




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Audit Committee
  Compensation Committee
  Directors and Executive Officers of Yuchai
   80




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Year First Elected orAppointed DirectorName
    
    Position
    
    Position or OfficerYAN Ping
    
    Chairman of the Board of Directors
    
    
    2005SAW Boo Guan (1)
    
    Deputy Chairman of the Board of Directors
    
    
    2009Wu Qiwei
    
    Director and General Manager
    
    
    2011GAN Khai Choon(1)
    
    Director
    
    
    2007KWEK Leng Peck(1)
    
    Director
    
    
    2005NEO Poh Kiat(1)
    
    Director
    
    
    2008TAN Aik-Leang(1)
    
    Director
    
    
    2005HOH Weng Ming
    
    Director
    
    
    2008HAN Yi Yong(1)
    
    Director and Company Secretary
    
    
    2010GU Tangsheng
    
    Assistant to Chairman and Director
    
    
    2005ZHANG Shi Yong(1)
    
    Director
    
    
    2007GAO Jia Lin
    
    Director
    
    
    2011TAY Hui Boon Kelly(2)
    
    Financial Controller
    
    
    2008LEE See Bee Patrick (2)
    
    Vice President, International Sales
    
    
    2009CHENG Ningbin
    
    Deputy General Manager
    
    
    2011ZHONG Yu Wei
    
    Deputy General Manager
    
    
    2010NING Xingyong
    
    Deputy General Manager
    
    
    2009LIANG Qinyan
    
    Deputy General Manager
    
    
    2009QIN Xiaohong
    
    Chief Accountant
    
    
    2007SHEN Jie
    
    General Engineer
    
    
    2002
  
 (1)
    
    Also a Director of the Company.(2)
    
    Secondees of the Company, whose salaries and expenses are paid by the Company.    81




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82




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Yuchai
      83




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84




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Compensation
 Company
     85




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Yuchai
   Employees
   
 ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
 Major Shareholders
   PercentageIdentity of Person or Group
    
    Number
    
    
    (%)Hong Leong Asia Ltd(1)
    
    
    10,523,313
    
    
    
    28.2
    %The Yulin City Government(2)
    
    
    6,709,322
    
    
    
    18.0
    %Shah Capital Management (3)
    
    
    2,002,796
    
    
    
    5.4
    %
 
 (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, October 28, 2009 and
August 30, 2010. Hong Leong Asia is the
beneficial owner of and exercises control over the 10,523,313 shares of Common Stock or
approximately 28.2% of the total number of shares of Common Stock 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.  86




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(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 13F filed by Shah Capital Management with the SEC
on February 9, 2011 for the quarter ended December 31, 2010.  The Special Share
     87




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Related Party Transactions
 Shareholders Agreement
    88




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Registration Rights Agreement
  Reorganization Agreement and Cooperation Agreement
   Other Transactions
    89




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90




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ITEM 8.
    
    FINANCIAL INFORMATION.
 Consolidated Financial Statements
  Legal Proceedings
  Proceedings with Yuchai
   91




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Other Legal Proceedings
    92




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ITEM 9.
    
    THE OFFER AND LISTING.
   US$
    
    
    US$Period
    
    High
    
    
    Low2006
    
    
    10.00
    
    
    
    4.532007
    
    
    13.85
    
    
    
    6.872008
    
    
    11.98
    
    
    
    2.492009
    
    
    17.37
    
    
    
    3.172010
    
    
    32.45
    
    
    
    12.302011 (through March 31, 2011)
    
    
    32.98
    
    
    
    23.00
 US$
    
    
    US$Period
    
    High
    
    
    Low2009 First Quarter
    
    
    5.49
    
    
    
    3.172009 Second Quarter
    
    
    8.89
    
    
    
    4.482009 Third Quarter
    
    
    10.50
    
    
    
    6.602009 Fourth Quarter
    
    
    17.37
    
    
    
    8.602010 First Quarter
    
    
    19.92
    
    
    
    12.302010 Second Quarter
    
    
    21.68
    
    
    
    13.732010 Third Quarter
    
    
    19.49
    
    
    
    15.172010 Fourth Quarter
    
    
    32.45
    
    
    
    18.752011 First Quarter (through March 31)
    
    
    32.98
    
    
    
    23.00
 US$
    
    
    US$Period
    
    High
    
    
    LowOctober 2010
    
    
    26.00
    
    
    
    18.75November 2010
    
    
    29.23
    
    
    
    23.10December 2010
    
    
    32.45
    
    
    
    25.51January 2011
    
    
    32.98
    
    
    
    26.21February 2011
    
    
    30.95
    
    
    
    24.22March 2011 (through March 31, 2011)
    
    
    29.62
    
    
    
    23.00
  93




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##### Table of Contents



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.
    
     Four of our ten
directors, Messrs. Neo Poh Kiat,
Tan Aik-Leang, Matthew Richards and
Ching Yew Chye are independent
within the meaning of the NYSE
standards.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.
  94




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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. One
of the members of our audit
committee, Mr. Tan Eng Kwee,
qualifies for the exemption under
Rule 10A-3(b)(iv)(D) under the
Securities Exchange Act of 1934.
See Item 16D, Exemptions from the
Listing Standards for Audit
Committee. 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 four members,
three of whom meets the
independence requirements of both
the NYSE rules and Rule 10A-3 under
the Exchange Act and the fourth
appointed pursuant to the exemption
under Rule 10A-3(b)(1)(iv)(D) under
the Securities Exchange Act of
1934. See Item 16D, Exemptions
from the Listing Standards for
Audit Committee. 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.
    
     Our audit committees charter outlines the
committees purpose and responsibilities which are
similar in scope to those required of US companies.
  95




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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 internal auditors and the
independent auditors.
    
     Our audit committee assesses
the auditors independence on an ongoing
basis by reviewing all relationships
between the company and its auditor. It
has established the companys hiring
guidelines for employees and former
employees of the independent auditor. The
committee also discusses 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 earning
guidance provided to analysts and rating
agencies, and policies with respect to
risk assessment and risk management. It
also meets separately, periodically, with
management, the internal 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.
  96




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##### Table of Contents



Standard for US Domestic Listed
    
    China Yuchai International LimitedsCompanies
    
    Practice 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- compensation plans and material revisions thereto, with
limited exceptions.
    
     We intend to have our
shareholders approve equity-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.
  97




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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.
   98




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##### Table of Contents



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.
   99




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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
    100




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Limitations on Rights to Own Securities
  inter alia
  Exchange Controls
 Bermuda Exchange Controls
    101




---



##### Table of Contents



China Exchange Controls
      102




---



##### Table of Contents



Taxation
 Bermuda Taxation
   Peoples Republic of China Taxation
   103




---



##### Table of Contents



Taxation of Dividends from Yuchai
  Taxation of Disposition of Yuchai Shares
     104




---



##### Table of Contents



Income Tax
      105




---



##### Table of Contents



Urban Maintenance & Construction Tax and Education Surcharges
  Value-Added Tax
    106




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##### Table of Contents



United States Federal Income Taxation
  
    
    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.
  107




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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
    Taxation of Capital Gains
   108




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##### Table of Contents



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
 
    
    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.
   109




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##### Table of Contents



New Legislation
  Documents on Display
  
 ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
   Market risk
  Interest rate risk
   110




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Interest rate sensitivity
   Foreign currency risk
    111




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December 31, 2009UnitedSingapore
    
    
    Euro
    
    
    States
    
    
    ChineseGroup
    
    Dollar
    
    
    Dollars
    
    
    Dollar
    
    
    Renminbi
    
    
    OthersRmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb(in thousands)Other 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
    )Rmb
    
    
    (154,837
    )
    
    
    9,424
    
    
    
    83,522
    
    
    
    31,018
    
    
    
    3US$
    
    
    (23,616
    )
    
    
    1,437
    
    
    
    12,739
    
    
    
    4,731
    
    
    
    
 December 31, 2010UnitedSingapore
    
    
    Euro
    
    
    States
    
    
    ChineseGroup
    
    Dollar
    
    
    Dollars
    
    
    Dollar
    
    
    Renminbi
    
    
    OthersRmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb(in thousands)Other investments
    
    
    59,615
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other receivables
    
    
    424
    
    
    
    20,072
    
    
    
    122,757
    
    
    
    35,290
    
    
    
    18Cash and cash equivalents
    
    
    90,804
    
    
    
    
    
    
    
    3,117
    
    
    
    
    
    
    
    Financial liabilities
    
    
    (152,772
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other payables
    
    
    (44,901
    )
    
    
    (674
    )
    
    
    (48,281
    )
    
    
    (4,453
    )
    
    
    (20
    )Rmb
    
    
    (46,830
    )
    
    
    19,398
    
    
    
    77,593
    
    
    
    30,837
    
    
    
    (2
    )US$
    
    
    (7,143
    )
    
    
    2,959
    
    
    
    11,835
    
    
    
    4,703
    
    
    
    
   2009
    
    
    2010
    
    
    2010Rmb
    
    
    Rmb
    
    
    US$(in thousands)Profit before tax
    
    
    Profit before tax
    
    
    Profit before taxSingapore dollar
    
    
    (15,484
    )
    
    
    (4,683
    )
    
    
    (714
    )Euro dollar
    
    
    942
    
    
    
    1,940
    
    
    
    296United States dollar
    
    
    8,352
    
    
    
    7,759
    
    
    
    1,184Chinese Renminbi
    
    
    3,102
    
    
    
    3,084
    
    
    
    470
  112




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##### Table of Contents



Equity price risk
    2009
    
    
    2010
    
    
    2010Rmb
    
    
    Rmb
    
    
    US$(in thousands)Equity
    
    
    4,606
    
    
    
    5,663
    
    
    
    864
  113




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##### Table of Contents



Number of
    
    
    Value as at 31 December
    
    
    Value as at 31 Decembershares
    
    
    2009
    
    
    2010Rmb
    
    
    Rmb
    
    
    US$(in millions)
    
    
    (in millions)
    
    
    (in millions)TCL
    
    
    898,990,352
    
    
    
    327.5
    
    
    
    
    
    
    
    TCL
    
    
    318,737,352
    
    
    
    
    
    
    
    56.6
    
    
    
    8.6
 
 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
    114




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##### Table of Contents



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
    
    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.
   Improper elimination of intercompany transactions and balances
   115




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##### Table of Contents



Improper recording of Purchase Price Allocation (PPA)
   C. Remediation Measures to address Material Weaknesses identified
  (i)
    
    Provided training at Yuchai relating to accounting for taxes and consolidation under
IFRS;(ii)
    
    Implemented procedures for quarterly closing and consolidation activities at Yuchai;
and(iii)
    
    Monitored the Yuchai closing processes on a quarterly basis to ensure adherence to the
designed policies and procedures.
  Improper elimination of intercompany transactions and balances
   116




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##### Table of Contents



Improper recording of Purchase Price Allocation (PPA)
  D. 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
  117




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##### Table of Contents



ITEM 16C.
    
    PRINCIPAL ACCOUNTANTS FEES AND SERVICES.
  Audit fees
    
    
    Audit-related fees
    
    
    Tax fees
    
    
    Others
    
    
    TotalRmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb(in thousands)2009
    
    
    7,333
    
    
    
    
    
    
    
    
    
    
    
    717
    
    
    
    8,0502010
    
    
    7,285
    
    
    
    
    
    
    
    
    
    
    
    89
    
    
    
    7,374
 Audit fees
  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
   118




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##### Table of Contents



ITEM 16G.
    
    CORPORATE GOVERNANCE
  
 PART III
 
 ITEM 17.
    
    FINANCIAL STATEMENTS.
   119




---



##### Table of Contents



ITEM 18.
    
    FINANCIAL STATEMENTS.
 Index to Financial Statements
 China Yuchai International Limited
 Reports of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated
Income Statements  for years ended December 31, 2008, 2009, and 2010
    
    
    F-4Consolidated
Statements of Comprehensive Income for years ended December 31, 2008, 2009 and 2010
    
    
    F-5Consolidated
Statements of Financial Position  as of January 1, 2009, December 31, 2009 and 2010
    
    
    F-6Consolidated Statements
of Changes in Equity for years
ended December 31, 2008, 2009 and 2010
    
    
    F-8Consolidated Statements of Cash Flows for years ended December 31, 2008, 2009 and 2010
    
    
    F-11Notes to the Consolidated Financial Statements for years ended December 31, 2008, 2009 and 2010
    
    
    F-14
  120




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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)).
  121




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##### Table of Contents



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)).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)
   122




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##### Table of Contents



SIGNATURES
  CHINA YUCHAI INTERNATIONAL LIMITEDBy:
    /s/ Saw Boo GuanName:
    Saw Boo GuanTitle:
    President and Director   123




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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)).
  124




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ExhibitNumber
    
    Description of Exhibit4.6
    
    
    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)).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)
   125




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China Yuchai International Limited
 Index
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Income Statements
    
    
    F-4Consolidated Statements of Comprehensive Income
    
    
    F-5Consolidated Statements of Financial Position
    
    
    F-6Consolidated Statements of Changes in Equity
    
    
    F-8Consolidated Statements of Cash Flows
    
    
    F-11Notes to the Consolidated Financial Statements
    
    
    F-14
  F-1




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




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##### 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




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##### 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
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Continuing operationsSales of goods
    
    8
    
    
    10,358,124
    
    
    
    13,139,578
    
    
    
    16,138,580
    
    
    
    2,461,500Rendering of services
    
    8
    
    
    46,664
    
    
    
    36,325
    
    
    
    69,604
    
    
    
    10,616Revenue
    
    8
    
    
    10,404,788
    
    
    
    13,175,903
    
    
    
    16,208,184
    
    
    
    2,472,116Cost of sales (goods)
    
    
    
    
    (8,328,058
    )
    
    
    (10,612,260
    )
    
    
    (12,112,215
    )
    
    
    (1,847,388
    )Cost of sales (services)
    
    
    
    
    (27,594
    )
    
    
    (17,825
    )
    
    
    (87,038
    )
    
    
    (13,275
    )Gross profit
    
    
    
    
    2,049,136
    
    
    
    2,545,818
    
    
    
    4,008,931
    
    
    
    611,453Other operating income
    
    9.2a
    
    
    28,465
    
    
    
    93,668
    
    
    
    129,075
    
    
    
    19,687Other operating expenses
    
    9.2b
    
    
    (9,005
    )
    
    
    (16,113
    )
    
    
    (41,447
    )
    
    
    (6,322
    )Research and development costs
    
    9.1, 9.3
    
    
    (184,794
    )
    
    
    (297,259
    )
    
    
    (324,123
    )
    
    
    (49,436
    )Selling, distribution and administrative costs
    
    9.1
    
    
    (1,268,060
    )
    
    
    (1,471,857
    )
    
    
    (1,822,764
    )
    
    
    (278,013
    )Operating profit
    
    
    
    
    615,742
    
    
    
    854,257
    
    
    
    1,949,672
    
    
    
    297,369Finance costs
    
    9.4
    
    
    (150,409
    )
    
    
    (77,493
    )
    
    
    (130,446
    )
    
    
    (19,896
    )Share of profit of associates
    
    6
    
    
    2,717
    
    
    
    2,954
    
    
    
    (121
    )
    
    
    (18
    )Share of results of joint ventures
    
    7
    
    
    13,692
    
    
    
    (16,000
    )
    
    
    (53,902
    )
    
    
    (8,221
    )Gain on acquisition of Guangxi Yulin Hotel Company in settlement of past loan
    
    31
    
    
    
    
    
    
    202,950
    
    
    
    
    
    
    
    Profit before tax from continuing operations
    
    
    
    
    481,742
    
    
    
    966,668
    
    
    
    1,765,203
    
    
    
    269,234Income tax expense
    
    10
    
    
    (110,526
    )
    
    
    (147,223
    )
    
    
    (327,946
    )
    
    
    (50,019
    )Profit for the year from continuing operations
    
    
    
    
    371,216
    
    
    
    819,445
    
    
    
    1,437,257
    
    
    
    219,215Discontinued operations(Loss)/profit after tax for the year from discontinued operations
    
    11
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    12,655
    
    
    
    1,930Profit for the year
    
    
    
    
    337,231
    
    
    
    832,467
    
    
    
    1,449,912
    
    
    
    221,145Attributable to:Owners of the Parent
    
    
    
    
    240,036
    
    
    
    628,331
    
    
    
    1,117,297
    
    
    
    170,413Non-controlling interests
    
    
    
    
    97,195
    
    
    
    204,136
    
    
    
    332,615
    
    
    
    50,732337,231
    
    
    
    832,467
    
    
    
    1,449,912
    
    
    
    221,145Earnings per share
    
    12For profit from continuing operations:- basic, profit for the year attributable to ordinary equity holders of the Parent
    
    
    
    
    7.35
    
    
    
    16.51
    
    
    
    29.64
    
    
    
    4.52- diluted, profit for the year attributable to ordinary equity holders of the Parent
    
    
    
    
    7.35
    
    
    
    16.51
    
    
    
    29.64
    
    
    
    4.52For profit for the year:- basic, profit for the year attributable to ordinary equity holders of the Parent
    
    
    
    
    6.44
    
    
    
    16.86
    
    
    
    29.98
    
    
    
    4.57- diluted, profit for the year attributable to ordinary equity holders of the Parent
    
    
    
    
    6.44
    
    
    
    16.86
    
    
    
    29.98
    
    
    
    4.57Weighted average number of shares- basic
    
    
    
    
    37,267,673
    
    
    
    37,267,673
    
    
    
    37,267,673
    
    
    
    37,267,673- diluted
    
    
    
    
    37,267,673
    
    
    
    37,267,673
    
    
    
    37,267,673
    
    
    
    37,267,673
 The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
  F-4




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##### Table of Contents



China Yuchai International Limited
 
 Consolidated Statements of Comprehensive Income
 (Rmb and US$ amounts expressed in thousands, except per share data)
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Profit for the year
    
    
    337,231
    
    
    
    832,467
    
    
    
    1,449,912
    
    
    
    221,145Other comprehensive (loss)/incomeForeign currency translation
    
    
    10,343
    
    
    
    (11,201
    )
    
    
    (22,084
    )
    
    
    (3,369
    )Share of other comprehensive
(loss)/ income of associates
    
    
    (90,265
    )
    
    
    21,038
    
    
    
    
    
    
    
    Others
    
    
    4,740
    
    
    
    (647
    )
    
    
    
    
    
    
    Other comprehensive
(loss)/income for the year, net
of tax
    
    
    (75,182
    )
    
    
    9,190
    
    
    
    (22,084
    )
    
    
    (3,369
    )Total comprehensive income for
the year, net of tax
    
    
    262,049
    
    
    
    841,657
    
    
    
    1,427,828
    
    
    
    217,776Attributable to:Owners of the Parent
    
    
    151,984
    
    
    
    640,908
    
    
    
    1,102,048
    
    
    
    168,087Non-controlling interests
    
    
    110,065
    
    
    
    200,749
    
    
    
    325,780
    
    
    
    49,689262,049
    
    
    
    841,657
    
    
    
    1,427,828
    
    
    
    217,776
 The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
  F-5




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##### Table of Contents



China Yuchai International Limited
 
 Consolidated Statements of Financial Position
 (Rmb and US$ amounts expressed in thousands, except per share data)
 Note
    
    1.1.2009
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000(Restated)
    
    
    (Restated)AssetsNon-current assetsProperty, plant and equipment
    
    13
    
    
    2,548,736
    
    
    
    2,975,169
    
    
    
    3,276,302
    
    
    
    499,711Investment properties
    
    14
    
    
    34,146
    
    
    
    33,852
    
    
    
    35,811
    
    
    
    5,462Prepaid operating leases
    
    15
    
    
    159,156
    
    
    
    355,931
    
    
    
    407,468
    
    
    
    62,148Goodwill
    
    16
    
    
    212,636
    
    
    
    212,636
    
    
    
    212,636
    
    
    
    32,432Intangible assets
    
    17
    
    
    
    
    
    
    
    
    
    
    13,389
    
    
    
    2,042Investment in associates
    
    6
    
    
    328,600
    
    
    
    39,644
    
    
    
    38,610
    
    
    
    5,889Investment in joint ventures
    
    7
    
    
    336,016
    
    
    
    368,025
    
    
    
    514,313
    
    
    
    78,444Other receivables
    
    18
    
    
    61,475
    
    
    
    72,183
    
    
    
    65,533
    
    
    
    9,995Deferred tax asset
    
    10
    
    
    145,233
    
    
    
    241,718
    
    
    
    294,934
    
    
    
    44,984Other investments
    
    
    
    
    6,765
    
    
    
    6,761
    
    
    
    6,364
    
    
    
    9713,832,763
    
    
    
    4,305,919
    
    
    
    4,865,360
    
    
    
    742,078Current assetsInventories
    
    21
    
    
    2,250,044
    
    
    
    2,130,026
    
    
    
    2,632,860
    
    
    
    401,571Trade and bills receivables
    
    23
    
    
    2,538,135
    
    
    
    2,506,701
    
    
    
    4,234,475
    
    
    
    645,854Prepayments
    
    
    
    
    150,581
    
    
    
    97,092
    
    
    
    107,834
    
    
    
    16,447Other receivables
    
    24
    
    
    223,686
    
    
    
    181,550
    
    
    
    211,126
    
    
    
    32,202Income tax recoverable
    
    
    
    
    46,296
    
    
    
    6,680
    
    
    
    3,964
    
    
    
    604Prepaid operating leases
    
    15
    
    
    6,151
    
    
    
    7,273
    
    
    
    11,004
    
    
    
    1,678Other current assets
    
    22
    
    
    96,293
    
    
    
    91,202
    
    
    
    118,650
    
    
    
    18,097Cash and cash equivalents
    
    25
    
    
    823,695
    
    
    
    3,657,981
    
    
    
    4,060,990
    
    
    
    619,3936,134,881
    
    
    
    8,678,505
    
    
    
    11,380,903
    
    
    
    1,735,846Assets classified as held for sale
    
    11
    
    
    
    
    
    
    321,487
    
    
    
    
    
    
    
    6,134,881
    
    
    
    8,999,992
    
    
    
    11,380,903
    
    
    
    1,735,846Total assets
    
    
    
    
    9,967,644
    
    
    
    13,305,911
    
    
    
    16,246,263
    
    
    
    2,477,924Equity and liabilitiesEquity attributable to owners of the ParentIssued capital
    
    26
    
    
    1,724,196
    
    
    
    1,724,196
    
    
    
    1,724,196
    
    
    
    262,979Preference shares
    
    26
    
    
    36
    
    
    
    36
    
    
    
    21
    
    
    
    3Statutory reserves
    
    28
    
    
    287,473
    
    
    
    291,686
    
    
    
    292,064
    
    
    
    44,546Capital reserves
    
    
    
    
    2,942
    
    
    
    2,942
    
    
    
    2,932
    
    
    
    447Retained earnings
    
    
    
    
    1,527,006
    
    
    
    2,125,059
    
    
    
    3,178,910
    
    
    
    484,856Other components of equity
    
    
    
    
    (96,473
    )
    
    
    (84,927
    )
    
    
    (100,176
    )
    
    
    (15,279
    )Reserve of asset classified as held for sale
    
    
    
    
    
    
    
    
    (9,661
    )
    
    
    
    
    
    
    Equity attributable to owners of the Parent
    
    
    
    
    3,445,180
    
    
    
    4,049,331
    
    
    
    5,097,947
    
    
    
    777,552Non-controlling interests
    
    
    
    
    1,169,779
    
    
    
    1,360,459
    
    
    
    1,687,980
    
    
    
    257,455Total equity
    
    
    
    
    4,614,959
    
    
    
    5,409,790
    
    
    
    6,785,927
    
    
    
    1,035,007
 The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
  F-6




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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
    
    1.1.2009
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Restated
    
    
    RestatedRmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Non-current liabilitiesInterest-bearing loans and
borrowings
    
    19(b)
    
    
    176,756
    
    
    
    411,875
    
    
    
    201,850
    
    
    
    30,787Other liabilities
    
    19(a)
    
    
    2,080
    
    
    
    26,877
    
    
    
    18,869
    
    
    
    2,878Deferred tax liability
    
    10
    
    
    16,158
    
    
    
    31,840
    
    
    
    77,274
    
    
    
    11,786Deferred grants
    
    20
    
    
    
    
    
    
    176,035
    
    
    
    269,736
    
    
    
    41,141194,994
    
    
    
    646,627
    
    
    
    567,729
    
    
    
    86,592Current liabilitiesTrade and other payables
    
    29
    
    
    3,604,128
    
    
    
    6,190,246
    
    
    
    7,902,317
    
    
    
    1,205,283Interest-bearing loans and
borrowings
    
    19(b)
    
    
    1,148,732
    
    
    
    667,173
    
    
    
    423,543
    
    
    
    64,600Provision for taxation
    
    
    
    
    13,277
    
    
    
    122,308
    
    
    
    204,850
    
    
    
    31,245Other liabilities
    
    19(a)
    
    
    5
    
    
    
    10,233
    
    
    
    9,743
    
    
    
    1,486Provision for product warranty
    
    30
    
    
    188,599
    
    
    
    259,534
    
    
    
    352,154
    
    
    
    53,711Deferred gain
    
    31
    
    
    202,950
    
    
    
    
    
    
    
    
    
    
    
    5,157,691
    
    
    
    7,249,494
    
    
    
    8,892,607
    
    
    
    1,356,325Total liabilities
    
    
    
    
    5,352,685
    
    
    
    7,896,121
    
    
    
    9,460,336
    
    
    
    1,442,917Total equity and liabilities
    
    
    
    
    9,967,644
    
    
    
    13,305,911
    
    
    
    16,246,263
    
    
    
    2,477,924
 The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
  F-7




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##### Table of Contents



China Yuchai International Limited
  
 Consolidated Statements of Changes in Equity
 (Rmb and US$ amounts expressed in thousands, except per share data)
 Attributable to the equity holders of the parentForeign
    
    
    
    
    
    
    Per-Issued
    
    
    Preference
    
    
    Statutory
    
    
    
    
    
    
    
    
    
    
    currency
    
    
    Revaluation
    
    
    formance
    
    
    
    
    
    
    Non-capital
    
    
    shares
    
    
    reserves
    
    
    Capital
    
    
    Retained
    
    
    translation
    
    
    reserve
    
    
    shares
    
    
    
    
    
    
    controlling
    
    
    Total(Note 26)
    
    
    (Note 26)
    
    
    (Note 28)
    
    
    reserves
    
    
    earnings
    
    
    reserve
    
    
    (Note i)
    
    
    reserve
    
    
    Total
    
    

interests
    
    
    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
non-controlling interests of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,473
    )
    
    
    (33,473
    )Dividends declared (US$0.10
per share) (Note 27)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,886
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,886
    )
    
    
    
    
    
    
    (25,886
    )Non-controlling 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
 The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
  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)
 Attributable to the equity holders of the parentPremiumReserve of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    paid forasset
    
    
    Foreign
    
    
    
    
    
    
    Per-
    
    
    acquisitionIssued
    
    
    Preference
    
    
    Statutory
    
    
    
    
    
    
    
    
    
    
    classified as
    
    
    currency
    
    
    Revaluation
    
    
    formance
    
    
    of non-
    
    
    
    
    
    
    Non-capital
    
    
    shares
    
    
    reserves
    
    
    Capital
    
    
    Retained
    
    
    held for sale
    
    
    translation
    
    
    reserve
    
    
    shares
    
    
    controlling
    
    
    
    
    
    
    controlling
    
    
    Total(Note 26)
    
    
    (Note 26)
    
    
    (Note 28)
    
    
    reserves
    
    
    earnings
    
    
    (Note 11)
    
    
    reserve
    
    
    (Note i)
    
    
    reserve
    
    
    interests
    
    
    Total
    
    
    interests
    
    
    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
non-controlling 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
    )Non-controlling interests
arising from increase in
share capital of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,225
    
    
    
    37,225Acquisition of
non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,306
    )
    
    
    (19,306
    )Premium paid on acquisition
of non-controlling 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
    
    
    
    5,409,790
 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).
 The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
  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)
 Attributable to the equity holders of the parentPremium paidReserve of
    
    
    
    
    
    
    
    
    
    
    forasset
    
    
    Foreign
    
    
    Per-
    
    
    acquisitionIssued
    
    
    Preference
    
    
    Statutory
    
    
    
    
    
    
    
    
    
    
    classified as
    
    
    currency
    
    
    formance
    
    
    of non-
    
    
    
    
    
    
    Non-capital
    
    
    shares
    
    
    reserves
    
    
    Capital
    
    
    Retained
    
    
    held for sale
    
    
    translation
    
    
    shares
    
    
    controlling
    
    
    
    
    
    
    controlling
    
    
    Total(Note 26)
    
    
    (Note 26)
    
    
    (Note 28)
    
    
    reserves
    
    
    earnings
    
    
    (Note 11)
    
    
    reserve
    
    
    reserve
    
    
    interests
    
    
    Total
    
    
    interests
    
    
    equityRmb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, 2010
    
    
    1,724,196
    
    
    
    36
    
    
    
    291,686
    
    
    
    2,942
    
    
    
    2,125,059
    
    
    
    (9,661
    )
    
    
    (74,150
    )
    
    
    (85
    )
    
    
    (10,692
    )
    
    
    4,049,331
    
    
    
    1,360,459
    
    
    
    5,409,790Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,117,297
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,117,297
    
    
    
    332,615
    
    
    
    1,449,912Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,249
    )
    
    
    
    
    
    
    
    
    
    
    (15,249
    )
    
    
    (6,835
    )
    
    
    (22,084
    )Total comprehensive income
for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,117,297
    
    
    
    
    
    
    
    (15,249
    )
    
    
    
    
    
    
    
    
    
    
    1,102,048
    
    
    
    325,780
    
    
    
    1,427,828Transfer to statutory reserves
    
    
    
    
    
    
    
    
    
    
    378
    
    
    
    
    
    
    
    (378
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends paid to
non-controlling interests of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,631
    )
    
    
    (44,631
    )Dividends declared (US$0.25
per share) (Note 27)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63,078
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63,078
    )
    
    
    
    
    
    
    (63,078
    )Liquidation of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,943
    )
    
    
    (2,943
    )Non-controlling interests
arising from increase in
share capital of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,000
    
    
    
    48,000Conversion of NCCPS
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    15
    
    
    
    Conversion of RCPS B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    1,300Realization of reserves upon
disposal of asset classified
as held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,661
    
    
    
    
    
    
    
    9,661At December 31, 2010
    
    
    1,724,196
    
    
    
    21
    
    
    
    292,064
    
    
    
    2,932
    
    
    
    3,178,910
    
    
    
    
    
    
    
    (89,399
    )
    
    
    (85
    )
    
    
    (10,692
    )
    
    
    5,097,947
    
    
    
    1,687,980
    
    
    
    6,785,927US$
    
    
    262,979
    
    
    
    3
    
    
    
    44,546
    
    
    
    447
    
    
    
    484,856
    
    
    
    
    
    
    
    (13,635
    )
    
    
    (13
    )
    
    
    (1,631
    )
    
    
    777,552
    
    
    
    257,455
    
    
    
    1,035,007
 The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
  F-10




---



##### 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
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Operating activitiesProfit before tax from continuing operations
    
    
    481,742
    
    
    
    966,668
    
    
    
    1,765,203
    
    
    
    269,234(Loss) / profit before tax from discontinued operations
    
    
    (33,731
    )
    
    
    14,321
    
    
    
    12,655
    
    
    
    1,930Profit before tax, total
    
    
    448,011
    
    
    
    980,989
    
    
    
    1,777,858
    
    
    
    271,164Non-cash adjustment to reconcile profit before tax to net
cash flowsGain on acquisition of Guangxi Yulin Hotel Company in
settlement of past loan
    
    
    
    
    
    
    (202,950
    )
    
    
    
    
    
    
    Allowance for doubtful debts made/(written back) (net)
    
    
    25,349
    
    
    
    (41,162
    )
    
    
    (21,725
    )
    
    
    (3,314
    )Allowance for stock obsolescence made/(written back) (net)
    
    
    52,747
    
    
    
    154,700
    
    
    
    (111,763
    )
    
    
    (17,046
    )Depreciation of property, plant and equipment and investment
properties
    
    
    265,834
    
    
    
    277,332
    
    
    
    275,136
    
    
    
    41,964Amortization of prepaid operating leases
    
    
    6,794
    
    
    
    7,982
    
    
    
    11,004
    
    
    
    1,678Dividend income from associates
    
    
    
    
    
    
    (11,162
    )
    
    
    
    
    
    
    Impairment of property, plant and equipment and prepaid
operating leases
    
    
    69,930
    
    
    
    7,785
    
    
    
    1,372
    
    
    
    209Write off of property, plant & equipment
    
    
    912
    
    
    
    5,723
    
    
    
    2,447
    
    
    
    373Write (back) / off of trade and other payables
    
    
    (869
    )
    
    
    (23,649
    )
    
    
    5,249
    
    
    
    801Write back of provision for impairment of receivables-Malkn
    
    
    
    
    
    
    (4,895
    )
    
    
    
    
    
    
    Write back of impairment of investment in joint ventures
    
    
    
    
    
    
    
    
    
    
    (10,936
    )
    
    
    (1,668
    )Impairment of goodwill
    
    
    5,675
    
    
    
    
    
    
    
    
    
    
    
    Share of net (profit) / loss of associates and joint ventures
    
    
    (16,409
    )
    
    
    13,046
    
    
    
    54,023
    
    
    
    8,239Loss on other investments
    
    
    153
    
    
    
    
    
    
    
    
    
    
    
    Negative goodwill
    
    
    (12,368
    )
    
    
    
    
    
    
    
    
    
    
    Exchange loss / (gain) on financing activities
    
    
    3,172
    
    
    
    6,543
    
    
    
    (19,975
    )
    
    
    (3,047
    )Loss on disposal of property, plant and equipment
    
    
    3,525
    
    
    
    8,618
    
    
    
    33,670
    
    
    
    5,135Gain on disposal of associates
    
    
    
    
    
    
    (1,906
    )
    
    
    (707
    )
    
    
    (108
    )Gain on disposal of a subsidiary
    
    
    
    
    
    
    
    
    
    
    (2,833
    )
    
    
    (432
    )Tax refund on reinvestment of net foreign dividend
    
    
    (2,440
    )
    
    
    
    
    
    
    
    
    
    
    Loss on disposal of other investment
    
    
    
    
    
    
    
    
    
    
    261
    
    
    
    40Finance costs
    
    
    150,409
    
    
    
    77,493
    
    
    
    130,446
    
    
    
    19,896Interest income
    
    
    (15,228
    )
    
    
    (31,576
    )
    
    
    (61,719
    )
    
    
    (9,414
    )Profit from discontinued operations
    
    
    33,985
    
    
    
    (13,022
    )
    
    
    (12,655
    )
    
    
    (1,930
    )Fair value gain on held for trading investment securities
    
    
    
    
    
    
    
    
    
    
    (17,123
    )
    
    
    (2,612
    )Changes in working capitalIncrease in inventories
    
    
    (653,827
    )
    
    
    (49,006
    )
    
    
    (409,118
    )
    
    
    (62,401
    )Decrease / (increase) in trade and other receivables
    
    
    338,716
    
    
    
    290,601
    
    
    
    (1,762,932
    )
    
    
    (268,887
    )Increase in trade and other payables
    
    
    3,064
    
    
    
    2,565,933
    
    
    
    1,739,923
    
    
    
    265,380Decrease in balances with related parties
    
    
    89,591
    
    
    
    24,953
    
    
    
    90,243
    
    
    
    13,764(Decrease) / increase in balances with holding company
    
    
    (3,577
    )
    
    
    2,022
    
    
    
    (8,406
    )
    
    
    (1,282
    )Decrease in development properties
    
    
    4,816
    
    
    
    5,393
    
    
    
    33,747
    
    
    
    5,147Income taxes paid
    
    
    (100,785
    )
    
    
    (80,427
    )
    
    
    (250,523
    )
    
    
    (38,209
    )Net cash flows from operating activities
    
    
    697,180
    
    
    
    3,969,358
    
    
    
    1,464,964
    
    
    
    223,440
 The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
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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
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb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
    )
    
    
    (191,906
    )
    
    
    (29,270
    )Dividends received from associates
    
    
    
    
    
    
    16,931
    
    
    
    
    
    
    
    Dividends received from joint ventures
    
    
    10,476
    
    
    
    19,122
    
    
    
    1,733
    
    
    
    264Interest received
    
    
    88,487
    
    
    
    31,578
    
    
    
    61,719
    
    
    
    9,414Purchase of other investments
    
    
    
    
    
    
    (82
    )
    
    
    
    
    
    
    Proceeds from disposal of other
investments
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    26Payment for prepaid operating leases
    
    
    
    
    
    
    (205,879
    )
    
    
    (66,300
    )
    
    
    (10,113
    )Additions of intangible asset
    
    
    
    
    
    
    
    
    
    
    (13,389
    )
    
    
    (2,042
    )Proceeds from sale of property, plant and
equipment
    
    
    37,789
    
    
    
    64,745
    
    
    
    30,410
    
    
    
    4,638Purchase of property, plant and equipment
and construction in progress (includes
interest capitalized)
    
    
    (376,440
    )
    
    
    (780,836
    )
    
    
    (629,626
    )
    
    
    (96,032
    )Proceeds from disposal of a subsidiary,
net of cash
    
    
    2,440
    
    
    
    
    
    
    
    1,902
    
    
    
    290Proceeds from disposal of assets
classified as held for sale
    
    
    
    
    
    
    
    
    
    
    302,655
    
    
    
    46,162Proceeds from disposal of associates
    
    
    
    
    
    
    1,906
    
    
    
    4,000
    
    
    
    610Acquisition of a non-controlling interests
    
    
    
    
    
    
    (29,998
    )
    
    
    
    
    
    
    Proceeds from redemption of
preference shares in an associate
    
    
    
    
    
    
    551
    
    
    
    
    
    
    
    Proceeds from government grants
    
    
    31,514
    
    
    
    150,917
    
    
    
    112,592
    
    
    
    17,173Net cash flows used in investing activities
    
    
    (218,427
    )
    
    
    (800,445
    )
    
    
    (386,041
    )
    
    
    (58,880
    )Financing activitiesDividends paid to non-controlling interests
    
    
    (33,473
    )
    
    
    (27,988
    )
    
    
    (44,631
    )
    
    
    (6,807
    )Dividends paid to equity holders of the
parent
    
    
    (25,886
    )
    
    
    (25,457
    )
    
    
    (63,078
    )
    
    
    (9,621
    )Interest paid
    
    
    (194,579
    )
    
    
    (93,433
    )
    
    
    (146,014
    )
    
    
    (22,270
    )Payment of finance lease liabilities
    
    
    
    
    
    
    (5,014
    )
    
    
    (7,240
    )
    
    
    (1,104
    )Proceeds from borrowings
    
    
    1,093,528
    
    
    
    998,402
    
    
    
    472,620
    
    
    
    72,085Repayment of borrowings
    
    
    (1,287,397
    )
    
    
    (1,256,441
    )
    
    
    (926,275
    )
    
    
    (141,278
    )Capital contributions from non-controlling
interests
    
    
    49,231
    
    
    
    37,225
    
    
    
    48,000
    
    
    
    7,321Fixed deposits pledged with banks for
banking facilities
    
    
    5
    
    
    
    (19
    )
    
    
    (10
    )
    
    
    (2
    )Proceeds from sale and leaseback
arrangement
    
    
    
    
    
    
    40,000
    
    
    
    
    
    
    
    Net cash flows used in financing activities
    
    
    (398,571
    )
    
    
    (332,725
    )
    
    
    (666,628
    )
    
    
    (101,676
    )
 The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
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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
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Net increase in cash and cash equivalents
    
    
    80,182
    
    
    
    2,836,188
    
    
    
    412,295
    
    
    
    62,884Cash and cash equivalents at 1 January
    
    
    759,837
    
    
    
    823,695
    
    
    
    3,657,981
    
    
    
    557,925Effect of exchange rate changes on
balances in foreign currencies
    
    
    (16,324
    )
    
    
    (1,902
    )
    
    
    (9,286
    )
    
    
    (1,416
    )Cash and cash equivalents at 31 December
    
    
    823,695
    
    
    
    3,657,981
    
    
    
    4,060,990
    
    
    
    619,393
 Significant non-cash investing and financing transactions
  The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
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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)
 1.
    
    Corporate information
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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)
 1.
    
    Corporate information (contd)
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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)
 1.
    
    Corporate information (contd)
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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
   2.2
    
    Summary of significant accounting policiesBasis of consolidationBasis of consolidation from January 1, 2010
       
    
    Derecognises the assets (including goodwill) and liabilities of the subsidiary
    
    Derecognises the carrying amount of any non-controlling interest
    
    Derecognises the cumulative translation differences, recorded in equity
    
    Recognises the fair value of the consideration received
    
    Recognises the fair value of any investment retained
    
    Recognises any surplus or deficit in profit or loss
    
    Reclassifies the parents share of components previously recognised in other comprehensive income to profit or loss or
retained earnings, as appropriate.
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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)Basis of consolidation (contd)Basis of consolidation prior to January 1, 2010
  
    
    Acquisitions of non-controlling interests, prior to 1 January 2010,
were accounted for using the parent entity extension method, whereby,
the difference between the consideration and the book value of the
share of the net assets acquired were recognised in goodwill.
    
    Losses incurred by the Group were attributed to the non-controlling
interest (NCI) until the balance was reduced to nil. Any further
excess losses were attributed to the parent, unless the
non-controlling interest had a binding obligation to cover these.
Losses prior to 1 January 2010 were not reallocated between NCI and
the parent shareholders.
    
    Upon loss of control, the Group accounted for the investment retained
at its proportionate share of net asset value at the date control was
lost. The carrying value of such investments at 1 January 2010 has not
been restated.(a)
    
    Business combinations and goodwill
 Business combinations from 1 January 2010
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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)Basis of consolidation (contd)
 (a)
    
    Business combinations and goodwill (contd)Business combinations from 1 January 2010 (contd)
    Business combinations prior to January 1, 2010
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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
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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
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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)
 (d)
    
    Non-current assets held for sale and discontinued operations
   (e)
    
    Foreign currency translationThe Companys functional currency is US dollar. The Groups consolidated financial statements
are presented in Renminbi (Rmb), which is also 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 retranslated at the
functional currency spot rate of exchange ruling at the reporting date.All differences are taken to the income statement with the exception of all monetary items
that provide an effective hedge for a net investment in a foreign operation. These are
recognised in other comprehensive income until the disposal of the net investment, at which
time they are recognised in the income statement. Tax charges and credits attributable to
exchange differences on those monetary items are also recorded in other comprehensive income.Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates as at the dates of the initial transactions. Non-monetary
items measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value is determined.
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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)
 (e)
    
    Foreign currency translation (contd)Group companiesThe assets and liabilities of the Company and its subsidiaries whose functional currency is
not Rmb are translated into Rmb at the rate of exchange prevailing at the reporting date and
their income statements are translated at exchange rates prevailing at the dates of the
transactions. The exchange differences arising on the translation are recognised in other
comprehensive income. On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation is recognised in the
income statement.For the US dollar convenience translation amounts included in the accompanying consolidated
financial statements, the Rmb equivalent amounts have been translated into US dollars at the
rate of Rmb 6.5564 = US$1.00, the rate quoted by the Peoples Bank of China (PBOC) at the
close of business on March 31, 2011. No representation is made that the Rmb amounts could
have been, or could be, converted into US dollars at that rate or at any other rate
prevailing on March 31, 2011 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, regardless of when the payment is
being made. Revenue is measured at the fair value of the consideration received or
receivable, taking into account contractually defined terms of payment and excluding
discounts, rebates, taxes or duty. The Group assesses its revenue arrangements against
specific criteria in order to determine if it is acting as principal or agent. The Group has
concluded that it is acting as principal in all of its revenue arrangements. 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.
 
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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)
 (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 recognised as revenue on a straight line basis over the
respective terms of the guarantees.Interest incomeFor all financial instruments measured at amortised cost and interest bearing financial
assets classified as available for sale, interest income or expense is recorded using the
effective interest rate (EIR), which is the rate that exactly discounts the estimated future
cash payments or receipts through the expected life of the financial instrument or a shorter
period, where appropriate, to the net carrying amount of the financial asset or liability.
Interest income is included in finance income in the income statement.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 Groups right to receive
payment is established.Dividend income from quoted investments is recognised when dividends are received.
 
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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)
    
    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,
at the reporting date in the countries where the Group operates and generates taxable income.Current income tax relating to items recognised directly in consolidated statement of
comprehensive income is recognised 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.Deferred taxDeferred tax is provided using the liability method on temporary differences at the reporting
date between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.Deferred tax liabilities are recognised for all taxable temporary differences, except:
 
    
    Where the deferred tax liability arises from the initial recognition of goodwill
or of an asset or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and
 
    
    In respect of taxable temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, where the timing of the
reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
  
    
    Where the deferred tax asset relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in a transaction that is
not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
    
    In respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred tax assets are
recognised only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilised.
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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)
 (g)
    
    Taxes (contd)Deferred tax (contd)The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets
are reassessed at each reporting date and are recognised to the extent that it has become
probable that future taxable profits will allow the deferred tax asset to be recovered.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
in the year when the asset is realised or the liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively enacted at the reporting date.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.Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right
exists to set off current tax assets against current income tax liabilities and the deferred
taxes relate to the same taxable entity and the same taxation authority.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.
  (h)
    
    Government grantsGovernment grants are recognised 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 recognised 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 recognised 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.
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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)
 (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.(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 include 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.
 
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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)Subsequent measurement (contd)Financial assets at fair value through profit or loss (contd)The Group has designated its remaining 12.2% shareholding interest in Thakral Corporation
Ltd. (TCL) as financial assets at fair value through profit or loss.The Group evaluated its financial assets held for trading, other than derivatives, to
determine whether the 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
intention to sell them in the foreseeable future significantly changes, the Group may elect
to reclassify these financial assets in rare circumstances. The reclassification to loans and
receivables, available-for-sale or held to maturity depends on the nature of the asset. This
evaluation does not affect any financial assets designated at fair value through profit or
loss using the fair value option at designation.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.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 fees 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,
2010 and 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)
 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 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 reclassified to 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 intention to do so significantly
changes 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 assets meet the definition of loans and receivables and the Group has the intent
and ability to hold these assets for the foreseeable future or until maturity.
Reclassification to the held-tomaturity category is permitted only when the entity has the
ability and intention to hold until the financial asset accordingly.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.
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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)Derecognition (contd)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.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 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.
 
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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)Financial assets carried at amortised cost (contd)If there is objective evidence that an impairment loss has been incurred, the amount of the
loss is measured as the difference between the assets 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.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 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.
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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 investments (contd)Future interest income continues to be accrued based on the reduced carrying amount of the
asset, 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.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 include 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.
 
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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 measurement (contd)Loans and borrowings
 After 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 costs in the income statement.Intra-group financial guarantees
 Financial guarantees are financial instruments issued by the Group to its subsidiaries 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 issued to by the group to its
subsidiaries are eliminated in full on consolidation.
 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.Derecognition
 A 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 instruments
 Financial 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.
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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)
 Fair value of financial instruments
 The 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; a 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.(k)
    
    Property, plant and equipment
 Property, plant and equipment is stated at cost, net of accumulated depreciation and/or
accumulated impairment losses, if any. Such cost includes the cost of replacing part of the
property, plant and equipment and borrowing costs for long-term construction projects if the
recognition criteria are met. When significant parts of property, plant and equipment are
required to be replaced at 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.
 Freehold land has an unlimited useful life and therefore is not depreciated. Asset under
construction included in plant and equipment are not depreciated as these assets are not yet
available for use. Depreciation is calculated on a straight-line basis over the estimated
useful life of the assets as follows:
 Freehold buildings
    
    :
    
    50 yearsLeasehold land, buildings and improvements
    
    :
    
    Shorter of 15 to 50 years or lease termPlant and machinery
    
    :
    
    3 to 20 yearsOffice furniture, fittings and equipment
    
    :
    
    3 to 20 yearsMotor and transport vehicles
    
    :
    
    3.5 to 6 years
 The carrying values of property, plant and equipment are reviewed for impairment when events
or changes in circumstances indicate that the carrying value may not be recoverable.
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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 equipment (contd)
 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 weighted average cost of the Groups general borrowings and actual
interest incurred for specific borrowings. Repairs and maintenance of a routine nature are
expensed while those that extend the life of assets are capitalized.
 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
capitalised as construction in progress.(l)
    
    Leases
 The 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, even if that right is not explicitly specified in an arrangement.Prepaid operating lease
 Prepaid operating lease represents payments made 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 lessee
 Finance 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 finance costs in the income statement.
 A leased asset is 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 operating expense in the income statement on a
straight-line basis over the lease term.
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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)
    
    Leases (contd)Sale and leaseback
 In accordance with IAS 17, Leases, the gain or loss on sale and operating leaseback
transactions is recognised 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 lessor
 Leases 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.(m)
    
    Borrowing costs
 Borrowing costs directly attributable to the acquisition, construction or production of an
asset that necessarily takes a substantial period of time to get ready for its intended use
or sale are capitalised as part of the cost of the respective assets. 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.
 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.
 The Group capitalises borrowing costs for all eligible assets where construction was
commenced on or after 1 January 2008.
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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)
 (n)
    
    Research and development expenses
 Research costs are expensed as incurred. The Group received research and development
subsidies of Rmb 43,610 and Rmb 46,080 (US$7,028) for the years ended December 31, 2009 and
2010 respectively.
 The subsidies received are recognised as deferred income and net off against research and
development expenses when earned.
 Development expenditures, on an individual project, are recognised as an intangible asset
when the Group can demonstrate the technical feasibility of completing the intangible asset
so that it will be available for use or sale, its intention to complete and its ability to
use or sell the asset, how the asset will generate future economic benefits, the availability
of resources to complete, and the ability to measure reliably the expenditures during
development.
 Capitalised development expenditures are stated at cost less accumulated amortisation and
impairment losses. As of December 31, 2010, capitalised development expenditures are not
amortized because the intangible asset has not been completed and available for use or sale.(o)
    
    Inventories
 Inventories 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 the estimated costs necessary to make the sale.(p)
    
    Impairment of non-financial assets
 The 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.
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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 assets (contd)
 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.
  Goodwill
 Goodwill 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.(q)
    
    Cash and cash equivalents
 Cash and cash equivalents in the statement of financial position 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 statement of cash flows, cash and cash equivalents
consist of cash and short- term deposits as defined above, net of outstanding bank
overdrafts.
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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)
 (r)
    
    ProvisionsGeneral
 Provisions 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 warranty
 The Group recognises 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 statement of financial position. If the nature, frequency and average cost
of warranty claims change, the accrued liability for product warranty will be adjusted
accordingly.(s)
    
    Convertible preference shares
 Convertible 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. Transaction costs are deducted from equity, net of
associated income tax. 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.
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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)
 (t)
    
    Investment properties
 Investment 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 of 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 properties
 Development 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.(v)
    
    Related parties
 A party is considered to be related to the Group if:
 (a)
    
    The party, directly or indirectly through one or more intermediaries,
 (i)
    
    controls, is controlled by, or is under common control with, the
Group;
 (ii)
    
    has an interest in the Group that gives it significant influence
over the Group; or
 (iii)
    
    has joint control over the Group;
 (b)
    
    The party is an associate;
 (c)
    
    The party is a jointly-controlled entity;
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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)
 (v)
    
    Related parties (contd)
 (d)
    
    The party is a member of the key management personnel of the Group or its parent;
 (e)
    
    The party is a close member of the family of any individual referred to in (a) or
(d); or
 (f)
    
    The party is an entity that is controlled, jointly controlled or significantly
influenced by or for which significant voting power in such entity resides with,
directly or indirectly, any individual referred to in (d) or (e); or
 (g)
    
    The party is a post-employment benefit plan for the benefit of the employees of
the Group, or of any entity that is a related party of the Group.
 2.3
    
    Changes in accounting policy and disclosuresNew and amended standards and interpretationsThe accounting policies adopted are consistent with those of the previous financial year, except
for the following new and amended IFRS and IFRIC interpretations effective as of January 1, 2010:
 
    
    IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated
and Separate Financial Statements (Amended) effective July 1, 2009,
including consequential amendments to IFRS 2, IFRS 5 IFRS 7, IAS 7,
IAS 21, IAS 28, IAS 31 and IAS 39
    
    Improvements to IFRSs (May 2008)
    
    Improvements to IFRSs (April 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)
 2
    
    Basis of preparation and accounting policies (contd)2.3
    
    Changes in accounting policy and disclosures (contd)The adoption of the standards or interpretations is described below:IFRS 3Business Combinations (Revised)and IAS 27Consolidated and Separate Financial Statements
(Amended)
    Improvements to IFRSs
  Issued in May 2008
 
    
    IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations:
clarifies that when a subsidiary is
classified as held for sale, all its
assets and liabilities are classified
as held for sale, even when the
entity remains a non-controlling
interest after the sale transaction.
The amendment is applied
prospectively and has no impact on
the financial position nor financial
performance of the Group.
 Issued in 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. The amendment is applied
prospectively and has no impact on
the financial position nor financial
performance of the Group.
    
    IFRS 8 Operating Segments: 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. As
the Groups chief operating decision
maker does review segment assets and
liabilities, the Group has continued
to disclose this information in Note
34.
  F-42




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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)2.3
    
    Changes in accounting policy and disclosures (contd)Issued in April 2009 (contd)
 
    
    IAS 7 Statement of Cash Flows: States
that only expenditure that results in
recognising an asset can be
classified as a cash flow from
investing activities.
    
    IAS 36 Impairment of Assets: The
amendment clarifies 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.
The amendment has no impact on the
Group as the annual impairment test
is performed before aggregation.
   
    
    IFRS 2 Share-based Payment
    
    IAS 1 Presentation of Financial Statements
    
    IAS 17 Leases
    
    IAS 38 Intangible Assets
    
    IAS 39 Financial Instruments: Recognition and MeasurementIFRIC 9 Reassessment of Embedded Derivatives
    
    IFRIC 16 Hedge of a Net Investment in a Foreign Operation
  
    
    IFRS 1 First-time adoption of IFRS
    
    IFRS 2 Share-based Payment
    
    IAS 32 Financial Instruments: Presentation
    
    IAS 39 Financial instruments: Recognition and Measurement
    
    IFRIC 16 Hedges of a net investment in a Foreign Operation
    
    IFRIC 17 Distribution of Non-cash assets to Owners
    
    IFRIC 18 Transfers of Assets from Customers
  F-43




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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)2.4
    
    Standards issued but not yet effective
  IAS 24 Related Party Disclosures (Amendment)
  IAS 32 Financial Instruments: Presentation  Classification of Rights Issues (Amendment)
   F-44




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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)2.4
    
    Standards issued but not yet effective (contd)IFRS 9Financial Instruments: Classification and Measurement
  IFRIC 14 Prepayments of a minimum funding requirement (Amendment)
  IFRIC 15 Agreements for the Construction of Real Estate
  IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
  Improvements to IFRSs (issued in May 2010)
 Improvements to IFRSs
 
    
    IFRS 3 Business Combinations
    
    IFRS 7 Financial Instruments: Disclosures
    
    IAS 1 Presentation of Financial Statements
    
    IAS 27 Consolidated and Separate Financial Statements
    
    IFRIC 13 Customer Loyalty Programmes
   F-45




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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)
 3.
    
    Significant accounting judgments, estimates and assumptions
 3.1
    
    Judgments
   Operating lease commitments- Group as lessor
  3.2
    
    Estimates and assumptions
  Impairment of non-financial assets
  Impairment of property, plant and equipment
    F-46




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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)
 3.
    
    Significant accounting judgments, estimates and assumptions (contd)3.2
    
    Estimates and assumptions (contd)Impairment of property, plant and equipment (contd)
   
    
    Property, plants and equipments Rmb 1,372 (US$209) (2009: Rmb 7,785; 2008: Rmb 43,664)
    
    Prepaid operating leases Rmb nil (US$nil) (2009: Rmb nil; 2008: Rmb 26,266)
  Deferred tax assets
   Fair value of financial instruments
  Provision for product warranty
   F-47




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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)
 3.
    
    Significant accounting judgments, estimates and assumptions (contd)3.2
    
    Estimates and assumptions (contd)Withholding tax
   Derecognition of bills receivable
  Inventory provision
  Accounts receivable provisions
   F-48




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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)
 3.
    
    Significant accounting judgments, estimates and assumptions (contd)3.2
    
    Estimates and assumptions (contd)Development costs
  4.
    
    Restatement
      F-49




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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)
 4.
    
    Restatement (contd)
       F-50




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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)
 4.
    
    Restatement (contd)
  1.1.2009
    
    
    31.12.2009As
    
    
    
    
    
    
    
    
    
    
    Aspreviously
    
    
    
    
    
    
    As
    
    
    previously
    
    
    
    
    
    
    Asreported
    
    
    Adjustment
    
    
    restated
    
    
    reported
    
    
    Adjustment
    
    
    restatedRmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000AssetsNon-current assetsProperty, plant and
equipment
    
    
    2,719,773
    
    
    
    (171,037
    )
    
    
    2,548,736
    
    
    
    3,146,206
    
    
    
    (171,037
    )
    
    
    2,975,169Investment in joint
ventures
    
    
    164,979
    
    
    
    171,037
    
    
    
    336,016
    
    
    
    196,988
    
    
    
    171,037
    
    
    
    368,025Non-current
liabilitiesInterest-bearing
loans and
borrowings
    
    
    176,756
    
    
    
    
    
    
    
    176,756
    
    
    
    625,256
    
    
    
    (213,381
    )
    
    
    411,875Current liabilitiesInterest-bearing
loans and
borrowings
    
    
    1,148,732
    
    
    
    
    
    
    
    1,148,732
    
    
    
    453,792
    
    
    
    213,381
    
    
    
    667,173
  F-51




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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.
    
    Investments in subsidiaries
 significant
 Groups effective equityPlace of
    
    interestName of significant subsidiary
    
    incorporation/business
    
    31.12.2009
    
    
    31.12.2010%
    
    
    %Guangxi Yuchai Machinery Company Limited
    
    Republic of China
    
    
    76.4
    
    
    
    76.4Guangxi Yulin Yuchai Accessories Manufacturing Company
Limited
    
    Republic of China
    
    
    74.2
    
    
    
    74.2Guangxi Yuchai Machinery Monopoly Development Company
Limited
    
    Republic of China
    
    
    54.9
    
    
    
    54.9Xiamen Yuchai Diesel Engines Company Limited
    
    Republic of China
    
    
    76.4
    
    
    
    76.4Guangxi Yulin Hotel Company Limited
    
    Republic of China
    
    
    76.4
    
    
    
    76.4Jining Yuchai Engine Company Limited (1)
    
    Republic of China
    
    
    39.7
    
    
    
    39.7Zhejiang Yuchai Sanli Engine Company Limited (1)
    
    Republic of China
    
    
    39.7
    
    
    
    39.7HL Global Enterprises Limited (2)
    
    Singapore
    
    
    45.4
    
    
    
    47.4
 (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)
    
    During the year, the Company converted 33,891,000 of RCPS B shares into HLGEs
ordinary shares. As a result, the Companys interest in HLGE increased to 47.4%. 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-52




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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.
    
    Investment in associates
  31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Initial cost
    
    
    439,335
    
    
    
    22,797
    
    
    
    3,477Less: Reclassification to asset
classified as held for sale
    
    
    (410,994
    )
    
    
    
    
    
    
    28,341
    
    
    
    22,797
    
    
    
    3,477Share of post acquisition earningsAt 1 January
    
    
    (40,099
    )
    
    
    18,201
    
    
    
    2,776Less: Reclassification to asset
classified as held for sale
    
    
    61,274
    
    
    
    
    
    
    
    21,175
    
    
    
    18,201
    
    
    
    2,776Share of results (net of tax)
    
    
    15,976
    
    
    
    (121
    )
    
    
    (18
    )Less: Reclassification to
discontinued operations
    
    
    (13,022
    )
    
    
    
    
    
    
    Share of results after tax
excluding discontinued operations
    
    
    2,954
    
    
    
    (121
    )
    
    
    (18
    )Disposal of associate
    
    
    
    
    
    
    707
    
    
    
    108Dividend received
    
    
    (6,038
    )
    
    
    
    
    
    
    Translation adjustment
    
    
    110
    
    
    
    
    
    
    
    At 1 January/31 December
    
    
    18,201
    
    
    
    18,787
    
    
    
    2,866Share of reserves
    
    
    (48,153
    )
    
    
    (2,974
    )
    
    
    (454
    )Less: Reclassification to
reserves of asset classified as
held for sale
    
    
    41,255
    
    
    
    
    
    
    
    (6,898
    )
    
    
    (2,974
    )
    
    
    (454
    )Investment in associate
    
    
    39,644
    
    
    
    38,610
    
    
    
    5,889Reclassification to assets held
for sale (Note 11)
    
    
    (321,487
    )
    
    
    
    
    
    
    
  F-53




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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.
    
    Investment in associates (contd)
  Place ofincorporation/
    
    Groups effective equityName of company
    
    Principal activities
    
    Business
    
    interest31.12.2009
    
    
    31.12.2010%
    
    
    %Held by subsidiaries:Scientex Park (M) Sdn Bhd (1)
    
    Property investment and development
    
    Malaysia
    
    
    12.7
    
    
    
    13.3Sinjori Sdn Bhd (1)
    
    Property investment and development
    
    Malaysia
    
    
    12.7
    
    
    
    13.3Guangxi Yuchai Automobile Spare parts Manufacturing Co., Ltd. (2)
    
    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
    
    
    14.8
    
    
    
    Yuchai Quan Xing Co., Ltd. (3)
    
    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
    
    
    14.8
    
    
    
    14.8Yuchai Property Management Co., Ltd. (4)
    
    Property management
    
    Republic of China
    
    
    22.3
    
    
    
    22.3
 (1)
    
    The Company has significant influence in these entities through HLGE who held
direct equity interests of 28% interest in these entities.(2)
    
    The Company had significant influence in this entity through YAMC who held direct
equity interests of 20% interest in this entity in 2009. The entity was disposed of by YAMC in
2010.(3)
    
    The Company has significant influence in this entity through YAMC who held direct
equity interests of 20% interest in this entity.(4)
    
    The Company has significant influence in this entity through YAMC who held direct
equity interests of 30% interest in this entity.  F-54




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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.
    
    Investment in associates (contd)The summarized financial information on the Groups associates, which is not adjusted for the
percentage of ownership held by the Group, is as follows:
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Assets and liabilitiesTotal assets
    
    
    282,365
    
    
    
    174,982
    
    
    
    26,688Total liabilities
    
    
    107,379
    
    
    
    34,739
    
    
    
    5,298Net assets
    
    
    174,986
    
    
    
    140,243
    
    
    
    21,390
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000ResultsRevenue
    
    
    2,274,869
    
    
    
    163,716
    
    
    
    105,855
    
    
    
    16,145(Loss)/profit after taxation
    
    
    (91,192
    )
    
    
    2,236
    
    
    
    (719
    )
    
    
    (110
    )
 7.
    
    Investment in joint ventures
  1.1.2009
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000(Restated)
    
    
    (Restated)Unquoted equity shares,
at costAs previously reported
    
    
    220,398
    
    
    
    287,510
    
    
    
    650,454
    
    
    
    99,208Reclassify from property,
plant and equipment (Note
4)
    
    
    171,037
    
    
    
    171,037
    
    
    
    
    
    
    
    As restated
    
    
    391,435
    
    
    
    458,547
    
    
    
    650,454
    
    
    
    99,208At 1 January
    
    
    (54,683
    )
    
    
    (46,907
    )
    
    
    (83,580
    )
    
    
    (12,748
    )Share of results after tax
    
    
    13,692
    
    
    
    (16,000
    )
    
    
    (53,902
    )
    
    
    (8,221
    )Dividend received
    
    
    (10,476
    )
    
    
    (19,122
    )
    
    
    (1,733
    )
    
    
    (264
    )Write-back of impairment
    
    
    
    
    
    
    
    
    
    
    10,936
    
    
    
    1,668Translation adjustment
    
    
    4,560
    
    
    
    (1,551
    )
    
    
    (4,864
    )
    
    
    (742
    )At 1 January/31 December
    
    
    (46,907
    )
    
    
    (83,580
    )
    
    
    (133,143
    )
    
    
    (20,307
    )Share of post acquisition
retained earnings
    
    
    (8,512
    )
    
    
    (6,942
    )
    
    
    (2,998
    )
    
    
    (457
    )Carrying amount of the
investment
    
    
    336,016
    
    
    
    368,025
    
    
    
    514,313
    
    
    
    78,444
  F-55




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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 joint ventures (contd)
  Name of company
    
    Percentage of interest held
    
    
    Principal activities1.1.2009
    
    
    31.12.2009
    
    
    31.12.2010%
    
    
    %
    
    
    %Held by subsidiaries:Augustland Hotel Sdn Bhd
    
    
    45
    
    
    
    45
    
    
    
    45
    
    
    Hotel development and operationCopthorne Hotel 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
    
    
    
    45
    
    
    Heavy duty diesel engineYuchai Remanufacturing Services Co., Ltd.
    
    
    
    
    
    
    
    
    
    
    51
    
    
    Remanufacture and sale of automobile parts, diesel engines and components
   1.1.2009
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Assets and liabilitiesCurrent assets
    
    
    64,270
    
    
    
    114,502
    
    
    
    197,526
    
    
    
    30,127Non-current assets
    
    
    258,496
    
    
    
    237,352
    
    
    
    406,166
    
    
    
    61,950Current liabilities
    
    
    43,428
    
    
    
    96,003
    
    
    
    145,808
    
    
    
    22,239Non-current liabilities
    
    
    89,409
    
    
    
    27,382
    
    
    
    78,803
    
    
    
    12,019Net assets
    
    
    189,929
    
    
    
    228,469
    
    
    
    379,081
    
    
    
    57,819
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Results
    
    RMB000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Revenue
    
    
    135,488
    
    
    
    107,229
    
    
    
    148,349
    
    
    
    22,627Profit/(loss) after taxation
    
    
    7,509
    
    
    
    (12,795
    )
    
    
    (9,162
    )
    
    
    (1,397
    )
  F-56




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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.
    
    Revenue
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Sale of goods
    
    
    10,358,124
    
    
    
    13,139,578
    
    
    
    16,138,580
    
    
    
    2,461,500Rendering of servicesConsisting of:Revenue from
hotel and
restaurant
operations
    
    
    37,618
    
    
    
    26,268
    
    
    
    41,948
    
    
    
    6,398Revenue from sale
of development
properties
    
    
    4,962
    
    
    
    6,744
    
    
    
    24,278
    
    
    
    3,703Rental income
    
    
    4,084
    
    
    
    3,313
    
    
    
    3,378
    
    
    
    515Total revenue from
rendering of
services
    
    
    46,664
    
    
    
    36,325
    
    
    
    69,604
    
    
    
    10,616Revenue
    
    
    10,404,788
    
    
    
    13,175,903
    
    
    
    16,208,184
    
    
    
    2,472,116
 9.1
    
    Depreciation and amortization, sales commissions and shipping and handling expenses
  31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Cost of goods sold
    
    
    182,473
    
    
    
    180,043
    
    
    
    193,504
    
    
    
    29,514Research and
development
expenses
    
    
    18,144
    
    
    
    22,175
    
    
    
    22,253
    
    
    
    3,394Selling, general
and administrative
expenses
    
    
    72,011
    
    
    
    83,096
    
    
    
    70,383
    
    
    
    10,734272,628
    
    
    
    285,314
    
    
    
    286,140
    
    
    
    43,642
  31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Selling, general
and administrative
expenses
    
    
    59,129
    
    
    
    79,129
    
    
    
    160,283
    
    
    
    24,447
  31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Selling, general
and administrative
expenses
    
    
    164,364
    
    
    
    215,621
    
    
    
    248,790
    
    
    
    37,946
  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)
 9.2
    
    (a) Other operating income
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Interest income
    
    
    15,228
    
    
    
    31,576
    
    
    
    61,719
    
    
    
    9,414Foreign exchange gain, net
    
    
    
    
    
    
    
    
    
    
    19,975
    
    
    
    3,047Dividend income from associates
    
    
    
    
    
    
    11,162
    
    
    
    
    
    
    
    Gain on disposal of associates
    
    
    
    
    
    
    1,906
    
    
    
    707
    
    
    
    108Gain on disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    2,833
    
    
    
    432Fair value gain on held for
trading investment securities
    
    
    
    
    
    
    
    
    
    
    17,123
    
    
    
    2,612Gain on assignment of debts
    
    
    
    
    
    
    5,657
    
    
    
    
    
    
    
    Negative goodwill
    
    
    12,368
    
    
    
    
    
    
    
    
    
    
    
    Write-back of impairment of
receivables
    
    
    
    
    
    
    4,895
    
    
    
    
    
    
    
    Write-back of trade and other
payables
    
    
    869
    
    
    
    23,649
    
    
    
    
    
    
    
    Write-back of impairment of
investment in joint ventures
    
    
    
    
    
    
    
    
    
    
    10,936
    
    
    
    1,668Government grant income
    
    
    
    
    
    
    14,823
    
    
    
    11,129
    
    
    
    1,697Others, net
    
    
    
    
    
    
    
    
    
    
    4,653
    
    
    
    70928,465
    
    
    
    93,668
    
    
    
    129,075
    
    
    
    19,687
 (b) Other operating expenses
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Foreign exchange loss, net
    
    
    (3,172
    )
    
    
    (6,543
    )
    
    
    
    
    
    
    Loss on disposal of
property, plant and
equipment
    
    
    (3,525
    )
    
    
    (8,618
    )
    
    
    (33,670
    )
    
    
    (5,135
    )Write-back of trade and
other payables
    
    
    
    
    
    
    
    
    
    
    (5,249
    )
    
    
    (801
    )Others, net
    
    
    (2,308
    )
    
    
    (952
    )
    
    
    (2,528
    )
    
    
    (386
    )(9,005
    )
    
    
    (16,113
    )
    
    
    (41,447
    )
    
    
    (6,322
    )
 9.3
    
    Research and development costs
   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)
 9.4
    
    Finance costs
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Interest expense for:Bank term loans
    
    
    66,765
    
    
    
    31,382
    
    
    
    31,302
    
    
    
    4,774Finance lease
    
    
    
    
    
    
    1,237
    
    
    
    1,649
    
    
    
    252Bills discounting
    
    
    90,809
    
    
    
    60,723
    
    
    
    109,260
    
    
    
    16,664Corporate bonds
    
    
    2,991
    
    
    
    (3,332
    )
    
    
    
    
    
    
    Bank charges
    
    
    1,344
    
    
    
    2,401
    
    
    
    2,911
    
    
    
    444Less:Borrowing costs capitalized
    
    
    (11,500
    )
    
    
    (14,918
    )
    
    
    (14,676
    )
    
    
    (2,238
    )150,409
    
    
    
    77,493
    
    
    
    130,446
    
    
    
    19,896
  9.5
    
    Staff costs
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Wages and salaries
    
    
    644,330
    
    
    
    763,483
    
    
    
    874,129
    
    
    
    133,325Contribution to
defined contribution
plans (i)
    
    
    116,379
    
    
    
    134,017
    
    
    
    189,564
    
    
    
    28,913Retrenchment costs
    
    
    7,097
    
    
    
    38
    
    
    
    
    
    
    
    Executive bonuses
    
    
    34,818
    
    
    
    45,182
    
    
    
    98,239
    
    
    
    14,984Staff welfare
    
    
    63,243
    
    
    
    47,439
    
    
    
    56,780
    
    
    
    8,660Others
    
    
    5,992
    
    
    
    5,369
    
    
    
    1,412
    
    
    
    215871,859
    
    
    
    995,528
    
    
    
    1,220,124
    
    
    
    186,097
  (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, 2010 and 2009, 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 187,900 (US$28,659) (2009: 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.  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)
 10.
    
    Income tax
  31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Current income tax:Current income tax charge
    
    
    87,676
    
    
    
    222,047
    
    
    
    332,524
    
    
    
    50,717Adjustments in respect of current income tax of previous year
    
    
    4,942
    
    
    
    5,999
    
    
    
    3,257
    
    
    
    497Deferred tax:Relating to origination and reversal of temporary differences
    
    
    17,908
    
    
    
    (79,632
    )
    
    
    (5,400
    )
    
    
    (824
    )Adjustments in respect of deferred tax of previous year
    
    
    
    
    
    
    (1,191
    )
    
    
    (2,435
    )
    
    
    (371
    )Income tax expense reported in the income statement
    
    
    110,526
    
    
    
    147,223
    
    
    
    327,946
    
    
    
    50,019
  31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Computed tax expense
    
    
    72,261
    
    
    
    145,000
    
    
    
    264,780
    
    
    
    40,385Adjustments resulting from:Non-deductible expenses
    
    
    19,326
    
    
    
    808
    
    
    
    10,432
    
    
    
    1,591Tax-exempt income
    
    
    
    
    
    
    (43,143
    )
    
    
    (2,994
    )
    
    
    (457
    )Utilisation of deferred tax benefits
previously not recognised
    
    
    858
    
    
    
    165
    
    
    
    (1,792
    )
    
    
    (273
    )Deferred tax benefits not recognised
    
    
    10,491
    
    
    
    4,968
    
    
    
    3,381
    
    
    
    516Tax credits for R&D expense
    
    
    (10,169
    )
    
    
    (14,563
    )
    
    
    (17,556
    )
    
    
    (2,678
    )Tax rate differential
    
    
    (2,017
    )
    
    
    33,516
    
    
    
    25,027
    
    
    
    3,816Underprovision in respect of prior years- current
    
    
    4,942
    
    
    
    5,999
    
    
    
    3,257
    
    
    
    497- deferred
    
    
    
    
    
    
    (1,191
    )
    
    
    (2,435
    )
    
    
    (371
    )Withholding tax expense
    
    
    15,282
    
    
    
    15,664
    
    
    
    45,846
    
    
    
    6,993Others
    
    
    (448
    )
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    110,526
    
    
    
    147,223
    
    
    
    327,946
    
    
    
    50,019
  F-60




---



##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 10.
    
    Income tax (contd)Deferred tax
  Consolidated statement offinancial position
    
    
    Consolidated income statement31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010
    
    
    31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Deferred income tax
liabilitiesAccelerated tax depreciation
    
    
    (354
    )
    
    
    (42
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    347
    
    
    
    53Unremitted earnings from
overseas source income
    
    
    (440
    )
    
    
    (440
    )
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expenditure currently
deferred for tax purpose
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    15PRC withholding tax on
dividend income
    
    
    (30,946
    )
    
    
    (76,792
    )
    
    
    (11,713
    )
    
    
    (15,282
    )
    
    
    (15,664
    )
    
    
    (45,846
    )
    
    
    (6,993
    )(31,840
    )
    
    
    (77,274
    )
    
    
    (11,786
    )
    
    
    (15,282
    )
    
    
    (15,664
    )
    
    
    (45,399
    )
    
    
    (6,925
    )Deferred income tax assetsAccelerated accounting
depreciation
    
    
    9,508
    
    
    
    8,418
    
    
    
    1,284
    
    
    
    (22,781
    )
    
    
    1,025
    
    
    
    (1,090
    )
    
    
    (166
    )Write down of inventory
    
    
    45,190
    
    
    
    36,104
    
    
    
    5,507
    
    
    
    11,079
    
    
    
    14,987
    
    
    
    (9,086
    )
    
    
    (1,386
    )Allowance for doubtful debts
    
    
    15,040
    
    
    
    9,872
    
    
    
    1,506
    
    
    
    (8,431
    )
    
    
    (5,861
    )
    
    
    (5,168
    )
    
    
    (788
    )Accruals
    
    
    120,931
    
    
    
    192,173
    
    
    
    29,311
    
    
    
    7,383
    
    
    
    45,526
    
    
    
    71,242
    
    
    
    10,866Tax value of loss carried
forward
    
    
    1,191
    
    
    
    2,480
    
    
    
    378
    
    
    
    2,323
    
    
    
    (1,132
    )
    
    
    1,307
    
    
    
    199Deferred income
    
    
    41,312
    
    
    
    35,669
    
    
    
    5,440
    
    
    
    7,918
    
    
    
    33,395
    
    
    
    (5,643
    )
    
    
    (861
    )Others
    
    
    8,546
    
    
    
    10,218
    
    
    
    1,558
    
    
    
    (117
    )
    
    
    8,547
    
    
    
    1,672
    
    
    
    256241,718
    
    
    
    294,934
    
    
    
    44,984
    
    
    
    (2,626
    )
    
    
    96,487
    
    
    
    53,234
    
    
    
    8,120
   F-61




---



##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 10.
    
    Income tax (contd)
     31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Deferred tax assets
    
    
    241,718
    
    
    
    294,934
    
    
    
    44,984Deferred tax liabilities
    
    
    (31,840
    )
    
    
    (77,274
    )
    
    
    (11,786
    )209,878
    
    
    
    217,660
    
    
    
    33,198
  F-62




---



##### 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.
    
    Discontinued operations
     31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Profit from
discontinued
operations:- Profit before tax
    
    
    (33,731
    )
    
    
    14,321
    
    
    
    
    
    
    
    - Gain on disposal
    
    
    
    
    
    
    
    
    
    
    12,655
    
    
    
    1,930- Taxation
    
    
    (254
    )
    
    
    (1,299
    )
    
    
    
    
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    12,655
    
    
    
    1,930
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    US$Earnings per share:Basic, from
discontinued
operation
    
    
    (0.91
    )
    
    
    0.35
    
    
    
    0.34
    
    
    
    0.05Diluted, from
discontinued
operation
    
    
    (0.91
    )
    
    
    0.35
    
    
    
    0.34
    
    
    
    0.05
  F-63




---



##### 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.
    
    Earnings per share
    31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Net profit
attributable to
ordinary equity
holders of the
Parent from
continuing
operations
    
    
    274,021
    
    
    
    615,309
    
    
    
    1,104,642
    
    
    
    168,483Profit attributable
to ordinary equity
holders of the
Parent from a
discontinued
operation
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    12,655
    
    
    
    1,930Net profit
attributable to
ordinary equity
holders of the
Parent for basic
earnings
    
    
    240,036
    
    
    
    628,331
    
    
    
    1,117,297
    
    
    
    170,413
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Weighted average
number of ordinary
shares for basic
earnings per share
    
    
    37,267,673
    
    
    
    37,267,673
    
    
    
    37,267,673
    
    
    
    37,267,673
   31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Net profit
attributable to
ordinary equity
holders of the
Parent from
discontinued
operation for basic
and diluted
earnings per share
calculations
    
    
    (33,985
    )
    
    
    13,022
    
    
    
    12,655
    
    
    
    1,930
  F-64




---



##### 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.
    
    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000(Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Restated)Cost:At January 1, 2009As previously reported
    
    
    591
    
    
    
    1,496,943
    
    
    
    275,592
    
    
    
    2,505,901
    
    
    
    110,235
    
    
    
    72,172
    
    
    
    4,461,434Reclassify to investment in joint
ventures (Note 7)
    
    
    
    
    
    
    (196,833
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (196,833
    )At January 1, 2009 (restated)
    
    
    591
    
    
    
    1,300,110
    
    
    
    275,592
    
    
    
    2,505,901
    
    
    
    110,235
    
    
    
    72,172
    
    
    
    4,264,601Additions
    
    
    
    
    
    
    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 and January 1, 2010
    
    
    594
    
    
    
    1,353,559
    
    
    
    610,461
    
    
    
    2,723,031
    
    
    
    108,960
    
    
    
    84,801
    
    
    
    4,881,406Additions
    
    
    
    
    
    
    75,669
    
    
    
    517,750
    
    
    
    24,251
    
    
    
    9,092
    
    
    
    17,543
    
    
    
    644,305Disposals
    
    
    
    
    
    
    (43,969
    )
    
    
    
    
    
    
    (48,126
    )
    
    
    (10,189
    )
    
    
    (8,406
    )
    
    
    (110,690
    )Transfers
    
    
    
    
    
    
    202,558
    
    
    
    (540,115
    )
    
    
    315,263
    
    
    
    22,053
    
    
    
    241
    
    
    
    Write-off
    
    
    
    
    
    
    (456
    )
    
    
    (16,183
    )
    
    
    (5,792
    )
    
    
    
    
    
    
    (17
    )
    
    
    (22,448
    )Translation difference
    
    
    40
    
    
    
    242
    
    
    
    (1,437
    )
    
    
    771
    
    
    
    528
    
    
    
    (35
    )
    
    
    109At December 31, 2010
    
    
    634
    
    
    
    1,587,603
    
    
    
    570,476
    
    
    
    3,009,398
    
    
    
    130,444
    
    
    
    94,127
    
    
    
    5,392,682
  F-65




---



##### 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.
    
    Property, plant and equipment (contd)
 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000(Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Restated)Depreciation and impairment:At January 1, 2009As previously reported
    
    
    591
    
    
    
    296,087
    
    
    
    20,975
    
    
    
    1,315,473
    
    
    
    75,148
    
    
    
    33,387
    
    
    
    1,741,661Reclassify to investment in joint
ventures (Note 7)
    
    
    
    
    
    
    (25,796
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,796
    )At January 1, 2009 (restated)
    
    
    591
    
    
    
    270,291
    
    
    
    20,975
    
    
    
    1,315,473
    
    
    
    75,148
    
    
    
    33,387
    
    
    
    1,715,865Charge 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 and January 1, 2010
    
    
    594
    
    
    
    311,452
    
    
    
    27,351
    
    
    
    1,446,783
    
    
    
    75,791
    
    
    
    44,266
    
    
    
    1,906,237Charge for the year
    
    
    
    
    
    
    49,360
    
    
    
    
    
    
    
    206,236
    
    
    
    11,420
    
    
    
    7,428
    
    
    
    274,444Disposals
    
    
    
    
    
    
    (2,074
    )
    
    
    
    
    
    
    (29,496
    )
    
    
    (8,410
    )
    
    
    (6,301
    )
    
    
    (46,281
    )Write-off
    
    
    
    
    
    
    (129
    )
    
    
    (16,183
    )
    
    
    (3,672
    )
    
    
    
    
    
    
    (17
    )
    
    
    (20,001
    )Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,372
    
    
    
    
    
    
    
    
    
    
    
    1,372Translation difference
    
    
    40
    
    
    
    (108
    )
    
    
    
    
    
    
    450
    
    
    
    240
    
    
    
    (13
    )
    
    
    609At December 31, 2010
    
    
    634
    
    
    
    358,501
    
    
    
    11,168
    
    
    
    1,621,673
    
    
    
    79,041
    
    
    
    45,363
    
    
    
    2,116,380Net book value:At January 1, 2009 (restated)
    
    
    
    
    
    
    1,029,819
    
    
    
    254,617
    
    
    
    1,190,428
    
    
    
    35,087
    
    
    
    38,785
    
    
    
    2,548,736At December 31, 2009 (restated)
    
    
    
    
    
    
    1,042,107
    
    
    
    583,110
    
    
    
    1,276,248
    
    
    
    33,169
    
    
    
    40,535
    
    
    
    2,975,169At December 31, 2010
    
    
    
    
    
    
    1,229,102
    
    
    
    559,308
    
    
    
    1,387,725
    
    
    
    51,403
    
    
    
    48,764
    
    
    
    3,276,302US$
    
    
    
    
    
    
    187,466
    
    
    
    85,307
    
    
    
    211,660
    
    
    
    7,840
    
    
    
    7,438
    
    
    
    499,711
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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.
    
    Property, plant and equipment (contd)The impairment loss includes impairment of buildings in Yulin hotel, and Guilin office building.
The recoverable amounts of the buildings have been determined based on fair value less cost to
sell. Fair values are determined using a market comparison and income approach.Capitalised borrowing costsThe amount of borrowing costs capitalised during the year ended 31 December 2010 was Rmb 14,676
(US$2,238) (2009: Rmb14,918). The rate used to determine the amount of borrowing costs eligible
for capitalisation was 5.00% which is the effective interest rate of the specific and any
applicable general borrowings that is used for the purpose of obtaining the qualifying assets.Finance leases and assets under constructionThe carrying value of plant and equipment held under finance leases at December 31, 2009 and 2010
were Rmb 36,818 and Rmb 33,037 (US$5,039) respectively. Leased assets are pledged as security for
the related finance lease.
 14.
    
    Investment properties
 Rmb000
    
    
    US$000Cost:As at January 1, 2009
    
    
    35,620
    
    
    
    5,433Translation during the year
    
    
    358
    
    
    
    55As at December 31, 2009 and 1 January 2010
    
    
    35,978
    
    
    
    5,488Translation during the year
    
    
    2,651
    
    
    
    404As at December 31, 2010
    
    
    38,629
    
    
    
    5,892Accumulated depreciation:As at January 1, 2009
    
    
    1,474
    
    
    
    225Charge during the year
    
    
    652
    
    
    
    99As at December 31, 2009 and 1 January 2010
    
    
    2,126
    
    
    
    324Charge during the year
    
    
    692
    
    
    
    106As at December 31, 2010
    
    
    2,818
    
    
    
    430Net book value:As at December 31, 2009
    
    
    33,852
    
    
    
    5,164As at December 31, 2010
    
    
    35,811
    
    
    
    5,462
  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)
 14.
    
    Investment properties (contd)Details of the investment property (non-current) as at December 31, 2010 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 December 31, 2009 and 2010 were Rmb 38,623 and Rmb 41,274
(US$6,295) 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, 2009 and December 31, 2010 are
Rmb 2,162 and Rmb 1,995 (US$304).
 15.
    
    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 7,982 and Rmb 11,004
(US$1,678) for the year ended December 31, 2009 and 2010, respectively.
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Current
    
    
    7,273
    
    
    
    11,004
    
    
    
    1,678Non-current
    
    
    355,931
    
    
    
    407,468
    
    
    
    62,148Total
    
    
    363,204
    
    
    
    418,472
    
    
    
    63,826
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Gross payments for prepaid
operating leases
    
    
    414,979
    
    
    
    481,251
    
    
    
    73,401Less: Amounts charged to expense
    
    
    (51,775
    )
    
    
    (62,779
    )
    
    
    (9,575
    )Total
    
    
    363,204
    
    
    
    418,472
    
    
    
    63,826
  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)
 16.
    
    Goodwill
 Goodwill
    
    
    GoodwillRmb000
    
    
    US$000Cost:At January 1, 2009, December 31, 2009
and December 31, 2010
    
    
    218,311
    
    
    
    33,297Impairment:At January 1, 2009, December 31, 2009 and
December 31, 2010
    
    
    5,675
    
    
    
    865Net book value:At December 31, 2009
    
    
    212,636
    
    
    
    32,432At December 31, 2010
    
    
    212,636
    
    
    
    32,432
 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. Goodwill allocated to Yulin Hotel has been fully impaired in 2008.
 Carrying amount of goodwill allocated to each of the cash-generating units:
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Yuchai
    
    
    212,636
    
    
    
    212,636
    
    
    
    32,432212,636
    
    
    
    212,636
    
    
    
    32,432
 Yuchai unitThe Group performed its annual impairment test as at December 31, 2010 and 2009. 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% (2009: 16.98%). No impairment was
identified for this unit.
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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)
 16.
    
    Goodwill (contd)
 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 15.77% and 12.64% for 2010 and 2009 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.
 17.
    
    Intangible assets
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Development costs
    
    
    
    
    
    
    13,389
    
    
    
    2,042
 During the financial year, the Group capitalised Rmb 13,389 (US$2,042) (2009: nil) of development
expenditure for intellectual property right, technical skill and knowledge of building a new
technology of heavy-duty diesel engine.
  F-70




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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)
 18.
    
    Other receivables

(non-current)
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Amount due from joint ventures (i)
    
    
    61,222
    
    
    
    58,914
    
    
    
    8,985Deposits
    
    
    2,000
    
    
    
    2,000
    
    
    
    305Lease receivable
    
    
    8,961
    
    
    
    4,619
    
    
    
    70572,183
    
    
    
    65,533
    
    
    
    9,995
 (i)
    
    The non-current non-trade amounts due from joint venture partners are unsecured, with
interest bearing at 1.681% (2009: 1.719%) per annum and are not expected to repay within 12
months from the financial year end. 19.
    
    Other financial liabilities
 (a)
    
    Other liabilities (current and non-current)
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Preference shares
    
    
    2,119
    
    
    
    861
    
    
    
    131Finance lease liabilities (Note 33)
    
    
    34,991
    
    
    
    27,751
    
    
    
    4,23337,110
    
    
    
    28,612
    
    
    
    4,364
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Current
    
    
    10,233
    
    
    
    9,743
    
    
    
    1,486Non-current
    
    
    26,877
    
    
    
    18,869
    
    
    
    2,878Total
    
    
    37,110
    
    
    
    28,612
    
    
    
    4,364
 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)
    
    HLGE 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 HLGE and certain of its subsidiaries with certain
of their bankers and other financial lenders on March 16, 2001;
  F-71




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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)
 19.
    
    Other financial liabilities (contd)
 (a)
    
    Other liabilities (current and non-current) (contd)
 
Redeemable convertible preference shares (RCPS) (contd)
 (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(d)
    
    HLGE 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)
    
    HLGE 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 HLGE 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.
 (e)
    
    If the conversion of all or any part of the Series B Preference Shares held
by any holder of Series B Preference Shares (i) is not permitted by law or regulations
or (ii) 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 over a period of twenty-two
months commencing after the Mandatory Conversion Date, without the requirement of the
passing of a Series B Preference Share Special Resolution, by giving a notice in
writing to HLGE.
  F-72




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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)
 19.
    
    Other financial liabilities (contd)
 (a)
    
    Other liabilities (current and non-current) (contd)
 As announced by the HLGE on 12 February 2010, an aggregate of 18,935,883 Series B RCPS shall be
mandatorily converted into an aggregate of 18,935,883 ordinary shares on 18 March 2010, being the
market day immediately following the fifth anniversary of the date of issue of the Series B RCPS
(the Mandatory Conversion Date).The Articles of Association of HLGE provides that if the conversion of all or any part of the
Series B RCPS held by any holder of Series B RCPS (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 RCPS held by it as will not (i) result in the breach of such law or regulations,
or (ii) trigger any takeover obligation on the Mandatory Conversion Date. Such holder will have the
option to convert the remaining number of Series B RCPS into ordinary shares over a period of
twenty-two months commencing after the Mandatory Conversion Date (the Extension Period), without
the requirement of the passing of a Series B RCPS Special Resolution, by giving a notice in writing
to HLGE.On 11 February 2010, Grace Star, the immediate holding company and a substantial holder of HLGE,
had informed HLGE that it would convert only 17,300,000 out of the
93,229,170 of Series B RCPS it held as at that date into ordinary shares of the Company so as not to trigger a
take-over obligation on the Mandatory Conversion Date. Following the Mandatory Conversion Date,
Grace Star became the sole holder of the remaining 75,929,170 Series B RCPS in issue.As Grace Star and HLGE are both subsidiaries of the Company, the Series B RCPS is eliminated at
consolidation level.
  F-73




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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)
 19.
    
    Other financial liabilities (contd)
 (b)
    
    Interest-bearing loans and borrowings
 31.12.2009Effective
    
    
    
    
    
    
    As
    
    
    31.12.2009interest rate
    
    
    
    
    
    
    previously
    
    
    As%
    
    
    Maturity
    
    
    stated
    
    
    restatedRmb000
    
    
    Rmb000Current:Renminbi denominated loans
    
    
    3.81
    
    
    
    2010
    
    
    
    434,393
    
    
    
    434,393Singapore dollars denominated loans
    
    
    2.22
    
    
    
    2010
    
    
    
    19,399
    
    
    
    232,780453,792
    
    
    
    667,173Non-Current:Renminbi denominated loans
    
    
    4.86
    
    
    
    2012
    
    
    
    150,000
    
    
    
    150,000Singapore dollars denominated loans
    
    
    1.97
    
    
    
    2010
    
    
    
    293,397
    
    
    
    80,016US$ denominated loans
    
    
    1.35
    
    
    
    2010
    
    
    
    181,859
    
    
    
    181,859625,256
    
    
    
    411,875
 Effectiveinterest rate%
    
    
    Maturity
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    US$000Current:Renminbi denominated loans
    
    
    4.73
    
    
    
    2011
    
    
    
    372,620
    
    
    
    56,833Singapore dollars denominated loans
    
    
    1.29
    
    
    
    2011
    
    
    
    50,923
    
    
    
    7,767423,543
    
    
    
    64,600Non-Current:Renminbi denominated loans
    
    
    4.86
    
    
    
    2012 - 2013
    
    
    
    100,000
    
    
    
    15,253Singapore dollars denominated loans
    
    
    1.20
    
    
    
    2011
    
    
    
    50,925
    
    
    
    7,767US$ denominated loans
    
    
    1.08
    
    
    
    2011
    
    
    
    50,925
    
    
    
    7,767201,850
    
    
    
    30,787
 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.
  F-74




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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)
 19.
    
    Other financial
liabilities (contd)
 (b)
    
    Interest-bearing loans and borrowings (contd)
 S$50.0 million bridging loan with DBS Bank Ltd. (DBS):
 On August 28, 2008, the Company entered into a bridging loan agreement of up to S$50
million for 12 months duration, with DBS Bank Ltd., (DBS) of Singapore, to partially
re-finance the US$50 million 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.
 S$50.0 million credit facility with DBS Bank Ltd. (DBS):
 On August 21, 2009, the Company entered into a new short-term loan agreement for up to S$50
million for 12 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. On September 1, 2010, the credit facility expired and was refinanced
for S$10.0 million with the same bank. This loan has a callable clause that resulted in the
restatement of the loan from non-current liabilities to current liabilities. Refer to Note
4 for discussion.
  F-75




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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)
 19.
    
    Other financial liabilities (contd)
 (b)
    
    Interest-bearing loans and borrowings (contd)
 S$10.0 million credit facility with DBS Bank Ltd. (DBS):
 On September 1, 2010, the Company entered into a new short-term loan agreement for up to
S$10 million for 12 months duration with DBS Bank Ltd. (DBS) of Singapore to refinance
the S$50 million facility that was due to mature on September 1, 2010. The facility will be
utilised by the Company to finance its long-term working capital requirements. The terms of
facility require, among other things, that HLA retains ownership of the special share and
that the Company remains a principal subsidiary of HLA, and that HLGE remains listed on the
Singapore Exchange Limited. 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) not less than US$350 million at any time, and the ratio of the Companys
consolidated debt to consolidated tangible net worth (as defined in the agreement) not
exceeding 1 time. All moneys owing by the Company shall be repaid in full on the date
falling 12 months after the drawdown date (Final Repayment Date).
 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 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. On March 17, 2010, the
credit facility expired and was refinanced for S$16.5 million with the same bank.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 19.
    
    Other financial liabilities (contd)
 (b)
    
    Interest-bearing loans and borrowings (contd)
 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.
 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 utilised 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. The credit facility expired on March
30, 2010 and was refinanced for US$30.0 million with the same bank.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 19.
    
    Other financial liabilities (contd)
 (b)
    
    Interest-bearing loans and borrowings (contd)
 US$30.0 million credit facility with Sumitomo:
 On 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 utilised 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.
 20.
    
    Deferred grants
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Balance at beginning of year
    
    
    31,514
    
    
    
    179,233
    
    
    
    27,337Received during the year
    
    
    150,917
    
    
    
    112,592
    
    
    
    17,173Released to the income statement
    
    
    (3,198
    )
    
    
    (11,129
    )
    
    
    (1,697
    )Balance at end of year
    
    
    179,233
    
    
    
    280,696
    
    
    
    42,813Current
    
    
    3,198
    
    
    
    10,960
    
    
    
    1,672Non-current
    
    
    176,035
    
    
    
    269,736
    
    
    
    41,141Total
    
    
    179,233
    
    
    
    280,696
    
    
    
    42,813
 Government grants have been received for the purchase of certain items of property, plant and
equipments.
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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)
 21.
    
    Inventories
 Inventories are comprised of:
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Raw materials
    
    
    1,056,581
    
    
    
    1,333,406
    
    
    
    203,375Work in progress
    
    
    21,481
    
    
    
    38,389
    
    
    
    5,855Finished goods
    
    
    1,051,964
    
    
    
    1,261,065
    
    
    
    192,341Total inventories at the lower
of cost and net realisable
value
    
    
    2,130,026
    
    
    
    2,632,860
    
    
    
    401,571
 Inventories recognised as an expense in cost of sales are Rmb 7,490,254, Rmb 9,567,280 and Rmb
11,230,551 (US$1,712,914) in the year ended December 31, 2008, 2009 and 2010 respectively.
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Balance at beginning of year
    
    
    136,256
    
    
    
    286,947
    
    
    
    43,766Charge to consolidated statements of income
    
    
    154,700
    
    
    
    (111,763
    )
    
    
    (17,046
    )Written off
    
    
    (4,009
    )
    
    
    (3,752
    )
    
    
    (572
    )Balance at end of year
    
    
    286,947
    
    
    
    171,432
    
    
    
    26,148
 The amount of write-down/(reversal) of inventories recognised as an expense and included in cost
of sales amounted to Rmb 52,747, Rmb 154,700 and Rmb (111,763) (US$(17,046)) in year ended
December 31, 2008, 2009 and 2010 respectively.
 22.
    
    Other current assets
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Properties held for sale
    
    
    91,202
    
    
    
    62,022
    
    
    
    9,460Held for trading investment
    
    
    
    
    
    
    56,628
    
    
    
    8,63791,202
    
    
    
    118,650
    
    
    
    18,097
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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)
 23.
    
    Trade and bills receivables
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Trade receivables (net)
    
    
    389,659
    
    
    
    536,011
    
    
    
    81,754Bills receivables
    
    
    2,117,042
    
    
    
    3,698,464
    
    
    
    564,1002,506,701
    
    
    
    4,234,475
    
    
    
    645,854
 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 December 31, 2009 and 2010, outstanding bills receivable discounted with banks for which the
Group retained a recourse obligation totaled Rmb 3,179,737 and Rmb 3,470,662 (US$529,355)
respectively.An analysis of the allowance for doubtful accounts is as follows:
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Balance at beginning of year
    
    
    96,147
    
    
    
    76,646
    
    
    
    11,690Credit to consolidated
statements of income
    
    
    (15,552
    )
    
    
    (15,491
    )
    
    
    (2,363
    )Written off
    
    
    (3,947
    )
    
    
    
    
    
    
    Translation differences
    
    
    (2
    )
    
    
    6
    
    
    
    1Balance at end of year
    
    
    76,646
    
    
    
    61,161
    
    
    
    9,328
 At December 31, 2009 and 2010, gross trade accounts receivable due from a major customer, Dongfeng
Automobile Company and its affiliates (the Dongfeng companies) were Rmb 271,209 and Rmb 319,400
(US$48,716), 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 31.12.2010
    
    
    4,234,475
    
    
    
    4,032,899
    
    
    
    140,811
    
    
    
    33,502
    
    
    
    26,948
    
    
    
    315As at 31.12.2009
    
    
    2,506,701
    
    
    
    2,438,348
    
    
    
    66,888
    
    
    
    19
    
    
    
    168
    
    
    
    1,278
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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)
 24.
    
    Other receivables

(current)
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000GST/VAT Recoverable
    
    
    83,825
    
    
    
    88,799
    
    
    
    13,544Staff advances
    
    
    7,394
    
    
    
    3,649
    
    
    
    556Amounts due under guarantee contracts,
net (see Note 33)
    
    
    12,557
    
    
    
    12,129
    
    
    
    1,850Land deposit
    
    
    5,000
    
    
    
    
    
    
    
    Associates
    
    
    44,662
    
    
    
    18,604
    
    
    
    2,838Other related parties
    
    
    20,310
    
    
    
    50,726
    
    
    
    7,737Interest receivables
    
    
    5,176
    
    
    
    5,920
    
    
    
    903Custom tax refund
    
    
    11,018
    
    
    
    4,380
    
    
    
    668Others
    
    
    23,921
    
    
    
    53,093
    
    
    
    8,098Impairment losses  other receivables (i)
    
    
    (32,313
    )
    
    
    (26,174
    )
    
    
    (3,992
    )181,550
    
    
    
    211,126
    
    
    
    32,202
  (i)
    
    An analysis of the impairment losses  other receivables is as follows: 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Balance at beginning of year
    
    
    79,626
    
    
    
    32,313
    
    
    
    4,928Credit to consolidated statements of income
    
    
    (28,506
    )
    
    
    (6,234
    )
    
    
    (951
    )Written off
    
    
    (19,314
    )
    
    
    
    
    
    
    Translation differences
    
    
    507
    
    
    
    95
    
    
    
    15Balance at end of year
    
    
    32,313
    
    
    
    26,174
    
    
    
    3,992
 25.
    
    Cash and cash equivalents
 For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the
following at 31 December:
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Cash at banks and on hand
    
    
    823,695
    
    
    
    3,657,981
    
    
    
    4,060,990
    
    
    
    619,393
 Cash at banks earn interest at floating rates based on daily bank deposit rates.
The weighted average effective interest rate as at  31 December 2010
for the Group was 2.65% (2009: 1.57%). Cash and cash
equivalents denominated in various currencies are held in bank accounts in the Singapore and
China.At December 31, 2009 and 2010, the Group had available Rmb 3,875,020 and Rmb 4,072,593 (US$621,163)
respectively of undrawn committed borrowing facilities in respect of which all conditions precedent
had been met. The commitment fees incurred for 2009 and 2010 were Rmb 104 and Rmb 102 (US$16)
respectively.
  F-81




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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)
 26.
    
    Issued capital and reserves
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010thousands
    
    
    thousands
    
    
    thousands
    
    
    thousandsAuthorized sharesOrdinary share of
US$0.10 each
    
    
    100,000
    
    
    
    100,000
    
    
    
    100,000
    
    
    
    100,000
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb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
    
    
    
    262,979
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Non-redeemable
convertible
cumulative
preference shares
(NCCPS)
    
    
    36
    
    
    
    36
    
    
    
    21
    
    
    
    3
 HLGE issued 197,141,190 NCCPS at an issue price of S$0.02 each on July 4, 2006, expiring on the
10th anniversary of the NCCPs issue date.The NCCPS shall, subject to the terms and conditions thereof, carry the right to receive, out of
the profits of HLGE available for payment of dividends, a fixed cumulative preferential dividend of
10% per annum of the issue price for each NCCPS (the Preference Dividend).Other than the Preference Dividend, the NCCPS holders shall have no further right to participate in
the profits or assets of HLGE.NCCPS holders shall have no voting rights except under certain circumstances referred to in the
Companies Act, Chapter 50 of Singapore set out in the terms of the NCCPS.The NCCPS are not listed and quoted on the Official List of the Singapore Exchange Securities
Trading Limited (the SGX-ST). However, the holders of the NCCPs are able to exercise their
rights to convert the NCCPS into new ordinary shares at a 1 for 1 ratio, subject to the terms and
conditions of the NCCPS. Such new ordinary shares will be listed and quoted on the Official List
of the SGX-ST when issued.
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 27.
    
    Dividends paid and proposed
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Declared and paid during the year:Dividends on ordinary shares:Interim dividend for 2009 US$0.10
per share (2008: US$0.10per share)
    
    
    25,457
    
    
    
    
    
    
    
    Interim dividend for
2010: US$0.25per share
(2009: US$0.10per share)
    
    
    
    
    
    
    63,078
    
    
    
    9,62125,457
    
    
    
    63,078
    
    
    
    9,621
 28.
    
    Statutory reserves
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Statutory general reserve
(see Note (ii))Balance at January 1
    
    
    174,033
    
    
    
    176,126
    
    
    
    180,339
    
    
    
    27,505Transfer from retained
earnings
    
    
    2,093
    
    
    
    4,213
    
    
    
    378
    
    
    
    58Balance at end of year
    
    
    176,126
    
    
    
    180,339
    
    
    
    180,717
    
    
    
    27,563Statutory public welfare
fund(see Note (iii))Balance at January 1
    
    
    70,600
    
    
    
    85,641
    
    
    
    85,641
    
    
    
    13,062Transfer from retained
earnings
    
    
    15,041
    
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    
    85,641
    
    
    
    85,641
    
    
    
    85,641
    
    
    
    13,062General surplus reserve
(see Note (iv))Balance at January 1 and
December 31
    
    
    25,706
    
    
    
    25,706
    
    
    
    25,706
    
    
    
    3,921Balance at end of year
    
    
    287,473
    
    
    
    291,686
    
    
    
    292,064
    
    
    
    44,546
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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)
 28.
    
    Statutory reserves (contd)
  (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 utilised 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 utilised to
pay staff welfare expenses. The transfer to this fund must be made before the distribution of
a dividend of a dividend to stockholders. Since January 1, 2006, in accordance with the
amended Companys policy, the contribution to the fund ceased.(iv)
    
    General surplus reserve is appropriated in accordance with Companys Articles and resolution
of the board of directors. General surplus reserve may be used to offset accumulated losses or
increase the registered capital. 29.
    
    Trade and other payables

(current)
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Trade payables
    
    
    4,749,651
    
    
    
    5,699,334
    
    
    
    869,278Other payables
    
    
    1,284,645
    
    
    
    1,949,918
    
    
    
    297,407Deferred grants
    
    
    3,198
    
    
    
    10,960
    
    
    
    1,672Interest payable
    
    
    2,498
    
    
    
    2,336
    
    
    
    356Immediate holding company
    
    
    362
    
    
    
    40
    
    
    
    6Associates
    
    
    
    
    
    
    9,458
    
    
    
    1,443Other related parties
    
    
    149,892
    
    
    
    230,271
    
    
    
    35,121Balance at end of year
    
    
    6,190,246
    
    
    
    7,902,317
    
    
    
    1,205,283
 Terms and conditions of the above financial liabilities:
 
    
    Trade payables are non-interest bearing and are normally settled on 60-day terms.
    
    Other payables are non-interest bearing and have an average term of six months.
    
    Interest payable is normally settled throughout the financial year.
    
    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
 (Rmb and US$ amounts expressed in thousands, except per share data)
 30.
    
    Provision for product warranty
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Balance at beginning of year
    
    
    188,599
    
    
    
    259,534
    
    
    
    39,585Provision made
    
    
    368,284
    
    
    
    498,767
    
    
    
    76,073Less: Provision utilised
    
    
    (297,349
    )
    
    
    (406,147
    )
    
    
    (61,947
    )Balance at end of year
    
    
    259,534
    
    
    
    352,154
    
    
    
    53,711
 31.
    
    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$618) was received and recognised in 2006, 2007 and 2008, respectively.Because the loans had already been disbursed, the Chinese Shareholders had issued guarantees for
these loans, and the Companys relationship with the Chinese Shareholders was improving, the
Directors of Yuchai believed that it was in the Companys and Yuchais best interest to ratify the
loans. Consequently, the loans were ratified by the Board of Directors of Yuchai in April 2005.In 2005, the Company discussed with the Chinese Shareholders the possibility of converting the
loans into an equity investment in YMCL, subject to the Yuchai boards approval. This potential
alternative was incorporated within the terms of the reorganization agreement entered into by the
Company with Yuchai and Coomber on April 7, 2005 (Reorganization Agreement).
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 31.
    
    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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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 31.
    
    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 statement of financial position. 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 recognised 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
statement of financial position. Such recovery was recognised 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 recognised in the Statement of Income in 2010.
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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)
 32.
    
    Related party disclosures
 The ultimate parentOur controlling shareholder, HLA, indirectly owns 10,523,313, or 28.2%, 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 7.2%
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 299
(US$46), Rmb 470 and Rmb 6,414 during the financial years ended December 31, 2010 and 2009 and 2008
respectively.Entity with significant influence over the GroupThe Yulin City Government through Coomber Investment Ltd owns 18% of the ordinary shares in the
Company (2009: 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, 2010 and 2009, refer to Notes 24 and 29):
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Sales of diesel engines to State
Holding Company, its subsidiaries
and affiliates (See Note (i))
    
    
    196,997
    
    
    
    338,094
    
    
    
    497,637
    
    
    
    75,901Sales of raw materials to YMCL
(See Note (i))
    
    
    
    
    
    
    232,560
    
    
    
    350,346
    
    
    
    53,436Sales to affiliates (See Note (i))
    
    
    18,067
    
    
    
    61,521
    
    
    
    4,442
    
    
    
    678Purchase of raw materials and
supplies from subsidiaries and
affiliates of State Holding
Company (See Note (i))
    
    
    (1,013,106
    )
    
    
    (1,509,950
    )
    
    
    (1,707,123
    )
    
    
    (260,375
    )Purchases of raw materials and
supplies from affiliates
(See Note (i))
    
    
    (17,781
    )
    
    
    (94,236
    )
    
    
    (38,163
    )
    
    
    (5,821
    )Delivery expense charged by a
subsidiary of YMCL
(See Note (ii))
    
    
    (161,036
    )
    
    
    (210,129
    )
    
    
    (244,360
    )
    
    
    (37,270
    )Storage expense charged by a
subsidiary of SHC
(See Note (iii))
    
    
    
    
    
    
    (58,667
    )
    
    
    (41,507
    )
    
    
    (6,331
    )
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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)
 32.
    
    Related party disclosures (contd)
 Entity with significant
influence over the Group (contd)
 31.12.2008
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000General and administrative
expenses- charged by State Holding
Company (See Note (iv))
    
    
    (34,934
    )
    
    
    (35,857
    )
    
    
    (21,906
    )
    
    
    (3,341
    )- charged by HLA (see Note (v))
    
    
    (6,758
    )
    
    
    (470
    )
    
    
    (299
    )
    
    
    (46
    )- charged by an affiliate of
HLA (See Note (vi))
    
    
    (6,760
    )
    
    
    (8,124
    )
    
    
    (6,260
    )
    
    
    (955
    )
  (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 are 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.  F-89




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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)
 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
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000Short term employee benefits
    
    
    24,773
    
    
    
    25,992
    
    
    
    53,883
    
    
    
    8,218
 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:
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Within one year
    
    
    9,007
    
    
    
    16,281
    
    
    
    2,483After one year but not more
than five years
    
    
    7,968
    
    
    
    20,469
    
    
    
    3,12216,975
    
    
    
    36,750
    
    
    
    5,605
 The minimum lease payments recognised as an expense in the period ended December 31, 2008, 2009 and
2010 amounted to Rmb 24,306, Rmb 46,092 and Rmb 49,780 (US$7,593).
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
 (Rmb and US$ amounts expressed in thousands, except per share data)
 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:
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Within one year
    
    
    5,998
    
    
    
    7,326
    
    
    
    1,117After one year but not more
than five years
    
    
    16,522
    
    
    
    11,091
    
    
    
    1,692More than five years
    
    
    515
    
    
    
    17
    
    
    
    323,035
    
    
    
    18,434
    
    
    
    2,812
 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:
 31.12.2009
    
    
    31.12.2010Present
    
    
    
    
    
    
    PresentMinimum
    
    
    value of
    
    
    Minimum
    
    
    value ofpayments
    
    
    payments
    
    
    payments
    
    
    paymentsRmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000Within one year
    
    
    11,397
    
    
    
    9,748
    
    
    
    11,392
    
    
    
    9,743After one year but
not more than five
years
    
    
    30,604
    
    
    
    25,243
    
    
    
    21,720
    
    
    
    18,008Total minimum lease
payments
    
    
    42,001
    
    
    
    34,991
    
    
    
    33,112
    
    
    
    27,751Less amounts
representing
finance charges
    
    
    (7,010
    )
    
    
    
    
    
    
    (5,361
    )
    
    
    Present value of
minimum lease
payments
    
    
    34,991
    
    
    
    34,991
    
    
    
    27,751
    
    
    
    27,751
 The finance lease was entered into by YAMC, a subsidiary of Yuchai.
 Letter of creditsAs of December 31, 2009 and 2010, Yuchai had issued irrevocable letter of credits of Rmb 60.9
million and Rmb 145.6 million (US$22.2 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 2009 and 2010, 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. 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, 2009 and 2010, 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 2009 and 2010 respectively,
which are included in Accrued expenses and other liabilities and recognised as revenue on a
straight line basis over the terms of the respective guarantee. Guarantee fees recognised as
revenue in 2009 and 2010 amounted to Rmb 54 and Rmb nil (US$ nil), respectively. As of December 31,
2009 and 2010, deferred guarantee fee revenue amounted to Rmb nil and Rmb nil (US$ nil),
respectively.Subsequent to initial measurement and recognition of the liability for YEGCLs obligations under
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, 2009 and 2010,
YEGCL had gross receivables of Rmb 12,557 and Rmb 12,129 (US$1,850), 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
12,273 and Rmb 12,061 (US$1,840) for other receivables, and Rmb 236 and Rmb 235 (US$36) for
potential losses associated with the guarantee at December 31, 2009 and 2010 respectively. The net
receivables amount of Rmb 284 and Rmb 68 (US$10) is included in
Other receivables, net in the accompanying consolidated statement of financial positions (See
Note 24).
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China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  33.
    
    Commitments and contingencies (contd)Guarantees (contd)As of December 31, 2009 and 2010, the maximum potential amount of future undiscounted payments
YEGCL could be required to make under the guarantees was Rmb 12,050 and Rmb 11,712 (US$1,786),
respectively. YEGCL held cash deposits of Rmb 1,237 and Rmb 937 (US$143) as of December 31, 2009
and 2010 and security interests in automobiles with an aggregate initial purchase value of Rmb
181,164 and Rmb 85,275 (US$13,006) as of December 31, 2009 and 2010, 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 236 and Rmb 235 (US$36) as of December 31, 2009 and 2010, respectively, included
in Accrued expenses and other liabilities.
 34.
    
    Segment information
  
    
    Yuchai primarily conducts manufacturing and sale of diesel engines
which are mainly distributed in the PRC market.
    
    The HLGE group is engaged in hospitality and property development
activities conducted mainly in the PRC and Malaysia.
 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 was classified
as a discontinued operation during the financial year of 2009. In 2010, with the disposal of
580,253,000 shares in TCL by the Company, the Company no longer has significant influence over the
operating and financial policies of TCL, and TCL is no longer regarded as a reporting segment of
the Group.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
    
    
    
    
    
    
    
    
    
    and
    
    
    financialDecember 31, 2010
    
    Yuchai
    
    
    HLGE
    
    
    eliminations
    
    
    statementsRmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000RevenueExternal customers
    
    
    16,158,415
    
    
    
    49,769
    
    
    
    
    
    
    
    16,208,184Inter-segment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    16,158,415
    
    
    
    49,769
    
    
    
    
    
    
    
    16,208,184ResultsInterest income
    
    
    60,285
    
    
    
    1,169
    
    
    
    265
    (1)
    
    
    61,719Interest expense
    
    
    (122,178
    )
    
    
    (15,791
    )
    
    
    10,434
    (1)
    
    
    (127,535
    )Impairment of property, plant
and equipment
    
    
    (1,372
    )
    
    
    
    
    
    
    
    
    
    
    (1,372
    )Depreciation and amortisation
    
    
    (279,295
    )
    
    
    (4,749
    )
    
    
    (2,096
    )(2)
    
    
    (286,140
    )Share of profits of associates
    
    
    (661
    )
    
    
    540
    
    
    
    
    
    
    
    (121
    )Share of losses of joint
ventures
    
    
    (13,498
    )
    
    
    6
    
    
    
    (40,410
    )(9)
    
    
    (53,902
    )Income tax (expense)/ credit
    
    
    (286,554
    )
    
    
    9,180
    
    
    
    (50,572
    )(3)
    
    
    (327,946
    )Segment profit
    
    
    1,851,597
    
    
    
    (23,787
    )
    
    
    (62,607
    ) (4)
    
    
    1,765,203Total assets
    
    
    15,194,764
    
    
    
    518,462
    
    
    
    533,037
    (5)
    
    
    16,246,263Total liabilities
    
    
    9,201,795
    
    
    
    595,542
    
    
    
    (337,001
    )(6)
    
    
    9,460,336Other disclosuresInvestment in associates
    
    
    1,661
    
    
    
    36,949
    
    
    
    
    
    
    
    38,610Investment in joint ventures
    
    
    245,827
    
    
    
    126,924
    
    
    
    141,562
    (8)
    
    
    514,313Capital expenditure
    
    
    625,773
    
    
    
    3,833
    
    
    
    20
    (7)
    
    
    629,626
   F-95




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##### Table of Contents



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
    
    
    
    
    
    
    
    114
    (1)
    
    
    31,576Interest expense
    
    
    (72,069
    )
    
    
    (21,160
    )
    
    
    
    
    
    
    15,736
    (1)
    
    
    (77,493
    )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
    
    
    
    557,531
    (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
    
    
    
    
    
    
    
    171,037
    (8)
    
    
    368,025Capital expenditure
    
    
    734,555
    
    
    
    46,778
    
    
    
    
    
    
    
    
    
    
    
    781,333
  F-96




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##### Table of Contents



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 disclosuresInvestments in associates
    
    
    7,261
    
    
    
    33,896
    
    
    
    287,443
    
    
    
    
    
    
    
    328,600Investments in joint
ventures
    
    
    
    
    
    
    164,979
    
    
    
    
    
    
    
    171,037
    (8)
    
    
    336,106Capital expenditure
    
    
    728,572
    
    
    
    2,099
    
    
    
    
    
    
    
    
    
    
    
    730,671
 (1)
    
    Included here are interest income and expense of the holding entitys interest
income and expense and inter-segment interest income and expense that 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.(7)
    
    Included here are capital expenditures incurred by the holding entity.(8)
    
    Included here are HLGEs share of its joint ventures property, plant and equipments
valued at fair value in excess of costs.(9)
    
    Included here are HLGEs share of additional depreciation on its joint ventures
property, plant and equipments valued at fair value in excess of costs.
  F-97




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  34.
    
    Segment information (contd)
 Geographic information
  31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000China
    
    
    13,162,087
    
    
    
    16,176,305
    
    
    
    2,467,254Other countries
    
    
    13,816
    
    
    
    31,879
    
    
    
    4,862Total
    
    
    13,175,903
    
    
    
    16,208,184
    
    
    
    2,472,116
   Non-current assets
 1.1.2009
    
    
    31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    US$000(Restated)
    
    
    (Restated)China
    
    
    3,237,063
    
    
    
    3,891,833
    
    
    
    4,419,873
    
    
    
    674,131Other countries
    
    
    53,627
    
    
    
    53,780
    
    
    
    40,046
    
    
    
    6,108Total
    
    
    3,290,690
    
    
    
    3,945,613
    
    
    
    4,459,919
    
    
    
    680,239
 .
  - 98 -




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##### Table of Contents



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, 2010 of the Group would increase/decrease by
Rmb 17.2 million (US$2.6 million) (2009: profit increase/decrease by Rmb 12.9 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.
  F-99




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  35.
    
    Financial risk management objectives and policies (contd)Foreign currency risk
(contd)
 The Groups exposures to foreign currency are as follows:
 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
    
    
    (23,616
    )
    
    
    1,437
    
    
    
    12,739
    
    
    
    4,731
    
    
    
    
 December 31, 2010UnitedSingapore
    
    
    Euro
    
    
    States
    
    
    ChineseGroup
    
    Dollar
    
    
    Dollars
    
    
    Dollar
    
    
    Renminbi
    
    
    OthersRmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000Other investments
    
    
    59,615
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other receivables
    
    
    424
    
    
    
    20,072
    
    
    
    122,757
    
    
    
    35,290
    
    
    
    18Cash and cash equivalents
    
    
    90,804
    
    
    
    
    
    
    
    3,117
    
    
    
    
    
    
    
    Financial liabilities
    
    
    (152,772
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade and other payables
    
    
    (44,901
    )
    
    
    (674
    )
    
    
    (48,281
    )
    
    
    (4,453
    )
    
    
    (20
    )In Rmb000
    
    
    (46,830
    )
    
    
    19,398
    
    
    
    77,593
    
    
    
    30,837
    
    
    
    (2
    )In US$000
    
    
    (7,143
    )
    
    
    2,959
    
    
    
    11,835
    
    
    
    4,703
    
    
    
    
 Foreign currency risk sensitivity
 A 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.
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Profit
    
    
    Profit
    
    
    Profitbefore tax
    
    
    before tax
    
    
    before taxSingapore dollar
    
    
    (15,484
    )
    
    
    (4,683
    )
    
    
    (714
    )Euro dollar
    
    
    942
    
    
    
    1,940
    
    
    
    296United States dollar
    
    
    8,352
    
    
    
    7,759
    
    
    
    1,184Chinese Renminbi
    
    
    3,102
    
    
    
    3,084
    
    
    
    470
  F-100




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##### Table of Contents



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:
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Equity
    
    
    4,606
    
    
    
    5,663
    
    
    
    864
 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.
  F-101




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  35.
    
    Financial risk management objectives and policies (contd)
 Credit risk (contd)At December 31, 2010, the Group had approximately top 20 customers (2009: top 20 customers) that
owed the Group more than Rmb 346.9 million (US$52.9 million) and accounted for approximately 58%
(2009: 70%) of accounts receivables (excluding bills receivables) owing respectively. These
customers are located in the PRC. There were 35 customers (2009: 22 customers) with balances
greater than 1 million (US$0.1 million) accounting for just over 82.6% (2009: 81.0%) 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.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 summarizesthe maturity profile of the Groups financial assets and liabilities
based on contractual undiscounted payments.
 One year
    
    
    One to fiveAs at December 31, 2010
    
    or less
    
    
    Years
    
    
    TotalRmb000
    
    
    Rmb000
    
    
    Rmb000Financial assets:Trade and bill receivables
    
    
    4,234,475
    
    
    
    
    
    
    
    4,234,475Other receivables:Staff advances
    
    
    3,649
    
    
    
    
    
    
    
    3,649Amounts due under guarantee
contracts, net
    
    
    12,129
    
    
    
    
    
    
    
    12,129Associates
    
    
    18,604
    
    
    
    
    
    
    
    18,604Other related parties
    
    
    50,726
    
    
    
    58,914
    
    
    
    109,640Others
    
    
    126,018
    
    
    
    6,619
    
    
    
    132,637Cash and cash equivalents
    
    
    4,060,990
    
    
    
    
    
    
    
    4,060,9908,506,591
    
    
    
    65,533
    
    
    
    8,572,124Financial liabilities:Interest-bearing loans and borrowings
    
    
    423,543
    
    
    
    201,850
    
    
    
    625,393Preference shares
    
    
    
    
    
    
    861
    
    
    
    861Trade and other payables
    
    
    7,891,357
    
    
    
    
    
    
    
    7,891,357Finance lease liabilities
    
    
    9,743
    
    
    
    18,008
    
    
    
    27,7518,324,643
    
    
    
    220,719
    
    
    
    8,545,362
  F-102




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##### Table of Contents



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, 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
    
    
    
    10,961
    
    
    
    102,588Cash and cash equivalents
    
    
    3,657,981
    
    
    
    
    
    
    
    3,657,9816,346,232
    
    
    
    72,183
    
    
    
    6,418,415Financial liabilities:Interest-bearing loans and borrowings
    
    
    667,173
    
    
    
    411,875
    
    
    
    1,079,048Preference shares
    
    
    485
    
    
    
    1,634
    
    
    
    2,119Trade and other payables
    
    
    6,187,048
    
    
    
    
    
    
    
    6,187,048Finance lease liabilities
    
    
    9,748
    
    
    
    25,243
    
    
    
    34,9916,864,454
    
    
    
    438,752
    
    
    
    7,303,206
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##### Table of Contents



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).
 31.12.2009
    
    
    31.12.2010
    
    
    31.12.2010Rmb000
    
    
    Rmb000
    
    
    US$000Interest-bearing loans and
borrowings (Note 19)
    
    
    1,079,048
    
    
    
    625,393
    
    
    
    95,387Trade and other payables (Note 29)
    
    
    6,190,246
    
    
    
    7,902,317
    
    
    
    1,205,283Less: cash and cash equivalents
(Note 25)
    
    
    (3,657,981
    )
    
    
    (4,060,990
    )
    
    
    (619,393
    )Net debt
    
    
    3,611,313
    
    
    
    4,466,720
    
    
    
    681,277Equity
    
    
    5,409,790
    
    
    
    6,785,927
    
    
    
    1,035,007Total capital and net debt
    
    
    9,021,103
    
    
    
    11,252,647
    
    
    
    1,716,284
 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,
2010 and 2009.
 37.
    
    Fair values of financial instruments
 Fair value hierarchyThe Group classifies fair value measurement using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy has the
following levels:
 Level 1 
    
    Quoted prices (unadjusted) in active markets for
identical assets or liabilitiesLevel 2 
    
    Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either
directly (i.e., as prices) or indirectly (i.e., derived
from prices); andLevel 3 
    
    Inputs for the asset or liability that are not based on
observable market data (unobservable inputs)
  F-104




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  37.
    
    Fair values of financial
instruments (contd)
 Fair value hierarchy
(contd)
 The Group has a financial asset in level 1. The Group owns shares in Thakral Corporation Ltd
(TCL), which 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. As at 31 December 2010, the Group classified the investment as
held for trading and measured the investment at fair value through profit or loss. The Group does
not have any financial instruments in level 2 and level 3 of the hierarchy.Fair value of financial instruments by classes that are not carried at fair value and whose
carrying amounts are reasonable approximation of fair value.The Groups financial assets consists of the carrying amounts of trade and bills receivables, other
receivables, cash and cash equivalents, interest-bearing loans and
borrowings, trade and other payables and other finance lease liabilities
approximate their fair value due to their short term nature.Other financial assets and liabilitiesThe carrying amounts of other receivables (long-term) and interest bearing loans and borrowings
(long-term) approximate their fair value as their interest rates approximates the market lending
rate.
  F-105




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  38.
    
    Events after the balance sheet date
 (a)
    
    S$30.0 million credit facility with Bank of Tokyo-Mitsubishi, UFJ Ltd, Singapore Branch
(BOTM)On March 11, 2011, 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$30.0 million with
three-year duration from March 18, 2011 to March 18, 2014. 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 18, 2011, 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$30.0 million facility that was due to mature on March 25, 2011. The facility is
available for three years from the date of the facility agreement and will be utilised 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 consolidated 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)
    
    Changes in shareholding of HLGEWith the conversion of 17,234,000 Existing HLGE RCPS B into HLGE ordinary shares on the
Mandatory Conversion Date, the Companys shareholding interest in HLGE increased from 47.4%
to 48.4% with effect from March 24, 2011 upon receipt of regulatory approval.
  F-106




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##### Table of Contents



China Yuchai International Limited
 Notes to the Consolidated Financial Statements
  38.
    
    Events after the balance sheet date (contd)
 (d)
    
    Yuchai Rmb 1 billion short-term financing bondsYuchai has received approval from Chinas National Association of Financial Market
Institutional Investors (NAFMII) for the issuance of RMB-denominated unsecured short term
financing bonds amounting to Rmb 1.7 billion (Bonds). The Bonds are to be issued in two
tranches. The first tranche of the Bonds amounting to Rmb 1 billion was issued on March 9,
2011 and will mature on March 9, 2012. The par value and issue price of each Bond is Rmb
100. The first tranche of the Bonds bears a fixed annual interest rate of 4.59%. Yuchai
intends to issue the second tranche of the Bonds with a principal amount of Rmb 700 million
in China at a later date, subject to market conditions. Subscription to and trading of the
Bonds is only available in China to institutional investors of Chinas National Inter-bank
Bond Market. The lead underwriter and bookrunner for the first tranche of the Bonds was the
Industrial and Commercial Bank of China. All the proceeds from the issuance of the Bonds
are to be used by Yuchai as working capital.(e)
    
    Sale and leaseback agreementOn January 2011, Yuchai terminated the sale and leaseback agreement signed with CDB Leasing
Company Limited (CDB) in 2009. YAMC repaid approximately RMB28 million in a lump sum to
CDB for redemption of the full ownership of the finance lease assets.(f)
    
    Sale of Guilin office
buildingOn April 27, 2011, Guangxi Yulin Hotel Company Limited entered into
a sale and purchase agreement with a third party to sell its office
building located in Guilin, Guangxi province for a total
consideration of Rmb 120 million, where Rmb 60 million of down
payment will be paid within 15 working days from the contract date,
and the remaining Rmb 60 million will be paid by November 30, 2011.
  F-107