Annual Report Summary

Contents
2 Corporate Information
3 Chairman’s Statement
7 Report of the Directors
18 Corporate Governance Report
28 Auditors’ Report
29 Consolidated Income Statement
30 Balance Sheets
32 Consolidated Statement of Changes in Equity
34 Consolidated Cash Flow Statement
35 Notes to the Consolidated Financial Statements
95 Investment Properties
Corporate Information
BOARD OF DIRECTORS LEGAL ADVISERS
Executive Directors Woo, Kwan, Lee & Lo
ZHANG Fangyou (Chairman) SHARE REGISTRAR

LU Zhifeng (Vice Chairman)
YANG Dadong Abacus Share Registrars Limited
ZENG Qinghong 26/F Tesbury Centre
ZHANG Baoqing (Managing Director) 28 Queen’s Road East
DING Baoshan Wanchai, Hong Kong
Independent Non-Executive Directors LISTING INFORMATION
CHEUNG Doi Shu The Stock Exchange of Hong Kong Limited

LEE Ka Lun Stock Code : 0203
FUNG Ka Pun
REGISTERED OFFICE
Room 801, Citicorp Centre

18 Whitfield Road
Causeway Bay, Hong Kong
WEBSITE
http://www.denway-motors.com
COMPANY SECRETARY
Mr. LEUNG Chong Shun
PRINCIPAL BANKERS
Bank of China (Hong Kong) Limited

Bank of China, Guangzhou Branch
AUDITORS
PricewaterhouseCoopers
Certified Public Accountants, Hong Kong
2
Chairman’s Statement
Chairman — Mr. Zhang Fangyou
To all Shareholders,
I hereby present the annual report of Denway Motors Limited (the ‘‘Company’’), and the audited
consolidated results of the Company and its subsidiaries (together the ‘‘Group’’), non-consolidated
subsidiaries, associates and jointly controlled entities for the year ended 31 December 2005.
BUSINESS REVIEW
For the year ended 31 December, 2005, turnover from the continuing operations of the Group was
approximately HK$850,483,000 (2004 : HK$970,407,000, adjusted), a decrease of 12.4% over last
year. Audited consolidated profit attributable to shareholders was HK$1,905,529,000 (2004 :
HK$2,062,447,000), a decrease of 7.6% over last year. Earnings per share from the continuing
operations was HK26.2 cents (2004 : HK28.9 cents, adjusted), a decrease of 9.3% over last year.
Given the favourable macroeconomic environment in 2005, the automobile industry of China
continued to sustain stable growth. Total automobile production and sales units for the year were
approximately 5,707,700 and 5,758,200 respectively, representing year-on-year increases of
DENWAY MOTORS LIMITED 3

approximately 12.56% and 13.54% respectively, of which total production and sales units of
passenger vehicles were approximately 3,930,700 and 3,971,100 respectively, representing year-on-
year increases of approximately 19.73% and 21.40% respectively.
During 2005, the Group produced and sold an aggregate of 232,194 units and 231,437 units of motor
vehicles respectively through a jointly controlled entity (the ‘‘Sedan Company’’) and its subsidiary
(the ‘‘Bus Company’’), representing an increase of approximately 14.1% and 13.8% respectively over
those of the previous year. Among the total, the output and sales of the Sedan Company accounted
for 231,550 units and 230,773 units respectively, representing an increase of approximately 14.5%
and 14.2% respectively over that of the previous year. In order to expand its market share and
maintain its competitiveness, the Sedan Company has implemented new pricing policy which led to
decrease in corporate earnings. However, the Sedan Company’s earnings level is still much higher
than domestic and overseas peer groups’ earnings level. The output and sales of the Bus Company
accounted for 644 units and 664 units respectively, representing a decrease of approximately 48.5%
and 49.2% respectively over that of the previous year. As the domestic bus industry at present is
under an unhealthy situation, the management of the Company decided to dispose of the bus
business and such disposal had been approved by the shareholders of the Company in the
extraordinary general meeting held on 23 March, 2006.
The Group completed, in 2005, the acquisitions of the 5% equity interests in Guangzhou Denway
Enterprises Development Company Limited and the 49% beneficial equity interests in Guangzhou
Automobile Group Component Co., Ltd. and, in 2006, the disposal of the 50% equity interests in
Guangzhou Denway Bus Co., Ltd pursuant to the approval of the said disposal obtained in the
extraordinary general meeting held on 23 March, 2006. Such a series of transactions not only enable
the Group to further enhance its asset structure by diversifying profit sources and underpinning
earnings basis, but also fitting into its long-term development.
In 2005, the Group’s other businesses, comprising vehicle trading, manufacture of vehicle-related
equipment and components, and manufacture and trading of audio equipment, met our expectations.
FUTURE PROSPECTS
The advent of China’s Eleventh Five-Year Plan in 2006 will continue to foster a more stable,
healthier and quicker development of the domestic economy. Establishment of the new rural village
under socialism will be the guiding tune of the economic development of China, and facilitate the
automobile marketplace a gigantic commercial opportunity. Battered by price wars and sweetened by
robust growth, the PRC vehicle market is maturing gradually amidst market jitters. The car
ownership per capita in China is far below that of the global average with ample room in the market.
According to the forecast of the PRC Car Industry Association, the production and sales units for
this year shall attain 6,400,000, representing a year-on-year increase of approximately 13%.
The Sedan Company plans to produce and sell 260,000 units of sedans in 2006, representing an
increase of 13% over that of 2005. The Sedan Company will continue to adopt a market-oriented
approach whereby more products, which may satisfy market demand and be welcomed by customers,
will be introduced. Meanwhile, the Sedan Company will continue to expand and perfect the sales
services system. Efforts will be dedicated to product technology, quality and services so as to
continue to enhance customers’ satisfaction and provide efficient services with high quality. The
Sedan Company persists on a roll-over principle for its development. The construction of the second
plant of the Sedan Company has been progressing smoothly and is now at the stage of equipment
installation and testing. It is expected that the second plant will start production in the second half
of this year.
4
Year 2006 will be a year of rapid development for the auto industry of Guangzhou. The Group will
continue to pursue for better development opportunities in relation to the automobile business. The
Board believes that the Group will maintain to seize such opportunities for further development,
thereby generating attractive and better returns for its shareholders.
FINANCIAL SUMMARY
The Group’s turnover from the continuing operations of the Group for the year ended 31 December,
2005 was about HK$850,483,000, representing a decrease of about 12.4% compared to that of 2004.
On 17 February, 2006, the Group announced a connected transaction to dispose the equity interest in
a subsidiary (‘‘the Disposed Subsidiary’’) solely conducting business in the manufacturing and
assembly of motor vehicles. In accordance with HKFRS, the relevant items relating to the Disposed
Subsidiary in the income statement in 2004 and 2005 and the balance sheet in 2005 were classified
separately as a discontinued operation. The transaction was approved by independent shareholders
and completed on 23 March, 2006.
The turnover of the trading of motor vehicles decreased by HK$150,092,000 which represented a
decrease of about 21.0% in 2005 compared that of 2004. However, the operating profit of this
segment increased by HK$13,353,000 or an increase of about 243.0% in 2005, mainly due to
reduction of cost of goods sold. The turnover of the manufacturing and trading of automotive
equipment and parts decreased by HK$7,423,000 which represented a decrease of about 39.5% in
2005, mainly due to the disposal and liquidation of subsidiaries in the second half of 2004. The
turnover of manufacturing and trading of audio equipment increased by HK$37,591,000 which
represented an increase of about 15.8% in 2005, mainly due to increase of sales orders. The
operating profit of this segment increased by HK$16,403,000 or an increase of about 140.3% in
2005, mainly due to increase of sales orders and reduction of cost of goods sold. The order on hand
of the Group for the business of the manufacturing and trading of audio equipment was about
HK$26,654,000 as at 31 December, 2005.
The total borrowings of the Group decreased from about HK$94,279,000 at the end of 2004 to about
HK$19,249,000 at the end of 2005, mainly due to exclusion of borrowings related to the Disposed
Subsidiary. The Group maintained a low ratio of borrowings relative to total equity at about 0.2% as
at 31 December, 2005 compared with that of at about 1.3% as at 31 December, 2004. The ratio of
total liabilities relative to total equity decreased to only about 4.6% as at 31 December, 2005 from
about 6.4% as at 31 December, 2004. The Group’s borrowings were secured by leasehold land,
property, plant and equipment and investment properties with a total net book value of about
HK$31,587,000 and bank balances of about HK$30,684,000. As at 31 December, 2005, the Group
had contingent liabilities of about HK$14,125,000 which mainly represented guarantees of bank
loans borrowed by an associate.
The Group had cash and bank balances of about HK$1,663,197,000 as at 31 December, 2005. This
included the net cash inflow from operating activities of about HK$55,463,000. During the year, the
payment of dividend by the Company was financed by the receipt of cash dividend from the
investment vehicles.
The Group’s general and administrative expenses for the year ended 31 December, 2005 were about
HK$94,852,000, representing a decrease of about 10.6% compared with that of 2004, mainly due to
implementation of effective cost controls within the Group. The finance costs had no material
variation. The interest cover remained at a high level of 1,398 multiples in 2005 compared to that of

1,460 multiples in 2004. The Group enjoyed the benefit of the currency appreciation of Renminbi,
the major operating currency of the Group for the year ended 31 December, 2005, which was
effective in July 2005 and resulted a significant exchange gains upon realization.
Share of losses of non-consolidated subsidiaries were about HK$966,000 in 2005 compared with that
of share of profits of about HK$93,000 in 2004. Further, share of profits of associated companies
were about HK$13,137,000 in 2005, represented an increase of about 114.6% compared to that of
2004.
On 6 October, 2005, the Group announced a connected transaction to acquire 49% effective equity
interest in a jointly controlled entity. The jointly controlled entity holds other jointly controlled
entities and the Group classified all of them as other jointly controlled entities for presentation
purpose. The transaction was approved by independent shareholders and completed on 2 November,
2005. After the completion of the transaction, the Group shared profits of HK$16,232,000 from other
jointly controlled entities in 2005.
Share of profit from a jointly controlled entity was the major source of profit for the Group, which
contributed about HK$1,900,443,000, and represented a decrease of about 8.5% compared with that
of 2004, mainly due to the introduction of a new sales policy during the year. Due to its importance
to the Group, the Group announced a connected transaction on 4 January, 2005 to acquire further
interest in the jointly controlled entity and the transaction was approved by independent shareholders
and completed on 4 February, 2005.
EMPLOYEES AND REMUNERATION POLICY
As at 31 December 2005, the continuing operations of the Group employed approximately 1,800
(2004 : 3,000) staffs in the PRC, Hong Kong and Australia.
The remuneration package adopted by the Group includes discretionary bonus and share options
being granted to eligible staff based on the Group’s performance and individual performance. Staff
training and development programs are conducted on a regular basis.
ACKNOWLEDGEMENTS
I would like to extend my appreciation to all shareholders for their support and to thank the
Directors for their guidance and the staff members for their dedication and hard work.
Zhang Fangyou
Chairman
Hong Kong, 19 April 2006
6
Report of the Directors
The Board of Directors (the ‘‘Board’’) submits its report together with the audited financial
statements for the year ended 31 December 2005.
PRINCIPAL ACTIVITIES AND SEGMENT INFORMATION
The Company is an investment holding company. Its subsidiaries (the Company and its subsidiaries
are hereafter referred to as the ‘‘Group’’), non-consolidated subsidiaries, associates and jointly
controlled entities are principally engaged in an integrated range of activities relating to the
manufacturing, assembly and trading of motor vehicles, and the manufacturing and trading of
automotive equipment and parts in the People’s Republic of China (the ‘‘PRC’’), and the
manufacturing and trading of audio equipment in Hong Kong. Details of segment information of
the Group are set out in Note 2 to the consolidated financial statements.
RESULTS AND APPROPRIATIONS
The results of the Group for the year are set out in the consolidated income statement on page 29.
The Board of directors recommends a final dividend of HK4 cents (2004 : HK4 cents) and a special
dividend of HK5 cents (2004 : nil) per ordinary share totalling HK9 cents for the year ended 31
December 2005. Together with the interim dividend of HK4 cents paid, total dividends for the year
will be HK13 cents (2004 : HK8 cents) per ordinary share. Subject to the approval of shareholders at
the forthcoming Annual General Meeting, the final dividend and the special dividend will be paid on
12 June 2006 to shareholders whose names appeared on the register of members of the Company on
6 June 2006.
CLOSURE OF REGISTER OF MEMBERS
The register of members of the Company will be closed from Thursday, 1 June 2006 to Tuesday, 6
June 2006, both days inclusive, during which no transfer of shares will be registered. In order to
qualify for the proposed final dividend and special dividend, all share certificates with completed
transfer forms either overleaf or separately must be lodged with the Company’s Registrars, Abacus
Share Registrars Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong
not later than 4 : 30 p.m. on Tuesday, 30 May 2006.
RESERVES
Movements in the reserves of the Group and the Company during the year are set out in note 28 to
the consolidated financial statements. The Company had distributable reserves of HK$996,224,000 at
31 December 2005, calculated pursuant to section 79B of the Company Ordinance (2004 :
601,714,000).
PROPERTY, PLANT AND EQUIPMENT
Details of the movements in property, plant and equipment of the Group and of the Company during
the year are set out in note 17 to the consolidated financial statements.
PRINCIPAL PROPERTIES
Details of the principal properties held for investment purposes are set out on pages 95 and 96.
SHARE CAPITAL AND OPTIONS
Details of movements in the issued share capital and options of the Company during the year are set
out in note 27 to the consolidated financial statements.

Details of movements in the share options granted by the Company during the year and options
outstanding as at 31 December 2005 are set out in note 27(c) to the consolidated financial
statements.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
The Company has not redeemed any of its shares during the year. Neither the Company nor any of
its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities during the
year.
PRINCIPAL SUBSIDIARIES
Details of the Company’s principal subsidiaries as at 31 December 2005 are set out in note 38 to the
consolidated financial statements.
BANK LOANS, OVERDRAFTS AND OTHER BORROWINGS
Details of bank loans, overdrafts and other borrowings of the Group and of the Company as at 31
December 2005 are set out in note 29 to the consolidated financial statements.
FIVE-YEAR FINANCIAL SUMMARY
The results, assets and liabilities of the Group for the current year and the last four financial years
are as follows:
2005 2004 2003 2002 2001

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Profit attributable to shareholders 1,905,529 2,062,447 1,686,709 1,091,913 724,242
Total assets 9,155,311 7,584,109 5,829,890 3,940,259 2,976,849

Total liabilities 400,653 456,178 502,558 335,090 429,576
Minority interests 84,462 157,564 171,228 109,107 66,838
Shareholders’ funds 8,670,196 6,970,367 5,156,104 3,496,062 2,480,435
DIRECTORS
The directors who held office during the year and up to the date of this report are:
Mr. ZHANG Fangyou

Mr. LU Zhifeng
Mr. YANG Dadong
Mr. ZENG Qinghong
Mr. ZHANG Baoqing
Mr. DING Baoshan
Mr. CHEUNG Doi Shu*
Mr. LEE Ka Lun*
Mr. FUNG Ka Pun*
* Independent non-executive directors
Messrs. LU Zhifeng, YANG Dadong and DING Baoshan shall retire by rotation in accordance with
Article 101 of the Articles of Association of the Company and, being eligible, shall offer themselves
for re-election at the forthcoming annual general meeting.
8
The Company has received annual confirmation from each of the independent non-executive
directors as regards their independence to the Company and considers that each of the independent
non-executive directors is independent to the Company.
DIRECTORS AND SENIOR MANAGEMENT’S PROFILES
Biographical details of the Directors of the Company and the senior management of the Group are
set out as follows:
Executive Directors
Mr. ZHANG Fangyou, aged 49, joined the Group in 1997 and became the Chairman of the
Company on 18 September 1998. He is also the Chairman of Guangzhou Automobile Industry Group
Co., Ltd., Guangzhou Automobile Group Co., Ltd., Guangzhou Toyota Motor Co., Ltd., Guangzhou
Auto Group (Hong Kong) Ltd. and China Lounge Investments Ltd. Mr. Zhang was the Managing
Director of China Lounge Investments Ltd. and the Company and a Director of Guangzhou Honda
Automobile Co., Ltd. He had held senior posts in the Zeng Cheng Municipal People’s Government
of Guangdong Province and was the Deputy Secretary-General of Guangzhou Municipal People’s
Government and the Director of the Automotive Industry Office of Guangzhou Municipal People’s
Government.
Mr. LU Zhifeng, aged 53, joined the Group in 1998 and was appointed as the Vice Chairman of the
Company on 11 January 2000. He is also the Managing Director of Guangzhou Automobile Industry
Group Co., Ltd., the Vice Chairman of Guangzhou Automobile Group Co., Ltd., the Vice Chairman
of the Guangzhou Auto Group (Hong Kong) Ltd. and China Lounge Investments Ltd. and the
Chairman of Guangzhou Honda Automobile Co., Ltd. Mr. Lu was the General Manager of
Guangzhou Automobile Group Co., Ltd., the Executive Deputy Managing Director of Guangzhou
Honda Automobile Co., Ltd., the General Manager of Guangzhou Yangcheng Automobile Group Co.
and the Vice Chairman and Managing Director of Guangzhou Yangcheng Automobile Co., Ltd.
Mr. YANG Dadong, aged 57, joined the Group on 16 January 2001 as a Director of the Company.
He is also the Vice Chairman of Guangzhou Automobile Industry Group Co., Ltd., a Director of
Guangzhou Automobile Group Co., Ltd., Guangzhou Auto Group (Hong Kong) Ltd., China Lounge
Investments Ltd. and Guangzhou Honda Automobile Co., Ltd. as well as the Chairman of Wu Yang-
Honda Motors (Guangzhou) Co., Ltd. Mr. Yang was the Chairman of Guangzhou Motorcycle Group
Co. and the Vice Chairman and Managing Director of Wu Yang-Honda Motors (Guangzhou) Co.,
Ltd.
Mr. ZENG Qinghong, aged 44, joined the Group in 1999 and was appointed as a Director of the
Company on 16 January 2001. He is also a Director of Guangzhou Automobile Industry Group Co.,
Ltd., the Vice Chairman and Managing Director of Guangzhou Automobile Group Co., Ltd., a
Director of Guangzhou Auto Group (Hong Kong) Ltd., China Lounge Investments Ltd. and
Guangzhou Honda Automobile Co., Ltd., the Chairman of Guangzhou Automobile Group Component
Co., Ltd. and Guangzhou Automobile Group Business Commercial Co., Ltd. as well as the Vice
Chairman and Managing Director of Guangzhou Auto Group Corporation. He was the Deputy
General Manager of Guangzhou Automobile Industry Group Co., Ltd., the Executive Deputy
Managing Director of Guangzhou Honda Automobile Co., Ltd. and the Vice Chairman and Deputy
Managing Director of Guangzhou Guangke Automobile Enterprises Group Co., Ltd.
Mr. ZHANG Baoqing, aged 56, joined the Group in 1998 and was appointed as the Deputy
Managing Director of the Company on 19 June 2001. He became the Managing Director on 23
September 2004 and a member of the Remuneration Committee of the Company on 3 January 2005.
He is also a Director of Guangzhou Automobile Group Co., Ltd., the Managing Director of

Guangzhou Auto Group (Hong Kong) Ltd. and China Lounge Investments Ltd. as well as the
Chairman of Guangzhou Denway Enterprises Development Co., Ltd. and of several members of the
Group. He was the Deputy Managing Director of Guangzhou Automobile Industry Group Co., Ltd.
and Guangzhou Automobile Group Co., Ltd., a Director of Guangzhou Motorcycle Group Co., the
Factory Manager of Guangzhou Automotive Manufacturing Factory and the Deputy General Manager
of Guangzhou Jinda Motors Holdings Enterprises.
Mr. DING Baoshan, aged 43, joined the Group as a Director of the Company on 26 October 2000.
He studied in the University of Science and Technology Beijing (formerly known as "Beijing
Institute of Iron and Steel Engineering") and the Graduate School of Chinese Academy of Social
Sciences where he obtained his Bachelor in Engineering, Master’s degree in Management and Ph.D.
in Economics. He had worked a long period of time in the national macroeconomic departments for
research of macroeconomical policies and corporate reform. He is also the Deputy General Manager
of Guangzhou Automobile Group Co., Ltd., a Director of Guangzhou Auto Group (Hong Kong) Ltd.
and China Lounge Investments Ltd. Mr. Ding was the Chief Economist of Guangzhou Automobile
Industry Group Co., Ltd., the Assistant to General Manager and Chief Economist of Guangzhou
Automobile Group Co., Ltd. and the Chairman of Guangzhou Honda Automobile No.1 Sales Co.,
Ltd.
Independent Non-Executive Directors
Mr. CHEUNG Doi Shu, aged 44, was appointed as an Independent Non-Executive Director on 16
April 1998, a member of the Audit Committee of the Company on 30 June 1999, the Chairman of
the Remuneration Committee of the Company on 3 January 2005 and a member of the Nomination
Committee of the Company on 2 September 2005. He is a qualified solicitor in the Australian
Capital Territory, Hong Kong, Singapore and England and Wales and received his Bachelor’s and
Master’s degree in Law from University of London. Mr. Cheung is an Independent Non-Executive
Director of GZI Transport Limited and the senior partner of D.S. Cheung & Co.
Mr. LEE Ka Lun, aged 51, was appointed as an Independent Non-Executive Director and the
Chairman of Audit Committee of the Company on 30 June 1999, a member of the Remuneration
Committee of the Company on 3 January 2005 and a member of the Nomination Committee of the
Company on 2 September 2005. Mr. Lee is also an Independent Non-Executive Director of
Guangzhou Investment Company Limited and Chow Sang Sang Holdings International Limited. He
is an accountant by profession and is the Deputy Chief Executive of Lloyds TSB Bank Plc, Hong
Kong Branch. Mr. Lee is a fellow of The Association of Chartered Certified Accountants in UK and
has over 25 years of experience in banking and auditing.
Mr. FUNG Ka Pun, aged 60, was appointed as an Independent Non-Executive Director and a
member of Audit Committee of the Company on 23 September 2004, a member of the Remuneration
Committee of the Company on 3 January 2005 and the Chairman of the Nomination Committee on 2
September 2005. He is also the Co-Chairman of E2-Capital (Holdings) Limited, the Chairman of
Goodwill International (Holdings) Limited, the Executive Director and Co-Chairman of Capital
Publications Limited and an Independent Non-Executive Director of GZI Transport Limited, Lei
Shing Hong Limited and Lee Hing Development Limited.
Mr. Fung is a part-time member of the Central Policy Unit, the Government of the HKSAR. He is a
fellow member of the Association of International Accountants and an associate member of the
Institute of Chartered Secretaries and Administrators and has more than 30 years of experience in
finance, securities and futures trading and corporate finance.
10
Senior Management
Ms. GAO Fusheng, aged 48, joined the Group in 1999 as the Deputy General Manger and the
Financial Controller of the Company. She is also a Director of a number of subsidiaries of the
Group. Ms. Gao obtained a Master in Business Administration from Murdoch University in Australia
and is a qualified senior accountant in the PRC. She was the Director of the Finance Department of
Guangzhou Automobile Group Co., Ltd. and the Director of the Finance Department of the
Automotive Industry Office of Guangzhou Municipal People’s Government.
Mr. HO Nai Ki, aged 56, is the Assistant to Managing Director of the Company and General
Manager of the Company’s Marketing Department. Prior to joining the Group in 1993, he had
worked in international financial institutions like the Chase Manhattan Bank and Sun Hung Kai
Group. Mr. Ho has over 25 years of experience in investment and financial management.
Mr. Su Pui Kwan, aged 41, is the Deputy General Manager of the Finance Department and the
Qualified Accountant of the Company. He joined the Group in 1997. He holds a Bachelor of Social
Science degree from the Chinese University of Hong Kong. He is also a Fellow of the Association of
Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants.
DIRECTORS’ SERVICE CONTRACTS
There is no service contract, which is not determinable by the Company within one year without
payment of compensation (other than statutory compensation), in respect of any Director of the
Company proposed for re-election at the forthcoming annual general meeting.
DIRECTORS’ INTEREST IN CONTRACTS
No contracts of significance in relation to the Group’s business to which the Company, its holding
company, its subsidiaries or its fellow subsidiaries was a party, and in which any Director of the
Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at
any time during the year of 2005.
SHARE OPTION SCHEME
During the year, the Company has a share option scheme (‘‘Share Option Scheme’’) which was
approved by the shareholders of the Company in general meeting on 6 June 2002. The purpose of the
Share Option Scheme is (i) to provide the Company with a flexible means of giving incentive to,
rewarding, remunerating, compensating and/or providing benefits to the participants and to provide
the participants with the opportunity to acquire proprietary interests in the Company and to
encourage participants to work towards enhancing the value of the Company and its shares for the
benefit of the Company and the shareholders as a whole and (ii) for such other purposes as the board
of directors may approve from time to time. Participants includes (i) any executive or non-executive
directors of the Group (or persons proposed to be appointed as such) or any employee of the Group;
(ii) any discretionary object of a discretionary trust established by any employee, executive or non-
executive director of the Group; (iii) any consultant(s) and professional adviser(s) to the Group (or
persons, firms or companies proposed to be appointed for providing such services); (iv) chief
executive or substantial shareholder of the Company; (v) associates of director, chief executive or
substantial shareholder of the Company; and (vi) employees of substantial shareholder.

The Board may, at their discretion, invite any participant who has rendered service or will render
service to the Group to take up options. An option is deemed to have been granted and accepted by
the grantee upon his or her signing the duplicate letter comprising acceptance of the option and
paying HK$1 by way of consideration for the grant thereof.
The subscription price for shares of the Company under the Share Option Scheme will be highest of
(i) the closing price of the shares of the Company as stated in the Stock Exchange’s daily quotations
sheet on the offer date (which date must be a business day), (ii) a price being the average of the
closing prices of the shares of the Company as stated in the Stock Exchange’s daily quotations
sheets for the five business days immediately preceding the offer date, and (iii) the nominal value of
a share of the Company.
The total number of shares of the Company which may be issued upon exercise of all options to be
granted under the Share Option Scheme and any other share option schemes of the Company shall
not in aggregate exceed 10 per cent. of the total number of shares of the Company in issue as at the
date of approval of the Share Option Scheme. (ie. 671,957,652 shares (after adjustments of one for
one bonus issue of shares in May 2004, representing 8.94 per cent. of the total number of shares of
the Company in issue as at the date of this report). An option may be exercised during a period to be
determined by the directors in its absolute discretion and in any event such period shall not be
longer than 10 years from the date upon which the option is granted.
The maximum entitlement for any one participant is that the total number of shares issued and to be
issued upon exercise of the options granted to each participant under the Share Option Scheme in
any 12-month period shall not exceed 1 per cent. of the total number of shares in issue of the
Company. Any further grant of options in excess of the 1 per cent. limit shall be subject to
shareholders’ approval in general meeting with such participant and his or her associates abstaining
from voting. The Share Option Scheme will remain in force for a period of 10 years from 6 June
2002.
Information disclosed in accordance with the Listing Rules in relation to the Share Option Scheme is
as follows:
Number of share options
As at Exercised As at
1 January during the 31 December
Grantee 2005 year 2005 Notes
ZHANG Fangyou 8,528,000 — 8,528,000 (3)
LU Zhifeng 7,684,000 — 7,684,000 (3)
YANG Dadong 5,664,000 — 5,664,000 (3)
ZENG Qinghong 5,664,000 — 5,664,000 (3)
ZHANG Baoqing 6,488,000 — 6,488,000 (3)
DING Baoshan 5,664,000 — 5,664,000 (3)
LEE Ka Lun 1,340,000 — 1,340,000 (3)
Aggregate total of employees 480,000 480,000 — (1)
Aggregate total of other participants 30,954,000 29,326,000 1,628,000 (1)
1,072,000 1,072,000 — (2)
5,664,000 — 5,664,000 (3)
12
Notes:
(1) These options were granted on 9 May 2003 at an adjusted exercise price of HK$1.325* per share for an exercise period
of three years from the date of grant of the options. The consideration paid by each grantee for the options granted was
HK$1. The adjusted closing price of the share immediately before the date on which the options were granted was
HK$1.35*.
(2) These options were granted on 2 July 2003 at an adjusted exercise price of HK$1.825* per share for an exercise period
of three years from the date of grant of options. The consideration paid by each grantee for options granted was HK$1.
The adjusted closing price of the share immediately before the date on which the options were granted was
HK$1.7625*.
(3) These options were granted on 7 August 2003 at an adjusted exercise price of HK$2.1525* per share for an exercise
period of ten years from the date of grant of the options. The consideration paid by each grantee for the options granted
was HK$1. The adjusted closing price of the share immediately before the date on which the options were granted was
HK$2.075*.
(4) The weight average closing price per share immediately before the date on which the options were exercised was
HK$2.8418.
(5) No option was granted, lapsed or cancelled pursuant to the Share Option Scheme during the year.
* adjusted per one for one bonus issue of shares in May 2004.
DIRECTORS’ INTEREST IN SHARES
As at 31 December 2005, the interests and short positions of the directors in the shares, underlying
shares and debentures of the Company or any of its associated corporations (within the meaning of
Part XV of the Securities and Futures Ordinance (the ‘‘SFO’’) as recorded in the register required to
be kept by the Company under Section 352 of the SFO or as otherwise notified to the Company and
The Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions
by Directors of Listed Companies were as follows:
(a) Long positions in shares of the Company
Number of shares Percentage of

Personal interest shareholding as at
Name of Director (as beneficial owner) 31 December 2005
CHEUNG Doi Shu 3,000,000 0.04%
LEE Ka Lun 100,000 0.0013%
(b) Long positions in underlying shares in respect of share options granted by the Company
Number of underlying shares

in respect of options granted Percentage of
Personal Interest shareholding as at
Name of Director (as beneficial owner) 31 December 2005
ZHANG Fangyou 8,528,000 0.11%

LU Zhifeng 7,684,000 0.10%
YANG Dadong 5,664,000 0.08%
ZENG Qinghong 5,664,000 0.08%
ZHANG Baoqing 6,488,000 0.09%
DING Baoshan 5,664,000 0.08%
LEE Ka Lun 1,340,000 0.02%

Note: Details of the options held by the directors are disclosed in the section ‘‘SHARE OPTION SCHEME’’ in this
report.
Save as disclosed above, as at 31 December 2005, none of the directors or chief executive of the
Company had any interest or short position in the shares, underlying shares or debentures of the
Company or any of its associated corporations (within the meaning of Part XV of the SFO) as
recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to
the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for
Securities Transactions by Directors of Listed Companies.
Apart from the Share Option Scheme, at no time during the year ended 31 December 2005 was the
Company or its holding companies or any of its subsidiaries or fellow subsidiaries a party to any
arrangements to enable the directors of the Company to acquire benefits by means of acquisition of
shares in, or debentures of, the Company or any other body corporate.
Save as disclosed above and in the section ‘‘SHARE OPTION SCHEME’’, during the year ended 31
December 2005, no rights to subscribe for equity or debt securities of the Company has been granted
by the Company to, nor have any such rights been exercised by, any directors and chief executives
of the Company.
DIRECTORS’ INTEREST IN COMPETING BUSINESS
Guangzhou Toyota Motor Co. Ltd. (‘‘Guangzhou Toyota’’), a sino-foreign equity joint venture
incorporated in the PRC, was established in September 2004 and owned as to 50% by Guangzhou
Automobile Group Co. Ltd. and as to 50% by Toyota Motor Corporation. Guangzhou Automobile
Group Co. Ltd. is a subsidiary of Guangzhou Automobile Industry Group Co. Ltd., the ultimate
holding company of the Company.
Guangzhou Toyota is engaged in product development, manufacturing of motor vehicles, sale and
after-sale service of automobiles and related business. Guangzhou Toyota is expected to commence
production in mid 2006.
The Board of the Company is of the view that the business of Guangzhou Toyota might compete
with that of the Group after mid 2006 when it commences production. But Guangzhou Toyota and
Guangzhou Honda Automobile Company Limited are both jointly-controlled entities whereby no
joint venture partner can control or dominate the board. The business and management of each
company are decided by the respective joint venture partners. The day-to-day operation of
Guangzhou Toyota and Guangzhou Honda is undertaken by different groups of staff and
management. As the Board of the Group is independent of the board of Guangzhou Toyota (save
for Mr. Zhang Fangyou who is the chairman of the Company and Guangzhou Toyota, is the only
common director in both of these companies), therefore the business of the Group and Guangzhou
Toyota is totally independent and operating separately.
Save as disclosed above and within the knowledge of the Directors, as at the date of this report,
none of the Directors and their respective associates had any interest in a business which competes
or may compete with the business of the Group.
14
SUBSTANTIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY
As at 31 December 2005, the corporations having an interest in 5% or more of the issued share
capital of the Company as recorded in the register of interests in shares and short positions required
to be kept under Section 336 of the Part XV of SFO were as follows:
Percentage of total
shareholding as at
Name Long position in shares 31 December 2005 Note
China Lounge Investments Limited 2,849,544,904 37.91% (a)

Guangzhou Automobile Group Company
Limited 2,849,544,904 37.91% (b)
Guangzhou Automobile Industry Group
Company Limited 2,849,544,904 37.91% (c)
Templeton Asset Management Limited 451,406,000 6.00% (d)
Notes:
(a) As at 31 December 2005, China Lounge Investment Limited held 2,775,744,904 shares of the Company and City
Achieve Investments Limited, which was wholly-owned by China Lounge, held 73,800,000 shares of the Company.
Accordingly, China Lounge Investment Limited was deemed to be interested under the SFO in a total of 2,849,544,904
shares of the Company.
(b) As at 31 December 2005, China Lounge Investment Limited was wholly-owned by Guangzhou Automobile Group
Company Limited which was accordingly deemed to be interested under the SFO in 2,849,544,904 shares.
(c) As at 31 December 2005, Guangzhou Automobile Group Company Limited was 91.93% owned by Guangzhou
Automobile Industry Group Company Limited which was accordingly deemed to be interested under the SFO in
2,849,544,904 shares of the Company.
(d) Templeton Asset Management Limited was interested in 451,406,000 shares in the Company as investment manager.
Save as disclosed herein, no other person was recorded in the register of substantial shareholders
maintained under Section 336 of Part XV of the SFO as having an interest in 5% or more of the
issued share capital of the Company as at 31 December 2005.
RETIREMENT SCHEME
Details of the Group’s retirement scheme are set out in note 13 to the consolidated financial
statements.
INDEPENDENT NON-EXECUTIVE DIRECTORS’ FEE
Each of the Independent Non-Executive Directors of the Company received HK$180,000 as

director’s fee for the year ended 31 December 2005.
MANAGEMENT CONTRACTS
No contracts, other than contract of service with person engaged in the full-time employment of the
Company, concerning the management and administration of the whole or any substantial part of the
business of the Company were entered into or existed during the year of 2005.
MAJOR SUPPLIERS
The percentage of purchase attributable to the Group’s major suppliers for the continuing operations
is as follows:
2005 2004
% %
— the largest supplier 45 41

— five largest suppliers combined 77 67

MAJOR CUSTOMERS
During 2004 and 2005, the Group’s sold less than 30% of its goods and services to its five largest
customers
CONNECTED TRANSACTIONS
Details of transactions regarded as connected transactions as defined in the Rules Governing the
Listing of Securities on the Stock Exchange (the ‘‘Listing Rules’’) are as follows:
(a) In accordance with the announcement dated 20 February 2003 and the agreement entered into
between Guangzhou Denway Development Enterprises Limited with Guangzhou Guangyue
Asset Management Limited, the fixed annual payment of RMB602,000 (equivalent to
approximately HK$563,000) (subject to reduction after the year of death of any retired
employee) for the year 2003 was reduced to RMB429,000 (equivalent to approximately
HK$408,000) in 2005, paid to Guangzhou Guangyue Asset Management Limited in respect of
transferring to Guangzhou Guangyue Asset Management Limited of Guangzhou Denway
Development Enterprises Limited’s obligations in the administration and management
(including but not limited to the pension, medical expenses, housing subsidies and other
benefits) of the retired employees. Guangzhou Guangyue Asset Management Limited is
indirectly wholly-owned by Guangzhou Automobile Industry Group Company Limited which is
the Company’s ultimate holding company.
(b) During the year, Guangzhou Denway Development Enterprises Limited provided bank
guarantees to the total extent of RMB30,000,000 (equivalent to approximately
HK$28,835,000) on several basis for Guangzhou Denway Bus Company Limited, a
subsidiary with 50% equity interest owned by the Company, to enable Guangzhou Denway
Bus Company Limited to obtain banking facilities. Guangzhou Automobile Group Company
Limited owns 50% equity interest in Guangzhou Denway Bus Company Limited has also
provided bank guarantees in its proportion of shareholdings in Guangzhou Denway Bus
Company Limited to the total of RMB30,000,000 (equivalent to approximately HK$28,835,000)
for Guangzhou Denway Bus Company Limited. Both aforesaid guarantees were provided
without obtaining security from Guangzhou Denway Bus Company Limited. Guangzhou
Denway Development Enterprises Limited has also provided a shareholder’s loan of
RMB10,775,000 (equivalent to HK$10,356,000) to Guangzhou Denway Bus Company
Limited for interest free short term loan and repayable in demand. Guangzhou Automobile
Group Company Limited also provided RMB10,775,000 (equivalent to HK$10,356,000) in
proportion of shareholdings in Guangzhou Denway Bus Company Limited.
The above-mentioned guarantees and short term loan will be released after the shareholding
meetings held on 23 March 2006 for the approval of the disposal of the owned total 50% equity
interest of Guangzhou Denway Bus Company Limited.
(c) On 3 January 2005, the Company has entered into an agreement (the ‘‘Acquisition Agreement’’)
with City Achieve Investments Limited, a wholly-owned subsidiary of China Lounge
Investments Limited, whereby the Company has conditionally agreed to acquire and take an
assignment of, and City Achieve Investments Limited has conditionally agreed to dispose of the
one (1) share of US$1.00 in the issued share capital of Smartstate Investments Limited which is
legally and beneficially owned by City Achieve Investments Limited (i.e. the entire
shareholding in Smartstate Investments Limited), and the Shareholders’ Loan amounted of
HK$56,272,916.95 which is outstanding, repayable upon demand and owing by Smartstate
Investments Limited to City Achieve Investments Limited as at the date of the Acquisition
Agreement and at Completion in respect of an interest-free and unsecured loan made available
by City Achieve Investments Limited to Smartstate Investments Limited. The sole asset held by
Smartstate is the 5% equity interests in Guangzhou Denway Development Enterprises Limited.
Upon Completion, each of Smartstate and Guangzhou Denway Development Enterprises
Limited will become wholly-owned subsidiary of the Company.
16
The total consideration of the Acquisition Agreement is HK$996,215,000 and will be satisfied
as to HK$789,353,600 in cash, and as to the balance thereof by the allotment and issue of
73,800,000 new ordinary shares (‘‘Shares’’) (‘‘Consideration Shares’’) of HK$0.10 each in the
share capital of the Company at the issue price of HK$2.803 to City Achieve Investment
Limited (or such other person(s) as may be directed by City Achieve Investment Limited in
writing). Based on the closing price of the Shares of HK$2.75 and HK$2.60 per Share as
quoted on the Stock Exchange on 3 January 2005 and 11 January 2005, being the date of the
Acquisition Agreement and the latest practicable date prior to the publication of the circular
dated 17 January 2005 for ascertaining certain information contained in the circular
respectively, the market value of the Consideration Shares would be equivalent to
approximately HK$203.0 million and HK$191.9 million respectively. The cash portion of the
total considerations will be settled as to HK$305,900,000 by the proceeds obtained from the
subscription of 350,000,000 new Shares by China Lounge Investments Limited as announced by
the Company on 7 September 2000 and as to HK$483,453,600 by the internal resources of the
Group.
(d) On 5 October 2005, the Company entered into the Agreement with Yue Lung Enterprises
Limited, a wholly-owned subsidiary of China Lounge Investments Limited, to purchase and
take an assignment of the share, representing the entire issued share capital of Steed Full
Development Limited and the Shareholder’s Loan amounted of RMB533,000,000 (equivalent to
approximately HK$512,000,000) at a total consideration of HK$710,000,000 payable in cash by
the Company The sole asset held by Steed Full Development Limited is the 49% equity
interests in Guangzhou Automobile Group Component Co., Ltd., a limited company
incorporated in the PRC, and is owned as to 51% by Guangzhou Automobile Group
Company Limited and as to 49% by Steed Full Development Limited after the acquisition.
(e) Guangzhou Denway Development Enterprises Limited provided bank guarantees to the total
extent of RMB 14,700,000 (equivalent to approximately HK$14,125,000) for Guangzhou Hua
De Automobile Spring Company Limited, an associated company with 49% owned by the
Company, to enable Guangzhou Hua De Automobile Spring Company Ltd to obtain banking
facilities. Guangzhou Automobile Group Component Co., Ltd owns 51% equity interest in
Guangzhou Hua De Automobile Spring Company Ltd has also provided bank guarantees in its
proportion of shareholdings in Guangzhou Hua De Automobile Spring Company Ltd to the total
of RMB15,300,000 (equivalent to approximately HK$14,706,000) for Guangzhou Hua De
Automobile Spring Company Ltd. Both aforesaid guarantees were provided on several bases
and without obtaining any security from Guangzhou Hua De Automobile Spring Company Ltd.
PUBLIC FLOAT
Based on the information that is publicly available to the Company and within the knowledge of the
directors, as at the date of this report, there is sufficient public float of not less than 25% of the
issued shares of the Company as required under the Listing Rules.
AUDITORS
The financial statements have been audited by PricewaterhouseCoopers, who retire and, being
eligible, offer themselves for re-appointment, and a resolution to this effect will be proposed at the
forthcoming annual general meeting of the Company.
By the Order of the Board

ZHANG Fangyou
Chairman

Corporate Governance Report
CORPORATE GOVERNANCE REPORT
As one of the leaders in China’s automotive industry, the Company endeavors to enhance and
improve our corporate governance standards. With our established visions and strategies for
corporate governance, the Board believes that accountability and reporting system with high
transparency for the Company’s operation has been in place. Disclosure could also be made timely
and accurately. At the same time, the rights of shareholders can be treated and protected equitably.
The Company is led by an efficient and responsible Board, which is comprised of individuals with
high qualifications. This can ensure that the Company and its subsidiaries (the ‘‘Group’’) maintain
good corporate governance practices and have comprehensive internal control systems, so as to cope
with the Group’s development strategies and increase the shareholders’ value.
The Company’s overall governance structure is as follows:
Shareholders of Denway Motors Limited
The Board
(comprises six executive directors and
three independent non-executive directors)
Nomination Committee Remuneration Committee Audit Committee Executive Committee

(comprises three independent (comprises three independent (comprises three independent (comprises three
non-executive directors ) non-executive directors and non-executive directors) executive directors)
the Managing Director)
The management
18
The Board formulated Denway Code on Corporate Governance (‘‘Denway Code’’), which was based
on the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
(‘‘Listing Rules’’), in 2005. Appendix 14 of the Listing Rules stipulates the code of good corporate
governance (the ‘‘Code’’), and two levels of recommendations: (a) code provisions; and (b)
recommended best practices. It is also states that issuers are expected to comply with, but may
choose to deviate from, the code provisions. The recommended best practices are for guidance only.
The Company opted to comply with all mandatory code provisions and provisions on recommended
best practices that are considered by the Board as reasonable and appropriate.
In 2005, the Company complied with the regulations set out in the code provisions promulgated by
the Stock Exchange and exceeded the requirements of these code provisions in a number of aspects.
In the 2005 accounting year and up to the date of this report, the Board hereby presents information
in relation to the Company’s corporate governance practices as summarized below.
1. THE BOARD
The Board of the Company assumes responsibility for leadership and control of the Company
and is responsible for promoting the success of the Company by directing and supervising its
affairs.
The Board is responsible for establishing the strategic direction of the Company, setting the
objectives of management, monitoring the performance of management, overseeing the
management of the Company’s relationships with stakeholders, ensuring that a framework of
prudent and effective controls is in place to enable risks to be assessed and managed, and
setting the Company’s values and standards.
The Board has established written procedures determining which issues require a decision of
the full Board and which the Board Committees or management can delegate, and reviews such
arrangements on a periodic basis.
When the Board delegates management and administrative functions to management, it has
given clear directions on the powers of management with respect to the circumstances where
management is to report back and obtain prior approval from the Board before making
decisions or entering into any commitment on behalf of the Company.
The task of the management and staff of the Company is the successful implementation of the
strategies and directions as determined by the Board. In doing so, they must apply business
principles and ethics, which are consistent with those expected by the Board and Shareholders
and other stakeholders.
The Board is comprised of six executive directors (including the Chairman and the Managing
Director) and three independent non-executive directors. Accounting for one-third of the
members of the Board, the independent non-executive directors help to ensure that the Board
can make independent judgment efficiently. Biographies for all directors are listed in Directors
and Senior Management’s Profiles set out on page 9 to page 11.
The independent non-executive directors possess appropriate professional qualification among

them, some possess expertise in accounting and financial management. Each independent non-
executive director has confirmed to the Stock Exchange his independence pursuant to the
requirements of the Listing Rules, and has also submitted an annual written confirmation to the

Company confirming his independence. All independent non-executive directors are engaged by
contract every year and are subject to retirement in accordance with the Company’s Articles of
Association.
In addition, there is no special relationship, including financial, business, family or other

material/relevant relationship among the members of the Board (in particular, between the
Chairman of the Board and the Managing Director).
All directors actively participated in the Board meetings to discuss the overall strategies and
business directions of the Group. In the 2005 accounting year, the Company held four regular
and eleven non-regular Board meetings (note). To ensure that the directors could obtain all
related information for performing their duties and responsibilities, when a regular meeting was
convened, documents for the Board meeting were supplied to directors for their consideration
before the meeting according to the regulations set out in the Listing Rules and code provision.
In the 2005 accounting year, Directors’ attendance was as follows:
Executive directors Attendance (Note)
Mr. Zhang Fangyou (Chairman) 11

Mr. Lu Zhifeng (Vice Chairman) 9
Mr. Yang Dadong 11
Mr. Zeng Qinghong 9
Mr. Zhang Baoqing (Managing Director) 14
Mr. Ding Baoshan 10
Independent non-executive directors
Mr. Cheung Doi Shu 10

Mr. Lee Ka Lun 11
Mr. Fung Ka Pun 11
Note: The attendance does not include eleven Board meetings specially convened for business, including (i) approving
the issue of the Company’s new shares upon the exercise of share options; and (ii) approving the amendment to
the address of the register of members of the Company due to the change of address of the Company’s Share
Registrar. Directors attending these meetings and their attendance were Mr. Zhang Fangyou (11 times), Mr.
Yang Dadong (7 times), Mr. Zeng Qinghong (4 times) and Mr. Zhang Baoqing (11 times).
Chairman of the Board and Managing Director (in this report, ‘‘Managing Director’’ is
equivalent to ‘‘Chief Executive Officer’’ set out in appendix 23 of the Listing Rules) are two
clearly separated roles and are performed by different individuals. Mr. Zhang Fangyou,
Chairman of the Board, is responsible for managing the Board. Mr. Zhang Baoqing, Managing
Director, is responsible for the Company’s operations. The division of responsibilities between
the Chairman of the Board and the Managing Director have been clearly defined and the
written terms of reference have been set.
20
Responsibilities of the Chairman of the Board are as follows:
(a) providing leadership for the Board;
(b) ensuring all Directors are properly briefed on matters to be discussed at Board meetings;
(c) ensuring all Directors receive adequate, complete and reliable information in a timely
manner;
(d) ensuring that the Board works effectively, discharges its responsibilities and discusses all
key issues in a timely manner;
(e) ensuring that, the Company Secretary settles and approves the agenda for Board meetings
on the Chairman’s behalf, taking into account any matters proposed by other Directors for
inclusion in the agenda;
(f) providing effective communication with Shareholders and that views of Shareholders are
communicated to the Board as a whole;
(g) ensuring good corporate governance practices and procedures are in place;
(h) giving each Director an opportunity to express his views at Board meetings, encouraging
all Directors to fully contribute to the Board’s affairs and ensuring that the Board acts in
the best interests of the Company; and
(i) facilitating the effective contribution of all Directors, in particular Non-Executive

Director, and building constructive relations between Executive and Non-executive
Directors.
The Managing Director is appointed by the Board, his responsibilities are as follows:
(a) providing leadership for the management;
(b) implementing and reporting to the Board on the Company’s strategies;
(c) overseeing the implementation by the Company of the objectives set by the Board;
(d) providing all such information to the Board as is necessary to enable the Board to monitor
the performance of Management;
(e) leading the management of the Company’s relationships with its stakeholders;
(f) putting in place programmes for management development and succession;
(g) working with the Head of Finance, establishing and maintaining proper internal controls
and systems as well as disclosure controls and procedures; and
(h) discharging such duties and authorities as may be delegated in writing to him by the
Board.

In addition, the Board formulated a set of procedures for the Directors to seek for independent
professional advice. Directors can make reasonable requests and seek for independent
professional advice for discharging their duties in appropriate circumstances. Related
expenses shall be borne by the Company.
2. AUDIT COMMITTEE
The Audit Committee was established on 30 June 1999, and is currently comprised of three
independent non-executive directors. The Audit Committee is chaired by Mr. Lee Ka Lun.
Roles and functions of the Audit Committee include: handle the relationship between the
Company and the external auditors (include: making recommendation to the Board on the
appointment, re-appointment and removal of external auditors, approve remuneration and terms
of engagement of the external auditors, handle issues for the resignation or dismissal of
external auditors, review and monitor the independence and objectivity of the external auditors
and effectiveness of the audit process and develop and implement policy on the engagement of
an external auditor to supply non-audit services), review the financial information of the
Company, monitor the financial reporting system and internal control procedures of the
Company.
The Audit Committee reports to the Board on its discussion results and recommendations after
each meeting.
In the entire 2005 accounting year, the Audit Committee reviewed the 2004 annual report and
2005 interim report of the Company, discussed the effectiveness of the internal control with
external auditors, and reviewed the 2005 budgeted auditing fees.
In addition, the Audit Committee considered and reviewed the annual report for the year and
annual results on 11 April 2006, and proposed to the Board for their approval.
All members of the Audit Committee actively participated in the committee’s meetings. In the
2005 accounting year, the Audit Committee met three times. Discussion results and
recommendations have been proposed to the Board for its review, and related
recommendations were adopted by the Board.
In the 2005 accounting year, committee members’ attendance was as follow:
Audit Committee Members Attendance
Mr. Cheung Doi Shu (Independent Non-Executive Director) 1

Mr. Lee Ka Lun (Independent Non-Executive Director)
(chairman of audit committee) 3
Mr. Fung Ka Pun (Independent Non-Executive Director) 3
All directors acknowledge their responsibilities in preparing the financial statements. As at 31

December 2005, none of the directors are aware of any uncertainties relating to events or
conditions that may cast significant doubt upon the Company’s ability to continue as a going
concern. As such, the directors have prepared the Company’s financial statements on a going
concern basis.
Responsibilities of external auditors to the financial statements are set out in the auditors’
report of the 2005 annual report.
22
3. NOMINATION COMMITTEE
The Nomination Committee was set up on 2 September 2005. It is comprised of three

independent non-executive directors. The Nomination Committee is chaired by Mr. Fung Ka
Pun.
Roles and functions of the Nomination Committee include:
(a) review the structure, size and composition of the Board;
(b) identify and nominate qualified individuals;
(c) make recommendations to the Board on matters relating to the appointment or re-
appointment of Directors and succession planning for Directors, in particular the
Chairman and the Managing Director;
(d) make recommendations to the Board with particular regard to ensuring a substantial
majority of the Directors on the Board being independent of management; and
(e) assess the independence of Independent Non-executive Directors.
The Nomination Committee reports to the Board on its discussion results and recommendations
after each meeting.
According to the Denway Code, the Nomination Committee is responsible for identifying and
nominating qualified candidate when additional member to the Board is required or vacancies
have to be filled. The Board shall then consider approving the nomination. The principal
selection criterion is whether the candidate can assist the Board in performing the duties set out
in Denway Code effectively.
In the entire 2005 accounting year, there was no change to the composition of the Board.
Before the Nomination Committee was established, the Board recommended Mr. Zhang
Baoqing to be re-appointed as the Company’s director at the 2005 Annual General Meeting,
and recommended Mr. Cheung Doi Shu, Mr. Lee Ka Lun and Mr. Fung Ka Pun to be re-
appointed as the Company’s independent non-executive directors at the 2005 Annual General
Meeting.
For the directors that are subject to retirement by rotation at the forthcoming 2006 Annual
General Meeting pursuant to the Company’s Articles of Association, the Nomination
Committee has recommended to the Board Mr. Lu Zhifeng, Mr. Yang Dadong and Mr. Ding
Baoshan to be re-elected as the Company’s directors.
All members of the Nomination Committee actively participated in the committee’s meetings.
In the 2005 accounting year, the Nomination Committee met once. Discussion results and
recommendations have been proposed to the Board for its review, and related recommendations
were adopted by the Board.

In the 2005 accounting year, committee members’ attendance was as follows:
Nomination Committee Members Attendance
Mr. Cheung Doi Shu (Independent Non-Executive Director) 1

Mr. Lee Ka Lun (Independent Non-Executive Director) 1
Mr. Fung Ka Pun (Independent Non-Executive Director)
(chairman of Nomination Committee) 1
4. REMUNERATION COMMITTEE
The Remuneration Committee was established on 3 January 2005. It is comprised of three

independent non-executive directors and the Managing Director. The Remuneration Committee
is chaired by Mr. Cheung Doi Shu.
Roles and functions of the Remuneration Committee are as follows:
(a) to make recommendations to the Board on policy and structure for the remuneration of
Directors, Senior Management and all other employees of the corporate office and on the
establishment of a formal and transparent procedure for developing policy on such
remuneration;
(b) to determine the remuneration of all Executive Directors and Senior Management;
(c) to make recommendations to the Board on the remuneration of the Non-executive

Directors;
(d) to review and approve performance-based remuneration by referring to corporate goals

and objectives set by the Board;
(e) to review and approve the compensation payable to Executive Directors and Senior
Management relating to any loss or termination of their office or appointment to ensure
that such compensation is determined in accordance with relevant contractual terms;
(f) to review and approve compensation arrangements relating to dismissal or removal of

Directors for misconduct to ensure that such arrangements are determined in accordance
with relevant contractual terms; and
(g) to ensure no Director or any of his associates is involved in deciding his own
remuneration.
The Remuneration Committee reports to the Board on its discussion results and
recommendations after each meeting.
In the entire 2005 accounting year, the Remuneration Committee reviewed the remuneration of
the executive directors and senior management of the Company.
All members of the Remuneration Committee actively participated in the committee’s meetings.
In the 2005 accounting year, the Remuneration Committee met once. Discussion results and
recommendations have been proposed to the Board for its review.
24
In the 2005 accounting year, committee members’ attendance was as follows:
Remuneration Committee Members Attendance
Mr. Cheung Doi Shu (Independent Non-Executive Director)

(chairman of Remuneration Committee) 1
Mr. Lee Ka Lun (Independent Non-Executive Director) 1
Mr. Fung Ka Pun (Independent Non-Executive Director) 1
Mr. Zhang Baoqing (Managing Director) 1
5. EXECUTIVE COMMITTEE
The Executive Committee was established on 2 September 2005. It is comprised of three

executive directors. When the Board is not in session, the Executive Committee can discharge
the specific power and administrative functions authorized by the Board. The Executive
Committee is mainly responsible for monitoring the daily operations of the Company, its
subsidiaries and associated companies.
6. SECURITIES TRANSACTION BY DIRECTORS
In the entire 2005 accounting year, the Company has complied with all code provisions of the
Model Code for Securities Transactions by Directors of Listed Issuers (‘‘Model Code’’)set out
in appendix 10 of the Listing Rules.
After making specific enquiries to all directors, the directors confirmed that they have
complied with the Model Code throughout the 2005 accounting year.
As at 31 December 2005, Directors’ interests in the Company’s shares were disclosed in

‘‘Report of the Directors’’ set out on pages 13 to 14 of the annual report.
7. OTHER INTERESTS OF THE DIRECTORS
As at 31 December 2005, Directors’ interests in any business which competes or may compete
with the business of the Group were disclosed in ‘‘Report of the Directors’’ set out on page 14
of the annual report.
8. REMUNERATION OF THE AUDITOR
For the year ended 31 December 2005, audit fee paid by the Company to
PricewaterhouseCoopers (external auditor of the Company) was HK$2,898,000. Non-auditing
fee paid amounted to HK$1,976,710, representing HK$855,000, HK$1,066,710 and HK$55,000
for auditing advice on merger and acquisition, taxation services and other fees, respectively.
9. INTERNAL CONTROL
The Board is responsible for maintaining a sound and effective internal control system for the
Group. The system is for the interests of the shareholders by protecting the shareholders’
investment and the assets of the Group.

The Company’s internal control system, which is based on the ‘‘Basic Structure for Internal
Control and Risk Management’’ issued by the Hong Kong Institute of Certified Public
Accountants in June 2005, is a set of procedures for providing reasonable guarantee, in a view
to meet the following objectives:
(a) effectiveness and efficiencies of operations;
(b) reliability of financial reporting; and
(c) compliance with the applicable laws and regulations.
For implementing internal control effectively, the Company shall review the following five
elements for internal control:
(i) Overall control
The Group has established a comprehensive organization structure and deployed suitable
personnel for the efficient implementation of policies. Adequate information is also
provided. Executive directors and the senior management are granted appropriate
authority to execute the strategies, policies and targets of the Group effectively when
risks are within control. At the same time, the Board and senior management shall
communicate the values and code of conduct of the Company to all the staff, for
maintaining honesty and a high level of morality. In addition, all directors actively
participate in the affairs of the Board and the work of all Board Committees.
(ii) Risk assessment
The Group determines annual operation targets, financial reporting targets and compliance
targets in accordance with the development strategies set by the Board. This is to ensure
that the Group operates within risks that are of tolerable and reasonable level.
The Company shall review the risks faced by the Group with external auditors regularly,
so as to set a firm base for the Board to review the effectiveness of internal control and
report to the shareholders on issues in relation to internal control.
(iii) Controlling activities
The Group fully undertakes controlling activities, for ensuring the implementation of the
management’s instructions, and different policies and procedures (including operation
management, information handling, actual monitoring, performance indicator and
definition of responsibilities and duties) in a consistent manner.
(iv) Information and communication
The Board and senior management shall communicate the importance of control to the
staff, enabling the staff to understand that control must be implemented. The staff shall
regularly report any information related to operation, financial and regulation to the Board
and senior management.
The senior management shall provide the latest information on the Group to the Board
and the Board Committees regularly or under material circumstances, in a view to have
sufficient preparation for any risks.
26
In order to lower risks, the Company actively communicates with, and considers opinions
from, all external parties, so that it is able to take appropriate actions in face of risks.
(v) Monitoring
The Company shall continuously assess and properly report the performance of the
internal control system.
10. SHAREHOLDERS’ RIGHTS AND INVESTORS’ RELATIONSHIP
It is the Company’s policies to have open communication and disclose information in a fair
manner. Information disclosure is a key means to enhance corporate governance standard.
Shareholders can assess the Company’s performance based on the information and provide
opinions to the Company. However, disclosure of more information does not necessarily
increase the transparency of a company’s operations. The completeness of the information
disclosed is very important for cultivating investors’ confidence towards the Company.
Information relating to the Group and its business, together with its financial condition, are
disclosed in the 2005 annual report and the Company’s website at www.denway-motors.com.
All registered shareholders shall receive notice of the Annual General Meeting and special
general meeting (together the ‘‘Meeting’’) by post. The notice of the Meeting contains an
agenda, resolutions proposed and a voting form. All shareholders, whose shares are registered
in the register of members, are entitled to attend the Meeting. Shareholders who cannot attend
the Meeting can appoint their proxies or the chairman of the meeting as their proxies by
completing the proxy form enclosed with the notice of the meeting and returning it to the
Company’s share registrar. Procedures for demanding a vote by poll, together with the notice
of the meeting, have been enclosed with a circular dispatched to the shareholders. The
procedures shall be read out at the Meeting by the chairman of the meeting.
In addition, separate resolutions for actually separated issues shall be proposed to the Meeting
for the approval of shareholders.
The Annual General Meeting (the ‘‘AGM’’) is considered as an annual significant event of the
Company. The AGM can provide a precious opportunity for the shareholders and the Board to
exchange constructive opinions. All directors and the senior management shall attend the AGM.
Apart from attending the AGM, the Chairman of the Board shall arrange the chairman of each
Board Committee to attend and answer questions at the AGM.

Auditors’ Report
AUDITORS’ REPORT TO THE SHAREHOLDERS OF

DENWAY MOTORS LIMITED
(incorporated in Hong Kong with limited liability)
We have audited the financial statements on pages 29 to 94 which have been prepared in accordance
with accounting principles generally accepted in Hong Kong.
Respective responsibilities of directors and auditors
The Hong Kong Companies Ordinance requires the directors to prepare financial statements which
give a true and fair view. In preparing financial statements which give a true and fair view it is
fundamental that appropriate accounting policies are selected and applied consistently.
It is our responsibility to form an independent opinion, based on our audit, on those financial
statements and to report our opinion solely to you, as a body, in accordance with section 141 of the
Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility
towards or accept liability to any other person for the contents of this report.
Basis of opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong
Kong Institute of Certified Public Accountants. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate to the circumstances
of the Company and the Group, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance as
to whether the financial statements are free from material misstatement. In forming our opinion we
also evaluated the overall adequacy of the presentation of information in the financial statements.
We believe that our audit provides a reasonable basis for our opinion.
Opinion
In our opinion the financial statements give a true and fair view of the state of affairs of the
Company and of the Group as at 31 December 2005 and of the Group’s profit and cash flows for the
year then ended and have been properly prepared in accordance with the Hong Kong Companies
Ordinance.
PricewaterhouseCoopers
Certified Public Accountants
28
Consolidated Income Statement
FOR THE YEAR ENDED 31 DECEMBER 2005
Group
2005 2004
Note HK$’000 HK$’000
Continuing operations:
Turnover 4 850,483 970,407
Cost of sales (754,813) (896,136)
Gross profit 95,670 74,271

Other gains 5 49,409 35,915
Selling and distribution costs (31,573) (21,907)
General and administrative expenses (94,852) (106,057)
Other operating income 34,842 17,376
Operating profit/(loss) 53,496 (402)

Finance costs 8 (1,418) (1,427)
Share of profits less losses of:
A jointly controlled entity 20(a) 1,900,443 2,077,320
Other jointly controlled entities 16,232 —
Associates 21 13,137 6,123
Non-consolidated subsidiaries 22 (966) 93
Profit before taxation 1,980,924 2,081,707

Taxation 9 (7,650) (6,401)
Profit for the year from continuing operations 1,973,274 2,075,306
Discontinued operations:
Loss for the year from discontinued operations 6 (113,026) (15,896)
Profit for the year 1,860,248 2,059,410
Attributable to:
Equity holders 10 1,905,529 2,062,447
Minority interests (45,281) (3,037)
1,860,248 2,059,410
Basic earnings/(losses) per share attributable

to the equity holders
— continuing operations 11 26.2 cents 28.9 cents
— discontinued operations 11 (0.8) cents (0.1) cents
25.4 cents 28.8 cents
Diluted earnings/(losses) per share attributable

to the equity holders
— continuing operations 11 26.1 cents 28.7 cents
— discontinued operations 11 (0.8) cents (0.1) cents
25.3 cents 28.6 cents
Dividends 12 977,256 589,771

Balance Sheets
AS AT 31 DECEMBER 2005
Group Company
2005 2004 2005 2004
Note HK$’000 HK$’000 HK$’000 HK$’000
ASSETS
Non-current assets
Intangible asset 15 804,065 24,526 — —
Leasehold land and land use rights 16 29,638 81,378 — —
Property, plant and equipment 17 72,990 201,770 425 1,005
Investment properties 18 41,160 37,740 10,360 9,950
Interests in subsidiaries 19 — — 1,814,258 1,372,456
Interest in a jointly controlled entity 20(a) 5,339,947 4,249,976 — —
Interests in other jointly controlled
entities 20(b) 721,368 — — —
Interests in associates 21 51,851 43,762 — —
Interests in non-consolidated
subsidiaries 22 2,105 2,991 — —
Investment securities 23 — 588 — 400
7,063,124 4,642,731 1,825,043 1,383,811

----------- ----------- ----------- -----------
Current assets
Inventories 24 88,710 141,190 — —
Trade and other receivables 25 96,634 205,303 2,247,556 555,531
Current tax recoverable 252 219 — —
Cash and bank balances
— pledged 26 30,684 57,671 — —
— others 26 1,632,513 2,536,995 193,234 1,677,436
1,848,793 2,941,378 2,440,790 2,232,967

Non-current assets classified as held
for sale 6 243,394 — — —
2,092,187 2,941,378 2,440,790 2,232,967

----------- ----------- ----------- -----------
Total assets 9,155,311 7,584,109 4,265,833 3,616,778
EQUITY
Share capital and reserves attributable to
equity holders
Share capital 27 751,736 741,268 751,736 741,268
Reserves
Proposed final dividend 12 & 28 300,694 296,507 300,694 296,507
Proposed special dividend 12 & 28 375,868 — 375,868 —
Others 28 7,241,898 5,932,592 2,821,143 2,568,845
8,670,196 6,970,367 4,249,441 3,606,620

Minority interests 84,462 157,564 — —
Total equity 8,754,658 7,127,931 4,249,441 3,606,620

----------- ----------- ----------- -----------
30
Balance Sheets
AS AT 31 DECEMBER 2005
Group Company
2005 2004 2005 2004
Note HK$’000 HK$’000 HK$’000 HK$’000
LIABILITIES
Non-current liabilities
Borrowings 29 5,563 8,671 — —
Deferred tax liabilities 30 1,127 926 — —
6,690 9,597 — —
----------- ----------- ----------- -----------
Current liabilities
Trade and other payables 31 175,724 353,190 9,851 3,617
Current tax liabilities 9,982 7,783 6,541 6,541
Borrowings 29 13,686 85,608 — —
199,392 446,581 16,392 10,158

Liabilities directly associated with
non-current assets classified as held
for sale 6 194,571 — — —
393,963 446,581 16,392 10,158

----------- ----------- ----------- -----------
Total liabilities 400,653 456,178 16,392 10,158
----------- ----------- ----------- -----------
Total equity and liabilities 9,155,311 7,584,109 4,265,833 3,616,778
Net current assets 1,698,224 2,494,797 2,424,398 2,222,809
Total assets less current liabilities 8,761,348 7,137,528 4,249,441 3,606,620
On behalf of the Board
Zhang Fangyou Zhang Baoqing

Chairman Director

Consolidated Statement of Changes in Equity
Attributable
to equity holders
Share Minority
capital Reserves interests Total
Note HK$’000 HK$’000 HK$’000 HK$’000
Balance at 1 January 2004, as

previously reported as equity 350,853 4,805,251 — 5,156,104
previously separately reported as
minority interests — — 171,228 171,228
Balance at 1 January 2004, as restated 350,853 4,805,251 171,228 5,327,332

----------- ----------- ----------- -----------
Currency translation differences and net
income recognised directly in equity 28 — 2,805 144 2,949
Profit/(loss) for the year — 2,062,447 (3,037) 2,059,410
Total recognised income for 2004 — 2,065,252 (2,893) 2,062,359

----------- ----------- ----------- -----------
Issue of shares upon exercise of
share options 27 & 28 36,983 507,824 — 544,807
Bonus issue 27 & 28 353,432 (353,432) — —
Dividends 28 — (788,068) (8,464) (796,532)
Reserve transferred to income
statement upon disposal and
liquidation of subsidiaries 28 — (45) — (45)
Reserves transferred to income
statement upon disposal of
an associate 28 — (7,683) — (7,683)
Disposal and liquidation of subsidiaries — — (2,307) (2,307)
390,415 (641,404) (10,771) (261,760)

----------- ----------- ----------- -----------
Balance at 31 December 2004 741,268 6,229,099 157,564 7,127,931
32
Consolidated Statement of Changes in Equity
Attributable
to equity holders
Share Minority
capital Reserves interests Total
Note HK$’000 HK$’000 HK$’000 HK$’000
Balance at 1 January 2005 as

previously reported as equity 741,268 6,229,099 — 6,970,367
previously separately reported as
minority interests — — 157,564 157,564
Balance at 1 January 2005, as restated 741,268 6,229,099 157,564 7,127,931

----------- ----------- ----------- -----------
Currency translation differences and net
income recognised directly in equity 28 — 112,817 (1,141) 111,676
Profit/(loss) for the year — 1,905,529 (45,281) 1,860,248
Total recognised income for 2005 — 2,018,346 (46,422) 1,971,924

----------- ----------- ----------- -----------
Issue of shares upon purchase of
partial interest in a subsidiary 27 & 28 7,380 199,481 — 206,861
share options 27 & 28 3,088 38,362 — 41,450
Purchase of partial interest in a
subsidiary 28 — 34,293 (56,456) (22,163)
Dividends 28 — (601,121) 29,776 (571,345)
10,468 (328,985) (26,680) (345,197)

----------- ----------- ----------- -----------
Balance at 31 December 2005 751,736 7,918,460 84,462 8,754,658

Consolidated Cash Flow Statement
Group
2005 2004
Note HK$’000 HK$’000
Operating activities
Net cash generated from/(used in) operations 32(a) 93,170 (30,186)
Interest paid 8 (1,418) (1,427)
Hong Kong profits tax paid (515) (1,277)
Overseas income tax paid (4,768) (3,068)
Operating cash flows of discontinued operations 6 (31,006) (10,378)
Net cash generated from/(used in) operating activities 55,463 (46,336)

------------ ------------
Investing activities
Purchase of property, plant and equipment 17 (4,745) (19,765)
Purchase of partial interest in a subsidiary (789,337) —
Purchase of interests in jointly controlled entities (710,000) —
Proceeds from disposal of property, plant and equipment — 3,275
Proceeds from disposal of subsidiaries 32(c) — 1,272
Proceeds from disposal of an associate — 1,866
Cash outflow on liquidation of subsidiaries 32(d) — (7,932)
Dividends received from a jointly controlled entity 1,136,331 925,527
Dividends received from associates 21 5,324 2,074
Dividend received from an investment security — 24
Interest received 5 33,864 25,580
Net change in bank deposits pledged (2,153) 18,335
Investing cash flows of discontinued operations 6 15,396 (35,260)
Net cash (used in)/generated from investing activities (315,320) 914,996

------------ ------------
Financing activities 32(b)
Issue of shares 41,450 544,807
New loans borrowed 555 7,009
Repayment of bank loans and other loans (19,236) (3,111)
Dividends paid to minority shareholders (26,231) (8,464)
Dividends paid (601,121) (788,068)
Financing cash flows of discontinued operations 6 (3,500) 18,829
Net cash used in financing (608,083) (228,998)

------------ ------------
(Decrease)/increase in cash and cash equivalents (867,940) 639,662
Cash and cash equivalents at 1 January 2,536,995 1,895,227
Effect of foreign exchange rate changes (15,671) 2,106
Cash and cash equivalents at 31 December 1,653,384 2,536,995
Analysis of the balances of cash and cash equivalents:

Cash and bank balances 1,632,513 2,536,995
Cash and bank balances classified as held for sale 6 20,871 —
1,653,384 2,536,995
34
Notes to the Consolidated Financial Statements
31 DECEMBER 2005
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated.
(a) Basis of preparation
The consolidated financial statements of Denway Motors Limited have been prepared in
accordance with Hong Kong Financial Reporting Standards (‘‘HKFRS’’) issued by the
Hong Kong Institute of Certified Public Accountants. They have been prepared under the
historical cost convention, as modified by the revaluation of investment properties, which
are stated at fair value.
The preparation of financial statements in conformity with HKFRS requires the use of
certain critical accounting estimates. It also requires management to exercise its
judgement in the process of applying the Company’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements, are disclosed in note 3.
The adoption of new/revised HKFRS
In 2005, the Group adopted the new/revised standards of HKFRS below, which are
relevant to its operations. The 2004 comparatives have been amended as required, in
accordance with the relevant requirements.
HKAS 1 Presentation of Financial Statements

HKAS 2 Inventories
HKAS 7 Cash Flow Statements
HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
HKAS 10 Events after the Balance Sheet Date
HKAS 16 Property, Plant and Equipment
HKAS 17 Leases
HKAS 21 The Effects of Changes in Foreign Exchange Rates
HKAS 23 Borrowing Costs
HKAS 24 Related Party Disclosures
HKAS 27 Consolidated and Separate Financial Statements
HKAS 28 Investments in Associates
HKAS 31 Investments in Joint Ventures
HKAS 32 Financial Instruments: Disclosures and Presentation
HKAS 33 Earnings per Share
HKAS 36 Impairment of Assets
HKAS 38 Intangible Assets
HKAS 39 Financial Instruments: Recognition and Measurement
HKAS 39 Amendment Transition and Initial Recognition of Financial Assets and
Financial Liabilities
HKAS 40 Investment Property
HKAS-Int 15 Operating Leases — Incentives
HKAS-Int 21 Income Taxes — Recovery of Revalued Non-Depreciated Assets
HKFRS 2 Share-based Payments
HKFRS 3 Business Combinations
HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations
HK-Int 4 Leases — Determination of the Length of Lease Term in respect
of Hong Kong Land Leases

31 DECEMBER 2005
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) Basis of preparation (continued)
The adoption of new/revised HKASs 1, 2, 7, 8, 10, 16, 21, 23, 24, 27, 28, 31, 33, HKAS-
Int 15 and HK-Int 4 did not result in substantial changes to the Group’s accounting
policies. In summary:
— HKAS 1 has affected the presentation of minority interests, share of net after-tax
results of jointly controlled entities, associates and non-consolidated subsidiaries and
other disclosures.
— HKASs 2, 7, 8, 10, 16, 23, 27, 28, 31, 33, HKAS-Int 15 and HK-Int 4 had no
material effect on the Group’s policies.
— HKAS 21 had no material effect on the Group’s policy. The functional currency of
each of the consolidated entities has been re-evaluated based on the guidance to the
revised standard.
— HKAS 24 has affected the identification of related parties and some other related
party disclosures.
The adoption of revised HKAS 17 has resulted in a change in the accounting policy
relating to the reclassification of leasehold land from property, plant and equipment to
operating leases. The up-front prepayments made for the leasehold land are expensed in
the income statement on a straight-line basis over the period of the lease or where there is
impairment, the impairment is expensed in the income statement. In prior years, the
leasehold land was accounted for at cost less accumulated depreciation and accumulated
impairment.
The adoption of HKAS 32 and 39 has resulted in a change in the accounting policy
relating to the classification of financial assets at fair value through profit and loss and
available-for-sale financial assets. It has also resulted in the recognition of derivative
financial instruments at fair value and the change in the recognition and measurement of
hedging activities.
The adoption of HKAS 40 has resulted in a change in the accounting policy of investment
properties of which the changes in fair values are recorded in the income statement as
part of other gains. In prior years, the increases in fair value were credited to the
investment properties revaluation reserve; decreases in fair value were first set off against
increases on earlier valuations on a portfolio basis and thereafter expensed in the income
statement.
The adoption of revised HKAS-Int 21 has resulted in a change in the accounting policy
relating to the measurement of deferred tax liabilities arising from the revaluation of
investment properties. Such deferred tax liabilities are measured on the basis of tax
consequences that would follow from recovery of the carrying amount of that asset
through use. In prior years, the carrying amount of that asset was expected to be
recovered through sale.
36
31 DECEMBER 2005
The adoption of HKFRS 2 has resulted in a change in the accounting policy for share-
based payments. Until 31 December 2004, the provision of share options to employees did
not result in an expense in the income statement. Effective 1 January 2005, the Group
expenses the fair value of share options in the income statement.
The adoption of HKFRS 3, HKAS 36 and HKAS 38 results in a change in the accounting
policy for goodwill. Until 31 December 2004, goodwill was:
— amortised on a straight-line basis over the estimated useful life; and
— assessed for an indication of impairment at each balance sheet date.
In accordance with the provisions of HKFRS 3 (note 1(c)(i)):
— the Group ceased amortisation of goodwill from 1 January 2005;
— accumulated amortisation as at 31 December 2004 has been eliminated with a

corresponding decrease in the cost of goodwill;
— from the year ended 31 December 2005 onwards, goodwill is tested annually for
impairment, as well as when there is indication of impairment.
The Group adopted HKFRS 5 from 1 January 2005 prospectively in accordance with the
standard’s provisions. The adoption of HKFRS 5 has resulted in a change in the
accounting policy for non-current assets (or disposal groups) held for sale. The non-
current assets (or disposal groups) held for sale were previously neither classified nor
presented as current assets or liabilities. There was no difference in measurement for non-
current assets (or disposal groups) held for sale or for continuing use.
The application of HKFRS 5 does not impact on the prior-year financial statements other
than a change in the presentation of the results and cash flows of discontinued operations.
All changes in the accounting policies have been made in accordance with the transition
provisions in the respective standards. All standards adopted by the Group require
retrospective application other than:
. HKAS 16 — the initial measurement of an item of property, plant and equipment

acquired in an exchange of assets transaction is accounted at fair value prospectively
only to future transactions;
. HKAS 21 — prospective application for accounting goodwill and fair value

adjustments as part of foreign operations;
. HKAS 39 — does not permit to recognise, derecognise and measure financial assets
and liabilities in accordance with this standard on a retrospective basis. The Group
applied the previous Statement of Standard Accounting Practice (‘‘SSAP’’) 24
‘‘Accounting for investments in securities’’ to investment securities for the 2004
comparative information. The adjustments required for the accounting differences
between SSAP 24 and HKAS 39, if any, are determined and recognised at 1 January
2005;

31 DECEMBER 2005
. HKAS 40 — since the Group has adopted the fair value model, there is no
requirement for the Group to restate the comparative information, any adjustment is
made to the retained earnings as at 1 January 2005, including the reclassification of
any amount held in revaluation surplus for investment property;
. HKAS-Int 15 does not require the recognition of incentives for leases beginning
before 1 January 2005;
. HKFRS 2 — only retrospective application for all equity instruments granted after 7
November 2002 and not vested at 1 January 2005; and
. HKFRS 3 — prospectively after the adoption date.
The adoption of HKAS 17 resulted in:
Group
2005 2004
HK$’000 HK$’000
decrease in property, plant and equipment 29,638 83,620

increase in leasehold land and land use rights 29,638 83,620
There was no impact on all other balance sheet items as at 1 January 2005 and results and
earnings per share for the year ended 31 December 2004 from the adoption of the
accounting policies described above.
Standards, interpretations and amendments to published standards that are not yet
effective
Certain new standards, amendments and interpretations to existing standards have been
published that are applicable for the Group’s accounting periods beginning on or after 1
January 2006 or later periods but which the Group has not early adopted, as follows:
. HKAS 39 (Amendment), The Fair Value Option (effective 1 January 2006).
. HKAS 39 and HKFRS 4 (Amendments), Financial Instruments: Recognition and

Measurement and Insurance Contracts — Financial Guarantee Contracts (effective 1
January 2006).
. HKFRS 7, Financial Instruments: Disclosures, and a complementary Amendment to

HKAS 1, Presentation of Financial Statements — Capital Disclosures (effective 1
January 2007).
. HKFRS-Int 4, Determining whether an Arrangement contains a Lease (effective 1

January 2006).
38
31 DECEMBER 2005
(b) Consolidation
(i) Subsidiaries
The consolidated financial statements include the financial statements of the

Company and all its subsidiaries, with the exception of non-consolidated
subsidiaries which are accounted for as mentioned below, made up to 31 December.
Subsidiaries are those entities in which the Company, directly or indirectly, controls
the composition of the board of directors, controls more than half of the voting
power or holds more than half of the issued share capital. A non-consolidated
subsidiary is a subsidiary which operates under contractual restrictions which
significantly impair control by the Company over that subsidiary but in which the
Company exercises significant influence.
Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of

subsidiaries by the Group. The cost of an acquisition is measured as the fair value of
the assets given, equity instruments issued and liabilities incurred or assumed at the
date of exchange, plus costs directly attributable to the acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess of the cost of
acquisition over the fair value of the Group’s share of the identifiable net assets
acquired is recorded as goodwill. If the cost of acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is recognised directly in
the consolidated income statement.
The results of consolidated subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of acquisition
or up to the effective date of disposal, as appropriate. Non-consolidated subsidiaries
are accounted for by the Group using the equity method of accounting.
The consolidated income statement includes the Group’s share of the results of non-
consolidated subsidiaries for the year and the consolidated balance sheet includes the
Group’s share of net assets of the non-consolidated subsidiaries.
All significant intercompany transactions and balances within the Group are
eliminated on consolidation.
In the Company’s balance sheet the interests in subsidiaries are stated at cost less
provision for impairment losses. The results of subsidiaries are accounted for by the
Company on the basis of dividends received and receivable.

31 DECEMBER 2005
(b) Consolidation (continued)
(ii) Jointly controlled entities
A joint venture is a contractual arrangement whereby the Group and other parties
undertake an economic activity which is subject to joint control and none of the
participating parties has unilateral control over the economic activity. Interests in
jointly controlled entities are accounted for using the equity method of accounting
and are initially recognised at cost. The Group’s interests in jointly controlled
entities include goodwill (net of any accumulated impairment loss) identified on
acquisition (see note 1(c)(i)).
The Group’s share of its jointly controlled entities’ post-acquisition profits or losses
is recognised in the consolidated income statement, and its share of post-acquisition
movements in reserves is recognised in reserves. The cumulative post-acquisition
movements are adjusted against the carrying amount of the investment.
In the Company’s balance sheet the interests in jointly controlled entities are stated
at cost less provision for impairment losses. The results of jointly controlled entities
are accounted for by the Company on the basis of dividend received and receivable.
(iii) Associates
Associates are all entities over which the Group has significant influence but not
control. Interests in associates are accounted for using the equity method of
accounting and are initially recognised at cost. The Group’s interests in associates
include goodwill (net of any accumulated impairment loss) identified on acquisition
(see note 1(c)(i)).
The Group’s share of its associates’ post-acquisition profits or losses is recognised

in the consolidated income statement, and its share of post-acquisition movements in
reserves is recognised in reserves. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the Group’s share of
losses in an associate equals or exceeds its interest in the associate, including any
other unsecured receivables, the Group does not recognise further losses, unless it
has incurred obligations or made payments on behalf of the associate.
In the Company’s balance sheet the interests in associates are stated at cost less
provision for impairment losses. The results of associates are accounted for by the
Company on the basis of dividends received and receivable.
40
31 DECEMBER 2005
(c) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of
the Group’s share of the net identifiable assets of the acquired subsidiary/associates/
jointly controlled entity at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in intangible assets. Goodwill on acquisitions of associates
and jointly controlled entities is included in respective investments. Goodwill is
tested annually for impairment and carried at cost less accumulated impairment
losses.
Goodwill is allocated to cash-generating units for the purpose of impairment testing.
(ii) Technology
Technology is shown at historical cost. Technology has a definite useful life and is
carried at cost less accumulated amortisation. Amortisation is calculated using the
straight-line method to allocate the cost of technology over its estimated useful
lives.
(d) Property, plant and equipment
(i) Depreciation
Property, plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses. The cost of an asset comprises its purchase price
and any directly attributable costs, including related borrowing costs, of bringing the
asset to its present working condition and location for its intended use.
Property, plant and equipment are depreciated at rates sufficient to write off their
cost over their estimated useful lives to the Group on a straight-line basis. The
principal annual rates used for this purpose are as follows:
Buildings 2%–5%
Plant and machinery 10%
Office equipment and leasehold
improvements 20%
Motor vehicles 20%
The assets’ useful lives are reviewed, and adjusted if appropriate, at each balance
sheet date.
(ii) Gain or loss on disposal of property, plant and equipment
The gain or loss on disposal of property, plant and equipment is the difference
between the net sales proceeds and the carrying amount of the relevant asset, and is
recognised in the income statement.

31 DECEMBER 2005
(d) Property, plant and equipment (continued)
(iii) Cost of restoring and improving property, plant and equipment
The plant components are depreciated over the period to overhaul. Major costs
incurred in restoring the plant components to their normal working condition to
allow continued use of the overall asset are capitalised and depreciated over the
period to the next overhaul.
Improvements are capitalised and depreciated over their expected useful lives to the
Group.
(e) Investment properties
Property that is held for long-term rental yields or for capital appreciation or both, and
that is not occupied by the companies in the consolidated Group, is classified as
investment property.
Investment property comprises land held under operating leases and buildings held under
finance leases.
Land held under operating leases is classified and accounted for as investment property
when the rest of the definition of investment property is met. The operating lease is
accounted for as if it were a finance lease.
Investment property is measured initially at its cost, including related transaction costs.
After initial recognition, investment property is carried at fair value. Fair value is based
on active market prices, adjusted, if necessary, for any difference in the nature, location
or condition of the specific asset. These valuations are performed in accordance with the
guidance issued by the International Valuation Standards Committee. These valuations are
reviewed annually by external valuers.
The fair value of investment property reflects, among other things, rental income from
current leases and assumptions about rental income from future leases in the light of
current market conditions.
Subsequent expenditure is charged to the asset’s carrying amount only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and maintenance costs are
expensed in the income statement during the financial period in which they are incurred.
Changes in fair values are recognised in the income statement.
If an investment property becomes owner-occupied, it is reclassified as property, plant

and equipment, and its fair value at the date of reclassification becomes its cost for
accounting purposes.
42
31 DECEMBER 2005
(e) Investment properties (continued)
If an item of property, plant and equipment becomes an investment property because its
use has changed, any difference resulting between the carrying amount and the fair value
of this item at the date of transfer is recognised in equity as a revaluation of property,
plant and equipment under HKAS 16. However, if a fair value gain reverses a previous
impairment loss, the gain is recognised in the income statement.
(f) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation, which are at least
tested annually for impairment and are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.
Assets that are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at each reporting date.
(g) Financial assets
From 1 January 2004 to 31 December 2004 :
The Group classified its investments other than subsidiaries, associates and jointly
controlled entities as investment securities.
Investment securities are stated at cost less accumulated impairment losses. The carrying
amounts of individual investments are reviewed at each balance sheet date to assess
whether the fair value have declined below the carrying amounts. When a decline other
than temporary has occurred, the carrying amount of such investment will be reduced to
its fair value. The impairment loss is recognised as an expense in the income statement.
This impairment loss is written back to income statement when the circumstances and
events that led to the write-downs or write-offs cease to exist and there is persuasive
evidence that the new circumstances and events will persist for the foreseeable future.
From 1 January 2005 onwards:
The Group classifies its financial assets in the following categories: at fair value through
profit or loss, loans and receivables, held-to-maturity investments and available-for-sale
financial assets. The classification depends on the purpose for which the financial assets
were acquired. Management determines the classification of its financial assets at initial
recognition and re-evaluates this designation at every reporting date.

31 DECEMBER 2005
(g) Financial assets (continued)
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those
designated at fair value through profit or loss at inception. A financial asset is
classified in this category if acquired principally for the purpose of selling in the
short term or if so designated by management. Derivatives are also categorised as
held for trading unless they are designated as hedges. Assets in this category are
classified as current assets if they are either held for trading or are expected to be
realised within 12 months of the balance sheet date.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are included in current
assets, except for maturities greater than 12 months after the balance sheet date.
These are classified as non-current assets. Loans and receivables are classified as
trade and other receivables in the balance sheet.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or

determinable payments and fixed maturities that the Group’s management has the
positive intention and ability to hold to maturity. During the period, the Group did
not hold any investments in this category.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in

this category or not classified in any of the other categories. They are included in
non-current assets unless management intends to dispose of the investment within 12
months of the balance sheet date.
Purchases and sales of investments are recognised on trade-date - the date on which
the Group commits to purchase or sell the asset. Investments are initially recognised
at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Investments are derecognised when the rights to receive cash
flows from the investments have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership. Available-for-sale
financial assets and financial assets at fair value through profit or loss are
subsequently carried at fair value. Loans and receivables and held-to-maturity
investments are carried at amortised cost using the effective interest method.
Realised and unrealised gains and losses arising from changes in the fair value of
the ‘financial assets at fair value through profit or loss’ category are included in the
income statement in the period in which they arise. Unrealised gains and losses
arising from changes in the fair value of non-monetary securities classified as
available-for-sale are recognised in equity. When securities classified as available-
for-sale are sold or impaired, the accumulated fair value adjustments are included in
the income statement as gains or losses from investment securities.
44
31 DECEMBER 2005
(g) Financial assets (continued)
The fair values of quoted investments are based on current bid prices. If the market for a
financial asset is not active (and for unlisted securities), the Group establishes fair value
by using valuation techniques. These include the use of recent arm’s length transactions,
reference to other instruments that are substantially the same, discounted cash flow
analysis, and option pricing models refined to reflect the issuer’s specific circumstances.
The Group assesses at each balance sheet date whether there is objective evidence that a
financial asset or a group of financial assets is impaired. In the case of equity securities
classified as available-for-sale, a significant or prolonged decline in the fair value of the
security below its cost is considered as an indicator that the securities are impaired. If any
such evidence exists for available-for-sale financial assets, the cumulative loss —
measured as the difference between the acquisition cost and the current fair value, less
any impairment loss on that financial asset previously recognised in the income statement
— is removed from equity and recognised in the income statement. Impairment losses
recognised in the income statement on equity instruments are not reversed through the
income statement. Impairment testing of trade and other receivable is described in note
1(i).
(h) Inventories
Inventories comprise stocks and work in progress and are stated at the lower of cost and
net realisable value. Cost, calculated on the weighted average basis, comprises materials,
direct labour and an appropriate proportion of all production overhead expenditure. Net
realisable value is determined on the basis of anticipated sales proceeds less estimated
selling expenses.
(i) Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision for
impairment. A provision for impairment of trade and other receivables is established when
there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of receivables. Significant financial difficulties of the
debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and
default or delinquency in payments are considered indicators that the receivable is
impaired. The amount of the provision is the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at the effective
interest rate. The amount of the provision is recognised in the income statement.
(j) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and bank
overdrafts.

31 DECEMBER 2005
(k) Non-current assets (or disposal groups) held for sale
Non-current assets (or disposals groups) are classified as assets held for sale and stated at
the lower of carrying amount and fair value less costs to sell if their carrying amount is
recovered principally through a sale transaction rather than through a continuing use.
(l) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as
a result of past events, it is probable that an outflow of resources will be required to settle
the obligation, and a reliable estimate of the amount can be made. Where the Group
expects a provision to be reimbursed, the reimbursement is recognised as a separate asset
but only when the reimbursement is virtually certain.
(m) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred.
Transaction costs are incremental costs that are directly attributable to the acquisition,
issue or disposal of a financial asset or financial liability, including fees and commissions
paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities
exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised
cost; any difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right
to defer settlement of the liability for at least 12 months after the balance sheet date.
(n) Deferred taxation
Deferred income tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements. However, if the deferred income tax
arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable
profit or loss, it is not accounted for. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the balance sheet date and
are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in

subsidiaries, associates and jointly controlled entities, except where the timing of the
reversal of the temporary difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
46
31 DECEMBER 2005
(o) Contingent liabilities
A contingent liability is a possible obligation that arises from past events and whose
existence will only be confirmed by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the Group. It can also be a
present obligation arising from past events that is not recognised because it is not
probable that outflow of economic resources will be required or the amount of obligation
cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the financial
statements. When a change in the probability of an outflow occurs so that the outflow
becomes probable, it will then be recognised as a provision.
(p) Revenue recognition
Revenue in respect of the sales of motor vehicles and related equipment and parts, and
other goods is recognised, net of sales tax, on the transfer of risks and rewards of
ownership, which generally coincides with the time when the goods are delivered to
customers and the title has passed.
Dividend income is recognised when the right to receive payment is established.
Interest income is recognised on a time-proportion basis using the effective interest

method.
Operating lease rental income is recognised on a straight-line basis over the lease period.
Handling service charges for motor vehicle registration is recognised when the service is
rendered.
(q) Operating leases
Leases where substantially all the risks and rewards of ownership of assets remain with
the leasing company are accounted for as operating leases. Payments made under
operating leases net of any incentives received from the leasing company are charged to
the income statement on a straight-line basis over the lease periods.
(r) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are
measured using the currency of the primary economic environment in which the
entity operates (‘‘the functional currency’’). The consolidated financial statements
are presented in Hong Kong dollars which is the Company’s functional and
presentation currency.

31 DECEMBER 2005
(r) Foreign currency translation (continued)
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the
exchange rates prevailing at the dates of the transactions. Foreign exchange gains
and losses resulting from the settlement of such transactions and from the translation
at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement.
Translation differences on non-monetary items, such as equity instruments held at

fair value through profit or loss, are reported as part of the fair value gain or loss.
Translation difference on non-monetary items, such as equities classified as
available-for-sale financial assets, are included in the fair value reserve in equity.
(iii) Group companies
The results and financial position of all the group entities (none of which has the
currency of a hyperinflationary economy) that have a functional currency different
from the presentation currency are translated into the presentation currency as
follows:
. assets and liabilities for each balance sheet presented are translated at the
closing rate at the date of that balance sheet;
. income and expenses for each income statement are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions); and
. all resulting exchange differences are recognised as a separate component of

equity.
On consolidation, exchange differences arising from the translation of the net

investment in foreign entities are taken to shareholders’ equity. When a foreign
operation is sold, such exchange differences are recognised in the income statement
as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the closing rate.
(s) Employee benefits
(i) Employee leave entitlements
Employee entitlements to annual leave and overtime leave are recognised when they
accrue to employees. A provision is made for the estimated liability for annual leave
and overtime leave as a result of services rendered by employees up to the balance
sheet date.
48
31 DECEMBER 2005
(s) Employee benefits (continued)
(i) Employee leave entitlements (continued)
Employee entitlements to sick leave and maternity leave are not recognised until the
time of leave.
(ii) Profit sharing and bonus plans
Provisions for profit sharing and bonus plans due wholly within twelve months after
the balance sheet date are recognised when the Group has a present legal or
constructive obligation as a result of services rendered by employees and a reliable
estimate of the obligation can be made.
(iii) Pension obligations
The Group participates in a number of defined contribution plans, the assets of

which are generally held in independently administered funds. The Group’s
contributions to the defined contribution retirement schemes are expensed as
incurred and are reduced by contributions forfeited by those employees who leave
the scheme prior to vesting fully in the contributions.
(iv) Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value
of the employee services received in exchange for the grant of the options is
recognised as an expense. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted, excluding the
impact of any non-market vesting conditions (for example, profitability and sales
growth targets). Non-market vesting conditions are included in assumptions about
the number of options that are expected to become exercisable. At each balance
sheet date, the entity revises its estimates of the number of options that are expected
to become exercisable. It recognises the impact of the revision of original estimates,
if any, in the income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited
to share capital (nominal value) and share premium when the options are exercised.
(t) Borrowing costs
Borrowing costs that are 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 that asset.
All other borrowing costs are charged to the income statement in the year in which they
are incurred.

31 DECEMBER 2005
(u) Segment reporting
In accordance with the Group’s internal financial reporting the Group has determined that
business segments be presented as the primary reporting format and geographical
segments as the secondary reporting format.
Unallocated costs represent corporate expenses. Segment assets consist primarily of

intangible assets, leasehold land and land use right, property, plant and equipment,
investment securities, inventories, receivables and operating cash. Segment liabilities
comprise operating liabilities and exclude items such as taxation and certain corporate
borrowings. Capital expenditure comprises additions to intangible assets, leasehold land
and land use right, and property, plant and equipment, including additions resulting from
acquisition through the purchase of subsidiaries.
In respect of geographical segment reporting, sales are based on the country in which the
customer is located. Total assets and capital expenditure are based on where the assets are
located.
2. FINANCIAL RISK MANAGEMENT
2.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including
foreign exchange risk and price risk), credit risk, liquidity risk and cash flow and fair
value interest-rate risk. The Group’s overall risk management policy focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effect on the
Group’s financial performance. The Group regularly monitors its exposure and currently
considers not necessary to hedge any of these financial risks.
(a) Market risk
(i) Foreign exchange risk
Majority of the subsidiaries of the Group operates in the PRC with most of the
transactions denominated in Renminbi. The Group is exposed to foreign
exchange risk arising from the exposure of Renminbi against Hong Kong
dollars. It has not hedged its foreign exchange rate risk.
In addition, the conversion of Renminbi into foreign currencies is subject to the

rules and regulations of the foreign exchange control promulgated by the PRC
government.
(ii) Price risk
The Group is exposed to price risk of the automotive industry in the PRC.
50
31 DECEMBER 2005
2. FINANCIAL RISK MANAGEMENT (continued)
2.1 Financial risk factors (continued)
(b) Credit risk
The Group has no significant concentrations of credit risk. It has policies in place to
ensure that sales are made to customers with an appropriate credit history. The
carrying amount of the trade receivables included in the consolidated balance sheet
represents the Group’s maximum exposure to credit risk in relation to its financial
assets.
(c) Liquidity risk
Due to the capital intensive nature of the Group’s business, the Group ensures that it
maintains sufficient cash and credit lines to meet its liquidity requirements.
(d) Cash flow and fair value interest rate risk
As the Group has significant interest-bearing bank balances, the Group’s income and
operating cash flows are dependent on changes in market interest rates.
The Group’s interest-rate risk arises from long-term borrowings. Borrowings issued
at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued
at fixed rates expose the Group to fair value interest-rate risk. The Group has not
hedged its cash flow and fair value interest rate risk.
2.2 Fair value estimation
The nominal value less estimated credit adjustments of trade receivables and payables are
assumed to approximate their fair values.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under
the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets or liabilities are discussed below.
(a) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance
with the accounting policy stated in note 1(c)(i). The recoverable amounts of cash-
generating units have been determined based on value-in-use calculations. These
calculations require the use of estimates.

31 DECEMBER 2005
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
(b) Taxation
The Group is subject to various taxes. Significant judgement is required in determining

the provision for these taxes. There are many transactions and calculations for which the
ultimate tax determination is uncertain during the ordinary course of business. Where the
final tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the tax provisions in the period in which such
determination is made.
Deferred tax assets relating to certain temporary differences and tax losses are recognised
as management considers it is probable that future taxable profit will be available against
which the temporary differences or tax losses can be utilised. Where the expectation is
different from the original estimate, such differences will impact the recognition of
deferred taxation assets and taxation in the periods in which such estimate is changed.
(c) Estimate of fair value of investment properties
The fair value of investment properties have been determined with reference to
independent valuations. The best evidence of fair value is current price in an active
market for similar lease and other contracts. The Group employed an independent firm of
professional surveyor to determine the open market values for the investment properties of
the Group. These valuations require the use of judgement and estimates.
4. TURNOVER AND SEGMENT INFORMATION
The Group is principally engaged in the manufacturing, assembly and trading of motor
vehicles, the manufacturing and trading of automotive equipment and parts and audio
equipment. Turnover recognised during the year are as follows:
Group
2005 2004
HK$’000 HK$’000
Trading of motor vehicles 563,891 713,983

Manufacturing and trading of automotive equipment and parts 11,369 18,792
Manufacturing and trading of audio equipment 275,223 237,632
850,483 970,407
52
31 DECEMBER 2005
4. TURNOVER AND SEGMENT INFORMATION (continued)
Primary reporting format — business segments
The Group is organised into four main business segments:
. Trading of motor vehicles
. Manufacturing and assembly of motor vehicles
. Manufacturing and trading of automotive equipment and parts
. Manufacturing and trading of audio equipment
Other operations of the Group mainly comprise investment holding and the holding of
investment properties.
There were no sales between the business segments.
Secondary reporting format — geographical segments
The Group’s business segments operate in three main geographical areas:
The People’s Republic of — trading of motor vehicles, manufacturing and assembly of

China (the ‘‘PRC’’) motor vehicles and manufacturing and trading of
automotive equipment and parts
Hong Kong — manufacturing and trading of audio equipment
Australia — manufacturing and trading of automotive equipment and
parts
There were no sales between the geographical segments.

31 DECEMBER 2005
Primary reporting format — business segments
Manufacturing
Manufacturing and trading of Manufacturing
Trading of and assembly automotive and trading of
motor of motor equipment and audio Other
vehicles vehicles parts equipment operations Total
2005 2005 2005 2005 2005 2005
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Turnover 563,891 — 11,369 275,223 — 850,483
Segment operating profit/(loss) 7,316 — (8,244) 27,951 (7,391) 19,632

Interest income 541 — 13,038 145 20,140 33,864
Operating profit 7,857 — 4,794 28,096 12,749 53,496

Finance costs (1,418)
A jointly controlled entity 1,900,443 1,900,443
Other jointly controlled
entities 16,232 16,232
Associates 10,248 2,889 13,137
Non-consolidated subsidiaries (966) (966)
Profit before taxation 1,980,924

Taxation (7,650)
Profit/(loss) for the year from:

Continuing operations 1,973,274
Discontinued operations (113,026) (113,026)
1,860,248
Segment assets 202,442 1,390,010 165,162 1,038,780 2,796,394

Interests in
entities 721,368 721,368
Associates 13,950 37,901 51,851
Non-consolidated subsidiaries 2,105 2,105
Non-current assets classified as
held for sale 243,394 243,394
Unallocated assets 252
Total assets 9,155,311
Segment liabilities (110,069) (11,424) (44,345) (9,886) (175,724)

Liabilities directly associated
with non-current assets
classified as held for sale (194,571) (194,571)
Unallocated liabilities (30,358)
Total liabilities (400,653)
Capital expenditure 825 — 1,650 2,072 198 4,745

Depreciation 2,272 5,826 787 5,695 1,864 16,444
Amortisation — 1,237 — 229 359 1,825
Provision/(write-back of
provision) for impairment
loss — 23,487 — (4,846) (7,369) 11,272
54
31 DECEMBER 2005
Primary reporting format — business segments (continued)
Manufacturing
Manufacturing and trading of Manufacturing
Trading of and assembly automotive and trading of
motor of motor equipment and audio Other
vehicles vehicles parts equipment operations Total
2004 2004 2004 2004 2004 2004
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Turnover 713,983 — 18,792 237,632 — 970,407
Segment operating (loss)/profit (6,562) — (32,264) 11,665 1,179 (25,982)

Interest income 1,066 — 10,606 28 13,880 25,580
Operating (loss)/profit (5,496) — (21,658) 11,693 15,059 (402)
Finance costs (1,427)

Associates 1,338 4,785 6,123
Non-consolidated subsidiaries 93 93
Profit before taxation 2,081,707

Taxation (6,401)
Profit/(loss) for the year from:

Continuing operations 2,075,306
Discontinued operations (15,896) (15,896)
2,059,410
Segment assets 201,843 413,607 783,277 156,122 1,732,312 3,287,161

Interests in
Associates 10,047 33,715 43,762
Non-consolidated subsidiaries 2,991 2,991
Segment liabilities (105,890) (197,839) (5,798) (39,972) (3,691) (353,190)

Unallocated liabilities (102,988)
Total liabilities (456,178)
Capital expenditure 4,228 32,284 9,490 5,981 66 52,049

Depreciation 2,815 4,760 1,114 5,353 1,600 15,642
Amortisation 1,533 1,241 — 229 370 3,373
Write-back of provision for
impairment loss — — — — (1,750) (1,750)

31 DECEMBER 2005
Secondary reporting format — geographical segments
Segment
operating Interest Operating Total Capital
Turnover (loss)/profit income profit/(loss) assets expenditure
2005 2005 2005 2005 2005 2005
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
PRC 563,891 (441) 13,549 13,108 1,586,136 2,475

Hong Kong 275,223 20,560 20,285 40,845 1,203,942 2,232
Australia 11,369 (487) 30 (457) 6,316 38
850,483 19,632 33,864 53,496 2,796,394 4,745
Interests in
A jointly controlled entity 5,339,947
entities 721,368
Associates 51,851
Non-consolidated subsidiaries 2,105
Non-current assets classified as
held for sale 243,394
Segment
operating Interest Operating Total Capital
Turnover (loss)/profit income (loss)/profit assets expenditure
2004 2004 2004 2004 2004 2004
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
PRC 732,246 (38,387) 11,667 (26,720) 1,391,295 45,823

Hong Kong 237,632 12,844 13,908 26,752 1,888,434 6,047
Australia 529 (439) 5 (434) 7,432 179
970,407 (25,982) 25,580 (402) 3,287,161 52,049
Interests in
A jointly controlled entity 4,249,976
Associates 43,762
Non-consolidated subsidiaries 2,991
56
31 DECEMBER 2005
5. OTHER GAINS
Group
2005 2004
HK$’000 HK$’000
Interest income 33,864 25,580

Gross rental income from investment properties 574 1,864
Gross rental income from other properties 829 612
Handling service charges for motor vehicles registration 2,484 2,218
Fair value gains on investment properties (note 18(a)) 8,780 4,053
Others 2,878 1,588
49,409 35,915
6. NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
The assets and liabilities related to Guangzhou Denway Bus Company Limited (‘‘Guangzhou
Denway Bus’’) (the manufacturing and assembly of motor vehicles segment) have been
presented as held for sale following the approval of the Group’s management and shareholders
on 23 March 2006 to sell Guangzhou Denway Bus in the PRC.
An analysis of the result of discontinued operations is as follows:
2005 2004
HK$’000 HK$’000
Revenue 179,526 344,298

Expense (292,552) (360,194)
Loss for the year (113,026) (15,896)
2005 2004
HK$’000 HK$’000
Operating cash flows (31,006) (10,378)

Investing cash flows 15,396 (35,260)
Financing cash flows (3,500) 18,829
Total cash flows (19,110) (26,809)

31 DECEMBER 2005
6. NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

(continued)
2005
HK$’000
Non-current assets classified as held for sale:
Land use right 40,742

Property, plant and equipment 124,226
Inventories 18,950
Trade and other receivables 24,342
Cash and bank balances
— pledged 14,263
— others 20,871
243,394
Liabilities directly associated with non-current assets classified as held for sale:
Bank borrowings
— non-current 4,804
— current 48,045
Trade and other payables
— due to intermediate holding company 10,719
— others 131,003
194,571
58
31 DECEMBER 2005
7. EXPENSES BY NATURE
Group
2005 2004
HK$’000 HK$’000
Expenses included in cost of sales, selling and distribution costs,

general and administrative expenses and other operating income
of continuing operations are analysed as follows:
Auditors’ remuneration 2,898 2,560

Staff costs (including directors’ emoluments) (note 13) 40,562 42,473
Operating lease rentals in respect of land and buildings 7,658 8,504
Outgoings in respect of investment properties 574 565
Outgoings in respect of other properties 46 190
Amortisation of goodwill (note 15) — 1,533
Amortisation of prepaid leasehold land and land use rights
(note 16) 588 599
Depreciation of property, plant and equipment (note 17) 10,618 10,882
Loss on disposal of property, plant and equipment 622 1,816
Write-back of provision for impairment loss (notes 16 and 17(a)) (12,215) (1,750)
Loss on disposal of subsidiaries — 762
Gain on liquidation of subsidiaries — (13,400)
Gain on disposal of an associate — (9,549)
(Write-back of provision)/provision for inventory obsolescence (480) 2,194
(Write-back of provision)/provision for doubtful debts (27) 807
Net exchange (gain)/loss (22,742) 211
Expenses included in discontinued operations are analysed

as follows:
Staff costs
— Termination benefits 36,439 —
— Others 39,805 39,619
Operating lease rentals in respect of land and buildings 952 509
Amortisation of prepaid leasehold land and land use rights
(note 16) 1,237 1,241
Depreciation of property, plant and equipment (note 17) 5,826 4,760
Provision for impairment loss (notes 16 and 17(a)) 23,487 —
Provision/(write-back of provision) for inventory obsolescence 14,896 (8,299)
(Write-back of provision)/provision for doubtful debts (2,908) 5,778

31 DECEMBER 2005
8. FINANCE COSTS
Group
2005 2004
HK$’000 HK$’000
Interest on bank borrowings 530 718

Interest on other loans — wholly repayable within five years 888 709
1,418 1,427
9. TAXATION
Hong Kong profits tax has been provided at the rate of 17.5% (2004 : 17.5%) on the estimated
assessable profit for the year. Taxation on overseas profits has been calculated on the estimated
assessable profits for the year at the rates of taxation prevailing in the countries in which the
Group operates.
The amount of taxation charged/(credited) to the consolidated income statement represents:
Group
2005 2004
HK$’000 HK$’000
Current taxation
Hong Kong profits tax 2,061 823
PRC enterprise income tax 5,379 5,619
Overseas income tax 9 8
7,449 6,450
Deferred taxation (note 30)
Hong Kong profits tax 201 (49)
7,650 6,401
The taxation differs from the theoretical amount that would arise using the PRC enterprise
income tax rate as follows:
2005 2004
HK$’000 HK$’000
Profit/(loss) before taxation, less share of profits less

losses of jointly controlled entities, associates and
non-consolidated subsidiaries 52,078 (1,829)
Calculated at a tax rate of 33% (2004 : 33%) 17,186 (604)

Effect of different tax rates in different tax jurisdictions (1,825) (729)
Income not subject to tax (7,896) (5,927)
Unrecognised tax losses — 12,340
Underprovision in prior years 185 1,321
Taxation charge 7,650 6,401
60
31 DECEMBER 2005
10. PROFIT ATTRIBUTABLE TO EQUITY HOLDERS
Included in the Group’s profit attributable to equity holders of HK$1,905,529,000 (2004 :

HK$2,062,447,000) is a profit of HK$995,631,000 (2004 : HK$801,257,000), which is dealt
with in the Company’s own financial statements.
11. EARNINGS PER SHARE
Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders by
the weighted average number of ordinary shares in issue during the year.
2005 2004
HK$’000 HK$’000
Profit/(loss) attributable to equity holders

— continuing operations 1,962,548 2,069,896
— discontinued operations (57,019) (7,449)
1,905,529 2,062,447
Weighted average number of ordinary shares in issue (’000) 7,502,012 7,168,177
Basic earnings/(losses) per share (HK cents)

— continuing operations 26.2 28.9
— discontinued operations (0.8) (0.1)
25.4 28.8
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company
has share options outstanding during the period which are dilutive potential ordinary shares.
Calculation is done to determine the number of shares that could have been acquired at fair
value (determined as the average daily market share price of the Company’s shares) based on
the monetary value of the subscription rights attached to outstanding share options. The number
of shares calculated as above is compared with the number of shares that would have been
issued assuming the exercise of the share options.

31 DECEMBER 2005
11. EARNINGS PER SHARE (continued)
Diluted (continued)
2005 2004
HK$’000 HK$’000
Profit/(loss) attributable to equity holders

— continuing operations 1,962,548 2,069,896
— discontinued operations (57,019) (7,449)
1,905,529 2,062,447
Weighted average number of ordinary shares in issue (’000) 7,502,012 7,168,177

Adjustments for — share options (’000) 10,543 37,105
Weighted average number of ordinary shares for diluted earnings

per share (’000) 7,512,555 7,205,282
Diluted earnings/(losses) per share (HK cents)

— continuing operations 26.1 28.7
— discontinued operations (0.8) (0.1)
25.3 28.6
12. DIVIDENDS
Company
2005 2004
HK$’000 HK$’000
Interim, paid, of HK4 cents (2004 : HK4 cents) per ordinary share 300,694 293,264
Final, proposed, of HK4 cents (2004 : HK4 cents) per ordinary
share (note (a)) 300,694 296,507
Special, proposed, of HK5 cents (2004 : Nil) per ordinary share
(note (a)) 375,868 —
977,256 589,771
(a) At a meeting held on 19 April 2006, the directors proposed a final dividend of HK4 cents
(2004 : HK4 cents) and a special dividend of HK5cents (2004 : Nil) per ordinary share.
These proposed dividends are not reflected as dividend payable in these financial
statements but will be reflected as an appropriation of retained earnings for the year
ending 31 December 2006.
62
31 DECEMBER 2005
13. STAFF COSTS (INCLUDING DIRECTORS’ EMOLUMENTS)
Group
2005 2004
HK$’000 HK$’000
Wages and salaries 37,665 37,691

Termination benefits — 1,852
Pension costs — retirement benefit costs 2,897 2,930
40,562 42,473
The Company and certain of its Hong Kong subsidiaries (the ‘‘Employers’’) participate in two
defined contribution schemes as defined in the Occupational Retirement Schemes Ordinance
(the ‘‘ORSO Schemes’’) and a mandatory provident fund scheme (‘‘MPF Scheme’’).
Contributions to the schemes by the Employers and employees are calculated as a
percentage of employees’ basic salaries.
The Group’s contributions are reduced by contributions forfeited by those employees who leave
the ORSO Schemes prior to vesting fully in the contributions. There were no (2004 :
HK$62,000) forfeited contributions utilised during the year. There was no outstanding balance
available at the balance sheet dates of 2004 and 2005 to reduce future contributions. As at 31
December 2005, contributions totalling HK$79,000 (2004 : HK$67,000) were payable to the
ORSO and MPF Schemes and are included in other payables. The assets of the schemes are
held separately from those of the Group in independently administered funds.
The subsidiaries of the Group in the PRC have participated in an employees’ retirement scheme
of Guangzhou city. The implementation of such scheme by the Guangzhou Municipal
Government is an administrative measure to provide pensions for retired employees. Pursuant
to the relevant provisions, the subsidiaries in the PRC make a monthly defined contribution of
23% (2004 : 23%) of the entire payroll of its staff while the employees need to contribute 3%
of their payroll. The pension plan has been paying monthly pensions to the retired employees
of these subsidiaries. In 2005, there was no material contribution forfeited by employees who
left the scheme prior to vesting fully in such contributions. The Group has no further
obligations for the actual payment of the pensions or post-retirement benefits beyond the
annual contributions made.
The Group’s retirement benefit costs were expensed as incurred and the total amount charged
to the income statement for the year was approximately HK$2,897,000 (2004 : HK$2,930,000).

31 DECEMBER 2005
14. DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS
(a) The remuneration of every Director for the year ended 31 December 2005 is set out
below:
Salaries, Share
allowances, and Retirement options
Name of Director Fees benefits in kind benefit costs exercised Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Executive director:
Zhang Fangyou 1,000 — — — 1,000
Lu Zhifeng 800 — — — 800
Yang Dadong 800 — — — 800
Zeng Qinghong 300 — — — 300
Zhang Baoqing 300 1,384 48 — 1,732
Ding Baoshan 300 — — — 300
3,500 1,384 48 — 4,932

------------- ---------------- ------------- ------------- -------------
Independent non-
executive director:
Cheung Doi Shu 180 — — — 180
Lee Ka Lun 180 — — — 180
Fung Ka Pun 180 — — — 180
540 — — — 540
------------- ---------------- ------------- ------------- -------------
4,040 1,384 48 — 5,472
The remuneration of every Director for the year ended 31 December 2004 is set out
below:
Salaries, Share
allowances, and Retirement options
Name of Director Fees benefits in kind benefit costs exercised Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Executive director:
Zhang Fangyou 1,000 — — — 1,000
Lu Zhifeng 800 — — — 800
Yang Dadong 800 — — — 800
Chen Xuejun (b) — — — — —
Zeng Qinghong 300 — — — 300
Zhang Baoqing 300 1,214 44 — 1,558
Ding Baoshan 300 — — — 300
3,500 1,214 44 — 4,758

------------- ---------------- ------------- ------------- -------------
Independent non-
executive director:
Cheung Doi Shu 180 — — 1,095 1,275
Lee Ka Lun 180 — — — 180
Fung Ka Pun (a) 180 — — — 180
540 — — 1,095 1,635

------------- ---------------- ------------- ------------- -------------
4,040 1,214 44 1,095 6,393
64
31 DECEMBER 2005
14. DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS (continued)
(a) Notes:
(a) Appointed on 23 September 2004
(b) Resigned on 23 September 2004
No director waived any emoluments and no emoluments were paid to the directors as an
inducement fee to join or as compensation for loss of office during the years ended 31
December 2004 and 2005.
(b) Five highest paid individuals
The five individuals whose emoluments were the highest for the year include two (2004 :
Nil) of the directors whose emoluments are reflected in the analysis presented above. The
emoluments payable to the remaining three (2004 : five) individuals during the year are as
follows:
Group
2005 2004
HK$’000 HK$’000
Basic salaries and bonus 2,651 978

Share options exercised 300 56,930
2,951 57,908
The emoluments fell within the following bands:
Number of individuals
Emolument bands 2005 2004
Below HK$1,000,000 3 —
HK$10,000,001–HK$11,000,000 — 2
HK$11,000,001–HK$12,000,000 — 2
HK$13,000,001–HK$14,000,000 — 1
During the year, no emoluments were paid to the five highest paid individuals as an
inducement fee to join or as compensation for loss of office.

31 DECEMBER 2005
15. INTANGIBLE ASSET
Group
Goodwill
HK$’000
At 1 January 2004
Cost 30,658
Accumulated amortisation (4,599)
Net book amount 26,059
Year ended 31 December 2004

Opening net book amount 26,059
Amortisation (note 7) (1,533)
Closing net book amount 24,526
At 31 December 2004
Cost 30,658
Accumulated amortisation (6,132)
Net book amount 24,526

Opening net book amount 24,526
Additions 778,850
Exchange differences 689
Closing net book amount 804,065
At 31 December 2005
Cost 1 804,065
1 Pursuant to the adoption of HKFRS 3 as set out in note 1(a), accumulated amortisation of goodwill of
HK$6,132,000 has been eliminated against cost as at 31 December 2004.
Goodwill is allocated to the Group’s cash-generating units identified according to business

segment.
66
31 DECEMBER 2005
15 INTANGIBLE ASSET (continued)
A segment-level summary of the goodwill is presented below.
2005 2004
Manufacturing
and trading of Manufacturing
Manufacturing automotive Manufacturing and trading of
Trading of and assembly equipment and Trading of and assembly automotive
motor of motor parts motor of motor equipment and
vehicles vehicles (note 20(b)) vehicles vehicles parts
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
PRC 25,215 778,850 208,467 24,526 — —
16. LEASEHOLD LAND AND LAND USE RIGHTS
Group
2005 2004
HK$’000 HK$’000
At 1 January 81,378 81,385

Exchange differences 1,129 83
Transfer to investment properties (note 18) (3,224) —
Transfer from investment properties (note 18) 6,332 —
Amortisation of prepaid operating lease payment (note 7) (1,825) (1,840)
Provision for impairment loss (18,096) —
Write-back of provision for impairment loss 4,686 1,750
Transfer to non-current assets classified as held for sale (note 6) (40,742) —
At 31 December 29,638 81,378
The Group’s interests in leasehold land and land use rights represent prepaid operating lease
payments and their net book values are analysed as follows:
2005 2004
HK$’000 HK$’000
In Hong Kong, held on:

Leases of over 50 years 3,577 2,725
Leases of between 10 to 50 years 24,238 18,028
Outside Hong Kong, held on:
29,638 81,378

31 DECEMBER 2005
16. LEASEHOLD LAND AND LAND USE RIGHTS (continued)
The net book value of land use rights included in non-current assets classified as held for sale
is analysed as follows:
2005
HK$’000

Leases of between 10 to 50 years 40,742
At 31 December 2005, certain leasehold land with a total net book value of approximately
HK$4,683,000 (2004 : HK$37,458,000) were pledged as security for the Group’s bank
borrowings (see note 29).
68
31 DECEMBER 2005
17. PROPERTY, PLANT AND EQUIPMENT
(a) Group
Office
equipment
Plant and and leasehold Motor
Buildings machinery improvements vehicles Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2004
Cost 121,070 100,751 36,117 23,869 281,807
Accumulated depreciation and accumulated
impairment (32,038) (44,698) (24,188) (8,908) (109,832)
Net book amount 89,032 56,053 11,929 14,961 171,975

Opening net book amount 89,032 56,053 11,929 14,961 171,975
Exchange differences 81 103 12 37 233
Additions 29,290 6,134 3,781 12,844 52,049
Disposals — (1,620) (1,765) (527) (3,912)
Disposal and liquidation of subsidiaries (343) (1,382) (1,208) — (2,933)
Depreciation (2,122) (7,364) (3,386) (2,770) (15,642)
Closing net book amount 115,938 51,924 9,363 24,545 201,770
At 31 December 2004
Cost 149,992 88,253 32,097 33,758 304,100
impairment (34,054) (36,329) (22,734) (9,213) (102,330)
Net book amount 115,938 51,924 9,363 24,545 201,770

Opening net book amount 115,938 51,924 9,363 24,545 201,770
Exchange differences 2,354 496 71 456 3,377
Additions — 1,911 821 2,013 4,745
Disposals — (12) (535) (75) (622)
Transfer to investment properties (note 18) (2,566) — — — (2,566)
Transfer from investment properties
(note 18) 4,818 — — — 4,818
Depreciation (note 7) (3,568) (7,795) (2,600) (2,481) (16,444)
Provision for impairment losses (2,678) (815) — (1,898) (5,391)
Write-back of provision for impairment loss 7,529 — — — 7,529
Transfer to non-current assets classified as
held for sale (note 6) (76,577) (29,974) — (17,675) (124,226)
Closing net book amount 45,250 15,735 7,120 4,885 72,990
At 31 December 2005
Cost 70,309 42,834 18,826 11,280 143,249
impairment (25,059) (27,099) (11,706) (6,395) (70,259)
Net book amount 45,250 15,735 7,120 4,885 72,990
The above assets are carried at cost at 31 December 2005 and 2004.

31 DECEMBER 2005
17. PROPERTY, PLANT AND EQUIPMENT (continued)
At 31 December 2005, certain property, plant and equipment with a total net book value of
approximately HK$5,474,000 (2004 : HK$5,495,000) were pledged as security for the Group’s
bank borrowings (see note 29).
(b) Company
Office
equipment
and leasehold Motor
improvements vehicles Total
HK$’000 HK$’000 HK$’000
At 1 January 2004
Cost 3,607 2,683 6,290
Accumulated depreciation (2,677) (1,851) (4,528)
Net book amount 930 832 1,762

Opening net book amount 930 832 1,762
Additions 66 — 66
Depreciation (385) (438) (823)
Closing net book amount 611 394 1,005

-------------- ----------- -----------
At 31 December 2004
Cost 3,673 2,683 6,356
Net book amount 611 394 1,005

Opening net book amount 611 394 1,005
Additions 197 — 197
Depreciation (443) (322) (765)
Disposals (12) — (12)
Closing net book amount 353 72 425
At 31 December 2005
Cost 3,449 2,683 6,132
Net book amount 353 72 425
The above assets are carried at cost at 31 December 2005 and 2004.
70
31 DECEMBER 2005
18. INVESTMENT PROPERTIES
(a) Group
2005 2004
HK$’000 HK$’000
At 1 January 37,740 35,007

Transfer from leasehold land and buildings
(notes 16 and 17(a)) 5,790 —
Transfer to leasehold land and buildings
(notes 16 and 17(a)) (11,150) —
Fair value gains (note 5) 8,780 4,053
Disposals — (1,320)
At 31 December 41,160 37,740
Investment properties were revalued at 31 December 2005 on the basis of their open
market values by Colliers International (Hong Kong) Limited, a member of the Hong
Kong Institute of Surveyors.
The Group’s interests in investment properties at their net book values are analysed as
follows:
2005 2004
HK$’000 HK$’000
In Hong Kong, held on:

Leases of over 50 years 8,230 6,270
Leases of over 50 years 590 510
41,160 37,740
At 31 December 2005, certain investment properties with a total net book value of
approximately HK$21,430,000 (2004 : HK$17,190,000) were pledged as security for the
Group’s bank borrowings (see note 29).

31 DECEMBER 2005
18. INVESTMENT PROPERTIES (continued)
(b)
Company
2005 2004
HK$’000 HK$’000
At 1 January 9,950 10,010

Fair value gains/(losses) 410 (60)
At 31 December 10,360 9,950
The Company’s interest in investment properties at their net book values are analysed as
follows:
2005 2004
HK$’000 HK$’000

Leases of over 50 years 590 510
10,360 9,950
19. INVESTMENTS IN SUBSIDIARIES
Company
2005 2004
HK$’000 HK$’000
Investments at cost
— unlisted shares 1,974,251 836,578
— provision for impairment losses (159,993) (89,263)
1,814,258 747,315
Amounts due from subsidiaries — 625,141
1,814,258 1,372,456
Particulars of principal consolidated subsidiaries are set out in note 38 to the financial
statements.
72
31 DECEMBER 2005
20. INTERESTS IN JOINTLY CONTROLLED ENTITIES
(a) Interest in a jointly controlled entity
Group
2005 2004
HK$’000 HK$’000
Share of net assets 5,339,947 4,239,959

Capitalisation of interest — 10,017
5,339,947 4,249,976
Particulars of a jointly controlled entity are as follows:
Place of
incorporation/ Effective
Name establishment Principal activities interest held
Guangzhou Honda PRC Manufacturing and 50%

Automobile Co. Ltd. assembly of motor
(‘‘Guangzhou Honda’’) vehicles in the PRC
This is a Sino-foreign equity joint-venture in which 50% (2004 : 50%) of the equity
capital, voting power and profit sharing is held by a 100% (2004 : 95%) owned subsidiary
of the Company. The Group’s investment cost in this company is HK$514,333,000 (2004 :
HK$514,333,000). The Group has no unilateral control over the joint venture company.
The joint venture period is 30 years from May 1998.

31 DECEMBER 2005
20. INTERESTS IN JOINTLY CONTROLLED ENTITIES (continued)
(a) Interest in a jointly controlled entity (continued)
The following amounts represent the Group’s 50% (2004 : 47.5%) share of assets and
liabilities, income and expenses of the jointly controlled entity:
2005 2004
HK$’000 HK$’000
Assets:
Property, plant and equipment 2,029,928 1,564,309
Land use rights 126,962 108,753
Intangible assets 1 230,429 216,177
Current assets 5,605,088 4,808,623
7,992,407 6,697,862
----------- -----------
Liabilities:
Non-current liabilities (961) —
Current liabilities (2,648,532) (2,455,191)
(2,649,493) (2,455,191)
----------- -----------
Minority interests (2,967) (2,712)
5,339,947 4,239,959
Income 16,059,400 13,935,629

Expenses (14,158,957) (11,858,309)
Profit for the year 1,900,443 2,077,320

1
Included in this balance is a goodwill of approximately HK$144,538,000 (2004 : HK$134,203,000) arising
from the acquisition of motor vehicle manufacturing business and a production plant in Guangzhou by the
jointly controlled entity.
Capital commitments
At 31 December 2005, the Group’s share of capital commitments in respect of

construction and purchase of property, plant and equipment of the jointly controlled
entity itself was as follows:
2005 2004
HK$’000 HK$’000
Authorised but not contracted for 247,896 —
Contracted but not provided for 1,192,919 —
74
31 DECEMBER 2005
20. INTERESTS IN JOINTLY CONTROLLED ENTITIES (continued)
(b) Interests in other jointly controlled entities
Group
2005
HK$’000
Share of net assets 319,542

-----------
Intangible assets
— Technology 193,359
— Goodwill (note 15) 208,467
-----------
401,826
-----------
721,368
Particulars of the principal jointly controlled entity are as follows:
Place of
incorporation/ Effective
Name establishment Principal activities interest held
Guangzhou Automobile PRC Investment holding in 49%

Group Component Co., entities engaged in
Limited (‘‘Guangzhou manufacturing and
Component’’) assembly of parts and
components for
motor vehicles in the
PRC
This is a Sino-foreign equity joint-venture in which 49% of the equity capital is held by a
100% owned subsidiary of the Company. The Group’s investment cost in this company is
HK$710,000,000 (2004 : Nil). The Group has no unilateral control over the joint venture
company. The joint venture period is 40 years from September 2005.

31 DECEMBER 2005
21. INTERESTS IN ASSOCIATES
Group
2005 2004
HK$’000 HK$’000
At 1 January 43,762 39,678

Share of results 13,137 6,123
Dividend paid (5,324) (2,074)
Exchange difference 276 35
At 31 December 51,851 43,762
22. INTERESTS IN NON-CONSOLIDATED SUBSIDIARIES
Group
2005 2004
HK$’000 HK$’000
At 1 January 2,991 2,890

Share of results (966) 93
Exchange difference 80 8
At 31 December 2,105 2,991
23. INVESTMENT SECURITIES
Group Company
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
Club debentures, at cost — 1,075 — 1,075

Unlisted shares — 338 — —
Less: provision for impairment loss
— club debentures — (675) — (675)
— unlisted shares — (150) — —
— 588 — 400
76
31 DECEMBER 2005
24. INVENTORIES
Group
2005 2004
HK$’000 HK$’000
Raw materials 22,660 53,986

Work in progress 8,602 31,861
Finished goods 60,390 73,206
Less: provision (2,942) (17,863)
88,710 141,190
The cost of inventories recognised as expense and included in cost of sales amounted to
HK$722,493,000 (2004 : HK$870,066,000).
25. TRADE AND OTHER RECEIVABLES
Group Company
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
Due from subsidiaries (note (a)) — — 2,243,046 550,717

Due from immediate holding
company (note (a)) 5 56 — 54
Due from a jointly controlled entity
(note (a)) 7,071 5,046 — —
Trade receivables (note (b)) 58,336 157,587 — —
Bills receivable (note (c)) — 8,962 — —
Other receivables, prepayments
and deposits 31,222 33,652 4,510 4,760
96,634 205,303 2,247,556 555,531
(a) The balances are unsecured, interest-free and repayable on demand.
(b) The Group allows its trade customers an average credit period of 90 days.
(c) Bills receivable have maturity dates between 3 to 6 months.
The carrying amounts of trade and other receivables approximate their fair values.

31 DECEMBER 2005
25. TRADE AND OTHER RECEIVABLES (continued)
At 31 December 2005, the ageing analysis of the trade receivables was as follows:
Group
2005 2004
HK$’000 HK$’000
Within 3 months 45,893 94,815

4–6 months 6,593 46,404
7–12 months 177 16,010
Over 12 months 5,673 358
58,336 157,587
The ageing analysis of the trade receivables included in non-current assets classified as held for
sale was as follows:
2005
HK$’000
Within 3 months 5,864

4–6 months 8,217
7–12 months 2,258
16,339
Trade and other receivables are denominated in the following currencies:
Group Company
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
Hong Kong dollar 57,259 39,650 690,622 4,760

Renminbi 37,869 164,093 1,556,934 550,771
Others 1,506 1,560 — —
96,634 205,303 2,247,556 555,531
78
31 DECEMBER 2005
26. CASH AND BANK BALANCES
Group Company
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
Cash at bank and in hand 225,970 388,315 9,706 12,340

Short-term bank deposits 1,437,227 2,206,351 183,528 1,665,096
1,663,197 2,594,666 193,234 1,677,436
Cash and bank balances are denominated in the following currencies:
Group Company
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
Hong Kong dollar 29,682 298,649 8,181 207,789

US dollar 185,079 1,469,118 184,342 1,466,480
Renminbi (note (c)) 1,446,884 825,289 — 2,678
Others 1,552 1,610 711 489
1,663,197 2,594,666 193,234 1,677,436
(a) At 31 December 2005, bank balances of the Group totalling HK$30,684,000 (2004 :
HK$57,671,000) were pledged as collateral for the Group’s bank borrowing facilities
(note 29).
(b) The weighted average effective interest rate on short-term bank deposits was 2.11%
(2004 : 1.88%); these deposits have an average maturity of 75 days (2004 : 43 days).
(c) Renminbi is not a freely convertible currency.

31 DECEMBER 2005
27. SHARE CAPITAL
Ordinary shares of HK$0.1 each

No. of shares HK$’000
Authorised:
At 1 January 2004 4,000,000,000 400,000

Increase in authorised share capital (note (a)) 6,000,000,000 600,000
At 31 December 2004 and 31 December 2005 10,000,000,000 1,000,000
Issued and fully paid:

At 1 January 2004 3,508,534,767 350,853
Bonus issue (note (b)) 3,534,317,767 353,432
Exercise of options (note (c)) 369,828,000 36,983
At 31 December 2004 7,412,680,534 741,268

Purchase of partial interest in a subsidiary (note (d)) 73,800,000 7,380
Exercise of options (note (c)) 30,878,000 3,088
At 31 December 2005 7,517,358,534 751,736
(a) By an ordinary resolution passed on 10 May 2004, the authorised share capital of the
Company increased from HK$400,000,000 to HK$1,000,000,000 by the creation of
6,000,000,000 ordinary shares of HK$0.1 each.
(b) In May 2004, a bonus issue of one bonus share, credited as fully paid, for every one share
was made by way of capitalisation of HK$353,432,000 standing to the credit of the share
premium account of the Company. These bonus shares rank pari passu in all respects with
the existing ordinary shares.
(c) On 6 June 2002, a share option scheme was approved at an Extraordinary General
Meeting of the Company under which the directors may, at their discretion, invite any
participant who has rendered services or will render services to the Group to take up
options. Movements in the number of share options outstanding and their related weighted
average exercise prices are as follows:
2005 2004
Average Average
exercise exercise
price in price in
HK$ per Options HK$ per Options
share 1 (’000) share 1 (’000)
At 1 January 1.82 79,202 1.45 237,406

Additional options due to bonus
issue of shares (note (b)) — — 1.46 211,624
Exercised 1.34 (30,878) 1.38 (369,828)
At 31 December 2.12 48,324 1.82 79,202
80
31 DECEMBER 2005
27. SHARE CAPITAL (continued)
All of the above outstanding options were exercisable. Options exercised in 2005 resulted
in 30,878,000 shares (2004 : 369,828,000 shares) being issued at HK$1.34 each (2004 :
HK$1.38 each). The related weighted average share price at the time of exercise was
HK$2.87 (2004 : HK$3.04) per share.
Share options outstanding at the end of the year have the following expiry dates and
exercise prices:
Exercise price in Options (’000)

Expiry date HK$ per share 2005 2004
8 May 2006 2.65 (1.325 1 ) 1,628 31,434

1 July 2006 3.65 (1.825 1 ) — 1,072
5 June 2012 4.305 (2.1525 1 ) 46,696 46,696
48,324 79,202
1
Adjusted for one for one bonus issue of shares in May 2004.
(d) The Group issued 73,800,000 shares on 7 February 2005 to the shareholders of City
Achieve Investments Limited, a fellow subsidiary of the Company, as part of the purchase
consideration of HK$996,215,000 for the remaining 5% equity interest in Guangzhou
Denway Enterprises Development Company Limited. The ordinary shares issued have the
same rights as the other shares in issue. The fair value of the shares issued at the date of
acquisition amounted to HK$206,861,000 (HK$2.803 per share).

31 DECEMBER 2005
28. RESERVES
Group Company
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
Share premium
At 1 January 2,263,638 2,109,246 2,263,638 2,109,246

Issue of shares 237,843 507,824 237,843 507,824
Bonus issue — (353,432) — (353,432)
At 31 December 2,501,481 2,263,638 2,501,481 2,263,638

----------- ----------- ----------- -----------
Exchange reserve
At 1 January (33,456) (28,533) — —

Exchange difference on translation of
financial statements of foreign
subsidiaries, jointly controlled
entities and associates 111,147 2,805 — —
Transfer to income statement upon
disposal and liquidation of
subsidiaries — (45) — —
Transfer to income statement upon
disposal of an associate — (7,683) — —
At 31 December 77,691 (33,456) — —

----------- ----------- ----------- -----------
Retained earnings (note (a))
At 1 January 3,122,681 2,021,159 601,714 588,525

Profit for the year 1,905,529 2,062,447 995,631 801,257
2004 final dividend/2003 final and
special dividends paid (300,427) (494,804) (300,427) (494,804)
Interim dividend paid (300,694) (293,264) (300,694) (293,264)
Transfer to capital reserve (165,687) (190,673) — —
Transfer from capital reserve upon
subsidiaries — 7,920 — —
Transfer from capital reserve upon
disposal of an associate — 9,896 —
At 31 December 4,261,402 3,122,681 996,224 601,714

----------- ----------- ----------- -----------
82
31 DECEMBER 2005
28. RESERVES (continued)
Group Company
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
Capital reserve (note (b))
At 1 January 876,236 703,379 — —

Exchange difference on translation of
financial statements of foreign
subsidiaries 1,670 — — —
Transfer to retained earnings upon
subsidiaries — (7,920) — —
Transfer to retained earnings upon
disposal of an associate — (9,896) — —
Transfer from income statement 165,687 190,673 — —
subsidiary 34,293 — — —
At 31 December 1,077,886 876,236 — —

----------- ----------- ----------- -----------
Total reserves 7,918,460 6,229,099 3,497,705 2,865,352
(a) Retained earnings/(accumulated losses)
Group
2005 2004
HK$’000 HK$’000
Company and subsidiaries 903,358 373,306

Other jointly controlled entities (22,625) —
Non-consolidated subsidiaries and associates (16,778) (23,624)
4,261,402 3,122,681
(b) The reserve represents transfers made to reserve funds and enterprise development funds
set up by certain subsidiaries, jointly controlled entities and associates, which are foreign
investment enterprises in the PRC, pursuant to regulations in the PRC. According to the
regulations, reserve funds may be used for making up losses, if any, and increasing capital
while enterprise development funds may be used for increasing capital.

31 DECEMBER 2005
29. BORROWINGS
Group
2005 2004
HK$’000 HK$’000
Non-current
Long-term bank loans 5,563 8,671
----------- -----------
Current
Trust receipt loans 10,095 23,654
Current portion of long-term bank loans 3,591 61,954
13,686 85,608
----------- -----------
Total borrowings 19,249 94,279
The maturity of bank borrowings is as follows:
Group
2005 2004
HK$’000 HK$’000
Within one year 13,686 85,608

In the second year 2,222 6,751
In the third to fifth year inclusive 3,085 1,403
After the fifth year 256 517
19,249 94,279
(a) Certain bank borrowings of the Group totalling HK$12,460,000 (2004 : HK$10,640,000)
are secured by certain leasehold land, property, plant and equipment and investment
properties (notes 16, 17 and 18) of the Group.
(b) The weighted average effective interest rates at the balance sheet date were as follows:
2005 2004
HK$ HK$ RMB
Bank loans 5.563% 4.539% 5.356%

Trust receipt loans 7.750% 5.000% —
(c) The carrying amounts of all borrowings approximate their fair values.
84
31 DECEMBER 2005
29. BORROWINGS (continued)
(d) The carrying amounts of the borrowings are denominated in the following currencies:
Group
2005 2004
HK$’000 HK$’000
Hong Kong dollar 19,249 37,930

Renminbi — 56,349
19,249 94,279
(e) At 31 December 2005, the Group had total banking facilities amounted to
HK$163,472,000 (2004 : HK$396,993,000), of which HK$74,235,000 (2004 :
HK$266,175,000) was utilised at that date.
30. DEFERRED TAXATION
Deferred taxation is calculated in full on temporary differences under the liability method using
the applicable income tax rate.
Deferred taxation at 31 December 2004 and 2005 represents deferred tax liabilities arising from
Hong Kong profits tax provided in respect of accelerated depreciation allowances.
The movement on the deferred tax liabilities account is as follows:
Group
2005 2004
HK$’000 HK$’000
At 1 January 926 975

Charged/(credited) to income statement (note 9) 201 (49)
At 31 December 1,127 926
Deferred income tax assets are only recognised for tax losses carried forward to the extent that
realisation of the related tax benefits through the future taxable profits is probable. Total
potential deferred taxation asset not provided for in the financial statements is as follows:
2005 2004
HK$’000 HK$’000
Tax losses 57,752 25,755

31 DECEMBER 2005
31. TRADE AND OTHER PAYABLES
Group Company
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
Due to ultimate holding company

(note (a)) — 10,119 — —
Due to immediate holding company
(note (b)) 8,123 2,194 548 —
Due to fellow subsidiaries (note (b)) — 38 — —
Due to an associate (note (b)) 1,448 — — —
Due to a minority shareholder of a
subsidiary (note (a)) 443 443 — —
Trade payables 45,301 102,337 — —
Bills payables (note (c)) 81,705 171,896 — —
Other payables, deposits received and
accrued charges 38,704 66,163 9,303 3,617
175,724 353,190 9,851 3,617
(a) The balance is unsecured, bears interest at commercial rate and repayable on demand
(b) The balances are unsecured, interest-free and repayable on demand.
(c) Bills payables are due for payments within 6 months.
At 31 December 2005, the ageing analysis of the trade payables was as follows:
Group
2005 2004
HK$’000 HK$’000
Within 3 months 44,760 84,722

4–6 months 402 6,669
7–12 months 66 1,958
Over 12 months 73 8,988
45,301 102,337
The ageing analysis of the trade payables included in liabilities directly associated with non-
current assets classified as held for sale was as follows:
2005
HK$’000
Within 3 months 27,506

4–6 months 1,618
7–12 months 1,130
Over 12 months 1,486
31,740
86
31 DECEMBER 2005
31. TRADE AND OTHER PAYABLES (continued)
Trade and other payables are denominated in the following currencies:
Group Company
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
Hong Kong dollar 53,683 43,663 9,303 3,617

Renminbi 120,553 307,510 548 —
Others 1,488 2,017 — —
175,724 353,190 9,851 3,617
32. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of profit before taxation to net cash generated from/(used in)
operations:
2005 2004
HK$’000 HK$’000
Profit before taxation 1,980,924 2,081,707

Interest income (33,864) (25,580)
Interest expense 1,418 1,427
A jointly controlled entity (1,900,443) (2,077,320)
Other jointly controlled entities (16,232) —
Associates (13,137) (6,123)
Non-consolidated subsidiaries 966 (93)
Fair value gains on investment properties (8,780) (4,053)
Amortisation of goodwill — 1,533
Amortisation of prepaid leasehold land and land use right 588 599
Depreciation of property, plant and equipment 10,618 10,882
Loss on disposal of property, plant and equipment 622 1,816
Write-back of provision for impairment loss (12,215) (1,750)
Loss on disposal of subsidiaries — 762
Gain on liquidation of subsidiaries — (13,400)
Gain on disposal of an associate — (9,549)
(Write-back of provision)/provision for inventory
obsolescence (480) 2,194
(Write-back of provision)/provision for doubtful debts (27) 807
Operating profit/(loss) before working capital changes 9,958 (36,141)

Decrease in inventories 34,010 9,613
Decrease in trade and other receivables 84,946 40,232
Decrease in trade and other payables (35,744) (43,890)
Net cash generated from/(used in) operations 93,170 (30,186)

31 DECEMBER 2005
32. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (continued)
(b) Analysis of changes in financing during the year
Share
capital
(including
share Minority
premium) Borrowings interests Total
HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2004 2,460,099 71,552 171,228 2,702,879

share options 544,807 — — 544,807
Share of losses by minority
interests — — (3,037) (3,037)
Minority interests in share of
exchange reserve — — 144 144
Cash inflow from financing
— continuing operations — 3,898 — 3,898
— discontinued operations — 18,829 — 18,829
Dividends paid to minority
shareholders — — (8,464) (8,464)
Disposal of subsidiaries — — (1,811) (1,811)
Liquidation of subsidiaries — — (496) (496)
At 31 December 2004 3,004,906 94,279 157,564 3,256,749

subsidiary 206,861 — (56,456) 150,405
share options 41,450 — — 41,450
Share of losses by minority
interests — — (45,281) (45,281)
Minority interests in share of
exchange reserve — — (1,141) (1,141)
Cash used in financing
— continuing operations — (18,681) — (18,681)
— discontinued operations — (3,500) — (3,500)
Dividends paid to minority
shareholders — — (26,231) (26,231)
Dividends payable to minority
shareholders — — 56,007 56,007
Transfer to liabilities directly
associated with non-current
assets classified as held for
sale — (52,849) — (52,849)
At 31 December 2005 3,253,217 19,249 84,462 3,356,928
88
31 DECEMBER 2005
32. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (continued)
(c) Disposal of subsidiaries
2005 2004
HK$’000 HK$’000
Net assets disposed of:
Property, plant and equipment — 1,382

Trade and other receivables — 5,173
Cash and bank balances — 9,155
Trade and other payables — (2,665)
Minority interests — (1,811)
Exchange reserve — (45)
— 11,189
Loss on disposal of subsidiaries — (762)
Cash consideration received — 10,427
Analysis of net cash and cash equivalents generated in respect of the disposal of
subsidiaries
2005 2004
HK$’000 HK$’000
Cash consideration received — 10,427

Cash and bank balances disposed of — (9,155)
Net cash generated — 1,272
(d) Liquidation of subsidiaries
2005 2004
HK$’000 HK$’000
Net liabilities disposed of:

Property, plant and equipment — 1,551
Trade and other receivables — 2,108
Cash and bank balances — 7,932
Trade and other payables — (22,088)
Minority interests — (496)
— (10,993)
Gain on liquidation of subsidiaries — 13,400
Proceeds receivable on liquidation — 2,407
Analysis of net cash and cash equivalents used in respect of the liquidation of
subsidiaries.
2005 2004
HK$’000 HK$’000
Cash and bank balances disposed of — (7,932)

31 DECEMBER 2005
33. COMMITMENTS
(a) Commitments under operating leases
At 31 December 2005, the Group had future aggregate minimum lease payments under
non-cancellable operating leases in respect of land and buildings as follows:
Group
2005 2004
HK$’000 HK$’000
Not later than one year 9,197 9,632

Later than one year and not later than five years 27,699 29,858
Later than five years 35,656 16,811
72,552 56,301
The Company had no operating lease commitments as at 31 December 2004 and 2005.
(b) Capital commitments
At 31 December 2005, the Group had capital commitments in respect of purchase of

property, plant and equipment as follows:
Group
2005 2004
HK$’000 HK$’000
Authorised but not provided for 1,546 8,756
Contracted but not provided for 938 —
The Company had no capital commitments as at 31 December 2004 and 2005.
34. CONTINGENT LIABILITIES
Group
2005 2004
HK$’000 HK$’000
Continuing operations:
Guarantees for bank loans borrowed by an associate 14,125 13,805
Discontinued operations:
Guarantees for bank loans borrowed by independent third parties 134,099 62,173
The Company had no contingent liabilities as at 31 December 2004 and 2005.
90
31 DECEMBER 2005
35. RELATED PARTY TRANSACTIONS
(a) Related parties
The Company’s single largest shareholder is China Lounge Investments Limited, which
owns 37.91% of the Company’s shares. The Company’s directors regard Guangzhou
Automobile Industry Group Company Limited (incorporated in the PRC) to be the
ultimate holding company.
Related parties are those parties which have the ability, directly or indirectly, to control
the other party or exercise significant influence over the other party in making financial
and operating decisions. Parties are also considered to be related if they are subject to
common control or common significant influence. Save as disclosed elsewhere in the
financial statements, the table set forth below summarised the names of significant parties
and nature of relationship with the Company as at 31 December 2005 :
Significant related party Relationship with the Company
Guangzhou Automobile Group Commercial Fellow subsidiary

Trading Co. Ltd.
Guangzhou Guangyue Asset Management Ltd. Fellow subsidiary
Shaoguan Denway Motors Trading Co. Ltd. Associate
(b) Transactions with related parties
Save as disclosed elsewhere in these financial statements, the following is a summary of

significant transactions with related parties during the year:
Group
2005 2004
HK$’000 HK$’000
Sales to a jointly controlled entity 1,386 1,932

Sales to associates 8,100 —
Purchases from a jointly controlled entity 324,092 358,498
Purchases from fellow subsidiaries — 2,348
Purchase of interests in jointly controlled entities from a
fellow subsidiary 710,000 —
Disposal of a partial interest in a non-consolidated
subsidiary to a fellow subsidiary — 822
Rental expenses paid to a fellow subsidiary — 263
Administration and management fees for retired employees
paid to a fellow subsidiary 408 486

31 DECEMBER 2005
35. RELATED PARTY TRANSACTIONS (continued)
(c) Balances with related parties
Save as disclosed elsewhere in the financial statements, there are no other significant
balances with related parties.
(d) Key management compensation
Group
2005 2004
HK$’000 HK$’000
Salaries and other short-term employee benefits 4,884 4,714

Retirement benefits 48 44
4,932 4,758
36. EVENTS AFTER THE BALANCE SHEET DATE
On 16 February 2006, the Company entered into an agreement with China Lounge Investments
Limited, the Company’s immediate controlling shareholder, pursuant to which the Company has
agreed to transfer the remaining 50% equity interest in Guangzhou Denway Bus to China
Lounge Investments Limited for cash consideration of HK$18,877,000. The transaction was
approved by independent shareholders in the extraordinary general meeting held on 23 March
2006. Guangzhou Denway Bus ceased to be a consolidated subsidiary of the Company after the
above transaction.
37. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the board of directors on 19 April 2006.
92
31 DECEMBER 2005
38. SUBSIDIARIES
The following includes the principal consolidated subsidiaries of the Company which, in the
opinion of the directors, were significant to the results for the year ended 31 December 2005 or
formed a substantial portion of the net assets of the Group at 31 December 2005 :
Place of Registered Effective

incorporation/ capital/issued interest
Name establishment Principal activities share capital held
Interest held directly:
Guangzhou Denway PRC Investment and US$87,272,700 100%

Enterprises management
Development
Company Limited
(notes (a) and (c))
Guangzhou Denway PRC Assembly and sales US$29,900,000 50%

Bus Company of coaches and
Limited (notes (a), sales of other
(b), (c) and (e)) vehicles
Easeco Enterprises Hong Kong Property holding HK$2 100%

Limited
Gardex Development Hong Kong Property holding HK$2 100%

Limited
National Grade Hong Kong Property holding HK$2 100%

Limited
Interest held indirectly:
Guangzhou Auto PRC Investment and RMB468,200,000 100%

Group Corporation management
(notes (a) and (c))
Guangzhou PRC Wholesale and retail RMB20,000,000 95%

Automotive of various types of
Industry Trading motor vehicles
Company Limited
(notes (a) and (c))
Guangzhou Honda PRC Trading of motor RMB18,000,000 51%

Automobile No. 1 sedan
Sales Company
Limited (notes (a)
and (c))

31 DECEMBER 2005
38. SUBSIDIARIES (continued)
Place of Registered Effective

incorporation/ capital/issued interest
Name establishment Principal activities share capital held
Interest held indirectly: (continued)
Promowide Hong Kong Investment holding HK$42,394,938 63%

Technology and management
Limited
Arkon Industrial Hong Kong Investment holding HK$10,000,000 61%

Limited and management
Art Sea Metal Works Hong Kong Manufacture of metal HK$400,000 63%
Limited (note (d)) parts
Uni-Art Precise Hong Kong Manufacture of audio HK$400,000 63%

Products Limited equipment
(note (d))
Classic Tech Hong Kong Property holding HK$35,010,000 63%

Development
Limited
Baker and Priem Bull Australia Design and AUD215,710 51%

Bars Pty Limited manufacture of
(note (c)) motor vehicles
accessories
Baker and Priem Australia Sales of motor AUD2 51%

Sales Pty Limited vehicle accessories
(note (c))
Notes:
(a) These are Sino-foreign equity joint ventures with a joint-venture period of 30 years from January 1993.
(b) The composition of the board of directors of this entity is controlled by the Company.
(c) Statutory financial statements of these subsidiaries were not audited by PricewaterhouseCoopers.
(d) Apart from these subsidiaries which mainly operate in the PRC, all the other subsidiaries above mainly operate
in their respective places of incorporation/establishment.
(e) Refer to notes 6 and 36.
94
Investment Properties
Particulars of investment properties held by the Group at 31 December 2005 are as follows:
Gross area
Location (sq. ft.) Type Tenure
Rooms 807 and 808 2,304 Commercial Medium lease

8th Floor, Citicorp Centre,
No. 18 Whitefield Road,
Causeway Bay, Hong Kong
Unit 5 on 4th Floor, Eastern Building, 1,039 Commercial Medium lease

No. 305 Huan Shi Road Central,
Guangzhou,
People’s Republic of China
Offices 1, 2, 3, 4 and 5 on 23rd Floor, 2,228 Commercial Medium/long lease (The

Shun Feng International Centre, property is held partly
No. 182 Queen’s Road East, under medium lease and
Wanchai, Hong Kong partly under long lease)
Unit 6 on 23rd Floor, 1,474 Commercial Long lease

118 Connaught Road West,
Sheung Wan, Hong Kong
Duplex Unit C on the 8th and 9th 1,563 Residential and Medium lease
Floors of Block 16, Classical Gardens, car park
(with one level of basement car park)
No. 10 Ma Wo Road,
Tai Po, New Territories
Car Park No. 592A on Basement — Car park Medium lease

(Designated as Basement 2 in
Occupation Permit), Laguna City,
Kwun Tong, Kowloon
Flat E on 10th Floor of Tower 1 749 Commercial Medium lease

(Sau Ming Court), Yue Xiu Plaza,
No. 9 Ning Yuen Street,
Sang Po Kong, Kowloon
Unit A on 15th Floor, 658 Commercial Medium lease

Eu Yan Sang Tower,
Nos 11–15 Chatham Road South,
Tsim Sha Tsui, Kowloon
Office 08 on 7th Floor, 765 Commercial Medium lease

Empress Plaza,
Nos 17–19 Chatham Road South,
Tsim Sha Tsui, Kowloon

Investment Properties
Gross area
Location (sq. ft.) Type Tenure
Unit 2 on 7th Floor, Jingshan 808 Commercial Medium lease

Burlingame Commercial Centre,
Degshikou Street,
Dong Cheng, Beijing,
Unit 4, 16th Floor, Block A, 977 Commercial Medium lease

Dide Building, 188 Dide Road,
Guangzhou,
Flat D, 11th Floor, Block 2, 567 Residential Medium lease

Finery Park, 7 Yuk Nga Lane,
Tseung Kwan O, Kowloon
Unit 206, 56 Yong Tai Road, 1,276 Commercial Medium lease

Tienhe District,
Guangzhou,
Ground Floor, 54 Yong Tai Road, 15,488 Commercial Medium lease

Tienhe District,
Guangzhou,
Carpark C5, 87 Hung To Road, — Carpark Medium lease

Yue Xiu Industrial Building,
Kwun Tong, Kowloon
96

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Contents

7 Report of the Directors

18 Corporate Governance Report

29 Consolidated Income Statement

32 Consolidated Statement of Changes in Equity

34 Consolidated Cash Flow Statement

35 Notes to the Consolidated Financial Statements

BOARD OF DIRECTORS LEGAL ADVISERS

Executive Directors Woo, Kwan, Lee & Lo

ZHANG Fangyou (Chairman) SHARE REGISTRAR

Independent Non-Executive Directors LISTING INFORMATION

CHEUNG Doi Shu The Stock Exchange of Hong Kong Limited

Room 801, Citicorp Centre

Mr. LEUNG Chong Shun

Bank of China (Hong Kong) Limited

Chairman — Mr. Zhang Fangyou

DENWAY MOTORS LIMITED 3

DENWAY MOTORS LIMITED 5

EMPLOYEES AND REMUNERATION POLICY

Hong Kong, 19 April 2006

PRINCIPAL ACTIVITIES AND SEGMENT INFORMATION

RESULTS AND APPROPRIATIONS

CLOSURE OF REGISTER OF MEMBERS

PROPERTY, PLANT AND EQUIPMENT

SHARE CAPITAL AND OPTIONS

DENWAY MOTORS LIMITED 7

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

BANK LOANS, OVERDRAFTS AND OTHER BORROWINGS

FIVE-YEAR FINANCIAL SUMMARY

2005 2004 2003 2002 2001

Profit attributable to shareholders 1,905,529 2,062,447 1,686,709 1,091,913 724,242

Total assets 9,155,311 7,584,109 5,829,890 3,940,259 2,976,849

Shareholders’ funds 8,670,196 6,970,367 5,156,104 3,496,062 2,480,435

Mr. ZHANG Fangyou

* Independent non-executive directors

DIRECTORS AND SENIOR MANAGEMENT’S PROFILES

DENWAY MOTORS LIMITED 9

Independent Non-Executive Directors

DIRECTORS’ SERVICE CONTRACTS

DIRECTORS’ INTEREST IN CONTRACTS

SHARE OPTION SCHEME

DENWAY MOTORS LIMITED 11

Number of share options

ZHANG Fangyou 8,528,000 — 8,528,000 (3)

LU Zhifeng 7,684,000 — 7,684,000 (3)

YANG Dadong 5,664,000 — 5,664,000 (3)

ZENG Qinghong 5,664,000 — 5,664,000 (3)

ZHANG Baoqing 6,488,000 — 6,488,000 (3)

DING Baoshan 5,664,000 — 5,664,000 (3)

LEE Ka Lun 1,340,000 — 1,340,000 (3)

Aggregate total of employees 480,000 480,000 — (1)

Aggregate total of other participants 30,954,000 29,326,000 1,628,000 (1)

1,072,000 1,072,000 — (2)

5,664,000 — 5,664,000 (3)

DIRECTORS’ INTEREST IN SHARES

(a) Long positions in shares of the Company

Number of shares Percentage of

CHEUNG Doi Shu 3,000,000 0.04%

LEE Ka Lun 100,000 0.0013%

Number of underlying shares

ZHANG Fangyou 8,528,000 0.11%

DENWAY MOTORS LIMITED 13

DIRECTORS’ INTEREST IN COMPETING BUSINESS