Jiangling Motors Corporation, Ltd.
2018 Annual Report
2019-03
Chapter I Important Notes, Contents and Abbreviations
Important NoteThe Board of Directors and its members, the Supervisory Board and its members,and the senior executives are jointly and severally liable for the truthfulness,accuracy and completeness of the information disclosed in the report and confirmthat the information disclosed herein does not contain any false statement,misrepresentation or major omission.
Chairman Qiu Tiangao, CFO Li Weihua and Chief of Finance Department, XieWanzhao, confirm that the Financial Statements in this Annual Report are truthfuland complete.
All Directors were present at the Board meeting to review this Annual Report.
The prospective description regarding future business plan and developmentstrategy in this report does not constitute virtual commitment. The investors shallpay attention to the risk.
All financial data in this report are prepared under International FinancialReporting Standards (‘IFRS’) unless otherwise specified.
The Annual Report is prepared in Chinese and English. In case of discrepancy,the Chinese version will prevail.
The year 2018 profit distribution proposal approved by the Board of Directors is asfollows:
A cash dividend of RMB 0.40 (including tax) will be distributed for every 10 sharesheld based on the total share capital of 863,214,000 shares, and there is no stockdividend. The Board decided not to convert capital reserve to share capital thistime.
Contents
Chapter I Important Notes, Contents and Abbreviations ...... 1
Chapter II Brief Introduction and Operating Highlight ...... 3
Chapter III Operating Overview ...... 5
Chapter IV Management Discussion and Analysis ...... 6
Chapter V Major Events ...... 16
Chapter VI Share Capital Changes & Shareholders ...... 26
Chapter VII Preferred Shares ...... 30Chapter VIII Directors, Supervisors, Senior Management and Employees....... 31Chapter IX Corporate Governance Structure ...... 41
Chapter X Corporate Bond ...... 48
Chapter XI Financial Statements ...... 48
Chapter XII Catalog on Documents for Reference ...... 128
Abbreviations:
JMC or the Company Jiangling Motors Corporation, Ltd.JMH Jiangling Motor Holdings Co., Ltd.Ford Ford Motor CompanyCSRC China Securities Regulatory CommissionJMCG Jiangling Motors Group Co., Ltd.JMCH JMC Heavy Duty Vehicle Co., Ltd.EVP Executive Vice PresidentCFO Chief Financial OfficerVP Vice President
Chapter II Brief Introduction and Operating Highlight
1. Company’s Information
| Share’s name | Jiangling Motors, Jiangling B | Share’s Code | 000550, 200550 |
| Place of listing | Shenzhen Stock Exchange | ||
| Company’s Chinese name | 江铃汽车股份有限公司 | ||
| English name | Jiangling Motors Corporation, Ltd. | ||
| Abbreviation | JMC | ||
| Company legal representative | Qiu Tiangao | ||
| Registered Address | No. 509, Northern Yingbin Avenue, Nanchang City, Jiangxi Province, P.R.C | ||
| Postal Code of Registered Address | 330001 | ||
| Headquarters Address | No. 509, Northern Yingbin Avenue, Nanchang City, Jiangxi Province, P.R.C | ||
| Postal Code of Headquarters Address | 330001 | ||
| Website | http://www.jmc.com.cn | ||
| relations@jmc.com.cn | |||
2. Contact Person and Method
| Board Secretary | Securities Affairs Representative | |
| Name | Wan Hong | Quan Shi |
| Address | No. 509, Northern Yingbin Avenue, Nanchang City, Jiangxi Province, P.R.C | No. 509, Northern Yingbin Avenue, Nanchang City, Jiangxi Province, P.R.C |
| Tel | 86-791-85266178 | 86-791-85266178 |
| Fax | 86-791-85232839 | 86-791-85232839 |
| relations@jmc.com.cn | relations@jmc.com.cn |
3. Information Disclosure and Place for Achieving Annual Report
| Newspapers for information disclosure | China Securities, Securities Times, Hong Kong Commercial Daily |
| Website designated by CSRC for publication of JMC’s Annual Report | http://www.cninfo.com.cn |
| Place for Achieving Annual Report | Securities Department, Jiangling Motors Corporation, Ltd. |
4. Changes of Registration
| Organization Code | 913600006124469438 |
| Changes of Controlling Shareholders | On December 1, 1993, JMC A shares were listed on Shenzhen Stock Exchange, while JMCG, the founder-member, was the controlling shareholder of the Company. On September 29, 1995 and November 12, 1998, JMC issued additional 344 million B shares totally, while, after the additional B share issuance, JMCG and Ford were the |
5. Other InformationAccounting Firm Appointed by JMC for Audit
controlling shareholders of the Company. On December 8,2005, the 354.176 million JMC shares held by JMCG, theformer controlling shareholder, were transferred to JMH.Presently, JMH and Ford are the controlling shareholdersof the Company.Name
| Name | PricewaterhouseCoopers Zhong Tian LLP (‘PwC Zhong Tian’) |
| Headquarters address | 11/F, PricewaterhouseCoopers Center Link Square 2,202 Hu Bin Road, Huangpu District Shanghai 200021, PRC |
| Names of Signed Accountants | Lei Fang, Ye Dan |
6. Main accounting data and financial ratios
Unit: RMB’ 000
| 2018 | 2017 | Change (%) | 2016 | |
| Revenue | 28,249,340 | 31,345,747 | -9.88% | 26,633,949 |
| Profit Attributable to the Equity Holders of the Company | 91,833 | 690,938 | -86.71% | 1,318,016 |
| Net Cash Generated From Operating Activities | -101,808 | 674,588 | -115.09% | 4,593,000 |
| Basic Earnings Per Share (RMB) | 0.11 | 0.8 | -86.71% | 1.53 |
| Diluted Earnings Per Share (RMB) | 0.11 | 0.8 | -86.71% | 1.53 |
| Weighted Average Return on Equity Ratio | 0.83% | 5.51% | -4.68% | 10.74% |
| End of Year 2018 | End of Year 2017 | Change (%) | End of Year 2016 | |
| Total Assets | 23,396,529 | 26,383,761 | -11.32% | 24,493,789 |
| Shareholders’ Equity Attributable to the Equity Holders of the Company | 10,384,498 | 12,572,402 | -17.40% | 12,409,236 |
7. Accounting data difference between China GAAP and IFRSI. Differences in net profit and net assets in financial statements between inaccordance with international accounting standards and Chinese accountingstandards□Applicable □√Not Applicable
II. Differences in net profit and net assets in financial statements between inaccordance with overseas accounting standards and Chinese accountingstandards
□Applicable □√Not Applicable
8. Main accounting data quarterly
Unit: RMB’ 000
| Q1 | Q2 | Q3 | Q4 | |
| Revenue | 6,481,073 | 7,806,424 | 5,902,627 | 8,059,216 |
| Profit Attributable to the Equity Holders of the Company | 153,606 | 165,345 | -100,164 | -126,954 |
| Net Cash Generated From Operating Activities | -1,397,337 | 490,519 | -1,382,054 | 2,187,064 |
Chapter III Operating Overview
1. Company’s Core Business during the Reporting Period
JMC’s core business is production and sales of commercial vehicles, SUV andrelated components. JMC’s major products include JMC series light truck, heavytruck, pickup and light bus; Yusheng SUV; Ford-brand light bus, MPV and SUV.The Company also produces and sells engines, castings and other componentsfor sales to domestic and overseas markets.
2. Major Change of Main Assets
I. Major Change of Main Assets
There’s no major change of main assets during the reporting period.
II. Main Overseas Assets□Applicable □√Not Applicable
3. Core Competitiveness Analysis
JMC is a Sino-foreign joint venture auto company with R&D, manufacturing andsales operations. With leading position and advanced technology of commercialvehicles, JMC is China auto industry pioneer providing excellent products andsolutions to smart logistics, which is certificated as a national high-tech enterprise,national innovative pilot enterprise, national enterprise technology centre, nationalindustrial design centre, national intellectual property demonstration enterprisesand national automobile export base; and had been ranked among the top 100most valuable global brands for consecutive years.
On traditional business, with the support from Ford's advanced technology andmanagement experience, JMC's influence over auto industry is improving steadily,making considerable progress both in new product development and technicalequipment. Series of Ford new products such as Ford brand Territory, high-endYuhu MCA，N800 HP, Kaiyun 4D30/Stg. V, classic Yuhu, Kairui EV and heavytruck Weilong HV5 launched further improved JMC’s competence on R&D and
manufacturing. JMC became one of the first vehicle connectivity demonstrationenterprises equipped with Bei Dou Navigation Satellite System (BDS) developedby China. The design paten of tractor JH476 won the China Paten Award ofExcellence; Kairui 800 won the Tiangong Cup Jiangxi Industrial Design GoldAward; the first JMC heavy truck Jiangling Weilong is awarded 2018 China Truckof the Year and The Most Potential Heavy Truck; which fully showed JMC’sleading technology in light commercial vehicle field and self innovation capability.High standard Xiaolan manufacturing site continues to expand modern plants ofvehicle, engine and frame, which will further ensure JMC's product production andquality improvement. With the construction of Fushan new energy base, JMC willdeliver more new energy vehicles in the future which will lay a solid foundation forJMC’s sustainable and healthy growth.
While continuous consolidating the traditional advantages, JMC has beendeveloping new business areas and innovative business models in response tothe new trend of overseas and domestic industries. In terms of new technologyexploration, JMC has been developing hydrogen fuel new energy vehicletechnology based on commercial freight situation; cooperated with the topdomestic autonomous driving company in R&D to carry out innovation underspecific situation with the realization of autonomous driving on mass productionCV for the program target, participated global smart driving competition andexplored ADAS mass production plan and autonomous driving Demo scheme. Interms of new business model, combined with accumulation of new technology,JMC reached strategic partnership with internet city-wide freight platform,domestic new energy transportation service platform and top logistics companies.Comprehensive joint development with mobile communication, freight logistics,CV manufacturing and smart driving to create a new ecological environment withcoordination of vehicle and road. These explorations will lay the foundation forJMC’s transformation into the strategic vision of to be the best partner for smartmobility and logistics solutions.
Chapter IV Management Discussion and Analysis
1. Summary
In 2018, China’s economic growth is slowing, so as its auto market. Total salesvolume was 28.08 million units, decreased 2.76% compared with last year.
During the reporting period, to cope with more severe competition, more stringentregulatory requirement and intensifying cost pressures, the Company focused onquality improvement, new product development, operating cost control andproduction efficiency enhancement. Simultaneously, the Company introducedseries of sales policy to respond the market risk. In 2018, JMC achieved salesvolume of 285,066 units, decreased 8.05% compared with last year, achievedrevenue of RMB 28.25 billion, decreased 9.88% compared with last year,achieved net profit of RMB 92 million, decreased 86.71% compared with last year.It mainly reflects: I. Maintain intensive R&D and exploration expense on newproduct, technology and business to improve product core competitiveness inorder to conform the auto trend of intelligence, netlink, electrification and sharing;II. Marketing expense increased and sales structure changed to compete in the
very challenging market brought by the new entrants of auto industry and pricestrategy of traditional competitors.
2. Core Business Analysis
I. Summary
In 2018, JMC sales volume achieved 285,066 units, decreased 8.05% comparedwith last year, including 107,202 units truck, 72,775 units pickup, 12,591 unitsSUV, 43,516 units Transit CV, 39,796 units light bus and 9,186 units CKD export.
2018 total production volume was 286,808 units, decreased 7.83% compared withlast year, including 108,594 units truck, 72,696 units pickup, 13,859 units SUV,43,768 units Transit CV, 38,705 units light bus and 9,186 units CKD export.
JMC total sales revenue in 2018 was RMB 28.25 billion, decreased 9.88%compared with last year.
II. Revenue and Cost
(a) Composition of Sales Revenue
Unit: RMB
| 2018 FY | 2017 FY | YOY change (%) | |||
| Amount | Proportion (%) | Amount | Proportion (%) | ||
| Revenue | 28,249,339,672 | 100.00% | 31,345,746,762 | 100.00% | -9.88% |
| By Industry | |||||
| Automobile Industry | 28,249,339,672 | 100.00% | 31,345,746,762 | 100.00% | -9.88% |
| By Products | |||||
| Vehicle | 25,178,859,631 | 89.13% | 28,390,845,975 | 90.58% | -11.31% |
| Components | 2,696,240,006 | 9.55% | 2,605,496,777 | 8.31% | 3.48% |
| Automobile Maintenance services | 71,798,771 | 0.25% | 18,720,025 | 0.06% | 283.54% |
| Material & Others | 302,441,264 | 1.07% | 330,683,985 | 1.05% | -8.54% |
| By region | |||||
| China | 28,249,339,672 | 100.00% | 31,345,746,762 | 100.00% | -9.88% |
(b) Reach to 10% of Revenue or Profit by Industry, Product or Region□√Applicable □Not Applicable
Unit: RMB
| Turnover | Cost | Gross Margin | Y-O-Y turnover change (%) | Y-O-Y Cost Change (%) | Y-O-Y gross margin change (points) | |
| By Industry | ||||||
| Automobile Industry | 28,249,339,672 | 24,409,546,754 | 13.59% | -9.88% | -2.54% | -6.51% |
| By Products | ||||||
| Vehicle | 25,178,859,631 | 22,143,813,493 | 12.05% | -11.31 % | -3.08% | -7.47% |
| By Region | ||||||
| China | 28,249,339,672 | 24,409,546,754 | 13.59% | -9.88% | -2.54% | -6.51% |
If the Company’s core business scope is adjusted during the reporting period, theCompany’s core business data of last year need to be adjusted per the scope inthis year□Applicable □√Not Applicable
(c) Whether Company’s Goods Revenue Higher Than Service Revenue□√Yes □No
| Industry | Item | Unit | 2018 | 2017 | Change (%) |
| Automobile | Sales volume | unit | 285,066 | 310,028 | -8.05% |
| Automobile | Production volume | unit | 286,808 | 311,180 | -7.83% |
Explanation on YOY change of over 30%□Applicable □√Not Applicable
(d) Execution of Company’s Signed Major Sales Contract□Applicable □√Not Applicable
(e) Composition of Operating Cost
Unit: RMB
| Product | 2018 FY | 2017 FY | YOY change（%） | ||
| Cost | Proportion (%) | Cost | Proportion (%) | ||
| Vehicle | 22,143,813,493 | 90.72% | 22,847,921,018 | 91.23% | -3.08% |
| Components | 1,921,477,490 | 7.87% | 1,874,840,311 | 7.49% | 2.49% |
| Automobile Maintenance services | 69,559,583 | 0.29% | 18,039,452 | 0.07% | 285.60% |
| Material & Others | 274,696,188 | 1.12% | 304,289,181 | 1.21% | -9.73% |
(f) Whether Consolidated Scope was Changed During the Reporting Period□√Yes □NoDuring the reporting period, the new consolidated subsidies included ShenzhenFujiang New Energy Automobile Sales Co., Ltd., Guangzhou Fujiang New EnergyAutomobile Sales Co., Ltd., and Xiamen Fujiang New Energy Automobile Sales
Co., Ltd. All the three companies are wholly-owned subsidiaries of the Companyestablished in 2018 with a cash investment of RMB 10 million.Please refer to the Note 16a Subsidiaries of the notes to the consolidated financialstatements in the Chapter XI Financial Statements for details.
(g) Major Change or Adjustment on Business, Products or Services During the
Reporting Period□Applicable □√Not Applicable
(h) Main Customers and Suppliers
Top 5 Customers:
| Total sales value to top 5 customers（RMB） | 3,656,375,426 |
| Accounted for the proportion of JMC’s total annual turnover | 12.95% |
| Included related party transaction accounted for the proportion of JMC’s total annual turnover | 4.35% |
| No. | Name of the Customer | Sales Value (RMB) | Percentage of JMC’s Total Turnover (%) |
| 1 | Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 1,228,470,623 | 4.35% |
| 2 | Zhejiang Jiangling Motors Sales Company | 1,138,232,870 | 4.03% |
| 3 | Hunan Transit Jiangling Motors Sales Company | 478,831,969 | 1.70% |
| 4 | Shanghai Keda Zhoupu Auto Sales Company | 439,610,214 | 1.56% |
| 5 | Beijing Jinglingshun Auto Sales Company | 371,229,750 | 1.31% |
| Total | 3,656,375,426 | 12.95% |
Other introduction to main customers□√Applicable □Not ApplicableJiangxi Jiangling Motors Imp. & Exp. Co., Ltd. is a related party of the Company.EVP Xiong Chunying holds the position of Director of Jiangxi Jiangling Motors Imp.& Exp. Co., Ltd.
Top 5 Suppliers:
| Total purchase value from top 5 suppliers（RMB） | 4,170,908,479 |
| Accounted for the proportion of JMC’s total annual purchase amount | 19.20% |
| Included related party transaction accounted for the proportion of JMC’s total annual purchase amount | 15.47% |
| No. | Name of the Supplier | Purchase Value (RMB) | Percentage of JMC’s Total Annual Purchase Amount (%) |
| 1 | Nanchang Baojiang Steel Processing Distribution Co., Ltd. | 922,453,891 | 4.25% |
| 2 | Jiangxi Jiangling Chassis Co., Ltd. | 864,932,239 | 3.98% |
| 3 | Bosch Auto Diesel System Company | 809,754,457 | 3.73% |
| 4 | GETRAG (Jiangxi) Transmission Company | 791,364,536 | 3.64% |
| 5 | Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 782,403,356 | 3.60% |
| Total | 4,170,908,479 | 19.20% |
Other introduction to main suppliers□√Applicable □Not ApplicableExcept Bosch Auto Diesel System Company, the other four suppliers are relatedparties of the Company.
III. Expense Analysis
Unit: RMB’ 000
| 2018 | 2017 | YOY Change | Major Changes Explanation | |
| Distribution Expenses | 1,202,382 | 2,694,779 | -55.38% | Due to the effect of implementing IFRS 15 -Revenue from Contracts with Customers since January 1, 2018, and this affects the presentation between income statement accounts and does not actually affect the net profit. |
| Administrative Expenses | 2,460,259 | 2,744,600 | -10.36% | |
| Finance Income-net | -182,587 | -239,221 | -23.67% | Cash balance decreased. |
IV. Research & DevelopmentIn 2018, JMC continued to focus on development of new product programs.Product related spending centred at future product development and compliancewith regulatory requirements, including new model, increased payloads, newstyling, and improved power, etc., ensuring the Company is compliant withstringent environmental and safety regulations. The competitive R&D will ensurethe company’s volume and profit growth in the future. Development expenditure in2018 was 1,735 million, representing 16.71% of net assets, or 6.14% of revenue.
R&D
| 2018 | 2017 | Change (%) | |
| R&D Staff (person) | 2,692 | 2,417 | 11.38% |
| R&D Staff as % of total employees | 16.28% | 13.94% | 2.34% |
| R&D Investment (RMB) | 1,735,368,721 | 2,054,740,061 | -15.54% |
| R&D Investment as % of revenue | 6.14% | 6.56% | -0.42% |
| Capitalization of R&D investment | 71,814,337 | 58,010,234 | 23.80% |
| Capitalization of R&D investment as % of R&D Investment | 4.14% | 2.82% | 1.32% |
Major change of R&D Investment as % of revenue□Applicable □√Not Applicable
Major change of capitalization of R&D investment□√Applicable □Not ApplicablePlease refer to the Note 14 Intangible Assets of the notes to the consolidatedfinancial statements in the Chapter XI Financial Statements for details.
V. Cash Flow Analysis
RMB’ 000
| Item | 2018 | 2017 | Y-O-Y Change |
| Net cash generated from operating activities | -101,808 | 674,588 | -115.09% |
| Net cash used in investing activities | -1,138,924 | -669,656 | -70.08% |
| Net cash used in financing activities | -2,280,111 | -533,431 | -327.44% |
| Net (decrease)/increase cash and cash equivalents | -3,520,843 | -528,499 | -566.20% |
Explanation on the major factors regarding major change of related data□√Applicable □Not ApplicableNet cash generated from operating activities de creased by RMB 776 million, down115.09% vs. 2017, mainly reflecting the volume decrease and increase ofgovernment subsidy receivable generated from higher sales volume of newenergy vehicle.Net cash used in investing activities increased up 70.08% vs. 2017, mainlyreflecting the increase in the amount of cash paid for fixed assets purchased andbuilt.Net cash used in financing activities increased by RMB 1,747 million, up 327.44%vs. 2017, mainly reflecting the payment of 2017 interim special dividenddistribution.
Explanation on significant difference between net cash generated from operatingactivities and net profit during the reporting period□Applicable □√Not Applicable
3. Non- core business analysis□√Applicable □Not Applicable
Unit: RMB
| Item | Amount | Proportion of PBT | Explanation | Sustainability （Y/N） |
| Non-operating Revenue | 248,127,231 | 625.96% | Government subsidies to support the Company’s development | Y |
4. Analysis of Assets and LiabilitiesI. Major changes
Unit: RMB’ 000
| Asset item | December 31, 2018 | December 31, 2017 | YOY | Major Changes Explanation | ||
| Proportion Change | ||||||
| Amount | Proportion | Amount | Proportion | (Points) | ||
| Property, plant and equipment | 6,941,292 | 29.67% | 6,714,088 | 25.45% | 4.22% | New Fushan plant. |
| Inventories | 2,522,354 | 10.78% | 2,339,304 | 8.87% | 1.91% | |
| Trade and other receivables and prepayments | 4,678,284 | 20.00% | 4,555,934 | 17.27% | 2.73% | |
| Cash and cash equivalents | 7,616,880 | 32.56% | 11,137,723 | 42.21% | -9.65% | Due to payment of 2017 interim special dividend distribution and payment increase for fixed assets purchasing |
| Trade and other payables | 12,195,966 | 52.13% | 13,222,540 | 50.12% | 2.01% | |
II. The fair value of the assets and liabilities (not applicable).
III. Restriction on Assets Rights as of the End of the Reporting PeriodThere was no major restriction on assets rights as of the end of the reporting period.
5. InvestmentI. Summary□Applicable □√Not Applicable
II. Obtained Major Equity Investment during the Reporting Period□Applicable □√Not Applicable
III. Ongoing Major Non-Equity Investment during the Reporting Period□√Applicable □Not Applicable
| Project Name | Investment Method/ source | Fixed Assets (Y/N) | Spending in 2018 (RMB mils) | Investment Committed (RMB mils) | Progress | Index | |||||
| Fushan Plant | Self-funded | Y | 372 | 372 | 11% | * | |||||
| Total | 372 | 372 | -- | -- |
*The announcement (No. 2017-044) was published on the website
www.cninfo.com.cn.
IV. Financial Assets Investment(a) Stock Investment□Applicable □√Not Applicable
(b) Derivative Investment□Applicable □√Not Applicable
V. Usage of Raised Fund□Applicable □√Not Applicable
6. Sales of Major Assets and EquityI. Sale of Major Assets□Applicable □√Not Applicable
II. Sales of Major Equity□Applicable □√Not Applicable
7. Operating Results of Main Subsidiaries and Joint-Stock Companies whoseimpact on JMC’s net profit more than 10%
Unit: RMB’000
| Name of Companies | Type of Companies | Main Business | Registered Capital | Assets | Net Assets | Turnover | Operating Profit | Net Profit |
| Jiangling Motors Sales Corporation, Ltd | Subsidiary | Sales vehicle, service parts | 50,000 | 3,638,713 | 249,594 | 23,592,089 | -2,569 | -2,158 |
| JMC Heavy Duty Vehicle Co., Ltd. | Subsidiary | Product heavy commercial vehicle , engine, component, and related service | 281,793 | 2,610,390 | -675,856 | 507,555 | -349,354 | -348,490 |
Acquisition and disposal of the subsidiaries□Applicable □√Not Applicable
8. Structured Entities Controlled by JMC□Applicable □√Not Applicable
9. OutlookI. Industry Competition and Development Trend
At present China is still in the stage of industrial and urbanization development,China's economic operation is remaining at a reasonable level, the macro-controltargets have been well achieved, the economy has maintained growth inmedium/high speed, imports and exports is stable, and the balance of paymentshas been basically balanced. Steady domestic demand, encouraged innovationand further deepening of the combination of internet and industrial will continue to
benefit China’s economy toward steady and improvement with the GDP growth ispredicted around 6.3%. The infrastructure construction and logistic industry inChina will also continue to develop combined with consumption incentive of GuardBlue Sky Plan and rural subsidy scheme of home appliances/cars which will begood to the stability and development of commercial vehicle segment. Meanwhile,China's Car Parc per capita is still lower than world’s average level indicating astrong auto market potential in the future. Currently, automobile industrydevelopment is affected by the urban traffic congestion, environment pollution,purchase tax incentive cancellation and new energy vehicle incentive cancellationgradually. However, as the economic progressing steadily, the consumption leveland purchasing power improved, domestic automobile sales volume is expectedto achieve higher level. In 2019, sales volume is still expected to continue to growslightly. The production, sales and use of automobile is significantly changed bythe combination of technology revolution characterized by electrification, digital,network and smart and innovative business model featured by platform andsharing. The pattern has continued for several hundred years of auto industry isfacing great changes, new energy vehicles and smart internet is becoming a cleardirection of auto industry to lead its upgrade, transformation and structureadjustment.
II. Corporation Strategy
Company takes to become the best partner for smart mobility and logisticssolutions as vision and integrity, innovation and win-win as core value, adoptsaggressive strategic actions in smart logistics of commercial vehicles tostrengthen its leading position; proactively participates in mobility of passengervehicle and tries different business model to build new core competitivenessthrough new technology application and new business model. JMC will continueto deliver SUV and crossover vehicles with high cost performance and high qualitynew energy vehicles with smart, environmental, safe and economic; participate insmart mobility and logistics service by cutting-edge technology and innovativebusiness model, and actively expand the company’s friend circle to continuouslydevelop new core competitiveness in auto ecosystem.
III. 2018 Business Plan
The Company is targeting 2019 sales volume level at 383 thousand units andrevenue level at RMB 37 billion, increases of 34% and 31% vs. 2018 respectively.To enhance profitability, the company is committed to the following plans in 2019:
(1) Achieve volume and market share targets by enhancing the sales network and
sales/marketing activities, especially pushing the third – fifth class city dealernetwork construction.(2) Continue to strengthen sales network and channel, actively develop network in
low-tier cities, establish flexible marketing scheme to deliver the target of salesvolume and share.(3) Well prepared the new products launch plan for Ford Territory, Everest MCA
and PK/LT upgrade to Stage VI.
(4) Continue to improve product quality, pursue cost reduction opportunities,
improve manufacturing and operating efficiency to achieve profit and costtargets.(5) Continue to research, develop and apply new energy, autonomous driving and
smart connectivity.(6) Continue to promote the new fuel economy and emission compliance program
to satisfy regulatory requirements.(7) Work with technical partners to execute future product development and R&D
ability improvement.(8) Expand finished vehicle exports and OEM components sales business.(9) Actively explore and try innovative business.
IV. Potential Challenges and Solutions
In 2019, the Company will continue to face fiercer competition, more stringentregulatory requirements, intensifying cost pressures and a slowdown in China’seconomic growth. To achieve steady growth, the Company will continue to focuson the following aspects in 2019:
(1) Optimizing company’s production system to improve efficiency and product
quality.(2) Optimizing dealer network and marketing spending to improve market share;(3) Improve suppliers’ capability and parts quality; continue to reduce parts
purchasing cost.(4) Strengthening corporate governance and application of appropriate risk
assessment and control mechanisms.(5) Sustaining the expense management and control to optimize the business
structure.(6) Execute company’s growth strategies to pursue sustainable and healthy
growth.
The Company will continue to optimize cost structure, improve productionefficiency, achieve competitive manufacturing output, optimize efficiency ofR&D/program and mitigate management cost to realize profitable growth.Meanwhile, focus on new product development to deliver the launch quality andcost target. With the support from technical partner, the Company continues topromote new products development and R&D ability improvement, to acceleratethe progress of launching new competitive and profitable products to the marketand the exploration and development of heavy truck to enhance the company’sinfluence on commercial vehicles. Meanwhile, the Company will strive to ensurethe timely delivery of high quality heavy truck, and devote to strengthening dealernetwork, expanding overseas market and parts business.
10. External research and media interview to the Company
I. Table of external research, communication and media interviews with the
Company in the reporting period
| Date | Communication Method | Type of Object | Information Discussed and Materials offered |
| May 17, 2018 | On-the-spot research | Institution | JMC Operating highlights |
| November 30, 2018 | On-the-spot research | Institution | JMC Operating highlights |
| Reception times | 2 | ||
| Visiting institution number | 26 | ||
| Visiting person number | 0 | ||
| Other objects | 0 | ||
| Whether to disclose, reveal or divulge the undisclosed material information | None | ||
Chapter V Major Events
1. Profit distribution and capital reserve conversion regarding common stockEstablishment, implementation or adjustment of profit distribution policy, esp. cashdividend distribution policy, regarding common stock during the reporting period□√Applicable □Not Applicable
In accordance with the requirements of laws, regulations and the Articles ofAssociation of the Company, the Company's profit distribution policy maintainscontinuity and stability, and the Company pays attention to the reasonable return toinvestors. The Company gives priority to cash dividend, and subject to theprovisions of laws, regulations and the Articles of Association of the Company, theBoard of Directors can put forward a mid-term or special profit distribution proposal.The Company's profit distribution policy is in line with the CSRC's guidance onencouraging cash dividends for listed companies.
| Special Explanation on Cash Dividend Policy | |
| Whether to comply with the requirements of the Articles of Association of JMC or resolution of the Shareholders’ Meeting (Y/N) | Y |
| Whether the standards and proportion of dividends on profit distribution are clear (Y/N) | Y |
| Whether the procedures are valid and legal (Y/N) | Y |
| Whether the Independent Director fulfil their duties (Y/N) | Y |
| Whether middle and small shareholders have opportunities to claim their appeals and their legal rights and interests are completely protected (Y/N) | Y |
| Whether the condition and procedure are reasonable and transparent when the cash dividend policy is being changed (Y/N) | Y |
Profit distribution plan or proposal in the recent three years(1) Proposal on 2018 Year Profit DistributionDetails on the profit available for appropriation of the Company in 2018 preparedin accordance with the China GAAP and International Financial ReportingStandard (‘IFRS’) are as follows:
Unit: RMB’ 000
| China GAAP | IFRS | |
| Retained earnings at Dec. 31, 2017 | 10,444,874 | 10,441,665 |
| 2018 net profit | 91,833 | 91,833 |
| Allocation of interim special dividend for 2017 | 2,000,067 | 2,000,067 |
| Allocation of dividend for 2017 | 276,228 | 276,228 |
| Retained earnings at Dec. 31, 2018 | 8,260,412 | 8,257,203 |
The upper limit of profit available for distribution was based on the lower of the un-appropriated profit calculated in accordance with the China GAAP and thatcalculated in accordance with IFRS. Therefore, the Company’s retained earningsavailable for distribution as of December 31, 2018 were RMB 8,257,203 thousand.
The Board approved to submit to the 2018 Annual Shareholders’ Meeting thefollowing proposal on year 2018 profit distribution:
(i). to appropriate for the dividend distribution from the profit available for
distribution, which shall be equal to RMB 0.04 per share and shall apply to theCompany’s total share capital; and(ii). to carry forward the un-appropriated portion to the following fiscal year.
Profit distribution proposal: a cash dividend of RMB 0.4 (including tax) per 10shares will be distributed to shareholders. Based on the total share capital of863,214,000 shares as of December 31, 2018, total cash dividend distributionamounts shall be RMB 34,528,560.
The cash dividend on B share shall be paid in Hong Kong Dollars and convertedat the middle rate of the HK dollar’s exchange rate against RMB quoted by thePeople’s Bank of China on the first working day following the relevant resolutionadopted by the Company’s Annual Shareholders’ Meeting.
The Board decided not to convert the capital reserve to the share capital this time.
(2) 2017 Year Profit Distribution PlanA cash dividend of RMB 3.2 (including tax) was distributed for every 10 sharesheld. Based on the total share capital of 863,214,000 shares as of December 31,2017, the total cash dividend distribution amounts were RMB 276,228,480.
B share dividend was paid in Hong Kong Dollars and converted based on theHKD-to-RMB standard exchange rate published by the People’s Bank of China onthe first working day following the approval on the profit distribution proposal bythe Shareholders’ Meeting of the Company.
The Board decided not to convert capital reserve to share capital this time.
(3) 2017 Interim Special Dividend Distribution PlanA cash dividend of RMB 23.17 (including tax) was distributed for every 10 sharesheld. Based on the total share capital of 863,214,000 shares as of September 30,2017, the total cash dividend distribution amounts were RMB 2,000,066,838.
B share dividend was paid in Hong Kong Dollars and converted based on theHKD-to-RMB standard exchange rate published by the People’s Bank of China onthe first working day following the approval on the profit distribution proposal bythe Shareholders’ Meeting of the Company.
The Board decided not to convert capital reserve to share capital this time.
(4) 2016 Year Profit Distribution PlanA cash dividend of RMB 6.1 (including tax) was distributed for every 10 sharesheld. Based on the total share capital of 863,214,000 shares as of December 31,2016, the total cash dividend distribution amounts were RMB 526,560,540.
B share dividend was paid in Hong Kong Dollars and converted based on theHKD-to-RMB standard exchange rate published by the People’s Bank of China on
the first working day following the approval on the profit distribution proposal bythe Shareholders’ Meeting of the Company.
The Board decided not to convert capital reserve to share capital this time.
Table of cash dividend in the recent three years
Unit: RMB’000
| Cash dividend (Including tax) | Profit attributable to the equity holders of the Company in that year | Cash dividend as % of profit attributable to the equity holders of the Company | |
| 2018 (Proposed) | 34,529 | 91,833 | 37.60% |
| 2017 | 2,276,295 | 690,938 | 329.45% |
| 2016 | 526,561 | 1,318,016 | 39.95% |
The Company made a profit during the reporting period and the profit of theparent company distributable to the common share holders is positive, but adistribution plan of cash dividends for the common shares is not put forward□Applicable □√Not Applicable
2. Proposal on 2018 Year Profit Distribution Plan or Capital Reserve Conversion□√Applicable □Not ApplicablePlease refer to Article 1, Chapter V of this Report.
3. Commitments3.1 Commitments of the Company, the shareholder, the actual controlling party,the acquirer, the Director, the Supervisor, the senior executive or other relatedparty of the Company□Applicable □√Not Applicable
3.2 Earnings forecast of the assets or project and the explanations□Applicable □√Not Applicable
4. Non-operating funding in the Company occupied by controlling shareholder andits affiliates□Applicable □√Not ApplicableThere was no non-operating funding in the Company occupied by controllingshareholder and its affiliates.
5. Explanation of the Board of Directors, Supervisory Committee and IndependentDirectors to abnormal opinions from accounting firm□Applicable □√Not Applicable
6. Explanation on the changes of accounting policy, accounting estimates,estimation method compared with that of last year□√Applicable □Not ApplicablePlease refer to the Note 2 Summary of Significant Accounting Policies of thenotes to the consolidated financial statements in the Chapter XI FinancialStatements for details.
7. Explanation on major accounting errors that shall be restated during thereporting period□Applicable □√Not ApplicableThere was no major accounting error that shall be restated during the reportingperiod.
8. Explanation on consolidated scope change compared with that of last year□√Applicable □Not ApplicableDuring the reporting period, the new consolidated subsidies included ShenzhenFujiang New Energy Automobile Sales Co., Ltd., Guangzhou Fujiang New EnergyAutomobile Sales Co., Ltd. and Xiamen Fujiang New Energy Automobile SalesCo., Ltd. All the three companies are wholly-owned subsidiaries of the Companyestablished in 2018 with a cash investment of RMB 10 million.Please refer to the Note 16a Subsidiaries of the notes to the consolidated financialstatements in the Chapter XI Financial Statements for details.
9. Appointment or Dismissal of Accounting FirmCurrent accounting firm
| Name | PricewaterhouseCoopers Zhong Tian LLP |
| Compensation (RMB’000) | 1,900 |
| Consecutive years offering audit services | 17 |
| Names of signed accountants | Lei Fang, Ye Dan |
| Consecutive years offering audit services of signed accountants | Lei Fang 2 year, Ye Dan 1 year |
Dismissal of accounting firm□Applicable □√Not Applicable
Appointment of C-SOX auditor, financial consultant or sponsor□√Applicable □Not ApplicableUpon the approval of 2014 Annual Shareholders’ Meeting, JMC agreed to appointPricewaterhouseCoopers Zhong Tian LLP as JMC’s 2016 to 2018 C-SOX auditor.In 2018, JMC paid RMB 550 thousand to PricewaterhouseCoopers Zhong TianLLP for the C-SOX audit.
10. Suspension and Termination of Listing after Annual Report Disclosed□Applicable □√Not Applicable
11. Related Matters regarding Bankruptcy□Applicable □√Not ApplicableThere was no matter involving bankruptcy during the reporting period.
12. Major Litigation or Arbitration□Applicable □√Not ApplicableThere was no major litigation or arbitration during the reporting period.In 2018, there was no major litigation and arbitration that had significant impactson the Company’s operation. As of the end of 2018, there was a total of 3 pendinglitigation in which the Company is as the defendant, involving an amount of RMB1.84 million.
13. Punishment□Applicable □√Not ApplicableNeither JMC nor its Directors or senior management were punished by regulatoryauthorities during the reporting period.
14. Honesty and credit of JMC and its controlling shareholder or actual controllingparty□Applicable □√Not Applicable
15. Implementation of Equity Incentive Plan, Employee Stock Ownership Plan andOther Employee Incentive Method□Applicable □√Not ApplicableThere was neither equity incentive plan or ESOP, nor other employee incentivemethod during the reporting period.
16. Major Related Transactionsi. Routine related party transactions□√Applicable □Not Applicable
| Transaction Parties | Content | Relationship | Pricing Principle | Settlement Method | Amount (RMB’000) | As % of Total Purchases/ Revenue |
| Ford and subsidiaries of Ford | goods purchase | Controlling shareholder of JMC and subsidiaries of Ford | Contracted price | D/P & T/T | 869,000 | 4.00% |
| Nanchang Bao-jiang Steel Processing Distribution Co., Ltd. | goods purchase | Associate of JMCG | Contracted price | Prepayment | 922,453 | 4.25% |
| Jiangxi Jiangling Chassis Co., Ltd. | goods purchase | Subsidiary of JMCG | Contracted price | 60 days after delivery and invoicing | 864,932 | 3.98% |
| GETRAG (Jiangxi) Transmission Company | goods purchase | Associate of JMCG | Contracted price | 60 days after delivery and invoicing | 791,365 | 3.64% |
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | goods purchase | Wholly-owned subsidiary of JMCG | Contracted price | 30 days after delivery and invoicing | 782,403 | 3.60% |
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | Sales | Associate of JMCG | Contracted price | 40% of prepayment and the remains paid during 30 days after delivery | 1,228,471 | 4.35% |
The Announcement (No.:2017-049) on Related Party Transactions of theCompany was published on the website www.cninfo.com.cn.
ii. Major related party transaction concerning transfer of assets or equity□Applicable □√Not ApplicableThere was no major related party transaction concerning transfer of assets orequity in the reporting period.
iii. Related party transaction concerning outside co-investment□Applicable □√Not ApplicableThere was no outside co-investment in the reporting period.
iv. Related credit and debt□√Applicable □Not ApplicableIs there non-operating related credit and debt?□Yes □√NoThe Company had no non-operating related credit and debt in the reporting period.
v. Other major related party transactions□√Applicable □Not ApplicableThe balance amount of bank deposit of the Company in JMCG Finance Companyas of the end of 2018 was RMB 833,617 thousand. The Board of Directorsreviewed and approved JMCG Finance Company Continuous Risk AssessmentReport. Please refer to the website www.cninfo.com.cn for the original of thereport which was published on March 28, 2019.
17. Major Contracts and Executioni. Entrustment, contract or leasea. Entrustment□Applicable □√Not ApplicableThere was no entrustment in the reporting period.
b. Contract□Applicable □√Not ApplicableThere was no contract in the reporting period.
c. Lease□√Applicable □Not ApplicablePlease refer to the note 13 Lease Prepayment of the notes to the consolidatedstatements in the Chapter XI Financial Statements for detail.
Project with more than 10% of net profit□Applicable □√Not ApplicableThere was no lease project with more than 10% of net profit in the reportingperiod.
ii. Major guarantee□Applicable □√Not ApplicableThe Company had no outside guarantee in the reporting period.
iii. Entrustment on cash asset managementa. Trust investment□Applicable □√Not ApplicableThere was no trust investment in the reporting period.
b. Entrusted loan□Applicable □√Not ApplicableThere was no entrusted loan in the reporting period.
iv. Other major contract□Applicable □√Not Applicable
18. Corporation Social ResponsibilitiesI. Corporation Social ResponsibilitiesJMC always consciously undertake social responsibility and create brand public-benefit “Jiangling Xiqiao Project” with the aim of “green, love, and safe”. By 2018,365 bridges have been donated in 106 counties and cities in 24 provinces,benefiting nearly 600,000 people. JMC was awarded China Poverty AlleviationAmbassador Prize, China Responsible Public Partners Prize and China SocialResponsibility Excellent Brand Prize.
During the reporting period, the Company operated according to law andregulations, upheld the interest of the shareholders, especially small & medium-sized shareholders, protected the legitimate rights and interests of employees,and treated suppliers, customers and consumers sincerely. Simultaneously, JMCpaid attention to environmental protection, energy saving and consumptionreduction, fully reduced energy consumption and pollutant discharge, and activelyfulfilled corporate social responsibility.
JMC 2018 Corporation Social Responsibilities Report can be downloaded fromJMC official website: www.jmc.com.cn or the website: www.cninfo.com.cn.
II. Targeted measures in poverty alleviationa. Plan on poverty alleviationThe Company joined the one-to-one poverty alleviation, depending on JMCG, inQianmo Village, Dai Jiapu Township, Suichuang County, Jiangxi Province andXianting Village, Songhu Town, Xinjian District, Nanchang City in accordance withthe working arrangement of Jiangxi Provincial Party Committee and ProvincialGovernment. The overall goal is: to help the poor village to achieve a well-offstandard of living before 2020 by cooperating with the local government.
b. Summary of poverty alleviation in 2018The Company regards the realization of precision poverty relief as the basicstrategy of precision poverty alleviation. In 2017, Xianting Village get rid of poverty.The Company continued to consolidate efforts of one-to-one poverty alleviation in2018.
c. Status of targeted measures in poverty alleviation
| Item | Unit | Amount/Progress |
| I. Brief Introduction | —— | —— |
| including：1. Funding | RMB (’000) | 4,200 |
| 2. Sum converted from the materials | RMB (’000) | 132.4 |
| 3. Persons get rid of poverty | Persons | 20 |
| II. Investments | —— | —— |
| 1. Anti-poverty depending on industry development | —— | —— |
| including：1.1 Type | —— | |
| 1.2 Projects | Number | |
| 1.3 Investment amount | RMB (’000) | |
| 1.4 Persons get rid of poverty | Persons | |
| 2. Anti-poverty depending on employment transfer | —— | —— |
| including：2.1 Investments on vocational skills | RMB (’000) | |
| 2.2 Training persons regarding vocational skills | Persons | |
| 2.3 Employment Persons | Persons | |
| 3. Anti-poverty depending on relocation | —— | —— |
| including：3.1 Employment persons among relocated persons | Persons | |
| 4. Anti-poverty depending on education | —— | —— |
| including：4.1 Grants in aid to poor students | RMB (’000) | 25.4 |
| 4.2 Poor students in aid | Persons | 1,400 |
| 4.3 Investments on the improvement of educational source in poverty-stricken are | RMB (’000) | 4,200 |
| 5. Health Anti-poverty | —— | —— |
| Including: 5.1 Investments on medical and health services in poverty-stricken area | RMB (’000) | |
| 6. Ecological protection anti-poverty | —— | —— |
| including：6.1 Project type | —— | |
| 6.2 Investment amount | RMB (’000) | |
| 7. Miscellaneous provisions | —— | —— |
| including：7.1 Investments on stay-at-home children, women and elderly | RMB (’000) | 107 |
| 7.2 Number of stay-at-home children, women and elderly in aid | Persons | |
| 7.3 Investments on poor & disable people | RMB (’000) | |
| 7.4 Number of poor & disable people in aid | Persons | |
| 8. Social anti-poverty | —— | —— |
| including：8.1 Investments on cooperation between West China and East China | RMB (’000) | |
| 8.2 Investments on one-to -one anti-poverty | RMB (’000) | |
| 8.3 Investments from anti-poverty charity fund | RMB (’000) | |
| 9. Other | —— | —— |
| including：9.1.Project | Number | |
| 9.2.Investment amount | RMB (’000) | |
| 9.3. Persons getting rid of poverty | Persons | |
| III. Awards | —— | —— |
d. On-going plan regarding targeted measures in poverty alleviationEducation is the fundamental way to get rid of poverty and become rich. In termsof education to poverty alleviation, the Company will rely on JMCG in 2019 toupgrade the existing Xianting Primary School into a standardized, modern andexemplary rural complete primary school to provide a sound learning environmentfor students studying in Xianting Primary School, in accordance with thegovernment overall planning arrangements and local conditions
III. Environmental protectionWhether the Company and affiliates is the key pollution discharge unit publishedby environmental protection administration?√Yes □No
| Name of principal pollutant and specific pollutant | Mode of discharge | Number of discharge outlet | Distribution of discharge outlet | Discharge concentration | Applicable standard for pollutant discharge | Total amount of discharge | Total amount of discharge audited | Excessive discharge |
| Wastewater (COD, NH-N) | continuous discharge | 6 | 3 in Mainsite, 1 in Xiaolan Site, 1 in Cast Plant and 1 in Axle Plant | "COD:155.7mg/L NH-N:26.1mg/L" | “Wastewater Discharge Standard”(GB 8978-1996) | COD: 178.51t; NH-N: 9.515t | COD≤843.34t; NH-N≤21.72t | Meet Standard |
| Exhaust gas (SO2,NOx,smoke,toluol, dimethylbenzene, NMHC） | continuous discharge | 125 | 51 in Mainsite, 35 in Xiaolan Site, 33 in Cast Plant and 6 in Axle Plant | SO2: 172mg/m3; NOx :240mg/m3; smoke: 72.4mg/m3; toluol :0.174mg/m3; dimethylbenzene:0.542mg/m3; | "The Emission Standard of Air Pollutants”, "Emission Standard of Air Pollutants for Boiler”（GB 13271-2014） | SO2: 86.15t; NOx : 15.77t | SO2≤93.01t; NOx≤60.91t | Meet Standard |
The construction and operation of pollutant preventive and control facilitiesSince 2006, JMC has invested more than RMB 30 million to construct sevenwastewater treatment stations (including the wastewater treatment station in theeast plant area and Xiaolan wastewater treatment station), with the treatmentcapacity as high as 9,000t/d. The treated wastewater reached the nationaldischarge standard. In 2018, JMC invested RMB 500 thousand to renovate
Xiaolan Wastewater Treatment Station, and invested RMB 870 thousand toupgrade the wastewater treatment process of the wastewater treatment station inAxle Plant. The sewage station has equipped with MBR integrated equipment,which increases the anti-shock load capacity of the sewage treatment system,and the effluent water quality is stable to meet the discharge standard.
For up-to-standard emission of waste gases, JMC has taken new controlmeasures over the years. JMC invested RMB 3.6 million in 2018 to upgrade the
dust collector of the Casting Plant and added an electric furnace dust removalequipment. The existing matching dust collectors were dismantled and two sets of“downstream” back flush flat bag filter system were installed to effectively reduceenvironmental pollution .
For noise reduction, JMC took different measures to reduce the environmentalimpact, such as increase of protective sound-proof doors & windows,establishment of noise enclosure for air blower, installation of muffler andtransformation of sound-proof doors & windows. All these measures can makesure up-to-standard discharge of noise at the plant boundary.
In the process of waste management, JMC managed from the source, and dividedthe generation of wastes. JMC established a temporary storage yard for solidwastes. Warning graphic symbols have been posted at the temporary storage siteof hazardous wastes. Besides, signboards have been provided as well, so as toremind the passer-by of probable hazards in the storage process of hazardouswastes. In 2017, JMC invested RMB500 thousand to extend Xiaolan storage yardfor solid wastes. In 2018, JMC invested RMB 550 thousand to renovate the
engine plant garbage station. According to the requirements of the Solid WasteControl Law, solid wastes must be protected against leakage, anti-diffusion, and
loss prevention, and should not be stored in the open air. After the anti-pollution,anti-seepage and classification treatment of the garbage station, leakage andpollution can be avoided and the requirements of the regulations are met.
EIA on construction project and other administrative permits forenvironmental protectionThe Company strictly implements the construction project environmental impactassessment system. With respect to new construction, expansion andreconstruction, JMC comprehensively planned environmental protection andevaluated the “Three Simultaneities”. From the source of design, JMC carried outthe philosophy of energy saving and low carbon all the time. The Company carrieson the environmental monitoring every year according to the requirements,ensures the pollutant discharge meeting the requirements of discharge permit,formulates the stricter internal control target, and strives to reduce the impact ofenvironmental pollution to the minimum. In 2018, the Company completed theenvironmental inspection and acceptance of the new energy vehicletransformation project of Qingyunpu Plant, and obtained the environmentalassessment approval of the new energy laboratory project and the project ofexpanding the capacity of 300 thousand vehicle parts and components per year(Phase II).
Emergency plan on emergency environmental incidentsIn order to dilute or prevent environmental risks, JMC established an emergencypreparation and response procedure and specific environmental emergency plans,so as to formulate corresponding control methods for potential accidents andemergences occurred or that may probably occur, and has been filed with theenvironmental protection bureau.JMC organize various emergency drills to theeffectiveness of the plan.
Environmental self-monitoring schemeIn 2018, JMC’s Qingyunpu Main Plant Area (the “Plant Area”) was listed as a keypollutant discharging organization of wastewater/hazardous wastes. The PlantArea monitored by itself in strict accordance with the Method for Self-monitoringand Information Disclosure of State Key Monitoring Enterprises (Trial). Its self-monitoring schemes, monitoring results and annual monitoring reports on pollutionsources were disclosed on the “pollution source self-monitoring reporting platformof Jiangxi Province”. Xiaolan plant area and other plant areas finished self-monitoring according to the EIA requirements.
Other information related to environmental protectionJMC paid high attention to environmental protection and pollution source control,taking resource saving and cost reduction as the primary task. Moreover, theCompany also took full advantage of 6sigma, and controlled from the source, soas to achieve the effect of environmental improvement. In the new expansion andreconstruction projects, JMC laid emphasis on improving the environmentalperformance, strictly implemented the system of “Three Simultaneities”,transacted the EIA procedure according to national standards, stipulated thepreventive and control measures for environmental pollution, and reported tocompetent administrative departments on environmental protection for approval.
19. Other Major EventsJMC received government incentives of approximate RMB 458 millionappropriated by Nanchang City, Nanchang County Xiaolan EconomyDevelopment Zone, Nanchang City Qingyupu District, and Shanxi
Transformation and Comprehensive Reform Demonstration Zone in 2018, whichis to support JMC’s development.
20. Major event of JMC subsidiary□Applicable □√Not Applicable
Chapter VI Share Capital Changes & Shareholders
1. Changes of shareholding structureI. Table of the changes of shareholding structure
| Before the change | Change (+, -) | After the change | |||||||
| Shares | Proportion of total shares (%) | New shares | Bonus Shares | Reserve- converted shares | Others | Subtotal | Shares | Proportion of total shares (%) | |
| I. Limited tradable A shares | 906,855 | 0.10% | - | - | - | -120,015 | -120,015 | 786,840 | 0.09% |
| 1. Other domestic shares | 906,855 | 0.10% | - | - | - | -120,015 | -120,015 | 786,840 | 0.09% |
| Including: | |||||||||
| Domestic legal person shares | 785,940 | 0.09% | - | - | - | - | - | 785,940 | 0.09% |
| Domestic natural person shares | 120,915 | 0.01% | - | - | - | -120,015 | -120,015 | 900 | 0.00% |
| II. Unlimited tradable shares | 862,307,145 | 99.90% | - | - | - | 120,015 | 120,015 | 862,427,160 | 99.91% |
| 1. A shares | 518,307,145 | 60.05% | - | - | - | 120,015 | 120,015 | 518,427,160 | 60.06% |
| 2. B shares | 344,000,000 | 39.85% | - | - | - | - | - | 344,000,000 | 39.85% |
| III. Total | 863,214,000 | 100.00% | - | - | - | - | - | 863,214,000 | 100.00% |
Causes of shareholding changes□√Applicable □Not ApplicableJMC did not issue shares or derivative securities during the past three years as ofDecember 31, 2018. JMC’s total shares remained unchanged in 2018, and thechange in shareholding structure was caused by the trading restriction on limitedA shares of 120,000 shares held by a natural person shareholder, Jiang Xiangwei,was relived on May 23, 2018.
Approval of changes of shareholding structure□Applicable □√Not Applicable
Shares Transfer□Applicable □√Not Applicable
Impact on accounting data, such as the latest EPS, diluted EPS, shareholders’equity attributable to the equity holders of the Company, generated from sharestransfer□Applicable □√Not Applicable
Others to be disclosed necessarily or per the requirements of securities regulator□Applicable □√Not Applicable
II. Changes of limited A shares□√Applicable □Not Applicable
2. Securities Issuance and ListingI. Securities issuance (not including preferred shares) in the reporting period□Applicable □√Not Applicable
II. Explanation on changes of shares, shareholding structure, assets and liabilitiesstructure□Applicable □√Not Applicable
III. Current staff shares□Applicable □√Not Applicable
3. Shareholders and actual controlling partiesI. Total shareholders, top ten shareholders, and top ten shareholders holdingunlimited tradable shares
| Total shareholders as of the end of the reporting period | JMC had 30,076 shareholders, including 24,702 A-share holders, and 5,374 B-share holders, as of December 31, 2018. | ||||||
| Total shareholders as of the last month-end prior to the disclosure date of the Report | JMC had 24,189 shareholders, including 18,732 A-share holders, and 5,457 B-share holders, as of February 28, 2018. | ||||||
| Top ten shareholders | |||||||
| Shareholder Name | Shareholder Type | Shareholding Percentage (%) | Shares at the End of Year | Change (+,-) | Shares with Trading Restriction | Shares due to mortgage or frozen | |
| Jiangling Motor Holdings Co., Ltd. | State-owned legal person | 41.03 | 354,176,000 | 0 | 0 | 0 | |
| Ford Motor Company | Foreign legal person | 32 | 276,228,394 | 0 | 0 | 0 | |
| China Securities Corporation Limited | Other | 2.72 | 23,458,066 | 714,482 | 0 | 0 | |
| Shanghai Gao Yi Asset Management Partnership (L.P.) | Other | 1.74 | 15,000,000 | 15,000,000 | 0 | 0 | |
| Shanghai Automotive Co., Ltd. | State-owned Legal person | 1.51 | 13,019,610 | 0 | 0 | 0 | |
| Central Huijin Investment Ltd. | State-owned legal person | 0.83 | 7,186,600 | 0 | 0 | 0 | |
| JPMBLSA RE FTIF TEMPLETON CHINA FUND GTI 5497 | Foreign legal person | 0.68 | 5,848,450 | 0 | 0 | 0 | |
| GAOLING FUND,L.P. | Foreign legal person | 0.63 | 5,453,086 | 14,000 | 0 | 0 | |
| INVESCO FUNDS SICAV | Foreign legal person | 0.58 | 5,035,746 | 0 | 0 | 0 | |
| TEMPLETON DRAGON FUND,INC. | Foreign legal person | 0.56 | 4,836,708 | 0 | 0 | 0 | |
| Notes on association among above-mentioned shareholders | None. | ||||||
| Top ten shareholders holding unlimited tradable shares | |||||||
| Shareholder Name | Shares without Trading Restriction | Share Type | |||||
| Jiangling Motor Holdings Co., Ltd. | 354,176,000 | A share | |||||
| Ford Motor Company | 276,228,394 | B share | |||||
| China Securities Corporation Limited | 22,743,584 | A share | |||||
| Shanghai Gao Yi Asset Management Partnership (L.P.) | 15,000,000 | A share | |||||
| Shanghai Automotive Co., Ltd. | 13,019,610 | A share |
| Central Huijin Investment Ltd. | 7,186,600 | A share |
| JPMBLSA RE FTIF TEMPLETON CHINA FUND GTI 5497 | 5,848,450 | B share |
| GAOLING FUND,L.P. | 5,453,086 | B share |
| INVESCO FUNDS SICAV | 5,035,746 | B share |
| TEMPLETON DRAGON FUND,INC. | 4,836,708 | B share |
| Notes on association among above-mentioned shareholders | None. | |
Stock buy-back by top ten shareholders or top ten shareholders holding unlimitedtradable shares in the reporting period□Applicable □√Not Applicable
II. Controlling ShareholdersNature of controlling shareholders: Central/Local government holdings, foreign
holdingsType: Legal person
| Name | Legal representative | Established Date | Organization code | Main scope of business |
| Jiangling Motor Holdings Co., Ltd. | Mr. Zhang Baolin | November 1, 2004 | 913601007670323079 | manufacturing of automobiles, engines, chassis, and automotive components and parts, sales of self-produced products, as well as related after-sales services; industrial investment; management & agent for merchandise and technology export & import; property management; sales of household articles, mechanical & electronic equipment, artistic handicrafts, agricultural by-products and steel; consulting business in enterprise management. |
| Ford Motor Company | William Clay Ford | January 1, 1903 | to design, manufacture, market, and service a full line of Ford cars, trucks, sport utility vehicles (“SUVs”), electrified vehicles, and Lincoln luxury vehicles, provide financial services through Ford Motor Credit Company LLC, and be pursuing leadership positions in electrification, autonomous vehicles, and mobility solutions. |
Change of controlling shareholders□Applicable □√Not ApplicableThere was no change of controlling shareholders in the reporting period.
III. Actual Controlling PartiesNature of controlling shareholders: Central/Local State-owned Assets Supervision
and AdministrationType: Legal person
| Name | Legal representative | Established Date | Organization code | Main scope of business |
| JMCG | Qiu Tiangao | July 27, 1991 | 91360000158263759R | manufacturing of automobiles, engines, chassis, specialty vehicle, transmission, other products, automotive quality testing, sales of self-produced products and raw materials, equipment, electronic products, parts and others, as well as related after-sales services and maintenance services; development of products derived from JMC brand light vehicle; overseas auto project-contracting, export equipment, material and related labour services. |
| Chongqing Changan Automobile Co., Ltd. | Zhang Baolin | December 31, 1996 | 9150000020286320X6 | development, manufacturing, sales, import & export business of auto (including sedan), engine, automotive components, die, tools, installation of machinery, technological consultant services. |
| Equity of listed company in domestic and aboard market held by the entity controlled by the actual controlling party during the reporting period | None | |||
Change of actual controlling parties□Applicable □√Not ApplicableThere was no change of actual controlling parties in the reporting period.Ownership and control relations between the Company and the actual controllingparties are shown as follows:
Actual controlling parties control the Company by the way of trust or other assetsmanagement□Applicable □√Not Applicable
| JMH | Ford |
JMCJMCG
JMCG32%
32%Chongqing Changan Automobile Co., Ltd.
Chongqing Changan Automobile Co., Ltd.SASAC
SASAC
Nanchang State-owned AssetsSupervision and Administration
Committee
Nanchang State-owned AssetsSupervision and Administration
Committee
43.11%
| 43.11% | 100% |
| 50% | 50% |
IV. Other legal person shareholder holding more than 10% of total equity of theCompany□Applicable □√Not Applicable
V. Shareholding reducing restriction to controlling shareholders, actual controllingparties, restructuring parties and other commitment-making entities□Applicable □√Not Applicable
Chapter VII Preferred Shares
□Applicable □√Not ApplicableJMC had no preferred shares in the reporting period.
Chapter VIII Directors, Supervisors, Senior Management and
Employees
1. Changes of Shares held by Directors, Supervisors and Senior Management
| Name | Position | Gender | Age | Term of Office | Shares at the period-beginning | Share Change in the reporting period | Shares at the period-end |
| Qiu Tiangao | Chairman | Male | 52 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Anning Chen | Vice Chairman | Male | 58 | 2018.12.05-2020.06.28 | 0 | 0 | 0 |
| David Johnston | Director | Male | 48 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Manto Wong | Candidate Director & President | Male | 56 | 2019.03.01-2020.06.28 | 0 | 0 | 0 |
| Xiong Chunying | Director & EVP | Female | 54 | 2017.06.29-2020.06.28 | 1,200 | 0 | 1,200 |
| Yuan Mingxue | Director | Male | 50 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Lu Song | Independent Director | Male | 61 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Wang Kun | Independent Director | Female | 42 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Li Xianjun | Independent Director | Male | 51 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Xiao Hu | Chief supervisor | Male | 50 | 2018.12.05-2020.06.28 | 0 | 0 | 0 |
| Alvin Qing Liu | Supervisor | Male | 61 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Zhang Jian | Supervisor | Male | 49 | 2017.06.29-2020.06.28 | 40 | 0 | 40 |
| Ding Zhaoyang | Supervisor | Male | 49 | 2017.06.28-2020.06.28 | 20 | 0 | 20 |
| Chen Guang | Supervisor | Male | 45 | 2017.06.28-2020.06.28 | 0 | 0 | 0 |
| Jin Wenhui | EVP | Male | 51 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Li Weihua | CFO | Female | 41 | 2018.06.29-2020.06.28 | 0 | 0 | 0 |
| Wan Hong | VP & Board Secretary | Male | 57 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Li Xiaojun | VP | Male | 43 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Liu Shuying | VP | Female | 56 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Mike Chang | VP | Male | 52 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Christian Chen | VP | Male | 46 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Wu Xiaojun | VP | Male | 44 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Ding Wenmin | VP | Male | 47 | 2018.01.01-2020.06.28 | 0 | 0 | 0 |
| Peter Fleet | Ex Vice Chairman | Male | 51 | 2017.06.29-2018.12.04 | 0 | 0 | 0 |
| Thomas Fann | Ex Director & | Male | 56 | 2017.06.29- | 0 | 0 | 0 |
| President | 2019.02.28 | ||||||
| Zhu Yi | Ex Chief Supervisor | Male | 51 | 2017.06.29-2018.12.04 | 0 | 0 | 0 |
| Gong Yuanyuan | Ex-CFO | Female | 45 | 2014.06.27-2018.07.31 | 0 | 0 | 0 |
| Zhu Shuixing | Ex-VP | Male | 53 | 2015.07.01-2018.08.15 | 0 | 0 | 0 |
| Tim Slatter | Ex-VP | Male | 44 | 2017.06.29-2019.02.28 | 0 | 0 | 0 |
| Total | 1,260 | 0 | 1,260 |
2. Changes of Directors, Supervisors and Senior Management
| Name | Position | Status | Date | Reason |
| Peter Fleet | Vice Chairman | Leave | 2018.12.05 | Work rotation |
| Zhu Yi | Chief Supervisor | Leave | 2018.12.05 | Work rotation |
| Gong Yuanyuan | CFO | Leave | 2018.08.01 | Work rotation |
| Zhu Shuixing | VP | Leave | 2018.08.16 | Resign from the vice president position for the personal reasons |
| Thomas Fann | Director & President | Leave | 2019.03.01 | Work rotation |
| Tim Slatter | VP | Leave | 2019.03.01 | Work rotation |
3. Particulars about working experience of Directors, Supervisors and seniormanagement
Directors and Candidate Director:
Mr. Qiu Tiangao, born in 1966, holds a Bachelor Degree in MechanicalManufacturing and a Master Degree in Industrial Engineering from HuazhongUniversity of Science and Technology, and is the Chairman of JMCG, ViceChairman of Jiangling Motor Holdings Co., Ltd., and Chairman of JMC. Mr. QiuTiangao held various positions including General Manager, Chairman ofNanchang Gear Co., Ltd., Chairman of Jiangxi JMCG Gear Co., Ltd., VicePresident of Jiangling Motor Holding Co., Ltd., and Director & General Manager ofJMCG.
Mr. Anning Chen, born in 1961, holds a Ph.D. in Engineering from the Universityof Cincinnati, Ohio, U.S. and MBA from the University of Michigan Ross BusinessSchool, Ann Arbor, Michigan, U.S., and is a Group Vice President of Ford MotorCompany, President and CEO of Ford Motor (China) Ltd., and Vice Chairman ofJMC. Mr. Anning Chen first began his distinguished career at Ford MotorCompany in 1992, and during his seventeen years at Ford, he held variousexecutive management roles. Most recently, Mr. Anning Chen was CEO of CheryAutomobile LTD, China as well as Chairman of the Board of Directors for CheryJaguar Land Rover Automotive, China.
Mr. David Johnston, born in 1970, holds a Bachelor Degree in Economics, MasterDegree in Economics and Manufacturing Leadership from Cambridge University,United Kingdom, and is CFO of Ford Asia Pacific and a Director of JMC. Mr.David Johnston held various positions including Controller and Finance Managerof PAG, Volvo China CFO, Ford ASEAN CFO, Manufacturing Controller of FordEurope, PD Controller of Ford Europe, PD Vehicle Controller of Ford GlobalFinance.
Mr. Manto Wong, born in 1962, holds a Bachelor’s Degree in ComputerEngineering and a Master’s Degree in Business Administration from the Universityof Michigan, U.S.A., and is a Candidate Director and President of JMC. Mr. MantoWong held various positions including Manger of U.S. Market AnalysisDepartment of Ford, Chief Financial Officer of JMC, Chief Financial Officer of FordJapan operations, Director of Business Strategy for Asia Pacific of Ford, VicePresident and Chief Financial Officer for Ford Motor (China) Ltd., and VicePresident of Finance for Changan Ford.
Ms. Xiong Chunying, born in 1964, senior engineer, holds a Bachelor Degree inAutomobile Engineering from Jiangsu Engineering College, a Master Degree inIndustrial Economics from Jiangxi University of Finance and Economics and anEMBA Degree from China Europe International Business School, and is a Directorof JMCG and a Director & First Executive Vice President of JMC, in charge of theCompany's product development and assists the President to support the overalloperation of the Company. Ms. Xiong Chunying held various positions includingChief of Quality Management Department, Assistant to the President, VicePresident of JMC.
Mr. Yuan Mingxue, born in 1968, senior engineer, holds a Bachelor’s Degree inAuto Engineering from Beijing Institute of Technology and an EMBA from ChinaEurope International Business School, and is a Standing Vice President ofChongqing Changan Automobile Company Limited (“Changan Automobile”) and aDirector of JMC. Mr. Yuan Mingxue has held various positions including Chief ofQuality Department, Manager of Engine Plant for Changan Company, GeneralManager of Nanjing Changan Auto Co., Ltd., Assistant to the President ofChangan Automobile and Executive Vice President of Jiangling Motor HoldingsCo., Ltd., Assistant to the President, Chief of Strategy Planning Department forChangan Automobile, Assistant to the President and General Manager ofOverseas Business Development Department for Changan Automobile, and VicePresident of Changan Automobile.
Mr. Lu Song, born in 1957, professor and arbitrator, holds a Bachelor’s Degree inLaw from Peking University and a Master’s Degree in Law from China ForeignAffairs University (“CFAU”) and Free University of Brussels respectively, and is aprofessor of CFAU and the arbitrator of international arbitral institutions, VicePresident of the Chinese Society of Private International Law, Executive Councilof the Chinese Society of International Law, and an Independent Director of JMC.Mr. Lu Song held various positions including Director of International Law Instituteof CFAU and Secretary General of the Chinese Society of International Law.
Ms. Wang Kun, born in 1976, associate professor, holds a Bachelor’s Degree inAdministration from Nankai University and a Doctor’s Degree in Accounting fromHong Kong University of Science and Technology, and is the Assistant to Dean ofSchool of Economics and Management of Tsinghua University, Deputy Director ofCorporate Governance Center of Tsinghua University, and an IndependentDirector of JMC. Ms. Wang Kun held position of lecturer in School of Economicsand Management of Tsinghua University.
Mr. Li Xianjun, born in 1967, holds a Bachelor’s Degree in Industrial Managementfrom Jilin University of Technology and a MBA, a Doctor’s Degree in Political
Economy from Jilin University, and is Head and Academic Director of School ofAutomotive Engineering of Tsinghua University, and an Independent Director ofJMC. Mr. Li Xianjun has held various positions including Planner of Engine Plantof FAW, Secretary of General Manager of Jilin Province Agricultural MachineCorporation, General Manager of Planning Department of Jilin Province FeedCompany, and Lecturer of School of Business of Jilin University.
Supervisors:
Mr. Xiao Hu, born in 1968, holds a Bachelor’s Degree in Radio from InformationScience & Electronic Engineering Department of Zhejiang University, and is amember of the Standing Committee of the CPC, the secretary of DisciplineInspection Commission and Chairman of Supervisory Board for JMCG, and ChiefSupervisor of JMC. Mr. Xiao Hu has served as a cadre in the General Office ofthe Nanchang Municipal People's Government, deputy director of the Office of theWorking Committee of the Nanchang Hi-tech Industrial Development Zone,deputy director of the Software Industry Office of the Nanchang Hi-tech IndustryDevelopment Zone Administrative Committee, deputy head of the OrganizationDepartment of the Working Committee of Nanchang Hi-tech IndustryDevelopment Zone, deputy director of the Personnel and Labor Bureau of theNanchang Hi-tech Industry Development Zone Administrative Committee, Head ofthe Organization Department of the Working Committee of Nanchang Hi-techIndustry Development Zone, and the Director of the Personnel Bureau of theNanchang Hi-tech Industry Development Zone Administrative Committee.
Mr. Alvin Qing Liu, born in 1957, holds a Master’s Degree in InternationalEconomics and a Jurisprudence Doctor’s Degree from Marquette University,U.S.A, and is a Vice President and General Counsel of Ford Asia Pacific, Director& Vice Chairman of Ford Motor (China) Ltd, and a Supervisor of JMC. Mr. Liu wasa practicing attorney at Ruder, Ware and Michler Law Firm, U.S.A., counsel ofAsia Pacific Region, Chrysler Corporation, U.S.A., counsel of Mergers andAcquisitions Group and Northeast Asia Operations, Daimler-Chrysler A.G.,Germany, an International Counsel in the Office of General Counsel, Ford MotorCompany, and Vice President & General Counsel of Ford Motor (China), Ltd.
Mr. Zhang Jian, born in 1969, holds a College Degree in Secretarial Professionalfrom North China University of Technology, and is Chairman of JMCG LaborUnion, Chief Supervisor of Jiangling Motor Holdings Co., Ltd, and a Supervisor ofJMC. Mr. Zhang Jian held various positions including Secretary of Chairman andDeputy Director of Office for JMC, Director of Office, Director of Communist PartyOffice, Chief of Publicity Department for JMCG, Assistant to General Manger ofJMCG, and Senior Vice Chairman of JMCG Labor Union.
Mr. Ding Zhaoyang, born in 1969, holds a MBA Degree from Université dePoitiers, France, and is a Supervisor of JMC and Chief of Public & legal AffairDepartment for JMC. Mr. Ding Zhaoyang held various positions including DeputyChief, Chief of Public Relationship Department of JMC.
Mr. Chen Guang, born in 1973, holds a Bachelor’s Degree in AutomobileEngineering from Hunan University, and is a Supervisor of JMC and a ViceGeneral Manager of JMC Heavy Duty Vehicle Co., Ltd. Mr. Chen Guang heldvarious positions including Deputy Chief of Quality Management Department,
Deputy Plant Manager of Assembly Plant for Jiangling-Isuzu Motors CompanyLimited, and Plant Manager of Assembly Plant for JMC.
Senior management:
Mr. Manto Wong, please refer to the part of Directors and Candidate Director.
Ms. Xiong Chunying, please refer to the part of Directors and Candidate Director.
Mr. Jin Wenhui, born in 1967, senior engineer, holds a Bachelor’s Degree inMechanical Manufacturing, a Master’s Degree in Mechanical Engineering fromHuazhong University of Science and Technology and an EMBA Degree in ChinaEurope International Business School, and is an Executive Vice President of JMC,in charge of sales and manufacturing management. Mr. Jin Wenhui held variouspositions including Chief of Manufacturing Department, Assistant to the President,Vice President of JMC, Director, General Manager of JMCG Jingma Motors Co.,Ltd., and Executive Vice General Manager of Jiangxi-Isuzu Motors Co., Ltd.
Ms. Li Weihua, born in 1977, holds a Bachelor’s Degree in International EconomicLaw from Shanghai University of Finance and Economics and a MBA fromCanada York University Schulich School of Business, and is the CFO of JMC, incharge of financial management. Ms. Li Weihua has held various positionsincluding Finance Analyst of Ford China, Finance Analyst, and Finance Managerof Ford Motor Research & Engineering (Nanjing) Co., Ltd., MFG Finance Manager,PD Finance Manager, MFG Finance Controller, and PD Finance Controller for Cand C SUV of Ford AP, and CFO of Ford Lioho.
Mr. Wan Hong, born in 1961, holds a Master of Business Administration Degreefrom Jiangxi University of Finance & Economics, and is the Vice President &Board Secretary of JMC, in charge of the Company human resources andrelevant duties of Board Secretary. Mr. Wan Hong held various positions includingChief of Labour and Personnel Department, Assistant to the President, and VicePresident for JMC.
Mr. Li Xiaojun, born in 1975, senior engineer, holds a Bachelor’s Degree inMechanical Design & Manufacturing from Jiangxi University of Science andTechnology and a Master’s Degree in Industrial Engineering from HuazhongUniversity of Science and Technology, and is a Vice President of JMC, in chargeof quality, manufacturing management and parts business. Mr. Li Xiaojun heldvarious positions including Chief of JMC Quality Management Department, PlantManager of Assembly Plant and Assistant to the President for JMC.
Ms. Liu Shuying, born in 1962, senior engineer, holds a Bachelor’s Degree inMechanical Manufacturing from Jiangxi University of Technology, and is a VicePresident of JMC, in charge of product development. Ms. Liu Shuying heldvarious positions including Chief of Quality & Supervision Department ofJiangling-Isuzu Motors Company Limited, Director of Product DevelopmentCenter and Assistant to the President of JMC.
Mr. Mike Chang, born in 1966, holds a Bachelor Degree in Naval ArchitectureEngineering from National Taiwan University, China Taiwan and a Master Degreein Manufacturing Engineering from University of California, Los Angeles, U.S.A.,
and is a Vice President of JMC, in charge of Xiaolan Branch and Engine Plant. Mr.Mike Chang held various positions including Paint Area Manger, Final AssemblyPlant Area Manager, Manufacturing Director, Board member of Ford Lio Ho, ViceGeneral Manager of BinXin Paper Company for Ting Hsin International Group,Manufacturing Director of Nam Chow Foods Co., China, General Manager ofTianjin Chuan Shun Foods Co., LTD, Tianjin Ting Fung Starch Development Co.,LTD, and Hangzhou StarPro Starch Co., LTD for Ting Hsin International Group,and General Manager of Changan Ford Automobile Co., Ltd. Harbin Branch.
Mr. Christian Chen, born in 1972, semi-senior engineer, holds a Bachelor’sDegree in Automotive Engineering from Wuhan University of Technology and aMBA from Wuhan University, and is a Vice President of JMC, in charge ofpurchasing business. Mr. Christian Chen held various positions including ProductDevelopment Manager of Dongfeng-Citroen, Quality Project Engineer of TUV,STA, Buyer, Purchasing Manager and Senior Purchasing Manager of Ford MotorCompany.
Mr. Wu Xiaojun, born in 1974, holds a Bachelor’s Degree from Wuhan Universityof Technology and a MBA from Jiangxi University of Finance and Economics, andis a Vice President of JMC and General Manager of JMC Heavy Duty Vehicle Co.,Ltd., in charge of heavy duty truck business. Mr. Wu Xiaojun held variouspositions including Chief of Quality Department, Assistant to the President forJMC, and Executive Deputy General Manager of JMC Heavy Duty Vehicle Co.,Ltd.
Mr. Ding Wenming, born in 1972, holds a Bachelor’s Degree in AutomobileExertion from Wuhan University of Technology, and is a Vice President of JMC, incharge of Company level strategic planning, product planning and projectmanagement. Mr. Ding Wenming held various positions including Deputy Chief ofProduct Development Center, Chief of Product Planning & Program ManagementDepartment, and Assistant to the President for JMC.
Positions at the shareholder entities□√Applicable □Not Applicable
| Name | Shareholder Entity | Title | Term of Office | Compensation Paid by Shareholder Entity (Y/N) |
| Qiu Tiangao | JMH | Vice Chairman | 2016.3— | N |
| Anning Chen | Ford | Group Vice President and President, Ford China | 2018.10— | Y |
| David Johnston | Ford | CFO, Ford Asia Pacific | 2017.7— | Y |
| Yuan Mingxue | JMH | Director | 2015.7— | N |
| Alvin Qing Liu | Ford | Vice President and General Counsel, Ford Asia Pacific | 2009.1— | Y |
Particulars about positions and concurrent positions in other entities other thanshareholder entities□√Applicable □Not Applicable
| Name | Entity | Title |
| Qiu Tiangao | JMCG | Chairman |
| JMCG Jingma Motors Co., Ltd. | Chairman | |
| Jiangling Dingsheng Investment Co., Ltd. | Chairman | |
| JMCG New Energy Vehicle Co., Ltd. | Chairman | |
| Jiangxi ISUZU Co., Ltd. | Chairman | |
| GETRAG (Jiangxi) Transmission Company | Chairman | |
| JMC Heavy Duty Vehicle Co., Ltd. | Chairman | |
| Anning Chen | Ford Motor (China) Ltd. | President & CEO |
| Changan Ford Automobile Co., Ltd. | Vice Chairman | |
| Fordshuttle Trading (Shanghai) Co., Ltd. | Chairman | |
| David Johnston | Ford Motor (China) Ltd. | Director |
| Changan Ford Automobile Co., Ltd. | Director | |
| Yuan Mingxue | Chongqing Changan Automobile Co., Ltd. | Standing Vice President |
| Lu Song | China Foreign Affairs University | Professor |
| Wang Kun | Tsinghua University | Assistant to Dean of School of Economics and Management & Deputy Director of Corporate Governance Center |
| Li Xianjun | Tsinghua University | Head and Academic Director of School of Automotive Engineering |
| Xiao Hu | JMCG | Chief supervisor |
| JMCG Jingma Motors Co., Ltd. | Supervisor | |
| Jiangling Dingsheng Investment Co., Ltd. | Supervisor | |
| Jiangxi Jiangling Real Estate Co., Ltd. | Chief supervisor | |
| Jiangxi Jiangling Chassis Co., Ltd. | Supervisor | |
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | Supervisor | |
| Alvin Qing Liu | Changan Ford Mazda Engine Co., Ltd. | Director |
| Ford Motor (China) Ltd. | Director | |
| Changan Ford Automobile Co., Ltd. | Director | |
| Ford Motor Research (Nanjing) Co., Ltd. | Supervisor | |
| Ford Motor Research Test(Nanjing) Co., Ltd. | Supervisor | |
| Fordshuttle Trading (Shanghai) Co., | Supervisor |
| Ltd. | ||
| Xiong Chunying | JMCG | Director |
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | Director | |
| JMC Heavy Duty Vehicle Co., Ltd. | Director | |
| Jin Wenhui | Jiangxi Jiangling Group Special Vehicle Co., Ltd. | Chairman |
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | Director | |
| Jiangling Motor Sales Co., Ltd. | Legal Representative & Executive Director | |
| JMC Heavy Duty Vehicle Co., Ltd. | Director | |
| Hanon Systems (Nanchang) Co., Ltd. | Director | |
| Shenzhen Fujiang New Energy Automobile Sales Co., Ltd. | Legal Representative | |
| Guangzhou Fujiang New Energy Automobile Sales Co., Ltd. | Legal Representative & Executive Director | |
| Xiamen Fujiang New Energy Automobile Sales Co., Ltd. | Legal Representative & Executive Director | |
| Li Weihua | Jiangling Motors Sales Co., Ltd. | Supervisor |
| JMC Heavy Duty Vehicle Co., Ltd. | Director | |
| Hanon Systems (Nanchang) Co., Ltd. | Director | |
| Shenzhen Fujiang New Energy Automobile Sales Co., Ltd. | Supervisor | |
| Guangzhou Fujiang New Energy Automobile Sales Co., Ltd. | Supervisor | |
| Xiamen Fujiang New Energy Automobile Sales Co., Ltd. | Supervisor | |
| Wan Hong | Jiangxi Hongdu Aviation Industry Co., Ltd. | Independent Director |
| JMC Heavy Duty Vehicle Co., Ltd. | Director | |
| Wu Xiaojun | JMC Heavy Duty Vehicle Co., Ltd. | Director & General Manager, |
| Chen Guang | JMC Heavy Duty Vehicle Co., Ltd. | Vice General Manager |
Penalties from securities regulator to the present and resigned Directors,Supervisors and senior executives in the recently three years□Applicable □√Not Applicable
4. Compensation of Directors, Supervisors and Senior Executives
Decision-making procedure, determination of basis, and actual payment regardingthe compensation of the Directors, Supervisors and senior executives
Directors and Supervisors who did not concurrently hold other managementpositions in JMC were not paid by JMC. Director Qiu Tiangao, Supervisors XiaoHu and Zhang Jian were paid by JMCG. Directors Anning Chen, David Johnstonand Supervisor Alvin Qing Liu were paid by Ford. Director Yuan Mingxue waspaid by Chongqing Changan Automobile Co., Ltd.
(1) In accordance with JMC Executive Compensation Scheme approved by theBoard of Directors, the compensation for the Chinese-side senior managementconsists of base salary and floating bonus. The base salary level is determinedaccording the grade of the senior executives, and the floating bones shall be paidaccording to the operating performance. 70% of the bonus will be distributed inthis year, and the rest 30% will be distributed in the next three years. In 2018, theCompany paid annual compensation before tax of approximately RMB 1,650thousand to EVP Xiong Chunying, paid approximately RMB 1,440 thousand toEVP Jin Wenhui, paid approximately RMB 1,180 thousand per person to VP &Board Secretary Wan Hong, VP Liu Shuying, VP Li Xiaojun and VP Liu Shuying,paid VP Wu Xiaojun approximately RMB 1,310 thousand, paid VP Ding Wenmingapproximately RMB 1,390 thousand, paid Ex-VP Zhu Shuixing approximatelyRMB 920 thousand,. Two employee-representative supervisors, Mr. DingZhaoyang and Mr. Chen Guang, were paid annual compensation before tax ofabout RMB 440 thousand and RMB 580 thousand respectively. The totalcompensation before tax paid by JMC for the aforesaid persons was about RMB11.27 million in the reporting period, including the long-term incentive of RMB 1.18million deferred from the previous years.
(2) JMC pays annual compensation for Ford-seconded senior managementpersonnel to Ford in accordance with the revised Personnel SecondmentAgreement signed between JMC and Ford and Ford Affiliates. In 2018, JMCshould pay US$ 375 thousand per person to Ford for Ex Director & PresidentThomas Fann, Ex VP Tim Slatter and VP Mike Chang, pay RMB 750 thousand forVP Christian Chen, pay RMB 312.5 thousand for CFO Li Weihua, and pay RMB437.5 thousand for Ex CFO Gong Yuanyuan. These payments made by JMC toFord do not reflect the actual salaries earned by Ford-seconded seniormanagement.
(3) Pursuant to the resolutions of JMC 2011 Annual Shareholder’s Meeting, theannual compensation for the JMC Independent Directors is RMB 100 thousandper person, and JMC bears their travel-related expenses associated with JMC’sbusiness.
Table on compensation of the Directors, Supervisors and senior executives in thereporting period
Unit: RMB’ 000
| Name | Position | Gender | Age | Present (Y/N) | Compensation Before Tax Paid by JMC | Compensation Paid by Related Party (Y/N) |
| Qiu Tiangao | Chairman | Male | 52 | Y | 0 | Y |
| Anning Chen | Vice Chairman | Male | 58 | Y | 0 | Y |
| David Johnston | Director | Male | 48 | Y | 0 | Y |
| Manto Wong | Candidate Director & President | Male | 56 | Y | 0 | Y |
| Xiong Chunying | Director & EVP | Female | 54 | Y | 1,650 | N |
| Yuan Mingxue | Director | Male | 50 | Y | 0 | Y |
| Lu Song | Independent Director | Male | 61 | Y | 100 | N |
| Wang Kun | Independent Director | Female | 42 | Y | 100 | N |
| Li Xianjun | Independent | Male | 51 | Y | 100 | N |
| Director | ||||||
| Xiao Hu | Chief supervisor | Male | 51 | Y | 0 | Y |
| Alvin Qing Liu | Supervisor | Male | 61 | Y | 0 | Y |
| Zhang Jian | Supervisor | Male | 49 | Y | 0 | Y |
| Ding Zhaoyang | Supervisor | Male | 49 | Y | 440 | N |
| Chen Guang | Supervisor | Male | 45 | Y | 580 | N |
| Jin Wenhui | EVP | Male | 51 | Y | 1,440 | N |
| Li Weihua | CFO | Female | 41 | Y | * | N |
| Wan Hong | VP & Board Secretary | Male | 57 | Y | 1,180 | N |
| Li Xiaojun | VP | Male | 42 | Y | 1,180 | N |
| Liu Shuying | VP | Female | 56 | Y | 1,180 | N |
| Mike Chang | VP | Male | 52 | Y | * | N |
| Christian Chen | VP | Male | 46 | Y | * | N |
| Wu Xiaojun | VP | Male | 44 | Y | 1,310 | N |
| Ding Wenming | VP | Male | 47 | Y | 1,390 | N |
| Peter Fleet | Vice Chairman | Male | 51 | N | 0 | Y |
| Thomas Fann | Director & President | Male | 56 | N | * | N |
| Zhu Yi | Chief Supervisor | Male | 48 | N | 0 | Y |
| Gong Yuanyuan | CFO | Female | 45 | N | * | N |
| Zhu Shuixing | VP | Male | 53 | N | 920 | N |
| Tim Slatter | VP | Male | 44 | N | * | N |
* Please refer to the relevant statement in the Article 4 Compensation of Directors,Supervisors and Senior Executives of this Chapter.
Granted equity incentive to the Directors, Supervisors and senior executives in thereporting period□Applicable □√Not Applicable
5. Employeesi. Employees, Professional Structure and Educational Level
| Employees in parent company (persons) | 14,449 | |
| Employees in subsidiaries (persons) | 2,091 | |
| Total employees (persons) | 16,540 | |
| Total employees paid compensation (persons) | 17,395 | |
| Retired employees bore retirement benefits in parent company and its subsidiaries | 806 | |
| Professional Structure | ||
| Type | Employees (Persons) | |
| Production Worker | 11,058 | |
| Sales Personnel | 692 | |
| Technical Personnel | 3,589 | |
| Finance Personnel | 245 | |
| Administrative Staff | 956 | |
| Total | 16,540 | |
| Educational Level | ||
| Type | Employees (Persons) | |
| Master degree and higher | 1,012 | |
| Bachelor degree | 3,802 | |
| Polytechnic school degree | 2,010 | |
| Below polytechnic school degree | 9,716 | |
| Total | 16,540 | |
ii. Compensation PolicyThe Company strictly complies with the relevant requirements of national laborlaws and regulations, provides a safe and comfortable workplace, andcontinuously establishes and improves the salary management mechanism thatmatches the employee’s income with the company’s performance, employee’sindividual performance and ability. By implementing policies such as theemployee’s annual salary adjustment, annual performance rewards, etc. thatallow employees to share company development achievements. At the same time,we constantly improve the employee welfare policy to meet the diverse individualneeds of employees and enhance employee experience and satisfaction.
iii. TrainingIn 2018, JMC’s training expense was RMB 13,960 thousand, and training person-time were 93,000 with training stratification of 97%. Please refer to 2018 JMCCorporation Social Responsibility Report for more details on 2018 training planimplementation.
iv. Labour outsourcing□Applicable □√Not Applicable
Chapter IX Corporate Governance Structure
1. Status of the Corporate Governance in JMCDifference between actual situation of corporate governance in JMC and that ofrequirements of listed company corporate governance promulgated by CSRC□Applicable □√Not Applicable
During the reporting period, the Company strictly abided by the Company Law,the Securities Law, the Code of Corporate Governance for Listed Companies inChina, the Rules Governing Listing of Stock on Shenzhen Stock Exchange, aswell as relevant laws and regulations, to carry out corporate governance activitiesand continued to improve its corporate governance.
2. Separation between JMC and the Controlling Shareholders in respect ofPersonnel, Assets and Finance, and Independence concerning Organization andBusiness:
(1) With respect to personnel matters, the positions of chairman and president areheld by different individuals; JMC’s senior management do not hold positionsother than director positions with its controlling shareholders; JMC seniormanagement personnel are paid by JMC; labor, personnel matters andcompensation management of JMC are completely independent.
(2) With respect to assets, JMC assets are complete. The assets utilized by JMC,including production system, supporting production system and peripheralfacilities, and non-patent technology, are owned and/or controlled by JMC.
(3) With respect to finance, JMC has an independent finance department andindependent accounting system, and has a uniform and independent accountingsystem and financial control system for its branches and subsidiaries. JMC has itsown bank accounts, and there are no bank accounts jointly owned by JMC and its
controlling shareholders. JMC pays taxes independently in accordance withrelevant laws.
(4) With respect to organization, JMC’s organization is independent, complete andscientifically established with a sound and efficient operating mechanism. Theestablishment and the operation of JMC’s corporate governance are strictlycarried out per the Articles of Association of JMC. Production and administrativemanagement are independent from the controlling shareholders. JMC hasestablished an organization structure that meets the need for ongoingdevelopment.
(5) With respect to business, JMC has independent purchasing, production andsales systems. The purchasing, production and sales of main materials andproducts are carried out through its own purchasing, production & sales functions.JMC is independent from the controlling shareholders in respect to its business,and has independent and complete business and self-sufficient operatingcapability.
3. Horizontal Competition□Applicable □√Not Applicable
4. Introduction to the Shareholders’ MeetingI. Index to the Shareholders’ Meeting in the reporting period
| Meeting | Meeting Type | Investor Participation Ratio | Convening Date | Disclosure Date | Index |
| 2018 First Special Shareholders’ Meeting | Special Shareholders’ Meeting | 77.59% | 2018.02.06 | 2018.02.07 | Announcement of this Special Shareholders’ Meeting (No: 2018-008) was published in the website www.cninfo.com.cn. |
| 2018Annual Shareholders’ Meeting | Annual Shareholders’ Meeting | 76.91% | 2018.06.26 | 2018.06.27 | Announcement of this Annual Shareholders’ Meeting (No: 2018-028) was published in the website www.cninfo.com.cn. |
| 2018 Second Special Shareholders’ Meeting | Special Shareholders’ Meeting | 77.70% | 2018.12.05 | 2018.12.06 | Announcement of this Special Shareholders’ Meeting (No: 2018-051) was published in the website www.cninfo.com.cn. |
II. Special Shareholders’ Meeting convened by preferred shareholders whose
voting rights were restored□Applicable □√Not Applicable
5. Independent Directors’ Performance of DutyI. Particulars about the directors’ attendance to the Board meeting and the
Shareholders’ Meeting
| Name | Required Board Attendance | Presence in Person | Presence in Form of Paper Meeting | Presence by Proxy | Absence | Not to present in person in two consecutive meetings (Y/N) | Presence at the Shareholders’ Meeting |
| Lu Song | 19 | 3 | 15 | 1 | 0 | N | 1 |
| Wang Kun | 19 | 3 | 15 | 1 | 0 | N | 1 |
| Li Xianjun | 19 | 1 | 15 | 3 | 0 | N | 1 |
II. Dissent from Independent Directors□Yes □√NoThe Independent Directors of the Company had no dissent to the relevantproposal of the Company in the reporting period.
III. Other introduction to Independent Directors’ Performance of Duty□√Yes □NoJMC has appointed three Independent Directors so far. The IndependentDirectors exercised their fiduciary duties on routine work and major decision-making of the Board of Directors. They studied every proposal reviewed by theBoard of Directors thoroughly and raised their opinions, inquired about majorevents which required opinions from the Independent Directors and issued theirwritten opinions, and actively engaged in the affairs of the CompensationCommittee and the Audit Committee in the reporting period, to protect theinterests of the Company and all the shareholders.
6. 2018 Diligence Report of the Committees under the Board of DirectorsI. Work of the Audit CommitteeA. Work Summary Report of the Audit CommitteeAccording to its Working Rules, the Audit Committee diligently executed its dutiesand delivered guiding opinions. The primary tasks completed during the reportingperiod were as follows.i. The Audit Committee reviewed the Company’s internal control work plan and
internal control implementation results regularly.ii. The Audit Committee reviewed the Eight Accounting Provisions and Write-off
proposal and submitted it to the Board for approval.iii. The Audit Committee reviewed the proposal on Implementing New Revenue
Recognition Standard and submitted it to the Board for approval.iv. The Audit Committee reviewed the independent auditor’s audit plan, letter of
engagement and risks and controls.v. The Audit Committee has coordinated with the independent auditor to allow the
audit and associated financial report can be submitted within the appointed
period.vi. The Audit Committee reviewed the financial statements before the certified
auditor’s on-site audit, after receiving the certified auditor’s initial and final audit
opinions. The Committee communicated with auditors face to face over
important events and major accounting estimations, audit adjustment items and
important accounting policies which potentially affect the financial statements,
and believes that the financial statements are truthful, accurate and fullyreflect the Company’s actual status.vii. The Audit Committee submitted the Summary Work Report of the Independent
Auditor for 2018 to Board for review.viii. The Audit Committee reviewed the Internal Control Self-assessment Report
and agreed to submit this to the Board for approval.
B. Written Opinions on JMC Financial StatementsThe Audit Committee reviewed the unaudited financial statements prepared bythe Company and issued its written opinions as follows on January 16, 2019: theAudit Committee reviewed the financial statements compiled by JMC and believesthat the financial statements have in all material aspects reflected the actualstatus of the Company. The Audit Committee would continue to keep in closecontact with the external auditor. After receiving the auditor’s initial auditcomments, the committee would review the financial statements once again.
The Audit Committee reviewed the financial statements prepared by JMC after theexternal auditor issued its initial audit opinions and issued written opinions asfollows on February 26, 2019: the financial statements have been preparedaccording to China GAAP and the Company’s financial policies; and, the financialstatements reported gives a true, accurate and fair view of the financial position ofthe Company as at December 31, 2018, and of its financial performance and itscash flows for the year then ended, in all material respects.
The Audit Committee made resolutions on the audited 2018 financial statementsas follows on March 7, 2019: the Audit Committee reviewed the financialstatements after the certified public auditor issued its final audit opinion, and theAudit Committee believed that the financial statements reported, including theBalance Sheet, Income Statement and Cash Flow, give a true, accurate and fairview of the financial position of the Company as at December 31, 2018, and of itsfinancial performance and its cash flows for the year then ended, in all materialrespects. The Audit Committee concurred to submit for Board approval.
C. 2018 Independent Audit Work Summary Report
The Audit Committee reviewed the 2018 Audit Work Plan submitted by theindependent auditing firm PwC Zhong Tian via communications with the PwCZhong Tian leading auditor. Agreement was achieved regarding timing andcontent and both parties believe that the plan ensures a comprehensivecompletion of the 2018 audit tasks.
The independent auditor thoroughly communicated with the management and theAudit Committee Members regarding: accounting policies implementation,revenue recognition, significant accounting estimates related to accrued expenses,accounting treatment for eight Provisions, Impairment of long term assets, andresearch and development expenses, related party transaction recognition andfairness and information disclosure. They have also discussed about issuesidentified and the corrective actions. As a result, all parties have a more in-depthunderstanding of the business status, financial status and internal control.Therefore, a solid foundation was laid for a fair audit conclusion issued by theindependent auditor.
The Audit Committee believed that the external certified auditor had executed theaudit work consistently with the requirements of China Certified AuditorIndependent Audit Principles. The audit period was adequate and the allocation ofpersonnel resources was sufficient to deliver an audit report which accuratelyreflects the Company’s financial position as at December 31, 2018, and thefinancial performance and cash flows for the year then ended. The auditconclusion fairly reflects the Company’s actual status.
II. 2018 Diligence Report of the Compensation CommitteeIn the reporting period, the Compensation Committee exercised its duties asfollows:
i. reviewed and approved the Proposal on 2017 Year-end Bonus for the
Company’s senior executives;ii. Reviewed and approved the adjustment of the annual total cash income target
of the Company’s senior executives in 2018;iii. Reviewed and approved the KPIs for the Company’s senior executives in 2018,
and;iv. Reviewed and approved the 2017 Due Diligence Report of the Compensation
Committee.
The Compensation Committee’s opinions on the annual compensation of theDirectors, Supervisors and senior management disclosed in this Report are asfollows:
The 2018 annual compensation for the Chinese-side senior management waspaid upon the principles promulgated in the JMC Executive CompensationScheme. The 2018 annual compensation for Ford-seconded senior managementpersonnel was paid in accordance with revised Personnel SecondmentAgreement signed between JMC and Ford and Ford Affiliates. The annualcompensation for the Director and Supervisor that the Company paid abided byJMC salary management system.
In the reporting period, the annual compensation of the Directors, Supervisors andsenior executives disclosed in this Report was complied with JMC salarymanagement system, and there was neither breach nor inconsistency of thissystem.
7. Works of Supervisory BoardRisks found by the Supervisory Board in the reporting period□Yes □√NoThe Supervisory Board had no dissent on inspection items in the reporting period.
8. Compensation & Incentive Mechanism for Senior Management in the Reporting
PeriodThe Compensation Committee of the Company approved the 2018 year-endbonus plan for the senior executive based on the actual performance of the keyperformance indicators for the senior executives, which is set out in JMCExecutive Compensation Scheme approved by the Board of Directors of theCompany, and approved to adjust the Year 2019 total income target of the seniorexecutives based on market conditions. These plans are applicable only to theChinese-side senior management.
9. Internal ControlI. Major defect of internal control in the reporting period□Yes □√No
II. Internal Control Self-assessment Report
| Issuance date | March 28, 2019 | ||
| Index | www.cninfo.com.cn | ||
| Total value of assets of the entities in scope counts as % of that disclosed in the consolidated financial statements | 100.00% | ||
| Total value of operating revenue of the entities in scope counts as % of that disclosed in the consolidated financial statements | 100.00% | ||
| Deficiency Determination Criteria | |||
| Type | Financial Report | Non-financial Report | |
| Qualitative Criteria | Material Weakness: An error that changes the trend of results, changes profit to loss or loss to profit Ineffective anti-fraud process or any fraud involving senior management Ineffective control over accounting policies Ineffective oversight by the Audit Committee Significant Deficiency; Errors in management reporting systems or Corporate accounting records that could lead to incorrect management decisions; Actions inconsistent with Company values, policies and other Corporate guidelines that are likely to significantly impact cost, quality, customer satisfaction, reputation, or competitive advantage; Control issues in IT infrastructure or applications that may lead to impairment of Company operations. Any actions indicating fraud or theft that is significant in value Minor Deficiency; Any control deficiencies that do not meet the criteria for material or significant. | Material Weakness: Unscientific decision making process such as incorrect decisions that result in unsuccessful mergers and acquisitions; Major regulatory compliance issues; Frequent media reports harmful to the Company’s reputation; A lack of control within key business processes or systematic breakdown of control policies Material weakness identified in the self-assessment without any action plan implemented Significant Deficiency; control deficiency, or combination of control deficiencies, that does not meet the criteria for material weakness but deserves the concerns of the Audit Committee and the Board of Directors. Minor Deficiency Any control deficiencies that do not meet the criteria for material or significant. | |
| Quantitative Criteria | Material Weakness Misstatement in the Income Statement is more than 5% of the annual profit before taxation; Misclassification in the Income Statement is more than 0.4% of the annual sales revenue Adjustment of net assets in the Balance Sheet is more than 1% of the shareholders' equity Adjustment of asset | Please refer to internal control deficiency over financial reporting for the criteria for non-financial reporting internal control. | |
| or liability in the Balance Sheet is more than 0.6% of the total assets; Adjustment in the Cash Flow Statement is more than 3% of the total net cash flow in the operating activities. Significant Deficiency Misstatement in the Income Statement is more than 2.5% of the annual profit before taxation; Misclassification in the Income Statement is more than 0.2% of the annual sales revenue; Adjustment of net assets in the Balance Sheet is more than 0.5% of the Shareholders’ equity; Adjustment of asset or liability in the Balance Sheet is more than 0.3% of the Total assets; Adjustment in the Cash Flow Statement is more than 1.5% of the total net cash flow from the operating activities. Minor Deficiency All the deficiencies that do not meet the quantitative criteria for significant. | ||
| Number of Material Weakness in financial report | 0 | |
| Number of Material Weakness in non-financial report | 0 | |
| Number of Significant Deficiency in financial report | 0 | |
| Number of Significant Deficiency in non-financial report | 0 | |
10. Internal Control Audit Report□√Applicable □Not Applicable
| Opinions in the Internal Control Audit Report | |
| Internal Control Audit Report Disclosed or not | Disclosed |
| Issuance date | March 28, 2019 |
| Index | www.cninfo.com.cn |
| Type of Opinion | Standard and unqualified opinions |
| Major Defect regarding non-financial report or no | No |
Abnormal opinion issued by the accounting firm□Yes □√NoOpinion issued by the accounting firm keeps the same with that of self-assessmentreport made by the Board□√Yes □No
Chapter X Corporate Bond
Whether the Company owns the corporate bond that it lists in the securitiesexchange and is undue or is not paid in full although it’s dueNo.
Chapter XI Financial Statements
| Type of Audit Report | Standard and Unqualified Opinion |
| Signature date | March 26, 2019 |
| Name of Auditor | PricewaterhouseCoopers Zhong Tian LLP |
| Document No. of Audit Report | 2019/SH-0175 |
Independent Auditor’s Report
2019/SH-0175
(Page 1 of 5)
To the Shareholders of Jiangling Motors Corporation, Ltd.
Opinion
What we have audited
The consolidated financial statements of Jiangling Motors Corporation, Ltd. (the “Company”) andits subsidiaries (the “Group”) set out on pages 55 to 127, which comprise:
? the consolidated statement of financial position as at 31 December 2018;? the consolidated statement of comprehensive income for the year then ended;? the consolidated statement of changes in equity for the year then ended;? the consolidated statement of cash flows for the year then ended; and? the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, theconsolidated financial position of the Group as at 31 December 2018, and its consolidated financialperformance and its consolidated cash flows for the year then ended in accordance withInternational Financial Reporting Standards (“IFRSs”).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities forthe Audit of the Consolidated Financial Statements section of our report. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the Code of Ethics for ProfessionalAccountants of the Chinese Institute of Certified Public Accountants (“CICPA Code”), and we havefulfilled our other ethical responsibilities in accordance with the CICPA Code.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of our audit of the consolidated financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters identified in our audit are summarised as follows:
? Research and development expenditures? Impairment of long term assets
2019/SH-0175
(Page 2 of 5)
| Key Audit Matter | How our audit addressed the Key Audit Matter |
| Research and development expenditures Refer to note 14 to the consolidated financial statements. We focussed on this area due to the incurred amount of research and development expenditures (RMB1,735,369,000 in 2018), the amount of the development costs capitalised (RMB71,814,000 in 2018), and the fact that there is management’s judgement involved in assessing whether the criteria set out in the accounting policies (note 2.10(2)) required for capitalisation of such development costs had been met, particularly: ? The technical feasibility of the project. ? The likelihood of the project generating sufficient future economic benefits. ? The timing to start capitalisation. We had particular regard to the fact that the Group has continued to invest in the technical improvements for its automobile products, and therefore we focussed on the accuracy and completeness of recorded research and development expenditures and whether the economic benefits of the projects under development supported the amounts capitalised. As part of our work we also focused on management’s judgements regarding whether capitalised costs were of a development stage rather than research stage (which would result in the costs being expensed rather than capitalised), and whether costs, including employment (payroll) costs, were directly attributable to relevant projects. | We obtained a breakdown, by value, of all individual research and development projects and reconciled this to the amounts of research and development expenses and capitalised research and development projects, which were recorded in the general ledger, identifying no reconciling differences. We tested the projects where research and development expenses were in excess of RMB31,000,000, together with a sample of randomly selected immaterial projects from the remaining population, as follows: ? We obtained the lists of expenses by nature on selected projects and inspected contracts and underlying invoices which were directly related to those projects. We also checked the reasonableness of the indirect expenses attributable to relevant projects, including employment costs and depreciation expenses, by understanding the allocating method and inspecting the supporting for the assembling and allocating process of those indirect expenses. ? We also checked the recorded research and development costs of those projects with budgeted amounts and discuss with project manager regarding to the status of selected projects. We found no material issues arising from the above procedures. We obtained the lists of capitalised projects and tested those projects with the capitalised amounts over RMB16,000,000. We obtained explanations from management of why those projects were considered to be capital in nature, in terms of how the specific requirements of the relevant accounting standards, most notably of IAS 38 were met. We also conducted interviews with individual project managers responsible for those projects selected to corroborate these explanations, which enabled us to independently assess whether the projects met all the criteria for capitalisation set out in accounting standards. In addition, we reviewed the selected projects’ inspection reports at different phases including the reports which indicated that the subject projects entered into developmental stage and related management and board meeting minutes. We found the information we gathered from those documents to be consistent with explanations obtained from individual project managers and to be in line with management’s assessment that the costs met the relevant capitalisation criteria. We considered management’s judgements on whether those selected projects should be capitalised were appropriate. |
2019/SH-0175(Page 3 of 5)
| Key Audit Matter | How our audit addressed the Key Audit Matter |
| Impairment of long term assets Refer to note 2.11, note 4.1(2) and note 12 to the consolidated financial statements. We focused on this area because JMC Heavy Duty Vehicle Co., Ltd. (“JMCH”), the subsidiary of the Group has incurred accumulated losses of RMB1,190,746,000 as at 31 December 2018, which indicates there may be impairment on its long term assets, mainly including property, plant and equipment with the amount of RMB1,354,783,000. The determination of whether or not an impairment charge for long term assets for JMCH is necessary to involve significant judgements of management about the future results of the business and assessment of future plans of the JMCH’s operations. Management considers JMCH to be a cash generating unit (“CGU”) and has calculated the fair value less costs of disposal as the recoverable amount of this CGU. The fair value less costs of disposal is based on discounted future cash flow forecasts over which the management make judgements on certain key inputs including revenue growth rate, sales price growth rate, discount rate and long term growth rate. | We evaluated management’s impairment calculations assessing the future cash flow forecasts used in the models, and the process by which they were drawn up, including comparing them to the latest Board approved budgets, and testing the underlying calculations. We found that management had followed their clearly documented process for drawing up future cash flow forecasts, which was subject to timely oversight and challenge by the directors and which was consistent with the Board’s approved budgets. We challenged: ? the key assumptions for revenue growth rate, sales growth rate, discount rate and long-term growth rate in the forecasts by comparing them to historical results, and economic and industry forecasts; ? the discount rate by assessing the cost of capital for the CGU and comparable organisations. We considered the key assumptions used were reasonably set in place. We discussed the action plans in place and evaluated the reasonableness of those plans, by comparing those action plans with the performance in prior years, automobile industry developing trends and existing market player’s performance. We considered those action plans were reasonably set in place. We also tested whether the required CGU performance improvement had ever been attained by the relevant CGU historically. We compared the current year actual results with the prior year forecast to evaluate whether the assumptions used in the prior year forecast were over optimistic. We found that the comparison analysis made by management between the actual results and forecasted figures were reasonable. We challenged management on the adequacy of their sensitivity calculations over the recoverable amount of the CGU. We determined that the calculations were most sensitive to assumptions for revenue growth rate, sales price growth rate, discount rate and long term growth rate. We calculated the degree to which these assumptions would need to move before an impairment conclusion was triggered. We discussed the likelihood of such a movement with management and agreed with their conclusion that it was unlikely. Based on the procedures we performed, management’s judgements and assessments relating to the impairment of long term assets are supported by the evidence we gathered. |
2019/SH-0175
(Page 4 of 5)
Other Information
Management of the Company is responsible for the other information. The other informationcomprises all of the information included in the annual report other than the consolidatedfinancial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and wedo not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to readthe other information and, in doing so, consider whether the other information is materiallyinconsistent with the consolidated financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Audit Committee for theConsolidated Financial Statements
Management of the Company is responsible for the preparation and fair presentation of theconsolidated financial statements in accordance with IFRSs, and for such internal control asmanagement determines is necessary to enable the preparation of consolidated financialstatements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern, disclosing, as applicable, matters related to goingconcern and using the going concern basis of accounting unless management either intends toliquidate the Group or to cease operations, or have no realistic alternative but to do so.
The Audit Committee is responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated FinancialStatements
Our objectives are to obtain reasonable assurance about whether the consolidated financialstatements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with ISAs will alwaysdetect a material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financialstatements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintainprofessional scepticism throughout the audit. We also:
? Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit proceduresresponsive to those risks, and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatement resultingfrom fraud is higher than for one resulting from error, as fraud may involve collusion,forgery, intentional omissions, misrepresentations, or the override of internal control.
2019/SH-0175
(Page 5 of 5)
? Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Group’s internal control.? Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.? Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.? Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.? Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance of
the group audit. We remain solely responsible for our audit opinion.
We communicate with Audit Committee regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internalcontrol that we identify during our audit.
We also provide Audit Committee with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable,related safeguards.
From the matters communicated with Audit Committee, we determine those matters that were ofmost significance in the audit of the consolidated financial statements of the current period andare therefore the key audit matters. We describe these matters in our auditor’s report unless law orregulation precludes public disclosure about the matter or when, in extremely rare circumstances,we determine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interest benefits ofsuch communication.
The engagement partner on the audit resulting in this independent auditor’s report is Lei Fang.
PricewaterhouseCoopers Zhong Tian LLP
Shanghai, the People’s Republic of China
26 March 2019
CONSOLIDATED FINANCIAL STATEMENTS ANDREPORT OF THE AUDITORS
31 DECEMBER 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2018
(All amounts in thousands of RMB unless otherwise stated)
| Notes | 2018 | 2017 | |||
| Revenue from contracts with customers | 5 | 28,249,340 | 31,345,747 | ||
| Taxes and surcharges | (687,133) | (967,011) | |||
| Cost of sales | 6 | (24,463,198) | (25,045,090) | ||
| Gross profit | 3,099,009 | 5,333,646 | |||
| Distribution costs | 6 | (1,202,382) | (2,694,779) | ||
| Administrative expenses | 6 | (2,460,259) | (2,744,600) | ||
| Net expected credit losses on financial assets | 3.1(2) | (1,089) | — | ||
| Net impairment losses on property, plant and equipment | (7,143) | (11,850) | |||
| Other income | 8 | 426,678 | 632,036 | ||
| Operating (loss)/profit | (145,186) | 514,453 | |||
| Finance income | 9 | 188,436 | 244,300 | ||
| Finance costs | 9 | (5,849) | (5,079) | ||
| Finance income-net | 9 | 182,587 | 239,221 | ||
| Share of profit of investments accounted for using the equity method | 16b | 2,238 | 8,149 | ||
| Profit before income tax | 39,639 | 761,823 | |||
| Income tax credit/(expense) | 10 | 52,194 | (70,885) | ||
| Profit for the period | 91,833 | 690,938 | |||
| Profit attributable to: | |||||
| Shareholders of the Company | 91,833 | 690,938 | |||
| Other comprehensive income/(loss) | |||||
| Item that will not be reclassified to profit or loss | |||||
| - Remeasurements of retirement benefits obligations | (4,590) | (1,616) | |||
| - Income tax relating to remeasurements of retirement benefit obligations | 1,148 | 404 | |||
| Other comprehensive loss for the period, net of tax | (3,442) | (1,212) | |||
| Total comprehensive income for the period | 88,391 | 689,726 |
| Total comprehensive income attributable to: | |||||
| Shareholders of the Company | 88,391 | 689,726 | |||
| Earnings per share for profit attributable to the shareholders of the Company for the period (expressed in RMB per share) | |||||
| - Basic and diluted | 11 | 0.11 | 0.80 |
The notes on pages 60 to 127 are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2018
(All amounts in thousands of RMB unless otherwise stated)
| Notes | 2018 | 2017 | |||
| ASSETS | |||||
| Non-current assets | |||||
| Property, plant and equipment | 12 | 6,941,292 | 6,714,088 | ||
| Lease prepayment | 13 | 601,260 | 616,834 | ||
| Intangible assets | 14 | 246,026 | 197,860 | ||
| Deferred income tax assets | 17 | 743,096 | 690,253 | ||
| Investments accounted for using the equity method | 16b | 40,112 | 37,874 | ||
| Other non-current assets | - | 478 | |||
| Total non-current assets | 8,571,786 | 8,257,387 | |||
| Current assets | |||||
| Inventories | 18 | 2,522,354 | 2,339,304 | ||
| Trade and other receivables and prepayments | 19 | 4,678,284 | 4,555,934 | ||
| Derivative financial instruments | 3.3 | 979 | - | ||
| Financial assets at fair value through other comprehensive income | 3.3 | 6,246 | - | ||
| Cash and cash equivalents | 20 | 7,616,880 | 11,137,723 | ||
| 14,824,743 | 18,032,961 | ||||
| Assets classified as held for sale | 21 | - | 93,413 | ||
| Total current assets | 14,824,743 | 18,126,374 | |||
| Total assets | 23,396,529 | 26,383,761 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)AS AT 31 DECEMBER 2018
(All amounts in thousands of RMB unless otherwise stated)
| Notes | 2018 | 2017 | |||
| EQUITY | |||||
| Share capital | 22 | 863,214 | 863,214 | ||
| Share premium | 816,609 | 816,609 | |||
| Other reserves | 23 | 447,472 | 450,914 | ||
| Retained earnings | 8,257,203 | 10,441,665 | |||
| Total equity | 10,384,498 | 12,572,402 |
| LIABILITIES | |||||
| Non-current liabilities | |||||
| Contract liabilities | 5 | 38,382 | — | ||
| Borrowings | 24 | 3,595 | 3,851 | ||
| Deferred income tax liabilities | 17 | 26,024 | 26,736 | ||
| Retirement benefit obligations | 25 | 63,425 | 54,764 | ||
| Provisions for statutory warranty | 26 | 151,492 | 184,688 | ||
| Other non-current liabilities | 60,160 | 240 | |||
| Total non-current liabilities | 343,078 | 270,279 | |||
| Current liabilities | |||||
| Trade and other payables | 27 | 12,195,966 | 13,222,540 | ||
| Contract liabilities | 5 | 266,702 | — | ||
| Current income tax liabilities | 179 | 114,906 | |||
| Borrowings | 24 | 449 | 428 | ||
| Financial liabilities at fair value through profit or loss | - | 8,493 | |||
| Retirement benefit obligations | 25 | 4,595 | 4,420 | ||
| Provisions for statutory warranty | 26 | 201,062 | 190,293 | ||
| Total current liabilities | 12,668,953 | 13,541,080 | |||
| Total liabilities | 13,012,031 | 13,811,359 | |||
| Total equity and liabilities | 23,396,529 | 26,383,761 | |||
| The notes on pages 60 to 127 are an integral part of these consolidated financial statements. | |||||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2018(All amounts in thousands of RMB unless otherwise stated)
| Notes | Share capital | Share premium | Other reserves | Retained earnings | Total | |
| Balance at 1 January 2017 | 863,214 | 816,609 | 452,126 | 10,277,287 | 12,409,236 | |
| Profit for the period | - | - | - | 690,938 | 690,938 | |
| Other comprehensive income | ||||||
| - Remeasurements of retirement benefit obligations, net of tax | - | - | (1,212) | - | (1,212) | |
| Dividends relating to 2016 | - | - | - | (526,560) | (526,560) | |
| Balance at 31 December 2017 | 863,214 | 816,609 | 450,914 | 10,441,665 | 12,572,402 | |
| Balance at 1 January 2018 | 863,214 | 816,609 | 450,914 | 10,441,665 | 12,572,402 | |
| Profit for the period | - | - | - | 91,833 | 91,833 | |
| Other comprehensive income | ||||||
| - Remeasurements of retirement benefit obligations, net of tax | - | - | (3,442) | - | (3,442) | |
| Dividends relating to 2017 | 28 | - | - | - | (2,276,295) | (2,276,295) |
| Balance at 31 December 2018 | 863,214 | 816,609 | 447,472 | 8,257,203 | 10,384,498 |
The notes on pages 60 to 127 are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2018
(All amounts in thousands of RMB unless otherwise stated)
| Notes | 2018 | 2017 | ||
| Cash flows from operating activities | ||||
| Cash generated from operations | 29 | (4,180) | 896,721 | |
| Interest paid | (218) | (226) | ||
| Income tax paid | (97,410) | (221,907) | ||
| Net cash (outflow)/inflow from operating activities | (101,808) | 674,588 | ||
| Cash flows from investing activities | ||||
| Payment for property, plant and equipment (“PPE”) | (1,385,315) | (1,019,830) | ||
| Purchase of financial assets at fair value through profit or loss | (10,353,000) | - | ||
| Other cash paid relating to investing activities | (16,321) | (11,080) | ||
| Proceeds from disposal of PPE, lease prepayment and intangible assets | 29 | 2,773 | 99,726 | |
| Proceeds from disposal of financial assets at fair value through profit or loss | 10,353,000 | - | ||
| Investment income from financial assets at fair value through profit or loss | 18,191 | - | ||
| Dividends received | - | 10,168 | ||
| Interest received | 232,627 | 240,338 | ||
| Other cash received from investing activities | 9,121 | 11,022 | ||
| Net cash outflow from investing activities | (1,138,924) | (669,656) | ||
| Cash flows from financing activities | ||||
| Repayments of borrowings | (434) | (5,443) | ||
| Dividends paid to shareholders of the Company | (2,278,417) | (527,117) | ||
| Other cash paid relating to financing activities | (1,260) | (871) | ||
| Net cash outflow from financing activities | (2,280,111) | (533,431) | ||
| Net decrease in cash and cash equivalents | (3,520,843) | (528,499) | ||
| Cash and cash equivalents at beginning of year | 11,137,723 | 11,666,222 | ||
| Effects of exchange rate changes | - | - | ||
| Cash and cash equivalents at end of year | 20 | 7,616,880 | 11,137,723 | |
The notes on pages 60 to 127 are an integral part of these consolidated financial statements.
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
1 General information
| Jiangling Motors Corporation, Ltd. (the “Company”) was established in the People’s Republic of China (the “PRC”) under the Company Law of the PRC and according to the approval of Hongban (1992) No. 005 of Nangchang Revolution and Authorisation Group of Company’s Joint Stock as a joint stock limited company to hold certain operational assets and liabilities of the automotive manufacturing business of Jiangxi Motors Manufacturing Factory, which was owned by Jiangling Motors Group Co.,Ltd (“JMCG”). The legal representative’s operating license of the Company is No. 913600006124469438. The address of the Company’s registered office is No.509, Northern Yingbin Avenue, Nanchang, Jiangxi Province, the PRC. In December 1993, the Company issued 494,000,000 domestic ordinary shares (“A share”). In addition, the Company issued 25,214,000 A shares as bonus shares to the existing shareholders in 1994. The bonus shares were issued by utilisation of the Company’s retained earnings. In 1995, the Company issued 174,000,000 domestically listed foreign shares (“B share”) and the Company issued 170,000,000 additional B shares in 1998. As at 31 December 2018, the total number of issued shares of the Company is 863,214,000 shares, which are all listed on the Shenzhen Stock Exchange, the PRC. The Company and its subsidiaries (the “Group”) are principally engaged in the development, manufacturing and selling of automobiles, engines and automobile related parts, dies and tools. These consolidated financial statements were authorised for issue by the Board of Directors on 26 March 2019. |
2 Summary of significant accounting policies
| This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group consisting the Company and its subsidiaries. | |
| 2.1 | Basis of preparation |
| The consolidated financial statements of the Group have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRS”). The consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities (including derivative instruments, financial assets at FVOCI and financial liabilities at FVPL) are measured at fair value. | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.1 | Basis of preparation (continued) |
| (1) | New and amended standards adopted by the Group |
| The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2018. The Group had to change its accounting policies following the adoption of these standards. There is no retrospective adjustment recoginsed in prior periods. The impact of adopting the following standards are disclosed in Note 2.2. | |
| ? IFRS 9 Financial Instruments | |
| ? IFRS 15 Revenue from Contracts with Customers | |
| (2) | New standards and interpretations not yet adopted |
| Certain new accounting standards and interpretations have been published that are not mandatory for reporting period ended 31 December 2018 and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below. | |
| ? IFRS 16 Leases | |
| Nature of change IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the statement of financial position by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. Impact The Group has set up a project team which has reviewed all of the Group’s leasing arrangements over the last year in light of the new lease accounting rules in IFRS 16. The Group only have leasing arrangements with short-term and low-value leases, no significant impact on the financial statement. Date of adoption by the Group The Group will apply the standard from its mandatory adoption date of 1 January 2019. No comparative amounts are need to be restated because all the leases are related to short-term and low-value leases. | |
| There are no other standards that are not yet effective that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions. | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.2 | Changes in accounting policies |
| This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the Group’s financial statements. | |
| (1) | Impact on the financial statements |
| IFRS 9 was generally adopted without restating comparative information; IFRS 15 was adopted using the modified retrospective transition method. As a result, the reclassifications and adjustments arising from the adoption of new standards are therefore not reflected in the statement of financial position as at 31 December 2017. The following tables show the adjustments recognised for each individual line item at the date of initial application, 1 January 2018. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided. There was no significant impact on retained earnings at 1 January 2018. The adjustments are explained in more detail by standard below. |
| Statement of Financial Position | Closing balance | Opening balance | |||
| (extract) | 31 December 2017 | IFRS 9 | IFRS 15 | 1 January 2018 | |
| Total assets | 26,383,761 | - | - | 26,383,761 | |
| Non-current liabilities | - | ||||
| Contract liabilities | 240 | - | 32,134 | 32,374 | |
| Current liabilities | |||||
| Trade and other payables | 13,222,540 | - | (168,062) | 13,054,478 | |
| Contract liabilities | - | - | 135,928 | 135,928 | |
| Financial liabilities at fair value through profit or loss (“FVPL”) | 8,493 | (8,493) | - | - | |
| Derivative financial instruments | - | 8,493 | - | 8,493 | |
| Total liabilities | 13,811,359 | - | - | 13,811,359 | |
| Net assets | 12,572,402 | - | - | 12,572,402 | |
| Total equity | 12,572,402 | - | - | 12,572,402 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.2 | Changes in accounting policies (continued) |
| (2) | IFRS 9 Financial Instruments |
| IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. | |
| The adoption of IFRS 9 Financial Instruments from 1 January 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in Notes 2.13 and 2.15 below. In accordance with the transitional provisions in IFRS 9(7.2.15) and (7.2.26), comparative figures have not been restated. | |
| There was no significant impact on the Group’s retained earnings as at 1 January 2018. The main effects resulting from reclassification are as follows: | |
| (i) | Reclassification of financial instruments on adoption of IFRS 9 |
| Financial assets – 1 January 2018 | Notes | FVPL | Derivative financial instruments | |
| Closing balance 31 December 2017 – IAS 39 | 8,493 | - | ||
| Reclassify foreign exchange forwards from FVPL to derivative financial instruments | (a) | (8,493) | 8,493 | |
| Opening balance 1 January 2018 - IFRS 9 | - | 8,493 |
| (a) | Reclassify foreign exchange forwards from FVPL to derivative financial instruments |
| Foreign exchange forwards is a derivative financial instruments, the cash flow of the contract is modified according to the foreign exchange rate. As a result, forwards foreign exchange was reclassified from FVPL to derivative financial instruments. |
| On the date of initial application, 1 January 2018, the financial instruments of the Group impacted by the adoption of IFRS 9 were as follows: |
| Measurement category | Carrying amount | |||||
| Original (IAS 39) | New (IFRS 9) | Original | New | Difference | ||
| Current financial liabilities | ||||||
| FVPL - foreign exchange forwards | FVPL | FVPL | 8,493 | - | (8,493) | |
| Derivatives - foreign exchange forwards | FVPL | FVPL | - | 8,493 | 8,493 | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.2 | Changes in accounting policies (continued) |
| (2) | IFRS 9 Financial Instruments (continued) |
| (ii) | Impairment of financial assets |
| Trade receivables for sales of inventory and from the provisions of services are the main financial assets of the Group that are subject to IFRS 9’s new expected credit loss model. | |
| The Group was required to revise its impairment methodology under IFRS 9 for the financial assets. The Group applies the IFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade receivables. The Group applies either 12-month expected credit losses or lifetime expected credit losses for other financial assets at amortised cost and financial assets at fair value through other comprehensive income, depending on whether there has been a significant increase in credit risk since initial recognition. The change in impairment methodology is disclosed in Note 2.13. There is no significant impact on the Group’s retained earnings and equity at 1 January 2018. | |
| While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. | |
| (3) | IFRS 15 Revenue from Contracts with Customers |
| The Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018 which resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. In accordance with the transition provisions in IFRS 15, the Group elected to use the modified retrospective approach for transition to the revenue standard and the cumulative effect of initially applying the revenue standard recognised as an adjustment to the opening balance of retained earnings at the date of initial application. Comparative figures have not been restated. | |
| The Group evaluated the impact of the adoption of IFRS 15 to the retained earnings of 1 January 2018, there is no significant impact on the retained earnings. In summary, the following adjustments were made to the amounts recognised in statement of financial position at the date of initial application (1 January 2018) and the end of current period presented (31 December 2018): |
| Closing balance 31 December 2017 | Reclassification | Opening balance 1 January 2018 | |||
| (ISA 18) | (IFRS 15) | ||||
| Trade and other payables | (a) | 13,222,540 | (168,062) | 13,054,478 | |
| Contract liabilities | (a) | - | 168,062 | 168,062 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) | ||||
| 2.2 | Changes in accounting policies (continued) | ||||
| (3) | IFRS 15 Revenue from Contracts with Customers (continued) | ||||
| 31 December 2018 | |||||
| Original (IAS 18) | Reclassification | New (IFRS 15) | |||
| Trade and other payables | (a) | 12,501,050 | (305,084) | 12,195,966 | |
| Contract liabilities | (a) | - | 305,084 | 305,084 | |
| The impact on the statement of profit and loss in the current period summarised as below: |
| 2018 | |||||
| Original (IAS 18) | Reclassification | New (IFRS 15) | |||
| Distribution costs | (b),(c) | 2,730,955 | (1,528,573) | 1,202,382 | |
| Revenue from contracts with customers | (b) | 29,121,617 | (872,277) | 28,249,340 | |
| Cost of sales | (c) | 23,753,250 | 656,297 | 24,409,547 |
| (a) | Contract liabilities |
| Advance from customers have been presented as trade and other payables originally are now presented as contract liabilities. With the adoption of IFRS 15, a contract liability is recognised if the entity receives consideration (or if it has the unconditional right to receive consideration) in advance of performance. Contract liabilities are expected to be settled within 12 months after the end of the period are presented as current liabilities in the statement of financial position, otherwise are presented as other non-current liabilities. | |
| (b) | Sales rebates |
| With the adoption of IFRS 15, sales rebates are recoginsed as reduction of revenue unless the payment to the customer is in exchange for a distinct good or service under IFRS 15. | |
| (c) | Shipping fees |
| Shipping fees have previously been recognised in distribution costs are now recognised in cost of sales. Shipping service of automobiles is considered as a separate performance obligation because the control of goods transfers to the customer before shipment, but the Group has promised to arrange for the goods to be shipped. As a result, shipping fees are reclassified from distribution costs to cost of sales accordingly. Shipping fees incurred as fulfilment cost for the contract with a customer are also reclassified to cost of sales. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.3 | Subsidiaries |
| A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. | |
| The acquisition method of accounting is used to account for business combinations by the Group. | |
| Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. |
| 2.4 | Associates |
| An associate is an entity over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. |
| The Group's share of post-acquisition profit or loss is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. Dividends received or receivable from associates and joint ventures are recognised as a reduction in 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 legal or constructive obligations or made payments on behalf of the associate. |
| The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit of investments accounted for using equity method’ in profit or loss. | |
| Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. | |
| Gains or losses on dilution of equity interest in associates are recognised in profit or loss. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.5 | Separate financial statements |
| Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable. Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill. | |
| 2.6 | Segment Reporting |
| Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive committee that makes strategic decisions. | |
| 2.7 | Foreign currency translation |
| (1) | 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 Renminbi (“RMB”), which is the Company’s functional and the Group’s presentation currency. | |
| (2) | Transactions and balances |
| Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. 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 profit or loss, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. | |
| Foreign exchange gains and losses are presented in profit or loss within other income/(expense)-net. | |
| Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as fair value through other comprehensive income are recognised in other comprehensive income. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.8 | Property, plant and equipment |
| Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition or construction of the items. | |
| Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, 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. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. |
| Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows: | ||
| Buildings | 35-40 years | |
| Plant and machinery | 10-15 years | |
| Motor automobiles | 6-10 years | |
| Moulds | 5 years | |
| Electronic and other equipment | 5-7 years | |
| The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. | |
| An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.11). |
| Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other income/(expense) - net in profit or loss. | |
| Assets under construction represent buildings under construction and plant and equipment pending installation, and are stated at cost. Costs include construction and acquisition costs. No provision for depreciation is made on assets under construction until such time as the relevant assets are completed and ready for intended use. When the assets concerned are brought into use, the costs are transferred to property, plant and equipment and depreciated in accordance with the policy as stated above. |
| 2.9 | Lease prepayment |
| Lease prepayment represents upfront prepayment made for the land use rights, and is expensed in profit or loss on a straight-line basis over the period of the lease or when there is impairment, the impairment is expensed in profit or loss. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.10 | Intangible assets |
| (1) | Goodwill |
| Goodwill arises on the acquisition of subsidiaries represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identified net assets acquired. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed. |
| (2) | Research and development |
| Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when the following criteria are fulfilled: (a) it is technically feasible to complete the intangible asset so that it will be available for use or sale; (b) management intends to complete the intangible asset and use or sell it; (c) there is an ability to use or sell the intangible asset; (d) it can be demonstrated how the intangible asset will generate probable future economic benefits; (e) adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and (f) the expenditure attributable to the intangible asset during its development can be reliably measured. | |
| The development cost of an internally generated intangible asset is the sum of the expenditure incurred from the date the asset meets the recognition criteria above to the date when it is available for use. The development costs capitalised in connection with the intangible asset include costs of materials and services used or consumed and employee costs incurred in the creation of the asset. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over its useful life. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.10 | Intangible assets (continued) |
| (3) | Computer software |
| Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of 5 years. | |
| (4) | Non-patent technology |
| Non-patent technology is capitalised from the development cost. These costs are amortised over their estimated useful lives of 5 years. |
| 2.11 | Impairment of non-financial assets |
| Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested 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 of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. |
| 2.12 | Non-current assets held-for-sale |
| Non-current assets are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement. | |
| An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition. | |
| Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. | |
| Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2.13 | Investments and other financial assets |
| (1) | Classification |
| From 1 January 2018, the Group classifies its financial assets in the following measurement categories: | |
| ? those to be measured subsequently at fair value (either through OCI or through profit or loss), and ? those to be measured at amortised cost. | |
| The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. | |
| For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (“FVOCI”). | |
| The Group reclassifies debt investments when and only when its business model for managing those assets changes. | |
| (2) | Recognition and derecognition |
| Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. | |
| (3) | Measurement |
| At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. | |
| Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. | |
| Debt instruments | |
| Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments: | |
| ? Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other income/(expense)-net together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.13 | Investments and other financial assets (continued) |
| (3) | Measurement (continued) |
| ? FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other income/(expense)-net. Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other income/(expense)-net and impairment expenses are presented as separate line item in the statement of profit or loss. | |
| ? FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other income/(expense)-net in the period in which it arises. |
| Equity instruments | |
| The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments is established. | |
| Changes in the fair value of financial assets at FVPL are recognised in other income/(expense)-net in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. | |
| (4) | Impairment |
| From 1 January 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see Note 3.1 for further details. | |
| (5) | Accounting policies applied until 31 December 2017 |
| The Group has applied IFRS 9 retrospectively, but has elected not to restate comparative information. As a result, the comparative information provided continues to be accounted for in accordance with the Group’s previous accounting policy. | |
| (i) | Classification |
| Until 31 December 2017 the Group classifies its financial assets in the following categories: ? financial assets at fair value through profit or loss, ? loans and receivables, ? available-for-sale financial assets. The classification determined on the purpose for which the investments were acquired. Management determined the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluated this designation at the end of each reporting |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| period. See Note 15 for details about each type of financial asset. | |
| 2 | Summary of significant accounting policies (continued) |
| 2.13 | Investments and other financial assets (continued) |
| (5) | Accounting policies applied until 31 December 2017 (continued) |
| (ii) | Subsequent measurement |
| Subsequent to the initial, recognition loans and receivables were subsequently carried at amortised cost using the effective interest method. | |
| Available-for-sale financial assets and financial assets at FVPL were subsequently carried at fair value. Gains or losses arising from changes in the fair value are recognised as follows: ? for ‘financial assets at FVPL’ – in profit or loss within other income/(expense)-net ? for available-for-sale financial assets that are monetary securities denominated in a foreign currency – translation differences related to changes in the amortised cost of the security were recognised in profit or loss and other changes in the carrying amount were recognised in other comprehensive income ? for other monetary and non-monetary securities classified as available-for-sale – in other comprehensive income. | |
| Details on how the fair value of financial instruments is determined are disclosed in Note 3.3. | |
| When securities classified as available-for-sale were sold, the accumulated fair value adjustments recognised in other comprehensive income were reclassified to profit or loss as gains and other losses from investment securities. | |
| (iii) | Impairment |
| The Group assessed at the end of each reporting period whether there was objective evidence that a financial asset or Group of financial assets was impaired. A financial asset or a Group of financial assets was impaired and impairment losses were incurred only if there was objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) had an impact on the estimated future cash flows of the financial asset or Group of financial assets that could be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost was considered an indicator that the assets are impaired. | |
| Assets carried at amortised cost | |
| For loans and receivables, the amount of the loss was measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that had not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset was reduced and the amount of the loss was recognised in profit or loss. If a loan or held-to-maturity investment had a variable interest rate, the discount rate for measuring any impairment loss was the current effective interest rate determined under the contract. As a practical expedient, the Group could measure impairment on the basis of an instrument’s fair value using an observable market price. | |
| If, in a subsequent period, the amount of the impairment loss decreased and the decrease could be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss was recognised in profit or loss. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.13 | Investments and other financial assets (continued) |
| (5) | Accounting policies applied until 31 December 2017 (continued) |
| (iii) | Impairment (continued) |
| Assets carried at amortised cost (continued) | |
| Impairment testing of trade receivables is described in Note 3.1(2). | |
| Assets classified as available-for-sale | |
| If there was objective evidence of impairment 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 profit or loss – was removed from equity and recognised in profit or loss. Impairment losses on equity instruments that were recognised in profit or loss were not reversed through profit or loss in a subsequent period. If the fair value of a debt instrument classified as available-for-sale increased in a subsequent period and the increase could be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss was reversed through profit or loss. | |
| 2.14 | Offsetting financial instruments |
| Financial assets and liabilities are offset and the net amount reported in the statement of financial position where the Group currently has a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Group has also entered into arrangements that do not meet the criteria for offsetting but still allow for the related amounts to be set off in certain circumstances, such as bankruptcy or the termination of a contract. | |
| 2.15 | Derivatives and hedging activities |
| Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. No derivative is designated as a hedging instrument by the Group, changes in the fair value of derivatives are recognised immediately in profit or loss and included in other income/(expense)-net. | |
| 2.16 | Inventories |
| Inventories are stated at the lower of cost and net realisable value. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads, the latter being allocated on the basis of normal operating capacity. Cost excludes borrowing costs. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.17 | Trade and other receivables |
| Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. | |
| Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. See Note 3.1 for further information about the Group’s accounting for trade receivables and a description of the Group’s impairment policies. |
| 2.18 | Cash and cash equivalents |
| In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. |
| 2.19 | Share capital |
| Share capital consists of “A” and “B” shares. | |
| Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. | |
| Where any group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to owners of the Company until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s shareholders. | |
| 2.20 | Trade and other payables |
| These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. | |
| 2.21 | Borrowings |
| Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.21 | Borrowings (continued) |
| Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income/(expense)-net or finance costs. | |
| 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 end of the reporting period. |
| 2.22 | Borrowing costs |
| General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. | |
| Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. | |
| All other borrowing costs are recognised in profit or loss in the period in which they are incurred. | |
| Borrowing costs include interest expense, finance charges in respect of finance lease and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. The exchange gains and losses that are an adjustment to interest costs include the interest rate differential between borrowing costs that would be incurred if the entity had borrowed funds in its functional currency, and the borrowing costs actually incurred on foreign currency borrowings. Such amounts are estimated based on interest rates on similar borrowings in the entity’s functional currency. | |
| When the construction of the qualifying assets takes more than one accounting period, the amount of foreign exchange differences eligible for capitalisation is determined for each annual period and are limited to the difference between the hypothetical interest amount for the functional currency borrowings and the actual interest incurred for foreign currency borrowings. Foreign exchange differences that did not meet the criteria for capitalisation in previous years should not be capitalised in subsequent years. |
| 2.23 | Current and deferred income tax |
| The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. | |
| (1) | Current income tax |
| The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.23 | Current and deferred income tax (continued) |
| (2) | Deferred income tax |
| 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, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it 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 nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. | |
| Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. | |
| Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. | |
| Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. | |
| 2.24 | Employee benefits |
| Employee benefits refer to all forms of consideration or compensation given by the Group in exchange for service rendered by employees or for termination of employment relationship, which include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits. | |
| (1) | Short-term employee benefits |
| Short-term employee benefits include wages or salaries, bonus, allowances and subsidies, staff welfare, premiums or contributions on medical insurance, work injury insurance and maternity insurance, housing funds, union running costs and employee education costs, short-term paid absences and etc. The short-term employee benefits actually occurred are recognised as a liability in the accounting period in which the service is rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets. Non-monetary benefits are measured at fair value. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.24 | Employee benefits (continued) |
| (2) | Post-employment benefits |
| The Group classifies post-employment benefit plans as either defined contribution plans or defined benefit plans. Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into a separate fund and will have no obligation to pay further contributions; and defined benefit plans are post-employment benefit plans other than defined contribution plans. During the reporting period, the premiums or contributions on basic pensions and unemployment insurance belong to defined contribution plans; the premiums or contributions on supplementary retirement benefits belong to defined benefit plans. | |
| (i) | Defined contribution plans |
| Basic pensions | |
| The Group’s employees participate in the basic pension plan set up and administered by local authorities of Ministry of Human Resource and Social Security. Monthly payments of premiums on the basic pensions are calculated according to the bases and percentage prescribed by the relevant local authorities. When employees retire, the relevant local authorities are obliged to pay the basic pensions to them. The amounts based on the above calculations are recognised as liabilities in the accounting period in which the service has been rendered by the employees, with a corresponding charge to the profit or loss for the current period or the cost of relevant assets. | |
| (ii) | Defined benefit plans |
| The Group provides employees with some supplementary retirement benefits belong to defined benefit plans in addition to the social security policy prescribed by the State. The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of national debt that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. | |
| The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss. | |
| Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the statement of financial position. | |
| Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs. | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.24 | Employee benefits (continued) |
| (3) | Termination benefits |
| The Group provides compensation for terminating the employment relationship with employees before the end of the employment contracts or as an offer to encourage employees to accept voluntary redundancy before the end of the employment contracts. The Group recognises a liability arising from compensation for termination of the employment relationship with employees, with a corresponding charge to profit or loss for the current period at the earlier of the following dates: 1) when the Group cannot unilaterally withdraw an employment termination plan or a curtailment proposal; 2) when the Group recognises costs or expenses for a restructuring that involves the payment of termination benefits. | |
| (4) | Early retirement benefits |
| The Group offers early retirement benefits to those employees who accept early retirement arrangements. The early retirement benefits refer to the salaries and social security contributions to be paid to and for the employees who accept voluntary retirement before the normal retirement date prescribed by the State, as approved by the management. The Group pays early retirement benefits to those early retired employees from the early retirement date until the normal retirement date. The Group accounts for the early retirement benefits in accordance with the treatment for termination benefits, in which the salaries and social security contributions to be paid to and for the early retired employees from the off-duty date to the normal retirement date are recognised as liabilities with a corresponding charge to the profit or loss for the current period. The differences arising from the changes in the respective actuarial assumptions of the early retirement benefits and the adjustments of benefit standards are recognised in profit or loss in the period in which they occur. | |
| The termination benefits expected to be settled within one year since the balance sheet date are classified as current liabilities. |
| 2.25 | Provisions |
| Provisions, mainly warranty costs, 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 the amount has been reliably estimated. Provisions are not recognised for future operating losses. | |
| Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. | |
| Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.26 | Revenue recognition |
| The Group manufactures and sells a range of automobiles and automobile parts to dealers and ending customers. Besides, the Group also provides automobile maintenance and additional warranty services. The Group recognises revenue when the customer obtains control of the goods and services. The revenue is recognised based on the consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to customers. | |
| (1) | Sales of goods – Automobile and automobile parts |
| The Group manufactures and sells a range of automobiles and automobile parts to dealers and ending customers. Sales are recognised when control of the products has transferred, being when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits from the products. Control of automobiles is transferred when automobiles are delivered out of warehouse, being when customer has accepted the products. Control of automobile parts is transferred when the products out of warehouse or shipped to designated destination, being when customer has accepted the products. | |
| When the contracts include two performance obligations, selling automobiles and providing shipping services, the transaction price will be allocated to each performance obligation based on the stand-alone selling prices. Where these are not directly observable, they are estimated considering market information, expected cost plus margin. | |
| No element of financing is deemed present as the sales are made with a credit term within one year, which is consistent with market practice. The Group’s obligation to repair or replace faulty products under the statutory warranty terms prescribed by the industry law and regulations is recognised as a provision, see Note 2.25. For additional warranty, it is considered as a separate performance obligation under IFRS 15, see Note 2.26(2). | |
| Revenue from these sales is recognised based on the price specified in the contract, net of the estimated discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. | |
| (2) | Rendering of services |
| The Group provides service of automobile maintenance and additional warranty. Revenue is recognised on the basis of inputs to the satisfaction of the performance obligation relative to the total expected inputs to the satisfaction of that performance obligation. | |
| Trade receivables are recognised when the Group recognised revenue according to the completion process and has an unconditional right to consideration. Contract assets are recognised when the Group satisfies a performance obligation but does not have an unconditional right to consideration. The provision of trade receivables and contract assets are subject to expected credit loss model. Contract liabilities are recognised when the consideration received before the Group satisfies the performance obligation. The contract assets and liabilities are presented on a net basis for the some contract. | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.26 | Revenue recognition (continued) |
| (3) | Accounting policies applied before 1 January 2018 |
| Revenue was measured at the fair value of the consideration received or receivable, and represented amounts receivable for goods supplied, stated net of discounts returns and value added taxes. The Group recognised revenue when the amount of revenue can be reliably measured; when it was probable that future economic benefits would flow to the entity; and when specific criteria had been met for each of the Group’s activities, as described below. The Group based its estimates of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. | |
| (i) Sales of goods | |
| Revenue from the sale of goods was recognised when significant risks and rewards of ownership of the goods were transferred to the customer, the customer had accepted the products and collectability of the related receivables was reasonably assured. | |
| (ii) Rental income | |
| Rental income was recognised on a straight-line basis over the period of the rental contracts. | |
| (iii) Rendering of services | |
| The Group provided service of vehicle maintenance. The related revenue was recognised using the percentage of completion method, with the stage of completion being determined based on proportion of costs incurred to date to the estimated total costs. | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.27 | Earnings per share |
| (1) | Basic earnings per share |
| Basic earnings per share is calculated by dividing: the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. | |
| (2) | Diluted earnings per share |
| Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: ? the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and ? the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. | |
| 2.28 | Leases |
| Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. | |
| 2.29 | Dividend distribution |
| Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders, where appropriate. | |
| 2.30 | Government grants |
| Government grants refer to the monetary or non-monetary assets obtained by the Group from the government, including tax return, financial subsidy and etc. | |
| Government grants are recognised when the grants can be received and the Group can comply with all attached conditions. If a government grant is a monetary asset, it will be measured at the amount received or receivable. If a government grant is a non-monetary asset, it will be measured at its fair value. If it is unable to obtain its fair value reliably, it will be measured at its nominal amount. | |
| Government grants related to assets refer to government grants which are obtained by the Group for the purposes of purchase, construction or acquisition of the long-term assets. Government grants related to income refer to the government grants other than those related to assets. | |
| Government grants related to assets will be recorded as deferred income and recognised evenly in profit or loss over the useful lives of the related assets. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 2 | Summary of significant accounting policies (continued) |
| 2.30 | Government grants (continued) |
| Government grants related to income will be recorded as deferred income and recognised in profit or loss in the period in which the related expenses are recognised if the grants are intended to compensate for future expenses or losses, and otherwise recognised in profit or loss for the current period if the grants are used to compensate for expenses or losses that have been incurred. | |
| 2.31 | Interest income |
| Interest income from financial assets at FVPL is included in other income/(expense)-net, see Note 8 below. | |
| Interest income on financial assets at amortised cost and financial assets at FVOCI (2017 –loans and receivables) calculated using the effective interest method is recognised in the statement of profit or loss as part of finance income. Interest income is presented as finance income where it is earned from financial assets that are held for cash management purposes, see Note 9 below. Any other interest income is included in other income/(expense)-net. | |
| Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance). |
| 3 | Financial risk management |
| The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. | |
| The Group’s risk management is predominantly controlled by Finance Department under policies approved by the Board of Directors. Group Finance Department identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk and credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. | |
| 3.1 | Financial risk factors |
| (1) | Market risk |
| (i) | Foreign exchange risk |
| The Group operates domestically and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to other payables dominated in US dollar (“USD”) and Euro. | |
| Management has set up a policy to require the Group to manage their foreign exchange risk against their functional currency. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the Company’s functional currency. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 3 | Financial risk management (continued) |
| 3.1 | Financial risk factors (continued) |
| (1) | Market risk (continued) |
| (i) | Foreign exchange risk (continued) |
| Exposure | |
| The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in RMB, was as follows: |
| 31 December 2018 | 31 December 2017 | ||||||
| USD RMB’000 | EUR RMB’000 | Other currency RMB’000 | USD RMB’000 | EUR RMB’000 | Other currency RMB’000 | ||
| Derivative financial instruments | |||||||
| Foreign exchange forwards | 979 | - | - | - | - | - | |
| Trade and other receivables | - | 265 | - | 5,711 | 8,706 | 100 | |
| Financial liabilities at fair value through profit or loss | |||||||
| Foreign exchange forwards | - | - | - | (8,493) | - | - | |
| Borrowings | (4,044) | - | - | (4,279) | - | - | |
| Trade and other payables | (164,599) | (100,450) | (4,045) | (235,847) | (116,320) | (2,685) | |
| (167,664) | (100,185) | (4,045) | (242,908) | (107,614) | (2,585) | ||
| Sensitivity | |
| As shown in the table above, the Group is primarily exposed to changes in USD/RMB and Euro/RMB exchange rates. | |
| As at 31 December 2018, if RMB had strengthened/weakened by 10% against USD with all other variable held constant, the Group’s net profit for the year then ended would have been approximately RMB14,187,000 (2017: RMB20,650,000) higher/lower. As at 31 December 2018, if RMB had strengthened/weakened by 10% against Euro with all other variable held constant, the Group’s net profit for the year then ended would have been approximately RMB8,626,000 (2017: RMB9,263,000) higher/lower. |
| (ii) | Interest rate risk |
| The Group’s income and operating cash flows are substantially independent of changes in market interest rates. As at 31 December 2018, a large portion of its bank deposits were at variable rates and all of its borrowings were at fixed rate. The Group has not used any interest rate swaps to hedge its exposure to interest rate risk. | |
| As at 31 December 2018, if the interest rate of the Group’s bank deposits had been increased/decreased by 10% and all other variables were held constant, the Group’s net profit for the year then ended would have been increased/decreased by approximately RMB14,174,000 (2017: RMB19,352,000). | |
| As at 31 December 2018, the difference between the fair value and book value of the Group’s borrowings with fixed rate is immaterial. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 3 | Financial risk management (continued) |
| 3.1 | Financial risk factors (continued) |
| (2) | Credit risk |
| Credit risk arises from cash and cash equivalents, contractual cash flows of other financial instruments at fair value through comprehensive income and at fair value through profit or loss, favourable derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables. | |
| (i) | Risk management |
| Credit risk is managed on a group basis. Risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The compliance with credit limits by customers is regularly monitored by line management. | |
| (ii) | Impairment of financial assets |
| The Group has four types of financial assets that are subject to the expected credit loss model: | |
| ? trade receivables for sales of inventory and from the provision of services, and ? notes receivables carried at FVOCI ? other financial assets at amortised cost ? cash and cash equivalents. | |
| Trade receivables | |
| The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. | |
| The expected loss rates are based on the payment profiles of sales over a period of 24 month before 31 December 2018 or 1 January 2018 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified the GDP and the unemployment rate of China in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. | |
| On that basis, the loss allowance as at 31 December 2018 and 1 January 2018 (on adoption of IFRS 9) was determined as follows for trade receivables: | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 3 | Financial risk management (continued) | ||||||
| 3.1 | Financial risk factors (continued) | ||||||
| (2) | Credit risk (continued) | ||||||
| (ii) | Impairment of financial assets (continued) | ||||||
| (a) | As at 31 December 2018, receivables with amounts are subject to separate assessment for impairment as below: | ||||||
| 31 December 2018 | Current | 1-30 days past due | More than 30 days past due | More than 60 days past due | More than 90 days past due | Total | |
| Expected loss rate | - | - | - | - | 100% | — | |
| Gross carrying amount – trade receivables | - | - | - | - | 8,633 | 8,633 | |
| Loss allowance | - | - | - | - | (8,633) | (8,633) | |
| As the above debtors involved in several lawsuits, the Group cannot be able to collect the amount under the original terms, a full provision for bad debts of that receivable were made. | |||||||
| (b) | As at 31 December 2018, trade receivables have been grouped on the basis of shared credit risk characteristics and the days past due for the measurement of expected credit losses: |
| i) | Notes receivables group |
| As at 31 December 2018, all the notes receivables are bank acceptance bills of RMB626,509,000, which will be accepted mainly by large state-owned banks or national commercial banks. The Group believes that there is no significant credit losses due to the bank default. |
| ii) | Automobiles sales group | ||||||
| 31 December 2018 | Current | 1-30 days past due | More than 30 days past due | More than 60 days past due | More than 90 days past due | Total | |
| Expected loss rate | 0.43% | 0.46% | 10.59% | 10.78% | 10.93% | — | |
| Gross carrying amount – trade receivables | 2,037,061 | 80,081 | 10,253 | 420 | 16,305 | 2,144,120 | |
| Loss allowance | (8,684) | (366) | (1,085) | (45) | (1,782) | (11,962) | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 3 | Financial risk management (continued) |
| 3.1 | Financial risk factors (continued) |
| (2) | Credit risk (continued) |
| (ii) | Impairment of financial assets (continued) |
| (b) | As at 31 December 2018, trade receivables have been grouped on the basis of shared credit risk characteristics and the days past due for the measurement of expected credit losses (continued): |
| iii) | New energy automobiles subsidies group | ||||||
| 31 December 2018 | Current | 1-30 days past due | More than 30 days past due | More than 60 days past due | More than 90 days past due | Total | |
| Expected loss rate | 0.30% | - | - | - | - | — | |
| Gross carrying amount – trade receivables | 228,543 | - | - | - | - | 228,543 | |
| Loss allowance | (686) | - | - | - | - | (686) | |
| iv) | Automobile parts group: | ||||||
| 31 December 2018 | Current | 1-30 days past due | More than 30 days past due | More than 60 days past due | More than 90 days past due | Total | |
| Expected loss rate | 0.30% | 0.30% | 0.50% | 0.60% | 5.00% | — | |
| Gross carrying amount – trade receivables | 313,028 | 614 | 484 | 485 | 1,021 | 315,632 | |
| Loss allowance | (939) | (2) | (2) | (3) | (51) | (997) | |
| For the opening loss allowances for trade receivables as at 1 January 2018, the restatement on transaction as a result of applying the expected credit risk model was not material. The closing loss allowances for trade receivables as at 31 December 2018 reconcile to the opening loss allowances as follows: |
| Trade receivables | |||
| 2018 RMB’000 | 2017 RMB’000 | ||
| 31 December – calculated under IAS 39 | 21,016 | 15,940 | |
| Amounts restated through opening retained earnings | - | - | |
| Opening loss allowance as at 1 January 2018 – calculated under IFRS 9 | 21,016 | 15,940 | |
| Increase in loss allowance recognised in profit or loss during the year | 2,052 | 5,703 | |
| Receivables written off during the year as uncollectible | (42) | - | |
| Unused amount reversed | (748) | (627) | |
| At 31 December | 22,278 | 21,016 | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 3 | Financial risk management (continued) |
| 3.1 | Financial risk factors (continued) |
| (2) | Credit risk (continued) |
| (ii) | Impairment of financial assets (continued) |
| Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments. | |
| Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. |
| Previous accounting policy for impairment of trade receivables | |
| In the prior year, the impairment of trade receivables was assessed based on the incurred loss model. Individual receivables which were known to be uncollectible were written off by reducing the carrying amount directly. The other receivables were assessed collectively to determine whether there was objective evidence that an impairment had been incurred but not yet been identified. For these receivables the estimated impairment losses were recognised in a separate provision for impairment. The Group considered that there was evidence of impairment if any of the following indicators were present: | |
| ? significant financial difficulties of the debtor ? probability that the debtor will enter bankruptcy or financial reorganisation, and ? default or late payments. |
| Receivables for which an impairment provision was recognised were written off against the provision when there was no expectation of recovering additional cash. | |
| Financial assets at fair value through other comprehensive income | |
| Notes receivables carried at FVOCI are considered to have low credit risk, and the loss allowance recognised during the period was therefore limited to 12 months expected losses. Management considers ‘low credit risk’ for the instruments that the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. JMC Heavy Duty Vehicle Co., Ltd. (“JMCH”), the subsidiary of the Group, held notes receivables for endorsement and presented as FVOCI at the statement of financial position. All the notes receivables are bank acceptable bills and considered as low credit risk financial instruments without significant credit risk because the banks have a strong capacity to meet its contractual cash flow obligations in the near term. |
| Other financial assets at amortised cost | |
| Other financial assets at amortised cost include bank interest receivables and other receivables. For the opening loss allowances for other financial assets as at 1 January 2018, the restatement on transaction as a result of applying the expected credit risk model was not material. The closing loss allowances for other financial assets as at 31 December 2018 reconcile to the opening loss allowances as follows: |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 3 | Financial risk management (continued) |
| 3.1 | Financial risk factors (continued) |
| (2) | Credit risk (continued) |
| (ii) | Impairment of financial assets (continued) |
| Other financial assets at amortised cost (continued) |
| 1-30 days past due: expected credit losses in the next 12 months RMB’000 | More than 90 days past due: expected credit losses throughout lifetime RMB’000 | Total RMB’000 | ||
| Closing loss allowance as at 31 December 2017 (calculated under IAS 39) | 554 | 104 | 658 | |
| Amounts restated through opening retained earnings | - | - | - | |
| Opening loss allowance as at 1 January 2018 (calculated under IFRS 9) | 554 | 104 | 658 | |
| Increase in the allowance recognised in profit or loss during the period | 14 | 99 | 113 | |
| Reverse of the allowance recognised in profit or loss during the period | (328) | - | (328) | |
| Closing loss allowance as at 31 December 2018 | 240 | 203 | 443 |
| All the bank interest receivables are considered as low credit risk financial instruments without significant credit risk because the banks have a strong capacity to meet its contractual cash flow obligations in the near term. | |
| Net impairment losses on financial assets recognised in profit or loss | |
| During the year, the following losses were recognised in profit or loss in relation to impaired financial assets: |
| 2018 RMB’000 | 2017 RMB’000 | ||
| Impairment losses | |||
| - movement in loss allowance for trade receivables | (2,052) | (5,703) | |
| Impairment losses on other financial assets | (113) | (225) | |
| Reversal of previous impairment losses | 1,076 | 627 | |
| Net impairment losses on financial and contract assets | (1,089) | (5,301) |
| Cash and cash equivalents | |
| While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 3 | Financial risk management (continued) |
| 3.1 | Financial risk factors (continued) |
| (3) | Liquidity risk |
| Cash flow forecasting is performed in the operating entities of the Group and aggregated by Finance Department. Finance Department monitors rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (Note 24) at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. | |
| The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. |
| Less than 1 year RMB’000 | Between 1 and 2 years RMB’000 | Between 2 and 5 years RMB’000 | Over 5 years RMB’000 | ||
| At 31 December 2018 | |||||
| Bank borrowings | |||||
| - Principals | 449 | 449 | 1,348 | 1,798 | |
| - Interests | 59 | 52 | 116 | 61 | |
| Trade and other payables (exclude payroll and welfare payables, other tax payables) | 11,658,259 | - | - | - | |
| 11,658,767 | 501 | 1,464 | 1,859 |
| At 31 December 2017 | |||||
| Bank borrowings | |||||
| - Principals | 428 | 428 | 1,284 | 2,139 | |
| - Interests | 63 | 56 | 130 | 88 | |
| Financial liabilities at fair value through profit or loss | 8,493 | - | - | - | |
| Trade and other payables (exclude payroll and welfare payables, other tax payables) | 12,641,368 | - | - | - | |
| 12,650,352 | 484 | 1,414 | 2,227 |
| 3.2 | Capital risk management |
| The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as borrowings divided by total capital. Total capital is calculated as equity, as shown in the consolidated statement of financial position, plus borrowings. The Group aims to maintain the gearing ratio at a reasonable level. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| As at 31 December 2018 | Level 1 | Level 2 | Level 3 | Total | |
| Financial assets | |||||
| Derivatives | |||||
| Foreign exchange forwards | - | 979 | - | 979 | |
| Financial assets at FVOCI | |||||
| Notes receivables | - | - | 6,246 | 6,246 | |
| Total financial assets | - | 979 | 6,246 | 7,225 |
| As at 31 December 2017 | Level 1 | Level 2 | Level 3 | Total | |
| Financial liabilities | |||||
| Financial liabilities at FVPL | |||||
| Foreign exchange forwards | - | 8,493 | - | 8,493 | |
| Total financial liabilities | - | 8,493 | - | 8,493 | |
| See Note 2.2 for reclassification following the adoption of IFRS 9 Financial Instruments. | |||||
| There were no transfers between levels 1 and 2 for recurring fair value measurements during the year. | |||||
| The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period. Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities. |
| 3 | Financial risk management (continued) |
| 3.2 | Capital risk management (continued) |
| The gearing ratios at 31 December 2018 and 2017 were as follows: | ||||
| 31 December 2018 | 31 December 2017 | |||
| Total borrowings | 4,044 | 4,279 | ||
| Total equity | 10,384,498 | 12,572,402 | ||
| Total capital | 10,388,542 | 12,576,681 | ||
| Gearing ratio | 0.04% | 0.03% | ||
| 3.3 | Fair value estimation |
| (1) | Fair value hierarchy |
| This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the financial statements. The Group has classified its financial instruments into the three levels prescribed under the accounting standards: |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 3 | Financial risk management (continued) |
| 3.3 | Fair value estimation (continued) |
| (2) | Valuation techniques used to determine fair values |
| Specific valuation techniques used to value financial instruments include: | |
| ? for foreign currency forwards - present value of future cash flows based on forward exchange rates at the balance sheet date ? for other financial instruments - discounted cash flow analysis. | |
| (3) Fair value measurements using significant unobservable inputs (level 3) | Fair value measurements using significant unobservable inputs (level 3) |
| The following table presents the changes in level 3 items for the periods ended 31 December 2018 and 31 December 2017: |
| Financial assets at FVPL- monetary fund | Financial assets at FVOCI- notes receivables | Total | ||
| Opening balance 1 January 2017 | - | — | - | |
| Acquisitions | - | — | - | |
| Disposals | - | — | - | |
| Closing balance 31 December 2017 | - | — | - | |
| Opening balance 1 January 2018 | - | - | - | |
| Acquisitions | 10,353,000 | 102,802 | 10,455,802 | |
| Disposals | (10,353,000) | (96,556) | (10,449,556) | |
| Closing balance 31 December 2018 | - | 6,246 | 6,246 |
| See Note 2.2 for reclassification following the adoption of IFRS 9 Financial Instruments. | |
| There is no unrealised gains or losses recognised in profit or loss attributable to balances held at the end of the reporting period. The gains or losses arising from the holding of the financial assets measured at fair value during the financial period are recognised in other income/(expense)-net. |
| 4 | Critical accounting estimates and judgements |
| Estimates and judgements are continually evaluated and 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 and liabilities within the next financial year are addressed below. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 4 | Critical accounting estimates and judgements (continued) |
| 4.1 | Critical accounting estimates |
| (1) | Measurement of expected credit losses |
| The Group calculates expected credit losses according to the default risk exposure and expected credit loss rate, and determines the expected credit loss rate based on default probability and default loss rate. In determining the expected credit loss rate, the Group uses data such as internal historical credit loss experience, etc., and adjusts historical data based on current conditions and forward-looking information. When considering forward-looking information, the indicators used by the Group include the risk of economic downturn, the expected increase in unemployment rate, the external market environment, the technological environment and changes in customer conditions. The Group regularly monitors and reviews assumptions related to the calculation of expected credit losses. In 2018, there was no significant change in the above estimation techniques and key assumptions. |
| (2) | Impairment of long term assets |
| The Group assesses whether there are indicators that the long term assets except for financial assets are impaired at each balance sheet date. When there are indicators that the carrying amounts of those long term assets are unrecoverable, an impairment test will be performed. | |
| When the carrying amount of the long term assets except for financial assets or the cash generating unit (“CGU”) is higher than its recoverable amount, which is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use, the impairment occurred. | |
| The Group determines the fair value less costs of disposal based on discounted future cash flow forecasts. The Group use the medium and long-term budgets of the business development plan approved by the management as a starting point when applying the present value technique, adjusting for market conditions. | |
| Key judgements are made on revenue growth rate, sales price growth rate, discount rate and long term growth rate when estimate the discounted future cash flow forecasts. The Group uses relevant accessible information, including the production and sales volumn, relevant market information which are based on the reasonable and supportable assumptions, to estimate the recoverable amount of those long term assets. |
| (3) | Taxation |
| The Group is subject to various taxes in the PRC, including corporate income tax, value added tax and consumption tax. Significant judgment 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. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from amounts that were initial recorded, such differences will impact the tax provisions in the period of final tax outcome. | |
| Deferred income tax assets relating to certain temporary differences are recognised as management considers it is probable that future taxable profit will be available against which the temporary differences can be utilised. Where the expectation is different from the original estimate, such differences will impact the recognition of deferred tax assets and tax in the periods in which such estimate is changed. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| (4) | Provisions |
| The Group provides statutory warranties on automobile and undertakes to repair or replace items that fail to perform satisfactorily based on certain pre-determined conditions. Management estimates the related warranty claims based on historical warranty claim information including level of repairs and returns as well as recent trends that might suggest that past cost information may differ from future claims. Factors that could impact the estimated claim information include the success of the Group’s productivity and quality controls, as well as parts and labour costs. Any increase or decrease in the provision would affect profit or loss in future years. | |
| (5) | Write-down of inventory |
| Inventories shall be measured at the lower of cost and the net realisable value. The net realisable value is estimated sales price less estimated cost to finish goods, estimated distribution expenses and related taxes in the daily operation. | |
| If management revises estimated sales price, estimated cost to finish goods, distribution expenses and related taxes, and revised sales price is lower than current sales price, or revised cost to finish goods, distribution expenses and related taxes are higher than those current estimation, the Group needs to consider increasing the write-down provision of the inventories. | |
| If the actual sales price, the cost to finish goods, distribution expenses and related taxes are higher or lower than the estimation of management, the Group will recognise the relevant influence in profit or loss in the relevant accounting period. |
| 4.2 | Critical accounting judgements |
| (1) | Classification of financial assets |
| Significant judgements made by the Group in the classification of financial assets include business model and analysis on contractual cash flow characteristics. | |
| The Group determines the business model for financial assets management on the group basis, and factors to be considered include the methods for evaluating of the financial assets performance and reporting the financial assets performance to key management personnel, the risks relating to the financial assets performance and corresponding management methods, the ways in which related business management personnel are remunerated, etc. |
| 4 | Critical accounting estimates and judgements (continued) |
| 4.1 | Critical accounting estimates (continued) |
| (3) | Taxation (continued) |
| As at 31 December 2018, the Group recorded deferred tax assets of approximately RMB743,096,000. To the extent that it is probable that taxable profit will be available against which the deductible temporary differences will be utilised, deferred tax assets are recognised mainly for temporary differences arising from accrued expenses and retirement benefit obligations. | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 4 | Critical accounting estimates and judgements (continued) |
| 4.2 | Critical accounting judgements (continued) |
| (1) | Classification of financial assets (continued) |
| When assessing whether contractual cash flow characteristics of financial assets are consistent with basic lending arrangement, key judgements made by the Group include: the possibility of changes in time schedule or amount of the principal during the lifetime due to reasons such as repayment in advance; whether interest only include time value of money, credit risks, other basic lending risks and considerations for costs and profits; whether the repayment in advance reflects the principal outstanding and corresponding interest and reasonable compensation paid for early termination of the contract. | |
| (2) | Judgement on significant increase in credit risk |
| Judgement made by the Group for significant increase in credit risk is mainly based on whether the overdue days exceed 30 days, or whether one or more of the following indicators change significantly: business environment of the debtor, internal and external credit rating, significant changes in actual or expected operating results, significant decrease in value of collateral or credit rate of guarantor, etc. | |
| Judgement made by the Group for the occurrence of credit impairment is mainly based on whether the overdue days exceed 90 days (i.e., a default has occurred), or whether one or more of the following conditions is/are satisfied: the debtor is suffering significant financial difficulties, the debtor is undergoing other debt restructuring, or the debtor probably goes bankrupt, etc. | |
| (3) | Capitalisation of development costs |
| Development costs are capitalised when the criteria in Note 2.10(2) are fulfilled. The assessments on whether the criteria for capitalisation of development have been met involves the judgements of the Group, including the technical feasibility of the project, the likelihood of the project generating sufficient future economic benefits and the timing to start capitalisation particularly. The Group makes the judgements on the capitalisation of development costs and recorded the process in meeting minutes based on feasibility analysis and regular review on the development project phase etc. | |
| (4) | Timing of revenue recognition |
| The Group sells automobiles and automobile parts to distributors and ending customers. As prescribed in the contract, control of automobiles is transferred to the customers when the good are out of the warehouse, while control of automobile parts is transferred when the parts are out of the warehouse or shipped to the designate destination based on the contract terms. The distributors and ending customers sign the delivery documents after they accept the products. Thereafter, the distributors or ending customers control the products and have the right to set the price, bear the risks of any obsolescence and loss of the products. The distributors and ending customers have obtained the control of the products after accepting the products. Therefore, the Group recognises the sales revenue of the products at the time when the delivery documents have been signed. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 4 | Critical accounting estimates and judgements (continued) |
| 4.2 | Critical accounting judgements (continued) |
| (5) | Sales with product warranties |
| The Group provides statutory warranty for automobiles and automobile parts, and the period and terms of such warranty comply with the requirements of laws and regulations related to the products. The Group does not provide any significant additional service for this purpose, thus this kind of warranty does not identified as a separate performance obligation. In addition, the Group also offers additional warranty other than the requirements of laws and regulations, which identified as a separate performance obligation. The Group recognises the revenue of the additional warranty over time during the period when services are rendered. |
| 5 | Revenue and segment information | |||||
| The Group principally derives its turnover from the manufacture, assembly and sale of automobiles, related spare parts and components, and sales are made principally in the PRC. Revenue represents the total invoiced value of goods supplied to customers, net of value-added tax, returns and allowances. | ||||||
| Management has determined the operating segment based on the reports reviewed by the strategic executive committee that are used to make strategic decisions. The committee considers the business from the product perspective as all the Group’s sales are made in the PRC. Since the Group principally derives its turnover from the sale of automobiles, the committee considers the automobile business as a whole in allocating resources and assessing performance. Accordingly, no segment information is presented. | ||||||
| The revenue by product of the whole business as follows: | ||||||
| 2018 | ||||||
| Automobiles | Automobile parts | Maintenance services | Materials and others | Total | ||
| Main business income | 25,178,860 | 2,696,240 | 71,799 | - | 27,946,899 | |
| -Recognition at a point in time | 25,178,860 | 2,696,240 | - | - | 27,875,100 | |
| -Recognition over time | - | - | 71,799 | - | 71,799 | |
| Other business income | - | - | - | 302,441 | 302,441 | |
| 25,178,860 | 2,696,240 | 71,799 | 302,441 | 28,249,340 | ||
| 2017 | ||||||
| Automobiles | Automobile parts | Maintenance services | Materials and others | Total | ||
| Main business income | 28,390,846 | 2,605,497 | 18,720 | - | 31,015,063 | |
| -Recognition at a point in time | 28,390,846 | 2,605,497 | - | - | 30,996,343 | |
| -Recognition over time | - | - | 18,720 | - | 18,720 | |
| Other business income | - | - | - | 330,684 | 330,684 | |
| 28,390,846 | 2,605,497 | 18,720 | 330,684 | 31,345,747 | ||
| As at 31 December 2018, the expected revenue of unsatisfied performance obligations from signed contract is RMB92,838,000. The Group will recognise the revenue from 2019 to 2021. | ||||||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 5 | Revenue and segment information (continued) |
| The Group has recognised the following assets and liabilities related to contracts with customers: |
| 31 December 2018 | 1 January 2018 | ||
| Contract liabilities | |||
| Automobiles and automobile parts | 212,246 | 110,470 | |
| Maintenance services and additional warranty | 92,838 | 57,592 | |
| Total contract liabilities | 305,084 | 168,062 | |
| Less: non-current liabilities | (38,382) | (32,134) | |
| Total current contract liabilities | 266,702 | 135,928 |
| See Note 2.2 for reclassification following the adoption of IFRS 15 Revenue from Contracts with Customers. | |
| As of 1 January 2018, the balance of the Group's contract liabilities was RMB168,062,000, of which RMB110,470,000 from automobiles and automobile parts, and RMB25,458,000 from maintenance services have been recognised in revenue in 2018. |
| 6 | Expenses by nature | |||
| 2018 | 2017 | |||
| Changes in inventories of finished goods and work in progress | (197,140) | (139,613) | ||
| Raw materials and consumables used | 21,532,654 | 22,638,768 | ||
| Employee benefit expense (Note 7) | 2,233,351 | 2,087,061 | ||
| Depreciation of PPE (Note 12, 29) | 925,888 | 845,100 | ||
| Repairs and maintenance expenditure on PPE | 160,692 | 186,019 | ||
| Transportation expenses | 656,297 | 558,395 | ||
| Amortisation of lease prepayment (Note 13, 29) | 15,574 | 15,574 | ||
| Amortisation of intangible assets (Note 14, 29) | 55,737 | 40,575 | ||
| Provision of statutory warranty (Note 26) | 291,471 | 313,289 | ||
| Design fees | 469,174 | 803,892 | ||
| Sales promotion expenses | 326,215 | 1,076,493 | ||
| Advertising and new product planning expenses | 194,932 | 309,267 | ||
| Net impairment losses on financial assets | — | 5,301 | ||
| Provision for inventories write-down | 53,651 | 34,655 | ||
| Others | 1,407,343 | 1,709,693 | ||
| Total cost of sales, distribution expenses and administrative expenses | 28,125,839 | 30,484,469 | ||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 7 | Employee benefit expense | |||
| 2018 | 2017 | |||
| Wages and salaries | 1,577,058 | 1,463,528 | ||
| Social security costs | 225,163 | 204,839 | ||
| Pension costs ? defined contribution plans | 267,737 | 251,727 | ||
| Pension costs ? defined benefit plans (Note 25) | 9,200 | 4,251 | ||
| Others | 154,193 | 162,716 | ||
| 2,233,351 | 2,087,061 | |||
| The employees of the Group participated in a retirement benefit plan organised by the municipal and provincial governments under which the Group was required to make defined contributions monthly to this plan. |
| In addition, the Group also paid certain pension subsidies to certain retired employees. In accordance with the Group’s early retirement programs, the Group was also committed to make periodic benefit payments to certain early-retired employees until they reach their legal retirement ages. |
| 8 | Other income | ||||
| 2018 | 2017 | ||||
| Government grants (a) | 398,427 | 640,577 | |||
| Net fair value gains/(losses) on derivative financial instruments | 9,472 | (17,032) | |||
| Net loss on disposal of derivative financial instruments | (7,200) | (58) | |||
| Others | 25,979 | 8,549 | |||
| 426,678 | 632,036 | ||||
| (a) | In 2018, the Group received grants of approximately RMB398,427,000, mainly from Finance Bureau of Nanchang, Finance Bureau of Nanchang Qingyunpu District, Economic Development District Administrative Commission of Xiaolan and the Finance Bureau of Economic, Transformation and Comprehensive Reform Demonstration Zone Administrative Commission of Shanxi. Those grants were income related government grants to support the Group’s operation. | ||||
| 9 | Finance income and expenses | ||||
| 2018 | 2017 | ||||
| (a) Finance income | |||||
| Interest income on bank deposits | 169,036 | 230,693 | |||
| Interest income on credit sales | 19,400 | 13,607 | |||
| 188,436 | 244,300 | ||||
| (b) Finance expenses | |||||
| Interest expense on bank loans | (217) | (225) | |||
| Bank charges and others | (5,632) | (4,854) | |||
| (5,849) | (5,079) | ||||
| Net finance income | 182,587 | 239,221 | |||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 10 | Taxation | ||||
| (i) | Corporate income tax (“CIT”) | ||||
| As the Company is qualified as a high-tech enterprise and approved by the relevant tax authorities in 2018, the Company is entitled to a preferential CIT rate of 15% from 2018 to 2020 (2017: 15%). The CIT rates of JMCH, Jiangling Motor Sales Co., Ltd. (“JMCS”), Shenzhen Fujiang New Energy Automobile Sales Co., Ltd. (“SZFJ”), Guangzhou Fujiang New Energy Automobile Sales Co., Ltd. (“GZFJ”) and Xiamen Fujiang New Energy Automobile Sales Co., Ltd. (“XMFJ”), the subsidiaries of the Company, are 25%. | |||||
| The amounts of income tax expense charged to profit or loss represented: | |||||
| 2018 | 2017 | ||||
| Current tax | 213 | 206,893 | |||
| Deferred tax (Note 17) | (52,407) | (136,008) | |||
| (52,194) | 70,885 | ||||
| The difference between the actual income tax charge in profit or loss and the amounts which result from applying the enacted tax rate to profit before income tax can be reconciled as follows: | |||||
| 2018 | 2017 | ||||
| Profit before tax | 39,639 | 761,823 | |||
| Tax calculated at tax rates applicable to profits in the respective companies | (29,654) | 96,654 | |||
| Tax concessions | (69) | (28) | |||
| Expenses not deductible for tax purposes | 561 | 726 | |||
| R&D costs deduction | (151,581) | (79,044) | |||
| Income not subject to tax | (336) | (1,223) | |||
| Effect of different tax rates applied for the periods in which the temporary differences are expected to reverse | 32,929 | (2,714) | |||
| Temporary differences for which no deferred income tax asset was recognised | 29,948 | 18,615 | |||
| Tax losses for which no deferred income tax asset was recognised | 66,008 | 37,899 | |||
| Tax charge | (52,194) | 70,885 | |||
The tax credit relating to other comprehensive income is as follows:
| 2018 | 2017 | |||||||
| Before tax | Tax credit | After tax | Before tax | Tax credit | After tax | |||
| Actuarial loss on retirement benefit obligations | (4,590) | 1,148 | (3,442) | (1,616) | 404 | (1,212) | ||
| Other comprehensive income | (4,590) | 1,148 | (3,442) | (1,616) | 404 | (1,212) | ||
| Current tax | - | - | ||||||
| Deferred tax (Note 17) | 1,148 | 404 | ||||||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 10 | Taxation (continued) |
| (ii) | Value-added tax (“VAT”) |
| Pursuant to the “Notice on the adjustment of VAT rate from the Ministry of Finance and the State Administration of Taxation” (Cai Shui [2018] 32) jointly issued by the Ministry of Finance and the State Administration of Taxation, the Group's taxable products sales income applicable VAT rate is 16% from 1 May 2018, while the VAT rate was 17% before then. The VAT rate applicable to the Group's transportation business is 10% from 1 May 2018, while the VAT rate was 11% before then. | |
| (iii) | Consumption Tax (“CT”) |
| The Group’s automobile sale is subject to CT at 3%, 5% or 9% on the selling price of goods. |
| 11 | Earnings per share | ||||||
| Basic earnings per share is calculated by dividing the profit attributable to shareholders of the Company by the weighted average number of ordinary shares in issue during the year. | |||||||
| 2018 | 2017 | ||||||
| Profit attributable to shareholders of the Company | 91,833 | 690,938 | |||||
| Weighted average number of ordinary shares in issue (‘000) | 863,214 | 863,214 | |||||
| Basic earnings per share (RMB) | 0.11 | 0.80 | |||||
| Diluted earnings per share equals to basic earnings per share as there were no dilutive potential ordinary shares outstanding during the year ended 31 December 2018. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 12 | Property, plant and equipment | |||||||
| Buildings | Plant and Machinery | Motor Automobiles | Moulds | Electronic and other equipment | Assets under constructions | Total | ||
| At 1 January 2017 | ||||||||
| Cost | 1,865,850 | 3,526,187 | 262,667 | 2,206,895 | 2,862,436 | 1,100,860 | 11,824,895 | |
| Accumulated depreciation and impairment | (373,449) | (1,787,948) | (123,898) | (1,399,618) | (1,450,760) | (692) | (5,136,365) | |
| Net book amount | 1,492,401 | 1,738,239 | 138,769 | 807,277 | 1,411,676 | 1,100,168 | 6,688,530 | |
| Year ended 31 December 2017 | ||||||||
| Opening net book amount | 1,492,401 | 1,738,239 | 138,769 | 807,277 | 1,411,676 | 1,100,168 | 6,688,530 | |
| Additions | - | - | - | - | - | 921,700 | 921,700 | |
| Transfers | 230,556 | 517,758 | 33,133 | 220,145 | 320,019 | (1,321,611) | - | |
| Disposals | (370) | (351) | (4,562) | - | (617) | - | (5,900) | |
| Classified as held for sale | (5,777) | - | - | - | - | - | (5,777) | |
| Other deductions | - | (4,817) | - | - | (433) | (22,265) | (27,515) | |
| Impairment charge (Note 29) | - | (8,061) | (352) | - | (3,021) | (416) | (11,850) | |
| Depreciation charge (Note 6, 29) | (47,385) | (223,833) | (30,926) | (224,991) | (317,965) | - | (845,100) | |
| Closing net book amount | 1,669,425 | 2,018,935 | 136,062 | 802,431 | 1,409,659 | 677,576 | 6,714,088 | |
| At 31 December 2017 | ||||||||
| Cost | 2,084,217 | 3,954,028 | 280,071 | 2,411,080 | 3,137,100 | 678,684 | 12,545,180 | |
| Accumulated depreciation and impairment | (414,792) | (1,935,093) | (144,009) | (1,608,649) | (1,727,441) | (1,108) | (5,831,092) | |
| Net book amount | 1,669,425 | 2,018,935 | 136,062 | 802,431 | 1,409,659 | 677,576 | 6,714,088 | |
| Year ended 31 December 2018 | ||||||||
| Opening net book amount | 1,669,425 | 2,018,935 | 136,062 | 802,431 | 1,409,659 | 677,576 | 6,714,088 | |
| Additions | - | - | - | - | - | 1,214,241 | 1,214,241 | |
| Transfers | 101,202 | 97,601 | 21,936 | 176,549 | 199,671 | (596,959) | - | |
| Disposals | (56) | (1,164) | (1,188) | (5,986) | (688) | (7) | (9,089) | |
| Reclassification | 2,965 | (143,415) | 29,462 | 3,871 | 107,117 | - | - | |
| Other deductions | - | (10,119) | - | - | (2,647) | (32,151) | (44,917) | |
| Impairment charge (Note 29) | - | (2,832) | (478) | - | (3,478) | (355) | (7,143) | |
| Depreciation charge (Note 6, 29) | (51,781) | (246,570) | (37,514) | (252,144) | (337,879) | - | (925,888) | |
| Closing net book amount | 1,721,755 | 1,712,436 | 148,280 | 724,721 | 1,371,755 | 1,262,345 | 6,941,292 | |
| At 31 December 2018 | ||||||||
| Cost | 2,188,306 | 3,837,053 | 326,799 | 2,556,744 | 3,376,670 | 1,263,392 | 13,548,964 | |
| Accumulated depreciation and impairment | (466,551) | (2,124,617) | (178,519) | (1,832,023) | (2,004,915) | (1,047) | (6,607,672) | |
| Net book amount | 1,721,755 | 1,712,436 | 148,280 | 724,721 | 1,371,755 | 1,262,345 | 6,941,292 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 12 | Property, plant and equipment (continued) | ||||||||
| For the year ended 31 December 2018, depreciation expense of approximately RMB761,189,000 (2017: RMB738,069,000) has been charged in cost of sales, RMB3,099,000 (2017: RMB2,841,000) in distribution costs and RMB161,600,000 (2017: RMB104,190,000) in administrative expenses. | |||||||||
| (i) | Temporarily idle property, plant and equipment | ||||||||
| As at 31 December 2018, property, plant and equipment with book value of approximately RMB 2,497,000 (cost of RMB56,727,000) (31 December 2017: book value of approximately RMB 1,878,000 and cost of RMB53,297,000) were temporarily idle due to product process adjustment and other reasons.The specific analysis is as follows: | |||||||||
| Cost | Accumulated depreciation | Impairment | Net book amount | ||||||
| Plant and Machinery | 28,138 | (16,597) | (10,609) | 932 | |||||
| Motor Automobiles | 3,826 | (2,391) | (470) | 965 | |||||
| Electronic and other equipment | 24,763 | (21,988) | (2,175) | 600 | |||||
| 56,727 | (40,976) | (13,254) | 2,497 | ||||||
| (ii) | Property, plant and equipment not yet obtained proper certificate | ||||||||
| Net book amount | Reasons for not completing proper certificate | ||||||||
| Buildings | 892,127,119 | Procedure not yet completed | |||||||
| 13 | Lease prepayment | ||||||||
| Lease prepayment represents the Group’s interests in land which are held on leases of 50 years. The movement is as follows: | |||||||||
| 31 December 2018 | 31 December 2017 | ||||
| Opening net book amount | 616,834 | 632,408 | |||
| Additions | - | - | |||
| Amortisation charge (Note 6, 29) | (15,574) | (15,574) | |||
| Closing net book amount | 601,260 | 616,834 | |||
| Cost | 751,626 | 751,626 | |||
| Accumulated amortisation | (150,366) | (134,792) | |||
| Net book amount | 601,260 | 616,834 |
| Amortisation expense was charged in administrative expenses. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 14 | Intangible assets | ||||||||||||
| Non-patent technology | Software | Goodwill | After-sale management model | Other | Total | ||||||||
| Year ended 31 December 2017 | |||||||||||||
| Opening net book amount | 115,893 | 38,797 | 3,462 | - | 8 | 158,160 | |||||||
| Addition | 58,010 | 22,265 | - | - | - | 80,275 | |||||||
| Amortisation charge (Note 6, 29) | (27,347) | (13,220) | - | - | (8) | (40,575) | |||||||
| Closing net book amount | 146,556 | 47,842 | 3,462 | - | - | 197,860 | |||||||
| At 31 December 2017 | |||||||||||||
| Cost | 182,597 | 120,282 | 89,028 | 36,978 | 1,649 | 430,534 | |||||||
| Accumulated amortisation and impairment | (36,041) | (72,440) | (85,566) | (36,978) | (1,649) | (232,674) | |||||||
| Net book amount | 146,556 | 47,842 | 3,462 | - | - | 197,860 | |||||||
| Year ended 31 December 2018 | |||||||||||||
| Opening net book amount | 146,556 | 47,842 | 3,462 | - | - | 197,860 | |||||||
| Addition | 71,814 | 32,152 | - | - | - | 103,966 | |||||||
| Disposals | - | (63) | - | - | - | (63) | |||||||
| Amortisation charge (Note 6, 29) | (38,952) | (16,785) | - | - | - | (55,737) | |||||||
| Closing net book amount | 179,418 | 63,146 | 3,462 | - | - | 246,026 | |||||||
| At 31 December 2018 | |||||||||||||
| Cost | 254,412 | 152,014 | 89,028 | 36,978 | 1,649 | 534,081 | |||||||
| Accumulated amortisation and impairment | (74,994) | (88,868) | (85,566) | (36,978) | (1,649) | (288,055) | |||||||
| Net book amount | 179,418 | 63,146 | 3,462 | - | - | 246,026 | |||||||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 14 | Intangible assets (continued) |
| (i) | For the year ended 31 December 2018, amortisation expense of approximately RMB54,860,000 (2017: RMB39,614,000) was charged in administrative expenses, RMB537,000 (2017: RMB621,000) in cost of sales and RMB340,000 (2017: RMB340,000) in distribution costs. |
| (ii) | Development cost of approximately RMB71,814,000 (2017: RMB58,010,000) were capitalised by the Group during the year ended 31 December 2018. |
| (iii) | Impairment test for goodwill |
| Goodwill arises on the acquisition of a subsidiary, and is monitored by the management at the cash generating unit level. The goodwill is allocated to the following cash generating unit (“CGU”): |
| 31 December 2017 | Addition | Impairment | 31 December 2018 | |||||
| JMCH | 3,462 | - | - | 3,462 |
| The recoverable amount of the CGU is determined based on fair value less costs of disposal. These calculations use after-tax cash flow projections based on financial budgets approved by management covering a seven-year period according to the medium and long-term budgets for the business development plan approved by the management. Adjustments for market conditions are also considered for the forecast. Cash flows beyond the seven-year period are extrapolated using the estimated long term growth rate stated below. The long term growth rate does not exceed the average growth rate for the heavy duty automobile business in which the CGU operates. The key assumptions used for calculations in 2018 are as follows: |
| Item | JMCH | |
| Revenue growth rate | 84% | |
| Sales price growth rate | 0% | |
| Long term growth rate | 3% | |
| Discount rate | 19.10% |
The key assumptions used for calculations in 2017 were as follows:
| Item | JMCH | |
| Revenue growth rate | 135% | |
| Sales price growth rate | 1% | |
| Long term growth rate | 3% | |
| Discount rate | 19.40% |
| The key assumptions used and forecast period are consistent with the heavy duty automobile industry. | |
| The discount rates used are after-tax and reflect specific risks relating to the relevant operating subsidiary. | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 14 | Intangible assets (continued) | |||||
| (iii) | Impairment test for goodwill (continued) | |||||
| In the opinion of management, the recoverable amount of the CGU will not be lower than the carrying amount even if taking into account a reasonably possible change in the key assumptions on the calculation of recoverable amount of the CGU. | ||||||
| The fair value measurement is categorised in level 3 of the fair value hierarchy. | ||||||
| 15 | Financial instruments by category | |||||
| The Group holds the following financial instruments: | ||||||
| Financial assets | Notes | 31 December 2018 | 31 December 2017 | |||
| Financial assets at amortised cost | ||||||
| Trade receivables | 19 | 2,674,650 | 2,307,119 | |||
| Notes receivables | 19 | 626,509 | 654,335 | |||
| Other receivables | 19 | 84,588 | 130,959 | |||
| Interest receivables | 19 | 37,923 | 79,217 | |||
| Cash and cash equivalents | 20 | 7,616,880 | 11,137,723 | |||
| Financial assets at fair value through other comprehensive income | ||||||
| Notes receivables | 6,246 | — | ||||
| Financial assets at fair value through profit or loss | ||||||
| Derivative financial instruments | 979 | - | ||||
| 11,047,775 | 14,309,353 | |||||
| Financial liabilities | Notes | 31 December 2018 | 31 December 2017 | ||
| Liabilities at amortised cost | |||||
| Trade and other payables(exclude payroll and welfare payables, other tax payables) | 27 | 11,658,259 | 12,641,368 | ||
| Borrowings | 24 | 4,044 | 4,279 | ||
| Financial liabilities at fair value through profit or loss | - | 8,493 | |||
| 11,662,303 | 12,654,140 |
| The Group’s exposure to various risks associated with the financial instruments is discussed in Note 3. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 16a | Subsidiaries |
| As at the date of this report, the Group has the following subsidiaries: | ||||||||
| Entity | Place and date of incorporation | Percentage of equity interest held | Principal activities | |||||
| JMCH | Taiyuan, PRC /8 January 2013 | 100% | Manufacture and sale of automobiles and spare parts | |||||
| JMCS | Nanchang, PRC /11 October 2013 | 100% | Sale of automobiles and spare parts | |||||
| SZFJ | Shenzhen, PRC /3 May 2018 | 100% | Sale of automobiles and spare parts | |||||
| GZFJ | Guangzhou, PRC /15 June 2018 | 100% | Sale of automobiles and spare parts | |||||
| XMFJ | Xiamen, PRC /20 June 2018 | 100% | Sale of automobiles and spare parts | |||||
| In 2018, the Company invested RMB10,000,000 respectively to set up subsidiaries, including SZFJ, GZFJ and XMFJ. | ||||||||
| 16b | Investments accounted for using the equity method | |||||||
| (i) | Summarised financial information for immaterial associate | |||||||
| The amount recognised in the consolidated statement of financial position was as follow: | ||||||||
| 31 December 2018 | 31 December 2017 | |||||||
| Associate | 40,112 | 37,874 | ||||||
| The amount recognised in the consolidated statement of comprehensive income was as follow: | |||||
| 2018 | 2017 | ||||
| Share of profit | 2,238 | 8,149 | |||
| The Company holds 19.15% interest of Hanon Systems (Nanchang) Co., Ltd. (“Hanon Systems”) and the investment is accounted for using the equity method of accounting. |
| (ii) | Reconciliation of summarised financial information of the associate | ||||
| 2018 | 2017 | ||||
| At beginning of the year | 197,774 | 208,317 | |||
| Profit for the year | 11,686 | 42,555 | |||
| Dividends distributed | - | (53,098) | |||
| At end of the year | 209,460 | 197,774 | |||
| Interest in associate | 19.15% | 19.15% | |||
| Carrying value | 40,112 | 37,874 | |||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 17 | Deferred income tax |
| 31 December 2018 | 31 December 2017 | ||||
| Deferred tax assets | 926,630 | 757,877 | |||
| Deferred tax liabilities-can be offset | (183,534) | (67,624) | |||
| Deferred tax liabilities-cannot be offset | (26,024) | (26,736) | |||
| Deferred tax assets-net | 743,096 | 690,253 | |||
| Deferred tax liabilities-net | (26,024) | (26,736) |
| The gross movement on the deferred income tax account is as follows: | |||||
| 31 December 2018 | 31 December 2017 | ||||
| At beginning of the year | 663,517 | 527,105 | |||
| Credited to profit or loss (Note 10(i)) | 52,407 | 136,008 | |||
| Credited to other comprehensive income (Note 10(i)) | 1,148 | 404 | |||
| At end of the year | 717,072 | 663,517 | |||
| The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: |
| Deferred tax assets | Provision for impairment of assets | Retirement benefits obligation | Accrued expenses and provision for statutory warranty | Amortization of non-patented technology | Tax losses | Others | Total | |
| At 1 January 2017 | 7,586 | 14,094 | 567,486 | 1,087 | - | 646 | 590,899 | |
| Credited/(charged) to profit or loss | 4,563 | (955) | 155,901 | 3,418 | - | 3,647 | 166,574 | |
| Credited to other comprehensive income | - | 404 | - | - | - | - | 404 | |
| At 31 December 2017 | 12,149 | 13,543 | 723,387 | 4,505 | - | 4,293 | 757,877 | |
| Credited/(charged) to profit or loss | 4,549 | 1,405 | (18,816) | 4,869 | 178,791 | (3,193) | 167,605 | |
| Credited to other comprehensive income | - | 1,148 | - | - | - | - | 1,148 | |
| At 31 December 2018 | 16,698 | 16,096 | 704,571 | 9,374 | 178,791 | 1,100 | 926,630 | |
| Deferred tax liabilities | Amortisation of intangible assets | PPE depreciation | Fair value gains | Forwards exchange contracts | Total | |
| At 1 January 2017 | (4,696) | (30,434) | (27,383) | (1,281) | (63,794) | |
| Credited/(charged) to profit or loss | 1,151 | (33,645) | 647 | 1,281 | (30,566) | |
| At 31 December 2017 | (3,545) | (64,079) | (26,736) | - | (94,360) | |
| (Charged)/credited to profit or loss | (841) | (114,922) | 712 | (147) | (115,198) | |
| At 31 December 2018 | (4,386) | (179,001) | (26,024) | (147) | (209,558) |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 17 | Deferred income tax (continued) |
| The analysis of deferred tax assets and deferred tax liabilities is as follows: | |||||
| 31 December 2018 | 31 December 2017 | ||||
| Deferred tax assets: | |||||
| –Deferred tax asset to be recovered after more than 12 months | 203,802 | 17,453 | |||
| –Deferred tax asset to be recovered within 12 months | 722,828 | 740,424 | |||
| 926,630 | 757,877 | ||||
| 31 December 2018 | 31 December 2017 | ||||
| Deferred tax liabilities: | |||||
| –Deferred tax liabilities to be recovered after more than 12 months | (182,373) | (90,097) | |||
| –Deferred tax liabilities to be recovered within 12 months | (27,185) | (4,263) | |||
| (209,558) | (94,360) |
| Deductible temporary differences and tax losses which no deferred income tax assets were recognised were as follows: |
| 31 December 2018 | 31 December 2017 | ||||
| Deductible temporary differences | 234,433 | 114,642 | |||
| Tax losses | 639,805 | 376,658 | |||
| 874,238 | 491,300 |
| The expiry years of the tax losses are as follows: |
| 31 December 2018 | 31 December 2017 | ||||
| 2019 | 36,772 | 36,772 | |||
| 2020 | 72,470 | 72,470 | |||
| 2021 | 115,820 | 115,820 | |||
| 2022 | 150,713 | 151,596 | |||
| 2023 | 264,030 | - | |||
| 639,805 | 376,658 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| Movement on the provision for inventories write-down is as follows: | |||||
| 31 December 2018 | 31 December 2017 | ||||
| At beginning of the year | (45,130) | (26,491) | |||
| Provision for inventories write-down (Note 29) | (53,651) | (34,655) | |||
| Inventories written off during the year as uncollectible | 21,966 | 16,016 | |||
| At end of the year | (76,815) | (45,130) | |||
| 19 | Trade and other receivables and prepayments | |||
| 31 December 2018 | 31 December 2017 | |||
| Trade receivables | 2,696,928 | 2,328,135 | ||
| Less: Provision for impairment of trade receivables | (22,278) | (21,016) | ||
| Trade receivables – net | 2,674,650 | 2,307,119 | ||
| Notes receivables | 626,509 | 654,335 | ||
| Other receivables | 85,031 | 131,617 | ||
| Less: Provision for impairment of other receivables | (443) | (658) | ||
| Other receivables – net | 84,588 | 130,959 | ||
| Prepayments | 1,158,303 | 1,238,878 | ||
| -Material payment in advance | 525,777 | 571,001 | ||
| -Advance payment of taxes and surcharges | 632,048 | 656,366 | ||
| -Others | 478 | 11,511 | ||
| Deductable VAT input tax | 96,311 | 145,426 | ||
| Interest receivables | 37,923 | 79,217 | ||
| 4,678,284 | 4,555,934 | |||
| Refer to Note 32 for details of receivables from related parties. |
| The carrying amounts of trade and other receivables approximate their fair values. |
| 18 | Inventories | ||||
| 31 December 2018 | 31 December 2017 | ||||
| Raw materials | 1,553,135 | 1,566,589 | |||
| Work in progress | 211,490 | 208,981 | |||
| Finished goods | 757,729 | 563,734 | |||
| 2,522,354 | 2,339,304 | ||||
| For the year ended 31 December 2018, the cost of inventories recognised as expenses and included in cost of sales amounted to approximately RMB21,121,474,000 (2017: RMB22,318,293,000). | |||||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 19 | Trade and other receivables and prepayments (continued) |
| Movement on the provision for impairment of trade and other receivables is as follows: | |||||
| 31 December 2018 | 31 December 2017 | ||||
| At beginning of the year | (21,674) | (16,373) | |||
| Provision for receivables impairment (Note 29) | (1,089) | (5,301) | |||
| Receivables written off during the year as uncollectible | 42 | - | |||
| At end of the year | (22,721) | (21,674) | |||
| For the year ended 31 December 2018, the creation of provision for impaired receivables was included in ‘Net expected credit losses on financial assets’ (2017: ‘administrative expense’) in profit or loss. |
| The other classes within trade and other receivables do not contain impaired assets. |
| The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security. |
| 20 | Cash and cash equivalents | ||||
| 31 December 2018 | 31 December 2017 | ||||
| Cash at bank and in hand | 2,016,859 | 2,046,999 | |||
| Short-term bank deposits (a) | 5,600,021 | 9,090,724 | |||
| 7,616,880 | 11,137,723 | ||||
| As at 31 December 2018 and 31 December 2017, all bank deposits are in RMB. As at 31 December 2018, the Group had cash of approximately RMB833,617,000 (2017: RMB1,120,806,000) deposited in Jiangling Motor Group Finance Company (“JMCF”) (Note 32 (ix)). The interest rates range from 0.455%-2.25% per annum (2017: 1.495%-2.25%). JMCF, a non-bank financial institution, is a subsidiary of JMCG. | |||||
| (a) | Short-term bank deposits can be withdrawn at the discretion of the Group without any restriction. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 21 | Assets classified as held for sale | ||||
| 31 December 2018 | 31 December 2017 | ||||
| Lease prepayment and buildings of Transit plant | - | 93,413 | |||
| As at 26 March 2015, under the authorization from the board of directors, the Company signed an agreement of “state-owned land reserves” with Nanchang City Land Reserve Centre (the “agreement”). According to the agreement, the Company sold its land use right and buildings of Transit plant, with a consideration of RMB135,000,000 to Nanchang City Land Reserve Centre. | |||||
| The transfer of the asset was completed in 2018, and the Group recognised the disposal profit of RMB33,840,000 in ‘other income’. | |||||
| 22 | Share capital | |||||
| Number of shares (thousands) | Tradable shares | Total | ||||
| “A” shares | “B” shares | |||||
| Restricted | Non-restricted | |||||
| Year ended 31 December 2017 | ||||||
| Balance at 1 January 2017 | 863,214 | 1,726 | 517,488 | 344,000 | 863,214 | |
| Transfer | - | (819) | 819 | - | - | |
| Balance at 31 December 2017 | 863,214 | 907 | 518,307 | 344,000 | 863,214 | |
| Year ended 31 December 2018 | ||||||
| Balance at 1 January 2018 | 863,214 | 907 | 518,307 | 344,000 | 863,214 | |
| Transfer | - | (120) | 120 | - | - | |
| Balance at 31 December 2018 | 863,214 | 787 | 518,427 | 344,000 | 863,214 | |
| All the “A” and “B” shares are registered, issued and fully paid shares of RMB1 each. All the “A” and “B” shares rank pari passu in all respects. |
| After the implementation of the share reform scheme on 13 February 2006, 787,000 shares were still restricted as at 31 December 2018. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 23 | Other reserves |
| Statutory surplus reserve fund (a) | Reserve fund | Others | Total | ||
| At 1 January 2017 | 431,607 | 18,627 | 1,892 | 452,126 | |
| Other comprehensive income | |||||
| -Remeasurements of retirement benefit obligation, net of tax | - | - | (1,212) | (1,212) | |
| At 31 December 2017 | 431,607 | 18,627 | 680 | 450,914 | |
| Other comprehensive income | |||||
| -Remeasurements of retirement benefit obligation, net of tax | - | - | (3,442) | (3,442) | |
| At 31 December 2018 | 431,607 | 18,627 | (2,762) | 447,472 |
| (a) | In accordance with the relevant laws and regulations in the PRC and Articles of Association of the Company, it is required to appropriate 10% of its annual net profit, after offsetting any prior years’ losses as determined under the Accounting Standards for Business Enterprises in the PRC, to the statutory surplus reserve fund before distributing the net profit. When the balance of the statutory surplus reserve fund reaches 50% of the Company’s share capital, any further appropriation is at the discretion of shareholders. The statutory surplus reserve fund can be used to offset prior years’ losses, if any, and may be converted into share capital by issuing new shares to shareholders in proportion to their existing shareholding or by increasing the par value of the shares currently held by them. The fund is non-distributable except for liquidation. |
| As the balance of the statutory surplus reserve fund has reached 50% of the Company’s share capital, no further appropriations to the statutory surplus reserve fund were provided for the years ended 31 December 2017 and 2018. |
| (a) | Bank borrowings of USD589,000 (equivalent to approximately RMB4,044,000) (2017: USD655,000 equivalent to approximately RMB4,279,000) were guaranteed by JMCF (Note 32 (iii)). |
| The interest rate of bank borrowings is 1.50% per annum (2017: 1.50%). | |
| The fair value of borrowings approximates their carrying values. |
| 24 | Borrowings | ||||
| 31 December 2018 | 31 December 2017 | ||||
| Current | |||||
| Bank borrowings - guaranteed (a) | 449 | 428 | |||
| Non-current | |||||
| Bank borrowings - guaranteed (a) | 3,595 | 3,851 | |||
| Total borrowings | 4,044 | 4,279 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| The maturity of non-current borrowings is as follows: | |||||
| 31 December 2018 | 31 December 2017 | ||||
| Between 1 and 2 years | 449 | 428 | |||
| Between 2 and 5 years | 1,348 | 1,284 | |||
| Over 5 years | 1,798 | 2,139 | |||
| 3,595 | 3,851 | ||||
| The Group has the following undrawn borrowing facilities: | |||||
| 31 December 2018 | 31 December 2017 | ||||
| Fixed rate | |||||
| - Expiring within one year | 2,270,784 | 2,113,140 | |||
| 24 | Borrowings (continued) |
| 25 | Retirement benefits obligations | ||||
| The amount of early retirement and supplemental benefit obligations recognised in the consolidated statement of financial position is as follows: | |||||
| 31 December 2018 | 31 December 2017 | ||||
| Present value of defined benefits obligations | 68,020 | 59,184 | |||
| The movement of early retirement and supplemental benefit obligations for the year ended 31 December 2018 is as follows: | |||||
| 31 December2018 | 31 December2017 | ||||
| At beginning of the year | 59,184 | 58,188 | |||
| For the year | |||||
| -Current service cost | 1,315 | 1,804 | |||
| -Interest cost | 2,410 | 1,951 | |||
| -Payment | (4,954) | (4,871) | |||
| -Past service cost from the change of plan | 2,386 | 670 | |||
| -Actuarial loss | 7,679 | 1,442 | |||
| At end of the year | 68,020 | 59,184 | |||
| Current | 4,595 | 4,420 | |||
| Non-current | 63,425 | 54,764 | |||
| 68,020 | 59,184 | ||||
| The material actuarial assumptions used in valuing these obligations are as follows: | |||||
| (i) Discount rate adopted: 3.5% (2017: 4.25%) | |||||
| (ii) Inflation rate adopted: 2.0% (2017: 2.0%) | |||||
| (iii) The salary and supplemental benefits inflation rate of retiree, early-retiree and employee at post: 0% to 6% (2017: 0% to 6% ) | |||||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| Change in assumption | Impact on overall liability | ||
| Discount rate | Increase/decrease by 0.5% | Decrease/increase by 5.7%/6.4% | |
| Inflation rate | Increase/decrease by 0.5% | Increase/decrease by 2.4%/2.1% |
| 26 | Provisions for statutory warranty | ||||
| The movement on the statutory warranty provisions and other liabilities is as follows: | |||||
| 31 December 2018 | 31 December 2017 | ||||
| At beginning of the year | 374,981 | 284,627 | |||
| Charged for the year (Note 6) | 291,471 | 313,289 | |||
| Utilised during the year | (313,898) | (222,935) | |||
| At end of the year | 352,554 | 374,981 | |||
| Analysis of total provisions: | |||||
| 31 December 2018 | 31 December 2017 | ||||
| Non-current | 151,492 | 184,688 | |||
| Current | 201,062 | 190,293 | |||
| 352,554 | 374,981 | ||||
| The above represents the statutory warranty protecting customer from faults that arise after the product has been transferred to the customer. The statutory warranty is estimated based on prior years’ experience on the occurrence of such cost. |
| 25 | Retirement benefits obligations (continued) |
| Based on the assessment and IAS 19, the Group estimated that, at 31 December 2018, a provision of RMB68,020,000 is sufficient to cover all future retirement-related obligations. | |
| Obligation in respect of retirement benefits of RMB68,020,000 is the present value of the unfunded obligations, of which the current portion amounting to RMB4,595,000 (2017: RMB4,420,000) has been included under current liabilities. | |
| The sensitivity of the overall pension liability to changes in the weighted principal assumptions is: |
| For the year ended 31 December 2018, approximately RMB9,200,000 (2017: RMB4,251,000) were charged in ‘administrative expenses’ and RMB4,590,000 (2017: RMB1,616,000) were charged in other comprehensive income. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 27 | Trade and other payables | ||||
| 31 December 2018 | 31 December 2017 | ||||
| Trade payables | 7,824,908 | 8,603,320 | |||
| Payroll and welfare payables | 304,322 | 273,666 | |||
| Dividend payables | 6,790 | 4,969 | |||
| Other tax payables | 233,385 | 139,442 | |||
| Payables of sales rebates | 1,714,485 | 1,767,366 | |||
| Payables of R&D expenses | 828,807 | 988,950 | |||
| Others | 1,283,269 | 1,444,827 | |||
| 12,195,966 | 13,222,540 |
| Refer to Note 32 for details of amount due to related parties. | |||
| 28 | Dividends | ||
| A special interim dividend for 2018 of RMB2,000,067,000 (RMB2.317 per share) was paid in 2018. A final dividend for 2017 of RMB276,228,000 (RMB0.32 per share) was paid in 2018. | |||
| 29 | Cash generated from operations |
| 2018 | 2017 | |||
| Profit before tax | 39,639 | 761,823 | ||
| Depreciation of PPE (Note 6, 12) | 925,888 | 845,100 | ||
| Amortisation of lease prepayment (Note 6, 13) | 15,574 | 15,574 | ||
| Amortisation of intangible assets (Note 6, 14) | 55,737 | 40,575 | ||
| Impairment charges of PPE (Note 12) | 7,143 | 11,850 | ||
| Provision for receivables impairment (Note 19) | 1,089 | 5,301 | ||
| Provision of inventories (Note 18) | 53,651 | 34,655 | ||
| (Gain)/loss on disposals of PPE | (26,953) | 976 | ||
| Finance expenses (Note 9) | 5,111 | 4,386 | ||
| Finance income (Note 9) | (188,436) | (244,300) | ||
| Net foreign exchange transaction loss/(gain) | 18,921 | (4,423) | ||
| Share of profit from investment accounted for using equity method (Note 16b) | (2,238) | (8,149) | ||
| Investment gain of finance asset investment | (18,191) | - | ||
| Investment loss of forwards exchange contracts | 7,200 | 58 | ||
| Changes on fair value of forwards exchange contracts | (9,472) | 17,032 | ||
| Provisions for statutory warranty | (22,427) | 90,354 | ||
| Changes in working capital: | ||||
| - Increase in inventories | (289,820) | (488,115) | ||
| - Increase in trade and other receivables | (233,475) | (1,804,557) | ||
| - (Decrease)/increase in trade and other payables | (347,367) | 1,619,201 | ||
| - Increase/(decrease) in pensions and other retirement benefits | 4,246 | (620) | ||
| Cash generated from operations | (4,180) | 896,721 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 29 | Cash generated from operations (continued) | |||
| In the cash flow statement, proceeds from disposal of PPE, lease prepayment and intangible assets comprise: | ||||
| Year ended 31 December | ||||
| 2018 | 2017 | |||
| Net book amount | 102,565 | 5,900 | ||
| Gain/(loss) on disposal of PPE, lease prepayment and intangible assets | 26,953 | (976) | ||
| (Decrease)/increase in trade and other payables | (126,745) | 94,802 | ||
| Proceeds from disposal of PPE, lease prepayment and intangible assets | 2,773 | 99,726 | ||
| 30 | Contingencies | |||
| At 31 December 2018, the Group did not have any significant contingent liabilities. | ||||
| 31 | Commitments |
| Capital commitments | |
| Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements are as follows: |
| 31 December 2018 | 31 December 2017 | ||||
| Contracted but not provided for: | |||||
| Purchases of buildings, plant and machinery | 1,095,333 | 477,482 |
| 32 | Related party transactions |
| Related parties are those parties that have the ability to control the other party or exercise significant influence in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. | |
| Jiangling Motor Holdings Co. Ltd. (“JMH”), which owns 41.03% of the Company’s shares, and Ford Motor Company (“Ford”), which owns 32% of the Company’s shares, are major shareholders of the Company as at 31 December 2018. The shareholders of JMH are Chongqing Changan Automobile Corporation Ltd. and JMCG, and both of them hold 50% equity interest of JMH, respectively. | |
| The following is a summary of the significant transactions carried out between the Group, its associates, JMCG and its subsidiaries, JMH and its subsidiaries and joint venture, Ford and its subsidiaries and joint venture in the ordinary course of business during the year ended 31 December 2018. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) | |
| For the year ended 31 December 2018, related parties, other than the subsidiary, and their relationship with the Group are as follows: | ||
| Name of related party | Relationship | |
| JMCG | Shareholder of JMH | |
| Nanchang Baojiang Steel Processing Distribution Co., Ltd. | Associate of JMCG | |
| GETRAG (Jiangxi) Transmission Company | Associate of JMCG | |
| Faurecia Emissions Control Technologies (Nanchang) Co., Ltd. | Associate of JMCG | |
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | Associate of JMCG | |
| Nanchang JMCG Mekra-Lang Vehicle Mirror Co., Ltd | Associate of JMCG | |
| Nanchang JMCG Skyman Auto Component Co., Ltd. | Associate of JMCG | |
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | Associate of JMCG | |
| Nanchang Hengou Industry Co. ,Ltd. | Associate of JMCG | |
| Jiangxi Jiangling Motors Imp. & Exp. Co.,Ltd. | Associate of JMCG | |
| Jiangxi JMCG Motorhome Co.,Ltd. | Associate of JMCG | |
| Jiangxi JMCG Specialty Vehicles Sales Corporation, Ltd. | Associate of JMCG | |
| Changan Ford Automobile Co.,Ltd. | Joint venture of Ford | |
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | Joint venture of JMCG | |
| Jiangxi Jiangling Lear Interior System Co., Ltd. | Joint venture of JMCG | |
| Nanchang Unistar Electric & Electronics Co., Ltd. | Joint venture of JMCG | |
| Nanchang Yinlun Heat-exchanger Co., Ltd. | Joint venture of JMCG | |
| Jiangxi ISUZU Engine Co., Ltd. | Joint venture of JMCG | |
| Jiangxi ISUZU Co., Ltd. | Joint venture of JMCG | |
| Ford Otomotiv Sanayi A.S. | Subsidiary of Ford | |
| Auto Alliance (Thailand) Co., Ltd. | Subsidiary of Ford | |
| Ford Global Technologies, LLC | Subsidiary of Ford | |
| Ford Motor (China) Co., Ltd. | Subsidiary of Ford | |
| Ford Motor Research & Engineering (Nanjing) Co., Ltd. | Subsidiary of Ford | |
| Ford Vietnam Limited | Subsidiary of Ford | |
| Jiangxi Jiangling Chassis Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | Subsidiary of JMCG | |
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | Subsidiary of JMCG | |
| Nanchang Lianda Machinery Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi Lingge Non-ferrous Metal Die-casting Co., Ltd. | Subsidiary of JMCG | |
| Jiangling Material Co.,Ltd. | Subsidiary of JMCG | |
| Jiangling Aowei Automobile Spare Part Co.,Ltd. | Subsidiary of JMCG | |
| Nanchang JMCG Xinchen Auto Component Co.,Ltd. | Subsidiary of JMCG | |
| Jiangxi JMCG Industry Co.,Ltd. | Subsidiary of JMCG | |
| Nanchang Gear Co., Ltd. | Subsidiary of JMCG | |
| NC.Gear Forging Factory | Subsidiary of JMCG | |
| Nanchang JMCG Shishun Logistics Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi Biaohong Engine Tappet Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi Lingrui Recycling Resources Development Corporation | Subsidiary of JMCG | |
| Jiangxi JMCG Shangrao Industrial Co., Ltd. | Subsidiary of JMCG | |
| JMCG Jiangxi Engineering Construction Co., Ltd. | Subsidiary of JMCG | |
| JMCG Property Management Co. | Subsidiary of JMCG | |
| JMCG Jingma Motors Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi JMCG Yichehang Second-hand Motors Sales Co., Ltd. | Subsidiary of JMCG | |
| Jiang ling Motor Electricity Vehicle Sales Co., Ltd | Subsidiary of JMCG | |
| JMCF | Subsidiary of JMCG | |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) | |||
| (i) | Purchases and sales of goods, provision and purchases of services | |||
| Purchase of goods | 2018 | 2017 | ||
| Nanchang Baojiang Steel Processing Distribution Co., Ltd. | 922,454 | 943,608 | ||
| Jiangxi Jiangling Chassis Co., Ltd. | 864,932 | 888,703 | ||
| GETRAG (Jiangxi) Transmission Company | 791,365 | 813,926 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 782,403 | 764,437 | ||
| Ford | 623,631 | 830,603 | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 515,419 | 543,846 | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | 454,604 | 550,290 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | 418,722 | 479,447 | ||
| Nanchang Unistar Electric & Electronics Co., Ltd. | 298,128 | 275,937 | ||
| Hanon Systems | 250,486 | 252,848 | ||
| Faurecia Emissions Control Technologies (Nanchang) Co., Ltd. | 195,453 | 221,553 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | 192,509 | 178,147 | ||
| Ford Otomotiv Sanayi A.S. | 128,341 | 47,775 | ||
| JMCG (a) | 110,093 | 112,201 | ||
| Auto Alliance (Thailand) Co., Ltd. | 106,035 | 188,931 | ||
| Nanchang JMCG Mekra-Lang Vehicle Mirror Co., Ltd | 91,976 | - | ||
| Nanchang Lianda Machinery Co., Ltd. | 69,827 | 66,691 | ||
| Jiangxi Lingge Non-ferrous Metal Die-casting Co., Ltd. | 63,649 | 64,907 | ||
| Nanchang Yinlun Heat-exchanger Co., Ltd. | 53,976 | 56,232 | ||
| Nanchang JMCG Skyman Auto Component Co., Ltd. (d) | 50,852 | 77,718 | ||
| Jiangxi ISUZU Engine Co., Ltd. | 49,911 | 10,028 | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 42,967 | 12,129 | ||
| Jiangling Material Co., Ltd. | 30,399 | 29,441 | ||
| Jiangling Aowei Automobile Spare Part Co., Ltd. | 26,464 | 31,737 | ||
| Nanchang JMCG Xinchen Auto Component Co., Ltd. | 18,297 | 23,097 | ||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) | |||
| (i) | Purchases and sales of goods, provision and purchases of services (continued) | |||
| Purchase of goods (continued) | 2018 | 2017 | ||
| Jiangxi JMCG Industry Co., Ltd. | 17,581 | 5,683 | ||
| Nanchang Gear Co., Ltd. | 15,420 | 18,758 | ||
| NC.Gear Forging Factory | 13,240 | - | ||
| JMH (d) | 12,484 | - | ||
| Changan Ford Automobile Co., Ltd. | 10,993 | 191,815 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. (b) | 10,097 | - | ||
| Jiangxi Biaohong Engine Tappet Co., Ltd. | 6,649 | 8,329 | ||
| Jiangxi Lingrui Recycling Resources Development Corporation(c) | 4,378 | 3,956 | ||
| Jiangxi JMCG Shangrao Industrial Co., Ltd. | 4,235 | 6,567 | ||
| JMCG Jiangxi Engineering Construction Co., Ltd. | - | 2,520 | ||
| Others | 211 | 6,888 | ||
| 7,248,181 | 7,708,748 | |||
| (a) In January 2019, the Jiangling Motors Corporation Group has been renamed to Jiangling Motors Group Corporation Limited. (b) In June 2018, the Nanchang JMCG Shishun Logistics LLC has been renamed to Nanchang JMCG Shishun Logistics Co., Ltd. (c) In March 2018, Jiangxi Jiangling Non-ferrous Metal Die-casting Co., Ltd has been renamed to Jiangxi Lingrui Recycling Resources Development Corporation. (d) In December 2018, JMH absorbed Nanchang JMCG Skyman Auto Component Co., Ltd. The Group purchased goods from related parties classified as two types: import parts and home-made parts. ? Purchase import parts from Ford or Ford’s suppliers, based on agreed price; ? Purchase home-made parts from other related parts, based on quotation, cost accounting and negotiation. | ||||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) |
| (i) | Purchases and sales of goods, provision and purchases of services (continued) |
| Purchase of services | Natures of transaction | 2018 | 2017 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | Truckage/Transportation | 247,762 | 304,852 | ||
| Ford Global Technologies, LLC | Royalty fee | 186,454 | 250,088 | ||
| Ford | Engineering service and design | 183,983 | 286,361 | ||
| Nanchang Hengou Industry Co., Ltd. | Packing/Truckage | 47,407 | 53,218 | ||
| Ford Otomotiv Sanayi A.S. | Engineering service and design | 42,734 | 74,245 | ||
| Ford | Secondments costs | 36,965 | 33,331 | ||
| Jiangxi JMCG Industry Co., Ltd. | Working meal | 35,249 | 33,451 | ||
| Ford Otomotiv Sanayi A.S. | Royalty fee | 24,868 | 25,143 | ||
| JMCG Jiangxi Engineering Construction Co., Ltd. | Engineering construction and maintenance | 16,830 | 64,940 | ||
| Changan Ford Automobile Co., Ltd. | Service fee/Design fee/Labor costs | 16,509 | 15,091 | ||
| Ford Otomotiv Sanayi A.S. | Secondments costs | 13,396 | 30,773 | ||
| Ford Motor (China) Co., Ltd. | Regional personnel costs | 9,572 | 5,763 | ||
| GETRAG (Jiangxi) Transmission Company | Design fee/Experimental costs | 9,546 | 11,572 | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | Promotion/Repairment | 6,968 | 972 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | Agent business of importation | 4,431 | 4,242 | ||
| Ford Motor Research & Engineering (Nanjing) Co., Ltd. | Regional personnel costs | 3,508 | 2,107 | ||
| Faurecia Emissions Control Technologies (Nanchang) Co., Ltd. | Design fee | 3,256 | 5,615 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | Promotion/Experimental manufacturing costs | 2,304 | 428 | ||
| JMCG Property Management Co. | Property management | 2,100 | 2,040 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) | ||||
| (i) | Purchases and sales of goods, provision and purchases of services (continued) | ||||
| Purchase of services (continued) | Natures of transaction | 2018 | 2017 | ||
| Jiangxi JMCG Motorhome Co., Ltd. | Promotion | 1,855 | 154 | ||
| JMH | Secondments costs/Labor fee | 2,054 | 1,904 | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | Experimental manufacturing costs/ Design fee | 704 | 3,649 | ||
| Ford Motor (China) Co., Ltd. | Software fee | 466 | 3,327 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | Promotion/Repairment | 57 | 2,200 | ||
| JMH | Royalty fee | - | 29,434 | ||
| Hanon Systems | Experimental manufacturing costs | - | 2,263 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | Experimental manufacturing costs | - | 1,824 | ||
| Others | 1,440 | 3,480 | |||
| 900,418 | 1,252,467 | ||||
| The Group purchased the service from related parties based on agreement price. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) | |||
| (i) | Purchases and sales of goods, provision and purchases of services (continued) | |||
| Purchase fuel consumption credits | 2018 | 2017 | ||
| JMH | 20,375 | - | ||
| Sales of goods | 2018 | 2017 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 1,228,471 | 1,047,618 | ||
| Jiangxi JMCG Specialty Vehicles Sales Corporation, Ltd. | 155,313 | - | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | 102,068 | 95,331 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 94,214 | 67,557 | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 85,326 | 22,006 | ||
| Jiangxi Jiangling Chassis Co., Ltd. | 74,362 | 83,408 | ||
| Jiangxi Lingrui Recycling Resources Development Corporation | 69,005 | 55,274 | ||
| JMCG Jingma Motors Co., Ltd. | 66,197 | 79,196 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | 51,945 | 62,506 | ||
| JMH | 35,107 | 148,459 | ||
| Nanchang Hengou Industry Co., Ltd. | 28,878 | 79,976 | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 14,071 | 18,650 | ||
| Jiangxi JMCG Yichehang Second-hand Motors Sales Co., Ltd. | 9,487 | 23,259 | ||
| JMCG Property Management Co. | 6,470 | 7,129 | ||
| Jiangxi JMCG Industry Co., Ltd. | 5,537 | 7,563 | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | 5,516 | 7,467 | ||
| Jiang ling Motor Electricity Vehicle Sales Co., Ltd | 5,139 | - | ||
| JMCG Jiangxi Engineering Construction Co., Ltd. | 1,974 | 47 | ||
| Jiangxi ISUZU Co., Ltd. | 1,806 | 1,896 | ||
| Nanchang Lianda Machinery Co., Ltd. | 1,157 | 400 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | 671 | 25,408 | ||
| Others | 1,701 | 950 | ||
| 2,044,415 | 1,834,100 | |||
| The Group sold goods to related parties, based on agreement price. |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) |
| (ii) | Rental |
| Rental cost |
| Lessor | Category | Rental cost of 2018 | Rental cost of 2017 | ||
| JMCG | Building | 4,687 | 4,140 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | Building | 4,297 | 4,400 | ||
| JMCG Property Management Co. | Building | 422 | 422 | ||
| 9,406 | 8,962 |
| Rental income | |||||
| Lessee | Category | Rental income of 2018 | Rental income of 2017 | ||
| Jiangling Material Co., Ltd. | Building | 120 | 132 | ||
| GETRAG (Jiangxi) Transmission Company | Building | 3 | 3 | ||
| JMH | Building | 3 | 55 | ||
| 126 | 190 | ||||
| (iii) | Guarantee |
| As at 31 December 2018, bank loans of USD589,000 (equivalent to approximately RMB 4,044,000) (2017:USD655,000, equivalent to approximately RMB4,279,000) were guaranteed by JMCF (Note 24). |
| (iv) | Sales of PPE |
| (v) | Purchase of PPE |
| 2018 | 2017 | |||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 6,424 | - | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 5,548 | - | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | 677 | - | ||
| JMH | 534 | - | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | - | 1,000 | ||
| 13,183 | 1,000 |
| 2018 | 2017 | |||
| Jiangxi JMCG Industrial Co., Ltd. | 1 | 5 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) |
| (vi) | Provide technique sharing |
| 2018 | 2017 | |||
| Ford Vietnam Limited | 10,780 | - | ||
| JMCG | 3,606 | - | ||
| 14,386 | - |
| (vii) | Key management remuneration |
| Key management includes directors (executive and non-executive), members of the Executive Committee, the Company Secretary and members of the Supervisory Board. During the year ended 31 December 2018, the total remuneration of the key management was approximately RMB11,591,000 (2017: RMB13,598,000). | |
| (viii) | Interest received from cash deposit in related parties |
| 31 December 2018 | 31 December 2017 | ||||
| JMCF | 17,323 | 20,156 | |||
| In 2018, the interest rates range from 0.455% to 2.25% per annum (2017: 1.495% to 2.25%). | |
| (ix) | Balances arising from sales/purchases of goods/services |
| Trade receivables from related parties | 31 December 2018 | 31 December 2017 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 251,236 | 171,475 | ||
| Jiangxi JMCG Specialty Vehicles Sales Corporation, Ltd. | 32,940 | - | ||
| Jiangxi Jiangling Chassis Co., Ltd. | 9,803 | - | ||
| JMCG Jingma Motors Co., Ltd. | 6,162 | 8,543 | ||
| Jiang ling Motor Electricity Vehicle Sales Co., Ltd | 5,961 | - | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 5,726 | - | ||
| Ford Vietnam Limited | 5,104 | - | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 1,899 | 3,765 | ||
| Nanchang Hengou Industry Co., Ltd. | 3 | 1,508 | ||
| JMH | - | 170,853 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | - | 14,731 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | - | 5,913 | ||
| Others | 356 | 549 | ||
| 319,190 | 377,337 |
| Other receivables from related parties | 31 December 2018 | 31 December 2017 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 35,027 | 42,356 | ||
| Ford | - | 5,158 | ||
| GETRAG (Jiangxi) Transmission Company | - | 2,770 | ||
| Others. | 11 | 964 | ||
| 35,038 | 51,248 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) |
| (ix) | Balances arising from sales/purchases of goods/services (continued) |
| Prepayments for purchasing of goods | 31 December 2018 | 31 December 2017 | ||
| Nanchang Baojiang Steel Processing Distribution Co., Ltd. | 496,146 | 457,613 | ||
| Ford Otomotiv Sanayi A.S. | - | 31,069 | ||
| 496,146 | 488,682 | |||
| Notes receivables from related parties | 31December2018 | 31December2017 | ||
| JMCG Jingma Motors Co., Ltd. | 41,418 | 48,491 |
| Prepayments for construction in progress | 31 December 2018 | 31 December 2017 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | 500 | 500 | ||
| JMCG Jiangxi Engineering Construction Co., Ltd. | - | 2,231 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | - | 572 | ||
| 500 | 3,303 |
| Prepayments for mould lease | 31 December 2018 | 31 December 2017 | ||
| Changan Ford Automobile Co., Ltd. | 478 | 11,990 |
| Cash deposit in related parties | 31 December 2018 | 31 December 2017 | ||
| JMCF (Note 20) | 833,617 | 1,120,806 |
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) | |||
| (ix) | Balances arising from sales/purchases of goods/services (continued) | |||
| Trade payables to related parties | 31 December 2018 | 31 December 2017 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 336,126 | 262,946 | ||
| Jiangxi Jiangling Chassis Co., Ltd. | 333,431 | 303,148 | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 316,174 | 243,796 | ||
| GETRAG (Jiangxi) Transmission Company | 275,275 | 251,080 | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | 214,139 | 352,627 | ||
| Ford | 151,749 | 86,504 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | 148,483 | 153,529 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | 138,209 | 209,228 | ||
| Nanchang Unistar Electric & Electronics Co., Ltd. | 96,905 | 118,889 | ||
| Hanon Systems | 91,656 | 135,846 | ||
| JMCG | 68,159 | 74,918 | ||
| Changan Ford Automobile Co., Ltd. | 67,622 | 68,221 | ||
| Faurecia Emissions Control Technologies (Nanchang) Co., Ltd. | 58,966 | 83,113 | ||
| Nanchang JMCG Mekra-Lang Vehicle Mirror Co., Ltd | 48,200 | - | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 28,944 | 10,490 | ||
| Nanchang Lianda Machinery Co., Ltd. | 28,325 | 24,651 | ||
| JMH | 26,349 | - | ||
| Nanchang Yinlun Heat-exchanger Co., Ltd. | 24,756 | 25,151 | ||
| Jiangxi Lingge Non-ferrous Metal Die-casting Co., Ltd. | 19,850 | 30,751 | ||
| Jiangling Aowei Automobile Spare Part Co., Ltd. | 14,533 | 17,142 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | 10,113 | 293 | ||
| Jiangxi ISUZU Engine Co., Ltd. | 9,956 | 11,714 | ||
| Jiangxi JMCG Industry Co., Ltd. | 7,830 | 2,394 | ||
| Nanchang JMCG Xinchen Auto Component Co., Ltd. | 6,355 | 5,334 | ||
| Nanchang Gear Co., Ltd. | 6,179 | 7,902 | ||
| NC.Gear Forging Factory | 4,173 | - | ||
| Auto Alliance (Thailand) Co., Ltd. | 2,151 | 17,000 | ||
| Jiangxi Biaohong Engine Tappet Co., Ltd. | 2,037 | 2,891 | ||
| Jiangxi Lingrui Recycling Resources Development Corporation | 1,736 | 1,712 | ||
| Jiangxi JMCG Shangrao Industrial Co., Ltd. | 1,693 | 4,009 | ||
| Jiangling Material Co., Ltd. | 1,372 | 1,002 | ||
| Ford Otomotiv Sanayi A.S. | 1,031 | 29,711 | ||
| Nanchang JMCG Skyman Auto Component Co., Ltd. | - | 36,998 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | - | 1,007 | ||
| Others | 16 | - | ||
| 2,542,493 | 2,573,997 | |||
FOR THE YEAR ENDED 31 DECEMBER 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
| 32 | Related party transactions (continued) |
| (ix) | I Balances arising from sales/purchases of goods/services (continued) |
| Other payables to related parties | 31 December 2018 | 31 December 2017 | ||
| Ford Otomotiv Sanayi A.S. | 115,254 | 134,059 | ||
| Ford | 92,310 | 104,814 | ||
| Ford Global Technologies, LLC | 41,203 | 62,410 | ||
| Jiangxi JMCG Specialty Vehicles Sales Corporation, Ltd. | 31,946 | - | ||
| JMCG Jiangxi Engineering Construction Co., Ltd. | 30,166 | 36,818 | ||
| JMH | 15,641 | 30,000 | ||
| GETRAG (Jiangxi) Transmission Company | 14,216 | 6,309 | ||
| Faurecia Emissions Control Technologies (Nanchang) Co., Ltd. | 13,584 | 8,521 | ||
| Nanchang Hengou Industry Co., Ltd. | 10,211 | 3,498 | ||
| Changan Ford Automobile Co., Ltd. | 9,776 | 2,765 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | 7,736 | 10,751 | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 7,222 | 3,693 | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 6,921 | 484 | ||
| Ford Motor (China) Co., Ltd. | 4,803 | 1,755 | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | 4,612 | 11,455 | ||
| Jiangxi JMCG Industry Co., Ltd. | 3,504 | 1,922 | ||
| Jiangxi JMCG Motorhome Co., Ltd. | 1,905 | 50 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 1,403 | 510 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | 283 | 4,860 | ||
| Hanon Systems | 45 | 2,520 | ||
| Others | 3,736 | 5,139 | ||
| 416,477 | 432,333 |
| Advance from related parties | 31 December 2018 | 31 December 2017 | |||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | - | 294 | |||
| Others | - | 1,501 | |||
| - | 1,795 | ||||
| Capital commitments | 31 December 2018 | 31 December 2017 | |||
| JMCG Jiangxi Engineering Construction Co., Ltd. | 29,456 | 35,178 | |||
| 33 | Event after the balance sheet date |
| According to the resolution of the Board of Directors as at 26 March 2019, the board of directors proposed that the Company distribute cash dividends to all shareholders at RMB0.04 per share. Based on the issued shares of 863,214,000, totalled amount of proposed dividend is RMB34,529,000. |
Chapter XII Catalog on Documents for Reference
1. Originals of 2018 financial statements signed by legal representative and Chief
Financial Officer.2. Originals of the Independent Auditor’s Reports signed by Independent
accountants and stamped by the accounting firm.3. Originals of all the documents and public announcements disclosed in
newspapers designated by CSRC in 2018.4. The Annual Report in the China GAAP.
Board of DirectorsJiangling Motors Corporation, Ltd.March 26, 2019