Jiangling Motors Corporation, Ltd.
2019 Annual Report
2020-03
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, DingNi, confirm that the Financial Statements in this Annual Report are truthful andcomplete.
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 2019 profit distribution proposal approved by the Board of Directors isas follows:
A cash dividend of RMB 0.70 (including tax) will be distributed for every 10shares held based on the total share capital of 863,214,000 shares, and there isno stock dividend. The Board decided not to convert capital reserve to sharecapital this time.
Contents
Chapter I Important Notes, Contents and Abbreviations ...... 1
Chapter II Brief Introduction and Operating Highlight ...... 3
Chapter III Operating Overview ...... 7
Chapter IV Management Discussion and Analysis ...... 9
Chapter V Major Events ...... 21
Chapter VI Share Capital Changes & Shareholders ...... 33
Chapter VII Preferred Shares ...... 38Chapter VIII Directors, Supervisors, Senior Management and Employees ...... 39Chapter IX Corporate Governance Structure ...... 52
Chapter X Corporate Bond ...... 52
Chapter XI Financial Statements ...... 59
Chapter XII Catalog on Documents for Reference ...... 128
Abbreviations:
JMC or the Company Jiangling Motors Corporation, Ltd.JIC Nanchang Jiangling Investment 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 in the Main Business since the Listing | No change. |
| 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 controlling shareholders of the Company. On December 8, 2005, the 354.176 million JMC shares held by JMCG, the former controlling shareholder, were transferred to Jiangling Motor Holdings Co., Ltd. After the transference, Jiangling Motor Holdings Co., Ltd. and Ford were the controlling shareholders of the Company. In 2019, Jiangling Motor Holdings Co., Ltd., the former controlling shareholder, was divided and separated into Jangling Motor Holdings Co., Ltd. and Nanchang Jiangling Investment Co., Ltd., and transferred the 354.176 million JMC shares it held to Nanchang Jiangling Investment Co., Ltd. Presently, Nanchang Jiangling Investment Co., Ltd. and Ford are the controlling shareholders of the Company. |
5. Other Information
Accounting Firm Appointed by JMC for Audit
| 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
| 2019 | 2018 | Change (%) | 2017 | |
| Revenue | 29,173,636 | 28,249,340 | 3.27% | 31,345,747 |
| Profit Attributable to the Equity Holders of the Company | 147,812 | 91,833 | 60.96% | 690,938 |
| Net Cash Generated From Operating Activities | 2,733,963 | -101,808 | 2785.41% | 674,588 |
| Basic Earnings Per Share (RMB) | 0.17 | 0.11 | 60.96% | 0.8 |
| Diluted Earnings Per Share (RMB) | 0.17 | 0.11 | 60.96% | 0.8 |
| Weighted Average Return on Equity Ratio | 1.42% | 0.83% | 0.59% | 5.51% |
| End of Year 2019 | End of Year 2018 | Change (%) | End of Year 2017 | |
| Total Assets | 24,298,529 | 23,396,529 | 3.86% | 26,383,761 |
| Shareholders’ Equity Attributable to the Equity Holders of the Company | 10,496,564 | 10,384,498 | 1.08% | 12,572,402 |
7. Accounting data difference between China GAAP and IFRS
I. 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 | 6,506,386 | 7,215,568 | 6,686,321 | 8,765,361 |
| Profit Attributable to the Equity Holders of the Company | 25,158 | 33,704 | 98,811 | -9,861 |
| Net Cash Generated From Operating Activities | -191,400 | 1,626,602 | -151,987 | 1,450,748 |
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 FordSUV. The Company also produces and sells engines, castings and othercomponents for 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 a 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,national industrial design centre, national intellectual property demonstrationenterprises and national automobile export base; and had been ranked amongthe top 100 most 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 improvingsteadily, making considerable progress both in new product development andtechnical equipment. With the implementation of the national phase six emissionstandards, JMC as the "bellwether" of the commercial vehicle market, rapidlyresponds to the national policy to upgrade the emission of vehicle products byvirtue of its advanced product research and development technology and high-quality manufacturing capacity. The JMC brand light truck EVI, Ford brand lightbus EVI and other series of products were successively launched. The new FordTerritory SUV, based on deep insights into Chinese consumers, not only hasleading space and size at the same level, but also takes the lead in introducingdomestic technologies such as the Miller cycle engine, 48V micro-hybrid power,and Feiyu Intelligent Voice Control System. Respond quickly to market demands,increase comfort, intelligent network connectivity and assisted driving, including16 all-standard 28-class leading configurations, which have been widelyrecognized by the market and customers since launched. High standard Xiaolan
manufacturing site continues to expand modern plants of vehicle, engine andframe, which will further ensure JMC's product production and qualityimprovement. With the construction of Fushan new energy base, JMC will delivermore new energy vehicles in the future which will lay a solid foundation for JMC’ssustainable 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 the new business field ofintelligent driving, as one of the first demonstration companies certified by thevehicle networking product of China's self-developed global satellite positioningsystem Beidou system, based on 5G and vehicle networking technologyapplication, the Company has researched and developed the first domesticintelligent driving pure electric TeShun light bus product with autonomous drivingtechnology on the mass production model, achieve multiple functions such ashigh-speed automatic formation, automatic remove formation, automatic obstacleavoidance, automatic pull over, etc. The Company cooperated with Jiangxiprovincial Department of Transportation, China mobile, Huawei and other leadingenterprises to complete the Changjiu intelligent high-speed formationautonomous driving demonstration project, Yingtan international IoT conferencecollaboration and presentation project, 2019 World VR industry conferencecollaboration and presentation project, etc. Based on the Company's new energylight truck platform, cooperated with partners to build a full series of large-tonnage autonomous special vehicles for environmental sanitation，the vehicleswill be used in municipal environmental sanitation and other demonstrationprojects. Combining with the above intelligent driving cooperation projects, theCompany has become a member of National Science and Technology MajorProject, , joint National Science and Technology Major Project -- "Zhi Gan Xing"subject research. In the field of new energy technology, based on the commercialscenario, the Company vigorously promotes the research and sales of pureelectric vehicle, and develops hydrogen fuel and methanol fuel vehicletechnology with advantageous partners. In the new business ecology field, theCompany participates in the construction of the automobile business ecosystem,and creates a new ecology of cross-industry intelligent service for commercialvehicles with domestic financial enterprises, communication enterprises, logisticsenterprises and mobile travel operating enterprises.
Chapter IV Management Discussion and Analysis
1. Summary
In 2019, China’s economic growth is slowing, so as its auto market. Total salesvolume was 25.72million units, decreased 7.51% 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 2019, JMC achieved salesvolume of 290,058 units, increased 1.75% compared with last year, achievedrevenue of RMB 29.17 billion, increased 3.27% compared with last year,achieved net profit of RMB 148 million, increased 60.96% compared with lastyear. It mainly reflects the rise in sales and the improvement of profitabilityresulted from the Company has taken positive measures to reduce cost andincrease efficiency.
2. Core Business Analysis
I. Summary
In 2019, JMC sales volume achieved 290,058 units, increased 1.75% comparedwith last year, including96,915 units JMC series truck, 59,486 units JMC seriespickup, 52,056 units SUV, 45,974 units Transit series commercial vehicle, and35,627 units JMC branded light bus.
2019 total production volume was 288,074 units, increased 0.44% compared withlast year, including 96,513 units JMC series truck, 58,368 units JMC seriespickup, 51,881 units SUV, 45,735 units Transit series commercial vehicle, and35,577 units JMC branded light bus.
JMC total sales revenue in 2019 was RMB 29.17 billion, increased 3.27%compared with last year.
II. Revenue and Cost
(a) Composition of Sales Revenue
Unit: RMB
| 2019 FY | 2018 FY | YOY change (%) | |||
| Amount | Proportion (%) | Amount | Proportion (%) | ||
| Revenue | 29,173,636,262 | 100.00% | 28,249,339,672 | 100.00% | 3.27% |
| By Industry | |||||
| Automobile Industry | 29,173,636,262 | 100.00% | 28,249,339,672 | 100.00% | 3.27% |
| By Products | |||||
| Vehicle | 26,252,631,564 | 89.99% | 25,178,859,631 | 89.13% | 4.26% |
| Components | 2,351,979,223 | 8.06% | 2,696,240,006 | 9.55% | -12.77% |
| Automobile Maintenance services | 103,582,678 | 0.36% | 71,798,771 | 0.25% | 44.27% |
| Material & Others | 465,442,797 | 1.60% | 302,441,264 | 1.07% | 53.90% |
| By region | |||||
| China | 29,173,636,262 | 100.00% | 28,249,339,672 | 100.00% | 3.27% |
(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 | 29,173,636,262 | 24,530,857,150 | 15.91% | 3.27% | 0.50% | 2.32% |
| By Products | ||||||
| Vehicle | 26,252,631,564 | 22,303,937,803 | 15.04% | 4.26% | 0.72% | 2.99% |
| By Region | ||||||
| China | 29,173,636,262 | 24,530,857,150 | 15.91% | 3.27% | 0.50% | 2.32% |
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 | 2019 | 2018 | Change (%) |
| Automobile | Sales volume | unit | 290,058 | 285,066 | 1.75% |
| Production volume | unit | 288,074 | 286,808 | 0.44% |
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 | 2019 FY | 2018 FY | YOY change（%） | ||
| Cost | Proportion (%) | Cost | Proportion (%) | ||
| Vehicle | 22,303,937,803 | 90.92% | 22,143,813,493 | 90.72% | 0.72% |
| Components | 1,696,042,274 | 6.92% | 1,921,477,490 | 7.87% | -11.73% |
| Automobile Maintenance services | 98,395,291 | 0.40% | 69,559,583 | 0.29% | 41.45% |
| Material & Others | 432,481,782 | 1.76% | 274,696,188 | 1.12% | 57.44% |
(f) Whether Consolidated Scope was Changed During the Reporting Period
□Yes □√No
Xiamen Fujiang New Energy Automobile Sales Co., Ltd. was cancelled onDecember 16, 2019.
(g) Major Change or Adjustment on Business, Products or Services During theReporting Period
□Applicable □√Not Applicable
(h) Main Customers and SuppliersTop 5 Customers:
| Total sales value to top 5 customers（RMB） | 3,239,393,170 |
| Accounted for the proportion of JMC’s total annual turnover | 11.11% |
| Included related party transaction accounted for the proportion of JMC’s total annual turnover | 3.75% |
| No. | Name of the Customer | Sales Value (RMB) | Percentage of JMC’s Total Turnover (%) |
| 1 | Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 1,093,233,543 | 3.75% |
| 2 | Zhejiang Jiangling Motors Sales Company | 1,075,100,487 | 3.69% |
| 3 | Hunan Transit Jiangling Motors Sales Company | 399,887,905 | 1.37% |
| 4 | Shanghai Keda Zhoupu Auto Sales Company | 335,775,073 | 1.15% |
| 5 | Beijing Jinglingshun Auto Sales Company | 335,396,162 | 1.15% |
| Total | 3,239,393,170 | 11.11% |
Other introduction to main customers
□√Applicable □Not Applicable
Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. is a related party of the Company.VP Li Xiaojun holds the position of Director of Jiangxi Jiangling Motors Imp. &Exp. Co., Ltd.
Top 5 Suppliers:
| Total purchase value from top 5 suppliers（RMB） | 3,732,511,710 |
| Accounted for the proportion of JMC’s total annual purchase amount | 16.96% |
| Included related party transaction accounted for the proportion of JMC’s total annual purchase amount | 13.60% |
| No. | Name of the Supplier | Purchase Value (RMB) | Percentage of JMC’s Total Annual Purchase Amount (%) |
| 1 | Nanchang Baojiang Steel Processing Distribution Co., Ltd. | 809,328,079 | 3.68% |
| 2 | Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 751,247,981 | 3.41% |
| 3 | Bosch Auto Diesel System (Wuxi) Company | 739,472,213 | 3.36% |
| 4 | Jiangxi Jiangling Chassis Co., Ltd. | 719,674,742 | 3.27% |
| 5 | Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 712,788,695 | 3.24% |
| Total | 3,732,511,710 | 16.96% |
Other introduction to main suppliers
□√Applicable □Not Applicable
Except Bosch Auto Diesel System (Wuxi) Company, the other four suppliers arerelated parties of the Company.
III. Expense Analysis
Unit: RMB’ 000
| 2019 | 2018 | YOY Change | Major Changes Explanation | |
| Distribution Expenses | 1,525,883 | 1,202,382 | 26.91% | |
| Administrative Expenses | 2,731,887 | 2,460,259 | 11.04% | |
| Finance Income-net | 195,644 | 182,587 | 7.15% |
IV. Research & DevelopmentIn 2019, JMC continued to focus on development of new product programs.Product related spending centered at future product development andcompliance with regulatory requirements, including new model, increasedpayloads, new styling, and improved power, ensuring the Company is compliantwith stringent environmental and safety regulations. The competitive R&D willensure the Company’s volume and profit growth in the future. Developmentexpenditure in 2019 was 1,937 million, representing 18.45% of net assets, or
6.64% of revenue.
R&D
| 2019 | 2018 | Change (%) | |
| R&D Staff (person) | 2,758 | 2,692 | 2.45% |
| R&D Staff as % of total employees | 18.65% | 16.28% | 2.37% |
| R&D Investment (RMB) | 1,937,077,557 | 1,735,368,721 | 11.62% |
| R&D Investment as % of revenue | 6.64% | 6.14% | 0.50% |
| Capitalization of R&D investment | 160,756,911 | 71,814,337 | 123.85% |
| Capitalization of R&D investment as % of R&D Investment | 8.30% | 4.14% | 4.16% |
Major change of R&D Investment as % of revenue
□Applicable □√Not Applicable
Major change of capitalization of R&D investment
□√Applicable □Not Applicable
Please refer to the Note 15 Intangible Assets of the notes to the consolidatedfinancial statements in the Chapter XI Financial Statements for details.
V. Cash Flow Analysis
RMB’000
| Item | 2019 | 2018 | Y-O-Y Change |
| Net cash generated from operating activities | 2,733,963 | -101,808 | 2,785.41% |
| Net cash used in investing activities | -1,365,093 | -1,138,924 | -19.86% |
| Net cash used in financing activities | -47,813 | -2,280,111 | 97.90% |
| Net (decrease)/increase cash and cash equivalents | 1,321,057 | -3,520,843 | 137.52% |
Explanation on the major factors regarding major change of related data
□√Applicable □Not Applicable
Increase of the net cash generated from operating activities compared with thesame period mainly reflected the increase of sales revenue and the decrease ofinventory level, as well as the increase of operating payables.
Decrease of the net cash used in investing activities compared with the sameperiod mainly reflected the increase in cash paid for the purchase andconstruction of fixed assets.
Decrease of the net cash used in financing activities compared with the sameperiod mainly reflected the payment of 2017 interim special dividends in 2018.
Increase of the net cash and cash equivalents compared with the same periodmainly reflected the increase of net cash generated from operating activities andthe payment of 2017 interim special dividends in 2018.
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 | 222,840,220 | 212.26% | Government subsidies to support the Company’s development | Y |
4. Analysis of Assets and Liabilities
I. Major changes
Unit: RMB’ 000
| Asset item | December 31, 2019 | December 31, 2018 | YOY | Major Changes Explanation | ||
| Proportion Change | ||||||
| Amount | Proportion | Amount | Proportion | (Points) | ||
| Property, plant and equipment | 7,212,614 | 29.68% | 6,941,292 | 29.67% | 0.01 | |
| Inventories | 1,946,869 | 8.01% | 2,522,354 | 10.78% | -2.77 | |
| Trade and other receivables and prepayments | 3,900,585 | 16.05% | 4,678,284 | 20.00% | -3.95 | |
| Cash and cash equivalents | 8,937,937 | 36.78% | 7,616,880 | 32.56% | 4.22 | |
| Trade and other payables | 12,826,996 | 52.79% | 12,195,966 | 52.13% | 0.66 | |
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 reportingperiod.
5. Investment
I. 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 2019 (RMB mils) | Cumulative Actual Investment (RMB mils) | Progress | Index |
| Fushan Plant | Self-funded | Y | 489 | 861 | 42% | * |
| Total | 489 | 861 | -- | -- |
**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 Equity
I. 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 | 3,261,398 | 231,472 | 26,527,567 | -23,853 | -18,125 |
| JMC Heavy Duty Vehicle Co., Ltd. | Subsidiary | Product heavy commercial vehicle , engine, component, and related service | 281,793 | 2,789,891 | -980,202 | 332,808 | -305,397 | -304,345 |
Acquisition and disposal of the subsidiaries
□√Applicable □Not Applicable
| Name of Companies | Acquisition and disposal of the subsidiaries | Influence |
| Xiamen Fujiang New Energy Automobile Sales Co., Ltd. | Cancellation | None |
8. Structured Entities Controlled by JMC
□Applicable □√Not Applicable
9. Outlook
I. 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, its macro-controltargets are well achieved, its imports and exports are stable, and its balance ofpayments is basically balanced. Domestic demand is stable, innovation isencouraged, and the combination of Internet and industry is further deepened.The long-term fundamentals of the Chinese economy have not changed, butshort-term growth is expected to slow due to the COVID-19. Due to the impact ofthe COVID-19, the delayed resumption of work across the country will affect thenormal operation of automobile OEMs, component companies, and logisticscompanies in the short term. There will be certain matching difficulties betweensupply and demand in the upstream and downstream of the supply chain,thereby reducing the industry overall capacity utilization. At the same time,because the automotive industry is a labor-intensive industry, the epidemic willinevitably lead to a short-term rise in the industry's overall labor costs, rawmaterial costs, and logistics costs.
From the demand side, due to the epidemic, it is expected that car sales in thefirst quarter will be larger decrease in amplitude. In addition, in the context of theoutbreak of the COVID-19, the online car-hailing service has been greatlyimpacted. As new energy vehicles are important models of the online car-hailingvehicle, the epidemic will inevitably lead to a sharp decline in demand for newenergy vehicles in the short term.
Along with the epidemic's impact on the country's production and operation, thestate level is also reviving the vitality of SMEs through measures such as taxreductions and low interest rate loans, and using monetary policy to promote theconstruction of a number of key projects, while expanding domestic consumptionand overseas trade, these measures will help reduce the negative impact of theepidemic on the automotive industry.
Meanwhile, China's Car Parc per capita is still lower than world’s average levelindicating a strong auto market potential in the future. Currently automobileindustry development is affected by the urban traffic congestion, environmentpollution, purchase tax incentive cancellation and new energy vehicle incentivecancellation gradually. However, as the economic progressing steadily, theconsumption level and purchasing power improved, domestic automobile salesvolume is expected to achieve higher level. In 2020, sales volume is stillexpected to continue to grow slightly. The production, sales and use ofautomobile is significantly changed by the combination of technology revolutioncharacterized by electrification, digital, network and smart and innovativebusiness model featured by platform and sharing. The pattern has continued forseveral hundred years of auto industry is facing great changes, new energyvehicles and smart internet is becoming a clear direction of auto industry to leadits upgrade, transformation and structure adjustment.
II. Corporation Strategy
The company has formulated a new development strategy, with the vision of“becoming a leader in the light commercial vehicle industry and a supplier ofcost-effective products for Ford”, we uphold the values of “integrity, dedication,innovation and cooperation”. The company's commercial vehicles are positionedas a supplier of comprehensive solutions for urban and mainline logisticsproducts and services, and passenger cars have made breakthroughs and largedevelopments in the small and medium-sized markets. In the future, thecompany will focus on innovation and services, promote structural adjustment,continue to vigorously implement product innovation-driven development,integrate resources to strengthen technological innovation, and promote productinnovation in the market; deepen transformation and adjustment, adhere tobusiness model innovation; and comprehensively enhance product corecompetitiveness. The company will focus on core business, focus on intensivecultivation in segmented areas, take customers as the center, improve marketawareness of the entire value chain, and actively build the company's products
into market segment leaders. The company will also aim at the new trends in theautomotive industry, and promote the implementation of the "new fourmodernization" development strategy of "electrification, intelligent networking,sharing, and autonomous driving". In the core of new energy vehicles, intelligentconnected vehicles, and autonomous driving, etc. The field has been laid out,and through the overall coordination and integration of the four modernizations,the construction of a future-oriented and globally competitive businessecosystem is accelerated.
III. 2020 Business Plan
The Company is targeting 2020 sales volume level at 331 thousand units andrevenue level at RMB 32 billion, increases of 14% and 10% vs. 2019 respectively.To enhance profitability, the company is committed to the following plans in 2020:
(1) Continue to consolidate and enhance the company's leading advantage in the
field of light commercial vehicles, and vigorously increase the popularity ofpassenger vehicle products and sales; continue to promote the layout of the"new four modernization" development strategy;
(2) Continue to strengthen the company's sales network and channels, activelylay out network channels in low-tier cities, establish flexible marketingprograms to achieve sales and market share targets, strengthen the capacitybuilding of dealer channels, and improve dealer channel performance;
(3) High-quality production and launch of new models of Ford Territory, FordEverest EVI models, and light bus all models upgraded to national phase sixemission standards and other new products, perfecting light truck and pickuptruck lineages;
(4) Promote cost reduction and efficiency, further reduce structural risks, andimprove the overall operating efficiency of the company;
(5) Continue to promote new fuel economy and emission adaptation projects tomeet the further requirements of national regulations on energy conservationand environmental protection;
(6) Strengthen cooperation with technology partners to continuously promotefuture product development and R & D capabilities;
(7) Expand finished vehicle exports and OEM components sales business.
(8) Actively explore and try innovative business.
IV. Potential Challenges and Solutions
Affected by the epidemic in 2020,the company faces huge growth tests,increased industry competition, stricter regulatory requirements, rising costpressures, and slowing economic growth. To maintain steady growth, thecompany will continue to focus on the following areas:
(1) Based on the prevention and control of the epidemic, steadily promote the
resumption of production and production at the factory;
(2) Insight into customer needs, design and release customer-oriented products,
improve channel performance, and achieve customer-centric business growth;
(3) Accelerate product platform, redefine product portfolio, enrich pedigree andnetwork connection configuration to better meet customer needs; promote thedevelopment of modified vehicle business, and improve market performanceand industrial share in special modified vehicle fields such as medical rescue,logistics and transportation;
(4) Continue to optimize JMC's lean production, improve production efficiencyand product quality level;
(5) Improve supplier capabilities and component quality, and continue to reducecomponent procurement costs;
(6) Strengthen corporate governance, strictly follow national laws and regulations,
and improve risk assessment and control mechanisms;
(7) Continuous expense management and control to optimize business structure;
(8) Through the established process optimization team, create a lean andefficient organization to respond flexibly to market changes.The Company will focus on light commercial vehicle with the support of SUV,maximize its own advantage and fully take advantage of shareholders resourceto realize sustainable profit. Strengthen channel coverage, improve financingservice ability; promote new products development and R&D ability improvement,to accelerate the progress of launching new competitive products to the market;develop more proactive cost reduction plan to improve the company’s profitability. The company will accelerate the development and cultivation of the heavytruck market and increase the company's influence in the field of commercialvehicles. Guided by the new strategy, the company will continuously implementall the specific initiatives to accelerate the strategic target achievement.
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
□√Applicable □Not Applicable
| Date | Communication Method | Type of Object | Information Discussed and Materials offered |
| July 11, 2019 | On-the-spot research | Other | JMC Operating highlights |
| July 18, 2019 | On-the-spot research | Institution | JMC Operating highlights |
| Reception times | 2 | ||
| Visiting institution number | 31 | ||
| Visiting person number | 20 | ||
| Other objects | 4 | ||
| 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 2019 Year Profit Distribution
Details on the profit available for appropriation of the Company in 2019 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, 2018 | 8,260,412 | 8,257,203 |
| 2019 net profit | 147,812 | 147,812 |
| Allocation of dividend for 2018 | 34,529 | 34,529 |
| Retained earnings at Dec. 31, 2019 | 8,373,695 | 8,370,486 |
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, 2019 were RMB 8,370,486 thousand.
The Board approved to submit to the 2019Annual Shareholders’ Meeting thefollowing proposal on year 2019profit distribution:
(i). to appropriate for the dividend distribution from the profit available for
distribution, which shall be equal to RMB 0.07 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 0.7 (including tax) per 10shares will be distributed to shareholders. Based on the total share capital of863,214,000 shares as of December 31, 2019, total cash dividend distributionamounts shall be RMB 60,424,980.
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) 2018 Year Profit Distribution Plan
a cash dividend of RMB 0.4 (including tax) per 10 shares will be distributed toshareholders. Based on the total share capital of 863,214,000 shares as ofDecember 31, 2018, total cash dividend distribution amounts shall be RMB34,528,560.
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.
(3) 2017 Year Profit Distribution Plan
A 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.
(4) 2017 Interim Special Dividend Distribution Plan
A 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.
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 | |
| 2019 (Proposed) | 60,425 | 147812 | 40.88% |
| 2018 | 34,529 | 91,833 | 37.60% |
| 2017 | 2,276,295 | 690,938 | 329.45% |
The Company made a profit during the reporting period and the profit of the parentcompany distributable to the common shareholders is positive, but a distributionplan of cash dividends for the common shares is not put forward
□Applicable □√Not Applicable
2. Proposal on 2019 Year Profit Distribution Plan or Capital Reserve Conversion
□√Applicable □Not Applicable
Please refer to Article 1, Chapter V of this Report.
3. Commitments
3.1 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 Applicable
There 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 Applicable
Please refer to the Note 2 Summary of Significant Accounting Policies of the notesto the consolidated financial statements in the Chapter XII Financial Statementsfor details.
7. Explanation on major accounting errors that shall be restated during thereporting period
□Applicable □√Not Applicable
There 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 Applicable
9. Appointment or Dismissal of Accounting Firm
Current accounting firm
| Name | PricewaterhouseCoopers Zhong Tian LLP |
| Compensation (RMB’000) | 2,000 |
| Consecutive years offering audit services | 18 |
| Names of signed accountants | Lei Fang, Ye Dan |
| Consecutive years offering audit services of signed accountants | Lei Fang 3 year, Ye Dan 2 year |
Dismissal of accounting firm
□Applicable □√Not Applicable
Appointment of C-SOX auditor, financial consultant or sponsor
□√Applicable □Not Applicable
Upon the approval of 2017 Annual Shareholders’ Meeting, JMC agreed to appointPricewaterhouseCoopers Zhong Tian LLP as JMC’s 2019 to 2021 C-SOX auditor.In 2019, 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 Applicable
There was no matter involving bankruptcy during the reporting period.
12. Major Litigation or Arbitration
□Applicable □√Not Applicable
There was no major litigation or arbitration during the reporting period.
13. Punishment
□Applicable □√Not Applicable
Neither 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 Applicable
There was neither equity incentive plan or ESOP, nor other employee incentivemethod during the reporting period.
16. Major Related Transactions
I. Routine related party transactions
Please refer to the Note 32 related party transactions of the notes to theconsolidated financial statements in the Chapter XII Financial Statements fordetails.
II. Major related party transaction concerning transfer of assets or equity
□Applicable □√Not Applicable
There 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 Applicable
There was no outside co-investment in the reporting period.
IV. Related credit and debt
□√Applicable □Not Applicable
Is there non-operating related credit and debt?
□Yes □√No
The Company had no non-operating related credit and debt in the reporting period.
V. Other major related party transactions
□√Applicable □Not Applicable
The announcement on Related Party Transactions
| Name | Disclosure Date | Index |
| Public Announcement on the 2019 Forecast Routine Related Party Transactions | March 28, 2019 | The announcement (No: 2019-014) was published in the website www.cninfo.com.cn. |
| Public Announcement on Related Party Transactions of the Eighth Session of the Ninth Board of Directors | April 2, 2019 | The announcement (No: 2019-017) was published in the website www.cninfo.com.cn. |
| Public Announcement on Related Party Transactions | June 1, 2019 | The announcement (No: 2019-028) was published in the website www.cninfo.com.cn. |
| Public Announcement on Related Party Transactions of the Ninth Session of the Ninth Board of Directors | June 29, 2019 | The announcement (No: 2019-034) was published in the website |
| Public Announcement on Related Party Transactions | September 28, 2019 | The announcement (No: 2019-051) was published in the website www.cninfo.com.cn. |
| Public Announcement on Related Party Transactions | November 13, 2019 | The announcement (No: 2019-059) was published in the website www.cninfo.com.cn. |
| Public Announcement on the 2020 Forecast Routine Related Party Transactions | March 26, 2020 | The announcement (No: 2020-0XX) was published in the website www.cninfo.com.cn. |
17. Major Contracts and Execution
I. Entrustment, contract or leasea. Entrustment
□Applicable □√Not Applicable
There was no entrustment in the reporting period.
b. Contract
□Applicable □√Not Applicable
There was no contract in the reporting period.
c. Lease
□√Applicable □Not Applicable
Please refer to the note14 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 Applicable
There was no lease project with more than 10% of net profit in the reporting period.
II. Major guarantee
□Applicable □√Not Applicable
The Company had no outside guarantee in the reporting period.
III. Entrustment on cash asset managementa. Trust investment
□Applicable □√Not Applicable
There was no trust investment in the reporting period.
b. Entrusted loan
□Applicable □√Not Applicable
There was no entrusted loan in the reporting period.
IV. Other major contract
□Applicable □√Not Applicable
18. Corporation Social Responsibilities
I. 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 2019,387 bridges have been donated in 24 provinces, benefiting nearly 600,000 people.After JMC had been awarded China Poverty Alleviation Ambassador Prize, ChinaResponsible Public Partners Prize and China Social Responsibility ExcellentBrand Prize, the video work "Bridge" recording the development process of"Jiangxi · Xiqiao Project" won the "2019 Public Welfare Image Award". JMC haswon the "China Charity Festival" award for many years.
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, andtreated suppliers, customers and consumers sincerely. Simultaneously, JMC paidattention to environmental protection, energy saving and consumption reduction,fully reduced energy consumption and pollutant discharge, and actively fulfilledcorporate social responsibility.
JMC 2019 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 2019The Company regards the realization of precision poverty relief as the basicstrategy of precision poverty alleviation. The Company continued to consolidateefforts of one-to-one poverty alleviation in 2019.
c. Status of targeted measures in poverty alleviation
| Item | Unit | Amount/Progress |
| I. Brief Introduction | —— | —— |
| including：1. Funding | RMB (’000) | 2,859.9 |
| 2. Sum converted from the materials | RMB (’000) | 30.8 |
| 3. Persons get rid of poverty | Persons | 3 |
| 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 | 3 |
| 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) | 36.9 |
| 4.2 Poor students in aid | Persons | |
| 4.3 Investments on the improvement of educational source in poverty-stricken are | RMB (’000) | 800 |
| 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) | 53.8 |
| 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) | 2,000 |
| 9. Other | —— | —— |
| including：9.1.Project | Number | |
| 9.2.Investment amount | RMB (’000) | |
| 9.3. Persons getting rid of poverty | Persons | |
| III. Awards | —— | —— |
| 2019 listed companies Social responsibility award (the 9th China public welfare festival) |
d. On-going plan regarding targeted measures in poverty alleviationThe year 2020 will be a decisive year in the fight against poverty, JMC will makeunremitting efforts to implement the strategy of precise poverty alleviation,strengthen the combination of poverty alleviation, ambition and wisdom, andcontribute to the fight against poverty.
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:145.4mg/L NH-N:12.64mg/L" | “Wastewater Discharge Standard”(GB 8978-1996) | COD: 113.615t; NH-N: 3.401t | COD≤841.68t; NH-N≤83.1414t | Meet Standard |
| Exhaust gas (SO2,NOx,smoke,toluol, dimethylbenzene, NMHC） | continuous discharge | 148 | 51 in Mainsite, 58 in Xiaolan Site, 33 in Cast Plant and 6 in Axle Plant | SO2: 13mg/m3; NOx :111mg/m3; smoke: 20mg/m3; toluol :1.913mg/m3; dimethylbenzene:23mg/m3; | "The Emission Standard of Air Pollutants”, "Emission Standard of Air Pollutants for Boiler”（GB 13271-2014） | SO2: 17.195t; NOx : 24.935t | NOx≤37.69t | Meet Standard |
The construction and operation of pollutant preventive and control facilitiesIn 2019, JMC built Wastewater Treatment Station and Solid Waste StorageStation at Fushan Plant. Fushan Plant mainly contained Stamping workshop,welding workshop, painting workshop and final assembly workshop. The plantproduced industrial wastewater including phosphating wastewater andcomprehensive wastewater, and domestic sewage. Industrial wastewater wascategorized, collected and pre-treated through two physicochemical treatmentsystems respectively. Comprehensive wastewater after pre-treatment, togetherwith domestic sewage, was transported to biochemical treatment system. At
present, wastewater to be discharged outside must reach Level 1 nationalstandard. At second stage, wastewater after biochemical treatment will be allreused by the plant. Solid Waste Storage Station was nicely designed, and itsexterior look was consistent with the overall plant outlook standard. Normal solidwaste and hazardous solid waste were separated in the Station, according to thestrict legitimate requirements.
In 2019, JMC introduced an organic system for exhaust gas treatment in FushanPlant, including one set of zeolite roller equipment and one set of regenerativethermal oxidizer equipment (RTO). Exhaust gas from solvent spray paint and paintmixing was collected and condensed through zeolite roller system and finally burntin RTO system. Exhaust gas from electrical coating-drying, PVC glue drying, paintdrying, and solvent recollection was collectively burnt in RTO.
The zeolite roller system can condense a big amount of low-density exhaust gasto a small amount of high-density enriched gas, by conducting three temperature-changing procedures of absorption and desorption. The system is especiallydesigned for treating large amounts of low-density exhaust gas with variouscompositions.
JMC Fushan Plant, dubbed as a smart plant with green and energy-efficienttechnologies, introduced several energy-saving and emission-reducing measures.The plant used LEDs for all the lighting in the plant, and an energy managementsystem to monitor energy use and consumption in the plant. The air supply in thePaint workshop can achieve 75% recycling of the air. The Paint Drying Furnace/RTO smoke residue heat was recollected to heat up the pre-treatment system andair conditioning for cooling or heating. Broad Air Conditioning system withcomprehensive energy-conservative technology was introduced. Photovoltaicpower generation equipment was installed in the Vehicle Shipyard and employees’vehicle parking lot. BIM technology was adopted to help build a digitalized plant.
In 2019, JMC Casting Plant introduced electrical furnace dust collector in the largeworkshop. After this action, the outdoor dust density and indoor post area dustdensity could meet the national standard, which effectively improved indoorworking environment and outdoor air quality.
EIA on construction project and other administrative permits for environmentalprotectionThe 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 2019, the Company completed theenvironmental inspection and acceptance of the new energy vehicletransformation project of Xiaolan Plant, New energy laboratory project and theintelligent equipment center, and obtained the environmental assessment approvalof Vehicle production expansion project and the project of expanding the capacityof 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 2019, JMC’s Qingyunpu Main Plant Area and Xiaolan Plant Areawere listed asa key pollutant discharging organization of wastewater/hazardous wastes, and itsmonitored by itself in strict accordance with the Method for Self-monitoring andInformation 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”.
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”, transactedthe EIA procedure according to national standards, stipulated the preventive andcontrol measures for environmental pollution, and reported to competentadministrative departments on environmental protection for approval.
19. Other Major Events
□√Applicable □Not Applicable
JMC received government incentives of approximate RMB 441 millionappropriated by Nanchang County Xiaolan Economy Development Zone, andShanxi Transformation and Comprehensive Reform Demonstration Zone in 2019,which is to support JMC’s development.
20. Major event of JMC subsidiary
□√Applicable □Not Applicable
Xiamen Fujiang New Energy Automobile Sales Co., Ltd., a wholly-ownedsubsidiary of the Company established in 2018 with a cash investment of RMB 10million, was cancelled on December 16, 2019.
Chapter VI Share Capital Changes & Shareholders
1. Changes of shareholding structure
I. 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 | 786,840 | 0.09% | - | - | - | -35,925 | -35,925 | 750,915 | 0.09% |
| 1. Other domestic shares | 786,840 | 0.09% | - | - | - | -35,925 | -35,925 | 750,915 | 0.09% |
| Including: | |||||||||
| Domestic legal person shares | 785,940 | 0.09% | - | - | - | -36,000 | -36,000 | 749,940 | 0.09% |
| Domestic natural person shares | 900 | 0.00% | - | - | - | 75 | 75 | 975 | |
| II. Unlimited tradable shares | 862,427,160 | 99.91% | - | - | - | 35,925 | 35,925 | 862,463,085 | 99.91% |
| 1. A shares | 518,427,160 | 60.06% | - | - | - | 35,925 | 35,925 | 518,463,085 | 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 Applicable
JMC did not issue shares or derivative securities during the past three years as ofDecember 31, 2019. JMC’s total shares remained unchanged in 2019, and thechange in shareholding structure was caused by the trading restriction on limited Ashares of 36,000 shares held by 17 natural persons, Huang Weiqing and others,were relived on December 30, 2019.
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 Listing
I. 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 parties
I. Total shareholders, top ten shareholders, and top ten shareholders holdingunlimited tradable shares
| Total shareholders as of the end of the reporting period | JMC had 27,891 shareholders, including 22,479 A-share holders, and 5,412 B-share holders, as of December 31, 2019. | |||||
| Total shareholders as of the last month-end prior to the disclosure date of the Report | JMC had 29,711 shareholders, including 24,112 A-share holders, and 5,599 B-share holders, as of February 29, 2020. | |||||
| 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 |
| Nanchang Jiangling Investment Co., Ltd. | State-owned legal person | 41.03 | 354,176,000 | 354,176,000 | 0 | 0 |
| Ford Motor Company | Foreign legal person | 32 | 276,228,394 | 0 | 0 | 0 |
| China Securities Corporation Limited | Domestic non-State-owned legal persons | 2.72 | 23,458,066 | 0 | 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 |
| Harvest Environmental Protection Low Carbon Stock Investment Fund | Other | 0.74 | 6,420,188 | 4,070,159 | 0 | 0 |
| GAOLING FUND, L.P. | Foreign legal person | 0.63 | 5,453,086 | 0 | 0 | 0 |
| INVESCO FUNDS SICAV | Foreign legal person | 0.56 | 4,841,889 | -193,857 | 0 | 0 |
| Hong Kong Central Clearing Limited | Foreign legal person | 0.54 | 4,664,502 | 3,959,166 | 0 | 0 |
| National Social Security Fund 602 Portfolio | Other | 0.52 | 4,488,212 | 2,706,312 | 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 | |
| Nanchang Jiangling Investment Co., Ltd. | 354,176,000 | A share | |
| Ford Motor Company | 276,228,394 | B share | |
| China Securities Corporation Limited | 23,458,066 | A share | |
| Shanghai Automotive Co., Ltd. | 13,019,610 | A share | |
| Central Huijin Investment Ltd. | 7,186,600 | A share | |
| Harvest Environmental Protection Low Carbon Stock Investment Fund | 6,420,188 | A share | |
| GAOLING FUND, L.P. | 5,453,086 | B share | |
| INVESCO FUNDS SICAV | 4,841,889 | B share | |
| Hong Kong Central Clearing Limited | 4,664,502 | B share | |
| National Social Security Fund 602 Portfolio | 4,488,212 | A 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 |
| Nanchang Jiangling Investment Co., Ltd. | Qiu Tiangao | May 28, 2019 | 91360125MA38LUR91F | investment management, industrial investment, asset management and other business. |
| Ford Motor Company | William Clay Ford, Jr. | 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 Applicable
| New Controlling Shareholders | Nanchang Jiangling Investment Co., Ltd. |
| Change Date | July 26, 2019 |
| Index | http://www.cninfo.com.cn |
| Disclosure Date | July 27, 2019 |
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 | October 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 Applicable
There 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
IV. Other legal person shareholder holding more than 10% of total equity of theCompany
□Applicable □√Not Applicable
41.03%
50%
| 50% | 50% |
| Nanchang Jiangling Investment Co., Ltd. | Ford Motor Company |
Jiangling Motors Co., Ltd.JMCG
JMCG32%
32%Chongqing Changan Automobile Co., Ltd.
Chongqing Changan Automobile Co., Ltd.
SASAC
| SASAC | ||
| Nanchang State-owned Assets Supervision and Administration Committee |
| 43.11% | 100% |
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 Applicable
JMC 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 | 53 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Anning Chen | Vice Chairman | Male | 58 | 2018.12.05-2020.06.28 | 0 | 0 | 0 |
| Wan Jianrong | Director | Male | 54 | 2017.09.23-2020.06.28 | 0 | 0 | 0 |
| Thomas Peter Hilditch | Director | Male | 42 | 2019.09.23-2020.06.28 | 0 | 0 | 0 |
| Manto Wong | Director & President | Male | 57 | 2019.06.28-2020.06.28 | 0 | 0 | 0 |
| Jin Wenhui | Director & EVP | Male | 52 | 2019.06.28-2020.06.28 | 0 | 0 | 0 |
| Lu Song | Independent Director | Male | 62 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Wang Kun | Independent Director | Female | 43 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Li Xianjun | Independent Director | Male | 52 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Xiao Hu | Chief supervisor | Male | 51 | 2018.12.05-2020.06.28 | 0 | 0 | 0 |
| Alvin Qing Liu | Supervisor | Male | 62 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Zhang Jian | Supervisor | Male | 50 | 2017.06.29-2020.06.28 | 40 | 0 | 40 |
| Ding Zhaoyang | Supervisor | Male | 50 | 2017.06.28-2020.06.28 | 20 | 0 | 20 |
| Chen Guang | Supervisor | Male | 46 | 2017.06.28-2020.06.28 | 0 | 0 | 0 |
| Xiong Chunying | EVP | Female | 55 | 2017.06.29-2020.06.28 | 1,200 | 0 | 1,200 |
| Li Weihua | CFO | Female | 42 | 2018.08.01-2020.06.28 | 0 | 0 | 0 |
| Wan Hong | VP & Board Secretary | Male | 58 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Li 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 |
| Milton Wong | VP | Male | 45 | 2019.07.01-2020.06.28 | 0 | 0 | 0 |
| Liu Shuying | VP | Female | 57 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Mike Chang | VP | Male | 53 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Wu Xiaojun | VP | Male | 45 | 2017.06.29-2020.06.28 | 0 | 0 | 0 |
| Luo Xiaofang | VP | Female | 41 | 2019.05.01- | 0 | 0 | 0 |
| 2020.06.28 | |||||||
| Yu Jianbin | VP | Male | 51 | 2019.10.16-2020.06.28 | 0 | 0 | 0 |
| David Johnston | Ex-Director | Male | 49 | 2017.06.29-2019.09.06 | 0 | 0 | 0 |
| Thomas Fann | Ex-Director & President | Male | 57 | 2017.06.29-2019.03.01 | 0 | 0 | 0 |
| Yuan Mingxue | Ex-Director | Male | 51 | 2017.06.29-2019.09.06 | 0 | 0 | 0 |
| Xiong Chunying | Ex-Director | Female | 55 | 2017.06.29-2019.03.29 | 1,200 | 0 | 1,200 |
| Tim Slatter | Ex-VP | Male | 45 | 2017.06.29-2019.03.01 | 0 | 0 | 0 |
| Christian Chen | Ex-VP | Male | 47 | 2017.06.29-2019.03.29 | 0 | 0 | 0 |
| Andy Ball | Ex-VP | Male | 54 | 2019.04.01-2019.05.01 | 0 | 0 | 0 |
| Total | 1260 | 0 | 1260 |
2. Changes of Directors, Supervisors and Senior Management
| Name | Position | Status | Date | Reason |
| David Johnston | Director | Leave | 2019.09.06 | Work rotation |
| Thomas Fann | Director & President | Leave | 2019.03.01 | Work rotation |
| Yuan Mingxue | Director | Leave | 2019.09.06 | Work rotation |
| Xiong Chunying | Director | Leave | 2019.03.29 | Work rotation |
| Tim Slatter | VP | Leave | 2019.03.01 | Work rotation |
| Christian Chen | VP | Leave | 2019.03.29 | Work rotation |
| Andy Ball | VP | Leave | 2019.05.01 | Resign from the vice president position for the personal reasons |
3. Particulars about working experience of Directors, Supervisors and seniormanagement
Directors:
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, Chairman ofNanchange Jiangling Investment 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 Holdings Co., Ltd., and Director & General Managerof JMCG.
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 and Presidentof Ford China for Ford Motor Company, President and CEO of Ford Motor (China)Ltd., and Vice Chairman of JMC. Mr. Anning Chen first began his distinguishedcareer at Ford Motor Company in 1992, and during his seventeen years at Ford,he held various executive management roles. Most recently, Mr. Anning Chen wasCEO of Chery Automobile LTD, China as well as Chairman of the Board ofDirectors for Chery Jaguar Land Rover Automotive, China.
Mr. Wan Jianrong, born in 1965, holds a Bachelor’s Degree in MechanicalManufacturing from Central China Engineering College and a MBA from JiangxiUniversity of Finance & Economics. He is Director and General Manager of JMCG,Director of Nanchange Jiangling Investment Co., Ltd. and Director of JMC. Mr.Wan Jianrong has held various positions including Deputy Manager and Managerfor Engineer Plant of JMC, Assistant to the President and Vice President of JMC,Deputy General Manger of JMCG, and Executive Deputy General Manager andGeneral Manager of Jiangxi Isuzu Automobile Co., Ltd.
Mr. Thomas Peter Hilditch, born in 1977, holds a Bachelor’s Degree in Chemistryfrom University of London and a Master’s Degree in Management Accounting fromthe Chartered Institute of Management Accountants, and is Director and ChiefFinancial Officer of Ford Motor (China) Ltd. and Director of JMC. Mr. Hilditch heldvarious positions including Controller of Ford Otosan, Purchasing Controller ofFord Asia Pacific, Chief Financial Officer of Ford Sollers, and Chief OperatingOfficer of Ford Sollers.
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 Director and President of JMC. Mr. Manto Wong heldvarious positions including Manger of U.S. Market Analysis Department of Ford,Chief Financial Officer of JMC, Chief Financial Officer of Ford Japan operations,Director of Business Strategy for Asia Pacific of Ford, Vice President and ChiefFinancial Officer for Ford Motor (China) Ltd., and Vice President of Finance forChangan Ford.
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 Director & First Executive VicePresident of JMC, in charge of marketing sales & service, manufacturing, IT andassist the President to manage the Company. 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., andExecutive Vice President of JMC.
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 Council ofthe Chinese Society of International Law, and an Independent Director of JMC. Mr.Lu Song held various positions including Director of International Law Institute ofCFAU 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 Independent
Director 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 PoliticalEconomy 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 of theNanchang Municipal People's Government, deputy director of the Office of theWorking Committee of the Nanchang Hi-tech Industrial Development Zone, deputydirector 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 Industry DevelopmentZone, deputy director of the Personnel and Labor Bureau of the Nanchang Hi-techIndustry Development Zone Administrative Committee, Head of the OrganizationDepartment of the Working Committee of Nanchang Hi-tech Industry DevelopmentZone, and the Director of the Personnel Bureau of the Nanchang Hi-tech IndustryDevelopment 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 Director of Ford Motor (China) Ltd, and a Supervisor of JMC. Mr.Liu was a practicing attorney at Ruder, Ware and Michler Law Firm, U.S.A.,counsel of Asia Pacific Region, Chrysler Corporation, U.S.A., counsel of Mergersand Acquisitions 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, Chairman of Supervisor Board of Nanchang Jiangling Investment Co., Ltd.,and a Supervisor of JMC. Mr. Zhang Jian held various positions includingSecretary of Chairman and Deputy Director of Office for JMC, Director of Office,Director of Communist Party Office, Chief of Publicity Department for JMCG,Assistant to General Manger of JMCG, and Senior Vice Chairman of JMCG LaborUnion.
Mr. Ding Zhaoyang, born in 1969, holds a MBA Degree from Université de Poitiers,France, and is a Supervisor of JMC and Chief of Public & legal Affair Departmentfor JMC. Mr. Ding Zhaoyang held various positions including Deputy Chief, Chiefof 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 for his resume.
Mr. Jin Wenhui, please refer to the part of Directors for his resume.
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 ExecutiveVice President of JMC, in charge of the Company's product research anddevelopment. Ms. Xiong Chunying held various positions including Chief ofQuality Management Department, Assistant to the President, Vice President, anda Director for JMC.
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 the Company’s financial management. Ms. Li Weihua has held variouspositions including Finance Analyst of Ford China, Finance Analyst, and FinanceManager of Ford Motor Research & Engineering (Nanjing) Co., Ltd., MFG FinanceManager, PD Finance Manager, MFG Finance Controller, and PD FinanceController for C and 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’s human resources andrelevant duties of Board Secretary. Mr. Wan Hong held various positions includingChief of Labour and Personnel Department, and Assistant to the President forJMC.
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 the Company’s quality, manufacturing management and strategic planning. Mr.Li Xiaojun held various positions including Chief of JMC Quality ManagementDepartment, Plant Manager of Assembly Plant and Assistant to the President forJMC.
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 the Company's product research and development. Mr. Ding Wenmingheld various positions including Deputy Chief of Product Development Center,
Chief of Product Planning & Program Management Department, and Assistant tothe President for JMC.
Mr. Milton Wong, born in 1974, holds a Bachelor’s Degree in MechanicalEngineering from Massachusetts Institute of Technology, a Master’s Degree inAutomotive Engineering from University of Michigan and a Master of BusinessAdministration from Harvard University, USA, and is a Vice President of JMC, incharge of the Company's product research and development. Mr. Milton Wonghas held various positions in Ford including Global Program Supervisor, AssistantChief Project Engineer, Chief Project Engineer for multiple product projects, andLincoln Segment Chief Project Engineer of Ford AP.
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 the Company's product research and development.Ms. Liu Shuying held various positions including Chief of Quality & SupervisionDepartment of Jiangling-Isuzu Motors Company Limited, Director of ProductDevelopment Center 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 Plant 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. 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 the Company’s heavy duty truck business. Mr. Wu Xiaojun heldvarious positions including Chief of Quality Department, Assistant to the Presidentfor JMC, and Executive Deputy General Manager of JMC Heavy Duty Vehicle Co.,Ltd.
Ms. Luo Xiaofang, born in 1978, holds a Bachelor’s Degree in Economics fromCentral South University, China and a MBA from Maastricht University,Netherlands, and is a Vice President of JMC, in charge of the Company’spurchasing business. Ms. Luo Xiaofang held various positions including RawMaterials Purchasing Supervisor for Irving Schweizer Asia, and Senior PurchasingManager for Ford AP.
Mr. Yu Jianbin, born in 1968, holds a Bachelor’s Degree in Forging from Xi’anJiaotong University, and is a Vice President of JMC, in charge of the Company’sSafety and Environmental Protection Department, Logistics Department andQingyunpu Plant. Yu Jianbin has held various positions including Manager for theEngineering Department, Manager for the Manufacturing & Logistics Department
for Jiangling Motor Holdings Co., Ltd., Assistant to General Manager of JiangxiFire-fighting Vehicle Plant, Deputy General Manager of Jiangxi-Isuzu Motors Co.,Ltd., and Deputy General Manager of JMCG Jingma Motors Co., Ltd.
Positions at the shareholder entities
□√Applicable □Not Applicable
| Name | Shareholder Entity | Title | Term of Office | Compensation Paid by Shareholder Entity (Y/N) |
| Qiu Tiangao | JIC | Chairman | 2019.05.28- | N |
| Anning Chen | Ford | Group Vice President and President, Ford China | 2018.10.24- | Y |
| Wan Jianrong | JIC | Director | 2019.05.28- | N |
| Thomas Peter Hilditch | Ford | CFO, Ford China | 2019.08.01- | Y |
| Zhang Jian | JIC | Chairman of Supervisor Board | 2019.05.28- | N |
Particulars about positions and concurrent positions in other entities other thanshareholder entities
□√Applicable □Not Applicable
| Name | Entity | Title | Compensation Paid by Other Entities (Y/N) |
| Qiu Tiangao | JMCG | Chairman | Y |
| Jiangling Motor Holdings Co., Ltd. | Vice Chairman | N | |
| JMCG Jingma Motors Co., Ltd. | Chairman | N | |
| Jiangling Dingsheng Investment Co., Ltd. | Chairman | N | |
| JMCG New Energy Vehicle Co., Ltd. | Chairman | N | |
| Jiangxi ISUZU Co., Ltd. | Chairman | N | |
| GETRAG (Jiangxi) Transmission Company | Director | N | |
| JMC Heavy Duty Vehicle Co., Ltd. | Chairman | N | |
| Anning Chen | Ford Motor (China) Ltd. | President & CEO | N |
| Changan Ford Automobile Co., Ltd. | Vice Chairman | N | |
| Fordshuttle Trading (Shanghai) Co., Ltd. | Chairman | N | |
| Wan Jianrong | JMCG | Director | Y |
| Jiangling Motor Holdings Co., Ltd. | Director | N | |
| Jiangxi ISUZU Co., Ltd. | Director | N | |
| JMCG New Energy Vehicle Co., Ltd. | Director | N | |
| JMCG Jingma Motors Co. | Director | N | |
| Jiangling Dingsheng Investment Co., Ltd. | Director | N | |
| Jiangxi Yizhizhingxing Automobile Operation Service co. LTD | Chairman | N | |
| Thomas Peter Hilditch | Ford Motor (China) Ltd. | Director | N |
| Changan Ford Automobile Co., Ltd. | Director | N | |
| Fordshuttle Trading (Shanghai) Co., Ltd. | Director | N | |
| Manto Wong | JMC Heavy Duty Vehicle Co., Ltd. | Director | N |
| Jin Wenhui | Jiangxi Jiangling Group Special Vehicle Co., Ltd. | Chairman | N |
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | Director | N | |
| Jiangling Motor Sales Co., Ltd. | Legal Representative & Executive Director | N |
| JMC Heavy Duty Vehicle Co., Ltd. | Director | N | |
| Hanon Systems (Nanchang) Co., Ltd. | Director | N | |
| Shenzhen Fujiang New Energy Automobile Sales Co., Ltd. | Legal Representative | N | |
| Guangzhou Fujiang New Energy Automobile Sales Co., Ltd. | Legal Representative & Executive Director | N | |
| Lu Song | China Foreign Affairs University | Professor | Y |
| Wang Kun | Tsinghua University | Assistant to Dean of School of Economics and Management & Deputy Director of Corporate Governance Center | Y |
| Li Xianjun | Tsinghua University | Head and Academic Director of School of Automotive Engineering | Y |
| Xiao Hu | JMCG | Chief supervisor | Y |
| JMCG Jingma Motors Co., Ltd. | Supervisor | N | |
| Jiangling Dingsheng Investment Co., Ltd. | Supervisor | N | |
| Jiangxi Jiangling Real Estate Co., Ltd. | Chief supervisor | N | |
| Jiangxi Jiangling Chassis Co., Ltd. | Supervisor | N | |
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | Supervisor | N | |
| Alvin Qing Liu | Ford Motor (China) Ltd. | Director | N |
| Changan Ford Automobile Co., Ltd. | Director | N | |
| Ford Motor Research (Nanjing) Co., Ltd. | Supervisor | N | |
| Ford Motor Research Test (Nanjing) Co., Ltd. | Supervisor | N | |
| Fordshuttle Trading (Shanghai) Co., Ltd. | Supervisor | N | |
| Zhang Jian | JMCG | Chairman of the Labor Union | Y |
| Jiangling Motor Holdings Co., Ltd. | Chief supervisor | N | |
| JMCG New Energy Automobile Co. Ltd. | Supervisor | N | |
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | Supervisor | N | |
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | Supervisor | N | |
| Nanchang Gear Co., Ltd. | Chief supervisor | N | |
| JMCG Finance Co., Ltd. | Chief supervisor | N | |
| Jiangxi Lingrui Renewable Resources Development Co., Ltd. | Supervisor | N | |
| Jiangxi Jiangling Real Estate Co.,Ltd | Supervisor | N | |
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | Chief supervisor | N | |
| Jiangxi Yizhizhixing Automobile Operation Service Co., Ltd. | Chief supervisor | N | |
| Xiong Chunying | JMC Heavy Duty Vehicle Co., Ltd. | Director | N |
| Li Weihua | Jiangling Motors Sales Co., Ltd. | Supervisor | N |
| JMC Heavy Duty Vehicle Co., Ltd. | Director | N | |
| Hanon Systems (Nanchang) Co., Ltd. | Director | N | |
| Shenzhen Fujiang New Energy Automobile | Supervisor | N |
| Sales Co., Ltd. | |||
| Guangzhou Fujiang New Energy Automobile Sales Co., Ltd. | Supervisor | N | |
| Wan Hong | Jiangxi Hongdu Aviation Industry Co., Ltd. | Independent Director | Y |
| Li Xiaojun | Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | Director | N |
| Ding Wenming | JMC Heavy Duty Vehicle Co., Ltd. | Director | N |
| Wu Xiaojun | JMC Heavy Duty Vehicle Co., Ltd. | Director & General Manager | N |
| Chen Guang | JMC Heavy Duty Vehicle Co., Ltd. | Vice General Manager | Y |
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, Wan Jianrong,Supervisors Xiao Hu and Zhang Jian were paid by JMCG. Directors Anning Chen,Thomas Peter Hilditch and Supervisor Alvin Qing Liu were paid by Ford.
(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 2019, theCompany paid annual compensation before tax of approximately RMB 1,570thousand to EVP Jin Wenhui, paid approximately RMB 1,640 thousand to EVPXiong Chunying, paid approximately RMB 1,190 thousand per person to VP &Board Secretary Wan Hong, VP Liu Shuying, paid approximately RMB 1,180thousand to VP Li Xiaojun, paid approximately RMB 1,170 thousand to VP DingWenming, paid approximately RMB 1,370 thousand to VP Wu Xiaojun, paidapproximately RMB 170 thousand to VP Yu Jianbin. Two employee-representativesupervisors, Mr. Ding Zhaoyang and Mr. Chen Guang, were paid annualcompensation before tax of about RMB 520 thousand and RMB 660 thousandrespectively. The total compensation before tax paid by JMC for the aforesaidpersons was about RMB 10.66 million in the reporting period, including the long-term incentive of RMB 0.84 million deferred from the previous years.
(2) JMC pays annual compensation for Ford-seconded senior managementpersonnel to Ford in accordance with the Personnel Secondment Agreementsigned between JMC and Ford & Ford Affiliates. In 2019, JMC should pay US$ 90thousand to Ford for Ex Director & President Thomas Fann, pay RMB 250thousand for Ex VP Christian Chen, pay US$ 60 thousand for Ex VP Tim Slatter,
pay US$ 125 thousand for Ex VP Andy Ball, pay US$ 325 thousand for PresidentManto Wong, pay RMB 786 thousand for CFO Li Weihua, pay US$ 200 thousandfor VP Milton Wong, pay US$ 376 thousand for VP Mike Chang, pay RMB 530thousand for VP Luo Xiaofang. These payments made by JMC to Ford do notreflect the actual salaries earned by Ford-seconded senior management.
(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 | 53 | Y | 0 | Y |
| Anning Chen | Vice Chairman | Male | 58 | Y | 0 | Y |
| Wan Jianrong | Director | Male | 54 | Y | 0 | Y |
| Thomas Peter Hilditch | Director | Male | 42 | Y | 0 | Y |
| Manto Wong | Director & President | Male | 57 | Y | * | Y |
| Jin Wenhui | Director & EVP | Male | 52 | Y | 1,570 | N |
| Lu Song | Independent Director | Male | 62 | Y | 100 | N |
| Wang Kun | Independent Director | Female | 43 | Y | 100 | N |
| Li Xianjun | Independent Director | Male | 52 | Y | 100 | N |
| Xiao Hu | Chief supervisor | Male | 51 | Y | 0 | Y |
| Alvin Qing Liu | Supervisor | Male | 62 | Y | 0 | Y |
| Zhang Jian | Supervisor | Male | 50 | Y | 0 | Y |
| Ding Zhaoyang | Supervisor | Male | 50 | Y | 520 | N |
| Chen Guang | Supervisor | Male | 46 | Y | 660 | N |
| Xiong Chunying | EVP | Female | 55 | Y | 1,640 | N |
| Li Weihua | CFO | Female | 42 | Y | * | Y |
| Wan Hong | VP & Board Secretary | Male | 58 | Y | 1,190 | N |
| Li Xiaojun | VP | Male | 44 | Y | 1,180 | N |
| Ding Wenmin | VP | Male | 47 | Y | 1,170 | N |
| Milton Wong | VP | Male | 45 | Y | * | Y |
| Liu Shuying | VP | Female | 57 | Y | 1,190 | N |
| Mike Chang | VP | Male | 53 | Y | * | Y |
| Wu Xiaojun | VP | Male | 45 | Y | 1,370 | N |
| Luo Xiaofang | VP | Female | 41 | Y | * | Y |
| Yu Jianbin | VP | Male | 51 | Y | 170 | N |
| David Johnston | Ex Director | Male | 49 | N | 0 | Y |
| Yuan Mingxue | Ex Director | Male | 51 | N | 0 | Y |
| Thomas Fann | Ex Director & President | Male | 57 | N | * | Y |
| Tim Slatter | Ex-VP | Male | 45 | N | * | Y |
| Christian Chen | Ex-VP | Male | 47 | N | * | Y |
| Andy Ball | Ex-VP | Male | 54 | N | * | Y |
| Total | -- | -- | ---- | -- | 10,960 | -- |
* 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. Employees
i. Employees, Professional Structure and Educational Level
| Employees in parent company (persons) | 13,492 | |
| Employees in subsidiaries (persons) | 1,296 | |
| Total employees (persons) | 14,788 | |
| Total employees paid compensation (persons) | 15,654 | |
| Retired employees bore retirement benefits in parent company and its subsidiaries | 754 | |
| Professional Structure | ||
| Type | Employees (Persons) | |
| Production Worker | 9,467 | |
| Sales Personnel | 646 | |
| Technical Personnel | 3,600 | |
| Finance Personnel | 201 | |
| Administrative Staff | 874 | |
| Total | 14,788 | |
| Educational Level | ||
| Type | Employees (Persons) | |
| Master degree and higher | 1,066 | |
| Bachelor degree | 3,793 | |
| Polytechnic school degree | 2,308 | |
| Below polytechnic school degree | 7,621 | |
| Total | 14,788 | |
ii. Compensation PolicyThe Company strictly complies with the relevant requirements of national laborlaws and regulations, provides a safe and environmentally friendly workplace, andcontinuously establishes and improves the salary management mechanism thatmatches the employees’ income with the Company’s performance, position value,employees’ individual ability and performance, and effectively link organizationalperformance and individual performance, strengthen the incentive guiding role ofcompensation, and precisely motivate high-performing backbone talents. At thesame time, the employees’ welfare policies are constantly improved to meet thediverse personal needs of employees and to enhance employees’ experience andsatisfaction.
iii. TrainingIn the current new normal of the industry, closely follow the Company's strategyand business needs, strengthen the training and construction of the talent team,and consolidate the training system to establish an "online + offline" diversifiedlearning method, to provide employees’ career development with a steady streamof knowledge support and diverse learning options. With HR vision and mission asthe goal, it provides talent retention and training solutions for the Company'sbusiness goals and strategic transformation.
Continue to optimize the career development channels for employees, build andimprove a management and professional dual-channel career developmentsystem starting from the comprehensive development of new employees, so thatemployees with different specialties and career development have moreprofessional choice and growth opportunities. Please refer to 2019 JMCCorporation Social Responsibility Report for more details on 2019 training planimplementation.
iv. Labour outsourcing
□Applicable □√Not Applicable
Chapter IX Corporate Governance Structure
1. Status of the Corporate Governance in JMC
Difference 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, theSecurities Law, the Code of Corporate Governance for Listed Companies in China,the Rules Governing Listing of Stock on Shenzhen Stock Exchange, as well asrelevant laws and regulations, to carry out corporate governance activities andcontinued 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 positions otherthan director positions with its controlling shareholders; JMC senior managementpersonnel are paid by JMC; labor, personnel matters and compensationmanagement 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 peripheral facilities,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 itscontrolling 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’ Meeting
I. Index to the Shareholders’ Meeting in the reporting period
| Meeting | Meeting Type | Investor Participation Ratio | Convening Date | Disclosure Date | Index |
| 2019 First Special Shareholders’ Meeting | Special Shareholders’ Meeting | 77.45% | 2019.02.20 | 2019.02.21 | The announcement (No: 2019-007) was published in the website www.cninfo.com.cn. |
| 2018 Annual Shareholders’ Meeting | Annual Shareholders’ Meeting | 76.86% | 2019.06.28 | 2019.06.29 | The announcement (No: 2019-032) was published in the website www.cninfo.com.cn. |
| 2019 Second Special Shareholders’ Meeting | Special Shareholders’ Meeting | 76.68% | 2019.09.23 | 2019.09.24 | The announcement (No: 2019-049) 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 Duty
I. 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 | 20 | 3 | 16 | 1 | 0 | N | 1 |
| Wang Kun | 20 | 3 | 16 | 1 | 0 | N | 0 |
| Li Xianjun | 20 | 2 | 16 | 2 | 0 | N | 0 |
II. Dissent from Independent Directors
□Yes □√No
The 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 □No
JMC has appointed three Independent Directors so far. The Independent Directorsexercised their fiduciary duties on routine work and major decision-making of theBoard of Directors. They studied every proposal reviewed by the Board ofDirectors thoroughly and raised their opinions, inquired about major events whichrequired opinions from the Independent Directors and issued their written opinions,and actively engaged in the affairs of the Compensation Committee and the Audit
Committee in the reporting period, to protect the interests of the Company and allthe shareholders.
6. 2019 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 andinternal control implementation results regularly.ii. The Audit Committee reviewed the Assets Impairment Provisions and Write-offproposal and submitted it to the Board for review and approval.iii. The Audit Committee reviewed the independent auditor’s audit plan, letter ofengagement and risks and controls.iv. The Audit Committee has coordinated with the independent auditor to allow theaudit and associated financial report can be submitted within the appointedperiod.v. The Audit Committee reviewed the financial statements before the certifiedauditor’s on-site audit, after receiving the certified auditor’s initial and final auditopinions. The Committee communicated with auditors face to face overimportant events and major accounting estimations, audit adjustment items andimportant accounting policies which potentially affect the financial statements,and believes that the financial statements are truthful, accurate and fully reflectthe Company’s actual status.vi. The Audit Committee has submitted the 2019 Independent Auditor SummaryReport to the Board for review.vii. The Audit Committee reviewed the Internal Control Self-assessment Reportand agreed to submit this to the Board for approval.
B. Written Opinions on JMC Financial StatementsThe Audit Committee reviewed the unaudited financial statements prepared by theCompany and issued its written opinions as follows on January 15, 2020: the AuditCommittee reviewed the financial statements compiled by JMC and believes thatthe financial statements have in all material aspects reflected the actual status ofthe Company. The Audit Committee would continue to keep in close contact withthe external auditor. After receiving the auditor’s initial audit comments, thecommittee 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 21, 2020: 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, 2019, 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 2019 financial statementsas follows on March 5, 2020: 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 the
Balance Sheet, Income Statement and Cash Flow, give a true, accurate and fairview of the financial position of the Company as at December 31, 2019, 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. 2019 Independent Audit Work Summary Report
The Audit Committee reviewed the 2019 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 2019 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, 2019, and thefinancial performance and cash flows for the year then ended. The auditconclusion fairly reflects the Company’s actual status.
II. 2019 Diligence Report of the Compensation CommitteeIn the reporting period, the Compensation Committee exercised its duties asfollows:
i. reviewed and approved the Proposal on 2018 Year-end Bonus for theCompany’s senior executives;ii. Reviewed and approved the adjustment of the annual total cash income target
of the Company’s senior executives in 2019;iii. Reviewed and approved the 2019 Due Diligence Report of the Compensation
Committee;iv. Reviewed and approved the KPIs for the Company’s senior executives in 2019.
The Compensation Committee’s opinions on the annual compensation of theDirectors, Supervisors and senior management disclosed in this Report are asfollows:
The 2019 annual compensation for the Chinese-side senior management waspaid upon the principles promulgated in the JMC Executive CompensationScheme. The 2019 annual compensation for Ford-seconded senior managementpersonnel was paid in accordance with the Personnel Secondment Agreementsigned between JMC and Ford & Ford Affiliates. The annual compensation for the
Director and Supervisor that the Company paid abided by JMC salarymanagement 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 Board
Risks found by the Supervisory Board in the reporting period
□Yes □√No
The Supervisory Board had no dissent on inspection items in the reporting period.
8. Compensation & Incentive Mechanism for Senior Management in the ReportingPeriodThe Compensation Committee of the Company approved the 2019 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 the KPIs for the Company’s senior executives in 2020and to adjust the Year 2020 total income target of the senior executives based onmarket conditions. These plans are applicable only to the Chinese-side seniormanagement.
9. Internal Control
I. Major defect of internal control in the reporting period
□Yes □√No
II. Internal Control Self-assessment Report
| Issuance date | March 26, 2020 | ||
| 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 | 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 | |
| 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. | 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 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. | Please refer to internal control deficiency over financial reporting for the criteria for non-financial reporting internal control. |
| Number of Material Weakness in financial report | 0 | |
| Number of Material Weakness in non-financial report | 0 | |
| Number of Significant | 0 | |
| Deficiency in financial report | |
| 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 26, 2020 |
| 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 □√No
Opinion issued by the accounting firm keeps the same with that of self-assessmentreport made by the Board
□√Yes □No
Chapter X Corporate BondWhether 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 24, 2020 |
| Name of Auditor | PricewaterhouseCoopers Zhong Tian LLP |
| Document No. of Audit Report | 2020/SH-0178 |
- 57 -
2020/SH-0178(Page 1 of 5)
Independent Auditor’s ReportTo the Shareholders of Jiangling Motors Corporation, Ltd.? (incorporated in the People's Republic of China with limited liability)
Opinion
What we have audited
The consolidated financial statements of Jiangling Motors Corporation, Ltd. (the “Company”) and itssubsidiaries (the “Group”) set out on pages 62 to 140, which comprise:
? the consolidated statement of financial position as at 31 December 2019;? 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 2019, 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 for theAudit of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Independence
We are independent of the Group in accordance with the Code of Ethics for Professional Accountantsof the Chinese Institute of Certified Public Accountants (“CICPA Code”), and we have fulfilled ourother 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 significance inour 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
2020/SH-0178
(Page 2 of 5)
| Key Audit Matter | How our audit addressed the Key Audit Matter |
| Research and development expenditures Refer to note 15 to the consolidated financial statements. We focussed on this area due to the incurred amount of research and development expenditures (RMB1,937,078,000 in 2019), the amount of the development costs capitalised (RMB160,757,000 in 2019), 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 RMB23,000,000, 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 RMB21,000,000. 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. |
2020/SH-0178(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 RMB1,495,092,000 as at 31 December 2019, which indicates there may be impairment on its long term assets, mainly including property, plant and equipment with the amount of RMB1,524,790,000. 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. |
2020/SH-0178
(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 consolidated financialstatements 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 the Audit Committee for theConsolidated Financial Statements
Management of the Company is responsible for the preparation and fair presentation of theseconsolidated 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 has 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. We report our opinion solely to you, as a body,and for no other purpose. We do not assume responsibility towards or accept liability to any otherperson for the contents of this report. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with ISAs will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintainprofessional scepticism throughout the audit. We also:
2020/SH-0178(Page 5 of 5)
? Identify and assess the risks of material misstatement of the consolidated financialstatements, whether due to fraud or error, design and perform audit procedures responsiveto those risks, and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the override of internal control.? 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 of expressingan opinion on the effectiveness of the Group’s internal control.? Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.? Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Group’s abilityto continue as a going concern. If we conclude that a material uncertainty exists, we arerequired to draw attention in our auditor’s report to the related disclosures in theconsolidated financial statements or, if such disclosures are inadequate, to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Group to cease tocontinue as a going concern.? Evaluate the overall presentation, structure and content of the consolidated financialstatements, including the disclosures, and whether the consolidated financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.? Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the consolidatedfinancial statements. We are responsible for the direction, supervision and performance ofthe group audit. We remain solely responsible for our audit opinion.We communicate with the Audit Committee regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the 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 the Audit Committee, we determine those matters that wereof most 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
24 March 2020
CONSOLIDATED FINANCIAL STATEMENTS ANDREPORT OF THE AUDITORS
31 DECEMBER 2019
- 63 -
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATEDSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31DECEMBER 2019(All amounts in thousands of RMB unless otherwise stated)
| Notes | 2019 | 2018 | |||
| Revenue from contracts with customers | 5 | 29,173,636 | 28,249,340 | ||
| Taxes and surcharges | (744,695) | (687,133) | |||
| Cost of sales | 6 | (24,597,898) | (24,463,198) | ||
| Gross profit | 3,831,043 | 3,099,009 | |||
| Distribution costs | 6 | (1,525,883) | (1,202,382) | ||
| Administrative expenses | 6 | (2,731,887) | (2,460,259) | ||
| Net impairment losses on financial assets | 3.1(2) | (131,701) | (1,089) | ||
| Net impairment losses on non-financial assets | (25,355) | (7,143) | |||
| Other income | 8 | 492,301 | 426,678 | ||
| Operating loss | (91,482) | (145,186) | |||
| Finance income | 9 | 203,950 | 188,436 | ||
| Finance costs | 9 | (8,306) | (5,849) | ||
| Finance income-net | 9 | 195,644 | 182,587 | ||
| Share of profit of investments accounted for using the equity method | 17b | 823 | 2,238 | ||
| Profit before income tax | 104,985 | 39,639 | |||
| Income tax credit | 10 | 42,827 | 52,194 | ||
| Profit for the period | 147,812 | 91,833 | |||
| Profit attributable to: | |||||
| Shareholders of the Company | 147,812 | 91,833 | |||
| Other comprehensive income/(loss) | |||||
| Item that will not be reclassified to profit or loss | |||||
| - Remeasurements of retirement benefits obligations | (1,623) | (4,590) | |||
| - Income tax relating to remeasurements of retirement benefit obligations | 406 | 1,148 | |||
| Other comprehensive loss for the period, net of tax | (1,217) | (3,442) | |||
| Total comprehensive income for the period | 146,595 | 88,391 |
| Total comprehensive income attributable to: | |||||
| Shareholders of the Company | 146,595 | 88,391 | |||
| Earnings per share for profit attributable to the shareholders of the Company for the period (expressed in RMB per share) | |||||
| - Basic and diluted | 11 | 0.17 | 0.11 |
The notes on pages 68 to 140 are an integral part of these consolidated financial statements.
- 64 -
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATEDSTATEMENT OF FINANCIAL POSITIONAS AT 31DECEMBER 2019(All amounts in thousands of RMB unless otherwise stated)
| Notes | 2019 | 2018 | |||
| ASSETS | |||||
| Non-current assets | |||||
| Property, plant and equipment | 12 | 7,212,614 | 6,941,292 | ||
| Right-of-use assets | 14 | 36,040 | — | ||
| Lease prepayment | 13 | 719,695 | 601,260 | ||
| Intangible assets | 15 | 354,203 | 246,026 | ||
| Deferred income tax assets | 18 | 860,607 | 743,096 | ||
| Investments accounted for using the equity method | 17b | 40,935 | 40,112 | ||
| Total non-current assets | 9,224,094 | 8,571,786 | |||
| Current assets | |||||
| Inventories | 19 | 1,946,869 | 2,522,354 | ||
| Trade and other receivables and prepayments | 20 | 3,900,585 | 4,678,284 | ||
| Derivative financial instruments | 3.3 | - | 979 | ||
| Financial assets at fair value through other comprehensive income | 3.3 | 289,044 | 6,246 | ||
| Cash and cash equivalents | 21 | 8,937,937 | 7,616,880 | ||
| Total current assets | 15,074,435 | 14,824,743 | |||
| Total assets | 24,298,529 | 23,396,529 |
- 65 -
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATEDSTATEMENT OF FINANCIAL POSITION (continued)AS AT 31DECEMBER 2019(All amounts in thousands of RMB unless otherwise stated)
| Notes | 2019 | 2018 | |||
| EQUITY | |||||
| Share capital | 22 | 863,214 | 863,214 | ||
| Share premium | 816,609 | 816,609 | |||
| Other reserves | 23 | 446,255 | 447,472 | ||
| Retained earnings | 8,370,486 | 8,257,203 | |||
| Total equity | 10,496,564 | 10,384,498 |
| LIABILITIES | |||||
| Non-current liabilities | |||||
| Contract liabilities | 5 | 61,714 | 38,382 | ||
| Borrowings | 24 | 3,198 | 3,595 | ||
| Leaseliabilities | 14 | 22,592 | — | ||
| Deferred income tax liabilities | 18 | 25,340 | 26,024 | ||
| Retirement benefit obligations | 25 | 63,685 | 63,425 | ||
| Provisions for statutory warranty | 26 | 166,687 | 151,492 | ||
| Other non-current liabilities | 34,470 | 60,160 | |||
| Total non-current liabilities | 377,686 | 343,078 | |||
| Current liabilities | |||||
| Trade and other payables | 27 | 12,826,996 | 12,195,966 | ||
| Contract liabilities | 5 | 268,170 | 266,702 | ||
| Current income tax liabilities | 75,019 | 179 | |||
| Borrowings | 24 | 457 | 449 | ||
| Lease liabilities | 14 | 13,387 | — | ||
| Derivative financial instruments | 3.3 | 546 | - | ||
| Retirement benefit obligations | 25 | 4,756 | 4,595 | ||
| Provisions for statutory warranty | 26 | 234,948 | 201,062 | ||
| Total current liabilities | 13,424,279 | 12,668,953 | |||
| Total liabilities | 13,801,965 | 13,012,031 | |||
| Total equity and liabilities | 24,298,529 | 23,396,529 | |||
| The notes on pages 68 to 140 are an integral part of these consolidated financial statements. | |||||
- 66 -
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2019(All amounts in thousands of RMB unless otherwise stated)
| Notes | Share capital | Share premium | Other reserves | Retained earnings | Total | |
| 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 | - | - | - | (2,276,295) | (2,276,295) | |
| Balance at 31 December 2018 | 863,214 | 816,609 | 447,472 | 8,257,203 | 10,384,498 | |
| Balance at 1 January 2019 | 863,214 | 816,609 | 447,472 | 8,257,203 | 10,384,498 | |
| Profit for the period | - | - | - | 147,812 | 147,812 | |
| Other comprehensive income | - | - | - | - | - | |
| - Remeasurements of retirement benefit obligations, net of tax | - | - | (1,217) | - | (1,217) | |
| Dividends relating to 2018 | 28 | - | - | - | (34,529) | (34,529) |
| Balance at 31 December 2019 | 863,214 | 816,609 | 446,255 | 8,370,486 | 10,496,564 |
The notes on pages 68 to 140 are an integral part of these consolidated financial statements.
- 67 -
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2019(All amounts in thousands of RMB unless otherwise stated)
| Notes | 2019 | 2018 | ||
| Cash flows from operating activities | ||||
| Cash generated from operations | 29 | 2,737,046 | (4,180) | |
| Interest paid | (2,904) | (218) | ||
| Income tax paid | (179) | (97,410) | ||
| Net cash inflow/(outflow) from operating activities | 2,733,963 | (101,808) | ||
| Cash flows from investing activities | ||||
| Payment for property, plant and equipment (“PPE”) | (1,616,841) | (1,385,315) | ||
| Purchase of financial assets at fair value through profit or loss | (9,200,000) | (10,353,000) | ||
| Other cash paid relating to investing activities | (12,942) | (16,321) | ||
| Proceeds from disposal of PPE | 3,888 | 2,773 | ||
| Proceeds from disposal of financial assets at fair value through profit or loss | 9,200,000 | 10,353,000 | ||
| Investment income from financial assets at fair value through profit or loss | 47,386 | 18,191 | ||
| Interest received | 209,561 | 232,627 | ||
| Other cash received from investing activities | 3,855 | 9,121 | ||
| Net cash outflow from investing activities | (1,365,093) | (1,138,924) | ||
| Cash flows from financing activities | ||||
| Proceeds from borrowings | 200,000 | - | ||
| Repayments of borrowings | (200,454) | (434) | ||
| Principal elements of lease payments | (12,831) | — | ||
| Dividends paid to shareholders of the Company | (34,509) | (2,278,417) | ||
| Other cash paid relating to financing activities | (19) | (1,260) | ||
| Net cash outflow from financing activities | (47,813) | (2,280,111) | ||
| Net increase/(decrease) in cash and cash equivalents | 1,321,057 | (3,520,843) | ||
| Cash and cash equivalents at beginning of year | 7,616,880 | 11,137,723 | ||
| Cash and cash equivalents at end of year | 21 | 8,937,937 | 7,616,880 | |
The notes on pages 68 to 140 are an integral part of these consolidated financial statements.
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 68 -
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 2019, 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 24 March 2020. |
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 and financial assets at FVOCI) are measured at fair value. | |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 69 -
| 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 IFRS 16 Leases for the first time for their annual reporting period commencing 1 January 2019. The Group had to change its accounting policies as a result of adopting IFRS 16. There is no retrospective adjustment recognised in prior periods. The impact of adopting the following standards are disclosed in Note 2.2. | |
| (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 2019 and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. |
| 2.2 | Changes in accounting policies |
| This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements. | |
| As indicated in note 2.1 above, the Group has adopted IFRS 16 Leases from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. No cumulative effect of the initial adoption need to be recognised in retained earnings on 1 January 2019. While the reclassifications arising from the new leasing rules are recognised in the opening balance sheet on 1 January 2019. The new accounting policies are disclosed in note 2.28. | |
| On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases.These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 4.8%. | |
| For leases previously classified as finance leases the entity should recognise the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date. The Group has no finance lease arrangement. | |
| (i) | Practical expedients applied |
| In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard: ? applying a single discount rate to a portfolio of leases with reasonably similar characteristics, and ? accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases. | |
| The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 70 -
| 2 | Summary of significant accounting policies(continued) |
| 2.2 | Changes in accounting policies (continued) |
| (ii) | Measurement of lease liabilities |
| 2019 | ||
| RMB’000 | ||
| Operating lease liabilities as at 31 December 2018 | 30,662 | |
| Discounted using the lessee’s incremental borrowing rate of at the date of initial application | 27,326 | |
| (Less): short-term leases not recognised as a liability | (4,176) | |
| Lease liability recognised as at 1 January 2019 | 23,150 | |
| Of which are: | ||
| Current lease liabilities | 3,913 | |
| Non-current lease liabilities | 19,237 | |
| 23,150 |
| (iii) | Measurement of right-of-use assets |
| Right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. | |
| (iv) | Adjustments recognised in the balance sheet on 1 January 2019 |
| The change in accounting policy affected the following items in the balance sheet on 1 January 2019: | |
| ? Right-of-use assets – increase by RMB23,150,000 ? Lease liabilities – increase by RMB23,150,000 | |
| No impact on retained earnings on 1 January 2019. | |
| (v) | Lessor accounting |
| The Group did not need to make any adjustments to the accounting for assets held as lessor under operating leases as a result of the adoption of IFRS 16. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 71 -
| 2 | Summary of significant accounting policies(continued) |
| 2.3 | Subsidiaries |
| Subsidiaries are all entities (including structured entities) 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 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 72 -
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 73 -
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 74 -
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 75 -
| 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 is 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 76 -
| 2 | Summary of significant accounting policies (continued) |
| 2.13 | Investments and other financial assets |
| (1) | Classification |
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 77 -
| 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 |
| 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. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 78 -
| 2 | Summary of significant accounting policies (continued) |
| 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. |
| 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. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 79 -
| 2 | Summary of significant accounting policies (continued) |
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 80 -
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 81 -
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 82 -
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 83 -
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 84 -
| 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 85 -
| 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 |
| As explained in note 2.2 above, the Group has changed its accounting policy for leases where the Group is the lessee. The new policy is described below and the impact of the change in note 2.2. | |
| Until 31 December 2018, leases in which a significant portion of the risks and rewards of ownership were not transferred to the Group as lessee were classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease. The Group has no financial leases arrangements. | |
| From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. | |
| Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: | |
| ? fixed payments (including in-substance fixed payments), less any lease incentives receivable; ? variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date; ? amounts expected to be payable by the Group under residual value guarantees; ? the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and ? payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. | |
| Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. | |
| The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 86 -
| 2 | Summary of significant accounting policies (continued) |
| 2.28 | Leases (continued) |
| To determine the incremental borrowing rate, the Group: | |
| ? where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received; ? uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third party financing, and ? makes adjustments specific to the lease, eg term, country, currency and security. | |
| There is no variable lease payments based on the lease contracts. | |
| Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. | |
| Right-of-use assets are measured at cost comprising the following: | |
| ? the amount of the initial measurement of lease liability ? any lease payments made at or before the commencement date less any lease incentives received ? any initial direct costs, and ? restoration costs. | |
| Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. There is no purchase option included in the lease contracts. | |
| Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture. | |
| Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature. The Group did not need to make any adjustments to the accounting for assets held as lessor as a result of adopting the new leasing standard. | |
| 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. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 87 -
| 2 | Summary of significant accounting policies (continued) |
| 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. | |
| 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 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). |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 88 -
| 2 | Summary of significant accounting policies (continued) |
| 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, including the use of foreign currency forwards. 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. | |
| Exposure | |
| The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in RMB, was as follows: |
| 31 December 2019 | 31 December 2018 | ||||||
| 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 | (546) | - | - | 979 | - | - | |
| Trade and other receivables | - | 30 | - | - | 265 | - | |
| Borrowings | (3,655) | - | - | (4,044) | - | - | |
| Trade and other payables | (260,962) | (42,659) | (5,574) | (164,599) | (100,450) | (4,045) | |
| (265,163) | (42,629) | (5,574) | (167,664) | (100,185) | (4,045) | ||
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 89 -
| 3 | Financial risk management (continued) |
| 3.1 | Financial risk factors (continued) |
| (1) | Market risk (continued) |
| (i) | Foreign exchange risk (continued) |
| Sensitivity | |
| As shown in the table above, the Group is primarily exposed to changes in USD/RMB and Euro/RMB exchange rates. The Group’s exposure to other foreign exchange movements is not material. | |
| As at 31 December 2019, 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 RMB22,553,000 (2018: RMB14,187,000) higher/lower. As at 31 December 2019, 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 RMB4,000,000 (2018: RMB8,626,000) 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 2019, 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 2019, 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 RMB16,235, 000(2018: RMB14,174,000 ). | |
| As at 31 December 2019, 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 90 -
| 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. If the credit losses of a signal trade receivable can be assessed at a reasonable cost, the credit losses of those trade receivables are assessed separately. If not, 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 2019 or 1 January 2019 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 2019 and 31 December 2018 was determined as follows for trade receivables: | |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 91 -
| 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 2019 and 31 December 2018,receivables with amounts are subject to separate assessment for impairment as below: |
| 31 December 2019 | 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% | - | - | - | 100% | ||
| Gross carrying amount – trade receivables from the sales of automobiles i) | 81,020 | - | - | - | 8,633 | 89,653 | |
| Gross carrying amount – trade receivables from the government subsidy of new energy vehicles ii) | 20,411 | - | - | - | - | 20,411 | |
| Loss allowance | (101,431) | - | - | - | (8,633) | (110,064) | |
| i) As the above debtors involved in several lawsuits, the Group does not expect to collect the amount under the original terms, a full provision were made to those trade receivables. | |||||||
| ii) As the above new energy vehicles cannot meet the mileage required within two years for the receiving of government subsidy, the Group does not expected to receive the amount under the original terms, a full provision were made to those government subsidy for the sales of new energy vehicles. | |||||||
| 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 i) | - | - | - | - | 8,633 | 8,633 | |
| Loss allowance | - | - | - | - | (8,633) | (8,633) | |
| i) As the above debtors involved in several lawsuits, the Group does not expected to collect the amount under the original terms, a full provision were made to those trade receivables. | |||||||
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 92 -
| 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 2019 and 31 December 2018, trade receivables have been grouped onthe 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 2019, all the notes receivables are bank acceptance bills of RMB85,816,000(2018: 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) | General group of automobiles | ||||||
| 31 December 2019 | 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 | 0.05% | 0.05% | 1.20% | 1.97% | 4.63% | ||
| Gross carrying amount – trade receivables | 1,152,288 | 15,981 | 2,840 | 323 | 31,805 | 1,203,237 | |
| Loss allowance | (558) | (8) | (34) | (6) | (1,473) | (2,079) | |
| 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 | 0.38% | 0.38% | 10.59% | 10.78% | 10.93% | ||
| Gross carrying amount – trade receivables | 1,202,896 | 28,827 | 10,253 | 420 | 16,305 | 1,258,701 | |
| Loss allowance | (4,574) | (110) | (1,085) | (45) | (1,782) | (7,596) |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 93 -
| 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 2019 and 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) | Group of new energy vehicles | ||||||
| 31 December 2019 | 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 | 5.53% | - | - | - | - | ||
| Gross carrying amount – trade receivables | 476,963 | - | - | - | - | 476,963 | |
| Loss allowance | (26,383) | - | - | - | - | (26,383) | |
| 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% | - | - | - | - | ||
| Gross carrying amount – trade receivables | 728,555 | - | - | - | - | 728,555 | |
| Loss allowance | (3,125) | - | - | - | - | (3,125) |
| iv) | Group of other automobiles | ||||||
| 31 December 2019 | 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 | 5.88% | 6.49% | 26.08% | 28.14% | 30.07% | ||
| Gross carrying amount – trade receivables | 40,410 | 17,873 | 5,836 | 1,202 | 28,183 | 93,504 | |
| Loss allowance | (2,377) | (1,161) | (1,522) | (338) | (8,474) | (13,872) | |
| 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 | 0.50% | 0.50% | - | - | - | ||
| Gross carrying amount – trade receivables | 334,154 | 51,253 | - | - | - | 385,407 | |
| Loss allowance | (1,671) | (256) | - | - | - | (1,927) |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 94 -
| 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 2019 and 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): |
| v) | Group of automobiles parts | ||||||
| 31 December 2019 | 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 | 437,011 | 29,418 | 4,208 | 2,823 | 5,083 | 478,543 | |
| Loss allowance | (1,297) | (88) | (21) | (17) | (254) | (1,677) | |
| 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 YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 95 -
| 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 2019 and 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): |
| The loss allowances for trade receivables and contract assets as at 31 December reconcile to the opening loss allowances as follows: |
| Trade receivables | |||
| 2019 RMB’000 | 2018 RMB’000 | ||
| Opening loss allowance at 1 January | 22,278 | 21,016 | |
| Increase in loss allowance recognised in profit or loss during the year | 131,797 | 2,052 | |
| Receivables written off during the year as uncollectible | - | (42) | |
| Unused amount reversed | - | (748) | |
| Closing loss allowance at 31 December | 154,075 | 22,278 | |
| 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. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 96 -
| 3 | Financial risk management (continued) |
| 3.1 | Financial risk factors (continued) |
| (2) | Credit risk (continued) |
| (ii) | Impairment of financial assets (continued) |
| 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. The notes receivables held by the Group for endorsement are 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. The loss allowances for other financial assets at amortised cost as at 31 December reconciles to the opening loss allowances as follows: |
| Bank interest receivables RMB’000 | Other receivable RMB’000 | Total RMB’000 | ||
| Closing loss allowance as at 1 January 2018 | - | 658 | 658 | |
| Increase in the allowance recognised in profit or loss during the period | - | 113 | 113 | |
| Reverse of the allowance recognised in profit or loss during the period | - | (328) | (328) | |
| Closing loss allowance as at 31 December 2018 | - | 443 | 443 | |
| Increase in the allowance recognised in profit or loss during the period | - | 20 | 20 | |
| Reverse of the allowance recognised in profit or loss during the period | - | (116) | (116) | |
| Closing loss allowance as at 31 December 2019 | - | 347 | 347 |
| 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. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 97 -
| 3 | Financial risk management(continued) |
| 3.1 | Financial risk factors(continued) |
| (2) | Credit risk (continued) |
| (ii) | Impairment of financial assets (continued) |
| 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: |
| 2019 RMB’000 | 2018 RMB’000 | ||
| Impairment losses | |||
| - movement in loss allowance for trade receivables | (131,797) | (2,052) | |
| Impairment losses on other financial assets | (20) | (113) | |
| Reversal of previous impairment losses | 116 | 1,076 | |
| Net impairment losses on financial and contract assets | (131,701) | (1,089) |
| 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. |
| (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 tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities for: (a) all non-derivative financial liabilities, and (b) net settled derivative financial instruments. | |
| The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 98 -
| 3 | Financial risk management(continued) |
| 3.1 | Financial risk factors(continued) |
| (3) | Liquidity risk (continued) |
| Contractual maturities of financial liabilities | 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 2019 | |||||
| Bank borrowings | |||||
| - Principals | 457 | 458 | 1,370 | 1,370 | |
| - Interests | 53 | 46 | 98 | 36 | |
| Trade and other payables (exclude payroll and welfare payables, other tax payables related) | 12,292,836 | - | - | - | |
| Lease liabilities | 13,387 | 6,987 | 15,605 | - | |
| Derivative financial instruments | 546 | - | - | - | |
| 12,307,279 | 7,491 | 17,073 | 1,406 |
| 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 related) | 11,658,259 | - | - | - | |
| 11,658,767 | 501 | 1,464 | 1,859 |
| 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. |
| The gearing ratios at 31 December 2019 and 2018 were as follows: | ||||
| 31 December 2019 | 31 December 2018 | |||
| Total borrowings | 3,655 | 4,044 | ||
| Total equity | 10,496,564 | 10,384,498 | ||
| Total capital | 10,500,219 | 10,388,542 | ||
| Gearing ratio | 0.03% | 0.04% | ||
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 99 -
| As at 31 December 2019 | Level 1 | Level 2 | Level 3 | Total | |
| Financial assets | |||||
| Financial assets at FVOCI | |||||
| Notes receivables | - | - | 289,044 | 289,044 | |
| Total financial assets | - | - | 289,044 | 289,044 | |
| Financial liabilities | |||||
| Derivatives | |||||
| Foreign exchange forwards | - | 546 | - | 546 | |
| Total financial liabilities | - | 546 | - | 546 |
| 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 | |
| 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) |
| 3.3 | 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 100 -
| 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 - the 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 2019 and 31 December 2018: |
| Financial assets at FVPL- monetary fund | Financial assets at FVPL- Structured deposit | Financial assets at FVOCI-notes receivables | Total | ||
| 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 |
| Opening balance 1 January 2019 | - | - | 6,246 | 6,246 | |
| Acquisitions | 3,300,000 | 5,900,000 | 1,654,757 | 10,854,757 | |
| Disposals | (3,300,000) | (5,900,000) | (1,371,959) | (10,571,959) | |
| Closing balance 31 December 2019 | - | - | 289,044 | 289,044 |
| 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. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 101 -
| 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. |
| 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 2019, there was no significant change in the above estimation techniques and key assumptions. |
| 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. |
| (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. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 102 -
| 4 | Critical accounting estimates and judgements (continued) |
| 4.1 | Critical accounting estimates (continued) |
| (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. |
| (3) | Taxation |
| The Group is subject to various taxes in the PRC, including corporate income tax, value added tax and consumption tax. Significant judgement is required in determining the provision for these taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. 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. | |
| As at 31 December 2019, the Group recorded deferred tax assets of approximately RMB860,607,000. 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 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 103 -
| 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. | |
| 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 | Critical accounting estimates and judgements (continued) |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 104 -
| 4 | Critical accounting estimates and judgements (continued) |
| 4.2 | Critical accounting judgements (continued) |
| (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. |
| (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. |
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 105 -
| 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: | ||||||
| 2019 | ||||||
| Automobiles | Automobile parts | Maintenance services | Materials and others | Total | ||
| Main business income | 26,252,632 | 2,351,979 | 103,583 | - | 28,708,194 | |
| -Recognition at a point in time | 26,252,632 | 2,351,979 | - | - | 28,604,611 | |
| -Recognition over time | - | - | 103,583 | - | 103,583 | |
| Other business income | - | - | - | 465,442 | 465,442 | |
| 26,252,632 | 2,351,979 | 103,583 | 465,442 | 29,173,636 | ||
| 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 | ||
| As at 31 December 2019, the expected revenue of unsatisfied performance obligations from signed contract is RMB102,110,000. The Group will recognise the revenue from 2020 to 2025. | ||||||
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 106 -
| 5 | Revenue and segment information (continued) |
| The Group has recognised the following assets and liabilities related to contracts with customers: |
| 31 December 2019 | 31 December 2018 | ||
| Contract liabilities | |||
| Automobiles and automobile parts | 227,774 | 212,246 | |
| Maintenance services and additional warranty | 102,110 | 92,838 | |
| Total contract liabilities | 329,884 | 305,084 | |
| Less: non-current liabilities | (61,714) | (38,382) | |
| Total current contract liabilities | 268,170 | 266,702 |
| During 2019, the amount of the Group's contract liabilities which was recorded at the opening balance and have been recognised as revenue was RMB257,892,000 (2018: RMB135,928,000), in which RMB212,246,000 (2018: RMB110,470,000) from automobiles and automobile parts, and RMB45,646,000 (2018: RMB25,458,000) from maintenance services have been recognised in revenue in 2019. |
| 6 | Expenses by nature | |||
| 2019 | 2018 | |||
| Changes in inventories of finished goods and work in progress | 185,846 | (197,140) | ||
| Raw materials and consumables used | 21,393,300 | 21,532,654 | ||
| Employee benefit expense (Note 7) | 2,333,270 | 2,233,351 | ||
| Depreciation of PPE (Note 12, 29) | 969,479 | 925,888 | ||
| Repairs and maintenance expenditure on PPE | 149,051 | 160,692 | ||
| Transportation expenses | 699,933 | 656,297 | ||
| Amortisation of lease prepayment (Note 13, 29) | 16,250 | 15,574 | ||
| Amortisation of intangible assets (Note 15, 29) | 73,930 | 55,737 | ||
| Amortisation of right-of-use assets (Note 14, 29) | 12,770 | — | ||
| Provision of statutory warranty (Note 26) | 383,568 | 291,471 | ||
| Design fees | 578,196 | 469,174 | ||
| Sales promotion expenses | 276,225 | 326,215 | ||
| Advertising and new product planning expenses | 404,920 | 194,932 | ||
| Provision for inventories write-down (Note 19) | 67,041 | 53,651 | ||
| Others | 1,311,889 | 1,407,343 | ||
| Total cost of sales, distribution expenses and administrative expenses | 28,855,668 | 28,125,839 | ||
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 107 -
| 7 | Employee benefit expense | |||
| 2019 | 2018 | |||
| Wages and salaries | 1,665,646 | 1,577,058 | ||
| Social security costs | 240,658 | 225,163 | ||
| Pension costs ? defined contribution plans | 247,078 | 267,737 | ||
| Pension costs ? defined benefit plans (Note 25) | 3,400 | 9,200 | ||
| Others | 176,488 | 154,193 | ||
| 2,333,270 | 2,233,351 | |||
| 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 | ||||
| 2019 | 2018 | ||||
| Government grants (a) | 466,818 | 398,427 | |||
| Net fair value (losses)/ gains on derivative financial instruments | (1,525) | 9,472 | |||
| Net loss on disposal of derivative financial instruments | (9,087) | (7,200) | |||
| Others | 36,095 | 25,979 | |||
| 492,301 | 426,678 | ||||
| (a) | In 2019, the Group received grants of approximately RMB466,818,000 mainly from 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 | ||||
| 2019 | 2018 | ||||
| (a) Finance income | |||||
| Interest income on bank deposits | 193,072 | 169,036 | |||
| Interest income on credit sales | 10,878 | 19,400 | |||
| 203,950 | 188,436 | ||||
| (b) Finance expenses | |||||
| Interest expense on bank loans | (947) | (217) | |||
| Interest for lease liabilities | (1,957) | — | |||
| Bank charges and others | (5,402) | (5,632) | |||
| (8,306) | (5,849) | ||||
| Net finance income | 195,644 | 182,587 | |||
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 108 -
| 10 | Taxation | ||||
| (1) | 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 to2020 (2018: 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: | |||||
| 2019 | 2018 | ||||
| Current tax | 74,962 | 213 | |||
| Deferred tax (Note 18) | (117,789) | (52,407) | |||
| (42,827) | (52,194) | ||||
| 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: | |||||
| 2019 | 2018 | ||||
| Profit before tax | 104,985 | 39,639 | |||
| Tax calculated at tax rates applicable to profits in the respective companies | (18,226) | (29,654) | |||
| Tax concessions | (9) | (69) | |||
| Expenses not deductible for tax purposes | 588 | 561 | |||
| R&D costs deduction | (151,181) | (151,581) | |||
| Income not subject to tax | (984) | (336) | |||
| Effect of different tax rates applied for the periods in which the temporary differences are expected to reverse | 37,703 | 32,929 | |||
| Utilisation of previously temporary differences for which no deferred income tax asset was recognised | (17,341) | - | |||
| Temporary differences for which no deferred income tax asset was recognised | - | 29,948 | |||
| Tax losses for which no deferred income tax asset was recognised | 106,623 | 66,008 | |||
| Tax credit | (42,827) | (52,194) | |||
The tax credit relating to other comprehensive income is as follows:
| 2019 | 2018 | |||||||
| Before tax | Tax credit | After tax | Before tax | Tax credit | After tax | |||
| Actuarial loss on retirement benefit obligations | (1,623) | 406 | (1,217) | (4,590) | 1,148 | (3,442) | ||
| Other comprehensive income | (1,623) | 406 | (1,217) | (4,590) | 1,148 | (3,442) | ||
| Current tax | - | - | ||||||
| Deferred tax (Note 18) | 406 | 1,148 | ||||||
FOR THE YEAR ENDED 31 DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 109 -
| 10 | Taxation (continued) |
| (2) | Value-added tax (“VAT”) |
| Pursuant to the “Notice on policies about deepening the VAT reformation” (Cai Shui [2019] 39) jointly issued by the Ministry of Finance, the State Administration of Taxation and General Administration of Customs, the Group's taxable products sales income applicable VAT rate is 13% from 1 April 2019, while the VAT rate was 16% before then. The VAT rate applicable to the Group's transportation business is 9% from 1 April 2019, while the VAT rate was 10% before then. | |
| (3) | 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. | |||||||
| 2019 | 2018 | ||||||
| Profit attributable to shareholders of the Company | 147,812 | 91,833 | |||||
| Weighted average number of ordinary shares in issue (‘000) | 863,214 | 863,214 | |||||
| Basic earnings per share (RMB) | 0.17 | 0.11 | |||||
| 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 2019. |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 110 -
| 12 | Property, plant and equipment | |||||||
| Buildings | Plant and Machinery | Motor Automobiles | Moulds | Electronic and other equipment | Assets under constructions | Total | ||
| At 1 January 2018 | ||||||||
| 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 31December 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(Note29) | - | (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 | |
| Year ended 31December 2019 | ||||||||
| Opening net book amount | 1,721,755 | 1,712,436 | 148,280 | 724,721 | 1,371,755 | 1,262,345 | 6,941,292 | |
| Additions | - | - | - | - | - | 1,438,059 | 1,438,059 | |
| Transfers | 108,106 | 76,241 | 35,369 | 495,716 | 327,340 | (1,042,772) | - | |
| Disposals | (902) | (5,091) | (2,555) | - | (638) | (10) | (9,196) | |
| Other deductions | - | (6,387) | - | - | (285) | (159,497) | (166,169) | |
| Impairment charge(Note29) | - | (19,164) | (114) | - | (2,615) | - | (21,893) | |
| Depreciation charge (Note 6,29) | (54,239) | (241,534) | (35,027) | (287,690) | (350,989) | - | (969,479) | |
| Closing net book amount | 1,774,720 | 1,516,501 | 145,953 | 932,747 | 1,344,568 | 1,498,125 | 7,212,614 | |
| At 31 December 2019 | ||||||||
| Cost | 2,294,038 | 3,820,738 | 350,351 | 3,030,591 | 3,672,244 | 1,498,816 | 14,666,778 | |
| Accumulated depreciation and impairment | (519,318) | (2,304,237) | (204,398) | (2,097,844) | (2,327,676) | (691) | (7,454,164) | |
| Net book amount | 1,774,720 | 1,516,501 | 145,953 | 932,747 | 1,344,568 | 1,498,125 | 7,212,614 |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 111 -
| 12 | Property, plant and equipment (continued) | |||||||
| For the year ended 31 December 2019, depreciation expense of approximately RMB790,993,000 (2018: RMB761,189,000) has been charged in cost of sales, RMB3,260,000 (2018: RMB3,099,000) in distribution costs and RMB175,226,000 (2018: RMB161,600,000) in administrative expenses. | ||||||||
| (i) | Temporarily idle property, plant and equipment | |||||||
| As at 31 December 2019, property, plant and equipment with book value of approximately RMB6,377,000 (cost of RMB155,508,000) (31 December 2018: book value of approximately RMB2,497,000 (cost of RMB56,727,000)) were temporarily idle due to product process adjustment. The specific analysis is as follows: | ||||||||
| Cost | Accumulated depreciation | Impairment | Net book amount | |||||
| Plant and Machinery | 122,154 | - | (102,459) | - | (15,052) | - | 4,643 | |
| Motor Automobiles | 2,658 | - | (2,171) | - | (120) | - | 367 | |
| Electronic and other equipment | 30,696 | - | (26,676) | - | (2,653) | - | 1,367 | |
| 155,508 | - | (131,306) | - | (17,825) | - | 6,377 | ||
| (ii) | Property, plant and equipment not yet obtained proper certificate | |||||||
| Net book amount | Reasons for not completing proper certificate | ||||
| Buildings | 961,428 | Procedure not yet completed | |||
| (iii) | Impairment assessment on the cash generating unit ("CGU”) | ||||
| The subsidiary of the Company JMCH has incurred accumulated losses which indicates there may be impairment on the long term assets. The management considers JMCH as a CGU to perform the impairment testing. Please refer to note 15 for the testing method and key assumptions. Based on the testing result, no impairment recognised on the property, plant and equipment of JMCH. | |||||
| 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 2019 | 31 December 2018 | ||||
| Opening net book amount | 601,260 | 616,834 | |||
| Additions | 134,685 | - | |||
| Amortisation charge (Note 6,29) | (16,250) | (15,574) | |||
| Closing net book amount | 719,695 | 601,260 | |||
| Cost | 886,310 | 751,626 | |||
| Accumulated amortisation | (166,615) | (150,366) | |||
| Net book amount | 719,695 | 601,260 |
| Amortisation expense was charged in administrative expenses. |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 112 -
| 14 | Leases |
| This note provides information for leases where the group is a lessee. | |
| (i) | Amounts recognised in the balance sheet |
| The balance sheet shows the following amounts relating to leases: |
| 31 December 2019 | 1 January 2019 | |||
| Right-of-use assets | ||||
| Buildings | 36,040 | 23,150 | ||
| Lease liabilities | ||||
| Current | 13,387 | 3,913 | ||
| Non-current | 22,592 | 19,237 | ||
| 35,979 | 23,150 | |||
| The Group has land lease arrangement with Chinese government as disclosed in Note 13. | |
| Additions to the right-of-use assets during the 2019 financial year were RMB25,660,000. | |
| (ii) | Amounts recognised in the statement of profit or loss |
| The statement of profit or loss shows the following amounts relating to leases: |
| Notes | 2019 | 2018 | ||
| Depreciation charge of right-of-use assets | ||||
| Buildings | 12,770 | — |
| Interest expense (included in finance cost) | 9 | 1,957 | — | |
| Expense relating to short-term and low-value assets leases (included in cost of goods sold and distribution expenses) | 6,093 | — |
| The total cash outflow for leases in 2019 was RMB20,881,000. | |
| (iii) | The Group’s leasing activities and how these are accounted for |
| The Group leases various offices, warehouses and apartments. Rental contracts are typically made for fixed periods of 12 months to 5 years without extension or termination options. Lease terms are negotiated on an individual basis. The lease agreements do not impose any covenants in relation to security interests in the leased assets that are held by the lessor. Leased assets are not used as security for borrowing purposes. The Group did not provide any residual value guarantees in relation to lease assets. |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 113 -
| 15 | Intangible assets | ||||||||||||
| Non-patent technology | Software | Goodwill | After-sale management model | Other | Total | ||||||||
| Year ended 31December 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 | |||||||
| Year ended 31December 2019 | |||||||||||||
| Opening net book amount | 179,418 | 63,146 | 3,462 | - | - | 246,026 | |||||||
| Addition | 160,757 | 24,812 | - | - | - | 185,569 | |||||||
| Impairment charge | - | - | (3,462) | - | - | (3,462) | |||||||
| Amortisation charge (Note 6, 29) | (53,500) | (20,430) | - | - | - | (73,930) | |||||||
| Closing net book amount | 286,675 | 67,528 | - | - | - | 354,203 | |||||||
| At 31 December 2019 | |||||||||||||
| Cost | 415,169 | 176,542 | 89,028 | 36,978 | 1,649 | 719,366 | |||||||
| Accumulated amortisation and impairment | (128,494) | (109,014) | (89,028) | (36,978) | (1,649) | (365,163) | |||||||
| Net book amount | 286,675 | 67,528 | - | - | - | 354,203 | |||||||
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 114 -
| 15 | Intangible assets (continued) |
| (i) | For the year ended 31 December 2019, amortisation expense of approximately RMB73,088,000 (2018: RMB54,860,000) was charged in administrative expenses, RMB502,000 (2018: RMB537,000) in cost of sales and RMB340,000 (2018: RMB340,000) in distribution costs. |
| (ii) | Development cost of approximately RMB160,757,000(2018: RMB71,814,000) were capitalised by the Group during the year ended 31 December 2019. |
| (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 CGU: |
| 31 December 2018 | Addition | Impairment | 31 December 2019 | |||||
| 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 2019 are as follows: |
| Item | JMCH | |
| Revenue growth rate | 61% | |
| Sales price growth rate | 0% | |
| Long term growth rate | 3% | |
| Discount rate | 16.50% |
The key assumptions used for calculations in 2018 were 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 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. | |
| The fair value measurement is categorised in level 3 of the fair value hierarchy. |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 115 -
| 16 | Financial instruments by category | |||||
| The Group holds the following financial instruments: | ||||||
| Financial assets | Notes | 31 December 2019 | 31 December 2018 | |||
| Financial assets at amortised cost | ||||||
| Trade receivables | 20 | 2,208,236 | 2,674,650 | |||
| Notes receivables | 20 | 85,816 | 626,509 | |||
| Other receivables | 20 | 83,890 | 84,588 | |||
| Interest receivables | 20 | 32,093 | 37,923 | |||
| Cash and cash equivalents | 21 | 8,937,937 | 7,616,880 | |||
| Financial assets at fair value through other comprehensive income | ||||||
| Notes receivables | 289,044 | 6,246 | ||||
| Financial assets at fair value through profit or loss | ||||||
| Derivative financial instruments | - | 979 | ||||
| 11,637,016 | 11,047,775 | |||||
| Financial liabilities | Notes | 31 December 2019 | 31 December 2018 | ||
| Liabilities at amortised cost | |||||
| Trade and other payables(exclude payroll and welfare payables, other tax payables related) | 27 | 12,292,836 | 11,658,259 | ||
| Borrowings | 24 | 3,655 | 4,044 | ||
| Lease liabilities | 14 | 35,979 | — | ||
| Financial liabilities at fair value through profit or loss | |||||
| Derivative financial instruments | 546 | - | |||
| 12,333,016 | 11,662,303 |
| 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 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 116 -
| 17a | 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 October 2019, the Group has closed XMFJ according to the Board Meeting on 15 October 2019. | ||||||||
| 17b | 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 2019 | 31 December 2018 | |||||||
| Associate | 40,935 | 40,112 | ||||||
| The amount recognised in the consolidated statement of comprehensive income was as follow: | |||||
| 2019 | 2018 | ||||
| Share of profit | 823 | 2,238 | |||
| 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 | ||||
| 2019 | 2018 | ||||
| At beginning of the year | 209,460 | 197,774 | |||
| Profit for the year | 4,298 | 11,686 | |||
| At end of the year | 213,758 | 209,460 | |||
| Interest in associate | 19.15% | 19.15% | |||
| Carrying value | 40,935 | 40,112 | |||
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 117 -
| 18 | Deferred income tax |
| 31 December 2019 | 31 December 2018 | ||||
| Deferred tax assets | 1,128,122 | 926,630 | |||
| Deferred tax liabilities-can be offset | (267,515) | (183,534) | |||
| Deferred tax liabilities-cannot be offset | (25,340) | (26,024) | |||
| Deferred tax assets-net | 860,607 | 743,096 | |||
| Deferred tax liabilities-net | (25,340) | (26,024) |
| The gross movement on the deferred income tax account is as follows: | |||||
| 31 December 2019 | 31 December 2018 | ||||
| At beginning of the year | 717,072 | 663,517 | |||
| Credited to profit or loss(Note 10(i)) | 117,789 | 52,407 | |||
| Credited to other comprehensive income (Note 10(i)) | 406 | 1,148 | |||
| At end of the year | 835,267 | 717,072 | |||
| 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 2018 | 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 | |
| Credited to profit or loss | 22,770 | 135 | 98,327 | 6,688 | 59,704 | 13,462 | 201,086 | |
| Credited to other comprehensive income | - | 406 | - | - | - | - | 406 | |
| At 31 December 2019 | 39,468 | 16,637 | 802,898 | 16,062 | 238,495 | 14,562 | 1,128,122 | |
| Deferred tax liabilities | Amortisation of intangible assets | PPE depreciation | Fair value gains | Others | Total | |
| At 1January2018 | (3,545) | (64,079) | (26,736) | - | (94,360) | |
| Credited/(charged)to profit or loss | (841) | (114,922) | 712 | (147) | (115,198) | |
| At 31 December 2018 | (4,386) | (179,001) | (26,024) | (147) | (209,558) | |
| (Charged)/credited to profit or loss | (2,582) | (81,406) | 684 | 7 | (83,297) | |
| At 31 December 2019 | (6,968) | (260,407) | (25,340) | (140) | (292,855) |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 118 -
| 18 | Deferred income tax (continued) |
| The analysis of deferred tax assets and deferred tax liabilities is as follows: | |||||
| 31 December 2019 | 31 December 2018 | ||||
| Deferred tax assets: | |||||
| –Deferred tax asset to be recovered after more than 12 months | 272,129 | 203,802 | |||
| –Deferred tax asset to be recovered within 12 months | 855,993 | 722,828 | |||
| 1,128,122 | 926,630 | ||||
| 31 December 2019 | 31 December 2018 | ||||
| Deferred tax liabilities: | |||||
| –Deferred tax liabilities to be recovered after more than 12 months | (245,492) | (182,373) | |||
| –Deferred tax liabilities to be recovered within 12 months | (47,363) | (27,185) | |||
| (292,855) | (209,558) |
| Deductible temporary differences and tax losses which no deferred income tax assets were recognised were as follows: |
| 31 December 2019 | 31 December 2018 | ||||
| Deductible temporary differences | 165,068 | 234,433 | |||
| Tax losses | 1,006,172 | 603,033 | |||
| 1,171,240 | 837,466 |
| The expiry years of the tax losses are as follows: |
| 31 December 2019 | 31 December 2018 | ||||
| 2020 | 72,470 | 72,470 | |||
| 2021 | 115,820 | 115,820 | |||
| 2022 | 150,713 | 150,713 | |||
| 2023 | 240,678 | 264,030 | |||
| 2024 | 426,491 | - | |||
| 1,006,172 | 603,033 |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 119 -
| Movement on the provision for inventories write-down is as follows: | |||||
| 31 December 2019 | 31 December 2018 | ||||
| At beginning of the year | (76,815) | (45,130) | |||
| Provision for inventories write-down (Note 29) | (67,041) | (53,651) | |||
| Inventories written off during the year as uncollectible | 60,533 | 21,966 | |||
| At end of the year | (83,323) | (76,815) | |||
| 20 | Trade and other receivables and prepayments | |||
| 31 December 2019 | 31 December 2018 | |||
| Trade receivables | 2,362,311 | 2,696,928 | ||
| Less: Provision for impairment of trade receivables | (154,075) | (22,278) | ||
| Trade receivables – net | 2,208,236 | 2,674,650 | ||
| Notes receivables | 85,816 | 626,509 | ||
| Other receivables | 84,237 | 85,031 | ||
| Less: Provision for impairment of other receivables | (347) | (443) | ||
| Other receivables – net | 83,890 | 84,588 | ||
| Prepayments | 1,311,667 | 1,158,303 | ||
| -Material payment in advance | 517,124 | 525,777 | ||
| -Advance payment of taxes and surcharges | 794,543 | 632,048 | ||
| -Others | - | 478 | ||
| Deductible VAT input tax | 178,883 | 96,311 | ||
| Interest receivables | 32,093 | 37,923 | ||
| 3,900,585 | 4,678,284 | |||
| Refer to Note 32 for details of receivables from related parties. |
| The carrying amounts of trade and other receivables approximate their fair values. |
| 19 | Inventories | ||||
| 31 December 2019 | 31 December 2018 | ||||
| Raw materials | 1,164,301 | 1,553,135 | |||
| Work in progress | 158,083 | 211,490 | |||
| Finished goods | 624,485 | 757,729 | |||
| 1,946,869 | 2,522,354 | ||||
| For the year ended 31 December 2019, the cost of inventories recognised as expenses and included in cost of sales amounted to approximately RMB21,579,146,000 (2018: RMB21,121,474,000). | |||||
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 120 -
| 20 | Trade and other receivables and prepayments (continued) |
| Movement on the provision for impairment of trade and other receivables is as follows: | |||||
| 31 December 2019 | 31 December 2018 | ||||
| At beginning of the year | (22,721) | (21,674) | |||
| Net Provision for receivables impairment (Note 29) | (131,701) | (1,089) | |||
| Receivables written off during the year as uncollectible | - | 42 | |||
| At end of the year | (154,422) | (22,721) | |||
| For the year ended 31 December 2019, the creation of provision for impaired receivables was included in ‘Net expected credit losses on financial assets’ (2018: ‘Net expected credit losses on financial assets’) 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. |
| 21 | Cash and cash equivalents | ||||
| 31 December 2019 | 31 December 2018 | ||||
| Cash at bank and in hand | 6,887,937 | 2,016,859 | |||
| Short-term bank deposits (a) | 2,050,000 | 5,600,021 | |||
| 8,937,937 | 7,616,880 | ||||
| As at 31 December 2019 and 31 December 2018, all bank deposits arein RMB. As at 31 December 2019, the Group had cash of approximately RMB967,750,000 (2018: RMB833,617,000) deposited in Jiangling Motor Group Finance Company (“JMCF”) (Note 32 (ix)). The interest rates range from 0.455%-3.30% per annum (2018: 0.455%-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 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 121 -
| 22 | Share capital | |||||
| Number of shares (thousands) | Tradable shares | Total | ||||
| “A” shares | “B” shares | |||||
| Restricted | Non-restricted | |||||
| 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 | |
| Year ended 31 December 2019 | ||||||
| Balance at 1 January 2019 | 863,214 | 787 | 518,427 | 344,000 | 863,214 | |
| Transfer | - | (36) | 36 | - | - | |
| Balance at 31 December 2019 | 863,214 | 751 | 518,463 | 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, 751,000 shares were still restricted as at 31 December 2019. |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 122 -
| 23 | Other reserves |
| Statutory surplus reserve fund (a) | Reserve fund | Others | Total | ||
| At 1 January 2018 | 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 | |
| Other comprehensive income | |||||
| -Remeasurements of retirement benefit obligation, net of tax | - | - | (1,217) | (1,217) | |
| At 31 December 2019 | 431,607 | 18,627 | (3,979) | 446,255 |
| (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 2018 and 2019. |
| (a) | Bank borrowings of USD524,000 (equivalent to approximately RMB3,655,000 (2018: USD589,000 (equivalent to approximately RMB4,044,000)) were guaranteed by JMCF (Note 32 (iii)). |
| The interest rate of bank borrowings is 1.50% per annum (2018: 1.50%). | |
| The fair value of borrowings approximates their carrying values. |
| 24 | Borrowings | ||||
| 31 December 2019 | 31 December 2018 | ||||
| Current | |||||
| Bank borrowings - guaranteed (a) | 457 | 449 | |||
| Non-current | |||||
| Bank borrowings - guaranteed (a) | 3,198 | 3,595 | |||
| Total borrowings | 3,655 | 4,044 |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 123 -
| The maturity of non-current borrowings is as follows: | |||||
| 31 December 2019 | 31 December 2018 | ||||
| Between 1 and 2 years | 458 | 449 | |||
| Between 2 and 5 years | 1,370 | 1,348 | |||
| Over 5 years | 1,370 | 1,798 | |||
| 3,198 | 3,595 | ||||
| The Group has the following undrawn borrowing facilities: | |||||
| 31 December 2019 | 31 December 2018 | ||||
| Fixed rate | |||||
| - Expiring within one year | 1,989,507 | 2,270,784 | |||
| 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 2019 | 31 December 2018 | ||||
| Present value of defined benefits obligations | 68,441 | 68,020 | |||
| The movement of early retirement and supplemental benefit obligations for the year ended31 December 2019 is as follows: | |||||
| 31 December2019 | 31 December2018 | ||||
| At beginning of the year | 68,020 | 59,184 | |||
| For the year | |||||
| -Current service cost | 1,203 | 1,315 | |||
| -Interest cost | 2,300 | 2,410 | |||
| -Payment | (4,602) | (4,954) | |||
| -Past service cost from the change of plan | (1,523) | 2,386 | |||
| -Actuarial loss | 3,043 | 7,679 | |||
| At end of the year | 68,441 | 68,020 | |||
| Current | 4,756 | 4,595 | |||
| Non-current | 63,685 | 63,425 | |||
| 68,441 | 68,020 | ||||
| The material actuarial assumptions used in valuing these obligations are as follows: | |||||
| (i) Discount rate adopted: 3.5% (2018: 3.5%) | |||||
| (ii) Inflation rate adopted: 2.0% (2018: 2.0%) | |||||
| (iii) The salary and supplemental benefits inflation rate of retiree, early-retiree and employee at post:0% to 6% (2018: 0% to 6% ) | |||||
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 124 -
| Change in assumption | Impact on overall liability | ||
| Discount rate | Increase/decrease by 0.5% | Decrease/increase by 5.6%/6.3% | |
| 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 2019 | 31 December 2018 | ||||
| At beginning of the year | 352,554 | 374,981 | |||
| Charged for the year (Note 6) | 383,568 | 291,471 | |||
| Utilised during the year | (334,487) | (313,898) | |||
| At end of the year | 401,635 | 352,554 | |||
| Analysis of total provisions: | |||||
| 31 December 2019 | 31 December 2018 | ||||
| Non-current | 166,687 | 151,492 | |||
| Current | 234,948 | 201,062 | |||
| 401,635 | 352,554 | ||||
| The above represents thestatutorywarrantyprotectingcustomerfromfaultsthatariseaftertheproducthasbeentransferredtothecustomer. 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 2019, a provision of RMB68,441,000 is sufficient to cover all future retirement-related obligations. | |
| Obligation in respect of retirement benefits of RMB68,441,000 is the present value of the unfunded obligations, of which the current portion amounting to RMB4,756,000 (2018: RMB4,595,000) 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 2019, approximately RMB3,400,000 (2018: RMB9,200,000) were charged in ‘administrative expenses’ and RMB1,623,000 (2018: RMB4,590,000) were charged in other comprehensive income. |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 125 -
| 27 | Trade and other payables | ||||
| 31 December 2019 | 31 December 2018 | ||||
| Notes payables(i) | 31,400 | - | |||
| Trade payables | 8,116,170 | 7,824,908 | |||
| Payroll and welfare payables | 380,791 | 304,322 | |||
| Dividend payables | 6,790 | 6,790 | |||
| Other tax payables related | 153,369 | 233,385 | |||
| Payables of sales rebates | 1,848,584 | 1,714,485 | |||
| Payables of R&D expenses | 1,016,588 | 828,807 | |||
| Others | 1,273,304 | 1,283,269 | |||
| 12,826,996 | 12,195,966 |
| (i) A book value of RMB31,400,000 bank notes payables was pledged by a book value of RBM34,197,000 bank notes received. | |
| Refer to Note 32 for details of amount due to related parties. |
| 28 | Dividends | ||
| A final dividend for 2018 of RMB34,528,560 (RMB0.04 per share) was paid in 2019. | |||
| 29 | Cash generated from operations |
| 2019 | 2018 | |||
| Profit before tax | 104,985 | 39,639 | ||
| Depreciation of PPE (Note 6, 12) | 969,479 | 925,888 | ||
| Amortisation of lease prepayment (Note 6, 13) | 16,250 | 15,574 | ||
| Amortisation of intangible assets (Note 6, 15) | 73,930 | 55,737 | ||
| Amortisation of right-of-use asset | 12,770 | — | ||
| Impairment charges of PPE (Note 12) | 21,893 | 7,143 | ||
| Impairment charges of goodwill (Note 15) | 3,462 | - | ||
| Net provision for receivables impairment (Note 20) | 131,701 | 1,089 | ||
| Provision of inventories (Note 19) | 67,041 | 53,651 | ||
| Loss/(gain)on disposals of PPE | 4,213 | (26,953) | ||
| Finance expenses (Note 9) | 7,420 | 5,111 | ||
| Finance income (Note 9) | (203,950) | (188,436) | ||
| Net foreign exchange transaction loss | 6,138 | 18,921 | ||
| Share of profit from investment accounted for using equity method (Note 17b) | (823) | (2,238) | ||
| Investment gain of finance asset investment | (47,386) | (18,191) | ||
| Investment loss of forwards exchange contracts | 9,087 | 7,200 | ||
| Changes on fair value of forwards exchange contracts | 1,525 | (9,472) | ||
| Net provisions for statutory warranty | 49,081 | (22,427) | ||
| Changes in working capital: | ||||
| - Decrease/(Increase) in inventories | 464,079 | (289,820) | ||
| - Decrease/(Increase) in trade and other receivables | 226,027 | (233,475) | ||
| - Increase/(decrease) in trade and other payables | 821,326 | (347,367) | ||
| - (Decrease)/increase in pensions and other retirement benefits | (1,202) | 4,246 | ||
| Cash generated from operations | 2,737,046 | (4,180) |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 126 -
| 30 | Contingencies |
| At 31 December 2019, 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 2019 | 31 December 2018 | ||||
| Contracted but not provided for: | |||||
| Purchases of buildings, plant and machinery | 701,817 | 1,095,333 |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 127 -
| 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. | |
| In 2019, Jiangling Motor Holdings Co., Ltd. (hereinafter referred to as “JMH”), one of the major shareholders of the Company, divided into two companies, Nanchang Jiangling Investment Co., Ltd. (hereinafter referred to as “JIC”) and Jiangling Motor Holdings Co., Ltd. (JMH as the existing company). After the division, JMH transferred all the shares of the Company to JIC, JIC became the new shareholder of the Company and owns 41.03% of the Company’s shares. JIC, 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 2019. The shareholders of JIC are Chongqing Changan Automobile Corporation Ltd. and JMCG, and both of them hold 50% equity interest of JIC, respectively. | |
| The following is a summary of the significant transactions carried out between the Group, its associates, JMCG and its subsidiaries, JIC 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 2019. |
| For the year ended 31 December 2019, related parties, other than the subsidiary, and their relationship with the Group are as follows: | ||
| Name of related party | Relationship | |
| JMCG | Shareholder of JIC | |
| 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 | |
| Nanchang JMCG Mekra-Lang Vehicle Mirror Co., Ltd. | Associate of JMCG | |
| JMH | Associate of JMCG | |
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | Associate of JMCG | |
| Jiangxi JMCG Specialty Vehicles 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 Specialty Vehicles Sales Corporation, Ltd. | Associate of JMCG | |
| Jiangxi Jiangling Overseas Automobile Sales and Service Co., Ltd. | Associate of JMCG | |
| Jiangxi Lingyun Automobile Industry Technology Co.,Ltd | Associate of JMCG | |
| Jiangxi JMCG Motorhome Co., Ltd. | Associate of JMCG | |
| 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 | |
| Dali Wanfu Vehicle Sales & Service Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Yunan Wanfu Vehicle Sales & Service Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Beijing Beifang Changfu Vehicle Sales & Service Co., Ltd. | Subsidiary of JIC’s shareholder | |
| China Changan Group Hefei Investing Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Chongqing Anfu Vehicle Marketing Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Guizhou Wanfu Vehicle Sales & Service Co., Ltd. | Subsidiary of JIC’s shareholder | |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 128 -
| 32 | Related party transactions (continued) | |
| Chengdu Wanxing Vehicle Sales & Service Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Chongqing Anbo Vehicle Sales Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Beijing Baiwang Changfu Vehicle Sales & Service Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Honghe Wanfu Vehicle Sales & Service Co., Ltd. | Subsidiary of JIC’s shareholder | |
| China Changan Group Tianjin Sales Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Chengdu Wanyou Vehicle Trade & Service Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Chongqing Wanyoulongrui Vehicle Sales & Service Co., Ltd. | Subsidiary of JIC’s shareholder | |
| Changan Ford Automobile Co., Ltd. | Joint venture of Ford | |
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | Subsidiary of JMCG | |
| Jiangling Material Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi JMCG Industry Co., Ltd. | Subsidiary of JMCG | |
| Nanchang Gear Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi Lingrui Recycling Resources Development Corporation | Subsidiary of JMCG | |
| JMCG Property Management Co. | Subsidiary of JMCG | |
| JMCG Jingma Motors Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi Jiangling Chassis Co., Ltd. | Subsidiary of JMCG | |
| Nanchang JMCG Shishun Logistics Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi Lingge Non-ferrous Metal Die-casting Co., Ltd. | Subsidiary of JMCG | |
| Nanchang JMCG Xinchen Auto Component Co., Ltd. | Subsidiary of JMCG | |
| JMCF | Subsidiary of JMCG | |
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | Subsidiary of JMCG | |
| Nanchang Lianda Machinery Co., Ltd. | Subsidiary of JMCG | |
| Jiangling Aowei Automobile Spare Part Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi Biaohong Engine Tappet Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi JMCG Boya brake system Co., Ltd | Subsidiary of JMCG | |
| NC.Gear Forging Factory | Subsidiary of JMCG | |
| Jiangxi JMCG Shangrao Industrial Co., Ltd. | Subsidiary of JMCG | |
| JMCG Jiangxi Engineering Construction Co., Ltd. | Subsidiary of JMCG | |
| Nanchang JMCG Frame Co., Ltd | Subsidiary of JMCG | |
| Jiangling Motor Electricity Vehicle Sales Co.,Ltd | Subsidiary of JMCG | |
| Jiujiang Fuwantong Vehicle Co., Ltd. | Subsidiary of JMCG | |
| Jiangxi Fuxiang Vehicle Co., Ltd. | Subsidiary of JMCG | |
| Yichun Xinfu Vehicle Co., Ltd. | Subsidiary of JMCG | |
| Ji'an Qingyuan District Yongfuda Vehicle Co., Ltd. | Subsidiary of JMCG | |
| 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 Otomotiv Sanayi A.S. | Subsidiary of Ford | |
| Auto Alliance (Thailand) Co., Ltd. | Subsidiary of Ford | |
| Ford Vietnam Limited | Subsidiary of Ford |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 129 -
| 32 | Related party transactions (continued) | |||
| (i) | Purchases and sales of goods, provision and purchases of services | |||
| Purchase of goods | 2019 | 2018 | ||
| Nanchang Baojiang Steel Processing Distribution Co., Ltd. | 809,328 | 922,454 | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 751,248 | 515,419 | ||
| Jiangxi Jiangling Chassis Co., Ltd. | 719,675 | 864,932 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 712,789 | 782,403 | ||
| GETRAG (Jiangxi) Transmission Company | 707,209 | 791,365 | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | 525,146 | 454,604 | ||
| Ford | 485,394 | 623,631 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | 372,578 | 418,722 | ||
| Faurecia Emissions Control Technologies (Nanchang) Co., Ltd. | 313,890 | 195,453 | ||
| Nanchang Unistar Electric & Electronics Co., Ltd. | 245,138 | 298,128 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | 236,929 | 10,097 | ||
| Hanon Systems | 188,064 | 250,486 | ||
| JMCG | 112,289 | 110,093 | ||
| Nanchang JMCG Mekra-Lang Vehicle Mirror Co., Ltd. | 98,454 | 91,976 | ||
| Jiangxi Lingge Non-ferrous Metal Die-casting Co., Ltd. | 67,682 | 63,649 | ||
| Nanchang Lianda Machinery Co., Ltd. | 64,025 | 69,827 | ||
| Nanchang Yinlun Heat-exchanger Co., Ltd. | 63,097 | 53,976 | ||
| JMH | 46,379 | 12,484 | ||
| Ford Otomotiv Sanayi A.S. | 28,954 | 128,341 | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 27,249 | 42,967 | ||
| Jiangling Material Co., Ltd. | 27,155 | 30,399 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | 26,778 | 192,509 | ||
| Jiangling Aowei Automobile Spare Part Co., Ltd. | 23,172 | 26,464 | ||
| Jiangxi JMCG Industry Co., Ltd. | 22,175 | 17,581 | ||
| Auto Alliance (Thailand) Co., Ltd. | 22,015 | 106,035 | ||
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 130 -
| 32 | Related party transactions (continued) | |||
| (i) | Purchases and sales of goods, provision and purchases of services (continued) | |||
| Purchase of goods (continued) | 2019 | 2018 | ||
| Nanchang JMCG Xinchen Auto Component Co., Ltd. | 16,109 | 18,297 | ||
| Jiangxi Lingyun Automobile Industry Technology Co.,Ltd | 13,910 | - | ||
| Jiangxi ISUZU Engine Co., Ltd. | 13,362 | 49,911 | ||
| Nanchang Gear Co., Ltd. | 12,368 | 15,420 | ||
| Jiangxi Lingrui Recycling Resources Development Corporation | 8,692 | 4,378 | ||
| Jiangxi Biaohong Engine Tappet Co., Ltd. | 6,483 | 6,649 | ||
| Jiangxi JMCG Boya brake system Co., Ltd | 6,005 | - | ||
| Changan Ford Automobile Co., Ltd. | 5,574 | 10,993 | ||
| NC.Gear Forging Factory | 3,296 | 13,240 | ||
| Jiangxi JMCG Shangrao Industrial Co., Ltd. | 3,083 | 4,235 | ||
| Nanchang JMCG Skyman Auto Component Co., Ltd. (a) | - | 50,852 | ||
| Others | 150 | 211 | ||
| 6,785,844 | 7,248,181 | |||
| (a) 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 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 131 -
| 32 | Related party transactions (continued) |
| (i) | Purchases and sales of goods, provision and purchases of services (continued) |
| Purchase of services | Natures of transaction | 2019 | 2018 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | Truckage/Transportation | 277,648 | 247,762 | ||
| Ford Global Technologies,LLC | Royalty fee | 239,856 | 186,454 | ||
| Ford | Engineering service and design | 217,224 | 183,983 | ||
| Changan Ford Automobile Co., Ltd. | Channel fee/Design fee/Labor costs | 114,469 | 16,509 | ||
| Ford Otomotiv Sanayi A.S. | Engineering service and design | 49,341 | 42,734 | ||
| Jiangxi JMCG Industry Co., Ltd. | Accommodation fee/dinning fee | 29,240 | 35,249 | ||
| Ford | Secondments costs | 29,161 | 36,965 | ||
| Ford Otomotiv Sanayi A.S. | Royalty fee | 17,862 | 24,868 | ||
| Nanchang Hengou Industry Co., Ltd. | Packing/Truckage | 11,649 | 47,407 | ||
| Ford Motor (China) Co., Ltd. | Regional personnel costs | 8,271 | 9,572 | ||
| JMH | Secondments costs/Labor fee | 8,248 | 2,054 | ||
| Ford Motor Research & Engineering (Nanjing) Co., Ltd. | Regional personnel costs | 7,906 | 3,508 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | Agent business/software cost | 7,683 | 4,431 | ||
| Ford Otomotiv Sanayi A.S. | Secondments costs | 5,829 | 13,396 | ||
| JMCG Jiangxi Engineering Construction Co., Ltd. | Engineering construction and maintenance | 4,683 | 16,830 | ||
| JMCG Property Management Co. | Property management | 2,413 | 2,100 | ||
| Jiangxi JMCG Specialty Vehicles Sales Corporation, Ltd. | Promotion | 2,278 | - | ||
| GETRAG (Jiangxi) Transmission Company | Design fee/Experimental costs | 753 | 9,546 | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | Promotion | - | 6,968 |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 132 -
| 32 | Related party transactions (continued) | ||||
| (i) | Purchases and sales of goods, provision and purchases of services (continued) | ||||
| Purchase of services (continued) | Natures of transaction | 2019 | 2018 | ||
| Faurecia Emissions Control Technologies (Nanchang) Co., Ltd. | Design fee | - | 3,256 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | Promotion | - | 2,304 | ||
| Jiangxi JMCG Motorhome Co., Ltd. | Promotion | - | 1,855 | ||
| Others | 4,413 | 2,667 | |||
| 1,038,927 | 900,418 | ||||
| The Group purchased the service from related parties based on agreement price. |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 133 -
| 32 | Related party transactions (continued) | |||
| (i) | Purchases and sales of goods, provision and purchases of services (continued) | |||
| Sales of goods | 2019 | 2018 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 1,093,234 | 1,228,471 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 142,293 | 94,214 | ||
| Jiangxi JMCG Specialty Vehicles Sales Corporation, Ltd. | 133,144 | 155,313 | ||
| Jiangxi Lingrui Recycling Resources Development Corporation | 81,514 | 69,005 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | 75,666 | 102,068 | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 60,985 | 85,326 | ||
| Jiangxi Jiangling Chassis Co., Ltd. | 51,280 | 74,362 | ||
| Dali Wanfu Vehicle Sales & Service Co., Ltd. | 50,109 | - | ||
| JMCG Jingma Motors Co., Ltd. | 49,619 | 66,197 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | 38,951 | 51,945 | ||
| Yunan Wanfu Vehicle Sales & Service Co., Ltd. | 26,020 | - | ||
| Beijing Beifang Changfu Vehicle Sales & Service Co., Ltd. | 25,576 | - | ||
| China Changan Group Hefei Investing Co., Ltd. | 24,232 | - | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | 23,967 | 671 | ||
| Chongqing Anfu Vehicle Marketing Co., Ltd. | 20,914 | - | ||
| Guizhou Wanfu Vehicle Sales & Service Co., Ltd. | 18,766 | - | ||
| Chengdu Wanxing Vehicle Sales & Service Co., Ltd. | 16,965 | - | ||
| Jiujiang Fuwantong Vehicle Co., Ltd. | 16,960 | - | ||
| Chongqing Anbo Vehicle Sales Co., Ltd. | 16,564 | - | ||
| Beijing Baiwang Changfu Vehicle Sales & Service Co., Ltd. | 9,564 | - | ||
| Jiangxi Jiangling Overseas Automobile Sales and Service Co., Ltd. | 9,235 | 912 | ||
| Nanchang Hengou Industry Co., Ltd. | 8,984 | 28,878 | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 7,689 | 14,071 | ||
| Jiangxi JMCG Yichehang Second-hand Motors Sales Co.,Ltd. (a) | 7,640 | 9,487 | ||
| Honghe Wanfu Vehicle Sales & Service Co., Ltd. | 6,723 | - | ||
| China Changan Group Tianjin Sales Co., Ltd. | 5,758 | - | ||
| Nanchang JMCG Frame Co., Ltd | 4,933 | - | ||
| Jiangxi JMCG Industry Co., Ltd. | 4,386 | 5,537 | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | 4,276 | 5,516 | ||
| Jiangxi Fuxiang Vehicle Co., Ltd. | 4,176 | - | ||
| Yichun Xinfu Vehicle Co., Ltd. | 3,806 | - | ||
| Chengdu Wanyou Vehicle Trade & Service Co., Ltd. | 3,516 | - | ||
| Chongqing Wanyoulongrui Vehicle Sales & Service Co., Ltd. | 3,228 | - | ||
| Ji'an Qingyuan District Yongfuda Vehicle Co., Ltd. | 3,067 | - | ||
| Jiangxi ISUZU Co., Ltd. | 1,768 | 1,806 | ||
| Nanchang Lianda Machinery Co., Ltd. | 1,429 | 1,157 | ||
| JMH | 732 | 35,107 | ||
| JMCG Property Management Co. | 203 | 6,470 | ||
| JMCG Jiangxi Engineering Construction Co., Ltd. | - | 1,974 | ||
| Jiang ling Motor Electricity Vehicle Sales Co.,Ltd | - | 5,139 | ||
| Others | 1,205 | 789 | ||
| 2,059,077 | 2,044,415 | |||
| (a) In July 2019, the Jiangxi JMCG Yichehang Second-hand Motors Sales Co.,Ltd. has not been the Group’s related party | |
| The Group sold goods to related parties, based on agreement price. |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 134 -
| 32 | Related party transactions (continued) |
| (ii) | Rental |
| Rental income | |||||
| Lessee | Category | Rental income of 2019 | Rental income of 2018 | ||
| Jiangling Material Co., Ltd. | Building | 121 | 120 | ||
| Jiangxi ISUZU Co., Ltd. | Building | 53 | - | ||
| GETRAG (Jiangxi) Transmission Company | Building | 8 | 3 | ||
| JMH | Building | 3 | 3 | ||
| 185 | 126 | ||||
| Right of use asset recognized as lessee | |||||
| Lessor | Category | 2019 | 2018 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co.,Ltd. | Building | 5,803 | — | ||
| JMCG | Building | 3,201 | — | ||
| 9,004 | — | ||||
| Interest expense amortised from lease liability as lessee | |||||
| Lessor | Category | 2019 | 2018 | ||
| JMCG | Building | 736 | — | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co.,Ltd. | Building | 177 | — | ||
| 913 | — | ||||
| (iii) | Guarantee |
| As at 31 December 2019, bank loans of USD524,000 (equivalent to approximately RMB3,655,000) (2018: USD589,000 (equivalent to approximately RMB4,044,000)) were guaranteed by JMCF (Note 24). |
| (iv) | Sales ofPPE |
| 2019 | 2018 | |||
| Nanchang JMCG Shishun Logistics Co., Ltd. | 299 | - | ||
| Jiangxi JMCG Industrial Co., Ltd. | 1 | 1 | ||
| 300 | 1 |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 135 -
| 32 | Related party transactions (continued) |
| (v) | Purchase of PPE |
| 2019 | 2018 | |||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 28,497 | 5,548 | ||
| Hanon Systems | 3,821 | |||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 1,200 | 6,424 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | 435 | - | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | - | 677 | ||
| JMH | - | 534 | ||
| 33,953 | 13,183 |
| (vi) | Provide technique sharing |
| 2019 | 2018 | |||
| Ford | 72,282 | - | ||
| Ford Vietnam Limitied | 40,034 | 10,780 | ||
| Ford Motor Research & Engineering (Nanjing) Co., Ltd. | 17,990 | - | ||
| JMH | - | 3,606 | ||
| 130,306 | 14,386 |
| (vii) | Payment for fuel consumption credits |
| 2019 | 2018 | |||
| JMH | 8,747 | 5,911 |
| (viii) | 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 2019, the total remuneration of the key management was approximately RMB10,962,000 (2018: RMB11,591,000). | |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 136 -
| 32 | Related party transactions (continued) |
| (ix) | Interest received from cash deposit in related parties |
| 31 December 2019 | 31 December 2018 | ||||
| JMCF | 12,883 | 17,323 | |||
| In 2019, the interest rates range from 0.455% to 3.30%per annum (2018: 0.455% to 2.25%). | |
| (x) | Balances arising from sales/purchases of goods/services |
| Trade receivables from related parties | 31 December 2019 | 31 December 2018 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 272,986 | 251,236 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | 58,148 | 237 | ||
| Ford | 21,554 | - | ||
| Jiangxi JMCG Specialty Vehicles Sales Corporation, Ltd. | 19,329 | 32,940 | ||
| Jiangxi Jiangling Chassis Co., Ltd. | 13,054 | 9,803 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | 12,767 | - | ||
| Ford Motor Research & Engineering (Nanjing) Co., Ltd. | 9,529 | - | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | 6,279 | - | ||
| Ford Vietnam Limited | 5,980 | 5,104 | ||
| Jiang ling Motor Electricity Vehicle Sales Co.,Ltd | 5,961 | 5,961 | ||
| Nanchang JMCG Frame Co., Ltd | 5,574 | - | ||
| JMCG Jingma Motors Co., Ltd. | 5,563 | 6,162 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 2,132 | - | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 2,128 | 1,899 | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | 1,083 | - | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | - | 5,727 | ||
| Others | 1,359 | 121 | ||
| 443,426 | 319,190 |
| Other receivables from related parties | 31 December 2019 | 31 December 2018 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co.,Ltd. | 35,208 | 35,027 | ||
| Others. | 42 | 11 | ||
| 35,250 | 35,038 |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 137 -
| 32 | Related party transactions (continued) |
| (ix) | Balances arising from sales/purchases of goods/services (continued) |
| Prepayments for purchasing of goods | 31 December 2019 | 31 December 2018 | ||
| Nanchang Baojiang Steel Processing Distribution Co.,Ltd. | 492,605 | 496,146 | ||
| Notes receivables from related parties | 31December2019 | 31December2018 | ||
| JMCG Jingma Motors Co.,Ltd. | - | 41,418 |
| Financial assets at fair value other comprehensive income | 31 December 2019 | 31 December 2018 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 32,000 | — | ||
| JMCG Jingma Motors Co., Ltd. | 17,148 | — | ||
| 49,148 | — |
| Prepayments for construction in progress | 31 December 2019 | 31 December 2018 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | - | 500 |
| Prepayments for mould lease | 31 December 2019 | 31 December 2018 | ||
| Changan Ford Automobile Co., Ltd. | - | 478 |
| Cash deposit in related parties | 31 December 2019 | 31 December 2018 | ||
| JMCF (Note 21) | 967,750 | 833,617 |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 138 -
| 32 | Related party transactions (continued) | |||
| (ix) | Balances arising from sales/purchases of goods/services (continued) | |||
| Trade payables to related parties | 31 December 2019 | 31 December 2018 | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 468,878 | 316,174 | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | 275,328 | 214,139 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 269,635 | 336,126 | ||
| Jiangxi Jiangling Chassis Co., Ltd. | 247,904 | 333,431 | ||
| GETRAG (Jiangxi) Transmission Company | 241,934 | 275,275 | ||
| Ford | 145,686 | 151,749 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | 135,344 | 10,113 | ||
| Nanchang JMCG Liancheng Auto Component Co., Ltd. | 133,716 | 148,483 | ||
| Faurecia Emissions Control Technologies (Nanchang) Co., Ltd. | 127,516 | 58,966 | ||
| Hanon Systems | 86,209 | 91,656 | ||
| Nanchang Unistar Electric & Electronics Co., Ltd. | 81,835 | 96,905 | ||
| Changan Ford Automobile Co., Ltd. | 57,563 | 67,622 | ||
| JMCG | 41,122 | 68,159 | ||
| Nanchang JMCG Mekra-Lang Vehicle Mirror Co., Ltd. | 38,644 | 48,200 | ||
| JMH | 23,805 | 26,349 | ||
| Nanchang Yinlun Heat-exchanger Co., Ltd. | 23,002 | 24,756 | ||
| Jiangxi Lingge Non-ferrous Metal Die-casting Co., Ltd. | 22,459 | 19,850 | ||
| Jiangxi JMCG Specialty Vehicles Co., Ltd. | 20,671 | 138,209 | ||
| Nanchang Lianda Machinery Co., Ltd. | 20,460 | 28,325 | ||
| Jiangling Aowei Automobile Spare Part Co., Ltd. | 14,675 | 14,533 | ||
| Jiangxi JMCG Industry Co., Ltd. | 9,408 | 7,830 | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 8,984 | 28,944 | ||
| Jiangxi ISUZU Engine Co., Ltd. | 5,958 | 9,956 | ||
| Ford Otomotiv Sanayi A.S. | 5,716 | 1,031 | ||
| Jiangxi Lingrui Recycling Resources Development Corporation | 5,038 | 1,736 | ||
| Jiangxi Lingyun Automobile Industry Technology Co.,Ltd | 5,019 | - | ||
| Nanchang JMCG Xinchen Auto Component Co., Ltd. | 3,207 | 6,355 | ||
| Jiangxi JMCG Boya brake system Co., Ltd | 2,918 | - | ||
| Nanchang Gear Co., Ltd. | 2,601 | 6,179 | ||
| Jiangxi Biaohong Engine Tappet Co., Ltd. | 1,983 | 2,037 | ||
| Jiangling Material Co., Ltd. | 1,505 | 1,372 | ||
| Jiangxi JMCG Shangrao Industrial Co., Ltd. | 1,139 | 1,693 | ||
| Auto Alliance (Thailand) Company Limited | 797 | 2,151 | ||
| NC.Gear Forging Factory | 12 | 4,173 | ||
| Others | - | 16 | ||
| 2,530,671 | 2,542,493 | |||
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of RMB unless otherwise stated)
- 139 -
| 32 | Related party transactions (continued) |
| (ix) | I Balances arising from sales/purchases of goods/services (continued) |
| Other payables to related parties | 31 December 2019 | 31 December 2018 | ||
| Ford | 188,390 | 92,310 | ||
| Ford Global Technologies, LLC | 67,275 | 41,203 | ||
| Ford Otomotiv Sanayi A.S. | 47,912 | 115,254 | ||
| Changan Ford Automobile Co., Ltd. | 26,537 | 9,776 | ||
| Jiangxi JMCG Specialty Vehicles Sales Corporation, Ltd. | 25,677 | 31,946 | ||
| Nanchang Jiangling HuaXiang Auto Components Co., Ltd. | 22,080 | 7,222 | ||
| GETRAG (Jiangxi) Transmission Company | 13,132 | 14,216 | ||
| JMCG Jiangxi Engineering Construction Co., Ltd. | 10,408 | 30,166 | ||
| Faurecia Emissions Control Technologies (Nanchang) Co., Ltd. | 7,617 | 13,584 | ||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 6,984 | 6,921 | ||
| Nanchang JMCG Shishun Logistics Co., Ltd. | 6,916 | 7,736 | ||
| Hanon Systems | 4,362 | 45 | ||
| Jiangxi Jiangling Special Purpose Vehicle Co., Ltd. | 4,064 | 1,403 | ||
| Ford Motor (China) Co., Ltd. | 3,326 | 4,803 | ||
| Ford Motor Research & Engineering (Nanjing) Co., Ltd. | 2,519 | 607 | ||
| Jiangxi JMCG Industry Co., Ltd. | 2,503 | 3,504 | ||
| Nanchang Baojiang Steel Processing Distribution Co., Ltd. | 2,087 | 187 | ||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 1,779 | - | ||
| Nanchang Unistar Electric & Electronics Co., Ltd. | 1,327 | - | ||
| Jiangxi Jiangling Lear Interior System Co., Ltd. | 1,207 | 4,612 | ||
| Nanchang JMCG Mekra-Lang Vehicle Mirror Co., Ltd. | 1,062 | 881 | ||
| Jiangxi JMCG Motorhome Co., Ltd. | 481 | 1,905 | ||
| JMH | - | 15,641 | ||
| Nanchang Hengou Industry Co., Ltd. | - | 10,211 | ||
| Others | 2,115 | 2,344 | ||
| 449,760 | 416,477 |
| Contract liability | 31 December 2019 | 31 December 2018 | |||
| Jiangxi Jiangling Group Special Vehicle Co., Ltd. | 2,682 | - | |||
| Yunan Wanfu Vehicle Sales & Service Co., Ltd. | 1,213 | ||||
| Others | 919 | 536 | |||
| 4,814 | 536 |
| Lease liability | 31 December 2019 | 31 December 2018 | |||
| JMCG | 12,673 | — | |||
| Jiangxi Jiangling Motors Imp. & Exp. Co., Ltd. | 2,343 | — | |||
| 15,016 | — |
FOR THE YEAR ENDED 31DECEMBER 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands of RMB unless otherwise stated)
- 140 -
| 32 | Related party transactions (continued) |
| (ix) | Balances arising from sales/purchases of goods/services (continued) |
| Capital commitments | 31 December 2019 | 31 December 2018 | |||
| JMCG Jiangxi Engineering Construction Co., Ltd. | 23,175 | 29,456 |
| 33 | Events after the balance sheet date |
| (i) | Description of profit distribution |
| According to the resolution of the Board of Directors as at 24 March 2020, the board of directors proposed that the Company distribute cash dividends to all shareholders at RMB0.07 per share. Based on the issued shares of 863,214,000, totalled amount of proposed dividend is RMB60,425,000. | |
| (ii) | The assessment of the impact of the Coronavirus Disease 2019 |
| Since the outbreak of Coronavirus Disease 2019 (“COVID-19”) in January 2020, the prevention and control of the COVID-19 has been going on throughout the country. The Group will continue to earnestly implement the requirements on the sufficient of key medical supplies for the supporting of the epidemic prevention and control. | |
| The COVID-19 has certain impacts on the business operation and overall economy in some areas or industries, including in Hubei Province. This may affect the risk of financial instruments and the operation performance of the Group in a degree, and the degree of the impact depends on the situation of the epidemic preventive measures, the duration of the epidemic and the implementation of regulatory policies. | |
| The Group will keep continuous attention on the situation of the COVID-19, assess and react actively to its impacts on the financial position and operating results of the Group. As at the date on which this set of financial statements were authorised for issue, the Group was not aware of any material adverse effects on the financial statements as a result of the COVID-19 outbreak. | |
- 141 -
Chapter XII Catalog on Documents for Reference
1. Originals of 2019 financial statements signed by legal representative and ChiefFinancial Officer.
2. Originals of the Independent Auditor’s Reports signed by Independentaccountants and stamped by the accounting firm.
3. Originals of all the documents and public announcements disclosed innewspapers designated by CSRC in 2019.
4. The Annual Report in the China GAAP.
Board of DirectorsJiangling Motors Corporation, Ltd.March 24, 2020