Jiangling Motors Corporation, Ltd.
2011 Half-year Report
Contents
Section I JMC’s Basic Information .......................................................................2
Section II Share Capital Changes and Main Shareholders ..................................4
Section IV Management Discussion and Analysis ................................................6
Section V Major Events .........................................................................................11
Section VI Financial Statements...........................................................................21
Section VII Catalog on Documents for reference ...............................................76
Important Note: The 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
confirm that the information disclosed herein does not contain false statements,
misrepresentations or major omissions.
Nine Directors shall attend this Board meeting and eight Directors were present.
Director Howard D. Welsh did not attend this meeting, and he authorized Director
Yuan-Ching Chen to represent him at this meeting.
Chairman Wang Xigao, President Yuan-Ching Chen, CFO Michael Joseph Brielmaier
and Chief of Finance Department, Ding Ni, confirm that the Financial Statements in
this Half-year Report are truthful and complete.
The Half-year Financial Statements have not been audited.
All financial data in this report are prepared under International Financial Reporting
Standards (‘IFRS’) unless otherwise specified.
The Half-year Report is prepared in Chinese and English. In the event of any
discrepancy, the Chinese version will prevail.
1
Section I JMC’s Basic Information
I. Brief Introduction
Company name in Chinese: 江铃汽车股份有限公司
Company name in English: Jiangling Motors Corporation, Ltd.
Abbreviation: JMC
Place of listing: Shenzhen Stock Exchange
Share’s name: Jiangling Motors Jiangling B
Share’s code: 000550 200550
JMC’s registered address and head office’s address: 509, Northern Yingbin
Avenue, Nanchang City, Jiangxi Province, P.R.C.
Postcode: 330001
Internet web site: http://www.jmc.com.cn
Legal representative of JMC: Mr. Wang Xigao
Board Secretary: Mr. Wan Hong
Board securities affair representative: Mr. Quan Shi
Contact address: Jiangling Motors Corporation, Ltd., 509, Northern Yingbin Avenue,
Nanchang City, Jiangxi Province, P.R.C.
Telephone: 0791-5266178
Fax: 0791-5232839
E-mail: relations@jmc.com.cn
Persons for financial information disclosure: Mr. Michael Joseph Brielmaier
(Tel: 0791-5266503)
Newspapers for information disclosure: China Securities, Securities Times, Hong
Kong Commercial Daily
Website designated by CSRC for publication of JMC’s Half-year Report:
http://www.cninfo.com.cn
Place for placing Half-year Report: Securities Department, Jiangling Motors
Corporation, Ltd.
Other Information:
1. JMC was registered with Nanchang Municipal Bureau of Industrial & Commercial
Administration on November 28, 1993. The company registration was changed
with Jiangxi Provincial Bureau of Industrial & Commercial Administration on
January 8, 1997, on October 25, 2003, on September 23, 2004, on January 11, 2006
and on June 21, 2007.
2. Business License Registration Number: 002473.
3. Taxation Registration Number:
(State Administration of Taxation) 360108612446943
(Nanchang Local Taxation) 360104612446943
2
II. Operating Highlights
Unit: RMB ’000
At the end of At the end of the Change (%)
reporting period* previous year
Total assets 11,616,231 11,237,715 3.37
Shareholder’s equity Attributable
to the Equity Holders of the 6,520,355 6,127,276 6.42
Company
Share Capital 863,214 863,214 0
Net Assets Per Share Attributable
to the Equity Holders of the 7.55 7.10 6.42
Company (RMB)
Reporting period Same period Change (%)
(2011 first half)* last year*
Revenue 9,221,540 7,675,817 20.14
Operating Profit 1,203,417 1,192,587 0.91
Profit Before Income Tax 1,286,509 1,237,702 3.94
Profit Attributable to the Equity
1,075,018 1,039,512 3.42
Holders of the Company
Basic Earnings Per Share (RMB) 1.25 1.20 3.42
Diluted Earnings Per Share (RMB) 1.25 1.20 3.42
Weighted Average Return on Net Down 3.30
16.13 19.43
Asset Ratio (%) percentage points
Net Cash Generated From
149,377 1,499,490 -90.04
Operating Activities
Net Cash Flow Per Share from
0.17 1.74 -90.04
Operating Activities (RMB)
*Unaudited financial indexes.
Impact of IFRS adjustments on the profit for the period:
Unit: RMB’000
Shareholder’s equity Profit Attributable to
Attributable to the Equity the Equity Holders of
Holders of the Company the Company
June 30, 2011 2011 First Half
As Prepared under the China GAAP** 6,524,048 1,078,711
Adjustment per IFRS:
Staff bonus and welfare fund appropriated
-3,693 -3,693
from net profit of a subsidiary
As Restated in Conformity with IFRS 6,520,355 1,075,018
** Based on the financial statements prepared by JMC under the China GAAP.
3
Section II Share Capital Changes and Main Shareholders
I. Table of the changes of shareholding structure
Before the change Change (+, -) After the change
Proportion Reserve- Proportion
New Bonus
Shares of total converted Others Subtotal Shares of total
shares Shares
shares (%) shares shares (%)
I. Limited tradable - - -
2,905,620 0.34% 1,170 1,170 2,906,790 0.34%
A shares
1.State-owned - - - - -
- - - -
shares
2. State-owned legal - - -
- - - - - -
person shares
3. Other domestic - - -
2,901,000 0.33% - - 2,901,000 0.33%
shares
Including:
Domestic legal 2,781,000 - - -
0.32% - - 2,781,000 0.32%
person shares
Domestic natural - - -
120,000 0.01% - - 120,000 0.01%
person shares
4. Management 4,620 0.01% - - -
1,170 1,170 5,790 0.01%
Shares
II. Unlimited
860,308,380 99.66% -1,170 -1,170 860,307,210 99.66%
tradable shares
1. A shares 516,308,380 59.81% - - - -1,170 -1,170 516,307,210 59.81%
2. B shares 344,000,000 39.85% - - - - - 344,000,000 39.85%
III. Total 863,214,000 100% - - - - - 863,214,000 100%
II. Total shareholders, top ten shareholders, and top ten shareholders holding
unlimited tradable shares
JMC had 21,833 shareholders, including 15,854 A-share holders and 5,979
Total shareholders
B-share holders, as of June 30, 2011.
Top ten shareholders
Shareholding Shares
Shares with
Shareholder Percentage Due to
Shareholder Name Shares Trading
Type （%） Restriction
Mortgage
or Frozen
Jiangling Motor Holding State-owned
41.03 354,176,000 - -
Co., Ltd. (“JMH”) legal person
Ford Motor Company Foreign
30 258,964,200 - -
(‘Ford’) legal person
Shanghai Automotive Co., State-owned
1.51 13,019,610 - -
Ltd. legal person
Bosera Thematic Sector Domestic non
Equity Securities -state-owned 1.51 12,999,900 - -
Investment Fund legal person
Domestic non
National Social Security
-state-owned 1.16 10,030,098 - -
Fund- Portfolio 102
legal person
Dragon Billion China Foreign
1.07 9,202,496 - -
Master Fund legal person
Domestic non
Huaan Tactical Select
-state-owned 0.85 7,374,087 - -
Securities Investment Fund
legal person
Jpmblsa Re Ftif Templeton Foreign 0.54 4,632,763 - -
4
China Fund Gti 5497 legal person
Domestic non
Harvest Stable Open
-state-owned 0.52 4,463,714 - -
Securities Investment Fund
legal person
Domestic non
National Social Security
-state-owned 0.51 4,436,560 - -
Fund- Portfolio 103
legal person
Top ten shareholders holding unlimited tradable shares
Shareholder Name Shares without Trading Restriction Share Type
Jiangling Motor Holding Co., Ltd. 354,176,000 A share
Ford Motor Company 258,964,200 B share
Shanghai Automotive Co., Ltd. 13,019,610 A share
Bosera Thematic Sector Equity Securities
12,999,900 A share
Investment Fund
National Social Security Fund- Portfolio 102 10,030,098 A share
Dragon Billion China Master Fund 9,202,496 B share
Huaan Tactical Select Securities Investment Fund 7,374,087 A share
Jpmblsa Re Ftif Templeton China Fund Gti 5497 4,632,763 B share
Harvest Stable Open Securities Investment Fund 4,463,714 A share
National Social Security Fund- Portfolio 103 4,436,560 A share
Notes on association among above-mentioned Bosera Thematic Sector Equity Securities Investment
shareholders Fund and National Social Security Fund- Portfolio
102 are in custody of Bosera Fund Management Co.,
Ltd.
Section III Directors, Supervisors and Senior Management
I. There was no change in the status of JMC directors, supervisors and senior
management holding JMC shares in the reporting period.
II. Changes of Directors, Supervisors and Senior Management During the Reporting
Period
Directors Changes:
Due to expiration of the three-year term for the sixth Board, the Board was re-elected
in accordance with the regulations of the Articles of Association of JMC.
Per approval of the JMC 2010 Annual Shareholders’ Meeting, Mr. Wang Xigao, Mr.
John Lawler, Mr. Howard D. Welsh, Mr. Yuan-Ching Chen, Ms. Xiong Chunying
and Mr. Cai Yong were elected as directors of JMC, and Mr. Shi Jiansan, Mr. Vincent
Pun Fong Kwan and Ms. Wang Xu were appointed as independent directors on June
23, 2011.
Supervisors Changes:
Due to expiration of the three-year term for the sixth Supervisory Board, the
Supervisory Board was re-elected in accordance with the regulations of the Articles of
Association of JMC.
5
Per approval of the JMC 2010 Annual Shareholders’ Meeting, Mr. Zhu Yi, Mr. Alvin
Qing Liu and Mr. Zhang Jian were elected as supervisors of JMC on June 23, 2011.
Mr. Jin Wenhui and Ms. Xu Lanfeng were elected in the meeting of employee
representatives as members of the new Supervisory Board of JMC in June 2011.
Senior Management changes:
The Board of Directors agreed Mr. Tu Hongfeng’s resignation from Executive Vice
President position due to his retirement at the twelfth session of the sixth Board on
March 31, 2011.
Due to re-election of the Board of Directors, the first session of the new Board was
held on June 23, 2011 and it approved the following resolutions: appointed Mr.
Yuan-Ching Chen as the President of the Company; based on the Chairman’s
nomination, appointed Mr. Wan Hong as the Board Secretary; based on the
President’s nomination, appointed Ms. Xiong Chunying and Ms. Liu Nianfeng as
Executive Vice Presidents, Mr. Michael Joseph Brielmaier as CFO, and Mr. Wan
Hong, Mr. Zhong Wanli, Mr. Zhou Yazhuo, Mr. Li Qing, Mr. Peter Dowding, Mr.
Wan Jianrong, Mr. Zhu Shuixing and Mr. William John Marshall as Vice Presidents.
Section IV Management Discussion and Analysis
I. Operating Results
JMC’s core business is production and sales of light commercial vehicles and related
components. Its major products include JMC series light truck, pickup, SUV and
Transit series commercial vehicles. The Company also produces engines, casting and
other components.
In First Half of 2011, JMC achieved record sales of 105,304 units including 38,261
JMC series light trucks, 37,052 JMC series pickups and SUV, and 29,991 Ford
Transit series commercial vehicles. Total sales volume was up 19% from same period
last year. Total production volume for the First Half was 98,581 units, including
34,837 JMC series light trucks, 35,089 JMC series pickups and SUV, and 28,655
Transits.
Compared with the same period a year ago, JMC series light truck sales volume
increased by 12%, JMC series pickup and SUV sales volume increased 28%, Transit
sales volume increased by 19%. The year-over-year volume improvement was
primarily attributed to share improvement.
In the First Half of 2011, the Company achieved a share of 3.1% of the commercial
vehicle market, an increase of 0.6 percentage points from the same period last year.
JMC has maintained or grown its share of the commercial vehicle segments in which
it participates. JMC light trucks (including pickup) accounted for 7.1% of the light
truck market, increasing by 1.0 point from the same period last year. Transit achieved
21.3% share of the light bus market, up 1.5 points vs. the same period last year. (Data
source for above analysis: China Association of Automobile Manufacturers and the
Company sales records)
6
II. Financial Results
The Table summarizes revenue & cost of goods sold from core business:
Unit: RMB ’000
Turnover Costs in core Gross margin
change from business change change from the
Cost in core Gross Margin
Product Turnover the same from the same same period last
business (%)
period last period last year year (points)
year (%) (%)
I. Vehicles 8,459,434 6,463,287 23.6% 19.2 22.8 -2.3
II. Components 661,816 477,255 27.9% 34.3 32.4 1.1
Total 9,121,250 6,940,542 23.9% 20.2 23.4 -2.0
Involving:
related party 618,693 505,285 18.3% 53.5 66.3 -6.3
transactions
Pricing principle
of related party Market Price
transactions
Details pertaining to core business classified according to region:
Unit: RMB ’000
Turnover change from
Region Turnover the same period last
year (%)
North-east China 448,574 15.4
North China 917,396 24.3
East China 4,505,544 18.4
South China 1,419,644 15.1
Central China 745,437 25.7
North-west China 462,507 39.3
South-west China 622,148 24.1
Revenue in the First Half of 2011 was RMB 9,222 million, up 20% from same period
last year. Under International Financial Reporting Standards, net profits were RMB
1,075 million, up RMB 36 million from same period last year. Higher profit derived
from volume increases was partially offset by the change in construction and
education tax and gross margin reduction from tactical price reductions and raw
material cost increases. Sales tax in the first half of 2011 increased by RMB 131
million, or 100%, from the same period last year, primarily reflecting higher
consumption tax generated from volume growth and the levy of construction and
education taxes. Financial income was RMB 80 million, up 92% from same period
last year, primarily reflecting increase of bank deposits, higher interest rates and
improved investment management.
Cash flow from operations was positive RMB 149 million, reflecting primarily
favorable working capital changes. Cash flow from investing activities was negative
RMB 339 million, primarily due to large capital expenditures in facilities, equipment
7
and tooling. Financing cash flow was negative RMB 25 million, primarily reflecting
repayment of bank loans.
At the end of June 2011, Company cash and cash equivalents totaled RMB
5,598 million, a decrease of RMB 215 million from the end of 2010. The balance of
bank borrowing was RMB 7 million, down RMB 25 million from the end of 2010.
Trade and other receivables at the end of the reporting period increased by RMB 662
million, or 80%, from the end of 2010, primarily reflecting sales increase and
advanced acceptance of bank bill before due time and more dealers choose to settle
with acceptance bill.
Total assets were RMB 11,616 million, up 3% from RMB 11,238 million at year-end
2010. The increase is primarily explained by increase of trade receivable and profit
increase.
Total liabilities were RMB 4,957 million, a decrease of RMB 38 million from at
year-end 2010, primarily reflecting decrease of accounts advanced and accounts
payable vs. the end of 2010.
Shareholder equity, including minority interest, was RMB 6,659 million at June 30,
2011, up RMB 416 million from year-end 2010. This increase is primarily explained
by net profit earned in the reporting period with partial offset by dividend payment
accrual.
III. Operational Challenges and Resolutions
In the First Half of 2011, the Company continued to face new product entry
competition, more stringent regulatory requirement, intensifying cost pressures, and
an industry slowdown. During the reporting period, the Company focused on quality
improvement, new product development and production capacity expansion which
sets the foundation for future growth.
During the reporting period, the Company continued to experience market share
pressure from lower-priced competitors. In response, the Company lowered the price
for selected models. Additionally, proactive marketing plans were initiated to help
generate sales. The Company also accelerated development of second tier markets and
enhanced its customer purchase experience. These actions helped to improve the
Company's overall market share vs. same period in 2010.
To pursue steady growth, the company continues to focus on (1) quality improvement
for all products, (2) tactically increasing media spending and sales promotion that
support both present and new products, (3) reducing component costs and improving
manufacturing efficiency, (4) balancing management of controllable expenses,
including operating, capacity-related, and new product development spending, while
ensuring that the company’s long term development remains consistent with company
objectives, and (5) strengthening corporate governance and application of appropriate
risk assessment and control mechanisms.
The company anticipates continued cost pressures and severe competition, including
raw material prices and labor cost increases, competitive vehicle price reduction, new
vehicle entries in selected market segments, government policy revisions and more
8
stringent regulatory requirements.
The Company continues to leverage previously established processes and work
groups to reduce production costs and eliminate operating waste throughout the
enterprise. Additionally, we are maximizing part sourcing localization and cost
reduction for new products. The company’s management remains focused on (1)
leveraging existing product platforms to generate new revenue streams, (2)
introducing new products to penetrate into new segments, and (3) expanding
production capacity to meet demand. The Company, with the support of our
technology partners, continues to execute major product development and
manufacturing projects approved by the Board. These programs include new Ford and
JMC branded products, gas and diesel engine, and additional capacity in both our
component and vehicle assembly operations. These actions will introduce fully
competitive and profitable products utilizing our enhanced PD testing and
development facilities and will provide incremental manufacturing capacity.
Finally, the company is continuing its efforts to ensure sustainable growth, including
studying opportunities for adding incremental products and expanding export and
OEM sales.
IV. Investment in the Reporting Period
1. In First Half of 2011, JMC did not raise equity funding, nor did it use equity
funding raised in previous years for capital investment.
2. Self funded major projects:
Total
Investment
Investment Investment To Be Planned Job#1
Project Name Committed
Approval Committed Date
(RMB Mils)
(RMB Mils) (RMB Mils)
N350 598.0 560.0 38.0 First Half, 2012
JX4D24 Engine for N350 30.0 18.6 3.4 First Half, 2012
N900 200.0 188.0 12.0 First Half, 2012
Stage IV JX493 Engine N
Series Light Truck 25.2 23.5 1.7 Second Half, 2011
Program
N800 725.0 223.7 471.3 Second Half, 2014
V348 China Stage IV
Heavy Duty Truck 59.0 48.7 - Completed
Program
E802 Engine Program 419.0 97.3 321.7 First Half, 2014
A4 Press Line 384.0 311.4 72.6 Second Half,2011
JX4D24 Engine Phase II 315.0 19.7 295.3 Second Half, 2012
CAL Program 47.1 37.0 4.7 Second Half, 2011
Vehicle storage and Second Half, 2011
35.0 24.5 10.5
delivery facility Phase I
PDM Program 10.5 8.0 2.5 Second Half, 2011
V348 A4 Line Die
10.0 7.4 2.6 First Half, 2012
Modification Program
Stage V and VI
Emissions Facilities 26.6 19.5 0.1 Second Half, 2011
Program
9
Capacity Expansion
566.5 233.6 332.9 First Half, 2013
Program
V348 FVL KD Supply
8.5 3.0 5.5 Second Half, 2011
Program
N351 249.0 10.5 238.5 Second Half, 2013
2.2L Global Puma Engine
30.0 5.1 24.9 Second Half, 2011
4C Localization Program
Casting Plant Melting
Technical Improvement 10.0 4.4 5.6 Second Half, 2011
Program
N330 Program Long
327.0 5.1 321.9 Second Half, 2012
Lead Funding
V348 Transit Emission
Update Program Long 208.1 118.7 89.4 First Half, 2013
Lead Funding
VE83 Transit Emission
7.5 5.6 1.9 Second Half, 2011
Update Program
N800 Long Wheel Base
91.0 6.8 84.2 First Half, 2013
Vehicle Program
Capacity Expansion in
2,133.0 134.2 1,998.8 First Half, 2013
Xiaolan Site
IT Strategy Proposal 45.0 15.0 30.0 Year End, 2012
Xiaolan Site Test Track First Half, 2013
79.6 0.2 79.4
Program
Capacity Expansion Second Half, 2011
33.2 4.6 28.6
Investment
Phase II Investment of Year End, 2012
Vehicle Emission Test 45 0.02 44.98
Lab
PD Center 424.0 - 424.0 First Half, 2013
Self-development Gas Year End, 2012
Engine Program Long 125.0 0.1 124.9
Lead Funding
7,266.8 2,134.2 5,071.9
The Spending will be funded from cash reserves.
V. 2011 Second Half Year Plan
The Company is projecting revenue in the range of RMB 8 to 10 billion for the
Second Half of 2011. Intensified competition resulting from new market entries and
the launch of new models will require increased levels of marketing expense.
Additionally, R&D and capital expenditures are projected to be higher as we progress
with new product programs and capacity expansion actions.
In the Second Half, the Company continues to focus on generating cash and profits,
enhance formulation of new product development strategies, and execute plans for
future growth. Specific actions include:
i. Accelerate efforts to strengthen our brand image by enhancing the Company's
distribution network, including distribution network expansion and improving
customer sales service to improve sales under the softening market
environment.
ii. Implement company-wide cost reduction actions to ensure achievement of
10
budgeted profit targets
iii. Improve N350 SUV sales
iv. Launch N350 Pickup on schedule to further improve company and dealers’
revenue and profits
v. Work with technology partners to execute the N330, N350, N800, JX4D24,
E802 and Capacity Expansion in Xiaolan Site and component operations.
vi. Enhance and execute product and engine cycle plans.
vii. Expand finished vehicle exports and OEM component sales business.
Section V Major Events
I. Status of the Corporate Governance in JMC
During the reporting period, the Company continued to operate its corporate
governance in compliance with the Company Law, the Securities Law, the Code of
Corporate Governance for Listed Companies in China, as well as relevant laws and
regulations. Generally, the actual situation of the corporate governance in JMC meets
the requirements of the laws and regulations promulgated by CSRC.
II. Execution of Profit Distribution Plan
The 2010 Annual Shareholders’ Meeting of the Company approved the 2010 calendar
year profit distribution plan on June 23, 2011. Announcement of 2010 calendar year
dividend distribution was published in China Securities, Securities Times and Hong
Kong Commercial Daily on July 12, 2011, and it has been executed accordingly.
The 2010 calendar year dividend distribution plan was as follows:
Based on the Company’s total share capital of 863,214,000 shares, a cash dividend of
RMB 7.9 (including tax) per 10 shares is to be distributed to shareholders.
Individual shareholders, investment funds, and qualified foreign institutional investors
holding the Company’s A shares will receive an after-tax cash dividend of RMB 7.11
per 10 shares; For other domestic residential enterprises, the Company will not
withhold nor pay the income tax on their behalf, and the taxpayer shall pay the tax in
the place where the income is received.
Domestic individual shareholders and non-resident enterprises holding the Company’s
B share will receive an after-tax cash dividend of RMB 7.11 per 10 shares; For
foreign individual shareholders, the Company will not withhold nor pay the income
tax on their behalf.
The cash dividends on B shares shall be paid in Hong Kong Dollars converted at
HKD1.00 = RMB0.8311, being the middle rate of the exchange rates between HK
dollar and RMB quoted by the People’s Bank of China on the first business day (June
24, 2011) immediately after the relevant resolutions were passed at the Company’s
Shareholders’ Meeting.
11
JMC did not convert capital reserves into share capital in the reporting period.
III. JMC had no major litigation or arbitration issues in the reporting period.
IV. JMC had no major purchase or sale of assets during the reporting period.
V. Major related party transactions
1. Related party transactions for purchase of commodities and services in the
reporting period
(1) JMC purchased certain raw materials, auxiliary materials and components from
related parties. Transactions with half-year value over RMB 15 million are listed
bellow:
Transaction Parties Pricing Settlement Amount As % of Total
Principle Method (RMB ’000) Purchases
Nanchang Bao-jiang Steel Contracted Prepayment
Processing & Distribution price
Co., Ltd. 296,665 4.69
GETRAG (Jiangxi) Contracted 60 days after
Transmission Company price delivery and
invoicing 288,689 4.56
Jiangxi Jiangling Chassis Contracted 60 days after
Company price delivery and
invoicing 276,107 4.36
JMCG Interior Trim Factory Contracted 60 days after
price delivery and
invoicing 268,792 4.25
Ford Contracted D/P
price 190,580 3.01
Jiangling-Lear Interior Trim Contracted 60 days after
Factory price delivery and
invoicing 166,475 2.63
NanchangJMCG Liancheng Contracted 60 days after
Auto Component Co. price delivery and
invoicing 106,210 1.68
Nanchang Jiangling Contracted 60 days after
Huaxiang Auto Components price delivery and
Co. invoicing 95,248 1.51
Visteon Climate Control Contracted 60 days after
(Nanchang) Co., Ltd. price delivery and
invoicing 93,281 1.47
Jiangxi Specialty Vehicles Contracted Monthly Netting
Jiangling Motors Group Co., price off payment of
Ltd. purchased goods 91,823 1.45
JMCG Contracted 60 days after
price delivery and
invoicing 51,209 0.81
Jiangling Material Company Contracted Pay on delivery
price 37,053 0.59
Nanchang Lianda Mechanical Contracted 60 days after 21,657 0.34
12
Co., Ltd. price delivery and
invoicing
Jiangxi JMCG Aowei Auto Contracted 60 days after
Component Co. price delivery and
invoicing 17,498 0.28
Nanchang Jiangling Auto Contracted 60 days after
Component Co. price delivery and
invoicing 16,635 0.26
Jiangling Metal Casting Co. Contracted 60 days after
price delivery and
invoicing 16,285 0.26
Nanchang JMCG Tianren Contracted 60 days after
Auto Component Co. price delivery and
invoicing 16,123 0.25
(2) The sales of products by JMC to related parties with half-year value over RMB
15 million are listed bellow:
Transaction Parties Pricing Settlement Amount As % of Total
Principle Method (RMB’000) Revenue
JMCG Import and Export Co., Contracted Receiving
Ltd. price 40% in
advance and
clearance of 440,058 4.77
the remains
within 30 days
after invoicing
Jiangxi Specialty Vehicles Contracted Monthly 59,412
Jiangling Motors Group Co., price Netting off
Ltd. payment of 0.64
purchased
goods
Jiangxi Jiangling Material Market Monthly
40,108 0.43
Utilization Co., Ltd. price settlement
JMCG Interior Trim Factory Contracted Monthly
price Netting off
payment of 36,855 0.40
purchased
goods
JMH Market 30 days after
33,463 0.36
price invoicing
Nanchang JMCG Liancheng Contracted 75 days after
24,770 0.27
Auto Component Co. price invoicing
Jiangling New-power Auto Contracted 30 days after
16,895 0.18
Manufacturing Co. price invoicing
Nanchang JMCG Trading Co. Contracted Delivery on
16,262 0.18
price payment
In the above mentioned pricing principle, market price means that it is based on the
market price of similar products, and contracted price means that for unique products
or services for which comparable market data is difficult to obtain, prices are
determined through the process of supplier quotation, cost assessment and
13
negotiations.
(3) Management Compensations
Pursuant to revised Personnel Secondment Agreement signed between JMC and Ford
and Ford Affiliates, in the firs half of 2011, the Company should pay US$ 2062.5
thousand and RMB 1170 thousand to Ford as service fee for expatriate secondees and
Chinese secondees assigned by Ford.
Pursuant to an agreement between the Company and JMH on January 1, 2011, in the
first half of 2011, the Company should pay approximately RMB 440,734 to JMH as
service fee for the employees assigned by JMH.
(4) Working Meal
In the first half of 2011, JMC paid RMB 8.93 million for working meal to Jiangxi
JMCG Industrial Company.
(5) Purchasing Agency
JMCG Import & Export Co., Ltd. was the import agent of JMC for acquiring import
materials, equipment and technology services. In the first half of 2011, JMC paid
JMCG Import & Export Co., Ltd. commission of RMB 2.12 million pursuant to the
Exclusive Import Agency Agreement signed by them.
(6) Project Construction and Maintenance
In the first half of 2011, JMC paid RMB 8.59 million for projection construction and
maintenance to JMCG Jiangxi Engineering Construction Co., Ltd.
2. The Company had no major related party transaction concerning transfer of assets
or equity during the reporting period.
3. Creditor’s rights, liabilities and guarantees between JMC and related parties
(1) Balance of accounts due to or due from main related parties with value over RMB
30 million:
Unit: RMB ’000
Item Related Parties Amount Ratio to the
(RMB thousands) Balance of
the Item
Receivables JMCG Import and Export Co., 75,946 18.31
Ltd.
Nanchang Bao-jiang Steel & 274,527 81.51
Prepayment
Processing Distribution Co., Ltd.
Project JMCG Import and Export Co., 31,681 9.41
prepayment Ltd.
Accounts and Jiangxi Specialty Vehicles 159,851 5.17
bills payable Jiangling Motors Group Co., Ltd.
Accounts and 120,396 3.90
Jiangxi Jiangling Chasis Company
bills payable
Accounts and GETRAG (Jiangxi) Transmission 118,681 3.84
bills payable Company
Accounts and Jiangling-Lear Interior Trim 106,141 3.43
bills payable Factory
14
Accounts and 83,349 2.70
JMCG Interior Trim Factory
bills payable
Accounts and Nanchang JMCG Liancheng Auto 72,163 2.34
bills payable Component Co.
Accounts and 61,687 2.00
Ford
bills payable
Accounts and Nanchang Jiangling Huaxiang Auto 59,684 1.93
bills payable Components Co.
Accounts and Visteon Climate Control 50,960 1.65
bills payable (Nanchang) Co., Ltd.
Other 62,074 10.12
Ford
payables
(2) Deposit
On June 30, 2011, JMC had a deposit of RMB 187.61 million in JMCG Finance Co.,
Ltd. JMC received a total of RMB 1.87 million in interest from JMCG Finance Co.,
Ltd. in the first half of 2011.
(3) Guarantees to JMC
As of June 30, 2011, JMCG Finance Co, Ltd provided a guarantee for JMC’s bank
loans of US$ 1.08 million.
4. Other major related party transactions during the first half of 2011
According to the V348 Transit Vehicles Series Technology Licensing Contract
(“V348 TLC”) signed by JMC and Ford as well as Supplemental Agreement to V348
TLC jointly signed by Ford, Ford Global Technologies, LLC., Ford Otosan and JMC,
JMC is to pay licensing fee annually reflecting 2.6% of V348 Transit net sales
revenue. Ford Global Technologies, LLC. shall receive 67.31% of the licensing fee
and Ford Otosan shall receive the reminder 32.69%. JMC bore a licensing fee of US$
4 million (equal to RMB 26.04 million) in the first half of 2011.
According to the Engagement Agreement Concerning China V348 Stage V and MCA
Engineering Services signed by JMC and Ford, JMC is to pay the engineering service
fee of US$ 26.381 million to Ford quarterly and pay off before the first quarter of
2013. JMC bore an engineering service fee of US$ 3190.5 thousand (equal to RMB
20,984 thousand) in the first half of 2011.
According to Ford Puma Technology Licensing Contract signed by JMC and Ford in
2007, JMC is to pay royalty fee of US$ 92 for each of the Engine Products
manufactured by JMC and matched with JMC brand vehicle under the aforesaid
license to Ford. JMC bore a royalty fee of US$ 334,328 (equivalent to approximately
RMB 2,181,914) in the first half of 2011.
VI. There were neither entrustment, contracts or leased assets from other
companies, nor entrustment, contracts or leases of JMC’s assets to other
companies from which profit was generated in excess of 10% of the reporting
period total profit. JMC did not entrust other people with cash asset
management in the reporting period.
VII. Accounting Estimate Change
Starting in June 2011, JMC will adopt a new methodology to adjust its warranty
15
reserve and cost per unit accrual. This will more appropriately reflect JMC’s actual
warranty trend and maintain proper warranty reserve more reasonably, The traditional
way is to fix the warranty reserve on the basis of historical warranty spending trend as
well as the total sales volume while the new methodology is to develop an adequate
reserve-to-spending ratio for reserve review guidelines (Maintain the reserve as a
multiple of the average actual spending cost of past four quarters) and review/adjust
the cost per unit accrual based on the reserve-to-spending ratio.
Under IFRS, the accounting estimate change herein has a negative impact of RMB
64.78 million on provision balance as of the end of June 2011, and correspondingly
has a positive impact of RMB 55.80 million on the profit attributable to the equity
holders of the Company in the first half of 2011.
VIII. Commitments of the Company, shareholder and actual controller
Promisor Content of
Item Implementation of commitments
Commitments
In the reporting period, JMH exercised its
Share reform JMH * commitments sincerely and did not breach
the promise.
Acquisition report or Statement
None N/A
of changes in equity
Major asset restructuring None N/A
Initial Public Offering None N/A
Other commitments None N/A
*JMH, which holds 41.03% of JMC total shares, issued letters of commitment, and
declared and promised the following:
(1) according to the requirements of Rules on Implementing the Full Tradable Share
Reform of the Listed Companies, legal commitments will be fulfilled in
accordance with provisions of the stock exchange laws and regulations;
(2) the promisor ensures that it will compensate losses resulting from partial or
complete non-fulfillment of its promises to other shareholders; and
(3) the promisor will fulfill its commitments faithfully and accept relevant legal
responsibility, and it will not transfer its shares unless the transferee agrees and
accepts liability to undertake the responsibility of the promise.
JMH promises specifically to pay the consideration on behalf of the unlisted-share
holders who oppose the Share Reform or did not express their opinions. The
above-mentioned unlisted-share holders should repay the consideration paid by JMH
and the interest, or obtain written consent from JMH, if they want to list their shares.
IX. Neither the Company nor its directors or senior management were punished by
regulatory authorities in the reporting period.
X. Independent directors’ explanation and independent opinions on the
Company’s account receivables by related parties and the Company’s outside
guarantee
16
Independent Director Shi Jiansan, Vincent Pun Fong Kwan and Wang Xu expressed
their opinions on the Company’s account receivables by related parties as follows:
i. We are aware of the cash flow occurring between the Company and its
controlling shareholders and other related parties, and believe that: cash flow
occurring between the Company and its controlling shareholders and other
related parties resulted from normal business transactions. There was no illegal
embezzlement of company funds;
ii. There is no outside guarantee during the reporting period.
XI. External research and media interviews of the Company
Date Place Communication Object Information discussed
Method and sources offered
January In the Oral Two analysts from JMC Operating
17, 2011 Company Communication Hengtai Securities highlights
Co., Ltd., Value Star
Asset Management
Co., Ltd.
January In the Oral Three analysts from JMC Operating
19, 2011 Company Communication Minsheng Royal Fund highlights
Management Co.,
Ltd., Orient Fund
Management Co.,
Ltd., Great Wall
Securities Co., Ltd.
January In the Oral Two analysts from JMC Operating
26, 2011 Company Communication Everbright Securities highlights
Company Limited,
Shanxi Securities Co.,
Ltd.
February In the Oral Ten analysts from JMC Operating
17, 2011 Company Communication China Securities Co., highlights
Ltd., Changsheng
Fund Management
Co., Ltd., Everbright
Pramerica Fund
Management Co.,
Ltd., Bank of
Communication
Schroders Fund
Management Co.,
Ltd., Galaxy Asset
Management Co.,
Ltd., Taikang Asset
Management Co.,
Ltd., Franklin
Templeton Sealand
Fund Management
Co., Ltd., GF Fund
Management Co.,
Ltd.
February In the Oral An analysts from JMC Operating
18, 2011 Company Communication China Re Asset highlights
Management
Company Ltd.
February In the Oral An analysts from JMC Operating
23, 2011 Company Communication Great Wall Fund highlights
17
Management Co.,
Ltd.
March 4, In the Oral An analysts from JMC Operating
2011 Company Communication China Securities Co., highlights
Ltd.
March 7, In the Oral Two analysts from JMC Operating
2011 Company Communication Shenyin & Wanguo highlights
Securities Co., Ltd,
Yinhua Fund
Management Co.,
Ltd.
March In the Oral Six analysts from JMC Operating
10, 2011 Company Communication Beijing Hongdao highlights
Investment Company,
GF Securities Co.,
Ltd., Huatai Asset
Management Co.,
Ltd., Guotai Junan
Securities Co., Ltd.,
Ping An Insurance
(Group) Company of
China, Ltd.
March In the Oral Five analysts from JMC Operating
16, 2011 Company Communication BOC International highlights
(China) Limited,
Bosera Fund
Management Co.,
Ltd.
March In the Oral An analyst from JMC Operating
17. 2011 Company Communication Nanjing Securities highlights
Co, Ltd.
March In the Oral Two analysts from JMC Operating
29, 2011 Company Communication Taikang Asset highlights
Management Co.,
Ltd.
March In the Oral An analyst from JMC Operating
31, 2011 Company Communication China Merchants highlights
Securities Co., Ltd.
April 12, In the Oral Four analysts from JMC Operating
2011 Company Communication Manulife Teda Fund highlights
Management Co.,
Ltd., Manulife Asset
Management (Hong
Kong) Limited
April 19, In the Oral Two analysts from JMC Operating
2011 Company Communication Everbright Securities highlights
Company Limited,
Shanxi Securities Co.,
Ltd.
April 21, In the Oral An analyst from JMC Operating
2011 Company Communication Huachuang Securities highlights
Co., Ltd.
April 26, In the Oral Three analysts from JMC Operating
2011 Company Communication BNP Paribus highlights
Securities (Asia)
Limited, Goldman
Sachs (Asia)
Company Limited,
18
Capital Research
Company
May 4, In the Oral Three analysts from JMC Operating
2011 Company Communication GF Securities Co., highlights
Ltd., Harvest Fund
Management Co.,
Ltd.
May 10, In the Oral Seven analysts from JMC Operating
2011 Company Communication Xiaoniu Asset highlights
Management Co.,
Ltd., Chongyang
Investment
Management Co.,
Ltd., Invesco Great
Wall Fund
Management Co.,
Ltd., HFT Investment
Management Co.,
Ltd., China Post &
Capital Fund
Management Co.,
Ltd., Sunshine
Insurance Group
Corporation Limited,
China Securities Co.,
Ltd.
May 13, In the Oral Eight analysts from JMC Operating
2011 Company Communication China International highlights
Capital Corporation
Limited, E Fund
Management Co.,
Ltd., New China
Fund Management
Co., Ltd.,
Citic-Prudential Fund
Management Co.,
Ltd., Hualong
Securities Co., Ltd.,
CCB Principal Asset
Management Co.,
Ltd., Fuanda Fund
Management Co.,
Ltd.
May 24, In the Oral An analyst from JMC Operating
2011 Company Communication PICC Asset highlights
Management
Company Limited
June 9, In the Oral An analyst from JMC Operating
2011 Company Communication Galaxy Securities highlights
Co., Ltd.
June 15 In the Oral Five analysts from JMC Operating
Company Communication Bosera Fund highlights
Management Co.,
Ltd., Manulife Teda
Fund Management
Co., Ltd.
June 23, In the Oral Five analysts from JMC Operating
2011 Company Communication China Life Insurance highlights
19
(Group) Company,
GoldenFaith Asset
Management Co.,
Ltd., Greenwoods
Asset Management
Co., Ltd., Essence
Securities Co., Ltd.,
Ping An Insurance
(Group) Company of
China
XII. Establishment and Implementation of Internal Control System
During the reporting period, the Company continuously improves its corporate
governance and internal control in compliance with the Code of Corporate
Governance for Listed Company in China, Basic Standards for Enterprise Internal
Control, Guidance for Enterprise Internal Control, and meet the company’s
operational status. Conclusion drawn from the results of testing conducted by the
Internal Audit Office is that the Company’s Internal Control is effective and no
significant deficiency or frauds have been found. Major internal control work finished
in the first half year of 2011 is as follows:
i. The Internal Audit Office conducted testing on key processes based on the Audit
Work Plan approved by the Audit Committee. Special attention was focused on the
company’s confidentiality system and data security status, and corrective actions were
put into place as planned for the issues identified.
ii. Per JMC’s current scale and revised Company Charter, the Delegation of Executive
Authorities was revised.
XIII JMC did not participate in securities investments nor did it hold equity in other
listed companies during the reporting period.
XIV Indexes for publication of information disclosure
All announcements of the Company are published in China Securities, Securities
Time and Hong Kong Commercial Daily. The website for information disclosure is
http: //www.cninfo.com.cn. The listing of information disclosed in the first half of
2011 is as follows:
1. Production and sales volume information in December 2010 was published on
January 6, 2011.
2. Year 2010 performance flash report was published on January 21, 2011.
3. Production and sales volume information in January 2011 was published on
February 10, 2011.
4. Production and sales volume information in February 2011 was published on
March 3, 2011.
5. Extracts from the 2010 Annual Report and announcements on the relevant
resolutions of the Board of Directors and the Supervisory Board were published
on March 18, 2011.
6. Announcements on the resolutions of the twelfth session of the sixth Board and
related party transaction, production and sales volume information in March 2011
were published on April 2, 2011.
7. 2011 First Quarter Report was published on April 26, 2011.
8. Production and sales volume information in April 2011 was published on May 4,
20
2011.
9. Announcements on the resolutions of the Board of Directors and the Supervisory
Board, Notice on Holding 2010 Annual Shareholders’ Meeting were published on
June 1, 2011.
10. Production and sales volume information in May 2011 was published on June 3,
2011.
11. Supplementary 2010 Annual Report and relevant supplementary announcement
were published on June 4, 2011.
12. Announcement on the resolution of the Supervisory Board was published on June
21, 2011.
13. Announcement on the resolutions of 2010 Annual Shareholders’ Meeting was
published on June 24, 2011.
Section VI Financial Statements
The Half-year Financial Statements have not been audited.
21
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2011
(All amounts in RMB unless otherwise stated)
As at
Note 30 June 2011# 31 December 2010
RMB’000 RMB’000
ASSETS
Non-current assets
Property, plant and equipment 5 2,817,293 2,630,524
Lease prepayment 6 274,608 277,870
Intangible assets 7 25,073 31,302
Investments in associate 8 21,157 17,928
Deferred income tax assets 9 156,609 205,063
3,294,740 3,162,687
Current assets
Inventories 10 1,235,399 1,436,492
Trade and other receivables 11 1,487,791 825,374
Trading financial assets 180 -
Cash and cash equivalents 12 5,598,121 5,813,162
8,321,491 8,075,028
Total assets 11,616,231 11,237,715
EQUITY
Capital and reserves attributable to the
Company’s equity holders
Share capital 13 863,214 863,214
Share premium 816,609 816,609
Other reserves 14 457,650 457,650
Retained earnings 4,382,882 3,989,803
6,520,355 6,127,276
Non-controlling interests 138,701 115,319
Total equity 6,659,056 6,242,595
LIABILITIES
Non-current liabilities
Borrowings 15 6,569 6,939
Retirement benefit obligations 16 47,170 54,569
Warranty provisions 17 135,872 171,789
189,611 233,297
Current liabilities
Trade and other payables 18 4,692,048 4,628,421
Current income tax liabilities 63,004 96,310
Borrowings 15 424 25,004
Retirement benefit obligations 16 12,088 12,088
4,767,564 4,761,823
Total liabilities 4,957,175 4,995,120
Total equity and liabilities 11,616,231 11,237,715
Unaudited financial indexes
The notes on pages 26 to 75 are an integral part of these consolidated financial statements.
22
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2011
(All amounts in RMB unless otherwise stated)
Six months ended 30 June
Note 2011# 2010#
RMB’000 RMB’000
Revenue 19 9,221,540 7,675,817
Sales tax (262,719) (131,399)
Cost of sales 20 (6,992,497) (5,675,348)
Gross profit 1,966,324 1,869,070
Distribution costs 20 (402,393) (381,236)
Administrative expenses 20 (361,193) (291,368)
Other (expense)/income 679 (3,879)
Operating profit 1,203,417 1,192,587
Finance income 22 80,433 42,363
Finance costs 22 (570) (845)
Finance income-net 22 79,863 41,518
Share of profit of associates 8 3,229 3,597
Profit before income tax 1,286,509 1,237,702
Income tax expense 23 (188,109) (182,882)
Profit for the period 1,098,400 1,054,820
Profit attributable to:
Equity holders of the Company 1,075,018 1,039,512
Non-controlling interests 23,382 15,308
1,098,400 1,054,820
Other comprehensive income - -
Total comprehensive income for the period 1,098,400 1,054,820
Total comprehensive income attributable to:
Equity holders of the Company 1,075,018 1,039,512
Non-controlling interests 23,382 15,308
1,098,400 1,054,820
Earnings per share for profit attributable to
the equity holders of the Company
(expressed in RMB per share)
- Basic and diluted 24 1.25 1.20
#Unaudited financial indexes
The notes on pages 26 to 75 are an integral part of these consolidated financial statements.
23
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2011
(All amounts in RMB unless otherwise stated)
Attributable to equity holders of the Company#
Non-
Note Share Share Other Retained controlling Total
capital premium reserves earnings interests# equity#
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January 2010 863,214 816,609 457,650 2,706,474 102,906 4,946,853
Profit for the six months - - 1,039,512 15,308 1,054,820
Dividend relating to 2009 - - (422,975) - (422,975)
Balance at 30 June 2010 863,214 816,609 457,650 3,323,011 118,214 5,578,698
Balance at 1 January 2011 863,214 816,609 457,650 3,989,803 115,319 6,242,595
Profit for the six months - - - 1,075,018 23,382 1,098,400
Dividend relating to 2010 25 - - - (681,939) (681,939)
Balance at 30 June 2011 863,214 816,609 457,650 4,382,882 138,701 6,659,056
#Unaudited financial indexes
The notes on pages 26 to 75 are an integral part of these consolidated financial statements.
24
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
(All amounts in RMB unless otherwise stated)
Six months ended June 30
Note 2011# 2010#
RMB’000 RMB’000
Cash flows from operating activities
Cash generated from operations 26 322,759 1,601,655
Interest paid (422) (711)
Income tax paid (172,960) (101,454)
Net cash generated from operating activities 149,377 1,499,490
Cash flows from investing activities
Purchase of held-to-maturity investments (314,968) -
Purchase of property, plant and equipment (“PPE”) (399,262) (129,580)
Proceeds from disposal of PPE 26 1,239 1,566
Interest received 58,410 31,367
Proceed from repayment of held-to-maturity investments 315,338 -
Net cash used in investing activities (339,243) (96,647)
Cash flows from financing activities
Proceeds from borrowings - 25,019
Repayments of borrowings (24,668) (25,224)
Dividends paid to the Company’s shareholders (276) (65)
Other cash paid relating to financing activities (231) (205)
Net cash used in financing activities (25,175) (475)
Net increase / (decrease) in cash and cash equivalents (215,041) 1,402,368
Cash and cash equivalents at beginning of year 5,813,162 3,913,823
Effects of exchange rate changes - 4
Cash and cash equivalents at end of period 5,598,121 5,316,195
#Unaudited financial indexes
The notes on pages 26 to 75 are an integral part of these consolidated financial statements.
25
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
1 General information
Jiangling Motors Corporation, Ltd. (the “Company”) was established in the People’s Republic
of China (the “PRC”) under the Company Law of the PRC and according to the approval of
Hongban (1992) No. 005 of Nangchang Revolution and Authorization 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 Corporation Group (“JMCG”). The legal representative’s operating
license of the Company is No.002473.
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 30 June 2011, the total issued shares of the Company are 863,214,000 shares, which
are all listed on the Shenzhen Stock Exchange, the PRC.
The Company and its subsidiary (the “Group”) are principally engaged in the development,
manufacturing and selling of automobiles, engines and automobile related parts, dies and
tools.
These consolidated financial statements were authorised for issue by the Board of Directors
on 21 August 2011.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards (“IFRS”). The consolidated financial statements
have been prepared under the historical cost convention except as disclosed in the accounting
policies below.
The preparation of financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the
process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimations are significant to the
consolidated financial statements are disclosed in Note 4.
26
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
Changes in accounting policy and disclosures
(a) New and amended standards adopted by the Group
The following new standards and amendments to standards are mandatory for the first time
for the financial year beginning 1 January 2010.
IFRS 3 (revised), ‘Business combinations’, and consequential amendments to IAS 27,
‘Consolidated and separate financial statements’, IAS 28, ‘Investments in associates’, and
IAS 31, ‘Interests in joint ventures’, are effective prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after 1 July 2009.
The revised standard continues to apply the acquisition method to business combinations
but with some significant changes compared with IFRS 3. For example, all payments to
purchase a business are recorded at fair value at the acquisition date, with contingent
payments classified as debt subsequently re-measured through the statement of
comprehensive income. There is a choice on an acquisition-by-acquisition basis to
measure the non-controlling interest in the acquiree either at fair value or at the
non-controlling interest’s proportionate share of the acquiree’s net assets. All
acquisition-related costs are expensed. IFRS 3 (revised) has had no impact on the current
period.
IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be
recorded in equity if there is no change in control and these transactions will no longer
result in goodwill or gains and losses. The standard also specifies the accounting when
control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain
or loss is recognised in profit or loss. IAS 27 (revised) has had no impact on the current
period, as none of the non-controlling interests have a deficit balance; there have been no
transactions whereby an interest in an entity is retained after the loss of control of that
entity, and there have been no transactions with non-controlling interests.
IAS 17 (amendment), ‘Leases’, deletes specific guidance regarding classification of leases
of land, so as to eliminate inconsistency with the general guidance on lease classification.
As a result, leases of land should be classified as either finance or operating lease using
the general principles of IAS 17, i.e. whether the lease transfers substantially all the risks
and rewards incidental to ownership of an asset to the lessee. Prior to the amendment,
land interest which title is not expected to pass to the Group by the end of the lease term
was classified as operating lease under “Lease prepayment”, and amortised over the lease
term.
(b) New and amended standards, and interpretations mandatory for the first time for the
financial year beginning 1 January 2010 but not currently relevant to the Group (although
they may affect the accounting for future transactions and events)
IFRIC 17, ‘Distribution of non-cash assets to owners’ (effective on or after 1 July 2009).
This interpretation was published in November 2008. This interpretation provides guidance
on accounting for arrangements whereby an entity distributes non-cash assets to
shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been
amended to require that assets are classified as held for distribution only when they are
available for distribution in their present condition and the distribution is highly probable.
27
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
Changes in accounting policy and disclosures (continued)
(b) New and amended standards, and interpretations mandatory for the first time for the
financial year beginning 1 January 2010 but not currently relevant to the Group (although
they may affect the accounting for future transactions and events) (continued)
IFRIC 18, ‘Transfers of assets from customers’, effective for transfer of assets received on
or after 1 July 2009. This interpretation clarifies the requirements of IFRSs for agreements
in which an entity receives from a customer an item of property, plant and equipment that
the entity must then use either to connect the customer to a network or to provide the
customer with ongoing access to a supply of goods or services (such as a supply of
electricity, gas or water). In some cases, the entity receives cash from a customer that
must be used only to acquire or construct the item of property, plant, and equipment in
order to connect the customer to a network or provide the customer with ongoing access to
a supply of goods or services (or to do both).
IFRIC 9, ‘Reassessment of embedded derivatives and IAS 39, Financial instruments:
Recognition and measurement’, effective from 1 July 2009. This amendment to IFRIC 9
requires an entity to assess whether an embedded derivative should be separated from a
host contract when the entity reclassifies a hybrid financial asset out of the ‘fair value
through profit or loss’ category. This assessment is to be made based on circumstances
that existed on the later of the date the entity first became a party to the contract and the
date of any contract amendments that significantly change the cash flows of the contract. If
the entity is unable to make this assessment, the hybrid instrument must remains classified
as at fair value through profit or loss in its entirety.
IFRIC 16, ‘Hedges of a net investment in a foreign operation’, effective from 1 July 2009.
This amendment states that, in a hedge of a net investment in a foreign operation,
qualifying hedging instruments may be held by any entity or entities within the group,
including the foreign operation itself, as long as the designation, documentation and
effectiveness requirements of IAS 39 that relate to a net investment hedge are satisfied. In
particular, the group should clearly document its hedging strategy because of the
possibility of different designations at different levels of the group. IAS 38 (amendment),
‘Intangible assets’, effective from 1 January 2010. The amendment clarifies guidance in
measuring the fair value of an intangible asset acquired in a business combination and
permits the grouping of intangible assets as a single asset if each asset has similar useful
economic lives.
IAS 1 (amendment), ‘Presentation of financial statements’. The amendment clarifies that
the potential settlement of a liability by the issue of equity is not relevant to its classification
as current or non current. By amending the definition of current liability, the amendment
permits a liability to be classified as non-current (provided that the entity has an
unconditional right to defer settlement by transfer of cash or other assets for at least 12
months after the accounting period) notwithstanding the fact that the entity could be
required by the counterparty to settle in shares at any time.
28
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
Changes in accounting policy and disclosures (continued)
(b) New and amended standards, and interpretations mandatory for the first time for the
financial year beginning 1 January 2010 but not currently relevant to the Group (although
they may affect the accounting for future transactions and events) (continued)
IAS 36 (amendment), ‘Impairment of assets’, effective from 1 January 2010. The
amendment clarifies that the largest cash-generating unit (or group of units) to which
goodwill should be allocated for the purposes of impairment testing is an operating
segment, as defined by paragraph 5 of IFRS 8, ‘Operating segments’ (that is, before the
aggregation of segments with similar economic characteristics).
IFRS 2 (amendments), ‘Group cash-settled share-based payment transactions’, effective
form 1 January 2010. In addition to incorporating IFRIC 8, ‘Scope of IFRS 2’, and IFRIC
11, ‘IFRS 2 - Group and treasury share transactions’, the amendments expand on the
guidance in IFRIC 11 to address the classification of group arrangements that were not
covered by that interpretation.
IFRS 5 (amendment), ‘Non-current assets held for sale and discontinued operations’. The
amendment clarifies that IFRS 5 specifies the disclosures required in respect of
non-current assets (or disposal groups) classified as held for sale or discontinued
operations. It also clarifies that the general requirement of IAS 1 still apply, in particular
paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation
uncertainty) of IAS 1.
29
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
Changes in accounting policy and disclosures (continued)
(c) New standards, amendments and interpretations have been issued but are not effective for
the financial year beginning 1 January 2010 and have not been early adopted
The Group’s and the Company’s assessment of the impact of these new standards and
interpretations is set out below.
IFRS 9, ‘Financial instruments’, issued in November 2009. This standard is the first step in
the process to replace IAS 39, ‘Financial instruments: recognition and measurement’. IFRS
9 introduces new requirements for classifying and measuring financial assets and is likely
to affect the Group’s accounting for its financial assets. The standard is not applicable until
1 January 2013 but is available for early adoption. The Group is yet to assess IFRS 9’s full
impact.
Revised IAS 24 (revised), ‘Related party disclosures’, issued in November 2009. It
supersedes IAS 24, ‘Related party disclosures’, issued in 2003. IAS 24 (revised) is
mandatory for periods beginning on or after 1 January 2011. Earlier application, in whole or
in part, is permitted.
The revised standard clarifies and simplifies the definition of a related party and removes
the requirement for government-related entities to disclose details of all transactions with
the government and other government-related entities. The Group will apply the revised
standard from 1 January 2011. When the revised standard is applied, the Group and the
Company will need to disclose any transactions between its subsidiaries and its
associates. The Group is currently putting systems in place to capture the necessary
information. It is, therefore, not possible at this stage to disclose the impact, if any, of the
revised standard on the related party disclosures.
‘Classification of rights issues’ (amendment to IAS 32), issued in October 2009. The
amendment applies to annual periods beginning on or after 1 February 2010. Earlier
application is permitted. The amendment addresses the accounting for rights issues that
are denominated in a currency other than the functional currency of the issuer. Provided
certain conditions are met, such rights issues are now classified as equity regardless of the
currency in which the exercise price is denominated. Previously, these issues had to be
accounted for as derivative liabilities. The amendment applies retrospectively in
accordance with IAS 8 ‘Accounting policies, changes in accounting estimates and errors’.
The Group will apply the amended standard from 1 January 2011.
30
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
Changes in accounting policy and disclosures (continued)
(c) New standards, amendments and interpretations have been issued but are not effective for
the financial year beginning 1 January 2010 and have not been early adopted (continued)
IFRIC - Int 19, ‘Extinguishing financial liabilities with equity instruments’, effective 1 July
2010. The interpretation clarifies the accounting by an entity when the terms of a financial
liability are renegotiated and result in the entity issuing equity instruments to a creditor of
the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a
gain or loss to be recognised in profit or loss, which is measured as the difference between
the carrying amount of the financial liability and the fair value of the equity instruments
issued. If the fair value of the equity instruments issued cannot be reliably measured, the
equity instruments should be measured to reflect the fair value of the financial liability
extinguished. The Group will apply the interpretation from 1 January 2011. It is not
expected to have any impact on the Group or the Company's financial statements.
‘Prepayments of a minimum funding requirement’ (amendments to IFRIC - Int 14). The
amendments correct an unintended consequence of IFRIC - Int 14, ‘IAS 19 – The limit on a
defined benefit asset, minimum funding requirements and their interaction’. Without the
amendments, entities are not permitted to recognise as an asset some voluntary
prepayments for minimum funding contributions. This was not intended when IFRIC - Int 14
was issued, and the amendments correct this. The amendments are effective for annual
periods beginning 1 January 2011. Earlier application is permitted. The amendments
should be applied retrospectively to the earliest comparative period presented. The Group
will apply these amendments for the financial reporting period commencing on 1 January
2011.
2.2 Consolidation
(1) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the
power to govern the financial and operating policies generally accompanying a shareholding
of more than one half of the voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when assessing whether the
Group controls another entity. Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from the date that control
ceases.
31
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.2 Consolidation (continued)
(1) Subsidiaries (continued)
Inter-company transactions, balances and unrealised gains on transactions between group
companies are eliminated. Unrealised losses are also eliminated. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
(2) Associates
Associates are all entities 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 and are
initially recognised at cost. The Group’s investment in associates includes goodwill identified
on acquisition, net of any accumulated impairment loss.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the
income statement, and its share of post-acquisition movements in other comprehensive
income is recognised in other comprehensive income. The cumulative post-acquisition
movements are adjusted against the carrying amount of the investment. When the Group’s
share of losses in an associate equals or exceeds its interest in the associate, including any
other unsecured receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the
extent of the Group’s interest in the associates. Unrealised losses are also 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.
Dilution gains and losses arising in investments in associates are recognised in the income
statement.
2.3 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.
32
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.4 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 the income statement, except when
deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
Foreign exchange gains and losses are presented in the income statement within ‘other
income/(expense)-net’.
Changes in the fair value of monetary securities denominated in foreign currency classified as
available-for-sale are analysed between translation differences resulting from changes in the
amortised cost of the security and other changes in the carrying amount of the security.
Translation differences related to changes in the amortised cost are recognised in profit or
loss, and other changes in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial 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. Translation differences on non-monetary financial assets such as equities classified as
available-for-sale, are included in other comprehensive income.
2.5 Property, plant and equipment
Property, plant and equipment are 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
the income statement 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 vehicles 6-10 years
Moulds 5 years
Electronic and other equipments 5-7 years
33
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.5 Property, plant and equipment (continued)
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 2.8).
Gains and losses on disposals are determined by comparing the proceeds with the carrying
amount and are recognised within ‘other income/(expense) – net’ in the income statement.
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.
2.6 Lease prepayment
Lease prepayment represents upfront prepayment made for the land use rights, and is
expensed in the income statement on a straight line basis over the period of the lease or when
there is impairment, the impairment is expensed in the income statement.
2.7 Intangible assets
(1) 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.
.
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. 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.
No development costs were capitalised by the Group during the year ended 30 June 2011
34
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.7 Intangible assets (continued)
(2) Technical know-how
Technical know-how referred to after-sale management model are initially recorded at costs
incurred to acquire and are amortised over the estimated useful lives of 6 years.
(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.
2.8 Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation
and are tested annually for impairment. Assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable cash flows (cash-generating
units). Non-financial assets other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at each reporting date.
2.9 Financial assets
(1) Classification
The Group classifies its financial assets in the following categories: at fair value through profit
or loss, loans and receivables, held-to-maturity financial assets and available-for-sale. The
classification depends on the purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at initial recognition. As at 30
June 2011, the Group only has loans and receivables which comprise ‘trade and other
receivables’ and cash and cash equivalents in the statement of financial position (Notes 2.13
and 2.14).
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A
financial asset is classified in this category if acquired principally for the purpose of selling in
the short term. Derivatives are also categorised as held for trading unless they are
designated as hedges. Assets in this category are classified as current assets if expected to
be settled within 12 months; otherwise, they are classified as non-current.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are included in current assets, except
for maturities greater than 12 months after the reporting period, which are classified as
non-current assets.
35
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.9 Financial assets (continued)
(1) Classification (continued)
(c) Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable
payments and fixed maturities that the Group’s management has the positive intention and
ability to hold to maturity. If the Group were to sell other than an insignificant amount of
held-to-maturity financial assets, the whole category would be tainted and reclassified as
available for sale. Held-to-maturity financial assets are included in non-current assets, except
for those with maturities less than 12 months from the end of the reporting period, which are
classified as current assets.
(d) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this
category or not classified in any of the other categories. They are included in non-current
assets unless the investment matures or management intends to dispose of it within 12
months of the end of the reporting period.
(2) Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date – the date
on which the Group commits to purchase or sell the asset. Investments are initially recognised
at fair value plus transaction costs for all financial assets not carried at fair value through profit
or loss. Financial assets carried at fair value through profit or loss are initially recognised at
fair value, and transaction costs are expensed in the income statement. Financial assets are
derecognised when the rights to receive cash flows from the investments have expired or
have been transferred and the Group has transferred substantially all risks and rewards of
ownership. Available-for-sale financial assets and financial assets at fair value through profit
or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity
financial assets are subsequently carried at amortised cost using the effective interest method.
Gains or losses arising from changes in the fair value of the ‘financial assets at fair value
through profit or loss’ category are presented in the income statement within ‘other
income/(expense) – net’ in the period in which they arise. Dividend income from financial
assets at fair value through profit or loss is recognised in the income statement as part of
other income when the Group’s right to receive payments is established.
Changes in the fair value of monetary and non-monetary securities classified as available for
sale are recognised in other comprehensive income.
When securities classified as available-for-sale are sold or impaired, the accumulated fair
value adjustments recognised in equity are included in the income statement as ‘gains and
losses from investment securities’.
36
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.9 Financial assets (continued)
(2) Recognition and measurement (continued)
Interest on available-for-sale securities calculated using the effective interest method is
recognised in the income statement as part of other income. Dividends on available-for-sale
equity instruments are recognised in the income statement as part of other income when the
Group’s right to receive payments is established.
2.10 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of
financial position when there is 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.
2.11 Impairment of financial assets
(1) Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence
that a financial asset or group of financial assets is impaired. A financial asset or a group of
financial assets is impaired and impairment losses are incurred only if there is objective
evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial assets that can be
reliably estimated.
The criteria that the Group uses to determine that there is objective evidence of an
impairment loss include:
significant financial difficulty of the issuer or obligor;
a breach of contract, such as a default or delinquency in interest or principal payments;
the Group, for economic or legal reasons relating to the borrower’s financial difficulty,
granting to the borrower a concession that the lender would not otherwise consider;
it becomes probable that the borrower will enter bankruptcy or other financial
reorganisation;
the disappearance of an active market for that financial asset because of financial
difficulties; or
observable data indicating that there is a measurable decrease in the estimated future
cash flows from a portfolio of financial assets since the initial recognition of those assets,
although the decrease cannot yet be identified with the individual financial assets in the
portfolio, including:
(i) adverse changes in the payment status of borrowers in the portfolio;
(ii) national or local economic conditions that correlate with defaults on the assets in the
portfolio.
The Group first assesses whether objective evidence of impairment exists.
37
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.11 Impairment of financial assets (continued)
(1) Assets carried at amortised cost (continued)
For loans and receivables category, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred) discounted at the financial asset’s
original effective interest rate. The carrying amount of the asset is reduced and the amount of
the loss is recognised in the consolidated income statement. If a loan or held-to-maturity
investment has a variable interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate determined under the contract. As a practical expedient,
the Group may measure impairment on the basis of an instrument’s fair value using an
observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised (such as
an improvement in the debtor’s credit rating), the reversal of the previously recognised
impairment loss is recognised in the consolidated income statement.
(2) Assets classified as available-for-sale
The Group assesses at the end of each reporting period whether there is objective evidence
that a financial asset or a group of financial assets is impaired. For debt securities, the Group
uses the criteria refer to (1) above. In the case of equity investments classified as
available-for-sale, a significant or prolonged decline in the fair value of the security below its
cost is also evidence that the assets are impaired. If any such evidence exists for
available-for-sale financial assets, the cumulative loss – measured as the difference between
the acquisition cost and the current fair value, less any impairment loss on that financial
asset previously recognised in profit or loss – is removed from equity and recognised in the
separate consolidated income statement. Impairment losses recognised in the separate
consolidated income statement on equity instruments are not reversed through the separate
consolidated income statement. If, in a subsequent period, the fair value of a debt instrument
classified as available-for-sale increases and the increase can be objectively related to an
event occurring after the impairment loss was recognised in profit or loss, the impairment
loss is reversed through the separate consolidated income statement.
Impairment testing of the investments in subsidiaries or associates is required upon receiving
dividends from these investments if the dividend exceeds the total comprehensive income of
the subsidiary or associate 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.
38
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using
the weighted average cost method. The cost of finished goods and work in progress comprises
raw materials, direct labour, other direct costs and related production overheads (based on
normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated
selling prices in the ordinary course of business, less applicable variable distribution costs.
2.13 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 provision for impairment.
2.14 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, other short-term highly liquid investments with original
maturities of three months or less, and bank overdrafts.
2.15 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.
2.16 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the
ordinary course of business from suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less (or in the normal operating cycle of the business if
longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.
2.17 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 the income statement over the
period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the end of the report period.
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the
period of time that is required to complete and prepare the asset for its intended use. Other
borrowing costs are expensed when incurred.
39
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.18 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the
income statement, 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.
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the PRC. 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.
Deferred income tax is recognised, 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, the deferred income tax is 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 or loss. Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising from investments in
subsidiaries and associates, except for deferred income tax liability where the timing of the
reversal of the temporary difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes
assets and liabilities relate to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention to settle the balances on a
net basis.
2.19 Employee benefits
(1) Pension obligations
The Group contributes on a monthly basis to a defined contribution retirement scheme
managed by the PRC government. The contribution to the scheme is charged to the income
statement as and when incurred. The Group’s obligations are determined at a certain
percentage of the salaries of the employees.
40
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.19 Employee benefits (continued)
(1) Pension obligations (continued)
In addition, the Group provides supplementary pension subsidies to certain qualified
employees. Such supplementary pension subsidies are considered as under defined benefit
plans. The liability recognised in the statement of financial position in respect of these defined
benefit plans is the present value of the defined benefit obligation at the balance sheet date
less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or
losses and past service cost. 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 according to
the terms of the related pension liability. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or credited to the income
statement in the period in which they arise.
(2) Housing fund and other benefits
The Group’s full-time employees are entitled to participate in a state-sponsored housing fund.
The fund can be used by the employees for the purchase of apartment accommodation, or
may be withdrawn upon their retirement. The Group is required to make annual contributions
to the state-sponsored housing fund equivalent to a certain percentage of the employees’
salaries.
(3) Bonus entitlement
The expected cost of bonus payments is recognised as a liability when the Group has a
present legal or constructive obligation as a result of services rendered by employees and a
reliable estimate of the obligation can be made. Liabilities for bonus are expected to be
settled within twelve months and are measured at the amounts expected to be paid when
they are settled.
2.20 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.
41
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.21 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of
goods and services in the ordinary course of the Group’s activities. Revenue is shown net of
value-added tax, returns, rebates and discounts and after elimination sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is
probable that future economic benefits will flow to the entity and specific criteria have been
met for each of the Group’s activities as described below. The Group bases its estimates on
historical results, taking into consideration the type of customer, the type of transaction and the
specifics of each arrangement.
(1) Sales of goods
Revenue from the sale of goods is recognised when significant risks and rewards of ownership
of the goods are transferred to the customer, the customer has accepted the products and
collectability of the related receivables is reasonably assured.
(2) Interest income
Interest income is recognised on a time-proportion basis, taking account of the principal
outstanding and the effective rate over the period to maturity, when it is determined that such
income will accrue to the Group.
(3) Rental income
Rental income is recognised on a straight-line basis over the period of the rental contracts.
2.22 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the income statement on a straight-line
basis over the period of the lease.
2.23 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.
42
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.24 Government grants
Grants from the government are recognised at their fair value where there is a reasonable
assurance that the grant will be received and the Group will comply with all attached
conditions.
Government grants relating to costs are deferred and recognised in the income statement
over the period necessary to match them with the costs they are intended to compensate.
Government grants not relating to future costs are recognised on receipt basis.
Government grants relating to the purchase of property, plant and equipment are included in
non-current liabilities as deferred income and are credited to the income statement on a
straight line basis over the expected lives of the related assets.
3 Financial risk management
3.1 Financial risk factors
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.
Risk management is carried out by Finance Department under policies approved by the Board
of Directors.
(1) Market risk
(a) Foreign exchange risk
The Company operates domestically and is exposed to foreign exchange risk arising from
various currency exposures, primarily with respect to the U.S.dollar.
Management has set up a policy to require the Company to manage their foreign exchange
risk against their functional currency. Foreign exchange risk arises when future commercial
transactions or recognised assets or liabilities are denominated in a currency that is not the
Company’s functional currency.
As at 30 June 2011, if RMB had strengthened/weakened by 10% against U.S.dollar with all
other variable held constant, the Group’s net profit for the six months ended 30 June 2011
would have been approximately RMB8,296,000 higher/lower.
43
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
3 Financial risk management (continued)
3.1 Financial risk factors (continued)
(1) Market risk (continued)
(b) Interest rate risk
The Group’s income and operating cash flows are substantially independent of changes in
market interest rates. As at 30 June 2011, a large portion of its bank deposits 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 30 June 2011, 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 six months ended 30 June 2011 would increase/decrease by approximately
RMB5,161,000.
As at 30 June 2011, if the interest rate of the Group’s bank borrowings had been
increased/decreased by 10% and all other variables were held constant, the Group’s net profit
for the six months ended 30 June 2011 would decrease/increase by approximately
RMB28,000.
(2) Credit risk
The Group’s maximum exposure to credit risk in relation to financial assets is the carrying
amounts of cash and cash equivalents and trade and other receivables.
As at 30 June 2011, the Group had cash deposits of approximately RMB187,611,000 (2010:
RMB167,549,000) placed with Jiangling Motor Group Finance Company (“JMCF”), which is a
non-bank financial institution and a subsidiary of JMCG (Note 12). The Group’s other bank
deposits are deposited in state-owned banks or other listed banks in the PRC. Management
believes all these financial institutions have high credit quality without significant credit risk.
All the Group’s trade and other receivables have no collateral. However, the Group has
policies in place to ensure that sales are made to customers with appropriate credit history
and the Group performs periodic credit evaluations of its customers. The Group assesses the
credit quality of each customer by taking into account its financial position, past experience
and other factors. Credit limit and terms are reviewed on periodic basis, and the financial
department is responsible for such monitoring procedures. In determining whether allowance
for bad and doubtful debts is required, the Group takes into consideration the aging status and
the likelihood of collection. In this regards, the directors of the Company are satisfied that the
risks is minimal as all customers are existing ones or related parties and have no default in the
past and adequate allowance for doubtful debts, if any, has been made in the financial
statements after assessing the collectability of individual debts. Further quantitative
disclosures in respect of the impairment of trade and other receivables are set out in Note 11.
44
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
3 Financial risk management (continued)
3.1 Financial risk factors (continued)
(3) Liquidity risk
Cash flow forecasting is performed in the operating entities of the Group in 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 15) at all times so that
the Group does not breach borrowing limits or covenants (where applicable) on any of its
borrowing facilities.
The table below analyses the Group’s financial liabilities into relevant maturity groupings
based on the remaining period at the balance sheet date to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash flows.
Less than 1 Between 1 and Between 2
year 2 years and 5 years Over 5 years
RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000
At 30 June 2011
Bank borrowings
- Principals 424 424 1,271 4,874
- Interests 103 97 253 439
Trade and other payables 3,703,564 - - -
3,704,091 521 1,524 5,313
At 31 December 2010
Bank borrowings
- Principals 25,004 434 1,301 5,204
- Interests 306 103 268 488
Trade and other payables 4,025,659 - - -
4,050,969 537 1,569 5,692
45
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
3 Financial risk management (continued)
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 30 June 2011 and 31 December 2010 were as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
Total borrowings 6,993 31,943
Total equity 6,659,056 6,242,595
Total capital 6,666,049 6,274,538
Gearing ratio 0.10% 0.51%
3.3 Fair value estimation
The carrying amounts of the Group’s financial assets including cash and cash equivalents,
trade and other receivables and financial liabilities including trade and other payables,
short-term borrowings, approximate their fair values due to their short maturities. The face
values less any estimated credit adjustments for financial assets and liabilities with a maturity
of less than one year are assumed to approximate their fair values.
In assessing the fair value of non-traded financial instruments, the Group uses a variety of
methods and makes assumptions that are based on market conditions existing at the balance
sheet date. The fair value of financial liabilities for disclosure purposes is estimated by
discounting the future contractual cash flows at the current market interest rate available to the
Group for similar financial instruments.
4 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.
46
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
4 Critical accounting estimates and judgements (continued)
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.
(1) Provisions
The Board meeting was held in form of paper meeting from June 24, 2011 to June 30, 2011.
The Board of Directors approved to adjust the warranty cost accrual and relevant reserve
levels.
The Group provides warranties on automobile and undertakes to repair or replace items that
fail to perform satisfactorily based on certain pre-determined conditions. 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.
Because of continuous quality improvement, the group actual spending on warranty per unit is
being reduced. In order to reflect the group’s actual warranty trend more accurately and
maintain a more appropriate warranty reserve, starting in June 2011, the group adopted a new
methodology for its warranty reserve and cost per unit accrual. The traditional way is to
establish the warranty reserve on the basis of historical warranty spending trends as well as
the total sales volume while the new methodology is to develop an adequate
reserve-to-spending ratio for reserve review guidelines (Maintain the reserve as a certain
multiple of the average actual spending cost of past four quarters) and review/adjust the cost
per unit accrual based on the reserve-to-spending ratio.
This new methodology change is recognized as modified prospective approach and will
reduce provision balance RMB 64,776,464, increase profit before tax RMB64,867,115, reduce
deferred income tax assets RMB 9,501,770, increase profit after tax RMB 55,365,345, among
of : Attributes to equity holders of the company is increased RMB 55,795,936, Non-controlling
interests is reduced RMB 430,591.
(2) Pension benefits
The present value of the pension obligations depend on a number of factors that are
determined on an actuarial basis using a number of assumptions. Any changes in these
assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each year. This is the
interest rate that should be used to determine the present value of estimated future cash
outflows expected to be required to settle the pension obligations. In determining the
appropriate discount rate, the Group considers the interest rates of government bonds that are
denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating the terms of the related pension liability.
Other key assumptions for pension obligations are based in part on current market conditions.
Additional information is disclosed in Note 16.
47
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
4 Critical accounting estimates and judgements (continued)
(3) Taxation
The Group is subject to various taxes in the PRC, including corporate income tax, value added
tax and consumption tax. Significant judgment is required in determining the provision for
these taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The Group recognises
liabilities for anticipated tax issues based on estimates of whether additional taxes will be due.
Where the final tax outcome of these matters is different from amounts that were initial
recorded, such differences will impact the tax provisions in the period such determination is
made.
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 30 June 2011, the Group has deferred tax assets in the amount of approximately
RMB156,609,000.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.
48
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
5 Property, plant and equipment
Plant and Motor Electronic and Assets under
Buildings Machinery Vehicles Moulds other equipments constructions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2010
Cost 719,661 2,110,971 75,241 970,431 1,106,927 505,198 5,488,429
Accumulated depreciation and impairment (180,220) (1,327,015) (40,993) (733,220) (715,130) (692) (2,997,270)
Net book amount 539,441 783,956 34,248 237,211 391,797 504,506 2,491,159
Year ended 31 December 2010
Opening net book amount 539,441 783,956 34,248 237,211 391,797 504,506 2,491,159
Additions - - - - 627 447,626 448,253
Transfers 68,687 180,816 19,670 146,134 153,453 (568,760) -
Disposals (1,837) (4,059) (667) - (883) - (7,446)
Other deduction - (821) - - (494) (11,825) (13,140)
Impairment charge - (109) - - (597) - (706)
Depreciation charge (18,230) (97,705) (8,158) (72,874) (90,629) - (287,596)
Closing net book amount 588,061 862,078 45,093 310,471 453,274 371,547 2,630,524
At 31 December 2010
Cost 785,766 2,263,629 89,591 1,109,079 1,229,483 372,239 5,849,787
Accumulated depreciation and impairment (197,705) (1,401,551) (44,498) (798,608) (776,209) (692) (3,219,263)
Net book amount 588,061 862,078 45,093 310,471 453,274 371,547 2,630,524
Six month ended 30 June 2011
Opening net book amount 588,061 862,078 45,093 310,471 453,274 371,547 2,630,524
Additions - - - - 52 345,106 345,158
Transfers 2,981 14,510 3,617 30,684 29,622 (81,414) -
Disposals (21) (344) (370) (233) (519) - (1,487)
Other deduction - - - - - (27) (27)
Impairment charge (Note 20,26) - (533) (73) (171) (228) - (1,005)
Depreciation charge (Note 20,26) (9,591) (51,860) (4,522) (40,445) (49,452) - (155,870)
Closing net book amount 581,430 823,851 43,745 300,306 432,749 635,212 2,817,293
At 30 June 2011
Cost 788,211 2,274,010 90,841 1,133,710 1,238,897 635,904 6,161,573
Accumulated depreciation and impairment (206,781) (1,450,159) (47,096) (833,404) (806,148) (692) (3,344,280)
Net book amount 581,430 823,851 43,745 300,306 432,749 635,212 2,817,293
49
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
5 Property, plant and equipment (continued)
For the six months ended 30 June 2011, depreciation expense of approximately
RMB138,373,000 (the six months ended 30 June 2010: RMB121,975,000) has been charged
in cost of sales, RMB637,000 (the six months ended 30 June 2010: RMB621,000) in distribution
costs and RMB16,860,000 (the six months ended 30 June 2010: RMB17,862,000) in
administrative expenses.
Lease rental expenses amounting to RMB1,703,000 (the six months ended 30 June 2010:
RMB1,915,000) relating to the lease of property are included in the income statement.
6 Lease prepayment
Lease prepayment represents the Group’s interests in land which are held on leases of 50
years. The movement is as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
Opening net book amount 277,870 284,393
Amortisation charge (Note 20,26) (3,262) (6,523)
Closing net book amount 274,608 277,870
Cost 329,863 329,863
Accumulated amortisation (55,255) (51,993)
Net book amount 274,608 277,870
All amortisation expense was charged in administrative expenses.
50
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
7 Intangible assets
After-sale
management
model Software Other Total
RMB’000 RMB’000 RMB’000 RMB’000
Year ended 31 December 2010
Opening net book amount 16,950 14,174 732 31,856
Addition - 10,609 - 10,609
Amortisation charge (6,163) (4,733) (267) (11,163)
Closing net book amount 10,787 20,050 465 31,302
At 31 December 2010
Cost 36,978 30,132 1,600 68,710
Accumulated amortisation (26,191) (10,082) (1,135) (37,408)
Net book amount 10,787 20,050 465 31,302
Six month ended 30 June 2011
Opening net book amount 10,787 20,050 465 31,302
Amortisation charge (Note 20, 26) (3,083) (3,014) (132) (6,229)
Closing net book amount 7,704 17,036 333 25,073
At 30 June 2011
Cost 36,978 30,132 1,600 68,710
Accumulated amortisation (29,274) (13,096) (1,267) (43,637)
Net book amount 7,704 17,036 333 25,073
For the six months ended 30 June 2011, amortisation expense of approximately RMB6,112,000
(the six months ended 30 June 2010: RMB5,213,000) was charged in administrative expenses
and RMB117,000 in distribution costs (the six months ended 30 June 2010: RMB109,000).
51
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
8 Investments in associate
(a) Movement of investment in associate is set out as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
At beginning of the year 17,928 17,292
Share of profit (Note 26) 3,229 7,109
Dividends received - (6,473)
At end of the period 21,157 17,928
In March 1996, the Company entered into a Sino-foreign equity joint venture agreement with
Visteon International Holding Co., Ltd. (“Visteon”) to form Jiangxi Fuchang Climate Systems
Co., Ltd. (“Jiangxi Fuchang”). The tenure of Jiangxi Fuchang is 30 years, and its principal
activities include manufacture and sale of air-conditioners and spare parts for motor vehicles.
On 1 June 2008, Visteon transferred its equity interests of Jiangxi Fuchang to Visteon Motor
Climate Control Holding (Hong Kong) Co., Ltd. (“Visteon Hong Kong”), a subsidiary of
Visteon, and Jiangxi Fuchang was renamed as Visteon Climate Control (Nanchang) Co., Ltd.
(“Visteon Climate Control Nanchang”).
Visteon Climate Control Nanchang has a registered capital of USD5.6 million, of which
Visteon Hong Kong has 80.85% interest and the Company has the remaining 19.15% interest.
As the Company has 2 out of 6 seats in the board, Visteon Climate Control Nanchang is
regarded as a 19.15% owned associate of the Company.
(b) The Group’s share of assets, liabilities, revenue and results of its associates are as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
Total assets 166,622 27,371
Total liabilities (56,144) (9,443)
Net assets 110,478 17,928
Six months ended 30 June
2011 2010
RMB’000 RMB’000
Revenue 121,601 23,420
Profit for the period 16,857 3,597
52
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
9 Deferred income tax assets
Deferred income taxes are calculated in full on temporary differences under the liability
method using applicable tax rate as stated in the following.
As the Company is qualified as a high-tech enterprise and approved by the relevant tax
authorities in 2009, the Company is entitled to a preferential corporate income tax (“CIT”) rate
of 15% from 2009 to 2011.
According to the Notice of Enterprise Income Tax Rate Transition Regulation issued by the
State Council of the PRC, Jiangling Isuzu Motor Corporation, Ltd. (“Jiangling Isuzu”), a
subsidiary of the Company, applied 18% CIT rate in 2008, 20% in 2009, 22% in 2010, 24% in
2011 and 25% in 2012.
30 June 2011 31 December 2010
RMB’000 RMB’000
Deferred tax assets 158,932 206,811
Deferred tax liabilities (2,323) (1,748)
Deferred tax assets (net) 156,609 205,063
The gross movement on the deferred income tax account is as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
At beginning of the year 205,063 134,133
Credited to the income statement
(Note 23) (48,454) 70,930
At end of the period 156,609 205,063
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 Retirement
impairment of benefits Accrued
obligation expenses Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2010 1,672 18,975 91,868 22,648 135,163
Credited/(charged) to
the income statement 66 (3,207) 67,232 7,557 71,648
At 31 December 2010 1,738 15,768 159,100 30,205 206,811
Credited/(charged) to the
income statement 924 (1,290) (42,041) (5,472) (47,879)
At 30 June 2011 2,662 14,478 117,059 24,733 158,932
53
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
.
9 Deferred income tax assets (continued)
Deferred tax liabilities Depreciation of property,
plant and equipment
RMB’000
At 1 January 2010 (1,030)
Charged to the income statement (718)
At 31 December 2010 (1,748)
Charged to the income statement (575)
At 30 June 2011 (2,323)
The amounts shown in the statement of financial position include the followings:
30 June 2011 31 December 2010
RMB’000 RMB’000
Deferred tax assets to be recovered after
more than 12 months 13,295 14,593
Deferred tax assets to be recovered
within 12 months 143,314 190,470
156,609 205,063
10 Inventories
30 June 2011 31 December 2010
RMB’000 RMB’000
Raw materials 751,476 646,192
Work in progress 229,876 144,090
Finished goods 254,047 646,210
1,235,399 1,436,492
For the six months ended 30 June 2011, the cost of inventories recognised as expenses and
included in cost of sales amounted to approximately RMB6,602,012,000 ( the six months
ended 30 June 2010: RMB5,669,783,000 ).
54
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
11 Trade and other receivables
30 June 2011 31 December 2010
RMB’000 RMB’000
Trade receivables 414,816 167,112
Less: Provision for impairment of trade
receivables (2,074) (836)
Trade receivables – net 412,742 166,276
Notes receivables 679,212 316,698
Other receivables 13,290 11,710
Less: Provision for impairment of other
receivables (70) (62)
Other receivables – net 13,220 11,648
Prepayments 336,793 306,114
Interest receivables 45,824 24,638
1,487,791 825,374
Refer to Note 29 for details of receivables from related parties. The carrying amounts of the
Group’s trade and other receivables are denominated in the following currencies:
30 June 2011 31 December 2010
RMB’000 RMB’000
RMB 1,487,002 824,822
UK pound 555 552
AUD 234 -
1,487,791 825,374
The carrying amounts of trade and other receivables approximate their fair values.
As of 30 June 2011, trade and other receivables of approximately RMB2,144,000 (2010:
RMB898,000) were impaired and provided for.
Movement on the provision for impairment of trade and other receivables is as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
At beginning of the year (898) (381)
Provision for of receivables impairment
(Note 20,26) (1,246) (517)
At end of the period (2,144) (898)
As of 30 June 2011, trade receivables of approximately RMB2,265,000 (2010: RM2,431,000)
were past due but not impaired. The aging analysis of these trade receivables is as below:
30 June 2011 31 December 2010
RMB’000 RMB’000
Up to three months 2,265 2,431
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.
55
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
12 Cash and cash equivalents
30 June 2011 31 December 2010
RMB’000 RMB’000
Cash at bank and in hand 749,915 1,558,603
Short-term bank deposits (a) 4,848,206 4,254,559
5,598,121 5,813,162
As at 30 June 2011, the Group had cash deposits of approximately RMB187,611,000 (2010:
RMB167,549,000) placed with JMCF (Note 29 (iii)). The interest rates range from 0.36 % to
3.25% per annum (2010: 0.36% to 1.17%). 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.
13 Share capital
Number of Tradable shares Total
shares “A” shares “B” shares
(thousands) Restricted Non-restricted
RMB’000 RMB’000 RMB’000 RMB’000
Year ended 31 December
2010
Balance at 1 January 2010 863,214 3,242 515,972 344,000 863,214
Transfer - (336) 336 - -
Balance at 31 December
2010 863,214 2,906 516,308 344,000 863,214
The six months ended
30 June 2011
Balance at 1 January 2011 863,214 2,906 516,308 344,000 863,214
Transfer - 1 (1) - -
Balance at 30 June 2011 863,214 2,907 516,307 344,000 863,214
All the “A” and “B” shares are registered, issued and fully paid ordinary shares of RMB1 each.
All the “A” and “B” shares rank pari passu in all respects.
56
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
14 Other reserves
Statutory
surplus reserve Reserve
fund (a) fund Others Total
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2010 431,607 18,627 7,416 457,650
- Profit appropriation - - - -
At 30 June 2011 431,607 18,627 7,416 457,650
(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 shareholders or by increasing the par
value of the shares currently held by them. The fund is non-distributable except for liquidation
situation.
As the balance of the statutory surplus reserve fund has reached 50% of the Company’s share
capital after the above appropriation, there are no further appropriations to the statutory
surplus reserve fund for the six months ended 30 June 2011.
57
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
15 Borrowings
30 June 2011 31 December 2010
RMB’000 RMB’000
Current
Bank borrowings
- secured (a) 424 434
- unsecured - 24,570
424 25,004
Non-current
Bank borrowings - secured (a) 6,569 6,939
Total borrowings 6,993 31,943
(a) Bank borrowings of USD1,080,488 (equivalent to approximately RMB6,993,000) (2010:
USD1,113,231 , equivalent to approximately RMB7,373,000) were guaranteed by JMCF
(Note 29 (v)).
The interest rate of bank borrowings is 1.50% per annum (2010: 1.50% to 4.374%).
The fair value of borrowings approximates their carrying values.
The maturity of non-current borrowings is as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
Between 1 and 2 years 424 434
Between 2 and 5 years 1,271 1,301
Over 5 years 4,874 5,204
6,569 6,939
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
30 June 2011 31 December 2010
RMB’000 RMB’000
RMB - 10,000
US dollar 6,993 21,943
6,993 31,943
The Group has the following undrawn borrowing facilities:
30 June 2011 31 December 2010
RMB’000 RMB’000
Fixed rate
- Expiring within one year 1,913,970 1,979,013
- Expiring beyond one year 800,000 500,000
2,713,970 2,479,013
58
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
16 Retirement benefits obligations
The amount of early retirement and supplemental benefit obligations recognised in the statement
of financial position is as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
Present value of defined benefits obligations
Defined benefit obligations 59,258 69,054
Unrecognised past service cost - (2,397)
Liability on the statement of financial position 59,258 66,657
The movement of early retirement and supplemental benefit obligations for the six months
ended 30 June 2011 is as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
At beginning of the year 66,657 84,023
For the year
-Current service cost - 502
-Interest cost - 3,184
-Payment (7,399) (13,870)
-Past service cost - 39
-Actuarial (gain)/loss - (7,221)
At end of the period 59,258 66,657
Current 12,088 12,088
Non-current 47,170 54,569
59,258 66,657
The material actuarial assumptions used in valuing these obligations are as follows:
(1) Discount rate adopted: 4.25% (2010: 4.25%)
(2) The salary and supplemental benefits inflation rate of retiree, early-retiree and employee at
post: 0% to 5% (2010: 0% to 5%)
(3) Mortality: average life expectancy of residents in the PRC
Based on the assessment and IAS 19, the Group estimated that, as at 30 June 2011, a
provision of RMB59,258,000 is sufficient to cover all future retirement-related obligations.
Obligation in respect of retirement benefits of RMB59,258,000 is the present value of the
unfunded obligations, of which the current portion amounting to RMB12,088,000 (2010:
RMB12,088,000) has been included under current liabilities.
The sensitivity of the overall pension liability to changes in the weighted principal assumptions is:
Change in assumption Impact on overall liability
Discount rate Increase/decrease by 0.5% Decrease/increase by 3.29%/3.59%
Inflation rate Increase/decrease by 0.5% Increase/decrease by 1.14%/1.00%
Rate of mortality Increase/decrease by 1 year Decrease/increase by 0.99%/0.64%
59
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
17 Warranty provisions
The movement on the warranty provisions is as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
At beginning of the year 171,789 122,361
Charged for the period (Note 20) 26,266 163,037
Utilised during the period (62,184) (113,609)
At end of the period 135,871 171,789
The above represents the warranty costs for repairs and maintenance, which are estimated
based on a certain multiple of the average actual spending cost of past four quarters. The
warranty period of commercial vehicles is the lesser of 2 years and 50,000 kilometers since the
motor vehicles are sold to consumer; the warranty period of passenger vehicles is the lesser of
3 years and 60,000 kilometers since the motor vehicles are sold to consumer.
18 Trade and other payables
30 June 2011 31 December 2010
RMB’000 RMB’000
Trade payables 3,090,050 3,117,732
Payroll and welfare payable 154,829 157,510
Dividend payables 688,767 6,934
Other payables 758,402 1,346,245
4,692,048 4,628,421
Refer to Note 29 for details of amount due to related parties.
19 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.
60
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
20 Expenses by nature
Six months ended 30 June
2011 2010
RMB’000 RMB’000
Changes in inventories of finished goods and work
in progress 299,238 170,274
Raw materials and consumables used 6,302,774 5,190,020
Employee benefit expenses (Note 21) 457,706 359,886
Depreciation on property, plant and equipment
(Note 5,26) 155,870 140,458
Impairment charges of property, plant and
equipment (Note 5,26) 1,005 -
Repairs and maintenance expenditure on
property, plant and equipment 29,789 27,131
Research and development expenditure 208,618 163,294
Amortisation of lease prepayment (Note 6,26) 3,262 3,262
Amortisation of intangible assets (Note 7,26) 6,229 5,322
Write-down /（Reversal）of inventories (Note 26) 7,521 (171)
Provision for receivables impairment (Note
11,26) 1,246 1,192
Provision of warranty (Note 17) 26,266 72,377
Others 256,559 214,907
Total cost of sales, distribution costs and
administrative expenses 7,756,083 6,347,952
21 Employee benefit expenses
Six months ended 30 June
2011 2010
RMB’000 RMB’000
Wages and salaries 342,819 295,094
Social security costs 32,628 17,306
Pension costs defined contribution plans 57,580 26,150
Pension costs defined benefit plan (Note 16) - -
Others 24,679 21,336
457,706 359,886
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.
61
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
22 Finance income and cost
Six months ended 30 June
2011 2010
RMB’000 RMB’000
(a) Finance income
Interest income on bank deposits 62,185 39,721
Interest income on credit sales 18,248 2,642
80,433 42,363
(b) Finance cost
Interest expense on bank loans (339) (640)
Bank charges (231) (205)
(570) (845)
Net finance income 79,863 41,518
23 Taxation
(a) CIT
The Group applicable tax rate was stated in Note 9. For the six months ended 30 June 2011,
the applicable CIT rates of the Company and its subsidiary are 15% and 24% respectively.
The amounts of income tax expense charged to the income statement represented:
Six months ended 30 June
2011 2010
RMB’000 RMB’000
Current tax (139,655) (186,582)
Deferred tax (Note 9) (48,454) 3,700
(188,109) (182,882)
62
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
23 Taxation (continued)
(a) CIT (continued)
The difference between the actual income tax charge in the income statement and the
amounts which result from applying the enacted tax rate to profit before income tax can be
reconciled as follows:
Six months ended 30 June
2011 2010
RMB’000 RMB’000
Profit before tax 1,286,509 1,237,702
Tax calculated at a tax rate of 15% (2010: 15%) (192,976) (185,655)
Company which is subject to different tax rate (11,170) (5,538)
Tax concessions 257 225
Expense not deductible for tax purposes (1,716) (1,022)
Income not subject to tax 17,483 9,172
Effect of different tax rates applied for the periods
in which the temporary differences are
expected to reverse 13 (64)
Tax charge (188,109) (182,882)
(b) Value-added tax (“VAT”)
Output VAT is levied at a general rate of 17% on the selling price of goods. Input VAT paid
on purchase of goods and equipment can be used to offset the output VAT to determine the
net VAT payable.
(c) Consumption Tax (“CT”)
The Group’s automobile sale is subject to CT at 5% on the selling price of goods.
24 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the
Company by the weighted average number of ordinary shares in issue during the six months
ended 30 June 2011.
Six months ended 30 June
2011 2010
Profit attributable to equity holders of the
Company (RMB ‘000) 1,075,018 1,039,512
Weighted average number of ordinary shares in
issue (thousands) 863,214 863,214
Basic earnings per share 1.25 1.20
Diluted earnings per share equals to basic earnings per share as there were no dilutive
potential ordinary shares outstanding during the six months ended 30 June 2011.
63
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
25 Dividends
A final dividend for 2010, amounting to a total dividend of RMB681,939,060 has been
approved at the Shareholders’ Meeting on 23 June 2011 (RMB0.79 per share).
26 Cash generated from operations
Six months ended 30 June
2011 2010
RMB’000 RMB’000
Profit before tax 1,286,509 1,237,702
Depreciation (Note 5,20) 155,870 140,458
Amortisation of lease prepayment (Note 6,20) 3,262 3,262
Amortisation of intangible assets (Note 7,20) 6,229 5,322
Impairment charge of PPE (Note 5,20) 1,005 -
Provision for receivables impairment (Note 20) 1,246 1,192
Write-down / (Reversal) of inventories (Note 20) 7,521 (171)
Loss on disposals of property, plant and
equipment 273 2,139
Finance cost (Note 22) 570 845
Finance income (Note 22) (80,433) (42,363)
Net foreign exchange transaction (gain) / loss (298) 21
Share of profit of associate (Note 8) (3,229) (3,597)
Invest income of held-to-maturity investment: (371) -
- Decrease in inventories 192,177 119,644
- Increase in trade and other receivables (638,539) (263,502)
- Increase/(Decrease) in warranty provisions (35,918) 20,353
- Increase/(Decrease) in trade and other payables (565,716) 387,722
- Decrease in pensions and other retirement
benefits (7,399) (7,372)
Cash generated from operations 322,759 1,601,655
In the cash flow statement, proceeds from disposal of property, plant and equipment comprise:
Six months ended 30 June
2011 2010
RMB’000 RMB’000
Net book amount 1,487 3,704
Loss on disposal of property, plant and equipment (273) (2,139)
Offset with trade and other payables 25 1
Proceeds from disposal of property, plant and
equipment 1,239 1,566
64
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
27 Contingencies
At 30 June 2011, the Group did not have any significant contingent liabilities.
28 Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but not recognised in the
financial statements are as follows:
30 June 2011 31 December 2010
RMB’000 RMB’000
Contracted but not provided for:
Purchases of buildings, plant and machinery 1,297,463 441,310
29 Related party transactions
Related parties are those parties that have the ability to control the other party or exercise
significant influence in making financial and operating decisions. Parties are also considered
to be related if they are subject to common control.
Jiangling Motor Holdings Co. Ltd. (“JMH”), which owns 41.03% of the Company’s shares, and
Ford, which owns 30% of the Company’s shares, are major shareholders of the Company as
at 30 June 2011. In addition, Chongqing Changan Automobile Corporation Ltd. (“Changan
Auto”) and JMCG hold 50% equity interest of JMH, respectively.
The following is a summary of the significant transactions carried out between the Group, its
associates, JMCG and its subsidiaries, Ford and its subsidiaries in the ordinary course of
business during the six months ended 30 June 2011.
65
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
For the six months ended 30 June 2011, related parties, other than the subsidiary, and their
relationship with the Group are as follow:
Name of related Party Relationship
JMCG Shareholder of JMH;
the same Chairman
as the Company
Ford Motor (China) Co., Ltd. Subsidiary of Ford
Ford Motor Research & Engineering (Nanjing) Co., Ltd. Subsidiary of Ford
Ford Global Technologies, LLC Subsidiary of Ford
Ford Otosan Company Subsidiary of Ford
Ford Motor Company of Australia Limited Subsidiary of Ford
JMCG Interior Trim Factory Subsidiary of JMCG
Jiangxi JMCG Industrial Co. Subsidiary of JMCG
JMCG Property Management Co. Subsidiary of JMCG
Jiangxi Jiangling Chassis Company Subsidiary of JMCG
Jiangling Material Co. Subsidiary of JMCG
Land Wind Sales Company Subsidiary of JMH
Nanchang JMCG Tianren Auto Component Co. Subsidiary of JMH
JMCG Import & Export Co., Ltd. Subsidiary of JMCG
Nanchang Gear Co., Ltd. Subsidiary of JMCG
Jiangling-Lear Interior Trim Factory Subsidiary of JMCG
Nanchang Jiangling Hua Xiang Auto Components Co. Subsidiary of JMCG
Jiangxi Specialty Vehicles Jiangling Motors Group Co., Ltd. Subsidiary of JMCG
JMCF Subsidiary of JMCG
Jiangling Metal Casting Co. Subsidiary of JMCG
Jiangling Auto Component Co. Subsidiary of JMCG
Jiangxi Jiangling Material Utilization Co., Ltd. Subsidiary of JMCG
JMCG Industrial Co. Shangrao Motor parts Plant Subsidiary of JMCG
JMCG Jiangxi Engineering Construction Co., Ltd. Subsidiary of JMCG
Nanchang JMCG Xinchen Auto Component Co. Subsidiary of JMCG
Jiangling New-power Auto manufacturing Co. Subsidiary of JMCG
Nanchang JMCG Shishun Auto Rental Co., Ltd. Subsidiary of JMCG
Nanchang Lianda Machinery Co., Ltd. Subsidiary of JMCG
Jiangxi JMCG Yichehang Second-hand Motors Sales Co., Subsidiary of JMCG
Ltd.
Jiangxi Velff Engine Co., Ltd. Subsidiary of JMCG
Nanchang JMCG Trading Co. Subsidiary of JMCG
Nanchang JMCG Liancheng Auto Component Co. Subsidiary of JMCG
Nanchang JMCG Printing Co.,Ltd Associate of JMCG
JMCG Hequn Costume Co., Ltd. Associate of JMCG
Visteon Climate Control Nanchang Associate of the Company
GETRAG (Jiangxi) Transmission Company Associate of JMCG
Nanchang Baojiang Steel Processing Distribution Co., Ltd. Associate of JMCG
Jiangxi JMCG Aowei Auto Component Co. Associate of JMCG
66
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
i) Purchases of goods and services
Purchase of goods Six months ended 30 June
2011 2010
RMB’000 RMB’000
JMCG 51,209 61,535
Ford 190,580 159,495
JMCG Interior Trim Factory 268,792 240,991
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. 91,823 71,861
Jiangxi JMCG Industrial Co. 13 34,301
Jiangling Material Co. 37,053 25,172
Visteon Climate Control Nanchang 93,281 78,312
Jiangxi Jiangling Chassis Company 276,107 233,124
Jiangling-Lear Interior Trim Factory 166,475 132,464
Jiangling Metal Casting Co. 16,285 13,309
Nanchang Gear Co., Ltd. 3,227 3,234
Nanchang Jiangling Hua Xiang Auto Components
Co. 95,248 60,177
Jiangling Auto Component Co. 16,635 5,887
JMCG Industrial Co. Shangrao Motor Parts Plant 6,035 2,619
Nanchang JMCG Printing Co.,Ltd 1,532 1,222
GETRAG (Jiangxi) Transmission Company 288,689 242,608
Nanchang JMCG Liancheng Auto Component Co. 106,210 83,109
JMCG Hequn Costume Co., Ltd. 1,417 1,113
Nanchang Baojiang Steel Processing Distribution
Co., Ltd. 296,665 277,088
Nanchang JMCG Xinchen Auto Component Co. 13,692 11,627
Jiangxi JMCG Aowei Auto Component Co. 17,498 15,001
Nanchang JMCG Tianren Auto Component Co. 16,123 2,286
Nanchang Lianda Machinery Co., Ltd. 21,657 -
Others 411 924
2,076,657 1,757,459
67
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
i) Purchases of goods and services (continued)
Purchase of services Six months ended 30 June
2011 2010
RMB’000 RMB’000
JMCG Import & Export Co., Ltd.
- commission expenses 2,120 2,022
JMCG
- rental expense 1,703 1,915
Ford
- services 1,563 8,924
JMCG Jiangxi Engineering Construction Co., Ltd.
- services 8,594 17,589
Jiangxi JMCG Industrial Co.
- services 8,929 7,555
JMCG Property Management Co.
- services 1,257 961
Ford Motor Research & Engineering (Nanjing)
Co., Ltd.
- services 1,092 1,134
Nanchang JMCG Shishun Auto Rental Co., Ltd.
- services 3,408 51
Others 4,559 1,656
33,225 41,807
68
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
ii) Sales of goods and provision of services
Sales of goods Six months ended 30 June
2011 2010
RMB’000 RMB’000
JMCG Import & Export Co., Ltd. 440,058 237,742
JMCG Interior Trim Factory 36,855 35,049
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. 59,412 82,635
JMCG Property Management Co. 3,565 3,431
Jiangxi JMCG Industrial Co. 607 1,367
Jiangxi Jiangling Chassis Company 12,052 12,127
Land Wind Sales Company 1,317 1,121
Jiangxi Jiangling Material Utilization Co., Ltd. 40,108 27,432
JMH 33,463 28,124
Nanchang JMCG Liancheng Auto Component Co. 24,770 17,356
Jiangling-Lear Interior Trim Factory 3,065 2,389
Jiangling New-power Auto Manufacturing Co. 16,895 17,638
Nanchang JMCG Trading Co. 16,262 2,243
Jiangxi Velff Engine Co., Ltd. 1,689 -
Nanchang Jiangling Hua Xiang Auto Components
Co. 7,854 -
Jiangxi JMCG Yichehang Second-hand Motors
Sales Co., Ltd. 1,266 1,586
Others 2,297 1,580
701,535 471,820
69
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
iii) Balances arising from sales/purchases of goods/services
Trade receivables from related parties 30 June 2011 31 December 2010
RMB’000 RMB’000
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. - 10,398
JMH 13,060 2,818
Jiangxi Jiangling Material Utilization Co., Ltd. 3,585 8,907
Nanchang JMCG Liancheng Auto Component Co. 9,166 8,435
Jiangling New-power Auto manufacturing Co. 3,725 2,370
JMCG Import & Export Co., Ltd. 75,946 24,523
Jiangxi Velff Engine Co., Ltd. 344 1,048
105,826 58,499
Notes receivables from related parties 30 June 2011 31 December 2010
RMB’000 RMB’000
Jiangxi Specialty Vehicles Jiangling Motors
Group Co., Ltd. - 25,454
Nanchang JMCG Trading Co. 6,171 2,000
Jiangling New-power Auto manufacturing Co. - 950
6,171 28,404
Other receivables from related parties 30 June 2011 31 December 2010
RMB’000 RMB’000
JMCG Import & Export Co., Ltd. 42 74
42 74
Prepayments for purchasing of goods 30 June 2011 31 December 2010
RMB’000 RMB’000
Nanchang Baojiang Steel Processing Distribution 274,527 249,596
Co., Ltd.
JMCG Jiangxi Engineering Construction Co.,Ltd. 2,796 4,670
277,323 254,266
70
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
iii) Balances arising from sales/purchases of goods/services (continued)
Prepayments for construction in progress 30 June 2011 31 December 2010
RMB’000 RMB’000
JMCG Import & Export Co., Ltd. 31,681 6,157
JMCG Jiangxi Engineering Construction Co., Ltd. 7,893 4,230
39,574 10,387
Trade payables to related parties 30 June 2011 31 December 2010
RMB’000 RMB’000
JMCG Interior Trim Factory 83,349 119,622
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. 159,851 141,160
Jiangling-Lear Interior Trim Factory 106,141 112,566
Visteon Climate Control Nanchang 50,960 60,002
JMCG 18,310 21,295
Jiangxi Jiangling Chassis Company 120,396 153,987
Nanchang Gear Co., Ltd. 1,995 1,719
Nanchang Jiangling Hua Xiang Auto Components
Co. 59,684 45,189
Jiangling Metal Casting Co. 7,893 8,724
Jiangxi JMCG Industrial Co. 1,004 15,034
JMCG Industrial Co. Shangrao Motor parts Plant 3,064 2,704
Jiangling Auto Component Co. 8,135 2,753
JMCG Import & Export Co., Ltd. 1,419 2,299
GETRAG (Jiangxi) Transmission Company 118,681 168,818
Nanchang JMCG Liancheng Auto Component Co. 72,163 60,283
Ford 61,687 108,679
Nanchang JMCG Xinchen Auto Component Co. 5,327 6,632
Jiangxi JMCG Aowei Auto Component Co. 21,052 18,146
Nanchang Lianda Machinery Co., Ltd. 15,415 16,840
Nanchang JMCG Tianren Auto Component Co. 11,726 3,286
Others 1,360 1,463
929,612 1,071,201
71
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
iii) Balances arising from sales/purchases of goods/services (continued)
Other payables to related parties 30 June 2011 31 December 2010
RMB’000 RMB’000
Ford 62,074 149,182
Ford Otosan Company 7,663 4,395
JMCG Jiangxi Engineering Construction Co., Ltd. 5,719 5,452
Jiangling-Lear Interior Trim Factory 1,935 2,730
Ford Motor Company of Australia Limited 3,157 4,257
Ford Global Technologies,LLC 17,724 9,048
Ford Motor Research & Engineering (Nanjing)
Co., Ltd. 1,795 3,000
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. 1,163 3,419
Jiangxi JMCG Industrial Co. 63 1,130
Nanchang Jiangling Hua Xiang Auto Components
Co. 562 1,923
Jiangxi Jiangling Chassis Company 1,822 1,822
JMH 441 810
Others 3,302 3,730
107,420 190,898
Advance from related parties 30 June 2011 31 December 2010
RMB’000 RMB’000
Nanchang JMCG Trading Co. 1,010 -
Others 583 1,127
1,593 1,127
Cash deposit in related parties 30 June 2011 31 December 2010
RMB’000 RMB’000
JMCF (Note 12) 187,611 167,549
72
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
iv) Service fee paid for management staff
Pursuant to an agreement among the Company, Ford, Ford Motor Research & Engineering
(Nanjing) Co., Ltd and Ford Motor (China) Co., Ltd. in 2008, some employees of Ford, Ford
Motor Research & Engineering (Nanjing) Co., Ltd and Ford Motor (China) Co., Ltd. were
assigned to the Company as management staff. During the six months ended 30 June 2011,
the Company accrued service fee of approximately USD2,063,000 (equivalent to
approximately RMB13,515,000), RMB265,000 and RMB905,000 payable to Ford, Ford Motor
Research & Engineering (Nanjing) Co., Ltd and Ford Motor (China) Co., Ltd. for these
employees, respectively.
Pursuant to an agreement between the Company and JMH in January 2011, some employees
of JMH were assigned to the Company as management staff. During the six months ended 30
June 2011, the Company accrued approximately service fee of RMB441,000 payable to JMH
for these employees.
v) Guarantee
As at 30 June 2011, bank loans of USD1,080,488 (equivalent to approximately
RMB6,993,000) (2010: USD1,113,231, equivalent to approximately RMB7,373,000) were
guaranteed by JMCF (Note 15).
vi) 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 six
months ended 30 June 2011, the total remuneration of the key management was about RMB
7,621,000(the six months ended 30 June 2010: RMB4,737,000).
73
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
vii) Royalty fee
a) Pursuant to a development agreement among the Company, Ford, Ford Global
Technologies, LLC and Ford Otosan Company in 2008, the Company agreed the payment of
royalty fee to Ford at 2.6% of V348 series automobiles net sale till production stopped. The
67.31% and 32.69% of total royalty fee should be paid to Ford Global Technologies, LLC and
Ford Otosan Company respectively. During the six months ended 30 June 2011, the total
royalty fee due to Ford Global Technologies, LLC and Ford Otosan Company was
approximately USD3,999,000 (equivalent to approximately RMB26,044,000). As at 30 June
2011,the remaining amount of USD3,803,000 was included in other payables.
b) Pursuant to the Agreement Concerning China V348 Stage V and MCA Engineering Service
between Ford and the Company, the Company shall pay USD 26,381,000 accumulated fees
of engineering service to Ford before the first quarter of 2013. During the six months ended 30
June 2011,the service fee due to Ford was USD 3,190,500 (equivalent to approximately RMB
20,984,000). As at 30 June 2011, the remaining amount of USD 1,595,000 was included in
other payables.
c) Pursuant to a development agreement among the Company, Ford and Ford Global
Technologies, LLC in 2007, the Company agreed the payment of royalty fee to Ford at USD
92 for each of the Contract Products manufactured by JMC under the aforesaid license (for
packaging with JMC Branded Vehicles or support the service of such vehicles); if JMC
continues to produce and sell the Contract Product Components after the cessation of
production of the Contract Product, JMC shall pay Ford the Licensing Fee based on 2.6% of
the net sales revenue of such Contract Product Components. During the six months ended 30
June 2011, the total royalty fee due to Ford was USD 334,000 (equivalent to approximately
RMB 2,182,000). As at 30 June 2011, the remaining amount of USD 334,000 was included in
other payables.
viii) Transaction with other state-owned entities
The Group’s largest shareholder is JMH, which was established by state-owned enterprises,
Changan Auto and JMCG, with equity interests of 50% and 50%, respectively. The Group is
thereby considered to be significantly influenced by the PRC Government, which controls a
substantial number of entities in the PRC. For the purpose of related party transactions
disclosure, the Group has in place procedures to assist the identification of the immediate
ownership structure of its customers and suppliers as to whether they are state-owned
entities. Many state-owned entities have multi-layered corporate structure and the ownership
structures change overtime. Nevertheless management of the Company believes that
meaningful information relating to such kind of related parties transactions has been
adequately disclosed.
Transactions with other state-owned entities
Six months ended 30 June
2011 2010
RMB’000 RMB’000
Purchase of goods 681,789 593,475
Purchase of fixed assets 64,158 5,185
Purchase of services 11,390 24,153
Sales of goods 21,260 18,945
Interest income 60,315 37,878
Interest expense 229 550
Borrowings - 25,019
Repayment of borrowings 24,668 25,224
74
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Related party transactions (continued)
viii) Transaction with other state-owned entities (continued)
Balances with other state-owned entities
30 June 2011 31 December 2010
RMB’000 RMB’000
Cash and cash equivalents 5,410,510 5,645,612
Borrowings 6,993 31,943
Trade and other receivables 62,604 51,971
Trade and other payables 293,613 277,370
30 Principal subsidiary
As at the date of this report, the Group has the following subsidiary:
Place and date of Percentage of equity
Entity incorporation interest held Principal activities
Jiangling Isuzu Nanchang, PRC / 75% Manufacture and sale of
10 March 1993 automobiles and spare parts
75
Section VII Catalog on Documents for reference
I. Originals of 2011 half-year report signed by Chairman;
II. Originals of 2011 half-year financial statements signed by Chairman, Chief Financial
Officer and Chief of Finance Department;
III. Originals of all the documents and public announcements disclosed in newspapers
designated by CSRC during the reporting period.
IV. The Half-year Report in China GAAP.
Board of Directors
Jiangling Motors Corporation, Ltd.
August 23, 2011
76
