Jiangling Motors Corporation, Ltd.
2012 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 ................................................. 10
Section V Major Events ........................................................................................... 16
Section VI Financial Statements ............................................................................. 26
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.
Chairman Wang Xigao, President Yuan-Ching Chen, CFO Dennis Leu 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: 0791-85266178
Fax: 0791-85232839
E-mail: relations@jmc.com.cn
Persons for financial information disclosure: Mr. Dennis Leu
(Tel: 0791-85266503)
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 September 20, 1999, on November 25, 2003, on September 23,
2004, on June 21, 2007 and on April 30, 2008.
2. Business License Registration Number: 360000511000021.
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 12,655,682 11,819,855 7.07
Shareholder’s equity Attributable
to the Equity Holders of the 7,408,302 7,311,768 1.32
Company
Share Capital 863,214 863,214 0
Net Assets Per Share Attributable
to the Equity Holders of the 8.58 8.47 1.32
Company (RMB)
Up 3.27
Liabilities/Assets (%) 40.43 37.16 percentage points
Reporting period Same period Change (%)
(2012 first half)* last year*
Revenue 8,721,529 9,221,540 -5.42
Operating Profit 956,217 1,203,417 -20.54
Profit Before Income Tax 1,074,783 1,286,509 -16.46
Profit Attributable to the Equity
838,898 1,075,018 -21.96
Holders of the Company
Basic Earnings Per Share (RMB) 0.97 1.25 -21.96
Diluted Earnings Per Share (RMB) 0.97 1.25 -21.96
Fully Diluted Return on Net Asset Down 5.17
11.32 16.49 percentage points
Ratio (%)
Weighted Average Return on Net Down 5.28
10.85 16.13
Asset Ratio (%) percentage points
Net Cash Generated From
972,431 149,377 550.99
Operating Activities
Net Cash Flow Per Share from
1.13 0.17 550.99
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, 2012 2012 First Half
As Prepared under the China GAAP** 7,410,732 841,328
Adjustment per IFRS:
Staff bonus and welfare fund appropriated
-2,430 -2,430
from net profit of a subsidiary
As Restated in Conformity with IFRS 7,408,302 838,898
** 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
2,781,930 0.32% - - - -30 -30 2,781,900 0.32%
A shares
1.State-owned
- - - - - - - - -
shares
2. State-owned legal
- - - - - - - - -
person shares
3. Other domestic
2,781,000 0.32% - - - - - 2,781,000 0.32%
shares
Including:
Domestic legal
2,781,000 0.32 - - - - - 2,781,000 0.32%
person shares
Domestic natural
0 - - - - - - 0 -
person shares
4. Management
930 - - - - -30 -30 900 -
Shares
II. Unlimited
860,432,070 99.68% 30 30 860,432,100 99.68%
tradable shares
1. A shares 516,432,070 59.83% - - - 30 30 516,432,100 59.83%
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 21,311 shareholders, including 15,144 A-share holders and 6,167
Total shareholders
B-share holders, as of June 30, 2012.
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
Domestic non
Huaan Tactical Select
-state-owned 2.31 19,919,249 - -
Securities Investment Fund
legal person
Shanghai Automotive Co., State-owned
1.51 13,019,610 - -
Ltd. legal person
Domestic non
National Social Security
-state-owned 1.30 11,234,091 - -
Fund- Portfolio 102
legal person
Bosera Thematic Sector Domestic non
Equity Securities -state-owned 1.10 9,500,000 - -
Investment Fund legal person
Dragon Billion China Foreign
1.04 8,969,196 - -
Master Fund legal person
Rongtong New Blue-chip Domestic non 0.82 7,082,010 - -
4
Securities Investment Fund -state-owned
legal person
Jpmblsa Re Ftif Templeton Foreign
0.58 5,035,263 - -
China Fund Gti 5497 legal person
Foreign
Invesco Funds Sicav 0.54 4,698,109 - -
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
Huaan Tactical Select Securities Investment Fund 19,919,249 A share
Shanghai Automotive Co., Ltd. 13,019,610 A share
National Social Security Fund- Portfolio 102 11,234,091 A share
Bosera Thematic Sector Equity Securities
9,500,000 A share
Investment Fund
Dragon Billion China Master Fund 8,969,196 B share
Rongtong New Blue-chip Securities Investment
7,082,010 A share
Fund
Jpmblsa Re Ftif Templeton China Fund Gti 5497 5,035,263 B share
Invesco Funds Sicav 4,698,109 B 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.
III. Controlling Shareholders
The controlling shareholders of JMC are Jiangling Motor Holding Co., Ltd. (‘JMH’)
and Ford Motor Company (‘Ford’).
JMH was founded on November 1, 2004 and its registered capital is RMB 2 billion.
Jiangling Motors Company (Group) (‘JMCG’) and Chongqing Changan Automobile
Co., Ltd. held 50% of total equity of JMH respectively. And its legal representative is
Mr. Xu Liuping. Main scope of business: manufacturing of automobiles, engines,
chassis, and automotive components and parts, sales of self-produced products, as
well as related after-sales services; industrial investment; management & agent for
merchandise and technology export & import; property management; sales of
household articles, mechanical & electronic equipment, artistic handicrafts,
agricultural by-products and steel; consulting business in enterprise management.
Ford, founded in 1903, is a US-based listed company. Chairman: William Clay Ford,
Jr. Main scope of business: design, manufacturing, assembly and sales of cars, trucks,
parts and components, financing, leasing of vehicles and equipment, and insurance
business.
IV. Actual Controlling Parties
The controlling shareholders of JMH are JMCG and Chongqing Changan Automobile
Co., Ltd.
5
JMCG, founded on July 27, 1991, is a wholly state-owned enterprise with registered
capital of RMB 1.5 billion and subordinate to Nanchang State-owned Assets
Supervision and Administration Committee. Its legal representative is Mr. Wang
Xigao. Main scope of business: manufacturing of automobiles, engines, chassis,
specialty vehicle, transmission, other products, automotive quality testing, sales of
self-produced products and raw materials, equipment, electronic products, parts and
others, as well as related after-sales services and maintenance services; development
of products derived from JMC brand light vehicle; oversea auto project-contracting,
export equipment, material and related labor services.
Chongqing Changan Automobile Co., Ltd., founded on December 31, 1996, is a
state-controlled enterprise with registered capital of RMB 2.33 billion and subject to
the State-owned Assets Supervision and Administration Committee of the State
Council (‘SASAC’). Its legal representative is Mr. Xu Liuping. Main scope of
business: development, manufacturing, sales, import & export business of auto
(including sedan), engine, automotive components, die, tools, installation of
machinery, technological consultant services.
Ownership and control relations between the Company and the actual controlling
parties are shown as follows:
SASAC
Nanchang State-owned Assets
Supervision and Administration
45.55% 100%
Chongqing Changan Automobile Co., Ltd. JMCG
50% 50%
JMH Ford
41.03% 30%
JMC
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. Positions at the shareholder entities held by the JMC directors and the
6
supervisors:
Name Shareholder Title Term of Compensation Paid
Entity Office by Shareholder
Entity (Y/N)
Wang Xigao JMH Vice Chairman 2004.11— N
David L. Schoch Ford Vice President Y
Zhu Yi JMH Board member 2004.11— N
Alvin Qing Liu Ford AP&A Vice President 2009.1— Y
and General Counsel
III. Particulars about positions and concurrent positions in other entities other than
shareholder entities:
Name/Title in the Relationship with the
Entity Title
Company Company
The Chairman of JMCG
JMCG also takes the post of the Chairman
Wang Xigao/Chairman Company’s Chairman
Jiangling-Isuzu Motors
Shareholding Subsidiary Chairman
Company Limited
David L. Schoch/Vice Ford wholly-owned
Ford Motor (China) Ltd. Chairman & CEO
Chairman subsidiary
Ford wholly-owned Director, Vice
Ford Motor (China) Ltd.
subsidiary President & CFO
Ford Motor Research &
Ford wholly-owned
Engineering (Nanjing) Director
subsidiary
Howard D. Welsh/Director Co., Ltd.
Changan Ford Mazda
Ford holds 35% shares Director
Automobile Co., Ltd.
Changan Ford Mazda
Ford holds 25% shares Vice Chairman
Engine Co., Ltd.
Yuan-Ching Chen/ Jiangling-Isuzu Motors
Shareholding Subsidiary Director
Director Company Limited
The Chairman of JMCG
JMCG also takes the post of the Director
Company’s Chairman
Jiangling-Isuzu Motors
Shareholding Subsidiary Director
Xiong Chunying/Director Company Limited
Wolff Engine (Jiangxi) Wholly-owned
Director
Co., Ltd. subsidiary of JMCG
JMCG Jingma Motors Shareholding subsidiary
Director
Co., Ltd. of JMCG
Supervisor, Assistant
to General Manager
and Director of Joint
Chongqing Changan See the figure in
Cai Yong /Director Venture &
Automobile Co., Ltd. Chapter III
Cooperation
Management
Department
7
Shi Jiansan/ Shanghai Academy of
No relationship Research Fellow
Independent director Social Sciences
Vincent Pun-Fong KWAN Yew Chung Education
CFO
/ Foundation Limited and No relationship
Independent Director Finet Holdings Limited Director
Dean of Trading and
Wang Xu/ Independent
Chongqing University No relationship Public Administration
Director
School
The Chairman of JMCG
Zhu Yi/Supervisor JMCG also takes the post of the Vice General Manager
Company’s Chairman
Changan Ford Mazda
Alvin Qing Liu/Supervisor Ford holds 35% shares Director
Automobile Co., Ltd.
The Chairman of JMCG
Liu Nianfeng/EVP JMCG also takes the post of the Director
Company’s Chairman
Jiangling-Isuzu Motors
Dennis Leu /CFO Shareholding Subsidiary Director
Company Limited
Zhou Yazhuo/Vice Jiangling-Isuzu Motors
Shareholding Subsidiary Vice General Manger
President Company Limited
Jiangling-Isuzu Motors
Liu Shuying/Vice President Shareholding Subsidiary Vice General Manger
Company Limited
IV. Annual Compensation
Directors and Supervisors who did not concurrently hold other management positions
in JMC were not paid by JMC. Director Wang Xigao, Supervisors Zhu Yi and Zhang
Jian were paid by JMCG. Directors David L. Schoch, Howard D. Welsh and
Supervisor Alvin Qing Liu were paid by Ford. Director Cai Yong was paid by
Chongqing Changan Automobile Co., Ltd.
(1) In accordance with the Senior Executive Compensation & Incentive Plan of JMC
approved by the Board of Directors and the Senior Executive Base Salary Plan of
JMC agreed by the Compensation Committee, the compensation for the Chinese-side
senior management consists of base salary, short-term incentive and long-term
incentive, and the long-term incentive would be paid equally in a deferred period of
three yeas. In the first half of 2012, the Company paid compensation before tax of
approximately RMB 1,100 thousand to Director & EVP Xiong Chunying, paid EVP
Liu Nianfeng approximately RMB 1,050 thousand, paid VP & Board Secretary Wan
Hong approximately RMB 800 thousand, paid VP Li Qing approximately RMB 800
thousand, paid VP Zhou Yazhuo approximately RMB 800 thousand, paid VP Zhu
Shuixing approximately RMB 770 thousand, paid VP Liu Shuying approximately
RMB 640 thousand. Two employee-representative supervisors, Ms Xu Lanfeng and
Mr. Liu Niansheng, were paid about RMB 200 thousand and RMB 240 thousand
respectively. The total compensation before tax paid by JMC for the aforesaid persons
was about RMB 6.40 million in the reporting period.
(2) JMC pays annual compensation for Ford-seconded senior management personnel
to Ford in accordance with the revised Personnel Secondment Agreement signed
8
between JMC and Ford and Ford Affiliates. In the first half of 2012, JMC should pay
US$ 187.5 thousand per person to Ford for Director & President Yuan-Ching Chen,
CFO Dennis Leu and VP William John Marshall, US$ 93,750 for VP John Scholtes,
and RMB 375 thousand for VP Zhong Wanli,. These payments made by JMC to Ford
do not reflect the actual salaries earned by Ford-seconded senior management.
(3) Pursuant to the resolutions of JMC 2011 Annual Shareholder’s Meeting, the
annual compensation for the JMC Independent Directors is adjusted to RMB 100
thousand per person, and JMC bears their travel-related expenses associated with
JMC’s business. In the first half of 2012, the Company paid compensation before tax
of approximately RMB 420 thousand per person.
V. Changes of Directors, Supervisors and Senior Management During the Reporting
Period
Director Change:
Per approval of the JMC 2012 First Special Shareholders’ Meeting, Mr. David L.
Schoch was elected as a Director of JMC. Mr. John Lawler did not hold the post of
Director of JMC.
Senior Management changes:
The Board of Directors agreed Mr. Peter Dowding’s resignation from Vice President
position due to work rotation on February 28, 2012. Per President Yuan-Ching Chen’s
nomination, the Board of Directors appointed Mr. John Scholtes as a Vice President
of the Company. The appointment shall enter into effect as of March 1, 2012.
The Board of Directors accepted Mr. Michael Joseph Brielmaier’s resignation from
the position of Chief Financial Officer, member of the Executive Committee and
Secretary of the Audit Committee of the Company due to work rotation on May 25,
2012. Per President Yuan-Ching Chen’s nomination, the Board of Directors appointed
Mr. Dennis Leu as Chief Financial Officer, member of the Executive Committee and
Secretary of the Audit Committee of the Company. The appointment shall enter into
effect as of June 1, 2012.
The Board of Directors accepted Mr. Jin Wenhui’s resignation from the position of
Vice President of the Company due to work reasons. Per President Yuan-Ching
Chen’s nomination, the Board of Directors appointed Mr. Liao Zanping as a Vice
President of the Company. The appointment shall enter into effect as of July 1, 2012.
VI. Employees
As of June 30, 2012, JMC had a total of 10,454 employees, of which 7,364 were
production workers, 411 sales personnel, 1,818 technical personnel, 126 finance
personnel, 735 administrative staff. The employees with polytechnic school degrees
or above accounted for 33% of the total. There were 1,046 persons with junior
technical titles, 688 with intermediate technical titles and 145 with senior technical
titles, altogether accounting for 18% of the total. There were 468 early-retired
employees. JMC bore retirement benefits of 968 retired employees.
9
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 brand truck, pickup, SUV, and Ford
brand Transit series commercial vehicles. The Company also produces engines,
casting and other components.
In the First Half of 2012, JMC sales volume was 102,614 units including 35,126 JMC
brand trucks, 40,586 JMC brand pickups and SUVs, and 26,902 Ford brand Transit
series commercial vehicles. Total sales volume was down 3% from same period last
year. Total production volume for the First Half was 104,172 units, including 35,723
JMC brand trucks, 40,779 JMC brand pickups and SUVs, and 27,670 Transits.
The Company’s sales decrease is primarily explained by lower commercial vehicle
industry. Compared with same period last year, JMC brand truck sales volume was
decreased by 8%, Transit sales volume was decreased by 10%, while JMC brand
pickup and SUV was increased by 9.5%.
In the First Half of 2012, the Company achieved a share of 3.4% of the commercial
vehicle market, an increase of 0.3 percentage points (pts.) from same period last year.
JMC brand trucks (including pickup) accounted for 7.9% of the light truck market,
increasing by 0.8 pts from same period last year. Transit achieved 19.1% share of the
light bus market, down 2.2 pts vs. the same period last year. (Data source for above
analysis: China Association of Automobile Manufacturers and the Company sales
records)
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 (%) (%)
8,000,658 6,093,748 23.8% -5.4 -5.7 0.2
I. Vehicles
640,981 461,975 27.9% -3.1 -3.2 0.0
II. Components
8,641,639 6,555,723 24.1% -5.3 -5.5 0.2
Total
Involving:
662,498 562,462 15.1% 7.1 11.3 -3.2
related party
transactions
Pricing principle
of related party Market Price
transactions
Details pertaining to core business classified according to region:
Unit: RMB ’000
10
Turnover change from
Region Turnover the same period last
year (%)
North-east China 434,889 -3.1
North China 854,958 -6.8
East China 4,200,378 -6.8
South China 1,297,985 -8.6
Central China 769,372 3.2
North-west China 426,431 -7.8
South-west China 657,626 5.7
Revenue in the First Half of 2012 was RMB 8,722 million, down 5% from same
period last year. Under International Financial Reporting Standards, net profits were
RMB 839 million, down RMB 236 million from same period last year. The lower
profit was primarily explained by lower sales volume from weak commercial vehicle
industry, higher marketing spending to resist intense competition, strategic pricing
actions and mixes changes. Finance income during the reporting period was increased
by RMB 35 million, or 44%, primarily reflecting more time deposits and favorable
interest rate.
Cash flow from operations was positive RMB 972 million, reflecting primarily
favorable profit and operating-related working capital changes. Cash flow from
investing activities was negative RMB 664 million, reflecting primarily capital
expenditure for facilities, equipment and tooling.
At the end of June 2012, Company cash and cash equivalents totaled RMB 5,693
million, an increase of RMB 308 million from the end of 2011.
Deferred income tax assets decreased about RMB 79 million, or down about 32%
from the end of 2011, reflecting primarily adjustment of income tax rate from 25% to
15% due to the Company passing the reexamination of hi-tech enterprise.
Total assets were RMB 12,656 million, up 7% from RMB 11,820 million at year-end
2011. The increase primarily reflects an increase in construction in progress.
Total liabilities were RMB 5,117 million, an increase of RMB 724 million or 16%
from year-end 2011, primarily reflecting increase of trade and other payables vs. the
end of 2011.
Shareholder equity, including minority interest, was RMB 7,539 million at June 30,
2012, up RMB 112 million from year-end 2011. This increase was primarily
explained by net profit earned in the reporting period partially offset by dividend
payment accrual.
III. Product Development, Innovation, Energy Saving and Environmental Protection
In the First Half of 2012, the Company further improved its self-development and
innovation capability. In May 2012, JMC test center was successfully accredited with
CNAS certificate. JMC is authorized to use CNAS and iLAC-MRA signs within
approved business scope and the test results are recognized by related authorities in
more than 50 countries and regions. Laboratory Second Phase Stage V project is
11
about to be ready for official operation. JMC branded JX6470P4/JX6471P4 multi
purpose passenger vehicle was awarded with the First Prize of Provincial Excellent
Product by Jiangxi Provincial Industry and Information Committee in 2012.
In the First Half of 2012, the Company continued to strengthen energy saving. As a
result, we completed the program of fuel oven modification in the painting workshop
and we achieved 3% lower energy cost per unit compared with the same period last
year. Additionally, another modification program of melting in the Casting Plant is
now in progress. In order to save energy maximally, we also popularized the best
practice and established an audit process for energy saving within the whole
Company.
In the First Half of 2012, the Company continued to improve environmental
management system. Based on the control subject to ISO14001 and internal audit
rules, we executed the environmental operation system positively to ensure the
Company complying with the requirements of environmental protection laws &
regulations. To meet with emission standard and lower pollutant discharge, the
Company arranged some special funds on the wastewater treatment station in Xiaolan
and the pre-treatment station in the Engine Plant, and laid great importance on the
operation of environment protection facilities. To ensure proper disposal of waste,
JMC established a waste management procedure, and waste were separated. Anti-sink,
anti-leakage and anti-loss processes are laid in the waste storage area. Furthermore,
JMC periodically followed up the status with suppliers.
IV. Operational Challenges and Resolutions
In the First Half of 2012, the Company continued to face a slowdown in the
commercial vehicle industry, new product entry competition, more stringent
regulatory requirement and intensifying cost pressures. During the reporting period,
the Company focused on quality improvement, new product development and new
plant construction, which set the foundation for future growth.
With regard to competition, the Company continued to experience market share
pressure from low price competitors. In response, the Company lowered price for
VE83 LWB Bus. Additionally, proactive marketing plans were initiated to help
generate sales. The Company also accelerated development of the dealer network in
the second tier markets and enhanced its customer purchase satisfaction.
To achieve steady growth, the company continues to focus on (1) quality
improvement for all products, (2) tactically accelerating marketing spending and sales
promotion that improve market share, (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, (5) strengthening corporate governance and application of appropriate risk
assessment and control mechanisms.
The company anticipates continued erratic vehicle industry growth, cost pressures and
severe competition in the future, including labor cost increases, competitive vehicle
price reduction, more new vehicle entries in selected market segments, government
policy revisions and more stringent regulatory requirements.
12
The Company will continue to leverage previously established processes and work
groups to reduce existing production costs and eliminate operating waste throughout
the enterprise. Additionally, we are maximizing design optimization and cost
reduction for new products. With the support of our technology partners, we will
continue to execute major projects approved by the Board. These programs include
the N351 SUV AT project, the N330 project (the next generation SUV which is
developed independently), the N800 project (the next generation truck product which
is developed independently), the J08 project (a SUV product introduced from Ford),
the J09 project (a new generation Transit product introduced from Ford), and the J10
project (an upgrade Pickup product developed on the existing Pickup platform by the
Company). These actions will be helpful to the competitiveness improvements in the
segments we participated.
Finally, the company is continuing its efforts to strengthen its dealer network
development and pursue export and OEM sales growth.
V. Investment in the Reporting Period
1. In First Half of 2012, JMC did not raise equity funding, nor did it use equity
funding raised in previous years for capital investment.
2. Self funded major projects:
First
Total Investment Investment
announcement Investment To Be
Project Name Approval Committed Planned Job#1 Date
date of disclosure Committed
(RMB Mils) (RMB Mils)
(RMB Mils)
N350 July 12, 2006 652.0 620.0 32.0 Second Half, 2012
September 18,
JX4D24 Engine for N350 30.0 19.2 0.1 Second Half,2012
2007
October 11,
N900 200.0 193.1 0.3 Second Half,2012
2005
N800 April 15, 2008 725.0 328.0 397.0 Second Half,2015
December 27,
E802 Engine Program 419.0 189.6 229.4 Second Half,2015
2008
March 27,
A4 Press Line 384.0 318.7 - Completed
2007
JX4D24 Engine Phase II July 10, 2008 315.0 126.8 188.2 Second Half,2012
CAL Program July 12, 2006 47.1 38.8 - Completed
Vehicle storage and
April 15, 2008 35.0 30.5 - Completed
delivery facility Phase I
PDM Program July 10, 2008 10.5 8.7 1.8 Second Half,2012
V348 A4 Line Die
April 2, 2009 10.0 9.7 - Completed
Modification Program
Stage V and VI
August 23,
Emissions Facilities 26.6 19.6 - Completed
2009
Program
Capacity Expansion
April 10, 2010 566.5 393.1 173.4 First Half,2013
Program
N351 SUV AT Program April 2, 2011 249.0 46.6 202.4 Second Half,2013
2.2L Global Puma Engine
April 10, 2010 30.0 10.6 19.4 Year End,2012
4C Localization Program
Casting Plant Melting
Technical Improvement April 10, 2010 10.0 8.2 - Completed
Program
13
N330 Program Long
July 1, 2010 327.0 59.4 267.6 Second Half,2013
Lead Funding
V348 Transit Emission
Update Program Long July 1, 2010 336.2 205.5 130.7 First Half,2013
Lead Funding
VE83 Transit Emission
July 1, 2010 7.5 4.9 - Completed
Update Program
N800 Long Wheel Base
July 1, 2010 91.0 13.5 77.5 First Half,2013
Vehicle Program
Capacity Expansion in First Half,
July 1, 2010 2,133.0 770.8 1,362.2
Xiao an Site 2013
IT Strategy Proposal July 1, 2010 45.0 36.2 6.0 Second Half,2012
Xiao an Site Test Track September 17,
79.6 25.8 53.8 First Half,2013
Program 2010
Capacity Expansion September 17,
33.2 23.7 5.1 Second Half,2012
Investment 2010
Phase II Investment of
December 17,
Vehicle Emission Test 45.0 24.1 20.9 Year End,2012
2010
Lab
PD Center Xiaolan Phase
June 25, 2011 424.0 18.7 405.3 Second Half,2013
I Investment Program
Self-development Gas
Engine Program Long April 2, 2011 125.0 34.3 89.7 First Half,2013
Lead Funding
Xiaolan Tryout Press September 27,
41.5 - 41.5 First Half,2014
Program 2011
Technological
Transformation of December 16,
34.15 5.4 28.75 Second Half,2013
Melting for Engine C/BL 2011
in Casting Plant
J08 Program Long Lead
April 11, 2012 222.0 16.4 205.6 First Half,2013
Funding
J09 Program Long Lead March 29,
612.0 8.2 603.8 Second Half,2013
Funding 2012
J10 Program June 21, 2012 153.0 4.7 148.3 Second Half,2014
Casting Plant Cold
Core-making Line
June 21, 2012 65.35 - 65.35 First Half,2014
Capacity Investment
Program
Total 8,484.2 3,612.8 4,756.2
The Spending will be funded from cash reserves.
VI. 2012 Second Half Year Plan
The Company is projecting revenue in the range of RMB 7.5 to 9.5 billion for the
Second Half of 2012. 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 of 2012, the Company will continue 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 brands through enhancing the Company's
14
distribution network, including brand-specific shop expansion and development
of JMC service strategy to achieve volume and market share targets.
ii. Improve product quality and customer satisfaction.
iii. Increase product cost reduction efforts and improve operating efficiencies to
achieve profit and cost targets.
iv. Work with technology partners to execute the N330, N351, N800, J08, J09, J10
and Xiao and new Assembly Plant, Test Track, New R&D Center, etc.
v. Enhance and execute product and engine cycle plans.
vi. Expand finished vehicle exports and OEM component sales business.
vii. Deliver recruiting, retention and training objectives that help to strengthen
employees' overall competence to support future growth.
VII. Cash Dividend Distribution Policy and Implementation
According to the requirements of Notice on Further Implementing Cash Dividend
Distribution Policy Among Listed Companies and Supplementary Notice on Further
Implementing Cash Dividend Distribution Policy Among Listed Companies
promulgated respectively by Chinese Securities Regulatory Commission (“CSRC”)
and Jiangxi Branch, CSRC, the Board of Directors approved to amend the related
articles in the Articles of Association of JMC involving profit distribution. The
proposal on the amendments to the Articles of Association herein was approved at the
2012 Second Special Shareholders’ Meeting on August 24, 2012.
The following conditions shall be met in the case of cash dividend distribution subject
to the revised Articles of Association:
i. The distributable profit achieved in the current year (i.e. the remainder of
after-tax profits after covering of the losses of the Corporation and drawing the
reserves) shall be positive value;
ii. There shall be no negative impact on the Corporation’s future operation after
implementing such cash dividend distribution;
iii. A standard audit report with no major comments shall be issued by an auditor for
the financial statements of the current year.
The interval and minimal ratio of cash dividend: the accumulative profits distributed
in cash within three years shall be no less than 30% of the average annual
distributable profits achieved over the past three years.
The draft and execution of the Company’s cash dividend proposal complies with the
relevant requirements of profit distribution stipulated in the Articles of Association of
JMC. The proposal on cash dividend distribution was approved by the Board, and
then reviewed and approved at the shareholders’ meeting. Conditions and ratio of the
cash dividend distribution were clear and definitive, and the Company thought over
reasonable appeals from the middle and small shareholders and defended their legal
rights and interests strongly when drafting and executing the proposal. JMC had
distributed cash dividends to all the shareholders in the consecutive nine years since
2003. Accumulated cash dividends for the nine years totaled RMB 3,409 million.
15
VIII. Implementation of Rules on Administration of Insiders
JMC has established the Rules on Registration and Filing of Insiders of JMC and
implements these Rules effectively. JMC Securities Department assists the Board
Secretary to handle the routine administration of insiders. The Directors, Supervisors,
senior executives and other insiders were advised that they shall not buy or sell JMC’s
stocks during the sensitive period prior to disclosure of periodical reports or major
events. In the reporting period, the Company’s Directors, Supervisors, senior
executives and insiders did not buy or sell JMC’s stocks in breach of the laws and
regulations.
In the reporting period, JMC filed relevant registration tables of insiders with China
Securities Regulatory Commission Jiangxi Branch and Shenzhen Stock Exchange as
required and required relevant insiders to undertake confidentiality obligation and use
such information within allowed scope per promissory requirements.
IX. Others
JMC has passed the reexamination of Jiangxi Province hi-tech enterprise. The hi-tech
enterprise qualification to the Company will be valid for three years (from April 20,
2012 to April 19, 2015). The enterprises passed reexamination as hi-tech enterprises
can apply to enjoy an enterprise income tax preferential policy from the current year
within the valid period. Enterprise income tax rate for a hi-tech enterprise will be 15%
in compliance with the provisions of the relevant regulations issued by the State.
Public announcement on the aforesaid event was published in China Securities,
Securities Times and Hong Kong Commercial Daily on August 15, 2012.
Financial foreign currency assets and liabilities:
Unit: RMB
Item Amount on Provision Amount on
January 1, 2012 accrued in 2012 June 30, 2012
Bank deposit 13,002 - -
Other receivables - - 3,310,145
Subtotal for financial assets 13,002 - 3,310,145
Subtotal for financial
90,687,463 - 61,330,673
liabilities
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, formulated the C-SOX Implementation Plan of JMC and appointed
PricewaterhouseCoopers Zhong Tian CPAs Company Limited as JMC’s 2012 C-SOX
auditor.
II. Execution of Profit Distribution Plan
The 2011 Annual Shareholders’ Meeting of the Company approved the 2011 calendar
year profit distribution plan on June 19, 2012. Announcement of 2011 calendar year
16
dividend distribution was published in China Securities, Securities Times and Hong
Kong Commercial Daily on July 5, 2012, and it has been executed accordingly.
The 2011 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 8.6 (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 7.74
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 7.74 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 = RMB0.8120, 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
20, 2012) immediately after the relevant resolutions were passed at the Company’s
Shareholders’ Meeting.
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 351,518 5.13
Co., Ltd.
GETRAG (Jiangxi) Contracted 60 days after
Transmission Company price delivery and 296,587 4.33
invoicing
Jiangxi Jiangling Chassis Contracted 60 days after
Company price delivery and 289,881 4.23
invoicing
JMCG Interior Trim Factory Contracted 60 days after
243,391 3.55
price delivery and
17
invoicing
Jiangling-Lear Interior Trim Contracted 60 days after
Factory price delivery and 170,354 2.49
invoicing
Ford Contracted D/P
117,830 1.72
price
NanchangJMCG Liancheng Contracted 60 days after
Auto Component Co. price delivery and 113,576 1.66
invoicing
Nanchang Jiangling Contracted 60 days after
Huaxiang Auto Components price delivery and 101,659 1.48
Co. invoicing
Jiangxi Specialty Vehicles Contracted 60 days after
Jiangling Motors Group Co., price delivery and 95,320 1.39
Ltd. invoicing
Visteon Climate Control Contracted 60 days after
(Nanchang) Co., Ltd. price delivery and 94,756 1.38
invoicing
JMCG Contracted 60 days after
price delivery and 61,928 0.90
invoicing
Nanchang Lianda Mechanical Contracted 60 days after
Co., Ltd. price delivery and 27,724 0.40
invoicing
Nanchang JMCG Tianren Contracted 60 days after
Auto Component Co. price delivery and 27,202 0.40
invoicing
Jiangling Material Company Contracted Pay on delivery
24,653 0.36
price
Jiangxi JMCG Aowei Auto Contracted 60 days after
Component Co. price delivery and 18,133 0.26
invoicing
Jiangling Metal Casting Co. Contracted 60 days after
price delivery and 17,281 0.25
invoicing
(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 502,723 5.76
the remains
within 30 days
after invoicing
Jiangxi Specialty Vehicles Contracted Monthly
Jiangling Motors Group Co., price Netting off 69,502 0.80
Ltd. payment of
18
purchased
goods
Jiangxi Jiangling Material Market Monthly
41,743 0.48
Utilization Co., Ltd. price settlement
JMCG Interior Trim Factory Contracted Monthly
price Netting off
payment of 39,466 0.45
purchased
goods
Jiangling New-power Auto Contracted 30 days after
20,199 0.23
Manufacturing Co. price invoicing
Nanchang JMCG Liancheng Contracted 60 days after
16,716 0.19
Auto Component Co. price invoicing
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
negotiations.
(3) Management Compensations
Pursuant to revised Personnel Secondment Agreement signed between JMC and Ford
and Ford Affiliates, in the firs half of 2012, the Company should pay US$ 2,531,250
and RMB 1,435,000 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, 2012, in the
first half of 2012, 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 2012, JMC paid RMB 10.98 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 2012, JMC paid
JMCG Import & Export Co., Ltd. commission of RMB 2.59 million pursuant to the
Exclusive Import Agency Agreement signed by them.
(6) Project Construction and Maintenance
In the first half of 2012, JMC paid RMB 10.74 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
19
(RMB thousands) Balance of
the Item
Receivables JMCG Import and Export Co.,
51,709 16.53
Ltd.
Nanchang Bao-jiang Steel &
Prepayment 144,554 76.57
Processing Distribution Co., Ltd.
Accounts and Jiangxi Specialty Vehicles
206,123 6.42
bills payable Jiangling Motors Group Co., Ltd.
Accounts and
Jiangxi Jiangling Chasis Company 183,813 5.73
bills payable
Accounts and GETRAG (Jiangxi) Transmission
134,576 4.19
bills payable Company
Accounts and
JMCG Interior Trim Factory 116,194 3.62
bills payable
Accounts and Jiangling-Lear Interior Trim
96,077 2.99
bills payable Factory
Accounts and Nanchang JMCG Liancheng Auto
85,207 2.66
bills payable Component Co.
Accounts and Nanchang Jiangling Huaxiang Auto
73,296 2.28
bills payable Components Co.
Accounts and Visteon Climate Control
68,195 2.13
bills payable (Nanchang) Co., Ltd.
Accounts and
JMCG 30,748 0.96
bills payable
Accounts and
Ford 30,298 0.94
bills payable
Other
Ford 31,565 4.50
payables
(2) Deposit
On June 30, 2012, JMC had a deposit of RMB 194.85 million in JMCG Finance Co.,
Ltd. JMC received a total of RMB 2.47 million in interest from JMCG Finance Co.,
Ltd. in the first half of 2012.
(3) Guarantees to JMC
As of June 30, 2012, JMCG Finance Co, Ltd provided a guarantee for JMC’s bank
loans of US$ 1.02 million.
4. Other major related party transactions during the first half of 2012
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$ 3,177,300 (equal to RMB 20,047,328) in the first half of 2012.
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
20
2013. JMC bore an engineering service fee of US$ 771,280 (equal to RMB 5,457,407)
in the first half of 2012.
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$ 478,952 (equivalent to approximately
RMB 3,020,788) in the first half of 2012.
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. Neither the Company nor its directors or senior management were punished by
regulatory authorities in the reporting period.
VIII. The independent directors’ explanation and independent opinions on the
Company’s outside guarantee and the Company’s account receivables by related
parties
Independent Director Shi Jiansan, Vincent Pun Fong Kwan and Wang Xu expressed
their opinions on the Company’s outside guarantee and the Company’s account
receivables by related parties as follows:
i. There is no outside guarantee during the reporting period;
ii. 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, and
iii. We have known the related party transaction with JMCG Finance Company
(“Finance Company”), and believe that the deposit limit of JMC in the Finance
Company and the proportion of the revenue settled through the Finance
Company in JMC’s gross revenue are reasonable. And, it ensured to minimize
the risk on the fund that JMCG and its subsidiaries (excluding JMC) bear the
unconditional joint and several guarantee obligation for all the debts, obligations
and responsibilities occurred due to the settlement transaction with the Finance
Company; the review and approval procedure of the related party transaction
with the Finance Company complied with the stipulations of the relevant laws,
regulations and the Articles of Association of JMC.
IX. External research and media interviews of the Company
Date Place Communication Object Information discussed
Method and sources offered
January In the Oral Three analysts from JMC Operating highlights
13, 2012 Company Communication Orient Securities
Company Limited,
China International
Fund Management
Co., Ltd., E Fund
Management Co.,
21
Ltd.
January In the Oral An analyst from JMC Operating highlights
18, 2012 Company Communication Founder Securities
Company Limited
February In the Oral Three analysts from JMC Operating highlights
9, 2012 Company Communication Ping An Insurance
(Group) Company of
China, Ltd., New
China Asset
Management Co.,
Ltd.
February In the Oral Two analysts from JMC Operating highlights
15, 2012 Company Communication New Thinking
Investment
Management Co.,
Ltd., Guoyuan
Consulting Service
Company
February In the Oral Four analysts from JMC Operating highlights
17, 2012 Company Communication Zhonghai Fund
Management Co.,
Ltd., SWS MU Fund
Management Co.,
Ltd., Golden Eagle
Asset Management
Co., Ltd.
March In the Oral Two analysts from JMC Operating highlights
30, 2012 Company Communication China Asset
Management Co.,
Ltd., Huachuang
Securities Company
Limited
April 17, In the Oral Seven analysts from JMC Operating highlights
2012 Company Communication Mingsheng Securities
Co., Ltd., New China
Fund Management
Co., Ltd., China
Universal Asset
Management Co.,
Ltd., Industrial
Securities Co., Ltd.,
Huaan Fund
Management Co.,
Ltd., SWS MU Fund
Management Co.,
Ltd., Fortis Haitong
Investmwnt
Management Co.,
Ltd.
May 9, In the Oral Four analysts from JMC Operating highlights
2012 Company Communication Huatai United
Securities Company,
Dacheng Fund
Management Co.,
Ltd.
May 17, In the Oral Three analysts from JMC Operating highlights
2012 Company Communication Donghai Securities
Company, Xiangcai
22
Securities Co., Ltd.,
Nanjing Securities
Company
May 29, In the Oral Twelve analysts from JMC Operating highlights
2012 Company Communication China Galaxy
Securities Co., Ltd.,
Mingji Investment
Company, Sunshine
Insurance Group
Corporation Limited,
Harvest Fund
Management Co.,
Ltd., Guotai Junan
Securities Co., Ltd.,
Shanghai Kaishi
Investment
Management
Company, Dacheng
Fund Management
Co., Ltd., GF
Securities Co., Ltd.,
Industrial Securities
Co., Ltd.
X. 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 Companies 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
completed in the first half year of 2012 is as follows:
i. Per the requirement of Basic Standards for Enterprise Internal Control (C-Sox),
the leading team and implementing team were established, and a C-Sox
Implementation Work Plan approved by Board of Directors was submitted to
Jiangxi Securities Regulatory Bureau. Testing scope along with assessment
criteria was determined, risk matrix developed, and external auditor to assess
company’s internal control status was selected. Key processes and high risky
areas were determined, and relevant training was organized by the external
auditor and Internal Audit Office. Testing will be performed to identify control
deficiencies, with corrective actions to be developed and implemented.
ii. 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 purchasing & payables processes and variable & fixed marketing
programs. Corrective actions were put into place as planned for the control issues
identified.
XI. JMC did not participate in securities investments nor did it hold equity in other
listed companies during the reporting period.
23
XII. Appointment or Dismissal of Accounting Firms
Upon the approval of 2011 Annual Shareholders’ Meeting, JMC continues to appoint
PwC Zhong Tian as JMC’s A & B share auditor from year 2013 to year 2015. The
firm has offered JMC audit services for eleven consecutive years.
The compensation paid to the accounting firm is as follows:
Accountant Firm Year 2012 Out of Pocket Expense
No more than RMB Included in audit fee.
PwC ZhongTian 1.80 million
(Both A & B share)
XIII . Subsequent Event
i. Acquiring 100% equity of Taiyuan Changan Heavy Truck Company
On July 16, 2012, the Board of Directors approved acquiring 100% equity of Taiyuan
Changan Heavy Truck Company (“TCHT”) jointly held by China South Industries
Group Corporation (“CSIG”) and China Changan Automobile Group Co., Ltd.
(“CCAG”) with a consideration of no more than RMB 270 million, approved the
Equity Transfer Agreement reached by CSIG, CCAG and the Company for the
acquisition, and authorized the Chairman to sign this Agreement. Upon the
completion of the equity transfer, TCHT will be a whole-owned subsidiary of the
Company to manufacture heavy duty trucks.
The transaction is subject to the approvals of the relevant government authorities.
Upon the issuance of 2012 Half-year Report, the Company has paid RMB 27 million
for the acquisition.
The Board of Directors approved the Agreement to Encourage and Support Taiyuan
Heavy Duty Truck Project between the Management Commission of Taiyuan
Economic & Technical Development Zone and the Company on July 16, 2012.
Please refer to the related Public Announcement in China Securities, Securities Times
and Hong Kong Commercial Daily on July 18, 2012 for details of the aforesaid
events.
ii. Transfer of Equity in Jiangling Isuzu Co., Ltd.
On August 6, 2012, the Board of Directors approved, after transfer of all the operation
assets, rights and obligations (other than taxation related rights and obligations) of
Jiangling Isuzu Co., Ltd. (“JMC Isuzu”) to the Company (which shall be completed
no later than January 31, 2013), and distribution of all accumulative distributable
profits of JMC Isuzu, to transfer 75% of equity held by the Company in JMC Isuzu to
JMCG, with a price of no less than the amount equal to 75% of the net assets value
stated in the formal audit report issued by an accounting firm appointed jointly by the
Company and JMCG. The Board of Directors also approved the Agreement on
Transfer of Equity in Jiangling Isuzu Co., Ltd. between JMCG and the Company, and
authorized the Company’s Vice Chairman, David L. Schoch, to sign this Agreement.
If the final price of the equity transfer is over the Board’s authority, the transfer shall
be submitted to the Shareholders’ Meeting of the Company for approval.
JMC Isuzu was established in 1993 with 75% equity owned by JMC and 25% owned
by Isuzu Motors Corporation and Itochu Corporation. The business license of JMC
24
Isuzu will expire in March 2013. JMCG intends to acquire the equity held by the
Company in JMC Isuzu and to establish a new whole vehicle program with Isuzu
Motors Corporation. To ensure the Company’s business continuity, all the operation
assets of JMC Isuzu shall be transferred to JMC before the equity transfer. Isuzu
Motors Corporation and Itochu Corporation abandon the priority to purchase the
equity.
Please refer to the related Public Announcement in China Securities, Securities Times
and Hong Kong Commercial Daily on August 8, 2012 for details of the aforesaid
events.
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
2012 is as follows:
1. Production and sales volume information in December 2011 was published on
January 5, 2012.
2. Announcement on the resolution of the Supervisory Board was published on
January 11, 2012.
3. Announcements on the resolutions of the Board of Directors and the Notice on
Holding 2012 First Special Shareholders’ Meeting were published on January 17,
2012.
4. Year 2011 performance flash report was published on January 19, 2012.
5. Production and sales volume information in January 2012 was published on
February 3, 2012.
6. Announcement on the resolution of the Board of Directors was published on
March 1, 2012.
7. Announcement on the resolutions of 2012 First Special Shareholders’ Meeting
was published on March 2, 2012.
8. Production and sales volume information in February 2012 was published on
March 3, 2012.
9. Extracts from the 2011 Annual Report and announcements on the relevant
resolutions of the Board of Directors and the Supervisory Board were published
on March 16, 2012.
10. Announcement on the resolutions of the fourth session of the seventh Board was
published on March 29, 2012.
11. Production and sales volume information in March 2012 was published on April
6, 2012.
12. Announcement on the resolution of the Board of Directors was published on
April 11, 2012.
13. 2012 First Quarter Report was published on April 25, 2012.
14. Production and sales volume information in April 2012 was published on May 3,
2012.
15. Announcements on the resolutions of the Board of Directors and the Notice on
Holding 2011 Annual Shareholders’ Meeting were published on May 29, 2012.
16. Production and sales volume information in May 2012 was published on June 5,
2012.
17. Announcement on the resolutions of 2011 Annual Shareholders’ Meeting was
published on June 20, 2012.
25
18. Announcement on the resolutions of the fifth session of the seventh Board was
published on June 21, 2012.
Section VI Financial Statements
The Half-year Financial Statements have not been audited.
26
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2012
(All amounts in RMB unless otherwise stated)
As at
Note 30 June 2012# 31 December 2011
RMB’000 RMB’000
ASSETS
Non-current assets
Property, plant and equipment 5 3,752,263 3,271,690
Lease prepayment 6 268,085 271,347
Intangible assets 7 17,960 21,954
Investments in associate 8 21,263 17,851
Deferred income tax assets 9 170,757 250,182
4,230,328 3,833,024
Current assets
Inventories 10 1,269,159 1,140,253
Trade and other receivables 11 1,463,527 1,461,601
Cash and cash equivalents 12 5,692,668 5,384,977
8,425,354 7,986,831
Total assets 12,655,682 11,819,855
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 5,270,829 5,174,295
7,408,302 7,311,768
Non-controlling interests 130,741 115,352
Total equity 7,539,043 7,427,120
LIABILITIES
Non-current liabilities
Borrowings 15 6,006 6,189
Retirement benefit obligations 16 45,601 52,198
Warranty provisions 17 156,432 140,855
208,039 199,242
Current liabilities
Financial liabilities held for trading 18 23 6,696
Trade and other payables 19 4,896,834 4,167,795
Current income tax liabilities 615 7,875
Borrowings 15 414 413
Retirement benefit obligations 16 10,714 10,714
4,908,600 4,193,493
Total liabilities 5,116,639 4,392,735
Total equity and liabilities 12,655,682 11,819,855
Unaudited financial indexes
The notes on pages 30 to 74 are an integral part of these consolidated financial statements.
27
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2012
(All amounts in RMB unless otherwise stated)
Six months ended 30 June
Note 2012# 2011#
RMB’000 RMB’000
Revenue 20 8,721,529 9,221,540
Sales tax (255,970) (262,719)
Cost of sales 21 (6,591,019) (6,992,497)
Gross profit 1,874,540 1,966,324
Distribution costs 21 (551,581) (402,393)
Administrative expenses 21 (375,191) (361,193)
Other income 23 8,449 679
Operating profit 956,217 1,203,417
Finance income 24 115,662 80,433
Finance costs 24 (508) (570)
Finance income-net 24 115,154 79,863
Share of profit of associates 8 3,412 3,229
Profit before income tax 1,074,783 1,286,509
Income tax expense 25 (220,496) (188,109)
Profit for the period 854,287 1,098,400
Profit attributable to:
Equity holders of the Company 838,898 1,075,018
Non-controlling interests 15,389 23,382
854,287 1,098,400
Other comprehensive income - -
Total comprehensive income for the period 854,287 1,098,400
Total comprehensive income attributable to:
Equity holders of the Company 838,898 1,075,018
Non-controlling interests 15,389 23,382
854,287 1,098,400
Earnings per share for profit attributable to
the equity holders of the Company
(expressed in RMB per share)
- Basic and diluted 26 0.97 1.25
#Unaudited financial indexes
The notes on pages 30 to 74 are an integral part of these consolidated financial statements.
28
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2012
(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 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 - - (681,939) - (681,939)
Balance at 30 June 2011 863,214 816,609 457,650 4,382,882 138,701 6,659,056
Balance at 1 January 2012 863,214 816,609 457,650 5,174,295 115,352 7,427,120
Profit for the six months - - - 838,898 15,389 854,287
Dividend relating to 2011 27 - - - (742,364) - (742,364)
Balance at 30 June 2012 863,214 816,609 457,650 5,270,829 130,741 7,539,043
#Unaudited financial indexes
The notes on pages 30 to 74 are an integral part of these consolidated financial statements.
29
JIANGLING MOTORS CORPORATION, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2012
(All amounts in RMB unless otherwise stated)
Six months ended June 30
Note 2012# 2011#
RMB’000 RMB’000
Cash flows from operating activities
Cash generated from operations 28 1,112,092 322,759
Interest paid (271) (422)
Income tax paid (139,390) (172,960)
Net cash generated from operating activities 972,431 149,377
Cash flows from investing activities
Purchase of held-to-maturity investments - (314,968)
Purchase of property, plant and equipment (“PPE”) (754,004) (399,262)
Other cash paid relating to investing activities (7,159) -
Proceeds from disposal of PPE 28 1,151 1,239
Proceed from repayment of held-to-maturity investments - 315,326
Interest received 95,534 58,410
Other cash received from investing activities 508 12
Net cash used in investing activities (663,970) (339,243)
Cash flows from financing activities
Repayments of borrowings (206) (24,668)
Dividends paid to the Company’s shareholders (265) (276)
Other cash paid relating to financing activities (299) (231)
Net cash used in financing activities (770) (25,175)
Net increase/(decrease) in cash and cash equivalents 307,691 (215,041)
Cash and cash equivalents at beginning of year 5,384,977 5,813,162
Cash and cash equivalents at end of period 5,692,668 5,598,121
#Unaudited financial indexes
The notes on pages 30 to 74 are an integral part of these consolidated financial statements.
30
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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. 360000511000021.
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 2012, 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 26 August 2012.
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.
31
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2011 that would be expected to have impact on the
Group.
IAS 24 (Revised), “Related Party Disclosures” is effective for annual period beginning on
or after January 2011. It introduces an exemption from all of the disclosure requirements
of IAS 24 for transactions among government related entities and the government. Those
disclosures are replaced with a requirement to disclose:
o The name of the government and the nature of their relationship;
o The nature and amount of any individually significant transactions; and
o The extent of any collectively-significant transactions qualitatively or quantitatively.
It also clarifies and simplifies the definition of a related party.
Refer to Note 31 (Viii) for details of transactions with government related entities.
(b) New and amended standards have been issued but are not effective for the financial year
beginning 1 January 2011 and have not been early adopted
The Group’s and Company’s assessment of the impact of these new and amended
standards is set out below.
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and
recognition of financial assets and financial liabilities. IFRS 9 was issued in November
2009. It replaces the parts of IAS 39 that relate to the classification and measurement of
financial instruments. IFRS 9 requires financial assets to be classified into two
measurement categories: those measured as at fair value and those measured at
amortised cost. The determination is made at initial recognition. The classification
depends on the entity’s business model for managing its financial instruments and the
contractual cash flow characteristics of the instrument. For financial liabilities, the
standard retains most of the IAS 39 requirements. The main change is that, in cases
where the fair value option is taken for financial liabilities, the part of a fair value change
due to an entity’s own credit risk is recorded in other comprehensive income rather than
profit or loss, unless this creates an accounting mismatch. The Group is yet to assess
IFRS 9’s full impact and intends to adopt IFRS 9 upon its effective date, which is for the
accounting period beginning on or after 1 January 2015.
32
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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)
IFRS 10, Consolidated financial statements’ builds on existing principles by identifying the
concept of control as the determining factor in whether an entity should be included within
the consolidated financial statements of the parent company. The standard provides
additional guidance to assist in the determination of control where this is difficult to
assess. The Group is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no
later than the accounting period beginning on or after 1 January 2013.
IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements
for all forms of interests in other entities, including joint arrangements, associates, special
purpose vehicles and other off balance sheet vehicles. The Group is yet to assess IFRS
12’s full impact and intends to adopt IFRS 12 no later than the accounting period
beginning on or after 1 January 2013.
IFRS 13, ‘Fair value measurement’ aims to improve consistency and reduce complexity
by providing a precise definition of fair value and a single source of fair value
measurement and disclosure requirements for use across IFRSs. The requirements do
not extend the use of fair value accounting but provide guidance on how it should be
applied where its use is already required or permitted by other standards within IFRS.
The Group is yet to assess IFRS 13’s full impact and intends to adopt IFRS 13 no later
than the accounting period beginning on or after 1 January 2013.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be
expected to have a material impact on the Group.
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.
Inter-company transactions, balances, income and expenses on transactions between group
companies are eliminated. Profits and losses resulting from inter-company transactions that
are recognised in assets 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. Under the
equity method, the investment is initially recognised at cost, and the carrying amount is
increased or decreased to recognise the investor’s share of the profit or loss of the investee
after the date of acquisition. The Group’s investment in associates includes goodwill identified
on acquisition.
33
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.2 Consolidation (continued)
(2) Associates (continued)
The Group's share of post-acquisition profit or loss is recognised in profit or loss, and its share
of post-acquisition movements in other comprehensive income is recognised in other
comprehensive income with a corresponding adjustment to the carrying amount of the
investment. When the Group's share of losses in an associate equals or exceeds its interest in
the associate, including any other unsecured receivables, the Group does not recognise
further losses, unless it has incurred legal or constructive obligations or made payments on
behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired. If this is the case, the Group calculates the amount of
impairment as the difference between the recoverable amount of the associate and its
carrying value and recognises the amount adjacent to ‘share of profit/(loss) of an associate’ in
profit or loss.
Profits and losses resulting from upstream and downstream transactions between the Group
and its associate are recognised in the Group’s financial statements only to the extent of
unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Dilution gains and losses arising in investments in associates are recognised in profit or loss.
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.
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.
34
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 (continued)
(2) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or valuation where items are remeasured.
Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss, except when deferred in
equity as qualifying cash flow hedges and qualifying net investment hedges.
Foreign exchange gains and losses are presented in profit or loss within “other
income/(expense)-net”.
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 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
profit or loss during the financial period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate their cost to their residual
values over their estimated useful lives, as follows:
Buildings 35-40 years
Plant and machinery 10-15 years
Motor vehicles 6-10 years
Moulds 5 years
Electronic and other equipments 5-7 years
35
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 profit or loss.
Assets under construction represent buildings under construction and plant and equipment
pending installation, and are stated at cost. Costs include construction and acquisition costs.
No provision for depreciation is made on assets under construction until such time as the
relevant assets are completed and ready for intended use. When the assets concerned are
brought into use, the costs are transferred to property, plant and equipment and depreciated in
accordance with the policy as stated above.
2.6 Lease prepayment
Lease prepayment represents upfront prepayment made for the land use rights, and is
expensed in profit or loss on a straight line basis over the period of the lease or when there is
impairment, the impairment is expensed in profit or loss.
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 six months ended 30 June
2012
36
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 that are subject to amortisation are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible reversal of the impairment at each reporting
date.
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 2012, 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 2.14
and 2.15).
(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 the amounts that are settled or expected to be settled more than 12 months after the end
of the reporting period. These are classified as non-current assets.
37
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 way 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 profit or loss. 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 profit or loss 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 profit or loss 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 profit or loss as ‘gains and losses from
investment securities’.
Interest on available-for-sale securities calculated using the effective interest method is
recognised in profit or loss as part of other income. Dividends on available-for-sale equity
instruments are recognised in profit or loss as part of other income when the Group’s right to
receive payments is established.
38
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
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.
Evidence of impairment may include indications that the debtors or a group of debtors is
experiencing significant financial difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other financial reorganisation, and
where observable data indicate that there is a measurable decrease in the estimated future
cash flows, such as changes in arrears or economic conditions that correlate with defaults.
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 profit or loss. 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 profit or loss.
39
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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)
(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 profit or loss. Impairment losses recognised in the separate
consolidated profit or loss on equity instruments are not reversed through the separate
consolidated profit or loss. 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 profit or loss.
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.
2.12 Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently re-measured at their fair value. The method of recognising the
resulting gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The Group has no derivative
instruments that qualifying for hedge accounting. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting are recognised immediately in profit or
loss.
2.13 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.
2.14 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.
40
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.15 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.
2.16 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.
2.17 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.
2.18 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings
are subsequently carried at amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in profit or loss over the period of the
borrowings using the effective interest method.
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.
2.19 Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a substantial period of
time to get ready for their intended use or sale, are added to the cost of those assets, until such
time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are
incurred.
41
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.20 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit
or loss, except to the extent that it relates to items recognised in other comprehensive income
or directly in equity. In this case the tax is also recognised in other comprehensive income or
directly in equity, respectively.
(1) Current income tax
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.
(2) Deferred income tax
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, deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill, 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 substantively 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 on 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.
(3) Offsetting
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.
2.21 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 profit or loss
as and when incurred. The Group’s obligations are determined at a certain percentage of the
salaries of the employees.
42
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.21 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 profit or loss 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.
2.22 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.
43
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
2 Summary of significant accounting policies (continued)
2.23 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and
represents amounts receivable for goods supplied, stated net of discounts returns and value
added taxes. The Group recognises revenue when the amount of revenue can be reliably
measured; when it is probable that future economic benefits will flow to the entity; and when
specific criteria have been met for each of the Group’s activities, as described below. The
Group bases its estimates of return 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.
2.24 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to profit or loss on a straight-line basis over
the period of the lease.
2.25 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.
2.26 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 profit or loss 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 profit or loss on a straight line
basis over the expected lives of the related assets.
44
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
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 other payables dominated in U.S.dollar
(“USD”).
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 2012, if RMB had strengthened/weakened by 10% against USD with all other
variable held constant, the Group’s net profit for the six months ended 30 June 2012 would
have been approximately RMB5,211,000 higher/lower.
(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 2012, 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 2012, 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 2012 would increase/decrease by approximately
RMB7,384,000.
(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 2012, the Group had cash deposits of approximately 194,847,000 (2011:
RMB182,049,000) 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. Management believes all
these financial institutions have high credit quality without significant credit risk.
45
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
3 Financial risk management (continued)
3.1 Financial risk factors (continued)
(2) Credit risk (continued)
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.
(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 2012
Bank borrowings
- Principals 414 414 1,243 4,349
- Interests 95 88 228 359
Trade and other payables 3,909,990 - - -
Financial liabilities held for
trading 23 - - -
3,910,522 502 1,471 4,708
At 31 December 2011
Bank borrowings
- Principals 413 413 1,237 4,539
- Interests 97 91 237 391
Trade and other payables 3,814,531 - - -
Financial liabilities held for
trading 6,696 - - -
3,821,737 504 1,474 4,930
46
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2012 and 31 December 2011 were as follows:
30 June 2012 31 December 2011
RMB’000 RMB’000
Total borrowings 6,420 6,602
Total equity 7,539,043 7,427,120
Total capital 7,545,463 7,433,722
Gearing ratio 0.09% 0.09%
3.3 Fair value estimation
The financial liabilities held for trading are forward exchange contracts and are not traded in
an active market. The fair value is determined by using valuation techniques which maximised
the use of observable market data where it is available and rely as little as possible on entity
specific estimates. The different levels have been defined as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
Inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)
(level 2).
Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).
Since all significant inputs required to fair value the instrument are observable, the financial
liabilities held for trading belong to level 2.
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.
47
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
3 Financial risk management (continued)
3.3 Fair value estimation (continued)
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
(1) Provisions
The Group provides warranties on automobile and undertakes to repair or replace items that
fail to perform satisfactorily based on certain pre-determined conditions. Management
estimates the related warranty claims based on historical warranty claim information including
level of repairs and returns as well as recent trends that might suggest that past cost
information may differ from future claims.
Factors that could impact the estimated claim information include the success of the Group’s
productivity and quality controls, as well as parts and labour costs. Any increase or decrease
in the provision would affect profit or loss in future years.
(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.
48
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2012, the Group has deferred tax assets in the amount of approximately
RMB170,757,000. 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.
49
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 Mouldsry Vehicles Moulds other equipments constructions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2011
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
Year ended 31 December 2011
Opening net book amount 588,061 862,078 45,093 310,471 453,274 371,547 2,630,524
Additions - - - - 1,089 973,422 974,511
Transfers 22,638 69,401 22,798 104,120 131,016 (349,973) -
Disposals (2,026) (543) (1,030) (233) (780) - (4,612)
Other deduction - - - - - (3,270) (3,270)
Impairment charge - (1,167) (73) (171) (724) - (2,135)
Depreciation charge (19,205) (103,562) (9,336) (90,703) (100,522) - (323,328)
Closing net book amount 589,468 826,207 57,452 323,484 483,353 991,726 3,271,690
At 31 December 2011
Cost 804,670 2,324,487 107,433 1,206,775 1,335,013 992,418 6,770,796
Accumulated depreciation and impairment (215,202) (1,498,280) (49,981) (883,291) (851,660) (692) (3,499,106)
Net book amount 589,468 826,207 57,452 323,484 483,353 991,726 3,271,690
Six month ended 30 June 2012
Opening net book amount 589,468 826,207 57,452 323,484 483,353 991,726 3,271,690
Additions - - - - - 664,225 664,225
Transfers 616 76,308 3,648 17,035 30,202 (127,809) -
Disposals - (371) (762) - (426) - (1,559)
Other deduction - - - - - (2,629) (2,629)
Depreciation charge (Note 21,28) (9,831) (53,376) (5,840) (56,225) (54,192) - (179,464)
Closing net book amount 580,253 848,768 54,498 284,294 458,937 1,525,513 3,752,263
At 30 June 2012
Cost 805,286 2,395,365 108,707 1,223,810 1,356,752 1,526,205 7,416,125
Accumulated depreciation and impairment (225,033) (1,546,597) (54,209) (939,516) (897,815) (692) (3,663,862)
Net book amount 580,253 848,768 54,498 284,294 458,937 1,525,513 3,752,263
50
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2012, depreciation expense of approximately
RMB160,910,000 (the six months ended 30 June 2011: RMB138,373,000) has been charged
in cost of sales, RMB684,000 (the six months ended 30 June 2011: 637,000) in distribution
costs and RMB17,870,000 (the six months ended 30 June 2011: RMB16,860,000) in
administrative expenses.
Lease rental expenses amounting to RMB2,272,000 (the six months ended 30 June 2011:
RMB1,703,000) relating to the lease of property are included in profit or loss.
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 2012 31 December 2011
RMB’000 RMB’000
Opening net book amount 271,347 277,870
Amortisation charge (Note 21,28) (3,262) (6,523)
Closing net book amount 268,085 271,347
Cost 329,863 329,863
Accumulated amortisation (61,778) (58,516)
Net book amount 268,085 271,347
All amortisation expense was charged in administrative expenses.
51
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2011
Opening net book amount 10,787 20,050 465 31,302
Addition - 3,269 - 3,269
Impairment charge - (97) - (97)
Amortisation charge (6,163) (6,090) (267) (12,520)
Closing net book amount 4,624 17,132 198 21,954
At 31 December 2011
Cost 36,978 33,078 1,600 71,656
Accumulated amortisation (32,354) (15,946) (1,402) (49,702)
Net book amount 4,624 17,132 198 21,954
Six month ended 30 June 2012
Opening net book amount 4,624 17,132 198 21,954
Addition - 2,616 - 2,616
Amortisation charge (Note 21, 28) (3,083) (3,395) (132) (6,610)
Closing net book amount 1,541 16,353 66 17,960
At 30 June 2012
Cost 36,978 35,694 1,600 74,272
Accumulated amortisation (35,437) (19,341) (1,534) (56,312)
Net book amount 1,541 16,353 66 17,960
For the six months ended 30 June 2012, amortisation expense of approximately RMB6,525,000
(the six months ended 30 June 2011: RMB6,112,000) was charged in administrative expenses
and RMB85,000 in distribution costs (the six months ended 30 June 2011: RMB117,000).
52
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2012 31 December 2011
RMB’000 RMB’000
At beginning of the year 17,851 17,928
Share of profit (Note 28) 3,412 7,032
Dividends received - (7,109)
At end of the period 21,263 17,851
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”), with operating period of 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 2012 31 December 2011
RMB’000 RMB’000
Total assets 186,510 28,969
Total liabilities (75,475) (11,118)
Net assets 111,035 17,851
Six months ended 30 June
2012 2011
RMB’000 RMB’000
Revenue 137,195 121,601
Profit for the period 17,819 16,857
53
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2012, the Company is entitled to a preferential corporate income tax (“CIT”) rate
of 15% from 2012 to 2014.
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 2012 31 December 2011
RMB’000 RMB’000
Deferred tax assets 171,243 252,707
Deferred tax liabilities (486) (2,525)
Deferred tax assets (net) 170,757 250,182
The gross movement on the deferred income tax account is as follows:
30 June 2012 31 December 2011
RMB’000 RMB’000
At beginning of the year 250,182 205,063
Credited to profit or loss
(Note 25) (79,425) 45,119
At end of the period 170,757 250,182
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
a obligation expenses Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2011 1,738 15,768 159,100 30,205 206,811
Credited/(charged) to
profit or loss 1,633 (40) 35,412 8,891 45,896
At 31 December 2011 3,371 15,728 194,512 39,096 252,707
Credited/(charged) to
profit or loss (1,269) (3,042) (64,387) (12,766) (81,464)
At 30 June 2012 2,102 12,686 130,125 26,330 171,243
54
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2011 (1,748)
Charged to profit or loss (777)
At 31 December 2011 (2,525)
Charged to profit or loss 2,039
At 30 June 2012 (486)
The amounts shown in the statement of financial position include the followings:
30 June 2012 31 December 2011
RMB’000 RMB’000
Deferred tax assets:
–Deferred tax asset to be recovered after
more than 12 months 12,248 14,288
–Deferred tax asset to be recovered
within 12 months 158,995 238,419
171,243 252,707
30 June 2012 31 December 2011
RMB’000 RMB’000
Deferred tax liabilities:
–Deferred tax liability to be recovered
within 12 months (486) (2,525)
10 Inventories
30 June 2012 31 December 2011
RMB’000 RMB’000
Raw materials 776,640 693,244
Work in progress 108,671 132,479
Finished goods 383,848 314,530
1,269,159 1,140,253
For the six months ended 30 June 2012, the cost of inventories recognised as expenses and
included in cost of sales amounted to approximately RMB5,886,675,000 ( the six months
ended 30 June 2011: RMB6,602,012,000 ).
55
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
11 Trade and other receivables
30 June 2012 31 December 2011
RMB’000 RMB’000
Trade receivables 312,905 310,156
Less: Provision for impairment of trade
receivables (1,564) (1,551)
Trade receivables – net 311,341 308,605
Notes receivables 896,108 933,794
Other receivables 23,013 15,513
Less: Provision for impairment of other
receivables (118) (81)
Other receivables – net 22,895 15,432
Prepayments 196,520 195,025
Interest receivables 36,663 8,745
1,463,527 1,461,601
Refer to Note 31 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 2012 31 December 2011
RMB’000 RMB’000
RMB 1,460,217 1,461,601
EUR 3,310 -
1,463,527 1,461,601
The carrying amounts of trade and other receivables approximate their fair values.
As at 30 June 2012, trade and other receivables of approximately RMB1,682,000 (2011:
RMB1,632,000) were impaired and provided for.
Movement on the provision for impairment of trade and other receivables is as follows:
30 June 2012 31 December 2011
RMB’000 RMB’000
At beginning of the year (1,632) (898)
Provision for receivables impairment
(Note 21,28) (50) (734)
At end of the period (1,682) (1,632)
As at 30 June 2012, trade receivables of approximately RMB5,489,000 (2011: RMB4,897,000)
were past due but not impaired. These balances related to a number of independent customers
for whom there was no recent history of default. The aging analysis of these trade receivables
based on past due date is as below:
56
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
11 Trade and other receivables (continued)
30 June 2012 31 December 2011
RMB’000 RMB’000
Up to three months 5,289 3,738
three months to six months 200 1,159
5,489 4,897
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.
12 Cash and cash equivalents
30 June 2012 31 December 2011
RMB’000 RMB’000
Cash at bank and in hand 999,454 647,279
Short-term bank deposits (a) 4,693,214 4,737,698
5,692,668 5,384,977
As at 30 June 2012, the Group had cash deposits of approximately RMB194,847,000 (2011:
RMB182,049,000) placed with JMCF (Note 31 (iii)). The interest rates range from 0.36% to
1.53% per annum (2011: 0.36% to 1.49%). 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 2011
Balance at 1 January 2011 863,214 2,906 516,308 344,000 863,214
Transfer - (124) 124 - -
Balance at 31 December 2011 863,214 2,782 516,432 344,000 863,214
The six months ended
30 June 2012
Balance at 1 January 2012 863,214 2,782 516,432 344,000 863,214
Transfer - - - - -
Balance at 30 June 2012 863,214 2,782 516,432 344,000 863,214
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.
After implementation of the share reform scheme on 13 February 2006, all of the non-tradable
A shares became tradable with conditions of 1-3 years restricted period. As at 30 June 2012,
2,782,000 shares were still restricted. In the first half of 2012, 30 restricted shares became
non-restricted.
57
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2012 431,607 18,627 7,416 457,650
- Profit appropriation - - - -
At 30 June 2012 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 for the six months ended 30 June 2012.
58
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
15 Borrowings
30 June 2012 31 December 2011
RMB’000 RMB’000
Current
Bank borrowings
- secured (a) 414 413
414 413
Non-current
Bank borrowings - secured (a) 6,006 6,189
Total borrowings 6,420 6,602
(a) Bank borrowings of USD1,015,000 (equivalent to approximately RMB6,420,000) (2011:
USD1,048,000, equivalent to approximately RMB6,602,000) were guaranteed by JMCF (Note
31 (v)).
The interest rate of bank borrowings is 1.50% per annum (2011: 1.50%).
The fair value of borrowings approximates their carrying values.
The maturity of non-current borrowings is as follows:
30 June 2012 31 December 2011
RMB’000 RMB’000
Between 1 and 2 years 414 413
Between 2 and 5 years 1,243 1,237
Over 5 years 4,349 4,539
6,006 6,189
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
30 June 2012 31 December 2011
RMB’000 RMB’000
USD 6,420 6,602
6,420 6,602
The Group has the following undrawn borrowing facilities:
30 June 2012 31 December 2011
RMB’000 RMB’000
Fixed rate
- Expiring within one year 1,682,570 1,347,325
- Expiring beyond one year 500,000 793,576
2,182,570 2,140,901
59
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2012 31 December 2011
RMB’000 RMB’000
Present value of defined benefits obligations
Defined benefit obligations 56,315 65,405
Unrecognised past service cost - (2,493)
Liability on the statement of financial position 56,315 62,912
The movement of early retirement and supplemental benefit obligations for the six months ended
30 June 2012 is as follows:
30 June 2012 31 December 2011
RMB’000 RMB’000
At beginning of the year 62,912 66,657
For the year
-Current service cost - 340
-Interest cost - 2,647
-Payment (6,597) (13,599)
-Past service cost - 831
-Actuarial loss/(gain) - 6,036
At end of the period 56,315 62,912
Current 10,714 10,714
Non-current 45,601 52,198
56,315 62,912
The material actuarial assumptions used in valuing these obligations are as follows:
(1) Discount rate adopted: 3.50% (2011: 3.50%)
(2) The salary and supplemental benefits inflation rate of retiree, early-retiree and employee at
post: 0% to 5% (2011: 0% to 5%)
(3) Mortality: average life expectancy of residents in the PRC
Based on the assessment and IAS 19, the Group estimated that, at 30 June 2012, a provision of
56,315,000 is sufficient to cover all future retirement-related obligations.
Obligation in respect of retirement benefits of 56,315,000 is the present value of the unfunded
obligations, of which the current portion amounting to RMB10,714,000 (2011: RMB10,714,000)
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 3.91%/4.31%
Inflation rate Increase/decrease by 0.5% Increase/decrease by 1.37%/1.20%
Rate of mortality Increase/decrease by 1 year Decrease/increase by 0.75%/0.88%
60
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 2012 31 December 2011
RMB’000 RMB’000
At beginning of the year 140,855 171,789
Charged for the period (Note 21) 89,775 96,155
Utilised during the period (74,198) (127,089)
At end of the period 156,432 140,855
The above represents the warranty costs for repairs and maintenance, which are estimated
based on present after-sale service policies and prior years’ experience on the incurrence of
such cost. For the business motor vehicles the warranty period is the sooner of 2 years and
50,000 kilometres since the motor vehicles are sold to consumer, while for the SUV the
warranty period is the sooner of 3 years and 60,000 kilometres since the motor vehicles are
sold to consumer.
18 Financial liabilities held for trading
30 June 2012 31 December 2011
RMB’000 RMB’000
Forward exchange contracts 23 6,696
19 Trade and other payables
30 June 2012 31 December 2011
RMB’000 RMB’000
Trade payables 3,209,114 2,945,440
Payroll and welfare payable 121,316 153,311
Dividend payables 752,024 8,752
Other payables 814,380 1,060,292
4,896,834 4,167,795
Refer to Note 31 for details of amount due to related parties.
20 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.
61
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
21 Expenses by nature
Six months ended 30 June
2012 2011
RMB’000 RMB’000
Changes in inventories of finished goods and work
in progress (44,352) 299,238
Raw materials and consumables used 5,931,027 6,302,774
Employee benefit expenses (Note 22) 496,559 457,706
Depreciation on PPE (Note 5,28) 179,464 155,870
Impairment charges of PPE (Note 5,28) - 1,005
Repairs and maintenance expenditure on PPE 22,513 29,789
Research and development expenditure 219,523 208,618
Amortisation of lease prepayment (Note 6,28) 3,262 3,262
Amortisation of intangible assets (Note 7,28) 6,610 6,229
Write-down of inventories (Note 28) 1,205 7,521
Provision for receivables impairment (Note 11,28) 51 1,246
Provision of warranty (Note 17) 89,775 26,266
Others 612,154 256,559
Total cost of sales, distribution costs and
administrative expenses 7,517,791 7,756,083
22 Employee benefit expenses
Six months ended 30 June
2012 2011
RMB’000 RMB’000
Wages and salaries 358,520 342,819
Social security costs 42,060 32,628
Pension costs defined contribution plans 64,660 57,580
Others 31,319 24,679
496,559 457,706
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.
62
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
23 Other income
Six months ended 30 June
2012 2011
RMB’000 RMB’000
Government grants (a) 10,768 1,390
Others (2,319) (711)
8,449 679
(a) For the six months ended 30 June 2012, the Group received unconditional grants of
approximately RMB10,768,000 mainly from the Government of Qinyunpu District, Nanchang
City. Such amounts are not considered to be government grants relating to future cost or PPE
and credited in profit or loss.
24 Finance income and cost
Six months ended 30 June
2012 2011
RMB’000 RMB’000
(a) Finance income
Interest income on bank deposits 89,381 62,185
Interest income on credit sales 26,281 18,248
115,662 80,433
(b) Finance cost
Interest expense on bank loans (209) (339)
Bank charges (299) (231)
(508) (570)
Net finance income 115,154 79,863
25 Taxation
(a) CIT
Refer to Note 9 for the Group applicable tax rates. For the six months ended 30 June 2012,
the applicable CIT rates of the Company and its subsidiary are 15% and 25% respectively.
The amounts of income tax expense charged to profit or loss represented:
Six months ended 30 June
2012 2011
RMB’000 RMB’000
Current tax (141,071) (139,655)
Deferred tax (Note 9) (79,425) (48,454)
(220,496) (188,109)
63
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
25 Taxation (continued)
(a) CIT (continued)
The difference between the actual income tax charge in profit or loss and the amounts which
result from applying the enacted tax rate to profit before income tax can be reconciled as
follows:
Six months ended 30 June
2012 2011
RMB’000 RMB’000
Profit before tax 1,074,784 1,286,509
Tax calculated at a tax rate of15% (2011: 15%) (161,218) (192,976)
Company which is subject to different tax rate (8,871) (11,170)
Tax concessions 86 257
Expense not deductible for tax purposes (1,200) (1,716)
Income not subject to tax 14,796 17,483
Effect of different tax rates applied for the periods
in which the temporary differences are
expected to reverse (64,089) 13
Tax charge (220,496) (188,109)
(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.
26 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 2012.
Six months ended 30 June
2012 2011
Profit attributable to equity holders of the
Company (‘000) 838,898 1,075,018
Weighted average number of ordinary shares in
issue (thousands) 863,214 863,214
Basic earnings per share 0.97 1.25
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 2012.
64
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
27 Dividends
A final dividend for 2011, amounting to a total dividend of RMB742,364,040 has been
approved at the Shareholders’ Meeting on 19 June 2012(RMB0.86 per share).
28 Cash generated from operations
Six months ended 30 June
2012 2011
RMB’000 RMB’000
Profit before tax 1,074,784 1,286,509
Depreciation (Note 5,21) 179,464 155,870
Amortisation of lease prepayment (Note 6,21) 3,262 3,262
Amortisation of intangible assets (Note 7,21) 6,610 6,229
Impairment charge of PPE (Note 5,21) - 1,005
Provision for receivables impairment (Note11, 21) 51 1,246
Write-down of inventories (Note 21) 1,205 7,521
Loss on disposals of PPE 468 273
Finance cost (Note 24) 508 570
Finance income (Note 24) (115,662) (80,433)
Net foreign exchange transaction loss/ (gain) 1,211 (298)
Share of profit of associate (Note 8) (3,412) (3,229)
Investment income of held-to-maturity investments - (359)
Investment loss /(gain) of forward exchange
contracts 6,651 (12)
Changes on fair value of forward exchange
contracts (6,673) (180)
Changes in working capital:
-(Increase)/Decrease in inventories (132,123) 192,177
-Decrease/(Increase) in trade and other
receivables 9,741 (638,539)
- Increase/(Decrease) in warranty provisions 15,577 (35,918)
- Increase/(Decrease) in trade and other payables 77,027 (565,536)
- Decrease in pensions and other retirement
benefits (6,597) (7,399)
Cash generated from operations 1,112,092 322,759
In the cash flow statement, proceeds from disposal of property, plant and equipment comprise:
Six months ended 30 June
2012 2011
RMB’000 RMB’000
Net book amount 1,559 1,487
Loss on disposal of property, plant and equipment (468) (273)
Offset with trade and other payables 60 25
Proceeds from disposal of property, plant and
equipment 1,151 1,239
65
JIANGLING MOTORS CORPORATION, LTD.
FOR THE SIX MONTHS ENDED 30 JUNE 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in RMB unless otherwise stated)
29 Contingencies
At 30 June 2012, the Group did not have any significant contingent liabilities.
30 Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but not recognised in the
financial statements are as follows:
30 June 2012 31 December 2011
RMB’000 RMB’000
Contracted but not provided for:
Purchases of buildings, plant and machinery 975,130 1,261,130
31 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 2012. 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 2012.
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)
31 Related party transactions (continued)
For the six months ended 30 June 2012, 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
Jiangxi JMCG Shangrao Industrial Co. 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
Jiangling Overseas Motors Sales&Service Co., Ltd. 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., Ltd. Subsidiary of JMCG
Jiangxi Velff Engine Co., Ltd. Subsidiary of JMCG
Nanchang JMCG Trading Co. Subsidiary of JMCG
Nanchang JMCG Liancheng Auto Component Co. Subsidiary of JMCG
JMCG Jingma Motors Co., Ltd. Subsidiary of JMCG
Nanchang JMCG Printing Plant Co. Associate of JMCG
JMCG Hequn Costume Co., Ltd. Associate of JMCG
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
Visteon Climate Control Nanchang Associate of the Company
GETRAG Ford Transmissions Gmbh Joint venture of Ford
Jiangxi Biaohong Engine Tappet Co., Ltd. Subsidiary of JMCG
Nanchang Jiangling Huasheng Cleaner Co., Ltd. Subsidiary of JMCG
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)
31 Related party transactions (continued)
i) Purchases of goods and services
Purchase of goods Six months ended 30 June
2012 2011
RMB’000 RMB’000
JMCG 61,928 51,209
Ford 117,830 190,580
JMCG Interior Trim Factory 243,391 268,792
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. 95,320 91,823
Jiangling Material Co. 24,653 37,053
Visteon Climate Control Nanchang 94,756 93,281
Jiangxi Jiangling Chassis Company 289,881 276,107
Jiangling-Lear Interior Trim Factory 170,354 166,475
Jiangling Metal Casting Co. 17,281 16,285
Nanchang Gear Co., Ltd. 3,108 3,227
Nanchang Jiangling Hua Xiang Auto Components
Co. 101,659 95,248
Jiangling Auto Component Co. 1,489 16,635
Jiangxi JMCG Shangrao Industrial Co. 6,381 6,035
Nanchang JMCG Printing Plant Co. 1,735 1,532
GETRAG (Jiangxi) Transmission Company 296,587 288,689
Nanchang JMCG Liancheng Auto Component Co. 113,576 106,210
JMCG Hequn Costume Co., Ltd. 1,864 1,417
Nanchang Baojiang Steel Processing Distribution
Co., Ltd. 351,518 296,665
Nanchang JMCG Xinchen Auto Component Co. 12,881 13,692
Jiangxi JMCG Aowei Auto Component Co. 18,133 17,498
Nanchang JMCG Tianren Auto Component Co. 27,202 16,123
Nanchang Lianda Machinery Co., Ltd. 27,724 21,657
Jiangxi Biaohong Engine Tappet Co., Ltd. 3,976 -
Nanchang Jiangling Huasheng Cleaner Co., Ltd. 2,247 -
Jiangxi Velff Engine Co., Ltd. 1,997 -
Jiangxi Jiangling Material Utilization Co., Ltd. 1,013 -
Others 153 424
2,088,637 2,076,657
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)
31 Related party transactions (continued)
i) Purchases of goods and services (continued)
Purchase of services Six months ended 30 June
2012 2011
RMB’000 RMB’000
JMCG Import & Export Co., Ltd.
- commission expenses 2,593 2,120
JMCG
- rental expense 2,272 1,703
Ford
- services 18,554 22,547
JMCG Jiangxi Engineering Construction Co., Ltd.
- services 10,741 8,594
Jiangxi JMCG Industrial Co.
- services 10,982 8,929
JMCG Property Management Co.
- services 906 1,257
Ford Motor Research & Engineering (Nanjing)
Co., Ltd.
- services 2,106 1,092
Nanchang JMCG Shishun Auto Rental Co., Ltd.
- services 2,949 3,408
Jiangxi Specialty Vehicles Jiangling Motors
Group Co., Ltd.
- services 1,239 940
Others 2,399 3,619
54,741 54,209
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)
31 Related party transactions (continued)
i) Purchases of goods and services (continued)
Purchases of property, plant and equipment Six months ended 30 June
2012 2011
RMB’000 RMB’000
Jiangling Overseas Motors Sales&Service Co., Ltd. 207 -
207 -
ii) Sales of goods and provision of services
Sales of goods Six months ended 30 June
2012 2011
RMB’000 RMB’000
JMCG Import & Export Co., Ltd. 502,723 440,058
JMCG Interior Trim Factory 39,466 36,855
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. 69,502 59,412
JMCG Property Management Co. 3,664 3,565
JMCG Jingma Motors Co., Ltd. 1,266 -
Jiangxi Jiangling Chassis Company 13,323 12,052
Land Wind Sales Company 946 1,317
Jiangxi Jiangling Material Utilization Co., Ltd. 41,743 40,108
JMH 9,977 33,463
Nanchang JMCG Liancheng Auto Component Co. 16,716 24,770
Jiangling-Lear Interior Trim Factory 4,298 3,065
Jiangling New-power Auto Manufacturing Co. 20,199 16,895
Nanchang JMCG Trading Co. 356 16,262
Jiangxi Velff Engine Co., Ltd. 649 1,689
Nanchang Jiangling Hua Xiang Auto Components
Co. - 7,854
Jiangxi JMCG Yichehang Second-hand Motors
Sales Co., Ltd. 754 1,266
Others 2,312 2,904
727,894 701,535
Rental income Six months ended 30 June
2012 2011
RMB’000 RMB’000
Jiangling Material Co. 132 -
132 -
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)
31 Related party transactions (continued)
iii) Balances arising from sales/purchases of goods/services
Trade receivables from related parties 30 June 2012 31 December 2011
RMB’000 RMB’000
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. - 44,255
JMH 2,783 3,557
Jiangxi Jiangling Material Utilization Co., Ltd. 2,716 3,650
Nanchang JMCG Liancheng Auto Component Co. 515 7,132
Jiangling New-power Auto manufacturing Co. 3,676 2,314
JMCG Import & Export Co., Ltd. 51,709 50,982
Jiangxi Velff Engine Co., Ltd. 561 158
JMCG Jingma Motors Co., Ltd. - 11
Jiangxi Jiangling Chassis Company 1,523 -
63,483 112,059
Other receivables from related parties 30 June 2012 31 December 2011
RMB’000 RMB’000
JMCG Import & Export Co., Ltd 888 109
Prepayments for purchasing of goods 30 June 2012 31 December 2011
RMB’000 RMB’000
Nanchang Baojiang Steel Processing Distribution 144,554 158,033
Co., Ltd.
144,554 158,033
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)
31 Related party transactions (continued)
iii) Balances arising from sales/purchases of goods/services (continued)
Prepayments for construction in progress 30 June 2012 31 December 2011
RMB’000 RMB’000
JMCG Import & Export Co., Ltd. 22,727 4,718
JMCG Jiangxi Engineering Construction Co., Ltd. 738 1,992
23,465 6,710
Trade payables to related parties 30 June 2012 31 December 2011
RMB’000 RMB’000
JMCG Interior Trim Factory 116,194 107,461
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. 206,123 168,527
Jiangling-Lear Interior Trim Factory 96,077 118,476
Visteon Climate Control Nanchang 68,195 59,200
JMCG 30,748 22,203
Jiangxi Jiangling Chassis Company 183,813 135,690
Nanchang Gear Co., Ltd. 1,683 2,223
Nanchang Jiangling Hua Xiang Auto Components
Co. 73,296 72,585
Jiangling Metal Casting Co. 6,414 7,721
Jiangxi VELFF Enginel Co., Ltd. 2,073 -
Jiangxi JMCG Shangrao Industrial Co. 2,752 2,592
Jiangling Auto Component Co. 924 1,262
JMCG Import & Export Co., Ltd. 87 1,733
Jiangling Material Co. 909 2,000
GETRAG (Jiangxi) Transmission Company 134,576 135,240
Nanchang JMCG Liancheng Auto Component Co. 85,207 72,387
Ford 30,298 51,703
Nanchang JMCG Xinchen Auto Component Co. 5,808 6,829
Jiangxi JMCG Aowei Auto Component Co. 29,359 19,394
Nanchang Lianda Machinery Co., Ltd. 17,473 17,220
Nanchang JMCG Tianren Auto Component Co. 14,543 13,278
JMH - 67
Jiangxi Biaohong Engine Tappet Co., Ltd. 2,276 -
Nanchang Jiangling Huasheng Cleaner Co., Ltd. 2,340 755
Others 1,756 1,378
1,112,924 1,019,924
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)
31 Related party transactions (continued)
iii) Balances arising from sales/purchases of goods/services (continued)
Other payables to related parties 30 June 2012 31 December 2011
RMB’000 RMB’000
Ford 31,565 47,038
Ford Otosan Company 5,899 8,269
Ford Motor (China) Co., Ltd. 950 1,377
GETRAG (Jiangxi) Transmission Company 1,240 1,240
JMCG Jiangxi Engineering Construction Co., Ltd. 4,153 4,950
Jiangling-Lear Interior Trim Factory 9,090 9,218
Ford Motor Company of Australia Limited 2,554 2,921
Ford Global Technologies,LLC 14,870 19,162
Ford Motor Research & Engineering (Nanjing)
Co., Ltd. 1,808 1,719
Jiangxi Specialty Vehicles Jiangling Motors Group
Co., Ltd. 1,462 3,542
JMCG 2,075 829
Nanchang Jiangling Hua Xiang Auto Components
Co. 1,157 807
Jiangxi Jiangling Chassis Company 2,570 3,030
JMH 441 -
GETRAG Ford Transmissions Gmbh 1,900 1,900
JMCG Interior Trim Factory 756 1,399
Others 1,199 1,794
83,689 109,195
Advance from related parties 30 June 2012 31 December 2011
RMB’000 RMB’000
JMCG Import & Export Co., Ltd. 948 2,007
Others 258 402
1,206 2,409
Cash deposit in related parties 30 June 2012 31 December 2011
RMB’000 RMB’000
JMCF (Note 12) 194,847 182,049
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)
31 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 2012,
the Company accrued service fee of approximately USD2,531,000 (equivalent to
approximately RMB15,952,000), RMB265,000 and RMB1,170,000 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 2012, some employees
of JMH were assigned to the Company as management staff. During the six months ended 30
June 2012, the Company accrued service fee of approximately RMB441,000 payable to JMH
for these employees.
v) Guarantee
As at 30 June 2012, bank loans of USD1,015,000 (equivalent to approximately
RMB6,420,000) (2011: USD1,048,000, equivalent to approximately RMB6,602,000) 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 2012, the total remuneration of the key management was
approximately RMB9,065,000 (the six months ended 30 June 2011:RMB7,621,000).
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% on the net sales amount of V348 series automobiles till the sale of
the products ceased. 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 2012, the total royalty fee due to Ford Global Technologies, LLC and Ford
Otosan Company was approximately USD3,177,000 (equivalent to approximately
RMB20,047,000). As at 30 June 2012, the remaining amount of USD3,177,000 was included
in other payables.
b) Pursuant to a technology licensing contract between the Company, Ford and Ford Global
Technologies, LLC in 2007, the Company agreed the payment of licensing fee to Ford or its
designee at USD92 for each of the Puma Diesel Engine manufactured. During the six months
ended 30 June 2012, the total licensing fee due to Ford Global Technologies, LLC was
approximately USD479,000 (equivalent to approximately RMB3,021,000). As at 30 June 2012,
the remaining amount of USD479,000 was included in other payables.
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)
31 Related party transactions (continued)
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. The Group has certain transactions with other state-owned enterprises
including but are not limited to sales and purchases of goods and services, payments for
utilities, purchase of fixed assets, depositing and borrowing money and entering into derivative
financial instruments. Except for the transactions and balances disclosed as follows, there is
no individually or collectively significant transactions:
Transactions with other state-owned entities
Six months ended 30 June
2012 2011
RMB’000 RMB’000
Purchase of goods 693,188 681,789
Purchase of fixed assets 19,382 64,158
Interest income 86,228 60,315
Balances with other state-owned entities
30 June 2012 31 December 2011
RMB’000 RMB’000
Cash and cash equivalents 5,447,418 5,152,928
Trade and other payables 309,720 236,813
32 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
33 Events after the balance sheet date
The Board of Directors approved acquiring 100% equity of Taiyuan Changan Heavy Truck
Company (“TCHT”) jointly held by China South Industries Group Corporation (“CSIG”) and
China Changan Automobile Group Co., Ltd. (“CCAG”) with a consideration of no more than
RMB 270 million, approved the Equity Transfer Agreement reached by CSIG, CCAG and
the Company for the acquisition. After the completion of the Equity Transfer, TCHT will
become a whole-owned subsidiary of the Company to manufacture heavy duty truck.
The transaction is subject to the approvals of the relevant government authorities.
75
Section VII Catalog on Documents for reference
I. Originals of 2012 half-year report signed by Chairman;
II. Originals of 2012 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 28, 2012
76
