Qingling Motors : 2020 Interim Report

2020 Interim Report 01

REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO THE BOARD OF DIRECTORS OF QINGLING MOTORS CO., LTD.

(a Sino-foreign joint venture joint stock limited company established in the People's Republic of China with limited liability)

INTRODUCTION

We have reviewed the condensed consolidated financial statements of Qingling Motors Co., Ltd. (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 3 to 46, which comprise the condensed consolidated statement of financial position as of 30 June 2020 and the related condensed consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six- month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" ("HKAS 34") issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

02 Qingling Motors Co. Ltd

REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

26 August 2020

2020 Interim Report 03

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2020

		Six months ended 30 June
			2019
		2020
	NOTES	RMB'000	RMB'000
		(unaudited)	(unaudited)
Revenue	3	2,247,765	2,414,401
Cost of sales		(1,972,790)	(1,974,535)
Gross profit		274,975	439,866
Other income		135,704	119,613
Impairment losses under expected
credit loss model, net of reversal	10	(560)	(116)
Other gains and losses, net		(1,807)	(730)
Distribution and selling expenses		(126,527)	(117,757)
Administrative expenses		(81,805)	(109,740)
Research expenses		(91,043)	(85,307)
Finance costs		(1,850)	(2,059)
Share of profit of an associate		168	319
Share of profit of joint ventures		809	1,279
Profit before tax	4	108,064	245,368
Income tax expense	5	(9,059)	(29,066)
Profit and total comprehensive
income for the period		99,005	216,302
Profit and total comprehensive
income for the period
attributable to:
Owners of the Company		94,593	212,579
Non-controlling interests		4,412	3,723
		99,005	216,302
Earnings per share
Basic	7	RMB0.04	RMB0.09

04 Qingling Motors Co. Ltd

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2020

		At	At
		30 June	31 December
		2020	2019
		RMB'000	RMB'000
		(unaudited)	(audited)
Non-current assets
Property, plant and equipment	8	816,889	811,797
Right-of-use assets		93,720	109,882
Investment properties		40,615	41,848
Intangible assets		248,316	261,299
Interest in an associate		8,353	8,185
Interests in joint ventures		492,880	492,071
Deferred tax assets		17,344	21,991
Time deposits	11	2,329,761	101,454
Deposit paid for property, plant
and equipment		20,502	11,803
		4,068,380	1,860,330
Current assets
Inventories		632,228	631,478
Trade, bills and other receivables
and prepayments	9	2,144,740	2,299,901
Time deposits	11	2,170,536	4,152,983
Tax recoverable		5,958	3,966
Restricted bank balances	12	137,633	137,633
Bank deposits, bank balances and
cash	12	1,608,940	1,909,323
		6,700,035	9,135,284
Current liabilities
Trade, bills and other payables	13	2,415,830	2,155,273
Provision for litigation	16	137,633	137,633
Lease liabilities		28,649	29,359
Tax liabilities		1,832	3,188
Contract liabilities		251,100	438,023
Refund liabilities		97,521	83,611
		2,932,565	2,847,087

2020 Interim Report 05

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

At 30 June 2020

	At	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
	(unaudited)	(audited)
Net current assets	3,767,470	6,288,197
Total assets less current liabilities	7,835,850	8,148,527
Capital and reserves
Share capital	2,482,268	2,482,268
Share premium and reserves	4,977,180	5,279,750
Equity attributable to owners of the
Company	7,459,448	7,762,018
Non-controlling interests	323,244	318,832
Total equity	7,782,692	8,080,850
Non-current liabilities
Deferred income - government
grants	8,430	8,694
Lease liabilities	44,728	58,983
	53,158	67,677
	7,835,850	8,148,527

06 Qingling Motors Co. Ltd

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2020

			Equity attributable to owners of the Company
				Statutory	Discretionary
				surplus	surplus			Non-
	Share	Share	Capital	reserve	reserve	Retained		controlling	Total
	capital	premium	reserve	fund	fund	profits	Total	interests	equity
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
For the six months
ended 30 June 2020
(unaudited)
At 1 January 2020
(audited)	2,482,268	1,764,905	571,200	1,176,896	2,347	1,764,402	7,762,018	318,832	8,080,850
Profit and total
comprehensive
income for the period	-	-	-	-	-	94,593	94,593	4,412	99,005
2019 final dividend
declared(Note 6)	-	-	-	-	-	(397,163)	(397,163)	-	(397,163)
At 30 June 2020
(unaudited)	2,482,268	1,764,905	571,200	1,176,896	2,347	1,461,832	7,459,448	323,244	7,782,692
For the six months
ended 30 June 2019
(unaudited)
At 1 January 2019 (audited)	2,482,268	1,764,905	571,200	1,143,180	2,347	1,849,973	7,813,873	310,241	8,124,114
Profit and total
comprehensive income
for the period	-	-	-	-	-	212,579	212,579	3,723	216,302
2018 final dividend
declared(Note 6)	-	-	-	-	-	(397,163)	(397,163)	-	(397,163)
At 30 June 2019
(unaudited)	2,482,268	1,764,905	571,200	1,143,180	2,347	1,665,389	7,629,289	313,964	7,943,253

2020 Interim Report 07

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2020

	Six months ended 30 June
		2019
	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
OPERATING ACTIVITIES
Operating cash flows before movements in
working capital	49,973	179,797
Decrease (increase) in inventories	4,290	(67,572)
Decrease in trade, bills and other receivables
and prepayments	155,184	555,607
Increase in trade, bills and other payables	278,749	216,395
Decrease in contract liabilities	(186,923)	(235,018)
Other operating activities	5,572	(33,868)
NET CASH FROM OPERATING ACTIVITIES	306,845	615,341
INVESTING ACTIVITIES
Acquisition of property, plant and equipment	(58,287)	(48,557)
Acquisition of intangible assets	-	(1,811)
Withdrawal of time deposits	3,721,000	425,834
Placement of time deposits	(3,971,000)	(3,711,035)
Interest received	114,628	55,558
Proceeds from disposal of property, plant and
equipment	121	575
NET CASH USED IN INVESTING ACTIVITIES	(193,538)	(3,279,436)

08 Qingling Motors Co. Ltd

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

For the six months ended 30 June 2020

	Six months ended 30 June
		2019
	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
FINANCING ACTIVITIES
Dividends paid	(397,163)	(397,163)
Payments of interest expenses of lease
liabilities	(1,850)	(99)
Repayments of lease liabilities	(14,965)	(1,270)
CASH USED IN FINANCING ACTIVITIES	(413,978)	(398,532)
NET DECREASE IN CASH AND CASH	(300,671)	(3,062,627)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 1 JANUARY	1,909,323	4,654,277
Effect of exchange rate changes on the balance
of cash held in foreign currencies	288	61
CASH AND CASH EQUIVALENTS AT 30 JUNE,
represented by bank deposits, bank balances
and cash	1,608,940	1,591,711

2020 Interim Report 09

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2020

1. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").

1A. SIGNIFICANT EVENTS IN THE CURRENT INTERIM PERIOD

The outbreak of Covid-19 and the subsequent quarantine measures as well as the travel restrictions imposed by many countries have had negative impacts to the global economy, business environment and directly and indirectly affect the operations of the Group. The Group stopped its manufacturing activities from late January 2020 to 14 February 2020 due to mandatory government quarantine measures in an effort to contain the spread of the pandemic. On the other hand, the PRC government has announced some financial measures and supports for corporates to overcome the negative impact arising from the pandemic to the Group. As such, the financial positions and performance of the Group were affected in different aspects, including reduction in revenue and production in the current period.

10 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis and certain financial instruments, which are measured at fair values, as appropriate.

Other than additional accounting policies resulting from application of amendments to Hong Kong Financial Reporting Standards ("HKFRSs") and application of certain accounting policies which became relevant to the Group, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those followed in the preparation of the annual consolidated financial statements of Qingling Motors Co., Ltd. (the "Company") and its subsidiaries (collectively referred to as the "Group") for the year ended 31 December 2019.

Application of amendments to HKFRSs

In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatory effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's condensed consolidated financial statements:

Amendments to HKAS 1 and HKAS 8	Definition of Material
Amendments to HKFRS 3	Definition of a Business
Amendments to HKFRS 9, HKAS 39 and	Interest Rate Benchmark
HKFRS 7	Reform

2020 Interim Report 11

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Application of amendments to HKFRSs (Continued)

Except as described below, the application the Amendments to References to the Conceptual Framework in HKFRS Standards and amendments to HKFRSs in the current period has had no material impact on the Group's financial positions and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements.

Impacts of application on Amendments to HKAS 1 and HKAS 8 "Definition of Material"

The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.

The application of the amendments in the current period had no impact on the condensed consolidated financial statements. Changes in presentation and disclosures on the application of the amendments, if any, will be reflected on the consolidated financial statements for the year ending 31 December 2020.

12 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

3. REVENUE/SEGMENT INFORMATION

1. Disaggregation of revenue from contracts with customers
   The Group's revenue represents sales of trucks, vehicles, chassis, automobile parts, accessories and others to external customers, net of discounts and sales related tax, that are recognised at a point in time. The following is an analysis of the Group's revenue from its major products:

	Six months ended 30 June
		2019
	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Types of goods
Sales of light-duty trucks	570,349	653,725
Sales of multi-purposes vehicles	-	76
Sales of pick-up trucks	412,733	569,071
Sales of medium and heavy-duty
trucks	531,655	477,419
Sales of chassis	641,076	606,956
Sales of automobile parts,
accessories and others	91,952	107,154
Total	2,247,765	2,414,401

Except for export sales to countries outside the PRC amounting to approximately RMB18,001,000 (2019: RMB12,305,000) (unaudited), all other sales of the Group are made to customers located in the PRC.

2020 Interim Report 13

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

3. REVENUE/SEGMENT INFORMATION (CONTINUED)

1. Disaggregation of revenue from contracts with customers (Continued)
   Set out below is the reconciliation of the revenue from contracts with customers disclosed in the segment information:

		Multi-		Medium and	Automobile
	Light-duty	purposes	Pick-up	heavy-duty	parts and
	trucks	vehicles	trucks	trucks	accessories	Consolidated
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Six months ended 30 June 2020
Sales of light-duty trucks	570,349	-	-	-	-	570,349
Sales of multi-purposes vehicles	-	-	-	-	-	-
Sales of pick-up trucks	-	-	412,733	-	-	412,733
Sales of medium and heavy-duty trucks	-	-	-	531,655	-	531,655
Sales of chassis	590,383	-	6,040	44,653	-	641,076
Sales of automobile parts, accessories
and others	-	-	-	-	91,952	91,952
Revenue	1,160,732	-	418,773	576,308	91,952	2,247,765
Six months ended 30 June 2019
Sales of light-duty trucks	653,725	-	-	-	-	653,725
Sales of multi-purposes vehicles	-	76	-	-	-	76
Sales of pick-up trucks	-	-	569,071	-	-	569,071
Sales of medium and heavy-duty trucks	-	-	-	477,419	-	477,419
Sales of chassis	546,358	-	27,064	33,534	-	606,956
Sales of automobile parts, accessories
and others	-	-	-	-	107,154	107,154
Revenue	1,200,083	76	596,135	510,953	107,154	2,414,401

14 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

3. REVENUE/SEGMENT INFORMATION (CONTINUED)

1. Segment information
   The Group is engaged in the manufacture and sales of five categories of products-light-duty trucks, multi-purposes vehicles, pick-up trucks, medium and heavy-duty trucks and automobile parts and accessories and the chief operating decision makers (i.e. the Company's executive directors) review the segment information by these categories to allocate resources to segments and to assess their performance.

Specifically, the Group's reportable segments under HKFRS 8 Operating Segments are as follows:

Light-duty trucks	-	manufacture and sales of light-duty
		trucks and chassis
Multi-purposes vehicles	-	manufacture and sales of multi-
		purposes vehicles
Pick-up trucks	-	manufacture and sales of pick-up
		trucks and chassis
Medium and heavy-duty	- manufacture and sales of medium and
trucks		heavy-duty trucks and chassis
Automobile parts and	-	manufacture and sales of automobile
accessories		parts, accessories and others

2020 Interim Report 15

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

3. REVENUE/SEGMENT INFORMATION (CONTINUED)

1. Segment information (Continued) Segment revenue and results
   The following is an analysis of the Group's revenue and results by reportable and operating segments:
   Six months ended 30 June 2020

		Multi-		Medium and	Automobile
	Light-duty	purposes	Pick-up	heavy-duty	parts and
	trucks	vehicles	trucks	trucks	accessories	Consolidated
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Segment revenue	1,160,732	-	418,773	576,308	91,952	2,247,765
Result
Segment profit	75,710	-	(7,352)	6,660	12,888	87,906
Central administration costs						(21,263)
Research expenses						(91,043)
Impairment losses, net of reversal						(560)
Interest income						110,488
Other income						25,216
Other gains and losses, net						(1,807)
Finance costs						(1,850)
Share of profit of an associate						168
Share of profit of joint ventures						809
Group's profit before tax						108,064

16 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

3. REVENUE/SEGMENT INFORMATION (CONTINUED)

1. Segment information (Continued) Segment revenue and results (Continued) Six months ended 30 June 2019

		Multi-		Medium and	Automobile
	Light-duty	purposes	Pick-up	heavy-duty	parts and
	trucks	vehicles	trucks	trucks	accessories	Consolidated
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Segment revenue	1,200,083	76	596,135	510,953	107,154	2,414,401
Result
Segment profit	156,583	(13)	43,113	20,861	9,693	230,237
Central administration costs						(17,868)
Research expenses						(85,307)
Impairment losses, net of reversal						(116)
Interest income						97,085
Other income						22,528
Other gains and losses, net						(730)
Finance costs						(2,059)
Share of profit of an associate						319
Share of profit of joint ventures						1,279
Group's profit before tax						245,368

There have been no inter-segment sales during the six months ended 30 June 2020 (2019: Nil) (unaudited).

Segment profit represents the profit earned by each segment without allocation of central administration costs, research expenses, interest income, other income, impairment losses (net of reversal), other gains and losses (net), finance costs, share of profit of an associate and share of profit of joint ventures. This is the measure reported to the chief operating decision makers for the purposes of resources allocation and performance assessment.

2020 Interim Report 17

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

3. REVENUE/SEGMENT INFORMATION (CONTINUED)

1. Segment information (Continued) Segment assets and liabilities
   The following is an analysis of the Group's assets and liabilities by operating segment:
   As at 30 June 2020

		Multi-		Medium and	Automobile
	Light-duty	purposes	Pick-up	heavy-duty	parts and
	trucks	vehicles	trucks	trucks	accessories	Consolidated
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Assets
Segment assets	1,267,593	-	487,199	1,154,183	274,321	3,183,296
Interchangeably used assets between
segments
- property, plant and equipment						275,891
- right-of-use assets						93,720
- inventories						170,129
Investment properties						40,615
Interest in an associate						8,353
Interests in joint ventures						492,880
Time deposits, restricted bank balances,
bank deposits, bank balances and cash						6,246,870
Other unallocated assets						256,661
Consolidated total assets						10,768,415
Liabilities
Segment liabilities	348,219	-	111,067	181,704	12,326	653,316
Unallocated trade, bills and other payables						2,111,135
Unallocated provision for litigation						137,633
Unallocated lease liabilities						73,377
Other unallocated liabilities						10,262
Consolidated total liabilities						2,985,723

18 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

3. REVENUE/SEGMENT INFORMATION (CONTINUED)

1. Segment information (Continued) Segment assets and liabilities (Continued) As at 31 December 2019

		Multi-		Medium and	Automobile
	Light-duty	purposes	Pick-up	heavy-duty	parts and
	trucks	vehicles	trucks	trucks	accessories	Consolidated
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	(audited)	(audited)	(audited)	(audited)	(audited)	(audited)
Assets
Segment assets	1,424,010	-	596,442	1,171,626	249,911	3,441,989
Interchangeably used assets between
segments
- property, plant and equipment						257,185
- right of use asset						109,882
- inventories						159,560
Investment properties						41,848
Interest in an associate						8,185
Interests in joint ventures						492,071
Time deposits, restricted bank balances,
bank deposits, bank balances and cash						6,301,393
Other unallocated assets						183,501
Consolidated total assets						10,995,614
Liabilities
Segment liabilities	485,126	-	195,368	221,211	-	901,705
Unallocated trade, bills and other payables						1,775,202
Unallocated provision for litigation						137,633
Unallocated lease liabilities						88,342
Other unallocated liabilities						11,882
Consolidated total liabilities						2,914,764

2020 Interim Report 19

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

3. REVENUE/SEGMENT INFORMATION (CONTINUED)

1. Segment information (Continued) Segment assets and liabilities (Continued)
   For the purposes of monitoring segment performances and allocating resources between segments:
2. • All assets are allocated to operating segments other than interchangeably used assets between segments, investment properties, interest in an associate, interests in joint ventures, time deposits, restricted bank balances, bank deposits, bank balances and cash and other unallocated assets held by the head office; and
   • All liabilities are allocated to operating segments other than unallocated trade, bills and other payables, unallocated provision for litigation, unallocated lease liabilities and other unallocated liabilities of the head office.

20 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

4.		PROFIT BEFORE TAX
			Six months ended 30 June
				2019
			2020
			RMB'000	RMB'000
			(unaudited)	(unaudited)
		Profit before tax has been arrived at
		after charging (crediting):
	Salaries and other payments and
		benefits	134,703	134,509
	Retirement benefits scheme
		contributions (note a)	7,213	20,875
		Total staff costs (including directors'
		and supervisors' remuneration)	141,916	155,384
		Staff costs capitalised in inventories	(58,836)	(63,653)
			83,080	91,731
		Loss (gain) on disposal of property, plant
		and equipment, net	26	(336)
	Amortisation of intangible assets
		(included in administrative expenses
		and research expenses)	18,912	17,687
	Depreciation of property, plant and
		equipment	20,228	19,630
	Depreciation of right-of-use assets	16,162	1,761
		Total deprecation	36,390	21,391
		Capitalised in inventories	(19,738)	(6,329)
			16,652	15,062

2020 Interim Report 21

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

4. PROFIT BEFORE TAX (CONTINUED)

	Six months ended 30 June
		2019
	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Finance cost of lease liabilities	1,850	99
Depreciation of investment properties	1,233	1,233
Expenses relating to short-term leases	1,436	17,140
Net foreign exchange losses	1,782	3,548
Cost of inventories recognised as cost
of sales	1,972,790	1,974,535
Reversals of write-down of inventories
(included in cost of sales)	(5,040)	(6,587)
Interest income from bank deposits and
balances	(110,488)	(97,085)
Income from renting investment
properties	(2,912)	(2,913)
Less: Direct operating expenses from
investment properties that
generated rental income during
the period	1,341	1,350
	(1,571)	(1,563)
Income from renting equipment	(21,296)	(19,055)
Government grants (note b)	(602)	(192)

Note:

1. During the current interim period, the Group are entitled a reduction of retirement benefit scheme contributions of RMB13,766,000 in respect of Covid-19-related subsidies, which relates to employment support scheme provided by the PRC government.
2. The amounts mainly represent government grants subsidising the Group's research expenses on innovation projects and major new products previously incurred, and the amortisation of deferred income related to the relevant assets.

22 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

5.	INCOME TAX EXPENSE
		Six months ended 30 June
			2019
		2020
		RMB'000	RMB'000
		(unaudited)	(unaudited)
	Current tax	2,333	19,631
	Under provision in respect of prior year	2,079	1,150
	Deferred tax	4,647	8,285
	Total income tax expense charged for
	the period	9,059	29,066

According to the Notice of the Enterprise Income Tax for Implementation of Exploration and Development of Western Region (Notice of the State Administration of Taxation No. 12 [2012]) and the Catalogue of Industries Encouraged to Develop in the Western Region (Order of the National Development and Reform Commission No. 15), companies located in the western region of the PRC and engaged in the businesses encouraged by the PRC government are entitled to the preferential enterprise income tax ("EIT") rate of 15% if their revenue from encouraged businesses in a year accounts for more than 70% of total revenue. The Company and 重慶慶鈴模具有限公司, a subsidiary of the Company, are engaged in the encouraged businesses included in the related notice and catalogue and the revenue from these encouraged businesses is expected to account for more than 70% of their respective total revenue for the year ending 31 December 2020, and therefore continue to enjoy the preferential EIT rate of 15% for the current period.

In addition, according to the Notice of the Continuation of the Enterprise Income Tax for Implementation of Exploration and Development of Western Region (Notice of the Ministry of Finance, State Administration of Taxation and National Development and Reform Commission No. 23 [2020]), companies located in the western region of the PRC and engaged in the business encouraged by the PRC government are entitled to the preferential EIT rate of 15% from 1 January 2021 to 31 December 2030 if the operating revenue of the encouraged business in a year accounted for more than 60% of the total income in that year.

2020 Interim Report 23

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

1. INCOME TAX EXPENSE (CONTINUED)
   重慶慶鈴技術中心有限公司 and 慶鈴（深圳）新能源汽車銷售服務有限公 司, subsidiaries of the Company, are subject to EIT rate of 25% for the six months ended 30 June 2020 (six months ended 30 June 2019: 25% (unaudited)).
2. DIVIDEND
   During the current interim period, a final dividend of RMB397,163,000 or RMB0.16 per share in respect of the year ended 31 December 2019 (six months ended 30 June 2019: RMB397,163,000 or RMB0.16 per share (unaudited) in respect of the year ended 31 December 2018) was declared to the owners of the Company.
   The directors of the Company have resolved not to declare an interim dividend for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil (unaudited)).
3. EARNINGS PER SHARE
   The calculation of the basic earnings per share attributable to the owners of the Company is based on the following data:

	Six months ended 30 June
		2019
	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Earnings
Earnings for the purpose of basic
earnings per share (Profit for the
period attributable to owners of the
Company)	94,593	212,579

24 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

7. EARNINGS PER SHARE (CONTINUED)

	Six months ended 30 June
		2019
	2020
	'000	'000
	(unaudited)	(unaudited)
Number of shares
Number of shares for the purpose of
basic earnings per share	2,482,268	2,482,268

No diluted earnings per share were presented as there were no potential ordinary shares in issue in both periods presented.

8. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT

During the current interim period, the Group acquired property, plant and equipment of approximately RMB31,396,000 (six months ended 30 June 2019: RMB26,576,000 (unaudited)) and disposed of property, plant and equipment with net carrying amount of RMB147,000 (six months ended 30 June 2019: RMB239,000 (unaudited)).

2020 Interim Report 25

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

9. TRADE, BILLS AND OTHER RECEIVABLES AND PREPAYMENTS

At the end of the reporting period, the Group's trade, bills and other receivables and prepayments are as follows:

	At	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
	(unaudited)	(audited)
Trade receivables, less allowance for
credit losses	109,261	92,729
Bills receivable	1,891,320	2,136,756
Other receivables, less allowance for
credit losses	32,817	18,333
Prepayments for raw materials	110,758	45,439
Value-added tax recoverable	584	6,644
	2,144,740	2,299,901

Before accepting any new external customers, the Group uses an internal credit rating to assess the potential customer's credit quality and assign credit limits thereto. Limits and rating attributed to customers are reviewed twice a year.

The credit period granted on sales of goods is mainly from 3 to 6 months except for the subsidiaries of Qingling Group (defined below), to which a credit period of 1 year were granted.

26 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

9. TRADE, BILLS AND OTHER RECEIVABLES AND PREPAYMENTS (CONTINUED)

At the end of the reporting period, the aged analysis of the Group's trade receivables, net of allowance for credit losses, presented based on invoice dates at the end of the reporting period, which approximated the respective revenue recognition dates, is as follows:

	At	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
	(unaudited)	(audited)
Within 3 months	24,244	57,726
Between 3 to 6 months	22,525	10,202
Between 6 to 12 months	39,435	4,515
Over 1 years	23,057	20,286
	109,261	92,729

2020 Interim Report 27

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

9. TRADE, BILLS AND OTHER RECEIVABLES AND PREPAYMENTS (CONTINUED)

At the end of the reporting period, the aged analysis of bills receivable of the Group is as follows:

	At	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
	(unaudited)	(audited)
Within 1 month	515,108	552,800
Between 1 to 2 months	315,113	367,129
Between 2 to 3 months	409,844	293,328
Between 3 to 6 months	471,695	909,593
Between 6 to 12 months	179,560	13,906
	1,891,320	2,136,756

All the above bills receivable are guaranteed by banks and their maturity dates are within 12 months.

28 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

9. TRADE, BILLS AND OTHER RECEIVABLES AND PREPAYMENTS (CONTINUED)

Included in the Group's trade and other receivables and prepayments at the end of the reporting period are amounts due from related parties, which are trade in nature, as follows:

At	At
30 June	31 December
2020	2019
RMB'000	RMB'000
(unaudited)	(audited)

The ultimate holding company of the

Company

• 慶鈴汽車（集團）有限公司("Qingling

Group")	6	400
Subsidiaries of Qingling Group	71,883	43,326

Associate of the Group

• 五十鈴慶鈴（重慶）技術開發有限公司

("Isuzu Qingling Engineering")

114

7

Joint venture of the Group

• 慶鈴五十鈴（重慶）汽車銷售服務有限

公司("Qingling Isuzu Sales")	11,489	3,741
	83,492	47,474

The above amounts due from related parties are unsecured and interest- free.

Details of the impairment assessment are set out in note 10.

2020 Interim Report 29

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

10. IMPAIRMENT ASSESSMENT ON FINANCIAL ASSETS AND OTHER ITEMS SUBJECT TO EXPECTED CREDIT LOSS MODEL

	Six months ended 30 June
		2019
	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Impairment loss recognised in respect
of
Trade receivables	560	95
Other receivables	-	21
	560	116

The basis of determining the inputs and assumptions and the estimation techniques used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019.

11. TIME DEPOSITS

The bank deposits are with a term from more than 3 months to 36 months (31 December 2019: from more than 3 months to 36 months (audited)) and carry interest rates ranging from 2.18% to 4.18% (31 December 2019: from 2.18% to 4.5% (audited)) per annum. Included in these bank deposits are deposits with carrying amount of RMB500,000,000 (31 December 2019: Nil) with the 6 months original maturity, the final interest payment of which is determined by the interest rate of future London Interbank US Dollar One Month Offered Rate on the maturity date with target interest rate ranging from 1.65% to 3.90% per annum.

30 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

12. RESTRICTED BANK BALANCES, BANK DEPOSITS, BANK BALANCES AND CASH

As at 30 June 2020, the final interest payment of bank deposits with original maturity less than 3 months of RMB310,000,000 is determined by the future gold price on the maturity date with target interest rate ranging from 1.35% to 4.10% per annum. As at 31 December 2019, bank deposits with original maturity less than 3 months of RMB500,000,000 carry fixed interest rate of 3.90% per annum.

Restricted bank balances and bank balances of RMB137,633,000 (2019: RMB137,633,000) and RMB1,293,859,000 (2019: RMB1,408,273,000) respectively carry interest at market rates, which ranging from 0.0001% to 0.30% (2019: 0.0001% to 0.39%) per annum.

As at 30 June 2020, RMB137,633,000 have been frozen according to the civil ruling issued by a court in relation to a dispute in respect of a financial credit agreement entered into between the Company's customer and a bank. Details of which are set out in note 16.

2020 Interim Report 31

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

13. TRADE, BILLS AND OTHER PAYABLES

At the end of reporting period, the Group's trade, bills and other payables are as follows:

	At	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
	(unaudited)	(audited)
Trade and bills payables	1,923,370	1,730,270
Selling expenses payables	225,825	231,289
Other tax payable	3,500	3,816
Other payables	263,135	189,898
	2,415,830	2,155,273

At the end of the reporting period, the age analysis of trade and bills payables of the Group based on purchase date/bills issue date is as follows:

	At	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
	(unaudited)	(audited)
Within 3 months	1,818,842	1,523,453
Between 3 to 6 months	73,354	200,206
Between 6 to 12 months	25,557	408
Over 1 year	5,617	6,203
	1,923,370	1,730,270

32 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

13. TRADE, BILLS AND OTHER PAYABLES (CONTINUED)

Included in the balance of trade, bills and other payables at the end of the reporting period are amounts due to related parties as follows:

At	At
30 June	31 December
2020	2019
RMB'000	RMB'000
(unaudited)	(audited)

Substantial shareholder of the Company

• 五十鈴自動車株式会社("Isuzu Motors Limited") ("Isuzu")

(note a)	99,244	95,201
Subsidiaries of Qingling Group	83,888	51,309

Joint Venture of the Group

• 五十鈴（中國）發動機有限公司("Isuzu

Engine") (note b)	88,147	49,912
Qingling Group	68,921	51,553
Qingling Isuzu Sales	180	-
	340,380	247,975

Note:

1. As at 30 June 2020, Isuzu owns 496,453,654 H shares representing 20% of the entire issued share capital of the Company and, in the opinion of the directors of the Company, Isuzu has significant influence over the Company.
2. The entity was formerly named 慶鈴五十鈴（重慶）發動機有限公司("Qingling Isuzu Engine ").

The amounts due to related parties are trade in nature, unsecured, interest-free and the credit period granted on purchases of materials is 3 to 6 months.

2020 Interim Report 33

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES

Apart from the amounts due from and to related companies as disclosed in notes 9 and 13, during the current interim period, the Group entered into the following transactions with related parties that are conducted in accordance with the terms of the relevant agreements:

1. Transactions with Qingling Group and its subsidiaries

	Six months ended 30 June
Type of transactions	2020	2019
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Sales of chassis to Qingling
Group	641,076	606,956
Sales of automobile parts and
others to:
- 重慶慶鈴鑄造有限公司
("Qingling Casting")	9,591	10,612
- 重慶慶鈴車橋有限公司
("Qingling Axle")	3,606	4,820

• 重慶慶鈴日發座椅有限公司

("Qingling Chair")

3,442

3,803

• 重慶慶鈴專用汽車有限公司

("Qingling Zhuanyong")

2,204

753

• 重慶慶鈴汽車機加部品製造有

限公司("Qingling Jijia")	1,162	1,020
- 重慶慶鈴鍛造有限公司
("Qingling Forging")	989	953

• 重慶慶鈴汽車底盤部品有限公

司("Qingling Chassis")

928

1,025

34 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

1. Transactions with Qingling Group and its subsidiaries (Continued)

	Six months ended 30 June
Type of transactions	2020	2019
	RMB'000	RMB'000
	(unaudited)	(unaudited)

• 重慶慶鈴鑄鋁有限公 司("Qingling Cast

Aluminium")

739

759

• 重慶慶鈴汽車配件製造有限公

司("Qingling Parts")	381	-
- 重慶慶鈴塑料有限公司
("Qingling Plastics")	376	574
- Qingling Group	16	13
- 重慶科渝汽車配件有限公司
("Keyu")	4	-
Purchases of automobile parts
and others from:
- Qingling Axle	175,308	179,370
- Qingling Chair	29,408	26,376
- Qingling Plastics	27,499	25,933
- Qingling Forging	14,796	16,566
- Qingling Casting	12,294	12,405
- Keyu	4,692	-
- Qingling Cast Aluminium	4,357	4,312
- Qingling Jijia	3,182	2,888
- Qingling Chassis	2,478	2,017
- Qingling Parts	2,098	-
- Qingling Zhuanyong	2,043	1,655

2020 Interim Report 35

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

1. Transactions with Qingling Group and its subsidiaries (Continued)

	Six months ended 30 June
		2019
Type of transactions	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Expense relating to short-term
lease for renting warehouse:
- Qingling Group	-	4,094
Lease liabilities for renting
warehouse (Note):
- Qingling Group	19,784	-
- Qingling Keyu	2,421	-
Interest on lease liabilities for
renting warehouse:
- Qingling Group	515	-
- Qingling Keyu	62	-
Expense relating to short-term
lease for renting building:
- Qingling Group	-	415

36 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

1. Transactions with Qingling Group and its subsidiaries (Continued)

	Six months ended 30 June
		2019
Type of transactions	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Lease liabilities for renting
building (Note) :
- Qingling Group	1,953	-
Interest on lease liabilities for
renting building:
- Qingling Group	50	-
Expense relating to short-term
lease for renting equipment:
- Qingling Forging	-	10,073
- Qingling Group	-	437
Lease liabilities for renting
equipment (Note) :
- Qingling Forging	47,161	-
- Qingling Group	2,058	-

2020 Interim Report 37

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

1. Transactions with Qingling Group and its subsidiaries (Continued)

	Six months ended 30 June
		2019
Type of transactions	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Interest on lease liabilities for
renting equipment:
- Qingling Forging	1,170	-
- Qingling Group	53	-
Rental income for leasing
equipment:
- Qingling Axle	191	129
Service fee income:
- Qingling Group	705	624

Note: In December 2019, the Group entered into several new lease agreements for the use of warehouse, building and equipment with the related parties for 3 years. Except for short-term lease in which the Group applied recognition exemption, the Group has recognised an addition of right-of-use assets and lease as at 31 December 2019 and 30 June 2020.

38 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

1. Transactions with Isuzu

	Six months ended 30 June
		2019
Type of transactions	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Purchase of automobile parts
and components	105,078	166,600
Sales of accessory sets and
other automobile parts and
components	934	2,161
Royalties and licence fee paid
on sales of trucks and other
vehicles	9,867	8,854
Research expenses	-	1,989
Marketing fee received	-	1,239
Sales of trucks	-	760

2020 Interim Report 39

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

1. Transactions with Isuzu Engine

	Six months ended 30 June
		2019
Type of transactions	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Purchases of automobile parts
and raw materials	531,888	493,910
Sales of automobile parts and
raw materials	288,384	352,348
Rental income from leasing
equipment	21,104	18,926
Rental income for investment
properties	2,105	2,136
Miscellaneous service income	290	1,165
Collaborative processing
income	5	11

1. Transactions with Qingling Isuzu Sales

	Six months ended 30 June
		2019
Type of transactions	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Sales of trucks and automobile
parts	8,377	8,181
Rental income for investment
properties	777	777
Miscellaneous service income	-	1

40 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

1. Transactions with Isuzu Qingling Engineering

	Six months ended 30 June
		2019
Type of transactions	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Miscellaneous service income	115	713
Sales of automobile parts and
raw materials	11	28

The above transactions with related parties also constitute connected transactions or continuing connected transactions as defined in Chapter 14A of the Listing Rules and are conducted in accordance with the terms of the relevant agreements.

1. Transactions/balances with other government-related entities in the PRC
   The Group operates in an economic environment currently predominated by entities directly or indirectly owned or controlled, jointly controlled or significantly influenced by the PRC government ("government-related entities"). In addition, the Group itself is part of a larger group of companies under Qingling Group which is controlled by the PRC government. Apart from the transactions with Qingling Group and its subsidiaries disclosed in section (1) above, the Group also conducts businesses with other government- related entities. The directors of the Company consider those government-related entities are independent third parties so far as the Group's business transactions with them are concerned.

2020 Interim Report 41

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

1. Transactions/balances with other government-related entities in the PRC (Continued)
   Material transactions/balances with other government-related entities are as follows:

	Six months ended 30 June
		2019
	2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Trade sales	86,733	170,477
Trade purchases	152,124	242,289
		At
	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
	(unaudited)	(audited)
Trade and other balances due
to other government-related
entities	73,434	120,548
Trade and other balances due
from other government-related
entities	167,846	157,349

42 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

14. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

1. Transactions/balances with other government-related entities in the PRC (Continued)
   In addition, the Group has entered into various transactions, including utilities services and surcharges/taxes charged by the PRC government, and deposits and other general banking facilities with certain banks and financial institutions which are government- related entities in its ordinary course of business. In view of the nature of these banking transactions, the directors of the Company are of the opinion that separate disclosure would not be meaningful.
   Except as disclosed above, the directors of the Company are of the opinion that transactions with government-related entities are not significant to the Group's operations.
2. Compensation of directors and key management personnel
   The short term benefits paid or payable by the Group to directors of the Company and other members of key management personnel during the six months ended 30 June 2020 amounted to approximately RMB2,314,000 (six months ended 30 June 2019: RMB1,972,000(unaudited)).

2020 Interim Report 43

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

15. COMMITMENTS

At the end of the reporting period, the Group had the following capital commitments:

	At	At
	30 June	31 December
	2020	2019
	RMB'000	RMB'000
	(unaudited)	(audited)
Contracted for but not provided in the
condensed consolidated financial
statements in respect of acquisition
of property, plant and equipment	90,714	59,612

16. PROVISION FOR LITIGATION

According to the civil ruling issued by 深圳市福田區人民法院 (transliterated as People's Court of Futian District, Shenzhen) in relation to a dispute in respect of a financial credit agreement (the "Credit Agreement") entered into between the Company's customer (the "Customer", who is independent to the Company) and a bank ("Bank A"), the Group's bank balances of RMB79,999,000 have been frozen since 16 August 2015 ("2015 Litigation").

44 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

16. PROVISION FOR LITIGATION (CONTINUED)

In 2015, Bank A alleged that the Customer has failed to meet the margin calls according to the requirements under the Credit Agreement, constituting an event of default of such agreement. Bank A is also entitled to demand the Customer to prematurely repay all the amount granted under the relevant credit facilities. Bank A further alleged that the Company did not, as instructed by Bank A, deliver the vehicles that had not been picked up but paid by the Customer in full with loan to the warehouse as specified by Bank A, leading to a breach of the Credit Agreement, and should be jointly and severally liable to compensate for the losses it suffered. Bank A stated that the outstanding credit balances due from the Customer was RMB80 million in aggregate. The replacement of Bank A by Company Y ultimately as the plaintiff was approved by relevant court afterwards.

The Company received the judgment (the "Judgment") dated 14 May 2018 from 深圳市中級人民法院 (transliterated as Shenzhen Intermediate People's Court, "Shenzhen Court") on 25 May 2018 ("First Hearing"). Summary of the Judgment is as follows:

1. the Customer shall pay Company Y the principal amount of approximately RMB80 million and the interest accretion on the principal amount based on the interest rate of 18% per annum until settlement date;
2. related guarantors (guarantor A, guarantor B, guarantee company A and guarantee company B) shall be jointly and severally liable to compensate Company Y in respect of the abovementioned indebtedness of the Customer; and
3. the Company shall assume the supplementary compensation liability for the abovementioned indebtedness of the Customer and the aforesaid guarantors. Upon the supplementary repayment, the Company is entitled to recover it from the Customer.

2020 Interim Report 45

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

16. PROVISION FOR LITIGATION (CONTINUED)

The Company appealed the Judgment to 廣東省高級人民法院 (transliterated as Guangdong Province Higher People's Court, "Guangdong Court") ("First Appeal"), and made a provision of RMB80,000,000 for the 2015 Litigation in June 2018.

On 16 August 2019, the Company received the appeal judgment (the "Appeal Judgment") from the Guangdong Court dated 2 August 2019. The Guangdong Court confirmed the facts as ascertained by the Shenzhen Court in the First Hearing, dismissed the appeal of the Company and upheld the Judgment. The Guangdong Court ruled that (1) the Credit Agreement is valid and effective; (2) the Company shall assume the corresponding supplementary compensation liability; and (3) the litigation fee of approximately RMB490,000 shall be borne by the Company.

After reviewing all documents and contracts related to the 2015 Litigation and taking into account the opinion of the PRC legal adviser, the directors of the Company are of the view that the facts are not clearly ascertained in the Appeal Judgment and the application of the law is incorrect, and thus have decided to apply to 中華人民共和國最高人民法院 (transliterated as Supreme People's Court of the PRC, the "Supreme People's Court ") for retrial (the "Retrial Application").

Meanwhile, after the Appeal Judgment came into effect, Company Y applied to the Shenzhen Court for enforcement of the Appeal Judgment. On 12 December 2019, the Company received the enforcement order dated 4 November 2019 (the "Enforcement Order") from the Shenzhen Court. According to the Enforcement Order, the properties of the Customer, relevant guarantors (guarantor A, guarantor B, guarantee company A and guarantee company B) and the Company in the aggregate amount of approximately RMB138 million shall be seized, frozen or transferred and in particular, the Company shall assume the supplementary compensation liability. The Group's bank balances of RMB79,999,000 previously frozen has been unfrozen and bank balances of RMB137,633,000 has been frozen according to the Enforcement Order as at 30 June 2020.

46 Qingling Motors Co. Ltd

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 30 June 2020

16. PROVISION FOR LITIGATION (CONTINUED)

On 25 February 2020, the PRC legal adviser of the Company received a notice from the Supreme People's Court regarding the acceptance of the Retrial Application. The Retrial Application has been formally filed.

On 13 June 2020, the Company received the ruling for enforcement dated 25 May 2020 (the "Enforcement Ruling") from the Shenzhen Court. The Enforcement Ruling states that the enforcement procedures for the 2015 Litigation shall be suspended and the application for enforcement shall be accepted again when the conditions for resumption of enforcement are fulfilled. On 26 July 2020, the PRC legal adviser of the Company received the civil ruling dated 25 May 2020 regarding the Retrial Application (the "Civil Ruling") from the Supreme People's Court. The Retrial Application was dismissed according to the Civil Ruling.

The Company is striving to negotiate with Company Y under court mediation in order to reach a settlement. The negotiation is still in progress. Up to the date of the issuance of these condensed consolidated financial statements, taking into consideration of the result of the Enforcement Ruling and Civil Ruling, the opinion of the PRC legal adviser and the information currently available to the Company, the Board has assessed the possible future outcome of the litigation and has made a provision for the litigation amounting to RMB137,633,000 as at 30 June 2020 including the interest accretion. The Board believes that an adequate provision has been made based on the available information and do not expect the 2015 Litigation to have any material impact on the overall financial or operating position of the Group.

2020 Interim Report 47

2020 FIRST HALF-YEARLY RESULTS

For the six months ended 30 June 2020, the Group sold 20,755 vehicles, representing a decrease of 10.18% over the corresponding period of the previous year. Sales revenue amounted to RMB2.25 billion, representing a decrease of 6.90% over the corresponding period of the previous year. Profit after tax was RMB99 million, representing a decrease of 54.23% over the corresponding period of the previous year.

MANAGEMENT DISCUSSION AND ANALYSIS

Review of Results

In the first half of the year, the sudden Covid-19 outbreak has made an unprecedented impact on the economic and social development of China. In the entire automobile industry, various automobile enterprises cut prices for sales promotion, and various OEMs were in a challenging operating environment. The Company has been focusing on pandemic prevention and control, while resuming work and achieving production goals, and at the same time also concentrating on reform and development, which was extremely challenging for the Company. As a result, it has not only achieved the goal of ensuring sufficient supply and stable turnover in a period, but also solidly promoted various key tasks, with stable production and operation.

1. Focusing on normalised pandemic prevention and control on an early, solid and detailed manner. In the first half of the year, the Company has established a leading group for pandemic prevention and control to carry out measures relating to pandemic prevention and control and production guarantees. Thus zero confirmed cases or suspected cases were reported among its staff and the staff of upstream supporting enterprises and downstream distributors. At the same time, it provided free maintenance and support services to all vehicles participating in pandemic prevention and control in Hubei.

48 Qingling Motors Co. Ltd

1. Striving to ensure sufficient supply and stable production, and basically achieve the goal of "guaranteeing stable turnover" in the first half of the year. The Company has carried out a comprehensive inventory of parts and components to "ensure sufficient supply" and stabilize the supply chain; it has quickly resumed work, stabilized production and achieved production goals by overcoming difficulties, and finally completed the SPP preparation and production verification for multiple new products; the Company has basically achieved the goal of "guaranteeing stable turnover" in production and operation in the first half of the year.
2. Steadily advancing key projects and storing reserve forces for enterprise development. The research and development of new products has accelerated. The light, medium, and heavy-dutycell pick-uptrucks were fully promoted, and the network of wide, large, heavy and light-truckswere overall improved; the investment in technological transformation was increased and the intelligent manufacturing was accelerated; and the development of the hydrogen fuel-cellvehicle industry was progressing smoothly.
3. Marketing team overcoming the pandemic, combating difficulties, and creating growth. Orderly operation was made in the new marketing system; the channel construction was strengthened; the promotion methods for new product were innovated; the entire vehicle exports were increased; and the after-salesservice level was further improved.
4. Stricter quality control measures were adopted. Achievements were made in production consistency management and control; we strengthened the management of the circulation of new products in the market; made comparison against competing products and improved our products; identified and improved defective products, to prevent the occurrence of defective products in the market.

2020 Interim Report 49

OUTLOOK AND PROSPECTS

In the second half of the year, for vehicle industry, on the one hand, favorable micro policies are expected to stimulate vehicle consumption, on the other hand, the acceleration of revolution and the work of "jungle law" in the industry will lead to more fierce competition for existing market shares and the increase of risks and challenges. The Company must continue to make great efforts to ensure sufficient product supply and increase in production, work more carefully and effectively to ensure stable operation. Priority will be given to the followings:

1. Marketing. To establish integration mechanism, promote our brand and products; to extend our marketing networks to cover low-tier cities and rural areas; to promptly launch new products to outlets, logistics markets and modification factories; to establish performance-based incentive and assessment system.
2. Cost control. To make comparison against competing products and the needs in the market, strengthen the control and accelerate the consumption of stock of raw materials, imported parts and components and vehicles, strengthen cost management and control.
3. To accelerate the launch of key and new product projects. To accelerate laws and regulations compliance, and to complete development, evaluation, mass production preparation as well as mass production and sales of new products on schedule.
4. To improve worksite management and enhance production efficiency. To improve production capacity of single shift; to promote cab welding automation, and coordinate project construction and production organization; to increase first time quality.
5. Stricter quality management. To ensure regular consistency management and control in production, attach high attention to unfavorable information feedback from the market, apply the concept of "high-quality, exquisite, sedan car's experience" in quality management, adopt modern quality management and control means.
6. To win policy support for the hydrogen fuel cell vehicle research and development and industrialization. To try to complete the trial production of samples as early as possible, optimize and improve their performance in demonstration operation.

50 Qingling Motors Co. Ltd

FINANCIAL REVIEW

FINANCIAL PERFORMANCE

For the six months ended 30 June 2020, the revenue of the Group was RMB2,247,765,000 representing a decrease of 6.90% and the decrease in revenue was mainly attributable to the negative impact of the Covid-19 pandemic on the market sentiment and business environment, affecting the sales volume of vehicles of the Group.

Gross profit for the period was RMB274,975,000 representing a decrease of 37.49% as compared to the corresponding period last year. Gross profit margin of the Group for the period was 12.23% and 18.22% for the corresponding period last year. Profit of the Group for the period attributable to owners of the Company was RMB94,593,000, representing a decrease of 55.50% as compared to the corresponding period last year.

For the six months ended 30 June 2020, the total of other income mainly including bank interest income and rental income, were RMB135,704,000, representing an increase of 13.45% as compared to the corresponding period last year, mainly due to the increase in bank interest income.

For the six months ended 30 June 2020, the total distribution and selling expenses of the Group mainly including transportation costs, maintenance fees and other market promotion expenses, were RMB126,527,000, representing an increase of 7.45% as compared to the corresponding period last year, mainly due to the increase in transportation costs and business promotion expenses.

For the six months ended 30 June 2020, the total administrative expenses of the Group mainly including staff's salaries and allowance, insurance premium, maintenance fees and other administrative expenses, were RMB81,805,000, representing a decrease of 25.46% as compared to the corresponding period last year, mainly due to the implementation of the periodic reduction and exemption of retirement benefits scheme contributions in respect of the impact of Covid-19.

For the six months ended 30 June 2020, the total share of profit of an associate and joint ventures to the Group was RMB977,000, representing a decrease of 38.86% as compared to the corresponding period last year, mainly due to the impact of Covid-19.

For the six months ended 30 June 2020, basic earnings per share was RMB0.04. The Company did not issue any new shares during the period.

2020 Interim Report 51

FINANCIAL POSITION

As at 30 June 2020, the total assets and total liabilities of the Group were RMB10,768,415,000 and RMB2,985,723,000 respectively.

The non-current assets were RMB4,068,380,000, mainly including time deposit, property, plant and equipment, interests in joint ventures and intangible assets.

The total current assets amounted to RMB6,700,035,000, mainly including RMB632,228,000 of inventories, RMB2,144,740,000 of trade, bills and other receivables and prepayments, RMB2,170,536,000 of time deposits and RMB1,746,573,000 of bank deposits and bank balances (including restricted bank balances of RMB137,633,000) and cash.

The total current liabilities amounted to RMB2,932,565,000, mainly including trade, bills and other payables of RMB2,415,830,000, provision of litigation of RMB137,633,000, contract liabilities of RMB251,100,000 and refund liabilities of RMB97,521,000.

A s a t 30 J u n e 2020, t h e G r o u p's n o n - c u r r e n t l i a b i l i t y a m o u n t e d t o RMB53,158,000 which included deferred income-government grants and lease liabilities.

Net current assets fell from RMB6,288,197,000 as at 31 December 2019 to RMB3,767,470,000 as at 30 June 2020, representing a decrease of 40.09%.

LIQUIDITY AND CAPITAL STRUCTURE

The Group's working capital requirement was financed by its own cash flow. Gearing ratio represented the percentage of total liabilities over total equity as per condensed consolidated statement of financial position. The gearing ratio of the Group as at 30 June 2020 was 38.36% (as at 31 December 2019: 36.07%).

Issued share capital as at 30 June 2020 maintained at RMB2,482,268,000 and no share was issued during this period of six months.

For the six months ended 30 June 2020, there was no material change in the financing strategies of the Group and the Group did not incur any bank borrowings nor any non-current liabilities except for deferred income and lease liabilities. The Company would closely monitor the financial and liquidity position of the Group and financial market from time to time in order to formulate financing strategies appropriate to the Group.

52 Qingling Motors Co. Ltd

The total equity attributable to owners of the Company as at 30 June 2020 was RMB7,782,692,000. The net asset per share (calculated by dividing the total equity attributable to owners of the Company by the number of ordinary shares in issue) as at 30 June 2020 was RMB3.14.

SIGNIFICANT INVESTMENT

A s a t 3 0 J u n e 2 0 2 0 , t h e G r o u p ' s i n t e r e s t s i n j o i n t v e n t u r e s w e r e RMB492,880,000 and interest in an associate was RMB8,353,000 which mainly included the interest in 五十鈴中國發動機有限公司 ("Isuzu Engine") (The entity was formerly named 慶鈴五十鈴（重慶）發動機有限公司 ("Qingling Isuzu Engine")), a joint venture, of RMB434,903,000. The revenue of Isuzu Engine decreased for the six months ended 30 June 2020 from the corresponding period last year that was mainly attributable to the reducing market demand due to the impact of Covid-19.

During the period ended 30 June 2020, there were no significant acquisition and disposal of the Group.

SEGMENT INFORMATION

The revenue contributed by light-duty trucks and medium and heavy-duty trucks were RMB1,160,732,000 and RMB576,308,000 respectively, representing 77.28% of the total revenue and 93.70% of the total segment profit. The revenue contributed by pick-up trucks was RMB418,773,000, representing 18.63% of the total revenue.

Light-duty trucks and medium and heavy-duty trucks are currently the major products accounting for the highest contribution to the Group.

PLEDGE OF ASSETS

During the period ended 30 June 2020, no asset of the Group was pledged for financial facilities (during the period ended 30 June 2019: Nil).

2020 Interim Report 53

EFFECTS OF FOREIGN EXCHANGE RATE CHANGES

As at 30 June 2020, the Group had bank balances of foreign currency of RMB22,541,000 and foreign currency payables and other payables of RMB99,244,000.

The major foreign currency transactions of the Group was the purchasing business of automobile parts denominated in Japanese Yen. The Group did not encounter any difficulty or suffer any significant impact on its operations or liquidity as a result of the fluctuation of the exchange rate.

COMMITMENTS

As at 30 June 2020, the Group had capital commitments of RMB90,714,000 that had been contracted for but not provided in the condensed consolidated financial statements, mainly including the outstanding consideration payable concerning property, plant and equipment. The Group expects to finance the above capital requirement by its own cash flows.

INTERIM DIVIDEND

The Board has resolved not to declare an interim dividend for the six months ended 30 June 2020 (for the period ended 30 June 2019: Nil).

PURCHASE, REDEMPTION AND SALE OF THE COMPANY'S LISTED SECURITIES

During the six months ended 30 June 2020, there were no purchase, redemption or sales of the Company's listed securities by the Company or any of its subsidiaries.

54 Qingling Motors Co. Ltd

EMPLOYEES AND REMUNERATION POLICY

As at 30 June 2020, the Group had 2,970 employees. For the six months ended 30 June 2020, labour cost was RMB141,916,000. The Group determines the emoluments payable to its employees based on their performances, experience and prevailing industry practices while the Group's remuneration policy and packages are reviewed on a regular basis so as to ensure that the pay levels are competitive and effective in attracting, retaining and motivating employees. Depending on the assessment about their work performances, employees may be granted bonuses and rewards which in turn provide the motives and incentives for better individual performance.

SALES OF STAFF QUARTERS

For the six months ended 30 June 2020, the Group has not sold any staff quarters to its employees.

STRUCTURE OF SHAREHOLDING

1. As at 30 June 2020, the entire share capital of the Company comprised
   2,482,268,268 shares, including:

		Percentage of
	Number of	total number of
	shares	issued shares
Domestic shares	1,243,616,403 shares	about 50.10%
Foreign shares (H shares)	1,238,651,865 shares	about 49.90%

1. Substantial shareholders
   As at 30 June 2020, shareholders other than a director, supervisor or chief executive of the Company having an interest and short positions in 5% or more of the issued share capital of the Company of the relevant classes as recorded in the register of interests in shares and short positions required to be kept by the Company pursuant to Section 336 of the Securities and Futures Ordinance (the "SFO") were as follows:

2020 Interim Report 55

Long positions in the shares of the Company:

				Percentage
				of share	Percentage
				capital of	of entire
Name of	Class of	Number of		relevant	share
shareholders	shares	shares held	Capacity	class	capital
Qingling Motors	Domestic	1,243,616,403	Beneficial	100.00%	50.10%
(Group) Company	shares	shares	Owner
Limited
Isuzu Motors	H shares	496,453,654	Beneficial	40.08%	20.00%
Limited		shares	Owner
Edgbaston	H shares	74,119,000	Investment	5.98%	2.99%
Investment		shares	manager
Partners LLP

Save as disclosed above, the register required to be kept under section 336 of the SFO showed that the Company had not been notified of any interests or short positions in the shares and underlying shares of the Company as at 30 June 2020.

DIRECTORS', SUPERVISORS' AND CHIEF EXECUTIVES' INTERESTS IN SHARES

As at 30 June 2020, none of the directors, supervisors and chief executives of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporations (as defined under the SFO) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code"). For the six months ended 30 June 2020, none of directors, supervisors and chief executives of the Company, their spouse or children under 18 had any rights to subscribe for equity or debt securities of the Company, nor has any of them exercised such rights.

56 Qingling Motors Co. Ltd

CORPORATE GOVERNANCE

The Company puts high emphasis on endeavors to maintain high standards of corporate governance. The Board believes that good corporate governance practices are important to promote investors' confidence and protect the interest of our shareholders. We attach importance to our staff, our code of conduct and our corporate policies and standards, which together form the basis of our corporate governance practices. The Board has adopted sound corporate and disclosure practices, and is committed to continuously improving those practices and cultivating an ethical corporate culture.

During the six months ended 30 June 2020, the Company has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules") except for the deviation from code provision A.1.8 of the Corporate Governance Code as stated below.

Under code provision A.1.8 of the Corporate Governance Code, an issuer should arrange appropriate insurance cover in respect of legal action against its directors. With regular, timely and effective communications among the directors and the management of the Group, the management of the Group believes that all potential claims and legal actions against the directors of the Company can be handled effectively, and the possibility of actual litigation against the directors of the Company is relatively low. On 1 August 2020, the Company has made insurance arrangements and complied with code provision A.1.8.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS AND SUPERVISORS

The Company has adopted the Model Code set out in Appendix 10 of the Listing Rules as the code of conduct regarding securities transactions by the directors and supervisors of the Company. Having made specific enquiry of all directors and supervisors of the Company, the Company confirmed all directors and supervisors of the Company have complied with the required standard set out in the Model Code during the six months ended 30 June 2020.

2020 Interim Report 57

EVENTS AFTER THE LATEST ANNUAL REPORT

Save as disclosed in this report, there were no other significant events affecting the Company nor any of its subsidiaries after the latest annual report requiring disclosure in this report.

INDEPENDENT REVIEW

The interim results for the six months ended 30 June 2020 are unaudited, but have been reviewed by the auditors of the Company in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. The interim results have also been reviewed by the audit committee of the Company.

PUBLICATION OF FINANCIAL INFORMATION

The Company's 2020 interim report containing all the financial information required by the Listing Rules will be dispatched to the shareholders and published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.qingling.com.cn) in due course.

By Order of the Board

Qingling Motors Co. Ltd

LEI Bin

Company Secretary

Chongqing, the PRC, 26 August 2020

58 Qingling Motors Co. Ltd

CORPORATE INFORMATION

DIRECTORS

Executive Directors:

LUO Yuguang (Chairman)

HAYASHI Shuichi (Vice Chairman and General Manager)

MAEGAKI Keiichiro

ADACHI Katsumi

LI Juxing

XU Song

LI Xiaodong

Independent Non-executive Directors:

LONG Tao

SONG Xiaojiang

LIU Erh Fei

LIU Tianni

SUPERVISORS

MIN Qing

ZHANG Yongning

COMPANY SECRETARY

responsible for PRC affairs: LEI Bin

responsible for Hong Kong affairs: TUNG Tat Chiu Michael

AUDIT COMMITTEE

SONG Xiaojiang (Committee Chairman)

LONG Tao

LIU Erh Fei

LIU Tianni

2020 Interim Report 59

REMUNERATION COMMITTEE

SONG Xiaojiang (Committee Chairman)

LUO Yuguang

LONG Tao

LIU Erh Fei

LIU Tianni

NOMINATION COMMITTEE

LUO Yuguang (Committee Chairman)

LONG Tao

SONG Xiaojiang

LIU Erh Fei

LIU Tianni

CORPORATE INFORMATION AVAILABLE AT

Qingling Motors Co. Ltd

LEGAL ADDRESS

1 Xiexing Cun

Zhongliangshan

Jiulongpo District

Chongqing

the People's Republic of China

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Office 1601, 16th Floor

LHT Tower

31 Queen's Road Central

Central, Hong Kong

COMPANY'S WEBSITE

www.qingling.com.cn

H SHARE REGISTRARS

Hong Kong Registrars Limited

Shops 1712-1716

17th Floor, Hopewell Centre

183 Queen's Road East

Wan Chai, Hong Kong

60 Qingling Motors Co. Ltd

H SHARE LISTING PLACE

The Stock Exchange of Hong Kong Limited

Stock code: 1122

PRINCIPAL BANKERS

Bank of China, Huayu Road Branch

Industrial and Commercial Bank of China, Huafu Road Branch Industrial Bank, Business Department of Chongqing Branch China CITIC Bank, Jiangbei Sub-branch

AUDITORS

Deloitte Touche Tohmatsu Certified Public Accountants LLP

Chongqing Branch

43/F World Financial Center

188 Minzu Road, Yuzhong District

Chongqing 400010

the People's Republic of China

Deloitte Touche Tohmatsu

35/F, One Pacific Place

88 Queensway, Hong Kong

LEGAL ADVISERS

as to Hong Kong laws: Tung & Co.

Office 1601, 16/F

LHT Tower

31 Queen's Road Central

Central, Hong Kong

as to PRC laws:

Chongqing Radiance Law Firm

26-1, Chongqing General Chamber of Commerce Building

No. 2, Hongjin Street, Hongqi River

Yubei District, Chongqing

the People's Republic of China