WULING MOTORS HOLDINGS LIMITED 五菱汽車集團控股有限公司 (Incorporated in Bermuda with limited liability) ENTERING THE ERA OF HIGH PERFORMANCE WITH CLEAN ENERGY ANNUAL REPORT 2017 HKEx Stock Code : 305 ANNUAL REPORT 2017 CORPORATE PROFILE Wuling Motors Holdings Limited (“Wuling Motors Holdings” or the “Company”) and its subsidiaries (collectively referred to as the “Wuling Group” or the “Group”) are principally engaged in the businesses of trading and manufacturing of automotive components, engines and specialized vehicles. Our Group’s corporate goal is to grasp the tremendous business opportunities arising from the rapidly growing automobile industry in China and Asia. We supply engines and automotive components to commercial-type mini-vehicles and passenger vehicles. We are also a qualified enterprise for manufacturing electrical mini-truck in China. The Group’s main production facilities are located in Liuzhou, Qingdao, Chongqing and Indonesia. Since 2011, we have been ranked as one of the Fortune China 500 Enterprises. GROUP STRUCTURE DRAGON HILL GUANGXI AUTOMOBILE 13.7% WULING MOTORS 60.6% HOLDINGS HKEx:305 60.9% 39.1% WULING INDUSTRIAL ENGINES AND AUTOMOTIVE SPECIALIZED RELATED PARTS COMPONENTS VEHICLES AND (INCLUDING NEW OTHER INDUSTRIAL ENERGY VEHICLES) SERVICES Wuling Motors Holdings Limited > Annual Report 2017 CONTENTS Corporate Profi le Group Structure 2 Chairman’s Statement 10 Report of the CEO 14 Operation Review Main Business Segments Engines and Automotive Specialized Related Parts Components Vehicles and Other (including Industrial New Energy Services Vehicles) 28 Financial Review 33 Directors’ and Senior Management’s Biographies 41 Corporate Governance Report 55 Report of the Directors 70 Independent Auditor’s Report 74 Consolidated Statement of Profi t or Loss and Other Comprehensive Income 75 Consolidated Statement of Financial Position 77 Consolidated Statement of Changes in Equity 78 Consolidated Statement of Cash Flows 80 Notes to the Consolidated Financial Statements Corporate Information 01 Wuling Motors Holdings Limited > Annual Report 2017 CHAIRMAN’S STATEMENT Mr. Yuann ZhijunZhijun Chairmann PURSUING Growth Amid Stability PROGRESSING With Determined Goals PREFACE 2017 marked our tenth year in the automobile industry. Following our investments into the business of manufacturing and trading of automotive components, ENHANCING engines and specialized vehicles of Liuzhou Wuling Motors Industrial Company Limited (“Wuling Industrial”), Quality and Effi ciency the Group accumulated valuable experiences from both favourable and adverse conditions in the industry. In addition, we completed the strategic deployment of major production facilities in Liuzhou, Qingdao, Chongqing and Indonesia. Furthermore, the Group PROMOTING actively carried out various benchmarking and Sustainable Development upgrading programs intended for its core products, and collaborated with its key customer on its business expansion and transformation. Over the last ten years, our revenue has been steadily moving upwards, resulting in a stable improvement in our shareholder returns. 02 Wuling Motors Holdings Limited > Annual Report 2017 CHAIRMAN’S STATEMENT In 2017, the automobile industry in China continued Net profit of the Group for the year ended 31 December benefiting from the steady growth momentum of its 2017 which had taken into account of the other gain of domestic economy. Throughout the year, the total RMB46,994,000 from the effect of changes in fair value automobile sales in China steadily grew by of the convertible loan notes was RMB281,784,000, approximately 3% to approximately 28.9 million vehicles. representing a slight increase of 0.5% as compared to Despite the increasingly fierce competition in the previous year. Profit attributable to the owners of the industry, the Group carried out product transformation Company was RMB173,158,000, representing an and upgrades and committed itself to market expansion increase of approximately 23.3%, while the profit by firmly adhering to both the operating policies of attributable to the owners of the Company netting off of “Pursuing Growth Amid Stability, Progressing With the related effective interest expenses incurred and the Determined Goals, Enhancing Quality And Efficiency, effect of changes in fair value from the convertible loan Promoting Sustainable Development” and the core work notes during the year for the purpose of computation of of “Maintaining Growth, Adjusting Structures, Expediting the earnings per share on a fully diluted basis, was Transformation, Emphasizing Effectiveness”. Under this RMB135,303,000, representing a decrease of challenging business environment, the Group reported approximately 3.7%. an annual revenue of RMB16,123,895,000, representing a decrease of 3.3% as compared to previous year. On 23 May 2017, the Company issued a convertible loan notes of a principal amount of HKD400,000,000 to Gross profit for the year under review was Wuling (Hong Kong) Holdings Limited (“Wuling HK”), our RMB1,603,669,000, representing a decrease of 14.7%. controlling shareholder, as approved by the Gross margin of the Group declined to 9.9% for the year. independent shareholders of the Company at a special Growth of businesses in relation to the passenger general meeting held on 16 December 2016. The vehicles segment of the automotive components and convertible loan notes which bear interest at 4% per the specialized vehicles helped to maintain a stable annum would be eligible to be converted into a total business volume of the Group for the year. However, number of 571,428,571 fully paid up shares of the such positive impact was adversely impeded by the Company at an initial conversion price of HKD0.70 per increases in the prices of raw material, the operating share on any business day commencing from 22 losses incurred in the newly set-up plant in Indonesia November 2017 up to the fifth business days prior to the and the drastic reduction in the businesses of the maturity date (being 23 May 2020). Among which, the engine and parts division during the year. Besides, the convertible loan notes of a principal amount of relatively low gross margin condition continued to HKD150,000,000 were converted by Wuling HK into a reflect the keen competition environment in the total number of 214,285,714 fully paid up shares of the automobile industry in China. Company on 29 December 2017. As a result of the conversion, the percentage of shareholding of Wuling Meanwhile, profitability of the Group’s operation was HK in the Company was increased from 56.04% to maintained due to the positive factors of the reversal of 60.64%. bad debt provision made in previous years, the one-off compensation income received on relocation and demolition of certain old plants and facilities, and a reduction in the research and development expenses during the year. 03 Wuling Motors Holdings Limited > Annual Report 2017 CHAIRMAN’S STATEMENT In connection with the issue of these convertible loan actively engaged in collaboration on resource notes and as approved by the independent shareholders integration with premier enterprises for mutual benefits. of the Company at the abovementioned special general By capitalizing on opportunities as initiated by the “Belt meeting, the Company had also completed the first and Road”, the Group strategically developed a business instalment of capital injection into Wuling Industrial, our landscape with “Multiple Growth Drivers”. Furthermore, non–wholly owned subsidiary, by contributing an the Group continued its meticulous management to additional sum of RMB340,000,000 in cash to Wuling enhance quality and efficiency that facilitate its Industrial of which RMB161,126,100 was contributed to development, while its capital securitization structure the registered capital of Wuling Industrial and was transformed to provide stable funding resources for RMB178,873,900 was contributed to the capital reserves the businesses of its entities. As a result, the Group laid of Wuling Industrial. Upon completion of this capital a primary cornerstone for its long–term development injection, the registered capital of Wuling Industrial was strategy of “Pursuing Growth Amid Stability, Progressing increased from RMB1,042,580,646 to RMB1,203,706,746 With Determined Goals”. For 2017 under review, the and the Company’s equity interest in Wuling Industrial Group’s salient development and performance were as on an enlarged basis was increased by approximately follows: 6.04% to approximately 60.90%. Completion of the capital injection in Wuling Industrial enabled the I. Transformation and Upgrade of Principal Company to have a greater equity share of the business Business Operations Spearheaded by operation of Wuling Industrial, our principal operating the Passenger Vehicle Market Segment arm in the automobile industry, whereas, the issue of the convertible loan notes to Wuling HK, as well as the 1. Market expansion of automotive exercise of the relevant conversion rights to increase components through transforming and the controlling interest in the company, demonstrated upgrading and cultivation of the future the long term commitment of the ultimate controlling prospect of engines through innovation shareholder, Guangxi Automobile Holdings Limited and technological development (“Guangxi Automobile”), in the Company. The Group was actively engaged in the REVIEW OF MAJOR ACHIEVEMENTS IN development of passenger vehicle products 2017 under innovated technical standards and revamped processing standards,