Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
  1. Homepage
  2. Equities
  3. Hong Kong
  4. Hong Kong Stock Exchange
  5. Minth Group Limited
  6. News
  7. Summary
    425   KYG6145U1094

MINTH GROUP LIMITED

(425)
  Report
SummaryChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsOther languagesPress ReleasesOfficial PublicationsSector news

Minth : 2020 Annual Report

04/26/2021 | 07:23pm EDT

CORE VALUES

• Integrity

• Teamwork

• Trust

• Embrace change

VISION

We create beauty in motion with intelligence

MISSION

Make automobiles lighter, prettier and more intelligent

TARGET

To be the top 50 global auto parts supplier in 2025

This annual report is printed on environmental paper

CONTENTS

Corporate Information

2

Summary of Financial Information

3

Chairperson's Statement

4

Management Discussion and Analysis

6

Directors and Senior Management

19

Corporate Governance Report

21

Directors' Report

29

Independent Auditor's Report

41

Consolidated Statement of Profit or Loss and

46

Other Comprehensive Income

Consolidated Statement of Financial Position

47

Consolidated Statement of Changes in Equity

49

Consolidated Statement of Cash Flows

51

Notes to the Consolidated Financial Statements

53

* Should there be any discrepancy between the English and Chinese versions, the English version shall prevail.

CORPORATE INFORMATION

THE BOARD OF DIRECTORS

Executive directors

Wei Ching Lien

(executive Director and Chairperson as appointed on 28 May 2020)

Chen Bin Bo

(executive Director as appointed on 28 May 2020 and Chief Executive Officer)

Chin Chien Ya

Huang Chiung Hui (resigned on 28 May 2020)

Independent non-executive directors

Wang Ching

Yu Zheng

Wu Tak Lung (appointed on 28 May 2020)

Wu Fred Fong (retired on 28 May 2020)

COMPANY SECRETARY

Yi Lei Li

REGISTERED OFFICE

Cricket Square

Hutchins Drive, P.O. Box 2681

Grand Cayman KY1-1111

Cayman Islands

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN CHINA

No. 1 Yazhong Road, Nanhu District

Jiaxing City, Zhejiang Province

Postal Code 314006

China

Tel: (86 573) 8368-6700

Website: www.minthgroup.com

OFFICE IN HONG KONG

Room 904, 9/F, Island Place Tower

No. 510 King's Road

North Point, Hong Kong

PRINCIPAL BANKERS

Bank of China

Ningbo Development Zone sub-branch 21 Donghai Road

Ningbo Economic and Technological Development Zone China

Citibank N.A.

Hong Kong Branch

44/F Citibank Tower

No. 3 Garden Road

Central, Hong Kong

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Suntera (Cayman) Limited

Suite 3204, Unit 2A

Block 3, Building D

P.O. Box 1586

Gardenia Court

Camana Bay

Grand Cayman, KY1-1100

Cayman Islands

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited

Shops 1712-1716

17th Floor, Hopewell Centre

183 Queen's Road East

Wan Chai, Hong Kong

AUDITOR

Deloitte Touche Tohmatsu

Certified Public Accountants

35th Floor, One Pacific Place

88 Queensway Hong Kong

LEGAL ADVISERS TO THE COMPANY

As to Hong Kong Law Reed Smith Richards Butler 17th Floor, One Island East Taikoo Place, 18 Westlands Road Quarry Bay, Hong Kong

As to PRC Law Zhejiang T&C Law Firm

11/F Block A Dragon Century Square 1 Hangda Road, Hangzhou

China

As to Cayman Islands Law

Conyers Dill & Pearman

Century Yard, Cricket Square

Hutchins Drive, George Town

Grand Cayman, British West Indies

STOCK CODE

SEHK Code: 0425

2 MINTH GROUP LIMITED

SUMMARY OF FINANCIAL INFORMATION

A summary of the results, assets and liabilities of Minth Group Limited (the "Company") together with its subsidiaries (collectively the "Group") for the last five financial years is as follows:

For the year ended 31 December

2016

2017

2018

2019

2020

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Result

Turnover

9,399,992

11,384,495

12,553,202

13,198,189

12,466,858

Profit before tax

2,118,599

2,488,296

2,046,074

2,101,278

1,679,575

Income tax expense

(339,172)

(395,564)

(333,534)

(336,187)

(216,587)

Profit for the year

1,779,427

2,092,732

1,712,540

1,765,091

1,462,988

Attributable to:

Owners of the Company

1,719,141

2,025,254

1,660,636

1,690,300

1,395,509

Non-controlling interests

60,286

67,478

51,904

74,791

67,479

1,779,427

2,092,732

1,712,540

1,765,091

1,462,988

As at 31 December

2016

2017

2018

2019

2020

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Assets and Liabilities

Total assets

15,050,712

18,108,962

21,268,088

23,642,675

27,205,745

Total liabilities

(4,195,006)

(5,710,857)

(7,839,382)

(8,898,981)

(11,892,850)

10,855,706

12,398,105

13,428,706

14,743,694

15,312,895

Equity attributable to

owners of the Company

10,597,514

12,113,134

13,160,414

14,324,945

14,944,004

Non-controlling interests

258,192

284,971

268,292

418,749

368,891

10,855,706

12,398,105

13,428,706

14,743,694

15,312,895

ANNUAL REPORT 2020

3

CHAIRPERSON'S STATEMENT

Dear Shareholders,

First of all, I would like to express my heartfelt appreciation for your trust and support in Minth Group! In adherence to our business philosophy of "continuous improvement for perfection" and our core values of "Integrity, Trust, Teamwork and Embrace change", we will continue to work with unremitting efforts to make maximum contributions to shareholders' interests, customers' value, staff happiness and social responsibility. I hereby present our 2020 Annual Report and future outlook for your review.

The outbreak and rapid spread of the coronavirus disease 2019 ("COVID-19") in early 2020 has dealt a heavy blow to the global economy. The epidemic prevention measures adopted by the governments of different countries in response have resulted in the suspension of production and operations of many industries. Meanwhile, factors such as geopolitical issues have aggravated the economic situation. With its global operations, Minth was also subjected to extremely trying times. Nevertheless, we responded with swift action and set up a crisis response team at the outbreak of the pandemic. We formulated proper risk controls and prevention measures at different stages and for different locations. This provided full coverage for the Group's factories and customers around the world in order to minimise the impact of the pandemic.

During this period, our staff overcame difficulties with united efforts and we were able to quickly resume operations and production. Moreover, owing to consistent efforts throughout the year, we were able to make up for the inevitable decline in the results of the first half of the year under the given market conditions, reporting substantial half-on-half improvements in key financial metrics. For the full year of 2020, we reported revenue of RMB12.467 billion, representing a year-on-year decrease of only 5.5%, while net profit amounted to RMB1.396 billion, representing a decrease of 17.4% when compared to the previous year.

Fluctuations in the market have not thwarted the progress of Minth's development. In 2020, we completed the restructuring of our product business units ("BUs"). Under this new organizational structure, we have shifted from regional management to specialized development in terms of both product development and m a n u f a c t u r i n g . T h i s h a s g i v e n m o r e autonomous management authority to the BUs and facilitated more efficient and cost-effective team cooperation. It has been conducive to achieving results growth in a healthy and systematic manner. In connection with new business intake, remarkable results were recorded despite the depressed market and we secured orders with an expected annualized revenue contribution of over RMB8 billion for the first time. Among these, overseas businesses accounted for approximately 55%, while businesses relating to new energy vehicles ("NEVs") accounted for more than 60%. A number of breakthroughs have been made in connection with our innovative products, battery housings in particular, the

4 MINTH GROUP LIMITED

CHAIRPERSON'S STATEMENT

new business wins for which accounted for approximately 50% of the total. As the pioneer of our innovative business, our research and development ("R&D") team has also continued to deliver tremendous results. In 2020, substantial progress was made in the development of products featuring weight reduction, electrification, intelligent application and internet-connection to provide a driving force for the Group's short-term, as well as long-term development on the back of technological strengths in numerous areas that topped our peers in Asia and even the rest of the world.

In 2021, we will continue sparing no efforts to drive the implementation of the Group's development strategies.

  1. Global presence: we will continue to enlarge our international footprint with a special focus on supporting the construction and commissioning of factories in Serbia, the Czech Republic and the United States, aiming to meet customers' demand for localised supply with our global layout while reducing our carbon footprint to do our part in contributing to green development.
  1. Product innovation: we will continue to expand our Innovation Research Center, consistently introducing

innovative solutions in materials, products and technologies to enhance marketing appeal and customer loyalty, such that Minth will become a preferred supplier for automotive OEMs.

  1. Revamping our production model: We will be completing the construction of Phase I of the Future Factory, and preparations are in place for horizontal development, with a view to significantly enhancing operational efficiency and improving the industrial park management through applications featuring flexibility, digitalisation and intelligence. At the same time, we will continue with our digital transformation project as planned to achieve efficiency enhancements and swift responses in our operational management.

IV. Team building: We believe that a united and long-lasting elite team would ensure Minth's competitiveness. Enduring operations can only be achieved if all employees are holistically healthy (i.e. with overall wellness). We have launched programmes that promote physical fitness, as well as more sophisticated programmes that promote psychological well-being for both staff and their families, such as the empowerment camps, couples' camps for parenting skills, childcare facilities, character-building camps for children of Minth staff, and the senior's center for elderly family members of Minth staff. These initiatives have notably enhanced staff happiness at both home and work, and their potential has been brought into play with greater drive as a result.

Irrespective of the future economic conditions, our first task is to develop our internal strengths - to consolidate and pass on our team's competitiveness, so that our Group is operated on a strong foundation and maintains its lead in the global industry.

Once again, on behalf of all the staff at the Group, let me express our sincere gratitude for the vigorous support of our shareholders!

Wei Ching Lien

Chairperson

26 March 2021

ANNUAL REPORT 2020

5

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY OVERVIEW

During the year ended 31 December 2020 (the "Review Year"), the production and sales of China's passenger vehicles ("PVs") were approximately 19,994,000 and 20,178,000 units respectively, representing a year-on-year decrease of approximately 6.5% and 6.0% respectively. Breaking it down into market segments, sedans saw declines of approximately 10.0% and 9.9% respectively in production and sales when compared to the same period in the previous year. Production and sales of MPVs also shrank by approximately 26.8% and 23.8% respectively when compared to the same period in the previous year. SUVs actually recorded year-on-year increases in production and sales of approximately 0.1% and 0.7% respectively as compared to the same period in the previous year, becoming the first segment to report positive growth and outperforming sedans in production and sales volumes. During the Review Year, China became the world's largest market for luxury cars which promoted robust growth in the sales of luxury cars, and it is anticipated that this growth in penetration rate will continue in the future. In terms of product origins, the market share of Japanese OEMs increased by approximately 1.8%, while German OEMs experienced an approximately 0.3% decline. German and Japanese OEMs each accounted for over 23% of the market. As for the market shares of other product origins, American OEMs reported growth while Korean and French OEMs experienced declines to varying degrees. Chinese OEMs continued to lead the market in terms of overall sales, although they reported an approximately 0.8% year-on-year decline in market share. During the Review Year, growth rate of sales for new energy vehicles ("NEVs") outperformed the market with an over 10% annual growth in retail sales. High-end NEVs known for their intelligent features and low-end NEVs known for their cost efficiency, have become two important segments in supporting China's NEV market.

During the Review Year, the global automobile market suffered a collective decline due to the impact of coronavirus disease 2019 ("COVID-19"). However, NEVs bucked this trend and reported growth, becoming the greatest highlight for the market. During the Review Year, global sales of light vehicles dropped approximately 14.0% year-on-year to approximately 77,600,000 units. In Europe, sales of NEVs continued to rise due to the ongoing incentive policies of the European governments despite the overall lacklustre sentiment of the automobile market. According to the estimates of PwC's Strategy&, NEVs will account for approximately 67.0% of overall automobile sales in the European markets by 2035, which would make Europe a

leader, ahead of other global markets in terms of market share for NEVs. The market of the United States (the "US") reported the fourth heaviest decline since 1980, as sales of light vehicles dropped approximately 14.6% to approximately 14,580,000 units. Light-weight trucks, as represented by the pick- up truck, remained a pillar supporting automobile sales in the US. In terms of Asian markets, Japan recorded a relatively substantial decline, while the Korean and Thai markets stabilised and reported growth in rebound. Brazil, India, Russia and Mexico experienced declines to varying degrees.

COMPANY OVERVIEW

The Group is primarily engaged in the design, manufacture and sales of trims, decorative parts, body structural parts, roof racks, battery housings and other related auto parts. The Group has its main manufacturing bases in China, the US, Mexico, Thailand and Germany, as well as Serbia, the United Kingdom (the "UK") and the Czech Republic where new plants have been built. These manufacturing bases are supported by the Group's sales, design and research and development ("R&D") centres in China, Germany, the US, Japan and Korea. These enable the Group to fully leverage geographical proximity to facilitate the development of new products and expand its market reach. With ongoing growth and expansion, the Group is able to serve major automotive markets across the globe, and to understand and meet the demands of its diverse customers.

During the Review Year, to further facilitate the Group's global strategy and deployment of its products, realise leadership in technology and build core competitiveness of its products in the global markets, the Group continued to consolidate its operation model comprising the four principal product business units ("BUs"), namely metal and trim products, plastic products, aluminium products and battery housings. This follows the successful completion of the strategic restructuring of the BUs, giving more autonomous management authority to the BUs and encouraging them to increase their economies of scale and explore opportunities for value growth. Meanwhile, the project management function was transferred from the Account Development Centre of the Group to the BUs, in order to enhance organisational and operational efficiency. At the same time, the Group has established the Supply Chain Management Department to streamline the Group's integrated supply-chain management, which will facilitate end-to-end management of the entire process from sales estimates, to production and sales coordination, agile planning, procurement management, logistics and warehousing. All these will be managed and viewed through a digitalised system.

6 MINTH GROUP LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

During the Review Year, the Group continued to expand the implementation of the Minth Operation Excellence System ("MOS") (敏實卓越運營系統). At the Group's manufacturing plants in China, Thailand, and Mexico, the Group applied a cost management pillar to improve the cost attribution matrix, which provided a more detailed analysis of wastes and losses incurred in the course of operations and helped formulate an effective improvement plan. During the Review Year, in respect of the application and standardisation of MOS tools, the Group started to implement a transition from the reaction stage to the preventive stage. The BUs are completing the MOS talent layout and establishing a succession of teams utilizing the LUTI (Learn/Use/Teach/ Inspect) system. The Group continued to utilise MOS as the assessment standard and identified seven perspectives (including management, "environment/quality/safety", cost, human resources, production excellence, logistics and supply chain) as the principal management elements of its plant operations, to promote communication and appraisals among its factories, and to build Bronze Level factories as the benchmark, so that best practices could be quickly standardised and replicated in its plants at various locations globally. In the course of MOS implementation, the Group has also been seeking improvements continuously. During the Review Year, the Group added primary-stage product management as an additional evaluation criterion at the battery housing BU on a trial basis to reduce the risks and costs incurred prior to mass production. This has helped to facilitate the standardisation and integration of MOS across the Group's global plants.

The Group is consistently seeking improvements in operations, including upgrades to the existing production models, process optimisations as well as the introduction of advanced manufacturing technologies. This is done while also enhancing the competitiveness of its traditional products in cost and quality, to further increase the penetration of various product types at the customer end. During the Review Year, the Group continued to promote new solutions to customers and to win their trust with quality products and services. During the Review Year, the Group's R&D and sales teams liaised with customers on technical solutions to facilitate market development of new products such as battery housings, intelligent front module and door systems. These endeavors should provide assurance for the Group's future revenue growth. In terms of project development, the Group's work on aluminium battery housings, radomes, illuminated emblems and grilles, active grille shutters, electric running boards and laser-welded door frames are moving along smoothly.

During the Review Year, with a view to enhance its core competitive strengths in this digital era, the Group established the Digital Transformation Centre, aiming to develop its digital platform and construct a forward-looking group management and production model, and in so doing accelerating the Group's digital transformation. During the Review Year, the Digital Transformation Centre established a digital factory project team which is responsible for the business planning and information infrastructure of the Group's global factory system. During the Review Year, the Group continued to appoint professional consultants to further update and promote the SAP project, aiming to create a globally integrated information platform and lay the foundation for the globalisation and agile operations of the Group. This transformation has allowed the Group to better proceed with production planning based on rolling forecasts and actual orders placed by the customers, to streamline its efforts by aligning production and sales with capacity, as well as to support the establishment and promotion of the management platform of entire supply chain covering multiple sites. The entire supply chain and online coordination process of production planning and management, warehousing, logistics, procurement and sales could be tracked through this platform.

During the first half of the Review Year, third-party partners were added to the Future Factory project and the work on top-level design plans officially commenced. Design work was almost completed by the end of the Review Year, and construction work has been progressing at a steady pace. The Group targets to realize intelligent manufacturing through construction of the Future Factory which is featured with flexibility, digitalisation and intelligence, in order to achieve comprehensive benefits in all aspects including the workshops, the layout, the logistics, the production technologies, the production management as well as enhancing the environmental protection and safety. Regarding the intelligent industrial park of the Group, the main idea is to bring about the best humanistic experience by employing the most advanced technologies. With the application of Big Data, the Internet of Things and Artificial Intelligence ("AI"), the Group plans to set up a new industrial environment that promotes a more humanistic experience and intelligent manufacturing while protecting the environment. This site is expected to lead the Group onto its path of digital transformation and upgrades.

Over the Review Year, the Group has kept broadening its engagement in its management of the environment, health and occupational safety ("EHS"). Based on the EHS system, The Group is working to achieve the goal of "healthy, intelligent and eco-friendly manufacturing". The development of the energy system and the carbon emission management system is nearing completion.

ANNUAL REPORT 2020

7

MANAGEMENT DISCUSSION AND ANALYSIS

During the Review Year, the Group continued to strengthen its safety management across all BUs on a uniform basis with a focus on on-site operations. A set of criteria called the "ten major red lines" has been adopted as the management method for setting key points and overseeing the process. It has been the key to enhancing the safety awareness of employees and to reinforcing the management's awareness of risk identification in order to ensure operational safety at the factory level. The Group has continued to introduce advanced technologies for waste water, emissions and hazardous waste treatment, while increasing investment in waste recycling facilities, reducing the consumption of raw materials and supplies, as well as installing an online monitoring system to provide real-time monitoring of the emission treatment facilities. This ensures effective operations of such facilities, resulting in the reduction of pollutant discharge and greater compliance with relevant emission standards. The Group has also taken greater heed of the development and management of occupational health by optimizing management mechanisms for jobs subject to occupational hazards and ensuring comprehensive implementation of the occupational health check systems to ensure the general health and well-being of the employees. There has been a substantial decrease in reportable incidents (OHSA recordable work injuries and open flame incidents) that have occurred during the Review Year in the Group when compared to the same period last year. No material safety, fire or environmental incidents were reported.

Over the course of the Review Year, the Group commenced the upgrades of ISO14001 and ISO45001 and has accepted energy management audits done by its major clients. The Group has started initiatives for carbon emission management with the convening of its first sustainability conference and the formulation of carbon reduction roadmap to implement relevant measures. During the Review Year, the Group's EHS team completed the evaluation of the on-site implementation and MOS-EHS pillar for the factories in China. With on-site training of operators, equipment handlers, junior managers and plant managers, staff competence in fire prevention and other safety issues has been comprehensively improved. The overall EHS performance of the Group has been enhanced, thereby ensuring safe and healthy operations.

During the Review Year, the Group was engaged in prevention work in regards to the COVID-19. The Group's EHS team completed tasks for the preparation, dispatch and use of anti-pandemic supplies as well as the sanitisation of workspaces. These efforts have facilitated the Group's smooth resumption of work and production while safeguarding employees' well-being.

During the Review Year, the Group continued to focus on its development strategy and, in tandem with its control model and the commencement of digitalisation reforms, the Group made corresponding planning to further strengthen its capability of independent oversight in addition to its commitment to improving the development and implementation standards of its comprehensive risk-oriented internal control system. With a strong emphasis on the efficiency in dealing with external risks, upgrades were planned for the digitalisation of risk management and internal oversight as integral parts of the Group's IT-based control and management, so as to exert more systematic and effective control over potential risks. During the Review Year, in response to the needs of organisational transformation, the Group commenced and completed modifications of the framework and procedures of authorisation. Process control was reviewed for its efficiency and effectiveness and optimised on an ongoing basis, while improvements were also made to the method of the Group's internal control management to consistently enhance its risk control and management standard and reasonably assure that potential risks were controlled within acceptable tolerance levels. During the Review Year, the Group published the revised policy called "Minth Group Regulations for the Administration of Audit and Supervision" to further ensure the independence of its internal audit function in the context of system and organisational structure, while continuing to allocate sufficient resources to support the performance of its duties, in continuous enhancement of the efficiency, effectiveness and standardisation of internal audit. In the meantime, audit covering all four BUs of the Group was completed in an ongoing effort to facilitate, enhance and supervise the effectiveness of overall risk management of each functional department and operating unit, as risk management was embedded in the daily operations and the core value chain of the Group. Continuous improvements were made particularly in areas such as procurement and supplier management, compliance management, and authorisation management. The Group was also highly concerned with improving the development of the system and capability for preventing and combating bribery. In addition to strengthening cooperation between the police force and fellow industry players, the Group has also published the revised policy called "Minth Group Regulations for Whistleblowing Management and Reward for Integrity" to enhance the development of internal whistleblowing channels and stipulate the reward of reporting on briberies and other acts of fraud. These measures have effectively safeguarded and promoted the sustainable and steady development of the Group.

8 MINTH GROUP LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

Business and Operation Layout

During the Review Year, the Group's revenue was approximately RMB12,466,858,000, representing a drop of approximately 5.5% as compared with approximately RMB13,198,189,000 in 2019. During the Review Year, the

domestic revenue of

the Group was

approximately

R M B7,391,431,000,

r e p r e s e n t i n g a

d e c r e a s e o f

approximately 2.8% as compared with approximately RMB7,605,321,000 in 2019. Although the domestic market had been impacted by COVID-19, China's automobile market benefited from the launch of various incentive policies to stimulate recovery after initial setbacks. The Group's European and Japanese OEMs in China outperformed the overall market. The Group's overseas revenue during the Review Year was approximately RMB5,075,427,000, representing a decrease of approximately 9.3% as compared with approximately RMB5,592,868,000 in 2019. This was mainly attributable to a global disruption in the supply chain of the automobile industry which was devastated by the COVID-19, resulting in temporary suspension of production or curtailed orders by the Group's OEM clients in China and abroad following lockdowns in numerous overseas countries.

During the Review Year, the new business intake for the Group exceeded RMB8 billion for the first time to achieve a new milestone in growth. Among them, a significant breakthrough was made in innovative products with substantial growth in new business intake. During the Review Year, the Group made rapid progress with its battery housing business, as it became a strategic supplier for MEB platform (Volkswagen Group's largest platform for electric vehicles) in Europe. Meanwhile, the Group gauged the pulse of the market for systems integration supply with pinpoint accuracy and commenced cooperation with battery makers such as CATL. In addition, the Group secured orders from a number of customers, such as BMW, Nissan and Renault, and gained rising importance in the NEV market. During the Review Year, the Group targeted popular trends in the market and made aggressive moves into illuminated products, gaining access to markets for illuminated grilles, illuminated emblems and illuminated body side mouldings. Moreover, the Group made multiple breakthroughs with new techniques and products, such as hot stamping, electric running boards, bumper beams, exhaust pipes and rocker panels, which forms an ongoing enhancement of its comprehensive competitiveness in multiple areas. In terms of customer development, the Group secured Tesla's aluminium trim business for the first time and became a tier-one supplier for Model Y (one of Tesla's popular products). In North America and Thailand, the Group continued to make breakthroughs in the business with Japanese OEMs, while being nominated as a qualified roof rack supplier for Lexus for the first time. At the same time,

the Group continued to explore the NEV market and allocated more attention to the development of EV start-ups and opportunities for potential cooperation.

The Group has been pursuing its global expansion plans in relation to battery housings and other products over the Review Year. Two new factories are about to start full production in Serbia, following the construction of several workshops, and installation and fine-tuning of large scale extrusion lines during the Review Year. The factories have been checked to ensure strict environmental controls and safety management are in place. These two factories, with state-of-the-art production lines, will be serving aluminum BU and battery housing BU of the Group. The Group has also established its presence in the Czech Republic, and has confirmed the workshop for battery housings as well as the planning for all related equipment. There are also two new plants established exclusively for battery housings in Chengdu and Shenyang, China. A factory was also set up in Xianning for both battery housings and metal and trim parts. All of these efforts have helped to further expand the Group's global footprint, meet customers' needs on proximity, and keep the Group competitive in the global market for battery housings and other products.

During the Review Year, the Group has been actively working on optimizing and expanding the capacity of existing sites according to their respective circumstances. This not only promoted the overall operational efficiency of the Group, but supported the Group to better satisfy its global customers' requirements in relation to product development and mass production. With the help of these updates, the Group has received multiple awards of supplier excellence for providing outstanding quality, reasonable costs, great after-sales service and being a team player at its sites in Jiaxing, Huai'an, Wuhan, Guangzhou, Zhengzhou, Tianjin, Beijing, Chongqing and Changchun. During the Review Year, the Group also formed a joint venture with the Hella Group to further explore opportunities in radome products (please refer to the Company's announcement dated 18 June 2020 for further details).

The Review Year presented its own unique challenges with the advent of a global pandemic, namely COVID-19, and severe chaos and major disruptions in markets were witnessed around the world, but a gradual recovery is in progress. To effectively mitigate the impact of the pandemic, the Group's crisis response team actively implemented epidemic prevention measures according to internally formulated epidemic prevention plans, including the anti- epidemic response plan, contingency plan and disease control manuals for different departments, with a view to ensuring the safe, healthy and stable operations of all subsidiaries within the Group. With a dual emphasis on anti- epidemic measures and production, the Group swiftly

ANNUAL REPORT 2020

9

MANAGEMENT DISCUSSION AND ANALYSIS

resumed operations while winning the support and recognition of the government, customers and its staff. Tasks in business intake, safety planning, quality management, efficiency enhancements, cost improvements and efficient delivery were rolled out as usual and tracked in a systematic and project- based manner, and notable results were achieved. In view of the volatile international trade relations, reasonable strategic adjustments were made with the assistance of professional investment, taxation and legal teams to safeguard the Group's international layout.

Following its restructuring into BUs, the Group also saw improvements in both exchanges (in technologies and talents) and cooperation among different factories in the Group, both locally and globally. Sophisticated project experience in product development, tooling development, process development and quality improvement of the factories in China could be easily duplicated at overseas factories, thus driving swift improvement of newly launched factories in other parts of the world.

Research and Development

The Group did not lag behind in research and development ("R&D") during the Review Year. It conducted a thorough analysis of current trends and market demands in the automotive industry in order to pursue continued breakthroughs in product and technology. This has led to substantial progress in product development in line with the trends of weight reduction, electrification, intelligent application and internet-connection for automobiles ("four disruptive trends").

Regarding battery housing products, the Group has been honing its competitive advantage and becoming a system solution provider. The Group, with its vertical integration capabilities from conception, technical design, process design and industrial development to global manufacturing, has been growing to be a preferred partner for multiple global automotive OEMs. With continuous R&D, the Group has maintained a constant output of innovation for new products and technologies, such as cell-to-pack ("CTP") battery housing solution, housings applicable for battery swapping, housings for solid-state batteries and thermal plastic housing covers. With this intense R&D activity, the Group has been able to secure multiple global projects for concurrent design and be engaged in concept design for OEMs' vehicle models. The Group has signed an agreement to be the battery housing expert supplier for a European OEM. The Group also has R&D teams that are focused on improving industrial technologies and processes. The Group has been cooperating with other technological leaders in the field around the world in order to optimize its production lines, tooling designs and production techniques. The Group's

factories in Anji and Shenyang officially kicked off mass production, and the Group is fast becoming one of the world's largest suppliers of aluminum battery housings based on its current order book. Meanwhile, the Group has also been making use of its diverse skills to start offering complementary parts for the battery housings such as front and rear crash management systems, rocker panels and other high pressure die cast structural parts. Orders have already been secured, which will offer another growth driver for the Group while cementing the Group's status as a complete solutions supplier of battery housings and integrated chassis components.

As for intelligent exterior products, the Group is focusing on the R&D of intelligent front modules and intelligent door systems. The Group is leading the charge among its domestic peers in technical capability and market share for products such as millimetre wave ("mmWave") compatible radomes and illuminated emblems. During the Review Year, the Group entered into an agreement with Hella Group from Germany for the formation of a joint venture to leverage complementary advantages, pursue synergetic development and improve the research capabilities of both parties, with a view to supplying a variety of bespoke solutions to customers and foster competitive edges in the global markets. In the meantime, the Group has continued to make breakthroughs in the R&D on technology for products such as mmWave compatible radomes with heating function, LiDAR compatible radomes and intelligent illuminated grilles, and has currently started to see order inflows. To fulfill the requirements for autonomous driving, the Group has worked out solutions for integrated intelligent front modules and multiple industry- leading patents have already been filed for those products. In-depth research is also proceeding in the development of intelligent door systems that provide innovative methods of entry into vehicles. In this area, the Group's intelligent pillar products have passed the technical qualification of multiple OEMs. On the side of electromechanical products, the Group is continuing to progress in long-sized seat sliding rails, electric running boards and roller shutters, for which the Group has gradually won orders from mainstream OEMs.

During the Review Year, the Group made large strides into the R&D of process technologies, materials, surface treatment, advanced toolings and production lines for the above-mentioned new products, and a comprehensive portfolio of patents for advanced technologies has been filed. In relation to technical and technological innovation, the Group has embarked on a campaign to comprehensively optimize its metal forming, plastic moulding and joint processes, achieving comprehensive proprietary design and manufacturing in key technologies for the integrated package consisting of toolings, moulds and automated production lines. In particular, strategic, directional and prospective coordinated innovation and research was conducted to seek

10 MINTH GROUP LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

breakthroughs in core technologies such as the modularisation of chassis structural parts and integration of optoelectronic products, while leading the Group's future development direction of technique and technology for innovative products. The Group continued to advance efforts in the standardisation of process techniques and reduction in energy consumption, gradually fostering advantages in technical stability and cost. To actively fulfil its corporate social responsibility and contribution to the goals of carbon peaking and carbon neutrality, the Group has established the "Carbon Neutrality" project team for the joint promotion of low carbon emission across the industry chain.

The Group continues to increase its investment in the research of materials, with a special focus on the R&D and innovation of high-performance aluminium and polymeric materials. In connection with high-performance decorative aluminium materials, the Group continues to maintain its global lead in the industry and has become the most competitive supplier of decorative aluminium solutions with its proprietary aluminium materials for exterior products as well as a unique patented anodizing technology. In connection with the R&D of high-performance structural aluminium, the Group continued to drive innovation in the core formula and process technique for aluminium structural profiles, filling a gap in the domestic industry. The Group's proprietary energy-absorbing structural aluminium, with various levels of strength, has gained recognition from mainstream European OEMs and has become fully eligible for use in battery housings and aluminium body structural products, which helps to make its new products much more competitive. In connection with the R&D of polymeric materials, the Group has focused its efforts in the development of high-elasticity sealing materials, intelligent surface materials, composites and eco-friendly materials. Regarding surface treatment technologies, the Group has continued to optimise the techniques of chrome plating for plastic products, coating for plastic and metal products and aluminium anodizing, with a special emphasis on the innovation and optimisation of surface treatment technologies required by the development of intelligent exterior products, in full preparation for the transformation of auto parts in line with the four disruptive trends.

As for its R&D organisation, the Group has started to consolidate its R&D resources for innovation around the world, including Europe, North America and Japan, as well as streamline resources for global strategic cooperation. Meanwhile, the Group has progressively consolidated its global concurrent design capabilities and has continued to second personnel to overseas offices in order to enhance local design services, and improved its network for global concurrent design with the support of the master data management system and product data management system.

The Group places a strong emphasis on the protection of intellectual property rights and seeks to comprehensively broaden its patent portfolio for innovative products with active application for international patents. During the Review Year, 487 patent applications were filed by the Group for approval, including 8 applications relating to international Patent Cooperation Treaty (PCT) patents, and 331 patents were authorised by competent authorities.

Corporate Social Responsibility

While pursuing maximum return to shareholders, the Group actively fulfills its corporate social responsibilities.

Over the Review Year, the Group has continued broadening its engagement in EHS management. Based on the EHS system, The Group is working to achieve the goal of "healthy, intelligent and eco-friendly manufacturing". The Group has continued to introduce advanced technologies for waste water, emissions and hazardous waste treatment, resulting in the reduction of pollutant discharge and greater compliance with relevant emission standards. The Group has also taken greater heed of the development and management of occupational health by optimizing management mechanisms for jobs subject to occupational hazards and ensuring comprehensive implementation of the occupational health check systems to ensure the general health and well-being of the employees. During the Review Year, the Group has started initiatives for carbon emission management with the convening of its first sustainability conference and the formulation of carbon reduction roadmap to implement relevant measures. Staff competence in fire prevention and other safety issues has been comprehensively improved through a series of activities organized by the Group, thereby ensuring its safe and healthy operations. During the Review Year, the Group was engaged in prevention work in regards to the COVID-19. The Group's EHS team completed tasks for the preparation, dispatch and use of anti-pandemic supplies as well as the sanitisation of workspaces. These efforts have facilitated the Group's smooth resumption of work and production while safeguarding employees' well-being.

During the Review Year, based on its core values and code of conduct, and in view of promoting greater support and overall wellness for all of its employees, the Group has continued to roll out the cultural "LOVE" program that taps the potential of the organizations and teams under the Group, and encourages employees to find happiness in all facets within themselves and their families. This forms part of the Group's emphasis on overall wellness so that the employees can continue to support the Group and its customers in the quest for success, both in the short and long term, across the globe. Continuing this emphasis on health, the Group has organised Holistic Empowerment

ANNUAL REPORT 2020

11

MANAGEMENT DISCUSSION AND ANALYSIS

Camps to provide support for the physical and psychological well-being of many key employees. At the same time, the Group has rolled out pilot projects in Jiaxing for a childcare facility and senior's center, and has provided care and development activities for employees' children and elderly relatives. Based on the data collected from this trial, they are being incorporated into the designs of the Future Factory as complementary facilities. Continuing this effort to offer overall wellness related activities for life's different stages, such as summer youth camps and the couples' camps, the Group is aiming to gradually improve happiness of all the families of the Group's global employees.

During the Review Year, the Group made strong efforts to promote enhancement of corporate social responsibility ("CSR") on the part of its supply-chain partners. The Group started to formulate plans for the medium to long-term goals of carbon reduction, increased utilization proportion of green energy and improved the efficiency of energy utilization. The Group also started to speed up its development and switch to the use of renewable materials, and its suppliers are encouraged and required to use recyclable raw materials. In connection with labour rights, health and safety, environmental protection and business ethics, the Group further enhanced the implementation of annual suppliers' audit and suppliers' self-inspection. The Group added and applied CSR requirements in its management rules for the admission and performance evaluation of suppliers. In the meantime, the Group continued to improve its internal control system for procurement, conducting investigation with sustained vigilance in relation to anti-fraud supervision and management in procurement.

Under the guidance of the business philosophy of "creating value for society", the Group has always adhered to the value of "caring for harmony", actively taking the lead to fulfill social responsibilities to care for disadvantaged groups, and paying attention to the education in poverty-stricken areas in China, and continued to create and explore new model for public welfare as a caring company. During the Review Year, the Group supported and initiated a number of public welfare projects, including the "Hope for Pearl" project, "Extraordinary Pearl Students of Minth Classes", the Charity Primary School project, the "Nanhu-Ruoergai Supporting Project in Education", and the establishment of Minth Special Fund and the anti-pandemic fund designated for its Mexico plants. As of the end of the Review Year, the Group had provided supports to a total of over 2 million people, with an aggregated donation of more than RMB6 million, and a total of 2.3 million person times have been allocated to community public welfare activities. During the Review Year, the Group actively supported the epidemic prevention and control during the epidemic period. It made donations to the First Hospital and Second Hospital of Jiaxing through the Red Cross Society of Nanhu District, Jiaxing, and was awarded

the "Special Contribution Award for Control of the Coronavirus Disease" by Red Cross Society of China Zhejiang Branch. During the Review Year, the Group won the "Outstanding Social Organization Award for Participating in Poverty Alleviation for Three Years" awarded by the Zhejiang Association for Non-profit Organization, and the "Top Ten Enterprise Charity Foundation in Zhejiang" issued by Zhejiang Daily, due to its outstanding achievements in public welfare.

FINANCIAL REVIEW

Results

During the Review Year, the Group's revenue was approximately RMB12,466,858,000, representing a decrease o f a p p r o x i m a t e l y 5 . 5 % f r o m a p p r o x i m a t e l y RMB13,198,189,000 in 2019. It was mainly attributable to the impacts of the global COVID-19 pandemic and the related anti-epidemic measures ("Impacts of the Global Pandemic") on the Group's overall business during the first half of the Review Year, resulting in a decrease in Group's revenue by approximately 20.9% compared to the first half of last year, while during the second half of the Review Year, with the gradual rebound of business in China and overseas regions, the Group's revenue returned to positive growth compared to the second half of last year, narrowing the decline in the Group's revenue for the whole year.

During the Review Year, the profit attributable to owners of the Company was approximately RMB1,395,509,000, representing a decrease of approximately 17.4% from approximately RMB1,690,300,000 in 2019. It was mainly due to a substantial decrease in gross profit in the first half of the year as compared to the same period of last year, which was because of, among others, a substantially lower utilisation rate of production capacity as a result of a decline in the Group's revenue during the first half of the year, while the Group recorded growth in overall revenue in the second half of the year compared to the second half of last year following the gradual recovery from the global pandemic as well as the effective control of related costs, resulting in growth in gross profit for the second half of the year compared to the same period of last year.

Sales of Products

During the Review Year, the Group continued focusing on the production of core products including trims, decorative parts and body structural parts for automobiles, which were mainly supplied to the factories of major global OEMs.

12 MINTH GROUP LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

An analysis on revenue by geographical markets based on locations of the customers is as follows:

Customer

2020

2019

category

RMB'000

%

RMB'000

%

The PRC

7,391,431

59.3

7,605,321

57.6

North America

2,259,373

18.1

2,757,224

20.9

Europe

2,147,664

17.2

2,231,828

16.9

Asia Pacific

668,390

5.4

603,816

4.6

Total

12,466,858

100.0

13,198,189

100.0

Revenue from Overseas Markets

During the Review Year, the Group's revenue from overseas markets amounted to approximately RMB5,075,427,000, representing a decrease of approximately 9.3% from approximately RMB5,592,868,000 in 2019. It accounted for approximately 40.7% of the total revenue of the Group in the Review Year, representing a decrease when compared to approximately 42.4% in 2019.

Gross Profit

During the Review Year, the Group's gross profit was approximately RMB3,858,843,000, representing a decrease of approximately 6.4% from approximately RMB4,121,439,000 in 2019. The gross profit margin for the Review Year was approximately 31.0%, representing a decrease of approximately 0.2% from approximately 31.2% in 2019. Such decrease was mainly due to a substantially lower utilisation rate of production capacity attributable to the decline in the Group's revenue under the impacts of the pandemic and the commissioning of certain new production lines during the Review Year, while the Group still faced the pressures of the ASP decline in prices of products for old models and higher tariffs on Chinese export products imposed by the U.S., the combined effect of which resulted in a decrease in overall gross profit margin. To address these, the Group maintained its efforts on reducing procurement costs, and continuously improved production efficiency and production yield by adopting measures such as lean production and technology upgrade, in order to partially offset the decrease in overall gross profit margin.

Investment Income

During the Review Year, the investment income of the Group was approximately RMB239,710,000, representing an increase of approximately RMB113,321,000 from approximately RMB126,389,000 in 2019. It was mainly due to an increase in the interest income of the Group.

Other Income

During the Review Year, the other income of the Group amounted to approximately RMB159,991,000, representing a decrease of approximately RMB40,476,000 from approximately RMB200,467,000 in 2019. It was mainly attributable to a decrease in government grants related to income.

Other Gains and Losses

During the Review Year, the Group's other gains and losses amounted to a net loss of approximately RMB31,389,000, representing a decrease of approximately RMB100,830,000 as compared to a net gain of approximately RMB69,441,000 in 2019. It was mainly attributable to the customs related administrative penalty accrued by the Group and the receipt of the compensation from the SFC proceeding in 2019 while there was no such gain recorded during the Review Year.

Distribution and Selling Expenses

During the Review Year, the Group's distribution and selling expenses were approximately RMB520,956,000, representing a decrease of approximately RMB17,723,000 from approximately RMB538,679,000 in 2019. It accounted for approximately 4.2% of the Group's revenue, representing an increase of approximately 0.1% from approximately 4.1% in 2019. During the Review Year, the Group's unit transportation cost increased as a result of the Impacts of the Global Pandemic, while the Group actively adopted various improvement plans and exercised strict expense control, resulting in the overall decrease in the Group's distribution and selling expenses.

Administrative Expenses

During the Review Year, the administrative expenses of the Group amounted to approximately RMB1,028,955,000, representing a decrease of approximately RMB19,097,000 from approximately RMB1,048,052,000 in 2019. It accounted for approximately 8.3% of the Group's revenue, representing an increase of approximately 0.4% from approximately 7.9% in 2019. It was mainly attributable to the Group's strict control over labour costs and relevant expenses to address the negative impacts caused by the global pandemic during the Review Year. However, the increase in fixed expenses (including depreciation and amortisation) and service costs incurred in the Group's digital transformation resulted in the increase of administrative expenses as a percentage of revenue as compared to that in the same period of last year.

ANNUAL REPORT 2020

13

MANAGEMENT DISCUSSION AND ANALYSIS

Research Expenditure

During the Review Year, the research expenditure of the Group amounted to approximately RMB764,187,000, representing an increase of approximately RMB108,661,000 from approximately RMB655,526,000 in 2019. It accounted for approximately 6.1% of the Group's revenue, representing an increase of approximately 1.1% from approximately 5.0% in 2019. It was mainly due to the Group's recruitment of senior R&D personnel and increase in R&D investment during the Review Year to enhance R&D capabilities to maintain its market competitiveness and sustainable development, as well as to continuously promote R&D on battery-housing and other innovative products.

Share of Profits of Joint Ventures

During the Review Year, the Group's share of profits of joint ventures was a net profit of approximately RMB11,618,000, representing an increase of approximately RMB7,230,000 from a net profit of approximately RMB4,388,000 in 2019, which was mainly attributable to an increase in profit from one of the joint ventures because of its commencement of mass production during the Review Year.

Share of Profits (Losses) of Associates

During the Review Year, the Group's share of profits (losses) of associates amounted to a net profit of approximately RMB2,524,000, representing an increase of approximately RMB23,294,000 from a net loss of approximately RMB20,770,000 in 2019. It was mainly attributable to a decrease in loss incurred by one of the associates in the Review Year.

Income Tax Expense

During the Review Year, the Group's income tax expense was approximately RMB216,587,000, representing a decrease of approximately RMB119,600,000 from approximately RMB336,187,000 in 2019.

During the Review Year, the effective tax rate was approximately 12.9%, representing a decrease of approximately 3.1% from approximately 16.0% in 2019, which was mainly attributable to the impact of differences in Enterprise Income Tax settlement for the previous year.

Profits Attributable to Non-controlling Interests

During the Review Year, the Group's profits attributable to non-controlling interests were approximately RMB67,479,000, representing a decrease of approximately RMB7,312,000 from

approximately RMB74,791,000 in 2019. It was mainly attributable to the decrease in net profit of one of the non- wholly owned subsidiaries during the Review Year.

Liquidity and Financial Resources

As of 31 December 2020, the Group's total amount of bank balances and cash and pledged bank deposits is approximately RMB6,926,622,000, representing an increase of approximately RMB1,218,121,000 as compared to approximately RMB5,708,501,000 as of 31 December 2019. As of 31 December 2020, the Group's low-cost borrowings totally amounted to approximately RMB6,519,200,000, among

which the equivalent

of approximately RMB2,682,593,000,

a p p r o x i m a t e l y R M B1,935,940,000,

a p p r o x i m a t e l y

RMB1,501,799,000,

approximately

RMB197,365,000,

approximately RMB144,250,000

and

approximately

RMB57,253,000 were denominated in RMB, US Dollar ("USD"), Euro ("EUR"), Hong Kong Dollar ("HKD"), Thai Baht ("THB") and Great Britain Pound, respectively, representing an increase of approximately RMB2,380,202,000 as compared to approximately RMB4,138,998,000 as of 31 December 2019. It was mainly the result of borrowings after considering the consolidated gains from exchange rates, interest rates and capital management by the Group.

During the Review Year, the net cash flow from the Group's operating activities was approximately RMB2,080,249,000, indicating a sound cash flow condition.

During the Review Year, the Group's trade receivables turnover days were approximately 92 days, which were approximately 6 days longer than approximately 86 days in 2019. This was mainly due to the decrease in the Group's revenue under the impacts of the pandemic during the Review Year, while the opening balance of trade receivables for the Review Year increased as compared to that of 2019, resulting in an increase in the average balance of trade receivables.

During the Review Year, the Group's trade payables turnover days were approximately 86 days, increased by approximately 8 days from approximately 78 days in 2019, which was mainly attributable to the extended payment cycle due to the Group's active negotiations with the suppliers and the changes in methods of settlement with the suppliers.

During the Review Year, the Group's inventory turnover days were approximately 94 days, extended by approximately 13 days from approximately 81 days in 2019, which was mainly attributable to the increase in the inventory of finished products for export owing to difficulties in the reservation of shipping space in international logistics and jammed ports under the impact of the pandemic, the increase in the

14 MINTH GROUP LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

inventory of moulds in line with the increase in new projects under development, as well as the increase in inventory reserves to avoid the risk of rising prices of raw materials.

The Group's current ratio was approximately 1.6 as of 31 December 2020, which was similar to approximately 1.6 as of 31 December 2019. As of 31 December 2020, the Group's gearing ratio was approximately 27 . 7% (31 December 2019: approximately 21.2%), which was a percentage based on the interest-bearing borrowings divided by total assets.

Note: The calculation methods for the above indicators are the same as those set out in the Company's prospectus dated 22 November 2005.

The Group's capital demands had no particular seasonality features.

The Group believed that during the Review Year, the favourable performance in sales, production and R&D activities, as well as the sound cash reserves provided a strong support for sustainable growth in the future.

COMMITMENTS

As at 31 December 2020, the Group had the following commitments:

RMB'000

Capital commitment

Capital expenditure contracted for but

not provided in the consolidated

financial statements in respect of:

- Acquisition of property, plant and

equipment

604,926

INTEREST RATE AND FOREIGN EXCHANGE RISKS

As at 31 December 2020, the balance of the Group's bank borrowings was approximately RMB6,519,200,000, of which approximately RMB2,672,520,000 was bearing at fixed interest rates, and approximately RMB3,846,680,000 was bearing at floating interest rates. The aforesaid borrowings had no seasonality features. In addition, approximately RMB3,029,508,000 of the borrowings was denominated in currencies other than the functional currencies of the Group's related entities, of which the equivalent of approximately RMB1,476,921,000, approximately RMB1,355,222,000 and approximately RMB197,365,000 were denominated in EUR, USD and HKD respectively.

The Group's cash and cash equivalents are mainly denominated in RMB and USD. Remittance of funds out of the PRC is subject to the foreign exchange control restrictions imposed by the Chinese government.

As at 31 December 2020, the Group's cash and cash equivalents denominated in currencies other than the functional currencies amounted to approximately RMB407,930,000, of which approximately RMB251,727,000 was denominated in USD, approximately RMB73,584,000 was denominated in EUR, approximately RMB39,709,000 was denominated in HKD, approximately RMB35,251,000 was denominated in Japanese Yen, approximately RMB7,619,000 was denominated in Mexico Peso, and the remainder of approximately RMB40,000 was denominated in other foreign currencies.

As a result of the constant expansion of overseas sales and the drastic fluctuations in the currency market, the management of the Group expressed great concerns on the foreign exchange risks, and would take the exchange rate expectations of relevant currencies into full consideration when deciding on the billing currencies for relevant businesses, and also closely monitor the foreign exchange exposure and adjust the control strategy on a timely basis. The Group entered into forward exchange contracts to manage and control foreign exchange risks.

CONTINGENT LIABILITIES

As at 31 December 2020, the Group had no contingent liabilities (31 December 2019: Nil).

MORTGAGED ASSETS

As of 31 December 2020, the Group had borrowings of approximately RMB770,790,000 and issued bills payables of approximately RMB246,551,000 due within 6 months, which were pledged by bills receivables with par value of approximately RMB162,818,000 and bank deposits of RMB776,000,000. The borrowings are to be settled in RMB (31 December 2019: the Group had borrowings of RMB50,000,000 and issued bills payables of approximately RMB228,097,000 due within 6 months, which were pledged by bills receivables with par value of approximately RMB260,959,000 and bank deposits of RMB500,000. The borrowings are to be settled in RMB).

ANNUAL REPORT 2020

15

MANAGEMENT DISCUSSION AND ANALYSIS

CAPITAL EXPENDITURE

Capital expenditure includes the acquisition of property, plant and equipment, the increase in construction in progress and the addition of land use rights. During the Review Year, the Group's capital expenditure amounted to approximately RMB2,362,114,000 (2019: approximately RMB1,674,703,000), which was attributable to the Group's further expansion of its R&D on battery-housing and other innovative products and its overseas market capacity layout during the Review Year and its active implementation of intelligence development strategies and initiative in establishing an intelligent industrial park for future automobiles in alignment with the development trend of the automobile industry. Meanwhile, to offset the impact of the lower utilisation of production capacity arising from the downturn of the PV market, the Group continued to exercise prudent control over the capital expenditure in accordance with the asset-light strategy, and adopted a stringent approval process in respect of investments in fixed assets for traditional product lines.

PLACING AND SUBSCRIPTION

The Group had no placing and subscription of shares during the Review Year.

MATERIAL ACQUISITIONS AND DISPOSALS

The Group had no material acquisition or disposal of subsidiaries, joint ventures and associates during the Review Year.

EMPLOYEES

As of 31 December 2020, the Group had a total workforce consisting of 17,812 employees, an increase of 1,656 employees when compared to 30 June 2020. The increase is mainly attributable to the recovery of the global PV market in the second half of the Review Year, the Group's European expansions, the development and production needs in the battery housing BU as well as the additional human resources required to push forward the digital transformation.

During the Review Year, based on its core values and code of conduct, and in view of promoting greater support and overall wellness for all of its employees, the Group has continued to roll out the cultural "LOVE" program that taps the potential of the organizations and teams under the Group, and encourages employees to find happiness in all facets within themselves and their families. This forms part of the Group's emphasis on overall wellness so that the employees can continue to support the Group and its customers in the quest for success, both in the short and

long term, across the globe. Continuing this emphasis on health, due to the impacts of the global pandemic, the Group has organised Holistic Empowerment Camps to provide support for the physical and psychological well-being of the workforce. 19 sessions of activities have been organized during the Review Year, and over 600 key employees have already participated. At the same time, the Group has rolled out pilot projects in Jiaxing for a childcare facility and senior's center, and has provided care and development activities for employees' children and elderly relatives. Based on the data collected from this trial, they are being incorporated into the designs of the Future Factory as complementary facilities. Continuing this effort to offer overall wellness related activities for life's different stages, such as summer youth camps and the couples' camps, the Group is aiming to gradually improve happiness of all the families of the Group's global employees.

With the continued impact of the global pandemic on global markets and expected economic growth, the Group has accelerated its plans for organisational development and optimization and proceeded with upgrades in corporate management. The Group has implemented a framework known as "the global manufacturing and supply chain layout" in order to better analyze and respond to disruptions in the supply chain around the world. It has also established "a new model of strategic control at the Group level" to drive global business competitiveness and promote greater efficiency and effectiveness of various teams within the Group at the organizational level. In terms of the global supply chain layout, the Group's new factories in Serbia and the UK are now ready for mass production after organizational development throughout the Review Year. Preparations at the Czech factory are proceeding on schedule. With regard to the new model of strategic control at the Group level, the BU organisation of the Group is running efficiently. The Group has completed strategic upgrades in functional units at the headquarters, and established the digital transformation teams and the Future Factory team. The adjustments to the Shared Services Center at the corporate level have also been completed, providing support for the Group's ongoing global success.

From the facet of talent development, the Group has continued to support improvements in its functional teams at both cultural and organizational level, with the support of an e-Learning platform and associated resources. With all the changes in 2020, the Group has been supporting its endeavors by improving strategic thinking and strategic competence of its core employees through a series of workshops so as to enhance the strategic abilities of the Group at both team and organizational level. Digital transformation education projects were implemented to enhance digital competence and awareness of the teams and to put them in a more forward looking mindset. Specialists'

16 MINTH GROUP LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

skills were enhanced by the establishment of 27 specializations and skills development roadmaps. The Group has continued with its future leadership recruitment, assessment and training programs as well as its international talent assessment and training program. All of these should improve the competence of different teams under the Group on the international stage for the near future as well as in the long term.

FUTURE PROSPECTS AND STRATEGIES

During the Review Year, despite the impact of COVID-19, the Chinese automobile market experienced a marked recovery after setbacks at the beginning of the year, owing to the impetus of various incentives offered by the domestic government, and actual market performance was better than expected. Looking forward to 2021, with the economy being expected to recover following the disruptions caused by the pandemic and assuming the continued relative stability in three major areas, namely the pandemic control, the general macro-economic factors and the current consumption policies, the Chinese automobile market is expected to post

  1. modest and positive year-on-year growth. According to the estimates of IHS Markit, the sales of light vehicles will rise by approximately 5.6%. SUVs are expected to sustain their rapid growth while sedans would experience slower gains. As for NEVs, given consumers' diverse needs for both cost- effective traveling and high-end experience, new energy PVs at both the entry and higher end levels are expected to cannibalize the market share of fuel-powered PVs. Sales of NEVs, including plug-in hybrid electric vehicle and fuel cell vehicles, are estimated to increase by approximately 40% in 2021.

During the Review Year, the world economy fell into a global recession due to the impact and spread of COVID-19, and the automobile markets of all major global economies reported declines. Looking ahead to 2021, with the successful development of vaccines and robust inoculation plans, the global economy is expected to gradually recover with a mild rebound for the automobile market. Among mature markets, the prospects of recovery in Europe are more complicated. Given factors such as the resurgence of the pandemic, uneven economic policies from different nations as well as ongoing Brexit negotiations, growth of the European market is forecasted at around 10%. The US market is also estimated to post 10% growth for the full year, despite an expected slow start, subject to effective control of the pandemic. Emerging markets, like Brazil, Thailand, India and Russia are forecasted to have more significant growth.

Governments around the world are putting policies in place that favour the NEV sector and related businesses. In connection with electrification, manufacturing centers for

battery electric vehicles ("BEVs") are mainly situated in China, Europe, North America, Japan and South Korea. According to the estimates of IHS Markit, the total volume of BEV production in the aforesaid countries or regions is expected to reach approximately 11 million units by 2025. Traditional automobile manufacturers will leverage their global production bases to accelerate the overall BEV production. To gain first- mover advantages, automobile manufacturers will most probably form alliances with each other as well as cooperate with battery suppliers for complementary benefits and risk sharing. As for intelligent features, consumer demands will also coax many producers to improve their driving performance and intelligent features which will lead to leaps in the development of technologies such as AI, 5G mobile connectivity and autonomous driving capabilities. Cross- sector cooperation between internet technology companies and automobile manufacturers will continue to grow. In the near future, it is expected that electrification and intelligent features will bring about a significant evolution to the automobile industry's ecology. OEMs and system integration suppliers will be working in closer partnerships with a higher level of interdependence, while standalone parts suppliers will increasingly find themselves in a precarious situation as the integrated systems era looms.

Guided by strategic planning at the corporate level, the Group will optimise and implement strategic planning for BUs at more comprehensive levels to enhance the Group's organisational and operational capabilities in multiple aspects, such as technologies, staffing efficiency and resource usage, with a view to forging comprehensive management strengths. The Group will continue to focus on BU standardisation by building replicable models of excellence for factory operations and management standards for global expansion and replication, while further enhancing the operational and management capabilities of overseas plants and maximising the scope of global resource sharing to bring in cost advantages and generally bolster the global competitiveness of its products.

In 2021, the Group will continue to actively drive MOS implementation, seeking consistent improvements on operations management at the preventive stage. In continued adherence to the cost pillar approach, the Group will seek an ongoing transition from target costs to optimal costs so as to lower overall operating costs and drive the consistent development of standardised operations capabilities. Meanwhile, MOS concepts and standards will be incorporated into the structure and conceptualization of digital transformation and the Future Factory, while setting benchmarks matched with customers' requests following exchanges with them in relation to operational and management excellence, in a bid to achieve synchronised implementation of a system for operational and management excellence.

ANNUAL REPORT 2020

17

MANAGEMENT DISCUSSION AND ANALYSIS

The Group will carry out the replacement and upgrade of its global application system through digital transformation. With the primary aim of enhancing customer experience, the Group will streamline the entire process from end to end, set data standards according to its unique circumstances to link business processes to research, production, supply management, sales and services, thus facilitating online closed-loop system that oversee the entire process from the receipt of customer orders to product delivery, invoicing and payment collection in a clear and transparent fashion. With the use of globally-advanced automated manufacturing equipment and technologies, the Group will build an intelligent platform to facilitate the establishment of a highly integrated auto parts manufacturing system that interconnects human beings with the equipment, resources, information and materials. The Group expects to develop an operation model that supports it to become a modern enterprise with front-end digitalisation and back- end integration, in order to facilitate swift and coordinated handling of purchase orders, intelligent planning, intelligent warehousing and distribution, intelligent manufacturing, intelligent equipment management and intelligent logistics. These efforts will also contribute to the integration of business and finance, efficient auditing, comprehensive budgeting, digital analysis and rational decision-making, thus promoting the "one unified business process, one unified set of data standards and one unified system platform" initiative on a global basis that nurtures "one professional team" mindset.

The Group has committed itself to the creation of a digital world supported by multi-sense,multi-connection, multi- scenario, and multi-intelligence with the application of next- generation digital technologies. On that basis, the Group aims to optimise and reshape its business in order to innovate and revamp the traditional models of management, operations and business, thus attaining business optimisation and success. The Group is also committed to designing more humanistic plants that will be characterised by greater efficiency, energy conservation and eco-friendliness while promoting safety and comfort through digital transformation, as well as technical platforms with functions to sense, learn, make decisions, execute and adapt in an automated manner.

The Group will continue to work closely with third-party partners and draw on advanced concepts and technologies in the industry in order to introduce optimal solutions and best practices to the construction of the Future Factory. This endeavours to provide the best experience for people with the aid of state-of-the-art technologies and hopefully build the Minth Future Factory into a benchmark for small and medium-sized enterprises in China. The Group expects to unveil Phase I of the Future Factory project to the public in the second half of 2021. At the same time, upon completion of digital transformation of its subsidiaries, the Group will be actively sharing its experiences and successes from the Future Factory with and providing resources to small and medium- sized enterprises in neighbouring regions and beyond, within China. This will become a new business format for the Group to facilitate the improvement of other companies.

For 2021, the Group will be actively monitoring the complex situation of the automobile industry and the challenge of de- globalisation resulting from the new normal after the COVID-19 pandemic. The Group will keep a close eye on the macro development in the industry and related policies that governments are rolling out in the hope of being able to seize opportunities that arise from the recovery and development of the global markets. The Group will be establishing strategic plans to take advantages of the favorable environment for NEVs and the trends of reducing weight, electrification and intelligence in the automobile industry. The Group will also be revising and optimising its current investment portfolio in order to flexibly enhance its value positioning. The Group will continue to reinforce its research with the focus on developing a comprehensive portfolio of new products, materials and technologies, enhance the core strengths of launched products and investigate new business frontiers in order to fuel its stable growth long into the future. Meanwhile, the Group will spare no effort in the development of its traditional products, as it seeks to further reinforce its overall competitiveness in operations and products through improvements of quality as well as the optimisation of costs and global capacity layout, while broadening its product portfolio through the extension and upgrade of existing production processes to further increase its share in the global market segment for traditional products. In an era fraught with both opportunities and challenges, the Group will forge ahead with innovations in its overall operations, committing itself to offering more products and better services with modularised solutions as well as to catering to customers' preferences.

18 MINTH GROUP LIMITED

DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS

Executive Directors

Ms. Wei Ching Lien (魏清蓮) ("Ms. Wei"), aged 64, is an executive Director and Chairperson of the Company. Ms. Wei graduated from National Taiwan University and obtained her master's degree in educational psychology and guidance from National Taiwan Normal University. Ms. Wei has over 40 years of experience in psychological counseling, talent development, team culture building and performance improvement. She has worked in professional psychological counseling organisations, universities and automobile parts companies. Since 2002, Ms. Wei has served as the Group's consultant, responsible for the development and optimisation of staff training activities, promoting the construction of values and culture and enhancing the effectiveness of teamwork. She served as the Group's chief human resources officer from March 2011 to April 2012. Ms. Wei was appointed as an executive Director and Chairperson of the Company on 28 May 2020. Ms. Wei is the spouse of Mr. Chin Jong Hwa ("Mr. Chin"), the ultimate controlling shareholder of the Company, and the mother of Ms. Chin Chien Ya, an executive Director. As at 31 December 2020, Mr. Chin held 450,072,000 shares of the Company through his wholly-ownedcompany, Minth Holdings Limited ("Minth Holdings"), which represented approximately 38.81% of the total issued Shares of the Company. Accordingly, Ms. Wei is deemed to be interested in the 450,072,000 Shares in which Mr. Chin was interested. As at 31 December 2020, save as disclosed herein, Ms. Wei had no interests in the Shares of the Company within the meaning of Part XV of the SFO.

Mr. Chen Bin Bo (陳斌波) ("Mr. Chen"), aged 57, is an executive Director and chief executive officer ("CEO") of the Company. Mr. Chen graduated from Huazhong University of Science and Technology with a bachelor's degree in marine internal combustion engine and later obtained his master's degree in engineering management. Mr. Chen has over 30 years of experience in the automotive industry including but not limited to the areas of research and development, sales and management. Prior to joining the Group as special assistant to the chairman of the Group since November 2018, Mr. Chen was the executive deputy general manager of Dongfeng Honda Automobile Co., Ltd. from 2009 to 2018. He also worked successively at Dongfeng Motor Co., Ltd., Dongfeng Peugeot Citroen Automobile Co., Ltd., Guangzhou Aeolus Automobile Co., Ltd. and Dongfeng Nissan Passenger Vehicle Company in various roles from 1987 to 2009. Mr. Chen was appointed as the CEO of the Company on 21 August 2019 and was appointed as an executive Director on 28 May 2020. As at 31 December 2020, save for his interest in 1,000,000 Share Options in the Company, Mr. Chen had no interests in the Shares of the Company within the meaning of Part XV of the SFO.

Chin Chien Ya (秦千雅) ("Ms. Chin"), aged 32, is an executive Director of the Company. Ms. Chin is currently responsible for global strategic development of the Group, and prior to this she was responsible for North American business development and operations. Ms. Chin graduated from Boston College, majoring in Business Management, Accounting and Mathematics and later obtained her master's degree from the Harvard Graduate School of Education, researching in adult and organization training. Prior to joining the Group in August 2015, she was responsible for operations and marketing in a startup company in Taiwan, and afterwards worked in public relations, providing consulting services for international companies on corporate social responsibility. Ms. Chin was appointed as a Director on 26 May 2016, and she is the daughter of Mr. Chin (the ultimate controlling shareholder of the Company) and Ms. Wei Ching Lien (an executive Director and Chairperson of the Company). As at 31 December 2020, save for her interest in 250,000 Share Options in the Company, Ms. Chin had no interests in the Shares of the Company within the meaning of Part XV of the SFO.

Independent Non-executive Directors

Wang Ching (王京) ("Dr. Wang"), aged 66, is an independent non-executiveDirector and the chairman of the nomination committee of the Company ("Nomination Committee"). Dr. Wang has over 29 years' managerial experience in investment banking, securities, treasury and asset management in the United States, Hong Kong, Taiwan and the PRC. He is currently the executive director of Shanghai International Asset Management (HK) Co., Ltd., a licensed corporation registered with Hong Kong Securities and Futures Commission and the executive director of Shanghai International Shanghai Growth Investment Limited, an investment fund company listed on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). Dr. Wang also serves as independent non-executivedirector of China Shuifa Singyes Energy Holdings Limited and Luen Thai Holdings Limited, which are both listed on the Stock Exchange. Dr. Wang received his doctorate degree from the Graduate School of Business, Columbia University in 1992. Dr. Wang joined the Company as an independent non-executiveDirector on 26 October 2005. As at 31 December 2020, save for his interest in 200,000 Share Options in the Company, Dr. Wang had no interests in the Shares of the Company within the meaning of Part XV of the SFO.

Yu Zheng (鄭豫) ("Ms. Zheng"), aged 52, is an independent non-executiveDirector and chairman of the remuneration committee of the Company ("Remuneration Committee"). Ms. Zheng is a partner at Advantage Partners Asia Fund. She has extensive experience in private equity, management consultancy and corporate management over the last 20 years. She was the managing director at PineBridge

ANNUAL REPORT 2020

19

DIRECTORS AND SENIOR MANAGEMENT

Investments (former AIG Investments) from 2008 to 2012. Ms. Zheng was a senior partner at Roland Berger Strategy Consultants and a Principal with the Boston Consulting Group. Ms. Zheng served as president of the sales company of Brilliance Auto Group from 2003 to 2004. In addition, she has been serving Fufeng Group (a company listed on the Stock Exchange) as an independent non-executive director. She also worked in the computer industry for years in China and the U.S. Ms. Zheng has a bachelor's degree of science in Computer Science from Beijing Normal University and an MBA degree from the University of Texas at Austin. Ms. Zheng joined the Group and was appointed as a non- executive Director of the Company on 1 January 2008, and was redesignated as an independent non-executive Director of the Company on 26 May 2016. As at 31 December 2020, Ms. Zheng was interested in 100,000 Share Options in the Company. Since Ms. Zheng is the spouse of Mr. Wei Wei ("Mr. Wei"), she is deemed to be also interested in the 1,010,000 Shares in which Mr. Wei was interested. Accordingly, Ms. Zheng was interested in 1,010,000 Shares and 100,000 Share Options in the Company. As at 31 December 2020, save as disclosed herein, Ms. Zheng had no interests in the Shares of the Company within the meaning of Part XV of the SFO.

Mr. Wu Tak Lung (吳德龍) ("Mr. Wu"), aged 55, is an independent non-executiveDirector and chairman of the audit committee of the Company ("Audit Committee"). Mr. Wu holds a master's degree in Business Administration jointly from The University of Manchester in association with University of Wales and a bachelor's degree in Business Administration from Hong Kong Baptist University. Mr. Wu worked at Deloitte Touche Tohmatsu from July 1989 to August 1994. Mr. Wu was the former Chairman of The Association of Chartered Certified Accountants, the former President of The Taxation Institute of Hong Kong and the former President of Hong Kong Business Accountants Association. He is now an associate member of The Hong Kong Institute of Certified Public Accountants, and a fellow member of each of The Association of Chartered Certified Accountants, The Hong Kong Securities and Investment Institute, The Taxation Institute of Hong Kong, and the Hong Kong Institute of Chartered Secretaries. Mr. Wu is currently an independent non-executivedirector of each of the following companies listed on the Stock Exchange: (1) China Machinery Engineering Corporation, (2) Sinomax Group Limited, (3) Kam Hing International Holdings Limited, (4) Henan Jinma Energy Company Limited, (5) Zhongguancun Science-TechLeasing Co., Ltd, and (6) Sinopharm Group Co., Ltd. Mr. Wu joined the Company as an independent non-executiveDirector on 28 May 2020. As at 31 December 2020, save for his interest in 100,000 Share Options in the Company, Mr. Wu had no interests in the Shares of the Company within the meaning of Part XV of the SFO.

20 MINTH GROUP LIMITED

SENIOR MANAGEMENT

Yi Lei Li (易蕾莉) ("Ms. Yi"), aged 47, is the Company Secretary of the Company. Ms. Yi graduated from East China Normal University in 1994 where she majored in English Language and Literature. Prior to joining the Group in February 2001, she was a lecturer at the Faculty of Foreign Languages in Ningbo University. Ms. Yi has 20 years of experience in the Company's business and operation through her successive roles as manager of the Human Resources Department, manager of Overseas Business Development Department, assistant to general manager and the head of the Investor Relations Department of the Group. Ms. Yi was appointed as the Company Secretary of the Company on 8 February 2018. As at 31 December 2020, save for her interest in 210,000 Shares and 230,000 Share Options in the Company, Ms. Yi had no interests in the Shares of the Company within the meaning of Part XV of the SFO.

Zhang Yuxia (張玉霞) ("Ms. Zhang"), aged 41, is the Chief Financial Officer ("CFO") of the Group. Ms. Zhang graduated from University of Science and Technology Beijing in which she majored in metal pressure processing and later obtained her Master's degree in management from Beijing Forestry University. Ms. Zhang has over 16 years' extensive experience and knowledge in finance, taxes and global M&A management and is a qualified CPA. Prior to joining the Group, Ms. Zhang worked for Beiqi Foton Mortor Co., Ltd., and then joined Beijing Reanda Accounting Firm as certified public accountant and project manager. In 2008, she continued her career in Minth Holdings and its subsidiaries as audit manager, financial manager and financial director. Ms. Zhang Joined the Group in February 2019 and was appointed as CFO in March 2019. As at 31 December 2020, save for her interest in 20,000 Shares and 400,000 Share Options in the Company, Ms. Zhang had no interests in the Shares of the Company within the meaning of Part XV of the SFO.

Liu Yan Chun (劉艷春) ("Mr. Liu"), aged 55, is the Chief Operating Officer ("COO") of the Group. Mr. Liu is in charge of the overall management of the operation system, with particular emphasis on the management of operational efficiency improvement. Mr. Liu graduated from Harbin Institute of Technology in 1989, majoring in industrial management engineering, and has been engaged in production management since graduation. Since joining the Group in 1999, Mr. Liu has worked successively as quality system manager, senior plant manager, regional general manager, assistant to the Chairman and general manager of the R&D Center of the Group. He has rich experience in quality system, factory, R&D and operations management. Mr. Liu was appointed as COO on 1 September 2018. As at 31 December 2020, save for his interest in 520,000 Share Options in the Company, Mr. Liu had no interests in the Shares of the Company within the meaning of Part XV of the SFO.

CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE PRACTICE

THE BOARD

The Group commits to maintaining and ensuring a high level of corporate governance standards and continuously reviews and improves its corporate governance and internal control practices. Save as disclosed herein, the Company has fully complied with all code provisions set out in the Corporate Governance Code (the "Code") contained in Appendix 14 of the Rules Governing the Listing of Securities ("Listing Rules") on the Stock Exchange for the Review Year. Set out below are the principles of corporate governance as adopted by the Company during the Review Year.

DISTINCTIVE ROLES OF CHAIRMAN, CHIEF EXECUTIVE OFFICER AND SENIOR MANAGEMENT

Subsequent to the resignation of Ms. Huang Chiung Hui ("Ms. Huang", the former Chairperson of the Board) with effect from 28 May 2020, Ms. Wei, the existing Chairperson of the Board, continues to be responsible for leading the Board in establishing and monitoring the implementation of strategies and plans to create values for Shareholders starting from 28 May 2020. Mr. Chen, the CEO, is responsible for managing the operations of the Group's businesses, proposing strategies to the Board and the effective implementation of the strategies and policies adopted by the Board.

The senior management is delegated to assist the executive Directors with the implementation of business operations and reports to the CEO.

As of 31 December 2020, there are six members on the Board, which are the Chairperson, two other executive Directors and three independent non-executive Directors ("INEDs").

The INEDs are considered by the Board to be independent of the management and free of any relationship that could materially interfere with the exercise of their independent judgments. The Board considered that each of the INEDs brings his or her own relevant expertise to the Board and its deliberations.

None of the INEDs has any business or financial interests with the Group nor has any relationship with other Directors and confirmed their independences to the Group.

The Board met regularly during the year and on ad hoc basis as required by business needs. During the Review Year, the Board also performed the following corporate governance duties:

  1. to develop and review the Company's policies and practices on corporate governance;
  2. to review and monitor the training and continuous professional development of Directors and senior management;
  3. to review and monitor the Company's policies and practices on compliance with legal and regulatory requirements;
  4. to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and Directors; and
  5. to review the Company's compliance with the Code and disclosure in the Corporate Governance Report.

The Board met fifteen times during the Review Year and the Directors' attendance is shown in the table on page 26 of the annual report.

INEDs are allowed to seek advice from independent professional consultants while performing their responsibilities and the costs are to be borne by the Company. The Board has conducted a review of the effectiveness of the system of internal control of the Group.

ANNUAL REPORT 2020

21

CORPORATE GOVERNANCE REPORT

Save for their business relationships as a result of their respective directorships and positions in the Company and what is disclosed in their biographies on page 19 to page 20 of the annual report, each of the members of the Board, including the Chairman and the CEO, does not have any significant financial, business, family or other material/relevant relationship among one another.

Article A.4.1 of the Code stipulates that non-executive directors shall be appointed for a specific term and be subject to re-election. All the independent non-executive directors have been appointed for an initial term of one year.

  1. to review the terms and conditions of connected transactions of the Group.

The Audit Committee reviewed the financial statements of the Group for the Review Year prior to recommending the financial statements to the Board for approval. The Board was informed that the Audit Committee had conducted a review of the effectiveness of the system of internal control and internal audit function of the Group. The Board has not taken a different view from that of the Audit Committee regarding the selection, resignation or dismissal of the external auditors.

AUDIT COMMITTEE

REMUNERATION COMMITTEE

The Group has established an Audit Committee with written terms of reference as suggested under the Code. As of 31 December 2020, the Audit Committee comprises all INEDs, namely Mr. Wu, Dr. Wang and Ms. Zheng. As of 31 December 2020, the chairman of the Audit Committee was Mr. Wu. Each member can bring to the Audit Committee his or her valuable experience in reviewing financial statements and evaluating significant control and financial issues of the Group who among themselves possess a wealth of management experience in the accounting profession or commercial sectors. The Audit Committee held three meetings during the Review Year and the relevant Directors' attendance is shown in the table on page 26 of the annual report.

The main duties of the Audit Committee are as follows:

  1. to review the half-year and annual financial statements before they are submitted to the Board for approval;
  2. to make recommendations to the Board on the appointment, reappointment and removal of the external auditor, and approve the remuneration and terms of engagement of the external auditor, and any questions of resignation or dismissal of that auditor;
  3. to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process in accordance with applicable standards;
  4. to review the Company's financial controls, internal controls and risk management systems;
  5. to review the Group's financial and accounting policies and practice;
  6. to review and monitor the effectiveness of the internal audit function; and

The Company established a Remuneration Committee in November 2005. Its terms of reference are summarized as follows:

  1. formulate remuneration policy for approval by the Board, and implement the remuneration policy laid down by the Board;
  2. without prejudice to the generality of the foregoing:
    1. to make recommendations to the Board on the Company's policy and structure for all Directors and senior management remuneration and on the establishment of a formal and transparent procedure for developing remuneration policy;
    2. to ensure no director or any of his associates is involved in deciding his own remuneration;
    3. to determine, with delegated responsibility, the remuneration packages of individual executive Directors and senior management. Remuneration packages include benefits in kind, pension rights and compensation payable for loss or termination of their office or appointment;
    4. to make recommendations to the Board on the remuneration of non-executive Directors;
    5. the Remuneration Committee should consult the Chairman and/or the chief executive about their remuneration proposals for other executive Directors;

22 MINTH GROUP LIMITED

CORPORATE GOVERNANCE REPORT

  1. to review and approve compensation payable to executive Directors and senior management for any loss or termination of office or appointment to ensure that it is consistent with contractual terms and is otherwise fair and not excessive;
  2. to review and approve compensation arrangements relating to dismissal or removal of directors for misconduct to ensure that they are consistent with contractual terms and are otherwise reasonable and appropriate; and
  3. to review and approve the management's remuneration proposals with reference to the Board's corporate goals and objectives.

As of 31 December 2020, the Remuneration Committee comprises all three INEDs namely Ms. Zheng, Dr. Wang, and Mr. Wu. Ms. Zheng was the chairman of the Remuneration Committee.

The Remuneration Committee held three meetings during the Review Year to discuss remuneration related matters including determining the policy for the remuneration of executive directors, assessing performance of executive directors and approving the terms of executive directors' service contracts and the relevant Directors' attendance is shown in the table set out on page 26 of the annual report.

In order to attract, retain, and motivate executives and key employees serving the Group, the Company has adopted a conditional share option scheme (the "2012 Share Option Scheme") on 22 May 2012. The 2012 Share Option Scheme aims at granting share options pursuant to the terms of the 2012 Share Option Scheme to those qualified persons who have contributed or will contribute to the Group as a reward or incentive.

Details of the amount of Directors' emoluments are set out in note 13 to the consolidated financial statements and details of the 2012 Share Option Scheme are set out in the Directors' Report and note 41 to the consolidated financial statements.

NOMINATION COMMITTEE

The Company established the Nomination Committee on

21 March 2012. Its duties are summarized as follows:

  1. formulate nomination policy for the Board's consideration and implement the Board's approved nomination policy; and
  2. without prejudice to the generality of the foregoing:
    1. to review the structure, size and composition (including the skills, knowledge, experience and length of service) of the Board at least annually and make recommendations on any proposed changes to the Board to complement the Company's corporate strategy;
    2. to identify individuals suitably qualified to become

B o a r d m e m b e r s a n d s e l e c t o r m a k e recommendations on the selection of individuals nominated for;

  1. to assess the independence of independent non- executive Directors;
  2. to make recommendations to the Board on the appointment or re-appointment of directors and succession planning for directors, in particular the Chairman and the CEO;
  3. to do any such things to enable the Nomination Committee to perform its responsibilities and functions conferred on it by the Board; and
  4. to conform to any requirement, direction, and regulation that may from time to time be prescribed by the Board or contained in the Company's articles of association (the "Articles") or imposed by legislation.

As of 31 December 2020, the Nomination Committee comprises all three INEDs, namely Dr. Wang, Ms. Zheng and Mr. Wu. Dr. Wang was the chairman of the Nomination Committee.

ANNUAL REPORT 2020

23

CORPORATE GOVERNANCE REPORT

During the Review Year, the Nomination Committee held one meeting to (i) review the structure, size and composition (including the gender, age, cultural and educational background, professional experience, skills, knowledge and length of service) of the Board; (ii) assess the independence of INEDs; and (iii) adopt the Board diversity policy. Directors' attendance is shown in the table set out on page 26 of the annual report.

In assessing the Board composition, the Nomination Committee would take into account various aspects set out in the Board diversity policy, including but not limited to gender, age, cultural and educational background, professional knowledge and experience, industry knowledge and experience and technical skills. The Nomination Committee would consider and, where applicable, agree on measurable objectives for achieving diversity on the Board and make recommendation to the Board. During the Review Year, the Nomination Committee has not set any measurable objectives for implementing the policy. The Nomination Committee considered the current composition of the Board to be appropriate taking into account of the above.

According to the director nomination policy, in evaluating and selecting a candidate for directorship, the following criteria shall be considered:

  • character and integrity;
  • qualifications including professional qualifications, skills, knowledge and experience and diversity criteria under the Board diversity policy of the Company which are relevant to the Company's business and corporate strategy;
  • any measurable objectives adopted for achieving diversity on the Board;
  • requirement for the Board to have independent Directors in accordance with the Listing Rules and whether the candidate would be considered independent with reference to the independence guidelines set out in the Listing Rules;
  • the potential contributions the candidate can bring to the Board in terms of qualifications, skills, experience, independence, gender diversity and diversity of perspectives;
  • willingness and ability to devote sufficient time to discharge duties as a member of the Board and/or Board committee(s); and
  • such other criteria which are appropriate to the Company's business and corporate strategy and the Board's succession plan and, where applicable, which may be adopted and/or amended by the Board and/or the Nomination Committee from time to time for nomination of directors and succession planning.

The Nomination Committee has also implemented the following procedures and processes in respect of the nomination of Directors pursuant to the director nomination policy:

  • The Nomination Committee and/or the Board may select candidates for directorship from various channels, including but not limited to internal promotion, re- designation, referral by other member of the management of the Company and external recruitment agents, and shall, upon receipt of the proposal on appointment of new Director and the biographical information (or relevant details) of the candidate, evaluate such candidate based on the criteria as set out above to determine whether such candidate is qualified for directorship.
  • If the process yields more than one qualified candidates, the Nomination Committee and/or the Board shall rank them by order of preference based on the needs of the Company and reference check of each candidate (where applicable).
  • The Nomination Committee shall then recommend to the Board to appoint the appropriate candidate for directorship, as applicable.
  • For any person who is nominated by any shareholder of the Company for election as a Director at any general meeting of the Company, the Nomination Committee and/or the Board shall evaluate such candidate based on the criteria as set out above to determine whether such candidate is qualified for directorship.
  • Where appropriate, the Nomination Committee and/or the Board shall make recommendation to the shareholders of the Company in respect of the proposed election of Director(s) at the general meeting of the Company.

24 MINTH GROUP LIMITED

CORPORATE GOVERNANCE REPORT

SHAREHOLDERS' RIGHTS

Shareholders have the right to receive dividends according to the Company's dividend policy which is summarized as follows:

  • The Company shall, when recommending or declaring dividends, maintain adequate cash reserves for meeting its working capital requirements and needs for future growth as well as its share value in the long- run.
  • The declaration of dividend(s) and/or the amount of dividends (if any) that may be declared and distributed to the shareholders of the Company is subject to the discretion of the Board, the constitutional documents of the Company, all applicable laws and regulations and the factors set out below.
  • The Board shall also take into account the following factors of the Company and its subsidiaries when considering the declaration and payment of dividends:
    • financial results;
    • cash flow situation;
    • availability of distributable profits;
    • business conditions and strategies;
    • future operations and earnings;
    • development plans;
    • cash requirements;
    • capital requirements and expenditure plans;
    • interests of shareholders as a whole;
    • any restrictions on declaration and/or payment of dividends; and
    • any other factors that the Board may consider relevant.
  • Depending on the financial conditions of the Group and the conditions and factors as set out above, the following dividends may be proposed and/or declared by the Board for a financial year or period:
    • interim dividend;
    • final dividend;
    • special dividend; and
    • any distribution of net profits that the Board may deem appropriate.
  • Any final dividend for a financial year shall be subject to shareholders' approval.
  • The Company may declare and pay dividends by way of cash or scrip or by any other means that the Board considers appropriate.
  • Any dividend unclaimed shall be forfeited and reverted to the Company in accordance with the constitutional documents of the Company and all applicable laws and regulations.

Shareholders have right to raise questions and make suggestions on the business of the Company. All Shareholders shall have equal rights according to their respective shareholding and assume corresponding obligations.

Shareholders are entitled to get access to and participate in the material matters of the Company as prescribed by laws, administrative regulations and the Articles.

ANNUAL REPORT 2020

25

CORPORATE GOVERNANCE REPORT

Any one or more members holding at the date of deposit of the requisition not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition to the Board or the Secretary of the Company, to require an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within two (2) months after the deposit of such requisition. If within twenty-one (21) days of such deposit the Board fails to proceed to convene such meeting, the requisition(s) himself (themselves) may do so in the same manner.

Shareholders should direct their questions about their shareholdings to the Company's Hong Kong Branch Registrar and Transfer office, Computershare Hong Kong Investor Services Limited at 17th Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong. If the Shareholders and the investors make a request for the Company's information, the Company will only provide such information to the extent that it is practicable to do so and such information is publicly available. Shareholders and the investors may communicate with the Company by mail, telephone, fax and email, details for which are made available on the Company's website.

Composition of the Board and the Directors' attendance record for the year ended 31 December 2020

2020 annual

general meeting

Remuneration

Nomination

("AGM")

The Board

Audit Committee

Committee

Committee

Number of Meetings

1

15

3

3

1

Executive Directors

Wei Ching Lien (executive Director and

Chairperson as appointed on

28 May 2020)

N/A

10

N/A

N/A

N/A

Chen Bin Bo (executive Director as

appointed on 28 May 2020 and

Chief Executive Officer)

0

10

N/A

N/A

N/A

Chin Chien Ya

0

15

N/A

N/A

N/A

Huang Chiung Hui

(resigned on 28 May 2020)

1

5

N/A

N/A

N/A

Independent Non-executive Directors

Wang Ching

1

15

3

3

1

Yu Zheng

1

15

3

3

1

Wu Tak Lung (appointed on 28 May 2020)

N/A

10

1

2

0

Wu Fred Fong (retired on 28 May 2020)

1

5

2

1

1

INDEPENDENCE INFORMATION

The Company has received, from each of the INEDs, a confirmation of his or her independence pursuant to Rule

3.13 of the Listing Rules. The Company considers all of the INEDs independent.

DIRECTOR'S TRAINING AND

DEVELOPMENT

Development and training of Directors is an ongoing process so that they can perform their duties appropriately. The Company regularly circulates details of training courses which may be of interest to Directors. All Directors are encouraged to attend relevant training courses.

During the Review Year, all Directors have participated in professional trainings to update their knowledge and skills. All Directors have provided the Company with their training records for the year.

The Company Secretary has confirmed her attendance of more than 15 hours of professional training during the Review Year.

26 MINTH GROUP LIMITED

CORPORATE GOVERNANCE REPORT

According to the records maintained by the Company, the Directors received the following training with the emphasis on the roles, functions and duties of a director of a listed company in compliance with the Code on the continuous professional development during the Review Year:

Corporate Governance/

Updates on Laws, rules and

Regulations/Updates on Industry Specific

Written Materials

Briefings/Seminars

Executive Directors

Wei Ching Lien (executive Director and Chairperson as appointed

on 28 May 2020)

Chen Bin Bo (executive Director as appointed on 28 May 2020

and Chief Executive Officer)

Chin Chien Ya

Huang Chiung Hui (resigned on 28 May 2020)

Independent Non-executive Directors

Wang Ching

Yu Zheng

Wu Tak Lung (appointed on 28 May 2020)

Wu Fred Fong (retired on 28 May 2020)

AUDITOR'S REMUNERATION

The Company's independent external auditor is Deloitte Touche Tohmatsu. The Audit Committee is responsible for considering the appointment of the external auditor and reviewing any non-audit functions performed by the external auditor, including whether such non-audit functions could lead to any potential material adverse effect on the Company. During the Review Year, the services (and associated remuneration) provided to the Company by Deloitte Touche Tohmatsu were as follows:

RMB'000

Audit services

3,730

Tax and legal advisory services

878

Total

4,608

RISK MANAGEMENT AND INTERNAL CONTROL

The Board understands that appropriate internal control and risk management are indispensable to effective governance and fulfillment of strategic objectives of the Group. The Board has also confirmed that the Board is responsible for ensuring the Group to maintain appropriate and effective internal control at any time to safeguard the interest of its shareholders and the assets of the Group. The Board will review the risk management and internal control systems annually. The Board has conducted reviews over the risk

management and internal control during the Review Year, and identified the efficiency and sufficiency of risk management and internal control.

The Group has established three barriers for risk management and internal control. The first barrier is the identification, evaluation and acknowledgement of risks and critical control points during the operating process by different levels of management from each functional unit, with internal controls by means such as verification of authorization, physical control and separation of duties. The second barrier is the internal review of each functional unit or department. Regular internal review in respects of human rights, financial rights and related procedures is conducted by departments of the Group headquarters, such as Human Resources Department and Finance Department, to ensure the compliance with laws and regulations and requirements of the Stock Exchange, as well as the accuracy and fairness of the financial statements. Due diligence are established in every functional unit to conduct self review and evaluation. The third barrier is the establishment of an audit and supervision department, which is independent of the business operation for the Group, to conduct irregular internal reviews over every system and subsidiaries or departments. In the case of material risks and loophole of internal control, the audit and supervision department will expand its coverage of auditing and report to the Audit Committee in a timely manner. Apart from sufficient allocation of resources, the Group ensures that the internal audit team can get access to all business filings, accounting records and related staff, so as to guarantee the effectiveness of its internal audit function. Whilst the three aforesaid barriers are positioned for risk

ANNUAL REPORT 2020

27

CORPORATE GOVERNANCE REPORT

management and internal control, the Group organizes seminars when necessary, where participants at all levels put forward cross-functional quick response and effective countermeasures towards the identified issues with potential high risk. Through the above, the Group can ensure that risk can be controlled within tolerance, and internal control can be effectively carried out.

The risk management and internal control system of the Group aims to manage, but not completely eliminate, the risks which hinder the achievement of business objectives, which only provides reasonable assurance, while cannot guarantee that material false statements and damages will be fully avoidable.

The Board considered that the Group's risk management and internal control systems maintained by the management are effective and adequate to address the financial, operational and compliance controls and risk management of the Group during the Review Year.

INVESTOR RELATIONS AND

COMMUNICATION

Through its Investor Relations Department, the Company maintains proactive communications with investors, sell-side analysts and other capital market participants so as to enable them to fully understand the operation and development of the Group. The Company's senior management presents in briefings or conference calls for its annual and interim results every year. Through various activities such as analyst meetings and road shows, senior management provides public investors with updates on important information and responds to key questions which are of concerns to the investors. This has helped to reinforce the understanding of the Company's business and the overall development of the industry.

During the Review Year, the outbreak of the COVID-19 epidemic brought a lot of challenges to the information disclosure and the communication between the Company and the capital market. As a result, the audit process of the Company's auditors was delayed and additional time was required to finalize the audited consolidated financial statements of 2019, leading to the Company's late release of the audited annual results announcement on 15 April 2020 eventually. Meanwhile, the Company had to cancel its annual results briefing originally scheduled to be held in Hong Kong. Despite the difficulties, the Company was still actively seeking better alternatives to mitigate the impact. For example, the results briefing was held in the from of telephone conference instead, and the annual general meeting was held by a combination of physical meeting and virtual video conference for the first time. The Company would like to express its sincere gratitude to all participants in the capital market for their support and understanding in such process.

As to daily communications with the investment community during the Review Year, due to the impact of the pandemic, the Company accommodated about 150 online meetings, such as conference calls, Tencent meetings and Zoom meetings, with the capital market instead of face-to-face meetings. The Company also participated in 19 virtual investment forums, 7 of which were held by Chinese brokers, facilitating effective communication with investors in regard to their concerned questions such as the disruption caused by the pandemic, contingency plan by the management team and trajectory of production recovery. To help investors better understand the operations of the Group's different BUs, conditional upon compliance with the requirements of pandemic prevention, plant tours at the Group's facilities in Ningbo, Jiaxing, Huai'an and Anji were still arranged during the Review Year.

At the last AGM held during the Review Year, to safeguard the health and safety of Shareholders and other participants of the AGM and to prevent the spreading of COVID-19, the Company encouraged Shareholders to appoint the Chairman of the AGM as their proxy to vote according to their indicated voting instructions as an alternative. Given the lingering impact of COVID-19, the Company will continue to implement a series of effective precautionary measures at the forthcoming AGM, and still encourage Shareholders to vote by proxy.

The Company would like to express its heartfelt gratitude to the Shareholders and other capital market participants for their consistent support, and its management and investor relations team will adhere to high ethical standards and continue to work with a humble and enthusiastic attitude, so as to maintain effective communication with the investment community.

There was no change in the Company's constitutional documents during the Review Year.

DIRECTORS' AND AUDITOR'S RESPONSIBILITIES FOR ACCOUNTS

The Directors' responsibilities for preparing the accounts and the reporting responsibilities of the external auditor to the Shareholders are set out on page 44 of the annual report.

LOOKING FORWARD

The Group will keep on reviewing its corporate governance standards on a timely basis and the Board endeavors to take necessary actions to ensure compliance with the provisions of the Code.

28 MINTH GROUP LIMITED

DIRECTORS' REPORT

The Board is pleased to present the annual report and the audited financial statements of the Group for the Review Year.

PRINCIPAL ACTIVITIES

The Company acts as an investment holding company while its subsidiaries are engaged in design, manufacturing, processing, developing and sales of automobile body parts and moulds of passenger cars. Further discussion and analysis of these activities as required by Schedule 5 to the Companies Ordinance (Cap. 622 of the Laws of Hong Kong), including a fair review of the business and a discussion of the principal risks and uncertainties facing the Group, particulars of important events affecting the Group that have occurred since the end of the Review Year, and an indication of likely future development in the Group's business, can be found in the "Summary of Financial Information", "Chairman's Statement" and "Management Discussion and Analysis" sections of the annual report.

RESULTS

The results of the Group for the Review Year are set out in the Consolidated Statement of Profit or Loss and Other Comprehensive Income on page 46 of the annual report.

DIVIDENDS

The Board has recommended the payment of a final dividend of HKD0.572 per share to shareholders whose names appear on the register of members of the Company on Tuesday, 8 June 2021 and the proposed final dividend will be paid on or about Tuesday, 22 June 2021. The payment of dividends shall be subject to the approval of the shareholders at the forthcoming annual general meeting, which is expected to be held on Monday, 31 May 2021.

PROPERTY, PLANT AND EQUIPMENT

During the Review Year, the Group incurred approximately RMB2,362,114,000 for the acquisition of property, plant and equipment. Details of these and other movements in property, plant and equipment of the Group are set out in note 16 to the consolidated financial statements.

SHARE CAPITAL AND RESERVES

During the Review Year, the Company has issued 9,665,500 Shares as a result of the exercise of Share Options granted pursuant to the 2012 Share Option Scheme. The total consideration received by the Company for such issue during the Review Year amounted to approximately HKD139,688,800.

During the Review Year, the trustee of the Share Award Scheme purchased a total of 8,520,000 shares of the Company on the Stock Exchange at a consideration of approximately HKD250,743,000 pursuant to the rules of the Share Award Scheme and the terms of the trust deed.

Save as disclosed herein, there was no purchase, sale or redemption by the Company or any of its subsidiaries, of its listed securities during the Review Year.

Movements in the reserves of the Group and the Company during the Review Year are set out in the Consolidated Statement of Changes in Equity on page 49 of the annual report.

The Company's reserves available for distribution represent the share premium, reserves and profit which in aggregate amounted to approximately RMB5,520 million as at 31 December 2020. Under the Companies Law, Cap 22 (Law 3 of 1961, consolidated and revised) of the Cayman Islands, the share premium of the Company is available for paying distributions or dividends to Shareholders subject to the provisions of the Company's memorandum and Articles and provided that immediately following the date on which distribution or dividend is proposed to be paid, the Company is able to pay its debts as they fall due in the ordinary course of business. In accordance with the Articles, dividends may be declared and paid out of the profits of the Company, realised or unrealised or from any reserve set aside from profits which the Directors determine is no longer needed. With the sanction of an ordinary resolution, dividend may also be declared and paid out of share premium account of the Company.

ANNUAL REPORT 2020

29

DIRECTORS' REPORT

DEBENTURES

During the Review Year, the Company did not issue any debentures.

FINANCIAL SUMMARY

A summary of the results of the assets and liabilities of the Group for the last five financial years is set out on page 3 of the annual report. The results do not constitute a part of the audited financial statements.

MAJOR SUPPLIERS AND CUSTOMERS

For the Review Year, the largest customer accounted for approximately 7.3% of the Group's revenue, and the five largest customers accounted for approximately 28.5% of the Group's revenue.

The purchases for the Review Year attributable to the Group's largest supplier and five largest suppliers were approximately 2.6% and approximately 9.0% of the Group's total cost of goods sold respectively.

None of the Directors, their respective associates or the existing shareholders (which to the knowledge of the Directors own more than 5% of the Company's share capital), has any interests in the Group's five largest customers and/or suppliers for the Review Year.

DONATION

During the Review Year, the donations made by the Group amounted to approximately RMB555,000 (2019: approximately RMB1,689,000).

DIRECTORS

The Directors of the Company during the Review Year and up to the date of the annual report were:

Executive directors

Wei Ching Lien (executive Director and Chairperson as appointed on 28 May 2020)

Chen Bin Bo (executive Director as appointed on 28 May 2020 and Chief Executive Officer)

Chin Chien Ya

Huang Chiung Hui (resigned on 28 May 2020)

Independent non-executive directors

Wang Ching

Yu Zheng

Wu Tak Lung (appointed on 28 May 2020)

Wu Fred Fong (retired on 28 May 2020)

In accordance with Article 87 of the Articles, Dr. Wang and Mr. Wu will retire from office, and all being eligible, offer themselves for re-election at the forthcoming AGM. Ms. Zheng has confirmed that she will retire as an independent non- executive Director with effect from the conclusion of the AGM and will not offer herself for re-election due to her personal career development.

30 MINTH GROUP LIMITED

DIRECTORS' REPORT

PERMITTED INDEMNITY PROVISION

Pursuant to the Company's Articles, every Director of the Company shall be indemnified and secured harmless out of the assets and profits of the Company from and against all actions, costs, charges, losses, damages and expenses which he may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of the duty, or supposed duty, in his office or trust, provided that such indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach to him. Such permitted indemnity provision was in force during the Review Year and at the time of approval of the annual report.

DIRECTORS' SERVICE CONTRACTS

Save as disclosed above, none of the Directors proposed for re-election at the forthcoming AGM has entered into a service contract which is not determinable by the Company or its subsidiaries within one year without payment of compensation, other than statutory compensation.

APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTORS

Dr. Wang was appointed as an independent non-executive Director on 26 October 2005 and his appointment was most recently renewed to the Company's forthcoming AGM.

Mr. Wu was appointed as an independent non-executive Director on 28 May 2020 and his appointment was most recently renewed to the Company's forthcoming AGM.

The Company has proposed to appoint Professor Chen Quan Shi as an independent non-executive Director on 31 May 2021, subject to the shareholders' approval in the forthcoming AGM, biography and other details of the appointment of Professor Chen Quan Shi is stated in the circular of the AGM.

The Company has received, from each of the INEDs, an annual confirmation of his independence pursuant to Rule 3.13 of the Listing Rules. The Company considers all of the INEDs are independent.

DIRECTORS' AND SENIOR MANAGEMENT'S EMOLUMENT

The remuneration paid to the Directors, by name, for the year ended 31 December 2020 is set out in note 13 to the consolidated financial statements.

The remuneration of senior management, by band, for the year ended 31 December 2020 is set out below:

2020

2019

No. of

No. of

employees

employees

HKD1,000,001 to HKD1,500,000

1

1

HKD1,500,001 to HKD2,000,000

0

1

HKD2,000,001 to HKD2,500,000

1

0

HKD2,500,001 to HKD3,000,000

1

1

HKD3,500,001 to HKD4,000,000

0

1

HKD7,500,001 to HKD8,000,000

0

1

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Brief biographical details of the Directors and senior management are set out on pages 19 to 20 of the annual report.

ANNUAL REPORT 2020

31

DIRECTORS' REPORT

DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ANY ASSOCIATED CORPORATION

As at 31 December 2020, the interests and short positions of the Directors and the chief executives of the Company in the Shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO), as recorded in the register maintained by the Company pursuant to Section 352 of the SFO, or which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions, if any, which they are taken or deemed to have under such provisions of the SFO) and the Model Code for Securities Transactions by Directors of Listed Issuers ("Model Code") as set out in Appendix 10 of the Listing Rules were as follows:

Interests or short positions in the shares of the Company and its associated corporations

Percentage of the

Company's

Issued Share

Company/

Capital as at

Name of Associated

Total Number of

31 December

Name of Director

Corporation

Long/Short Position

Capacity

Ordinary Shares

2020

(Note 1)

Wei Ching Lien

Company

Long position

Interest of spouse

450,072,000

38.81%

(Note 2)

Chen Bin Bo

Company

Long position

Beneficial owner

1,000,000

0.09%

(Note 3)

Chin Chien Ya

Company

Long position

Beneficial owner

250,000

0.02%

(Note 4)

Huang Chiung Hui

Company

Long position

Beneficial owner

500,000

0.04%

Interest of spouse

120,000

0.01%

(Note 5)

Wang Ching

Company

Long position

Beneficial owner

200,000

0.02%

(Note 4)

Yu Zheng

Company

Long position

Beneficial owner

100,000

0.01%

Interest of spouse

1,010,000

0.09%

(Note 6)

Wu Tak Lung

Company

Long position

Beneficial owner

100,000

0.01%

(Note 7)

Wu Fred Fong

Company

Long position

Beneficial owner

70,000

0.01%

(Note 8)

32 MINTH GROUP LIMITED

DIRECTORS' REPORT

Note 1: The percentage of the Company's issued share capital is based on the 1,159,655,500 Shares issued as at 31 December 2020.

Note 2: As at 31 December 2020, Mr. Chin (the spouse of Ms. Wei) held 450,072,000 shares of the Company through his wholly-owned company, Minth Holdings, which represented 38.81% of the total issued Shares. Accordingly, Ms. Wei is deemed to be interested in the 450,072,000 Shares in which Mr. Chin was interested. Ms. Wei was appointed as an executive Director and Chairperson of the Company on 28 May 2020.

Note 3: This figure represents the 1,000,000 Share Options granted to Mr. Chen under the 2012 Share Option Scheme that are exercisable. Upon exercise of the Share Options, Mr. Chen will acquire an aggregate of 1,000,000 Shares. Mr. Chen was appointed as an executive Director of the Company on 28 May 2020.

Note 4: These figures represent the Share Options granted to Ms. Chin and Dr. Wang under the 2012 Share Option Scheme that are exercisable. Upon exercise of the Share Options, Ms. Chin and Dr. Wang will acquire 250,000 Shares and 200,000 Shares respectively.

Note 5: These figures represent (i) 500,000 Share Options granted to Ms. Huang under the 2012 Share Option Scheme that are exercisable and (ii) 120,000 Shares Options granted to Mr. Bau Hsin Hong ("Mr. Bau") under the 2012 Share Option Scheme that are exercisable. Upon exercise of the Share Options, Ms. Huang will acquire 500,000 Shares. Since Ms. Huang is the spouse of Mr. Bau, she is also deemed to be interested in the aforesaid Shares in which Mr. Bau is interested. Ms. Huang resigned as an executive Director and Chairperson of the Company with effect from 28 May 2020 and Mr. Bau resigned from the Group with effect from 30 June 2020.

Note 6: These figures represent (i) 100,000 Share Options granted to Ms. Zheng under the 2012 Share Option Scheme that are exercisable and (ii) 1,010,000 Shares held by Mr. Wei. Upon exercise of the Share Options, Ms. Zheng will acquire 100,000 Shares. Since Ms. Zheng is the spouse of Mr. Wei, she is deemed to be interested in the aforesaid Shares in which Mr. Wei is interested.

Note 7: This figure represents the 100,000 Share Options granted to Mr. Wu under the 2012 Share Option Scheme that are exercisable. Upon exercise of the Share Options, Dr. Wang will acquire 100,000 Shares. Mr. Wu was appointed as an independent non-executive Director of the Company on 28 May 2020.

Note 8: This figure represents the 70,000 Share Options granted to Mr. Wu Fred Fong under the 2012 Share Option Scheme that are exercisable. Upon exercise of the Share Options, Mr. Wu Fred Fong will acquire 70,000 Shares. Mr. Wu Fred Fong retired as an independent non-executive Director of the Company with effect from 28 May 2020.

Other than as disclosed above, as at 31 December 2020, none of the Directors, chief executives and their associates had any interests or short positions in any Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

ANNUAL REPORT 2020

33

DIRECTORS' REPORT

SHARE OPTION SCHEMES

The 2005 Share Option Scheme was adopted by the Company for a period of 10 years pursuant to a written resolution of all the then shareholders of the Company on 13 November 2005. Such scheme was terminated on 22 May 2012 and the 2012 Share Option Scheme with substantively similar terms to the 2005 Share Option Scheme was adopted on the same day at the 2012 annual general meeting of the Company for 10 years.

The purpose of the 2012 Share Option Scheme is to enable the Group to grant options to selected participants as incentives or rewards for their contributions to the Group. All Directors and employees of the Group, and any advisors, consultants, distributors, contractors, suppliers, agents, customers, business partners, joint venture business partners, promoters, services providers of any member of the Group whom the Board considers, in its sole discretion, have contributed or will contribute to the Group are eligible to participate in the 2012 Share Option Scheme.

The 2012 Share Option Scheme will remain in force for a period of 10 years after the date on which the scheme was adopted. The total number of Shares which may be allotted and issued upon exercise of all options to be granted under the 2012 Share Option Scheme adopted by the Group must not in aggregate exceed 10% ("General Scheme Limit") of the Shares of the Company in issue on 22 May 2012, the date when the Company adopted the 2012 Share Option Scheme, was 107,704,500 Shares. The Company may renew the General Scheme Limit with shareholders' approval provided that each such renewal may not exceed 10% of the Shares of the Company in issue as at the date of the shareholders' approval.

The maximum number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the 2012 Share Option Scheme and any other share option schemes adopted by the Company must not in aggregate exceed 30% of the Shares in issue from time to time.

Unless approved by shareholders of the Company, the total number of Shares issued and to be issued upon exercise of the options granted under the 2012 Share Option Scheme and any other share option schemes of the Company (including both exercised or outstanding options) to each participant in any 12-month period shall not exceed 1% of the issued share capital of the Company for the time being ("Individual Limit").

An option may be accepted by a participant within 28 days from the date of the offer of grant of the option. A nominal consideration of HKD1.00 is payable on acceptance of the grant of an option.

An option may be exercised in accordance with the terms of the 2012 Share Option Scheme at any time during the period to be determined and notified by the Board to each grantee, at the time of making an offer of the grant of an option which shall not expire later than 10 years from the date of grant of the option.

The subscription price for the Shares under the 2012 Share Option Scheme will be a price determined by the Directors, but shall not be less than the highest of (i) the closing price of shares as stated in the daily quotations sheets issued by the Stock Exchange on the date of the offer of grant, which must be a business day; (ii) the average closing price of the Shares as stated in the daily quotations sheets issued by the Stock Exchange for the five business days immediately preceding the date of the offer of grant; and (iii) the nominal value of the Shares.

During the Review Year, the total number of Share Options that the Company granted to the employees including to the Directors amounted to 28,000,000. As at the date of the annual report, the number of Share Options that could still be granted under the 2012 Share Option Scheme was 22,432,000, representing approximately 1.93% of the 1,159,800,000 Shares in issue as at 26 March 2021, being the date of the annual report.

34 MINTH GROUP LIMITED

DIRECTORS' REPORT

Details are as follows:

Number of Share Options (Note 1)

Weighted

average

closing price

of Shares

immediately

before the

Outstanding

Outstanding

Exercise

date(s) on

as at

Granted

Exercised

Lapsed

as at

price of the

which Share

Name and category

1 January

during the

during the

during the

31 December

Date of

Exercise

Share

Options were

of participants

2020

Review Year

Review Year

Review Year

2020

grant

period

Options

exercised

(HKD)

(HKD)

(Note 8)

(Note 9)

(Note 10)

Directors, chief executives,

and substantial

Shareholders and their

respective connected

persons

Mr. Chen Bin Bo (Note 2)

-

1,000,000

-

-

1,000,000

28-7-2020

1-7-2021 to

23.85

N/A

31-12-2025

Ms. Chin Chien Ya (Note 3)

100,000

-

-

-

100,000

10-4-2018

1-4-2019 to

37.60

N/A

31-12-2023

-

150,000

-

-

150,000

28-7-2020

1-7-2021 to

23.85

N/A

31-12-2025

Ms. Huang Chiung Hui

1,000,000

-

1,000,000

-

-

25-3-2015

1-1-2016 to

14.08

31.58

(Note 4)

31-12-2020

500,000

-

-

-

500,000

10-4-2018

1-4-2019 to

37.60

N/A

31-12-2023

Dr. Wang Ching

80,000

-

80,000

-

-

25-3-2015

1-1-2016 to

14.08

31.68

31-12-2020

100,000

-

-

-

100,000

10-4-2018

1-4-2019 to

37.60

N/A

31-12-2023

-

100,000

-

-

100,000

28-7-2020

1-7-2021 to

23.85

N/A

31-12-2025

Ms. Yu Zheng

200,000

-

200,000

-

-

25-3-2015

1-1-2016 to

14.08

33.05

31-12-2020

100,000

-

-

-

100,000

10-4-2018

1-4-2019 to

37.60

N/A

31-12-2023

Mr. Wu Tak Lung (Note 5)

-

100,000

-

-

100,000

28-7-2020

1-7-2021 to

23.85

N/A

31-12-2025

Mr. Wu Fred Fong (Note 6)

140,000

-

140,000

-

-

25-3-2015

1-1-2016 to

14.08

29.00

31-12-2020

100,000

-

30,000

-

70,000

10-4-2018

1-4-2019 to

37.60

39.05

31-12-2023

Mr. Bau Hsin Hong (Note 7)

180,000

-

180,000

-

-

25-3-2015

1-1-2016 to

14.08

31.19

31-12-2020

120,000

-

-

-

120,000

10-4-2018

1-4-2019 to

37.60

N/A

31-12-2023

Subtotal

2,620,000

1,350,000

1,630,000

-

2,340,000

Other Participants

7,932,500

-

7,912,500

20,000

-

25-3-2015

1-1-2016 to

14.08

31.88

31-12-2020

21,172,000

-

123,000

2,336,000

18,713,000

10-4-2018

1-4-2019 to

37.60

39.38

31-12-2023

-

26,650,000

-

-

26,650,000

28-7-2020

1-7-2021 to

23.85

N/A

31-12-2025

Subtotal

29,104,500

26,650,000

8,035,500

2,356,000

45,363,000

Total

31,724,500

28,000,000

9,665,500

2,356,000

47,703,000

ANNUAL REPORT 2020

35

DIRECTORS' REPORT

Note 1: Numbers of Shares over which options granted under the 2012 Share Option Scheme are exercisable.

Note 2: Mr. Chen was appointed as an executive Director of the Company with effect from 28 May 2020.

Note 3: The daughter of Ms. Wei Ching Lien, and an executive Director of the Company.

Note 4: Ms. Huang resigned as an executive Director and Chairperson of the Company with effect from 28 May 2020.

Note 5: Mr. Wu was appointed as an independent non-executive Director of the Company with effect from 28 May 2020.

Note 6: Mr. Wu Fred Fong retired as an independent non-executive Director of the Company with effect from 28 May 2020.

Note 7: Spouse of Ms. Huang, resigned from the Group with effect from 30 June 2020.

Note 8: The closing price of the Shares immediately before the date on which the Share Options were granted pursuant to the 2012 Share Option Scheme on (i) 25 March 2015, i.e. on 24 March 2015 was HKD14.02, (ii) 10 April 2018, i.e. on 9 April 2018 was HKD37.65, and (iii) 28 July 2020, i.e. on 27 July 2020 was HKD22.40.

Note 9: The option period for the Share Options granted on 25 March 2015 is for five years nine months and six days and the vesting periods of such Share Options are as follows: (i) up to 30% of the Share Options granted on or after 1 January 2016; (ii) up to a further 30% of the Share Options granted on or after 1 January 2017; and (iii) all of the remaining Share Options granted on or after 1 January 2018. The option period for the Share Options granted on 10 April 2018 is for five years eight months and twenty-one days and the vesting periods of such Share Options are as follows: (i) up to 30% of the Share Options granted on or after 1 April 2019; (ii) up to a further 30% of the Share Options granted on or after 1 April 2020; and (iii) all of the remaining Share Options granted on or after 1 April 2021. The option period for the Share Options granted on 28 July 2020 is for five years five months and three days and the vesting periods of such Share Options are as follows: (i) up to 30% of the Share Options granted on or after 1 July 2021; (ii) up to a further 30% of the Share Options granted on or after 1 July 2022; and (iii) all of the remaining Share Options granted on or after 1 July 2023.

Note 10: The exercise price of the Share Options is subject to adjustment in the case of rights or bonus issues, or other similar changes.

During the Review Year, the Grantees of the Share Option Scheme exercised 9,665,500 Share Options in accordance with the rules and terms of the Share Option Scheme, and 2,356,000 Share Options lapsed as a result of the resignations of grantees.

Apart from the 2012 Share Option Scheme as disclosed above, no option was granted, exercised, cancelled or lapsed during the Review Year. Particulars of the Company's 2012 Share Option Scheme are set out in note 41 to the consolidated financial statements.

SHARE AWARD SCHEME

On 28 July 2020, The Company adopted a share award scheme (the "Share Award Scheme") to allow share awards at the absolute discretion of the Board. The purposes of the Scheme are to recognise the contributions by certain eligible participants and to provide them with incentives in order to retain them for the continual operation and development of the Group and to attract suitable personnel for further development of the Group. Selected participants pursuant to the terms of the Share Award Scheme will be notified the number of shares awarded to them. For details of the said Share Award Scheme, please refer to the announcement of the Company dated 28 July 2020.

EQUITY-LINKED AGREEMENTS

Other than the 2012 Share Option Scheme, no equity-linked agreements that will or may result in the Company issuing Shares or that require the Company to enter into any agreements that will or may result in the Company issuing Shares were entered into by the Company during the Review Year or subsisted at the end of the Review Year.

DIRECTORS' RIGHTS IN PURCHASING SHARES OR DEBENTURE

Save as disclosed in the annual report, at no time during the Review Year was the Company, its holding company or its subsidiaries a party to any arrangements which enabled the Directors to acquire benefits by means of acquisition of Shares in or debenture of the Company or any other body corporate.

36 MINTH GROUP LIMITED

DIRECTORS' REPORT

DIRECTORS' INTERESTS IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS OF SIGNIFICANCE

Save as disclosed in the annual report, no transactions, arrangements or contracts of significance to which the Company, its subsidiaries, the controlling shareholder of the Company or any of its subsidiaries was a party and in which a Director or an entity connected with a Director had a material interest, whether directly or indirectly, subsisted during or at the end of the Review Year.

MANAGEMENT CONTRACT

No contracts concerning the management and administration of the whole or any substantial part of the business of the Group were entered into or existed during the Review Year.

SUBSTANTIAL SHAREHOLDERS

Interests or short positions in the Company

As at 31 December 2020, the interests or short positions of substantial Shareholders, other than the Directors or the chief executives of the Company, in the Shares and underlying shares of the Company as recorded in the register of substantial Shareholders maintained by the Company pursuant to Section 336 of the SFO are as follows:

Percentage of the

Long/Short

Total Number of

Company's Issued

Name of Substantial Shareholder

Capacity

Position

Ordinary Shares

Share Capital

(Note 1)

Chin Jong Hwa

Interest of controlled

Long position

450,072,000

38.81%

corporations

(Note 2)

Minth Holdings Limited

Beneficial owner

Long position

450,072,000

38.81%

(Note 3)

Mitsubishi UFJ Financial Group, Inc.

Interest of controlled

Long position

102,962,000

8.88%

corporations

(Note 4)

Matthews International Capital

Investment manager

Long position

80,091,000

6.91%

Management, LLC

Citigroup Inc.

Interest of controlled

Long Position

962,549

0.08%

corporations

Short Position

358,194

0.03%

Approved lending agent

Long Position

63,678,546

5.49%

(Note 5)

Note 1: The percentage of the Company's issued share capital of 1,159,655,500 Shares as at 31 December 2020.

Note 2: As at 31 December 2020, Minth Holdings was beneficially interested in 450,072,000 Shares. Minth Holdings was wholly-owned by Mr. Chin and he was therefore deemed to be interested in the entire 450,072,000 Shares held by Minth Holdings.

Note 3: As at 31 December 2020, Minth Holdings, a company wholly-owned by Mr. Chin, was beneficially interested in 450,072,000 Shares.

Note 4: As at 31 December 2020, according to the information disclosed to the Company under Division 2 and Division 3 of Part XV of the SFO, these Shares were held by corporations controlled directly or indirectly as to 100% by Mitsubishi UFJ Financial Group, Inc.

Note 5: As at 31 December 2020, according to the information disclosed to the Company under Division 2 and Division 3 of Part XV of the SFO, these Shares were held by corporations controlled directly or indirectly as to 100% by Citigroup Inc.

Other than as disclosed above, as at 31 December 2020, the Company had not been acknowledged by any person of any interests or short positions in any Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

ANNUAL REPORT 2020

37

DIRECTORS' REPORT

PURCHASE, SALE OR REDEMPTION OF SHARES OF THE COMPANY

During the Review Year, the trustee of the Share Award Scheme purchased a total of 8,520,000 shares of the Company on the Stock Exchange at a consideration of approximately HKD250,743,000 pursuant to the rules of the Share Award Scheme and the terms of the trust deed.

Save as disclosed herein, there was no purchase, sale or redemption by the Company or any of its subsidiaries of any listed securities of the Company during the Review Year.

CONTINUING CONNECTED TRANSACTIONS

The Company entered into a framework agreement with Jiaxing Futing Mechanical Co., Ltd.* (嘉興富廷機械有限公司) ("Jiaxing Futing") on 28 December 2017 pursuant to which the Group would purchase finished or semi-finished moulds and related equipment and auxiliary materials (the "Framework Agreement") for the period from 28 December 2017 to 27 December 2020. The proposed annual caps for each of the three years ending 31 December 2018, 2019 and 2020 are RMB200,000,000 (equivalent to approximately HKD238,860,000), RMB200,000,000 (equivalent to approximately HKD238,860,000) and RMB200,000,000 (equivalent to approximately HKD238,860,000), respectively.

As Jiaxing Futing is a company indirectly wholly-owned by Mr. Chin, a substantial shareholder and an executive Director of the Company at the time, Jiaxing Futing is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transactions between the Group and Jiaxing Futing contemplated under the Framework Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

The Company was informed that Jiaxing Futing is expected to cease production of the relevant materials in 2020, the Company has decided to purchase the relevant production equipment in addition to the materials it currently needs in order to ensure the ongoing operational needs of the Group is met.

On 6 May 2020, Jiaxing Shinyou Mould Tech Co., Ltd.* (嘉興信元精密模具科技有限公司), ("Shinyou Mould"), a wholly-owned subsidiary of the Company, entered into the purchase agreement with Jiaxing Futing, pursuant to which Jiaxing Futing agreed to sell and Shinyou Mould agreed to purchase the assets including raw material, low-value consumables, semi-finished moulds, fixed assets and intangible assets at the total consideration of approximately RMB27,247,000 (equivalent to approximately HKD29,869,000) ("the 2020 Purchase Agreement"). After the completion of the 2020 Purchase Agreement, the continuing connected transactions ceased.

Further details of the Framework Agreement and the 2020 Purchase Agreement are set out in the Company's announcements dated 28 December 2017 and 6 May 2020 respectively.

On 3 December 2018, Jiaxing Minhui Automotive Parts Co., Ltd.* (嘉興敏惠汽車零部件有限公司), a wholly owned subsidiary of the Company ("Jiaxing Minhui"), entered into a purchase agreement with Ningbo Chunmin Electronic Co., Ltd.* (寧波淳敏 電子有限公司) ("Ningbo Chunmin Electronic") whereby the Group would purchase products including automobile camera accessories, automobile video recording devices and parts for the period from 3 December 2018 to 31 December 2019 (the "Purchase Agreement"). On 15 October 2019, a supplemental purchase agreement was entered into to extend the term of the Purchase Agreement for two years ending 31 December 2021 (the "Supplemental Purchase Agreement", and together with the Purchase Agreement hereinafter referred to as the "Purchase Agreements"). The proposed annual caps for the extension of two years ending 31 December 2021 in respect of the transactions under the Purchase Agreements for the year ending 31 December 2019, 2020, 2021 are RMB36,080,000 (equivalent to approximately HKD40,000,000), RMB54,121,000 (equivalent to approximately HKD60,000,000) and RMB72,161,000 (equivalent to approximately HKD80,000,000), respectively.

As Ningbo Chunmin Electronic is wholly-owned by Shun On Electronic Co., Limited* (淳安電子股份有限公司) ("Shun On Electronic") and Mr. Chin and his associates are together indirectly beneficially interested in 38.81% of Shun On Electronic, Ningbo Chunmin Electronic is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transactions contemplated under the Purchase Agreements constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Further details of the Purchase Agreements are set out in the Company's announcement dated 15 October 2019.

38 MINTH GROUP LIMITED

DIRECTORS' REPORT

The independent non-executive Directors have reviewed and confirmed that the above continuing connected transactions that were carried out during the year ended 31 December 2020 have been entered into by the Group:

  1. in the ordinary and usual course of business of the Group;
  2. either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Group than terms available to or from (as appropriate) independent third parties; and
  3. in accordance with the agreements governing the transactions that are fair and reasonable and in the interests of the shareholders of the Company as a whole.

The Board further confirmed that in accordance with Rule 14A.71 of the Listing Rules, for the purposes for Rule 14A.56, the auditor of the Company has provided a letter to the Board confirming that nothing has come to their attention that causes them to believe that the above continuing connected transactions:

  1. have not been approved by the Board;
  2. were not entered into, in all material respects in accordance with the relevant agreements governing the transactions; and
  3. have exceeded the cap.

Save for the above, during the Review Year, the Group did not enter into any continuing connected transactions which is subject to the reporting, annual review, announcement and/or independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

REMUNERATION POLICY

Remuneration policy of the Group is set by the Remuneration Committee, making reference to legal framework, market condition and performance of the Group and individual staff. The remuneration policy and remuneration packages of the Directors and senior management staff of the Group are reviewed by the Remuneration Committee, making reference to the prevailing market practice, his/her duties and responsibilities within the Group and his/her contribution to the Group.

Ms. Wei, the executive Director has agreed to waive her remuneration since 28 May 2020.

The Company has adopted the 2012 Share Option Scheme as an incentive to Directors and eligible employees, details of the 2012 Share Option Scheme are set out on pages 34 to 36 of the annual report.

SUFFICIENCY OF PUBLIC FLOAT

Based on information that is publicly available to the Company and within the knowledge of the Directors, as at the date of the annual report, the Company has maintained sufficient public float as required under the Listing Rules.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE AND COMPLIANCE WITH MODEL CODE

The Company's corporate governance practices are based on the principles and code provisions as set out in the Code. None of the Directors is aware of any information that would reasonably indicate that the Company did not, at any time during the corresponding periods of the Review Year, comply with the Code.

The Company has adopted the Model Code as the Company's code of conduct and the code for dealing in the Company's securities by all Directors. Having made specific enquiries to all Directors, the Directors confirmed that they had strictly complied with the standards stipulated under the Model Code during the Review Year.

ANNUAL REPORT 2020

39

DIRECTORS' REPORT

MATERIAL LITIGATION AND ARBITRATION

On 11 April 2014, the Company was served with a petition by the Securities and Futures Commission, judgment and order were delivered on 6 November 2019 by the High Court (the "Case"). Details of the Case were set out in the Company's announcements dated 14 April 2014, 29 May 2014, 9 July 2014, 25 October 2019, 6 November 2019 and 7 July 2020, and its 2015-2019 annual reports and 2020 interim report.

On 7 July 2020, the High Court made an order dismissing Mr. Chin, former executive Director's application for exempting the three private companies from the disqualification order, and the disqualification order for Mr. Chin came into effect.

Save for the above which has now come to full conclusion, the Group was not engaged in any litigation or arbitration of material importance during the Review Year and up to the date of this report.

EVENT AFTER THE REPORTING PERIOD

On 4 March 2021, the Board of Directors further approved the proposed issue of no more than 204,670,588 ordinary shares to be subscribed for in RMB (the "RMB Shares"), to be listed on the Sci-Tech Board of the Shanghai Stock Exchange (the "RMB Share Issue"). A specific mandate to allot and issue RMB Shares pursuant to the RMB Share Issue and related matters, are conditional upon and subject to, among other things, market conditions, the approval by shareholders at the extraordinary general meeting of the Company and the necessary regulatory approval(s). Details of the proposed RMB Share Issue are set out in the Company's announcement dated 4 March 2021.

Save as aforesaid, no significant events occurred after the reporting period which would have a material adverse impact on the final position of the Company.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company's articles of association, or the laws of Cayman Islands, which would oblige the Company to offer new Shares on a pro-rata basis to existing shareholders.

AUDITOR

A resolution will be proposed at the forthcoming AGM to re-appoint Messrs. Deloitte Touche Tohmatsu as auditor of the Company.

UPDATES ON BIOGRAPHICAL DETAILS OF DIRECTORS UNDER RULE 13.51B(1) OF THE LISTING RULES

Pursuant to Rule 13.51B(1) of the Listing Rules, save for the remuneration paid to the Directors during the Review Year set out in note 13 to the consolidated financial statements, there is no other information required to be disclosed.

By Order of the Board

Minth Group Limited

Wei Ching Lien

Chairperson

Hong Kong, 26 March 2021

40 MINTH GROUP LIMITED

INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS OF MINTH GROUP LIMITED (incorporated in the Cayman Islands with limited liability)

OPINION

We have audited the consolidated financial statements of Minth Group Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 46 to 176, which comprise the consolidated statement of financial position as at 31 December 2020, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

ANNUAL REPORT 2020

41

INDEPENDENT AUDITOR'S REPORT

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters

How our audit addressed the key audit matters

Occurrence in the revenue recognition of automobile body parts

(Refer to Note 5 to the consolidated financial statements)

We identified the occurrence in the revenue recognition of automobile body parts as a key audit matter due to the significance of revenue recognition of automobile body parts to the Group's consolidated financial statements.

For the year ended 31 December 2020, the Group has recognised revenue of RMB11,465,979,000 from its sales of automobile body parts, which accounted for 92.0% of total revenue of the Group.

As disclosed in note 5 to the consolidated financial statements, revenue from sales of automobile body parts is recognised when control of the products has been transferred to the customer, being at the point the goods are delivered to the customer's specific location and accepted by the customer.

Our procedures in relation to occurrence in the revenue recognition of automobile body parts included:

  • Obtaining an understanding and testing the key internal controls in respect of the occurrence in the revenue recognition of automobile body parts;
  • Reviewing the sales contracts with customers, on a sampling basis, and verifying the terms and conditions set out in the sales contracts regarding the criteria of satisfaction of performance obligation;
  • Analysing revenue and gross margin from sales of automobile body parts during the current reporting period and identifying unusual fluctuations in sales of automobile body parts during the current reporting period and inquiring the management to understand and evaluate the appropriateness of the reasons for the unusual fluctuations (if applicable);
  • Testing the sales of automobile body parts, on a sampling basis, by inspecting the relevant supporting documents on the completion of sales;
  • Sending audit confirmations to the customers, on a sampling basis, to verify validity and accuracy of trade receivables in relation to sales of automobile body parts; and
  • Visiting customer's site and interviewing the customers to whom the Group sells the automobile body parts, on a sampling basis, to verify occurrence in the revenue recognition of automobile body parts.

42 MINTH GROUP LIMITED

INDEPENDENT AUDITOR'S REPORT

KEY AUDIT MATTERS (CONTINUED)

How our audit addressed the key audit matters

Key audit matters (Continued)

(Continued)

Impairment assessment of trade receivables

(Refer to Notes 27 and 45 to the consolidated financial statements)

We identified impairment assessment of trade receivables as a key audit matter due to the significance of trade receivables to the Group's consolidated financial position and the involvement of subjective judgement and management estimates in evaluating the expected credit losses ("ECL") of the Group's trade receivables at the end of the reporting period.

As at 31 December 2020, the Group's net trade receivables amounting to approximately Renminbi ("RMB") 3,302,430,000 (net of allowance for credit loss of RMB14,328,000), which represented approximately 12.1% of total assets of the Group.

As disclosed in note 45 to the consolidated financial statements, the management of the Group estimates the amount of lifetime ECL of trade receivables based on provision matrix through grouping of various debtors that have similar loss patterns, after considering internal credit ratings of trade debtors, ageing, repayment history and/or past due status of respective trade receivables. Estimated loss rates are based on historical observed default rates over the expected life of the debtors and forward-looking information. In addition, trade receivables that are credit-impaired are assessed for ECL individually. The loss allowance amount of the credit-impaired trade receivables is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows with the consideration of expected future credit losses.

As disclosed in note 45 to the consolidated financial statements, the Group recognised a net additional amount of RMB15,987,000 of impairment of trade receivables for the year ended 31 December 2020 and the Group's lifetime ECL on trade receivables as at 31 December 2020 amounted to approximately RMB14,328,000.

Our procedures in relation to impairment assessment of trade receivables included:

  • Understanding and evaluating the effectiveness of the design and implementation of key controls in relation to the Group's ECL on trade receivables;
  • Understanding and evaluating the appropriateness of the methods and models used by the management to determine the ECL on trade receivables;
  • Challenging management's basis and judgement in determining credit loss allowance on trade receivables as at 31 December 2020, including their identification of credit-impaired trade receivables, the reasonableness of management's grouping of the remaining trade debtors into different categories in the provision matrix, and the basis of estimated loss rates applied in each category in the provision matrix (with reference to historical default rates and forward-looking information);
  • Testing the integrity of information used by management to develop the provision matrix, including trade receivables ageing analysis as at 31 December 2020, on a sample basis, by comparing individual items in the analysis with the relevant sales agreements, sales invoices and other supporting documents;
  • Evaluating the disclosures regarding the impairment assessment of trade receivables in notes 27 and 45 to the consolidated financial statements; and
  • Testing subsequent settlements of credit-impaired trade receivables, on a sample basis, by inspecting supporting documents in relation to cash receipt from trade debtors subsequent to the end of the current reporting period.

ANNUAL REPORT 2020

43

INDEPENDENT AUDITOR'S REPORT

OTHER INFORMATION

The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors of the Company determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors of the Company are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors of the Company either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion 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. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

44 MINTH GROUP LIMITED

INDEPENDENT AUDITOR'S REPORT

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors of the Company.
  • Conclude on the appropriateness of the directors of the Company's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in the independent auditor's report is Kay Man Wo, Dick.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

26 March 2021

ANNUAL REPORT 2020

45

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2020

2020

2019

NOTES

RMB'000

RMB'000

Revenue

5

12,466,858

13,198,189

Cost of sales

(8,608,015)

(9,076,750)

Gross profit

3,858,843

4,121,439

Investment income

7

239,710

126,389

Other income

8

159,991

200,467

Other gains and losses

9

(31,389)

69,441

Distribution and selling expenses

(520,956)

(538,679)

Administrative expenses

(1,028,955)

(1,048,052)

Research expenditure

(764,187)

(655,526)

Interest expenses

(247,624)

(157,819)

Share of profits of joint ventures

11,618

4,388

Share of profits (losses) of associates

2,524

(20,770)

Profit before tax

1,679,575

2,101,278

Income tax expense

10

(216,587)

(336,187)

Profit for the year

12

1,462,988

1,765,091

Other comprehensive (expense) income:

Item that will not be reclassified to profit or loss:

Loss on remeasurement of defined benefit obligation

(1,191)

(871)

Items that may be reclassified subsequently to profit or loss:

Exchange differences arising on translation of foreign operations

(49,557)

30,457

Fair value gain on debt instruments measured at fair value through

other comprehensive income

1,672

3,189

Other comprehensive (expense) income for the year, net of income tax

(49,076)

32,775

Total comprehensive income for the year

1,413,912

1,797,866

Profit for the year attributable to:

Owners of the Company

1,395,509

1,690,300

Non-controlling interests

67,479

74,791

1,462,988

1,765,091

Total comprehensive income for the year attributable to:

Owners of the Company

1,348,770

1,720,111

Non-controlling interests

65,142

77,755

1,413,912

1,797,866

Earnings per share

15

Basic

RMB1.213

RMB1.472

Diluted

RMB1.210

RMB1.466

46 MINTH GROUP LIMITED

CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

At 31 December 2020

2020

2019

NOTES

RMB'000

RMB'000

Non-current assets

Property, plant and equipment

16

9,615,646

8,748,976

Right-of-use assets

17

959,635

988,425

Goodwill

18

98,030

98,030

Other intangible assets

19

78,198

56,554

Interests in joint ventures

20

136,812

90,194

Interests in associates

21

125,889

124,865

Deferred tax assets

24

157,670

187,079

Prepayment for acquisition of property, plant and equipment

185,970

57,391

Contract assets

28

695,413

576,542

Contract costs

28

170,794

128,891

Plan assets

42

2,043

1,942

12,226,100

11,058,889

Current assets

Inventories

25

2,384,748

2,039,976

Loan receivables

23

6,000

6,000

Property under development

26

13,405

19,308

Trade and other receivables

27

4,614,575

4,315,920

Contract assets

28

174,482

234,230

Derivative financial assets

30

4,834

3,204

Held-for-trading investments

29

450,625

-

Debt instruments at fair value through other comprehensive

income

22

151,457

256,647

Pledged bank deposits

31

918,350

21,267

Bank balances and cash

31

6,008,272

5,687,234

14,726,748

12,583,786

Assets classified as held for sale

11

252,897

-

14,979,645

12,583,786

Current liabilities

Trade and other payables

32

3,974,555

3,436,692

Tax liabilities

98,350

120,410

Borrowings

34

5,445,289

4,138,998

Lease liabilities

38

7,712

5,311

Contract liabilities

33

97,322

111,783

Derivative financial liabilities

30

4,969

2,640

9,628,197

7,815,834

Liabilities classified as held for sale

11

4,770

-

9,632,967

7,815,834

Net current assets

5,346,678

4,767,952

Total assets less current liabilities

17,572,778

15,826,841

ANNUAL REPORT 2020

47

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2020

2020

2019

NOTES

RMB'000

RMB'000

Capital and reserves

Share capital

35

116,069

115,227

Share premium and reserves

14,827,935

14,209,718

Equity attributable to owners of the Company

14,944,004

14,324,945

Non-controlling interests

36

368,891

418,749

Total equity

15,312,895

14,743,694

Non-current liabilities

Deferred tax liabilities

24

107,111

94,944

Borrowings

34

1,073,911

-

Lease liabilities

38

11,595

93,568

Retirement benefit obligation

42

14,534

16,537

Derivative financial liabilities

30

20,181

-

Deferred income

28,209

13,653

Other long-term liabilities

43

1,004,342

864,445

2,259,883

1,083,147

17,572,778

15,826,841

The consolidated financial statements on pages 46 to 176 were approved and authorised for issue by the board of directors (the "Board") on 26 March 2021 and are signed on its behalf by:

Wei ChingLien

Chen BinBo

DIRECTOR

DIRECTOR

48 MINTH GROUP LIMITED

CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the year ended 31 December 2020

Statutory

Enterprise

Share

Attributable

Non-

Share

Share

Treasury

Special

Other

surplus

expansion

FVTOCI

Exchange

options

Retained

to owners of

controlling

capital

premium

stock

reserve

reserve

reserve fund

fund

reserve

reserve

reserve

profits

the Company

interests

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

At 1 January 2020

115,227

3,937,536

-

276,199

(20,093)

757,206

110,335

(2,730)

(57,806)

162,194

9,046,877

14,324,945

418,749

14,743,694

Profit for the year

-

-

-

-

-

-

-

-

-

-

1,395,509

1,395,509

67,479

1,462,988

Fair value gain on debt instruments

measured at fair value through other

comprehensive income

-

-

-

-

-

-

-

1,672

-

-

-

1,672

-

1,672

Exchange differences arising on

translation of foreign operations

-

-

-

-

-

-

-

-

(47,220)

-

-

(47,220)

(2,337)

(49,557)

Remeasurement of defined benefit

obligation

-

-

-

-

-

-

-

-

-

-

(1,191)

(1,191)

-

(1,191)

Total comprehensive income for the year

-

-

-

-

-

-

-

1,672

(47,220)

-

1,394,318

1,348,770

65,142

1,413,912

Recognition of equity-settled

share-based payments (note 41)

-

-

-

-

-

-

-

-

-

66,307

-

66,307

-

66,307

Transfer to reserve fund

-

-

-

-

-

292,694

269,329

-

-

-

(562,023)

-

-

-

Transfer to other reserve for share option

forfeited after the vesting date

-

-

-

-

10,687

-

-

-

-

(10,687)

-

-

-

-

Dividends recognised as distribution

(note 14)

-

-

-

-

-

-

-

-

-

-

(694,445)

(694,445)

-

(694,445)

Dividends paid to non-controlling

interests

-

-

-

-

-

-

-

-

-

-

-

-

(115,376)

(115,376)

Capital contribution from non-controlling

shareholders

-

-

-

-

-

-

-

-

-

-

-

-

376

376

Treasury stock (note)

-

-

(222,075)

-

-

-

-

-

-

-

-

(222,075)

-

(222,075)

Exercise of share options

842

151,564

-

-

-

-

-

-

-

(31,904)

-

120,502

-

120,502

At 31 December 2020

116,069

4,089,100

(222,075)

276,199

(9,406)

1,049,900

379,664

(1,058)

(105,026)

185,910

9,184,727

14,944,004

368,891

15,312,895

Note: On 28 July 2020, Minth Group Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") has adopted a share award scheme ("2020 Share Award Scheme") to recognise the contributions by certain eligible participants (consist of (i) employee (including executive director); (ii) non-executive director or independent non-executive director or officer; and (iii) an employee of a corporate or entity who, pursuant to a contract for services, renders services to a member of the Group as determined by the Board from time to time), and to provide them with incentives in order to retain them for the continual operation and development of the Group and to attract suitable personnel for further development of the Group. The 2020 Share Award Scheme shall be valid and effective for a term of 10 years commencing on 28 July 2020. Pursuant to the 2020 Share Award Scheme, the Board may, at its discretion and from time to time, determine a reference amount in respect of which the trustee shall purchase awarded shares from the market as a reserve for future awards to selected participants.

In September 2020, the Group has purchased 8,520,000 issued ordinary shares from the market through the trustee, the consideration for which amounted to approximately HK$251,265,000 (equivalent to approximately RMB222,075,000). These ordinary shares purchased by trustee are accounted for as treasury stock and presented as a deduction to the reserve. Pursuant to the 2020 Share Award Scheme, in any event, the aggregate number of Shares held by the trustee (whether directly or indirectly through other controlled corporations) as a whole would not exceed 2% of the issued share capital of the Company at any time (on an actual basis as well as on a fully diluted basis). As at 31 December 2020, no eligible participants has yet been selected by the Board for participation in the 2020 Share Award Scheme.

ANNUAL REPORT 2020

49

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

Statutory

Attributable

surplus

Enterprise

Share

to owners

Non-

Share

Share

Special

Other

reserve

expansion

FVTOCI

Exchange

options

Retained

of the

controlling

capital

premium

reserve

reserve

fund

fund

reserve

reserve

reserve

profits

Company

interests

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

At 1 January 2019

114,902

3,876,217

276,199

(22,930)

642,063

85,512

(5,919)

(85,299)

114,871

8,164,798

13,160,414

268,292

13,428,706

Profit for the year

-

-

-

-

-

-

-

-

-

1,690,300

1,690,300

74,791

1,765,091

Fair value gain on debt

instruments measured at

fair value through other

comprehensive income

-

-

-

-

-

-

3,189

-

-

-

3,189

-

3,189

Exchange differences arising

on translation of foreign

operations

-

-

-

-

-

-

-

27,493

-

-

27,493

2,964

30,457

Remeasurement of defined

benefit obligation

-

-

-

-

-

-

-

-

-

(871)

(871)

-

(871)

Total comprehensive income

for the year

-

-

-

-

-

-

3,189

27,493

-

1,689,429

1,720,111

77,755

1,797,866

Recognition of equity-settled

share-based payments

(note 41)

-

-

-

-

-

-

-

-

63,081

-

63,081

-

63,081

Non-controlling interest arising

on the acquisition of a

subsidiary

-

-

-

-

-

-

-

-

-

-

-

71,652

71,652

Transfer to reserve fund

-

-

-

-

115,143

30,129

-

-

-

(145,272)

-

-

-

Transfer to other reserve for

share option forfeited after

the vesting date

-

-

-

2,837

-

-

-

-

(2,837)

-

-

-

-

Dividends recognised as

distribution (note 14)

-

-

-

-

-

-

-

-

-

(667,384)

(667,384)

-

(667,384)

Liquidation of a subsidiary

-

-

-

-

-

(5,306)

-

-

-

5,306

-

-

-

Capital contribution from non-

controlling shareholders

-

-

-

-

-

-

-

-

-

-

-

1,050

1,050

Exercise of share options

325

61,319

-

-

-

-

-

-

(12,921)

-

48,723

-

48,723

At 31 December 2019

115,227

3,937,536

276,199

(20,093)

757,206

110,335

(2,730)

(57,806)

162,194

9,046,877

14,324,945

418,749

14,743,694

The special reserve of the Group represents the difference between the nominal amount of the shares issued by the Company and the aggregate amount of the paid-in capital of subsidiaries acquired pursuant to the group reorganisation in June 2005.

The other reserve of the Group consists of: (i) contributions from the substantial shareholder, Mr. Chin Jong Hwa ("Mr. Chin"), in connection with the Group's acquisition of an associate from Mr. Chin pursuant to the group reorganisation; (ii) reserve arising from acquisition of additional interest in subsidiaries; (iii) revaluation reserve recognised upon acquisition of businesses from interests in joint ventures; and (iv) reserve transferred from share options reserve for share options forfeited after the vesting dates.

As stipulated by the relevant laws and regulations for foreign investment enterprise in the People's Republic of China (the "PRC"), the PRC subsidiaries are required to maintain a statutory surplus reserve fund which is non-distributable. Appropriations to such reserve are made out of profit after taxation of the statutory financial statements of the PRC subsidiaries. The amount and basis of allocation are decided by its respective board of directors annually. The statutory surplus reserve fund can be used to make up its prior year losses, if any, and can be applied in conversion into capital by means of capitalisation issue. The enterprise expansion fund are also appropriated out of profit after taxation of the statutory financial statements of the PRC subsidiaries subject to the approval by its respective board of directors annually, for the use of development and expanding the capital base of the PRC subsidiaries.

The financial instruments measured at fair value through other comprehensive income ("FVTOCI") reserve represents the changes in fair value of bills receivables which was measured as debt instruments at FVTOCI.

50 MINTH GROUP LIMITED

CONSOLIDATED STATEMENT OF

CASH FLOWS

For the year ended 31 December 2020

2020

2019

RMB'000

RMB'000

Operating activities

Profit before tax

1,679,575

2,101,278

Adjustments for:

Finance costs

247,624

157,819

Interest income

(239,710)

(126,389)

Share of profits of joint ventures

(11,618)

(4,388)

Share of (profits) losses of associates

(2,524)

20,770

Depreciation of property, plant and equipment

815,457

750,881

Depreciation of right-of-use assets

30,729

26,365

Amortisation of other intangible assets

33,445

27,979

Share-based payment expense

66,307

63,081

Fair value changes of other financial assets at fair value through profit or

loss ("FVTPL")

(68,461)

(58,978)

Fair value changes of derivative financial instruments

15,619

1,192

Gain on disposal of property, plant and equipment

(6,616)

(9,661)

Gain on disposal of subsidiaries (note 37)

(1,001)

-

Gain on deemed disposal of an associate

-

(836)

Impairment loss, net of reversal

- property, plant and equipment

16,378

12,264

- financial assets and other items under expected credit loss model

15,935

1,305

- inventories

78,312

32,230

Net foreign exchange (gain) losses

(29,674)

23,297

Operating cash flows before movements in working capital

2,639,777

3,018,209

Increase in inventories

(426,481)

(81,072)

Decrease (increase) in property under development

5,903

(3,961)

Increase in trade and other receivables

(300,356)

(86,309)

Decrease in debt instruments at FVTOCI

105,190

82,406

Increase in contract assets

(59,123)

(228,439)

Increase in contract costs

(41,903)

(63,910)

Increase in trade and other payables

368,457

71,643

(Decrease) increase in contract liabilities

(14,461)

39,098

Cash generated from operations

2,277,003

2,747,665

Income taxes paid

(196,754)

(363,673)

Net cash from operating activities

2,080,249

2,383,992

ANNUAL REPORT 2020

51

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2020

2020

2019

RMB'000

RMB'000

Investing activities

Proceeds from redemption of other financial assets and derivative financial

instruments

8,227,371

12,792,842

Interest received

193,547

96,432

Dividend received from a joint venture and an associate

6,500

10,000

Proceeds from disposal of property, plant and equipment

60,579

97,886

Proceeds from disposal of other intangible assets

60

3

Investment in other financial assets and derivative financial instruments

(8,604,289)

(12,732,608)

Purchases of property, plant and equipment

(2,213,384)

(1,535,793)

Payments for right-of-use assets

(148,730)

(138,910)

Purchases of other intangible assets

(66,473)

(21,286)

Government subsidy received relating to the purchase of property, plant and

equipment and other intangible assets

70,875

87,691

Placement of pledged bank deposits

(897,923)

(69,072)

Withdrawal of pledged bank deposits

840

113,316

Net cash inflow arising on acquisition of a subsidiary

-

129,215

Net cash inflow arising on disposal of subsidiaries (note 37)

6,496

-

Net cash inflow arising on disposal of a joint venture

-

2,498

Loan to a joint venture

-

(2,000)

Payment for investment in a joint venture

(40,000)

-

Repayment from a joint venture

-

4,000

Bank balances and cash classified as held for sale (note 11)

(7,246)

-

Net cash used in investing activities

(3,411,777)

(1,165,786)

Financing activities

Repayment of borrowings

(16,680,256)

(10,232,018)

Repayments of lease liabilities

(5,617)

(6,607)

New borrowings raised

19,297,159

10,246,170

Dividends paid to owners of the Company

(694,445)

(667,384)

Dividends paid to non-controlling shareholders

(115,376)

-

Interest paid

(208,812)

(149,634)

Proceeds from exercise of share options

120,502

48,723

Payment on repurchase shares as treasury stock

(222,075)

-

Loan from the government

117,000

800,100

Repayments of loan from the government

-

(104,412)

Loan from related companies

92,800

-

Repayments to related companies

(30,000)

-

Capital contributions from non-controlling shareholders

376

1,050

Net cash from (used in) financing activities (note 46)

1,671,256

(64,012)

Net increase in cash and cash equivalents

339,728

1,154,194

Cash and cash equivalents at the beginning of the year

5,687,234

4,521,870

Effect of foreign exchange rate changes

(18,690)

11,170

Cash and cash equivalents at the end of the year

6,008,272

5,687,234

Analysis of the balances of cash and cash equivalents

Bank balances and cash

6,008,272

5,687,234

52 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS

For the year ended 31 December 2020

1. GENERAL INFORMATION

The Company was incorporated under the Companies Law of the Cayman Islands on 22 June 2005 and registered as an exempted company with limited liability. Its registered office is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. The shares of the Company have been listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") since 1 December 2005. The Company acts as an investment holding company with its subsidiaries engaged in the design, development, manufacture, processing and sales of automobile body parts and moulds. The principal activities of the Company's subsidiaries are set out in note 47.

In the opinion of the directors of the Company (the "Directors"), the immediate and ultimate holding company of the Company is Minth Holdings Limited, a limited company incorporated in the British Virgin Islands on 7 January 2005, which was formerly known as Linkfair Investments Limited.

The consolidated financial statements are presented in Renminbi ("RMB"), which is the same as the functional currency of the Company.

2. APPLICATION OF AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs")

Amendments to HKFRSs that are mandatorily effective for the current year

In the current year, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") for the first time, which are mandatorily effective for the annual period beginning on or after 1 January

2020 for the preparation of the 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 Reform

HKFRS 7

The application of the Amendments to References to the Conceptual Framework in HKFRS Standards and the amendments to HKFRSs in the current year had no material impact on the Group's financial positions and performance for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

ANNUAL REPORT 2020

53

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

2. APPLICATION OF AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs") (CONTINUED)

New and amendments to HKFRSs in issue but not yet effect

The Group has not early applied the following new and amendments to HKFRSs that have been issued but are not yet effective:

HKFRS 17

Amendment to HKFRS 16 Amendments to HKFRS 3 Amendments to HKFRS 9 HKAS 39, HKFRS 7

HKFRS 4 and HKFRS 16 Amendments to HKFRS 10 and HKAS 28

Amendments to HKAS 1

Amendments to HKAS 16

Amendments to HKAS 37

Amendments to HKFRSs

Insurance Contracts and the related Amendments1

Covid-19-Related Rent Concessions4

Reference to the Conceptual Framework2

Interest Rate Benchmark Reform - Phase 25

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture3

Classification of Liabilities as Current or Non-current and related amendments to Hong Kong Interpretation 5 (2020)1

Property, Plant and Equipment - Proceeds before Intended Use2 Onerous Contracts - Cost of Fulfilling a Contract2

Annual Improvements to HKFRSs 2018-20202

1

2

3

4

5

Effective for annual periods beginning on or after 1 January 2023. Effective for annual periods beginning on or after 1 January 2022. Effective for annual periods beginning on or after a date to be determined. Effective for annual periods beginning on or after 1 June 2020.

Effective for annual periods beginning on or after 1 January 2021.

The Directors anticipate that the application of all the new and amendments to HKFRSs will have no material impact on the consolidated financial statements in the foreseeable future.

54 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation of consolidated financial statements

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. For the purpose of preparation of the consolidated financial statements, information is considered material if such information is reasonably expected to influence decisions made by primary users. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values at the end of the reporting period, as explained in the accounting policies set out below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2 Share-basedPayment , leasing transactions that are accounted for in accordance with HKFRS 16 Lease , and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 Inventories or value in use in HKAS 36 Impairment of Assets .

For financial instruments which are transacted at fair value and a valuation technique that unobservable inputs is to be used to measure fair value in subsequent periods, the valuation technique is calibrated so that at initial recognition the results of the valuation technique equals the transaction price.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

  • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
  • Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
  • Level 3 inputs are unobservable inputs for the asset or liability.

ANNUAL REPORT 2020

55

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:

  • has power over the investee;
  • is exposed, or has rights, to variable returns from its involvement with the investee; and
  • has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group's voting rights in an investee are sufficient to give it power, including:

  • the size of the Group's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
  • potential voting rights held by the Group, other vote holders or other parties;
  • rights arising from other contractual arrangements; and
  • any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary.

Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Group's equity therein, which represent present ownership interests entitling their holders to a proportionate share of net assets of the relevant subsidiaries upon liquidation.

56 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Basis of consolidation (Continued)

Changes in the Group's interests in existing subsidiaries

Changes in the Group's interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's relevant components of equity and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries, including re-attribution of relevant reserves between the Group and the non-controlling interests according to the Group's and the non-controlling interests' proportionate interests.

Any difference between the amount by which the non-controlling interests are adjusted, and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and non-controlling interests (if any) are derecognised. A gain or loss is recognised in the profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the carrying amount of the assets (including goodwill), and liabilities of the subsidiary attributable to the owners of the Company. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e., reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRSs). The fair value of any investment retained in the former subsidiary at the date when the control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKFRS 9 Financial Instruments ("HKFRS 9") or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

ANNUAL REPORT 2020

57

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Business combinations

Acquisitions of businesses, other than business combination under common control are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

Except for certain recognition exemptions, the identifiable assets acquired and liabilities assumed must meet the definitions of an asset and a liability in the Framework for the Preparation and Presentation of Financial Statements (replaced by the Conceptual Framework for Financial Reporting issued in October 2010).

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

  • deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively;
  • liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 Share-basedPayment at the acquisition date (see the accounting policy below);
  • assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-currentAssets Held for Sale and Discontinued Operations are measured in accordance with that standard; and
  • lease liabilities are recognised and measured at the present value of the remaining lease payments (as defined in HKFRS 16) as if the acquired leases were new leases at the acquisition date, except for leases for which (a) the lease term ends within 12 months of the acquisition date; or (b) the underlying asset is of low value. Right-of-use assets are recognised and measured at the same amount as the relevant lease liabilities, adjusted to reflect favourable or unfavourable terms of the lease when compared with market terms.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net amount of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed as at acquisition date.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the relevant subsidiary's net assets in the event of liquidation are initially measured at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets.

When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control), and the resulting gain or loss, if any, is recognised in profit or loss or other comprehensive income, as appropriate. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income and measured under HKFRS 9 would be accounted for on the same basis as would be required if the Group had disposed directly of the previously held equity interest.

58 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see the accounting policy above) less accumulated impairment losses, if any.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination, which represent the lowest level at which the goodwill is monitored for internal management purposes and not larger than an operating segment.

  1. cash-generatingunit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment annually or more frequently when there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment before the end of that reporting period. If the recoverable amount is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit (or group of cash-generating units).

On disposal of the relevant cash-generating unit or any of the cash-generating unit within the group of cash-generating units, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal. When the Group disposes of an operation within the cash-generating unit (or a cash- generating unit within a group of cash-generating units), the amount of goodwill disposed of is measured on the basis of the relative values of the operation (or the cash-generating unit) disposed of and the portion of the cash-generating unit (or the group of cash-generating units) retained.

The Group's policy for goodwill arising on the acquisition of associates and joint ventures is described below.

ANNUAL REPORT 2020

59

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Investments in associates and joint ventures

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting. The financial statements of associates and joint ventures used for equity accounting purposes are prepared using uniform accounting policies as those of the Group for like transactions and events in similar circumstances. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate or joint venture. Changes in net assets of the associate/joint venture other than profit or loss and other comprehensive income are not accounted for unless such changes resulted in changes in ownership interest held by the Group. When the Group's share of losses of an associate or joint venture exceeds the Group's interest in that associate or joint venture (which includes any long-term interest that, in substance, form part of the Group's net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group's share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

The Group assesses whether there is an objective evidence that the interest in an associate or a joint venture may be impaired. When any objective evidence exists, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

60 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Investments in associates and joint ventures (Continued)

When the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of the entire interest in the investee with a resulting gain or loss being recognised in profit or loss. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset within the scope of HKFRS 9, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition. The difference between the carrying amount of the associate or joint venture and the fair value of any retained interest and any proceeds from disposing of the relevant interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) upon disposal/partial disposal of the relevant associate or joint venture.

The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.

When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.

When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group's consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group.

ANNUAL REPORT 2020

61

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Non-current assets held for sale

Non-current assets (and disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in the relevant subsidiary after the sale.

When the Group is committed to a sale plan involving disposal of an investment, or a portion of an investment, in an associate or joint venture, the investment or the portion of the investment that will be disposed of is classified as held for sale when the criteria described above are met, and the Group discontinues the use of the equity method in relation to the portion that is classified as held for sale from the time when the investment is classified as held for sale.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell which continue to be measured in accordance with the accounting policies as set out in respective sections.

62 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Revenue from contracts with customers

The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when "control" of the goods or services underlying the particular performance obligation is transferred to the customer.

A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same.

Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met:

  • the customer simultaneously receives and consumes the benefits provided by the Group's performance as the Group performs;
  • the Group's performance creates or enhances an asset that the customer controls as the Group performs; or
  • the Group's performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.

A contract asset represents the Group's right to consideration in exchange for goods or services that the Group has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with HKFRS 9. In contrast, a receivable represents the Group's unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

A contract liability represents the Group's obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

A contract asset and a contract liability relating to the same contract are accounted for and presented on a net basis.

ANNUAL REPORT 2020

63

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Revenue from contracts with customers (Continued)

Contracts with multiple performance obligations (including allocation of transaction price)

For contracts that contain more than one performance obligations (including sales of products and development of moulds), the Group allocates the transaction price to each performance obligation on a relative stand-alone selling price basis.

The stand-alone selling price of the distinct good or service underlying each performance obligation is determined at contract inception. It represents the price at which the Group would sell a promised good or service separately to a customer. If a stand-alone selling price is not directly observable, the Group estimates it using appropriate techniques such that the transaction price ultimately allocated to any performance obligation reflects the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods or services to the customer.

Existence of significant financing component

In determining the transaction price, the Group adjusts the promised amount of consideration for the effects of the time value of money if the timing of payments agreed (either explicitly or implicitly) provides the customer or the Group with a significant benefit of financing the transfer of goods or services to the customer. In those circumstances, the contract contains a significant financing component. A significant financing component may exist regardless of whether the promise of financing is explicitly stated in the contract or implied by the payment terms agreed by the parties to the contract.

For contracts where the period between payment and transfer of the associated goods or services is less than one year, the Group applies the practical expedient of not adjusting the transaction price for any significant financing component.

Contract costs

Incremental costs of obtaining a contract

Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained.

The Group recognises such costs as an asset if it expects to recover these costs. The asset so recognised is subsequently amortised to profit or loss on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate.

The Group applies the practical expedient of expensing all incremental costs to obtain a contract if these costs would otherwise have been fully amortised to profit or loss within one year.

64 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or supply of goods or services, or for administrative purposes (other than construction in progress and freehold land), are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment losses. Cost includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation is recognised so as to write off the cost of assets other than construction in progress and freehold land less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Freehold land is carried at cost less any recognised impairment loss.

When the Group makes payments for ownership interests of properties which includes both leasehold land and building elements, the entire consideration is allocated between the leasehold land and the building elements in proportion to the relative fair values at initial recognition. To the extent the allocation of the relevant payments can be made reliably, interest in leasehold land is presented as "right-of-use assets" in the consolidated statement of financial position. When the consideration cannot be allocated reliably between non-lease building element and undivided interest in the underlying leasehold land, the entire properties are classified as property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Property under development

Properties under development which are intended to be sold upon completion of development and properties for sale are classified as current assets. Except for the leasehold land element which is measured at cost model in accordance with the accounting policies of right-of-use assets, properties under development for sale are carried at the lower of cost and net realisable value. Cost is determined on a specific identification basis including allocation of the related development expenditure incurred and where appropriate, borrowing costs capitalised. Net realisable value represents the estimated selling price for the properties less estimated cost to completion and costs necessary to make the sales.

Properties under development for sale are transferred to properties for sale upon completion.

ANNUAL REPORT 2020

65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Leases

Definition of a lease

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

For contracts entered into or modified on or after the date of initial application or arising from business combinations, the Group assesses whether a contract is or contains a lease based on the definition under HKFRS 16 at inception, modification date or acquisition date, as appropriate. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed.

The Group as a lessee

Allocation of consideration to components of a contract

For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components, including contract for acquisition of ownership interests of a property which includes both leasehold land and non-lease building components, unless such allocation cannot be made reliably.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to leases of buildings, motor vehicles, furniture and equipment, and machinery that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the recognition exemption for lease of low-value assets. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis or another systematic basis over the lease term.

Right-of-use assets

The cost of right-of-use assets includes:

  • the amount of the initial measurement of the lease liability;
  • any lease payments made at or before the commencement date, less any lease incentives received;
  • any initial direct costs incurred by the Group; and
  • an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.

66 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

3.2 Significant accounting policies (Continued)

Leases (Continued)

The Group as a lessee (Continued)

Right-of-use assets (Continued)

Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets at the end of the lease term are depreciated from commencement date to the end of the useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.

The Group presents right-of-use assets as a separate line item on the consolidated statement of financial position.

Refundable rental deposits

Refundable rental deposits paid are accounted under HKFRS 9 and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments and included in the cost of right-of-use assets.

Lease liabilities

At the commencement date of a lease, the Group recognises and measures the lease liability at the present value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.

The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable.

Variable lease payments that do not depend on an index or a rate are not included in the measurement of lease liabilities and right-of-use assets, and are recognised as expense in the period in which the event or condition that triggers the payment occurs.

After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.

The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-use assets) whenever the lease term has changed, in which case the related lease liability is remeasured by discounting the revised lease payments using a revised discount rate at the date of reassessment.

The Group presents lease liabilities as a separate line item on the consolidated statement of financial position.

ANNUAL REPORT 2020

67

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Leases (Continued)

Lease modifications

The Group accounts for a lease modification as a separate lease if:

  • the modification increases the scope of the lease by adding the right to use one or more underlying assets; and
  • the consideration for the leases increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.

For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease liability, less any lease incentives receivable, based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the relevant right-of-use asset. When the modified contract contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the modified contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

The Group as a lessor

Classification and measurement of leases

Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. All of the Group's leases during the year and prior year are classified as operating leases.

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and such costs are recognised as an expense on a straight-line basis over the lease term.

Allocation of consideration to components of a contract

When a contract includes both leases and non-lease components, the Group applies HKFRS 15 to allocate consideration in a contract to lease and non-lease components. Non-lease components are separated from lease component on the basis of their relative stand-alone selling prices.

Refundable rental deposits

Refundable rental deposits received are accounted for under HKFRS 9 and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments from lessees.

68 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Leases (Continued)

The Group as a lessor (Continued)

Lease modification

Changes in considerations of lease contracts that were not part of the original terms and conditions are accounted for as lease modifications, including lease incentives provided through forgiveness or reduction of rentals.

The Group accounts for a modification to an operating lease as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into the presentation currency of the Group (i.e. RMB) using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during the period, in which case the exchange rates prevailing at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of exchange reserve (attributed to non-controlling interests as appropriate).

Goodwill and fair value adjustments to identifiable assets acquired arising on an acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income.

ANNUAL REPORT 2020

69

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Borrowing costs

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.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as a deduction from the carrying amount of the relevant asset in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

70 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit before tax' because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

For the purposes of measuring deferred tax for leasing transactions in which the Group recognises the right- of- use assets and the related lease liabilities, the Group first determines whether the tax deductions are attributable to the right-of-use assets or the lease liabilities.

ANNUAL REPORT 2020

71

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Taxation (Continued)

Deferred tax (Continued)

For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies HKAS 12 Income Taxes requirements to right-of-use assets and lease liabilities separately. Temporary differences on initial recognition of the relevant right-of-use assets and lease liabilities are not recognised due to application of the initial recognition exemption. Temporary differences arising from subsequent revision to the carrying amounts of right-of-use assets and lease liabilities, resulting from remeasurement of lease liabilities and lease modifications, that are not subject to initial recognition exemption are recognised on the date of remeasurement or modification.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied to the same taxable entity by the same taxation authority.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income, in which case, the current and deferred tax are also recognised in other comprehensive income. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

In assessing any uncertainty over income tax treatments, the Group considers whether it is probable that the relevant tax authority will accept the uncertain tax treatment used, or proposed to be use by individual group entities in their income tax filings. If it is probable, the current and deferred taxes are determined consistently with the tax treatment in the income tax filings. If it is not probable that the relevant taxation authority will accept an uncertain tax treatment, the effect of each uncertainty is reflected by using either the most likely amount or the expected value.

Employee benefits

Retirement benefit costs

Payments to defined contribution retirement benefit plans and state-managed retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to the contributions.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is reflected immediately in the consolidated statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained profits and will not be reclassified to profit or loss.

Past service cost is recognised in profit or loss in the period of a plan amendment or curtailment and a gain or loss on settlement is recognised when settlement occurs. When determining past service cost, or a gain or loss on settlement, an entity shall remeasure the net defined benefit liability or asset using the current fair value of plan assets and current actuarial assumptions, reflecting the benefits offered under the plan and the plan assets before and after the plan amendment, curtailment or settlement, without considering the effect of asset ceiling (i.e. the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan).

72 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Employee benefits (Continued)

Retirement benefit costs (Continued)

Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. However, if the Group remeasures the net defined benefit liability or asset before plan amendment, curtailment or settlement, the Group determines net interest for the remainder of the annual reporting period after the plan amendment, curtailment or settlement using the benefits offered under the plan and the plan assets after the plan amendment, curtailment or settlement and the discount rate used to remeasure such net defined benefit liability or asset, taking into account any changes in the net defined benefit liability or asset during the period resulting from contributions or benefit payments.

Defined benefit costs are categorised as follows:

  • service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
  • net interest expense or income; and
  • remeasurement.

The Group presents the first two components of defined benefit costs in profit or loss in the line item "administrative expenses".

The retirement benefit obligation recognised in the consolidated statement of financial position represents the actual deficit or surplus in the Group's defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.

Contributions from employees to defined benefit plans

Discretionary contributions made by employees reduce service cost upon payment of these contributions to the plan.

When the formal terms of the plan specify that there will be contributions from employees, the accounting depends on whether the contributions are linked to service, as follows:

  • If the contributions are not linked to services (e.g. contributions are required to reduce a deficit arising from losses on plan assets or from actuarial losses), they are reflected in the remeasurement of the net defined benefit liability or asset.
  • If contributions are linked to services, they reduce service costs. For the amount of contribution that is dependent on the number of years of service, the entity reduces service cost by attributing the contributions to periods of service using the attribution method required by HKAS 19 paragraph 70 for the gross benefits. For the amount of contribution that is independent of the number of years of service, the entity reduces service cost in the period in which the related service is rendered.

ANNUAL REPORT 2020

73

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Employee benefits (Continued)

Termination benefits

A liability for a termination benefit is recognised at the earlier of when the Group entity can no longer withdraw the offer of the termination benefit and when it recognises any related restructuring costs.

Short-term employee benefits

Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense unless another HKFRS requires or permits the inclusion of the benefit in the cost of an asset.

A liability is recognised for benefits accruing to employees (such as wages and salaries, and annual leave) after deducting any amount already paid.

Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees up to the reporting date. Any changes in the liabilities' carrying amounts resulting from service cost, interest and remeasurements are recognised in profit or loss except to the extent that another HKFRS requires or permits their inclusion in the cost of an asset.

Intangible assets

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are recognised separately from goodwill and are initially recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful lives are reported at costs less accumulated amortisation and any accumulated impairment losses on the same basis as intangible assets that are acquired separately.

74 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Intangible assets (Continued)

Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development activities (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

  • the technical feasibility of completing the intangible asset so that it will be available for use or sale;
  • the intention to complete the intangible asset and use or sell it;
  • the ability to use or sell the intangible asset;
  • how the intangible asset will generate probable future economic benefits;
  • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
  • the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally- generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

Derecognition of intangible assets

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

ANNUAL REPORT 2020

75

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Impairment losses on property, plant and equipment, right-of-use assets, contract costs and intangible assets other than goodwill (see the accounting policy in respect of goodwill above and financial assets below)

At the end of the reporting period, the Group reviews the carrying amounts of its property, plant and equipment, right-of-use assets, intangible assets with finite useful lives and contract costs to determine whether there is any indication that these assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.

The recoverable amount of property, plant and equipment, right-of-use assets and intangible assets are estimated individually. When it is not possible to estimate the recoverable amount individually, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

In testing a cash-generating unit for impairment, corporate assets are allocated to the relevant cash-generating unit when a reasonable and consistent basis of allocation can be established, or otherwise they are allocated to the smallest group of cash generating units for which a reasonable and consistent allocation basis can be established. The recoverable amount is determined for the cash-generating unit or group of cash-generating units to which the corporate asset belongs, and is compared with the carrying amount of the relevant cash-generating unit or group of cash-generating units.

Before the Group recognises an impairment loss for assets capitalised as contract costs under HKFRS 15 Revenue from Contracts with Customers , the Group assesses and recognises any impairment loss on other assets related to the relevant contracts in accordance with applicable standards. Then, impairment loss, if any, for assets capitalised as contract costs is recognised to the extent the carrying amounts exceeds the remaining amount of consideration that the Group expects to receive in exchange for related goods or services less the costs which relate directly to providing those goods or services that have not been recognised as expenses. The assets capitalised as contract costs are then included in the carrying amount of the cash-generating unit to which they belong for the purpose of evaluating impairment of that cash-generating unit.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

76 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Impairment losses on property, plant and equipment, right-of-use assets, contract costs and intangible assets other than goodwill (see the accounting policy in respect of goodwill above and financial assets below) (Continued)

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. For corporate assets or portion of corporate assets which cannot be allocated on a reasonable and consistent basis to a cash-generating unit, the Group compares the carrying amount of a group of cash-generating units, including the carrying amounts of the corporate assets or portion of corporate assets allocated to that group of cash-generating units, with the recoverable amount of the group of cash-generating units. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit or the group of cash-generating units. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro-rata to the other assets of the unit or the group of cash-generating units. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit or a group of cash-generating units) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit or a group of cash-generating units) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

ANNUAL REPORT 2020

77

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued)

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instruments. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.

Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance with HKFRS 15. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liabilities and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial assets

Classification and subsequent measurement of financial assets

Financial assets that meet the following conditions are subsequently measured at amortised cost:

  • the financial asset is held within a business model whose objective is to collect contractual cash flows; and
  • the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets that meet the following conditions are subsequently measured at FVTOCI:

  • the financial asset is held within a business model whose objective is achieved by both selling and collecting contractual cash flows; and
  • the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other financial assets are subsequently measured at FVTPL. Except that at initial recognition of a financial asset the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if that equity investment is not held for trading.

A financial asset is held for trading if:

  • it has been acquired principally for the purpose of selling in the near term; or
  • on initial recognition it is a part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-termprofit-taking; or
  • it is a derivative that is not designated and effective as a hedging instrument.

78 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Financial instruments (Continued)

Financial assets (Continued)

Classification and subsequent measurement of financial assets (Continued)

  1. Amortised cost and interest income
    Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost and debt instruments subsequently measured at FVTOCI. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see below). For financial assets that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from the next reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset from the beginning of the reporting period following the determination that the asset is no longer credit-impaired.
  2. Debt instruments classified as at FVTOCI
    Subsequent changes in the carrying amounts for debt instruments classified as at FVTOCI as a result of interest income calculated using the effective interest method are recognised in profit or loss. All other changes in the carrying amount of these debt instruments are recognised in other comprehensive income and accumulated under the heading of FVTOCI reserve. Impairment allowances are recognised in profit or loss with corresponding adjustment to other comprehensive income without reducing the carrying amounts of these debt instruments. When these debt instruments are derecognised, the cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss.
  3. Financial assets at FVTPL
    Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as FVTOCI are measured at FVTPL.
    Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss includes any dividend or interest earned on the financial asset and is included in the "other gains and losses" line item.

ANNUAL REPORT 2020

79

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Financial instruments (Continued)

Financial assets (Continued)

Impairment of financial assets and other items subject to impairment assessment under HKFRS 9

The Group performs impairment assessment under expected credit loss ("ECL") model on financial assets (including trade and other receivables, loan receivables, bank balances and cash, pledge bank deposits, debt instruments at FVTOCI, and other item (contract assets)) which are subject to impairment assessment under HKFRS 9. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL ("12m ECL") represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessments are done based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.

The Group always recognises lifetime ECL for trade receivables and contract assets. The ECL on these assets are assessed individually for debtors credit-impaired and/or collectively using a provision matrix with appropriate groupings.

For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, in which case the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

80 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Financial instruments (Continued)

Financial assets (Continued)

Impairment of financial assets and other items subject to impairment assessment under HKFRS 9 (Continued)

  1. Significant increase in credit risk
    In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.
    In particular, the following information is taken into account when assessing whether credit risk has increased significantly:
    • an actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating;
    • significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor;
    • existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor's ability to meet its debt obligations;
    • an actual or expected significant deterioration in the operating results of the debtor;
    • an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor's ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.

Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not increased significantly since initial recognition if the debt instrument is determined to have low credit risk at the reporting date. A debt instrument is determined to have low credit risk if i) it has a low risk of default; ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term; and iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The Group considers a debt instrument to have low credit risk when it has an internal or external credit rating of 'investment grade' as per globally understood definitions.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

ANNUAL REPORT 2020

81

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Financial instruments (Continued)

Financial assets (Continued)

Impairment of financial assets and other items subject to impairment assessment under HKFRS 9 (Continued)

  1. Definition of default
    For internal credit risk management, the Group considers an event of default occurs when information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collaterals held by the Group).
    Irrespective of the above, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.
  2. Credit-impairedfinancial assets
    A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit- impaired includes observable data about the following events:
    1. significant financial difficulty of the issuer or the borrower;
    2. a breach of contract, such as a default or past due event;
    3. the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; or
    4. it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation.
  3. Write-offpolicy
    The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over two years past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group's recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or loss.

82 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Financial instruments (Continued)

Financial assets (Continued)

Impairment of financial assets and other items subject to impairment assessment under HKFRS 9 (Continued)

  1. Measurement and recognition of ECL
    The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data and forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is determined with the respective risks of default occurring as the weights. The Group uses a practical expedient in estimation ECL on trade receivables using a provision matrix taking into consideration historical credit loss experience, adjusted for forward looking information that is available without undue cost or effort.
    Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition.
    Lifetime ECL for certain trade and other receivables and contract assets are considered on a collective basis taking into consideration past due information and relevant credit information such as forward looking macroeconomic information.
    For collective assessment, the Group takes into consideration the following characteristics when formulating the grouping:
    • Past-duestatus;
    • Nature, size and industry of debtors; and
    • External credit ratings where available;

The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.

Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on amortised cost of the financial asset.

Except for investments in debt instruments that are measured at FVTOCI, the Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade receivables, other receivables and contract assets where the corresponding adjustment is recognised through a loss allowance account. For investments in debt instruments that are measured at FVTOCI, the loss allowance is recognised in other comprehensive income and accumulated in the FVTOCI reserve without reducing the carrying amounts of these debt instruments. Such amount represents the changes in the FVTOCI reserve in relation to accumulated loss allowance.

ANNUAL REPORT 2020

83

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Financial instruments (Continued)

Financial assets (Continued)

Impairment of financial assets and other items subject to impairment assessment under HKFRS 9 (Continued)

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and liability for the proceeds received.

On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

On derecognition of an investment in a debt instrument classified as at FVTOCI, the cumulative gain or loss previously accumulated in the FVTOCI reserve is reclassified to profit or loss.

Financial liabilities and equity

Classification as debt or equity

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Repurchase of the Company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

Financial liabilities at amortised cost

Financial liabilities including borrowings, other long-term liabilities and trade and other payables are subsequently measured at amortised cost, using the effective interest method.

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of an acquirer in a business combination to which HKFRS 3 applies, (ii) held for trading or (iii) it is designated as at

FVTPL.

84 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.2 Significant accounting policies (Continued) Financial instruments (Continued)

Financial liabilities and equity (Continued)

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in profit or loss.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date when derivative contracts are entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

Offsetting a financial asset and a financial liability

Where the Group has a legal right that is currently enforceable to set off the amount of the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset.

Equity-settledshare-based payment transactions of the Company

Equity-settledshare-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

The fair value of the equity-settledshare-based payments determined by reference to the fair value of share options and awarded shares granted at the grant date without taking into consideration all non-market vesting conditions is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity (share options reserve or awarded shares reserve). At the end of the reporting period, the Group revises its estimates of the number of equity instruments expected to vest based on assessment of all relevant non-market vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share options reserve or awarded shares reserve.

When the share options are exercised, the amount previously recognised in share options reserve will be transferred to share capital and share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share options reserve will be transferred to other reserve.

When awarded shares are vested, the amount previously recognised in awarded shares reserve will be transferred to share capital and share premium.

ANNUAL REPORT 2020

85

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group's accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that has a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Provision of ECL for trade receivables

The Group uses provision matrix to calculate ECL for the trade receivables. The provision rates are based on internal credit ratings as groupings of various debtors that have similar loss patterns. The provision matrix is based on the Group's historical default rates taking into consideration forward-looking information that is reasonable and supportable available without undue costs or effort. At every reporting date, the historical observed default rates are reassessed and changes in the forward-looking information are considered. In addition, trade receivables with credit-impaired are assessed for ECL individually.

The provision of ECL is sensitive to changes in estimates. The information about the ECL and the Group's trade receivables are disclosed in notes 45 and 27 respectively.

Useful lives, residual values and impairment of property, plant and equipment

The Directors determine the residual values, useful lives and related depreciation charges for the Group's property, plant and equipment. This estimate is based on the historical experience of the actual residual values and useful lives of property, plant and equipment of similar nature and functions. In addition, the Directors assess impairment whenever events or changes in circumstances and technical innovation of automobile products indicate that the carrying amount of an asset may not be recoverable. As at 31 December 2020, the carrying amount of the Group's property, plant and equipment was RMB9,615,646,000 (net of accumulated impairment loss of RMB35,439,000) (2019: carrying amount of RMB8,748,976,000 (net of accumulated impairment loss of RMB41,634,000)).

Allowances for inventories

The Directors review the aging of the inventories at the end of the reporting period, and make allowance for obsolete and slow-moving inventory items identified that are no longer suitable for use in production or saleable in the market. The Directors estimate the net realisable value for such items based primarily on the latest invoice prices and current market conditions. The Group carries out an inventory review on a product-by-product basis at the end of the reporting period and makes allowance for obsolete items. As at 31 December 2020, the carrying amount of inventories was RMB2,384,748,000 (net of allowance for inventories of RMB138,704,000) (2019: carrying amount of inventories was RMB2,039,976,000 (net of allowance for inventories of RMB92,021,000)).

86 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

4. KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)

Fair value measurements and valuation processes

Some of the Group's assets and liabilities are measured at fair value for financial reporting purposes. A valuation team has been set up, which is headed up by the Chief Financial Officer ("CFO") of the Group, to determine the appropriate valuation techniques and inputs for fair value measurements.

In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Group engages third party qualified valuers to perform the valuation.

The CFO works closely with the qualified external valuers and internal specialists to establish the appropriate valuation techniques and inputs to the model.

As at 31 December 2020, the fair values of held-for-trading investments, debt instruments at FVTOCI, derivative financial assets and derivative financial liabilities were estimated to be RMB450,625,000 (2019:nil), RMB151,457,000 (2019: RMB256,647,000), RMB4,834,000 (2019: RMB3,204,000) and RMB25,150,000 (2019: RMB2,640,000), respectively.

5. REVENUE

  1. Disaggregation of revenue from contracts with customers

For the year ended 31 December 2020

Automobile

body parts

Moulds

Total

RMB'000

RMB'000

RMB'000

Types of goods or services

Sales of goods

11,465,979

1,000,879

12,466,858

Geographical markets

The PRC

6,909,349

482,082

7,391,431

Other countries

4,556,630

518,797

5,075,427

Total

11,465,979

1,000,879

12,466,858

For the year ended 31 December 2019

Automobile

body parts

Moulds

Total

RMB'000

RMB'000

RMB'000

Types of goods or services

Sales of goods

11,895,949

1,302,240

13,198,189

Geographical markets

The PRC

6,838,917

766,404

7,605,321

Other countries

5,057,032

535,836

5,592,868

Total

11,895,949

1,302,240

13,198,189

All the revenue of the Group has been recognised at a point in time.

ANNUAL REPORT 2020

87

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

5. REVENUE (CONTINUED)

  1. Performance obligations for contracts with customers

Sales of automobile body parts

The Group sells automobile body parts directly to customers in accordance with the orders from and framework contracts entered with the customers. Revenue is recognised when control of the products has transferred to the customer, being at the point the goods are delivered to the customer. Delivery occurs when the products have been accepted by the customer. The normal credit term is 60 to 90 days effective from the invoice date. When the customer pay in advance for the orders, the transaction price received by the Group is recognised as a contract liability until the goods have been delivered to the customer.

Development of moulds

The Group develops moulds for customers in accordance with the requirements specified in the relevant contract entered with the customers. Revenue is recognised when the development of moulds is completed and accepted by the customer. Acceptance occurs when the moulds have been verified and confirmed by the customer. For those the consideration for the development of moulds are paid separately, the normal credit term is 60 to 90 days effective from the invoice date. When the customer pay in advance for the orders, the transaction price received by the Group is recognised as a contract liability until the revenue in respect of moulds have been recognised.

Where a contract contains both development of moulds and sales of the relevant automobile body parts, the mould development is regarded as a separate performance obligation other than the delivery of automobile body parts. Revenue is recognised when the development of moulds is completed and accepted by the customer. Transaction price is allocated between sales of automobile body parts and the development of moulds on a stand-alone selling price basis. The transaction price allocated to the development of moulds is recognised as contract assets at the time of revenue recognised and until the right to consideration becoming unconditional (i.e. over the period of delivery of relevant automobile body parts).

  1. Transaction price allocated to the remaining performance obligation for contracts with customers

The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at the end of the reporting period and the expected timing of recognising revenue are as follows:

2020

2019

Moulds

Moulds

RMB'000

RMB'000

Within one year

1,154,446

1,277,560

More than one year but not more than two years

1,135,572

836,438

More than two years

359,271

374,295

2,649,289

2,488,293

All automobile body parts are delivered within period less than one year. As permitted under HKFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.

88 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

6. SEGMENT INFORMATION

In prior year, information reported to the Executive Directors of the Company, being the chief operating decision maker ("CODM"), for the purposes of resource allocation and assessment of segment performance focuses on goods or services delivered or provided to the Group's customers in different geographic locations.

In the current year, the Group reorganised its internal reporting structure and information reported to the CODM changes to focus on types of goods or services delivered or provided, which resulted in changes to the composition of its reportable segments. Prior year segment disclosures have been represented to conform with the current year's presentation.

No operating segments have been aggregated in arriving at the reportable segments of the Group.

Segment revenue and results

The following is an analysis of the Group's revenue and results by reportable and operating segments.

For the year ended 31 December 2020

Battery-

Metal &

Aluminium

Plastic

housing

Trim

Others

Elimination

Consolidated

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Revenue

3,112,007

3,700,310

95,713

4,672,960

1,372,148

(486,280)

12,466,858

Segment profit

1,015,962

1,148,777

6,319

1,348,895

273,449

65,441

3,858,843

239,710

Investment income

Other unallocated income,

gains and losses

128,602

Unallocated expenses

(2,314,098)

Interest expenses

(247,624)

Share of profits of joint ventures

11,618

Share of profits of associates

2,524

Profit before tax

1,679,575

Income tax expense

(216,587)

Profit for the year

1,462,988

ANNUAL REPORT 2020

89

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

6. SEGMENT INFORMATION (CONTINUED)

Segment revenue and results (Continued)

For the year ended 31 December 2019

Battery-

Metal &

Aluminium

Plastic

housing

Trim

Others

Elimination

Consolidated

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Revenue

3,253,595

3,930,394

6,768

4,980,902

1,649,478

(622,948)

13,198,189

Segment profit

1,019,000

1,207,508

311

1,460,588

433,912

120

4,121,439

Investment income

126,389

Other unallocated income, gains and

losses

269,908

Unallocated expenses

(2,242,257)

Interest expenses

(157,819)

Share of profits of joint ventures

4,388

Share of losses of associates

(20,770)

Profit before tax

2,101,278

Income tax expense

(336,187)

Profit for the year

1,765,091

The accounting policies of the reportable and operating segments are the same as the Group's accounting policies described in note 3. Segment profit represents the gross profit earned by each segment without allocation of investment income, other income, other gains and losses, distribution and selling expenses, administrative expenses, research expenditure, interest expenses and share of profits (losses) of associates and joint ventures. This is the measure reported to the CODM for the purposes of resource allocation and performance assessment.

The CODM makes decisions according to operating results of each segment. No analysis of segment asset and segment liability is presented as the CODM does not regularly review such information for the purposes of resources allocation and performance assessment. Therefore, only segment revenue and segment results are presented.

90 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

6. SEGMENT INFORMATION (CONTINUED)

Geographical information

The Group's operations are located in the PRC, the United States of America (the "USA"), Japan, Thailand, Germany and Mexico.

Information about the Group's revenue is presented based on the geographical locations of the Group's customers.

2020

2019

RMB'000

RMB'000

The PRC

7,391,431

7,605,321

Other countries

5,075,427

5,592,868

12,466,858

13,198,189

Information about the Group's non-current assets is presented based on the geographical locations of the assets.

2020

2019

RMB'000

RMB'000

The PRC

9,285,197

8,777,343

Other countries

2,781,190

2,092,525

12,066,387

10,869,868

Note: non-current assets excluded deferred tax assets and plan assets.

Information about major customer

No single customer contributed 10% or more to the Group's revenue for both 2020 and 2019.

ANNUAL REPORT 2020

91

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

7. INVESTMENT INCOME

2020

2019

RMB'000

RMB'000

Interest on bank deposits

239,360

125,964

Interest on loan receivables

350

425

Total

239,710

126,389

8.

OTHER INCOME

2020

2019

RMB'000

RMB'000

Government grants (note i)

93,378

138,280

Service and consultation income (note ii)

20,282

6,397

Sales of scrap and raw materials (note iii)

13,450

20,816

Rental income, net of outgoings

10,233

9,195

Indemnity income

6,376

7,877

Others

16,272

17,902

Total

159,991

200,467

Notes:

  1. The amounts represent the various subsidies granted by the PRC local government authorities to group entities as incentives for their good performance in quality control or environmental protection, or involvement in the hi-techknow-how industry and product development activities. The government grants were unconditional and had been approved by the PRC local government authorities.
  2. The Group provides certain maintenance, repairing and technical consultation services to customers, which are recognised as a performance obligation satisfied over time as the customer simultaneously receives and consumes the benefits provided by the Group's performance as the Group performs. As a practical expedient, the Group has not disclosed the information of unsatisfied performance obligation since the performance obligation has an original expected duration of one year or less. The amounts shown in note 8 for the year have been offset by the relevant costs for service and consultation income of RMB4,454,000 (2019: RMB7,920,000).
  3. Revenue for sales of scrap and raw materials is recognised when control of the materials has transferred to the buyer, being at the point the goods are delivered to the buyer. As a practical expedient, the Group has not disclosed the information of unsatisfied performance obligation since the performance obligation has an original expected duration of one year or less. The amounts shown in note 8 for the year have been offset by the relevant costs for sales of scrap and raw materials of RMB172,835,000 (2019: RMB174,766,000).

92 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

9.

OTHER GAINS AND LOSSES

2020

2019

RMB'000

RMB'000

Net foreign exchange loss

(326)

(5,619)

Fair value changes of derivative financial instruments

(15,619)

(1,192)

Fair value changes of other financial assets at FVTPL

68,461

58,978

Impairment loss recognised on trade and other receivables

(15,935)

(1,305)

Impairment loss for property, plant and equipment

(16,378)

(12,264)

Gain on disposal of property, plant and equipment

6,616

9,661

Gain on disposal of subsidiaries (note 37)

1,001

-

Gain on deemed disposal of an associate

-

836

Compensation from the legal proceeding

-

20,346

Provision (note)

(52,875)

-

Others

(6,334)

-

Total

(31,389)

69,441

Note: During the current year, a subsidiary of the Company located in Mexico received the notice of penalty of Peso Mexicano161,195,000 (equivalent to RMB52,875,000) from the local customs in relation to alleged violation of certain local regulations. The Group has submitted an administrative appeal which was dismissed by the local customs subsequent to the end of the reporting period on 1 March 2021 and is now preparing for a further appeal to the local contentious-administrative federal court. In the opinion of the Directors, it is probable that the Group will be required to settle such penalty if the further appeal is eventually dismissed. Hence, the Group has fully provided such penalty as at 31 December 2020.

ANNUAL REPORT 2020

93

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

10. INCOME TAX EXPENSE

2020

2019

RMB'000

RMB'000

Current tax:

PRC Enterprise Income Tax

261,609

377,788

Other jurisdictions

(653)

10,665

Withholding tax paid

-

10,273

260,956

398,726

Over provision in prior years:

PRC Enterprise Income Tax

(86,262)

(52,677)

Deferred tax:

Current year charge (credit) (note 24)

41,893

(9,862)

216,587

336,187

No provision for taxation in Hong Kong has been made as the Group's income neither arises in, nor is derived from Hong Kong.

Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25%.

Under the Law of the Mexican Corporate Income Tax (the "CIT Law"), the tax rate of the Mexico subsidiaries is 30%.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

According to the EIT Law of the PRC, which issued in the year 2007, and the Caishui [2011] No. 58 ("Circular 58"), certain of the group entities located in the PRC were entitled to the following tax concession:

  1. Those entities which are located in specific provinces of western China and engaged in specific encouraged industries would enjoy a preferential tax rate of 15% under the EIT Law until 31 December 2020.
  2. Those entities which are qualified as Hi-New Tech Enterprises would enjoy a preferential tax rate of 15% under EIT Law during the current and prior year and subject to every 3-year renewal.

Under the relevant tax law and implementation regulations of the PRC, withholding income tax is applicable to interest and dividends payable to investors that are "non-tax resident enterprises", which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such interest or dividends have their sources within the PRC. Under such circumstances, dividends distributed from the PRC subsidiaries to offshore group entities in respect of the undistributed profits attributable to the Group as earned by the Group's PRC subsidiaries from 1 January 2008 onwards shall be subject to the withholding tax at 10% or a lower treaty rate. Under the relevant tax treaty, the withholding tax rate on distributions to Hong Kong resident companies is 5%. Therefore, withholding tax has been provided for based on the anticipated dividends to be distributed by the PRC entities.

94 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

10. INCOME TAX EXPENSE (CONTINUED)

The tax expense for the year can be reconciled to the profit before tax per the consolidated statement of profit or loss and other comprehensive income as follows:

2020

2019

RMB'000

%

RMB'000

%

Profit before tax

1,679,575

2,101,278

Tax at the applicable income tax rate

of 25% (2019: 25%) (note)

419,894

25.0

525,320

25.0

Tax effect of share of (profits) losses

of associates and joint ventures

(3,536)

(0.2)

4,096

0.2

Tax effect of expenses not deductible

for tax purpose

30,797

1.8

10,095

0.5

Tax effect of income not taxable for

(1,904)

(0.1)

tax purpose

(5,828)

(0.3)

Tax effect of tax losses not

92,083

5.5

recognised as deferred tax assets

43,117

2.1

Tax effect of utilisation of tax losses

previously not recognised as

(39,529)

(2.4)

deferred tax assets

(14,472)

(0.7)

Effect of tax concessions granted to

(167,091)

(9.9)

the PRC subsidiaries

(188,253)

(9.0)

Withholding tax provision on the

21,233

1.2

profits of the PRC subsidiaries

20,637

1.0

Tax effect of different tax rates of

2,988

0.2

subsidiaries

(5,712)

(0.3)

Deferred tax charged at different tax

232

-

rates

(136)

-

Super deduction for research and

(52,318)

(3.1)

development expenses

-

-

Over provision in respect of prior

(86,262)

(5.1)

years

(52,677)

(2.5)

Tax expense and effective tax rate for

the year

216,587

12.9

336,187

16.0

Note: The domestic tax rate (which is the PRC Enterprise Income Tax Rate) in the jurisdiction where the operation of the Group is substantially based in used.

ANNUAL REPORT 2020

95

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

11. ASSETS/LIABILITIES CLASSIFIED AS HELD FOR SALE

On 30 December 2020, the Group enters into an agreement with an independent third party, pursuant to which, the Group agrees to sell and the independent third party agrees to buy the entire equity interest of the Group's subsidiary engaging in manufacturing and sales of automobile body parts for a cash consideration of RMB400,000,000, which will be settled by stages according to the schedule as stated in the agreement and the Group expects to receive majority of the settlement within twelve months upon completion of the disposal. The net proceed of disposal exceeds the carrying amount of the net assets of the subsidiary to be disposal of, and accordingly, no impairment loss has been recognised as at 31 December 2020.

The assets and liabilities attributable to the subsidiary, which is expected to be sold within twelve months, have been classified as a disposal group held for sale and are presented separately in the consolidated statement of financial position (see below).

The major classes of assets and liabilities of the subsidiary classified as held for sale are as follows:

2020

RMB'000

Property, plant and equipment

166,253

Right-of-use assets

70,378

Other intangible assets

3,549

Inventories

3,608

Trade and other receivables

1,863

Bank balances and cash

7,246

Total assets classified as held for sale

252,897

Trade and other payables

4,743

Deferred income

27

Total liabilities classified as held for sale

4,770

96 MINTH GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

12. PROFIT FOR THE YEAR

2020

2019

RMB'000

RMB'000

Profit for the year has been arrived at after charging (crediting):

Cost of inventories as recognised

8,608,015

9,076,750

Directors' remuneration (note 13)

8,171

11,142

Other staff's salaries and allowances

2,381,501

2,475,565

Other staff's related welfares and benefits

226,969

240,479

Other staff's retirement benefits scheme contributions

67,189

112,016

Other staff's share-based payments

63,651

59,157

Total staff costs

2,747,481

2,898,359

Less: Staff costs included in research expenditure

(387,770)

(401,537)

2,359,711

2,496,822

Remuneration of the Company's auditor

3,730

3,730

Depreciation of property, plant and equipment

815,457

750,881

Depreciation of right-of-use assets

30,729

26,365

Amortisation of other intangible assets

33,445

27,979

Less: Depreciation and amortisation included in research expenditure

(30,470)

(29,073)

Capitalised in inventories

(674,261)

(616,801)

174,900

159,351

Write down of inventories (note)

55,790

32,230

Rental income

(20,812)

(17,954)

Less: Outgoings

10,579

8,759

(10,233)

(9,195)

Research expenditure recognised as an expense and comprised:

Staff costs

387,770

401,537

Cost of materials

283,801

165,119

Depreciation and amortisation expenses

30,470

29,073

Other operating costs

62,146

59,797

764,187

655,526

Note: The amounts represent write-down of inventories recognised in cost of sales during both years.

ANNUAL REPORT 2020

97

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

13. DIRECTORS' AND CHIEF EXECUTIVE'S AND EMPLOYEES' EMOLUMENTS

  1. Directors' and Chief Executive's emoluments

The emoluments paid or payable to the Directors and the chief executive during the year were as follows:

Other emoluments

Retirement

benefits

Salaries and

Performance

Share-based

scheme

Fees

other benefits

related bonus

payments

contributions

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

(note)

2020

Executive directors:

Ms. Wei

(Appointed on

28 May 2020)

-

-

-

-

-

-

Chen Binbo

(Appointed on

28 May 2020)

-

2,223

300

1,536

3

4,062

Huang Chiung Hui

(Resigned on

28 May 2020)

-

940

-

147

3

1,090

Chin Chien Ya

-

1,101

354

366

82

1,903

-

4,264

654

2,049

88

7,055

The executive directors' emoluments shown above were for their services in connection with the management of the affairs of the Company and the Group. Chen Binbo is also the chief executive officer of the Company and his emoluments disclosed above also include those for services rendered by him as the chief executive officer.

98 MINTH GROUP LIMITED

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Minth Group Limited published this content on 27 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 April 2021 23:22:07 UTC.


ę Publicnow 2021
All news about MINTH GROUP LIMITED
08/30Minth Group Limited Reports Earnings Results for the Half Year Ended June 30, 2021
CI
06/30MINTH : Shanghai Bourse Accepts Minth Group's Listing Application
MT
05/31Minth Group Limited Announces Executive Changes
CI
04/26MINTH : Change of the head office and principal place of business in china
PU
04/26MINTH : 2020 Annual Report
PU
04/26Minth Group Limited Announces Change of the Head Office and Principal Place of Business..
CI
04/26MINTH : Proxy form
PU
04/26MINTH : Proposed grant of general mandate to issue and repurchase shares and retirement an..
PU
04/14MINTH : Poll results of the extraordinary general meeting held on 14 april 2021
PU
03/26Minth Group Limited Reports Earnings Results for the Full Year Ended December 31, 2020
CI
More news
Financials
Sales 2021 14 484 M 2 240 M 2 240 M
Net income 2021 1 795 M 278 M 278 M
Net Debt 2021 978 M 151 M 151 M
P/E ratio 2021 14,5x
Yield 2021 2,76%
Capitalization 25 876 M 4 002 M 4 002 M
EV / Sales 2021 1,85x
EV / Sales 2022 1,55x
Nbr of Employees 18 804
Free-Float 61,0%
Chart MINTH GROUP LIMITED
Duration : Period :
Minth Group Limited Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends MINTH GROUP LIMITED
Short TermMid-TermLong Term
TrendsBearishBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 18
Last Close Price 22,30 CNY
Average target price 35,86 CNY
Spread / Average Target 60,8%
EPS Revisions
Managers and Directors
Binbo Chen Chief Executive Officer & Executive Director
Yu xia Zhang Chief Financial Officer
Ching Lien Wei Chairman
Yan Chun Liu Chief Operating Officer
Ching Wang Independent Non-Executive Director
Sector and Competitors