Changchai Company, Limited Third Quarter Report 2018 CHANGCHAI COMPANY, LIMITED THIRD QUARTER REPORT 2018 October 2018 1 Changchai Company, Limited Third Quarter Report 2018 Part I Important Notes The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of Changchai Company, Limited (together with its consolidated subsidiaries, the “Company”, except where the context otherwise requires) hereby guarantee the factuality, accuracy and completeness of the contents of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements or material omissions therein. All the Company’s directors have attended the Board meeting for the review of this Report and its summary. Shi Xinkun, the Company’s legal representative, Zhang Xin, the Company’s General Manager, and Jiang He, head of the Company’s financial department (equivalent to financial manager) hereby guarantee that the financial statements carried in this Report are factual, accurate and complete. This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. 2 Changchai Company, Limited Third Quarter Report 2018 Part II Key Corporate Information I Key Consolidated Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No September 30, 2018 December 31, 2017 Change Total assets (RMB) 3,756,252,247.55 3,722,905,285.05 0.90% Equity attributable to owners of the parent 2,109,129,803.12 2,246,896,857.86 -6.13% (RMB) July-September January-Septemb YoY YoY change 2018 er 2018 change Net sales (RMB) 432,605,495.58 -21.55% 1,619,366,387.84 -12.91% Net margin attributable to owners of the parent 4,670,842.38 52.03% 23,309,400.04 -45.48% (RMB) Net margin attributable to owners of the parent -5,982,192.17 — 11,280,631.08 -47.29% before exceptional gains and losses (RMB) Net cash from operating activities (RMB) — — -54,251,797.59 — Basic earnings per share (RMB/share) 0.01 0.00% 0.04 -50.00% Diluted earnings per share (RMB/share) 0.01 0.00% 0.04 -50.00% Weighted average return on equity (%) 0.22% 0.09% 1.05% -0.80% Exceptional gains and losses: √ Applicable □ Not applicable Unit: RMB Item Q1-Q3 2018 Note In July 2018, the company recovered the entrusted loan of 1,000.00 million yuan which had fully accrued the asset impairment Gain or loss on disposal of non-current assets 12,044,376.37 provision. For details, please refer (inclusive of impairment allowance write-offs) to the company's announcement on recovering part of the entrusted loan disclosed on July 13, 2018 (announcement number: 2018-018). Government subsidies charged to current profit or 475,400.00 loss (exclusive of government subsidies given in the 3 Changchai Company, Limited Third Quarter Report 2018 Company’s ordinary course of business at fixed quotas or amounts as per government’s uniform standards) Capital occupation charges on non-financial 573,182.00 enterprises that are charged to current profit or loss Gain or loss on fair-value changes in trading financial assets and liabilities & investment income from disposal of trading financial assets and liabilities and 455,319.86 available-for-sale financial assets (exclusive of effective portion of hedges that arise in the Company’s ordinary course of business) Other gains and losses that meet definition of 656,800.26 exceptional gain/loss Less: Income tax effects 2,176,309.53 Total 12,028,768.96 -- Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss Items: □ Applicable √ Not applicable No such cases for the Reporting Period. II Total Number of Shareholders and Holdings of Top 10 Shareholders at 30 September 2018 1. Numbers of Ordinary Shareholders and Preferred Shareholders with Resumed Voting Rights as well as Holdings of Top 10 Shareholders Unit: share Number of preferred shareholders with Number of ordinary shareholders 49,459 0 resumed voting rights (if any) Top 10 shareholders Shares in Sharehol Restri pledge or ding Number of cted Name of shareholder Nature of shareholder frozen percenta shares share Stat Shar ge s us es State-owned Assets Supervision and Administration Commission of State-owned legal person 30.43% 170,845,236 Changzhou Municipal People’s Government KGI Asia Limited Foreign legal person 0.57% 3,189,845 4 Changchai Company, Limited Third Quarter Report 2018 Wang Jianwei Domestic natural person 0.34% 1,934,500 Zhang Ruirong Domestic natural person 0.32% 1,789,800 Wan Peizhong Domestic natural person 0.29% 1,645,800 Huang Guoliang Domestic natural person 0.27% 1,528,891 Hu Wenyong Domestic natural person 0.27% 1,500,066 Li Suinan Domestic natural person 0.24% 1,356,000 Vanguard Total International Foreign legal person 0.23% 1,292,594 Stock Index Fund Xiong Shunbao Domestic natural person 0.23% 1,282,251 Top 10 unrestricted shareholders Unrestricted Shares by type Name of shareholder shares Type Shares State-owned Assets Supervision and Administration Commission of Changzhou 170,845,236 RMB-denominated ordinary stock 170,845,236 Municipal People’s Government KGI Asia Limited 3,189,845 Domestically listed foreign stock 3,189,845 Wang Jianwei 1,934,500 RMB-denominated ordinary stock 1,934,500 Zhang Ruirong 1,789,800 RMB-denominated ordinary stock 1,789,800 Wan Peizhong 1,645,800 RMB-denominated ordinary stock 1,645,800 Huang Guoliang 1,528,891 Domestically listed foreign stock 1,528,891 Hu Wenyong 1,500,066 Domestically listed foreign stock 1,500,066 Li Suinan 1,356,000 Domestically listed foreign stock 1,356,000 Vanguard Total International Stock Index 1,292,594 Domestically listed foreign stock 1,292,594 Fund Xiong Shunbao 1,282,251 RMB-denominated ordinary stock 1,282,251 It is unknown whether there is any connected party or acting-in-concert party as defined in the Measures for the Related or acting-in-concert parties among Administration of Disclosure of Shareholder Equity Changes of shareholders above Listed Companies among the top 10 tradable share holders or the top 10 unrestricted tradable share holders. Top 10 ordinary shareholders involved in N/A securities margin trading (if any) Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yea √ No No such cases in the Reporting Period. 5 Changchai Company, Limited Third Quarter Report 2018 2. Number of Preferred Shareholders and Shareholdings of Top 10 of Them □ Applicable √ Not applicable 6 Changchai Company, Limited Third Quarter Report 2018 Part III Significant Events I Changes in Key Consolidated Financial Statement Line Items and Explanation of why √ Applicable □ Not applicable 1. Consolidated Balance Sheet Items as at 30 September 2018 Item 30 September 2018 31 December 2017 Change Explanation of why (RMB) (RMB) (%) Notes and accounts 1,485,050,866.65 1,108,415,299.12 33.98%During Q1~Q3 2018, credit sale was receivable properly carried out to extend market space, and most multi-cylinder engine customers were supporting manufacturers for bigger enterprises, which means relatively long account ages for the Company,resulting in an increase of 117.69% in receivables compared to the beginning. Other receivables 21,267,589.07 5,794,971.22 267.00%Temporary loans granted by subsidiary Changzhou Housheng Investment Co., Ltd. to Xuzhou Huadong Foundry Factory, etc. Other current assets 23,104,987.78 42,540,184.05 -45.69%Decrease in overpaid VAT Payroll payable 24,782,530.80 51,247,112.66 -51.64%Salaries and bonuses accrued in the nine months ended 30 September 2017 were mostly paid in the corresponding period of the current year 2. Consolidated Income Statement Items for Q1~Q3 2018 Q1~Q3 2018 Q1~Q3 2017 Change Item Explanation of why (RMB) (RMB) (%) Finance costs -4,311,945.83 -1,287,876.55 —— Increase in foreign exchange income resulted from exchange rate fluctuations Asset impairment -2,531,847.48 9,150,039.27 —— Allowances for doubtful accounts receivable loss recorded based on aging led to an increase in asset impairment loss, while the collection of entrusted loans with full-amount impairment allowances resulted in writedowns in this item Investment income 8,053,269.86 13,407,484.45 -39.93%Decline in dividends from Foton Motor Non-operating 2,830,716.11 25,903,268.01 -89.07% Last year saw the non-operating income income arising from including Changzhou Fuji 7 Changchai Company, Limited Third Quarter Report 2018 Changchai Robin Gasoline Engine Co., Ltd., whose equity interests had been acquired by the Company at a discount, into the consolidated financial statements Non-operating 1,698,515.85 7,979,840.88 -78.71%Greater loss on the disposal of inactive expense materials during the same period of last year Net profit 23,643,295.60 43,305,505.88 -45.40%Last year saw the non-operating income arising from including Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd., whose equity interests had been acquired by the Company at a discount, into the consolidated financial statements Other -144,235,225.00 -41,677,200.00 —— Significant decline in gains on fair value comprehensive changes of available-for-sale financial assets income, net of tax 3. Consolidated Cash Flow Statement Items for Q1~Q3 2018 Q1~Q3 2018 Q1~Q3 2017 Change Item Explanation of why (RMB) (RMB) (%) Tax rebates 39,981,450.76 24,619,585.42 62.40%Mainly for the report period received more export tax rebates. Taxes paid 21,038,574.94 30,890,368.40 -31.89%Changes in sales and profit, as well as the effect of the government’s tax cuts Net cash generated -23,421,616.03 -63,559,009.38 —— Significant decline in payments for from/used in acquisition of fixed assets, intangible assets investing activities and other long-lived assets Net cash generated Mainly for the last reporting period from/used in -16,892,465.30 21,794,509.81 —— borrowings increased more financing activities II Progress, Influence and Solutions Associated with Significant Events √ Applicable □ Not applicable The controlling shareholder of the Company—State-owned Assets Supervision and Administration Commission of Changzhou Municipal Government (hereinafter referred to as “Changzhou SASAC”) and Changzhou Investment Group Co., Ltd. signed the Agreement on Gratuitous Transfer of State-owned Shares Held by Changchai Company Limited on 16 August 2018, in which the Changzhou SASAC intended to gratuitously transfer all 170,845,236 shares in Changchai Company Limited held by it to Changzhou Investment Group Co., Ltd. The issue has been approved by Changzhou People’s Government and the State-owned Assets Supervision and Administration Commission of Jiangsu Provincial Government. In addition, China securities regulatory 8 Changchai Company, Limited Third Quarter Report 2018 commission (CSRC) has agreed to exempt Changzhou Investment Group Co., Ltd. from the tender offer obligation for holding the Company’s shares due to gratuitous transfer. The issue is currently going through the relevant equity transfer procedures. For more details, please refer to the Indicative Announcement on Gratuitous Transfer of State-owned Shares Held by the Controlling Shareholder (Announcement No.: 2018-015), Announcement on the Progress of Gratuitous Transfer of State-owned Shares Held by the Controlling Shareholder (Announcement No.: 2018-020) and Announcement on the Progress of Gratuitous Transfer of State-owned Shares Held by the Controlling Shareholder (Announcement No.: 2018-025) disclosed by the Company respectively on 1 June 2018, 17 August 2018 and 5 September 2018. After the completion of the transfer, Changzhou Investment Group Co., Ltd. will be the controlling shareholder of the Company and the actual controller of the Company will not change. Overview of significant event Disclosure date Related announcement 1 June 2018 2018-015 Gratuitous transfer of state-owned 16 August 2018 2018-020 shares 5 September 2018 2018-025 20 October 2018 2018-026 III Commitments that the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and Other Parties, Failed to Fulfill on Time during Reporting Period √ Applicable □ Not applicable Date of Period Type of Commitme commit of Fulfil Commitment commit Contents nt maker ment commit lment ment making ment Rewards Plan for Shareholders in Next Three Years(2017-2019) Under the premise of positive distributive profit (remaining after-tax profits after making up for the loss and extracting for the Imple Other common reserves) in this year or ment commitments Changchai Year half year and abundant money flow 11 May in a made to Company, bonus 2017-2 and no influence on the following-up 2017 norm minority Limited 019 going concern after cash bonus, the al shareholders profits allocated by cash every year way shouldn’t be lower than 10% of the allocable profits from parent company. Meanwhile, the accumulated allocable profits by cash in the arbitrary continuous three 9 Changchai Company, Limited Third Quarter Report 2018 accounting years should not be lower than 30% of the annual average allocable profits in those three years. Fulfilled on time Yes When the commitment was not completely fulfilled at maturity, the specific N/A reasons and following work plan shall be given IV 2018 Annual Operating Performance Forecast Warning of a forecast loss on or a forecast significant year-on-year change in net profit for year 2018, as well as explanation of why: □ Applicable √ Not applicable V Securities Investments □ Applicable √ Not applicable No such cases in the Reporting Period. VI Wealth Management Entrustment √ Applicable □ Not applicable Unit: RMB’0,000 (in RMB ten thousand yuan) Outstanding amount Overdue Type of wealth management Funding source Principal before maturity amount Wealth management product purchased Self-funded 1,600 1,600 0 from securities company Total 1,600 1,600 0 High-risk wealth management entrustments with amounts that are individually significant, or with low security, low liquidity, or no protection of the principal: □ Applicable √ Not applicable Wealth management entrustments with possible impairments including an expectedly unrecoverable principal: □ Applicable √ Not applicable VII Investments in Derivative Financial Instruments □ Applicable √ Not applicable No such cases in the Reporting Period. VIII Visits Paid to the Company for Purposes of Research, Communication, Interview, etc. during Reporting Period √ Applicable □ Not applicable 10 Changchai Company, Limited Third Quarter Report 2018 Date of visit Way of visit Type of visitor About Progress of lithium battery diaphragm project invested 13 August 2018 Other Individual with industry funds set up by the Company 18 July 2018 Other Individual Repurchase of B-share IX Irregularities in Provision of Guarantees for External Parties □ Applicable √ Not applicable No such cases in the Reporting Period. X Occupation of the Company’s Capital by Controlling Shareholder or Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. 11 Changchai Company, Limited Third Quarter Report 2018 Part IV Financial Statements I Financial Statements 1. Consolidated Balance Sheet Prepared by Changchai Company Limited 30 September 2018 Unit: RMB Item 30 September 2018 31 December 2017 Current assets: Monetary capital 411,034,175.51 430,305,367.71 Settlement reserve Interbank loans granted Financial assets at fair value through profit or loss Derivative financial assets Notes and accounts receivable 1,485,050,866.65 1,108,415,299.12 Including: Notes receivable 631,687,682.49 716,404,345.57 Accounts receivable 853,363,184.16 392,010,953.55 Prepayments 19,751,263.00 17,781,007.77 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other receivables 21,267,589.07 5,794,971.22 Financial assets purchased under resale agreements Inventories 424,522,218.24 508,246,807.48 Assets classified as held for sale Current portion of non-current assets Other current assets 23,104,987.78 42,540,184.05 Total current assets 2,384,731,100.25 2,113,083,637.35 Non-current assets: Loans and advances to customers Available-for-sale financial assets 616,859,101.49 793,522,639.04 Held-to-maturity investments 12 Changchai Company, Limited Third Quarter Report 2018 Long-term receivables Long-term equity investments Investment property 51,208,092.83 52,864,348.43 Fixed assets 518,930,402.74 560,049,970.50 Construction in progress 79,665,817.80 94,581,989.06 Productive living assets Oil and gas assets Intangible assets 103,850,781.63 107,795,746.86 R&D expense Goodwill Long-term prepaid expense Deferred income tax assets 1,006,950.81 1,006,953.81 Other non-current assets Total non-current assets 1,371,521,147.30 1,609,821,647.70 Total assets 3,756,252,247.55 3,722,905,285.05 Current liabilities: Short-term borrowings 27,000,000.00 24,900,000.00 Borrowings from central bank Customer deposits and interbank deposits Interbank loans obtained Financial liabilities at fair value through profit or loss Derivative financial liabilities Notes and accounts payable 1,143,196,396.32 963,299,000.18 Advances from customers 51,157,778.08 40,153,984.91 Financial assets sold under repurchase agreements Handling charges and commissions payable Payroll payable 24,782,530.80 51,247,112.66 Taxes payable 10,298,127.47 4,017,920.78 Other payables 219,162,163.02 195,985,676.91 Reinsurance payables Insurance contract reserve Payables for acting trading of securities Payables for underwriting of securities Liabilities directly associated with assets classified as held for sale 13 Changchai Company, Limited Third Quarter Report 2018 Current portion of non-current liabilities Other current liabilities 2,924,539.46 2,028,937.59 Total current liabilities 1,478,521,535.15 1,281,632,633.03 Non-current liabilities: Long-term borrowings 21,000,000.00 21,500,000.00 Bonds payable Including: Preferred shares Perpetual bonds Long-term payables Long-term payroll payable Provisions Deferred income 60,992,858.46 60,992,858.46 Deferred income tax liabilities 66,800,998.95 92,409,779.39 Other non-current liabilities Total non-current liabilities 148,793,857.41 174,902,637.85 Total liabilities 1,627,315,392.56 1,456,535,270.88 Owners’ equity: Share capital 561,374,326.00 561,374,326.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 164,328,665.43 164,328,665.43 Less: Treasury stock Other comprehensive income 370,833,325.00 515,068,550.00 Specific reserve 13,289,059.21 13,289,059.21 Surplus reserves 313,705,210.16 313,705,210.16 General reserve Retained earnings 685,599,217.32 679,131,047.06 Total equity attributable to owners of the Company as the parent 2,109,129,803.12 2,246,896,857.86 Non-controlling interests 19,807,051.87 19,473,156.31 Total owners’ equity 2,128,936,854.99 2,266,370,014.17 Total liabilities and owners’ equity 3,756,252,247.55 3,722,905,285.05 Legal representative: Shi Xinkun General manager: Zhang Xin head of financial department: Jiang He 14 Changchai Company, Limited Third Quarter Report 2018 2. Balance Sheet of the Company as the Parent Unit: RMB Item 30 September 2018 31 December 2017 Current assets: Monetary capital 368,196,862.63 366,907,287.64 Financial assets at fair value through profit or loss Derivative financial assets Notes and accounts receivable 1,374,522,228.30 1,031,361,397.27 Including: Notes receivable 617,668,214.49 711,474,345.57 Accounts receivable 756,854,013.81 319,887,051.70 Prepayments 4,181,621.10 9,815,561.98 Other receivables 10,525,373.22 11,798,211.40 Inventories 299,370,138.70 376,814,388.82 Assets classified as held for sale Current portion of non-current assets Other current assets 20,692,057.15 Total current assets 2,056,796,223.95 1,817,388,904.26 Non-current assets: Available-for-sale financial assets 616,149,000.00 785,837,500.00 Held-to-maturity investments Long-term receivables Long-term equity investments 231,752,730.03 231,752,730.03 Investment property 51,208,092.83 52,864,348.43 Fixed assets 418,626,042.81 453,155,359.47 Construction in progress 79,280,694.44 93,681,793.26 Productive living assets Oil and gas assets Intangible assets 72,708,970.40 75,623,219.49 R&D expense Goodwill Long-term prepaid expense Deferred income tax assets 934,554.06 934,554.06 Other non-current assets Total non-current assets 1,470,660,084.57 1,693,849,504.74 15 Changchai Company, Limited Third Quarter Report 2018 Total assets 3,527,456,308.52 3,511,238,409.00 Current liabilities: Short-term borrowings 10,000,000.00 Financial liabilities at fair value through profit or loss Derivative financial liabilities Notes and accounts payable 1,053,470,134.46 883,244,989.22 Advances from customers 49,253,055.31 38,382,261.14 Payroll payable 19,402,520.44 41,401,495.39 Taxes payable 2,031,773.51 1,373,036.64 Other payables 201,143,326.08 185,981,889.23 Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,335,300,809.80 1,150,383,671.62 Non-current liabilities: Long-term borrowings 19,000,000.00 19,500,000.00 Bonds payable Including: Preferred shares Perpetual bonds Long-term payables Long-term payroll payable Provisions Deferred income 60,992,858.46 60,992,858.46 Deferred income tax liabilities 65,441,175.00 90,894,450.00 Other non-current liabilities Total non-current liabilities 145,434,033.46 171,387,308.46 Total liabilities 1,480,734,843.26 1,321,770,980.08 Owners’ equity: Share capital 561,374,326.00 561,374,326.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 183,071,147.70 183,071,147.70 Less: Treasury stock 16 Changchai Company, Limited Third Quarter Report 2018 Other comprehensive income 370,833,325.00 515,068,550.00 Specific reserve 13,289,059.21 13,289,059.21 Surplus reserves 313,705,210.16 313,705,210.16 Retained earnings 604,448,397.19 602,959,135.85 Total owners’ equity 2,046,721,465.26 2,189,467,428.92 Total liabilities and owners’ equity 3,527,456,308.52 3,511,238,409.00 Legal representative: Shi Xinkun General manager: Zhang Xin head of financial department: Jiang He 3. Consolidated Income Statement for Q3 Unit: RMB Item Q3 2018 Q3 2017 1. Revenue 432,605,495.58 551,411,429.29 Including: Operating revenue 432,605,495.58 551,411,429.29 Interest income Premium income Handling charge and commission income 2. Operating costs and expenses 435,376,583.73 553,758,537.78 Including: Cost of sales 368,800,817.45 470,832,920.30 Interest expense Handling charge and commission expense Surrenders Net claims paid Net amount provided as insurance contract reserve Expenditure on policy dividends Reinsurance premium expense Taxes and surcharges 3,622,252.63 1,498,185.39 Selling expense 41,800,679.58 38,153,014.94 Administrative expense 21,842,985.31 31,350,187.76 R&D expense 15,978,761.69 13,545,557.30 Finance costs -4,179,608.71 -1,621,327.91 Including: Interest expense 740,882.96 557,914.97 Interest income 682,638.32 988,604.45 Asset impairment loss -12,489,304.22 Add: Other income 17 Changchai Company, Limited Third Quarter Report 2018 Investment income (“-” for loss) 7,677,178.18 4,049,357.83 Including: Share of profit or loss of joint ventures and associates Gain on changes in fair value (“-” for loss) Foreign exchange gain (“-” for loss) Asset disposal income (“-” for loss) 3. Operating profit (“-” for loss) 4,906,090.03 1,702,249.34 Add: Non-operating income 727,633.08 4,129,944.60 Less: Non-operating expense 171,349.64 1,585,185.70 4. Profit before tax (“-” for loss) 5,462,373.47 4,247,008.24 Less: Income tax expense 726,986.79 992,114.23 5. Net profit (“-” for net loss) 4,735,386.68 3,254,894.01 5.1 Net profit from continuing operations (“-” for net loss) 4,735,386.68 3,254,894.01 5.2 Net profit from discontinued operations (“-” for net loss) Net profit attributable to owners of the Company as the parent 4,670,842.38 3,072,285.14 Net profit attributable to non-controlling interests 64,544.30 182,608.87 6. Other comprehensive income, net of tax -18,037,000.00 -42,075.00 Attributable to owners of the Company as the parent -18,037,000.00 -42,075.00 6.1 Items that will not be reclassified to profit or loss 6.1.1 Changes in net liabilities or assets caused by remeasurements on defined benefit pension schemes 6.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 6.2 Items that may subsequently be reclassified to profit or -18,037,000.00 -42,075.00 loss 6.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 6.2.2 Gain/Loss on changes in fair value of -18,037,000.00 -42,075.00 available-for-sale financial assets 6.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets 6.2.4 Effective gain/loss on cash flow hedges 6.2.5 Differences arising from translation of foreign currency-denominated financial statements 6.2.6 Other Attributable to non-controlling interests 7. Total comprehensive income -13,301,613.32 3,212,819.01 Attributable to owners of the Company as the parent -13,366,157.62 3,030,210.14 18 Changchai Company, Limited Third Quarter Report 2018 Attributable to non-controlling interests 64,544.30 182,608.87 8. Earnings per share 8.1 Basic earnings per share 0.01 0.01 8.2 Diluted earnings per share 0.01 0.01 Legal representative: Shi Xinkun General manager: Zhang Xin head of financial department: Jiang He 4. Income Statement of the Company as the Parent for Q3 Unit: RMB Item Q3 2018 Q3 2017 1. Operating revenue 416,427,359.56 519,533,251.59 Less: Cost of sales 362,072,818.22 448,760,167.59 Taxes and surcharges 2,893,386.71 1,417,116.02 Selling expense 39,994,953.30 34,703,041.46 Administrative expense 17,353,285.58 26,533,742.68 R&D expense 15,978,761.69 13,545,557.30 Finance costs -4,413,035.38 -2,767,240.21 Including: Interest expense 768,546.57 469,437.35 Interest income 591,988.98 775,478.29 Asset impairment loss -12,556,816.51 Add: Other income Investment income (“-” for loss) 7,576,950.00 3,757,000.00 Including: Share of profit or loss of joint ventures and associates Gain on changes in fair value (“-” for loss) Asset disposal income (“-” for loss) 2. Operating profit (“-” for loss) 2,680,955.95 1,097,866.75 Add: Non-operating income 344,083.46 2,746,050.87 Less: Non-operating expense 170,435.64 777,184.55 3. Profit before tax (“-” for loss) 2,854,603.77 3,066,733.07 Less: Income tax expense 291,560.85 4. Net profit (“-” for net loss) 2,854,603.77 2,775,172.22 4.1 Net profit from continuing operations (“-” for net loss) 2,854,603.77 2,775,172.22 4.2 Net profit from discontinued operations (“-” for net loss) 5. Other comprehensive income, net of tax -18,037,000.00 -42,075.00 19 Changchai Company, Limited Third Quarter Report 2018 5.1 Items that will not be reclassified to profit or loss 5.1.1 Changes in net liabilities or assets caused by remeasurements on defined benefit pension schemes 5.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 5.2 Items that may subsequently be reclassified to profit or loss -18,037,000.00 -42,075.00 5.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 5.2.2 Gain/Loss on changes in fair value of available-for-sale -18,037,000.00 -42,075.00 financial assets 5.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets 5.2.4 Effective gain/loss on cash flow hedges 5.2.5 Differences arising from translation of foreign currency-denominated financial statements 5.2.6 Other 6. Total comprehensive income -15,182,396.23 2,733,097.22 7. Earnings per share 7.1 Basic earnings per share 7.2 Diluted earnings per share Legal representative: Shi Xinkun General manager: Zhang Xin head of financial department: Jiang He 5. Consolidated Income Statement for Q1~Q3 Unit: RMB Item Q1~Q3 2018 Q1~Q3 2017 1. Revenue 1,619,366,387.84 1,859,517,610.21 Including: Operating revenue 1,619,366,387.84 1,859,517,610.21 Interest income Premium income Handling charge and commission income 2. Operating costs and expenses 1,599,958,648.92 1,840,879,902.93 Including: Cost of sales 1,403,155,726.44 1,612,225,242.18 Interest expense Handling charge and commission expense Surrenders Net claims paid 20 Changchai Company, Limited Third Quarter Report 2018 Net amount provided as insurance contract reserve Expenditure on policy dividends Reinsurance premium expense Taxes and surcharges 9,361,725.89 8,530,314.39 Selling expense 94,028,755.44 93,968,371.07 Administrative expense 63,731,730.10 84,002,874.30 R&D expense 36,524,504.36 34,290,938.27 Finance costs -4,311,945.83 -1,287,876.55 Including: Interest expense 2,545,980.06 3,024,858.13 Interest income 1,574,301.49 2,984,418.67 Asset impairment loss -2,531,847.48 9,150,039.27 Add: Other income 129,600.00 Investment income (“-” for loss) 8,053,269.86 13,407,484.45 Including: Share of profit or loss of joint ventures and associates Gain on changes in fair value (“-” for loss) Foreign exchange gain (“-” for loss) Asset disposal income (“-” for loss) 3. Operating profit (“-” for loss) 27,590,608.78 32,045,191.73 Add: Non-operating income 2,830,716.11 25,903,268.01 Less: Non-operating expense 1,698,515.85 7,979,840.88 4. Profit before tax (“-” for loss) 28,722,809.04 49,968,618.86 Less: Income tax expense 5,079,513.44 6,663,112.98 5. Net profit (“-” for net loss) 23,643,295.60 43,305,505.88 5.1 Net profit from continuing operations (“-” for net loss) 23,643,295.60 43,305,505.88 5.2 Net profit from discontinued operations (“-” for net loss) Net profit attributable to owners of the Company as the parent 23,309,400.04 42,751,443.27 Net profit attributable to non-controlling interests 333,895.56 554,062.61 6. Other comprehensive income, net of tax -144,235,225.00 -41,677,200.00 Attributable to owners of the Company as the parent -144,235,225.00 -41,677,200.00 6.1 Items that will not be reclassified to profit or loss 6.1.1 Changes in net liabilities or assets caused by remeasurements on defined benefit pension schemes 6.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 21 Changchai Company, Limited Third Quarter Report 2018 6.2 Items that may subsequently be reclassified to profit or loss -144,235,225.00 -41,677,200.00 6.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 6.2.2 Gain/Loss on changes in fair value of -144,235,225.00 -41,677,200.00 available-for-sale financial assets 6.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets 6.2.4 Effective gain/loss on cash flow hedges 6.2.5 Differences arising from translation of foreign currency-denominated financial statements 6.2.6 Other Attributable to non-controlling interests 7. Total comprehensive income -120,591,929.40 1,628,305.88 Attributable to owners of the Company as the parent -120,925,824.96 1,074,243.27 Attributable to non-controlling interests 333,895.56 554,062.61 8. Earnings per share 8.1 Basic earnings per share 0.04 0.08 8.2 Diluted earnings per share 0.04 0.08 Legal representative: Shi Xinkun General manager: Zhang Xin head of financial department: Jiang He 6. Income Statement of the Company as the Parent for Q1~Q3 Unit: RMB Item Q1~Q3 2018 Q1~Q3 2017 1. Operating revenue 1,537,762,482.71 1,748,840,798.71 Less: Cost of sales 1,353,150,662.71 1,535,510,001.55 Taxes and surcharges 7,281,502.74 7,469,956.58 Selling expense 86,373,935.16 85,011,010.11 Administrative expense 50,165,905.14 70,323,735.83 R&D expense 36,524,504.36 34,290,938.27 Finance costs -6,333,999.37 -3,403,441.05 Including: Interest expense 2,380,867.34 2,712,359.91 Interest income 1,395,580.84 2,600,951.07 Asset impairment loss -2,631,847.48 9,150,039.27 Add: Other income 129,600.00 Investment income (“-” for loss) 7,597,950.00 10,709,750.99 22 Changchai Company, Limited Third Quarter Report 2018 Including: Share of profit or loss of joint ventures and associates Gain on changes in fair value (“-” for loss) Asset disposal income (“-” for loss) 2. Operating profit (“-” for loss) 20,959,369.45 21,198,309.14 Add: Non-operating income 2,104,313.37 3,313,407.07 Less: Non-operating expense 1,695,773.85 6,969,533.83 3. Profit before tax (“-” for loss) 21,367,908.97 17,542,182.38 Less: Income tax expense 3,037,417.85 4,164,955.68 4. Net profit (“-” for net loss) 18,330,491.12 13,377,226.70 4.1 Net profit from continuing operations (“-” for net loss) 18,330,491.12 13,377,226.70 4.2 Net profit from discontinued operations (“-” for net loss) 5. Other comprehensive income, net of tax -144,235,225.00 -41,677,200.00 5.1 Items that will not be reclassified to profit or loss 5.1.1 Changes in net liabilities or assets caused by remeasurements on defined benefit pension schemes 5.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 5.2 Items that may subsequently be reclassified to profit or loss -144,235,225.00 -41,677,200.00 5.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 5.2.2 Gain/Loss on changes in fair value of available-for-sale -144,235,225.00 -41,677,200.00 financial assets 5.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets 5.2.4 Effective gain/loss on cash flow hedges 5.2.5 Differences arising from translation of foreign currency-denominated financial statements 5.2.6 Other 6. Total comprehensive income -125,904,733.88 -28,299,973.30 7. Earnings per share 7.1 Basic earnings per share 7.2 Diluted earnings per share Legal representative: Shi Xinkun General manager: Zhang Xin head of financial department: Jiang He 7. Consolidated Cash Flow Statement for Q1~Q3 Unit: RMB 23 Changchai Company, Limited Third Quarter Report 2018 Item Q1~Q3 2018 Q1~Q3 2017 1. Cash flows from operating activities: Proceeds from sale of commodities and rendering of services 1,502,082,934.17 1,847,464,192.62 Net increase in customer deposits and interbank deposits Net increase in borrowings from central bank Net increase in loans from other financial institutions Premiums received on original insurance contracts Net proceeds from reinsurance Net increase in deposits and investments of policy holders Net increase in proceeds from disposal of financial assets at fair value through profit or loss Interest, handling charges and commissions received Net increase in interbank loans obtained Net increase in proceeds from repurchase transactions Tax rebates 39,981,450.76 24,619,585.42 Cash generated from other operating activities 9,176,454.39 8,501,430.20 Subtotal of cash generated from operating activities 1,551,240,839.32 1,880,585,208.24 Payments for commodities and services 1,302,400,952.42 1,592,437,011.20 Net increase in loans and advances to customers Net increase in deposits in central bank and in interbank loans granted Payments for claims on original insurance contracts Interest, handling charges and commissions paid Policy dividends paid Cash paid to and for employees 227,468,105.70 244,510,500.67 Taxes paid 21,038,574.94 30,890,368.40 Cash used in other operating activities 54,585,003.85 73,799,301.59 Subtotal of cash used in operating activities 1,605,492,636.91 1,941,637,181.86 Net cash generated from/used in operating activities -54,251,797.59 -61,051,973.62 2. Cash flows from investing activities: Proceeds from disinvestment 23,459,682.03 12,000,000.00 Investment income 8,053,269.86 13,407,484.45 Net proceeds from disposal of fixed assets, intangible assets and 295,880.71 612,112.84 other long-lived assets Net proceeds from disposal of subsidiaries or other business units 24 Changchai Company, Limited Third Quarter Report 2018 Cash generated from other investing activities Subtotal of cash generated from investing activities 31,808,832.60 26,019,597.29 Payments for acquisition of fixed assets, intangible assets and 27,248,307.93 64,624,007.34 other long-lived assets Payments for investments 6,000,000.00 Net increase in pledged loans granted Net payments for acquisition of subsidiaries and other business 1,854,599.33 units Cash used in other investing activities 27,982,140.70 17,100,000.00 Subtotal of cash used in investing activities 55,230,448.63 89,578,606.67 Net cash generated from/used in investing activities -23,421,616.03 -63,559,009.38 3. Cash flows from financing activities: Capital contributions received Including: Capital contributions by non-controlling interests to subsidiaries Increase in borrowings obtained 17,000,000.00 44,900,000.00 Net proceeds from issuance of bonds Cash generated from other financing activities Subtotal of cash generated from financing activities 17,000,000.00 44,900,000.00 Repayment of borrowings 15,400,000.00 5,000,000.00 Payments for interest and dividends 18,492,465.30 18,105,490.19 Including: Dividends paid by subsidiaries to non-controlling interests Cash used in other financing activities Subtotal of cash used in financing activities 33,892,465.30 23,105,490.19 Net cash generated from/used in financing activities -16,892,465.30 21,794,509.81 4. Effect of foreign exchange rate changes on cash and cash equivalents 5. Net increase in cash and cash equivalents -94,565,878.92 -102,816,473.19 Add: Cash and cash equivalents, beginning of the period 325,263,654.43 583,278,129.09 6. Cash and cash equivalents, end of the period 230,697,775.51 480,461,655.90 Legal representative: Shi Xinkun General manager: Zhang Xin head of financial department: Jiang He 8. Cash Flow Statement of the Company as the Parent for Q1~Q3 Unit: RMB Item Q1~Q3 2018 Q1~Q3 2017 25 Changchai Company, Limited Third Quarter Report 2018 1. Cash flows from operating activities: Proceeds from sale of commodities and rendering of services 1,415,048,015.22 1,708,157,948.66 Tax rebates 31,526,429.06 24,619,585.42 Cash generated from other operating activities 7,685,480.38 6,986,793.79 Subtotal of cash generated from operating activities 1,454,259,924.66 1,739,764,327.87 Payments for commodities and services 1,235,746,003.49 1,483,506,231.99 Cash paid to and for employees 198,291,459.90 218,784,328.58 Taxes paid 15,439,986.70 26,440,358.98 Cash used in other operating activities 51,499,872.31 68,004,253.14 Subtotal of cash used in operating activities 1,500,977,322.40 1,796,735,172.69 Net cash generated from/used in operating activities -46,717,397.74 -56,970,844.82 2. Cash flows from investing activities: Proceeds from disinvestment Investment income 7,597,950.00 10,709,750.99 Net proceeds from disposal of fixed assets, intangible assets and 154,889.08 193,991.71 other long-lived assets Net proceeds from disposal of subsidiaries or other business units Cash generated from other investing activities Subtotal of cash generated from investing activities 7,752,839.08 10,903,742.70 Payments for acquisition of fixed assets, intangible assets and 25,507,202.39 63,978,352.64 other long-lived assets Payments for investments Net payments for acquisition of subsidiaries and other business 26,516,925.27 units Cash used in other investing activities Subtotal of cash used in investing activities 25,507,202.39 90,495,277.91 Net cash generated from/used in investing activities -17,754,363.31 -79,591,535.21 3. Cash flows from financing activities: Capital contributions received Increase in borrowings obtained 10,000,000.00 20,000,000.00 Net proceeds from issuance of bonds Cash generated from other financing activities Subtotal of cash generated from financing activities 10,000,000.00 20,000,000.00 Repayment of borrowings 500,000.00 Payments for interest and dividends 17,852,241.03 16,841,229.78 26 Changchai Company, Limited Third Quarter Report 2018 Cash used in other financing activities Sub-total of cash used in financing activities 18,352,241.03 16,841,229.78 Net cash generated from/used in financing activities -8,352,241.03 3,158,770.22 4. Effect of foreign exchange rate changes on cash and cash equivalents 5. Net increase in cash and cash equivalents -72,824,002.08 -133,403,609.81 Add: Cash and cash equivalents, beginning of the period 272,064,464.71 558,159,090.01 6. Cash and cash equivalents, end of the period 199,240,462.63 424,755,480.20 Legal representative: Shi Xinkun General manager: Zhang Xin head of financial department: Jiang He II Independent Auditor’s Report Indicate by tick mark whether the financial statements above have been audited by an independent auditor. □Yes √ No These financial statements have not been audited by such an auditor. 27