Changchai Company, Limited Annual Report 2022 CHANGCHAI COMPANY, LIMITED ANNUAL REPORT 2022 April 2023 1 Changchai Company, Limited Annual Report 2022 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of Changchai Company, Limited (hereinafter referred to as the “Company”) 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. 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. All the Company’s directors have attended the Board meeting for the review of this Report and its summary. Any plans for the future and other forward-looking statements mentioned in this Report shall NOT be considered as absolute promises of the Company to investors. Therefore, investors are kindly reminded to pay attention to possible investment risks. The Company has described in detail the risks it might face in “XI Prospects” in “Part III Management Discussion and Analysis” herein. The Board has approved a final dividend plan as follows: based on the 705,692,507 shares, a cash dividend of RMB0.10 (tax inclusive) per 10 shares is to be distributed to the shareholders, with no bonus issue from either profit or capital reserves. 2 Changchai Company, Limited Annual Report 2022 Table of Contents Part I Important Notes, Table of Contents and Definitions........................................................... 2 Part II Corporate Information and Key Financial Information................................................... 6 Part III Management Discussion and Analysis..............................................................................11 Part IV Corporate Governance.......................................................................................................46 Part V Environmental and Social Responsibility.......................................................................... 65 Part VI Significant Events............................................................................................................... 66 Part VII Share Changes and Shareholder Information................................................................77 Part VIII Preferred Shares.............................................................................................................. 86 Part IX Bonds................................................................................................................................... 87 Part X Financial Statements............................................................................................................88 3 Changchai Company, Limited Annual Report 2022 Documents Available for Reference 1. The financial statements signed and sealed by the Company’s legal representative, General Manager and head of the financial department. 2. The original copy of the Independent Auditor’s Report signed and sealed by the CPAs, as well as sealed by the CPA firm. 3. The originals of all the Company’s documents and announcements which were disclosed on Securities Time and Ta Kung Pao (HK) (newspapers designated by the CSRC for information disclosure) during the Reporting Period. 4. The Annual Report disclosed in other securities markets. The above-mentioned documents available for reference are all kept in the Secretariat of the Board of Directors of the Company . This Report has been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail. 4 Changchai Company, Limited Annual Report 2022 Definitions Term Definition “Changchai”, the “Company” or Changchai Company, Limited and its consolidated “we” subsidiaries, except where the context otherwise requires Changzhou Changchai Benniu Diesel Engine Fittings Co., Changchai Benniu Ltd. Changchai Wanzhou Changchai Wanzhou Diesel Engine Co., Ltd. Horizon Investment Changzhou Horizon Investment Co., Ltd. Changzhou Changchai Horizon Agricultural Equipment Horizon Agricultural Equipment Co., Ltd. Changzhou Fuji Changchai Robin Gasoline Engine Co., Changchai Robin Ltd. Xingsheng Real Estate Management Changzhou Xingsheng Real Estate Management Co., Ltd. Changchai Machinery Jiangsu Changchai Machinery Co., Ltd. Zhenjiang Siyang Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. Expressed in the Chinese currency of Renminbi, expressed RMB, RMB’0,000 in tens of thousands of Renminbi The “Reporting Period” or “Current The period from 1 January 2022 to 31 December 2022 Period” 5 Changchai Company, Limited Annual Report 2022 Part II Corporate Information and Key Financial Information I Corporate Information Stock name Changchai, Changchai-B Stock code 000570, 200570 Stock exchange for stock listing Shenzhen Stock Exchange Company name in Chinese 常柴股份有限公司 Abbr. 苏常柴 Company name in English (if any) CHANGCHAI COMPANY,LIMITED Abbr. (if any) CHANGCAHI CO.,LTD. Legal representative Shi Xinkun Registered address 123 Huaide Middle Road, Changzhou, Jiangsu, China Registered addresses previously used N/A Zip code 213002 Office address 123 Huaide Middle Road, Changzhou, Jiangsu, China Zip code 213002 Company website http://www.changchai.com.cn Email address cctqm@public.cz.js.cn II Contact Information Board Secretary Securities Representative Name He Jianjiang 123 Huaide Middle Road, Address Changzhou, Jiangsu, China Tel. (86)519-68683155 Fax (86)519-86630954 Email address cchjj@changchai.com III Media for Information Disclosure and Place where this Report Is Lodged Newspapers designated by the Company for Securities Times, Ta Kung Pao (HK) information disclosure Website designated by CSRC for publication of http://www.cninfo.com.cn this Report Place where this Report is lodged Board Secretariat of the Company IV Change to Company Registered Information Unified social credit code 91320400134792410W 6 Changchai Company, Limited Annual Report 2022 Change to principal activity of the No change Company since going public On 22 November 2018, the State-owned Assets Supervision and Administration Commission of Changzhou Municipal People’s Every change of controlling Government transferred its entire holdings of 170,845,236 shares in the shareholder since incorporation Company (a stake of 30.43%) to Changzhou Investment Group Co., Ltd. for no compensation, which has thus become the controlling shareholder of the Company. V Other Information The independent audit firm hired by the Company: Name Gongzheng Tianye Certified Public Accountants LLP Office address Yingtong Commerce Building, Changzhou, Jiangsu, China Accountants writing signatures Wang Wenkai, Qin Zhijun The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period: √ Applicable □ Not applicable Name Office address Representatives Supervision period 10/F, China Industrial China Industrial Securities Plaza, 36 Wang Lingxiao, Li 5 July 2021-31 Securities Co., Ltd. Changliu Road, Pudong Lihong December 2022 New District, Shanghai 6/F, Donghai Securities Donghai Securities Co., Plaza, 1928 Dongfang 5 July 2021-31 Wang Jiangqin, Xu Qin Ltd. Road, Pudong New District, December 2022 Shanghai The independent financial advisor hired by the Company to exercise constant supervision over the Company in the Reporting Period: □ Applicable √ Not applicable VI Key Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No 2022-over-2021 2022 2021 2020 change (%) Operating revenue 2,182,043,095.61 2,452,430,515.60 -11.03% 2,296,464,711.24 (RMB) Net profit attributable to the listed company’s 76,684,796.91 103,006,232.54 -25.55% 52,432,443.05 shareholders (RMB) Net profit attributable to -73,636,511.02 5,329,092.87 —— 25,483,147.57 the listed company’s 7 Changchai Company, Limited Annual Report 2022 shareholders before exceptional gains and losses (RMB) Net cash generated from/used in operating 364,930,277.84 -266,323,779.30 —— 251,796,654.53 activities (RMB) Basic earnings per share 0.1087 0.1657 -34.40% 0.0934 (RMB/share) Diluted earnings per 0.1087 0.1657 -34.40% 0.0934 share (RMB/share) Weighted average return 2.51% 3.86% -1.35% 2.40% on equity (%) Change of 31 31 December December 2022 31 December 2022 31 December 2020 2021 over 31 December 2021 (%) Total assets (RMB) 5,219,359,853.42 4,860,382,961.26 7.39% 3,952,954,464.45 Equity attributable to the listed company’s 3,284,710,665.90 3,077,550,018.33 6.73% 2,273,349,347.02 shareholders (RMB) Indicate by tick mark whether the lower of the net profit attributable to the listed company’s shareholders before and after exceptional gains and losses was negative for the last three accounting years, and the latest independent auditor’s report indicated that there was uncertainty about the Company’s ability to continue as a going concern. □ Yes √ No Indicate by tick mark whether the lower of the net profit attributable to the listed company’s shareholders before and after exceptional gains and losses was negative. √ Yes □ No Item 2022 2021 Note Production and sales of the Company’s primary products of Operating revenue (RMB) 2,182,043,095.61 2,452,430,515.60 diesel engines, gasoline engines, etc. Deductions from operating Other business revenue than the 36,475,111.66 48,310,768.54 revenue (RMB) main operations Operating revenue exclusive of Diesel engines, gasoline engines, 2,145,567,983.95 2,404,119,747.06 deductions (RMB) and accessories VII Accounting Data Differences under China’s Accounting Standards for Business Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards 1. Net Profit and Equity under CAS and IFRS □ Applicable √ Not applicable 8 Changchai Company, Limited Annual Report 2022 No difference for the Reporting Period. 2. Net Profit and Equity under CAS and Foreign Accounting Standards □ Applicable √ Not applicable No difference for the Reporting Period. VIII Key Financial Information by Quarter Unit: RMB Q1 Q2 Q3 Q4 Operating revenue 675,718,729.65 502,503,762.39 545,599,669.07 458,220,934.50 Net profit attributable to the -31,087,265.83 16,491,996.22 150,405,621.57 -59,125,555.05 listed company’s shareholders Net profit attributable to the listed company’s shareholders -12,317,891.45 6,508,531.38 -5,566,500.16 -62,260,650.79 before exceptional gains and losses Net cash generated from/used in -47,199,474.48 -27,101,026.64 -8,250,338.30 447,481,117.26 operating activities Indicate by tick mark whether any of the quarterly financial data in the table above or their summations differs materially from what have been disclosed in the Company’s quarterly or interim reports. □ Yes √ No IX Exceptional Gains and Losses √ Applicable □ Not applicable Unit: RMB Item 2022 2021 2020 Note Gain or loss on disposal of non-current assets (inclusive 393,161.73 155,515.49 263,408.53 of impairment allowance write-offs) Government grants through profit or loss (exclusive of government grants consistently given in the Company’s ordinary course 3,774,298.59 4,268,950.18 7,763,215.65 of business at fixed quotas or amounts as per governmental policies or standards) Capital occupation charges 344,842.86 on non-financial enterprises 9 Changchai Company, Limited Annual Report 2022 that are recognized in profit or loss Increase in the fair Gain or loss on fair-value value of the Company’s interest changes on held-for-trading in Jiangsu Horizon financial assets and New Energy liabilities & income from Technology Co., Ltd., as well as disposal of held-for-trading decreased prices of financial assets and the shares held by 162,319,373.53 114,738,153.54 27,526,935.85 liabilities and wholly-owned subsidiary Horizon available-for-sale financial Investment in assets (exclusive of the Jiangsu Liance effective portion of hedges Electromechanical that arise in the Company’s Technology Co., Ltd. and Kailong ordinary course of business) High Technology Co., Ltd. Reversed portions of impairment allowances for 30,000.00 147,611.25 receivables which are tested individually for impairment Non-operating income and 1,735,346.51 2,400,863.71 -1,571,453.49 expense other than the above Negative goodwill due to business combination not 1,904,132.58 under common control Less: Income tax effects 19,859,063.58 24,027,164.56 7,122,148.63 Non-controlling -24,058.57 6,789.94 255,505.29 interests effects (net of tax) Total 150,321,307.93 97,677,139.67 26,949,295.48 -- Particulars about other items that meet the definition of exceptional gain/loss: □ Applicable √ Not applicable No such cases for the Reporting Period. Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item 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. 10 Changchai Company, Limited Annual Report 2022 Part III Management Discussion and Analysis I Industry Overview for the Reporting Period We are a manufacturer of internal combustion engines and fittings in general equipment manufacturing. According to the classification of fuel used, internal combustion engines are mainly divided into diesel engines and gasoline engines. Our diesel engines and gasoline engines are mainly used in non-road mobile machinery fields such as harvesters, tractors, plant protection machinery, small engineering machinery, and shipborne machinery. (1) Basic information on the industry The internal combustion engine is an important support for China's manufacturing industry security, energy security and national defense security, and an important basic industry of national economy and national defense construction. The internal combustion engine is the most power-dense, thermally efficient and widely used heat engine power unit. In order to implement the national overall development strategy of energy conservation, emission reduction, transformation, and upgrading, the internal combustion engine industry and agricultural machinery industry will strengthen independent innovation and research and development, accelerate the construction of a common basic technology platform, optimize the construction of the upstream and downstream industry chain, implement intelligent manufacturing, and actively carry out international exchange and cooperation to accelerate the realization of industrial technology upgrading. (2) Development pattern and trend of the industry In terms of policies, at the beginning of 2023, the 20th No. 1 Document guiding the work on agriculture, rural areas, and farmers issued by the central government demonstrated the government’s intention to attach greater importance to agriculture and strengthen agricultural development. In a bid to do so, the government will step up efforts to enhance agricultural science and technology and provide more equipment, drive to tackle key problems of key and core technologies in agriculture, and make agricultural machinery more intelligent and automated. In terms of industry concerns, the upgrade and conversion to products that meet the National Emission Standard IV raise challenges to enterprises. At the end of 2022, the central government appropriated RMB211.5 billion of agriculture-related transfer payment funds for 2023 in advance, including RMB14.5 billion for subsidies of agricultural machinery procurement and application. The central government allocated substantive funds for subsidies and implemented policies to strengthen agriculture and benefit farmers, indicating that the state will continue to attach great importance to agricultural mechanization. In terms of industrial development, after a ten-year golden period of development, since 2016, the entire agricultural machinery industry has entered a period of deep adjustment that has lasted for years. Although short-term explosive growth was seen in 2020, it went down again, entering a phase of updating existing machinery from the growth of new machine procurement. 2022, the first year of switching to the National Emission Standard IV for Non-road Vehicles, the agricultural machinery industry faced pressures such as the shrinking of the demand side, premature market overdraft, participation of tycoons from other industries, and the impact of new energy market on the traditional market. Currently, multiple segmented scenarios still require all-weather and continuous input and output, which is an advantage of diesel engines that cannot be substituted in a short time. Furthermore, new development opportunities have been brought about in the process of national strategic deployment and acceleration of transformation and upgrade. Therefore, the traditional market of agricultural machinery still has a brilliant future. 11 Changchai Company, Limited Annual Report 2022 China's diesel engine and gasoline engine industries present a pattern of multiple competitions. As the state adopts increasingly strict environmental protection policy and the emission standards continue to upgrade, the core technology and key parts of internal combustion engines will be rapidly developed and applied, and the research, development, promoting and application of environmentally friendly and efficient diesel engines and gasoline engines will become the mainstream trend, which promotes the wide use of the fuel injection system, high-efficiency supercharger and high-efficiency after-treatment. In the new normal, the internal combustion engine industry and agricultural machinery industry will improve the industry's capability of independent innovation, support the whole machine development, and organize and implement green manufacturing and intelligent manufacturing, so as to improve the overall strength of the industry. The market share of diesel and gasoline engines is gradually concentrated in a few large-scale enterprises with technical and capital strength. The present development trend of internal combustion engine industry is as follows: (1) energy saving and emission reduction; (2) intelligent manufacturing; (3) lightweight. Medium- and low-end internal combustion engines with low technical content and low added value will be gradually squeezed out of the market. The upgrade of emission standards and the market's demand for high-end products will eliminate those small enterprises with low level of research and development or less technology reserves. (3) Sales of internal combustion engine industry in 2022 The total volume of the market dropped significantly due to factors such as subsidy policy change, tight supply chain, upgrading of the National Emission Standard IV for Non-road Vehicles, and intensified existing competition. The total sales of internal combustion engines in 2022 were 43,154,700 units, a decrease of 14.51% compared to 2021. The total sales of diesel engines for the year were 4,286,600 units, down by 29.82% year on year. Specifically, 837,200 engines for construction machinery, 1,222,300 engines for agricultural machinery, 39,700 engines for shipborne machinery, and 311,700 engines for electricity generation were sold. The sales of gasoline internal combustion engines were 38,856,000, a drop of 12.39% year on year. On the whole, the internal combustion engine market showed a declining tendency for the whole year, with the construction and agricultural machinery still showing an adjustment trend. The agricultural machinery industry faced a major shakeout, focusing on the switching of products that meet the China IV emission standards for non-road mobile machinery. According to the information on the subsidies of agricultural machinery procurement, the main terminal products that need to be upgraded to meet China IV emission standards are large and medium tractors, wheat harvesters, forage harvesters, and spray rod-type sprayers. The market paid more attention to whether they can be adequately verified to meet China IV emission standards and whether mass production can be realized. In the second half of 2022, the sales of large and medium tractors, wheat harvesters, and corn harvesters peaked, showing that the traditional demand cycle was altered. In terms of the segments of the internal combustion engine market, in 2022, 897,300 units of construction machinery were sold, down by 21.00% year on year; 4,141,300 units of agricultural machinery were sold, down by 22.87% year on year; 39,700 units of shipborne machinery were sold, down by 1.18% year on year; 1,253,000 units of generator sets were sold, down by 19.02 year on year; and 1,645,400 units of horticultural machinery were sold, down by 34.15% year on year. Compared with last year, the year-over-year growth of all kinds of machinery was negative. Due to the impact of international trade and the characteristics of the enterprise scale, the internal combustion engine industry was steady and showed a positive trend on the whole. In 2022, the total volume of imports and exports was USD30,086 million, down by 2.47% year on year; specifically, the import volume was USD8,803 million, down by 18.63% year on year and the export volume was USD21,284 million, up by 6.27% year on year. 12 Changchai Company, Limited Annual Report 2022 II Principal Activity of the Company in the Reporting Period 1. Principal Operations of the Company We mainly specialize in the R&D, manufacture and sales of diesel engines under the brand "Changchai" and gasoline engines under the brand "Robin". Our products are mainly used in agricultural machinery, small engineering machinery, light commercial vehicles, generator sets and shipborne machinery and other fields closely related to people's livelihood. In the Reporting Period, there were no major changes in the Company's core business and main products. 2. Main Products of the Company Our main products are divided into two categories: diesel engines and gasoline engines. The details are as follows: Main Product Application Graphic display Product description products features fields Our diesel engine products include single-cylinder diesel engines and High power, low Agricultural multi-cylinder engines, covering oil consumption, machinery, power range from 1.62kW to low noise, construction Diesel 117.6kW, and cylinder diameters from compact machinery, engine 65mm to 135mm, with one or more structure, low generator sets, cylinders. Besides sale in domestic emission, good shipborne market, our diesel engines are sold to reliability machinery Southeast Asia, South America, the Middle East and Africa. Our gasoline engines are mainly general-purpose small gasoline engines, covering the power range Simple structure, Agricultural Gasoline from 1.5kW to 7.0kW. Besides sale in good reliability, machinery, small engine domestic market, our gasoline engines easy construction are sold to Southeast Asia, the Middle maintenance machinery East, Europe and America, Africa, Japan and other countries and regions. 3. Major Business Models (1) R&D model We have established an innovative technology management system for internal combustion engine based on market demand and forward-looking technologies. Prior to the new products or new technologies development, the marketing department first conducts market assessment and customer research, and then initiates a project according to the forecasted market demand; the technology center conducts development according to the project materials, and collects feedback information from the market and customers in real time during the development process to ensure technology leadership and product suitability. (2) Purchasing model We adopt the "purchase-to-order" purchasing model. The ERP system converts the sales orders, the sales plan developed by the sales department and the production plan drawn up by the production department into the demand of parts needed, and the purchasing department organizes the purchase according to such demand. Meanwhile, the purchasing department makes a plan to guide parts procurement according to the sales 13 Changchai Company, Limited Annual Report 2022 department's sales plan, and provide it to the supplier, and urge the supplier to prepare for the goods. (3) Production model We adopt the "make-to-order" production management model. The sales department makes sales plans for different stages according to the orders in hand, sales data in previous years, market demand judgment and feedback of existing customers' purchasing intentions. The Company's production department makes the production plan according to the sales orders displayed in the ERP system, the sales plan made by the sales department and the reserve inventory demand, and organizes the production task in strict accordance with the plan. During the production process, the quality assurance department arranges regular inspection to ensure the product quality. (4) Sale model We adopt the sales model of "direct selling + distribution", i.e. the direct selling model for the main engine factory, and the distribution model for the individual circulation market represented by farmers and overseas market. 4. The Company's position in the market We mainly specialize in the R&D, manufacture and sales of diesel engines under the brand "Changchai" and gasoline engines under the brand "Robin". Up to now, we have successfully developed a number of advanced core technologies with independent intellectual property rights. In terms of diesel engine, according to the statistics of China Internal Combustion Engine Industry Association (CICEIA), as the largest small- and medium-sized single-cylinder diesel engine manufacturer in the agricultural machinery industry of China, we have maintained a high market share of single-cylinder engines, and our market share of single-cylinder diesel engines of some power ranges has ranked first in China. For many years, in the process of achieving steady economic development of the enterprise, we developed in a sound manner and cultivated the "Changchai" brand, a famous small diesel engine brand of China with independent intellectual property rights. 5. Key Performance Drivers (1) National policy driver In recent years, various departments of the state have introduced a series of preferential policies to encourage the development of internal combustion engine industry. In terms of agricultural machinery, the central government has taken solving the problems relating to "agriculture, rural areas and farmers" as the top priority of the work of the Party and the government, and issued a series of policies to benefit farmers, creating a good atmosphere for promoting the development of agriculture and economy and society in rural areas; in terms of construction machinery, the strategy of "western development", the "eight vertical and eight horizontal" high-speed railway network plan and the policy of "new rural construction" have all created a good policy environment for the application of internal combustion engine in downstream construction machinery. (2) Industrial chain synergy empowers the sustainable development of the Company We have built our own casting manufacturing and processing plants to meet the use requirements of some diesel engine parts. In terms of production and quality, we have formed a significant synergy with its own internal combustion engine assembly team. Our casting manufacturing team and internal combustion engine assembly team work together to form a mutually reinforcing positive feedback loop to assist the Company in integrating the internal combustion engine industry chain and building differentiated industry barriers. In terms of collaborative production, the reduction of external purchase is of great significance for the Company to reduce process flow, reduce intermediate loss, improve production efficiency, shorten delivery time and increase purchasing bargaining power. In terms of quality coordination, the self-built foundry can improve our quality control of parts to improve the yield and reliability of internal combustion engines. (3) Stable and efficient R&D team We have experienced technical management team and perfect technical support team. Our key technical personnel 14 Changchai Company, Limited Annual Report 2022 and R&D management personnel have been engaged in internal combustion engine R&D design, production and manufacturing for a long time. With profound professional knowledge and rich practical experience, they can make strong forward-looking and scientific judgment in the market direction and technical route. Also, we have established an effective training mechanism to foster talented persons for the follow-up R&D. (4) Well-known brand with many well-known customers The Company, formerly known as Changzhou Diesel Engine Factory, is a national industrial enterprise with a history of a hundred years and one of the earliest professional internal combustion engine manufacturers in China. Our diesel and gasoline engines, as power sources of agricultural machinery, construction machinery and commercial vehicles, show excellent performance in power range, reliability, power per litre, noise control and emission standards, and have been recognized by customers. We maintained a long-term partnership with major customers, with cumulative partnership time exceeding 15 years. Many main engine plant customers of the Company are well-known enterprises in the agricultural machinery industry, with their market shares being at the forefront of the market. III Core Competitiveness Analysis 1. Advantages in Brand Changchai is a national industrial enterprise with a history of over one hundred years. It is one of the earliest professional manufacturers of internal combustion engines in China. The brand "Changchai" is the earliest domestic trademark of production goods known as China's well-known trademarks. The diesel engine of "Changchai" brand is China's brand-name product. The enterprise has been certified by ISO9001 and IATF16949 quality systems, ISO14001 environmental management system, IATF16949 automotive product quality management system, and accessed to the national export-free enterprise qualification. Changchai was honorably ranked among “the Top One Hundred Chinese Enterprises in Engineering Industry” and “China Pacesetter Enterprise of Industrial Industry” for several times, and was awarded the honorary title of “State-level Enterprise of Observing Contracts and Keeping Promise”, “China's Agricultural Machinery Parts and Components Leading Enterprises”, “China's Agricultural Machinery AAA Credit Enterprise”, “Quality Management Excellence Award of Jiangsu Province” and “Mayor Quality Award of Changzhou City”. The Company has been among the 10 users’ most satisfied leading brands in “Jing Geng” competition for many years. In 2022, the Company was awarded honorary titles such as Top 500 Machinery Industry In China, National Demonstration Enterprise of Product and Service Quality Integrity, National Quality Leader of Internal Combustion Engine Industry, National Quality Leading Brand of Internal Combustion Engine Industry, Product with Guaranteed Quality and Reputation in China, Stable Qualified Product in National Quality Inspection, Top Ten Enterprises of Agricultural Machinery and Equipment Industry in Jiangsu Province, and Three Star Enterprise in Changzhou. For many years, in the process of achieving steady economic development of the enterprise, we developed in a sound manner and cultivated the “Changchai” brand, a famous small diesel engine brand of China with independent intellectual property rights. 2. Advantages in Technology The Company has a state-level technology center and post-doctoral research station, and a research center of small and medium-power internal combustion engine engineering and technology in Jiangsu Province. Currently, it is mainly engaged in production of small and medium-power single-cylinder and multi-cylinder diesel engine. It has a complete product range, a wide power level coverage, a high reputation and intellectual property rights for its main products. During the Reporting Period, the Company obtained the Re-assessment Certificate of the National Enterprise Technology Centre, and seven models including EH36 and ZN490B were recognized as High-tech 15 Changchai Company, Limited Annual Report 2022 Products of Changzhou City. In addition, the Company won the honor of the research and development base of the intelligent and lightweight diesel engine of the agricultural machinery and equipment industry in Jiangsu Province. During the Reporting Period, the Company was granted 23 patents. As of the end of 2022, it has a total of 159 valid patents at home and abroad, including 13 invention patents. 3. Advantages in Marketing Changchai has built up a sales service network covering the whole country, with 5 sales business units, 26 sales service centers, and 698 designated maintenance stations. In addition, in order to meet the National Emission Standard IV for Non-Road Vehicles and provide better after-sales service for customers, a service monitoring platform with Changchai characteristics has been put in place. With a perfect diesel sales service network system, the Company is able to provide high quality, efficient and timely services for customers. IV Core Business Analysis 1. Overview In 2022, the domestic and international political and economic situation was complex and volatile. China’s economy continued to face multiple pressures such as shrinking demand, supply interruptions, and weakened expectations. The total volume of the market dropped due to factors such as subsidy policy change, tight supply chain, upgrading of the National Emission Standard IV for Non-road Vehicles, and intensified existing competition. Facing the new normal of the complicated and volatile development and declining trend of the agricultural machinery industry, the Company united all employees and further focused on products, market, and quality to seek progress while maintaining stability and innovation. The Company spared no effort to advance the implementation of the annual operation policy and objectives, effectively combined product operation and capital management, and accelerated production upgrade and industrial chain expansion to maintain a stable and orderly development tendency. During the Reporting Period, the Company sold approximately 607,300 diesel engines, gasoline engines and generator sets, including approximately 147,000 gasoline engines, generating total sales revenue of RMB2.182 billion, a decrease of 11.03% year-on-year. In terms of product development and support, the Company completed the development and support certification for mainstream models of single-cylinder and multi-cylinder engines that met the National Emission Standard IV for Non-road Vehicles and launched them to the market through mass production. The Company orderly advanced the extension of multi-cylinder engines’ upper and lower power ranges. The high-power multi-cylinder engines were launched to the market through mass production after completing support verification and the optimized multi-cylinder products with small cylinder diameters made breakthroughs in terms of the supporting fields. In addition, the development of the diesel outboard engine made phased progress and passed RCD, MED EU certification, and CCS certification. In terms of market services, domestic and overseas sales maintained the stability of the foundation and expanded new markets. The single-cylinder orderly completed the switch of accessories that met the National Emission Standard IV for Non-Road Engines of main engine factories and promoted the sales of products in the non-agriculture fields by active guidance and network optimization. In terms of multi-cylinder engines, the market share of accessories in the key fields was increased. In addition, the foreign trade market maintained sales growth in core market segments and made breakthroughs in the emerging market. The Company stepped up efforts to manage the appraisals of service sites in the service process and further optimized the resource allocation of the service sites. The Company completed the function iteration and development of the remote monitoring platform of engines, which will provide effective technical support for the Company’s product design and development and 16 Changchai Company, Limited Annual Report 2022 the after-sales services of repair, replacement and return. In terms of quality management, the Company stepped up efforts to develop the quality management system, implemented the quality responsibility system, strengthened the quality loss control of the entire production and manufacturing process, and effectively reduced quality loss. The Company organized to implement the management review, internal review of the quality system, product review, and process review and properly adjust the content of the system documents based on reality, and successfully passed the annual external audit of the quality management system. In terms of internal management, the Company continued to carry out the three-year action of special safety rectification of safety production, promoted the “safety code” in all respects, made the hidden risk screening and governance institutionalized and standardized, and successfully passed the ISO14001 environmental system supervision and review during the year. The Company initiated the standard implementation of the management system of the integration of “information technology and industrialization” within the year and successfully passed the assessment of the AA-grade integration of “information technology and industrialization” management system. During the Reporting Period, the Company adopted multiple measures to reduce costs and increase efficiency to cope with the continuous rise in raw material prices at home and abroad. Great efforts were made to resolutely crack down on infringements in the market and the Company’s intellectual property was effectively safeguarded through innovative measures. In the Reporting Period, the Company acquired 41.5% of the equity of Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. by bidding. On 16 May 2022, Zhenjiang Siyang convened a general meeting of shareholders, a meeting of the Board of Directors and a meeting of the Supervisory Committee to re-elect members for the Board of Directors, the Supervisory Committee and management. Zhenjiang Siyang has been included in the consolidated financial statements of the Company. 2. Revenue and Cost Analysis (1) Breakdown of Operating Revenue Unit: RMB 2022 2021 As % of As % of total total Change (%) Operating revenue operating Operating revenue operating revenue (%) revenue (%) Total 2,182,043,095.61 100% 2,452,430,515.60 100% -11.03% By operating division Internal combustion 2,145,567,983.95 98.33% 2,404,119,747.06 98.03% -10.75% engines Other 36,475,111.66 1.67% 48,310,768.54 1.97% -24.50% By product category Diesel engines 1,971,005,207.88 90.33% 2,241,032,641.05 91.38% -12.05% Gasoline 148,144,749.68 6.79% 149,717,934.82 6.10% -1.05% engines Other 62,893,138.05 2.88% 61,679,939.73 2.52% 1.97% 17 Changchai Company, Limited Annual Report 2022 By operating segment Domestic 1,857,845,869.48 85.14% 2,038,317,678.97 83.11% -8.85% Overseas 324,197,226.13 14.86% 414,112,836.63 16.89% -21.71% By marketing model Distribution 770,975,653.30 35.33% 689,413,386.97 28.11% 11.83% Direct sales 1,411,067,442.31 64.67% 1,763,017,128.63 71.89% -19.96% (2) Operating Division, Product Category, Operating Segment or Marketing Model Contributing over 10% of Operating Revenue or Operating Profit √ Applicable □ Not applicable Unit: RMB YoY change YoY change YoY change Operating Gross profit in gross Cost of sales in operating in cost of revenue margin profit margin revenue (%) sales (%) (%) By operating division Internal 2,145,567,98 1,924,209,35 combustion 10.32% -10.75% -6.22% -4.33% 3.95 0.48 engines By product category Diesel 1,971,005,20 1,795,214,08 8.92% -12.05% -6.77% -5.16% engines 7.88 0.08 Gasoline 148,144,749. 125,625,016. 15.20% -1.05% -2.60% 1.35% engines 68 85 By operating segment 1,857,845,86 1,633,460,07 Domestic 12.08% -8.85% -3.08% -5.23% 9.48 3.55 324,197,226. 315,216,962. Overseas 2.77% -21.71% -21.69% -0.03% 13 97 By marketing model 770,975,653. 678,293,018. Distribution 12.02% 11.83% 18.49% -4.95% 30 21 1,411,067,44 1,270,384,01 Direct sales 9.97% -19.96% -16.17% -4.07% 2.31 8.31 Core business data of the prior year restated according to the changed statistical caliber for the Reporting Period: □ Applicable √ Not applicable (3) Whether Revenue from Physical Sales Is Higher than Service Revenue √ Yes □ No Operating Item Unit 2022 2021 Change (%) division Diesel engines Unit sales Unit 458,300 596,279.00 -23.14% 18 Changchai Company, Limited Annual Report 2022 Output Unit 439,604 601,253.00 -26.89% Inventory Unit 64,867 83,563.00 -22.37% Any over 30% YoY movements in the data above and why: □ Applicable √ Not applicable (4) Execution Progress of Major Signed Sales and Purchase Contracts in the Reporting Period □ Applicable √ Not applicable (5) Breakdown of Cost of Sales Unit: RMB 2022 2021 As % of As % of Product Item total cost total cost Change (%) category Cost of sales Cost of sales of sales of sales (%) (%) Diesel Raw 1,560,381,852.91 80.07% 1,659,710,451.07 79.61% -5.98% engines materials Diesel Labor cost 229,434,494.85 11.77% 240,110,930.78 11.52% -4.45% engines Diesel Depreciation 56,624,131.58 2.91% 71,198,110.78 3.42% -20.47% engines Diesel Energy 15,340,866.19 0.79% 30,044,125.27 1.44% -48.94% engines (6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period √ Yes □ No The Sixth Extraordinary Meeting of the Board of Directors in 2021 held by the Company on 28 October 2021 deliberated on and approved the Proposal on Participation in Bidding for 41.5% Equity Interests in Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd., authorizing the Management of the Company to participate in bidding for 41.5% equity interest in Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. (hereinafter referred to as "Zhenjiang Siyang") that had been put out for sale by Jiangsu Keda Assets Marketing Co., Ltd. (hereinafter, “Keda Assets”). On 12 January 2022, Jiangsu Assets and Equity Exchange Co., Ltd. issued the Confirmation of Transaction on the Transfer of 41.5% Equity Interests (Corresponding to Capital Contribution of RMB830,000) in Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. The Company won the bid for the 41.5% equity interests in Zhenjiang Siyang at a price of RMB33,520,800.00. On 23 February 2022, the Company signed the Contract on Transfer of State-owned Property Rights with Keda Assets. On 9 March 2022, Zhenjiang Siyang has completed the relevant registration alteration formalities with the competent industrial and commercial administration. On 16 May 2022, Zhenjiang Siyang held meetings of shareholders, the Board of Directors and the Supervisory Committee to elect and appoint new members for the Board of Directors, the Supervisory Committee and management, with the Company taking over half of the seats in the Board of Zhenjiang Siyang. As such, Zhenjiang Siyang has been included in the consolidated financial statements of the Company, bringing the number of consolidated subsidiaries to eight. 19 Changchai Company, Limited Annual Report 2022 (7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period □ Applicable √ Not applicable (8) Major Customers and Suppliers Major customers: Total sales to top five customers (RMB) 1,054,121,258.48 Total sales to top five customers as % of total sales of the 48.31% Reporting Period (%) Total sales to related parties among top five customers as % of 0.00% total sales of the Reporting Period (%) Information about top five customers: Sales revenue contributed for the As % of total sales revenue No. Customer Reporting Period (RMB) (%) 1 Customer 1 550,073,305.21 25.21% 2 Customer 2 207,614,866.65 9.51% 3 Customer 3 174,674,496.40 8.01% 4 Customer 4 66,280,122.00 3.04% 5 Customer 5 55,478,468.22 2.54% Total -- 1,054,121,258.48 48.31% Other information about major customers: □ Applicable √ Not applicable Major suppliers: Total purchases from top five suppliers (RMB) 288,156,794.05 Total purchases from top five suppliers as % of total purchases of the Reporting Period (%) 18.39% Total purchases from related parties among top five suppliers 0.00% as % of total purchases of the Reporting Period (%) Information about top five suppliers: Purchase in the Reporting Period No. Supplier As % of total purchases (%) (RMB) 1 Supplier 1 128,212,300.00 8.18% 2 Supplier 2 57,147,375.28 3.65% 3 Supplier 3 43,433,746.37 2.77% 4 Supplier 4 35,757,706.62 2.28% 5 Supplier 5 23,605,665.79 1.51% Total -- 288,156,794.05 18.39% Other information about major suppliers: □ Applicable √ Not applicable 20 Changchai Company, Limited Annual Report 2022 3. Expense Unit: RMB Reason for any 2022 2021 Change (%) significant change Selling expense 102,630,223.71 117,242,290.32 -12.46% Administrative 119,511,189.72 98,890,284.22 20.85% expense Increased exchange Finance costs -21,589,704.63 1,203,615.80 —— gains and interest income R&D expenses 81,239,597.06 82,390,284.14 -1.40% 4. R&D Investments √ Applicable □ Not applicable Major R&D Expected impact on the Purpose Progress Specific objectives project Company Developing the Optimizing and upgrading multi-cylinder based on the M series diesel diesel engine with engine. Increasing engine After the small cylinder Development power by adopting the implementation of the diameters that can project of the high-pressure common rail project, the upgraded meet the supporting lightweight, system, electronic control diesel engine will have requirements of rice In low-emission technical route, supercharger a broad and good transplanters, plant progress diesel engine and post-processing market application protection spray of common rail technology to meet the prospects and will be machines, tractors, series National Emission Standard more competitive in the small construction IV for Non-Road Vehicles and market. machinery, and expand market supporting horticultural fields. machinery Making an optimal design of After the the engine’s structure and implementation of the performance to significantly Developing project, the product will improve product indicators The power and efficient, meet the requirements such as reliability, fuel assembly R&D eco-friendly, and of the National In consumption, and emission to project of energy-saving Emission Standard IV progress meet the advanced level of diesel outboard power and for Non-road Vehicles similar products abroad as engines assembly of diesel and will have extensive well as the requirements of outboard engines. application scenarios the National Emission and broad market Standard IV for Non-road prospects. Vehicles. Development Developing In Realizing energy saving, After the 21 Changchai Company, Limited Annual Report 2022 project of the efficient, progress meeting the requirements of implementation of the special diesel eco-friendly, and the National Emission project, the product will engine of the energy-saving Standard IV for Non-road have salient advantages high outboard engines Vehicles, and meeting the in terms of power horsepower supporting requirements of performance, safety, outboard various types of small fishery economic efficiency, engines machinery by applying and environmental high-performance protection and meet the technologies such as diesel requirements of the engine energy saving, noise National Emission reduction, environmental Standard IV for protection, material saving, Non-road Vehicles. and service life extension. Developing Diversifying the Making major optimization of lightweight Company’s products, the diesel engine’s structure Development single-cylinder, further expanding the and performance to meet the project of the water-cooled, power market, and In advanced level of similar special diesel high-speed diesel meeting non-emission progress products abroad as well as the engine of the engines to meet the regulatory requirements requirements of the National motorcycle power requirements can bring about new Emission Standard IV for of motor-tricycle in growth points for the Three-wheelers. the market Company’s benefits. After the Further making diesel engines implementation of the more technical and lowering project, the upgraded the harmful substance diesel engine will meet Developing diesel emissions of diesel engines to the requirements of the Development engines that have make their indicators better, National Emission project of higher performance In meet domestically advanced Standard IV for 4G29 diesel and meet the progress level in terms of economic Non-road Vehicles and engine emission efficiency and power drive the Company’s requirements performance and meet the non-road vehicle requirements of the National technologies to be more Emission Standard IV for mature and Non-road Vehicles. well-developed. Development Developing Improving diesel engine’s After the project of single-cylinder power performance, economic implementation of the single-cylinder diesel engines with efficiency of fuel, and other project, the product will diesel engines a mechanical pump performance indicators, as meet the requirements In with a that have higher well as service life and of the National progress mechanical performance and making the emission Emission Standard IV pump that can meet the National indicators meet the National for Non-road Vehicles meet the Emission Standard Emission Standard IV for in terms of the emission National IV for Non-road Non-road Vehicles indicators and meet the 22 Changchai Company, Limited Annual Report 2022 Emission Vehicles supporting Standard IV requirements of for Non-road machinery, bringing Vehicles about new growth points for the Company’s benefits. After the implementation of the project, the product will Developing a Conducting structural meet the requirements higher-performance Development optimization of diesel engine of non-road China IV light multi-cylinder In of V402 diesel components to improve vehicle emission diesel engine that progress engine product performance and regulations, the meets the emission reliability. supporting requirements requirements of machinery, and market demand. Conducting major design After the Developing more optimization of the engine implementation of the efficient, structure and performance to project, the product will Development environmentally improve the reliability, fuel meet the requirements of D15 diesel In friendly and consumption, emissions and of non-road China IV outboard progress energy-saving other indicators of the vehicle emission engine diesel-powered product, so as to reach the regulations and open up products advanced level of similar the market of ship foreign products. machinery. After the implementation of the project, the product Improving the emission meets the market Developing Development characteristics and economic demand and makes the efficient and of characteristics of goods quality and environmentally In diesel-electric diesel-electric hybrid diesel logistics efficiency of friendly progress hybrid engines to enhance the energy the cold chain timely, diesel-powered products efficiency, endurance and safe and efficient, products reliability. providing a whole-procedure temperature and quality management solution. Details about R&D personnel: 2022 2021 Change (%) Number of R&D 236 264 -10.61% personnel R&D personnel as % of 8.89% 9.55% -0.66% 23 Changchai Company, Limited Annual Report 2022 total employees Educational background of R&D personnel Bachelor’s degree 101 117 -13.68% Master’s degree 7 13 -46.15% Age structure of R&D personnel Below 30 25 34 -26.47% 30~40 84 95 -11.59% Details about R&D investments: 2022 2021 Change (%) R&D investments (RMB) 81,239,597.06 82,390,284.14 -1.40% R&D investments as % of operating 3.72% 3.36% 0.36% revenue Capitalized R&D investments (RMB) 0.00 0.00 —— Capitalized R&D investments as % of 0.00% 0.00% —— total R&D investments Reasons for any significant change in the composition of R&D personnel and the impact: □ Applicable √ Not applicable Reasons for any significant YoY change in the percentage of R&D expense in operating revenue: □ Applicable √ Not applicable Reasons for any sharp variation in the percentage of capitalized R&D expense and rationale: □ Applicable √ Not applicable 5. Cash Flows Unit: RMB Item 2022 2021 Change (%) Subtotal of cash generated from 2,150,597,784.38 1,878,728,640.47 14.47% operating activities Subtotal of cash used in 1,785,667,506.54 2,145,052,419.77 -16.75% operating activities Net cash generated from/used in 364,930,277.84 -266,323,779.30 —— operating activities Subtotal of cash generated from 944,067,348.19 385,166,151.68 145.11% investing activities Subtotal of cash used in 1,082,020,854.62 850,680,343.34 27.19% investing activities Net cash generated from/used in -137,953,506.43 -465,514,191.66 —— investing activities Subtotal of cash generated from 135,437,700.65 711,844,747.79 -80.97% financing activities Subtotal of cash used in 114,312,925.54 45,328,892.65 152.19% financing activities Net cash generated from/used in 21,124,775.11 666,515,855.14 -96.83% financing activities Net increase in cash and cash 247,948,744.46 -67,537,318.91 —— 24 Changchai Company, Limited Annual Report 2022 equivalents Explanation of why any of the data above varies significantly: √Applicable Not applicable The significant year-on-year change in net cash generated from/used in operating activities was primarily because the Company strengthened the collection of payments by customers, destocked due to the rising emission standards (resulting in decreased procurement expenditure), and discounted certain bank acceptance notes from customers with high credit levels for cash management purposes in pursuit of higher income in the Reporting Period. The significant year-on-year change in net cash generated from/used in investing activities was primarily due to the Company’s acquisition of a 41.5% interest in Zhenjiang Siyang, a capital increase to Jiangsu Horizon New Energy Technology Co., Ltd., and the proper use of idle funds for cash management purposes, in the Reporting Period. The significant year-on-year change in net cash generated from/used in financing activities was primarily because the Company raised a gross amount of RMB634,999,936.40 (net proceeds: RMB620,665,733.97) in a private placement of 144,318,181 shares of the RMB-denominated ordinary stock (A-stock) last year, while there were no such financing activities during the Reporting Period. Reason for any big difference between the net operating cash flow and the net profit for this Reporting Period √Applicable Not applicable The big difference between the net operating cash flow and the net profit for this Reporting Period was mainly because of the impact on the current income of the fair value changes of the financial assets held by the Company, and the discounting of certain bank acceptance notes with high credit levels. V Analysis of Non-Core Businesses √Applicable Not applicable Unit: RMB As % of Recurrent Amount Source gross profit or not Return on Stock dividends and income from cash 7,969,467.19 9.75% Yes investment management increased fair value of the Company’s interest in Jiangsu Horizon New Energy Technology Co., Ltd., as well as the Gains/losses on decreased prices of the shares held by changes in fair 145,243,457.17 177.75% No wholly-owned subsidiary Horizon value Investment in Jiangsu Liance Electromechanical Technology Co., Ltd. and Kailong High Technology Co., Ltd. Asset impairment -14,367,197.27 -17.58% Inventory valuation loss No loss Negative goodwill and amounts that Non-operating 4,257,942.65 5.21% require no payment due to business No income combination not under common control Non-operating 618,463.56 0.76% Loss on retirement of non-current assets No expense 25 Changchai Company, Limited Annual Report 2022 VI Analysis of Assets and Liabilities 1. Significant Changes in Asset Composition Unit: RMB 31 December 2022 1 January 2022 Change As % As % of in Reason for any Amount of total Amount total percenta significant change assets assets ge (%) The strengthened collection of payments Monetary by customers, and the 930,013,350.97 17.82% 707,966,678.74 14.57% 3.25% discounting of certain assets bank acceptance notes from customers in the Reporting Period. Accounts 370,322,179.77 7.10% 375,209,126.48 7.72% -0.62% receivable Inventories 571,996,881.74 10.96% 651,083,758.18 13.40% -2.44% Investment 42,160,779.65 0.81% 44,597,255.21 0.92% -0.11% property Majority-owned subsidiary Changchai Machinery’s lightweight engine and casting relocation Fixed assets 720,061,387.76 13.80% 402,915,521.65 8.29% 5.51% project was transferred from construction in progress to fixed assets in the Reporting Period. Majority-owned subsidiary Changchai Machinery’s lightweight engine and Construction casting relocation 30,281,547.56 0.58% 270,305,690.91 5.56% -4.98% in progress project was transferred from construction in progress to fixed assets in the Reporting Period. Certain bank acceptance notes with Short-term low credit levels were 115,437,700.65 2.21% 73,971,466.65 1.52% 0.69% discounted in the borrowings Reporting Period, which were undue at the period-end. Contract 32,843,692.83 0.63% 26,864,081.97 0.55% 0.08% liabilities Indicate whether overseas assets take up a high percentage in total assets. 26 Changchai Company, Limited Annual Report 2022 □ Applicable √ Not applicable 2. Assets and Liabilities at Fair Value √ Applicable □ Not applicable Unit: RMB Gain/loss Cumulati Impairme on ve nt Purchase Sold in fair-value Beginnin fair-value allowance d in the the Other Ending Item changes g amount changes for the Reporting Reporting change amount in the charged Reporting Period Period Reporting to equity Period Period Financial assets 1. Held-for-t rading financial assets 404,053,2 -42,836,7 969,060,7 960,173,6 370,103,6 (derivativ 61.57 41.19 67.00 84.81 02.57 e financial assets exclusive ) 4. Investme nt in 779,877,6 770,990,2 955,560,2 other 46.53 40.08 40.08 equity instrumen ts Subtotal of 1,183,930 -42,836,7 770,990,2 969,060,7 960,173,6 1,325,663 financial ,908.10 41.19 40.08 67.00 84.81 ,842.65 assets 150,398,2 187,411,3 75,000,00 412,809,5 Other 26.39 61.54 0.00 87.93 Total of 1,334,329 144,574,6 770,990,2 1,044,060 960,173,6 1,738,473 above ,134.49 20.35 40.08 ,767.00 84.81 ,430.58 Financial 0.00 0.00 liabilities Significant changes to the measurement attributes of the major assets in the Reporting Period: 27 Changchai Company, Limited Annual Report 2022 □ Yes √ No 3. Restricted Asset Rights as at the Period-End Item Ending carrying value Reasons Security deposits associated with bank acceptance Monetary assets 95,662,384.92 notes, environment, etc. Buildings 1,530,890.90 Collateral for bank loan Land use right 879,275.35 Collateral for bank loan Plant and equipment 31,222,420.22 Collateral for bank loan Payment obligations in relation to 110,000,000.00 discounted notes that were undue Payment obligations in relation to 66,395,231.83 transferred notes that were undue Total 305,690,203.22 VII Investments Made 1. Total Investment Amount √ Applicable □ Not applicable Investments made in Reporting Investments made in same period +/-% Period (RMB) of last year (RMB) 108,520,800.00 160,000,000.00 -32.17% 2. Major Equity Investments Made in the Reporting Period √ Applicable □ Not applicable Unit: RMB Profi ts or Prog losse ress s of Invo Shar Disc Disc Inve Inve Capi as of Esti inve lvin Mai ehol Inve Type losur losur stme stme tal the mate stme g in Inve n ding Part stme of e e nt nt reso bala d nt in laws stee busi perc ner nt prod date inde meth amo urce nce inco the uit ness enta term ucts (if x (if od unt s shee me Rep or ge any) any) t ortin not date g Peri od 28 Changchai Company, Limited Annual Report 2022 Tran Man Man Zhe sacti ufact ufact njian on urin urin g com g g Siya plete and and ng d mar mar Dies with ketin 33,5 Self- Lon ketin 29 el Acq Non the 1,90 g of 20,8 41.5 g of Octo 2021 Engi uisiti fund g-ter relev 0.00 4,13 Not dies 00.0 0% e dies ber -068 ne on ed m ant 2.58 el 0 el 2021 Man equit engi engi ufact y ne ne urin inter sets sets g ests for for Co., trans ship ship Ltd. ferre s s d Own ershi p Jian chan gsu ge Hori regis zon tered Lithi Lithi New Capi 75,0 Self- Lon with 186, 27 um Non um Ener tal 00,0 5.36 the 000, Aug 2022 diap fund g-ter diap 0.00 Not gy incre 00.0 % e indu 000. ust -049 hrag ed m hrag Tech ase 0 strial 00 2022 m m nolo and gy com Co., merc Ltd. ial admi nistr ation 108, 187, Tota 520, 904, -- -- -- -- -- -- -- -- 0.00 -- -- -- l 800. 132. 00 58 3. Major Non-Equity Investments Ongoing in the Reporting Period □ Applicable √ Not applicable 4. Financial Investments (1) Securities Investments √ Applicable □ Not applicable Unit: RMB Varie Code Nam Initia Acco Begi Gain/ Accu Purc Sold Gain/ Endi Acco Fund untin nnin loss mula hase in loss ng ty of of e of l g g on ted d in the in carry untin ing 29 Changchai Company, Limited Annual Report 2022 secur secur secur inves meas carry fair fair the Repo the ing g sourc urem ing value value Repo rting Repo amou ity ity ity tmen title e ent amou chan chan rting Perio rting nt t cost meth nt ges ges Perio d Perio od in the recor d d Repo ded rting in Perio equit d y Inves tmen Dom t in Foto Fair estic/ 364, 406, other Self- n 41,78 value 497,0 6001 261, 045, forei 4,000 80,00 0.00 0.00 0.00 0.00 equit fund 66 Moto meth 000. 000. gn .00 0.00 y ed 00 00 r od stock instr umen ts Inves tmen Dom t in Bank Fair estic/ 127, 170, other Self- of 42,78 value 136,4 6009 800, 586, forei 6,000 22,00 0.00 0.00 0.00 0.00 equit fund 19 Jiang meth 000. 000. gn .00 0.00 00 00 y ed su od stock instr umen ts Kailo Held Dom -for-t ng Fair -10,5 radin estic/ 20,00 24,13 -10,5 13,5 Self- 3009 High value 43,9 g forei 1,268 6,339 43,92 0.00 0.00 0.00 92,41 fund 12 Tech meth 28.0 finan gn .00 .00 8.00 1.00 ed 0 cial nolo od stock asset gy s Held Dom Lian -for-t Fair -27,7 60,0 radin estic/ ce 7,200 87,84 -27,7 Self- 6881 value 77,6 62,4 g forei Tech ,000. 0,000 77,60 0.00 0.00 0.00 fund 13 meth 00.0 00.0 finan gn nolo 00 .00 0.00 ed 0 0 cial od stock gy asset s Held Dom -for-t Fair radin estic/ Lanti -42,0 247, Self- 6053 160,7 value 289,0 -42,0 g forei an 0.00 0.00 0.00 00.0 000. fund 68 44.76 meth 00.00 00.00 finan gn Gas 0 00 ed cial od stock asset s Dom 8328 Stars 3,600 Fair 9,675 -4,83 0.00 0.00 0.00 -4,83 4,83 Held Self- 30 Changchai Company, Limited Annual Report 2022 estic/ 85 Scien ,000. value ,000. 7,500 7,50 7,50 -for-t fund 00 00 .00 0.00 0.00 radin forei ce meth ed g gn and od finan stock Tech cial nolo asset s gy 492, -43,2 655, 115,5 755,4 -43,2 061, 01,0 370, Total 32,01 -- 42,33 01,02 0.00 0.00 -- -- 000. 28.0 311.0 2.76 9.00 8.00 00 0 0 (2) Investments in Derivative Financial Instruments □ Applicable √ Not applicable No such cases in the Reporting Period. 5. Use of Raised Funds √ Applicable □ Not applicable (1) Overall Use of Raised Funds √ Applicable □ Not applicable Unit: RMB’0,000 Total Proport Raised Total raised Total Total ion of Total Use funds raised funds raised accumu total raised and that funds with funds lative accumu funds owners have Year Method that altered Total that raised lative that hip been for of have purpos raised have funds raised have change left fund-ra fund-ra been es funds been with funds not of unused ising ising used in during used altered with been unused for the the accumu purpos altered used raised over current Reporti latively es purpos yet funds two period ng es years Period Special account Non-pu for blic 63,500. 8,944.4 34,682. 28,817. 2021 0.00 0.00 0.00% deposit 0.00 offerin 00 5 81 19 ing g raised funds 63,500. 8,944.4 34,682. 28,817. Total -- 0.00 0.00 0.00% -- 0.00 00 5 81 19 31 Changchai Company, Limited Annual Report 2022 Explanation of the overall use of raised funds On 17 December 2020, the Company received the Reply Concerning the Approval of the Non-public Offering of Shares of Changchai Co., Ltd. (CSRC Permit [2020] No. 3374) from the China Securities Regulatory Commission, which approved the non-public offering of up to 168,412,297 shares of the Company. On June 11, 2021, the subscribers of this non-public offering have fully remitted the subscription funds to the bank account designated by the sponsor institution, and the total amount of funds raised was RMB634,999,996.40. After the capital verification by Gongzheng Tianye Accounting Firm (Special General Partnership), the Capital Verification Report of the Funds Raised by the Non-public Issuance of Changchai Co., Ltd. (S.G.W [2021] B061) was issued. With the issuance expenses deducted, the actual net funds raised were RMB620,665,733.97. On June 15, 2021, the aforementioned raised funds were remitted to the special account set up by the Company for raised funds from the non-public offering of shares. After the capital verification by Gongzheng Tianye Accounting Firm (Special General Partnership), the Capital Verification Report of the Funds Raised by the Non-public Issuance of Changchai Co., Ltd. (S.G.W [2021] B062) was issued. The raised funds have all been deposited in the special account for the raised funds and a tripartite supervision agreement has been signed with the sponsor institution and the account opening bank for the funds raised. There is no material difference between the tripartite supervision agreement and the model tripartite supervision agreement of Shenzhen Stock Exchange, and the Company strictly complies with it when using the raised funds. As of 31 December 2022, RMB346.8281 million of raised funds has been used cumulatively, with the unused raised funds being RMB288.1719 million. (2) Committed Projects of Raised Funds √ Applicable □ Not applicable Unit: RMB’0,000 Accu Wheth Wheth mulati Invest er er The ve ment Date projec Benefi there Total invest invest progre when Wheth ts Adjust ts are Committed comm ment ment ss as the er the have ed record materi investment itted amou amou of the projec estima been total ed al projects and invest nt nt as end of ts are ted altere invest during chang investment of ment during of the the ready benefi d ment the es in excessive raised with the end of Repor for ts are (inclu amou Repor the funds raised Repor the ting their reache ding nt (1) ting projec funds ting Repor Period intend d partial Period t Period ting (3) = ed use altern feasibi Period (2)/(1) ation) lity (2) Committed investment projects Relocation project 31 54,76 54,76 8,311. 32,41 59.19 -1,639 of light engines No May No No 6.71 6.71 17 8.32 % .88 and casting 2022 Innovation 31 Not Not capacity building 8,733. 7,299. 633.2 759.2 10.40 Dece No applic applic No project of the 29 86 8 1 % mber 2023 able able technical center -1,639 Subtotal of -- 63,50 62,06 8,944. 33,17 -- -- -- -- .88 32 Changchai Company, Limited Annual Report 2022 committed 0.00 6.57 45 7.53 investment projects Investment of excessive raised funds Not applicable 63,50 62,06 8,944. 33,17 -1,639 Total -- -- -- -- -- 0.00 6.57 45 7.53 .88 The reasons for the failure to realize the benefits of the relocation project of light engines and casting during the Reporting Period: The project met the hoped condition for use in May 2022. However, due to market factors, the production line failed to achieve the expected production volume. The sales revenue of the products was inadequate to cover the costs of the depreciation of new fixed assets and administrative expenses. As a result, the project failed to achieve the anticipated benefit as of 31 December 2022. The reasons for the slow payment progress of the relocation project of light engines and Cases and reasons casting: As of 31 December 2022, the project did not complete the final account audit and for failing to final acceptance inspection of equipment, compromising the payment progress. As of 31 reach the planned March 2023, the payment amount reached RMB476.1310 million, accounting for 86.94% progress or of the total amount. The unpaid funds mainly refer to the supporting working capital and predicted return the balance of the remaining unaccepted equipment. (by specific The reasons for the slow payment progress of the innovation capacity construction of the projects) technology centre: As of 31 December 2022, half of the construction period of the innovation capacity construction of the technology centre was passed and some R&D objectives were achieved. However, the payment progress of the project was slow for the following specific reasons: 1. From the beginning of the project initiation, the Company adhered to the principles of saving capital and increasing the asset utilisation rate. It utilised existing equipment to complete some of the R&D processes, saving some expenses of equipment. 2. The balance of some signed contracts was not paid. 2. The balance of some signed contracts was not paid. Explanations of the material Not applicable changes in the project feasibility Amount, use, and use progress of Not applicable excessive raised funds Applicable Implementation Occurred during the Reporting Period of location The Proposal on Adding Implementation Location to the Private Placement Raised Funds changes in the Investment Project of Innovation Capacity Building of the Technical Centre was approved investment at the 13th Meeting of the 9th Board of Directors and the 12th Meeting of the 9th projects with the Supervisory Committee of the Company on 22 August 2022. The Company decided to raised funds add the sites of certain branches of the Company as the parent and wholly-owned subsidiary Changchai Machinery as locations to place the R&D equipment and 33 Changchai Company, Limited Annual Report 2022 implement the R&D project. This change will not re-purpose the raised funds and will help carry forward the technical innovation project. Implementation of method adjustments to the Not applicable investment projects with the raised funds Applicable Prior to the availability of the raised funds, in order to ensure the smooth implementation of the investment projects with raised funds, the Company used its own funds to invest in part of the investment projects with raised funds and paid part of the issuance expenses. As of 17 June 2021, the cumulative amount of the Company's self-financing funds pre-invested in the investment projects with raised funds was RMB181,803,327.94, the amount of issuance expenses advanced was RMB2,358,490.56, totaling RMB184,161,818.50, and the proposed replacement amount was RMB184,161,818.50. The capitals were verified by the Gongzheng Tianye Accounting Firm (Special General Early investment Partnership), and the Verification Report on the Pre-investment of Self-financing Funds and placement into the Investment Project with Raised Funds and the Payment of Issuance Expenses by concerning the Self-financing Funds of Changchai Co., Ltd. (S.G.W [2021] E1347) was issued on 25 investment June 2021. On 28 June 2021, the Third Interim Meeting of the Board of Directors of the projects with the Company in 2021 deliberated and approved the Proposal on Replacing the Funds raised funds Pre-invested in the Project and Advanced Issuance Expenses with the Raised Funds, agreeing to use the raised funds from the non-public offering of shares to replace the self-financing funds totaling RMB184,161,818.50 that had been pre-invested in the project prior to the availability of the raised funds. In addition, Xingye Securities Co., Ltd. and Donghai Securities Co., Ltd. issued a verification opinion on the use of raised funds to replace self-financing funds that had been invested in advance in the projects with raised funds. For details, see the Announcement on the Use of Raised Funds to Replace Pre-invested Project Funds and Advanced Issue Expenses (Announcement No. 2021-036) published on Cninfo (http://www.cninfo.com.cn) on 30 June 2021. Temporary replenishment of working capital Not applicable with the idle raised funds Surplus raised funds for project implementation Not applicable and reasons for the surplus Use and Some are deposited in the special account for raised funds and some temporarily idle ownership change raised funds are used to purchase wealth management products of unused raised 34 Changchai Company, Limited Annual Report 2022 funds On 13 July 2021, the Fourth Interim Meeting of the Board of Directors of the Company in 2021 deliberated and approved the Proposal on Changing the Implementation Entity of Some Investment Projects with Raised Funds, agreeing to change the implementation entity of the Company's investment projects with funds raised through non-public offering of shares, the "relocation project of light engines and casting", from Changchai Problems in the Machinery, a wholly-owned subsidiary of the Company, to the parent company of use of raised Changchai Co., Ltd. The matter did not change the use and implementation of the funds funds and raised and was not a significant change in the investment projects with raised funds. disclosure, or The Proposal on Adding Implementation Entity to the Private Placement Raised Funds other cases Investment Project of Relocation of Light Engines and Casting was approved at the 13th Meeting of the 9th Board of Directors and the 12th Meeting of the 9th Supervisory Committee of the Company on 22 August 2022. As such, the Company has added Changchai Machinery as another operating entity with the Company as the parent to joint operate the relocation project for better operational flexibility and stronger market competitiveness. (3) Altered Projects of Raised Funds □ Applicable √ Not applicable VIII Sale of Major Assets and Equity Interests 1. Sale of Major Assets □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Sale of Major Equity Interests □ Applicable √ Not applicable IX Major Subsidiaries √ Applicable □ Not applicable Major fully/majority-owned subsidiaries and those minority-owned subsidiaries with an over 10% effect on the Company’s net profit: Unit: RMB Relations hip with Principal Registere Total Operating Operating Name activity Net assets Net profit the d capital assets revenue profit Company 55,063,00 Changcha Subsidiar Productio 155,037,7 80,050,38 190,631,8 -9,633,75 -8,323,25 0.00 35 Changchai Company, Limited Annual Report 2022 i Benniu y n of 13.45 1.90 59.08 8.49 6.01 diesel engine accessori es Changcha Diesel Subsidiar 85,000,00 70,361,72 49,264,10 34,281,25 -658,955. -652,107. i engine y 0.00 7.25 8.12 2.72 59 80 Wanzhou assembly External Horizon investme Subsidiar 40,000,00 94,446,63 80,931,10 -40,971,2 -30,437,8 Investme nt and 0.00 y 0.00 5.52 1.39 43.24 09.17 nt consultin g agricultur Horizon al Agricultu machiner Subsidiar 10,000,00 9,071,468 -15,054,4 3,513,853 -4,209,35 -4,209,35 ral y product y 0.00 .38 66.60 .60 8.80 8.80 Equipme of rice nt transplant er etc. Gasoline Changcha Subsidiar 37,250,00 107,556,9 86,383,80 148,144,7 12,403,78 11,452,34 engines i Robin y 0.00 55.89 8.82 49.68 4.38 7.12 assembly Internal combusti Changcha on engine i Subsidiar 300,000,0 577,467,0 277,452,2 27,200,81 -23,984,3 -18,691,4 and Machiner y 00.00 39.02 20.47 2.94 44.72 34.92 related y accessori es Xingshen Real g Real estate Subsidiar 1,000,000 2,614,116 559,218.0 4,640,127 197,076.5 141,777.6 Estate managem y .00 .80 4 .66 1 4 Managem ent ent service Manufact uring and Zhenjiang Subsidiar marketing 2,000,000 108,595,3 88,360,05 35,440,98 4,616,942 4,885,811 Siyang y of diesel .00 10.06 3.89 3.37 .04 .05 engines for ships Subsidiaries obtained or disposed of in the Reporting Period: √ Applicable □ Not applicable How the subsidiary was obtained or disposed Impact on the Company’s Company name of in the Reporting Period operations and operating results 36 Changchai Company, Limited Annual Report 2022 The Company won the bid of RMB33.5208 This transaction will help the million of own funds for the 41.5% equity Zhenjiang Siyang Diesel Company expand its product interests in Zhenjiang Siyang Diesel Engine Engine Manufacturing chain, complete its business Manufacturing Co., Ltd., which was put out for Co., Ltd. portfolio and promote long-term sale by Jiangsu Keda Assets Marketing Co., development. Ltd. Other information about principal subsidiaries and joint stock companies: N/A X Structured Bodies Controlled by the Company □ Applicable √ Not applicable XI Prospects 1. Development strategy of the Company The Company’s development strategy is to base on farm machinery, become stronger in the engine business, explore more markets and develop in a scientific way. The state’s existing policies and new policies on comprehensively promoting rural revitalization and accelerating to build China into an agricultural power will bring about significant and positive impacts for the industry. The Company will make full use of the policy-based dividend of strong national support for agricultural production and development of agricultural machinery and continue to promote innovative development, talent recruitment, quality improvement, brand building, and capital boost to accelerate the technological upgrade of traditional power products, expand new markets in new fields, and also to achieve diversified development of the industry. The Company’s main development directions are as follows: (1) Accelerating technological upgrading and area expansion for traditional products First, the Company will continue to promote the mass production of the full range of models that meet the National Emission Standard IV for Non-road Vehicles. It will further optimize the products that meet the National Emission Standard IV for Non-road Vehicles and develop its capability of production, manufacturing, and after-sales service to ensure that the products’ power performance, economic efficiency, and reliability can meet market demands. Second, traditional products will be developed in the direction of intelligent and networked high-end products. Based on the electronic, networked and intelligent characteristics of the development of agricultural machinery products, the Company will promote the application of advanced technologies such as the Internet, big data, artificial intelligence and new materials to product development, further improve the diesel engines’ functions of intelligent control, real-time monitoring and big data collection and analysis, accelerate the R&D of intelligent terminals and hybrid power, promote the products to develop towards the high end, strengthen the existing advantageous products, and raise the added value of products to better meet user demands. Third, traditional products will be developed in the terminal direction. The diesel engine is an intermediate product and a core product to develop in the terminal direction. At present, the Company’s main products are small and medium-power diesel engines and general gasoline engines, the market of supporting facilities is mainly distributed in agricultural machinery, plant protection machinery, construction machinery, shipborne machinery, and other non-road areas. The Company is now focusing on terminal fields such as generating sets, outboard engines, cold chains, fishing boats, and iron towers, with a broad prospect. Currently, the Company has successfully acquired 41.5% of the equity of Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd., (“Zhenjiang Siyang”) becoming the largest shareholder and gaining control. Zhenjiang Siyang mainly engages in the diesel engine units of lifeboats and rescue boats, which is a top 1 brand of the main engine of lifeboats in the 37 Changchai Company, Limited Annual Report 2022 world. Meanwhile, the outboard engine project has made phased progress, with the small-power outboard engines gradually completing market verification. In addition, a domestic and overseas market sales system has been built, which is conducive to expanding the product chain and improving the business structure. The Company will make full use of the capital platform of the listed company to cut in at the right time through joint venture cooperation, mergers and acquisitions, restructuring, etc., to accelerate the extension of the industrial chain and build new competitive advantages. (2) Promoting industrial transformation and development in the direction of combination with new energy The irreversible development of new energy has impacted internal combustion engine products, but the opportunity exists for a long time. While tapping the advantages of traditional industries, internal combustion engines should develop with the development of new energy as well. At present, the Company has invested in Jiangsu Horizon New Energy Technology Co., Ltd. through equity participation, mainly engaging in the products of the project of wet-process separator film for lithium batteries, with a good development momentum. In the future, the Company will seize the development opportunities of the “carbon peaking and carbon neutrality” strategy raised by the state, continue to increase its efforts to explore new energy areas such as lithium battery and hydrogen fuel, promote cooperation and penetration of related green industry, and drive it to expand to new fields. 2. Operation plan for the Year 2023: The Company will consolidate the traditional market of agricultural machinery, explore the emerging area of power, raise quality to create fine products with core technologies, highlight efficiency by integrating resources, stimulate vitality by deepening reform, and leverage capital to promote development. In 2023, sales revenue is expected to be RMB2.2 billion, with revenue of USD52 million through export. The above operation plan does not represent the profit forecast of Y2023 by the listed company, and whether can be realized depends on various factors on the changes of market conditions and the effort level of the management team. There is a lot of uncertainty, and investors should pay special attention on it. 3. Possible future risks and countermeasures of the Company (1) Market risk: The total volume of the market will drop due to factors such as subsidy policy change, tight supply chain, upgrading of the National Emission Standard IV for Non-road Vehicles, and intensified existing competition. In recent years, the agricultural machinery industry has still been in a period of deep adjustment. The diesel engine market faces limited total demand, the delivery capacity and environment of products need to be improved, and the lower user revenue compromises the increase in the demand side. Countermeasures: First, the Company solidifies the traditional supporting fields, further expands the Company’s advantages in the field of agricultural machinery, and continues to promote the mass production of the full range of models that meet the National Emission Standard IV for Non-road Vehicles to ensure the continuous supply level of supply chains and meet market demands. Second, the Company expands applications in shipborne generator sets, high-speed rice transplanters, cold chain vehicles, excavators and other small construction machinery, conducts in-depth research and development in new areas and development and supporting of key products. Third, the Company creates the “internal combustion engine+” mode, actively promotes the application of advanced technologies such as the Internet, big data, artificial intelligence and new materials to product development, further improves the diesel engines’ functions of intelligent control, real-time monitoring and big data collection and analysis, accelerates the R&D of intelligent terminals and hybrid power, promotes the products to develop towards the high end, and builds new competitive edges. (2) Industrial risk In recent years, the state advocates energy conservation and emission reduction. New energy power represented by pure electric, hybrid power and hydrogen fuel power has grabbed the market share of diesel engine to a certain 38 Changchai Company, Limited Annual Report 2022 extent. At present, new energy power is mainly used in vehicles. Its use in agricultural machinery is still facing problems such as high cost and complex operating environment. However, as breakthroughs have been made in new energy battery technology, the local application scenario of diesel engine may be replaced by new energy power. Countermeasures: The Company strengthens exploration in the new energy sector, and actively promotes project construction and development. Meanwhile, the Company makes proper efforts in product R&D, develops efficient and eco-friendly products, and expands new development directions and application areas. (3) Foreign trade risk In the context of the complex and changeable global economic environment and the turmoil in the breadbasket of Europe caused by the Russia-Ukraine conflict, the prices of imported agricultural products, fertilizer, feed, oil, and gas increase, which directly compromise the planting costs and purchasing power of farmers. The unstable factors have brought about certain impacts on product export. Countermeasures: The Company will actively deal with the foreign trade market changes, strengthen the maintenance and management of overseas key markets and customers, intensify efforts in the development of emerging markets and new users, and endeavor to improve the sales of high-value-added products. (4) Foreign exchange risk Some of the Company’s exports are settled in USD. In the future, due to the significant exchange rate fluctuation of RMB against USD, the Company may face the risk of adverse impact on product sales due to exchange rate fluctuation. Countermeasures: First, the Company will enhance risk control to ensure its capital security, constantly pay attention to the depreciation of currencies and shortage of USD in the market, and lower risk by changing payment methods change and insuring export credit insurance. Second, the Company will promptly adjust product prices and payment terms to cope with fluctuations in exchange rates and material prices. (5) Talent risk: The Company needs high-level talents, highly skilled talents and lacks talents to help the Company improve its operational efficiency and strengthen technological innovation to cope with the increasingly fierce market competition and industry development trend. Therefore, the demand for professional talents and senior management talents has increased significantly. Countermeasures: First, the Company has stepped up efforts to cultivate and appoint young leaders and recruited more professional talents. Second, the Company has promoted the reform program of appraisal and motivation, recruited advanced talents through multiple approaches, and constantly enhanced the development of skill experts, technical and management personnel, and workers and technicians so as to raise the contribution rate of human resources in all respects. XII Communications with the Investment Community such as Researches, Inquiries and Interviews during the Reporting Period √ Applicable □ Not applicable Type Way Index to Place of of Contents and materials Date of visit of Visitor main inquiry visit visit provided visit information or http://irm.cn Othe Indiv Individual Product usage of Horizon http://irm.cni 4 January 2022 info.com.cn r idual investor New Energy Technology nfo.com.cn 39 Changchai Company, Limited Annual Report 2022 Co., Ltd. Development, products, http://irm.cn Othe Indiv Individual and financing of Horizon http://irm.cni 6 January 2022 info.com.cn r idual investor New Energy Technology nfo.com.cn Co., Ltd. Product status and http://irm.cn Othe Indiv Individual development suggestions http://irm.cni 12 January 2022 info.com.cn r idual investor of Horizon New Energy nfo.com.cn Technology Co., Ltd. http://irm.cn Othe Indiv Individual Company’s production http://irm.cni 18 January 2022 and operation status and info.com.cn r idual investor nfo.com.cn product suggestions http://irm.cn Othe Indiv Individual Impact of the results of http://irm.cni 20 January 2022 Horizon New Energy on info.com.cn r idual investor nfo.com.cn the Company http://irm.cn Othe Indiv Individual The intention of the http://irm.cni 27 January 2022 Company to repurchase info.com.cn r idual investor nfo.com.cn shares The Company’s product http://irm.cn Othe Indiv Individual R&D, market http://irm.cni 31 January 2022 advantages, and situation info.com.cn r idual investor nfo.com.cn of the outboard engine product http://irm.cn Othe Indiv Individual The Company’s product http://irm.cni 8 February 2022 R&D, application, and info.com.cn r idual investor nfo.com.cn market advantages Product production and sales of Horizon New http://irm.cn Othe Indiv Individual Energy Technology Co., http://irm.cni 9 February 2022 Ltd., the progress of the info.com.cn r idual investor nfo.com.cn Company’s relocation project, and product application Product capacity release http://irm.cn Othe Indiv Individual of Phase II Shanxi Base http://irm.cni 10 February 2022 info.com.cn r idual investor Project of Horizon New nfo.com.cn Energy Impact of the development direction of http://irm.cn Othe Indiv Individual Horizon New Energy http://irm.cni 13 February 2022 Technology Co., Ltd. and info.com.cn r idual investor nfo.com.cn progress of the Company’s relocation project on the Company http://irm.cn Othe Indiv Individual The Company’s monthly http://irm.cni 22 February 2022 info.com.cn r idual investor production capacity nfo.com.cn http://irm.cn Othe Indiv Individual The monthly production http://irm.cni 28 February 2022 capacity of Horizon New info.com.cn r idual investor nfo.com.cn Energy Co., Ltd. http://irm.cn Othe Indiv Individual The Company’s overseas http://irm.cni 3 March 2022 info.com.cn r idual investor customers nfo.com.cn 18 March 2022 http://irm.cn Othe Indiv Individual Product application of http://irm.cni 40 Changchai Company, Limited Annual Report 2022 info.com.cn r idual investor Horizon New Energy nfo.com.cn Technology Co., Ltd. The Company’s share repurchase intention, http://irm.cn Othe Indiv Individual production, and sales, http://irm.cni 21 March 2022 info.com.cn r idual investor and the results of nfo.com.cn Horizon New Energy Technology Co., Ltd. The Company’s product expansion and R&D, the http://irm.cn Othe Indiv Individual customer profile and http://irm.cni 30 March 2022 production capacity in info.com.cn r idual investor nfo.com.cn 2021 of Horizon New Energy Technology Co., Ltd. The monthly production http://irm.cn Othe Indiv Individual capacity of the separator http://irm.cni 14 April 2022 info.com.cn r idual investor film of Horizon New nfo.com.cn Energy Information on 000570 Changchai’s Results Investors The Company’s Online Othe Othe Presentation production and operating 21 April 2022 and the and meeting r r activities, and public Roadshow on investments www.cninfo. com.cn dated 21 April 2022 The Company’s assets, http://irm.cn Othe Indiv Individual and intention to sell the http://irm.cni 28 April 2022 info.com.cn r idual investor held Liance Technology nfo.com.cn shares http://irm.cn Othe Indiv Individual The shipments in Q1 of http://irm.cni 6 May 2022 Horizon New Energy info.com.cn r idual investor nfo.com.cn Technology Co., Ltd. http://irm.cn Othe Indiv Individual The impact of the “Belt http://irm.cni 11 May 2022 and Road” on the info.com.cn r idual investor nfo.com.cn Company http://irm.cn Othe Indiv Individual The Company’s sales in http://irm.cni 16 May 2022 info.com.cn r idual investor Q1 and customers nfo.com.cn http://irm.cn Othe Indiv Individual Supply and customers of http://irm.cni 13 June 2022 Horizon New Energy info.com.cn r idual investor nfo.com.cn Technology Co., Ltd. http://irm.cn Othe Indiv Individual Company’s shareholding http://irm.cni 14 June 2022 in Horizon New Energy info.com.cn r idual investor nfo.com.cn Technology Co., Ltd. The Company’s http://irm.cn Othe Indiv Individual relocation project, the http://irm.cni 15 June 2022 use of the funds raised, info.com.cn r idual investor nfo.com.cn product R&D progress, the Company’s 41 Changchai Company, Limited Annual Report 2022 development direction and progress, assistance of controlling shareholders to the Company, and operation and customers of Horizon New Energy Technology Co., Ltd. http://irm.cn Othe Indiv Individual Product application http://irm.cni 17 June 2022 fields of the subsidiary, info.com.cn r idual investor nfo.com.cn Zhenjiang Siyang http://irm.cn Othe Indiv Individual http://irm.cni 20 June 2022 Purchase and storage info.com.cn r idual investor nfo.com.cn http://irm.cn Othe Indiv Individual The Company’s http://irm.cni 23 June 2022 application fields of info.com.cn r idual investor nfo.com.cn diesel engine products http://irm.cn Othe Indiv Individual The development http://irm.cni 27 June 2022 intentions of the info.com.cn r idual investor nfo.com.cn Company’s subsidiaries http://irm.cn Othe Indiv Individual The shipments in Q2 of http://irm.cni 19 July 2022 Horizon New Energy info.com.cn r idual investor nfo.com.cn Technology Co., Ltd. http://irm.cn Othe Indiv Individual The development http://irm.cni 21 July 2022 intentions of the info.com.cn r idual investor nfo.com.cn Company http://irm.cn Othe Indiv Individual The shipments of http://irm.cni 23 July 2022 Horizon New Energy info.com.cn r idual investor nfo.com.cn Technology Co., Ltd. http://irm.cn Othe Indiv Individual The shipments of http://irm.cni 24 July 2022 Horizon New Energy info.com.cn r idual investor nfo.com.cn Technology Co., Ltd. http://irm.cn Othe Indiv Individual The companies invested http://irm.cni 25 July 2022 info.com.cn r idual investor by the Company nfo.com.cn http://irm.cn Othe Indiv Individual Product applicability of http://irm.cni 26 July 2022 Horizon New Energy info.com.cn r idual investor nfo.com.cn Technology Co., Ltd. Product applicability of Horizon New Energy http://irm.cn Othe Indiv Individual Technology Co., Ltd. and http://irm.cni 27 July 2022 info.com.cn r idual investor the situation of its nfo.com.cn subsidiary, Horizon New Material http://irm.cn Othe Indiv Individual http://irm.cni 1 August 2022 Number of shareholders info.com.cn r idual investor nfo.com.cn http://irm.cn Othe Indiv Individual Suggestions on the http://irm.cni 2 August 2022 info.com.cn r idual investor Company’s development nfo.com.cn http://irm.cn Othe Indiv Individual Suggestions on the http://irm.cni 2 August 2022 info.com.cn r idual investor Company’s development nfo.com.cn http://irm.cn Othe Indiv Individual Equity situation of http://irm.cni 3 August 2022 Changzhou Synergetic info.com.cn r idual investor nfo.com.cn Innovation Private 42 Changchai Company, Limited Annual Report 2022 Equity Fund invested by the Company http://irm.cn Othe Indiv Individual http://irm.cni 5 August 2022 The Company’s business info.com.cn r idual investor nfo.com.cn The product capacity of http://irm.cn Othe Indiv Individual Horizon New Material, a http://irm.cni 8 August 2022 subsidiary of Horizon info.com.cn r idual investor nfo.com.cn New Energy Technology Co., Ltd. http://irm.cn Othe Indiv Individual http://irm.cni 11 August 2022 The Company’s products info.com.cn r idual investor nfo.com.cn http://irm.cn Othe Indiv Individual The Company’s products http://irm.cni 17 August 2022 info.com.cn r idual investor and business nfo.com.cn http://irm.cn Othe Indiv Individual The Company’s products http://irm.cni 18 August 2022 info.com.cn r idual investor and business nfo.com.cn http://irm.cn Othe Indiv Individual The application of the http://irm.cni 19 August 2022 Company’s products in info.com.cn r idual investor nfo.com.cn shipborne machinery The Company http://irm.cn Othe Indiv Individual development suggestions http://irm.cni 22 August 2022 and progress in info.com.cn r idual investor nfo.com.cn relocation, purchase and storage Impact of the results of http://irm.cn Othe Indiv Individual Horizon New Energy and http://irm.cni 25 August 2022 subsidies of agricultural info.com.cn r idual investor nfo.com.cn machinery on the Company’s sales http://irm.cn Othe Indiv Individual The Company’s http://irm.cni 26 August 2022 info.com.cn r idual investor development nfo.com.cn Impact of the Company’s investment in Changzhou http://irm.cn Othe Indiv Individual Synergetic Innovation http://irm.cni 31 August 2022 info.com.cn r idual investor Private Equity Fund nfo.com.cn (Limited Partnership) of the Company The Company’s capital http://irm.cn Othe Indiv Individual increase in Horizon New http://irm.cni 1 September 2022 info.com.cn r idual investor Energy Technology Co., nfo.com.cn Ltd. http://irm.cn Othe Indiv Individual The Company’s product http://irm.cni 13 September 2022 info.com.cn r idual investor export nfo.com.cn http://irm.cn Othe Indiv Individual The supporting fields of http://irm.cni 30 September 2022 info.com.cn r idual investor the Company’s products nfo.com.cn The Company’s progress in purchase and storage, http://irm.cn Othe Indiv Individual investment, shareholding http://irm.cni 12 October 2022 info.com.cn r idual investor intentions of employees, nfo.com.cn and production capacity after the relocation 43 Changchai Company, Limited Annual Report 2022 Customers of Horizon http://irm.cn Othe Indiv Individual New Material, a http://irm.cni 20 October 2022 subsidiary of Horizon info.com.cn r idual investor nfo.com.cn New Energy Technology Co., Ltd. Customers of Horizon http://irm.cn Othe Indiv Individual New Material, a http://irm.cni 25 October 2022 subsidiary of Horizon info.com.cn r idual investor nfo.com.cn New Energy Technology Co., Ltd. http://irm.cn Othe Indiv Individual http://irm.cni 8 November 2022 Relocation expenses info.com.cn r idual investor nfo.com.cn Impact of the National Emission Standard IV for Non-road Vehicles on the http://irm.cn Othe Indiv Individual Company’s products and http://irm.cni 16 November 2022 info.com.cn r idual investor sales, and the Company’s nfo.com.cn product certification and featured service monitoring platforms The Company’s production, sales, and http://irm.cn Othe Indiv Individual market of diesel engines http://irm.cni 17 November 2022 info.com.cn r idual investor that meet the National nfo.com.cn Emission Standard IV for Non-road Vehicles The intention of going public, product http://irm.cn Othe Indiv Individual applicability, and product http://irm.cni 24 November 2022 info.com.cn r idual investor orders of Horizon New nfo.com.cn Energy Technology Co., Ltd. http://irm.cn Othe Indiv Individual Customer cooperation of http://irm.cni 27 November 2022 Horizon New Energy info.com.cn r idual investor nfo.com.cn Technology Co., Ltd. The Company’s product application and sales, purchase and storage, prototyping testing of the http://irm.cn Othe Indiv Individual cold chain hybrid power http://irm.cni 30 November 2022 info.com.cn r idual investor product, and extension of nfo.com.cn Changzhou Synergetic Innovation Private Equity Fund (Limited Partnership) http://irm.cn Othe Indiv Individual Supporting fields of http://irm.cni 5 December 2022 info.com.cn r idual investor generating sets nfo.com.cn The Company’s development http://irm.cn Othe Indiv Individual suggestions, and the http://irm.cni 21 December 2022 production line and info.com.cn r idual investor nfo.com.cn product capacity of Horizon New Energy Technology Co., Ltd. 44 Changchai Company, Limited Annual Report 2022 http://irm.cn Othe Indiv Individual Production capacity of http://irm.cni 23 December 2022 Horizon New Energy info.com.cn r idual investor nfo.com.cn Technology Co., Ltd. 45 Changchai Company, Limited Annual Report 2022 Part IV Corporate Governance I General Information of Corporate Governance In the Reporting Period, the Company was strictly in line with laws, statutes such as Company Law, Securities Laws, Code of Corporate Governance of Listed Companies, Guide Opinion on Establishment of Independent Director System by Listed Companies and Guidelines on Internal Controls of Listed Companies and so on, continuously perfected corporate governance, established and accomplished internal management and control system, consistently and deeply put forward corporate governance activities, so as to further normalized operation of the Company, raising corporate governance level, laying a guard for steady and healthy development of the Company, protect legal rights and interests of the Company and all shareholders. The Company promulgated or revised a series of internal control system through all aspects of normal operation and management activities in accordance with each national laws and regulations, characteristics of the industry, operation and self-managing business, and improved it continuously, and finally formed a normative management system. And formulated a series of management system, process and standard covered each operation link and level of the financial assets control, human resources management, quality environment management and internal audit supervisor etc., which ensured all the work had rules to follow. Indicate by tick market whether there is any material incompliance with the applicable laws, administrative regulations and regulations issued by the CSRC governing the governance of listed companies. □ Yes √ No No such cases in the Reporting Period. II The Company’s Independence from Its Controlling Shareholder and Actual Controller in Asset, Personnel, Financial Affairs, Organization and Business The Company was independent from the controlling shareholder Changzhou Investment Group Co., Ltd in terms of assets, business, personnel, organization and financing, with independent & complete business and capability to operate independently. 1. Assets: The property rights relationship between the Company and the controlling shareholder is clear, assets are clearly defined, and there are no funds, assets and other resources being occupied or used without compensation between them. 2. Personnel: The Company and the controlling shareholder are independent of each other in terms of labor, personnel and salary management, and each has an independent management organization, a sound management policy, and an independent personnel appraisal and assessment system. 3. Finance: The Company has set up a special finance department, established an independent accounting system and financial management policy, opened an independent bank account, and implemented independent accounting and independent tax payments. There is no interference in the financial activities of the Company by the controlling shareholder. 4. Institution: The Company has a complete and independent corporate governance structure and has established a sound organizational system that meets its own production and operation needs, which operates independently and well, and there is no subordinate relationship with the functional departments of the controlling shareholder. 5. Business: The Company has an independent and complete business system with independent and autonomous 46 Changchai Company, Limited Annual Report 2022 production and operational capability. The Company conducts related transactions reasonably on the principle of independence. III Horizontal Competition □ Applicable √ Not applicable IV Annual and Special General Meetings Convened during the Reporting Period 1. General Meeting Convened during the Reporting Period Investor Date of the Meeting Type participatio Disclosure date Resolution meeting n ratio All proposals were approved. See The 2021 Annual Announcement No. Annual General 32.33% 6 May 2022 7 May 2022 2022-027 on General Meeting Resolutions of the Meeting 2021 Annual General Meeting. 2. Special General Meetings Convened at the Request of Preferred Shareholders with Resumed Voting Rights □ Applicable √ Not applicable V Directors, Supervisors and Senior Management 1. General Information Ending Incumbent Gende Name Office title Age Start of tenure End of tenure shareholding /Former r (share) Shi Chairman of the Incumbent Male 59 18 October 2016 Ongoing 0 Board Xinkun Zhang Director, Incumbent Male 57 18 October 2016 Ongoing 0 Xin General Manager Lin Tian Director Incumbent Male 60 17 December 2018 Ongoing 0 Director, Xu Yi Incumbent Male 59 16 April 2020 Ongoing 0 Vice-general 47 Changchai Company, Limited Annual Report 2022 Manager Director, Chief Jiang He Incumbent Male 51 16 April 2020 Ongoing 0 Accountant Yang Director Incumbent Male 51 16 April 2020 Ongoing 0 Feng Wang Independent Incumbent Male 60 16 April 2020 Ongoing 0 Mancang director Xing Independent Incumbent Male 69 16 April 2020 Ongoing 0 Min director Zhang Independent Femal Incumbent 53 16 April 2020 Ongoing 0 Yan director e Yin Vice-general Incumbent Male 59 18 October 2016 Ongoing 0 Lihou Manager Xie Vice-general Guozhon Incumbent Male 54 16 April 2020 Ongoing 0 Manager g Sun Vice-general Jianzhon Incumbent Male 51 16 April 2020 Ongoing 0 Manager g Vice-general He Manager and Incumbent Male 44 18 October 2016 Ongoing 0 Jianjiang Secretary of the Board He Chairman of the Jianguan Supervisory Incumbent Male 59 17 December 2020 Ongoing 0 g Committee Lu Zhonggu Supervisor Incumbent Male 56 18 October 2016 Ongoing 0 i Liu Yi Supervisor Incumbent Male 54 18 October 2016 Ongoing 0 Chen Femal Supervisor Incumbent 40 16 April 2020 Ongoing 0 Lijia e 48 Changchai Company, Limited Annual Report 2022 Ge Femal Supervisor Incumbent 53 16 April 2020 Ongoing 0 Jiangli e Total -- -- -- -- -- -- 0 Indicate whether any director, supervisor or senior management resigned before the expiry of their tenure during the Reporting Period. □ Yes √ No Change of directors, supervisors and senior management: □ Applicable √ Not applicable 2. Biographical Information Professional backgrounds, major work experience and current duties in the Company of the incumbent directors, supervisors and senior management: Shi Xinkun: Now he acts as the Chairman of the Board and Party Secretary in the Company, the Chairman of the Board in Jiangsu Horizon New Energy Technology Co., Ltd., the Chairman of the Board in Shanxi Horizon New Material Technology Co., Ltd., and an Investment and Development Advisor for Changzhou Investment Group Co., Ltd. Zhang Xin: He successively took the posts of Sales Manager, General Manager Assistant, and vice-general manager in our company. Now, he acts as Director, General Manager, deputy Party Secretary of the Company and executive director of Jiangsu Changchai Machinery Co., Ltd. Lin Tian: He successively worked as deputy director of enterprise development Dept., GM of investment management Dept. II and I, assistant president and vice president in Changzhou Investment Group Co., Ltd. Now he is an Investment and Development Advisor for Changzhou Investment Group Co., Ltd., and the director of the Company. Xu Yi: successively served as the director and assistant to the GM of the Company’s technology center, and currently serves as the director and deputy GM of the Company, in addition to being a director of Horizon Investment. Jiang He: successively served as the accountant, assistant to the minister, and vice minister of the financial department of the Company. He is currently a director, chief accountant and minister of the financial department of the Company. Yang Feng: successively served as the business manager of the Shanghai Investment Banking Department of China Economic Development Trust and Investment Co., Ltd., business director of the investment banking department of Orient Securities Co., Ltd., GM of and assistant chairman of AJ Securities’ investment banking department, operation management headquarters, worked in the development finance department and investment banking department, and served as the EGM in the equipment group, investment recommendation group, NEEQ business department and comprehensive group of CITIC Securities Co., Ltd. Currently serving as an executive director of De Xin Investment Manage Co., Limited, and the director of the Company. Wang Mancang: successively served as a teacher and lecturer in the Department of Management, as well as a financial lecturer and professor in the Department of Finance of the School of Economics and Management of Northwest University, and currently serves as the director of the Department of Finance of the School of Economics and Management of Northwest University, counselor of Xi'an municipal government, chairman of 49 Changchai Company, Limited Annual Report 2022 Shaanxi Securities Research Society, as well as an independent director of Focuslight Technologies Inc., Ccoop Group Co., Ltd., Shaanxi Construction Machinery Co., Ltd, Xi'an Wonder Energy Chemical Co., Ltd., and the Company. Xing Min: successively served as secretary of the Party Committee and administrative assistant general manager (AGM) of China National Heavy Machinery Corporation; secretary of the Party Committee and GM of China National Machine Tool Sales and Technical Service Corporation (CNMTC); currently Executive Vice Chairman and Secretary-General of China Internal Combustion Engine Industry Association (CICEIA), Independent Director of Zhejiang Zhongjian Technology Co., Ltd., Independent Director of Jiangsu Yunyi Electric Co., Ltd., Independent Director of Weifu High-Technology Group Co., Ltd., Independent Director of Zhejiang Xinchai Co., Ltd., director of ActBlue Co., Ltd., and Independent Director of the Company. Zhang Yan: successively served as chief accountant of Changzhou Zhengda Certified Public Accountants Co., Ltd., executive deputy chief accountant of Jiangsu Gongzheng Certified Public Accountants Co., Ltd., currently associate professor of Business School of Jiangsu University of Technology,independent non-executive director of S-Enjoy Service Group Co., Limited, director of Changzhou Communications Industry Group Co., Ltd., as well as independent director of Wuxi SAHAT Electric Technology Co., Ltd., Jiangsu Tianmu Lake Tourism Co., Ltd., and the Company. Yin Lihou: He worked as Minister of Human Resources Department and General Manager Assistant. Now he acts as Deputy General Manager of the Company, and the Chairman of the Board of Changchai Robin. Xie Guozhong: He used to be General Manager Assistant, Secretary of Party General Branch and Supervisor of the Company. He is now Deputy GM of the Company, GM of the Sales Company, Chairman of the Board of Changchai Wanzhou, and Supervisor of Beiqi Foton Motor Co., Ltd. Sun Jianzhong: successively served as the director of the technical center and assistant to the general manager of the Company. He is currently the deputy general manager of the Company, the general manager of Changchai Machinery, and the chairman of the board of Changchai Benniu. He Jianjiang: He used to be the Staff Member, Assistant to the Chief, and Deputy Chief of the Investment and Development Department, and Securities Representative of the Company. Now he is Deputy General Manager, Secretary of the Board, and Chief of the Investment and Development Department of the Company, as well as Chairman of the Board & GM of Horizon Investment, Director of Horizon Agricultural Equipment and Changchai Wanzhou, Chairman of the Board of Zhenjiang Siyang, and Supervisor of Donghai Securities Co., Ltd. He Jianguang: successively served as deputy chief of Design Section of Changzhou Diesel Engine Factory, engineer of Product Development Department, deputy director of the Company’s Joint Venture Office, deputy director of Technology Center, chief engineer, director, general manager, vice chairman of Changzhou Diesel Engine Factory, a member of the Party committee, secretary of the Discipline Inspection Commission and supervisor of Changzhou Investment Group Co., Ltd., currently an investment and development advisor of Changzhou Investment Group Co., Ltd., and chairman of the Supervisory Committee of the Company. Chen Lijia: Formerly vice president and general manager of risk control legal department of Changzhou Investment Group Co., Ltd.; and currently deputy general manager of Changzhou Metro Group Co., Ltd., and supervisor of the Company. 50 Changchai Company, Limited Annual Report 2022 Ge Jiangli: Formerly head of Human Resources Department of the Company, and currently supervisor of the Company. Lu Zhonggui: Now he acts as Minister of political Department of the Company, Office Director, Secretary of Organ Party General Branch as well as employee supervisor of the Company and Director of Xingsheng Real Estate Management. Liu Yi: He successively took the posts of Assistant Minister of Enterprise Management Department. Now he acts as Director of Audit Department and Employee Supervisor of the Company, Director of the Company, Supervisor of Changchai Wanzhou, Changchai Benniu, Horizon Investment, Horizon Agricultural Equipment, Changchai Robin, Changchai Machinery, Xingsheng Real Estate Management and Jiangsu Horizon New Energy Technology Co., Ltd. Offices held concurrently in shareholding entities: √ Applicable □ Not applicable Remuneration or Office held in the End of Name Shareholding entity Start of tenure allowance from the shareholding entity tenure shareholding entity Investment and Changzhou Investment Lin Tian Development October 2021 Yes Group Co., Ltd. Advisor Investment and Changzhou Investment December Shi Xinkun Development No Group Co., Ltd. 2022 Advisor Investment and He Changzhou Investment December Development Yes Jianguang Group Co., Ltd. 2022 Advisor Notes N/A Offices held concurrently in other entities: √ Applicable □ Not applicable Remuneration or Office held in the End of Name Other entity Start of tenure allowance from entity tenure the entity Jiangsu Horizon New Energy Chairman of the 19 November 2021 No Shi Technology Co., Ltd. Board Xinkun Shanxi Horizon New Material Chairman of the 7 February 2021 No Technology Co., Ltd. Board He Donghai Securities Co., Ltd. Supervisor 18 January 2023 No Jianjiang Xie Guozhon Beiqi Foton Motor Co., Ltd. Supervisor 15 November 2022 Yes g 51 Changchai Company, Limited Annual Report 2022 Yang De Xin Investment Manage Co., Executive 1 June 2022 No Feng Limited Director Finance Department of School of Economics & Management Teacher 1 October 1996 Northwest University Xi’an Government Consultant 1 October 2015 Shaanxi Securities Research Society Chairman 1 October 2017 Xi’an Focuslight Technology Co., Independent Wang 2 May 2019 Ltd. Director Yes Mancang Independent Ccoop Group Co., Ltd. 1 September 2020 Director Shaanxi Construction Machinery Independent 16 November 2018 Co., Ltd. Director Xi'an Wonder Energy Chemical Co., Independent 1 June 2020 Ltd. Director Standing Vice China Internal Combustion Engine Chairman and 1 December 2021 Industry Association Secretary-general Independent Zhongjian Technology Co.,Ltd 20 June 2017 Director Independent Jiangsu Yunyi Electronic Co.,Ltd. 15 July 2019 May 2022 Xing Min Director Yes Weifu High-Technology Group Co., Independent 20 May 2021 Ltd. Director Independent September Zhejiang Xinchai Co., Ltd. 6 December 2019 Director 2022 ActBlue Co., Ltd. Director 22 November 2021 Associate Jiangsu University of Technology 1 August 2008 professor Changzhou Communications Director 1 May 2022 Industry Group Co., Ltd. Wuxi SAHAT Electric Technology Independent Zhang 2 November 2020 Co., Ltd. Director Yes Yan Jiangsu Tianmu Lake Tourism Co., Independent 8 February 2021 Ltd. Director Independent S-Enjoy Service Group Co., Limited non-executive 20 October 2018 director Notes None Punishments imposed in the recent three years by the securities regulator on the incumbent directors, supervisors and senior management as well as those who left in the Reporting Period: 52 Changchai Company, Limited Annual Report 2022 □ Applicable √ Not applicable 3. Remuneration of Directors, Supervisors and Senior Management Decision-making procedure, determination basis and actual payments of remuneration for directors, supervisors and senior management: In 2022, the monthly salaries of directors, supervisors and senior executives in the Company were in line with the stipulations of relevant salary management and grade standards, and the benefits of the Company and assessment results. Director Lin Tian and Supervisors He Jianguang obtained salaries in shareholders' entities. Remuneration of directors, supervisors and senior management for the Reporting Period Unit: RMB’0,000 Total Any before-tax Incumbent/For remuneration Name Office title Gender Age remuneration mer from related from the party Company Chairman of the Shi Xinkun Male 59 Incumbent 85.49 No Board Director, 85.49 Zhang Xin Male 57 Incumbent No General Manager Lin Tian Director Male 60 Incumbent 0.00 Yes Director, Xu Yi Vice-general Male 59 Incumbent 74.51 No Manager Director, Chief Jiang He Male 51 Incumbent 73.99 No Accountant Yang Feng Director Male 51 Incumbent 0.00 No Wang Independent Male 60 Incumbent 10.00 No Mancang director Independent Xing Min Male 69 Incumbent 10.00 No director Independent Zhang Yan Female 53 Incumbent 10.00 No director Vice-general Yin Lihou Male 59 Incumbent 73.99 No Manager Vice-general Xie Guozhong Male 54 Incumbent 74.51 No Manager Vice-general Sun Jianzhong Male 51 Incumbent 74.51 No Manager He Jianjiang Vice-general Male 44 Incumbent 74.51 No 53 Changchai Company, Limited Annual Report 2022 Manager and Secretary of the Board Chairman of the He Jianguang Supervisory Male 59 Incumbent 0.00 Yes Committee Chen Lijia Supervisor Female 40 Incumbent 0.00 Yes Lu Zhonggui Supervisor Male 56 Incumbent 19.92 No Ge Jiangli Supervisor Female 53 Incumbent 20.91 No Liu Yi Supervisor Male 54 Incumbent 23.18 No Total -- -- -- -- 711.01 -- VI Performance of Duty by Directors in the Reporting Period 1. Board Meetings Convened in the Reporting Period Date of Meeting Disclosure date Resolution meeting The 1st Extraordinary 19 January 21 January The meeting deliberated on and approved the Meeting of the Obligations on Conducting Forward Foreign Board of Directors 2022 2022 Exchange Settlement in 2022 The meeting deliberated on and approved the Report on the Work of the General Manager for the Year 2021, the Business Policy Objectives of the The 11th Meeting 21 January Company for the Year 2022, the Results of the of the 9th Board of —— Performance Appraisal of the Senior Management of Directors 2022 the Company for the Year 2021, the Contract on the Performance Appraisal of the Senior Management of the Company for the Year 2022, and the Proposal on Application for Bank Credit Line The meeting deliberated on and approved the Annual Report for 2021 and Its Summary, the Annual Work Report of the Board of Directors for 2021, Plan of the Profit Distribution and Conversion of Surplus Reserves into Share Capital for 2021, Proposal on the Re-appointment of the Financial Audit Institution for 2022 and Its Audit Expenses, Proposal on the Re-appointment of the Internal Control Audit The 12th Meeting Institution for 2022, Proposal on Expanding the of the 9th Board of 11 April 2022 13 April 2022 Business Scope of the Company and Amending the Directors Articles of Association of the Company, Proposal on Amending the Rules of Procedure of the Board Meeting, the Proposal on Amending the Rules of Procedure of the General Meeting, the Proposal on Amending the Policy of Independent Directors, Special Report on the Deposit and Use of Raised Funds for 2021, the Annual Self-Evaluation Report on Internal Control for 2021, the Proposal on the 54 Changchai Company, Limited Annual Report 2022 Provision of Reserves for Credit Impairment and Asset Impairment, the 2021 Social Responsibility Report, and Proposal on Convening the Annual General Meeting of the Company for 2021 The 2nd Extraordinary The meeting deliberated on and approved the Report Meeting of the 28 April 2022 30 April 2022 for the First Quarter of 2022 Board of Directors in 2022 The 3rd The meeting deliberated on and approved the Extraordinary Proposal on Using Own Idle Funds to Purchase Meeting of the 11 July 2022 12 July 2022 Wealth Management Products and Proposal on Board of Directors Using Idle Funds to Purchase Wealth Management in 2022 Products The meeting deliberated on and approved the Semi-annual Report for 2022 and Its Summary, Proposal on Provision of Reserves for Credit Impairment and Asset Impairment, Proposal on Change of Accounting Policy, Special Report on the The 13th Meeting 22 August Deposit and Use of Raised Funds for the of the 9th Board of 24 August 2022 Semi-annual Period of 2022, Proposal on Adding Directors 2022 Implementation Location to the Private Placement Raised Funds Investment Project of Innovation Capacity Building of the Technical Centre, Proposal on Adding Implementation Entity to the Private Placement Raised Funds Investment Project of Relocation of Light Engines and Casting The meeting deliberated on and approved the The 4th Proposal on Planning to Participate in Capital Extraordinary 25 August Increase and Share Expansion and Related Meeting of the 27 August 2022 2022 Transactions of Jiangsu Horizon New Energy Board of Directors Technology Co., Ltd. and the Proposal on Planning in 2022 to Sell Part of the Trading Financial Assets The 5th The meeting deliberated on and approved the Extraordinary 29 September 30 September Proposal on Planning to Use Bank Acceptances for Meeting of the 2022 2022 Part of the Payments of Fund-raising Projects and Board of Directors Equal Replacement of Raised Funds in 2022 The 6th The meeting deliberated on and approved the Extraordinary 17 October 18 October Proposal on Planning to Extend the Operation Period Meeting of the 2022 2022 of Changzhou Synergetic Innovation Private Equity Board of Directors Fund (Limited Partnership) in 2022 The 14th Meeting 28 October 29 October The meeting deliberated on and approved the Report of the 9th Board of 2022 2022 of the Third Quarter of 2022 Directors 55 Changchai Company, Limited Annual Report 2022 The 7th Extraordinary 15 December 16 December The meeting deliberated on and approved the Meeting of the Proposal on Using Idle Funds to Purchase the Limit Board of Directors 2022 2022 of Wealth Management Products in 2022 2. Attendance of Directors at Board Meetings and General Meetings Attendance of directors at board meetings and general meetings Total The number of Board director Board Board board Board meetings failed to meetings meetings General meetings meetings attended by attend two Director attended the director meetings the director attended on way of consecutiv through a failed to attended was site telecommu e board proxy attend eligible to nication meetings attend (yes/no) Shi Xinkun 11 2 9 0 0 No 1 Zhang Xin 11 2 9 0 0 No 1 Lin Tian 11 1 9 1 0 No 1 Xu Yi 11 2 9 0 0 No 1 Jiang He 11 2 9 0 0 No 1 Yang Feng 11 2 9 0 0 No 1 Xing Min 11 2 9 0 0 No 1 Wang 11 2 9 0 0 No 1 Mancang Zhang Yan 11 2 9 0 0 No 1 Explanation of why any director failed to attend two consecutive board meetings: N/A 3. Objections Raised by Directors on Matters of the Company Indicate by tick mark whether any directors raised any objections on any matter of the Company. □ Yes √ No No such cases in the Reporting Period. 4. Other Information about the Performance of Duty by Directors Indicate by tick mark whether any suggestions from directors were adopted by the Company. √ Yes □ No Suggestions from directors adopted or not adopted by the Company: All directors of the Company in line with the law, rules, normative documents and obligations given by the Company of the Company law, Article of Associations, Rules of Procedure of the Board and Independent Directors Work Rules, comprehensively focused on the development and operation of the Company, actively attended the general meeting of shareholder and meeting of board of directors. Independent directors given 56 Changchai Company, Limited Annual Report 2022 independent opinions for the significant events of the Company, and effectively maintained the profits of the Company and all the shareholders. The Company actively listened to the suggestions from directors upon the significant events and adopted them. For more details, please refer to the Report on the Work of the Board of Directors for 2022 disclosed by the Company on http://www.cninfo.com.cn dated 12 April 2023. VII Special Committees under the Board of Directors during the Reporting Period Number Specific Important Other Name of of Date of disputed Members Contents comments and performance committee meetings meeting matters suggestions of duties convened (if any) The Company's financial statements have been prepared in accordance with the new Accounting Standards for Business The meeting discussed and Enterprises and the approved the Report on provisions of the Financial Pre-audit in 2021, Company's relevant Report on Audit Plan financial policies 19 Arrangement for 2021, and presented fairly, January Report on Internal Audit in all material 2022 Work in 2021 and Internal respects, the Audit Plan for 2022 and financial status of Report on the Deposit and the Company as of Use of Raised Funds for 31 December 2021 2021 and the operating results and cash Zhang flows for 2021. The Audit Yan, Company's financial Committee Wang 3 and accounting Mancang, statements are authentic and Lin Tian accurate. The meeting reviewed and approved the Annual Financial Statements of the Company for 2021, Proposal on Provision of Reserves for Asset Impairment, Special It was consented Report on the Deposit and that both the Use of Raised Funds for 7 April 2021, the Annual proposals shall be 2022 Self-Evaluation Report on submitted to the Internal Control for 2021, Board of Directors Proposal on the Re-appointment of the for discussion Financial Audit Institution for 2022 and Its Audit Expenses, and Proposal on the Re-appointment of the Internal Control Audit 57 Changchai Company, Limited Annual Report 2022 Institution for 2022 The meeting deliberated on and approved the Semi-annual Work Summary of the Audit Department for 2022, the Semi-annual Report for 2022, Proposal on Provision of Reserves for Credit Impairment and Asset Impairment, Special Report on the Deposit and Use of Raised Funds for the It was consented Semi-annual Period of 2022, that both the 18 Proposal on Change of proposals shall be August Accounting Policy, Proposal submitted to the 2022 on Adding Implementation Location to the Private Board of Directors Placement Raised Funds for discussion Investment Project of Innovation Capacity Building of the Technical Centre and Proposal on Adding Implementation Entity to the Private Placement Raised Funds Investment Project of Relocation of Light Engines and Casting The meeting deliberated on and approved the Contract Xing on the Performance It was consented Remuneration Min, Appraisal of the Senior that both the 20 Management of the and Wang proposals shall be 1 January Company for the Year 2021 Evaluation Mancang, submitted to the 2022 and the Contract on the Committee Shi Performance Appraisal of Board of Directors Xinkun the Senior Management of for discussion the Company for the Year 2022 VIII Performance of Duty by the Supervisory Committee Indicate by tick mark whether the Supervisory Committee found any risk to the Company during its supervision in the Reporting Period. □ Yes √ No The Supervisory Committee raised no objections in the Reporting Period. IX Employees 1. Number, Functions and Educational Backgrounds of Employees Number of in-service employees of the Company as the parent at 2,114 the period-end 58 Changchai Company, Limited Annual Report 2022 Number of in-service employees of major subsidiaries at the 542 period-end Total number of in-service employees at the period-end 2,656 Total number of paid employees in the Reporting Period 2,656 Number of retirees to whom the Company as the parent or its 0 major subsidiaries need to pay retirement pensions Functions Function Employees Production 1,731 Sales 195 Technical 356 Financial 42 Administrative 288 Other 44 Total 2,656 Educational backgrounds Educational background Employees Junior high school graduates and below 1,133 High school graduates 747 College graduates and technical secondary school graduates 487 Bachelors 271 Masters and above 18 Total 2,656 2. Employee Remuneration Policy The Company always adhered to the principle of tilting the remuneration incentive mechanism towards excellent talents, so as to display the roles of various professional technicians, management staffs and skilled backbones. Besides, it adhered to the principle of increasing the employee’s income integrated with increasing labor production efficiency and production & operation efficiency, so as to perfect the salary structure and further increase employees’ income steadily. 3. Employee Training Plans The Company established the Management Rules on the Education & Training for Employees, aiming to enhance employees’ quality and try its best to cultivate a team of faithful and highly professional talents. Besides, it innovated the training mechanism, optimized the training environment, and reinforced to encourage employees to attend various training, so as to inspire the employees’ potential to the maximum extent and further promote the sustainable development of the Company. 4. Labor Outsourcing □ Applicable √ Not applicable 59 Changchai Company, Limited Annual Report 2022 X Profit Distributions (in the Form of Cash and/or Stock) How the profit distribution policy, especially the cash dividend policy, was formulated, executed or revised in the Reporting Period: √ Applicable □ Not applicable In Articles of Association, which had confirmed the specific profits distribution and cleared out the conditions, standards and proportion of the cash bonus, stipulated the decision-making progress of the formulation and alternation of the profits distribution policies and the chapters as well as the regulations fully ensure the opportunities for the medium and small shareholders to exert the functions and to provide advices as well as appeals. The cash bonus of recent 3 years of the Company met with the regulations of the Articles of Association and during the decision-making process of the profits distribution proposal, the Independent Directors stated the independent advices and fully respected the advices from the medium and small shareholders. The profits distribution preplan and the turning capital reserve into share capital preplan of the Company were both met with the relevant regulations of the Articles of Association and so on. Special statement about the cash dividend policy In compliance with the Company’s Articles of Association and Yes resolution of general meeting Specific and clear dividend standard and ratio Yes Complete decision-making procedure and mechanism Yes Independent directors faithfully performed their duties and played their Yes due role Non-controlling interests are able to fully express their opinion and Yes desire and their legal rights and interests are fully protected In case of adjusting or changing the cash dividend policy, the conditions and procedures involved are in compliance with applicable N/A regulations and transparent Indicate by tick mark whether the Company fails to put forward a cash dividend proposal despite the facts that the Company has made profits in the Reporting Period and the profits of the Company as the parent distributable to shareholders are positive. □ Applicable √ Not applicable Final dividend plan for the Reporting Period: √ Applicable □ Not applicable Bonus shares for every 10 shares (share) 0 Dividend for every 10 shares (RMB) (tax inclusive) 0.10 Additional shares to be converted from capital reserve for every 0 10 shares (share) Total shares as the basis for the profit distribution proposal 705,692,507 (share) Cash dividends (RMB) (tax inclusive) 7,056,925.07 Cash dividends in other forms (such as share repurchase) (RMB) 0 Total cash dividends (including those in other forms) (RMB) 7,056,925.07 Distributable profit (RMB) 915,495,909.35 Total cash dividends (including those in other forms) as % of 100% total profit distribution 60 Changchai Company, Limited Annual Report 2022 Cash dividend policy Other Particulars about the dividend plan The Board has approved a final dividend plan as follows: based on the total share capital of the Company at 31 December 2022, a cash dividend of RMB0.10 (tax inclusive) per 10 shares is to be distributed to the shareholders, with no bonus issue from either profit or capital reserves. XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees □ Applicable √ Not applicable No such cases in the Reporting Period. XII Formulation and Implementation of Internal Control System during the Reporting Period 1. Internal Control Formulation and Implementation During the Reporting Period, the Company strictly complied with national laws and regulations and relevant regulations such as the Basic Code for Internal Control of Enterprises and the Guidelines for Application of Enterprise Internal Control, as well as the provisions and requirements of the Company's internal control standards, and optimized important business processes and improved and perfected the internal control system through continuous supervision and effective evaluation of the operation of the Company's internal control, so as to adapt to the changing external environment and internal management requirements and improve the efficiency of the Company's operation and management. By doing so, the Company effectively prevented risks in operation and management, and promoted the achievement of internal control objectives. The Company's internal control system can cover the major aspects of the Company's operation and management, and the internal control design is sound and reasonable, with no material omissions. 2. Material Internal Control Weaknesses Identified for the Reporting Period □ Yes √ No XIII Management of Subsidiaries by the Company during the Reporting Period Problem Solutio Subseq s found Solution n uent Subsidiary Integration plan Progress on integration in s taken progre solutio integrati ss n on Zhenjiang As the largest On 16 May 2022, Zhenjiang Siyang shareholder of Siyang convened a meeting of Diesel Zhenjiang Siyang, shareholders, the Board of N/A N/A N/A N/A Engine the Company Directors, and the Board of Manufacturi nominated Supervisors to elect new ng Co., Ltd. directors, members of the Board of 61 Changchai Company, Limited Annual Report 2022 supervisors, and Directors, the Board of Management Supervisors and the personnel for the Management. The directors new Board of designated by the Company Directors and accounted for more than half Board of and Zhenjiang Siyang was Supervisors and included in the Company’s dispatched consolidated report. The Management, Company designated three financial, and Management personnel to technical personnel Zhenjiang Siyang for routine to Zhenjiang management, financial, and Siyang for technical posts. production and operations management. XIV Self-Evaluation Report or Independent Auditor’s Report on Internal Control 1. Internal Control Self-Evaluation Report Disclosure date of the internal 12 April 2023 control self-evaluation report Index to the disclosed internal 2023-011 control self-evaluation report Evaluated entities’ combined assets 100.00% as % of consolidated total assets Evaluated entities’ combined operating revenue as % of 100.00% consolidated operating revenue Identification standards for internal control weaknesses Weaknesses in internal control over Weaknesses in internal control Type financial reporting not related to financial reporting The Company classified the defects Defects with the following as serious defect, important defect random characteristics should be and general defect according to the recognized as serious defect: influence degree from the internal 1) Seriously violated the national control: laws and administrative (1) Serious defect: refers to one or regulations and the normative multiple groups with control defect documents; which may lead the enterprise 2) “three significant one great” seriously deviates the control target; event had not been through the Nature standard (2) Important defect: refers to one or collective decision-making multiple groups with control defect process; with the severity and the economic 3) the significant events involved results lower than the great defect with the production and but may still lead the enterprise operation of the Company lacked seriously deviates the control target; of systematic control or the (3) General defect: refers to other institutional system was invalid; defect except for the great defect 4) the internal control of the and significant defect. information disclosure was 62 Changchai Company, Limited Annual Report 2022 Nature standards: invalid, which led the Company defects with the following random be open condemned by the characteristics should be recognized supervision department; as serious defect: 5) the serious defect from the 1) the defect involves with the assessment results of the internal malpractice of the Directors, control had not been revised. Supervisors and Senior Executives; 2) revised the disclosed financial report; 3) CPAs discovered the great misstatement among the current financial statement while which could not be found during the operating process of the internal control; 4) the supervision from the Audit Committee and the internal audit institution of the enterprise was invalid. Refer to the quantitative criteria of the internal control defect of Quantitative standards: the financial report, to recognize The quantitative standards of the quantitative criteria of the recognizing the significant degree of significant degree of the internal the misstatement (including the false control defect of the negatives) of the consolidated non-financial report of the financial report of the Company Company as: based on the data from the 2022 Serious defect: possibly caused Quantitative standard consolidated statements was as: directly losses≥0.1% of the net Serious defect: misstatement≥5% of assets the annual profits Important defect: 0.05% of the Important defect: 2.5% of the annual net assets≤ possibly caused profits≤ misstatement < 5% of the directly losses < 0.1% of the net annual profits assets General defect<2.5% of the annual General defect: possibly caused profits directly losses<0.05% of the net assets Number of material weaknesses in internal control over financial 0 reporting Number of material weaknesses in internal control not related to 0 financial reporting Number of serious weaknesses in internal control over financial 0 reporting Number of serious weaknesses in internal control not related to 0 financial reporting 63 Changchai Company, Limited Annual Report 2022 2. Independent Auditor’s Report on Internal Control √ Applicable □ Not applicable Opinion paragraph in the independent auditor’s report on internal control We believed that Changchai Company, Limited maintained effective internal control of the financial report in significant aspects according to the Basic Norms of Internal Control and relevant regulations on 31 December 2022. Independent auditor’s report on Disclosed internal control disclosed or not Disclosure date 10 April 2023 Index to such report disclosed S.G. W[2023] E1111 Type of the auditor’s opinion Unmodified unqualified opinion Material weaknesses in internal control not related to financial None reporting Indicate by tick mark whether any modified opinion is expressed in the independent auditor’s report on the Company’s internal control. □ Yes √ No Indicate by tick mark whether the independent auditor’s report on the Company’s internal control is consistent with the internal control self-evaluation report issued by the Company’s Board. √ Yes □ No XV Remediation of Problems Identified by Self-inspection in the Special Action on the Governance of Listed Companies N/A 64 Changchai Company, Limited Annual Report 2022 Part V Environmental and Social Responsibility I Major Environmental Issues Indicate by tick mark whether the Company or any of its subsidiaries was identified as a key polluter by the environment authorities. □ Yes √ No Administrative punishments received in the Reporting Period due to environmental issues: Rectification Company or Reason for Impact on the Violation Punishment measures of the subsidiary punishment Company Company N/A N/A N/A N/A N/A N/A Actions taken during the Reporting Period to reduce carbon emissions and the impact: √ Applicable □ Not applicable See the 2022 Social Responsibility Report of Changchai Company, Limited disclosed on http://www.cninfo.com.cn dated 12 April 2023. Reasons for not disclosing other environment-related information: N/A II Social Responsibility See the 2022 Social Responsibility Report of Changchai Company, Limited disclosed on http://www.cninfo.com.cn dated 12 April 2023. III Efforts in Poverty Alleviation and Rural Revitalization N/A 65 Changchai Company, Limited Annual Report 2022 Part VI Significant Events I Fulfillment of Commitments 1. Commitments of the Company’s De Facto Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and Other Entities Fulfilled in the Reporting Period or Ongoing at the Period-End √ Applicable □ Not applicable Da Ty te pe of of co Ful co m Term of fill Commitment Promisor m Details of commitment mi commit me mi tm ment nt tm ent en ma t kin g 1. The company and its controlled related parties have not reduced their holdings of A shares of Changchai Company from the bo six months prior to the announcement of ut the decision of the Board of Directors of sh 29 Changchai Company, Limited 10 ar Se ("Changchai Company") concerning the October eh pte Ex Changzhou Investment proposal to consider the non-public 2019 ol mb pir Group Co., Ltd. offering of shares to the date of issuance -30 di er ed of this Letter of Commitment. June ng 20 2. The company and its controlled related 2022 Commitments made in re 20 parties have no plan to reduce their refinancing du holdings of shares of Changchai Company cti from the date of issuance of this Letter of on Commitment to six months after the completion of this issuance. A bo It will not transfer the shares it has 5 5 July ut obtained in the private placement of Jul On Changzhou Investment 2021 -5 sh Changchai within 36 months starting from y goi Group Co., Ltd. July ar the date when the private placement of 20 ng 2024 e A-shares is allowed for public trading. 21 tra 66 Changchai Company, Limited Annual Report 2022 di ng re str ict io n 1. It undertakes not to interfere in the Company's operation and management activities beyond its authority and not to encroach on the Company's interests; 2. It undertakes not to transfer benefits to other entities or individuals free of charge or on unfair terms, nor to impair the interests of the Company by any other means; 3. After the issuance of this Letter of Commitment and before the completion of the Company's non-public offering of shares, if the China Securities Regulatory 11 11 April Ot Commission (CSRC) makes other new Ap 2020 On Changzhou Investment he regulatory provisions on the return filling ril -31 goi Group Co., Ltd. r measures and commitments, and the 20 Decemb ng aforesaid commitments cannot meet such 20 er 9999 provisions of the CSRC, it undertakes to issue supplementary commitments in accordance with the latest provisions of the CSRC; 4. It undertakes to effectively implement the Company's measures to fill the return and any commitments made thereon. If the Company breaches such commitments and causes losses to the Company or the investors, the Company is willing to compensate the Company or the investors according to law. UBS AG, Caitong Fund A Management Co., Ltd., bo I/We undertake that I/we will not transfer 5 Changzhou Traffic ut the shares I/we have obtained in the 5 July Jul Ex Construction Investment sh private placement of Changchai within 6 2021-5 y pir Development General ar months starting from the date when the January 20 ed Company, Chen Beiwen, e private placement of A-shares is allowed 2022 21 Guotai Asset Management tra for public trading. Co., Ltd., Jiangxi Jintou di 67 Changchai Company, Limited Annual Report 2022 Industrial Development ng Co., Ltd., Li Xueqin, re Nanhua Fund Co., Ltd., str Enjoy (Ningbo) Asset ict Management L.P., Nuode io Asset Management Co., n Ltd., Sun Meichun, Minmetals Securities Co., Ltd., Yao Jianquan, China National Gold Group Asset Management Co., Ltd., and Zhou Zhiheng Rewards Plan for Shareholders in Next Three Years(2020-2022) Under the premise of positive distributive profit (remaining after-tax profits after making up for the loss and extracting for A the common reserves) in this year or half bo year and abundant money flow and no 8 ut influence on the following-up going M Year Ex Other commitments Changchai Company, di made to minority concern after cash bonus, the profits ay 2020-20 pir Limited vi shareholders allocated by cash every year shouldn’t be 20 22 ed de nd lower than 10% of the allocable profits 20 s from parent company. Meanwhile, the accumulated allocable profits by cash in the arbitrary continuous three accounting years should not be lower than 30% of the annual average allocable profits in those three years. Fulfilled on time or not Yes Specific reasons for failing to fulfill commitments on time N/A and plans for next step (if any) 2. Where there had been an earnings forecast for an asset or project and the Reporting Period was still within the forecast period, explain why the forecast has been reached for the Reporting Period. □ Applicable √ Not applicable II Occupation of the Company’s Capital by the Controlling Shareholder or any of Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable 68 Changchai Company, Limited Annual Report 2022 No such cases in the Reporting Period. III Irregularities in the Provision of Guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. IV Explanations Given by the Board of Directors Regarding the Independent Auditor's “Modified Opinion” on the Financial Statements of the Latest Period □ Applicable √ Not applicable V Explanations Given by the Board of Directors, the Supervisory Board and the Independent Directors (if any) Regarding the Independent Auditor's “Modified Opinion” on the Financial Statements of the Reporting Period □ Applicable √ Not applicable VI YoY Changes to Accounting Policies, Estimates and Correction of Material Accounting Errors √Applicable □ Not applicable Changes to the accounting policies and why Approval process Remark The Company starts to implement the “Accounting treatment for sales of products or by-products by On 22 August 2022, the 13th Meeting enterprises generated from fixed assets before reaching the of the 9th Board of Directors and the Notes of intended state of availability or from the period of R&D” th 12 Meeting of the 9th Supervisory changes to and “Judgment on onerous contracts” and “Presentation of Committee were held by the Company accounting centralized capital management” stipulated in the on which the Proposal on Changes of policies-(1) Accounting Standards for Business Enterprises Accounting Policies was approved. Interpretation No. 15 issued by the Ministry of Finance in 2021 since 1 January 2022. The Company starts to implement the “accounting treatment of the income tax effect of financial instrument related dividend whose issuer is classified as equity Notes of instrument” and “accounting treatment of share-based changes to payment in cash settlement modified into share-based / accounting payment in equity settlement by the enterprise” stipulated policies-(2) in the Accounting Standards for Business Enterprises Interpretation No. 16 issued by the Ministry of Finance in 2022 since 13 December 2022. Description of changes in accounting policies: 69 Changchai Company, Limited Annual Report 2022 (1) The impact of implementing the Interpretation No. 15 of Accounting Standards for Business Enterprises on the Company On 31 December 2021, the Ministry of Finance issued the Interpretation No. 15 of Accounting Standards for Business Enterprises (C.K. [2021] No. 35) (hereinafter referred to as “Interpretation No. 15”). Contents of “accounting treatment of external sales of products or by-product produced by the enterprise before the fixed assets reach the intended usable state or during the research and development process (hereinafter referred to as ‘Trial Sales’)” and “judgment on loss-making contracts” came into force on 1 January 2022. The Company implemented Interpretation No. 15 since the date of issuance, and the implementation has no material impact on the financial statements during the reporting period. (2) The impact of implementing the Interpretation No. 16 of Accounting Standards for Business Enterprises on the Company On 13 December 2022, the Ministry of Finance issued the Interpretation No. 16 of Accounting Standards for Business Enterprises (C.K. [2022] No. 31) (hereinafter referred to as “Interpretation No. 16”). The regulations of “accounting treatment for deferred income tax relating to assets and liabilities arising from a single transaction that is not subject to the initial recognition exemption” came into force on 1 January 2023, allowing companies to implement the exemption prior to the year of issuance, which has not been implemented by the Company in advance this year. In addition, the contents of “accounting treatment of the income tax effect of financial instrument related dividend whose issuer is classified as equity instrument” and “accounting treatment of share-based payment in cash settlement modified into share-based payment in equity settlement by the enterprise” came into force on the issuance date. The Company implemented Interpretation No. 16 since the date of issuance, and the implementation has no material impact on the financial statements during the reporting period. VII YoY Changes to the Scope of the Consolidated Financial Statements √ Applicable □ Not applicable The Sixth Extraordinary Meeting of the Board of Directors in 2021 held by the Company on 28 October 2021 deliberated on and approved the Proposal on Participation in Bidding for 41.5% Equity Interests in Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd., authorizing the Management of the Company to participate in bidding for 41.5% equity interest in Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. (hereinafter referred to as "Zhenjiang Siyang") that had been put out for sale by Jiangsu Keda Assets Marketing Co., Ltd. (hereinafter, “Keda Assets”). On 12 January 2022, Jiangsu Assets and Equity Exchange Co., Ltd. issued the Confirmation of Transaction on the Transfer of 41.5% Equity Interests (Corresponding to Capital Contribution of RMB830,000) in Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. The Company won the bid for the 41.5% equity interests in Zhenjiang Siyang at a price of RMB33,520,800.00. On 23 February 2022, the Company signed the Contract on Transfer of State-owned Property Rights with Keda Assets. On 9 March 2022, Zhenjiang Siyang has completed the relevant registration alteration formalities with the competent industrial and commercial administration. On 16 May 2022, Zhenjiang Siyang held meetings of shareholders, the Board of Directors and the Supervisory Committee to elect and appoint new members for the Board of Directors, the Supervisory Committee and management. The Company holds more than half of the board seats of Zhejiang Siyang and Zhenjiang Siyang has been included in the consolidated financial statements of the Company. Since then, the number of subsidiaries within the consolidation scope of the Company increases to eight from seven. 70 Changchai Company, Limited Annual Report 2022 VIII Engagement and Disengagement of Independent Auditor Current independent auditor: Gongzheng Tianye Certified Public Accountants Name of the domestic independent auditor (Special General Partnership) The Company’s payment to the domestic independent 60 auditor (RMB’0,000) How many consecutive years the domestic independent 21 auditor has provided audit service for the Company Names of the certified public accountants from the domestic independent auditor writing signatures on the Wang Wenkai, Qin Zhijun auditor’s report How many consecutive years the certified public Two years for Wang Wenkai, two years for Qin accountants have provided audit service for the Zhijun Company Indicate by tick mark whether the independent auditor was changed for the Reporting Period. □ Yes √ No Independent auditor, financial advisor or sponsor engaged for the audit of internal controls: √Applicable □ Not applicable In this year, the Company retained Gongzheng Tianye Certified Public Accountants (Special General Partnership) as the audit institution for its internal control at the audit fees of RMB120,000. IX Possibility of Delisting after Disclosure of this Report □ Applicable √ Not applicable X Insolvency and Reorganization □ Applicable √ Not applicable No such cases in the Reporting Period. XI Major Legal Matters □ Applicable √ Not applicable No such cases in the Reporting Period. XII Punishments and Rectifications □ Applicable √ Not applicable No such cases in the Reporting Period. 71 Changchai Company, Limited Annual Report 2022 XIII Credit Quality of the Company as well as Its Controlling Shareholder and Actual Controller √ Applicable □ Not applicable The de facto controller of the Company is SASAC of Changzhou People’s Government and the controlling shareholder of it is Changzhou Investment Group Co., Ltd. There is no such case that the controlling shareholder fails to perform any legally effective judgment of courts or to pay off matured debts with a large amount. XIV Major Related-Party Transactions 1. Continuing Related-Party Transactions □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Related-Party Transactions Regarding Purchase or Disposal of Assets or Equity Investments □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Related-Party Transactions Regarding Joint Investments in Third Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Amounts Due to and from Related Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 5. Transactions with Related Finance Companies □ Applicable √ Not applicable The Company did not make deposits in, receive loans or credit from and was not involved in any other finance business with any related finance company or any other related parties. 6. Transactions with Related Parties by Finance Companies Controlled by the Company □ Applicable √ Not applicable The finance company controlled by the Company did not make deposits, receive loans or credit from and was not involved in any other finance business with any related parties. 7. Other Major Related-Party Transactions √Applicable □ Not applicable 72 Changchai Company, Limited Annual Report 2022 On 25 August 2022, the Company held the Fourth Interim Meeting of the Board of Directors and the Fourth Interim Meeting of the Supervisory Committee in 2022 and deliberated and approved the Proposal on Planning to Participate in Capital Increase and Share Expansion and Related Transactions of Jiangsu Horizon New Energy Technology Co., Ltd., agreeing to increase RMB75 million capital to Horizon New Energy for the subscription of its newly registered capital of RMB18,844,200 and authorizing Shi Xinkun, the Company’s Chairman, to sign capital increase agreements with related parties. In August 2022, Horizon New Energy and its shareholders signed the Capital Increase Agreement of Jiangsu Horizon New Energy Technology Co., Ltd., agreeing that the registered capital of Horizon New Energy was increased from RMB1,405,622,491 to RMB1.75 billion. In October 2022, Horizon New Energy completed the industrial and commercial change registration procedures according to the aforesaid capital increase agreement and obtained the new business license. Index to the public announcements about the said related-party transactions disclosed Title of public announcement Disclosure date Disclosure website Proposal on Planning to Participate in Capital Increase and Share Expansion and Related 27 August 2022 www.cninfo.com.cn Transactions of Jiangsu Horizon New Energy Technology Co., Ltd. XV Major Contracts and Execution thereof 1. Entrustment, Contracting and Leases (1) Entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Contracting □ Applicable √ Not applicable No such cases in the Reporting Period. (3) Leases □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Major Guarantees √ Applicable □ Not applicable Unit: RMB'0,000 Guarantees provided by the Company for external parties (exclusive of those for subsidiaries) Disclos Line of Actual Actual Havin Guara Guarantee-receiv Type of Term of ure date guarant occurrence guarante g ntee ing entity guarantee guarantee of the ee date e expire for a 73 Changchai Company, Limited Annual Report 2022 guarant (agreement amount d or relate ee line signing date) not d announc party ement or not Guarantees provided by the Company as the parent for its subsidiaries Disclos Guara ure date Actual Havin ntee Actual of the Line of occurrence g for a Guarantee-receiv guarante Type of Term of guarant guarant date expire relate ing entity e guarantee guarantee ee line ee (agreement d or d amount announ signing date) not party cement or not Changzhou Changchai Horizon 15 April Joint 2,000 7 May 2021 2,000 1 year Yes No Agricultural 2021 liability Equipment Co., Ltd. Total actual amount Total approved line for such of such guarantees in guarantees in the Reporting 0 500 the Reporting Period Period (B1) (B2) Total actual balance Total approved line for such of such guarantees at guarantees at the end of the 0 the end of the 0 Reporting Period (B3) Reporting Period (B4) Guarantees between subsidiaries Disclos Guara ure date Actual Havin Actual ntee of the Line of occurrence g Guarantee-receiv guarante Type of Term of for a guarant guarant date expire ing entity e guarantee guarantee related ee line ee (agreement d or amount party announ signing date) not or not cement Total guarantee amount (total of the three kinds of guarantees above) Total actual Total guarantee line guarantee amount in approved in the Reporting 0 500 the Reporting Period Period (A1+B1+C1) (A2+B2+C2) Total approved guarantee Total actual line at the end of the guarantee balance at 0 0 Reporting Period the end of the (A3+B3+C3) Reporting Period 74 Changchai Company, Limited Annual Report 2022 (A4+B4+C4) Total actual guarantee amount (A4+B4+C4) as % of the 0.00% Company’s net assets Of which: Balance of guarantees provided for shareholders, the de 0 facto controller and their related parties (D) Balance of debt guarantees provided directly or indirectly for entities with an over 70% debt/asset ratio 0 (E) Amount by which the total guarantee amount exceeds 0 50% of the Company’s net assets (F) Total of the three amounts above (D+E+F) 0 Possibility of having to execute joint liability on N/A outstanding guarantees (if any) Irregularities in the provision of guarantees to external N/A parties (if any) Compound guarantees: N/A 3. Cash Entrusted for Wealth Management (1) Cash Entrusted for Wealth Management √ Applicable □ Not applicable Overviews of cash entrusted for wealth management during the Reporting Period Unit: RMB’0,000 Unrecovered Unrecovered overdue Capital Specific type Amount incurred Undue balance overdue amount with resources amount provision for impairment Broker financial Self-funded 885 600 0 0 products Bank financial Self-funded 18,200 18,200 0 0 products Broker financial Raised-funded 5,000 0 0 0 products Bank financial Raised-funded 28,000 10,000 0 0 products Total 52,085 28,800 0 0 75 Changchai Company, Limited Annual Report 2022 High-risk wealth management transactions with a significant single amount, or with low security, low liquidity: □ Applicable √ Not applicable Situation where the principal is expectedly irrecoverable or an impairment may be incurred: □ Applicable √ Not applicable (2) Entrusted Loans □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Other Major Contracts □ Applicable √ Not applicable No such cases in the Reporting Period. XVI Other Significant Events □ Applicable √ Not applicable XVII Significant Events of Subsidiaries □ Applicable √ Not applicable 76 Changchai Company, Limited Annual Report 2022 Part VII Share Changes and Shareholder Information I Share Changes 1. Share Changes Unit: share Before Increase/decrease in the Reporting Period (+/-) After Shares Shares as as divide Ne divide nd Percent w nd conver Percent Number Other Subtotal Number age (%) issu conver ted age (%) es ted from from capital profit reserv es 1. Restricted 144,318, -87,500,00 -87,500,00 56,818,18 20.45% 8.05% shares 181 0.00 0.00 1 1.1 Shares held 0 0.00% 0.00 0.00 0 0.00% by government 1.2 Shares held 72,045,4 -15,227,27 -15,227,27 56,818,18 by state-owned 10.21% 8.05% 53 2.00 2.00 1.00 legal persons 1.3 Shares held by other 68,863,6 -68,863,63 -68,863,63 9.76% 0 0.00% domestic 38 8.00 8.00 investors Among which: Shares held by 48,818,1 -48,818,17 -48,818,17 6.92% 0 0.00% domestic legal 78 8.00 8.00 persons S hares held by 20,045,4 -20,045,46 -20,045,46 2.84% 0 0.00% domestic 60 0.00 0.00 natural persons 1.4 Shares held 3,409,09 -3,409,090 -3,409,090 by foreign 0.48% 0 0.00% 0 .00 .00 investors Among which: Shares held by 3,409,09 -3,409,090 -3,409,090 0.48% 0 0.00% foreign legal 0 .00 .00 persons 77 Changchai Company, Limited Annual Report 2022 S hares held by 0 0.00% 0 0 0 0.00% foreign natural persons 2. Unrestricted 561,374, 87,500,00 87,500,00 648,874,3 79.55% 91.95% shares 326 0.00 0.00 26 2.1 RMB-denomin 411,374, 87,500,00 87,500,00 498,874,3 58.29% 70.69% ated ordinary 326 0.00 0.00 26 shares 2.2 Domestically 150,000, 150,000,0 21.26% 0 0 21.26% listed foreign 000 00 shares 2.3 Oversea listed foreign 0 0.00% 0 0 0 0.00% shares 2.4 Other 0 0.00% 0 0 0 0.00% 705,692, 100.00 705,692,5 100.00 3. Total shares 0 0 507 % 07 % Reasons for the share changes: □ Applicable √ Not applicable Approval of share changes: □ Applicable √ Not applicable Transfer of share ownership: □ Applicable √ Not applicable Effects of share changes on the basic and diluted earnings per share, equity per share attributable to the Company’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period, respectively: □ Applicable √ Not applicable Other information that the Company considers necessary or is required by the securities regulator to be disclosed: □ Applicable √ Not applicable 2. Changes in Restricted Shares √ Applicable □ Not applicable Unit: share Restricted Restricted shares Restricted Restricted shares Name of the amount at shares Restricted shares shares increased amount at Restricted reasons shareholders the relieved of relieved date of the the the period period-begi period period-end n Additional issuance UBS AG 3,409,090 3,409,090 0 0 5 January 2022 of 3,409,090 shares 78 Changchai Company, Limited Annual Report 2022 through the private placement of shares Additional issuance Caitong Fund of 7,909,090 shares Management 7,909,090 7,909,090 0 0 5 January 2022 through the private Co., Ltd. placement of shares Jiangxi Additional issuance Jintou of 4,545,454 shares Industrial 4,545,454 4,545,454 0 0 5 January 2022 through the private Development placement of shares Co., Ltd. Additional issuance Guotai Asset of 8,181,818 shares Management 8,181,818 8,181,818 0 0 5 January 2022 through the private Co., Ltd. placement of shares Enjoy Additional issuance (Ningbo) of 6,818,181 shares Asset 6,818,181 6,818,181 0 0 5 January 2022 through the private Management placement of shares L.P. Additional issuance Zhou of 3,409,090 shares 3,409,090 3,409,090 0 0 5 January 2022 Zhiheng through the private placement of shares China Additional issuance National of 10,681,818 Gold Group 10,681,818 10,681,818 0 0 shares through the 5 January 2022 Asset private placement Management of shares Co., Ltd. Additional issuance of 4,545,454 shares Sun Meichun 4,545,454 4,545,454 0 0 5 January 2022 through the private placement of shares Additional issuance Nuode Asset of 11,363,636 Management 11,363,636 11,363,636 0 0 shares through the 5 January 2022 Co., Ltd. private placement of shares Additional issuance Minmetals of 4,545,454 shares Securities 4,545,454 4,545,454 0 0 5 January 2022 through the private Co., Ltd. placement of shares 79 Changchai Company, Limited Annual Report 2022 Additional issuance of 7,272,727 shares Chen Beiwen 7,272,727 7,272,727 0 0 5 January 2022 through the private placement of shares Additional issuance Nanhua Fund of 5,454,545 shares 5,454,545 5,454,545 0 0 5 January 2022 Co., Ltd. through the private placement of shares Additional issuance of 4,545,454 shares Yao Jianquan 4,545,454 4,545,454 0 0 5 January 2022 through the private placement of shares Changzhou Transportatio Additional issuance n of 4,545,454 shares Construction 4,545,454 4,545,454 0 0 5 January 2022 through the private Investment placement of shares Development Co., Ltd. Additional issuance of 272,735 shares Li Xueqin 272,735 272,735 0 0 5 January 2022 through the private placement of shares Total 87,500,000 87,500,000 0 0 -- -- II. Issuance and Listing of Securities 1. Securities (Exclusive of Preferred Shares) Issued in the Reporting Period □ Applicable √ Not applicable 2. Changes to Total Shares, Shareholder Structure and Asset and Liability Structures □ Applicable √ Not applicable 3. Existing Staff-Held Shares □ Applicable √ Not applicable III Shareholders and Actual Controller Unit: share 80 Changchai Company, Limited Annual Report 2022 Number of Number of preferred ordinary Number of shareholders with Number of shareholders at preferred resumed voting ordinary 50,886 the month-end 49,998 shareholders 0 0 rights at the shareholders prior to the with resumed month-end prior disclosure of this voting rights to the disclosure Report of this Report 5% or greater shareholders or top 10 shareholders Increase/d Shares in pledge Shareho Total shares ecrease in or frozen Name of Nature of lding Restricted Unrestricted held at the the shareholder shareholder percent shares held shares held period-end Reporting Status Shares age Period Changzhou State-owned Investment Group 32.26% 227,663,417 56,818,181 170,845,236 legal person Co., Ltd Domestic Chen Jian natural 0.71% 4,979,900 4,979,900 person MORGAN STANLEY & CO. Foreign legal 0.45% 3,146,392 3,146,392 INTERNATIONA person L PLC. KGI ASIA Foreign legal 0.44% 3,101,695 3,101,695 LIMITED person Domestic Yang Xuee natural 0.37% 2,611,500 2,611,500 person China Minsheng Bank-Goldstate Yuanqi Dynamic Asset Allocation Other 0.36% 2,530,800 2,530,800 Mixed Type Securities Investment Fund CLSA Asset Management Foreign legal 0.25% 1,780,068 1,780,068 Limited-Clients’ person Capital Domestic Dai Wenping natural 0.25% 1,776,200 1,776,200 person Domestic Li Suinan natural 0.22% 1,569,100 1,569,100 person Domestic Huang Guoliang natural 0.22% 1,528,891 1,528,891 person Strategic investor or general legal N/A 81 Changchai Company, Limited Annual Report 2022 person becoming a top-10 ordinary shareholder due to rights issue (if any) It is unknown whether there is among the top 10 public shareholders and the Related or acting-in-concert top 10 unrestricted public shareholders any related parties or acting-in-concert parties among the shareholders parties as defined in the Administrative Measures for Information Regarding above Shareholding Alteration. Above shareholders involved in entrusting/being entrusted with N/A voting rights and giving up voting rights Special account for share repurchases (if any) among the N/A top 10 shareholders Top 10 unrestricted shareholders Unrestricted shares held at the Shares by type Name of shareholder period-end Type Shares Changzhou Investment Group RMB-denominated 170,845,236 170,845,236 Co., Ltd ordinary share RMB-denominated Chen Jian 4,979,900 4,979,900 ordinary share MORGAN STANLEY & CO. RMB-denominated 3,146,392 3,146,392 INTERNATIONAL PLC. ordinary share Domestically listed KGI ASIA LIMITED 3,101,695 3,101,695 foreign share RMB-denominated Yang Xuee 2,611,500 2,611,500 ordinary share China Minsheng Bank-Goldstate Yuanqi Dynamic Asset RMB-denominated 2,530,800 2,530,800 Allocation Mixed Type ordinary share Securities Investment Fund CLSA Asset Management RMB-denominated 1,780,068 1,780,068 Limited-Clients’ Capital ordinary share RMB-denominated Dai Wenping 1,776,200 1,776,200 ordinary share Domestically listed Li Suinan 1,569,100 1,569,100 foreign share Domestically listed Huang Guoliang 1,528,891 1,528,891 foreign share Related or acting-in-concert parties among top 10 unrestricted It is unknown whether there is among the top 10 public shareholders and the public shareholders, as well as top 10 unrestricted public shareholders any related parties or acting-in-concert between top 10 unrestricted parties as defined in the Administrative Measures for Information Regarding public shareholders and top 10 Shareholding Alteration. shareholders 82 Changchai Company, Limited Annual Report 2022 Top 10 ordinary shareholders Shareholders Chen Jian and Dai Wenping held 3,320,000 and 1,610,200 shares involved in securities margin respectively in the Company through their margin accounts. 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. □ Yes √ No No such cases in the Reporting Period. 2. Controlling Shareholder Nature of the controlling shareholder: Controlled by a local state-owned legal person Type of the controlling shareholder: Legal person Legal Name of controlling representative/ Date of Unified social Principal activity shareholder person in establishment credit code charge Changzhou Investment 913204004672839 Property investment Chen Limin 20 June 2002 Group Co., Ltd 80X and management Controlling shareholder’s holdings in other listed companies at home or None abroad in the Reporting Period Change of the controlling shareholder in the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Actual Controller and Its Acting-in-Concert Parties Nature of the actual controller: Local institution for state-owned assets management Type of the actual controller: Legal person Legal representativ Date of Name of actual controller Unified social credit code Principal activity e/person in establishment charge State-owned Assets Supervision and Administration Wang 11320400014110251M Not applicable Commission of Wenzhuo Changzhou Municipal People’s Government Other listed companies at home or abroad None controlled by the actual 83 Changchai Company, Limited Annual Report 2022 controller in the Reporting Period Change of the actual controller during the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. Ownership and control relations between the actual controller and the Company: Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset management. □ Applicable √ Not applicable 4. Number of Accumulative Pledged Shares held by the Company’s Controlling Shareholder or the Largest Shareholder as well as Its Acting-in-Concert Parties Accounts for 80% of all shares of the Company held by Them □ Applicable √ Not applicable 5. Other 10% or Greater Corporate Shareholders □ Applicable √ Not applicable 6. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller, Reorganizer and Other Commitment Makers √ Applicable □ Not applicable Changzhou Investment Group Co., Ltd., the controlling shareholder of the Company, participated in the non-public offering of shares of the Company and was allotted 56,818,181 shares with a subscription amount of RMB249,999,996.40. The shares were listed on 5 July 2021, with a 36-month lock-up period and a release date of 5 July 2024. 84 Changchai Company, Limited Annual Report 2022 IV Specific Implementation of Share Repurchase during the Reporting Period Progress on any share repurchase □ Applicable √ Not applicable Progress on reducing the repurchased shares by means of centralized bidding □ Applicable √ Not applicable 85 Changchai Company, Limited Annual Report 2022 Part VIII Preference Shares □ Applicable √ Not applicable No preference shares in the Reporting Period. 86 Changchai Company, Limited Annual Report 2022 Part IX Bonds □ Applicable √ Not applicable 87 Changchai Company, Limited Annual Report 2022 Part X Financial Statements I Independent Auditor’s Report Type of the independent auditor’s opinion Unmodified unqualified opinion Date of signing this report 10th April 2023 Gongzheng Tianye Certified Public Accountants Name of the independent auditor (Special General Partnership) No. of the auditor’s report S.G. No.W[2023]A351 Name of the certified public accountants Wang Wenkai, Qin Zhijun Text of the Independent Auditor’s Report To the Shareholders of Changchai Company, Limited, I Opinion We have audited the accompanying financial statements of Changchai Company, Limited. (together with its consolidated subsidiaries included in the consolidated financial statements, the “Company”), which comprise the parent’s and consolidated balance sheets as at 31 December 2022, the parent’s and consolidated income statements, the parent’s and consolidated cash flow statements, the parent’s and consolidated statements of changes in owners’ equity for the year then ended, as well as the notes to the financial statements. In our opinion, the financial statements attached were prepared in line with the regulations of Accounting Standards for Business Enterprises in all significant aspects which gave a true and fair view of the consolidated and parent financial position of Changchai Company, Limited. As at 31 December 2022 and the consolidated and parent business performance and cash flow for 2022. II Basis for Opinion We conducted our audits in accordance with the Audit Standards for Chinese Registered Accountants. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for Audit of Financial Statements section of our report. We are independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled our other ethical responsibilities in accordance with the said Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. III Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. And key audit matter identified in our audit is summarized as follows: (I) Recognition of revenue 1. Description of the item For details and analysis of the accounting policies for revenue recognition, please refer to accounting policies stated in the notes to financial statements “III. 30. Revenue” and “V. 37. Operating income and operating cost”. In 2022, the operating income of Changchai Company amounted to RMB2,182,043,100. Since the operating revenue is one of key performance indicators of the Company, and there is the inherent risk that the management may manipulate the timing of revenue recognition for the purpose of achieving certain goals or expectations, so we identify the revenue recognition as a key audit item. 88 Changchai Company, Limited Annual Report 2022 2. Response for audit (1) Know the key internal control related to revenue recognition, evaluate whether its design and execution are valid or not, and test the operation effectiveness of the related internal control. (2) Interview the management, know about the recognition policies regarding revenue of the Company, get and check contracts or agreements of the Company signed with customers, identify contract terms related to the recognition of sales revenue of products and evaluate whether the revenue recognition of the Company meets the requirements of accounting standards for business enterprises. (3) For sales revenue, conducting sampling tests on supporting documents related to revenue recognition, so as to check supporting documents such as terms associated with control transfer of commodities in sales contracts and documentation collected and acknowledged by auxiliary manufacturers (including but not limited to sales contracts, orders, sales invoices, delivery notes, export customs declarations, etc.); (4) Check the operating revenue recognized before and after the balance sheet date to the supporting documents, such as shipping order, declaration for exportation, and etc by sampling method to assess whether the operating revenue is recognized within appropriate period. (5) Implement the confirmation by drawing sample to recognize the balance of accounts receivable and the amount of sales revenue according to the features and natures of customer transaction. (II) Bad debt provision for accounts receivable 1. Description of the item As accounting policies stated in the notes to financial statements “III. 10. Impairment of financial instruments” and “V. 4. Accounts receivable”. On 31 December 2022, the book balance of accounts receivable of Changchai Company stood at RMB522,168,300, the bad debt provision amounted to RMB151,846,100 million, and the book value was RMB370,322,200, accounting for 7.10% of the total assets at the end of the reporting period. As the balance of accounts receivable is significant and the judgement of the Management is involved in the withdrawal of bad debt provision of accounts receivable, we consider this as a key audit matter. 2. Response for audit (1) Access Changchai’s internal control systems of sales and accounts receivable management to understand and evaluate the design of internal control, and carry out walk-through test to confirm the implementation of internal control systems. (2) Analyze and confirm the reasonableness of Changchai’s accounting estimates of bad debt provision for accounts receivable, including the basis for determining the combination of accounts receivable, the expected credit loss rate and the judgment of impairment test of accounts receivable evaluated individually. (3) Combined bad debt provision policy for accounts receivable, verifying the accuracy of the basis for determining accounts receivable portfolio and the reasonableness of bad debt provision separately accrued; (4) Access and check the account receivable details, aging schedule, statement of provisions for bad debts, and confirm the reasonableness of bad debt provision for accounts receivable by combining with the request of confirmation of balance and subsequent collection inspection; (5) For accounts receivable with bad debt provision by single item, referring to corresponding contracts and other information to obtain an understanding of sales and repayments and determine whether the bad debt provision by single item is adequately withdrawn. (6) Send request for confirmation of balance, and confirm the authenticity and accuracy of the amount of accounts receivable on the balance sheet date by combining with subsequent inspection and other procedures. IV Other Information The Company’s management (hereinafter referred to as “management”) is responsible for the other information. The other information comprises all of the information included in the Company’s 2022 Annual Report other than 89 Changchai Company, Limited Annual Report 2022 the financial statements and our auditor’s report thereon. Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the 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. V Responsibilities of Management and Those Charged with Governance for Financial Statements The management is responsible for the preparation of the financial statements that give a fair view in accordance with CAS, and for designing, implementing and maintaining such internal control as the management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, matters related to going concern (if applicable) and using the going concern basis of accounting unless the management either intends to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. VI Auditor’s Responsibilities for Audit of Financial Statements Our objectives are to obtain reasonable assurance about whether the 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. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CAS 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 financial statements. As part of an audit in accordance with CAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: (1) Identify and assess the risks of material misstatement of the 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. (2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. (3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. (4) Conclude on the appropriateness of the management’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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required by CAS to draw users’ attention in our auditor’s report to the related disclosures in the financial statements. If such disclosures are inadequate, we need 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 Company to cease to continue as a going concern. (5) Evaluate the overall presentation, structure and content of the financial statements, and whether the financial 90 Changchai Company, Limited Annual Report 2022 statements represent the underlying transactions and events in a manner that achieves fair presentation. (6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding the planned scope and timing of the audit and significant audit findings, including any noteworthy 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 communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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. Gongzheng Tianye Certified Public Accountants Chinese CPA: Wang Wenkai (Special General Partnership) (Engagement Partner) Chinese CPA: Qin Zhijun Wuxi China 10th April 2023 II Financial Statements Currency unit for the financial statements and the notes thereto: RMB 1. Consolidated Balance Sheet Prepared by Changchai Company, Limited 31 December 2022 Unit: RMB Item 31 December 2022 1 January 2022 Current assets: Monetary assets 930,013,350.97 707,966,678.74 Settlement reserve Interbank loans granted Held-for-trading financial assets 370,103,602.57 404,053,261.57 Derivative financial assets Notes receivable 297,125,872.54 334,311,236.78 Accounts receivable 370,322,179.77 375,209,126.48 Accounts receivable financing 242,813,392.79 497,388,826.02 Prepayments 6,330,202.69 8,197,418.39 Premiums receivable 91 Changchai Company, Limited Annual Report 2022 Reinsurance receivables Receivable reinsurance contract reserve Other receivables 32,938,305.16 19,515,350.52 Including: Interest receivable Dividends receivable Financial assets purchased under resale agreements Inventories 571,996,881.74 651,083,758.18 Contract assets Assets held for sale Current portion of non-current assets Other current assets 49,279,022.49 44,060,822.57 Total current assets 2,870,922,810.72 3,041,786,479.25 Non-current assets: Loans and advances to customers Investments in debt obligations 39,309,587.93 37,898,226.39 Investments in other debt obligations Long-term receivables Long-term equity investments Investments in other equity 955,560,240.08 779,877,646.53 instruments Other non-current financial 373,500,000.00 112,500,000.00 assets Investment property 42,160,779.65 44,597,255.21 Fixed assets 720,061,387.76 402,915,521.65 Construction in progress 30,281,547.56 270,305,690.91 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 157,392,217.54 155,154,745.91 Development costs Goodwill Long-term prepaid expense 3,279,970.32 110,345.30 Deferred income tax assets 26,220,575.93 10,693,809.23 Other non-current assets 670,735.93 4,543,240.88 Total non-current assets 2,348,437,042.70 1,818,596,482.01 Total assets 5,219,359,853.42 4,860,382,961.26 Current liabilities: Short-term borrowings 115,437,700.65 73,971,466.65 92 Changchai Company, Limited Annual Report 2022 Borrowings from the central bank Interbank loans obtained Held-for-trading financial liabilities Derivative financial liabilities Notes payable 471,876,397.72 550,774,400.00 Accounts payable 747,010,098.88 666,186,668.82 Advances from customers 837,425.55 660,965.62 Contract liabilities 32,843,692.83 26,864,081.97 Financial assets sold under repurchase agreements Customer deposits and interbank deposits Payables for acting trading of securities Payables for underwriting of securities Employee benefits payable 49,351,022.47 45,385,667.48 Taxes payable 8,570,175.39 5,306,378.82 Other payables 160,046,882.93 148,361,373.29 Including: Interest payable Dividends payable 3,891,433.83 3,891,433.83 Handling charges and commissions payable Reinsurance payables Liabilities directly associated with assets held for sale Current portion of non-current liabilities Other current liabilities 78,645,741.16 88,938,192.79 Total current liabilities 1,664,619,137.58 1,606,449,195.44 Non-current liabilities: Insurance contract reserve Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions Deferred income 36,205,625.94 39,615,355.40 93 Changchai Company, Limited Annual Report 2022 Deferred income tax liabilities 161,360,251.33 117,344,161.11 Other non-current liabilities Total non-current liabilities 197,565,877.27 156,959,516.51 Total liabilities 1,862,185,014.85 1,763,408,711.95 Owners’ equity: Share capital 705,692,507.00 705,692,507.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 640,133,963.01 640,676,218.40 Less: Treasury stock Other comprehensive income 655,341,704.07 506,011,499.55 Specific reserve 18,848,856.75 18,812,950.04 Surplus reserves 349,197,725.72 334,144,488.46 General reserve Retained earnings 915,495,909.35 872,212,354.88 Total equity attributable to owners 3,284,710,665.90 3,077,550,018.33 of the Company as the parent Non-controlling interests 72,464,172.67 19,424,230.98 Total owners’ equity 3,357,174,838.57 3,096,974,249.31 Total liabilities and owners’ equity 5,219,359,853.42 4,860,382,961.26 Legal representative: Shi Xinkun General Manager: Zhang Xin Head of the accounting department: Jiang He 94 Changchai Company, Limited Annual Report 2022 2. Balance Sheet of the Company as the Parent Unit: RMB Item 31 December 2022 1 January 2022 Current assets: Monetary assets 792,744,709.77 615,184,387.01 Held-for-trading financial assets 280,354,111.11 262,004,030.14 Derivative financial assets Notes receivable 282,556,327.54 312,118,296.88 Accounts receivable 329,060,940.50 349,135,255.42 Accounts receivable financing 291,837,385.00 497,388,826.02 Prepayments 3,097,586.07 2,727,652.23 Other receivables 179,596,495.57 26,497,081.34 Including: Interest receivable Dividends receivable Inventories 397,626,837.43 516,588,187.24 Contract assets Assets held for sale Current portion of non-current assets Other current assets 15,594,949.05 21,292,211.46 Total current assets 2,572,469,342.04 2,602,935,927.74 Non-current assets: Investments in debt obligations 39,309,587.93 37,898,226.39 Investments in other debt obligations Long-term receivables Long-term equity investments 569,273,530.03 535,752,730.03 Investments in other equity 955,560,240.08 779,877,646.53 instruments Other non-current financial 373,500,000.00 112,500,000.00 assets Investment property 42,160,779.65 44,597,255.21 Fixed assets 249,558,305.21 325,034,679.67 Construction in progress 18,366,604.84 15,557,418.76 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 64,783,364.89 66,621,426.26 Development costs Goodwill Long-term prepaid expense Deferred income tax assets 19,860,262.43 9,613,375.32 Other non-current assets 95 Changchai Company, Limited Annual Report 2022 Total non-current assets 2,332,372,675.06 1,927,452,758.17 Total assets 4,904,842,017.10 4,530,388,685.91 Current liabilities: Short-term borrowings 108,437,700.65 58,971,466.65 Held-for-trading financial liabilities Derivative financial liabilities Notes payable 518,918,596.58 544,444,400.00 Accounts payable 541,911,517.64 546,689,207.59 Advances from customers 837,425.55 660,965.62 Contract liabilities 24,129,579.35 24,730,270.44 Employee benefits payable 41,558,489.86 37,861,577.50 Taxes payable 3,119,171.69 2,955,053.82 Other payables 151,206,684.89 135,773,368.98 Including: Interest payable Dividends payable 3,243,179.97 3,243,179.97 Liabilities directly associated with assets held for sale Current portion of non-current liabilities Other current liabilities 67,810,395.33 63,535,570.11 Total current liabilities 1,457,929,561.54 1,415,621,880.71 Non-current liabilities: Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions Deferred income 36,205,625.94 39,615,355.40 Deferred income tax liabilities 149,039,152.68 95,034,251.50 Other non-current liabilities Total non-current liabilities 185,244,778.62 134,649,606.90 Total liabilities 1,643,174,340.16 1,550,271,487.61 Owners’ equity: Share capital 705,692,507.00 705,692,507.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 659,418,700.67 659,418,700.67 Less: Treasury stock 96 Changchai Company, Limited Annual Report 2022 Other comprehensive income 655,341,704.07 506,011,499.55 Specific reserve 18,848,856.75 18,812,950.04 Surplus reserves 349,197,725.72 334,144,488.46 Retained earnings 873,168,182.73 756,037,052.58 Total owners’ equity 3,261,667,676.94 2,980,117,198.30 Total liabilities and owners’ equity 4,904,842,017.10 4,530,388,685.91 Legal representative: Shi Xinkun General Manager: Zhang Xin Head of the accounting department: Jiang He 97 Changchai Company, Limited Annual Report 2022 3. Consolidated Income Statement Unit: RMB Item 2022 2021 1. Revenue 2,182,043,095.61 2,452,430,515.60 Including: Operating revenue 2,182,043,095.61 2,452,430,515.60 Interest income Insurance premium income Handling charge and commission income 2. Costs and expenses 2,247,441,538.64 2,399,524,185.52 Including: Cost of sales 1,948,677,036.52 2,084,671,762.08 Interest expense Handling charge and commission expense Surrenders Net insurance claims paid Net amount provided as insurance contract reserve Expenditure on policy dividends Reinsurance premium expense Taxes and surcharges 16,973,196.26 15,125,948.96 Selling expense 102,630,223.71 117,242,290.32 Administrative expense 119,511,189.72 98,890,284.22 R&D expense 81,239,597.06 82,390,284.14 Finance costs -21,589,704.63 1,203,615.80 Including: Interest expense 1,993,453.71 5,907,625.42 Interest income 12,804,077.19 7,921,535.62 Add: Other income 7,184,028.05 6,633,332.38 Return on investment (“-” for loss) 7,969,467.19 9,327,296.95 Including: Share of profit or loss of joint ventures and associates Income from the derecognition of financial assets at amortized cost (“-” for loss) Exchange gain (“-” for loss) Net gain on exposure hedges (“-” for loss) Gain on changes in fair value (“-” for loss) 145,243,457.17 104,570,498.36 Credit impairment loss (“-” for loss) -2,953,740.73 -52,017,151.82 Asset impairment loss (“-” for loss) -14,367,197.27 -8,676,024.20 Asset disposal income (“-” for loss) 393,161.73 155,515.49 3. Operating profit (“-” for loss) 78,070,733.11 112,899,797.24 Add: Non-operating income 4,257,942.65 4,037,896.76 Less: Non-operating expense 618,463.56 1,637,033.05 4. Profit before tax (“-” for loss) 81,710,212.20 115,300,660.95 Less: Income tax expense 2,464,079.74 12,368,786.58 5. Net profit (“-” for net loss) 79,246,132.46 102,931,874.37 5.1 By operating continuity 98 Changchai Company, Limited Annual Report 2022 5.1.1 Net profit from continuing operations (“-” for net 79,246,132.46 102,931,874.37 loss) 5.1.2 Net profit from discontinued operations (“-” for net loss) 5.2 By ownership 5.2.1 Net profit attributable to shareholders of the 76,684,796.91 103,006,232.54 Company as the parent 5.2.1 Net profit attributable to non-controlling interests 2,561,335.55 -74,358.17 6. Other comprehensive income, net of tax 149,330,204.52 80,528,741.31 Attributable to owners of the Company as the parent 149,330,204.52 80,528,741.31 6.1 Items that will not be reclassified to profit or loss 149,330,204.52 80,528,741.31 6.1.1 Changes caused by remeasurements on defined benefit schemes 6.1.2 Other comprehensive income that will not be reclassified to profit or loss under the equity method 6.1.3 Changes in the fair value of investments in other 149,330,204.52 80,528,741.31 equity instruments 6.1.4 Changes in the fair value arising from changes in own credit risk 6.1.5 Other 6.2 Items that will be reclassified to profit or loss 6.2.1 Other comprehensive income that will be reclassified to profit or loss under the equity method 6.2.2 Changes in the fair value of investments in other debt obligations 6.2.3 Other comprehensive income arising from the reclassification of financial assets 6.2.4 Credit impairment allowance for investments in other debt obligations 6.2.5 Reserve for cash flow hedges 6.2.6 Differences arising from the translation of foreign currency-denominated financial statements 6.2.7 Other Attributable to non-controlling interests 7. Total comprehensive income 228,576,336.98 183,460,615.68 Attributable to owners of the Company as the parent 226,015,001.43 183,534,973.85 Attributable to non-controlling interests 2,561,335.55 -74,358.17 8. Earnings per share 8.1 Basic earnings per share 0.1087 0.1657 8.2 Diluted earnings per share 0.1087 0.1657 Legal representative: Shi Xinkun General Manager: Zhang Xin Head of the accounting department: Jiang He 99 Changchai Company, Limited Annual Report 2022 4. Income Statement of the Company as the Parent Unit: RMB Item 2022 2021 1. Operating revenue 1,988,473,044.55 2,267,232,119.78 Less: Cost of sales 1,784,345,704.10 1,944,820,462.59 Taxes and surcharges 11,846,885.20 11,893,439.38 Selling expense 97,601,117.35 106,770,873.83 Administrative expense 90,150,661.31 80,635,862.36 R&D expense 72,372,647.10 75,021,386.36 Finance costs -22,274,862.27 -2,350,968.39 Including: Interest expense 1,531,942.32 3,932,469.12 Interest income 15,122,552.35 8,354,523.54 Add: Other income 6,504,428.46 5,810,480.10 Return on investment (“-” for loss) 36,604,658.62 8,352,714.26 Including: Share of profit or loss of joint ventures 28,800,000.00 and associates Income from the derecognition of financial assets at amortized cost (“-” for loss) Net gain on exposure hedges (“-” for loss) Gain on changes in fair value (“-” for loss) 186,354,111.11 35,754,030.14 Credit impairment loss (“-” for loss) -8,854,137.91 -16,143,004.02 Asset impairment loss (“-” for loss) -11,526,145.82 -3,866,890.01 Asset disposal income (“-” for loss) 4,181,548.77 6,642.47 2. Operating profit (“-” for loss) 167,695,354.99 80,355,036.59 Add: Non-operating income 345,409.40 3,441,588.57 Less: Non-operating expense 102,766.76 1,086,173.24 3. Profit before tax (“-” for loss) 167,937,997.63 82,710,451.92 Less: Income tax expense 17,405,625.04 -4,219,121.23 4. Net profit (“-” for net loss) 150,532,372.59 86,929,573.15 4.1 Net profit from continuing operations (“-” for net loss) 150,532,372.59 86,929,573.15 4.2 Net profit from discontinued operations (“-” for net loss) 5. Other comprehensive income, net of tax 149,330,204.52 80,528,741.31 5.1 Items that will not be reclassified to profit or loss 149,330,204.52 80,528,741.31 5.1.1 Changes caused by remeasurements on defined benefit schemes 5.1.2 Other comprehensive income that will not be reclassified to profit or loss under the equity method 5.1.3 Changes in the fair value of investments in other 149,330,204.52 80,528,741.31 equity instruments 5.1.4 Changes in the fair value arising from changes in own credit risk 5.1.5 Other 5.2 Items that will be reclassified to profit or loss 100 Changchai Company, Limited Annual Report 2022 5.2.1 Other comprehensive income that will be reclassified to profit or loss under the equity method 5.2.2 Changes in the fair value of investments in other debt obligations 5.2.3 Other comprehensive income arising from the reclassification of financial assets 5.2.4 Credit impairment allowance for investments in other debt obligations 5.2.5 Reserve for cash flow hedges 5.2.6 Differences arising from the translation of foreign currency-denominated financial statements 5.2.7 Other 6. Total comprehensive income 299,862,577.11 167,458,314.46 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 the accounting department: Jiang He 101 Changchai Company, Limited Annual Report 2022 5. Consolidated Cash Flow Statement Unit: RMB Item 2022 2021 1. Cash flows from operating activities: Proceeds from sale of commodities and rendering of services 2,089,127,900.17 1,806,075,487.79 Net increase in customer deposits and interbank deposits Net increase in borrowings from the 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 Interest, handling charges and commissions received Net increase in interbank loans obtained Net increase in proceeds from repurchase transactions Net proceeds from acting trading of securities Tax rebates 38,479,590.77 50,016,426.49 Cash generated from other operating activities 22,990,293.44 22,636,726.19 Subtotal of cash generated from operating activities 2,150,597,784.38 1,878,728,640.47 Payments for commodities and services 1,312,012,931.69 1,648,743,526.28 Net increase in loans and advances to customers Net increase in deposits in the central bank and in interbank loans granted Payments for claims on original insurance contracts Net increase in interbank loans granted Interest, handling charges and commissions paid Policy dividends paid Cash paid to and for employees 313,119,839.28 323,020,547.09 Taxes paid 52,344,111.33 31,276,348.44 Cash used in other operating activities 108,190,624.24 142,011,997.96 Subtotal of cash used in operating activities 1,785,667,506.54 2,145,052,419.77 Net cash generated from/used in operating activities 364,930,277.84 -266,323,779.30 2. Cash flows from investing activities: Proceeds from disinvestment 914,060,767.00 373,180,033.58 Return on investment 17,913,476.59 11,396,891.86 Net proceeds from the disposal of fixed assets, intangible assets 692,980.99 589,226.24 and other long-lived assets Net proceeds from the disposal of subsidiaries and other business units Cash generated from other investing activities 11,400,123.61 Subtotal of cash generated from investing activities 944,067,348.19 385,166,151.68 Payments for the acquisition of fixed assets, intangible assets and 48,439,287.62 139,772,849.33 other long-lived assets Payments for investments 1,033,581,567.00 709,038,171.10 Net increase in pledged loans granted 102 Changchai Company, Limited Annual Report 2022 Net payments for the acquisition of subsidiaries and other business units Cash used in other investing activities 1,869,322.91 Subtotal of cash used in investing activities 1,082,020,854.62 850,680,343.34 Net cash generated from/used in investing activities -137,953,506.43 -465,514,191.66 3. Cash flows from financing activities: Capital contributions received 633,873,281.14 Including: Capital contributions by non-controlling interests to subsidiaries Borrowings raised 7,000,000.00 19,000,000.00 Cash generated from other financing activities 128,437,700.65 58,971,466.65 Subtotal of cash generated from financing activities 135,437,700.65 711,844,747.79 Repayment of borrowings 12,000,000.00 29,000,000.00 Interest and dividends paid 18,689,380.47 1,707,729.02 Including: Dividends paid by subsidiaries to non-controlling interests Cash used in other financing activities 83,623,545.07 14,621,163.63 Subtotal of cash used in financing activities 114,312,925.54 45,328,892.65 Net cash generated from/used in financing activities 21,124,775.11 666,515,855.14 4. Effect of foreign exchange rates changes on cash and cash -152,802.06 -2,215,203.09 equivalents 5. Net increase in cash and cash equivalents 247,948,744.46 -67,537,318.91 Add: Cash and cash equivalents, beginning of the period 562,402,221.59 629,939,540.50 6. Cash and cash equivalents, end of the period 810,350,966.05 562,402,221.59 Legal representative: Shi Xinkun General Manager: Zhang Xin Head of the accounting department: Jiang He 103 Changchai Company, Limited Annual Report 2022 6. Cash Flow Statement of the Company as the Parent Unit: RMB Item 2022 2021 1. Cash flows from operating activities: Proceeds from sale of commodities and rendering of services 2,040,092,339.55 1,721,407,332.48 Tax rebates 27,588,745.34 39,451,775.67 Cash generated from other operating activities 21,378,587.89 16,788,453.39 Subtotal of cash generated from operating activities 2,089,059,672.78 1,777,647,561.54 Payments for commodities and services 1,330,893,073.67 1,632,770,616.35 Cash paid to and for employees 243,134,907.26 267,953,154.75 Taxes paid 39,870,320.72 21,295,926.17 Cash used in other operating activities 222,082,917.91 129,115,999.33 Subtotal of cash used in operating activities 1,835,981,219.56 2,051,135,696.60 Net cash generated from/used in operating activities 253,078,453.22 -273,488,135.06 2. Cash flows from investing activities: Proceeds from disinvestment 855,000,000.00 Return on investment 45,708,640.27 10,222,037.17 Net proceeds from the disposal of fixed assets, intangible assets 38,250,224.61 124,954.89 and other long-lived assets Net proceeds from the disposal of subsidiaries and other business units Cash generated from other investing activities Subtotal of cash generated from investing activities 938,958,864.88 10,346,992.06 Payments for the acquisition of fixed assets, intangible assets and 8,002,707.77 5,665,400.94 other long-lived assets Payments for investments 983,520,800.00 484,148,226.39 Net payments for the acquisition of subsidiaries and other business units Cash used in other investing activities 1,869,322.91 Subtotal of cash used in investing activities 991,523,507.77 491,682,950.24 Net cash generated from/used in investing activities -52,564,642.89 -481,335,958.18 3. Cash flows from financing activities: Capital contributions received 633,873,281.14 Borrowings raised 5,000,000.00 Cash generated from other financing activities 128,437,700.65 58,971,466.65 Subtotal of cash generated from financing activities 128,437,700.65 697,844,747.79 Repayment of borrowings 10,000,000.00 Interest and dividends paid 18,348,005.18 160,362.10 Cash used in other financing activities 80,503,408.97 14,621,163.63 Subtotal of cash used in financing activities 98,851,414.15 24,781,525.73 Net cash generated from/used in financing activities 29,586,286.50 673,063,222.06 4. Effect of foreign exchange rates changes on cash and cash -1,851,060.10 -1,401,721.22 equivalents 5. Net increase in cash and cash equivalents 228,249,036.73 -83,162,592.40 104 Changchai Company, Limited Annual Report 2022 Add: Cash and cash equivalents, beginning of the period 476,410,739.41 559,573,331.81 6. Cash and cash equivalents, end of the period 704,659,776.14 476,410,739.41 Legal representative: Shi Xinkun General Manager: Zhang Xin Head of the accounting department: Jiang He 105 Changchai Company, Limited Annual Report 2022 7. Consolidated Statements of Changes in Owners’ Equity 2022 Unit: RMB 2022 Equity attributable to owners of the Company as the parent Other L equity e instruments s s : G P T P e re r er n fe e Other Non-cont Total Item p er Ot Share rr Capital a compre Specific Surplus Retained rolling owners’ et al he Subtotal capital e O reserves s hensive reserve reserves earnings interests equity u re r d th u income al se s er r b rv h y o e ar s n e t ds s o c k 1. Balance as at the end of the 705,692, 640,676 506,011, 18,812, 334,144, 872,212, 3,077,55 19,424,2 3,096,97 prior year 507.00 ,218.40 499.55 950.04 488.46 354.88 0,018.33 30.98 4,249.31 Add: Adjustment for change in accounting policy Adjustment for correction of previous error Adjustment for business 106 Changchai Company, Limited Annual Report 2022 combination under common control Other adjustments 2. Balance as at the beginning 705,692, 640,676 506,011, 18,812, 334,144, 872,212, 3,077,55 19,424,2 3,096,97 of the year 507.00 ,218.40 499.55 950.04 488.46 354.88 0,018.33 30.98 4,249.31 3. Increase/ decrease in the -542,25 149,330 35,906. 15,053,2 43,283,5 207,160, 53,039,9 260,200, period (“-” for decrease) 5.39 ,204.52 71 37.26 54.47 647.57 41.69 589.26 3.1 Total comprehensive 149,330 76,684,7 226,015, 2,561,33 228,576, income ,204.52 96.91 001.43 5.55 336.98 3.2 Capital increased and -542,25 -542,25 50,478,6 49,936,3 reduced by owners 5.39 5.39 06.14 50.75 3.2.1 Ordinary shares increased by owners 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity -542,25 -542,25 50,478,6 49,936,3 3.2.4 Other 5.39 5.39 06.14 50.75 15,053,2 -33,401, -18,348, -18,348, 3.3 Profit distribution 37.26 242.44 005.18 005.18 3.3.1 Appropriation to 15,053,2 -15,053, surplus reserves 37.26 237.26 3.3.2 Appropriation to general reserve 3.3.3 Appropriation to -18,348, -18,348, -18,348, owners (or shareholders) 005.18 005.18 005.18 3.3.4 Other 3.4 Transfers within owners’ 107 Changchai Company, Limited Annual Report 2022 equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 35,906. 35,906.7 35,906.7 3.5 Specific reserve 71 1 1 4,877,2 4,877,23 4,877,23 3.5.1 Increase in the period 32.12 2.12 2.12 4,841,3 4,841,32 4,841,32 3.5.2 Used in the period 25.41 5.41 5.41 3.6 Other 4. Balance as at the end of the 705,692, 640,133 655,341 18,848, 349,197, 915,495, 3,284,71 72,464,1 3,357,17 period 507.00 ,963.01 ,704.07 856.75 725.72 909.35 0,665.90 72.67 4,838.57 2021 Unit: RMB 2021 Item Equity attributable to owners of the Company as the parent Non-cont Total 108 Changchai Company, Limited Annual Report 2022 Other L rolling owners’ equity e interests equity instruments s s : G P T P e re r er n fe e Other p er Ot Share rr Capital a compre Specific Surplus Retained et al he Subtotal capital e O reserves s hensive reserve reserves earnings u re r d th u income al se s er r b rv h y o e ar s n e t ds s o c k 1. Balance as at the end of the 561,374, 164,328 425,482 18,812, 325,451, 777,899, 2,273,34 19,498,5 2,292,84 prior year 326.00 ,665.43 ,758.24 986.55 531.14 079.66 9,347.02 89.15 7,936.17 Add: Adjustment for change in accounting policy Adjustment for correction of previous error Adjustment for business combination under common control Other adjustments 2. Balance as at the beginning 561,374, 164,328 425,482 18,812, 325,451, 777,899, 2,273,34 19,498,5 2,292,84 of the year 326.00 ,665.43 ,758.24 986.55 531.14 079.66 9,347.02 89.15 7,936.17 109 Changchai Company, Limited Annual Report 2022 3. Increase/ decrease in the 144,318, 476,347 80,528, 8,692,95 94,313,2 804,200, -74,358. 804,126, -36.51 period (“-” for decrease) 181.00 ,552.97 741.31 7.32 75.22 671.31 17 313.14 3.1 Total comprehensive 80,528, 103,006, 183,534, -74,358. 183,460, income 741.31 232.54 973.85 17 615.68 3.2 Capital increased and 144,318, 476,347 620,665, 620,665, reduced by owners 181.00 ,552.97 733.97 733.97 3.2.1 Ordinary shares 144,318, 476,347 620,665, 620,665, increased by owners 181.00 ,552.97 733.97 733.97 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 8,692,95 -8,692,9 3.3 Profit distribution 7.32 57.32 3.3.1 Appropriation to 8,692,95 -8,692,9 surplus reserves 7.32 57.32 3.3.2 Appropriation to general reserve 3.3.3 Appropriation to owners (or shareholders) 3.3.4 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 110 Changchai Company, Limited Annual Report 2022 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve -36.51 -36.51 -36.51 4,023,2 4,023,20 4,023,20 3.5.1 Increase in the period 00.24 0.24 0.24 4,023,2 4,023,23 4,023,23 3.5.2 Used in the period 36.75 6.75 6.75 3.6 Other 4. Balance as at the end of the 705,692, 640,676 506,011, 18,812, 334,144, 872,212, 3,077,55 19,424,2 3,096,97 period 507.00 ,218.40 499.55 950.04 488.46 354.88 0,018.33 30.98 4,249.31 Legal representative: Shi Xinkun General Manager: Zhang Xin Head of the accounting department: Jiang He 111 Changchai Company, Limited Annual Report 2022 8. Statements of Changes in Owners’ Equity of the Company as the Parent 2022 Unit: RMB 2022 Other equity instruments Le Pe ss: Pr rp Tr Other efe O Total Item et Capital eas comprehe Specific Surplus Retained Share capital rre O th owners’ ua reserves ur nsive reserve reserves earnings d th er equity l y income sh er bo sto are nd ck s s 1. Balance as at the end of the 705,692,507.0 659,418,70 505,663,1 18,812,950. 334,144,488 756,385,421. 2,980,117,1 prior year 0 0.67 30.88 04 .46 25 98.30 Add: Adjustment for change in accounting policy Adjustment for correction of previous error Other adjustments 2. Balance as at the beginning of 705,692,507.0 659,418,70 505,663,1 18,812,950. 334,144,488 756,385,421. 2,980,117,1 the year 0 0.67 30.88 04 .46 25 98.30 3. Increase/ decrease in the 149,330,2 15,053,237. 117,131,130. 281,550,47 35,906.71 period (“-” for decrease) 04.52 26 15 8.64 3.1 Total comprehensive 149,330,2 150,532,372. 299,862,57 income 04.52 59 7.11 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares 112 Changchai Company, Limited Annual Report 2022 increased by owners 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 15,053,237. -33,401,242. -18,348,00 3.3 Profit distribution 26 44 5.18 3.3.1 Appropriation to 15,053,237. -15,053,237. surplus reserves 26 26 3.3.2 Appropriation to -18,348,005. -18,348,00 owners (or shareholders) 18 5.18 3.3.3 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 113 Changchai Company, Limited Annual Report 2022 3.4.6 Other 3.5 Specific reserve 35,906.71 35,906.71 4,877,232.1 4,877,232.1 3.5.1 Increase in the period 2 2 4,841,325.4 4,841,325.4 3.5.2 Used in the period 1 1 3.6 Other 4. Balance as at the end of the 705,692,507.0 659,418,70 654,993,3 18,848,856. 349,197,725 873,516,551. 3,261,667,6 period 0 0.67 35.40 75 .72 40 76.94 2021 Unit: RMB 2021 Other equity instruments Le P ss: Pr er Tr Other efe pe O Total Item Capital eas comprehe Specific Surplus Retained Share capital rre tu Ot th owners’ reserves ur nsive reserve reserves earnings d al he er equity y income sh b r sto are o ck s n ds 1. Balance as at the end of the 561,374,326.0 183,071,14 425,482,7 18,812,986. 325,451,531 677,800,436. 2,191,993,1 prior year 0 7.70 58.24 55 .14 75 86.38 Add: Adjustment for change in accounting policy Adjustment for correction of previous error Other adjustments 114 Changchai Company, Limited Annual Report 2022 2. Balance as at the beginning of 561,374,326.0 183,071,14 425,482,7 18,812,986. 325,451,531 677,800,436. 2,191,993,1 the year 0 7.70 58.24 55 .14 75 86.38 3. Increase/ decrease in the 144,318,181.0 476,347,55 80,528,74 8,692,957.3 78,236,615.8 788,124,01 -36.51 period (“-” for decrease) 0 2.97 1.31 2 3 1.92 3.1 Total comprehensive 80,528,74 86,929,573.1 167,458,31 income 1.31 5 4.46 3.2 Capital increased and 144,318,181.0 476,347,55 620,665,73 reduced by owners 0 2.97 3.97 3.2.1 Ordinary shares 144,318,181.0 476,347,55 620,665,73 increased by owners 0 2.97 3.97 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 8,692,957.3 -8,692,957.3 3.3 Profit distribution 2 2 3.3.1 Appropriation to 8,692,957.3 -8,692,957.3 surplus reserves 2 2 3.3.2 Appropriation to owners (or shareholders) 3.3.3 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 115 Changchai Company, Limited Annual Report 2022 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve -36.51 -36.51 4,023,200.2 4,023,200.2 3.5.1 Increase in the period 4 4 4,023,236.7 4,023,236.7 3.5.2 Used in the period 5 5 3.6 Other 4. Balance as at the end of the 705,692,507.0 659,418,70 506,011,4 18,812,950. 334,144,488 756,037,052. 2,980,117,1 period 0 0.67 99.55 04 .46 58 98.30 Legal representative: Shi Xinkun General Manager: Zhang Xin Head of the accounting department: Jiang He 116 Changchai Company, Limited Annual Report 2022 III. Company Profile Changchai Company, Limited (hereinafter referred to as “the Company”) was founded on 5 May 1994, which is a company limited by shares promoted solely by Changzhou Diesel Engine Plant through the approval by the State Commission for Restructuring the Economic Systems with document TGS [1993] No. 9 on 15 January 1993 by way of public offering of shares. With the approved of the People’s Government of Jiangsu Province SZF [1993] No. 67, as well as reexamined and approved by China Securities Regulatory Commission (“CSRC”) through document ZJFSZ (1994) No. 9, the Company initially issued A shares to the public from 15 March 1994 to 30 March 1994. As approved by the Shenzhen Stock Exchange through document SZSFZ (1994) No. 15, such tradable shares of the public got listing on 1 July 1994 at Shenzhen Stock Exchange with “Su Changchai A” for short of stock, as well as “0570” as stock code (present stock code is “000570”). In 1996, with the recommendation of the Office of the People’s Government of Jiangsu Province SZBH [1996] No. 13, as well as first review by Shenzhen Municipal Securities Administration Office through SZBZ [1996] No. 24, and approval of the State Council Securities Commission ZWF [1996] No. 27, the Company issued 100 million B shares to qualified investors on 27 August 1996 to 30 August 1996, getting listed on 13 September 1996. On 9 June 2006, the Company held a shareholders’ general meeting related to A shares market to examine and approve share merger reform plan, and performed the share merger reform on 19 June 2006. As examined and approved at the 2nd Extraordinary General Meeting of 2009 in September 2009, based on the total share capital of 374,249,551 shares as at 30 June 2009, the Company implemented the profit distribution plan, i.e. to distribute 5 bonus shares and cash of RMB0.80 for every 10 shares, with registered capital increased by RMB187,124,775.00, as well as registered capital of RMB561,374,326.00 after change, which verified by Jiangsu Gongzheng Tianye Certified Public Accountants Company Limited with issuing Capital Verification Report SGC [2010] No. B002. A non-public offering of up to 168,412,297 new shares was deliberated on and approved as a resolution of the 2020 Annual General Meeting held on 7 May 2021 and approved by the Approval of the Non-public Offering of Shares of Changchai Co., Ltd. (CSRC Permit [2020] No. 3374) issued by Changchai Company Limited the China Securities Regulatory Commission. On 16 June 2021, the capital verification report "S.G. W [2021] B062" was issued by Gongzheng Tianye Accounting Firm (Special General Partnership), confirming that the Company had issued 144,318,181 RMB ordinary shares (A shares) in a non-public offering, with an additional paid-in capital (share capital) of RMB144,318,181. The total amount raised was RMB634,999,996.40; the net amount raised was RMB620,665,733.97, which increased the capital reserve (share capital premium) by RMB476,347,552.97. As of 31 December 2021, the total share capital of the Company was RMB705,692,507. Credibility code of the Company’s License of Business Corporation: 91320400134792410W. The Company’s registered address is situated at No. 123 Huaide Middle Road, Changzhou, Jiangsu, as well as its head office located at No. 123 Huaide Middle Road, Changzhou, Jiangsu. The Company belongs to manufacturing with business scope including manufacturing and sale of diesel engine, diesel engines part and casting, grain harvesting machine, rotary cultivators, walking tractor, mould and fixtures, assembling and sale of diesel generating set and pumping unit. The Company mainly engaged in the production and sales of small and medium-sized single cylinders and multi-cylinder diesel engine with the label of Changchai Brand. The diesel engine produced and sold by the Company were mainly used in tractors, combine harvest models, light commercial vehicle, farm equipment, small-sized construction machinery, generating sets and shipborne machinery and equipment, etc. The Company’s main business remained unchanged in the Reporting 117 Changchai Company, Limited Annual Report 2022 Period. The Company established the Shareholders’ General Meeting, the Board of Directors and the Supervisory Committee, Corporate office, Financial Department, Political Department, Investment and Development Department, Audit Department, Human Recourses Department, Production Department, Procurement Department, Sales Company, Chief Engineer Office, Technology Center, QA Department, Foundry Branch, Machine Processing Branch, Single-cylinder Engine branch, Multi-cylinder Engine Branch and Overseas Business Department in the Company. The financial report has been approved to be issued by the Board of Directors on 10 April 2023. The consolidated scope of the Company of the Reporting Period includes the Company as the parent and 8 subsidiaries. For the details of the consolidated scope of the Reporting Period and the changes situation, please refer to the changes of the consolidated scope of the notes to the financial report and the notes to the equities among other entities. IV. Basis for Preparation of the Financial Report 1. Basis for Preparation With the going-concern assumption as the basis and based on transactions and other events that actually occurred, the Group prepared financial statements in accordance with The Accounting Standards for Business Enterprises—Basic Standard issued by the Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the various specific accounting standards, the Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and other regulations issued and revised from 15 February 2006 onwards (hereinafter jointly referred to as “the Accounting Standards for Business Enterprises”, “China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission. In accordance with relevant provisions of the Accounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments, where impairment occurred on an asset, an impairment reserve was withdrawn accordingly pursuant to relevant requirements. 2. Continuation The Company comprehensively evaluated the information acquired recently that there would be no such factors in the 12 months from the end of the Reporting Period that would obviously influence the continuation capability of the Company and predicted that the operating activities would continue in the future 12 months of the Company. The financial statement compiled base on the continuous operation. V. Important Accounting Policies and Estimations Notification of specific accounting policies and accounting estimations: The Company and each subsidiary according to the actual production and operation characteristics and in accord with the regulations of the relevant ASBE, formulated certain specific accounting policies and accounting estimations, which mainly reflected in the financial instruments, withdrawal method of the bad debt provision of the accounts receivable, the measurement of the inventory and the depreciation of the fixed assets etc. 118 Changchai Company, Limited Annual Report 2022 1. Statement of Compliance with the Accounting Standards for Business Enterprises The financial statements prepared by the Group are in compliance with in compliance with the Accounting Standards for Business Enterprises, which factually and completely present the Company’s and the Group’s financial positions, business results and cash flows and other relevant information. 2. Fiscal Period The fiscal periods are divided into fiscal year and metaphase, the fiscal year is from January 1 to December 31 and as the metaphase included monthly, quarterly and semi-yearly periods. 3. Operating Cycle A normal operating cycle refers to a period from the Group purchasing assets for processing to realizing cash or cash equivalents. An operating cycle for the Group is 12 months, which is also the classification criterion for the liquidity of its assets and liabilities. 4. Currency Used in Bookkeeping Renminbi is functional currency of the Company. 5. Accounting Methods for Business Combinations under the Same Control and Business Combinations not under the Same Control (1) Business combinations under the same control: A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary. For the merger of enterprises under the same control, if the consideration of the merging enterprise is that it makes payment in cash, transfers non-cash assets or bear its debts, it shall, on the date of merger, regard the share of the book value of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. If the consideration of the merging enterprise is that it issues equity securities, it shall, on the date of merger, regard the share of the book value of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The total face value of the stocks issued shall be regarded as the capital stock, while the difference between the initial cost of the long-term equity investment and total face value of the shares issued shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. All direct costs for the business combination, including expenses for audit, evaluating and legal services shall be recorded into the profits and losses at the current period. The expenses such as the handling charges and commission etc, premium income of deducting the equity securities, and as for the premium income was insufficient to dilute, the retained earnings shall be written down. Owning to the reasons such as the additional investment, for the equity investment held before acquiring the 119 Changchai Company, Limited Annual Report 2022 control right of the combined parties, the confirmed relevant gains and losses, other comprehensive income and the changes of other net assets since the date of the earlier one between the date when acquiring the original equity right and the date when the combine parties and combined ones were under the same control to the combination date, should be respectively written down and compared with the beginning balance of retained earnings or the current gains and losses during the statement period. (2) Business combinations not under the same control A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination. The combination costs of the acquirer and the identifiable net assets obtained by the acquirer in a business combination shall be measured at the fair values. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains forms the acquiree as business reputation. The direct relevant expenses occurred from the enterprise combination should be included in the current gains and losses when occurred. The combination costs of the acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at the acquiring date. The difference between the fair value of the assets paid out by the Company and its book value should be included in the current gains and losses. The purchase date refers to the date that the purchaser acquires the control right of the acquiree. For the business combinations not under the same control realized through step by step multiple transaction, as for the equity interests that the Group holds in the acquiree before the acquiring date, they shall be re-measured according to their fair values at the acquiring date; the positive difference between their fair values and carrying amounts shall be recorded into the investment gains for the period including the acquiring date. The equity holed by the acquiree which involved with the other comprehensive income and the other owners’ equities changes except for the net gains and losses, other comprehensive income and the profits distribution and other related comprehensive gains and other owners’ equities which in relation to the equity interests that the Group holds in the acquiree before the acquiring date should be transferred into the current investment income on the acquiring date, except for the other comprehensive income occurred from the re-measurement of the net profits of the defined benefit plans or the changes of the net assets of the investees. 6. Methods for Preparing Consolidated Financial Statements The Company confirms the consolidated scope based on the control and includes the subsidiaries with actual control right into the consolidated financial statement. The consolidated financial statement of the Company is compiled according to the regulations of No. 33 of ASBE-Consolidated Financial Statement and the relevant regulations and as for the whole significant come-and-go balance, investment, transaction and the unrealized profits should be written off when compiling the consolidated financial statement. The portion of a subsidiary’s shareholders’ equity and the portion of a subsidiary’s net profits and losses for the period not held by the Group are recognized as minority interests and minority shareholder profits and losses respectively and presented separately under shareholders’ equity and net profits in the consolidation financial statements. The portion of a subsidiary’s net profits and losses for the period that belong to minority interests is presented as the item of “minority shareholder profits and losses” under the bigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholders exceeds the portion enjoyed by minority shareholders in the subsidiary’s opening owners’ equity, minority interests are offset. The accounting policy or accounting period of each subsidiary is different from which of the Company, which 120 Changchai Company, Limited Annual Report 2022 shall be adjusted as the Company; or subsidiaries shall prepare financial statement again required by the Company when preparing the consolidated financial statements. As for the added subsidiary company not controlled by the same enterprise preparing the consolidated financial statement, shall adjust individual financial statement based on the fair value of the identifiable net assets on the acquisition date; as for the added subsidiary companies controlled by the same enterprise preparing the financial statement, shall not adjust the financial statement of the subsidiaries, namely survived by integration as participating in the consolidation when the final control party starts implementing control and should adjust the period-begin amount of the consolidated balance sheet and at the same time adjust the relevant items of the compared statement. As for the disposed subsidiaries, the operation result and the cash flow should be included in the consolidated income statement and the consolidated cash flow before the disposing date; the disposed subsidiaries of the current period, should not be adjusted the period-begin amount of the consolidated balance sheet. Where the Group losses control on its original subsidiaries due to disposal of some equity investments or other reasons, the residual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of the consideration obtained from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in the original subsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Group according to the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when the Group’s control on the subsidiary ceases. Other comprehensive incomes in relation to the equity investment and the other owners’ equities changes except for the net gains and losses, other comprehensive income and profits distribution in the original subsidiary are treated on the same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is, except for the changes in the net liabilities or assets with a defined benefit plan resulted from re-measurement of the original subsidiary, the rest shall all be transferred into current investment gains) when such control ceases. And subsequent measurement is conducted on the residual equity interests according to the No.2 Accounting Standard for Business Enterprises-Long-term Equity Investments or the No.22 Accounting Standard for Business Enterprises-Recognition and Measurement of Financial Instruments. For the disposal of equity investment belongs to a package deal, should be considered as a transaction and conduct accounting treatment. However, Before losing control, every disposal cost and corresponding net assets balance of subsidiary of disposal investment are confirmed as other comprehensive income in consolidated financial statements, which together transferred into the current profits and losses in the loss of control, when the Group losing control on its subsidiary. For the disposal of the equity investment not belongs to a package deal, should be executed accounting treatment according to the relevant policies of partly disposing the equity investment of the subsidiaries under the situation not lose the control right before losing the control right; when losing the control right, the former should be executed accounting treatment according to the general disposing method of the disposal of the subsidiaries. 7. Classification of Joint Arrangements and Accounting Treatment of Joint Operations The Group classifies joint arrangements into joint operations and joint ventures. A joint operation refers to a joint arrangement where the Group is the joint operations party of the joint arrangement and enjoys assets and has to bear liabilities related to the arrangement. The Company confirms the following items related to the interests share among the joint operations and executes accounting treatment according to the regulations of the relevant ASBE: (1) Recognizes the assets that it holds and bears in the joint operation and recognizes the jointly-held assets 121 Changchai Company, Limited Annual Report 2022 according to the Group’s stake in the joint operation; (2) Recognizes the liabilities that it holds and bears in the joint operation and recognizes the jointly-held liabilities according to the Group’s stake in the joint operation; (3) Recognizes the income from sale of the Group’s share in the output of the joint operation (4) Recognizes the income from sale of the joint operation’s outputs according to the Group’s stake in it (5) Recognizes the expense solely incurred to the Group and the expense incurred to the joint operation according to the Group’s stake in it. 8. Recognition Standard for Cash and Cash Equivalents In the Group’s understanding, cash and cash equivalents include cash on hand, any deposit that can be used for cover, and short-term (usually due within 3 months since the day of purchase) and high circulating investments, which are easily convertible into known amount of cash and whose risks in change of value are minimal. 9. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements (1) Foreign currency business Concerning the foreign-currency transactions that occurred, the foreign currency shall be converted into the recording currency according to the middle price of the market exchange rate disclosed by the People’s Bank of China on the date of the transaction. Among the said transactions that occurred, those involving foreign exchanges shall be converted according to the exchange rates adopted in the actual transactions. On the balance sheet date, the foreign-currency monetary assets and the balance of the liability account shall be converted into the recoding currency according to the middle price of the market exchange rates disclosed by the People’s Bank of China on the Balance Sheet Date. The difference between the recording-currency amount converted according to the exchange rate on the Balance Sheet Date and the original book recording-currency amount shall be recognized as gains/losses from foreign exchange. And the exchange gain/loss caused by the foreign-currency borrowings related to purchasing fixed assets shall be handled according to the principle of capitalizing borrowing expenses; the exchange gain/loss incurred in the establishment period shall be recorded into the establishment expense; others shall be recorded into the financial expenses for the current period. On the balance sheet date, the foreign-currency non-monetary items measured by historical cost shall be converted according to the middle price of the market exchange disclosed by the People’s Bank of China on the date of the transaction, with no changes in the original recording-currency amount; while the foreign-currency non-monetary items measured by fair value shall be converted according to the middle price of the market exchange disclosed by the People’s Bank of China on the date when the fair value is recognized, and the exchange gain/loss caused thereof shall be recognized as the gain/loss from fair value changes and recorded into the gain/loss of the current period. (2) Translation of foreign currency The assets and liabilities items among the balance sheet of the foreign operation shall be translated at a spot exchange rate on the balance sheet date. Among the owner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred. And the revenues and expenses items among the balance sheet of the foreign operation shall be translated at the approximate exchange rate of the transaction date. The difference caused from the above transaction of the foreign currency statement should be listed in the other comprehensive income among the owners’ equities. 122 Changchai Company, Limited Annual Report 2022 10. Financial Instruments (1) Classification of Financial Instruments The Company classifies the financial assets when initially recognized into the following three categories based on the business model for financial assets management and characteristics of contractual cash flow of financial assets: financial assets measured at amortized cost, financial assets at fair value through other comprehensive income (debt instruments) and financial assets at fair value through profit or loss Financial liabilities were classifies when initially recognized into financial liabilities at fair value through profit or loss and financial liabilities measured at amortized cost. (2) Recognition Basis and Measurement Method for Financial Instruments ① Financial assets measured at amortized cost Financial assets at amortized cost include notes receivable, accounts receivable, other receivables, long-term receivables, and investment in debt obligations which are initially measured at fair value and related transaction cost shall be recorded into the initial recognized amount. For accounts receivable excluding significant financing and accounts receivable that the Company decides not to consider financing components less than one year, the initial measurement shall be made at the contract transaction price. The interest calculated with actual rates for the holding period shall be recorded into the current profit or loss. When recovered or disposed, the difference between the price obtained and the carrying value of the financial assets shall be recorded into the current profit or loss. ② Financial assets at fair value through other comprehensive income (debt instruments) Financial assets at fair value through other comprehensive income (debt instruments) include accounts receivable financing and investment in other debt obligations which are initially measured at fair value and related transaction cost shall be recorded into the initial recognized amount. The subsequent measurement of the financial assets shall be at fair value and changes of fair value except for interest calculated with actual rates, impairment losses or gains and exchange gains or losses shall be recorded into other comprehensive income. When derecognized, the accumulated gains or losses originally recorded into other comprehensive income shall be transferred into the current profit or loss. ③ Financial assets at fair value through other comprehensive income (equity instruments) Financial assets at fair value through other comprehensive income (equity instruments) include investment in other equity instruments, etc. which are initially measured at fair value and related transaction cost shall be recorded into the initial recognized amount. The subsequent measurement of the financial assets shall be at fair value and changes of fair value shall be recorded into other comprehensive income. The dividends obtained shall be recorded into the current profit or loss. When derecognized, the accumulated gains or losses originally recorded into other comprehensive income shall be transferred into retained earnings. ④ Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include held-for-trading financial assets, derivative financial assets and other non-current financial assets which are initially measured at fair value and the related transaction cost shall be recorded into the current profit or loss. The subsequent measurement of the financial assets shall be at fair value and the changes of fair value shall be recorded into the current profit or loss. ⑤ Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include held-for-trading financial liabilities and derivative financial liabilities which are initially measured at fair value and the related transaction cost shall be recorded into the current profit or loss. The subsequent measurement of the financial liabilities shall be at fair value and the changes of fair value shall be recorded into the current profit or loss. When derecognized, the difference between 123 Changchai Company, Limited Annual Report 2022 the carrying value and the paid consideration shall be recorded into the current profit or loss. ⑥ Financial liabilities at amortized cost Financial liabilities at amortized cost include short-term borrowings, notes payable, accounts payable, other payables, long-term borrowings, bonds payable and long-term payables which are initially measured at fair value and the related transaction cost shall be recorded into the initial recognized amount. The interest calculated with actual rates for the holding period shall be recorded into the current profit or loss. When derecognized, the difference between the paid consideration and the carrying value of the financial liabilities shall be recorded into the current profit or loss. (3) Recognition Basis and Measurement of Transfer of Financial Assets Where the Company has transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall stop recognizing the financial asset and separately recognize the rights and obligations generated retained from the transfer as assets or liabilities. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall continue to recognize the transferred financial asset. Where the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of a financial asset, it shall deal with it according to the circumstances as follows, respectively: (1) If it gives up its control over the financial asset, it shall stop recognizing the financial asset and separately recognize the rights and obligations generated retained from the transfer as assets or liabilities; (2) If it does not give up its control over the financial asset, it shall, according to the extent of its continuous involvement in the transferred financial asset, recognize the related financial asset and recognize the relevant liability accordingly. If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the difference between the amounts of the following 2 items shall be recorded in the profits and losses of the current period: (1) The carrying value of the transferred financial asset on the derecognition date; (2) The sum of consideration received from the transfer of financial assets, and derecognition amount among the accumulative amount of the changes of the fair value originally recorded in the other comprehensive income (the financial assets involve transfer are investments in debt instruments at fair value through other comprehensive income. If the transfer of partial financial asset satisfies the conditions to stop the recognition, the entire carrying value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped, be apportioned according to their respective relative fair value on the transfer date, and the difference between the amounts of the following two items shall be included into the profits and losses of the current period: (1)The carrying value of the portion whose recognition has been stopped; (2)The sum of consideration of the portion whose recognition has been stopped, and derecognition amount among the accumulative amount of the changes of the fair value originally recorded in the other comprehensive income (the financial assets involve transfer are investments in debt instruments at fair value through other comprehensive income. (4) Derecognition Basis of Financial Liabilities A financial liability or part of it can be derecognized after its current obligation has been relieved in full or in part. (5) Recognition of Fair Value of Financial Assets and Financial Liabilities The fair value of financial instruments with an active market is determined by the quoted price in the active market. For financial instruments without active market, the fair value is determined by valuation techniques. The Company adopts the valuation techniques applicable to the current conditions which are supported by sufficient data and other information for valuation, and selects the input values consistent with the characteristics of assets or liabilities considered by market participants in asset or liability transactions, with priority to observable input values. Unobservable input values are used only when relevant observable input values are not available or practical. 124 Changchai Company, Limited Annual Report 2022 (6) Impairment of financial instrument ① Impairment measurement and accounting handling of financial instrument Based on expected credit loss, the Company conducts impairment handling and confirms credit impairment loss for financial assets which is measured by amortized cost, debt instrument investment which is measured by fair value and whose change is calculated into other comprehensive profits, financial guarantee contract. Expected credit loss refers to weighted average of credit loss of financial instrument which takes the risk of contract breach occurrence as the weight. Credit loss refers to the difference between all contract cash flow which is converted into cash according to actual interest rate and receivable according to contract and all cash flow which to be charged as expected, i.e. current value of all cash shortage. Among it, as for financial asset purchased or original which has had credit impairment, it should be converted into cash according actual interest rate of this financial asset after credit adjustment. Lifetime expected credit losses refer to those caused by possible defaults during the entire expected duration of a financial instrument. The expected credit losses in the next 12 months refers to those caused by the default events of the financial instrument that may occur within 12 months (or the expected duration if the expected duration of the financial instrument is less than 12 months) after the balance sheet date, and is part of the expected credit losses in the entire duration. On each balance sheet date, the Company respectively measured the expected credit losses of financial instruments in different stages. If the credit risk of a financial instrument has had no significant increase since its initial recognition, the instrument shall fall in the first stage, for which the Company would measure the loss reserves according to the expected credit losses in the future 12 months. If the credit risk of a financial instrument has had a significant increase since its initial recognition but no credit impairment has occurred, the instrument shall fall in the second stage, for which the Company would measure the loss reserves according to the expected credit losses in the entire duration of the instrument. If the credit impairment has occurred since its initial recognition, the financial instrument shall fall in the third stage, for which the Company would measure the loss reserves according to the expected credit losses in the entire duration of the instrument. As for a financial instrument with low credit risks on the balance sheet date, the Company measured the loss reserves according to the expected credit losses in the future 12 months, assuming that its credit risk has had no significant increase since its initial recognition. For financial instruments with low credit risks in stages 1 and 2, the Company calculated the interest income at the effective interest rate and on the carrying amount of the instruments without deductions for provisions for asset impairment. For financial instruments in stage 3, interest income was calculated at the effective interest rates and on the amortized cost by reducing the provisions for asset impairment from the carrying amount. For notes receivables, accounts receivables, and financing receivables, whether there was a significant financial component or not, the Company measured the loss reserves based on the expected credit losses for the entire duration. A. Accounts receivable For notes receivable, accounts receivable, other receivables and accounts receivable financing with objective evidence indicating impairment and those suitable for individual evaluation, the Company carries out impairment test separately to confirm expected credit loss and prepare provision for impairment of single items. For notes receivable, accounts receivable, other receivables, accounts receivable financing, contract assets and long-term receivables without objective evidence of impairment, or a single financial asset with expected credit loss impossible to be assessed at a reasonable cost, the Company divides the notes receivable, accounts receivable, other receivables and accounts receivable financing into groups according to the characteristics of credit risk, and calculates the expected credit loss based on receivable groups. The basis for recognizing groups is as follows: 125 Changchai Company, Limited Annual Report 2022 Item Recognition basis Method of measuring expected credit losses Group 1 of notes Consulting historical experience in credit losses, All commercial bills receivable combining current situation and prediction for future Bank’s acceptance bills economic situation, the expected credit loss shall be Group 2 of notes with low credit rating accounted through exposure at default and the expected receivable credit loss rate over the entire life Bank’s acceptance bills Consulting historical experience in credit losses, with high credit rating combining current situation and prediction for future Accounts receivable economic situation, the expected credit loss shall be financing accounted through exposure at default and the expected credit loss rate over the entire life Prepare the comparative list between aging of accounts receivable and expected credit loss rate over the entire life and calculate the expected credit loss by consulting Accounts Accounts receivable historical experience in credit losses, combining current receivable-credit risk portfolio with credit situation and prediction for future economic situation. characteristics group period The Company takes aging as credit risk characteristics groups and calculates the expected credit loss for accounts receivable. Accounts Consulting historical experience in credit losses, receivable-intercourse combining current situation and prediction for future Related party within the funds among related economic situation, the expected credit loss shall be consolidation scope party group within the accounted through exposure at default and the expected consolidation scope credit loss rate over the entire life Basis for recognizing groups of other receivables is as follows: Item Recognition basis Method of measuring expected credit losses Consulting historical experience in credit losses, Other receivables combining current situation and prediction for future excluding those from economic situation, the expected credit loss shall be Group 1 of other receivables related parties-aging accounted through exposure at default and the expected group credit loss rate within the next 12 months or over the entire life Consulting historical experience in credit losses, combining current situation and prediction for future Related party within economic situation, the expected credit loss shall be Group 2 of other receivables the consolidation accounted through exposure at default and the expected scope credit loss rate within the next 12 months or over the entire life 11. Accounts Receivable See “10. Financial Instruments”. 126 Changchai Company, Limited Annual Report 2022 12. Accounts Receivable Financing See “10. Financial Instruments”. 13. Other Receivables See “10. Financial Instruments”. 14. Inventory (1) Category of Inventory Inventory refers to the held-for-sale finished products or commodities, goods in process, materials consumed in the production process or the process providing the labor service etc. Inventory is mainly including the raw materials, low priced and easily worn articles, unfinished products, inventories and work in process–outsourced etc. (2) Pricing method Purchasing and storage of the various inventories should be valued according to the planed cost and the dispatch be calculated according to the weighted average method; carried forward the cost of the finished products according to the actual cost of the current period and the sales cost according to the weighted average method. (3) Determination basis of the net realizable value of inventory and withdrawal method of the provision for falling price of inventory At the balance sheet date, inventories are measured at the lower of the costs and net realizable value. When all the inventories are checked roundly, for those which were destroyed, outdated in all or in part, sold at a loss, etc, the Company shall estimate the irrecoverable part of its cost and withdrawal the inventory falling price reserve at the year-end. Where the cost of the single inventory item is higher than the net realizable value, the inventory falling price reserve shall be withdrawn and recorded into profits and losses of the current period. Of which: in the normal production and operating process, as for the commodities inventory directly for sales such as the finished products, commodities and the materials for sales, should recognize the net realizable value according to the amount of the estimated selling price of the inventory minuses the estimated selling expenses and the relevant taxes; as for the materials inventory needs to be processed in the normal production and operating process, should recognize its net realizable value according to the amount of the estimated selling price of the finished products minuses the cost predicts to be occur when the production completes and the estimated selling expenses as well as the relevant taxes; on the balance sheet date, for the same inventory with one part agreed by the contract price and other parts not by the contract price, should be respectively recognized the net realizable value. For items of inventories relating to a product line that are produced and marketed in the same geographical area, have the same or similar end users or purposes, and cannot be practicably evaluated separately from other items in that product line provision for decline in value is determined on an aggregate basis; for large quantity and low value items of inventories, provision for decline in value is made based on categories of inventories. (4) The perpetual inventory system is maintained for stock system. (5) Amortization method of low-value consumables and packages One time amortization method is adopted for low-value consumables and packages. 127 Changchai Company, Limited Annual Report 2022 15. Contract Assets Contract Assets means that the Company is endowed with the right to charge the consideration through transferring any commodity or service to the client, and such right depends on other factors except the passing of time. The Company’s unconditional right (only depending on the passing of time) of charging the consideration from the client shall be separately presented as receivables. The recognition method and accounting treatment method of the estimated credit loss of contract assets are consistent with that specified in Notes V.11. 16. Contract Costs (1) Costs from Acquiring Contract If the incremental cost resulting from the Company’s acquiring of contract (namely costs merely resulting from the acquiring of contract) is predicted to be retrieved, it shall be recognized as an assets, amortized by adopting the same basis with the recognition of commodities or service revenues related to the assets and included into the current profit and loss. If the assets’ amortization period does not exceed one year, it shall be immediately included into the current profit and loss. Other expenses resulting from the Company’s acquiring of contract shall also be included into the current profit and loss unless it is explicitly borne by the client. (2) Costs from Executing Contract The Company’s costs from executing contract is not covered by other ASBE except for Revenue Standards, and when the following situations are met, such costs can be recognized as an assets: ① the costs are directly related to a current or predicted contract; ② the costs increase the Company’s resources applied to fulfill performance obligations in the future; ③ the costs are predicted to be retrieved. The recognized assets shall be amortized by adopting the same basis with the recognition of commodities or service revenues related to the assets and included into the current profit and loss. If the book value of contract costs is higher than the difference of the following two items, corresponding depreciation reserves shall be counted and withdrawn and it shall be recognized as the assets depreciation loss: ① the residual consideration predicted to be acquired by transferring commodities related to the assets; ② the costs predicted to occur due to the transfer of related commodities. If the difference between ① and ② is higher than the book value of contract costs due to any change in various factors causing depreciation in previous periods, it shall be restituted to the withdrawn assets depreciation reserves and included in the current profit and loss. However, the book value of restituted contract costs shall not exceed the book value of the assets on the day of restitution based on the hypothesis that depreciation reserves are not counted and withdrawn. 17. Assets Held for Sale The Company recognizes the components (or the non-current assets) which meet with the following conditions as assets held for sale: (1) The components must be immediately sold only according to the usual terms of selling this kind of components under the current conditions; (2) The Company had made solutions on disposing the components (or the non-current assets), for example, the Company should gain the approval from the shareholders according to the regulations and had acquired the approved from the Annual General Meeting or the relevant authority institutions; 128 Changchai Company, Limited Annual Report 2022 (3) The Company had signed the irrevocable transformation agreement with the transferee; (4) The transformation should be completed within 1 year. 18. Long-term Equity Investments (1) Judgment standard of joint control and significant influences Joint control, refers to the control jointly owned according to the relevant agreement on an arrangement by the Company and the relevant activities of the arrangement should be decided only after the participants which share the control right make consensus. Significant influence refers to the power of the Company which could anticipate in the finance and the operation polices of the investees, but could not control or jointly control the formulation of the policies with the other parties. (2) Recognition for initial investment cost The initial investment cost of the long-term equity investment shall be recognized by adopting the following ways in accordance with different methods of acquisition: 1) As for those forms under the same control of the enterprise combine, if the combine party takes the cash payment, non-cash assets transformation, liabilities assumption or equity securities issuance as the combination consideration, should take the shares of the book value by the ultimate control party in the consolidate financial statement of the owners’ equities of the combiners acquired on the merger date as the initial investment cost. The difference between the initial investment cost and the book value of the paid combination consideration or the total amount of the issued shares of the long-term equity investment should be adjusted the capital reserve; If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. To include each direct relevant expense occurred when executing the enterprise merger into the current gains and losses; while the handling charges and commission occurs from the issuing the equity securities or the bonds for the enterprise merger should be included in the initial measurement amount of the shareholders’ equities or the liabilities. 2) As for long-term equity investment acquired through the merger of enterprises not under the same control, its initial investment cost shall regard as the combination cost calculated by the fair value of the assets, equity instrument issued and liabilities incurred or undertaken on the purchase date adding the direct cost related with the acquisition. The identifiable assets of the combined party and the liabilities (including contingent liability) undertaken on the combining date shall be measured at the fair value without considering the amount of minority interest. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. The acquirer shall record the negative balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree into the consolidated income statement directly. The agent expense and other relevant management expenses such as the audit, legal service and evaluation consultation occurs from the enterprise merger, should be included in the current gains and losses when occur; while the handling charges and commission occurs from the issuing the equity securities or the bonds for the enterprise merger should be included in the initial measurement amount of the shareholders’ equities or the liabilities. 3) Long-term equity investment obtained by other means The initial cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost which is actually paid. The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. The initial cost of a long-term equity investment of an investor shall be the value stipulated in the investment contract or agreement, the unfair value stipulated in the contract or agreement shall be measured at fair value. As for long-term investment obtained by the exchange of non-monetary assets, where it is commercial in nature, 129 Changchai Company, Limited Annual Report 2022 the fair value of the assets surrendered shall be recognized as the initial cost of the long-term equity investment received; where it is not commercial in nature, the book value of the assets surrendered shall be recognized as the initial cost of the long-term equity investment received. The initial cost of a long-term equity investment obtained by recombination of liabilities shall be recognized at fair value of long-term equity investment. (3) Subsequent measurement and recognition of profits and losses 1) An investment in the subsidiary company shall be measured by employing the cost method Where the Company hold, and is able to do equity investment with control over an invested entity, the invested entity shall be its subsidiary company. Where the Company holds the shares of an entity over 50%, or, while the Company holds the shares of an entity below 50%, but has a real control to the said entity, then the said entity shall be its subsidiary company. 2) An investment in the joint enterprise or associated enterprise shall be measured by employing the equity method Where the Company hold, and is able to do equity investment with joint control with other parties over an invested entity, the invested entity shall be its joint enterprise. Where the Company hold, and is able to have equity investment with significant influences on an invested entity, the invested entity shall be its associated entity. After the Company acquired the long-term equity investment, should respectively recognize investment income and other comprehensive income according to the net gains and losses as well as the portion of other comprehensive income which should be enjoyed or be shared, and at the same time adjust the book value of the long-term equity investment; corresponding reduce the book value of the long-term equity investment according to profits which be declared to distribute by the investees or the portion of the calculation of cash dividends which should be enjoyed; for the other changes except for the net gains and losses, other comprehensive income and the owners’ equity except for the profits distribution of the investees, should adjust the book value of the long-term equity investment as well as include in the owners’ equity . The investing enterprise shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity. If the accounting policy adopted by the investees is not accord with that of the Company, should be adjusted according to the accounting policies of the Company and the financial statement of the investees during the accounting period and according which to recognize the investment income as well as other comprehensive income. For the transaction happened between the Company and associated enterprises as well as joint ventures, if the assets launched or sold not form into business, the portion of the unrealized gains and losses of the internal transaction, which belongs to the Company according to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction happened between the Company and the investees which belongs to the impairment losses of the transferred assets, should not be neutralized. The Company shall recognize the net losses of the invested enterprise according to the following sequence: first of all, to write down the book value of the long-term equity investment. Secondly, if the book value of the long-term equity investment is insufficient for written down, should be continued to recognized the investment losses limited to the book value of other long-term equity which forms of the net investment of the investees and to written down the book value of the long-term accounts receivable etc. Lastly, through the above handling, for those should still undertake the additional obligations according to the investment contracts or the agreements, it shall 130 Changchai Company, Limited Annual Report 2022 be recognized as the estimated liabilities in accordance with the estimated duties and then recorded into investment losses at current period. If the invested entity realizes any net profits later, the Company shall, after the amount of its attributable share of profits offsets against its attributable share of the un-recognized losses, resume recognizing its attributable share of profits. In the preparation for the financial statements, the balance existed between the long-term equity investment increased by acquiring shares of minority interest and the attributable net assets on the subsidiary calculated by the increased shares held since the purchase date (or combination date), the capital reserves shall be adjusted, if the capital reserves are not sufficient to offset, the retained profits shall be adjusted; the Company disposed part of the long-term equity investment on subsidiaries without losing its controlling right on them, the balance between the disposed price and attributable net assets of subsidiaries by disposing the long-term equity investment shall be recorded into owners’ equity. For other ways on disposal of long-term equity investment, the balance between the book value of the disposed equity and its actual payment gained shall be recorded into current profits and losses. For the long-term equity investment measured by adopting equity method, if the remained equity after disposal still adopts the equity method for measurement, the other comprehensive income originally recorded into owners’ equity should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees according to the corresponding proportion. The owners’ equity recognized owning to the changes of the other owners’ equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into the current gains and losses according to the proportion. For the long-term equity investment which adopts the cost method of measurement, if the remained equity still adopt the cost method, the other comprehensive income recognized owning to adopting the equity method for measurement or the recognition and measurement standards of financial instrument before acquiring the control of the investees, should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees and should be carried forward into the current gains and losses according to the proportion; the changes of the other owners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion. For those the Company lost the control of the investees by disposing part of the equity investment as well as the remained equity after disposal could execute joint control or significant influences on the investees, should change to measure by equity method when compiling the individual financial statement and should adjust the measurement of the remained equity to equity method as adopted since the time acquired; if the remained equity after disposal could not execute joint control or significant influences on the investees, should change the accounting disposal according to the relevant regulations of the recognition and measurement standards of financial instrument, and its difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized by adopting equity method for measurement or the recognition and measurement standards of financial instrument before the Company acquired the control of the investees, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when lose the control of them, while the changes of the other owners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion. Of which, for the disposed remained equity which adopted the equity method for measurement, the other comprehensive income and the other owners’ equity should be carried forward according to the proportion; for the disposed remained equity which changed to execute the accounting disposal according to 131 Changchai Company, Limited Annual Report 2022 the recognition and measurement standards of financial instrument, the other comprehensive income and the other owners’ equity should be carried forward in full amount. For those the Company lost the control of the investees by disposing part of the equity investment, the disposed remained equity should change to calculate according to the recognition and measurement standards of financial instrument, and difference between the fair value and book value on the date lose the control right should be included in the current gains and losses. For the other comprehensive income recognized from the original equity investment by adopting the equity method, should execute the accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when terminate the equity method for measurement, while for the owners’ equity recognized owning to the changes of the other owner’s equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into the current investment income with full amount when terminate adopting the equity method. 19. Investment Real Estate Measurement mode of investment real estate: Measurement of cost method Depreciation or amortization method The investment real estate shall be measured at its cost. Of which, the cost of an investment real estate by acquisition consists of the acquisition price, relevant taxes, and other expense directly relegated to the asset; the cost of a self-built investment real estate composes of the necessary expenses for building the asset to the hoped condition for use. The investment real estate invested by investors shall be recorded at the value stipulated in the investment contracts or agreements, but the unfair value appointed in the contract or agreement shall be entered into the account book at the fair value. As for withdrawal basis of provision for impairment of investment real estates, please refer to withdrawal method for provision for impairment of fixed assets. 20. Fixed Assets (1) Recognition Conditions Fixed assets refers to the tangible assets that simultaneously possess the features as follows: (a) they are held for the sake of producing commodities, rendering labor service, renting or business management; and (b) their useful life is in excess of one fiscal year. The fixed assets are only recognized when the relevant economic benefits probably flow in the Company and its cost could be reliable measured. (2) Depreciation Method Category of fixed assets Method Useful life Annual deprecation Housing and building Average method of 20-40 years 2.50%-5% useful life Machinery equipment Average method of 6-15 years 6.67%-16.67% useful life Transportation Average method of 5-10 years 10%-20% equipment useful life Average method of Other equipment 5-10 years 10%-20% useful life (3) Recognition Basis, Pricing and Depreciation Method of Fixed Assets by Finance Lease 132 Changchai Company, Limited Annual Report 2022 The Company recognizes those meet with the following one or certain standards as the fixed assets by finance lease: 1) The leasing contract had agreed that (or made the reasonable judgment according to the relevant conditions on the lease starting date) when the lease term expires, the ownership of leasing the fixed assets could be transferred to the Company; 2) The Company owns the choosing right for purchasing and leasing the fixed assets, with the set purchase price which is estimated far lower than the fair value of the fixed assets by finance lease when executing the choosing right, so the Company could execute the choosing right reasonably on the lease starting date; 3) Even if the ownership of the fixed assets not be transferred, the lease period is of 75% or above of the useful life of the lease fixed assets; 4) The current value of the minimum lease payment on the lease starting date of the Company is equal to 90% or above of the fair value of the lease fixed assets on the lease starting date; the current value of the minimum lease receipts on the lease starting date of the leaser is equal to 90% or above of the fair value of the lease fixed assets on the lease starting date; 5) The nature of the lease assets is special that only the Company could use it if not execute large transformation. The fixed assets by finance lease should take the lower one between the fair value of the leasing assets and the current value of the minimum lease payment on the lease starting date as the entry value. As for the minimum lease payment which be regarded as the entry value of the long-term accounts payable, its difference should be regarded as the unrecognized financing expense. For the initial direct expenses occur in the lease negotiations and the signing process of the lease contracts that attribute to the handling expenses, counsel fees, travel expenses and stamp taxes of the lease items, should be included in the charter-in assets value. The unrecognized financing expenses should be amortized by adopting the actual interest rate during the period of the lease term. The fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life 21. Construction in Progress (1) Valuation of the progress in construction Construction in progress shall be measured at actual cost. Self-operating projects shall be measured at direct materials, direct wages and direct construction fees; construction contract shall be measured at project price payable; project cost for plant engineering shall be recognized at value of equipments installed, cost of installation, trail run of projects. Costs of construction in process also include borrowing costs and exchange gains and losses, which should be capitalized. (2) Standardization on construction in process transferred into fixed assets and time point The construction in process, of which the fixed assets reach to the predicted condition for use, shall carry forward fixed assets on schedule. The one that has not audited the final accounting shall recognize the cost and make depreciation in line with valuation value. The construction in process shall adjust the original valuation value at its historical cost but not adjust the depreciation that has been made after auditing the final accounting. 22. Borrowing Costs (1) Recognition principle of capitalization of borrowing costs The borrowing costs shall include the interest on borrowings, amortization of discounts or premiums on 133 Changchai Company, Limited Annual Report 2022 borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. Where the borrowing costs occurred belong to specifically borrowed loan or general borrowing used for the acquisition and construction of investment real estates and inventories over one year (including one year) shall be capitalized, and record into relevant assets cost. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses. The borrowing costs shall not be capitalized unless they simultaneously meet the following three requirements: (1) The asset disbursements have already incurred; (2) The borrowing costs have already incurred; and (3) The acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started. (2) The period of capitalization of borrowing costs The borrowing costs arising from acquisition and construction of fixed assets, investment real estates and inventories, if they meet the above-mentioned capitalization conditions, the capitalization of the borrowing costs shall be measured into asset cost before such assets reach to the intended use or sale, Where acquisition and construction of fixed assets, investment real estates and inventories is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended, and recorded into the current expense, till the acquisition and construction of the assets restarts. When the qualified asset is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased, the borrowing costs occurred later shall be included into the financial expense directly at the current period. (3) Measurement method of capitalization amount of borrowing costs As for specifically borrowed loans for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests shall be determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment. Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the enterprise shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general borrowing. 23. Intangible Assets (1) Pricing Method, Service Life, and Impairment Test (1) Pricing method of intangible assets Intangible assets purchased should take the actual payment and the relevant other expenses as the actual cost. For the intangible assets invested by the investors should be recognized the actual cost according to the value of the investment contracts or agreements, however, for the value of the contracts or agreements is not fair, the actual cost should be recognized according to the fair value. For the intangible assets acquires from the exchange of the non-currency assets, if own the commercial nature, should be recorded according to the fair value of the swap-out assets; for those not own the commercial nature, should be recorded according to the book value of the swap-out assets. For the intangible assets acquires from the debts reorganization should be recognized by the fair value. (2) Amortization method and term of intangible assets As for the intangible assets with limited service life, which are amortized by straight-line method when it is available for use within the service period, shall be recorded into the current profits and losses. The Company shall, at least at the end of each year, check the service life and the amortization method of intangible assets with 134 Changchai Company, Limited Annual Report 2022 limited service life. When the service life and the amortization method of intangible assets are different from those before, the years and method of the amortization shall be changed. Intangible assets with uncertain service life may not be amortized. However, the Company shall check the service life of intangible assets with uncertain service life during each accounting period. Where there are evidences to prove the intangible assets have limited service life, it shall be estimated of its service life, and be amortized according to the above method mentioned. The rights to use land of the Company shall be amortized according to the rest service life. (2) Accounting Polices of Internal R & D Costs The internal research and development projects of an enterprise shall be classified into research phase and development phase: the term “research” refers to the creative and planned investigation to acquire and understand new scientific or technological knowledge; the term “development” refers to the application of research achievements and other knowledge to a certain plan or design, prior to the commercial production or use, so as to produce any new material, device or product, or substantially improved material, device and product. The Company collects the costs of the corresponding phases according to the above standard of classifying the research phase and the development phase. The research expenditures for its internal research and development projects of an enterprise shall be recorded into the profit or loss for the current period. The development costs for its internal research and development projects of an enterprise may be capitalized when they satisfy the following conditions simultaneously: it is feasible technically to finish intangible assets for use or sale; it is intended to finish and use or sell the intangible assets; the usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally; it is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources; the development costs of the intangible assets can be reliably measured. 24. Impairment of Long-term Assets For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with limited service life, investing real estate with cost model, long-term equity investment of subsidiaries, cooperative enterprises and joint ventures, the Company should judge whether decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for decrease in value if it exists. Other intangible Assets of reputation and uncertain service life and other non-accessible intangible assets should be tested for decrease in value no matter whether it exists. If the recoverable amount is less than book value in impairment test results, the provision for impairment of differences should include in impairment loss. Recoverable amounts would be the higher of net value of asset fair value deducting disposal charges or present value of predicted cash flow. Asset fair value should be determined according to negotiated sales price of fair trade. If no sales agreement exists but with asset active market, fair value should be determined according to the Buyer’s price of the asset. If no sales agreement or asset active market exists, asset fair value could be acquired on the basis of best information available. Disposal expenses include legal fees, taxes, cartage or other direct expenses of merchantable Assets related to asset disposal. Present value of predicted asset cash flow should be determined by the proper discount rate according to Assets in service and predicted cash flow of final disposal. Asset depreciation reserves should be calculated on the basis of single Assets. If it is difficult to predict the recoverable amounts for single Assets, recoverable amounts should be determined according to the belonging asset group. Asset group is the minimum asset combination producing cash 135 Changchai Company, Limited Annual Report 2022 flow independently. In impairment test, book value of the business reputation in financial report should be shared to beneficial asset group and asset group combination in collaboration of business merger. It is shown in the test that if recoverable amounts of shared business reputation asset group or asset group combination are lower than book value, it should determine the impairment loss. Impairment loss amount should firstly be deducted and shared to the book value of business reputation of asset group or asset group combination, then deduct book value of all assets according to proportions of other book value of above assets in asset group or asset group combination except business reputation. After the asset impairment loss is determined, recoverable value amounts would not be returned in future. 25. Long-term Deferred Expenses Long-term deferred expanses of the Company shall be recorded in light of the actual expenditure, and amortized averagely within benefit period. In case of no benefit in the future accounting period, the amortized value of such project that fails to be amortized shall be transferred into the profits and losses of the current period. 26. Contract Liabilities Contract liabilities refer to the Company’s obligations in transferring commodities or services to the client for the received or predicted consideration. Contract assets and contract liabilities under the same contract shall be presented based on the net amount. 27. Employee Benefits (1) Accounting Treatment of Short-term Compensation Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure and personnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting period when the active staff offering the service for the Company should be recognized as liabilities and is included in the current gains and losses or relevant assets cost. Of which the non-monetary benefits should be measured according to the fair value. (2) Accounting Treatment of the Welfare after Demission The Company classifies the welfare plans after demission into defined contribution plans and defined benefit plans. Welfare plans after demission refers to the agreement on the welfare after demission reaches between the Company and the employees, or the regulations or methods formulated by the Company for providing the welfare after demission for the employees. Of which, defined contribution plans refers to the welfare plans after demission that the Company no more undertake the further payment obligations after the payment of the fixed expenses for the independent funds; defined benefit plans, refers to the welfare plans after demission except for the defined contribution plans. Defined contribution plans During the accounting period that the Company providing the service for the employees, the Company should recognize the liabilities according to the deposited amount calculated by defined contribution plans, and should be included in the current gains and losses or the relevant assets cost. 136 Changchai Company, Limited Annual Report 2022 (3) Accounting Treatment of the Demission Welfare The Company should recognize the payroll payment liabilities occur from the demission welfare according to the earlier date between the following two conditions and include which in the current gains and losses when providing the demission welfare for the employees: the Company could not unilaterally withdraw the demission welfare owning to the relieve plans of the labor relationship or reduction; when the Company recognizing the costs or expenses related to the reorganization involves with the demission welfare payments. 28. Lease Liabilities On the commencement date of the lease term, the Company recognizes the present value of unpaid lease payments as lease liabilities. Lease payments include: fixed payment and substantial fixed payment, and the relevant amount after the lease incentive (if any) is deducted; variable lease payments that depend on indexation or ratio, which are determined according to the indexation or ratio on the commencement date of the lease term in the initial measurement; exercise price of the purchased option, provided that the lessee reasonably determines that the option will be exercised; the amount to be paid for the exercise of the lease termination options, provided that the lease term reflects that the lessee will exercise the options to terminate the lease; and estimated payments due to the guaranteed residual value provided by the lessee. The Company uses the interest rate implicit in lease as the rate of discount when calculating the present value of the lease payments. The incremental lending rate of the lessee will be used as the rate of discount, if the interest rate implicit in lease cannot be determined. The Company calculates the interest charge of the lease liabilities in each period of the lease term at a fixed periodic interest rate and includes it in the profit or loss of the current period, unless such interest charge is stipulated to be included in the underlying asset costs. Variable lease payments that are not included in the measurement of the lease liabilities should be included in the profit or loss of the current period when they are actually incurred, unless such payments are stipulated to be included in the underlying asset costs. The Company will re-calculate the lease liabilities using the present value of the changed lease payments, if the substantial fixed payment, the estimated payments due to the guaranteed residual value, the index or rate used to determine the lease payments, or the assessment result of the call option, the renewal option, or the termination option, or the actual exercise changes, after the commencement date of the lease term. 29. Provisions (1) Criteria of provisions Only if the obligation pertinent to a contingencies shall be recognized as an estimated debts when the following conditions are satisfied simultaneously: 1) That obligation is a current obligation of the Company; 2) It is likely to cause any economic benefit to flow out of the Company as a result of performance of the obligation; 3) The amount of the obligation can be measured in a reliable way. (2) Measurement of provisions The Company shall measure the provisions in accordance with the best estimate of the necessary expenses for the performance of the current obligation. 137 Changchai Company, Limited Annual Report 2022 The Company shall check the book value of the provisions on the Balance Sheet Date. If there is any conclusive evidence proving that the said book value can’t truly reflect the current best estimate, the Company shall, subject to change, make adjustment to carrying value to reflect the current best estimate. 30. Revenue Accounting policies for recognition and measurement of revenue: When the Company fulfills its due performance obligations (namely when the client obtains the control over related commodities or services), revenues shall be recognized based on the obligation’s amortized transaction price. Performance Obligation refers to the Company’s promise of transferring commodities or services that can be clearly defined to the client. Transaction Price refers to the consideration amount duly charged by the Company for transferring commodities or services to the client, excluding any amount charged by the third party and any amount predicted to be returned to the client. Control Over Relevant Commodities means that the use of commodities can be controlled and almost all economic interests can be obtained. On the contract commencement day, the Company shall evaluate the contract, recognize individual performance obligation and confirm that individual performance obligation is fulfilled in a certain period. When one of the following conditions is met, such performance obligation shall be deemed as fulfilled in a certain period, and the Company shall recognize it as revenue within a certain period according to the performance schedule: (1) the client obtains and consumes the economic interests resulting from the Company’s performance of contract while performing the contract; (2) the client is able to control the commodities under construction during the performance; (3) commodities produced by the Company during the performance possess the irreplaceable purpose, and the Company has the right to charge all finished parts during the contract period; otherwise, the Company shall recognize the revenue when the client obtains the control over relevant commodities or services. The Company shall adopt the Input Method to determine the Performance Schedule. Namely, the Performance Schedule shall be determined according to the Company’s input for fulfilling performance obligations. When the Performance Schedule cannot be reasonably determined and all resulting costs are predicted to be compensated, the Company shall recognize the revenue based on the resulting cost amount till the Performance Schedule can be reasonably determined. When the contract involves two or more than two performance obligations, the transaction price shall be amortized to each single performance obligation on the contract commencement day according to the relative proportion of the independent selling price of commodities or services under each single performance obligation. If any solid evidence proves that the contract discount or variable consideration only relates to one or more than one (not all) performance obligation under the contract, the Company shall amortize the contract discount or variable consideration to one or more than one related performance obligations. Independent selling price refers to the price adopted by the Company to independently sell commodities or services to the client. However, independent selling price cannot be directly observed. The Company shall estimate the independent selling price by comprehensively considering all related information that can be reasonably obtained and maximally adopting the observable input value. Variable Consideration If any variable consideration exists in the contract, the Company shall determine the optimal estimation of the variable consideration based on the expected values or the most possible amount. The variable consideration’s transaction price shall be included without exceeding the total revenue amount recognized without the risk of significant restitution when all uncertainties are eliminated. On each balance sheet day, the Company shall re-estimate the variable consideration amount to be included in the transaction price. 138 Changchai Company, Limited Annual Report 2022 Consideration Payable to the Client If any consideration payable to the client exists in the contract, the Company shall use such consideration to offset the transaction price unless such consideration is paid for acquiring other clearly-defined commodities or services from the client, and write down the current revenue at the later time between the time of recognizing relevant revenues and the time of paying (or promising the payment) the consideration to the client. Sales with the Quality Assurance For sales with the Quality Assurance, if the Quality Assurance involves another separate service except for the guarantee of all sold commodities or services meeting all established standards, the Quality Assurance shall constitute a single Performance Obligation; otherwise, the Company shall make corresponding accounting treatment to the Quality Assurance according to ASBE No.13--Contingency. Main Responsibility Person/Agent According to whether the control over commodities or services is obtained before they are transferred to the client, the Company can judge whether it is Main Responsibility Person or Agent based on its status during the transaction. If the Company can control commodities or services before they are transferred to the client, the Company shall be Main Responsibility Person, and revenues shall be recognized according to the total consideration amount received or to be received; otherwise, the Company shall be Agent, and revenues shall be recognized according to the commission or service fees predicted to be duly charged. However, such amount shall be determined based on the net amount after deducting other amounts payable to other related parties from the total consideration received or to be duly received or the fixed commission amount or proportion. Specific methods The specific methods of the Company's revenue recognition are as follows: The sale contract between the Company and its customers usually contains only the performance obligation for the transfer of goods, which is satisfied at a point in time. The following requirements must be met to confirm the revenue of domestic products: The Company has delivered the goods to the customer in accordance with the contract and the customer has accepted the goods. The payment has been recovered or the receipt voucher has been obtained, and the relevant economic benefits are likely to flow in. The customer has obtained control of the relevant goods. The main risks and rewards of product ownership have been transferred. The legal ownership of the goods has been transferred. The following requirements must be met to confirm the revenue of export products: The Company has declared the products in accordance with the contract, obtained the bills of lading, and received the payment or obtained the receipt voucher and the related economic benefits are likely to flow in. The main risks and rewards of product ownership have been transferred. The legal ownership of the goods has been transferred. Interest Revenue Interest Revenue shall be determined according to the time of the Company’s use of monetary capital and the actual interest rate. 31. Government Grants (1) Type A government grant means the monetary or non-monetary assets obtained free by an enterprise from the government. Government grants consist of the government grants pertinent to assets and government grants pertinent to income according to the relevant government documents. For those the government documents not definite stipulate the assistance object, the judgment basis of the 139 Changchai Company, Limited Annual Report 2022 Company classifies the government grants pertinent to assets and government subsidies pertinent to income is: whether are used for purchasing or constructing or for forming the long-term assets by other methods. (2) Recognition of Government Subsidies The government subsidies should be recognized only when meet with the attached conditions of the government grants as well as could be acquired. If the government grants are the monetary assets, should be measured according to the received or receivable amount; and for the government grants are the non-monetary assets, should be measured by fair value. (3) Accounting Treatment The government grants pertinent to assets shall be recognized as deferred income, and included in the current gains and losses or offset the book value of related assets within the useful lives of the relevant assets with a reasonable and systematic method. Government grants pertinent to income used to compensate the relevant costs, expenses or losses of the Company in the subsequent period shall be recognized as deferred income, and shall be included in the current profit and loss during the period of confirming the relevant costs, expenses or losses; those used to compensate the relevant costs, expenses or losses of the Company already happened shall be included in the current gains and losses or used to offset relevant costs directly. For government grants that include both assets-related and income-related parts, they should be distinguished separately for accounting treatment; for government subsidies that are difficult to be distinguished, they should be classified as income-related. Government grants related to the daily activities of the Company shall be included into other income or used to offset relevant costs by the nature of economic business; those unrelated shall be included into non-operating income. The government grants recognized with relevant deferred income balance but need to return shall be used to offset the book balance of relevant deferred income, the excessive part shall be included in the current gains and losses or adjusting the book value of assets for the government grants assets-related that offset the book value of relevant assets when they are initially recognized; those belong to other cases shall be directly included in the current gains and losses. 32. Deferred Income Tax Assets/Deferred Income Tax Liabilities (1) Basis of recognizing the deferred income tax assets According to the difference between the book value of the assets and liabilities and their tax basis, a deferred tax asset shall be measured in accord with the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. The recognition of the deferred income tax assets is limited by the income tax payable that the Company probably gains for deducting the deductible temporary differences. At the balance sheet date, where there is strong evidence showing that sufficient taxable profit will be available against which the deductible temporary difference can be utilized, the deferred tax asset unrecognized in prior period shall be recognized. The Company assesses the carrying amount of deferred tax asset at the balance sheet date. If it’s probable that sufficient taxable profit will not be available against which the deductible temporary difference can be utilized, the Company shall write down the carrying amount of deferred tax asset, or reverse the amount written down later when it’s probable that sufficient taxable profit will be available. (2) Basis of recognizing the deferred income tax liabilities 140 Changchai Company, Limited Annual Report 2022 According to the difference between the book value of the assets and liabilities and their tax basis, A deferred tax liability shall be measured in accord with the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. 33. Lease The term "lease" refers to a contract whereby the lessor transfers the right of use regarding the leased asset(s) to the lessee within a specified time in exchange for consideration. From the effective date of a contract, the Company assesses whether the contract is a lease or includes any lease. If a party to the contract transferred the right allowing the control over the use of one or more assets that have been identified within a certain period, in exchange for a consideration, such contract is a lease or includes a lease. If a contract contains multiple single leases at the same time, the Company will split the contract, and conduct accounting treatment of each single lease respectively. If a contract contains both lease and non-lease parts at the same time, the lessee and lessor will split the lease and non-lease parts. (1) The Company as the lessee See Note 28 (lease liabilities) for the general accounting treatment of the Company as the lessee. For short-term leases with a lease term not exceeding 12 months and leases of low-value assets when single leased assets are brand new assets, the Company chooses not to recognize right-of-use assets and lease liabilities, and records relevant rental expenses into the profit or loss of the current period or the underlying asset costs on a straight-line basis in each period within the lease term. If a lease changes and meets the following conditions at the same time, the Company will account for the lease change as a separate lease: the lease change expands the lease scope by increasing the right to use one or more leased assets; the increased consideration is equivalent to the separate price of the expanded lease scope adjusted according to the contract. Where the lease change is not accounted for as a separate lease, on the effective date of the lease change, the Company will allocate the consideration of the changed contract and re-determine the changed lease term. The present value determined based on the changed lease payments and the revised rate of discount are used to remeasure the lease liabilities. (2) The Company as the lessor On the commencement date of the lease term, the Company classifies the leases that substantially transfer almost all risks and rewards related to the ownership of the leased assets as finance leases, and leases other than finance leases as operating leases. 1) Operating lease The Company recognizes the lease payments receivable as rentals in each period within the lease term on a straight-line basis. The Company capitalizes the initial direct costs related to operating leases upon incurrence thereof and apportions and includes such costs in the profit or loss of the current period on the basis same as the recognition of rentals. The received variable lease payments related to operating leases that are not included in the lease payments receivable are included in profit or loss of the current period when they are actually incurred. 2) Financial lease On the commencement date of the lease term, the Company recognizes the finance lease receivables on the basis of net investment in the lease (the sum of the unguaranteed residual value and the present value of the lease payments receivable not yet received on the commencement date of the lease term discounted at the interest rate implicit in lease) and derecognizes the leased asset of the finance lease. The Company calculates and recognizes interest income based on the interest rate implicit in lease in each period within the lease term. The received 141 Changchai Company, Limited Annual Report 2022 variable lease payments that are not covered in the measurement of the net investment in the lease are included in the profit or loss of the current period when actually incurred. (3) Sale and leaseback The Company assesses whether the asset transfer in a sale and leaseback transaction is a sale in accordance with relevant provisions of the Accounting Standards for Business Enterprises No. 14 - Income. 1) The Company as the lessee If the asset transfer in a sale and leaseback transaction is a sale, the Company measures the right-of-use assets formed by the sale and leaseback based on the portion of the original asset's carrying value that is related to the use right acquired by the leaseback, and recognizes related gains or losses only for the right transferred to the lessor. If the asset transfer in a sale and leaseback transaction is not a sale, the Company continues to recognize the transferred asset and at the same time recognizes a financial liability equivalent to the transfer income, and conducts corresponding accounting treatment for the financial liability in accordance with the Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments. 2) The Company as the lessor If the asset transfer in a sale and leaseback transaction is a sale, the Company applies other accounting standards for business enterprises to the accounting treatment for asset purchase, and conducts corresponding accounting treatment for asset lease in accordance with the Accounting Standard for Business Enterprises No. 21 - Leases. If the asset transfer in a sale and leaseback transaction is not a sale, the Company does not recognize the transferred asset, but recognizes a financial asset equivalent to the transfer income, and conducts corresponding accounting treatment for the financial asset in accordance with the Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments. 34. Other Significant Accounting Policies and Accounting Estimates The Company evaluates the important accounting estimates and key assumptions adopted on an ongoing basis, based on historical experience and other factors, including reasonable expectations of future events. Important accounting estimates and critical assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fiscal year are listed as follows: (1) Classification of financial assets The significant judgments involved when the Company determines the classification of financial assets include analysis of business models and contractual cash flow characteristics. The Company determines the business model for managing financial assets at the level of the financial asset portfolio, taking into account factors such as the approach of evaluating and reporting the performance of financial assets to key management personnel, the risks affecting the performance of financial assets and the manner in which they are managed, and way in which the relevant business management personnel are compensated. The following main judgments exist in assessing whether the contractual cash flows of financial assets are consistent with the basic lending arrangements: Whether the time distribution or amount of the principal amount during the duration may change due to early repayment or for other reasons; whether the interest includes only the time value of money, credit risk, other basic lending risks and consideration against costs and profits. For example, whether the amount of early repayment reflects only the outstanding principal and interest based on the outstanding principal, as well as reasonable compensation paid for early termination of the contract. 142 Changchai Company, Limited Annual Report 2022 (2) Measurement of expected credit losses of accounts receivable The Company calculates the expected credit loss of accounts receivable using the exposure to default risk of accounts receivable and the expected credit loss ratio, and determines the expected credit loss ratio based on the probability of default and the default loss ratio. When determining the expected credit loss ratio, the Company uses data such as internal historical credit loss experience and adjusts historical data to take into account current conditions and forward-looking information. When considering forward-looking information, the Company uses indicators such as the risk of economic downturn and changes in the external market environment, technological environment and customer profile. The Company regularly monitors and reviews the assumptions related to the calculation of expected credit losses. (3) Inventory falling price reserves The Company follows the inventory accounting policy and carries out measurement based on which is smaller between the cost and the net realizable value. If the cost of inventories is higher than its net realizable value, then the inventory falling prices reserves were implemented. The impairment of inventories to net realizable value is based on an assessment of the marketability of the inventories and their net realizable value. The management shall determine the impairment of inventories after obtaining reliable evidence while taking into account the purpose of holding inventories, the effect of items after the balance sheet date, and other factors. Differences between actual results and original estimates will affect the carrying value of inventories and the provision or reversal of reverses for falling prices of inventories in the period in which the estimates are changed. (4) Determination of fair value of unlisted equity investment The fair value of unlisted equity investment is the expected future cash flows discounted at the current discount rate for items with similar terms and risk characteristics. Such valuation requires the Company to estimate expected future cash flows and discount rates and is therefore subject to uncertainty. Under limited circumstances, if the information used to determine fair value is insufficient, or if the range of possible estimates of fair value is wide and the cost represents the best estimate of fair value within that range, the cost may represent its appropriate estimate of fair value within that range of distribution. (5) Reserves for long-term assets impairment The Company determines at the balance sheet date whether there is any indication that a non-current asset, other than a financial asset, may be impaired. For intangible assets with an uncertain useful life, impairment tests shall be conducted when there is an indication of impairment besides the annual impairment test. Other non-current assets other than financial assets shall be tested for impairment when there is an indication that the carrying amount is irrecoverable. An impairment is indicated when the carrying amount of an asset or asset group is greater than the recoverable amount, which is the higher of the fair value minus disposal expenses and the present value of estimated future cash flows. The net value of the fair value minus disposal expenses is determined by referring to the negotiable sale price or observable market price of similar assets in a fair transaction and deducting incremental costs directly attributable to the disposal of the asset. Estimating the present value of future cash flows requires significant judgments with respect to the production volume of the asset (or asset group), the selling price, the related operating costs and the discount rate used in calculating the present value. The Company uses all available relevant information in estimating recoverable amounts, including projections of volumes, selling prices and related operating costs based on reasonable and supportable assumptions. (6) Depreciation and amortization 143 Changchai Company, Limited Annual Report 2022 The Company depreciates and amortizes investment properties, fixed assets and intangible assets on a straight-line basis within their service lives after taking into account their residual values. The Company regularly reviews service lives to determine the amount of depreciation and amortization expenses to be included in each reporting period. The service life is determined by the Company based on past experience with similar assets and expected technological updates. Depreciation and amortization expenses will be adjusted in the future period if there is a significant change in previous estimates. (7) Deferred income tax assets To the extent that it is probable that sufficient taxable profit will be available to offset the losses, the Company recognizes deferred income tax assets for all unused tax losses. This requires the Company's management to use many judgments to estimate the timing and amount of future taxable profits, taking into account tax planning strategies, so as to determine the amount of deferred income tax assets to be recognized. (8) Income tax In the normal operating activities of the Company, the ultimate tax treatment and calculation of certain transactions are subject to certain uncertainties. Whether some items can be disbursed before tax requires the approval of the tax authorities. If the final determination of these tax matters differs from the amounts initially estimated, the difference will have an impact on current and deferred income taxes in the period in which they are finally determined. 35. Changes in Main Accounting Policies and Estimates (1) Change of Accounting Policies √ Applicable □ Not applicable Changes to the accounting policies and why Approval process Remark The Company starts to implement the “Accounting treatment for sales of products or by-products by On 22 August 2022, the 13th Meeting enterprises generated from fixed assets before reaching the of the 9th Board of Directors and the Notes of intended state of availability or from the period of R&D” th 12 Meeting of the 9 th Supervisory changes to and “Judgment on onerous contracts” and “Presentation of Committee were held by the Company accounting centralized capital management” stipulated in the on which the Proposal on Changes of policies-(1) Accounting Standards for Business Enterprises Accounting Policies was approved. Interpretation No. 15 issued by the Ministry of Finance in 2021 since 1 January 2022. The Company starts to implement the “accounting treatment of the income tax effect of financial instrument related dividend whose issuer is classified as equity Notes of instrument” and “accounting treatment of share-based changes to payment in cash settlement modified into share-based / accounting payment in equity settlement by the enterprise” stipulated policies-(2) in the Accounting Standards for Business Enterprises Interpretation No. 16 issued by the Ministry of Finance in 2022 since 13 December 2022. Description of changes in accounting policies: 144 Changchai Company, Limited Annual Report 2022 (1) The impact of implementing the Interpretation No. 15 of Accounting Standards for Business Enterprises on the Company On 31 December 2021, the Ministry of Finance issued the Interpretation No. 15 of Accounting Standards for Business Enterprises (C.K. [2021] No. 35) (hereinafter referred to as “Interpretation No. 15”). Contents of “accounting treatment of external sales of products or by-product produced by the enterprise before the fixed assets reach the intended usable state or during the research and development process (hereinafter referred to as ‘Trial Sales’)” and “judgment on loss-making contracts” came into force on 1 January 2022. The Company implemented Interpretation No. 15 since the date of issuance, and the implementation has no material impact on the financial statements during the reporting period. (2) The impact of implementing the Interpretation No. 16 of Accounting Standards for Business Enterprises on the Company On 13 December 2022, the Ministry of Finance issued the Interpretation No. 16 of Accounting Standards for Business Enterprises (C.K. [2022] No. 31) (hereinafter referred to as “Interpretation No. 16”). The regulations of “accounting treatment for deferred income tax relating to assets and liabilities arising from a single transaction that is not subject to the initial recognition exemption” came into force on 1 January 2023, allowing companies to implement the exemption prior to the year of issuance, which has not been implemented by the Company in advance this year. In addition, the contents of “accounting treatment of the income tax effect of financial instrument related dividend whose issuer is classified as equity instrument” and “accounting treatment of share-based payment in cash settlement modified into share-based payment in equity settlement by the enterprise” came into force on the issuance date. The Company implemented Interpretation No. 16 since the date of issuance, and the implementation has no material impact on the financial statements during the reporting period. (2) Changes in Accounting Estimates □ Applicable √ Not applicable VI. Taxation 1. Main Taxes and Tax Rate Category of taxes Tax basis Tax rate VAT Payable to sales revenue 13%, 9%, 6%, 5% Urban maintenance and Tax paid in accordance with the tax Taxable turnover amount construction tax regulations of tax units location Enterprise income tax Taxable income 25%, 15%, 2.5% Education surcharge Taxable turnover amount 5% Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate Name Income tax rate Changchai Company, Limited 15% Changchai Wanzhou Diesel Engine Co., Ltd. 15% Changzhou Changchai Benniu Diesel Engine Fittings Co., Ltd. 25% Changzhou Horizon Investment Co., Ltd. 25% Changzhou Changchai Horizon Agricultural Equipment Co., 25% 145 Changchai Company, Limited Annual Report 2022 Ltd. Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. 15% Jiangsu Changchai Machinery Co., Ltd. 25% Changzhou Xingsheng Real Estate Management Co., Ltd. 2.5% Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. 15% 2. Tax Preference On 30 November 2021, the Company obtained the Certificates for High-tech Enterprises again, and it still enjoys 15-percent preferential rate for corporate income tax during the Reporting Period; the Company’s controlling subsidiary-Changchai Wanzhou Diesel Engine Co., Ltd., the controlling subsidiary company, shall pay the corporate income tax at tax rate 15% from 1 January 2011 to 31 December 2030 in accordance with the Notice of the Ministry of Finance, the General Administration of Customs of PRC and the National Administration of Taxation about the Preferential Tax Policies for the Western Development and Ministry of Finance Announcement No. 23 [2020] Announcement of the Ministry of Finance, the State Administration of Taxation and the National Development and Reform Commission on Continuing the Enterprise Income Tax Policy for the Great Western Development. On 2 December 2020, the wholly-owned subsidiary Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. obtained the "High-tech Enterprise Certificate" and enjoyed a 15% preferential corporate income tax rate during the Reporting Period; The wholly-owned subsidiary Changzhou Xingsheng Real Estate Management Co., Ltd. is eligible small enterprise with low profits and shall pay the corporate income tax at tax rate 2.5% for small enterprises with low profits during the Reporting Period; The subsidiary Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. acquired in the year has obtained the "High-tech Enterprise Certificate" and enjoyed a 15% preferential corporate income tax rate during the Reporting Period. VII. Notes to Major Items in the Consolidated Financial Statements of the Company 1. Monetary Assets Unit: RMB Item Ending balance Beginning balance Cash on hand 251,965.06 145,594.98 Bank deposits 830,914,999.19 561,746,767.12 Other monetary assets 98,846,386.72 146,074,316.64 Total 930,013,350.97 707,966,678.74 Of which: Total amount deposited overseas Total amount of restriction in use by mortgage, 95,662,384.92 145,564,457.15 pledge or freeze At the period-end, the restricted monetary assets of the Company was RMB95,662,384.92, of which RMB91,084,933.63 was the cash deposit for bank acceptance bills, RMB2,993,220.00 was cash deposit for L/G, RMB871,348.35 was cash deposit for environment and RMB712,882.94 was cash deposit for credit. 146 Changchai Company, Limited Annual Report 2022 2. Trading Financial Assets Unit: RMB Item Ending balance Beginning balance Financial assets at fair value 370,103,602.57 404,053,261.57 through profit or loss Of which: Stocks 78,739,311.00 121,940,343.76 Financial products 291,364,291.57 282,112,917.81 Total 370,103,602.57 404,053,261.57 3. Notes Receivable (1) Notes Receivable Listed by Category Unit: RMB Item Ending balance Beginning balance Bank acceptance bill 297,125,872.54 334,311,236.78 Total 297,125,872.54 334,311,236.78 If the bad debt provision for notes receivable was withdrawn in accordance with the general model of expected credit losses, information related to bad debt provision shall be disclosed by reference to the disclosure method of other receivables: □ Applicable √ Not applicable (2) Notes Receivable Pledged by the Company at the Period-end: None (3) Notes Receivable which Had Endorsed by the Company or had Discounted but had not Due on the Balance Sheet Date at the Period-end Unit: RMB Amount of recognition termination Amount of not terminated Item at the period-end recognition at the period-end Bank acceptance bill 176,395,231.83 Total 176,395,231.83 (4) There Were No Notes Transferred to Accounts Receivable because Drawer of the Notes Failed to Execute the Contract or Agreement at the Period-end 4. Accounts Receivable (1) Accounts Receivable Classified by Category Unit: RMB Ending balance Beginning balance Carrying Bad debt Carrying Bad debt amount provision amount provision Carryi Category Withd Withd Carryin ng Amou Propo Amou rawal Amou Propor Amou rawal g value value nt rtion nt propo nt tion nt propor rtion tion 147 Changchai Company, Limited Annual Report 2022 Accounts receivable for 51,75 34,36 17,38 50,43 44,054 which bad debt 66.40 87.34 6,383,0 7,257. 9.91% 7,361. 9,896. 7,453. 9.10% ,367.1 provision % % 86.48 99 83 16 63 5 separately accrued Of which: Accounts receivable for 470,4 117,4 352,9 504,0 135,26 which bad debt 90.09 24.97 90.90 26.83 368,826 11,04 78,75 32,28 92,72 6,680. provision % % % % ,040.00 2.15 8.54 3.61 0.08 08 accrued by group Of which: Accounts receivable for which bad debt 470,4 117,4 352,9 504,0 135,26 90.09 24.97 90.90 26.83 368,826 provision 11,04 78,75 32,28 92,72 6,680. % % % % ,040.00 accrued by 2.15 8.54 3.61 0.08 08 credit risk features group 522,1 151,8 370,3 554,5 179,32 100.0 29.08 100.00 32.34 375,209 Total 68,30 46,12 22,17 30,17 1,047. 0% % % % ,126.48 0.14 0.37 9.77 3.71 23 Account receivables withdrawn bad debt provision separately with significant amount at the period end: Unit: RMB Ending balance Name Carrying Bad debt Withdrawal Reason of withdrawal amount provision proportion Customer 1 1,470,110.64 1,470,110.64 100.00% Difficult to recover Customer 2 1,902,326.58 1,902,326.58 100.00% Difficult to recover Customer 3 6,215,662.64 6,215,662.64 100.00% Difficult to recover Customer 4 2,797,123.26 2,194,980.28 78.47% Expected to difficultly recover Customer 5 3,633,081.23 2,122,165.73 58.41% Expected to difficultly recover Customer 6 2,584,805.83 2,584,805.83 100.00% Difficult to recover Customer 7 1,731,493.71 1,731,493.71 100.00% Difficult to recover Customer 8 1,511,937.64 604,775.06 40.00% Expected to difficultly recover Customer 9 3,329,074.84 720,031.71 21.63% Expected to difficultly recover Customer 10 2,025,880.18 2,025,880.18 100.00% Difficult to recover Customer 11 5,972,101.90 5,972,101.90 100.00% Difficult to recover Customer 12 4,592,679.05 4,592,679.05 100.00% Difficult to recover Total 37,766,277.50 32,137,013.31 -- -- Accounts receivable for which bad debt provision accrued by credit risk features group: 148 Changchai Company, Limited Annual Report 2022 Unit: RMB Ending balance Aging Carrying amount Bad debt provision Withdrawal proportion Within 1 year 327,927,427.98 6,558,548.57 2.00 % 1 to 2 years 25,360,867.63 1,268,043.39 5.00 % 2 to 3 years 6,764,456.55 1,014,668.48 15.00 % 3 to 4 years 1,377,872.15 413,361.64 30.00 % 4 to 5 years 1,890,703.46 1,134,422.08 60.00 % Over 5 years 107,089,714.38 107,089,714.38 100.00 % Total 470,411,042.15 117,478,758.54 -- Notes of the basis of determining the group: The accounts receivable was adopted the aging analysis based on the months when the accounts incurred actually, among which the accounts incurred earlier will be priority to be settled in terms of the capital turnover. Explanation of the input value and assumption adopted to determine the withdrawal amount of bad debt provision on the Current Period: With reference to the experience of the historical credit loss, combining with the prediction of the present status and future financial situation, the comparison table was prepared between the aging of the accounts receivable and estimated credit loss rate in the duration and to calculate the estimated credit loss. Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if adopting the general mode of expected credit loss to withdraw bad debt provision of accounts receivable. □ Applicable √ Not applicable Disclosure by aging Unit: RMB Aging Carrying amount Within 1 year (including 1 year) 343,017,134.79 1 to 2 years 25,903,580.29 2 to 3 years 6,917,677.75 Over 3 years 146,329,907.31 3 to 4 years 3,465,761.24 4 to 5 years 3,840,453.02 Over 5 years 139,023,693.05 Total 522,168,300.14 (2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Information of bad debt provision withdrawn: Unit: RMB Changes in the Reporting Period Beginning Reversal Transfer of Category Ending balance balance Withdrawal or Write-off consolidate recovery d subsidiary Bad debt provision 44,054,367.15 493,726.45 10,180,731.77 34,367,361.83 withdrawn separately 149 Changchai Company, Limited Annual Report 2022 Bad debt provision 135,266,680.08 2,632,425.80 20,769,169.67 348,822.33 117,478,758.54 withdrawn by group Total 179,321,047.23 3,126,152.25 30,949,901.44 348,822.33 151,846,120.37 Of which bad debt provision reversed or recovered with significant amount in the Reporting Period: No. (3) Accounts Receivable with Actual Verification during the Reporting Period Unit: RMB Item Verified amount Accounts receivable with actual verification 30,949,901.44 Of which the verification of significant accounts receivable: Unit: RMB Arising from Nature of the Verification Name of the Verified related-par accounts Reason for verification procedures entity amount ty receivable performed transactio ns or not Customer 1 2,837,045.23 Customer 2 2,790,920.00 With accounts Changchai Customer 3 2,589,892.74 receivable aging over 5 Wanzhou Diesel years, the debtors have Engine Co., Ltd. Customer 4 2,173,984.00 held the 1st Customer 5 1,962,873.80 no assets for debt Extraordinary extinguishment due to General Meeting Customer 6 Accounts 1,635,047.54 the counterpart on 20 December Customer 7 receivable for 1,444,186.14 Not company being 2022 and Customer 8 goods 1,266,654.55 revoked or cancelled, approved the Customer 9 1,209,883.25 Proposal on or debt reorganisation, Customer 10 1,128,969.12 Verification of bankruptcy clearing, or Some Accounts Customer 11 1,068,019.00 judicial litigation and Receivable. Customer 12 1,062,062.94 other reasons. Customer 13 1,043,064.00 Total 22,212,602.31 (4) Top 5 of the Ending Balance of the Accounts Receivable Collected according to the Arrears Party Unit: RMB Name of the Ending balance of Proportion to total ending balance of Ending balance of entity accounts receivable accounts receivable bad debt provision Customer 1 182,469,247.05 34.94% 3,649,384.94 Customer 2 40,330,698.62 7.72% 806,613.97 Customer 3 20,619,430.63 3.95% 412,388.61 150 Changchai Company, Limited Annual Report 2022 Customer 4 18,538,588.59 3.55% 913,245.46 Customer 5 15,564,496.00 2.98% 311,289.92 Total 277,522,460.89 53.14% 5. Accounts Receivable Financing Unit: RMB Item Ending balance Beginning balance Bank acceptance bills 242,813,392.79 497,388,826.02 Total 242,813,392.79 497,388,826.02 Changes of accounts receivable financing and fair value thereof in the Reporting Period √ Applicable □ Not applicable Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if adopting the general mode of expected credit loss to withdraw bad debt provision of accounts receivable financing. □ Applicable √ Not applicable Other notes: The Company discounts and endorses a portion of its bank acceptances based on its routine fund management needs, and the conditions for derecognition are met, so the bank acceptances are classified as financial assets measured at fair value whose change is included in other comprehensive income. On 31 December 2022, there was no bank acceptance for which bad debt provision accrued separately in the Company. The Company measures the provision of bad debt provision on the basis of expected credit losses throughout the duration. The Company believes that the credit risk characteristics of the bank acceptances it holds are similar, and there was no bank acceptance for which bad debt provision accrued separately. In addition, there was no significant credit risk in the bank acceptance, and no significant loss would be caused by bank defaults. (1) Accounts receivable financing which had endorsed by the Company or had discounted but had not due at the period-end Unit: RMB Amount of recognition Amount of not terminated Item termination at the period-end recognition at the period-end Bank acceptance bill 511,689,991.87 Total 511,689,991.87 6. Prepayments (1) List by Aging Analysis Unit: RMB Ending balance Beginning balance Aging Amount Proportion Amount Proportion Within 1 year 5,941,708.21 93.86% 6,706,970.55 81.82% 1 to 2 years 289,373.60 4.57% 94,583.55 1.15% 151 Changchai Company, Limited Annual Report 2022 2 to 3 years 71,654.18 1.13% 362,397.67 4.42% Over 3 years 27,466.70 0.44% 1,033,466.62 12.61% Total 6,330,202.69 -- 8,197,418.39 -- There was no prepayment with significant amount aging over one year as of the period-end. (2) Top 5 of the Ending Balance of the Prepayments Collected according to the Prepayment Target At the period-end, the total top 5 of the ending balance of the prepayments collected according to the prepayment target was RMB4,798,600 accounting for 75.80% of the total ending balance of prepayments. 7. Other Receivables Unit: RMB Item Ending balance Beginning balance Interest receivable Dividend receivable Other receivables 32,938,305.16 19,515,350.52 Total 32,938,305.16 19,515,350.52 (1) Other Receivables 1) Other Receivables Classified by Accounts Nature Unit: RMB Nature Ending carrying value Beginning carrying value Margin and cash pledge 2,028,096.87 1,299,600.00 Intercourse funds 48,701,034.90 35,889,738.80 Petty cash and borrowings by 742,075.76 1,184,204.41 employees Other 13,635,867.60 13,630,284.64 Total 65,107,075.13 52,003,827.85 2) Withdrawal of Bad Debt Provision Unit: RMB First stage Second stage Third stage Expected loss in Expected loss in Expected credit Bad debt provision the duration (credit the duration Total loss of the next impairment not (credit impairment 12 months occurred) occurred) Balance of 1 January 287,609.45 26,486,676.97 5,714,190.91 32,488,477.33 2022 Balance of 1 January 2022 in the Current Period --Transfer to Second -871.48 871.48 stage -- Transfer to Third stage -4,266.68 -23,342,513.38 23,346,780.06 -- Reverse to Second stage 152 Changchai Company, Limited Annual Report 2022 -- Reverse to First stage Transfer of consolidated 3,810.00 3,810.00 subsidiary Withdrawal of the 150,404.27 150,404.27 Current Period Reversal of the Current 148,176.99 174,638.80 322,815.79 Period Write-offs of the Current Period Verification of the 63,002.91 88,102.93 151,105.84 Current Period Other changes Balance of 31 December 373,682.65 2,908,755.15 28,886,332.17 32,168,769.97 2022 Changes of carrying amount with significant amount changed of loss provision in the current period □ Applicable √ Not applicable Disclosure by aging Unit: RMB Aging Ending balance Within 1 year (including 1 year) 16,050,004.29 1 to 2 years 15,783,825.92 2 to 3 years 1,164,476.00 Over 3 years 32,108,768.92 3 to 4 years 420,716.17 4 to 5 years 338,457.65 Over 5 years 31,349,595.10 Total 65,107,075.13 3) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Information of withdrawal of bad debt provision: Unit: RMB Changes in the Reporting Period Beginning Transfer of Ending Category Withdraw Reversal or Write- balance consolidate balance al recovery off d subsidiary Bad debt provision for 5,714,190.91 177,905.47 5,536,285.44 which accrued separately 153 Changchai Company, Limited Annual Report 2022 Bad debt provision for 151,10 26,774,286.42 5,493.95 3,810.00 26,632,484.53 which accrued by 5.84 group 151,10 Total 32,488,477.33 5,493.95 177,905.47 3,810.00 32,168,769.97 5.84 4) There Were No Particulars of the Actual Verification of Other Receivables during the Reporting Period Unit: RMB Item Written-off amount Other receivables with actual verification 151,105.84 Of which the verification of significant other receivables: Unit: RMB Whether occurred Name of the Natur Written-off Reason for Verification procedures because of entity e amount verification performed related-part y transactions Customer 1 21,472.28 With accounts Approved by the administrative receivable aging office meeting of Changzhou Customer 2 41,530.63 over 5 years, the Changchai Benniu Diesel Engine counterpart Parts Co., Ltd., a subsidiary. Customer 3 9,020.00 company being Other Customer 4 8,357.60 revoked or interc Customer 5 7,933.63 cancelled, or debt Not ourse The Proposal on the Write-off of reorganisation, Customer 6 funds 7,800.00 Certain Other Receivables was bankruptcy Customer 7 6,700.00 approved at the Party Committee clearing or the Customer 8 6,000.00 and Office Meeting. debtors have no Customer 9 6,000.00 assets for debt Customer 10 5,525.00 extinguishment Total 120,339.14 -- -- -- 5) Top 5 of the Ending Balance of Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to total ending Ending Name of the entity Nature Ending balance Aging balance of balance of bad other debt provision receivables % 154 Changchai Company, Limited Annual Report 2022 Changzhou Compressor Intercourse 2,940,000.00 Over 5 years 4.52% 2,940,000.00 Factory funds Changchai Group Imp. & Intercourse 2,853,188.02 Over 5 years 4.38% 2,853,188.02 Exp. Co., Ltd. funds Changzhou New District Intercourse 1,626,483.25 Over 5 years 2.50% 1,626,483.25 Accounting Center funds Changchai Group Intercourse 1,140,722.16 1,140,722.16 Over 5 years 1.75% Settlement Center funds Changzhou Huadi Engineerin Engineering Guarantee 1,065,400.00 2-3 years 1.64% 159,810.00 g deposit Co., Ltd. Total 9,625,793.43 14.78% 8,720,203.43 8. Inventory Whether the Company needs to comply with the requirements of real estate industry No (1) Category of Inventory Unit: RMB Ending balance Beginning balance Item Carrying Falling price Carrying Carrying Falling price Carrying amount reserves value amount reserves value Raw 163,954,131. 157,971,844. 148,617,321. 141,356,757. 5,982,286.51 7,260,564.47 materials 27 76 85 38 Materials 12,299,968.9 12,299,968.9 13,877,280.6 13,877,280.6 processed on 8 8 0 0 commission Goods in 110,883,778. 10,725,860.4 100,157,918. 119,354,374. 15,534,236.3 103,820,137. process 58 3 15 14 5 79 Finished 322,959,181. 22,755,460.8 300,203,720. 403,855,588. 13,029,104.2 390,826,484. goods 08 0 28 94 6 68 Low priced and easily 1,363,429.57 1,363,429.57 1,203,097.73 1,203,097.73 worn articles 611,460,489. 39,463,607.7 571,996,881. 686,907,663. 35,823,905.0 651,083,758. Total 48 4 74 26 8 18 (2) Falling Price Reserves of Inventory and Impairment Reserves for Contract Performance Costs Unit: RMB Item Beginning Increase Decrease Ending balance 155 Changchai Company, Limited Annual Report 2022 balance Transf er of consol Reversal or Withdrawal Other idated write-off subsid iary 491,7 Raw materials 7,260,564.47 1,473,329.89 3,243,314.87 5,982,286.51 07.02 Goods in 15,534,236.35 4,808,375.92 10,725,860.43 process Finished goods 13,029,104.26 13,441,573.49 3,715,216.95 22,755,460.80 491,7 Total 35,823,905.08 14,914,903.38 11,766,907.74 39,463,607.74 07.02 (3) There Was No Capitalized Borrowing Expense in the Ending Balance of Inventories. 9. Other Current Assets Unit: RMB Item Ending balance Beginning balance The VAT tax credits 47,682,930.23 37,806,274.29 Prepaid corporate income tax 1,505,424.80 6,143,886.15 Prepaid expense 90,667.46 110,662.13 Total 49,279,022.49 44,060,822.57 10. Investments in Debt Obligations Unit: RMB Ending balance Beginning balance Item Carrying Falling price Carrying Carrying Falling price Carrying amount reserves value amount reserves value Three-year 39,309,587.9 39,309,587.9 37,898,226.3 37,898,226.3 fixed term 3 3 9 9 deposit 39,309,587.9 39,309,587.9 37,898,226.3 37,898,226.3 Total 3 3 9 9 Significant investments in debt obligations Unit: RMB Ending balance Beginning balance Actual Actual Item Par Coupon Maturity Par Coupon Maturity interest interest value rate date value rate date rate rate Three-year fixed 37,000,0 26 April 37,000,0 26 Apri 3.80% 3.72% 3.80% term deposit 00.00 2024 00.00 l 2024 156 Changchai Company, Limited Annual Report 2022 37,000,0 37,000,0 Total —— —— —— —— —— —— 00.00 00.00 Changes of carrying amount with significant amount changed of loss provision in the reporting period □ Applicable √ Not applicable 11. Long-term Equity Investment Unit: RMB Increase/decrease Gain Adjust Endin Begin Cash Endin or loss ment Withd g ning bonus g recogn of rawal balanc balanc Additi Reduc Chang or balanc Invest ized other of e of e onal ed es in profit e ees under compr deprec Other deprec (carryi invest invest other annou (carryi the ehensi iation iation ng ment ment equity nced ng equity ve reserv reserv value) to value) metho incom es es issue d e II. Associated enterprises Beijin g Tsingh ua Indust rial 44,182 0.00 0.00 Invest .50 ment Mana gemen t Co., Ltd. Subtot 44,182 0.00 0.00 al .50 44,182 Total 0.00 0.00 .50 12. Other Equity Instrument Investment Unit: RMB Item Ending balance Beginning balance Changzhou Synergetic Innovation Private Equity 378,929,240.08 146,375,646.53 Fund (Limited Partnership) 157 Changchai Company, Limited Annual Report 2022 Other equity instrument investment measured by 576,631,000.00 633,502,000.00 fair value Total 955,560,240.08 779,877,646.53 Non-trading equity instrument investment disclosed by category Unit: RMB Reason for Amount of Reason for assigning other Accu other to measure by fair Dividend comprehensi Accumulative mulat comprehensiv value of which Item income ve income gains ive e transferred changes be included to recognized transferred to losses to retained other comprehensive retained earnings income earnings Foton Motor Co., Non-trading equity 364,261,000.00 Ltd. investment Non-trading equity Bank of Jiangsu 9,360,000.00 127,800,000.00 investment Changzhou Synergetic Innovation Non-trading equity 278,929,240.08 Private Equity investment Fund (Limited Partnership) Other notes: The corporate securities of accommodation business still on lending at the period-end: 350,000 shares of Foton Motor Co., Ltd. 13. Other Non-current Financial Assets Unit: RMB Item Ending balance Beginning balance Jiangsu Horizon New Energy Technology 373,500,000.00 112,500,000.00 Co., Ltd. Total 373,500,000.00 112,500,000.00 14. Investment Property (1) Investment Property Adopting the Cost Measurement Mode √ Applicable □ Not applicable Unit: RMB Item Houses and buildings Total I. Original carrying value 1. Beginning balance 93,077,479.52 93,077,479.52 158 Changchai Company, Limited Annual Report 2022 2. Increased amount of the period (1) Outsourcing (2) Transfer from inventories/fixed assets/construction in progress (3) Enterprise combination increase 3. Decreased amount of the period (1) Disposal (2) Other transfer 4. Ending balance 93,077,479.52 93,077,479.52 II. Accumulative depreciation and accumulative amortization 1. Beginning balance 48,480,224.31 48,480,224.31 2. Increased amount of the period 2,436,475.56 2,436,475.56 (1) Withdrawal or amortization 2,436,475.56 2,436,475.56 3. Decreased amount of the period (1) Disposal (2) Other transfer 4. Ending balance 50,916,699.87 50,916,699.87 III. Depreciation reserves 1. Beginning balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal (2) Other transfer 4. Ending balance IV. Carrying value 1. Ending carrying value 42,160,779.65 42,160,779.65 2. Beginning carrying value 44,597,255.21 44,597,255.21 15. Fixed Assets Unit: RMB Item Ending balance Beginning balance Fixed assets 720,061,387.76 402,915,521.65 Disposal of fixed assets Total 720,061,387.76 402,915,521.65 (1) List of Fixed Assets Unit: RMB Houses and Machinery Transportation Other Item Total buildings equipment equipment equipment 159 Changchai Company, Limited Annual Report 2022 I. Original carrying value 1. Beginning 1,012,550,535.1 457,375,409.95 15,509,653.38 41,354,837.04 1,526,790,435.49 balance 2 2. Increased amount of the 253,254,929.43 125,801,337.31 4,237,121.43 18,442,087.47 401,735,475.64 period (1) Purchase 39,329.44 1,242,576.10 603,856.90 2,296,172.76 4,181,935.20 (2) Transfer from 232,659,718.43 117,139,454.39 3,010,897.32 15,794,897.09 368,604,967.23 construction in progress (3) Enterprise combination 20,555,881.56 7,419,306.82 622,367.21 351,017.62 28,948,573.21 increase 3. Decreased amount of the 26,299.50 19,654,185.78 614,584.34 2,771,002.52 23,066,072.14 period (1) Disposal or 26,299.50 19,654,185.78 614,584.34 2,771,002.52 23,066,072.14 scrap 4. Ending 1,118,697,686.6 710,604,039.88 19,132,190.47 57,025,921.99 1,905,459,838.99 balance 5 II. Accumulative depreciation 1. Beginning 309,538,003.02 765,592,089.06 12,399,386.82 35,864,760.69 1,123,394,239.59 balance 2. Increased amount of the 21,330,936.61 58,002,318.90 1,645,043.30 3,596,006.84 84,574,305.65 period (1) Withdrawal 18,617,538.65 54,407,073.34 1,103,512.47 3,362,056.95 77,490,181.41 (2) Transfer from 2,713,397.96 3,595,245.56 541,530.83 233,949.89 7,084,124.24 combination 3. Decreased amount of the 23,799.50 19,648,705.40 598,206.35 2,722,626.79 22,993,338.04 period (1) Disposal or 23,799.50 19,648,705.40 598,206.35 2,722,626.79 22,993,338.04 scrap 4. Ending 330,845,140.13 803,945,702.56 13,446,223.77 36,738,140.74 1,184,975,207.20 balance III.Depreciation reserves 160 Changchai Company, Limited Annual Report 2022 1. Beginning 480,674.25 480,674.25 balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the 57,430.22 57,430.22 period (1) Disposal or 57,430.22 57,430.22 scrap 4. Ending 423,244.03 423,244.03 balance IV. Carrying value 1. Ending 379,758,899.75 314,328,740.06 5,685,966.70 20,287,781.25 720,061,387.76 carrying value 2. Beginning 147,837,406.93 246,477,771.81 3,110,266.56 5,490,076.35 402,915,521.65 carrying value (2) List of Temporarily Idle Fixed Assets Unit: RMB Original Accumulative Depreciation Item Carrying value Note carrying value depreciation reserves Machinery 476,507.50 53,263.47 423,244.03 equipment 16. Construction in Progress Unit: RMB Item Ending balance Beginning balance Construction in progress 30,259,647.16 268,417,880.66 Engineering materials 21,900.40 1,887,810.25 Total 30,281,547.56 270,305,690.91 (1) List of Construction in Progress Unit: RMB Ending balance Beginning balance Item Carrying Depreciatio Carrying Carrying Depreciati Carrying amount n reserves value amount on reserves value 161 Changchai Company, Limited Annual Report 2022 Expansion capacity of multi-cylinde 1,097,435.90 1,097,435.90 r (The 2nd Period) Innovation capacity construction 5,443,764.33 5,443,764.33 3,714,601.76 3,714,601.76 of technology center Relocation project of 254,748,122.4 254,748,122.4 11,155,119.70 11,155,119.70 light engine 9 9 and casting Equipment to be installed 13,660,763.13 13,660,763.13 8,857,720.51 8,857,720.51 and payment for projects 268,417,880.6 268,417,880.6 Total 30,259,647.16 30,259,647.16 6 6 (2) Changes in Significant Construction in Progress during the Reporting Period Unit: RMB Propo Of rtion which Capit of Accu : alizati accu mulat Amo on mulat ed unt of rate Trans Other Begin Incre Endin ed amou capita of Capit ferred decre Job Budg ning ased g invest nt of lized intere al Item in ased sched et balan amou balan ment intere intere sts for resou fixed amou ule ce nt ce in st sts for the rces assets nt constr capita the Repor uctio lizati Repor ting ns to on ting Perio budge Perio d t d 162 Changchai Company, Limited Annual Report 2022 Expa nsion capac ity of multi- 1,097 1,097 Comp Self-r cylin ,435. ,435. leted aised der 90 90 (The 2nd Perio d) Innov ation capac ity Self-r 96,06 3,714 1,950 5,443 Unco aised constr 221,7 5.90 6,200 ,601. ,929. ,764. mplet and uctio 66.66 % raised .00 76 23 33 ed n of funds techn ology center Reloc ation proje Self-r ct of 474,7 254,7 120,7 361,1 3,240 11,15 Unco aised light 06,00 48,27 75,06 28,21 ,000. 5,119. 79.11 mplet and engin 0.00 2.15 5.42 7.87 00 70 % ed raised funds e and castin g 570,7 259,5 122,7 362,4 3,240 16,59 Total 72,20 60,30 25,99 47,42 ,000. 8,884 -- -- -- 0.00 9.81 4.65 0.43 00 .03 (3) Engineering Materials Unit: RMB Ending balance Beginning balance Depreciati Item Carrying Carrying Carrying Depreciation Carrying on amount value amount reserves value reserves Engineerin 21,900.40 21,900.40 1,887,810.25 1,887,810.25 g materials Total 21,900.40 21,900.40 1,887,810.25 1,887,810.25 163 Changchai Company, Limited Annual Report 2022 17. Intangible Assets (1) List of Intangible Assets Unit: RMB Trademark use Item Land use right Software License fee Total right I. Original carrying value 1. Beginning balance 206,783,546.68 15,736,719.66 5,488,000.00 1,650,973.47 229,659,239.81 2. Increased amount of the period 7,404,229.03 2,110,482.48 50,000.00 9,564,711.51 (1) Purchase 1,933,758.50 1,933,758.50 (2) Internal R&D (3) Business combination increase 7,404,229.03 176,723.98 50,000.00 7,630,953.01 3. Decreased amount of the period (1) Disposal 4. Ending balance 214,187,775.71 17,847,202.14 5,538,000.00 1,650,973.47 239,223,951.32 II. Accumulated amortization 1. Beginning balance 58,805,643.96 12,856,960.12 2,652,533.14 189,356.68 74,504,493.90 2. Increased amount of the period 5,026,881.78 1,539,099.16 594,217.03 167,041.92 7,327,239.89 (1) Withdrawal 4,298,126.15 1,426,192.17 551,717.03 167,041.92 6,443,077.27 (2) Combination increase 728,755.63 112,906.99 42,500.00 884,162.62 3. Decreased amount of the period (1) Disposal 4. Ending balance 63,832,525.74 14,396,059.28 3,246,750.17 356,398.60 81,831,733.79 III. Depreciation reserves 1. Beginning balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal 4. Ending balance IV. Carrying value 164 Changchai Company, Limited Annual Report 2022 1. Ending carrying value 150,355,249.97 3,451,142.87 2,291,249.83 1,294,574.87 157,392,217.54 2. Beginning carrying value 147,977,902.72 2,879,759.54 2,835,466.86 1,461,616.79 155,154,745.91 18. Long-term Prepaid Expenses Beginning Amortized Item Increase Decrease Ending balance balance amount Trademark 110,345.30 105,518.03 13,893.01 201,970.32 renewal fee External power line access 3,240,000.00 162,000.00 3,078,000.00 project Total 110,345.30 3,345,518.03 175,893.01 3,279,970.32 19. Deferred Income Tax Assets/Deferred Income Tax Liabilities (1) Deferred Income Tax Assets that Had not Been Off-set Unit: RMB Ending balance Beginning balance Deductible Deductible Item Deferred income Deferred income temporary temporary tax assets tax assets difference difference Bad debt provision 6,853,948.19 1,048,165.04 7,196,880.38 1,087,755.38 Deductible loss 149,230,051.55 24,713,867.00 59,064,221.02 9,085,419.14 Inventory falling 2,633,715.26 395,057.29 2,990,223.81 448,533.57 price reserves Impairment of fixed 423,244.03 63,486.60 480,674.25 72,101.14 assets Total 159,140,959.03 26,220,575.93 69,731,999.46 10,693,809.23 (2) Deferred Income Tax Liabilities Had Not Been Off-set Unit: RMB Ending balance Beginning balance Item Taxable temporary Deferred income Taxable temporary Deferred income difference tax liabilities difference tax liabilities Assets evaluation appreciation for business 5,677,718.36 851,657.75 3,643,147.16 546,472.07 combination not under the same control 165 Changchai Company, Limited Annual Report 2022 Changes of fair 1,039,472,114.80 160,508,593.58 720,658,981.89 116,797,689.04 value Total 1,045,149,833.16 161,360,251.33 724,302,129.05 117,344,161.11 (3) List of Unrecognized Deferred Income Tax Assets Unit: RMB Item Ending balance Beginning balance Bad debt provision 177,160,942.15 204,612,644.18 Falling price reserves of 36,829,892.48 32,833,681.27 inventories Deductible loss 22,257,409.96 14,716,019.78 Total 236,248,244.59 252,162,345.23 (4) Deductible Losses of Unrecognized Deferred Income Tax Assets will Due in the Following Years Years Ending amount Beginning amount Note 2022 434,000.66 2023 1,146,746.13 940,673.56 2024 3,605,384.25 6,538,363.99 2025 5,250,820.81 2,279,179.37 2026 7,372,277.94 4,523,802.20 2027 4,882,180.83 Total 22,257,409.96 14,716,019.78 -- 20. Other Non-current Assets Unit: RMB Ending balance Beginning balance Depreciati Depreciati Item Carrying Carrying on Carrying value on Carrying value amount amount reserves reserves Advances payment of 670,735.93 670,735.93 4,543,240.88 4,543,240.88 equipments Total 670,735.93 670,735.93 4,543,240.88 4,543,240.88 21. Short-term Borrowings (1) Category of Short-term Borrowings Unit: RMB Item Ending balance Beginning balance Mortgage loans 7,000,000.00 7,000,000.00 Guaranteed loans 5,000,000.00 Obligation to pay bills discounted 108,437,700.65 61,971,466.65 before maturity 166 Changchai Company, Limited Annual Report 2022 Total 115,437,700.65 73,971,466.65 (2) There Was No Short-term Borrowings Overdue but Unpaid. 22. Notes Payable Unit: RMB Category Ending balance Beginning balance Bank acceptance bill 471,876,397.72 550,774,400.00 Total 471,876,397.72 550,774,400.00 At the end of the current period, there were no notes payable due and not paid. 23. Accounts Payable (1) List of Accounts Payable Unit: RMB Item Ending balance Beginning balance Payment for goods 747,010,098.88 666,186,668.82 Total 747,010,098.88 666,186,668.82 (2) Significant Accounts Payable Aging over One Year Item Ending balance Unpaid/ Un-carry-over reason Supplier terminates cooperation, Payment for goods 53,297,351.52 pending payment Payment for equipment 40,637,976.87 Equipment warranty Total 93,935,328.39 24. Advances from Customers Unit: RMB Item Ending balance Beginning balance Advance payment of house rent 837,425.55 660,965.62 Total 837,425.55 660,965.62 There were no significant advances from customers aging over one year at the end of the period. 25. Contract Liabilities Unit: RMB Item Ending balance Beginning balance Contract liabilities 32,843,692.83 26,864,081.97 Total 32,843,692.83 26,864,081.97 There were no significant contract liabilities aging over one year at the end of the period. 167 Changchai Company, Limited Annual Report 2022 26. Payroll Payable (1) List of Payroll Payable Unit: RMB Beginning Item Increase Decrease Ending balance balance I. Short-term salary 45,385,667.48 279,381,408.55 275,616,053.56 49,151,022.47 II.Post-employment benefit-defined 37,243,881.82 37,243,881.82 contribution plans III. Termination 459,903.90 259,903.90 200,000.00 benefits IV. Current portion of other benefits Total 45,385,667.48 317,085,194.27 313,119,839.28 49,351,022.47 (2) List of Short-term Salary Unit: RMB Beginning Item Increase Decrease Ending balance balance 1. Salary, bonus, 37,375,772.77 229,118,091.49 225,610,345.49 40,883,518.77 allowance, subsidy 2.Employee welfare 1,592.74 3,138,764.51 3,138,764.51 1,592.74 3. Social insurance 21,460,410.40 21,460,410.40 Of which: Medical 17,834,836.44 17,834,836.44 insurance premiums Work-related injury 2,049,942.68 2,049,942.68 insurance Maternity insurance 1,575,631.28 1,575,631.28 4. Housing fund 21,244,377.54 21,244,377.54 5.Labor union budget and employee education 8,008,301.97 4,419,764.61 4,162,155.62 8,265,910.96 budget 6. Short-term absence with salary 7. Short-term profit sharing scheme Total 45,385,667.48 279,381,408.55 275,616,053.56 49,151,022.47 (3) List of Defined Contribution Plans Unit: RMB Beginning Item Increase Decrease Ending balance balance 168 Changchai Company, Limited Annual Report 2022 1. Basic pension 36,127,234.70 36,127,234.70 benefits 2. Unemployment 1,116,647.12 1,116,647.12 insurance 3. Enterprise annuities Total 37,243,881.82 37,243,881.82 27. Taxes Payable Unit: RMB Item Ending balance Beginning balance VAT 2,240,512.82 372,401.11 Corporate income tax 1,272,876.86 470,363.07 Personal income tax 68,629.73 76,559.47 Urban maintenance and 1,151,395.75 957,520.42 construction tax Property tax 1,172,973.71 1,160,865.33 Land use tax 1,041,594.39 1,026,217.69 Stamp duty 286,018.61 44,759.84 Education Surcharge 229,345.14 90,862.46 Comprehensive fees 1,075,134.76 1,075,134.76 Environmental protection tax 31,693.62 31,694.67 Total 8,570,175.39 5,306,378.82 28. Other Payables Unit: RMB Item Ending balance Beginning balance Interest payable Dividends payable 3,891,433.83 3,891,433.83 Other payables 156,155,449.10 144,469,939.46 Total 160,046,882.93 148,361,373.29 (1) Dividends Payable Unit: RMB Item Ending balance Beginning balance Ordinary share dividends 3,243,179.97 3,243,179.97 Interest of preferred shares/ perpetual bond classified as equity instrument Dividends for non-controlling 648,253.86 648,253.86 shareholders 169 Changchai Company, Limited Annual Report 2022 Other Total 3,891,433.83 3,891,433.83 The reason for non-payment for over one year: Not gotten by shareholders yet. (2) Other Payables 1) Other Payables Listed by Nature of Account Unit: RMB Item Ending balance Beginning balance Margin & cash pledged 4,293,474.88 5,045,246.58 Intercourse funds among units 7,831,477.01 8,364,769.41 Intercourse funds among 397,761.04 402,661.04 individuals Sales discount and three 126,787,544.75 114,581,855.32 guarantees Other 16,845,191.42 16,075,407.11 Total 156,155,449.10 144,469,939.46 2) Significant Other Payables Aging over One Year The significant other payables aging over one year at the period-end mainly referred to the unsettled temporary credits and charges owned. 29. Other Current Liabilities Unit: RMB Item Ending balance Beginning balance Sale service fee 806,555.29 460,437.94 Transportation storage fee 597,090.12 870,397.06 Electric charge 1,467,332.18 3,131,920.88 Tax to be transferred 2,821,340.54 2,250,515.65 Estimated share value added tax 1,909,715.09 3,989,913.45 Obligation to pay bills transferred 66,395,231.83 72,391,302.15 before maturity Other withholding expenses 4,648,476.11 5,843,705.66 Total 78,645,741.16 88,938,192.79 30. Deferred Income Unit: RMB Beginning Reason for Item Increase Decrease Ending balance balance formation Government Government 39,615,355.40 3,409,729.46 36,205,625.94 grants appropriation Total 39,615,355.40 3,409,729.46 36,205,625.94 -- Item involving government grants: Unit: RMB 170 Changchai Company, Limited Annual Report 2022 Amount recorded Amount Amou into recorded Amount Related Beginni nt of non-oper into other offset Other Ending to Item ng new ating income in cost in the chan balanc assets/re balance subsid income in the Reporting ges e lated y the Reporting Period income Reporting Period Period National major project special allocations- Flexible 13,040, 1,519,266. 11,521, Related processing production 367.00 00 101.00 to assets line for cylinders of diesel engines 17,847 18,513, 665,973.6 Related Remove ,790.3 763.98 2 to assets compensation 6 Research and development and industrialization allocations of national 8,061,2 1,224,489. 6,836, Related III/IV standard 24.42 84 734.58 to assets high-powered efficient diesel engine for agricultural use 31. Share Capital Unit: RMB Increase/decrease (+/-) Beginning Bonus Ending New shares Bonus balance issue from Other Subtotal balance issued shares profit The sum of 705,692,50 705,692,50 shares 7.00 7.00 32. Capital Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Capital premium 620,338,243.21 620,338,243.21 (premium on stock) Other capital reserves 20,337,975.19 -542,255.39 19,795,719.80 Total 640,676,218.40 -542,255.39 640,133,963.01 171 Changchai Company, Limited Annual Report 2022 Other notes, including changes and reasons thereof: Increase for the current period: The original shareholding ratio of the parent company to the subsidiary company Changzhou Changchai Horizon Agricultural Equipment Co., Ltd. (hereinafter referred to as “Horizon Agricultural Equipment”) is 95%. The original minority shareholders of Horizon Agricultural Equipment transferred their 5% shares to the parent company for free this year, and was included in long-term equity investment and capital surplus as 5% of the opening net assets of Horizon Agricultural Equipment. 33. Other Comprehensive Income Unit: RMB Reporting Period Less: Record Less: ed in Recorded other in other compre comprehe hensiv Attribu nsive e table to Attribu Income income in income owners table to before Less: Endin Beginni prior in prior of the non-co taxatio Income g Item ng period period Compa ntrollin n in the tax balan balance and and ny as g Curren expens ce transferre transfe the interest t e d in rred in parent s after Period profit or retaine after tax loss in d tax the earning Current s in the Period Curren t Period I. Other comprehensive 175,68 149,33 655,3 506,011, 26,352, income that will not be 2,593.5 0,204.5 41,70 499.55 389.03 reclassified to profit or loss 5 2 4.07 Of which: Changes caused by re-measurements on defined benefit pension schemes Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 172 Changchai Company, Limited Annual Report 2022 Changes in fair value of 175,68 149,33 655,3 506,011, 26,352, other equity instrument 2,593.5 0,204.5 41,70 499.55 389.03 investment 5 2 4.07 Changes in fair value of corporate credit risk II. Other comprehensive income that may subsequently be reclassified to profit or loss Of which: Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method Changes in fair value of investment in other debt obligations Amount of financial assets reclassified to other comprehensive income Credit depreciation reserves of investment in other debt obligations Reserves for cash flow hedges Differences arising from translation of foreign currency-denominated financial statements 175,68 149,33 655,3 Total of other 506,011, 26,352, 2,593.5 0,204.5 41,70 comprehensive income 499.55 389.03 5 2 4.07 34. Specific Reserve Unit: RMB Item Beginning balance Increase Decrease Ending balance Safety production 18,812,950.04 4,877,232.12 4,841,325.41 18,848,856.75 cost Total 18,812,950.04 4,877,232.12 4,841,325.41 18,848,856.75 173 Changchai Company, Limited Annual Report 2022 35. Surplus Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Statutory surplus 320,987,630.56 15,053,237.26 336,040,867.82 reserves Discretional surplus 13,156,857.90 13,156,857.90 reserves Total 334,144,488.46 15,053,237.26 349,197,725.72 36. Retained Earnings Unit: RMB Item Reporting Period Same period of last year Beginning balance of retained earnings before 872,212,354.88 777,899,079.66 adjustments Total retained earnings at the beginning of the adjustment period (“+” means up, “-” means down) Beginning balance of retained earnings after 872,212,354.88 777,899,079.66 adjustments Add: Net profit attributable to owners of the 76,684,796.91 103,006,232.54 Company as the parent Less: Withdrawal of statutory surplus reserves 15,053,237.26 8,692,957.32 Withdrawal of discretional surplus reserves Withdrawal of general reserve Dividend of ordinary shares payable 18,348,005.18 Dividends of ordinary shares transferred as share capital Ending retained earnings 915,495,909.35 872,212,354.88 List of adjustment of beginning retained earnings: (1) RMB0.00 beginning retained earnings was affected by retrospective adjustment conducted according to the Accounting Standards for Business Enterprises and relevant new regulations. (2) RMB0.00 beginning retained earnings was affected by changes in accounting policies. (3) RMB0.00 beginning retained earnings was affected by correction of significant accounting errors. (4) RMB0.00 beginning retained earnings was affected by changes in combination scope arising from same control. (5) RMB0.00 beginning retained earnings was affected totally by other adjustments. 37. Operating Revenue and Cost of Sales Unit: RMB Item Reporting Period Same period of last year 174 Changchai Company, Limited Annual Report 2022 Operating revenue Cost of sales Operating revenue Cost of sales Main operations 2,145,567,983.95 1,924,209,350.48 2,404,119,747.06 2,051,932,677.42 Other operations 36,475,111.66 24,467,686.04 48,310,768.54 32,739,084.66 Total 2,182,043,095.61 1,948,677,036.52 2,452,430,515.60 2,084,671,762.08 Whether the lower of the audited net profit before and after deduction of non-recurring gains and losses is negative √ Yes □ No Unit: RMB Item 2022 Specific deduction 2021 Specific deduction The main business The main business of the Company is of the Company is the production and the production and Operating revenue 2,182,043,095.61 2,452,430,515.60 sales of diesel sales of diesel engines and engines and gasoline engines gasoline engines Total operating Other business Other business income with 36,475,111.66 income other than 48,310,768.54 income other than deduction main operations main operations The proportion of total operating income 1.67% 1.97% with deduction in operating revenue I. Business income not related to the main business 1. Other business income outside normal business. E.g., income from the lease of fixed assets, intangible assets, packaging materials, sales materials, Income from sales Income from sales non-monetary asset of materials, of materials, exchange with 36,475,111.66 48,310,768.54 housing rental housing rental materials and fees, property and fees, property and operation of entrusted utility charges utility charges management business, and income that is included in the income from primary business but is outside the normal business of the listed company. Income from sales Income from sales Subtotal of business of materials, of materials, income not related to 36,475,111.66 housing rental 48,310,768.54 housing rental the main business fees, property and fees, property and utility charges utility charges II. Income without commercial substance Subtotal of income 0.00 None 0.00 None 175 Changchai Company, Limited Annual Report 2022 without commercial substance III. Other income not related to the main 0.00 None 0.00 None business or without commercial substance Diesel engines, Diesel engines, Operating revenue gasoline engines gasoline engines 2,145,567,983.95 2,404,119,747.06 after deduction and fittings and fittings business business Relevant information of revenue: Unit: RMB Category of contracts Total Product Types Of which: Single-cylinder diesel engines 814,545,044.55 Multi-cylinder diesel engines 1,055,889,184.19 Other products 212,223,234.20 Fittings 62,910,521.01 Classified by business area Of which: Sales in domestic market 1,821,370,757.82 Export sales 324,197,226.13 Total 2,145,567,983.95 Information related to performance obligations: none 38. Taxes and Surtaxes Unit: RMB Item Reporting Period Same period of last year Urban maintenance and 2,905,289.19 1,472,605.59 construction tax Education surcharge 2,073,990.11 1,051,826.51 Property tax 6,312,819.28 6,157,554.67 Land use tax 4,474,736.13 5,226,882.22 Vehicle and vessel use tax 3,092.64 2,875.00 Stamp duty 898,751.20 969,210.59 Environment tax 293,572.90 204,133.44 Other 10,944.81 40,860.94 Total 16,973,196.26 15,125,948.96 176 Changchai Company, Limited Annual Report 2022 39. Selling Expense Unit: RMB Item Reporting Period Same period of last year Employee benefits 41,414,480.36 42,968,060.55 Office expenses 9,191,582.99 11,247,378.94 Sales promotional expense 1,435,536.25 Three guarantees 50,709,187.02 60,722,393.46 Transport charge 320,853.84 Other 1,314,973.34 548,067.28 Total 102,630,223.71 117,242,290.32 40. Administrative Expense Unit: RMB Item Reporting Period Same period of last year Employee benefits 62,242,258.03 51,646,790.82 Office expenses 9,510,389.69 9,359,397.93 Depreciation and amortization 16,116,539.74 9,925,872.31 Safety expenses 4,877,232.12 4,023,200.24 Repair charge 1,736,442.58 1,985,784.26 Inventory scrap and inventory loss -333,858.14 5,218,542.74 (profit) Other 25,362,185.70 16,730,695.92 Total 119,511,189.72 98,890,284.22 41. Development Costs Unit: RMB Item Reporting Period Same period of last year Direct input expense 43,996,939.37 49,871,973.96 Employee benefits 24,608,063.95 21,059,641.45 Depreciation and amortization 4,570,577.95 4,240,194.24 Design costs 250,000.00 Entrusted development charges 6,509,898.89 5,521,861.13 Other 1,554,116.90 1,446,613.36 Total 81,239,597.06 82,390,284.14 42. Finance Costs Unit: RMB Item Reporting Period Same period of last year 177 Changchai Company, Limited Annual Report 2022 Interest expense 1,993,453.71 5,907,625.42 Less: Interest income 12,804,077.19 7,921,535.62 Net foreign exchange gains or -10,929,750.57 3,969,634.63 losses Other 150,669.42 -752,108.63 Total -21,589,704.63 1,203,615.80 43. Other Income Unit: RMB Sources Reporting Period Same period of last year Government grants directly recorded into the current profit or 3,749,273.00 4,234,711.29 loss Government grants related to 3,409,729.46 2,364,382.20 deferred income Others 25,025.59 34,238.89 44. Investment Income Unit: RMB Item Reporting Period Same period of last year Long-term equity investment income accounted by equity method Investment income from disposal of long-term equity investment Investment income from holding of trading financial assets Investment income from disposal of trading 12,262.47 450,637.63 financial assets Dividend income from holding of other equity 9,360,000.00 7,394,400.00 instrument investment Income from re-measurement of residual stock rights at fair value after losing control power Interest income from holding of investment in debt 1,411,361.54 obligations Interest income from holding of investment in other debt obligations Investment income from disposal of investment in other debt obligations Income from debt reorganization 178 Changchai Company, Limited Annual Report 2022 Investment income from disposal of other -221,711.92 non-current financial assets Dividend income from holding of held-for-trading 296,740.00 189,085.80 financial assets Income from refinancing operations 136,003.96 1,028,964.68 Investment income from financial products 5,995,552.35 2,292,008.67 Forward income from foreign exchange settlement 63,235.00 Accounts receivable financing-discount interest of -9,242,453.13 -1,869,322.91 bank acceptance bills Total 7,969,467.19 9,327,296.95 45. Gain on Changes in Fair Value Unit: RMB Sources Reporting Period Same period of last year Held-for-trading financial assets -40,756,542.83 70,820,498.36 Other non-current financial assets 186,000,000.00 33,750,000.00 Total 145,243,457.17 104,570,498.36 46. Credit Impairment Loss Unit: RMB Item Reporting Period Same period of last year Bad debt loss of other receivables 172,411.52 -562,856.87 Bad debt loss of accounts -3,126,152.25 -51,454,294.95 receivable Total -2,953,740.73 -52,017,151.82 47. Asset Impairment Loss Unit: RMB Item Reporting Period Same period of last year I. Bad debt loss II. Loss on inventory valuation and contract -14,367,197.27 -8,676,024.20 performance cost III. Impairment loss on long-term equity investment IV. Impairment loss on investment property V. Impairment loss on fixed assets VI. Impairment loss on engineering materials VII. Impairment loss on construction in progress VIII. Impairment loss on productive living assets IX. Impairment loss on oil and gas assets 179 Changchai Company, Limited Annual Report 2022 X. Impairment loss on intangible assets XI. Impairment loss on goodwill XII. Other Total -14,367,197.27 -8,676,024.20 48. Asset Disposal Income Unit: RMB Sources Reporting Period Same period of last year Disposal income of fixed assets 393,161.73 155,515.49 49. Non-operating Income Unit: RMB Amount recorded in the Item Reporting Period Same period of last year current non-recurring profit or loss Income from scrap of 236,284.29 5,825.24 236,284.29 fixed assets Income from scrap of 2,089,369.81 construction in progress Income from penalty 93,140.00 398,143.00 93,140.00 Accounts not required to 1,714,502.08 1,429,558.71 1,714,502.08 be paid Negative goodwill generated from 1,904,132.58 1,904,132.58 combination not under the same control Other 309,883.70 115,000.00 309,883.70 Total 4,257,942.65 4,037,896.76 4,257,942.65 50. Non-operating Expense Unit: RMB Amount recorded in the Item Reporting Period Same period of last year current non-recurring profit or loss Retirement loss of 148,926.11 22,405.72 148,926.11 non-current assets Compensation for quality 208,884.78 507,265.91 208,884.78 Donation 168,300.00 168,300.00 Other 92,352.67 1,107,361.42 92,352.67 Total 618,463.56 1,637,033.05 618,463.56 180 Changchai Company, Limited Annual Report 2022 51. Income Tax Expense (1) List of Income Tax Expense Unit: RMB Item Reporting Period Same period of last year Current income tax expense 1,267,934.70 443,034.91 Deferred income tax expense 1,930,017.97 15,999,671.86 Adjustment of income tax of prior -733,872.93 -4,073,920.19 years Total 2,464,079.74 12,368,786.58 (2) Adjustment Process of Accounting Profit and Income Tax Expense Unit: RMB Item Reporting Period Profit before taxation 81,710,212.20 Current income tax expense accounted at statutory/applicable tax rate 12,256,531.82 Influence of applying different tax rates by subsidiaries -7,278,933.33 Influence of income tax before adjustment -733,872.93 Influence of non-taxable income -1,430,654.07 Influence of non-deductable costs, expenses and losses 3,725,995.40 Influence of deductable losses of unrecognized deferred income tax at the 172,794.49 beginning of the Reporting Period Influence of deductable temporary difference or deductable losses of 4,019,365.61 unrecognized deferred income tax assets in the Reporting Period Tax preference from eligible expenditures -8,267,147.25 Income tax expense 2,464,079.74 52. Other Comprehensive Income See Note 33 for details. 53. Cash Flow Statement (1) Cash Generated from Other Operating Activities Unit: RMB Item Reporting Period Same period of last year Subsidy and appropriation 3,751,451.59 4,240,292.03 Other intercourses in cash 4,962,530.66 6,603,764.28 Interest income 12,804,077.19 7,921,535.62 Other 1,472,234.00 3,871,134.26 Total 22,990,293.44 22,636,726.19 (2) Cash Used in Other Operating Activities Unit: RMB Item Reporting Period Same period of last year 181 Changchai Company, Limited Annual Report 2022 Selling and administrative expense 89,311,871.19 101,602,750.69 paid in cash Handling charges 1,212,912.33 1,220,112.47 Other 16,260,652.67 15,807,386.22 Other transactions 1,405,188.05 23,381,748.58 Total 108,190,624.24 142,011,997.96 (3) Cash Generated from Other Investing Activities Unit: RMB Item Reporting Period Same period of last year Cash and cash equivalents from 11,400,123.61 combination of subsidiary Total 11,400,123.61 (4) Cash Used in Other Investing Activities Unit: RMB Item Reporting Period Same period of last year Accounts receivable financing-discount 1,869,322.91 interest from bank acceptance bills Total 1,869,322.91 (5) Cash Generated from Other Financial Activities Unit: RMB Item Reporting Period Same period of last year Discount of bank acceptance bills with 128,437,700.65 58,971,466.65 low credit rating Total 128,437,700.65 58,971,466.65 (6) Cash Used in Other Financial Activities Unit: RMB Item Reporting Period Same period of last year Intermediary agency fees for private 10,849,056.61 placement Discount of bank acceptance bills 83,623,545.07 3,772,107.02 with low credit rating Total 83,623,545.07 14,621,163.63 54. Supplemental Information for Cash Flow Statement (1) Supplemental Information for Cash Flow Statement Unit: RMB Same period of last Supplemental information Reporting Period year 1. Reconciliation of net profit to net cash flows generated -- -- from operating activities Net profit 79,246,132.46 102,931,874.37 182 Changchai Company, Limited Annual Report 2022 Add: Provision for impairment of assets 17,320,938.00 60,693,176.02 Depreciation of fixed assets, of oil and gas assets, of 79,926,656.97 76,128,177.44 productive living assets Depreciation of right-of-use assets Amortization of intangible assets 5,824,591.44 4,711,649.34 Amortization of long-term deferred expenses 175,893.01 17,605.33 Losses on disposal of fixed assets, intangible assets and other -393,161.73 -155,515.49 long-term assets (gains by “-”) Losses on the scrapping of fixed assets (gains by “-”) -87,358.18 -2,072,789.33 Losses on the changes in fair value (gains by “-”) -145,243,457.17 -104,570,498.36 Financial expenses (gains by “-”) 2,146,237.77 8,122,828.51 Investment losses (gains by “-”) -17,211,920.32 -9,327,296.95 Decrease in deferred income tax assets (increase by “-”) -15,400,115.80 -6,461,936.08 Increase in deferred income tax liabilities (decrease by “-”) 17,330,133.77 22,461,607.94 Decrease in inventory (increase by “-”) 89,813,152.96 -53,079,441.83 Decrease in accounts receivable from operating activities -33,140,187.50 -286,670,314.47 (increase by “-”) Increase in payables from operating activities (decrease by 286,526,874.74 -79,052,905.74 “-”) Other -1,904,132.58 Net cash flows generated from operating activities 364,930,277.84 -266,323,779.30 2. Investing and financing activities that do not involving cash receipts and payment: Debt transferred as capital Convertible corporate bond due within one year Fixed assets from financing lease 3. Net increase in cash and cash equivalents Ending balance of cash 810,350,966.05 562,402,221.59 Less: Beginning balance of cash 562,402,221.59 629,939,540.50 Add: Ending balance of cash equivalents Less: Beginning balance of cash equivalents Net increase in cash and cash equivalents 247,948,744.46 -67,537,318.91 (2) Cash and Cash Equivalents Unit: RMB Item Ending balance Beginning balance I. Cash 810,350,966.05 562,402,221.59 Including: Cash on hand 251,965.06 145,594.98 Bank deposit on demand 806,914,999.19 561,746,767.12 Other monetary assets on demand 3,184,001.80 509,859.49 Accounts deposited in the central bank available for payment Deposits in other banks 183 Changchai Company, Limited Annual Report 2022 Accounts of interbank II. Cash equivalents Of which: Bond investment expired within three months III. Ending balance of cash and cash 810,350,966.05 562,402,221.59 equivalents Of which: Cash and cash equivalents with restriction in use for the Company as the parent or subsidiaries of the Group 55. Assets with Restricted Ownership or Right to Use Unit: RMB Item Ending carrying value Reason for restriction As cash deposit for bank acceptance bill Monetary assets 95,662,384.92 and for environment Houses and buildings 1,530,890.90 Mortgaged for borrowings from banks Land use right 879,275.35 Mortgaged for borrowings from banks Machinery equipment 31,222,420.22 Mortgaged for borrowings from banks Obligation to pay bills discounted 110,000,000.00 before maturity Obligation to pay bills transferred 66,395,231.83 before maturity Total 305,690,203.22 56. Foreign Currency Monetary Items (1) Foreign Currency Monetary Items Unit: RMB Ending foreign currency Ending balance Item Exchange rate balance converted to RMB Monetary assets -- -- Of which: USD 13,543,608.99 6.9646 94,325,820.43 HKD 320,344.50 0.8933 286,163.74 Accounts receivable Of which: USD 8,596,374.27 6.9646 59,870,308.38 GBP -67,212.27 8.3941 -564,186.52 Accounts payable Of which: USD 302.60 6.9646 2,107.49 Contract liabilities Of which: USD 635,740.16 6.9646 4,427,675.94 EUR 117,145.84 7.4229 869,561.86 184 Changchai Company, Limited Annual Report 2022 (2) Notes to Overseas Entities Including: for Significant Oversea Entities, Main Operating Place, Recording Currency and Selection Basis Shall Be Disclosed; if there Are Changes in Recording Currency, Relevant Reasons Shall Be Disclosed. □ Applicable √ Not applicable 57. Government Grants (1) Basic Information on Government Grants Unit: RMB Amount recorded in Category Amount Listed items the current profit or loss Subsidies for stabilizing and increasing job 2,396,713.00 Other income 2,396,713.00 positions and retaining workers Special funds for business development 102,800.00 Other income 102,800.00 Membership dues return 4,760.00 Other income 4,760.00 Municipal special funds for environmental 10,000.00 Other income 10,000.00 protection 2021 Enterprise Technical Innovation Award 50,000.00 Other income 50,000.00 Financial Assistance to the 19th Batch of 200,000.00 Other income 200,000.00 Technology Plans in Changzhou in 2021 The 9th Batch of Special Funds for Talents in 50,000.00 Other income 50,000.00 2022 Support Funds for Agricultural Machinery Guild in Zhonglou Distrcit of Changzhou in 250,000.00 Other income 250,000.00 2022 Incentives and subsidies for earlier phase-out and scrapping of high-emission old cars in 59,800.00 Other income 59,800.00 Changzhou Financial Assistance to the 2rd Batch of 110,000.00 Other income 110,000.00 Technology Plans in Chanzhou The 25th Batch of Special Funds for Talents in 120,000.00 Other income 120,000.00 2022 Industrial development funds 1,500.00 Other income 1,500.00 Incentives for R&D spending on No. 208 47,000.00 Other income 47,000.00 185 Changchai Company, Limited Annual Report 2022 Incentives for provincial technology transfer 27,700.00 Other income 27,700.00 acceptor Employment and apprenticeship subsidies 11,000.00 Other income 11,000.00 Subsidies for high-quality invention 2,000.00 Other income 2,000.00 Tax Contribution Award 30,000.00 Other income 30,000.00 Subsidies for work-based training 45,000.00 Other income 45,000.00 Innovation-driven incentives 31,000.00 Other income 31,000.00 Re-affirm and declare incentives for high and 200,000.00 Other income 200,000.00 new tech enterprises Demolition compensation (replacing Zou 13,344,397.90 Deferred income 267,333.48 Village with Hehai Road) Demolition compensation - main workshops 11,864,289.02 Deferred income 398,640.14 in the base in Hehai Road The national major special project - the flexible processing production line for diesel 13,800,000.00 Deferred income 1,519,266.00 engine cylinder blocks National III/IV Appropriation for the research and development and industrialization of 10,000,000.00 Deferred income 1,224,489.84 standard high-horsepower high-efficiency agricultural diesel engine Return of Government Grants □ Applicable √ Not applicable VIII. Changes of Consolidation Scope 1. Business Combination Not under the Same Control (1) Business Combination Not under the Same Control in the Reporting Period Unit: RMB Income Net of profits of Recogniti Time and acquiree acquiree Cost of Proportio Way to on basis Name of place of Purchase from the from the gaining n of gain the of acquiree gaining date purchase purchase the equity equity equity purchase the equity date to date to date period-en period-en d d 186 Changchai Company, Limited Annual Report 2022 On 16 May 2022, the Board of Directors of Zhenjiang Siyang was reorganiz ed and its Articles of Associati on were amended, after which Zhenjiang directors Siyang appointed 35,440,98 4,824,237 Diesel 23 33,520,80 Acquisiti 31 May by Engine February 41.50% 3.37 .05 0.00 on in cash 2022 Changcha Manufact 2022 i uring Co., Company Ltd. are in the majority. In May 2022, Changcha i appointed managers to participat e in the productio n and operation managem ent of Zhenjiang Siyang. (2) Combination Cost and Goodwill Unit: RMB Combination cost --Cash 33,520,800.00 --Fair value of non-cash assets --Fair value of debts issued or undertaken --Fair value of equity securities issued --Fair value of contingent consideration --Fair value of equities held before the purchase date on the purchase date --Other Total combination cost 33,520,800.00 Less: fair value of identifiable net assets acquired 35,424,932.58 187 Changchai Company, Limited Annual Report 2022 The amount of goodwill/combined cost less than the fair value share of -1,904,132.58 identifiable net assets obtained Note to determination method of the fair value of the combination cost, consideration and changes: Combination cost: According to the Confirmation of Transaction on the Transfer of 41.5% Equity Interest (Corresponding to Capital Contribution of RMB830,000) in Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. issued by Jiangsu Property Rights Exchange Co., Ltd. on 12 January 2022, the transaction price is RMB33,520,800.00, and Changchai Company, Limited paid a one-time payment of RMB33,520,800.00 on 23 February 2022. Determination method of fair value: Zhenjiang Siyang's base date of assets evaluation is 31 March 2021. The evaluated value of assets of Zhenjiang Siyang on 31 March 2021 is used as the fair value. The fair value of Zhenjiang Siyang continuously measured from 31 May 2022 is calculated, which is multiplied by the shareholding ratio of Changchai Company, Limited to obtain the fair value share of the identifiable net assets obtained by Changchai Company, Limited. The main reasons for the formation of large-value goodwill: Not applicable (3) The Identifiable Assets and Liabilities of Acquiree on Purchase Date Unit: RMB Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. Fair value on purchase date Carrying value on purchase date Assets: 99,167,047.96 96,946,440.05 Monetary assets 19,400,123.61 19,400,123.61 Accounts receivable 24,790,090.34 24,790,090.34 Inventories 25,093,473.79 25,096,648.68 Fixed assets 21,864,448.97 21,427,812.03 Intangible assets 6,746,790.39 4,959,644.53 Other current assets 697,629.25 697,629.25 Construction in progress 447,840.71 447,840.71 Deferred income tax assets 126,650.90 126,650.90 Liabilities: 13,805,764.63 13,472,197.21 Borrowings Accounts payable 13,472,197.21 13,472,197.21 Deferred income tax liabilities 333,567.42 Net assets 85,361,283.33 83,474,242.84 Less: Non-controlling interests 49,936,350.75 48,832,432.06 Net assets acquired 35,424,932.58 34,641,810.78 (4) Gains or losses from Re-measurement of Equity Held before the Purchase Date at Fair Value Whether there is a transaction that through multiple transaction step by step to realize business combination and gaining the control during the Reporting Period □ Yes √ No 188 Changchai Company, Limited Annual Report 2022 (5) Notes to Reasonable Consideration or Fair Value of Identifiable Assets and Liabilities of the Acquiree that Cannot Be Determined on the Acquisition Date or during the Period-end of the Merger Not applicable IX. Equity in Other Entities 1. Equity in Subsidiary (1) Subsidiaries Natur Holding percentage Main Registrat e of (%) Way of Name operatin ion busin Indirectl gaining g place place Directly ess y Changchai Wanzhou Diesel Engine Chongq Chongqi Indus 60.00% Set-up Co., Ltd. ing ng try Changzhou Changchai Benniu Diesel Changz Changzh Indus 99.00% 1.00% Set-up Engine Fittings Co., Ltd. hou ou try Changzhou Horizon Investment Co., Changz Changzh Servi 100.00% Set-up Ltd. hou ou ce Changzhou Changchai Horizon Changz Changzh Indus 75.00% 25.00% Set-up Agricultural Equipment Co., Ltd. hou ou try Combination Changzhou Fuji Changchai Robin Changz Changzh Indus 100.00% not under the Gasoline Engine Co., Ltd. hou ou try same control Jiangsu Changchai Machinery Co., Changz Changzh Indus 100.00% Set-up Ltd. hou ou try Changzhou Xingsheng Property Changz Changzh Servi 100.00% Set-up Management Co., Ltd. hou ou ce Combination Zhenjiang Siyang Diesel Engine Zhenjia Zhenjian Indus 41.50% not under the Manufacturing Co., Ltd. ng g try same control Explanation: the company holds 41.5% of the shares in Zhenjiang Siyang Diesel Engine Manufacturing Co., Ltd. Our company is the largest shareholder, and the other shareholders are employee and non employee shares, which are relatively scattered. There are no other shareholders with a high shareholding ratio that is close to the actual controller's shareholding ratio; Among the 7 members of the board of directors of Zhenjiang Siyang, 5 are dispatched by our company. The chairman of Zhenjiang Siyang is dispatched by our company, and our company is the substantive controller of Zhenjiang Siyang, which constitutes the conditions for merger. (2) Significant Non-wholly-owned Subsidiary Unit: RMB Declaring Shareholding The profit or loss Balance of dividends proportion of attributable to the non-controlling Name distributed to non-controlling non-controlling interests at the non-controlling interests interests period-end interests 189 Changchai Company, Limited Annual Report 2022 Changchai Wanzhou Diesel 40.00% -260,843.12 19,705,643.25 Engine Co., Ltd. Zhenjiang Siyang Diesel Engine 58.50% 2,822,178.67 52,758,529.42 Manufacturing Co., Ltd. Holding proportion of non-controlling interests in subsidiary different from voting proportion: Not applicable (3) The Main Financial Information of Significant Not Wholly-owned Subsidiary Unit: RMB Ending balance Beginning balance Non- Non- Non- Curre Non- Curre Curre curre Total Curre curre Total Name curre Total nt curre Total nt nt nt liabili nt nt liabili nt assets liabili nt assets liabili assets liabili ties assets liabili ties assets ties assets ties ty ty Chan gchai Wanz hou 47,13 23,22 70,36 21,09 21,09 48,20 24,14 72,34 22,42 22,42 Diese 3,617 8,110. 1,727 7,619 7,619 0,342 1,889 2,232 6,016 6,016 l .16 09 .25 .13 .13 .77 .90 .67 .75 .75 Engin e Co., Ltd. Zhenj iang Siyan g Diese l 82,69 28,04 110,7 20,23 20,55 322,7 Engin 7,983 5,494 43,47 5,256 7,957 —— —— —— —— —— —— e 01.42 .58 .39 7.97 .17 .59 Manu factur ing Co., Ltd. Chan gzho u Chan gchai Hori 14,50 14,83 25,67 25,67 324,3 zon —— —— —— —— —— —— 5,888 0,191 5,299 5,299 Agri 02.84 .53 .37 .17 .17 cultu ral Equi pme nt 190 Changchai Company, Limited Annual Report 2022 Co., Ltd. Unit: RMB Reporting Period Same period of last year Cash Cash Total Total flows flows Name Operating comprehe Operating comprehe Net profit from Net profit from revenue nsive revenue nsive operating operating income income activities activities Changcha i Wanzhou 34,281,25 -652,107. -652,107. 650,437.0 42,629,37 386,567.2 386,567.2 2,563,679 Diesel 2.72 80 80 3 9.24 7 7 .17 Engine Co., Ltd. Zhenjian g Siyang Diesel 35,440,98 4,824,237 4,824,237 -9,291,53 Engine —— —— —— —— Manufact 3.37 .05 .05 7.82 uring Co., Ltd. Changz hou Changc hai Horizon 14,362,87 -4,579,70 -4,579,70 6,216,842 —— —— —— —— Agricult 2.77 1.60 1.60 .70 ural Equipm ent Co., Ltd. 2. Equity in the Structured Entity Excluded in the Scope of Consolidated Financial Statements Notes to the structured entity excluded in the scope of consolidated financial statements: In 2017, the Company set up Changzhou Xietong Private Equity Fund (Limited Partnership) together with Synergetic Innovation Fund Management Co., Ltd. through joint investment. On 18 October 2018 and 3 December 2020, new partners were respectively added. Partnership Shares transfer was made on 29 December 2022. In line with the revised Partnership Agreement, the general partner is Synergetic Innovation Fund Management Co., Ltd., and the limited partners are Changchai Company, Limited, Changzhou Zhongyou Petroleum Sales Co., Ltd., Changzhou Fuel Co., Ltd., Tong Yinzhu, Tong Yinxin, Anhui Haiyunzhou Equity Investment Partnership Enterprise (Limited), Shenzhen Jiaxin One Venture Capital Partnership (limited partnership)and Zhong Wende. In accordance with the Partnership Agreement, the limited partner does not execute the partnership affairs. Thus, the Company does not control Changzhou Xietong Private Equity Fund (Limited Partnership) and did not include it into the scope of consolidated financial statements. 191 Changchai Company, Limited Annual Report 2022 X. The Risk Related to Financial Instruments The goal of the Company’s risk management was gaining the balance between the risk and income, and reduced the negative impact to the operation performance of the Company in the lowest level and maximized the interests of shareholders and other equity investors. Base on the risk management goal, the basis strategy of the Company’s risk management was to recognized and analyze all kinds of risk that the Company faced, set up suitable risk bottom line and conduct risk management, and supervised the risks timely and reliably and control the risk within the limited scope. The main risks of the Company due to financial instruments were credit risk, liquidity risk and market risk. The management level had reviewed and approved the policies to manage the risks, which summarized as follows: (I) Credit Risk Credit risk was one party of the contract failed to fulfill the obligations and causes loss of financial assets of the other party. The credit of risk of the Company mainly was related to account receivable, in order to control the risk, the Company conduct the following methods. The Company only conducts related transaction with approved and reputable third party, in line with the policy of the Company, the Company need to conduct credit-check for the clients adopting way of credit to conduct transaction. In addition, the Company continuously monitors the balance of account receivable to ensure the Company would not face the significant bad debt risk. (II) Liquidity Risk Liquidity risk is referred to the risk of incurring capital shortage when performing settlement obligation in the way of cash payment or other financial assets. The policies of the Company are to ensure that there was sufficient cash to pay the due liabilities. The liquidity risk was centralized controlled by the financial department of the Company. The financial departments through supervising the balance of the cash and securities can be convert to cash at any time and the rolling prediction of cash flow in future 12 months to ensure the Company has sufficient cash to pay the liabilities under the case of all reasonable prediction. (III) Market Risk Market risk is refer to risk of the fair value or future cash flow of financial instrument changed due to the change of market price, including foreign exchange rate risk, interest rate risk. 1. Interest Rate Risk Interest rate risk is refers to fluctuation risk of the fair value or future cash flow of financial instrument change due to the change of market price. 2. Foreign Exchange Risk Foreign exchange rate risk is referred to the risk incurred form the change of exchange rate. As for the Company’s export business, customers will be given a certain credit term, if the RMB appreciates against the dollar, the company's accounts receivable will incur foreign currency exchange loss. XI. The Disclosure of Fair Value 1. Ending Fair Value of Assets and Liabilities at Fair Value Unit: RMB Item Ending fair value 192 Changchai Company, Limited Annual Report 2022 Fair value Fair value Fair value measurement items measurement items measurement items Total at level 1 at level 2 at level 3 I. Consistent fair -- -- -- -- value measurement (I) Trading financial 78,739,311.00 291,364,291.57 370,103,602.57 assets 1. Financial assets at fair value through 78,739,311.00 291,364,291.57 370,103,602.57 profit or loss (1) Debt instrument investment (2) Equity instrument 78,739,311.00 78,739,311.00 investment (3) Derivative financial assets Wealth management 291,364,291.57 291,364,291.57 investments 2. Financial assets designated to be measured at fair value and the changes included into the current profit or loss (1) Debt instrument investment (2) Equity instrument investment (II) Other investments in debt obligations (III)Other equity instrument 576,631,000.00 378,929,240.08 955,560,240.08 investment (IV) Investment property 1. Land use right for lease 2. Buildings leased out 3. Land use right 193 Changchai Company, Limited Annual Report 2022 held and planned to be transferred once appreciating (V) Living assets 1. Consumptive living assets 2. Productive living assets Accounts receivable 242,813,392.79 242,813,392.79 financing Other non-current 373,500,000.00 373,500,000.00 financial assets Total assets consistently 655,370,311.00 291,364,291.57 995,242,632.87 1,941,977,235.44 measured by fair value (VI) Trading financial liabilities Of which: Issued trading bonds Derivative financial liabilities Other (VII) Financial liabilities designated to be measured at fair value and the changes recorded into the current profit or loss Total liabilities consistently measured by fair value II. Inconsistent fair -- -- -- -- value measurement (1) Assets held for sale Total assets inconsistently measured by fair value Total liabilities 194 Changchai Company, Limited Annual Report 2022 inconsistently measured by fair value 2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value Measurement Items at Level 1 For the listed company stocks held by the company in the held-for-trading financial assets measured at fair value, the closing market price on the balance sheet date was the basis for the measurement of fair value. 3. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for Consistent and Inconsistent Fair Value Measurement Items at Level 2 Wealth management and investment: The underlying assets of investment in wealth management products include bond assets, deposit assets, fund assets, etc. The portfolio of investment assets should be dynamically managed. The fair value of wealth management products should be adjusted according to the yield of similar products provided by the counterparty. 4. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for Consistent and Inconsistent Fair Value Measurement Items at Level 3 (1) Accounts receivable financing: Accounts receivable financing is a bank acceptance with high credit rating, short maturity and low risk. The par amount is close to the fair value and is used as the fair value. (2) Among the other non-current financial assets: for the investments in equity instrument of Jiangsu Horizon New Energy Technology Co., Ltd., Jiangsu Horizon New Energy Technology Co., Ltd. entrusted an appraisal agency to evaluate the value of all its shareholders’ equity due to the need for capital increase and share expansion in 2022, and confirmed the premium rate of capital increase based on the appreciation rate of the equity value. The company’s new investors signed the investment agreements on 29 August 2022. Therefore, the fair value of the equity investment had been adjusted and confirmed accordingly based on the premium rate of the new round of financing. (3) Among other equity investment instruments, the total investment in Chengdu Changwan Diesel Engine Distribution Co., Ltd., Chongqing Wanzhou Changwan Diesel Engine Parts Co., Ltd., Changzhou Economic and Technological Development Company, Changzhou Tractor Company, Changzhou Economic Commission Industrial Capital Mutual Aid Association, Beijing Engineering Machinery Agricultural Machinery Company was RMB 1.21 million, and the fair value was RMB 0.00 due to the difficulty in recovering the investment. Since its establishment in October 2017, Changzhou Synergetic Innovation Private Equity Fund (Limited Partnership) had increased the equity of partners at the end of the year due to the change in fair value of the equity held by it. In addition, the company's business environment, operating conditions, and financial status had not undergone major changes. Therefore, the company determined its fair value on the basis of the net book assets of the partnership at the end of the period. 5. Sensitiveness Analysis on Unobservable Parameters and Adjustment Information between Beginning and Ending Carrying Value of Consistent Fair Value Measurement Items at Level 3 195 Changchai Company, Limited Annual Report 2022 Not applicable 6. Explain the Reason for Conversion and the Governing Policy when the Conversion Happens if Conversion Happens among Consistent Fair Value Measurement Items at Different Levels Not applicable 7. Changes in the Valuation Technique in the Current Period and the Reason for Such Changes Not applicable 8. Fair Value of Financial Assets and Liabilities Not Measured at Fair Value The financial assets and liabilities measured at amortization cost mainly include notes receivable, accounts receivable, other receivables, short-term borrowings, accounts payable, other payables, etc. The difference between the carrying value and fair value for financial assets and liabilities not measured at fair value is small. 9. Other During the year, there was no conversion between Level 1 and Level 2, nor was there any transfer to or from Level 3 for the fair value measurement of the Company's financial assets and financial liabilities. XII. Related Party and Related-party Transactions 1. Information Related to the Company as the Parent of the Company Proportion of Proportion of share held by voting rights Registration Nature of Registered the Company as owned by the Name place business capital the parent Company as the against the parent against Company the Company Investment and operations of state-owned assets, assets Changzhou management Investment Changzhou (excluding RMB1.2 billion 32.26% 32.26% Group Co., Ltd. financial business), investment consulting (excluding 196 Changchai Company, Limited Annual Report 2022 consulting on investment in securities and options), etc. Notes: Information on the Company as the parent The parent company of the Company is Changzhou Investment Group Co., Ltd. According to the guiding principle of the Notice of Provincial Government on Issuing the Implementation Plan for Transferring Part of State-owned Capital to Boost Social Security Fund in Jiangsu Province (SZF [2020] No. 27), the Notice on Transferring Part of State-owned Capital to Cities and Counties to Boost Social Security Fund (SCGM [2020] No. 139) from the Department of Finance of Jiangsu Province and other five departments and the Notice on Transferring Part of State-owned Capital at Urban (District) Level to Boost Social Security Fund (CCGM [2020] No. 4) from Changzhou Finance Bureau and other four departments, the 10% state-owned equity of the Investment Group held by Changzhou Municipal People's Government is transferred to the Department of Finance of Jiangsu Province free of charge. After the share transfer, Changzhou People’s Government holds 90% state-owned equity of the Investment Group and the Department of Finance of Jiangsu Province holds 10% state-owned equity of the Investment Group. In accordance with Changzhou People’s Government Document (CZF [2006] No. 62), Changzhou Investment Group Co., Ltd. is an enterprise which Changzhou People’s Government authorizes Changzhou Government State-owned Assets Supervision and Administration Commission to perform duties of investors. Thus, Changzhou Investment Group Co., Ltd. is the controlling shareholder of the Company and Changzhou Government State-owned Assets Supervision and Administration Commission is still the actual controller of the Company. The final controller of the Company is Changzhou Government State-owned Assets Supervision and Administration Commission. 2. Subsidiaries of the Company Refer to Note IX for details. 3、Situation of joint ventures and associated enterprises of the company None 4. Information on Other Related Parties Name Relationship with the Company Changzhou Synergetic Innovation Private Equity Participated in establishing the industrial investment Fund (Limited Partnership) fund Jiangsu Horizon New Energy Technology Co., Ltd. Shareholding enterprise of the Company Donghai Securities Co., Ltd. Controlled by the same Company as the parent 5.Related Party Transactions (1)Compensation for key management personnel Unit: RMB 197 Changchai Company, Limited Annual Report 2022 Amount incurred in the previous Item Current amount incurred period Compensation for key 7,110,100.00 7,667,300.00 management personnel (2) Other Related-party Transaction 1) On 25 August 2022, the Company held the Fourth Interim Meeting of the Board of Directors and the Fourth Interim Meeting of the Supervisory Committee in 2022 and deliberated and approved the Proposal on Planning to Participate in Capital Increase and Share Expansion and Related Transactions of Jiangsu Horizon New Energy Technology Co., Ltd., agreeing to increase RMB75 million capital to Horizon New Energy for the subscription of its newly registered capital of RMB18,844,200 and authorizing Shi Xinkun, the Company’s Chairman, to sign capital increase agreements with related parties. In August 2022, Horizon New Energy and its shareholders signed the Capital Increase Agreement of Jiangsu Horizon New Energy Technology Co., Ltd., agreeing that the registered capital of Horizon New Energy was increased from RMB1,405,622,491 to RMB1.75 billion. In October 2022, Horizon New Energy completed the industrial and commercial change registration procedures according to the aforesaid capital increase agreement and obtained the new business license. 2) The Proposal on Using Idle Funds to Purchase Wealth Management Products was deliberated and approved at the Fourth Interim Meeting of the Board of Directors in 2021 and the Second Interim Meeting of the Board of Supervisors in 2021 held by the Company on 13 July 2021, allowing the Company and its wholly-owned subsidiaries to use no more than RMB350 million of idle raised funds to purchase wealth management products for cash management on the premise that the investment projects with raised funds are carried out normally and the use of raised funds is not affected. On 27 July 2021, the Company entered into a subscription agreement with Donghai Securities Co., Ltd. for the product "Donghai Securities Long Gain Return Certificate June Type Customized Issue No. 13". The subscription amount is RMB50 million, and the source of funds is idle raised funds. The return certificate matured on 25 January 2022, with a total of RMB50,949,315.07 in principal and return actually received, which is recognized as gains on changes of fair value of RMB817,465.75 in 2021 and as investment income of RMB131,849.32 in 2022. XIII. Commitments and Contingency 1. Significant Commitments Significant commitments on balance sheet date As of 31 December 2022, there was no significant commitment for the Company to disclose. 2. Contingency (1) Significant Contingency on Balance Sheet Date None (2) In Despite of no Significant Contingency to Disclose, the Company Shall Also Make Relevant Statements There was no significant contingency in the Company. 198 Changchai Company, Limited Annual Report 2022 XIV. Events after Balance Sheet Date 1. Profit Distribution Unit: RMB Profits or dividends to be distributed 7,056,925.07 2. Sales Return None 3. Notes to Other Events after Balance Sheet Date There was no other event after balance sheet date. XV. Other Significant Events 1. The Accounting Errors Correction in Previous Period (1) Retrospective Restatement None (2) Prospective Application None 2. Debt Restructuring Not applicable 3. Assets Replacement Not applicable 4. Pension Plans Not applicable 5. Discontinued Operations Not applicable 6. Segment Information (1) Determination Basis and Accounting Policies of Reportable Segment Due to the operation scope of the Company and subsidiaries were similar, the Company conducts common 199 Changchai Company, Limited Annual Report 2022 management, and did not divide business unit, so the Company only made single branch report. 7. Other Significant Transactions and Events with Influence on Investors’ Decision-making None XVI. Notes of Main Items in the Financial Statements of the Company as the Parent 1. Accounts Receivable (1) Accounts Receivable Classified by Category Unit: RMB Ending balance Beginning balance Carrying Bad debt Carrying Bad debt amount provision amount provision Carryi Category Withd Withd Carryin ng Amou Propo Amou rawal Amou Propor Amou rawal g value value nt rtion nt propo nt tion nt propor rtion tion Accounts receivable for 27,36 21,60 5,756, 27,50 21,126 which bad debt 78.96 76.80 6,383,0 4,067. 6.22% 7,429. 637.8 9,745. 6.00% ,658.8 provision % % 86.48 34 50 4 33 5 separately accrued Of which: Accounts receivable for 412,7 89,46 323,3 430,7 88,019 which bad debt 93.78 21.67 94.00 20.43 342,752 69,15 4,855. 04,30 71,91 ,743.0 provision % % % % ,168.94 8.39 73 2.66 2.03 9 accrued by group Of which: Accounts receivable for which bad debt 412,7 89,46 323,3 430,7 88,019 93.78 21.67 94.00 20.43 342,752 provision 69,15 4,855. 04,30 71,91 ,743.0 % % % % ,168.94 accrued by 8.39 73 2.66 2.03 9 credit risk features group 440,1 111,0 329,0 458,2 109,14 100.0 25.24 100.00 23.82 349,135 Total 33,22 72,28 60,94 81,65 6,401. 0% % % % ,255.42 5.73 5.23 0.50 7.36 94 200 Changchai Company, Limited Annual Report 2022 Accounts receivable with significant single amount for which bad debt provision separately accrued at the end of the period: Unit: RMB Ending balance Name Carrying Bad debt Withdrawal Withdrawal reason amount provision proportion Customer 1 1,470,110.64 1,470,110.64 100.00% Difficult to recover Customer 2 1,902,326.58 1,902,326.58 100.00% Difficult to recover Customer 3 6,215,662.64 6,215,662.64 100.00% Difficult to recover Customer 4 2,797,123.26 2,194,980.28 78.47% Expected to difficultly recover Customer 5 3,633,081.23 2,122,165.73 58.41% Expected to difficultly recover Customer 6 2,584,805.83 2,584,805.83 100.00% Difficult to recover Customer 7 1,731,493.71 1,731,493.71 100.00% Difficult to recover Customer 8 1,511,937.64 604,775.06 40.00% Expected to difficultly recover Customer 9 3,329,074.84 720,031.71 21.63% Expected to difficultly recover Total 25,175,616.37 19,546,352.18 -- -- Accounts receivable for which bad debt provision accrued by credit risk features group Unit: RMB Ending balance Carrying amount Bad debt provision Withdrawal proportion Within 1 year 300,792,980.52 6,015,859.61 2.00 % 1 to 2 years 25,189,130.52 1,259,456.53 5.00 % 2 to 3 years 4,391,594.73 658,739.21 15.00% 3 to 4 years 829,958.37 248,987.51 30.00% 4 to 5 years 709,203.46 425,522.08 60.00% Over 5 years 80,856,290.79 80,856,290.79 100.00% Total 412,769,158.39 89,464,855.73 Notes to the basis for the determination of the groups: The accounts receivable was adopted the aging analysis based on the months when the accounts occurred actually, among which the accounts occurred earlier will be priority to be settled in terms of the capital turnover. Explanation of the input value and assumption adopted to determine the withdrawal amount of bad debt provision on the Current Period: With reference to the experience of the historical credit loss, combining with the prediction of the present status and future financial situation, the comparison table was prepared between the aging of the accounts receivable and estimated credit loss rate in the duration and to calculate the estimated credit loss. Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if adopting the general mode of expected credit loss to withdraw bad debt provision of accounts receivable. □ Applicable √ Not applicable Disclosure by aging Unit: RMB Aging Carrying amount Within 1 year (including 1 year) 304,249,429.01 1 to 2 years 25,731,843.18 2 to 3 years 4,391,594.73 201 Changchai Company, Limited Annual Report 2022 Over 3 years 105,760,358.81 3 to 4 years 2,917,847.46 4 to 5 years 2,658,953.02 Over 5 years 100,183,558.33 Total 440,133,225.73 (2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Unit: RMB Changes in the Reporting Period Beginning Category Reversal or Ending balance balance Withdrawal Write-off Other recovery Bad debt provision 21,126,658.85 480,770.65 21,607,429.50 withdrawn separately Bad debt provision 88,019,743.09 2,150,511.77 705,399.13 89,464,855.73 withdrawn by group Total 109,146,401.94 2,631,282.42 705,399.13 111,072,285.23 Of which bad debt provision reversed or recovered with significant amount in the Reporting Period: No. (3) Accounts Receivable with Actual Verification during the Reporting Period Unit: RMB Item Amount verified Accounts receivable with actual verification 705,399.13 Of which the verification of significant accounts receivable: Unit: RMB Whether generated from Name of the Amount Performance of verification Nature Reason related-pa entity verified procedures rty transactio n Customer 1 256,244.04 With accounts Customer 2 69,529.81 receivable aging over The Party Committee and the Customer 3 72,967.54 5 years, the office meeting reviewed and Account Customer 4 59,625.69 counterpart company approved the Proposal on the s Customer 5 44,647.49 being revoked or Verification of Accounts receivab Not Customer 6 71,769.00 cancelled, or debt Receivable of the Overseas le of reorganisation, Business Department Due to goods bankruptcy clearing or Pending Prototypes and Customer 7 40,120.00 the debtors have no Pending Quality Issues assets for debt 202 Changchai Company, Limited Annual Report 2022 extinguishment Total 614,903.57 -- -- -- (4) Top 5 of the Ending Balance of Accounts Receivable Collected according to the Arrears Party Unit: RMB Ending balance Ending balance of Proportion to total ending Name of the entity of bad debt accounts receivable balance of accounts receivable provision Customer 1 182,469,247.05 41.46% 3,649,384.94 Customer 2 40,330,698.62 9.16% 806,613.97 Customer 3 20,619,430.63 4.68% 412,388.61 Customer 4 18,538,588.59 4.21% 913,245.46 Customer 5 15,564,496.00 3.54% 311,289.92 Total 277,522,460.89 63.05% 2. Other Receivables Unit: RMB Item Ending balance Beginning balance Other receivables 179,596,495.57 26,497,081.34 Total 179,596,495.57 26,497,081.34 (1) Other Receivable 1) Other Receivables Classified by Account Nature Unit: RMB Beginning carrying Nature Ending carrying amount amount Cash deposit and Margin 1,300.00 4,200.00 Intercourse funds among units 214,624,107.53 55,450,919.93 Petty cash and borrowings by employees 671,817.84 613,410.65 Other 13,635,256.64 13,629,784.64 Total 228,932,482.01 69,698,315.22 2) Withdrawal of Bad Debt Provision Unit: RMB First stage Second stage Third stage Expected loss in the Expected credit Expected loss in the Bad debt provision duration (credit Total loss of the next duration (credit impairment not 12 months impairment occurred) occurred) Balance of 1 209,613.53 23,809,010.58 19,182,609.77 43,201,233.88 January 2022 Balance of 1 January 2022 in the —— —— —— —— Current Period 203 Changchai Company, Limited Annual Report 2022 --Transfer to Second stage -- Transfer to Third -23,342,513.38 23,342,513.38 stage -- Reverse to Second stage -- Reverse to First stage Withdrawal of the 6,574,799.60 6,574,799.60 Current Period Reversal of the 183,426.54 168,517.57 351,944.11 Current Period Write-offs of the Current Period Verification of the 88,102.93 88,102.93 Current Period Other changes Balance of 31 26,186.99 209,876.70 49,099,922.75 49,335,986.44 December 2022 Changes of carrying amount with significant amount changed of loss provision in the Current Period □ Applicable √ Not applicable Disclosure by aging Unit: RMB Aging Carrying amount Within 1 year (including 1 year) 182,815,353.08 1 to 2 years 16,778,473.11 2 to 3 years 99,076.00 Over 3 years 29,239,579.82 3 to 4 years 420,716.17 4 to 5 years 333,939.40 Over 5 years 28,484,924.25 Total 228,932,482.01 3) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Information of bad debt provision withdrawn: Unit: RMB Changes in the Reporting Period Beginning Category Reversal or Write-of Ending balance balance Withdrawal Other recovery f 204 Changchai Company, Limited Annual Report 2022 Bad debt provision 19,182,609.77 6,574,799.60 25,757,409.37 withdrawn separately Bad debt provision 88,102.9 24,018,624.11 351,944.11 23,578,577.07 withdrawn by 3 group 88,102.9 Total 43,201,233.88 6,574,799.60 351,944.11 49,335,986.44 3 4) Particulars of the Actual Verification of Other Receivables during the Reporting Period Unit: RMB Item Written-off amount Other receivables with actual verification 88,102.93 Of which the verification of significant other receivables: Unit: RMB Whether occurred Verification Name of the Natur Written-of because of Reason for verification procedures entity e f amount related-part performed y transactions Customer 1 9,020.00 With accounts receivable aging The Proposal on the Customer 2 8,357.60 over 5 years, the counterpart Other Write-off of Certain Customer 3 7,933.63 company being revoked or interc Other Receivables Customer 4 7,800.00 cancelled, or debt reorganisation, Not ourse was approved at the Customer 5 6,700.00 bankruptcy clearing or the funds Party Committee and debtors have no assets for debt Customer 6 6,000.00 Office Meeting. extinguishment Customer 7 6,000.00 Total 51,811.23 -- -- -- 5) Top 5 of the Ending Balance of Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to total ending Ending balance Name of the entity Nature Ending balance Aging balance of of bad debt other provision receivables 205 Changchai Company, Limited Annual Report 2022 Jiangsu Changchai Interco Machinery urse 135,735,255.26 Within 1 year 59.29% Manufacturing Co., Ltd. funds Within 1 year with Changzhou Changchai Interco RMB18,996,476. Horizon Agricultural urse 20,221,123.93 8.83% 20,221,123.93 74, 1-2 years with Equipment Co., Ltd. funds RMB1,224,647.1 9 Interco Changzhou Changniu urse 9,000,000.00 1-2 years 3.93% Machinery Co., Ltd. funds Interco Changzhou Compressors urse 2,940,000.00 Over 5 years 1.28% 2,940,000.00 Factory funds Interco Changchai Group Imp. urse 2,853,188.02 Over 5 years 1.25% 2,853,188.02 & Exp. Co., Ltd. funds Total -- 170,749,567.21 74.58% 26,014,311.95 6) Derecognition of Other Receivables due to the Transfer of Financial Assets: none 7) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Other Receivables: none 3. Long-term Equity Investment Unit: RMB Ending balance Beginning balance Item Carrying Depreciation Carrying Carrying Depreciation Carrying amount reserves value amount reserves value Investment to 576,273,530. 569,273,530. 542,752,730. 535,752,730. 7,000,000.00 7,000,000.00 subsidiaries 03 03 03 03 Investment to joint ventures and 44,182.50 44,182.50 44,182.50 44,182.50 associated enterprises 576,317,712. 569,273,530. 542,796,912. 535,752,730. Total 7,044,182.50 7,044,182.50 53 03 53 03 (1) Investment to Subsidiaries Unit: RMB Beginning Increase/decrease Ending Ending Investee balance balance balance of Additional Reduced Withdrawa Other (carrying (carrying depreciatio 206 Changchai Company, Limited Annual Report 2022 value) investment investment l of value) n reserve depreciatio n reserve Changchai Wanzhou 51,000,000 51,000,000 Diesel .00 .00 Engine Co., Ltd. Changzhou Changchai Benniu 96,466,500 96,466,500 Diesel .00 .00 Engine Fittings Co., Ltd. Changzhou Horizon 40,000,000 40,000,000 Investment .00 .00 Co., Ltd. Changzhou Changchai Horizon 7,000,000. 0.00 0.00 Agricultural 00 Equipment Co., Ltd. Changzhou Fuji Changchai 47,286,230 47,286,230 Robin .03 .03 Gasoline Engine Co., Ltd. Jiangsu Changchai 300,000,00 300,000,00 Machinery 0.00 0.00 Co., Ltd. Changzhou Xingsheng 1,000,000. 1,000,000. Property 00 00 Managemen t Co., Ltd. Zhenjiang 33,520,800 33,520,800 Siyang .00 .00 Diesel 207 Changchai Company, Limited Annual Report 2022 Engine Manufacturi ng Co., Ltd. 535,752,73 33,520,800 569,273,53 7,000,000. Total 0.03 .00 0.03 00 (2) Investment to Joint Ventures and Associated Enterprises Unit: RMB Increase/decrease Gains Adjust Endin Begin and Cash Endin ment Withd g ning losses bonus g of rawal balanc balanc Additi Reduc recogn Chang or balanc Invest other of e of e onal ed ized es of profits e ee compr impair Other deprec (carryi invest invest under other annou (carryi ehensi ment iation ng ment ment the equity nced ng ve provis reserv value) equity to value) incom ion e metho issue e d II. Associated enterprises Beijin g Tsingh ua Xingy e Indust 44,182 0.00 0.00 rial .50 Invest ment Mana gemen t Co., Ltd. Subtot 44,182 0.00 0.00 al .50 44,182 Total 0.00 0.00 .50 4. Operating Revenue and Cost of Sales Unit: RMB Reporting Period Same period of last year Item Operating revenue Cost of sales Operating revenue Cost of sales 208 Changchai Company, Limited Annual Report 2022 Main operations 1,937,402,949.98 1,743,767,173.55 2,221,914,222.25 1,913,817,106.36 Other operations 51,070,094.57 40,578,530.55 45,317,897.53 31,003,356.23 Total 1,988,473,044.55 1,784,345,704.10 2,267,232,119.78 1,944,820,462.59 Information on revenue: Unit: RMB Category of contracts Total Product Types Of which: Single-cylinder diesel engines 810,033,457.43 Multi-cylinder diesel engines 1,068,550,094.42 Other products 31,841,402.73 Fittings 26,977,995.40 Classified by business area Of which: Sales in domestic market 1,717,395,940.92 Export sales 220,007,009.06 Total 1,937,402,949.98 Information related to performance obligations: none 5. Investment Income Unit: RMB Item Reporting Period Same period of last year Dividend income from holding of other equity 9,360,000.00 7,394,400.00 instrument investment Income from refinancing operations 136,003.96 1,028,964.68 Dividends under cost accounting 28,800,000.00 Interest income from holding of debt obligation 1,411,361.54 investments Investment income from disposal of 5,408,606.17 1,798,672.49 held-for-trading financial assets Accounts receivable financing-discount interest of -8,511,313.05 -1,869,322.91 bank acceptance bills Total 36,604,658.62 8,352,714.26 XVII. Supplementary Materials 1. Items and Amounts of Non-recurring Profit or Loss √ Applicable □ Not applicable Unit: RMB 209 Changchai Company, Limited Annual Report 2022 Item Amount Note Gain or loss on disposal of non-current assets 393,161.73 Government subsidies charged to current profit or loss (exclusive of government subsidies given in the Company’s ordinary course of business at fixed quotas 3,774,298.59 or amounts as per the government’s uniform standards) Increase in the fair value of the equity of Jiangsu Horizon New Energy Technology Co., Gain/loss from change of fair value of trading Ltd. held by the Company and financial assets and liabilities, and investment gains price falling of stocks of from disposal of trading financial assets and liabilities, Jiangsu Liance 162,319,373.53 and derivative financial assets and liabilities, and Electromechanical Technology available-for-sale financial assets, other than valid Co., Ltd. and Kailong High hedging related to the Company’s common businesses Technology Co., Ltd. held by the wholly-owned subsidiary Horizon Investment during the Reporting Period. Reverse of provision for impairment of accounts 30,000.00 receivable individually conducting impairment test Other non-operating income and expenses other than 1,735,346.51 the above Negative goodwill due to business combination not 1,904,132.58 under common control Less: Income tax effects 19,859,063.58 Non-controlling interests effects (after tax) -24,058.57 Total 150,321,307.93 -- Explain the reasons if the Company classifies an item as an non-recurring gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item. □ Applicable √ Not applicable 2. Return on Equity and Earnings Per Share Weighted average ROE EPS (Yuan/share) Profit as of Reporting Period (%) EPS-basic EPS-diluted Net profit attributable to ordinary 2.51% 0.1087 0.1087 shareholders of the Company 210 Changchai Company, Limited Annual Report 2022 Net profit attributable to ordinary shareholders of the Company after -2.41 % -0.1043 -0.1043 deduction of non-recurring profit or loss The Board of Directors Changchai Company, Limited 10 April 2023 211