Changchai Company, Limited Third Quarter Report 2018 (Summary) Stock Code: 000570, 200570 Stock Name: Changchai, Changchai-B Announcement No. 2018-027 CHANGCHAI COMPANY, LIMITED THIRD QUARTER REPORT 2018 (SUMMARY) Part I Important Notes The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of Changchai Company, Limited (together with its consolidated subsidiaries, the “Company”, except where the context otherwise requires) hereby guarantee the factuality, accuracy and completeness of the contents of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements or material omissions therein. All the Company’s directors have attended the Board meeting for the review of this Report and its summary. Shi Xinkun, the Company’s legal representative, Zhang Xin, the Company’s General Manager, and Jiang He, head of the Company’s financial department (equivalent to financial manager) hereby guarantee that the financial statements carried in this Report are factual, accurate and complete. This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. 1 Changchai Company, Limited Third Quarter Report 2018 (Summary) Part II Key Corporate Information I Key Consolidated Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No September 30, 2018 December 31, 2017 Change Total assets (RMB) 3,756,252,247.55 3,722,905,285.05 0.90% Equity attributable to owners of the parent 2,109,129,803.12 2,246,896,857.86 -6.13% (RMB) July-September January-Septemb YoY YoY change 2018 er 2018 change Net sales (RMB) 432,605,495.58 -21.55% 1,619,366,387.84 -12.91% Net margin attributable to owners of the parent 4,670,842.38 52.03% 23,309,400.04 -45.48% (RMB) Net margin attributable to owners of the parent -5,982,192.17 — 11,280,631.08 -47.29% before exceptional gains and losses (RMB) Net cash from operating activities (RMB) — — -54,251,797.59 — Basic earnings per share (RMB/share) 0.01 0.00% 0.04 -50.00% Diluted earnings per share (RMB/share) 0.01 0.00% 0.04 -50.00% Weighted average return on equity (%) 0.22% 0.09% 1.05% -0.80% Exceptional gains and losses: √ Applicable □ Not applicable Unit: RMB Item Q1-Q3 2018 Note In July 2018, the company recovered the entrusted loan of 1,000.00 million yuan which had fully accrued the asset impairment Gain or loss on disposal of non-current assets 12,044,376.37 provision. For details, please refer (inclusive of impairment allowance write-offs) to the company's announcement on recovering part of the entrusted loan disclosed on July 13, 2018 (announcement number: 2018-018). Government subsidies charged to current profit or loss (exclusive of government subsidies given in the 475,400.00 Company’s ordinary course of business at fixed 2 Changchai Company, Limited Third Quarter Report 2018 (Summary) quotas or amounts as per government’s uniform standards) Capital occupation charges on non-financial 573,182.00 enterprises that are charged to current profit or loss Gain or loss on fair-value changes in trading financial assets and liabilities & investment income from disposal of trading financial assets and liabilities and 455,319.86 available-for-sale financial assets (exclusive of effective portion of hedges that arise in the Company’s ordinary course of business) Other gains and losses that meet definition of 656,800.26 exceptional gain/loss Less: Income tax effects 2,176,309.53 Total 12,028,768.96 -- Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss Items: □ Applicable √ Not applicable No such cases for the Reporting Period. II Total Number of Shareholders and Holdings of Top 10 Shareholders at 30 September 2018 1. Numbers of Ordinary Shareholders and Preferred Shareholders with Resumed Voting Rights as well as Holdings of Top 10 Shareholders Unit: share Number of preferred shareholders with Number of ordinary shareholders 49,459 0 resumed voting rights (if any) Top 10 shareholders Shares in Sharehol Restri pledge or ding Number of cted Name of shareholder Nature of shareholder frozen percenta shares share Stat Shar ge s us es State-owned Assets Supervision and Administration Commission of State-owned legal person 30.43% 170,845,236 Changzhou Municipal People’s Government KGI Asia Limited Foreign legal person 0.57% 3,189,845 Wang Jianwei Domestic natural person 0.34% 1,934,500 3 Changchai Company, Limited Third Quarter Report 2018 (Summary) Zhang Ruirong Domestic natural person 0.32% 1,789,800 Wan Peizhong Domestic natural person 0.29% 1,645,800 Huang Guoliang Domestic natural person 0.27% 1,528,891 Hu Wenyong Domestic natural person 0.27% 1,500,066 Li Suinan Domestic natural person 0.24% 1,356,000 Vanguard Total International Foreign legal person 0.23% 1,292,594 Stock Index Fund Xiong Shunbao Domestic natural person 0.23% 1,282,251 Top 10 unrestricted shareholders Unrestricted Shares by type Name of shareholder shares Type Shares State-owned Assets Supervision and Administration Commission of Changzhou 170,845,236 RMB-denominated ordinary stock 170,845,236 Municipal People’s Government KGI Asia Limited 3,189,845 Domestically listed foreign stock 3,189,845 Wang Jianwei 1,934,500 RMB-denominated ordinary stock 1,934,500 Zhang Ruirong 1,789,800 RMB-denominated ordinary stock 1,789,800 Wan Peizhong 1,645,800 RMB-denominated ordinary stock 1,645,800 Huang Guoliang 1,528,891 Domestically listed foreign stock 1,528,891 Hu Wenyong 1,500,066 Domestically listed foreign stock 1,500,066 Li Suinan 1,356,000 Domestically listed foreign stock 1,356,000 Vanguard Total International Stock Index 1,292,594 Domestically listed foreign stock 1,292,594 Fund Xiong Shunbao 1,282,251 RMB-denominated ordinary stock 1,282,251 It is unknown whether there is any connected party or acting-in-concert party as defined in the Measures for the Related or acting-in-concert parties among Administration of Disclosure of Shareholder Equity Changes of shareholders above Listed Companies among the top 10 tradable share holders or the top 10 unrestricted tradable share holders. Top 10 ordinary shareholders involved in N/A securities margin trading (if any) Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yea √ No No such cases in the Reporting Period. 2. Number of Preferred Shareholders and Shareholdings of Top 10 of Them 4 Changchai Company, Limited Third Quarter Report 2018 (Summary) □ Applicable √ Not applicable 5 Changchai Company, Limited Third Quarter Report 2018 (Summary) Part III Significant Events I Changes in Key Consolidated Financial Statement Line Items and Explanation of why √ Applicable □ Not applicable 1. Consolidated Balance Sheet Items as at 30 September 2018 Item 30 September 2018 31 December 2017 Change (%) Explanation of why (RMB) (RMB) Notes and accounts 1,485,050,866.65 1,108,415,299.12 33.98% During Q1~Q3 2018, credit sale was receivable properly carried out to extend market space, and most multi-cylinder engine customers were supporting manufacturers for bigger enterprises, which means relatively long account ages for the Company,resulting in an increase of 117.69% in receivables compared to the beginning. Other receivables 21,267,589.07 5,794,971.22 267.00% Temporary loans granted by subsidiary Changzhou Housheng Investment Co., Ltd. to Xuzhou Huadong Foundry Factory, etc. Other current assets 23,104,987.78 42,540,184.05 -45.69% Decrease in overpaid VAT Payroll payable 24,782,530.80 51,247,112.66 -51.64% Salaries and bonuses accrued in the nine months ended 30 September 2017 were mostly paid in the corresponding period of the current year 2. Consolidated Income Statement Items for Q1~Q3 2018 Q1~Q3 2018 Q1~Q3 2017 Change Item Explanation of why (RMB) (RMB) (%) Finance costs -4,311,945.83 -1,287,876.55 —— Increase in foreign exchange income resulted from exchange rate fluctuations Asset impairment -2,531,847.48 9,150,039.27 —— Allowances for doubtful accounts receivable loss recorded based on aging led to an increase in asset impairment loss, while the collection of entrusted loans with full-amount impairment allowances resulted in writedowns in this item Investment income 8,053,269.86 13,407,484.45 -39.93% Decline in dividends from Foton Motor 6 Changchai Company, Limited Third Quarter Report 2018 (Summary) Non-operating 2,830,716.11 25,903,268.01 -89.07% Last year saw the non-operating income income arising from including Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd., whose equity interests had been acquired by the Company at a discount, into the consolidated financial statements Non-operating 1,698,515.85 7,979,840.88 -78.71% Greater loss on the disposal of inactive expense materials during the same period of last year Net profit 23,643,295.60 43,305,505.88 -45.40% Last year saw the non-operating income arising from including Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd., whose equity interests had been acquired by the Company at a discount, into the consolidated financial statements Other -144,235,225.00 -41,677,200.00 —— Significant decline in gains on fair value comprehensive changes of available-for-sale financial assets income, net of tax 3. Consolidated Cash Flow Statement Items for Q1~Q3 2018 Q1~Q3 2018 Q1~Q3 2017 Change Item Explanation of why (RMB) (RMB) (%) Tax rebates 39,981,450.76 24,619,585.42 62.40% Mainly for the report period received more export tax rebates. Taxes paid 21,038,574.94 30,890,368.40 -31.89% Changes in sales and profit, as well as the effect of the government’s tax cuts Net cash generated -23,421,616.03 -63,559,009.38 —— Significant decline in payments for from/used in acquisition of fixed assets, intangible assets investing activities and other long-lived assets Net cash generated Mainly for the last reporting period from/used in -16,892,465.30 21,794,509.81 —— borrowings increased more financing activities II Progress, Influence and Solutions Associated with Significant Events √ Applicable □ Not applicable The controlling shareholder of the Company—State-owned Assets Supervision and Administration Commission of Changzhou Municipal Government (hereinafter referred to as “Changzhou SASAC”) and Changzhou Investment Group Co., Ltd. signed the Agreement on Gratuitous Transfer of State-owned Shares Held by Changchai Company Limited on 16 August 2018, in which the Changzhou SASAC intended to gratuitously transfer all 170,845,236 shares in Changchai Company Limited held by it to Changzhou Investment Group Co., 7 Changchai Company, Limited Third Quarter Report 2018 (Summary) Ltd. The issue has been approved by Changzhou People’s Government and the State-owned Assets Supervision and Administration Commission of Jiangsu Provincial Government. In addition, China securities regulatory commission (CSRC) has agreed to exempt Changzhou Investment Group Co., Ltd. from the tender offer obligation for holding the Company’s shares due to gratuitous transfer. The issue is currently going through the relevant equity transfer procedures. For more details, please refer to the Indicative Announcement on Gratuitous Transfer of State-owned Shares Held by the Controlling Shareholder (Announcement No.: 2018-015), Announcement on the Progress of Gratuitous Transfer of State-owned Shares Held by the Controlling Shareholder (Announcement No.: 2018-020) and Announcement on the Progress of Gratuitous Transfer of State-owned Shares Held by the Controlling Shareholder (Announcement No.: 2018-025) disclosed by the Company respectively on 1 June 2018, 17 August 2018 and 5 September 2018. After the completion of the transfer, Changzhou Investment Group Co., Ltd. will be the controlling shareholder of the Company and the actual controller of the Company will not change. Overview of significant event Disclosure date Related announcement 1 June 2018 2018-015 Gratuitous transfer of state-owned 16 August 2018 2018-020 shares 5 September 2018 2018-025 20 October 2018 2018-026 III Commitments that the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and Other Parties, Failed to Fulfill on Time during Reporting Period √ Applicable □ Not applicable Date of Period Type of Commitme commit of Fulfil Commitment commit Contents nt maker ment commit lment ment making ment Rewards Plan for Shareholders in Next Three Years(2017-2019) Under the premise of positive distributive profit (remaining after-tax profits after making up for Imple Other the loss and extracting for the ment commitments Changchai Year common reserves) in this year or 11 May in a made to Company, bonus 2017-2 half year and abundant money flow 2017 norm minority Limited 019 and no influence on the following-up al shareholders going concern after cash bonus, the way profits allocated by cash every year shouldn’t be lower than 10% of the allocable profits from parent company. Meanwhile, the 8 Changchai Company, Limited Third Quarter Report 2018 (Summary) 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 Yes When the commitment was not completely fulfilled at maturity, the specific N/A reasons and following work plan shall be given IV 2018 Annual Operating Performance Forecast Warning of a forecast loss on or a forecast significant year-on-year change in net profit for year 2018, as well as explanation of why: □ Applicable √ Not applicable V Securities Investments □ Applicable √ Not applicable No such cases in the Reporting Period. VI Wealth Management Entrustment √ Applicable □ Not applicable Unit: RMB’0,000 (in RMB ten thousand yuan) Outstanding amount Overdue Type of wealth management Funding source Principal before maturity amount Wealth management product purchased Self-funded 1,600 1,600 0 from securities company Total 1,600 1,600 0 High-risk wealth management entrustments with amounts that are individually significant, or with low security, low liquidity, or no protection of the principal: □ Applicable √ Not applicable Wealth management entrustments with possible impairments including an expectedly unrecoverable principal: □ Applicable √ Not applicable VII Investments in Derivative Financial Instruments □ Applicable √ Not applicable No such cases in the Reporting Period. 9 Changchai Company, Limited Third Quarter Report 2018 (Summary) VIII Visits Paid to the Company for Purposes of Research, Communication, Interview, etc. during Reporting Period √ Applicable □ Not applicable Date of visit Way of visit Type of visitor About Progress of lithium battery diaphragm project invested 13 August 2018 Other Individual with industry funds set up by the Company 18 July 2018 Other Individual Repurchase of B-share IX Irregularities in Provision of Guarantees for External Parties □ Applicable √ Not applicable No such cases in the Reporting Period. X Occupation of the Company’s Capital by Controlling Shareholder or Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. 10