Changchai Company, Limited Annual Report 2020 CHANGCHAI COMPANY, LIMITED ANNUAL REPORT 2020 April 2021 1 Changchai Company, Limited Annual Report 2020 Table of Contents Part I Important Notes, Table of Contents and Definitions........................................................... 3 Part II Corporate Information and Key Financial Information................................................... 5 Part III Business Summary............................................................................................................... 9 Part IV Operating Performance Discussion and Analysis............................................................11 Part V Significant Events.................................................................................................................30 Part VI Share Changes and Shareholder Information................................................................. 42 Part VII Preferred Shares................................................................................................................49 Part VIII Convertible Corporate Bonds........................................................................................ 50 Part IX Directors, Supervisors, Senior Management and Staff...................................................51 Part X Corporate Governance........................................................................................................ 60 Part XI Corporate Bonds.................................................................................................................67 Part XII Financial Statements.........................................................................................................68 Part XIII Documents Available for Reference............................................................................. 202 2 Changchai Company, Limited Annual Report 2020 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 directors of the Company attended in person the board meeting for the approval of this Report except for the following: Proxy Reason for not entrusted to Name Office title attending the meeting attend the in person meeting Xing Min Independent Director For reason of work Zhang Yan 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 “Part IV Operating Performance Discussion and Analysis”, IX, “4. Possible Risks in Future” herein. The Board has approved a final dividend plan as follows: the Company has no final dividend plan, either in the form of cash or stock. 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. 3 Changchai Company, Limited Annual Report 2020 Definitions Term Definition The “Company”, “Changchai” 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. Housheng Investment Changzhou Housheng Investment Co., Ltd. Changzhou Changchai Housheng Agricultural Equipment Housheng 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. 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 2020 to 31 December 2020 Period” 4 Changchai Company, Limited Annual Report 2020 Part II Corporate Information and Key Financial Information I Corporate Information Changchai, Stock name Stock code 000570, 200570 Changchai-B 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 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 Board Secretariat of the Company and the Shenzhen Place where this Report is lodged Stock Exchange IV Change to Company Registered Information Unified social credit code 91320400134792410W 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. These shares are non-restricted public shares. 5 Changchai Company, Limited Annual Report 2020 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 Dai Weizhong, Xu Wenxiang The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period: □ Applicable √ Not applicable 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 Reason for retrospective restatement: Correction of accounting error. 2020-over- 2019 2019 2018 2020 change (%) Before Restated Restated Before Restated Operating revenue 2,296,464, 2,040,133, 2,045,820, 2,132,902, 2,139,272, 12.25% (RMB) 711.24 717.30 801.10 718.60 523.92 Net profit attributable to 52,432,443 24,934,586 24,966,526 62,021,374 62,409,528 the listed company’s 110.01% .05 .11 .85 .04 .46 shareholders (RMB) Net profit attributable to the listed company’s 25,483,147 14,376,783 14,405,485 -43,333,19 -42,961,54 shareholders before 76.90% .57 .21 .64 6.13 9.69 exceptional gains and losses (RMB) Net cash generated 251,796,65 -20,542,85 -20,325,18 273,819,52 274,514,94 from/used in operating —— 4.53 7.52 9.56 6.89 5.73 activities (RMB) Basic earnings per share 0.0934 0.0444 0.0445 109.89% 0.1112 0.1112 (RMB/share) Diluted earnings per 0.0934 0.0444 0.0445 109.89% 0.1112 0.1112 share (RMB/share) Weighted average return 2.40% 1.20% 1.21% 1.19% 2.84% 2.86% on equity (%) Change of 31 31 December 31 December 2019 31 December 2018 December 2020 2020 over 6 Changchai Company, Limited Annual Report 2020 31 December 2019 (%) Before Restated Restated Before Restated 3,952,954, 3,484,975, 3,488,820, 3,542,019, 3,546,079, Total assets (RMB) 13.30% 464.45 990.48 324.60 195.75 628.86 Equity attributable to the 2,273,349, 2,109,239, 2,110,892, 2,043,308, 2,044,929, listed company’s 7.70% 347.02 597.94 767.58 026.74 255.64 shareholders (RMB) Reason for change in accounting policies and correction of accounting error: For details, see “Part XII Financial Statements/XV Other Significant Events/1. Correction of Previous Accounting Error”. 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 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 2. Net Profit and Equity under CAS and Foreign Accounting Standards □ Applicable √ Not applicable 3. Reasons for Accounting Data Differences Above □ Applicable √ Not applicable VIII Key Financial Information by Quarter Unit: RMB Q1 Q2 Q3 Q4 Operating revenue 537,033,349.19 630,422,433.11 584,404,482.93 544,604,446.01 Net profit attributable to the 1,510,305.60 26,180,005.46 11,263,467.62 13,478,664.37 listed company’s shareholders Net profit attributable to the listed company’s shareholders 1,271,708.92 19,400,431.04 8,151,814.68 -3,340,807.07 before exceptional gains and losses Net cash generated from/used in 19,241,295.96 -39,596,025.21 38,040,529.46 234,110,854.32 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 7 Changchai Company, Limited Annual Report 2020 IX Exceptional Gains and Losses √ Applicable □ Not applicable Unit: RMB Item 2020 2019 2018 Note Gain or loss on disposal of non-current assets (inclusive of 263,408.53 1,914,137.47 662,151.89 impairment allowance write-offs) Government grants through profit or loss (exclusive of government grants given in the Company’s 7,763,215.65 5,312,295.51 6,291,685.65 ordinary course of business at fixed quotas or amounts as per the government’s uniform standards) Capital occupation charges on non-financial enterprises that are 344,842.86 536,504.84 938,737.87 recognized in profit or loss Gain or loss on fair-value changes on held-for-trading and derivative financial assets and liabilities & income from disposal of held-for-trading and derivative 27,526,935.85 -49,255.00 105,672,874.83 financial assets and liabilities and other debt investments (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) Non-operating income and expense -1,571,453.49 375,943.68 483,119.47 other than the above Reversed portions of impairment allowances for entrustment loans 4,000,000.00 10,000,000.00 which are tested individually for impairment Less: Income tax effects 7,122,148.63 1,521,028.42 18,672,206.20 Non-controlling interests 255,505.29 7,556.87 5,285.36 effects (net of tax) Total 26,949,295.48 10,561,041.21 105,371,078.15 -- 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. 8 Changchai Company, Limited Annual Report 2020 Part III Business Summary I Principal Activity of the Company in the Reporting Period As a manufacturer, we specialize in the manufacture and sale of diesel engines, diesel engine fittings and castings, gasoline engines, gasoline engine fittings, rotovators, walking tractors, molds and jigs as well as the assembly and sale of diesel engine and gasoline engine supporting sets. We mainly manufacture and sell small and medium-sized single-cylinder and multi-cylinder diesel engines under the brand of “ Changchai ” , which are often used in tractors, combine-harvesters, light commercial vehicles, agriculture equipment, small-sized engineering machinery, generator sets, ship machines, etc. II Significant Changes in Major Assets 1. Significant Changes in Major Assets Major assets Main reason for significant changes Other current The ending amount was up by RMB20,878,087.25 (or 325.14%) from the beginning assets amount, primarily driven by an increase in overpaid VAT in the Reporting Period. The ending amount was up by RMB59,171,181.45 (or 59.35%) from the beginning Intangible assets amount, primarily driven by the acquisition of land use rights by Changchai Machinery in an auction in the Reporting Period. Deferred income The ending amount was up by RMB3,208,010.11 (or 313.32%) from the beginning tax assets amount, primarily driven by an increase in deductible losses in the Reporting Period. Taxes and levies The ending amount was down by RMB6,224,897.17 (or 68.45%) from the beginning payable amount, primarily driven by a decrease in income tax payable in the Reporting Period. The ending amount was up by RMB23,588,708.55 (or 41.32%) from the beginning Deferred income amount, primarily driven by an increase in the fair value of the financial assets held by tax liabilities the Company during the Reporting Period. Other The ending amount was up by RMB108,422,983.24 (or 34.20%) from the beginning comprehensive amount, primarily driven by an increase in the fair value of the financial assets held by income the Company during the Reporting Period. The ending amount was up by RMB192,311,000.00 (or 47.72%) from the beginning Notes payable amount, primarily driven by an increase in bank acceptance notes settlement in the Reporting Period. The ending amount was up by RMB4,056,234.74 (or 344.42%) from the beginning Other current amount, primarily driven by an increase in accrued electricity charges of subsidiaries, as liabilities well as adjustments to financial statement items as per the changed accounting policies. 2. Major Assets Overseas □ Applicable √ Not applicable 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 9 Changchai Company, Limited Annual Report 2020 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, ISO/TS16949 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”. Also, it has been among the 10 users’ most satisfied leading brands in “Jing Geng” competition for many years. In 2020, the Company was awarded the titles of Top 100 China Machinery Industry Companies, National Model Enterprise for Trustworthy Product and Service Quality, The China’s 500 Most Valuable Brands, Internal Combustion Engine Maker with Leading Quality in China, Top 100 Innovative Companies of Jiangsu Province, National Benchmark Company in Quality and Integrity, among others. 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 passed the re-evaluation of the National Enterprise Technology Center. Its research center of small- and medium-power internal combustion engine engineering and technology in Jiangsu Province was rated as excellent in the performance evaluation. The post-doctoral research station was rated as an excellent unit. The 4G33V16 Diesel Engine was recognized as an "Innovative Product of Changzhou Manufacturing". The Company's five electronically controlled single-cylinder diesel engines of the China III emission standards, including L28 and ZS1115, were recognized as high-tech products by the city. During the Reporting Period, the Company filed for 13 patents and was granted 12 patents. Currently, the Company has a total of 141 patents granted by authorities 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, over 900 service stations and 750 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. 10 Changchai Company, Limited Annual Report 2020 Part IV Operating Performance Discussion and Analysis I Overview In 2020, the outbreak of the COVID-19 pandemic caused decline in the international trade and turmoil in the financial markets. The agricultural machinery industry and the internal combustion engine industry ushered in a trend of contrarian growth in the continuous deep adjustment under the combined effect of various favorable factors such as the comprehensive and effective national prevention and control measures, the proactive local policies for supporting the resumption of work and production, China attaching great importance to food safety and standardizing the implementation of subsidy policies for agricultural machinery purchases, and new infrastructure construction promoting the rapid growth of the construction machinery market. The Company closely followed the decisions and arrangements of the central, provincial and municipal governments, and coordinated the promotion of pandemic prevention and control and corporate economic development. Under the premise of comprehensively strengthening the implementation of pandemic prevention and control arrangements and normalizing pandemic prevention and control, the Company correctly grasped the strategic development direction and insisted on strengthening the main business, expanding the areas and improving quality and efficiency, thus achieving good operating results. Performance in economic indicators such as sales and profits have improved. During the Reporting Period, the Company sold 759,500 units of diesel engines, gasoline engines and related generator sets, including 132,200 units of gasoline engines, generating total sales revenue of RMB2,296,464,711.24, an increase of 12.25% year-on-year. In terms of product development and supporting areas, the Company completed the development, promotion and supporting work of major non-road multi-cylinder diesel engines of the China IV emission standards and a variety of ultra-conventional varieties, which has built strong support for the annual sales. Four power ranges of 192FA and two power ranges of ZN390B have obtained Euro V emission certificates. Except for non-agricultural sectors, products have significantly increased in marine, electromechanical and construction industries. The Company continued to optimize its products and had sufficient new product reserves; it comprehensively expanded supporting resources, and achieved significant increases in the field of benchmarking. With regard to market service, the Company strengthened the after-market service business, built and improved the after-market sales network; it optimized market service resources and personnel structure, and enhanced the assessment management of service centers and service stations in the service process. Market service capabilities and service timeliness have been improved. The Company reached a new high level of market service satisfaction. The CRM project was integrated with the released applications within the Company, which made customer management more standardized and consolidated the foundation for promoting the informationization of the entire market. Concerning quality management, the Company passed the ISO9001 and IATF16949 quality system supervision and audit views during the Reporting Period, and passed the voluntary certification of 4L88 agricultural machinery products by Nanjing Sam Certification T&D Co., Ltd. The Company further optimized the quality assessment system to effectively improve product reliability. As for internal management, the Company strengthened lean management to promote the improvement of quality and efficiency; it further deepened the construction of internal control systems, strengthened the supervision of key projects, and achieved obvious results in standardizing the management of subsidiaries. By accelerating the mobilization of internal and external resources, the Company met market demand to the greatest extent and 11 Changchai Company, Limited Annual Report 2020 improved its production and operation efficiency. During the Reporting Period, construction of Changchai Machinery was in full swing and proceeded smoothly. In mid-April, the Company launched a private placement project of 2020, and the plan was reviewed and approved by the China Securities Regulation Commission. II Core Business Analysis 1. Overview See “I Overview” above. 2. Revenue and Cost Analysis (1) Breakdown of Operating Revenue Unit: RMB 2020 2019 As % of As % of total total Operating Change (%) Operating revenue operating operating revenue revenue (%) revenue (%) Total 2,296,464,711.24 100% 2,045,820,801.10 100% 12.25% By operating division Internal combustion 2,252,479,553.51 98.08% 2,001,911,782.04 97.85% 12.52% engines Other 43,985,157.73 1.92% 43,909,019.06 2.15% 0.17% By product category Diesel engines 2,112,251,290.73 91.98% 1,856,130,365.33 90.73% 13.80% Gasoline 132,735,777.75 5.78% 133,936,656.91 6.55% -0.90% engines Other 51,477,642.76 2.24% 55,753,778.86 2.73% -7.67% By operating segment Domestic 1,922,972,122.74 83.74% 1,731,861,396.59 84.65% 11.03% Overseas 373,492,588.50 16.26% 313,959,404.51 15.35% 18.96% (2) Operating Division, Product Category or Operating Segment Contributing over 10% of Operating Revenue or Operating Profit √ Applicable □ Not applicable Unit: RMB YoY YoY YoY change in Gross change in change in gross Operating revenue Cost of sales profit operating cost of profit margin revenue sales (%) margin (%) (%) By operating division Internal combustion 2,252,479,553.51 1,918,486,625.85 14.83% 12.52% 14.21% -1.26% engines By product category 12 Changchai Company, Limited Annual Report 2020 Diesel 2,112,251,290.73 1,799,217,464.83 14.82% 13.80% 15.29% -1.10% engines Gasoline 132,735,777.75 108,270,190.66 18.43% -0.90% -0.38% -0.43% engines Other 51,477,642.76 43,086,335.78 16.30% -7.67% -4.70% -2.61% By operating segment Domestic 1,922,972,122.74 1,587,725,941.54 17.43% 11.03% 12.63% -1.17% Overseas 373,492,588.50 362,848,049.73 2.85% 18.96% 19.04% -0.06% 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 2020 2019 Change (%) division Unit sales Unit 627,331 536,932 16.84% Diesel engines Output Unit 657,917 519,339 26.68% Inventory Unit 78,589 48,003 63.72% Any over 30% YoY movements in the data above and why: √ Applicable □ Not applicable The Company properly increased its inventory in response to the recovery in the agricultural machinery industry and the spring farming season in 2021. (4) Execution Progress of Major Signed Sales Contracts in the Reporting Period □ Applicable √ Not applicable (5) Breakdown of Cost of Sales Unit: RMB 2020 2019 As % of As % of Product Change Item total cost total cost category Cost of sales Cost of sales (%) of sales of sales (%) (%) Diesel Raw 1,526,191,466.63 78.24% 1,317,459,424.33 78.43% 15.84% engines materials Diesel Labor cost 222,248,951.31 11.39% 214,361,508.91 12.76% 3.68% engines Diesel Depreciati 71,562,851.51 3.67% 74,355,935.23 4.43% -3.76% engines on Diesel Energy 34,214,195.38 1.75% 27,773,748.68 1.65% 23.19% engines (6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period □ Yes √ No (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: 13 Changchai Company, Limited Annual Report 2020 Total sales to top five customers (RMB) 1,026,672,658.60 Total sales to top five customers as % of total sales of the 44.71% 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 As % of total sales No. Customer for the Reporting Period revenue (%) (RMB) 1 Customer 1 439,066,347.33 19.12% 2 Customer 2 242,920,433.07 10.58% 3 Customer 3 142,420,154.12 6.20% 4 Customer 4 103,689,649.75 4.52% 5 Customer 5 98,576,074.33 4.29% Total -- 1,026,672,658.60 44.71% Other information about major customers: □ Applicable √ Not applicable Major suppliers: Total purchases from top five suppliers (RMB) 250,959,619.80 Total purchases from top five suppliers as % of total purchases 11.07% of the Reporting Period (%) 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 As % of total purchases No. Supplier Period (RMB) (%) 1 Supplier 1 80,662,072.00 3.56% 2 Supplier 2 58,983,251.28 2.60% 3 Supplier 3 47,225,855.00 2.08% 4 Supplier 4 39,322,805.50 1.73% 5 Supplier 5 24,765,636.06 1.09% Total -- 250,959,619.84 11.07% Other information about major suppliers: □ Applicable √ Not applicable 3. Expense Unit: RMB Reason for any significant 2020 2019 Change (%) change Increase in accrual-warranty expense due to prolonged Selling expense 128,372,278.62 97,085,117.05 32.23% warranty periods required by certain customers in the Reporting Period 14 Changchai Company, Limited Annual Report 2020 Administrative 87,446,195.74 107,015,957.41 -18.29% expense Finance costs 15,768,310.32 -4,436,573.36 —— R&D expenses 72,258,781.08 66,221,376.27 9.12% 4. R&D Investments √ Applicable □ Not applicable The Company has been valuing the R&D of new products and application of new technologies. Based on the market-oriented policy, the Company continuously promotes technological upgrading, makes great efforts to improve the technological development capacity and self-innovation capacity and increases the added value of products so as to continuously enhance the Company’s market competitiveness. Details about R&D investments: 2020 2019 Change (%) Number of R&D personnel 354 360 -1.67% R&D personnel as % of total employees 12.36% 11.96% 0.40% R&D investments (RMB) 72,258,781.08 66,221,376.27 9.12% R&D investments as % of operating 3.15% 3.24% -0.09% 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 YoY change in the percentage of R&D expense in operating revenue: □ Applicable √ Not applicable Reason for any sharp variation in the percentage of capitalized R&D expense and rationale: □ Applicable √ Not applicable 5. Cash Flows Unit: RMB Item 2020 2019 Change (%) Subtotal of cash generated from 2,281,623,334.91 2,233,233,647.12 2.17% operating activities Subtotal of cash used in 2,029,826,680.38 2,253,558,836.68 -9.93% operating activities Net cash generated from/used in 251,796,654.53 -20,325,189.56 —— operating activities Subtotal of cash generated from 564,355,776.61 23,975,484.12 2,253.89% investing activities Subtotal of cash used in 717,612,880.11 105,167,007.71 582.36% investing activities Net cash generated from/used in -153,257,103.50 -81,191,523.59 —— investing activities Subtotal of cash generated from 22,000,000.00 34,000,000.00 -35.29% financing activities Subtotal of cash used in 27,732,890.38 78,505,058.96 -64.67% financing activities 15 Changchai Company, Limited Annual Report 2020 Net cash generated from/used in -5,732,890.38 -44,505,058.96 —— financing activities Net increase in cash and cash 83,979,542.30 -145,306,375.14 —— 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 bank acceptance notes were adopted more often in the settlement with suppliers, resulting in a decrease in cash used in operating activities and thus an increase in net cash generated from operating activities. The significant year-on-year change in net cash generated from/used in investing activities was actual investement in Changchai Machinery and the participation in a rights issue of Bank of Jiangsu, in the current period. The significant year-on-year change in net cash generated from/used in financing activities was primarily because last year saw the repayment of some bank borrowings and the payment of 2018 final dividends, resulting in a year-on-year increase in net cash generated from financing activities in 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 bank acceptance notes were adopted much more often in the settlement with suppliers, affecting net cash generated from operating activities. III Analysis of Non-Core Businesses □ Applicable √ Not applicable IV Analysis of Assets and Liabilities 1. Significant Changes in Asset Composition Indicate whether the Company has adopted the new accounting standards governing revenue and leases since 2020 and restated the beginning amounts of relevant financial statement line items in the year. Applicable. Unit: RMB 31 December 2020 1 January 2020 Change As % of As % of in Reason for any Amount total Amount total percentag significant change assets assets e (%) Monetary 760,728,222.85 19.24% 638,589,260.09 18.30% 0.94% assets Accounts 397,154,016.49 10.05% 419,302,056.87 12.02% -1.97% receivable Inventories 606,680,340.55 15.35% 473,359,168.90 13.57% 1.78% Investment 46,239,326.03 1.17% 48,447,666.83 1.39% -0.22% property Long-term equity 0.00 0.00% 0.00 0.00% —— investments Fixed assets 454,181,555.68 11.49% 457,722,667.32 13.12% -1.63% 16 Changchai Company, Limited Annual Report 2020 Construction 66,502,432.41 1.68% 91,358,156.24 2.62% -0.94% in progress Short-term 22,000,000.00 0.56% 22,000,000.00 0.63% -0.07% borrowings Long-term 0.00 0.00% 0.00 0.00% —— borrowings 2. Assets and Liabilities at Fair Value √ Applicable □ Not applicable Unit: RMB Gain/loss Cumulati Impairme on ve nt Purchased Sold in Beginni fair-value fair-value allowance in the the Other Ending Item ng changes changes for the Reporting Reporting change amount amount in the charged Reporting Period Period Reporting to equity Period Period Financial assets 1. Held-for-tra ding financial 13,050, 200,272.0 33,822,95 35,572,95 11,500,2 assets 000.00 0 6.16 6.16 72.00 (derivative financial assets exclusive) 2. Derivative financial assets 3. Other debt investment 4. Investment 532,886 127,966,2 24,786,00 500,345.4 685,137, in other ,000.00 96.36 0.00 9 950.87 equity instruments Subtotal of 545,936 200,272.0 127,966,2 58,608,95 36,073,30 696,638, financial ,000.00 0 96.36 6.16 1.65 222.87 assets Investment 17 Changchai Company, Limited Annual Report 2020 property Productive living assets 77,952, 20,780,83 98,732,9 Other 101.63 7.00 38.63 Total of 623,888 20,981,10 127,966,2 58,608,95 36,073,30 795,371, above ,101.63 9.00 96.36 6.16 1.65 161.50 Financial 0.00 0.00 liabilities Significant changes to the measurement attributes of the major assets in the Reporting Period: □ Yes √ No 3. Restricted Asset Rights as at the Period-End Item Ending carrying value Reasons Security deposits associated with bank acceptance Monetary assets 130,788,682.35 notes, environment, etc. House constructions 2,012,894.88Collateral for bank loan Land use right 962,953.87Collateral for bank loan Machinery equipment 34,959,585.43Collateral for bank loan Total 168,724,116.53 -- V Investments Made 1. Total Investment Amount √ Applicable □ Not applicable Investments made in Reporting Investments made in same period +/-% Period (RMB) of last year (RMB) 154,786,000.00 60,000,000.00 157.98% 2. Major Equity Investments Made in the Reporting Period √ Applicable □ Not applicable Unit: RMB Profi S ts or ha Prog losse re ress s of Invo ho Inv Disc Disc Inve Inve Cap as of Esti inve lvin ld est Type losur losur Inv Main stme stme ital the mate stme g in in me of e e este busin nt nt reso Partner bala d nt in laws g nt prod date inde e ess meth amo urc nce inco the uit pe ter ucts (if x (if od unt es shee me Rep or rc m any) any) t ortin not en date g ta Peri ge od 18 Changchai Company, Limited Annual Report 2020 Changzh Capi ou Jian tal Investme gsu incre nt Group Ho ase Co., Ltd. ush regis and eng tered Changzh Lithi Ne Lithi with Capi 26,2 ou um w um Self Lon the 2,50 12 tal 50,0 8. Synerget batte 2020 Ene batter -ow g-te indu 0.00 0,00 No Dec. incre 00.0 72 ic ry -074 rgy y ned rm strial 0.00 2020 ase 0 % Innovati baffl Tec baffle and on e hno com Private log merc Equity y ial Fund Co., admi (Limited Ltd. nistr Partners ation hip) Inter Inter nal nal Jian comb com gsu ustio busti Cha n on The ngc engin Paid 130, 10 engi inpu -1,5 26 hai Self Lon e, in 000, 0. ne, t has 94,4 Febr 2019 Ma -ow Naught g-te 0.00 No relate capit 000. 00 relat been 04.4 uary -004 chi ned rm d al 00 % ed mad 7 2019 ner gener gene e y ator rator Co., sets sets Ltd. and and parts parts 156, 905, Tot 250, -- -- -- -- -- -- -- -- 0.00 595. -- -- -- al 000. 53 00 3. Major Non-Equity Investments Ongoing in the Reporting Period □ Applicable √ Not applicable 4. Financial Investments (1) Securities Investments √ Applicable □ Not applicable 19 Changchai Company, Limited Annual Report 2020 Gain Accu /Loss mula Acco on Sour Initia ted Purc Gain untin Begi fair Sold Varie Code Nam fair hase /loss Endi Acco ce of l g nnin value in ty of of e of value d in in ng untin inves meas g chan Repo inves chan Repo Repo carry secur secur secur urem carry ges rting g tmen tmen ges rting rting ing ent ing in Perio ity ity ity charg Perio Perio value title t t cost meth value Repo d ed to d d funds od rting equit Perio y d Inves tmen Dom t in Foto 41,7 Fair 302, 351, 455, Self- estic/ other 6001 n 84,0 value 005, 0.00 382, 175, owne Forei 0.00 0.00 0.00 equit 66 Moto 00.0 meth 000. 350. 000. d gn y r 0 od 00 00 00 fund stock instr ume nts Inves tmen Dom t in Bank 42,7 Fair 130, 72,2 24,7 127, Self- estic/ 5,00 other 6009 of 86,0 value 320, 31,3 86,0 764, owne Forei 0.00 0.00 4,00 equit 19 Jiang 00.0 meth 000. 00.0 00.0 000. d gn 0.00 y su 0 od 00 0 0 00 fund stock instr ume nts Inves tmen Dom Jiang t in Fair Self- estic/ su 90,5 561, 340, 491, other 6003 value owne Forei Expr 00.0 000. 0.00 425. 0.00 000. 0.00 equit 77 meth d gn essw 0 00 00 00 y od fund stock ay instr ume nts 20 Changchai Company, Limited Annual Report 2020 Othe r Kailo Dom non- ng 20,0 Fair 20,0 18,2 18,2 38,2 Self- estic/ curre 3009 High 01,2 value 01,2 80,8 80,8 82,1 owne Forei 0.00 0.00 0 nt 12 Tech 68.0 meth 68.0 37.0 37.0 05.0 d gn finan nolog 0 od 0 0 0 0 fund stock cial y asset s Other securities investments held at -- -- -- the period-end 104, 452, 18,2 423, 24,7 23,2 621, 491, 661, 887, 80,8 954, 86,0 84,8 221, Total -- 000. -- -- 768. 268. 37.0 075. 00.0 37.0 105. 00 00 00 0 00 0 0 00 Disclosure date of the announcement on the board’s approval of 12 Dec. 2020 the securities investments (2) Investments in Derivative Financial Instruments □ Applicable √ Not applicable No such cases in the Reporting Period. 5. Use of Funds Raised □ Applicable √ Not applicable No such cases in the Reporting Period. VI 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 VII 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 Principal Register hip with Total Net Operatin Operatin Name activity ed Net profit the assets assets g revenue g profit capital Company Changcha Subsidiar Production 55,063,0 164,656, 86,054,6 209,003, 1,880,28 137,775. 21 Changchai Company, Limited Annual Report 2020 i Benniu y of diesel 00.00 448.49 92.70 734.70 0.35 00 engine accessories Changcha Diesel Subsidiar 85,000,0 74,311,1 49,529,6 43,143,2 554,513. 494,776. i engine y 00.00 71.17 48.65 96.52 62 84 Wanzhou assembly Houshen External g Subsidiar investment 40,000,0 64,827,7 59,714,5 344,842. 16,316,0 11,684,8 Investme y and 00.00 53.14 34.13 86 82.73 21.20 nt consulting Houshen agricultural g machinery Agricultu Subsidiar product of 10,000,0 26,779,6 -6,265,40 14,280,0 -6,462,05 -6,712,05 ral y rice 00.00 98.80 6.20 66.47 2.03 2.03 Equipme transplanter nt etc. Gasoline Changcha Subsidiar 37,250,0 113,064, 100,165, 132,735, 10,850,8 10,074,3 engines i Robin y 00.00 063.56 773.29 777.75 00.51 37.57 assembly Internal Changc combustion hai Subsidiar 300,000, 138,696, 138,011, -1,586,82 -1,594,40 engine and 0.00 Machine y 000.00 225.19 999.19 5.63 4.47 related ry accessories Xingshen g Real Real estate Subsidiar 1000,00 5,870,00 3,408,67 5,608,87 808,606. 773,836. Estate managemen y 0.00 2.21 2.66 1.93 70 84 Managem t service ent Subsidiaries obtained or disposed in the Reporting Period: □ Applicable √ Not applicable VIII Structured Bodies Controlled by the Company □ Applicable √ Not applicable IX Prospects 1. Industrial Competition Pattern and Development Trend In 2020, due to the COVID-19 pandemic, the agricultural machinery industry and the internal combustion engine industry ushered in a trend of contrarian growth in the continuous deep adjustment under the combined effect of various favorable factors such as national policies, local support and market boosts. In 2021, China's agricultural machinery market will still be in a state of deep adjustment and transformation of upgrading. Despite the decline of the traditional categories market, opportunities can still be found in market segments, with intelligent agricultural machinery favored by the market.The national macro-economy will be positive in the long run and agricultural machinery industry is supported by policies. The agricultural machinery market is prospective from the perspective of long-term development. As total market demand is large, it is not only an opportunity but also a challenge for agricultural machinery manufacturers, who need to accelerate the upgrading of agricultural 22 Changchai Company, Limited Annual Report 2020 machinery products and technology. In addition, the huge pressure brought by the new energy industry to traditional internal-combustion engine companies has forced traditional engine manufacturers to actively or passively become involved in the development of new energy automotive industries. At present, the development trend and market situation of the industry are mainly as follows: First, the agricultural industry is in the stage of deep adjustment, bringing further competition to the industry; second, market demand shows fragmentation and segmentation; third, the development of agricultural machinery is diversified. Large scale and miniaturization coexist. High-end intelligence has become the dominant direction; fourth, the concentration of the internal combustion engine industry will increase rapidly, with intensive industrial reshuffle; fifth, the combination of capital and industry will boost internationally competitive large enterprises. The threshold of competition will be higher in the future. Overall, the diesel market competition is fierce. There will be better market prospects for diesel engines with high-performance in energy saving and environmental protection and meeting the rigid demand of specific fields. 2. Company development strategies: The Company’s development strategies are to base on the farm machinery, do stronger in the power, develop the fields and develop scientifically. In the field of agricultural machinery, the Company maintained a leading position in the horsepower segment and continues to expand the market share, and actively explored and entered the market in large-horse-powered vehicles and non-road-specific power supporting areas for engineering use and achieved stable breakthroughs in the niche. In the terminal area, the Company actively expanded the market share of transplanter products. In terms of product support, the Company focused on agriculture originally and gradually entered into engineering, construction, orchard, forestry, fishery and electromechanical industries. Meanwhile, it expanded the military support and bidding market, and gradually promoted the development of the market of motor generator sets. In addition, the Company extended its product structure to the gasoline engine field by acquiring Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd., continuously expanded product application, firmly grasped product quality and actively developed overseas and domestic customers. The Company will further innovate the management mechanism, accelerate the progress of product development and vigorously expand the market to promote the sustained and steady development of the Company. The Company is using the cloud platform technology to promote information building and develop a highly efficient and practical information platform. Meanwhile, as a response to governmental planning, the Company is implementing light engine and casting relocation projects to integrate existing resources, improve quality and increase efficiency, which is beneficial to the Company’s sustainable development. A private placement program is launched to the capital market to raise financings and activate resources, which will help boost the Company’s R&D projects and development. 3. Operation Plan for the Year 2021: The Company will consolidate its leading position with single-cylinder diesel engines and build a boutique image with multi-cylinder diesel engines, accelerate the expansion of terminals, comprehensively upgrade product emission standards, create new management models for higher returns, and utilize capital to drive development. In 2021, sales revenue is expected to be RMB2.15 billion, and new products sales will exceed 100,000 units. The above operation plan does not represent the profit forecast of Y2021 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. 4. Possible risks and countermeasures: (1) Market risk: 23 Changchai Company, Limited Annual Report 2020 Fierce competition results in over-capacity of some traditional products. With the adjustment of the national agricultural production structure and the continuous expansion of the scale of farm operation, as well as the changes in farmers' production and operation methods, agricultural machinery is developing towards the trend of large-scale, high-efficiency and intelligent automation, and resource-saving and environmentally-friendly products have gradually become the mainstream. In the future, emission standards of internal combustion engines will be further updated and air pollution control will be further stringent. Safety production and environmental protection will be normalized, and the industry will still be in a period of transformation and adjustment. However, long-term improvement of the national macro-economy remains unchanged, and the agricultural machinery market is still promising with a large total market demand. Countermeasures: The first is to solidly upgrade emission standards and actively expand product areas. The second is to boost both internal and external markets in different areas and empower the enterprise to develop steadily and well. The third is to focus on quality management in the whole process and continuously enhance the competitive advantage of quality. The fourth is to strictly standardize and implementation of technical transformation projects and vigorously promote the completion and commissioning of Changchai Industry Park. The fifth is to continuously strengthen refined management and comprehensively improve the efficiency of production, operation and management. The sixth is to continuously improve the development strength of subsidiaries and promote capital operation projects in a steady and orderly manner. (2) Industrial risk: The rapid development of the new energy industry has impacted the traditional fuel automobile industry and its industrial chain. With the support of national policies and investment, the maturity of the new energy industry has been growing continuously and gradually exerting an impact on the agricultural machinery industry. Battery-powered products have gradually appeared in planting machinery, garden machinery and so on. In order to cope with the upgrading of emission standards and the rapid development of new energy industry, enterprises in the traditional internal combustion engine industry need to seek new development opportunities, improve their technical level or try to make cooperations to transfer the industrial risks. Countermeasures: The first measure is to prepare layout in new energy industries in advance to seize the opportunity for industry development. The second is to develop innovative products and upgrade products towards intelligent and Internet-based high-end products. The third is to explore new fields, boost the competitiveness of the product chain, explore the development direction of new industries and meet the industrial upgrading and transformation. (3) Policy risk: The macro-economic environment is complex and changeable, economic growth is slowing down and the policy on the diesel engine emissions is becoming stricter and stricter, which increased the operating difficulties and the pressure. As such, the market demands for some products of the Company will be affected to some extent. Countermeasures: The Company will pay close attention to the government’s economic macro-control policies and market developments. To promote the work such as “promote the products upgrade and quality enhancing”, to embrace the upgrading of the engine emission standards, to accelerate the forging of the new “Standard V” platform, and to execute the necessary products resources reserves in advance. 24 Changchai Company, Limited Annual Report 2020 (4) Raw material price risk: Due to the economic situation and the global financial easing policies, fluctuations in the prices of raw materials such as steel and pig iron will put pressure on the Company's manufacturing costs. Countermeasures: The Company will further improve its operating efficiency, reduce costs and improve efficiency, and reduce the pressure of rising costs through measures such as optimizing the supply system, strengthening inventory and plan management, and controlling costs and expenses. (5) Talent risk: As the Company keeps, in recent years, improving operational efficiency and technological innovation to cope with the increasingly fierce market competition and industry development trend, the demand for professional and senior management personnel is greatly increased. Countermeasures: The first is to strengthen the building of management and talent teams, accelerate the training of young management, continuously enhance the vitality of the management team, strengthen the training, assessment and utilization of existing talents such as skilled experts, technical management personnel and worker technicians, and increase recruitment and introduction of urgently needed talents based on the Company's development needs; The second is to optimize the deployment of enterprise employment and improve employee skills, supplement frontline employees through multiple channels, strengthen the training of management and employees at all levels, and further improve employee skills through the organization and development of skill level identification. X Communications with the Investment Community such as Researches, Inquiries and Interviews 1. During the Reporting Period √ Applicable □ Not applicable Index to Place of Way of Type of Contents and materials main Date of visit Visitor visit visit visitor provided inquiry information Individual Products situation of the 2020-12-18 EasyIR Other Individual EasyIR investor Company Individual Products situation of the 2020-12-17 EasyIR Other Individual EasyIR investor Company Individual Progress of lithium battery 2020-12-08 EasyIR Other Individual EasyIR investor baffle project Individual Progress of R&D projects of 2020-11-18 EasyIR Other Individual EasyIR investor the Company Individual 2020-10-29 EasyIR Other Individual Shareholders of the Company EasyIR investor Individual Progress of lithium battery 2020-10-15 EasyIR Other Individual EasyIR investor baffle project Pricing of the Company's Individual 2020-09-14 EasyIR Other Individual non-public offering of shares in EasyIR investor 2020 Equity structure and product Individual 2020-08-18 EasyIR Other Individual situation of Housheng New EasyIR investor Energy Technology 25 Changchai Company, Limited Annual Report 2020 Individual Equity structure of Housheng 2020-08-18 EasyIR Other Individual EasyIR investor New Energy Technology Individual Disposal plan of Foton shares 2020-08-13 EasyIR Other Individual EasyIR investor held by the Company Reasons for the Company's Individual 2020-08-13 EasyIR Other Individual sales expenses increase in the EasyIR investor first half of the year Progress of the Company's Individual 2020-08-13 EasyIR Other Individual application for non-public EasyIR investor offering of shares Individual Progress of the Company's 2020-07-27 EasyIR Other Individual EasyIR investor non-public offering of shares Construction period of the Individual Company's technology center 2020-07-27 EasyIR Other Individual EasyIR investor innovation capability construction project Suggestions for the Company Individual 2020-07-24 EasyIR Other Individual to seek help from the EasyIR investor government Individual 2020-07-24 EasyIR Other Individual Treatment process of old plant EasyIR investor Executive salary assessment Individual standards and investor 2020-07-07 EasyIR Other Individual EasyIR investor exchange meeting plan of the Company Individual Factory audit of lithium battery 2020-07-07 EasyIR Other Individual EasyIR investor baffle project Individual The Company's industrial 2020-07-07 EasyIR Other Individual EasyIR investor transformation and upgrading Individual The Company's industrial 2020-07-07 EasyIR Other Individual EasyIR investor transformation and upgrading Individual 2020-07-07 EasyIR Other Individual Product R&D of the Company EasyIR investor Individual Appointment of Board 2020-07-07 EasyIR Other Individual EasyIR investor Secretary of the Company Labor contract relationship of Individual the general manager of 2020-07-07 EasyIR Other Individual EasyIR investor Housheng New Energy Technology Individual 2020-07-06 EasyIR Other Individual Land situation of the Company EasyIR investor Individual Suggestions for the Company's 2020-06-12 EasyIR Other Individual EasyIR investor development 2020-06-12 EasyIR Other Individual Individual Products situation of lithium EasyIR 26 Changchai Company, Limited Annual Report 2020 investor battery baffle project Whether the Company is Individual 2020-06-12 EasyIR Other Individual involved in regional acquisition EasyIR investor and demolition projects Individual Product application field of the 2020-06-02 EasyIR Other Individual EasyIR investor Company Individual Suggestions for the Company's 2020-06-02 EasyIR Other Individual EasyIR investor development Individual Production situation of lithium 2020-05-28 EasyIR Other Individual EasyIR investor battery baffle project Individual Production situation of lithium 2020-05-27 EasyIR Other Individual EasyIR investor battery baffle project Individual Suggestions for the Company's 2020-05-13 EasyIR Other Individual EasyIR investor development Individual Suggestions for the Company's 2020-05-13 EasyIR Other Individual EasyIR investor development Individual The Company's layout in the 2020-05-13 EasyIR Other Individual EasyIR investor new energy industry Individual Product application field of the 2020-05-07 EasyIR Other Individual EasyIR investor lithium battery baffle project Individual Progress of lithium battery 2020-04-29 EasyIR Other Individual EasyIR investor baffle project Individual Securities investment of the 2020-04-26 EasyIR Other Individual EasyIR investor Company Individual 2020-04-14 EasyIR Other Individual Financing of the Company EasyIR investor Individual 2020-04-14 EasyIR Other Individual Positioning of the Company EasyIR investor Individual Impact of the Company's 2020-04-13 EasyIR Other Individual EasyIR investor additional stock issuance Purchase and storage plan of Individual the original plant after the 2020-04-11 EasyIR Other Individual EasyIR investor Company's relocation project is completed Salary growth of Company Individual 2020-04-11 EasyIR Other Individual executives and independent EasyIR investor directors Individual Suggestions for the Company's 2020-04-11 EasyIR Other Individual EasyIR investor development Individual Suggestions on the objects of 2020-04-11 EasyIR Other Individual EasyIR investor non-public offering Individual Non-public offering of stock 2020-04-11 EasyIR Other Individual EasyIR investor pricing and net assets 2020-04-09 EasyIR Other Individual Individual Renewal of Directors and EasyIR 27 Changchai Company, Limited Annual Report 2020 investor Supervisors Individual The Company's mixed reform 2020-04-09 EasyIR Other Individual EasyIR investor situation Individual 2020-04-09 EasyIR Other Individual Renewal of Directors EasyIR investor Individual Suggestions for the Company's 2020-03-19 EasyIR Other Individual EasyIR investor development Individual Company transformation and 2020-03-19 EasyIR Other Individual EasyIR investor upgrading Individual The Company's 2019 annual 2020-03-12 EasyIR Other Individual EasyIR investor report Individual Product situation of lithium 2020-03-09 EasyIR Other Individual EasyIR investor battery baffle project Individual Product situation of lithium 2020-03-09 EasyIR Other Individual EasyIR investor battery baffle project Individual Products situation of the 2020-03-09 EasyIR Other Individual EasyIR investor Company Individual Business situation of the 2020-03-03 EasyIR Other Individual EasyIR investor Company Individual 2020-03-02 EasyIR Other Individual Brand value of the Company EasyIR investor Individual Reform and development of the 2020-02-28 EasyIR Other Individual EasyIR investor Company Individual Operation of lithium battery 2020-02-22 EasyIR Other Individual EasyIR investor baffle project Individual Operation of lithium battery 2020-02-22 EasyIR Other Individual EasyIR investor baffle project Individual Lithium battery baffle project 2020-02-22 EasyIR Other Individual EasyIR investor production plan Individual Progress of lithium battery 2020-02-17 EasyIR Other Individual EasyIR investor baffle project Individual Progress of lithium battery 2020-02-17 EasyIR Other Individual EasyIR investor baffle project Individual Work resumption of the 2020-02-14 EasyIR Other Individual EasyIR investor Company Individual 2020-02-14 EasyIR Other Individual Renewal of Directors EasyIR investor Individual The Company's epidemic 2020-02-06 EasyIR Other Individual EasyIR investor prevention situation Completion of the Company's Individual 2020-02-05 EasyIR Other Individual main tasks in 2019 and main EasyIR investor goals in 2020 Individual Suggestions for the Company's 2020-02-04 EasyIR Other Individual EasyIR investor development 28 Changchai Company, Limited Annual Report 2020 Individual Market concept of the 2020-02-04 EasyIR Other Individual EasyIR investor Company Individual Progress of lithium battery 2020-02-03 EasyIR Other Individual EasyIR investor baffle project Individual Change of Directors and 2020-02-03 EasyIR Other Individual EasyIR investor Supervisors Individual Suggestions for the Company's 2020-01-22 EasyIR Other Individual EasyIR investor development Individual 2020-01-22 EasyIR Other Individual Development of the Company EasyIR investor Individual Lithium battery baffle project 2020-01-15 EasyIR Other Individual EasyIR investor situation Individual Progress of lithium battery 2020-01-14 EasyIR Other Individual EasyIR investor baffle project Individual Customer situation of the 2020-01-13 EasyIR Other Individual EasyIR investor Company Individual Progress of lithium battery 2020-01-09 EasyIR Other Individual EasyIR investor baffle project The progress of the lithium Individual battery baffle project and the 2020-01-07 EasyIR Other Individual EasyIR investor salary of the Company's executives Individual 2020-01-01 EasyIR Other Individual Development of the Company EasyIR investor Times of communications 78 Number of institutions 0 communicated with Number of individuals 78 communicated with Number of other communication 0 parties Tip-offs or leakages of substantial supposedly-confidential None information during communications 29 Changchai Company, Limited Annual Report 2020 Part V Significant Events I Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock) How the profit distribution policy, especially the cash dividend policy, for ordinary shareholders 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 Yes Association and resolution of general meeting Specific and clear dividend standard and ratio Yes Complete decision-making procedure and mechanism Yes Independent directors faithfully performed their Yes duties and played their due role Non-controlling interests are able to fully express their opinion and desire and their legal rights and Yes interests are fully protected In case of adjusting or changing the cash dividend policy, the conditions and procedures involved are in N/A compliance with applicable regulations and transparent The profit distributions to ordinary shareholders, either in the form of cash or stock, in the past three years (including the Reporting Period) are summarized as follows: Year Profits distribution proposal Turning capital reserve into share Execution capital proposal Still needed to submit 2020 No No to the Annual General Meeting 2019 No No Finished the execution Distributed RMB0.25 of every 10 2018 No Finished the execution shares (taxes including) Cash dividend for ordinary shareholders in the past three years (including the Reporting Period): Unit: RMB 30 Changchai Company, Limited Annual Report 2020 Net profit attributable to Cash Cash ordinary Total cash A divide dividends shareholders dividends as % nds in C as % D as % of Year (tax of the listed (including of B other of B (%) B (%) inclusive) company in those in other (%) forms (A) consolidated forms) (D) (C) statements for the year (B) 2020 0.00 52,432,443.05 0.00% 0.00 0.00% 0.00 0.00% 2019 0.00 24,966,526.85 0.00% 0.00 0.00% 0.00 0.00% 2018 14,034,358.15 62,409,528.46 22.49% 0.00 0.00% 14,034,358.15 22.49% Indicate by tick mark whether the Company fails to put forward a cash dividend proposal for the ordinary shareholders despite the facts that the Company has made profits in the Reporting Period and the profits of the Company as the parent distributable to the ordinary shareholders are positive. √ Applicable □ Not applicable Reason why the Company fails to put forward a cash dividend proposal for the ordinary shareholders despite the facts that the Company has made profits in Use and use plan for retained earnings of the the Reporting Period and the profits of the Company Company as the parent distributable to the ordinary shareholders are positive Simple description about the reason why no cash dividend was made at the end of this year: the sum of cash dividend made by the Company in recent three years was RMB 14.0344 million, exceeding 30% of the yearly net profit of the listed company’s Support the construction of the subsidiary Changchai shareholders, and has met the relevant rules on cash Machinery and the promotion of R&D projects of the dividend. Generally considering the construction Company capital demand, development project’s progress and non-public offering project’s progress of Changchai Machinery, a subsidiary of the Company, in 2021, the Company intended not to distribute cash dividend or issue bonus shares or transfer common reserve fund into share capital in 2020. II Final Dividend Plan for the Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. III Fulfillment of Commitments 1. Commitments of the Company’s Actual 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 Commitment Promisor Type Details of commitment Date Term Fulfil 31 Changchai Company, Limited Annual Report 2020 of of of lmen comm commi commi t itmen tment tment t makin g 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 the common reserves) in this year or half year and abundant Changch money flow and no influence on the Other commitments ai Year Bonu following-up going concern after cash 8 May Ongo made to minority Compan 2020- s bonus, the profits allocated by cash 2020 ing shareholders y, 2022 Limited every year shouldn’t be lower than 10% of the allocable profits from parent company. Meanwhile, the accumulated allocable profits by cash in the arbitrary continuous three accounting years should not be lower than 30% of the annual average allocable profits in those three years. Fulfilled on time Yes Specific reasons for failing to fulfill commitments on N/A time 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 IV Occupation of the Company’s Capital by the Controlling Shareholder or Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. 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 Methods √Applicable □ Not applicable Changes to the accounting policies and why Approval process Remark 32 Changchai Company, Limited Annual Report 2020 The Ministry of Finance issued the Notice on Revising and On 28 April 2020, the Issuing the Accounting Standards for Business Enterprises Company convened the 2nd No.14-Revenue (CK [2017] No.22) (hereinafter referred to Meeting of the 9th Board as the “New Standards governing Revenue) in July 2017 of Directors and the 2nd and required all companies listed domestically to Meeting of the 9th implement it since 1 January 2020. Supervisory Committee and approved the Proposal on Changes of Some Accounting Policies. (1) Influence of Implementing the New Standards governing Revenue Affected items in the consolidated balance sheet and amount thereof: Affected by classification and 1 January 2020 Item 31 December 2019 measurement Advances from 31,789,001.78 -31,789,001.78 customers Contract liabilities 29,652,202.74 29,652,202.74 Other current liabilities 1,177,712.38 2,136,799.04 3,314,511.42 Affected items in the balance sheet of the Company as the parent and amount thereof: Affected by classification and 1 January 2020 Item 31 December 2019 measurement Advances from 28,673,664.87 -28,673,664.87 customers Contract liabilities 26,661,229.33 26,661,229.33 Other current liabilities 2,012,435.54 2,012,435.54 VII Retrospective Restatements due to Correction of Material Accounting Errors in the Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. VIII YoY Changes to the Scope of the Consolidated Financial Statements □ Applicable √ Not applicable No such cases in the Reporting Period. IX 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 auditor has provided audit service for the 19 Company 33 Changchai Company, Limited Annual Report 2020 Names of the certified public accountants from the domestic independent auditor writing signatures on Dai Weizhong, Xu Wenxiang the auditor’s report How many consecutive years the certified public accountants have provided audit service for the Dai Weizhong five years, Xu Wenxiang three years 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; the Company employed Industrial Securities Co., Ltd. and Donghai Securities Co., Ltd. as co-sponsor underwriter for non-public issuance of A shares in 2020. In the report period, the Company paid the sponsor fees of RMB1.50 million to Industrial Securities Co., Ltd. and Donghai Securities Co., Ltd. respectively. X Possibility of Delisting after Disclosure of this Report □ Applicable √ Not applicable XI Insolvency and Reorganization □ Applicable √ Not applicable No such cases in the Reporting Period. XII Major Legal Matters √Applicable □ Not applicable Involved Index to Decisio Disclos amount Provisi Execution of disclosed General information Progress ns and ure (RMB’0, on decisions informati effects date 000) on As for the lawsuit against Shandong Hongli Group Co., Ltd., the defendant accumulatively owed the Company’s The payment for goods of RMB14.36 million. The insolvency judgment The Company filed an appeal to Changzhou Not liquidation was made Intermediate People’s Court in 2001 and 1,436 None applicab procedures at the applied to the court for compulsory le have been second execution in April 2002. The insolvency completed. instance liquidation procedures have been completed on 12 November 2020 and the liquidity rate of arrears of the Company was zero. XIII Punishments and Rectifications □ Applicable √ Not applicable No such cases in the Reporting Period. XIV 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 34 Changchai Company, Limited Annual Report 2020 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. XV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees □ Applicable √ Not applicable XVI 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 Sales of Assets or Equity Interests □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Related Transactions Regarding Joint Investments in Third Parties √ Applicable □ Not applicable Main Registered Total assets of Net assets of Net profit of Name of Co-investor Relation business of capital of investee investee investee investee investee investee (RMB’0,000) (RMB’0,000) (RMB’0,000) Jiangsu Changzho Controlli Housheng u ng New Li-ion RMB860 Investme sharehold Energy battery 100,081.00 54,165.13 -2,969.75 million nt Group er of the Technolo diaphragm Co., Ltd. Company gy Co., Ltd. On 11 December 2020, the Board of Directors of the Company discussed and approved the Proposal on Participating in Equity Capital Increase and Related Transactions of Jiangsu Housheng New Energy Technology Co., Ltd., and agreed the Company and the controlling shareholder Changzhou Investment Group Co., Ltd. to invest RMB26.25 million respectively for equity capital increase in Jiangsu Housheng New Energy Technology Co., Ltd. For the details, please see the Notice for Participating in Equity Capital Increase and Related Transactions of Jiangsu Housheng New Energy Technology Co., Ltd. (No. 2020-074) disclosed by the Company on www.cninfo.com.cn on 12 December 2020. The business registration change of Jiangsu Housheng New Energy Technology Co., Ltd. was completed on 31 December 2020. The Company paid the investment fund in January 2021. 4. Credits and Liabilities with Related Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 5. Other Major Related-Party Transactions □ Applicable √ Not applicable No such cases in the Reporting Period. XVII Major Contracts and Execution thereof 1. Entrustment, Contracting and Leases (1) Entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. 35 Changchai Company, Limited Annual Report 2020 (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 (1) Guarantees Unit: RMB'0,000 Guarantees provided by the Company as the parent and its subsidiaries for external parties (exclusive of those for subsidiaries) Disclosur Guara e date of Actual Havin ntee Line Actual the occurrence g for a of guarante Type of Term of Obligor guarantee date (date of expire relate guara e guarantee guarantee line agreement d or d ntee amount announce signing) not party ment or not Guarantees between the Company as the parent and its subsidiaries Disclosur Guara e date of Actual Havin ntee Line Actual the occurrence g for a of guarante Type of Term of Obligor guarantee date (date of expire relate guara e guarantee guarantee line agreement d or d ntee amount announce signing) not party ment or not Changzhou Changchai 25 Housheng Joint Novembe 2,000 16 April 2020 2,000 1 year No No Agricultural liability r 2019 Equipment Co., Ltd. Total actual amount Total approved line for such of such guarantees in guarantees in the Reporting 2,000 2,000 the Reporting Period Period (B1) (B2) Total actual balance Total approved line for such of such guarantees at guarantees at the end of the 2,000 the end of the 2,000 Reporting Period (B3) Reporting Period (B4) Guarantees provided between subsidiaries 36 Changchai Company, Limited Annual Report 2020 Disclosur Guara e date of Actual Havin Line Actual ntee the occurrence g of guarante Type of Term of for a Obligor guarantee date (date of expire guara e guarantee guarantee related line agreement d or ntee amount party announce signing) not or not ment Total guarantee amount (total of the three kinds of guarantees above) Total actual Total guarantee line approved guarantee amount in in the Reporting Period 2,000 2,000 the Reporting Period (A1+B1+C1) (A2+B2+C2) Total actual Total approved guarantee line guarantee balance at at the end of the Reporting 2,000 the end of the 2,000 Period (A3+B3+C3) Reporting Period (A4+B4+C4) Total actual guarantee amount (A4+B4+C4) as % of the 0.88% Company’s net assets Of which: Balance of guarantees provided for shareholders, actual 0 controller and their related parties (D) Balance of debt guarantees provided directly or indirectly for obligors with an over 70% debt/asset ratio 2,000 (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) 2,000 Explanation on possibility to bear joint liability due to N/A undue guarantees (if any) Explanation on the external guarantees in violation of N/A stipulated procedures (if any) (2) Irregularities in Provision of Guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Cash Entrusted to Other Entities for 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 Specific type Capital resources Amount incurred Undue Balance Overdue amount Broker financial Self-owned funds 3,072.30 1,130.00 0.00 products Particulars of cash entrusted for wealth management with single significant amount or low security, bad liquidity, 37 Changchai Company, Limited Annual Report 2020 and no capital preservation □ Applicable √ Not applicable Whether there is the case where the principal cannot be recovered at maturity or other case which may cause impairment for entrusted asset management □ Applicable √ Not applicable (2) Entrusted Loans □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Continuing Major Contracts □ Applicable √ Not applicable 5. Other Major Contracts □ Applicable √ Not applicable No such cases in the Reporting Period. XVIII Corporate Social Responsibility (CSR) 1. Measures Taken to Fulfill CSR Commitment The Company is under compliance management and stable operation, creates economic benefit, performs its social liability and actively participates in construction of harmonious society. By taking "Provide Green Power for A Better Life" as its corporate mission and "Customer First, Staff First, Rewarding Shareholders and Benefiting the Society" as its core value, the Company pays attention to the interests of all parties, earnestly fulfill the responsibilities and obligations due to shareholders, employees, consumers, suppliers and other parties, and support and assist common development. Over the years, the Company has formed an enterprise culture system of "Love Country as well as Love Factory, Work Down to Earth as well as Good at Innovation, Strict in Discipline, and Noble in Ethics", and strives to achieve the coordination and unity between enterprise development and ecological and environmental protection as well as social harmony. I. Compliance management for ensuring interests of all shareholders. The Company has established its perfect corporate governance structure and sound internal control system, strengthens risk management and internal supervision and improves scientific decision level in accordance with the Companies Law, Securities Law, Code of Corporate Governance for Listed Companies, Listing Rules of Shenzhen Stock Exchange and other laws and regulations, standard documents on corporate governance for listed companies and articles of association of the Company. In the report period, the general meeting, board of directors, board of supervisors of the Company were convened, and decision-making process was performed in accordance with laws, regulations and rules, exercise of duties and powers was subject to relevant laws and regulations, and interests of all shareholders were properly protected. The information disclosure of the Company was in compliance with relevant rules and the disclosed information was true, accurate and complete so as to ensure shareholders’ right to learn the truth and provide sufficient investment information for investors. The Company properly managed investors, kept smooth and effective communication with shareholders and fairly treated all shareholders. The Company attached importance to management of insider information and no circumstance of insider dealing or impairing shareholder’s interest existed in the Company in the report period. II. Love employees and protect their legal rights and interests. The Company signs labor contracts with its staff in accordance with the Labor Law, Labor Contract Law, Social Insurance Law and other laws and regulations, protect legal rights and interests of employees, pays social insurances for employees on schedule, carries out physical examinations for employees and guarantees their leave interest, including annual leave, marriage leave and maternity leave. The Company pays attention to major family affairs of employees, assists them in balancing work and life, and promptly provides spirit comfort and actual assistance at the crucial moment. By establishing a 38 Changchai Company, Limited Annual Report 2020 reasonable human resource management system and perfect performance examination system, the Company pays close attention to personnel training, builds up steady and harmonious labor capital relationship, improves sense of belonging and sense of collective honor of employees and promotes common growth of employees and enterprise. III. Maintain honesty business operation and balance interests of all concerned parties. The Company keeps honesty business operation on the basis of mutual benefit and has obtained honors such as Quality Benchmark Enterprise of China, Top 100 Quality Inspection Benchmark Enterprise. The Company always insists on the moral standard of “good faith”, strengthens quality management, provides satisfactory services to customers and maintains long-term cooperation with suppliers. The Company first selects those suppliers who own advanced technologies and supply green products, and supports their technical progress and environmental protection efforts. The Company keeps improving service level based on market demand and situation change, provides efficient services for customers and establishes a perfect service systems. IV. Follow the strategic development direction, insist on major business and extend scope of business. Based on the national policies and actual situation, the Company takes the opportunity of emission standard updating of non-road machinery and rural construction to promote the research and development of agricultural machinery products and speeds up product updating, and promotes the supporting application of products. The Company has continuously implemented the measures of energy conservation and emission reduction, improved the efficiency of energy utilization, and achieved remarkable results in cost and expenditure reduction, and it has promoted the Company to continuously improve its governance system and enhance its management level. Under the support of relevant government departments, the Company proceeds the construction of industrial parks in accordance with urban planning in an orderly manner to form industrial agglomeration for the implement of urban planning and a green and harmonious living environment. The Company utilizes financing platforms to actively promote re-financing for project development and industry transformation and upgrade. The Company also actively extends new investment projects and improves its competiveness. V. Actively carry out charity activities. The Company supports education. After Changchai Hope Primary School was built up 25 years ago, the Company donated several times for the school to support its operation and improve its teaching level; the Company set up Changchai Award Fund in colleges and universities and paid RMB1 million in total for encouraging students to work hard and serve our motherland. The Company actively participates in relevant charity activities and donates difficult residents every year. The Company always remembers its social responsibilities and does not forget social contribution in business operation, for example, help farmers, donation for fighting blood; encourages its employees to participate in blood donation, volunteer service, environmental protection and other beneficial activities. 2. Measures Taken for Targeted Poverty Alleviation (1) Plans Responding to the call of the Central Committee of the Communist Youth League of China, Province, City and Changzhou Hope project, the Company participates in poverty alleviation activities and supports the business of education of China. (2) Summary of the Related Work Done in the Reporting Period During the Reporting Period, the Company donated RMB250,000 to the Hope Primary School that we built up in 1995 by the Company, for its further development. (3) Results Measurement Indicator Quantity/Progress unit 1. General results —— —— 39 Changchai Company, Limited Annual Report 2020 Of which: 1.1 Funds Ten thousand 25 1.2 Materials converted into cash Ten thousand 1.3 Number of persons out of poverty Person which were helped to set up file card 2. Itemized results —— —— 2.1 Out of poverty by industrial development —— —— 2.2 Out of poverty by transferring employment —— —— 2.3 Out of poverty by relocation —— —— 2.4 Out of poverty by education —— —— Of which: 2.4.1 Invested amounts to subsidize Ten thousand poor students 2.4.2 Number of poor students Person subsidized 2.4.3 Invested amounts to improve Ten thousand 25 education resources in poverty-stricken area 2.5 Out of poverty by improving health —— —— 2.6 Out of poverty by protecting ecological —— —— environment 2.7 Subsidy for the poorest —— —— 2.8 Social poverty alleviation —— —— 2.9 Other items —— —— 3. Accolades received (for what and at what level) —— —— The case of Changchai donating in construction and development of the Hope primary school became an excellent case on poverty alleviation in the agricultural machinery industry of China. (4) Subsequent Plans In 2020, the Fifth Plenum of the 17th CPC Central Committee listed “consolidating poverty alleviation result and overall implementation of rural revitalization strategy” the major targets of the economic and social development in the “fourteenth five-year plan”. The Company will actively participate in poverty alleviation work according to the call of the Communist Party of China and the governmental planning and make its own contribution for realizing common prosperity in China. 3. Issues Related to Environmental Protection Indicate by tick mark whether the Company or any of its subsidiaries is identified as a major polluter by the environmental protection authorities. □ Yes √ No The Company and its subsidiaries are not the major polluter identified by the environmental protection authorities of China during the Reporting Period. The Company attaches great importance to the work of environmental protection, and requires the subsidiaries to build corresponding environmental protection facilities according to the actual situation of production and operation, strictly controlling the pollutants, like “waste gas, waste water, and waste residue” generated from the production process. XIX Other Significant Events √ Applicable □ Not Applicable 1. Non-public offering matters in 2020 On 9 April 2020, the 24th meeting of the 8th board of directors of the Company discussed and approved the Non-public Offering Plan of the Company for 2020. The Company intended to make non-public issuance of 40 Changchai Company, Limited Annual Report 2020 domestic common shares listed in RMB to specific objects, and this matter was approved by the controlling shareholder Changzhou Investment Group Co., Ltd. and was reviewed and adopted in the meeting of shareholders of 2019. On 18 September 2020, the temporary meeting of the board of directors of the Company discussed and approved the relevant revision matters concerning non-public issuance of shares, the Company supplemented and improved the foresaid plan according to the relevant revision matters, and prepared the Non-public Offering Plan of the Company for 2020 (Revision Version), which was discussed and approved in the second temporary meeting of shareholders in 2020. The application of the Company about non-public offering in 2020 was reviewed and approved by the Issuance Examination Commission of China Securities Regulatory Commission and the Company received the written approval document from China Securities Regulatory Commission. Now the Company is actively carrying out relevant work on non-public offering. XX Significant Events of Subsidiaries □ Applicable √ Not applicable 41 Changchai Company, Limited Annual Report 2020 Part VI Share Changes and Shareholder Information I. Share Changes 1. Share Changes Unit: share Increase/decrease in the Before After Reporting Period (+/-) Sh Sha are res s as as div div ide ide nd Ne nd con Su Percenta w co ver Oth bt Percenta Shares Shares ge (%) iss nv ted er ot ge (%) ues ert fro al ed m fro cap m ital pr res ofi erv t es I. Restricted shares 0 0.00% 0 0.00% 1.Shares held by the state 0 0.00% 0 0.00% 2. Shares held by 0 0.00% 0 0.00% state-own Legal-person 3. Shares held by other 0 0.00% 0 0.00% domestic investors Among which: shares held by domestic legal 0 0.00% 0 0.00% person Shares held by domestic 0 0.00% 0 0.00% natural person 4.Oversea shareholdings 0 0.00% 0 0.00% Among which: shares held by oversea legal 0 0.00% 0 0.00% person Shares held by oversea 0 0.00% 0 0.00% natural person II. Unrestricted shares 561,374,326 100.00% 561,374,326 100.00% 1. RMB ordinary shares 411,374,326 73.28% 411,374,326 73.28% 2. Domestically listed 150,000,000 26.72% 150,000,000 26.72% foreign shares 42 Changchai Company, Limited Annual Report 2020 3. Overseas listed foreign 0 0.00% 0 0.00% shares 4. Other 0 0.00% 0 0.00% III. Total shares 561,374,326 100.00% 561,374,326 100.00% Reasons for share changes: □ Applicable √ Not applicable Approval of share changes: □ Applicable √ Not applicable Transfer of share ownership: □ Applicable √ Not applicable Progress on any share repurchases: □ Applicable √ Not applicable Progress on reducing the repurchased shares by means of centralized bidding: □ 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 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 1. Shareholders and Their Shareholdings at the Period-End Unit: share Number of Number of preferred ordinary Number of shareholders with Number of shareholders at preferred resumed voting ordinary 47,770 the month-end 57,470 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 Shareho Total shares Increase/d Shares in pledge Name of Nature of Restricted Unrestricted lding held at the ecrease in or frozen shareholder shareholder shares held shares held percent period-end the Status Shares 43 Changchai Company, Limited Annual Report 2020 age Reporting Period Changzhou State-owned Investment Group 30.43% 170,845,236 170,845,236 legal person Co., Ltd China Construction Bank- First State Cinda New Other 1.47% 8,233,132 8,233,132 Energy Industry Stock Type Securities Investment Fund KGI ASIA Foreign 0.57% 3,189,845 3,189,845 LIMITED legal person Domestic Chen Jian natural 0.49% 2,764,000 2,764,000 person Domestic Li Suinan natural 0.28% 1,548,100 1,548,100 person Domestic Huang Guoliang natural 0.27% 1,528,891 1,528,891 person Domestic Zeng Li natural 0.24% 1,360,000 1,360,000 person Domestic Chen Hengjun natural 0.23% 1,281,000 1,281,000 person Domestic Xue Hong natural 0.22% 1,240,000 1,240,000 person Domestic Hu Wenyong natural 0.22% 1,230,066 1,230,066 person Strategic investor or general legal person becoming a top-10 N/A ordinary shareholder due to rights issue 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. 44 Changchai Company, Limited Annual Report 2020 Above shareholders involved in entrusting/being entrusted with N/A voting rights and giving up voting rights Top 10 unrestricted shareholders Unrestricted shares Shares by type Name of shareholder held at the period-end Type Shares Changzhou Investment Group 170,845,236 RMB ordinary shares 170,845,236 Co., Ltd China Construction Bank- First State Cinda New Energy 8,233,132 RMB ordinary shares 8,233,132 Industry Stock Type Securities Investment Fund KGI ASIA LIMITED 3,189,845 Domestically listed foreign shares 3,189,845 Chen Jian 2,764,000 RMB ordinary shares 2,764,000 Li Suinan 1,548,100 Domestically listed foreign shares 1,548,100 Huang Guoliang 1,528,891 Domestically listed foreign shares 1,528,891 Zeng Li 1,360,000 RMB ordinary shares 1,360,000 Chen Hengjun 1,281,000 RMB ordinary shares 1,281,000 Xue Hong 1,240,000 Domestically listed foreign shares 1,240,000 Hu Wenyong 1,230,066 Domestically listed foreign shares 1,230,066 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 Top 10 ordinary shareholders The shareholders Chen Jian held 900,000 shares of the Company through the involved in securities margin credit accounts. trading 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 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 representativ Date of Unified social credit Principal activity shareholder e/person in establishment code charge Property Changzhou Investment Chen Limin 20 June 2002 91320400467283980X investment and Group Co., Ltd management Controlling shareholder’s None 45 Changchai Company, Limited Annual Report 2020 holdings in other listed companies at home or 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 Unified social Name of actual controller Principal activity e/person in establishment credit code charge State-owned Assets Supervision and Administration Liu Yuedong 01411025-1 Not applicable Commission of Changzhou Municipal People’s Government Other listed companies at home or abroad controlled by the actual None 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: According to the document of Changzhou Municipal People's Government (CZF[2006] No. 62]),the controlling shareholder Changzhou Investment Group Co., Ltd. is the enterprise to perform the investor role for the State-owned Assets Supervision and Administration Commission of Changzhou Municipal People’s Government as authorized by Changzhou Municipal People’s Government. Thus, the State-owned Assets Supervision and Administration Commission of Changzhou Municipal People’s Government is the actual controller of the 46 Changchai Company, Limited Annual Report 2020 Company. Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset management. □ Applicable √ Not applicable 4. Other 10% or Greater Corporate Shareholders □ Applicable √ Not applicable 5. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller, Reorganizer and Other Commitment Makers □ Applicable √ Not applicable 47 Changchai Company, Limited Annual Report 2020 Part VII Preferred Shares □ Applicable √ Not applicable No preferred shares in the Reporting Period. 48 Changchai Company, Limited Annual Report 2020 Part VIII Convertible Corporate Bonds □ Applicable √ Not applicable No convertible corporate bonds in the Reporting Period. 49 Changchai Company, Limited Annual Report 2020 Part IX Directors, Supervisors, Senior Management and Staff I Change in Shareholdings of Directors, Supervisors and Senior Management Ending Incumben Gende Name Office title Age Start of tenure End of tenure shareholding t/Former r (share) Shi Chairman of the Incumben Board Male 57 18 October 2016 Up to now 0 Xinkun t Zhang Director, Incumben Male 55 18 October 2016 Up to now 0 Xin General Manager t Incumben Lin Tian Director Male 58 17 December 2018 Up to now 0 t Director, Incumben Xu Yi Vice-general Male 57 16 April 2020 Up to now 0 t Manager Director, Chief Incumben Jiang He Male 49 16 April 2020 Up to now 0 Accountant t Yang Incumben Director Male 49 16 April 2020 Up to now 0 Feng t Wang Independent Incumben Male 58 16 April 2020 Up to now 0 Mancang director t Xing Independent Incumben Male 67 16 April 2020 Up to now 0 Min director t Zhang Independent Incumben Femal 51 16 April 2020 Up to now 0 Yan director t e Yin Vice-general Incumben Male 57 18 October 2016 Up to now 0 Lihou Manager t Xie Vice-general Incumben Guozhon Male 52 16 April 2020 Up to now 0 Manager t g Sun Vice-general Incumben Jianzhon Male 49 16 April 2020 Up to now 0 Manager t g 50 Changchai Company, Limited Annual Report 2020 He Chairman of the Incumben Jianguan Supervisory Male 57 17 December 2020 Up to now 0 t g Committee Lu Incumben Zhonggu Supervisor Male 54 18 October 2016 Up to now 0 t i Incumben Liu Yi Supervisor Male 52 18 October 2016 Up to now 0 t Chen Incumben Femal Supervisor 38 16 April 2020 Up to now 0 Lijia t e Ge Incumben Femal Supervisor 51 16 April 2020 Up to now 0 Jiangli t e He Secretary of the Incumben Male 42 18 October 2016 Up to now 0 Jianjiang Board t Director, Shi Vice-general Former Male 59 18 October 2016 16 April 2020 0 Jianchun Manager Zhang Femal Director Former 63 18 October 2016 16 April 2020 0 Qiong e Li Independent Former Male 47 18 October 2016 16 April 2020 0 Minghui director Independent Jia Bin Former Male 43 18 October 2016 16 April 2020 0 director Feng Independent Former Male 64 18 October 2016 16 April 2020 0 Genfu director Liu Vice-general Former Male 59 18 October 2016 16 April 2020 0 Xiaoyun Manager Wei Vice-general Former Male 58 18 October 2016 16 April 2020 0 Jinxiang Manager Ni Chairman of the Minglian Supervisory Former Male 54 18 October 2016 17 December 2020 0 g Committee 51 Changchai Company, Limited Annual Report 2020 Zhu Min Supervisor Former Male 57 18 October 2016 16 April 2020 0 Total -- -- -- -- -- -- 0 II Change of Directors, Supervisors and Senior Management Type of Name Office title Date of change Reason for change change Director, Left for Left for expiration of Shi Jianchun Vice-general expiration of 16 April 2020 appointment Manager appointment Left for Left for expiration of Zhang Qiong Director expiration of 16 April 2020 appointment appointment Left for Left for expiration of Li Minghui Independent director expiration of 16 April 2020 appointment appointment Left for Left for expiration of Jia Bin Independent director expiration of 16 April 2020 appointment appointment Left for Left for expiration of Feng Genfu Independent director expiration of 16 April 2020 appointment appointment Left for Vice-general Left for expiration of Liu Xiaoyun expiration of 16 April 2020 appointment Manager appointment Left for Vice-general Left for expiration of Wei Jinxiang expiration of 16 April 2020 Manager appointment appointment Chairman of the Ni Mingliang Supervisory Left 17 December 2020 Job change Committee Left for Left for expiration of Zhu Min Supervisor expiration of 16 April 2020 appointment appointment Xu Yi Director Elected 16 April 2020 General election Vice-general Xu Yi Appointed 16 April 2020 Appointed by the Board Manager Jiang He Director Elected 16 April 2020 General election 52 Changchai Company, Limited Annual Report 2020 Jiang He Chief Accountant Appointed 16 April 2020 Appointed by the Board Yang Feng Director Elected 16 April 2020 General election Wang Mancang Independent director Elected 16 April 2020 General election Xing Min Independent director Elected 16 April 2020 General election Zhang Yan Independent director Elected 16 April 2020 General election Left for Left for expiration of Xie Guozhong Supervisor expiration of 16 April 2020 appointment appointment Vice-general Xie Guozhong Appointed 16 April 2020 Appointed by the Board Manager Vice-general Sun Jianzhong Appointed 16 April 2020 Appointed by the Board Manager Chairman of the He Jianguang Supervisory Elected 17 December 2020 Elected Committee Chen Lijia Supervisor Elected 16 April 2020 General election Ge Jiangli Supervisor Elected 16 April 2020 General election III 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 vice-president of Changzhou Investment Group Co., Ltd., the Chairman of the Board and Party Secretary in the Company and the director in Jiangsu Housheng New Energy Technology 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 in Changzhou Investment Group Co., Ltd. Now he is the vice president, director of 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. 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 53 Changchai Company, Limited Annual Report 2020 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 the director and GM of Shanghai Linghe Asset Management Partnership (LP), Daiwa Securities China Co., Ltd., and the director of the Company. Wang Mancang: successively served as a teacher, lecturer, 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, and the director of Institute of Public Economics, counselor of Xi'an municipal government, expert of the "financial group" of the government decision advisory committee, independent director of Xi'an Chenxi Aviation Technology Corp., Ltd., Shaanxi Construction Machinery Co., Ltd, Chang'an International Trust Co., Ltd., Focuslight Technologies Inc. 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 Secretary-General of China Internal Combustion Engine Industry Association (CICEIA), Independent Director of ZYNP Corporation, Zhejiang Zhongjian Technology Co., Ltd., Jiangsu Yunyi Electric Co., Ltd., and 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, independent director of Jiangsu Changhai Composite Materials Co., Ltd., 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: Now he acts as General Manager Assistant of the Company, General Manager and Secretary of Party General Branch of the Sales Company, Supervisor and Deputy GM of the Company and Chairman of the Board of Changchai Wanzhou. 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. 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 a member of the Party Committee of Changzhou Investment Group Co., Ltd., and chairman of the board of supervisors of the Company. Chen Lijia: general manager of risk control legal department of Changzhou Investment Group Co., Ltd. and supervisor of the Company. Ge Jiangli: director and supervisor of Human Resources Department of the Company. Lu Zhonggui: Now he acts as Minister of political Department of the Company, Office Director, Secretary of 54 Changchai Company, Limited Annual Report 2020 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 Deputy Director of Audit Department and employee supervisor of the Company, Changchai Wanzhou, Changchai Benniu, Housheng Investment, Housheng Agricultural Equipment, Changchai Robin, Changchai Machinery and Xingsheng Real Estate Management. He Jianjiang: He successively acted as the Section Member, Assistant Minister, Vice Minister of Investment and Development Department, Representative of Securities in the Company. Now he is Secretary of the Board and Minister of Investment and Development Department in our Company, and Director GM of Housheng Investment, Director of Housheng Agricultural Equipment and Changchai Wanzhou. Offices held concurrently in shareholding entities: √ Applicable □ Not applicable Remuneration or allowance Office held in the Start of End of Name Shareholding entity from the shareholding entity tenure tenure shareholding entity Changzhou Investment Vice president, December Lin Tian Yes Group Co., Ltd. director 2017 Changzhou Investment GM of Risk Control Chen Lijia March 2018 Yes Group Co., Ltd. Legal Department Changzhou Investment Shi Xinkun Vice president No Group Co., Ltd. He Changzhou Investment Member of the Party January Yes Jianguang Group Co., Ltd. Committee 2019 Notes None 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 Yang Feng Daiwa Securities (China) Co.Ltd. Director , GM 1 January 2021 Yes Finance Department of School of Economics & Management Teacher 1 October 1996 Northwest University Wang Xi’an Government Consultant 1 October 2015 Yes Mancang Decision-making Advisory Finance group 1 April 2017 Committee of Xi’an Government leader Shaanxi Securities Research President 1 October 2017 Association 55 Changchai Company, Limited Annual Report 2020 Chang'an International Trust Independent 1 July 2018 Co.,Ltd. Director Shaanxi Construction Machinery Independent 16 November 2018 Co., Ltd. Director Independent 5 Xi’an Chenxi Aviation Technology Director 26 September 2018 December Corp.,Ltd. 2020 Xi’an Focuslight Technology Co., Independent 1 October 2018 Ltd. Director China Internal Combustion Engine Secretary-general 1 August 2008 Industry Association Full-time Tianjin University 1 June 2019 professor Independent Xing Min ZYNP Corporation 29 January 2016 Yes Director Independent Zhongjian Technology Co.,Ltd 20 June 2017 Director Independent Jiangsu Yunyi Electronic Co.,Ltd. 15 July 2019 Director Associate Jiangsu University of Technology 1 August 2008 professor Jiangsu Changhai Composite Independent 16 February 2016 Materials Co., Ltd. Director Independent S-Enjoy Service Group Co., Zhang Yan non-executive 20 October 2018 Yes Limited director Wuxi SAHAT Electric Technology Independent 2 November 2020 Co., Ltd. Director Jiangsu Tianmu Lake Tourism Co., Independent 8 February 2021 Ltd. 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: □ Applicable √ Not applicable IV Remuneration of Directors, Supervisors and Senior Management Decision-making procedure, determination basis and actual payments of remuneration for directors, supervisors and senior management: In 2020, 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. The Director Lin Tian ,Supervisor He Jianguang and Chen Lijia obtained salaries in shareholders' entities. Remuneration of directors, supervisors and senior management for the Reporting Period 56 Changchai Company, Limited Annual Report 2020 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 57 Incumbent 81.5 No Board Director, 81.5 Zhang Xin Male 55 Incumbent No General Manager Lin Tian Director Male 58 Incumbent 0 Yes Director, Xu Yi Vice-general Male 57 Incumbent 72.12 No Manager Director, Chief Jiang He Male 49 Incumbent 66.22 No Accountant Yang Feng Director Male 49 Incumbent 0 No Wang Independent Male 58 Incumbent 7.5 No Mancang director Independent Xing Min Male 67 Incumbent 7.5 No director Independent Zhang Yan Female 51 Incumbent 7.5 No director Vice-general Yin Lihou Male 57 Incumbent 71.09 No Manager Vice-general Xie Guozhong Male 52 Incumbent 70.72 No Manager Vice-general Sun Jianzhong Male 49 Incumbent 67.83 No Manager Chairman of the He Jianguang Supervisory Male 57 Incumbent 0 Yes Committee Chen Lijia Supervisor Female 38 Incumbent 0 Yes Lu Zhonggui Supervisor Male 54 Incumbent 17.19 No Ge Jiangli Supervisor Female 51 Incumbent 17.41 No Liu Yi Supervisor Male 52 Incumbent 17.52 No Secretary of the He Jianjiang Male 42 Incumbent 48.41 No Board 57 Changchai Company, Limited Annual Report 2020 Independent Li Minghui Male 47 Former 1.5 No director Independent Jia Bin Male 43 Former 1.5 No director Independent Feng Genfu Male 64 Former 1.5 No director Chairman of the Ni Mingliang Supervisory Male 54 Former 70.58 No Committee Total -- -- -- -- 709.09 -- Equity incentives for directors, supervisors and senior management in the Reporting Period: □ Applicable √ Not applicable V Employees 1. Number, Functions and Educational Backgrounds of Employees Number of in-service employees of the Company as the 2,308 parent Number of in-service employees of major subsidiaries 555 Total number of in-service employees 2,863 Total number of paid employees in the Reporting Period 2,863 Number of retirees to whom the Company as the parent or its 0 major subsidiaries need to pay retirement pensions Functions Function Employees Production 1,919 Sales 211 Technical 354 Financial 39 Administrative 322 Other 18 Total 2,863 Educational backgrounds Educational background Employees Junior high school graduates and below 1,259 High school graduates 826 College graduates and technical secondary school graduates 499 Bachelors 260 Masters and above 19 Total 2,863 2. Employee Remuneration Policy The Company always adhered to the principle of tilting the remuneration incentive mechanism towards excellent 58 Changchai Company, Limited Annual Report 2020 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 2020 Part X 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 regulatory documents 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 in Business, Personnel, Asset, Organization and Financial Affairs The Company was totally 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. 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 Index to Investor disclosed Meeting Type participati Date of the meeting Disclosure date informati on ratio on The 1st Extraordinary Extraordinary General Meeting of General 31.35% 16 April 2020 17 April 2020 2020-026 2020 Meeting The 2019 Annual Annual General 34.88% 8 May 2020 9 May 2020 2020-036 General Meeting Meeting The 2nd Extraordinary Extraordinary General 32.89% 12 October 2020 13 October 2020 2020-061 General Meeting of Meeting 2020 60 Changchai Company, Limited Annual Report 2020 The 3rd Extraordinary Extraordinary General 30.49% 17 December 2020 18 December 2020 2020-079 General Meeting of Meeting 2020 2. Special General Meetings Convened at the Request of Preferred Shareholders with Resumed Voting Rights □ Applicable √ Not applicable V Performance of Duty by Independent Directors in the Reporting Period 1. Attendance of Independent Directors at Board Meetings and General Meetings Attendance of independent directors at board meetings and general meetings Total The number of Board independe board Board Board meetings nt director meetings Board meetings meetings the failed to General Independent the meetings attended attended independe attend two meetings director independe attended by way of through a nt director consecutiv attended nt director on site telecommu proxy failed to e board was nication attend meetings eligible to (yes/no) attend Xing Min 8 6 2 0 0 No 3 Wang 8 6 2 0 0 No 3 Mancang Zhang Yan 8 6 2 0 0 No 3 Li Minghui 3 3 0 0 0 No 1 Feng Genfu 3 3 0 0 0 No 1 Jia Bin 3 2 0 1 0 No 1 2. Objections Raised by Independent Directors on Matters of the Company Indicate by tick mark whether any independent directors raised any objections on any matter of the Company. □ Yes √ No No such cases in the Reporting Period. 3. Other Information about the Performance of Duty by Independent Directors Indicate by tick mark whether any suggestions from independent directors were adopted by the Company. √ Yes □ No Suggestions from independent directors adopted or not adopted by the Company: The independent 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 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, and given 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 the independent directors upon the significant events and adopted them. VI Performance of Duty by Specialized Committees under the Board in the Reporting Period 1. Summary Report on Responsibility Performance of the Audit Committee under the Board of Directors: 61 Changchai Company, Limited Annual Report 2020 During the Reporting Period, the Audit Committee under the Board of Directors performed its duty according to the diligent and responsible principle, based on relevant regulations such as the Company Law, the Guidelines for Corporate Governance of Listed Companies, the Articles of Association as well as provisions in the Enforcement Regulation of the Audit Committee under the Board of Director of the Company. (1) Major work of Audit Committee in Reporting Period: 1) Periodically examined the working plan and execution of inner control of the Company; 2) Communicated fully with the CPAs firm on plan and content of audit; 3) Urged the CPAs firm to summit report as scheduled; 4) The Audit Committee reviewed the financial statements of the Company before the audit and after the issuance of preliminary opinion by the CPAs firm. After it communicated with the CPAs firm on some important items as well as major accounting estimation items, audit adjustment items and important accounting policies which were likely to have potential influence on the financial statements, it considered that the financial statements reflected the overall situation of the Company authentically, accurately and completely. 5) Submitted the summary report on annual audit of the Company conducted by the CPAs firm to the Board of Directors; (2) Written opinions on financial statements of the Company issued by the Audit Committee 1) On 18 January 2021, the Audit Committee the Audit Committee communicated with the Chairman of the Board, GM, Finance Director and the CPAs firm on some important items including the overall audit plan, members of the audit group, risk judgment, the testing and evaluation methods for risks and fraudulent practices and key points of the annual audit. 2) With regard to the audited financial statements 2020, on 6 April 2021, the Audit Committee made the following resolution: the Audit Committee reviewed the financial statements 2020 audited by auditors, and believed that the said financial statements faithfully reflected the financial position of the Company as at 31 December 2020, as well as the business results and cash flows in 2020 in all material aspects. It agreed to submit the statements to the Board of Directors for examination and approval. (3) Summary report on the audit work conducted by the CPAs firm in 2020: According to the annual audit plan jointly formulated by the Audit Committee and Gongzheng Tianye Certified Public Accountants (Special General Partnership), auditors communicated fully with the management personnel of the Company and members of the Audit Committee on the consolidation of financial statements, accounting adjustment, accounting policy and other accounting work needed to be improved, which helped both parties acquire a deeper understanding about the operation, financial process and implementation of the New Accounting Standards for Business Enterprises in the Company. With such understanding, the annual audit accountants would make more mature judgment to issue a fair audit conclusion. The Audit Committee held that the CPAs firm conducted the audit strictly in accordance with provisions stipulated in the Independent Auditing Standards for CPAs of the PRC. The time of audit was sufficient, and the auditors with excellent ability to practice were deployed reasonably. The issued auditor’s report fully reflected the financial position of the Company as at 31 December 2020, as well as the business results and cash flows in 2020, and the audit conclusion was in line with the actual situation of the Company. 2. Summary Report on Responsibility Performance of Remuneration & Appraisal Committee under the Board of Directors: The Remuneration & Appraisal Committee under the Board of Directors was composed of 3 Directors, including 2 Independent Directors and 1 Non-independent Director. And one of the Independent Directors assumed the position of Chairman of the Committee. In the Reporting Period, the Remuneration & Appraisal Committee raised the proposal on implementing the 62 Changchai Company, Limited Annual Report 2020 appraisal of senior executives in 2020, based on the fulfillment of the main financial indicators and operation targets in 2020, which were determined in the Contract for Appraisal of Senior Executives in 2020. In the Reporting Period, based on relevant regulations and rules, the Remuneration & Appraisal Committee examined the remuneration of the Company’s senior executives in 2020 and issued opinions as follows: The Remuneration & Appraisal Committee held that, the remuneration of the Company’s senior executives in 2020 was in accordance with provisions in the Contract for Appraisal of Senior Executives in 2020, as well as the laws, regulations and rules of the Company. 3. Summary Report on Responsibility Performance of Strategic Development Committee under the Board of Directors: The Strategic Development Committee under the Board of Directors was composed of 3 Directors, including 1 Independent Directors, 1 External Director and 1 Internal Director. And the Chairman of the Board assumed the position of Chairman of the Committee. The Strategic Development Committee under the Board of Directors did some research on the development direction of the Company in the future according to the Company Law, the Guidelines for Corporate Governance of Listed Companies, the Articles of Association as well as Rules of Procedures for Strategic Development Committee under the Board of Directors. VII 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. VIII Appraisal of and Incentive for Senior Management The Company has established a fair and objective performance appraisal and incentive restraint mechanism for senior management staffs. The annual remuneration of senior management staffs consisted of the basic annual salary and performance appraisal bonus, and the basic annual salary was distributed monthly with a certain proportion, while the performance appraisal bonus was distributed after being appraised according to the appraisal scheme for senior management staffs signed between the Board of Directors and the managers for each year. IX Internal Control 1. Material Internal Control Weaknesses Identified for the Reporting Period □ Yes √ No 2. Internal Control Self-Evaluation Report Disclosure date of the internal 15 April 2021 control self-evaluation report Index to the disclosed internal 2021-012 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 63 Changchai Company, Limited Annual Report 2020 The Company classified the defects as serious defect, important defect and general defect according to the influence degree from the internal control: (1) Serious defect: refers to one or multiple groups with control defect Defects with the following which may lead the enterprise random characteristics should be seriously deviates the control target; recognized as serious defect: (2) Important defect: refers to one or 1) Seriously violated the national multiple groups with control defect laws and administrative with the severity and the economic regulations and the normative results lower than the great defect documents; but may still lead the enterprise 2) “three significant one great” seriously deviates the control target; event had not been through the (3) General defect: refers to other collective decision-making defect except for the great defect process; and significant defect. 3) the significant events involved Nature standard Nature standards: with the production and defects with the following random operation of the Company lacked characteristics should be recognized of systematic control or the as serious defect: institutional system was invalid; 1) the defect involves with the 4) the internal control of the malpractice of the Directors, information disclosure was Supervisors and Senior Executives; invalid, which led the Company 2) revised the disclosed financial be open condemned by the report; supervision department; 3) CPAs discovered the great 5) the serious defect from the misstatement among the current assessment results of the internal financial statement while which control had not been revised. 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. 64 Changchai Company, Limited Annual Report 2020 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 2020 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 X 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 2020. Independent auditor’s report on internal control disclosed Disclosed or not Disclosure date 15 April 2021 Index to such report 2021-012 disclosed Type of the auditor’s opinion Unmodified unqualified opinion Material weaknesses in internal control not related None to financial reporting Indicate by tick mark whether any modified opinion is expressed in the independent auditor’s report on the 65 Changchai Company, Limited Annual Report 2020 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 66 Changchai Company, Limited Annual Report 2020 Part XI Corporate Bonds Does the Company have any corporate bonds publicly offered on the stock exchange, which were outstanding before the date of this Report’s approval or were due but could not be redeemed in full? No. 67 Changchai Company, Limited Annual Report 2020 Part XII Financial Statements I Independent Auditor’s Report Type of the independent auditor’s opinion Unmodified unqualified opinion Date of signing this report 13 April 2021 Gongzheng Tianye Certified Public Accountants Name of the independent auditor (Special General Partnership) No. of the auditor’s report SGW[2021]ANo.359 Name of the certified public accountants Dai Weizhong, Xu Wenxiang 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 2020, 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 2020 and the consolidated and parent business performance and cash flow for 2020. 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 of accounting policies governing revenue recognition, please refer to the Note III-28 Revenue and the Note V-35 Operating Revenue and Cost of Sales. The operating revenue of the Company in 2020 is RMB2,296,464,700. 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. 2. Response for audit (1) Know the key internal control related to revenue recognition, evaluate whether its design and execution are 68 Changchai Company, Limited Annual Report 2020 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) Check the supporting documents related to revenue recognition, such as sales contracts, order form, invoice for sales, shipping order, declaration for exportation, and 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 Please refer to the accounting policies stipulated in the Note III-10 Impairment of Financial Instruments and the Note V-4 Accounts Receivable. On 31 December 2020, as for accounts receivable of the Company, the carrying amount was RMB563.1894 million, the bad debt provision was RMB166.0354 million, and the carrying value was RMB397.154 million, accounting for 10.05% of total assets at the period-end. The bad debt of accounts receivable due to failure of recovery at maturity or failure of recovery will generate significant impacts on financial statements, thus, we identify the impairment of accounts receivable as a key audit item. 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) 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; (4) Understand the reasons for accounts receivable, check Changchai’s reconciliation and collection during the reporting period and any other data related to payment recovery, verify and confirm its accounts receivable without transaction dispute at the end of the reporting period, as well as the adequacy of bad debt provision for accounts receivable. (5) 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 2020 Annual Report other than 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 69 Changchai Company, Limited Annual Report 2020 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 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 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 70 Changchai Company, Limited Annual Report 2020 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 Dai Weizhong (Special General Partnership) (Engagement Partner) Chinese CPA Xu Wenxiang Wuxi China 13 April 2021 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 2020 Unit: RMB Item 31 December 2020 31 December 2019 Current assets: Monetary assets 760,728,222.85 638,589,260.09 Settlement reserve Interbank loans granted Held-for-trading financial assets 11,500,272.00 13,050,000.00 Derivative financial assets Notes receivable 600,140,938.05 606,283,023.05 Accounts receivable 397,154,016.49 419,302,056.87 Accounts receivable financing Prepayments 9,357,840.75 12,968,746.16 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other receivables 6,212,062.80 9,703,390.94 Including: Interest receivable Dividends receivable Financial assets purchased under resale agreements Inventories 606,680,340.55 473,359,168.90 71 Changchai Company, Limited Annual Report 2020 Contract assets Assets held for sale Current portion of non-current assets Other current assets 27,299,362.72 6,421,275.47 Total current assets 2,419,073,056.21 2,179,676,921.48 Non-current assets: Loans and advances to customers Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity investments Investments in other equity 685,137,950.87 532,886,000.00 instruments Other non-current financial assets 98,732,938.63 77,952,101.63 Investment property 46,239,326.03 48,447,666.83 Fixed assets 454,181,555.68 457,722,667.32 Construction in progress 66,502,432.41 91,358,156.24 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 158,870,631.71 99,699,450.26 Development costs Goodwill Long-term prepaid expense 13,693.20 53,497.80 Deferred income tax assets 4,231,873.15 1,023,863.04 Other non-current assets 19,971,006.56 Total non-current assets 1,533,881,408.24 1,309,143,403.12 Total assets 3,952,954,464.45 3,488,820,324.60 Current liabilities: Short-term borrowings 22,000,000.00 22,000,000.00 Borrowings from the central bank Interbank loans obtained Held-for-trading financial liabilities Derivative financial liabilities Notes payable 595,346,000.00 403,035,000.00 Accounts payable 612,757,392.46 525,625,016.89 Advances from customers 661,612.17 31,789,001.78 Contract liabilities 35,944,517.15 Financial assets sold under repurchase agreements Customer deposits and interbank 72 Changchai Company, Limited Annual Report 2020 deposits Payables for acting trading of securities Payables for underwriting of securities Employee benefits payable 50,127,161.47 44,559,015.79 Taxes payable 2,869,485.41 9,094,382.58 Other payables 197,545,076.08 205,064,145.10 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 5,233,947.12 1,177,712.38 Total current liabilities 1,522,485,191.86 1,242,344,274.52 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 56,949,737.60 58,864,111.22 Deferred income tax liabilities 80,671,598.82 57,082,890.27 Other non-current liabilities Total non-current liabilities 137,621,336.42 115,947,001.49 Total liabilities 1,660,106,528.28 1,358,291,276.01 Owners’ equity: Share capital 561,374,326.00 561,374,326.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 164,328,665.43 164,328,665.43 Less: Treasury stock Other comprehensive income 425,482,758.24 317,059,775.00 73 Changchai Company, Limited Annual Report 2020 Specific reserve 18,812,986.55 17,560,202.07 Surplus reserves 325,451,531.14 322,228,533.72 General reserve Retained earnings 777,899,079.66 728,341,265.36 Total equity attributable to owners of 2,273,349,347.02 2,110,892,767.58 the Company as the parent Non-controlling interests 19,498,589.15 19,636,281.01 Total owners’ equity 2,292,847,936.17 2,130,529,048.59 Total liabilities and owners’ equity 3,952,954,464.45 3,488,820,324.60 Legal representative: Shi Xinkun General Manager: Zhang Xin Head of the accounting department: Jiang He 74 Changchai Company, Limited Annual Report 2020 2. Balance Sheet of the Company as the Parent Unit: RMB Item 31 December 2020 31 December 2019 Current assets: Monetary assets 682,322,659.41 584,957,678.96 Held-for-trading financial assets Derivative financial assets Notes receivable 581,230,938.05 576,948,023.05 Accounts receivable 317,828,161.25 337,447,538.04 Accounts receivable financing Prepayments 6,592,567.26 6,386,284.14 Other receivables 24,327,355.36 22,741,542.22 Including: Interest receivable Dividends receivable Inventories 475,688,026.57 368,653,472.39 Contract assets Assets held for sale Current portion of non-current assets Other current assets 17,521,203.46 3,898,333.51 Total current assets 2,105,510,911.36 1,901,032,872.31 Non-current assets: Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity investments 375,752,730.03 252,752,730.03 Investments in other equity 685,137,950.87 532,886,000.00 instruments Other non-current financial 52,500,000.00 50,000,000.00 assets Investment property 46,239,326.03 48,447,666.83 Fixed assets 369,194,314.03 364,071,199.07 Construction in progress 26,195,189.06 89,330,161.60 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 68,088,982.37 70,169,770.91 75 Changchai Company, Limited Annual Report 2020 Development costs Goodwill Long-term prepaid expense Deferred income tax assets 4,179,544.86 970,026.67 Other non-current assets Total non-current assets 1,627,288,037.25 1,408,627,555.11 Total assets 3,732,798,948.61 3,309,660,427.42 Current liabilities: Short-term borrowings 5,000,000.00 5,000,000.00 Held-for-trading financial liabilities Derivative financial liabilities Notes payable 589,534,000.00 392,105,000.00 Accounts payable 550,360,564.07 481,854,210.18 Advances from customers 661,612.17 28,673,664.87 Contract liabilities 32,344,514.86 Employee benefits payable 42,455,158.67 39,125,477.30 Taxes payable 1,099,861.63 5,952,664.10 Other payables 184,513,545.20 192,046,130.29 Including: Interest payable Dividends 3,243,179.97 3,243,179.97 payable Liabilities directly associated with assets held for sale Current portion of non-current liabilities Other current liabilities 2,426,575.40 Total current liabilities 1,408,395,832.00 1,144,757,146.74 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 56,949,737.60 58,864,111.22 Deferred income tax 75,460,192.63 55,951,725.00 liabilities Other non-current liabilities Total non-current liabilities 132,409,930.23 114,815,836.22 76 Changchai Company, Limited Annual Report 2020 Total liabilities 1,540,805,762.23 1,259,572,982.96 Owners’ equity: Share capital 561,374,326.00 561,374,326.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 183,071,147.70 183,071,147.70 Less: Treasury stock Other comprehensive income 425,482,758.24 317,059,775.00 Specific reserve 18,812,986.55 17,560,202.07 Surplus reserves 325,451,531.14 322,228,533.72 Retained earnings 677,800,436.75 648,793,459.97 Total owners’ equity 2,191,993,186.38 2,050,087,444.46 Total liabilities and owners’ 3,732,798,948.61 3,309,660,427.42 equity 77 Changchai Company, Limited Annual Report 2020 3. Consolidated Income Statement Unit: RMB Item 2020 2019 1. Revenue 2,296,464,711.24 2,045,820,801.10 Including: Operating revenue 2,296,464,711.24 2,045,820,801.10 Interest income Insurance premium income Handling charge and commission income 2. Costs and expenses 2,267,289,166.18 1,991,399,859.93 Including: Cost of sales 1,950,573,991.27 1,714,533,867.50 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 12,869,609.15 10,980,115.06 Selling expense 128,372,278.62 97,085,117.05 Administrative 87,446,195.74 107,015,957.41 expense R&D expense 72,258,781.08 66,221,376.27 Finance costs 15,768,310.32 -4,436,573.36 Including: Interest 8,084,428.03 5,722,554.43 expense Interest 6,249,975.99 6,733,183.88 income Add: Other income 7,808,732.52 5,324,358.80 Return on investment (“-” 6,545,826.85 8,010,260.85 for loss) Including: Share of profit or loss of joint ventures and associates Income from the derecognition of financial assets at amortized cost (“-” for loss) 78 Changchai Company, Limited Annual Report 2020 Exchange gain (“-” for loss) Net gain on exposure hedges (“-” for loss) Gain on changes in fair value 20,981,109.00 -49,255.00 (“-” for loss) Credit impairment loss (“-” 2,378,630.68 -925,811.28 for loss) Asset impairment loss (“-” -11,155,930.76 -42,371,202.17 for loss) Asset disposal income (“-” 229,121.29 2,059,668.56 for loss) 3. Operating profit (“-” for loss) 55,963,034.64 26,468,960.93 Add: Non-operating income 1,047,114.21 462,351.48 Less: Non-operating expense 2,629,797.33 231,938.89 4. Profit before tax (“-” for loss) 54,380,351.52 26,699,373.52 Less: Income tax expense 2,085,600.33 1,715,045.77 5. Net profit (“-” for net loss) 52,294,751.19 24,984,327.75 5.1 By operating continuity 5.1.1 Net profit from continuing operations (“-” for net 52,294,751.19 24,984,327.75 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 Company as 52,432,443.05 24,966,526.85 the parent 5.2.1 Net profit attributable to -137,691.86 17,800.90 non-controlling interests 6. Other comprehensive income, 108,771,351.91 52,654,100.00 net of tax Attributable to owners of the 108,771,351.91 52,654,100.00 Company as the parent 6.1 Items that will not be 108,771,351.91 52,654,100.00 reclassified to profit or loss 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 79 Changchai Company, Limited Annual Report 2020 6.1.3 Changes in the fair value of investments in other 108,771,351.91 52,654,100.00 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 161,066,103.10 77,638,427.75 Attributable to owners of the 161,203,794.96 77,620,626.85 Company as the parent Attributable to non-controlling -137,691.86 17,800.90 interests 8. Earnings per share 8.1 Basic earnings per share 0.0934 0.0445 8.2 Diluted earnings per share 0.0934 0.0445 Legal representative: Shi Xinkun General Manager: Zhang Xin Head of the accounting department: Jiang He 80 Changchai Company, Limited Annual Report 2020 4. Income Statement of the Company as the Parent Unit: RMB Item 2020 2019 1. Operating revenue 2,123,200,238.11 1,866,291,739.39 Less: Cost of sales 1,823,443,404.79 1,575,626,989.46 Taxes and surcharges 10,349,672.15 8,407,285.53 Selling expense 110,774,087.06 89,281,567.68 Administrative expense 70,342,720.73 89,269,943.25 R&D expense 67,074,041.38 60,705,823.99 Finance costs 10,879,173.24 -7,320,351.23 Including: Interest 5,197,914.71 3,477,128.23 expense Interest 6,017,663.50 6,955,017.26 income Add: Other income 5,478,200.87 3,864,303.74 Return on investment (“-” 5,437,925.05 6,206,814.50 for loss) Including: Share of profit or loss of joint ventures 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 2,500,000.00 value (“-” for loss) Credit impairment loss 2,599,053.83 755,537.33 (“-” for loss) Asset impairment loss -18,384,759.06 -41,914,242.93 (“-” for loss) Asset disposal income 80,014.23 2,072,367.71 (“-” for loss) 2. Operating profit (“-” for loss) 28,047,573.68 21,305,261.06 Add: Non-operating income 542,506.89 13,825.00 Less: Non-operating expense 262,488.62 141,118.07 3. Profit before tax (“-” for loss) 28,327,591.95 21,177,967.99 Less: Income tax expense -3,554,013.58 236,773.02 4. Net profit (“-” for net loss) 31,881,605.53 20,941,194.97 4.1 Net profit from continuing operations (“-” for 31,881,605.53 20,941,194.97 net loss) 4.2 Net profit from 81 Changchai Company, Limited Annual Report 2020 discontinued operations (“-” for net loss) 5. Other comprehensive income, 108,771,351.91 52,654,100.00 net of tax 5.1 Items that will not be 108,771,351.91 52,654,100.00 reclassified to profit or loss 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 108,771,351.91 52,654,100.00 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 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 140,652,957.44 73,595,294.97 82 Changchai Company, Limited Annual Report 2020 7. Earnings per share 7.1 Basic earnings per share 7.2 Diluted earnings per share 83 Changchai Company, Limited Annual Report 2020 5. Consolidated Cash Flow Statement Unit: RMB Item 2020 2019 1. Cash flows from operating activities: Proceeds from sale of commodities and rendering of 2,230,952,492.49 2,178,835,433.27 services 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 33,693,741.46 42,607,617.45 Cash generated from other 16,977,100.96 11,790,596.40 operating activities Subtotal of cash generated from 2,281,623,334.91 2,233,233,647.12 operating activities Payments for commodities 1,571,967,433.96 1,824,178,697.91 and services 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 84 Changchai Company, Limited Annual Report 2020 Interest, handling charges and commissions paid Policy dividends paid Cash paid to and for 294,472,502.80 287,894,549.87 employees Taxes paid 39,853,712.33 19,999,117.04 Cash used in other operating 123,533,031.29 121,486,471.86 activities Subtotal of cash used in 2,029,826,680.38 2,253,558,836.68 operating activities Net cash generated from/used in 251,796,654.53 -20,325,189.56 operating activities 2. Cash flows from investing activities: Proceeds from disinvestment 557,198,253.76 15,101,882.58 Return on investment 6,545,826.85 8,546,765.69 Net proceeds from the disposal of fixed assets, 275,546.00 326,835.85 intangible assets and other long-lived assets Net proceeds from the disposal of subsidiaries and other business units Cash generated from other 336,150.00 investing activities Subtotal of cash generated from 564,355,776.61 23,975,484.12 investing activities Payments for the acquisition of fixed assets, intangible assets 133,737,262.64 39,236,511.40 and other long-lived assets Payments for investments 579,733,766.76 65,930,496.31 Net increase in pledged loans granted Net payments for the acquisition of subsidiaries and other business units Cash used in other investing 4,141,850.71 activities Subtotal of cash used in 717,612,880.11 105,167,007.71 investing activities Net cash generated from/used in -153,257,103.50 -81,191,523.59 investing activities 3. Cash flows from financing activities: 85 Changchai Company, Limited Annual Report 2020 Capital contributions received Including: Capital contributions by non-controlling interests to subsidiaries Borrowings raised 22,000,000.00 34,000,000.00 Cash generated from other financing activities Subtotal of cash generated from 22,000,000.00 34,000,000.00 financing activities Repayment of borrowings 22,000,000.00 59,500,000.00 Interest and dividends paid 3,232,890.38 19,005,058.96 Including: Dividends paid by subsidiaries to non-controlling interests Cash used in other financing 2,500,000.00 activities Subtotal of cash used in 27,732,890.38 78,505,058.96 financing activities Net cash generated from/used in -5,732,890.38 -44,505,058.96 financing activities 4. Effect of foreign exchange rates changes on cash and cash -8,827,118.35 715,396.97 equivalents 5. Net increase in cash and cash 83,979,542.30 -145,306,375.14 equivalents Add: Cash and cash equivalents, 545,959,998.20 691,266,373.34 beginning of the period 6. Cash and cash equivalents, 629,939,540.50 545,959,998.20 end of the period 86 Changchai Company, Limited Annual Report 2020 6. Cash Flow Statement of the Company as the Parent Unit: RMB Item 2020 2019 1. Cash flows from operating activities: Proceeds from sale of commodities and rendering of 1,963,288,154.66 1,911,679,765.84 services Tax rebates 25,903,016.36 34,035,423.13 Cash generated from other 9,006,278.01 9,754,947.38 operating activities Subtotal of cash generated from 1,998,197,449.03 1,955,470,136.35 operating activities Payments for commodities 1,388,644,147.32 1,637,576,894.25 and services Cash paid to and for 247,717,051.40 237,310,147.26 employees Taxes paid 26,755,852.89 8,675,558.38 Cash used in other operating 110,744,198.57 107,932,998.05 activities Subtotal of cash used in 1,773,861,250.18 1,991,495,597.94 operating activities Net cash generated from/used in 224,336,198.85 -36,025,461.59 operating activities 2. Cash flows from investing activities: Proceeds from disinvestment 500,487.00 4,000,000.00 Return on investment 5,437,925.05 6,206,814.50 Net proceeds from the disposal of fixed assets, 183,890.00 297,935.85 intangible assets and other long-lived assets Net proceeds from the disposal of subsidiaries and other business units Cash generated from other 9,718,669.72 9,500,000.00 investing activities Subtotal of cash generated from 15,840,971.77 20,004,750.35 investing activities Payments for the acquisition of fixed assets, intangible assets 4,071,225.07 30,078,441.85 and other long-lived assets Payments for investments 154,786,000.00 60,000,000.00 87 Changchai Company, Limited Annual Report 2020 Net payments for the acquisition of subsidiaries and other business units Cash used in other investing 9,000,000.00 9,500,000.00 activities Subtotal of cash used in 167,857,225.07 99,578,441.85 investing activities Net cash generated from/used in -152,016,253.30 -79,573,691.50 investing activities 3. Cash flows from financing activities: Capital contributions received Borrowings raised 5,000,000.00 5,000,000.00 Cash generated from other financing activities Subtotal of cash generated from 5,000,000.00 5,000,000.00 financing activities Repayment of borrowings 5,000,000.00 28,500,000.00 Interest and dividends paid 1,027,748.70 16,009,069.84 Cash used in other financing 2,500,000.00 activities Subtotal of cash used in 8,527,748.70 44,509,069.84 financing activities Net cash generated from/used in -3,527,748.70 -39,509,069.84 financing activities 4. Effect of foreign exchange rates changes on cash and cash -6,995,969.85 1,031,120.95 equivalents 5. Net increase in cash and cash 61,796,227.00 -154,077,101.98 equivalents Add: Cash and cash equivalents, 497,777,104.81 651,854,206.79 beginning of the period 6. Cash and cash equivalents, 559,573,331.81 497,777,104.81 end of the period 88 Changchai Company, Limited Annual Report 2020 7. Consolidated Statements of Changes in Owners’ Equity 2020 Unit: RMB 2020 Equity attributable to owners of the Company as the parent Other equity instrument G s e P n r P Les e e e s: r O f r Other Non-contr Total Item Tre al t Share e p Capital comprehen Specific Surplus Retained olling owners’ asu r h Subtotal capital rr et reserves sive reserve reserves earnings interests equity O ry e e e u income th sto s r d al er ck e s b r h o v a n e r d e s s 1. Bala nce 561,374,32 164,328,66 317,059,77 17,560,20 322,226,70 726,689,92 2,109,239,59 19,636,28 2,128,875,87 as at 6.00 5.43 5.00 2.07 0.34 9.10 7.94 1.01 8.95 the end of 89 Changchai Company, Limited Annual Report 2020 the prior year Add: Adju stme nt for chan ge in acco untin g polic y Adju stme nt for corre 1,651,336.2 1,833.38 1,653,169.64 1,653,169.64 ction 6 of previ ous error Adju stme nt for busin ess 90 Changchai Company, Limited Annual Report 2020 comb inatio n under com mon contr ol Other adjus tment s 2. Bala nce as at the 561,374,32 164,328,66 317,059,77 17,560,20 322,228,53 728,341,26 2,110,892,76 19,636,28 2,130,529,04 begin 6.00 5.43 5.00 2.07 3.72 5.36 7.58 1.01 8.59 ning of the year 3. Incre ase/ 108,422,98 1,252,784. 3,222,997.4 49,557,814. 162,456,579. -137,691.8 162,318,887. decre 3.24 48 2 30 44 6 58 ase in the perio 91 Changchai Company, Limited Annual Report 2020 d (“-” for decre ase) 3.1 Total comp 108,771,35 52,432,443. 161,203,794. -137,691.8 161,066,103. rehen 1.91 05 96 6 10 sive inco me 3.2 Capit al incre ased and reduc ed by owne rs 3 .2.1 Ordi nary share s incre ased 92 Changchai Company, Limited Annual Report 2020 by owne rs 3 .2.2 Capit al incre ased by holde rs of other equit y instru ment s 3 .2.3 Share -base d paym ents inclu ded in owne rs’ 93 Changchai Company, Limited Annual Report 2020 equit y 3 .2.4 Other 3.3 Profit 3,222,997.4 -3,222,997. distri 2 42 butio n 3.3.1 Appr opria tion 3,222,997.4 -3,222,997. to 2 42 surpl us reser ves 3.3.2 Appr opria tion to gener al reser ve 94 Changchai Company, Limited Annual Report 2020 3.3.3 Appr opria tion to owne rs (or share holde rs) 3.3.4 Other 3.4 Trans fers withi -348,368.6 n 348,368.67 7 owne rs’ equit y 3.4.1 Incre ase in capit al (or 95 Changchai Company, Limited Annual Report 2020 share capit al) from capit al reser ves 3.4.2 Incre ase in capit al (or share capit al) from surpl us reser ves 3.4.3 Loss offset by surpl us 96 Changchai Company, Limited Annual Report 2020 reser ves 3.4.4 Chan ges in defin ed benef it sche mes transf erred to retain ed earni ngs 3.4.5 Other comp rehen sive inco me transf erred 97 Changchai Company, Limited Annual Report 2020 to retain ed earni ngs -348,368.6 3.4.6 348,368.67 7 Other 3.5 Speci 1,252,784. fic 1,252,784.48 1,252,784.48 48 reser ve 3.5.1 Incre 3,766,291. ase 3,766,291.74 3,766,291.74 74 in the perio d 3.5.2 Used 2,513,507. 2,513,507.26 2,513,507.26 in the 26 perio d 3.6 Other 4. 561,374,32 164,328,66 425,482,75 18,812,98 325,451,53 777,899,07 2,273,349,34 19,498,58 2,292,847,93 Bala 6.00 5.43 8.24 6.55 1.14 9.66 7.02 9.15 6.17 98 Changchai Company, Limited Annual Report 2020 nce as at the end of the perio d 2019 Unit: RMB 2019 Equity attributable to owners of the Company as the parent Other equity instruments Less: Other Gen Non-cont Total Item Share Prefe Perpe Capital Trea compreh Specific Surplus eral Retained Ot rolling owners’ Subtotal capital rred tual Ot reserves sury ensive reserve reserves reser earnings her interests equity share bond her stock income ve s s 1. Balance as at the 561,374, 164,328, 264,405, 15,182,9 320,133, 717,883, 2,043,308, 19,618,48 2,062,926, end of 326.00 665.43 675.00 58.83 050.15 351.33 026.74 0.11 506.85 the prior year Add: Adjustm ent for change in accounti 99 Changchai Company, Limited Annual Report 2020 ng policy Adjustm ent for 1,619,86 1,621,228. 1,621,228. correctio 1,364.08 4.82 90 90 n of previous error Adjustm ent for business combinat ion under common control Other adjustme nts 2. Balance as at the 561,374, 164,328, 264,405, 15,182,9 320,134, 719,503, 2,044,929, 19,618,48 2,064,547, beginnin 326.00 665.43 675.00 58.83 414.23 216.15 255.64 0.11 735.75 g of the year 3. Increase/ 52,654,1 2,377,24 2,094,11 8,838,04 65,963,51 65,981,31 17,800.90 decrease 00.00 3.24 9.49 9.21 1.94 2.84 in the 100 Changchai Company, Limited Annual Report 2020 period (“-” for decrease ) 3.1 Total 52,654,1 24,966,5 77,620,62 77,638,42 compreh 17,800.90 00.00 26.85 6.85 7.75 ensive income 3.2 Capital increase d and reduced by owners 3.2. 1 Ordinary shares increase d by owners 3.2. 2 Capital increase d by holders of other equity 101 Changchai Company, Limited Annual Report 2020 instrume nts 3.2. 3 Share-ba sed payment s included in owners’ equity 3.2. 4 Other 3.3 Profit 2,094,11 -16,128,4 -14,034,35 -14,034,35 distributi 9.49 77.64 8.15 8.15 on 3.3.1 Appropri 2,094,11 -2,094,11 ation to 9.49 9.49 surplus reserves 3.3.2 Appropri ation to general reserve 102 Changchai Company, Limited Annual Report 2020 3.3.3 Appropri ation to -14,034,3 -14,034,35 -14,034,35 owners 58.15 8.15 8.15 (or sharehol ders) 3.3.4 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 103 Changchai Company, Limited Annual Report 2020 capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit schemes transferr ed to retained earnings 3.4.5 Other compreh ensive income transferr ed to retained 104 Changchai Company, Limited Annual Report 2020 earnings 3.4.6 Other 3.5 2,377,24 2,377,243. 2,377,243. Specific 3.24 24 24 reserve 3.5.1 3,868,72 3,868,727. 3,868,727. Increase 7.07 07 07 in the period 3.5.2 1,491,48 1,491,483. 1,491,483. Used in 3.83 83 83 the period 3.6 Other 4. Balance as at the 561,374, 164,328, 317,059, 17,560,2 322,228, 728,341, 2,110,892, 19,636,28 2,130,529, end of 326.00 665.43 775.00 02.07 533.72 265.36 767.58 1.01 048.59 the period 105 Changchai Company, Limited Annual Report 2020 8. Statements of Changes in Owners’ Equity of the Company as the Parent 2020 Unit: RMB 2020 Other equity instruments Less: Other Item Share Preferr Perpetu Capital Treasu Specific Surplus Retained Oth Total owners’ Oth comprehensi capital ed al reserves ry reserve reserves earnings er equity er ve income shares bonds stock 1. Balance as at the end 561,374,326 183,071,147 317,059,775 17,560,202 322,226,700 648,776,959 2,050,069,110 of the prior .00 .70 .00 .07 .34 .53 .64 year Add: Adjustment for change in accounting policy Adjustment for 1,833.38 16,500.44 18,333.82 correction of previous error Other adjustments 2. Balance as at the 561,374,326 183,071,147 317,059,775 17,560,202 322,228,533 648,793,459 2,050,087,444 beginning .00 .70 .00 .07 .72 .97 .46 of the year 106 Changchai Company, Limited Annual Report 2020 3. Increase/ decrease in 108,422,983 1,252,784. 3,222,997.4 29,006,976. 141,905,741.9 the period .24 48 2 78 2 (“-” for decrease) 3.1 Total 108,771,351 31,881,605. 140,652,957.4 comprehens .91 53 4 ive income 3.2 Capital increased and reduced by owners 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’ 107 Changchai Company, Limited Annual Report 2020 equity 3.2.4 Other 3.3 Profit 3,222,997.4 -3,222,997.4 distribution 2 2 3.3.1 Appropriati 3,222,997.4 -3,222,997.4 on to 2 2 surplus reserves 3.3.2 Appropriati on to owners (or shareholder s) 3.3.3 Other 3.4 Transfers within -348,368.67 348,368.67 owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 108 Changchai Company, Limited Annual Report 2020 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 comprehens ive income -348,368.67 348,368.67 transferred to retained earnings 3.4.6 Other 3.5 1,252,784. 1,252,784.48 109 Changchai Company, Limited Annual Report 2020 Specific 48 reserve 3.5.1 3,766,291. Increase in 3,766,291.74 74 the period 3.5.2 2,513,507. Used in the 2,513,507.26 26 period 3.6 Other 4. Balance as at the end 561,374,326 183,071,147 425,482,758 18,812,986 325,451,531 677,800,436 2,191,993,186 of the .00 .70 .24 .55 .14 .75 .38 period 2019 Unit: RMB 2019 Other equity instruments Less: Other Item Share Preferr Perpetu Capital Treasu Specific Surplus Retained Oth Total owners’ Oth comprehensi capital ed al reserves ry reserve reserves earnings er equity er ve income shares bonds stock 1. Balance as at the end 561,374,326 183,071,147 264,405,675 15,182,958 320,133,050 643,968,465 1,988,135,623 of the prior .00 .70 .00 .83 .15 .93 .61 year Add: Adjustment for change in accounting policy 110 Changchai Company, Limited Annual Report 2020 Adjustment for 1,364.08 12,276.71 13,640.79 correction of previous error Other adjustments 2. Balance as at the 561,374,326 183,071,147 264,405,675 15,182,958 320,134,414 643,980,742 1,988,149,264 beginning .00 .70 .00 .83 .23 .64 .40 of the year 3. Increase/ decrease in 52,654,100. 2,377,243. 2,094,119.4 4,812,717.3 the period 61,938,180.06 00 24 9 3 (“-” for decrease) 3.1 Total 52,654,100. 20,941,194. comprehens 73,595,294.97 00 97 ive income 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by owners 111 Changchai Company, Limited Annual Report 2020 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 3.3 Profit 2,094,119.4 -16,128,477. -14,034,358.1 distribution 9 64 5 3.3.1 Appropriati 2,094,119.4 -2,094,119.4 on to 9 9 surplus reserves 3.3.2 Appropriati on to -14,034,358. -14,034,358.1 owners (or 15 5 shareholder s) 3.3.3 Other 112 Changchai Company, Limited Annual Report 2020 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 113 Changchai Company, Limited Annual Report 2020 to retained earnings 3.4.5 Other comprehens ive income transferred to retained earnings 3.4.6 Other 3.5 2,377,243. Specific 2,377,243.24 24 reserve 3.5.1 3,868,727. Increase in 3,868,727.07 07 the period 3.5.2 1,491,483. Used in the 1,491,483.83 83 period 3.6 Other 4. Balance as at the end 561,374,326 183,071,147 317,059,775 17,560,202 322,228,533 648,793,459 2,050,087,444 of the .00 .70 .00 .07 .72 .97 .46 period 114 Changchai Company, Limited Annual Report 2020 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. As at 31 December 2015, the total share capital of the Company is 561,374,326.00 shares, as well as registered capital of RMB561,374,326.00, which verified by Jiangsu Gongzheng Tianye Certified Public Accountants Company Limited with issuing Capital Verification Report SGC [2010] No. B002. And the unified social credit code of the enterprise business license of the Company is 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 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 13 April 2021. The consolidated scope of the Company of the Reporting Period includes the Company as the parent and 7 subsidiaries. For the details of the consolidated scope of the Reporting Period and the changes situation, please 115 Changchai Company, Limited Annual Report 2020 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. 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. 116 Changchai Company, Limited Annual Report 2020 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 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 117 Changchai Company, Limited Annual Report 2020 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 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 118 Changchai Company, Limited Annual Report 2020 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 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. 119 Changchai Company, Limited Annual Report 2020 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. 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. 120 Changchai Company, Limited Annual Report 2020 (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 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 121 Changchai Company, Limited Annual Report 2020 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. (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 122 Changchai Company, Limited Annual Report 2020 or original which has had credit impairment, it should be converted into cash according actual interest rate of this financial asset after credit adjustment. As for financial asset purchased or original which has had credit impairment, the Company only confirms cumulative change of expected credit loss within the whole duration after initial confirmation on the balance sheet date as loss reserve. As for accounts receivable which don’t include major financing contents or the Company does not consider financing contents in contract which is less than one year, the Company applies simplified measurement method, and measures loss reserve according to amount of expected credit loss within the whole duration. As for account receivable of rental and accounts receivable including major financing contents, the Company applies simplified measurement method, and measure loss reserve according to amount of expected credit loss within the whole duration. As for financial asset beyond above mentioned measurement methods, the Company evaluates whether its credit risk has increased obviously since the initial confirmation on each balance sheet date. In case credit risk has increased obviously, the Company measures the loss reserve according to amount of expected credit loss within the whole duration; in case the credit risk does not increase obviously, the Company measures loss reserve according to the amount of expected credit loss in next 12 months. By utilizing obtainable rational and well grounded information, including forward-looking information, comparing the risk of contract breach on balance sheet date and risk of contract breach on initial confirmation date, the Company confirms whether the credit risk of financial instrument has increased obviously from initial confirmation. On balance sheet date, in case the Company judges that the financial instrument just has relatively low credit risk, then it will be assumed that credit risk of the financial instrument has not increased obviously. Based on single financial instrument or financial portfolio, the Company evaluates expected credit risk and measures expected credit loss. When based on financial instrument portfolio, the Company takes common risk characteristics as the basis, and divides financial instruments into different portfolios. The Company measures expected credit loss again on each balance sheet date, the increase of loss reserve or amount which is transfer back generated by it is calculated into current profits and losses as impairment profits or losses. As for financial asset which is measured by amortized cost, loss reserve offsets the carrying value of the financial asset listed in the balance sheet; as for debt investment which is measured by fair value and whose change is calculated into other comprehensive profits, the Company confirms its loss reserve in other comprehensive profits and does not offset the carrying value of the financial asset. ② For notes receivable, accounts receivable, other receivables and long-term receivables 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 and other 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 receivables into groups according to the characteristics of credit risk, and calculates the expected credit loss based on receivable groups. Accounts receivable with expected credit losses measured by groups Specific groups and method of measuring expected credit loss Item Recognition basis Method of measuring expected credit losses Bank’s acceptance bills Consulting historical experience in credit losses, receivable Bill type combining current situation and prediction for future economic situation, the expected credit 123 Changchai Company, Limited Annual Report 2020 Trade acceptance bills loss shall be accounted through exposure at receivable default and the expected credit loss rate over the entire life Accounts Aging group Prepare the comparative list between aging of receivable-credit risk accounts receivable and expected credit loss rate characteristics group over the entire life and calculate the expected credit loss by consulting historical experience in credit losses, combining current situation and prediction for future economic situation Consulting historical experience in credit losses, Accounts combining current situation and prediction for receivable-intercourse Related party within the future economic situation, the expected credit funds among related party consolidation scope loss shall be accounted through exposure at group within the default and the expected credit loss rate over the consolidation scope entire life Accounts receivable-the comparative list between aging of credit risk characteristic group and expected credit loss rate over the entire life Aging Withdrawal proportion Within 1 year 2.00% 1 to 2 years 5.00% 2 to 3 years 15.00% 3 to 4 years 30.00% 4 to 5 years 60.00% Over 5 years 100.00% Other receivables with expected credit losses measured by groups Specific groups and method of measuring expected credit loss Item Recognition basis Method of measuring expected credit losses Consulting historical experience in credit losses, combining current situation and prediction for future economic situation, the Other receivables-aging Aging group expected credit loss shall be accounted through analysis group exposure at default and the expected credit loss rate within the next 12 months or over the entire life Consulting historical experience in credit Other losses, combining current situation and receivables-intercourse Related party within prediction for future economic situation, the funds among related party the consolidation expected credit loss shall be accounted through group within the scope exposure at default and the expected credit loss consolidation scope rate over the entire life 124 Changchai Company, Limited Annual Report 2020 For the measurement of impairment loss of other receivables, refer to the aforesaid measurement of impairment loss of accounts receivable. 11. Notes Receivable See “10. Financial Instruments”. 12. Accounts Receivable See “10. Financial Instruments”. 13. 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. 125 Changchai Company, Limited Annual Report 2020 14. 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.12. 15. 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. 16. 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; 126 Changchai Company, Limited Annual Report 2020 (3) The Company had signed the irrevocable transformation agreement with the transferee; (4) The transformation should be completed within 1 year. 17. 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, 127 Changchai Company, Limited Annual Report 2020 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 128 Changchai Company, Limited Annual Report 2020 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 129 Changchai Company, Limited Annual Report 2020 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. 18. 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. 19. 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 useful life 20-40 2.50%-5% Machinery equipment Average method of useful life 6-15 6.67%-16.67% Transportation Average method of useful life 5-10 10%-20% equipment Other equipment Average method of useful life 5-10 10%-20% 130 Changchai Company, Limited Annual Report 2020 (3) Recognition Basis, Pricing and Depreciation Method of Fixed Assets by Finance Lease 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 20. 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. 131 Changchai Company, Limited Annual Report 2020 21. 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 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. 22. 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. 132 Changchai Company, Limited Annual Report 2020 (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 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. 23. 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 133 Changchai Company, Limited Annual Report 2020 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 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. 24. 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. 25. 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. 26. 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 134 Changchai Company, Limited Annual Report 2020 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. (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. 27. 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. 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. 28. 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. 135 Changchai Company, Limited Annual Report 2020 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. 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. Interest Revenue Interest Revenue shall be determined according to the time of the Company’s use of monetary capital and the actual interest rate. 136 Changchai Company, Limited Annual Report 2020 Rental Income The rental income from operating lease shall be recognized during each lease period according to the straight-line method, and the contingent rent shall be included into the current profit and loss without delay. 29. 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 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. 30. 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. 137 Changchai Company, Limited Annual Report 2020 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 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. 31. Lease (1) Accounting Treatment of Operating Lease Lessee in an operating lease shall treat the lease payment under an operating lease as a relevant asset cost or the current profit or loss on a straight-line basis over the lease term. The initial direct costs incurred shall be recognized as the current profit or loss; Contingent rents shall be charged as expenses in the periods in which they are incurred. Lessors in an operating lease shall be recognized as the current profit or loss on a straight-line basis over the lease term; Initial direct costs incurred by lessors shall be recognized as the current profit or loss; the initial direct expenses occur should be directly included in the current gains and losses except for those with larger amount and be capitalized as well as be included in the gains and losses by stages. Contingent rents shall be charged as expenses in the periods in which they are incurred. (2) Accounting Treatments of Financial Lease When the Company as the lessee, On the lease beginning date, the Company shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges and the occurred initial direct expenses, should be recorded in the lease assets value. During each lease period, should recognize the current financing expenses by adopting the actual interest rate. When the Company as the leasor and on the beginning date of the lease term, the Company shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entering value in an account of the financing lease values receivable, and record the unguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. During each lease period, should recognize the current financing revenues adopting the actual interest rate. 138 Changchai Company, Limited Annual Report 2020 32. 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 On 28 April 2020, the The Ministry of Finance issued the Notice on Company held the 2nd Meeting Revising and Printing the Accounting Standards for of the 9th Board of Directors Business Enterprises No.14-Revenue and the 2nd Meeting of the 9th (CK[2017]No.22) (hereinafter referred to as the Supervisory Committee and “New Standards governing Revenue”) in July 2017 approved the Proposal on and required all domestically listed companies to Changes of Some Accounting implement it since 1 January 2020. Policies (1) Influence of Implementing the New Standards Governing Revenue Affected items in the consolidated balance sheet and amount thereof: Item 31 December 2019 Affected by classification and 1 January 2020 measurement Advances from customers 31,789,001.78 -31,789,001.78 Contract liabilities 29,652,202.74 29,652,202.74 Other current liabilities 1,177,712.38 2,136,799.04 3,314,511.42 Affected items in the balance sheet of the Company as the parent and amount thereof: Item 31 December 2019 Affected by classification and 1 January 2020 measurement Advances from customers 28,673,664.87 -28,673,664.87 Contract liabilities 26,661,229.33 26,661,229.33 Other current liabilities 2,012,435.54 2,012,435.54 (2) Changes in Accounting Estimates □ Applicable √ Not applicable (3) Adjustments to the Financial Statements at the Beginning of the First Execution Year of any New Standards Governing Revenue or Leases since 2020 Applicable Consolidated Balance Sheet Unit: RMB Item 31 December 2019 1 January 2020 Adjusted Current assets: Monetary assets 638,589,260.09 638,589,260.09 Settlement reserve Interbank loans granted Held-for-trading financial 13,050,000.00 13,050,000.00 assets Derivative financial assets 139 Changchai Company, Limited Annual Report 2020 Notes receivable 606,283,023.05 606,283,023.05 Accounts receivable 419,302,056.87 419,302,056.87 Accounts receivable financing Prepayments 12,968,746.16 12,968,746.16 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other receivables 9,703,390.94 9,703,390.94 Including: Interest receivable Dividends receivable Financial assets purchased under resale agreements Inventories 473,359,168.90 473,359,168.90 Contract assets Assets held for sale Current portion of non-current assets Other current assets 6,421,275.47 6,421,275.47 Total current assets 2,179,676,921.48 2,179,676,921.48 Non-current assets: Loans and advances to customers Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity investments Investments in other 532,886,000.00 532,886,000.00 equity instruments Other non-current 77,952,101.63 77,952,101.63 financial assets Investment property 48,447,666.83 48,447,666.83 Fixed assets 457,722,667.32 457,722,667.32 Construction in progress 91,358,156.24 91,358,156.24 Productive living assets 140 Changchai Company, Limited Annual Report 2020 Oil and gas assets Right-of-use assets Intangible assets 99,699,450.26 99,699,450.26 Development costs Goodwill Long-term prepaid 53,497.80 53,497.80 expense Deferred income tax 1,023,863.04 1,023,863.04 assets Other non-current assets Total non-current assets 1,309,143,403.12 1,309,143,403.12 Total assets 3,488,820,324.60 3,488,820,324.60 Current liabilities: Short-term borrowings 22,000,000.00 22,000,000.00 Borrowings from the central bank Interbank loans obtained Held-for-trading financial liabilities Derivative financial liabilities Notes payable 403,035,000.00 403,035,000.00 Accounts payable 525,625,016.89 525,625,016.89 Advances from customers 31,789,001.78 -31,789,001.78 Contract liabilities 29,652,202.74 29,652,202.74 Financial assets sold under repurchase agreements Customer deposits and interbank deposits Payables for acting trading of securities Payables for underwriting of securities Employee benefits 44,559,015.79 44,559,015.79 payable Taxes payable 9,094,382.58 9,094,382.58 Other payables 205,064,145.10 205,064,145.10 Including: Interest payable Dividends 3,891,433.83 3,891,433.83 141 Changchai Company, Limited Annual Report 2020 payable Handling charges and commissions payable Reinsurance payables Liabilities directly associated with assets held for sale Current portion of non-current liabilities Other current liabilities 1,177,712.38 3,314,511.42 2,136,799.04 Total current liabilities 1,242,344,274.52 1,242,344,274.52 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 58,864,111.22 58,864,111.22 Deferred income tax 57,082,890.27 57,082,890.27 liabilities Other non-current liabilities Total non-current liabilities 115,947,001.49 115,947,001.49 Total liabilities 1,358,291,276.01 1,358,291,276.01 Owners’ equity: Share capital 561,374,326.00 561,374,326.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 164,328,665.43 164,328,665.43 Less: Treasury stock Other comprehensive 317,059,775.00 317,059,775.00 142 Changchai Company, Limited Annual Report 2020 income Specific reserve 17,560,202.07 17,560,202.07 Surplus reserves 322,228,533.72 322,228,533.72 General reserve Retained earnings 728,341,265.36 728,341,265.36 Total equity attributable to owners of the Company as 2,110,892,767.58 2,110,892,767.58 the parent Non-controlling interests 19,636,281.01 19,636,281.01 Total owners’ equity 2,130,529,048.59 2,130,529,048.59 Total liabilities and owners’ 3,488,820,324.60 3,488,820,324.60 equity Balance Sheet of the Company as the Parent Unit: RMB Item 31 December 2019 1 January 2020 Adjusted Current assets: Monetary assets 584,957,678.96 584,957,678.96 Held-for-trading financial assets Derivative financial assets Notes receivable 576,948,023.05 576,948,023.05 Accounts receivable 337,447,538.04 337,447,538.04 Accounts receivable financing Prepayments 6,386,284.14 6,386,284.14 Other receivables 22,741,542.22 22,741,542.22 Including: Interest receivable Dividends receivable Inventories 368,653,472.39 368,653,472.39 Contract assets Assets held for sale Current portion of non-current assets Other current assets 3,898,333.51 3,898,333.51 Total current assets 1,901,032,872.31 1,901,032,872.31 Non-current assets: Investments in debt 143 Changchai Company, Limited Annual Report 2020 obligations Investments in other debt obligations Long-term receivables Long-term equity 252,752,730.03 252,752,730.03 investments Investments in other 532,886,000.00 532,886,000.00 equity instruments Other non-current 50,000,000.00 50,000,000.00 financial assets Investment property 48,447,666.83 48,447,666.83 Fixed assets 364,071,199.07 364,071,199.07 Construction in progress 89,330,161.60 89,330,161.60 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 70,169,770.91 70,169,770.91 Development costs Goodwill Long-term prepaid expense Deferred income tax 970,026.67 970,026.67 assets Other non-current assets Total non-current assets 1,408,627,555.11 1,408,627,555.11 Total assets 3,309,660,427.42 3,309,660,427.42 Current liabilities: Short-term borrowings 5,000,000.00 5,000,000.00 Held-for-trading financial liabilities Derivative financial liabilities Notes payable 392,105,000.00 392,105,000.00 Accounts payable 481,854,210.18 481,854,210.18 Advances from customers 28,673,664.87 -28,673,664.87 Contract liabilities 26,661,229.33 26,661,229.33 Employee benefits 39,125,477.30 39,125,477.30 payable Taxes payable 5,952,664.10 5,952,664.10 144 Changchai Company, Limited Annual Report 2020 Other payables 192,046,130.29 192,046,130.29 Including: Interest payable Dividends 3,243,179.97 3,243,179.97 payable Liabilities directly associated with assets held for sale Current portion of non-current liabilities Other current liabilities 2,012,435.54 2,012,435.54 Total current liabilities 1,144,757,146.74 1,144,757,146.74 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 58,864,111.22 58,864,111.22 Deferred income tax 55,951,725.00 55,951,725.00 liabilities Other non-current liabilities Total non-current liabilities 114,815,836.22 114,815,836.22 Total liabilities 1,259,572,982.96 1,259,572,982.96 Owners’ equity: Share capital 561,374,326.00 561,374,326.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 183,071,147.70 183,071,147.70 Less: Treasury stock 145 Changchai Company, Limited Annual Report 2020 Other comprehensive 317,059,775.00 317,059,775.00 income Specific reserve 17,560,202.07 17,560,202.07 Surplus reserves 322,228,533.72 322,228,533.72 Retained earnings 648,793,459.97 648,793,459.97 Total owners’ equity 2,050,087,444.46 2,050,087,444.46 Total liabilities and owners’ 3,309,660,427.42 3,309,660,427.42 equity (4) Retroactive Adjustments to Comparative Data of Prior Years when First Execution of any New Standards Governing Revenue or Leases since 2020 □ 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% 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%、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 Housheng Investment Co., Ltd. 25% Changzhou Changchai Housheng Agricultural Equipment Co., Ltd. 25% Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. 15% Jiangsu Changchai Machinery Co., Ltd. 25% Changzhou Xingsheng Real Estate Management Co., Ltd. 5% 2. Tax Preference On 24 October 2018, 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 2020 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. 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 subsidiariy Changzhou Xingsheng Real Estate Management Co., Ltd. is eligible small enterprise with low profits and shall pay the corporate income tax at tax rate 5% for small enterprises with low profits during the Reporting Period. 146 Changchai Company, Limited Annual Report 2020 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 287,505.91 181,115.21 Bank deposits 620,966,786.57 545,271,159.50 Other monetary assets 139,473,930.37 93,136,985.38 Total 760,728,222.85 638,589,260.09 Of which: Total amount deposited overseas At the period-end, the restricted monetary assets of the Company was RMB130,788,682.35, of which RMB126,979,327.60 was the cash deposit for bank acceptance bills, RMB2,993,220.00 was cash deposit for L/G, and RMB816,134.75 was cash deposit for environment. 2. Trading Financial Assets Unit: RMB Item Ending balance Beginning balance Financial assets at fair value 11,500,272.00 13,050,000.00 through profit or loss Of which: Forward settlement 200,272.00 Financial products 11,300,000.00 13,050,000.00 Total 11,500,272.00 13,050,000.00 3. Notes Receivable (1) Notes Receivable Listed by Category Unit: RMB Item Ending balance Beginning balance Bank acceptance bill 600,140,938.05 606,283,023.05 Total 600,140,938.05 606,283,023.05 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) There Were No Notes Receivable Pledged by the Company at the Period-end (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 765,010,766.00 Total 765,010,766.00 147 Changchai Company, Limited Annual Report 2020 (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 Accounts receivable for 33,70 31,80 1,895, 35,53 33,449 which bad debt 94.38 94.13 2,084,7 3,039. 5.98% 7,452. 586.8 4,574. 5.31% ,794.4 provision % % 80.14 72 89 3 55 1 separately accrued Of which: Accounts receivable with significant 29,87 27,97 1,895, 30,64 28,557 amount for 93.65 2,084,7 0,525. 5.30% 4,938. 586.8 2,717. ,937.4 93.20 which bad debt % 4.58% 80.14 05 22 3 62 8 % provision separately accrued Accounts receivable with insignificant 3,832, 3,832, 4,891, amount for 100.0 4,891, 100.0 514.6 0.68% 514.6 0.00 856.9 0.00 which bad debt 0% 0.73% 856.93 0% 7 7 3 provision separately accrued Accounts receivable for 529,4 134,2 395,2 633,0 215,84 which bad debt 94.02 25.35 94.69 417,217 86,38 27,95 58,42 62,36 5,088. 34.10 provision % % % ,276.73 2.09 2.43 9.66 5.04 31 % accrued by group Of which: 148 Changchai Company, Limited Annual Report 2020 Accounts receivable for which bad debt 529,4 134,2 395,2 633,0 215,84 94.02 25.35 417,217 provision 86,38 27,95 58,42 62,36 94.69 5,088. 34.10 % % ,276.73 accrued by 2.09 2.43 9.66 5.04 % 31 % credit risk features group 563,1 166,0 397,1 668,5 249,29 100.0 29.48 100.00 37.29 419,302 Total 89,42 35,40 54,01 96,93 4,882. 0% % % % ,056.87 1.81 5.32 6.49 9.59 72 Account receivables withdrawn bad debt provision separately with significant amount at the period end: Unit: RMB Ending balance Name Withdrawal Reason of Carrying amount Bad debt provision proportion withdrawal 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 96.49% Expected to Customer 4 2,254,860.60 2,175,814.38 difficultly recover 50.00% Expected to Customer 5 3,633,081.23 1,816,540.62 difficultly recover Customer 6 3,279,100.00 3,279,100.00 100.00% Difficult to recover Customer 7 1,617,988.01 1,617,988.01 100.00% Difficult to recover Customer 8 5,359,381.00 5,359,381.00 100.00% Difficult to recover Customer 9 2,584,805.83 2,584,805.83 100.00% Difficult to recover Customer 10 1,553,208.52 1,553,208.52 100.00% Difficult to recover Total 29,870,525.05 27,974,938.22 -- -- Accounts receivable for which bad debt provision accrued by credit risk features group: Unit: RMB Ending balance Aging Carrying amount Bad debt provision Withdrawal proportion Within 1 year 385,027,068.11 7,700,541.84 2.00% 1 to 2 years 10,151,185.00 507,559.25 5.00% 2 to 3 years 4,745,351.68 711,802.76 15.00% 3 to 4 years 5,193,053.09 1,557,915.93 30.00% 4 to 5 years 1,548,978.90 929,387.34 60.00% Over 5 years 122,820,745.31 122,820,745.31 100.00% Total 529,486,382.09 134,227,952.43 -- 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 149 Changchai Company, Limited Annual Report 2020 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) 385,027,068.11 1 to 2 years 10,871,134.25 2 to 3 years 6,695,101.24 Over 3 years 160,596,118.21 3 to 4 years 7,729,342.84 4 to 5 years 4,161,559.72 Over 5 years 148,705,215.65 Total 563,189,421.81 (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 Category Reversal or Ending balance balance Withdrawal Write-off recovery Bad debt provision 33,449,794.41 159,597.80 1,801,939.32 31,807,452.89 withdrawn separately Bad debt provision 215,845,088.31 766,429.39 4,361.56 82,379,203.71 134,227,952.43 withdrawn by group Total 249,294,882.72 926,027.19 1,806,300.88 82,379,203.71 166,035,405.32 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 82,379,203.71 Of which the verification of significant accounts receivable: Unit: RMB Arising Nature of the Name of the Reason for Verification from accounts Verified amount entity verification procedures performed related-p receivable arty 150 Changchai Company, Limited Annual Report 2020 transacti ons or not Customer 1 14,234,302.79 Customer 2 10,000,000.00 1. The Company held Customer 3 7,583,232.65 The aging of the 3rd Meeting of the Customer 4 4,581,880.41 canceled 9th Board of Directors Customer 5 3,600,000.00 receivables and the 3rd Meeting of Customer 6 2,752,840.00 shall exceed 5 the 9th Supervisory Customer 7 2,450,966.67 years and result Committee on 28 June Customer 8 2,180,243.72 from fruitless 2020 and approved the Customer 9 1,976,282.47 collection, and Proposal on Customer 10 1,860,830.82 if any single Verification of Some client’s large Customer 11 1,758,686.48 Accounts Receivable. amount is Customer 12 1,662,052.98 2. On 12 November involved Customer 13 1,285,160.60 2020, the bankruptcy without any Customer 14 1,236,225.30 liquidation procedures business Customer 15 1,235,170.95 of Shandong Hongli transaction with Customer 16 Bad debt losses 1,200,000.00 Group Co., Ltd. had Not the Company Customer 17 1,149,217.70 been implemented, and for over ten Customer 18 848,158.92 the repayment rate of years, the Customer 19 841,642.86 the Company’s client’s Customer 20 830,000.00 outstanding payment qualification for Customer 21 800,000.00 was 0. On 29 January business Customer 22 797,786.72 2021, the Company operation shall Customer 23 796,226.73 held the 7th Meeting be canceled or Customer 24 760,197.20 of the 9th Board of the insolvency Customer 25 728,666.36 Directors and liquidation is Customer 26 677,250.00 approved the Proposal finished without on Verification of Customer 27 551,305.36 any production Accounts Receivable Customer 28 549,800.00 and operation of Shandong Hongli Customer 29 537,698.10 activities. Group Co., Ltd.. Customer 30 12,343,782.28 Customer 31 520,892.51 Total -- 82,330,500.58 -- -- -- (4) Top 5 of the Ending Balance of the Accounts Receivable Collected according to the Arrears Party Unit: RMB Proportion to total Ending Ending balance of Name of the entity ending balance of balance of bad accounts receivable accounts receivable debt provision Customer 1 140,334,103.03 24.92% 2,806,682.06 Customer 2 36,991,841.04 6.57% 856,733.55 Customer 3 33,407,519.00 5.93% 668,150.38 151 Changchai Company, Limited Annual Report 2020 Customer 4 22,051,755.53 3.92% 441,035.11 Customer 5 18,721,197.34 3.32% 374,423.95 Total 251,506,415.94 44.66% 5. Prepayments (1) List by Aging Analysis Unit: RMB Ending balance Beginning balance Aging Amount Proportion Amount Proportion Within 1 year 7,039,656.05 75.23% 10,857,776.65 83.72% 1 to 2 years 641,762.79 6.86% 993,030.99 7.66% 2 to 3 years 673,819.29 7.20% 115,335.90 0.89% Over 3 years 1002602.62 10.71% 1,002,602.62 7.73% Total 9,357,840.75 -- 12,968,746.16 -- As of the end of the Reporting Period, the Company had no prepayments with an aging of more than 1 year and a significant amount. (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 RMB5,537,493.47 accounting for 59.17% of the total ending balance of prepayments. 6. Other Receivables Unit: RMB Item Ending balance Beginning balance Interest receivable 0.00 0.00 Dividend receivable 0.00 0.00 Other receivables 6,212,062.80 9,703,390.94 Total 6,212,062.80 9,703,390.94 (1) Other Receivables 1) Other Receivables Classified by Accounts Nature Unit: RMB Nature Ending carrying value Beginning carrying value Margin and cash pledge 4,200.00 7,758.60 Intercourse funds 22,967,220.99 24,536,151.71 Petty cash and borrowings by employees 1,359,483.08 3,208,541.67 Other 13,806,779.19 15,374,916.41 Total 38,137,683.26 43,127,368.39 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 33,423,977.45 33,423,977.45 January 2020 152 Changchai Company, Limited Annual Report 2020 Balance of 1 January 2020 in the Current Period --Transfer to Second stage -- Transfer to Third stage -- Reverse to Second stage -- Reverse to First stage Withdrawal of the 27,302.92 27,302.92 Current Period Reversal of the 1,525,659.91 1,525,659.91 Current Period Write-offs of the Current Period Verification of the Current Period Other changes Balance of 31 31,925,620.46 31,925,620.46 December 2020 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) 4,544,798.95 1 to 2 years 488,230.94 2 to 3 years 461,642.22 Over 3 years 32,643,011.15 3 to 4 years 1,168,912.97 4 to 5 years 208,579.74 Over 5 years 31,265,518.44 Total 38,137,683.26 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 Category Beginning balance Reversal or Write- Ending balance Withdrawal Other recovery off 153 Changchai Company, Limited Annual Report 2020 Bad debt provision for 5,042,448.58 3,080.17 5,039,368.41 which accrued separately Bad debt provision for 28,381,528.87 27,302.92 1,522,579.74 26,886,252.05 which accrued by group Total 33,423,977.45 27,302.92 1,525,659.91 31,925,620.46 4) There Was No Particulars of the Actual Verification of Other Receivables during the Reporting Period 5) Top 5 of the Ending Balance of the Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to Ending balance ending balance Name of the entity Nature Ending balance Aging of bad debt of other provision receivables% Changzhou Compressor Intercourse Over 5 2,940,000.00 7.71% 2,940,000.00 Factory funds years Changchai Group Imp. Intercourse Over 5 2,853,188.02 7.48% 2,853,188.02 & Exp. Co., Ltd. funds years Changzhou New Intercourse Over 5 District Accounting 1,626,483.25 4.26% 1,626,483.25 funds years Center Changchai Group Intercourse Over 5 1,140,722.16 2.99% 1,140,722.16 Settlement Center funds years Changzhou Huadi Intercourse Within 1 Engineering Guarantee 1,065,400.00 2.79% 21,308.00 funds year Co., Ltd. Total -- 9,625,793.43 -- 25.23% 8,581,701.43 7. 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 134,712,519. 5,559,513.66 129,084,129. 125,757,856. 6,539,831.39 119,218,025. materials 83 60 89 50 Materials 68,876.57 12,444,566.4 183,111.28 12,261,455.1 14,065,866.5 14,065,866.5 processed on 1 3 2 2 commission Goods in 134,454,109. 18,512,449.0 115,941,660. 142,399,981. 26,985,350.1 115,414,631. process 88 8 80 66 4 52 154 Changchai Company, Limited Annual Report 2020 Finished 361,975,004. 15,261,416.1 346,713,588. 239,701,513. 15,404,153.2 224,297,359. goods 89 7 72 09 9 80 Low priced 3,373,235.80 1,205,538.85 2,167,696.95 and easily 1,906,803.53 1,031,708.62 875,094.91 worn articles Total 647,114,304. 40,433,964.1 606,680,340. 523,677,153. 50,317,984.9 473,359,168. 65 0 55 85 5 90 (2) Falling Price Reserves Unit: RMB Increase Decrease Beginning Item Reversal or Ending balance balance Withdrawal Other Other write-off Raw materials 6,539,831.39 1,393,521.63 2,373,839.36 5,559,513.66 Materials processed on 183,111.28 68,876.57 183,111.28 68,876.57 commission Goods in 26,985,350.14 4,107,305.33 12,580,206.39 18,512,449.08 process Finished goods 15,404,153.29 7,064,868.66 7,207,605.78 15,261,416.17 Low priced and easily worn 1,205,538.85 1,031,708.62 1,205,538.85 1,031,708.62 articles Total 50,317,984.95 13,666,280.81 23,550,301.66 40,433,964.10 (3) There Was No Capitalized Borrowing Expense in the Ending Balance of Inventories 8. Other Current Assets Unit: RMB Item Ending balance Beginning balance The VAT tax credits 22,534,134.72 6,043,473.29 Private placement of intermediary 2,358,490.56 agency fees Prepaid corporate income tax 2,240,396.88 Prepaid expense 80,070.32 98,856.26 Other 86,270.24 278,945.92 Total 27,299,362.72 6,421,275.47 9. Long-term Equity Investment Unit: RMB Invest Begin Increase/decrease Endin Endin 155 Changchai Company, Limited Annual Report 2020 ees ning Gain Adjust g g Cash balanc or loss ment Withd balanc balanc bonus e recogn of rawal e e of Additi Reduc Chang or (carryi ized other of (carryi deprec onal ed es in profit ng under compr deprec Other ng iation invest invest other annou value) the ehensi iation value) reserv ment ment equity nced equity ve reserv es to metho incom 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 10. Other Equity Instrument Investment Unit: RMB Item Ending balance Beginning balance Changzhou Synergetic Innovation Private Equity 102,198,950.87 100,000,000.00 Fund (Limited Partnership) Other equity instrument investment measured by 582,939,000.00 432,886,000.00 fair value Total 685,137,950.87 532,886,000.00 Non-trading equity instrument investment disclosed by category Unit: RMB 156 Changchai Company, Limited Annual Report 2020 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 192,185,000.00 Ltd. investment Non-trading equity Bank of Jiangsu 5,004,000.00 522,000.00 investment Jiangsu Ninghu The stock Non-trading equity Expressway Co., 348,368.67 348,368.67 has been sold investment Ltd. this year Changzhou Synergetic Innovation Non-trading equity 2,198,950.87 Private Equity investment Fund (Limited Partnership) Total 5,004,000.00 195,254,319.54 348,368.67 Other notes: Securities of the Company's securities refinancing business which was still on loan at the end of the period: 26,272,100 shares of Foton Motor Co., Ltd. 11. Other Non-current Financial Assets Unit: RMB Item Ending balance Beginning balance Jiangsu Liance Electromechanical Technology 7,200,000.00 7,200,000.00 Co., Ltd. Kailong High Technology Co., Ltd. 38,282,105.00 20,001,268.00 Guizhou Weimen Pharmaceutical Co., Ltd. 200,104.80 200,104.80 Guizhou Anda Technology Energy Co., Ltd. 195,297.49 195,297.49 Henan Lantian Gas Co., Ltd. 160,744.76 160,744.76 Hebei Songhe Renewable Resources Co., Ltd. 104,699.44 104,699.44 Anhui Haofang Electromechanical Co., Ltd. 89,987.14 89,987.14 Jiangsu Hosun New Energy Technology Co., 52,500,000.00 50,000,000.00 Ltd. Total 98,732,938.63 77,952,101.63 157 Changchai Company, Limited Annual Report 2020 12. 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 87,632,571.14 87,632,571.14 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 87,632,571.14 87,632,571.14 II. Accumulative depreciation and accumulative amortization 1.Beginning balance 39,184,904.31 39,184,904.31 2.Increased amount of the period 2,208,340.80 2,208,340.80 (1) Withdrawal or amortization 2,208,340.80 2,208,340.80 3.Decreased amount of the period (1) Disposal (2) Other transfer 4. Ending balance 41,393,245.11 41,393,245.11 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 46,239,326.03 46,239,326.03 2.Beginning carrying value 48,447,666.83 48,447,666.83 13. Fixed Assets Unit: RMB Item Ending balance Beginning balance Fixed assets 454,181,555.68 457,722,667.32 Disposal of fixed assets Total 454,181,555.68 457,722,667.32 158 Changchai Company, Limited Annual Report 2020 (1) List of Fixed Assets Unit: RMB Houses and Machinery Transportation Other Item Total buildings equipment equipment equipment I. Original carrying value 1. Beginning 448,688,661.22 956,138,240.18 17,283,169.54 42,791,587.37 1,464,901,658.31 balance 2. Increased amount of the 16,740,314.49 55,956,615.74 1,265,424.03 1,253,215.06 75,215,569.32 period (1) Purchase 418,626.65 1,790,876.46 420,194.69 605,480.50 3,235,178.30 (2) Transfer from 16,321,687.84 54,165,739.28 845,229.34 647,734.56 71,980,391.02 construction in progress (3) Enterprise combination increase 3. Decreased amount of the 15,123,976.27 1,609,285.56 1,920,409.32 18,653,671.15 period (1) Disposal or 15,123,976.27 1,609,285.56 1,920,409.32 18,653,671.15 scrap 4. Ending 465,428,975.71 996,970,879.65 16,939,308.01 42,124,393.11 1,521,463,556.48 balance II.Accumulative depreciation 1. Beginning 281,666,582.26 674,545,182.51 13,892,318.80 35,580,792.42 1,005,684,875.99 balance 2. Increased amount of the 16,501,775.40 57,821,450.01 1,098,838.47 2,985,836.70 78,407,900.58 period (1) Withdrawal 16,501,775.40 57,821,450.01 1,098,838.47 2,985,836.70 78,407,900.58 3. Decreased amount of the 1,235.25 13,868,284.82 1,526,161.49 1,895,768.46 17,291,450.02 period (1) Disposal or 1,235.25 13,868,284.82 1,526,161.49 1,895,768.46 17,291,450.02 scrap 4. Ending 298,167,122.41 718,498,347.70 13,464,995.78 36,670,860.66 1,066,801,326.55 balance III.Depreciation reserves 159 Changchai Company, Limited Annual Report 2020 1. Beginning 1,494,115.00 1,494,115.00 balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the 1,013,440.75 1,013,440.75 period (1) Disposal or 1,013,440.75 1,013,440.75 scrap 4. Ending 480,674.25 480,674.25 balance IV. Carrying value 1. Ending 167,261,853.30 277,991,857.70 3,474,312.23 5,453,532.45 454,181,555.68 carrying value 2. Beginning 167,022,078.96 280,098,942.67 3,390,850.74 7,210,794.95 457,722,667.32 carrying value 14. Construction in Progress Unit: RMB Item Ending balance Beginning balance Construction in progress 44,844,896.77 63,216,445.03 Engineering materials 21,657,535.64 28,141,711.21 Total 66,502,432.41 91,358,156.24 (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 Expansion capacity of multi-cylinde 1,128,887.90 1,128,887.90 11,375,531.74 11,375,531.74 r (The 2nd Period) Diesel Engine Cylinder Body 38,266,788.31 38,266,788.31 Flexible Manufacturin g Line 160 Changchai Company, Limited Annual Report 2020 35KV 1,321,959.41 1,321,959.41 Substation Oily water separating 340,800.00 340,800.00 equipment Relocation project of 40,307,243.35 40,307,243.35 1,687,194.64 1,687,194.64 light engine and casting Equipment to be installed 3,408,765.52 3,408,765.52 10,224,170.93 10,224,170.93 and payment for projects Total 44,844,896.77 44,844,896.77 63,216,445.03 63,216,445.03 (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 Expa nsion capac ity of multi- 79,00 11,37 10,27 1,128 Unco 31,45 Self-f cylin 0,000 5,531 8,095 ,887. mplet 2.00 unded der .00 .74 .84 90 ed (The 2nd Perio d) 161 Changchai Company, Limited Annual Report 2020 Diese l Engin e Cylin der 116,0 38,26 38,45 187,7 Self-f Body 40,00 6,788 4,558 0.00 69.94 unded Flexi 0.00 .31 .25 ble Manu factur ing Line 35KV 73,29 1,321 1,712 390,6 Self-f Subst 0,000 ,959. ,635. 0.00 76.04 unded ation .00 41 45 Reloc ation proje ct of 474,7 1,687 38,62 40,30 Unco 8.49 Self-f light 06,00 ,194. 0,048 0.00 7,243 mplet % unded engin 0.00 64 .71 .35 ed e and castin g 52,65 39,22 50,44 41,43 Total —— 1,474 9,946 5,289 6,131 -- -- -- .10 .69 .54 .25 (3) Engineering Materials Unit: RMB Ending balance Beginning balance Depreciati Item Carrying Carrying Carrying Depreciation Carrying on amount value amount reserves value reserves Engineerin 21,657,535.64 21,657,535.64 28,141,711.21 28,141,711.21 g materials Total 21,657,535.64 21,657,535.64 28,141,711.21 28,141,711.21 15. Intangible Assets (1) List of Intangible Assets Unit: RMB Trademark use Item Land use right Patent right License fee Total right I. Original carrying value 162 Changchai Company, Limited Annual Report 2020 1. Beginning balance 144,770,507.85 12,866,992.58 5,488,000.00 163,125,500.43 2. Increased amount of 62,013,038.83 1,200,922.58 1,087,042.79 64,301,004.20 the period (1) Purchase 62,013,038.83 1,200,922.58 1,087,042.79 64,301,004.20 (2) Internal R&D (3) Business combination increase 3. Decreased amount of the period (1) Disposal 4. Ending balance 206,783,546.68 14,067,915.16 5,488,000.00 1,087,042.79 227,426,504.63 II. Accumulated amortization 1. Beginning balance 51,100,000.82 10,771,116.13 1,554,933.22 63,426,050.17 2. Increased amount of 3,445,675.20 1,108,171.52 548,799.96 27,176.07 5,129,822.75 the period (1) Withdrawal 3,445,675.20 1,108,171.52 548,799.96 27,176.07 5,129,822.75 3. Decreased amount of the period (1) Disposal 4. Ending balance 54,545,676.02 11,879,287.65 2,103,733.18 27,176.07 68,555,872.92 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 1. Ending carrying 152,237,870.66 2,188,627.51 3,384,266.82 1,059,866.72 158,870,631.71 value 2. Beginning carrying 93,670,507.03 2,095,876.45 3,933,066.78 0.00 99,699,450.26 value 16. Long-term Prepaid Expenses Item Beginning Increase Amortized Decrease Ending balance balance amount Furniture of employee 53,497.80 39,804.60 13,693.20 dormitory, etc. Total 53,497.80 39,804.60 13,693.20 163 Changchai Company, Limited Annual Report 2020 17. 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 6,544,083.47 981,314.04 6,682,294.34 1,023,863.04 Deductible loss 21,670,394.08 3,250,559.11 Total 28,214,477.55 4,231,873.15 6,682,294.34 1,023,863.04 (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 Changes in fair value of other 500,567,950.87 75,085,192.63 373,011,500.00 55,951,725.00 equity instrument investment Changes in fair value of trading 18,481,109.00 4,600,250.05 financial assets Changes in fair value of other 2,500,000.00 375,000.00 non-current financial assets Assets evaluation appreciation for business 4,074,374.26 611,156.14 4,524,661.07 1,131,165.27 combination not under the same control Total 525,623,434.13 80,671,598.82 377,536,161.07 57,082,890.27 (3) List of Unrecognized Deferred Income Tax Assets Unit: RMB Item Ending balance Beginning balance Bad debt provision 191,416,942.31 276,036,565.83 Falling price reserves of 40,433,964.10 50,317,984.95 inventories Total 231,850,906.41 326,354,550.78 18. Other Non-current Assets Unit: RMB Item Ending balance Beginning balance 164 Changchai Company, Limited Annual Report 2020 Depreciati Carrying Carrying Depreciation Carrying on Carrying value amount amount reserves value reserves Advances payment of 19,971,006.56 19,971,006.56 equipments Total 19,971,006.56 19,971,006.56 19. 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 10,000,000.00 10,000,000.00 Credit loans 5,000,000.00 5,000,000.00 Total 22,000,000.00 22,000,000.00 (2) There Was No Short-term Borrowings Overdue but Unpaid. 20. Notes Payable Unit: RMB Category Ending balance Beginning balance Bank acceptance bill 595,346,000.00 403,035,000.00 Total 595,346,000.00 403,035,000.00 At the end of the current period, the total amount of notes payable due and not paid was RMB0. 21. Accounts Payable (1) List of Accounts Payable Unit: RMB Item Ending balance Beginning balance Payment for goods 612,757,392.46 525,625,016.89 Total 612,757,392.46 525,625,016.89 (2) There Was No Significant Accounts Payable Aging over One Year 22. Deposit Received Unit: RMB Item Ending balance Beginning balance Payment for goods 661,612.17 Total 661,612.17 Refer to “V Significant Accounting Policies, Estimates-32(1) Changes to Significant Accounting Policies” for the difference between the beginning balance and ending balance of prior period (31 December 2019). (2) There Was No Significant Accounts Payable Aging over One Year 23. Contract Liabilities Unit: RMB Item Ending balance Beginning balance Contract liabilities 35,944,517.15 29,652,202.74 165 Changchai Company, Limited Annual Report 2020 Total 35,944,517.15 29,652,202.74 Refer to “V Significant Accounting Policies, Estimates-32(1) Changes to Significant Accounting Policies” for the difference between the beginning balance and ending balance of prior period (31 December 2019). 24. Payroll Payable (1) List of Payroll Payable Unit: RMB Item Beginning balance Increase Decrease Ending balance I. Short-term salary 44,559,015.79 277,676,314.10 272,108,168.42 50,127,161.47 II.Post-employment benefit-defined 22,003,717.86 22,003,717.86 contribution plans III. Termination 109,584.00 109,584.00 benefits Total 44,559,015.79 299,789,615.96 294,221,470.28 50,127,161.47 (2) List of Short-term Salary Unit: RMB Item Beginning balance Increase Decrease Ending balance 1. Salary, bonus, 36,894,953.71 237,003,162.20 231,989,488.74 41,908,627.17 allowance, subsidy 2.Employee welfare 1,592.74 3,302,752.84 3,302,752.84 1,592.74 3. Social insurance 14,152,537.94 14,152,537.94 Of which: Medical insurance 11,550,069.03 11,550,069.03 premiums Work-related injury 1,128,043.94 1,128,043.94 insurance Maternity insurance 1,474,424.97 1,474,424.97 4. Housing fund 18,592,725.00 18,592,725.00 5.Labor union budget and 7,662,469.34 4,625,136.12 4,070,663.90 8,216,941.56 employee education budget 6. Short-term absence with salary 7. Short-term profit sharing scheme Total 44,559,015.79 277,676,314.10 272,108,168.42 50,127,161.47 (3) List of Defined Contribution Plans Unit: RMB Item Beginning balance Increase Decrease Ending balance 1. Basic pension 21,335,032.17 21,335,032.17 benefits 166 Changchai Company, Limited Annual Report 2020 2. Unemployment 668,685.69 668,685.69 insurance 3. Enterprise annuities Total 22,003,717.86 22,003,717.86 25. Taxes Payable Unit: RMB Item Ending balance Beginning balance VAT 461.22 1,290,060.47 Corporate income tax 531,557.38 5,090,781.18 Personal income tax 114,208.40 367,624.40 Urban maintenance and 879,346.31 970,067.92 construction tax Property tax 94,863.50 94,257.20 Land use tax 100,135.19 100,135.19 Stamp duty 6,851.35 6,282.95 Education Surcharge 35,023.81 99,824.96 Comprehensive fees 1,075,134.76 1,075,134.76 Environmental protection tax 31,903.49 213.55 Total 2,869,485.41 9,094,382.58 26. Other Payables Unit: RMB Item Ending balance Beginning balance Interest payable Dividends payable 3,891,433.83 3,891,433.83 Other payables 193,653,642.25 201,172,711.27 Total 197,545,076.08 205,064,145.10 (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 Other Total 3,891,433.83 3,891,433.83 The reason for non-payment for over one year: Not gotten by shareholders yet. 167 Changchai Company, Limited Annual Report 2020 (2) Other Payables 1) Other Payables Listed by Nature of Account Unit: RMB Item Ending balance Beginning balance Margin & cash pledged 3,406,041.83 3,271,541.83 Intercourse funds among units 9,309,617.95 11,321,462.95 Intercourse funds among 1,256,848.49 430,612.05 individuals Sales discount and three 147,739,746.71 143,497,522.22 guarantees Other 31,941,387.27 42,651,572.22 Total 193,653,642.25 201,172,711.27 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. 27. Other Current Liabilities Unit: RMB Item Ending balance Beginning balance Sale service fee 365,047.65 229,387.96 Transportation storage fee 260,055.33 132,551.86 Electric charge 1,972,314.61 815,772.56 Tax to be transferred 2,636,529.53 2,136,799.04 Total 5,233,947.12 3,314,511.42 Refer to “V Significant Accounting Policies, Estimates-32(1) Changes to Significant Accounting Policies” for the difference between the beginning balance and ending balance of prior period (31 December 2019). 28. Deferred Income Unit: RMB Beginning Reason for Item Increase Decrease Ending balance balance formation Government Government 58,864,111.22 1,914,373.62 56,949,737.60 grants appropriation Total 58,864,111.22 1,914,373.62 56,949,737.60 -- Item involving government grants: Unit: RMB 168 Changchai Company, Limited Annual Report 2020 Amount Amount recorded recorded Amount into Related into offset Amount non-oper to Beginning other cost in Other Ending Item of new ating assets/rel balance income the changes balance subsidy income ated in the Reportin in the income Reportin g Period Reportin g Period g Period Electric control of diesel engine research and 248,400. Related 248,400.00 develop 000 to assets ment and industrial ization allocatio ns National major project 28,770,000. 28,770,000. Related special 00 00 to assets allocatio ns Remove 19,845,711. 665,973. 19,179,737. Related compens 22 62 60 to assets ation 169 Changchai Company, Limited Annual Report 2020 Research and develop ment and industrial ization allocatio ns of national 10,000,000. 1,000,00 9,000,000.0 Related III/IV 00 0.00 0 to assets standard high-po wered efficient diesel engine for agricultu ral use 58,864,111. 1,914,37 56,949,737. Total 22 3.62 60 29. Share Capital 单位:元 Increase/decrease (+/-) Beginning Bonus Ending New shares Bonus balance issue from Other Subtotal balance issued shares profit The sum of 561,374,32 561,374,32 shares 6.00 6.00 30. Capital Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Capital premium 143,990,690.24 143,990,690.24 (premium on stock) Other capital reserves 20,337,975.19 20,337,975.19 Total 164,328,665.43 164,328,665.43 31. Other Comprehensive Income Unit: RMB Item Beginni Reporting Period Endin 170 Changchai Company, Limited Annual Report 2020 ng Less: g balance Record balan Less: ed in ce Recorded other in other compre comprehe hensiv Attribu nsive e table to Attribu Income income in income owners table to before Less: prior in prior of the non-co taxatio Income period period Compa ntrollin n in the tax and and ny as g Curren expens 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 127,96 108,42 425,4 317,059, 348,36 19,194, income that will not be 6,296.3 2,983.2 82,75 775.00 8.67 944.45 reclassified to profit or loss 6 4 8.24 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 Changes in fair value of 127,96 108,42 425,4 317,059, 348,36 19,194, other equity instrument 6,296.3 2,983.2 82,75 775.00 8.67 944.45 investment 6 4 8.24 Changes in fair value of corporate credit risk II. Other comprehensive income that may subsequently be reclassified to profit or loss 171 Changchai Company, Limited Annual Report 2020 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 127,96 108,42 425,4 Total of other 317,059, 348,36 19,194, 6,296.3 2,983.2 82,75 comprehensive income 775.00 8.67 944.45 6 4 8.24 32. Specific Reserve Unit: RMB Item Beginning balance Increase Decrease Ending balance Safety production 17,560,202.07 3,766,291.74 2,513,507.26 18,812,986.55 cost Total 17,560,202.07 3,766,291.74 2,513,507.26 18,812,986.55 33. Surplus Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Statutory surplus 312,294,673.24 309,071,675.82 reserves 3,222,997.42 Discretional surplus 13,156,857.90 13,156,857.90 reserves Total 322,228,533.72 3,222,997.42 325,451,531.14 34. Retained Earnings Unit: RMB Item Reporting Period Same period of last year Beginning balance of retained earnings before 717,883,351.33 726,689,929.10 adjustments 172 Changchai Company, Limited Annual Report 2020 Total retained earnings at the beginning of the 1,619,864.82 adjustment period (“+” means up, “-” means 1,651,336.26 down) Beginning balance of retained earnings after 719,503,216.15 728,341,265.36 adjustments Add: Net profit attributable to owners of the 52,432,443.05 24,966,526.85 Company as the parent Less: Withdrawal of statutory surplus reserves 3,222,997.42 2,094,119.49 Withdrawal of discretional surplus reserves Withdrawal of general reserve Dividend of ordinary shares payable 14,034,358.15 Dividends of ordinary shares transferred as share capital Recorded in other comprehensive income in prior period and transferred in retained profits in 348,368.67 the Current Period Ending retained earnings 777,899,079.66 728,341,265.36 Notes: The retained earnings at the beginning of the adjustment period due to the accounting errors correction in previous period: RMB1,651,336.26 at the period-beginning of 2020, and RMB1,619,864.82 at the period-beginning of 2019. 35. 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 Main operations 2,252,479,553.51 1,918,486,625.85 2,001,911,782.04 1,679,856,891.00 Other operations 43,985,157.73 32,087,365.42 43,909,019.06 34,676,976.50 Total 2,296,464,711.24 1,950,573,991.27 2,045,820,801.10 1,714,533,867.50 Information related to performance obligations: performing according to the contract offer Information related to transaction value assigned to residual performance obligations: The amount of revenue corresponding to performance obligations of contracts signed but not performed or not fully performed yet was RMB0 at the period-end. 36. Taxes and Surtaxes Unit: RMB Item Reporting Period Same period of last year Urban maintenance and 2,090,758.82 967,755.74 construction tax Education surcharge 1,493,399.12 690,897.41 Property tax 4,573,282.78 4,692,583.81 Land use tax 3,752,947.49 3,813,015.72 Vehicle and vessel use tax 1,350.00 1,320.00 Stamp duty 698,047.82 541,541.14 173 Changchai Company, Limited Annual Report 2020 Environment tax 221,775.24 238,068.00 Other 38,047.88 34,933.24 Total 12,869,609.15 10,980,115.06 37. Selling Expense Unit: RMB Item Reporting Period Same period of last year Office expenses 15,665,504.29 15,164,256.65 Employee benefits 38,670,632.17 29,850,039.44 Sales promotional expense 6,859,494.25 5,260,765.63 Three guarantees 65,108,496.52 38,321,773.50 Transport charge 7,296,670.11 Other 2,068,151.39 1,191,611.72 Total 128,372,278.62 97,085,117.05 38. Administrative Expense Unit: RMB Item Reporting Period Same period of last year Safety expenses 3,766,291.74 3,868,727.07 Office expenses 10,970,658.73 11,096,718.08 Other 7,389,204.00 22,624,149.85 Repair charge 788,498.70 391,744.51 Transport fees 2,035,060.15 Depreciation and amortization 10,255,597.50 11,166,156.58 Employee benefits 54,275,945.07 55,833,401.17 Total 87,446,195.74 107,015,957.41 39. Development Costs Unit: RMB Item Reporting Period Same period of last year Direct input expense 43,808,908.87 39,929,867.41 Employee benefits 20,288,706.97 19,795,993.59 Depreciation and amortization 4,534,946.69 3,926,467.26 Entrusted development charges 430,000.00 26,000.00 Other 3,196,218.55 2,543,048.01 Total 72,258,781.08 66,221,376.27 40. Finance Costs Unit: RMB Item Reporting Period Same period of last year Interest expense 7,302,086.80 5,722,554.43 Less: Interest income 5,467,634.76 6,733,183.88 Net foreign exchange gains or 14,491,248.00 -1,709,183.70 losses Other -557,389.72 -1,716,760.21 Total 15,768,310.32 -4,436,573.36 174 Changchai Company, Limited Annual Report 2020 41. Other Income Unit: RMB Sources Reporting Period Same period of last year Government grants 7,763,215.65 5,312,295.51 Other 45,516.87 12,063.29 42. 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 -25,036.13 financial assets Dividend income from holding of other equity 5,004,000.00 6,069,000.00 instrument investment Investment income from holding of held-to –maturity investment Investment income from holding of available-for-sale financial assets Investment income from disposal of available-for-sale financial assets Investment income from disposal of held-to –maturity investment Income from re-measurement of residual stock rights at fair value after losing control power Interest income from holding of investment in debt obligations Interest income from holding of investment in other debt obligations Investment income from disposal of investment in other debt obligations Investment income from disposal of other -18,685.03 non-current financial assets Dividend income from holding of other 149,821.58 1,408,752.61 non-current financial assets Other income from holding of other equity 433,925.05 137,814.50 instrument investments Investment income from financial products 753,991.35 413,378.77 Forward income from foreign exchange settlement 229,125.00 175 Changchai Company, Limited Annual Report 2020 Total 6,545,826.85 8,010,260.85 43. Gain on Changes in Fair Value Unit: RMB Sources Reporting Period Same period of last year Transactional financial assets 200,272.00 -49,255.00 Other non-current financial assets 20,780,837.00 Total 20,981,109.00 -49,255.00 44. Credit Impairment Loss Unit: RMB Item Reporting Period Same period of last year Bad debt loss of other receivables 1,498,356.99 -288,027.65 Bad debt loss of accounts 880,273.69 -4,637,783.63 receivable Impairment loss of entrusted loan 4,000,000.00 Total 2,378,630.68 -925,811.28 45. Asset Impairment Loss Unit: RMB Item Reporting Period Same period of last year I. Bad debt loss II. Loss on inventory valuation and contract -11,155,930.76 -42,371,202.17 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 X. Impairment loss on intangible assets XI. Impairment loss on goodwill XII. Other Total -11,155,930.76 -42,371,202.17 46. Asset Disposal Income Unit: RMB Sources Reporting Period Same period of last year Disposal income of fixed assets 229,121.29 2,059,668.56 47. 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 penalty 267,439.00 373,200.44 267,439.00 176 Changchai Company, Limited Annual Report 2020 No payment required 399,049.91 29,831.10 399,049.91 Other 380,625.30 59,319.94 380,625.30 Total 1,047,114.21 462,351.48 1,047,114.21 48. 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 34,356.44 158,128.44 34,356.44 non-current assets Quality indemnity 2,085,438.03 2,085,438.03 Donation expenditure 250,000.00 250,000.00 Other 260,002.86 73,810.45 260,002.86 Total 2,629,797.33 231,938.89 2,629,797.33 49. Income Tax Expense (1) List of Income Tax Expense Unit: RMB Item Reporting Period Same period of last year Current income tax expense 838,369.52 1,939,568.19 Deferred income tax expense 1,247,230.81 -224,522.42 Total 2,085,600.33 1,715,045.77 (2) Adjustment Process of Accounting Profit and Income Tax Expense Unit: RMB Item Reporting Period Profit before taxation 54,380,351.52 Current income tax expense accounted at statutory/applicable tax rate 8,157,052.73 Influence of applying different tax rates by subsidiaries 733,969.40 Influence of income tax before adjustment -728,340.92 Influence of non-taxable income -788,055.39 Influence of non-deductable costs, expenses and losses 456,287.08 Influence of deductable losses of unrecognized deferred income tax at the -2,140,409.67 beginning of the Reporting Period Influence of deductable temporary difference or deductable losses of 110,589.49 unrecognized deferred income tax assets in the Reporting Period Tax preference generated from eligible expense -3,241,494.34 Changes in the balance of deferred income tax assets/liabilities at the -473,998.05 beginning of the period due to tax rate adjustments Income tax expense 2,085,600.33 50. Cash Flow Statement (1) Cash Generated from Other Operating Activities Unit: RMB Item Reporting Period Same period of last year Subsidy and appropriation 5,857,679.00 4,247,921.89 177 Changchai Company, Limited Annual Report 2020 Other intercourses in cash 5,144,619.79 176,497.69 Interest income 5,467,634.76 6,987,251.60 Other 507,167.41 378,925.22 Total 16,977,100.96 11,790,596.40 (2) Cash Used in Other Operating Activities Unit: RMB Item Reporting Period Same period of last year Selling and administrative 120,086,467.93 120,289,403.78 expenses paid in cash Handling charges 1,776,237.12 938,872.65 Other 777,383.09 317,407.08 Other transactions 690,007.30 143,724.20 Total 123,533,031.29 121,486,471.86 (3) Cash Generated from Other Investing Activities Item Reporting Period Same period of last year Deposit of construction unit 336,150.00 Total 336,150.00 (4) Cash Used in Other Investing Activities Item Reporting Period Same period of last year Product margin 4,141,850.71 Total 4,141,850.71 (5) Cash Used in Other Financial Activities Item Reporting Period Same period of last year Private placement of intermediary agency 2,500,000.00 fees Total 2,500,000.00 51. 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 52,294,751.19 24,984,327.75 Add: Provision for impairment of assets 8,777,300.08 43,297,013.45 Depreciation of fixed assets, of oil and gas assets, of 80,616,241.38 85,591,455.99 productive living assets Depreciation of right-of-use assets Amortization of intangible assets 5,129,822.75 4,826,730.02 Amortization of long-term deferred expenses 39,804.60 39,804.60 Losses on disposal of fixed assets, intangible assets and other -229,121.29 -2,059,668.56 long-term assets (gains by “-”) 178 Changchai Company, Limited Annual Report 2020 Losses on the scrapping of fixed assets (gains by “-”) 34,356.44 158,128.44 Losses on the changes in fair value (gains by “-”) -20,981,109.00 49,255.00 Financial expenses (gains by “-”) 16,911,546.38 5,007,157.46 Investment losses (gains by “-”) -6,545,826.85 -8,010,260.85 Decrease in deferred income tax assets (increase by “-”) -3,208,010.11 -43,732.33 Increase in deferred income tax liabilities (decrease by “-”) 4,455,240.92 -180,790.09 Decrease in inventory (increase by “-”) -144,477,102.41 42,238,508.04 Decrease in accounts receivable from operating activities 16,892,902.36 -138,877,379.35 (increase by “-”) Increase in payables from operating activities (decrease by 278,992,494.07 -99,909,743.96 “-”) Other -36,906,635.98 22,564,004.83 Net cash flows generated from operating activities 251,796,654.53 -20,325,189.56 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 629,939,540.50 545,959,998.20 Less: Beginning balance of cash 545,959,998.20 691,266,373.34 Add: Ending balance of cash equivalents Less: Beginning balance of cash equivalents Net increase in cash and cash equivalents 83,979,542.30 -145,306,375.14 (2) Cash and Cash Equivalents Unit: RMB Item Ending balance Beginning balance I. Cash 629,939,540.50 545,959,998.20 Including: Cash on hand 287,505.91 181,115.21 Bank deposit on demand 620,966,786.57 545,271,159.5 Other monetary assets on demand 8,685,248.02 507,723.49 Accounts deposited in the central bank available for payment Deposits in other banks Accounts of interbank II. Cash equivalents Of which: Bond investment expired within three months III. Ending balance of cash and cash 629,939,540.50 545,959,998.20 equivalents Of which: Cash and cash equivalents with restriction in use for the Company as the parent or subsidiaries of the Group 179 Changchai Company, Limited Annual Report 2020 52. 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 130,788,682.35 and environment Houses and buildings 2,012,894.88 Mortgaged for borrowings from banks Land use right 962,953.87 Mortgaged for borrowings from banks Machinery equipment 34,959,585.43 Mortgaged for borrowings from banks Total 168,724,116.53 -- 53. 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 -- -- 88,036,406.31 Of which: USD 22,205,667.87 6.5249 144,889,762.28 EUR HKD 285,402.45 0.84164 240,206.12 SGD 54,427.95 4.9314 268,405.99 JPY 1.00 0.0632 0.06 Accounts receivable -- -- Of which: USD 7,621,884.47 6.5249 49,732,033.97 Accounts payable Of which: USD 302.60 6.5249 1,974.43 (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 54. Government Grants (1) Basic Information on Government Grants Unit: RMB Amount recorded in the Category Amount Listed items current profit or loss Industrial and information industry 150,000.00 Other income 150,000.00 transformation and upgrading subsidies Trinity subsidy 615,000.00 Other income 615,000.00 Subsidy for stabilizing posts 3,147,000.03 Other income 3,147,000.03 Business development fund 10,600.00 Other income 10,600.00 Small and medium-sized enterprises 14,200.00 Other income 14,200.00 exploit capital Export credit insurance subsidies 323,200.00 Other income 323,200.00 Relocation compensation 665,973.62 Other income 665,973.62 180 Changchai Company, Limited Annual Report 2020 R & D and industrialization of off-road 248,400.00 Other income 248,400.00 diesel engine controlled by electricity Tax contribution award 50,000.00 Other income 50,000.00 Funding for the first year of the demonstration base for training 35,000.00 Other income 35,000.00 advanced skilled personnel Subsidies for training by work 1,217,500.00 Other income 1,217,500.00 Epidemic subsidy 2,000.00 Other income 2,000.00 Development funds for science and 10,000.00 Other income 10,000.00 technology projects Post-doctoral grants, outbound awards 50,000.00 Other income 50,000.00 and site establishment awards The third batch of intellectual property 100,000.00 Other income 100,000.00 award funds in Changzhou Financial center subsidy 50,460.00 Other income 50,460.00 Innovation-driven rewards 6,000.00 Other income 6,000.00 Subsidy fund of New District Finance 7,882.00 Other income 7,882.00 Bureau award Subsidies for high-tech enterprises from 60,000.00 Other income 60,000.00 the New District Finance Bureau Appropriation or research and development and industrialization allocations of national III/IV standard 1,000,000.00 Other income 1,000,000.00 high-powered efficient diesel engine for agricultural use Return of Government Grants □ Applicable √ Not applicable VIII. Changes of Consolidation Scope None 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 Housheng Investment Changz Changzh Servi 100.00% Set-up Co., Ltd. hou ou ce 181 Changchai Company, Limited Annual Report 2020 Changzhou Changchai Housheng Changz Changzh Indus 70.00% 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 (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 Changchai Wanzhou Diesel 40.00% 197,910.74 19,811,859.46 Engine Co., Ltd. Changzhou Changchai Housheng 5.00% -335,602.60 -313,270.31 Agricultural Equipment 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 49,26 25,04 74,31 24,78 24,78 43,80 25,82 69,62 20,59 20,59 Diese 7,159 4,012 1,171 1,522 1,522 7,991 1,314 9,305 4,433 4,433 l .00 .17 .17 .52 .52 .71 .00 .71 .90 .90 Engin e Co., Ltd. 182 Changchai Company, Limited Annual Report 2020 Chan gzhou Chan gchai Hous heng 26,35 26,77 33,04 33,04 28,57 29,08 28,64 28,64 423,4 514,6 Agric 6,205 9,698 5,105 5,105 3,892 8,562 1,916 1,916 93.77 69.94 ultura .03 .80 .00 .00 .12 .06 .23 .23 l Equip ment 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 43,143,29 494,776.8 494,776.8 2,183,407 40,959,22 160,355.4 160,355.4 1,526,529 Diesel 6.52 4 4 .36 2.43 3 3 .99 Engine Co., Ltd. Changzh ou Changcha i Houshen 14,280,06 -6,712,05 -6,712,05 -171,680. 13,888,57 -926,825. -926,825. -419,750. g 6.47 2.03 2.03 44 9.77 38 38 02 Agricultu ral Equipme nt 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 added. 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 and Anhui 183 Changchai Company, Limited Annual Report 2020 Haiyunzhou Equity Investment Partnership Enterprise (Limited). 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. 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 184 Changchai Company, Limited Annual Report 2020 Ending fair value Fair value Fair value Fair value Item measurement measurement measurement Total items at level items at level 1 items at level 3 2 I. Consistent fair value -- -- -- -- measurement 1. Trading financial assets 49,582,105.00 60,651,105.63 110,233,210.63 (I) Financial assets at fair value 49,582,105.00 60,651,105.63 110,233,210.63 through profit or loss (1) Debt instrument investment (2) Equity instrument investment 49,582,105.00 60,651,105.63 110,233,210.63 (3) Derivative financial assets 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 bond investment (III)Other equity instrument 582,939,000.00 102,198,950.87 685,137,950.87 investment (2) Equity instrument investment (IV) Investment property 1. Land use right for lease 2. Buildings leased out 3. Land use right held and planned to be transferred once appreciating (V) Living assets 1. Consumptive living assets 2. Productive living assets Total assets consistently measured 632,521,105.00 162,850,056.50 795,371,161.50 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 185 Changchai Company, Limited Annual Report 2020 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 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 investment of other equity instruments measured at fair value, the closing price at the end of the period 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 3 (1) Among the trading financial assets, the basic assets invested in financial products include bond assets, deposit assets, fund assets, etc. The portfolio of investment is managed dynamically, and the change in the fair value of financial products is difficult to measure, so the cost amount is adopted to confirm its fair value. For the unsettled forward settlement contract at the end of the period, its fair value was measured based on the valuation of the bank. (2) Among the non-current financial assets, such as the equity investment in Jiangsu Liance Mechanical and Electrical Technology Co., Ltd., which did not have active market transactions, the Company’s equity of the investee was relatively low and had no significant impact, so it is not feasible to use the income method or market method to estimate the value. Therefore, the investment cost was treated as reasonable estimation of fair value to measure at the period-end. In terms of shares of NEEQ unlisted public companies held by the Company, as for the equity instrument investment with inactive market transactions, due to the market value of shares cannot be reflected by the market transaction price with the low volume of holding, so the appraisement to the invested companies by income or market approach was unfeasible. Therefore, the investment cost shall be treated as reasonable estimation of fair value to measure at the period-end. Jiangsu Housheng 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 2020, and confirmed the premium rate of capital increase based on the appreciation rate of the equity value (on 30 December 2020, the company’s investors signed an investment agreement). Therefore, at the end of the period, the fair value of the equity investment had been adjusted and confirmed accordingly. (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) has invested in Jiangsu Housheng New Energy Technology Co., Ltd., and the change in fair value of the company's equity held by it had increased the equity of partners at the end of the year. In addition, the company's business environment, operating conditions, and financial status had not undergone major changes. 186 Changchai Company, Limited Annual Report 2020 Therefore, the company determined its fair value on the basis of the net book assets of the partnership at the end of the period. 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 Registratio Registere the Company as owned by the Name Nature of business n place d capital the parent Company as the against the parent against Company the Company Investment and operations of state-owned assets, assets management Changzhou (excluding financial RMB1.2 Investment Changzhou 30.43% 30.43% business), investment billion Group Co., Ltd. consulting (excluding consulting on investment in securities and options), etc. Notes: Information on the Company as the parent The parent company of the enterprise is Changzhou Investment Group Co., Ltd., which is a wholly-owned subsidiary of Changzhou Municipal People's Government. In accordance with Changzhou People’s Government Document (CZF [2006] No. 62), both the Company and Changzhou Investment Group Co., Ltd. are enterprises which Changzhou People’s Government authorizes Changzhou Government State-owned Assets Supervision and Administration Commission to perform duties of investors. Thus, after the sharer transfer, 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. Information on Other Related Parties Name Relationship with the Company Senior executives of the company used to serve as Synergetic Innovation Fund Management Co., Ltd. directors of the Company (no longer as directors of the Company on 16 April 2020) Changzhou Synergetic Innovation Private Equity Participated in establishing the industrial investment Fund (Limited Partnership) fund Jiangsu Housheng New Energy Technology Co., Ltd. Shareholding enterprise of the Company Donghai Securities Co., Ltd. Controlled by the same Company as the parent 4. Related-party Transactions (1) Other Related-party Transaction On 28 June 2020, the 3rd Meeting of the 9th Board of Directors approved the Proposal on Signature of Joint Sponsorship Underwriting Agreement of the Private Placement of A shares and Related-party Transaction, which 187 Changchai Company, Limited Annual Report 2020 allowed the Company signing the joint sponsorship underwriting agreement with Industrial Securities Co., Ltd. (hereinafter referred to as “Industrial Securities”) and Donghai Securities Co., Ltd. (hereinafter referred to as “Donghai Securities”), and appointing Industrial Securities and Donghai Securities as the co-sponsor underwriters for the private placement of A shares of the Company with sponsor fee of RMB3 million to Industrial Securities and Donghai Securities and the underwriting fee of no more than RMB11 million (inclusive of RMB11 million). As of 31 December 2020, the Company has paid a sponsorship fee of RMB 750,000 to Donghai Securities. XIII. Commitments and Contingency 1. Significant Commitments Significant commitments on balance sheet date As of 31 December 2020, there was no significant commitment for the Company to disclose. 2. Contingency As of 31 December 2020, there was no contingencies for the Company to disclose. XIV. Events after Balance Sheet Date 1. Profit Distribution Unit: RMB Profits or dividends to be distributed 0 2. Notes to Other Events after Balance Sheet Date According to the Investment Agreement signed on 30 December 2020, the Company increased its capital to Jiangsu Housheng New Energy Technology Co., Ltd. by RMB 26.25 million on 11 January 2021. As of the approval issue date of financial statements, there was no other significant event after balance sheet date that shall be disclosed. XV. Other Significant Events 1. Correction of Previous Accounting Error (1) Retrospective Restatement Unit: RMB Processing Affected financial statement line items of the Cumulative Content procedure comparative periods effects Changzhou Consolidated Balance Sheet in 2019-Mnetary assets 1,375,254.03 Xingsheng Consolidated Balance Sheet in 2019-Trading 3,050,000.00 Property financial assets The 4th Meeting Management Consolidated Balance Sheet in 2019-Accounts of the 9th Board 6,391.36 Co., Ltd. that receivable of Directors held was not Consolidated Balance Sheet in 2019-Prepayment 38,200.00 on 29 July 2020 included in Consolidated Balance Sheet in 2019-Other reviewed and -893,682.24 the scope of receivables approved the consolidated Consolidated Balance Sheet in 2019-Inventories 7,158.32 Proposal on statements Consolidated Balance Sheet in 2019-Other current Accounting 67,355.14 before has assets Errors Correction been Consolidated Balance Sheet in 2019-Total of current in Previous 4,632,342.79 conducted assets Period. accounting Consolidated Balance Sheet in 2019-Fixed assets 140,153.19 treatment Consolidated Balance Sheet in 2019-Long-term 53,497.80 according to prepaid expenses 188 Changchai Company, Limited Annual Report 2020 the Consolidated Balance Sheet in 2019-Deferred 6.52 provisions of income tax assets the Consolidated Balance Sheet in 2019-Total of 193,657.51 accounting non-current assets standards Consolidated Balance Sheet in 2019- Total assets 4,826,000.30 during the Consolidated Balance Sheet in 2019-Accounts 14,760.00 Reporting payable Period. Consolidated Balance Sheet in 2019-Advances from 952,386.57 customers Consolidated Balance Sheet in 2019-Other payables 1,224,017.91 Consolidated Balance Sheet in 2019-Total of current 2,191,164.48 liabilities Consolidated Balance Sheet in 2019-Total liabilities 2,191,164.48 Consolidated Balance Sheet in 2019-Surplus 163,483.58 reserves Consolidated Balance Sheet in 2019- Retained 1,471,352.24 earnings Consolidated Balance Sheet in 2019- Total equity 2,634,835.82 attributable to owners of the Company as the parent Consolidated Balance Sheet in 2019- Total owners’ 2,634,835.82 equity Consolidated Balance Sheet in 2019- Total liabilities 4,826,000.30 and owners’ equity Consolidated Income Statement in 2019- Revenue 5,687,083.80 Consolidated Income Statement in 2019- Operating 5,687,083.80 revenue Consolidated Income Statement in 2019-Operating 5,726,254.73 costs Consolidated Income Statement in 2019- Cost of 4,884,089.75 sales Consolidated Income Statement in 2019- Taxes and 21,043.17 surtaxes Consolidated Income Statement in 2019- 832,824.01 Administrative expense Consolidated Income Statement in 2019- Finance -11,702.20 costs Consolidated Income Statement in 2019-Interest 13,193.10 income Consolidated Income Statement in 2019- Other 12,063.29 income Consolidated Income Statement in 2019- Investment 58,549.24 income Consolidated Income Statement in 2019-Credit 7,317.61 189 Changchai Company, Limited Annual Report 2020 impairment loss Consolidated Income Statement in 2019-Operating 38,759.21 profit Consolidated Income Statement in 2019- 16,006.10 Non-operating income Consolidated Income Statement in 2019- 12,597.35 Non-operating expense Consolidated Income Statement in 2019- Profit 42,167.96 before taxation Consolidated Income Statement in 2019- Income tax 10,227.22 Consolidated Income Statement in 2019-Net profit 31,940.74 Consolidated Income Statement in 2019- Net profit 31,940.74 from continuing operations Consolidated Income Statement in 2019- Net profit 31,940.74 attributable to owners of the Company as the parent Consolidated Income Statement in 2019-Total 31,940.74 comprehensive income Consolidated Income Statement in 2019- 31,940.74 Attributable to owners of the Company as the parent Consolidated Income Statement in 2019-Earnings 0.00005 per share Consolidated Income Statement in 2019- Diluted 0.00005 earnings per share Consolidated Cash Flow Statement in 2019-Proceeds from sale of commodities and 6,150,306.39 rendering of services Consolidated Cash Flow Statement in 2019- Cash 110,627.50 generated from other operating activities Consolidated Cash Flow Statement in 2019-Subtotal 6,260,933.89 of cash used in operating activities Consolidated Cash Flow Statement in 2019- 4,051,587.11 Payments for commodities and services Consolidated Cash Flow Statement in 2019- Cash 1,415,158.29 paid to and for employees Consolidated Cash Flow Statement in 2019- Taxes 223,381.96 paid Consolidated Cash Flow Statement in 2019- Cash 353,138.57 used in other operating activities Consolidated Cash Flow Statement in 2019- 6,043,265.93 Subtotal of cash used in operating activities Consolidated Cash Flow Statement in 2019- Net 217,667.96 cash generated from/used in operating activities Consolidated Cash Flow Statement in 3,900,000.00 190 Changchai Company, Limited Annual Report 2020 2019-Proceeds from disinvestments Consolidated Cash Flow Statement in 2019- 58,549.24 Investment income Consolidated Cash Flow Statement in 2019- 3,958,549.24 Subtotal of cash generated from investing activities Consolidated Cash Flow Statement in 2019-Payments for acquisition of fixed assets, 37,696.92 intangible assets and other long-lived assets Consolidated Cash Flow Statement in 2019- 6,950,000.00 Payments for investments Consolidated Cash Flow Statement in 2019- 6,987,696.92 Subtotal of cash used in investing activities Consolidated Cash Flow Statement in 2019- Net -3,029,147.68 cash generated from/used in investing activities Consolidated Cash Flow Statement in 2019- Net -2,811,479.72 increase in cash and cash equivalents 2. 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 management, and did not divide business unit, so the Company only made single branch report. 3. Other Significant Transactions and Events with Influence on Investors’ Decision-making No. 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 33,54 31,64 1,895, 37,51 33,788 which bad debt 94.35 3,721,7 3,441. 7.29% 7,855. 586.8 0,056. 6.66% ,291.8 90.08 provision % 65.04 92 09 3 90 6 % separately accrued Of which: 191 Changchai Company, Limited Annual Report 2020 Accounts receivable with significant 29,87 27,97 1,895, 32,61 28,896 single amount 93.65 3,721,7 0,525. 4,938. 586.8 8,199. ,434.9 88.59 for which bad 6.50% % 5.79% 65.04 05 22 3 97 3 % debt provision separately accrued Accounts receivable with insignificant 3,672, 3,672, 4,891, single amount 100.0 4,891, 100.0 916.8 916.8 856.9 for which bad 0.80% 0% 0.87% 856.93 0% 7 7 3 debt provision separately accrued Accounts receivable for 426,3 110,3 315,9 525,8 192,14 which bad debt 25.89 333,725 00,27 92.71 67,70 32,57 74,42 93.34 8,650. 36.54 provision % ,773.00 9.29 % 4.87 4.42 3.56 % 56 % accrued by group Of which: Accounts receivable for which bad debt 426,3 110,3 315,9 525,8 192,14 25.89 333,725 provision 00,27 92.71 67,70 32,57 74,42 93.34 8,650. 36.54 % ,773.00 accrued by 9.29 % 4.87 4.42 3.56 % 56 % credit risk features group 459,8 142,0 317,8 563,3 225,93 100.0 30.88 100.00 337,447 Total 43,72 15,55 28,16 84,48 6,942. 40.10 0% % % ,538.04 1.21 9.96 1.25 0.46 42 % Accounts receivable with significant single amount for which bad debt provision separately accrued at the end of the period: Unit: RMB Ending balance Name Withdrawal Carrying amount Bad debt provision Withdrawal reason 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 192 Changchai Company, Limited Annual Report 2020 Expected to Customer 4 2,254,860.60 2,175,814.38 96.49% difficultly recover Expected to Customer 5 3,633,081.23 1,816,540.62 50.00% difficultly recover Customer 6 3,279,100.00 3,279,100.00 100.00% Difficult to recover Customer 7 1,617,988.01 1,617,988.01 100.00% Difficult to recover Customer 8 5,359,381.00 5,359,381.00 100.00% Difficult to recover Customer 9 2,584,805.83 2,584,805.83 100.00% Difficult to recover Customer 10 1,553,208.52 1,553,208.52 100.00% Difficult to recover Total 29,870,525.05 27,974,938.22 -- -- Accounts receivable for which bad debt provision accrued by credit risk features group Unit: RMB Ending balance Name Carrying amount Bad debt provision Withdrawal proportion Within 1 year 309,661,916.82 6,193,238.34 2.00% 1 to 2 years 8,482,312.62 424,115.63 5.00% 2 to 3 years 1,236,457.38 185,468.61 15.00% 3 to 4 years 4,343,446.09 1,303,033.83 30.00% 4 to 5 years 785,744.81 471,446.89 60.00% Over 5 years 101,790,401.57 101,790,401.57 100.00% Total 426,300,279.29 110,367,704.87 -- 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) 309,661,916.82 1 to 2 years 9,058,714.07 2 to 3 years 3,186,206.94 Over 3 years 137,936,883.38 3 to 4 years 6,867,235.84 4 to 5 years 3,394,775.63 Over 5 years 127,674,871.91 193 Changchai Company, Limited Annual Report 2020 Total 459,843,721.21 (2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Unit: RMB Changes in the Reporting Period Beginning Category Reversal or Write-o Ending balance balance Withdrawal Other recovery ff Bad debt 31,647 provision 33,788,291.86 2,140,436.77 ,855.0 withdrawn 9 separately Bad debt 110,36 provision 82,379, 192,148,650.56 598,258.02 7,704. withdrawn 203.71 87 by group 142,01 82,379, Total 225,936,942.42 598,258.02 2,140,436.77 5,559. 203.71 96 Of which bad debt provision reversed or recovered with significant amount in the Reporting Period: No. (3) There Was No Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount Actual verification of accounts receivable 82,379,203.71 Of which the verification of significant accounts receivable: Unit: RMB Whethe r generate Name of the Amount Performance of verification d from Nature Reason entity verified procedures related- party transacti on Customer 1 14,234,302.79 The aging of 1. The Company held the 3rd Customer 2 10,000,000.00 canceled receivables Meeting of the 9th Board of Customer 3 7,583,232.65 shall exceed 5 years Directors and the 3rd Meeting Customer 4 4,581,880.41 and result from of the 9th Supervisory Bad Customer 5 3,600,000.00 fruitless collection, Committee on 28 June 2020 debt Not Customer 6 2,752,840.00 and if any single and approved the Proposal on losses Customer 7 2,450,966.67 client’s large amount Verification of Some Accounts Customer 8 2,180,243.72 is involved without Receivable. Customer 9 1,976,282.47 any business 2. On 12 November 2020, the Customer 10 1,860,830.82 transaction with the bankruptcy liquidation 194 Changchai Company, Limited Annual Report 2020 Customer 11 1,758,686.48 Company for over procedures of Shandong Customer 12 1,662,052.98 ten years, the client’s Hongli Group Co., Ltd. had Customer 13 1,285,160.60 qualification for been implemented, and the Customer 14 1,236,225.30 business operation repayment rate of the Customer 15 1,235,170.95 shall be canceled or Company’s outstanding Customer 16 1,200,000.00 the insolvency payment was 0. On 29 Customer 17 1,149,217.70 liquidation is January 2021, the Company Customer 18 848,158.92 finished without any held the 7th Meeting of the Customer 19 841,642.86 production and 9th Board of Directors and Customer 20 830,000.00 operation activities. approved the Proposal on Customer 21 800,000.00 Verification of Accounts Receivable of Shandong Customer 22 797,786.72 Hongli Group Co., Ltd.. Customer 23 796,226.73 Customer 24 760,197.20 Customer 25 728,666.36 Customer 26 677,250.00 Customer 27 551,305.36 Customer 28 549,800.00 Customer 29 537,698.10 Customer 30 12,343,782.28 Customer 31 520,892.51 Total 82,330,500.58 -- -- -- (4) Top 5 of the Ending Balance of Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to total ending Ending balance of Ending balance of bad Name of the entity balance of accounts accounts receivable debt provision receivable Customer 1 140,334,103.03 30.52% 2,806,682.06 Customer 2 36,991,841.04 8.04% 856,733.55 Customer 3 33,407,519.00 7.26% 668,150.38 Customer 4 22,051,755.53 4.80% 441,035.11 Customer 5 18,721,197.34 4.07% 374,423.95 Total 251,506,415.94 54.69% 2. Other Receivables Unit: RMB Item Ending balance Beginning balance Other receivables 24,327,355.36 22,741,542.22 Total 24,327,355.36 22,741,542.22 (1) Other Receivable 1) Other Receivables Classified by Account Nature Unit: RMB Nature Ending carrying amount Beginning carrying amount Cash deposit and Margin 4,200.00 4,200.00 195 Changchai Company, Limited Annual Report 2020 Intercourse funds among units 39,857,085.87 37,618,642.29 Petty cash and borrowings by 673,198.96 624,083.07 employees Other 13,614,585.00 15,373,206.41 Total 54,149,069.83 53,620,131.77 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 30,878,589.55 30,878,589.55 January 2020 Balance of 1 January 2020 in the —— —— —— —— Current Period --Transfer to Second stage -- Transfer to Third stage -- Reverse to Second stage -- Reverse to First stage Withdrawal of the Current Period Reversal of the 1,056,875.08 1,056,875.08 Current Period Write-offs of the Current Period Verification of the Current Period Other changes Balance of 31 29,821,714.47 29,821,714.47 December 2020 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) 14,386,648.65 196 Changchai Company, Limited Annual Report 2020 1 to 2 years 8,533,236.84 2 to 3 years 1,450,140.04 Over 3 years 29,779,044.30 3 to 4 years 1,151,162.51 4 to 5 years 208,579.74 Over 5 years 28,419,302.05 Total 54,149,069.83 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 Bad debt provision 5,042,448.58 3,080.17 5,039,368.41 withdrawn separately Bad debt provision 25,836,140.97 1,053,794.91 24,782,346.06 withdrawn by group Total 30,878,589.55 1,056,875.08 29,821,714.47 4) Particulars of the Actual Verification of Other Receivables during the Reporting Period: No. 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 Changzhou Changchai Interco Benniu Diesel Engine urse 10,000,000.00 Within 1 year 18.47% 200,000.00 Fittings Co., Ltd. funds Within 1 year with RMB Changzhou Changchai Interco 1,411,701.19, 1-2 Housheng Agricultural urse 10,522,177.72 years with RMB 19.43% 585,921.31 Equipment Co., Ltd. funds 8,088,841.90, 2-3 years with RMB 1,021,634.63 197 Changchai Company, Limited Annual Report 2020 Interco Changzhou Compressors urse 2,940,000.00 Over 5 years 5.43% 2,940,000.00 Factory funds Interco Changchai Group Imp. urse 2,853,188.02 Over 5 years 5.27% 2,853,188.02 & Exp. Co., Ltd. funds Interco Changchai New District urse 1,626,483.25 Over 5 years 3.00% 1,626,483.25 Accounting Center funds Total -- 27,941,848.99 51.60% 8,205,592.58 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 382,752,730. 375,752,730. 252,752,730. 252,752,730. 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 382,796,912. 375,752,730. 252,796,912. 252,752,730. Total 7,044,182.50 44,182.50 53 03 53 03 (1) Investment to Subsidiaries Unit: RMB Increase/decrease Beginning Ending Ending Withdrawa balance balance balance of Investee Additional Reduced l of (carrying Other (carrying depreciatio investment investment depreciatio value) value) n reserve 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. 198 Changchai Company, Limited Annual Report 2020 Changzhou Housheng 40,000,000 40,000,000 Investment .00 .00 Co., Ltd. Changzhou Changchai Housheng 7,000,000. 7,000,000. 7,000,000. Agricultural 00 00 00 Equipment Co., Ltd. Changzhou Fuji Changchai 47,286,230 47,286,230 Robin .03 .03 Gasoline Engine Co., Ltd. Jiangsu Changchai 10,000,000 130,000,00 140,000,00 Machinery .00 0.00 0.00 Co., Ltd. Changzhou Xingsheng 1,000,000. 1,000,000. Property 00 00 Managemen t Co., Ltd. 252,752,73 130,000,00 7,000,000. 375,752,73 7,000,000. Total 0.03 0.00 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 199 Changchai Company, Limited Annual Report 2020 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 Main operations 2,086,035,553.15 1,794,202,913.98 1,829,511,302.64 1,547,250,831.33 Other operations 37,164,684.96 29,240,490.81 36,780,436.75 28,376,158.13 Total 2,123,200,238.11 1,823,443,404.79 1,866,291,739.39 1,575,626,989.46 Information related to performance obligations: performing according to the contract offer Information related to transaction value assigned to residual performance obligations: The amount of revenue corresponding to performance obligations of contracts signed but not performed or not fully performed yet was RMB0 at the period-end. 5. Investment Income Unit: RMB Item Reporting Period Same period of last year Dividend income from holding of other equity 5,004,000.00 6,069,000.00 instrument investment Income from transferring to accommodation business 433,925.05 137,814.50 Total 5,437,925.05 6,206,814.50 XVII. Supplementary Materials 1. Items and Amounts of Non-recurring Profit or Loss √ Applicable □ Not applicable Unit: RMB Item Amount Note Gain or loss on disposal of non-current assets 263,408.53 200 Changchai Company, Limited Annual Report 2020 Government subsidies charged to current profit or loss (exclusive of government subsidies given in the 7,763,215.65 Company’s ordinary course of business at fixed quotas or amounts as per the government’s uniform standards) Capital occupation charges on non-financial enterprises 344,842.86 that are recorded into current gains and losses Gain/loss from change of fair value of trading financial assets and liabilities, and derivative financial assets and liabilities, and investment gains from disposal of trading financial assets and liabilities, and derivative financial 27,526,935.85 assets and liabilities, and investment in other debt obligations, other than valid hedging related to the Company’s common businesses Other non-operating income and expenses other than the -1,571,453.49 above Less: Income tax effects 7,122,148.63 Non-controlling interests effects 255,505.29 Total 26,949,295.48 -- 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 EPS Profit as of Reporting Period Weighted average ROE EPS-basic EPS-diluted(Yuan/s (Yuan/share) hare) Net profit attributable to ordinary 2.45% 0.0934 0.0934 shareholders of the Company Net profit attributable to ordinary shareholders of the Company after 1.19% 0.0454 0.0454 deduction of non-recurring profit or loss 201 Changchai Company, Limited Annual Report 2020 Part XIII 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 on other stock markets. The above-mentioned documents available for reference are all kept in the Secretariat of the Board of Directors of the Company and the Shenzhen Stock Exchange. This Annual Report and its abstract have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail. The Board of Directors Changchai Company, Limited 15 April 2021 202