Changchai Company, Limited Annual Report 2017 (Abstract) Stock Symbol: 000570, 200570 Stock Name: Changchai A, Changchai B Announcement No.: 2018-002 CHANGCHAI COMPANY, LIMITED
ANNUAL REPORT 2017 (ABSTRACT)
Part I Important Notes
This Abstract is based on the full text of the Annual Report of Changchai Company, Limited (together with its consolidated subsidiaries, the “Company”, except where the context otherwise requires). In order for a full understanding of theCompany’s operating results, financial condition and future development planning, investors should carefully read the full text which has been disclosed together with this Abstract on the media designated by the China Securities Regulatory Commission (the “CSRC”).
The independent director Mr. Jia Bin was not present at the board session for reviewing this annual report and its summary and thus entrusted the independent director Mr. Feng Genfu to vote on behalf of him.
Independentauditor’s modified opinion:
□ Applicable√ Not applicable
Proposal on cash and/or share dividend for common shareholders for the Reporting Period, which has been considered and approved by the Board:
√ Applicable□ Not applicable
Share dividend converted from capital reserves:
□ Yes√ No
The Board has considered and approved a dividend payout proposal for the common shareholders for the Reporting Period: Based on the total shares of 561,374,326, a cash dividend of RMB0.30 (tax inclusive) per 10 shares would be distributed to all the shareholders, with no share dividend in any form.
Proposal on cash and/or share dividend for preferred shareholders for the Reporting Period, which has been considered and approved by the Board:
□ Applicable√ Not applicable
Changchai Company, Limited Annual Report 2017 (Abstract) Part II Company Profile
1. Stock Profile
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|-|-|-|-|-|-|
||Changchai A,Changchai B||||000570, 200570|
|Stock name|||Stock symbol|||
|Stock exchange||Shenzhen Stock Exchange||||
|Contact information||Board Secretary||Securities Representative||
|Name|He Jianjiang|||||
||123 Huaide Middle Road,Changzhou, Jiangsu, China|||||
|Office address||||||
|Fax|（86）519-86630954|||||
|Tel.|（86）519-68683155|||||
|E-mail address|cchjj@changchai.com|||||

2. Brief Introduction to Main Business Scope or Products in 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.
3. Key Financial Information
(1) Key Financial Information of Past Three Years
Indicate by tick mark whether there is any retrospectively restated datum in the table below.
□ Yes√ No
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||||||2017-over-201||
|||2017||2016||2015|
||||||6 change||
|Operating revenue|2,423,058,958.29||2,283,028,855.52||6.13%|2,519,799,547.29|
|Net income attributable to|46,431,302.73||62,539,896.17||||
|shareholders of the listed|||||-25.76%|71,102,792.49|
|company|||||||
|Net income attributable to|||||||
|shareholders of the listed|||||||
|||18,818,435.16||56,835,566.28|-66.89%|61,588,462.29|
|company before nonrecurring|||||||
|gains and losses|||||||

Changchai Company, Limited Annual Report 2017 (Abstract)
||||||||
|-|-|-|-|-|-|-|
|Net cash flows from operating|-121,669,279.39||99,473,944.04||||
||||||-|127,926,882.95|
|activities|||||||
|Basic earnings per share|0.08||0.11||||
||||||-27.27%|0.13|
|(RMB/share)|||||||
|Diluted earnings per share|0.08||0.11||||
||||||-27.27%|0.13|
|(RMB/share)|||||||
|Weighted average return on|||||||
|||2.00%||3.00%|-1.00%|3.53%|
|equity (%)|||||||
||||||Change ofDecember 31,2017 overDecember 31,2016||
|||December 31,||December 31,2016||December 31,|
|||2017||||2015|
|Total assets|3,722,905,285.05||3,724,857,266.71||-0.05%|3,232,406,102.20|
|Equity attributable to|2,246,896,857.86||2,323,712,892.92||||
|shareholders of the listed|||||-3.31%|2,002,910,311.01|
|company|||||||

(2) Key Financial Information by Quarter
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|||Q1||Q2|Q3|Q4|
|Operating revenue|723,164,530.66||584,941,650.26||551,411,429.29|563,541,348.08|
|Net income attributable to|34,991,536.70||4,687,621.43||3,072,285.14||
|shareholders of the listed||||||3,679,859.46|
|company|||||||
|Net income attributable to|14,440,682.83||6,333,364.66||629,008.33||
|shareholders of the listed|||||||
|||||||-2,584,620.66|
|company before nonrecurring|||||||
|gains and losses|||||||
|Net cash flows from operating|-52,599,067.83||116,978,391.14||-125,431,296.93||
|||||||-60,617,305.77|
|activities|||||||

Indicate by tick mark whether any of the financial data in the table above or their summations differs materially from what have been disclosed in theCompany’s quarterly or semi-annual reports.
□ Yes√ No
4. Share Capital and Shareholder Information
(1) Numbers of Common Shareholders and Preferred Shareholders with Resumed Voting Rights as well as Shareholdings of Top Ten Shareholders
Unit: share
|||||||||
|-|-|-|-|-|-|-|-|
|||Common||Preferredshareholderswith resumedvoting rightsat period-end||Preferred||
|Common||shareholders||||shareholders||
|shareholders at|52,046|at|50,907||0|with resumed|0|
|period-end||month-end||||voting rights at||
|||prior to||||month-end||

Changchai Company, Limited Annual Report 2017 (Abstract)
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||disclosure of||||||prior to|||
|||||this Report||||||disclosure of|||
|||||||||||this Report|||
||Top ten shareholders||||||||||||
|||||||Shareholding|||||Pledged or frozen||
||Name of||Nature of||||||Restricted||||
|||||||percentage at||Shares|||shares||
||shareholder||shareholder||||||shares||||
|||||||period-end (%)|||||Status|Shares|
|State-owned AssetsSupervision andAdministrationCommission ofChangzhouMunicipal People’sGovernment||On behalf ofthegovernment|||30.43%||170,845,236||||||
|KGI Asia Limited||Foreigncorporation|||0.57%||3,189,845||||||
|Cao Yuting||Domesticindividual|||0.33%||1,828,000||||||
|Vanguard TotalInternation A StockIndex Fund||Foreigncorporation|||0.29%||1,626,592||||||
|Wan Peizhong||Domesticindividual|||0.27%||1,530,700||||||
|Huang Guoliang||Domesticindividual|||0.27%||1,528,891||||||
|Hu Wenyong||Domesticindividual|||0.24%||1,365,836||||||
|Liang Nianyou||Domesticindividual|||0.24%||1,339,452||||||
|Li Suinan||Domesticindividual|||0.24%||1,338,700||||||
|VanguardInvestment AustraliaCo., Ltd－VanguardEmerging MarketStock Index Funds(Stock Exchange)||Foreigncorporation|||0.21%||1,196,785||||||
|||||||It is unknown whether there is among the top 10 tradable shareholders|||||||
||Related or acting-in-concert parties|||||and the top 10 non-restrictedly tradable shareholders any related parties|||||||
||among shareholders above|||||or acting-in-concert parties as defined in the Administrative Measures|||||||
|||||||for Information Regarding Shareholding Alteration.|||||||
||Shareholders conducting securities||||||||||||
|||||||N/A|||||||
||margin trading (if any)||||||||||||

(2) Number of Preferred Shareholders and Shareholdings of Top Ten of Them
□ Applicable√ Not applicable
Changchai Company, Limited Annual Report 2017 (Abstract) No preferred shareholders in the Reporting Period.
(3) Ownership and Control Relations between Actual Controller and the Company
STATE-OWNED ASSETS SUPERVISION AND ADMINISTRATION
COMMISSION OF CHANGZHOU MUNICIPALPEOPLE’S GOVERNMENT
30.43%
CHANGCHAI COMPANY, LIMITED
5. Corporate Bonds
Does the Company have any corporate bonds publicly offered and listed on the stock exchange, which were undue before the date of thisReport’s approval or were due but could not be redeemed in full?
No.
Part III Company Performance Discussion and Analysis
1. Business Review for Reporting Period
In 2017, the macro-economy was stabilizing, with the agricultural machinery industry undergoing a key stage characterized by deep changes in the market and product innovation and upgrading. Agricultural equipment manufacturers were busy destocking and improving their new outputs. Amid increasingly fierce competition, the Company focused more on improving product quality, management, appraisal and its talent structure, while continuing to upgrade technology, restructure products and optimize marketing channels. The total market of diesel engines in total dropped slightly, but despite a harsh market environment,, it took up a larger share in the single-cylinder diesel engine market against all the unfavorable factors. As such, it is safe to say the Company has been a leading seller in the industry. For 2017, the Company sold 836,100 units of diesel engines, gasoline engines and generator sets in total,including 160,000 units of gasoline engines, generated sales revenue of RMB2,423,058,958.29, and increased6.13% a year-over-year .
The Company has adjusted its product mix. Regarding diesel engines for automobile, theCompany’s two products meeting the National Emission Standard V have been put into mass production for sales, and these two products enjoy good market prospects for they are highly cost effective and competitive. As for diesel engines for non-road sectors, the Company has had a wide range of products covering20~160 horsepower for tractors, harvesters and engineering machinery, as well as for peanut harvesters and ships, among others.
Changchai Company, Limited Annual Report 2017 (Abstract) With respect to quality control and research and development, the Company adopted strict appraisals and strengthened discipline to control and improve product quality; and it used four-valve, shared rail and other new technologies to greatly improve its products in cost efficiency, reliability, etc., boosting market recognition and helping generating better economic results. The Reporting Period has seen excellent outcomes of theCompany’s efforts in technology innovation. It has applied for 13 patents during the year, of which seven have been granted. In marketing management, the Company attached importance to operating safety and sales benefits. It strengthened and expanded its competitive products, vigorously promoted new products, tapped new markets and improved customer service. The Company is proceeding well with marketing.
Concerning internal management in 2017, the Company fully promoted information-technology-based management for better management efficiency; and it improved its internal control system by strengthening supervision over key programs and launching various specialized audits, which has further improved its risk control ability and internal audit quality.
Is the Company subject to any disclosure requirements for special industries?
No.
2. Material Change in Main Business Scope in Reporting Period
□ Yes√ No
3. Product Categories Contributing over10% of Main Business Revenue or Income
√ Applicable□ Not applicable
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|||||YoY change in|YoY change in|YoY change in|
|Product|||Gross margin||||
||Operating revenue|O perating income||operating|operating|gross margin|
|category|||percentage||||
|||||revenue|income|percentage|
|Diesel|||||||
||2,232,948,960.31|320,391,133.16|16.75%|-1.13%|-21.58%|-1.55%|
|engines|||||||
|Gasoline|||||||
||160,850,613.34|19,426,114.34|13.74%|——|——|——|
|engines|||||||

4. Business Seasonality to which Special Attention should Be Paid
□ Yes√ No
5. Material YoY Changes in Operating Revenue, Cost of Operating Revenue and Net Income Attributable to Common Shareholders or Their Composition
□ Applicable√ Not applicable
Changchai Company, Limited Annual Report 2017 (Abstract) 6. Possibility of Listing Suspension or Termination
□ Applicable√ Not applicable
7. Matters Related to Financial Reporting
(1) YoY Changes in Accounting Policies, Accounting Estimates or Measurement Methods
√ Applicable□ Not applicable
On April 28, 2017, the Ministry of Finance issued and printed the Accounting Standard No. 42 for BusinessEnterprises—Non-Current Assets and Disposal Groups Classified as Held for Sale and Discontinued Operations, which was implemented from May 28, 2017. The non-current assets and disposal groups classified as held for sale and discontinued operations existed on the implemented date were dealt with prospective application method. On May 10, 2017, the Ministry of Finance promulgated the Accounting Standard No. 16 for BusinessEnterprises—Government Subsidies (Revised), which was implemented from June 12, 2017. The Company dealt with the government subsidies existed on January 1, 2017 by adopting prospective application method, and adjusted the newly added government subsidies from January 1, 2017 to the implemented date according to the Standard.
According to the relevant regulations of the 2 above-mentioned accounting standards, the Ministry of Finance revised the format of general financial statements of enterprises, and issued the Notice on Revision and Issuance of Format of General Financial Statements of Enterprises On December 25, 2017; line item of “Assets Held for Sale” and “Liabilities Held for Sale” were newly added to the Balance Sheet; line item of “Assets Disposal Income” and “Other Income” were newly added to Income Statement; line item of “(I) Net Profits of Continuing Operation” and “(II) Net Profits of Discontinued Operation” were newly added to the item of Net Profits. The Ministry of Finance issued Interpretation on Related Questions of Format of General Financial Statements of Enterprises on January 12, 2018, according to the relevant regulations of the Interpretation:
For the line item of “Assets Disposal Income” newly added to Income Statement, the Company adjusted the comparative data in comparative period according to the Notice based on the relevant regulations of the Accounting Standard No. 30 for BusinessEnterprises—List and Presentation of Financial Statement.
For the line item of “Other Income” newly added to Income Statement, the Company dealt with the government subsidies existed on January 1, 2017 by adopting prospective application method, no need to adjust the comparative data in comparative period according to the relevant regulations of the Accounting Standard No. 16 for BusinessEnterprises—Government Subsidies.
Due to the retroactive adjustment to the item of “Assets Disposal Income”, the influences on the statement for 2016 are as follows:
Unit: RMB
||
|-|
|Before the change|

Changchai Company, Limited Annual Report 2017 (Abstract)
||
|-|
|15,602,392.47|
|10,729,181.83|

(2) Retrospective Restatements due to Correction of Material Accounting Errors in Reporting Period□ Applicable√ Not applicable
No such cases.
(3) YoY Changes in Scope of Consolidated Financial Statements
√ Applicable□ Not applicable
The Company held an extraordinary meeting of the board of directors on August 26, 2016. The Proposal on the Transferee of67% Equity Interest in Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. held by Fuji Heavy Industries Co., Ltd. of Japan was reviewed and passed in the meeting. The Company holds the100% equity interest in Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. after completion of the acquisition, and Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. was changed from a Chinese-foreign joint venture to a domestic-funded enterprise. On January 20, 2017, the registration procedures for industrial and commercial changes related to equity transfer of Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. was completed, and the business license renewed by Changzhou National High-Tech Industrial Development Zone (Xinbei District) Market Supervision Administration was issued to the company, which stated a registered capital of RMB 37.25 million, a business scope includes: production, processing, development, sales and technical consultation of small general-purpose gasoline engines and the supporting units (including agricultural machinery, engineering machinery, pump units and small generator sets) as well as the production, processing, development, sales and technical consultation of related components, parts and accessories. Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd. has been included in the scope of the consolidated financial statements of the Company since January 20, 2017. The Company has paid for the equity transfer. The share purchase transaction generated revenue of RMB 21,675,689.55, which was included in the investment income and non-operation income of the current period.