GREAT WALL MOTOR COMPANY LIMITED* (a joint stock company incorporated in the People s Republic of China with limited liability) (Stock Code: 2333)

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1 Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. GREAT WALL MOTOR COMPANY LIMITED* (a joint stock company incorporated in the People s Republic of China with limited liability) (Stock Code: 2333) ANNOUNCEMENT RESPONSES TO INQUIRY FROM THE SHANGHAI STOCK EXCHANGE Reference is made to the announcement dated 27 December 2018 of Great Wall Motor Company Limited (the Company, or the Great Wall Motor ) in relation to the connected transaction in relation to disposal of assets, and the announcement dated 30 December 2018 in relation to inquiry from the Shanghai Stock Exchange (together, the Announcements ). Capitalised terms used in this announcement shall have the same meanings as defined in the Announcements. The Company received the Inquiry on Matters Regarding the Connected Transactions of Great Wall Motor Company Limited (Shang Zheng Gong Han [2018] No. 2775) ( ( [2018]2775 )) from the Shanghai Stock Exchange on 28 December 2018 (the Inquiry ) in relation to the Announcement Inquiry From The Shanghai Stock Exchange published by the Company on the website of The Stock Exchange of Hong Kong Limited (the Hong Kong Stock Exchange ) on 27 December 2018, and an announcement in relation to the Inquiry was made on 30 December In accordance with the requirements of the Inquiry, the Company hereby responds to the relevant inquiries as follows: I. On 12 February 2018, the Company established Honeycomb Energy with an investment of RMB1 billion, and then transferred 100% of its equity interests in Honeycomb Energy to a related party at the end of October Two months later, the Company disposed of the relevant patented and non-patented technology assets. The Company had disclosed its development strategy and business plan in its annual report, stating that it would further contemplate and improve the strategic planning for the core components of new energy vehicles, and will accelerate the development of the new energy business... Please provide supplementary disclosure of: (1) the purpose of the establishment of Honeycomb Energy, the Company s investment in it and reason of disposal in the short term; (2) whether the transfer of the patented and non-patented technology assets together with the previous transfer of Honeycomb Energy are package deal arrangements; (3) whether such transfer of the Company is contrary to its Development Strategy and Business Plan as previously disclosed, and whether its strategy has undergone substantial changes, if so, please make a self-inspection to verify whether there are any other major issues that should have been but not yet to be disclosed. 1

2 Response: (1) Prior to the establishment of Honeycomb Energy, the battery business of Great Wall Motor was operated in the form of business segment and could not effectively expand into the external market. The Company established Honeycomb Energy as a platform and vehicle to operate the battery business, for the purpose of promoting the independence of the battery business and expansion into the external market. It also lay the foundation for Honeycomb Energy s subsequent transfer of equity interest and external investment. The Company has invested RMB790 million in Honeycomb Energy as registered capital. The Company transferred Honeycomb Energy in order to further facilitate the independent development of the battery business and marketing operation. On one hand, the new energy finished automobile business of Great Wall Motor can choose batteries from all battery enterprises to ensure access to battery products with the most advanced technology, the most reliable quality and the highest cost-effectiveness in the market, thus ensuring the quality of the new energy finished automobile products of Great Wall Motor. On the other hand, Honeycomb Energy, as an independent supplier, would participate in the battery supply of the Company and other automobile enterprises through market competition. By actively taking part in market competition, it goes through the test of market and it can also obtain more investment from social capital at the same time. It is beneficial to the expansion and reinforcement of the battery business and its becoming of a competitive individual brand. (2) The transfer of the patented, non-patented technology assets and certain assets together with the transfer of equity interest in Honeycomb Energy mentioned in the announcement of connected transaction issued by the Company on 26 October 2018 are package deal arrangements. When the Company worked on the plan to transfer the equity interest in Honeycomb Energy, it identified the businesses related thereto. Such patented, nonpatented technology assets and certain assets were used in the production and research and development of power batteries, and required to be transferred to Honeycomb Energy. As it would take a relatively long period of time to valuate patented and non-patented technology assets and certain assets, Honeycomb Energy s transfer of equity interest and such patented, non-patented technology assets and certain assets were transferred through separate transactions. When ascertaining whether relevant transaction is subject to approval of general meetings, the transaction amounts of such two transactions have been calculated on an aggregated basis. The transfer price of Honeycomb Energy s equity interest was RMB790 million. The transfer price of the patented, non-patented technology assets and certain assets was RMB164,118,300 and RMB47,700,700 respectively, and thus the total transaction amount was RMB1,001,819,000. After considering the relevant standards for the connected transactions to be approved by general meetings when their amount meet certain thresholds under the Rules Governing the Listing of Securities on the Shanghai Stock Exchange and the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, the threshold amount of the Company s connected transactions to be approved by general meetings is RMB2,306,524,000. 2

3 (3) The development strategy of the Company is the focus will be on SUVs, building a professional SUV brand and becoming a global leader in SUV; cutting-edge technology in innovative electronics, intelligent driving and Internet access will be developed, with research and development of new energy vehicles, intelligent vehicles and key components being carried out; the Company will provide its customers with integrated solutions for smart travel and serve as a mobile travel service provider as the trends of electrification, networking, intelligent driving and sharing sweep across the globe. The strategy of the Company has not undergone substantial changes, and the Company is proactive in integrating resources to develop models of new energy automotive and engages in the planning and development of EV, HEV and PHEV, which involve different types of technology. In order to achieve market-oriented operation of the new energy automotive parts business and enhance its competitiveness, the Company made relevant transfer, which will not affect the implementation of the overall strategy of the Company. II. The patented and non-patented technology assets to be transferred by the Company mainly comprise the 76 utility model patents which were independently developed by the Company from 2015 to 2018, and the 47 non-patented technologies that have been submitted, but without certificates obtained yet. Such patented and non-patented technologies are mainly used in such fields as battery management system, battery manufacturing, battery packaging and automobile component production. The relevant R&D costs have been accounted for in the current expenses, with zero book value. Some of the assets to be transferred are equipment, projects in progress and know-how. Please provide supplementary disclosure: (1) the investment amounts of the above-mentioned patented and non-patented technology assets in stages, including the reasons why the relevant investments were not accounted for as costs and performed accounting measurement; (2) further explain whether there is possibility that the transfer price does not reasonably reflect the cost of investment with reference to the valuation of such assets with the income approach; (3) the selection criteria for the assets to be transferred and whether they will affect the principal production and operation of the Company; (4) taking into account the application of the relevant patents and technologies in the Company s products, explain whether it has a significant impact on the Company s production and operation; (5) whether the Company has retained certain patents and technologies related to the battery management system, battery manufacturing, battery packaging and automobile component production, and the subsequent arrangements for the application of the relevant patents and technologies. Response: (1) In respect of patented technologies and non-patented technologies, calculations have been made by the Company in accord with the formation cycle of the technologies, that is three years, for expense involved with such inventors and their organizations, mainly including staff salaries and benefits, depreciation of equipment, commissioning fees, design and development costs, testing fees and materials expenses. As those patented technology and non-patented technology assets were mostly generated in 2017, the Company has calculated the investment amounts for those assets for the three years from 2015 to 2017, and they are RMB17,823,400, RMB71,688,800 and RMB55,418,600, respectively. The accumulated investment amount is RMB144,930,800. Due to changes in personnel involved in the above patents and adjustments to personnel duties within their organizations from 2015 to 2017, such data are arrived at by application of pro-rata calculation with reference to actual condition of the Company. The patented and non-patented technology in this transfer was mainly generated during the R&D process before R&D projects of the Company are approved and managed mainly with products and product platforms as subjects. The patents above were all generated in the development process of product or product platform projects. They were generated and 3

4 attached to the development of products without clear and independent R&D start date and process and there was no individual project approvals and statistics and centralization of costs and expenses. Meanwhile, the research and development model of our Company is matrix R&D. There is sharing of major resources such as R&D personnel and assets among projects. As a result, accounts of R&D business are all reported as common costs and expenses and R&D inputs could not be allocated precisely to various projects. As it fails to fulfill the requirements of accounting standards for R&D capitalization (expenditure attributable to the development phase of the intangible assets can be reliably measured), R&D expenses of the Company could only be expensed and were not accounted for as costs and performed accounting measurement. (2) The patented and non-patented technology assets adopt the income valuation approach, which reaches the valuation by discounting the future sales income from cell product project of Honeycomb Energy contributed by these patented and non-patented technology assets, and the appraised value is RMB164,118,300, which objectively reflects the fair value of the relevant assets on the valuation base date. The valuer is qualified to perform the valuation of the securities and futures related businesses. There is no possibility that the transfer price does not reasonably reflect the cost of investment when compared with the above-mentioned cost of investment of RMB144,930,800. (3) Certain assets transferred in this transfer include: equipment, projects in progress (unfinished equipment), and know how. The transferee of the certain assets transferred in this transfer was the Baoding Branch of Honeycomb Energy, and the core function of Honeycomb Energy is the research and development of power battery technology. The equipment, projects in progress and know how included in this transfer are all necessary assets for the research and development of power battery technology of the Baoding Branch of Honeycomb Energy. Upon the completion of the transfer of certain assets, the Great Wall Motor will no longer use them, and the transfer of certain assets will not affect the principal production and operation of the Company. (4) The existing products of the Company have not applied the patented and non-patented technology transferred this time, and this patented and non-patented technology transfer will not have a significant impact on the Company s operation. (5) The patented and non-patented technologies in this transfer mainly comprise the patents related to motive batteries, mainly including, among other things, PACK (the Battery Pack ) design, BMS (the Battery Management System ) design, battery cell manufacturing and related processes, and solid-state battery technology. The Great Wall Motor only retained the patented technologies of the new energy finished automobiles. Upon the completion of this transfer, Great Wall Motor will mainly focus on the development of battery systems for new energy vehicles at finished automobile level, and Honeycomb Energy will conduct specific designing at component level using the patented and non-patented technologies in this transfer, to make the related products more competitive. III. It is disclosed that, Baoding Ruimao, the controlling shareholder of Honeycomb Energy, is a wholly-owned enterprise of Great Wall Holdings, the indirect controlling shareholder of the Company. Baoding Ruimao was established on 8 October 2018, and its principal business is enterprise management consultation service. Taking into account the current business operation of Baoding Ruimao, please further analyze the feasibility of enabling the market operation of Honeycomb Energy and improving the quality of its products by Baoding Ruimao. Meanwhile, please provide supplementary disclosure of Baoding Ruimao s subsequent consideration and arrangements for the relevant assets. 4

5 Response: Baoding Ruimao is a wholly-owned subsidiary of Baoding Great Wall Holdings Company Limited ( Great Wall Holdings ), and Great Wall Holdings is a large conglomerate that encompasses automobile business, new energy power system business, finance business, real estate business, education business, medical care business and expressway business. With total assets of approximately RMB120 billion, Great Wall Holdings has strong economic power. At present, the funds required for external investment for Baoding Ruimao are from Great Wall Holdings. Baoding Ruimao was established on 8 October Its principal business is corporate management and consulting services. Its registered capital is now RMB1 billion. Due to numerous businesses of Great Wall Holdings, it established Baoding Ruimao considering the convenience of clear business delineation, simplified shareholding structure and future introduction of external shareholders. Currently, Baoding Ruimao only plays the role of the controlling shareholder but will not directly intervene with the operation of Honeycomb Energy. The market-oriented operation of Honeycomb Energy mainly covers two areas: the first being the market-oriented product sales, meaning its products are not only sold to Great Wall Motor but also other external manufacturers; the second being the market-oriented investing shareholders. To Honeycomb Energy, a company with market-oriented operation, having Baoding Ruimao as a controlling shareholder is more advantageous in introducing the investment of other external shareholders, thus promoting the sustainable and healthy development of Honeycomb Energy. Honeycomb Energy is in the construction period for its plant and production is expected to officially begin in The patented and non-patented technology assets and certain assets involved in this connected transaction have been transferred to Honeycomb Energy and the Baoding Branch of Honeycomb Energy and will be put into use for production. The shareholders of the Company and potential investors are advised to exercise caution when dealing in the securities of the Company. This announcement is made by the order of the Company. All members of the board of directors of the Company jointly and severally accept responsibility for the accuracy of this announcement. Baoding, Hebei Province, the PRC, 11 January 2019 As at the date of this announcement, members of the Board comprise: By order of the Board Great Wall Motor Company Limited Xu Hui Company Secretary Executive Directors: Mr. Wei Jian Jun, Ms. Wang Feng Ying and Ms. Yang Zhi Juan. Non-executive Director: Mr. He Ping. Independent Non-executive Directors: Mr. Ma Li Hui, Mr. Li Wan Jun and Mr. Ng Chi Kit. * For identification purpose only 5