UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

For the fiscal year ended December 31, 2024

OR

OR

Date of event requiring this shell company report

For the transition period from     to

Commission file number 1-13522

China Yuchai International Limited

(Exact Name of Registrant as Specified in Its Charter)

16 Raffles Quay #39-01A

Hong Leong Building

Singapore 048581

(Address of Principal Executive Offices)

Loo Choon Sen

Chief Financial Officer

16 Raffles Quay

#39-01A Hong Leong Building

Singapore 048581

Tel: +65 6220 8411

Fax: +65 6221 1172

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2024, 37,518,322 shares of Common Stock, par value US$0.10 per share, and one special share, par value US$0.10, were issued and outstanding (excluding 3,339,968 shares held as treasury shares).

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

TABLE OF CONTENTS

CHINA YUCHAI INTERNATIONAL LIMITED

Certain Definitions and Supplemental Information

All references to “China” and “PRC” in this Annual Report are references to the People’s Republic of China. Unless otherwise specified, all references in this Annual Report to “US dollar” or “US$” are to the United States dollar; all references to “Renminbi” or “RMB” are to Renminbi, the legal tender currency of China; all references to “S$” are to the Singapore dollar, the legal tender currency of Singapore. Unless otherwise specified, translation of amounts for the convenience of the reader has been made in this Annual Report (i) from Renminbi to US dollar at the rate of RMB 7.1738 = US$1.00, the rate quoted by the People’s Bank of China, or the PBOC, on February 28, 2025, and (ii) from Singapore dollar to US dollar at the rate of S$1.3493 = US$1.00, the noon buying rate in New York for cable transfers payable in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York on February 28, 2025. No representation is made that the Renminbi amounts or Singapore dollar amounts could have been, or could be, converted into US dollar at rates specified herein or any other rate.

As used in this Annual Report, unless the context otherwise requires, the terms “the Company”, “the Group”, “CYI”, “we”, “us”, “our” and “our Company” refer to China Yuchai International Limited, or as the context requires, China Yuchai International Limited and its subsidiaries. All references herein to “Yuchai” are to Guangxi Yuchai Machinery Company Limited and its subsidiaries and, prior to its incorporation in July 1992, to the machinery business of its predecessor, Guangxi Yulin Diesel Engine Factory, or Yulin Diesel. In the restructuring of Yulin Diesel in July 1992, its other businesses were transferred to Guangxi Yuchai Machinery Group Company, which became a shareholder of Yuchai. All references herein to “GY” are to Guangxi Yuchai Machinery Group Company (formerly known as Guangxi Yuchai Machinery Holdings Company, and also Guangxi Yuchai Machinery Group Company Limited). All references herein to “the GY Group” are to GY and its subsidiaries. In May 1993, in order to finance further expansion, Yuchai sold shares to the Company. All references herein to “Foreign Shares” are to the shares sold by Yuchai to non-Chinese legal and natural persons (currently only CYI). All references to “HLGE” are to HL Global Enterprises Limited (formerly known as HLG Enterprise Limited); and all references to the “HLGE group” are to HLGE and its subsidiaries. All references to "MGP" are to Guangxi Yuchai Marine and Genset Power Co., Ltd., or as the context requires, Guangxi Yuchai Marine and Genset Power Co., Ltd. and its subsidiaries. All references to “Yuchai Simlan” are to Yuchai Simlan Technology Co., Ltd. (formerly known as Yuchai Xin-Lan New Energy Power Technology Co., Ltd.), or as the context requires, Yuchai Simlan Technology Co., Ltd. and its subsidiaries.

As of December 31, 2024, 37,518,322 shares of our Common Stock, par value US$0.10 per share, or Common Stock, (excluding 3,339,968 shares held as treasury shares) and one special share, par value US$0.10, were issued and outstanding. The weighted average shares of Common Stock outstanding during the year was 39,325,763. Unless otherwise indicated herein, all percentage share amounts with respect to the Company are based on the weighted average number of shares of 39,325,763 for 2024. As of February 28, 2025, 37,518,322 shares of our Common Stock (excluding 3,339,968 shares held as treasury shares), and one special share, par value US$0.10, were issued and outstanding.

In China, Euro emission standards are equivalent to National emission standards, and references to National emission standards are equivalent to references to Euro emission standards. All references to Tier-3 and Tier-4 emission standards are to emission standards adopted by the Ministry of Ecology and Environment of the People’s Republic of China, or the “MEE”, applicable to diesel engines used in off-road machinery.

All references to “CAAM” are to the China Association of Automobile Manufacturers. Unless stated otherwise, all data related to the commercial vehicle market in China in this Annual Report is attributed to CAAM.

Our consolidated financial statements are reported in Renminbi and prepared in conformity with IFRS accounting standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”). Totals presented in this Annual Report may not correctly total due to rounding of numbers. References to a particular fiscal year are to the period ended December 31 of such year.

The financial and operational data included in this Annual Report reflect Yuchai’s current classification system for light-, medium- and heavy-duty engines. Under this classification system, light-duty engines have engine capacity of 3.8 liters or less; medium-duty engines have engine capacity of between 3.8 liters and 7.0 liters; and heavy-duty engines have engine capacity of more than 7.0 liters.

Cautionary Statements with Respect to Forward-Looking Statements

This Annual Report may contain forward-looking statements that reflect our current expectations, beliefs, assumption and views of future events which we believe may affect our financial condition, results of operations, business and prospects. The forward-looking statements are made under the “safe-harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are statements that may be deemed forward-looking statements.

The words such as “believe” “expect”, “anticipate”, “project”, “target”, “optimistic”, “confident that”, “continue to”, “predict”, “intend”, “aim”, “will” or similar expressions in this Annual Report are intended to identify forward-looking statements. We wish to caution readers that the forward-looking statements contained in this Annual Report, which include all statements that, at the time made, address future results of operations, are based upon our interpretation of factors affecting our business and operations. These forward-looking statements include statements relating to:

Known or unknown risks, uncertainties and other factors, including those discussed in “Item 3. Key Information — D. Risk Factors”, may cause our actual results, performance or achievements to be materially different from those expressed in, or implied by, the forward-looking statements contained in this Annual Report. Accordingly, we can give no assurances that any of the events anticipated by these forward-looking statements will transpire or occur or, if any of the foregoing factors or other risks and uncertainties described elsewhere in this Annual Report were to occur, what impact they will have on these forward-looking statements, including the results of our operations or financial condition. In view of these uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. We expressly disclaim any obligation to publicly revise any forward-looking statements contained in this Annual Report to reflect the occurrence of events after the date of this Annual Report.

Summary of Risk Factors

Our business is subject to a number of risks and uncertainties, including those described in Item 3.D. of this Annual Report. If any of those risks are realized, our business, financial condition and results of operations could be materially and adversely affected. Set forth below is a summary list of the key risks to our business:

Risks Related to Our Business and Industry

Risks related to Corporate Structure

General Risk Factors

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3. KEY INFORMATION

Not applicable

Not applicable

Risks Related to Our Business and Industry

The diesel engine business in China is dependent in large part on the performance of the Chinese and the global economy. Adverse economic developments in China or in the global economy could have a material adverse effect on our financial condition, results of operations, business or prospects.

Our operations and performance are significantly influenced by economic factors in China and globally such as GDP growth, industrial output, consumer spending and trade dynamics. These factors directly or indirectly influence the demand for our products in various market sectors, including transportation, construction, agriculture, industrial, new energy, marine and power generation.

The interconnectivity of the global economy further amplifies these risks. Economic events and trends in major markets like the United States and Europe, as well as emerging economies in the Asia-Pacific region, can impact the economic and industrial conditions in China. Trade tensions, geopolitical instability, and evolving regulatory or environmental policies in these markets can disrupt supply chains, shift consumer preferences, and create ripple effects on global trade flows and economic activities, ultimately influencing demand for our products sold both in China and overseas.

In particular, should global trade be negatively impacted over sustained periods as a result of rising tariff and non-tariff barriers imposed by countries around the world, our ability to grow our exports may be constrained. This impact could be direct, in the case of restrictions or higher costs associated with exporting our products, or indirect, where trade limitations affect the final products or equipment into which our engines are installed. These trade barriers could limit market access, affect our competitive advantages, and increase compliance and logistics costs, all of which could adversely affect our overseas sales and long-term growth strategy in international market.

The performance of the Chinese economy affects, to a significant degree, our financial condition, results of operations, business and prospects. Adverse changes in Chinese and global economy, such as slowing GDP growth, reduced industrial output, or declining customer confidence, could increase costs associated with product development, decrease the availability of potential sources of financing, raise financing costs, and increase our exposure to material losses from our investments. Any of these outcomes could have a material adverse impact on our financial condition and operating results.

The diesel engine business in China is dependent in large part on relevant government policies. As a result, our financial condition, results of operations, business and prospects could be adversely affected by changes in government policies in China.

Our business is heavily dependent on government policies, which significantly influence various aspects of the industry, including productions, emission regulations, subsidies, and market demand. Changes in these policies could adversely affect our financial condition, results of operations, business, or prospects.

Government policies in China regarding emissions standards and fuel efficiency requirements directly impact the design, production, and sale of engines, as well as market demand for new energy products. These policies serve as the framework within which we operate, and directly influence our strategies and activities across various aspects of our business. In recent years, the Chinese government has prioritized energy conservation and carbon reduction, exemplified by its commitment to achieving peak carbon emissions by 2030 and carbon neutrality by 2060. This has led to the introduction of policies that may de-emphasize traditional engines, such as diesel engines, and encourage increased use of cleaner energy alternatives. Such changes could adversely impact our financial condition and market position. Compliance with stringent emission and fuel efficiency standards requires significant investment in advanced technologies to optimize engine performance while minimizing environmental impacts.

Government policies influence market demand by shaping economic conditions, infrastructure development, and investment in transportation sectors. For instance, policies promoting construction of highways, railways, and ports can drive demand for heavy-duty vehicles powered by engines, while subsidies or incentives for agricultural machinery can boost our sales in the agricultural sector. The government incentive schemes have, directly or indirectly, contributed to our overall engine sales in the past. However, government policies are subject to change, and we cannot guarantee our continuous compliance with or benefit from the government policies.

We have previously identified material weaknesses in our internal control over financial reporting and cannot assure you that material weaknesses will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in material misstatements in our financial statements which could require us to restate financial statements in the future, or cause us not to be able to provide timely financial information, which may cause investors to lose confidence in our reported financial information and have a negative effect on our stock price.

We reported material weaknesses in our internal control over financial reporting as of December 31, 2005 to 2011, and our management concluded that our disclosure controls and procedures and our internal control over financial reporting were not effective for that period. However, since the year ended December 31, 2012, we have not identified any material weaknesses in our internal control over financial reporting. Our management concluded that our disclosure controls and procedures and our internal control over financial reporting were effective for the financial years ended December 31, 2012 to 2024. See “Item 15. Controls and Procedures.” Our independent registered public accounting firm has expressed an unqualified opinion on the effectiveness of our internal control over financial reporting for the financial years ended December 31, 2012 to 2024.

We cannot assure you that material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. Any failure to maintain or improve existing controls or implement new controls could result in material weaknesses or significant deficiencies and cause us to fail to meet our periodic reporting obligations, which in turn could cause our shares to be delisted or suspended from trading on the New York Stock Exchange, or NYSE. In addition, any such failure could result in material misstatements in our financial statements and require us to restate our financial statements and adversely affect the results of annual management evaluations regarding the effectiveness of our internal control over financial reporting. Any of the foregoing could cause investors to lose confidence in our reported financial information, leading to a decline in our share price.

We depend on and expect to continue to depend on our largest customers for a significant percentage of our sales.

Sales to our top five customers accounted for approximately 39.1% of our total revenue in 2024. Our top customer is a leading automobile manufacturer group in China. In 2024, sales to our top customer as a group accounted for approximately 16.2% of our total revenue, including approximately 7.4% to one entity within the group. Although we consider our relationship with our top customers to be good, the loss of one or more of our top customers, whether singly or combined together, would have a material adverse effect on our financial condition, results of operations, business or prospects.

Our dependency on purchases made by our top customers exposes us to risks associated with their liquidity and purchasing decisions. Any adverse changes in their financial stability, market position, or purchasing patterns could adversely impact our sales volume and revenue. We cannot assure you that our top customers will be able to repay all the money they owe to us or continue purchasing the same volume of products from us, which would reduce our overall sales volume. In addition, fluctuations in the economic environment or industry-specific challenges may lead to reduced demand from these major customers, further intensifying the risks.

Our top customer is part of our competitor’s group of companies, which also operates in the engine market in China. Although we believe that the companies within our top customer’s group generally make independent purchasing decisions based on end-user preferences, we cannot assure you that manufacturers associated with our top customer will not preferentially purchase engines manufactured by companies within their own group over those manufactured by us.

We are dependent on our suppliers, some of whom are our single source suppliers, for the components they supply.

Our engines contain parts or components that we purchase from external suppliers, and some of these suppliers serve as our single source for the relevant components. This dependency presents a significant risk, as any disruption in the supply chain — whether due to logistical issues, financial instability, or other unforeseen circumstances — could lead to delays or halts in our manufacturing activities. Such disruptions could adversely impact our ability to deliver orders and meet customer demands, potentially resulting in contractual defaults, lost revenue and increased costs. We generally do not enter into long-term agreements with our suppliers in order to maintain flexibility in our own procurement and sourcing processes. However, there can be no assurance that we would be able to successfully secure alternative suppliers or the necessary parts and components to meet our requirements on a timely basis, on acceptable terms or at all. Our dependence on single-source suppliers could lead to quality control challenges, higher costs and limited adoption of new technologies. The financial stability of these suppliers is also crucial, as their financial distress could significantly disrupt our supply chain. Additionally, changes in business conditions, force majeure, governmental changes and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis or at all. Any of the foregoing could materially and adversely affect our business, results of operations, financial condition and prospects.

Competition in China from other diesel engine manufacturers may adversely affect our financial condition, results of operations, business or prospects.

The diesel engine industry in China is highly competitive, with several factors contributing to this competitive landscape:

We believe that the excess capacity in the diesel engine industry has arisen from time to time, due to fluctuations in market demand. Any excess capacity or decrease in demand in our industry could lead to a decrease in prices of diesel engines. As we and our competitors compete through lower prices, this could adversely impact our revenues, margins and overall profitability. Furthermore, if restrictions and tariffs on the import of motor vehicles and motor vehicle parts into China are reduced, competition could increase significantly. An increase in competition as a result of these various factors, operating singly or together, may adversely affect our financial condition, results of operations, business or prospects as a result of lower gross margins, higher fixed costs or decreasing market share.

Our long-term business prospects will depend largely upon our ability to develop and introduce new and improved products in response to market demands at competitive prices. Our competitors in the diesel engine markets may be able to introduce new or improved products that are more favorably received by customers. Competition in the end-user markets could also lead to technological improvements and advances that render our current products obsolete earlier than expected, in which case we may have to depreciate or impair our production equipment more rapidly than planned. Failure to introduce or delays in the introduction of new or improved products at competitive prices could have a material adverse effect on our financial condition, results of operations, business or prospects.

In addition, any consolidations or alliances in our industry may result in higher competition for us from the resulting larger companies. Concentration within our industry, or other potential moves by our competitors, could improve their competitive position and market share and may exert further pricing pressure on us. Any consolidation or alliances in our industry involving our key suppliers or customers may adversely affect our existing relationships and arrangements with them. The loss of one or more of our key suppliers or customers due to consolidation in our industry or otherwise could have a material adverse effect on our business, financial condition and results of operations.

China’s vehicle industry is continuing its transition to new energy vehicles, with growth in new energy vehicles seen in truck and bus markets in addition to passenger cars. This may lead to decrease in demand for our engines affecting our market share and profitability.

China has set targets to reduce carbon emissions and enhance energy efficiency, which has led to increased support for the development and adoption of electric vehicles (EVs), hybrid vehicles, and other alternative energy technologies such as hydrogen powered and fuel cell vehicles (collectively “NEVs”). According to the New Energy Vehicle Industry Development Plan (2021 - 2035), China aims for NEVs to account for 20% of total vehicle sales by 2025 and to become a global leader in NEV technology by 2035. A series of policies and measures have been implemented to achieve these targets, including subsidies for NEV purchases, tax incentives, and investment in charging infrastructure. Many provincial and municipal governments offer additional support, such as parking privileges, toll exemptions, and subsidies for NEV purchases, to encourage consumer adoption. These policies have set specific industrialization goals for NEVs, in terms of annual and cumulative production and sales, promote the sales of NEVs, including EVs in China. According to CAAM, approximately 12.9 million units of NEVs were sold in 2024, representing 40.9% of the total vehicles sold of 31.4 million units for the year.

These developments underscore the importance of aligning our strategies with China's evolving automotive landscape. Yuchai conducts its research and development, production and sales of NEV products through Yuchai Simlan and its subsidiaries. The foregoing incentive and preferable policies require us to effectively adapt to these regulatory changes, while managing competitive pressures and shifting consumer preferences. Failure to effectively respond to these trends could adversely impact our market position, financial performance, and long-term prospects in China’s vehicle industry.

Given that diesel engines account for the majority of our sales volume, if the market for NEV continues to develop or develops more quickly than we expect, the additional competition resulting from the growing NEV development could reduce demand for our diesel engines, which could adversely affect our business, financial condition, results of operations and prospects. For information on Yuchai’s new energy products, see “Item 4. Information on the Company – B. Business Overview – Products and Key Product Development – New Energy Products.”

If we are not able to continually improve our existing engine products and develop new engine products or successfully enter into other markets, we may become less competitive, and our financial condition, results of operations, business and prospects will be adversely affected.

Given the highly competitive nature and ongoing evolution of the diesel engine industry in China, we will have to continually improve our existing engine products, develop new products and enter into new markets in order to remain competitive. Our long-term business prospects largely depend upon our ability to develop and introduce new or improved products at competitive prices and enter into new local and overseas markets. These future products may utilize different technologies and require market expertise beyond our current scope. We have dedicated substantial resources to improving our product technology, ensuring their competitiveness in the market. Yuchai offers a portfolio of diesel and natural gas engines, along with the development of new energy powertrain systems and environmentally friendly hybrid engines. There is no assurance that our efforts will be successful, or that our new products will be attractive to customers. Research and development efforts may not yield successful outcomes, and our products may not meet all customer needs or gain market acceptance. Additionally, competitors may develop technology more quickly or profitably than us. Failure to yield successful technologies and products could adversely affect our business, financial condition, and results of operations.

The technological requirements to comply with National VI and Tier-4 emission standards, and our commitment to preparing for more stringent or advanced technological requirements in the future, have required us to deploy significant resources on improving major engine components, systems and aftertreatment systems which has led to increased costs. The high cost of rare metal supply has resulted in a more expensive exhaust aftertreatment system. If such cost increase cannot be entirely transferred to our customers and the original equipment manufacturers, it could adversely affect our margins and profitability.

The development of a sustainable market for natural gas and alternative fuel combustion engines and new energy power systems in China may be affected by many factors, some of which are beyond our control, including:

Rapidly changing markets, technology, emerging industry standards and frequent introduction of new products characterize our business. The introduction of new products embodying new technologies, including new manufacturing processes, and the emergence of new industry standards may render our planned product offerings obsolete, less competitive or less marketable. The process of developing our planned products is complex and requires significant continuing costs, development efforts and third party commitments. Our failure to develop new technologies and products and the obsolescence of existing technologies could adversely affect our business, financial condition and operating results. Our success will depend, in part, on our ability to continue to enhance our existing technologies, develop new technology that addresses the increasing sophistication and varied needs of the market, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis.

We may be unable to obtain sufficient financing to fund our capital requirements, which could limit our growth potential.

We may face risks associated with securing sufficient financing to meet increased funding requirements in the future, in particular for expansion of our existing business and new energy business and product development. The expansion of our existing business and new energy business and product development requires significant capital investment. While we are utilizing our operating cash flows to invest in these areas, the scale of our future investments may require us to obtain additional funding, including through additional borrowings and by accessing the equity and debt capital markets. Without adequate funding, we could face critical challenges in developing the necessary technological and operational capabilities, which could hinder our ability to compete effectively in the rapidly evolving market. To bridge the gap, we may need to seek additional funding through loans, equity investments, or strategic partnerships. However, securing such financing is subject to various uncertainties, including our operational results, financial condition, cash flow, and broader economic, political, and market conditions in China.

Our ability to obtain external financing is further influenced by factors such as China’s policies on foreign currency borrowings and the state of both domestic and international capital markets. For instance, the PBOC has adjusted loan prime rates multiple times in recent years, with the one-year rate declining from 3.55% in June 2023 to 3.1% in October 2024, and the five-year rate decreasing from 4.2% to 3.6% over the same period. While the PBOC has emphasized maintaining stability and ensuring ample liquidity, there is no assurance that the rate will not be increased in the future which could affect our borrowing from the banks or increase our funding costs. Changes in interest rates and market liquidity conditions could have an adverse impact on our earnings, cash flows and ability to secure financing, potentially affecting our business, financial condition, results of operations and prospects. A shortage of liquidity in the banking system or any other factor that results in our inability to access capital may further exacerbate these challenges.

The success of our investments in our new energy business and product development also depends on our ability to accurately align the timing and direction of these investments to meet market demand. To position ourselves and fast track market penetration of our products, we may seek to expand our existing customer base and invest in additional sales and distribution channels. These objectives may require significant additional investments and potentially require additional external funding. There can be no assurance that we will be able to obtain such external funding on commercially attractive terms, in a timely manner or at all. Relying on external funding sources introduces risks such as increased financial leverage, dilution of ownership, or dependency on third-party investors. These factors could impact our financial stability and operational flexibility.

We are subject to risks associated with strategic alliances, including joint ventures.

We have entered into strategic alliances, including joint ventures, in the past with various third parties to further our business purpose, and we may do so in the future from time to time. We cannot guarantee that our strategic alliances including joint ventures will be successful, profitable, or achieve their intended objectives. The success of these partnerships depends on a variety of factors, including market conditions, the regulatory environment, technological advancements, and the performance of our business partners. If these alliances or joint ventures fail to perform as expected, our financial condition, results of operations, and business prospects could be materially affected. These alliances could subject us to a number of risks, including risks associated with sharing propriety information and non-performance by third parties, among others.

We have entered into the following major strategic alliances:

There can be no assurance that our strategic alliances will be or continue to be successful or profitable. We have recognized impairment losses in the past related to our investments in the joint ventures and may incur such losses again in the future due to market dynamics, underperformance of the joint ventures, or other external factors beyond our control. We review our investments in these joint ventures on an ongoing basis and may take such action as is deemed strategically appropriate including but not limited to divestment, restructuring, or changes in shareholding. Such actions could result in additional costs, write-downs, or other financial impacts. Furthermore, disagreements with partners over strategic direction, operational decisions, or financial commitments could disrupt operations or lead to the dissolution of partnerships, which could adversely affect our business and financial performance.

Joint ventures and strategic alliances often involve shared control, which may limit our ability to unilaterally make decisions or implement changes. This could delay responses to market opportunities or challenges, putting us at a competitive disadvantage. The financial and operational risks associated with these partnerships are inherent, and we may not always be able to mitigate such risks effectively.

Our financial condition, results of operations, business or prospects may be adversely affected to the extent we are unable to continue our sales growth.

Our engine sales witnessed a 2.4% decline to 313,493 units in 2023 compared to 321,256 units in 2022. In 2024, our engine sales increased to 356,586 units, representing 13.7% growth compared to 2023. These fluctuations demonstrate the volatility of our sales performance. We cannot assure that we will be able to maintain or increase engine sales in the future. Challenges may arise in maintaining or increasing sales revenue in line with our expanded production capacity. Our future growth is dependent in large part on factors beyond our control, such as the continued growth and stability of the global and Chinese economies. See “— The diesel engine business in China is dependent in large part on the performance of the Chinese and the global economy. Adverse economic developments in China or in the global economy could have a material adverse effect on our financial condition, results of operations, business or prospects.”

We also cannot assure you that we will be able to effectively manage any future growth, including:

Furthermore, we have acquired in the past, and may acquire in the future, equity interests in engine parts suppliers and related business. If we are unable to effectively manage or assimilate these acquisitions, our financial condition, results of operations, business or prospects could be adversely affected.

Our business could be adversely affected by the disruption of supply or shortage of raw materials and components.

We may experience a sustained interruption in the supply or shortage of commodities, raw materials and other inputs used by us and our suppliers in our and their businesses and products, such as steel and semiconductor chips, which could adversely affect our future profitability or our ability to timely execute our business plan. For instance, the global semiconductor chip supply shortage in 2021 has had wide-ranging effects across multiple industries, particularly the automotive industry, and may continue to pose challenges to our business. In recent years, supply chain disruptions, including those caused by global health crises and other external factors, have led to delayed deliveries and even order cancellations, adversely affecting our engine sales volumes and revenues. Any supply interruptions or shortage could materially and negatively impact our business, prospects, financial condition and operating results.

We could be exposed to the impact of interest rates and foreign currency movements with respect to our future borrowings and business.

We may use borrowings from time to time to supplement our working capital requirements and to fund our continued business expansion plans. A portion of our borrowings may be structured on a floating rate basis and denominated in US dollar, Singapore dollar or Renminbi. As of February 28, 2025, the U.S. Federal Reserve maintains the federal benchmark interest rate at a range of 4.25% to 4.50%, and we cannot predict future interest rate policy decisions that the Federal Reserve may take. An increase in the federal benchmark rate could result in an increase in market interest rates. An increase in interest rates could make it more difficult to obtain the financing necessary to meet our working capital and financing requirements on favorable terms. Any fluctuations in interest rates, or fluctuations in exchange rates between the Renminbi or Singapore dollar and US dollar, may increase our funding costs or the availability of funding. This could affect our financial condition, results of operations, business or prospects.

Our financial condition, results of operations, business or prospects could also be adversely affected by a devaluation of the Renminbi. The value of the Renminbi is subject to changes in monetary policy in China and to international economic and political developments. Since we may not be able to hedge effectively against Renminbi or Singapore dollar fluctuations, future movements in the exchange rate of the Renminbi, the Singapore dollar and other currencies could have an adverse effect on our business, financial condition and results of operations.

If prices of energy, raw materials or components increase, it may adversely affect our profitability or cause us to suffer operating losses.

Our manufacturing processes and production activities are dependent on energy, raw materials, and various components, the prices of which are subject to significant volatility due to factors beyond our control, depending on market conditions and fluctuations in global demand.

Rising prices of key raw materials such as steel, aluminum, and rare earth metals, as well as increases in energy prices (e.g., electricity, natural gas, and oil), could significantly elevate our production costs. According to the National Bureau of Statistics, China’s average annual Customer Price Index (CPI), a main gauge of inflation in China, was 2.0%, 0.2%, and 0.2% for the years 2022, 2023 and 2024 respectively. Rising inflation could drive up our costs in various aspects of operations, including procurement, manufacturing, and distribution. While we may attempt to mitigate these risks by passing some of the increased costs onto customers through price adjustments, our ability to do so may be limited by competitive pressures, contractual obligations, or customer resistance. In cases where we are unable to fully absorb or pass on rising costs, our profit margins would be compressed, potentially leading to reduced profitability or even operating losses.

We are subject to increasingly stringent policies and regulations related to the environment, climate change, and employee health and safety.

Our operations and products must comply with national and local laws and regulations in China governing emissions, noise, air quality, soil contamination, wastewater discharge, and the treatment and disposal of hazardous and non-hazardous waste materials, employee health and safety, climate change and environmental protection. These regulations impose environmental taxes, fines for pollution, and may require the closure of non-compliant facilities or the cessation of activities causing environmental damage. These laws and regulations may impose numerous obligations that are applicable to our operations, including acquisition of relevant permits or other approvals and imposition of significant liabilities for pollution or accidents arising from our operations.

Regulations in China have been steadily tightened for both on-road and off-road transportation. For instance, the mandatory implementation of National VI emission standards and Tier-4 emission standards has required Yuchai to increase its research and development expenditures to meet these requirements. There can be no assurance that Yuchai will be able to comply with future emission standards or that stricter regulations will not result in a material adverse effect on our business, financial condition and results of operations. Environmental regulations, such as electric vehicle energy consumption standards, could also become significantly stricter in other markets where our powertrains or vehicles with our powertrains are sold.

Non-compliance with these regulations would result in significant financial and reputational risks. Therefore, our ability to align with and proactively respond to government policies is fundamental to our continued success and sustainability in the dynamic powertrain market in China.

Various jurisdictions are adopting or considering new laws and regulations that expand mandatory disclosure, reporting and diligence requirements with respect to environmental, social and governance (“ESG”) matters. The ESG and sustainability landscape and expectations of investors, customers, employees and other stakeholders in this area continue to evolve due to new regulations and geopolitical developments. Compliance with these new rules along with any other anticipated ESG reporting rules may result in additional costs and operational complexities. Moreover, investors, lenders and other stakeholders (including those in support of or in opposition to ESG principles) may have a negative view of us to the extent we are perceived to have not responded appropriately to their ESG concerns or take positions that are contrary to their views or expectations. Failure to comply with present or future ESG regulations or to meet stakeholder expectations, could harm our reputation, business and financial condition.

The adoption of stringent emission standards, including National VI and Tier-4 emission standards for diesel engines manufactured in China, may adversely affect our results of operations and financial condition.

The manufacture of our engines is subject to regulation by the MEE and other authorities in China. Regulations in China have been steadily tightened for both on-road and off-road transportation in recent years, requiring compliance with stringent standards, including the mandatory implementation of National VI and Tier-4 emission standards. National VI and Tier-4 emission standards have adopted the latest internal combustion engine manufacturing technologies in China that Yuchai had developed and built up anew. These emission standards impose a series of emission tests, not only in the manufacturing processes but also ongoing emission tests on the road after engine installation.

Our engines involve technically complex manufacturing processes and require a supply of highly specialized component parts. For some products and component parts, we may also rely on a single source of supply. The combination of these factors means that supply is never guaranteed. If we or our third party suppliers fail to comply fully with regulations, there could be a product recall or other shutdown or disruption of our production activities. There is no assurance that we will not experience supply interruptions in the future. The implementation of new standards may also reduce the supply or increase the price of components for certain of our existing engine models which could be sold for the export markets.

The failure or malfunctioning of the exhaust aftertreatment system would also trigger the engine monitoring system to shut down or reduce engine loading to idling speed, which may cause disruption of transportation or service of the vehicles, potentially inducing damages and leading to higher costs of warranty. Yuchai’s performance may be affected by any unexpected failure in these systems. Any of these issues could materially and adversely affect our business, results of operations, financial condition, and prospects.

We are subject to risks associated with being subject to U.S. and European trade control laws and regulations.

Yuchai may, from time to time, procure production equipment from overseas suppliers which could expose us to regulatory scrutiny, export control restrictions, or licensing requirements imposed by U.S. or European authorities. Failure to comply with these laws and regulations, whether due to oversight, misinterpretation, or changes in regulatory requirements, could result in significant penalties, fines or restrictions on our ability to import or use critical equipment. Additionally, geopolitical tensions or shifts in trade policies could further complicate our procurement processes, leading to delays, increased costs, or the inability to acquire necessary technology. Such disruptions could adversely affect our production capabilities, operational efficiency, and overall business performance.

In October 2022, Yuchai was placed on the Unverified List, or UVL, which is a supplement to the Export Administration Regulations, or EAR, promulgated by the Bureau of Industry and Security, or BIS, in the Department of Commerce, or the “U.S. Department of Commerce. Entities are added to the UVL where the BIS is unable to verify the legitimacy and reliability relating to the end use or end users of items subject to the EAR because an end-use check, such as a pre-license check or a post-shipment verification cannot be completed satisfactorily for reasons outside the U.S. Government’s control. The U.S. Department of Commerce removed Yuchai from the UVL in December 2022. We cannot guarantee that we or Yuchai or any of our other subsidiaries will not be included to the UVL or the BIS’ Entity List or Denied Persons List in the future. If we or any of our subsidiaries are placed on one of BIS’ lists in the future, we could face reputational harm, supply disruptions, restrictions or difficulties in dealing with business partners or obtaining banking facilities, or additional compliance requirements or costs, which could have significantly adverse impact on our business and results of operations.

Outbreaks of communicable diseases may materially and adversely affect our business, financial condition and results of operations.

We face risks related to health epidemics or outbreaks of communicable diseases. In general, our business had in the past and in the future could be adversely affected by the outbreak of other communicable diseases, such as severe acute respiratory syndrome (SARS), the H1N1 and H5N1 influenza viruses, Ebola or Zika fever. Such communicable diseases could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of many countries, as well as our business, financial condition or results of operations.

Beginning in late 2019 and early 2020, the COVID-19 pandemic resulted in temporary closure of many manufacturing facilities and factories across China and the world, and our industry and many others experienced increased supply lead time, supply disruption and limited transport and shipment options from and to affected regions. Although the COVID-19 restrictions have been lifted, the lingering effects of the COVID-19 pandemic may continue to influence the economy and our business, and an outbreak of COVID-19 or other communicable diseases could occur again. Outbreaks of communicable diseases have led to, and in the future could lead to our factory closures, workforce shortages, supply chain disruptions, transportation disruptions or similar consequences. The duration of such business disruptions and their resulting financial and operational impacts cannot be predicted or reasonably estimated.

Our insurance coverage may not be adequate to cover risks related to our production and other operations.

The amount of our insurance coverage for our buildings and equipment is at cost, which could be less than the replacement value. Similarly, the insurance coverage for our inventory is at book value, which could be less than the replacement value. In accordance with what we believe is customary practice among industrial equipment manufacturers in China, we insure our properties, equipment and inventories. The amount of insurance coverage for our facilities and inventory aligns with Chinese market practice but may expose us to risks in the event of a major accident where our insurance recovery may be inadequate. We also carry public liability insurance to cover claims in respect of bodily injury and property damage to any third party arising from accidents on our property or relating to our operations. We do not carry business interruption insurance as such coverage is not customary in China. Losses incurred or payments required to be made by us which are not fully insured could have a material adverse effect on our financial condition.

Increases in labor costs and enforcement of stricter labor laws and regulations in China may adversely affect our business and our profitability.

The average wage level in China, where most of our employees are located, has increased in recent years, and China-based manufacturing operations no longer have the cost competitive advantages that they had in the past. We expect that our labor costs, including wages and employee benefits, will continue to increase in the future in absolute terms and relative to the costs of operating in other countries and regions where labor costs are lower. Unless we are able to pass on these increased labor costs to those who pay for our services, our profitability and results of operations may be materially and adversely affected.

In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and limitation with respect to utilization of labor dispatching, labor protection and labor condition and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract Law and its implementation rules, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employee’s probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the PRC Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations.

We are dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity risks and data leakage risks. Any failure to comply with the various applicable laws and regulations related to data security and cybersecurity could lead to liabilities, penalties or other regulatory actions, which could have a material and adverse effect on our business, financial condition and results of operations.

We are dependent on information technology systems and infrastructure to support our operations, manage data and conduct business activities. This dependence exposes us to certain risks, including cybersecurity threats and data leakage. We cannot be certain that advances in criminal capabilities such as cyberattacks, malware or exploitation of vulnerabilities in our or third-party systems, will not compromise or breach the technology protecting our systems or the systems and networks of third parties that access and store sensitive information about us, our customers or suppliers. Cyber threats like phishing and trojans could intrude into our or a third party’s network to steal data or to seek sensitive information about us or our customers or suppliers. Any intrusion into our or such third party’s network that results in any breach of security could cause damage to our reputation and adversely impact our business and financial results. A significant failure in security measures could have a material adverse effect on our business, reputation, results of operations and financial condition. Although we seek to implement measures to protect sensitive and confidential client data, there can be no assurance that we would be able to prevent breaches of security. While we have developed and implemented a cybersecurity risk management program, there can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information. See also “Item 16K – Cybersecurity.”

As a significant part of our business and operations is conducted in China, we are subject to the PRC laws, rules and regulations, including those related to data security and cybersecurity. PRC regulators have intensified their focus on regulating data security and data protection, reflecting the growing importance of these areas in the digital economy. China has introduced a series of stringent laws and regulations, including the Cyber Security Law, the Data Security Law, and the Personal Information Protection Law (PIPL), which impose comprehensive requirements on data collection, storage, processing, transmission, and cross-border transfers. These regulatory frameworks mandate that companies implement robust data protection measures, conduct risk assessments, and ensure compliance with data classification and grading standards. Additionally, businesses are required to report security incidents, obtain necessary approvals for data exports, and adhere to strict guidelines for handling sensitive and personal information. The evolving nature of these regulations means that compliance requirements are subject to change, and we must continuously monitor and adapt to new rules and enforcement practices. We believe that our existing practices are compliant with applicable requirements imposed under the foregoing laws, rules and regulations, including the regulations or policies that have been issued by the CAC, in all material respects. However, we cannot preclude the possibility that new laws, regulations or rules promulgated in the future will impose additional compliance requirements on us, will subject us to the cybersecurity or national security review in relation to our operations, or will require us to change our business practices or incur additional operating expenses, which may have material and negative impacts on our business, financial condition and prospects and the value of our securities.

If it is determined in the future that any additional procedures, including the cybersecurity review under the Cybersecurity Review Measures and national security review under the Network Data Security Regulations, are required for our offshore offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. CAC and/or other PRC regulation and oversight of cybersecurity, data protection and other technology-related matters that the PRC government deems to relate to national security could impact our ability to conduct, or the timing of, our future offerings. In addition, given the current regulatory environment in the PRC, there remains uncertainty regarding the interpretation and enforcement of PRC laws, including the foregoing relevant laws and regulations issued by the CAC, which can change quickly and with little advance notice. See “— General Risk Factors — The PRC government can exercise influence over the conduct of business in China. Changes in and uncertainties relating to political or social conditions, government policies or regulations in China could have a material and adverse effect on our business and results of operations” for more details.

Our business depends substantially on the continuing efforts of our key employees and qualified personnel.

We are highly dependent on our executive officers and senior management, as well as our research and development and sales and marketing personnel. Recruiting and retaining qualified personnel is critical to our success. The loss of the services of our executive officers or other key employees could impede our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop and commercialize products and services. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel. The failure to attract, integrate, train, motivate and retain these personnel could adversely affect our business, financial condition or results of operations.

We and our subsidiaries utilize equity incentive plans to attract, retain, and motivate management and employees, which can have a dilutive effect on your investment in us and our interests in our subsidiaries.

We previously adopted an equity incentive plan to attract and retain eligible directors, officers and employees of our Company. Although the plan expired in May 2024, we may adopt a similar plan in the future. If we issue additional stock-based awards to eligible participants under an equity incentive plan, the issuance of these stock-based awards may dilute an investment in our shares. Our stock price may also face incremental downward pressure if plan participants sell more shares into the market.

Our subsidiaries, Yuchai and MGP adopted their own equity schemes in 2024, in order to retain and motivate their management and key personnel. The Guangxi Yuchai Machinery Company Limited Equity Holding Scheme, or the "Yuchai Equity Scheme", and Guangxi Yuchai Marine and Genset Power Co., Ltd Incentive Scheme, or the "MGP Incentive Scheme", collectively, the "Two Schemes", were approved by the shareholders of Yuchai and became effective on June 20, 2024. Certain directors and executive officers and employees of Yuchai and MGP, including one of whom is also a director of the Company, have been awarded equity interest in MGP under the Two Schemes. Participants of the Two Schemes were awarded interests in MGP such that the registered capital of MGP was increased by an aggregate amount of RMB 28.00 million which corresponded to approximately 6.54% interest in the enlarged registered capital of MGP (the “MGP Interest”) and participants of the Two Schemes contributed an aggregate amount of RMB 82.88 million at the price of RMB 2.96 per RMB 1.0 registered capital in cash. Participants of the Yuchai Equity Scheme are employees (who may also be directors) within the Yuchai group of entities (other than MGP and its subsidiaries) and participants of the MGP Incentive Scheme are employees (who may also be directors) of MGP and its subsidiaries. Following the awards of the MGP Interest, Yuchai’s equity interest in MGP decreased from 100% to 93.46% and the Company's effective equity interest in MGP decreased from 76.4% to 71.4% as of December 31, 2024. Upon the implementation of the Two Schemes, Yuchai's equity interest in MGP reduced from 100% to 93.46%.

In addition, our subsidiary, Guangxi SKY Cloud Technology Co., Ltd., or Sky Cloud, adopted its own equity incentive plan, or the "Sky Cloud Equity Plan", on March 21, 2025, in order to motivate and incentivize employees who play a vital role in its long-term growth, and for their continued contribution, dedication and loyalty to Sky Cloud. Under the Sky Cloud Equity Plan, Sky Cloud will increase its registered capital by an aggregate of RMB 1.25 million which corresponds to a 20% interest of the enlarged registered capital of Sky Cloud (the "Sky Cloud Interest") for subscription by separated partnership vehicles established by the participants, who are selected employees, directors and senior officers of Sky Cloud. The Sky Cloud Interest will be granted in two (2) phases, among which, Phase One amounting to an aggregate of RMB 1,080,002 has been granted in April 2025 at the subscription price of RMB 1 per RMB 1 registered capital of Sky Cloud. As such, Yuchai's equity interest in Sky Cloud has reduced from 100% to 82.74%. The remaining Sky Cloud Interest will be granted in Phase Two by June 30, 2027, at a subscription price of 80% of the latest audited net assets value or RMB 1 (whichever is higher) per RMB 1 registered capital of Sky Cloud.

Our interest in our subsidiaries could be diluted by the implementation and operation of any equity incentive plans by these subsidiaries. Any shares reserved under any such subsidiary plan, if and when issued, could reduce our ownership interest in that subsidiary. The issuance of these shares by a subsidiary of ours could cause our share of the earnings of the affected subsidiary to be reduced, which could adversely impact our results of operations.

The market price of our Common Stock may be volatile.

There continues to be volatility in the market price of our Common Stock. See “Item 9. The Offer and Listing.” The market price could fluctuate substantially in the future in response to a number of factors, including:

Any of the above factors either individually or together may result in market fluctuations which may materially adversely affect our stock price.

As an exempted company incorporated under Bermuda law, our operations may be subject to economic substance requirements.

On December 5, 2017, following an assessment of the tax policies of various countries by the Code of Conduct Group for Business Taxation of the European Union (the “COCG”), the Council of the EU approved and published Council conclusions containing a list of non-cooperative jurisdictions for tax purposes (the “Conclusions”). Although not considered so-called “non-cooperative jurisdictions”, certain countries, including Bermuda, were listed as having “tax regimes that facilitate offshore structures which attract profits without real economic activity.” In connection with the Conclusions, and to avoid being placed on the list of “non-cooperative jurisdictions”, the government of Bermuda, among others, committed to addressing COCG proposals relating to economic substance for entities doing business in or through their respective jurisdictions and to pass legislation to implement any appropriate changes by the end of 2018.

The Economic Substance Act 2018 and the Economic Substance Regulations 2018 of Bermuda (the “Economic Substance Act” and the “Economic Substance Regulations”, respectively) became operative on December 31, 2018. The Economic Substance Act applies to every registered entity in Bermuda that engages in a relevant activity and requires that every such entity shall maintain a substantial economic presence in Bermuda. Relevant activities for the purposes of the Economic Substance Act include, among other things, conducting business as a holding entity, which may include a pure equity holding entity. The Economic Substance Regulations provide that minimum economic substance requirements shall apply in relation to an entity if the entity is a pure equity holding entity, which is an entity which as its primary function acquires and holds shares or an equitable interest in other entities, performs no commercial activity and which (a) holds the majority of the voting rights in another entity; (b) is a shareholder, member or partner in another entity and has the right to appoint or remove a majority of the board of directors, managers or equivalent of that other entity; or (c) is a shareholder, member or partner in another entity and controls alone, under an agreement with others, a majority of the voting rights in that other entity. The minimum economic substance requirements include (a) compliance with applicable corporate governance requirements set forth in, among others, the Bermuda Companies Act 1981 including keeping records of account, books and papers and financial statements; and (b) submission of an annual economic substance declaration form. However, the economic substance requirements do not apply to an entity which is a tax resident of a jurisdiction outside of Bermuda, provided that the jurisdiction is not in the EU list of non-cooperative jurisdictions for tax purposes. If we fail to comply with our obligations under the Bermuda Economic Substance Act or any similar law applicable to us in any other jurisdictions, we could be subject to financial penalties and spontaneous disclosure of information to foreign tax officials in related jurisdictions and may be struck from the register of companies in Bermuda or such other jurisdiction. Any of these actions could have a material adverse effect on our business, financial condition and results of operations.

In 2020, our Board of Directors, having considered the Bermuda economic substance legislation as well as the Company’s presence and substance in Singapore through our Singapore Branch office, approved a proposal for the Company to establish its tax residency in Singapore. A submission was made to the Inland Revenue Authority of Singapore, or IRAS, regarding the Company’s Singapore tax residency and the IRAS responded with a written confirmation that the Company is a tax resident in Singapore for Singapore income tax purposes for the calendar year 2020. We have been considered as a Singapore tax resident since then. Our Singapore tax residency status is to be self-assessed on a yearly basis if our management control is exercised in Singapore for the preceding calendar year. If the Company is not a tax resident of a jurisdiction outside of Bermuda (other than a jurisdiction which is on the EU list of non-cooperative jurisdictions for tax purposes), we may be subject to economic substance requirements under Bermuda’s Economic Substance Act, Economic Substance Regulations and/or any new economic substance regulations adopted in Bermuda. We may be subject to penalties if the Company or any of its subsidiaries fail to comply with the applicable economic substance laws in Bermuda or any other jurisdiction.

We may be classified as a passive foreign investment company, which could result in adverse United States federal income tax consequences to U.S. Holders.

A non-United States corporation is considered a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the total value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income. For this purpose, the total value of our assets generally will be determined by reference to the market price of our shares. We believe that our shares should not be treated as stock of a PFIC for United States federal income tax purposes for the taxable year that ended on December 31, 2024. However, there is no guarantee that the United States Internal Revenue Service will not take a contrary position or that our shares will not be treated as stock of a PFIC for any future taxable year. Our PFIC status will be affected by, among other things, the market value of our shares and the assets and operations of our Company and subsidiaries. If we were to be treated as a PFIC for any taxable year during which a U.S. Holder (defined below) holds our shares, certain adverse United States federal income tax consequences could apply to the U.S. Holder. See “Item 10. Additional Information — C. Taxation — United States Federal Income Taxation — PFIC Rules.”

If a United States person is treated as owning at least 10% of our shares, such holder may be subject to adverse U.S. federal income tax consequences.

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our Common Stock, such person may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” (“CFC”) in our group (if any). If our group includes one or more U.S. subsidiaries, under recently-enacted rules, certain of our non-U.S. subsidiaries could be treated as CFCs regardless of whether we are or are not treated as a CFC. A United States shareholder of a CFC may be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart F income”, “global intangible low-taxed income” and investments in U.S. property by CFCs, whether or not we make any distributions. An individual that is a United States shareholder with respect to a CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. A failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether any of our non-U.S. subsidiaries are treated as a CFC or whether such investor is treated as a United States shareholder with respect to any of such CFCs or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. The United States Internal Revenue Service provided limited guidance on situations in which investors may rely on publicly available alternative information to comply with their reporting and tax paying obligations with respect to foreign-controlled CFCs. A United States investor should consult its own advisors regarding the potential application of these rules to its investment in the Common Stock.

The HLGE group’s hotel ownership and management business may be adversely affected by risks inherent in the hotel industry.

The HLGE group operates Copthorne Hotel Cameron Highlands (“CHCH”), a hotel in Cameron Highlands, Malaysia. As of February 28, 2025, we had a 48.9% shareholding interest in HLGE, a company listed on the Main Board of the Singapore Exchange Securities Trading Limited (the “Singapore Exchange”). See “Item 5. Operating and Financial Review and Prospects — Business Expansion and Diversification Plan” for further information on our investment in HLGE.

The HLGE group’s financial performance is dependent on the performance of the hotel it operates. The HLGE group’s hotel ownership and management business is exposed to risks which are inherent in and/or common to the hotel industry and which may adversely affect the HLGE group’s financial performance, including the following:

The above factors may materially affect the performance of CHCH and the profitability and financial condition of the HLGE group. There can be no assurance that we will not suffer any losses arising from our investment in HLGE.

Risks related to Corporate Structure

Our financial condition, results of operations, business and prospects may be adversely affected if we are unable to implement the Reorganization Agreement and the Cooperation Agreement.

We own 76.4% of the outstanding shares of Yuchai, and one of our primary sources of cash flow continues to be our share of the dividends, if any, paid by Yuchai and investment earnings thereon. As a result of the agreement reached with Yuchai and its related parties pursuant to the July 2003 Agreement, we discontinued legal and arbitration proceedings initiated by us in May 2003 relating to difficulties with respect to our investment in Yuchai. In furtherance of the terms of the July 2003 Agreement, we, Yuchai and Coomber Investments Limited, or Coomber, entered into the Reorganization Agreement in April 2005, as amended in December 2005 and November 2006, and agreed on a restructuring plan intended to be beneficial to our shareholders. Coomber is wholly owned by Goldman Industrial Limited which in turn is a wholly-owned subsidiary of GY which in turn is a majority-owned subsidiary of the State-owned Assets Supervision and Administration Commission of the People’s Government of Guangxi Zhuang Autonomous Region. The Reorganization Agreement provides for the implementation of corporate governance guidelines approved by the directors and shareholders of Yuchai in November 2002 and outlines steps for the adoption of corporate governance practices at Yuchai conforming to international custom and practice.

The Reorganization Agreement was scheduled to terminate on June 30, 2007. On June 30, 2007, we, along with Yuchai, Coomber and GY, entered into the Cooperation Agreement. The Cooperation Agreement amends certain terms of the Reorganization Agreement and, as so amended, incorporates the terms of the Reorganization Agreement. The Reorganization Agreement, as amended, and the Cooperation Agreement continue to be in force and effect. Pursuant to the amendments to the Reorganization Agreement, the Company agreed that the restructuring and spin-off of Yuchai would not be effected, and, recognizing the understandings that have been reached between the Company and GY to jointly undertake efforts to expand the business of Yuchai, the Company will not seek to recover the anti-dilution fee of US$20 million that was due from Yuchai. For more information on these agreements see “Item 4. Information on the Company — A. History and Development of the Company.” No assurance can be given as to when the business expansion requirements relating to Yuchai as contemplated by the Reorganization Agreement and the Cooperation Agreement will be fully implemented, or that implementation of the Reorganization Agreement and the Cooperation Agreement will effectively resolve all of the difficulties faced by us with respect to our investment in Yuchai.

In addition, the Reorganization Agreement as amended by the Cooperation Agreement contemplates the continued implementation of our business expansion and diversification plan adopted in February 2005. The Cooperation Agreement provides that the parties will explore new business opportunities and ventures with a view to diversifying and expanding the assets, business divisions, sources of revenue and operations of Yuchai. Subsequently, we acquired strategic stakes in HLGE and Thakral Corporation Ltd, or TCL (which we have since fully divested). In addition, Yuchai has entered into various strategic alliances, including joint ventures, with various third parties to further our business purpose, including a 45% joint venture of Yuchai with Jirui United Heavy Industry Co., Ltd. and Shenzhen City Jiusi Investment Management Limited, a 50-50 joint venture of MGP with MTU Friedrichshafen GmbH, a 49% joint venture of Yuchai’s wholly-owned subsidiary with Purem International GmbH, and a 51% subsidiary of Yuchai’s wholly-owned subsidiary with Lotusfairy Power Technologies Corporate. For more details, see “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — We are subject to risks associated with strategic alliances, including joint ventures."

Nonetheless, no assurance can be given that we will be able to successfully expand and diversify our business. We may also not be able to continue to identify suitable acquisition opportunities, secure funding to consummate such acquisitions or successfully integrate such acquired businesses within our operations. Any failure to implement the terms of the Reorganization Agreement and Cooperation Agreement, including our continued expansion and diversification, could have a material adverse effect on our financial condition, results of operations, business or prospects. Additionally, although the Cooperation Agreement amends certain provisions of the Reorganization Agreement and also acknowledges the understandings that have been reached between us and GY to jointly undertake efforts to expand and diversify the business of Yuchai, no assurance can be given that we will be able to successfully implement those efforts or as to when the transactions contemplated therein will be consummated.