2020 Annual Board of Directors Work Report

Dear Shareholders:

On behalf of the company's board of directors, I am submitting the 2020 annual board of directors work report to the shareholders' meeting for your review. We also invite the directors, supervisors, and senior management personnel attending this shareholders' meeting to provide their opinions and suggestions.

2020 2020 was a milestone year and an extraordinary one in the development history of Changyuan Donggu. Over the past year, Changyuan Donggu faced significant challenges but also seized invaluable opportunities. In 2020, the company, under the correct leadership of the board of directors, focused on improving economic efficiency, achieving operational targets, and returning value to shareholders. Through meticulous planning and the concerted efforts of all staff, we successfully completed the various economic indicators and work targets set at the beginning of the year, significantly improving the company's overall profitability.

The company's board of directors strictly followed the relevant provisions of laws and regulations such as the Company Law and Securities Law, as well as the company's articles of association and the Shanghai Stock Exchange's stock listing rules. We diligently fulfilled the responsibilities entrusted to the board of directors by the shareholders' meeting, promoting the company's sustainable, healthy, and stable development and effectively advancing the achievement of the company's annual work targets. The main work of the company's board of directors in 2020 is reported as follows:

I. Overview of the Automotive Industry Development in 2020

2020 Since the recovery from the epidemic in April 2020, benefiting from national policies such as "new infrastructure," the elimination of National III emission standard vehicles, and stricter overload control, national automobile sales have continued to grow, setting new monthly production and sales records for nine consecutive months and reaching a historical high in June. In 2020, commercial vehicle sales reached 5.133 million units, a year-on-year increase of 18.7%, with heavy truck sales reaching 1.619 million units, a year-on-year increase of 37.9%. (Data source: First Commercial Vehicle Network)

II. Main Operating Conditions of the Company in 2020

(I) Completion of Main Operating Indicators

2020 In 2020, the company achieved operating revenue of RMB 1,677,984,500, a year-on-year increase of 45.25%; operating profit of RMB 354,200,300, a year-on-year increase of 20.46%; and net profit of RMB 320,727,900, a year-on-year increase of 17.72%; of which net profit attributable to shareholders of the parent company was RMB 314,538,600, a year-on-year increase of 17.01%.

As of the end of 2020, the company's total assets were RMB 3.61 billion, total liabilities were RMB 1.57 billion, and owner's equity was RMB 2.04 billion.

(II) Completion of Key Tasks

1 1. Epidemic Prevention and Control

2020 At the beginning of 2020, the sudden COVID-19 epidemic undoubtedly added to the downward pressure on the domestic economy. The company fully responded to the Party and the state's epidemic prevention and control policies, implementing various measures to effectively protect the health and safety of its employees. Located in Xiangyang, Hubei, with the guidance and assistance of the local government, the company's production lines continued to operate during the epidemic, resolving urgent supply shortages for customers. Looking back at the achievements of the first quarter, the company withstood the pressure, achieving a net profit attributable to the parent company of RMB 44,245,200, a year-on-year increase of 10.04%.

2 2. Strategic Layout

2020 In 2020, the company carried out various tasks centered on its operating strategic layout, fully implementing a strategy that prioritizes stabilizing the Dongfeng and Cummins markets while comprehensively entering the domestic market. Against the backdrop of the booming demand in the medium and heavy truck market, the company actively introduced advanced equipment from Germany (BW) and Japan (Okuma), ensuring stable supply to existing customers such as Dongfeng Cummins, Foton Cummins, and Dongfeng Commercial Vehicle; continuously promoted the construction of investment projects, with the Guangxi Yuchai National VI project and the Dongfeng Cummins 13L project achieving mass production and supply, laying the foundation for the company's capacity reserves; and successfully introduced new projects such as Shangfei Hong and Shangchai, creating new growth points for the company's performance.

After years of hard work, the company completed its initial public offering of shares and was listed on the Shanghai Stock Exchange in May 2020, breaking through the capital bottleneck that had constrained the company's rapid development, optimizing its capital structure, and eliminating future concerns for the company's subsequent development.

3 3. Research and Development

Adhering to the philosophy of "Long-lasting quality, originating from professionalism," the company improved product quality through measures such as optimizing production processes and strengthening quality control, ensuring stable product quality under conditions of sustained high output. Through years of cultivation, the company has refined and improved its products, achieving a double harvest of revenue and reputation, effectively enhancing the competitiveness of its products. The company continuously integrates the production experience and technology of multiple engine cylinder block and cylinder head manufacturers, enabling the full play of its flexible production technology. The company has achieved real-time online factory operation through the Genyun Industrial Internet platform, connecting its advanced equipment with CNC systems such as ERP/PDM to build a Changyuan Donggu smart factory and establish digital models for product design and production line optimization. By improving human-machine interaction efficiency, the company enhances equipment utilization, reduces waste in production, effectively achieves cost reduction and efficiency improvement, and significantly improves company profitability.

III. Daily Work of the Company's Board of Directors in 2020

(I) Board Meetings

2020 In 2020, the company held 5 board meetings and deliberated on 29 proposals. The procedures for convening and holding board meetings, the qualifications of attendees, the qualifications of conveners, and voting procedures all complied with relevant legal and regulatory provisions and the company's articles of association, and the resolutions adopted were legal and valid. The matters deliberated and approved by the meetings were effectively implemented by the board of directors. The details are as follows:

(II) Implementation of the resolutions of the shareholders' meeting by the board of directors

2020 In the year, the company held 1 annual shareholders' meeting and 3 extraordinary shareholders' meetings, reviewing and approving 14 proposals. The content of the proposals involved major matters such as annual reports, employment of audit firms, amendment of the company's articles of association, and profit distribution. The company's board of directors followed the relevant regulations and requirements of the "Company Law", "Company Articles of Association", etc., and strictly implemented the resolutions of the shareholders' meeting. All 14 proposals were effectively carried out or implemented in accordance with the content of the resolutions.

(III) Performance of the board's various specialized committees

The company's board of directors has four specialized committees: the strategy committee, the audit committee, the nomination committee, and the remuneration and appraisal committee. In 2020, a total of 5 audit committee meetings were held to review the company's regular reports and other related matters, 1 remuneration and committee meeting was held to review the remuneration of the company's directors, supervisors, and senior executives, and 1 strategy committee meeting was held to review the company's securities investment management. Each committee operates within the scope of its powers as stipulated in its own working rules, conducts research on professional matters, and puts forward opinions and suggestions for the board of directors' decision-making reference.

(IV) Strengthening corporate governance and improving relevant systems

2020 In the year, the company continued to strengthen corporate governance, and through improving other internal management systems, etc., it balanced compliance with development, safeguarding the long-term interests of the company and shareholders.

IV. 2021 Board of Directors' Work Arrangements and Outlook

2021 In the year, the board of directors will resolutely implement the resolutions of the shareholders' meeting, fulfill its duties in accordance with the requirements of the "Company Law" and the "Company Articles of Association", continuously improve relevant regulations and systems, strengthen the standardized operation of the internal management mechanism, and give full play to the strategic decision-making role of the board of directors. Further enhance the professional role and internal supervision functions of the board's exclusive institutions, improve the scientific and professional level of the board's decision-making, improve the ability to prevent risks and internal control, and provide a strong guarantee for the quality and efficiency of the board's decision-making. Achieve new progress in production and operation and standardized operation, strive to maximize the company's value and shareholder interests, and effectively protect the interests of all shareholders.

In this year's work, we will focus on the following aspects:

1 Promote investment projects

Continue to carry out the construction of the Hongshantou factory and the Laohekou factory surrounding areas according to the plan of the investment project. Accelerate the implementation of the second phase construction of the Yuchai Machinery National VI project and achieve the income of the investment project as soon as possible. Make full use of the policy dividends of "National VI", seize the opportunity of high growth in the sales of medium and heavy trucks, and improve the company's production and operation income.

2 Customer and market development

Continue to carry out various tasks around the business strategy layout. On the premise of ensuring the long-term stability of existing core customers, make full use of the company's leading technological advantages and good brand reputation in the manufacturing of core parts of diesel engines, actively expand the vast market, make good use of the company's scale advantages and advanced equipment advantages, and conduct more in-depth cooperation with major vehicle manufacturers and engine manufacturers to steadily improve the market share of the company's products.

3 Improve the company's management level

Continue to adhere to the principle of "improving quality and efficiency", break down the barriers between various processes, improve the company's production efficiency, continuously strengthen plan control and inventory control, strengthen the cost control capabilities of various units, and continuously promote the company's automation construction. Continue to strengthen the construction of talent teams, increase talent reserves, and explore channels for introducing mid-to-high-end talents to ensure that the company's high-quality and rapid development is accompanied by a simultaneous and effective improvement in the company's management level. Continue to carry out the construction of the company's internal control system, adhere to the implementation of the "Opinions of the State Council on Further Improving the Quality of Listed Companies", and further improve the company's governance level.

4 Improve the quality of information disclosure and listen to the voices of investors

The company will strictly follow the requirements of national laws, regulations, and relevant normative documents, continue to standardize information disclosure work, improve the overall quality of information disclosure work, ensure the timeliness, truthfulness, accuracy, and completeness of information disclosure, and establish a good corporate image in the capital market. In terms of investor relations management, the company will take the vital interests of the majority of investors as its starting point, and through multiple channels such as the Interactive Easy platform, investor hotline, and company email, deepen investors' understanding and trust in the company, and further promote a good, harmonious, and stable relationship between the two parties.

Please review by all shareholders and shareholder representatives.

Xiangyang Changyuan Donggu Industrial Co., Ltd.

Board of Directors

2021 March 22 2020