Security Code: 603950 Security Abbreviation: Changyuan Donggu Announcement No.: 2021-004

Xiangyang Changyuan Donggu Industrial Co., Ltd.

Regarding the Company’s intention to enter into an agreement with the People’s Government of Xiangzhou District, Xiangyang City

Announcement of the Signing of the Investment Agreement

Special Note:

1. Xiangyang Changyuan Donggu Industrial Co., Ltd. (hereinafter referred to as the “Company” or “Party B”) intends to sign an Investment Agreement (hereinafter referred to as the “Investment Agreement”) with the People’s Government of Xiangzhou District, Xiangyang City (hereinafter referred to as “Party A”). The estimated total investment for the project is approximately RMB 300 million. The proposed total investment amount represents the planned investment; subsequently, the Company may make adjustments based on specific factors such as fundraising, land acquisition, and supportive policies. There is a risk that the Company’s actual investment amount may differ from the project’s investment plan. The actual investment amount shall prevail; investors are advised to note this risk.

2. The project land involved in the investment agreement to be signed this time must be acquired in accordance with current national laws and regulations and standard land-use procedures, through tendering, auction, or public listing. There is uncertainty as to whether the land use right can be successfully bid for, the final transaction price of the land use right, and the timing of its acquisition.

3. The investment agreement signed this time does not have a material impact on the company’s operating revenue, net profit, or other production and operational metrics for 2021, and its effect on the company’s future long-term operating performance remains uncertain.

I. Investment Overview

1. Basic Information on the Investment

The company plans to sign an Investment Agreement with the People’s Government of Xiangzhou District, Xiangyang City. The company intends to invest in expanding its engine block and cylinder head manufacturing project in Xiangzhou District, Xiangyang City, with a total investment of approximately RMB 300 million, funded by the company’s own capital or self-raised funds.

2. The 17th meeting of the Company’s Third Board of Directors, with a vote of 11 in favor, 0 against, and 0 abstentions, and the 14th meeting of the Third Supervisory Board, with a vote of 3 in favor, 0 against, and 0 abstentions, approved the following: < Regarding the proposal to enter into an Investment Agreement with the People’s Government of Xiangzhou District, in accordance with the Company’s Articles of Association and the Shanghai Stock Exchange Listing Rules, this external investment falls within the Board of Directors’ approval authority and does not require submission to the shareholders’ meeting for deliberation.

3 The company’s board of directors has authorized management to enter into an agreement to establish a wholly owned subsidiary and participate in the land “bidding, auction, and listing” process, as well as other related subsequent implementation matters, within the aforementioned monetary limits.

4 This signing of the Investment Agreement does not constitute a related-party transaction, nor does it constitute a major asset restructuring as defined in the Measures for the Administration of Major Asset Restructuring of Listed Companies.

II. Basic Information About the Other Party to the Agreement

1 Name: People’s Government of Xiangzhou District, Xiangyang City

2 , Nature: Local government agency

3 Relationship with the company: No affiliation exists.

III. Main Contents of the Agreement:

Party A: People’s Government of Xiangzhou District, Xiangyang City

Party B: Xiangyang Changyuan Donggu Industrial Co., Ltd.

1 Basic Information About the Project

(1) Party B’s investment project: Engine block and cylinder head manufacturing project.

(2) Within three months after signing the investment agreement, Party B shall register a new independent legal entity (a wholly owned subsidiary) in Xiangzhou District and operate and pay taxes there in accordance with the law for no less than 15 years.

2 Project land:

The project is located in the Xiangzhou Mechanical and Electrical Industrial Park, immediately south of the Changyuan Donggu factory site. The land is designated for industrial use, with an area limited to no more than 90 mu (the specific location and land area shall be subject to the red-line map issued by the land and resources authority).

3 Investment intensity and requirements:

(1) Party B’s total project investment is approximately RMB 300 million. Party B shall be responsible for site leveling of the project land, and shall bear all associated costs.

(2) The project must be completed and put into operation within 18 months of obtaining the construction land and meeting the conditions for commencement. Within two years of starting construction, the project’s fixed asset investment must total no less than RMB 200 million.

(3) Starting from the year following the project’s completion and commissioning, the new company shall pay Party A no less than RMB 13.5 million in production and business taxes.

4. The terms of the agreement to be signed in this instance are still under negotiation and remain subject to uncertainty; the final terms shall be governed by the Investment Agreement formally executed by both parties.

IV. Impact on the Company

The company this time with The People’s Government of Xiangzhou District, Xiangyang City, has signed an Investment Agreement that will effectively increase the company’s production capacity and improve production efficiency. This aligns with the company’s overall strategic plan, supports its long-term development, and further enhances the market share of its products.

The performance of this Agreement will not affect the independence of the Company’s business, and the Company will not become dependent on Party A as a result of performing this Agreement. The implementation and construction of this project will require a certain period of time and will not have a material impact on the Company’s operating results for 2021.

V. Risk Warning

1 The funding for this project will come from the company’s own capital or self-raised funds. There is uncertainty as to whether these funds can be secured on schedule. Moreover, changes in financing arrangements, credit policies, and the ease of accessing financing channels during the investment and construction phases may expose the company to certain financial risks related to liquidity.

2 This project investment is based on the company’s strategic development needs and its assessment of industry market prospects; however, uncertainties exist regarding industry trends, market conditions, and the operational team’s ability to expand business, all of which may adversely affect the realization of future operating results.

3 The acquisition of the project site still requires adherence to the prescribed “tendering, auction, and listing” procedures under relevant regulations, introducing a degree of uncertainty. Furthermore, this project involves various approval matters related to project initiation, environmental protection, planning, construction permitting, environmental impact assessment, and safety assessment, all of which must be approved by the competent authorities, thereby entailing additional uncertainties.

4 The project investment amount, investment intensity, tax figures, and other metrics in the investment agreement are all planned or estimated values. During the project’s construction, various uncertainties may arise, creating significant uncertainty as to whether the commencement of construction, completion, and formal production can be achieved within the timeframes stipulated in the agreement. Additionally, future changes in market conditions will also introduce uncertainty into the realization of revenue and tax receipts. It is expected that, in the short term, this project will not have a material impact on the company’s operating performance.

5 The provisions in this Agreement regarding output value, tax contributions, and similar matters do not constitute the Company’s forecasts of future performance, nor do they amount to any performance commitments to investors. The Company hereby cautions investors to invest rationally and to be mindful of investment risks.

VI. Reference Documents

1 Resolution of the Seventeenth Meeting of the Third Board of Directors of the Company;

2 Resolution of the Fourteenth Meeting of the Third Session of the Company’s Supervisory Board.

This is hereby announced.

Xiangyang Changyuan Donggu Industrial Co., Ltd.

Board of Directors

2021 March 10