Security Code: 603950 Security Abbreviation: Changyuan Donggu Announcement No.: 2021-009

Xiangyang Changyuan Donggu Industrial Co., Ltd.

Special Report on the Deposit and Actual Use of Funds Raised in 2020

I. Basic Information on Funds Raised

Pursuant to the approval in the “Notice of Approval for the Initial Public Offering of Shares by Xiangyang Changyuan Donggu Industrial Co., Ltd.” (Securities Regulatory Commission Approval [2020] No. 564) issued by the China Securities Regulatory Commission, the company publicly issued 57,880,500 Renminbi ordinary shares (A-shares), at an issue price of RMB 15.81 per share, raising total proceeds of RMB 915,090,705.00. After deducting various issuance expenses, the net proceeds actually raised amounted to RMB 883,527,029.52. Zhongshen Zhonghuan Certified Public Accountants (Special General Partnership) verified the receipt of the aforementioned funds and issued Verification Report No. “Zhonghuan Yanzi [2020] No. 170004” on May 20, 2020. The company and its relevant subsidiaries have, in accordance with regulations, implemented dedicated account storage management for the raised funds and have entered into supervisory agreements for the raised funds with the sponsor institution and the bank where the accounts are opened.

2020 During the year (hereinafter referred to as “the Reporting Period”), the Company utilized the raised funds as follows: RMB 680.0359 million was directly invested in the fund‑raising investment projects, and RMB 0.04 million was paid for bank handling fees. As of December 31, 2020, the balance of the raised funds should have been RMB 203.4907 million; however, the actual balance in the dedicated account for raised funds was RMB 206.8684 million, resulting in a discrepancy of RMB 3.3777 million. This difference arose from interest income received on bank deposits amounting to RMB 3.3777 million.

II. Management of Funds Raised

To standardize the management and use of raised funds and protect investors’ rights and interests, the company, in accordance with the requirements of relevant laws and regulations such as the “Shanghai Stock Exchange Measures for the Administration of Funds Raised by Listed Companies (Revised in 2013),” and taking into account its actual circumstances, has formulated the “Fund-Raising Management System of Xiangyang Changyuan Donggu Industrial Co., Ltd.,” which sets out clear provisions regarding the storage, approval, use, management, and supervision of raised funds. The company manages raised funds strictly in compliance with the provisions of the “Fund-Raising Management System of Xiangyang Changyuan Donggu Industrial Co., Ltd.,” and there have been no violations of relevant regulations concerning the storage, utilization, alteration, or supervision of such funds.

2020 On May 20 of the year, the Company and its relevant subsidiary, Xiangyang Changyuan Langhong Technology Co., Ltd., entered into a Tripartite Supervisory Agreement on the Dedicated Account for Raised Funds with Hubei Xiangyang Rural Commercial Bank Co., Ltd. and First Securities Underwriting & Sponsorship Co., Ltd. The aforementioned agreement does not contain any material differences from the Shanghai Stock Exchange’s “Tripartite Supervisory Agreement on the Dedicated Account for Raised Funds (Model).”

As of December 31, 2020, the status of funds raised held in dedicated accounts by the Company and its subsidiaries is as follows:

Unit: RMB yuan

III. Actual Use of Funds Raised This Year

(1) Use of funds for the fund-raising investment projects (hereinafter referred to as “Fund-Raising Investment Projects”).

For details of the Company’s actual use of proceeds raised during the reporting period, please refer to Schedule 1, “Schedule of Use of Proceeds.”

(II) Initial investments in fundraising projects and the status of their replacement.

To meet the company’s production and operational needs, prior to the receipt and deployment of funds raised through the initial public offering, the company advanced a total of RMB 508.0933 million from its own funds for the fundraising investment projects. Zhongshen Zhonghuan Accounting Firm (Special General Partnership) issued the “Attestation Report on Xiangyang Changyuan Donggu Industrial Co., Ltd.’s Advance Investment in Fundraising Projects with Self-Raised Funds” (Zhonghuan Special No. [2020]170046). The 14th meeting of the 3rd Board of Directors and the 11th meeting of the 3rd Supervisory Board reviewed and approved the “Proposal on Using Raised Funds to Replace Self-Raised Funds Previously Invested in Fundraising Projects,” agreeing that the company use RMB 508.0933 million of raised funds to replace the self-raised funds it had already invested in the fundraising projects.

(3) Use of idle raised funds to temporarily replenish working capital.

None

(4) Cash management of idle raised funds and details of investments in related products.

None

(5) Use of proceeds from the excess offering to permanently replenish working capital or repay bank loans.

None

(6) Use of excess proceeds for projects under construction and new projects (including asset acquisitions, etc.).

None

(7) Use of surplus raised funds.

The company is still in the process of investing the funds raised, and there are currently no surplus funds.

(8) Other matters concerning the use of funds raised.

None

IV. Use of Funds for Changes to Fund-Raising Investment Projects

During the reporting period, the company did not change the use of funds for any investment projects financed through fundraising.

V. Issues in the Use and Disclosure of Raised Funds

The company has used the raised funds in accordance with the provisions and requirements of applicable laws, regulations, and normative documents, and has promptly disclosed the use of these funds. There have been no violations in the use or management of the raised funds.

VI. Conclusive Opinion in the Attestation Report Issued by the Accounting Firm on the Company’s Annual Storage and Use of Raised Funds

Zhongshen Zhonghuan Accounting Firm (Special General Partnership) believes that the “Special Report on the Annual Storage and Use of Raised Funds” for 2020, prepared by the company’s board of directors, complies with the provisions of the Measures for the Administration of Raised Funds of Listed Companies of the Shanghai Stock Exchange (Revised in 2013) and the relevant format guidelines, and faithfully reflects the actual storage and use of raised funds by Xiangyang Changyuan Donggu Industrial Co., Ltd. in 2020.

VII. Conclusive Opinions in the Special Verification Report Issued by the Sponsor Institution Regarding the Company’s Annual Storage and Use of Raised Funds

Upon verification, the sponsor institution concludes that: during the reporting period, the company’s deposit and use of raised funds complied with the requirements of relevant regulations, including “Regulatory Guidance No. 2 for Listed Companies—Regulatory Requirements for the Management and Use of Funds Raised by Listed Companies” (CSRC Announcement [2012] No. 44) and the “Administrative Measures for the Management of Funds Raised by Listed Companies of the Shanghai Stock Exchange (Revised in 2013)”; the raised funds were held in dedicated accounts and used for designated purposes only; there were no instances of indirectly altering the intended use of the funds or harming shareholder interests; the controlling shareholder and actual controller did not misappropriate the raised funds; and there were no unauthorized replenishments of working capital, replacements of prior investments, or changes to project implementation sites without proper deliberation and approval procedures. Furthermore, the verification confirmed that the company’s use of raised funds during the reporting period did not violate any applicable national anti‑money laundering laws or regulations.

This is hereby announced.

Xiangyang Changyuan Donggu Industrial Co., Ltd.

Board of Directors

2021 March 23