2020 Annual Report on the Work of the Board of Directors

Dear Shareholders:

I have been entrusted by the Board of Directors to present the 2020 Board of Directors’ Work Report to the General Meeting of Shareholders for your consideration. I also invite all directors, supervisors, and senior management attending this General Meeting to offer their comments and suggestions.

2020 The year was a milestone in the development history of Changyuan Donggu, an exceptionally extraordinary year. Over the past year, Changyuan Donggu faced tremendous challenges while also seizing extremely valuable opportunities. Throughout 2020, with improving economic efficiency as its starting point, implementing operational targets as its primary goal, and delivering returns to shareholders as its guiding principle, the company, under the sound leadership of the Board of Directors, meticulously planned and, with the concerted efforts of all employees, successfully achieved the various economic indicators and work objectives set at the beginning of the year, resulting in a significant enhancement of the company’s overall profitability.

The Board of Directors has strictly adhered to the Company Law, the Securities Law, and other applicable laws and regulations, as well as the relevant provisions of the Articles of Association and the Shanghai Stock Exchange’s Rules for Listing Stocks. It has faithfully discharged the duties entrusted to it by the Shareholders’ Meeting, diligently carried out all its responsibilities, promoted the company’s sustained, sound, and stable development, and effectively advanced the achievement of the company’s annual objectives. The following is a report on the principal activities of the Board of Directors for the year 2020:

I. Overview of the Automotive Industry in 2020

2020 Since April, following the recovery from the pandemic, nationwide automobile sales have continued to grow, benefiting from government policies such as “new infrastructure development,” the phase-out of China‑III emission‑standard vehicles, and stricter enforcement against overloading. Sales set new monthly production and sales records for nine consecutive months, reaching an all‑time high in June. In 2020, commercial vehicle sales totaled 5.133 million units, up 18.7% year on year, with heavy‑duty truck sales reaching 1.619 million units, a 37.9% increase. (Data source: First Commercial Vehicle Network)

II. Main Operating Performance of the Company for 2020

(I) Status of Achievement of Key Operating Indicators

2020 For the year, the company reported operating revenue of RMB 16,779.845 million, up 45.25% year over year; operating profit of RMB 3,542.003 million, up 20.46% year over year; and net profit of RMB 3,207.279 million, up 17.72% year over year. Net profit attributable to shareholders of the parent company was RMB 3,145.386 million, up 17.01% year over year.

As of the end of 2020, the company’s total assets amounted to RMB 3.61 billion, total liabilities stood at RMB 1.57 billion, and equity was RMB 2.04 billion.

(II) Progress in Implementing Key Tasks

1 , epidemic prevention and control

2020 At the beginning of the year, the sudden COVID‑19 outbreak dealt a severe blow to the domestic economy, which was already under mounting downward pressure. The company fully responded to the Party and government’s call to implement epidemic prevention policies and introduced a range of measures, effectively safeguarding the health and safety of its employees. Located in Xiangyang, Hubei Province, and guided and supported by local authorities, the company kept several production lines running continuously throughout the pandemic, helping customers address urgent supply shortages. Looking back at the first quarter, despite significant challenges, the company reported net profit attributable to owners of the parent of RMB 44.2452 million, up 10.04% year over year.

2 , strategic layout

2020 Throughout the year, the company consistently aligned all operations with its strategic business plan, fully implementing a strategy focused on consolidating its positions in the Dongfeng and Cummins markets while aggressively expanding into the domestic market. Amid a robust surge in demand for medium- and heavy-duty trucks, the company invested heavily in advanced domestic and international equipment, including Germany’s BW and Japan’s Okuma machines, thereby ensuring stable supply to existing customers such as Dongfeng Cummins, Foton Cummins, and Dongfeng Commercial Vehicle. The company also continued to advance its fundraising‑driven projects: Yuchai Guangxi’s China VI project and Dongfeng Cummins’ 13L project have both entered mass production and supply, laying the groundwork for future capacity expansion. Additionally, new projects involving Shanghai Fiat Powertrain and Shanghai Diesel Engine Co., Ltd. were successfully brought on board, creating fresh growth drivers for the company’s performance.

After years of dedicated effort, the company completed its initial public offering and listed on the Shanghai Stock Exchange in May 2020, breaking the capital bottleneck that had constrained its rapid growth, optimizing its capital structure, and removing a major concern for its future development.

3 Regarding research and development

The company adheres to the philosophy of “Enduring Quality, Rooted in Expertise,” and by optimizing process flows and strengthening quality control measures, it has enhanced product quality, ensuring stable performance even under sustained high output. Through years of dedicated effort, the company has refined and improved its products, achieving both strong revenue growth and an excellent reputation, thereby effectively boosting product competitiveness. By continuously integrating production experience and technologies from multiple engine block and cylinder head manufacturers, the company has fully leveraged its flexible manufacturing capabilities. Via the Genyun Industrial Internet Platform, the factory has achieved real-time online connectivity, linking advanced equipment with CNC systems such as ERP and PDM to build the Changyuan Donggu Smart Factory and establish digital models for product design and production line optimization. Enhanced human-machine interaction efficiency has improved equipment utilization, reduced waste in production, and effectively achieved cost reduction and efficiency gains, leading to a significant increase in corporate profitability.

III. Daily Operations of the Company’s Board of Directors in 2020

(1) Details of the Board Meeting

2020 In the year, the Company convened a total of five board meetings and deliberated on 29 agenda items. The procedures for convening and holding board meetings, the qualifications of attendees and the convener, as well as the voting procedures, all complied with applicable laws, regulations, and the relevant provisions of the Company’s Articles of Association, and the resolutions adopted were lawful and valid. All matters approved at the meetings were effectively implemented under the Board’s oversight. Details are as follows:

(II) Implementation of Resolutions Adopted by the General Meeting of Shareholders by the Board of Directors

2020 In the year, the company convened one annual general meeting and three extraordinary general meetings, at which 14 proposals were reviewed and approved. These proposals covered major matters such as the annual report, the appointment of an auditing firm, amendments to the Articles of Association, and profit distribution. In accordance with the Company Law, the Articles of Association, and other relevant regulations and requirements, the Board of Directors rigorously implemented all resolutions passed by the shareholders’ meetings, and each of the 14 proposals was either effectively carried out or fully executed in line with its respective resolution.

(3) Performance of Duties by the Board’s Special Committees

The company’s Board of Directors has four standing committees: the Strategy Committee, the Audit Committee, the Nomination Committee, and the Remuneration and Assessment Committee. In 2020, the Audit Committee met five times to review the company’s periodic reports and related matters; the Remuneration and Assessment Committee met once to deliberate on the remuneration of directors, supervisors, and senior executives; and the Strategy Committee met once to review the company’s securities investment management. Each committee operates within the scope of its authority as defined in its respective rules of procedure, conducts research on specialized issues, and submits opinions and recommendations for the Board’s consideration in decision-making.

(4) Strengthen corporate governance and improve relevant systems.

2020 In [Year], the company continued to strengthen corporate governance, balancing growth with compliance through measures such as refining other internal management systems, thereby safeguarding the long-term interests of the company and its shareholders.

IV. Board Work Plan and Outlook for 2021

2021 This year, the Board of Directors will resolutely implement the resolutions of the Shareholders’ Meeting, diligently fulfill its duties in accordance with the Company Law and the Articles of Association, continuously improve relevant rules and regulations, strengthen the standardized operation of internal management mechanisms, and fully leverage the Board’s strategic decision-making role. We will further enhance the specialized functions of the Board’s dedicated committees and its internal oversight responsibilities, elevate the scientific rigor and professional expertise of Board decisions, and strengthen risk prevention and internal control capabilities, thereby providing robust assurance for the quality and efficiency of Board decision-making. We aim to reach new heights in production, operations, and compliant governance, striving to maximize corporate value and shareholder interests while effectively safeguarding the rights and interests of all shareholders.

In this year’s work, we will focus on the following key areas:

1 , advancing fundraising investment projects

Continue to carry out construction around the Hongshantou and Laohukou plants in accordance with the plans for the fundraising investment projects. Expedite the implementation of Phase II of Yuchai Machinery’s China VI project to realize returns from the fundraising investment projects as soon as possible. Fully leverage the policy benefits of the China VI standards, seize the opportunity presented by the rapid growth in sales of medium- and heavy-duty trucks, and enhance the company’s production and operational profitability.

2 Customer and Market Development

We will continue to align all our efforts with our business strategy. While ensuring the long-term stability of our existing core customers, we will fully leverage the company’s technological leadership and strong brand reputation in the manufacturing of critical diesel engine components to actively expand into this vast market. By capitalizing on our economies of scale and advanced equipment, we will deepen collaborations with major vehicle manufacturers and engine producers, steadily increasing our market share.

3 , Enhance the company’s management level

Continue to uphold the principle of “improving quality and increasing efficiency,” break down silos between production processes, and enhance the company’s overall productivity. Strengthen planning and inventory management, bolster cost-control capabilities across all units, and advance automation initiatives. Further reinforce talent development and succession planning, expand channels for recruiting mid‑ to high‑level professionals, and ensure that, while supporting the company’s high‑quality, rapid growth, its management capabilities are simultaneously improved in a meaningful and effective manner. Ongoing efforts to build and refine the company’s internal control system will be maintained, with unwavering implementation of the State Council’s “Opinions on Further Enhancing the Quality of Listed Companies” to further elevate corporate governance standards.

4 , Enhancing the quality of information disclosure and listening to investors’ voices

The company will strictly comply with national laws, regulations, and relevant normative documents, continue to standardize its information disclosure practices, and enhance the overall quality of such disclosures. It will ensure that information is disclosed in a timely, truthful, accurate, and complete manner, thereby fostering a positive corporate image in the capital markets. In terms of investor relations management, the company will prioritize the legitimate interests of investors and, through multiple channels—including the Interactive Easy platform, an investor helpline, and the company’s email—deepen investors’ understanding of and confidence in the enterprise, further promoting a sound, harmonious, and stable relationship between both parties.

Ladies and gentlemen shareholders and shareholder representatives, please review.

Xiangyang Changyuan Donggu Industrial Co., Ltd.

Board of Directors

2021 March 22 day