Xiangyang Changyuan Donggu Industrial Co., Ltd.

2020 Annual Report on the Performance of Duties by the Board’s Audit Committee

In accordance with the relevant provisions of the “Shanghai Stock Exchange Guidelines for the Operation of Audit Committees of Listed Company Boards,” the “Corporate Governance Code for Listed Companies,” and the company’s “Detailed Rules for the Implementation of the Board of Directors’ Audit Committee,” the Audit Committee of the company’s Board of Directors, guided by the principles of diligence and responsibility, has conscientiously fulfilled its duties. The following is the 2020 Annual Work Report:

I. Basic Information on the Audit Committee

The Audit Committee of the Company’s Third Board of Directors consists of three directors: Independent Director Mr. Yu Jingzhong, Independent Director Mr. Wang Hong, and Director Mr. Li Zuoyuan. The Chair of the Audit Committee is Mr. Yu Jingzhong, an independent director with professional accounting qualifications.

II. Status of the Audit Committee’s Meetings in 2020

During the reporting period, the Audit Committee held a total of five meetings, as detailed below:

1.2020 On February 18, the Audit Committee of the Third Board of Directors held its seventh meeting and reviewed the “Proposal on the Audit Report of Xiangyang Changyuan Donggu Industrial Co., Ltd.,” the “Proposal on the Company’s Internal Control Self-Evaluation Report,” the “Proposal on the Company’s 2019 Annual Financial Closing Report,” the “Proposal on the Company’s 2020 Annual Financial Budget Report,” the “Proposal on the Company’s 2019 Profit Distribution,” the “Proposal on Re-appointing Zhongshen Zhonghuan Accounting Firm (Special General Partnership) as the Company’s Auditor for 2020,” and the “Proposal on the Establishment by the Company of a Special Deposit Account for Raised Funds,” and agreed to submit them to the Board of Directors for consideration.

    2.2020 On May 19, the Audit Committee of the Third Board of Directors held its eighth meeting, reviewed the “Proposal on the ‘Review Report of Xiangyang Changyuan Donggu Industrial Co., Ltd. for the First Quarter of 2020’,” and agreed to submit it to the Company’s Board of Directors for consideration.

3.2020 On June 18, the Audit Committee of the Third Board of Directors held its ninth meeting, reviewed the “Proposal on Using Raised Funds to Replace Previously Self-Funded Capital Invested in Fund-Raising Investment Projects,” and agreed to submit it to the Company’s Board of Directors for consideration.

4.2020 On August 9, the Audit Committee of the Third Board of Directors held its tenth meeting, at which it reviewed the “Proposal on the Company’s 2020 Semi-Annual Financial Report,” the “Proposal on the Company’s 2020 Semi-Annual Report and Summary,” the “Proposal on the Company’s 2020 Semi-Annual Profit Distribution Plan,” and the “Special Report on the Deposit and Actual Use of Funds Raised in the First Half of 2020.” The Committee approved submitting these proposals to the Board of Directors for consideration.

5.2020 On October 28, the Audit Committee of the Third Board of Directors held its eleventh meeting, reviewed the “Proposal Regarding the Company’s Third Quarter Report for 2020,” and approved its submission to the Board of Directors for consideration.

III. Main Activities of the Audit Committee in 2020

(1) Supervising and evaluating the work of external auditors

1. Propose the appointment of an external auditing firm

To ensure the smooth completion of the company’s 2020 audit, in accordance with applicable laws and regulations and the relevant provisions of the Company’s Articles of Association, and following deliberation and voting by the Audit Committee, it is proposed to the Board of Directors to re-appoint Zhongshen Zhonghuan Certified Public Accountants (Special General Partnership) as the company’s auditor for the year 2020, for a term of one year. 2. Assess the independence and professionalism of the external auditing firm

Upon review, Zhongshen Zhonghuan Accounting Firm (Special General Partnership), as the auditing institution, has effectively carried out all tasks entrusted by the company and is qualified to engage in securities-related business. Since its appointment as the company’s annual auditor, it has performed its duties diligently and conscientiously, adhered to the principles of independence, objectivity, and fairness, and issued independent audit opinions that are fair and reasonable.

3. Discussion and communication regarding audit work and significant matters

During the reporting period, the Audit Committee engaged in thorough discussions and communications with the external auditor regarding the audit scope, audit plan, and audit approach, and no other significant matters were identified during the audit.

(2) Guiding internal audit work

During the reporting period, the Audit Committee engaged in thorough communication with the company’s internal auditors and provided guidance on issues identified in the internal audit. After reviewing the internal audit report, the Audit Committee found no material issues in the company’s financial management or internal controls.

(3) Review the company’s financial reports and express an opinion thereon.

During the reporting period, the Audit Committee of the Third Board of Directors carefully reviewed the Company’s 2019 Annual Report, the first-quarter 2020 financial report, the semi-annual 2020 financial report, and the third-quarter 2020 financial report, and concluded that the information contained in the Company’s financial reports fairly, accurately, completely, and impartially reflects the Company’s financial position and operating performance.

(4) Assessing the effectiveness of internal control

In accordance with the Company Law, the Securities Law, and other relevant laws and regulations, as well as the requirements of the China Securities Regulatory Commission (CSRC) and the Shanghai Stock Exchange, the company has established a relatively sound corporate governance structure and framework. During the reporting period, the company strictly complied with all applicable laws, regulations, rules, its Articles of Association, and internal management systems. The shareholders’ meeting, board of directors, supervisory board, and management operated in compliance with established procedures, effectively safeguarding the legitimate rights and interests of the company and its shareholders. Accordingly, the Audit Committee concludes that the company’s internal controls are operating in compliance with the corporate governance standards for listed companies issued by the CSRC.

(5) Coordinate communication among management, the internal audit department, relevant departments, and the external auditing firm.

During the reporting period, the Audit Committee actively coordinated effective collaboration and thorough communication among management, the internal audit department, relevant departments, and the external auditors, thereby ensuring the smooth progress of the audit work and overseeing its timely completion in accordance with applicable regulations.

IV. Summary of Performance for the Year 2020

During the reporting period, the Audit Committee diligently fulfilled its duties in strict accordance with applicable laws, regulations, and relevant provisions. Each member exercised due diligence and responsibility, playing an active role in overseeing and evaluating the work of the external auditors, guiding the company’s internal audit function, reviewing financial reports, and assessing internal controls. In 2021, the Audit Committee will continue to standardize its operations, exercise due diligence, and safeguard the interests of the company and all shareholders.

This is hereby reported.

Yu Jingzhong Wang Hong Li Zuoyuan

March 22, 2021