Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report ZHEJIANG WANFENG AUTO WHEEL CO., LTD 2020 Annual Report April 2021 1 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section I: Important Notes, Contents and Definitions The Board of Directors, Board of Supervisors, Directors, Supervisors and Senior Management of Zhejiang Wanfeng Auto Wheel Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee that the information presented in this report shall be authentic, accurate, complete, and free from material misstatement whether due to false record, misleading statement or significant omission, and they will bear both individual and joint legal liabilities. Chen Bin, the Company's legal representative, Dong Ruiping, the person in charge of accounting work, and Chen Shanfu, the person in charge of the accounting department (accounting officer), hereby declare that the financial statements in the annual report are true, accurate and complete. All directors attended the board meeting to review this report. The information pertaining to future plans and performance forecasts in this report is uncertain and does not constitute a substantial commitment to investors. The Company are exposed to risks of macroeconomic and industry conditions, fluctuations in the RMB exchange rate, raw material prices, rising labor costs, trade barriers, and the impact of COVID 19. Investors are advised to pay attention to investment risks. Pre-arranged profit distribution plan approved by the Board of Directors: distribute 1.0 Yuan cash dividends per 10 common stocks (tax inclusive) and 0 stock dividend to all shareholders, on the basis of 2,072,107,520 shares (total issued shares of 2,186,879,678 minus repurchased shares of 114,772,158). If there is no specific explanation or otherwise stated in tables, the currency in this report is RMB or yuan used interchangeably. This report and its abstract have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail. 2 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report CONTENTS Section I: Important Notes, Contents and Definitions .............................................................. 2 Section II: Corporate Profile and Key Financial Indicators ...................................................... 6 Section III: Corporate Business Overview ............................................................................... 12 Section IV: Management’s Discussion and Analysis ............................................................. 21 Section V: Significant Events ................................................................................................... 47 Section VI: Changes in Shares and Information about Shareholders .................................. 88 Section VII: Information of Preferred Shares .......................................................................... 99 Section VIII: Information about Convertible Bonds .............................................................. 100 Section IX: Information about Directors, Supervisors, Senior Management...................... 101 Section X: Corporate Governance ......................................................................................... 113 Section XI: Corporate Bonds .................................................................................................. 123 Section XII: Financial Statements .......................................................................................... 124 Section XIII: Documents Available for Reference ................................................................. 348 3 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Definitions Items Refers to Definition Company, the Company, Refers to Zhejiang Wanfeng Auto Wheel Co., Ltd Wanfeng Auto Wheel, We Group, the Group Refers to The Company and its subsidiaries Wanfeng Group Refers to Wanfeng Auto Holding Group Co., Ltd. Wanfeng Motorcycle Wheel Refers to Zhejiang Wanfeng Motorcycle Wheel Co., Ltd. Ningbo Aoweier Refers to Ningbo Aoweier Wheel Co., Ltd. Guangdong Motorcycle Wheel Refers to Guangdong Motor Wheel Co., Ltd. Weihai Wanfeng Magnesium Technology Weihai Magnesium Refers to Development Co., Ltd. Weihai Wanfeng Refers to Weihai Wanfeng Auto Wheel Co., Ltd. Jilin Wanfeng Refers to Jilin Wanfeng Auto Wheel Co., Ltd. Wanfeng Aluminum Wheel (India) Pty. Co., India Wanfeng Refers to Ltd Chongqing Wanfeng Refers to Chongqing Wanfeng Auto Wheel Co., Ltd Shanghai Dacromet Refers to Shanghai Dacromet Coating Industry Co., Ltd Ningbo Economic and Technological Ningbo Dacromet Refers to Development Zone Dacromet Coating Industry Co., Ltd Zhejiang Wanfeng Shangda Coating Shangda Tu Fu Refers to Technology Co., Ltd. Wanfeng Meridian Refers to Wanfeng MLTH Holdings Co., Ltd Wanfeng Meridian New Material Technology Meridian New Material Refers to Co., Ltd. Shandong Weiwan Ke Chuanglian Weiwan Lianchuang Refers to Engineering Technology Co., Ltd. Shanghai Fengtu Automobile Technology Co., Shanghai Fengtu Refers to Ltd. Wuxi Xiongwei Refers to Wuxi Xiongwei Precision Technology Co., Ltd. 4 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Wuxi Geoff Refers to Wuxi Geoff Machinery Technology Co., Ltd. Yancheng Xiongwei Refers to Yancheng Xiongwei Auto Parts Co., Ltd. Yizheng Xiongwei Machinery Technology Co., Yizheng Xiongwei Refers to Ltd. Changchun Xiongwei Refers to Changchun Xiongwei Auto Parts Co., Ltd. Shanghai Meridian Magnesium Products Shanghai Meridian Refers to Company Limited Suzhou Yucuiyuan Trading Enterprise Suzhou Yucuiyuan Refers to (General Partnership) Aviation Industry or Wanfeng Refers to Wanfeng Aviation Industry Co., Ltd. Aviation Aircraft Industry or Wanfeng Refers to Wanfeng Aircraft Industry Co., Ltd. Aircraft Wanfeng Jinyuan Refers to Wanfeng Jinyuan Holdings Group Co., Ltd. Articles of Association of Zhejiang Wanfeng Articles of Association Refers to Auto Wheel Co., Ltd. the General Meeting of shareholders of General Meeting Refers to Zhejiang Wanfeng Auto Wheel Co., Ltd. The Board of Directors of Zhejiang Wanfeng The Board of Directors Refers to Auto Wheel Co., Ltd. the Board of Supervisors of Zhejiang Wanfeng The Board of Supervisors Refers to Auto Wheel Co., Ltd. The CSRC Refers to the China Securities Regulatory Commission SZSE Refers to the Shenzhen Stock Exchange Yuan Refers to RMB Company Law of the People's Republic of Company Law Refers to China Securities Law of the People's Republic of Securities Law Refers to China 5 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section II: Corporate Profile and Key Financial Indicators I. Corporate Information Stock Abbreviation Wanfeng Auto Wheel Ticker 002085 Listed Security Exchange Shenzhen Stock Exchange Company Name in Chinese 浙江万丰奥威汽轮股份有限公司 Abbr. Company Name in Chinese 万丰奥威 Company Name in English Zhejiang Wanfeng Auto Wheel Co., Ltd Legal Representative Chen Bin Registered Address Xinchang County Industrial Park, Zhejiang, China Registered Address Post code 312500 Office Address Xinchang County Industrial Park, Zhejiang, China Office Address Post code 312500 Official website http://www.wfaw.com.cn E-mail wfirm@wfjt.com II. Contact Information Securities Affairs Board Secretary Representative Name Zhang Yinfeng Li Ya Xinchang County Industrial Park, Xinchang County Industrial Park, Address Zhejiang, China Zhejiang, China Tel. 0575-86298339 0575-86298339 Fax 0575-86298339 0575-86298339 E-mail yinfeng.zhang@wfjt.com ya.li@wfjt.com III. Information Disclosure and Place of the Report Information Disclosure Media Securities Times Annual Report Publishment Website Designated by China Securities http://www.cninfo.com.cn Regulatory Commission Office of the Board of Directors, Zhejiang Wanfeng Company's Annual Report Prepared Place Auto Wheel Co., Ltd., Xinchang County Industrial Park, Zhejiang, China IV. Registration Changes Institution Code 913300007324065674 6 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 1. In June 2011, with the approval of the CSRC (CSRC issued the "Approval of the Zhejiang Wanfeng Auto Wheel Co., Ltd. to issue shares and purchase assets from Wanfeng Auto Holding Group Co., Ltd." (CSRC Permit [2011] No. 1005), the Company acquired 75% of Wanfeng Motorcycle Wheels, and thereby added motorcycle wheel to its principal business. 2. In November 2013, the Company’s General Meeting of Shareholders approved the acquisition of Shanghai Dacromet Coating Industry Co., Ltd. The Company thereby added environmental coating to its principal business. 3. In December 2015, with the approval of the CSRC, the Changes in the Company’s Company acquired 100% shares of Wanfeng Meridian for RMB principal business since its 1.35 billion in cash raised from a private placement. The listing Company thereby added lightweight magnesium alloy auto parts to its principal business. 4. In June 2018, with the approval of the Company’s Extraordinary General Meeting of Shareholders, the company acquired 95% shares of Wuxi Xiongwei Precision Technology Co., Ltd. for 1.254 billion yuan in cash, and added the die stamping auto parts to its principal business. 5. In April 2020, with the approval of the Company’s Extraordinary General Meeting of Shareholders, the Company acquired 55% shares of Wanfeng Aircraft Industry Co., Ltd, and added general aviation aircraft manufacturing to its principal business. Previous changes in No Change controlling shareholders V. Other Relevant Information Accounting firm hired by the Company Ernst & Young Hua Ming Certified Public Accountants Accounting Firm Name (Special General Partnership) 50th Floor, Shanghai World Financial Center, 100 Accounting Firm Address Century Avenue, Pudong New Area, Shanghai Signing Accountant Yin Guowei; Zhou Hao Sponsor institutions engaged by the Company to perform duties of continuous supervision during the reporting period □ Applicable √ Not applicable Financial advisors engaged by the Company to perform duties of continuous supervision during the reporting period □ Applicable √ Not applicable VI. Key Accounting Data and Financial Indicators 7 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Whether the Company performed a retrospective adjustment or restatement of previous accounting data √Yes □No Retrospective adjustment or restatement reason: Business combination under the same control Unit: RMB unless otherwise 2019 YoY % 2018 2020 Before After After Before After Operating 10,699,224,904.57 10,787,734,491.15 12,635,131,976.26 -15.32% 11,005,069,692.59 12,558,190,252.99 Revenue Net Income Attributable to Shareholders 565,820,630.75 769,318,977.36 895,769,920.83 -36.83% 958,699,967.31 1,086,024,287.66 of the Listed Company Net Income Attributable to Shareholders of the Listed Company after 415,879,097.84 578,267,116.50 578,267,116.45 -28.08% 733,675,219.16 733,675,219.16 Deducting Non-recurring Gains and Losses Net Cash Flow Generated by 1,735,780,906.42 1,362,402,127.06 1,420,368,879.77 22.21% 1,316,448,423.97 1,548,633,356.11 Operating Activities Basic EPS 0.27 0.36 0.41 -34.15% 0.44 0.50 (RMB/ share) Diluted EPS 0.27 0.36 0.41 -34.15% 0.44 0.50 (RMB/ share) Weighted 10.27% 12.58% 9.19% 1.08% 13.93% 14.11% Average ROE 2019 Year End YoY% 2018 Year End 2020 Year End Before After After Before Before Total Assets 15,973,225,900.87 13,988,933,546.56 18,487,249,917.89 -13.60% 13,392,895,948.68 17,560,462,236.85 Net assets attributable to shareholders 5,353,609,030.21 6,150,821,541.43 7,992,455,452.51 -33.02% 6,330,544,402.36 7,963,848,565.52 of the Listed Company 8 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The Company's net profit before and after deducting non-recurring profit and loss in the last three fiscal years, whichever is lower, is negative and the audit report of the last year shows that the Company's ability to continue as a going concern is uncertain □ Yes √ No The lower of the net profit before and after deducting the non-recurring profit and loss is negative □ Yes √ No VII. Differences in Accounting Data between Domestic and Overseas Accounting Standards 1. Difference in the financial report of net profits and net assets according to the disclosure of International Financial Reporting Standards and China Accounting Standards □ Applicable √ Not applicable There is no difference in the financial report of net profits and net assets according to the disclosure of International Financial Reporting Standards (IFRS) and China Accounting Standards in the reporting period. 2. Difference in the financial report of net profits and net assets according to the disclosure of Overseas Accounting Standards and China Accounting Standards □ Applicable √ Not applicable There is no difference in the financial report of net profits and net assets according to the disclosure of Overseas Accounting Standards and China Accounting Standards in the reporting period. VIII. Key Quarterly Financial Indicators Unit: RMB Q1 Q2 Q3 Q4 Operating 2,383,781,671.83 2,038,517,384.94 2,935,425,929.77 3,341,499,918.03 Revenue Net Income Attributable to Shareholders 122,641,051.81 129,902,429.25 157,903,363.82 155,373,785.87 of the Listed Company 9 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Net Income Attributable to Shareholders of the Listed 77,712,897.01 57,744,665.34 136,961,688.75 143,459,846.74 Company after Deducting Non- recurring Gains and Losses Net Cash Flow Generated by 346,389,316.54 243,417,393.50 207,968,461.35 938,005,735.03 Operating Activities Indicate by check mark if any material difference between the above financial indicators or their summations and those disclosed in the Company’s Quarterly or Interim report. √Yes □No The Company's operating revenue from January to March 2020 disclosed in the Full Text of the First Quarter Report of 2020 on April 29, 2020, was 2,000,161,246.07 yuan. On April 16th, 2020, the Company acquired 55% equity of Wanfeng Aircraft Industry Co., Ltd., a company under common control, and retrospectively adjusted the same period financial data in the previous year in accordance with "Accounting Standards for Business Enterprises No. 33- Consolidated Financial Statements" to 2,383,781,671.83 yuan. IX. Items and Amounts of Non-recurring Gains and Losses √ Applicable □ Not applicable Unit: RMB Items 2020FY 2019FY 2018FY Gains or Losses from Disposal of Non- current Assets (Including the Write-off for 501,156.94 -3,277,757.06 -33,114,832.31 the Accrued Impairment of Assets) The Government Subsidies Included in the Current Gains and Losses (Excluding the Government Subsidies Closely Related 104,562,193.16 91,209,395.45 97,537,996.40 to Regular Businesses of the Company and Issued in the Quota or Quantity Based on the National Standards) 10 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Net Profit and Loss for the Current Period from the Beginning of the Period to the Date 74,836,418.19 229,910,806.40 231,498,764.28 of the Merger Arising from a Business Combination under the Same Control Gains or Losses Attributed to the Changes in Fair Value of Held-for-trading financial assets, Derivative Financial Assets, Trading Financial Liabilities, Derivative Financial Liabilities and Investment Income from Disposal of Held-for-trading financial 2,859,105.21 -1,714,863.22 78,609,340.40 assets, Derivative Financial Assets, Trading Financial Liabilities, Derivative Financial Liabilities and Other Debt Investment, Excluding Hedging Businesses Related to the Regular Business Operation of the Company Reversal of provision for impairment of 4,653,372.07 1,917,307.35 Account Receivables and Contract Assets Non-operating Income and Expenditures 33,063,841.71 161,174,464.09 141,604,258.09 Other Than the Above Less: Impact of Income Tax 27,235,065.43 50,675,826.88 56,040,011.85 Impact of Minority Equity (after tax) 43,299,488.94 109,123,414.40 109,663,753.86 Total 149,941,532.91 317,502,804.38 352,349,068.50 The reasons for the non-recurring gains and losses items defined or listed in the Explanatory Announcement No.1 of Information Disclosure of Listed Companies – Non-recurring Gains and Losses are defined as recurring gains and losses items □Applicable √ Not applicable In the reporting period, the Company did not define any non-recurring gains and losses items defined and listed in the Explanatory Announcement No. 1 of Information Disclosure of Listed Companies – Non-recurring Gains and Losses, as recurring gains and losses items. 11 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section III: Corporate Business Overview I. The Principal Business of the Company during the Reporting Period The Company is required to comply with the disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guidelines No. 16- Listed Companies Engaged in Automobile Manufacturing Related Business. The Company is an international conglomerate dedicated to advanced manufacturing, with R&D centers and plants in ten countries (regions). Growing over the past two decades, the Company has established a growth strategy propelled by “dual-engine”: lightweight auto parts, and general aviation aircraft featured by the "Diamond" brand. The company has become a leader in the automotive parts sector specialized in lightweight applications of metal materials "magnesium alloys, aluminum alloys, and high-strength steels". It’s subsidiary Meridian, a global leading supplier of magnesium alloy parts, has cutting-edge technology of magnesium alloy design, development, and manufacturing. The Company also operates the world-leading aluminum alloy wheels manufacturing business. Besides, Wuxi Xiongwei, another subsidiary, is a leading manufacturer of high-strength steel sheet stamping auto parts in China. In addition, the Company has a domestically leading environmental Dacromet coating business. The Company’s general aviation aircraft business has three manufacturing bases (Austria, Canada, China), three R&D centers (Austria, Canada, Czech Republic), and one provincial engineering center (China). Its subsidiary Diamond Aircraft owns the complete intellectual property (IP) of 4 series, 8 basic types and 16 models of aircraft, as well as multiple engines and flight simulators. Main aircraft models include DA20, DA40, DA42, DA50 and DART series. Diamond ranks the first for the market share of twin-engine piston aircraft, and the third for the market share of piston-engine aircraft. It is the first in the world to adopt the composite material design of general aviation aircraft. Its aircraft is the only in the industry equipped with in-house designed and manufactured engines. The economy of operation and flight range have greater advantages in similar aircraft, and it has the safest flight record among peers. (1) Lightweight metal auto parts business The Company's lightweight metal parts business mainly serves the automobile market. Lightweight has become an inevitable trend during the advancement of the automobile industry and an important means of automobile energy saving and emission reduction. In October 2020, the Ministry of Industry and Information Technology of China released the Energy-saving and New Energy Vehicle Technology Roadmap 2.0, further confirming the "low-carbon, 12 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report informatization, and intelligent" direction of global automotive technology. It also proposed the development goal for China’s automotive industry to reduce total carbon emissions by more than 20% from the peak by 2035, with new energy vehicles gradually becoming mainstream products. Automotive light-weighting is the primary vehicle to meet national emission standards and reduce energy consumption and pollutant emissions. Aluminum and magnesium alloys are currently the most ideal materials for automotive light-weighting. The Company has fully entered the supply chain of core customers and established an addressable market that is based on traditional ICE automobiles, with new energy automobiles as a fulcrum, focusing on both foreign and domestic and coordinating OEMs and aftermarket. The Company gives full play to the advantages of lightweight applications of metal materials "magnesium alloy- aluminum alloy-high strength steel” and is committed to becoming a global promoter and leader of lightweight automotive metal parts. Magnesium Alloy Magnesium alloy products are mainly supplied to renowned automakers globally as well as customers operating in aerospace, transportation, and 5G telecommunication sectors. As a global leader in the advanced treatment of lightweight magnesium alloy materials, the Company has strong integration capabilities of value chain and has marketed its products to transportation, 5G and other fields. The Company has 7 production bases in the United States, Canada, the United Kingdom, Mexico, and China (Shandong, Shanghai, and Zhejiang) and 4 R&D centers. Our main products include powertrain parts, front-end carriers, cross car beams, brackets, rear lift door inner panels etc. Our customers are mainly top-notch global brands such as Ford, GM, Porsche, Tesla, Audi, Mercedes Benz, and BMW. Aluminum Alloy Wheels Since its establishment, the Company has committed itself to R&D, manufacturing, service of high-end aluminum alloy wheels, serving the world- known OEMs through superior product design, a sound manufacturing management system and after-sales service network. With an annual output capacity of more than 40 million sets of aluminum alloy wheels (including Aluminum Alloy Motorcycle Wheels), it has become a global leader in the respective industry segments. In the "Industry 4.0" era, the Company has built a smart factory, the first among its peers, and has explored an innovative model featured by digital intelligence and care to environment. The Company’s has 5 production bases for aluminum alloy wheels in Xinchang and Ningbo of Zhejiang Province, Weihai of Shandong Province, Jilin of Jilin Province, and Chongqing. The Company continues to implement the "26313+N" marketing strategy (US pedigree: GM, Ford; European pedigree: Volkswagen, BMW, Mercedes-Benz, Stellantis (Fiat Chrysler & Peugeot), Land Rover; Japanese pedigree: Toyota, Honda, Nissan; Korean pedigree: Hyundai-Kia; Chinese pedigree Chery, BYD, JAC; + N, new energy vehicle customers), advocate intelligent manufacturing in the wheel industry, and enhance the Company's international influence in product quality, R&D, and design. 13 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report In the motorcycle wheel segment, the Company has always been centering on "India, Indonesia, Pakistan, Brazil and China" markets, with "Honda and Yamaha" as the long-term strategic partners, Dachangjiang, Suzuki and HERO as major customers complemented by BMW, Harley-Davidson and Ducati in the premium market. In recent years, the automotive industry has undergone some challenges. The Company has increased investment in nimble production capacity against those challenges. Under the new cycle of recovery in the automotive industry, the Company's ready-to-use production capacity is expected to drive aluminum alloy wheel business to bottom out. As the chair unit of the National Motorcycle Wheel Committee, we are entering a new era of informatization, scientific and intelligentization for advanced manufacturing. The Company is well positioned to benefit from the high-end trend of the motorcycle industry and the upgrading of product structure, through its global production network and technological advantage. High-strength Steel Die Stamping Parts Wuxi Xiongwei’s main products are automotive stamping parts and molds, focusing on automotive body systems, which includes seat parts and body accessories, such as seat frames and adjustment structures, seat belt buckles, airbags stamping parts, door hinges, etc. It has 4 production bases in Wuxi Yizheng and Yancheng of Jiangsu Province and Changchun of Jilin Province, with an annual capacity of 350 million parts. With leading R&D, design, and manufacturing capabilities in mold, it has become a core supplier of globally renowned manufacturers such as Faurecia, Brose, Autoliv, Adient, and Johnson Controls. By continuously optimizing the design of products, introducing advanced mold design system, and adopting the world's advanced automated continuous stamping for all products, it has improved product quality and reduced costs. It has been awarded the "Best Supplier" and "Excellent Supplier" from customers such as Yanfeng Adient and Faurecia. It also has synergistic coordination with the Company’s magnesium and aluminum alloy business segments, through mold R&D, stamping process linkage, production base collaboration, and customer interaction. Environmentally Friendly Dacromet Coating The Company’s environmentally friendly Dacromet coating business includes metal bolt manufacturing and processing, mechanical parts coating treatment, coating equipment manufacturing, etc. With production and technical application capabilities of Chromium-free Dacromet coating processing, solution manufacturing and coating equipment production throughout the industrial chain, the Company has 3 production bases in Shanghai, Ningbo and Jiaxing of Zhejiang Province and an annual capacity over 70,000 tons, taking a leading position in China and synergizing well with other business segments. The Company has taken the lead in the application of digitalization and Chromium-free coating technology and has the world’s advanced chromium- 14 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report free coating production line to ensure that the product quality meets the "EU ROHS Directive" standards. The multifunctional composite coating developed by the Company has been awarded the honor of "National Key New Product", "Shanghai Key New Product" and " Quality Trusted Key Brand of China's Environmentally Friendly Product" several times. The Company has established strategic partnerships with globally recognized brands such as Delta, Geomet, and Zintech. Customers widely spread in industries such as automobile, rail transit, wind power, mechanical engineering, and construction. The Company has completed the order delivery of the core components of the Shenzhou spacecraft for many times. (2) General aviation aircraft manufacturing business In April 2020, the Company acquired 55% equity of Wanfeng Aircraft Industry which thereby became a Company’s controlling subsidiary. Wanfeng Aircraft Industry is a specialized general aviation aircraft manufacturer integrating independent R&D, top-level design, advanced manufacturing, and sales services. Its main revenue sources from aircraft sales, after-sales services, aircraft manufacturing licensing and other revenues. Its subsidiary Diamond Aircraft has the cutting-edge IPs, new material technology and advanced manufacturing, with three design and R&D centers (Austria, Canada, Czech Republic), one provincial engineering center (China) and three manufacturing bases (Austria, Canada, China). Customers include flight academies, airlines, aviation clubs and private pilots, and they are supported by 192 service centers in 90+ countries. In February 2021, Wanfeng Aircraft Industry introduced Qingdao Wansheng Chengfeng Equity Investment Partnership (Limited Partnership), controlled by Qingdao City Construction Investment Group Co., Ltd, as a strategic investor. Post transaction, the Company retains 55% of the shares of the Aircraft Industry, with Qingdao Wansheng Chengfeng Equity Investment Partnership (limited partnership) holding 35% and Wanfeng Aviation Industry holding 10% of the shares in Aircraft Industry, respectively. The Company will work closely with its partners to accelerate the growth of and tap the trillion-dollar domestic general aviation market and strive to build Wanfeng Aircraft Industry into a global leader of innovative manufacturing. With the promulgation of supportive national policies, such as the Overall Plan for Building The Low-altitude Flight Service Guarantee System and the China Civil Aviation Four Features Airport Construction Action Plan (2020-2035), China’s general aviation industry has begun to accelerate. The aircraft manufacturing business will become a new growth engine for the Company in near future. II. Significant Changes in Main Assets 1. Significant changes in main assets 15 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Main assets Explanation on Major Changes At the end of 2020, equity decreased by RMB 12,253,800 compared with the beginning of the year, a decrease of 69.8%, mainly due to the Equity withdrawal of the Aircraft Industry from the original 20% equity of China Electronics Technology Group Wuhu General Aviation Industry Research Institute Co., Ltd. At the end of 2020, fixed assets decreased by RMB 241,196,200 Fixed assets compared with the beginning of the year, down 4.72%, mainly due to the depreciation of fixed assets. At the end of 2020, intangible assets decreased by RMB 112,746,600 or Intangible assets 6.34% from the beginning of the year, mainly due to the amortization of intangible assets. Construction in progress at the end of 2020 decreased by RMB 167,378,700 compared with the beginning of the year, a decrease of Construction in progress 39.26%, which was mainly due to the fact that the assets of the Meridian US plant reached a usable state and transferred to fixed assets. At the end of 2020, cash & cash equivalents decreased by RMB Cash & cash equivalents 777,775,100 or 31.71% from the beginning of the year, mainly due to the payment of acquiring 55% of equity in the Aircraft Industry. At the end of 2020, other receivables decreased by RMB 848,007,500 Other receivables from the beginning of the year, or 92.54%, mainly due to the recovery of financial assistance from controlling shareholders and related parties. The development expenditure in 2020 is RMB 70,537,900 at the end of the Development expenditure year, mainly due to the capitalization of the Aircraft Industry's research and development expenses. The deferred income tax assets at the end of 2020 increased by RMB 74,732,200 over the beginning of the year, an increase of 39.60%, which Deferred tax assets was mainly due to the steady growth of the aircraft manufacturing business, without compensating the recognition of deferred income tax assets for losses.in the current period At the end of 2020, other non-current assets decreased by RMB 43,194,500 compared with the beginning of the year, a decrease of Other non-current assets 85.27%, which was mainly due to the decrease in prepayments for equipment during the period. 2. Major overseas assets □Applicable √Not applicable III. Core Competencies Analysis The Company is required to comply with the disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guidelines No. 16- Listed Companies Engaged in Automobile Manufacturing Related Business. 16 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report By the acquisition of Aircraft Industry, the Company has established the “dual- engine” growth strategy in lightweight auto parts and general aviation aircraft manufacturing. Whether in the auto parts industry or the general aviation aircraft industry, the Company has competitive advantages in terms of leading industry position, brand customers, global bases, R&D technology, global enterprise management and unique corporate culture. During the reporting period, the Company did not experience any serious impact on its core competitiveness due to equipment or technology upgrades, and the departure of core management teams or key technical personnel. 1. Global leader advantage Growing over the past two decades, the Company has become a leader in the automotive parts sector specialized in lightweight applications of metal materials "magnesium alloys, aluminum alloys, and high-strength steels". It’s subsidiary Meridian, a global leading supplier of magnesium alloy parts, has cutting-edge technology of magnesium alloy design, development, and manufacturing. The Company also operates the world-leading aluminum alloy wheels manufacturing business. Besides, Wuxi Xiongwei, another subsidiary, is a leading manufacturer of high-strength steel sheet stamping auto parts in China. As the world’s top 3 general aviation aircraft manufacturer, Aircraft Industry has a high reputation leading in this field. According to GAMA (General Aviation Manufacturers Association) data, the aircraft delivered by Diamond Aircraft in 2019 accounted for 15.4% of the global piston general aviation aircraft delivered that year. It has three major aircraft manufacturing bases in Austria, Canada, and China (Zhejiang Xinchang). Its subsidiary Diamond Aircraft company has the competitive advantages in engine manufacturing, new material technology and advanced manufacturing. Our customers are in Europe, North America, Asia-Pacific, Middle East and other regions. 2. Intelligent manufacturing advantage The intelligent manufacturing system focuses on Industry 4.0 and transformation & upgrading, reflecting efficiency improvements. By procurement of cutting-edge intelligent manufacturing equipment, automation of existing production lines and construction of new smart factories, the Company has transformed and upgraded production, improved labor efficiency. At present, the company has 8 proprietary core technologies including fully automatic casting system, large-scale thin-wall magnesium alloy die-casting technology, dynamic balance control technology, casting lightweight casting technology, etc., which have been all commercialized. 17 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 3. Top-notch customer advantage Following “26313+N" customer strategy, the auto parts business has been integrated into the supply chain of core customers, forming a market pattern of "traditional ICE cars + new energy vehicles" and "OEMs + aftermarket". The Company has long-term cooperation with top-notch brands— Porsche, BMW, Mercedes-Benz., Land Rover, Tesla, Volkswagen, Audi, Toyota, GM, Ford, Volvo, Nissan, Hyundai, and other top international automakers, while providing service to emerging new energy vehicles brands. In terms of motorcycle aluminum alloy wheels business, the Company has established a global customer base with "Honda and Yamaha" as strategic partners, Dachangjiang, Suzuki and HERO as major customers complemented by BMW, Harley- Davidson and Ducati in the premium market. Diamond Aircraft holds a total of 39 trademarks and has obtained the Design Organization Approval (DOA) and the DUA Aeronautical R&D Organization Certification issued by the European Aviation Safety Agency (EASA). It’s one of the few companies in the industry to obtain these certificates. 4. Global scale production advantage The Company's auto parts and aircraft manufacturing businesses have established manufacturing bases and R&D centers in 10 countries around the world, including 18 plants in 7 provinces of China. Meridian has formed a global network with full production processes in 7 physical factories across 5 countries in America, Europe, and Asia. The Company’s motorcycle wheel subsidiary has built production facilities in India. Aircraft Industry has established main production bases in Austria, Canada, and China, with 192 sales & service centers in more than 90 countries around the world. The Company's global network has complementary advantages by resource sharing and interactive development. 18 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 5. R&D technological advantage Aiming to "grow stronger by science and technology", the Company always takes technological innovation as an important measure to improve core competitiveness. Making full use of the resources offered by its controlling shareholder Wanfeng Group, such as academician workstation and doctoral workstation, and relying on the national technology center of China, the Company has long-term industry-university-research cooperation with China Automotive Technology Research Center, Beijing Machinery Research Institute and Zhejiang University. The Company has a global R&D center for lightweight magnesium alloy in Canada, as well as aircraft R&D centers in Austria, Canada and Czech. This promotes the advancement of new projects and increases the added value of products in high-end markets. The Company has accumulated over 1,400 patents. Relying on accumulated production experience and enriched R&D capabilities, the Company has participated in the drafting and revision of national (industry) standards for the wheel industry for several times. The Company presided over or participated in the formulation of 3 international standards, 27 national and industry standards, of which 9 were drafted. The continuous R&D investment has enabled the Company to seize the opportunity in China's aluminum wheel field and gradually become the forefront in international wheel industry. Meridian won the 2020 Automotive Magnesium Casting Product Design Award issued by the International Magnesium Association (IMA), and the new diamond DA50 model won the German aviation magazine Aerokurier 2020 Most Innovative Award in 2020. The Company reserves a large number of general aviation R&D and design talents, and has general aircraft R&D and design technologies featuring aero engines, composite materials, and new piston fixed-wing aircraft design. To comply with the requirements of the European Aviation Safety Agency on the roadmap of green energy aviation technology development, the Company pioneered the design and development of hybrid aircraft and has successfully test flighted the first gasoline-electric hybrid aircraft, achieving a breakthrough in the general aviation industry. 6. International management advantage From serving international customers in early stage to the subsequent cross- border M&A and integration, the Company successfully explored its own path, forming Wanfeng's unique management solution and team. By integrating Wanfeng's philosophy with local culture, the Company has achieved remarkable success among its Chinese peers. Through the existing integrated management, cost control management and quality and safety management system advantages of listed companies, the Company has strengthened building international and professional teams, provided core personnel with competitive salaries and related benefits. The Company fully promoted exchanges between excellent domestic and cross- 19 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report board management and R&D technical personnel. Through the promotion of an effective performance management system, the establishment and improvement of a talent training system, the Company creates a good atmosphere for rapid growth and development of talents, enhances team cohesion, and ensures the stability of core personnel. 7. Corporate culture advantage As an international conglomerate in the advanced manufacturing field for nearly 20 years, the Company has always adhered to the values of "eternal value enhancement and continuous dedication to society", advocating the business philosophy of "people-oriented, governing the enterprise according to law, and driving success with innovation", and creating a "work happily and live joyfully" atmosphere for employees. The Company has always focused on the real economy, promoting the spirit of craftsmanship. By introducing international talents, the Company has laid a solid foundation for achieving the vision of " being recognized globally and becoming a long-standing enterprise" and the goal of “being strong, reputable and sustainable”. 20 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section IV: Management’s Discussion and Analysis I. Business review for the reporting period In 2020, the Company booked total revenue of 10.699 billion yuan, a decrease of 0.82% and 15.32% from before and after retrospective adjustment, respectively. The Company realized total net profit of 566 million yuan attributable to shareholders of listed company, a decrease of 26.45% and 36.83% from before and after retrospective adjustment, respectively. In April 2020, the Company acquired 55% of the shares in Wanfeng Aircraft Industry and established a growth strategy driven by the "dual-engine". The automotive metal lightweight parts business has been negatively affected by the Covid-19 pandemic and China-US trade frictions. The Company actively and orderly resumed work and, strengthened staff training and protection, and implemented cost reduction and efficiency enhancement initiatives, while actively responding to trade tariff issues. The Company reviewed its business strategies, improved customer communication, adjusted business structure, effectively reduced the decline in operating performance and generated follow- up growth momentum. The general aviation aircraft business has also been affected to a certain extent by the Covid-19 pandemic, which is mainly reflected in the delays in the acceptance and delivery of foreign aircraft orders and revenue recognition. The Company strengthened collaborations with government agencies of countries where it has operations, resumed factory production in an orderly manner, and launching of new aircraft models. Meanwhile, the Company actively carried out licensing and technology transfer business for aircraft and components, achieving mass production and sales from Chinese aircraft market. There efforts have reduced the impact of foreign delivery delays on operating performance and contributed to a substantial increase in operating performance. The Company exceeded the first-year performance guarantee and is well-positioned for sustainable development. (1) Enhance internal control system The Company optimized the organizational structure and management process comprehensively, enhanced the supervision of internal audit department to improve the depth and breadth of internal audit work, improved the internal control procedures, strengthened internal financial management and monitoring to prevent financial risks and internal control risks. (2) Focus on resumption of operations and advance market development steadily 21 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report From January 2020, the Covid-19 started to spread in China and other countries. Governments across the globe have introduced a series of restrictive quarantine measures to prevent the spread of COVID 19 pandemic. The Company took swift action in response to these restrictions by ensuring the health and safety of our employees and our domestic factories resumed production in mid-February 2020. Due to the evolving pandemic and government policies, the resumption of overseas factories was delayed to May 2020. Based on the current global economic and industry situation, the Company actively made efforts to acquire new energy vehicles (NEVs) customers in the domestic market and accelerate the development of new products. The Company’s magnesium alloy and stamping business units have been awarded designated projects by Faurecia China (Tesla Tier one supplier) and Yanfeng Adient, Evergrande New Energy Vehicle. The aluminum alloy wheel business obtained new projects from Toyota in Japan and FAW Toyota, FAW Hongqi, and BMW Brilliance. The motorcycle aluminum alloy wheel business has developed steadily as a whole. As the demand for large- displacement personalized motorcycles increases, the Company optimized product structure and production network, upgraded technologies, and successfully increased supplies to Qianjiang, Suzuki, Indian Honda, Yamaha, and Baijiajie. In terms of the coating business, the Company increased the incremental orders from existing customers, advanced the localization of the supplier systems of Mercedes-Benz, BMW and Geely, and expanded into wind power and 5G markets. (3) A clear pathway to develop automotive lightweight parts business As a lightweight magnesium alloy large-scale casting structure design, process and mold designer, the Company focuses on lightweight application of metal materials "magnesium alloy-aluminum alloy-high strength steel", providing customers with low-cost, optimization, and turn-key solution. At present, the Company's mature magnesium alloy products, such as cross-car beam, tailgate inner panel, front-end frame, etc., total about 100Kg. It has become the first choice for OEMs to cooperate in automotive magnesium alloy lightweight fields. In 2020, the Company established a T3+1 strategic cooperation mechanism with T3 (China FAW Group Co., Ltd., Dongfeng Automobile Co., Ltd., and Chongqing Changan Automobile Co., Ltd., "T3"). The Company is responsible for design, manufacturing and service for large-scale magnesium alloy castings. The first batch of R&D products under the T3+1 mechanism focused on cross car beam brackets, wheels, front-end modules and gearbox housings, etc., involving nearly ten vehicle models, of which products under development or quotation include cross car beam brackets, front-end modules, display case, screen lifter bracket, and other magnesium products. With the continuous advancement of T3+1 alliance technology R&D, it will greatly promote the application and development of magnesium alloy parts in China's automobile industry and form a market-driven demonstration effect. 22 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report In 2020, new energy vehicles have shown strong resilience and endogenous power. The annual production and sales of 1.367 million and 1.336 million vehicles in Chinese market were completed, representing an increase of 10.9% and 7.5% year-on-year, respectively, maintaining a good growth trend. With its mature applications in new energy vehicles OEMs such as Tesla, NIO, Xiaopeng, and its advantages in product and technology innovation, global resource synergy, and cost leadership, Meridian provides lightweight solutions for new energy vehicles and opens up a new era for magnesium alloys application in China. (4) Acquired 55% shares from Aircraft Industry and established “dual- engine” growth strategy With advanced manufacturing as its core, the Company has become a global leader in aluminum alloy wheels and lightweight magnesium alloy parts, and a domestic leader in environmentally friendly Dacromet coating and high-strength steel die stamping parts. To diversify and expand in the “broad transportation” sector, the Company acquired a controlling stake in general aviation aircraft manufacturing business, leaping from auto parts to aircraft and aero parts manufacturing field. This strategic move will widen our market access, profit avenues and improve the asset quality and risk tolerance ability of the Company, ensuring the long-term sustainable growth. The establishment of “dual-engine” growth strategy, i.e., automotive lightweight parts, and general aviation aircraft, sets a clear direction for the Company to grow in the long run. With the vision of “becoming a advocate in automotive light-weighting trend”, the Company’s auto parts business has shifted from multiple sub-leading silos model to comprehensive synergistic development. The Company will capitalize on its leading market positions in "magnesium alloy, aluminum alloy, high- strength steel metal parts", and strengthen collaboration in brand customers, R&D, global network, and management. Besides, the Company has treated NEVs as an important market development, focusing on key customers, and continuously increasing the value per customers, per brand and per vehicle to achieve the "1+1>2" synergy goal. Capitalizing on the leading technological advantage of Diamond brand, the Company will expand the domestic flight training market, develop short- distance transportation, Air Taxi, government public services, business travel flights, aviation sports and competition markets, while strengthening the aircraft after-sales market to achieve rapid growth in domestic market. Meanwhile, it will consolidate and enhance aircraft sales in overseas market, actively expand licensing business, to ensure the sustained and steady growth of overseas market and build the aircraft manufacturing business into a leader in this field. 23 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The Company is required to comply with the disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guidelines No. 16- Listed Companies Engaged in Automobile Manufacturing Related Business. Production and operation of vehicle manufacturing during the reporting period □ Applicable √ Not applicable Production and operation of auto parts during the reporting period √ Applicable □Not applicable Production Volume Sales Volume Same period Same period Current of previous YoY % Current period of previous YoY % period year year Classified by types of parts Automotive aluminum alloy 14,174,994.00 16,932,994.00 -16.29% 14,087,508.00 17,180,720.00 -18.00% wheels (set) Stamping parts 230,722,938.00 261,183,567.00 -11.66% 228,255,135.00 271,869,402.00 -16.04% (set) Magnesium alloy die 14,869,805.00 18,511,085.00 -19.67% 13,138,601.00 16,303,410.00 -19.41% casting parts (set) Classified by aftermarket Automotive aluminum alloy 2,104,207.00 1,734,183.00 21.34% 1,774,347.00 1,491,868.00 18.93% wheels AM (set) Classified by region Other classification Reasons for a year-on-year change of more than 30% □ Applicable √ Not applicable Parts sales model The Company's auto parts sales are mainly OEM-based. The Company operates auto finance business □ Applicable √ Not applicable The Company operates new energy vehicle related business √ Applicable □ Not applicable Production and operation of new energy vehicles and parts 24 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB unless otherwise stated Production Production Volume Product Category Sales Volume Sales Revenue Capacity (set) (set) Automotive aluminum -- 648,094 677,321 167,711,492.15 alloy wheels Stamping parts -- 3,138,575 2,867,775 14,089,208.52 Magnesium alloy die -- 84,193 58,834 19,972,503.69 casting parts New energy vehicle subsidy income None II. Main Business Analysis 1. Overview Please refer to details in “I. Overview” of “Section IV Management Discussion and Analysis” 2. Revenue and cost (1) Operating Revenue structure Unit: RMB 2020 2019 % of YoY % % of Operating Amount Amount Operating Revenue Revenue Total operating 10,699,224,904.57 100% 12,635,131,976.26 100% -15.32% revenue By industries Automotive metal lightweight parts 9,068,833,929.89 84.76% 10,787,734,491.15 85.38% -15.93% manufacturing Aircraft 1,630,390,974.68 15.24% 1,847,397,485.11 14.62% -11.75% manufacturing By products Automotive metal 9,068,833,929.89 84.76% 10,787,734,491.15 85.38% -15.93% lightweight parts General aviation 1,630,390,974.68 15.24% 1,847,397,485.11 14.62% -11.75% aircraft 25 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report By region Mainland China 4,686,803,547.58 43.81% 5,250,462,160.15 41.55% -10.74% Overseas 6,012,421,356.99 56.19% 7,384,669,816.11 58.45% -18.58% (2) Industries, products, or regions accounting for more than 10% of the Company’s operating revenue or operating profit. √ Applicable □ Not applicable Unit: RMB YoY % Gross YoY % of YoY % of of Operating Operating Cost Profit Operating Operating Gross revenue Margin Revenue Cost Profit Margin Classified by Industry Automotive metal lightweight 9,068,833,929.89 7,392,811,290.04 18.48% -15.93% -14.09% -1.75% parts manufacturing Aircraft 1,630,390,974.68 1,146,598,775.38 29.67% -11.75% -11.31% -0.35% manufacturing Total 10,699,224,904.57 8,539,410,065.42 20.19% -15.32% -13.73% -1.47% Classified by Products Automotive metal 9,068,833,929.89 7,392,811,290.04 18.48% -15.93% -14.09% -1.75% lightweight parts General aviation 1,630,390,974.68 1,146,598,775.38 29.67% -11.75% -11.31% -0.35% aircraft Total 10,699,224,904.57 8,539,410,065.42 20.19% -15.32% -13.73% -1.47% Classified by Region Mainland 4,686,803,547.58 3,838,683,119.22 18.10% -10.74% -1.61% -7.59% China Overseas 6,012,421,356.99 4,700,726,946.20 21.82% -18.58% -21.61% 3.02% Total 10,699,224,904.57 8,539,410,065.42 20.19% -15.32% -13.73% -1.47% If the company’s principal business data caliber is adjusted during the reporting period, the company’s principal business data after caliber adjusted at the end of the reporting period of last year □ Applicable √ Not applicable 26 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (3) If revenue from physical products sales greater than revenue from providing services √ Yes □ No Industry Items Unit 2020 FY 2019 FY YoY % classification sales 10,295,928,707.36 12,240,494,250.98 -15.89% volume Manufacturing production RMB 8,140,569,295.3 9,297,765,650.22 -12.45% industry volume inventory 745,299,986.77 779,307,046.36 -4.36% volume Explanations on relevant data changed for more than 30% on a year-over-year base. □Applicable √Not applicable (4) The implementation of the major sales contracts that the Company has signed up to the reporting period. □Applicable √Not applicable (5) Composition of operating costs Classified by industry Unit: RMB 2020 FY 2019 FY Cost % of % of Industries YoY % items Amount operating Amount operating cost cost Direct material 4,576,690,709.14 64.34% 5,192,093,268.87 62.39% -11.85% Labor 868,846,427.62 12.21% 1,082,744,369.16 13.01% -19.76% Auto parts manufacturing Depreciation & 1,117,423,142.42 15.71% 1,334,103,265.83 16.03% -16.24% consumables Fuel power 420,297,291.69 5.91% 542,357,997.58 6.52% -22.51% 27 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Outsourcing processing 130,458,718.16 1.83% 170,920,400.82 2.05% -23.67% cost Sub total 7,113,716,289.03 100% 8,322,219,302.26 100% -14.52% Direct material 805,804,284.12 70.50% 838,066,207.84 64.86% -3.85% Labor 209,858,641.99 18.36% 316,241,746.51 24.47% -33.64% Depreciation & 112,309,518.91 9.83% 121,485,027.07 9.40% -7.55% consumables Aircraft manufacturing Fuel power 9,075,584.32 0.79% 10,441,846.95 0.81% -13.08% Outsourcing 5,858,073.54 0.51% 5,911,463.12 0.46% -0.90% processing Sub total 1,142,906,102.88 100% 1,292,146,291.49 100% -11.55% Notes None (6) Whether the consolidation scope has changed during the reporting period √Yes □No During the reporting period, the Company acquired 55% of the equity of Wanfeng Aircraft Industry Co., Ltd. for RMB 2,418,075,000 and completed the industrial and commercial change registration of the equity transfer on April 16, 2020, and the consolidated scope of the Company's statements added Wanfeng Aircraft Industry Co., Ltd. (7) Significant changes or adjustments to the Company’s business, products, or services during the reporting period √Applicable □ Not applicable During the reporting period, the consolidated scope of the Company's statements added Wanfeng Aircraft Industry Co., Ltd. The Company’s principal business scope includes general aviation aircraft. (8) Main customers and main suppliers The Company's main customers 28 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Total sales amount of the top five customers (RMB) 2,921,615,150.81 Total sales amount of the top five customers as a % of total 28.38% annual sales Sales from related parties among the top five customers as a % 0.00% total annual sales Profile of the Company's top 5 customers % of total No. Customer Name Sales (RMB) sales 1 First 1,156,533,240.24 11.23% 2 Second 805,714,890.04 7.83% 3 Third 422,130,318.19 4.10% 4 Fourth 323,931,853.67 3.15% 5 Fifth 213,304,848.67 2.07% Total - 2,921,615,150.81 28.38% Other information about Company’s customers □Applicable √Not applicable The Company's main suppliers Total sales amount of the top five suppliers (RMB) 1,830,796,702.40 Total sales amount of the top five suppliers as a % of total annual 23.65% sales Sales from related parties among the top five suppliers as a % 0.00% total annual sales Profile of the Company's top 5 suppliers % of total No. Supplier Name Purchase (RMB) purchase 1 First 632,766,433.08 8.17% 2 Second 403,054,824.11 5.21% 3 Third 344,790,054.40 4.45% 4 Fourth 238,938,716.18 3.09% 29 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 5 Fifth 211,246,674.62 2.73% Total 1,830,796,702.40 23.65% Other information about Company’s suppliers □Applicable √Not applicable 3. Expense Unit: RMB Notes to significant 2020 FY 2019 FY YoY % changes Mainly due to the adjustment of the transportation expenses that were originally Sales expense 202,937,418.90 326,373,313.10 -37.82% collected as sales expenses to the fulfillment costs according to the new revenue standards Administration 590,837,746.38 669,461,795.85 -11.74% expense Financial expense 269,122,000.97 219,013,198.53 22.88% R&D expense 337,448,870.68 446,102,958.85 -24.36% 4. Research and development investment Percentage 2020 FY 2019 FY change Number of R&D personnel (person) 1,576 1,603 -1.68% Proportion of R & D personnel 13.35% 14.49% -1.14% R&D investment (RMB) 407,986,763.68 446,102,958.85 -8.54% R&D investment as a percentage of 3.81% 3.53% 0.28% operating revenue Capitalized amount of R&D 70,537,893.00 0.00 investment (RMB) Capitalized R&D expense as a 17.29% 0.00% 17.29% percentage of R&D investment Reasons for the significant change of total R&D investment as a percentage of operating revenue as compared to last year □Applicable √Not applicable Reasons for the substantial changes in the capitalization rate of R&D investment and its rationality √Applicable □Not applicable 30 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The capitalization rate of R&D investment in 2020 is 17.29%, which is mainly due to the capitalization of R&D expenses of the controlling subsidiary Aircraft Industry. 5. Cash flow Unit: RMB Items 2020 FY 2019 FY YoY % Cash inflow from operating 11,092,029,864.02 12,823,629,497.66 -13.50% activities Cash outflow from operating 9,356,248,957.60 11,403,260,617.89 -17.95% activities Net cash flow from operating 1,735,780,906.42 1,420,368,879.77 22.21% activities Cash inflow from investment 1,673,233,118.74 2,492,182,608.25 -32.86% activities Cash outflow from investment 598,702,345.98 3,109,509,375.99 -80.75% activities Net cash flow from investment 1,074,530,772.76 -617,326,767.74 274.06% activities Cash inflow from financing 4,747,409,710.84 5,210,444,193.61 -8.89% activities Cash outflow from financing 7,578,184,122.46 5,786,693,748.16 30.96% activities Net cash flow from financing -2,830,774,411.62 -576,249,554.55 -391.24% activities Net increase in cash and cash -14,281,113.87 258,679,854.07 -105.52% equivalents Explanation of the main influencing factors of significant year-on-year changes in relevant data √Applicable □Not applicable 1. The net cash flow from operating activities increased by 22.21% over the same period last year, mainly due to the decrease in the payment of taxes, employee compensation and benefits and related expenses during the reporting period due to the impact of the epidemic. 2. Cash inflow from investment activities decreased by 32.86% from the same period last year, mainly due to the year-on-year decrease in other cash received related to investment activities, which was due to the return of funds and interest from related parties in the same period last year. 3. Cash outflow from investment activities decreased by 80.75% compared with the same period last year, which was mainly due to the borrowing of funds from related parties in the same period last year. 4. Net cash flow from investment activities increased by 274.06% compared with the same period last year, which was mainly due to the significant decrease in cash outflow from investment activities compared with the same period last year. 31 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 5. Cash outflow from financing activities increased by 30.96% year-on-year, which was mainly due to the payment for the acquisition of 55% of the equity in the aircraft industry during the reporting period. 6. The net cash flow from financing activities decreased by 391.24% over the same period of the year, mainly due to the impact of cash outflows from financing activities. 7. The net increase in cash and cash equivalents decreased by RMB 273 million compared with the same period last year, which was mainly due to the decrease in net cash flow from investment activities compared with the same period last year. Explanation of the reason for the significant difference between the Company’s net cash flow generated from operating activities during the reporting period and the current year’s net profit. □Applicable √Not applicable III. Non-Core Business Analysis √Applicable □Not applicable Unit: RMB Proportion to Amount Notes to Changes Sustainability Net Income Investment Income 612,550.85 0.07% no Gains or Losses from Change in Fair 2,246,554.36 0.27% no Value Mainly for the provision of asset Asset Impairment -10,179,361.63 -1.23% impairment losses no after the inventory valuation Mainly for this reporting period, Non-operating 43,050,711.82 5.19% Meridian’s US no Revenue factory received insurance claims Mainly for public welfare donation Non-operating Cost 9,986,870.11 1.20% expenditure and no asset destruction and scrapping Mainly government Other Gains 104,562,193.16 12.61% no subsidies Mainly accrued for Credit Impairment bad debt losses of -7,223,519.05 -0.87% no Loss accounts receivable IV. Assets and Liabilities Analysis 32 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 1. Material Changes of Assets The Company will implement the new revenue standards or new lease standards for the first time since 2020 and adjust the implementation of relevant items in the financial statements at the beginning of the year. √Applicable □Not applicable Unit: 10,000 RMB 2020 Year 2020 Year End Beginning Notes to Significant YoY % % of % of Changes Amount Total Amount Total Assets Assets Mainly due to payment Cash and for acquiring 55% equity Cash 167,498 10.49% 245,275 13.27% -2.78% of Aircraft Industry Equivalents during the reporting period Account 231,498 14.49% 255,570 13.82% 0.67% Receivables Inventory 230,991 14.46% 239,395 12.95% 1.51% Investment 0.00 Property Mainly due to the withdrawal of the Aircraft Industry from the original Long-term 20% equity of China Equity 57 0.00% 1,261 0.07% -0.07% Electronics Technology Investment Group Wuhu General Aviation Industry Research Institute Co., Ltd. Fixed Asset 487,246 30.50% 511,366 27.66% 2.84% Mainly because the Construction assets reach the usable 25,897 1.62% 426,35 2.31% -0.69% in Progress state and turn into fixed assets Mainly due to the needs of operation and Short-term acquisition projects 354,430 22.19% 307,012 16.61% 5.58% Borrowings during the reporting period, which increased bank loans Mainly due to the needs of operation and Long-term acquisition projects 117,920 7.38% 116,522 6.30% 1.08% Borrowings during the reporting period, which increased bank loans Mainly due to the needs of operation and Non-current acquisition projects Liabilities due 69,443 4.35% 57,197 3.09% 1.26% during the reporting within one year period, which increased bank loans 33 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Prepaid 15,814 0.99% 17,360 0.94% 0.05% Payments Mainly due to the recovery of financial assistance from Other Account 6,832 0.43% 91,633 4.96% -4.53% controlling shareholders Receivables and related parties during the reporting period Other Current 9,560 0.60% 11,701 0.63% -0.03% Asset Intangible 166,543 10.43% 177,818 9.62% 0.81% Asset Goodwill 166,299 10.41% 170,116 9.20% 1.21% Deferred tax 26,344 1.65% 18,871 1.02% 0.63% asset Other current 9,560 0.60% 11,701 0.63% -0.03% Asset Notes 19,287 1.21% 21,860 1.18% 0.03% Payables Contract 51,284 3.21% 64,857 3.51% -0.30% Liabilities Mainly due to the decrease in the amount of engineering Other Account equipment payable 38,422 2.41% 72,729 3.93% -1.52% Payables during the reporting period and the payment of Suzhou Yucuiyuan's investment Mainly due to the steady growth in the performance of the aircraft manufacturing Differed Tax 26,863 1.68% 26,823 1.45% 0.23% business, the deferred Liabilities income tax assets are recognized in the current period without making up for losses 2. Assets and liabilities Measured at Fair Value √ Applicable □ Not applicable Unit: 10,000 RMB Chang e in Profit Cumulati and ve Accrual Curre Openin Loss Current Closin Change Impairmen nt Other g throug Purcha g Items in Equity ts in the Sale Chang Balanc h Fair se Balanc through Current Amou es e Value Amount e Fair Period nt in the Value Curre nt Period Financial Assets 34 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 1. Held- for- trading financial assets 6,303 196 5,997 503 (Excludin g Derivative Financial Assets) 2.Derivati ve 29 29 Financial Assets Subtotal of 6,303 225 5,997 531 financial assets Total 6,303 225 5,997 531 Financial 0.00 0.00 Liabilities Whether there were any material changes on the measurement attributes of major assets of the Company During the reporting period: □ Yes √ No 3. Assets right restrictions as of the end of reporting period Details are disclosed in "Section XII Item 7, 81: Assets with Restricted Ownership or Use Right" of this report V. Investment Analysis 1. Overview √Applicable □ Not applicable Investment during the Reporting Investment over the Period Corresponding Period YOY % (RMB) of Last Year (RMB) 2,769,704,594.31 1,031,209,167.78 168.59% 2. Significant equity investment during the reporting period 35 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report √Applicable □ Not applicable Unit: Million RMB Current If Invested period Main Investment Invested Funds Expected involved Disclosure Disclosure company Shareholding Progress investment business method amount source income in date reference name profit or lawsuit loss "Announcement on the Acquisition of 55% Equity and Related Completed Aircraft Transactions of Aircraft Self- 55% Feb 25, manufacturing Acquisition 2,418 55.00% 290 340 Yes Wanfeng Aircraft Industry funded equity 2020 and sales Industry Co., Ltd." transfer disclosed in "Securities Times" and www.cninfo.com.cn Total -- -- 2,418 -- -- -- 290 340 -- -- -- 3. Significant non-equity investment during the reporting period □ Applicable √ Not applicable 4. Financial asset portfolio (1) Securities Investments □ Applicable √ Not applicable No securities investment during the reporting period 36 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (2) Derivatives Investments □ Applicable √ Not applicable No derivatives investments during the reporting period 5. Usage of raised funds □ Applicable √ Not applicable No usage of raised funds during the reporting period VI. Disposal of Significant Assets and Equity 1. Disposal of significant assets □ Applicable √ Not applicable During the reporting period, there was no disposal of significant assets. 2. Sales of significant equity □ Applicable √ Not applicable VII. Major Subsidiaries and Investees Analysis √ Applicable □ Not applicable Information about major subsidiaries, and investees that contribute above 10% of the Company’s net Profit. Unit: RMB 37 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Company Company Registered Operating Operating Principal business Total assets Net assets Net profit name Type capital revenue profit Mainly engaged in the design, Wanfeng research and development, MLTH manufacturing and sales of USD Subsidiary 76,001,900 3,435,371,228.62 2,076,513,724.18 2,557,650,411.18 228,875,241.33 176,910,509.14 Holdings lightweight magnesium materials Co., Ltd and components for automobiles and motorcycles Wuxi Mainly engaged in the design, Xiongwei manufacture and sales of RMB Precision Subsidiary automotive stamping parts and their 79,000,000 1,192,080,356.54 914,479,480.16 753,572,627.73 135,228,963.33 117,389,834.06 Technology automated stamping dies and Co., Ltd. precision molds Mainly engaged in the design, experiment, production, sales and Wanfeng maintenance of general aircraft, Aircraft RMB Subsidiary helicopters, aviation engines, 60,000,000 4,690,103,855.76 3,645,828,950.31 1,630,390,974.68 293,762,210.43 340,429,883.23 Industry avionics and mechanical systems; Co., Ltd. technology development and consulting services. Acquisition and disposal of subsidiaries during the reporting period √ Applicable □ Not applicable Company name Method of acquisition and disposal of subsidiaries Impact on performance The company acquired 55% of the shares of Wanfeng Aircraft The net profit of the Aircraft Industry in 2020 is Wanfeng Aircraft Industry Co., Ltd. Industry Co., Ltd. and completed the industrial and commercial 340,429,900 yuan, and the contribution goes to the change registration of the equity transfer on April 16, 2020 parent net profit of 187,236,400 yuan. Explanation on main shareholding companies 38 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 1. Wholly owned subsidiary: Wanfeng MLTH Holdings Co., Ltd Wanfeng MLTH Holdings Co., Ltd was established in the United Kingdom on November 6, 2013, with its management headquarter in Ontario, Canada. Wanfeng Meridian is a global leader in the magnesium alloy die-casting business. It has cutting-edge core technology in the industry. Its production bases are located in the United States, Canada, the United Kingdom, Mexico, China, and other places. It’s in the business of design, R&D, manufacturing, and sales of lightweight magnesium materials and automobiles and motorcycles components. The registered capital is 76,001,900 US dollars, and the Company holds 100% of the shares. As of December 31, 2020, total assets were 3,345,371,200 yuan, net assets were 2,076,513,700 yuan; operating revenue in 2020 was 2,576,504,000 yuan; net profit was 176,910,500 yuan, a decrease of 25.89% from the same period last year, mainly due to the impact of the epidemic and orders decrease. 2. Controlling subsidiary: Wuxi Xiongwei Precision Technology Co., Ltd. Wuxi Xiongwei Precision Technology Co., Ltd. was established in June 2003. The main business is design, manufacture and sales of automotive stamping parts, automated stamping dies and precision molds. The registered capital is RMB 79 million, and the Company holds 95% of the shares. As of December 31, 2020, total assets of 1,190,080,400 yuan, net assets of 914,479,500 yuan; operating revenue of 753,572,600 yuan in 2020; net profit of 117,389,800 yuan, a decrease of 19.85% from the previous year, mainly due to the decrease in gross profit affected by the epidemic. 3. Controlling subsidiary: Wanfeng Aircraft Industry Co., Ltd. Wanfeng Aircraft Industry Co., Ltd. was established in March 2018. Aircraft Industry is a professional general aircraft manufacturer integrating independent R&D, top-level design, advanced manufacturing, and sales services. It is one of the world’s top three fixed-wing general aircraft manufacturers. With 600 million yuan registered capital, the Company holds 55% of the shares. As of December 31, 2020, the total assets were 4,690,103,9 00 yuan and the net assets were 3,645,829,900 yuan; the operating revenue in 2020 was 1,630,391,000 yuan; the net profit was 340,429,900 yuan, an increase of 48.07% over the same period of the previous year, mainly due to the optimization of product structure and gross margin improvement and the release of domestic production capacity. VIII. Structural Entities Controlled by the Company □ Applicable √ Not applicable 39 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report IX. Outlook for the Future Development of the Company In 2021, the Company will adhere to the general keynote of "seeking progress while maintaining stability", focusing on the real economy, promoting the spirit of craftsmanship, positioning in the big transportation, taking the two-wheel drive of industry and capital as the starting point, and relying on the ability to obtain and apply information and the system for a global enterprise. It endeavors to become a differentiated and innovative enterprise from competition, build a corporate where each member can participate, become a global all-around leader in its segments, realize the high-quality development of the enterprise and maximize the value of the enterprise, and become the creator of the world’s advanced productivity. 1. Optimize the business structure of automotive metal lightweight parts and components, vigorously promote the expansion of the magnesium alloy business in the Asia-Pacific market, realize the defensive recovery growth of the aluminum alloy business, and conduct long-term strategic reassessment and arrangements for the high-strength steel business The Company's automotive metal parts industry focuses on the lightweight application of "magnesium alloy-aluminum alloy-high strength steel" metal materials, with the vision of "becoming a global automotive metal parts light- weighting promoter". The Company grasps global market trends, aligns various business units, continuously optimizes the business structure, and promote the Company's growth through technology. (1) The automotive wheel business in the aluminum alloy business may face strong threats from China-US trade policies and domestic competitors for a long time in the future. In the short term, it will be affected by the increase in upstream raw material prices and the shortage of downstream automotive chips, and the overall business will be on defensive-offense state. The Company will adopt a differentiated strategy, give full play to the Company's forging process advantages, increase the proportion of business in the aftermarket and special-purpose fields, and increase profitability; continue to promote the "26313+N" customer target, consolidate traditional automobiles, and actively expand new energy automobile business ; Accelerate the establishment of international factories, build a global production and sales network, and effectively avoid the ongoing and possible future trade conflicts. The overall development of the Company's motorcycle business is smooth, and it will maintain its strategy of seizing increments, integrating stocks, and developing mid-to-high end market rapidly. The northern plant in India has made a good start, and is accelerating its deployment in the southern plant to seize the world’s largest incremental market; integrating domestic production capacity, transforming smart factory production lines, increasing the Company’s automated production capacity, and increasing its domestic market share; the 40 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Company’s high-end motorcycle products continue to sell in the market. In the future, we will continue to increase cooperation with high-end motorcycle manufacturers to build a technology-led moat. The high-strength steel stamping parts business has reached long-term strategic cooperation with the world’s top first- and second-tier suppliers Yanfeng, Faurecia, Brose, Autoliv, etc. In the future, it will focus on cultivating new projects such as Japanese, European and American customers, and develop new energy vehicle market. In 2021, the Company will pay more attention to the advantages and disadvantages of high-strength steel in the field of auto parts molding and re-evaluate and arrange its positioning in the "automotive lightweight parts" industry. (2) The magnesium alloy business continues to maintain a double-digit R&D expense ratio and maintains an absolute lead in magnesium alloy application technology. The total amount of applied products will reach 180Kg from the current 100Kg to 2025, and single vehicle usage will increase from the current 1.5Kg Increase to 15Kg in 2025. The Company will maintain a 65% market share in the North American market, promote the rapid development of the Asian market, and gradually return to the European market. In the North American market, through in-depth on-site cooperation with automobile OEMs, the original business share is maintained, and the existing needs of customers are met. At the same time, the application of magnesium alloy components in the entire vehicle is improved from the design side. In the Asian market, especially in the Chinese market, the application of magnesium alloy components is promoted. On the one hand, the “T3+1” platform promotes the application of state-owned platforms and traditional automotive magnesium alloy components, On the other hand, in new energy vehicle market, use “NIO Business” template, strengthen the research and development source cooperation with the top 5 new energy vehicle manufacturers, grasp the opportunities of lightweight application in new energy vehicles. In the European market, strengthen cooperation with European OEMs and increase the current capacity utilization rate of Asian plants. 2. Build a global leader in the innovative manufacturing of general aviation aircraft The Company will focus on the vision of "becoming a global leader in the innovative manufacturing of general aviation aircraft", aim to achieve the top general aircraft manufacturing technology and sales volume in the world. The Company will adopt the circular progressive model of "Leading R&D— Licensing/technology transfer—Aircraft Manufacturing and Sales". High R&D investment is to maintain the world's “leading” position, “Licensing/technology transfer” is to support R&D and profits, “Manufacturing and sales" is to capture 41 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report the market share of mature markets. By matching the applicable scenarios of various general aviation in developing countries, the Company aims to gradually realize the promotion and application of general aviation aircraft in different countries and regions, and becomes the "unicorn" in general aviation sector. (1) Research and development business. The Company acquired the "Diamond" aircraft and successfully secured the "Crown" position of the general aviation aircraft. From its entry in the general aviation field, it has achieved a world-class leading advantage. In the future, it will continue to invest in R&D and maintain its world leading position. With the top R&D platform of Diamond brand aircraft, we will continue to develop the future general aviation aircraft EVTOL through self- research and cooperation with top customers. Continuously introduce competitive and leading new models in accordance with the pace of aircraft development and certification. From a global perspective, focus on the "Laboratory Test Flight" project, and when the time is ripe, assist it in transforming technology into products and markets. (2) Licensing/technology transfer business. Through planned "licensing" business, we will strengthen monetization of the Company's current and future aircraft technology. For developing countries including China, we will carry out whole-aircraft licensing /technology transfer business to quickly recoup funds to meet the Company's technology R&D funding needs, and at the same time increase the Company's basic profitability. Through the licensing model, build a domestic "production base" and promote the industrialization of domestic general aviation aircraft. Through the technology transfer model, gradually realize the production of parts in the country where the production base is located, and form a general aviation industry ecosystem. (3) Aircraft manufacturing and sales business. Strongly launch new models, head on to seize the market in mature countries for general aviation, and increase the market share of Diamond aircraft. Exploration and promotion of application scenarios of general aviation aircraft in developing countries. In 2020, the Company capitalized on the domestic trainer application scenarios and successfully achieved mass production sales. In the future, new application scenarios will be continuously explored and piloted based on actual conditions to promote the advancement of the domestic general aviation market. At the same time, it will seek application scenarios and promotion models for the general aviation industry in other developing countries. 42 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 3. Give full play to the functions of the capital market and optimize the Company's financial structure According to the Company's strategic thinking of "industry and capital flying together", in 2021, we will give more consideration and make use of capital market tools to optimize the Company's financial structure and enhance the Company's profitability. Risk analysis and countermeasures (1) Macroeconomic and industry risks and countermeasures In 2020, the global economy was affected by the epidemics in stages, and the automobile industry took a hit. From January to December 2020, China's automobile production and sales completed 25.225 million vehicles and 25.311 million vehicles, a year-on-year decrease of 2.0% and 1.9% respectively. The total sales of light vehicles in the United States were 14.6 million units, down 14% year-on-year and the lowest level since 14.49 million units in 2012. Affected by Covid-19 and the overall decline in the automotive industry, the industry will still face greater pressure. If the economy continues to slow down, it will lead to a continued decline in demand in the automotive industry, which will in turn have a certain impact on the Company's market structure and profitability. In response to this risk, on the one hand, the Company closely monitors the trend of the industry, strengthens the integration and coordination of sub- leading auto parts industry, continuously strengthens collaboration of brand customer, global bases, R&D design, and management, enhances the overall competitiveness of auto parts, and increases new energy vehicles business, the value of single brand, single customer and single vehicle. on the other hand, it has increased the transformation and upgrading of enterprises, took advantage of the global competitiveness of general aviation aircraft manufacturing, further optimized the industrial layout, and improved the Company’s asset quality and anti-risk capabilities. (2) International trade barrier risks and countermeasures In recent years, a series of overseas trade protectionist measures have had a certain impact on China’s exports, and the Company is facing certain risks of export trade barriers. Especially since 2018, China-US trade frictions have continued. As a result, the tariffs on imports from China’s automobiles and parts have risen. If the trade frictions continue to escalate, it will be possible to affect the Company's revenue and profitability. In response to this risk, on the one hand, the Company launched the overseas plant project for automotive aluminum alloy wheels and leveraged the synergy 43 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report of the global bases of various segments to realize global production, refined management, convenient supply, and reduce risk of trade barriers. On the other hand, it will increase the development of the Asia-Pacific market, especially increase the market share of high-end customers, promote the development, production and delivery of Audi and Mercedes-Benz projects; take advantage of the development opportunities in the new energy vehicle market, fully cut into the supply chain of core customers, and increase market share. (3) Rising energy and labor costs risks and countermeasures The main costs of the products are raw materials, energy, and labor costs. Since the fluctuation of raw material prices has a greater impact on the Company’s operating performance, the Company has signed a price linkage mechanism with most customers to adjust product prices with fluctuations in raw material market prices. However, due to the lagging nature of the Company's product sales settlement, fluctuations in energy prices and rising labor costs have a certain impact on the Company's performance. In response to this risk, the Company will strengthen global management coordination, reduce management costs, improve management efficiency, enhance raw material inventory management, optimize supplier management system and increase bargaining power for raw materials. And the Company will also increase its global scientific and technological research and development collaboration, reduce costs through process improvement, technological innovation, and increased automation, enhancing the Company’s competitiveness. (4) Currency exchange rate risks and countermeasures In recent years, the Company's products have been exported to the United States, India, Europe and other countries and regions. The overseas business income accounted for about 50% of the Company's main business income in the same period. The fluctuation of the RMB exchange rate will have a material impact on the Company's operating performance. In response to this risk, the Company will reduce the exchange rate risk through global business layout. The Company will increase the development of the domestic market and increase the proportion of product sales in addition to choose cross-border RMB settlement. The financial department will strictly implement the Internal Control Management System for Forward Foreign Exchange Settlement Business and use tools such as forward FX settlement and sale to carry out FX hedging business in a planned way to control exchange rate risks to the greatest extent. (5) Domestic aviation openness policy risks and countermeasures 44 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The domestic low-altitude airspace opening policy is the most important factor in the advancement of domestic general aviation industry. The degree of openness has a decisive effect on the development of the domestic general aviation industry to a certain extent, and it also has a significant impact on the growth of the Company's general aviation business. In response to this risk, the Company will continuously and effectively communicate with the National Air Traffic Management Bureau and relevant management departments. Currently, Wanfeng Aviation has been selected to conduct pilot projects. The low-altitude opening has also been substantially expanded. As Wanfeng Aviation actively strives to obtain the support from relevant management departments, Wanfeng’s aviation business has not been restrained in this slow opening process but has accumulated more development opportunities and advantages. (6) Impact of pandemic risks and countermeasures At the beginning of January 2020, the COVID 19 pandemic has spread in China and other countries. Governments of various countries have introduced a series of restrictive quarantine measures. The resumption of overseas factories has been delayed than originally planned, and short-term order delivery has been affected. In response to this risk, the Company puts the health and safety of its employees at the highest priority, actively enforced the local governments’ requirements, strictly performs normal epidemic prevention and control work, and assume social responsibilities. The Company will strengthen raw material price cost control and customer demand tracking, rely on the Company's global information technology to improve efficiency and efficiency, ensure stable production and operation, meet customer requirements, and minimize the adverse impact of the epidemic on production and operation. X. Reception of activities including research, communication and interviews during the report period Registration form for reception of research, communication, interviews, and other activities during the reporting period √Applicable □ Not applicable 45 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Reception Venue Reception Visitor Visitor name Discussion Index of the basic situation of the survey date method type The Company’s main "Record of Investor Relations Activities on business, lightweight September 2, 2020" published by the Company on Company’s Institution Shanghai Shenjiu magnesium alloy 2020.09.02 Site visit the website conference room investor Asset Management business and the http://irm.p5w.net/ssgs/S002085/?code=002085 on synergy of various September 3, 2020. business lines. Shanghai The Company's main "Record of Investor Relations Activities on Meridian China International business, the September 3, 2020" published by the Company on Magnesium Institutional Capital Corporation, competitive 2020.09.03 Site visit the website Products Co., investor Foresight Fund advantages, and future http://irm.p5w.net/ssgs/S002085/?code=002085 on Ltd conference Management prospects of Meridian September 4, 2020. room products. Shanghai Jingjing The Company's main "Record of Investor Relations Activities on Investment business, magnesium September 21, 2020" published by the Company Company’s Institutional 2020.09.21 Site visit Management, alloy and general on the website conference room investor Jingsheng Investment aviation aircraft http://irm.p5w.net/ssgs/S002085/?code=002085 on (Beijing) manufacturing business September 22, 2020. The Company's "Record of Investor Relations Activities on China International lightweight business, November 9, 2020" published by the Company on Company’s Conference Institutional Capital Corporation automotive lightweight 2020.11.09 the website conference room call investor and other 30 strategy and http://irm.p5w.net/ssgs/S002085/?code=002085 on institutions magnesium alloy November 11, 2020. "T3+1" progress The Company's main "Record of Investor Relations Activities on business, lightweight November 10, 2020" published by the Company on Company’s Institutional China Knowledge strategy, general 2020.11.10 Site visit the website conference room investor (Singapore) aviation market and http://irm.p5w.net/ssgs/S002085/?code=002085 on aircraft manufacturing November 11, 2020. business The Company's main Shanghai business, the "Record of Investor Relations Activities on Meridian competitive advantages December 17, 2020" published by the Company on Magnesium Institutional Shenwan Hongyuan and future development 2020.12.17 Site visit the website Products Co., investor and other 9 institutions prospects of http://irm.p5w.net/ssgs/S002085/?code=002085 on Ltd conference magnesium products, December 18, 2020. room and magnesium alloy "T3+1" 46 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section V: Significant Events I. Common Share Profit Distribution and Conversion of Capital Reserve to Share Capital During the reporting period, the common stock profit distribution policy, especially the formulation, implementation, or adjustment of the cash dividend policy √ Applicable □ Not applicable The 2018 Second Extraordinary General Meeting of Shareholders was held on June 1, 2018. In accordance with the China Securities Regulatory Commission’s Listed Companies Supervision Guidelines No. 3-Listed Companies Cash Dividends (China Securities Regulatory Commission Announcement [2013] No. 43), Regarding Further Implementation The Notice on Matters Concerning the Cash Dividend Distribution of Listed Companies (Zheng Jian Fa [2012] No. 37) and the relevant provisions of the Articles of Association, the Company’s shareholder return plan for the next three years (2018-2020) was formulated. The form of profit distribution, the conditions that should be met at the same time when implementing cash dividends, the proportion of cash dividends, and the decision-making procedures and mechanisms for profit distribution have been clarified. According to the "Company’s Shareholder Return Plan for the Next Three Years (2018-2020)", the Company’s board of directors consulted the opinions of independent directors and Company shareholders, and considered the Company’s profitability and actual operations. According to the 2020 Semi- Annual Profit Distribution Proposal approved on the Company’s fourth extraordinary shareholder meeting in 2020, on September 10, 2020, the Company implemented the 2020 semi-annual equity distribution plan. Taking the Company's total share capital of 2,186,879,678 shares after excluding 78,431,058 shares that have been repurchased, using 2,108,448,620 shares as the base number, RMB 2.00 in cash (tax included) was distributed to all shareholders for every 10 shares, no bonus shares, and no capital reserve converted into share capital. Special Notes on Cash Dividend Policies Whether they comply with the requirements of the Company's Articles of Incorporation or the resolutions of the General Meeting of Shareholders Yes Whether the dividend standards and proportions are distinct and clear Yes Whether the relevant decision-making procedures and mechanisms are complete Yes Whether the independent directors performed their duties and played their due role Yes 47 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Whether the minority shareholders have the opportunity to fully express their opinions and appeals, and whether their legitimate rights and interests have been Yes fully protected: Whether relevant conditions and procedures are compliant and transparent when the cash dividend policies are being adjusted or changes Yes The Company’s common stock dividend distribution plan (proposal) and the capital reserve conversion plan (proposal) for the past 3 years (including this reporting period): 2018 profit distribution plan: On June 12, 2019, the Company, based on a total share capital of 2,186,879,678 shares, distributed a cash dividend of 3.0 yuan (tax included) for every 10 shares of undistributed profit to all shareholders. 2019 profit distribution plan: The Company did not distribute cash dividends in its profit distribution for 2019, no bonus shares, and no capital reserve conversion into share capital. 2020 semi-annual profit distribution plan: On September 10, 2020, taking the total share capital of 2,186,879,678 shares after excluding the 78,431,058 shares that have been repurchased, using 2,108,448,620 shares as the base, RMB 2.00 (tax included) was distributed to all shareholders for every 10 shares. No bonus shares, and no capital reserve converted into share capital. 2020 profit distribution plan: The eighth meeting of the Company's seventh board of directors approved the "2020 Profit Distribution Proposal." The company plans to use 2,072,107,520 shares (total share capital of 2,186,879,678 shares minus 114,772,158 shares that have been repurchased) as the base, and distribute cash dividends of RMB 1.0 (tax included) to all shareholders for every 10 shares. No bonus shares will be given, or capital reserve will be converted into share capital. The above plan still needs to be approved by the shareholders' meeting. The Company’s cash dividends of common shares in the past three years (including this reporting period) Unit: 10,000 RMB The Net profit The ratio of The ratio of total proportion attributable to cash amount of cash The amount of cash Total common dividends to dividends Cash of cash dividends in amount of stock the net profit (including other dividend dividends in other ways cash shareholders attributable to ways) to the net amount other ways to the net dividends Year in the ordinary profit (tax (such as profit (including consolidated shareholders attributable to included) share attributable other financial in the ordinary repurchase) to ordinary ways) statement of consolidated shareholders in shareholder the year for statements the s in the dividend consolidated consolidated distribution statements statements 48 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2020 42,169 56,582 74.53% 42,169 74.53% 2019 65,606 89,577 73.24% 65,606 73.24% 2018 65,606 108,602 60.41% 65,606 60.41% During the reporting period, the company was profitable and the distributable profits to ordinary shareholders of the parent company was positive, but the Company did not propose a cash dividend distribution plan of ordinary shares. □ Applicable √ Not applicable II. Profit Distribution and Conversion of Capital Reserve to Share Capital During the Reporting Period √Applicable □ Not applicable Bonus share issued per 10 shares 0 (share) Cash dividend per 10 shares (RMB) 1 (tax inclusive) Total capital share basis for the 2,072,107,520 distribution proposal (share) Total cash dividend (RMB) (tax 207,210,752.00 inclusive) Cash dividend amount in other ways 0 (such as share repurchase) (RMB) Total cash dividends (including other 207,210,752.00 ways) (RMB) Distributable profits (RMB) 482,774,473.27 Percentage of cash dividends of the 100% total distributed profit (%) Cash dividends If the Company's development stage is in a mature period and there is no major capital expenditure arrangement, when the profit distribution is carried out, the proportion of cash dividends in this profit distribution should be at least 80% Detailed description of profit distribution or capital reserves conversion plan The eighth meeting of the Company's seventh board of directors deliberated and passed the "Proposal for Profit Distribution in 2020." The Company intends to use 2,072,107,520 shares (total share capital of 2,186,879,678 shares minus 114,772,158 shares repurchased) as the base, and distribute cash dividends of RMB 1.0 (tax included) to all shareholders for every 10 shares. No bonus shares will be given, or capital reserve will be converted into share capital. The above plan still needs to be approved by the shareholders meeting. 49 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report III. Performance of Commitments 1. Complete and incomplete commitments of the Company and its actual controller, shareholders, related parties, acquirers, and other related parties for the commitments by the end of the reporting period. √Applicable □ Not applicable Giver of Date of Term of Commitments Nature Details of commitments Performance commitments commitments commitments Commitment from reformation of N/A N/A N/A N/A N/A N/A shareholding Commitment from M&A announcement N/A N/A N/A N/A N/A or equity change announcement 50 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 1. The controlling shareholder Wanfeng Group’s commitment to avoid horizontal competition: After the completion of this reorganization, Wanfeng Group’s motorcycle aluminum alloy wheel business has been incorporated into the listed company. In order to avoid horizontal competition with listed companies, Wanfeng Group has issued the "A Letter of Commitment to Avoid Horizontal Competition and Regulate Related Party Transactions", making the following commitment: "The company and its wholly-owned subsidiaries, holding subsidiaries, and other companies that the company has actual control or significant influence (referred to "The company and controlled company") will not engage in any business that occurs or may compete with Wanfeng Auto Wheel’s business after the completion of this Chen Ailian and reorganization in the future. If the company and the Wu Liangding controlled company compete with Wanfeng Auto Wheel family, the or have conflict interest with Wanfeng Auto Wheel in actual Commitment business activities, the company and the controlled Commitment from controllers of to avoid company will exercise the right of veto, or urge the Strict 21-Jul-11 long-term asset restructuring the controlling horizontal controlled company abandons the business that may performance shareholder competition cause horizontal competition to ensure that it does not Wanfeng Auto directly or indirectly compete with the Wanfeng Auto Holding Group Wheel in the same industry or be injected into Wanfeng Co., Ltd. Auto Wheel at a fair market price. If there is a business opportunity within the business scope of Wanfeng Auto, the company will give priority to Wanfeng Auto Wheel. For projects that Wanfeng Auto Wheel has constructed or planned to invest in, our company will avoid the same or similar business as Wanfeng Auto Wheels in terms of investment direction and project selection and will not compete with Wanfeng Auto Wheel in the same industry in order to protect Wanfeng Auto Wheel's interests. " 2. In order to avoid horizontal competition, Wanfeng Auto's actual controllers Chen Ailian and Wu Liangding's family issued the "Letter of Commitment on Avoiding Horizontal Competition and Regulating Related Party Transactions". Making the following commitments: "The companies and units we control will not engage in any 51 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report business that will or may compete with Wanfeng Auto Wheel after the completion of this transaction or in the future. If the companies and units we control compete with Wanfeng Auto Wheel or conflict interest with Wanfeng Auto Wheel in business activities, we will exercise the right of veto, or we will give up or prompt the company or unit we control to give up the possibility in direct or indirect horizontal competition with Wanfeng Auto Wheel in the same industry or inject all the businesses of companies or units under our control that generate horizontal competition into Wanfeng Auto Wheel at a fair market price. If there is a business opportunity within the business scope of Wanfeng Auto Wheel, we will give priority to Wanfeng Auto Wheel. For the projects that Wanfeng Auto Wheel has constructed or intends to invest in, we will avoid the same or similar to Wanfeng Auto Wheel in terms of investment direction and project selection and will not compete with Wanfeng Auto Wheel in the same industry in order to maintain Wanfeng Auto Wheel's interests. 52 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Chen Ailian and Wu Liangding family, the actual Commitment During the period of being the Company's largest Commitment from controllers of to avoid shareholder and actual controller, no subsidiary Strict 28-Nov-06 long-term IPO or refinancing the controlling horizontal companies will engage in the same or similar business performance shareholder competition as Zhejiang Wanfeng Auto Wheel Co., Ltd. Wanfeng Auto Holding Group Co., Ltd. Commitment from N/A N/A N/A N/A N/A N/A stock incentive 53 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 1. Do not directly or indirectly engage in the same or similar business as the listed company to avoid possible direct or indirect business competition with the production and operation of the listed company. Guarantee to take the legal and effective measures to urge other companies (excluding companies controlled by the listed company) not to engage in or participate in any activities or businesses that compete with the production and operation of the listed company. 2.If the business activities of the promise party and its close relatives (if the promise party is a natural person) having control rights may compete with the listed Chen Ailian and company’s business in the same industry in the future, Wu Liangding the promise party will urge the promise party and the family, the enterprises that the promise party's close relatives have Other commitment actual Commitment control rights to abandon the business that may cause to Company's small controllers of to avoid competition in the same industry and are willing to take Strict 22-Feb-20 long-term and medium the controlling horizontal all the responsibilities. performance shareholders shareholder competition 3. If the promise party or other enterprises that the Wanfeng Auto promise party has control have any business opportunity Holding Group to engage in or participate in any activity that may Co., Ltd. compete with the production and operation of the listed company, the listed company shall be notified in a written form about the business opportunity immediately. If the listed company gives a written affirmative reply that it is willing to take advantage of the business opportunity within the reasonable time limit specified in the notice, we will try our best to provide the listed company with the business opportunity in priority. 4. If the listed company has suffered losses due to the breach of the above-mentioned commitments by the promise party, the operating profit obtained shall belong to the listed company and shall be compensated for all losses. Are the commitments Yes fulfilled on time 54 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Details in unfulfilled commitments and N/A work plan 55 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2. Where any profit forecast was made for any of the Company’s assets or projects and the current reporting period is still within the forecast period, the Company shall explain whether the performance of the asset or project reaches the profit forecast and why: √ Applicable □ Not applicable Forecast Actual Reason for Original Profit performanc performan not forecas Original forecast e for the ce for the Forecast Forecast reaching t forecast asset or current current start time end time the forecast disclos disclosure project period period (if ure index name (10,000 (10,000 applicable) date RMB) RMB) "Announcement on the Acquisition of 55% Equity of Wanfeng Aircraft Industry Co., Aircraft Dec 31, Feb 25, Jan 1, 2020 28,980 33,034 N/A Ltd. and related Industry 2022 2020 party transaction" disclosed on www.cninfo.com and "Securities Times" Commitments made by the Company’s shareholders and counterparties in the reporting year’s operating performance √ Applicable □ Not applicable In 2020, the Company acquired 55% of the equity in Aircraft Industry, and the transferor Aviation Industry promised to realize the net profit attributable to the parent company in the consolidated statements of the Aircraft Industry in 2020, 2021, and 2022 (referring to the net profit after deducting non-recurring gains and losses) no less than 289.8 million yuan, 303.5 million yuan, and 366.6 million yuan respectively. If the net profit realized by Wanfeng Aircraft at the end of 2020, 2021, and 2022 fails to reach the cumulative committed net profit as of the end of the year as agreed in the profit commitment, the amount of cash that should be compensated = (accumulated commitment net profit as of the end of the current period - the accumulated realized net profit as of the end of the current period) × (the transfer price of the underlying equity / the sum of the committed net profit of each year during the profit compensation period)- the amount of compensation The completion of performance commitments and its impact on the impairment test of goodwill 56 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The transferor promises that the net profit attributable to the parent company in the consolidated statement realized by the Aircraft Industry in 2020 (net profit after deducting non-recurring gains and losses) shall not be less than 289.8 million yuan, and the figure actually realized by Aircraft Industry in 2020 was 330.34 million yuan. The management has conducted impairment tests on the goodwill of Aircraft Industry. The approved five-year financial budget has considered the impact of actual performance lower than the promised performance on future expected cash flows. Aircraft Industry has no impairment as of December 31, 2020. IV. The Company’s funds used by the controlling shareholder or its related parties for non-operating purposes. √ Applicable □ Not applicable Unit: 10,000 RMB Ending Expe Expe New Repaid balance Name of cted cted Period of Beginni amount amount as of Expected shareholder repay repay time for Reason ng during during disclosur repayme or related ment ment funds used balance reporting reporting e date of nt date party meth amou period period annual od nt report Wanfeng 2019-12-5 to Group (note Lending 12,000 0 12,000 0 - 2020-3-24 1) Wanfeng 2019-12-5 to Group (note Lending 26,070 0 26,070 0 - 2020-3-25 1) Shaoxing Jiajing 2019-10-10 to Lending 4,200 0 4,200 0 - Trading Co., 2020-3-27 Ltd (note 2) Shaoxing Jiajing 2019-10-15 to Lending 800 0 800 0 - Trading Co., 2020-3-27 Ltd (note 2) Shaoxing Jiajing 2019-10-17 to Lending 2,000 0 2,000 0 - Trading Co., 2020-3-27 Ltd (note 2) Shaoxing Jiajing 2019-10-21 to Lending 3,000 0 3,000 0 - Trading Co., 2020-3-27 Ltd (note 2) Shaoxing 2019-10-11 to Lending 5,000 0 5,000 0 - Jiajing 2020-3-27 57 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Trading Co., Ltd (note 2) Wanfeng 2020.4.16 to Group (note Lending 7,200 7,200 0 2020.8.17 1) Aircraft 2020.4.16 to Industry Lending 31,262 31,262 0 2020.8.17 (note 4) Total 84,332 7,200 91,532 0 -- 0 -- The total amount at the end of the period as % of the most recent 0.00% audited net assets Note 1, Note 2: The relevant decision-making procedures have Related decision-making not been fulfilled, and the principal and interest of the funds used procedures have been repaid before June 2020. The "Balance of Used Funds at the Beginning of 2020" and "The Balance of Funds at the Beginning of 2020" were restated. The reasons for the use of non- Note 3: Prior to January 1, 2020, Diamond Aircrafts Industries operating funds of the new major GMBH, a subsidiary of Aircraft Industry, had borrowed funds from shareholders and their affiliated Wanfeng Group's subsidiary Aviation Industry of RMB 312.62 companies in the current period, the million, and the Aviation Industry had repaid the principal in accountability of the responsible August 2020. And interest of RMB 316.18 million. On December persons, and the explanation of the 31, 2020, the principal and interest have been fully repaid. measures taken by the board of directors Note 4: On April 16, 2020, Wanfeng Aircraft has lent RMB 72 million to Wanfeng Group. Wanfeng Group has repaid all outstanding balance and interest of RMB 73.51 million from April to August 2020. The reasons for the failure to repay the non-operating funds use as planned, the accountability situation N/A and the explanation of the measures taken by the board of directors Disclosure index of CPA's special April 30, 2021 review opinions on funds used V. Explanation Given by the Board of Directors, Supervisory Committee, independent directors (if any) Regarding the “Non- standard Auditor’s Report” Issued by the CPA Firm for the Reporting Period □Applicable √Not applicable VI. Explanation on the changes in accounting policy, accounting estimates, and accounting methods as compared to the financial report for the prior year √ Applicable □Not applicable 58 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report New policy on revenue In 2017, the Ministry of Finance promulgated the revised "Accounting Standards for Business Enterprises No. 14-Revenue" (Cai Kuai [2017] No. 22). The Company began accounting treatment in accordance with the newly revised standards from January 1, 2020. According to the convergence rules, the comparable period information will not be adjusted. The difference between the implementation of the new standards and the current standards on the first day will be retrospectively adjusted for retained earnings at the beginning of the reporting period. The new revenue standard establishes a new revenue recognition model for standardizing revenue generated from contracts with customers. According to the new revenue standards, the method of revenue recognition should reflect the entity's transfer of goods or services to customers, and the amount of revenue should reflect the amount of consideration that the entity expects to be entitled to because of the transfer of these goods or services to customers. At the same time, the new revenue standard also regulates the judgments and estimates required for each step of revenue recognition. The Company only adjusts the cumulative impact of contracts that have not yet been completed on January 1, 2020. For contract changes that occurred before January 1, 2020, the Company adopts a simplified method to deal with the final results of all contracts based on contract changes, identify fulfilled and unfulfilled performance obligations, determine transaction prices, and apportion transaction prices between fulfilled and unfulfilled performance obligations. VII. Explanation for retrospective restatement of major accounting errors during the reporting period □Applicable √Not applicable During the reporting period, the Company had no major accounting error corrections requiring retrospective restatement. VIII. Explanation for changes in scope of the consolidated financial statements as compared to the financial report for the prior year √Applicable □Not applicable During the reporting period, the Company acquired 55% equity of Wanfeng Aircraft Industry Co., Ltd. for RMB 2,418.0750 million in cash. The equity transfer was completed on April 16, 2020. Wanfeng Aircraft Industry Co., Ltd. was added to the consolidated scope of the company's statements. IX. Engagement and disengagement of the CPA firm 59 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report CPA firm engaged at present Name of the domestic CPA firm Ernst & Young Hua Ming LLP Remuneration of domestic accounting firms 443.8 (in 10,000 RMB) Consecutive years of the audit service 18 years provided by the domestic CPA firm Name of the certified public accountants from Yin Guowei, Zhou Hao the domestic CPA firm Consecutive years of the audit service provided by the certified public accountants Yin Guowei (1 year), Zhou Hao (5 years) from the domestic CPA firm Ernst & Young LLP Name of overseas accounting firm (if any) Ernst & Young Wirtschaftsprüfungsgesellschaft m.b.H. Remuneration of overseas accounting firm 620.28 (10,000 RMB) (if any) Ernst & Young LLP (8 years) Consecutive years of audit services of Ernst & Young Wirtschaftsprüfungsgesellschaft overseas accounting firms (if any) m.b.H. (1 year) Name of the certified public accountant of the Elizabeth Maccabe overseas accounting firm (if any) Severin Eisl Whether the CPA firm was changed in the current period □ Yes √ No Engagement of internal control audit CPA firm, financial advisor or sponsor □Applicable √Not applicable X. Listing suspension and termination after disclosure of this annual report □Applicable √Not applicable XI. Bankruptcy and Restructuring □Applicable √Not applicable No bankruptcy and restructuring happened during the reporting period. XII. Material Litigation and Arbitration Significant material litigation and arbitration □Applicable √Not applicable No such case during the reporting period. XIII. Punishment and Rectification □Applicable √Not applicable No punishment and rectification during the reporting period 60 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report XIV. The Integrity of the Company and Its Controlling Shareholders and Actual Controllers □Applicable √Not applicable XV. The Implementation of an Equity Incentive Plan, Employee Stock Incentive Plan, or Other Incentive Plans √Applicable □ Not applicable The Company held the first extraordinary 2018 general meeting of shareholders on January 29, 2018. The Company approved the "Company's Phase One Employee Stock Ownership Plan (Draft) and its summary" and related proposals, agreeing to implement the first phase employee’s stock ownership plan. The duration of the first phase employee stock ownership plan is 24 months, starting from the date of approval of the Company's first extraordinary shareholders general meeting in 2018, i.e., from January 29, 2018 to January 28, 2020. The lock-up period is 12 months. The first phase employee stock ownership plan purchased 45,429,282 shares of Wanfeng Auto Wheel (002085) through centralized bidding in the secondary market trading system of the Shenzhen Stock Exchange, accounting for 2.08% of the Company’s total share capital. The purchase has been completed within 6 months from the date of approval. The Company approved the "Proposal on the Extension of the Company's Phase One Employee Stock Ownership Plan" on the first phase of employee stock ownership plan holders' meeting on November 20, 2019. On November 25, 2019, the Company held the sixth session of the board of directors meeting, during which the "Proposal on the Extension of the Company's Phase One Employee Stock Ownership Plan" was approved, agreeing to extend the duration of the Company's employee stock ownership plan for 12 months, that is, until January 28, 2021. During the extension period, the lock-up period will no longer be set. The employee stock ownership plan management committee can choose the opportunity to sell stocks according to the Company's stock price. If all the Company stocks held by the employee stock ownership plan are sold, the employee stock ownership plan can be terminated early. As of the end of the reporting period, the first phase of the employee stock ownership plan has reduced its holdings by 44,200,782 shares. As of January 28, 2021, all the company stocks held by the first phase of the employee stock 61 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report ownership plan have been sold and the liquidation and distribution work has been completed. XVI. Significant Related-party Transaction 1. Significant related-party transactions arising from routine operation √Applicable □ Not applicable Pricing Amount Approve Wheth Settleme Available Percenta Principle of d er it nt Market Related Related ge in the Related s for Related Transact Excee Method Prices Disclos Related Relation Transacti Transact Amount Disclosure Transact Related Transact ion ds the of for ure Party ship on ion of Similar Index ion Type Party ion Quota Appro Related Similar Date Content Price Transacti Transacti (10,000 (10,000 ved Transact Transacti ons ons RMB) RMB) Quota ion ons The "Announce ment on the Estimates Compani Xinchang of Daily es Fangqi Related controlled Investme House Market 26-Jun- Party by the Lease N/A 42.5 1.88% 70 No Transfer N/A nt Fund lease price 20 Transaction same Associati s in 2020" actual on disclosed controller on cninfo.com. cn and Securities Times. 62 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Compani Shengzh es ou controlled Sale of Market Hechuan by the Sale N/A 199.57 0.02% No Transfer N/A molds price g Trading same Co., Ltd. actual controller Compani Wanfeng es Jinyuan controlled House Market Holding by the Lease N/A 119.27 5.28% No Transfer N/A lease price Group same Co., Ltd actual controller 8,480 Compani Shengzh es purchase ou controlled of molds Purchas Market Hechuan by the and N/A 413.29 0.08% No Transfer N/A e price g Trading same accessori Co., Ltd. actual es controller Zhejiang Compani Purchase Wanfeng es raw Technolo controlled materials, Purchas Market gy by the equipmen N/A 126.85 0.03% No Transfer N/A e price Develop same t ment Co., actual accessori Ltd. controller es 63 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Zhejiang Compani Wanfeng es Equipmen Technolo controlled t Accept Market gy by the maintena N/A 96.45 73.36% No Transfer N/A Service price Develop same nce ment Co., actual service Ltd. controller Zhejiang Compani Wanfeng es machiner Technolo controlled Purchas y Market gy by the N/A 896.23 1.03% No Transfer N/A e equipmen price Develop same t ment Co., actual Ltd. controller Compani Zhejiang es Rifa machiner controlled Precision Purchas y Market by the N/A 33.25 0.01% No Transfer N/A Machiner e equipmen price same y Co., t actual Ltd. controller Compani raw Zhejiang es materials Rifa controlled and Precision by Market purchase equipmen N/A 0.68 0.00% 3,500 No Transfer N/A Machiner controllin price t y Co., g accessori Ltd. sharehold es ers 64 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Compani es Zhejiang controlled measure Wanfeng by Provide ment Market Precision N/A 5.19 0.85% No Transfer N/A controllin Service repair price Machiner g service y Co., Ltd sharehold ers Compani Zhejiang es Rifa controlled equipmen Precision by Accept t Market N/A 39.14 29.77% No Transfer N/A Machiner controllin Service maintena price y Co., g nce Ltd. sharehold ers Compani es Zhejiang controlled Wanfeng by Equipmen Market Precision purchase N/A 312.48 0.36% No Transfer N/A controllin t price Machiner g y Co., Ltd sharehold ers Compani es Zhejiang controlled Wanfeng by Equipmen Market Precision purchase N/A 86.73 0.10% No Transfer N/A controllin t price Machiner g y Co., Ltd sharehold ers 65 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report internet and equipmen Wanfeng parent accept Market t N/A 367.84 18.81% No Transfer N/A Group company service price maintena nce service Compani es aircraft Wanfeng controlled and Aviation Market by the purchase aviation N/A 451.32 0.09% No Transfer N/A Industry price same equipmen Co., Ltd actual t controller Compani es Wanfeng controlled Flight General Accept Market by the chartering N/A 1,390.84 11.01% No Transfer N/A Aviation service price same service Co., Ltd actual controller Compani Zhejiang es Wanfeng controlled Property Property by Accept Market managem N/A 371.77 27.10% 8,030 No Transfer N/A Manage controllin service price ent ment Co., g Ltd sharehold ers 66 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Compani internet es and Wanfeng controlled equipmen Aviation by accept Market t N/A 48.83 2.50% No Transfer N/A Industry controllin service price maintena Co., Ltd g nce sharehold service ers Compani Zhejiang es Wanfeng controlled Accept Airport Market General by the N/A 25.75 0.02% No Transfer N/A service service price Aviation same Co., Ltd actual controller Compani es Aircraft Wanfeng controlled taking off General Accept Market by the and N/A 6.07 0.00% No Transfer N/A Aviation service price same landing Co., Ltd actual service controller Compani Xinchang es County controlled Chitong by House Market Intelligent Lease N/A 460.84 20.40% No Transfer N/A controllin lease price Equipme g nt Co., sharehold Ltd ers 67 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Compani es Zhejiang controlled House, Wanfeng by Market Lease land N/A 588.57 26.05% No Transfer N/A Industry controllin price lease Co., Ltd g sharehold ers Compani es Wanfeng controlled Aviation by House Market Lease N/A 192.95 8.54% No Transfer N/A Industry controllin lease price Co., Ltd g sharehold ers Compani Zhejiang es Aircraft Wanfeng controlled and Market General by the Sale aviation N/A 373.47 0.04% No Transfer N/A price Aviation same equipmen Co., Ltd actual t controller Compani Shanghai es Wanfeng controlled House Market Aviation by the Lease N/A 252.29 49.06% No Transfer N/A lease price Club Co., same Ltd actual controller 68 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Compani es Wanfeng controlled General by Market Lease Aircraft N/A 8.85 100.00% No Transfer N/A Aviation controllin price Co., Ltd g sharehold ers Total -- -- 6,911.02 -- 20,080 -- -- -- -- -- Details of returns of large sales None The actual performance during the reporting period (if any) is estimated by category for The related parties performed the purchase and sale business in accordance with the signed contract, and the execution the total amount of daily related of the contract met expectations. transactions that will occur in the current period Reasons for the large difference between the transaction price and the market N/A reference price (if applicable) 2. Related-party transactions regarding purchase and disposal of assets or equity √Applicable □ Not applicable 69 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Pricing Book Settleme Appraised Transactio Principle Value of nt Value of Transfer n Gains Related Related s for Transferr Method Transferre Price and Disclosur Disclosure Party Relationship Transactio Description Related ed of d Assets (10,000 Losses e Date Index n Type Party Assets Related (10,000 RMB) (10,000 Transact (10,000R Transacti RMB) RMB) ions MB) on "Announcement on the Acquisition of 55% Equity and Related Companies Acquire 55% Transactions of Appraisal Wanfeng controlled by Equity equity of Wanfeng Aircraft income 330,098.72 488,500 241,807.50 Transfer 0 25-Feb-20 Aviation controlling acquisition Aircraft Industry Co., method shareholders Industry Ltd." disclosed in "Securities Times" and www.cninfo.com. cn According to the income method assessment, the value of all shareholders' equity of the Aircraft Industry on the assessment base date (September 30, 2019) is RMB 4,885 million, with an appreciation amount of RMB Reasons for the large difference between the transfer 1,584,112,800, and an appreciation rate of 47.99%. The evaluation is based on the Aircraft Industry’s expected price and the book value or appraised value (if any) net income, which not only includes the income that can be generated by tangible assets, but also includes the intangible assets owned by the company (such as customer resources, technical assets, etc.). Therefore, the income method results in appreciation. The general aviation aircraft industry has broad prospects for downstream demand, with a relatively high market competitive position and good sustained profitability. At the same time, Wanfeng Aviation promises that the net profit attributable to the parent company after deducting non-recurring gains and losses from the consolidated Impact on the Company’s operating results and statements realized by the Aircraft Industry in 2020, 2021, and 2022 shall not be less than 289.8 million yuan, financial status 303.5 million yuan, and 366.6 million yuan, respectively. After the completion of this transaction, it will further enhance the business scale of the listed company and build new profit growth points, which will help increase the value of the listed company and bring better returns to the shareholders of the listed company. If the relevant transaction involves performance In 2020, the Aircraft Industry realized net profit of 330.34 million yuan attributable to the parent company after agreement, the performance achieved during the deducting non-recurring gains and losses. reporting period 3. Significant related-party transactions arising from joint investments on external parties 70 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report □Applicable √Not applicable No such case in the reporting period. 4. Related credit and debt transactions √Applicable □ Not applicable Whether there are non-operating related credit and debt transactions √Yes □No Account receivable from related parties: Whether there Interest of Balance at Beginning New Amount Amount is Non- the Current the end of Related Party Balance of the Current Recovered in Interest Relationship Reasons operating Period the Period (10,000 Period this Period Rate Capital (10,000 (10,000 RMB) (10,000 RMB) (10,000 RMB) Occupation RMB) RMB) Wanfeng Group Controlling Lending Yes 38,070 0 38,070 N/A N/A 0 (note 1) shareholder A legal person Shaoxing Jiajing controlled by an Trading Co., Ltd. Lending Yes 15,000 0 15,000 N/A N/A 0 associated natural (note 2) person Wanfeng Group Controlling Lending Yes 31,262 0 31,262 N/A N/A 0 (note 3) shareholder Controlling Aviation Industry shareholder's Lending Yes 0 7,200 7,200 N/A N/A 0 (note 4) subsidiary The impact of related creditor's rights Note 1, Note 2: As of March 31, 2020, all non-operating funds occupied have been returned. With reference to the benchmark on the Company's operating results loan interest rate of 4.35%, the accumulative interest has been repaid RMB 12,973,600 based on the actual occupied time. and financial status 71 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Note 3, Note 4: In April 2020, the Company acquired 55% of the equity in the Aircraft Industry held by the Aviation Industry through a business combination under common control. The Company's audited financial statements for 2020 have consolidated Wanfeng Aircraft in accordance with the requirements of "Business Combinations Under Common Control" in the Accounting Standards for Business Enterprises-Business Combinations and restated the comparative data of the previous year. The capital occupation of the controlling shareholders and other related parties mentioned in Note 3. and Note 4 has been restated on the "Balance of Occupied Funds at the Beginning of 2020" and "The Balance of Funds at the Beginning of 2020" in accordance with the principle of business combination under common control. Note 3: Prior to January 1, 2020, Diamond Aircrafts Industries GMBH, a subsidiary of Aircraft Industry, had borrowed funds from Wanfeng Group's subsidiary Aviation Industry of RMB 312.62 million, and the Aviation Industry had repaid the principal in August 2020. And interest of RMB 316.18 million. On December 31, 2020, the principal and interest have been fully repaid. Note 4: From January to April of 2020, prior to business combination under common control, Wanfeng Aircraft has lent RMB 72 million to Wanfeng Group. Wanfeng Group has repaid all outstanding balance and interest of RMB 73.51 million from April to August 2020. 72 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Account payable to related parties: New Amo Whethe unt Amoun Balance r there Beginn of t Interest at the is Non- ing the Recove of the Relat Inter end of Relation Reas operati Balanc Curr red in Current ed est the ship ons ng e ent this Period Party Rate Period Capital (10,000 Perio Period (10,000R (10,000R Occupa RMB) d (10,000 MB) MB) tion (10,0 RMB) 00 RMB) 5. Other significant related party transactions □Applicable √Not applicable No such case in the reporting period. XVII. Significant Contracts and Execution 1. Matters on trusteeship, contracting, and leasing (1) Trusteeship □ Applicable √ Not applicable No such case in the reporting period. (2) Contracting □ Applicable √ Not applicable No such case in the reporting period (3) Leasing □ Applicable √ Not applicable No such case in the reporting period 2. Significant guarantees √Applicable □ Not applicable (1) Guarantees Unit: 10,000 RMB 73 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report External Guarantees from the Company and its Subsidiaries (Excluding Guarantees to the Subsidiaries) Announcement Guarantee Actual Actual Date of Disclosure Guarantee Type of Term of Due or for Related Guaranteed Party Occurrence Guarantee of the Guarantee Amount Guarantee Guarantee Not Parties or Date Amount Amount Not Joint liability 2020-11-18 to Wanfeng Group 2020-06-24 150,000 2020-11-19 52,199.2 and several No Yes 2024-12-31 guarantee Total amount of external guarantee Total actual amount of external approved during the reporting period 150,000 guarantees during the reporting 52,199.2 (A1) period (A2) The total amount of external guarantees Total balance of actual external approved at the end of the reporting 150,000 guarantees at the end of the 52,199.2 period (A3) reporting period (A4) 74 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Announcement Guarantee Actual Actual Date of Disclosure Guarantee Type of Term of Due or for Related Guaranteed Party Occurrence Guarantee of the Guarantee Amount Guarantee Guarantee Not Parties or Date Amount Amount Not 2020.4.8 - Ningbo Orwell 24-June-20 4,000 2020.05.20 2,300 Joint liability No Yes 2025.4.7 and several 2020.5.29 - Ningbo Orwell 24-June-20 6,000 2020.05.29 5,500 guarantee No Yes 2021.5.28 2020.2.28 - Weihai Wanfeng 24-June-20 4,400 2020.02.28 4,000 No Yes 2021.2.27 Joint liability 2019.5.10 - Weihai Wanfeng 24-June-20 5,600 2019.05.10 3,000 and several No Yes 2022.5.10 guarantee 2018.11.1 - Weihai Wanfeng 24-June-20 10,000 2018.11.01 5,000 No Yes 2021.10.31 2019.5.16 - Weihai Magnesium 24-June-20 5,000 2019.05.16 2,000 No Yes 2020.5.16 Joint liability 2020.6.4 - Weihai Magnesium 24-June-20 4,500 2020.06.04 3,500 and several No Yes 2021.6.4 guarantee 2020.10.16 - Weihai Magnesium 24-June-20 20,000 2020.10.16 2,000 No Yes 2023.10.16 2018.1.31 - Jilin Wanfeng 24-June-20 25,500 2018.01.31 18,200 No Yes 2023.11.20 2020.11.27 - Jilin Wanfeng 24-June-20 12,000 2020.11.27 8,000 No Yes Joint liability 2022.11.26 and several 2020.05.22 - Jilin Wanfeng 24-June-20 10,000 2020.05.22 5,000 No Yes guarantee 2021.05.21 2020.10.22 - Jilin Wanfeng 24-June-20 2020.10.22 4,000 No Yes 2021.10.21 Jilin Wanfeng 24-June-20 8,000 Yes Yes 75 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Wanfeng 24-June-20 16,000 Yes Yes Motorcycle Wheel Wanfeng 2019.1.11 - 24-June-20 48,500 2019.01.11 30,600 No Yes Motorcycle Wheel 2021.1.11 Wanfeng 2020.4.10 - 24-June-20 15,000 2020.04.10 15,000 No Yes Motorcycle Wheel 2021.4.9 Joint liability Wanfeng 2020.3.9 - 24-June-20 5,000 2020.03.09 5,000 and several No Yes Motorcycle Wheel 2021.3.5 guarantee Wanfeng 2020.3.20- 24-June-20 5,000 2020.03.20 5,000 No Yes Motorcycle Wheel 2021.3.18 Wanfeng 2020.10.19- 24-June-20 10,000 2020.10.19 8,000 No Yes Motorcycle Wheel 2023.10.19 Wanfeng 24-June-20 5,000 Yes Yes Motorcycle Wheel 2015.5.8 - India Wanfeng 24-June-20 21,000 2015.05.08 11,412 No Yes 2023.5.14 India Wanfeng 24-June-20 Joint liability Yes Yes and several India Wanfeng 24-June-20 7,000 guarantee Yes Yes 2020.2.18 - India Wanfeng 24-June-20 7,000 2020.02.18 2,669 No Yes 2025.2.18 Chongqing 2020.1.16 - 24-June-20 10,000 2020.01.16 10,000 Yes Yes Wanfeng 2022.1.16 Joint liability Chongqing 24-June-20 9,000 and several Wanfeng guarantee Chongqing 2020.7.1 - 24-June-20 5,680 2020.07.01 5,680 No Yes Wanfeng 2023.7.1 2020.11.13 - Shanghai Dacromet 24-June-20 2,500 2020.11.13 2,500 No Yes Joint liability 2021.11.12 Shanghai Dacromet 24-June-20 8,000 and several Yes Yes guarantee Shanghai Dacromet 24-June-20 5,000 Yes Yes Joint liability Meridian New 2017.6.23 - 24-June-20 18,000 2017.06.23 8,227 and several No Yes Material 2023.12.25 guarantee Joint liability Guangdong 2020.6.22 - 24-June-20 15,000 2020.06.22 12,835 and several No Yes Motorcycle Wheel 2021.6.20 guarantee 76 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Joint liability Ningbo Dacromet 24-June-20 2,000 and several Yes Yes guarantee Joint liability Shangda Tu Fu 24-June-20 2,000 and several Yes Yes guarantee Joint liability 2020.12.02 - Wuxi Xiongwei 24-June-20 15,000 2020.12.02 10,000 No Yes and several 2021.03.23 Wuxi Xiongwei 24-June-20 10,000 guarantee Yes Yes Total Amount of Guarantees Total Amount of Guarantees to Towards Subsidiaries Actually Subsidiaries Approved during the 356,680 110,984.18 Occurred during the Reporting Reporting Period (B1) Period (B2) Total Outstanding Guarantee Total Amount of Guarantees to Balance Towards Subsidiaries at Subsidiaries Approved by the End of the 356,680 189,423.04 Reporting Period (B3) the End of the Reporting Period (B4) Subsidiaries' Guarantees to Subsidiaries Announcement Guarantee Actual Actual Date of Disclosure Guarantee Type of Term of Due or for Related Guaranteed Party Occurrence Guarantee of the Guarantee Amount Guarantee Guarantee Not Parties or Date Amount Amount Not The total amount of the Company's guarantees (the total of the above three items) 77 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Total Amount of Guarantees Total Amount of Guarantees Approved 506,680 Actually Occurred during the 163,183.38 during the Reporting Period (A1+B1+C1) Reporting Period (A2+B2+C2) Total Amount of Guarantees Approved Total Outstanding Guarantees by the End of the Reporting Period 506,680 Balance at the End of the 241,622.24 (A3+B3+C3) Reporting Period (A4+B4+C4) Total Amount of Actual Guarantees (A4+B4+C4) as a 45.13% Percentage of the Company's Net Assets Of which: The balance of guarantees provided for shareholders, actual controllers and 52,199.2 their related parties (D) Balance of Debt Guarantees Directly or Indirectly Offered to Guaranteed 0 Objects with Asset-liability Ratio Exceeding 70% (E) The amount of the total guarantee exceeding 50% of the net assets (F) 112,881.43 Total Amount of the Above Three Guarantees (D+E+F) 165,080.63 For unexpired guarantees, the guarantee liability has occurred during the none reporting period or may bear joint liability for repayment (if any) Instructions for providing external guarantees in violation of prescribed none procedures (if any) Description of the specific circumstances of the use of composite guarantees No (2) Non-compliance external guarantees 78 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report √Applicable □ Not applicable Unit: 10,000 RMB Balance of Percentag Non- Percentag Amount of e of the complianc e of the Estimate Non- Expecte Estimate most e most d Guarantee Relationship with complianc Type of Term of d d Recent Guarantee Recent Release d Party Listed Company e Guarantee Guarantee Release Release Audited s at the Audited Time Guarantee Method Amount Net End of Net (Month) s Assets Reporting Assets Period Wanfeng Controlling 2019.01.15- 31,350 5.10% 0 0% Released Released Group shareholder 2020.01.15 Pledge guarantee Wanfeng Controlling 2019.10.24- 31,600 5.14% 0 0% Released Released Group shareholder 2020.10.23 Wanfeng Controlling Joint liability and 2019.07.19- 69,762 11.34% 0 0% Released Released Group shareholder several guarantee 2024.07.18 Total 132,712 21.58% 0 0% 79 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 3. Entrust others to manage cash assets (1) Entrusted wealth management √Applicable □ Not applicable Unit: 10,000 RMB Balance Overdue Specific types Capital source Amount before uncollected maturity amount Bank financial products The Company’s owned funds 267.44 0 0 Total 267.44 0 0 Specific situation of high-risk entrusted financial management with large single amount or low security, poor liquidity and without guarantee of principal. □ Applicable √ Not applicable Entrusted financial management expected to be unable to recover the principal or other situations that may lead to impairment. □ Applicable √ Not applicable (2) Entrusted loans □ Applicable √ Not applicable No such case in the reporting period. 4. Significant contracts in operation □ Applicable √ Not applicable 5. Other significant contracts □ Applicable √ Not applicable No such case in the reporting period. XVIII. Social Responsibility 1. Fulfillment of social responsibilities The Company has always been adhering to the values of "eternal value enhancement and continuous dedication to society", and following the business philosophy of "green Wanfeng, digital Wanfeng, and credible Wanfeng". The Company aims to build the best-in-class enterprise leading in the industry with strong R&D capability, career development, and “Safety, Green, Health" practices. The Company will advance towards the vision of "becoming globally 80 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report recognized and long-standing enterprise”, and the goal of “being strong, reputable and sustainable”. The Company strictly follows the Company Law, Shenzhen Stock Exchange Listed Companies Stock Listing Rules, Shenzhen Stock Exchange Listed Companies Standard Operation Guidelines and other relevant laws and regulations, continuously improves the corporate governance, optimizes the internal control system, and standardizes operations. The Company actively fulfills information disclosure obligations, holds performance briefings in accordance with regulations, and answers questions related to periodic reports and company operations within the scope of the rules. The Company actively maintains effective communication with investors, accepts institutional research and releases the "Investor Relations Activity Record Sheet" in a timely manner, and communicates with investors through various methods such as investor telephone calls, faxes, company websites, and investor relations interactive platforms, which has improved the Company’s transparency and integrity. With the responsibility and mission of "providing customers with high-quality products and satisfactory services", while continuously creating value for shareholders, the Company also actively assumes responsibilities to employees, customers, suppliers, society and other related parties, and adheres to the equal emphasis on economic, social and environmental benefits to achieve the Company's sustainable development. The Company implements five major projects, including the "Caring Project, Democracy Project, Quality Project, Housing Project, and Health Project", strictly abides by the Labor Law and Labor Contract Law, establishes a care and rights protection organization, implements collective contracts, and protects the legal rights of employees in accordance with the law; improve the labor safety and health system, improve the labor environment, ensure the safety of employees, reduce the rate of work-related accidents, and ensure the physical and mental health of employees; conduct education and training and various recreational and sports activities to cultivate employee sentiment, created the corporate spirit of "efficiency, excellence, service, dedication", further enhance corporate cohesion, and build a harmonious win-win relationship between labor and capital; focus on the career development of employees, actively carry out employee training, encourage and support employees to participate in external training, and improve their comprehensive ability, provide more opportunities for employee development. For shareholders, the Company improves corporate governance, strictly enforces the decisions of the shareholders meeting, accepts the supervision of the shareholders meeting, and discloses information according to law. While protecting the legitimate rights and interests of shareholders, the Company attaches importance to the return to shareholders. The Company has formulated a shareholder dividend return plan, implemented a relatively stable profit distribution plan, and provided investors with stable and reasonable returns on the premise of ensuring the Company's normal operation and long- 81 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report term development. For creditors, the Company formulates strict and feasible borrowing and repayment plans every year, and all due debts can be paid off in time, to establish a good corporate image for creditors and keep the debt financing channels open. While pursuing economic benefits, the Company attaches great importance to environmental protection, energy conservation and consumption reduction, and regards building a green enterprise as an important part of its sustainable development strategy. The Company pays attention to social impact and social benefits to ensure that production activities meet the requirements of environmental management and reduce the impact on the environment. The environmental policy formulated by the Company is: focus on energy conservation and emission reduction, create a green environment, and build a happy home. On the one hand, comply with the laws, regulations and standards related to the ecological and environmental protection of the country (region) where it operates, and formulate and implement effective air, wastewater, waste management, and energy and water use goals, plans and measures , reduce the adverse impact on the environment; on the other hand, establish an effective information communication and consultation mechanism with the Company’s internal and external stakeholders, and accept the supervision of investors and the public. Adhering to the value of "eternally enhance value and continue to contribute to society", while the Company is growing, it actively contributes to the society. The Company focuses on four public welfare themes of "charitable donations, education, cultural and sports, community development ". After the outbreak of Covid-19, the Company immediately donated 1 million yuan to the Zhejiang Charity Federation. In the future, the Company will continue to take the initiative to assume social responsibility, support public welfare undertakings with its own actions, benefit the society, and make contributions to the construction of a harmonious and beautiful society contribution. 2. Fulfillment of the social responsibility of targeted poverty alleviation In the reporting year, the Company has not carried out targeted poverty alleviation work, and there is no follow-up targeted poverty alleviation plan for the time being. 3. Environmental protection Whether the Company or the Company’s subsidiaries are critical pollutant enterprises disclosed by environmental protection authorities Yes 82 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Name of main Name of Numb Distribution Emission Total Approved Over pollutants and Emission Company or Emission mode er of of emission concentrati emissio total standard characteristic standards subsidiary outlets outlets on ns emission emission pollutants After being treated by the Wanfeng Inside the GB8978-1996- 13.59 33.26 Reach the CODcr sewage station, it will be 1 86mg/l Auto Wheel factory level 3 ton T/year standard discharged through nanotube After being treated by the Wanfeng Ammonia Inside the GB8978-1996- Reach the sewage station, it will be 1 4.93mg/l 0.95 ton 3.33 T/year Auto Wheel nitrogen factory level 3 standard discharged through nanotube After treatment, it is discharged Wanfeng Inside the GB16297-1996- 34.93 83.03 Reach the VOCs through a 15-meter pipeline to 5 17.8mg/m3 Auto Wheel factory level 2 ton T/year standard high altitude After treatment, it is discharged Wanfeng Inside the GB16297-1996- Reach the SO2 through a 15-meter pipeline to 3 3 mg/m3 3.26 ton 16.5 T/ year Auto Wheel factory level 2 standard high altitude After treatment, it is discharged Wanfeng Inside the GB16297-1996- 23.36 Reach the Nox through a 15-meter pipeline to 3 1.34mg/m3 75 T/year Auto Wheel factory level 2 ton standard high altitude Wanfeng After being treated by the Inside the GB8978-1996- 24.62 T/ Reach the Motorcycle CODcr sewage station, it will be 2 86mg/l 8.25 ton factory level 3 year standard Wheel discharged through nanotube Wanfeng After being treated by the Ammonia Inside the GB8978-1996- 0.825 2.462 T/ Reach the Motorcycle sewage station, it will be 2 4.93mg/l nitrogen factory level 3 ton year standard Wheel discharged through nanotube Wanfeng After treatment, it is discharged Inside the GB16297-1996- 16.74 164.94 T/ Reach the Motorcycle VOCs through a 15-meter pipeline to 6 28.54mg/ m3 factory level 2 ton year standard Wheel high altitude Wanfeng After treatment, it is discharged Inside the GB16297-1996- 13.32 T/ Reach the Motorcycle SO2 through a 15-meter pipeline to 7 1.5mg/ m3 1.91 ton factory level 2 year standard Wheel high altitude Wanfeng After treatment, it is discharged Inside the GB16297-1996- 20.05 Reach the Motorcycle NOx through a 15-meter pipeline to 7 24mg/ m3 63.2 T/ year factory level 2 ton standard Wheel high altitude After treatment, it is discharged Shanghai Inside the Reach the VOCs through a 15-meter pipeline to 2 32.7mg/m3 DB31/933-2015 / / Dacromet factory standard high altitude 83 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report After being treated by the Northwest Weihai GB8978-1996- Reach the CODcr sewage station, it will be 1 corner of the 28mg/l 5.88 ton 6.22 T/year Wanfeng level 3 standard discharged through nanotube factory After being treated by the Northwest Weihai Ammonia GB8978-1996- Reach the sewage station, it will be 1 corner of the 0.92 mg/l 0.59 ton 0.62 T/year Wanfeng nitrogen level 3 standard discharged through nanotube factory After treatment, it is discharged Weihai Inside the DB37/2801.5- 9.295 T/ Reach the VOCs through a 15-meter pipeline to 2 2.25mg/m3 7.12 ton Wanfeng factory 2018 year standard high altitude After treatment, it is discharged GB16297-1996- Weihai Inside the 6.134 Reach the NOx through a 15-meter pipeline to 3 148mg/m3 level 2; 6.02 ton Wanfeng factory T/year standard high altitude DB37/2376-2013 After treatment, it is discharged GB16297-1996- Weihai Inside the Reach the SO2 through a 15-meter pipeline to 3 7.5mg/m3 level 2; 1.12 ton 1.87 T/year Wanfeng factory standard high altitude DB37/2376-2013 After treatment, it is discharged Jilin Inside the GB16297-1996- Reach the SO2 through a 15-meter pipeline to 18 9mg/ m3 5.1ton 16.3 T/year Wanfeng factory level 2 standard high altitude After treatment, it is discharged Jilin Inside the GB16297-1996- Reach the NOx through a 15-meter pipeline to 18 31mg/ m3 15.7 ton 47.7 T/year Wanfeng factory level 2 standard high altitude After treatment, it is discharged Jilin Inside the GB16297-1996- 124.8 Reach the VOCs through a 15-meter pipeline to 2 12.56mg/ m3 48.2 ton Wanfeng factory level 2 T/year standard high altitude After being treated by the Jilin Inside the GB8979-1996- Reach the CODcr sewage station, it will be 1 110mg/L 18.2 ton 62 T/year Wanfeng factory level 3 standard discharged through nanotube After being treated by the Jilin Ammonia Inside the GB8979-1996- Reach the sewage station, it will be 1 2.05 mg/L 0.34 ton 0.9 T/year Wanfeng nitrogen factory level 3 standard discharged through nanotube After treatment, it is discharged Weihai Inside the DB37/2801.5- Reach the VOCs through a 15-meter pipeline to 2 4.4mg/l 1.6 ton / Magnesium factory 2018 standard high altitude After treatment, it is discharged GB16297-1996- Weihai Inside the Reach the NOx through a 15-meter pipeline to 1 20mg/l level 2; 0.86 ton / Magnesium factory standard high altitude DB37/2376-2013 84 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Guangdong After treatment, it is discharged Inside the DB-44/816-2010- 26.68 Reach the Motorcycle VOCs through a 15-meter pipeline to 2 25.7mg/l 8.41 ton factory Second period T/year standard Wheel high altitude Construction and operation of pollution control facilities The Company and its subsidiaries strictly adhere to the Environmental Protection Law of the People's Republic of China, Water Pollution Prevention Law of the People's Republic of China, Air Pollution Prevention Law of the People's Republic of China, Environmental Noise Pollution Prevention Law of the People's Republic of China, Solid Waste Pollution Prevention Law of the People's Republic of China, and other laws and regulations, actively adopting high-efficiency and environmentally-friendly new technologies to promote clean production in an all-round way and meet environmental protection requirements for all emission indicators. (1) Wastewater treatment The Company and its subsidiaries all have built sewage treatment stations. After pretreatment, all wastewater meets the national or local standards and discharged through nanotube. (2) Waste gas treatment Coating exhaust gas is purified and discharged through exhaust gas treatment device (zeolite runner concentration + RTO, dry filtration + activated carbon adsorption + catalytic combustion, etc.). The smelting exhaust gas is purified before discharge (bag dust removal, three-stage water shower, etc.). All emissions meet national or local regulations. At present, waste gas and wastewater treatment equipment are operating normally, and all pollutant indicators are within the specified standard range. Shanghai Dacromet has established VOC adsorption, odor removal, and particulate matter spraying and dust removal. All three exhaust gas treatment facilities have passed the inspection and are in good operation. After the exhaust gas treatment, the emissions have reached the Shanghai air emission standard. 85 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (3) Solid waste treatment In order to strengthen environmental management, raise awareness of environmental protection, and control the storage and disposal of hazardous waste, the Company supervises its subsidiaries to build standardized hazardous waste storage sites in strict accordance with the Hazardous Waste Storage Pollution Control Standard" (GB18597-2001), and entrust relevant qualified institutions to regulate the disposal. The relevant formalities are complete. As for general industrial solid wastes temporarily unused or unusable, our company set up storage sites or adopt harmless disposal measures. Environmental Impact Assessment (EIA) of construction projects and other administrative permits for environmental protection The environmental impact assessment and acceptance of construction projects of the Company and its subsidiaries are declared and approved in accordance with relevant regulations, and the procedures and corresponding documents are complete. Environmental Contingency Plan In accordance with the requirements of relevant regulations, the Company and its subsidiaries have prepared and filed "Contingency Plan for Sudden Environmental Incidents". Combined with the implementation of environmental emergency plans, the Company evaluates environmental risks, drafts plan and conducts drills annually. Environmental self-monitoring program The Company and its subsidiaries are equipped with automatic wastewater monitors for 7*24. The monitoring indicators, monitoring methods, implementation of emission standards and standard limits for pollutants have been clearly specified and strictly implemented. At the same time, a third-party testing agency is regularly entrusted to conduct wastewater and exhaust gas testing and issue testing reports annually. Other environmental information that should be disclosed Not applicable Other environmental information Not applicable 4. Fulfillment of the social responsibility of targeted poverty alleviation 86 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Not applicable XIX. Other Significant Events □ Applicable √ Not applicable There were no other significant issues that need to be explained during the current reporting period. XX. Significant Events of the Company’s Subsidiaries □ Applicable √ Not applicable 87 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section VI: Changes in Shares and Information about Shareholders I. Changes in shares 1. Changes in shares Unit: Share Before Changes in the period (+, -) After Share New Bonus transferred Shares Ratio Shares Others Subtotal Shares Ratio share from capital Issued reserve 1. Shares with 73,144,170 3.34% 24,381,390 24,381,390 97,525,560 4.46% restriction 1) Shares held by state 2) Shares held by state-owned legal person 3) Other domestic 73,144,170 3.34% 24,381,390 24,381,390 97,525,560 shares Of which: Shares held by domestic legal person Shares held by domestic natural 73,144,170 3.34% 24,381,390 24,381,390 97,525,560 person 88 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 4) Foreign shares Of which: Shares held by foreign legal person Shares held by foreign natural person 2. Shares without restriction 2,113,735,508 96.66% -24,381,390 -24,381,390 2,089,354,118 95.54% 1) RMB ordinary 2,113,735,508 96.66% -24,381,390 -24,381,390 2,089,354,118 95.54% shares 2) Domestically listed foreign shares 3) Overseas listed foreign shares 4) Others 3. Total 2,186,879,678 100.00% 2,186,879,678 100.00% Reason for the changes in share capital □Applicable √Not applicable Approval for changes in share capital □Applicable √Not applicable 89 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Transfer of shares □Applicable √Not applicable Information about the implementation of share repurchase √Applicable □Not applicable 1) The Company held the 24th meeting of the sixth Board of Directors on December 25, 2018 and approved the "Proposal on the Repurchase of Company Shares". As of December 24, 2019, the Company share repurchase plan has expired. Accumulatively through the repurchase special securities account, 45,312,250 shares were repurchased through centralized auction trading, with a total transaction amount of 332,172,772.73 yuan. The Company's share repurchase plan has been implemented. 2) The Company held the 32nd meeting of the sixth Board of Directors on December 26, 2019 and approved the "Proposal on the Repurchase of Company Shares". As of December 25, 2020, the Company share repurchase plan has expired. Accumulatively through the repurchase special securities account, 35,501,808 shares were repurchased through a centralized bidding transaction, accounting for 1.62% of the company's total share capital, and the total transaction amount was 239,640,478.46 yuan. The Company's share repurchase plan has been implemented. 3) The Company held the sixth meeting of the seventh Board of Directors on December 30, 2020 and Approved the "Proposal on the Repurchase of Company Shares". The repurchase is to trade through the Shenzhen Stock Exchange with its own funds or self-raised funds through centralized bidding. The total amount of the repurchased shares is not less than RMB 100 million and not more than RMB 200 million. The repurchase price does not exceed RMB 11 per share (inclusive). The repurchase period is no more than 12 months from the date of approval of this repurchase plan by board of directors. As of December 31, 2020, the Company's share repurchase plan has not yet been implemented. As of February 5, 2021, 33,958,100 shares were repurchased through a centralized bidding transaction through a special security repurchase account, accounting for 1.55% of the company’s total share capital. The highest transaction price was RMB 6.91 per share and the lowest transaction price was RMB 5.25 per share, with a total transaction amount of 199,999,589.41 yuan. The Company's share repurchase plan has been implemented. 90 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report As of the disclosure date of this report, the Company has cumulatively repurchased 114,772,158 shares through centralized bidding transactions through special securities repurchase accounts, accounting for 5.25% of the company's total share capital, and the total transaction amount is 771,812,840.60 yuan. The progress on reduction of re-purchase shares by means of centralized bidding □Applicable √Not applicable Effects of changes in share capital on the basic earnings per share (EPS), diluted EPS, net assets per share attributable to common shareholders of the Company, and other financial metrics over the last year and last period □Applicable √Not applicable Other contents that the Company considers necessary or required by the security’s regulatory authorities to disclose □ Applicable √ Not applicable 2. Changes in restricted shares □ Applicable √ Not applicable Unit: Share Opening Unlock Closing Name of Vested in balance of shares in balance of Note for restricted Date of sharehold current restricted current restricted shares unlocking er period shares period shares During the reporting period, Ms. Chen Ailian ceased to be a director Ms. Chen 73,144,170 24,381,390 0 97,525,560 of the Company, and all Jan 2021 Ailian the shares she held became restricted shares. Total 73,144,170 24,381,390 0 97,525,560 -- -- II. Issuance and Listing of Securities 1. Securities (exclude preferred share) issued during the reporting period □ Applicable √ Not applicable 2. Explanation on changes in share capital & the structure of shareholders, the structure of assets and liabilities □ Applicable √ Not applicable 3. Existent shares held by internal staff of the Company 91 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report □ Applicable √ Not applicable III. Particulars about the shareholders and actual controller 1. Total number of shareholders and their shareholdings Unit: Share Total number of Total number of Total number of Total number of shareholders of shareholders of shareholders of preferred shareholders of common stocks at preferred stock with stock with resumed voting common stocks at 53,208 48,790 0 0 previous month-end resumed voting right at rights at previous month- the end of the of this report’s the end of the reporting end of this report’s reporting period disclosure period disclosure Shareholding status of shareholders holding more than 5% or the top 10 shareholders. Unit: Share Quantity of stocks Quantity of Pledged or frozen stocks Name Nature Ownership at the reporting restricted period end stocks held Status Quantity Domestic non- Wanfeng Auto Holding Group state-owned 33.37% 729,697,747 Pledged 575,419,088 corporate Aeon Life Insurance Company Limited – traditional insurance Other 6.28% 137,414,138 products Domestic Chen Ailian 4.46% 97,525,560 97,525,560 Pledged 79,380,000 natural person Zhejiang Wanfeng Auto Wheel Co., Ltd - Dedicated Securities Other 3.70% 80,814,058 Account for Repurchase Shanghai Perseverance Asset Management L.L.P - Gaoyi Other 2.03% 44,500,000 Linshan No. 1 Yuanwang Fund 92 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Aeon Life Insurance Company Limited – participating 1.94% 42,329,493 insurance products Domestic non- Shanghai Raas Blood Products Co. Ltd state-owned 1.83% 39,960,800 corporate Shaanxi Intl Trust-Shan Guo Tou- Jixiang Ruyi No.2 Targeted trust plan of assembled funds Other 1.68% 36,700,000 CCB Principal Asset Management- Industrial Bank- China Fortune Trust- China Fortune TrustHuizhi Investments No.54 Other 1.67% 36,523,687 Structural trust plan of assembled funds Chang’An International Trust Co., Ltd. – Chang’An Trust- Chang’An Investment No.633 Securities Investments trust Other 1.67% 36,420,000 plan of assembled funds Among the above-mentioned top ten shareholders, Wanfeng Auto Holding Group holds 33.37% of the Company’s shares and is the controlling shareholder. Ms. Ailian Chen holds 4.46% of the Company’s shares and owns 39.6% of Wanfeng Auto Holding Group, therefore the actual controller of the Company. Among other shareholders, CCB Principal Asset Management- Industrial Bank- China Fortune Trust- China Fortune Explanation on the above-mentioned shareholders’ affiliated Trust Huizhi Investments No.54 Structural Pooled Funds Trust Plan became a shareholder through private relationship or concerted action placement in 2015. Aeon Life Insurance Company Limited – traditional insurance products and Aeon Life Insurance Company Limited – participating insurance products are persons acting in concert. The Company is not made aware whether there is any affiliated relationship between the other shareholders or whether they are persons acting in concert. Explanation on the above-mentioned top ten shareholders Not applicable that are engaged in margin trading business (if any) 93 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Shareholding status of the top 10 non-restricted shareholders Unit: Share Number of Common Type of shares Shares Held without Name of Shareholder Restrictions at the End of the Type Amount Reporting Period Wanfeng Auto Holding Group 729,697,747 RMB common stock 729,697,747 Aeon Life Insurance Company Limited – traditional insurance products 137,414,138 RMB common stock 137,414,138 Zhejiang Wanfeng Auto Wheel Co., Ltd - Dedicated Securities Account for Repurchase 80,814,058 RMB common stock 80,814,058 Shanghai Perseverance Asset Management L.L.P - Gaoyi Linshan No. 1 Yuanwang Fund 44,500,000 RMB common stock 44,500,000 Aeon Life Insurance Company Limited – participating insurance products 42,329,493 RMB common stock 42,329,493 Shanghai Raas Blood Products Co. Ltd 39,960,800 RMB common stock 39,960,800 Shaanxi Intl Trust-Shan Guo Tou- Jixiang Ruyi No.2 Targeted trust plan of assembled funds 36,700,000 RMB common stock 36,700,000 CCB Principal Asset Management- Industrial Bank- China Fortune Trust- China Fortune 36,523,687 RMB common stock 36,523,687 TrustHuizhi Investments No.54 Structural trust plan of assembled funds Chang’An International Trust Co., Ltd. – Chang’An Trust- Chang’An Investment No.633 Securities 36,420,000 RMB common stock 36,420,000 Investments trust plan of assembled funds Chang’An International Trust Co., Ltd. – Chang’An Trust- Chang’An Investment No.669 Securities 34,720,374 RMB common stock 34,720,374 Investments trust plan of assembled funds Among the above-mentioned top ten shareholders, Wanfeng Auto Holding Explanation of Associated Relationship or Concerted Actions among Top Ten Common Group holds 33.37% of the Company’s shares and is the controlling Shareholders without Trading Restrictions, and between Top Ten Common Shareholders shareholder. Ms. Ailian Chen holds 4.46% of the Company’s shares and without Trading Restrictions and Top Ten Common Shareholders owns 39.6% of Wanfeng Auto Holding Group, therefore the actual controller of the Company. Among other shareholders, CCB Principal Asset Management- Industrial Bank- China Fortune Trust- China Fortune 94 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Trust Huizhi Investments No.54 Structural Pooled Funds Trust Plan became a shareholder through private placement in 2015. Aeon Life Insurance Company Limited – traditional insurance products and Aeon Life Insurance Company Limited – participating insurance products are persons acting in concert. The Company is not made aware whether there is any affiliated relationship between the other shareholders or whether they are persons acting in concert. Explanation of Top Ten Common Shareholders’ Participation in Securities Margin Not applicable Trading (If Any) (Refer to Note 4) Any of the Company’s top 10 common shareholders or top 10 non-restricted common shareholders conducted any agreed buy-back in the reporting period □ Yes √ No No such cases during the current reporting period. 2. Particulars about controlling shareholder of the Company Nature of the controlling shareholder: Natural person holding Type of controlling shareholder: Legal person 95 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Legal Representative Date of Name Organization code Business scope /People in establishment charge Industrial investment; production and sales: automobile and motorcycle parts, machinery and Wanfeng Auto electronic Holding Group Chen Ailian 4-Mar-98 91330624704501065X products; civil Co., Ltd. aircraft import and export; goods import and export; technology import and export. Shares held by the controlling shareholder in other listed companies through controlling or No holding during the reporting period Change of the controlling shareholder during the reporting period □ Applicable √ Not applicable The Company’s controlling shareholder has not changed during the reporting period. 3. Particulars about the Company’s actual controller & concerted parties Nature of the actual controller: Domestic natural person Type of the actual controller: Natural person Relationship with the Whether he/she has obtained the right of Name Nationality actual residence in another country or region controller Ms. Chen Ailian Herself China No Wu Liangding family (Mr. Wu Liangding Themselves China No and Mr. Wu Jie) 96 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Ms. Chen Ailian: Chinese nationality, no permanent residency abroad, born in January 1958, postgraduate degree, senior economics professional qualification; Chair of the Board of Directors of Wanfeng Auto Holding Group Co., Ltd. And Chair of Wanfeng Jinyuan Holding Group Co., Ltd.; successively won honors and titles of Chinese Business Master, National Outstanding Entrepreneur, National Outstanding Builder of Socialist Society with Chinese Characteristics, National “March 8th” Red Flag Bearer, “China’s Top Ten Outstanding Women”, “Zhejiang Merchants”, China’s most influential “Business Women Diamond Mulan”, “Hu Run Top 100 Richest Entrepreneurs”; elected as a representative of the 17th National Congress of the Communist Party of China, a representative of the 12 th and 13th National People’s Congress, a member of the Non-Public Special Committee of the National Party Building Research Association, a party representative of the 11th, 12th, 13th, 14th of the Zhejiang Provincial Committee of the Communist Party of China; served as Vice President of China Enterprise Confederation, Vice President of Zhejiang Chamber of Commerce, Vice President of Zhejiang Federation of Industry and Commerce, President of Zhejiang Women Entrepreneurs Association, Secretary of Party Committee of Zhejiang Main occupation Chamber of Commerce in Shanghai, etc. and position Mr. Wu Liangding: Chinese nationality, no permanent residency abroad, born in September 1946, senior economics professional qualification, “National Light Industry Labor Model”, founder of Zhejiang Zhongbao Industrial Holding Co., Ltd. And Zhejiang Rifa Holding Group Co., Ltd. Mr. Wu Jie: Chinese nationality, no permanent residency abroad, born in October 1967, Master Degree of Law, economist, currently Chair, CEO and President of Zhejiang Rifa Holding Group Co., Ltd., Chair of Zhejiang Rifa Precision Machinery Co., Ltd. He won the second prize of the National Science and Technology Progress Award, the National 863 Program CIMS Theme Work Advanced Worker, Zhejiang Outstanding Private Entrepreneur, the 3rd Zhejiang Youth Science and Technology Gold Award, Shaoxing City Youth Construction Hero, the third price of Zhejiang Textile Industry Science, and Technology Progress Award. He is the Vice-Chair of Zhejiang Private Economic Research Association, Standing Director of China Economic Development Forum, Standing Director of Zhejiang Enterprise Confederation 5th Standing Director, 7th Shaoxing Municipal People's Congress, and many others honorary titles. Domestic and Ms. Chen Ailian, Mr. Wu Liangding and Mr. Wu Jie are the actual controllers foreign listed of Rifa Precision Machinery (002520.SZ). companies controlled in the Ms. Chen Ailian is one of the actual controllers of Changchun Jingkai past 10 years (600215.SH). Change of the actual controller during the reporting period □ Applicable √ Not applicable 97 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report No such change during the reporting period. The ownership and controlling relationship between the actual controller and the Company is detailed as follows: Ailian Chen Liangding Wu’s Family 39.60% 26.26% Wanfeng Auto Holding Co., Ltd 4.46% 0.57% 33.37% Wanfeng Auto Wheel Co., Ltd The actual controller controls the Company via trust or other ways of asset management □ Applicable √ Not applicable 4. Particulars about other corporate shareholders with shareholding proportion over 10% □ Applicable √ Not applicable 5. Particulars on shareholding reduction restrictions for the controlling shareholders, actual controller, restructurer or other committing parties □ Applicable √ Not applicable 98 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section VII: Information of Preferred Shares □ Applicable √ Not applicable No existing preferred shares for the Company during the current reporting period. 99 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section VIII: Information about Convertible Bonds □ Applicable √ Not applicable No existed Convertible bonds for the Company during the current reporting period. 100 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section IX: Information about Directors, Supervisors, Senior Management I. Shareholding Changes of Directors, Supervisors, Senior Management Shares held Shares Shares Shares held at the Termination increased decreased Other at the end Tenure Commencement beginning Name Title Gender Age of term of during the during the changes of the status of term of office of the office Period Period (Shares) Period Period (Shares) (Shares) (Shares) (Shares) Chen Director Resigned Female 63 2017.02.28 2020.06.08 97,525,560 0 0 0 97,525,560 Ailian Chen Bin Chair Incumbent Male 41 2019.03.25 2023.06.07 Chen Director Incumbent Female 50 2020.06.08 2023.06.07 Hanxia Director Dong General Incumbent Male 50 2017.02.28 2023.06.07 Ruiping Manager Li Yun Director Incumbent Male 43 2017.02.28 2023.06.07 Wu Director Incumbent Male 52 2020.06.08 2023.06.07 Xingzhong Deputy General Manager, Zhang Director, Incumbent Female 47 2020.06.08 2023.06.07 Yinfeng Secretary to Board of Directors Bu Yong Director Resigned Male 50 2017.02.28 2020.06.08 101 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report He Director Incumbent Female 48 2020.06.08 2023.06.07 Qiongwen Yang Independent Resigned Male 50 2017.02.28 2020.06.08 Haifeng Director Chu Independent Incumbent Male 45 2017.02.28 2023.06.07 Minhong Director Wang Independent Resigned Male 45 2017.02.28 2020.06.08 Xiao Director Independent Xie Tao Incumbent Male 57 2020.06.08 2023.06.07 Director Guan Independent Incumbent Male 47 2020.06.08 2023.06.07 Zheng Director Chair of Yang Board of Resigned Female 52 2017.02.28 2020.06.08 Huihui Supervisors Chair of Xu Board of Resigned Male 42 2020.06.08 2020.08.16 Zhenyu Supervisors Chair of Xu Board of Incumbent Male 50 2020.06.08 2023.06.07 Zhiliang Supervisors Yu Supervisor Incumbent Male 49 2017.02.28 2023.06.07 Guangyao Tong Supervisor Incumbent Male 50 2017.02.28 2023.06.07 Shengkun Yu Supervisor Resigned Female 41 2017.05.22 2020.06.08 Tingting Hu Supervisor Incumbent Female 34 2020.09.07 2023.06.07 Xingxing Chen Supervisor Incumbent Male 44 2020.06.08 2023.06.07 Weidong Deputy Yang General Incumbent Male 50 2019.01.10 2023.06.07 Huasheng Manager 102 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Deputy Wu General Incumbent Male 46 2017.05.22 2023.06.07 Shaoying Manager Chen CFO Incumbent Male 45 2017.02.28 2023.06.07 Shanfu Total -- -- -- -- -- -- 97,525,560 0 0 0 97,525,560 II. Changes of Directors, Supervisors and Senior Management √ Applicable □ Not applicable Name Position Type Date Reason Leave the position when term of Chen Ailian Director 2020.06.08 -- office expires Leave the position when term of Zhang Yinfeng Director 2020.06.08 -- office expires Leave the position when term of Bu Yong Director 2020.06.08 -- office expires Leave the position when term of Yang Haifeng Independent Director 2020.06.08 -- office expires Leave the position when term of Wang Xiao Independent Director 2020.06.08 -- office expires Leave the position when term of Yang Huihui Chair of Board of Supervisors 2020.06.08 -- office expires Xu Zhenyu Chair of Board of Supervisors Resigned 2020.08.16 Passed away on 2020.08.16 Leave the position when term of Yu Tingting Supervisor 2020.06.08 -- office expires 103 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report III. Positions and Incumbency Professional background, work experience and main responsibilities of the Company's current directors, supervisors, and senior management personnel. 1. Mr. Chen Bin: Male, born in 1979, MBA, University of Hull. He is the Chair of Zhejiang Wanfeng Auto Wheel Co., Ltd., Director and President of Wanfeng Auto Holding Group, Chair of Wanfeng Aviation Industry Co., Ltd., Chair of Wanfeng Aircraft Industry Co., Ltd. He has successively won the awards and honors of “Chinese Master of Business Management”, “Chinese Senior Economist”, “Person of Year, Zhejiang Provincial Economy”, “Provincial Outstanding Entrepreneur”, “Provincial Outstanding Youth”, “Provincial Top Ten Rising Star Zhejiang Entrepreneurs Award”, “Provincial Top Ten Innovative Zhejiang Entrepreneurs”, “Provincial New Zhejiang Entrepreneurs”, “Provincial New Generation Entrepreneur”, “Provincial Youth Entrepreneurship Award”, Zhejiang "Ten Thousand Talents Program" talents etc. He was elected as the representative of the 12th and 13th People's Congress of Jilin Province, member of the 7th and 8th Standing Committee of the Shaoxing City of the CPPCC, and served as the Chair of the Wheel Committee of the China Automobile Manufacturers Association, the first Chair of the Zhejiang General Aviation Industry Association (Alliance), and the vice-Chair of the Zhejiang New Generation Entrepreneurs Association. 2. Mr. Dong Ruiping: Male, born in July 1970, EMBA of Fudan University, senior economics professional qualification. He is the Director and General Manager of Zhejiang Wanfeng Auto Wheel Co., Ltd., Chair of Weihai Wanfeng Auto Wheel Co., Ltd., Chair of Zhejiang Wanfeng Motorcycle Wheel Co., Ltd., Chair of Shanghai Fengtu Automobile Technology Co., Ltd., Chair of Chongqing Wanfeng Auto Aluminum Wheel Co., Ltd., Director of Wanfeng Auto Holding Group Co., Ltd.; Concurrently served as a representative of the Xinchang County People's Congress of Shaoxing City; Won the Top Ten Outstanding Youth of Weihai City and the Top Ten Outstanding Professional Managers of Zhejiang Province in 2018; He used to be the general manager and deputy general manager of Weihai Wanfeng Auto Wheel Co., Ltd. 3. Mr. Li Yun: Male, born in September 1977, EMBA of Fudan University. He is the Director of Zhejiang Wanfeng Auto Wheel Co., Ltd., Director of Ningbo Aoweier Wheel Co., Ltd., and General Manager of Jilin Wanfeng Auto Wheel Co., Ltd. He used to be the general manager of Jilin Wanfeng Auto Wheel Co., Ltd, general manager of Ningbo Aoweier Wheel Co., Ltd., the director of the president office of Wanfeng Auto Holding Group Co., Ltd., the Office Director, Party Group Member, and Office Director of the Xinchang County Chengdong New District Management Committee, and the Deputy Mayor of Shaxi Town Government of Xinchang County. 104 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 4. Mr. Wu Xingzhong: Male, born in October 1968, university graduate, senior engineer. He is the Director of Zhejiang Wanfeng Auto Wheel Co., Ltd., and the General Manager of Wuxi Xiongwei Precision Technology Co., Ltd. He used to be the Director of the technology center of Wanfeng Auto Holding Group, the General Manager of the coating department of Zhejiang Wanfeng Technology Development Co., Ltd., and the Assistant General Manager and Deputy General Manager (in charge of marketing) of Zhejiang Wanfeng Auto Wheel Co., Ltd. 5. Ms. Chen Hanxia: Female, born in September 1971, EMBA student. She is the Director of Zhejiang Wanfeng Auto Wheel Co., Ltd., the Director and Vice president of Wanfeng Auto Holding Group Co., Ltd. She used to be the Chief Financial Officer Assistant and Deputy Chief Financial Officer of Wanfeng Auto Holding Group Co., Ltd., and the Financial Manager of Zhejiang Wanfeng Auto Wheel Co., Ltd. 6. Ms. He Qiongwen: Female, born in October 1972, Master Degree in Real Estate Finance, University of Cambridge. She is Director of Zhejiang Wanfeng Auto Wheel Co., Ltd., the Deputy General Manager of Aeon Life Insurance Asset Management Co., Ltd. She successively held relevant management and investment positions in Ping An Insurance Company and Xinhua Asset Management Co., Ltd. She joined Aeon Life Insurance Co., Ltd. in May 2011, and successively served as Deputy General Manager of the investment department and Deputy General Manager of the asset management center of Aeon Life Insurance Co., Ltd. 7. Mr. Chu Minhong: Male, born in June 1975, master’s degree. He is the Independent Director of Zhejiang Wanfeng Auto Wheel Co., Ltd., Vice President, Secretary of the Board and Chief Financial Officer of Shanghai Plite Composite Materials Co., Ltd. He used to serve as Executive Director of Shenwan Hongyuan Securities Underwriting Sponsor Co., Ltd. 8. Mr. Xie Tao: born in August 1963, bachelor’s degree, member of ACCA, Singapore nationality. He is the Independent Director of Zhejiang Wanfeng Auto Wheel Co., Ltd., an Independent Director of China Yuchai International Limited and an Independent Director of Bull Group Co., Ltd. He used to be a former partner of PricewaterhouseCoopers, CEO of Agria Corporation, partner of Ernst & Young, partner of Housheng Investment Fund, CEO of Hunan Dakang International Agri-Food Co., Ltd. 9. Mr. Guan Zheng: Male, born in December 1973, MBA of Oxford University, Chair of Invest industrial Asia, Former Chair of Deutsche Bank North Asia, Managing Director Edmund Rothschild. 105 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 10. Mr. Xu Zhiliang: Male, born in March 1971, undergraduate, Chair of Board of Supervisors of Zhejiang Wanfeng Auto Wheel Co., Ltd. Director and Deputy Secretary of the party committee, and Director of the president's office of Wanfeng Auto Holding Group Co., Ltd., Zhejiang General Aviation Industry Association ( Alliance) Deputy Secretary-General, member of the 10th Xinchang County Committee of the Chinese People's Political Consultative Conference, and the 13th Party Representative of Xinchang County of the Communist Party of China; formerly Deputy Director, Organization Section Chief, Director of the Office, Member of the Departmental Conference of Shaoxing Yuecheng District Organization Department Office, Xinjiang Deputy principal of Yutian No. 2 Middle School in Hetian District (Aid Xinjiang), and vice-principal of Gaobu Town Middle School in Yuecheng District, Shaoxing City. 11. Mr. Chen Weidong: Male, born in December 1976, bachelor’s degree, statistician, International Certified Internal Auditor. He is the supervisor, manager of the audit department of Zhejiang Wanfeng Auto Wheel Co., Ltd., and once served in the marketing department, assistant of comprehensive statistics, manufacturing manager Assistant of Weihai Wanfeng Auto Wheel Co., Ltd, audit manager of Wanfeng Holding Group Co., Ltd. He has won the recognition from provincial and departmental level and prefecture (city) level once each. 12. Mr. Tong Shengkun: Male, born in August 1970, university degree, Supervisor and Chief Engineer of Zhejiang Wanfeng Auto Wheel Co., Ltd. He has presided over the development of more than 1,600 aluminum wheels, passed 22 provincial new product appraisals, and is responsible for the implementation of 2 national innovation projects and 3 provincial innovation projects. 2 national standards and 2 industry standards have been formulated and released. He is the Company's technical expert talent and has received the following honors: “The Top Ten Best New Xinchang People in 2005”, “The Seventh Batch of Top-notch Professional and Technical Talents in Xinchang County in 2007", the third-level training personnel of the "New Century 151 Talent Project" in Zhejiang Province in 2007, the Top Ten Enterprises Innovative Talents in Xinchang County in 2009,Excellent Enterprise Manager of Zhejiang Machinery Industry in 2016, Chief Engineer of Outstanding Project of China Transportation Association in 2019 13. Mr. Yu Guangyao: Male, born in October 1971, college degree, Supervisor of Zhejiang Wanfeng Auto Wheel Co., Ltd., and Manager of safety and environmental protection department. He used to serve as Director of General Manager Office and Chair of Labor Union, Manager of Internal Affairs Department of Manufacturing Center, Manager of Outsourcing Department, Factory Directorof Zhejiang Wanfeng Auto Wheel., Ltd., Director of Party Committee Office, Head of Discipline Inspection and Supervision Department of Wanfeng Auto Holding Group Co., Ltd. He has 106 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report received the following honors: Excellent Trade Union Worker of Xinchang County Federation of Trade Unions in 2002, Outstanding Trade Union Worker of Xinchang County Federation of Trade Unions in 2005, Active Worker of Shaoxing City Trade Union in 2011, Outstanding Individual Production Safety of Xinchang County in 2020. 14. Hu Xingxing: Female, born in January 1987, bachelor’s degree, Supervisor of Zhejiang Wanfeng Auto Wheel Co., Ltd., a supervisor of Wanfeng Auto Holding Group Co., Ltd., and deputy director of the Legal Affairs Center; formerly, she has served as the head of the Risk Management and Control Department of the Legal Center, Chief of the Compliance Management Department, Deputy Head of Risk Management and Control Department of Wanfeng Auto Holding Group Co., Ltd., 15. Ms. Zhang Yinfeng: Female, born in February 1974, bachelor degree, Deputy General Manager and Secretary of the Board of Directors of Zhejiang Wanfeng Auto Wheel Co., Ltd., Secretary of the Board of Directors of Weihai Wanfeng Auto Wheel Co., Ltd., Secretary of the Board of Directors of Ningbo Wanfeng Aoweier Wheel Co., Ltd., Secretary of the Board of Directors of Weihai Wanfeng Magnesium Technology Development Co., Ltd., Secretary of the Board of Directors of Jilin Wanfeng Auto Wheel Co., Ltd., Secretary of the Board of Directors of Chongqing Wanfeng Auto Aluminum Wheel Co., Ltd., Secretary of the Board of Directors of Zhejiang Wanfeng Motorcycle Wheel Co., Ltd., Secretary of the Board of Directors of Shanghai Dacromet Coating Industry Co., Ltd; She used to serve as Securities Affairs Representative of Zhejiang Wanfeng Auto Wheel Co., Ltd., and Assistant General Manager of Zhejiang Wanfeng Technology Development Co., Ltd. 16. Mr. Wu Shaoying: Male, born in November 1974, college degree, Deputy General Manager of Zhejiang Wanfeng Auto Wheel Co., Ltd. in charge of production. He used to be the Supervisor, the Director of the third plant and Manager of the manufacturing department of Zhejiang Wanfeng Auto Wheel Co., Ltd., Deputy General Manager and General Manager of Ningbo Aoweier Wheel Co., Ltd., and Deputy General Manager of Jilin Wanfeng Auto Wheel Co., Ltd. 17. Mr. Yang Huasheng: Male, born in August 1970, master’s degree, Deputy General Manager of Zhejiang Wanfeng Auto Wheel Co., Ltd. He used to be the General Manager Assistant, the Manager of the first international department, the Manager of the OEM department, the Deputy Manager of the second marketing center of Zhejiang Wanfeng Auto Wheel Co., Ltd., and the Business Director of the German SCHOTT Group. 107 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 18. Mr. Chen Shanfu: Male, born in April 1976, university degree, professional talent in corporate management. He is the CFO of Zhejiang Wanfeng Auto Wheel Co., Ltd., He used to be the Financial Manager of Shanghai Wanfeng Aluminum and Chongqing Wanfeng Motorcycle Wheel Co., Ltd, and the Director of capital management and the Deputy Financial Director of Wanfeng Auto Holding Group Co., Ltd. Position held in shareholders’ entities √Applicable □ Not applicable Compensation Position in and allowance Shareholder's Commencement Termination Name shareholders’ from the entity of the term of the term entities shareholders' entity Wanfeng Auto President, Chen Bin Holding Group 6-Feb-15 No Director Co., Ltd. Wanfeng Auto Chen Holding Group Vice President 1-Jan-17 Yes Hanxia Co., Ltd. Aeon Life Insurance Deputy He Asset General 1-Jan-17 Yes Qiongwen Management Manager Co., Ltd. Wanfeng Auto Xu Holding Group Director 26-Jul-18 Yes Zhiliang Co., Ltd. Wanfeng Auto Dong Holding Group Director 26-Jul-18 No Ruiping Co., Ltd. Wanfeng Auto Hu Holding Group Supervisor 29-Sept-20 Yes Xingxing Co., Ltd. Description of the position in shareholders’ N/A entities Positions held in other entities √Applicable □ Not applicable 108 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Compensation Position in and allowance Name of Commencement Termination Name other from the other entities of the term of the term entities shareholders' entity Vice President, Shanghai Plite Chief Chu Composite Financial 26-Feb-16 Yes Minhong Materials Co., Officer and Ltd. Secretary of the Board of Directors China Yuchai Independent Xie Tao International 1-Apr-19 Yes Director Limited Bull Group Independent Xie Tao 23-Dec-17 Yes Co., Ltd. Director Guan Chair of Investindustrial 1-Mar-20 Yes Zheng Asia Region Description of the position in N/A other entities Incumbent and resigned directors, supervisors and senior management personnel during the reporting period that have been imposed administrative penalties by the CSRC during the last three years. □ Applicable √ Not applicable IV. Remuneration of Directors, Supervisors, and Senior Management Decision-making procedures, determination basis, and actual payment of directors, supervisors, and senior executives' remuneration The work group under Remuneration Committee proposes data and calculation basis, and the Committee puts forward a salary appraisal plan. This remuneration plan of directors and supervisors will be Decision-making approved by the Board of directors and implement after the general procedures for the meeting of shareholders. The remuneration plan for senior management remuneration of will be approved by the board of directors. Directors, supervisors, and directors, supervisors, senior management submit reports and self-assessments of the annual and senior executives appraisal, and the Committee conducts appraisal based on the standards and completed performance (performance indicators are subject to external audit data), the appraisal results are submitted to the Board of Directors for approval by procedures. 109 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Remuneration is determined based on job responsibilities of directors and supervisors, the scope of the position, the Company’s profit growth, The basis for and the remuneration level of comparable companies. The monthly determining the salary is assessed by the Company's human resources department, and remuneration of the Company's actual completion indicators (subject to the external audit directors, supervisors, data) will be evaluated in accordance with the standards. The actual and senior managers annual salary will be determined after the evaluation results are submitted for approval in accordance with regulations. Actual payment of remuneration for During the reporting period, a total of RMB 8,555,300 paid to directors, directors, supervisors, supervisors, and senior management.. and senior executives Remuneration of directors, supervisors, and senior management personnel Unit: 10,000 RMB Total Remuneration Tenure remuneration Name Title Gender Age from related status from the parties (Y/N) Company Chen Ailian Director Female 63 Resigned Yes Chen Bin Chair Male 41 Incumbent 346.03 Chen Director Female 50 Incumbent Yes Hanxia Director Dong General Male 50 Incumbent 75.03 Ruiping Manager Li Yun Director Male 43 Incumbent 63.96 Wu Director Male 52 Incumbent 68.67 Xingzhong Deputy General Manager Zhang Director, Female 47 Incumbent 44.34 Yinfeng Secretary to Board of Directors Bu Yong Director Male 50 Resigned He Director Female 48 Incumbent Yes Qiongwen Yang Independent Male 50 Resigned 5 Haifeng Director Chu Independent Male 45 Incumbent 6 Minhong Director Independent Wang Xiao Male 45 Resigned 3 Director Independent Xie Tao Male 57 Incumbent 5 Director Guan Independent Male 47 Incumbent 3 Zheng Director 110 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Chair of Board Yang Huihui Female 52 Resigned of Supervisors Chair of Board Xu Zhenyu Male 42 Resigned of Supervisors Chair of Board Xu Zhiliang Male 50 Incumbent Yes of Supervisors Yu Supervisor Male 49 Incumbent 30.6 Guangyao Tong Supervisor Male 50 Incumbent 53.45 Shengkun Yu Tingting Supervisor Female 41 Resigned 7.25 Hu Xingxing Supervisor Female 34 Incumbent Yes Chen Supervisor Male 44 Incumbent 9.01 Weidong Deputy Yang General Male 50 Incumbent 48.48 Huasheng Manager Deputy Wu General Male 46 Incumbent 53.43 Shaoying Manager Chen CFO Male 45 Incumbent 33.28 Shanfu Total -- -- -- -- 855.53 Share incentives for directors, supervisors and senior executives in the Reporting Period □Applicable √Not applicable V. Company’s Employee 1. Statistics of employees, professional structure of the staff, and educational background Number of incumbent employees in the parent 1,487 company Number of incumbent employees in major 10,319 subsidiaries Number of incumbent employees 11,806 Number of employees receiving salaries in 11,806 current period Number of retired employees requiring the parent Company and 0 its subsidiaries to bear costs Professional structure Tier Number of employees Production staff 8,827 Sales staff 172 Technical staff 1,576 Financial staff 135 111 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Administrative Staff 1,096 Total 11,806 Educational background Education background Number of employees Master and/or doctor/or above 159 Bachelor 1,143 College 2,206 High school and below 8,298 Total 11,806 2. Staff remuneration policy The salary includes basic salary, performance bonus, overtime salary, other bonuses and deductions, seniority allowance, and other benefits. The wage of production personnel is determined according to the piece rate, qualification rate, seniority allowance, skill allowance, and other relevant indicators. The salaries of sales staff consist of basic salary, performance bonus, overtime salary, bonuses and deductions, seniority subsidies, and benefits. Their performance salary is related to indicators such as sales completion rate, return completion rate, gross profit margin, and accounts receivable management. Administrative staff salaries are assessed according to the key performance indicators specified for different job functions. 3. Staff training plans To improve the overall quality and work efficiency of employees, the Company's human resources department prepare a training plan for the next year, which will include training content, schedule, participants, training methods, cost, etc. The training plan includes policies and cultural training, employee skills training, professional technical training, manager quality training, executive training, etc. 4. Labor outsourcing □Applicable √ Not applicable 112 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section X: Corporate Governance I. Corporate Governance Overview During the reporting period, the Company strictly followed the requirements of the Company Law, Securities Law and relevant laws and regulations of the China Securities Regulatory Commission to continuously improve the corporate governance of the Company and establish and improve internal management and control systems. As of the end of the reporting period, the Company's operations, information disclosure practices, and the actual status of corporate governance basically met the requirements of the regulatory documents on listed company governance issued by the China Securities Regulatory Commission. In the future work, the Company will continue to improve the corporate governance structure of the Company in accordance with relevant laws and regulations and the requirements of the Shenzhen Stock Exchange, further standardize the operation of the company, and improve the level of corporate governance. 1. About shareholders and general meeting of shareholders The Company convenes a general meeting of shareholders in strict accordance with the Articles of Association and Rules of Procedure of the General Meeting of Shareholders to ensure that all shareholders, especially small and medium shareholders, enjoy equal status and fully exercise their rights. 2. About the Company and its controlling shareholders The Company has independent businesses and autonomous operating capabilities, separate from controlling shareholder in terms of business, personnel, assets, organizations, and finances. The controlling shareholder of the Company strictly regulates their own behavior and does not directly or indirectly interfere with the Company’s decision-making and business activities beyond the Company’s general meeting of shareholders. The Company's board of directors, board of supervisors and internal units operate independently. 3. About directors and the board of directors The Company elects directors in strict accordance with the selection and appointment procedures stipulated in the Articles of Incorporation; the Company currently has 3 independent directors, accounting for one third of all directors. The number and composition of the board of directors comply with the requirements of laws and regulations and the Articles of Association. All directors of the Company carry out their duty in accordance with the Rules of Procedure of the Board of Directors, Guidance Note on Independent Directors, Conduct Code of Directors of Listed Companies in the SME Board, attend the board meetings and general meeting of shareholders on time, actively participate in relevant knowledge training, and are familiar with relevant laws and regulations. 4. About the supervisors and the board of supervisors 113 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The Company’s board of supervisors has 5 supervisors, including 2 employee representatives. The number and composition of the board of supervisors meet the requirements of relevant laws and regulations; the board of supervisors convenes meetings in strict accordance with the Articles of Association and Rules of Procedures for the Board of Supervisors; Supervisors can earnestly perform their duties and effectively supervise the Company's major investment and financing decisions, financial status, and performance of directors and senior management. 5. About performance evaluation and incentive restraint mechanism The Company has gradually established fair and transparent performance evaluation standards and incentive restraint mechanisms for directors, supervisors, and managers. The remuneration of senior managers is linked to the Company’s business performance indicators, and the recruitment procedure of managerial level employees is open and transparent in line with laws and regulations. 6. About relevant stakeholders The Company fully respects and safeguards the legitimate rights and interests of relevant stakeholders, balances the interests of society, shareholders, employees and the Company, and jointly promotes the Company's sustainable development. 7. About information disclosure and transparency The Company has designated the secretary of the board of directors to oversee information disclosure, investor relations management, and reception of visits and inquiries from shareholders; designated Securities Times and CNINFO.COM as the Company’s information disclosure newspapers and the website. The Company ensures that all shareholders have a fair opportunity to obtain information by disclosing information truthfully, accurately and in a timely manner, in strict accordance with relevant laws and regulations, 8. About the internal audit system The Company has established an audit department with three auditors. Under the leadership of the audit committee of the board of directors, the internal audit function supervises the Company and its subsidiaries’ business activities and results, internal control system and implementation, usage of various expenses and asset update-to-date status to ensure compliance with corporate governance standards. II. Independence of Business, Personnel, Assets, Organizations, Finances from Controlling Shareholder The Company is independent of its controlling shareholders in terms of business, personnel, assets, organization, and finance. The Company has independent and complete business and independent management capabilities. 114 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 1. Business The Company's business is independent of the controlling shareholder and its subsidiaries, has an independent and complete supply, production and sales system, and conducts business independently without relying on shareholders or any other related parties. 2. Personnel The Company’s personnel, labor, human resources management and wages are completely independent. The Company’s Chair, general manager, deputy general managers, secretary of the board of directors, chief financial officer and other senior management personnel all work in the Company and receive salaries, and there is no part-time job prohibited by relevant laws and regulations. 3. Assets Except for some of the office buildings used by the Company which are leased from related parties, the Company has a production and operation site independent of the controlling shareholder, an independent and complete asset structure, an independent production system, auxiliary production system and supporting facilities, and land use rights, property ownership right, independent procurement and sales systems. 4. Organization The Company has established a sound organizational system, operates independently, and has no affiliation with controlling shareholders or other functional departments. 5. Finance The Company has an independent financial department, has established an independent accounting system and financial management system, and independently makes financial decisions. The Company opens bank accounts and pays taxes independently. III. Horizontal Competition □ Applicable √ Not applicable 115 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report IV. Information about the Annual General Meeting and Extraordinary General Meeting held During the Reporting Period 1. Annual General Meeting convened during the reporting period Proportion of Disclosure Meeting Type participating Convened Date Disclosure Index date investors Announcement of the 1st Extraordinary 2020 1st extraordinary General Meeting of extraordinary general 60.52% 2020.01.13 2020.01.14 Shareholders in general meeting meeting 2020 (2020-002) published in the Securities Times and CNINFO Announcement of the 2nd Extraordinary 2020 2nd extraordinary General Meeting of Shareholders in extraordinary general 71.57% 2020.03.20 2020.03.21 2020 (2020-002) general meeting meeting published in the Securities Times and CNINFO Announcement of the 3rd Extraordinary 2020 3rd extraordinary General Meeting of Shareholders in extraordinary general 61.29% 2020.06.08 2020.06.09 2020 (2020-038) general meeting meeting published in the Securities Times and CNINFO Announcement of 2019 Annual General Meeting of annual Shareholders 2019 annual general 64.58% 2020.07.15 2020.07.16 (2020-059) general meeting meeting published in the Securities Times and CNINFO Announcement of the 4th Extraordinary 2020 4th extraordinary General Meeting of extraordinary general 51.79% 2020.08.19 2020.08.20 Shareholders in general meeting meeting 2020 (2020-079) published in the Securities Times and CNINFO 116 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Announcement of the 5th Extraordinary 2020 5th extraordinary General Meeting of Shareholders in extraordinary general 43.71% 2020.09.07 2020.09.08 2020 (2020-086) general meeting meeting published in the Securities Times and CNINFO Announcement of the 6th Extraordinary 2020 6th extraordinary General Meeting of Shareholders in extraordinary general 42.61% 2020.11.02 2020.11.03 2020 (2020-098) general meeting meeting published in the Securities Times and CNINFO 2. Extraordinary general meetings convened at the request of preferred shareholders with resumed voting rights: □ Applicable √ Not applicable V. Performance of duties by Independent Directors During the Reporting Period 1. Attendance of independent directors in board meetings and general meetings Attendance of independent directors in board meetings and general meetings Board Board Board Presence meeting meeting Board meeting of Board independe presence presence meeting Board not Name of meeting nt required in by presence meeting attended Independent presence directors the telecom- through a absence in person Director on site in general reporting communic proxy (times) for two (times) meetings period ation (times) consecutiv (times) (times) e times (times) Yang Haifeng 4 0 4 0 0 No 2 Chu Minhong 10 1 9 0 0 No 7 Wang Xiao 4 0 4 0 0 No 1 Xie Tao 6 0 6 0 0 No 4 Guan Zhen 6 0 6 0 0 No 2 117 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2. Objections from independent directors on related issues of the Company Were there any objections on related issues of the Company from independent directors? □ Yes √ No 3. Other details about the performance of duties by independent directors Were there any suggestions from independent directors accepted by the Company? √ Yes □ No During the reporting period, the independent directors of the Company followed the Company Law, Guiding Opinions on Establishing an Independent Director System in Listed Companies, Guidelines for the Normative Operation of Listed Companies on the Shenzhen Stock Exchange, Articles of Association and Independent Director Work System, and other relevant laws, regulations and rules and regulations. They were diligent, responsible, and independently performed their duties; pay close attention to the industry trends and the opportunities and challenges in the Company’s business, and promptly alert risks; review the regular reports and temporary announcements provided by the Company; carefully review each proposal and play a positive role in the decision-making, management and operation of the board of directors; pay close attention to the Company's internal control operation status, and put forward constructive opinions, which effectively safeguard the interests of the small and medium shareholders. The Company accepted reasonable suggestions raised by independent directors. VI. Performance of Special Committees under the Board of Directors During the Reporting Period 1. Performance of the duties of the Strategy Committee The Strategy Committee of the Board of Directors performs its duties in accordance with the Articles of Association and Working Rules of the Strategy Committee. It is mainly responsible for conducting feasibility studies on important issues such as the Company's strategic planning, investment and financing plans, and making reasonable suggestions. During the reporting period, the Strategy Committee mainly carried out the following tasks: (1) Provided guiding suggestions for the Company's entry into general aviation aircraft manufacturing business, and the transformation from solo auto parts to dual-engine strategy. (2) In-depth analysis of the Company's industry prospects 118 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report and operating conditions in various business areas, exchanges with company directors and senior management and putting forward constructive opinions and playing an important role in the decision-making of the board of directors and the Company's high-quality development. 2. The performance of the duties of the Audit Committee The Audit Committee of the Board of Directors performs its duties in accordance with the Articles of Association and Working Rules of the Audit Committee. It is mainly responsible for supervising the implementation of the Company's internal audit, reviewing internal control, external guarantees, etc. and making reasonable suggestions; strengthening the communication between internal and external auditing; reviewing the Company’s financial information and its disclosure, and proposing to hire an audit agency. During the reporting period, the audit committee carefully reviewed the Company’s periodic reports of financial information and its disclosure, reviewed the routine audit reports with internal audit department, and put forward constructive suggestions on the effective implementation of internal control, the selection and appointment of external audit institutions and the annual audit work. In the annual report audit, in accordance with the relevant requirements of the China Securities Regulatory Commission, it fully communicated with the Company’s audit department, finance department and annual audit accountants, reasonably determined the annual audit work plan, proposed reasonable solutions to the problems in the audit process, and timely reviewed the Company’s the unaudited financial statements and draft of accountants' audit report, and earnestly performed the duties of the audit committee. 3. Performance of the duties of the Remuneration and Appraisal Committee The Remuneration and Appraisal Committee of the Board of Directors performs its duties in accordance with the Articles of Association and the Working Rules of the Remuneration and Appraisal Committee. It is mainly responsible for formulating the remuneration plan for directors and senior management personnel of the Company, reviewing their performance, carrying out annual performance appraisal and supervising the implementation of the Company's remuneration system. During the reporting period, the Remuneration and Appraisal Committee conducted a serious review of the remuneration appraisal methods of the Company’s directors and senior management personnel, and believed that the Company could strictly follow the remuneration and relevant incentive appraisal system, and the remuneration payment complied with provisions of relevant laws, regulations and the Articles of Association. 119 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 4. Performance of the duties of Nomination Committee The Nomination Committee of the Board of Directors performs its duties in accordance with the Articles of Association and Working Rules of the Nomination Committee. It is mainly responsible for formulating the selection criteria and procedures for directors and senior managers, searching for qualified directors and senior managers, conducting reviews and making recommendations. During the reporting period, the term of office of the sixth board of directors and senior executives expired. The Nomination Committee reviewed the qualifications and capabilities of the new directors, senior executives and other personnel. It believed that the nominated persons are capable of fulfilling the responsibilities of the corresponding positions, which will further promote the stability of the Company’s management team and benefit the development of the Company. VII. Performance of Supervisors Board Were there any risks to the Company identified by Supervisory Committee when performing its duties during the Reporting Period? □ Yes √ No The Board of Supervisors has no objection to the supervision matters during the reporting period. VIII. Assessment and incentive mechanism for the senior management According to the remuneration appraisal plan for senior executives approved by the Remuneration and Appraisal Committee of the Board of Directors, a dual appraisal system of operating and management task indicators was implemented for senior executives, and the business and management objectives were quantified. 2020 Responsibilities, Authority and Performance Targets was signed. The annual task indicators are broken down to each month, monthly and annual performance evaluations are implemented according to the completion of business and management indicators, and salary ratings, job arrangements, and hiring are determined based on the results of the evaluation. The Company will continue to improve the assessment and incentive mechanism for senior managers to maximize the potential of senior managers. IX. Internal Control evaluation Report 120 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 1. Any significant internal control deficiencies during the reporting period □ Yes √ No 2. Self-evaluation report on internal control Disclosure date of full text of self-evaluation report on April 30, 2021 internal control Disclosure index of full text of self-evaluation report on Self-evaluation Report on Internal Control of the Company in 2020 http://www.cninfo.com.cn internal control Proportion of assets evaluated in total assets 100.00% per consolidated financial statement Proportion of revenue evaluated in total revenue 99.6% per consolidated financial statement Recognition standard of deficiencies Nature Financial report Non-financial report The determination of non-financial report deficiencies is mainly Major deficiencies: Single deficiencies or in combination with other deficiencies based on the degree of influence of the deficiencies on the lead to failure to prevent or detect and correct major misstatements in financial effectiveness of the business process and the possibility of reports in a timely manner. If the following circumstances occur, it is deemed as occurrence. If the probability of occurrence of a defect is ow, or a major defect: ①The control environment is invalid; ②The fraudulent it will reduce work efficiency or effectiveness, or increase the behavior of directors, supervisors and senior management; ③Major uncertainty of the effect, or make it deviate from the expected deficiencies that have been discovered and reported to the management have Qualitative criteria target, it is deemed as a general defect; if the probability of not been corrected after a reasonable time; ④The supervision of internal occurrence of a defect is high, or it will significantly reduce work control by the company’s audit committee and the audit department is invalid; efficiency or effectiveness, or significantly increase the ⑤Other defects that may affect the correct judgment of the report users. uncertainty of the effect, or make it significantly deviate from Important defects: Individual defects or other defects that cannot be prevented the expected target, it is deemed as an material defect; if the or detected and corrected in a timely manner in the financial report, although probability of occurrence of the defect is high, or it will seriously the level of importance is not reached or exceeded, the misstatement should reduce the work efficiency or effectiveness, or seriously 121 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report still be paid attention to by management. General defects: other internal control increase the uncertainty of the effect, or make it seriously defects that do not constitute major defects or important defects. deviate from the expected target, it is deemed as a major defect. Losses that may be caused by internal control defects and related to the income statement, are measured by the total profit indicator. If this defect alone or in combination with other defects may cause the financial report The quantitative standards for the determination of defects in misstatement amount to exceed 10% of the total profit, it is deemed a major non-financial reports are mainly determined based on the defect; if it is less than 10% of the total profit, more than 5% is deemed a major absolute amount of direct property losses that the defects may defect; if it is less than 5% of the total profit, it is regarded as a general defect. Quantitative criteria cause. If the amount of direct property loss exceeds 10% of the Losses that may be caused by internal control deficiencies are related to asset total profit, it is deemed a major defect; if it is less than 10% of management, are measured by the total assets indicator. If the financial report the total profit, more than 5%, it is deemed a major defect; if it misstatement amount caused by the defect alone or in combination with other is less than 5% of the total profit, it is deemed a general defect. defects exceeds 1% of the total assets, it is considered a major defect; if it is less than 1% of the total assets and more than 0.5%, it is considered a major defect; if it is less than the total assets 0.5% is regarded as a general defect. Number of significant deficiencies in financial 0 report Number of significant deficiencies in non- 0 financial report Number of important deficiencies in financial 0 report Number of important deficiencies in non- 0 financial report level 3. Internal Control Audit or Assurance Report Not applicable 122 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section XI: Corporate Bonds Whether the Company has publicly issued corporate bonds on Stock Exchange, which has not terminated or terminated but fail to collect the full payment before annual report authorized disclosure date. □Yes √No 123 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section XII: Financial Statements I. Auditor Report Type of audit opinion Standard Unqualified opinion Date of signing of audit report April 28, 2021 Name of audit firm Ernst & Young Hua Ming LLP Ernst & Young Huaming (2021) Audit No. Document number of audit report 60468741_B01 Name of the certified accountants Yin Guowei, Zhou Hao Auditor’s Report 1. Audit opinion We have audited the financial statements of Zhejiang Wanfeng Auto Wheel Co., Ltd. (the “Company”), including the consolidated and parent company balance sheets as of December 31, 2020, the consolidated and parent company income statements, cash flow statements, and statements of changes in equity for the year ended in 2020, as well as notes to financial statements. In our opinion, the attached financial statements of Zhejiang Wanfeng Auto Wheel Co., Ltd. present fairly, in all material respects, the financial position of the Company as of December 31, 2020, its financial performance and its cash flows for the year ended in accordance with China Accounting Standards for Business Enterprises. 2. Basis for Audit Opinion We conducted our audit in accordance with Chinese Standards on Audit. Our responsibilities under those standards are further described in the Certified Public Accountant’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Zhejiang Wanfeng Auto Wheel Co., Ltd. in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 3. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements, and in forming our opinion thereon, and we do not 124 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report express a separate opinion on these matters. We have fulfilled the responsibilities described in the "Certified Accountants' Responsibilities for the Audit of Financial Statements" section of this report, including those related to these key audit matters. Correspondingly, our audit work includes the implementation of audit procedures designed to deal with the risk of material misstatement of assessed financial statements. The results of our audit procedures, including the procedures performed in response to the following key audit matters, provide a basis for the overall audit opinion of the financial statements. Key audit matters How the matter was dealt with in the audit Goodwill impairment As of December 31, 2020, the book value of goodwill During the audit process, we assessed the of Zhejiang Wanfeng Auto Wheel Co., Ltd., and its Group management’s identification of CGUs and subsidiaries (hereinafter referred to as "the Group") group of CGUs and the goodwill allocated to totaled RMB 1,662.99 million. The Accounting CGUs and group of CGUs. With the assistance Standards for Business Enterprises require the Group of internal valuation experts, we evaluated the to conduct a goodwill impairment test at least annually. rationality of the major assumptions and The assessment of goodwill impairment is based on evaluation methods used by the Group the recoverable amount of each cash-generating unit management in predicting the recoverable (CGU) or group of CGUs to which the goodwill amount of the CGU, including the discount rate belongs. We identified the impairment of goodwill as a and long-term growth rate, etc. In addition, we key audit matter because of the importance of the evaluated the rationales of the estimated sales Group’s goodwill balance to financial reporting and the revenue and operating performance in the future complexity of the assessment process of goodwill and compared it with its historical operating impairment. The management involves the use of performance. We also reviewed the sensitivity significant judgments when determining whether analysis on the recoverable amount of the CGU goodwill is impaired, and there is inherent uncertainty and assessed whether the possible reasonable in estimating future cash flows. changes in key assumptions would cause the book value of the CGU to exceed its recoverable The disclosure of the impairment of goodwill is amount. In addition, we have checked the included in notes V, 31, 43 and notes VII and 28 of the adequacy of the relevant disclosures of the financial statements, respectively. Group in the notes to the financial statements. Non-current asset impairment Meridian Technologies Mexico, S. de R.L. de C.V., a subsidiary of the Group, is in a state of continuous loss, and the corresponding fixed assets and non- During the audit process, with the assistance of current assets such as long-term deferred expenses internal valuation experts, we assessed the have signs of impairment. According to the rationality of the management’s method of requirements of the Accounting Standards for estimating the recoverable amount. Business Enterprises, the Group is required to conduct Communicating with the management on the an impairment test on the non-current assets. The estimation process, methods and important recoverable amount of the non-current assets shall be assumptions, we also conducted a sensitivity determined based on the higher of the net value of the analysis on the net value of the fair value of non- fair value of the assets minus the disposal expenses current assets minus disposal expenses. In and the present value of the expected future cash addition, we have checked the adequacy of the flows of the assets. In 2020, the book value of the non- relevant disclosures of the Group in the notes to current assets of Meridian Technologies Mexico, S. de the financial statements. R.L. de C.V. totaled RMB 88.44 million. The recoverable amount is determined based on the net 125 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report amount of the fair value of the asset minus the disposal expenses, and the non-current assets have not been impaired. The Group's estimation of the recoverable amount of non-current assets involves the use of significant judgments and assumptions, including fair value assessment and disposal cost forecasts. Given the importance and complexity of the estimation of the recoverable amount of non-current assets, we have identified it as a key audit matter. The disclosure of the above-mentioned non-current asset impairment provision is included in the financial statement notes V, 24, and 31, and notes VII, 21, and 29. 4. Other Information The management of Zhejiang Wanfeng Auto Wheel Co., Ltd. is responsible for other information. Other information includes the information covered in the annual report but does not include the financial statements and our audit report. Our audit opinions on the financial statements do not cover other information, and we do not issue any form of assurance conclusions on other information. In conjunction with our audit of the financial statements, our responsibility is to read other information. In this process, consider whether the other information is materially inconsistent with the financial statements or what we have learned during the audit or there seems to be a material misstatement. Based on the work we have performed, if we determine that there is a material misstatement of other information, we should report that fact. In this regard, we have nothing to report. 5. Responsibilities of the Management, Board of Directors and Supervisory BoardThe management is responsible for preparing and presenting fairly the financial statements in accordance with the provisions of China Accounting Standards for Business Enterprises, and designing, implementing and maintaining necessary internal controls so that there are no major misstatements due to fraud or errors in the financial statements. When preparing the financial statements, the management is responsible for assessing Zhejiang Wanfeng Auto Wheel Co., Ltd.’s ability to continue as a going concern , disclosing matters related to going concern (if applicable), and using the going concern basis of accounting unless the Management intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process of Zhejiang Wanfeng Auto Wheel Co., Ltd. 6. Certified Public Accountant’s Responsibilities for the Audit of the 126 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that we will always detect a material misstatement even though our auditing work conducted in accordance with Chinese Standards on Auditing. Misstatement can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users relying on these financial statements. We exercise professional judgment and maintain professional skepticism throughout the audit performed in accordance with Chinese Standards on Auditing. We also: (1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (2) Obtain an understanding of internal control relevant to the audit to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. (3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management. (4) Conclude on the appropriateness of the Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Zhejiang Wanfeng Auto Wheel Co., Ltd.’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statement or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. (5) Evaluate the overall presentation (including disclosure), structure and content of the financial statements, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (6) Obtain sufficient and appropriate audit evidence regarding the financial 127 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain sole responsibility for our audit opinion. We communicate with those charged with governance regarding the planned audit scope, time schedule and significant audit findings, including any deficiencies in internal control of concern that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. (if applicable) From the matters communicated with those charged with governance, we determine those matters of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. II. Financial Statements 1. Consolidated Balance Sheet Prepared by: Zhejiang Wanfeng Auto Wheel Co., Ltd. December 31, 2020 Unit: RMB Items December 31, 2020 December 31, 2019 Current Assets: Cash and cash equivalents 1,674,978,958.17 2,452,754,083.38 Provision of settlement fund Loans to other banks Held-for-trading financial assets 5,312,974.87 63,034,283.90 Derivative financial assets Notes receivable 0.00 0.00 Accounts receivable 2,314,980,882.28 2,555,697,203.97 Accounts receivable Financing 382,204,743.00 378,904,590.58 Advances paid 158,136,290.24 173,597,304.56 Premium receivable 128 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Reinsurance accounts receivable Reinsurance reserves receivable Other receivables 68,318,081.18 916,325,582.02 Including: Interest receivable 0.00 0.00 Dividend receivable 0.00 0.00 Financial assets under reverse repo Inventories 2,309,913,390.26 2,393,951,480.24 Contract assets Assets classified as held for sale Non-current assets due within one year Other current assets 95,604,249.64 117,007,873.14 Total current assets 7,009,449,569.64 9,051,272,401.79 Non-current assets: Loans and advances paid Debt investments Other debt investments Long-term receivable Long-term equity investments 567,810.84 12,612,542.86 Other equity instrument investments 4,733,395.22 4,942,489.56 Other non-current financial assets Investment property 0.00 0.00 Fixed assets 4,872,464,413.48 5,113,660,627.42 Construction in progress 258,966,481.11 426,345,202.99 Productive biological assets Oil & gas assets Right-of-use assets Intangible assets 1,665,433,876.04 1,778,179,906.06 Development expenditures 70,537,893.00 0.00 Goodwill 1,662,994,509.32 1,701,158,115.52 Long-term prepayments 157,174,258.10 159,712,622.07 Deferred tax assets 263,442,276.75 188,710,115.07 Other non-current assets 7,461,417.37 50,655,894.55 Total non-current assets 8,963,776,331.23 9,435,977,516.10 Total assets 15,973,225,900.87 18,487,249,917.89 Current liabilities: Short-term borrowings 3,544,296,670.02 3,070,118,768.19 129 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Central bank loans Loans from other banks Held-for-trading financial liabilities 0.00 1,324,581.60 Derivative financial liabilities Notes payable 192,867,169.90 218,601,865.08 Accounts payable 935,542,222.20 1,083,181,883.19 Unearned revenue 0.00 653,874,136.71 Contract liabilities 512,836,059.89 0.00 Financial liabilities under repo Absorbing deposit and interbank deposit Deposit for agency security transaction Deposit for agency security underwriting Employee benefits payable 231,516,785.37 238,740,090.73 Tax payable 113,185,854.56 71,472,056.11 Other payables 384,220,500.31 759,261,155.63 Including: Interest Payable 0.00 0.00 Dividends Payable 0.00 0.00 Handling fee and commission payable Reinsurance accounts payable Held-for-sale liabilities Non-current liabilities due within one year 694,425,998.19 571,968,504.83 Other current liabilities 4,192,272.05 0.00 Total current liabilities 6,613,083,532.49 6,668,543,042.07 Non-current liabilities: Insurance policy reserve Long-term borrowings 1,179,201,272.08 1,165,220,492.00 Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions 189,197,618.87 174,680,866.90 Deferred income 214,274,852.58 202,630,087.75 Deferred tax liabilities 268,634,907.53 268,233,346.43 130 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Other non-current liabilities Total non-current liabilities 1,851,308,651.06 1,810,764,793.08 Total liabilities 8,464,392,183.55 8,479,307,835.15 Equity: Share capital 2,186,879,678.00 2,186,879,678.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve 0.00 1,691,289,940.77 Less: Treasury shares 571,813,251.19 333,092,868.42 Other comprehensive income -54,828,527.62 74,589,529.22 Special reserve 13,513,057.42 10,261,018.12 Surplus reserve 47,015,012.60 427,043,757.25 General risk reserve Undistributed profit 3,732,843,061.00 3,935,484,397.57 Total equity attributable to the parent 5,353,609,030.21 7,992,455,452.51 Company Non-controlling interest 2,155,224,687.11 2,015,486,630.23 Total equity 7,508,833,717.32 10,007,942,082.74 Total liabilities & equity 15,973,225,900.87 18,487,249,917.89 Legal representative: Chen Bin Officer in charge of accounting: Dong Ruiping Head of accounting department: Chen Shanfu 2. Balance Sheet of the Parent Company Unit: RMB Items December 31, 2020 December 31, 2019 Current Assets: Cash and cash equivalents 173,973,126.72 1,004,904,910.05 Held-for-trading financial assets 0.00 60,034,900.00 Derivative financial assets Notes receivable 0.00 0.00 Accounts receivable 512,371,249.54 678,186,227.12 Accounts receivable Financing 188,767,363.39 159,939,620.65 Advances paid 31,624,593.38 28,429,672.81 Other receivables 241,713,997.31 494,780,887.10 Including: Interest receivable 0.00 0.00 Dividend receivable 0.00 129,600,000.00 Inventories 182,348,341.74 243,049,665.85 Contract assets Assets classified as held for sale Non-current assets due within one year 131 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Other current assets 17,591,154.73 17,910,061.89 Total current assets 1,348,389,826.81 2,687,235,945.47 Non-current assets: Debt investments Other debt investments Long-term receivable Long-term equity investments 6,104,568,111.43 4,198,711,501.05 Other equity instrument investments Other non-current financial assets Investment property Fixed assets 334,702,051.77 364,884,432.10 Construction in progress 44,769,695.54 57,506,951.74 Productive biological assets Oil & gas assets Right-of-use assets Intangible assets 51,462,555.18 53,332,915.40 Development expenditures Goodwill Long-term prepayments 7,921,595.36 9,208,148.95 Deferred tax assets 19,218,317.44 2,777,151.86 Other non-current assets 2,731,215.11 38,683,336.01 Total non-current assets 6,565,373,541.83 4,725,104,437.11 Total assets 7,913,763,368.64 7,412,340,382.58 Current liabilities: Short-term borrowings 1,772,075,155.81 1,282,185,084.02 Held-for-trading financial liabilities Derivative financial liabilities Note payable 105,954,728.08 290,920,548.28 Account payable 295,956,510.99 417,556,226.11 Unearned revenue 0.00 3,103,027.57 Contract liabilities 4,359,811.90 0.00 Employee benefits payable 28,661,855.99 35,028,390.32 Tax payable 3,133,619.85 3,998,075.37 Other payables 1,630,748,176.80 891,820,777.91 Including: Interest Payable 0.00 0.00 Dividends Payable 0.00 0.00 Held-for-sale liabilities Non-current liabilities due within 409,189,611.17 265,717,562.36 one year Other current liabilities 132 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Total current liabilities 4,250,079,470.59 3,190,329,691.94 Non-current liabilities: Long-term borrowings 540,000,000.00 396,962,631.92 Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions Deferred income 1,361,000.00 1,872,600.00 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 541,361,000.00 398,835,231.92 Total liabilities 4,791,440,470.59 3,589,164,923.86 Equity: Share capital 2,186,879,678.00 2,186,879,678.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve 546,877,912.39 1,059,096,302.01 Less: Treasury shares 571,813,251.19 333,092,868.42 Other comprehensive income Special reserve 3,545,315.73 1,919,506.02 Surplus reserve 474,058,769.85 427,043,757.25 Undistributed profit 482,774,473.27 481,329,083.86 Total equity 3,122,322,898.05 3,823,175,458.72 Total liabilities & equity 7,913,763,368.64 7,412,340,382.58 3. Consolidated Income Statement Unit: RMB Items 2020 FY 2019 FY I. Total operating revenue 10,699,224,904.57 12,635,131,976.26 Including: Operating revenue 10,699,224,904.57 12,635,131,976.26 Interest income Premium earned Revenue from handling charges and commission II. Total operating cost 9,993,785,587.88 11,625,527,060.84 Including: Operating cost 8,539,410,065.42 9,898,549,079.42 Interest expenses Handling charges and commission expenditures 133 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Surrender value Net payment of insurance claims Net provision of insurance policy reserve Premium bonus expenditures Reinsurance expenses Taxes and surcharges 54,029,485.53 66,026,715.09 Selling expenses 202,937,418.90 326,373,313.10 Administrative expenses 590,837,746.38 669,461,795.85 R&D expenses 337,448,870.68 446,102,958.85 Financial expenses 269,122,000.97 219,013,198.53 Including: Interest expenses 245,818,075.95 241,813,490.17 Interest income 34,003,395.60 46,585,659.98 Add: Other income 104,562,193.16 91,765,417.17 Investment income (loss) 612,550.85 2,020,850.00 Including: Investment income from -876,459.23 633,198.02 associates and joint ventures Gains from derecognition of financial assets at amortized cost Gains (Losses) on foreign exchange Gains (Losses) on net exposure to hedging risk Gains (Losses) on changes in fair value 2,246,554.36 -255,950.82 Credit impairment loss -7,223,519.05 -32,936,944.78 Asset impairment loss -10,179,361.63 -18,650,416.29 Gains (Losses) on asset disposal 501,156.94 -783,226.18 III. Operating profit (Loss) 795,958,891.32 1,050,764,644.52 Add: Non-operating revenue 43,050,711.82 170,199,098.05 Less: Non-operating expenditures 9,986,870.11 6,935,181.29 IV. Profit before tax (Loss) 829,022,733.03 1,214,028,561.28 Less: Income tax expense 64,146,512.15 172,794,219.07 V. Net profit (Loss) 764,876,220.88 1,041,234,342.21 (I) Categorized by the continuity of operations 1. Net profit (loss) from continuing operations 764,876,220.88 1,041,234,342.21 134 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2. Net profit (loss) from discontinued operations (II) Categorized by the portion of equity ownership 1. Net profit (loss) attributable to owners of 565,820,630.75 895,769,920.83 parent Company 2. Net profit (loss) attributable to non- 199,055,590.13 145,464,421.38 controlling shareholders VI. Other comprehensive income after tax -148,446,465.82 129,200,209.01 Items attributable to the owners of the parent -129,418,056.84 98,544,238.16 Company (I) Not to be reclassified subsequently to 0.00 0.00 profit and loss 1.Changes in remeasurement on the net defined benefit plan 2. Items under equity method that will not be reclassified to profit and loss 3. Changes in fair value of other equity instrument investments 4. Changes in fair value of own credit risk 5. Others (II) To be reclassified subsequently to profit -129,418,056.84 98,544,238.16 and loss 1. Items under equity method that may be reclassified to profit and loss 2. Changes in fair value of other debt investments 3. Profit and loss from reclassification of financial assets into other comprehensive income 4. Provision for credit impairment of other debt investments 5. Cash flow hedging reserve 6. Translation reserve -129,418,056.84 98,544,238.16 7. Others Items attributable to non-controlling -19,028,408.98 30,655,970.85 shareholders VII. Total comprehensive income 616,429,755.06 1,170,434,551.22 Items attributable to the owners of the parent 436,402,573.91 994,314,158.99 Company Items attributable to non-controlling 180,027,181.15 176,120,392.23 shareholders VIII. Earnings per share (EPS): (I) Basic EPS (yuan per share) 0.27 0.41 (II) Diluted EPS (yuan per share) 0.27 0.41 In the current period of business combination under the common control, the net profit realized by the merged party before the combination was 74,836,418.19 yuan, and the net profit realized by the merged party in the 135 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report previous period was 229,910,806.31 yuan. Legal representative: Chen Bin Officer in charge of accounting: Dong Ruiping Head of accounting department: Chen Shanfu 4. Income Statement of Parent Company Unit: RMB Items 2020 FY 2019 FY I. Total operating revenue 2,349,143,663.22 3,139,659,207.59 Less: Operating cost 2,036,931,290.14 2,605,922,606.23 Taxes and surcharges 10,520,889.86 13,383,767.86 Selling expenses 30,034,081.55 45,416,077.55 Administrative expenses 73,910,484.22 75,155,827.27 R&D expenses 97,470,913.47 116,425,011.43 Financial expenses 152,395,765.07 90,542,907.65 Including: Interest expenses 168,222,674.30 111,391,522.53 Interest income 37,369,509.04 19,909,734.18 Add: Other income 7,015,547.09 13,610,933.42 Investment income (loss) 501,406,627.81 116,260,000.00 Including: Investment income from 0.00 0.00 associates and joint ventures Gains from derecognition of financial assets at amortized cost Gains (Losses) on foreign exchange Gains (Losses) on changes in fair value 0.00 -1,305.00 Credit impairment loss 4,341,633.88 -4,167,701.30 Asset impairment loss -1,396,874.52 -4,172,696.45 Gains (Losses) on asset disposal -581,524.59 -634,061.65 II. Operating profit (Loss) 458,665,648.58 313,708,178.62 Add: Non-operating revenue 2,493,796.90 35,452,610.95 Less: Non-operating expenditures 2,022,804.87 108,064.92 III. Profit before tax (Loss) 459,136,640.61 349,052,724.65 Less: Income tax expense -11,013,485.40 17,526,555.12 IV. Net profit (Loss) 470,150,126.01 331,526,169.53 (I) Net profit (Loss) from the continuity of 470,150,126.01 331,526,169.53 operations (II) Net profit (Loss) from the discontinuity of operations V. Other comprehensive income after tax (I) Not to be reclassified subsequently to profit and loss 1.Changes in remeasurement on the net defined benefit plan 2. Items under equity method that will not be reclassified to profit and loss 136 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 3. Changes in fair value of other equity instrument investments 4. Changes in fair value of own credit risk 5. Others (II) To be reclassified subsequently to profit and loss 1. Items under equity method that may be reclassified to profit and loss 2. Changes in fair value of other debt investments 3. Profit and loss from reclassification of financial assets into other comprehensive income 4. Provision for credit impairment of other debt investments 5. Cash flow hedging reserve 6. Translation reserve 7. Others VI. Total comprehensive income 470,150,126.01 331,526,169.53 VII. Earnings per share (EPS): (I) Basic EPS (yuan per share) 0.22 0.15 (II) Diluted EPS (yuan per share) 0.22 0.15 5. Consolidated Cash Flow Statement Unit: RMB Items 2020 FY 2019 FY I. Cash flows from operating activities: Cash receipts from sale of goods 10,748,387,602.66 12,425,185,321.70 or rendering of services Net increase of client deposit and interbank deposit Net increase of central bank loans Net increase of loans from other financial institutions Cash receipts from original insurance contract premium Net cash receipts from reinsurance Net increase of policy-holder deposit and investment 137 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Cash receipts from interest, handling charges and commission Net increase of loans from others Net increase of repurchase Net cash receipts from agency security transaction Cash receipts of tax and fee 135,380,632.65 230,368,027.14 refund Other cash receipts related to 208,261,628.71 168,076,148.82 operating activities Subtotal of cash inflows from 11,092,029,864.02 12,823,629,497.66 operating activities Cash payments for goods 6,504,776,125.54 8,010,207,900.09 purchased and services received Net increase of loans and advances to clients Net increase of central bank deposit and interbank deposit Cash payments for insurance indemnities of original insurance contracts Net increase of loans to others Cash payments for interest, handling charges and commission Cash payments for policy bonus Cash paid to and on behalf of 1,786,434,955.90 1,982,012,404.38 employees Cash payments for tax and fee 345,568,987.48 480,299,957.07 Other cash payments related to 719,468,888.68 930,740,356.35 operating activities Subtotal of cash outflows from 9,356,248,957.60 11,403,260,617.89 operating activities Net cash flows from operating 1,735,780,906.42 1,420,368,879.77 activities II. Cash flows from investing activities: Cash receipts from withdrawal of 37,264,900.00 369,821,633.24 investments Cash receipts from investment 0.00 2,826,628.60 income 138 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Net cash receipts from the disposal of fixed assets, intangible 48,807,553.01 5,744,155.38 asset and other long-term asset Net cash receipts from the disposal of subsidiaries & other 10,461,733.98 0.00 business units Other cash receipts related to 1,576,698,931.75 2,113,790,191.03 investing activities Subtotal of cash inflows from 1,673,233,118.74 2,492,182,608.25 investing activities Cash payments for the acquisition of fixed assets, intangible 470,883,605.98 980,086,310.09 asset and other long-term asset Cash payments for investments 37,230,000.00 244,525,588.90 Net increase of pledged borrowings Net cash payments for the acquisition of subsidiaries & other 0.00 0.00 business units Other cash payments related to 90,588,740.00 1,884,897,477.00 investing activities Subtotal of cash outflows from 598,702,345.98 3,109,509,375.99 investing activities Net cash flows from investing 1,074,530,772.76 -617,326,767.74 activities III. Cash flows from financing activities: Cash receipts from absorbing 0.00 91,500,000.00 investments Including: Cash received by subsidiaries from non-controlling 0.00 0.00 shareholders as investments Cash receipts from borrowings 4,528,609,710.84 5,060,014,993.61 Other cash receipts related to 218,800,000.00 58,929,200.00 financing activities Subtotal of cash inflows from 4,747,409,710.84 5,210,444,193.61 financing activities Cash payments for the 3,978,582,138.60 4,211,260,285.60 repayment of borrowings 139 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Cash payments for distribution of dividends or profits and for interest 712,806,601.09 973,540,594.14 expenses Including: Cash paid by subsidiaries to non-controlling 39,905,253.01 62,801,879.35 shareholders as dividend or profit Other cash payments related to 2,886,795,382.77 601,892,868.42 financing activities Subtotal of cash outflows from 7,578,184,122.46 5,786,693,748.16 financing activities Net cash flows from financing -2,830,774,411.62 -576,249,554.55 activities IV. Effect of foreign exchange rate changes on cash & cash 6,181,618.57 31,887,296.59 equivalents V. Net increase in cash and cash -14,281,113.87 258,679,854.07 equivalents Add: Opening balance of cash 1,426,647,961.41 1,167,968,107.34 and cash equivalents VI. Closing balance of cash and 1,412,366,847.54 1,426,647,961.41 cash equivalents 6. Cash Flow Statement of Parent Company Unit: RMB Items 2020 FY 2019 FY I. Cash flows from operating activities: Cash receipts from sale of goods 2,733,114,976.71 3,051,573,302.62 or rendering of services Cash receipts of tax and fee 66,559,713.45 126,777,169.39 refund Other cash receipts related to 80,694,298.23 29,607,387.39 operating activities Subtotal of cash inflows from 2,880,368,988.39 3,207,957,859.40 operating activities Cash payments for goods 1,814,822,275.21 2,361,560,613.29 purchased and services received Cash paid to and on behalf of 185,943,926.44 206,274,202.85 employees Cash payments for tax and fee 9,654,062.38 53,332,603.08 140 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Other cash payments related to 106,169,002.16 205,178,776.90 operating activities Subtotal of cash outflows from 2,116,589,266.19 2,826,346,196.12 operating activities Net cash flows from operating 763,779,722.20 381,611,663.28 activities II. Cash flows from investing activities: Cash receipts from withdrawal of 34,900.00 97,885,700.00 investments Cash receipts from investment 608,727,020.93 106,291,097.13 income Net cash receipts from the disposal of fixed assets, intangible 585,896.09 584,336.51 assets and other long-term assets Net cash receipts from the disposal of subsidiaries & other 0.00 0.00 business units Other cash receipts related to 1,211,313,748.92 1,523,450,378.58 investing activities Subtotal of cash inflows from 1,820,661,565.94 1,728,211,512.22 investing activities Cash payments for the acquisition of fixed assets, intangible 12,712,815.29 91,123,117.31 assets and other long-term assets Cash payments for investments 2,418,075,000.00 36,205.00 Net cash payments for the acquisition of subsidiaries & other 0.00 0.00 business units Other cash payments related to 403,015,284.50 1,188,643,952.79 investing activities Subtotal of cash outflows from 2,833,803,099.79 1,279,803,275.10 investing activities Net cash flows from investing -1,013,141,533.85 448,408,237.12 activities III. Cash flows from financing activities: Cash receipts from absorbing 0.00 0.00 investments Cash receipts from borrowings 4,491,107,248.30 3,049,613,485.16 Other cash receipts related to 161,000,000.00 financing activities 141 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Subtotal of cash inflows from 4,652,107,248.30 3,049,613,485.16 financing activities Cash payments for the 3,641,165,775.06 2,484,507,491.30 repayment of borrowings Cash payments for distribution of dividends or profits and for interest 590,335,992.12 770,757,962.38 expenses Other cash payments related to 238,720,382.77 531,892,868.42 financing activities Subtotal of cash outflows from 4,470,222,149.95 3,787,158,322.10 financing activities Net cash flows from financing 181,885,098.35 -737,544,836.94 activities IV. Effect of foreign exchange rate changes on cash & cash -942,299.26 580,136.64 equivalents V. Net increase in cash and cash -68,419,012.56 93,055,200.10 equivalents Add: Opening balance of cash 185,112,728.92 92,057,528.82 and cash equivalents VI. Closing balance of cash and 116,693,716.36 185,112,728.92 cash equivalents 142 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 7. Consolidated Statement of Changes in Owner’s Equity Amount in the current period Unit: 10,000 RMB 2020 FY Equity Attributable to parent Company Non- Items Other equity instruments Other controlli Total Less: General Undistri Share Preferre Perpetu Capital compre Special Surplus ng equity treasury risk buted Others Subtotal Capital d al Others reserve hensive reserve reserve interest shares reserve profit shares bonds income I. Balanc e at the 218,688 11,496 33,309 5,568 1,026 42,704 368,909 615,082 51,001 666,083 end of prior year Add: Cumula tive change s of account ing policies Error correcti on of prior period Busines s combin 157,633 1,891 24,639 184,163 150,548 334,711 ation under 143 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report commo n control Others II. Balanc e at the beginni 218,688 169,129 33,309 7,459 1,026 42,704 393,548 799,246 201,549 1,000,794 ng of current year III. Current period increas -169,129 23,872 -12,941 325 -38,003 -20,264 -263,885 13,974 -249,911 e (or "- " decrea se) (I) Total compre -12,942 56,582 43,640 18,003 61,643 hensive income (II) Capital contribu ted or -169,129 23,872 -42,704 -29,976 -265,681 -38,387 -265,720 withdra wn by owners 1. Ordinar y shares contribu ted by owners 144 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2. Capital contribu ted by holders of other equity instrum ents 3. Amount of share- based paymen t include d in equity 4. -169,129 23,872 -42,704 -29,976 -265,681 -38,387 -265,720 Others (III) Profit 4,702 -46,870 -42,169 -3,991 -46,159 distribut ion 1. Appropr iation of 4,702 -4,702 surplus reserve 2. Appropr iation of general risk reserve 3. Appropr -42,169 -42,169 -3,991 -46,159 iation of 145 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report profit to owners 4. Others (IV) Internal carry- over within equity 1. Transfe r of capital reserve to capital 2. Transfe r of surplus reserve to capital 3. Surplus reserve to cover losses 4. Change s in defined benefit plan carried over to retained 146 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report earning s 5. Other compre hensive income carried over to retained earning s 6. Others (V) Special 325 325 325 reserve 1. Appropr iation of 2,098 2,098 2,098 current period 2. Applicat ion of -1,773 -1,773 -1,773 current period (VI) Others IV. Balanc e at the 218,688 57,181 -5,483 1,351 4,702 373,284 535,361 215,522 750,883 end of current period Amount in the pervious period Unit:10,000 RMB 147 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2019 FY Equity Attributable to parent Company Non- Items Other equity instruments Other controll Total Less: General Undistri Share Preferre Perpetu Capital compre Special Surplus Subtot ing equity treasury risk buted Others Capital d al Others reserve hensive reserve reserve al interest shares reserve profit shares bonds income I. Balanc e at the 218,688 11,496 670 690 39,389 362,122 633,054 50,859 683,913 end of prior year Add: Cumula tive change -1,223 -1,223 -63 -1,286 s of account ing policies Error correcti on of prior period Busines s combin ation 157,633 -3,066 11,994 166,562 137,136 303,698 under commo n control Others II. Balanc 218,688 169,129 -2,395 690 39,389 372,893 798,393 187,932 986,325 e at the 148 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report beginni ng of current year III. Current period increas 33,309 9,854 337 3,315 20,655 852 13,617 14,469 e (or “-” decrea se) (I) Total compre 9,854 89,577 99,431 17,612 117,043 hensive income (II) Capital contribu ted or 33,309 -33,309 40 -33,269 withdra wn by owners 1. Ordinar y shares 40 40 contribu ted by owners 2. Capital contribu ted by holders of other equity instrum ents 149 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 3. Amount of share- based paymen t include d in equity 4. 33,309 -33,309 -33,309 Others (III) Profit 3,315 -68,922 -65,606 -4,035 -69,642 distribut ion 1. Appropr iation of 3,315 -3,315 surplus reserve 2. Appropr iation of general risk reserve 3. Appropr iation of -65,606 -65,606 -4,035 -69,642 profit to owners 4. Others (IV) Internal carry- over 150 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report within equity 1. Transfe r of capital reserve to capital 2. Transfe r of surplus reserve to capital 3. Surplus reserve to cover losses 4. Change s in defined benefit plan carried over to retained earning s 5. Other compre hensive income carried over to retained 151 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report earning s 6. Others (V) Special 337 337 337 reserve 1. Appropr iation of 2,773 2,773 2,773 current period 2. Applicat ion of -2,436 -2,436 -2,436 current period (VI) Others IV. Balanc e at the 218,688 169,129 33,309 7,459 1,026 42,704 393,548 799,246 201,549 1,000,794 end of current period 8. Statement of Changes in Owner’s Equity of the Parent Company Amount in the current period Unit:10,000 RMB 2020 FY Other equity instruments Items Other Share Capital Less: treasury Special Surplus Undistributed Total Preferred Perpetual comprehensive Others Capital Others reserve shares reserve reserve profit equity shares bonds income I. Balance at the end of 218,688 105,910 333,092,868.42 192 42,704 48,133 382,318 prior year 152 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Add: Cumulative changes of accounting policies Error correction of prior period Others II. Balance at the beginning 218,688 105,910 33,310 192 42,704 48,133 382,318 of current year III. Current period -51,222 23,872 162,581 4,702 145 -70,085 increase (or “-”decrease) (I) Total comprehensive 47,015 47,015 income (II) Capital contributed or -51,222 23,872 -75,094 withdrawn by owners 1. Ordinary shares contributed by owners 2. Capital contributed by holders of other equity instruments 3. Amount of share-based payment included in equity 4. Others -51,222 23,872 -75,094 153 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (III) Profit 4,702 -46,870 -42,169 distribution 1. Appropriation of surplus 4,702 -4,702 reserve 2. Appropriation of profit to -42,169 -42,169 owners 3. Others (IV) Internal carry-over within equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others (V) Special 163 163 reserve 1. Appropriation of current 456 456 period 154 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2. Application of -294 -294 current period (VI) Others IV. Balance at the end of 218,688 54,688 57,181 355 47,406 48,277 312,232 current period Amount in the previous period Unit:10,000 RMB 2019 FY Other equity instruments Less: Other Items Share Capital Special Surplus Undistributed Total Preferred Perpetual treasury comprehensive Others Capital Others reserve reserve reserve profit equity shares bonds shares income I. Balance at the end of 218,688 105,910 39,389 84,460 448,447 prior year Add: Cumulative changes of -558 -558 accounting policies Error correction of prior period Others II. Balance at the beginning 218,688 105,910 39,389 83,902 447,889 of current year III. Current period 33,309 192 3,315 -35,769 -65,571 increase (or “-” decrease) (I) Total comprehensive 33,153 33,153 income 155 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (II) Capital contributed or 33,309 -33,309 withdrawn by owners 1. Ordinary shares contributed by owners 2. Capital contributed by holders of other equity instruments 3. Amount of share-based payment included in equity 4. Others 33,309 -33,309 (III) Profit 3,315 -68,922 -65,606 distribution 1. Appropriation 3,315 -3,315 of surplus reserve 2. Appropriation -65,606 -65,606 of profit to owners 3. Others (IV) Internal carry-over within equity 1. Transfer of capital reserve to capital 156 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2. Transfer of surplus reserve to capital 3. Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others (V) Special 192 192 reserve 1. Appropriation 468 468 of current period 2. Application of current -276 -276 period (VI) Others IV. Balance at the end of 218,688 105,910 33,309 192 42,704 48,133 382,318 current period 157 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report III. Basic information of the Company Zhejiang Wanfeng Auto Wheel Co., Ltd. ("the Company" or "Wanfeng Auto Wheel") is a joint-stock limited company registered in Zhejiang, China and was established in September 30, 2001. The ordinary A shares denominated in RMB issued by the Company have been listed on the Shenzhen Stock Exchange. The Company is headquartered in Xinchang County Industrial Zone (Houxi), Zhejiang, China. The principal business of the Company includes: production, sales and technical consultation, service of automobile aluminum alloy wheels, motorcycle aluminum alloy wheels and other parts; Design, research and development, manufacturing and sales of lightweight magnesium materials and components for automobiles and motorcycles; Research, development, manufacturing, sales and related technical services of metal, non-metallic materials and their products, karts, and environmental protection equipment; Manufacturing and processing of metal bolts, coating treatment of mechanical parts, coating equipment, manufacturing of coating solvents, coating technology services; Manufacturing of textile machinery and parts (excluding cotton spinning frames and accessories); Manufacturing and processing of molds, mechanical parts, and auto parts; operating imports and exports business; Design, test, production, sales, maintenance and repair of general aviation aircraft, helicopters, aero engines, and avionics electrical and mechanical systems; Technology development and consulting services for the general aviation industry; Import and export of goods and technology. The parent and ultimate parent of the Company is Wanfeng Auto Holding Group Co., Ltd. (hereinafter referred to as "Wanfeng Group") established in the People's Republic of China. As of December 31, 2020, Wanfeng Group currently holds 33.37% shares of the Company and is the Company’s controlling shareholder. Ms. Chen Ailian and Mr. Wu Liangding hold 4.46% and 0.57% shares of the Company respectively. Ms. Chen Ailian, Mr. Wu Liangding, and Mr. Wu Jie hold 39.60%, 22.50%, and 3.76% shares of Wanfeng Group respectively. Ms. Chen Ailian and Mr. Wu Liangding are in a husband-wife relationship. Mr. Wu Liangding and Mr. Wu Jie are a father-son relationship. Ms. Chen Ailian and the Wu Liangding family (Mr. Wu Liangding and Mr. Wu Jie) are jointly the actual controllers of the Company. This financial statement was approved by the Company's Board of Directors on April 28, 2021. According to the Articles of Association of the Company, this financial statement will be submitted to the general meeting of shareholders for deliberation. The consolidation scope of the consolidated financial statements is determined on the basis of control. Please refer to Note VIII for changes in this year. 158 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report IV. Preparation Basis of the Financial Statements 1. Preparation basis The financial statements are prepared according to the Accounting Standards for Business Enterprises-Basic Standards promulgated by the Ministry of Finance and specific accounting standards, application guidelines, interpretations, and other relevant regulations (collectively referred to as "Accounting Standards for Business Enterprises") promulgated and revised thereafter. This financial statement is presented based on going concern basis. When preparing these financial statements, except for certain financial instruments, historical cost is used as the pricing principle. If an asset is impaired, the corresponding provision for impairment shall be made according to relevant regulations. The influence of business combination under the common control on the preparation basis of financial statements: Wanfeng Aircraft Industry Co., Ltd. was established on March 16, 2018 (hereinafter referred to as "Aircraft Industry") as a limited company registered in Zhejiang, China. The parent company of the Aircraft Industry is Wanfeng Aviation Industry Co., Ltd., and the ultimate controlling shareholder is Wanfeng Group. The Company held the 33rd meeting of the sixth board of directors on February 22, 2020, and the second extraordinary general meeting of shareholders in 2020 on March 20, 2020, and passed the resolutions of using its own and self- raised funds purchased a 55% stake in Wanfeng Aircraft Industry Co., Ltd. from Wanfeng Aviation Industry Co., Ltd. On April 16, 2020, the Company acquired a 55% equity interest in the Aircraft Industry from Wanfeng Aviation Industry Co., Ltd. for RMB 2,418,075,000.00 in cash. As before and after the combination, the Company and Aircraft Industry are ultimately controlled by Wanfeng Group and the control is not temporary. Therefore, the assets and liabilities of the Aircraft Industry acquired by the Company in accordance with the relevant requirements for business combinations under the common control are measured based on the book value of the Aircraft Industry on the combination date. In accordance with the relevant requirements for business combinations under the common control, the operating results and cash flows of the Aircraft Industry have been included in the consolidated financial statements from the date when Aircraft Industry and the Company are under the control of the ultimate 159 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report controlling party. And the transactions balance and amount between the two shall be offset at the time of the combination. The reporting entity formed after the combination is deemed to have always existed since the ultimate controlling party began to exercise control. Therefore, when the Company prepared the 2020 financial statements, it restated the consolidated balance sheet on December 31, 2019, the consolidated income statement, the consolidated cash flow statement, and the consolidated statement of changes in owner’s equity in 2019. (Hereinafter referred to as "restatement"). 2. Going concern The Company has no events or conditions that may cast significant doubts upon the Company’s ability to continue as a going concern within the 12 months after the balance sheet date. V. Significant Accounting Polices and Accounting Estimates Notes to specific accounting policies and accounting estimates: The Group has formulated specific accounting policies and accounting estimates based on actual production and operation characteristics, reflected in the allowance of doubtful debt receivables, inventory valuation methods, fixed asset depreciation, intangible asset amortization, and revenue recognition and measurement. 1. Statement of compliance with China Accounting Standards for Business Enterprises The financial statements have been prepared in accordance with the requirements of China Accounting Standards for Business Enterprises (CASBEs), and present truly and completely the financial position on December 31, 2020, results of operations and cash flows of the Company of 2020. 2. Accounting period The accounting period of the Company is from 1 January to 31 December of each calendar year. 3. Operating cycle The Company has a relatively short operating cycle for its business, and an asset or a liability is classified as current if it is expected to be realized or due within 12 months. 4. Functional currency The Company's functional currency and the currency used in the financial statements are both RMB. Unless otherwise specified, they are all expressed in RMB or yuan. Subsidiaries of the Group determine their accounting currency based on the economic environment in which they operate and convert them into RMB in 160 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report accordance with the policies described in Note V. 9 when preparing financial statements. 5. Accounting treatments of business combination under and not under common control Business combinations are divided into business combinations under common control and business combinations not under common control. Accounting treatment of business combination under common control The enterprises participating in the combination are ultimately controlled by the same party or the same multiple parties before and after the combination. The control is not temporary and is a business combination under common control. In a business combination under common control, the party that obtains control of other participating companies on the combination date is the combining party . The other companies participating in the merger are the combined parties. The combination date refers to the date on which the combining party obtains control of the combined party. The assets and liabilities obtained by the combining party in a business combination under a common control (including the goodwill formed by the ultimate controlling party’s acquisition of the combined party) shall be accounted for based on the book value in the ultimate controlling party’s financial statements on the combination date. The difference between the book value of the net assets obtained by the combining party and the book value of the actual paid (or the total par value of the issued shares) shall be adjusted for the equity premium in the capital reserve and the balance transferred from the capital reserve of the original system. If it is insufficient to offset, the retained earnings will be adjusted. Accounting treatment of business combination not under common control If the enterprises participating in the combination are not ultimately controlled by the same party or the same multiple parties before and after the combination, it is a business combination not under common control. In a business combination not under common control, the party that obtains control of other participating companies on the purchase date is the acquirer. The other companies participating in the combination are the acquiree. The purchase date refers to the date on which the acquirer obtains control of the acquiree. The identifiable assets, liabilities, and contingent liabilities of the acquiree obtained in a business combination not under common control are measured at their fair value on the acquisition date. The difference between combination cost and the fair value of identifiable net assets obtained from the acquiree at the acquisition date is recognized as goodwill. Otherwise, the fair value of identifiable assets, liabilities and contingent liabilities, and the measurement of the combination cost are 161 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report reviewed, then the difference is recognized in profit and loss. The subsequent measurement is made based on cost minus accumulated impairment loss. 6. Compilation method of consolidated financial statements The scope of the consolidated financial statements is based on control, including the financial statements of the Company and all its subsidiaries. Subsidiary refers to the entity controlled by the Company (including the divisible part of the enterprise and the invested unit, and the structured entity controlled by the Company, etc.). When preparing consolidated financial statements, the subsidiary adopts the same fiscal year and accounting policies as the Company. All assets, liabilities, equity, income, expenses, and cash flows arising from transactions between companies within the group are fully offset at the time of consolidation. If the current loss shared by the minority shareholders of a subsidiary exceeds the initial shareholders’ equity of the subsidiary, the balance shall still be offset against the minority shareholders’ equity. For subsidiaries not under common control, the operating results and cash flows of the acquiree will be included in the consolidated financial statements from obtaining the control of the acquiree. When preparing consolidated financial statements, the financial statements of subsidiaries are adjusted based on the fair value of the identifiable assets, liabilities, and contingent liabilities on the purchase date. For subsidiaries under common control, the operating results and cash flows of the combined party are included in the consolidated financial statements from the beginning of the combination. When preparing the consolidated financial statements, the relevant items of the previous financial statements are adjusted. The reporting entity formed after the combination is deemed to have always existed since the ultimate controlling party began to exercise control. If changes in relevant facts and circumstances lead to changes in one or more of the control elements, the Company will reassess whether to control the investee. 7. Classification of joint arrangement and accounting treatment method of joint operation Joint arrangements can be classified into joint operations and joint ventures. Joint operation refers to the arrangement in which a joint party party has rights to the related assets of such arrangement and assumes the related liabilities of such arrangement. A joint venture refers to the arrangement that the joint venture party only has rights to the net asset’s of such arrangement. 8. Recognition criteria of cash and cash equivalents Cash refers to cash on hand and deposit on demand for payment. Cash 162 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report equivalents refer to short-term, highly liquid investments that can be readily converted to cash and that are subject to an insignificant risk of changes in value. 9. Foreign currency translation The Group converts foreign currency amounts into functional currency amounts for foreign currency transactions. Transactions denominated in foreign currency are translated into functional currency amounts at the spot exchange rate at the transaction date at initial recognition. Monetary items denominated in foreign currency are translated at the spot exchange rate at the balance sheet date. The difference will be recognized through profit and loss, except for those arising from the principal and interest of exclusive borrowings eligible for capitalization. Non-monetary items carried at historical costs in foreign currency are translated at the spot exchange rate at the transaction date, with its functional currency amounts unchanged. Non-monetary items carried at fair value in foreign currency are translated at the spot exchange rate at the date when the fair value was determined. The difference will be recognized through profit and loss, or other comprehensive income depending on the nature of those non-monetary items. For overseas operations, the Group converts its functional currency amounts into RMB when preparing financial statements: The assets and liabilities in the balance sheet are translated into RMB at the spot rate at the balance sheet date; the equity items, other than undistributed profit, are translated at the spot rate at the transaction date; the revenues and expenses in the income statement are translated into RMB at the average exchange rate during the transaction period. The difference arising from the aforementioned foreign currency translation is recognized in other comprehensive income. In terms of disposal of an overseas operation, the other comprehensive income related to the overseas operation is transferred to the current profit and loss. The partial disposal is calculated according to the disposal ratio. Foreign currency cash flows and cash flows of overseas subsidiaries are translated using the average exchange rate. The impact of exchange rate changes on cash is treated as an adjustment item and presented separately in the cash flow statement. 10. Financial instruments Financial instruments refer to contracts that form one party’s financial assets into other parties’ financial liabilities or equity instruments. Recognition and derecognition of financial instruments When the Company becomes a party to a financial instrument, it is recognized as a financial asset or financial liability. 163 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report If the following conditions are met, the derecognition of a financial asset (or part of a financial asset, or part of a group of similar financial assets) shall be written off from its account and balance sheet: (1) The right to receive cash flows of financial assets expires. (2) The right to collect the cash flow of financial assets is transferred, or the obligation to fully pay the collected cash flow to a third party on time under the "pass-through agreement", and satisfied one of the following criteria: (a) all the risks and rewards related to the ownership of the financial assets have been transferred. (b) Although all the risks and rewards of the ownership financial assets are neither transferred nor retained, the control of the financial assets has been abandoned. If the responsibility of the financial liability has been fulfilled, canceled, or expired, the financial liability shall be derecognized. If an existing financial liability is replaced by the same creditor with another financial liability with almost completely different terms, or almost all the terms of the existing liability are substantially modified, such replacement or modification shall be regarded as the derecognition of the original liability and the recognition of the new liability. For debt treatment, the difference is included in the current profit and loss. The purchase and sale of financial assets in a conventional manner shall be recognized and derecognized according to the transaction day. The conventional way of buying and selling financial assets refers to the receipt or delivery of financial assets within the time limit stipulated by laws and regulations or common practices in accordance with the terms of the contract. Transaction date refers to the date on which the Group promises to buy or sell financial assets. Classification and measurement of financial assets The Company’s financial assets are classified according to the business model of the Group’s corporate management of financial assets and the contractual cash flow characteristics of financial assets at initial recognition. It can be classified into financial assets measured at fair value through profit and loss, financial assets measured at amortized cost, and financial assets measured at fair value through other comprehensive income. Financial assets initially recognized by the Company and measured at fair value. hHowever, for accounts receivable as a result of selling goods or providing services that do not contain a significant financing component or not consider financing components with an associated period less than one year, the Company measures at their transaction price. 164 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report For the financial assets measured at fair value and the changes recognized through the current profit and loss, the transaction expenses thereof are directly included in profit and loss. For other categories of financial assets and financial liabilities, the transaction expenses thereof are included in the initially recognized amount. The subsequent measurement of financial assets depends on their classification: Debt investments measured at amortized cost Financial assets that meet the following conditions are classified as financial assets measured at amortized cost: The financial assets aim to collect contract cash flow; The contract terms of the financial asset stipulate that the cash flow generated on a specific date is only used to pay for the principal and interest. Such financial assets use the effective interest rate method to recognize interest income. The gains and losses arising from the derecognition, modification, or impairment are included in the current profit and loss. Debt Investment measured at fair value and the changes recognized through other comprehensive income Financial assets that meet the following conditions are classified as financial assets measured at fair value and the changes recognized through other comprehensive income: The financial assets aim to collect contractual cash flow and to sell financial assets. The contract terms of the financial assets stipulate that the cash flow generated on a specific date is only used to pay for the principal and interest. Such financial assets use the effective interest method to recognize interest income. Except for interest income, impairment losses, and exchange differences recognized as current profits and losses, the other fair value changes are recognized in other comprehensive income. When financial assets are derecognized, the accumulated gains and losses previously included in other comprehensive income are transferred to current profit and loss. Equity instrument investment measured at fair value and the changes recognized through other comprehensive income The Group irrevocably chooses to designate some non-trading equity instrument investments as financial assets measured at fair value and the changes recognized through other comprehensive income. Only the relevant dividend income (except for the dividend income that is clearly recovered as part of the investment cost) is included in the current profit and loss, and subsequent changes in the fair value are included in other comprehensive income, and no impairment provision is required. When financial assets are derecognized, the accumulated gains and losses previously included in other 165 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report comprehensive income are transferred from other comprehensive income to retained earnings. Financial assets measured at fair value and the changes recognized through current profit and loss Other financial assets, except for financial assets measured at amortized cost and other than financial assets measured at amortized cost and financial assets measured at fair value and the changes recognized through other comprehensive, are classified as financial assets measured at fair value through current profits and losses. Such financial assets, fair value is used for subsequent measurement, and all changes in fair value are recognized in the current profit and loss. Classification and measurement of financial liabilities The Company’s financial liabilities are classified at initial recognition: financial liabilities measured at fair value through current profits and losses and other financial liabilities. For financial liabilities measured at fair value through current profit and loss, the related transaction costs are directly included in the current profit and loss. For other financial liabilities, the related transaction costs are included in the initial recognition amount. The subsequent measurement of financial liabilities depends on its classification: Financial liabilities measured at fair value and the changes recognized through current profit and loss Financial liabilities measured at fair value and the changes recognized through current profits and losses include trading financial liabilities (including derivatives that are financial liabilities) and financial liabilities measured at fair value through current profits and losses designated at the initial recognition. Trading financial liabilities (including derivatives that are financial liabilities) are subsequently measured at fair value, and all changes in fair value are recognized in the current profit and loss. For financial liabilities measured at fair value through current profit and loss, subsequent measurement is carried out at fair value. Except for changes in fair value caused by the Group’s own credit risk are recognized through other comprehensive income, other changes in fair value are included in the current profit and loss. If changes in fair value through other comprehensive income caused by Group's credit risk cause or enlarge the accounting mismatch in profit and loss, the Group will include all changes in fair value (including the amount affected by changes in its own credit risk) in current profit and loss. Other financial liabilities 166 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report For such financial liabilities, the effective interest rate method is adopted, and subsequent measurement is carried out in accordance with amortized cost. Impairment of financial instruments Based on expected credit losses, the Company recognized the impairment of financial assets measured at amortized cost and debt instrument investments measured at fair value and the changes recognized through other comprehensive income. For receivables that do not contain significant financing provisions, the Company simplified measurement methods to measure the loss provision equivalent to the expected credit loss during the entire duration. For financial assets other than the above-mentioned simplified measurement methods, the Company separately measures the expected credit losses of financial instruments at different stages on the balance sheet date. In the first stage, if the credit risk of a financial instrument has not increased significantly since the initial recognition, the loss provision is measured according to the expected credit loss in the next 12 months. The interest income is calculated based on the book balance and the effective interest rate. In the second stage, if the credit risk of a financial instrument has increased significantly since its initial recognition but no credit impairment has occurred, the loss provision is measured based on the expected credit loss for the entire duration. The interest income is calculated based on the book balance and the effective interest rate. In the third stage, if a financial instrument has been credit-impaired since its initial recognition, the loss provision is measured based on the expected credit loss for the entire duration. The interest income is based on amortized cost and effective interest rate. For financial instruments with relatively low credit risk on the balance sheet date, the Company assumes that their credit risk has not increased significantly since the initial recognition. The Company assesses the expected credit losses of financial instruments based on individual items and portfolios. The Company considers the credit risk characteristics of different customers and evaluates the expected credit loss of the accounts receivable based on the aging combination. Please refer to Note X. 4 for the disclosure of the Company's criteria for determining a significant increase in credit risk, the definition of credit-impaired assets, and the assumptions for the measurement of expected credit losses. When the Company no longer reasonably expects to recover all or part of the contractual cash flow of a financial asset, the Company directly writes down the book value of the financial asset. 167 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Offsetting financial instrument If the following conditions are all met, the financial assets and financial liabilities are listed in the balance sheet as the net amount after offsetting each other: Financial assets have the statutory right to offset the confirmed amount, and this statutory right is currently enforceable. The plan is to settle on a net basis or to realize the financial assets and pay off the financial liabilities at the same time. Financial asset transfer If the Group has transferred almost all the risks and rewards of financial assets to the transferee, it shall terminate the recognition of the financial assets. If the Group retains almost all the risks and rewards of financial assets, it shall not terminate the recognition of the financial assets. If the Group neither transfers nor retains almost all the risks and rewards of financial assets, it shall be dealt with as follows: If the control of the financial assets is abandoned, the financial assets shall be derecognized, and the assets and liabilities shall be confirmed. If the financial asset is in control, the relevant financial assets shall be recognized according to the extent of its continued involvement in the transferred financial assets, and the relevant liabilities shall be recognized accordingly. Financial assets that are involved through the provision of financial guarantees, the value of the assets will be the lower of financial assets book value and financial guarantees. The financial guarantee amount refers to the highest amount required to be repaid among the consideration received. 11. Notes receivable Refers to note v.10 “Financial instrument”. 12. Accounts receivable Refers to note v.10 “Financial instrument”. 13. Accounts receivable financing Refers to note v.10 “Financial instrument”. 14. Other receivables The determination method and accounting treatment method of the expected credit loss of other receivables 168 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Refers to note v.10 “Financial instrument”. 15. Inventories Inventories include raw material, work in process product, semi-product, low- value consumables, and finished goods. Inventories are initially measured at historical cost. Inventory costs include purchase costs, processing costs, and other costs. The weighted average method is used to determine the actual cost when inventory is sold. Low-value consumables are amortized with the one-shot write-off method. The perpetual inventory system is adopted here. On the balance sheet date, inventories are measured at the lower of cost or net realizable value. Provisions for inventory write-down are made on the excess of its cost over the net realizable value. The difference will be included in the profit and loss. If the factors influencing the previous provision for inventory depreciation have disappeared, making the net realizable value of the inventory higher than its book value, the previously deducted amount of the inventory depreciation reserve amount will be restored and the amount transferred back in the current profit and loss. The net realizable value refers to the amount of the estimated selling price of the inventory minus the estimated cost, estimated selling expenses, and related taxes and fees at the time of completion in daily activities. When making provision for inventory depreciation, raw materials are accrued by category, and finished products are accrued according to individual inventory items. 16. Contract assets The Company presents contract assets or contract liabilities in the balance sheet based on the relationship between its performance obligations and customers’ payments. Contract assets and contract liabilities under the same contract shall offset each other and be presented on a net basis. Contract assets refer to the right to receive consideration for the transfer of goods or services to customers, and this right depends on factors other than the passage of time. 17. Contract cost No 18. Assets classified as held for sale 169 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report No 19. Debt investments No 20. Other debt investments No 21. Long-term receivable No 22. Long-term equity investments Long-term equity investments include equity investments in subsidiaries, joint ventures, and associates. Long-term equity investment is initially measured at the initial investment cost when it is acquired. For business combination under common control, on the date of combination, it regards the share of the carrying amount of the equity of the combined party included the consolidated financial statements of the ultimate controlling party as the initial cost of the investment. The difference between the initial cost of the long-term equity investments and the carrying amount of the combination consideration paid or the par value of shares issued offsets capital reserve. (If the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings.) Other comprehensive income before the combination date shall be accounted for on the same basis as the investee’s direct disposal of related assets or liabilities. Shareholders’ equity recognized through changes in shareholders’ equity other than net profit and loss, other comprehensive income and profit distribution of the investee shall be transferred to the current profit and loss when disposing of the investment. Among them, those that are still long-term equity investments after disposal are carried forward in proportion, and those that are converted into financial instruments after disposal are carried forward in full amount. For business combinations not under common control, the combination cost is used as the initial investment cost. The combination cost includes the sum of the assets paid by the purchaser, the liabilities incurred or assumed, and the fair value of the issued equity securities. For the other comprehensive income that is held before the purchase date using the equity method, when disposing of the investment, the same basis as the direct disposal of related assets or liabilities 170 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report by the investee is used for accounting treatment. Shareholders’ equity recognized due to changes in shareholders’ equity other than net profit and loss, other comprehensive income and profit distribution of the investee, shall be transferred to the current profit and loss. Among them, those that are still long- term equity investments after disposal are carried forward in proportion and those that are converted into financial instruments after disposal are carried forward in full amount. The equity investment held before the purchase date as a financial instrument is included in other comprehensive income and the cumulative fair value changes are all transferred to retained earnings when the cost method is changed. For long-term equity investments except the long-term equity investment formed by business combinations, the initial investment cost shall be determined as follows: for the long-term investment obtained through paying cash, the actual purchase price paid and the expenses, taxes, and other necessary expenses directly related to the acquisition of long-term equity investment shall be the initial investment cost; for the long-term investment obtained through the issuance of equity securities, the fair value of the equity securities shall be the initial investment cost. The long-term equity investment that the Company is able to exercise control over the investee is accounted for by the cost method in the Company's individual financial statements. Control refers to having the power over the investee, enjoying variable returns by participating in the relevant activities of the investee, and having the ability to use the power over the investee to affect the amount of return. When the cost method is adopted, long-term equity investments are priced at the initial investment cost. In case of additional or recovery of investment, the cost of long-term equity investment shall be adjusted. The cash dividends or profits declared to be distributed shall be recognized as investment income for the current period. Long-term equity investments with joint control or significant influence relationship are accounted for with the equity method. Joint control refers to the common control of an arrangement in accordance with relevant agreements, and the relevant activities of the arrangement must be agreed by the participants who share control rights before making decisions. Significant influence refers to the power to participate in decision-making on the financial and operating policies of the investee, but not the ability to control or jointly control the formulation of these policies with other parties. When the equity method is adopted, if the initial investment cost is greater than the fair value of the investee's identifiable net assets at the time of investment, it shall be included in the initial investment cost of the long-term equity investment. Otherwise, the difference shall be included in the current profit and loss, and the cost of the long-term equity investment shall be adjusted at the same time. 171 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report When using the equity method, the investment profits and losses and other comprehensive income shall be recognized according to the share of the net profits and losses and other comprehensive income realized by the invested entity, and the book value of the long-term equity investment shall be adjusted. When confirming the share of the net profit and loss of the investee, it is based on the fair value of the investee’s identifiable assets at the time the investment is obtained. In accordance with the Group’s accounting policies and accounting period, and offsetting the share of the investment with associates and joint ventures, the internal transaction gains and losses that occur between the two parties are calculated according to the proportion that should be enjoyed by the investor (if the internal transaction loss is an asset impairment loss, it should be recognized in full amount), and the net profit of the investee is adjusted and confirmed, unless the invested or sold assets constitute a business. Calculate the portion that should be enjoyed based on the declared profit or cash dividends of the invested entity, and reduce the book value of the long-term equity investment accordingly. The Group recognizes the net loss incurred by the investee, and the book value of the long-term equity investment and other long-term equity that constitutes the net investment in the investee is written down to zero, unless the group is liable for additional loss obligations. For other changes in shareholders' equity in addition to net profit and loss, other comprehensive income and profit distribution of the investee, the book value of long-term equity investment is adjusted and included in shareholders' equity. When disposing of a long-term equity investment, the difference between its book value and the actual purchase price shall be included in the current profit and loss. For long-term equity investments accounted for using the equity method, if the equity method is terminated due to disposal, the relevant other comprehensive income accounted for by the original equity method shall be accounted for on the same basis as the investee’s direct disposal of related assets or liabilities. Shareholders’ equity confirmed by changes in other shareholders’ equity other than profit and loss, other comprehensive income and profit distribution shall be transferred to current profits and losses. If the equity method is still adopted, the relevant other comprehensive income calculated by the original equity method shall be accounted for on the same basis as the investee’s direct disposal of related assets or liabilities and transferred to the current profit and loss on a pro rata basis. Shareholders’ equity confirmed by changes in other shareholder’s equity other than the distribution of income and profits shall be transferred to the current profit and loss according to the corresponding proportion. 23. Investment property Investment property measurement model Not applicable 172 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 24. Fixed assets (1) Recognition principles of fixed assets Fixed assets are only recognized when the economic benefits associated with assets are likely to flow into the Group and the costs can be measured reliably. Subsequent expenditures related to fixed assets that meet the recognition conditions shall be included in the cost of fixed assets, and derecognise the book value of the replaced part. Otherwise, it shall be included in the current profit and loss when incurred. Fixed assets are initially measured at historical cost, considering the impact of expected abandonment cost factors. The cost of purchasing a fixed asset includes the purchase price, relevant taxes, and other expenditures directly attributed to the asset that occurs before the fixed asset reaches its intended useable state. The depreciation of fixed assets is calculated using the average life method. The depreciation life, estimated net residual value rate and annual depreciation rate of various fixed assets are as follows: (2) Depreciation method of different categories of fixed assets Estimated Annual Depreciation Useful life Categories residual value depreciation rate method (years) proportion (%) (%) Buildings and Straight-line method 5-35 years 3-10% 2.57-19.40% structures Specialized Straight-line method 3-17 years 3-10% 5.29-32.33% equipment Vehicle Straight-line method 4-10 years 3-10% 9.00-24.25% General tools Straight-line method 3-10 years 3-10% 9.00-32.33% Decoration Straight-line method 5 years 20% The Group reviews the useful life, estimated net residual value and depreciation method of fixed assets at least at the end of each year, and adjusts them if necessary. (3) Recognition basis, valuation and depreciation method of financial leased fixed assets During the reporting period, the Group did not have finance leased fixed assets. 25. Construction in progress The cost of construction in progress is determined based on actual project 173 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report expenditures, including various necessary project expenditures incurred during the construction period, capitalized borrowing costs before the project reaches its intended use status and other related expenses. Construction in progress is transferred to fixed assets when it reaches the expected usable state. 26. Borrowing costs Borrowing costs refer to the interest and other related costs incurred by the Group due to borrowings, including borrowing interest, amortization of discounts or premiums, auxiliary expenses, and exchange differences arising from foreign currency borrowings. Borrowing costs that can be directly attributable to the acquisition, construction or production of assets that meet the capitalization conditions shall be capitalized, and other borrowing costs shall be recognized in the current profit and loss. Assets that meet the conditions for capitalization refer to fixed assets, investment property, inventory, and other assets that require a long period of acquisition, construction or production activities to reach the intended usable or saleable state. Borrowing costs can be capitalized only if the following conditions are met simultaneously: (1) Asset expenditure has occurred. (2) Borrowing costs have been incurred. (3) The purchase, construction or production activities necessary for the asset to reach the intended usable or saleable state have begun. When the acquisition, construction or production of assets that meet the capitalization conditions reaches the intended usable or saleable state, the capitalization of borrowing costs shall cease. Borrowing costs incurred thereafter are included in the current profit and loss. During the capitalization period, the amount of interest capitalization in each accounting period is determined in accordance with the following methods: (1) Special borrowings are determined by the amount of interest expenses actually incurred in the current period, minus temporary deposit interest income or investment income. (2) General borrowings are calculated and determined based on the weighted average number of asset expenditures of the accumulated asset expenditure exceeding the portion of special borrowings multiplied by the weighted average interest rate of the occupied general borrowings. During the acquisition, construction or production process of assets that meet the conditions for capitalization, the capitalization of borrowing costs shall be suspended if there is an abnormal interruption other than the procedures necessary to reach the intended usable or saleable state, and the interruption 174 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report lasts for more than 3 months. The borrowing costs incurred during the interruption period are recognized as expenses and included in the current profit and loss until the acquisition, construction or production activities of the asset restart. 27. Productive biological assets No 28. Oil & gas assets No 29. Right-of-use assets No 30. Intangible assets (1) Valuation method, service life, impairment test Intangible assets are recognized, only if the economic benefits are likely to flow into the Group, and the costs can be measured reliably. The initial measurement of intangible assets is based on its cost. However, if the fair value of an intangible asset obtained in a business combination not under common control can be reliably measured, it is separately recognized as an intangible asset and measured at its fair value. The useful life of intangible assets is determined according to the period during which it can bring economic benefits to the Group. If it is impossible to foresee the period of time that it will bring economic benefits to the Group, it is regarded as an intangible asset with an indefinite useful life. The useful life of each intangible asset is as follows: Useful Life 292-600 months or Land use right perpetual Application software 3-10 years Customer relations 20 years Patented technology 7-40 years 10 years or Trademark uncertain Technology 21 years authorization The land use rights obtained by the Group are usually accounted for as intangible assets. For self-development and construction of buildings such as 175 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report workshops, relevant land use rights and buildings are accounted for as intangible assets and fixed assets respectively. The price paid for the purchased land and buildings is allocated to the land use rights and the buildings. If it is difficult to allocate them reasonably, they shall all be treated as fixed assets. Intangible assets with a definite service life are amortized using the straight-line method during their service life. The Group reviews the useful life and amortization method of intangible assets with a definite useful life at the end of each year and adjusts it if necessary. For intangible assets with uncertain service life, regardless of whether there are signs of impairment, an impairment test is carried out every year. Such intangible assets are not amortized, and their useful lives are reviewed in each accounting period. If there is evidence that the service life is limited, the accounting treatment shall be carried out according to the abovementioned policy for intangible assets with definite service life. (2) Accounting policy for internal R&D expenditure The Group divides R&D expenditures into research phase expenditures and development phase expenditures. Expenditures in the research phase are included in the current profit and loss. Expenditures in the development stage can be capitalized only when the following conditions are met at the same time: it is technically feasible to complete the intangible asset so that it can be used or sold; it has the intention to complete the intangible asset and use or sell it; Intangible assets generate economic benefits, including the ability to prove that the products produced by the intangible assets exist in the market or the intangible assets themselves exist in the market, or intangible assets will be used internally and can prove their usefulness; The Group has sufficient technology, financial resources, and other resource support to complete the development of the intangible asset and can use or sell the intangible asset; The expenditure attributable to the development of the intangible asset can be measured reliably. Development expenditures that do not meet the above conditions are included in the current profits and losses when incurred. 31. Impairment of long-term assets The Group determines the impairment of assets excluding inventories, deferred income tax, and financial assets according to the following methods: The Group judges on the balance sheet date whether there are signs of possible impairment of assets. If there are signs of impairment, the Group will estimate its recoverable amount and conduct impairment tests. No matter whether there are signs of impairment, the goodwill recognized as a result of business combination shall be tested for impairment at least once a year. Intangible assets that have not yet reached the usable state, an impairment test is also carried out annually. 176 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The recoverable amount is determined based on the higher of the net value of the asset’s fair value minus the disposal expenses and the present value of the asset’s expected future cash flow. The Group estimates its recoverable amount on the basis of a single asset. If it is difficult to estimate the recoverable amount of a single asset, the recoverable amount of the CGU is determined based on the CGU to which the asset belongs. The identification of an CGU is based on whether the main cash inflow generated by the CGU is independent of the cash inflows of other assets or CGUs. When the recoverable amount of an asset or CGU is lower than its book value, the Group writes down its book value to the recoverable amount. The reduced amount is included in the current profit and loss, and the corresponding asset impairment provision is made simultaneously. As for the impairment test of goodwill, the book value of goodwill shall be allocated to the relevant CGU according to a reasonable method from the date of purchase. If it is difficult to allocate to the relevant CGU, it shall be allocated to a group of CGUs. The related CGU or group of CGUs is the CGU or group of CGUs that can benefit from the synergies of the business combination and is not larger than the reporting segment determined by the Group. When performing an impairment test on a related CGU or group of CGUs that contains goodwill, if there are signs of impairment, an impairment test will be performed first on the CGU or group of CGUs that do not contain goodwill, determining recoverable amount and impairment losses. Then conduct an impairment test on the CGU or group of CGUs containing goodwill and compare its book value with the recoverable amount. If the recoverable amount is lower than the book value, the amount of impairment loss is first offset and allocated to the book value of the goodwill in the CGU or group of CGUs. Then, according to the proportion of the book value of each asset other than goodwill in the CGU or group of CGUs, the book value of other assets is deducted proportionally. Once the aforementioned asset impairment loss is confirmed, it will not be reversed in the subsequent accounting periods. 32. Long-term prepayments Long-term prepayments are mainly for molds, which are amortized using the production method or the straight-line method. 33. Contract liabilities The Group lists contract assets or contract liabilities in the balance sheet based on the relationship between performance obligations and customer payments. The Group offsets the contract assets and contract liabilities under the same contract as the net amount. 177 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Contract liabilities refer to the obligation to transfer goods or services to customers for the consideration received or receivable from customers, such as the amount that an enterprise has received before the transfer of promised goods or services. 34. Employee benefits (1) Short-term employee benefits Employee remuneration refers to the various forms of remuneration or compensation provided by the Group to obtain services provided by employees or terminate the labor relationship. Employee compensation includes short-term compensation and post-employment benefits. The benefits provided by the Group to employee spouses, children, dependents, survivors of deceased employees, and other beneficiaries are also employee compensation. Short-term salary During the accounting period when employees provide services, the actual short-term compensation is recognized as a liability and included in the current profit and loss or the cost of related assets. (2) Post-employment benefits Post-employment benefits (set a deposit plan) The Group employees participate in pension and unemployment insurance managed by the local government, and the corresponding expenditures are included in the current profits and losses when incurred. Other long-term employee benefits For other long-term employee benefits provided to employees, the relevant regulations on post-employment benefits shall be applied to confirm and measure the net liabilities or net assets of other long-term employee benefits, but the changes are included in the current profit and loss or the cost of related assets. (3) Termination benefits No (4) Other long-term employee benefits No 35. Lease liabilities 178 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report No 36. Provisions Except for the contingent consideration and the contingent liabilities assumed in the business combination not under the common control, when the obligations related to the contingent events meet the following conditions at the same time, the Group recognizes them as provisions: (1) The obligation is the current obligation assumed by the Group. (2) The performance of this obligation is likely to cause economic benefits outflow. (3) The amount of the obligation can be measured reliably. The provisions are initially measured in accordance with the best estimate of the expenditure required to perform the relevant current obligations, and comprehensively consider factors such as risks, uncertainties and time value of money related to contingencies. The book value of provisions is reviewed on each balance sheet date. If there is conclusive evidence that the book value cannot reflect the current best estimate, the book value shall be adjusted according to the current best estimate. The contingent liabilities of the acquiree obtained in a business combination not under the common control are measured at fair value initially. After the initial recognition, the amount recognized in accordance with the provisions, and the balance of the initially recognized amount after deducting the accumulated amortization determined by the revenue recognition principle shall be subsequently measured at the higher of the two. 37. Share-based payment No 38. Preferred shares, Perpetual bonds, and Other financial instrument No 39. Revenue Accounting policies used in revenue recognition and measurement The Group has fulfilled the performance obligations in the contract, that is, revenue is recognized when the customer obtains control of the relevant goods or services. Obtaining control over related goods or services means being able to lead the use of the goods or the provision of the service and obtaining almost all of the economic benefits from it. 179 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Sales contract Goods sales contracts between the Group and customers usually only include performance obligations for the transferred goods. The Group generally considers the following factors and recognizes revenue when the customer obtains control of the relevant product: the current right to receive payment for the product, the transfer of major risks and rewards in the ownership of the product, the transfer of legal ownership of the product, the transfer of the physical assets of the product, and the customer's acceptance of the product. Service contract Service provision contracts between the Group and customers usually include performance obligations for services to customers. The performance obligations of the service provided by the Group do not meet the conditions for fulfilling the performance obligations within a period. The Group usually recognizes revenue at the time when the customer obtains the service or the control of the service-related asset based on comprehensive consideration of the following factors: Obtain the current right of collection of assets, the transfer of major risks and rewards of asset ownership, the transfer of legal ownership of assets, the transfer of physical assets, and the customer's acceptance of the asset. Consideration payable to customers For the consideration payable to customers, the Group offsets it against the transaction price. And at the time when the relevant income is recognized and customer consideration is paid (or promised), whichever is later, the current income is offset, unless the consideration payable is to obtain other distinguishable goods or services from the customer. Warranty obligations In accordance with contractual agreements and legal provisions, the Group provides quality assurance for the products sold. For guaranteed quality assurance to ensure that the products sold meet the established standards, the Group conducts accounting treatment in accordance with Note V. 43. For the service quality assurance that provides a separate service in addition to the established standards to ensure that the goods sold meet the established standards, the Group regards it as a single performance obligation and allocates part of the transaction price to the service quality assurance based on the relative proportion of the stand-alone selling price of the goods and services quality assurance provided, and recognizes revenue when the customer obtains the control of the service. When assessing whether the quality assurance provides a separate service in addition to ensuring that the products sold meet the established standards, the Group considers whether the quality 180 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report assurance is a legal requirement, the quality assurance period, and the nature of the Group's commitment to performing tasks. Differences in accounting policies for revenue recognition caused by the adoption of different business models for similar businesses No 40. Government grants Government grants are recognized when they can meet the attached conditions and can be received. Monetary government grants are measured at the amount received or receivable. Non-monetary government grants are measured at fair value, and can be measured at the nominal amount in the circumstance that fair value can’t be assessed. Government grants related to assets are government grants with which the Group construct or otherwise acquire long-term assets under requirements of government. In the circumstances that there is no specific government requirement, the Group shall determine based on the primary condition to acquire the grants and government grants related to assets are government grants whose primary condition is to construct or otherwise acquire long-term assets. Other government grants are recognized as income. Government grants are calculated using the gross method. For government grants related to income used for compensating the related future cost, expenses or losses of the Group are recognized as deferred income and are included in profit and loss during the period in which the relevant cost, expenses or losses are recognized. For government grants related to income used for compensating the related cost, expenses or losses already incurred to the Group, they are directly included in profit and loss. Government subsidies related to assets are recognized as deferred income, and are included in profit and loss according to a reasonable and systematic method within the useful life of the relevant asset. For assets sold, transferred, disposed or damaged within the useful lives, the balance of unamortized deferred income is transferred into profit and loss of the year in which the disposal occurred. 41. Deferred tax assets/Deferred tax liabilities Income tax includes current income tax and deferred income tax. Except for the adjusted goodwill arising from a business combination, or the transactions or events directly included in the shareholders' equity, all of them are included in the current profit and loss as income tax expenses or income. 181 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The Group's current income tax liabilities or assets formed in the current and previous periods are measured in accordance with the expected amount of income tax to be paid or returned as calculated in accordance with the tax law. Based on the temporary difference between the book value of assets and liabilities on the balance sheet date and the tax basis, as well as temporary differences arising from the difference between the book value of items that are not recognized as assets and liabilities but whose tax base can be determined in accordance with the tax law and the tax base, the Group uses the balance sheet debt method to accrue deferred income tax. Various taxable temporary differences are used to recognize deferred income tax liabilities, unless: 1. The temporary differences are generated in the following transactions: upon the initial recognition of goodwill, or the initial recognition of assets or liabilities arising from transactions with the following characteristics: the transaction is not a business combination, and neither affects accounting profits nor taxable income or deductible losses when the transaction occurs. 2. For temporary differences related to investments in subsidiaries, joint ventures and associates, the time for the reversal of the temporary differences can be controlled and the temporary differences may not be reversed in the foreseeable future. For deductible temporary differences, deductible losses and tax deductions that can be carried forward to future years, the Group recognizes the deferred income tax assets within the limit of the future taxable income that is likely to be used to deduct deductible temporary differences, deductible losses and tax deductions, unless: 1. The deductible temporary difference is generated in the following transaction: the transaction is not a business combination, and when the transaction occurs, it neither affects accounting profits nor taxable income or deductible losses. 2. For the investment of subsidiaries, joint ventures and associates, the corresponding deferred income tax assets are recognized when the following conditions are met at the same time: Temporary differences are likely to be reversed in the foreseeable future, and the taxable income that can be used to deduct temporary differences is likely to be obtained in the future. The Group calculates deferred income tax assets and deferred income tax liabilities in accordance with the provisions of the tax law and applicable tax rate on the balance sheet date. It also reflects the income tax impact of the expected return of assets or settlement of liabilities on the balance sheet date. 182 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report On the balance sheet date, the Group reviews the book value of deferred income tax assets. If it is probable that sufficient taxable income cannot be obtained in the future period to deduct the benefits of deferred income tax assets, the amount of deferred income tax assets shall be reduced. On the balance sheet date, the Group reassess the unrecognized deferred income tax assets, and recognizes the deferred income tax assets to the extent that it is likely to obtain sufficient taxable income for the reversal of all or part of the deferred income tax assets. Deferred income tax assets and deferred income tax liabilities are listed as the net amount after offset if the following conditions are met simultaneously: the Group has the legal right to settle current income tax assets and current income tax liabilities on a net basis. Deferred income tax assets and deferred income tax liabilities are related to the same tax administration department or to different taxation entities, but in the future period of reversal of each important deferred income tax asset and deferred income tax liability, the taxpayer intends to settle the current income tax assets and current income tax liabilities on a net basis or obtain assets and pay off debts at the same time. 42. Leases (1) Accounting of operating lease Leases that have substantially transferred all the risks and rewards related to asset ownership are finance leases, and all other leases are operating leases. As an operating lease lessee The rental expenses are included in the relevant asset cost or current profit and loss according to the straight-line method during each lease term, and the contingent rent is included in the current profit and loss when it actually occurs. As an operating lease lessor The rental income is recognized as current profit and loss on a straight-line basis during each lease term, and contingent rent is included in current profit and loss when it actually occurs. (2) Accounting of finance lease No 43. Other significant accounting policies and estimates The preparation of financial statements requires management to make judgments, estimates and assumptions, which will affect the reported amounts and disclosures of income, expenses, assets and liabilities, and the disclosure of contingent liabilities on the balance sheet date. The results of these uncertain 183 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report assumptions and estimates may cause significant adjustments to the carrying amount of assets or liabilities in the future. Judgment In the process of applying the Group’s accounting policies, the management team has made the following judgments that have a significant impact on the amounts recognized in the financial statements: Business model The classification of financial assets at initial recognition depends on the business model of the Group’s management of financial assets. When judging the business model, the Group considers corporate evaluation and financial asset performance reporting to key management personnel, risks affecting financial asset performance and its management method and the way relevant business managers get paid, etc. When evaluating whether to collect contractual cash flow as the goal, the Group needs to analyze and judge the reasons, time, frequency and value of the financial assets sold before the expiry date. Contract cash flow characteristics The classification of financial assets at initial recognition depends on the contractual cash flow characteristics of financial assets. It is necessary to determine whether the contractual cash flow is only the payment of principal and interest based on the outstanding principal, including the correction of the time value of money. In the assessment, it is necessary to judge whether there is a significant difference compared with the benchmark cash flow. For financial assets that include prepayment characteristics, it is necessary to judge whether the fair value of the prepayment characteristics is insignificant, etc. Uncertainty of estimates The following are the key assumptions about the future and other key sources of estimation uncertainty at the balance sheet date, which may cause significant adjustments to the carrying amounts of assets and liabilities in future accounting periods. Impairment of financial instruments The Group uses the expected credit loss model to evaluate the impairment of financial instruments. The application of the expected credit loss model requires significant judgments and estimates, and all reasonable and supportive information, including forward-looking information. In making these judgments and estimates, the Group infers the expected changes in the owing party's 184 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report credit risk based on historical repayment data combined with economic policies, macroeconomic indicators, industry risks and other factors. Different estimates may affect the provision for impairment, and the provision for impairment that has been made may not be equal to the actual amount of impairment losses in the future. Impairment of non-current assets other than financial assets (except goodwill) On the balance sheet date, the Group judges whether non-current assets other than financial assets are likely to be impaired. For intangible assets with uncertain service life, in addition to the annual impairment test, an impairment test is also performed when there are signs of impairment. Other non-current assets except financial assets are tested for impairment when there are signs that the carrying value is not recoverable. An impairment has occurred when the book value of an asset or CGU is higher than the recoverable amount, that is, the higher of the net value of the fair value minus the disposal expenses and the present value of the expected future cash flow. The net amount of fair value minus disposal expenses is determined by the sale agreement price of similar assets in a fair transaction or the observable market price, minus the incremental cost directly attributable to the disposal of the asset. When predicting the present value of future cash flows, the management team must estimate the expected future cash flow of the asset or CGU and select an appropriate discount rate to determine the present value of future cash flows. Goodwill impairment The Group takes goodwill impairment tests at least annually. This requires an estimation of the present value of the future cash flow of the CGU or group of CGUs that goodwill has been allocated. When estimating the present value of future cash flows, the Group needs to estimate the cash flow generated by the future CGU or group of CGUs, and select an appropriate discount rate to determine the present value of future cash flows. See Note V, 31. Development expenditure When determining the amount of capitalization, management must make assumptions about the expected future cash flow of the asset, the applicable discount rate, and the expected benefit period. Deferred tax assets Deferred income tax assets should be recognized for all unused deductible losses if there is likely to be sufficient taxable income to reduce deductible losses. This requires the management team to use a lot of judgment to estimate the time and amount of taxable income in the future, combined with tax planning strategies, to determine the amount of deferred income tax assets. 185 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Quality assurance For a combination of contracts with similar characteristics, the Group makes reasonable estimates of the warranty rates based on historical warranty data, current warranty conditions, and after considering all relevant information such as product improvements and market changes. The estimated warranty rate may not be equal to the actual future warranty rate. The Group re-evaluates the warranty rate at least on each balance sheet date and determines the estimated liabilities based on the re-evaluated warranty rate. 44. Changes in significant accounting policies and accounting estimates (1) Changes in significant accounting policies √ Applicable □ Not applicable Contents and reasons of changes in accounting approval procedure Note policies It has been approved at the 35th Changes and adjustments to Meeting of the sixth Board of the new revenue standards Directors of the Company on April 27, 2020 In accordance with the relevant requirements of the Accounting Standards for Business Enterprises No. 14-Revenue(Cai Kuai [2017] No. 22) issued by the Ministry of Finance, the Company made corresponding changes and adjustments since January 1, 2020. According to the convergence regulations, the comparable period information will not be adjusted. The difference between the implementation of the new standards and the current standards on the first day will be retrospectively adjusted for retained earnings at the beginning of the reporting period. The new revenue standard establishes a new revenue recognition model for regulating revenue generated from contracts with customers. According to the new revenue standards, the method of recognizing revenue should reflect the entity's transfer of goods or services to customers, and the amount of the revenue should reflect the amount of consideration that the entity expects to be entitled to because of the transfer of these goods or services to customers. At the same time, the new revenue standard also regulates the judgments and estimates required for each cycle of revenue recognition. The Group only adjusts the cumulative impact of contracts that have not been completed on January 1, 2020. For contract changes that occurred before January 1, 2020, the Group adopts a simplified treatment method: for all contracts, according to the final arrangement of contract changes, identify the performed and unfulfilled performance obligations, determine the transaction price, and allocate the transaction price between the performed and unfulfilled performance obligations. 186 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Based on the inspection of sales contracts that have not been executed as of December 31, 2019, the Group believes that the use of simplified processing methods will not have a significant impact on the Group’s financial statements. The main reason is that the revenue recognized by the Group based on the transfer of risk rewards is synchronized with the realization of the performance obligations of the sales contract. The impact of the implementation of the new revenue standard on the 2020 financial statements is as follows: Consolidated balance sheet Unit: RMB According to Carrying value Impact original strandard Contract liabilities 512,836,059.89 - 512,836,059.89 Unearned revenue - 517,028,331.94 (517,028,331.94) Other current liabilities 4,192,272.05 - 4,192,272.05 Account payable 935,542,222.20 911,952,560.39 23,589,661.81 Other account payable 384,220,500.31 407,810,162.12 (23,589,661.81) Parent Company’s balance sheet Unit: RMB According to Carrying value Impact original strandard Contract liabilities 4,359,811.90 - 4,359,811.90 Unearned revenue - 4,359,811.90 (4,359,811.90) Account payable 295,956,510.99 290,542,172.86 5,414,338.13 Other account payable 1,630,748,176.80 1,636,162,514.93 (5,414,338.13) Consolidated income statement Unit: RMB According to Carrying value Impact original strandard Operating cost 8,539,410,065.42 8,413,058,402.91 126,351,662.51 Sales cost 202,937,418.90 329,289,081.41 (126,351,662.51) Parent Company’s income statement Unit: RMB According to Carrying value Impact original strandard Operating cost 2,036,931,290.14 2,026,747,323.25 10,183,966.89 Sales cost 30,034,081.55 40,218,048.44 (10,183,966.89) 187 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The main effects of retrospective adjustments caused by the above accounting policy changes on the financial statements are as follows: The Group 2020 FY Consolidated balance sheet Unit: RMB Carrying value according Carrying value according to to orignal standard Reclassification new standard Decemeber 31, 2019 January 1, 2020 Contract liabilities - 648,572,264.26 648,572,264.26 Unearned revenue 653,874,136.71 (653,874,136.71) - Other current - 5,301,872.45 5,301,872.45 liabilities Account payable 1,083,181,883.19 31,968,469.81 1,115,150,353.00 Other account 759,261,155.63 (31,968,469.81) 727,292,685.82 payable Parent Company’s balance sheet Unit: RMB Carrying value according Carrying value according to to original standard Reclassification new standard Decemeber 31, 2019 January 1, 2020 Contract liabilities - 3,103,027.57 3,103,027.57 Unearned revenue 3,103,027.57 (3,103,027.57) - Account payable 417,556,226.11 1,273,036.85 418,829,262.96 Other account 891,820,777.91 (1,273,036.85) 890,547,741.06 payable (2) Changes in significant accounting estimates □ Applicable √Not applicable (3) Since 2020, Adjustments to the relevant items of financial statements at the beginning of the year at the first implementation of new revenue and lease standards Applicable Whether it is necessary to adjust the balance sheet accounts at the beginning of the year √ Yes □ No Consolidated balance sheet Unit: RMB 188 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Items December 31, 2019 January 1, 2020 Adjustments Current Assets: Cash and cash 2,452,754,083.38 2,452,754,083.38 equivalents Settlement funds Loans to other banks Held-for-trading financial 63,034,283.90 63,034,283.90 assets Derivative financial assets Notes receivable 0.00 Accounts receivable 2,555,697,203.97 2,555,697,203.97 Accounts receivable 378,904,590.58 378,904,590.58 financing Advances paid 173,597,304.56 173,597,304.56 Premium receivable Reinsurance accounts receivable Reinsurance reserves receivable Other receivables 916,325,582.02 916,325,582.02 Including: Interest 0.00 receivable Dividend receivable 0.00 Financial assets under reverse repo Inventories 2,393,951,480.24 2,393,951,480.24 Contract assets Assets classified as held for sale Non-current assets due within one year Other current assets 117,007,873.14 117,007,873.14 Total current assets 9,051,272,401.79 9,051,272,401.79 Non-current assets: Loans and advances paid Debt investments Other debt investments Long-term receivable Long-term equity 12,612,542.86 12,612,542.86 investments Other equity instrument 4,942,489.56 4,942,489.56 investments Other non-current financial assets Investment property 0.00 Fixed assets 5,113,660,627.42 5,113,660,627.42 189 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Construction in progress 426,345,202.99 426,345,202.99 Productive biological assets Oil & gas assets Right-of-use assets Intangible assets 1,778,179,906.06 1,778,179,906.06 Development 0.00 expenditures Goodwill 1,701,158,115.52 1,701,158,115.52 Long-term prepayments 159,712,622.07 159,712,622.07 Deferred tax assets 188,710,115.07 188,710,115.07 Other non-current 50,655,894.55 50,655,894.55 assets Total non-current assets 9,435,977,516.10 9,435,977,516.10 Total assets 18,487,249,917.89 18,487,249,917.89 Current liabilities: Short-term borrowings 3,070,118,768.19 3,070,118,768.19 Central bank loans Loans from other banks Held-for-trading financial 1,324,581.60 1,324,581.60 liabilities Derivative financial liabilities Notes payable 218,601,865.08 218,601,865.08 Accounts payable 1,083,181,883.19 1,115,150,353.00 -31,968,469.81 Unearned revenue 653,874,136.71 653,874,136.71 Contract liabilities 0.00 648,572,264.26 -648,572,264.26 Financial liabilities under repo Absorbing deposit and interbank deposit Deposit for agency security transaction Deposit for agency security underwriting Employee benefits 238,740,090.73 238,740,090.73 payable Tax payable 71,472,056.11 71,472,056.11 Other payables 759,261,155.63 727,292,685.82 31,968,469.81 Including: Interest Payable 0.00 Dividends Payable 0.00 Handling fee and commission payable Reinsurance accounts payable Held-for-sale liabilities 190 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Non-current liabilities 571,968,504.83 571,968,504.83 due within one year Other current liabilities 0.00 5,301,872.45 -5,301,872.45 Total current liabilities 6,668,543,042.07 6,668,543,042.07 Non-current liabilities: Insurance policy reserve Long-term borrowings 1,165,220,492.00 1,165,220,492.00 Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions 174,680,866.90 174,680,866.90 Deferred income 202,630,087.75 202,630,087.75 Deferred tax liabilities 268,233,346.43 268,233,346.43 Other non-current liabilities Total non-current liabilities 1,810,764,793.08 1,810,764,793.08 Total liabilities 8,479,307,835.15 8,479,307,835.15 Equity: Share capital 2,186,879,678.00 2,186,879,678.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve 1,691,289,940.77 1,691,289,940.77 Less: Treasury shares 333,092,868.42 333,092,868.42 Other comprehensive 74,589,529.22 74,589,529.22 income Special reserve 10,261,018.12 10,261,018.12 Surplus reserve 427,043,757.25 427,043,757.25 General risk reserve Undistributed profit 3,935,484,397.57 3,935,484,397.57 Total equity attributable to 7,992,455,452.51 7,992,455,452.51 the parent Company Non-controlling interest 2,015,486,630.23 2,015,486,630.23 Total equity 10,007,942,082.74 10,007,942,082.74 Total liabilities & equity 18,487,249,917.89 18,487,249,917.89 Adjustment statement No Balance Sheet of the Parent Company Unit: RMB 191 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Items December 31, 2019 January 1, 2020 Adjustments Current Assets: Cash and cash 1,004,904,910.05 1,004,904,910.05 equivalents Held-for-trading financial 60,034,900.00 60,034,900.00 assets Derivative financial assets Notes receivable 0.00 Accounts receivable 678,186,227.12 678,186,227.12 Accounts receivable 159,939,620.65 159,939,620.65 financing Advances paid 28,429,672.81 28,429,672.81 Other receivables 494,780,887.10 494,780,887.10 Including: Interest receivable 0.00 Dividend receivable 129,600,000.00 129,600,000.00 Inventories 243,049,665.85 243,049,665.85 Contract assets Assets classified as held for sale Non-current assets due within one year Other current assets 17,910,061.89 17,910,061.89 Total current assets 2,687,235,945.47 2,687,235,945.47 Non-current assets: Debt investments Other debt investments Long-term receivable Long-term equity 4,198,711,501.05 4,198,711,501.05 investments Other equity instrument investments Other non-current financial assets Investment property Fixed assets 364,884,432.10 364,884,432.10 Construction in progress 57,506,951.74 57,506,951.74 Productive biological assets Oil & gas assets Right-of-use assets Intangible assets 53,332,915.40 53,332,915.40 Development expenditures Goodwill Long-term prepayments 9,208,148.95 9,208,148.95 Deferred tax assets 2,777,151.86 2,777,151.86 Other non-current assets 38,683,336.01 38,683,336.01 192 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Total non-current assets 4,725,104,437.11 4,725,104,437.11 Total assets 7,412,340,382.58 7,412,340,382.58 Current liabilities: Short-term borrowings 1,282,185,084.02 1,282,185,084.02 Held-for-trading financial liabilities Derivative financial liabilities Note payable 290,920,548.28 290,920,548.28 Account payable 417,556,226.11 418,829,262.96 -1,273,036.85 Unearned revenue 3,103,027.57 3,103,027.57 Contract liabilities 0.00 3,103,027.57 -3,103,027.57 Employee benefits 35,028,390.32 35,028,390.32 payable Tax payable 3,998,075.37 3,998,075.37 Other payables 891,820,777.91 890,547,741.06 1,273,036.85 Including: Interest Payable 0.00 Dividends Payable 0.00 Held-for-sale liabilities Non-current liabilities due 265,717,562.36 265,717,562.36 within one year Other current liabilities Total current liabilities 3,190,329,691.94 3,190,329,691.94 Non-current liabilities: Long-term borrowings 396,962,631.92 396,962,631.92 Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term employee benefits payable Provisions Deferred income 1,872,600.00 1,872,600.00 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 398,835,231.92 398,835,231.92 Total liabilities 3,589,164,923.86 3,589,164,923.86 Equity: Share capital 2,186,879,678.00 2,186,879,678.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve 1,059,096,302.01 1,059,096,302.01 Less: Treasury shares 333,092,868.42 333,092,868.42 193 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Other comprehensive income Special reserve 1,919,506.02 1,919,506.02 Surplus reserve 427,043,757.25 427,043,757.25 Undistributed profit 481,329,083.86 481,329,083.86 Total equity 3,823,175,458.72 3,823,175,458.72 Total liabilities & equity 7,412,340,382.58 7,412,340,382.58 Adjustment statement No (4) Since 2020, the statements of first implementation of new revenue and lease standards to trace and adjust previous comparative data. □ Applicable √Not applicable 45. Others (1) Stock repurchase The consideration and transaction costs paid for repurchasing own equity instruments to reduce shareholders’ equity. Except for share-based payment, the issuance (including refinancing), repurchase, sale or cancellation of own equity instruments shall be treated as changes in equity. (2) Profit distribution The Company's cash dividends are recognized as liabilities after approval by the General Meeting of Shareholders. (3) Safety production fee The safety production fee withdrawn in accordance with the regulations shall be included in the cost of the relevant product or the current profit and loss, meanwhile, included in the special reserve. Distinguish whether fixed assets are formed and deal with them separately: if it is an expense, it will directly offset the special reserve; If it is a fixed asset, the fixed asset is recognized when they reach the intended usable state. Meanwhile, the equivalent special reserve is deducted and the equivalent accumulated depreciation is recognized. (4) Fair value measurement The Group measures derivative financial instruments and equity instrument investments at fair value on each balance sheet date. Fair value refers to the price that market participants can receive an asset or pay for the transfer of a 194 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report liability in an orderly transaction on the measurement date. The Group measures related assets or liabilities at fair value, assuming that the orderly transaction of selling assets or transferring liabilities takes place in the main market of the relevant assets or liabilities. If there is no main market, the Group assumes that the transaction proceeds in the most beneficial market to the relevant assets or liabilities. The main market (or the most favorable market) is the trading market that the Group can enter on the measurement date. The Group adopts the assumptions used by market participants to maximize their economic benefits when pricing the asset or liability. When measuring non-financial assets at fair value, the Group considers the ability of market participants to use the asset for the best purpose to generate economic benefits, or to sell the asset to other market participants who can be used for the best purpose to generate economic benefits. The Group adopts valuation techniques that are applicable under current circumstances and have sufficient available data and other information to support. Priority is given to the use of relevant observable input values, and unobservable input values are used only when observable input values cannot be obtained or are not practicable. For assets and liabilities that are measured or disclosed at fair value in financial statements, determine the fair value level to which they belong based on the lowest level of input value that is important for fair value measurement as a whole: The input value of the first level refers to the unadjusted quotation of the same asset or liability that can be obtained in the active market on the measurement date; The second-level input value refers to the directly or indirectly observable input value of related assets or liabilities, except for the first-level input value; The third level input value refers to the unobservable input value of related assets or liabilities. On each balance sheet date, the Group re-evaluates the assets and liabilities recognized in the financial statements that are continuously measured at fair value to determine whether there is a switch between the fair value measurement levels. VI. Taxes 1. Major categories of taxes and tax rates Tax Type Taxation basis Tax rate 195 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The taxable revenue of general taxpayers of Chinese coporate calculates output tax at a tax rate of 13%, and pays value- added tax on the difference after deducting the input tax that is allowed to be deducted in the current period. The Mexican subsidiary, Meridian Technologies Mexico, S. de R.L. de C.V., calculates output tax at 16% of taxable revenue and pays VAT based on the difference after deducting the input tax allowed to be deducted in the current period. Wanfeng MLTH Holdings Co., LTD (Hereinafter referred to as "Wanfeng Meridian") and its British subsidiary, Meridian Lightweight Technology UK Limited, calculate the output tax at 20% of the taxable revenue and pay the VAT on the difference 13%、16%、 VAT after deducting the input tax allowed to be deducted in the 20% current period. The Wanfeng Aluminum Wheels (India) Pty. Co., Ltd applies to the taxation regulations of Delhi, Haryana, India, where it is registered, calculates output tax and pays VAT based on the difference after deducting the input tax allowed to be deducted in the current period. The Austrian subsidiary Diamond Verwaltungs GmbH and its local subsidiary Austro Engine GmbH calculate the output tax at 20% of the taxable revenue, and pay VAT based on the difference after deducting the input tax allowed to be deducted in the current period. Urban Chinese corporate pays 5%, 7%,or 0% of the turnover tax 5%、7%、 maintenance and actually paid. 0% construction tax Chinese corporate income tax is paid at 15% or 25% of the taxable income. Please refer to Note vi 2. Wanfeng MLTH Holdings Co., Ltd is subject to the income tax regulations of Nottinghamshire, Ashfield, England, where it is registered, and the tax rate is 19%. Meridian Lightweight Technology UK Limited are subject to income tax laws and regulations in its place of registration, and the tax rate is 19%. 15%、19%、 The American subsidiary, Wanfeng North America Co., Ltd., is subject to the income tax regulations of the state of Michigan, 23.35%、 Corporate where it is registered. Magnesium Products of America Inc. is 22%、30%、 income tax subject to the income tax regulations of its place of registration. The tax rate for 2019 and 2020 was 23.35%. 25%、 26.50% The Indian subsidiary, Wanfeng Aluminum Wheels (India) Pty Co., Ltd., is subject to the income tax regulations of Delhi, Haryana, India, where it is registered, and the tax rate is 22%. The Mexican subsidiary, Meridian Technologies Mexico, S. de R.L. de C.V., is subject to the income tax regulations of its place of registration, and the tax rate is 30% 196 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The Canadian subsidiaries, Meridian Lightweight Technologies Inc., Meridian Lightweight Technologies Holdings Inc., Meridian Canada Inc., and Diamond Aircraft Industries Inc. are subject to the income tax regulations of their registered places. Tax rates are 25%, 26.5%, 26.5% and 25%, respectively. The Austrian subsidiary Diamond Verwaltungs GmbH and its subsidiaries Diamond Aircraft Industries GmbH (Austria) and Austro Engine GmbH are subject to the income tax regulations of their registered places, and the tax rate is 25%. The Canadian subsidiaries, Meridian Lightweight Technologies Inc., Meridian Lightweight Technologies Holdings Inc., Meridian Sales tax Canada Inc., and Diamond Aircraft Industries Inc. are taxed at 13% 13% of taxable revenue, and pay sales tax based on the difference after deducting the current allowable tax deduction. The Group’s sales revenue in Ohio, the United States is Business activity subject to local tax regulations for calculating business activity tax tax. The Indian subsidiary Wanfeng Aluminum Wheels (India) Pty Withhold income Co., Ltd. is subject to the taxation regulations of Delhi, tax Haryana, India, where it is registered, to calculate and pay withholding income tax. 197 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Education Chinese corporate pays 5% or0% of the turnover tax actually 5%、0% supplementary tax paid. Water Chinese corporate pays 1%, 0.1%, or 0% of their operating 1%、0.1%、 conservancy revenue. 0% construction fund Different corporate income tax rates applicable to different taxpayers: Taxpayers Income tax rate The Company, Weihai Wanfeng, Chongqing Wanfeng, Weihai Magnesium, Wanfeng Motorcycle Wheel, Guangdong Motorcycle Wheel, Shanghai Dacromet, Shanghai Meridian, 15% Meridian New Material, Wuxi Xiongwei, Yancheng Xiongwei, Changchun Xiongwei, Wuxi Geoff, Yizheng Xiongwei Ningbo Aoweier, Jilin Wanfeng, Shanghai Fengtu, Ningbo Dacromet, Aircraft Industry, 25% Diamond Verwaltungs GmbH and local Austrian subsidiary Subject to income tax regulations in Wanfeng MLTH Holdings Co., Ltd Nottinghamshire, Ashfield, England, where it was registered, and the tax rate is 19%. Subject to income tax regulations in its place of Meridian Lightweight Technology UK Limited registration and the tax rate is 19%. American subsidiary: Wanfeng North America Subject to income tax regulations in the state of Co., Ltd. Michigan, where it was registered. Subject to income tax regulations in its place of Magnesium Products of America Inc. registration, and the tax rate for 2019 and 2020 was 23.35%. Subject to income tax regulations in the city of Indian subsidiary: Wanfeng Aluminum Wheels Delhi, Haryana, India, where it was registered, the (India) Pty tax rate is 22%. Mexican subsidiary: Meridian Technologies Subject to income tax regulations in its place of Mexico, S. de R.L. de C.V. registration, and the tax rate is 30% Canadian subsidiaries, Meridian Lightweight Subject to income tax regulations in the place of Technologies Inc., Meridian Lightweight registration. Tax rates are 25%, 26.5%, 26.5% Technologies Holdings Inc., Meridian Canada and 25%, respectively. Inc., and Diamond Aircraft Industries Inc. 198 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Austrian subsidiar Diamond Verwaltungs GmbH Subject to income tax regulations in their place of and its subsidiaries Diamond Aircraft Industries registration at a rate of 25%. GmbH (Austria) and Austro Engine GmbH 2. Tax preferential policies The Company received the High-tech Enterprise Certificate (Certificate No. GR202033005649) jointly issued by Zhejiang Provincial Department of Science and Technology, Zhejiang Provincial Department of Finance, Zhejiang Provincial State Taxation Bureau, and Local Taxation Bureau on December 1, 2020. The Company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2020 to 2022) after the Company is recognized as a high-tech enterprise. The subsidiary Weihai Wanfeng Auto Wheel Co., Ltd. received the High-tech Enterprise Certificate (Certificate No. GR202037002645) jointly issued by Shandong Provincial Department of Science and Technology, Shandong Provincial Department of Finance, Shandong Provincial Bureau of Taxation and Local Taxation Bureau on December 8, 2020. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2020 to 2022) after the company is recognized as a high-tech enterprise. The subsidiary Weihai Wanfeng Magnesium Technology Development Co., Ltd. received the High-tech Enterprise Certificate (Certificate No. GR202037000108) jointly issued by Shandong Provincial Department of Science and Technology, Shandong Provincial Department of Finance, Shandong Provincial Bureau of Taxation and Local Taxation Bureau on August 17, 2020. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2020 to 2022) after the company is recognized as a high-tech enterprise. The subsidiary, Chongqing Wanfeng Aolun Aluminum Wheel Co., Ltd., is an encouraged enterprise located in the western region. According to the Notice on the Taxation Policy Issues Concerning the Further Implementation of the Western Development Strategy jointly issued by the Ministry of Finance, the General Administration of Customs, and the State Administration of Taxation on July 27, 2011, it was registered as an encouraged industrial enterprise in the western region by filing records to Qingxi Taxation Office, State Taxation Bureau, Fuling District, Chongqing each year, and the income tax was paid at a tax rate of 15% in 2016. According to Chinese relevant tax policies for encouraged industrial enterprises in the western region, the company does not 199 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report need to file special records from 2018, and the income tax will still be paid at the tax rate of 15% in 2020. The subsidiary Zhejiang Wanfeng Motorcycle Wheel Co., Ltd. received the High-tech Enterprise Certificate (Certificate No. GR201833001613) jointly issued by Zhejiang Provincial Department of Science and Technology, Zhejiang Provincial Department of Finance, and Zhejiang Provincial Taxation Bureau of the State Administration of Taxation on November 30, 2018. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2018 to 2020) after the company is recognized as a high-tech enterprise. The subsidiary Guangdong Wanfeng Motorcycle Wheel Co., Ltd. received the High-tech Enterprise Certificate (Certificate No. GR201844002073) jointly issued by Guangdong Provincial Department of Science and Technology, Guangdong Provincial Department of Finance, Guangdong Provincial State Taxation Bureau, and Guangdong Provincial Local Taxation Bureau on November 28, 2018. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2018 to 2020) after the company is recognized as a high-tech enterprise. The subsidiary Shanghai Dacromet Coating Industry Co., Ltd. received the High-tech Enterprise Certificate (Certificate No. GR201831000793) jointly issued by Shanghai Science and Technology Commission, Shanghai Finance Bureau, Shanghai State Taxation Bureau, and Shanghai Local Taxation Bureau on November 2, 2018. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2018 to 2020) after the company is recognized as a high-tech enterprise. The subsidiary Shanghai Meridian Magnesium Products Co., Ltd. received the "High-tech Enterprise Certificate (Certificate No. GR201931000323) jointly issued by Shanghai Science and Technology Commission, Shanghai Finance Bureau, Shanghai State Taxation Bureau and Shanghai Local Taxation Bureau on October 8, 2019. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2019 to 2021) after the company is recognized as a high-tech enterprise. The subsidiary Wanfeng Meridian New Material Technology Co., Ltd. received the High-tech Enterprise Certificate (Certificate No. GR201833001014) jointly issued by Zhejiang Provincial Department of Science and Technology, Zhejiang Provincial Department of Finance, and Zhejiang Provincial Taxation Bureau of the State Administration of Taxation on November 30, 2018. The company is 200 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2018 to 2020) after the company is recognized as a high-tech enterprise. The subsidiary Wuxi Xiongwei Precision Technology Co., Ltd. received the High-tech Enterprise Certificate (Certificate No. GR202032006479) jointly issued by Jiangsu Provincial Department of Science and Technology, Jiangsu Provincial Department of Finance, Jiangsu Provincial State Taxation Bureau, and Jiangsu Provincial Local Taxation Bureau on December 2, 2020. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2020 to 2022) after the company is recognized as a high-tech enterprise. The subsidiary Changchun Xiongwei Auto Parts Co., Ltd. received the High- tech Enterprise Certificate (Certificate No. GR202022000006) jointly issued by Jilin Provincial Department of Science and Technology, Jilin Provincial Department of Finance, Jilin Provincial State Taxation Bureau, and Jilin Provincial Local Taxation Bureau on September 10, 2020. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2020 to 2022) after the company is recognized as a high-tech enterprise. The subsidiary Wuxi Geoff Machinery Technology Co., Ltd. received the High- tech Enterprise Certificate (Certificate No. GR201832004062) jointly issued by Jiangsu Provincial Department of Science and Technology, Jiangsu Provincial Department of Finance, and Jiangsu Provincial Taxation Bureau of the State Administration of Taxation on November 28, 2018. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2018 to 2020) after the company is recognized as a high-tech enterprise. The subsidiary Yancheng Xiongwei Auto Parts Co., Ltd. received the High-tech Enterprise Certificate (Certificate No. GR202032007938) jointly issued by Jiangsu Provincial Department of Science and Technology, Jiangsu Provincial Department of Finance, Jiangsu Provincial State Taxation Bureau, and Jiangsu Provincial Local Taxation Bureau on December 2, 2020. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2020 to 2022) after the company is recognized as a high-tech enterprise. The subsidiary Yizheng Xiongwei Machinery Technology Co., Ltd. received the 201 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report High-tech Enterprise Certificate (Certificate No. GR202032002099) jointly issued by Jiangsu Provincial Department of Science and Technology, Jiangsu Provincial Department of Finance, Jiangsu Provincial State Taxation Bureau, and Jiangsu Provincial Local Taxation Bureau on December 2, 2020. The company is recognized as a high-tech enterprise, and the certification is valid for 3 years. According to Chinese relevant tax policies for high-tech enterprises, the income tax will be 15% within three years (from 2020 to 2022) after the company is recognized as a high-tech enterprise. 3. Others No VII. Notes to Consolidated Financial Statements Items 1. Cash and cash equivalents Unit: RMB Items Closing balance Opening balance Cash on hand 928,560.58 1,007,340.38 Deposits in bank 1,463,778,286.96 2,200,640,621.03 Other cash equivalents 210,272,110.63 251,106,121.97 Total 1,674,978,958.17 2,452,754,083.38 Other remarks: As of December 31, 2020, the Group’s cash and cash equivalents in foreign currencies were 74,120,174.94 U.S. dollars, 4,236,852.60 British pounds, 488,563,163.81 Indian rupees, 12,610,625.22 Canadian dollars, 6,143,754.32 Mexican pesos, 35,301,672.42 Euros, and 45,849,364.00 Japanese yen, and 3,230,720.62 Czech Koruna (As of December 31, 2019, the Group’s cash and cash equivalents in foreign currencies were 50,607,978.18 U.S. dollars, 2,355,972.53 British pounds, 26,803,013.93 Indian rupees, 15,188,698.3 Canadian dollars, 938,794.62 Mexican pesos, 25,946,195.26 Euros, 46,472,557.00 Japanese yen, and 4,343,738.02 Czech Koruna). As of December 31, 2020, please refer to Note VII. 81 for cash and cash equivalents with restricted ownership of the Group. Bank demand deposits earn interest income in accordance with the bank demand deposit interest rate. 2. Held-for-trading financial assets Unit: RMB 202 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Items Closing balance Opening balance Financial assets measured at fair value and changes recognized 5,312,974.87 63,034,283.90 through profit and loss Including: Foreign exchange forward contract 2,474,818.46 440,000.00 Foreign exchange option contract 207,581.54 Structured deposits 60,000,000.00 Stock 2,630,574.87 2,594,283.90 Including: Total 5,312,974.87 63,034,283.90 Other remarks: Please refer to Note VII. 81 for details of the above-mentioned structured deposits whose ownership or use rights are restricted. 3. Derivative Financial Assets Unit: RMB Items Closing balance Opening balance Other remarks: No 4. Notes receivable (1) Categories of notes receivable Unit: RMB Items Closing balance Opening balance Total 0.00 Unit: RMB Closing balance Opening balance Provision for Provision for Book balance Book balance doubtful debt Carryi doubtful debt Carryin Categories Provisi ng Provisi g Amou Propor Amou on amoun Amou Propor on amoun t Amount t nt tion nt propor nt tion propor tion tion Including: Including: Provision for doubtful debts made on individual basis: Unit: RMB 203 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Closing balance Items Provision for Provision proportion Book balance Reasons doubtful debt (%) Provision for doubtful debts made on collective basis: Unit: RMB Closing balance Items Provision for doubtful Book balance Provision proportion (%) debt Description of determining the collective basis: None Provision for doubtful debts made on collective basis: Unit: RMB Closing balance Items Provision for doubtful Book balance Provision proportion (%) debt Description of determining the collective basis: If the provision for doubtful debts of bills receivable is made according to the general model of expected credit losses, please refer to the disclosure of the doubtful debt provision for other receivables: □ Applicable √ Not applicable (2) Provision for doubtful debt accrued, recovered or reversed in current period Doubtful debt provision in the current period Unit: RMB Changed amount of this period Opening Closing Categories Recovered or Written balance Accrual Others balance reversed off The amount of doubtful debt provision for the current period to be recovered or reversed is significant: □ Applicable √ Not applicable (3) Pledged notes at the balance sheet date Unit: RMB 204 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Items Closing balance of pledged notes (4) Endorsed or discounted but undue notes at the balance sheet date Unit: RMB Closing balance Closing balance not yet Items derecognized derecognized (5) Notes transferred to accounts receivable by the drawer without performance at the end of reporting period Unit: RMB Closing balance of amount transferred to Items accounts receivable Other remarks: No (6) Notes receivable actually written off in the current period Unit: RMB Items Amount of write-off Significant notes receivable written off: Unit: RMB Whether the Nature of payment is Amount of Reasons for Write-off Company notes generated by write-off written-off procedures receivable related party transactions Remarks on notes receivable written off: No 5. Accounts receivable (1) Disclosure of accounts receivable by categories Unit:RMB 205 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Closing balance Opening balance Provision for doubtful Book balance Book balance Provision for doubtful debt debt Categories Carrying Carrying Proporti Provision amount Provision amount Amount Amount Amount Proportion Amount on proportion proportion Receivables with provision made 46,054,287 30,158,50 15,895,785.6 41,352,651.8 25,154,998.7 16,197,653.0 1.93% 65.48% 1.58% 60.83% on an individual .07 1.41 6 4 5 9 basis Including: Receivables with provision made 2,342,524, 43,439,47 2,299,085,09 2,583,991,84 44,492,290.2 2,539,499,55 98.07% 1.85% 98.42% 1.72% on a collective 568.18 1.56 6.62 1.13 5 0.88 basis Including: 2,388,578, 73,597,97 2,314,980,88 2,625,344,49 69,647,289.0 2,555,697,20 Total 100.00% 3.08% 100.00% 2.65% 855.25 2.97 2.28 2.97 0 3.97 Provision for doubtful debts on individual basis: 30,158,501 206 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Closing balance Items Provision for Provision proportion Book balance Reasons doubtful debt (%) Estimated No.1 10,619,046.44 10,619,046.44 100.00% collection risk Estimated No.2 8,280,910.13 2,781,910.13 33.59% collection risk Product No.3 6,625,061.06 1,414,787.38 21.36% quality disputes Estimated No.4 4,055,686.16 4,055,686.16 100.00% collection risk Estimated No.5 3,751,626.02 1,875,813.01 50.00% collection risk Estimated Others 12,721,957.26 9,411,258.29 73.98% collection risk Total 46,054,287.07 30,158,501.41 -- -- Doubtful debt provisions made on individual basis: Unit: RMB Closing balance Items Provision for Provision proportion Book balance Reasons doubtful debt (%) Doubtful debt provisions made on collective basis: Unit: RMB Closing balance Items Provision for doubtful Book balance Provision proportion (%) debt Description of determining the collective basis: No Provision for doubtful debts on collective basis: 43,439,471.56 Unit: RMB Closing balance Items Provision for doubtful Provision proportion Book balance debt (%) Within 1 year 2,246,198,613.39 23,656,329.43 1.05% 1 to 2 years 66,051,391.45 2,793,506.98 4.23% 2 to 3 years 24,766,755.78 11,670,494.43 47.12% Over 3 years 5,507,807.56 5,319,140.72 96.57% 207 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Total 2,342,524,568.18 43,439,471.56 -- Description of determining the collective basis: In 2020, a provision for doubtful debts of RMB 11,932,332.85 (2019: RMB 37,296,124.07) was made, and a provision for doubtful debts of RMB 5,304,843.83 was recovered or transferred back (2019: RMB 2,502,676.39). The actual written-off of accounts receivable in 2020 is RMB 2,676,805.05 (2019: RMB 1,102,659.64). Provision for doubtful debts by on collective basis: Unit: RMB Closing balance Items Provision for doubtful Provision proportion Book balance debt (%) Description of determining the collective basis: If the provision for doubtful debts of accounts receivable is accrued in accordance with the general model of expected credit losses, please refer to the disclosure of the doubtful debt provision for other accounts receivable: □ Applicable √ Not applicable Disclosure by age Aging Book balance Within 1 year (inclusive) 2,254,965,619.41 1 to 2 years 74,785,286.02 2 to 3 years 51,938,480.19 Over 3 years 6,889,469.63 3 to 4 years 6,889,469.63 Total 2,388,578,855.25 (2) Provision for doubtful debt accrued, recovered or reversed in current period Provision for doubtful debts accrued in the current period: Unit: RMB Changed amount of this period Opening Closing Categories Recovered balance Accrual Written off Others balance or reversed 2020FY 69,647,289.00 11,932,332.85 5,304,843.83 2,676,805.05 73,597,972.97 Total 69,647,289.00 11,932,332.85 5,304,843.83 2,676,805.05 73,597,972.97 208 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Significant provision for doubtful debts reversed or recovered in the current period Unit: RMB Company Amount recovered or reversed Recovery method None (3) Accounts receivable actually written off in the current period Unit: RMB Items Amount of written-off Significant account receivable written off: Unit: RMB Whether the payment is Nature of Reasons Amount of Write-off generated Company account for written written- off procedures by related receivable off party transactions Remarks on account receivable written off: None (4) Details of the top 5 owning parties with largest balances Unit: RMB Proportion to total Closing balance of Closing balance of Company closing balance of doubtful debt account receivables account receivables provision No.1 145,883,190.32 6.11% 723,764.42 No.2 84,570,249.81 3.54% 422,851.24 No.3 73,059,587.54 3.06% 365,297.94 No.4 72,086,733.75 3.02% 360,433.67 No.5 67,556,464.43 2.83% 337,782.32 Total 443,156,225.85 18.56% (5) Accounts receivable derecognized due to the transfer of financial assets 209 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report None (6) The amount of assets and liabilities formed by transferring and continuing to be involved in accounts receivable None Other remarks: None 6. Accounts receivable financing Unit: RMB Items Closing balance Opening balance Bank acceptance 338,736,142.63 350,320,590.58 Trade acceptance 43,468,600.37 28,584,000.00 Total 382,204,743.00 378,904,590.58 Changes in accounts receivable financing during the current period and changes in fair value □Applicable √Not Applicable If the provision for financing impairment of receivables is accrued in accordance with the general expected credit loss model, please refer to the disclosure methods of other receivables to disclose the relevant information of the impairment provision: □Applicable √Not Applicable Other remarks: The accounts receivables financing pledged is as follows: Unit: RMB Categories 2020FY 2019FY Bank acceptance 186,082,811.84 132,911,797.58 Trade acceptance 1,000,000.00 14,960,000.00 Total 187,082,811.84 147,871,797.58 (1) The notes receivable that has been endorsed or discounted but are not yet due on the balance sheet date are as follows: Unit: RMB 2020FY 2019FY Categories Derecognized Not Derecognized Derecognized Not derecognized Bank acceptance 706,520,717.60 60,264,049.38 586,953,297.41 52,584,811.00 Trade acceptance - 1,000,000.00 - 10,960,000.00 Total 706,520,717.60 61,264,049.38 586,953,297.41 63,544,811.00 (2) The drawer failed to perform the contract and converted the notes to the 210 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report account receivable as follows: No 7. Advances paid (1) Advances paid by aging Unit: RMB Closing balance Opening balance Aging Amount Percentage Amount Percentage Within 1 year 152,570,939.60 96.49% 168,067,208.16 96.82% 1 to 2 years 1,018,291.92 0.64% 1,183,585.18 0.68% 2 to 3 years 225,922.70 0.14% 4,151,292.61 2.39% Over 3 years 4,321,136.02 2.73% 195,218.61 0.11% Total 158,136,290.24 -- 173,597,304.56 -- Remarks on reasons for unsettled significant advances paid with aging over one year: No (2) Top 5 owing parties with the largest advances paid Unit: RMB Percentage to Relationship total Company Amount Age Reasons with the Group advances paid (%) Within 1 Goods not No. 1 third party 27,005,328.32 17.08 year received Within 1 Goods not No. 2 third party 23,621,431.84 14.94 year received Within 1 Goods not No. 3 third party 16,181,548.86 10.23 year received Within 1 Goods not No. 4 third party 12,477,187.30 7.89 year received Within 1 Goods not No. 5 third party 6,781,193.40 4.29 year received Total 86,066,689.72 54.43 Other remarks: None 8. Other receivables Unit: RMB Items Closing balance Opening balance Interest receivables 0.00 Dividend 0.00 receivables Other receivables 68,318,081.18 916,325,582.02 Total 68,318,081.18 916,325,582.02 211 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (1) Interest receivables 1) Interest receivables categories Unit: RMB Items Closing balance Opening balance Total 2) Significant overdue interest Unit: RMB Whether the Overdue interest receivable Borrower Closing balance Overdue time reasons impaired and its criteria Other remarks: None 3) Provision of doubtful debt □Applicable √Not Applicable (2) Dividend receivables 1) Dividend receivables categories Unit: RMB Items (or investee) Closing balance Opening balance Total 2) Significant dividend receivables more than 1 year Unit: RMB Whether it has Items (or Closing balance Age Reasons impaired and its investee) criteria 212 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 3) Provision of doubtful debt □ Applicable √ Not applicable Other remarks: None (3) Other receivables 1) Other receivables categorized by nature Unit: RMB Items Closing balance Opening balance Related parties occupy 0.00 843,320,000.00 funds Guarantee deposit 7,622,075.86 11,930,507.11 Stock repurchase payment 866,935.63 6,913,835.11 Petty Cash for employee 3,849,343.39 4,304,279.29 Reimbursed expenses 3,551,863.38 1,211,041.51 Compensation receivable 2,558,050.02 2,730,734.57 Export tax refund 215,930.22 28,828.35 Tax refund receivable 20,904,450.90 24,350,645.18 Employee compensation 11,700,450.00 receivable Others 20,816,494.34 24,707,193.43 Total 72,085,593.74 919,497,064.55 2) Provision of doubtful debt Unit: RMB Phase I Phase II Phase III Provision for Lifetime Lifetime 12-month Total doubtful debt expected credit expected credit expected credit losses (credit losses (credit losses not impaired) impaired) Balance on 84,280.54 1,126,401.99 1,960,800.00 3,171,482.53 January 1, 2020 The balance as of January 1, 2020 is —— —— —— —— in the current period Transferred to -84,280.54 84,280.54 Phase II Transferred to -128,015.35 128,015.35 Phase III 213 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Provision made in 348,067.87 678,287.91 1,026,355.78 the current period Provision recovered in 173,874.15 151,924.25 104,527.35 430,325.75 current period Balance on December 31, 174,193.72 1,609,030.84 1,984,288.00 3,767,512.56 2020 Loss provisions for significant changes in book balances in current period □ Applicable √ Not Applicable Disclose by aging Unit: RMB Aging Closing balance Within 1 year (including 1 year) 56,351,143.02 1 to 2 years 1,005,658.62 2 to 3 years 4,259,072.47 Over 3 years 10,469,719.63 3 to 4 years 10,469,719.63 Total 72,085,593.74 3) Provision for doubtful debt accrued, recovered or reversed in current period Provision for doubtful debt accrued in current period: Unit: RMB Changed amount of the current period Opening Closing Categories Recovered Written balance Accrued Others balance or reversed off 2020 FY 3,171,482.53 1,026,355.78 430,325.75 3,767,512.56 Total 3,171,482.53 1,026,355.78 430,325.75 3,767,512.56 None Significant doubtful debt provisions recovered or reversed in the current period Unit: RMB Company Amount reversed or recovered Recovery Method 4) The actual other account receivables written off Unit: RMB 214 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Items Amount written off after verification Significant doubtful debt recovered or reversed in the current period Unit: RMB Whether the amount Nature of other is generate Amount Procedure for Company account Reason by related written off written-off receivables party transaction s Other remarks: No 5) Details of the top 5 owning parties with largest balances Unit: RMB Proportion to Provision the total for doubtful Nature of Closing Company Age balance of debt at the receivables balance other end of the receivables period Austrian Tax Tax refund Within 1 and Finance 20,904,450.90 29.00% receivable year Bureau Employee Austrian Labor Within 1 compensation 11,700,450.00 16.23% Bureau year receivable Xinchang County Land 2-3 Guarantee deposit 2,879,575.00 3.99% 287,957.50 and Resources years Bureau Gates Canada Compensation over 3 2,558,050.02 3.55% Inc receivable years Dongguan Huawei Coating Advance payment Within 1 2,000,000.00 2.77% Equipment Co., for equipment year Ltd. Total 40,042,525.92 55.54% 287,957.50 6) Other receivables related to government grants Unit: RMB 215 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Estimated receipt Company Government grant Closing balance Aging time, amount and basis 7) Other receivables derecognized due to the transfer of financial assets None 8) The amount of assets and liabilities formed by transferring and continuing to be involved in other account receivables None Other remarks: None 9. Inventories Whether the Company needs to comply with the disclosure requirements of the real estate industry No (1) Categories of inventories 216 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Closing balance Opening balance Provision for decline in Provision for decline in Items value of inventories or value of inventories or Book balance provision for Carrying amount Book balance provision for Carrying amount impairment of contract impairment of contract performance costs performance costs Raw materials 1,021,336,904.37 93,791,188.32 927,545,716.05 1,050,945,010.87 95,480,390.87 955,464,620.00 Work-in-progress 656,710,134.88 4,790,661.33 651,919,473.55 680,658,858.81 3,694,539.11 676,964,319.70 Finished goods 745,299,986.77 14,851,786.11 730,448,200.66 779,307,046.36 17,784,505.82 761,522,540.54 Total 2,423,347,026.02 113,433,635.76 2,309,913,390.26 2,510,910,916.04 116,959,435.80 2,393,951,480.24 (2) Provision for decline in value of inventories and provision for impairment of contract performance costs Unit: RMB Increase in current period Decrease in current period Items Opening balance Closing balance Accrued Others Reversal or write-off Others Raw materials 95,480,390.87 2,042,644.70 3,731,847.25 93,791,188.32 Work-in-progress 3,694,539.11 1,105,500.72 9,378.50 4,790,661.33 Finished goods 17,784,505.82 5,323,533.33 8,256,253.04 14,851,786.11 Total 116,959,435.80 8,471,678.75 11,997,478.79 113,433,635.76 217 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (3) Explanation on inventory closing balance including capitalized borrowing costs None (4) Explanation on amortization of contract cost in the current period None 10. Contract assets Unit: RMB Closing balance Opening balance Items Book Provision for Carrying Book Provision for Carrying balance impairment amount balance impairment amount The significant change in carrying amount of contract assets and reasons: Unit: RMB Items Amount changed Reasons If the provision for doubtful debts of contract assets is accrued in accordance with the general expected credit loss model, please refer to the disclosure of doubtful debts provision for other receivables: □ Applicable √ Not applicable Provision for impairment of contract assets Unit: RMB Write- off in Provisions in Reversal in Items current Reasons current period current period period Other remarks: None 11. Assets classified as held for sale Unit: RMB Carrying Estimated Estimated Closing Provisions for value at the Fair Items disposal disposal balance impairment end of value cost time period Other remarks: None 12. Non-current assets due within one year Unit: RMB 218 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Items Closing balance Opening balance Significant debt investment/ other debt investment Unit: RMB Closing balance Opening balance Time Items Book Coupo Effecti Time to Book Coupon Effective to balanc n rate ve rate maturity balance rate rate maturit e y Other remarks: None 13. Other current assets Unit: RMB Items Closing balance Opening balance Deductible VAT, Sales tax, and 69,003,341.08 69,837,690.54 consumption tax/ pending tax Prepaid corporate 26,600,908.56 47,170,182.60 income tax Total 95,604,249.64 117,007,873.14 Other remarks: As of December 31, 2020, the Group had no other current assets with restricted ownership. 14. Debt investments Unit: RMB Closing balance Opening balance Items Provisions Provisions Book Carrying Book Carrying for for balance amount balance amount impairment impairment Significant debt investment Unit: RMB Closing balance Opening balance Debt investment Face Coupon Effective Time to Face Coupon Effective Time to items value rate rate maturity value rate rate maturity Provisions for impairment Unit: RMB 219 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Phase I Phase II Phase III Lifetime Provision for Lifetime 12-month expected Total doubtful debt expected credit expected credit credit losses losses (credit losses (credit not impaired) impaired) Balance on January 1, 2020 The significant change of book value of provisions impairment in the current period □ Applicable √ Not Applicable Other remarks: None 15. Other debt investments Unit: RMB Accumulative Chang impairment e of fair Openin Accrue Closing Accumulativ provisions Ite value Cos Not g d balanc e change in recognized in m in the t e balance interest e fair value other current comprehensiv period e income Significant other debt investment Unit: RMB Closing balance Opening balance Other debt investmen Face Time to Face Coupo Effectiv Coupo Effective Time to t items valu maturit valu n rate e rate n rate rate maturity e y e Provision for impairment Unit: RMB Phase I Phase II Phase III Lifetime Lifetime Provision for expected expected 12-month Total doubtful debt credit credit expected losses losses credit losses (credit not (credit impaired) impaired) Balance on January 1, 2020 The significant change of carrying value of provisions impairment in the current 220 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report period □ Applicable √ Not Applicable Other remarks: None 16. Long-term receivables (1) Long-term receivables Unit: RMB Closing balance Opening balance Range of Items discount rate Provisions Provisions Book Carrying Book Carrying for for balance amount balance amount impairment impairment Provisions for doubtful debt Unit: RMB Phase I Phase II Phase III Lifetime Provision for Lifetime 12-month expected Total doubtful debt expected credit expected credit credit losses losses (credit losses (credit not impaired) impaired) Balance on January 1, 2020 The significant change of carrying value of provisions impairment in the current period □ Applicable √ Not Applicable (2) Long-term receivables derecognized due to the transfer of financial assets None (3) The amount of assets and liabilities formed by transferring long-term receivables and continuing to be involved None Other remarks None 17. Long-term equity investments 221 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Percentage change in the current period Investment Closing Change in Closing Opening gain or loss Cash balance of other Change in Provision balance Investee balance Increased Decreased recognized dividend provisions comprehe other for Other (Carrying (book value) investment investment under paid or for nsive equity impairment value) equity profit impairment income method I. Joint ventures II. Associates Diamond Flight Centre 765,855.96 -166,729.89 -31,315.23 567,810.84 London INC. 222 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report CETC Wuhu General Aviation Industry 11,846,686.90 -11,136,957.56 -709,729.34 Technology Research Institute Co., Ltd. Subtotal 12,612,542.86 -11,136,957.56 -876,459.23 -31,315.23 567,810.84 Total 12,612,542.86 -11,136,957.56 -876,459.23 -31,315.23 567,810.84 Other remarks: No 18. Other equity instrument investments Unit: RMB Items Closing balance Opening balance Diamond Flight Centre London INC. 4,733,395.22 4,942,489.56 Total 4,733,395.22 4,942,489.56 Disclosure of investment in non-trading equity instruments for the current period by items 223 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Reason for the designation Amount of Reasons for as being other transferring Recogniz measured at comprehensi other Item ed Accumulati Accumulati fair value ve income comprehensi s dividend ve gain ve loss and the transferred ve income to income changes to retained retained recognized earnings earnings in other comprehensi ve income Other remarks: None 19. Other non-current financial assets Unit: RMB Items Closing balance Opening balance Other remarks: None 20. Investment property (1) Investment property with cost measurement model □ Applicable √ Not Applicable (2) Investment property with fair value measurement model □ Applicable √ Not Applicable (3) The situation of investment property without property ownership certificate Unit: RMB Reasons for not having property Items Book value ownership certificate Other remarks: None 224 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 21. Fixed assets Unit: RMB Items Closing balance Opening balance Fixed asset 4,872,464,413.48 5,113,660,627.42 Total 4,872,464,413.48 5,113,660,627.42 (1) Fixed assets overview Unit: RMB Specialized Items Buildings Vehicle General tools Decoration Total Equipment I. Original book value 1. Opening balance 3,055,868,712.55 4,614,959,380.24 107,869,598.56 222,244,427.42 2,340,060.98 8,003,282,179.75 2. Increase in the current 78,285,305.98 327,433,341.47 37,357,047.62 15,323,963.50 26,045.31 458,425,703.88 period (1) Purchase 2,548,119.90 52,422,104.25 37,246,428.15 11,353,851.31 26,045.31 103,596,548.92 (1) Transferred from construction in 75,737,186.08 275,011,237.22 110,619.47 3,970,112.19 354,829,154.96 progress (2) Increase in business combination 3. Decrease in the current 45,788,527.40 181,865,263.50 10,678,267.39 29,282,107.74 30,000.00 267,644,166.03 period (1). Disposal or scrap 2,007,506.37 106,547,352.57 12,719,051.08 29,331,275.10 30,000.00 150,635,185.12 Foreign currency 43,781,021.03 75,317,910.93 -2,040,783.69 -49,167.36 117,008,980.91 translation 4. Closing balance 3,088,365,491.13 4,760,527,458.21 134,548,378.79 208,286,283.18 2,336,106.29 8,194,063,717.60 225 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report II. Accumulative depreciation 1. Opening balance 635,660,456.18 2,034,215,012.89 25,637,002.03 135,638,742.07 1,966,060.72 2,833,117,273.89 2. Increase in the current 122,374,683.92 430,016,646.04 9,676,594.26 20,621,205.24 164,681.37 582,853,810.83 period (1). Accrual 122,374,683.92 430,016,646.04 9,676,594.26 20,621,205.24 164,681.37 582,853,810.83 3. Decrease in the current 12,152,116.67 108,472,830.22 1,392,883.95 28,403,855.69 28,500.00 150,450,186.53 period (1). Disposal or scrap 2,006,459.67 86,392,170.99 1,607,875.14 29,157,095.90 28,500.00 119,192,101.70 (2). Foreign currency 10,145,657.00 22,080,659.23 -214,991.19 -753,240.21 31,258,084.83 translation 4. Closing balance 745,883,023.43 2,355,758,828.71 33,920,712.34 127,856,091.62 2,102,242.09 3,265,520,898.19 III. Provisions for impairment 1. Opening balance 2,266,776.28 53,832,251.62 405,250.54 56,504,278.44 2. Increase in the current 2,675,523.03 10,234.45 2,685,757.48 period (1). Accrual 2,675,523.03 10,234.45 2,685,757.48 3. Decrease in the current 98,956.02 2,964,488.23 48,185.74 3,111,629.99 period (1). Disposal or scrap 1,017,453.06 32,050.46 1,049,503.52 4. Closing balance 98,956.02 1,947,035.17 16,135.28 2,062,126.47 IV. Book value 2,167,820.26 53,543,286.42 367,299.25 56,078,405.93 1. Book value at the end of the period 226 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2. Book value at the 2,340,314,647.44 2,351,225,343.08 100,627,666.45 80,062,892.31 233,864.20 4,872,464,413.48 beginning of the period 2,417,941,480.09 2,526,912,115.73 82,232,596.53 86,200,434.81 374,000.26 5,113,660,627.42 (2) Temporarily idle fixed assets Unit: RMB Provisions for Items Historical book value Accumulative depreciation Book value Note impairment Building 1,520,714.68 1,520,714.68 Specialized equipment 89,315,237.07 62,104,530.92 5,037,016.50 22,173,689.65 General equipment 6,023,171.77 5,472,894.78 28,516.04 521,760.95 Total 96,859,123.52 69,098,140.38 5,065,532.54 22,695,450.60 (3) Fixed assets acquired under finance lease Unit: RMB Items Historical book value Accumulative depreciation Provisions for impairment Carrying value (4) Fixed assets rented in through operating lease 227 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Items Closing book value Buildings 145,679,914.15 (5) Fixed assets without title certificate Unit: RMB Reasons for without property Items Book value ownership certificate The property ownership certificate is Buildings 98,395,904.63 being processed Other remarks: None (6) Fixed assets liquidation Unit: RMB Items Closing balance Opening balance Other remarks: None 22. Construction in progress Unit: RMB Items Closing balance Opening balance Construction in 258,966,481.11 426,345,202.99 progress Total 258,966,481.11 426,345,202.99 228 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (1) Construction in progress overview Unit: RMB Closing balance Opening balance Items Provisions for Provisions for Book balance Book value Book balance Book value impairment impairment Construction in 258,966,481.11 258,966,481.11 426,345,202.99 426,345,202.99 progress Total 258,966,481.11 258,966,481.11 426,345,202.99 426,345,202.99 (2) Significant change in construction in progress during the reporting period Unit: 10,000 RMB Amount Accumulativ Including: Amount Other Accumulativ Interest transferre Closin e project interest Budget Openin increase reduction Project e amount of capitalizatio Capital d to fixed g investment capitalize Items amoun g d in the s in the progres interest n rate in the resource assets in balanc as a d in the t balance current current s capitalizatio current s current e percentage current period period n period period of budget period. Aluminum Alloy Wheels Smart Factory 53,193 3,139 299 3,438 7.00% 7% Others with 2.2 million sets capacity 229 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Auto Wheel Smart Factory in 38,157 1,450 1,298 2,410 338 85.00% 85% Others Jilin with 3 million sets capacity Aluminum Alloy Motorcycl e Wheels 44,873 1,311 64 1,003 371 95.00% 95% Others Smart Factory with 6 million 230 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report sets capacity Equipmen t to be 0.00 321 422 421 322 Others installed Aluminum alloy wheels project in 11,696 3,161 969 2,224 343 1,563 86.00% 86% Others India with 3 million sets capacity Meridian America 0.00 6,136 2,680 8,594 221 Others Factory Other equipmen 0.00 19,623 11,223 15,325 412 15,108 Others t Other 0.00 7,495 2,932 5,506 164 4,756 Others project Total 147,919 42,635 19,886 35,483 1,141 25,897 -- -- -- 231 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (3) Provisions for impairment of accrual construction in progress Unit: RMB Accrual amount in the current Items Reasons period Other remarks: None (4) Construction material Unit: RMB Closing balance Opening balance Provision Items Provisions Book Book s for Book Book balance for value balance impairme value impairment nt Other remarks: None 23. Productive biological assets (1) Productive biological assets measured at cost method □ Applicable √ Not Applicable (2) Productive biological assets measured at fair value method □ Applicable √ Not Applicable 24. Oil & gas assets □ Applicable √ Not Applicable 25. Right-of-use assets Unit :RMB Items Total Other remarks 232 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report None 26. Intangible assets (1) Intangible assets overview Unit: RMB Non- Customer Technology Items Land use rights Patent rights patent Trademark Software Total relations authorization rights I. Original book value 1. Opening 762,797,808.37 1,003,206,595.05 175,900,000.00 92,486,670.23 60,433,833.20 70,393,236.48 2,165,218,143.33 balance 2. Increase in the 3,105,331.75 395,336.71 4,309,852.51 135,773.61 7,946,294.58 current period (1). Purchase 3,105,331.75 395,336.71 4,309,852.51 135,773.61 7,946,294.58 (2). Internal R&D (3). Increase in business combination 3. Decrease in the current -10,558,394.96 -33,672,741.74 0.00 0.00 -2,464,147.14 -1,435,490.87 -463,906.67 -48,594,681.38 period (1). Disposal -2,315,733.43 -1,291,236.67 -2,315,733.43 -3,606,970.10 Foreign currency -10,558,394.96 -33,672,741.74 -2,464,147.14 -144,254.20 1,851,826.76 -44,987,711.28 translation 233 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 4. Closing 755,344,745.16 969,929,190.02 175,900,000.00 90,022,523.09 63,308,194.84 70,065,103.42 2,124,569,756.53 balance II. Accumulative depreciation 1. Opening 85,690,815.72 182,071,752.28 50,941,250.00 5,421,352.27 45,605,736.27 17,307,330.73 387,038,237.27 balance 2. Increase in the 12,937,886.67 48,697,542.55 8,795,000.00 3,424,011.96 2,215,715.49 4,552,713.21 80,622,869.88 current period (1). Accrual 12,937,886.67 48,697,542.55 8,795,000.00 3,424,011.96 2,215,715.49 4,552,713.21 80,622,869.88 3. Decrease in the current -0.03 -5,067,260.35 0.00 0.00 0.00 -1,694,250.37 -1,763,715.91 -8,525,226.66 period (1). Disposal -1,287,210.78 -2,264,508.38 -3,551,719.16 Foreign currency -0.03 -5,067,260.35 -407,039.59 500,792.47 -4,973,507.50 translation 4. Closing 98,628,702.36 225,702,034.48 59,736,250.00 8,845,364.23 46,127,201.39 20,096,328.03 459,135,880.49 balance III. Provisions for impairment 1. Opening balance 2. Increase in the current period (1). Accrual 234 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 3. Decrease in the current period (1). Disposal 4. Closing balance IV. Book value 1. Closing book 656,716,042.80 744,227,155.54 116,163,750.00 81,177,158.86 17,180,993.45 49,968,775.39 1,665,433,876.04 value 2. Opening book 677,106,992.65 821,134,842.77 124,958,750.00 87,065,317.96 14,828,096.93 53,085,905.75 1,778,179,906.06 value The proportion of intangible assets formed through the company's internal research and development at the end of the period to the balance of intangible assets is 0%. (2) Land use rights without property ownership certificate Unit: RMB Items Book value Reasons for without property ownership certificate Other remarks: As of December 31, 2020, please refer to Note VII. 81 for intangible assets with restricted ownership of the Group. On December 31, 2020 and December 31, 2019, the management conducted an impairment test on trademarks with uncertain service life, and no impairment was found. 27. Development expenditures Unit: RMB 235 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Increase in the current period Decrease in the current period Opening Transferred to Items Internal development Recognized as Foreign currency Closing balance balance Others current profit and expenditures intangible assets translation loss General Aviation 69,419,211.82 1,118,681.18 70,537,893.00 Aircraft R&D Project Total 69,419,211.82 1,118,681.18 70,537,893.00 Other remarks: None 28. Goodwill (1) Original book value of goodwill Unit: RMB Increase in the current period Decrease in the current period Investee or event Opening balance Formed by business Foreign currency Closing balance forming goodwill Disposal combination translation Goodwill 1,701,158,115.52 38,163,606.20 1,662,994,509.32 Total 1,701,158,115.52 38,163,606.20 1,662,994,509.32 236 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (2) Provisions for impairment of goodwill Unit: RMB Investee or Increase in the current Decrease in the event Opening period current period Closing balance forming balance Accrual Disposal goodwill Total Information about the CGU or group of CGUs The Group acquired Shanghai Dacromet Coating Industry Co., Ltd. in December 2013, forming goodwill of RMB 235,709,395.09. In December 2014, it acquired Ningbo Economic and Technological Development Zone Dacromet Co., Ltd., forming goodwill of RMB 15,021,635.69. In June 2018, it acquired Wuxi Xiongwei Precision Technology Co., Ltd. and formed goodwill of RMB 290,891,792.51. In April 2020, the Group acquired Wanfeng Aircraft Industry Co., Ltd., through business combination under the common control, and obtained a goodwill of RMB 1,121,371,686.03. Explanation on the process of goodwill impairment testing, key parameters (such as the growth rate in the growing period and stable period, profit margin, discount rate, forecast period, etc. when predicting the present value of future cash flows) and the recognition method of the impairment loss of goodwill: The goodwill obtained from a business combination has been allocated to the following CGUs or groups of CGUs for impairment testing: Group of CGUs of Shanghai Dacromet Coating Industry Co., Ltd. and its subsidiary Zhejiang Wanfeng Shangda Coating Technology Co., Ltd CGU of Ningbo Economic and Technological Development Zone Dacromet Coating Co., Ltd. Group of CGUs of Wuxi Xiongwei Precision Technology Co., Ltd. and its subsidiaries Group of CGUs of Wanfeng Aircraft Industry Co., Ltd and its subsidiaries The CGU of Shanghai Dacromet Coating Industry Co., Ltd. and its subsidiary Zhejiang Wanfeng Shangda Coating Technology Co., Ltd. is mainly composed of long-term assets of these two companies (excluding the long-term equity investment in Ningbo Economic and Technological Development Zone Dacromet Co., Ltd.). The value is consistent with the CGU determined during the previous year's impairment test. The book value of the group of CGUs is RMB 275,210,978.70 (excluding goodwill). The recoverable amount adopts the present value of the expected future cash flow of the group of CGUs and is determined according to the cash flow forecast based on the five-year financial budget approved by the management. The discount rate used in the cash flow forecast is 18% (2019: 18%). The growth rate of revenue is 3% in 5 years (2019: 3%). This growth rate is similar to the long-term average growth rate of the 237 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report industry in which the CGU is located. The CGU of Ningbo Economic and Technological Development Zone Dacromet Co., Ltd. mainly consists of the long-term assets of the company. The value is consistent with the CGU determined during the impairment test on the purchase date and previous years. The book value of this CGU is RMB 41,466,389.36 (excluding goodwill). The recoverable amount adopts the present value of the expected future cash flow of the CGU and is determined according to the cash flow forecast based on the five-year financial budget approved by the management. The discount rate used in the cash flow forecast is 21% (2019: 22%). The growth rate used to forecast income five years from now is 3% (2019: 3%). This growth rate is similar to the long-term average growth rate of the industry in which the CGU is located. The cash inflows generated by Wuxi Xiongwei Precision Technology Co., Ltd. and its subsidiaries are independent of the cash inflows of other assets or CGUs of the Group. The operating and production activities of Wuxi Xiongwei Precision Technology Co., Ltd and its subsidiaries are managed by the management team of Wuxi Xiongwei Precision Technology Co., Ltd. Therefore, the goodwill is allocated to the group of CGUs of Wuxi Xiongwei Precision Technology Co., Ltd. and its subsidiaries. The group of CGUs is mainly composed of the long-term assets of Wuxi Xiongwei Precision Technology Co., Ltd. and its subsidiaries, and is consistent with the group of CGUs determined on the purchase date. The book value of the group of CGUs is RMB 457,751,993.48 (excluding goodwill). The recoverable amount adopts the present value of the expected future cash flow of the group of CGUs and is determined according to the cash flow forecast based on the five-year financial budget approved by the management. The discount rate used in the cash flow forecast is 17% (2019: 17%). The growth rate used to forecast income five years from now is 3% (2019: 3%). This growth rate is similar to the long-term average growth rate of the industry in which the group of CGUs is located. The cash inflows generated by Wanfeng Aircraft Industry Co., Ltd. and its subsidiaries are independent of the cash inflows of other assets or CGUs of the Group. At the same time, the management of Wanfeng Aircraft Industry Co., Ltd. manages the overall production and operation activities of Wanfeng Aircraft Industry Co., Ltd. and its subsidiaries, so the goodwill is allocated to the group of CGUs of Wanfeng Aircraft Industry Co., Ltd. and its subsidiaries. The group of CGUs is mainly composed of the long-term assets of Wanfeng Aircraft Industry Co., Ltd. and its subsidiaries, and the value is consistent with the group of CGUs determined on the combination date. The book value of the group of CGUs is RMB 1,189,116,794.64 (excluding goodwill). The recoverable amount adopts the present value of the expected future cash flow of the group of CGUs and is determined according to the cash flow forecast based on the five-year financial budget approved by the management. The discount rate used for cash flow forecasting is 15%. The growth rate of income in five years is 0%. This growth rate is similar to the long-term average growth rate of the industry in 238 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report which the group of CGUs is located. The impact of goodwill impairment testing Assumptions are used to calculate the present value of the estimated future cash flows of the CGU on December 31, 2020, and December 31, 2019. The key assumptions made by the management in determining the cash flow forecast to conduct the impairment test of goodwill are as follows: The budgeted gross profit- is based on the average gross profit margin achieved in the year before the budget year, and appropriate adjustments to the average gross profit margin based on the expected improvement in efficiency and the expected market development. Discount rate—The discount rate used is the pre-tax discount rate that reflects the specific risks of the relevant CGU. The amount of key assumptions allocated to the aforementioned CGU or group of CGUs is consistent with the historical experience of the Group and external information. Other remarks: None 29. Long-term prepayments Unit: RMB Amortization Increase in Other Opening amount in Closing Items the current decreased balance the current balance period amount period Mold cost 155,574,404.91 120,403,888.58 117,296,286.89 6,539,051.40 152,142,955.20 Others 4,138,217.16 3,426,357.10 2,533,271.36 5,031,302.90 Total 159,712,622.07 123,830,245.68 119,829,558.25 6,539,051.40 157,174,258.10 Other remarks: None 30. Deferred tax assets/Deferred tax liabilities (1) Deferred tax assets before offset Unit: RMB Closing balance Opening balance Items Deductible Deductible Deferred tax Deferred tax temporary temporary assets assets difference difference Impairment of 103,197,497.76 19,454,818.29 101,571,717.56 18,733,041.43 assets 239 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unrealized profit from 28,403,632.18 6,513,020.37 38,452,198.52 9,139,506.41 internal transactions Deductible 887,572,565.95 207,165,175.85 539,284,651.54 134,364,475.53 losses Held for trading financial 0.00 1,324,581.60 198,687.24 liabilities Deferred income 34,991,981.94 5,234,028.07 19,743,547.14 2,961,532.07 Differences in depreciation life 46,415,580.39 7,635,453.22 50,651,033.40 8,202,838.28 of fixed assets Accrued costs 88,400,965.39 17,439,780.95 75,946,109.24 15,110,034.11 Total 1,188,982,223.61 263,442,276.75 826,973,839.00 188,710,115.07 (2) Deferred tax liabilities before offset Unit: RMB Closing balance Opening balance Items Taxable Taxable Deferred tax Deferred tax temporary temporary liabilities liabilities difference difference Appraisal and appreciation of combined assets 618,572,990.33 128,998,950.89 695,954,080.47 143,940,380.48 of companies under the uncommon control Differences in depreciation life of 449,463,686.72 105,621,790.35 460,724,738.47 107,779,719.37 fixed assets Mold amortization 64,905,823.19 15,977,333.04 67,576,409.18 16,513,246.58 Held-for-trading 2,682,400.00 402,360.00 0.00 financial assets Capitalized R&D 70,537,893.00 17,634,473.25 expense Total 1,206,162,793.24 268,634,907.53 1,224,255,228.12 268,233,346.43 (3) Deferred tax assets or liabilities shown on a net offsetting basis Unit: RMB Deferred tax Deferred tax Opening Closing balance assets and assets and balance of of deferred tax liabilities offset liabilities offset deferred tax Items assets or amount at the amount at the assets or liabilities after end of the beginning of the liabilities after offset balance amount balance amount offset 240 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Deferred tax 1,188,982,223.61 263,442,276.75 826,973,839.00 188,710,115.07 assets Deferred tax 1,206,162,793.24 268,634,907.53 1,224,255,228.12 268,233,346.43 liabilities (4) Details of unrecognized deferred tax assets Unit: RMB Items Closing balance Opening balance Deductible temporary 64,892,971.32 58,123,373.93 difference Deductible loss 709,064,668.42 1,121,656,110.65 Total 773,957,639.74 1,179,779,484.58 (5) Deductible losses of unrecognized deferred tax assets will expire in the following years Unit: RMB Maturity years Closing balance Opening balance Note 2020 0.00 14,462,870.02 2021 0.00 29,923,131.64 2022 14,107,939.28 33,953,830.77 2023 0.00 1,503,643.11 2024 19,874,937.50 57,734,101.04 2025 and onwards 675,081,791.64 984,078,534.07 Total 709,064,668.42 1,121,656,110.65 -- Other remarks: None 31. Other non-current assets Unit: RMB Closing balance Opening balance Items Provisions Provisions Book Book for Book value for Book value balance balance impairment impairment Prepayment for equipment 7,461,417.37 7,461,417.37 50,655,894.55 50,655,894.55 purchase (note 1) Total 7,461,417.37 7,461,417.37 50,655,894.55 50,655,894.55 Other remarks: Note 1: The Company held the seventh meeting of the sixth board of directors in December 2017 and approved the Proposal on the Company's investment in a smart factory project with an annual output of 2.2 million aluminum alloy wheels, agreeing to invest in a smart factory project with an annual output of 2.2 million aluminum alloy wheels. In July 2019, the Company prepaid RMB 241 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 36.23 million to Zhejiang Wanfeng Technology Development Co., Ltd. to purchase equipment required for the smart factory project. Since then, due to market changes in the automotive industry, the Company decided to suspend the smart factory project. As of December 31, 2019, the payment was still prepaid for equipment. The Company recovered the payment in June 2020. 32. Short-term borrowings (1) Categories of short-term borrowings Unit: RMB Items Closing balance Opening balance Pledge borrowings 350,971,345.88 318,825,376.00 Mortgage borrowings 466,584,522.23 198,476,192.23 Guaranteed borrowings 261,912,928.58 300,287,468.95 Credit borrowings 1,621,761,545.54 2,007,220,560.05 Mortgage and Guaranteed 843,066,327.79 245,309,170.96 Loan Total 3,544,296,670.02 3,070,118,768.19 Remarks on short-term borrowings categories: As of December 31, 2020, the annual interest rate of the above-mentioned borrowings was 2.85%-8.00% (December 31, 2019: 2.54%-8.00%). (2) Overdue or unpaid short-term borrowings The total amount of short-term loans that have been overdue and not repaid at the end of the period is RMB 0.00. The significant short-term loans that have been overdue and have not been repaid are as follows: Unit: RMB Overdue interest Borrower Closing balance Borrowing rate Overdue time rate Other remarks: None 33. Held-for-trading financial liabilities Unit: RMB Items Closing balance Opening balance Held-for-trading financial 1,324,581.60 liabilities Including: 242 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Foreign exchange option 1,155,357.75 contract Interest swap contract 169,223.85 Including: Total 0.00 1,324,581.60 Other remarks: None 34. Derivative financial liabilities Unit: RMB Items Closing balance Opening balance Other remarks: None 35. Notes payable Unit: RMB Categories Closing balance Opening balance Bank acceptance bill 192,867,169.90 218,601,865.08 Total 192,867,169.90 218,601,865.08 At the balance sheet date, balances due but unpaid totaled RMB 0.00 36. Accounts payable (1) Accounts payable overview Unit: RMB Items Closing balance Opening balance Accounts payable 935,542,222.20 1,115,150,353.00 Total 935,542,222.20 1,115,150,353.00 (2) Significant accounts payable with age more than 1 year Unit: RMB Reasons for outstanding or carry- Items Closing balance over Other remarks: None 37. Unearned revenue 243 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (1) Unearned revenue overview Unit: RMB Items Closing balance Opening balance 0.00 (2) Significant unearned revenue with age more than 1 year Unit: RMB Reasons for outstanding or carry- Items Closing balance over 38. Contract liabilities Unit: RMB Items Closing balance Opening balance Unearned revenue from merchandise 512,836,059.89 648,572,264.26 sales Total 512,836,059.89 648,572,264.26 The amount and reason for the significant change in the book value during the reporting period Unit: RMB Items Amount Change Reasons for change 39. Employee benefits payable (1) Employee benefits payable overview Unit: RMB Opening Increase in the Decrease in the Closing Items balance current period current period balance I. Short-term employee 233,205,108.09 1,576,879,887.52 1,586,451,269.92 223,633,725.69 benefits II. Post- employment benefits - 5,534,982.64 140,553,760.87 138,205,683.83 7,883,059.68 defined contribution plan Total 238,740,090.73 1,717,433,648.39 1,724,656,953.75 231,516,785.37 (2) Short-term employee benefits payable overview Unit: RMB 244 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Opening Increase in the Decrease in the Items Closing balance balance current period current period 1. Wage, bonus, 222,730,889.11 1,391,851,569.01 1,400,543,318.63 214,039,139.49 allowances and subsidy 2. Employee 6,312,197.09 56,801,256.61 58,032,387.97 5,081,065.73 welfare fund 3. Social insurance 2,570,817.85 78,445,371.51 77,984,675.41 3,031,513.95 premium Including: medical care 1,661,616.35 73,236,052.08 73,008,266.24 1,889,402.19 premium Occupational injuries 784,818.06 4,167,349.33 4,013,894.55 938,272.84 premium Maternity 124,383.44 1,041,970.10 962,514.62 203,838.92 premium 4. Housing 644,019.62 28,896,668.58 28,923,149.42 617,538.78 provident fund 5. Trade union fund and 947,184.42 10,050,223.65 10,132,940.33 864,467.74 employee education fund Others 10,834,798.16 10,834,798.16 Total 233,205,108.09 1,576,879,887.52 1,586,451,269.92 223,633,725.69 (3) Defined contribution plan overview Unit: RMB Decrease in Increase in the Closing Items Opening balance the current current period balance period 1. Basic pension 5,137,086.26 137,737,516.10 135,435,334.63 7,439,267.73 premium 2. Unemployment 397,896.38 2,816,244.77 2,770,349.20 443,791.95 insurance premium Total 5,534,982.64 140,553,760.87 138,205,683.83 7,883,059.68 Other remarks: None 40. Tax payable Unit: RMB Items Closing balance Opening balance VAT 26,542,927.11 34,206,653.17 Corporate income tax 39,186,672.93 22,371,143.85 Individual income tax 5,102,080.09 4,256,244.53 245 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Urban maintenance and 1,899,576.31 2,221,116.30 construction tax Land use tax 4,254,745.36 2,209,282.12 Housing property tax 4,852,646.95 2,451,938.91 Stamp tax 124,470.71 71,666.17 Education surcharge 1,266,995.16 1,786,125.57 Vehicle and vessel usage fee 2,940.00 2,940.00 Local foundation for water works 289,400.82 517,649.20 Property tax 4,176,660.14 398,994.34 Withholding income tax 837,889.76 957,925.19 Withholding and paying income 19,869,554.00 tax Business activity tax 14,956.76 Others 4,779,295.22 5,420.00 Total 113,185,854.56 71,472,056.11 Other remarks: None 41. Other payables Unit: RMB Items Closing balance Opening balance Interest payable 0.00 Dividend payable 0.00 Other payable 384,220,500.31 727,292,685.82 Total 384,220,500.31 727,292,685.82 (1) Interest payable Unit: RMB Items Closing balance Opening balance Total Significant overdue interest payment: Unit: RMB Borrower Overdue amount Overdue reasons Other remarks: None (2) Dividend payable Unit: RMB Items Closing balance Opening balance 246 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Total 0.00 Other remarks: the reasons for non-payment of significant dividends payable that have not been paid for more than one year None (3) Other payables 1) Other payables listed by nature Unit: RMB Items Closing balance Opening balance Investment payable (note) 250,875,527.78 Engineering equipment payable 123,040,085.71 195,544,451.22 Contract deposit 20,506,005.21 18,438,067.14 Freight and storage fees payable 21,188,614.05 26,534,374.31 Other payables 169,154,774.77 170,461,805.20 Others 50,331,020.57 65,438,460.17 Total 384,220,500.31 727,292,685.82 2) Significant other payables with age more than 1 year Unit: RMB Reasons for outstanding or Items Closing balance carry-over Huawei Coating Equipment 5,394,029.63 Project to be accepted HK CO.,LTD Wanfeng Group 5,000,000.00 Deposit for intended cooperation Shenyang Dongda Sanjian Industrial Furnace 4,834,285.70 Project to be accepted Manufacturing Co., Ltd. Zhejiang Huali Intelligent 2,710,274.01 Project to be accepted Equipment Co., Ltd. Zhejiang Wanfeng Technology Development 1,390,249.94 Warranty period Co., Ltd. 247 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Nanjing Changjiang Industrial Furnace 1,301,914.60 Project to be accepted Technology Co., Ltd. Shenzhen Yuandong Machinery Development 1,085,394.10 Project to be accepted Co., Ltd. Total 21,716,147.98 -- Other remarks: Note: On January 31, 2019, Ningbo Aoweier Wheel Co., Ltd., a subsidiary of the group, and Wanfeng Aviation Industry Co., Ltd., acquired 100% partnership share from Horgos Changsheng Equity Investment Co., Ltd. and Shanghai Shouxin Investment Management Center (Limited Partnership), former shareholders of Suzhou Yucuiyuan Trading Company (general partnership), at a consideration of RMB 399.8 million, of which Ningbo Aoweier Wheel Co., Ltd. funded 99.9%. Ningbo Aoweier Wheel Co., Ltd. paid RMB 200 million in advance in 2018. According to the agreement on the share transfer of the partnership, the remaining consideration of RMB 199,800,000 was paid by Suzhou Yucuiyuan Trading Enterprise (General Partnership) on their behalf. On January 2, 2019, Suzhou Yucuiyuan Trading Enterprise (General Partnership) signed a one-year loan agreement of RMB 50 million with Shoushan (Zhangjiagang) Enterprise Management Co., Ltd., a related party of its former shareholders aforementioned. The annual interest rate was 5%. On January 31, 2019, Suzhou Yucuiyuan Trading Enterprise (General Partnership) signed a one-year loan agreement with Shanghai Boyu Investment Management Center (Limited Partnership) and Suzhou Tajian Trading Co., Ltd., related parties of its former shareholders aforementioned. The equity purchase payment of RMB 199,400,000 paid by Yucuiyuan Trading Enterprise (General Partnership) on behalf of Ningbo Aoweier Wheel Co., Ltd. was converted into a loan to former shareholder's related party. The annual interest was 5%. The loan contract stipulates that Suzhou Yucuiyuan Trading Enterprise (general partnership) provides a mortgage guarantee for the above-mentioned loan with a real estate (total construction area of 10,616.50 square meters) located in Huamu Road, Pudong New District, Shanghai. The property has not been registered with the Shanghai Real Estate Registration Affairs Center for related mortgage. As of December 31, 2019, the unpaid interest was RMB 1.48 million. Suzhou Yucuiyuan Trading Enterprise (General Partnership) has paid the above-mentioned payables totaling RMB 250.88 million in full in January 2020. 42. Held-for-sale liabilities Unit: RMB Items Closing balance Opening balance 248 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Other remarks: None 43. Non-current liabilities due within one year Unit: RMB Items Closing balance Opening balance Long-term loan due 694,425,998.19 571,968,504.83 within one year Total 694,425,998.19 571,968,504.83 Other remarks: As of December 31, 2020, there are no overdue principal and interest (December 31, 2019: None), and the annual interest rate of long-term loans due within one year is 3.50%-5.22% (December 31, 2019: 3.50%-6.52%). Among them, please refer to Note VII. 81 for information on mortgage assets related to mortgage loans. 44. Other current liabilities Unit: RMB Items Closing balance Opening balance Output VAT to be 4,192,272.05 5,301,872.45 transferred Total 4,192,272.05 5,301,872.45 Changes in short-term bonds payable: Unit: RMB Ope Amortizati Issuan Interest Repaymen Par Issu nin on of Bon Ter ce Current accrued t in the Closing valu e g premium d m amou issue at face current balance e date bala and nt value period nce discount -- Other remarks: None 45. Long-term borrowings (1) Long-term borrowings categories Unit: RMB Items Closing balance Opening balance Pledge borrowings 396,962,631.92 Mortgage borrowings 500,503,566.56 553,895,193.84 Guaranteed borrowings 408,697,705.52 Credit borrowings 80,000,000.00 214,362,666.24 Mortgage and Guaranteed 190,000,000.00 Loan Total 1,179,201,272.08 1,165,220,492.00 249 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Remarks on classification of long-term borrowings: None Other remarks, including interest rate range: As of December 31, 2020, the annual interest rate of the above-mentioned borrowings was 3.50%-5.22% (December 31, 2019: 3.50%-6.52%). Among them, please refer to Note VII. 81 for information on mortgaged loans and mortgaged assets related to pledged loans. 46. Bonds payable (1) Bonds payable Unit: RMB Items Closing balance Opening balance (2) Changes in bonds payable (Excluding other financial instruments such as preferred stocks and perpetual bonds classified as financial liabilities) Unit: RMB Interest Amortiza Repaym Issua Openi accrue tion of ent in Par Issue nce ng Curren Closing Bond Term d at premium the value date amou balan t issue balance face and current nt ce value discount period -- Total -- -- -- (3) Description of conversion conditions and conversion time of convertible corporate bonds None (4) Description of other financial instruments classified as financial liabilities Summary of other financial instruments such as preferred stocks and perpetual bonds issued at the end of the period None Changes in financial instruments such as preferred stocks and perpetual bonds issued at the end of the period 250 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Outstandi Increase in the Decrease in the Opening balance Closing balance ng current period current period financial instrumen Book Book Book Book Amount Amount Amount Amount t value value value value Remarks on the basis for classifying other financial instruments as financial liabilities None Other remarks: No 47. Lease liabilities Unit: RMB Items Closing balance Opening balance Other remarks: None 48. Long-term payables Unit: RMB Items Closing balance Opening balance (1) Long-term payables according to the nature of the payment Unit: RMB Items Closing balance Opening balance Other remarks: None (2) Special payables Unit: RMB Opening Increase in the Decrease in the Closing Items Reasons balance current period current period balance -- Other remarks: None 49. Long-term employee benefits payable (1) Long-term employee benefits Unit: RMB Items Closing balance Opening balance 251 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (2) Changes in defined benefit plans Present value of defined benefit plans: Unit: RMB Items Amount in current period Amount in prior period Plann assets: Unit: RMB Items Amount in current period Amount in prior period Defined benefit plan net liabilities (net assets) Unit: RMB Items Amount in current period Amount in prior period Description of the content of the defined benefit plan and related risks, the impact on the company's future cash flow, time and uncertainty: No Explanation of major actuarial assumptions and sensitivity analysis results of defined benefit plans: None other remarks: None 50. Provisions Unit: RMB Items Closing balance Opening balance Reasons Pending litigation 157,323,343.91 151,393,866.81 (Note 1) Product quality 27,389,011.22 19,118,430.88 assurance Fixed asset disposal 3,538,805.35 3,646,570.77 costs Employee compensation 946,458.39 521,998.44 (Note 2) Total 189,197,618.87 174,680,866.90 -- Other explanations, including significant assumptions and estimation explanations related to significant provisions: Note 1: Shandong Bin’ao Aircraft Manufacturing Co., Ltd. litigated the Company’s subsidiary, Austria Diamond Aircraft Industry Co., Ltd., in a dispute over model production license authorization, and the litigation is still in the 252 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report arbitration process. As of December 31, 2020, Austria Diamond Aircraft Industry Co., Ltd. accumulatively accrued provisions of RMB 157,323,343.91 based on estimates (December 31, 2019: RMB 151,393,866.81). Note 2: Wanfeng Meridian and its subsidiaries (hereinafter referred to as “Wanfeng Meridian Group”) hired CMI, A York Risk Services Company, Inc. (hereinafter referred to as CMI), a third-party employee compensation risk management agency to handle employee compensation claim. CMI provides estimates to the Company after evaluating all outstanding claims each year. As of December 31, 2020, there were several outstanding claims (2019: multiple outstanding claims), and Wanfeng Meridian Group recognized contingent liabilities based on the estimated amount. 51. Deferred income Unit: RMB Increase in the current Decrease in the current Items Opening balance Closing balance Reasons period period Government grants 202,630,087.75 69,496,834.32 57,852,069.49 214,274,852.58 Total 202,630,087.75 69,496,834.32 57,852,069.49 214,274,852.58 -- Projects related to government grants: Unit: RMB Amount included in Amount Amount of New subsidy non- included in cost Related to Other Liability projects Opening balance amount for the operating other income in reduction in Closing balance assets/related changes current period revenue in the current the current to income the current period period period Technical transformation project of intelligent production line for 1,262,775.16 164,724.84 1,098,050.32 Related to assets auto parts 253 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Industrialization and Informatization Development 200,000.00 150,000.00 50,000.00 Related to assets Fund Fiscal subsidies for energy saving and consumption 30,000.00 30,000.00 Related to assets reduction projects National Industrial Transformation and Upgrade 7,200,000.00 900,000.00 6,300,000.00 Related to assets Fund Intelligent Casting Technological Transformation 6,300,000.00 900,000.00 5,400,000.00 Related to assets Project for Annual Production of 3 Million Motorcycle Wheels National Intelligent Manufacturing New Model 11,000,000.00 1,571,429.00 9,428,571.00 Related to assets Application Project Industrialization project of ultra- light and high-strength digital Related to 960,000.00 960,000.00 forming aluminum-magnesium income alloy sub-frame Complete sets of technology and industrialization of engineering preparation and Related to processing of high thermal 149,999.96 50,000.04 99,999.92 income /electric conductivity magnesium alloy materials and their products-1 Preparation, processing and industrialization of high thermal Related to 147,368.44 147,368.44 conductivity magnesium alloy income materials and products 254 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Weihai Lightweight Material Related to 1,000,000.04 1,000,000.04 Technology Innovation Center income Related to Multi-function data logger rack 214,285.76 214,285.76 income Complete sets of technology and industrialization of engineering preparation and Related to processing of high thermal 153,191.48 51,063.84 102,127.64 income /electric conductivity magnesium alloy materials and their products-2 Key technologies for plastic processing, manufacturing and Related to application of high-strength and 1,010,526.29 1,010,526.29 income tough magnesium alloys for load-bearing applications Digital visual management Related to 531,600.00 531,600.00 processing workshop project income High strength and toughness Al- Related to Cu rare earth casting alloy and 91,200.00 91,200.00 income its lightweight application R&D and industrialization of high-strength and high- Related to toughness magnesium- 1,920,000.00 960,000.00 960,000.00 income aluminum alloy bulletproof support Magnesium alloy materials for communication equipment and Related to 600,000.00 399,999.96 200,000.04 their application technology income R&D projects 255 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report High thermal conductivity magnesium alloy body Related to 4,800,000.00 4,800,000.00 component industry chain income construction project Undertake international service Related to outsourcing business (service 367,600.00 367,600.00 income outsourcing enterprise) Complete sets of technology and industrialization projects for the engineering preparation and Related to processing of high thermal / 300,000.00 65,217.40 234,782.60 income electric conductivity magnesium alloy materials and their products High-strength, low-heat- cracking susceptibility magnesium alloy materials and Related to 500,000.00 108,695.70 391,304.30 compact forming technology income and lightweight application projects Large-scale thin-wall casting Related to 250,000.00 250,000.00 technology R&D project income Foundry sand core unorganized Related to 1,500,000.00 1,500,000.00 waste gas treatment project income 256 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Large-displacement motorcycle racing aluminum-magnesium Related to alloy sub-frame (rocker arm) 200,000.00 200,000.00 income technology patented navigation project Application of high thermal Related to conductivity magnesium alloy in 3,000,000.00 214,285.71 2,785,714.29 income 5G communication base station Development and industrialization of a composite Related to integrated framework of carbon 100,000.00 9,090.91 90,909.09 income fiber and magnesium alloy for communications Study on Atomic Cluster Structure Spectrum and Atomic Related to 70,000.00 2,258.06 67,741.94 Diffusion Behavior of Aluminum- income Cu Alloy Melt Complete sets of technology and industrialization of engineering preparation and Related to processing of high thermal / 300,000.00 54,545.44 245,454.56 income electric conductivity magnesium alloy materials and their products -3 Complete sets of technology and industrialization of engineering preparation and Related to processing of high thermal / 2,000,000.00 363,636.40 1,636,363.60 income electric conductivity magnesium alloy materials and their products-4 257 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Complete set technology and industrialization of engineering preparation and processing of Related to 600,000.00 97,674.43 502,325.57 high thermal / electric income conductivity magnesium alloy materials and their products -5 High-strength, low-heat- cracking susceptibility Related to magnesium alloy materials and 600,000.00 119,999.96 480,000.04 income compact forming technology and lightweight applications-1 High-strength, low-heat- cracking sensitivity magnesium Related to alloy material and compact 500,000.00 90,909.12 409,090.88 income forming technology and lightweight application-2 High strength and toughness, low thermal cracking susceptibility magnesium alloy Related to 2,000,000.00 153,846.15 1,846,153.85 material and compact forming income technology and lightweight application-3 Research on Key Processes of Preparation of Diamond/Copper Related to 160,000.00 12,307.69 147,692.31 Matrix Composites for Heat income Dissipation OME Aluminum Alloy Wheel 65,254,418.06 11,951,636.28 53,302,781.78 Related to asset Project New Energy Automobile Wheel Smart Factory Construction 7,971,632.71 5,000,000.00 921,632.71 12,050,000.00 Related to asset Project 258 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Support funds for the construction of aluminum alloy 82,732,248.52 13,745,354.92 68,986,893.60 Related to asset wheel projects Support funds for industrial transformation and upgrading 16,433,102.81 2,690,737.93 13,742,364.88 Related to asset projects Special funds for private 3,452,542.57 561,975.34 2,890,567.23 Related to asset economic development Rewards for the construction of smart factories and digital 473,362.40 56,197.55 417,164.85 Related to asset workshops 2020 energy optimization project subsidy transferred to 1,872,600.00 511,600.00 1,361,000.00 Related to asset deferral Industrial Strong Base Project 28,820,000.00 9,334,217.84 19,485,782.16 Related to asset Museum subsidy 363,504.17 91,831.69 8,263.76 279,936.24 Related to asset Photovoltaic project subsidy 2,204,098.71 479,011.30 148,687.23 64,406.78 2,598,829.56 Related to asset Housing and equipment 6,801,630.67 295,932.82 177,552.48 6,683,250.33 Related to asset subsidies Total 202,630,087.75 69,246,611.30 57,852,069.49 250,223.02 214,274,852.58 Other remarks: None 259 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 52. Other non-current liabilities Unit: RMB Items Closing balance Opening balance -- Other remarks: None 53. Share capital Unit:10,000 RMB Change in the current period(+、-) Opening Provident Closing balance New Bonus Fund balance Others Subtotal issuance shares Conversio n Total number of 218,688 218,688 shares Other remarks: None 54. Other equity instruments (1) Other financial instruments such as preferred stocks and perpetual bonds outstanding at the end of the period None (2) Changes in other financial instruments such as preferred stocks and perpetual bonds outstanding at the end of the period Unit: RMB Outstandi Increase in the Decrease in the Opening balance Closing balance ng current period current period financial instrumen Amount Book Book Book Book Amount Amount Amount t value value value value Other equity instruments' changes in the current period, explanations of the reasons for the changes, and the basis for related accounting treatments: None Other remarks: None 55. Capital reserve Unit: RMB 260 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Increase in the Decrease in the Items Opening balance Closing balance current period current period Capital premium (Share 110,790,013.13 110,790,013.13 premium) Other capital 2,747,500.00 2,747,500.00 reserve Combination under 1,576,333,004.32 1,576,333,004.32 the common control Original system 1,419,423.32 1,419,423.32 capital reserve Total 1,691,289,940.77 1,691,289,940.77 0.00 Other explanations, including changes in the current period and the reasons: On July 6, 2020, Zhejiang Wanfeng Motor Wheel Co., Ltd., a subsidiary of the Company, signed an equity transfer agreement with Wanfeng Aviation Industry Co., Ltd. (hereinafter referred to as "Wanfeng Aviation") to invest RMB 399,800.00 in cash to acquire 0.1% partnership share of Suzhou Yucuiyuan Trading Enterprise (General Partnership) held by Wanfeng Aviation. The acquisition was completed on July 6, 2020. The acquisition was completed on July 6, 2020. The acquisition of minority shareholders’ equity resulted in a decrease of RMB 15,928.74 in capital reserve. As mentioned in Note 4, in April 2020, the Company acquired 55% of Wanfeng Aircraft for RMB 2,418,075,000.00 in cash, forming a business combination under common control. Capital reserve, surplus reserve, and undistributed profit decreased by RMB 1,691,274,012.03, RMB 427,043,757.25 and RMB 299,757,230.72, respectively. 56. Treasury shares Unit: RMB Increase in the Decrease in the Items Opening balance Closing balance current period current period Treasury stock 333,092,868.42 238,720,382.77 571,813,251.19 Total 333,092,868.42 238,720,382.77 571,813,251.19 Other explanations, including changes in the current period and the reasons: Note: The Company held the 32nd meeting of the sixth board of directors on December 26, 2019, approved the Proposal on the Repurchase of Company Shares , and disclosed the Report on Repurchase of Company Shares on December 28, 2019. The decision was made to repurchase the Company’s shares by means of a centralized bidding method through the Shenzhen Stock Exchange trading system with its own funds or self-raised funds. These shares will be used for subsequent employee stock ownership plans or equity 261 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report incentives. The total amount of funds for the repurchase of shares shall not be less than RMB 150 million and not more than RMB 300 million, and the repurchase price shall not exceed RMB 10 per share (inclusive). The repurchase period is no more than 12 months from the approval date of the repurchase plan by the board of directors. As of December 25, 2020, the Company's share repurchase period has expired. During the repurchase period, the Company accumulatively repurchased 35,501,808 shares by means of a centralized bidding transaction through the special securities account for repurchase, accounting for 1.62% of the Company's total share capital, and the total transaction amount was RMB 239,640,478.46 (including transaction costs). The Company's share repurchase plan has been completed. The Company held the sixth meeting of the seventh board of directors on December 30, 2020, approved the Proposal on the Repurchase of Company Shares, disclosed the Report on Repurchase of Company Shares on January 4, 2021. The decision was made to repurchase the Company’s shares by means of centralized bidding through the Shenzhen Stock Exchange trading system with its own funds or self-raised funds. These shares will be used for subsequent employee stock ownership plans or equity incentives. The total amount of funds for the repurchase of shares shall not be less than RMB 100 million and not more than RMB 200 million, and the repurchase price shall not exceed RMB 11 per share (inclusive), and the repurchase period is no more than 12 months from the approval date of the repurchase plan by the board of directors . As of December 31, 2020, the Company's share repurchase plan has not yet been implemented. 262 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 57. Other comprehensive income (OCI) Unit: RMB Current period Less: OCI Less: OCI Attributable to Attributable to Closing Items Opening balance Amount before carried forward Less: carried forward the parent non-controlling balance income tax in transferred to income tax transferred to company after interest after current period retained expense profit and loss tax tax earnings II. Items to be reclassified subsequently to profit and 74,589,529.22 -148,446,465.82 -129,418,056.84 -19,028,408.98 -54,828,527.62 loss Foreign currency 74,589,529.22 -148,446,465.82 -129,418,056.84 -19,028,408.98 -54,828,527.62 translation reserves Other comprehensive 74,589,529.22 -148,446,465.82 -129,418,056.84 -19,028,408.98 -54,828,527.62 income in total Other explanations, including the adjustment of the effective part of the cash flow hedge gains and losses into the initial recognition amount of the hedged item: None 58. Special reserve Unit: RMB Items Opening balance Increase in the current period Decrease in the current period Closing balance Safety production fee 10,261,018.12 20,979,159.41 17,727,120.11 13,513,057.42 Total 10,261,018.12 20,979,159.41 17,727,120.11 13,513,057.42 Other remarks, including changes in the current period and reasons: None 263 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 59. Surplus reserve Unit: RMB Increase in the Decrease in the Items Opening balance Closing balance current period current period Statutory surplus 427,043,757.25 47,015,012.60 427,043,757.25 47,015,012.60 reserve Total 427,043,757.25 47,015,012.60 427,043,757.25 47,015,012.60 The explanation of the surplus reserve, including the changes in the current period and the reasons: According to the Company Law and the Company's Articles of Association, the Company draws a statutory surplus reserve fund at 10% of net profit. If the statutory surplus reserve is more than 50% of the Company's registered capital, it can no longer be drawn. The Company can withdraw any surplus reserve after drawing the statutory surplus reserve. Upon approval, the discretionary surplus reserve can be used to make up for previous years' losses or increase share capital. 60. Undistributed profit Unit: RMB Items Current period Previous period Balance of undistributed profit at the end of the previous period before 3,935,484,397.57 3,621,219,587.26 adjustment Total amount of undistributed profits at the beginning of the period before 107,711,409.83 adjustment (increase +, decrease -) Undistributed profit at the beginning 3,935,484,397.57 3,728,930,997.09 of the period after adjustment Add: Net profit attributable to shareholders of the parent company 565,820,630.75 895,769,920.83 for current year Less: Appropriation of statutory 47,015,012.60 33,152,616.95 surplus reserve Payable dividends on ordinary 421,689,724.00 656,063,903.40 shares Business combination under the 299,757,230.72 common control Closing balance 3,732,843,061.00 3,935,484,397.57 Adjust the details of the undistributed profit at the beginning of the period: 1). Due to the retrospective adjustment according to the Accounting Standards for Business Enterprises and related new regulations, the undistributed profit at the beginning of the period was affected by RMB 0.00. 264 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2). Due to changes in accounting policies, the undistributed profit at the beginning of the period was affected by RMB-12,227,868.01. 3) Due to the correction of major accounting errors, the undistributed profit at the beginning of the period was affected by RMB 0.00. 4) The change in the scope of consolidation caused by the same control affected the undistributed profit at the beginning of the period by RMB 119,939,277.84. 5) Other adjustments affected the undistributed profit at the beginning of the period by RMB 0.00. 61. Operating revenue and Operating cost Unit: RMB Current period Prior period Items Revenue Cost Revenue Cost Main operations 10,295,928,707.36 8,256,622,391.91 12,240,494,250.98 9,614,365,593.75 Other operations 403,296,197.21 282,787,673.51 394,637,725.28 284,183,485.67 Total 10,699,224,904.57 8,539,410,065.42 12,635,131,976.26 9,898,549,079.42 Audited net profit before and after deducting non-recurring profit and loss, whichever is lower, is negative or not □ Applicable √ Not Applicable Revenue related information: Unit: RMB Contract Section 1 Section 2 Total classification Including: Information related to performance obligations: None Information related to the transaction price allocated to the remaining performance obligations: At the end of the reporting period, the amount of revenue corresponding to the performance obligations that have been signed but not yet fulfilled or in the process of fulfillment is RMB 0.00. Among them, RMB 0.00 is expected to recognize revenue in the year. Other remarks None 62. Taxes and surcharges 265 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Items Current period Prior period Urban maintenance and 13,816,638.45 19,745,602.24 construction tax Education surcharge 11,840,055.90 17,805,728.34 Housing property tax 11,769,148.28 10,896,560.51 Land use tax 9,848,384.13 11,197,338.30 Vehicle usage tax 22,272.08 107,075.05 Stamp duty 3,556,512.48 3,646,380.92 Environmental protection tax 334,797.31 298,447.98 Chamber of Commerce Tax 444,915.02 648,072.21 Business tax 1,746,705.49 1,210,761.06 Others 650,056.39 470,748.48 Total 54,029,485.53 66,026,715.09 Other remarks: None 63. Selling expenses Unit: RMB Items Current period Prior period Transportation fee 98,999,575.96 Rental costs 32,639,223.39 33,427,814.50 Employee compensation and 57,286,444.90 49,507,270.00 labor insurance premiums Commission 80,144,914.92 98,764,600.84 Travel expense 2,917,023.59 8,112,411.21 Business hospitality 2,280,016.25 5,135,790.26 Rework and repair fee 1,314,888.29 1,021,698.74 Other 26,354,907.56 31,404,151.59 Total 202,937,418.90 326,373,313.10 Other remarks: None 64. Administrative expenses Unit: RMB Items Current period Prior period Employee compensation and 253,974,877.57 336,547,102.49 labor insurance premiums 266 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Depreciation expense 81,012,763.39 84,928,773.17 Professional service fee 67,268,386.40 68,386,119.76 Amortization of intangible assets 28,081,645.11 27,377,486.81 Business hospitality 24,918,655.72 24,112,594.31 Office expense 20,034,195.34 22,860,054.00 Property rental fee 14,777,427.27 16,925,824.89 Computer and software 13,717,008.33 13,242,229.66 maintenance fee Travel expense 5,196,486.24 13,022,022.58 Insurance 4,654,956.23 1,953,097.69 Employee education funds and 2,914,839.77 2,497,355.21 labor union funds Others 74,286,505.01 57,609,135.28 Total 590,837,746.38 669,461,795.85 Other remarks: None 65. R&D expenses Unit: RMB Items Current period Prior period Trial production and material cost 120,631,171.97 165,239,150.69 Depreciation expenses 35,023,658.55 34,559,098.29 Fuel and power 37,037,593.92 57,391,913.63 Mold expenses 14,064,645.28 14,567,653.35 Employee compensation and labor 121,930,108.10 155,149,369.13 insurance premiums Others 8,761,692.86 19,195,773.76 Total 337,448,870.68 446,102,958.85 Other remarks: None 66. Financial expenses Unit: RMB Items Current period Prior period Interest expense 245,818,075.95 241,813,490.17 Less: Interest income 34,003,395.60 46,585,659.98 Translation losses 49,782,761.54 14,505,478.58 Bank fees 7,524,559.08 9,279,889.76 267 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Total 269,122,000.97 219,013,198.53 Other remarks: None 67. Other income Unit: RMB Source of the other income Current period Prior period Government grants related to 104,562,193.16 91,765,417.17 operating activities 68. Investment income Unit: RMB Items Current period Prior period Investment income from long- term equity investments under -876,459.23 633,198.02 equity method Investment income from disposal of long-term equity -675,223.58 investments Investment income from disposal of held-for-trading -4,600.00 financial assets Gains and losses on settlement of foreign exchange forward 2,077,790.82 -1,037,330.00 contracts Investment income of short-term 1,485.24 2,834,421.98 financial products Gains and losses on settlement of -1,235,024.00 futures contracts Gains and losses on settlement of 1,324,581.60 -409,440.00 foreign exchange option Total 612,550.85 2,020,850.00 Other remarks: None 69. Gains and losses on net exposure to hedging risk Unit: RMB Items Current period Prior period Other remarks: None 70. Gains and losses on changes in fair value Unit: RMB Sources of income from Current period Prior period 268 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report changes in fair value Held-for-trading financial 4,154.36 18,630.78 assets Foreign exchange forward 1,960,000.00 1,050,000.00 contract Gains and losses on settlement 282,400.00 -1,155,357.75 of foreign exchange option Gains and losses on settlement -169,223.85 of interest rate swap Total 2,246,554.36 -255,950.82 Other remarks: None 71. Credit impairment loss Unit: RMB Items Current period Prior period Impairment losses on other -596,030.03 1,856,502.90 receivables Impairment losses on accounts -6,627,489.02 -34,793,447.68 receivable Total -7,223,519.05 -32,936,944.78 Other remarks: None 72. Assets impairment loss Unit: RMB Items Current period Prior period Ⅱ. Inventory write-down loss and contract performance cost -7,493,604.15 -16,367,780.12 impairment loss VI. Fixed assets impairment -2,685,757.48 -2,282,636.17 loss Total -10,179,361.63 -18,650,416.29 Other remarks: None 73. Gains on disposal of asset Unit: RMB Sources of gains on disposal Current period Prior period of asset Gains from disposal of non- 2,913,955.21 2,114,706.06 current assets Losses from disposal of non- -2,412,798.27 -2,897,932.24 269 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report current assets Total 501,156.94 -783,226.18 74. Non-operating revenue Unit: RMB Amount recorded into the current non- Items Current period Prior period recurring profit and loss Confiscated income 1,046,034.81 6,659,158.22 1,046,034.81 Compensation income 28,071,500.00 (Note 1) Net income from production accidents in 35,106,031.66 126,048,046.71 35,106,031.66 U.S. factories (Note 2) Others 6,898,645.35 9,420,393.12 6,898,645.35 Total 43,050,711.82 170,199,098.05 43,050,711.82 Government grants recorded in current profit and loss: Unit: RMB Whether the Related subsidy Whether to Subsidy affect the it is a Current Prior Issuer Reasons Type assets/rel items current special period period ated to year's subsidy income profit and loss -- Other remarks: Note 1: On January 22, 2019, Shenzhen Kelu Electronic Technology Co., Ltd. paid the Group RMB 23,199,000.00 for the remaining equity transfer of Shanghai Kanai. Since the payment was later than the agreed date in the contract, Shenzhen Kelu Electronic Technology Co., Ltd. paid a penalty of RMB 3,611,000.00 to the Group on the same day. On April 8, 2019, the Group received a compensation payment of RMB 24,460,500.00 from the original shareholders of Wuxi Xiongwei Precision Technology Co., Ltd., including Ma Leiquan, Xiang Yuyu, Yan Yidong, and Zhao Weijun for unfulfilled performance commitments. Note 2: On May 2, 2018, a production accident occurred in the US Meridian Lightweight Technology Co., Ltd., a subsidiary of the Group, which caused damage to some buildings and production equipment. In 2020, US Meridian Lightweight Technology Co., Ltd. received a follow-up compensation of RMB 35,106,031.66 from the insurance company, which was recognized as non- operating revenue. 270 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 75. Non-operating expenditures Unit: RMB Amount recorded into the current non- Items Current period Prior period recurring profit and loss External donation 1,362,874.02 80,410.61 1,362,874.02 Losses from production accidents in U.S. and 3,539,343.31 3,539,343.31 Canadian factories Special Fund for Water Conservancy 752,950.97 693,492.19 752,950.97 Construction Loss from scrap of non- 1,599,934.06 current assets Others 4,331,701.81 4,561,344.43 4,331,701.81 Total 9,986,870.11 6,935,181.29 9,986,870.11 Other remarks: None 76. Income tax expenses (1) Income tax expenses Unit: RMB Items Current period Prior period Current period income tax 124,485,676.11 138,277,717.78 expenses Deferred income tax expenses -60,339,163.96 34,516,501.29 Total 64,146,512.15 172,794,219.07 (2) Reconciliation of accounting profit to income tax expenses Unit: RMB Items Current period Profit before tax 829,022,733.03 Income tax expense based on statutory/applicable 124,353,409.98 tax rate The impact of different tax rates applied to 54,621,522.03 subsidiaries The impact of income tax before adjustment -2,088,886.95 The impact of non-taxable income -7,407,788.55 The impact of non-deductible cost, expense, and 13,225,300.77 losses The impact of change in tax rate -1,097,562.36 271 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Use of deductible losses of the previous years and recognize the deductible losses that have not been -106,350,989.94 recognized in the previous years Effect of deducible temporary differences or 13,851,320.32 deductible losses not recognized Deductible expenses not included in the total profit -160,134.66 Extra deduction of expenses -46,749,493.17 Cross-border profit distribution withholding income tax 21,949,814.68 Tax expenses calculated according to the company's 64,146,512.15 effective tax rate Income tax expenses 64,146,512.15 Other remarks: As mentioned in Note vi, the Company and its internal subsidiaries enjoy tax incentives for high-tech enterprises, and their income tax is accrued based on the estimated taxable income obtained in China with the applicable tax rate of 15%. Except for these subsidiaries, the income tax of other subsidiaries in China is accrued based on the estimated taxable income obtained in China and the applicable tax rate of 25%. Taxes on taxable income derived from other regions are calculated at the applicable tax rate in accordance with the current laws, interpretations and practices of the country where the company operates. 77. Other comprehensive income See Note VII. 57 for details. 78. Notes to items of the consolidated cash flow statement (1) Other cash receipts related to operating activities Unit: RMB Items Current period Prior period Insurance indemnities received in a production accident in the United States except for the 35,106,031.66 72,873,856.18 purchase and construction of assets Government grants related to 92,987,587.09 61,362,644.82 income Government grants related to 22,779,011.30 500,000.00 assets Changes in other cash and cash 10,408,322.61 297,656.27 equivalents Others 46,980,676.05 33,041,991.55 Total 208,261,628.71 168,076,148.82 272 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Description of other cash receipts related to operating activities: No (2) Other cash payments related to operating activities Unit: RMB Items Current period Prior period Selling expenses 148,403,947.53 277,559,152.72 Administrative and R&D 427,832,236.32 589,436,025.60 expenses Expenditures related to production accidents in the 3,539,343.30 36,144,970.27 United States and Canada Changes in other cash and cash -4,097,276.75 - equivalents Bank fees 8,022,755.63 9,510,528.79 Cash paid for operating costs 126,351,662.51 Others 9,416,220.14 18,089,678.97 Total 719,468,888.68 930,740,356.35 Remarks on other cash payments related to operating activities No (3) Other cash receipts related to investing activities Unit: RMB Items Current period Prior period Related parties return funds and 944,235,315.71 1,360,423,532.78 interest Wuxi Precision Acquisition 24,460,500.00 Performance Compensation Receipt of payment for default on 3,611,000.00 disposal of equity Insurance compensation received for the purchase and construction 89,319,160.80 of assets in a production accident in a US factory Gains from disposal of held-for- 2,962,130.80 trading financial assets Settlement income of other 1,485.24 7,793.38 financial products Changes in restricted cash and cash equivalents guaranteed for 629,500,000.00 635,893,602.05 Wanfeng Group 273 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Others 74,602.02 Total 1,576,698,931.75 2,113,790,191.03 Remarks on other cash receipts related to investing activities: None (4) Other cash payments related to investing activities Unit: RMB Items Current period Prior period Cash lent to related parties 76,650,000.00 1,883,450,707.00 Disposal of held-for-trading 888,940.00 1,446,770.00 financial assets Changes in restricted cash and cash equivalents guaranteed for 13,049,800.00 - Wanfeng Group Total 90,588,740.00 1,884,897,477.00 Remarks on other cash payments related to investing activities No (5) Other cash receipts related to financing activities Unit: RMB Items Current period Prior period Recover the deposit paid to 218,800,000.00 58,929,200.00 obtain loan Total 218,800,000.00 58,929,200.00 Other remarks on other cash receipts related to financing activities None (6) Other cash payments related to financing activities Unit: RMB Items Current period Prior period Stock repurchases 238,720,382.77 333,092,868.42 Deposit paid to obtain loan 230,000,000.00 268,800,000.00 Cash paid to acquire subsidiary 2,418,075,000.00 Total 2,886,795,382.77 601,892,868.42 Other remarks on other cash payments related to financing activities None 79. Supplement information to the cash flow statement (1) Supplement information to the cash flow statement 274 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Supplement information Current period Prior period 1. Reconciliation of net profit to cash flow from -- -- operating activities: Net profit 764,876,220.88 1,041,234,342.21 Add:Provisions for assets impairment loss 17,402,880.68 51,587,361.07 Depreciation of fixed assets, oil and gas 582,853,810.83 551,655,806.11 assets, productive biological assets Amortization of right-of-use assets Amortization of intangible assets 80,622,869.88 91,458,733.96 Amortization of long-term deferred 119,829,558.25 118,705,736.28 expenses Loss on disposal of fixed assets, intangible assets and other long-term assets -501,156.94 783,226.18 (Less:gains) Loss on scrap of fixed assets (Less: 1,599,934.06 gains) Losses on changes in fair value (Less: -2,246,554.36 255,950.82 gains) Financial expenses (Less: gains) 248,850,044.00 237,169,394.08 Investment losses (Less: gains) -612,550.85 -2,020,850.00 Decrease of deferred tax assets (Less: -75,400,834.00 20,468,783.72 increase) Increase of deferred tax liabilities (Less: 8,208,840.54 16,116,037.21 decrease) Decrease of inventories (Less: increase) 69,482,782.06 -131,522,140.63 Decrease of operating receivables -181,446,594.32 -404,474,923.83 (Less: increase) Increase of operating payables (Less: 102,038,205.77 -53,092,585.55 decrease) Others 1,823,384.00 -119,555,925.92 Net cash flows generated from operating 1,735,780,906.42 1,420,368,879.77 activities 2.Significant investing and financing activities -- -- not related to cash receipts and payments: Conversion of debt into capital Convertible bonds due within one year Fixed assets leased in under finance leases 3.Net changes in cash and cash equivalents: -- -- Cash at the end of the period 1,412,366,847.54 1,426,647,961.41 275 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Less: Cash at the beginning of the period Add: Cash equivalents at the end of the period Less: Cash equivalents at the beginning of 1,426,647,961.41 1,167,968,107.34 the period Net increase of cash and cash equivalents -14,281,113.87 258,679,854.07 (2) Net cash paid for acquiring subsidiaries in current period Unit: RMB Amount Cash and cash equivalents paid in current period 2,418,075,000.00 for business combination Including: -- Acquired subsidiaries 2,418,075,000.00 Including: -- Including: -- Net cash paid to acquire subsidiaries 2,418,075,000.00 Other remarks: None (3) Net cash receipts from disposal of subsidiaries in current period Unit: RMB Amount Net cash of cash equivalents receipts from 10,461,733.98 disposal of subsidiaries in current period Net cash receipts from disposal of subsidiaries 10,461,733.98 Other remarks: Disposal of a 20% equity in the joint venture CETC Wuhu General Aviation Industry Technology Research Institute Co., Ltd. (4) Composition of cash and cash equivalents Unit: RMB Items Closing balance Opening balance I. Cash 1,412,366,847.54 1,426,647,961.41 Including: Cash on hand 928,560.58 1,007,340.38 Cash in bank that can be 1,411,438,286.96 1,425,640,621.03 readily drawn on demand II. Cash equivalents 276 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Ⅲ. Cash and cash equivalents at 1,412,366,847.54 1,426,647,961.41 end of year Other remarks: None 80. Notes to Statement of Changes in Owner’s Equity Remarks on the "other" items and the amount of adjustment to adjust the balance at the end of the previous year: No 81. Assets with restriction on ownership or use rights Unit: RMB Carrying amount at the end of Items Reasons for restriction the period Cash and cash equivalents 262,612,110.63 Note 1 Fixed assets 756,254,109.17 Note 3 Intangible assets 317,431,152.87 Note 3 Accounts receivable financing 187,082,811.84 Note 2 Total 1,523,380,184.51 -- Other remarks: Note 1: As of December 31, 2020, the cash and cash equivalent for which the ownership of the Group is restricted is RMB 262,612,110.63 (December 31, 2019: RMB 1,026,106,121.97), including: 1) The guarantee deposit for issuing a letter of guarantee to provide guarantee for Wanfeng Group’s loans is RMB 13,049,800 (December 31, 2019: The deposit certificate pledged for Wanfeng Group’s loan guarantee is RMB 629,500,000.00); 2) The deposit for issuing bank acceptance bills is RMB 52,834,578.20 (December 31, 2019: RMB 95,615,428.67); 3) Issuing bank acceptance drafts with a pledge of RMB 20,000,000.00 in term deposits (December 31, 2019: None); 4) The deposit for issuing a letter of credit is RMB 19,567,430.00 (December 31, 2019: RMB 4,883,340.00); 5) The deposit for issuing a bank guarantee is RMB 16,760,000.00 (December 31, 2019: RMB 19,728,406.08); 6) The deposit for issuing forward foreign exchange settlement is RMB 943,992.47 (December 31, 2019: RMB 2,537,790.28); 7) The guarantee deposit for obtaining loans is RMB 50,000,000.00 (December 31, 2019: RMB 218,800,000.00); 8) The pledged term deposit of RMB 30,000,000.00 is the guarantee for the Group’s borrowings (December 31, 2019: None); 9) Issue a guarantee deposit of RMB 1,114,223.59 for the quality of construction project (December 31, 2019: RMB 1,114,223.59); 10) Issue a sales performance bond of RMB 159,004,141.44 (December 31, 2019: RMB 142,231,939.85) with a deposit of RMB 56,002,086.37 (December 31, 2019: RMB 53,926,933.35) as a guarantee; 11) Bank deposits of RMB 2,340,000 were frozen due to equipment contract disputes (December 31, 2019: None). 277 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Note 2: As of December 31, 2019, the Group’s held-for-trading financial assets with restricted ownership were RMB 60,000,000.00. Including 1) Pledge of structured deposits of RMB 50,000,000.00 to obtain loans; 2) Pledge of structured deposits of RMB 10,000,000.00 to obtain bank acceptance bills. Note 3: As of December 31, 2020, the Group’s restricted ownership of accounts receivable financing was RMB 187,082,811.84 (December 31, 2019: 147,871,797.58). Including: 1) Pledge of RMB 95,818,762.46 of accounts receivable financing (December 31, 2019: RMB 63,456,986.58 of bills receivable) to issue bank acceptance drafts; 2) Pledge of RMB 30,000,000.00 of accounts receivable financing to obtain loans from China Construction Bank Fuling Branch (December 31, 2019: Pledge of RMB 20,870,000.00 of bills receivable to obtain loans from China Construction Bank Fuling Branch); 3) Financing of RMB 58,264,049.38 yuan (December 31, 2019: RMB 53,544,811.00 of bills receivable) endorsed to pay the supplier purchase price; 4) Financing of RMB 3,000,000.00 with accounts receivable (December 31, 2019: RMB 10,000,000.00 of bills receivable) and discounted to obtain bank loans. Note 4: As of December 31, 2020, except for the assets guaranteed or mortgaged by Wanfeng Meridian disclosed below, the fixed assets and intangible assets with restricted ownership of the Group were RMB 756,254,109.17 and RMB 317,431,152.87, respectively (December 31, 2019: RMB 529,912,312.56 and RMB 184,362,853.26), including: 1) Fixed assets of RMB 17,056,994.90 and intangible assets of RMB 6,820,428.00 were pledged to obtain a loan line of RMB 164.12 million from Jiangmen Rural Commercial Bank Co., Ltd Tangxia Branch. On December 31, 2020, under the agreement, the balance of short-term loan was RMB 128.35 million; 2) Fixed assets of RMB 103,453,918.66 and intangible assets of RMB 138,628,139.83 were collateralized to obtain a loan line of RMB 200 million from Export-Import Bank of China Jilin Branch. On December 31, 2020, under the agreement, the balance of short-term loans obtained was RMB 40 million, and the balance of long-term loans obtained was RMB 102.16 million, of which RMB 34.16 million was due within one year; 3) Intangible assets of RMB 71,927,645.22 were collateralized to obtain a loan line of Indian rupees 800 million from HDFC Bank . On December 31, 2020, under the agreement, the balance of short-term loan obtained was Indian rupees 200 million (Equivalent to RMB 17.82 million); 4) Fixed assets of RMB 82,973,199.73 were collateralized to obtain a loan line of EUR 10 million from Oberbank AG. As of December 31, 2020, under the agreement, there was no loan balance; 278 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 5) With fixed assets of RMB 54,198,682.69 as collateral, on December 31, 2020, under the agreement, Wanfeng Auto Wheel obtained a short-term loan of RMB 60 million from Agricultural Bank of China Xinchang Branch; 6) With Wanfeng Auto Wheel’s fixed assets of RMB 22,953,031.39 and intangible assets of RMB 49,928,224.40 as collateral, on December 31, 2020, under the agreement, Wanfeng Auto Wheel obtained a short-term loan of RMB 230 million from Agricultural Bank of China Xinchang Branch; 7) With Fengzeyuan’s fixed assets of RMB 399,001,519.62 as collateral, on December 31, 2020, under the agreement, the Company obtained a short-term loan of RMB 30 million from Agricultural Bank of China Xinchang Branch ; 8) With the residual value of fixed assets of Fengzeyuan and the residual value of fixed assets and intangible assets of Wanfeng Auto Wheel as collateral, on December 31, 2020, under the agreement, Wanfeng Auto Wheel obtained a short-term loan of RMB 80 million from Agricultural Bank of China Xinchang Branch; 9) With the residual value of fixed assets of Fengzeyuan and the residual value of fixed assets and intangible assets of Wanfeng Auto Wheel as collateral, and guarantee from Zhejiang Rifa Holding Group Co., Ltd., on December 31, 2020, under the agreement, the Company obtained a short-term loan of RMB 260 million from Agricultural Bank of China Xinchang Branch; 10) With the residual value of fixed assets and intangible assets of Wanfeng Auto Wheel as collateral, and guarantee from Zhejiang Rifa Holding Group Co., on December 31, 2020, under the agreement, the Company obtained a long- term loan of RMB 190 million from Agricultural Bank of China Xinchang Branch; 11) With its fixed assets of RMB 13,842,308.28 and intangible assets of RMB 22,813,328.69 as collateral, and joint liability guarantee from Zhejiang Rifa Holding Group Co., Ltd., on December 31, 2020, under the agreement, the Company obtained a short-term loan of RMB 1.82 million from Export-Import Bank of China Zhejiang Branch; 12) With fixed assets of RMB 62,774,453.90 and intangible assets of RMB 27,313,386.73 as collateral, and 95% equity of the subsidiary Wuxi Xiongwei Precision Technology Co., Ltd. pledged to Minsheng Bank Hangzhou Branch, the Company obtained a credit line of RMB 750,000,000.00. Please refer to the following " Pledge of long-term equity investment in subsidiaries" for details. The above 5 to 11 loans are all supplemented with Chen Ailian's personal joint liability guarantee. Other situations where ownership or use rights are restricted 279 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Wanfeng Meridian Guarantee Wanfeng Meridian Group is a subsidiary group controlled by the Company. On August 27, 2014, Meridian Lightweight Technologies UK Limited, Magnesium Products of America Inc., and Magnesium Meridian Lightweight Technologies Inc. signed a term and revolving credit loan agreement with Comerica Incorporated (as the lead bank), with a revolving loan amount of up to USD 65 million and a term loan amount of up to USD 81.6 million. The maturity date for revolving loans and term loans is September 20, 2023. On December 31, 2020, under the agreement, long-term loans of USD 74,987,847.79 (equivalent to RMB 489,288,208.06) and GBP 10,865,111.00 (equivalent to RMB 96,594,096.32) were obtained, of which USD 20,333,218.77 (equivalent to RMB 132,672,219.18) and GBP 2,329,113.60 RMB (equivalent to RMB 20,706,518.64), will mature within one year (December 31, 2019: Long-term borrowings of USD 74,497,542.43 (equivalent to RMB 517,983,727.20) and GBP 7,571,361.52 (equivalent to RMB 69,556,654.95), of which USD 17.2 million (equivalent to RMB 123,370,484.51) and GBP 1,336,122.62 (equivalent to RMB 12,274,703.80), will be due within one year). As of December 31, 2020, and December 31, 2019, the assets of Wanfeng Meridian Group have the following guarantees: a. Meridian Lightweight Technologies UK Limited took Comerica Bank (as the lead bank) as the beneficiary and set fixed and floating charges on all its land, goodwill, accounts, investments, intellectual property rights and licenses to guarantee debts under the credit agreement. b. Wanfeng Meridian took Comerica Bank (as the lead bank) as the beneficiary and set all the property rights, interests and other rights it enjoys in any land, equipment, goodwill, accounts, shares and intellectual property as mortgage to guarantee the debts under the credit agreement. In addition, Wanfeng Meridian have also pledged its shares of its subsidiary companies Meridian Lightweight Technologies UK Limited, Meridian Lightweight Technologies Deutschland GmbH, Mexico Meridian Technologies Mexico, S. de RL de CV. c. Meridian Lightweight Technologies Inc. pledged all its shares and assets to Comerica Bank (as the lead bank) as the beneficiary at the same time, for debts assumed by Comerica Incorporated (as the lead bank), and subject to the risks of credit agreements and related guarantees. d. Meridian Lightweight Technologies Holdings Inc. pledged all its shares and assets to Comerica Bank (as the lead bank) as the beneficiary at the same time, for debts assumed by Comerica Incorporated (as the lead bank), and subject to the risks of credit agreements and related guarantees. 280 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report e. Magnesium Products of America Inc. pledged all its shares, assets and equipment to Comerica Incorporated (as the lead bank) as the beneficiary, as a guarantee for the debts of its and/or affiliated companies under the credit agreement. f. Mexico Meridian Technologies Mexico, S. de RL de CV. pledged its assets (equipment, machinery, accessories, and movable property used to implement the company's main business activities) to Comerica Bank (as the lead bank) as the pledgee, in a non-possessive way.The 2-A and 2-B plots and buildings owned by Meridian Technologies Mexico, S. de R.L. de C.V. have all been mortgaged to Comerica Incorporated (as the lead bank). Pledge of long-term equity investment in subsidiaries As of December 31, 2020, the Company's long-term equity investment with restricted ownership was RMB 1.254 billion (December 31, 2019: RMB 1.254 billion). The Company pledged 95% equity of Wuxi Xiongwei Precision Technology Co., Ltd. to Minsheng Bank Hangzhou Branch to obtain a credit line of RMB 750,000,000.00. On December 31, 2020, under this line of credit, the Company obtained a financing guarantee letter of EUR 85,000,000.00 issued by the Minsheng Bank Hangzhou Branch, against which the Company borrowed EUR 18,531,816.60 (equivalent to RMB 148,717,828.22) and Euro 32,259,896.27 (equivalent to RMB 258,885,667.48) for long-term loans from Minsheng Bank Hong Kong Branch and China Merchants Bank Hong Kong Branch. Loans from Minsheng Bank Hong Kong Branch Euro 18,631,799.84 (equivalent to RMB 149,520,193.69 yuan) and China Merchants Bank Hong Kong Branch Euro 32,259,896.27 (equivalent to RMB 258,885,667.48 yuan) will mature within one year. 82. Monetary items in foreign currencies (1) Monetary items in foreign currencies Unit: RMB Closing balance in Items Exchange rate RMB equivalent foreign currencies Cash and cash -- -- equivalents Including: USD 93,819,960.95 6.5249 612,165,863.19 EUR 35,301,672.42 8.0250 283,295,921.17 HKD CAD 12,610,915.22 5.1161 64,518,703.37 MXN 6,143,754.32 0.3280 2,015,151.42 281 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report YEN 153,044,536.00 0.0632 9,677,924.28 GBP 4,405,086.45 8.8903 39,162,540.06 INR 488,563,163.81 0.0891 43,532,932.15 CZK 3,230,720.63 0.3046 984,077.50 Accounts receivable -- -- Including: USD 83,057,055.28 6.5249 541,938,980.00 EUR 10,316,741.45 8.0250 82,791,850.17 HKD CAD 13,801,351.24 5.1161 70,609,093.10 MXN 401,652.66 0.3280 131,742.07 YEN 344,785,275.06 0.0632 21,802,841.65 GBP 1,392,790.53 8.8903 12,382,325.65 INR 801,918,585.01 0.0891 71,454,153.60 CZK 9,648,899.10 0.3046 2,939,054.67 Other accounts receivable USD 1,198,098.08 6.5249 7,817,470.16 CAD 1,557,272.36 5.1161 7,967,161.10 YEN 1,326,000.06 0.0632 83,850.94 EUR 5,480,137.04 8.0250 43,978,099.75 GBP 28,827.37 8.8903 256,283.97 INR 17,581,895.62 0.0891 1,566,617.23 CZK 1,489.96 0.3046 453.84 Short-term borrowings USD 6.5249 EUR 1,637,487.80 8.0250 13,140,839.60 INR 500,000,000.00 0.0891 44,552,000.00 Accounts payable USD 19,433,367.90 6.5249 126,800,782.19 CAD 11,492,117.79 5.1161 58,794,823.84 MXN 7,711,898.90 0.3280 2,529,502.84 YEN 0.0632 EUR 14,350,423.29 8.0250 115,162,146.88 GBP 783,794.99 8.8903 6,968,172.60 INR 243,396,199.16 0.0891 21,687,574.93 282 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report CZK 998.19 0.3046 304.05 Other accounts payable USD 630,060.27 6.5249 4,111,080.27 CAD 345,315.59 5.1161 1,766,669.09 MXN 1,294.67 0.3280 424.65 YEN 6,416,792.02 0.0632 405,772.26 EUR 8,076,552.28 8.0250 64,814,332.05 GBP 986.66 8.8903 8,771.68 INR 615,007,123.06 0.0891 54,799,594.69 Non-current liabilities due within one year USD 26,083,218.77 6.5249 170,190,394.15 EUR 50,791,712.87 8.0250 407,603,495.77 GBP 2,329,113.60 8.8903 20,706,518.64 Long-term borrowings -- -- Including: USD 63,654,629.02 6.5249 415,340,088.89 EUR 8.0250 HKD GBP 8,535,997.40 8.8903 75,887,577.69 Other remarks: No (2) Notes on overseas operating entities, including for the significant overseas operating entities, its main operating locations, reporting currency and the basis for selection should be disclosed, and the reason for changes in functional currency should also be disclosed. √ Applicable □ Not Applicable Conversion rate of the main statement items of overseas operating entities Currency exchange on Currency exchange on December 31, 2020 December 31, 2019 USD 6.5249 6.9762 GBP 8.8903 9.1501 CAD 5.1161 5.3421 INR 0.0891 0.1021 EUR 8.0250 7.8155 The functional currency information of significant overseas business entities is as follows: Principle place of Reporting Currency 283 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report business Wanfeng Meridain UK USD Holdings Co., Ltd. Meridian Lightweight Canada CAD Technologies Holdings Inc. Meridian Lightweight Germany CAD Technologies Deutschland GmbH Meridian Lightweight UK GBP Technologies UK Limited Meridian Technologies Mexico USD Mexico, S. de R.L. de C.V. Magnesium Products of America USD America Inc. Meridian Lightweight Canada CAD Technologies Inc. Wanfeng Aluminum India INR Wheels (India) Pty Co., Ltd. Diamond Aircraft Austria EUR Industries GmbH Austro Engine GmbH Austria EUR Diamond Aircraft Canada CAD Industries Inc. The reasons for the overseas business entity to determine the functional currency for bookkeeping are: Commodities and services are usually priced and settled in this currency; this currency is used for the valuation and settlement of commodities and required service, labor, materials and other expenses; It is the currency obtained from financing activities and used to save the money received from operating activities. 83. Hedging Disclosure of qualitative and quantitative information about hedged items, related hedging tools, and hedged risks according to the types of hedges: None 84. Government grants (1) Government grants overview 284 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Amount recognized Category Amount Listed project through profit and loss -- (2) Refund of government grants □ Applicable √Not Applicable Other remarks: None 85. Others None VIII. Changes in Scope of Consolidation 1. Business combinations not under the common control (1) Business combinations not under the common control occurred in the current period Unit: RMB Revenue Net profit The basis of of Proportio Date of Cost of Method of for acquiree acquiree n of equity equity equity Purchase determini from the from the Acquiree equity acquisitio acquisitio acquisitio date ng the purchase purchase acquisitio n n n purchase date to date to n date the end of the end of the period the period -- Other remarks: None (2) Combination cost and goodwill Unit: RMB Combination cost -- Explanation on the determination method of combination cost at fair value, and contingent consideration and its changes: None The main reasons of large amounts of goodwill: None 285 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Other remarks: None (3) Identifiable assets and liabilities on the purchase date Unit: RMB Carrying value at purchase Fair value at purchase date date Determination method of identifiable assets and liabilities at fair value: None Contingent liabilities of the acquiree assumed in a business combination None Other remarks: None (4) Gains and losses arising from the remeasurement of equity held before the purchase date at fair value Whether there is a transaction that realizes a business combination step by step through multiple transactions and obtains control during the reporting period □ Yes √ No (5) Explanations on failure to reasonably determine the combination consideration or the fair value of the identifiable assets and liabilities of the acquiree on the purchase date or at the end of the current period None (6) Others None 2. Business combinations under the common control (1) Business combinations under the common control occurred in the current period 286 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Revenue of the Net profit of the The basis for a combined party combined party Revenue of the Net profit of the Proportion of business The basis for from the from the combined party combined party Combination Combined party equity combination under determining the beginning of the beginning of the during the during the date acquisition the common combination date current period to current period to comparison comparison control the combination the combination period period date date The parent company of the Aircraft Industry is the Aviation Industry Aviation Industry, completed the and the ultimate industrial and controlling commercial shareholder is change Wanfeng Group. registration on Since both parties April 16 and Wanfeng Aircraft 55.00% are controlled by April 16, 2020 transferred all the 438,319,818.56 74,836,418.19 1,847,397,485.11 229,910,806.41 Industry Co., Ltd. Wanfeng Group shares of the before and after the Aircraft Industry to combination and the the Company, so control is not the combination temporary, the date was transaction is a determined to be business April 16. combination under the common control. Other remarks: In September 2019, Wanfeng Group passed a resolution to increase the capital of Wanfeng Aircraft by injection of 100% equity of Wanfeng (UK) Aviation Co., Ltd. held by Wanfeng Aviation Industry Co., Ltd. Since Wanfeng Aircraft and Wanfeng (UK) Aviation Co., Ltd. are both under the ultimate control of Wanfeng Group and the control is not temporary, the transaction is a business 287 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report combination under the common control. The industrial and commercial change registration for this equity transfer was completed on September 11, 2019, so the combination date was determined as of September 11. In accordance with the relevant accounting requirements for business combinations under the common control, the financial position, operating results and cash flow of Wanfeng (UK) Aviation Co., Ltd in the consolidated financial statements of its ultimate controlling party will be included in Wanfeng Aircraft’s consolidated financial statements since January 1, 2019. And the balance and transactions occurred between the two parties will be offset at the time of the combination. The reporting entity formed after the combination is deemed to have always existed since the ultimate controlling party began to exercise control. In April 2020, the Company acquired a 55% equity interest in Wanfeng Aircraft for RMB 2,418,075,000.00 in cash. Wanfeng Aviation Industry Co., Ltd. completed the industrial and commercial change registration on April 16 and transferred all the shares of Wanfeng Aviation to the Company. Therefore, the combination date is determined to be April 16. The above-mentioned business combination under the common control constitutes a related transaction. (2) Combination cost Unit: RMB Combination cost --Cash 2,418,075,000.00 Explanation on contingent consideration and its changes None Other remarks: None (3) Book value of assets and liabilities of the combined party on the combination date Unit: RMB Balance at the combination Balance at the end of the Items date previous period Assets: 4,440,614,324.41 4,498,316,371.34 Cash and cash equivalents 217,109,673.96 398,090,569.07 Account receivables 155,575,659.38 131,640,062.99 Inventory 1,213,468,662.16 1,079,583,549.14 Fixed assets 330,606,218.74 276,904,814.44 Intangible assets 833,140,588.89 839,189,958.47 Held- for-trading financial 2,559,383.90 2,559,383.90 288 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report assets Advances paid 9,524,841.32 46,082,520.69 Other account receivables 384,336,723.38 356,043,582.32 Other current assets 19,073,647.50 26,832,125.14 Long-term equity investments 567,810.84 12,612,542.86 Other equity instrument 4,733,395.22 4,942,489.56 investments Construction in progress 20,429,169.40 19,760,466.37 Intangible assets 833,140,588.89 839,189,958.47 R&D expenses 12,869,539.70 Goodwill 1,104,898,547.65 1,159,535,292.23 Long-term prepayments 240,934.87 247,818.70 Deferred tax assets 131,479,527.50 143,803,981.04 Liabilities: 976,780,258.18 1,151,205,028.35 Account payables 128,081,891.74 175,358,430.08 Unearned revenue 606,781,571.25 Contract liabilities 474,698,284.16 Employee benefits payable 66,313,543.82 74,491,858.24 Tax payable 10,903,698.95 9,945,612.55 Other payable 59,694,052.74 68,309,049.34 Provisions 188,391,712.74 170,512,297.69 Deferred income 9,296,944.93 9,369,233.55 Deferred tax liabilities 39,400,129.10 36,436,975.65 Net assets 3,463,834,066.23 3,347,111,342.99 Less:Minority interest 1,557,977,455.85 1,505,477,431.91 Net assets acquired 1,905,856,610.38 1,841,633,911.08 The contingent liabilities of the combined party assumed in the business combination: None Other remarks: None 3. Reverse purchase Basic information of the transaction, the basis for the reverse purchase of the transaction, whether the assets and liabilities retained by the listed company constitute a business and its basis, the determination of the combination cost, 289 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report the amount of equity adjustment and its calculation when processing the equity transaction: None 4. Disposal of subsidiaries Whether single disposal of the investment in the subsidiary will lose control of the investment □ Yes √ No Whether the investment in the subsidiary is disposed of step by step through multiple transactions and the control is lost in the current period □ Yes √ No 5. Changes in consolidation scope due to other reasons Explain the changes in the scope of consolidation caused by other reasons (such as the establishment of a new subsidiary, a liquidation subsidiary, etc.) and related conditions: WNS Grundstücksverwertungsgesellschaft M.B.H., to simplify the group structure, the board of directors of the company decided to dissolve the company. Related assets and liabilities were absorbed by its parent company Diamond Verwaltungs GmbH. The company has been liquidated and canceled in 2019. Diamond Maintenance GmbH, to simplify the group structure, the board of directors of the company decided to dissolve the company. Related assets and liabilities were absorbed by its parent company Diamond Verwaltungs GmbH. The company has been liquidated and cancelled in 2019. Diamond Star Engines GmbH, to simplify the group structure, the board of directors of the company decided to dissolve the company. Related assets and liabilities were absorbed by its parent company, Austro Engine GmbH. The company has been liquidated and cancelled in 2019. Diamond Simulation Holding GmbH, to simplify the group structure, the board of directors of the company decided to dissolve the company. Related assets and liabilities were absorbed by its parent company Diamond Aircraft Industries GmbH. The company has been liquidated and cancelled in 2019. Diamond Simulation Holding GmbH & Co. KG, to simplify the group structure, the board of directors of the company decided to dissolve the company. Related assets and liabilities were absorbed by its parent company Diamond Aircraft Industries GmbH. The company has been liquidated and cancelled in 2019. 290 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Diamond Aircraft Holdings Inc., to simplify the group structure, the company's board of directors decided to dissolve the company. Related assets and liabilities were absorbed by Diamond Aircraft Industries Inc. The company has been liquidated and cancelled in 2020. Diamond D-Jet Corporation, to simplify the group structure, the board of directors of the company decided to dissolve the company. Related assets and liabilities were absorbed by Diamond Aircraft Industries Inc. The company has been liquidated and cancelled in 2020. 6. Others None IX. Interest in Other Entities 1. Interest in subsidiaries (1) The composition of the Group Main Holding proportion Place of Business Inclusion Subsidy operating registration nature Direct Indirect method place Weihai Wanfeng Establish Auto Wheel Co., Shandong Shandong Manufacture 65.00% ment Ltd. Ningbo Aoweier Establish Zhejiang Zhejiang Manufacture 75.00% Wheel Co., Ltd. ment Jilin Wanfeng Auto Establish Jilin Jilin Manufacture 100.00% Wheel Co., Ltd. ment Chongqing Wanfeng Aolun Establish Chongqing Chongqing Manufacture 100.00% Aluminum Wheel ment Co., Ltd Wanfeng North Establish America America Service 100.00% America Co., Ltd. ment Wanfeng Aluminum Wheels Establish India India Manufacture 100.00% (India) Pty. Co., ment Ltd Shandong Weiwan Ke Chuanglian Establish Engineering Shandong Shandong Manufacture 68.80% ment Technology Co., Ltd. Shanghai Fengtu Automobile Establish Shanghai Shanghai Commerce 55.00% Technology Co., ment Ltd. 291 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Wanfeng Meridian New Material Establish Zhejiang Zhejiang Manufacture 100.00% Technology Co., ment Ltd. Zhejiang Wanfeng Shangda Coating Establish Zhejiang Zhejiang Manufacture 100.00% Technology Co., ment Ltd. Wanfeng Japan Establish Japan Japan Service 100.00% Co., Ltd. ment Zhejiang Wanfeng Business Motorcycle Wheel Zhejiang Zhejiang Manufacture 100.00% combinati Co., Ltd. on Guangdong Business Motorcycle Wheel Guangdong Guangdong Manufacture 100.00% combinati Co., Ltd. on Weihai Wanfeng Magnesium Business Technology Shandong Shandong Manufacture 68.80% combinati Development Co., on Ltd. Business Wanfeng MLTH UK UK Investment 100.00% combinati Holdings CO.,Ltd. on Meridian Business Lightweight Canada Canada Investment 100.00% combinati Technologies on Holdings Inc. Meridian Lightweight Business Technologies Germany Germany Office 100.00% combinati Deutschland on GmbH Meridian Business Lightweight UK UK Manufacture 100.00% combinati Technologies UK on Limited Meridian Business Technologies Mexico Mexico Manufacture 100.00% combinati Mexico,S.de R.L on de C.V. Magnesium Business Products of America America Manufacture 100.00% combinati America Inc. on Meridian Business Lightweight Canada Canada Manufacture 100.00% combinati Technologies Inc. on Business Meridian Canada Canada Canada Investment 100.00% combinati Inc. on 292 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Shanghai Meridian Business Magnesium Shanghai Shanghai Manufacture 60.00% combinati Products Company on Limited Business Wanfeng Aircraft Zhejiang Zhejiang Manufacture 55.00% combinati Industry Co., Ltd. on Business Wanfeng (UK) UK UK Investment 55.00% combinati Aviation Co., Ltd. on Business Wanfeng Aircraft Czech Czech Service 55.00% combinati Industries s.r.o Republic Republic on Diamond Business Verwaltungs Austria Austria Manufacture 55.00% combinati GmbH on Wanfeng Business (Canada) Canada Canada Investment 55.00% combinati Aviation Co., Inc. on Diamond SFCA Business Flugplatzbetriebs Austria Austria Service 54.40% combinati GmbH on Business Diamond Austria Austria Manufacture 55.00% combinati Informatics GmbH on Business 2542112 Ontario Canada Canada Investment 55.00% combinati Inc. on Business Diamond finance- Austria Austria Finance 55.00% combinati Services GmbH on Diamond Business Development Austria Austria Manufacture 55.00% combinati GmbH on Business Diamond Aircraft Austria Austria Manufacture 55.00% combinati Industries GmbH on Business Austro Engine Austria Austria Manufacture 55.00% combinati GmbH on 钻石飞机工业有限 Business 公司(Diamond Canada Canada Manufacture 55.00% combinati Aircraft Industries on Inc.) Business Diamond Airborne Austria Austria Commerce 55.00% combinati Sensing GmbH on Diamond Aircraft Germany Germany Service 55.00% Business Industries combinati 293 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Deutschland on GmbH Business Diamond Aviation Croatia Croatia Service 49.50% combinati Center d.o.o on Business Diamond Financial America America Service 55.00% combinati USA Inc. on Business Diamond Aircraft America America Commerce 55.00% combinati Sales USA Inc. on Business DK café Inc. Canada Canada Service 55.00% combinati on Shanghai Business Dacromet Coating Shanghai Shanghai Manufacture 100.00% combinati Industry Co., Ltd on Ningbo Economic and Technological Business Development Zone Ningbo Ningbo Manufacture 100.00% combinati Dacromet Coating on Industry Co., Ltd Wuxi Xiongwei Business Precision Jiangsu Jiangsu Manufacture 95.00% combinati Technology Co., on Ltd. Changchun Business Xiongwei Auto Jilin Jilin Manufacture 95.00% combinati Parts Co., Ltd. on Wuxi Geoff Business Machinery Jiangsu Jiangsu Manufacture 95.00% combinati Technology Co., on Ltd. Yancheng Business Xiongwei Auto Jiangsu Jiangsu Manufacture 95.00% combinati Parts Co., Ltd. on Yizheng Xiongwei Business Machinery Jiangsu Jiangsu Manufacture 95.00% combinati Technology Co., on Ltd. Suzhou Yucuiyuan Business Trading Enterprise Shanghai Jiangsu Service 75.03% combinati (General on Partnership) Explanation on the proportion of shares held in the subsidiary differing from the proportion of voting rights: None Basis for holding half or less of the voting rights but still controlling the investee, 294 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report and holding more than half of the voting rights but not controlling the investee: None Basis for significant structured entities included in the scope of consolidation and control: None Basis for determining whether the company is an agent or a principal: None other remarks: None (2) Significant but not wholly owned subsidiaries Unit: RMB Dividends Profit and loss Balance of Minority declared to attributable to minority shareholders' minority Subsidy minority shareholders' shareholding shareholders in shareholders in equity at the end ratio the current the current period of the period period Weihai Wanfeng Auto 35.00% 4,834,605.90 17,500,000.00 262,479,382.40 Wheel Co., Ltd. Ningbo Aoweier Wheel Co., Ltd. and its 25.00% -645,141.19 46,732,996.94 subsidiaries Weihai Wanfeng Magnesium Technology 31.20% 14,498,760.18 3,744,000.00 65,621,607.55 Development Co., Ltd. and its subsidiaries Shanghai Meridian Magnesium Products 40.00% 20,533,316.47 12,736,253.01 78,187,737.82 Co., Ltd Shanghai Fengtu Automobile Technology 45.00% 1,549,586.01 11,730,384.21 Co., Ltd. Wuxi Xiongwei Precision Technology 5.00% 5,091,015.31 5,925,000.00 50,830,107.81 Co., Ltd. Wanfeng Aircraft Industry Co., Ltd. and 45.00% 153,193,447.38 1,639,642,470.39 its subsidiaries Total 199,055,590.06 39,905,253.01 2,155,224,687.12 Explanation on minority shareholder’s shareholding ratio differing from the voting rights ratio: None 295 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Other remarks: None (3) Financial information of significant not wholly-owned subsidiaries Unit: RMB Closing balance Opening balance Subsidy Non- Non- Non- Non- Current Current Total Current Current Total current Total asset current current Total asset current asset liability liability asset liability liability asset liability asset liability Weihai Wanfeng 794,177,416 280,815,017 1,074,992,4 324,551,341 324,551,341 808,518,137 301,520,710 1,110,038,8 323,910,915 323,910,915 Auto Wheel .41 .83 34.24 .62 .62 .56 .34 47.90 .00 .00 Co., Ltd. Ningbo Aoweier 108,400,523 501,063,987 609,464,510 414,903,052 414,903,052 205,810,706 514,724,296 720,535,003 523,713,810 523,713,810 Wheel Co., .31 .27 .58 .71 .71 .91 .75 .66 .62 .62 Ltd. and its subsidiaries Weihai Wanfeng Magnesium Technology 273,765,767 119,207,910 392,973,678 161,488,352 10,559,660. 172,048,012 208,648,418 111,403,926 320,052,345 128,527,561 14,858,171. 143,385,733 Developmen .21 .91 .12 .27 63 .90 .99 .15 .14 .80 97 .77 t Co., Ltd. and its subsidiaries Shanghai 221,587,127 108,619,121 330,206,248 162,327,657 162,327,657 164,243,712 120,312,891 284,556,604 133,048,491 133,048,491 Meridian .07 .84 .91 .61 .61 .93 .65 .58 .26 .26 Magnesium 296 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Products Co., Ltd Shanghai Fengtu 27,006,853. 1,191,624.0 28,198,477. 2,130,957.3 2,130,957.3 23,841,008. 2,048,613.9 25,889,621. 3,265,625.9 3,265,625.9 Automobile 75 4 79 3 3 04 4 98 8 8 Technology Co., Ltd. Wuxi Xiongwei 837,836,401 354,243,955 1,192,080,3 273,601,668 3,999,207.8 277,600,876 701,692,373 383,143,929 1,084,836,3 165,215,556 4,917,614.0 170,133,170 Precision .05 .49 56.54 .54 4 .38 .22 .06 02.28 .54 4 .58 Technology Co., Ltd. Wanfeng Aircraft Industry 2,185,109,5 2,504,994,2 4,690,103,8 798,502,880 245,772,024 1,044,274,9 2,040,831,7 2,457,484,5 4,498,316,3 934,886,521 216,318,506 1,151,205,0 Co., Ltd. 76.62 79.14 55.76 .59 .86 05.45 93.25 78.09 71.34 .45 .89 28.34 and its subsidiaries Unit: RMB Current period Prior period Cash flow Cash flow Subsidy Other Other Operating generate by Operating generate by Net profit comprehensive Net profit comprehensive revenue operating revenue operating income income activities activities Weihai Wanfeng Auto Wheel Co., 558,754,738.19 13,813,159.72 13,813,159.72 12,764,916.42 774,637,527.87 37,182,310.51 37,182,310.51 30,282,570.93 Ltd. Ningbo Aoweier Wheel Co., Ltd. 299,608,751.12 -2,588,674.19 -2,588,674.19 45,138,682.32 245,254,508.45 -28,986,937.83 -28,986,937.83 43,878,947.19 and its 297 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report subsidiaries Weihai Wanfeng Magnesium Technology 337,661,298.68 48,590,385.18 48,590,385.18 43,609,591.42 335,979,824.72 46,985,561.24 46,985,561.24 33,067,452.70 Development Co., Ltd. and its subsidiaries Shanghai Meridian 323,295,619.36 50,219,906.78 50,219,906.78 80,207,783.88 332,422,363.18 35,378,480.58 35,378,480.58 45,802,503.40 Magnesium Products Co., Ltd Shanghai Fengtu Automobile 56,541,260.51 3,443,524.46 3,443,524.46 6,678,598.10 40,693,342.65 2,329,133.92 2,329,133.92 -6,185,631.51 Technology Co., Ltd. Wuxi Xiongwei Precision 753,572,627.73 117,389,834.06 117,389,834.06 77,175,260.06 823,033,014.32 146,459,146.34 146,459,146.34 233,554,648.19 Technology Co., Ltd. Wanfeng Aircraft Industry Co., Ltd. 1,630,390,974.68 340,429,883.23 298,543,578.19 152,598,936.24 1,847,397,485.11 229,910,806.40 294,949,841.61 57,966,752.80 and its subsidiaries Other remarks: Main financial information of the above-mentioned subsidiaries. This information is the amount before offsetting between the companies in the Group (excluding the goodwill obtained due to business combinations not under the common control). (4) Significant restrictions on the use of the Group assets and the settlement of the Group debts None 298 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (5) Financial support or other support provided to structured entities included in the scope of consolidated financial statements None Other remarks: None 2. Transactions resulting in changes in subsidiaries’ equity but without losing control (1) Changes in subsidiaries’ equity As stated in Note VII. 55, in 2020, Zhejiang Wanfeng Motorcycle Wheel Co., Ltd., a subsidiary of the Company, invested RMB 399,800.00 in cash to acquire the 0.1% partnership share of Suzhou Yucuiyuan Trading Enterprise (General Partnership) held by Wanfeng Aviation. The net asset share of Suzhou Yucuiyuan Trading Enterprise (general partnership) obtained in this acquisition is RMB 383,871.26 based on the proportion of the partnership share. The difference between the purchase cost and the net asset share calculated according to the proportion of the partnership share obtained was RMB 15,928.74 to offset the share premium of the capital reserve. (2) Effect of transactions on non-controlling interest and equity attributable to parent company Unit: RMB Other remarks: None 3. Interest in significant joint venture or associate (1) Significant joint venture or associate Holding proportion Accounting treatment of Principal Joint venture or Place of Business investment place of associates registration nature Direct Indirect in joint business ventures or associaes Diamond Flight Equity Canada Canada Service 25.00% Centre London INC. method CETC Wuhu General Aviation Equity Industry Technology Anhui Wuhu Anhui Wuhu Manufacture 20.00% method Research Institute Co., Ltd. Explanation on shareholding ratio in a joint venture or associate differing from 299 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report the voting rights ratio: None Basis for holding less than 20% of the voting rights but having significant influence, or holding 20% or more of the voting rights but not having significant influence: None (2) Financial information of significant joint venture Unit: RMB Closing balance/ Current period Opening balance / Prior period Other remarks: None (3) Financial information of significant associate Unit: RMB Closing balance/ Current Opening balance / Prior period period Other remarks: None (4) Financial information of non-significant joint venture and associate Unit: RMB Closing balance/ Current Opening balance / Prior period period Joint venture: -- -- The total of the following items calculated according to the -- -- shareholding ratio Associate: -- -- The total of the following items calculated according to the -- -- shareholding ratio Other remarks: None 300 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (5) Explanation of significant restrictions on the ability of joint ventures or associates to transfer funds to the company None (6) Excess losses incurred by joint ventures or associates Unit: RMB Cumulative Unrecognized loss in Accumulated Joint venture or unrecognized loss the current period (or unrecognized loss at associate accumulated in the net profit shared in the the end of the period previous period current period) -- Other remarks: None (7) Unrecognized commitments related to joint venture investment No (8) Contingent liabilities related to investment in joint ventures or associates None 4. Significant joint operation Principal Holding proportion Place of Business Joint operation place of registration nature Direct Indirect business Explanation of the shareholding ratio or the share entitled in the joint operation differing from the voting rights ratio: No If a joint operation is a separate entity, the basis for classification as a joint operation: None other remarks None 5. Interest in the structured entities that are not included in the consolidated financial statements Relevant explanations for structured entities not included in the scope of the 301 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report consolidated financial statements: None 6. Others No X. Financial Instrument Related Risk 1. Financial instruments classification The book values of various financial instruments on the balance sheet date are as follows: 2020 FY Financial asset Unit: RMB Financial assets Financial assets Financial measured at fair value measured at fair value assets and changes Total and changes recognized measured at recognized through through profit and loss amortized cost other comprehensive income Standards Designati Standards Designati requirement on requirement on Cash - - 1,674,978,958.17 - - 1,674,978,958.17 Held-for- trading 5,312,974.87 - - - - 5,312,974.87 financial assets Account - - 2,314,980,882.28 - - 2,314,980,882.28 receivalbe Account receivable - - - 382,204,743.00 - 382,204,743.00 financing Other account - - 68,318,081.18 - - 68,318,081.18 receivable Investment in other equity - - - 4,733,395.22 - 4,733,395.22 instruments Total 5,312,974.87 - 4,058,277,921.63 386,938,138.22 - 4,450,529,034.72 Financial liability Unit: RMB Financial liability measured at Financial fair value and changes liabilities Total recognized through profit and measured at loss amortized cost 302 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Standards Designation requirement Short-term borrowings - - 3,544,296,670.02 3,544,296,670.02 Notes payable - - 192,867,169.90 192,867,169.90 Account payable - - 935,542,222.20 935,542,222.20 Other account payable - - 384,220,500.31 384,220,500.31 Non-current liability due - - 694,425,998.19 694,425,998.19 within one year Long-term borrowings - - 1,179,201,272.08 1,179,201,272.08 Total - - 6,930,553,832.70 6,930,553,832.70 2019 FY Financial asset Unit: RMB Financial assets Financial assets Financial measured at fair value measured at fair value assets and changes Total and changes recognized measured at recognized through through profit and loss amortized cost other comprehensive income Standards Designati Standards Designati requirement on requirement on Cash - - 2,452,754,083.38 - - 2,452,754,083.38 Held-for- trading 63,034,283.90 - - - - 63,034,283.90 financial assets Account - - 2,555,697,203.97 - - 2,555,697,203.97 receivalbe Account receivable - - - 378,904,590.58 - 378,904,590.58 financing Other account - - 916,325,582.02 - - 916,325,582.02 receivable Investment in other equity - - - 4,942,489.56 - 4,942,489.56 instruments Total 63,034,283.90 - 5,924,776,869.37 383,847,080.14 - 6,371,658,233.41 Financial liability Unit: RMB Financial liability measured at Financial fair value and changes liability Total recognized through profit and measured at loss amortized cost 303 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Standards Designation requirement Short-term borrowing - - 3,070,118,768.19 3,070,118,768.19 Held-for-trading 1,324,581.60 - - 1,324,581.60 financial liability Notes payable - - 218,601,865.08 218,601,865.08 Account payable - - 1,083,181,883.19 1,083,181,883.19 Other account payable - - 759,261,155.63 759,261,155.63 Non-current liability due - - 571,968,504.83 571,968,504.83 within one year Long-term borrowings - - 1,165,220,492.00 1,165,220,492.00 Total 1,324,581.60 - 6,869,677,250.52 6,868,352,668.92 2. Financial instrument offset None 3. Financial instrument transfer Financial assets that have been transferred but not fully derecognized As stated in Note vii, 6, (1), as of December 31, 2020, to settle accounts payable and other account payables, the book value of bank acceptance bill that the Group has endorsed to suppliers but not fully derecognized is RMB 57,264,049.38. The book value of the commercial acceptance bill is RMB 1,000,000.00. The book value of the bank acceptance bill that the Group has discounted to the bank but not fully derecognized is RMB 3,000,000.00. On December 31, 2020, its maturity is from 1 to 11 months. The Group believes that the Group retains almost all its risks and rewards, including the associated default risk. Therefore, it continues to fully recognize it and its related settled accounts payable and other payables, as well as short-term borrowings. After endorsement or discounting, the Group no longer reserves the right to use it, including the right to sell, transfer or pledge it to other third parties. The transferred financial assets that have been fully derecognized but continue to be involved As of December 31, 2020, to settle accounts payable and other account payables, the book value of bank acceptance bill that the Group has endorsed to suppliers and fully derecognized is RMB 706,520,717.60. (As of December 31, 2019: , to settle accounts payable and other account payables, the book value of bank acceptance bill that the Group has endorsed to suppliers and fully 304 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report derecognized is RMB 586,953,297.41). On December 31, 2020, its maturity date is 1 to 12 months. According to the relevant provisions of the Negotiable Instruments Law, if the accepting bank refuses to pay, its holder has the right to recourse against the Group ("continued involvement "). The Group believes that the Group has transferred almost all of its risks and rewards. Therefore, it has derecognized its book value and related settled accounts payable and other payables. The maximum loss and undiscounted cash flow of continuing involvement and repurchase are equal to its book value. The Group believes that continued involvement in fair value is not significant. In 2020, the Group did not recognize gains and losses on the transfer date. The Group did not continue to be involved in the derecognized financial assets for the current year and accumulatively recognized income or expenses. Endorsements occurred roughly evenly this year. 4. Financial instrument risk The Group faces various financial instrument risks in its daily activities, mainly including credit risk, liquidity risk and market risk (including exchange rate risk, interest rate risk and commodity price risk). The main financial instruments of the Group include monetary funds, equity investment, loans, notes receivable and accounts receivable, notes payable and accounts payable, etc. The risks associated with these financial instruments and the risk management strategies adopted by the Group to reduce these risks are as follows. The Group mitigates the risks of financial instruments through appropriately diversified investment and business portfolios and formulates risk management policies to reduce the risks concentrated in any single industry, specific region or specific counterparty. Credit risk The Group only conducts transactions with recognized and reputable third parties and related parties. According to the Group's policy, all customers who require credit-based transactions are subject to credit review. In addition, the Group continuously monitors the balance of accounts receivable to ensure that the Group does not face significant risks of doubtful debts. For transactions that are not settled in the functional currency of the relevant business unit, the Group does not provide credit transaction conditions, unless specifically approved by the credit control department of the Group. Since the counterparties of monetary funds, bank acceptance bills receivable and derivative financial instruments are banks with good reputations and high credit ratings, these financial instruments have relatively low credit risks. Other financial assets of the Group include accounts receivable and other receivables. The credit risk of these financial assets originates from the default of the counterparty, and the maximum risk exposure is equal to the book value of these instruments. 305 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The maximum credit risk exposure that the Group faces on each balance sheet date is the total amount received from customers minus the amount of doubtful debt provision. Since the Group only conducts transactions with recognized and reputable third parties and related parties, there is no need for collateral. Credit risk is centralized and managed according to customers. As of December 31, 2020, the Group has a specific concentration of credit risk. 6.11% (2019: 5.93%) and 18.56% (2019: 19.08%) of the Group’s accounts receivable are derived from accounts receivable of the largest and the top five customers respectively. The Group does not hold any collateral or other credit enhancements for the balance of accounts receivable. For quantitative data on the credit risk exposure of the Group due to accounts receivable and other receivables, please refer to Notes VII, 5 and 8. Standards to judge the significant increase of credit risk The Group assesses on each balance sheet date whether the credit risk of relevant financial instruments has increased significantly since the initial recognition. When determining whether the credit risk has increased significantly since the initial recognition, The Group considers reasonable and well-founded information obtained without unnecessary additional cost or effort, including qualitative analysis based on historical data of the Group, external credit risk ratings, and forward-looking information. Based on a single financial instrument or a combination of financial instruments with similar credit risk characteristics, the Group compares the risk of default on the balance sheet date and the risk of default on the initial recognition date to determine the changes in the risk of default during expected life of the financial instrument. When the following qualitative standards are triggered, the Group believes that the credit risk of financial instruments has increased significantly: The qualitative standards are mainly the major adverse changes in the owing party’s business or financial situation, the list of early warning customers, etc. Definition of credit-impaired assets In order to determine whether credit impairment has occurred, the standard used by the Group is consistent with the internal credit risk management objectives for relevant financial instruments, and qualitative indicators are also considered. When the Group assesses whether an owing party has credit impairment, it mainly considers the following factors: (1) The issuer or owing party has major financial difficulties; 306 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (2) The owing party breached the contract, such as defaulting or overdue payment of interest or principal; (3) The creditor, out of economic or contractual considerations related to the owing party’s financial difficulties, gives the owing party a concession that the creditor would not make under any other circumstances; (4) The owing party is likely to go bankrupt or other financial reorganization; (5) The issuer or owing party’s financial difficulties lead to the disappearance of the active market for the financial asset; (6) A financial asset is purchased or originated at a steep discount, and the discount reflects the fact that credit losses have occurred. The credit impairment of financial assets may be caused by a combination of multiple events, and may not be caused by a separately identifiable event. Parameters of expected credit loss measurement According to whether there has been a significant increase in credit risk and whether credit impairment has occurred, the Group measures impairment provisions for different assets with 12-month or entire duration expected credit losses. The key parameters of expected credit loss measurement include default probability, loss given default and default risk exposure. The Group considers the quantitative analysis and forward-looking information of historical statistical data (such as counterparty ratings, guarantee methods and types of collaterals, repayment methods, etc.) to establish models of default probability, loss given default and default risk exposure. The relevant definitions are as follows: (1) The probability of default refers to the possibility that the owing party will not be able to perform its payment obligations in the next 12 months or throughout the remaining duration. The Group’s default probability is adjusted based on the expected credit impairment model results. And forward-looking information is added to reflect the default probability of owing parties under the current macroeconomic environment; (2) The loss given default refers to the Group's expectations of the extent of losses incurred by default risk exposures. The loss given defaulty varies according to the type of counterparty, the method and priority of recourse, and the collateral. The loss given default is the percentage of the risk exposure loss at the time of the default, calculated based on the next 12 months or the entire duration; (3) Default risk exposure refers to the amount that the Group should be repaid when default occurs in the next 12 months or throughout the remaining duration. 307 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report The assessment of a significant increase in credit risk and the calculation of expected credit losses involve forward-looking information. Through historical data analysis, the Group has identified key economic indicators that affect the credit risks and expected credit losses of various business types. The impact of these economic indicators on the probability of default and loss given default vary by different types of businesses. In this process, the Group referred to authoritative forecasts. Based on the results, the Group predicted these economic indicators and determined the impact of these economic indicators on the probability of default and loss given default. 2020 FY The maximum risk exposure of the Group's financial assets and the classification according to the credit risk level at the end of the year are as follows: Unit: RMB Expected credit loss in the next Lifetime expected credit loss 12 months Total Phase I Phase II Phase III Simple method Cash and cash 1,674,978,958.17 - - - 1,674,978,958.17 equivalent s Account receivable - - - 382,204,743.00 382,204,743.00 financing Account - - - 2,314,980,882.28 2,314,980,882.28 receivable Other account 55,724,863.72 6,810,285.82 5,782,931.64 - 68,318,081.18 receivable Total 1,730,703,821.89 6,810,285.82 5,782,931.64 2,697,185,625.28 4,440,482,664.63 2019 FY Unit: RMB Expected credit loss in Lifetime expected credit loss the next 12 Total months Phase I Phase II Phase III Simple method Cash and cash 2,452,754,083.38 - - - 2,452,754,083.38 equivalents Account receivable - - - 378,904,590.58 378,904,590.58 financing Account - - - 2,555,697,203.97 2,555,697,203.97 308 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report receivable Other account 570,392,006.87 342,677,517.73 3,256,057.42 916,325,582.02 receivable Total 3,023,146,090.25 342,677,517.73 3,256,057.42 2,934,601,794.55 6,303,681,459.95 Liquidity risk The Group uses circular liquidity planning tools to manage the risk of shortage of funds. This tool considers both the maturity date of its financial instruments and the estimated cash flows generated by the Group's operations. The Group’s goal is to use bank borrowings, notes payable, bonds payable and other financing methods to maintain a balance between continuity and flexibility of financing. In 2020, 81.70% (2019: 81.40%) of the Group's debt will mature in less than one year. The following table summarizes the maturity analysis of financial liabilities based on undiscounted contractual cash flows: 2020 FY Unit: RMB More Less than 3 3 months to 1 1 year to 5 Spot than 5 Total months year years years Short-term - 492,747,376.81 3,117,045,843.55 - - 3,609,793,220.36 borrowings Notes payable - 111,693,820.23 81,173,349.67 - - 192,867,169.90 Account 134,192,679.9 800,394,943.15 954,599.08 - - 935,542,222.20 payable 7 Other account 157,657,562.9 154,861,277.46 71,701,659.88 - - 384,220,500.31 payable 7 Non-current liability due 33,930,384.46 159,019,310.94 520,711,222.10 - - 713,660,917.50 within 1 year Long-term 1,307,099,209.2 - - - - 1,307,099,209.23 borrowings 3 325,780,627.4 1,718,716,728.5 Total 0 9 3,791,586,674.28 1,307,099,209.2 - 7,143,183,239.50 3 Shor-term - 492,747,376.81 3,117,045,843.55 - - 3,609,793,220.36 borrowings 2019 FY Unit: RMB More Less than 3 3 months to 1 1 year to 5 Spot than 5 Total months year years years Short-term - 418,136,596.22 - - 3,128,291,894.30 borrowings 2,710,155,298.08 Held-for- trading - 852,989.70 471,591.90 - - 1,324,581.60 financial 309 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report liability Notes - 107,274,147.22 111,327,717.86 - - 218,601,865.08 payable Account 200,124,368.72 883,057,514.47 - - - 1,083,181,883.19 payable Other account 196,397,643.81 508,620,199.87 54,243,311.95 - - 759,261,155.63 payable Non-current liability due - 254,361,971.74 333,471,823.50 - - 587,833,795.24 within 1 year Long-term - - - 1,320,050,160.04 - 1,320,050,160.04 borrowings Total 396,522,012.53 2,172,303,419.22 3,209,669,743.29 1,320,050,160.04 - 7,098,545,335.08 Market risk Interest rate risk The risk of changes in market interest rates faced by the Group is mainly related to the Group's long-term liabilities with floating interest rates. The following table shows the sensitivity analysis of interest rate risk reflecting the impact on net profit and loss (through the impact on floating-rate borrowing) and the net after-tax impact of other comprehensive income under the assumption that all other variables remain unchanged. Unit: RMB Net after tax other Basis point Net profit and Total shareholders' comprehensive increase/ loss increase/ equity increase/ income increase/ (decrease) (decrease) (decrease) (decrease) December 31, 2020 0.50% (2,182,169.15) - (2,182,169.15) USD borrowings (0.50%) 2,182,169.15 - 2,182,169.15 December 31, 2019 0.50% (1,996,573.70) - (1,996,573.70) USD borrowings (0.50%) 1,996,573.70 - 1,996,573.70 Currency exchange risk The Group faces transactional exchange rate risks. Such risks are caused by business units' sales or purchases in currencies other than their functional currency. Approximately 52% (2019: 59%) of the Group’s sales are denominated in currencies other than the functional currency, and about 100% (2019: 100%) of the cost is priced in the operating unit’s functional currency. The following table shows the sensitivity analysis of exchange rate risk, reflecting the impact on net profit and loss (due to changes in the fair value of monetary assets and liabilities) and net after-tax other comprehensive income under the assumption that all other variables remain unchanged when the exchange rate changes reasonably. 310 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 2020 FY Unit: RMB Exchange Net after tax other Net profit and loss rate comprehensive Equity increase/(decreas increase/(d income increase/(decrease) e) ecrease) increase/(decrease) RMB depreciaiton against 5% 15,834,638.29 - 15,834,638.29 USD RMB appreciation against (5%) (15,834,638.29) - (15,834,638.29) USD CAD depreciaiton against 5% (3,456,879.75) - (3,456,879.75) USD CAD appreciation against (5%) 3,456,879.75 - 3,456,879.75 USD INR depreciaiton against 5% (4,624,522.88) - (4,624,522.88) USD INR appreciation against (5%) 4,624,522.88 - 4,624,522.88 USD RMB depreciaiton against 5% (16,653,106.66) - (16,653,106.66) EUR RMB appreciation against (5%) 16,653,106.66 - 16,653,106.66 EUR 2019 FY Unit: RMB Net after tax other Exchange Net profit and loss comprehensive Equity rate increase/(decrease income increase/(decrease increase/( ) increase/(decrease ) decrease) ) RMB depreciaiton against 5% 13,224,707.73 - 13,224,707.73 USD RMB appreciation against (5%) (13,224,707.73) - (13,224,707.73) USD CAD depreciaiton against 5% (8,709,300.19) - (8,709,300.19) USD CAD appreciation against (5%) 8,709,300.19 - 8,709,300.19 USD INR depreciaiton against 5% (4,944,381.75) - (4,944,381.75) USD INR appreciation against (5%) 4,944,381.75 - 4,944,381.75 USD RMB depreciaiton against 5% (27,396,053.18) - (27,396,053.18) EUR RMB appreciation against (5%) 27,396,053.18 - 27,396,053.18 EUR 311 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 5. Capital management The main objective of the Group's capital management is to ensure continuing operations and maintaining a healthy capital ratio to support business development and maximize shareholder value. The Group manages the capital structure and adjusts it according to changes in the economic situation and the risk characteristics of related assets. To maintain or adjust the capital structure, the Group may adjust the distribution of profits to shareholders, return capital to shareholders or issue new shares. In 2020 and 2019, there is no change in capital management objectives, policies or procedures. The Group uses a leverage ratio to manage capital. The leverage ratio refers to the ratio of net debt to shareholders’ equity plus net debt. Net debt refers to the net amount of short-term loans, long-term loans due within one year, long- term loans, and bonds payable after deducting cash and cash equivalents. The Group’s leverage ratio at the balance sheet date is as follows: Unit: RMB Items 2020FY 2019FY Short-term borrowings 3,544,296,670.02 3,070,118,768.19 Long-term borrowings due within one 694,425,998.19 571,968,504.83 year Long-term borrowings 1,179,201,272.08 1,165,220,492.00 Less: Cash and cash equivalents 1,674,978,958.17 2,452,754,083.38 Net debt 3,742,944,982.12 2,354,553,681.64 Shareholder’s equity 7,508,833,717.32 10,007,942,082.74 Net debt and shareholder’s equity 11,251,778,699.44 12,362,495,764.38 Leverage ratio 33.27% 19.05% XI. Disclosure of Fair Values 1. Fair values of the assets and liabilities at the end of the period Unit: RMB Fair value as of the balance sheet date Items Level 1 Level 2 Level 3 Total I. Constant fair value -- -- -- -- measurement i. Held-for-trading 5,312,974.87 381,704,743.00 387,017,717.87 financial assets 1. Financial assets measured at fair value and changes 5,312,974.87 381,704,743.00 387,017,717.87 recognized through profit and loss 312 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (1)Debt instrument 381,704,743.00 381,704,743.00 investments (2)equity instrument 2,630,574.87 2,630,574.87 investments (3)Derivative 2,682,400.00 2,682,400.00 financial assets iii.Other equity 4,733,395.22 4,733,395.22 investments II. Non-constant measurement at -- -- -- -- fair values 2. Basis for determining the market price of items under first level constant and non-constant measurement at fair value. Not applicable 3. Items under second level constant and non-constant measurement at fair value, valuation technique adopted, and qualitative and quantitative information of significant parameters Not applicable 4. Items under third level constant and non-constant measurement at fair value, valuation technique adopted, and qualitative and quantitative information of significant parameters. Not applicable 5. Items under third level constant measurement at fair value, sensitivity analysis of adjusted beginning and ending book value information and unobservable parameters. Not applicable 6. Items under constant measurement at fair value, switched levels in the reporting period, reasons and policy for switch timing Not applicable 7. Change of valuation techniques and reasons Not applicable 313 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 8. The fair value of financial assets and financial liabilities not measured at fair value Not applicable 9. Others Fair value valuation The following are the book values and fair values of various types of financial instruments of the Group, except for financial instruments with little difference between book value and fair value, and equity instruments without quotation in an active market and can not reliably be measured. Unit: RMB 2020 FY 2019 FY Carrying value Fair value Carrying value Fair value Long-term 1,179,201,272.08 1,143,282,342.39 1,165,220,492.00 1,149,530,944.40 borrowings The management has evaluated cash and cash equivalents, notes receivable, accounts receivable, notes payable, other receivables, other current assets, short-term loans, accounts payable, other payables and non-current liabilities due within one year, etc. Since the remaining period is not long, the fair value is similar to the book value. The fair value of financial assets and financial liabilities is determined by the amount of voluntary asset exchange or debt settlement by both parties familiar with the situation in a fair transaction, rather than the amount under forced sale or liquidation. Long-term borrowings are measured at amortized cost. The fair value is determined by the discounted future cash flow method and the market rate of return of other financial instruments with similar contractual terms, credit risks and remaining maturities is used as the discount rate, which belongs to the third level. The significant unobservable inputs for the fair value measurement of long-term borrowings are the prepayment rate and the loss given default. The higher the prepayment rate and loss given default, the lower the fair value. On December 31, 2020, the non-performance risk such as long-term loans was assessed as not significant. The Group has entered foreign exchange forward contracts with multiple counterparties. Foreign exchange forward contracts are measured using the discounted cash flow model and option pricing model, which belong to the second level. The model covers observable input values in multiple markets, including spot and forward exchange rates. The book value of a foreign 314 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report exchange forward contract is the same as the fair value. The financial instruments measured at fair value by the Group and the Company in this year and last year did not have significant transfers between various levels. XII. Related Party Relationships and Transactions 1. Parent Company Unit: RMB Shareholding Voting right Parent Place of Business Registered proportion proportion Company registration nature capital over the over the Company Company Wanfeng Holding Group Zhejiang, China Manufacture RMB 120 million 33.37% 33.37% Co., Ltd Description of the Company’s parent company Please refer to Note III. Basic information of the Group. The ultimate controlling parties of the Company are Ms. Chen Ailian and Wu Liangding's family. other remarks: None 2. Information about the Company's subsidiaries For details of the Company's subsidiaries, please refer to Note IX. 1. 3. Joint ventures and associates of the Company For details of the significant joint ventures or associates of the Company, please refer to Note IX and 3. The situation of other joint ventures or associates that have related party transactions with the Company during the current period or the balance of the related party transactions with the Company in the previous period is as follows: Joint venture or associates Relationship with the Company -- Other remarks: No 4. Other related parties of the Company 315 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Other related parties Relationship with the Company Wanfeng Jinyuan Holding Group Co., Ltd. Company controlled by Chen Ailian Zhejiang Wanfeng Technology Development Co., Subsidiary of Wanfeng Jinyuan Holding Group Co., Ltd. Ltd Zhejiang Rifa Holding Group Co., Ltd. Company controlled by Wu Liangding Zhejiang Rifa Precision Machinery Co., Ltd. Subsidiary of Zhejiang Rifa Holding Group Co., Ltd. Xinchang Textile Investment Fund Association Wu Liangding, Director of the Association Beijing Wanfeng Innovation Investment Co., Ltd. Subsidiary of Wanfeng Jinyuan Holding Group Co., Ltd. Zhejiang Wanfeng Industrial Co., Ltd. Company controlled by the parent company Zhejiang Wanfeng Real Estate Co., Ltd. Company s controlled by the parent company Zhejiang Wanfeng General Aviation Co., Ltd. Company controlled by the parent company Zhejiang Wanfeng Property Management Co., Ltd. Company controlled by the parent company Wanfeng Aviation Industry Co., Ltd. Company controlled by the parent company Shanghai Wanfeng Aviation Club Co., Ltd. Company controlled by the parent company Shengzhou Hechuang Trading Co., Ltd. Subsidiary of Wanfeng Jinyuan Holding Group Co., Ltd. Wanfeng General Airport Management Co., Ltd. Company controlled by the parent company Zhejiang Wanfeng New Energy Automobile Company controlled by the parent company Technology Co., Ltd. Wanfeng General Aviation Co., Ltd. Company controlled by the parent company Shaoxing Jiajing Trading Co., Ltd. Company controlled by Zhang Linglin, an employee of the parent company Wanfeng Financial Leasing Co., Ltd. Subsidiary of Wanfeng Jinyuan Holding Group Co., Ltd. Xinchang County Chitong Intelligent Equipment Co., Company controlled by the parent company Ltd. Zhejiang Rifa Precision Machine Tool Co., Ltd. Subsidiary of Zhejiang Rifa Holding Group Co., Ltd. Zhejiang Wanfeng Precision Manufacturing Co., Ltd. Subsidiary of Wanfeng Jinyuan Holding Group Co., Ltd. Wanfeng General Airport Management Co., Ltd. Subsidiary of Wanfeng Aviation Industry Co., Ltd. Other remarks: Zhang Linglin, an employee of the parent company, belongs to other natural persons who have a special relationship with the listed company and may cause the listed company to tilt its interests based on the principle of substance over form. 5. Related party transactions (1) Purchase and sale of goods, rendering and receiving services Purchase of goods and receiving of services 316 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Approved Over the Related Content of Current period Transaction Transaction Prior period parties transaction Limit Limit or No Wanfeng Purchase Aviation aircraft and 4,513,168.35 No 2,903,871.79 Industry Co., aviation Ltd. materials Shengzhou Purchase molds Hechuang and equipment 4,132,865.14 No 6,385,194.83 Trading Co., accessories Ltd. Zhejiang Purchase raw Wanfeng materials, molds Technology 1,268,509.02 No 3,178,959.25 and equipment Development accessories Co., Ltd. Zhejiang Rifa Purchase Precision equipment 332,458.38 No 39,668.15 Machine Tool accessories Co., Ltd. Zhejiang Rifa Purchase raw Precision materials and 6,796.46 No 383,784.63 Machinery Co., equipment Ltd. accessories Wanfeng General Purchase goods No 6,792.45 Aviation Co., Ltd. Wanfeng General Air charter 13,908,446.06 No 3,524,382.29 Aviation Co., service Ltd. Zhejiang Wanfeng Property Property Management 3,717,673.85 No 6,805,275.94 Management Service Co., Ltd. Network and equipment Wanfeng Group 3,678,420.37 No 5,195,743.42 maintenance services Zhejiang Wanfeng Equipment Technology maintenance 964,543.62 No 238,244.40 Development service Co., Ltd. Wanfeng Network and Aviation equipment 488,304.32 No Industry Co., maintenance Ltd. services 317 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Zhejiang Rifa Equipment Precision maintenance 391,407.07 No Machine Tool service Co., Ltd. Zhejiang Wanfeng Airport service General 257,477.10 No 280,476.98 fee Aviation Co., Ltd. Wanfeng Airport aircraft General Airport take-off and 60,687.93 No 12,877.36 Management landing service Co., Ltd. Sale of goods and rendering of services Unit: RMB Content of Related parties Current period Prior period transaction Zhejiang Wanfeng Sales of aircraft and General Aviation Co., 3,734,690.02 24,292.04 aviation materials Ltd. Shengzhou Hechuang Sales of mold 1,995,689.49 4,614,862.09 Trading Co., Ltd. Wanfeng Aviation Sales of parts 5,183,717.63 Industry Co., Ltd. Diamond Flight Centre Sales of repair parts 1,627,441.28 London INC. Zhejiang Wanfeng Sales of finished Technology products, raw materials 863,469.44 Development Co., Ltd. and molds Zhejiang Wanfeng For metrological Precision Manufacturing 51,880.00 maintenance service Co., Ltd. Diamond Flight Centre Training Services 1,231,000.08 London INC. Wanfeng Aviation Providing labor 619,539.05 Industry Co., Ltd. services Remarks of related transactions related to the purchase and sale of goods and the provision and acceptance of services None (2) Related entrusted management/contracting and entrusted management/outsourcing situation The Company's entrusted management/contracting Unit: RMB 318 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Entrustment Pricing basis /contracting Types of Principal/Out Entrustment/ Entrustment/ for income Name of entrusted/co sourcer's contracting contracting entrustment recognized contractor ntracted Name start date end date /contracting in the assets income current period -- Description of related entrustment /contracting situation None The Company's entrusted management / outsourcing Unit: RMB Entrustment Pricing basis Types of End of /outsourcing Principal/Out Entrustment/ for Name of entrusted/ou entrustment/ fees sourcer's outsourcing entrustment contractor tsourced outsourcing recognized Name start date /outsourcing assets end date in the current fees period -- Description of related entrustment /outsourcing situation No (3) Related party leases The Company as lessor Unit: RMB Lease income for Lease income for the Lessees Types of asset leased current period prior period Suzhou Yucuiyuan Trading Enterprise Real estate 2,522,935.83 1,225,000.00 (General Partnership) Aircraft industry Real estate 512,841.60 Aircraft industry Aircraft 406,407.74 Aircraft industry Aircraft 88,495.58 The Company as lessee Unit: RMB Lease expenses for Lease expenses for the Lessors Types of asset leased current period prior period Xinchang Textile Investment Fund Real estate 290,537.80 290,537.80 Association 319 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Xinchang Textile Investment Fund Real estate 134,497.40 134,497.40 Association Wanfeng Jinyuan Real estate 1,192,660.55 1,183,165.14 Holding Group Co., Ltd. Xinchang County Chitong Intelligent Real estate 2,100,000.00 2,100,000.00 Equipment Co., Ltd. Xinchang County Chitong Intelligent Real estate 2,508,400.00 2,508,400.00 Equipment Co., Ltd. Zhejiang Wanfeng Real estate 1,333,333.32 Industrial Co., Ltd. Zhejiang Wanfeng Real estate, land, etc. 5,885,714.29 5,777,460.10 Industrial Co., Ltd. Wanfeng Aviation Real estate 1,929,524.49 1,929,524.49 Industry Co., Ltd. Wanfeng General Aircraft 2,551,778.76 Aviation Co., Ltd. Remarks on related party leases None (4) Related party guarantees The Company as guarantor Unit: RMB Whether the Amount Commencement Guaranteed party Maturity date guarantee is guaranteed date mature Wanfeng Group u 313,500,000.00 January 15, 2019 January 15, 2020 Yes Wanfeng Group u 316,000,000.00 October 24, 2019 October 23, 2020 Yes Wanfeng Group v USD100,000,000.00 July 19, 2019 July 18, 2024 Yes Wanfeng Group w USD100,000,000.00 November 18, 2020 December 31, 2024 No The Company as guaranteed party Unit: RMB Whether the Amount Commencement Guarantor Maturity date guarantee is guaranteed date mature Wanfeng Group a 10,000,000.00 May 10, 2019 May 07, 2022 No Wanfeng Group b 100,000,000.00 August 05, 2019 May 03, 2020 Yes Wanfeng Group c 250,000,000.00 February 15, 2019 February 15, 2021 No 320 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Wanfeng Group d 100,000,000.00 December 23, 2019 March 19, 2022 No Zhejiang Rifa September 10, Holding Group Co., 245,000,000.00 December 05, 2019 No 2022 Ltd. e Zhejiang Rifa Holding Group Co., USD30,000,000.00 May 15, 2015 May 15, 2025 No Ltd. f Wanfeng Group g 100,000,000.00 April 27, 2020 March 19, 2022 No Wanfeng Group h 33,000,000.00 October 13, 2020 October 13, 2023 No Wanfeng Group i 65,000,000.00 March 20, 2020 June 19, 2020 Yes Wanfeng Group j 35,000,000.00 March 25, 2020 November 09, 2020 Yes Wanfeng Group and Wanfeng 132,000,000.00 October 14, 2020 October 13, 2022 No Jinyuan Holdings Group Co., Ltd. k Zhejiang Rifa September 21, September 17, Holding Group Co., 240,000,000.00 No 2020 2021 Ltd. l Zhejiang Rifa Holding Group Co., 960,000,000.00 April 16, 2020 April 23, 2023 No Ltd. m Chen Ailian n 1,200,000,000.00 April 16, 2020 April 23, 2023 No Remarks on related party guarantees a. From May 10, 2019 to May 7, 2022, Wanfeng Group provided a free guarantee for Wanfeng Auto Wheel’s loan from the Agricultural Bank of China, with a guaranteed amount of RMB 10,000,000. b. From August 5, 2019 to May 3, 2020, Wanfeng Group provided a free guarantee for Wanfeng Auto Wheel’s loan from China Merchants Bank, with a guaranteed amount of RMB 100,000,000.00. The guarantee has expired and been released. c. From February 15, 2019 to February 15, 2021, Wanfeng Group provided a free guarantee for Wanfeng Auto Wheel’s loan from the Bank of China, with a guaranteed amount of RMB 250,000,000.00. d. From December 23, 2019 to March 19, 2022, Wanfeng Group provided a free guarantee for Wanfeng Auto Wheel’s loan from the Bank of Hangzhou, with a guarantee amount of RMB 100,000,000.00. e. From December 5, 2019 to September 10, 2022, Zhejiang Rifa Holding Group Co., Ltd. provided a free guarantee for Wanfeng Auto Wheel’s loan from the Export-Import Bank of China, with a guaranteed amount of RMB 245,000,000.00. 321 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report f. From May 15th, 2015 to May 15th, 2025, Zhejiang Rifa Holding Group Co., Ltd. provided a free guarantee for Wanfeng Aluminum Wheels (India)’s loan from China Development Bank, with a guaranteed amount of USD 30,000,000.00. g. From April 27, 2020 to March 19, 2022, Wanfeng Group provided a free guarantee for Wanfeng Auto Wheel’s loan from China Merchants Bank Shaoxing Branch, with a guaranteed amount of RMB 100,000,000.00. h. From October 13, 2020 to October 13, 2023, Wanfeng Group provided a free guarantee for Wanfeng Auto Wheel’s loan to Shanghai Pudong Development Bank Shengzhou Branch, with a guaranteed amount of RMB 33,000,000.00. i. From March 20, 2020 to June 19, 2020, Wanfeng Group provided a free guarantee for Wanfeng Auto Wheel’s loan from the Bank of Hangzhou Xinchang Branch, with a guaranteed amount of RMB 65,000,000. The guarantee has expired and been released. j. From March 25, 2020 to November 9, 2020, Wanfeng Group provided a free guarantee for Wanfeng Auto Wheel’s loan from Bank of Hangzhou Shaoxing Branch, with a guaranteed amount of RMB 35,000,000. The guarantee has expired and been released. k. From October 14, 2020 to October 13, 2022, Wanfeng Group and Wanfeng Jinyuan Holding Group Co., Ltd. provided free guarantees for Wanfeng Auto Wheel’s loans from Bank of Hangzhou Shaoxing Branch, with a guaranteed amount of RMB 132,000,000. l. From September 21, 2020 to September 17, 2021, Zhejiang Rifa Holding Group Co., Ltd. provided a free guarantee for Wanfeng Auto Wheel’s loan from the Export-Import Bank Zhejiang Branch, with a guaranteed amount of RMB 240 million. m. From April 16, 2020 to April 23, 2023, Zhejiang Rifa Holding Group Co., Ltd. provided a free guarantee for Wanfeng Aowei’s loan from Agricultural Bank of China Xinchang Branch, with a guaranteed amount of RMB 960,000,000. n. From April 16, 2020 to April 23, 2023, Chen Ailian provided a free guarantee for Wanfeng Auto Wheel’s loan from Agricultural Bank of China Xinchang Branch, with a guaranteed amount of RMB 1,200,000,000. u. From July 2018 to October 2019, Wanfeng Auto Wheel provided a guarantee to Wanfeng Group through pledge and re-pledge after release of its bank deposit certificates deposited in the Baoji Branch of Changan Bank Co., Ltd. Under these guarantees, Wanfeng Group obtained a total of RMB 1.530 million in loans from the Baoji Branch of Chang'an Bank Co., Ltd. from 2018 to 2019, and Wanfeng Auto Wheel provided guarantees to Wanfeng Group for a total of RMB 1.594 billion. 322 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report As of December 31, 2019, Wanfeng Group's outstanding loan amount was RMB 60 million, and Wanfeng Auto Wheel's outstanding guarantee amount was RMB 629,500,000. In March and April 2020, Wanfeng Group has repaid the remaining RMB 60 million of the loan to the Baoji Branch of Chang'an Bank Co., Ltd., and Wanfeng Auto Wheel released the guarantee of RMB 629.5 million accordingly. v. Meridian Lightweight Technologies Inc. provided a free credit guarantee for Wanfeng Group’s loan from Export Development Canada (EDC). The guarantee period is from July 19, 2019 to July 18, 2024. The guaranteed amount is USD 100,000,000.00. At the same time, Wanfeng Auto Wheel provides liquidity support for the loan. According to the guarantee agreement and the liquidity support agreement, if Wanfeng Group is unable to perform its repayment obligations as required by the loan agreement, Meridian Lightweight Technologies Inc. shall assume joint and several repayment liabilities. Wanfeng Auto Wheel shall provide liquidity support to Wanfeng Group or the guarantor of the loan to ensure that Wanfeng Group or the guarantor of the loan performs its obligations following the requirements of the loan agreement. In January and May 2020, Wanfeng Group has repaid US$20 million in borrowings, and the remaining US$80 million has not been repaid. The aforementioned guarantees and liquidity support have subsequently been released. w. Wanfeng Auto Wheel held the 2019 Annual General Meeting of Shareholders on July 15, 2020, and approved the Proposal on Providing External Guarantees in 2020. In 2020, it will provide a guarantee plan of RMB 150 million for controlling shareholders. On November 19, 2020, Wanfeng Auto Wheel and Meridian have signed the Liquidity Support Contract Exemption Letter and Regarding the Termination and Disclaimer Agreement of the Guarantee of Meridian Lightweight Technologies Inc. with EDC, respectively. The liquidity support and joint liability guarantee provided by Wanfeng Auto Wheel and its subsidiary Meridian respectively to Wanfeng Group’s remaining US$80 million borrowings from EDC has been released. On the same day, Wanfeng Group and EDC signed the Revised and Restated Loan Agreement with a loan balance of US$80 million. Wanfeng Auto Wheel and its controlling subsidiary Ontario 2542112 Co., Ltd. provided joint liability guarantees for the above loans. The guarantee period is from November 19, 2020 to July 18, 2024. The Company’s controlling subsidiary Wanfeng (Canada) Aviation Co., Ltd. will issue a US$2 million letter of guarantee. The guarantee period is from November 18, 2020 to December 31, 2024. The amount of the guarantee is within the total amount of RMB 1.5 billion in guarantee for the controlling shareholder Wanfeng Group approved by Wanfeng Auto Wheel at the 2019 Annual General Meeting of Shareholders on July 15, 2020. At the same time, Wanfeng Group pledged its 40% equity of Wanfeng Aviation Industry Co., Ltd. to Wanfeng Auto Wheel as a counter-guarantee measure for 323 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report the guarantee. As of December 31, 2020, Wanfeng Group's outstanding loan balance under this guarantee was US$80 million. (5) Related party lending Unit: RMB Commenc Related Maturity Loan amount ement Description parties date date Borrowed from Lent to Prior to January 1, 2020, Diamond Aircrafts Industries GMBH, a subsidiary of Wanfeng Wanfeng Aircraft, had borrowed funds from Wanfeng Aviation April 16, August 17, Aviation Industry Co., Ltd. with a balance of 312,620,000.00 Industry 2020 2020 RMB 312.62 million, which Wanfeng Aviation Co., Ltd. Industry Co., Ltd. had repaid in August 2020. The total principal and interest were RMB 316.18 million. From January to April 2020, prior to business combination under the same control, Wanfeng Aircraft had lent RMB 76.65 million to Wanfeng January August 14, Wanfeng Group, and Wanfeng Group had 76,650,000.00 Group 02, 2020 2020 repaid RMB 4.65 million, and the remaining amount was RMB 72 million. Wanfeng Group has repaid all principal and interest of RMB 73.51 million from April to August 2020. On December 5, 2019, Chongqing Wanfeng repaid the principal and interest of the loan RMB 380.70 million on behalf of Wanfeng Group due to the overdue payment of the remaining loans of RMB 376 million. On Wanfeng December March 25, December 31, 2019, the balance formed 380,700,000.00 Group 05, 2019 2020 Wanfeng Group's capital occupation of Wanfeng Auto Wheel. Wanfeng Group has repaid RMB 120 million and RMB 260.7 million to Chongqing Wanfeng on March 24, 2020 and March 25, 2020, respectively, and the capital occupation has been settled. In 2019, the Group lent RMB 740 million to Wanfeng Group through Shaoxing Jiajing Wanfeng Trading Co., Ltd., and recovered RMB 590 Group million. As of December 31, 2019, the balance (through January March 26, was RMB 150 million. The above-mentioned Shaoxing 740,000,000.00 02, 2019 2020 lent funds formed Wanfeng Group's capital Jiajing occupation of Wanfeng Auto Wheel. On Trading March 26, 2020, the amount was repaid to the Co., Ltd.) Group by Wanfeng Group through Shaoxing Jiajing Trading Co., Ltd. (6) Assets transfer and debt restructuring of the related parties Unit: RMB Content of related Related parties Current period Prior period party transactions 324 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report -- (7) Key management’s emoluments Unit: RMB Items Current period Prior period Key management’s emoluments 8,555,298.00 5,864,537.00 (8) Other related party transactions Wanfeng Group received two government grants totaling RMB 38.82 million from the 2018 National Industrial Transformation and Upgrade Fund and the 2017 Second Batch of Provincial Technology-based Small and Medium-sized Enterprises Support and Technology Development Special Fund. Wanfeng Group intended to cooperate with Wanfeng Meridian New Material Technology Co., Ltd., a subsidiary of the Group, to complete the government subsidy project, and paid RMB 35.82 million as deposit for the intended cooperation to Wanfeng Meridian New Material Technology Co., Ltd. In 2019, Wanfeng Meridian New Material Technology Co., Ltd. returned to Wanfeng Group RMB 2 million of 2017 Second Batch of Provincial Technology- based Small and Medium-sized Enterprises Support and Technology Development Special Fund in accordance with the requirements of the government subsidy grantor. As of the end of 2020, RMB 28.82 million from the 2018 National Industrial Transformation and Upgrading Fund has been checked and accepted and transferred to deferred income. The balance of RMB 5 million of 2017 Second Batch of Provincial Technology-based Small and Medium-sized Enterprises Support and Technology Development Special Fund has not yet been checked and accepted this year. The Group will list the deposit for intended cooperation received as other payables. 6. Account receivable and payable of related parties (1) Receivables Unit: RMB Closing balance Beginning balance Provis Items Related parties Provision ion for Book balance for doubtful Book balance doubtf debts ul debts Account Wanfeng Aviation Industry 7,349,781.19 7,157,908.40 receivable Co., Ltd. Account Zhejiang Wanfeng General 4,089,187.56 1,011,549.00 receivable Aviation Co., Ltd. 325 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Account Shanghai Wanfeng Aviation 900,000.00 receivable Club Co., Ltd. Account Diamond Flight Centre 439,969.35 receivable London INC. Account Shengzhou Hechuang 100,000.00 5,214,794.16 receivable Trading Co., Ltd. Zhejiang Wanfeng Advances paid Technology Development 24,000.00 189,462.00 Co., Ltd. Wanfeng General Aviation Advances paid 1,339,952.92 Co., Ltd. Other account Zhejiang Rifa Precision 176,000.00 receivable Machinery Co., Ltd. Other account Wanfeng Auto Holding 380,700,000.00 receivable Group Co., Ltd. Other account Wanfeng Aviation Industry 312,620,000.00 receivable Co., Ltd. Other account Shaoxing Jiajing Trading 150,000,000.00 receivable Co., Ltd. Zhejiang Wanfeng Other account Technology Development 91,538.50 receivable Co., Ltd. Other account Zhejiang Wanfeng Property 25,037.62 receivable Management Co., Ltd. Zhejiang Wanfeng New Other account Energy Automobile 2,040.61 receivable Technology Co., Ltd. Zhejiang Wanfeng Other non- Technology Development 49,771.65 38,271,052.25 current assets Co., Ltd. (2) Payables Unit: RMB Items Related parties Closing balance Beginning balance Account payable Wanfeng Aviation Industry Co., Ltd. 4,518,937.15 29,875,732.07 Zhejiang Wanfeng Technology Account payable 1,082,569.09 1,380,818.37 Development Co., Ltd. Zhejiang Rifa Precision Machinery Account payable 1,062,394.00 207,044.08 Co., Ltd. Zhejiang Rifa Precision Machine Tool Account payable 264,822.00 75,072.00 Co., Ltd. Shengzhou Hechuang Trading Co., Account payable 5,409.14 2,442,228.10 Ltd. Account payable Wanfeng General Aviation Co., Ltd. 505,023.91 326 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Account payable Wanfeng Group 29,266.73 Wanfeng General Airport Account payable 6,975.50 Management Co., Ltd. Other account Zhejiang Rifa Precision Machinery 16,115,519.05 4,928,580.19 payable Co., Ltd. Other account Wanfeng Group 5,000,000.00 33,820,000.00 payable Other account Zhejiang Wanfeng Technology 4,938,304.35 8,995,287.32 payable Development Co., Ltd. Other account Zhejiang Rifa Precision Machine Tool 1,924,001.84 payable Co., Ltd. Other account Shengzhou Hechuang Trading Co., 253,862.98 452,369.32 payable Ltd. Other account Wanfeng Finance Leasing Co., Ltd. 2,000,000.00 payable 7. Related party commitments (1) On December 31, 2020, the Group and Zhejiang Wanfeng Technology Development Co., Ltd. signed an unfulfilled equipment procurement contract totaling RMB 4,674,400.00 (RMB 4,136,637.17 excluding tax), and purchase production machinery and equipment from the latter. As of December 31, 2020, the purchase amount paid by the Group was RMB 1,547,820.00, and the contracted and unprovided amount was RMB 3,126,580. (2) On December 31, 2020, the Group and Zhejiang Rifa Precision Machine Tool Co., Ltd. signed an unfulfilled equipment procurement contract totaling RMB 2,071,473.05 (RMB 1,833,161.99 excluding tax) to purchase machinery and equipment from the latter for production. As of December 31, 2020, the purchase amount paid by the Group was RMB 414,292.00, and the contracted and unprovided amount was RMB 1,657,181.05. (3) On December 31, 2020, according to the lease contract signed between the Group and Zhejiang Wanfeng Industrial Co., Ltd., the minimum lease payment for an irrevocable lease was RMB 33,697,452.86. The lease term is from August 1, 2016 to July 31, 2026. The factory and land are leased for production and operation. (4) On December 31, 2020, according to the lease contract signed between the Group and Xinchang County Chitong Intelligent Equipment Co., Ltd., the minimum lease payment for an irrevocable lease was RMB 9,216,800.00. The lease term is from January 1, 2019 to December 31, 2022. The factory are leased for production and operation. 327 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report 8. Others None XIII. Share-based Payment 1. Overall information of share-based payment □Applicable √Not applicable 2. Equity-settled share-based payment □Applicable √Not applicable 3. Cash-settled share-based payment □Applicable √Not applicable 4. Amendment and termination of share-based payment None 5. Others None XIV. Commitments and Contingencies 1. Significant commitments Important commitment on the balance sheet date (1) Important commitments As of December 31, 2020, the amount of capital commitments that the Group has signed but not provided for is RMB 67,753,615.41 (December 31, 2019: RMB 73,700,139.92). As of December 31, 2020, the Group has no investment commitments that have been signed but not provided for (December 31, 2019: None). (2) Pending litigation As stated in Note VII, 50, Shandong Bin'ao Aircraft Manufacturing Co., Ltd. litigated a dispute over the authorization of model production licenses by the Company's subsidiary Austria Diamond Aircraft Industries GmbH. As of December 31, 2020, the litigation is still in the process of arbitration. Austria Diamond Aircraft Industries GmbH made provisions based on estimates. 328 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (3) Outstanding claims As stated in Note VII, 50, the Group had a number of outstanding employee claims on December 31, 2020. The Group has hired a third-party risk management company to handle employee compensation claims and made provisions based on its estimated amount after evaluating all outstanding claims. 2. Contingencies (1) Significant contingencies existing on the balance sheet date ①Environmental testing deposit In April 2001, Canada Meridian Technology Holdings Inc. divested its business activities related to its primary aluminum business unit. As one of the steps in divestiture, the Company disposed of all the net assets of Jutras Die Casting Ltd. except for real estate, which is located in Toronto, Ontario. According to the terms of the divestiture, Canadian Meridian Technology Holdings Inc. continues to retain the rights to the real estate, mainly because the real estate is undergoing environmental investigations related to legal proceedings at that time. The lawsuit was filed by a company adjacent to Jutras Die Casting Ltd. and a financial institution that provided financing services for the company. In December 2001, the lawsuit ended. According to the results of the lawsuit, the real estate will be transferred to the adjacent company of Jutras Die Casting Ltd. after completing a series of administrative procedures and environmental investigations in accordance with Ontario’s legal requirements. Canada Meridian Technology Holding Inc. is obliged to monitor the environmental level of the real estate within 10 years, and the monitoring results must show that the pollution level of the transferred real estate has been gradually degraded according to the model predictions displayed at the time of the lawsuit. In 2004, the relevant administrative procedures were completed, including the provision of a CAD 2,100,000.00 guarantee to the Ministry of Environment in the form of a letter of credit. The relevant real estate was transferred on December 14, 2004. In 2014, before the expiration of the monitoring obligation, Canadian Meridian Technology Holdings Inc. agreed to continue to extend the monitoring obligation to 2017. In 2020, the company has completed the above-mentioned environmental testing obligations and is waiting for the final certification result of the government's Ministry of Environment. ②Pay taxes On April 16, 2013, Meridian Lightweight Technologies Holding Inc. was informed that, after completing the audit, the Italian customs department had filed with the liquidator Magnesium Products of Italy S.r.L (formerly known as Magnesium Products of America Inc.) during the 2009 tax period. It is claimed 329 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report that its unpaid value-added tax amounted to EUR 138,000 and demanded a fine of EUR 141,640. Magnesium Products of Italy has been liquidated and has no assets to repay. As of the date of issuance of this report, none of the above taxes and fines have been paid. After consulting with legal counsel, the management believes that Magnesium Products of America Inc. and Wanfeng Meridian Group, as independent entities, have no legal obligation to pay such taxes and fines. In 2015, Wanfeng Group issued a commitment, and it agreed that if Wanfeng Meridian Group would eventually have to bear corresponding taxes and/or penalties due to these matters, the resulting losses (including but not limited to taxes, fines, and litigation costs) will be compensated by Wanfeng Group or its designated third party (excluding Wanfeng Meridian Group, and Wanfeng Auto Wheel and its companies within the scope of its consolidated financial statements). ③Customer compensation Magnesium Products of America Inc. and Meridian Lightweight Technologies Inc. had multiple production accidents in 2018 that affected daily production. One or more customers may request Magnesium Products of America Inc. and Meridian Lightweight Technologies Inc. to compensate for the losses caused by the interruption of their supply chain. In October 2020, Ford Motor Company filed a lawsuit against Meridian Lightweight Technologies Inc. through its agent insurance company. Since the specific compensation amount will be formally proposed in the discovery stage several months later, the future compensation obligations and compensation amount are highly uncertain. Therefore, on December 31, 2020, the Group did not make relevant provisions. (2) If no significant contingent matter to be disclosed by the Company, it should also be noted accordingly No important contingent matter needs to be disclosed by the Company. (3) Other information required by the Guidelines for Information Disclosure of Automobile Manufacturing Related Industries Mortgage sales, finance leasing and other models of sales accounted for more than 10% of operating revenue □ Applicable √ Not applicable The Company's guarantee to the dealer □ Applicable √ Not applicable 3. Others No 330 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report XV. Events after the Balance Sheet Date 1. Significant non-adjustment items Unit: RMB Impact on financial Items Content position and operating Reasons results 2. Profit distribution Unit: RMB Proposed profits or dividends 207,210,752.00 Profits or dividends declared to be paid after 207,210,752.00 approval 3. Sales return None 4. Other explanation on events after the balance sheet date (1) Share repurchase On December 30, 2020 the Company held the sixth meeting of the seventh board of directors and approved the Proposal on the Repurchase of Company Shares. On January 4, 2021, it disclosed the Report on the Repurchase of Company Shares decided to repurchase the Company’s shares by means of centralized bidding through the Shenzhen Stock Exchange trading system with own funds or self-raised funds. These shares will be used for subsequent employee stock ownership plans or equity incentives. The total amount of funds for the repurchase of shares shall not be less than RMB 100 million and not more than RMB 200 million, and the repurchase price shall not exceed RMB 11 per share (inclusive), and the repurchase period shall be no more than 12 months from the date of approval of the repurchase plan by the board of directors. Starting from January 2021, the Company has successively implemented share repurchases. (2) Subsidiary establishment The Company held the seventh meeting of the seventh board of directors on January 12, 2021, and approved the Proposal on the Establishment of a Wholly Owned Subsidiary of by Subsidiary Aircraft Industry, agreeing that Wanfeng Aircraft Industry Co., Ltd., a subsidiary of the Company, shall invest in the establishment of a wholly-owned subsidiary Zhejiang Wanfeng Aircraft Manufacturing Co., Ltd. in the form of assets and cash. Zhejiang Wanfeng Aircraft Manufacturing Co., Ltd. was established on January 15, 2021, with a registered capital of RMB 100 million, of which RMB 39.9 million was contributed by assets and RMB 60.1 million was contributed by cash. The 331 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report address is located at No. 1, Aofeng Road, Xinchang Industrial Park, Zhejiang, China. The scope of business includes design, testing, production, sales, maintenance and repair of general aviation aircraft, helicopters, aero engines, avionics, electrical and mechanical systems; technology development and consulting services for the general aviation industry; bonded warehouse operations; goods import and export; technology import and export. XVI. Other Significant Events 1. Prior accounting error correction (1) Retrospective restatement method Unit: RMB Items in each Correction of Processing procedure comparison period Cumulative influence accounting error affected -- (2) Prospective adjustment method Unit: RMB Reasons for adopting Correction of accounting error Approval procedure prospective adjustment method -- 2. Debt restructuring No 3. Asset replacement (1) Non-monetary asset exchange None (2) Replacement of other assets None 4. Annuity plan None 5. Discontinued business Unit: RMB Items Revenue Expenses Total profit Income tax Net profit Discontinue 332 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report expense d operating profit attributable to owners of the parent company -- Other remarks: None 6. Segment information (1) Basis for reportable segments and the accounting policy Operating Segments For management purposes, the Group divides its business units based on products. The Group has the following 6 reporting segments: (1) The Automobile Wheel segment produces automobile wheels; (2) The Motorcycle Wheels segment produces motorcycle wheels; (3) The Coating segment is engaged in the coating treatment of mechanical parts; (4) The Magnesium Alloy Die-Casting Products segment produces magnesium alloy die-casting products; (5) Stamping Parts segment produces stamping parts for automobiles; (6) The General Aviation Aircraft segment produces general aviation aircraft. For the decision-making purposes of resource allocation and performance evaluation, the management separately manages the operating results of each segment. Division performance is evaluated based on the reported segment profit. This indicator is an adjusted indicator of the total profit from continuing operations and is consistent with the total profit from continuing operations of the Group. (2) Financial information of the reporting segment 333 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Magnesium alloy Automobile Motorcycle Coating General Aviation Inter-segment Item die casting Stamping Total wheel wheel processing Aircraft elimination products External transaction 3,861,538,493.07 1,623,157,538.62 272,914,859.29 2,557,650,411.18 753,572,627.73 1,630,390,974.68 10,699,224,904.57 revenue Inter-segment transaction 2,825,131.19 -2,825,131.19 revenue Investment income from -876,459.23 associates Asset -3,988,474.85 -3,036,182.07 509,471.83 -2,983,670.52 -680,506.02 -10,179,361.63 impairment loss Depreciation and 258,899,027.39 122,648,411.78 32,815,327.54 225,733,598.51 68,442,088.67 74,767,785.07 783,306,238.96 amortization The total profit 532,939,773.63 33,621,660.30 46,252,586.15 263,278,982.96 117,676,362.71 294,305,214.27 -459,051,846.99 829,022,733.03 Income tax 6,795,013.66 -2,853,684.21 9,345,321.42 82,128,473.82 14,856,056.42 -46,124,668.96 64,146,512.15 expense Total assets 10,089,670,942.84 1,971,970,108.80 463,180,113.04 3,435,371,228.62 1,192,080,356.54 4,690,103,855.76 -5,869,150,704.73 15,973,225,900.87 Total liabilities 5,596,204,167.89 1,285,425,861.89 75,421,685.39 1,358,857,504.44 277,600,876.38 1,044,274,905.45 -1,173,392,817.89 8,464,392,183.55 Long-term equity investment in 567,810.84 567,810.84 associates (3) Reasons on no reportable segment, or the total assets and total liabilities of each reportable segment that cannot be disclosed None 334 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (4) Other remarks None 7. Other significant events influencing investor’s investment decision None 8. Others None XVII. Notes to Parent Company Financial Statements Items 1. Accounts receivable (1) Account receivable disclosed by category Unit: RMB Closing balance Opening balance Doubtful debt Category Book balance Book balance Doubtful debt provisions provisions Carrying value Carrying value Amount % Amount % Amount % Amount % Accounts receivable provided for doubtful 17,923,454.32 3.44% 5,305,626.69 29.60% 12,617,827.63 16,558,335.50 2.40% 7,689,685.14 46.44% 8,868,650.36 debts on individual basis Including: 335 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Accounts receivable provided for doubtful 502,413,199.87 96.56% 2,659,777.96 0.53% 499,753,421.91 673,934,882.91 97.60% 4,617,306.15 0.69% 669,317,576.76 debts on collective basis Including: Total 520,336,654.19 100.00% 7,965,404.65 1.53% 512,371,249.54 690,493,218.41 100.00% 12,306,991.29 1.78% 678,186,227.12 Provision for doubtful debts on individual basis: 5,305,626.69 Unit: RMB Closing balance Company Book balance Provisions for doubtful debt % Reasons Hunan Leopard Automobile Co., Ltd. 8,280,910.13 2,781,910.13 33.59% Estimated collection risk CIA WHEEL GROUP 6,625,061.06 1,414,787.38 21.36% Product quality disputes CPC WHEELS CORPORATION 3,017,483.13 1,108,929.18 36.75% Estimated collection risk Total 17,923,454.32 5,305,626.69 -- -- Provision for doubtful debts on individual basis: Unit: RMB Closing balance Company Provisions for Book balance % Reasons doubtful debt Provision for doubtful debts on collective basis: 2,659,777.96 336 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Closing balance Company Provisions for doubtful Book balance % debt Within 1 year 499,501,004.84 2,296,548.48 0.46% 1 year to 2 years 372,690.38 79,459.12 21.32% 2 years to 3 years 438,033.11 131,409.93 30.00% More than 3 years 2,101,471.54 152,360.43 7.25% Total 502,413,199.87 2,659,777.96 -- Description of determining the collective basis: None Provision for doubtful debts on collective basis: Unit: RMB Closing balance Company Provisions for doubtful Book balance % debt Description of determining the collective basis: If the provision for doubtful debts of accounts receivable is accrued in accordance with the general model of expected credit losses, please refer to the disclosure of other accounts receivable: □ Applicable √ Not applicable Disclosure by age Unit: RMB Aging Book balance Within 1 year (including 1 year) 505,726,693.22 1 year to 2 years 2,407,884.12 2 years to 3 years 8,718,943.24 More than 3 years 3,483,133.61 3 years to 4 years 3,483,133.61 Total 520,336,654.19 (2) Provision for doubtful debts accrued, recovered or reversed in the current period Doubtful debt provisions in the current reporting period 337 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Change in current reporting period Opening Closing Category Recovery or balance Accrual Write-off Others balance reversal 2020FY 12,306,991.29 4,341,586.64 7,965,404.65 Total 12,306,991.29 4,341,586.64 7,965,404.65 Significant reversal of doubtful debt provisions in the current reporting period Unit: RMB Company Recovery or reversal amount Recovery method -- No provision for doubtful debts was made in 2020, and the recovery of provision for doubtful debts was RMB 4,341,586.64 (with provision for doubtful debts of RMB 6,888,847.81 in 2019, no recovery or reversal of provision for doubtful debts). (3) Accounts receivable written off in the current period Unit: RMB Items Written off amount -- Significant account receivable written off Unit: RMB Whether the Nature of payment is Written off Reasons for Write-off Company account generated by amount write- off procedure receivable related party transactions -- Explanation on account receivable written off There are no accounts receivable actually written off in 2020 (2019: none). (4) The top five accounts receivable at the end of the period aggregated by the owing party Unit: RMB % of the total balance Closing balance of Account receivable Company of accounts receivable provisions for doubtful closing balance at the end of the period debt No. 1 72,086,733.75 13.85% 360,433.67 No. 2 58,758,771.03 11.29% 282,042.10 No. 3 57,723,960.86 11.09% 277,075.01 No. 4 37,786,187.75 7.26% 181,373.70 338 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report No. 5 31,414,819.00 6.04% 150,791.13 Total 257,770,472.39 49.53% (5) Accounts receivable derecognized due to the transfer of financial assets None (6) The amount of assets and liabilities formed by transferring accounts receivable and continuing to be involved None Other remarks: None 2. Other receivables Unit: RMB Items Closing balance Opening balance Interest receivables 0.00 Dividend receivables 0.00 129,600,000.00 Other receivables 241,713,997.31 365,180,887.10 Total 241,713,997.31 494,780,887.10 (1) Interest receivables 1) Interest receivables by category Unit: RMB Items Closing balance Opening balance Total 0.00 2) Significant overdue interest Unit: RMB Whether Reasons for impairment Borrower Closing balance Overdue time overdue occurred and its judgment basis -- Other remarks: None 3) Doubtful debt provisions □ Applicable √ Not applicable 339 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (2) Dividend receivables 1) Dividend receivables by category Unit: RMB Items (or investee) Closing balance Opening balance Zhejiang Wanfeng Motorcycle 0.00 129,600,000.00 Wheel Co., Ltd. Total 0.00 129,600,000.00 2) Significant dividends receivable with an aging of more than 1 year Unit: RMB Whether Reasons for not impairment Items (or investee) Closing balance Age received occurred and its judgment basis -- 3) Provision for doubtful debts □ Applicable √ Not applicable Other remarks: None (3) Other receivables 1) Other receivables categorized by nature Unit: RMB Other receivables categorized Closing balance Opening balance by nature Subsidiary financial aid 229,800,000.00 247,700,000.00 Amounts due from related parties 100,000,000.00 Stock repurchases deposit and 866,935.63 6,913,835.11 withdrawal Employee petty cash 173,368.21 198,110.62 Disbursement fee 10,157,307.66 10,157,307.66 Other 716,385.81 211,680.95 Total 241,713,997.31 365,180,934.34 2) Doubtful debt provisions 340 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Unit: RMB Phase I Phase II Phase III Doubtful debt Next 12month Lifetime expected Lifetime expected Total provisions expected credit credit losses (credit credit losses (credit losses not impaired) impaired) Balance on 47.24 47.24 January 1, 2020 Balance in current period on January —— —— —— —— 1, 2020 Provision reversed in 47.24 47.24 current period Balance on December 31, 0.00 0.00 2020 Loss provisions for significant changes in book balances in current period □ Applicable √ Not Applicable Disclosure by aging Unit: RMB Aging Closing balance Within 1 year (including 1 year) 231,356,452.61 1 to 2 years 38,650.56 Over 3 years 10,318,894.14 3 to 4 years 10,318,894.14 Total 241,713,997.31 3) Provision for doubtful debt accrued, recovered or reversed in current period Provision for doubtful debt accrued in current period: Unit: RMB Changes in the current period Opening Closing Category Recovered balance Accrued Write- off Others balance or reversed 2020FY 47.24 47.24 0.00 Total 47.24 47.24 0.00 Including significant provision for doubtful debt recovered or reversed amount: Unit: RMB 341 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Owing parties Recovered or reversed Way of collection -- 4) Other accounts receivable actually written off in the current period Unit: RMB Items Amount written off -- Significant other account receivable written off: Unit: RMB Whether the Nature of payment is Amount Reasons for Write-off Owing parties other account generated by written off write-off procedures receivable related party transactions -- Remarks on other account receivable written off: None 5) Top 5 owing parties with the largest other receivables balances Unit: RMB Proportion to Provision for the total Nature of Closing doubtful debt Owing parties Aging balance of receivables balance at the end of other the period receivables -- 6) Other receivables related to government grants Unit: RMB Estimated time, Government Company Closing balance Aging amount and basis subsidy project of receipt -- 7) Other receivables derecognized due to the transfer of financial assets None 8) The amount of assets and liabilities formed by transferring other 342 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report receivables and continuing to be involved None Other remarks: None 3. Long-term equity investments Unit: RMB Closing balance Opening balance Provisio Provisi Items n for Carrying on for Carrying Book balance Book balance impairm amount impair amount ent ment Investments in 6,104,568,111.43 6,104,568,111.43 4,198,711,501.05 4,198,711,501.05 subsidiaries Total 6,104,568,111.43 6,104,568,111.43 4,198,711,501.05 4,198,711,501.05 (1) Investment in subsidiaries Unit: RMB Changes in the current period Closi ng bala nce Opening balance Invest Provisi Closing balance of Investees (Carrying Investment ments on for Other (Carrying provi amount) increased decrea impair s amount) sion sed ment for impa irme nt Weihai Wanfeng 78,600,024.75 78,600,024.75 Auto Wheel Co., Ltd. Ningbo Aoweier 118,269,148.42 118,269,148.42 Wheel Co., Ltd. Jilin Wanfeng 250,000,000.00 250,000,000.00 Auto Wheel Co., Ltd. Chongqing Wanfeng Aolun 200,000,000.00 200,000,000.00 Aluminum Wheel Co., 343 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Ltd Wanfeng North 797,300.00 797,300.00 America Co., Ltd. Zhejiang Wanfeng Motorcycle 587,585,877.60 587,585,877.60 Wheel Co., Ltd. Weihai Wanfeng Magnesium 32,647,399.88 32,647,399.88 Technology Developmen t Co., Ltd. Shanghai Dacromet Coating 508,163,547.00 508,163,547.00 Industry Co., Ltd. Wanfeng Meridian 1,151,962,857.40 1,151,962,857.40 Holdings Co., Ltd. Shanghai Fengtu Automobile 16,500,000.00 16,500,000.00 Technology Co., Ltd. Wuxi Xiongwei Precision 1,254,000,000.00 1,254,000,000.00 Technology Co., Ltd. Wanfeng Japan Co., 185,346.00 185,346.00 Ltd. Wanfeng Aircraft 1,905,856,610.38 1,905,856,610.38 Industry Co., Ltd. Total 4,198,711,501.05 1,905,856,610.38 6,104,568,111.43 (2) Investments in associates and joint ventures Unit: RMB Openin Changes in the current period Closin Closin Investe g g g es balanc Invest Invest Invest Adjust Chang Cash Provisi Others balanc balanc e ments ments ment ment es in dividen on for e e of 344 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report (Carryi increas decrea gains in other d/profit impair (Carryi provisi ng ed sed and other equity declare ment ng on for amoun losses compr d for amoun impair t) recogn ehensi distrib t) ment ized ve ution under income equity metho d I. Joint ventures II. Associates (3) Other remarks 4. Operating revenue and Operating cost Unit: RMB Current period Prior period Items Revenue Cost Revenue Cost Main operations 2,294,509,596.18 1,994,367,230.96 3,076,231,080.13 2,559,457,625.21 Other operations 54,634,067.04 42,564,059.18 63,428,127.46 46,464,981.02 Total 2,349,143,663.22 2,036,931,290.14 3,139,659,207.59 2,605,922,606.23 Information related to revenue: Unit: RMB Contract Segment 1 Segment 2 Total classification Including: Information related to performance obligations: No Information related to the transaction price allocated to the remaining performance obligations: At the end of the reporting period, the amount of revenue corresponding to the performance obligations that have been signed, but not yet performed or not yet completed is 0.00 yuan. Other remarks: None 5. Investment income Unit: RMB Items Current period Prior period Investment income from long- 499,807,846.99 116,260,000.00 term equity investments under 345 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report cost method Gains on disposal of held-for- -4,600.00 trading financial products Gains on settlement of foreign 1,603,380.82 exchange forward contract Total 501,406,627.81 116,260,000.00 6. Others XVIII. Supplementary Information 1. Non-recurring profit and loss in current period √ Applicable □ Not applicable Unit: RMB Items Amount Note Gains or loss on disposal of non-current assets 501,156.94 Government grants included in profit and loss (excluding those closely related to operating 104,562,193.16 activities of the Company, with quantity/quota based on certain standards) Net profit and loss in the current period from the beginning of the period to the date of the 74,836,418.19 combination arising from a business combination under the common control Gains on changes in fair value of held-for-trading financial assets, derivative financial assets, held-for- trading financial liabilities and derivative financial liabilities, and investment income from disposal of held-for-trading financial assets, derivative financial 2,859,105.21 assets, held-for-trading financial liabilities, derivative financial liabilities and other investment, excluding those arising from hedging business related to operating activities Reversal of provision for impairment of receivables and contract assets that have been tested for 4,653,372.07 impairment on individual basis Other non-operating revenue or expenditures except 33,063,841.71 the above items Less: Corporate income tax affected 27,235,065.43 Non-controlling interest affected 43,299,488.94 Total 149,941,532.91 -- For items defined as non-recurring profit and loss according to the No. 1 Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to Public - Non-recurring Profit and loss, non-recurring profit and loss items listed in the said document defined as recurring profit and loss 346 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report items, specify the reason □ Applicable √ Not Applicable 2. ROE and EPS EPS Profit of the reporting Weighted average ROE Basic EPS Diluted EPS period (RMB/share) (RMB/share) Net profit attributable to ordinary shareholders of 10.27% 0.27 0.27 the Company Net profit attributable to ordinary shareholders of the Company after 7.21% 0.20 0.20 deducting non-recurring profit and loss 3. Accounting data differences under domestic and abroad accounting standards (1) Differences of net profits and net assets in the financial reports disclosed according to the IFRS and Chinese Accounting Standards □ Applicable √ Not Applicable (2) Differences of net profits and net assets in the financial reports disclosed according to the overseas accounting standards and Chinese Accounting Standards □ Applicable √ Not Applicable (3) Reasons for accounting data differences under domestic and international accounting standards, and for the difference adjustment on the data already audited by an overseas audit institution, the name of the audit institution should be noted. None 4. Others None 347 Zhejiang Wanfeng Auto Wheel Co., Ltd.2020 Annual Report Section XIII: Documents Available for Reference I. Financial statements signed and sealed by the legal representative, the person in charge of the accounting work, and the person in charge of the accounting department. II. The original audit report with the seal of the accounting firm and the signature and seal of the certified public accountant. III. The original copies of all Company documents and announcements publicly disclosed in newspapers designated by the CSRC during the reporting period. IV. The original documents of the 2020 Annual Report with the signature of the legal representative. V. The place where the above reference documents are prepared: the office of the Company's Board of Directors. Zhejiang Wanfeng Auto Wheel Co., Ltd Legal Representative: Chen Bin April 30, 2021 348