*ST Kerry (002072): Letter Of Concern

Stock Code: 002072 securities short: *ST Kerry announcement number: 2019-L139

Kerid Cmi Holdings Ltd's reply to the letter of concern of the Shenzhen stock exchange and the members of the board of Directors ensure that the contents of the announcement are true, accurate and complete, and there is no false record, misleading statement or major omission. Kerid Cmi Holdings Ltd (hereinafter referred to as "Kai Reed" or "company") received the letter of concern letter to Kay, Reed and Cmi Holdings Ltd (small board concern letter 2019 [448th]) issued in December 24, 2019. The company immediately conducted a careful study and verification of the problems in the letter.

1, please explain your company's confirmation of the 277 million yuan receivables of the German cotton group, and whether the relevant receivables are in line with the conditions for asset confirmation, and ask the accountant to make clear comments.

Reply:

The company shall receive accounts receivable from the 277 million yuan receivable account of the decotton group, which is formed by the company in accordance with the "major asset sale framework agreement" signed by the German cotton group in February 4, 2015, and the assets sold to the German cotton group by the supplementary agreement signed in July 22, 2015. Details of the assets to be sold are as follows:

The formation of the above assets has the essence of a legally compliant commercial economy, and the relevant documents are complete. When the assets are confirmed at the time, according to the accounting standards for enterprises, the economic benefits can be brought into the enterprise, and the company recognised them as assets in accordance with the standards. The above assets are audited by the accounting firms in the qualified accounting firms engaged in Securities and futures business, which are true and lawful in accordance with the conditions for the confirmation of assets, while having the qualification to engage in Securities and futures business when assets are sold.

The assets appraisal agency Beijing Zhongtian Heng Ping International Assets Appraisal Co., Ltd. has carried out the evaluation, which is real and fair. Because the company has not yet hired an annual accounting firm, the company has not yet obtained the opinion of the accountant. The company will hire the accounting firm as soon as possible and invite the accounting firm to give an opinion after the election.

2, Zhang Peifeng made a commitment to pay debt in 2017, after which he failed to fulfill his promise for a long time. Please explain the specific background and reasons for its debt undertaking at the current time in the light of the reasons for its failure to fulfill its promise in the early stage.

Zhang Peifeng issued a letter of commitment to the company on 18 May 2017, promising that he and Reed are actively communicating with the Shandong Securities Regulatory Commission and the Shenzhen stock exchange to complete the sale of all textile properties as soon as possible with the Shandong Securities Regulatory Commission and the Shenzhen stock exchange. Zhejiang's fifth quarter Industrial Co., Ltd. has already issued a promise: "if the German cotton group fails to pay the transaction consideration within the time limit stipulated in the agreement, the fifth quarter industry will raise funds through various ways such as self financing and financing, instead of paying the remaining balance of the transaction price which the German cotton group has not yet paid for the sale of the assets. The fifth quarter industry will pay the payment after the payment of the price. Therefore. As chairman of the Cmi Holdings Ltd, Reed, chairman of the Cmi Holdings Ltd, will urge the Dezhou municipal government and the German cotton group to pay the full amount of the sale of the textile assets to the company before December 31, 2017, and assume the security responsibility for the actual payment of the remaining amount.

In April 25, 2018, on the basis of the above commitments, Zhang Peifeng paid the price of 50 million yuan for the sale of textile assets by the receipts of the Kai Reed company and the cash bank of the Dade cotton group. At the same time, he made a new commitment in April 25, 2018. He promised that he would continue to urge the German cotton group and Zhejiang fifth quarter Industrial Co., Ltd. to pay the balance and payment commitments before December 31, 2018, and to continue to provide guarantees for the payment of the balance.

In view of the main debtor of de cotton group, Zhang Peifeng is the guarantor of the debt, and is also the guarantor of Zhejiang fifth quarter industrial limited company. When the German cotton group did not repay the debt and the company has been actively and continuously promoting the payment of arrears by the German cotton group, Zhang Peifeng did not take the initiative to undertake and fulfill the guaranty responsibility when Zhejiang fifth quarter Industrial Co., Ltd. failed to fulfill the obligation of guaranty. In order to ensure that the interests of the company are not damaged and fail to contact Mr. Wu Lianmo, the actual controller of the fifth quarter industrial limited company of Zhejiang, in order to maximize the protection of the interests of listed companies and other small shareholders, properly solve the historical legacy of the sale of textiles to the German cotton group, at the same time, in order to safeguard the interests of Zhang Peifeng as the second largest shareholder of the company, Zhang Peifeng voluntarily undertakes the debt payment of the assets sold by the German cotton group under the company's assets.

3, Zhang Peifeng is currently detained in the detention center of Jinhua, Zhejiang Province, and has been listed as a restricted consumer by several courts. Please take into account the specific reasons for the enforcement measures, the latest progress in the case, personal assets, liabilities, the situation of the court being restricted to the consumer, the commitments made by the other third parties (if any), the credit of the bank or financial institutions, if there is any other credit enhancement measures or performance guarantee measures, to show whether it has the ability to perform. The independent directors are required to verify and express their views on the above matters.

As an independent director of the company, the following comments are made on Zhang Peifeng's personal status and whether he has the ability to perform.

I. verification

1, Mr. Zhang Peifeng is being detained in a detention center in Jinhua, Zhejiang Province on suspicion of a criminal offence. According to the information previously obtained by the company, Mr. Zhang Peifeng is suspected of manipulating the securities market. According to the criminal procedure law of the People's Republic of China, in the whole criminal procedure of Zhang Peifeng's criminal cases, because of the criminal investigation system and disciplinary requirements, as an independent director of the company, we can not know the latest progress of the case involved.

2, subject to objective conditions, we have no right to verify Zhang Peifeng's personal assets and liabilities. However, we can learn about Zhang's information by referring to the relevant information of "China's implementation of information disclosure network" and "national enterprise credit information publicity system".

(1) the current assets of Zhang Peifeng's foreign investment are as follows:

1. Kai Reed Cmi Holdings Ltd (direct shareholding 5.19%, holding 9143134 shares, according to the closing price in December 27, 2019 corresponding value of 58 million 970 thousand yuan, at present the stock is in pledge).

2. Shenzhen city's Dun Stone Industrial Co., Ltd. (indirectly holding 100% of Shenzhen's Qianhai Dan's information Limited). In June 18, 2019, it was listed in the abnormal list of the camp by the Shenzhen market and the quality supervision and Management Committee Futian Bureau in June 18, 2019 because of the unregistered connection with the residence or business premises. There was no mortgage or pledge situation; in September 23, 2019, the enforcement case was executed as a result of (2019) Guangdong 01 enforcement 5298; in October 22, 2019, because of (0304) 31584 of Guangdong 0304, it became the executor; not the dishonest executor.

3. Lishui Dehong Auction Co., Ltd. (direct shareholding 27.78%) has no violation.

(4) Lishui Ardo handicraft development Co., Ltd. (direct indirect shareholding 99.8382%), Zhang Peifeng made the pledge amount of 1 million 735 thousand yuan, and in September 23, 2019, it became the executor because of (2019) Guangdong 01 enforcement 5298 enforcement case; in October 22, 2019, (2019) Guangdong 0304 31584 became the executor, but not the dishonest executor.

5. Shenzhen Qianhai Dan's information limited company (direct shareholding 100%) was listed in the abnormal list of Shenzhen municipal Market Supervision Bureau in December 12, 2019 because it did not publicized the annual report in 2018 according to the prescribed time limit. It is not the executor, but the dishonest executor.

(2) Zhang Peifeng's liabilities and restricted consumption are as follows

(1) in the query page of the "dishonest executor", enter the name of the executor "Zhang Peifeng" and its identity card number "332522197702150093". The result of the inquiry is "no 332522197702150093 Zhang Peifeng has been found nationwide.

Related results ".

(2) in the "restricted consumption personnel" enquiry page, enter the name of the executor "Zhang Peifeng" and its identity card number "332522197702150093". The result of the enquiry shows that there are 25 cases in execution that restrict Mr. Zhang Peifeng to the consumer. First to twenty-first cases were carried out by Kay Reed company, and Mr. Zhang Peifeng was restricted by consumption as the current legal representative of Kay Reed company. Sir, as the executor, he has been listed as a limiting consumer member. There are two cases: one is twenty-second cases, and the other is the contract dispute between Mr. Zhang Peifeng and the Shanghai Pudong Development Bank Pudong branch of the Shenzhen branch, which is restricted by the Futian District court of Shenzhen (case number 2019 (Guangdong Province 0304) 31584); two is twenty-third to twenty-fifth, and Zhao Jun and the executor Lishui Lishui handicraft development Co., Ltd., the executor Shenzhen City, and the executor Zhang Peifeng loan contract dispute case, was restricted consumption by the intermediate people's Court of Guangzhou (case number 2019 2019). Zhang Peifeng

There are two cases of direct execution by Mr. Zhang Peifeng as mentioned above: the court of Futian District, Shenzhen (2019), No. 0304 of Guangdong 0304, with the enforcement target of 23995438 yuan; Guangzhou intermediate people's Court (2019), Guangdong 01, 5298, with the implementation target of 165588736 yuan.

In addition to the above query information and Kai Reed has disclosed information, I failed to verify other information that needs to be supplemented.

3, after verification, Zhang Peifeng has not undertaken any other third party's promise to pay for the debts mentioned above, nor does Zhang Peifeng have any credit from banks or financial institutions, nor does there exist any other measures to increase credit or safeguards for performance. In view of the fact that Mr. Zhang Peifeng has paid $27 million 720 thousand to the company through his concerted action Mr. Wang Jian's actual control of the company (Beijing) Limited, the follow up may be paid by the third party on behalf of the company and other measures to enhance its ability to perform the contract. Third.

Two. Verification opinion

According to Mr. Zhang Peifeng's current situation and behavior, as an independent director of the company, we believe that Mr. Zhang Peifeng has certain solvency, for the following reasons:

First, Mr. Zhang Peifeng arranged a concerted action. Wang Jian passed the insurance company's prosperity in December 20, 2019 to pay 10% yuan or 27 million 720 thousand yuan for the 270 million yuan de cotton group's arrears.

Second, Zhang Peifeng paid 50 million 10 thousand yuan to the company in April 2018, and the payment of 27 million 720 thousand yuan. Mr. Zhang Peifeng enjoyed a total debt of 77 million 730 thousand yuan for the German cotton group. In the relevant agreement on the transfer of creditor's rights and liabilities, Zhang Peifeng provided the company with a pledge of 77 million 730 thousand yuan of creditor's rights, and entrusted the company with 77 million 730 thousand yuan of creditor's rights to the company. The company had the right to repay the company's debts of 249 million yuan in advance, and the guarantee coverage accounted for 32% of the debt payable by Mr. Zhang Peifeng.

Third, although Mr. Zhang Peifeng entrusted the voting rights of 5.19% of the company to Mr. Wang Jian, the above 5.19% companies

The right of return of the stock is still Mr. Zhang Peifeng. According to the closing price of the stock in December 27, 2019, the stock corresponds to the value of 58 million 970 thousand yuan. Although the stock has been pledged, the stock after the pledge is satisfied can still be used to repay the company's 249 million yuan debt. We believe that Mr. Zhang Peifeng has certain solvency based on the above, but we can not deduce that Mr. Zhang Peifeng has full solvency and performance capability. The company has made sufficient risk hints about the uncertainty of Zhang's performance capability.

The lawyer's opinions are detailed in the reply of Shanghai Haihua Yongtai (Beijing) law firm concerning the letter of concern.

4. Let Zhang Peifeng clarify whether his payment commitment is irrevocable and irrevocable, and ask his lawyer to make clear opinions.

Reply:

According to the contract signed by Mr. Zhang Peifeng, the company and Jinmian, Zhang Peifeng's commitment to undertake the accounts payable by the German cotton group as a new payment agent is irrevocable and irrevocable. The reasons are as follows:

The legal provisions of the company concerning the change and cancellation of the contract are as follows:

General principles of civil law

147th civil juristic acts based on major misunderstandings, and the perpetrator shall have the right to request the people's courts or arbitration institutions to cancel them.

The 148th party shall be guilty of fraudulent means to make the other party act in violation of the true meaning of the civil legal act. The fraudulent party shall have the right to request the people's court or the arbitration agency to cancel it.

If a 149th party or third persons commit a fraud, a party who knows or should know the fraudulent act in violation of the true meaning of the civil act, the fraudulent party shall have the right to request the people's court or the arbitration institution to cancel it.

If the 150th party or third party coercion means to make the other party act in violation of the true meaning, the coercive party shall have the right to request the people's court or the arbitration agency to cancel it.

If the 151st party takes advantage of the other party in a state of distress and lack of judgement, the civil juristic act is unfair when it is established, and the injured party shall have the right to request the people's court or the arbitration agency to cancel it.

Contract law of the People's Republic of China

In the fifty-fourth contract, the parties shall have the right to petition the people's court or the arbitration institution to alter or cancel: (1) made by a major misunderstanding; (two) when the contract is concluded, it is obviously unfair. The injured party shall have the right to request the people's court or arbitration institution to alter or cancel the contract made by the party in violation of the true meaning by fraud, coercion or the danger of taking advantage of others.

The seventy-seventh parties can change the contract by consensus. In accordance with the provisions of laws and administrative regulations, the approval and registration procedures shall be applied to change contracts.

According to the above legal provisions, (1) the contract can be changed through consultation by the parties concerned; (2) the injured party has the right to request the court or arbitration institution to alter or cancel the contract based on a major misunderstanding, one party being cheated, one party being coerced or under unfair circumstances.

[(2019) Chinese businessman FJZ No. 0182], in December 3, 2019, Xu Shuigen, lawyer and lawyer of Guangdong business law firm, witnessed Mr. Zhang Peifeng's careful inspection of documents such as 2019DM1 and 2019DM2, and fully understood the contents of the above-mentioned documents, clearly defined the rights and obligations of the parties to the agreement, and then signed and pressed the fingerprints on the above-mentioned documents. Xu Shuigen lawyer and Chen Zike lawyer also witnessed the authorized representatives of your company and Dezhou Jinmian Textile Co., Ltd., Li Jiang, after consulting the agreement carefully, he said that he knew the contents of the agreement completely, clearly defined the rights and obligations of the parties to the agreement, and then added the official seal to the instruments such as the creditor's rights transfer agreement (2019DM1), the contract (2019DM2), and so on. 2019DM1 according to "lawyer's certificate" issued by Guangdong Chinese business law firm in December 5, 2019. It can be seen that Zhang Peifeng signed the above contract, which is the true meaning of the contract. The contract has come into force and there is no major misunderstanding, fraud, coercion or unfair situation. There is no statutory revocable or changeable reason in the contract.

The lawyer's opinions are detailed in the reply of Shanghai Haihua Yongtai (Beijing) law firm concerning the letter of concern.

5, please explain why the shareholders holding the 3% stake of your company, Baoding Dingsheng international trade (Beijing) Company (hereinafter referred to as "Baocheng Dingsheng"), pay the 27 million 720 thousand payment on behalf of Zhang Peifeng, so as to ensure whether the debt will continue to be paid for the remaining debts. Whether there is any other undisclosed agreement or transaction arrangement between Zhang Peifeng and your company and Wang Jian and Wang Xuanzhe, whether there is any other undisclosed relationship or action relationship. Lawyers are requested to make clear comments on the above matters.

Reply:

1. The reason why Holding Company's 3% share holder has reached the peak of Zhang Peifeng's 27 million 720 thousand payment.

In May 24, 2019, Mr. Zhang Peifeng and Mr. Wang Jian signed the entrustment agreement on Shareholder's right to vote. Because Mr. Zhang paid a sum of money to Mr. Wang Jian, in order to ensure that Mr. Wang Jian could recover his arrears, Mr. Zhang Peifeng exercised unconditionally and irrevocable consignment of the 9143134 shares of the ordinary tradable shares of the company (5.19% of the total share capital) of his company to Mr. Wang Jian, who was acting in concert. Baocheng Dingsheng is a shareholder of 3% of the company. Its shareholders are Mr. Wang Jian (who accounts for 70% of the registered capital of Baocheng, the actual controller of the company) and Mr. Wang Xuanzhe (30% of the registered capital). Mr. Wang Jian and Mr. Wang are also directors of the company, and Wang Jian holds the right to vote for 8.19% of the total voting rights of the company. Mr. Wang Jian, as the real controller of prosperity, Zhang Peifeng and Wang Xuanzhe, as directors of the company, agreed to agree to pay the company's payment of 27 million 720 thousand yuan to the company, which is in line with business logic.

Two, will the payment of liabilities to the remaining debts be fulfilled? Zhang Peifeng, your company and Baocheng prosperity and their shareholders.

Is there any other undisclosed agreement or transaction arrangement between Wang Xuanzhe and kin? Is there any other undisclosed relationship or concerted action relationship?

Up to now, the inquiry has been held in the prime of life, and there has been no declaration of payment obligation for the remaining debts, nor has there been any other undisclosed agreements and transaction arrangements with Zhang Peifeng, the company and its shareholders, Wang Jian and Wang Xuanzhe, and there are no other undisclosed ties or concerted actions. The lawyer's opinions are detailed in the reply of Shanghai Haihua Yongtai (Beijing) law firm concerning the letter of concern.

6. According to the instructions submitted by your company, the transfer of creditor's rights does not affect profit and loss and does not affect net assets. Please ask the accountant to give opinions on the specific accounting treatment of the received money and the future payment. If the above shareholders' meeting is deliberated, please explain the specific method and basis for your company to prepare the bad debt provision for the accounts receivable at the end of the accounting year and subsequent accounting year. Reply:

(1) the specific accounting treatment of the company's receipt of funds and future payments.

Owing to the sale of assets to de cotton group for 15 years, the company acquired 277 million 200 thousand yuan owed by the German cotton company. Now the company will transfer Zhang Peifeng's 27 million 720 thousand yuan claims to the German cotton group to the company.

Borrow: other receivables - Zhang Peifeng 27 million 720 thousand yuan loan: other receivables - 27 million 720 thousand of the German cotton group company received the payment made by Zhang Peifeng to the company in December 20, 2019.

Borrow: 27 million 720 thousand yuan of bank deposits: other receivables - Zhang Peifeng 27 million 720 thousand yuan according to the contract signed by the company, Jinmian and Zhang bFeng. Zhang Peifeng voluntarily replaced the German cotton group as the payment obligation of the above-mentioned "Kay Reed Cmi Holdings Ltd major asset sale framework agreement" and "Kai Reed Cmi Holdings Ltd major asset sale supplementary agreement", paying the remaining balance of 249508699 yuan. The company carries out the following accounting treatment according to the relevant provisions of the contract:

Borrow: other receivables - Zhang Peifeng 24950.87 loan: other receivables - the 24950.87 company of decotton group received Zhang Peifeng's repayment of the debt from the company according to the contract.

Loan: bank deposit loan: other receivables - Zhang Peifeng listed company and the German cotton group signed the "major asset sale framework agreement" in February 4, 2015, and the supplementary agreement signed in July 22, 2015, and the agreement on debt rights transfer signed by Jinmian and Zhang Peifeng in November 19, 2019.

The contract is processed in accordance with the accounting standards of enterprises. The above accounting treatment does not involve liabilities, equity and profit and loss accounting subjects. The listed company recovers that accounts receivable from assets sold by the listed company are converted from other accounts receivable to bank deposits, which will not affect the company's assets and profits or losses.

(2) if the above matters are considered and approved by the shareholders' general meeting, please explain the specific method and basis for your company to prepare bad debts for the accounts receivable at the end of this year's accounting and subsequent accounting year. Reply:

When considering the above matters, the company's associated shareholders, Zhejiang fifth quarter industrial limited company, Mr. Zhang Peifeng, Mr. Wang Jian, Baocheng Dingsheng International (Beijing) Co., Ltd., will avoid voting. If the above shareholders' meeting is adopted for examination and approval, the main body of the company's receivable asset sales shall be changed from the German cotton group to Zhang Peifeng, and the debtor of the Zhang Peifeng company. The company will carry out the impairment test according to the account receivable bad account policy of other enterprises and the method of accounts receivable in the new financial instruments.

Because the company has not yet hired an annual accounting firm, the company has not yet obtained the opinion of the accountant. The company will hire the accounting firm as soon as possible and invite the accounting firm to give an opinion after the election.

7, please explain that the reason why your board of directors submitted the motion on subsidiary related transactions (two) to the shareholders' meeting is whether it is in conformity with the relevant provisions of the company law, the articles of association and the rules of procedure of the shareholders' meeting. Lawyers are requested to verify and express their views on the above matters.

Reply:

The board of directors of the company submitted the motion on subsidiary related transactions (two) to the shareholders' meeting for consideration.

(1) as a result of the related items in the bill on related transactions (two) of subsidiary companies, according to the second articles (six) of the 111st articles of the articles of association, the related transactions involving the transactions between the company and the associated person (except for the guarantee) amount to more than thirty million yuan, and account for more than 5% of the absolute value of the audited net assets of the company in the latest period, shall be submitted to the shareholders' meeting for deliberation after deliberation by the board of directors of the company. The absolute value of the latest audited net assets of the company is 189532314.52 yuan, and the amount of the related transaction is 249 million, so as to meet the standards required to be submitted to the shareholders general assembly for consideration in the articles of association.

(2) according to the 100th law of the company law, "the annual general meeting of shareholders should be held annually. In case of any of the following circumstances, a provisional shareholders meeting shall be held within two months: (four) when the Board considers it necessary. " The 102nd law of the company law: "convening the interim shareholders general meeting shall notify the shareholders fifteen days before the meeting. A shareholder who holds more than three percent of the shares of a company individually or collectively may submit a provisional proposal ten days before the shareholders' meeting and submit it to the board of directors in writing. The board of directors shall notify the other shareholders within two days after receiving the proposal and submit the provisional proposal to the shareholders' meeting for deliberation. The company was in public in December 14, 2019.

In the form of the notice, a notice was held to convene the general meeting of shareholders. In December 19, 2019, he received a letter entitled "proposal to increase the provisional motion for the third extraordinary shareholders meeting of 2019" submitted by the shareholder of the company holding 3% of the company's shareholding, which was submitted by Dingsheng international trade (Beijing) Co., Ltd., and submitted the motion on related transactions (two) of the subsidiary company to the company's provisional shareholders' meeting for consideration and vote in the form of a provisional proposal on 2019. Therefore, the matter of this transaction is submitted to the shareholders' meeting by the board of directors for consideration of the provisions of the company law.

(3) according to the company's rules of procedure of shareholders' meeting fourth: "shareholders' meeting is divided into annual general meeting and provisional shareholders meeting. The annual general meeting shall be held once a year and shall be held within 6 months after the end of the preceding accounting year. If the provisional shareholders' meeting is not held regularly, one of the following situations shall occur. A provisional shareholders meeting shall be held within two months: (four) when the Board considers it necessary. " This transaction is submitted to the shareholders' meeting for consideration by the board of directors on the basis of the provisional motion submitted by the board of directors and the relevant provisions of the company law and the articles of association of the company, which is in conformity with the provisions of the company's rules of procedure for shareholders' meetings.

(4) Zhejiang fifth quarter Industrial Co., Ltd., Mr. Zhang Peifeng, Mr. Wang Jian, Baocheng Dingsheng international trade (Beijing) Co., Ltd. related party. Therefore, the items related to the subsidiary related transactions (two) Bill constitute related transactions. At the shareholders' meeting, the motion is that the shareholders of Zhejiang fifth quarter industrial limited company, Mr. Zhang Peifeng, Mr. Wang Jian, Baocheng Dingsheng international trade (Beijing) Co., Ltd. all avoid voting. The matter will be referred to the non related small and medium-sized shareholders for voting, and decide whether the company and Zhang Peifeng will finally sign the above contract through legalization, market-oriented legal compliance, open and fair way. Therefore, the board of directors of the company decided to submit the bill on related transactions of subsidiaries (two) to the shareholders' meeting for deliberation.

In summary, the company believes that the board of directors will submit the motion on matters related to the transactions of subsidiaries (two) to the shareholders' meeting to consider relevant provisions in accordance with the company law, the articles of association and the rules of procedure of shareholders' meetings, and it is also a measure to safeguard the legitimate rights and interests of small and medium shareholders.

The lawyer's opinions are detailed in the reply of Shanghai Haihua Yongtai (Beijing) law firm concerning the letter of concern.

Notice hereby.

Kerid Cmi Holdings Ltd board of directors

December 31, 2019