Zhejiang Furun (600070): Reply To The Inquiry Letter On Equity Transfer

Stock Code: 600070 stock abbreviation: Zhejiang Furun Announcement No.: 2021-034

Reply notice of Zhejiang Furun Digital Technology Co., Ltd. on the inquiry letter of equity transfer related matters

The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this announcement, and shall bear individual and joint liabilities for the authenticity, accuracy and completeness of the contents.

Special risk tips:

The framework agreement on share transfer signed by Furun Holding Group Co., Ltd. (hereinafter referred to as "Furun group") and Guoxin Huaxia Information System Group Co., Ltd. (hereinafter referred to as "Guoxin Huaxia") on June 9, 2021, is only an agreement of intent, Among them, there are preconditions for equity transfer and voting right entrustment arrangement. Investors should pay attention to the uncertainty risk of this transaction

1. Before the formal agreement on share transfer is signed between Furun group and Guoxin Huaxia, due diligence and examination and approval by the competent authorities of both parties are required. There is significant uncertainty whether the transfer can be completed.

2. The precondition of voting power entrustment is that Guoxin Huaxia coordinates and arranges the listed companies to complete the introduction of strategic resources, which is mainly to coordinate the project contact and docking between the listed companies and the resource parties associated with the existing big data business, and complete the project landing. There is significant uncertainty whether the project can be implemented. At present, no formal agreement has been signed on the specific content, completion standard and time cycle of strategic resources introduction, and there is significant uncertainty whether the preconditions for voting power entrustment can be reached.

3. According to the "framework agreement on share transfer" signed by both parties, if Furun group only entrusts 5.24% of the voting rights, the transferee does not conform to the determination of the actual controller in the administrative measures for acquisition of listed companies. Only when the transferee meets the requirements of Article 84 of the administrative measures for the acquisition of listed companies will the right of control of the company be changed.

Please pay attention to the above risks and invest rationally.

On June 10, 2021, the company received the inquiry letter on matters related to equity transfer of Zhejiang Furun Digital Technology Co., Ltd. (shgh [2021] 0611) (hereinafter referred to as the "inquiry letter") issued by the supervision department of listed companies of Shanghai Stock Exchange The controlling shareholders, the transferee and other parties of polar organization jointly implement and reply to the issues involved in the inquiry letter one by one. The announcement is as follows:

1、 The announcement disclosed that after Guoxin Huaxia coordinated and arranged the listed company to complete the introduction of strategic resources, Furun group entrusted Guoxin Huaxia with the voting right of no less than 5.24% of the total shares of the listed company according to the project situation. The company is requested to: (1) clarify the specific meaning of "coordinating and arranging listed companies to complete the introduction of strategic resources", the standards for the completion and the time limit requirements（ 2) Clarify the time limit of voting right entrustment, whether it can be revoked and the conditions for revocation（ 3) State whether there is consideration arrangement for voting right entrustment. If so, please disclose the specific agreement（ 4) Combined with the relevant arrangements of voting power entrustment, the risk is fully indicated.

（1） To clarify the specific meaning of "coordinating and arranging listed companies to complete the introduction of strategic resources", the standards for determining the completion and the time limit requirements;

reply:

According to the framework agreement on share transfer signed by the controlling shareholder Furun group and Guoxin Huaxia, Furun group will entrust part of the voting rights of its shares to Guoxin Huaxia after Guoxin Huaxia coordinates and arranges the listed company to complete the introduction of strategic resources. The transferee will coordinate and arrange the listed companies to complete the introduction of strategic resources, mainly to coordinate the listed companies and the resource parties related to the existing big data business for project contact and docking, and complete the project implementation.

In 2020, the listed companies have completed the stripping of traditional business such as printing and dyeing, and are committed to concentrating resources to develop emerging businesses with internet marketing and data analysis as the core. Guoxin Huaxia, the transferee, is a wholly-owned enterprise under China Guoxin Information Corporation. China Guoxin Information Corporation is subordinate to the National Information Center. The business scope of Guoxin Huaxia's subsidiary holding companies covers aviation logistics, high-tech, information technology, property management, supply chain management and other fields. As of December 31, 2020, the total assets of Guoxin Huaxia are 2.990 billion yuan, the net assets are 613 million yuan, and the asset liability ratio is 79.46%; In 2020, the operating revenue is 589 million yuan, and the net profit is 10 0235 million yuan（ The above financial data are taken from Guoxin Huaxia's audited consolidated financial statements in 2020). Guoxin Huaxia and its controlling shareholders have no plans to inject assets into listed companies.

At present, Guoxin Huaxia and China Guoxin Information Corporation have reached investment agreements or cooperation intentions with several local governments on IDC (Data Center) construction projects. After Guoxin Huaxia becomes a shareholder of the listed company, it will actively coordinate and arrange the listed company to become the main participant of IDC projects in various regions. According to the further communication between the two sides of the transaction, it is clear that the content of introducing strategic resources is not less than 10000 cabinets or IDC projects with an investment scale of 1 billion yuan; The completion standard is to realize the formal contract signing of the project and obtain the approval approval from the competent government departments; The completion time is within 6 months after the completion of 9% share transfer. At present, the transferor has not signed a formal agreement on the specific content, completion standard and time cycle of the above strategic resources introduction

In the agreement.

In this transaction, Guoxin Huaxia coordinated the introduction of strategic resources by listed companies as the precondition of voting power entrustment, mainly considering that IDC projects need to be approved by government departments, which has certain uncertainty. Guoxin Huaxia's transfer of 9% shares is mainly based on the judgment of the long-term value of the listed company and the recognition of the existing business development potential of the listed company. If it fails to introduce the project of continuously improving the company's value for the listed company, it is willing to be the strategic shareholder of the listed company for a long time and jointly promote the business development of the listed company with the controlling shareholder.

（2） Clarify the time limit of voting right entrustment, whether it can be revoked and the conditions for revocation;

reply:

According to the framework agreement on share transfer, voting power entrustment is subject to preconditions, and the two parties have not set a time limit for voting right entrustment. On the basis of ensuring the stability of the control right of the listed company, both parties will agree on the entrustment period when signing the voting power entrustment agreement. Up to now, the preconditions of voting right entrustment have not been met, the two parties have not signed the voting right entrustment agreement, and the control right has not been changed. Investors should pay attention to the risks.

If the trustee violates laws and regulations and damages the interests of listed companies and shareholders and is subject to administrative punishment, the authorization of voting rights can be revoked. If the transferee continues to increase the shares of the listed company in the future and can meet the identification standard of the actual controller without considering the entrustment of voting rights, the voting right will be automatically revoked.

（3） State whether there is consideration arrangement for voting right entrustment. If so, please disclose the specific agreement;

reply:

There is no consideration arrangement for voting right entrustment.

（4） Combined with the relevant arrangements of voting power entrustment, the risk is fully indicated.

reply:

1. The premise of the delegation of the voting right is that the transferee coordinates the introduction of strategic resources for the listed company, whether it can be introduced or not, and the introduction time are uncertain;

2. Guoxin Huaxia becoming a shareholder of the company is a long-term cooperation arrangement based on the common values and the consensus of the future development goals of listed companies. Controlling shareholders set up the preconditions of voting rights entrustment, in order to better protect the interests of listed companies and shareholders. If the preconditions are satisfied, the controlling shareholders are willing to transfer more decision-making power of listed companies to Guoxin Huaxia. But at present, the preconditions of voting right entrustment are not satisfied, the voting power entrustment agreement has not been signed, and the transfer parties have not yet agreed on the term and method of voting right entrustment. In this process, there is a risk of disagreement between the two sides. Both sides promise to perform their respective rights and obligations in strict accordance with the requirements of laws and regulations. Please pay attention to the investment risks.

2、 According to the announcement, Furun group plans to transfer 9% equity to Guoxin Huaxia, with a transaction price of 397 million yuan. The prerequisite for the above equity transfer is that Guoxin Huaxia has completed due diligence and is satisfied with the results, and has been approved by the competent authorities of both parties. The company is requested to make supplementary disclosure: (1) the specific purpose of the transfer funds of Furun holdings and whether it has plans to continue to reduce the shares of the listed company in the next 12 months（ 2) The approval procedures, due diligence schedule, expected due diligence result issuing time, etc. of the above equity transaction shall be fully indicated in combination with the actual situation.

（1） Whether Furun group has plans to reduce the shares of Listed Companies in the next 12 months for the specific purposes of the transferred funds;

reply:

In August 2020, Furun group, the controlling shareholder of the company, transferred the traditional business of the listed company at the price of 315.4486 million yuan (see the company announcement Lin 2020-053 for details), and its main source of funds is bank loans. By the end of May 2021, the stock pledge rate of Furun group reached 48.98%. The main purpose of the share transfer funds of Furun group is to repay bank loans and reduce debts and burdens.

According to the framework agreement on share transfer, Furun Group intends to entrust some voting rights of shares to the transferee in the next 12 months. In addition to the above arrangements, as of the disclosure date of this announcement, Furun group has no plan to continue to reduce the shares of Listed Companies in the next 12 months. If there is a reduction plan in the future, it will fulfill the obligation of information disclosure in accordance with the law.

（2） The approval procedures, due diligence schedule, expected due diligence result issuing time, etc. of the above equity transaction shall be fully indicated in combination with the actual situation.

reply:

For this equity transaction, the transferee Guoxin Huaxia shall obtain the approval of China Guoxin Information Corporation in addition to the internal decision-making procedures. As an enterprise owned by the whole people, China Guoxin Information Corporation implements the factory director (Manager) responsibility system according to the law of the people's Republic of China on enterprises owned by the whole people, and can make decisions on the use of its own retained funds. The transferor Furun group shall perform the procedures of the board of directors and the shareholders' meeting in accordance with the articles of association, and report to the state-owned shareholders for the record. According to the framework agreement on share transfer, Guoxin Huaxia will arrange lawyers and accountants with securities practice qualification to conduct due diligence on the listed company after paying the deposit. It is expected that the due diligence results will be issued within 30 days, which will be determined through consultation with the listed companies.

To sum up, there are major uncertainties in the equity transaction, such as the failure to pass the approval and the due diligence results are not as expected, which may lead to the failure to sign a formal transaction agreement. Please pay attention to the investment risk.

3、 According to the announcement, Guoxin Huaxia will hold no less than 14.24% of the voting rights after the completion of the transaction, and the total proportion of the voting rights held by Furun group and Huifeng venture capital, the person acting in concert, will be reduced to less than 10%. Therefore, it is believed that the company's control right will change. Please explain whether the company's determination of the actual controller complies with the relevant provisions such as the administrative measures for the acquisition of listed companies and other relevant provisions, and whether the relevant transaction arrangements are conducive to maintaining the stability of the company's control power in combination with the shareholding ratio of all subsequent parties, the seats of the board of directors, personnel arrangement, and daily business decisions.

reply:

According to the framework agreement on share transfer signed by both parties, after the agreement transfer and voting right entrustment are completed, Guoxin Huaxia (or its share transferee) will hold 9% of the shares and 14.24% of the voting rights of the listed company, while Furun group and its persons acting in concert will hold 10% of the shares, and the number of voting rights held by Furun group will be lower than that of the equity transferee. At the same time, in the company's nine board seats (including three independent director seats), the subject of share transfer will obtain three non independent director seats and one independent director's nomination right.

According to the provisions of Article 84 of the administrative measures for the acquisition of listed companies, the right of control of a listed company shall be deemed to have one of the following circumstances:

(1) The investor is the controlling shareholder holding more than 50% shares of the listed company;

(2) Investors can actually control more than 30% of the voting rights of the listed company's shares;

(3) Investors can determine the appointment of more than half of the board of directors by actually controlling the voting rights of the listed company's shares;

(4) The voting rights of the listed company that the investor can actually control are enough to have a significant impact on the resolution of the general meeting of shareholders of the company;

(5) Other circumstances recognized by the CSRC.

According to the framework agreement on share transfer signed by both sides of the transfer, it does not conform to the determination of the control right of the listed company in Article 84 of the administrative measures for the acquisition of listed companies. In order to clearly identify the control right of the listed company, through further communication between the transferor and the transferor, on the premise of meeting the voting right entrustment, Furun group is willing to increase the voting right entrustment by 5.16% on the basis of 5.24% of the voting right, so as to increase the proportion of shares with voting right owned by the subject of share transfer to 19.40%. No formal agreement has yet been signed for the above-mentioned new voting rights entrustment arrangement, which needs to be signed It shall be stipulated in the formal agreement. According to the register of shareholders of the company as of May 31, 2021, if the proportion of voting rights held by Guoxin Huaxia (or the subject of its share transfer) is increased to 19.40%, the total proportion of voting rights held by Furun group and Huifeng venture capital will be reduced to 4.84%, The proportion of voting rights held by Guoxin Huaxia (or its equity transferee) will be more than 4 times of that held by Furun group and Huifeng venture capital, the person acting in concert. In addition, according to the number of shareholders attending the first extraordinary general meeting of shareholders in 2021 and the general meeting of shareholders in 2020, the total shareholding ratio of shareholders with voting rights attending the first extraordinary general meeting of shareholders in 2021 is 6831%, and the total shareholding ratio of voting shareholders attending the 2020 general meeting of shareholders is 31.7722%. Based on the voting situation of the above two voting shareholders participating in the company's general meeting, Guoxin Huaxia (or its share transferee) holds 19.40% of the company's shares that can be actually controlled, which will have a significant impact on the resolution results of the general meeting of shareholders, and be able to determine the election of more than half of the board of directors of the company, It is in line with the standards of Article 84 (3) and (4) of the administrative measures for acquisition of listed companies on the recognition of having the control right of listed companies. At the same time, Furun group agrees that the subject of share transfer can increase the nomination right of another independent director, so that the number of seats on the board of directors can be increased to three of the six non independent directors and two of the three independent directors, which is more than half of all members of the board of directors.

According to the framework agreement on share transfer, the subject of share transfer will recommend one executive deputy general manager and one deputy chief financial officer to the listed company to participate in the daily operation and management. According to the needs of follow-up business development, the introduction of strategic resources and the specific implementation of voting power entrustment, the listed company will adjust the senior management personnel in accordance with the provisions of the articles of association to ensure the stability of the control right of the listed company. The daily business decisions of listed companies will be carried out in strict accordance with the company law, the articles of association, the Listing Rules of Shanghai Stock Exchange and the company's internal control system. The above arrangement on the board of directors and the adjustment of senior management personnel are not binding on both sides of the transfer, and need to be agreed upon when signing a formal agreement. Please pay attention to the risk of investment.

It is hereby announced.

Zhejiang Furun Digital Technology Co., Ltd

Board of directors 19 June 2021