*ST Kerry (002072): Prior Notice Of Administrative Penalty And Market Entry.

Stock Code: 002072 securities short: *ST Kerry announcement number: 2019-L078

Kerid Cmi Holdings Ltd received notice of administrative penalty and market entry notice in advance

All members of the company and the board of directors guarantee that the contents of the information disclosure are true, accurate and complete, without false records, misleading statements or major omissions. Kerid Cmi Holdings Ltd (hereinafter referred to as "Kai Reed" or "company") received the notice of investigation (No. 2016020: Lu Zheng No. 2) of the China Securities Regulatory Commission (hereinafter referred to as the "China Securities Regulatory Commission") in October 31, 2016. It was suspected of violating the provisions of the securities law because of the disclosure of the company's information. According to the relevant provisions of the securities law of the People's Republic of China, the China Securities Regulatory Commission decided to file a case investigation. In November 1, 2016, the company issued a notice on receipt of the investigation notice of the China Securities Regulatory Commission (Bulletin number: 2016-L101) and a notice on the existence of the risk of suspension of the stock market (Bulletin number: 2016-L102). According to the regulations, the company publishes a monthly announcement on the progress of the investigation and the risk notice. Recently, the company received "advance notice of administrative penalty and market entry" (serial number: Penal word [2019] 114). The main contents are announced as follows:

1. The sale of subsidiary stock matters is not disclosed as related transactions.

In December 1, 2014, Kai Reed signed an agreement with Zhejiang Yifu Holding Group Co., Ltd. (hereinafter referred to as Zhejiang billion) to transfer the 100% equity interest of the wholly owned subsidiary of Zibo Jie Jen Meng Trading Co., Ltd. (hereinafter referred to as JE) for 117 million yuan to Zhejiang billion. Convention: Zhejiang Yifu paid 5% of the purchase amount ($5 million 850 thousand) as a performance bond within 5 days after the signing of the agreement, paid 50% of the purchase amount (58 million 500 thousand yuan) within 5 days after the approval of the Reed shareholders' meeting, paid off the remaining acquisition amount (52 million 650 thousand yuan) within 20 days after the transfer of shares; Kai Reed handled the transfer of shares within 20 days after receiving the second purchase; Zhejiang billion promised that if there was an outstanding amount of payment to Kerid when the equity transfer procedures were being processed, the total amount of the outstanding payments to Kerid (up to October 31, 2014, the total amount of 32 million 767 thousand and 500 yuan payable to the Kay Reed account), would be paid within the month of the date of the transfer of equity and not later than February 28, 2015. Both sides In December 27, 2014, Kai Reed and Zhejiang Yifu completed the industrial and commercial registration formalities of the shareholders of JE, and JE became a wholly owned subsidiary of Zhejiang billion capital. But on the day of the transfer of shares, Zhejiang billion did not fully pay second equity purchase (58 million 500 thousand yuan still had 27 million 850 thousand yuan unpaid, then until December 31). After that, Zhejiang Yifu did not pay the remaining shares in accordance with the agreement within 20 days after the completion of the transfer of shares (i.e., before January 16, 2015).

The acquisition amount was 52 million 650 thousand yuan, and it was not agreed to pay the payment to Kai Reed before February 28, 2015. In April 17, 2015, when Zhejiang's billion dollar had not yet paid for the 52 million 650 thousand yuan purchase, it sold the 100% stake of JJC to Hong Kai International Financial Holdings Limited (Shenzhen) Limited (hereinafter referred to as Hung Kai International), reselling the price of 52 million 650 thousand yuan (the same amount as the equity buyout paid by Reed to Zhejiang). In from April 3rd to 22nd of the same year, Hung Kai International paid $52 million 650 thousand to Reed for the remaining equity purchase on behalf of Zhejiang billion. In April 29, 2015, Kerid confirmed in 2014's annual report that the transfer of JE's equity investment income was 7368062.82 yuan.

According to the investigation, Kai Reed sold the 100% stake in JE's subsidiary company, which was nominally a non related transaction between Kerid and Zhejiang billion, but it was essentially a related transaction between Kerid and the actual controller Wu Lianmo of that time.

Kai Reed did not disclose the related transactions. In the case of the sale of JE's stake in related transactions, Kerid announced in December 3, 2014 the notice on the transfer of the 100% equity interest of the subsidiary company Zibo jitunmeng trading company and the 2014 annual report, which was disclosed in April 29, 2015, did not disclose the sale of Jay's equity trading as a related transaction.

Two, illegal write off accounts payable, resulting in false information disclosure.

In April 25, 2015, Kai Reed released the notice on the verification of long term accounts payable. He said: in April 23, 2015, Kai Reed convened the board of directors to deliberate and adopt the bill on accounts payable payable for long term checking, and the 31 accounts payable for long-term accounts were sold for verification, and the amount of cancellation was 13761054.44 yuan. All of them were included in Kerid's 2014 operating income and increased Kerid's net profit attributable to parent company 13761054.44 yuan in 2014. The reason for Kerid to write off the 31 accounts payable is: "the long-term accounts payable account payable by the company is relatively long, and there is no transaction for a long time (no transaction in four years). Accounts receivable for long term accounts are identified as non business income to reflect the financial situation of the enterprises, comply with the relevant provisions of the enterprise accounting standards and the actual situation of the company.

Kerid illegally wrote off accounts payable, resulting in false information disclosure. As Kay Reed illegally wrote off 31 accounts payable and wrote off the amount of 13761054.44 yuan in 2014, it resulted in false accounts of accounts payable, operating income and net profit disclosed by Kay Reed in 2014 annual report.

Three. Failure to disclose non operating capital transactions with related parties without stipulations

Wu Lianmo was the actual controller of Kerid, the fifth quarter international Klc Holdings Ltd (hereinafter referred to as the fifth quarter International) and Zhejiang fifth quarter Industrial Limited (hereinafter referred to as fifth quarter industrial), and it was the holding company of Wu Lian Mo, of which fifth quarter industry was the largest shareholder of Kai Reed. According to the 216th principles and fourth items of the company law of the People's Republic of China, the seventy-first items of third measures of the information disclosure management of listed companies (No. fortieth of the SFC order), and the provisions of section 10.1.3 of the Shenzhen Stock Exchange Listing Rules (revised in 2014) (Shenzhen No. 2014) 378, the fifth quarter international and fifth season industries are the related legal persons of Kai Reed.

Between 2014 and June 2016, Kai Reed had a large number of non operating capital transactions involving related businesses in the fifth quarter of the international and fifth quarter industries.

In 2014, Kai Reed and the fifth quarter international non operating capital transactions between borrowers 46153885.44 yuan, 54178700 yuan lender; and fifth quarter industrial non operating capital loans to 6529933.86 yuan, the lender 6392339.64 yuan.

In 2015, Kai Reed and the fifth quarter international non operating capital transactions between borrowers 33398420.35 yuan, 26406164.94 yuan lender; and fifth quarter industrial non operating capital loans to 26700000 yuan, the lender 27000000 yuan. Among them, in the first half of 2015, Kai Reed and the fifth quarter international non operating capital transactions between borrowers 11198420.35 yuan, 20668305.79 yuan lender; and fifth quarter industrial non operating capital transactions between the lender 27000000 yuan.

In the first half of 2016, Kai Reed and the fifth quarter of international non operating capital transactions between borrowers 35300000 yuan, 32621634.02 yuan lender.

Kai Reed did not make timely disclosure of the non operating capital transactions related to the transaction, and did not disclose them in accordance with the regulations in the 2014 annual report, the 2015 semi annual report, the 2015 annual report and the 2016 semi annual report. According to the China Securities Regulatory Commission, Kai Reed did not disclose the sale of subsidiaries of JE's shares as related transactions, suspected of violating the sixty-third provision of the securities law of the People's Republic of China (hereinafter referred to as the Securities Law), and constituted the act of "issuer, listed company or other information disclosure obligor not disclosing information in accordance with the provisions" or "false information, misleading statements or major omissions" disclosed in article 193rd, paragraph 1, of the securities law. Kerid's violation of 31 accounts payable resulted in a false record of accounts payable, non operating income and net profit in the annual report of 2014. It violated the provisions of the sixty-third law of the securities law, and constituted the act of "issuer, listed company or other information disclosure obligor not disclosing information in accordance with the Provisions" or "false information, misleading statements or major omissions" disclosed in the 193rd paragraph 1 of the securities law. Kerid's failure to disclose the non operating capital transactions with the affiliated party in accordance with the regulations violates the provisions of the sixty-third articles, sixty-fifth items, fifth items and sixty-sixth articles in the securities law, and constitutes the act of "issuer, listed company or other information disclosure obligor not disclosing information in accordance with the regulations, or false information, misleading statements or major omissions" described in article 193rd of the securities law of the first section of the securities law. Wu Lianmo, as Kerid's actual controller, directly involved in the decision making behavior, and he concealed relevant facts to Kai Reed under the circumstances of knowing the facts involved in the related transactions. He also did not ask Kai Reed to fulfill his obligation to disclose information. His behavior directly led to the disclosure of the case by Kai Reed, which constituted the behavior of the controlling shareholder of the issuer, the listed company or other information disclosure obligor and the actual controller to engage in the first two illegal acts mentioned in the third and 193rd clause of the securities law.

According to the facts, nature, circumstances and social harmfulness of the above-mentioned illegal acts, the CSRC intends to decide on the basis of the provisions of the 193rd and third paragraphs of the securities law.

1. Warnings given to Kai Reed Cmi Holdings Ltd and a fine of 600 thousand yuan; two, warnings given to Wu Lianmo and a fine of 900 thousand yuan, including a fine of 300 thousand yuan as a directly responsible person, and a fine of 600 thousand yuan as the actual controller.

Three, give Liu Shuyan a warning and pay a fine of 150 thousand yuan.

Four, give Zhang Bin a warning and pay a fine of 100 thousand yuan.

Five, give Liu Tao a warning and pay a fine of 50 thousand yuan.

Six, give warning to Yuan Hao, Wu Chunxi, Liu Junqing, Liu Haiying, Lu Renzhong, Zhang Linjian, Zhao Wei, Zhao Wei, Zhang Fu Yun, Rao Tai Cheng, Hui, Hui, Hui, and Hui, and impose a fine of 30 thousand yuan respectively. China is at the core position, actively planning and implementing related cases, and its serious violation of the law. According to the provisions of the 233rd articles of the securities law and the first item, second items and fifth articles of the third prohibition of securities market (SFC Order No. 115th), the China Securities Regulatory Commission (CSRC) has decided to take 5 years' measures to prohibit the securities market from taking part in the Wu joint mode. From the date of the announcement by the China Securities Regulatory Commission, the CSRC shall not continue to engage in the securities business in the original structure, or assume the post of directors, supervisors or senior managerial personnel of the original listed companies or public listed companies, nor be allowed to engage in securities business in any other institution or to serve as directors, supervisors or senior managerial personnel of other listed companies or unlisted public companies. In addition, in view of Wu Lian Mo as Kerid's actual controller and chairman, Kai Reed information disclosure violations. In accordance with the relevant provisions of the thirty-second and forty-second articles of the administrative punishment law of the People's Republic of China and the rules of hearing of the administrative penalty of the China Securities Regulatory Commission (SFC Order No. 119th), all of you have the right to declare, plead and request for hearing on the administrative penalty and market entry that the CSRC intends to impose on all of you. The facts, reasons and evidence mentioned above will be adopted by the CSRC after being reviewed by the CSRC. If all of you give up the right to declare, plead and request for hearing, the CSRC will make a formal decision on administrative penalty and market entry in accordance with the above facts, reasons and grounds. Please fax the receipt to the CSRC designated contact person within 3 days from the date of receipt of this notification, and deliver the original receipt to the administrative penalty committee or the local securities regulatory bureau on that date. The above is the main contents of the CSRC's prior notice of administrative penalties and market entry prohibition. This administrative penalty and advance notice of market entry has no effect on the company's operation and financial status. The company will fulfill its obligation of information disclosure in accordance with the progress of the matter, and invite investors to pay attention to investment risks.

The company's receipt of the "administrative penalty and market advance notice" involved in the illegal act did not touch on the serious illegal delisting situation stipulated in articles seventh to ninth of article 13.2.1 of the Shenzhen Stock Exchange Listing Rules. The company does not have any major illegal activities such as fraudulent issuance, serious disclosure of information or other serious damage to the order of the securities market, and seriously affects the listing status. If the stock should be terminated, there will be no illegal activities involving national security, public safety, ecological safety, safety of production and public health and safety. The circumstances are very serious, which seriously damages the interests of the state, the public and the public. It seriously affects the listing status. The stock should be terminated, and it will not touch the situation of serious illegal delisting of the second, fourth and fifth provisions of the listed companies' enforcement measures for major illegal delisting. The information disclosure media designated by the company are Shanghai Securities Daily, China Securities Journal, securities times and www.cninfo.com.cn. The information about the company is based on the information contained in the above designated media. Investors are advised to make prudent decisions and invest risks.

Notice hereby.

Kerid Cmi Holdings Ltd board of directors

August 16, 2019