*St Carey (002072): Reply To The Inquiry

Reply of Kairui Holding Co., Ltd. to the inquiry letter of Shenzhen Stock Exchange

Kairui Holding Co., Ltd. (hereinafter referred to as "Kairui" or "the company") received the inquiry letter on Kairui Holdings Co., Ltd. (SME board inquiry letter [2021] No. 2) (hereinafter referred to as "inquiry letter") issued by your exchange on January 8, 2021. The company immediately studied and verified the issues involved in the inquiry letter, and invited the annual audit accountant We have issued special opinions and now reply to the questions involved in the inquiry letter as follows:

On January 5, 2021, your company disclosed the announcement on the provision for impairment of assets, which disclosed that your company intends to make provision for impairment of assets by a total of 198 million yuan, accounting for 32.92% of your company's total assets attributable to shareholders of listed companies after audit in 2019. Our department is concerned about this. Please explain and disclose the following issues:

1. At the end of 2020, your company plans to make a provision for bad debts of 170.9387 million yuan for other receivables due from Zhang Peifeng, the former shareholder of your company. Please give a detailed description of the composition of your company's receivables from Zhang Peifeng, the formation reasons, the basis and proportion of the provision for bad debts. In combination with Zhang Peifeng's performance ability and relevant performance guarantee measures, further explain the measures taken and planned to be taken for the above-mentioned accounts receivable and whether your company's provision for bad debts of relevant receivables at the end of 2019 is sufficient Whether it is in line with the relevant provisions of the accounting standards for business enterprises, the annual audit accountant shall give special opinions.

Reply: according to the contract signed by the company, Dezhou Jinmian Textile Co., Ltd. and Zhang Peifeng, in order to protect the rights and interests of listed companies and small and medium-sized shareholders to the maximum extent, Zhang Peifeng voluntarily replaced Shandong Demian Group Co., Ltd. to become the framework agreement on the sale of major assets of Kairui Holding Co., Ltd. and the supplement to the sale of major assets of kairuide Holding Co., Ltd According to the agreement, the payer shall pay off the arrears by instalments of 249508699.00 yuan.

In 2019, the company made provision for bad debts at 10% of the above receivables from Zhang Peifeng. The reasons are as follows: ① as of the issuing date of the annual report in 2019, Zhang Peifeng has paid off the first phase of payment in full on schedule and the second phase in advance, totaling 55.44 million yuan, and the performance amount accounts for 20% of the contract amount. In terms of the larger scope of settlement, Zhang Peifeng paid 133.17 million yuan of textile assets package paid by Demian group to the company in total, with a settlement rate of 41%. ② Although Zhang Peifeng took the company 5.19%

The voting right of the shares is entrusted to Wang Jian. However, the usufructuary of the above 5.19% of the company's shares is still Mr. Zhang Peifeng. Although the shares have been pledged, the stock cash can still be used to repay the company's 249 million yuan debt after the pledge is lifted. To sum up, in combination with the payment arrangement, actual payment and the actual situation of Zhang Peifeng, the company believes that Mr. Zhang Peifeng has the willingness to actively repay the debts and can actively repay the debts according to the repayment requirements of the contract. Under the condition that the company has obtained the corresponding debt repayment ratio and has the possibility of continuing to recover the creditor's rights, the company believes that in 2019, the company will pay for the accounts receivable Peifeng's provision for bad debts at the ratio of 10% of the contract amount is appropriate and in line with the principle of prudence. There is no violation of the relevant provisions of the accounting standards for business enterprises. Whether the company's withdrawal of relevant bad debt reserves at 10% of the above receivables of Zhang Peifeng in 2019 violates the relevant provisions of the accounting standards for business enterprises and the appropriateness, please refer to the reply to the inquiry letter on the annual report of Shenzhen Stock Exchange in 2019 of the company "1. As of the end of 2019, your company's receivable shareholder Zhang Peifeng amounted to 249 million yuan, which is the undertaking of Demian Group Co., Ltd. (hereinafter referred to as DMC) It is due to your company for the disposal of textile asset package. Because Zhang Peifeng's behavior is limited and Demian group only replied in writing that the assets were handed over according to the agreement, the accountant did not have enough evidence to judge the debt undertaken by shareholder Zhang Peifeng and its repayment ability, nor could he reasonably determine whether it was necessary to adjust the above receivables and bad debt reserves, which led to your company's reservation opinion. (1) Please explain whether Zhang Peifeng has the ability to perform the contract in combination with the specific reasons for the compulsory measures taken by Zhang Peifeng, the latest progress of the case involved, the personal assets and liabilities, the situation of being listed as the restricted consumer by the court, the commitment of other third parties to pay on behalf of the bank or financial institutions (if any), and whether there are other credit enhancement measures or performance guarantee measures, etc (2) for the relevant accounts receivable from Zhang Peifeng, your company shall withdraw the relevant bad debt reserves according to the proportion of 10%. Please further explain the appropriateness of the bad debt provision proportion, whether it conforms to the principle of prudence, and whether it conforms to the relevant provisions of the accounting standards for business enterprises in combination with the explanation of Zhang Peifeng's repayment ability in question (1) Response to questions.

As of December 31, 2020, Wang Jian has paid 78.57 million yuan on behalf of Zhang Peifeng through Baocheng Dingsheng international trade (Beijing) Co., Ltd. under his actual control, and the remaining outstanding payment of Zhang Peifeng is 170938699.00 yuan. Zhang Peifeng has overdue and failed to pay the third and fourth instalments in full, of which 27.72 million yuan of the third phase should be paid before September 15, 2020, and the actual payment amount is 23.13 million yuan; the fourth phase of 27.72 million yuan should be paid before December 15, 2020, and has not been paid so far. At the same time, the company's shares held by Zhang Peifeng have been enforced by the judiciary, and the personal freedom is still restricted due to illegal operation of the securities market. Therefore, based on the latest situation in 2020, after comprehensively judging its solvency, and according to the principle of prudence, the company decided to carry out a single amount revaluation for the receivables

100% of the total amount of the single amount of large-scale consolidation is withdrawn for impairment. For Zhang Peifeng's receivables, the full amount of provision for asset impairment has been deliberated and approved by the 30th meeting of the 7th board of directors, the 14th meeting of the 7th board of supervisors and the first extraordinary general meeting of the company in 2021. Independent directors have expressed their independent opinions on this matter. The company believes that the provision for bad debts of relevant receivables is sufficient and in line with the relevant provisions of accounting standards for business enterprises.

In view of the fact that the company's shares held by Zhang Peifeng have been subject to judicial enforcement, Zhang Peifeng has failed to pay part of the third phase and the whole amount of the fourth phase, totaling 32.31 million yuan, and he is still in a state of restricted personal freedom due to suspected criminal crimes, the company believes that Zhang Peifeng's current performance ability is weak. Therefore, the company has made full provision for bad debts due from Zhang Peifeng. In the next step, the company will actively communicate and negotiate with relevant parties to seek solutions that are beneficial to the listed company and its shareholders. For the specific opinions of the annual audit accountants, please refer to the special instructions of Asia Pacific (Group) accounting firm (special general partnership) on the inquiry letter of kairuide Holding Co., Ltd.

2. At the end of the reporting period, the book value of your company's investment in Hangzhou quanzhimai e-commerce Co., Ltd. (hereinafter referred to as "quanzhimai") is RMB 28 million. Your company plans to withdraw 50% of the impairment reserves this time. Please list the main financial data of the whole company in the past three years, and explain the specific basis for your company to judge the signs of impairment and the specific basis for calculating and withdrawing the impairment in combination with its operating conditions, and whether the relevant accounting treatment conforms to the provisions of the accounting standards for business enterprises, and ask the annual auditing accountant to check and give clear opinions.

Reply: on December 22, 2016, the company and Hangzhou quanzhimai e-commerce Co., Ltd. (hereinafter referred to as "quanzhimai") signed the capital increase and share expansion agreement between Kairui Holdings Co., Ltd., Hangzhou quanzhimai e-commerce Co., Ltd., Jiang Rong and he yuan, stipulating that the company should use its own capital of RMB 28 million to increase its capital Among them, 89844 million yuan was added as new registered capital and 27.10156 million yuan was included in capital reserve. After the completion of this capital increase, the company holds 1.5444% equity of quanzhimai. On December 30, 2017, the registered capital of quanzhimai was changed from RMB 58.17488 million to RMB 78.82776 million, the investment amount of the company remained unchanged, and the shareholding ratio was changed to 1.1398%. Due to the low shareholding ratio, the company failed to obtain the financial statements of quanzhimai company.

According to the company's information from quanzhimai, quanzhimai failed to operate in the whole year in 2020 due to the company's own reasons, and there is significant uncertainty about whether it can normally carry out business in the future. Based on the principle of prudence, the company has made a 50% impairment of the equity investment in this part after considering the above situations, and has performed the corresponding approval procedures. The company believes that the above accounting treatment conforms to the relevant provisions of the accounting standards for business enterprises.

For the specific opinions of the annual audit accountants, please refer to the special instructions of Asia Pacific (Group) accounting firm (special general partnership) on the inquiry letter of kairuide Holding Co., Ltd.

3. Other matters to be explained by your company.

Re: none.

I hereby reply

Kairuide Holding Co., Ltd. January 26, 2021