Securities code: Shenzhen Fountain Corporation(000005) Securities abbreviation: Shenzhen Fountain Corporation(000005) Announcement No.: 2022013 Shenzhen Fountain Corporation(000005)
Independent opinions of independent directors on matters related to the 2021 Annual Report
The independent directors of the company held a meeting in the company’s conference room on April 25, 2022 to consider matters related to the 2021 annual report. Five independent directors shall be present at the meeting, and five independent directors shall actually be present. The independent directors present at the meeting deliberated and adopted the following independent opinions with 5 affirmative votes, 0 negative votes and 0 abstention:
1、 Special instructions and independent opinions on the occupation of the company’s funds and the company’s external guarantees by the controlling shareholders and their related parties: according to the provisions of the regulatory guidelines for listed companies No. 8 – regulatory requirements for capital transactions and external guarantees of listed companies issued by the CSRC, we explain the implementation of the above provisions of the company as follows:
1. After relevant personnel of the consulting company and reviewing the financial audit report of the company, it is not found that the controlling shareholders and their related parties occupy the company’s funds.
2. By the end of 2020, the company had provided 242 million yuan of guarantee for related parties and failed to fulfill the approval procedures and information disclosure obligations. The company has required the actual controller to divest and eliminate the litigation risk of private loans one by one within the time limit, and strictly required the counter guarantor of the contract to implement the exemption commitment to the listed company and fulfill the financial obligations. On April 29, 2021, the company reached an agreement on the exemption of the company’s guarantee obligations with various private loan lenders, the original other guarantors of the guaranteed debt and the exemption guarantors, and the company’s liability for the above-mentioned illegal guarantee has been exempted.
3. By the end of the reporting period, the actual balance guaranteed by the company to its subsidiaries was RMB 63.5 million.
4. During the reporting period, some capital transactions between the company and other related parties failed to fulfill the corresponding approval procedures and information disclosure obligations in accordance with the relevant provisions of the company, and the above funds have been recovered.
We will continue to urge the company’s management to abide by high integrity responsibilities and diligence obligations, eliminate the risk of illegal guarantee as soon as possible, build and improve an effective internal control system, and strictly perform the relevant approval procedures and information disclosure obligations, so as to make the company’s internal control meet the requirements of relevant national laws, regulations and regulatory authorities.
2、 Opinions of independent directors on the evaluation of the company’s internal control:
According to the relevant provisions of the guidelines on internal control of listed companies issued by Shenzhen Stock Exchange, the independent directors of the company express the following opinions on the self-evaluation of the company’s internal control:
The company has established and improved the internal control system covering all links of the company in accordance with the relevant provisions of China Securities Regulatory Commission and Shenzhen Stock Exchange, the basic principles of internal control and its own actual situation.
In order to implement the basic norms of enterprise internal control and relevant supporting guidelines, during the reporting period, the company hired China Audit Asia Pacific accounting firm to audit the internal control of the company’s financial report and issued an internal control audit report with negative opinions. According to the identification of major defects in the company’s internal control over financial reporting, on the benchmark date of the internal control evaluation report, due to the existence of major defects in the internal control over financial reporting, the independent directors believe that the company has failed to maintain effective internal control over financial reporting in all major aspects in accordance with the requirements of the enterprise’s internal control standard system and relevant regulations.
In view of the company’s defects in internal control, in order to reduce the company’s internal control risk, our independent directors instructed the company to set up full-time posts as soon as possible, arrange professionals to be responsible for the company’s information disclosure, and strengthen the integrity of the company’s information disclosure through the above measures. We will urge the company’s management to abide by high integrity responsibilities and diligence obligations, eliminate the risk of illegal guarantee as soon as possible, and continue to urge the company’s management to build a sound and effective internal control system, strictly perform relevant approval procedures and information disclosure obligations, so as to make the company’s internal control meet the requirements of relevant national laws, regulations and regulatory authorities.
3、 Independent opinion on non-standard audit report in 2021:
China Audit Asia Pacific Certified Public Accountants has issued a qualified audit report on the company’s 2021 financial report. According to the provisions of the stock listing rules of Shenzhen Stock Exchange, we explain the matters involved in the audit opinion as follows:
Reserved item 1 – conditional borrowings and impairment
(1) In order to control the demolition cost in the primary land development stage of Pinghu old reconstruction project, the company entrusted Xingyuan Zhifu as the main body of urban renewal and reconstruction. It is agreed that when the land development rights and interests are confirmed, the land development rights and interests of Pinghu old reconstruction project under the name of Xingyuan Zhifu can be obtained by carrying forward the “conditional loan”.
The company and Shenzhen Pinghu Co., Ltd. signed the letter of intent for the reconstruction and cooperative development of old villages in Pinghu community, Pinghu street, Longgang District, Shenzhen, and reached the intention for the reconstruction and cooperative development of old villages in Pinghu community. The letter of intent stipulates that the company is responsible for the capital investment required in the whole process of the development of the reconstruction project of old villages in Pinghu community, and Pinghu Co., Ltd. is responsible for the land. On December 27, 2010, the company and Shenzhen Pinghu Co., Ltd. signed the Pinghu old village cooperative transformation contract and supplementary agreement. In 2012, the company entrusted Xingyuan Zhifu industry (Shenzhen) Co., Ltd. as the main body of the renovation of Pinghu old reconstruction project. On March 28, 2014, the two sides signed the supplementary agreement on accelerating the urban renewal project in Pinghu area. Since the signing of the above agreement, the company has fully fulfilled the main obligations of the contract and completed the re establishment of the project, the adjustment of the scope line, the publicity of the planning scheme, the achievement of demolition and compensation standards, including the preparation of a special cultural relics protection plan and a special plan for the urban renewal unit for 50000 square meters of non removable cultural relics buildings, so that the project can continue to be promoted according to the demolition and reconstruction projects, In order to promote the special planning for the protection of cultural relics, the special planning for the protection of the historical features of Pinghu Dawei old village and the special planning scheme for the renewal unit of Pinghu old village reconstruction project, the company carried out special planning and design. On August 15, 2018, the Pinghu old village reconstruction project obtained the notice of the municipal planning and Land Commission on the approval of the urban renewal unit planning of Pinghu District, Pinghu street, Longgang District (SGT [2018] No. 604).
With regard to the dispute over the cooperation contract between the company and Shenzhen Pinghu Co., Ltd. on the urban renewal unit project in Pinghu area, although the company has obtained the final judgment (2019) Yue 03 min Zhong No. 19234, it ruled that Shenzhen Pinghu Co., Ltd. lost the lawsuit and rejected its claim to terminate the contract. Subsequently, after the retrial procedure of Guangdong Provincial Higher People’s Court (2020) yueminshen No. 1008, it ruled to reject the retrial application of Shenzhen Pinghu joint stock cooperation company for overturning the final judgment. Whereas Shenzhen Pinghu Co., Ltd. filed another lawsuit (2020) Yue 0307 min Chu No. 39413 on the same matter during the reporting year; The company filed a targeted lawsuit No. (2021) Yue 0307 min Chu No. 15030, requested to suspend the trial of repeated lawsuit No. (2020) Yue 0307 min Chu No. 39413, and filed an application to exclude Shenzhen Pinghu joint stock cooperation company from hindering the company’s right to perform the contract. The case has been filed and accepted in Longgang District People’s court. Based on the principle of prudence and judging the impact of litigation cases, the company has accrued credit impairment losses for the conditional loan.
(2) In 2017, the company signed the cooperation framework agreement and loan agreement with Shenzhen Xingyuan Lisheng Water Environment Technology Co., Ltd. and Shenzhen Wenshu Shengyuan Investment Development Co., Ltd. to carry out overseas clean energy projects. The agreement stipulates that the company will provide conditional loans (with an annual interest rate of 13.5%) to Xingyuan Lisheng and Manjusri Shengyuan, and all the relevant funds will be used for overseas water resources operating projects and the expenses for the establishment of the carbon frontier technology M & A fund established in cooperation with Mapu Academy of Sciences. All the conditional loans from Xingyuan Lisheng and Manjusri Shengyuan will be used after the company obtains the administrative license of all cross-border investors, Directly carry forward to 100% of the investment funds of overseas sub projects consolidated in the company’s system. The agreement stipulates that if there is procedural risk in foreign investment, Xingyuan Lisheng and Manjusri Shengyuan need to repay the conditional loan to the company to eliminate the procedural risk of cross-border investment. From 2017 to 2020, through cooperation with Xingyuan Lisheng and Manjusri Shengyuan, the company completed the merger and acquisition of Fudao Hong Kong and the establishment of its overseas subsidiary century Xingyuan Bali Water Resources System Co., Ltd. In 2020, affected by the epidemic, the company closed many overseas offices, interrupted the preliminary work of overseas projects, and there are major uncertainties in the future project development. The company has accrued credit impairment loss for the conditional loan.
Reserved item 2 – long term receivables – impairment of Zhaoqing project
In December 2019, Zhaoqing natural resources bureau made the decision on revoking Zhaofu Guoyong (Zheng) Zi No. 0002 state owned land use certificate, and then the company entrusted Beijing JunZeJun Law firm to file an administrative reconsideration with farcor limited, faryck limited, finewood limited, full bloom limited and jackford Limited (hereinafter collectively referred to as “five companies in Hong Kong”) as the applicant to the Department of natural resources of Guangdong Province, It is required to revoke the decision on revoking Zhaofu Guoyong (certificate) Zi No. 0002 state owned land use certificate made by Zhaoqing natural resources bureau.
On July 6, 2020, the Department of natural resources of Guangdong Province rejected the application for administrative reconsideration of the five companies in Hong Kong.
On July 15, 2020, the company filed an administrative lawsuit with Zhaoqing intermediate people’s Court of Guangdong Province with Hong Kong five company as the plaintiff. The company believes that although the company has filed a lawsuit for the revocation of the land certificate, it is unlikely to win the administrative lawsuit. The basis for the development of Zhaoqing project by the project company no longer exists, the feasibility of continuing to develop Zhaoqing project is very small, and there are significant signs of impairment in the equity of Zhaoqing project recognized by the company.
In view of the fact that the reconsideration organ has rejected the applicant’s application for administrative reconsideration, and the relevant administrative litigation attorney also said that he was unable to evaluate the possibility of winning the administrative litigation. Based on the principle of prudence, the management of the company made full provision for impairment losses on the rights and interests of Zhaoqing project with reference to the evaluation of the evaluation institution and the relevant opinions of litigation lawyers. On March 18, 2022, Zhaoqing intermediate people’s Court of Guangdong Province made an administrative judgment and rejected the plaintiff’s claim. At present, Guangjin international plans to arrange Hong Kong five companies to file an administrative appeal again. However, in view of the uncertainty of the appeal result of administrative reconsideration, it is still a reserved item in the audit opinion of this fiscal year. Highlights – external guarantees
(1) In the audit report of fiscal year 2020, a qualified opinion was issued on “guarantee matters involving the failure to timely perform procedures and letter Phi obligations”. The guarantee matters involved are all in 2018 and 2019. Before going through the procedures of “returning the old and borrowing the new” of the due bank loans of the listed company, the company obtained the “bridge loan” lent by the actual controller and its related parties to the listed company without interest in the form of providing guarantee for the actual controller and its related parties to apply for the short-term financing loan of private borrowers; The transaction failed to fulfill the approval procedures and information disclosure obligations. Moreover, after the expiration of the private financing loan term of the actual controller and its related parties, the extension of the guarantee term of the private short-term financing loan provided by the actual controller and its related parties due to the listed company’s delay in repaying the interest free “bridge loan” also failed to fulfill the approval procedures and information disclosure obligations.
(2) In 2018 and 2019, the company provided seven guarantees for the actual controller and other related parties, involving an amount of 145 million yuan. Shenzhen Hezhong Architectural Decoration Engineering Co., Ltd. (hereinafter referred to as “Hezhong company”) provided the company with an exemption agreement. The company does not bear the guarantee and civil compensation liability of the exemption part, of which one guarantee involved a loan of 9.5 million yuan, which has been closed. Another case involved a loan of 10.5 million yuan, and Hezhong company has provided a replacement and preservation fund of 12.553 million yuan. In July 2021, the four private lending lawsuits disclosed by the company involved an amount of 97 million yuan, which is explained as follows: 1. The guarantee period of the above guarantee case has expired, and the company does not bear the guarantee liability; 2. The borrower has provided evidence of principal repayment, which remains to be determined by the court. 3. According to the lawyer’s letter, there is no evidence in the evidence submitted by the lender to the court to prove that the company is the actual borrower, and the company does not need to bear the obligation of repayment. However, due to the pending litigation involving guarantee, the accountant issued audit opinions on emphasized matters in this fiscal year.
In view of the importance of the above matters to the company and the huge financial risks that may be brought to the company’s future operation, our independent directors will continue to urge the company’s management to abide by a high degree of integrity and diligence, rectify the problems existing in the company’s internal control, build a sound and effective internal control system, and eliminate the possible risks to the company as soon as possible on the premise of strict compliance with information disclosure, Strive for the best interests of shareholders.
4、 Independent opinions of independent directors on profit distribution
According to the audit of China Audit Asia Pacific Certified Public Accountants, the consolidated profit of the company in 2021 is 13903673582 yuan, of which the profit of the parent company in 2021 is 14040998079 yuan, plus the undistributed profit at the beginning of the year (parent company) -59738406519 yuan, and the distributable profit (parent company) in this year is -45697408440 yuan. According to the relevant provisions of the company law, the board of directors recommends that the profit distribution plan for this year is: no distribution and no increase.
Upon the review of independent directors, the undistributed profits of the company (parent company) are negative. According to the relevant provisions of the company law, profit distribution cannot be carried out before making up the losses. Therefore, we agree with the above profit distribution plan of the board of directors.
5、 Independent opinions on providing guarantee for loans of wholly-owned and holding subsidiaries
According to the operation and development plan of all wholly-owned and holding subsidiaries, the company plans to provide guarantee for the loans of wholly-owned and holding subsidiaries of no more than 150 million yuan within one year after the deliberation and approval of the general meeting of shareholders. The specific distribution of the guarantee amount of 150 million yuan is as follows: the guarantee amount for Shenzhen smart space Property Management Service Co., Ltd. is no more than 60 million yuan, The amount of guarantee for Shenzhen Xindeli new energy car rental Co., Ltd. is no more than 30 million yuan, and the amount of guarantee for Zhejiang Boshihua Environmental Protection Technology Co., Ltd. is no more than 60 million yuan. After deliberation by independent directors, it is agreed that the company will provide guarantee for the foreign loan limit of the above wholly-owned and holding subsidiaries of no more than 150 million yuan.
6、 Independent opinions of independent directors on withdrawing asset impairment
According to the provisions of the accounting standards for Business Enterprises No. 8 – asset impairment, an impairment test is conducted on the assets with signs of impairment. If the impairment test results show that the recoverable amount of the assets is lower than the book value, it will be
