Announcement on the Reply to the Shenzhen Stock Exchange's Inquiry Letter
The company and all members of the board guarantee that the content of the information disclosure is true, accurate, and complete, without false records, misleading statements, or major omissions.
Shenzhen Jia Kai City Group Co., Ltd. (hereinafter referred to as "the Company," "this Company," or "Jia Kai City") received the Shenzhen Stock Exchange's inquiry letter regarding Jia Kai City Group Co., Ltd. (Company Department Inquiry Letter [2023] No. 233, hereinafter referred to as "the Inquiry Letter") on May 11, 2023. The Company attaches great importance to this and has organized relevant personnel to verify the matters involved in a timely manner according to the content and requirements of the Inquiry Letter. The Company has also inquired with its controlling shareholder, Shenzhen Huajian Holdings Co., Ltd. (hereinafter referred to as "Huajian Holdings"). The response is as follows:
On May 11, 2023, the Company disclosed the "Announcement on Receiving the Relevant Notice Letter from the Company's Controlling Shareholder" (hereinafter referred to as "the Announcement"), which indicates that according to previous commitments, the restructuring transaction party promised to complete the actual profit and profit forecast compensation work within one year after the sales completion of the Shanghai Mantuyuan Project and Nanjing Jiaye International City Project (hereinafter referred to as "the Performance Compensation Projects"). If the restructuring transaction party fails to pay the compensation amount in full to the listed company, Huajian Holdings will make up the unpaid portion within thirty days from the expiration of the performance period. As of now, the Performance Compensation Projects have not completed sales. Huajian Holdings intends to compensate the listed company in cash according to the original agreement based on the difference between the actual profit and profit forecast after the sales completion of the Performance Compensation Projects by December 31, 2023. If the Performance Compensation Projects are not sold out by December 31, 2023, Huajian Holdings will compensate the Company in cash based on the difference between the actual profit and profit forecast as of June 30, 2023, before December 31, 2023. After the remaining portion is sold, if the total compensation amount calculated exceeds the amount already compensated, Huajian Holdings will make up the remaining difference according to the original agreement.
The department expresses concern and requests the Company to verify and explain the following matters:
Question 1
Please explain in detail the main considerations, reasons, and rationality for Huajian Holdings to propose performance compensation to the Company when the Performance Compensation Projects have not completed sales and have not triggered performance compensation obligations. Are there any other interest arrangements between the Company, Huajian Holdings, and the restructuring transaction party?
Response: The arrangement for Huajian Holdings to fulfill its performance compensation commitment before December 31, 2023, is an important measure to support the development of the listed company, beneficial for further safeguarding the rights of the listed company and in line with the interests of the Company and minority shareholders. This arrangement clarifies the performance deadline, making the commitment more operationally feasible. Huajian Holdings' conditions for fulfilling the commitment are accurate and complete, further confirming that even if the listed company cannot complete the sales of the Performance Compensation Projects in 2023, it will still fulfill the original commitment based on the compensation amount at a specific point in time within 2023. Huajian Holdings is currently in good operational condition and has a healthy financial status, with approximately 1.937 billion yuan in claims against the listed company, which can ensure the smooth implementation of the performance compensation. There are no other interest arrangements between the Company, Huajian Holdings, and the restructuring transaction party.