Home » Wanzhou International responds to Wan Hongjian’s allegations: No funds have been transferred overseas and denies Bandung’s $200 million income has not paid taxes

Wanzhou International responds to Wan Hongjian’s allegations: No funds have been transferred overseas and denies Bandung’s $200 million income has not paid taxes

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August 23,Wanzhou InternationalPublishAnnouncement, In response to the five major issues of Wan Hongjian’s recent allegations, one by one response.Wanzhou InternationalStated that no funds were transferred fromShuanghui DevelopmentTransfer to overseas markets; acquisitionsSmithThe issuance and rewards of related shares of Field are properly managed in accordance with relevant rules and regulations;Shuanghui DevelopmentImported pork inventory from the United States did not incur any impairment loss; the board of directors believes that Mr. Guo Lijun is the most suitable candidate for the CEO; Bandung sold for 200 million US dollarsShuanghui DevelopmentThe allegation that 5% of the shares did not pay taxes is false.

  1. There is no transfer of funds from Shuanghui Development to overseas markets

  Wan Hongjian accused:

  Wanzhou InternationalThere is no substantial operation. Wanzhou International transferred funds from its subsidiary Henan Shuanghui Investment Development Co., Ltd. (Shuanghui Development), a subsidiary listed on the Shenzhen Stock Exchange, to overseas markets through various means.

  Wanzhou International responded:

The company was incorporated in the Cayman Islands as an exempted limited company on March 2, 2006. The company is an investment holding company and conducts the world‘s largest pork business, including the production and sales of pork and meat products, mainly in the People’s Republic of China (China), the United States of America (USA) and certain selected markets in Europe.

The indirect non-wholly-owned subsidiary of the Company in China Shuanghui Development and its subsidiaries have been operating in accordance with the relevant rules, regulations and procedures of China regarding capital and foreign exchange control.

Except for general business and investment needs (including dividend distribution, settlement of trade payables and sale of equity in Shuanghui Development’s subsidiary), the company has not transferred funds from Shuanghui Development to overseas markets.

(i) Dividend distribution

Rotex Co., Ltd. (“Rotex”, a company incorporated in Hong Kong) is an indirect wholly-owned subsidiary of the company and is the holding company of Shuanghui DevelopmentShareholders(Hold approximately 70.33% equity as of the date of this announcement). Therefore, the dividends declared by Shuanghui Development in the past years have been distributed to Rotex’s Hong Kong account in accordance with relevant procedures, laws and regulations.

(ii) Dealing with Rotex and WanzhouInternational tradeLimited company (“WanzhouInternational trade“, the company’s indirect wholly-owned subsidiary)’s trade payables, Shuanghui Development Subsidiary, has signed a contract with Rotex and Wanzhou respectively.International tradeEntered into certain supply agreements, pursuant to which Rotex and Wanzhou International Trade will provide frozen meat products and other raw material products to Shuanghui Development and its subsidiaries.

To this end, funds are transferred from onshore accounts of relevant subsidiaries of Shuanghui Development to relevant Hong Kong accounts of Rotex and Wanzhou International Trade from time to time in order to settle trade payables related to the above-mentioned transactions.

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(iii) The sale of the equity in the subsidiary of Shuanghui Development as an internal part of simplifying the structure of the GroupReorganizationIn the past, Rotex had sold its minority interests in certain subsidiaries of Shuanghui Development to Shuanghui Development.

To this end, funds were transferred from the onshore account of Shuanghui Development and/or its subsidiaries to the Hong Kong account of Rotorks in order to settle the consideration of the sale.

  2. AcquisitionSmithThe issuance and rewards of related shares of Field are properly managed in accordance with relevant rules and regulations

  Wan Hongjian accused:

Mr. Wan Long (together with his secretary) completed the acquisition in 2013SmithField Foods (Smithfield, an indirect wholly-owned subsidiary of the company) later received more than HK$5 billion in bonuses from the company. In addition, Mr. Wan Long instructed the company to grant 350 million award shares to him in 2017, and the award shares were originally promised to be granted to the management team of the company.

  Wanzhou International clarified:

(i) The company issued 573,099,645 shares and 245,614,133 shares (valued at approximately US$418 million and US$179 million at the time) to a company wholly-owned by Mr. Wan Long and a company wholly-owned by Mr. Yang Zhijun, respectively, in recognition of Mr. Wan Long And Mr. Yang Zhijun’s contribution to the acquisition of Smithfield in 2013 (Mr. Yang Zhijun was then an executive director and vice president of the company); ), granted 350,877,333 shares to Mr. Wanlong in 2017.Relevant share issuance and awards are properly managed in accordance with relevant rules and regulations.

Further details of the share awards are set out below:

Share-based payment transactions in 2013

On October 23, 2013, the company conducted the following share-based payment transactions to commend and reward Mr. Wanlong and Mr. Yang Zhijun for their contribution to the acquisition of Smithfield (completed in September 2013), marking the company’s business Expansion to the U.S. and international markets:

(i) Issue 4.9% shares to Shuntong. The company allotted and issued 573,099,645 shares (on a fully diluted basis, accounting for approximately 4.9% of the company’s issued share capital at that time).

(ii) Issue 2.1% shares to Yuji. The company allotted and issued 245,614,133 shares (on a fully diluted basis, approximately accounting for the company’s then-currently 2.1% of issued share capital).

The voting rights of the shares held by Shuntong and Yuji will be exercised in accordance with the instructions given by Xiongyu Investment Co., Ltd. The estimated fair value of these share awards at the date of grant was approximately US$597 million.

For more details, please refer to page 152 of the company’s prospectus dated July 24, 2014 (the “Prospectus”).

Share awards granted in 2017

The board of directors adopted the 2013 share award plan on October 23, 2013. According to the 2013 Share Award Plan, both directors Mr. Wan Long and Mr. Jiao Shuge have the right to jointly choose the recipient of the share award.

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According to the rules of the 2013 Share Award Plan, on April 28, 2017, Mr. Bandung was temporarily granted 350,877,333 shares (shares granted in 2013). According to the terms and conditions of the relevant grant notice and the rules of the 2013 Share Award Plan, the vesting of the shares granted in 2013 was completed on June 28, 2019 through the transfer of all the interests in High Zenith Limited (“HighZenith”). High Zenith has undertaken to exercise the voting rights of the shares granted in 2013 in accordance with the instructions issued by the company from time to time.

For more details, please refer to pages 151 and 152 of the Prospectus and pages 56 and 57 of the Company’s 2019 Annual Report.

  3. Shuanghui Development did not incur any impairment losses on its imported pork inventory from the United States

  Wan Hongjian accused:

In February 2021, Mr. Wan Long and Mr. Guo Lijun (Mr. Guo, an executive director) instructed Shuanghui Development to import pork from the United States at a price of US$25,800 per ton (import transaction), which was much higher than US$21,000 per ton. Market price. As a result, the company suffered a loss of more than RMB 800 million due to inventory write-offs.

  Wanzhou International clarified:

(i) Cross-border trade transactions (including import transactions between the company’s subsidiaries in Hong Kong and the company’s subsidiaries in the United States and Europe, and between the company’s subsidiaries in Hong Kong and the company’s subsidiaries in mainland China) ) Constitutes related party transactions of the Group, and these transactions are carried out in accordance with relevant rules and regulations in the daily business process of related parties. These transactions are aimed at achieving synergies within the Group.

The price of the import transaction is the current market price, and is based on (i) the buyer’s average purchase price for similar products of the same quality during the relevant period; Market practice is determined.

(ii) At the end of June 2021, the company’s imported meat inventory in China was 164,000 metric tons (including but not limited to pork imported from the United States). For the six months ended June 30, 2021, due to the decline in domestic pig prices, Shuanghui Development has made an inventory impairment provision of RMB 126 million.

Since the unrealized gains/losses of import transactions have been eliminated in the consolidated accounts of the Company, there is no need to accrue impairment losses on relevant inventories during the period ending June 30, 2021.

These accounting policies (including those applicable to inventories) have been consistently applied by the Group and Shuanghui Development. The interim financial information of the Group for the six months ended June 30, 2021 has been reviewed by its auditor Ernst & Young.

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  4. The board of directors believes that Mr. Guo Lijun is the most suitable candidate for the chief executive officer

  Wan Hongjian accused:

Guo Lijun did not have the qualifications to be promoted to the chief executive officer of the company because of major losses to the company due to foreign exchange hedging and pork imports.

  Wanzhou International responded:

After considering (among other things) Mr. Guo Lijun’s experience, qualifications and in-depth understanding of the business of the Group, the board of directors believes that Mr. Guo is the most suitable candidate for the chief executive officer of the company.

As mentioned in the response to the third allegation above, on an aggregate basis, the Group did not incur any impairment losses on China’s imported meat inventory during the period ended June 30, 2021.

The Group generally adopts the same kind ofCurrencyCalculate income and expenses, assets and liabilities to reduce currency risk. Only certain entities of the Group have currency mismatches in the source and use of funds in their daily business processes. The management team of the company monitors the foreign exchange risk of the group and may sometimes enter into forward contracts. In 202, due to the fluctuations in the exchange rate of RMB against the US dollar and Hong Kong dollar during the period, the Group recorded a fair value loss on financial derivatives. The amount was not significant and was less than 3% of the reported profit for the year.

  5. The allegation of unpaid taxes on the sale of 5% of Shuanghui Development’s shares for US$200 million is false

  Wan Hongjian accused:

In 2007, during the reorganization of Shuanghui Development, Bandung obtained a 5% equity interest in Shuanghui Development from CDH Investment (CDH allegations). Bandung subsequently sold a 5% interest in Shuanghui Development for a consideration of US$200 million, but he never declared or paid taxes on the amount (together with CDH’s allegations, collectively referred to as the “5% share allegation”).

  Wanzhou International responded:

CDH Investments and Mr. Wanlong have respectively denied the CDH allegations and the 5% share allegations in writing.

Based on the company’s information, Shuanghui Development’s largest public shareholder (other than the controlling shareholder of the company’s subsidiary) has a shareholding range of 0.95% to 3.66% at the end of each year of 2007 and 2020, and the highest shareholding obtained at the end of 2018 3.66% of the volume is held by the Central Clearing and Settlement System (CCASS).

In view of the above, after making all reasonable enquiries in each case, as far as the company is aware, the company is not aware of any matter that could reasonably cause it to disagree with the allegation of 5% shares being false.

(Source: CDC Finance)

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