Announcement of Shandong Hongchuang Aluminum Holding Co., Ltd. on Reply to Concern Letter of Shenzhen Stock Exchange

On the evening of August 16, 2022, Shandong Hongchuang Aluminum Holding Co., Ltd. (stock code: 002,379, stock abbreviation: Hongchuang Holding) released the Announcement on Reply to the Concern Letter of Shenzhen Stock Exchange.

On July 14, 2022, Management Department I of Listed Companies of Shenzhen Stock Exchange issued a letter of concern to Hongchuang Holdings, Said: Zouping Hongshuo Aluminum Co., Ltd. (hereinafter referred to as "Hongshuo Aluminum"), a wholly-owned subsidiary of your company, intends to purchase 100% of the equity of Shandong Hongqing New Material Science and Technology Co., Ltd. (hereinafter referred to as "Shandong Hongqing") held by Zouping Huisheng New Material Technology Co., Ltd. (hereinafter referred to as "Huisheng New Material"), a related party, with its own capital of 60 million yuan. The book value of Shandong Hongqing's net assets is 70.634 million yuan, and the assessed value is 62.012 million yuan, with the assessed impairment rate of 12.21%. In this regard, we express our concern and ask your company to check the following issues and make a statement: Shandong Hongqing was established in September 2021. It has not been established for a long time and has not yet carried out its main business. In the future, it will face uncertainties in strategic transformation. In the first quarter of 2021 and 2022, the operating revenue will be zero, and the net profit will be -2,370,000 yuan and -2,291,400 yuan respectively. According to the public information, Shandong Hongqing has a registered capital of 50 million yuan, and the number of insured people is 0. Please explain the establishment background of Shandong Hongqing, the reason and necessity for your company to acquire 100% of its equity when Shandong Hongqing was founded less than a year ago and has not yet carried out its main business, and the business plan after your company acquired Shandong Hongqing.

The main contents of Hongchuang Holding's reply are as follows:

1、 The listed company Hongchuang Holding Tong acquired 100% of the equity of Shandong Hongqing Company. The main assets of Shandong Hongqing New Material Technology Co., Ltd. (hereinafter referred to as "Shandong Hongqing") are land

Shandong Hongqing, founded on September 8, 2021, is a wholly-owned subsidiary of Zouping Huisheng New Material Technology Co., Ltd. (hereinafter referred to as "Huisheng New Material") indirectly controlled by Shandong Hongqiao New Material Co., Ltd. (hereinafter referred to as "Shandong Hongqiao" or "Group Company"), the company's controlling shareholder. On September 8, 2021, Shandong Hongqing's shareholder Huisheng New Materials agreed that Hongqing New Materials received Huisheng New Materials to form an asset group (treated as paid in capital or capital reserve) with relevant land use rights, house ownership, structures, machinery and equipment, as well as relevant creditor's rights, debts and personnel through restructuring (transfer of investment). The shareholder Huisheng Xincai transfers its asset group to Shandong Hongqing according to the book value, and the shareholder Huisheng Xincai receives 100% equity payment from Shandong Hongqing. Shandong Hongqing is treated as investment (paid in capital, capital reserve), and recorded at book value. The tax base is determined based on the original tax base transferred to the asset group. According to the provisions of the Announcement of the State Administration of Taxation on the Issues Concerning the Collection and Management of Enterprise Income Tax on Asset (Equity) Transfer (No. 40 in 2015), the assets accepted by the Company as capital contributions are recorded according to the book value of the investor, and the enterprise income tax is treated according to special tax treatment provisions. In December 2021, Huisheng Xincai went through the formalities of asset property right change registration for this physical asset contribution, and transferred the relevant land and property to Shandong Hongqing.

2、 After the listed company acquired the land use right through the acquisition of equity, the buildings of the acquisition company will be demolished.

In December 2021, Shandong Hongqiao sold 100% of its equity in Shandong Hongqing to the listed company. The main asset of Shandong Hongqing is this real estate, and the social security payer is 0. The listed company plans to purchase land for the raised investment project. After the acquisition of Shandong Hongqing, since the real estate owned by Shandong Hongqing is mainly used for electrolytic aluminum production, and the listed company has no business plan, the listed company needs to demolish the above ground buildings and build the plant required for the raised investment project after the acquisition is completed. If the listed company directly purchases land and its above ground buildings and other attachments from Shandong Hongqing, Shandong Hongqing needs to pay value-added tax and additional taxes, deed tax, corporate income tax, etc., and bear certain tax costs. In view of the certain tax cost of the listed company's direct purchase of land and its above ground buildings and other attachments from Shandong Hongqing, based on the principle of integration of real estate and land, the listed company acquired the equity of Shandong Hongqing and used its land as the land for the raised investment project through consultation with Shandong Hongqiao.