China High Speed Transmission Equipment Group Co., Ltd. (the "Company", Stock Code: 0658.HK, together with its subsidiaries, the "Group") today issued the following statement in response to an announcement issued by Fullshare Holdings Limited ("Fullshare" or Stock Code: 0607.HK) on April 1, 2025.
1. Legitimacy of Legal Proceedings
To prevent the Group’s shareholders and the market from being misled by Fullshare’s description of the Writ of Summons, the Group clarifies that the concise and straightforward formulation of the Writ fully complies with legal procedural requirements. Under Hong Kong civil procedure rules, a Writ of Summons serves as the initial litigation document. Given the complexity of the case, which involves multiple defendants and relationships, a detailed statement of claim will be submitted in subsequent proceedings.
Notably, the PRC police have initiated a formal criminal investigation under Article 112 of Criminal Procedure Law for suspected embezzlement and misappropriation of funds and assets by individuals in positions of authority. This confirms that the case meets the criteria for criminal case filing and underscores the legitimacy of the Group’s claims.
The Group confirms that Fullshare has acknowledged receipt of the Writ on April 1, 2025, but other individual defendants (including current directors and employees sharing the same service address as Fullshare) have not yet done so. Pursuant to the relevant rules, Fullshare must respond within 14 days of service.
2. Connection Between Defendants and Relevant Amounts
Fullshare questioned the connection between the 13 defendants and the RMB 6.64 billion in funds, describing the claim as “malicious, without basis and absurd.” This statement contradicts evidence provided to the Group. Since November 2024, the Group has engaged a leading PRC law firm to conduct an investigation. Key evidence includes the improper involvement of Fullshare executives in the management and decision-making of the Group’s trading business, as well as undisclosed relationships between certain counterparties and Fullshare or its related personnel. These findings were detailed in the announcement issued by the Group on March 31, 2025. Given that the case has entered judicial proceedings, the Group will make further disclosures at appropriate times.
3. Legal Basis for Naming Five Seasons as a Defendant
Fullshare’s questioning of the intention for including Five Seasons as a Defendant is baseless. As the Company’s 71.62% controlling shareholder, Five Seasons’ actions have exceeded ordinary investment boundaries:
• Five Seasons recommended Mr. Fang Jian to the Group’s management. Subsequently, Mr. Fang collaborated with Fullshare-related personnel to deeply involve in managing the trading business. Mr. Fang’s tenure coincided with the abnormal fund transfers.
• The Group’s independent investigation committee, comprising of the Company's independent directors, have engaged an independent investigator since December 2024. As the independent investigation progressed, Five Seasons abruptly proposed a board restructuring with an undefendable excuse. This is apparently an attempt to obstruct the investigation, showing no regard for the interests of other shareholders at all.
4. Timeline for Identifying the Relevant Amounts
Fullshare has ignored the deliberate obstruction by related parties in its questioning of the timeline for discovering the irregularities. After Mr. Fang Jian's release from key positions at the relevant subsidiaries in the second half of 2024, he refused to comply with handover obligations, delaying access to critical financial records. He also repeatedly obstructed the Group’s appointed independent investigators during the investigation.
Eventually, financial records were discovered in Fullshare’s finance department and in its office of the Assistant to the President. Some documents showed signs of tampering or destruction. Fullshare denied possessing relevant financial records and later reiterated that this denial reflected the unanimous opinion of its Board.
Upon discovering the irregularities in the financial records, the Group implemented remedial measures, including suspending the trading business, enhancing controls over contracts, deliveries, and cash flow, eliminating advance payments and credit terms, and reorganizing the trading business management team.
5. Hong Kong SFC’s Legal Proceedings Against Board of Directors of 3DG Holdings
Fullshare’s comparison of this case and the proceedings involving 3DG Holdings (International) Limited is misleading. These two cases are fundamentally different. The Group urges the market to focus on the specific facts of this case and will provide updates in compliance with regulatory requirements.
6. Relationship with AVIS and Service Contracts
The Group hereby clarifies its relationship with AVIS Transmission Technology Co., Ltd (“AVIS”) and the terms of its service contract:
• AVIS operates as an independent entity, with all business dealings between the Group and AVIS conducted on market-driven and independently negotiated terms. The flow of talent is normal for companies within the same industry. The Group has no control over AVIS, nor is it a related party. Neither the Company’s Chairman, Mr. Hu Jichun, nor its Executive Director, Mr. Hu Yueming, holds beneficial interest in AVIS, which is currently a state-owned enterprise under the Shenzhen municipal government.
• Under a multi-year service contract, AVIS provides maintenance, repair, and overhaul services for more than 7,000 wind turbine gearboxes over a five-year term. The RMB 175 million agreement (RMB 35 million annually) was established through market-driven negotiations and reflects industry-standard pricing. The terms are mutually beneficial and address the Group’s operational needs.
7. Amendment to the Articles of Association of Nanjing High Speed
Fullshare’s claims regarding the amendment to Nanjing High Speed Gear Manufacturing Co., Ltd. (“Nanjing High Speed”) are significantly misleading. Their claim of losing “definite control” not only contradicts the facts but also misinterprets the legal effect of the acting-in-concert agreement.
• The amendment reflects changes to Nanjing High Speed's shareholding structure and ensures equitable treatment for all shareholders. Driven by Fullshare, Nanjing High Speed transitioned from a 100% owned subsidiary of the Company to its current multi-shareholder setup, including Nanjing Gear Management (50.0233%), Nanjing Golden Eagle (30.2108%), Jiangsu Ruihua (11.1892%), Jinhu Shifu Enterprise Management LLP (6.9767%), and Bank of Nanjing (1.6%). A leading law firm in China has confirmed that both the amendment procedure and the amended content fully comply with applicable laws.
• The Group retains effective control of Nanjing High Speed through its wholly-owned subsidiary, Nanjing Gear Management, which holds a controlling 50.02% stake. An acting-in-concert agreement with the employee shareholding platform Jinhu Shifu Enterprise Management LLP ensures that Nanjing Gear Management controls six of nine board seats, representing 66.7% of voting rights. This has been verified by Baker Tilly International Limited and a Big Four accounting firm.
• Fullshare's claim of losing “definite control” disregards the Company’s status as an independent listed company. It appears to seek to bypass the Company’s board to interfere directly with its subsidiaries. This violates the Listing Rules regarding board independence. A listed company's board must serve all shareholders, not just the interests of its majority shareholder. Notably, Fullshare's own annual financial statement acknowledges its control over Nanjing High Speed, contradicting its claims.
The Group believes this incident involves the controlling shareholder and related parties misappropriating assets, harming the interests of the Group and its shareholders. The Group will pursue accountability through legal actions and will provide timely clarifications on any misleading statements aimed at diverting market attention.