Fairness Analysis Report on Related Party Transactions of Fuen Co., Ltd. for Its IPO

Based on an in-depth analysis of the IPO-related documents of Fuen Co., Ltd. (Hangzhou Fuen Co., Ltd.), I will systematically evaluate the fairness of its related party transactions from multiple dimensions.

During the reporting period, the related party transactions of Fuen Co., Ltd. mainly involve the following categories [0]:

Transaction Type	Related Party	January-June 2025	2024 Fiscal Year	2023 Fiscal Year	2022 Fiscal Year
Related Party Procurement	Zhengkai Group	RMB 15.6073 million	RMB 25.0383 million	RMB 25.0053 million	RMB 36.6148 million
Related Party Sales	Zhengkai Group	RMB 0.9736 million	RMB 5.0506 million	RMB 5.5952 million	RMB 4.3672 million
Transfer of Large-Value Certificates of Deposit	Paiya Holdings	RMB 30 million	RMB 20.5942 million	-	-
Acquisition of Large-Value Certificates of Deposit	Paiya Holdings	-	RMB 50 million	-	-
Transfer of Equity Instruments	Paiya Holdings	-	-	-	RMB 20.3544 million
Transfer of Real Estate	Chen Meifen	-	-	-	RMB 3.6794 million

The scale of related party transactions is relatively small compared to the company’s overall operating scale [0]:

• Related Party Procurement
  accounts for 2.27%-2.87% of the current period’s operating costs
• Related Party Sales
  account for only 0.10%-0.37% of the current period’s operating revenue
• Related party procurement is mainly for outsourcing processing services, accounting for 7.72%-10.36% of the total procurement of outsourced processing

Zhengkai Group holds a special position in transactions with Fuen Co., Ltd. — it is both a customer and a supplier [1]:

:

• The main procurement contents include commissioned processing of grey cloth, grey cloth, yarn, etc.
• Pricing refers to industry practices and is determined through negotiation based on factors such as processing technology and grey cloth varieties
• Procurement pricing is determined based on market prices of similar transactions, and the pricing is fair

:

• It mainly provides dyeing and finishing processing services to Zhengkai Textile
• Zhengkai Textile only engages in grey cloth weaving and has no dyeing and finishing capacity, so it entrusts the company with processing to ensure product consistency
• Sales pricing is also determined based on market prices of similar transactions

According to the legal opinion of Grandall Law Firm (Hangzhou) [2]:

“All related party transactions between the Issuer and its related parties during the reporting period are acts of autonomy of will between equal civil subjects, which are objective and fair. The pricing basis reflects market-oriented principles, and the prices are reasonable and fair. There is no situation that damages the interests of the Issuer, its subsidiaries, or other shareholders.”

The fairness of related party transactions has undergone multi-level reviews [2]:

• Independent Directors’ Review Opinion
  : Confirm that related party transactions follow the principles of equality, voluntariness, equivalence, and compensation, and the terms of the agreements are fair and reasonable
• Board of Supervisors’ Review Opinion
  : Confirm that there is no situation of manipulating profits or damaging the company’s interests through related party transactions
• Board of Directors’ Review
  : Related directors abstained from voting, and the review confirmed that the related party transactions are fair
• Shareholders’ General Meeting Review
  : Related shareholders abstained from voting, and confirmed that the related party transactions are compliant

The role of Zhengkai Group in transactions with Fuen Co., Ltd. requires special attention [1]:

Identity	Transaction Content	Amount Range
Supplier	Procurement of grey cloth, commissioned processing, yarn	RMB 15 million-RMB 37 million per year
Customer	Dyeing and finishing processing services	RMB 0.97 million-RMB 5.6 million per year
Related Party of Shareholders	Zhejiang Zhengkai holds shares in the Issuer	-

This multiple-identity arrangement theoretically carries the risk of interest transfer, but regulatory authorities have already reviewed this matter.

During the reporting period, the company had fund borrowing with related party Qiu Qinchao [0]:

• It mainly involved collecting sporadic payments using personal bank cards
• Interest has been accrued with reference to the benchmark lending rate of banks in the same period
• All related funds and interest were settled by the end of 2023

Transfer of large-value certificates of deposit with controlling shareholder Paiya Holdings [0]:

• The Issuer transfers large-value certificates of deposit to external parties, and the bank acts as the platform for principal and interest settlement
• Then Paiya Technology purchases them at the face value principal
• This occasional related party transaction has gone through internal decision-making procedures

1. Compliant Decision-Making Procedures
   : All related party transactions have been reviewed by independent directors, the board of directors, the board of supervisors, and the shareholders’ general meeting, and related shareholders and directors have abstained from voting in accordance with the law [2]
2. Market-Oriented Pricing
   : The pricing basis reflects market-oriented principles, and is determined by comparing with market prices of similar transactions
3. Limited Proportion of Amounts
   : Related party transactions account for a small proportion of the company’s revenue and costs, and do not constitute a significant adverse impact on the company’s operations
4. Commitments from Controlling Shareholders
   : The controlling shareholders and shareholders holding more than 5% of the shares have issued commitments to standardize and reduce related party transactions

1. Risk of Dependence on Zhengkai Group
   : As one of the top five outsourcing suppliers, changes in cooperation may affect supply chain stability
2. Pricing Transparency
   : Although the pricing of related party transactions is claimed to be based on market principles, there is a lack of detailed third-party price comparison data
3. Historical Fund Borrowing
   : There was a situation of collecting payments using personal bank cards, indicating past flaws in internal control

Based on the above analysis, the related party transactions of Fuen Co., Ltd. reflect fairness in the following aspects:

1. Compliant Procedures
   : The decision-making procedures for related party transactions are complete, and related parties have abstained from voting in accordance with the law
2. Pricing Principles
   : Pricing refers to industry practices and market prices of similar transactions
3. Moderate Amounts
   : Related party transactions account for a small proportion of the company’s overall operating scale
4. External Confirmation
   : Independent directors, the board of supervisors, and the law firm have all confirmed the fairness of the transactions

: Overall, the related party transactions of Fuen Co., Ltd. meet fairness requirements, the pricing mechanism reflects market-oriented principles, and the decision-making procedures are compliant and effective. However, investors still need to pay attention to the potential conflict of interest risks brought by the multiple identities of Zhengkai Group, as well as the completeness of related party transaction disclosures.

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[0] Prospectus (Application Draft) for the Initial Public Offering of Shares by Hangzhou Fuen Co., Ltd. - Shenzhen Stock Exchange (http://pdf.dfcfw.com/pdf/H2_AN202512171802371563_1.pdf)

[1] Response Report to the Second Round of Review Inquiry Letter Regarding the Application Documents for the Initial Public Offering of Shares and Listing on the Main Board by Hangzhou Fuen Co., Ltd. - Shenzhen Stock Exchange (http://reportdocs.static.szse.cn/UpFiles/rasinfodisc1/202511/RAS_202511_2015001C98CA70DFBC4C1B81B6C3ED30D20E09.pdf)

[2] Legal Opinion of Grandall Law Firm (Hangzhou) on the Initial Public Offering of Shares and Listing by Hangzhou Fuen Co., Ltd. - Shenzhen Stock Exchange (http://reportdocs.static.szse.cn/UpFiles/rasinfodisc1/202506/RAS_202506_242105D07090332ABB4DD4AB6424F5CD889B5F.pdf)