I. Latest Developments in the Yili 'Rumor' Incident

On April 9, in response to Yili's Zhang Jianqiu's recent accusation, Caixin reported that Zheng Junhuai had commissioned lawyers to issue a statement denying the allegations. The full text of the statement is as follows:

Lawyer Yang Hangyuan of Beijing Weiheng Law Firm, commissioned by Mr. Zheng Junhuai and Heilongjiang Red Star Group Food Co., Ltd. (hereinafter referred to as Red Star Group), issued the following statement in response to recent media reports that Zheng Junhuai was the mastermind behind the 'Pan Gang disappearance rumors':

1. Zheng Junhuai had no knowledge of the 'Pan Gang disappearance rumors'

With the support of the Heilongjiang Province and Mudanjiang City governments, Red Star Group has invested heavily in Mudanjiang to build an internationalized organic dairy industry chain. Mr. Zheng Junhuai leads the Red Star Group management team, working day and night to sell the internationally certified Obeixing organic baby formula and Linhai Xueyuan pasteurized organic fresh milk nationwide. He has no time to pay attention to anything else.

Mr. Zheng Junhuai is the founder of Inner Mongolia Yili Industrial Group Co., Ltd. (hereinafter referred to as Yili Group). He has deep feelings for Yili Group and, despite having left, still hopes for its healthy development and would not do anything to harm its legitimate interests.

Mr. Pan Gang is an entrepreneur personally cultivated by Mr. Zheng Junhuai. Mr. Zheng hopes that Pan Gang will fulfill his duties, abide by laws and regulations, and continue to contribute to Yili Group.

2. Legal action will be taken against Zhang Jianqiu's malicious defamation

Yili Group is a listed company. As Chairman Pan Gang has been abroad for a long time, it is normal for investors to raise questions, and the company should have promptly come forward to explain the situation truthfully. Unfortunately, Pan Gang did not appear, and Zhang Jianqiu, Executive President of Yili Group, in order to blur the focus and divert attention, baselessly accused Zheng Junhuai of being the mastermind behind the 'Pan Gang disappearance rumors'. Zhang Jianqiu also brought up old stories, using accusations to defame Zheng Junhuai. Some media outlets published Zhang Jianqiu's slanderous words without investigation or verification, causing great harm to Zheng Junhuai and Red Star Group.

Zheng Junhuai and Red Star Group demand that Zhang Jianqiu and the relevant media immediately cease the infringement, eliminate the impact, publicly apologize, and compensate for losses. Otherwise, they will resort to legal action.

On the same day, Yili announced again: Pan Gang is receiving treatment abroad, and the company's operations are normal

On the evening of April 9, Yili issued another announcement stating that the company had recently released the 'Inner Mongolia Yili Industrial Group Co., Ltd. Clarification Announcement Regarding Media Reports' in response to false rumors in relevant media, explaining the performance of Chairman Pan Gang's duties and the company's production and operations. On April 7, 2018, the company issued a statement through its official website, official WeChat, and official Weibo. As the statement attracted high market attention, the company now provides further clarification as follows:

The company's Chairman, Mr. Pan Gang, is receiving treatment abroad for 'congenital coarctation of the aorta'. During treatment and recovery, Mr. Pan Gang continues to preside over the company's relevant work and fulfill his corresponding duties. The company's production and operations are completely normal.

II. Review of the Yili Incident

1. The 'Disappearance' Rumor Was Stopped

On March 26, Guangxiang Finance published an article: Yili Chairman Pan Gang May Be 'Missing'

The article claimed: Guangxiang Finance learned that Pan Gang had recently returned to China but was quickly taken away by relevant authorities and asked to assist in an investigation.

Earlier on March 26, Yili responded to the public, saying that in response to multiple rumors online, relevant government departments at the Inner Mongolia Autonomous Region and Hohhot city levels had set up a special working group to investigate, and on March 19, one person involved in spreading rumors had been detained.

Yili seemed to have weathered the storm and was happily contacting major media. The 'rumormonger' was caught, the 'mastermind' appeared, and Yili's stock price rose.

After the storm broke, Pan Gang never appeared publicly, but Yili officials had been denying the rumors through various channels. Late at night, Yili officially announced that on April 4, Yili Group held an important discussion on 'sustainability', where Chairman Pan Gang and the group's senior and middle management jointly reviewed and approved the 2017 sustainable development work report.

2. Accusation Against Former Chairman Zheng Junhuai

On April 4, in response to the recent rumors surrounding Yili, Zhang Jianqiu, Executive President of Yili Group, revealed in an interview with media reporters that six suspects had been detained by police. He stated that according to the suspects' confessions, 'this was an organized, premeditated, planned, and clearly divided network rumor case', with a mastermind hiring a group of online writers to spread rumors and defame Yili and its main leaders through online articles, novels, and stories, causing huge losses to the company's operations and to shareholders and investors.

Media reports stated that Zhang Jianqiu publicly identified the mastermind as a former executive of Yili. Although Zhang did not name him, based on the information about the former executive reported by the media, other major media directly pointed out that the person Yili referred to as the mastermind was Zheng Junhuai, founder of Yili Group and current chairman of Red Star Group.

Zhang Jianqiu also stated that the company would protect its rights according to law and called on judicial authorities to prosecute a previous case involving the executive's misappropriation of 240 million yuan of public funds.

3. Disappointment: Pan Gang Unable to Attend Boao Forum

On April 6, reporters noticed that Pan Gang's name appeared in the latest guest list for the Boao Forum published by Hainan Daily, confirming that he would attend the forum opening on April 8.

On the evening of April 7, Yili Group issued a statement saying that Chairman Pan Gang had been invited by the Boao Forum for Asia Secretariat to attend the 2018 annual meeting and participate in important activities, but due to his ongoing treatment and recovery, he was unable to attend and had communicated with the organizers. During his treatment and recovery, Chairman Pan Gang has continued to work, presiding over the company's operations and management through various means. Currently, the company's production and operations are in good shape.

After finally being 'invited by the Boao Forum for Asia Secretariat to attend the 2018 annual meeting and participate in important activities', he could have appeared. But 'due to his ongoing treatment and recovery', last night Yili suddenly announced that Pan Gang 'would be unable to attend this event'.

Hoping, hoping, Pan Gang would return and attend the Boao Forum for Asia.

But Chairman Pan's health was really 'not cooperative'.

On the evening of April 9, reporters noted that Yili's stock continued to fall, down 3.87%. According to the company: on March 26, the day the rumors appeared, Yili's stock price fluctuated by 8.95% during trading, with market value evaporating 13.19 billion yuan from the day's high, causing losses to investors.

Yili has a market value of over 180 billion yuan and 178,000 shareholders. Every move of the chairman affects the sensitive nerves of shareholders.

Yili has repeatedly claimed that 'rumors stop at the wise', but Pan Gang has not appeared so far, leaving investors puzzled: Chairman, where are you?

This article is compiled by New Distribution.

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