**Verification Opinions on the Deposit and Use of Funds Raised by Zhengzhou Huajing Diamond Co., Ltd. in 2012**
*China Merchants Securities Co., Ltd.*
As the sponsor institution for Zhengzhou Huajing Diamond Co., Ltd. (hereinafter referred to as “Yu Diamond†or “the Companyâ€), China Merchants Securities Co., Ltd. (hereinafter referred to as “China Merchants Securities†or “the Sponsorâ€) conducted a comprehensive review of the deposit and use of funds raised by the Company during 2012, in accordance with the relevant regulations including the *Administrative Measures for Securities Issuance and Listing Sponsorship*, the *Shenzhen Stock Exchange GEM Stock Listing Rules*, and the *Shenzhen Stock Exchange GEM Listed Companies Standard Operation Guidelines*. The purpose of this report is to provide an independent and objective assessment of the company’s compliance with the rules governing fundraising activities.
### I. Overview of the Fundraising Activities
The Company successfully completed its initial public offering (IPO) in 2010, raising a total of RMB 810,160,000. After deducting underwriting and sponsorship fees of RMB 55,711,200, the net proceeds amounted to RMB 754,448,800. Further deductions for legal expenses such as attorney fees and audit fees brought the final net amount to RMB 745,021,800, which was verified by Zhongqin Wanxin Certified Public Accountants Co., Ltd. The Company maintained a dedicated account system for the management of these funds, ensuring transparency and compliance.
### II. Use of Funds in 2012
In 2012, the Company invested a total of RMB 188,904,242.80 into its fundraising projects, with cumulative investments reaching RMB 692,500,675.07 by year-end. As of December 31, 2012, the balance in the fundraising accounts stood at RMB 76,035,352.21, comprising RMB 51,035,352.21 in current accounts and RMB 25,000,000 in time deposits. No discrepancies were found in the fund usage, and all transactions were properly documented and reviewed.
### III. Management and Supervision of Funds
The Company established strict internal controls over the use of raised funds, including the implementation of a special account system and the signing of tripartite supervision agreements with the bank and the sponsor institution. These agreements ensured that all parties—management, the sponsor, and the bank—were held accountable for the proper handling of the funds.
### IV. Changes in Fund Usage
During 2012, the Company made adjustments to the location and execution method of certain fundraising projects. Specifically, it decided to establish Henan Huamao New Material Technology Development Co., Ltd. in Luoyang City due to changes in the local economic environment and long-term strategic planning. This change was approved by the board of directors, the board of supervisors, and the independent directors, and the Sponsor confirmed that the adjustment did not alter the fundamental nature of the project or the investment direction.
Additionally, there were no instances where the Company used self-raised funds to replace previously funded projects, nor did it temporarily use idle fundraising funds for working capital purposes.
### V. Compliance and Disclosure
While the Company generally complied with the requirements for fund usage, some issues were noted regarding the timeliness and completeness of disclosures. It is recommended that the Company improve its reporting mechanisms to ensure full transparency.
### VI. Verification Process
During the continuous supervision period in 2012, China Merchants Securities conducted a thorough review of the fund usage through document analysis, on-site inspections, and interviews with relevant personnel. The verification process included checking bank statements, payment vouchers, contracts, and project implementation reports to confirm that the funds were used in accordance with the approved plans.
### VII. Conclusion and Opinion
After a detailed examination, China Merchants Securities concluded that the deposit and use of the raised funds by the Company in 2012 were in compliance with all applicable laws and regulations. The Company adhered to its internal fund management policies and ensured that the funds were used for their intended purposes without any violations or misappropriations. Therefore, the Sponsor has no objections to the manner in which the funds were deposited and utilized.
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**Sponsor Representative:**
Yang Weilin, Yu Guoqing
**China Merchants Securities Co., Ltd.**
March 20, 2013
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