Orient Securities Company Limited(600958) underwriting sponsor Co., Ltd
About Xinjiang Zhongtai Chenical Co.Ltd(002092)
Verification opinions on carrying out commodity futures hedging business in 2022
Orient Securities Company Limited(600958) underwriting recommendation Co., Ltd. (hereinafter referred to as “Oriental Investment Bank” or “recommendation institution”) is a recommendation institution for continuous supervision of Xinjiang Zhongtai Chenical Co.Ltd(002092) (hereinafter referred to as ” Xinjiang Zhongtai Chenical Co.Ltd(002092) ” or “company”) non-public offering of shares in 2021, In accordance with the requirements of relevant laws and regulations and normative documents such as the measures for the administration of securities issuance and listing recommendation business, the stock listing rules of Shenzhen Stock Exchange (revised in 2022), the self regulatory guidelines for listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board, and the self regulatory guidelines for listed companies of Shenzhen Stock Exchange No. 13 – recommendation business, We have carefully verified the commodity futures hedging business in Xinjiang Zhongtai Chenical Co.Ltd(002092) 2022, and now the verification situation and verification opinions are published as follows:
1、 How to carry out futures hedging
1. Futures varieties: the varieties of futures hedging business carried out by the company are related products and raw materials for production and operation and industrial chain operation of the company.
2. Scale and source of invested funds: when the company carries out futures hedging business, the maximum amount of margin occupied shall not exceed 5% of the owner’s equity of the parent company in the latest audit. Within the validity period of the above amount and resolution, it can be recycled and used. The source of funds is the company’s own funds, not involving raised funds.
3. Implementation subject: according to the business implementation, the implementation subject is the company and its subsidiaries. Without the consent of the company, its subsidiaries shall not carry out futures business.
4. Term of validity: the term of validity shall be valid within one year from the date of deliberation and approval by the board of directors.
2、 Risk analysis of commodity futures hedging business
The company’s futures hedging business is mainly to avoid the impact of commodity price fluctuations on the company, but there will also be certain risks:
1. Market risk: it will be affected by many factors such as international and Chinese economic policies and economic situation, exchange rate and interest rate fluctuations, such as large changes in raw material and product prices, exchange rate and interest rate, which may cause futures trading losses.
2. If the transaction price is too low, the actual risk of the position cannot be traded, resulting in the deviation between the transaction design and the actual risk of the hedging plan. 3. Operational risk: hedging is highly professional and complex, and there are risks caused by improper operation or operation failure.
4. Technical risk: due to uncontrollable and unpredictable system failure, network failure and communication failure, the trading system operates abnormally, resulting in trading instruction delay, interruption or data error.
5. Capital risk: when the company fails to make up the margin in time, it may be forced to close its position and suffer losses.
3、 Risk control measures taken by the company
1. Clarify the trading principles of hedging business: hedging business transactions take hedging as the principle and eliminate speculative transactions. Match the hedging business with the company’s production and operation, and adjust the operation strategy in time to improve the hedging effect.
2. Strictly control the capital scale of hedging business, reasonably plan and use the margin within the amount and period approved by the board of directors of the company. The company will reasonably allocate its own funds for hedging business, and will not use the raised funds for hedging directly or indirectly.
3. The company has established the management measures for internal control of Xinjiang Zhongtai Chenical Co.Ltd(002092) futures hedging business to clarify the organizational structure and responsibilities, business authorization process and operation process, risk management and other contents of hedging business, which can effectively standardize futures hedging transactions and control trading risks.
4. The company continuously strengthens the professional ethics education and business training of relevant staff to improve their comprehensive quality. Strengthen the grasp and understanding of the policies of the state and relevant regulatory institutions, and timely and reasonably adjust the hedging ideas and schemes.
4、 Accounting policies and accounting principles
The company determines the fair value of futures hedging business in accordance with the relevant provisions and guidelines of the Ministry of finance, such as accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments, accounting standards for Business Enterprises No. 24 – hedging accounting, accounting standards for Business Enterprises No. 37 – presentation of financial instruments. In the actual operation process, The company will continue to pay attention to the effectiveness of hedging to ensure that relevant hedging businesses are highly effective.
5、 Feasibility analysis of futures hedging business
The company has formulated the management measures for internal control of Xinjiang Zhongtai Chenical Co.Ltd(002092) futures hedging business as the internal control and risk management system for futures hedging business, which clearly stipulates the amount of margin used in hedging business, the variety and scope of hedging business, the approval authority, the responsible department and person, the internal risk reporting system and risk handling procedures, It can effectively ensure the smooth progress of futures business and effectively control risks. The targeted risk control measures taken by the company are feasible, and it is feasible to carry out futures hedging business.
The company has set up a reasonable hedging business organization, defined the responsibilities and authorities, approval authorities and authorization scope of relevant departments and posts, avoided ultra vires disposal, and ensured the independence of personnel in each post and the effectiveness of internal supervision and management mechanism to the greatest extent.
6、 Relevant review and approval procedures
(I) opinions of the board of directors
The company held the 35th session of the 7th board of directors on February 16, 2022, and approved the proposal on the company’s futures hedging business in 2022. In order to avoid the adverse impact of commodity price fluctuations on production and operation and resolve price risks, the company agreed to carry out futures hedging business, The maximum amount of deposit occupied shall not exceed 5% of the owner’s equity of the parent company in the latest audit. The term of validity is one year from the date of deliberation and approval by the board of directors, and the funds can be recycled within the term. The proposal does not need to be submitted to the general meeting of shareholders of the company for deliberation.
(II) opinions of independent directors
According to its own business characteristics and commodity price fluctuation characteristics, the company carries out futures hedging business on the premise of ensuring normal production and operation, which is conducive to reducing the adverse impact of commodity price fluctuation on production and operation and resolving price risks, without damaging the interests of the company and all shareholders. The company has formulated relevant systems and defined internal control procedures such as business operation process, approval process and risk prevention and control, which has played a role in ensuring the company’s control of futures risk. We agree that the company uses its own funds to carry out futures hedging business.
7、 Verification opinions of the recommendation institution
After verification, the sponsor believes that: the company’s commodity hedging business with its own funds meets the needs of actual operation, can avoid the risk of price fluctuation of raw materials and products to a certain extent, reduce the production and operation risk, and there is no situation that damages the interests of the company and all shareholders, especially small and medium-sized shareholders. The company shall operate in accordance with the requirements of the guidelines for self discipline supervision of listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board and the management measures for internal control of Xinjiang Zhongtai Chenical Co.Ltd(002092) futures hedging business, and control the business risk of hedging from the perspective of system.
The matter has been deliberated and approved at the 35th meeting of the seventh board of directors of the company. The independent directors of the company have expressed their independent opinions on the matter. Up to now, the company has fulfilled the necessary decision-making procedures.
The recommendation institution draws the company’s attention: in the process of commodity hedging business, it is necessary to strengthen the training and risk responsibility education of relevant business personnel, and implement specific risk control measures and accountability system; Put an end to speculation aimed at profit, and do not use the raised funds for hedging directly or indirectly.
The sponsor also draws the attention of investors: Although the company has taken corresponding risk control measures for commodity hedging business, the price fluctuation risk, customer default risk and other factors related to hedging business may have a certain impact on the company’s operating performance.
To sum up, China Eastern Investment Bank has no objection to carrying out commodity futures hedging business in Xinjiang Zhongtai Chenical Co.Ltd(002092) 2022. (no text below)
(there is no text on this page, which is the signature page of the verification opinions of Orient Securities Company Limited(600958) underwriting recommendation Co., Ltd. on carrying out commodity futures hedging business in Xinjiang Zhongtai Chenical Co.Ltd(002092) 2022) recommendation representative:
Li Zheng, Cui Hongjun
Orient Securities Company Limited(600958) underwriting and recommendation Co., Ltd. February 16, 2022
