Haitong Securities Company Limited(600837)
About Zhonghong Pulin Medical Products Co.Ltd(300981)
Verification opinions on carrying out foreign exchange derivatives trading business in 2022
Haitong Securities Company Limited(600837) (hereinafter referred to as ” Haitong Securities Company Limited(600837) ” or “sponsor”) is a continuous supervision sponsor of Zhonghong Pulin Medical Products Co.Ltd(300981) (hereinafter referred to as ” Zhonghong Pulin Medical Products Co.Ltd(300981) “, “listed company” or “company”) for initial public offering and listing on GEM, In accordance with the measures for the administration of securities issuance and listing recommendation business, Shenzhen Stock Exchange GEM Listing Rules (revised in 2022), Shenzhen Stock Exchange listed companies self regulatory guidance No. 2 – standardized operation of GEM listed companies and other relevant provisions, the company has conducted prudent verification on the transactions of foreign exchange derivatives in 2022. The details are as follows:
1、 Basic information of this foreign exchange derivatives trading business
(I) investment purpose
1. Types of trading business: the types of foreign exchange derivatives trading to be carried out by the company include but are not limited to foreign exchange forward trading, foreign exchange swap trading, foreign exchange option trading, RMB foreign exchange forward trading, RMB foreign exchange currency swap, RMB foreign exchange option trading, RMB to foreign exchange option combination and other products or combinations of the above products. The basic targets of derivatives include exchange rate, interest rate, currency and other targets.
2. Counterparty: banks, futures companies and other financial institutions (non related party institutions)
3. Liquidity arrangement: foreign exchange derivatives transactions are based on the normal domestic and foreign currency revenue and expenditure business, based on specific business operations, and the investment amount and investment period match the actual business needs, so as to reasonably arrange the use of funds.
(II) investment mode
The types of foreign exchange derivatives transactions to be carried out by the company include but are not limited to foreign exchange forward transactions, foreign exchange swap transactions, foreign exchange option transactions, RMB foreign exchange forward transactions, RMB foreign exchange currency swaps, RMB foreign exchange option transactions, RMB to foreign exchange option combinations and other products or combinations of the above products. The basic targets of derivatives include exchange rate, interest rate, currency and other targets.
(III) transaction limit and validity period of authorization
If it exceeds US $500 million, the above transaction limit can be recycled and used in a rolling manner; The board of directors requests the general meeting of shareholders to authorize the general manager to act as the general person in charge of foreign exchange derivatives investment business, which shall examine and approve the foreign exchange derivatives investment business within the limit, and authorize and handle relevant matters for the specific person in charge of the foreign exchange derivatives investment business of the company and its holding subsidiaries.
(IV) source of funds
In the process of signing credit agreements with subsidiaries or stock holding companies, it is not necessary to pay a certain proportion of the margin for the use of the funds raised by subsidiaries or stock holding companies in the process of credit granting.
(V) information disclosure
The company will disclose the company’s foreign exchange derivatives trading in accordance with the relevant requirements of the Shenzhen Stock Exchange GEM Listing Rules (revised in 2022), Shenzhen Stock Exchange listed companies self regulatory guidelines No. 2 – standardized operation of GEM listed companies, etc, Disclose the relevant progress and implementation of foreign exchange derivatives transactions in the regular report.
2、 Risk analysis of foreign exchange derivatives trading business
1. Market risk: the difference between the exchange rate and interest rate of foreign exchange derivatives trading contract and the actual exchange rate and interest rate on the maturity date will produce trading profits and losses; During the duration of foreign exchange derivatives, revaluation gains and losses will occur in each accounting period, and the cumulative value of revaluation gains and losses to the maturity date is equal to transaction gains and losses.
2. Liquidity risk: the risk that the transaction cannot be completed due to insufficient market liquidity.
3. Performance risk: there is a risk of default caused by failure to perform the contract when the contract expires.
4. Other risks: when conducting transactions, if the operators fail to conduct foreign exchange derivatives transactions according to the specified procedures or fail to fully understand the derivatives information, operational risks will be brought; If the terms of the transaction contract are not clear, it may face legal risks.
3、 Risk control measures to be taken by the company
1. Clarify the trading principle of foreign exchange derivatives: the company does not conduct foreign exchange derivatives trading solely for profit, and the trading behavior of foreign exchange derivatives carried out by the company is based on normal production and operation and based on specific operation
Based on business, with the purpose of hedging, avoiding and preventing exchange rate risk and interest rate risk.
2. System and talent construction: the company has formulated the derivatives investment management system, which clearly stipulates the risk control, approval procedures, practical operation management, follow-up management and information disclosure, file management and information confidentiality of foreign exchange derivatives trading business, so as to control the trading risk; It shall be carried out by specialized personnel with rich experience and clear division of labor.
3. Transaction management: the company will carefully review the contract terms signed with the bank and strictly implement the risk management system to prevent legal risks.
4. Risk early warning management: the financial management department of the company will continue to track the changes in the open market price or fair value of foreign exchange derivatives, timely evaluate the changes in the risk exposure of foreign exchange derivatives transactions, timely report abnormal conditions to the management, prompt risks and implement emergency measures.
5. Internal control management: the internal control audit department of the company shall supervise and inspect the compliance of the decision-making, management and execution of foreign exchange derivatives transactions.
4、 Impact of foreign exchange derivatives trading business on the company
The company’s foreign exchange derivatives trading business is based on specific business operations and matches the company’s daily business needs. The company’s foreign exchange derivatives business makes full use of the hedging function of foreign exchange derivatives to hedge the exchange rate risk in business activities, effectively avoid the risk of foreign exchange market to a certain extent, and reduce the impact of large exchange rate fluctuations on the company. In view of the certain risks in the development of foreign exchange derivatives trading business and the uncertain impact on the company, the company will timely perform the obligation of information disclosure in strict accordance with relevant regulations.
5、 Accounting policies and accounting principles
According to 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 standards for Business Enterprises No. 37 – presentation of financial instruments, the company conducts corresponding accounting treatment for the proposed foreign exchange derivatives trading business, Reflected in the relevant accounts of the balance sheet and income statement.
6、 Implementation of review procedures and relevant opinions
(I) opinions of the board of directors
On February 23, 2022, the company held the 7th Meeting of the 3rd board of directors, deliberated and approved the proposal on carrying out foreign exchange derivatives trading business in 2022. According to the needs of business development, the company and its holding subsidiaries were agreed to carry out foreign exchange derivatives trading business in 2022, and the balance at any time point did not exceed US $500 million. The above trading quota can be recycled and rolled. This proposal needs to be deliberated and approved by the general meeting of shareholders.
(II) opinions of independent directors
Since the company’s import and export business requires a large number of foreign exchange transactions, the company and its holding subsidiaries use reasonable financial instruments to lock in transaction costs, which is conducive to avoiding the risk of exchange rate fluctuations.
The foreign exchange derivatives transactions carried out by the company and its holding subsidiaries are closely related to the daily business needs, and the company has established corresponding monitoring mechanisms, which comply with the provisions of relevant laws and regulations. After comprehensively considering the economic development and financial trend outside China, the expectation of exchange rate fluctuation and the business scale of the company, we agree to the proposal on carrying out foreign exchange derivatives trading business in 2022.
The deliberation and voting procedures of this proposal comply with the provisions of the company law, the stock listing rules of Shenzhen Stock Exchange (revised in 2022) and other relevant laws, regulations and the articles of association.
7、 Verification opinions of the recommendation institution
After verification, the recommendation institution believes that:
1. It is necessary for the company to carry out foreign exchange derivatives trading business, which is closely related to its daily operation, in order to avoid the operational risks caused by exchange rate fluctuations;
2. The matter has been deliberated and adopted at the 7th Meeting of the third board of directors of the company, and the independent directors have expressed clear consent;
3. The sponsor draws the attention of investors: Although the company has taken corresponding risk control measures for foreign exchange derivatives trading business, the inherent exchange rate fluctuation risk of foreign exchange derivatives trading business and the inherent limitations of internal control may have an impact on the company’s business performance.
In conclusion, the recommendation institution has no objection to the company and its holding subsidiaries carrying out foreign exchange derivatives transactions within the approved limit.
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(there is no text on this page, which is the signature and seal page of the verification opinions of Haitong Securities Company Limited(600837) on carrying out foreign exchange derivatives trading business in Zhonghong Pulin Medical Products Co.Ltd(300981) 2022) signature of the sponsor representative:
Zhang Zihui, Lei Hao
Haitong Securities Company Limited(600837) mm / DD / yy
