Shanghai Smith Adhesive New Material Co.Ltd(603683) : Shanghai Smith Adhesive New Material Co.Ltd(603683) announcement on carrying out forward foreign exchange settlement and sales business in 2022

Securities code: Shanghai Smith Adhesive New Material Co.Ltd(603683) securities abbreviation: Shanghai Smith Adhesive New Material Co.Ltd(603683) Announcement No.: 2022019 Shanghai Smith Adhesive New Material Co.Ltd(603683)

Announcement on carrying out forward foreign exchange settlement and sales business in 2022

The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this announcement, and bear individual and joint liabilities for the authenticity, accuracy and completeness of its contents.

Shanghai Smith Adhesive New Material Co.Ltd(603683) (hereinafter referred to as "the company") held the 20th meeting of the third board of directors on March 29, 2022, deliberated and adopted the proposal on the company's long-term foreign exchange settlement and sales business in 2022. In order to reduce the risk of exchange rate fluctuation, according to the business development needs of the company, the company plans to carry out long-term foreign exchange settlement and sales business. The relevant information is announced as follows:

1、 Purpose of carrying out forward foreign exchange settlement and sales

Because the company has export business and mainly uses US dollars for settlement, when the exchange rate fluctuates greatly, the exchange gain or loss will have a great impact on the company's operating performance. In order to reduce the impact of exchange rate fluctuations on the company's profits and meet the needs of business strategy, so as to maintain a stable profit level and focus on production and operation, the company plans to carry out long-term foreign exchange settlement and sales business with banks. Forward settlement and sale of foreign exchange is a foreign exchange hedging financial product approved by the people's Bank of China.

2、 Types of forward foreign exchange settlement and sales business

The company's forward foreign exchange settlement and sales transactions are in US dollars and euros.

3、 Period, quota and authorization of forward foreign exchange settlement and sales business

The long-term foreign exchange settlement and sales business to be carried out by the company in 2022 is expected to be USD 30 million and EUR 10 million, which can be used in rolling within the above limit. The board of directors of the company authorizes the chairman to sign relevant forward foreign exchange settlement and sales business agreements within the above limit. The authorization period shall be valid within 12 months from the date of adoption of the resolution at the 20th meeting of the third board of directors. To carry out forward foreign exchange settlement and sales business, the company can pay a certain proportion of deposit according to the agreement signed with the bank.

4、 Risk analysis of forward settlement and sale of foreign exchange

The forward foreign exchange settlement and sales business of the company follows the principle of locking exchange rate risk and hedging, and does not engage in speculative and arbitrage transactions. Therefore, strict risk control is carried out when signing the forward foreign exchange settlement contract, and the transaction is strictly matched with the payment collection time according to the exchange rate quoted by the company and the customer. The long-term foreign exchange settlement and sales operation can smooth the impact of exchange rate fluctuations on the company and enable the company to focus on production and operation. When the exchange rate fluctuates sharply, the company still maintains a stable profit level, but at the same time, the long-term foreign exchange settlement and sales operation will also have certain risks:

1. Exchange rate fluctuation risk: in the case of large changes in the exchange rate market, the bank's forward foreign exchange settlement exchange rate quotation may be lower than the company's quotation exchange rate to customers, so that the company cannot lock according to the quotation exchange rate to customers, resulting in exchange losses.

2. Internal control risk: forward foreign exchange settlement and sales transactions are highly professional and complex, which may cause risks due to imperfect internal control system.

3. Customer default risk: the customer's accounts receivable are overdue and the payment cannot be recovered within the predicted collection period, which will cause the delay of forward foreign exchange settlement and delivery, resulting in the loss of the company.

4. Collection forecast risk: the marketing department forecasts the collection according to the customer's orders and expected orders. In the actual implementation process, the customer may adjust their own orders and forecasts, resulting in inaccurate collection forecast of the company, resulting in the risk of delayed delivery of forward foreign exchange settlement.

5、 Risk control measures taken by the company

1. The marketing department uses the bank's forward foreign exchange settlement exchange rate provided by the capital department to quote to the customer, so that the company can lock the customer's quotation exchange rate after determining the order; When the exchange rate fluctuates greatly, if the forward exchange rate is far lower than the exchange rate quoted to the customer, the company will put forward requirements and negotiate with the customer to adjust the price.

2. The company's hedging is currently limited to foreign exchange hedging business, with the main purpose of avoiding risks, and speculation and arbitrage transactions are prohibited. The company has made provisions on the hedging amount, scope of hedging varieties, approval authority, internal audit process, responsible departments and responsible persons, information isolation measures, internal risk reporting system and risk handling procedures. The system meets the relevant requirements of regulatory authorities and the needs of practical operation. The risk control measures formulated are practical and effective.

3. In order to prevent the delayed delivery of forward settlement and sales of foreign exchange, the company attaches great importance to the management of accounts receivable, actively urges the collection of accounts receivable, and avoids the overdue phenomenon of accounts receivable. At the same time, the company purchases credit insurance for export loans, so as to reduce the risk of customer default and default.

4. The company's forward foreign exchange settlement and sales transactions must be based on the company's export business income, and the foreign currency amount of the forward foreign exchange settlement contract shall not exceed the forecast amount of export business income.

6、 Impact of carrying out forward foreign exchange settlement and sales business on the company

The company's forward foreign exchange settlement and sales business is based on normal production and operation, relying on specific business, and does not carry out foreign exchange transactions for the purpose of speculation or arbitrage. The company has established a corresponding management system to clearly specify the normative requirements for the development of long-term foreign exchange settlement and sales business, and has strong foreign exchange risk control ability, which will not have a significant adverse impact on the company's operation.

7、 Opinions of independent directors

The company plans to use US $30 million to carry out the forward foreign exchange settlement and sales business in 2022, which can avoid and prevent the risk of exchange rate fluctuation. The development of the forward foreign exchange settlement and sales business can further improve the company's foreign exchange risk management ability, reduce the impact of exchange rate fluctuation on the company's operating performance, help to ensure the stability of the company's profits, and there is no damage to the interests of the company and all shareholders, especially small and medium-sized shareholders. The review procedures of the company comply with the provisions of laws, regulations and the articles of association. Therefore, we agree that the company will carry out forward foreign exchange settlement and sales business in 2022. It is hereby announced.

Shanghai Smith Adhesive New Material Co.Ltd(603683) board of directors March 31, 2022

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