About Jiangsu Eastern Shenghong Co.Ltd(000301)
Verification opinions on carrying out foreign exchange derivatives trading business in 2022
Huatai United Securities Co., Ltd. (hereinafter referred to as “sponsor” and “Huatai united”) is the sponsor of Jiangsu Eastern Shenghong Co.Ltd(000301) (hereinafter referred to as ” Jiangsu Eastern Shenghong Co.Ltd(000301) “, “company” and “listed company”) for public issuance of convertible corporate bonds in 2021, In accordance with the provisions of relevant laws, 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, the self regulatory guidelines for listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board, and the guidance for information disclosure of listed companies of Shenzhen Stock Exchange No. 6 – recommendation business, The foreign exchange derivatives trading business carried out in Jiangsu Eastern Shenghong Co.Ltd(000301) 2022 was reviewed and verified. The details are as follows:
1、 Overview of investment
1. Purpose of investment
The import and export business of the company is mainly settled in US dollars, which is greatly affected by international political and economic uncertainties. In the financial market environment of two-way fluctuation of RMB exchange rate and marketization of interest rate, in order to avoid the exchange rate and interest rate risks faced by import and export business and foreign currency loans, it is necessary to carry out foreign exchange derivatives trading business.
Based on the amount of the company’s crude oil import business, foreign currency loans and other foreign exchange businesses, the business cycle of relevant businesses, and in combination with the company’s fund management requirements and daily business needs, the company plans to resolve the exchange rate or interest rate risk faced by the foreign exchange assets and liabilities derived from the import and export business by carrying out foreign exchange derivatives trading business.
2. Investment amount
The total balance at any time point during the investment period (including the relevant amount of reinvestment from the income of the above investment) shall not exceed US $3.5 billion (other currencies are converted into US dollars at the current exchange rate).
3. Investment mode
The chairman of the company shall organize and establish a leading group as the decision-making body to manage the foreign exchange derivatives trading business, and operate in accordance with the derivatives trading management system and relevant business rules and processes formulated by the company. Foreign exchange derivatives transactions are based on normal foreign exchange assets and liabilities, and the business amount and business period match the expected foreign exchange revenue and expenditure period. The types of investment include but are not limited to forward settlement and sales of foreign exchange, RMB and other foreign exchange swap business, forward foreign exchange trading, foreign exchange swap, foreign exchange option, interest rate swap, interest rate option and other transactions. The counterparty is an institution approved by the State Administration of foreign exchange and the people’s Bank of China and qualified for foreign exchange derivatives trading business.
4. Investment period
The investment period starts from the date of deliberation and approval at the first extraordinary general meeting of shareholders in 2022 to the date of holding the annual general meeting of shareholders in 2022.
2、 Review procedure
On January 12, 2022, the company held the 42nd meeting of the 8th board of directors, deliberated and adopted the proposal on carrying out foreign exchange derivatives trading business. Based on the amount of the company’s crude oil import business, foreign currency loans and other foreign exchange businesses in 2022 and the business cycle of relevant businesses, the company and its subsidiaries are expected to carry out foreign exchange derivatives trading business in 2022, The total balance at any time point during the investment period (including the relevant amount of reinvestment from the income of the above investment) shall not exceed US $3.5 billion (other currencies are converted into US dollars at the current exchange rate). The investment period starts from the date of deliberation and approval at the first extraordinary general meeting of shareholders in 2022 to the date of holding the annual general meeting of shareholders in 2022. The independent directors of the company have expressed their independent opinions on this matter.
This matter needs to be submitted to the general meeting of shareholders for deliberation. This item does not involve related party transactions.
3、 Investment risk analysis and risk control measures
1. Investment risk analysis
The company carries out foreign exchange derivatives trading business in order to better deal with exchange rate and interest rate risks, lock in transaction costs, reduce operational risks, enhance the company’s financial stability, and does not engage in derivatives trading for speculation, but there will be certain risks at the same time. The main risks are as follows:
(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) Operational risk: when carrying out foreign exchange derivatives trading business, if the operators fail to report and approve according to the specified procedures, or fail to accurately, timely and completely record the trading business information, it may lead to the loss of derivatives business or the loss of trading opportunities.
(3) Legal risk: when conducting foreign exchange derivatives trading business, there are trading personnel who fail to fully understand the terms of the trading contract and product information, resulting in non-compliance with the legal provisions of the trading business or external legal disputes, resulting in losses to the enterprise.
2. Risk control measures
(1) Carry out foreign exchange derivatives trading business for the purpose of locking in costs, avoiding and preventing exchange rate and interest rate risks, and prohibit speculation and arbitrage trading solely for profit.
(2) Formulate and strictly implement relevant business rules and processes, and carry out risk control through authorization, post containment and internal audit.
(3) Carry out relevant business with legally qualified institutions, and carefully review the relevant contract terms signed to prevent legal risks.
(4) Strengthen professional ethics education and business training, improve the comprehensive quality of relevant personnel, and form efficient risk handling procedures.
4、 Impact of investment on the company
The purpose of the company’s foreign exchange derivatives trading business is to achieve steady operation, avoid the risks of the foreign exchange market and reduce the cost of foreign exchange settlement. It will not have an adverse impact on the company’s financial and operating conditions, and is in the interests of the company and all shareholders.
The company will conduct corresponding accounting treatment on foreign exchange derivatives business and reflect relevant items in financial statements in accordance with relevant provisions and guidelines such as accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments, accounting standards for Business Enterprises No. 24 – hedge accounting and accounting standards for Business Enterprises No. 37 – presentation of financial instruments issued by the Ministry of finance. 5、 Opinions of independent directors
1. The convening and convening of this meeting, as well as the deliberation and voting procedures of relevant proposals, comply with the provisions of relevant laws, administrative regulations and the articles of association.
2. The company establishes and improves relevant internal control systems, and controls derivatives investment risks by strengthening internal management and implementing risk prevention measures; The company carries out foreign exchange derivatives trading business for the purpose of avoiding the risk of exchange rate or interest rate fluctuation, which is closely related to the production and operation needs of the company, and there is no situation that damages the interests of the company and all shareholders, especially minority shareholders.
We agree to the company’s foreign exchange derivatives trading business and submit the proposal to the general meeting of shareholders for deliberation. 6、 Verification opinions of the recommendation institution
After verification, the sponsor believes that: the company has established and improved relevant internal control systems, implemented risk prevention measures and controlled derivatives investment risks by strengthening internal management; The company carries out foreign exchange derivatives trading business for the purpose of avoiding the risk of exchange rate or interest rate fluctuation, which is closely related to the production and operation needs of the company, and there is no situation that damages the interests of the company and all shareholders, especially minority shareholders. The matter has been deliberated and approved at the 42nd meeting of the 8th board of directors of the company. The independent directors of the company have expressed their independent opinions on the matter, which needs to be deliberated and approved by the general meeting of shareholders of the company. The recommendation institution has no objection to the company’s foreign exchange derivatives trading business this time.
(there is no text below, which is the signature and seal page of the verification opinions of Huatai United Securities Co., Ltd. on carrying out foreign exchange derivatives trading business in Jiangsu Eastern Shenghong Co.Ltd(000301) 2022) sponsor representative:
Jiang Haiyang, Li Yongwei
Huatai United Securities Co., Ltd. mm / DD / 2022
