Securities code: 300068 securities abbreviation: Zhejiang Narada Power Source Co.Ltd(300068) Announcement No.: 2022-008 Zhejiang Narada Power Source Co.Ltd(300068)
Announcement on carrying out futures hedging business
The company and all members of the board of directors guarantee that the contents of the announcement are true, accurate and complete, and are responsible for any false records, misleading statements or major omissions in the announcement.
Zhejiang Narada Power Source Co.Ltd(300068) (hereinafter referred to as “the company”) held the 28th meeting of the seventh board of directors on January 25, 2022, deliberated and adopted the proposal on developing futures hedging business, and agreed that the company and its subsidiaries use their own funds to carry out futures hedging business, with the total amount of guarantee not exceeding 120 million yuan per year, It can be recycled within the limit, and the business term is valid within one year after the deliberation and approval of the board of directors. The commodity futures hedging business to be carried out this time does not involve related party transactions. According to the articles of association, the proposal does not exceed the authority of the board of directors. It can be implemented after being deliberated and approved by the board of directors, and there is no need to submit it to the general meeting of shareholders for deliberation and approval. The relevant information is hereby announced as follows:
1、 Purpose of Futures Hedging
The futures hedging business carried out by the company and its subsidiaries is limited to the products and raw materials related to the company’s production and operation. It aims to reasonably avoid the adverse impact of commodity price fluctuations on the company’s raw material procurement and product sales, control the company’s operating risks and achieve the goal of stable operation of the company with the help of the price discovery and hedging function of the futures market.
2、 Basic information of hedging
(I) trading varieties
The futures hedging business of the company and its subsidiaries is limited to the main futures varieties related to production and operation traded in domestic futures exchanges, and any speculative trading for the purpose of profit is strictly prohibited.
(II) proposed investment amount and business period
According to the actual production and operation of the company and its subsidiaries, the quantity and scale of hedging shall be determined based on the existing sales orders in the current period. With a certain risk fluctuation fund, the total amount of margin to be invested by the company and its subsidiaries shall not exceed 120 million yuan for futures hedging business. It can be recycled within the limit, and the business term is valid within one year after the deliberation and approval of the board of directors.
(III) source of funds
The company and its subsidiaries will use their own funds for hedging operations.
(IV) accounting policies and assessment principles
The relevant accounting policies and accounting principles for the company’s futures hedging business will be implemented in strict accordance with the relevant provisions of the accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments and the accounting standards for Business Enterprises No. 24 – hedge accounting issued by the Ministry of finance of the people’s Republic of China. The changes in the fair value of futures products used in futures hedging business will be included in the current profits and losses of the company, which will increase or decrease the profits of the company.
3、 Feasibility of developing futures hedging business
The company has established a futures leading group to supervise and manage the futures hedging business; A futures operation team is set up to be responsible for the specific implementation of matters related to futures business. The company will organize special personnel with good quality to be responsible for the trading of futures business.
The company has formulated the management system of futures hedging business as the internal control and risk management system for futures hedging business, which clearly stipulates the amount of 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 company’s current self owned capital scale can support the total amount of margin engaged in futures hedging business. 4、 Risk analysis of futures hedging business
The company does not carry out hedging business for the purpose of speculation, which is mainly to reasonably avoid the impact on the company caused by the fluctuation of raw material purchase price and product sales price in the company’s production and operation, but there will also be certain risks:
1. Price fluctuation risk: the futures market changes greatly, which may lead to price fluctuation risk and investment loss.
2. Capital risk: futures trading adopts the margin and mark to market system. If the investment amount is too large, it may cause capital liquidity risk, and even be forced to close the position because it is too late to supplement the margin, resulting in actual losses.
3. Internal control risk: futures trading is highly professional and complex, which may cause risks due to imperfect internal control system.
4. Customer default risk: when the futures price fluctuates unfavourably, the customer may violate the relevant provisions of the contract and cancel the product order, resulting in losses to the company.
5. Technical risk: from trading to capital setting and risk control, to the link with futures companies, the stability of internal system and the matching of futures trading, there are risks that the transaction may not be concluded due to system crash, program error, information risk, communication failure and so on.
5、 Risk control measures taken by the company
1. Match the hedging business with the production and operation of the company and its subsidiaries to hedge the risk of price fluctuation to the greatest extent;
2. The company and its subsidiaries will reasonably allocate their own funds for hedging business, strictly control the capital scale of hedging, and reasonably plan and use margin;
3. In accordance with the futures hedging business management system, the hedging business quota, variety range, approval authority, internal audit process, responsible department and person, information isolation measures, internal risk report and handling procedures, information disclosure, etc. shall be clearly stipulated. The company will control all links in strict accordance with the provisions of the futures hedging business management system.
4. The company will establish a customer’s credit management system, review the credit of the counterparty before the transaction, and determine that the counterparty is capable of performing relevant contracts.
5. Set up computer systems and related facilities that meet the requirements to ensure the normal operation of transactions. In case of abnormal faults, corresponding treatment measures shall be taken in time to reduce losses.
6、 Impact Analysis on the company
1. The impact of futures hedging business on the company’s production and operation
When carrying out futures hedging business, the company and its subsidiaries can make full use of the hedging function of the futures market, reasonably avoid the adverse impact of commodity price fluctuations on the company’s raw material procurement and product sales, control the company’s operating risks and achieve the goal of stable operation of the company.
2. The impact of futures hedging business on the company’s finance
The company will conduct accounting treatment in accordance with the accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments and the accounting standards for Business Enterprises No. 24 – hedge accounting issued by the Ministry of finance of the people’s Republic of China.
7、 Opinions of the board of supervisors and independent directors
(I) opinions of the board of supervisors
On January 25, 2022, the 26th meeting of the sixth board of supervisors of the company deliberated and adopted the proposal on developing futures hedging business. The board of supervisors of the company held that the company and its subsidiaries can make full use of the hedging function of the futures market by developing futures hedging business, Reasonably avoid the adverse impact of commodity price fluctuations on the company’s raw material procurement and product sales, control the company’s business risks and achieve the company’s goal of stable operation.
This proposal does not harm the interests of investors and complies with the relevant documents of China Securities Regulatory Commission and Shenzhen Stock Exchange. We agree that the company and its subsidiaries carry out futures hedging business. (II) opinions of independent directors
The independent directors express their independent opinions on the futures hedging business of the company and its subsidiaries as follows: after review, we believe that the relevant approval procedures for the company to carry out futures hedging business comply with relevant laws, regulations and the articles of Association; The company has formulated the management system of futures hedging business, which has formulated specific operating procedures for the company to engage in futures hedging business by strengthening internal control, implementing risk prevention measures, improving operation and management level; When carrying out futures hedging business, the company and its subsidiaries can make full use of the hedging function of the futures market, reasonably avoid the adverse impact of commodity price fluctuations on the company’s raw material procurement and product sales, control the company’s operating risks and achieve the goal of stable operation of the company. We believe that the company’s futures hedging business does not harm the interests of the company and all shareholders, and agree to the company’s hedging business.
8、 Documents for future reference
1. Resolutions of the 28th meeting of the 7th board of directors;
2. Resolutions of the 26th meeting of the 6th board of supervisors;
3. Independent opinions of independent directors on relevant matters.
It is hereby announced.
Zhejiang Narada Power Source Co.Ltd(300068)
Board of directors
January 26, 2022
