Jiangsu Guofa Textile Co., Ltd.
Feasibility Analysis Report on Carrying Out Commodity Futures and Options Hedging Business
I. Overview of Hedging Business
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Purpose and Necessity of Carrying Out Commodity Futures and Options Hedging: Cotton is a major raw material for the company, accounting for a significant portion of its product costs. Cotton price fluctuations are frequent and have a considerable impact on product costs and gross profit margins. To hedge against the adverse effects of raw material price volatility on production and sales and to control operating risks, the company and its subsidiaries plan to use their own funds to conduct hedging business in relevant commodity futures and options.
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Types of Futures and Options to be Invested In: Limited to cotton futures and options contracts listed and traded on domestic and international futures exchanges.
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Scale and Source of Funds: Based on actual business needs, the funds (margin) invested in cotton futures and options hedging business will not exceed RMB 50 million. Funds within this limit can be used on a revolving basis. All funds will come from the company's own capital.
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Authorization and Term: Given that the commodity futures and options hedging business is closely related to the company's production and operation, it is proposed that the shareholders' meeting authorize the company's chairman to approve daily commodity futures and options hedging plans and sign relevant contracts. The authorization period will not exceed 12 months from the date of approval by the shareholders' meeting in 2025.