Huamao Shares (000850): Reply To Annual Enquiry Letter, Investment Business Did Not Result In Volatility

In May 28th, 000850.SZ issued a letter of reply on the annual inquiry of Anhui Huamao textile Limited by Share Ltd.

The announcement shows that in May 23, 2019, Huamao shares received the annual inquiry letter sent by the Shenzhen Stock Exchange.

Q: at the end of the reporting period, the balance of the company's available financial assets is 2 billion 182 million yuan.

The balance of long-term equity investment is 1 billion 103 million yuan, short-term loans are 1 billion 779 million yuan, and long-term loans are 171 million yuan.

Supplementary explanation:

(1) the specific contents of the company's investment management business, whether the company has sufficient funds, professionals and experience to carry out related investment management business.

Reply: the company's investment business mainly includes financial investment such as Guotai Junan, GF Securities, Huizhou Merchants Bank, Chongqing contemporary gravel (indirectly holding Huatai Insurance), financial investment of PE equity projects based on Anhui Huamao Industrial Investment Co., Ltd., and mineral resources investment based on Anqing Yuan Hong Mining Investment Co., Ltd.

The company has sufficient funds to protect the company's daily operation and investment. The company's external investment is approved by the shareholders' meeting, board of directors or general manager's office, and is determined as short-term investment or long-term investment according to the actual situation.

The company set up specialized departments to provide specialized personnel for investment business management.

(2) the risk control measures and implementation results formulated by the company for investment management business, and whether the investment management business may lead to the risk of substantial fluctuations in performance of the investment management business decision-making mechanism.

Reply: the company has the internal control system of investment and the internal control system of securities investment, which is effective in the management and control of the company's investment business. The investment business carried out by the company strictly implements the necessary investment decision-making procedures and disclosure obligations in accordance with the relevant regulations such as the guidelines for the standardized operation of the listed companies on the main board of the Shenzhen stock exchange and the rules for the listing of Shenzhen Stock Exchange, and by the end of December 31, 2018, the company's investment business did not cause the company's performance to fluctuate significantly.

(3) the specific uses of short-term loans and long-term loans.

Reply: the company's short-term borrowing is mainly used for normal production and business turnover, mainly including the purchase of raw materials, the payment of water and electricity charges, etc., of which about 1 billion 540 million yuan is purchased for raw materials and 240 million yuan for water and electricity charges.

In 2018, the operating cost of the company was about 2 billion 400 million yuan, and the proportion of purchasing raw materials accounted for about 64%. The proportion of water and electricity charges accounted for about 10%, which was basically in line with the cost proportion of the cotton textile industry.

Long term borrowing is mainly used for equipment pformation of the company, which is about 33 million yuan, and the construction of one hundred and fifty thousand entries for the eight branch plant is about 150 million yuan.

(4) in the case of large interest bearing liabilities, especially short-term loans, it is necessary to maintain large amounts of available financial assets and long-term equity investments.

Reply: compared with the traditional textile business of the company, at present, the company's investment in financial equity and other long-term equity investment business is relatively good. Maintaining a certain share of the available financial assets and long-term equity investment can reduce the company's liquidity risk and increase the company's ability to resist risks. There is no mismatch between the debt maturity and the asset maturity.

Q: two, the annual report shows that the initial balance of the available financial assets measured at fair value is 2 billion 451 million yuan, and the profit and loss of the fair value change is -4.06 billion yuan. The current sale amount is 224 million yuan, and the balance at the end is 1 billion 852 million yuan.

The sale of financial assets at fair value mainly includes the shares of listed companies held by Guotai Junan, GF Securities and Huizhou Merchants Bank.

Explain:

(1) the purpose of holding the above shares is to acquire the shares of the listed companies.

Reply: first, the way to get the shares mentioned above.

Guotai Junan: the company obtained some stake in Guotai Junan Securities Limited by Share Ltd through the way of initiating and increasing capital; GF Securities: the company obtained part of the shareholding of GF Securities through the way of granting and increasing capital; Huizhou Merchants Bank: the company obtained the partial shareholding of Limited by Share Ltd Merchants Bank by launching and increasing capital.

Two, the purpose of holding the above shares.

Compared with the traditional textile business of the company, at present, the company's investment in financial equity and other long-term equity investment business is relatively good, and investment business can reduce the company's liquidity risk, increase the company's ability to resist risks and profitability, and increase the liquidity of the assets of the company.

(2) the company recognised the shares of the listed companies as the basis for the fair value measurement of the sale of financial assets rather than the trading financial assets, and whether it was in conformity with the accounting standards of enterprises.

Reply: in conjunction with the revised and issued "accounting standards for Enterprises No. twenty-second - financial instruments validation and measurement" revised and promulgated by the Ministry of Finance in 2006 and the revised Accounting Standard No. second, which was revised and issued in 2014.

"Long term equity investment" and other provisions, taking into account the volatility of the stock market, in order to avoid the volatility of financial asset prices on the company's performance uncertainty, the company divided the above shares into fair value measurement of the sale of financial assets, and not divided into trading financial assets.

(3) during the reporting period, the fair value of the sale of financial assets measured at fair value is -4.06

A hundred million yuan shows the reasons for the decline of fair value and the measures and effectiveness to deal with the risk of fair value decline.

Reply: in the 2018 year, the fair value of the sale of financial assets in the company changed greatly, which was mainly affected by the decline in the share price of the two market. In response to the measures and effectiveness of the risk of fair value fall, the company firmly believed that China's securities capital market was generally objective, and at the same time, the company was going to discuss some hedging financial derivatives business at the technical level to avoid or reduce the adverse impact on the company due to the sharp decline in share prices.

Q: three, the annual report shows that the main business of the company's subsidiary Anqing Yuan Hong Mining Investment Co., Ltd. (consolidated statements caliber) is investment management. The registered capital of the subsidiary is 450 million yuan, and its operating income is 42 million 331 thousand and 300 yuan during the reporting period.

30 million 777 thousand and 300 yuan. As at the end of the reporting period, the total assets were 491 million 568 thousand and 500 yuan and the net assets were 401 million 601 thousand and 600 yuan.

(1) the main investment direction, the decision-making mechanism of the investment business and the specific business development of the subsidiary, and the accounting subjects, accounting methods and accounts dealing with the related foreign investment.

Reply: Anqing Yuan Hong Mining Investment Co., Ltd. (referred to as: Yuan Hong mining) is the five four Board of directors of the company (2011

In August 9th 2003, he considered and approved the establishment of a mining investment subsidiary with his own capital invested by 450 million yuan alone. Yuan Hong mining held 80% of the shares of Liuyang Xin Lei Mining Development Co., Ltd. and Kunming Dongchuan old Ming mining industry Co. Ltd., holding shares for the company's mining investment, except for the above equity investments. According to the relevant provisions of the enterprise accounting standards, the company accounted for Yuan Hong mining and its subsidiaries in the cost accounting method, accounting for long-term equity investment subjects, and incorporated into the consolidated statements.

The initial investment cost is the investment cost according to the actual payment price.

The subsequent measurement adopts the long-term equity investment calculated by the cost method, and adjusts the cost of the long-term equity investment when the investment is added or recovered, and the cash dividends or profits declared by the investment unit are recognized as the current investment income.

(2) the reason for the company's loss this year is whether there is a big business risk.

Reply: the main reason for the combined deficit of Yuan Hong mining is the increase in the cost of mining rights amortization; the two reason is that the old mining industry of the subsidiary company has stopped production, and there is no operating income and the larger amount of depreciation of fixed assets.

Q: four, explain the reasons for the investment income of the sale of financial assets during the holding period.

Reply: the investment income generated from the sale of the financial assets during the holding period is 50 million 940 thousand and 600 yuan, which is mainly the annual dividend income of the company participating in the reporting period. According to the accounting policy of the enterprise, the dividend income is included in the investment income subject (the investment income for the sale of financial assets during the holding period).

Q: five, the annual report shows that the initial balance of the original value of the company's pport equipment is 2 billion 466 million yuan, an increase of 3.66 during the current period.

Billion yuan, including 310 million yuan from construction projects, the final balance of 2 billion 719 million yuan.

Up to the end of the reporting period, the company had accumulated a total of 80 million yuan for pportation equipment.

Explain the specific contents of pport equipment, especially the pport equipment pferred from the construction project to the current stage, and whether the current scale of pport equipment is compatible with the scale of production and operation of your company, and whether the reasons and the estimated amount of the company's allowance for the pportation facilities are adequate.

Reply: the balance of the original value of the "pportation equipment" at the beginning of the term shall be 2 billion 466 million yuan, which should be the initial balance of the corresponding original value of the production equipment of the company.

The production equipment has increased by 366 million yuan during this period, of which 310 million yuan has been pferred from the construction project to 310 million yuan, which is the eight branch project pformation project of the company in 2005.

The relevant data is caused by the malposition of staff in the system entry. The company will strengthen the audit work in the preparation of periodic reports, improve the quality of information disclosure, and avoid similar problems.

Huamao shares went public in October 7, 1998, and is actually controlled by the Anqing Municipal Finance Bureau, which mainly produces pure, blended yarn such as cotton, wool, hemp, silk and man-made fibers.