Business introduction

Time: 17 January 2017 Source: Far East Material Trading Center Co., Ltd

Part I Introduction to the Trading Center

Far East Material Trading Co., Ltd. is a wholly-owned subsidiary of A-share listed company Far East Smarter Energy Co., Ltd. (stock code: 600869). The registered capital is RMB 100 million only. The spot trading business of the Trading Center, through the inspection and acceptance made by People's Government of Jiangsu Province in 2013, has been recognized and can be kept (SZBF [2013] No. 74). On July 13, 2016, the Far East Material Trading Co., Ltd. received the Reply on Approving the Far East Material Trading Co., Ltd. to Start Business (SJRBF [2016] No. 82) issued by the Financial Affairs Office of the People's Government of Jiangsu Province, marking that the Trading Center is recognized by the supervision department. Through more than five years of development, mature management system and operation mode have been established in the spot trading business of the Trading Center. Cooperative relationship has been established between the Trading Center and more than 800 corporate enterprises. The trading varieties are mainly 8 mm copper bar, 3 mm copper wire, 9.5 mm aluminum rod, PVC, iron wooden drum and steel belt. The average daily volume of business is about RMB 150 million with daily delivery rate of commodity over 90 %. The Trading Center provides customers with the best services including bulk commodity trading, delivery, settlement and financing.

With the support from all levels of government, the Far East Material Trading Co., Ltd. takes such bulk commodities as copper, aluminum, PVC and rubber as the main listed trading varieties. The Trading Center employs various modes in trading, such as continuous spot trading and spot listing trading. This not only realizes product delivery of entity enterprises, but also satisfies the demands of customers on hedging, investment and financing. In addition, this also improves the traditional spot trading modes and methods, while diversifying the investment channels of investors. On the premise of legal and compliance management, the Trading Center explores innovative trading modes including the mode combining the futures trading and spot trading. The Trading Center gives full play to the financial attributes of commodities on the basis of spot trading, thus greatly enriching the investment choices of investors.

The Far East Material Trading Co., Ltd. adheres to serve the real economy. Based on electrotechnics and electrical industries, it provides the customers with the best services, such as bulk commodity trading, delivery, settlement and financing. It further implements the national strategy of "Internet +", constantly enriches and improves the e-commerce business product line, pays equal attention to both online and offline business and continuously enlarges the platform flow and trading volume, so as to achieve the Company's future development strategy.

Part II Introduction to Some Varieties

Copper bar: it is an indispensable material in fabricating copper products including electric wire and cable, enamelled wire and electronic wire. With the rapid and stable development of world electronic information, the demands on copper products increase in high speed as well. Therefore, the demands on the upstream product copper bar and the requirements on quality grow day by day. 8mm copper bar is the main pole stock employed for electric wire and cable fabrication. It will then be drawn into copper wires of different types according to different requirements.

Copper wire: it is drawn from copper bar with draw bench. 3mm copper wire is widely used in the conductors of various electric wires and cables. It can also be further processed into thin copper wire of different types.

Overview on application and market of copper bar and copper wire: output of copper product process in China takes up over 40% of the total output in the world, making it the largest production country of cooper product processed products. The industrial pattern centered on winding bar, tubular products and plate and strip has taken shape by now.

According to the structure of copper demand in China, the demand in power industry (over 50%) ranks first. Copper is mainly used in electric wire and cable in the power industry. Copper used in electric wire and cable account for 90% of copper used in power industry. China, the largest cable production country, registered sales value of RMB 731 billion in the cable industry in 2009 and over 900 billion in 2010.

Part III Contract on Entering the Market

Main Clauses in Contract for 8mm Copper Rod

Name of Trading Variety	8mm copper rod
Trading Unit	1 t/Shou
Price Quotation Unit	Yuan (RMB)/t
Minimum Price Variation Unit	RMB 10
Daily Price Limits	Not exceeding ±5% of the settlement price of the previous trading day
Trading Life of Contract	Continuous trading
Trading Hour (Beijing time)	9:00-11:30 in the morning; 13:30-16:00 in the afternoon and 19:30-22:00 at night
Time for Delivery Declaration (Beijing time)	16:15-16:30 of each trading day
Quality standard	Trading variety: φ8.0mm copper rod for electric works, with quality standard conforming to standard for T1R type in GB/T3952-2008; Substitute: φ8.0mm copper rod for electric works, with quality standard conforming to standard for T2R type in GB/T3952-2008 (with an agio of RMB 200/t compared with T1R type);
Delivery Place	Delivery warehouse designated by the Exchange
Minimum Delivery Unit	4 t (±1% Over-landed or Short-landed allowed with calculation as per actual quantity)
Performance bond	No less than 20% of the contract price
Handling charge collected by the Exchange	Not greater than RMB 12/t
Handling charge for delivery	Not greater than RMB 30/t
Delivery Mode	Physical delivery
Compensation rate for deferred delivery	0.8‰/day
Commodity Code	Cuφ8
Stock Exchange Listed	China Cable Material Trading Center

Main Clauses in Contract for 3mm Copper Wire

Name of Trading Variety	3mm copper wire
Trading Unit	1 t/Shou
Price Quotation Unit	Yuan (RMB)/t
Minimum Price Variation Unit	RMB 10
Daily Price Limits	Not exceeding ±5% of the settlement price of the previous trading day
Trading Life of Contract	Continuous trading
Trading Hour (Beijing time)	9:00-11:30 in the morning; 13:30-16:00 in the afternoon and 19:30-22:00 at night
Time for Delivery Declaration (Beijing time)	16:15-16:30 of each trading day
Quality standard	Trading variety: φ3mm round copper wire for electric works, with quality standard conforming to standard for TY in GB/T3953-2009;
Delivery Place	Delivery warehouse designated by the Exchange
Minimum Delivery Unit	1 t (±1% Over-landed or Short-landed allowed with calculation as per actual quantity)
Performance bond	No less than 20% of the contract price
Handling charge collected by the Exchange	Not greater than RMB 12/t
Handling charge for delivery	Not greater than RMB 30/t
Delivery Mode	Physical delivery
Compensation rate for deferred delivery	0.8‰/day
Commodity Code	Cuφ3
Stock Exchange Listed	China Cable Material Trading Center

Main Clauses in Contract for 9.5mm Aluminum Rod

Name of Trading Variety	9.5mm aluminum rod
Trading Unit	1 t/Shou
Price Quotation Unit	Yuan (RMB)/t
Minimum Price Variation Unit	RMB 5
Daily Price Limits	Not exceeding ±5% of the settlement price of the previous trading day
Trading Life of Contract	Continuous trading
Trading Hour (Beijing time)	9:00-11:30 in the morning; 13:30-16:00 in the afternoon and 19:30-22:00 at night
Time for Delivery Declaration (Beijing time)	16:15-16:30 of each trading day
Quality standard	Trading variety: φ9.5mm round aluminum rod for electric works, with quality standard conforming to standard for A6 in GB/T3954-2008; Substitute: φ9.5mm round aluminum rod for electric works, with quality standard conforming to standard for A4 in GB/T3954-2008.
Delivery Place	Delivery warehouse designated by the Exchange
Minimum Delivery Unit	2 t (±1.5% Over-landed or Short-landed allowed with calculation as per actual quantity)
Performance bond	No less than 20% of the contract price
Handling charge collected by the Exchange	Not greater than RMB 2/t
Handling charge for delivery	Not greater than RMB 30/t
Delivery Mode	Physical delivery
Compensation rate for deferred delivery	0.8‰/day
Commodity Code	Alφ9.5
Stock Exchange Listed	China Cable Material Trading Center

Main Clauses in Contract for Aluminum

Name of Trading Variety	Aluminum
Trading Unit	1 t/Shou
Price Quotation Unit	Yuan (RMB)/t
Minimum Price Variation Unit	RMB 5
Daily Price Limits	Not exceeding ±5% of the settlement price of the previous trading day
Trading Life of Contract	Continuous trading
Trading Hour (Beijing time)	9:00-11:30 in the morning; 13:30-16:00 in the afternoon and 19:30-22:00 at night
Time for Delivery Declaration (Beijing time)	16:15-16:30 of each trading day
Quality standard	Trading variety: aluminium ingot, conforming to A199.70 in GB/T1196-2002, with aluminium content no less than 99.70%; Substitute: 1. aluminium ingot, conforming to A199.85 and A199.90 in GB/T1196-2008. 2. Aluminium ingot, conforming to P1020A.
Delivery Place	Delivery warehouse designated by the Exchange
Minimum Delivery Unit	5 t (±1.5% Over-landed or Short-landed allowed with calculation as per actual quantity)
Performance bond	No less than 20% of the contract price
Handling charge collected by the Exchange	Not greater than RMB 2/t
Handling charge for delivery	Not greater than RMB 30/t
Delivery Mode	Physical delivery
Compensation rate for deferred delivery	0.8‰/day
Commodity Code	AlD
Stock Exchange Listed	China Cable Material Trading Center

Main Clauses in Contract for Cathode Copper

Name of Trading Variety	Cathode copper
Trading Unit	1 t/Shou
Price Quotation Unit	Yuan (RMB)/t
Minimum Price Variation Unit	RMB 10
Daily Price Limits	Not exceeding ±5% of the settlement price of the previous trading day
Trading Life of Contract	Continuous trading
Trading Hour (Beijing time)	9:00-11:30 in the morning; 13:30-16:00 in the afternoon and 19:30-22:00 at night
Time for Delivery Declaration (Beijing time)	16:15-16:30 of each trading day
Quality standard	Trading variety: Standard cathode copper, conforming to the specification for cathode copper in GB/T467-2010, with principal components copper and silver no less than 99.95%. Substitute: 1. High-purity cathode copper, conforming to the specification for high-purity cathode copper in GB/T467-2010. 2. LME-registered cathode copper, conforming to BSEN 1978:1998 (cathode copper level code: Cu-CATH-1)
Delivery Place	Delivery warehouse designated by the Exchange
Minimum Delivery Unit	5 t (±1.5% Over-landed or Short-landed allowed with calculation as per actual quantity)
Performance bond	No less than 20% of the contract price
Handling charge collected by the Exchange	Not greater than RMB 12/t
Handling charge for delivery	Not greater than RMB 30/t
Delivery Mode	Physical delivery
Compensation rate for deferred delivery	0.8‰/day
Commodity Code	CuD
Stock Exchange Listed	China Cable Material Trading Center

Main Clauses in Contract for Polyvinyl Chloride (PVC)

Name of Trading Variety	PVC
Trading Unit	1 t/Shou
Price Quotation Unit	Yuan (RMB)/t
Minimum Price Variation Unit	RMB 1
Daily Price Limits	Not exceeding ±5% of the settlement price of the previous trading day
Trading Life of Contract	Continuous trading
Trading Hour (Beijing time)	9:00-11:30 in the morning; 13:30-16:00 in the afternoon and 19:30-22:00 at night
Time for Delivery Declaration (Beijing time)	16:15-16:30 of each trading day
Quality standard	Trading variety: PVC, conforming to SG5 type with top quality and superior quality specified in GB/T5761-2006.
Delivery Place	Delivery warehouse designated by the Exchange
Minimum Delivery Unit	5 t (±1.5% Over-landed or Short-landed allowed with calculation as per actual quantity)
Performance bond	No less than 20% of the contract price
Handling charge collected by the Exchange	Not greater than RMB 2/t
Handling charge for delivery	Not greater than RMB 10/t
Delivery Mode	Physical delivery
Compensation rate for deferred delivery	0.8‰/day
Commodity Code	PVC
Stock Exchange Listed	China Cable Material Trading Center

Main Clauses in Contract for I-type 90℃ Sheathing-grade Flexible PVC Plastics

Name of Trading Variety	90℃ PVC material
Trading Unit	1 t/Shou
Price Quotation Unit	Yuan (RMB)/t
Minimum Price Variation Unit	5 RMB/ton
Daily Price Limits	Not exceeding ±5% of the settlement price of the previous trading day
Trading Life of Contract	Continuous trading
Trading Hour (Beijing time)	9:00-11:30 in the morning; 13:30-16:00 in the afternoon and 19:30-22:00 at night
Time for Delivery Declaration (Beijing time)	16:15-16:30 of each trading day
Quality standard	Trading variety: I type 90℃ black sheathing-grade flexible PVC plastics, with quality conforming to GB/T 8815-2008
Delivery Place	Delivery warehouse designated by the Exchange
Minimum Delivery Unit	5 t (±1.5% Over-landed or Short-landed allowed with calculation as per actual quantity)
Performance bond	No less than 20% of the contract price
Handling charge collected by the Exchange	Not greater than RMB 2/t
Handling charge for delivery	Not greater than RMB 30/t
Delivery Mode	Physical delivery
Compensation rate for deferred delivery	0.8‰/day
Commodity Code	90PVC
Stock Exchange Listed	China Cable Material Trading Center

Main Clauses in Contract for Linear Low Density Polyethylene

Name of Trading Variety	LLDPE
Trading Unit	1 t/Shou
Price Quotation Unit	Yuan (RMB)/t
Minimum Price Variation Unit	5 RMB/ton
Daily Price Limits	Not exceeding ±5% of the settlement price of the previous trading day
Trading Life of Contract	Continuous trading
Trading Hour (Beijing time)	9:00-11:30 in the morning; 13:30-16:00 in the afternoon and 19:30-22:00 at night
Time for Delivery Declaration (Beijing time)	16:15-16:30 of each trading day
Quality standard	Trading variety: LLDPE, with quality conforming to GB/T 15182-1994
Delivery Place	Delivery warehouse designated by the Exchange
Minimum Delivery Unit	5 t (±1.5% Over-landed or Short-landed allowed with calculation as per actual quantity)
Performance bond	No less than 20% of the contract price
Handling charge collected by the Exchange	Not greater than RMB 2/t
Handling charge for delivery	Not greater than RMB 10/t
Delivery Mode	Physical delivery
Compensation rate for deferred delivery	0.8‰/day
Commodity Code	LLD
Stock Exchange Listed	China Cable Material Trading Center

Main Clauses in Contract for Natural Rubber

Name of Trading Variety	Natural rubber
Trading Unit	1 t/Shou
Price Quotation Unit	Yuan (RMB)/t
Minimum Price Variation Unit	5 RMB/ton
Daily Price Limits	Not exceeding ±5% of the settlement price of the previous trading day
Trading Life of Contract	Continuous trading
Trading Hour (Beijing time)	9:00-11:30 in the morning; 13:30-16:00 in the afternoon and 19:30-22:00 at night
Time for Delivery Declaration (Beijing time)	16:15-16:30 of each trading day
Quality standard	Trading variety: 1. Domestic natural rubber (SCR WF), with quality conforming to GB/T 8081-2008. 2. Imported No. 3 smoked rubber sheet (RSS3), with quality conforming to the International Standards of Quality and Packing for Natural Rubber Grades (the Green Book).
Delivery Place	Delivery warehouse designated by the Exchange
Minimum Delivery Unit	5 t (±1.5% Over-landed or Short-landed allowed with calculation as per actual quantity)
Performance bond	No less than 20% of the contract price
Handling charge collected by the Exchange	Not greater than RMB 3/t
Handling charge for delivery	Not greater than RMB 30/t
Delivery Mode	Physical delivery
Compensation rate for deferred delivery	0.8‰/day
Commodity Code	RUD
Stock Exchange Listed	China Cable Material Trading Center