Wangsu Science & Technology Co.Ltd(300017)
Feasibility analysis report on developing financial derivatives trading business
1、 Background and purpose of financial derivatives trading business
Since the investment period of financial derivatives approved by the company's previous board of directors expires on February 21, 2022, and with the expansion of the company's global business, the company still involves a large number of foreign currency businesses and holds a certain amount of foreign exchange assets in its daily business process. In order to effectively avoid and prevent the fluctuation risk of exchange rate and interest rate during the company's overseas business and foreign currency borrowing, and reasonably control the impact of exchange risk on the company's operating performance, combined with the needs of daily operation, the company plans to continue to carry out financial derivatives transactions for the purpose of hedging.
2、 Overview of financial derivatives trading business
1. Types of financial derivatives trading business to be carried out
In order to reduce the impact of exchange rate and interest rate fluctuations on the company's operating performance, the types of financial derivatives transactions to be carried out by the company include but are not limited to forward foreign exchange settlement and sales, options, forward foreign exchange trading, swaps (including currency swaps and interest rate swaps), currency swap business and the combination of the above products.
2. Amount, validity period and authorization of financial derivatives trading business to be carried out
The company plans to carry out financial derivatives trading business for hedging purposes. The amount of funds used for financial derivatives trading business shall not exceed RMB 1 billion or equivalent foreign currency. Within the authorization period, the funds can be recycled. The authorization period shall be valid within 12 months from the date of deliberation and approval by the board of directors. If the duration of a single transaction exceeds the authorization period, the authorized option shall be automatically extended until the termination of the transaction. During the authorization period, the company carries out financial derivatives trading business, and the balance at any time point shall not exceed RMB 1 billion or equivalent foreign currency. The board of directors of the company authorizes the general manager to exercise the approval authority of the financial derivatives trading business within the scope of the balance not exceeding the above limit, and the finance department shall implement the relevant matters of the above derivatives trading business.
3. Counterparty
The counterparties that the company plans to carry out financial derivatives trading business are banks and other financial institutions with sound operation, good credit and qualified for financial derivatives trading business.
4. Source of funds
The company plans to carry out financial derivatives trading, and the funds come from the company's own funds.
3、 Necessity of carrying out financial derivatives trading business
With the expansion of global business, the company's daily operation involves a large number of foreign currency businesses and holds a certain amount of foreign exchange assets. In order to effectively avoid the risk of exchange rate and interest rate fluctuations in the process of the company's overseas business and foreign currency borrowing, and prevent the adverse impact of large fluctuations in exchange rate and interest rate on the company, the company plans to carry out financial derivatives trading business.
The company does not conduct financial derivatives transactions solely for profit. All financial derivatives transactions are based on normal production and operation, based on specific business operations, and for the purpose of hedging, avoiding and preventing exchange rate and interest rate risks.
4、 Risk analysis of financial derivatives trading
1. Price fluctuation risk: market risk that may cause trading losses due to fluctuations in the underlying interest rate, exchange rate and market price.
2. Liquidity risk: the risk that the transaction cannot be completed due to insufficient market liquidity.
3. Performance risk: there is a risk of default caused by the counterparty's failure to perform when the contract expires when carrying out financial derivatives business.
4. Legal risk: due to the change of relevant laws or the violation of relevant legal systems by counterparties, the contract may not be executed normally and bring losses to the company.
5、 Risk response measures taken by the company
1. Clarify the trading principles of financial derivatives: the purpose of financial derivatives trading is to avoid and prevent exchange rate and interest rate risks, and any risk speculation is prohibited.
2. System construction: the company has formulated the financial derivatives trading business management system, which has made clear provisions on the operation specification, approval authority, management process, information isolation measures, internal risk reporting system, information disclosure and file management of financial derivatives trading business, which can effectively regulate the trading behavior of financial derivatives and control the trading risk of financial derivatives.
3. Product selection: before financial derivatives trading, conduct comparative analysis between multiple counterparties and multiple products, and select the financial derivatives most suitable for the company's business background, strong liquidity and controllable risk to carry out business.
4. Counterparty Management: fully understand the business qualification, implementation team, involved trading personnel and authorization system of financial institutions handling financial derivatives, and carefully select banks and other financial institutions with good credit and long-term business contacts with the company. If necessary, professional institutions can be hired to analyze and compare the trading modes and counterparties of derivatives.
5. A specially assigned person shall be responsible for: a specially assigned person shall be assigned to continuously monitor the financial derivatives contracts held, timely report to the company's decision-making level and formulate response plans in case of severe market fluctuations or increased risks, or major floating profits and losses.
6、 Accounting policies and accounting standards for financial derivatives business
According to the relevant provisions and guidelines of accounting standards for Business Enterprises No. 22 - recognition and measurement of financial instruments, accounting standards for Business Enterprises No. 24 - hedge accounting, accounting standards for Business Enterprises No. 37 - presentation of financial instruments and accounting standards for Business Enterprises No. 39 - fair value measurement issued by the Ministry of Finance, Carry out corresponding accounting and accounting treatment for the proposed financial derivatives trading business, and reflect the relevant items of the balance sheet and income statement.
7、 Conclusion of feasibility analysis of financial derivatives trading business carried out by the company
With the expansion of global business, the company's daily operation involves a large number of foreign currency business and holds a certain amount of foreign exchange assets. In order to effectively avoid the risk of exchange rate and interest rate fluctuations during the company's overseas business and foreign currency borrowing, and prevent the adverse impact of large fluctuations in exchange rate and interest rate on the company, the company plans to carry out financial derivatives trading business for the purpose of hedging, so as to avoid and prevent the risk of exchange rate and interest rate fluctuations to a certain extent and reasonably control the exchange rate The impact of sharp fluctuations in interest rates on the company's performance.
The company has formulated the management system of financial derivatives trading business and formulated corresponding rules and regulations for financial derivatives trading business. On the basis of normal operation, the company conducts financial derivatives transactions with its own funds, which will not affect the normal turnover of daily funds and the normal development of its main business.
Therefore, the company plans to carry out financial derivatives trading business within the period, limit and scope authorized by the board of directors.
Wangsu Science & Technology Co.Ltd(300017) board of directors February 21, 2022
