Securities code (A / h): Zte Corporation(000063) / 763 securities abbreviation (A / h): Zte Corporation(000063) Announcement No.: 202217 Zte Corporation(000063)
Announcement on applying for derivatives investment quota in 2002
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Important content tips:
1. Type of investment: Zte Corporation(000063) and its holding subsidiaries (hereinafter collectively referred to as “the company” or “the company”) intend to carry out derivatives trading business. The types of derivatives trading include: foreign exchange forward contract, forward interest rate agreement, currency swap, interest rate swap, call option and structural long-term contract.
2. Investment amount: the amount of derivatives trading business to be carried out by the company is equivalent to US $2.8 billion, that is, the investment balance at any time point within the validity of the authorization shall not exceed the equivalent of US $2.8 billion, and this amount can be recycled within the validity of the authorization.
3. Special risk warning: the investment has no guarantee of principal or income, and there are market risk, liquidity risk and performance risk in the investment process. Please pay attention to the investment risk.
1、 Overview of investment
1. Investment purpose: in order to prevent the adverse impact of exchange rate and interest rate fluctuations on the company’s assets, liabilities and profitability, the company needs to invest in hedging derivatives to reduce the risk of uncertainty. The company is prohibited from engaging in derivatives speculation.
2. Investment amount: the company plans to apply for a hedging derivative investment amount equivalent to USD 2.8 billion in 2022. The limit is valid from the date of adoption of the resolution of the general meeting of shareholders to the end of the annual general meeting of shareholders of the company next year or when the general meeting of shareholders modifies or revokes this authorization, whichever is earlier, The investment balance at any time point within the validity of the authorization shall not exceed the equivalent of US $2.8 billion, and this amount can be recycled within the validity of the authorization. Specifically: (1) the investment amount of foreign exchange derivatives is equivalent to US $2.5 billion, and the hedging targets of foreign exchange derivatives investment include foreign exchange exposure, future income, future revenue and expenditure forecast, etc. (2) The amount of interest rate swap is equivalent to USD 300 million, and the hedging object of interest rate swap is floating interest rate foreign currency loan, etc.
3. Investment method: the company uses the foreign exchange and interest rate products provided by financial institutions to carry out hedging derivatives investment against the background of normal import and export business and foreign currency loans. Derivatives investment business mainly involves foreign exchange forward contracts, forward interest rate agreements, currency swaps, interest rate swaps, call options and structural forward contracts. Derivatives investments are cleared by means of principal swap or net delivery. Derivative investments do not involve performance guarantees. The derivatives traded by the company are non standardized contracts signed over the counter. The counterparties of derivatives investment are financial institutions with derivatives trading business qualification, stable operation and good credit, and there is basically no performance risk. The effectiveness of the derivatives trading contract shall be subject to the confirmation of written documents. The standardized Master Agreement and supplementary terms following industry practices shall be signed with each cooperative financial institution. In case of any dispute, it shall be handled based on the principle of friendly negotiation between both parties.
4. Investment term: it matches the actual business needs. Except for interest rate swap, it generally does not exceed one year.
5. Source of funds: derivatives investment mainly uses the comprehensive credit line of the company’s financial institutions, and is delivered with principal swap or net amount at maturity. The company is not involved in derivatives investment with raised funds.
2、 Review procedure
The 45th meeting of the 8th board of directors held on March 8, 2022 considered and approved the proposal on feasibility analysis of derivatives investment and application for investment quota in 2002, which needs to be approved by the general meeting of shareholders of the company.
This matter does not belong to related party transactions, and there is no need to perform the voting procedures of related party transactions.
3、 Risk analysis and risk control measures of derivatives investment
(I) risk analysis
1. Market risk
The difference between the exchange rate or interest rate of the hedging derivative investment contract and the actual exchange rate or interest rate on the maturity date will produce investment profits and losses; During the duration of hedging derivatives, revaluation profits and losses will occur in each accounting period, and the cumulative value of revaluation profits and losses to the maturity date is equal to investment profits and losses.
The company’s derivative investment is a hedging derivative, and the contract profit and loss form a hedging relationship with the value fluctuation of the hedging target. Its purpose is to reduce the uncertainty of the operating performance caused by the exchange rate fluctuation. The company will track the changes of the market situation and the hedging target, and make a sensitivity analysis for the market risk faced by the company, Assess the losses caused by the contract due to the occurrence of risks and the impact on the company’s operating performance; The company has corresponding control mechanism, stop loss process and disclosure system, so the risks faced by derivative investment have limited impact on the company’s operation.
2. Liquidity risk
Hedging derivatives are based on the company’s foreign exchange revenue and expenditure budget and actual foreign currency borrowings, which are matched with the actual business to ensure that there are sufficient funds for clearing at the time of delivery, or choose net delivery of derivatives to reduce the demand for cash flow on the maturity date and avoid liquidity risk.
3. Performance risk
The company’s derivatives investment counterparties are financial institutions with good credit and have established long-term business contacts with the company, and there is basically no performance risk.
4. Other risks
When conducting business, if operators fail to conduct derivatives investment operations according to the specified procedures or do not fully understand derivatives information, operational risks will be brought; If the terms of the transaction contract are not clear, it may face legal risks. (II) risk control measures
1. The derivative investment carried out by the company aims to reduce the impact of exchange rate and interest rate fluctuations on the company, and any risk speculation is prohibited; The derivative investment amount of the company shall not exceed the upper limit of the authorized amount approved by the board of directors or the general meeting of shareholders; The company shall not invest in derivatives with leverage.
2. The company has formulated the derivative investment risk control and information disclosure system and the derivative investment management specification, which clearly stipulates the risk control, review procedures, follow-up management and information disclosure of the company’s derivative investment, so as to effectively regulate the derivative investment behavior and control the derivative investment risk.
3. The company establishes a derivatives investment decision-making committee and a Derivatives Investment Working Group, equipped with professionals in investment decision-making, business operation, risk control and so on. The personnel involved in the investment fully understand the risks of Derivative Investment and strictly implement the business operation and risk management system of derivative investment.
The derivatives investment decision-making committee shall conduct risk assessment and voting decision on the hedging scheme of derivatives within the specific authorization of the board of directors or the general meeting of shareholders, analyze the feasibility and necessity of derivatives investment, and timely re conduct risk assessment and decision-making according to major market changes and the actual operation of derivatives. For the abnormalities found in tracking derivatives investment, timely report to the audit committee of the company, and prompt the investment working group to stop investment loss and implement emergency measures. Report the changes in the fair value of derivatives and the changes in the risk exposure of investment derivatives to the company’s audit committee every six months.
The Derivatives Investment Working Group is responsible for the operation of derivatives investment, conducting risk analysis and formulating investment plans (including investment varieties, term, amount, etc.) before derivatives investment, submitting them to the company’s derivatives investment decision-making committee for risk review, and finally approved by the chief financial officer.
4. The company signed contracts with cooperative financial institutions with clear terms and strictly implemented the risk management system to prevent legal risks. The company shall open a settlement account or designated settlement account in the derivative cooperative financial institution as required, and deliver the funds according to the transaction instructions on the settlement date of the derivative contract.
5. The internal control and Audit Department of the company is responsible for the process review and performance evaluation of derivatives investment every half year.
4、 Impact of derivatives investment on the company
Derivative investment is an active management strategy adopted by the company to reduce the adverse impact of exchange rate and interest rate fluctuations on the company. The company will carefully carry out relevant work in accordance with relevant laws and regulations and relevant provisions of the company’s system. The company adopts trading financial assets / liabilities for the initial and subsequent measurement of derivative contracts. The accounting and presentation are in accordance with the relevant provisions and guidelines of the accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments and the accounting standards for Business Enterprises No. 37 – presentation of financial instruments issued by the Ministry of finance of the people’s Republic of China, And will perform the obligation of information disclosure in accordance with the relevant requirements of the securities regulatory department. The derivatives investment carried out by the company is mainly aimed at currencies with strong liquidity. The market transparency is large, and the transaction price and the settlement unit price on that day can fully reflect the fair value of derivatives. The company determines the profit and loss of changes in fair value and investment profit and loss arising from derivatives contracts according to the price provided or obtained by financial institutions, Luft system and other pricing service institutions.
5、 Opinions of independent non-executive directors
The independent non-executive director of the company reviewed the company’s derivatives investment and expressed the following independent opinions on the matter:
In order to prevent the adverse impact of exchange rate and interest rate fluctuations on the company, the company and its holding subsidiaries need to invest in hedging derivatives. The company has conducted strict internal evaluation for derivatives business and established corresponding supervision mechanism. The internal review procedures performed comply with relevant laws and regulations and the provisions of Zte Corporation(000063) articles of association.
The company has formulated the management system of Derivative Investment and issued the feasibility analysis report of derivative investment business. The company carries out Derivative Investment on the basis of actual business in order to reduce the adverse impact of exchange rate and interest rate fluctuations on the company and enhance the financial stability of the company. We believe that it is feasible for the company to carry out derivative investment. 6、 Documents for future reference
1. Resolution of the 45th meeting of the 8th board of directors
2. Independent opinions of independent non-executive directors
3. Zte Corporation(000063) feasibility analysis report on derivatives investment
4. Zte Corporation(000063) derivatives investment risk control and information disclosure system
It is hereby announced.
Zte Corporation(000063) board of directors March 9, 2022
