Zhejiang Meorient Commerce & Exhibition Inc(300795)
Feasibility analysis report on carrying out forward foreign exchange settlement and sales business
1、 Background and purpose of carrying out forward foreign exchange settlement and sales business
Zhejiang Meorient Commerce & Exhibition Inc(300795) (hereinafter referred to as “the company”) and its subsidiaries’ overseas exhibition services are mainly settled in foreign currencies such as US dollars. Therefore, when the exchange rate fluctuates greatly, it will not only affect the normal operation of the company’s business, but also have a great impact on the company’s operating performance. In order to lock in costs, reduce some exchange gains and losses and reduce financial expenses, the company carries out forward foreign exchange settlement and sales business to reduce the impact of exchange rate fluctuations on the company’s operating profit.
2、 Necessity and feasibility of carrying out forward foreign exchange settlement and sales business
The overseas exhibition services of the company and its subsidiaries are affected by international political and economic uncertainties, the foreign exchange market fluctuates more frequently, and the uncertainty of the company’s operation increases. In order to prevent foreign exchange market risks, it is necessary for the company to appropriately carry out forward foreign exchange settlement and sales business according to specific conditions.
The forward foreign exchange settlement and sales business carried out by the company is closely related to the company’s business. Based on the company’s foreign exchange payment business, it can further improve the company’s ability to deal with the risk of foreign exchange fluctuation, better avoid and prevent the risk of foreign exchange rate and interest rate fluctuation faced by the company, and enhance the company’s financial stability.
3、 Overview of the company’s proposed long-term foreign exchange settlement and sales business
1. Main currencies involved: the company’s forward foreign exchange settlement and sales business aims to lock in costs and is limited to the same currencies as the main settlement currencies used in the company’s production and operation. The main foreign currencies include US dollar, euro, etc.
2. Term of carrying out forward foreign exchange settlement and sales business: the maximum delivery period of forward foreign exchange settlement and sales business shall not exceed 12 months.
3. Capital source and scale: the total amount of long-term foreign exchange settlement and sales business carried out by the company shall not exceed US $20 million; Within the above limit, the funds can be recycled. The source of funds is self owned funds and does not involve raised funds.
4. Counterparties: banks and other financial institutions with legal business qualifications. 5. Liquidity arrangement: all foreign exchange capital businesses correspond to normal and reasonable business background, match the collection and payment time, and will not affect the liquidity of the company.
4、 Risk analysis of forward foreign exchange settlement and sales business
The forward foreign exchange settlement and sales business can reduce the impact of exchange rate fluctuations on the company in case of large exchange rate fluctuations, but there may also be some risks:
1. Market risk: in case of significant deviation between the exchange rate trend and the expectation, the cost expenditure of the company after locking the exchange rate cost may exceed the cost expenditure when it is not locked, resulting in potential losses.
2. Operational risk: when the company carries out the above business, if the operators fail to report and approve according to the specified procedures, or fail to accurately, timely and completely perform the relevant business, it may lead to transaction loss or loss of transaction opportunities.
3. Legal risk: when the company signs the long-term foreign exchange settlement and sales business agreement with the bank, it shall handle the business in strict accordance with the requirements of the agreement. At the same time, it shall pay attention to the company’s capital position and other financial conditions to avoid the loss of the company caused by breach of contract.
5、 Risk control measures taken by the company
1. Select the forward foreign exchange settlement and sales business with simple structure, strong liquidity and controllable risk, which can only be carried out within the authorized limit, and strictly control its transaction scale.
2. Formulate standardized business operation process and authorization management system, allocate full-time personnel, clarify post responsibilities, and engage in the above businesses within the scope of authorization; At the same time, strengthen the business training and professional ethics of relevant personnel, improve the quality of relevant personnel, and establish a timely reporting system of abnormal conditions to avoid the occurrence of operational risks to the greatest extent.
3. Strengthen the management of bank accounts and funds, and strictly enforce the approval procedures for fund prediction, allocation and use.
4. The company regularly supervises and inspects the standardization of forward foreign exchange settlement and sales business, the effectiveness of internal control mechanism and the authenticity of information disclosure.
6、 Feasibility analysis conclusion of the company’s long-term foreign exchange settlement and sales business
The purpose of the company’s foreign exchange forward settlement and sales business is to make full use of the forward settlement and sales tools to reduce or avoid the exchange rate risk caused by exchange rate fluctuation, reduce exchange loss and control business risk, which is of sufficient necessity. The company’s foreign exchange forward settlement and sales business is based on specific business operations, without speculative and arbitrage trading operations, which can effectively lock in transaction costs and benefits, deal with foreign exchange risks brought by foreign exchange fluctuations, enhance the company’s financial stability, and meet the requirements of the company’s stable operation.
Zhejiang Meorient Commerce & Exhibition Inc(300795) board of directors March 23, 2022
