Shenzhen Hepalink Pharmaceutical Group Co.Ltd(002399)
Feasibility analysis report on foreign exchange derivatives trading
1、 Background of foreign exchange derivatives trading
With the global business layout of Shenzhen Hepalink Pharmaceutical Group Co.Ltd(002399) (hereinafter referred to as "the company") and the rapid growth of overseas business, the foreign exchange assets and foreign exchange liabilities held by the company and its subsidiaries within the scope of consolidated statements have increased. In order to effectively avoid foreign exchange market risks, prevent the adverse impact of large exchange rate fluctuations on the company and reasonably reduce financial expenses, the company and its subsidiaries within the scope of consolidated statements plan to carry out foreign exchange derivatives trading business in 2022.
2、 Overview of foreign exchange derivatives transactions
In order to reduce the impact of exchange rate fluctuations on the company's operating performance, the company and its subsidiaries plan to carry out foreign exchange derivatives trading business for the purpose of hedging in combination with the actual business needs. The business types are not limited to foreign exchange derivatives trading varieties such as foreign exchange forward, foreign exchange swap, foreign exchange option, cross currency swap and cross interest rate swap.
The varieties of foreign exchange derivatives transactions carried out by the company are simple foreign exchange derivatives closely related to the company's basic business, and such foreign exchange derivatives and basic business need to match each other in terms of variety, scale, direction and term, so as to follow the company's prudent and prudent risk management principles.
3、 Necessity and feasibility analysis of forward foreign exchange transaction
The company's daily production and operation involves foreign currency business. With the global business layout and the rapid growth of overseas business, in order to effectively avoid the risk of exchange rate fluctuation and enhance financial stability, the company plans to carry out foreign exchange derivatives trading business to reduce the possible impact of exchange gains and losses on the company's operating performance. The development of this business is necessary.
The company has formulated and improved relevant internal control systems in accordance with relevant laws and regulations, and equipped professionals to carry out foreign exchange derivatives trading. The targeted risk control measures taken by the company are practical and feasible, and it is feasible to carry out foreign exchange derivatives trading business.
4、 Basic information of the company's foreign exchange derivatives transactions
1. Transaction limit and authorization validity
The company and its subsidiaries within the scope of consolidated statements intend to carry out foreign exchange derivatives business with a total amount of no more than US $200 million (or equivalent foreign currency), which shall be effective within 12 months from the date of approval by the board of directors of the company. The above quota can be recycled and rolled within the approval period. During the term of validity, the company and its subsidiaries within the scope of consolidated statements carry out foreign exchange derivatives trading business, and the balance at any time point shall not exceed US $200 million (or equivalent foreign currency). If the duration of a single transaction exceeds the authorization period, the authorization period will be automatically extended to the termination of the transaction.
2. Source of funds
The funds for the foreign exchange derivatives transactions to be carried out by the company come from the idle self owned funds of the company.
3. Trading partner
Financial institutions approved by regulatory authorities and qualified for foreign exchange derivatives trading business.
5、 Risk analysis
The company follows the principles of legality, prudence, safety and effectiveness in carrying out foreign exchange derivatives trading, and does not engage in speculative and arbitrage trading operations, but there are still certain risks in foreign exchange derivatives trading operations.
1. Market risk. The difference between the exchange rate and interest rate of foreign exchange derivatives trading contract and the actual exchange rate and interest rate on the maturity date will produce trading profits and losses; During the duration of foreign exchange derivatives, revaluation gains and losses will occur in each accounting period, and the cumulative value of revaluation gains and losses to the maturity date is equal to transaction gains and losses.
2. Liquidity risk. Based on the company's foreign exchange assets and liabilities, foreign exchange derivatives match the actual foreign exchange revenue and expenditure, so as to ensure that there are sufficient funds for clearing at the time of delivery, so as to reduce the demand for cash flow on the maturity date. 3. Performance risk. The counterparties of the company's foreign exchange derivatives transactions are banks and financial institutions with good credit and have established business relations with the company, and the performance risk is low.
4. Other risks. When conducting transactions, if the operators fail to conduct foreign exchange derivatives transactions according to the specified procedures or fail to fully understand the derivatives information, operational risks will be brought; If the terms of the transaction contract are not clear, it may face legal risks.
6、 Risk control measures
1. The foreign exchange derivatives transactions carried out by the company are aimed at locking in costs, avoiding and preventing exchange rate and interest rate risks, and any risk speculation is prohibited.
2. The company has formulated the financial derivatives trading business management system, which clearly defines the operating principles, approval authority, management and internal operation processes, information isolation measures, internal risk reporting system and risk handling procedures, information disclosure, etc. of the foreign exchange derivatives trading business, so as to control the trading risk.
3. The company will carefully review the contract terms signed with the bank and strictly implement the risk management system to prevent legal risks.
4. The Finance Department of the company will continue to track the changes in the open market price or fair value of foreign exchange derivatives, timely evaluate the changes in the risk exposure of foreign exchange derivatives transactions, timely report abnormal conditions to the management, prompt risks and implement emergency measures.
5. The internal audit department of the company shall regularly supervise and inspect the compliance of the decision-making, management and execution of foreign exchange derivatives transactions.
7、 Conclusion of feasibility analysis on foreign exchange derivatives trading
The foreign exchange derivatives transaction proposed by the company is based on the needs of normal production and operation, reduces the impact of exchange rate fluctuations on the company, helps to improve the company's ability to control foreign exchange risks, and is in line with the interests of the company and all shareholders. It is necessary to carry out this business. The company has established a sound internal control system and implemented risk prevention measures in accordance with the requirements of relevant laws and regulations. The targeted risk control measures taken are practical and feasible. It is feasible for the company to carry out foreign exchange derivatives trading.
Shenzhen Hepalink Pharmaceutical Group Co.Ltd(002399) board of directors April 11, 2002
