Securities code: Yifan Pharmaceutical Co.Ltd(002019) securities abbreviation: Yifan Pharmaceutical Co.Ltd(002019) Announcement No.: 2022031 Yifan Pharmaceutical Co.Ltd(002019)
Announcement on carrying out foreign exchange derivatives trading business
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. Investment types: interest rate swap, foreign exchange swap, foreign exchange forward, currency swap, call option, put option and above business combinations.
2. Investment amount: the company and all subsidiaries within the scope of the consolidated statements intend to carry out foreign exchange derivatives transactions. The cumulative transaction amount at any point in time shall not exceed RMB 2 billion or other equivalent currencies. The validity period is one year from the date of deliberation and approval at the 23rd Meeting of the seventh board of directors of the company.
3. Special risk warning: there are still certain market risks, liquidity risks, performance risks, customer default risks and other risks in the company’s foreign exchange derivatives trading. Please pay attention to the investment risks.
1、 Overview of investment
1. Purpose of investment: with the in-depth promotion of the global business layout of Yifan Pharmaceutical Co.Ltd(002019) (hereinafter referred to as “the company”), the foreign exchange assets held by the company and its subsidiaries have increased, the proportion of the company’s foreign exchange assets has been rising, and a large number of foreign currency settlements are also involved in the daily operation process. At present, the international foreign exchange market fluctuates violently, and the foreign exchange rate dominated by US dollars fluctuates. In order to improve the company’s ability to deal with the risk of foreign exchange fluctuation, better avoid and prevent the risk of foreign exchange rate fluctuation faced by the company, enhance the company’s financial stability, and prevent the adverse impact of exchange rate fluctuation on the company’s profits and shareholders’ equity, the company plans to appropriately carry out foreign exchange derivatives trading business according to specific conditions, so as to strengthen the company’s foreign exchange risk management.
The company carries out foreign exchange derivatives trading business for the purpose of hedging, which is used to lock in costs and avoid exchange rate risks. The company selects simple foreign exchange derivatives closely related to its main business, and the derivatives match the variety, scale, direction and duration of its business background, which is in line with the company’s prudent and prudent risk management principles.
2. Investment period and amount: the company and its subsidiaries within the scope of merger plan to carry out foreign exchange derivatives transactions. The cumulative transaction amount at any time point shall not exceed RMB 2 billion or other equivalent currencies. The period is 12 months from the date of deliberation and approval at the 23rd Meeting of the seventh board of directors. The above amount can be recycled and rolled within the period. 3. Investment method: the foreign exchange derivatives transactions to be carried out by the company include interest rate swaps, foreign exchange swaps, foreign exchange forwards, currency swaps, call options, put options and the above business combinations. The contract term matches the term of the underlying transaction. If the duration of a single transaction exceeds the authorization term, the authorization term will be automatically extended until the termination of the transaction. The counterparty is a financial institution approved by the State Administration of foreign exchange and the people’s Bank of China and qualified for foreign exchange derivatives trading business.
4. Source of funds: the company carries out foreign exchange derivatives trading business for hedging. According to the agreement signed with financial institutions, the company and its holding subsidiaries may need to pay a certain proportion of margin, which will be paid with the company’s own funds or offset by the credit line of financial institutions to the company.
2、 Review procedure
The company held the 23rd Meeting of the 7th board of directors on April 11, 2022, deliberated and passed the proposal on carrying out foreign exchange derivatives transactions, and agreed that the company and its subsidiaries within the scope of consolidated statements should carry out foreign exchange derivatives transactions, and the cumulative transaction amount at any time point should not exceed RMB 2 billion or other equivalent currencies, The validity period is one year from the date of deliberation and approval at the 23rd Meeting of the seventh board of directors of the company. This matter is within the approval authority of the board of directors, does not involve related party transactions, and does not need to be deliberated by the general meeting of shareholders.
3、 Investment risk analysis and risk control measures
(I) investment risk analysis
The company follows the principle of locking exchange rate and interest rate risk in 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:
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: foreign exchange derivatives are based on the company’s foreign exchange assets and liabilities and match with the actual foreign exchange revenue and expenditure to ensure that there are sufficient funds for settlement at the time of delivery, or choose net delivery derivatives to reduce the capital demand on the maturity date.
3. Performance risk: the objects of the company’s foreign exchange derivatives transactions are banks with good credit and have established long-term business relations with the company, and the performance risk is low.
4. Customer default risk: the customer’s accounts receivable are overdue, and the payment cannot be recovered within the predicted recovery period, which will lead to delayed delivery and losses to the company.
5. 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.
(II) risk control measures
1. Clarify the trading principle of foreign exchange derivatives: the trading principle of foreign exchange derivatives is to preserve the value, avoid the risks caused by exchange rate fluctuations to the greatest extent, and adjust the operation strategy in time in combination with the market conditions to improve the effect of hedging. 2. System construction: the company has established the securities investment and derivatives trading management system, which clearly stipulates the authorization scope, approval procedures, operation points, risk management and information disclosure of derivatives trading, which can effectively regulate the trading behavior of foreign exchange derivatives and control the trading risk of foreign exchange derivatives.
3. Product selection: before foreign exchange 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: carefully select counterparties engaged in foreign exchange derivatives business. The company only carries out financial derivatives trading business with financial institutions such as legally qualified large commercial banks to avoid possible legal risks.
5. Specially assigned person: the company’s management representative, the company’s financial management department, the audit department and other relevant departments shall establish a special working group to be responsible for the risk assessment before the transaction of foreign exchange derivatives, analyze the feasibility and necessity of the transaction, and the financial management department shall be responsible for the specific operation of the transaction, timely report the changes of risk assessment and put forward feasible emergency stop loss measures in case of major changes in the market.
4、 Impact of investment on the company
The foreign exchange derivatives transactions to be carried out by the company are closely related to the daily operation. Focusing on the company’s foreign currency assets, liabilities and foreign exchange revenue and expenditure business, a certain proportion of foreign exchange derivatives transactions are matched according to the real transaction background, so as to deal with the foreign exchange risk brought to the company by foreign exchange fluctuations, enhance the company’s financial stability and meet the requirements of the company’s stable operation.
In accordance with the relevant provisions and guidelines of the Ministry of finance, such as 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, the company will conduct corresponding accounting and presentation of the proposed foreign exchange derivatives trading business. Foreign exchange derivative contracts are initially and subsequently measured by trading financial assets, and the fair value of trading financial assets is priced by financial institutions according to the open market transaction data.
5、 Opinions of independent directors
The independent directors believe that the company’s foreign exchange derivatives trading business is mainly to avoid the foreign exchange risk caused by the fluctuation of RMB exchange rate, effectively control the cost uncertainty caused by foreign exchange risk, enhance the company’s financial stability and meet the needs of the company’s operation and development. The company has formulated the securities investment and derivatives trading management system and relevant risk control measures, which is conducive to strengthening the risk management and control of foreign exchange derivatives trading. Relevant businesses have fulfilled the corresponding decision-making procedures and information disclosure obligations, and there is no situation that damages the interests of the company and all shareholders, especially small and medium-sized shareholders. Accordingly, the company is approved to carry out foreign exchange derivatives trading business.
6、 Documents for future reference
1. Resolution of the 23rd Meeting of the 7th board of directors
2. The independent opinions of independent directors on matters related to the 23rd Meeting of the seventh board of directors of the company are hereby announced.
Yifan Pharmaceutical Co.Ltd(002019) board of directors April 13, 2022
