Zhejiang Zhaolong Interconnect Technology Co.Limited(300913)
Feasibility analysis report on carrying out foreign exchange hedging business
1、 Purpose of foreign exchange hedging business
Zhejiang Zhaolong Interconnect Technology Co.Limited(300913) (hereinafter referred to as "the company") due to the continuous development of the company's foreign market, the company's overseas business accounts for a large proportion, and the foreign exchange settlement is mainly in US dollars. In order to prevent the company's foreign exchange risks, further improve the ability to deal with foreign exchange fluctuation risks, better avoid and prevent foreign exchange rate fluctuation risks, and enhance financial stability, the company and its subsidiaries plan to carry out foreign exchange hedging business with banks and other financial institutions approved by relevant government departments and qualified for foreign exchange hedging business.
2、 Basic information of foreign exchange hedging business
1. It mainly involves currency and business types
The currency of foreign exchange hedging business to be carried out by the company and its subsidiaries is limited to the main settlement currency used by the company's production and operation, including US dollar, euro, etc. The company's forward foreign exchange settlement and sales business follows the principle of hedging, does not engage in speculative arbitrage transactions, and the risk level is low.
The specific methods or products of foreign exchange hedging business to be carried out by the company and its subsidiaries include but are not limited to forward settlement and sales of foreign exchange, foreign exchange swaps, foreign exchange options and other foreign exchange derivatives.
2. Business quota and term
According to the company's asset scale and business needs, the balance of foreign exchange hedging business proposed by the company and its subsidiaries at any time point shall not exceed US $80 million or equivalent foreign currency, and the authorization period shall be effective within 12 months from the date of deliberation and approval by the general meeting of shareholders of the company. If the duration of a single transaction exceeds the validity of the resolution, the validity of the resolution shall be automatically extended until the termination of the single transaction.
3. Source of funds
The sources of funds invested by the company in carrying out foreign exchange hedging business are its own funds, debt financing and funds raised by the company in other ways permitted by laws and regulations, which are not related to the raised funds.
4. Authorization
Since the foreign exchange hedging business is closely related to the company's operation, the board of directors of the company requests the general meeting of shareholders to authorize the general manager and his authorized person to exercise the decision-making power of the business, and the financial department shall implement the foreign exchange hedging business plan and sign relevant agreements and documents in accordance with the provisions of the company's system.
5. Counterparty
The counterparties are banks and other financial institutions approved by relevant government departments and qualified for foreign exchange hedging business.
3、 Feasibility analysis of foreign exchange hedging business
The company's overseas business accounts for a large proportion. Affected by international political and economic uncertainties, the foreign exchange market fluctuates more frequently, and the uncertainty of the company's operation increases. The company and its subsidiaries carry out foreign exchange hedging business in order to make full use of foreign exchange hedging tools to reduce or avoid exchange rate risks caused by exchange rate fluctuations, reduce exchange losses and control operational risks.
The company has formulated the Zhejiang Zhaolong Interconnect Technology Co.Limited(300913) foreign exchange hedging business management system, improved the relevant internal control system and equipped professionals for foreign exchange hedging business. The targeted risk control measures taken by the company are practical and feasible, and it is feasible to carry out foreign exchange hedging business.
By carrying out foreign exchange hedging, the company and its subsidiaries can avoid the risk of foreign exchange market to a certain extent, prevent the adverse impact of large exchange rate fluctuations on the company, improve the use efficiency of foreign exchange funds and enhance financial stability.
4、 Risk analysis of foreign exchange hedging business
The company's foreign exchange hedging business follows the principle of prudence and does not conduct foreign exchange transactions for the purpose of speculation. All foreign exchange hedging business is based on normal production and operation, relying on specific business operations and aiming at avoiding and preventing exchange rate risks. However, there are certain risks in foreign exchange hedging business, mainly including:
1. Exchange rate fluctuation risk: when the foreign exchange rate fluctuates greatly, the company judges that the direction of large exchange rate fluctuation is inconsistent with the direction of foreign exchange hedging contract, which will cause exchange loss; If the exchange rate fluctuates in the future, a large deviation from the foreign exchange hedging contract may also cause exchange losses;
2. Internal control risk: foreign exchange hedging business is highly professional and complex, and losses may still be caused by imperfect internal control system in the process of handling foreign exchange hedging business;
3. Transaction default risk: if the foreign exchange hedging counterparty defaults and fails to pay the hedging profit of the company as agreed, the actual exchange loss of the company cannot be hedged, which will cause the loss of the company.
5、 Risk control measures taken by the company
1. The company has formulated Zhejiang Zhaolong Interconnect Technology Co.Limited(300913) foreign exchange hedging business management system, which clearly stipulates the operation principles, approval authority, business management and internal operation process, information isolation measures, internal risk management and other aspects of foreign exchange hedging business.
2. In order to reduce or avoid the exchange rate risk caused by exchange rate fluctuation, the company will strengthen the research and analysis of exchange rate, pay real-time attention to the changes of international and Chinese market environment, timely adjust the operation and business operation strategies, and avoid exchange loss to the greatest extent.
3. In order to prevent internal control risks, all foreign exchange transactions of the company and its subsidiaries are based on normal production and operation and rely on specific business operations. Speculation and arbitrage transactions are not allowed. Business operations are carried out in strict accordance with the provisions of Zhejiang Zhaolong Interconnect Technology Co.Limited(300913) foreign exchange hedging business management system to effectively ensure the implementation of the system. The internal audit department of the company regularly audits the actual operation, capital use and profit and loss of foreign exchange hedging business, and whether the transaction and information disclosure are implemented in accordance with relevant internal control systems.
4. In order to control the risk of transaction default, the company and its subsidiaries only carry out foreign exchange hedging business with banks and other financial institutions with relevant business operation qualifications to ensure the legitimacy of the management of foreign exchange derivatives transactions of the company and its subsidiaries.
6、 Accounting policies and accounting principles
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 carries out corresponding accounting treatment for the foreign exchange hedging business and reflects the relevant items of the balance sheet and income statement.
7、 Conclusion of feasibility analysis of foreign exchange hedging business
The company's foreign exchange hedging business is based on the business background and makes full use of foreign exchange hedging tools for the purpose of avoiding and preventing exchange rate risks and reducing exchange losses, which is helpful for the company to reduce the adverse impact of large exchange rate fluctuations on its operation. The company has formulated Zhejiang Zhaolong Interconnect Technology Co.Limited(300913) foreign exchange hedging business management system, and the company will carry out business operations on the premise of strictly following relevant internal control systems. In conclusion, the company's foreign exchange hedging business can avoid the risks of the foreign exchange market to a certain extent, prevent the adverse impact of large exchange rate fluctuations on the company, improve the use efficiency of foreign exchange funds and enhance financial stability, which is feasible.
Zhejiang Zhaolong Interconnect Technology Co.Limited(300913) board of directors April 21, 2022
