Shenzhen Sea Star Technology Co.Ltd(002137)
Feasibility analysis report on carrying out forward foreign exchange transactions
1、 The purpose of the company’s forward foreign exchange trading business
Under the premise that the company intends to adopt the “forward exchange rate” (hereinafter referred to as the “effective exchange rate”) to avoid the risk of large foreign exchange transactions and reduce the exchange risk of the company’s foreign exchange settlement under the premise that the forward exchange rate of the company’s foreign exchange business is reasonable, and the forward exchange rate can be used to avoid the risk of large foreign exchange transactions. In this context, the company and its subsidiaries plan to timely carry out forward foreign exchange trading business with financial institutions according to the changes of market exchange rate, make full use of the hedging function of forward foreign exchange trading products (the specific products depend on the business products of financial institutions), and reduce the impact of exchange rate fluctuations on the company.
The forward foreign exchange transaction business meets the relevant conditions for the application of hedging accounting methods specified in the accounting standards for business enterprises.
2、 Overview of forward foreign exchange trading business
The forward foreign exchange trading business proposed by the company is a forward foreign exchange trading business conducted in financial institutions to avoid and prevent exchange rate risks in order to meet the needs of normal production and operation. Specifically, it refers to the settlement or sale of foreign exchange by signing a forward foreign exchange trading contract with financial institutions and agreeing to deliver at a certain time in the future according to the agreed currency, amount and exchange rate.
3、 Overview of forward foreign exchange transactions expected to be carried out (I) types of forward foreign exchange transactions
The company plans to reduce the adverse impact of foreign exchange fluctuations on the company by carrying out forward foreign exchange transactions. Forward foreign exchange transactions refer to the derivative investment business for the purpose of hedging by using foreign exchange products provided by financial institutions in order to reduce the impact of exchange rate fluctuations on the company’s assets, liabilities and profitability in actual business activities. These businesses mainly involve foreign exchange forward, structural forward, foreign exchange swap, foreign exchange option Interest rate swaps and structural swaps. (II) business conditions
1. Expected scale of forward foreign exchange transactions: the cumulative total amount of forward foreign exchange transactions within the expected period shall not exceed US $100 million (or equivalent RMB).
2. Development period: one year from the date of deliberation and approval by the general meeting of shareholders.
3. The board of directors of the company authorizes the chairman to be responsible for the operation and management of the above forward foreign exchange trading business, sign relevant agreements and documents, and authorizes the Finance Department of the company to be responsible for the specific handling of the forward foreign exchange trading business within the above quota range and business period.
4. The company and its subsidiaries are only allowed to conduct transactions with financial institutions approved by the State Administration of foreign exchange and the people’s Bank of China and qualified for the hedging business of forward foreign exchange transactions, and abide by the administrative provisions on the settlement, sale and payment of foreign exchange of the people’s Bank of China and the relevant administrative provisions on the forward foreign exchange trading business of the State Administration of foreign exchange.
5. Estimated Occupied Funds
To carry out forward foreign exchange trading business, the company does not need to invest other funds except to pay a certain proportion of deposit according to the agreement signed with financial institutions. The deposit will use the company’s own funds. The proportion of deposit paid shall be determined according to the specific agreements signed with different financial institutions.
4、 Risk analysis and risk control measures of forward foreign exchange trading business (Ⅰ) risk analysis
The forward foreign exchange trading business carried out by the company aims to lock in the exchange rate risk, do not engage in speculative and arbitrage trading operations, and conduct transactions in strict accordance with the company’s predicted collection period, collection amount and due loan amount to be repaid when signing the contract.
Forward foreign exchange transactions can reduce the impact of exchange rate fluctuations on the company in case of significant exchange rate fluctuations, but they still have the following risks:
1. Exchange rate fluctuation risk: when the exchange rate changes greatly, if the forward exchange rate agreed in the relevant business confirmation is lower than the real-time exchange rate, exchange losses will be caused.
2. Internal control risk: forward foreign exchange transactions and hedging transactions are highly professional and complex, which may cause risks due to imperfect internal control system.
3. Customer default risk: the customer’s accounts receivable are overdue and the payment cannot be recovered within the predicted collection period, which will cause the delay of forward foreign exchange settlement and delivery, resulting in the loss of the company.
4. Collection forecast risk: the business department forecasts the collection according to the customer’s orders and expected orders. In the actual implementation process, the customer may adjust their own orders and forecasts, resulting in inaccurate collection forecast of the company, resulting in the risk of delayed delivery of forward foreign exchange settlement. (II) risk control measures to be taken by the company
1. The company will strengthen the research and analysis of the exchange rate, and adjust the business strategy in time in case of large exchange rate fluctuations, so as to stabilize the export business and avoid exchange losses to the greatest extent.
2. In order to control transaction risks, the company has formulated the foreign exchange transaction decision-making system, which clearly stipulates the decision-making procedures, internal operation processes and risk management of foreign exchange transaction related businesses. According to the relevant systems of the company, the company will strengthen the professional ethics education and business training of relevant personnel, improve the comprehensive quality of relevant personnel, and establish a timely reporting system of abnormal conditions to form an efficient risk handling procedure. The company’s internal audit department and the audit committee of the board of directors will also regularly and irregularly check the signing and implementation of the actual transaction contract. 3. The company’s forward foreign exchange transaction business shall be based on the company’s foreign currency collection and payment forecast. The cumulative total amount of forward foreign exchange transactions during the transaction period shall not exceed US $100 million (or equivalent RMB), so as to control the possible risks faced by the company within an acceptable range.
5、 Fair value analysis
The forward foreign exchange trading products carried out by the company are mainly aimed at currencies with strong liquidity, with great market transparency. The transaction price and the settlement unit price on that day can fully reflect the fair value of derivatives. The company determines them according to the price provided or obtained by banks and other pricing service institutions.
6、 Accounting policies and subsequent disclosure
1. The accounting method of forward foreign exchange transactions carried out by the company is determined in accordance with the accounting standards for business enterprises. 2. When the fair value impairment of the company’s invested derivatives and the changes in the value of assets (if any) used for risk hedging add up, resulting in the total loss or floating loss amount reaching 10% of the company’s latest audited net assets, and the absolute amount exceeds 10 million yuan, the company will disclose it in a timely manner by interim announcement.
3. The company will disclose the information related to the forward foreign exchange transactions that have been carried out in the regular report.
7、 Feasibility analysis of forward foreign exchange trading business
The forward foreign exchange trading business of the company and its subsidiaries is carried out around the company’s business. Based on normal production and operation, relying on specific business operations and hedging, it is conducive to avoiding and preventing the risk of exchange rate fluctuations and reducing the impact of exchange rate fluctuations on the company’s operating performance. The company has formulated the foreign exchange transaction decision-making system and improved the relevant internal control processes. The targeted risk control measures taken by the company are feasible and effective; At the same time, the margin of forward foreign exchange trading business to be carried out by the company and its subsidiaries will use its own funds, not involving raised funds. Therefore, it is necessary and feasible for the company and its subsidiaries to carry out forward foreign exchange trading business, which can effectively reduce the risk of exchange rate fluctuation.
Shenzhen Sea Star Technology Co.Ltd(002137) board of directors
April 22, 2022
