Feasibility analysis report on carrying out foreign exchange derivatives trading business
1、 Background of the company’s foreign exchange derivatives trading
With the further deepening of global business layout and the strong development of overseas business in 2021, Bgi Genomics Co.Ltd(300676) (hereinafter referred to as the company) and its subsidiaries within the scope of consolidated statements continue to increase their foreign exchange revenue and expenditure in the process of international business. Under the financial market environment of two-way fluctuation of RMB exchange rate and marketization of interest rate, in order to effectively avoid the risk of foreign exchange market and prevent the adverse impact of large fluctuation of exchange rate on the company, in combination with the requirements of fund management and daily business needs, The company and its subsidiaries within the scope of consolidated statements intend to continue to carry out foreign exchange derivatives trading business in 2022 without affecting the development of the company’s main business.
2、 Overview of the company’s foreign exchange derivatives transactions
The company’s foreign exchange derivatives trading business is based on normal production and operation, relies on specific business operations, aims to avoid and prevent exchange rate risks, and does not carry out derivatives trading for the purpose of speculation and arbitrage. The details are as follows:
(I) investment mode
1. Types of transaction business: the foreign exchange derivatives to be carried out this time are limited to the currencies that are the same as the main settlement currencies used in the production and operation of the company (the main foreign currency currencies include US dollar, Hong Kong dollar, euro, etc.), and the transaction types include but are not limited to foreign exchange forward transaction, foreign exchange swap transaction, foreign exchange option transaction, RMB foreign exchange forward transaction, RMB foreign exchange currency swap RMB foreign exchange option trading, RMB to foreign exchange option portfolio and other products or a combination of the above products. The basic objects of derivatives include exchange rate, interest rate, currency, commodity and other objects.
2. Counterparty: banking financial institutions
3. Liquidity arrangement: foreign exchange derivatives transactions are based on the normal domestic and foreign currency revenue and expenditure business, based on specific business operations, and the investment amount and investment period match the actual business needs, so as to reasonably arrange the use of funds.
(II) transaction limit and validity period of authorization
The total amount of foreign exchange derivatives transactions carried out by the company and its subsidiaries within the scope of consolidated statements shall not exceed RMB 2.5 billion (or equivalent foreign currency), which shall be effective within 12 months from the date of deliberation and approval by the board of directors of the company, and can be recycled and used 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 RMB 2.5 billion (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.
The board of directors of the company authorizes the general manager of the company to exercise the right of investment decision-making according to relevant regulations within the scope of the above authorized amount and the approval period, and the financial department of the company is responsible for the specific implementation.
(III) source of funds
The capital of the foreign exchange derivatives transaction to be carried out by the company comes from the company’s own funds, and there is no case of using raised funds or bank credit funds to engage in this business.
(IV) information disclosure
The company will disclose the company’s foreign exchange derivatives transactions in accordance with the relevant requirements of the Shenzhen Stock Exchange gem stock listing rules, Shenzhen Stock Exchange listed companies self regulatory guidance No. 2 – standardized operation of GEM listed companies, and disclose the relevant progress and implementation of the foreign exchange derivatives transactions in the regular report.
3、 Necessity and feasibility of the company’s foreign exchange derivatives trading
With the continuous change of overseas financial market environment, the fluctuation of foreign exchange rate is becoming more and more frequent, and the uncertainty of foreign exchange market is becoming more and more prominent. In 2021, the global business layout of the company was further deepened, the overseas business development was still strong, and a certain amount of foreign exchange assets and foreign exchange liabilities were accumulated in the daily operation process. The mismatch between foreign currency income and expenditure resulted in the continuous expansion of the company’s foreign exchange risk exposure. In order to effectively avoid foreign exchange market risks and prevent the adverse impact of large exchange rate fluctuations on the company, the company and its subsidiaries within the scope of consolidated statements carry out foreign exchange derivatives trading business without affecting the development of the company’s main business. By carrying out foreign exchange derivatives trading business, the company can reduce the risk of exchange rate or interest rate fluctuations and enhance the company’s financial stability. The company’s foreign exchange derivatives trading this time complies with the provisions of relevant laws and regulations. The company has formulated the management system of foreign exchange derivatives trading business, which covers the operation principles, business responsibilities and approval authority, management and internal operation processes, information isolation measures, internal risk reporting system and risk handling procedures of foreign exchange derivatives trading business Information disclosure has made clear provisions to control transaction risks as much as possible by strengthening internal control. Therefore, it is feasible for the company to carry out foreign exchange derivatives transactions.
4、 Risk analysis of the company’s foreign exchange derivatives trading business
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: the risk that the transaction cannot be completed due to insufficient market liquidity.
3. Performance risk: there is a risk of default caused by failure to perform the contract when the contract expires.
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.
5、 Risk control measures for the company to carry out foreign exchange derivatives trading business
1. Clarify the trading principles of foreign exchange derivatives: the company does not conduct foreign exchange derivatives trading solely for the purpose of profit. The trading activities of foreign exchange derivatives carried out by the company are based on normal production and operation, based on specific business operations, and for the purpose of hedging, avoiding and preventing exchange rate risk and interest rate risk.
2. System construction: the company has formulated the management system of foreign exchange derivatives trading business, which clearly stipulates the operation principles, approval authority, management and internal operation processes, information isolation measures, internal risk reporting system and risk handling procedures, information disclosure, etc. of foreign exchange derivatives trading business, so as to control transaction risks.
3. Transaction management: the company will carefully review the contract terms signed with the bank and strictly implement the risk management system to prevent legal risks.
4. Risk early warning management: 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. Internal control management: the company’s internal audit and internal control department shall supervise and inspect the compliance of the decision-making, management and implementation of foreign exchange derivatives transactions.
6、 Feasibility analysis conclusion of foreign exchange derivatives transactions carried out by the company
The company’s foreign exchange derivatives trading business is based on normal production and operation, relies on specific business operations, aims to avoid and prevent exchange rate risks, and does not carry out transactions for the purpose of speculation and arbitrage. By carrying out appropriate foreign exchange derivatives trading business, the company and its subsidiaries within the scope of consolidated statements can effectively avoid the risk of foreign exchange market to a certain extent, prevent the adverse impact of large exchange rate fluctuations on the company, and help to enhance the financial stability of the company. The company has formulated the management system of foreign exchange derivatives trading business in accordance with the requirements of relevant laws and regulations, and formulated specific operating procedures for the company to engage in foreign exchange derivatives trading business by strengthening internal control and implementing risk prevention measures. Therefore, it is feasible for the company to carry out foreign exchange derivatives trading business.
Bgi Genomics Co.Ltd(300676) board of directors January 26, 2022
