Fengbei Biotech’s feasibility analysis report on carrying out forward foreign exchange settlement and sales and other foreign exchange derivatives trading business
Suzhou Fengbei Biotechnology Co., Ltd.
Regarding the development of forward foreign exchange settlement and sales and other foreign exchange derivatives transactions
feasibility analysis report
1. The background and purpose of carrying out forward foreign exchange settlement and sales and other foreign exchange derivatives trading business
With the continuous expansion of the import and export business of Suzhou Fengbei Biotechnology Co., Ltd. (hereinafter referred to as the "Company") and its subsidiaries, the scale of foreign exchange receipts and payments has increased simultaneously. Affected by factors such as the international political and economic situation, exchange rate and interest rate fluctuations have continued to increase, and foreign exchange market risks have increased significantly. In order to respond to changes in the foreign exchange market, effectively avoid and prevent foreign exchange market risks and large exchange rate fluctuations from adversely affecting the company, and enhance the company's financial stability, the company and its subsidiaries carry out forward foreign exchange settlement and sales and other foreign exchange derivatives transactions based on the actual conditions related to production and operations.
The foreign exchange derivatives transactions planned to be carried out by the company and its subsidiaries will follow the principles of legality, prudence, safety and effectiveness. All foreign exchange derivatives transactions are for the purpose of hedging, avoiding and preventing interest rate and exchange rate risks, and will not affect the company's normal production and operation, and speculation and arbitrage transactions will not be conducted.
2. Overview of carrying out forward foreign exchange settlement and sales and other foreign exchange derivatives transactions
(1) Trading varieties
The forward foreign exchange settlement and sales and other foreign exchange derivatives trading businesses planned to be carried out by the company and its subsidiaries will be based on actual operating needs and in accordance with the principles of derivatives hedging and exchange rate risk neutral management principles, and flexibly select products with high safety and liquidity, including but not limited to: forward foreign exchange settlement and sales, foreign exchange options, foreign exchange swaps, currency swaps, interest rate swaps, etc. or a combination of the aforementioned products. The counterparties are domestic and international financial institutions that are qualified to operate foreign exchange derivatives transactions, have stable operations and have good credit standing.
(2) Transaction amount
Based on the actual business scale, fund receipt and payment arrangements, etc., and without affecting normal production and operations, the company and its subsidiaries estimate that the total amount of idle self-owned funds will not exceed 50 million US dollars (or the equivalent in other currencies) to carry out forward foreign exchange settlement and sales and other foreign exchange derivatives transactions, and the maximum contract value at any point in the period (including the relevant amount of reinvestment of the aforementioned investment income) will not exceed 50 million US dollars (or the equivalent in other currencies). And the upper limit of the transaction margin and premium expected to be used (including the value of the collateral provided for the transaction, the expected credit line of the financial institution, the margin reserved for emergency measures, etc.) does not exceed US$2.5 million (or the equivalent in other currencies). The use period shall not exceed 12 months from the date of approval by the company's board of directors, and the transaction amount can be recycled within the scope and period of authorization.
(3) Source of funds
The funds for the forward foreign exchange settlement and sales and other foreign exchange derivatives transactions planned to be carried out by the company and its subsidiaries will come from the company's own idle funds.
3. The necessity and feasibility of carrying out forward foreign exchange settlement and sales and other foreign exchange derivatives transactions
The company and its subsidiaries carry out overseas purchasing and sales business due to actual business needs. Affected by factors such as the international market environment and external uncertainties, it is expected that exchange rates will fluctuate more frequently in the future. In order to avoid foreign exchange market risks, effectively respond to changes in the foreign exchange market, effectively avoid and prevent the adverse effects of foreign exchange market risks and large exchange rate fluctuations on the company, and enhance the company's financial stability, the company plans to carry out forward foreign exchange settlement and sales and other foreign exchange derivatives trading businesses to minimize the impact of foreign exchange fluctuations on the company and its subsidiaries.
4. Risk analysis and control measures for carrying out forward foreign exchange settlement and sales and other foreign exchange derivatives transactions
(1) Transaction risk analysis
The forward foreign exchange settlement and sales and other foreign exchange derivatives trading business carried out by the company and its subsidiaries follow the principles of legal, prudent, safe and effective locking of exchange rate and interest rate risks, and do not engage in speculative or arbitrage trading operations. However, there are still certain risks in foreign exchange derivatives trading business operations:
Market risk: Due to large changes in the foreign exchange market, there may be market risks of losses due to price changes in foreign exchange derivatives caused by fluctuations in market prices such as underlying interest rates and exchange rates.
Performance risk: The counterparty defaults on the contract and is unable to pay the company's hedging profits as agreed, thereby being unable to hedge the company's actual exchange losses.
Liquidity risk: Due to various reasons such as company business changes, market changes, customer defaults, repayment budget deviations, etc., foreign exchange derivatives transactions that need to be closed in advance or extended, there is a risk that the difference will be paid to the bank or the company will suffer losses due to delayed delivery.
Legal risks: Changes in relevant laws or violations of relevant laws and regulations by counterparties may cause the contract to be unable to be executed normally and cause losses to the company.
Operational risk: Operational risk caused by human errors by trading or management personnel or system failures or control failures.
(2) Risk control measures
In order to avoid exchange losses caused by large fluctuations in exchange rates to the company, the company will continue to pay attention to changes in the international market environment, strengthen research and analysis on exchange rates, and adjust operating strategies and scale of operations in a timely manner to avoid exchange losses to the greatest extent. Choose foreign exchange derivatives with a relatively simple and transparent product structure, strong liquidity, identifiable risks, public reference prices in the market, and a term of no more than 12 months, and do not engage in foreign exchange derivatives transactions that are complex, nested, or linked to uncontrollable factors.
The company has formulated strict decision-making procedures, reporting mechanisms and monitoring measures, and clarified specific requirements such as job responsibilities, approval authority, operating points and information disclosure. When the company conducts foreign exchange derivatives trading business, it will strictly follow the company's relevant internal control systems.
The company will reasonably arrange foreign exchange assets and liabilities to ensure that the implementation of foreign exchange derivatives trading business matches the company's actual foreign exchange receipts and expenditures, so that it will have sufficient funds for settlement at the time of delivery to reduce liquidity risks.
The company's finance department uniformly manages forward foreign exchange settlement and sales and other foreign exchange derivatives trading businesses, continuously tracks changes in open market prices and fair values, timely assesses changes in risk exposures in this business, and reports regularly to the company's management. If abnormal situations are found, report them promptly, alert risks and implement emergency measures.
The company will select domestic and international financial institutions that are qualified to operate foreign exchange derivatives trading business, have stable operations and good credit standing as counterparties to carry out forward foreign exchange settlement and sales and other foreign exchange derivatives trading business, and will prudently review the relevant contract terms signed with financial institutions and strictly implement relevant regulations to prevent legal risks.
5. Relevant accounting treatments
In accordance with relevant regulations 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" and "Accounting Standards for Business Enterprises No. 39 - Fair Value Measurement" issued by the Ministry of Finance, the company conducts corresponding accounting treatments for forward foreign exchange settlement and sales and other foreign exchange derivatives transactions, reflecting relevant items on the balance sheet and income statement. The company's final accounting treatment of this business is subject to the opinions of the accounting firm responsible for the company's audit.
6. Feasibility analysis conclusion on carrying out forward foreign exchange settlement and sales and other foreign exchange derivatives trading business
The company and its subsidiaries use part of their idle self-owned funds to carry out forward foreign exchange settlement and sales and other foreign exchange derivatives trading businesses, which are closely linked to daily operations and carried out with real import and export business, which is conducive to making full use of the hedging function of forward foreign exchange settlement and sales and other foreign exchange derivatives. The foreign exchange cost lock-in function of raw products achieves the purpose of avoiding and preventing foreign exchange exchange rate and interest rate fluctuation risks and enhancing financial stability, which is in line with the company's requirements for stable operations; it is conducive to improving the company's ability to deal with foreign exchange fluctuation risks and preventing the adverse impact of exchange rate fluctuations on the company's operations.
The company has fully estimated and calculated the risks and returns of foreign exchange settlement and sales and other foreign exchange derivatives business, as well as future capital needs, and has formulated and adopted risk control measures accordingly. It ensures that the use of funds will not affect the company's daily operations and main business development, and will help improve the efficiency of the company's idle funds.
It is necessary and feasible for the company and its subsidiaries to appropriately carry out forward foreign exchange settlement and sales and other foreign exchange derivatives transactions on the premise of fully ensuring daily operating capital needs, not affecting normal operating activities and effectively controlling risks.
Board of Directors of Suzhou Fengbei Biotechnology Co., Ltd.
December 9, 2025