Jiangsu Fafang Textile Co., Ltd.
Feasibility Analysis Report on Developing Foreign Exchange Hedging Business
I. Overview of Developing Foreign Exchange Hedging Business
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Purpose and Necessity of Foreign Exchange Hedging: The company's significant export business, primarily settled in USD, and its import of major equipment settled in foreign currencies like USD and EUR, expose it to exchange rate fluctuations that can impact operating performance. To effectively hedge against and prevent foreign exchange market risks and mitigate the adverse effects of significant exchange rate volatility on production and operations, the company plans to engage in foreign exchange hedging with financial institutions.
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Scope of Business and Currencies Involved: To meet the needs of international trade and investment and financing, the foreign exchange hedging business of the company and its subsidiaries will include, but not be limited to, forward transactions, swap transactions (currency swaps, interest rate swaps), exchange transactions (currency exchanges, interest rate exchanges), option transactions (foreign exchange options, interest rate options), and related composite products offered by commercial banks and other financial institutions. The currencies involved will include, but not be limited to, the main settlement currencies used in the company's production and operations, such as USD, EUR, and Indonesian Rupiah.
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Business Scale and Funding Sources: Based on the company's asset scale and business needs, the proposed scale of foreign exchange hedging business for the company and its subsidiaries will not exceed USD 50 million or its equivalent in other foreign currencies. Funds within this limit can be used on a revolving basis. For developing foreign exchange hedging business, the company and its subsidiaries will, in addition to paying a certain proportion of margin and option premiums (if required) as per the agreements signed with banks, not need to invest other funds. This margin and option premium will be funded by the company's own capital. The margin and option premium will be determined according to the specific agreements signed with different banks.