Guangdong Xiangshan Instrument Group Co., Ltd. Feasibility Analysis Report on Conducting Foreign Exchange Derivative Hedging Business
I. Background of Conducting Foreign Exchange Derivative Hedging Business
Guangdong Xiangshan Instrument Group Co., Ltd. (hereinafter referred to as "the Company") has a subsidiary, Ningbo JunSheng QunYing Automotive System Co., Ltd., with significant overseas business, primarily settled in Euros and other foreign currencies. Given the frequent fluctuations in the foreign exchange market, and in conjunction with the Company's fund management requirements and daily business needs, to hedge and prevent foreign exchange risks, reduce exposure, minimize exchange rate losses, and reasonably reduce financial expenses, thereby enhancing financial stability, the Company plans to conduct foreign exchange derivative hedging business in compliance with national policies and regulations.
II. Necessity and Feasibility of Conducting Foreign Exchange Derivative Hedging Business
Influenced by international political and economic situations, the amplitude of exchange rate fluctuations has continuously increased, and foreign exchange market risks have significantly risen. To lock in costs and hedge against exchange rate risks, it is necessary for the Company to conduct foreign exchange derivative hedging business related to its daily operations, based on specific circumstances, to mitigate the risks of exchange rate fluctuations that the Company continuously faces. The foreign exchange derivative hedging business conducted by the Company adheres to the principle of hedging, aiming to fix exchange costs, stabilize and expand exports, and prevent exchange rate risks. It does not involve foreign exchange transactions for the sole purpose of profit-making or speculation. The foreign exchange derivative hedging business that the Company and its subsidiaries plan to conduct is closely related to daily operational needs and is based on the Company's actual situation. It can enhance the Company's ability to proactively respond to foreign exchange fluctuation risks, demonstrating its necessity.
The amount and term of the foreign exchange derivative hedging business to be conducted by the Company and its subsidiaries are matched with the Company's actual situation. Under the two-way fluctuation of the exchange rate between RMB (or local currency) and foreign currencies, it can better hedge the foreign exchange rate and interest rate risks faced by the Company and its subsidiaries, enhance the financial stability of the Company, and will not affect the development of the main business of the Company and its subsidiaries. The fund utilization arrangement is reasonable. The Company has formulated the "Futures and Derivatives Trading Management System," which can effectively control transaction risks. Therefore, the foreign exchange derivative hedging business to be conducted by the Company is feasible.
III. Basic Situation of Foreign Exchange Derivative Hedging Business
(I) Transaction Quota and Term