1. Purpose of Conducting Foreign Exchange Derivative Trading Business
With the steady advancement of Kailer Environmental Technology (Shanghai) Co., Ltd.'s (hereinafter referred to as "the Company") globalization strategy, the international business of the Company and its subsidiaries continues to expand, and the scale of foreign exchange income and expenditure from imports and exports is growing. By 2025, the revenue from overseas business is expected to account for 31% of the Company's total revenue. Due to factors such as international political and economic conditions, fluctuations in exchange rates and interest rates have increased significantly, leading to a notable rise in foreign exchange market risks. The export orders of the Company and its subsidiaries primarily use the US dollar as the settlement currency, while procurement transactions paid in US dollars are relatively few. Therefore, significant fluctuations in exchange rates may impact the Company's operating performance due to foreign exchange gains and losses. To effectively mitigate foreign exchange market risks, enhance the Company's ability to respond to exchange rate fluctuations, prevent adverse effects from significant exchange rate volatility, and strengthen financial stability, the Company and its subsidiaries plan to moderately engage in foreign exchange derivative trading based on their actual business needs.
2. Basic Information on Foreign Exchange Derivative Trading Business
- Transaction Amount
The Company and its subsidiaries plan to conduct foreign exchange derivative trading with an amount not exceeding $20 million (or equivalent in other currencies). At any point during the trading period, the transaction amount (including the related amounts from the aforementioned trading profits) will not exceed this limit. The expected maximum margin and premium (including the value of collateral provided for trading, anticipated credit limits from financial institutions, and reserved margins for emergency measures) will not exceed RMB 5 million (or equivalent in foreign currency).