Shennan Circuit Raises Forex Hedging Scale to $400 Million, Strengthening Exchange Rate Risk Management

[Shenzhen, March 12, 2026] Shennan Circuit Co., Ltd. (Stock Code: 002916, hereinafter referred to as “the Company”) announced today that in response to the increasing foreign exchange risk exposure, the Company has decided to significantly increase the scale of its foreign exchange derivatives hedging business from the original $126 million (or equivalent in other currencies) to $400 million (or equivalent in other currencies), an increase of 217%.

The announcement shows that the Company’s 14th meeting of the fourth Board of Directors held on March 11, 2026, approved the proposal to increase the scale of foreign exchange derivatives hedging. After this adjustment, the trading varieties, trading venues, and business validity period remain unchanged, still involving foreign exchange forwards and swaps, with trading venues approved by the State Administration of Foreign Exchange and the People’s Bank of China, valid from the date of approval at the 11th meeting of the fourth Board of Directors until December 31, 2026.

Overview of Business Scale Adjustment

The Company states that with the deepening reform of the RMB exchange rate marketization, exchange rate fluctuations are increasing. The mismatch in the currencies and scales of the Company’s import and export settlement and payment leads to a continuous expansion of foreign exchange risk exposure. The increase in hedging business scale aims to further optimize foreign exchange risk management strategies, improve the ability to respond to exchange rate fluctuations, enhance the Company’s financial stability, and prevent adverse impacts of exchange rate volatility on profits and shareholders’ equity.

Specific Business Operations

According to the announcement, the source of funds for the Company’s foreign exchange derivatives trading is from comprehensive credit lines, not involving the use of raised funds or bank loans. The upper limit of credit used by financial institutions is expected not to exceed 50% of the Company’s latest audited net profit. The contract terms will match the underlying transaction periods, generally not exceeding one year.

Regarding authorization mechanisms, the Company’s Board of Directors authorizes the finance manager and foreign exchange accountant to develop financial derivatives business plans. After review by the Finance Department Director, approval by the Chief Accountant and Chairman is required before implementation, with ongoing tracking and reporting of business development.

Risk Control Measures

The Company emphasizes that foreign exchange derivatives trading will strictly follow principles of locking in exchange rates and interest rate risks, avoiding speculative and arbitrage transactions. To control related risks, the Company has established a strict “Foreign Exchange Derivatives Trading Business Management System,” which clearly stipulates operational principles, approval authority, responsibilities, internal processes, risk warning, and handling mechanisms.

The announcement also reminds that foreign exchange derivatives trading still involves certain risks, mainly including market risk (exchange rate fluctuations may cause translation losses), liquidity risk (ensuring sufficient funds at settlement), performance risk (trading with financially sound institutions), and legal risk (issues arising from unclear contract terms).

The Company states that it will control risks through measures such as strictly limiting trading scale within authorized limits, prohibiting any risk speculation activities, avoiding leveraged foreign exchange derivatives trading, carefully reviewing contract terms, and closely monitoring market price movements with regular reports on risk exposure.

In terms of accounting treatment, the Company will recognize and measure according to the relevant provisions of the “Enterprise Accounting Standards,” conducting fair value measurement and recognition monthly. When the fair value impairment of traded derivatives and the changes in the value of assets used for hedging reach 10% of the Company’s latest audited net profit for the past year and the absolute amount exceeds RMB 10 million, the Company will disclose in a timely manner.

This adjustment in business scale does not constitute a related-party transaction and does not require approval from the shareholders’ meeting.

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