Analysis Report on the Feasibility of Developing Futures Hedging Business

Huafu Fashion Co., Ltd.

Analysis Report on the Feasibility of Developing Futures Hedging Business

The Company and all members of the Board of Directors guarantee the truthfulness, accuracy, and completeness of the information disclosed, and are free from any false representations, misleading statements, or material omissions.

I. Background of the Company's Development of Futures Hedging Business

Huafu Fashion Co., Ltd. (hereinafter referred to as the "Company") requires raw materials such as cotton and yarn for its production and operation. Given the potential adverse impact of raw material price fluctuations on the Company's production and operation, and to fully utilize the hedging function of the futures market, effectively hedge against raw material price fluctuation risks, and ensure the Company's healthy and sustainable operation, the Company has decided to develop futures hedging business.

II. Basic Situation of Developing Futures Hedging Business

Hedging Futures Products: Contracts for cotton and yarn traded on the Zhengzhou Commodity Exchange, as well as over-the-counter derivatives related to the Company's production and operation.

Based on market and company operating conditions, it is estimated that the maximum margin for the Company's futures hedging transactions in 2026 will not exceed RMB 1.5 billion. Funds within this limit can be used on a revolving basis. The validity period is 12 months from the date the Company's shareholders' meeting approves this matter.

III. Necessity and Feasibility of the Company's Participation in Futures Hedging Transactions