Feasibility analysis report on the company's foreign exchange derivatives trading

1. The background of the company's foreign exchange derivatives trading business

Due to the continuous development of the business of Zhuzhou CRRC Times Electric Co., Ltd. (hereinafter collectively referred to as the "Company"), the scale of foreign exchange receipts and payments has also continued to grow, and the exposure to foreign exchange risk has been expanding. Affected by factors such as international politics and economic situation, the fluctuation range of exchange rates has been increasing, and the foreign exchange risk has increased significantly.

In this context, in order to prevent the adverse impact of large fluctuations in exchange rates on the company, improve the efficiency of foreign exchange use, and reasonably reduce financial costs, the company intends to carry out foreign exchange hedging through foreign exchange derivatives trading business according to specific business conditions. The foreign exchange derivatives transactions carried out by the company are closely related to the daily business needs, and are based on the company's foreign currency assets, liabilities and foreign exchange receipts and expenditures, which can improve the company's ability to actively respond to exchange rate risks and interest rate risks, and enhance the company's financial soundness. The company's foreign exchange derivatives trading business is mainly used to pay for the purchase of overseas suppliers and the payment of overseas customers, and will reasonably arrange the use of funds, which will not affect the development of the company's main business.

Second, the basic situation of the company's foreign exchange derivatives trading business

(1) Transaction amount

The quota of foreign exchange derivatives trading business to be carried out by the Company is RMB 2.75 billion or its equivalent in other currencies, and the quota shall be used within 12 months from the date of approval of the matter by the Board of Directors. The above quota can be used on a rolling basis during the term, provided that the investment balance at any point in the term does not exceed the equivalent of RMB 2.75 billion or equivalent currencies.

(2) The type of transaction

The Company and its subsidiaries will follow the principle of derivatives hedging and the principle of exchange-rate risk-neutral management.

According to the needs of the contract, we can flexibly choose foreign exchange derivatives such as foreign exchange forwards and foreign exchange swaps, which are relatively simple and transparent, have strong liquidity, have cognizable risks, have a public reference price in the market, and do not exceed 12 months, and do not engage in complex nested foreign exchange derivatives transactions linked to uncontrollable factors.

(3) Duration of the contract

Matches the underlying deal term and is no more than 12 months.

(4) The transaction margin and premium that are expected to be used

The foreign exchange derivatives transactions to be carried out by the company do not need to pay margin, and the credit line of the financial institution occupied at any point in the term shall not exceed RMB 330 million or other equivalent foreign currency.

(5) Sources of funds

It is mainly its own funds and does not involve the use of raised funds or bank credit funds.

(6) Counterparties

The counterparties of the company's foreign exchange derivatives are all large commercial banks with high credit ratings and long-term business dealings with the company.

(6) Liquidity arrangements

The foreign exchange derivatives trading business is based on normal foreign exchange assets and liabilities, and the business amount and business period match the expected income and expenditure plan.

(7) Delivery method

The maturity of foreign exchange derivatives trading business adopts the method of principal delivery or net delivery.

3. Risk analysis of the company's foreign exchange derivatives trading business

(1) Market risk

Due to the large fluctuations in exchange rates caused by changes in domestic and foreign economic forms, the company may face certain market risks in foreign exchange derivatives trading. The company audits the foreign exchange derivatives trading business and year

When planning the degree, we strictly abide by the principle of hedging, adhere to the purpose of reducing the risk exposure of the main business, choose derivative products with simple structure, controllable risk and strong liquidity, and match the business structure with the main business exposure variety, scale, direction, term and other elements to ensure the hedging relationship between the derivative business and the hedging project. It is strictly forbidden to carry out speculative transactions and effectively prevent market risks.

(2) Operational risks

Foreign exchange derivatives business is highly professional and complex, and there may be certain risks caused by the operator's failure to timely or understand the derivatives information, or the operation in accordance with the rules and regulations. The company will continue to improve the foreign exchange risk management system, clarify the separation of front, middle and back office positions in the derivative business, and the operators have relevant experience or business qualifications, and strictly prevent operational risks through the review of practitioners, system control and hierarchical authorization and approval mechanism.

(3) Liquidity risk

Unreasonable purchase arrangements for foreign exchange derivatives may trigger liquidity risk for the company's funds. Foreign exchange derivatives are based on the company's foreign exchange assets and liabilities, matching with the actual foreign exchange receipts and expenditures, and selecting the appropriate foreign exchange derivatives in a timely manner and the appropriate selection of net delivery foreign exchange derivatives can ensure that there are sufficient funds for liquidation at the time of delivery and reduce liquidity risk.

(4) Performance risk

If the counterparty of the foreign exchange derivatives cannot execute the contract at the price agreed in the contract at expiration, the corresponding foreign exchange exposure cannot be closed, and the exchange rate risk cannot be managed as expected. The counterparties of the company's foreign exchange derivatives are all large commercial banks with high credit ratings and long-term business dealings with the company, so as to avoid performance risks.

4. Risk prevention and control measures taken by the company for foreign exchange derivatives trading business

(1) The foreign exchange derivatives trading varieties carried out by the company are closely related to the basic business

Foreign exchange derivatives with simple structure, controllable risks and strong liquidity, and such foreign exchange derivatives match the basic business in terms of variety, scale, direction, term and other elements, so as to follow the company's prudent and prudent risk management principles, do not do speculative transactions, and effectively prevent market risks.

(2) The company has formulated a strict "Financial Derivatives Business Management Measures" and "Financial Derivatives Business Operation Manual", which clearly stipulate the operating principles, approval authority, department setting and staffing, internal operation procedures, internal risk reporting system and risk handling procedures, information disclosure and information isolation measures for foreign exchange derivatives trading, so as to avoid operational risks.

(3) The company will prudently select the counterparty to carry out foreign exchange derivatives transactions, requiring the counterparty to be a large commercial bank with a high credit rating and long-term business dealings with the company, and strictly review the terms of the contract signed with qualified financial institutions, strictly implement the risk management system, and effectively avoid performance risks.

(4) The company's internal audit department is responsible for regularly reviewing and evaluating derivatives transactions.

5. Conclusion of the feasibility analysis of the foreign exchange derivatives trading business carried out by the company

Based on the daily business needs, the company aims to cope with exchange rate risks and enhance the company's financial soundness, focusing on foreign currency assets, liabilities and foreign exchange receipts and payments, and supporting corresponding foreign exchange derivatives transactions according to the actual business situation. The company has formulated a strict management system, and has clarified the rights and responsibilities and division of labor in the approval, operation, tracking, review and disclosure of transactions, and has equipped professionals to effectively control relevant risks. Therefore, it is feasible to carry out foreign exchange derivatives trading.

Board of Directors of Zhuzhou CRRC Times Electric Co., Ltd

March 28, 2025