Ferrotec : (Progress of a Disclosed Item) Notice of a Lawsuit against Our Equity-Method Affiliate in China and a Decision on our Counterclaim (China Construction First) picture_as

News Release: Ferrotec Holdings Corporation (6890 TSE Standard)

January 10, 2023

(Progress of a Disclosed Item) Notice of a Lawsuit against Our Equity-Method Affiliate in China

and a Decision on our Counterclaim (China Construction First)

Ferrotec Holdings Corporation (Representative Director: He Xian Han; hereinafter "the Company") announces the progress of the disclosed item as follows, as we have received a decision of the People's Republic of China Zhejiang Hangzhou Intermediate People's Court on December 28, 2022 regarding a lawsuit for demanding the payment of charges, etc. for electrical facility work contract (hereinafter "the lawsuit") and a counterclaim against the lawsuit mentioned in "(Progress of a Disclosed Item) Notice of a Lawsuit against Our Equity-Method Affiliate in China and Progress of our Counterclaim" dated November 12, 2021.

1. Overview of the other party in the lawsuit

	(1)	Name	China Construction First Group Construction & Development Co., Ltd.
	(China Construction First)
	(2)	Address	Building 17, Wangli Road West, Chaoyang District, Beijing, People's
	Republic of China
	(3)	Title and name of	Liao Ganglin, Legal representative
	representative
2. Overview of the equity-method affiliate of the Company as of September 30, 2022
	(1)	Name	Hangzhou Semiconductor Wafer Co., Ltd. (CCMC)
	(2)	Address	888 Dongken Road, Qiantang New District, Hangzhou, Zhejiang Province,
			People's Republic of China
	(3)	Title and name of	He Xian Han, Legal representative
		representative
	(4)	Contents of business	Manufacture of semiconductor wafers
	(5)	Capital	5,032 million yuan (approx. 95.7 billion yen)
	(6)	Our investment ratio	23.05%

*Exchange rate: 1 Chinese yuan = 19.01 yen

3. Progress of the lawsuit

China Construction First filed a lawsuit on November 6, 2019 (date of service of the complaint: December 19, 2019) in the People's Republic of China Zhejiang Hangzhou Intermediate People's Court against CCMC, which is an equity-method affiliate of the Company, seeking payment totaling 386 million yuan (approx. 7,338 million yen) for additional altered construction charges of the construction of a semiconductor wafer plant. That lawsuit was once withdrawn after receiving a court decision, but was divided into two lawsuits claiming the payment of charges under a public works contract and electrical facility work contract, respectively, and then re-filed (hereinafter "the re-filing of lawsuits"). The total amount of the claims as of the end of this second quarter is 380 million yuan (approx. 7,223 million yen).

In response to that, CCMC filed a lawsuit on April 16, 2020 in the People's Republic of China Zhejiang Hangzhou Intermediate People's Court against China Construction First claiming damages of 188 million yuan (approx. 3,573 million yen) as a penalty under the construction contract due to the delay in the plant construction work and construction cost to other contractors for the unfinished work. (CCMC also divided this into two lawsuits claiming damages under a public works contract and electrical facility work contract, respectively, and then re-filed after having withdrawn the first lawsuit following the re-filing by China Construction First.)

In addition, China Construction First applied for a provisional seizure against the assets of CCMC together with the re-filing of lawsuits. The court sent the Notice of Protective Matters to CCMC on December 18, 2019 and issued a preservative disposition for provisional seizure including the land usage rights of the plant of CCMC. However, the target of the provisional seizure was changed to the land usage rights of the plant of Hangzhou Dahe Thermo-Magnetics Co., Ltd. (hereinafter "FTH"), a consolidated subsidiary of the Company. China Construction First re-applied for provisional seizure of the assets of CCMC with the above re-filing and the court issued a preservative disposition. However, the subjects of the provisional seizure were

News Release: Ferrotec Holdings Corporation (6890 TSE Standard)

changed to the land usage rights of the factory of FTH and so on.

4. Court that made the decision, and the date of the decision

1. Court: The People's Republic of China Zhejiang Hangzhou Intermediate People's Court
2. Date of decision: December 26, 2022 (Date of receipt of the decision: December 28, 2022)

5. Outline of the decision about the lawsuit and our counterclaim

1. CCMC shall pay 39,144,182.19 yuan (approx. 744 million yen) as construction charges to China Construction First within
   30 days from the date of this decision.
2. CCMC shall pay the interest on 39,144,182.19 yuan (approx. 744 million yen) as construction charges for a period from June 12, 2019 to the date of payment to China Construction First within 30 days from the date of this decision.
3. China Construction First has the right to receive the construction charges mentioned in the above section (1) on a priority basis from the funds raised by CCMC through the foreclosure sale of electrical equipment, etc.
4. China Construction First shall pay 1.95 million yuan (approx. 37 million yen) as the compensation for delay in construction to CCMC within 30 days from the date of this decision.
5. The other claims from China Construction First and CCMC have been rejected.
6. As the costs for the lawsuit and the counterclaim against it amount to 569,862 yuan (approx. 11 million yen), China Construction First shall bear 290,924 yuan (approx. 6 million yen) and CCMC shall bear 278,938 yuan (approx. 5 million yen).

6. Future outlook

There is a possibility that China Construction First will appeal against the above decision to the Zhejiang Higher People's

Court, but there is no sign as of now. If China Construction First appeals and it is accepted, the above decision will become pending. If they appeal, we will insist the legitimacy of CCMC's activities.

CCMC rationally estimated the obligations regarding these lawsuits in the previous term, and posted them in its financial statements. The impact on the business performance of the Company for the current fiscal year and onwards through this matter is expected to be minor. However, we will promptly disclose relevant items as soon as they are confirmed.