(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: Electrical Facility Work) picture_as

News Release: Ferrotec Holdings Corporation (6890 TSE Standard)

July 6, 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: Electrical Facility Work)

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 Zhejiang Higher People's Court on July 3, 2023 regarding a lawsuit filed by China Construction First Group Construction & Development Co., Ltd. (hereinafter "China Construction First"), which was disclosed in "(Progress of a Disclosed Item) Notice of an Appeal against Our Equity-Method Affiliate in China and a Decision on our Counterclaim (China Construction First: Electrical Facility Work) dated January 17, 2023.

The Company and China Construction First are filing lawsuits for two cases (a public works contract and electrical facility

work contract), respectively, and we are making a counterclaim against these. This time, a judgment on electrical facility work was rendered. Therefore, we added the phrase "Electrical Facility Work" to the title in order to prevent confusion on a judgment on public works.

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 March 31, 2023
	(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. 100.3 billion yen)
	(6)	Our investment ratio	23.05%

*Exchange rate: 1 Chinese yuan = 19.94 yen

3. Progress of the lawsuit

China Construction First filed a lawsuit on November 6, 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. 7,697 million yen) for additional altered construction charges of the construction of a semiconductor wafer plant (date of service of the complaint: December 19, 2019). 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. The total amount of the claims as of the end of the fiscal year March

2022 (43rd term ) is 380 million yuan (approx. 7,577 million yen). The amount pertaining to an electrical facility work contract is 95 million yuan (approx. 1,894 million yen).

CCMC made a counterclaim 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. 3,749 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. The amount pertaining to an electrical facility work contract is 13 million yuan (approx. 259 million yen). The People's Republic of China Zhejiang Hangzhou Intermediate People's Court rendered the following and other decisions

News Release: Ferrotec Holdings Corporation (6890 TSE Standard)

on December 26, 2022 (date of receipt of the decision: December 28, 2022):

1. CCMC shall pay 39,144,182.19 yuan (approx. 780 million yen) as construction charges, the interest on the amount and the costs for the lawsuit to China Construction First within 30 days from the date of this decision.
2. China Construction First shall pay 1.95 million yuan (approx. 38 million yen) as the compensation for delay in construction and the costs for the lawsuit to CCMC within 30 days from the date of this decision.
3. The other claims from China Construction First and CCMC have been rejected.

China Construction First was dissatisfied with the decision on electrical facility work and made an appeal to the Zhejiang Higher People's Court on January 7, 2023.

4. Summary of the decision

1. Court: The Zhejiang Higher People's Court
2. Date of decision: June 29, 2023 (Date of receipt of the decision: July 3, 2023)
3. Outline of the decision

I. CCMC shall pay 43,684,792.09 yuan (approx. 871 million yen) as construction charges to China Construction First within 30 days from the date of this decision.

1. CCMC shall pay the interest on 43,684,792.09 yuan (approx. 871 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.
   III. China Construction First has the right to receive the construction charges mentioned in the above Section I on a priority basis from the funds raised by CCMC through the foreclosure sale of electrical equipment, etc.
   IV. China Construction First shall pay 1.95 million yuan (approx. 38 million yen) as the compensation for delay in construction to CCMC within 30 days from the date of this decision.
   V. The other claims from China Construction First and CCMC have been rejected.
   VI. As the costs for the lawsuit and the counterclaim against it amount to 623,842 yuan (approx. 12 million yen), China Construction First shall bear 293,650 yuan (approx. 6 million yen) and CCMC shall bear 330,192 yuan (approx. 6 million yen).

5. Future outlook

In China, up to two trials are held for each lawsuit. The judgment at the second trial becomes a final one, so China

Construction First and CCMC need to follow the judgment at the second trial. However, there is a possibility that China Construction First will file for retrial at the Supreme People's Court, considering that there was an error in the trial. We have not confirmed their petition for retrial, but if China Construction First files for retrial and it is accepted, the above judgment may be overturned. If they file for retrial, 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.