Ferrotec : (Progress of a Disclosed Item) Notice of a Lawsuit against Our Equity-Method Affiliate in China and Progress of our Appeal (L&K Engineering) picture_as

News Release: Ferrotec Holdings Corporation (6890 TSE Standard)

July 24, 2023

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

and Progress of our Appeal (L&K Engineering)

Ferrotec Holdings Corporation (Representative Director: He Xian Han; hereinafter "the Company") announces the progress of the disclosed item as follows, as a court made a decision about a lawsuit filed by Hangzhou Semiconductor Wafer Co., Ltd. (hereinafter "CCMC") against L&K Engineering (Suzhou) Co., Ltd. (hereinafter "L&K Engineering"), which was disclosed in "(Progress of a Disclosed Item) Notice of a Lawsuit against Our Equity-Method Affiliate in China and Progress of our Appeal (L&K Engineering)" released on January 10, 2023.

1. Overview of the other party in the lawsuit

	(1)	Name	L&K Engineering (Suzhou) Co., Ltd. (L&K Engineering)
	(2)	Address	No. 33, Fangda Street, Suzhou Industrial Park, Jiangsu Province, People's
	Republic of China
	(3)	Title and name of	Yao Zuxiang, 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 and sale of semiconductor wafers
	(5)	Capital	5,032 million yuan (approx. 97.4 billion yen)
	(6)	Our investment ratio	23.05%

*Exchange rate: 1 Chinese yuan = 19.35 yen

3. Progress of the lawsuit

On June 6, 2019, L&K Engineering filed a lawsuit against CCMC, which is an equity-method affiliate of the Company, at the People's Republic of China Zhejiang Hangzhou Intermediate People's Court, to demand the payment of 128 million yuan (approx. 2,477 million yen) as the total amount including the accrued construction costs for clean room installation work (hereinafter "the lawsuit filed against CCMC").

-On November 12, 2021, the People's Republic of China Zhejiang Hangzhou Intermediate People's Court delivered the lower court sentence ordering CCMC to pay the accrued construction costs amounting to 109 million yuan (approx. 2,109 million yen) and the interest on late payment to L&K Engineering.

-On December 10, 2021, CCMC was dissatisfied with said decision and appealed to the Zhejiang Higher People's Court, and it was accepted.

-At the appeal trial on May 24, 2022, the court overturned the earlier decision because deliberation was insufficient, and decided to remand the case to the People's Republic of China Zhejiang Hangzhou Intermediate People's Court.

-In regards to this lawsuit, on April 11, 2023, the People's Republic of China Zhejiang Hangzhou Intermediate People's Court delivered the sentence ordering CCMC to pay the accrued construction costs amounting to 110 million yuan (approx. 2,129 million yen) and the interest on late payment to L&K Engineering. On April 18, 2023, CCMC received the sentence on this lawsuit.

-On April 26, 2023, L&K Engineering was dissatisfied with said decision on retrial and appealed to the Zhejiang Higher People's Court. On the same day, CCMC also appealed to the Zhejiang Higher People's Court because CCMC was dissatisfied with said decision on retrial, and the appeal was accepted on May 4, 2023.

-With regard to the lawsuit filed against CCMC, it is currently pending at the Zhejiang Higher People's Court.

On the other hand, on June 13, 2019, CCMC filed a lawsuit against L&K Engineering at the People's Republic of China Zhejiang Hangzhou Intermediate People's Court for demanding the payment of a total of 69 million yuan (approx. 1,335 million yen) as penalties for the construction period delays in the installation of a clean room and the rejectable quality of their

News Release: Ferrotec Holdings Corporation (6890 TSE Standard)

installation work, lawsuit costs, and maintenance expenses (hereinafter "the lawsuit"), as mentioned in "Notice of Filing of Lawsuit Against Our Chinese Subsidiary" disclosed on June 25, 2019. The subsequent progress is as follows, including the contents mentioned in "(Progress of a Disclosed Item) Notice of a Lawsuit against Our Equity-Method Affiliate in China and Progress of our Appeal" disclosed on December 17, 2021.

-On October 19, 2020, the People's Republic of China Zhejiang Hangzhou Intermediate People's Court sent a lower court decision to reject CCMC's request for a lawsuit and make CCMC bear the cost for accepting this case.

-On November 4, 2020, CCMC was dissatisfied with said decision, and appealed to the Zhejiang Higher People's Court.

-On April 1, 2021, the Zhejiang Higher People's Court sent an appellate court's decision to overturn the lower court decision and remand this case to the People's Republic of China Zhejiang Hangzhou Intermediate People's Court.

-On December 26, 2022, regarding the lawsuit, the People's Republic of China Zhejiang Hangzhou Intermediate People's Court sent a lower court decision to reject CCMC's request for a lawsuit and make CCMC bear the cost for accepting this case.

-On January 6, 2023, CCMC was dissatisfied with said decision, and submitted a written appeal to the Zhejiang Higher People's Court.

4. Summary of the decision

1. Court: The Zhejiang Higher People's Court
2. Date of decision: July 17, 2023 (Date of receipt of the decision: July 19, 2023)
3. Outline of the decision

An appeal was rejected and the original decision is affirmed.

5. Future outlook

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

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.