Zhejiang Shibao : (A) PROPOSED TERMINATION OF SOME INVESTMENT PROJECTS FINANCED BY PROCEEDS FROM PRIVATE PLACEMENT AND USE RELEVANT PROCEEDS FROM PRIVATE PLACEMENT TO PERMANENTLY REPLENISH THE WORKING CAPITAL AND (B) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

ZHEJIANG SHIBAO COMPANY LIMITED*

浙江世寶股份有限公司

(a joint stock company incorporated in the People's Republic of China with limited liability)

(Stock Code: 1057)

1. PROPOSED TERMINATION OF SOME INVESTMENT PROJECTS FINANCED BY PROCEEDS FROM

PRIVATE PLACEMENT AND USE RELEVANT PROCEEDS

FROM PRIVATE PLACEMENT TO PERMANENTLY

REPLENISH THE WORKING CAPITAL

AND

1. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

On 31 October 2019, the sixth session of the Board of the Company resolved by way of written resolutions to (i) terminate some investment projects financed by proceeds from private placement and use relevant proceeds from private placement to permanently replenish the working capital; and (ii) amend the Articles of Association, which subject to Shareholders' approval. Such resolutions shall be submitted to the Company's general meeting for consideration and approval pursuant to the Articles of Association.

GENERAL

The Company shall convene the general meeting for the purposes of, among other things, seeking approval by the Shareholders on the above mentioned (i) the proposal on termination of some investment projects financed by proceeds from private placement and use relevant proceeds from private placement to permanently replenish the working capital; and (ii) the proposal on amendments to the Articles of Association.

• For identification purposes only

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On 31 October 2019, the sixth session of the Board of the Company resolved by way of written resolutions to (i) terminate some investment projects financed by proceeds from private placement and use relevant proceeds from private placement to permanently replenish the working capital; and (ii) amend the Articles of Association, which subject to Shareholders' approval. Such resolutions shall be submitted to the Company's general meeting for consideration and approval pursuant to the Articles of Association.

1. TERMINATION OF SOME INVESTMENT PROJECTS FINANCED BY PROCEEDS FROM PRIVATE PLACEMENT AND USE RELEVANT PROCEEDS FROM PRIVATE PLACEMENT TO PERMANENTLY REPLENISH THE WORKING CAPITAL

1. OVERVIEW OF THE RAISED FUNDS INVESTMENT PROJECT WHICH IS PROPOSED TO BE TERMINATED
   1. Overview of fundraising
   As approved by the document of the CSRC (ZJXK2014No.1101), the Company issued 38,200,000 RMB ordinary Shares (A Shares) to specific subscribers by way of non-public issuance at an issue price of RMB18.46 per Share, with the total raised funds of RMB705,172,000.00. The raised funds after deduction of underwriting and sponsoring fees were remitted by the then lead underwriter to the fundraising escrow account of the Company on 11 December 2014. The raised funds after deduction of issue costs were RMB658,162,877.04. The availability of the above raised funds was verified by Pan-China Certified Public Accountants LLP, which issued the Capital Verification Report (TJY 2014 No.265). The above raised funds were used for the following projects:

	Unit:
	RMB'0,000
	Amount of
	Raised Funds
S/N Project Name	to be Used

1. The increase of production of power automotive steering gears project
2. The precious casting and processing of automotive components project
3. The research and development, examination and inspection and trial production centre of automotive steering gear system project
4. The annual production of 2,100,000 automotive steering gear (EPS) components series industrialization investment and development project

Total

12,800.00

20,000.00

4,000.00

29,016.29

65,816.29

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The "increase of production of power automotive steering gears project" and the "research and development, examination and inspection and trial production centre of automotive steering gear system project" were ready for their intended use on 31 December 2016; as at the date of the announcement, the "annual production of 2,100,000 automotive steering gear (EPS) components series industrialization investment and development project" has been under construction.

2. Information on the raised funds investment project which is proposed to be terminated

			Unit:
			RMB'0,000
			Amount of
		Amount of	Raised Funds
		Raised Funds	Used as at 30
S/N	Project Name	to be Used	October 2019
1	The precious casting and	20,000.00	13,353.86
	processing of automotive
	components project

The raised funds of RMB200 million in total were proposed to be invested in the "precious casting and processing of automotive components project", and as at 30 October 2019, the total raised funds which were invested in the project were RMB133,538,600.00, representing 66.77% and which were mainly used for construction of a casting factory and a machining factory, and purchase of equipment for the casting line and the machining line in the project and otherwise. As at 30 October 2019, the casting factory for the project was completed and put into operation; the machining factory passed the acceptance inspection and was put into operation; certain equipment for the casting line was purchased, which formed the casting capacity of approximately 7,000 tons, and certain equipment was purchased for the machining line, which mainly formed the capacity for machining approximately 150,000 shells, and 300,000 tubular columns and other products.

As at 30 October 2019, the remaining raised funds for the project were RMB80,496,900.00 (which included the accumulated amount of interests received from bank deposits and net gains from short-term bank wealth management products less bank charges, and the amount of RMB80,000,000.00 which was not due and temporarily used for replenishing the working capital).

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1. REASONS FOR TERMINATION OF SOME RAISED FUNDS INVESTMENT PROJECTS AND PLAN FOR SUBSEQUENT USE
2. 1. Reasons for termination of the "precious casting and processing of automotive components project"
      1. Recent decline in the vehicle market and the vehicle parts market
      In 2018, the production and sales volumes of China automobile industry were 27,809,000 units and 28,081,000 units respectively, representing a decrease of 4.20% and 2.80% year on year respectively. The production and sales volumes of passenger cars were 23,529,000 units and 23,710,000 units respectively, representing a decrease of 5.20% and 4.10% year on year respectively. Among these, the sales volume of China-brand passenger cars was 9,980,000 units, representing a decrease of 8.00% year on year.
      From January to June 2019, the production and sales volumes of China automobile industry were 12,132,000 units and 12,323,000 units respectively, representing a decrease of 13.70% and 12.40% year on year respectively. The production and sales volume of passenger cars were 9,978,000 units and 10,127,000 units respectively, representing a decrease of 15.80% and 14.00% year on year respectively. Among passenger cars, the sales volume of China-brand passenger cars was 3,998,000 units, representing a decrease of 21.70% year on year. The production and sales volumes of commercial vehicles were 2,154,000 units and 2,196,000 units respectively, representing a decrease of 2.30% and 4.10% year on year respectively. Among commercial vehicles, the production and sales volumes of buses decreased by 10.90% and 6.90% year on year respectively; the production and sales volume of trucks decreased by 1.30% and 3.80% year on year respectively.
      The fluctuations in the vehicle market directly affected the vehicle parts market. The overall poor performance of the automobile industry in China led to the significant decline in the sales volume of China-brand passenger cars, which had a certain adverse impact on the sales of products of the Company. The production and sales volumes of knuckles which involved the internal utilization of the precision casting production capacity remained low. In 2018 and the first half of 2019, the rates of utilization of the casting production capacity of Jilin Shibao were 46.98% and 49.81% respectively, resulting in a certain gap in full utilization of the capacity. Meanwhile, based on current market conditions, the forecast space for the vehicle parts market in the future and its development plans, the Company believed that the current casting and machining capacity for precision castings basically met the future needs of the Company.
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1. 2. With the decline in the overall results of the Company recently, the termination of the project is capable of saving financial expenses for the Company and avoiding a significant increase in depreciation, which will help improve the future results of the Company

   The overall poor performance of the automobile industry in China led to the significant decline in the sales volume of China-brand passenger cars, which had a certain adverse impact on the sales of products of the Company. It recorded meager profit in 2018 and losses between January and June 2019, and expected a loss for the whole year of 2019. If the Company continues to make a significant investment in the "precious casting and processing of automotive components project" as originally scheduled, there will be a considerable depreciation for the Company in the short term, after construction in progress is classified into fixed assets. Meanwhile, based on the current vehicle market conditions, the precision casting production capacity of the Company is capable of meeting production needs. If the Company continues to make an investment in the "precious casting and processing of automotive components project", the additional precious casting production capacity cannot be used to generate profits in the short term, which is adverse to improving the results of the Company and safeguarding the interests of all Shareholders. In addition, based on the current one-year loan interest rate of a commercial bank, the Company is able to save financial expenses of RMB3,501,600.00 by using, the remaining raised funds of approximately RMB80,496,900.00 in the project, for permanently replenishing the working capital. Therefore, in consideration of the operational stability and economy, the Company determines to terminate the "precious casting and processing of automotive components project".

2. Change of the use of raised funds and plan for permanently replenishing the working capital
   As at 30 October 2019, the remaining raised funds for the project were RMB80,496,900.00 (which included the accumulated amount of interests received from bank deposits and net gains from short-term bank wealth management products less bank charges, and the amount of RMB80,000,000.00 which was not due and temporarily used for replenishing the working capital). The above remaining raised funds and interest are proposed to be used for permanently replenishing the working capital (based on the balance on which the bank settles the interest, on the date of transfer of the funds). After being used for permanently replenishing the working capital, the above remaining raised funds and interest will be used for daily operating activities of the Company.

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1. ARRANGEMENTS FOR RAISED FUNDS AFTER TERMINATION OF THE "PRECIOUS CASTING AND PROCESSING OF AUTOMOTIVE COMPONENTS PROJECT"

Based on the principle of maximizing Shareholders' interests, and in accordance

with relevant provisions of the Rules Governing the Listing of Stocks on the SME Board of the Shenzhen Stock Exchange (深圳證券交易所中小板股票上市規則),

and the Guide to Standard Operation of Companies Listed on the SME Board of the Shenzhen Stock Exchange (深圳證券交易所中小板上市公司規範運作指引),

and in consideration of the development plan and actual production and operation needs of the Company, it intends to use the remaining raised funds and interest in the "precious casting and processing of automotive components project", one of the projects of investment of raised funds from the non-public issuance of A Shares in 2014, for permanently replenishing the working capital (based on the balance on which the bank settles the interest, on the date of transfer of the funds). The Company will cancel the project raised fund account after the above raised funds of the project are used for permanently replenishing the working capital, and the agreement for escrow of raised funds between the Company, the sponsor and the deposit bank will terminate upon the cancellation.

IV. IMPACT OF TERMINATION OF THE RAISED FUNDS INVESTMENT PROJECT ON THE COMPANY

The decision on the termination of the "precious casting and processing of automotive components project", one of the projects of investment of raised funds from the non-public issuance of A Shares in 2014, is cautiously made, based on development and change of objective and actual conditions, in order to avoid making a new production capacity idle and ineffective investment. Such termination is capable of avoiding investment risks and in line with the actual conditions of production and operation of the Company, and will not materially and adversely affect the production and operation of the Company. The proposed use of all of the remaining raised funds and interest upon the termination of the project, for permanently replenishing the working capital, will help improve the efficiency in using raised funds and reduce financial costs, and is in the interest of all Shareholders.

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1. RELEVANT UNDERTAKINGS OF THE COMPANY
   In accordance with the Rules Governing the Listing of Stocks on the Shenzhen Stock Exchange and the Guide to Standard Operation of Companies Listed on the SME Board of the Shenzhen Stock Exchange, the Company undertakes that:
2. 1. The raised funds for permanently replenishing the working capital was received one year ago;
   2. The use of the raised funds for permanently replenishing the working capital will not affect other raised funds investment projects;
   3. It has not carried out any venture investment or provided financial support for entities other than majority-owned subsidiaries, within twelve months prior to the use of the raised funds for permanently replenishing the working capital;
   4. It will not carry out any venture investment or provide financial support for entities other than majority-owned subsidiaries, within twelve months following the use of the raised funds for permanently replenishing the working capital.

The proposal is subject to review and approval by the Company's general meeting.

2. AMENDMENTS TO THE ARTICLES OF ASSOCIATION

1. Proposed amendments to the Articles of Association
   In accordance with the Reply Concerning Adjustment for Application of Provisions on Matters Including the Notice Period of the General Meeting of
   an Overseas Listed Company published by the State Council (GH 2019 No.97), relevant provisions of the Company Law of the People's Republic of China applies to, and Articles 20 to 22 of the Special Regulations of the State Council on the Overseas Offering and Listing of Shares by Joint Stock Limited Liability Companies cease to apply to the notice period of a general meeting, the right of a shareholder to submit a proposal at the general meeting and the procedures of convening the general meeting of a limited liability company registered in China and listed overseas. Therefore, the Company hereby proposes to amend the terms of the Articles of Association, in relation to the notice period of the general meeting, the right of a shareholder to submit a proposal at the general meeting and the procedures of convening the general meeting. In addition, due to production and operation needs, the Company proposes to adjust the scope of business and correspondingly amend the Articles of Association.

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(2) Specific amendments are as follows:
S/N Original Provisions of the Articles	Amended Provisions of the Articles
of Association	of Association

1 Article 12 The business scope of Article 12 The business scope of the Company is subject to the the Company is subject to the

items as approved by the authority	items as approved by the authority
responsible for the registration of	responsible for the registration of
companies.			companies.
The principal scope of the	The scope of business of the
Company: manufacture and sales	Company: manufacture and sales
of automotive	components,	sales	of	automotive	components,	sales
of	metal materials, mechanical	of	metal	materials,	mechanical
and	electrical	products as	well	and electrical	products as	well
as electronic products, sales of	as electronic products. There is
automobiles (restricted to branches	one branch: Place of business:
to operate). (MP10)		No.2290	Hehuanan	Street,
				Choujiang	Avenue, Yiwu	City,
				Zhejiang	Province;	Scope	of
				business:	manufacture	and	sales
				of	automotive	components,	sales
				of	metal	materials,	mechanical
				and electrical products as well as
				electronic products. (Items subject
				to approval by laws shall not be
				carried out unless with the approval
				of relevant authorities) (MP10)

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S/N Original Provisions of the Articles	Amended Provisions of the Articles
of Association	of Association

2 Article 73 If the Company Article 73 To convene an convenes a general meeting, it annual general meeting of the shall issue a written notice forty- Company, the Company shall

five (45) days (excluding the date	notify	all shareholders	by	way
of issue of notice and date of	of	announcement	at	least	20
meeting) prior to the meeting to	clear business days prior to the
all shareholders who are on the	meeting	and	shall	also	notify
register of shareholders, specifying	the	Shareholders	for	H	Shares
the matters to be considered at the	in writing; in the case of an
meeting and the date and place of	extraordinary	general	meeting,
the meeting. The shareholders who	the	Company	shall		notify
intend to attend the meeting shall	all shareholders by way of
serve on the Company written	announcement at least 15 clear
replies of their intention to attend	business days prior to the meeting.
twenty (20) days (excluding the	When the Company convenes a
date of issue of notice and date	meeting	of	class	shareholders,
of meeting) prior to the meeting.	the period of notice and the
(MP53)	notification method shall be as
In calculating the notice period, the	specified in Article 131 of Articles
of Association.
date of meeting shall be excluded.

In calculating the notice period, the date of issue of notice and date of meeting shall be excluded. The aforementioned business day shall mean the date on which the Hong Kong Stock Exchange opens for securities trading.

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S/N Original Provisions of the Articles	Amended Provisions of the Articles
of Association	of Association

3 Article 75 The Company shall, based on the written replies received by the Company twenty (20) days (exclusive of the date of meeting) prior to the date of a general meeting, calculate the number of voting shares represented by shareholders who have indicated their intention to attend the meeting. Where the number of voting shares represented by such shareholders reaches more than one-half (1/2) of the Company's total number of voting shares, the Company may convene the general meeting. Otherwise, the Company shall, within five (5) days, inform the shareholders again of the matters to be considered, the date and place of the meeting by way of public announcement. After making the announcement, the Company may convene the general meeting. (MP55)

An extraordinary general meeting shall not decide on matters which are not specified in the notice.

Article 75 An extraordinary general meeting shall not decide on matters which are not specified in the notice.

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S/N Original Provisions of the Articles	Amended Provisions of the Articles
of Association	of Association

4 Article 131 If the Company convenes a meeting of class shareholders, it shall issue a written notice forty-five (45) days (excluding the date of issue of notice and date of meeting) prior to the meeting to all shareholders of such class who are on the register of shareholders, specifying the matters to be considered at the meeting and the date and place of the meeting. The shareholders who intend to attend the meeting shall serve on the Company written replies of their intention to attend twenty (20) days (excluding the date of issue of notice and date of meeting) prior to the meeting. (MP83)

If the number of shares vested with voting rights at such meeting held by those shareholders who intend to attend such meeting shall reach more than one-half (1/2) of the total number of shares vested with the voting rights at such meeting, the Company may convene such meeting of class shareholders; otherwise, the Company shall, within five (5) days, inform the shareholders again of the matters to be considered at the meeting and the date and place of the meeting by way of a public announcement. After making the announcement, the Company may convene the meeting of class shareholders.

Article 131 To convene the meeting of class shareholders, the Company shall, at least 20 clear business days prior to the annual general meeting (excluding the date of issue of notice and date of meeting) or at least 15 clear business days prior to the extraordinary general meeting (excluding the date of issue of notice and date of meeting), give registered holders of shares of the class, written notice, specifying matters to be considered at the meeting and the date and place of the meeting. The aforementioned business day shall mean the date on which the Hong Kong Stock Exchange opens for securities trading. (MP83)

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The above proposed amendments to the Articles of Association are subject to approval of the Shareholders by special resolution at the Company's general meeting. The proposed amendments to the Articles of Association will come into force upon approval of the Shareholders by special resolution at the Company's general meeting and the Company's obtaining all required approval or endorsement from or registration with the relevant regulatory authorities.

Note: The amendments to the Articles of Association were originally drafted in Chinese and the English translation is for reference only. In case of any inconsistencies between the Chinese and the English version, the Chinese version shall prevail.

GENERAL

The Company shall convene the general meeting for the purposes of, among other things, seeking approval by the Shareholders on (i) the proposal on termination of some investment projects financed by proceeds from private placement and use relevant proceeds from private placement to permanently replenish the working capital; and (ii) the proposal on amendments to the Articles of Association.

DEFINITIONS

In this announcement, the following expressions shall have the meanings set out below unless the context requires otherwise.

"A Shareholder(s)"	holder(s) of A Shares
"A Shares"	PRC listed A Shares of the Company, with nominal value of
	RMB1.00 each, which are listed and traded on the Shenzhen
	Stock Exchange
"Articles of Association"	the articles of association of the Company, as amended from
	time to time
"Board"	the board of Directors of the Company
"Company"	浙江世寶股份有限公司 (Zhejiang Shibao Company Limited*),
	a joint stock limited company incorporated in the PRC
"CSRC"	China Securities Regulatory Commission
"Director(s)"	director(s) of the Company
"H Shareholder(s)'"	holder(s) of H Shares
"H Shares"	overseas listed foreign shares of the Company, with nominal
	value of RMB1.00 each, which are listed and traded on the
	Hong Kong Stock Exchange
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"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Hong Kong Stock	The Stock Exchange of Hong Kong Limited
Exchange"
"Listing Rules"	the Rules Governing the Listing of Securities on Hong Kong
	Stock Exchange
"PRC"	the People's Republic of China, but for the purposes of this
	announcement, excludes Hong Kong, the Macau Special
	Administrative Region and Taiwan
"RMB"	Renminbi, the lawful currency of the PRC for the time being
"Shareholder(s)"	Holder(s) of Shares
"Share(s)"	A Share(s) and/or H Share(s)
	By order of the Board
	Zhejiang Shibao Company Limited
	Zhang Shi Quan
	Chairman

Hangzhou, Zhejiang, the PRC

1 November 2019

As at the date of this announcement, the board of directors comprises Mr. Zhang Bao Yi, Mr. Tang Hao Han, Ms. Zhang Lan Jun and Ms. Liu Xiao Ping as executive directors; Mr. Zhang Shi Quan and Mr. Zhang Shi Zhong as non-executive directors; and Mr. Lin Yi, Mr. Guo Kong Hui and Mr. Shum Shing Kei as independent non-executive directors.

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