Zhejiang Shibao : Inside Information - Announcement on Related Expenses Borne by A Subsidiary for Product Quality

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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)

Inside Information

Announcement on Related Expenses Borne by A Subsidiary for Product Quality

This announcement is made by Zhejiang Shibao Company Limited (the "Company") pursuant to the disclosure requirements of Rule 13.09(2)(a) and Rule 13.10B of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

1. SUMMARY OF THE EVENT

Hangzhou Shibao Auto Steering Gear Co., Ltd. ("Hangzhou Shibao"), a wholly-owned subsidiary of the Company, is a qualified supplier of steering gears for Daimler AG ("Daimler"), which has supplied steering gear assemblies required for some vehicle models manufactured by Daimler in its German factory since January 2018. Due to product quality problems in partial batches of steering gears, Daimler needed to replace steering gears and recall relevant vehicles for repair, resulting in a total cost of EUR2,840,628, which was undertaken by Hangzhou Shibao.

Hangzhou Shibao will pay the above fees to Daimler in three installments. The first installment of EUR1,440,628 will be paid before 2 December 2019, the second installment of EUR700,000 will be paid before 1 June 2020 and the third installment of EUR700,000 will be paid before 1 November 2020.

• For identification purpose only

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2. IMPACT ON THE COMPANY

It is expected that the above event will make total profit of the Company in the year of 2019 reduce by approximately RMB22.38 million (unaudited), and the specific amount affected shall be subject to the amount recorded at the time of actual payment.

The Company attaches great importance to this event and has carried out an internal rectification. The Company hereby apologizes to the investors for the loss incurred by the product quality problem. In the future, the Company will further strictly control the research and development, production, testing and other stages of the products to improve the quality of the Company's products, minimize the risk of similar quality problems in the operation of the Company and create more value for its shareholders.

By order of the Board

Zhejiang Shibao Company Limited

Zhang Shi Quan

Chairman

Hangzhou, Zhejiang, the PRC

25 October 2019

As at the date of this announcement, the board of directors of the Company 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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