WafangdianBearingCo.,Ltd. RelatedTransactionofLeasedProperty TheCompanyandwholemembersoftheBoardherebyensurethattheNoticeisfactual,accurateandcompletewithoutanyfalserecord,misleadingstatementsorimportantomissions. I Summaryofrelatedtransactions 1.ThreecompaniesincludingWafangdianBearingCompanyLimited(hereinafterreferredtoas"theCompany")rollingelementbranchcompanyhaveneverreallyfacedthemarketandsearchedthedevelopmentchancesduetothelong-terminactivesystemandmechanismandinsufficientintrinsicmotivationandvitality,sotheproductsareshortofcompetitiveness. Inrecentyears,theordershavebeenreducing,andovercapacity,risingcosts,benefitsdeclineand st otherissueshavebecomeincreasinglyprominent.Thecompany’s1 meetingoftheseventhboardof directors has approved that theCompanydecidesto terminate the businesses of these three companiesandclosethem,respectivelyrentouttheassetstothenewlyestablishedcompanyofWafangdianBearingGroupCorp.(hereinafterreferredtoas"ZWZ"),andgraduallyselltheassetstocounterpartiesaccordingtotheneedsofproductionandmanagement.Thecompanywillcarryouttherelevant approval and disclosure of business in accordance with legal procedures, theabove-mentionedtransactiondoesnotconstituteamajorassetrestructuring. 2.ThesethreenewcompanyarethebranchorsubsidiaryofWafangdianBearingGroupCorp.(hereinafterreferredtoas"ZWZ")-theCompany'slargestshareholder,soleasingassetsthistimeconstitutestherelatedtransaction; 3.TherelateddirectorsMengWei,ZhangXinghai,ChenJiajun,LiShi,SunMaolinandSunNajuanavoidedthedeliberationonthismatter,otherdirectorsallvotedyesforthismatter,therewasneithernegative votenor abstention vote.Thecompany’sindependentdirectorshaveissuedthe“Priorapprovalofindependentdirectors"andmade"Independentdirectors’opinions"onthismatter; 4.Thistransactionstillneedstogettheapprovalofshareholdersmeeting,personaffiliatedwiththisrelatedtransactionwilgiveuptherightstovoteforthisproposalattheshareholdersmeeting. IIBasicinformationofthecounterparties ThecounterpartiesofthistransactionareZWZ’snewlyestablishedbranchesandsubsidiaries,i.e.WafangdianBearingGroupPrecisionRollerCo.,Ltd.(subsidiary),WafangdianBearingGroupPrecisionHolderCo.,Ltd.(subsidiary),andWafangdianBearingGroupPremierAutomotiveBearing Co.,Ltd.(BranchCompany).Becauseabovecompaniesarefoundedinlessthanayear,theinvestorsareherebyintroducedasfollows: CompanyName:WafangdianBearingGroupCorp. Registeredcapital:413,793,100yuan Legalrepresentative:MengWei CompanyType:State-ownedenterprise Businessscope:manufacturingandmarketingofbearings,componentsandaccessoriesofbearings,specialtoolsofbearings,tooling,equipments,mechanicalequipments,abrasives,toolings,casting, autoparts,motorpartsandrelatedindustrialproducts;design,repair,maintenanceandtechnical servicesofbearings;purchaseandmarketingofrawmaterialsandauxiliarymaterialsofbearing;houserentalandequipmentrental. Financialsituationofthepastyear: TheauditedfinancialsituationofZWZin2015:Totalassetsare3,547,637,492.19yuan,netassetsare1,241,838,726.01yuan,operatingincomesare714,658,810.29yuan,andnetprofitsattributabletoownersofparentcompanyare68,062,752.06yuan. III Abouttheobjectoftransactions 1.Overviewoftheunderlyingassets Therentalunderlyingassetsthistimeincludetheproductionequipments,housingandlandofRollingElementCompany,HolderCompany,andAutomotiveBearingCompany.Detailsareasbelowtable: (1) AssetsleasingsituationofWafangdianBearingGroupAutomotiveBearingCompany(branchcompany) InRMB Original 2 No. Lessee Lessor AssetsName PCS Area(m) NetValue RentalFee Value Mechanical power transportation 414 - 8,445.76 3,173.50 945.03 equipment New Valuation Automotive Joint-stock 5 - 3,262.39 2,734.97 370.25 1 acceptancedevice Bearing company Meteringequipment 25 - 134.22 3.81 15.23 Branch Officeequipment Company 138 - 238.44 104.32 60.08 Housing 30,020.00 - - 360.24 582 30,020.00 12,080.81 6,016.60 1,750.83 Total (2) AssetsleasingsituationofWafangdianBearingGroupPrecisionHolderCompany(subsidiary) InRMB Original 2 No. Lessee Lessor AssetsName PCS Area(m) RentalFee Value NetValue Mechanicalpower transportation 299 - 4802.51 779.86 573.28 equipment Valuation acceptance NewHolder Joint-stock 8 - 70.46 14.78 9.47 2 device Subsidiary company Metering 43 - 27.14 1.73 3.56 equipment Officeequipment - 11982 - - 71.89 Housing - 17911.5 - - 26.87 350 29,893.5 4,900.11 796.37 685.07 Total (3) AssetsleasingsituationofWafangdianBearingGroupPrecisionRollerCompany(subsidiary) InRMB Original Rental 2 No. Lessee Lessor AssetsName PCS Area(m) Value NetValue Fee Mechanical power transportation 866 - 19026.87 8295.24 1830.77 Rolling equipment Element Joint-stock Meteringequipment 76 - 423.15 110.18 58.49 3 Branch company Officeequipment 35 - 22.63 0.68 2.57 Company Housing - 36063.54 2408.36 757.06 216.38 Land - 13712.49 - - 20.57 Total 977 - 21881.01 9163.16 2128.78 (4)Therentalfeesofequipmentsandothersarecalculatedbythedepreciationchargesandtaxesandduesandconsideringthemarketpricebymutualagreement;rentalfeesofhousingandlandarecalculatedbythemarketpriceatthesamedistrict. (5)TheleasetermstartsfromthedateonwhichbothpartiessignthecontracttoDecember31,2016;thecompanywillincludethisbusinessintothedailyrelatedtransactionsforunifiedcontrolin2017.2.Othermatters (1)Placementofpersonnel Thestaffsintheoldcompanywillbeemployedbythethreenewcompaniesandsignnewlabor contractsvoluntarily.asforthestaffrefusetoacceptthesettlementfromWBGC,he/shecanbestayinPartyAandsettlebyWBC.ifthereareeconomiccompensationoccurredinthefuture,theexpensesshouldbecoverbytwoparties.Othermattesnotprovidedhereincanbeconductedbynegotiationtogether. (2)Bothsidessigntherelatedtransactionprotocolfortherelatedtransactionsgeneratedbytheassetsleasing,andproceednormatively. IVTheimpactofthetransactiononthecompany 1.Neededbythecompany'sdevelopmentstrategy,threeunitshavebeenseriouslyhamperingthecompany’sdevelopmentwhichalreadymadelossesof2.5millionyuaninthefirsthalfof2016,andthereisnotrendtoimproveinthenexthalfyear,andoperatinglossesofthesethreeunitscanbedecreasedbybusinessadjustment. 2.Vitalizeassetsandincreaseannualrentalincomeofabout45millionyuan.whichcanincreasethecashinflow. 3.Discontinuingoperationofthethreecompaniescanreducetheemployeeandcostburdensonthejoint-stockcompanysothatthecompanycanfocusonthedevelopmentofsuperiorproductsofjoint-stockcompany. 4.Thecompany'soriginaldemandsforrollingelementsandholderpartsandaccessorieswillmakebiddingprocurementfacingtosociety.Thethreenewcompanycanalsobethesuppliers. VIndependentdirectors’opinions Thecompany’sindependentdirectorshaveissuedthe“Priorapprovalofindependentdirectors"andmade"Independentdirectors’opinions"onthismatter,theindependentdirectorsthinkthistransactioncanhelpthecompanytovitalizeassetsandincreaserentalincomes,concentrateondevelopingthesuperiorproductsofjoint-stockcompaniesandreducethecompany'slosses,soitwillneitherdamagethecompany’sinterestsnortherightsandinterestsofminorityshareholders. VIDocumentsavailableforreference th 1.ResolutionoftheFirstMeetingof7 BoardofDirectorsofWafangdianBearingCo.,Ltd.; 2.IndependentOpinions; 3.Priorapprovalofindependentdirectors. Herebynotify BoardofDirectorsof WafangdianBearingCo.,Ltd. 26August2016