RoboSense Technology Co., Ltd — Annual Report 2010

Mar 29, 2011

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.

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SUMMARY ANNUAL REPORT OF 2010

1 IMPORTANT NOTICE

• 1.1 The board of directors (the “Board”), the supervisory committee, the directors (the “Directors”), supervisors and senior management of the Company warrant that there are no false representation and misleading statement or material omission in this report and jointly and severally accept responsibilities for the truthfulness, accuracy and completeness of the content contained herein. This summary of the annual report is extracted from the full text of the annual report. Investors should read the full text of the annual report for a thorough understanding of its content.

• 1.2 All Directors attended the Board meeting.

— 1 —

• 1.3 The financial statements were prepared in accordance with the Accounting Standards for Enterprises issued by the Ministry of Finance of the People’s Republic of China (“PRC GAAP”) and International Financial Reporting Standards (“IFRSs”). Daxin Certified Public Accountants Co., Ltd. and PKF Certified Public Accountants have issued auditors’ reports with standard unqualified opinions.

• 1.4 There was no utilization of funds by the controlling shareholders and their related parties during the Reporting Period.

• 1.5 There was no external guarantee in violation of the stipulated decision-making procedures during the Reporting Period.

• 1.6 Mr. Song Jianming, the Chairman, Ms. Song Fei, the Chief Financial Controller and Ms. Chen Jing, the Head of Finance Department, warrant the faithfulness and completeness of the financial statements set out in the annual report.

2 COMPANY PROFILE

2.1 Basic Information

Stock name ST Luobo Luoyang Glass Stock code 600876 01108 Place of listing Shanghai Stock Exchange The Stock Exchange of Hong Kong Limited Registered address and No.9, Tang Gong Zhong Lu, Xigong District, office address Luoyang Municipal, Henan Province, the PRC Postal code 471009 International website http://www.zhglb.com of the Company Email gfbgs@clfg.com

— 2 —

2.2 Contact person and method

Company Secretary

Securities Affairs Representative

Name Ms. Song Fei Mr. Zhang Kefeng Correspondence Address Secretary Office of the Board, Secretary Office of the Board, Luoyang Glass Company Limited, Luoyang Glass Company Limited, No.9, Tang Gong Zhong Lu, No.9, Tang Gong Zhong Lu, Xigong District, Xigong District, Luoyang Municipal, Luoyang Municipal, Henan Province Henan Province Telephone number 86-379-63908588, 63908507 86-379-63908629 Facsimile number 86-379-63251984 86-379-63251984 Email lbjtsf@163.com lyzkf@163.com

3 SUMMARY OF ACCOUNTING DATA AND FINANCIAL INDICATORS

The financial information disclosed in the announcement is generally prepared in accordance with the PRC GAAP except for the specific sections.

3.1 Major Accounting Data

Unit: RMB

				Increase/
	2010	2009		(decrease)	2008
		Before	After	of the year	Before	After
		adjustment	adjustment	over last year	adjustment	adjustment
				(%)
Operating income	1,168,481,659.06	972,949,859.17	972,949,859.17	20.10	1,322,532,854.82	1,322,532,854.82
Total profit	72,984,475.22	–171,666,551.34	–171,666,551.34	Not Applicable	–37,209,125.73	–37,209,125.73
Net profit attributable to shareholders of
the listed company	60,787,804.31	–167,456,263.00	–141,822,269.14	Not Applicable	12,783,782.14	23,469,642.64
Net profit attributable to shareholders of
the listed company after deducting
extraordinary profit or loss	52,673,738.58	–154,617,713.88	–130,622,403.97	Not Applicable	–245,984,788.36	–235,298,927.86
Net cash flow from operating activities	22,939,486.99	–82,566,656.61	–82,566,656.61	Not Applicable	–47,722,300.79	–47,722,300.79
	As at
	31 December
	2010	As at 31 December 2009		Percentage	As at 31 December 2008
		Before	After	change	Before	After
		adjustment	adjustment	over last year	adjustment	adjustment
				(%)
Total assets	1,439,514,723.66	1,485,214,615.77	1,485,214,615.77	–3.08	2,003,149,707.07	2,003,149,707.07
Equity of owners’ (or shareholders)
of the parent company	115,555,651.36	34,678,917.62	93,762,180.82	23.24	229,156,045.71	255,845,242.61

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3.2 Major Financial Indicators

2010 2009 Increase/ (decrease) Before adjustment After adjustment of the year over last year (%) Basic earnings per share_(RMB) 0.1216 –0.335 –0.2836 Not Applicable Diluted earnings per share(RMB) 0.1216 –0.335 –0.2836 Not Applicable Basic earnings per share after deducting extraordinary profit or loss(RMB) 0.1053 –0.309 –0.2612 Not Applicable Return on net assets fully diluted(%) 52.6 –482.88 –151.26 Not Applicable Weighted average return on net assets(%) 53.13 –115.15 –83.93 Not Applicable Return on net assets fully diluted after deducting extraordinary profit or loss(%) 45.58 –445.86 –139.31 Not Applicable Weighted average return on net assets after deducting extraordinary profit or loss(%) 46.04 –106.32 –77.30 Not Applicable Net cash flow from operations per share(RMB) 0.046 –0.165 –0.165 Not Applicable As at 31 December 2010 As at 31 December 2009 Increase/ (decrease) Before adjustment After adjustment of the year over last year (%) Net assets per share attributable to shareholders of the listed company(RMB)_ 0.231 0.069 0.188 22.87 Non-recurring items 3Applicable Not applicable Non-recurring items Gain on disposal of non-current assets Government subsidies through profit or loss Gain from debt reorganisation Other non-operating income and expenses Costs of corporate reorganization, i.e. expenses for staff settlement, integration costs, etc Non-recurring profit or loss effects-income tax Non-recurring profit or loss effects-minority interest Total

2008 Be fore adjustment After adjustment 0.026 0.0469 0.026 0.0469 –0.492 –0.4706 5.58 9.17 5.74 10.29 –107.34 –91.97 –110.42 –103.15 –0.095 –0.095 As at 31 December 2008 Before adjustment After adjustment 0.458 0.512 Amount (RMB) 1,253,770.69 74,921,373.03 1,853,191.25 –869,279.41 –68,486,387.32 161,664.64 396,937.87 8,114,065.73

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Items accounted at fair value

Applicable 3 Not applicable

3.3 Differences between the PRC and overseas accounting standards

		PRC
		Accounting
		Standards IFRSs
Net profit attributable		to the shareholders
of the listed company 60,787,804.31 61,946,533.26
Equity attributable to		the shareholders
of the parent	company 115,555,651.36 63,397,479.56
Description of	1.	The main reason of the difference: land use right disclosed
differences		under PRC GAAP includes holding company’s revaluation
		gain from fair value re-alignment. Yet, under IFRS, cost
		model is adopted and cost of land is booked at zero cost. As
		the accounting models under different accounting standards
		result in different cost values, difference in land use right
		amortisation has arisen.

Under PRC Accounting Standards, the land use right revaluation gain will be reflected in shareholders’ equity. Yet under IFRS, which adopts cost model, revaluation gain would not be recognised, and therefore the gain would not be recorded in shareholders’ equity or other accounts.

— 5 —

1. As PRC GAAP require retrospective adjustment be made to subsidiaries’ losses in excess of non-controlling interests’ pro-rated contribution of shareholders’ equity, undistributed profits at beginning of the Reporting Period is increased by RMB 59,083,263.20 and non-controlling interests at beginning of the Reporting Period is reduced by RMB 59,083,263.20. In financial year 2009, profit attributable to parent company is increased by RMB25,633,993.86, while non-controlling interests is decreased by RMB25,633,993.86. However, under IFRS, adjustment to the above excessive losses to be borne by non-controlling interests pro-rated equity shareholding would be prospectively applied, and no adjustment would be made to opening balance.

4 CHANGES IN SHARE CAPITAL AND PARTICULARS OF SHAREHOLDERS

4.1 Changes in share capital

Unit: Share

			Before	change			Change (+/–)			After	change
							Shares
							converted
					Issue of		from public
Item			Number	Percentage	new shares	Bonus issue	reserve	Others	Sub-total	Number	Percentage
I.	Share subject to trading moratorium		179,018,242	35.80%				–179,018,242	–179,018,242	0	0
	1.	State-owned shares
	2.	State-owned legal person shares	179,018,242	35.80%				–179,018,242	–179,018,242	0	0
	3.	Other domestic shares
		Including: shares held by domestic
		legal persons
		Shares held by domestic
		natural persons
	4.	Foreign invested shares
		Including: shares held by overseas
		legal persons
		Shares held by overseas
		natural persons
II.	Circulating shares not subject
	to trading moratorium		321,000,000	64.20%				+179,018,242	+179,018,242	500,018,242	100%
	1.	Ordinary shares denominated in RMB	71,000,000	14.20%				+179,018,242	+179,018,242	250,018,242	50%
	2.	Domestic listed foreign
		invested shares
	3.	Overseas listed foreign
		invested shares	250,000,000	50%						250,000,000	50%
	4.	Others
III.	Total number of shares		500,018,242	100%						500,018,242	100%

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Changes in shares subject to trading moratorium

	Number of	Number of	Number of	Number of
	shares subject	shares	Additional	shares subject
	to trading	with trading	shares subject	to trading
	moratorium at	moratorium	to trading	moratorium	Reason	Expiry date
	the beginning	released	moratorium	at the end	for trading	of trading
Name of shareholders	of the year	in the year	in the year	of the year	moratorium	moratorium
China Luoyang Float Glass
(Group) Company Limited
(“CLFG”)	179,018,242	179,018,242	0	0	N/A	17 May 2010

4.2 Number of shareholders and their shareholdings

Unit: share

Total number of shareholders of the Company

As at 31 December 2010, there were 17,453 shareholders, including 1 state-owned legal person shareholder, 17,392 other shareholders of A shares and 60 shareholders of H shares.

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Shareholdings of the top 10 shareholders of the Company

				Number of
				shares subject
				to trading	Number of
		Shareholding	Total number	moratorium	shares pledged
Name of shareholder	Nature of shareholder	percentage	of shares held	held	or frozen
HKSCC Nominees Limited	Foreign shareholder	49.54%	247,722,998	0	0
China Luoyang Float Glass	Holder of state-owned
(Group) Company Limited	shares	31.80%	159,018,242	0	159,018,242
Liu Yongsheng	Individual shareholder	0.887%	4,438,347	0	0
Fang Caixia	Individual shareholder	0.681%	3,410,244	0	0
Chen Mingzhu	Individual shareholder	0.254%	1,268,990	0	0
Guo Donglin	Individual shareholder	0.253%	1,265,534	0	0
China Construction Bank —
Huabao Industrial Multi-strategy
Growth Securities
Investment Fund	Fund	0.215%	1,074,725	0	0
Zhang Shuxia	Individual shareholder	0.188%	940,680	0	0
China Investment New Asian-
Pacific (Henan) Investment
Management Co., Ltd.	Corporate shareholder	0.163%	816,794	0	0
Wang Jingsi	Individual shareholder	0.160%	801,753	0	0

— 8 —

Particulars of the top 10 holders of shares not subject to trading moratorium

Number of shares held not subject to trading

Name of shareholder moratorium Type of shares HKSCC Nominees Limited 247,722,998 Overseas listed foreign shares China Luoyang Float Glass (Group) Company Limited 159,018,242 Ordinary shares denominated in RMB Liu Yongsheng 4,438,347 Ordinary shares denominated in RMB Fang Caixia 3,410,244 Ordinary shares denominated in RMB Chen Mingzhu 1,268,990 Ordinary shares denominated in RMB Guo Donglin 1,265,534 Ordinary shares denominated in RMB China Construction Bank — Huabao Industrial Multistrategy Growth Securities Investment Fund 1,074,725 Ordinary shares denominated in RMB Zhang Shuxia 940,680 Ordinary shares denominated in RMB China Investment New Asian-Pacific (Henan) Investment Management Co., Ltd. 816,794 Ordinary shares denominated in RMB Wang Jingsi 801,753 Ordinary shares denominated in RMB

Parties acting in concert or other relationship among the aforesaid shareholders

There are no connected parties or persons acting in concert as defined by Regulations for Disclosure of Changes in Shareholding of Listed Companies (上市公司股東持股 變動信息披露管理辦法) among the top ten shareholders of the Company, including CLFG and other shareholders of circulating shares. The Company is not aware of any parties acting in concert or any connected relationship among other holders of circulating shares.

Note: Nature of shareholder includes state-owned shareholder, foreign shareholder and others. Type of shares includes ordinary shares denominated in RMB, domestic listed foreign shares, overseas listed foreign shares and others.

— 9 —

4.3 Controlling shareholders and de facto controller

4.3.1 Changes of controlling shareholders and de facto controller

3 Applicable Not applicable

On 9th July, 2010, China National Building National (Group) Co., Ltd., (“CNBMG”), the ultimate controller of the Company, transferred its 19% equity interest in CLFG to Bengbu Glass Industry Design Institute (“Bengbu”) at nil consideration. Bengbu is wholly-owned by CNBMG through its wholly-owned subsidiary, China Building Materials Academy.

On 12th July, 2010, CNBMG entered into a conditional share transfer agreement with China Building Materials Glass Company (“CBM Glass”), pursuant to which CNBMG agreed to transfer 51.70% equity interest in CLFG to CBM Glass at nil consideration. CBM Glass is a wholly-owned subsidiary of CNBMG.

On 8 December 2010, CBM Glass obtained the approval from China Securities Regulatory Commission (“CSRC”) for a waiver from strict compliance with the requirements to make a mandatory offer in respect of the transfer of its equity interest at nil consideration and the control of 159,018,242 shares of the Company, representing 31.80% of the total issued share capital of the Company.

Since then, the transfer of 70.7% equity interest in CLFG held by CNBMG was completed, and CNBMG remains the de facto controller of the Company.

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4.3.2 Particulars of the controlling shareholder and de facto controller

CLFG, the controlling shareholder, was established in April 1991 and its legal representative is Zhao Yuanxiang. Its registered capital is RMB1,286.74 million and its shareholders include China Building Material Class Company, Bengbu Glass Industry Design Institute (“Bengbu”), Luoyang State-owned Assets Operation Company Limited, China Huarong Asset Management Corporation, China Great Wall Asset Management Corporation, China Dongfang Assets Management Company and China Xinda Assets Management Company, holding 51.7%, 19%, 10.27%, 8.55%, 5.44%, 3.10% and 1.94% of its shares, respectively. Its principal activities include production and sales of float glass, imports and exports of processing technology of glass and internal business, design and subcontracting of engineering works, labour export and other businesses.

Information about the de facto controller of the Company

CNBMG was established in 1984 and its legal representative is Song Zhiping. Its registered capital is RMB 3,723,038,000. This company is principally engaged in the development, wholesale and retail of construction materials (including steel products and wood products, but only purchased by and supplied to those enterprises which are directly under and supplied by the system), raw materials and productive technology equipment as well as the supply of sedan in the plan of the system; undertaking designs and construction of building, factory and decoration involving new construction materials.

— 11 —

4.3.3 Illustration of shareholding and controlling relationship between the

Company and its de facto controller

==> picture [269 x 305] intentionally omitted <==

----- Start of picture text -----

State-owned Assets Supervision and
Administration Commission of the State Council
100%
China National Building
Material Group Corporationl
100% 100%
China Building Materials China Building Materials Academy
Glass Company
100%
Bengbu Glass Industry
51.70%
Design Institute
19.00%
China Luoyang Float Glass
(Group) Company Limited
31.80%
Luoyang Glass Company Limited
----- End of picture text -----

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5 DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT

5.1 Changes in shareholdings and remuneration of directors, supervisors and senior Management

									Total	Whether
									remuneration	received
									received from	remuneration
									the Company	from corporate
						Shareholding	Shareholding		during	shareholders or
				Commencing date	Ceasing date	at the beginning	at the end	Reason for	the reporting	other connected
Name	Position	Sex	Age	of term of office	of term of office	of the year	of the year	change	period	parties
						(share)	(share)		(RMB0’000)
Song Jianming	Chairman	Male	54	30 June 2008 (Director)	18 May 2012	0	0	N/A	32.08	No
				27 May 2009 (Chairman)
Ni Zhisen	Executive Director	Male	39	27 May 2009	18 May 2012	0	0	N/A	26.31	No
	General Manager			(General Manager)
				28 September 2009 (Director)
Song Fei	Executive Director	Female	47	14 April 2008	18 May 2012	0	0	N/A	16.68	No
	Chief Financial Controller			(Chief Financial Controller)
	Secretary to the Board			30 June 2008 (Director)
				11 December 2008
				(Secretary to the Board)
Cheng Zonghui	Executive Director &	Male	48	24 July 2007	18 May 2012	0	0	N/A	16.60	No
	Deputy General Manager			(Deputy General Manager)
				28 September 2009 (Director)
Shen Antai	Former Non-executive	Male	61	10 September 2007	30 June 2010	0	0	N/A	2	Yes
	Director
Bao Wenchun	Former Non-executive	Male	56	18 May 2009	30 June 2010	0	0	N/A	2	Yes
	Director
Guo Yimin	Non-executive Director	Male	46	28 September 2009	18 May 2012	0	0	N/A	4	Yes
Zhao Yuanxiang	Non-executive Director	Male	42	25 August 2010	18 May 2012	0	0	N/A	1.3	Yes
Zhang Chengong	Non-executive Director	Male	38	25 August 2010	18 May 2012	0	0	N/A	1.3	Yes
Guo Aimin	Independent Director	Male	56	10 April 2006	18 May 2012	0	0	N/A	4	No
Zhang Zhanying	Independent Director	Male	53	10 April 2006	18 May 2012	0	0	N/A	4	No
Huang Ping	Independent Director	Male	42	18 May 2009	18 May 2012	0	0	N/A	4	No
Dong Jiachun	Independent Director	Male	54	28 September 2009	18 May 2012	0	0	N/A	4	No
Ren Zhenduo	Chairman of the	Male	46	10 September 2007	18 May 2012	0	0	N/A	2	Yes
	Supervisory Committee			(Supervisor)
				12 September 2007
				(Chairman of the
				Supervisory Committee)
He Baofeng	Independent Director	Male	39	10 September 2007	18 May 2012	0	0	N/A	2	No
Yao Wenjun	Former Director	Female	42	10 September 2007	29 July 2010	0	0	N/A	1.17	Yes
Guo Hao	Independent Director	Male	53	18 May 2009	18 May 2012	0	0	N/A	2	No
Lu Junfeng	Employee Supervisor	Male	40	10 September 2007	18 May 2012	0	0	N/A	4.78	No
Wang Jian	Employee Supervisor	Male	35	26 May 2010	18 May 2012	0	0	N/A	6.01	No
Ip Pui Sum	Company Secretary	Male	50	6 August 2008	18 May 2012	0	0	N/A	HK$120,000	No

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• Note: (1) Save as disclosed above, as at 31 December 2010, none of the Directors, supervisors and senior management of the Company had any interest nor short position in the underlying shares or debentures in the shares, equity derivatives of the Company or its associated corporations (within the meaning as defined in Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) ) which was required to be entered in the register of interest kept by the Company pursuant to section 352 of the Securities and Futures Ordinance; or required to be notified to the Company or Hong Kong Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

• (2) As of 31 December 2010, none of the Directors, supervisors or their spouses or children under the age of eighteen was granted rights to purchase shares or debentures of the Company or any of its respective associated companies.

• (3) Total remuneration above amounted to approximately RMB1.13 million.

• (4) The Company has not implemented any share incentive schemes during the reporting period.

6 REPORT OF THE DIRECTORS

6.1 Management Discussion and Analysis

Business Review

The Company is the place of origin for one of three major float glass manufacturing methods — “Luoyang Float Glass”. The Company is one of the relatively large manufacturers and distributors of float glass in glass industry in the PRC. The Company is mainly engaged in the manufacturing and sales of float sheet glass. Capable of producing float glass of 0.55mm–25mm, the Company currently holds a leading position in terms of the production technology of ultrathin and ultra-thick glass.

— 14 —

Overall operation of the Company during the reporting period

In 2010, aiming at enhancing the profitability of principal operations to remove the ST label, and by taking advantage of the government’’s support during the personnel transfer, the Company managed to streamline the management, stabilize the production, lower the costs and increase selling price, improve the performance and strengthen the basis for development. At the same time, the Company accelerated project construction to boost the structural adjustment, and implemented the debt reorganization with banks to reduce financial costs. In addition, the Company made arrangements for redundant staff to solve the burben of relevant staff, eliminating the effects of those historical issues and obstacles for the Company’s future development. The Company achieved the annual business objectives, demonstrating good development momentum.

According to the PRC GAAP, the operating revenue of the Group for 2010 was RMB 1,168,481,700, representing an increase of RMB 195,531,800 over the corresponding period of last year. Total profit before tax amounted to RMB 72,984,500, representing an increase of RMB 244,651,100 over the corresponding period of last year. Net profit attributable to shareholders of the Company was RMB 60,787,800, representing an increase of RMB 202,610,000 over the corresponding period of last year. Basic earming per share attributable to the shareholders of the Company was RMB 0.12.

According to IFRSs, the operating revenue of the Group for 2010 was RMB 1,167,044,000, representing an increase of RMB 194,632,000 over the corresponding period of last year. Total profit before tax amounted to RMB 74,216,000, representing an increase of RMB 244,651,000 over the corresponding period of last year. Net profit attributable to shareholders of the Company was RMB 61,947,000, representing an increase of RMB 228,172,000 over the corresponding period of last year. Basic earning per share attributable to the shareholders of the Company was RMB 0.12.

The Board does not recommend the distribution of any final dividend or the transfer of capital reserve to share capital.

— 15 —

In 2010, major measures taken by the Company include:

• (1) Launching overall business improvement to implement benchmarking management and promote the implementation of daily and weekly costing, thus achieving substantial reduction in cost and total expenses as compared with last year.

• (2) Placing emphasis on both ends of the market to lower the purchasing cost and increase sales price, thereby improving economic efficiency.

Several measures were take to lower the purchasing cost, stabilize the quality of raw materials and fuel to meet production requirements. Dense soda ash was replaced with smaller particles of dense soda ash to reduce the procurement cost of soda ash; the proportion of directly supplied coal and the process supervision were enhanced to reduce procurement cost and stabilize coal quality, thereby effectively reducing coal consumption and cost.

Guided by the market, the Company optimized the product mix and increased the sales price to raise profitability. In respect of ultra thin glass, with close attention to changes in market demand, the Company expanded the production and sales volumes and raised sales price for several times to increase profit. As for ordinary glass, the Company arranged alternating production schedule for F green, emerald green and ocean blue glasses to boost comprehensive sales price and production and sales volumes.

• (3) Strengthening production technology management to increase the output, stabilize the quality, reduce consumption and cost.

Firstly, the Company ensured that the furnaces were in safe and stable operation without incidents.

Secondly, the Company paid more attention to technological breakthroughs, promoted the application of technological innovations, and constantly optimized the technology. The 0.8mm and 0.9mm glass products of the Company were accredited by the State.

— 16 —

Thirdly, the Company replaced raw materials and fuels to lower the manufacturing cost.

Fourthly, the Company improved the packaging methods to lower the packaging cost. Loose packaging was adopted as much as possible and paper inserting was replaced with online powder spray to minimize packaging cost.

• (4) Speeding up project progress and readjusting the product mix to develop profit growth points.

Firstly, the Company optimized the CLFG Longmen Glass Company Limited (“Longmen Glass”) equity structure and solved the historical issues, and at the same reformed the Shuangchao project and started production as scheduled.

Secondly, the Company resumed the CLFG Longfei Glass Company Limited (“Longfei”) production line. The production line was put into production on 13 June 2010 and was in stable operation thereafter.

Thirdly, the Company completed the whole procedure of business registration for the wholly-owned subsidiary of Xinjiang project and obtained the approval regarding the environmental appraisal.

Fourthly, energy saving and environmental protection projects, including the dust removal and desulphurization in melting furnaces of CLFG Luoyang Longhai Electric Glass Company Limited (“Longhai”), the desulphurization projects of Longfei and CLFG Luoyang Longxiang Glass Company Limited (“Longxiang”), and double subtraction wet desulphurization facility project of Longhao, were put into operation and have achieved results.

— 17 —

• (5) Implementing the debt reduction policy to lower financial costs and solve historical issues.

In 2010, the Company signed an agreement with relevant banks, pursuant to which the preferential policy of interest-free extension was granted to the Company for the debt of RMB 630 million. Such policy will reduce the interest expenses of RMB 38 million for the Company each year for a consecutive seven years, which will greatly reduce the financial burden and is beneficial to recover and strengthen the principal operations.

• (6) Implementing asset reorganization to optimize the capital structure.

Firstly, after the acquisition of 20.94% equity interests in Longmen Glass from the Bureau of Land and Resources of Yanshi City, the realignment of shareholdings has laid the foundation for the Company to increase capitals and implement the Shuangchao project of Longmen Glass.

Secondly, the Company completed the transfer of creditor’s rights of Guangdong International Trust & Investment Corporation, which reduced the burden and losses and lowered the risks.

Thirdly, the Company completed the custody of 50% equity interests in Longxin owned by CLFG, further enhancing the Company’s competitive edge in the market.

• (7) Smooth rearrangements of redundant staff to reduce the burden.

After careful deployment, the Company smoothly made rearrangements for staff and stabilized the production. At the end of the reporting period, 1,244 staff was arranged, thus reducing the burden and enhancing the production efficiency.

The following discussion and analysis should be read in conjunction with the audited financial statements of the Group and the notes thereto prepared in accordance with PRC GAAP as set out in other sections of the annual report.

— 18 —

6.2 Statement of the principal operations by industries and products

				Increase/	Increase
				(decrease)	(decrease)	Increase/
				of income	of cost	decrease
				from principal	of principal	of operating
	Income	Cost of	Profit	operations	operations	profit margin
By industry or	from principal	principal	margin of	as compared	as compared	as compared
products	operations	operations	operations	with last year	with last year	with last year
	(RMB)	(RMB)	(%)	(%)	(%)	(%)
Float glass	947,852,434.20	746,679,086.88	21.22	22.94	11.68	7.95
						percentage
						points
Silica sand	28,561,068.74	13,827,851.66	51.58	50.01	25.09	9.64
						percentage
						points

6.3 Principal operations by regions

		Increase/
		(decrease)
		of income
		from principal
	Income	operations
	from principal	as compared
Regions	operations	with last year
	(RMB)	(%)
Domestic	961,867,363.08	23.70
Exports	14,546,139.86	17.02

6.4 Top 5 Suppliers and Top 5 Customers

Total purchase
from top		Percentage
5 suppliers(RMB)	274,853,749.83	in total purchase	36.14%
Total sales to
the top
5 customers		Percentage
(RMB)	317,702,529.02	in total sales	27.20%

— 19 —

Save as disclosed above, none of the Directors, the Company’s, supervisors and their respective associates and any shareholders (whom to the best knowledge of the directors holds 5% or more of equity interests in the Company’s share capital) had any interest in the aforesaid suppliers and customers.

6.5 Composition of cash flow

• (1) Other cash received relating to operating activities increased 66.97% over the corresponding period of last year, mainly due to the receipt of government grant for employees resettlement,etc.;

• (2) Cash paid relating to the payment to and for employees increased 56.39% over the corresponding period of last year, mainly due to the payment for staff resettlement;

• (3) Payment of various taxes increased 39.85% over the corresponding period of last year, mainly due to the increase in value-added tax and income tax;

• (4) Cash received from investment income decreased 100% over the corresponding period of last year, mainly due to the receipt of bonuses from finance companies in 2009;

• (5) Cash received from disposal of fixed assets, intangible assets and other long term assets decreased 98.35% over the corresponding period of last year, mainly due to the receipt of proceeds from land disposal in 2009;

• (6) Cash paid relating to the acquisition and construction of fixed assets, intangible assets and other long term assets increased 389.34% over the corresponding period of last year, mainly due to the payments for the lands and engineering cold repair and reconstruction by subsidiaries;

• (7) Cash paid relating to the investment decreased 100% over the corresponding period of last year, mainly due to the acquisition of minority interest of holding companies in 2009;

• (8) Cash paid relating to dividend distribution, profit and cash payment for interests decreased 78.1% over the corresponding period of last year, mainly due to the debt reduction and interest exemption granted by financial institutions.

— 20 —

6.6 Analysis of items in the financial statements with movements of over 30%

• (1) Monetary funds decreased 41.06% as compared with the beginning of the reporting period, mainly due to the payments for engineering funds and matured bills and the payments of loans;

• (2) Other account receivables increased 39.87% as compared with the beginning of the reporting period, mainly due to the employment resettlement funds subsidized by the government;

• (3) Inventories increased 30.51% as compared with the beginning of the reporting period, mainly due to the increase in raw materials and merchandise inventories;

• (4) Constructions increased 61.46% as compared with the beginning of the reporting period, mainly due to the cold repair and reconstruction of Longmen Glass Company;

• (5) Construction materials increased 989.9% as compared with the beginning of the reporting period, mainly due to additional materials for the project renovation;

• (6) Intangible assets increased 38.59% as compared with the beginning of the reporting period, mainly due to the purchase of land use rights by Longhai and LongHao;

• (7) Other current assets decreased 96.78% as compared with the beginning of the reporting period, mainly due to the transfer of creditor’s rights of Guangzhou International Trust & Investment Corporation;

• (8) Short-term borrowings decreased 96.76% as compared with the beginning of the reporting period, mainly due to the transfer from short-term borrowings into long-term borrowings resulting from the implementation of the debt reduction policy with financial institutions;

• (9) Taxes payable decreased 88.5% as compared with the beginning of the reporting period, mainly due to the increase in value-added tax and income tax paid in the reporting period;

— 21 —

• (10) Long-term borrowings increased 14204.83% as compared with the beginning of the reporting period, mainly due to the transfer from short-term borrowings into long-term borrowings;

• (11) Non-controlling interests increased 61.31% as compared with the beginning of the reporting period, mainly due to the improvement of the Company’s production and operation in this year;

• (12) Sales taxes and extra duties increased 39.02% over the corresponding period of last year, mainly due to the increase in the income from principal operations;

• (13) Financial costs decreased 75.52% over the corresponding period of last year, mainly due to the waiver of borrowing interests of RMB 638,000,000 from the debt reduction policy with finance institutes;

• (14) Gains on investment decreased 100% over the corresponding period of last year, mainly due to no such expense in this year resulting from the disposal of equity interests in 2009;

• (15) Non-operating income increased 1852.03% over the corresponding period of last year, mainly due to government grant received for employee resettlement;

• (16) Non-operating expenses decreased 96.71% over the corresponding period of last year, mainly due to the retirement of certain fixed assets in 2009;

• (17) Income tax increased 930.71% over the corresponding period of last year, mainly due to the increase in total profit for good business operations in this year;

• (18) Net profit increased 131.5% over the corresponding period of last year, mainly due to the increase in total profit.

— 22 —

6.7 Analysis of operating results of major subsidiaries and investee companies

	Nature of		Registered
Company name	business	Major products	capital	Total assets	Net assets	Net profit
			(RMB)	(RMB)	(RMB)	(RMB)
CLFG Lougmen Glass	Production and sales	Ultra thin glass	20,000,000.00	183,549,455.64	–189,138,335.00	–9,755,076.32
Company Limited
CLFG Luoyang	Production and sales	Ultra thin glass	60,000,000.00	279,196,217.17	109,184,863.78	85,341,806.53
Longhai Electric
Glass Company
Limited
CLFG Luoyang	Production and sales	Float glass	50,000,000.00	305,123,315.56	64,279,507.90	14,395,800.53
Longhao Glass
Company Limited
CLFG Longfei Glass	Production and sales	Float glass	74,080,000.00	204,258,610.94	–38,728,233.85	–11,574,745.13
Company Limited
CLFG Luoyang	Production and sales	Float glass	50,000,000.00	140,454,310.69	24,718,828.25	–705,383.79
Longxiang Glass
Company Limited
Yinan Mineral	Production and sales	Silica sand raw	28,000,000.00	41,730,665.57	5,612,733.82	–115,964.01
Products Co., Ltd.		materials
Luoyang Luobo	Sales of products	Glass and raw	5,000,000.00	32,602,409.72	3,754,751.15	–399,421.28
Industrial Co., Ltd.		materials and
		fuel
CLFG Shawan	Production and sales	Float glass	9,000,000.00	9,017,968.14	8,717,968.14	–282,031.86
Glass Co., Ltd.
Dengfeng CLFG	Production and sales	Silica sand raw	3,000,000.00	6,571,936.73	2,171,936.73	–109,710.68
Silicon Company		materials
Limited
Dengfeng Hongzhai	Production and sales	Silica sand raw	2,050,000.00	3,397,398.86	1,787,398.86	–262,601.14
Silicon Co.. Ltd.		materials
Luoyang Jingxin	Production and sales	Inner wall tile	41,945,000.00	125,351,727.93	–62,716,960.22	–4,440,134.81
Ceramic Co., Ltd.
CLFG Minerals	Production and sales	Silica sand raw	30,960,055.81	31,408,915.74	–12,917,274.82	–1,685,964.80
Products Co., Ltd.		materials

6.8 Use of the proceeds from share issue

Applicable 3 Not applicable

Change of projects

Applicable 3 Not applicable

— 23 —

6.9 Projects not funded by proceeds from share issue

Applicable 3 Not applicable

6.10 The Board’s explanation for non-standard opinion given by the auditors

Applicable 3 Not applicable

6.11 Plan of the Board of Directors for profit appropriation or transfer of statutory surplus reserve to capital for this year

According to the IFRSs, the net profit attributable to the equity shareholders of the Company for 2010 was RMB 61.95 million. Taking into account the undistributable profit of RMB-962.54 million at the beginning of the year, accumulated loss was RMB900.59 million. As a result, the Company does not recommend profit distribution for 2010 or any transfer of capital reserve to share capital.

According to the PRC Accounting Standards, the net profit attributable to the equity shareholders of the Company for 2010 was RMB60.79 million. Taking into account the undistributable profit of RMB–1,355.13 million at the beginning of the year accumulated loss was RMB1,294.34 million. As a result, the Company does not recommend profit distribution for 2010 or any transfer of capital reserve to share capital.

6.12 Profit during the reporting period of the Company without forwarding proposal of cash profit distribution

Applicable 3 Not applicable

— 24 —

Future Development Prospect

1. Environment analysis

2. (1) Industry Trend and Market Competition

In 2011, the Indemnificatory Housing Policy will boost large-scale construction, which guarantees certain demand for glass and maintains the industry prospect. With the adjustment of national industry structure and improved consumption structure, the glass industry is faced with a good opportunity for developing solar glass and energy-saving glass. As the automobile market maintains a stable growth, the demand for deepprocessing glass is about to accelerate. However, due to the production capacity expansion of common float glass and the launch of real estate control policy in 2011, the glass demand is suppressed, which leads to difficulty in the sharp increase of sales price.

• (2) Opportunities and Challenges for the Company

Future opportunities:

• (1) As people demand for the better quality of living space, processed functional products such as LOW-E glass, safety glass, and energysaving insulating glass will witness wide applications. The glass process rate will grow further with increasing demand for glass sheets.

• (2) The new rural construction and urbanization will guarantee a long-term demand growth of glass products. For example, the construction of the 10-million suits of indemnificatory houses in 2011 was signed by local governments.

• (3) Increase of per capita income will lead to a rapid development of the automobile industry. As a result, the demand for automotive glass will grow accordingly.

• (4) Global economic recovery will bring stable export growth.

— 25 —

• (5) Solar glass is the highlight of future glass market and witnesses rapid development in recent years. It is predicted that the production of solar battery in China and all over the world stays increasing. In China, the demand for super white rolled glass and TCO conductive glass is very large.

Future challenges:

• (1) As economic growth slows down, the investment in the real estate industry is suppressed. The demand for glass is consequently affected.

• (2) The national control policy of real estate industry will lead to excessive supply in a period and affect the profitability of glass industry.

• (3) Twenty-six new glass production lines were put into operation throughout China in 2010. The new production capacity will be fully demonstrated in 2011. In addition, another 18 production lines will be put into operation this year. The contradiction between supply and demand still stands out.

• (4) It is predicted that in 2011, the prices of major raw materials and fuels (such as heavy fuel oils, coals, and stone materials) remain at high level. The rise of prices will affect the profit of the Company.

• (5) Multiple production lines are under extended service, which affects stable production.

• Business Plan for 2011

Float glass production:	10,324,600 boxes
Operating Income	RMB 1,382 million
Production-sales ratio:	100%
Costs as a percentage to sales revenue:	94.97%

— 26 —

1. Countermeasures

2. (1) To innovate the mechanism, enhance management, and increase operation efficiency

3. To implement the competition mechanism for positions, optimize the allocation of human resources and tap the potential of various talents to the maximum extent, so as to bring the best out of various existing personnel.

4. (2) To innovate the administration and control mode, improve working mechanism, reinforce performance appraisal, and motivate internal initiatives

Firstly, the Company will exercise decentralized management and production-supply-marketing integration operation in Longmen Glass and Longhai which have sole responsibility for their own profits or losses. As for other subsidiaries that produce float glass and serve as cost centers, the Company will combine unified and separate operations and exercise control mode for the subsidiaries to manage production and control costs. The Company will reinforce the functions such as guidance, supervision, coordination, control and service of functional departments, to unify and improve the operation efficiency.

Secondly, the Company will continue to intensify performance appraisal and establish a scientific salary system. Payroll and evaluation assessment must follow the principle of “performance appraisal, quantified assessment and position-based salary”, through which the Company can dynamically combine the responsibilities, rights, and interests to further encourage staff in all positions.

• (3) The Company will enhance internal control, place emphasis on risk management, implement the Work Program for the Code on Internal Control, and at the same time do well in all stages according to the promotion plan to ensure compliant operations.

— 27 —

• (4) The Company will continue to improve the method of daily cost accounting, weekly progress assessment, and monthly benchmarking management to fully develop cost management as predictive index. A continuous improvement mechanism for cost control will be established to maximize profit.

• (5) The Company will speed up the promotion of information system for integration of capital flow, logistics and information flow. By virtue of information, the Company will progress in management and increase profit and operation efficiency.

• (6) The Company will do well in integrating the three quality management systems to effectively push the establishment of the Company’s quality, safety, and environment management system. Based on the management mode and method with Luobo characteristics, the Company will continue to improve the level of managing quality, occupational health and safety, as well as environment and lay a solid management foundation.

• (2) Rely on technological innovation and enhance production management to increase production, reduce consumption, and improve competitiveness

• (1) The Company will expand the application promotion of technologies in production lines to develop, perfect and promote technologies during practice and release the productivity of technologies into profit.

• (2) By enhancing production management, the Company aims to produce exceptional products with high and stable output and low consumption so as to increase product competitiveness.

• (3) The Company will start safety education to prevent accidents. Under the safety policy: safety first, prevention and integrated treatment, the Company will make sure that the production is safe and under control.

— 28 —

• (4) The Company will fulfill her social responsibilities by promoting energy saving, reducing emission and realizing low-carbon economy.

• (3) Strengthen marketing and sales, exploit the market for ultra clear and ultra thin glass, and constantly boost profitability

• (1) In the common float glass market, the Company will continue the strategy for producing differentiated products and avoid homogeneous competition.

• (2) In the ultra thin glass market, the Company will further solidify and expand the market shares, narrow the gap between the home products and imported products in order to provide a strong support for increasing profit.

• (3) In the ultra clear and ultra thin glass market, the Company must do well in publicity, marketing planning and promotion to open access to the market as quickly as possible. The Company will foster a good and healthy image in the ultra clear and ultra thin glass market to improve the production-sales ratio.

• (4) Through expanding supply channels and implementing open purchases, the Company will manufacture products with the best cost performance, which will provide strong support for production.

• (4) Speed up project progress and develop new profit growth points.

• (1) The Company will accelerate the relocation progress of primary projects for early completion.

• (2) The Company will commence operation of the LOW-E glass production line with the capacity of 600T/D, adjust product mix to increase the added values and develop new profit growth points.

• (3) The Company will actively push the project development in Xinjiang and expand the local market shares.

— 29 —

• (4) The Company will do well in the reform project of Longhao by practicing technological demonstration of developing the capacity of 400T/D into 500T/D and making preparations for cold repair reform.

• (5) The Company will make early preparations for the 500T/D solar ultra clear glass project as soon as possible and go into the approval process to speed up the implementation progress.

• (5) Reorganize assets and optimize capital structure to improve the Company’s image in capital market

• (6) Take the corporate culture of CNBMG as guideline, to be peopleoriented, rally public support and build a top-ranking team

• (1) Through the launch of the “Do a good job” activity and measures of promotion, education and guidance, the Company will guide the management staff into production and operation-related thinking and strengthen their global awareness and sense of responsibility so as to increase enterprise cohesion.

• (2) By virtue of planned training and going out for learning, the Company will enhance the cultivation of comprehensive abilities of managers and meet the demands for talents in development and technological progress.

• (3) The Company will strengthen team building, rectify the Party style, and maintain a clean and honest team to provide organizational guarantee for development.

— 30 —

• (4) Stress the building of corporate culture, adhere to CNBMG’s core philosophy of “Good use of resources to serve the industrial construction” , uphold the corporate spirit of “honest service and united team” and advocate the moral principles of “being lenient, being tolerant and creating a relaxed work environment” and the cultural values of “innovation, harmony, performance and responsibility”. These ideas and values and shall be applied in the daily management activities of the Company and be systemized so that the abstract concepts shall be materialized, specified and be executable, thus realizing merge, penetration and elevation with the culture of the Company.

• All risk factors which may pose adverse impact on the realisation of future development strategies and operational targets

During the production and operation, the Group proactively adopts various measures to avoid all kinds of risks. However, in actual circumstances, the operation is still exposed to various risks and uncertainties.

• (1) Risks arising from macro policies: As China’s 12th five-year plan has set the economic growth rate at 7%, a bit slower than that of 11th fiveyear plan, it may affect the total demands in the market. In addition, the adoption of the tight monetary policy by the Chinese government will result in the slowdown of economic development, and the tight policy regarding the economic development will in turn lead to the fluctuations of the downstream demands.

• (2) Market risks or business risks: With the change of the Chinese government’s macro-adjustment policy towards the real estate market, it may affect the overall demands in the glass industry if the decrease in the growth rate of investments in commercial housings goes beyond expectation. Meanwhile, with the release of substantial new production capacity in 2011 resulting from the operations of 34 newly-built and resumed production lines, relationship between supply and demand would vary with oversupply re-emerging again, which will pose a downside risk to prices.

— 31 —

(3) Financial Risks:

• (1) The irrational capital structure, low net assets value and a high gearing ratio of 93.45% would bring a substantial adverse impact to the financing exercise of the Company.

• (2) The company is exposed to certain risks related to its liabilities.

• (4) Exchange rate risks:

As the Group had small amount of foreign exchange transactions in the year, exchange rate fluctuations did not have material impact on the Group.

7 SIGNIFICANT EVENTS

7.1 Acquisition of assets

3 Applicable Not applicable

Unit: RMB

					Net profit
					contributed by
					the asset to the
					Company from
					the beginning
					of the year to the
					end of the year	Whether a
				Net profit	(applicable	connected	Whether
				contributed to	to business	transaction	all relevant	Whether all
				the listed company	combination	(if yes, please	entitlement of	related claims
Parties to				from the date	involving	elaborate	the assets	and debts
the transaction or		Date of	Price of the	of acquisition to	enterprises under	the pricing	had been	had been
ultimate controller	Assets acquired	acquisition	asset acquisition	the end of the year	common control)	principle)	transferred	transferred
Yanshi Administration of	20.94% equity interest	28 September 2010	1	–611,234.57	—	No	Yes	Yes
the State-owned Assets	in Longmen
	Glass Company

— 32 —

7.2 Disposal of assets

3 Applicable

Not applicable

Unit: RMB

						Net profit
						contributed by
						the asset to the
						Company from
						the beginning
						of the year to the
						end of the year	Whether a
				Net profit		(applicable	connected	Whether
				contributed to		to business	transaction	all relevant	Whether all
				the listed company		combination	(if yes, please	entitlement of	related claims
Parties to				from the date		involving	elaborate	the assets	and debts
the transaction or		Date of	Price of the	of acquisition to		enterprises under	the pricing	had been	had been
ultimate controller	Assets acquired	acquisition	asset acquisition	the end of the year		common control)	principle)	transferred	transferred
China Luoyang Float	49.09% equity interests	12 June 2010	1		—	—	Yes	Yes	Yes
Glass (Group)	in CLFG Processing						audit and
Company Limited	Glass Co., Ltd.						assessment
China Luoyang Float	Guangzhou International	30 November 2010	35,000,000		—	—	Yes	Yes	Yes
Glass (Group)	Trust & Investment
Company Limited	Corporation

7.3 Material guarantees

3 Applicable Not applicable

Unit: RMB

— (A) Total amount of guarantees provided by the Company — Balance of guarantees at the end of the reporting period

(B)	Guarantees provided by the Company to its controlling subsidiaries	Guarantees provided by the Company to its controlling subsidiaries
	Total amount of guarantees provided by the Company
	to its controlling subsidiaries	15,000,000.00
	Balance of guarantees provided by the Company to its
	controlling subsidiaries at the end of the reporting period	19,862,776.00

— 33 —

(C)	Total guarantees provided by the Company
	(including guarantees to controlling subsidiaries)
	Total amount of guarantees	19,862,776.00
	Total amount of guarantees as a percentage
	to the Company’s net assets (%)	17.19
	Including:
	Amount of guarantees provided to shareholders,
	the de facto controller and its related parties	—
	Debt guarantee directly or indirectly provided
	to parties with gearing ratio over 70%	19,862,776.00
	Total amount of guarantee over 50% of the net assets	—
	Total amount of above 3 guarantees	19,862,776.00

— 34 —

7.4 Material related party transactions

7.4.1 Related party transactions relating to daily operations

3 Applicable Not applicable

Unit: RMB

	Sale of products	Sale of products	Provision of services	Provision of services	Purchase of products	Purchase of products	Receiving	services
	to related parties		to related parties		from related parties		from related parties
		Percentage		Percentage		Percentage		Percentage
		to similar		to similar		to similar		to similar
		type of		type of		type of		type of
		transactions		transactions		transactions		transactions
	Amount of	in terms of	Amount of	in terms of	Amount of	in terms of	Amount of	in terms of
Related party	transactions	amount	transactions	amount	transactions	amount	transactions	amount
	(RMB)	(%)	(RMB)	(%)	(RMB)	(%)	(RMB)	(%)
Luoyang Longxin Glass Ltd.					116,182,118.09	15.28
CLFG Minerals Products Co., Ltd.					3,297,076.65	0.43
China Luoyang Float Glass
(Group) Company Limited							2,000,000.00	1.17
China Xinxing Construction
Material (Group) Company							2,820,000.00	1.65
Luobo (Beijing) International
Engineering Co., Ltd.							610,000.00	0.51
Luobo (Beijing) International
Engineering Co., Ltd.					770,000.00	0.65
CLFG Processing Glass Co., Ltd.	391,631.86	0.04
Luoyang Xinjingrun Engineering
Glass Co., Ltd.	7,298,079.80	0.75
Anhui Province Bengbu Huayi
Conductive Film Glass Co., Ltd.	73,105,979.40	7.49
Henan Province Zhonglian Glass Co., Ltd.	3,335,309.23	0.34
Luoyang Longxin Glass Co., Ltd.	143,323,199.53	74.62
CLFG Luoyang Processing Glass Co., Ltd.			3,600.00	0.00
Luoyang Longxin Glass Co., Ltd.			2,841,231.20	1.48
Henan Province Zhonglian Glass Co., Ltd.			380,000.00	0.20
Luoyang Luobo Glass Fibre Co., Ltd.			8,745,629.03	4.55
Luoyang Xinxing Property
Management Co., Ltd.			7,305,220.16	3.80
CLFG Xinxing Industry
Development Co., Ltd.			33,773.01	0.02
China Luoyang Float Glass Group
Jinghua Industry Corporation			193,498.67	0.10
CLFG Processing Glass Co., Ltd.			1,040.37	0.00
China Luoyang Float Glass
(Group) Company Limited			1,215,875.26	0.63
CLFG Processing Glass Co., Ltd.			470,000.00	0.04
Luoyang Luobo Logistics Co., Ltd.							1,000,000.00	0.11
China Triumph International
Engineering Group Company Limited							1,250,000.00	1.05

— 35 —

7.4.2 Creditor rights and debts with related parties

3 Applicable

Not applicable

	Connected			Funds provided by related party	Funds provided by related party
Related party	Relations	Funds provided to related party		to the listed	company
		Amounts		Amounts
		incurred	Balance	incurred	Balance
China Luoyang Float Glass	Controlling
(Group) Company Limited	shareholder			70,557,469.03	13,336,368.87
Total				70,557,469.03	13,336,368.87
Amounts incurred in the provision of
funds by the Company to controlling
shareholders and its subsidiaries during
the reporting period_(RMB)_			70,557,469.03
Balance of the funds by the Company
provided to controlling shareholders
and its subsidiaries_(RMB)_			13,336,368.87

Reason for the creditor’s rights and debts with related party

According to the Notice concerning the Matters in relation to the Adjustment to Operation Budget for State-owned Assets in 2010 of China National Building Material Group Corporation (Guo Zi Shou Yi (2011) no.87) issued by State-owned Assets Supervision and Administration Commission of the State Council, and with reference to the “Luobo Fa [2010] No.223 Document — Settlement Plan for Employees of China Luoyang Float Glass (Group) Company Limited (中國洛陽浮法玻璃集團有限責 任公司職工安置方案)”, as at 31 December 2010, of the compensation subsidies receivable for the settlement of employees of RMB 70,557,469.03, the Company received the subsidies of RMB 57,221,100.16.

Settlement of the creditor’s rights and debts with related party

Amounts received as at 27 January 2011 was RMB 12,702,485.39

— 36 —

Undertakings in

relation to the

The balance of RMB633,883.48 will be paid by 31 March 2011.

creditor’s rights and debts with related party

Effect of the creditor’s Nil

rights and debts

with related party

on operating results

and financial

position of

the Company

7.5 Designated financial management

Applicable 3 Not applicable

7.6 Performance of undertakings

3 Applicable Not applicable

When CBM Glass indirectly acquired 31.8% shares in the Company by transfer of the State-owned equity interests at nil consideration, CBM Glass undertook that: CBM Glass and its controlled enterprises will not directly or indirectly involve in any businesses or activities in competition with the principal operations of the Company, by any means (including but not limited to the independent business, joint venture or having shares or interest in another company or enterprise). In the event that the business opportunities obtained will compete with the principal operations of the Company, it will notify the Company of those matters as soon as possible and pass such business opportunities to the Company to ensure that there is no prejudice to the interests of the shareholders of the Company as a whole.

As at the end of the reporting period, CBM Glass honored its undertaking.

7.7 Material litigation and arbitration

3 Not applicable

Applicable

— 37 —

7.8 Explanations on other significant events and influence therefrom and solution thereon

7.8.1 Securities investment

Applicable 3 Not applicable

7.8.2 Particulars of the Company’s shareholding in other listed companies

Applicable 3 Not applicable

7.8.3 The Company’s shareholding in non-listed financial enterprises

3 Applicable Not applicable

	Initial		Book value	Earnings
	investment	Shareholding	at the end	for the	Source
Name of investee	cost	percentage	of the period	period	of shares
	(RMB)	(%)	(RMB)	(RMB)
Yanshi Rural Credit	410,000	0.67	410,000	—	Original
and Cooperatives					Investment
Sanmenxia Urban	7,000,000	4.99	7,000,000	—	Original
Credit and					Investment
Cooperatives Co., Ltd

7.8.4 Trading of securities of other listed companies

Applicable 3 Not applicable

• 7.9 The Company has disclosed the Self-Assessment Report on the Internal Control and the Social Responsibility Performance Report, for details of which please refer to the full text of the A Share annual report.

7.10 Repurchase, sale and redemption of shares

During the period, the Company and its subsidiaries did not repurchase, sell or redeem any securities of the Company.

— 38 —

7.11 Overdue deposits

There were no overdue deposits during the reporting period.

7.12 Pre-emptive Rights

Neither the Articles of Association of the Company nor the relevant laws of the PRC has listed terms on pre-emptive rights.

7.13 Public Float

Based on public information and the information available for the Company as at the date of this announcement, to the best knowledge of Directors, the Company has maintained a public float in compliance with the Listing Rules and such public float has been approved by the Stock Exchange of Hong Kong Limited.

7.14 Compliance with the Code on Corporate Governance Practices

The Company has been in compliance with all the provisions of the Code on Corporate Governance Practices in Appendix 14 of the Listing Rules of Hong Kong Stock Exchange.

8 REPORT OF THE SUPERVISORY COMMITTEE

8.1 Opinions of the Supervisory Committee on the Company’s compliance of relevant laws and regulations

During the reporting period, the Supervisory Committee, following the laws and regulations, supervised the convening procedures of general meetings and board meetings, resolutions, the Board’s implementation of the general meeting’s resolutions, senior management’s performance of their duties and the Company’s internal control. The Supervisory Committee is of the opinion that the Board of Directors has standardized operation in accordance with the PRC Company Law, Articles of Associations of the Company and relevant laws and regulations. Directors and senior management executed their duties within their terms of reference. No violation of any laws, regulations and the Articles of Association of the Company or action detrimental to the Company’s interests were found.

— 39 —

8.2 Independent opinions of the Supervisory Committee on the Company’s financial status

The Supervisory Committee concurs with auditors’ reports issued by Daxin Certified Public Accountants Co., Ltd. and PKF Certified Public Accountants prepared under the PRC Accounting Standards and Regulations and IFRSs respectively. The Supervisory Committee is of opinion that the auditors’ reports are objective and fair, and the Company’s financial statements give a true, objective, complete and accurate view of the financial position and operating results of the Company.

8.3 Opinions of the Supervisory Committee on actual utilisation of the latest raised proceeds

Not applicable for the Company as to utilisation of raised proceeds during the reporting period

8.4 Opinions of the Supervisory Committee on the Company’s assets acquisition and disposal

During the reporting period, the transaction consideration for assets acquisition and disposal of the Company were reasonable. No inside trading, indication of damage of shareholders’ rights and interests or runoff of the Company’s assets has been found.

8.5 Opinions of the Supervisory Committee on connected transactions

The Supervisory Committee is of the opinion that relevant connected transactions were conducted at arm’s length on normal commercial terms and do not adversely affect the interests of the Company.

8.6 Opinions of the Supervisory Committee on Self-Assessment Report on the Internal Control

The Supervisory Committee has reviewed the Self-Assessment Report on the Internal Control and has no objects to the Self-Assessment Report on the Internal Control prepared by the Board of Directors.

— 40 —

9. FINANCIAL REPORT

9.1 Auditor’s opinions

The auditors have audited the Company’s annual report and issued the auditors’ report with standard unqualified opinions.

• 9.2 The annual results for the year ended 31 December 2010 have been reviewed by the audit committee of the Company.

• 9.3 For details of the consolidated and the Company’s balance sheets and income statements, presented for comparison, and cash flow statements and Changes in owners’ equity for the year prepared under PRC GAAP, please refer to the A share 2010 annual report dated 28 March 2011 which was published on the website of the Shanghai Stock Exchange.

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9.4 Audited financial statement prepared under IFRSs.

Consolidated Statement of Comprehensive Income

For the year ended 31st December, 2010 (Expressed in Renminbi)

Note Turnover 4 Cost of sales Gross profit Other operating income 5 Other operating expenses Selling expenses Administrative expenses Profit/(loss) from operations Net finance costs 6(a) Net investment income 6(b) Share of net profit of an associate 6(c) Profit/(loss) before income tax 6 Income tax expense 7 Profit/(loss) for the year Total comprehensive income/(loss) for the year	2010 RMB’000 1,167,044 (936,412) 230,632 80,210 (672) (40,685) (180,564) 88,921 (14,705) — — 74,216 (18,356) 55,860 55,860	2009 RMB’000 972,412 (848,656) 123,756 5,693 (2,907) (35,789) (221,861) (131,108) (60,062) 19,183 1,552 (170,435) (1,781) (172,216) (172,216)

— 42 —

2010 2009

RMB’000

RMB’000

Note

Attributable to Equity shareholders of the Company Non-controlling interests Profit/(loss) for the year Basic earnings/(loss) per share (in RMB : Yuan) 9 Consolidated Statement of Financial Position As at 31st December, 2010 (Expressed in Renminbi) Notes NON-CURRENT ASSETS Property, plant and equipment Construction in progress Intangible assets Exploration and evaluation assets Lease prepayments Interests in associates Other investments Investment deposit Deposits with a non-bank financial institution	61,947 (6,087) 55,860 0.12 2010 RMB’000 671,646 61,370 10,586 1,128 55,293 — 7,410 — — 807,433	(166,225) (5,991) (172,216) (0.33) 2009 RMB’000 792,490 17,723 10,878 — 32,881 1,128 7,410 1,030 35,000 898,540

— 43 —

2010 2009 Notes RMB’000 RMB’000

CURRENT ASSETS Inventories Trade and bills receivables 10 Other receivables Income tax recoverable Pledged deposits with banks Cash and bank balances Assets classified as held for sale CURRENT LIABILITIES Trade and bills payables 11 Other payables Amount due to an associate Bank and other loans NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES	202,066 94,827 83,745 5,127 113,000 20,208 518,973 90,703 609,676 448,324 186,103 1,493 24,319 660,239 (50,563) 756,870	154,834 100,558 76,863 2,710 192,800 33,189 560,954 — 560,954 470,518 237,809 — 735,971 1,444,298 (883,344) 15,196

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Note NON-CURRENT LIABILITIES Bank and other loans Deferred income NET ASSETS CAPITAL AND RESERVES Share capital Reserves 12 TOTAL EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY NON-CONTROLLING INTERESTS TOTAL EQUITY	2010 RMB’000 690,080 3,230 693,310 63,560 500,018 (436,619) 63,399 161 63,560	2009 RMB’000 4,824 3,692 8,516 6,680 500,018 (497,207) 2,811 3,869 6,680

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Consolidated Statement of Changes in Equity

For the year ended 31st December, 2010 (Expressed in Renminbi)

Attributable to equity shareholders of the Company

At 1.1.2009 Disposal of a subsidiary Acquisition of additional interests in subsidiaries Capital contribution in a subsidiary by a non-controlling shareholder Total comprehensive loss for the year At 31.12.2009 and 1.1.2010 Acquisition of additional interests in a subsidiary Capital contribution in a newly incorporated subsidiary by non-controlling shareholders Total comprehensive income/(loss) for the year At 31.12.2010	Share capital RMB’000 500,018 — — — — 500,018 — — — 500,018	Share premium RMB’000 540,028 — — — — 540,028 — — — 540,028	Reserves RMB’000 (45,873) — (28,823) — — (74,696) (1,359) — — (76,055)	Accumulated losses RMB’000 (796,314) — — — (166,225) (962,539) — — 61,947 (900,592)	Total RMB’000 197,859 — (28,823) — (166,225) 2,811 (1,359) — 61,947 63,399	Non- controlling interests RMB’000 28,852 (2,608) (17,364) 980 (5,991) 3,869 1,359 1,020 (6,087) 161	Total equity RMB’000 226,711 (2,608) (46,187) 980 (172,216)
							6,680 — 1,020 55,860
							63,560

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Consolidated Statement of Cash Flows

For the year ended 31st December, 2010 (Expressed in Renminbi)

CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from/(used in) operations Income tax paid NET CASH GENERATED FROM/ (USED IN) OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Interest received Purchase of property, plant and equipment Increase in exploration and evaluation assets Increase in construction in progress Acquisition of lease prepayments Dividend received from an associate Decrease in amount due from an associate Increase/(decrease) in amount due to an associate Decrease/(increase) in investment deposit Proceeds from disposal of property, plant and equipment Proceeds from disposal of construction in progress	2010 RMB’000 40,032 (20,773) 19,259 1,488 (801) (510) (9,927) (23,553) — 1,128 1,493 1,030 5,361 529	2009 RMB’000 (74,152) (10) (74,162) 3,967 (2,641) — (13,402) (2,579) 1,552 — (1,435) (1,030) 471 —

— 47 —

2010 2009 RMB’000 RMB’000

Proceeds from disposal of lease prepayments Proceeds from disposal of an associate Proceeds from disposal of deposits with a non-bank financial institution Refund of an investment deposit Acquisition of additional interests in subsidiaries Net cash outflow arising on disposal of interests in a subsidiary NET CASH GENERATED FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Interest paid New bank and other loans Repayment of bank and other loans Capital contribution received from non-controlling shareholders	— — 35,000 — (5,970) — 5,268 (12,132) 540,500 (566,896) 1,020	120,000 4,957 — 35,000 (13,212) (28) 131,620 (57,255) 768,500 (800,792) 980

— 48 —

2010 2009 RMB’000 RMB’000

NET CASH USED IN FINANCING ACTIVITIES NET DECREASE IN CASH AND CASH EQUIVALENTS EFFECT OF FOREIGN EXCHANGE RATE CHANGE CASH AND CASH EQUIVALENTS AT 1ST JANUARY CASH AND CASH EQUIVALENTS AT 31ST DECEMBER ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances	(37,508) (12,981) — 33,189 20,208 20,208	(88,561) (31,109) (280) 64,578 33,189 33,189

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31st December, 2010 (Expressed in Renminbi)

1. BACKGROUND OF THE COMPANY

Luoyang Glass Company Limited (the “Company”) is a company incorporated in the People’s Republic of China (the “PRC”) as a joint stock limited company that, together with its subsidiaries (collectively referred to as the “Group”), engaged in the production and sales of float sheet glass.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”) which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards (“IAS”) and Interpretations (“IFRIC”) promulgated by the International Accounting Standards Board (“IASB”). These consolidated financial statements also comply with the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

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(b) Basis of preparation of the consolidated financial statements

The consolidated financial statements comprise the Group and the Group’s interests in associates.

The consolidated financial statements are presented in Renminbi, rounded to the nearest thousand. The measurement basis used in the preparation of the consolidated financial statements is historical cost.

The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

(c) Basis of consolidation

(i) Subsidiaries and non-controlling interests

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

— 51 —

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intragroup transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

Non-controlling interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Company, whether directly or indirectly through subsidiaries, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated statement of comprehensive income as an allocation of the total profit or loss for the year between non-controlling interests and the equity shareholders of the Company.

Change in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate.

— 52 —

(ii) Associates

An associate is an entity in which the Group or Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

An investment in an associate is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the associate’s net assets, unless it is classified as held for sale. The consolidated statement of comprehensive income includes the Group’s share of the post-acquisition, post-tax results of the associates for the year, including any impairment loss on goodwill relating to the investment in associates recognised for the year.

When the Group’s share of losses exceeds its interest in the associate, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. For this purpose, the Group’s interest in the associate is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate.

Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associate, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the date when significant influence is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset.

— 53 —

3. SEGMENT REPORTING

The Group has adopted IFRS 8 “Operating Segments”. For management purposes, the Group is organised into two operating divisions. These divisions are the basis on which the Group reports its segment information.

Principal activities are as follows :

Float sheet glass business — production and sales of float sheet glass; and sales of raw materials for production of float sheet glass Silicon powder business — manufacturing, selling and distribution of silicon powder

For the purposes of assessing segment performance and allocating resources, the Group’s senior executive management monitors the results, assets and liabilities attributable to each reportable segment on the following bases:

Segment assets include all tangible, intangible assets and current assets with the exception of interests in associates and other corporate assets. Segment liabilities include trade and bills payables, and other payables attributable to the individual segments and bank and other borrowings managed directly by the segments.

Revenue and expenses are allocated to the reportable segments with reference to sales generated by those segments and the expenses incurred by those segments or which otherwise arise from the depreciation or amortisation of assets attributable to those segments.

The measure used for reporting segment result is “adjusted EBIT” i.e. adjusted earnings before interest and taxes. To arrive at adjusted EBIT, the Group’s earnings are further adjusted for items not specially attributed to individual segments, such as net finance costs, net investment income, share of net profit of an associate, directors’ and auditors’ remuneration and other head office or corporate administration costs.

In addition to receiving segment information concerning adjusted EBIT, management is provided with segment information concerning revenue, interest income and expense from cash balances and borrowings managed directly by the segments, depreciation, amortisation, impairment losses and additions to non-current segment assets used by the segments in their operations.

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(a) Segments results, assets and liabilities

The following tables present the information of the Group’s reporting segments :

For the year ended 31st December, 2010

REPORTABLE SEGMENT REVENUE REPORTABLE SEGMENT RESULT Unallocated expenses Net finance costs Profit before income tax Income tax expense Profit for the year	Float sheet glass RMB’000 1,138,483 92,109	Silicon powder RMB’000 28,561 (488)	Elimination RMB’000 — —	Total RMB’000 1,167,044 91,621 (2,700) (14,705) 74,216 (18,356) 55,860

— 55 —

Float sheet Silicon glass powder Elimination RMB’000 RMB’000 RMB’000 Assets and liabilities ASSETS Reportable segment assets 1,398,415 41,732 (30,448) Other investments 7,410 Total assets LIABILITIES Reportable segment liabilities (1,344,670) (36,118) 30,448 Amount due to an associate (1,493) Unallocated liabilities Total liabilities Float sheet Silicon glass powder Elimination RMB’000 RMB’000 RMB’000 OTHER INFORMATION Capital expenditure 119,881 70 — Interest income (3,068) (7) 1,287 Interest expense 10,945 1,287 (1,287) Depreciation 69,665 1,784 — Impairment loss on trade receivables 666 — — Impairment loss on other receivables 358 — — Impairment loss on property, plant and equipment 4,471 — — Write-down of inventories 3,837 — — Reversal of write-down of inventories (8,501) — — Amortisation of intangible assets 1,472 20 — Amortisation of lease prepayments 1,005 136 —

Total RMB’000 1,409,699 7,410 1,417,109 (1,350,340) (1,493) (1,716) (1,353,549) Total RMB’000 119,951 (1,788) 10,945 71,449 666 358 4,471 3,837 (8,501) 1,492 1,141

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For the year ended 31st December, 2009

REPORTABLE SEGMENT REVENUE REPORTABLE SEGMENT RESULT Unallocated income Unallocated expenses Net finance costs Net investment income Share of net profit of an associate Loss before income tax Income tax expense Loss for the year	Float sheet glass RMB’000 953,372 (129,227)	Silicon powder RMB’000 19,040 (570)	Elimination RMB’000 — —	Total RMB’000 972,412 (129,797) 2,203 (3,514) (60,062) 19,183 1,552 (170,435) (1,781) (172,216)

— 57 —

Float sheet Silicon glass powder Elimination RMB’000 RMB’000 RMB’000 ASSETS Reportable segment assets 1,438,979 41,395 (30,448) Interests in associates 1,128 — — Other investments Investment deposit Total assets LIABILITIES Reportable segment liabilities (1,440,079) (35,666) 30,448 Unallocated liabilities Total liabilities Float sheet Silicon glass powder Elimination RMB’000 RMB’000 RMB’000 OTHER INFORMATION Capital expenditure 18,610 12 — Interest income (5,245) (9) 1,287 Interest expense 58,552 1,287 (1,287) Depreciation 80,483 2,643 — Impairment loss on trade receivables 2,033 — — Impairment loss on other receivables 202 33 — Impairment loss on property, plant and equipment 3,431 104 — Impairment loss on construction in progress 2,795 — — Write-down of inventories 12,597 — — Reversal of write-down of inventories (29,591) — — Amortisation of intangible assets 1,472 20 — Amortisation of lease prepayments 745 156 —

Total RMB’000 1,449,926 1,128 7,410 1,030 1,459,494 (1,445,297) (7,517) (1,452,814) Total RMB’000 18,622 (3,967) 58,552 83,126 2,033 235 3,535 2,795 12,597 (29,591) 1,492 901

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(b) Geographic information

The following table sets out information about the geographical location of (i) the Group’s revenue from external customers and (ii) the Group’s property, plant and equipment, construction in progress, intangible assets, exploration and evaluation assets, lease prepayments and interests in associates (“specified non-current assets”). The geographical location of customers is based on the location at which the goods delivered. The geographical location of the specified non-current assets is based on the physical location of the assets, in the case of property, plant and equipment, construction in progress and lease prepayments, the location of the operation to which they are allocated, in the case of intangible assets and exploration and evaluation assets, and the location of operations, in the case of interests in associates.

China Asia Others	Revenues from external customers 2010 2009 RMB’000 RMB’000 1,152,497 961,550 14,380 10,774 167 88 14,547 10,862 1,167,044 972,412	Specified Non-current assets 2010 2009 RMB’000 RMB’000 805,080 855,100 — — — — — — 805,080 855,100	Specified Non-current assets 2010 2009 RMB’000 RMB’000 805,080 855,100 — — — — — — 805,080 855,100
			— —
			—
			855,100

The Group’s customer base is diversified and no customer with whom transactions have exceeded 10% of the Group’s revenue.

— 59 —

4. TURNOVER

Turnover represents revenue from the invoiced value of goods sold to customers, after deduction of an trade discounts and net of value-added tax and surcharges.

5. OTHER OPERATING INCOME

Waiver of debts Government grants_(note 5(a))_ Gain on disposal of property, plant and equipment Write off of other payables Others	2010 RMB’000 1,853 75,383 1,443 — 1,531 80,210	2009 RMB’000 1,645 462 — 2,224 1,362
		5,693

Note:

• (a) Included in government grants of RMB75,383,000 (2009 : RMB462,000) mainly represents :

• according to notices from the Yanshi Municipal Finance Bureau and Henan Province Finance Bureau, a government grant of RMB6,000,000 was awarded in 2005 to CLFG Longmen Glass Co., Ltd. (“Longmen”), a subsidiary of the Company, for the construction of a production plant. Such grant is recognised in the consolidated statement of comprehensive income over the useful life of the respective assets, of which RMB462,000 has been recognised during the year (2009 : RMB462,000);

— according to Guo Zi Shou Yi (2011) No. 87 issued by State-owned Assets Supervision and Administration Commission, a government grant of RMB180 million from the Stated-owned Capital Operation Budget Fund was granted to CLFG for the provision of compensation to the redundant employees as a result of relocation of the production lines. CLFG allocated a portion of government grant of RMB70,558,000 to the Group to pay for the termination benefits and the amount was recognised during the year (note 5(d)(i));

• according to notices from the Luoyang Human Resources and Social Insurance Bureau and Luoyang Municipal Finance Bureau, a government grant of RMB3,186,000 was granted to the Company for financial support; and

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— Mianchi County Government granted a special reward of RMB1,000,000 to Luogfei for the resumption of production during the year.

6. PROFIT/(LOSS) BEFORE INCOME TAX

Profit/(loss) before income tax is arrived at after (charging)/crediting :

(a) Net finance costs : Interest on bank loans and other borrowings repayable within 5 years Interest income Net foreign exchange gain/(loss) Bank charges (b) Net investment income : Gain on disposal of an other investment Gain on disposal of an associate Loss on disposal of interest in a subsidiary (c) Share of net profit of an associate	2010 RMB’000 (10,945) 1,788 382 (5,930) (14,705) 2010 RMB’000 — — — — 2010 RMB’000 —	2009 RMB’000 (58,552) 3,967 (110) (5,367) (60,062) 2009 RMB’000 1,000 18,899 (716) 19,183 2009 RMB’000 1,552

— 61 —

2010 2009

RMB’000 RMB’000

(d) Staff costs (including directors’ remuneration) :

Termination benefits_(note 6(d)(i))_ Wages and salaries Contributions to defined contribution plan	(68,486) (54,899) (16,192) (139,577)	— (68,950) (19,951) (88,901)

Note :

• (i) Pursuant to the requirements of the construction planning of Luoyang City, certain production lines of the Group have ceased production and will be relocated, which will result in redundant employees. According to the unified arrangement of CLFG and with reference to “Luobo Fa (2010) No. 223 Document - Settlement Plan for Employees of China Luoyang Float Glass (Group) Company Limited”, the employees initiate applications and subject to prior consent of the Group, negotiate with the Group for termination of their respective employment contracts and provision of economic compensation to them, in accordance with the relevant laws and regulations and on the basis of openness and fairness and arm’s length negotiation. The settlement plan will be closed on 31st March, 2011.

— 62 —

2010 2009

RMB’000 RMB’000

(e) Other items :

Cost of inventories sold	(936,412)	(848,656)
Depreciation	(71,449)	(83,126)
Net impairment loss of
— trade receivables	(666)	(2,033)
— other receivables	(358)	(235)
— property, plant and equipment	(4,471)	(3,535)
— construction in progress	—	(2,795)
Write-down of inventories	(3,837)	(12,597)
Reversal of write-down of inventories	8,501	29,591
Gain/(loss) on disposal of property,
plant and equipment	1,443	(42,468)
Loss on disposal of construction in progress	(197)	—
Research and development cost	(8,231)	—
Auditors’ remuneration	(2,700)	(2,100)
Amortisation of intangible assets	(1,492)	(1,492)
Amortisation of lease prepayments	(1,141)	(901)

7. INCOME TAX EXPENSE

(a) Income tax expense in the consolidated statement of comprehensive income represents :

Provision for the year Under-provision in previous year Income tax expense	2010 RMB’000 18,056 300 18,356	2009 RMB’000 1,781 —
		1,781

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On 16th March, 2007, the People’s Republic of China promulgated the Law of People’s Republic of China on Enterprise Income Tax (the “New Law”) by Order No. 63 of the President of the PRC. On 6th December, 2007, the State Council issued Implementation Regulation of the New Law. The New Law and Implementation Regulation changed the tax rate to 25% from 1st January, 2008 onwards.

The provision for PRC income tax is calculated at 25% (2009 : 25%) of the estimated assessable profits in accordance with the relevant income tax rules and regulations of the PRC.

On 8th November, 2010, CLFG Longhai Electronic Glass Co., Ltd. (“Longhai”) was recognised as a high-tech enterprise in Henan Province and thus enjoying preferential tax reduction from 25% to 15% for the three years ended 31st December, 2012.

The Group did not carry on business overseas and therefore no provision has been made for overseas profits tax.

Reconciliation between income tax expense and accounting profit/(loss) at applicable tax rate:

Profit/(loss) before income tax Notional PRC income tax using the Company’s tax rate of 25% (2009 : 25%) Tax effect of tax exempt revenue Tax effect of non-deductible expenses Tax effect of tax loss utilised Tax losses not recognised for deferred tax Under-provision in previous year Effect of preferential tax rate Income tax expense	2010 RMB’000 74,216 18,554 (117) 862 (2,652) 9,953 300 (8,544) 18,356	2009 RMB’000 (170,435) (42,609) (753) 26,731 (3,057) 21,469 — — 1,781

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(b) Major components of unrecognised deferred tax assets are as follows :

Provisions Lease prepayments Tax loss Total	2010 RMB’000 68,326 6,416 127,506 202,248	2009 RMB’000 68,485 5,953 123,354
		197,792

The deferred tax assets have not been recognised as it is not certain whether the potential taxation benefit will be realised in the foreseeable future. The tax losses represent the maximum benefit from unutilised tax losses, which can be carried forward up to 5 years from the year in which the loss was originated to offset against future taxable profits. Also, no deferred tax liability has been recognised at the end of the reporting period.

8. DIVIDENDS

The board of directors of the Company does not recommend the payment of a dividend in respect of the year ended 31st December, 2010 (2009 : Nil).

9. BASIC EARNINGS/(LOSS) PER SHARE

The calculation of basic earnings/(loss) per share is based on the profit attributable to equity shareholders of the Company of RMB61,947,000 (2009 : loss of RMB166,225,000) and 500,018,000 (2009 : 500,018,000) shares in issue during the year.

No diluted earnings/(loss) per share is calculated as there are no dilutive potential shares for the two years ended 31st December, 2010.

— 65 —

10. TRADE AND BILLS RECEIVABLES

At 31st December, 2010, the Group’s trade and bills receivables of RMB38,843,000 (2009 : RMB82,580,000) were past due but not impaired. These receivables relate to a number of independent customers that have a good track record with the Group. Based on past experience, the directors believe that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

At 31st December, 2010, the Group’s trade and bills receivables of RMB46,088,000 (2009 : RMB45,422,000) respectively were individually determined to be fully impaired. The individually impaired receivables related to customers that were in financial difficulties and the directors assessed that such debts were not expected to be recovered. The Group does not hold any collateral over these balances. The ageing analysis of these trade and bills receivables is as follows :

Between 1 and 2 years Between 2 and 3 years More than 3 years	2010 RMB’000 370 2,491 43,227 46,088	2009 RMB’000 2,228 32 43,162
		45,422

The movements in the allowances for impairment of doubtful debts during the year are as follows :

At 1st January Impairment loss recognised Deconsolidation due to disposal of a subsidiary At 31st December	2010 RMB’000 45,422 666 — 46,088	2009 RMB’000 45,265 2,033 (1,876) 45,422

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Included in trade and bills receivables is the following amount denominated in a currency other than the functional currency of the entity to which it relates :

2010 ‘000 United States Dollars 807 TRADE AND BILLS PAYABLES 2010 RMB’000 Trade payables — third parties 299,955 — subsidiaries of the controlling shareholder company 369 300,324 Bills payable 148,000 448,324 The ageing analysis of trade and bills payables is as follows : 2010 RMB’000 Due within 1 month or on demand 448,324	2009 ‘000 907
	2009 RMB’000 296,248 270
	296,518 174,000
	470,518
	2009 RMB’000 470,518

11. TRADE AND BILLS PAYABLES

— 67 —

12. RESERVES

Excess

At 1st January, 2009 Acquisition of additional interests in subsidiaries Total comprehensive loss for the year At 31st December, 2009 and at 1st January, 2010 Acquisition of additional interests in a subsidiary Total comprehensive income for the year At 31st December, 2010	Share premium RMB’000 540,028 — — 540,028 — — 540,028	Statutory surplus reserve RMB’000 Note (a) 61,076 — — 61,076 — — 61,076	over share capital RMB’000 Note (b) (106,949) — — (106,949) — — (106,949)	Other reserve RMB’000 Note (c) — (28,823) — (28,823) (1,359) — (30,182)	Accumulated losses RMB’000 (796,314) — (166,225) (962,539) — 61,947 (900,592)	Total RMB’000 (302,159) (28,823) (166,225)
						(497,207) (1,359) 61,947
						(436,619)

Notes:

• (a) According to the Company’s and its subsidiaries’ Articles of Association, the Company and its subsidiaries are required to transfer 10% of their respective profit after taxation, as determined in accordance with the PRC Accounting Rules and Regulations, to statutory surplus reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before the distribution of a dividend to shareholders. Statutory surplus reserve can be used to make good previous years’ losses, if any, and for capitalisation issue provided that the balance after such issue is not less than 25% of the registered capital.

• (b) Effective 1st January, 2002, land use rights which are included in lease prepayments are carried at historical cost. Accordingly, the surplus on the revaluation of land use rights was reversed to shareholders’ funds.

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• (c) Other reserve represents the difference between the fair value of consideration paid and payable and the carrying amount of net assets attributable to the additional interests in the subsidiaries being acquired from non-controlling interests during the year. The directors consider that it is more clear to present such difference under a separate reserve in the equity of the Company.

• (d) According to the Company’s Articles of Association, the reserve available for distribution is the lower of the amount determined under PRC Accounting Rules and Regulations and the amount determined under IFRSs. As at 31st December, 2010, there was no reserve available for distribution (2009 : Nil).

13. POST BALANCE SHEET EVENTS

• (a) On 31st January, 2011, the Company entered into a sales agreement with the Luoyang Land Centre relating to the disposal of the land use rights and the buildings and ancillary structures located at No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang, Henan Province, the PRC, at a total consideration of RMB177,900,000 (the “Disposal”).

• (b) On 11th March, 2011, the Company passed a resolution at the meeting of the Board of Directors of disposing the Company’s No. 2 float glass production line which had been stopped production since February, 2006, due to expiry of kiln age. In light of the environmental protection requirements of Luoyang and the Disposal as mentioned in note 13(a), the production line cannot be resumed on the original site. The Company has authorised the management to dispose the assets.

By order of the Board Luoyang Glass Company Limited Song Jianming Chairman

Luoyang, the PRC 28 March 2011

As at the date of this announcement, the Board comprises four executive Directors: Mr. Song Jianming, Mr. Ni Zhisen, Ms. Song Fei and Mr. Cheng Zonghui; three nonexecutive Directors: Mr. Zhao Yuanxiang, Mr. Zhang Chengong and Mr. Guo Yimin; and four independent non-executive Directors: Mr. Zhang Zhanying, Mr. Guo Aimin, Mr. Huang Ping and Mr. Dong Jiachun.

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