RoboSense Technology Co., Ltd — Capital/Financing Update 2001

Oct 10, 2001

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

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

ANNOUNCEMENT

CONNECTED TRANSACTIONS

Establishment of the Yangshao Company

And

Increase of Registered Capital in

China Luoyang Float Glass Group Financial Company Limited

On 23rd September 2000, the Company entered into the Contract with CLFG, Henan Mianchi and the People's Government of Mianchi of Sanmenxia City (三門峽市澠池縣人民政府) pursuant to which all four parties agreed to set up the Yangshao Company to construct production lines of float glass in Henan, the PRC. The registered capital of the Yangshao Company is RMB74,080,000, of which RMB40,000,000 (constituting approximately 54% thereof) was contributed by the Company, RMB26,680,000 (constituting approximately 36% thereof) was contributed by Henan Mianchi, and RMB7,400,000 (constituting approximately 10% thereof) was contributed by CLFG, whilst the People's Government of Mianchi of Sanmenxia City did not make any capital contribution. The purpose of the People's Government of Mianchi of Sanmenxia City entering into the contract is to express its support to the Yangshao Company so that the Yangshao Company can commence operation as soon as possible. Apart from the terms stipulated in the Contract, the People's Government of Mianchi of Sanmenxia City has made no other commitments to the Yangshao Company.

To comply with the order issued by the People's Bank of China requesting finance companies in the PRC to have a minimum registered capital of RMB300,000,000, the board of directors of CLFC passed a resolution on 24th March 2001 to increase its registered capital from RMB100,000,000 to RMB300,000,000. On 21st May 2001, the Company made further capital contribution in CLFC by way of cash in the sum of RMB71,000,000. Such capital increase was financed by bank borrowings. CLFG and Gongyi, a new shareholder of CLFC, have also made capital contributions to CLFC by way of cash in the respective sums of RMB120,000,000 and RMB 9,000,000. Henan Longhao, one of CLFC's existing shareholders, has indicated that owing to its financial needs, it has decided not to increase its capital investment in CLFC. Upon completion of the capital increase, CLFC is held as to approximately 37% by the Company, approximately 56.67% by CLFG, approximately 3.33% by Henan Longhao and approximately 3% by Gongyi.

CLFG is the controlling shareholder (as defined in the Listing Rules) of the Company and is interested in approximately 57.14% of the issued share capital of the Company. The transactions described above therefore constituted connected transactions for the Company under the Listing Rules. As the respective investment amounts contemplated under the Contract and the capital increase in CLFC exceeded 3% of the Company's audited consolidated net tangible assets as at 31st December 2000, public announcement of the same should have been made, circulars containing particulars of the transactions and recommendation from an independent financial advisor should have been sent to the shareholders of the Company and approval of the Contract and the capital increase in CLFC by the Independent Shareholders at the shareholders' meeting was required under Rule 14.26 of the Listing Rules.

It should be noted that failure by the Company to make appropriate announcements and despatch circulars regarding the Contract and the capital increase in CLFC at the time when these transactions were entered into and to seek approval of the Independent Shareholders of the same constituted breaches of the Listing Rules. The Directors admitted that the above constituted breaches of the Listing Rules by the Company. The Stock Exchange indicated that it has reserved its right to take appropriate action against the Company and/or its Directors for its or their failure to comply with the Listing Rules.

The investments contemplated under the Contract and the capital increase in CLFC were not continuing in nature. In addition, according to section 3, Chapter 7 of the listing rules issued by the Shanghai Stock Exchange on 8th June 2001, the investments contemplated under the Contract and the capital increase in CLFC constituted connected transactions of the Company. However, given that these transactions have long been completed and that disclosure of the same has been made in the Company's interim report as at 30th June 2001, the Company does not propose to convene a shareholders' meeting to deal with these transactions. Instead, the Company will form an Independent Board Committee to advise the Independent Shareholders on the Contract and the capital increase in CLFC. An independent financial adviser will be appointed to advise the Independent Board Committee of the Company on these transactions.

The Company will send a circular containing, among other things, details of the terms and conditions of the Contract and the capital increase in CLFC, the recommendation from the Independent Board Committee and the advice of the independent financial adviser to the Independent Board Committee, to the H Shares' Shareholders as soon as practicable. For the concern of A Shares' Shareholders, please refer to the announcement containing the advice prepared by the Company's independent financial adviser published on the newspapers, namely, China Securities and Shanghai Securities Daily.

(1) ESTABLISHMENT OF THE YANGSHAO COMPANY

1. The Contract

1. Date 23rd September 2000

2. Parties the Company, CLFG, Henan Mianchi and the People's Government of Mianchi of Sanmenxia City

(The People's Government of Mianchi of Sanmenxia City is an independent third party not connected with the Company and its associates (as defined in the Listing Rules))

1. Scope of business Principally engaged in the production and sale of float glass, processed glass and related raw materials and fuel together with mineral products

2. Registered capital RMB74,080,000 (approximately HK$69,821,000)

3. Shareholding Structure and the mode of capital contribution

(i) The Company (a) RMB40,000,000 (approximately HK$37,700,000), representing approximately 54% of the registered capital thereof

(b) the capital contribution of RMB40,000,000 was made by way of cash which was wholly financed by internal resources

(ii) CLFG (a) RMB7,400,000 (approximately HK$6,975,000), representing approximately 10% of the registered capital thereof

(b) the capital contribution of RMB7,400,000 was made by way of "Luoyang Float Glass Technology" and the use of trademark right of "Luoyang Glass"

(iii) Henan Mianchi (a) RMB26,680,000 (approximately HK$25,146,000), representing approximately 36% of the registered capital thereof

(b) the capital contribution of RMB26,680,000 was made by way of transfer of the production lines of float glass, the land use rights, the factory site and the ancillary facilities to the Yangshao Company in the total value of RMB33,320,000. The excess of RMB6,640,000 will be repaid to Henan Mianchi by the Yangshao Company by installments in cash (the Yangshao Company will be responsible for the equipment fees and the installation fees owed to the Company by Henan Mianchi and in return, the Yangshao Company will own the construction, equipment and the materials which Henan Mianchi has already paid in advance). In the Contract, it has stated that the equipment and installation fees concerned are balance payment due to the Company by Henan Mianchi for equipment and material supplied by the Company, it is agreed that the Yangshao Company will pay the balance due to the Company for Henan Mianchi and in return, the Yangshao Company will have the equipment and materials transferred from Henan Mianchi.

1. Undertakings of the the People's Government of Mianchi of Sanmenxia City

People's Government has undertaken to let the Yangshao Company to have the

of Mianchi of benefits stated in point 9 in the following headed

Sanmenxia City "Special terms".

1. The board of directors the board of directors of the Yangshao Company comprises of 7 directors in total; 1 director was appointed by CLFG; 3 directors were appointed by each of the Company and Henan Mianchi, respectively.

2. Profit Distribution the profit distribution and the responsibilities of risk will be allocated in proportion to the shareholding of the shareholders of the Yangshao Company.

3. Special terms the People's Government of Mianchi of Sanmenxia City has undertaken to the Yangshao Company that it can enjoy, inter alia, the following benefits:-

(a) For the first five years after the date of incorporation of the Yangshao Company, the Yangshao Company has the unconditional rights to use the railway transportation of Yangshao Shuini Group Company Limited (仰韶水泥集團有限責任公司) without payment of any charges and Yangshao Company shall not be responsible for any railway maintenance expenses of Yangshao Shuini Group Company Limited.

(b) Following the expiry of the first five years after the date of incorporation of the Yangshao Company, the Yangshao Company shall be responsible for a portion of the railway maintenance expenses which shall be in proportion to its transportation volume.

2. Incorporation of the Yangshao Company

The Yangshao Company was incorporated on 26th September 2000 upon issue of a business license by the Local Administration for Industry and Commerce of Mianchi (澠池縣工商行政管理局) on the same day, pursuant to which its business license period commenced as of 26th September 2000 and will expire on 25th September 2003.

3. Reasons for the establishment of the Yangshao Company

CLFG and Henan Mianchi have rich experience and relevant expertise in the production of float glass in the PRC. In addition, the People's Government of Mianchi of Sanmenxia City has undertaken to the Yangshao Company that it can enjoy all benefits available under local policies for enterprises. Although the People's Government of Mianchi of Sanmenxia City was a signatory to the Contract, it is not a shareholder of Yangshao Company. The purpose of the People's Government of Mianchi of Sanmenxia City entering into the Contract is to express its support to the Yangshao Company so that the Yangshao Company can commence operation as soon as possible. Apart from the terms stipulated in the Contract, the People's Government of Mianchi of Sanmenxia City has made no other commitments to the Yangshao Company. Accordingly, the Directors considered that the establishment of the Yangshao Company provided a good opportunity for the Group to increase its market share in Henan and its surrounding region and can further strengthen its production capacity of float glass, which could offer an attractive returns in terms of cost saving and a stronger long term growth prospect for the Company in the PRC.

The aggregate consideration for the establishment of the Yangshao Company was arrived at after arm's length negotiation between the parties. The Directors take the view that the establishment of the Yangshao Company with CLFG, Henan Mianchi and the People's Government of Mianchi of Sanmenxia City has been made in the ordinary course of business of the Company, on normal commercial terms and on terms which are fair and reasonable to and are in the best interest of the Company and its Shareholders taken as a whole having regard to the circumstances in which the Yangshao Company was established.

(2) INCREASE OF REGISTERED CAPITAL IN CLFC

1. General information of CLFC

Background

CLFC is a company with limited liability which was established on 27th October 1993 in the PRC. Before the capital increase was made, CLFC had a registered capital of RMB100,000,000, as to RMB40,000,000 (constituting approximately 40% thereof) of which was contributed by the Company, RMB50,000,000 (constituting approximately 50% thereof) was contributed by CLFG and RMB10,000,000 (constituting approximately 10% thereof) was contributed by Henan Longhao. Detailed information regarding CLFC was disclosed by the Company in an announcement dated 23rd July 1999 when the Company acquired its existing investment in CLFC.

CLFC is principally engaged in the provision of financial or treasury service which includes deposit taking, lending facilitates, product leasing and financing, transportation insurance, letter of credit, market research and consultation to CLFG Group.

The following audited financial information prepared in accordance with PRC accounting standards for the two years ended 31st December, 2000 has been provided to the Company by CLFC in respect of its financial position:

For the year ended For the year ended

31st December 1999 31st December 2000

(RMB'000) (RMB'000)

Turnover 11,694 9,692

Net Profit/(loss) before Tax 8.132 8,128

Net Profit/(loss) after Tax 5,449 5,538

The audited net asset value of CLFC as at 31st December 2000 was approximately RMB105,372,000.

2. Particulars of the capital increase

Pursuant to Clause 6 of Article 2 of the latest order issued by the People's Bank of China on 30th June 2000, a financial company in the PRC shall have a minimum registered capital of RMB300,000,000. To comply with such minimum requirement on the registered capital of a financial company, the board of directors of CLFC passed the resolution on 24th March 2001 to increase its registered capital to RMB300,000,000 (approximately HK$282,752,000) by the capital increase of RMB200,000,000 (approximately HK$188,501,000).

On 21st May 2001, the Company further contributed RMB71,000.000 (approximately HK$66,918,000) in the registered capital of CLFC by way of cash. Such capital increase was financed by bank borrowings. CLFG and Gongyi, a new shareholder of CLFC, have contributed to the registered capital of CLFC both by way of cash in the respective sums of RMB120,000,000 (approximately HK$113,101,000) and RMB9,000,000 (approximately HK$8,483,000). Henan Longhao has indicated that, owing to its financial needs, it has decided not to increase its capital investment in CLFC.

After completion of the capital increase in CLFC, CLFC is held as to approximately 37% by the Company, approximately 56.67% by CLFG, approximately 3.33% by Henan Longhao and approximately 3% by Gongyi.

It is the procedure that the injection of capital would first be made to CLFC, CLFC would then notify the relevant government authorities and banking institutions that it has complied with the minimum registered capital requirement of RMB300,000,000 pursuant to Clause 6 of Article 2 of the latest order issued by the People's Bank of China on 30th June 2000 as stated above. CLFC is now waiting for the formal registration approvals to be issued by the relevant government authorities and the banking institutions.

CLFC has confirmed to the Company that the additional registered capital of RMB200,000,000 would be used to meet the capital requirement pursuant to the order issued by the People's Bank of China and be injected into the working capital of CLFC to strengthen its asset base and capital needs in relation to cash settlement, investment, securities and intermediate financial business. The increase in the registered capital of CLFC has provided additional funds to CLFC without increasing its financial expenses, and has also increased its operational efficiency and profitability.

3. Reasons for the capital increase in CLFC

CLFC required additional funds in order to comply with the minimum capital requirement of a financial company as imposed by the People's Bank of China on 30th June 2000 so as to facilitate the continuing development of its financial business.

The Directors considered that it is in the interest of the Company to maintain its shareholding interests in CLFC, a company with a profitable track record. The Directors also considered that by maintaining the Company's substantial control in CLFC, the financial and cash position of the Group would be benefited and strengthened, which would add value to the operations of the Group.

CONNECTED TRANSACTIONS

The Company is principally engaged in the manufacture of float flat glass and reprocessed automobile glass.

CLFG is the controlling shareholder (as defined in the Listing Rules) of the Company and is interested in approximately 57.14% of the issued share capital of the Company. The transactions described above therefore constituted connected transactions for the Company under the Listing Rules. The Directors confirm that both the Contract and the capital increase in CLFC constituted connected transactions of the Company under Rule 14.26 of the Listing Rules. As the consideration contemplated under the Contract and under the capital increase in CLFC exceeded 3% of the audited value of the Company's consolidated net tangible assets as at 31st December 2000, public announcement of the Contract and the capital increase in CLFC should have been made at the time when these transactions were made, circulars containing particulars of the same and recommendation from an independent financial advisor should have been sent to the shareholders of the Company and approval of these transactions by the Independent Shareholders at the shareholders meeting was required by Rule 14.26 of the Listing Rules. Failure to publish announcements and despatch circulars of these transactions, to send circulars to shareholders of the Company and to obtain shareholders' approval of the same constituted breaches of the Listing Rules.

Due to lack of coordination within the Company, the Company failed to make announcements of the Contract and the capital increase in CLFC described above at the time these transactions were entered into or made, nor seek Independent Shareholders' approval of the same. The Directors admitted that the above constituted breaches of the Listing Rules by the Company. The Stock Exchange indicated that it has reserved its rights to take appropriate action against the Company and/or its Directors for its or their failure to comply with the Listing Rules.

CIRCULAR TO BE DESPATCHED TO INDEPENDENT SHAREHOLDERS

The investments contemplated under the Contract and the capital increase in CLFC were not continuing in nature. In addition, according to section 3, Chapter 7 of the listing rules issued by the Shanghai Stock Exchange on 8th June 2001, the investments contemplated under the Contract and the capital increase in CLFC constituted connected transactions of the Company. However, given that the transactions contemplated under the Contract and the capital increase in CLFC have long been completed and that disclosure of the same has been made in the Company's interim report as at 30th June 2001, the Company does not propose to convene a shareholders' meeting with respect to these transactions. However, the Company will, for the interests of its shareholders, form an Independent Board Committee to advise the Independent Shareholders on the Contract and the capital increase in CLFC. An independent financial adviser will be appointed to advise the Independent Board Committee of the Company on these transactions.

In addition to the aforesaid, the Company will send a circular containing, among other things, details of the terms and conditions of the Contract and the capital increase in CLFC, the recommendation from the Independent Board Committee and the advice of the independent financial adviser to the Independent Board Committee, to the H Shares' Shareholders as soon as practicable for their information. For the concern of A Shares' Shareholders, please refer to the announcement containing the advice prepared by the Company's independent financial adviser published on the newspapers, namely, China Securities and Shanghai Securities Daily.

DEFINITIONS

Terms used in this announcement have the following meaning:

"A Shares" Renminbi-denominated domestic shares of nominal value of RMB1.00 each in the ordinary share capital of the Company

"CLFC" China Luoyang Float Glass Group Financial Company (中國洛陽浮法玻璃集團財務有限責任公司), an associated company of the Company, which was held as to approximately 40% by the Company before the capital increase and approximately 37% by the Company thereafter

"CLFG" China Luoyang Float Glass (Group) Company Limited (中國洛陽浮法玻璃集團有限責任公司), the controlling shareholder of the Company

"CLFG Group" CLFG and its subsidiaries

"Company" Luoyang Glass Company Limited (洛陽玻璃股份有限公司), a joint stock limited company incorporated in the PRC with limited liability, the Shares of which are listed on the Stock Exchange

"Contract" the contract dated 23rd September 2000 entered into by and between the Company, CLFG, Henan Mianchi and the People's Government of Mianchi of Sanmenxia City relating to the establishment of the Yangshao Company

"Director(s)" director(s) of the Company

"Group" the Company and its subsidiaries

"Gongyi" Gongyi Alkaline Plant (鞏義市鹼廠), an independent third party which is independent of and not connected with any Director, supervisor, chief executive or substantial Shareholder of the Company or any of its subsidiaries or an associate of any of them (as defined in the Listing Rules)

"H Shares" overseas listed foreign shares in the ordinary share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Stock Exchange

"Henan Longhao" Henan Longhao Enterprise Company Limited (河南省龍浩實業有限公司), an independent third party which is independent of and not connected with any Director, supervisor, chief executive or substantial Shareholder of the Company or any of its subsidiaries or an associate of any of them (as defined in the Listing Rules). CLFC is held as to approximately 3.33% by Henan Longhao and other than its interest in CLFC, it is not in any way connected to the Company

"Henan Mianchi" Henan Mianchi Float Glass Plant (河南省澠池浮法玻璃廠), an independent third party which is independent of and not connected with any Director, supervisor, chief executive or substantial Shareholder of the Company or any of its subsidiaries or an associate of any of them (as defined in the Listing Rules)

"Hong Kong" the Hong Kong Special Administrative Region of the People's Republic of China

"HK$/HKD" Hong Kong dollar, the lawful currency of Hong Kong

"Independent Board an independent board committee of the Board comprising the

Committee" independent non-executive Directors of the Company, namely Mr.Dai Zhiliang and Mr. Wei Cheng Long

"Independent Shareholders" Shareholders other than CLFG and its associates

"Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange

"PRC" the People's Republic of China

"RMB" Renminbi, the lawful currency of the PRC

"Shareholder(s)" shareholder(s) of the Company

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"Yangshao Company" Luoyang Glass Group Yangshao Glass Company Limited (洛玻集團仰韶玻璃有限公司), a company established under the Contract

In this announcement, unless otherwise stated, certain amounts denominated in RMB have been converted (for information only) into HKD using an exchange rate of HK$1.00 : RMB1.061.

By the order of the Board

Luoyang Glass Company Limited

Guo Xiaohuan

Chairman

Henan, PRC, 9th October 2001

"Please also refer to the published version of this announcement in the Hong Kong i-mail"