RoboSense Technology Co., Ltd — Capital/Financing Update 2021

Jun 8, 2021

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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ANNOUNCEMENT IN RELATION TO THE RESPONSE TO THE “LETTER IN RESPECT OF PREPARATION WORKS FOR ISSUANCE EXAMINATION COMMITTEE MEETING ON THE NON-PUBLIC ISSUANCE OF SHARES OF LUOYANG GLASS” IN RELATION TO THE NON-PUBLIC ISSUANCE OF A SHARES

All members of the board of directors of Luoyang Glass Company Limited (the “ Company* ”) hereby warrant the truthfulness, accuracy and completeness of the contents of this announcement, and accept several and joint responsibilities for any false information, misleading statements or material omissions in this announcement.

References are made to (i) the announcement of the Company dated 30 December 2020 in relation to (1) proposed Non-public Issuance of A Shares; (2) connected transaction in relation to the proposed subscription for A Shares by Triumph Group; and (3) Specific Mandate; (ii) the supplemental announcement of the Company dated 20 January 2021; (iii) the announcement of the Company in respect of the grant of approval by China National Building Material Group Co., Ltd. regarding the Non-public Issuance of A Shares dated 22 February 2021; (iv) the circular of the Company dated 24 February 2021 (the “ Circular* ”); (v) the announcement of the Company dated 12 March 2021 on the resolutions passed at the 2021 second extraordinary general meeting, the 2021 first H Shareholders’ Class Meeting and the 2021 first A Shareholders’ Class Meeting; (vi) the announcement of the Company dated 1 April 2021 relating to the acceptance of the

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application for Non-public Issuance of A Shares by the CSRC; (vii) the announcement of the Company dated 14 April 2021 in relation to the receipt of the “Notice Regarding the CSRC’s First Feedback on the Review of Administrative Permission Items”; (viii) the announcement of the Company dated 13 May 2021 in relation to the response to the “Notice Regarding the CSRC’s First Feedback on the Review of Administrative Permission Items” in relation to the Non-public Issuance of A Shares; and (ix) the announcement of the Company dated 19 May 2021 in relation to the revised response to the “Notice Regarding the CSRC’s First Feedback on the Review of Administrative Permission Items” in relation to the Non-public Issuance of A Shares. Unless otherwise defined, capitalised terms used herein shall have the same meanings as defined in the Circular.

On 3 June 2021, the Company has received “Letter in respect of Preparation Works for Issuance Examination Committee Meeting on the Non-public Issuance of Shares of Luoyang Glass” (《關於請做好洛陽玻璃非公開發行股票申請發審委會 議準備工作的函》) (the “ Notification Letter ”) from the CSRC. The Company, the sponsor CITIC Securities Company Limited and other relevant intermediaries have carefully studied and confirmed items by items of the issues raised in the Notification Letter and have replied the relevant issues according to the requirements in the Notification Letter. The full text of the “Reply Regarding the Letter in respect of Preparation Works for Issuance Examination Committee Meeting on the Non-Public Issuance of Luoyang Glass by Luoyang Glass Company Limited and CITIC Securities Company Limited” (《洛陽玻璃股份有限公司及中信證券股份有限公司關 於請做好洛陽玻璃非公開申請發審委會議準備工作的函之回覆》) (the “ Reply Report ”) is set out in the appendix of this announcement. The English version of the Reply Report is an unofficial translation of its Chinese version. In case of any discrepancy between the two versions, the Chinese version shall prevail.

The Company and the sponsor will submit the abovementioned Reply Report and the relevant response materials to the CSRC according to the relevant requirement in a timely manner.

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The Non-public Issuance of A Shares remains subject to the further review and the obtaining of the approval from the CSRC (the “ Approval ”). There are uncertainties as to whether the Company can obtain the Approval. The Company will perform its obligation of information disclosure in a timely manner according to the progress of the Approval by the CSRC. Investors are advised to pay attention to investment risks.

By order of the Board Luoyang Glass Company Limited* Zhang Chong Chairman

Luoyang, the PRC 8 June 2021

As at the date of this announcement, the Board comprises five executive directors: Mr. Zhang Chong, Mr. Xie Jun, Mr. Ma Yan, Mr. Wang Guoqiang and Mr. Zhang Rong; two non-executive directors: Mr. Ren Hongcan and Mr. Chen Yong; and four independent non-executive directors: Mr. Jin Zhanping, Mr. Ye Shuhua, Mr. He Baofeng and Ms. Zhang Yajuan.

• For identification purposes only

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APPENDIX

REPLY REGARDING THE LETTER IN RESPECT OF PREPARATION WORKS FOR ISSUANCE EXAMINATION COMMITTEE MEETING ON THE NON-PUBLIC ISSUANCE OF LUOYANG GLASS

BY LUOYANG GLASS COMPANY LIMITED* AND CITIC SECURITIES COMPANY LIMITED

Sponsor (Lead underwriter)

==> picture [235 x 41] intentionally omitted <==

North Tower, Excellence Times Square II, No. 8 Zhongxin San Road, Futian District, Shenzhen, Guangdong Province

June 2021

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CHINA SECURITIES REGULATORY COMMISSION:

The Letter in respect of Preparation Works for Issuance Examination Committee Meeting on the Non-public Issuance of shares of Luoyang Glass (《關於請做好洛陽 玻璃非公開發行股票申請發審委會議準備工作的函》) (hereinafter referred to as the “ Notification Letter ”) issued by you on 1 June 2021 has been received. CITIC Securities Company Limited (hereinafter referred to as “ CITIC Securities ” or the “ Sponsor ”), as the Sponsor (the lead underwriter) of Luoyang Glass Company Limited (hereinafter referred to as “ Luoyang Glass ”, the “ Issuer ”, the “ Company ” or the “ Applicant ”) for the non-public issuance of shares, together with the Issuer and the Issuer’s lawyer, Beijing Jia Yuan Law Offices (hereinafter referred to as the “I ssuer’s Lawyer ”) and the issuer’s certified public accountants, WUYIGE Certified Public Accountants LLP (hereinafter referred to as the “ Issuer’s Accountant ”), has verified, implemented and explained the issues listed in the Notification Letter one by one. The reply to Letter in respect of Preparation Works for Issuance Examination Committee Meeting on the Non-public Issuance of shares of Luoyang Glass (《關於請做好洛 陽玻璃非公開發行股票申請發審委會議準備工作的函》) is set out below, please examine and verify.

Unless otherwise specified, the abbreviations used in this Reply Report regarding the Notification Letter shall be the same as those used in the Due Diligence Report.

Questions listed in the Notification Letter SimHei (bold) Reply to questions Simsun (unbold) Opinions of the intermediaries Simsun, bold

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8

CONTENT

QUESTION 1 Regarding horizontal competition and the fulfillment of commitment. According to the application materials, during the material assets restructuring of the Applicant in 2017, CLFG, China National Building Material Group and other related parties made relevant commitment, “The company would not directly or indirectly engage in any business that is the same as or similar to the main business of Luoyang Glass or its wholly-owned or controlled subsidiaries after the completion of the transaction, to avoid possible direct or indirect business competition with the production and operation of Luoyang Glass, and the company would procure enterprises that are directly or indirectly controlled by them not to directly or indirectly engage in any business or activity that competes with or may compete with the main business of the Luoyang Glass or its wholly owned or controlled subsidiaries in the commercial field; in case that the company or its directly or indirectly controlled enterprises have any business or business opportunity that directly or indirectly competes with or may compete with the main business of Luoyang Glass or its wholly-owned or controlled subsidiaries, the company shall abandon such business or business opportunity that may cause horizontal competition, or facilitate to offer the business or business opportunity to the Listed Company or its wholly-owned or controlled subsidiaries on fair and reasonable terms, or transfer the business or business opportunity to any other third parties not related to any of them.[. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

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27

• QUESTION 2 Regarding related transactions. The Applicant is requested to provide a supplementary explanation on and disclose: whether there will be new related transactions in this issuance and whether it complies with the relevant provisions of the Specific Rules for Implementation of the Non-Public Issuance of Shares by Listed Companies (《上市公司非公開發 行股票實施細則》). The Sponsor and the lawyer of the Applicant are requested to explain the basis and process for the verifications, and express their clear and definite opinions on the verifications.[. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

• QUESTION 3 Regarding accounts receivable. As at 31 December 2018, 31 December 2019, 31 December 2020 and 31 March 2021, the net accounts receivable of the Applicant were RMB492,277,400, RMB562,892,700, RMB637,911,200 and RMB461,059,300, respectively, accounting for 10.93%, 10.74%, 11.38% and 7.84% of the total assets, respectively. The Applicant is requested to provide a supplementary explanation on and disclose: whether there is sufficient provision for bad debts during the reporting period by taking into account the aging of accounts receivable, credit policy, sales receipts, etc. The Sponsor and the accountant of the Applicant are requested to explain the basis and process for the verifications, and express their clear and definite opinions on the verifications.[. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

33

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QUESTION 1: Regarding horizontal competition and the fulfillment of commitment. According to the application materials, during the material assets restructuring of the Applicant in 2017, CLFG, China National Building Material Group and other related parties made relevant commitment, “The company would not directly or indirectly engage in any business that is the same as or similar to the main business of Luoyang Glass or its wholly-owned or controlled subsidiaries after the completion of the transaction, to avoid possible direct or indirect business competition with the production and operation of Luoyang Glass, and the company would procure enterprises that are directly or indirectly controlled by them not to directly or indirectly engage in any business or activity that competes with or may compete with the main business of the Luoyang Glass or its wholly owned or controlled subsidiaries in the commercial field; in case that the company or its directly or indirectly controlled enterprises have any business or business opportunity that directly or indirectly competes with or may compete with the main business of Luoyang Glass or its whollyowned or controlled subsidiaries, the company shall abandon such business or business opportunity that may cause horizontal competition, or facilitate to offer the business or business opportunity to the Listed Company or its wholly-owned or controlled subsidiaries on fair and reasonable terms, or transfer the business or business opportunity to any other third parties not related to any of them.

North Glass and Triumph Jinghua plan to construct the photovoltaic cell packaging projects respectively. In order to avoid horizontal competition, China National Building Material Group plans to ensure that Luoyang Glass controls relevant entities before the completion of these production projects, so as to avoid horizontal competition with Luoyang Glass. The Company signed the Cooperation Framework Agreement with the shareholders of the above two companies on 30 December 2020 respectively, which intends to give priority to the transfer of the business opportunity to the Applicant in a fair and reasonable manner. The audit, evaluation, legal and business due diligence involved in the equity transfer have been completed. On 29 April 2021, the Company signed the Equity Transfer Agreement with China Yaohua Glass Group Corporation Co., Ltd., the shareholder of North Glass, in relation to the proposed acquisition of

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60% equity interest in North Glass, the acquisition was approved at the 30th meeting of the ninth session of the Board of the Company. The equity acquisition still needs to be submitted to the general meeting of shareholders of the Company for consideration. As of the issuing date of this feedback reply, the Company has not signed an official agreement with the shareholders of Triumph

Jinghua.

The Applicant is requested to provide additional explanations and disclose: (1) whether the shareholding structure and business scope of North Glass and Triumph Jinghua potentially directly or indirectly competes with the production and operation of the Listed Company; the progress of relevant solutions; (2) the particulars of the proposed construction of photovoltaic glass production projects of North Glass and Triumph Jinghua, including, but not limited to, the background, reasons, decisionmaking process and current progress; (3) the reasons why the abovementioned projects will not be constructed by the Applicant but by North Glass and Triumph Jinghua and then transferred to the Applicant and its reasonableness; the fairness of the transfer pricing of the photovoltaic cell packaging materials projects; (4) the legal force of the Cooperation Framework Agreement, the reasons why no formal agreement has been entered into with the shareholders of Triumph Jinghua, whether there is any dispute or potential dispute, any timetable for the entering into of formal agreement, and in case no formal agreement can be entered into, whether the undertaking against horizontal competition will be breached; (5) based on abovementioned, analyze whether the de facto controller and the controlling shareholder have breached the undertaking against horizontal competition, damaged the interests of the Listed Company, whether the non-public issuance complies with regulatory requirements, will constitute new horizontal competition circumstances after the implementation of the projects invested with funds to be raised, and whether it complies with the relevant provisions of the Administrative Measures on Securities Issuance of Listed Companies (《上市公司證券發行管理 辦法》).

The Sponsor and the Applicant’ s Lawyer are requested to explain the basis and process for the verifications, and express clear and definite opinions on the verifications.

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Reply:

• I. Whether the shareholding structure and business scope of North Glass and Triumph Jinghua potentially directly or indirectly competes with the production and operation of the Listed Company; the progress of relevant solutions

As at the date of issuance of the Reply Report regarding the Notification Letter, the shareholding structure of Qinhuangdao North Glass Co., Ltd. ( 秦皇島北方 玻璃有限公司 ) (hereinafter referred to as “ North Glass* ”) is set out as follows:

China National Building Material Group Co., Ltd. (中國建材集團有限公司) 100% Triumph Technology Group Company Limited (凱盛科技集團有限公司) 56.82% China Yaohua Glass Group Corporation Co., Ltd.* (中國耀華玻璃集團有限公司) 100%

Qinhuangdao North Glass Co., Ltd.*

As at the date of issuance of the Reply Report regarding the Notification Letter, the basic information on the business scope of North Glass is set out as follows:

Name	Qinhuangdao North Glass Co., Ltd.*
Nature	Limited liability company (wholly owned by a legal person that is invested in or controlled by a non- natural person)
Controlling shareholder	China Yaohua Glass Group Corporation Co., Ltd. (hereinafter referred to as “Yaohua Group*”)
Proportion of shareholding	100.00%
Legal representative	Chen Xing (陳幸)
Registered capital	RMB643,903,700

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Date of establishment	20 December 1996
Unified social credit code	911303002359947167
Business scope	General business items (excluding those prohibited to be operated and the licensed operations): production and sale of glass and glass products, refractory materials and ceramic products; import and export of goods and technologies; stevedoring services

As at the date of issuance of the Reply Report regarding the Notification Letter, the shareholding structure of Triumph Jinghua Glass Co., Ltd. * ( 凱盛晶華 玻璃有限公司 ) (hereinafter referred to as “ Triumph Jinghua ”) is set out as follows:

==> picture [255 x 239] intentionally omitted <==

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

China National Building Material Group Co., Ltd.
100%
Triumph Technology Group Company Limited
100%
Triumph Glass Holding Co., Ltd.
(凱盛玻璃控股有限公司)
100%
Triumph Jinghua Glass Co., Ltd.
----- End of picture text -----

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As at the date of issuance of the Reply Report regarding the Notification Letter, the basic information on the business scope of Triumph Jinghua is set out as follows:

Name	Triumph Jinghua Glass Co., Ltd.*
Nature	Limited liability company (wholly owned by a legal person that is invested in or controlled by a non- natural person)
Legal representative	Lv Yingcheng (呂應成)
Controlling shareholder	Triumph Glass Holding Co., Ltd. (hereinafter referred to as “Triumph Holding*”)
Proportion of shareholding	100.00%
Registered capital	RMB50,000,000
Date of establishment	4 March 2016
Unified social credit code	91371402MA3C72AT88
Business scope	Production and sales of plate glass and technical glass products; operations of import and export of goods and technologies; utilization of waste materials for electricity production. (For projects subject to approval pursuant to the laws, operating activities shall commence upon receipt of the approval from relevant authorities)

The principal activities of North Glass are production and sales of painted glass, which is the major product of North Glass, and the float glass technology is adopted in the production. The finished products are mainly used in the fields of painted buildings and decoration, etc. The principal activities of Triumph Jinghua are production and sales of ordinary glass used in the construction field and its major product is glass for construction purpose. The production adopts float glass technology and the finished products are mainly used in the fields of building curtain walls and decoration, etc.

The principal activities of Luoyang Glass are production and sales of information display glass and new energy glass.

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The relevant activities of North Glass and Triumph Jinghua significantly differ from the principal activities of the Listed Company in production process, application fields and downstream customers, and do not constitute direct or indirect business competition with the production and operation of the Listed Company.

In order to capture the market opportunities of new energy glass, North Glass and Triumph Jinghua plan to construct the photovoltaic cell packaging projects, respectively. In order to avoid horizontal competition, after CNBMG, the de facto controller of Luoyang Glass, and Triumph Group, the indirect controlling shareholder of Luoyang Glass became aware of the relevant business opportunity, they requested to give priority to offer such business opportunity to the Listed Company on fair and reasonable terms. Upon the consideration by the Board of the Listed Company, the Listed Company entered into the Cooperation Framework Agreement with the shareholders of North Glass and Triumph Jinghua on 30 December 2020, respectively, intending to transfer the business opportunity on fair and reasonable terms.

On 29 April 2021, the Company signed the Equity Transfer Agreement with Yaohua Group, the controlling shareholder of North Glass, in relation to the proposed acquisition of 60% equity interest in North Glass. The acquisition has been considered and approved by the 30th meeting of the ninth session of the Board of the Company and is still required to be submitted to the general meeting of the Company for consideration.

Due to the adjustment of the production and operation plan, Triumph Jinghua intends to abandon the business opportunity in new energy glass, and cease to construct the “Project of Photovoltaic Cell Packaging Materials for Solar Equipment of Triumph Jinghua”. On 7 June 2021, the Resolution in Relation to the Termination of Cooperation between the Company and Triumph Glass Holding Co., Ltd.* (《關於公司與凱盛玻璃控股有限公司終止合作的 議案》) was considered and approved at the 33rd meeting of the ninth session of the Board of the Listed Company, and the Termination Agreement of Cooperation Framework Agreement was entered into between the Listed Company and Triumph Holding, the shareholder of Triumph Jinghua. The Listed Company terminated the acquisition of the controlling interests in Triumph Jinghua.

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• II. The particulars of the proposed construction of photovoltaic glass production projects of North Glass and Triumph Jinghua, including, but not limited to, the background, reasons, decision-making process and current progress;

• (I) Particulars of the proposed photovoltaic glass production project of North Glass

  1. Background of and reasons for the project

New energy industry is the forerunner of national economy, and photovoltaic glass is the key material of photovoltaic power generation. The construction of photovoltaic glass projects is in line with the requirements of the national “13th Five Year” Plan and the requirements of industrial policies and local development planning, and also has good market prospects.

Yaohua Group, in which North Glass is a subsidiary, founded in 1922, is the first enterprise in Asia to continuously produce plate glass by machine. It is named as the “Cradle of Glass Industry in China”, and is the key group for glass industry in North China. According to the requirements for urban planning and development of Qinhuangdao, North Glass will relocate from the urban area to the industrial park. Under this background, North Glass plans to relocate the existing float glass production line to a new place, and construct the photovoltaic glass production project.

1. Decision-making process

2. (1) On 10 October 2020, North Glass submitted the Notice Regarding the Feasibility Study Report on the Construction of Project of Photovoltaic Cell Packaging Material for Solar Equipment (《關於 建設太陽能裝備用光伏電池封裝材料項目可行性研究 報告的請示》) to Yaohua Group.

3. (2) On 27 October 2020, Yaohua Group reported the Notice Regarding the Feasibility Study Report on the Construction of Project of Photovoltaic Cell Packaging Material for Solar Equipment by Qinhuangdao North Glass Co., Ltd.* (《關於轉報秦皇島北方 玻璃有限公司建設太陽能裝備用光伏電池封裝材料項 目可行性研究報告的請示》) to Triumph Group.

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• (3) On 6 November 2020, Triumph Group reported the Notice Regarding the Feasibility Study Report on the Construction of Project of Photovoltaic Cell Packaging Material for Solar Equipment by Qinhuangdao North Glass Co., Ltd.* of Yaohua Group to CNBMG.

• (4) On 20 November 2020, CNBMG issued the Approval Regarding the Feasibility Study Report on the Project of Photovoltaic Cell Packaging Material for Solar Equipment by Qinhuangdao North Glass Co., Ltd.* (《關於秦皇島北方玻璃有限公司太陽能 裝備用光伏電池封裝材料項目可行性研究報告的批覆》).

• Current progress

The construction of the Project of Photovoltaic Cell Packaging Material for Solar Equipment of North Glass has not yet commenced, the details of the progress of which are as follows:

• (1) On 10 March 2021, North Glass completed the filing of the project for record with the administrative examination and approval authority of Qinhuangdao Economic & Technological Development Zone, with the project name being “Project of Photovoltaic Cell Packaging Material for Solar Equipment of Qinhuangdao North Glass Co., Ltd.*” and the record number being Ji Qin Qu Bei Zi [2021] No. 47 ( 冀秦區備字 [2021]47 號 );

• (2) On 15 March 2021, North Glass and Economic & Technological Development Zone Branch of Natural Resources and Planning Bureau of Qinhuangdao Municipality ( 秦皇島市自然資源和 規劃局經濟技術開發區分局 ) entered into the State-owned Construction Land Use Right Transfer Contract (Kai Zheng Chu (2021) No. 6, Kai Zheng Chu (2021) No. 7 and Kai Zheng Chu (2021) No. 8) ( 開政出 (2021)6 號、開政出 (2021)7 號、開政出 (2021)8 號 )). The land grant fees and deed tax have been paid up and the real estate ownership certificate (Ji [2021] Qin Kai Real Estate Ownership No. 0001563) ( 冀 [2021] 秦開不動產權第 0001563 號 ) has been obtained;

• (3) North Glass has engaged professional institutions to conduct environmental impact assessment, energy consumption assessment and other works on the project.

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• (II) Particulars of the proposed photovoltaic glass production project of Triumph Jinghua (terminated)

• Background of and reasons for the project

Photovoltaic glass is the key material of photovoltaic power generation. The construction of photovoltaic glass projects is in line with the requirements of the national “13th Five Year” Plan and the requirements of industrial policies and local development planning, and also has good market prospects.

Triumph Jinghua is located at Tianqu Industrial Park, Dezhou City, Shandong Province, with excellent industrial supporting conditions and convenient and smooth transportation, which shows obvious geographical advantages. According to the national industrial policies and the local economic development planning, Triumph Jinghua plans to construct the photovoltaic glass production project to fill the shortage of production capacity in Shandong Province and its surrounding areas.

1. Decision-making process

2. (1) On 26 October 2020, Triumph Jinghua submitted the Notice Regarding the Feasibility Study Report on the Project of Photovoltaic Cell Packaging Material for Solar Equipment (《關於 太陽能裝備用光伏電池封裝材料項目可行性研究報告 的請示》) to Triumph Group.

3. (2) On 6 November 2020, Triumph Group reported the Notice Regarding the Feasibility Study Report on the Project of Photovoltaic Cell Packaging Material for Solar Equipment by Triumph Jinghua to CNBMG.

4. (3) On 20 November 2020, CNBMG issued the Approval Regarding the Feasibility Study Report on the Project of Photovoltaic Cell Packaging Material for Solar Equipment of Triumph Jinghua Glass Co., Ltd.* (《關於凱盛晶華玻璃有限公司太陽能裝備用 光伏電池封裝材料項目可行性研究報告的批覆》);

5. Current progress

Due to the adjustment of the production and operation plan, Triumph Jinghua intends to abandon the business opportunity in new energy glass, cease to implement the “Project of Photovoltaic Cell Packaging Materials for Solar Equipment of Triumph Jinghua”, and continue to engage in the production and sales of the existing float glass.

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• III. The reasons why the abovementioned projects will not be constructed by the Applicant but by North Glass and Triumph Jinghua and then transferred to the Applicant and its reasonableness; the fairness of the transfer pricing of the photovoltaic cell packaging materials projects

• (I) Reasons for the projects to be constructed by North Glass and Triumph Jinghua and then transferred to the Applicant and its reasonableness

In order to capture the market opportunities in the photovoltaic industry, North Glass and Triumph Jinghua plan to construct the photovoltaic glass projects based on their existing production lines, and have submitted the feasibility study reports for the projects to Triumph Group in October 2020. After Triumph Group and CNBMG became aware of the relevant situation, they requested the shareholders of North Glass and Triumph Jinghua to transfer their controlling shareholdings to the Listed Company in order to avoid the problem of horizontal competition with Luoyang Glass in the future.

It has certain advantages for Luoyang Glass to acquire the photovoltaic glass projects to be constructed by the related parties on fair and reasonable terms as compared to the construction of project by itself: (1) the construction of photovoltaic glass projects by Luoyang Glass itself in other places requires plenty of costs and time for the pre-project work, and there are uncertainties in land acquisition, project approval, personnel recruitment and market cultivation; the acquisition of the projects to be constructed by the related parties can make full use of the existing industrial resources and reduce operational risks; (2) photovoltaic glass has a sale coverage, and the existing photovoltaic glass production lines of Luoyang Glass are mainly located in Eastern China, while North Glass and Triumph Jinghua to be acquired are located in Northern China, which is beneficial to the improvement of the layout of the Listed Company; (3) as Luoyang Glass is in the process of expanding its existing photovoltaic glass production lines, and with the acquisition of the projects to be constructed by the related parties, it can better seize the development opportunities of the new energy industry. Therefore, it is reasonable for Luoyang Glass to acquire the photovoltaic glass projects to be constructed by the related parties on fair and reasonable terms.

• (II) Fairness of the transfer pricing of the photovoltaic cell packaging materials

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projects

1. Fairness of the transfer pricing of 60% equity interest in North Glass

For the matter of equity transfer of North Glass, Zhongjing Minxin (Beijing) Assets Appraisal Co., Ltd.,* ( 中京民信（北京）資產評 估有限公司 ) has issued the Assets Appraisal Report (Jing Xin Ping Bao Zi (2021) No. 005) (《資產評估報告》( 京信評報字 [2021] 第 005 號 )). As at 30 November 2020, the appraisal value of the entire equity interest attributable to the shareholders of North Glass was RMB303,793,200. The 60% equity interest in North Glass was transferred to Luoyang Glass, and the corresponding transfer price of RMB182,275,900 was calculated and determined with reference to the abovementioned appraisal value.

This appraisal was conducted using both the cost approach and the income approach, of which the appraisal value of the entire shareholders’ equity of North Glass under the cost approach was RMB303,793,200, with an appreciation of RMB118,519,800 or 63.97%; the appraisal value of the entire shareholders’ equity of North Glass under the income approach was RMB298,944,800, with an appreciation of RMB113,671,400 or 61.35%. Taking into account the appraisal target, the purpose of the appraisal, applicable type of value and other factors, the appraisal institution selected the appraisal results under the cost approach as the final appraisal conclusion.

Under the cost approach, the appraisal results of North Glass are summarized as follows:

Unit: RMB0’000

		Appraisal	Appreciation/	Appreciation
Item	Book Value	Value	Depreciation	Rate
				(%)
Current assets	67,933.18	69,270.75	1,337.57	1.97
No n-current assets	32,453.40	31,889.11	-564.29	-1.74
Lo ng-term equity
investment	11,401.64	1,314.44	-10,087.19	-88.47
Fixed assets	15,699.83	20,977.45	5,277.61	33.62
Co nstruction in
progress	2,918.39	2,918.39	–	–
Intangible assets	2,043.54	6,288.83	4,245.29	207.74
Lo ng-term
deferred
expenses	390.00	390.00	–	–
Total assets	100,386.58	101,159.86	773.28	0.77

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		Appraisal	Appreciation/	Appreciation
Item	Book Value	Value	Depreciation	Rate
				(%)
Current liabilities	56,602.96	45,524.26	-11,078.70	-19.57
No n-current
liabilities	25,256.28	25,256.28	–	–
Total liabilities	81,859.24	70,780.54	-11,078.70	-13.53
Owner’s equity	18,527.34	30,379.32	11,851.98	63.97

The appraisal value of the entire shareholders’ equity of North Glass under the cost approach was RMB303,793,200, with an appreciation of RMB118,519,800 or 63.97%, mainly due to: (1) the intangible assets: the value of the land use rights for the two parcels of land appraised increased by RMB42,985,900, representing an appreciation rate of 210.35%, which was mainly due to the low price for acquiring the land by the enterprise and the rapid increase in the price of industrial land in recent years; (2) the fixed assets: the appraisal value of buildings and properties increased by RMB51,451,800, representing an appreciation rate of 56.54%, which was mainly due to a significant increase in construction costs as a result of the increase in construction materials costs and labor costs during the period from an earlier age when the buildings and properties were built till now.

The pricing of the Company’s acquisition of the controlling interest in Northern Glass was based on the Asset Appraisal Report (record number: 1592ZGJC2021042) filed by CNBMG. The appraisal institution engaged was independent, the appraisal approach was related to the purpose of the appraisal, and the appraisal conclusion was reasonable. Therefore, the pricing of the equity transfer was fair.

2. Termination of transfer of equity interest in Triumph Jinghua

On 7 June 2021, the 33rd meeting of the ninth session of the Board of the Listed Company was convened, at which the Resolution in Relation to the Termination of Cooperation between the Company and Triumph Glass Holding Co., Ltd.* (《關於公司與凱盛玻璃控股 有限公司終止合作的議案》) was considered and approved, and the Termination Agreement of Cooperation Framework Agreement was entered into between the Listed Company and Triumph Holding. As at the date of issuance of the Reply Report regarding the Notification Letter, the transfer of equity interest in Triumph Jinghua has been terminated, without involving the fairness of the transfer pricing.

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• IV. The legal force of the Cooperation Framework Agreement, the reasons why no formal agreement has been entered into with the shareholders of Triumph Jinghua, whether there is any dispute or potential dispute, any timetable for the entering into of formal agreement, and in case no formal agreement can be entered into, whether the undertaking against horizontal competition will be breached

The Cooperation Framework Agreements signed by Luoyang Glass, Yaohua Group and Triumph Holding are an effective legal documents, but such agreements are intentional contracts, have no legal effect in respect of the equity acquisition of North Glass and Triumph Jinghua and are only the arrangements for the subsequent equity acquisition by each party. Upon completion of the audit, appraisal, legal and business due diligence, each party will promote the cooperation matter according to the situation.

Luoyang Glass has signed a formal Equity Transfer Agreement with Yaohua Group on 29 April 2021. Both parties have agreed on the acquisition of 60% equity interest in North Glass held by Yaohua Group by Luoyang Glass. As at the date of issuance of the Reply Report regarding the Notification Letter, the Equity Transfer Agreement will come into effect subject to the consideration and approval at the general meeting of Luoyang Glass.

Due to the adjustment of the production and operation plan, Triumph Jinghua decided to terminate the construction of “Project of Photovoltaic Cell Packaging Materials for Solar Equipment of Triumph Jinghua”, pursuant to which, Luoyang Glass and Triumph Holding planned to terminate the cooperation for equity acquisition. Both parties signed the Termination Agreement of Cooperation Framework Agreement on 7 June 2021, confirming that “both parties have no disagreements or disputes under the Cooperation Framework Agreement. The termination agreement is the true intention of both parties, both parties shall not constitute a breach of contract and shall not be liable for the breach of contract to each other”. At the same time, Triumph Holding committed that “Party A (Triumph Holding) will guarantee that Triumph Jinghua will no longer process the proposed construction of photovoltaic cell packaging project, and during the period that Triumph Jinghua acts as a subsidiary controlled by Party A, Party A and Triumph Jinghua will not, directly or indirectly, engage in any business or activity which competes or may compete with the principal business of Party B (Luoyang Glass) or its wholly-owned or controlled subsidiaries”. Therefore, there is no dispute or potential dispute between Luoyang Glass and Triumph Holding in respect of the termination of acquisition of Triumph Jinghua, and CNBMG, the de facto controller of Luoyang Glass and Triumph Group, the indirect controlling shareholder of Luoyang Glass, have not violated the commitments to horizontal competition.

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• V. Based on abovementioned, analyze whether the de facto controller and the controlling shareholder have breached the undertaking against horizontal competition, damaged the interests of the Listed Company, whether the non-public issuance complies with regulatory requirements, will constitute new horizontal competition circumstances after the implementation of the projects invested with funds to be raised, and whether it complies with the relevant provisions of the Administrative Measures on Securities Issuance of Listed Companies (《上市公 司證券發行管理辦法》)

• (I) Contents of the undertaking letter on avoiding horizontal competition issued by the controlling shareholder and de facto controller of Luoyang Glass

Controlling shareholder and de facto controller of Luoyang Glass have issued the undertaking letter on avoiding horizontal competition with Luoyang Glass. The commitment is as follows:

• “I. In respect of the businesses or business opportunities similar to those of the Listed Company that the company and the other companies under the control of the company contemplates to conduct or actually obtain in the future, and the assets and businesses generated by such businesses or business opportunities may constitute potential intraindustry competition with the Listed Company:

• The company would not directly or indirectly engage in any business that is the same as or similar to the main business of Listed Company or its wholly-owned or controlled subsidiaries after the completion of the transaction, to avoid possible direct or indirect business competition for the production and operation of Listed Company, and the company would procure enterprises that are directly or indirectly controlled by them not to directly or indirectly engage in any business or activity that competes with or may compete with the main business of the Listed Company or its wholly owned or controlled subsidiaries in the commercial field;

• in case that the company or its directly or indirectly controlled enterprises participate in or have the opportunity to participate in any business that directly or indirectly competes with or may compete with the main business of the Listed Company or its wholly-owned or controlled subsidiaries, the company shall abandon or cause their directly or indirectly controlled enterprises to abandon such business or opportunity that may be competitive, or facilitate to offer the business or opportunity to the Listed Company or its wholly-owned or controlled subsidiaries on fair and reasonable terms, or transfer the business or opportunity to any other third parties not related to any of them;

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  3. The company will strictly abide by the relevant provisions of the CSRC, Shanghai Stock Exchange and the Articles of Association of Listed Company, exercise the rights and obligations of shareholders on an equal basis with other shareholders, and will not seek improper interests by taking advantage of the position of controlling shareholder, and will not undermine the legitimate rights and interests of Listed Company and other shareholders.”

• (II) Whether the de facto controller and the controlling shareholder have breached the undertaking against horizontal competition, damaged the interests of the Listed Company, whether the non-public issuance complies with regulatory requirements, will constitute new horizontal competition circumstances after the implementation of the projects invested with funds to be raised, and whether it complies with the relevant provisions of the Administrative Measures on Securities Issuance of Listed Companies

• Whether the de facto controller and the controlling shareholder have breached the undertaking against horizontal competition, and damaged the interests of the Listed Company

  • After Triumph Group, the indirect controlling shareholder of Luoyang Glass, and CNBMG, the de facto controller of Luoyang Glass, became aware of the photovoltaic cell packaging materials projects to be invested and constructed by their subsidiaries North Glass and Triumph Jinghua, they have facilitated to give priority to offer such business opportunities to the Listed Company or its wholly-owned or controlled subsidiaries on fair and reasonable terms in accordance with the contents of the undertaking letter on avoiding horizontal competition with Luoyang Glass made by them, and fulfilled the commitments to the avoidance of horizontal competition. After being aware of relevant business opportunities, Luoyang Glass signed the Cooperation Framework Agreement with Yaohua Group, the controlling shareholder of North Glass, and Triumph Holding, the controlling shareholder of Triumph Jinghua, and signed the Share Transfer Agreement with Yaohua Group in respect of the equity transfer, respectively. Due to the adjustment of the production and operation plan, Triumph Jinghua decided to terminate the construction of “Project of Photovoltaic Cell Packaging Materials for Solar Equipment of Triumph Jinghua”. Luoyang Glass and its controlling shareholder Triumph Holding have signed the Termination Agreement of Cooperation Framework Agreement and Triumph Holding has guaranteed and ensured that Triumph Holding and Triumph Jinghua will not, directly or indirectly, engage in any business or activity which competes or may compete with the principal business of Luoyang Glass or the wholly-owned or controlled subsidiaries of Luoyang Glass.

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Therefore, CNBMG, the de facto controller of Luoyang Glass, and Triumph Group, the indirect controlling shareholder of Luoyang Glass, have strictly complied with the commitments to the avoidance of horizontal competition, and there are no circumstances where the interests of the Listed Company are damaged.

1. Whether the non-public issuance complies with regulatory requirements, will constitute new horizontal competition circumstances after the implementation of the projects invested with funds to be raised, and whether it complies with the relevant provisions of the Administrative Measures on Securities Issuance of Listed Companies

The projects invested with funds to be raised in the non-public issuance of Luoyang Glass are the projects of photovoltaic cell packaging materials for solar equipment and the repayment of interest bearing liabilities and replenishment of working capital, of which the projects of photovoltaic cell packaging material for solar equipment include the Project of Photovoltaic Cell Packaging Material for Solar Equipment of CNBM (Hefei) New Energy Company Limited ( 中建材（合肥） 新能源有限公司 ) and Phase I of the Project of Photovoltaic Cell Packaging Material for Solar Equipment of CNBM (Tongcheng) New Energy Materials Company Limited ( 中國建材桐城新能源材料 有限公司 ), and each of the projects invested with funds to be raised is the principal business of Luoyang Glass. After the implementation of the projects invested with funds to be raised, Luoyang Glass will enhance the production capacity of photovoltaic cell packaging materials, will not increase the horizontal competition with the controlling shareholder and the de facto controller, and will not affect the independence of production and operation of the Listed Company.

Therefore, the non-public issuance complies with regulatory requirements, will not constitute new horizontal competition circumstances or affect the independence of production and operation of the Listed Company after the implementation of the projects invested with funds to be raised, and is in line with the relevant provisions and regulatory requirements of the Administrative Measures on Securities Issuance of Listed Companies.

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VI. Verification opinions of intermediaries

Regarding the above matters, the Sponsor and the Issuer’s Lawyer performed the following verification procedures: (1) checked the shareholding structure, the scope of business and others of North Glass and Triumph Jinghua through the industrial and commercial system; (2) checked the decisionmarking documents submitted for approval in relation to the project of the photovoltaic glass production to be constructed by North Glass and Triumph Jinghua to understand the progress of the project; (3) conducted interviews with Triumph Group to understand the reasons for the construction by North Glass and Triumph Jinghua and the then transfer to the Applicant and its rationality; checked the feasibility study report, the valuation report and valuation explanation, and valuation document being filed for record; (4) checked the Cooperation Framework Agreement, the Share Transfer Agreement entered into with Yaohua Group, and the Termination Agreement of Cooperation Framework Agreement entered into with Triumph Holding.

Upon verification, the Sponsor believes that: (1) North Glass and Triumph Jinghua are companies controlled by Triumph Group, and there is no direct or indirect competition between their existing businesses and the production and operation of the Listed Company. (2) In order to seize the market opportunity in the photovoltaic industry, North Glass and Triumph Jinghua intend to construct the photovoltaic glass project based on the existing production lines; China National Building Material Group and Triumph Group will facilitate the transfer of the controlling interests in North Glass and Triumph Jinghua to the Listed Company in accordance with the horizontal competition commitment after they are aware of the relevant conditions. The Listed Company and the shareholders of North Glass have entered into formal equity interest transfer agreement, which will take effect after being submitted to the general meeting of the Listed Company for consideration; as Triumph Jinghua has quitted the construction of new energy glass project due to the adjustment to its production and operation plan, the Listed Company and the shareholders of Triumph Jinghua have entered into the Termination Agreement of Cooperation Framework Agreement. (3) As for the Listed Company, it is reasonable to acquire the

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photovoltaic glass project to be constructed from the related party on fair and reasonable terms, which can facilitate the full utilization of the existing industrial resources including the land and personnel, reduce operation risks, expand the layout of regional business and facilitate better seizure of industrial development opportunities as compared with conducting the new construction projects itself; the transfer of the equity interest in North Glass is determined based on the asset valuation report being filed for record, and at fair price. (4) As the Cooperation Framework Agreement is an agreement of intent and a formal agreement has been entered into in relation to the acquisition of the controlling interests in North Glass and a termination agreement in relation to the acquisition of the controlling interests in Triumph Jinghua has been entered into, there are no disputes or potential disputes. (5) The de facto controller and the controlling shareholder have not violated the horizontal competition commitment. There are no circumstances where the interests of the Listed Company will be prejudiced in the nonpublic issuance and there will be no new horizontal competition or no influence on the independence of the production and operation of the Listed Company after the implementation of the projects invested with funds to be raised. The non-public issuance complies with the Administrative Measures on Securities Issuance of Listed Companies (《上市公司證券發行管理辦法》) and other relevant provisions and regulatory requirements.

Upon verification, the Issuer’s Lawyer believes that: (1) North Glass and Triumph Jinghua are companies controlled by Triumph Group, and there is no direct or indirect competition between their existing businesses and the production and operation of the Listed Company. (2) In order to seize the market opportunity in the photovoltaic industry, North Glass and Triumph Jinghua intend to construct the photovoltaic glass project based on the existing production lines; China National Building Material Group and Triumph Group will facilitate the transfer of the controlling interests in North Glass and Triumph Jinghua to the Listed Company in accordance with the horizontal competition commitment after they are aware of the relevant conditions. The Listed Company and the shareholders of North Glass have entered into formal equity interest transfer agreement, which will take effect after being submitted to the general meeting of the Listed Company for consideration; as Triumph Jinghua has quitted the construction of new energy glass project due to the adjustment to its production and operation plan, the Listed Company and the shareholders of Triumph Jinghua have entered into the Termination Agreement of Cooperation Framework Agreement. (3) As for the Listed Company, it is reasonable to acquire the

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photovoltaic glass project to be constructed by the related party on fair and reasonable terms, which can facilitate the full utilization of the existing industrial resources including the land and personnel, reduce operation risks, expand the layout of regional business and facilitate better seizure of industrial development opportunities as compared with conducting the new construction projects by itself; the transfer of the equity interest in North Glass is determined based on the asset valuation report being filed for record, and at fair price. (4) As the Cooperation Framework Agreement is an agreement of intent and a formal agreement has been entered into in relation to the acquisition of the controlling interests in North Glass and a termination agreement in relation to the acquisition of the controlling interests in Triumph Jinghua has been entered into, there are no disputes or potential disputes. (5) The de facto controller and the controlling shareholder have not violated the horizontal competition commitment. There are no circumstances where the interests of the Listed Company will be prejudiced in the non-public issuance and there will be no new horizontal competition and no influence on the independence of the production and operation of the Listed Company after the implementation of the project. The non-public issuance complies with the Administrative Measures on Securities Issuance of Listed Companies (《上市公司證券發行管理辦法》) and other relevant provisions and regulatory requirements.

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• QUESTION 2. Regarding the related transactions. The Applicant is requested to provide a supplementary explanation on and disclose: whether there will be new related transactions in this issuance and whether it complies with the relevant provisions of the Specific Rules for Implementation of the Non-public Issuance of Shares by Listed Companies (《上 市公司非公開發行股票實施細則》). The Sponsor and the lawyer of the Applicant are requested to explain the basis and process for the verifications, and express their clear and definite opinions on the verifications.

Reply:

• I. There will be new related transactions in this issuance

During the reporting period, the related transactions between the Company and the controlling shareholder, the de facto controller and its subordinate companies mainly include: (1) obtaining the provision of the equipment, materials and construction and installation services by the related parties required for the project; (2) purchasing soda ash, quartz sand, etc. from related parties as raw materials for product production; (3) selling glass products to related parties.

The funds to be raised in this non-public issuance will mainly be used for the photovoltaic cell packaging material projects for solar equipment, which is conducted for the production and sales of new energy glass, the Company’s existing main business. It is expected that there will be new related transactions with the controlling shareholder, the de facto controller and their subsidiaries during the construction period and operation period of the projects invested with funds to be raised. The details are as follows:

1. Construction period: to accept the engineering services provided by related parties for the project construction with raised funds

China Triumph International Engineering, a subsidiary of China National Building Material Group, is a leading enterprise in the field of glass engineering and the main engineering service provider for the Company’s existing production lines. A contract has been signed with the parties including China Triumph International Engineering, a related party, in respect to the construction of the project to be funded by the issuance, to accept the services provided, such as civil engineering and equipment installation. It is expected that there will be new related transactions. The aforementioned transaction contract has fulfilled the necessary related transaction procedures of the Company and adopted market-oriented pricing.

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1. Operation period: to purchase raw materials from related parties and sell products to related parties

In the production process of new energy glass, the Company needs to purchase soda ash, quartz sand and other raw materials. As the largest glass R & D, design and production group in China, China National Building Material Group has large-scale procurement of raw materials such as soda ash with high quality requirements and certain price advantages. In addition, China National Building Material Group also has its independent quartz placer. In order to ensure the supply and quality of soda ash, quartz sand and other raw materials, it is reasonable for the Company to purchase soda ash, quartz sand and other raw materials from China National Building Material Group and its subsidiaries. After the project to be funded by the issuance is put into operation, the Company’s photovoltaic glass production capacity will be enhanced, which is expected to further increase the purchase of soda ash, quartz sand and other raw materials from China National Building Material Group and its subsidiaries.

The Company’s related parties, including Jetion Solar Technology Co., Limited ( 中建材浚鑫科技有限公司 ), are engaged in the manufacture of photovoltaic cells and modules. The photovoltaic glass is the component required for its products. The photovoltaic industry is in rapid development. After the project to be funded by the issuance is put into operation, the production capacity of the Company’s photovoltaic glass products will be enhanced. It is expected that the Company will further increase the sales of photovoltaic glass products to related parties such as Jetion Solar Technology Co., Limited ( 中建材浚鑫科技有限公司 ).

Assuming: (1) the proportion of operating revenue, operating costs from the Company’s existing production lines and related transactions remain unchanged, the same with that of 2020; (2) after the completion of the project to be funded by the issuance and its reaching of the design capacity, the operating revenue and operating costs shall be based on the forecast values in the feasibility study report, and the related transaction may be combined with the feasibility study and the estimated proportion, then after completion of the implementation of this non-public issuance, it is expected that the amount of related transactions of the Listed Company will increase, among which, the proportion of related sales in operating revenue will decrease, the proportion of related procurement in operating costs will

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increase slightly, and the change of overall proportion will be relatively stable. The details are as follows:

Unit: RMB0’000

Item	Before this non-public issuance (For the year 2020)	The estimated increase due to the project to be funded by this issuance	The estimated amount after the implementation of the project to be funded by this issuance
1. Related sales	19,041.55	10,790.00	29,831.55
Operating revenue	301,179.35	207,810.00	508,989.35
Proportion in operating revenue	6.32%	5.19%	5.86%
2. Related procurement	23,913.66	23,995.13	47,908.79
Operating cost	207,642.75	144,799.34	352,442.08
Proportion in operating cost	11.52%	16.57%	13.59%

Upon completion of the implementation of this non-public issuance, it is expected that there will be a slight increase in the proportion of the Listed Company’s related procurement in operating costs, mainly because the related procurement is mainly raw materials such as soda ash and quartz sand, the production capacity of new energy glass will be significantly improved upon the implementation of the project to be funded by this issuance. As a result of the economies of scale, the proportion of cost of energy consumption, labor and depreciation, etc. in the operating cost will decrease, and the proportion of cost of raw materials will thus increase. As a result, the overall proportion of procurement of raw materials in operating cost will also increase. The Listed Company will set the price in a market-oriented manner, strictly comply with the related transactions review procedures to ensure the reasonableness and fairness of the related transactions.

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• II. The issuance is in compliance with the relevant provisions of the Specific Rules for Implementation of the Non-public Issuance of Shares by Listed Companies 《上市公司非公開發行股票實施細則》( )

• (I) Necessity and reasonableness of new related transactions

As China’s largest comprehensive building materials group, China National Building Material Group, through its wholly-owned subsidiaries including, Triumph Group, has its layout in the raw materials, engineering and application of photovoltaic glass; there are related transactions between the Company and the subsidiaries of China National Building Material Group in project construction, raw material procurement and sales of photovoltaic glass products. In particular, the centralized procurement of raw material through the related parties has obvious advantages in the quality of products and the stability of supply. These transactions are commercially reasonable and the required related transaction consideration procedures are performed.

The project to be funded by this issuance focuses on the production and sale of new energy glass, the Applicant’s main business, aiming to improve the production capacity of new energy glass. In its construction stage, the project to be funded by this issuance needs project engineering services, and in its operation stage, it needs to purchase raw materials and sell goods, so new related transactions will be created. These transactions are the existing types of transactions of the Listed Company, and are necessary and reasonable.

• (II) Fairness of the pricing of the new related transactions

The relevant framework agreements or formal agreements have been entered into in respect to the existing related transactions between the Company and the subsidiaries of China National Building Material Group. The transaction prices have been negotiated and determined in a market-oriented manner and the required related transaction consideration procedures have been performed. The new related transactions in this issuance shall be included in the related transactions of the Company for management, and continue to be priced in a market-oriented manner through negotiation. The required related transaction consideration procedures are performed to ensure the fairness and compliance of the new related transactions and ensure that the interests of the Listed Company and minority shareholders are not prejudiced.

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(III) Measures and arrangements to reduce and regulate the related transactions

In order to further reduce and regulate the related transactions of the Listed Company, CLFG, the controlling shareholder of the Company, Triumph Group, the indirect controlling shareholder, and China National Building Material Group, the de facto controller, issued the Letter of Undertaking on Regulating Related Transactions in 2017. They undertook that “The Company will try to avoid or minimize related transactions between the Company, other enterprises which the Company actually controls or those on which the Company exerts significant influence and the Listed Company (including enterprises controlled by the Listed Company at present and in the future) upon the completion of the transaction. Any inevitable related business or transaction should be concluded based on the market transaction principles of openness, fairness and justness and at fair and reasonable market prices. In addition, the decision-making procedure for related transactions should be fulfilled in accordance with relevant laws, regulations, regulatory documents and the Articles of Associations of the Listed Company, and the obligation for information disclosure should be fulfilled as required by law”. Until now, such commitments are being performed normally.

The Company will urge the related parties to continue to strictly fulfill the Undertaking on Regulating Related Transactions; the Company will avoid and reduce related transactions through increasing the adoption of methods such as market-orientation procurement and so on. Any inevitable related business or transaction should be concluded at fair and reasonable market prices, and the decision-making procedure for related transactions should be fulfilled and the obligation for information disclosure should be fulfilled.

To sum up, given that: (1) although there are new related transactions created in this issuance, they are of existing transaction types and the changes in the proportion of related transactions are relatively stable, which are necessary and reasonable, and are priced in market-oriented manner, it will not constitute significant and adverse impact on the independent operation capacity of the Company, (2) the Listed Company will urge the controlling shareholder and the de facto controller to continue to strictly perform their commitment on related transactions, and take measures to avoid and reduce related transactions, regulate the inevitable related transactions, this issuance is in compliance with the provisions of the Specific Rules for Implementation of the Non-public Issuance of Shares by Listed Companies 《上市公司非公開發行股票實施細則》( ).

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III. Verification opinions of intermediaries

Regarding the above matters, the Sponsor and the Issuer’s Lawyer have performed the following verification procedures: (1) checked the feasibility study report of the project to be funded by this issuance, the related transaction contracts of the Issuer during the Reporting Period, the pricing basis and other documents; (2) interviewed with the financial controller of the Issuer to understand the expected related transactions due to the project to be funded by this issuance in its construction stage and the operation stage.

Upon verification, the Sponsor believes that: the project to be funded by this issuance is the production capacity expansion of the existing photovoltaic glass business of the Issuer, and it is expected that new related transactions will be created in the project construction stage and operation stage, which is commercially reasonable; the new related transactions are all of the existing transaction types and will continue to be priced in accordance with the market-oriented way and the related transaction consideration procedures will be performed. Such transactions will not have significant and adverse impact on the independent operation ability of the Issuer, the Issuer will urge the controlling shareholder and the de facto controller to continue to strictly perform their commitment on related transactions, and the Issuer will take measures to reduce and regulate the related transactions. This issuance is in compliance with the provisions of the Specific Rules for Implementation of the Non-public Issuance of Shares by Listed Companies (《上市公司非公開 發行股票實施細則》).

Upon verification, the Issuer’s Lawyer believes that: the project to be funded by this issuance is the production capacity expansion of the existing photovoltaic glass business of the Issuer, and it is expected that new related transactions will be created in the project construction stage and operation stage, which is commercially reasonable; the new related transactions are all of the existing transaction types and will continue to be priced in accordance with the market-oriented way and the related transaction consideration procedures will be performed. Such transactions will not have significant and adverse impact on the independent operation ability of the Issuer, the Issuer will urge the controlling shareholder and the de facto controller to continue to strictly perform their commitment on related transactions, and will take measures to reduce and regulate the related transactions. This issuance is in compliance with the provisions of the Specific Rules for Implementation of the Non-public Issuance of Shares by Listed Companies (《上市公司非公開 發行股票實施細則》).

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QUESTION 3. Regarding the accounts receivable. As at 31 December 2018, 31 December 2019, 31 December 2020 and 31 March 2021, the net accounts receivables of the Applicant were RMB492,277,400, RMB562,892,700, RMB637,911,200 and RMB461,059,300, respectively, accounting for 10.93%, 10.74%, 11.38% and 7.84% of the total assets, respectively. The Applicant is requested to provide a supplementary explanation on and disclose: whether there is sufficient provision for bad debts during the reporting period by taking into account the aging of accounts receivable, credit policy, sales receipts, etc. The Sponsor and the accountant of the Applicant are requested to explain the basis and process for the verifications, and express their clear and definite opinions on the verifications.

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Reply:

As at the end of 2018, the end of 2019, the end of 2020 and the end of March 2021, the net accounts receivable of the Company were RMB492,277,400, RMB562,892,700, RMB637,911,200 and RMB461,059,300, respectively, and the provision for bad debts of accounts receivable was RMB72,202,600, RMB104,823,400, RMB112,709,500 and RMB112,889,100, respectively. The sufficiency statement of the provision for bad debts is as follows:

• I. Aging of accounts receivable

At the end of each period during the reporting period, details of the aging of the balance of accounts receivable of the Company are as follows:

Unit: RMB0’000

	As at the end of 2018	As at the end of 2018	As at the end of 2019	As at the end of 2019	As at the end of 2020	As at the end of 2020	As at the end of March 2021	As at the end of March 2021
	Carrying amount	Proportion	Carrying amount	Proportion	Carrying amount	Proportion	Carrying amount	Proportion
Within 1 year	47,366.00	83.91%	52,953.95	79.30%	63,606.39	84.74%	46,194.44	80.49%
1–2 years	1,046.89	1.85%	6,814.58	10.21%	2,658.40	3.54%	2,262.59	3.94%
2–3 years	2,381.38	4.22%	1,095.53	1.64%	2,019.18	2.69%	1,567.03	2.73%
3–4 years	191.43	0.34%	257.85	0.39%	1,095.53	1.46%	817.85	1.42%
4–5 years	21.97	0.04%	191.43	0.29%	220.56	0.29%	1,090.92	1.90%
Over 5 years	5,440.34	9.64%	5,458.26	8.17%	5,462.00	7.28%	5,462.00	9.52%
Total	56,448.01	100.00%	66,771.60	100.00%	75,062.06	100.00%	57,394.83	100.00%

As shown in the above table, the aging of the accounts receivable of the Company is of stable structure. The proportion of the accounts receivable within 1 year as at the end of each period during the reporting period exceeds 75%, representing a relatively short aging of the accounts receivable.

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II. Credit policy

The operating revenue and accounts receivable of the Company are mainly derived from the sales of photovoltaic glass further processed products to enterprises engaged in photovoltaic modules, including LONGI Group ( 隆基股 份 ), Trina Solar ( 天合光能 ), Risen ( 東方日昇 ) and other leading enterprises in the industry and the Company maintains a good credit standing. With reference to the industry practice, the Company generally offers a certain credit period to these customers, and the credit period offered to the customers with good credit standing is generally not more than 6 months.

• III. Recovery of subsequent repayment of accounts receivable

The recovery of subsequent repayment of accounts receivable of the Company is in good condition. As at the end of 2020, the balance of the accounts receivable of the Company amounted to RMB750,620,700. As at the end of March 2021, the total amount that has been collected amounted to RMB638,827,500. The proportion of the repayment for the subsequent 3 months is 85.11%, demonstrating a good condition for the recovery of subsequent repayment.

IV. Bad debt provision for accounts receivable

As at the end of each period during the reporting period, the Company’s policies on the provision for bad debts of accounts receivable are as follows:

• ① Accounts receivable without containing significant financing components. For the accounts receivable without containing significant financing components arising from transactions regulated under the Accounting Standards for Business Enterprises No. 14 – Revenue, the Company adopts a simplified approach which is to always measure the loss provisions at lifetime expected credit loss.

Based on the nature of financial instruments, the Company assesses whether credit risk has increased significantly on the basis of an individual financial asset or groupings of financial assets. When the expected credit loss of an individual financial asset could not be assessed at a reasonable cost, the Company divides accounts receivable into certain groupings based on credit risk characteristics, and calculates the expected credit loss on groupings basis. Basis for the grouping is as follows:

Accounts receivable grouping 1: general customer

Accounts receivable grouping 2: related party customer (de facto controller and its subsidiaries)

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Notes receivable grouping 1: commercial acceptances

Notes receivable grouping 2: bank acceptances

For accounts receivable and notes receivable that are classified into general customer grouping and commercial acceptances, respectively, by making reference to the experience of historical credit losses and giving consideration to the current situation and the forecast of the future economic situation, the Company prepares a comparison table specifying the aging and the lifetime expected credit loss rates of such receivables to calculate the expected credit loss. For accounts receivable that are classified as related party group, by making reference to the experience of historical credit losses and giving consideration to the current situation and the forecast of the future economic situation, the Company calculates expected credit loss using exposure at default (“ EAD ”) and lifetime expected credit loss rate.

• ② Accounts receivable and rental receivable containing significant financing components

For accounts receivable containing significant financing components, and rental receivable regulated under the Accounting Standards for Business Enterprises No. 21 – Leases, the Company measures loss provisions with the general approach, i.e. the “three-stage” model.

In particular, the Company makes bad debt provision for accounts receivable on both individual basis and group basis (including general customers and related party customers). At the end of 2020, the balance of the accounts receivable provided on individual basis amounted to RMB36,626,800, with a bad debt provision ratio of 100%; the balance of the accounts receivable provided on group (related party) basis amounted to RMB46,741,800, with a bad debt provision ratio of 2%; the balance of the accounts receivable provided on group

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(general customers) basis amounted to RMB667,252,000, and the ratio of bad debt provision by aging analysis is 11.26%. Among the listed companies in glass industry, IRICO New Energy ( 彩虹新能源 ), Yaohua Pilkington Glass ( 耀皮玻 璃 ) and other companies disclosed the proportion of bad debt provision by aging analysis in 2020, details of which are as follows:

	Within 1 year	1 to 2 years	2 to 3 years	3 to 4 years	4 to 5 years	Over 5 years
Company	2%	30%	50%	100%	100%	100%
IRICO New Energy	No provision for those within 0–6 months and 1% for 7 to 12 months	30%	50%	100%	100%	100%
Yaohua Pilkington Glass	1.5%	14.36%	14.36%	96.64%	96.64%	96.64%
Kibing Group	5%	10%	20%	30%	50%	100%
Fuyao Glass	0.1%	11.31%	49.06%	100%	100%	100%
Golden Glass	5%	10%	15%	25%	50%	100%

As shown in the above table, the proportion of bad debt provision for accounts receivable on aging portfolio basis by the Company falls into a reasonable level among the listed companies in glass industry.

To sum up, the aging of the accounts receivable of the Company at the end of each reporting period was relatively short, the major customers were in good credit standing and the subsequent repayment was in good condition; it is comparable between the policy of bad debt provision for the accounts receivables and the proportion of the bad debt provision on aging portfolio basis of the Company and that of the listed companies in the same industry. It is sufficient for the bad debt provision for the accounts receivables of the Company.

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V. Verification opinions of the intermediaries

Regarding the above matters, the Sponsor and the Issuer’s Accountant have performed the following verification procedures: (1) obtained the breakdown of the accounts receivable and the aging accounts receivable of the Applicant at the end of each reporting period, analyzed whether the aging division of the accounts receivable is reasonable and reviewed the accuracy of the aging division based on the amounts of each period; (2) obtained the major sales contracts of the Applicant for each reporting period, checked the methods for settlement as well as the settlement period as agreed in the sales contracts and agreements and compared that with the aging of the accounts receivable; (3) assessed the bad debt provision policy for the accounts receivable of the Applicant and compared that with that in the industry; (4) obtained the standing book of the accounts receivable of the customers after the reporting period and spot checked the collection of the accounts receivable; (5) spot checked the major customers of the accounts receivable at the end of each reporting period through industry and commerce information system, Tianyancha ( 天眼查 ) and other internet public information system to understand their credit positions, operation situation and others. If a customer has poor credit or material litigation, the Company shall verify whether it has made bad debt provision on individual basis and assess the adequacy of the bad debt provision on individual basis.

Upon verification, the Sponsor believes that: the aging of the accounts receivable of the Applicant at the end of each reporting period was relatively short and the major customers were in good credit positions and the collection of accounts receivable subsequent to the period was well; the bad debt provision policy for the accounts receivables and the proportion of the bad debt provision on aging portfolio basis of the Applicant are comparable with that of the listed companies in the industry. The bad debt provision for the accounts receivables of the Applicant is adequate.

Upon verification, the Issuer’s Accountant believes that: the aging of the accounts receivable of the Applicant at the end of each reporting period was relatively short and the major customers were in good credit positions and the collection of accounts receivable subsequent to the period was well; the bad debt provision policy for the accounts receivables and the proportion of the bad debt provision on aging portfolio basis of the Applicant are comparable with that of the listed companies in the industry. The bad debt provision for the accounts receivables of the Applicant is adequate.

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(There is no text on this page. It is the sealed page of the Reply Regarding the Letter in respect of Preparation Works for Issuance Examination Committee Meeting on the Non-Public Issuance of Luoyang Glass by Luoyang Glass Company Limited* and CITIC Securities Company Limited)

Luoyang Glass Company Limited*

8 June 2021

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(There is no text on this page. It is the seal page for the Reply Regarding the Letter in respect of Preparation Works for Issuance Examination Committee Meeting on the Non-Public Issuance of Luoyang Glass by Luoyang Glass Company Limited* and CITIC Securities Company Limited)

Sponsor representative: Ling Tao Ge Weijie

CITIC Securities Company Limited

8 June 2021

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STATEMENT OF CHAIRMAN OF SPONSOR

I have carefully read all the contents of the Reply Regarding the Letter in respect of Preparation Works for Issuance Examination Committee Meeting on the Non-Public Issuance of Luoyang Glass by Luoyang Glass Company Limited* and CITIC Securities Company Limited, understood the verification process of the problems involved in the report, the Company’s core and risk control process, and confirmed that the Company carried out the verification procedures in accordance with the principle of diligence, and there were no false records and misleading statements or major omissions in the Reply Report on the Feedback Opinions, and the Company bears the corresponding legal responsibility for the authenticity, accuracy, completeness and timeliness of the above documents.

Chairman: ZHANG Youjun

CITIC Securities Company Limited

8 June 2021

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