RoboSense Technology Co., Ltd - Proxy Solicitation & Information Statement 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Luoyang Glass Company Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser(s) or the transferee(s), or to the bank, licensed securities dealer or other agent through whom the sale or the transfer was effected for transmission to the purchaser(s) or the transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

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

(Stock Code: 1108)

CONTINUING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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A notice of the second extraordinary general meeting 2009 (the “ EGM ”) of the Company to be held at 9:00 a.m. on 13 July 2009 at the conference room of the Company on 1st Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the People’s Republic of China (the “ PRC ”) is set out on pages 81 to 87 of this circular.

A form of proxy for use at the EGM is enclosed. Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s share registrar, Hong Kong Registrars Limited at Rooms 1901-5, Hopewell Centre, 183 Queen’s Road East, Hong Kong or to the Company at No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC as soon as possible and in any event not less than 24 hours before the time appointed for holding the EGM or for any adjournments thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

27 May 2009

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Non-exempt CCT Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Basis of the Caps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Reasons for the Non-exempt Continuing Connected Transactions . . . . . . . . . . . . . . . . . . . . . .	29
Information and Relationship of the Parties to
the Non-exempt CCT Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30
Listing Rules Implication of the Non-exempt
Continuing Connected Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34
Letter from Access Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
Appendix I — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	77
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81

— i —

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

“Access Capital”

Access Capital Limited, being a corporation licensed by the Securities and Futures Commission of Hong Kong for carrying Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in connection with the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions;

“associates”

has the same meaning as ascribed to the Listing Rules;

“Board”
“Cap(s)”
the board of directors of the Company from time to time; the maximum aggregated annual values of the Non-exempt Continuing Connected Transactions for each of the years between 2009 and 2011;
“CLFG” 中國洛陽浮法玻璃集團有限責任公司 (China Luoyang Float Glass (Group) Company Limited*), a limited liability company incorporated in the PRC and the controlling shareholder of the Company holding a 35.8% equity interest in the Company;
“CLFG Group”
CLFG and its subsidiaries/controlled companies/entities;
“CLFG Mineral Company”
中國洛陽浮法玻璃集團礦產有限公司 (CLFG Mineral Company Limited*), a limited liability company incorporated in the PRC, 40.29% and 59.71% shareholding of which is owned by the Company and CLFG respectively;
“CLFG Xinxing Company” 洛玻集團新興實業開發有限責任公司 (CLFG Xinxing Development Company Limited*), a limited liability company incorporated in the PRC and a subsidiary of CLFG;
“CNBMG”

China National Building Material Group Corporation, a wholly Stateowned enterprise incorporated in the PRC and the ultimate controller of the Company;

— ii —

DEFINITIONS

“Company” 洛陽玻璃股份有限公司 (Luoyang Glass Company Limited), a joint stock limited company incorporated in the PRC with limited liability, the H Shares of which are listed on the Main Board of the Stock Exchange (stock code: 1108); “Company Supply Agreement” the float glass sale and purchase framework agreement dated 24 April 2009 entered into between the Company, on behalf of the Group, as supplier and CLFG, on behalf of CLFG Group, as purchaser, pursuant to which the Group agreed to sell its products to CLFG Group; “connected person” has the same meaning as ascribed to the Listing Rules; “Directors” the directors of the Company, including the independent non-executive directors; “EGM” the second extraordinary general meeting of the Company to be convened and held at 9:00 a.m. on 13 July 2009 at the conference room of the Company on 1st Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC for the purpose of considering, and if thought fit, approving the Nonexempt CCT Agreements and their respective proposed Cap amounts in relation to the transactions contemplated thereunder; “Group” the Company and its subsidiaries; “Hong Kong” the Hong Kong Special Administrative Region of the PRC; “Huayi Glass” 安徽省蚌埠華益導電膜玻璃有限公司 (Anhui Province Bangbu Huayi Glass Company Limited), a limited liability company incorporated in the PRC and an associate of CNBMG; “Huayi Glass Supply Agreement” the super-thin float glass sale and purchase contract dated 24 April 2009 entered into between Longhai Glass as supplier and Huayi Glass as purchaser, pursuant to which Longhai Glass agreed to sell its super-thin float glass to Huayi Glass;

— iii —

DEFINITIONS

“Independent Board Committee”
“Independent Shareholders”
“Independent Third Party(ies)”
“Latest Practicable Date”
“Listing Rules”
“Longfei Composite Services Agreement”
“Longfei Entrusted Loan Agreement”
“Longfei Glass”
“Longfei Glass Supply Agreement”
an independent board committee of the Company comprising all the independent non-executive Directors namely Mr. Zhang Zhanying, Mr. Guo Aimin and Mr. Huang Ping, to advise the Independent Shareholders as to the terms of the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions;
Shareholders other than CLFG and its associates;
person(s) or company(ies) and their respective ultimate beneficial owner(s) which, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, are third parties independent of and not connected with the Company and its subsidiaries and its connected persons (as defined in the Listing Rules);
21 May 2009, being the latest practicable date before the printing of this circular for ascertaining certain information;

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

the composite services contract dated 24 April 2009 entered into between the Company as services provider and Longfei Glass as customer, pursuant to which the Company agreed to provide technology, staff training, transportation and storage services to Longfei Glass;

the agreement dated 24 April 2009 entered into between the Company and Longfei Glass, pursuant to which the Company agreed to provide entrusted loans to Longfei Glass;

洛玻集團龍飛玻璃有限公司 (CLFG Longfei Glass Company Limited*), a limited liability company incorporated in the PRC, 54% and 10% shareholding of which is owned by the Company and CLFG respectively;
the supply contract dated 24 April 2009 entered into between the Longfei Glass as supplier and the Company as purchaser, pursuant to which Longfei Glass agreed to sell its products to the Company;

— iv —

DEFINITIONS

“Longfei Guarantee Agreement”
“Longhai Composite Services Agreement”
“Longhai Entrusted Loan Agreement”
“Longhai Glass”
“Longhai Guarantee Agreement”
“Longhao Composite Services Agreement”
“Longhao Entrusted Loan Agreement”
“Longhao Glass”

the guarantee contract dated 24 April 2009 entered into between the Company and Longfei Glass, pursuant to which the Company agreed to provide guarantees to Longfei Glass;

the composite services contract dated 24 April 2009 entered into between the Company as services provider and Longhai Glass as customer, pursuant to which the Company agreed to provide technology, staff training, transportation and storage services to Longhai Glass;

the agreement dated 24 April 2009 entered into between the Company and Longhai Glass, pursuant to which the Company agreed to provide entrusted loans to Longhai Glass;

洛玻集團洛陽龍海電子玻璃有限公司 (CLFG Luoyang Longhai Electric Glass Company Limited*), a limited liability company incorporated in the PRC, 80% and 20% shareholding of which is owned by the Company and CLFG respectively;
the guarantee contract dated 24 April 2009 entered into between the Company and Longhai Glass, pursuant to which the Company agreed to provide guarantees to Longhai Glass;
the composite services contract dated 24 April 2009 entered into between the Company as services provider and Longhao Glass as customer, pursuant to which the Company agreed to provide technology, staff training, transportation and storage services to Longhao Glass;
the agreement dated 24 April 2009 entered into between the Company and Longhao Glass, pursuant to which the Company agreed to provide entrusted loans to Longhao Glass;
洛玻集團洛陽龍昊玻璃有限責任公司 (CLFG Luoyang Longhao Glass Company Limited*), a limited liability company incorporated in the PRC, 80% and 20% shareholding of which is owned by the Company and CLFG respectively;

— v —

DEFINITIONS

“Longhao Glass Supply Agreement”
“Longhao Guarantee Agreement”
“Longhao Raw Material Supply Agreement”
“Longmen Glass”
“Longxiang Composite Services Agreement”
“Longxiang Equity Acquisition”
“Longxiang Glass”
“Longxiang Glass Supply Agreement”
the supply contract dated 24 April 2009 entered into between the Longhao Glass as supplier and the Company as purchaser, pursuant to which Longhao Glass agreed to sell its products to the Company;

the guarantee contract dated 24 April 2009 entered into between the Company and Longhao Glass, pursuant to which the Company agreed to provide guarantees to Longhao Glass;

the raw material and fuel purchase contract dated 24 April 2009 entered into between the Company as supplier and Longhao Glass as purchaser, pursuant to which the Company agreed to provide certain raw materials to Longhao Glass;
洛玻集團龍門玻璃有限責任公司(CLFG Longmen Glass Company Limited*), a limited liability company incorporated in the PRC and a subsidiary of the Company;
the composite services contract dated 24 April 2009 entered into between the Company as services provider and Longxiang Glass as customer, pursuant to which the Company agreed to provide technology, staff training, transportation and storage services to Longxiang Glass;
the acquisition of an aggregate 60% equity interest in Longxiang Glass by Longfei Glass from 13 of the then independent shareholders of Longxiang Glass. The acquisition was completed in January 2009;
洛玻集團龍翔玻璃有限公司 (CLFG Luoyang Longxiang Glass Company Limited*), a limited liability company incorporated in the PRC, a wholly owned subsidiary of Longfei Glass. Before completion of the Longxiang Equity Acquisition, Longfei Glass owned 40% shareholding of Longxiang Glass;
the supply contract dated 24 April 2009 entered into between the Longxiang Glass as supplier and the Company as purchaser, pursuant to which Longxiang Glass agreed to sell its products to the Company;

— vi —

DEFINITIONS

“Longxiang Guarantee Agreement”
the guarantee contract dated 24 April 2009 entered into between the Company and Longxiang Glass, pursuant to which the Company agreed to provide guarantees to Longxiang Glass;
“Longxiang Raw Material Supply Agreement”

the raw material purchase contract dated 24 April 2009 entered into between the Company as supplier and Longxiang Glass as purchaser, pursuant to which the Company agreed to provide certain raw materials to Longxiang Glass;

“Longxin Composite Services Agreement”

the composite services contract dated 24 April 2009 entered into between the Company as services provider and Longxin Glass as customer, pursuant to which the Company agreed to provide technology, staff training, transportation and storage services to Longxin Glass;

“Longxin Glass”
洛玻集團洛陽龍新玻璃有限公司 (CLFG Luoyang Longxin Glass Company Limited*), a limited liability company incorporated in the PRC, 50% shareholding of which is owned by CLFG;
“Longxin Glass Supply Agreement”
the supply contract dated 24 April 2009 entered into between Longxin Glass as supplier and the Company as purchaser, pursuant to which Longxin Glass agreed to sell its products to the Company;
“Longxin Raw Material Supply Agreement”
the raw material purchase contract dated 24 April 2009 entered into between the Company as supplier and Longxin Glass as purchaser, pursuant to which the Company agreed to provide certain raw materials to Longxin Glass;
“Luoyang Xinxing” 洛陽新興物業管理有限公司 (Luoyang Xinxing Property Management Company Limited*), a limited liability company incorporated in the PRC and a subsidiary of CLFG;

— vii —

DEFINITIONS

“Non-exempt CCT Agreements”

“Non-exempt Continuing Connected Transactions”
“PBOC”
“percentage ratio”
“PRC”
“Provision of Water, Electricity and Steam Agreement”
A total of 24 agreements, being Company Supply Agreement, Provision of Water, Electricity and Steam Agreement, Longhao Entrusted Loan Agreement, Longhai Entrusted Loan Agreement, Longfei Entrusted Loan Agreement, Longhao Guarantee Agreement, Longhai Guarantee Agreement, Longfei Guarantee Agreement, Longxiang Guarantee Agreement, Longhao Raw Material Supply Agreement, Longfei Raw Material Supply Agreement, Longxiang Raw Material Supply Agreement, Longxin Raw Material Supply Agreement, Longhao Glass Supply Agreement, Longfei Glass Supply Agreement, Longxiang Glass Supply Agreement, Longxin Glass Supply Agreement, Huayi Glass Supply Agreement, Silicon Powder Supply Agreement, Longhao Composite Services Agreement, Longhai Composite Services Agreement, Longfei Composite Services Agreement, Longxiang Composite Services Agreement and Longxin Composite Services Agreement, the entering into of each of which constitutes non-exempt continuing connected transactions under Chapter 14A of the Listing Rules, which, together with the respective Caps, is subject to the reporting, announcement and Independent Shareholders’ approval requirements;
the continuing connected transactions contemplated under each of the Non-exempt CCT Agreements (as the context may require), which are subject to reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules;
People’s Bank of China;
has the meaning ascribed to this term under the Listing Rules, as application to a transaction;
the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, Macau and Taiwan;
the provision of water, electricity and steam framework agreement dated 24 April 2009 entered into between the Company as supplier and CLFG, on behalf of CLFG Group, as purchaser, pursuant to which the Company agreed to provide water, electricity and steam to CLFG Group;

— viii —

DEFINITIONS

“RMB” Renminbi, the lawful currency of the PRC; “SFO” the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong; “Share(s)” share(s) of RMB1.00 each of the Company; “Shareholder(s)” registered holder(s) of the Shares; “Silicon Powder Supply Agreement” the silicon powder sale and purchase framework contract dated 24 April 2009 entered into between CLFG Mineral Company, as supplier and the Company, on behalf of the Group, as purchaser, pursuant to which CLFG Mineral Company agreed to provide certain raw materials to the Group; “State Price” mandatory price set by the central government of the PRC; “Stock Exchange” The Stock Exchange of Hong Kong Limited; “subsidiaries” has the meaning given to it in the Listing rules; and “Supervisors” the supervisors of the Company;

For identification purpose only

— ix —

LETTER FROM THE BOARD

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

(Stock Code: 1108)

Executive Directors:

Mr. Gao Tianbao (Chairman) Mr. Xie Jun Mr. Cao Mingchun Mr. Song Jianming Ms. Song Fei

Registered office:

No. 9 Tang Gong Zhong Lu Xigong District Luoyang Municipal Henan Province the PRC

Non-executive Directors:

Mr. Shen Anqin

Mr. Bao Wenchun

Independent non-executive Directors:

Mr. Zhang Zhanying

Mr. Guo Aimin

Mr. Huang Ping

27 May 2009

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

Reference is made to the announcement of the Company dated 24 April 2009 in respect of the continuing connected transactions and connected transactions of the Company (the “ Announcement ”).

— 1 —

LETTER FROM THE BOARD

The Company is principally engaged in the production and sale of float sheet glass and is one of the largest manufacturers and distributors of float glass in the PRC. In order to secure continuous supply of raw materials and energy for the Group’s production as well as to provide the Group with operational and financial flexibility, on 24 April 2009, the Group entered into the Non-exempt CCT Agreements with members of CLFG Group in respect of purchases of raw material and energy, provision of various services, supply of products as well as provision of entrusted loans and guarantees.

Historical breaches of the Listing Rules

During the period between 2004 and 2008, the Group conducted transactions similar in nature to those contemplated under the Non-exempt CCT Agreements which were not in full compliance with the requirements to (i) enter into written agreement(s) pursuant to Rule 14A.35(1) of the Listing Rules; (ii) conduct annual review by the Company’s independent non-executive Directors pursuant to Rule 14A.37 of the Listing Rules; and (iii) conduct annual review by the Company’s auditors pursuant to Rule 14A.38 of the Listing Rules. Set out below is a summary of the non-compliance aspects of the abovementioned transactions under the Listing Rules:

Non-exempt CCT Agreements	Non-exempt CCT Agreements	2004	2005	2006	2007	2008
						(Note 2)
1.	Company Supply Agreement_(Note 1)_	I	I	I	R	R
2.	Provision of Water, Electricity and
	Steam Agreement_(Note 1)_	I	I	I	I	I
3.	Longhao Entrusted Loan Agreement	nil	nil	I	I	I
4.	Longhai Entrusted Loan Agreement	nil	nil	I	I	I
5.	Longfei Entrusted Loan Agreement	I	I	I	I	I
6.	Longhao Guarantee Agreement	nil	I	I	I	I
7.	Longhai Guarantee Agreement	nil	R	I	I	I
8.	Longfei Guarantee Agreement	I	I	I	I	I
9.	Longxiang Guarantee Agreement	nil	nil	nil	nil	I
10.	Longhao Raw Material Supply
	Agreement_(Note 1)_	nil	nil	I	nil	I
11.	Longfei Raw Material Supply
	Agreement_(Note 1)_	nil	nil	nil	R	I
12.	Longxiang Raw Material Supply
	Agreement_(Note 1)_	nil	nil	nil	nil	I
13.	Longxin Raw Material Supply
	Agreement_(Note 1)_	nil	nil	nil	nil	I
14.	Longhao Glass Supply Agreement	nil	nil	I	I	I

— 2 —

LETTER FROM THE BOARD

15.	Longfei Glass Supply Agreement	R	R	nil	R	I
16.	Longxiang Glass Supply Agreement	nil	nil	nil	nil	I
17.	Longxin Glass Supply Agreement	I	I	I	I	I
18.	Huayi Glass Supply Agreement_(Note 1)_	nil	nil	nil	I	I
19.	Silicon Powder Supply Agreement	I	R	I	I	I
20.	Longhao Composite Services
	Agreement_(Note 1)_	nil	nil	nil	R	R
21.	Longfei Composite Services
	Agreement_(Note 1)_	nil	nil	nil	R	R
22.	Longxiang Composite Services
	Agreement_(Note 1)_	nil	nil	nil	R	R
23.	Longxin Composite Services
	Agreement_(Note 1)_	nil	R	R	R	R

Remarks:

R — not complied with the reporting and announcement requirements

I — not complied with the reporting, announcement and Independent Shareholders’ approval requirements

Note 1: Based on the work performed, the auditors of the Company have confirmed in a letter to the Board that these continuing connected transactions occurred during the year ended 31 December 2008 were in accordance with the pricing policies of the Group, as a requirement set out in Rule 14A.38(2) of the Listing Rules.
Note 2: The Company has notified the Stock Exchange, pursuant to Rule 14A.40 of the Listing Rules, that the auditors of the Company are unable to confirm the matters set out in Rule 14A.38(1), (3) and (4) of the Listing Rules in respect of the abovementioned continuing connected transactions that occurred during the year ended 31 December 2008.

Remedial actions taken by the incumbent Board

Since the appointment of the existing Directors, the management of the Company is determined to enhance the internal control system including the information disclosure system, with a view to ensuring full compliance with the Listing Rules in the future. All of the Non-exempt Continuing Connected Transactions commenced before the resignation of the former directors and were unveiled when a majority of the new management of the Company came on board in 2008. An announcement disclosing the Non-exempt Continuing Connected Transactions was made on 24 April 2009. As the Non-exempt Continuing Connected Transactions form part and parcel of the core business of the Group, the Directors are of the view that the termination of these transactions will adversely affect the Group’s normal operation and is not in the best interest of the Shareholders and the Company. As such, the Non-exempt Continuing Connected Transactions are continuing as at the date of this circular.

— 3 —

LETTER FROM THE BOARD

The Company has retained an independent adviser, ShineWing (HK) CPA Limited (the “ Independent Adviser ”) to conduct a review of its internal control system. Based on the findings of the Independent Adviser, the Company under the supervision of its new management has instituted additional measures with a view to avoiding recurrence of similar non-compliance with the Listing Rules in the future and in recognition of the utmost importance of strict compliance with the Listing Rules. In January 2008, the Independent Adviser completed its follow up review of the internal control system of the Group and was of the view that the Group satisfactorily implemented most of its recommendations to the Group, and non-implementation of the remaining recommendations would not result in the Group having significant deficiencies in detecting or preventing breaches of relevant regulations or fraudulent acts. In response to the Independent Adviser’s follow up review, the Company has implemented the remaining recommendations by June 2008. The Company has engaged the Independent Adviser to conduct another review (the “ Latest Review ”) on its information disclosure system in October 2008. No major deficiencies were identified by the Independent Adviser during this Latest Review. The Company and the Independent Adviser are of the opinion that the Company’s present system and overall controls on information disclosure are adequate and effective.

The Directors believe that the Company has instituted proper internal controls to comply with the Listing Rules.

On 24 April 2009, the 24 Non-exempt CCT Agreements were entered into for a period up to 31 December 2011 with a view to ensuring the continuous provision of goods and services such as supply of raw materials and energy, provision of entrusted loans, guarantees and composite services to the Group for its operations.

The entering into each of the Non-exempt CCT Agreements constitutes non-exempt continuing connected transactions under Chapter 14A of the Listing Rules. In addition, the transactions contemplated under each of the Longhao Entrusted Loan Agreement, the Longhai Entrusted Loan Agreement, the Longfei Entrusted Loan Agreement, the Longhao Guarantee Agreement, the Longhai Guarantee Agreement, the Longfei Guarantee Agreement and the Longxiang Guarantee Agreement (all form part of the Non-exempt CCT Agreements) also constitute non-exempt financial assistances under Rule 14A.63 of the Listing Rules. As such, all of these transactions are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The purpose of this Circular is to provide Shareholders, amongst other things, with (i) further information on the Non-exempt Continuing Connected Transactions; (ii) the letter of advice from the Independent Board Committee to the Independent Shareholders; (iii) the letter of advice from Access Capital to the Independent Board Committee and the Independent Shareholders; and (iv) a notice of the EGM for the purpose of approving the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts.

— 4 —

LETTER FROM THE BOARD

NON-EXEMPT CCT AGREEMENTS

Set out below is a summary of the principal terms of the Non-exempt CCT Agreements:

PARTICULARS OF COMPANY SUPPLY AGREEMENT

Date

24 April 2009

Parties

(1) The Company, on behalf of the Group, as supplier; and
(2) CLFG, on behalf of CLFG Group, as purchaser

Period

The Company Supply Agreement shall take effect after the signing of the agreement and the approval of the agreement by the Independent Shareholders at the EGM for a period up to 31 December 2011.

Goods to be provided and pricing

The Group will supply float flat glass products at the car-making level （汽車級） and the mirror-making level （制鏡級） to CLFG Group at a price to be determined with reference to the prevailing market price at the time of the particular transaction. The price for supplying the same or similar products to third parties will be taken into account when determining the market price. The price offered to CLFG Group will not be less than that offered to third party customers of the Group.

Condition

The Company Supply Agreement is conditional on obtaining the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

— 5 —

LETTER FROM THE BOARD

PARTICULARS OF PROVISION OF WATER, ELECTRICITY AND STEAM AGREEMENT

Date

24 April 2009

Parties

(1) The Company, as supplier; and
(2) CLFG, on behalf of CLFG Group, as purchaser

Period

The Provision of Water, Electricity and Steam Services Agreement shall take effect after the signing of the agreement and the approval of the agreement by the Independent Shareholders at the EGM for a period up to 31 December 2011.

Goods to be provided and pricing

The Company will supply water, electricity and steam to CLFG Group at a price to be determined with reference to the respective prevailing market price, which is determined based on the relevant PRC regulations from time to time, and thus is on normal commercial terms.

Condition

The Provision of Water, Electricity and Steam Services Agreement is conditional on obtaining the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

— 6 —

LETTER FROM THE BOARD

PARTICULARS OF LONGHAO ENTRUSTED LOAN AGREEMENT, LONGHAI ENTRUSTED LOAN AGREEMENT AND LONGFEI ENTRUSTED LOAN AGREEMENT

Date

24 April 2009

Parties

Longhao Entrusted Loan Agreement:

(1) The Company; and
(2) Longhao Glass, a non-wholly owned subsidiary of the Company and the equity interest of which is owned as to 80% by the Company and 20% by CLFG. It is a connected person of the Company because CLFG is its substantial shareholder.

Longhai Entrusted Loan Agreement:

(1) The Company; and
(2) Longhai Glass, a non-wholly owned subsidiary of the Company and the equity interest of which is owned as to 80% by the Company and 20% by CLFG. It is a connected person of the Company because CLFG is its substantial shareholder.

Longfei Entrusted Loan Agreement:

(1) The Company; and
(2) Longfei Glass, a non-wholly owned subsidiary of the Company and the equity interest of which is owned as to 54% by the Company, 10% by CLFG and 36% by Yingchi Float Glass Factory, an Independent Third Party not connected with the Company or connected persons of the Company. Longfei Glass is a connected person of the Company because CLFG is its substantial shareholder.

Period

The Longhao Entrusted Loan Agreement, the Longhai Entrusted Loan Agreement and the Longfei Entrusted Loan Agreement shall take effect after the signing of the agreements and the approval of the agreements by the Independent Shareholders at the EGM for a period up to 31 December 2011.

— 7 —

LETTER FROM THE BOARD

Entrusted loans to be provided by the Company

The Company entered into an entrusted loan agreement with each of Longhao Glass, Longhai Glass and Longfei Glass with principally the same terms, and pursuant to which the Company would provide a loan via a financial institute (to be designated by the parties and being Independent Third Party to the Company) to Longhao Glass, Longhai Glass and Longfei Glass for carrying out their working projects assigned by the Company. Such loan will be interest bearing and the interest rate will be determined with reference to the relevant loan basic interest rates set by PBOC and the permitted range of floating interest rates for financial institutions set by PBOC at the time of providing the loan.

The Company has entered into certain additional entrusted loan agreements in respect of the above entrusted loan arrangement with the relevant financial institute(s) designated by the parties.

Conditions

Each of the Longhao Entrusted Loan Agreement, the Longhai Entrusted Loan Agreement and the Longfei Entrusted Loan Agreement is conditional on obtaining the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

As mentioned above, given that the Company is not a licensed financial institution, it is not authorized to carry out banking related businesses in the PRC. As such, in order to facilitate the implementation of the Company’s designated projects of its subsidiaries, the Company has made certain loan arrangements in the form of entrusted loans via financial institute(s) designated by the parties. The entrusted loans are granted by the financial institute(s) to the designated subsidiaries on behalf of the Company, from time to time, on a temporary basis and on normal commercial terms as described above.

PARTICULARS OF LONGHAO GUARANTEE AGREEMENT, LONGHAI GUARANTEE AGREEMENT, LONGFEI GUARANTEE AGREEMENT AND LONGXIANG GUARANTEE AGREEMENT

Date

24 April 2009

Parties

Longhao Guarantee Agreement:

(1) The Company, as guarantor; and
(2) Longhao Glass, as guarantee

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LETTER FROM THE BOARD

Longhai Guarantee Agreement:

(1) The Company, as guarantor; and
(2) Longhai Glass, as guarantee

Longfei Guarantee Agreement:

(1) The Company, as guarantor; and
(2) Longfei Glass, as guarantee

Longxiang Guarantee Agreement:

(1) The Company, as guarantor; and
(2) Longxiang Glass, as guarantee, the equity interest of which was owned as to 40% by Longfei Glass before completion of the Longxiang Equity Acquisition. Given that Longfei Glass was effectively entitled to control the composition of a majority of the board of directors of Longxiang Glass, Longxiang Glass was regarded as a subsidiary of Longfei Glass, which in turn is a non wholly-owned subsidiary of the Company and the equity interest of which is owned as to 54% by the Company, 10% by CLFG and 36% by Yingchi Float Glass Factory, an Independent Third Party not connected with the Company or connected persons of the Company. As such, Longxiang Glass is a connected person of the Company under the definition of the Listing Rules. Upon completion of the Longxiang Equity Acquisition, Longxiang Glass becomes a wholly owned subsidiary of Longfei Glass.

Period

The Longhao Guarantee Agreement, the Longhai Guarantee Agreement, the Longfei Guarantee Agreement and the Longxiang Guarantee Agreement shall take effect after the signing of the agreements and the approval of the agreements by the Independent Shareholders at the EGM for a period up to 31 December 2011.

Guarantee to be provided by the Company

The Company entered into a guarantee agreement with each of Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass with principally the same terms whereby the Company would provide guarantee in respect of bank loans of Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass and the latter four parties shall provide in favour of the Company counter-guarantees in respect of the guarantees given by the Company.

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LETTER FROM THE BOARD

Condition

Each of the Longhao Guarantee Agreement, the Longhai Guarantee Agreement, the Longfei Guarantee Agreement and the Longxiang Guarantee Agreement is conditional on obtaining the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass are non-wholly owned subsidiaries of the Company and are engaged in carrying out specific projects assigned by the Company. In the course implementing these projects, it is often necessary for the Company that has a stronger financial standing to provide guarantees in respect of bank loans obtained by these companies.

PARTICULARS OF LONGHAO RAW MATERIAL SUPPLY AGREEMENT, LONGFEI RAW MATERIAL SUPPLY AGREEMENT, LONGXIANG RAW MATERIAL SUPPLY AGREEMENT AND LONGXIN RAW MATERIAL SUPPLY AGREEMENT

Date

24 April 2009

Parties

Longhao Raw Material Supply Agreement:

(1) The Company, as supplier; and
(2) Longhao Glass, as purchaser

Longfei Raw Material Supply Agreement:

(1) The Company, as supplier; and
(2) Longfei Glass, as purchaser

Longxiang Raw Material Supply Agreement:

(1) The Company, as supplier; and
(2) Longxiang Glass, as purchaser

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LETTER FROM THE BOARD

Longxin Raw Material Supply Agreement:

(1) The Company, as supplier; and
(2) Longxin Glass, as purchaser, which is owned as to 50% by CLFG, and thus a connected person of the Company.

Period

The Longhao Raw Material Supply Agreement, the Longfei Raw Material Supply Agreement, the Longxiang Raw Material Supply Agreement and the Longxin Raw Material Supply Agreement shall take effect after the signing of the agreements and the approval of the agreements by the Independent Shareholders at the EGM for a period up to 31 December 2011.

Raw materials to be supplied and price

Prior to 2008, each of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass sourced most of their own raw materials. Subsequently, in order to achieve greater economies of scale and leverage on the stronger bargaining power with the suppliers, the Group decided to adopt a centralised approach in sourcing raw material whereby the Company would source raw materials on behalf of its subsidiaries. In particular, the Company entered into a raw material supply agreement with each of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass on principally the same terms, and pursuant to which the Company would provide certain raw materials including alkali, oil, thenardite, silicon powder, dolomite powder, limestone powder, potassium feldspar powder and shattered glass to Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass at a price to be determined by reference to the prevailing market price of such raw materials.

Conditions

Each of the Longhao Raw Material Supply Agreement, the Longfei Raw Material Supply Agreement, the Longxiang Raw Material Supply Agreement and the Longxin Raw Material Supply Agreement is conditional on obtaining the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

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LETTER FROM THE BOARD

PARTICULARS OF LONGHAO GLASS SUPPLY AGREEMENT, LONGFEI GLASS SUPPLY AGREEMENT, LONGXIANG GLASS SUPPLY AGREEMENT AND LONGXIN GLASS SUPPLY AGREEMENT

Date

24 April 2009

Parties

Longhao Glass Supply Agreement:

(1) Longhao Glass, as supplier; and
(2) The Company, as purchaser

Longfei Glass Supply Agreement:

(1) Longfei Glass, as supplier; and
(2) The Company, as purchaser

Longxiang Glass Supply Agreement:

(1) Longxiang Glass, as supplier; and
(2) The Company, as purchaser

Longxin Glass Supply Agreement:

(1) Longxin Glass, as supplier; and
(2) The Company, as purchaser

Period

The Longhao Glass Supply Agreement, the Longfei Glass Supply Agreement, the Longxiang Glass Supply Agreement and the Longxin Glass Supply Agreement shall take effect after the signing of the agreements and the approval of the agreements by the Independent Shareholders at the EGM for a period up to 31 December 2011.

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LETTER FROM THE BOARD

Goods to be provided and price

Prior to 2008, each of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass sold most of their respective products independently. In order to achieve greater economies of scale and leverage on the enlarged bargaining power with the customers, the Group decided to adopt a centralised approach in selling its products whereby the Company would sell the products on behalf of the relevant subsidiaries. In particular, each of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass entered into a supply agreement with the Company on principally the same terms, and pursuant to which these four companies would respectively supply float flat glass products to the Company at a price to be determined with reference to the prevailing market price at the time the transaction takes place.

Condition

Each of the Longhao Glass Supply Agreement, the Longfei Glass Supply Agreement, the Longxiang Glass Supply Agreement and the Longxin Glass Supply Agreement is conditional on obtaining approval by the Independent Shareholders at the EGM as required under the Listing Rules.

PARTICULARS OF HUAYI GLASS SUPPLY AGREEMENT

Date

24 April 2009

Parties

(1) Longhai Glass, as supplier; and
(2) Huayi Glass, as purchaser. Huayi Glass is a connected person of the Company because it is a subsidiary and is thus an associate of CNBMG, the Company’s ultimate controlling shareholder.

Period

The Huayi Glass Supply Agreement shall take effect after the signing of the agreement and the approval of the agreement by the Independent Shareholders at the EGM for a period up to 31 December 2011.

Goods to be provided and pricing

Longhai Glass will supply super-thin float flat glass to Huayi Glass at a price to be determined with reference to the prevailing market price at the time of transaction.

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LETTER FROM THE BOARD

Condition

The Huayi Glass Supply Agreement is conditional on obtaining the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

PARTICULARS OF SILICON POWDER SUPPLY AGREEMENT

Date

24 April 2009

Parties

(1) The Company, on behalf of the Group, as purchaser; and
(2) CLFG Mineral Company, as supplier. CLFG Mineral Company is owned as to 40.29% by the Company and 59.71% by CLFG. It is a connected person of the Company because it is a subsidiary of CLFG, the controlling shareholder of the Company.

Period

The Silicon Powder Supply Agreement shall take effect after the signing of the agreement and the approval of the agreement by the Independent Shareholders at the EGM for a period up to 31 December 2011.

Goods to be purchased by the Group and pricing

CLFG Mineral Company shall supply to the Group at least 250,000 tonnes silicon powder per annum (which was mistakenly typed as 25 tonnes in the Announcement), which was manufactured by CLFG Mineral Company.
The Group has the priority over other third parties to purchase silicon powder from CLFG Mineral Company.
The price shall be determined with reference to the prevailing market price at the time of transaction. The parties will assess and confirm the price before 31 December every year.
The price of the silicon powder shall be calculated based on dry silicon powder, which should have water content below 6%, exceeding which the price should decrease and by reference to the prevailing market price.

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LETTER FROM THE BOARD

In the event that the Group is alike to obtain a lower price or better quality silicon powder from other suppliers, the Group may purchase the silicon powder from other suppliers provided the Group gives a 3-month prior written notice to CLFG Mineral Company.

Condition

The Silicon Powder Supply Agreement is conditional on obtaining the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

PARTICULARS OF LONGHAO COMPOSITE SERVICES AGREEMENT, LONGHAI COMPOSITE SERVICES AGREEMENT, LONGFEI COMPOSITE SERVICES AGREEMENT, LONGXIANG COMPOSITE SERVICES AGREEMENT AND LONGXIN COMPOSITE SERVICES AGREEMENT

Date

24 April 2009

Parties

Longhao Composite Services Agreement:

(1) The Company, as services provider; and
(2) Longhao Glass, as customer

Longhai Composite Services Agreement:

(1) The Company, as services provider; and
(2) Longhai Glass, as customer

Longfei Composite Services Agreement:

(1) The Company, as services provider; and
(2) Longfei Glass, as customer

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LETTER FROM THE BOARD

Longxiang Composite Services Agreement:

(1) The Company, as services provider; and
(2) Longxiang Glass, as customer

Longxin Composite Services Agreement:

(1) The Company, as services provider; and
(2) Longxin Glass, as customer

Period

The Longhao Composite Services Agreement, the Longhai Composite Services Agreement, the Longfei Composite Services Agreement, the Longxiang Composite Services Agreement and the Longxin Composite Services Agreement shall take effect after the signing of the agreements and approval of the agreements by the Independent Shareholders at the EGM for a period up to 31 December 2011.

Services to be provided and pricing

a. The Company entered into a composite services agreement with each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass with principally the same terms, and pursuant to which the Company would provide the following services to Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass:
technology usage and consultation services;
establishment and organization of systems on production safety and environmental protection;
implementation of glass colour change according to the need of the market;
preparing software for glass technology to implement the technology operation;
analytical services for defected glass;
examination of oven and main equipments and preparation of repairing proposal;
examination of production table and testing devices;

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LETTER FROM THE BOARD

assistance in restoration of production after serious accident;
storage services;
transportation services;
training services for management; and
brand management.
b. The price will be determined with reference to the prevailing market price at the time of transaction.
c. Each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass shall engage the Company to conduct any research which relies on the technology solely owned by the Company. The Company shall entitle to the ownership of any new production technology for producing float flat glass and related technologies developed in the course of conducting such researches. However, during the effective period of the respective agreements, each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass shall be entitled to use these new technologies for its operations in free of charge.

Conditions

Each of the Longhao Composite Services Agreements, the Longhai Composite Services Agreement, the Longfei Composite Services Agreement, the Longxiang Composite Services Agreement and the Longxin Composite Services Agreement is conditional on obtaining approval by the Independent Shareholders at the EGM as required under the Listing Rules.

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LETTER FROM THE BOARD

BASIS OF THE CAPS

The following table summarises the proposed Cap amounts for the transactions contemplated under the Nonexempt CCT agreements for the period between the date of approving the Cap amounts to 31 December 2009 and each of the two years ending 31 December 2011:

		Historical
		transaction
		amounts		Proposed Cap	amounts
		2008	20093	2010	2011
		RMB’000	RMB’000	RMB’000	RMB’000
1.	Company Supply Agreement	5,804	14,025	37,172	51,670
2.	Provision of Water, Electricity and
	Steam Agreement	20,294	24,714	25,881	27,105
3.	Longhao Entrusted Loan Agreement1	92,700	112,700	112,700	112,700
4.	Longhai Entrusted Loan Agreement1	136,708	181,000	181,000	181,000
5.	Longfei Entrusted Loan Agreement1	15,000	72,000	72,000	72,000
6.	Longhao Guarantee Agreement2	40,000	20,000	20,000	20,000
7.	Longhai Guarantee Agreement2	27,000	50,000	50,000	50,000
8.	Longfei Guarantee Agreement2	52,000	10,000	10,000	10,000
9.	Longxiang Guarantee Agreement2	21,000	30,000	30,000	30,000
10.	Longhao Raw Material Supply Agreement	208,843	553,810	573,470	300,000
11.	Longfei Raw Material Supply Agreement	43,591	172,445	357,640	368,940
12.	Longxiang Raw Material Supply Agreement	76,349	440,390	457,220	472,030
13.	Longxin Raw Material Supply Agreement	137,101	722,860	797,100	927,370
14.	Longhao Glass Supply Agreement	246,500	351,900	387,090	212,925
15.	Longfei Glass Supply Agreement	18,441	76,000	167,200	184,000
16.	Longxiang Glass Supply Agreement	58,904	189,750	208,725	229,625
17.	Longxin Glass Supply Agreement	56,326	274,030	301,433	331,699
18.	Huayi Glass Supply Agreement	18,904	28,410	31,430	34,260
19.	Silicon Powder Supply Agreement	12,635	29,980	37,295	39,250
20.	Longhao Composite Services Agreement	4,293	5,500	5,500	5,500
21.	Longhai Composite Services Agreement	695	900	900	900
22.	Longfei Composite Services Agreement	1,010	2,900	2,900	2,900
23.	Longxiang Composite Services Agreement	2,036	2,900	2,900	2,900
24.	Longxin Composite Services Agreement	3,142	5,000	5,000	5,000

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LETTER FROM THE BOARD

Note:

The amounts for 2008 shown above were calculated based on the average relevant month-end balance in 2008.
The amounts for 2008 shown above were based on the maximum outstanding balance during 2008.
This refers to the proposed Cap amount for the period between the date of the EGM when the Cap amounts are approved and 31 December 2009.

1. Company Supply Agreement

The Cap amounts for the Company Supply Agreement are determined based on management’s internal projection of sales taking into account of (i) the anticipated increase in the market price of float flat glass products and (ii) the anticipated increase in the volume of products to be supplied. The Group began to conduct these transactions since the establishment of the Company back in 1994. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	23,308	14,896	12,552	8,398	5,804

2. Provision of Water, Electricity and Steam Agreement

The Cap amounts for the Provision of Water, Electricity and Steam Agreement are determined based on management’s internal projection on the expected value of the services to be rendered taking into account of (i) the anticipated increase in the unit price for each types of services with reference to the prevailing market price; and (ii) the anticipated increase in the supply volume for each type of services. The Group began to conduct these transactions since the establishment of the Company back in 1994. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	13,438	16,663	18,695	24,118	20,294

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LETTER FROM THE BOARD

3. Longhao Entrusted Loan Agreement

The Cap amounts for the Longhao Entrusted Loan Agreement are determined based on (i) the previous entrusted loan amounts (based on the average monthly balance) and (ii) the Company’s internal projection on Longhao Glass’s business growth. The interest to be payable each year is based on the loan basic interest rates set by PBOC and the permitted range of floating interest rates for financial institutions set by PBOC at the time of providing the loans. The Company began to conduct these transactions since 2006 and has received interests with reference to the rates set by PBOC. Based on the average month-end figures of the relevant years, the historical transaction amounts (inclusive of interests accrued) for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	56,007	94,700	92,700

4. Longhai Entrusted Loan Agreement

The Cap amounts for the Longhai Entrusted Loan Agreement are determined based on (i) the previous entrusted loan amounts (based on the average monthly balance) and (ii) the Company’s internal projection on Longhai Glass’s business growth. The interest to be payable each year is based on the loan basic interest rates set by PBOC and the permitted range of floating interest rates for financial institutions set by PBOC at the time of providing the loans. The Company began to conduct these transactions since 2006 and has received interests with reference to the rates set by PBOC. Based on the average month-end figures of the relevant years, the historical transaction amounts (inclusive of interests accrued) for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	31,583	84,750	136,708

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LETTER FROM THE BOARD

5. Longfei Entrusted Loan Agreement

The Cap amounts for the Longfei Entrusted Loan Agreement are determined based on (i) the previous entrusted loan amounts (based on the average monthly balance) and (ii) the Company’s internal projection on Longfei Glass’s business growth. The interest payable each year is based on the loan basic interest rates set by PBOC and the permitted range of floating interest rates for financial institutions set by PBOC at the time of providing the loans. The Company began to conduct these transactions since the establishment of Longfei Glass back in 2000 and has received interests with reference to the rates set by PBOC. Based on the average month-end figures of the relevant years, the historical transaction amounts (inclusive of interests accrued) for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	17,250	15,000	15,417	15,750	15,000

6. Longhao Guarantee Agreement

The Cap amounts for the Longhao Guarantee Agreement are determined based on management’s expectation with reference to (i) the previous guarantee amounts (based on year-end outstanding amount) by the Company, (ii) the Company’s internal projection on Longhao Glass’s business growth and (iii) the business development of the Company. The Company began to conduct these transactions since 2005. Based on the maximum outstanding amounts during the relevant years, the historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	25,000	40,000	50,000	40,000

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LETTER FROM THE BOARD

7. Longhai Guarantee Agreement

The Cap amounts for the Longhai Guarantee Agreement are determined based on management’s expectation with reference to (i) the previous guarantee amounts (based on year-end outstanding amount) by the Company; (ii) the Company’s internal projection on Longhai Glass’s business growth; and (iii) the business development of the Company. The Company began to conduct these transactions since 2005. Based on the maximum outstanding amounts during the relevant years, the historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	6,000	26,000	19,500	27,000

8. Longfei Guarantee Agreement

The Cap amounts for the Longfei Guarantee Agreement are determined based on management’s expectation with reference to (i) the previous guarantee amounts (based on year-end outstanding amount) by the Company, (ii) the Company’s internal projection on Longfei Glass’s business growth and (iii) the business development of the Company. The Company began to conduct these transactions since the establishment of Longfei Glass in 2000. Based on the maximum outstanding amount during the relevant years, the historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	12,000	25,000	82,000	57,000	52,000

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LETTER FROM THE BOARD

9. Longxiang Guarantee Agreement

The Cap amounts for the Longxiang Guarantee Agreement are determined based on management’s expectation with reference to (i) the Company’s internal projection on Longxiang Glass’s business growth and (ii) the business development of the Company. The Company began to conduct these transactions since March 2008. Based on the maximum outstanding amounts during the relevant years, the historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	nil	nil	21,000

10. Longhao Raw Material Supply Agreement

The Cap amounts for the Longhao Raw Material Supply Agreement are determined based on management’s internal projection on the expected value of the raw materials to be sourced on behalf of Longhao Glass taking into account of (i) the expected demand of raw materials by Longhao Glass, and (ii) the expected increase in the price of the raw materials. The Company began to conduct these transactions since 2006. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	13,022	422	208,843

11. Longfei Raw Material Supply Agreement

The Cap amounts for the Longfei Raw Material Supply Agreement are determined based on management’s internal projection on the expected value of the raw materials to be sourced on behalf of Longfei Glass taking into account of (i) the expected demand of raw materials by Longfei Glass, and (ii) the expected increase in the price of the raw materials. The Company began to conduct these transactions since 2007. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	nil	2,093	43,591

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LETTER FROM THE BOARD

12. Longxiang Raw Material Supply Agreement

The Cap amounts for the Longxiang Raw Material Supply Agreement are determined based on management’s internal projection on the expected value of the raw materials to be sourced on behalf of Longxiang Glass taking into account of (i) the expected demand of raw materials by Longxiang Glass, and (ii) the expected increase in the price of the raw materials. The Company began to conduct these transactions since March 2008. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	nil	nil	76,349

13. Longxin Raw Material Supply Agreement

The Cap amounts for the Longxin Raw Material Supply Agreement are determined based on management’s internal projection on the expected value of the raw materials to be sourced on behalf of Longxin Glass taking into account of (i) the expected demand of raw materials by Longxin Glass, and (ii) the expected increase in the price of the raw materials. The Company began to conduct these transactions since March 2008. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	nil	nil	137,101

As mentioned in the section headed “Particulars of Longhao Raw Material Supply Agreement, Longfei Raw Material Supply Agreement, Longxiang Raw Material Supply Agreement and Longxin Raw Material Supply Agreement” above, in order to achieve greater economies of scale and leverage on the stronger bargaining power with the suppliers, the Group adopted a centralised approach whereby the Company would source raw materials on behalf of its subsidiaries then subsequently supply the raw materials to its subsidiaries. Accordingly, the Caps for each of the Longhao Raw Material Supply Agreement, the Longfei Raw Material Supply Agreement, the Longxiang Raw Material Supply Agreement and the Longxin Raw Material Supply Agreement will be significantly higher than their respective historical transaction amounts.

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LETTER FROM THE BOARD

14. Longhao Glass Supply Agreement

The Cap amounts for the Longhao Glass Supply Agreement are determined based on management’s internal projection on the expected value of the goods to be sold on behalf of Longhao Glass taking into account of (i) the expected demand of the products to be supplied by Longhao Glass, and (ii) the expected increase in the selling price of the float flat glass in the PRC with reference to the prevailing market price. The Company began to conduct these transactions since 2006. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	12,529	17,264	246,500

15. Longfei Glass Supply Agreement

The Cap amounts for the Longfei Glass Supply Agreement are determined based on management’s internal projection on the expected value of the goods to be sold on behalf of Longfei Glass taking into account of (i) the expected demand of the products to be supplied by Longfei Glass, and (ii) the expected increase in the selling price of the float flat glass in the PRC with reference to the prevailing market price. The Company began to conduct these transactions since the establishment of Longfei back in 2000. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	9,343	7,742	949	1,067	18,441

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LETTER FROM THE BOARD

16. Longxiang Glass Supply Agreement

The Cap amounts for the Longxiang Glass Supply Agreement are determined based on management’s internal projection on the expected value of the goods to be sold on behalf of Longxiang Glass taking into account of (i) the expected demand of the products to be supplied by Longxiang Glass, and (ii) the expected increase in the selling price of the float flat glass in the PRC with reference to the market price. The Company began to conduct these transactions since 2007. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	nil	791	58,904

17. Longxin Glass Supply Agreement

The Cap amounts for the Longxin Glass Supply Agreement are determined based on management’s internal projection on the expected value of the goods to be sold on behalf of Longxin Glass taking into account of (i) the expected demand of the products to be supplied by Longxin Glass, and (ii) the expected increase in the selling price of the float flat glass in the PRC with reference to the prevailing market price. The Company began to conduct these transactions since 2004. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	23,726	68,343	110,065	88,681	56,326

As mentioned in the section headed “Particulars of Longhao Glass Supply Agreement, Longfei Glass Supply Agreement, Longxiang Glass Supply Agreement and Longxin Glass Supply Agreement” above, in order to achieve greater economies of scale and leverage on the stronger bargaining power with the customers, the Group decided to adopt a centralised approach in selling its products whereby the relevant subsidiaries would supply the products to the Company who would subsequently sell the products for them on behalf. Accordingly, the Caps for the Longhao Glass Supply Agreement, the Longfei Glass Supply Agreement, the Longxiang Glass Supply Agreement and the Longxin Glass Supply Agreement will be significantly higher than their respective historical transaction amounts.

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LETTER FROM THE BOARD

18. Huayi Glass Supply Agreement

The Cap amounts for the Huayi Glass Supply Agreement are determined based on management’s internal projection on the expected value of the goods to be sold to Huayi Glass taking into account of (i) the expected demand of such products by Huayi Glass, and (ii) the expected increase in the selling price of the A-grade super-thin float flat glass in the PRC with reference to the prevailing market price. These transactions became continuing connected transactions of the Company in 2007. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	nil	23,102	18,904

19. Silicon Powder Supply Agreement

The Cap amounts for the Silicon Powder Supply Agreement are determined based on management’s internal projection on the expected value of the silicon powder to be supplied by CLFG Mineral Company taking into account (i) the production expansion plan of the Company; (ii) the selling price and consumed amount in the previous three years; and (iii) the expected increase in the price of the silicon powder. The Company began to conduct these transactions since the establishment of the Company in 1994. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	17,836	9,242	12,205	11,143	12,635

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LETTER FROM THE BOARD

20. Longhao Composite Services Agreement

The Cap amounts for the Longhao Composite Services Agreement are determined with reference to (i) the previous transaction amounts in the past three years; (ii) the expected demand of such services to be rendered by the Company for Longhao Glass; and (iii) the prevailing market price for these services in Luoyang City. The Company began to conduct these transactions since 2006. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	799	4,273	4,293

21. Longhai Composite Services Agreement

The Cap amounts for the Longhai Composite Services Agreement are determined with reference to (i) the previous transaction amounts in the past three years; (ii) the expected demand of such services to be rendered by the Company for Longhai Glass; and (iii) the prevailing market price for these services in Luoyang City. The Company began to conduct these transactions since 2007. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	nil	704	695

22. Longfei Composite Services Agreement

The Cap amounts for the Longfei Composite Services Agreement are determined with reference to (i) the previous transaction amounts in the past three years; (ii) the expected demand of such services to be rendered by the Company for Longfei Glass; and (iii) the prevailing market price for these services in Luoyang City. The Company began to conduct these transactions since 2006. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	480	2,438	1,010

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LETTER FROM THE BOARD

23. Longxiang Composite Services Agreement

The Cap amounts for the Longxiang Composite Services Agreement are determined with reference to (i) the previous transaction amounts in the past three years; (ii) the expected demand of such services to be rendered by the Company for Longxiang Glass; and (iii) the prevailing market price for these services in Luoyang City. The Company began to conduct these transactions since 2006. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	nil	100	2,233	2,036

24. Longxin Composite Services Agreement

The Cap amounts for the Longxin Composite Services Agreement are determined with reference to (i) the previous transaction amounts in the past three years, (ii) the expected demand of such services to be rendered by the Company for Longxin Glass and (iii) the prevailing market price for these services in Luoyang City. The Company began to conduct these transactions since 2005. The historical transaction amounts for the five years ended 31 December 2008 were as follows:

	2004	2005	2006	2007	2008
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Transaction amounts	nil	4,550	5,472	2,240	3,142

REASONS FOR THE NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

The Group is principally engaged in the production and sale of float sheet glass and reprocessed automobile glass and is one of the largest manufacturers and distributors of float glass in the PRC. In order to secure continuous supply of raw materials and energy for the Group’s production as well as to provide the Group with operational and financial flexibility, on 24 April 2009, the Group entered into the Non-exempt CCT Agreements with members of CLFG Group in respect of purchases of raw material and energy, provision of various services and supply of products. The Directors (including the independent non-executive Directors) are of the view that the Non-exempt CCT Agreements have been entered into on normal commercial terms and in the ordinary and usual course of business of the Group, the terms of the Non-exempt CCT Agreements and the respective Cap amounts are fair and reasonable and in the interests of the Shareholders and the Company as a whole.

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LETTER FROM THE BOARD

INFORMATION AND RELATIONSHIP OF THE PARTIES TO THE NON-EXEMPT CCT AGREEMENTS

CLFG, the Company’s controlling shareholder, is principally engaged in the production of glass, related raw materials and equipment, import, export and domestic sale of glass, processing technology, design and subcontracting of engineering works, labour export, provision of industrial production material (excluding those under control of the state), technological services, consultation services and goods transportation.

CNBMG is the controlling shareholder of CLFG and the ultimate controlling shareholder of the Company. The principal operations of CNBMG include research and development, wholesale and retail of building materials (including steel products and timber, but only limited to procurement and supply directly to the enterprises under its system), auxiliary raw materials and production equipment, supply of small cars under the plan of its system; contraction of design and construction of new-model building material houses, factories and ornament and decoration engineering.

Longhao Glass is principally engaged in the business of production and sale of float sheet glass. Its 80% and 20% shareholdings are owned by the Company and CLFG respectively.

Longhai Glass is principally engaged in the business of production and sale of float sheet glass. Its 80% and 20% shareholdings are owned by the Company and CLFG respectively.

Longfei Glass is principally engaged in the business of production and sale of float sheet glass. Its 54% and 10% shareholdings are owned by the Company and CLFG respectively.

Longxiang Glass is principally engaged in the business of production and sale of float sheet glass. Longfei Glass owned 40% shareholding of Longxiang Glass. Upon completion of the Longxiang Equity Acquisition in January 2009, Longxiang Glass became a wholly owned subsidiary of Longfei Glass.

Longxin Glass is principally engaged in production and sale of float sheet glass. CLFG owns 50% shareholding of Longxin Glass. On 22 October 2007, the Company and CLFG entered into a share transfer agreement with CLFG whereby the Company agreed to conditionally acquire from CLFG such 50% equity interest in Longxin Glass for a cash consideration of RMB35,000,000. The acquisition, which constituted a discloseable and connected transaction within the meaning of Chapters 14 and 14A of the Listing Rules, was duly approved by independent shareholders of the Company on 18 December 2007. As at the date of this circular, given that certain conditions precedent of the share transfer agreement in respect of proposed acquisition have yet to be satisfied, the agreement has not been completed. Both parties to the agreement have agreed in writing to extend the original long stop date for completion from 31 March 2008 to 30 September 2009. At present and prior to completion of the share transfer agreement, the equity capital of Longxin Glass continues to be held as to 50% by CLFG and 50% by Xinan Fada Construction Investment Company Limited （新安縣發達建設投資有限公司）, an independent party not connected with the Company or its connected persons. As such, Longxin Glass remains a connected person of the Company before completion of the share transfer agreement.

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LETTER FROM THE BOARD

Longmen Glass is a non-wholly owned subsidiary of the Company and is principally engaged in the business of production and sale of float sheet glass.

Huayi Glass is an associate of CNBMG and principally engaged in the business of production and sale of ITO conductive coating glass, vacuum coated glass, and relevant machinery and equipment and electrical products.

CLFG Mineral Company is a subsidiary of CLFG and principally engaged in the business of manufacturing and sale of silicon material and products.

Luoyang Xinxing, an enterprise controlled by CLFG, is principally engaged in the business of property management. CLFG is entitled to control the composition of the majority of the board of directors of Luoyang Xinxing and thus Luoyang Xinxing is an associate of CLFG.

In light of the above, CLFG, CNBMG, Huayi Glass, CLFG Mineral Company and Luoyang Xinxing are regarded as connected persons of the Company. CLFG is a substantial shareholder of each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass and which are therefore connected persons of the Company.

LISTING RULES IMPLICATIONS OF THE NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Since each of the applicable percentage ratios for the Non-exempt CCT Agreements other than the Longhao Composite Services Agreement, the Longhai Composite Services Agreement, the Longfei Composite Services Agreement, the Longxiang Composite Services Agreement and the Longxin Composite Services Agreement on an annual basis exceeds 2.5% and their respective annual consideration is more than HK$10,000,000, the entering into of each of the Non-exempt CCT Agreements (except for each of the Longhao Composite Services Agreement, the Longhai Composite Services Agreement, the Longfei Composite Services Agreement, the Longxiang Composite Services Agreement and the Longxin Composite Services Agreement) constitutes non-exempt continuing connected transactions under Chapter 14A of the Listing Rules.

As for the Longhao Composite Services Agreement, the Longhai Composite Services Agreement, the Longfei Composite Services Agreement, the Longxiang Composite Services Agreement and the Longxin Composite Services Agreement, the applicable percentage ratio for each of which is less than 2.5%. However, given these agreements are considered similar in nature and are entered into with the same group of connected persons, for the purpose of calculating the relevant applicable percentage ratios, the transactions contemplated thereunder shall be aggregated. After aggregation, their applicable percentage ratios on an annual basis exceed 2.5% and the aggregate annual consideration for these agreements is more than HK$10,000,000. As such, the entering into of the Longhao Composite Services Agreement, the Longhai Composite Services Agreement, the Longfei Composite Services Agreement, the Longxiang Composite Services Agreement and the Longxin Composite Services Agreement constitutes non-exempt continuing connected transactions under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

In addition, the transactions contemplated under each of the Longhao Entrusted Loan Agreement, the Longhai Entrusted Loan Agreement, the Longfei Entrusted Loan Agreement, the Longhao Guarantee Agreement, the Longhai Guarantee Agreement, the Longfei Guarantee Agreement and the Longxiang Guarantee Agreement also constitute non-exempt financial assistances under Rule 14A.63 of the Listing Rules.

On the basis set out above, the transactions as contemplated under each of the Non-exempt CCT Agreements are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

At the EGM, the Company will seek Independent Shareholders’ approval for the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts. The votes to be taken at the EGM will be taken by poll, the results of which be announced after the EGM.

An Independent Board Committee has been established to advise the Independent Shareholders in respect of the terms of the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions, and Access Capital has been retained as the independent financial advisor to advise to the Independent Board Committee and the Independent Shareholders in connection with the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions. Shareholders should consider carefully the recommendations of the Independent Board Committee and the factors, reasons and recommendations in relation to the Nonexempt CCT Agreements and the Non-exempt Continuing Connected Transactions set out in the letter from Access Capital.

EGM

The EGM will be held at the conference room of the Company on 1st Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC at 9:00 a.m. on 13 July 2009 for the purpose of seeking Independent Shareholders’ approval on the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts. CLFG and its associates will abstain from voting in respect of the resolutions relating to the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts. The votes to be taken at the EGM will be taken by poll. A notice of the EGM is set out on pages 81 to 87 of this circular.

A form of proxy for use at the EGM is enclosed. Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s share registrar, Hong Kong Registrars Limited at Rooms 1901-5, Hopewell Centre, 183 Queen’s Road East, Hong Kong or to the Company at No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC as soon as possible and in any event not later than 24 hours before the time appointed for holding the EGM or for any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors, including the independent non-executive Directors, consider that the terms of the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts are normal commercial terms and are fair and reasonable so far as the Shareholders are concerned, and the Non-exempt Continuing Connected Transactions and their respective Cap amounts are in the interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM for approving the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts.

Your attention is also drawn to the letter from the Independent Board Committee set out on pages 34 to 35 of this circular and the letter of advice from Access Capital to the Independent Board Committee and the Independent Shareholders set out on pages 36 to 76 of this circular in connection with the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts and the principal factors and reasons considered by them in arriving at their advice.

ADDITIONAL INFORMATION

Your attention is drawn to the general information set out in the Appendix I to this Circular.

Yours faithfully,

For and on behalf of the Board Luoyang Glass Company Limited Gao Tianbao

Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [60 x 42] intentionally omitted <==

==> picture [49 x 42] intentionally omitted <==

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

(Stock Code: 1108)

27 May 2009

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 27 May 2009 of the Company (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meanings herein unless the context otherwise requires.

We have been appointed to form the Independent Board Committee to consider and to advise the Independent Shareholders as to whether, in our opinion, the terms of the Non-exempt CCT Agreements and the Nonexempt Continuing Connected Transactions and their respective Cap amounts are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Access Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts.

We wish to draw your attention to the “Letter from the Board” set out on pages 1 to 33 of the Circular which contains, inter alia, information of the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts, as well as the “Letter from Access Capital” set out on pages 36 to 76 of the Circular which contains its advice in respect of the terms of the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the advice of Access Capital, we consider that the terms of the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM in respect of the Non-exempt CCT Agreements and the Non-exempt Continuing Connected Transactions and their respective Cap amounts.

Yours faithfully, For and on behalf of Independent Board Committee

Luoyang Glass Company Limited

Mr. Zhang Zhanying Mr. Guo Aimin* Mr. Huang Ping

Independent non-executive Directors

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LETTER FROM ACCESS CAPITAL

Set out below is the text of the letter of advice from Access Capital Limited to the Independent Board Committee and the Independent Shareholders prepared for inclusion in this Circular.

==> picture [99 x 45] intentionally omitted <==

Suite 606, 6th Floor Bank of America Tower 12 Harcourt Road Central Hong Kong

27 May 2009

To the Independent Board Committee and the Independent Shareholders of Luoyang Glass Company Limited

Dear Sirs,

CONTINUING CONNECTED TRANACTIONS

I. INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Non-exempt CCT Agreements, details of which are set out in the letter from the Board (the “Letter from the Board”) contained in the circular dated 27 May 2009 issued by the Company to the Shareholders (the “Circular”), of which this letter forms part. This letter contains our advice to the Independent Board Committee and the Independent Shareholders in respect of the Non-exempt CCT Agreements. Unless otherwise stated, terms defined in the Circular have the same meanings in this letter.

On 24 April 2009, the Board announced that the Non-exempt CCT Agreements were entered into for a period of up to 31 December 2011 with a view to ensuring the continuous provision of goods and services such as supply of raw material and energy, provision of entrusted loans, guarantees and composite services to the Group for its operations (details of the Non-exempt CCT Agreements are stated in the section headed “The Non-exempt CCT Agreements” below).

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LETTER FROM ACCESS CAPITAL

The entering into each of the Non-exempt CCT Agreements constitutes non-exempt continuing connected transactions under Chapter 14A of the Listing Rules. In addition, the transactions contemplated under each of the Longhao Entrusted Loan Agreement, the Longhai Entrusted Loan Agreement, the Longfei Entrusted Loan Agreement, the Longhao Guarantee Agreement, the Longhai Guarantee Agreement, the Longfei Guarantee Agreement and the Longxiang Guarantee Agreement (all form part of the Nonexempt CCT Agreements) also constitute non-exempt financial assistances under Rule 14A.63 of the Listing Rules. As such, all of these transactions are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

II. THE INDEPENDENT BOARD COMMITTEE

The Board currently comprises five executive Directors, namely Mr. Gao Tianbao, Mr. Xie Jun, Mr. Cao Mingchun, Mr. Song Jianming and Ms. Song Fei; two non-executive Directors, namely Mr. Shen Anqin and Mr. Bao Wenchun; and three independent non-executive Directors, namely Mr. Zhang Zhanying, Mr. Guo Aimin and Mr. Huang Ping.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Zhang Zhanying, Mr. Guo Aimin and Mr. Huang Ping, has been established to advise the Shareholders on the terms of the Non-exempt CCT Agreements.

We have been appointed to advise the Independent Board Committee and the Shareholders as to (i) whether or not the transactions contemplated under each of the Non-exempt CCT Agreements are in the interests of the Company and the Shareholders as a whole; (ii) whether or not the respective terms of the Non-exempt CCT Agreements, including the maximum value of the transactions contemplated thereunder, are fair and reasonable; and (iii) how the Independent Shareholders should vote in respect of the resolutions to approve each of the Non-exempt CCT Agreements and the transactions contemplated thereunder at the relevant general meeting of the Company.

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LETTER FROM ACCESS CAPITAL

III. BASIS AND ASSUMPTIONS OF THE ADVICE

In formulating our advice, we have relied solely on the statements, information, opinions and representations for matters relating to the Group contained in the Circular and the information and representations provided to us by the Group and/or its senior management staff and/or the Directors. We have assumed that all such statements, information, opinions and representations for matters relating to the Group contained or referred to in the Circular or otherwise provided or made or given by the Group and/or its senior management staff and/or the Directors and for which it is/they are solely responsible were true and accurate and valid at the time they were made and given and continue to be true and valid as at the date of the Circular. We have assumed that all the opinions and representations for matters relating to the Group made or provided by the Directors and/or the senior management staff of the Group contained in the Circular have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Group and/or its senior management staff and/or the Directors that no material facts have been omitted from the information provided and referred to in the Circular.

We consider that we have reviewed all currently available information and documents which are available to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinions. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions and representations provided to us by the Group and/or its senior management staff and/or the Directors and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out an independent verification of the information provided, nor have we conducted an independent investigation into the business and affairs of the Company or any of its subsidiaries.

For the avoidance of doubt, we do not express any opinion for the transactions other than the Nonexempt Continuing Connected Transactions for the Non-exempt CCT Agreements entered into on 24 April 2009. In particular, we do not express any opinion on those connected transactions or continuing connected transactions relating to the periods up to 31 December 2008 no matter whether they had been properly disclosed under the Listing Rules. Furthermore, the Company’s internal data quoted herein, particularly the historical amount of the Non-exempt Continuing Connected Transactions, has not been verified by us. The Board collectively and individually accepts full responsibility for the accuracy of these information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

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LETTER FROM ACCESS CAPITAL

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion regarding the Non-exempt CCT Agreements, we have taken into consideration the following principal factors:

I. Background to and reasons for the Non-exempt CCT Agreements

1. Information on the Group

The Company was incorporated in the PRC as a joint stock limited company that, together with its subsidiaries, engaged in the production and sales of float sheet glass. Substantially all of the Group’s turnover was derived from the PRC market. For each of the two years ended 31 December 2008, approximately 97.2% and 97.8%, respectively, of the Group’s turnover was derived from the PRC market with the rest derived from Asian, America, Oceanian and other overseas markets.

Set out below is a summary of the Group’s operating results and financial position extracted from the Company’s annual report for the year ended 31 December 2007 and 2008, extracted from the 2008 annual report of the Company (“2008 Annual Report”):

	For the year ended 31 December	For the year ended 31 December
	2007	2008
	RMB’000	RMB’000
	(Audited)	(Audited)
Turnover	1,444,535	1,314,946
Gross profit/(loss)	134,115	(19,687)
Other operating income	32,608	243,892
Other operating expenses	(7,422)	(10,288)
Selling expenses	(39,247)	(40,359)
Administrative expenses	(149,379)	(160,881)
Profit/(loss) from operations	(29,325)	12,677
Profit/(loss) for the year	(81,070)	5,793

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LETTER FROM ACCESS CAPITAL

	As at 31	December
	2007	2008
	RMB’000	RMB’000
	(Audited)	(Audited)
Non-current assets	1,310,212	1,185,137
Current assets	654,377	792,768
Current liabilities	1,732,651	1,741,784
Non-current liabilities	11,020	9,410
Net current liabilities	1,078,274	949,016
Total equity	220,918	226,711

For the year ended 31 December 2008, the Group’s turnover was approximately RMB1,314.9 million, a decrease of about 9.0% from the previous year. Due to the increase of raw material price and decrease of revenue, the Group recorded a gross loss of approximately RMB19.7 million in 2008, compared to a gross profit of approximately RMB134.1 million recorded in the previous year.

The Group recorded other operating income of approximately RMB243.9 million. The income was mainly attributable to approximately RMB180 million from gain on disposal of lease prepayments and approximately RMB34 million from gain on disposal of property, plant and equipment. As a result, the Group recorded a profit of approximately RMB5.8 million in 2008, an improvement from a loss of approximately RMB81.1 million in 2007.

As stated in the 2008 Annual Report, 2008 was the most difficult year in the Company’s operating history. Under the impact of volatile domestic and international economies, raw materials and fuel prices were prone to great fluctuations. Sales of products were dampened, prices went flat and supply of funding was tightened as a result of natural disasters and weaker market demands during the year.

In light of the global financial crisis and the downturn in the glass industry in 2008, the Company adopted a series of effective measures to realise profits, including:

reorganized, disposed or realized part of its assets to increase cash gains;
innovated new management and control modes to boost synergies in operation. To such end, the Company established a centralized management platform whereby the Company integrated the sales of products, the management of capital and the bulk procurement of raw materials which enhanced economies of scale and synergies;

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LETTER FROM ACCESS CAPITAL

adjusted product structure, improved product packaging, promoted nude kit and reduced cost;

— closed and suspended the operation of production lines which might require cold maintenance or upgrading;

increased funding to commence trade finance through various channels which guaranteed the Company’s capital demand for production and operation; and
reinforced its fundamental management which reduced cost expenses.

As at 31 December 2008, the Group had total current assets of approximately RMB792.8 million and total current liabilities of approximately RMB1,741.8 million, representing net current liabilities of approximately RMB949 million. As at 31 December 2008, the total equity of the Group amounted to approximately RMB226.7 million.

2. Information and relationship of the parties to the Non-exempt CCT Agreements

CLFG, the Company’s controlling shareholder, is principally engaged in the production of glass, related raw materials and equipment, import, export and domestic sales of glass, processing technology, design and sub-contracting of engineering works, labour export, provision of industrial production material (excluding those under control of the state), technological services, consultation services and goods transportation.

CNBMG is the controlling shareholder of CLFG and the ultimate controlling shareholder of the Company. The principal operations of CNBMG include research and development, wholesale and retail of building materials (including steel products and timber, but only limited to procurement and supply directly to the enterprises under its system), auxiliary raw materials and production technology equipment, supply of small cars under the plan of its system; contraction of design and construction of new-model building material houses, factories and ornament and decoration engineering.

Longhao Glass is principally engaged in the business of production and sale of float flat glass. Its 80% and 20% shareholdings are owned by the Company and CLFG respectively.

Longhai Glass is principally engaged in the business of production and sale of float flat glass. Its 80% and 20% shareholdings are owned by the Company and CLFG respectively.

Longfei Glass is principally engaged in the business of production and sale of float flat glass. Its 54% and 10% shareholdings are owned by the Company and CLFG respectively.

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LETTER FROM ACCESS CAPITAL

Longxiang Glass is principally engaged in the business of production and sale of float flat glass. Longfei Glass owns 40% shareholding of Longxiang Glass. Upon completion of the Longxiang Equity Acquisition on January 2009, Longxiang Glass became a wholly-owned subsidiary of Longfei Glass.

Longxin Glass is principally engaged in the business of production and sale of float flat glass. CLFG owns 50% shareholding of Longxin Glass. On 22 October 2007, the Company and CLFG entered into a share transfer agreement with CLFG whereby the Company agreed to conditionally acquire from CLFG a 50% equity interest in Longxin Glass for a cash consideration of RMB35,000,000. The acquisition, which constituted a discloseable and connected transaction within the meaning of Chapters 14 and 14A of the Listing Rules, was duly approved by independent shareholders of the Company on 18 December 2007. As at the date of this circular, given that certain conditions precedent of the share transfer agreement in respect of proposed acquisition have yet to be satisfied, the agreement has not been completed. Both parties to the agreement have agreed in writing to extend the original long stop date for completion from 31 March 2008 to 30 September 2009. At present and prior to completion of the share transfer agreement, the equity capital of Longxin Glass continues to be held as to 50% by CLFG and 50% by Xinan Fada Construction Investment Company (新安縣發達建設投資有限公司), an independent party not connected with the Company or its connected persons. As such, Longxin Glass remains a connected person of the Company before completion of the share transfer agreement.

Longmen Glass is a non-wholly owned subsidiary of the Company and is principally engaged in the business of production and sale of float flat glass.

Huayi Glass is an associate of CNBMG and principally engaged in the business of production and sales of ITO conductive coating glass, vacuum coated glass and relevant machinery and equipment and electrical products.

CLFG Mineral Company is a subsidiary of CLFG and principally engaged in the business of manufacturing and sale of silicon material and products.

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LETTER FROM ACCESS CAPITAL

3. The Glass Industry in the PRC

The glass industry has experienced growth in the PRC. As cities in the PRC are becoming increasingly modernised, the output of plate glass increased as well. Set out below is the output of plate glass in the PRC from 2003 to 2007:

Year		2003	2004	2005	2006	2007
Output (’000	weight cases)	277,026	370,262	402,102	465,747	539,181

As shown above, the output of plate glass increased from approximately 277 million weight cases in 2003 to approximately 539.2 million weight cases in 2007, representing a compounded annual growth rate of approximately 18.1%.

In August 2007, the PRC National Development and Reform Commission (“NDRC”) issued the “Elimination of existing small and low production capacity of float glass manufactures” (“做好淘汰落後平板玻璃生產能力有關工作的通知”). Such document reiterated the existing policy on float glass industry and to eliminate the small and low production capacity of float glass manufactures during the “Eleventh-five year period” and to promote healthy development of the float glass industry.

Faced with economic downturn under the impact of the global financial crisis, the PRC government has taken an active fiscal policy and increased central spending since the second half 2008. In the fourth quarter of 2008, the PRC government announced a stimulus plan in the amount of RMB4 trillion in order to combat the global financial crisis and the slowdown in worldwide economies. The main goal of the stimulus plan is to boost the domestic consumption in the PRC to offset the slowdown in the country’s exports. Among the RMB4 trillion, it is estimated that approximately RMB1.5 trillion will be spent on the development of infrastructure, approximately RMB1 trillion will be spent on redevelopment of Sichuan as part of the earthquake relief program and approximately RMB400 billion will be spent on building affordable housing. According to the NDRC, with the accelerating development of affordable housing and infrastructure projects, the glass industry is expected to be one of the industries benefiting from the stimulus plan.

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4. Reasons for the Non-exempt CCT Agreements

Under the Non-exempt CCT Agreements, the Group may enter into certain transactions with the relevant members of CLFG Group in respect of sales and purchases of raw material and energy, provision of various services and sales and supply of products (particulars and terms of each category of the aforesaid transactions are discussed in the section headed “The Non-exempt CCT Agreements” below).

As noted in the Company’s interim report of 2008, the surplus production capacity of the industry leads to keen competition between participants. Approximately 12 new production lines are expected to start operation in the later half of this year, which led to an increase in production capacity of the industry by around 10 million weighted cases which will lead to keen competition in the industry.

In order to combat the adverse environment, the Company has adopted a number of countermeasures to overcome the gloomy economy to gain a competitive advantage over its competitors. One of the measures is to lower procurement costs by carrying out large scale procurement, bidding procurement and risky procurement.

As stated in the 2008 Annual Report, in order to reduce costs and enhance profitability, the Company adopted a series of effective measures to realise profits, one of which is to innovate new management and control modes to boost synergies in operation. To such end, the Company established a centralized management platform whereby the Company integrated the sales of products, the management of capital and the bulk procurement of raw materials which enhanced economies of scale and synergies.

We understand from the Company that the Group has been carrying out similar transactions under the Non-exempt CCT Agreements with members of the CLFG Group since as early as the establishment of the Company in 1994. The Group and members of the CLFG Group has established a close business relationship because of the cooperation between both parties. Given the similar principal activities between the Group and CLFG which include the production of glass, export and domestic sales of glass, we consider that the business arrangements under the Non-exempt CCT Agreements serve essentially to improve the efficiency of the Group.

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In view of the substantial interest of CLFG in the Company, we consider it commercially reasonable and sensible for CLFG to assist the Group in improving the operations of the Group has been affected by the adverse market environment.

In addition, certain transactions contemplated under the Non-exempt CCT Agreements such as the Company Supply Agreement, Provision of Water, Electricity and Steam Agreement and Huayi Glass Supply Agreement, when take place, will be recognised by the Group as its sales or other income, and the overall revenue of the Group will therefore be increased as a result of such transactions. The competitiveness of the Group’s products in terms of costing may therefore increase.

As regards those transactions contemplated under the Non-exempt CCT Agreements in relation to the supply of raw material and composite services and the purchase of glass and silicon powder, they are expected to reduce the Group’s expenses or purchase costs and hence improve the competitiveness of the Group’s products and the operations of the Group.

Based on the above, as the Non-exempt CCT Agreements allow the Company to achieve greater bargaining power with customers and suppliers, increase revenue by providing products or services to members of CLFG Group and improving the efficiency of the Group as a whole, we are of the view that the entering into the Non-exempt CCT Agreements with members of CLFG Group benefits the Group and is in the interest of the Company and Shareholders as a whole.

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II. The Non-exempt CCT Agreements

Pursuant to Rule 14A.35(2) of the Listing Rules, the transactions contemplated under each of the Non-exempt CCT Agreements during the three years ending 31 December 2011 will be subject to an annual cap for each of the three financial year ending 31 December 2011 of the Company. The proposed maximum aggregate values, or “caps”, of the transactions contemplated under the Non-exempt CCT Agreements for the period up to 31 December 2011 and the unaudited value of similar transactions between the relevant parties from 2006 to 2008 are summarised below:

	Historical	transaction	amounts	Proposed cap amounts	Proposed cap amounts	Proposed cap amounts
RMB’000	2006	2007	2008	2009	2010	2011
Company Supply Agreement	12,552	8,398	5,804	14,025	37,172	51,670
Provision of Water, Electricity and
Steam Agreement	18,695	24,118	20,294	24,714	25,881	27,105
Longhao Entrusted Loan Agreement	56,007	94,700	92,700	112,700	112,700	112,700
Longhai Entrusted Loan Agreement	31,583	84,750	136,708	181,000	181,000	181,000
Longfei Entrusted Loan Agreement	15,417	15,750	15,000	72,000	72,000	72,000
Longhao Guarantee Agreement	40,000	50,000	40,000	20,000	20,000	20,000
Longhai Guarantee Agreement	26,000	19,500	27,000	50,000	50,000	50,000
Longfei Guarantee Agreement	82,000	57,000	52,000	10,000	10,000	10,000
Longxiang Guarantee Agreement	—	—	21,000	30,000	30,000	30,000
Longhao Raw Material Supply Agreement	13,022	422	208,843	553,810	573,470	300,000
Longfei Raw Material Supply Agreement	—	2,093	43,591	172,445	357,640	368,940
Longxiang Raw Material Supply Agreement	—	—	76,349	440,390	457,220	472,030
Longxin Raw Material Supply Agreement	—	—	137,101	722,860	797,100	927,370
Longhao Glass Supply Agreement	12,529	17,264	246,500	351,900	387,090	212,925
Longfei Glass Supply Agreement	949	1,067	18,441	76,000	167,200	184,000
Longxiang Glass Supply Agreement	—	791	58,904	189,750	208,725	229,625
Longxin Glass Supply Agreement	110,065	88,681	56,326	274,030	301,433	331,699
Huayi Glass Supply Agreement	—	23,102	18,904	28,410	31,430	34,260
Silicon Powder Supply Agreement	12,205	11,143	12,635	29,980	37,295	39,250
Longhao Composite Services Agreement	799	4,273	4,293	5,500	5,500	5,500
Longhai Composite Services Agreement	—	704	695	900	900	900
Longfei Composite Services Agreement	480	2,438	1,010	2,900	2,900	2,900
Longxiang Composite Services Agreement	100	2,233	2,036	2,900	2,900	2,900
Longxin Composite Services Agreement	5,472	2,240	3,142	5,000	5,000	5,000

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LETTER FROM ACCESS CAPITAL

1. Company Supply Agreement

Particulars

Period

The Company Supply Agreement shall take effect after the approval of the agreement by the Independent Shareholders for a period up to 31 December 2011.

Goods to be provided and pricing

Condition

The Company Supply Agreement is conditional on the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

Past transactions

The Group began to conduct these transactions since the establishment of the Company back in 1994. Because of the 15 years of co-operation between the Company and CLFG, CLFG has been very satisfied with the quality of the Company’s products. It is expected that CLFG will continue to purchase float flat glass product from the Company in the future.

Our view

On the basis that (i) the sale and supply of float flat glass products by the Company to CLFG will enhance the revenue of the Group and (ii) such sales will be conducted in the ordinary and usual course of business of the Group and will not be less than that offered to third party customers of the Group, we are of the view that the terms of the Company Supply Agreement with respect to the sale and supply of float flat glass products by the Company to CLFG Group are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

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Basis of the Cap

Set out below is the unaudited historical transaction amounts for the five years ended 31 December 2008 for the Company Supply Agreement:

		Historical	transaction	amounts
RMB’000	2004	2005	2006	2007	2008
CLFG Group	23,308	14,896	12,552	8,398	5,804

Set out below is the caps set for Company Supply Agreement:

		Proposed cap	Proposed cap	amounts
RMB’000		2009	2010	2011
Company	Supply Agreement	14,025	37,172	51,670

The caps set for the years ending 31 December 2009, 2010 and 2011 was based on (i) the anticipated increase in the market price of float flat glass products and (ii) the anticipated increase in the volume of products to be supplied.

The proposed annual caps for 2009 to 2011 represent an increase of approximately 141.6%, 165% and 39% over the previous year, respectively. We understand from the Company that the production line of one of the subsidiaries of the CLFG Group commenced production in 2009 which leads to the increasing demand for float flat glass from the CLFG Group in the future. As 2009 is the first year of the new production line, the estimated sales from the new production line is expected to be relatively low due to the expansion of new market. However, for the year 2010 and 2011, the sales is expected to pick up and the demand for float flat glass by CLFG Group is expected to increase. Taking into account (i) the expected increase in supply volume and (ii) the estimated price increase in float flat glass in the future, we are of the view that the proposed annual caps for the Company Supply Agreement has been arrived at on a fair and reasonable basis.

In general, the Group will be benefited from the supply of float flat glass products to the CLFG Group as such transactions will increase the Group’s revenue, we are of the view that it is of the commercial interest for the Company to maximise the value of such transactions.

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Conclusion

In view of the foregoing, we are of the view that the Company Supply Agreement is in the interests of the Company and Shareholders as a whole, and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholder are concerned.

2. Provision of Water, Electricity and Steam Agreement

Particulars

Period

The Provision of Water, Electricity and Steam Agreement shall take effect after the approval of the agreement by the Independent Shareholders for a period up to 31 December 2011.

Goods to be provided and pricing

Condition

The Provision of Water, Electricity and Steam Agreement is conditional on the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

Past transaction

The Group began to conduct these transactions since the establishment of the Company back in 1994. Because of the 15 years of co-operation between the Company and CLFG Group, CLFG Group has been very satisfied with the quality of the Company’s services. It is expected that CLFG Group will continue to purchase water, electricity and steam from the Company in the future.

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Our view

On the basis that i) the supply of water, electricity and steam by the Company to CLFG will increase the revenue of the Group and ii) the price is determined with reference to the respective prevailing market price, which is determined based on the relevant PRC regulations from time to time, we consider the terms under the Provision of Water, Electricity and Steam Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

Basis of caps

Set out below is the historical transaction amounts for the five years ended 31 December 2008 for the provision of water, electricity and steam to CLFG Group:

RMB’000	2004	2005	2006	2007	2008
CLFG Group	13,438	16,663	18,695	24,118	20,294

Set out below is the caps set for the Provision of Water, Electricity and Steam Agreement for the year ending 31 December 2009, 2010 and 2011:

	Proposed cap	Proposed cap	amounts
RMB’000	2009	2010	2011
Provision of Water, Electricity and
Steam Agreement	24,714	25,881	27,105

The caps are set based on (i) the anticipated increase in the unit price for each types of services with reference to the prevailing market price; and (ii) the anticipated increase in the supply volume for each type of services.

As shown above, the transactions under Provision of Water, Electricity and Steam Agreement increased from approximately RMB13.4 million in 2004 to approximately RMB20.3 million in 2008, representing a 10.9% compounded annual growth rate. We understand from the Company that as the CLFG Group expects to continue its business growth in the future, the amount of water, electricity and steam consumed by the CLFG Group is expected to increase. The proposed cap of RMB27.1 million for the year ending 31 December 2011 represents a 33.5% increase over the historical transaction amount for the year ended 31 December 2008, or a compounded annual growth rate of 10.1% which is similar to the growth rate of the past transactions. We understand from the

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Company that the price of water, electricity and steam has been rising consistently in the past. The Company anticipates that the price of water, electricity and steam, which is set by the relevant PRC government department, will continue to rise in the near future.

In general, the Group will be benefited from the provision of water, electricity and steam as the Group sources the supplies from outsiders and resells to CLFG with mark up, such transactions will increase the Group’s revenue. We are of the view that it is of the commercial interest for the Company to maximise the value of such transactions.

On the basis that (i) the CLFG Group is expected to continue its growth in the future and (ii) the growth rate of the caps is similar to the growth rate of the past transactions, we are of the view that the proposed annual caps for the transactions contemplated under the Provision of Water, Electricity and Steam Agreement have been arrived at on a fair and reasonable basis.

Conclusion

In view of the foregoing, we are of the view that the Provision of Water, Electricity and Steam Agreement is in the interests of the Company and Shareholders as a whole and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned.

3. Longhao Entrusted Loan Agreement, Longhai Entrusted Loan Agreement and Longfei Entrusted Loan Agreement

Particulars

Period

The Longhao Entrusted Loan Agreement, the Longhai Entrusted Loan Agreement and the Longfei Entrusted Loan Agreement shall take effect after the approval of the agreements by the Independent Shareholders for a period up to 31 December 2011.

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Entrusted loans to be provided by the Company

The Company entered into an entrusted loan agreement with each of Longhao Glass, Longhai Glass and Longfei Glass with principally the same terms, and pursuant to which the Company will provide a loan via a financial institution (to be designated by the parties and being independent third party to the Company) to Longhao Glass, Longhai Glass and Longfei Glass for carrying out their working projects assigned by the Company. Such loan will be interest bearing and the interest rate will be determined with reference to the relevant loan basic interest rates set by PBOC and the permitted range of floating interest rates for financial institutions set by PBOC at the time of providing the loan.

The Company has entered into certain additional entrusted loan agreement(s) in respect of the above entrusted loan arrangement with the relevant financial institute(s) designated by the parties.

Conditions

Each of the Longhao Entrusted Loan Agreement, the Longhai Entrusted Loan Agreement and the Longfei Entrusted Loan Agreement is conditional on the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

Rationale behind the transactions

Given that the Company is not a licensed financial institution, it is not authorized to carry out banking related businesses in the PRC. As such, in order to facilitate the implementation of the Company’s designated projects of its subsidiaries, the Company will make loan arrangements in the form of entrusted loans via financial institution(s) designated by the parties. The entrusted loans are granted by the financial institution(s) to the designated subsidiaries on behalf of the Company, from time to time, on a temporary basis and on normal commercial terms.

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Past transactions

The Company has conducted similar transactions with Longfei Glass since its establishment in 2000 and with Longhao Glass and Longhai Glass since 2006. Longhao Glass, Longhai Glass and Longfei Glass have been relying on the entrusted loans provided by the Company in order to implement projects designated by the Company. Without these entrusted loans, Longhao Glass, Longhai Glass and Longfei Glass’s operations may be disrupted due to the lack of financing.

Our view

On the basis that (i) the Company is providing entrusted loans to its subsidiaries at interest rates determined with reference to the relevant loan basic interest rates set by PBOC and the permitted range of floating interest rates for financial institutions set by PBOC at the time of providing the loan, (ii) the interest rates paid by Longhao Glass, Longhai Glass and Longfei Glass to the Company will not be lower than the interest rates paid by the Company to the relevant financial institution, and (iii) Longhao Glass, Longhai Glass and Longfei Glass, all of which are subsidiaries of the Company, rely on the entrusted loans to carry out projects designated by the Company, we consider the terms under the Longhao Entrusted Loan Agreement, Longhai Entrusted Loan Agreement and Longfei Entrusted Loan Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

Basis of Caps

Set out below is the historical transaction amounts (based on the average monthly balance) for the five years ended 31 December 2008 for the provision of entrusted loans to Longhao Glass, Longhai Glass and Longfei Glass:

RMB’000 Longhao Glass Longhai Glass Longfei Glass Total	2004 — — 17,250 17,250	2005 — — 15,000 15,000	2006 56,007 31,583 15,417 103,007	2007 94,700 84,750 15,750 195,200	2008 92,700 136,708 15,000
					244,408

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LETTER FROM ACCESS CAPITAL

Set out below is the caps set for the Longhao Entrusted Loan Agreement, Longhai Entrusted Loan Agreement and Longfei Entrusted Loan Agreement for the year ending 31 December 2009, 2010 and 2011:

RMB’000 Longhao Entrusted Loan Agreement Longhai Entrusted Loan Agreement Longfei Entrusted Loan Agreement Total	Proposed cap amounts 2009 2010 2011 112,700 112,700 112,700 181,000 181,000 181,000 72,000 72,000 72,000 365,700 365,700 365,700	Proposed cap amounts 2009 2010 2011 112,700 112,700 112,700 181,000 181,000 181,000 72,000 72,000 72,000 365,700 365,700 365,700
		365,700

The caps set are based on (i) the previous entrusted loan amounts (based on average monthly balance) and (ii) the Company’s internal projection on Longhao Glass, Longhai Glass and Longfei Glass’s business growth.

We understand from the Company that the proposed caps are made with reference to the Company’s projection of business growth of Longhao Glass, Longhai Glass and Longfei Glass. The proposed cap of 2009 to 2011 for Longhao Entrusted Loan represents an increase of approximately 21.6% over the historical amount in 2008 while the proposed cap of 2009 to 2011 for Longhai Entrusted Loan represents an increase of approximately 32.4% over the historical amount in 2008. Taking into account (i) the expected increase in sales volume of float flat glass of Longhao Glass and Longhai Glass and (ii) the estimated increase in the price of float flat glass in the future, we consider such estimates to be reasonable estimates of Longhao Glass and Longhai Glass’s growth. With regard to the large increase of the proposed annual caps for the Longfei Entrusted Loan Agreement over the historical amount in 2008, we understand from the Company that Longfei Glass has been relying on loans from independent financial institutions. With the entrusted loan from the Company, Longfei Glass is able to obtain more borrowings in order not to disrupt its business operations. As a result, Longfei Glass will increase its borrowings through the entrusted loans provide by the Company.

On the basis that Longhao Glass, Longhai Glass and Longfei Glass will be benefited from the entrusted loans provided by the Company and the proposed annual caps are made with reference to the projected business growth of Longhao Glass, Longhai Glass and Longfei Glass, we are of the view that the proposed annual caps for the transactions contemplated under the Longhao Entrusted Loan Agreement, Longhai Entrusted Loan Agreement and Longfei Entrusted Loan Agreement have been arrived at on a fair and reasonable basis.

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Conclusion

In view of the foregoing, we are of the view that the Longhao Entrusted Loan Agreement, Longhai Entrusted Loan Agreement and Longfei Entrusted Loan Agreement are in the interests of the Company and Shareholders as a whole and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned.

4. Longhao Guarantee Agreement, Longhai Guarantee Agreement, Longfei Guarantee Agreement and Longxiang Guarantee Agreement

Particulars

Period

The Longhao Guarantee Agreement, the Longhai Guarantee Agreement, the Longfei Guarantee Agreement and the Longxiang Guarantee Agreement shall take effect after the approval of the agreements by the Independent Shareholders for a period up to 31 December 2011.

Guarantee to be provided by the Company

The Company entered into a guarantee agreement with each of Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass with principally the same terms whereby the Company will provide guarantee in respect of bank loans of Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass and the latter four parties shall provide in favour of the Company counter-guarantees in respect of the guarantees given by the Company.

Condition

Each of the Longhao Guarantee Agreement, the Longhai Guarantee Agreement, the Longfei Guarantee Agreement and the Longxiang Guarantee Agreement is conditional on the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

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Past transactions

The Company has conducted similar transactions with Longfei Glass since its establishment in 2000, with Longhao Glass and Longhai Glass since 2005 and with Longxiang since 2008. Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass have been relying on the guarantees provided by the Company in order to carry out specific projects assigned by the Company. Without these guarantees, Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass’s operations may be disrupted due to lack of support from a company with stronger financial standing.

On the basis that (i) the Company is providing guarantees to its subsidiaries to carry out specific projects assigned by the Company and (ii) Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass shall provide in favour of the Company counterguarantees in respect of the guarantees given by the Company, we consider the terms under the Longhao Guarantee Agreement, Longhai Guarantee Agreement, Longfei Guarantee Agreement and Longxiang Guarantee Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

Basis of Caps

Set out below is the historical transaction amounts (based on the maximum outstanding amounts during the relevant years) for the five years ended 31 December 2008 for the provision of guarantee to Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass:

RMB’000 Longhao Glass Longhai Glass Longfei Glass Longxiang Glass Total	2004 — — 12,000 — 12,000	2005 25,000 6,000 25,000 — 56,000	2006 40,000 26,000 82,000 — 148,000	2007 50,000 19,500 57,000 — 126,500	2008 40,000 27,000 52,000 21,000
					140,000

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Set out below is the caps set for the Longhao Guarantee Agreement, Longhai Guarantee Agreement, Longfei Guarantee Agreement and Longxiang Guarantee Agreement for the year ending 31 December 2009, 2010 and 2011:

RMB’000 Longhao Guarantee Agreement Longhai Guarantee Agreement Longfei Guarantee Agreement Longxiang Guarantee Agreement Total	Proposed cap amounts 2009 2010 2011 20,000 20,000 20,000 50,000 50,000 50,000 10,000 10,000 10,000 30,000 30,000 30,000 110,000 110,000 110,000	Proposed cap amounts 2009 2010 2011 20,000 20,000 20,000 50,000 50,000 50,000 10,000 10,000 10,000 30,000 30,000 30,000 110,000 110,000 110,000
		110,000

The caps are set based on (i) the previous guarantee amounts (based on year-end outstanding amount) by the Company, (ii) the Company’s internal projection on Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass’s business growth and (iii) the business development of the Company.

The proposed annual caps for Longhao Glass and Longfei Glass decrease from the historical amounts in 2008 while the proposed annual caps for Longhai Glass and Longxiang Glass increase from the historical amounts in 2008. In this regard, we discussed with the Company and understand that since Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass have a shorter operation history than the Company, they cannot obtain a large amount of bank borrowings from financial institutions. The Company anticipates that the loans provided by financial institutions to Longhao Glass and Longfei Glass will reduce from 2009 to 2011, therefore the Company will provide less guarantee in respect of the bank loans granted to Longhao Glass and Longfei Glass.

In contrast, the amount of borrowings granted by financial institutions to Longhai Glass and Longxiang Glass will increase for 2009 to 2011. We understand from the Company that this is due to (i) Longhai Glass specialises in the production of super-thin float flat glass, which is a more advanced product and different from products of Longhao Glass, Longfei Glass and Longxiang Glass and (ii) Longxiang Glass has not fully utilised the facilities provided by financial institutions in the past. Therefore, the Company will provide more guarantee to Longhai Glass and Longxiang Glass for 2009 to 2011.

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The aggregate proposed cap amount of the provision of guarantee to Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass is lower than each of the three years ended 31 December 2008. We consider the reduction of guarantee in the future reduces the risk imposed to the Company and therefore is in the interest of the Company and Shareholders as a whole. Accordingly, we are of the view that that the proposed annual caps for the transactions contemplated under the Longhao Guarantee Agreement, Longhai Guarantee Agreement, Longfei Guarantee Agreement and Longxiang Guarantee Agreement has been arrived at on a fair and reasonable basis.

Conclusion

In view of the foregoing, we are of the view that the Longhao Guarantee Agreement, Longhai Guarantee Agreement, Longfei Guarantee Agreement and Longxiang Guarantee Agreement are in the interests of the Company and Shareholders as a whole and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned.

5. Longhao Raw Material Supply Agreement, Longfei Raw Material Supply Agreement, Longxiang Raw Material Supply Agreement and Longxin Raw Material Supply Agreement

Particulars

Period

The Longhao Raw Material Supply Agreement, the Longfei Raw Material Supply Agreement, the Longxiang Raw Material Supply Agreement and the Longxin Raw Material Supply Agreement shall take effect after the approval of the agreements by the Independent Shareholders for a period up to 31 December 2011.

Raw materials to be supplied and price

In particular, the Company entered into a raw material supply agreement with each of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass on principally the same terms, and pursuant to which the Company will provide certain raw materials including alkali, oil, thenardite, silicon powder, dolomite powder, limestone powder, potassium feldspar powder and shattered glass to Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass at a price to be determined by reference to the prevailing market price of such raw materials.

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Conditions

Each of the Longhao Raw Material Supply Agreement, the Longfei Raw Material Supply Agreement, the Longxiang Raw Material Supply Agreement and the Longxin Raw Material Supply Agreement is conditional on the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

Past transactions

The Company has conducted similar transactions with Longhao Glass since 2006, with Longfei Glass since 2007 and with Longxiang Glass and Longxin Glass since 2008. Prior to the cooperation between each of Longhao Glass, Longfei Glass, Longxiang Glass, Longxin Glass and the Company, each of the four companies sourced their own raw materials.

As noted in the 2008 interim report of the Company, due to the substantial rise of purchasing price of raw materials, the gross profit margin of the Company was decreased. Therefore, it is essential for the Company to implement strategies in order to lower the cost of raw material in order to improve the profitability of the Group.

In order to achieve greater economies of scale and leverage on the stronger bargaining power with the suppliers, the Group decided to adopt a centralised approach in sourcing raw material whereby the Company would source raw materials on behalf of its subsidiaries. Upon the implementation of such strategy, the Company is able to purchase raw material at a lower price due to its increased bargaining power with the suppliers. Therefore, we are of the view that the Company can save costs for its subsidiaries and improve the profitability of the Group as a whole by entering into Longhao Raw Material Supply Agreement, Longfei Raw Material Supply Agreement, Longxiang Raw Material Supply Agreement and Longxin Raw Material Supply Agreement. In addition, the aggregate overhead cost will be reduced since the purchase and procurement of the Group will be centralised whereas Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass had their own purchasing and procurement department before. The adopting of the centralised approach in sourcing raw material would improve the efficiency of the Group as a whole.

On the basis that the Group can reduce the expenses on raw materials due to greater economics of scale and the increase in bargaining power with the suppliers, we consider the terms under the Longhao Raw Material Supply Agreement, Longfei Raw Material Supply Agreement, Longxiang Raw Material Supply Agreement and Longxin Raw Material Supply Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

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Basis of the Caps

Set out below is the historical transaction amounts for the three years ended 31 December 2008 for the raw materials supply to Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass:

RMB’000 Longhao Glass Longfei Glass Longxiang Glass Longxin Glass Total	2006 13,022 — — — 13,022	2007 422 2,093 — — 2,515	2008 208,843 43,591 76,349 137,101
			465,884

Set out below is the caps set for the Longhao Raw Material Supply Agreement, Longfei Raw Material Supply Agreement, Longxiang Raw Material Supply Agreement and Longxin Raw Material Supply Agreement for the year ending 31 December 2009, 2010 and 2011:

RMB’000 Longhao Raw Material Agreement Longfei Raw Material Agreement Longxiang Raw Material Agreement Longxin Raw Material Agreement Total	Proposed cap amounts 2009 2010 2011 553,810 573,470 300,000 172,445 357,640 368,940 440,390 457,220 472,030 722,860 797,100 927,370 1,889,505 2,185,430 2,068,340	Proposed cap amounts 2009 2010 2011 553,810 573,470 300,000 172,445 357,640 368,940 440,390 457,220 472,030 722,860 797,100 927,370 1,889,505 2,185,430 2,068,340
		2,068,340

The caps are set based on (i) the expected demand of raw materials by each of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass, and (ii) the expected increase in the price of the raw materials.

As the Group started adopting the centralised approach in sourcing raw material in March 2008, the historical transaction amount in 2008 does not reflect the full year figure. Since the Company is very satisfied by the improvement in efficiency and the increased in bargaining power with suppliers, it decided to increase the amount of centralised sourcing in the future.

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LETTER FROM ACCESS CAPITAL

We note that the proposed cap for 2011 of the Longhao Raw Material Agreement and the proposed cap for 2009 of the Longfei Raw Material Agreement represent a decrease of approximately half from the proposed cap for the other two years. We understand from the Company that the production lines of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass undertake maintenance once in several years and the production would halt for half year due to the maintenance. Longhao Glass and Longfei Glass’s production lines are due for maintenance in 2011 and 2009, respectively.

For illustration purpose only, if the production line of Longhao Glass and Longfei Glass do not require the half year maintenance, the proposed annual caps for Longhao Raw Material Agreement in 2011 and Longfei Raw Material Agreement in 2009 would double the current proposed caps. After making such adjustment, the aggregate proposed caps for Longhao Raw Material Supply Agreement, Longfei Raw Material Supply Agreement, Longxiang Raw Material Supply Agreement and Longxin Raw Material Supply Agreement in 2009 to 2011 represent a compounded annual growth rate of approximately 7.2%, which we consider to be a prudent estimate of the anticipated purchasing volume of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass and the estimated price increase in raw material in the next three years.

In view of the above, we are of the view that the proposed annual caps for the transactions contemplated under the Longhao Raw Material Agreement, Longfei Raw Material Agreement, Longxiang Raw Material Agreement and Longxin Raw Material Agreement has been arrived at on a fair and reasonable basis.

Conclusion

In view of the foregoing, we are of the view that the Longhao Raw Material Agreement, Longfei Raw Material Agreement, Longxiang Raw Material Agreement and Longxin Raw Material Agreement are in the interests of the Company and Shareholders as a whole and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM ACCESS CAPITAL

6. Longhao Glass Supply Agreement, Longfei Glass Supply Agreement, Longxiang Glass Supply Agreement and Longxin Glass Supply Agreement

Particulars

Period

The Longhao Glass Supply Agreement, the Longfei Glass Supply Agreement, the Longxiang Glass Supply Agreement and the Longxin Glass Supply Agreement shall take effect after the approval of the agreements by the Independent Shareholders for a period up to 31 December 2011.

Goods to be provided and price

Each of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass entered into a supply agreement with the Company on principally the same terms, and pursuant to which these four companies would respectively supply float flat glass products to the Company at a price to be determined with reference to the prevailing market price at the time the transaction takes place.

Condition

Each of the Longhao Glass Supply Agreement, the Longfei Glass Supply Agreement, the Longxiang Glass Supply Agreement and the Longxin Glass Supply Agreement is conditional on the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

Past transactions

The Company has conducted similar transactions with Longfei Glass since its establishment in 2000, with Longxin Glass since 2004, with Longhao Glass since 2006 and with Longxiang Glass since 2007. Prior to the cooperation between each of Longhao Glass, Longfei Glass, Longxiang Glass, Longxin Glass and the Company, each of the four companies sold their respective products independently.

Subsequently, in order to achieve greater economies of scale and leverage on the stronger bargaining power with the customers, the Group decided to adopt a centralised approach in selling its products whereby the Company would sell the products on behalf of its relevant subsidiaries. Upon the implementation of such strategy, the Company is able to exercise its bargaining power and enhance the Group’s overall profitability.

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LETTER FROM ACCESS CAPITAL

In the past, Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass did not cooperate in selling float glass products. Since the four companies operate near Luoyang City, they were competing with each other in the past. As a result, the profitability of the Group was impaired due to the competition among the Group’s subsidiaries. In addition, since the adoption of the centralised approach in selling the Group’s products, each of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass can specialise in the production of fewer products whereas they needed to produce full range of products before, which leads to less time in adjusting the production line and the capacity of each production line would increase.

On the basis that (i) the Group can increase the overall profitability from the increase in bargaining power with its customers from the centralised approach in selling its products and (ii) the pricing of the products is determined with reference to the prevailing market price at the time the transaction takes place which is no less favourable to the Group than those offered to the Group by independent third party customers, we consider the terms under the Longhao Glass Supply Agreement, Longfei Glass Supply Agreement, Longxiang Glass Supply Agreement and Longxin Glass Supply Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

Basis of the Caps

Set out below is the historical transaction amounts for the five years ended 31 December 2008 for the glass supply from Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass to the Company:

RMB’000 2004 Longhao Glass — Longfei Glass 9,343 Longxiang Glass — Longxin Glass 23,726 Total 33,069	2005 — 7,742 — 68,343 76,085	2006 12,529 949 — 110,065 123,543	2007 17,264 1,067 791 88,681 107,803	2008 246,500 18,441 58,904 56,326
				380,171

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LETTER FROM ACCESS CAPITAL

Set out below is the caps set for the Longhao Glass Supply Agreement, Longfei Glass Supply Agreement, Longxiang Glass Supply Agreement and Longxin Glass Supply Agreement for the year ending 31 December 2009, 2010 and 2011:

RMB’000 Longhao Glass Supply Agreement Longfei Glass Supply Agreement Longxiang Glass Supply Agreement Longxin Glass Supply Agreement Total	Proposed cap amounts 2009 2010 2011 351,900 387,090 212,925 76,000 167,200 184,000 189,750 208,725 229,625 274,030 301,433 331,699 891,680 1,064,448 958,249	Proposed cap amounts 2009 2010 2011 351,900 387,090 212,925 76,000 167,200 184,000 189,750 208,725 229,625 274,030 301,433 331,699 891,680 1,064,448 958,249
		958,249

The caps are set based on (i) the expected demand of the products to be supplied by Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass, and (ii) the expected increase in the selling price of the float flat glass in the PRC with reference to the prevailing market price.

As the Group started adopting the centralised approach in selling its products in March 2008, the historical transaction amount in 2008 does not reflect the full year figure. Since the Company is very satisfied by the improvement in efficiency and the increased in bargaining power with customers, it decided to increase the amount of centralised selling in the future.

We note that the proposed cap of the Longhao Glass Supply Agreement in 2011 and the proposed cap of the Longfei Glass Supply Agreement in 2009 represent a decrease of approximately half from the proposed cap for the other two years. As stated above, the production lines of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass undertake maintenance once in several years and the production would halt for half year due to the maintenance. Longhao Glass and Longfei Glass’s production lines are due for maintenance in 2011 and 2009, respectively.

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LETTER FROM ACCESS CAPITAL

For illustration purpose only, if the production line of Longhao Glass and Longfei Glass do not require the half year maintenance, the proposed annual caps for Longhao Glass Supply Agreement in 2011 and Longfei Glass Supply Agreement in 2009 would double the current proposed caps. After making such adjustment, the aggregate proposed caps for Longhao Glass Supply Agreement, Longfei Glass Supply Agreement, Longxiang Glass Supply Agreement and Longxin Glass Supply Agreement in 2009 to 2011 represent a compounded annual growth rate of approximately 10%, which we consider to be a prudent estimate of the anticipated sales volume growth of Longhao Glass, Longfei Glass, Longxiang Glass and Longxin Glass and the estimated increase in the price of float flat glass in the next three years.

In view of the above, we are of the view that the proposed annual caps for the transactions contemplated under the Longhao Glass Agreement, Longfei Glass Supply Agreement, Longxiang Glass Supply Agreement and Longxin Glass Supply Agreement has been arrived at on a fair and reasonable basis.

Conclusion

In view of the foregoing, we are of the view that the Longhao Glass Agreement, Longfei Glass Supply Agreement, Longxiang Glass Supply Agreement and Longxin Glass Supply Agreement are in the interests of the Company and Shareholders as a whole and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned.

7. Huayi Glass Supply Agreement

Particulars

Period

The Huayi Glass Supply Agreement shall take effect after the approval of the agreement by the Independent Shareholders for a period up to 31 December 2011.

Goods to be provided and pricing

Longhai Glass will supply super-thin float flat glass to Huayi Glass at a price to be determined with reference to the prevailing market price at the time of transaction.

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LETTER FROM ACCESS CAPITAL

Condition

The Huayi Glass Supply Agreement is conditional on the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

On the basis that (i) the supply of super-thin float flat glass by Longhai Glass to Huayi Glass will increase the revenue of the Group and (ii) the pricing of the products is determined with reference to the prevailing market price at the time the transaction takes place which is no less favourable to the Group than those offered to the Group by independent third party customers, we consider the terms under the Huayi Glass Supply Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

Basis of Caps

Set out below is the historical transaction amounts for the three years ended 31 December 2008 for the glass supply to Huayi Glass:

RMB’000	2006	2007	2008
Huayi Glass	—	23,102	18,904

Set out below is the caps set for the Huayi Glass Supply Agreement for the year ending 31 December 2009, 2010 and 2011:

	Proposed cap	Proposed cap	amounts
RMB’000	2009	2010	2011
Huayi Glass Supply Agreement	28,410	31,430	34,260

Pursuant to the Huayi Glass Supply Agreement, Longhai Glass will supply super-thin float flat glass to Huayi Glass. As Huayi Glass is principally engaged in the business of production and sales of ITO conductive coating glass and vacuum coated glass and relevant machinery and equipment and electrical products, super-thin float flat glass is one of the components of Huayi Glass’s products.

The caps set are based on (i) the expected demand of such products by Huayi Glass, and (ii) the expected increase in the selling price of the A-grade super-thin float flat glass in the PRC with reference to the prevailing market price.

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LETTER FROM ACCESS CAPITAL

The proposed annual cap for the year 2009 represents an increase of approximately 50.3% over the historical transaction amount in 2008 and the increase in proposed annual caps for 2010 and 2011 represent an increase of approximately 10.6% and 9% over the previous year, respectively. After discussion with the Company, we understand that the reasons for the increase in proposed annual caps over the historical transaction amount is due to (i) the business expansion of Huayi Glass in the downstream market which leads to increase in sales volume and (ii) due to the steady improvement in the quality of Longhai Glass’s A-grade super-thin float flat glass, Huayi Glass will shift some of the super-thin float flat glass imported from overseas to Longhai Glass.

In general, the Group will be benefited from the sales of super-thin float flat glass as such transactions will increase the Group’s revenue. We are of the view that it is of the commercial interest for the Company to maximise the value of such transactions. As such, we are also of the view that the proposed annual cap of RMB28,410,000 for the year ending 31 December 2009 and the subsequent increase of 10.6% and 9% for the next two years are acceptable and have been prepared on a fair and reasonable basis.

Conclusion

In view of the foregoing, we are of the view that the Huayi Glass Supply Agreement is in the interests of the Company and Shareholders as a whole and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned.

8. Silicon Powder Supply Agreement

Particulars

Period

The Silicon Powder Supply Agreement shall take effect after the approval of the agreement by the Independent Shareholders for a period up to 31 December 2011.

Goods to be purchased by the Group and pricing

CLFG Mineral Company shall supply to the Group at least 250,000 tonnes silicon powder per annum, which was manufactured by CLFG Mineral Company in Tiemen Town, Xin An County, Henan Province.
The Group has the priority over other third parties to purchase silicon powder from CLFG Mineral Company.

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LETTER FROM ACCESS CAPITAL

The price shall be determined with reference to the prevailing market price at the time of transaction. The parties will assess and confirm the price before 31 December every year.
The price of the silicon powder shall be calculated based on dry silicon powder, which should have water content below 6%, exceeding which the price should decrease and by reference to the prevailing market price.
In the event that the Group is alike to obtain a lower price or better quality silicon powder from other suppliers, the Group may purchase the silicon powder from other suppliers provided the Group gives a 3-month prior written notice to CLFG Mineral Company.

Condition

The Silicon Powder Supply Agreement is conditional on the approval by the Independent Shareholders at the EGM as required under the Listing Rules.

Past transactions

As silicon powder is one of the main raw material components for the production of glass, the quality and stable supply of silicon powder is essential to the Group. The Company began to conduct similar transactions since the establishment of the Company in 1994. We understand from the Company that the Company is very satisfied with the quality and pricing of the products CLFG Mineral Company with 15 years of cooperation between both parties. Pursuant to the Silicon Powder Supply Agreement, CLFG Mineral Company shall supply to the Group at least 250,000 tonnes silicon powder per annum which would provide the Group a stable and reliable supply source. There are also other clauses to safeguard the interests of the Group to ensure the Group pays the most favourable price for silicon powder from CLFG Mineral Company for a comparable quality of silicon powder.

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LETTER FROM ACCESS CAPITAL

Our view

On the basis that (i) the stable and reliable supply of silicon powder is essential for the Group to carry out its production of glass; (ii) the long history of business relationship between the Group and CLFG Mineral Company and (iii) the pricing of silicon powder is determined with reference to the prevailing market price at the time the transaction takes place which is no less favourable to the Group than those offered to the Group by independent third party suppliers, we consider the terms under the Silicon Powder Supply Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

Basis of caps

Set out below is the historical transaction amounts for the five years ended 31 December 2008 for the silicon powder to be supplied from CLFG Mineral Company:

RMB’000	2004	2005	2006	2007	2008
CLFG Mineral
Company	17,836	9,242	12,205	11,143	12,635

Set out below is the caps set for the Silicon Powder Supply Agreement for the year ending 31 December 2009, 2010 and 2011:

	Proposed cap	Proposed cap	amounts
RMB’000	2009	2010	2011
Silicon Powder Agreement	29,980	37,295	39,250

The caps are set based on the production expansion plan of the Company; (ii) the selling price and usage in the previous three years; and (iii) the expected increase in the price of the silicon powder.

Pursuant to the Silicon Powder Supply Agreement, CLFG Mineral Company, an associate company owned as to 40.29% by the Company, will supply silicon powder to the Company.

The Company expects to increase the purchase volume of silicon powder from CLFG Mineral Company because CLFG Mineral Company is able to provide the cheapest silicon powder for a comparable quality.

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LETTER FROM ACCESS CAPITAL

As mentioned in “The Glass Industry in the PRC” section above, part of the PRC government’s stimulus plan would require float glass as raw material in building affordable housing and the development of infrastructure. Because of the stimulus plan and the need for float glass to carry out the projects, the Company expects to increase its production plan in the future. Therefore, the Company will require more silicon powder for the production of float glass.

We understand from the Company that the 250,000 tonnes silicon powder per annum figure is the annual capacity of CLFG Mineral Company. The Company requires more than 250,000 tonnes of silicon powder as component of producing float flat glass in a given year and it has other silicon powder suppliers. Therefore, the Company would not be purchasing more silicon powder than it needs in a given year.

The proposed annual cap of RMB39,250,000 in 2011 represents a 210.6% increase over the historical transaction amount of approximately RMB12,635,000 in 2008 and a compounded annual growth rate of approximately 14.4% over the proposed annual cap in 2009. We understand that the Company purchased less than 250,000 tonnes of silicon powder from CLFG Mineral Company in 2008, hence the increase of the proposed annual cap for 2009 over the historical transaction amount represents the increase in purchasing volume and the estimated increase in silicon powder price. The increase in proposed annual cap of 2011 from 2009 represents the estimated increase in the price of silicon powder after considering the expected price increase in raw material and labour. Taken into account of the Company’s projection of i) the production expansion plan of the Company and ii) the expected increase in the price of the silicon powder, we are of the view that the proposed annual caps for the transactions contemplated under the Silicon Powder Supply Agreement have been arrived at on a fair and reasonable basis.

Conclusion

In view of the foregoing, we are of the view that the Silicon Powder Supply Agreement is in the interests of the Company and Shareholders as a whole and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM ACCESS CAPITAL

9. Longhao Composite Services Agreement, Longhai Composite Services Agreement, Longfei Composite Services Agreement, Longxiang Composite Services Agreement and Longxin Composite Services Agreement

Particulars

Period

Services to be provided and pricing

a. The Company entered into a composite services agreement with each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass with principally the same terms, and pursuant to which the Company would provide the following services to Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass:
technology usage and consultation services;
establishment and organization of systems on production safety and environmental protection;
implementation of glass colour change according to the need of the market;
preparing software for glass technology to implement the technology operation;
analytical services for defected glass;
examination of oven and main equipments and preparation of repairing proposal;
examination of production table and testing devices;
assistance in restoration of production after serious accident;

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LETTER FROM ACCESS CAPITAL

storage services;
transportation services;
training services for management; and
brand management.
b. The price will be determined with reference to the prevailing market price at the time of transaction.
c. Each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass shall engage the Company to conduct any research which relies on the technology solely owned by the Company. The Company shall entitle to the ownership of any new production technology for producing float flat glass and related technologies developed in the course of conducting such researches. However, during the effective period of the respective agreements, each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass shall be entitled to use these new technologies for its operations in free of charge.

Past transactions

The Company has conducted similar transactions with Longxin Glass since 2005, Longhao Glass, Longfei Glass and Longxiang Glass since 2006 and with Longhai Glass since 2007. Prior to the cooperation between the Company and each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass, each of the five companies obtained relevant services independently.

Since the Company started providing services to Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass, each of the latter five companies are very satisfied with the Company’s services. As Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass are subsidiaries of the Company, the Group can improve its overall efficiency by providing services such as to Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass. For example, the Company can maintain a coherent brand image by providing brand management services to Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass. By providing services such as examination of production table and testing devices and analytical services for defected glass, the Company can ensure the quality of the Group’s products is preserved.

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LETTER FROM ACCESS CAPITAL

Each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass shall engage the Company to conduct any research which relies on the technology solely owned by the Company.

As Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass are subsidiaries of the Company, it is in the interest of the Company if Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass benefit from the Company’s research and develop superior quality float flat glass. Moreover, the Company shall entitle to the ownership of any new production technology for producing float flat glass and related technologies developed in the course of conducting such researches. Accordingly, we are of the view that it is fair and reasonable to allow each of Longhao Glass, Longhai Glass, Longfei Glass and Longxiang Glass to use the new technologies by the Company for its operations free of charge.

On the basis that (i) the Group can improve its overall efficiency and (ii) the pricing of the relevant services is determined with reference to the prevailing market price at the time the transaction takes place which is no less favourable to the Group than those offered to the Group by independent third party customers, we consider the terms under the Longhao Composite Services Agreement, Longhai Composite Services Agreement, Longfei Composite Services Agreement, Longxiang Composite Services Agreement and Longxin Composite Services Agreement are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and fair and reasonable.

Basis of the Caps

Set out below is the historical transaction amounts for the five years ended 31 December 2008 for the composite services provided to Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass:

RMB’000 2004 Longhao Glass — Longhai Glass — Longfei Glass — Longxiang Glass — Longxin Glass — Total —	2005 — — — — 4,550 4,550	2006 799 — 480 100 5,472 6,851	2007 4,273 704 2,438 2,233 2,240 11,888	2008 4,293 695 1,010 2,036 3,142
				11,176

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LETTER FROM ACCESS CAPITAL

Set out below is the caps set for the Longhao Composite Services Agreement, Longhai Composite Services Agreement, Longfei Composite Services Agreement, Longxiang Composite Services Agreement and Longxin Composite Services Agreement for the year ending 31 December 2009, 2010 and 2011:

RMB’000 Longhao Composite Services Agreement Longhai Composite Services Agreement Longfei Composite Services Agreement Longxiang Composite Services Agreement Longxin Composite Services Agreement Total	Proposed cap amounts 2009 2010 2011 5,500 5,500 5,500 900 900 900 2,900 2,900 2,900 2,900 2,900 2,900 5,000 5,000 5,000 17,200 17,200 17,200	Proposed cap amounts 2009 2010 2011 5,500 5,500 5,500 900 900 900 2,900 2,900 2,900 2,900 2,900 2,900 5,000 5,000 5,000 17,200 17,200 17,200
		17,200

The caps are set based on (i) the previous transaction amounts in the past three years; (ii) the expected demand of such services to be rendered by the Company for Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass; and (iii) the prevailing market price for these services in Luoyang City.

Taken into account of the Company’s projection of the business growth of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass, it is expected that the demand of such services to be rendered by the Company to each of the five companies will increase in the future.

After discussion with the Company, we understand that since the adoption of centralised sourcing of raw material and selling the Group’s products, the overhead costs of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass are reduced because the Company currently has staff to source raw material and sell its products on behalf of its subsidiaries. As a result, each of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass will obtain more composite services from the Company in the future. In particular, since the Company will sell its products on behalf of its subsidiaries, the brand image of Longhao Glass, Longhai Glass, Longfei Glass, Longxiang Glass and Longxin Glass will be coherent and hence, the Company will provide more composite services in relation to brand management.

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LETTER FROM ACCESS CAPITAL

We note that the aggregate proposed annual cap of RMB17.2 million represents an increase of approximately 53.9% and 44.7% over the historical transaction amount of 2007 and 2008, respectively, being the two years since the Company started providing composite services to all five companies. In general, the Company will be benefited from the provision of composite services as such transactions will increase the Company’s revenue, we are of the view that it is of the commercial interest for the Company to maximise the value of such transactions. As such, we are also of the view that the proposed annual caps have been prepared on a fair and reasonable basis.

Conclusion

In view of the foregoing, we are of the view that the Longhao Composite Services Agreement, Longhai Composite Services Agreement, Longfei Composite Services Agreement, Longxiang Composite Services Agreement and Longxin Composite Services Agreement are in the interests of the Company and Shareholders as a whole and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned.

III. Conditions of the annual caps under the Non-exempted CCT Agreements

There are certain conditions of the annual cap pursuant to the Listing Rules, in particular, the restriction of the value of the transactions contemplated under the Non-exempted CCT Agreements by way of the annual cap for the three financial years ending 31 December 2011 and the annual review by the independent non-executive Directors of the terms of such transactions and the relevant annual caps not being exceeded, details of which must be included in the Company’s subsequent published annual reports and accounts. Also, pursuant to the Listing Rules, each year the auditors of the Company must provide a letter to the Board confirming, among other things, that the transactions contemplated under the Non-exempted CCT Agreements are conducted in accordance with the terms of the relevant Non-exempted CCT Agreements and that the relevant annual caps not being exceeded. In addition, pursuant to the Listing Rules, the Company shall publish an announcement if it knows or has reason to believe that the independent non-executive Directors and/or its auditors will not be able to confirm the terms of such transactions or the relevant annual caps not being exceeded. We are of the view that there are appropriate measures in place to govern the conduct of the transactions to be contemplated under the Non-exempt CCT Agreements and safeguard the interests of the Independent Shareholders.

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LETTER FROM ACCESS CAPITAL

RECOMMENDATION

In formulating our recommendation to the Independent Board Committee and the Independent Shareholders, we have considered the above principal factors and reasons, in particular, the following:

(i) the background of and reasons for the Non-exempted CCT Agreements;
(ii) the Non-exempted CCT Agreements will be conducted in the ordinary and usual course of business of the Group and on normal commercial terms that are no less favourable to the Group than those offered to the Group by independent third party customers or suppliers, details of which are set out in the sections headed “Background to and reasons for the Non-exempted CCT Agreements” and “The Non-exempted CCT Agreements” respectively;
(iii) the transactions contemplated under the Non-exempted CCT Agreements may increase the profitability of the Group by increasing the Group’s revenue and/or reducing the Group’s expenses;
(iv) internal control procedures, including the ongoing review by the management of the Company, annual review by the independent non-executive Directors and confirmation from the auditors of the Company in respect of the terms of the Non-exempted CCT Agreements, are in place to monitor and to compare the terms and conditions of the Non-exempted CCT Agreements; and
(v) the value of, and the basis for determining, the annual caps for the Non-exempted CCT Agreements are reasonable, details of which are set out in the section headed “The Non-exempted CCT Agreements”.

Based on the above consideration, we are of the opinion that the Non-exempted CCT Agreements is in the interests of the Company and the Shareholders as a whole, and the terms of which including the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we would advise the Independent Board Committee and the Independent Shareholders that the Independent Shareholders should vote in favour of the ordinary resolutions to approve the Non-exempted CCT Agreements and the proposed annual caps contemplated under the Non-exempted CCT Agreements at the EGM.

Yours faithfully, For and on behalf of

ACCESS CAPITAL LIMITED

Alexander Tai

Ivan Chan

Principal Director Senior Vice President

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GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests of Directors and chief executive of the Company

As at the Latest Practicable Date, none of the Directors, Supervisors or chief executive of the Company has an interest or short position in any shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which is required to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Directors, Supervisors or chief executive of the Company was taken or deemed to have under such provisions of the SFO); or (ii) entered in the register kept by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

As at the Latest Practicable Date, none of the Directors or the controlling shareholders of the Company and their respective associates has any interest in a business, apart from the business of the Company, which competes or may compete with the business of the Company or has any other conflict of interest with the Company which would be required to be disclosed under Rule 8.10 of the Listing Rules.

As at the Latest Practicable Date, none of the Directors, Supervisors or chief executives of the Company or their spouses or children under 18 years of age were granted or had exercised any right to subscribe for any equity or debt securities of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

None of the Directors has any interest, direct or indirect, in any assets which have been acquired or disposed of by, or leased to any member of the Group, or are proposed to be acquired or disposed of by, or leased to any member of the Group since 31 December 2008, the date to which the latest published audited financial statement of the Group was made up.

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GENERAL INFORMATION

APPENDIX I

None of the Directors is materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the Latest Practicable Date and which is significant in relation to the business of the Group taken as a whole.

(b) Substantial Shareholders’ and other Shareholders’ interests

As at the Latest Practicable Date, save as disclosed below, so far as is known to the Directors or chief executive of the Company, no other person has an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or were required to be notified to the Company and the Stock Exchange pursuant to section 324 of the SFO, or, who is, directly or indirectly, interested in 10 per cent. (10%) or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any members of the Group.

Long position in the shares of the Company

			Approximate
			percentage of
			total issued
		Number of	share capital
Name of Shareholder	Capacity	Shares held	of the Company
			(%)
CLFG	Beneficial owner	179,018,242	35.80
China National Building	Interest in controlled	179,018,242	35.80
Material Group	corporation
Corporation
(“CNBMG”)(Note 1)

Note:

These 179,018,242 Shares are registered and owned by CLFG. The major shareholder of CLFG is CNBMG which owns 70% of the registered capital in CLFG. CNBMG is therefore deemed to be interested in 179,018,242 Shares held by CLFG under the SFO.

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GENERAL INFORMATION

APPENDIX I

3. EXPERTS AND CONSENTS

The following is the qualifications of the expert who has been named in this circular or have given opinion or advice contained in this circular:

Name Qualification Access Capital a licensed corporation to conduct Type 1 (dealing in securities), Type 4 (advising on securities) , Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO

As at the Latest Practicable Date, Access Capital is not beneficially interested in the share capital of any member of the Group nor has any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Access Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name and letter in the form and context in which they appear.

The letter and recommendation given by Access Capital are given as of the date of this circular for incorporation herein.

Access Capital has, or has had, no direct or indirect interest in any assets which have been acquired or disposed of by, or leased to, any member of the Group or are proposed to be acquired of by, or leased to, any member of the Group since 31 December 2008, the date to which the latest published audited financial statement of the Group was made up.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors entered or proposed to enter into any service contract with the Company which is not determinable by the Company within one year without payment of compensation other than statutory compensation.

5. MATERIAL ADVERSE CHANGE

Save as disclosed in this circular, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December, 2008, the date to which the latest published audited accounts of the company were made up.

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GENERAL INFORMATION

APPENDIX I

6. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Messrs. Li & Partners at 22nd Floor, World Wide House, Central, Hong Kong during normal business hours on any weekday (except public holidays) for a period of 14 days from the date hereof:

(a) the Non-exempt CCT Agreements;
(b) the letter from the Independent Board Committee as set out on pages 34 to 35 of this circular; and
(c) the letter from Access Capital as set out on pages 36 to 76 of this circular.

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NOTICE OF EGM

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

(Stock Code: 1108)

NOTICE OF THE SECOND EXTRAORDINARY GENERAL MEETING 2009

NOTICE IS HEREBY given that the Second Extraordinary General Meeting 2009 (the “ EGM ”) of the Company will be held at the conference room of the Company on 1st Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the People’s Republic of China (the “ PRC ”) at 9:00 a.m. on 13 July 2009 for the purpose of considering and, if thought fit, passing the following ordinary resolutions:

“ THAT :

the Company Supply Agreement (as defined in the circular of the Company dated 27 May 2009 (the “ Circular ”), copy of which has been produced to the EGM marked “1” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Provision of Water, Electricity and Steam Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “2” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the CLFG Composite Services Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “3” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;

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NOTICE OF EGM

the Longhao Entrusted Loan Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “4” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longhai Entrusted Loan Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “5” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longfei Entrusted Loan Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “6” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longhao Guarantee Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “7” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longhai Guarantee Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “8” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longfei Guarantee Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “9” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longxiang Guarantee Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “10” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longhao Raw Material Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “11” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;

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NOTICE OF EGM

the Longfei Raw Material Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “12” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longxiang Raw Material Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “13” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longxin Raw Material Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “14” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longhao Glass Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “15” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longfei Glass Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “16” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longxiang Glass Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “17” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longxin Glass Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “18” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;

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NOTICE OF EGM

the Huayi Glass Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “19” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Silicon Powder Supply Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “20” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longhao Composite Services Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “21” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longfei Composite Services Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “22” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longxiang Composite Services Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “23” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;
the Longxin Composite Services Agreement (as defined in the Circular, copy of which has been produced to the EGM marked “24” and signed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and its proposed Cap amounts and the transaction contemplated thereunder and the implementation thereof be and are hereby approved and confirmed;

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NOTICE OF EGM

any one of the directors be authorised for and on behalf of the Company, among other matters, to sign, execute, perfect, deliver or to authorise signing, executing, perfecting and delivering all such documents and deeds, to do or authorise doing all such acts, matters and things as they may in their discretion consider necessary, expedient or desirable to give effect to and implement the Company Supply Agreement, the Provision of Water, Electricity and Steam Agreement, the Longhao Entrusted Loan Agreement, the Longhai Entrusted Loan Agreement, the Longfei Entrusted Loan Agreement, the Longhao Guarantee Agreement, the Longhai Guarantee Agreement, the Longfei Guarantee Agreement, the Longxiang Guarantee Agreement, the Longhao Raw Material Supply Agreement, the Longfei Raw Material Supply Agreement, the Longxiang Raw Material Supply Agreement, the Longxin Raw Material Supply Agreement, the Longhao Glass Supply Agreement, the Longfei Glass Supply Agreement, the Longxiang Glass Supply Agreement, the Longxin Glass Supply Agreement, the Huayi Glass Supply Agreement, the Silicon Powder Supply Agreement, the Longhao Composite Services Agreement, the Longhai Composite Services Agreement, the Longfei Composite Services Agreement, the Longxiang Composite Services Agreement and the Longxin Composite Services Agreement (together the “ Nonexempt CCT Agreements ”) and to waive compliance from or make and agree such variations of a non-material nature to any of the terms of the Non-exempt CCT Agreements they may in their discretion consider to be desirable and in the interests of the Company and all the directors’ acts as aforesaid be hereby approved, ratified and confirmed.”

By order of the Board Gao Tianbao Chairman

Luoyang, the PRC 27 May 2009

As at the date of this notice, the Board comprises five executive Directors: Mr. Gao Tianbao, Mr. Xie Jun, Mr. Cao Mingchun, Mr. Song Jianming and Ms. Song Fei, two non-executive Directors: Mr. Shen Anqin and Mr. Bao Wenchun, and three independent non-executive Directors: Mr. Zhang Zhanying, Mr. Guo Aimin and Mr. Huang Ping.

— 85 —

NOTICE OF EGM

Notes:

Holders of the Company’s A Shares who registered in the Shanghai Securities Central Clearing and Registration Corporation, and whose names appear on the register of members maintained by Shanghai Central Securities Registration and Clearing Company at the close of trading at 3:00 p.m. on 12 June 2009, are entitled to attend the EGM by presenting their identity cards, share account cards as well as power of attorney and identity cards of proxy(ies) (if applicable) during 8:00 a.m. to 12:00 p.m. and 2:00 p.m. to 5:30 p.m. on 22 June 2009 at the Secretarial Office of the Board of Directors, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC for registration in relation to attending the EGM; overseas shareholders may fax the copy of the same to the registered address of the Company on or before 22 June 2009.
Holders of the Company’s H Shares, whose names appear on the register of members maintained by Hong Kong Registrars Limited at the close of trading at 4:00 p.m. on 12 June 2009, are entitled to attend and vote at the EGM. The Register of Members of the Company’s H Shares will be closed from 13 June 2009 to 13 July 2009 (both days inclusive), during which period no transfer of H Shares will be effected in order to determine the list of holders of H shares eligible to attend the EGM. Holders of H shares of the Company who wish to attend the EGM must lodge all share transfer forms accompanied by the relevant H share certificates with the registrar of the Company’s H shares, namely Hong Kong Registrars Limited at Rooms 1901-5, Hopewell Centre, 183 Queen’s Road East, Hong Kong by 4:00 p.m. on 12 June 2009.
Any shareholder entitled to attend and vote at EGM may appoint a proxy or proxies (who need not be a shareholder of the Company) to attend and vote at the EGM on his/her behalf. A proxy of a Shareholder who has appointed more than one proxy may only vote on a poll. A proxy of the Shareholder needs not be a Shareholder.
The principal may appoint a proxy in written form (i.e. through the enclosed proxy form). The proxy form shall be signed by the principal or his attorney as authorised. In case that the proxy form is signed by the attorney of the principal, the power of attorney or other authority must be notarially certified. To be valid, the proxy form, together with a notarially certified copy of the power of attorney or other authorisation documents must be lodged at the Company’s share registrar in Hong Kong, Hong Kong Registrars Limited, at the Rooms 1901-5, Hopewell Centre, 183 Queen’s Road East, Hong Kong or to the Company at No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC not less than 24 hours before the time appointed for holding of EGM or any adjournment thereof.
Shareholders who intend to attend the EGM in person or by proxy should complete and return the signed reply slip for attending the EGM to the registered address of the Company on or before 22 June 2009 personally or by mail or fax.
Shareholders or their proxies shall produce their proofs of identity when attending the EGM. A proxy of shareholder who is appointed to attend the EGM shall produce the proxy form at the same time.
The EGM is expected to last for one day. Shareholders and proxies attending the EGM should be responsible for their own traveling and accommodation expenses.

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NOTICE OF EGM

The Company’s registered address is as follows:

No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, The People’s Republic of China Postal Code: 471009 Tel: 86-379-63908588 Fax: 86-379-63251984

Completion and return of the proxy form will not preclude shareholders of the Company from subsequently attending and voting in person at the EGM or any adjourned meetings should you so wish.

— 87 —

AI assistant

RoboSense Technology Co., Ltd — Proxy Solicitation & Information Statement 2009

50628_rns_2009-05-26_2410f14b-15fd-4a36-ba19-9f4c97f75e97.pdf

CONTINUING CONNECTED TRANSACTIONS

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Executive Directors:

Registered office:

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE BOARD

Historical breaches of the Listing Rules

LETTER FROM THE BOARD

Remedial actions taken by the incumbent Board

LETTER FROM THE BOARD

NON-EXEMPT CCT AGREEMENTS

PARTICULARS OF COMPANY SUPPLY AGREEMENT

Date

Parties

Period

Goods to be provided and pricing

Condition

PARTICULARS OF PROVISION OF WATER, ELECTRICITY AND STEAM AGREEMENT

Date

Parties

Period

Goods to be provided and pricing

Condition

PARTICULARS OF LONGHAO ENTRUSTED LOAN AGREEMENT, LONGHAI ENTRUSTED LOAN AGREEMENT AND LONGFEI ENTRUSTED LOAN AGREEMENT

Date

Parties

Period

LETTER FROM THE BOARD

Entrusted loans to be provided by the Company

Conditions

PARTICULARS OF LONGHAO GUARANTEE AGREEMENT, LONGHAI GUARANTEE AGREEMENT, LONGFEI GUARANTEE AGREEMENT AND LONGXIANG GUARANTEE AGREEMENT

Date

Parties

LETTER FROM THE BOARD

Period

Guarantee to be provided by the Company

Condition

PARTICULARS OF LONGHAO RAW MATERIAL SUPPLY AGREEMENT, LONGFEI RAW MATERIAL SUPPLY AGREEMENT, LONGXIANG RAW MATERIAL SUPPLY AGREEMENT AND LONGXIN RAW MATERIAL SUPPLY AGREEMENT

Date

Parties

Period

Raw materials to be supplied and price

Conditions

LETTER FROM THE BOARD

PARTICULARS OF LONGHAO GLASS SUPPLY AGREEMENT, LONGFEI GLASS SUPPLY AGREEMENT, LONGXIANG GLASS SUPPLY AGREEMENT AND LONGXIN GLASS SUPPLY AGREEMENT

Date

Parties

Period

Goods to be provided and price

Condition

PARTICULARS OF HUAYI GLASS SUPPLY AGREEMENT

Date

Parties

Period

Goods to be provided and pricing

Condition

PARTICULARS OF SILICON POWDER SUPPLY AGREEMENT

Date

Parties

Period

Goods to be purchased by the Group and pricing

Condition

Date

Parties

Period

Services to be provided and pricing

Conditions

LETTER FROM THE BOARD

RoboSense Technology Co., Ltd Proxy Solicitation & Information Statement 2009