RoboSense Technology Co., Ltd - Proxy Solicitation & Information Statement 2015

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 licenced 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* , you should at once hand this circular with the accompanying revised form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

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MAJOR AND CONNECTED TRANSACTIONS, PROPOSED ISSUANCE AND PLACING OF A SHARES, PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND TERMINATION OF EXISTING CONTINUING CONNECTED TRANSACTION

Financial adviser to Luoyang Glass Company Limited*

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

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A letter from the Board is set out on pages 1 to 54 of this circular. A letter from the Independent Board Committee is set out on pages 55 to 56 of this circular. A letter from Goldin, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 57 to 88 of this circular.

A supplemental notice of the EGM to be held at 9:00 a.m. on 25 August 2015 at the conference room of the Company on 3rd Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC was published by the Company on 31 July 2015. A supplemental notice of the H Shares Class Meeting to be held at 11:00 a.m. on 25 August 2015 at the conference room of the Company on 3rd Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC was published by the Company on 31 July 2015. Revised forms of proxy for use at the EGM and the H Shares Class Meeting were also despatched by the Company on 31 July 2015. Whether or not you are able to attend the EGM and/or the H Shares Class Meeting in person, you are requested to complete and return the accompanying revised forms of proxy in accordance with the instructions printed thereon to the Company’s share registrar in Hong Kong, Hong Kong Registrars Limited, at Rooms 1712-1716, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, or to the Company’s registered address 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 of the EGM and/or the H Shares Class Meeting or any adjournment thereof. Completion and return of the revised forms of proxy will not preclude you from attending and voting in person at the EGM and/or the H Shares Class Meeting or any adjournment thereof should you so wish.

10 August 2015

* For identification purposes only

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Letter from Goldin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Appendix I — Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Appendix II — Financial information of Bengbu Company. . . . . . . . . . . . . . . . . . . . . . . 91
Appendix III — Financial information of Longhao Company. . . . . . . . . . . . . . . . . . . . . . 174
Appendix IV — Financial information of Longfei Company. . . . . . . . . . . . . . . . . . . . . . . 219
Appendix V — Financial information of Dengfeng Silicon Company. . . . . . . . . . . . . . . 280
Appendix VI — Financial information of Yinan Huasheng Company. . . . . . . . . . . . . . . 328
Appendix VII — Financial information of Mineral Products Company. . . . . . . . . . . . . . . 373
Appendix VIII — Report on the amounts due from the Outgoing Entities. . . . . . . . . . . . . 423
Appendix IX — Unaudited pro forma financial information of the enlarged Group. . . . 429
Appendix X — Valuation report of Longhao Company. . . . . . . . . . . . . . . . . . . . . . . . . . 434
Appendix XI — Valuation report of Longfei Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 479
Appendix XII — Valuation report of Dengfeng Silicon Company. . . . . . . . . . . . . . . . . . . . 523
Appendix XIII — Valuation report of Yinan Huasheng. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555
Appendix XIV — Valuation report of Mineral Products Company. . . . . . . . . . . . . . . . . . . 601

— i —

CONTENTS

Appendix XV — Valuation report of the amounts due from the Outgoing Entities
to the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634
Appendix XVI — Valuation report of Bengbu Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 655
AppendixXVII — General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709
Supplemental notice of the EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 718
Supplemental notice of the H Shares Class Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723

— ii —

DEFINITIONS

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

“A Share(s)” domestic ordinary share(s) with a par value of RMB1.00 each in the share capital of the Company which are listed on the SSE and traded in RMB
“A Shareholder(s)” holder(s) of the A Share(s) “A Shares Class Meeting” the class meeting of the A Shareholders to be held to consider and, if thought fit, approve, among other things, the Formal Agreement and the transactions contemplated thereunder and the specific mandates
“Acquisition” the transfer by CLFG of the Incoming Entity to the Company pursuant to the terms and conditions of the Formal Agreement
“Articles of Association” the articles of association of the Company, as amended from time to time
“Assets Leasing Agreement” the assets leasing agreement dated 17 April 2014 entered into between Longhao Company and CLFG, pursuant to which CLFG has agreed to lease to Longhao Company the Leased Assets
“associate(s)”

has the meaning ascribed to it under the Listing Rules

“Bengbu Company” or “Incoming Entity”
Bengbu China Building Information Display Materials Co. Ltd.* ( 蚌埠中建材信息顯示材料有限公司 ), a company established in the PRC with limited liability and a wholly-owned subsidiary of CLFG

“Bengbu Institute”

Bengbu Glass Industry Design Institute* ( 蚌埠玻璃工業設計研究院 ), an indirect wholly-owned subsidiary of CNBMG and a 19.0% shareholder of CLFG

“Board”

the board of Directors

“Class Meetings”

the A Shares Class Meeting and the H Shares Class Meeting

— iii —

DEFINITIONS

“CLFG” China Luoyang Float Glass (Group) Company Limited* ( 中國洛陽浮法玻璃集團有限責任公司 ), a company established in the PRC with limited liability and a controlling Shareholder of the Company under the Listing Rules
“CNBMG” China National Building Material Group Corporation* ( 中國建築材料集團有限公司 ), a wholly state-owned enterprise incorporated in the PRC and the ultimate controlling Shareholder of the Company
“Company” Luoyang Glass Company Limited*, a joint stock company incorporated in the PRC with limited liability and the Shares of which are listed on the Main Board of the Stock Exchange and the SSE
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“Consideration Share(s)” a total of 15,000,000 new A Shares to be allotted and issued by the Company to CLFG pursuant to the Formal Agreement as the settlement of the difference between the considerations of the Disposal and the Acquisition (excluding the cash portion)
“CSRC” the China Securities Regulatory Commission
“Dengfeng Hongzhai Silicon” Dengfeng Hongzhai Silicon Co. Ltd.* ( 登封紅寨硅砂有限公司 ), a company established in the PRC with limited liability and is owned as to 55.12% by Dengfeng Silicon Company
“Dengfeng Silicon Company” Dengfeng CLFG Silicon Co. Ltd.* ( 登封洛玻硅砂有限公司 ), a company established in the PRC with limited liability and is owned as to 67.00% by Longhai Company
“Dengfeng Silicon Group” Dengfeng Silicon Company and Dengfeng Hongzhai Silicon
“Director(s)” the director(s) of the Company
“Disposal” the transfer by the Company of the Sale Interests in the Outgoing Entities and the amounts due from the Outgoing Entities to the Company to CLFG pursuant to the terms and conditions of the Formal Agreement

— iv —

DEFINITIONS

“EGM”

“Equity Interest Transfer Agreement I”
“Equity Interest Transfer Agreement II”
“Equity Interest Transfer Agreement III”
“Formal Agreement”
“Framework Agreement”

the extraordinary general meeting to be convened and held by the Company at 9:00 a.m. on 25 August 2015 at the conference room of the Company on 3rd Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC to consider and, if thought fit, approve, among other things, the Formal Agreement and the transactions contemplated thereunder, the specific mandates, the amendments to the Articles of Association and the termination of the Assets Leasing Agreement

the equity interest transfer agreement dated 27 October 2014 entered into between CLFG and the Bengbu Institute in relation to the sale and purchase of 93.68% equity interest in Bengbu Company
the equity interest transfer agreement dated 31 December 2014 entered into between CLFG and Bengbu Institute in relation to the transfer of the Transfer Shares from CLFG to Bengbu Institute
the equity interest transfer agreement dated 31 December 2014 entered into between Longhai Company and the Company in relation to the sale and purchase of 67.00% equity interest in Dengfeng Silicon Company
the formal agreement dated 10 June 2015 entered into between CLFG and the Company in relation to the Disposal, the Acquisition, the issue of the Consideration Shares and the Proposed A Share Placing
the initial framework agreement dated 31 December 2014 entered into between CLFG and the Company in relation to the Disposal, the Acquisition, the issue of the Consideration Shares and the Proposed A Share Placing and superseded by the Formal Agreement

— v —

DEFINITIONS

“Goldin” or “Independent Financial Adviser”
“Group”
“H Share(s)”
“H Shareholder(s)”
“H Shares Class Meeting”
“HK$”
“Hong Kong”
“Independent Board Committee”
“Independent Shareholders”
“Last Trading Day”
Goldin Financial Limited, a licensed corporation to carry out type 6 regulated activity (advising on corporate finance) under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Formal Agreement and the transactions contemplated thereunder and the specific mandates
the Company and its subsidiaries
overseas listed foreign share(s) with a par value of RMB1.00 each in the share capital of the Company, listed on the Main Board of the Stock Exchange and traded in Hong Kong dollars
holder(s) of the H Share(s)
the class meeting of the H Shareholders to be held at 11:00 a.m. on 25 August 2015 at the conference room of the Company on 3rd Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC to consider and, if thought fit, approve, among other things, the Formal Agreement and the transactions contemplated thereunder and the specific mandates
Hong Kong dollars, the lawful currency of Hong Kong
the Hong Kong Special Administrative Region of the PRC
an independent board committee comprising all the independent non-executive Directors, namely Mr. Huang Ping, Mr. Dong Jiachun, Mr. Liu Tianni and Mr. Jin Zhanping, established by the Company to advise the Independent Shareholders on, inter alia, the Formal Agreement and the transactions contemplated thereunder and the specific mandates
Shareholders other than CLFG and its close associates
27 June 2014

— vi —

DEFINITIONS

“Latest Practicable Date”
6 August 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information herein
“Leased Assets” a 600t/d online Low-E glass production line workshop and equipment located at Neibu Village, Ruyang County, Luoyang, Henan Province, the PRC, including but not limited to the main production line, raw material workshop, homogenization silo, mixtures transportation system, cullet system, hydrogen production station, electric power substation, nitrogen production station, compressed air station, liquid ammonia storage shed, raw material auxiliary workshop and circulating water pump house, etc.
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Longfei Company” CLFG Longfei Glass Co. Ltd.* ( 洛玻集團龍飛玻璃有限公司 ), a company established in the PRC with limited liability and is owned as to 63.98% by the Company
“Longhai Company”
CLFG Longhai Electronic Glass Limited* ( 洛玻集團洛陽龍海電子玻璃有限公司 ), a company established in the PRC with limited liability and a wholly-owned subsidiary of the Company
“Longhao Company”
CLFG Longhao Glass Co. Ltd.* ( 洛玻集團洛陽龍昊玻璃有限公司 ), a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of the Company
“Longxiang Company”
CLFG Longxiang Glass Co. Ltd* ( 洛玻集團龍翔玻璃有限公司 ), a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of Longfei Company
“Mineral Products Company”
CLFG Mineral Company Limited* ( 中國洛陽浮法玻璃集團礦產有限公司 ), a company incorporated in the PRC with limited liability and is owned as to 40.29% by the Company

— vii —

DEFINITIONS

“New Measures”
“Outgoing Entities”
“PRC”
“Proposed A Share Placing”
“Reorganisation”
“RMB”
Amendment to the Administrative Measures on Significant Asset Restructuring of Listing Companies with Regard to Applicable Opinions in Rule 14 and Rule 44 – Applicable Opinions No. 12 on the Securities and Futures Laws (Zheng Jian Hui Gong Gao [2015] No. 10) (《第十四條、第四十四條的適用意見 – 證券期貨法律適用意見第12號》( 證監會公告 [2015]10號）修訂版 ) and Questions and Answers about Issuance of Shares by Listed Companies to Acquire Assets and Use of Supporting Proceeds (《關於上市公司發行股份購買資產同時募集配套資金用途等問題與解答》) issued by the CSRC on 24 April 2015, which details, among other things, the following changes to fund raising activities in relation to significant asset restructuring: (i) the fund raising size in relation to the significant asset restructuring by PRC listed companies shall not be more than 100% of the consideration of proposed assets to be acquired; and (ii) the PRC listed companies shall not allocate more than 50% of its proceeds from the fund raising for working capital use
the entities owned by the Company as at the Latest Practicable Date as more particularly described in the section headed “Information on the Outgoing Entities” of the letter from the Board contained in this circular
the People’s Republic of China, which for the purpose of this circular excludes Hong Kong, Macau Special Administrative Region and Taiwan
the proposed placing of not more than 32,137,519 new A Shares by the Company based on the minimum issue price of RMB6.69 per A Share to not more than 10 independent specific investors
the transactions contemplated under the Framework Agreement and the Equity Interest Transfer Agreements I and III
Renminbi, the lawful currency of the PRC

— viii —

DEFINITIONS

“Sale Interests” 100.00% equity interest in Longhao Company, 63.98% equity interest in Longfei Company, 67.00% equity interest in Dengfeng Silicon Company, 52.00% equity interest in Yinan Huasheng and 40.29% equity interest in Mineral Products Company “SASAC” State-owned Assets Supervision and Administration Commission of the State Council

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Share(s)” ordinary share(s) of RMB1.00 each in the share capital of the Company, including A Share(s) and H Share(s)

“Shareholder(s)” holder(s) of the Share(s)

“SSE” the Shanghai Stock Exchange

“Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Hong Kong Code on Takeovers and Mergers

“Termination Agreement” the termination agreement dated 17 June 2015 entered into between Longhao Company and CLFG in relation to the termination of the Assets Leasing Agreement

“Transfer Share(s)” 69,000,000 A Shares owned by CLFG, representing approximately 13.80% of the existing total issued share capital of the Company

“Valuer” China United Assets Appraisal Group Limited* ( 中聯資產評估集團有限公司 ), an independent professional valuer engaged by the Company and CLFG

“Xinan Transport”

Xinan Province Mineral Transport Co. Ltd.* ( 新安縣礦產運輸有限公司 ), a company established in the PRC with limited liability and is owned as to 63.51% by Mineral Products Company

— ix —

DEFINITIONS

“Yinan Huasheng”

Yinan Huasheng Mineral Products Industry Co. Ltd.* ( 沂南華盛礦產實業有限公司 ), a company established in the PRC with limited liability and is owned as to 52.00% by the Company

“%”

per cent

“mm” millimeter(s)

“t/d” tons per day

For identification purposes only

— x —

LETTER FROM THE BOARD

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Executive Directors:

Mr. Ma Liyun (Chairman)

Mr. Ni Zhisen (General Manager)

Ms. Sun Lei Mr. Xie Jun

Registered office:

No. 9 Tang Gong Zhong Lu Xigong District Luoyang Municipal Henan Province The People’s Republic of China

Non-executive Directors:

Mr. Zhang Chong (Vice Chairman)

Mr. Zhang Chengong

Independent non-executive Directors:

Mr. Huang Ping

Mr. Dong Jiachun

Mr. Liu Tianni

Mr. Jin Zhanping

10 August 2015

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS, PROPOSED ISSUANCE AND PLACING OF A SHARES, PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND

TERMINATION OF EXISTING CONTINUING CONNECTED TRANSACTION

INTRODUCTION

References are made to the announcements of the Company dated 31 July 2015, 10 June 2015, 29 May 2015, 22 May 2015, 12 May 2015, 10 April 2015, 31 March 2015, 13 March 2015, 20 January 2015, 31 December 2014, 23 December 2014, 18 December 2014, 16 December 2014, 12 December

* For identification purposes only

— 1 —

LETTER FROM THE BOARD

2014, 5 December 2014, 28 November 2014, 21 November 2014, 14 November 2014, 11 November 2014, 4 November 2014, 28 October 2014, 21 October 2014, 14 October 2014, 10 October 2014, 26 September 2014, 19 September 2014, 12 September 2014, 9 September 2014, 2 September 2014, 26 August 2014, 19 August 2014, 12 August 2014, 8 August 2014, 1 August 2014, 25 July 2014 and 18 July 2014 regarding the significant asset restructuring.

On 31 December 2014, the Company entered into the Framework Agreement with CLFG. The filing of valuation in relation to the Outgoing Entities and the Incoming Entity by the SASAC was undertaken by the Company in early May 2015. In order to ensure the compliance with the New Measures of the PRC authorities governing the fund raising activities in relation to significant asset restructuring of PRC listed companies and to make sure that not more than 50% of the gross proceeds from the Proposed A Share Placing will be used for general working capital of the Group, the Company and CLFG amended the structure of the Reorganisation and entered into the Formal Agreement which superseded the Framework Agreement on 10 June 2015. Pursuant to the Formal Agreement, (i) the Company has conditionally agreed to transfer its Sale Interests in the Outgoing Entities and the amounts due from the Outgoing Entities to the Company to CLFG for a total consideration of RMB494,179,465; (ii) CLFG has conditionally agreed to transfer its 100.00% equity interest in the Incoming Entity to the Company for a consideration of RMB674,909,180; and (iii) the difference between the considerations of the Disposal and the Acquisition of RMB180,729,715 will be partially settled by cash of RMB90,729,715 from the proceeds of the Proposed A Share Placing within two months after the completion of the Proposed A Share Placing while the remaining balance of RMB90,000,000 will be settled by the allotment and issue of 15,000,000 Consideration Shares to CLFG at the issue price of RMB6.00 per Consideration Share. As part of the Formal Agreement, the Company plans to undertake the proposed placing of not more than 32,137,519 new A Shares to not more than 10 independent specific investors at the minimum issue price of RMB6.69 per A Share for a gross proceeds of not more than RMB215,000,000 subsequent to the completion of the Disposal, the Acquisition and the issue of the Consideration Shares. The exact issue price will be determined after obtaining the approval of the CSRC for the Proposed A Share Placing with reference to bid prices offered by target subscribers.

Reference is made to the announcement of the Company dated 10 June 2015 regarding the proposed amendments to the Articles of Association.

According to the relevant requirements of the “Guidelines for the Articles of Association of Listed Companies (Amended in 2014)《上市公司章程指引（2014年修訂）》”, “Rules for General Meetings of Listed Companies (Amended in 2014)《上市公司股東大會規則（2014年修訂）》” and “Guideline No. 3 for the Supervision and Administration of Listed Companies – Cash Dividend for Listed Companies 《上市公司監管指引第3號 – 上市公司現金分紅》” of the CSRC, and coupled with the actual situation of the Company, the Company proposes to amend the Articles of Association.

References are made to the announcements of the Company dated 17 June 2015 and 17 April 2014 and the circular of the Company dated 14 May 2014 regarding the Assets Leasing Agreement and the Termination Agreement.

— 2 —

LETTER FROM THE BOARD

On 17 April 2014, Longhao Company and CLFG entered into the Assets Leasing Agreement pursuant to which CLFG had agreed to lease to Longhao Company the Leased Assets for a term of three years from 3 June 2014 to May 2017. On 17 June 2015, Longhao Company and CLFG entered into the Termination Agreement to terminate the Assets Leasing Agreement.

The purpose of this circular is to provide you with, among other things, (i) details of the Reorganisation, the Framework Agreement and the Formal Agreement, the transactions contemplated thereunder, the specific mandates and the Proposed A Share Placing; (ii) details of the amendments to the Articles of Association; (iii) details of the termination of the Assets Leasing Agreement; (iv) a letter of recommendation from the Independent Board Committee to the Independent Shareholders on the Formal Agreement and the transactions contemplated thereunder and the specific mandates; (v) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders on the Formal Agreement and the transactions contemplated thereunder and the specific mandates; and (vi) supplemental notices of the EGM and the H Shares Class Meeting.

(I) THE REORGANISATION

The Formal Agreement

Date

10 June 2015

Parties

(a) The Company; and
(b) CLFG.

CLFG is a controlling Shareholder and therefore is a connected person of the Company under Chapter 14A of the Listing Rules.

The Disposal

Pursuant to the Formal Agreement, the Company has conditionally agreed to transfer its Sale Interests in the Outgoing Entities and the amounts due from the Outgoing Entities to the Company to CLFG.

The aggregate consideration for the Disposal is RMB494,179,465, which was determined on arm’s length negotiations with reference to (i) the valuation of the net assets/(liabilities) of the Outgoing Entities as at 31 October 2014 (If the fair value of the net assets of any of the Outgoing Entities is negative, the consideration for the disposal of that entity shall then be RMB1.00. For those Outgoing Entities with a positive fair value of net assets, the consideration is calculated based on the fair value of the net assets multiplied by the Company’s proportionate equity interest in the respective Outgoing Entities); and (ii) the valuation of the amounts due from the Outgoing Entities to the Company as at 31 October 2014 as appraised by the Valuer based on the cost method.

— 3 —

LETTER FROM THE BOARD

Set out below is a summary of the valuation of (i) the net assets/(liabilities) of the Outgoing Entities as at 31 October 2014; and (ii) the amounts due from the Outgoing Entities to the Company as at 31 October 2014:

(i) Valuation of the net assets/(liabilities) of the Outgoing Entities as at 31 October 2014

Company Audited book value of the net assets/(liabilities) of the relevant company Valuation of the net assets/(liabilities) of the relevant company Interest of the Company in the relevant company (RMB) (RMB) (%) Longhao Company (245,393,598) (178,305,058) 100.00 Longfei Company (205,684,970) (145,172,516) 63.98 Dengfeng Silicon Company 10,055,540 30,056,144 67.00 Yinan Huasheng 4,020,129 37,793,155 52.00 Mineral Products Company (32,310,825) 24,298,793 40.29 Total	Consideration (RMB) 1 1 20,137,616 19,652,441 9,789,984
	49,580,043

Company
Audited book
value of the net
assets/(liabilities)
of the relevant
company
Valuation of
the net
assets/(liabilities)
of the relevant
company
Interest
of the Company
in the relevant
company
(RMB)
(RMB)
(%)
Longhao Company
(245,393,598)
(178,305,058)
100.00
Longfei Company
(205,684,970)
(145,172,516)
63.98
Dengfeng Silicon Company
10,055,540
30,056,144
67.00
Yinan Huasheng
4,020,129
37,793,155
52.00
Mineral Products Company
(32,310,825)
24,298,793
40.29
Total

Consideration
(RMB)
1
1
20,137,616
19,652,441
9,789,984

49,580,043

(ii) Valuation of the amounts due from the Outgoing Entities to the Company as at 31 October 2014

Amount due from Longhao Company Amount due from Longfei Company Amount due from Longxiang Company Amount due from Yinan Huasheng Amount due from Mineral Products Company Total	Audited book value (RMB) 247,559,310 107,843,480 63,129,231 20,987,425 1,341,990 440,861,436	Valuation Consideration (RMB) (RMB) 250,532,385 250,532,385 108,994,916 108,994,916 62,742,706 62,742,706 20,987,425 20,987,425 1,341,990 1,341,990 444,599,422 444,599,422	Valuation Consideration (RMB) (RMB) 250,532,385 250,532,385 108,994,916 108,994,916 62,742,706 62,742,706 20,987,425 20,987,425 1,341,990 1,341,990 444,599,422 444,599,422
			444,599,422

The valuation reports of the net assets/(liabilities) of the Outgoing Entities as at 31 October 2014 and the amounts due from the Outgoing Entities to the Company as at 31 October 2014 are set out in Appendices X to XIV to this circular. As confirmed by the Valuer, if the material subsequent events in each of the valuation reports are taken into consideration, the valuation of the Outgoing Entities would not be significantly affected.

— 4 —

LETTER FROM THE BOARD

The Acquisition

Pursuant to the Formal Agreement, CLFG has conditionally agreed to transfer its 100.00% equity interest in the Incoming Entity to the Company.

The consideration for the Acquisition is RMB674,909,180, which was determined on arm’s length negotiations with reference to the valuation of the net asset value of the Incoming Entity as at 31 October 2014 as appraised by the Valuer based on the cost method.

Set out below is a summary of the valuation of the net asset value of the Incoming Entity as at 31 October 2014:

(i) Valuation of the net asset value of the Incoming Entity as at 31 October 2014

	Audited book
	value of	Valuation of	Interest in
	the net asset	the net asset	the Incoming
	value of	value of	Entity to be
	the Incoming	the Incoming	acquired by
Company	Entity	Entity	the Company	Consideration
	(RMB)	(RMB)	(%)	(RMB)
Bengbu Company	665,486,742	674,909,180	100.00	674,909,180

The valuation report of the net asset value of the Incoming Entity as at 31 October 2014 is set out in Appendix XVI to this circular. As confirmed by the Valuer, if the material subsequent events in the valuation report are taken into consideration, the valuation of the Incoming Entity would not be significantly affected.

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LETTER FROM THE BOARD

As advised by the Valuer, the valuation of the net asset value of Bengbu Company as at 31 October 2014 was carried out using the asset-based approach and the income approach due to the requirements of SASAC. However, Bengbu Company was established in September 2013. The enterprise was in production adjustment and testing stage before August 2014. In view of the relatively short operating period of Bengbu Company, the accuracies of estimated data used in income approach such as operating income, cost structure, asset turnover efficiency and working capital, etc. may be affected. While asset-based approach reflects the replacement value based on the current assets of the enterprise, the data being used in asset-based approach is of higher quality comparing with that in income approach. In addition, asset-based approach estimates and calculates various assets and liabilities of the enterprise separately, which is more precise. In consideration of the above analysis, the Valuer has selected asset-based approach as the reference for the valuation of the net asset value of Bengbu Company. Shareholders are advised not to make reference to the valuation conclusion under the income approach as set out in the valuation report of Bengbu Company while considering the Formal Agreement and the transactions contemplated thereunder. The income approach referred in the valuation report of the net asset value of Bengbu Company as at 31 October 2014 constitutes profit forecast (the “ Profit Forecast ”) under Rule 14.61 of the Listing Rules. WUYIGE Certified Public Accountants LLP (“ WUYIGE ”), acting as the Company’s auditor, has reviewed the accounting policies and calculations for the Profit Forecast. TC Capital Asia Limited (“ TC Capital ”), acting as the Company’s financial adviser, has confirmed that it is satisfied that the Profit Forecast has been made by the Directors after due and careful enquiry. A letter from WUYIGE dated 10 August 2015 in compliance with Rule 14.62(2) of the Listing Rules and a letter from TC Capital dated 10 August 2015 in compliance with Rule 14.62(3) of the Listing Rules have been submitted to the Stock Exchange, the texts of which are included in “APPENDIX XVI – VALUATION REPORT OF BENGBU COMPANY – B – LETTER FROM WUYIGE CERTIFIED PUBLIC ACCOUNTANTS LLP.” and “APPENDIX XVI – VALUATION REPORT OF BENGBU COMPANY – C – LETTER FROM TC CAPITAL ASIA LIMITED” of this circular, respectively.

— 6 —

LETTER FROM THE BOARD

The Consideration Shares

In order to ensure the compliance with the New Measures of the PRC authorities governing the fund raising activities in relation to significant asset restructuring of PRC listed companies, both parties to the Formal Agreement have agreed that the difference between the considerations of the Disposal and the Acquisition of RMB180,729,715 will be settled partially by cash of RMB90,729,715 from the proceeds of the Proposed A Share Placing within two months after the completion of the Proposed A Share Placing while the remaining balance of RMB90,000,000 will be settled by the allotment and issue of 15,000,000 Consideration Shares by the Company to CLFG at the issue price of RMB6.00 per Consideration Share. In the event that the net proceeds from the Proposed A Share Placing fell short of RMB90,729,715, the Company will settle the shortfall amount by internal funding or other settlement methods to be determined by commercial negotiations between the Company and CLFG however excluding the allotment and issue of new Shares by the Company to CLFG. The Company does not obviate the possibility to obtain bank loans or other loans or to settle by provision of assets in the event that the net proceeds from the Proposed A Share Placing fell short of RMB90,729,715.

According to the Measures for Administration of Material Asset Reorganisation of Listed Companies* (《上市公司重大資產重組管理辦法》) issued by the CSRC, the issue price of the shares to be issued by listed companies in the PRC for acquisition of assets shall be not less than 90% of the market reference price, being the average share price for the preceding 20 trading days, 60 trading days or 120 trading days before the board resolution announcement date regarding the relevant acquisition of assets. In the case of the Consideration Shares, the Company and CLFG have agreed to adopt the median of the aforesaid range having balanced the interests of the controlling Shareholder and the existing public Shareholders. Therefore, the issue price of the Consideration Shares is RMB6.00 (equivalent to approximately HK$7.50) per Consideration Share, which is equivalent to 90% of the ratio of the total turnover over the total volume of the A Shares for the last 60 trading days as quoted on the SSE prior to the date of first board meeting in relation to the Reorganisation. As trading in the Shares was suspended during the period from 30 June 2014 to the date of first board meeting in relation to the Reorganisation, the issue price of the Consideration Shares was determined based on 90% of the ratio of the total turnover over the total volume of the A Shares for the last 60 trading days prior to 30 June 2014. Such issue price represents:

(a) a premium of approximately 10.78% over the closing price of HK$6.77 per H Share as quoted on the Stock Exchange on the date of the Formal Agreement;
(b) a premium of approximately 97.37% over the closing price of HK$3.80 per H Share as quoted on the Stock Exchange on the Last Trading Day;
(c) a premium of approximately 90.16% over the average closing price of approximately HK$3.94 per H Share as quoted on the Stock Exchange for the last five trading days up to and including the Last Trading Day;
(d) a premium of approximately 94.30% over the average closing price of approximately HK$3.86 per H Share as quoted on the Stock Exchange for the last ten trading days up to and including the Last Trading Day;

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LETTER FROM THE BOARD

(e) a premium of approximately 150.36% over the average closing price of approximately HK$3.00 per H Share as quoted on the Stock Exchange for the last thirty trading days up to and including the Last Trading Day;
(f) a discount of approximately 74.39% to the closing price of RMB23.43 (equivalent to approximately HK$29.29) per A Share as quoted on the SSE on the date of the Formal Agreement;
(g) a discount of approximately 17.13% to the closing price of RMB7.24 (equivalent to approximately HK$9.05) per A Share as quoted on the SSE on the Last Trading Day; and
(h) a premium of approximately 17,000.00% over the unaudited net assets attributable to the Shareholders per Share of approximately RMB0.03 (equivalent to approximately HK$0.04), calculated based on the Company’s unaudited net assets attributable to the Shareholders of approximately RMB17.38 million as at 31 March 2015.

Based on (i) the portion of the difference between the considerations of the Disposal and the Acquisition of RMB90,729,715 to be settled by the proceeds from the Proposed A Shares Placing, and (ii) the issue price of RMB6.00 per Consideration Share, the aggregate number of Consideration Shares to be issued by the Company is 15,000,000 new A Shares, which represent approximately 3.00% of the issued share capital of the Company as at the Latest Practicable Date and approximately 2.91% of the issued share capital of the Company as enlarged by the issue of such Consideration Shares.

The Consideration Shares shall rank pari passu among themselves and with the A Shares in issue. The issue of the Consideration Shares will be subject to the approval by the Independent Shareholders at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

The Consideration Shares to be issued to CLFG for settlement of the difference between the considerations of the Disposal and the Acquisition (excluding the cash portion) cannot be transferred within 36 months after completion of the issue of the Consideration Shares (the “Lock-up Period”), which is in compliance with the relevant requirements of the Measures for Administration of Material Asset Reorganisation of Listed Companies* (《上市公司重大資產重組管理辦法》) issued by the CSRC. CLFG undertakes that if the closing prices of the A Shares for 20 consecutive trading days are below the issue price of the Consideration Shares within the 6-month period from the issue date of the Consideration Shares or the closing price of the A Shares is below the issue price of the Consideration Shares as at the end of the 6-month period after completion of the issue of the Consideration Shares, the Lock-up Period will be automatically extended for at least 6 months. If the Lock-up Period does not comply with the latest requirements of the CSRC, CLFG will adjust the Lock-up Period according to the latest requirements of the CSRC.

— 8 —

LETTER FROM THE BOARD

The Proposed A Share Placing

The Company plans to undertake a proposed placing of not more than 32,137,519 new A Shares at the minimum issue price of RMB6.69 per A Share to not more than 10 independent specific investors which according to the requirements of the CSRC include securities investment fund management companies, insurance institutional investors, trust investment companies, finance companies, securities companies, qualified foreign institutional investors (QFII), natural persons and other qualified investors under statutory requirements to be procured by the independent financial adviser of the Company in the PRC. The Proposed A Share Placing is non-legally binding and is conditional on the Disposal, the Acquisition and the issue of the Consideration Shares. In accordance with the applicable PRC laws and regulations, the Proposed A Share Placing will be subject to the approval by the Independent Shareholders at the EGM, the A Shares Class Meeting and the H Shares Class Meeting.

The terms of the Proposed A Share Placing are as follows:

Type of shares and nominal : A Shares, with a nominal value of RMB1.00 each. value

Method of issue : Non-public issuance.

Target subscribers

: The Company will issue the new A Shares to not more than 10 independent specific investors which according to the requirements of the CSRC include securities investment fund management companies, insurance institutional investors, trust investment companies, finance companies, securities companies, qualified foreign institutional investors (QFII), natural persons and other qualified investors under statutory requirements to be procured by the independent financial adviser of the Company in the PRC. Such specified investors shall not include connected persons of the Company as defined under the Listing Rules and persons acting in concert with the controlling Shareholder as defined under the Takeovers Code. The Company will determine the target subscribers to ensure that no specific investor will become connected persons of the Company after the Proposed A Share Placing.

— 9 —

LETTER FROM THE BOARD

To the best knowledge, information and belief of the Directors, as at the Latest Practicable Date, the Company was not aware of any potential investors or any of their respective ultimate beneficial owners who were connected persons of the Company. The Company will comply with the relevant requirements of the Listing Rules should there be any changes or if otherwise necessary.

Lock-up period : The A Shares to be subscribed by the target subscribers are not transferable for a period of 12 months from the date of completion of the issue of the new A Shares under the Proposed A Share Placing, which is in compliance with the relevant requirements of the Measures for Administration of Issuance of Securities by Listed Companies* (《上市公司證券發行管理辦法》) issued by the CSRC.
Subscription method : All target subscribers will subscribe for the A Shares under the Proposed A Share Placing in cash.
Pricing base date and price : According to the Measures for Administration of of the issue Issuance of Securities by Listed Companies* (《上市公司證券發行管理辦法》) issued by the CSRC, for any non-public issuance of shares by listed companies in the PRC for fund raising purposes, the issue price of the relevant shares shall be not less than 90% of the average share price for the preceding 20 trading days before the relevant price determination date. The pricing base date of the Proposed A Share Placing is the date of announcement of the resolution of the first board meeting in relation to the Reorganisation (i.e. 31 December 2014). Therefore, the issue price per A Share will be not less than 90% of the average trading price of the A Shares for the 20 trading days immediately preceding the pricing base date, i.e. not less than RMB6.69 per A Share. The exact issue price will be determined after obtaining the approval of the CSRC according to the relevant regulations of the CSRC for the Proposed A Share Placing with reference to bid prices offered by target subscribers. The issue price of the A Shares under the Proposed A Share Placing will be adjusted correspondingly in case of ex-rights or ex-dividend during the period from the pricing base date to the issue date.

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LETTER FROM THE BOARD

Amount of gross proceeds : The maximum amount of gross funds to be raised to be raised and number through the Proposed A Share Placing will not of A Shares to be issued exceed RMB215,000,000 in accordance with the New Measures pursuant to which the fund raising size in relation to the significant asset restructuring by PRC listed companies shall not be more than 100% of the consideration of proposed assets to be acquired i.e. RMB674,909,180.

Based on the minimum issue price of RMB6.69 per A Share under the Proposed A Share Placing, the number of new A Shares to be issued will not be more than 32,137,519 A Shares.

The final number of new A Shares to be issued under the Proposed A Share Placing will be determined by the Board based on the final issue price and the result of price bidding as authorised in the Shareholders’ general meeting of the Company.

Place of listing

: The A Shares to be issued pursuant to the Proposed A Share Placing will be listed and traded on the SSE.
Use of proceeds : The proceeds to be raised from the Proposed A Share Placing will not exceed RMB215,000,000. After the settlement of the cash portion of the difference between the considerations of the Disposal and the Acquisition and the deduction of the relevant cost of transaction (including relevant tax, expense, offering cost and intermediary fee, etc.), the remaining net proceeds, which shall not be more than 50% of the gross proceeds from the Proposed A Share Placing in accordance with the New Measures, will be used for general working capital of the Group. In the event that the net proceeds from the Proposed A Share Placing fell short of RMB215,000,000, such proceeds will be used to settle the difference between the considerations of the Disposal and the Acquisition with priority. In the event that the net proceeds from the Proposed A Share Placing fell short of RMB90,729,715, the Company will settle the shortfall amount by internal funding or other settlement methods to be determined by commercial negotiations between the Company and CLFG however excluding the allotment and issue of new Shares by the Company to CLFG.

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LETTER FROM THE BOARD

Arrangements with regard : The new Shareholders after completion of the to the undistributed Proposed A Share Placing and existing Shareholders cumulated profits will share the undistributed profits cumulated prior to the Proposed A Share Placing.

Period of validity of the resolution(s) in relation to the Proposed A Share Placing

: 12 months from the date of the resolution(s) of the Proposed A Share Placing passed at the Shareholders’ general meeting of the Company. If the Company has obtained the approval from the CSRC in relation to the Proposed A Share Placing within this 12-month period, the period of validity will be automatically extended until the date of completion of the Proposed A Share Placing.

Conditions precedent

The Formal Agreement shall become effective after satisfaction of, among other things, the conditions set forth below. If any of the conditions precedent below remains not satisfied, the Formal Agreement shall not become effective and no party shall have any claim against or liability or obligation to the other party save in respect of any deliberate or serious defect (including but not limited to any breach of mandatory requirements under any applicable laws and regulations) causing any of the conditions set out below unable to be fulfilled.

(a) the approval of the transactions contemplated under the Formal Agreement by the Board;
(b) the approval of the transactions contemplated under the Formal Agreement by the Nonconnected Shareholders at the EGM and the A Shares Class Meeting;
(c) the approval of the transactions contemplated under the Formal Agreement by the Independent Shareholders at the EGM and the H Shares Class Meeting;
(d) the approval of the transactions contemplated under the Formal Agreement by the SASAC; and
(e) the approval of the transactions contemplated under the Formal Agreement by the CSRC.

In the event that any of the conditions precedent for the Formal Agreement to become effective cannot be fulfilled or satisfied within the period agreed or expected by the parties, the parties shall negotiate amendments, modification, supplements or improvements for the Formal Agreement with the aim of enhancing the Company’s quality of assets, financial position and profitability and safeguarding minority Shareholders’ interests.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, condition (a) had been fulfilled.

Completion of the transactions contemplated under the Formal Agreement

The Formal Agreement shall become effective after satisfaction of the conditions precedent set forth therein. Completion of the transactions contemplated under the Formal Agreement shall take place after all the conditions precedent for the Formal Agreement to become effective have been fulfilled. The Acquisition and the Disposal shall take place simultaneously and are interconditional with each other. There will be no change in control of the Company as a result of the Disposal and the Acquisition. The Proposed A Share Placing shall take place subsequent to the Disposal, the Acquisition and the issue of the Consideration Shares and whether the Proposed A Share Placing is implemented or fully subscribed or not will not affect the implementation of the Disposal, the Acquisition and the issue of the Consideration Shares.

Profit and loss of the Outgoing Entities and the Incoming Entity

CLFG and the Company agreed that upon completion of the Disposal and the Acquisition, all the profit or loss of the Outgoing Entities arising from or incurred during the period commencing from 31 October 2014 to the completion date of the Disposal and the Acquisition shall belong to or be borne by the Company.

CLFG and the Company also agreed that upon completion of the Disposal and the Acquisition, all the profit of the Incoming Entity arising from or incurred during the period commencing from 31 October 2014 to the completion date of the Disposal and the Acquisition shall belong to the Company and all the loss of the Incoming Entity arising from or incurred during the period commencing from 31 October 2014 to the completion date of the Disposal and the Acquisition shall be compensated by CLFG in cash.

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LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE

Based upon the shares in issue for each of the companies identified below, the simplified shareholding structure of the relevant companies as at the date of this circular and after completion of the Reorganisation are as follows:

As at the Latest Practicable Date (Before completion of the Reorganisation, the transfer of 67.00% equity interest in Dengfeng Silicon Company from Longhai Company to the Company under the Equity Interest Transfer Agreement III and the transfer of the Transfer Shares from CLFG to Bengbu Institute under the Equity Interest Transfer Agreement II)

==> picture [417 x 252] intentionally omitted <==

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

CLFG
31.80% 100.00%
Bengbu
Company
Company
100.00% 100.00% 100.00% 63.98% 52.00% 100.00% 40.29% 59.71%
CLFG Mineral
CompanyLonghai Glass CompanyLongmen CompanyLonghao CompanyLongfei HuashengYinan LuoyangFuruidaLuobo CompanyProducts
Limited Commerce
67.00% 100.00% Company 63.51%
Limited
Dengfeng
Silicon Longxiang Xinan Transport
Company
Company
55.12%
Dengfeng
Hongzhai
Silicon
----- End of picture text -----

— 14 —

LETTER FROM THE BOARD

After completion of the Reorganisation (but not taking into account the transfer of the Transfer Shares under the Equity Interest Transfer Agreement II)

==> picture [449 x 247] intentionally omitted <==

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

CLFG
31.80% 67.00% 100.00% 63.98% 52.00% 100.00%
Company DengfengSilicon Longhao Longfei Yinan ProductsMineral
Company Company Huasheng
Company Company
55.12% 100.00% 63.51%
Dengfeng Longxiang Xinan
Hongzhai
Silicon Company Transport
100.00% 100.00% 100.00% 100.00%
Bengbu Longhai CLFG LongmenGlass Company Furuida CommerceLuoyang Luobo
Company Company Limited Company Limited
----- End of picture text -----

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LETTER FROM THE BOARD

EFFECT OF THE REORGANISATION, THE PROPOSED A SHARE PLACING AND THE TRANSFER OF THE TRANSFER SHARES ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

The following table sets out the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately after completion of the Reorganisation (but not taking into account the Proposed A Share Placing and the transfer of the Transfer Shares); (iii) immediately after completion of the Reorganisation and the Proposed A Share Placing (but not taking into account the transfer of the Transfer Shares); and (iv) immediately after completion of the Reorganisation, the Proposed A Share Placing and the transfer of the Transfer Shares:

Shareholders A Shares CLFG Bengbu Institute_(note 1)_ Other A Shareholders Sub-total H Shares Public H Shareholders Total	As at the Latest Practicable Date Immediately after completion of the Reorganisation (but not taking into account the Proposed A Share Placing and the transfer of the Transfer Shares) Number of Shares Shareholding percentage of the total issued Shares Number of Shares Shareholding percentage of the total issued Shares (million) % (million) % 159.0 31.80% 174.0 33.79% – 0.00% – 0.00% 91.0 18.20% 91.0 17.67% 250.0 50.00% 265.0 51.46% 250.0 50.00% 250.0 47.54% 500.0 100.00% 515.0 100.00%	Immediately after completion of the Reorganisation and the Proposed A Share Placing (but not taking into account the transfer of the Transfer Shares) Number of Shares Shareholding percentage of the total issued Shares (million) % 174.0 31.80% – 0.00% 123.1 22.51% 297.2 54.31% 250.0 45.69% 547.2 100.00%	Immediately after completion of the Reorganisation, the Proposed A Share Placing and the transfer of the Transfer Shares (note 3) Number of Shares Shareholding percentage of the total issued Shares (million) % 105.0 19.19% 69.0 12.61% 123.1 22.51% 297.2 54.31% 250.0 45.69% 547.2 100.00%	Immediately after completion of the Reorganisation, the Proposed A Share Placing and the transfer of the Transfer Shares (note 3) Number of Shares Shareholding percentage of the total issued Shares (million) % 105.0 19.19% 69.0 12.61% 123.1 22.51% 297.2 54.31% 250.0 45.69% 547.2 100.00%
				54.31%
				45.69%
				100.00%

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LETTER FROM THE BOARD

Notes:

Bengbu Institute directly holds 19.00% equity interest in CLFG. Bengbu Institute is an indirect wholly-owned subsidiary of CNBMG. CNBMG, through another wholly-owned subsidiary of it, indirectly holds approximately 51.70% interest in CLFG.
The Company will be able to comply with the public float requirements of the Listing Rules at all circumstances.
The SASAC has granted the approval of the transfer of the Transfer Shares under the Equity Interest Transfer Agreement II. The transfer of the Transfer Shares is subject to the arrangement among CLFG and Bengbu Institute. The shareholding structure above has assumed the transfer of the Transfer Shares to take place subsequent to the completion of the Formal Agreement.

INFORMATION ON THE COMPANY

The Company is principally engaged in the production and sale of ordinary float glass and ultrathin glass substrate.

INFORMATION ON CLFG

CLFG is principally engaged in the production and sale of float glass, imports, exports and the domestic sale of processing technology of glass, design and subcontracting of engineering works, labour export and other businesses.

INFORMATION ON THE OUTGOING ENTITIES

Longhao Company

Longhao Company is a company established under the laws of the PRC with limited liability. As at the Latest Practicable Date, Longhao Company was a wholly-owned subsidiary of the Company. Upon completion of the Reorganisation, Longhao Company will cease to be a subsidiary of the Company.

Longhao Company is mainly engaged in the manufacturing and sales of float glass. As disclosed in the Company’s announcement dated 7 May 2015, the Company resolved that the 650 tons float glass production line of Longhao Company would have phased suspension of production and reformation in order to further enhance the market competitiveness of its products and to meet the relevant requirements of the environmental protection authorities.

— 17 —

LETTER FROM THE BOARD

Set out below is the audited financial information of Longhao Company prepared in accordance with PRC generally accepted accounting principles for the two years ended 31 December 2014 and the five months ended 31 May 2015:

	For the five	For the year ended	For the year ended
	months ended	31 December
	31 May 2015	2014	2013
	RMB’000	RMB’000	RMB’000
Revenue	95,099	245,962	56,781
Loss before taxation	(85,786)	(138,743)	(34,735)
Net loss after taxation	(85,786)	(138,743)	(34,735)

The audited net liability value of Longhao Company was approximately RMB350,192,283 as at 31 May 2015. The audited book value of the amount due from Longhao Company to the Company, which includes account and other receivables, was approximately RMB288,745,840 as at 31 May 2015.

The accountants’ report of Longhao Company is set out in Appendix III to this circular for Shareholders’ information while considering the Formal Agreement and the transactions contemplated thereunder.

Longfei Company

Longfei Company is a company established under the laws of the PRC with limited liability. As at the Latest Practicable Date, Longfei Company was a 63.98% owned subsidiary of the Company and was interested in the entire equity interest in Longxiang Company. Upon completion of the Reorganisation, Longfei Company and its subsidiary will cease to be subsidiaries of the Company.

Longfei Company is mainly engaged in the manufacturing and sales of float sheet glass for construction and automobile uses. Longxiang Company is also engaged in the manufacturing and sales of float sheet glass.

— 18 —

LETTER FROM THE BOARD

Set out below is the audited consolidated financial information of Longfei Company prepared in accordance with PRC generally accepted accounting principles for the two years ended 31 December 2014 and the five months ended 31 May 2015:

	For the five	For the year ended	For the year ended
	months ended	31 December
	31 May 2015	2014	2013
	RMB’000	RMB’000	RMB’000
Revenue	168	592	1,111
Loss before taxation	(10,922)	(33,825)	(32,954)
Net loss after taxation	(10,922)	(33,825)	(32,954)

The standalone audited net liability value of Longfei Company was approximately RMB216,250,670 as at 31 May 2015. The audited book value of the amount due from Longfei Company to the Company, which includes account and other receivables, was approximately RMB113,364,086 as at 31 May 2015. The audited book value of the amount due from Longxiang Company to the Company was approximately RMB63,025,110 as at 31 May 2015.

The accountants’ report of Longfei Company is set out in Appendix IV to this circular for Shareholders’ information while considering the Formal Agreement and the transactions contemplated thereunder.

Dengfeng Silicon Company

Dengfeng Silicon Company is a company established under the laws of the PRC with limited liability. As at the Latest Practicable Date, Dengfeng Silicon Company was a 67.00% owned subsidiary of the Company and was interested in 55.12% equity interest in Dengfeng Hongzhai Silicon. Upon completion of the Reorganisation, Dengfeng Silicon Company and its subsidiary will cease to be subsidiaries of the Company.

Dengfeng Silicon Company is mainly engaged in the sales of silica sands. Dengfeng Hongzhai Silicon is mainly engaged in the sales of silica sands and the mining, processing and sales of quartzite.

— 19 —

LETTER FROM THE BOARD

Set out below is the audited consolidated financial information of Dengfeng Silicon Company prepared in accordance with PRC generally accepted accounting principles for the two years ended 31 December 2014 and the five months ended 31 May 2015:

	For the five	For the year ended	For the year ended
	months ended	31 December
	31 May 2015	2014	2013
	RMB’000	RMB’000	RMB’000
Revenue	930	–	–
Loss before taxation	(307)	(1,946)	(1,279)
Net loss after taxation	(307)	(1,946)	(1,280)

The standalone audited net asset value of Dengfeng Silicon Company was approximately RMB9,659,306 as at 31 May 2015.

The accountants’ report of Dengfeng Silicon Company is set out in Appendix V to this circular for Shareholders’ information while considering the Formal Agreement and the transactions contemplated thereunder.

On 31 December 2014, Longhai Company and the Company entered into the Equity Interest Transfer Agreement III, pursuant to which Longhai Company agreed to sell and the Company agreed to purchase 67.00% equity interest in Dengfeng Silicon Company at a consideration of approximately RMB7,094,453. Prior to the date of signing the Equity Interest Transfer Agreement III, Dengfeng Silicon Company was owned as to 67.00% by Longhai Company which is a wholly-owned subsidiary of the Company. Upon completion of the Equity Interest Transfer Agreement III, the Dengfeng Silicon Group will be owned by the Company.

The consideration of approximately RMB7,094,453 was determined after arm’s length negotiations between Longhai Company and the Company with reference to the audited net asset value of Dengfeng Silicon Company as at 31 December 2013.

Yinan Huasheng

Yinan Huasheng is a company established under the laws of the PRC with limited liability. As at the Latest Practicable Date, Yinan Huasheng was a 52.00% owned subsidiary of the Company. Upon completion of the Reorganisation, Yinan Huasheng will cease to be a subsidiary of the Company.

Yinan Huasheng is mainly engaged in the manufacturing, selling and distribution services of silicon powder.

— 20 —

LETTER FROM THE BOARD

Set out below is the audited financial information of Yinan Huasheng prepared in accordance with PRC generally accepted accounting principles for the two years ended 31 December 2014 and the five months ended 31 May 2015:

	For the five	For the year ended	For the year ended
	months ended	31 December
	31 May 2015	2014	2013
	RMB’000	RMB’000	RMB’000
Revenue	16,826	31,092	37,107
Profit/(Loss) before taxation	(181)	(4,990)	1,255
Net profit/(loss) after taxation	(44)	(5,123)	1,092

The audited net asset value of Yinan Huasheng was approximately RMB3,822,318 as at 31 May 2015. The audited book value of the amount due from Yinan Huasheng to the Company, which includes other receivable due from Yinan Huasheng, was approximately RMB24,638,095 as at 31 May 2015.

The accountants’ report of Yinan Huasheng is set out in Appendix VI to this circular for Shareholders’ information while considering the Formal Agreement and the transactions contemplated thereunder.

Mineral Products Company

Mineral Products Company is a company established under the laws of the PRC with limited liability. As at the Latest Practicable Date, Mineral Products Company was a 40.29% owned associate of the Company and was interested in 63.51% equity interest in Xinan Transport. Upon completion of the Reorganisation, Mineral Products Company and its subsidiary will cease to be associates of the Company.

Mineral Products Company is mainly engaged in the mining of clay and other soil, sand and stone. Xinan Transport is mainly engaged in the provision of goods transportation services and is in the process of de-registration.

— 21 —

LETTER FROM THE BOARD

Set out below are the audited consolidated financial information of Mineral Products Company prepared in accordance with PRC generally accepted accounting principles for the two years ended 31 December 2014 and the five months ended 31 May 2015:

	For the five	For the year ended	For the year ended
	months ended	31 December
	31 May 2015	2014	2013
	RMB’000	RMB’000	RMB’000
Revenue	1,227	4,431	2,884
Loss before taxation	(1,085)	(8,649)	(3,107)
Net loss after taxation	(1,085)	(8,649)	(3,107)

The standalone audited net liability value of Mineral Products Company was approximately RMB33,473,428 as at 31 May 2015. The audited book value of the amount due from Mineral Products Company to the Company was approximately RMB1,341,990 as at 31 May 2015.

The accountants’ report of Mineral Products Company is set out in Appendix VII to this circular for Shareholders’ information while considering the Formal Agreement and the transactions contemplated thereunder.

The accountants’ report of the amounts due from the Outgoing Entities to the Company is set out in Appendix VIII to this circular for Shareholders’ information while considering the Formal Agreement and the transactions contemplated thereunder.

INFORMATION ON THE INCOMING ENTITY

Bengbu Company

Bengbu Company is a company established under the laws of the PRC with limited liability on 29 September 2013. As at the Latest Practicable Date, Bengbu Company was a wholly-owned subsidiary of CLFG. Upon completion of the Reorganisation, Bengbu Company will become a wholly-owned subsidiary of the Company.

Bengbu Company is mainly engaged in the research and development, production and sales of ultra-thin (1.1mm, 0.7mm, 0.55mm, 0.4mm and 0.33mm and etc.) glass substrates. Compared with ordinary plate glass which is commonly used in the construction market, ultra-thin glass substrate is a new type of glass with different physical properties, chemical composition and production technology and is widely used in various areas including (a) flat panel displays like liquid-crystal display, plasma display panel, organic light-emitting diode displays; (b) touch panel displays; (c) instruments, meters and cameras; and (d) microscope and pharmaceutical uses.

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LETTER FROM THE BOARD

Bengbu Company currently operates a 150t/d electronic information display ultra-thin glass substrates production line which started business operation in October 2013 and commenced mass production since August 2014 and is one of the few PRC manufacturers equipped with production technology of 0.55mm and 0.33mm ultra-thin glass substrates in the PRC.

Set out below is the audited financial information of Bengbu Company prepared in accordance with PRC generally accepted accounting principles for the period from 29 September 2013 (date of incorporation) to 31 December 2013, the year ended 31 December 2014 and the five months ended 31 May 2015:

			From
			29 September
	For the	For	2013 (date of
	five months	the year ended	incorporation)
	ended 31 May	31 December	to 31 December
	2015	2014	2013
	RMB’000	RMB’000	RMB’000
Revenue	49,098	47,517	–
Profit before taxation	7,303	7,262	10
Net profit after taxation	5,616	5,155	8

The audited net asset value of Bengbu Company was approximately RMB673,295,227 as at 31 May 2015.

The accountants’ report of Bengbu Company is set out in Appendix II to this circular.

On 27 October 2014, CLFG and Bengbu Institute entered into the Equity Interest Transfer Agreement I pursuant to which Bengbu Institute agreed to sell and CLFG agreed to purchase 93.68% equity interest in Bengbu Company at a consideration of approximately RMB628.7 million. As at the date of the Equity Interest Transfer Agreement I, Bengbu Company was owned as to 93.68% by Bengbu Institute and 6.32% by CLFG. Completion of the Equity Interest Transfer Agreement I had taken place as at the Latest Practicable Date and Bengbu Company has become a wholly-owned subsidiary of CLFG.

On 31 December 2014, CLFG and Bengbu Institute entered into the Equity Interest Transfer Agreement II pursuant to which both parties agreed that RMB434.7 million among the consideration of approximately RMB628.7 million under the Equity Interest Transfer Agreement I will be satisfied by the transfer of the 69,000,000 Transfer Shares from CLFG to Bengbu Institute. The transfer price of the Transfer Shares is RMB6.30 per Transfer Share.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, the remaining balance of approximately RMB194.0 million of the consideration under the Equity Interest Transfer Agreement I has been settled by CLFG in cash.

The SASAC has granted the approval of the transfer of the Transfer Shares under the Equity Interest Transfer Agreement II. The transfer of the Transfer Shares is subject to the arrangement among CLFG and Bengbu Institute.

REASONS FOR AND BENEFITS OF THE REORGANISATION

In recent years, the current structural excess supply in light of the slowing demand and intense competition in the ordinary float glass market in the PRC has an adverse impact on the ordinary float glass business of the Group which has dragged down the economic efficiency and profitability of the Company. The Company expects that such situation will not improve significantly in the near future due to the deteriorating industry trend in the ordinary float glass industry. On 30 December 2011, the State Council of the PRC published the “About Industrial Restructuring the Upgrading Plan (2011-2015)” (《關於工業轉型升級規劃 (2011-2015)》) which emphasises the development of ultra-thin glass substrate, photovoltaic solar cells with ultrawhite glass, transparent conductive oxide (TCO) glass and encourages the development and application of low-emissivity (Low-E) coated glass, hollow glass vacuum and other energysaving glass.

Prior to the Reorganisation, the major products of the Company include ordinary float glass and ultra-thin glass substrate. In order to sustain the continuous development and growth, and enhance the competitiveness and profitability of the Company and hence maximise the interest of the Shareholders, the Company decided to undertake the Reorganisation through (i) the injection of more profitable ultra-thin glass substrate assets from the Incoming Entity to the Company; and (ii) the disposal of assets in the ordinary float glass and related segments with the aim to focus the Group in the production and sale of ultra-thin glass substrate products. After the Reorganisation, the Group will no longer produce ordinary float glass products and will concentrate on the production and sale of ultra-thin glass substrate products. The shift in major products of the Group towards the ultra-thin glass substrate business provides better opportunities for the Company’s development.

Accordingly, the Directors are of the view that the terms of the Formal Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE PROPOSED A SHARE PLACING

The Directors consider that the Proposed A Share Placing represents an opportunity to raise additional capital for the Group to partially finance the Reorganisation and enhance its general working capital base for the business operation of the Group, which is in the interests of the Group. The additional funds for general working capital will also improve the financial position and capital structure of the Group, which is necessary given the net current liabilities of the Group and the higher gearing of the Group as compared with its industry comparables.

The proceeds to be raised from the Proposed A Share Placing will not exceed RMB215,000,000, which was determined based on the funding requirements of the Company as well as the New Measures issued by the CSRC. After the settlement of the cash portion of the difference between the considerations of the Disposal and the Acquisition and the deduction of the relevant cost of transaction (including relevant tax, expense, offering cost and intermediary fee, etc.), the remaining net proceeds, which shall not be more than 50% of the gross proceeds from the Proposed A Share Placing in accordance with the New Measures, will be used for general working capital of the Group. Save for the proposed use of proceeds from the A Share Placing above, the Company had no other proposed investment project in the foreseeable future as at the Latest Practicable Date.

The Directors consider that the terms of the Proposed A Share Placing, including the issue price, are on normal commercial terms and are fair and reasonable based on the current market conditions and in the interests of the Company and the Shareholders as a whole.

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

The Company has not conducted any fund raising activities involving the issue of equity shares within the 12 months immediately prior to the Latest Practicable Date.

FINANCIAL EFFECTS OF THE DISPOSAL AND THE ACQUISITION AND THE USE OF THE CONSIDERATION FOR THE DISPOSAL

The following analysis is based on (i) the audited consolidated financial statements of the Company for the year ended 31 December 2014 as extracted from the Company’s annual report for the year ended 31 December 2014 which were prepared in accordance with the Accounting Standards for Business Enterprises; and (ii) the unaudited pro forma consolidated balance sheet of the enlarged Group as set out in Appendix IX to this circular which were prepared in accordance with the Accounting Standards for Business Enterprises. Upon completion of the Disposal and the Acquisition, Bengbu Company will become a wholly-owned subsidiary of the Company and its financial results will be consolidated into the accounts of the enlarged Group.

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LETTER FROM THE BOARD

Effect on net assets

The audited net assets attributable to the equity holders of the Company and the audited net assets attributable to the equity holders of the Company per Share were approximately RMB49.40 million and approximately RMB0.10 as at 31 December 2014. Immediately after completion of the Disposal and the Acquisition, the net assets attributable to the equity holders of the Company and the net assets attributable to the equity holders of the Company per Share would have been increased to approximately RMB315.71 million and approximately RMB0.61 (assuming no change in the issued share capital of the Company from the Latest Practicable Date other than the issue of the Consideration Shares) as at 31 December 2014 according to the unaudited pro forma consolidated balance sheet of the enlarged Group.

Effect on earnings

Based on the preliminary assessment, the Company expects to recognise a net gain of approximately RMB174.87 million upon completion of the Disposal, which is calculated with reference to the difference between the consideration of the Disposal of approximately RMB494.18 million and the sum of the proportionate interests in the audited net assets/ (liabilities) of the Outgoing Entities and the book value of the amounts due from the Outgoing Entities to the Company as at 31 October 2014, which amounts to approximately RMB319.31 million in aggregate. The amount of the actual gain arising from the Disposal will be determined and confirmed by the auditors of the Company subsequent to completion of the Disposal depending on the actual net assets/(liabilities) of the Outgoing Entities and the amounts due from the Outgoing Entities to the Company (which can only be determined upon completion of the Disposal) and therefore may be different from the amount mentioned above.

Taking into account of the future prospects of Bengbu Company, the Company expects that the Acquisition would likely to have a positive impact on the future earnings of the enlarged Group as the Company will be able to fully consolidate the financial results of Bengbu Company into its consolidated financial statements upon completion of the Acquisition.

Effects on gearing and working capital

The Group’s gearing ratio (calculated as total liabilities divided by total assets) was approximately 103.73% as at 31 December 2014. Immediately after completion of the Disposal and the Acquisition, the total liabilities of the enlarged Group would have been decreased from approximately RMB1,096.46 million to approximately RMB971.41 million and the total assets of the enlarged Group would have been increased from approximately RMB1,057.07 million to approximately RMB1,287.12 million as at 31 December 2014 according to the unaudited pro forma consolidated balance sheet of the enlarged Group. Consequently, the gearing ratio of the Group would have been improved to approximately 75.47% as at 31 December 2014.

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LETTER FROM THE BOARD

The Group had bank balance and cash of approximately RMB68.48 million and net current liabilities of approximately RMB256.37 million as at 31 December 2014. Immediately after completion of the Disposal and the Acquisition, the enlarged Group would have had bank balance and cash of approximately RMB81.26 million and net current liabilities of approximately RMB99.11 million as at 31 December 2014 according to the unaudited pro forma consolidated balance sheet of the enlarged Group.

The Company plans to undertake the Proposed A Share Placing subsequent to the completion of the Disposal, the Acquisition and the issue of the Consideration Shares. Part of the net proceeds from the Proposed A Share Placing will be used as general working capital of the Group.

The consideration to be received by the Company from the Disposal will be fully used to net off the consideration for the Acquisition payable by the Company. The difference between the considerations of the Disposal and the Acquisition of RMB180,729,715 will be settled partially by cash of RMB90,729,715 from the proceeds of the Proposed A Share Placing within two months after the completion of the Proposed A Share Placing while the remaining balance of RMB90,000,000 will be settled by the allotment and issue of 15,000,000 Consideration Shares by the Company to CLFG at the issue price of RMB6.00 per Consideration Share. In the event that the net proceeds from the Proposed A Share Placing fell short of RMB90,729,715, the Company will settle the shortfall amount by internal funding or other settlement methods to be determined by commercial negotiations between the Company and CLFG however excluding the allotment and issue of new Shares by the Company to CLFG.

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

Prior to the Reorganisation, the Group is principally engaged in the production and sale of ordinary float glass and ultra-thin glass substrate. In recent years, as the ordinary float glass market in the PRC has been experiencing a structural excess production capacity, market competition became increasingly fierce, selling price of products fell and a large-scale loss was recorded in the industry. Amid of the downturn of the business conditions, through measures including scientific renovation, structural adjustment, management optimisation and assets disposal, the Group kept the on-going business and operation and basically achieved the annual profit targets but failed to effectively enhance the its profitability in a considerable scale.

Upon completion of the Reorganisation, the Group will no longer produce ordinary float glass products and will concentrate on the production and sale of ultra-thin glass substrate products. The Incoming Entity is one of the leading ultra-thin glass substrate producers in the PRC given that it is one of the few PRC manufacturers equipped with production technology of 0.55mm and 0.33mm ultra-thin glass substrates in the PRC. It currently operates a 150t/d electronic information display ultra-thin glass substrates production line.

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LETTER FROM THE BOARD

The expected positive outlook of the ultra-thin glass substrate industry in the PRC is expected to provide a favourable development environment for the development of the Group upon completion of the Reorganisation. Ultra-thin glass substrate is widely used in different areas including flat panel displays such as liquid-crystal displays and touch panel displays and therefore the consistent growth in the flat panel display market in the PRC driven by the expanding domestic high technology consumer product market such as smartphones and tablets will in turn boost the domestic demand for the ultra-thin glass substrate.

Leveraging on the advanced research and development and production technology in ultra-thin glass substrates of the Incoming Entity, the Directors are of the view that the Reorganisation will improve the overall financial performance of the Group in near future.

LISTING RULES IMPLICATIONS

The Reorganisation involves, inter alia, the execution of the Formal Agreement which involves the Disposal, the Acquisition and the issue of the Consideration Shares. As (i) one or more of the applicable percentage ratios calculated pursuant to Chapter 14 of the Listing Rules in respect of the Disposal are more than 25% but less than 75%; and (ii) CLFG (as a controlling Shareholder) is a connected person of the Company, the Disposal constitutes a major disposal and connected transaction of the Company. As (i) one or more of the applicable percentage ratios calculated pursuant to Chapter 14 of the Listing Rules in respect of the Acquisition are more than 25% but less than 100%; and (ii) CLFG (as a controlling Shareholder) is a connected person of the Company, the Acquisition constitutes a major acquisition and connected transaction of the Company.

Accordingly, the Formal Agreement comprising the Disposal, the Acquisition and the issue of the Consideration Shares is subject to the notification, announcement, circular and independent Shareholders’ approval requirements of the Listing Rules.

Mr. Ma Liyun, Mr. Xie Jun, Mr. Zhang Chengong and Mr. Zhang Chong, who are considered to have conflicts of interests in the Formal Agreement and the transactions contemplated thereunder and the specific mandates, have abstained from voting on the Board resolutions approving the Formal Agreement and the transactions contemplated thereunder and the specific mandates.

Completion of the Disposal, the Acquisition, the issue of the Consideration Shares and the Proposed A Share Placing is subject to the satisfaction of the conditions precedent for the Formal Agreement and therefore, may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

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LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all the independent non-executive Directors has been established by the Company to advise the Independent Shareholders on the terms of the Formal Agreement and the transactions contemplated thereunder and the specific mandates.

Goldin has been appointed as the independent financial adviser with the approval of the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders as to whether the Formal Agreement and the transactions contemplated thereunder and the specific mandates are fair and reasonable and in the interests of the Company and the Shareholders as a whole and make recommendation on voting.

(II) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

According to the relevant requirements of the “Guidelines for the Articles of Association of Listed Companies (Amended in 2014)《上市公司章程指引（2014年修訂）》”, “Rules for General Meetings of Listed Companies (Amended in 2014)《上市公司股東大會規則（2014年修訂）》” and “Guideline No. 3 for the Supervision and Administration of Listed Companies – Cash Dividend for Listed Companies《上市公司監管指引第3號 – 上市公司現金分紅》” of the CSRC, and coupled with the actual situation of the Company, the Company proposes to, subject to the approval by the Shareholders at the EGM, amend the Articles of Association.

Details of the proposed amendments to the Articles of Association are as follows:

Article 6

Original Article 6:

Upon approval by the general meeting of the Company by a special resolution, the State Commission for Restructuring Economic Systems and the China Securities Regulatory Commission and register with the industry and commerce administration authorities, this articles of association (“Articles of Association” or “Articles”) shall come into effect and completely replace the original Articles of Association registered with such authorities.

Amended Article 6:

This articles of association (“Articles of Association” or “Articles”) shall come into effect upon approval for adoption by the general meeting of the Company by the way of special resolution and approval by relevant government authorities, and be registered with industry and commerce administration authorities.

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LETTER FROM THE BOARD

Article 27

Original Article 27:

The Company shall prepare a balance sheet and an inventory of assets when it reduces its registered capital.

The Company shall notify its creditors within ten (10) days from the date of the Company’s resolution on reduction of capital and shall publish announcements in the newspaper at least three (3) times within thirty (30) days from the date of such resolution. A creditor has the right, within thirty (30) days of receiving the notice from the Company or, in the case of a creditor who does not receive the notice, within ninety (90) days from the date of the first announcement, to require the Company to repay its debt or provide a corresponding guarantee for such debt. The registered capital of the Company following the reduction of capital shall not fall below the minimum statutory requirement.

Amended Article 27:

The Company shall prepare a balance sheet and a list of assets when it reduces its registered capital.

The Company shall notify its creditors within ten (10) days from the date of the Company’s resolution on reduction of registered capital and shall publish announcements in the newspaper within thirty (30) days from the date of such resolution. A creditor has the right, within thirty (30) days of receiving the notice from the Company or, in the case of a creditor who does not receive the notice, within forty-five (45) days from the date of the announcement, to require the Company to repay its debt or provide a corresponding guarantee for such debt.

The reduction of registered capital of the Company shall be registered with the company registration authorities according to the law.

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LETTER FROM THE BOARD

Article 50

Original Article 50:

Amended Article 50:

Any Shareholder who is registered in, or any person who requests to have his name entered in, the register of Shareholders may, if his share certificates (the “ original certificates ”) are lost, apply to the Company for a replacement share certificate in respect of such shares (the “ relevant shares ”). If a holder of the domestic shares loses his share certificates and applies for their replacement, it shall be dealt with in accordance with the provisions of Article 150 of the Company Law. If a holder of overseas-listed foreigninvested shares loses his share certificates and applies for their replacements, it may be dealt with in accordance with the relevant laws, the rules of the stock exchange and other relevant regulations of the place where the original register of holders of overseas-listed foreign-invested shares is maintained.
Any Shareholder who is registered in, or any person who requests to have his name entered in, the register of Shareholders may, if his share certificates (the “original certificates”) are lost, apply to the Company for a replacement share certificate in respect of such shares (the “relevant shares”). If a holder of the domestic shares loses his share certificates and applies for their replacement, it shall be dealt with in accordance with the provisions of Article 143 of the Company Law. If a holder of overseas-listed foreigninvested shares loses his share certificates and applies for their replacements, it may be dealt with in accordance with the relevant laws, the rules of the stock exchange and other relevant regulations of the place where the original register of holders of overseas-listed foreign-invested shares is maintained.

Article 67

Original Article 67:

The general meeting may exercise the following functions and powers:

(1) to decide on the operating policies and investment plans of the Company;

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LETTER FROM THE BOARD

(2) to elect and remove Directors and to decide on matter relating to the remuneration of the relevant Directors;
(3) to elect and remove supervisors (being Shareholders’ representatives), and to decide on matter relating to the remuneration of the relevant supervisors;
(4) to consider and approve the reports of the Board;
(5) to consider and approve the reports of the Supervisory Committee;
(6) to consider and approve the proposed annual financial budgets and final accounts of the Company;
(7) to consider and approve the profit distribution plans and loss recovery plans of the Company;
(8) to adopt resolutions on any increase or reduction of registered capital of the Company;
(9) to adopt resolutions on matters such as merger, division, dissolution, and liquidation of the Company;
(10) to adopt resolutions on the issue of debentures of the Company;
(11) to adopt resolutions on the appointments, dismissals or nonreappointments of accounting firms;
(12) to amend the Articles of Association of the Company;
(13) to consider the proposals submitted by Shareholders holding more than 5% (including 5%) of the Company’s voting shares;
(14) to consider other matters required by laws, administrative regulations and the Articles of Association of the Company to be resolved by general meeting of Shareholders;

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LETTER FROM THE BOARD

(15) to resolve the appointment or removal of the auditors of the Company;
(16) to consider and approve the guarantees pursuant to Article 68;
(17) to consider the acquisition or disposal of any major assets, the amount of which exceeds 30% of the latest audited total assets of the Company;
(18) to consider the change of use of proceeds from capitals raised;
(19) to consider the adoption of share incentive scheme;
(20) the general meeting may authorize or delegate to the Board to attend to authorized or entrusted matters.

Amended Article 67: the general meeting may exercise the following functions and powers:

(1) to decide on the operating policies and investment plans of the Company;
(2) to elect and remove Directors and to decide on matter relating to the remuneration of the relevant Directors;
(3) to elect and remove supervisors (being Shareholders’ representatives), and to decide on matter relating to the remuneration of the relevant supervisors;
(4) to consider and approve the reports of the Board;
(5) to consider and approve the reports of the Supervisory Committee;
(6) to consider and approve the proposed annual financial budgets and final accounts of the Company;

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LETTER FROM THE BOARD

(7) to consider and approve the profit distribution plans and loss recovery plans of the Company;
(8) to adopt resolutions on any increase or reduction of registered capital of the Company;
(9) to adopt resolutions on matters such as merger, division, dissolution, and liquidation of the Company;
(10) to adopt resolutions on the issue of debentures of the Company;
(11) to adopt resolutions on the appointments, dismissals of accounting firms;
(12) to amend the Articles of Association of the Company;
(13) to consider the temporary proposals submitted by Shareholders who individually or collectively hold more than 3% (including 3%) of the Company’s voting shares;
(14) to consider and approve the guarantees pursuant to Article 68;
(15) to consider the acquisition or disposal of any major assets, the amount of which exceeds 30% of the latest audited total assets of the Company;
(16) to consider the change of use of proceeds from capitals raised;
(17) to consider the adoption of share incentive scheme;
(18) to consider other things required by laws, administrative regulations and the Articles of Association of the Company to be resolved by general meeting of Shareholders;
(19) to authorize or delegate to the Board to attend to deal with the authorized or entrusted matters.

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LETTER FROM THE BOARD

Article 70

Original Article 70:

General meetings shall be annual general meetings and extraordinary general meetings. A general meeting shall be convened by the Board. The annual general meeting shall be held once every year within six (6) months after the end of the previous accounting year.

The Board shall convene an extraordinary general meeting within two (2) months upon the occurrence of one of the following circumstances:

(1) the number of Directors is less than the number required by the Company Law or less than two-thirds of the number required by the Articles of Association;
(2) the uncovered losses are in excess of one third of the Company’s total share capital;
(3) Shareholders holding more than 10% (including 10%) of the Company’s issued shares with voting rights request in writing to convene an extraordinary general meeting;
(4) the Board considers it necessary or the Supervisory Committee proposes to convene such a meeting.

Amended Article 70:

The Board shall convene an extraordinary general meeting within two (2) months upon the occurrence of one of the following circumstances:

(1) the number of Directors is less than the number required by the Company Law or less than two-thirds (2/3) of the number required by the Articles of Association;

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LETTER FROM THE BOARD

(2) the uncovered losses are in excess of one third (1/3) of the Company’s total share capital;
(3) Shareholders holding more than 10% (including 10%) of the Company’s issued shares with voting rights request in writing to convene an extraordinary general meeting;
(4) the Board considers it necessary or the Supervisory Committee proposes to convene such a meeting;
(5) other circumstances as required by laws, administrative regulations, departmental rules or this Articles of Association.

Article 71

Original Article 71:

A written notice shall be given to notify all the Shareholders whose names appear in the register of members of the matters proposed to be considered and the date and place of the meeting forty-five (45) days prior to the date of convening the general meeting (including the date of meeting but excluding the issuance date). Shareholders who intend to attend the meeting shall serve their written replies to the Company twenty (20) days prior to the date of the meeting.

The general meeting shall have a venue and be held on-site. The Company shall also provide the internet or other conveniences to facilitate the participation of Shareholders in the general meeting. A Shareholder who participated in a general meeting in the aforesaid manners shall be deemed to have been present at the meeting. The same voting right can only be exercised by electing to vote at the scene or via internet. In the event that the same voting right has been exercised twice, the result of the first voting shall prevail.

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LETTER FROM THE BOARD

Amended Article 71:

A notice, by announcement or in other forms as required by this Articles of Association, where necessary, shall be given to notify all the Shareholders whose names appear in the register of members of the matters proposed to be considered and the date and place of the meeting within the period of forty-five (45) days to fifty (50) days prior to the date of convening the general meeting. Shareholders who intend to attend the meeting shall serve their written replies to the Company twenty (20) days prior to the date of the meeting.

Article 73

Original Article 73:

Amended Article 73:

While convening the annual general meeting, the Shareholders holding more than 5% (including 5%) of the voting shares of the Company shall have right to propose the new motion in writing and the Company shall include the items within the duty scope of the general meeting in the agenda of the meeting.

While convening the general meeting, the Shareholders who individually or collectively hold more than 3% (including 3%) of the Company’s shares can make a temporary proposal and submit in writing to the Board ten (10) days prior to the date of the general meeting. The Board shall issue a supplementary notice of the general meeting within two (2) days upon the receipt of the proposal and submit such temporary proposal to the general meeting for consideration. Contents of the temporary proposal shall be within the duty scope of the general meeting, and have clear issues and substantial resolutions.

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LETTER FROM THE BOARD

Article 84

Original Article 84:

A notice of the general meeting shall meet the following requirements:

(1) in written form;
(2) specifying the place, date and time of the meeting;
(3) stating the matters to be discussed at the meeting;
(4) providing Shareholders with such information and explanation as are necessary for them to make an informed decision in respect to the matters to be discussed. This principle shall include (but not limited to) where the Company proposes to merge, repurchase its shares, restructure share capital or undergo other reorganization. The specific conditions and contracts (if any) of the proposed transactions must be provided and the reasons and effects of the same must be properly explained;
(5) if any Director, supervisor, manager and other senior management members have material interests in the matters subject to discussion, the nature and extent of such material interests shall be disclosed, and if the effect of the proposed matters on such Director, supervisor, manager and other senior management members in their capacity as Shareholders is different from that of other Shareholders of the same class, the differences shall also be specified;
(6) containing full text of any special resolution to be proposed at the meeting for consideration and approval;
(7) containing a clear statement that a Shareholder who has the right to attend and vote at the meeting shall have the right to appoint one or more proxies to attend and vote at the meeting on his behalf and that such proxies need not be a Shareholders; stating the date and place for the service of the proxy forms for the meeting.

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LETTER FROM THE BOARD

Amended Article 84:

A notice of the general meeting shall meet the following requirements:

(1) in written form;
(2) specifying the place, date and time of the meeting;
(3) stating the matters to be discussed at the meeting;
(4) providing Shareholders with such information and explanation as are necessary for them to make an informed decision in respect to the matters to be discussed, and this principle shall include (but not limited to) where the Company proposes to merge, repurchase its shares, restructure share capital or undergo other reorganization, the specific conditions and contracts (if any) of the proposed transactions must be provided and the reasons and effects of the same must be properly explained;
(5) if any Director, supervisor, manager and other senior management members have material interests in the matters subject to discussion, the nature and extent of such material interests shall be disclosed, and if the effect of the proposed matters on such Director, supervisor, manager and other senior management members in their capacity as Shareholders is different from that of other Shareholders of the same class, the differences shall also be specified;
(6) containing full text of any special resolution to be proposed at the meeting for consideration and approval;
(7) containing a clear statement that a Shareholder who has the right to attend and vote at the meeting shall have the right to appoint one or more proxies to attend and vote at the meeting on his behalf and that such proxies need not be Shareholders;
(8) specifying the time and place for lodging proxy forms for the meeting;

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LETTER FROM THE BOARD

(9) stating the date as record date for determining the Shareholders who are entitled to attend general meetings;
(10) stating the name and contact number of the standing contact person for the affairs of the meeting.

Article 85

Original Article 85:

A notice of the general meeting shall be dispatched to Shareholders (regardless of their voting rights at the general meeting) by personal delivery or by pre-paid mail. The addresses of the recipients shall be such addresses as shown in the register of members. For holders of domestic shares, a notice of the general meeting may also be given by way of announcement.

The announcement referred to in the preceding paragraph shall be published within a period of forty-five (45) to fifty (50) days prior to the date of the general meeting in one or more newspapers and journals designated by competent securities authorities of the State Council. Once an announcement is made, all holders of the domestic shares are deemed to have received the relevant notice of the general meeting.

Amended Article 85:

A notice of the general meeting shall be dispatched to Shareholders (regardless of their voting rights at the general meeting) by way of announcement and/or personal delivery or by pre-paid mail. The addresses of the recipients shall be such addresses as shown in the register of members.

The above-mentioned announcement shall be published within a period of forty-five (45) to fifty (50) days prior to the date of the general meeting at the websites of the Company and/or stock exchanges of the listed places, and in one or more newspapers and journals designated by competent securities authorities of the State Council, or by other means as permitted by competent securities authorities of the State Council from time to time. Once announced or published, all the Shareholders shall be deemed to have received the notice of the general meeting.

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LETTER FROM THE BOARD

Article 98

Original Article 98:

Amended Article 98:

A Shareholder (including proxy) when voting at a general meeting may exercise voting rights in accordance with the number of shares carrying the right to vote and each share shall have one vote. The Company shall have no voting rights for the shares that it holds, which are not counted in the total number of shares with voting rights attending the general meeting.

A Shareholder (including a proxy) when voting at a general meeting may exercise such voting rights in accordance with the number of shares carrying the right to vote and each share shall have one vote. When material issues affecting the interests of minority investors are considered at the general meeting, the votes of minority investors shall be counted separately. The result of separate vote counting shall be disclosed publicly and promptly. The Company shall have no voting rights for the shares that it holds, which are not counted in the total number of shares with voting rights attending the general meeting.

The Board, independent Directors and Shareholders who meet the relevant required conditions are entitled to collect voting rights from Shareholders publicly. When collecting voting rights from Shareholders, the information such as specific voting intention shall be disclosed fully to the ones collected from. It is prohibited to collect voting rights from Shareholders by paying consideration or de facto consideration. The Company shall not impose minimum shareholding limitation for the collection of voting rights.

— 41 —

LETTER FROM THE BOARD

Article 105

Original Article 105:

The following items shall be resolved in the general meeting and more than half of the public Shareholders attending with the voting rights, before they shall be implemented or applied for:

(1) Unless otherwise stipulated in the laws and regulations, the Company issues additional new shares to the public (including the issue of overseas-listed foreign-invested shares listed abroad or other warrants), issues convertible bonds and places shares to the existing Shareholders (except the Shareholders with actual controlling right promise to subscribe in cash before the meeting);
(2) Major assets restructuring of the Company. The total purchase price of the acquired assets is or exceeds 20% of the audited net book value of the purchased assets;
(3) The Shareholder of the Company repays the debts he owes to the Company with the Company’s equity held by him;
(4) The subsidiary that have significant impact on the Company is listed overseas;
(5) The relevant items that have significant impact on the interest of the public Shareholders during the development of the Company.

Subject to the technological conditions, where the Company convenes the general meeting to review the aforesaid items, the Company shall provide the network voting platform for the Shareholders.

— 42 —

LETTER FROM THE BOARD

Amended Article 105:

The following items shall be resolved in the general meeting and more than half of the public Shareholders attending with the voting rights, before they shall be implemented or applied for:

(1) Unless otherwise stipulated in the laws and regulations, the Company issues additional new shares to the public (including the issue of overseas-listed foreign-invested shares listed abroad or other warrants), issues convertible bonds and places shares to the existing Shareholders (except the Shareholders with actual controlling right promise to subscribe in cash before the meeting);
(2) Major assets restructuring of the Company where the total purchase price of the acquired assets is or exceeds 20% of the audited net book value of the purchased assets;
(3) The Shareholder of the Company repays the debts he owes to the Company with the Company’s equity held by him;
(4) The subsidiary that has significant impact on the Company is listed overseas;
(5) The relevant items that have significant impact on the interest of the public Shareholders during the development of the Company.

Article 210

Original Article 210:

The profit distribution policy of the Company is:

(I) Basic principles of profit distribution
The Company adopts a consistent and stable profit distribution policy with sufficient consideration of the return to investors as well as the longterm interests of the Company, the interests of Shareholders as a whole and the sustainable development of the Company.

— 43 —

LETTER FROM THE BOARD

The Company’s profit distribution shall not exceed the range of the accumulated distributable profits nor harm the ability of sustainable operation of the Company.
The Company may distribute the dividend in the form of cash, shares, a combination of cash and shares and other forms as permitted under laws and regulations.
(II) Specific policy for profit distribution
The Company may distribute the dividend in the form of cash, shares, the combination of cash and shares or such other form permitted by the law and regulations on the condition that the Company makes a profit and after making full allocations to the statutory reserve fund and discretionary reserve fund in accordance with relevant regulations, the cash could support the Company’s continuous operation and long-term development.
If the Company makes a profit for a year and the accumulated undistributed profit is positive, the Company may distribute the dividend in the form of cash, and the distributed profits in cash accumulated in the latest three years shall not be less than 30% of the realized annual distributable profits in latest three years. The actual proportion of cash dividends for a year shall be proposed by the Board based on the amount of profit recorded for the year and future fund use plan of the Company.

— 44 —

LETTER FROM THE BOARD

(III) Procedures for considering the profit distribution policy of the Company
The Board of the Company shall make dividend proposal and a preliminary scheme regarding the profit distribution plan in accordance with the requirements of the Articles of Association and with reference to the Company’s profit and capital demands, in respect of which independent directors shall issue independent opinions. Such preliminary distribution scheme shall be considered by the Board before being submitted to the general meeting for consideration.
When the detailed cash dividend plan is considered by the general meeting, the Company shall actively communicate and exchange ideas with Shareholders, especially minority Shareholders by various means, take into full account the opinions and requests of minority shareholders and address their concerns in time. Other than on-site general meetings, the Company may also provide Shareholders with internet voting platform.
The supervisory committee shall monitor the implementation by the Board of the Company’s dividend policies and profit distribution plan as well as the decision-making procedures.
(IV) Implementation of the Company’s profit distribution plan

After the resolution in respect of profit distribution plan is approved at the Shareholders’ general meeting, the Board shall complete the dividend (or share) distribution within 2 months after the holding of the general meeting.

— 45 —

LETTER FROM THE BOARD

(V) Changes in the Company’s profit distribution policy

The Company may adjust its profit distribution policy in case of war, natural disasters and other force majeure, or changes in the Company’s external operational environment resulting in significant impact on its production and operation, or relatively significant changes in the Company’s operational position.

The Board shall conduct specific discussion over adjustment to the Company’s profit distribution policy, demonstrate in detail the reasons for such adjustment and form a written demonstration report for an independent opinion to be issued by the independent Directors, which shall be then submitted to the general meeting for approval by way of special resolution. In considering amendments to the profit distribution policy, the Company shall make internet voting accessible to Shareholders.

Amended Article 210 (I) Profit distribution policy of the Company

Principle for profit distribution: The Company adopts consistent and stable profit distribution policies, aiming at bringing reasonable returns to investors while ensuring the Company’s sustainable development as well as integrating the profitability and actual needs of the future development strategy of the Company, so as to establish a consistent and stable return mechanism to investors. The Board, the Supervisory Committee and the general meeting shall, in the decision-making and discussion process in respect of profit policies, fully consider the opinions of independent Directors, supervisors and public investors.

The Company’s profit distribution shall not exceed the range of accumulated distributable profits nor harm the ability of sustainable operation of the Company.

— 46 —

LETTER FROM THE BOARD

Form of profit distribution: The Company may distribute the dividend in the form of cash, shares, a combination of cash and shares and other forms as permitted under laws and regulations. The Company shall adopt cash distribution as the prioritised mean to distribute profit provided that the conditions for cash distribution are satisfied.
Principally, if the Company proposes to distribute dividends in cash, the following conditions shall be satisfied:
(1) The Company realizes profit for the year and accumulated distributable profit is positive after offsetting losses in the previous years and withdrawing public reserve funds legally;
(2) The auditor issues a standard and unqualified audit report on the financial report of the Company for the year;
(3) The Company has no significant investment plan nor material cash expenditure for the year.
If the aforesaid conditions for cash dividend distribution are satisfied, the Company shall principally distribute dividends in cash once each year. The Board of the Company could propose to distribute interim dividends in cash according to the profit and capital needs of the Company.

— 47 —

LETTER FROM THE BOARD

Proportions of cash distribution: If the aforesaid conditions for cash dividend distribution are satisfied, the Company shall principally distribute dividends in cash each year according to a fixed proportion of the realized distributable profit for the year, and the accumulated distributed profit in cash in the latest three years shall not be less than 30% of the average realized distributable annual profit in the latest three years.

The Board shall take into account its industry characteristics, development stages, business model and profitability as well as whether it has any substantial capital expenditure arrangement, and shall propose a differentiated cash dividend policy in accordance with the procedures set out in the Articles of Association.

If the Board considers that the distribution of stock dividend will not cause an unreasonable share capital scale or shareholding structure, it could propose and implement the stock dividend distribution proposal in addition to the satisfaction of the aforesaid cash distribution.
In the event of misappropriation of the Company’s funds by Shareholder, the Company can deduct the funds misappropriated from the cash dividends to be allocated to that Shareholder as repayment of the misappropriated fund.

— 48 —

LETTER FROM THE BOARD

(II) Procedures and Mechanism for decision making on profit distribution
The annual profit distribution plan of the Company is proposed and drafted by the Board after considering the requirements of the Articles of Association, profitability and the capital need, and would be submitted to the general meeting for approval after it is considered and approved by the Board. Independent Directors shall issue an independent opinion in relation to the profit distribution plan.
When the Company is drafting a specific cash dividend proposal, the Board shall carefully study and demonstrate matters such as the timing, conditions and minimum ratio, conditions for adjustment and requirements for decision-making process. Independent Directors shall provide a clear opinion.

Independent Directors can collect the views from minority shareholders and make a proposal for dividend distribution and directly submit it to the Board for consideration and approval.

Before considering a specific cash dividend proposal at the general meeting, active communication and exchanges with shareholders, especially the minority shareholders, through various channels shall be encouraged by the Company in order to fully hear the views and demands of minority shareholders and address the concerns of minority shareholders promptly.

The Board, the independent Directors and shareholders who meet certain conditions may collect voting rights from the Company’s shareholders which may be cast by them at the general meeting.

— 49 —

LETTER FROM THE BOARD

The Supervisory Committee shall supervise the implementation situation and decision making procedures of the Company’s profit distribution policy. When profit distribution proposal has not been proposed for the profit realized for the year, it shall also express its specific explanation and opinion.
The general meeting shall vote on the profit distribution proposal proposed by the Board in accordance with the law, regulations and the relevant provisions in the Articles of Association.
(III) Adjustment of profit distribution policy

The Company may adjust its profit distribution policy according to the production and operation needs. The adjusted profit distribution policy shall not violate the requirements of relevant laws, regulations, regulatory documents and the Articles of Association. The relevant resolution in relation to adjustment of profit distribution policy shall be first brought to independent Directors and the Supervisory Committee for advice, and after consideration and approval by the Board, submit to the general meeting for approval by more than two-thirds (2/3) of the voting rights represented by the Shareholders present at the general meeting. The Company shall provide various voting methods at the general meeting so as to facilitate the public Shareholders to attend the general meeting and vote.

— 50 —

LETTER FROM THE BOARD

Article 211

Original Article 211:

The Company shall pay the dividend once at least a year and the current dividend shall be distributed within the second quarter in the following year. While distributing the dividend, the Company shall notify the Shareholders.

While Company pays the dividend to the holder of overseas-listed foreign-invested shares, it shall be priced in RMB and announced to be paid in foreign currency. The foreign share dividends listed in Hong Kong shall be paid Hong Kong dollars.

Amended Article 211:

The English version of the above articles is an unofficial translation of its Chinese version. In case of any discrepancy between the two versions, the Chinese version shall prevail.

— 51 —

LETTER FROM THE BOARD

(III) THE TERMINATION OF THE ASSETS LEASING AGREEMENT

On 17 June 2015, Longhao Company and CLFG entered into the Termination Agreement to terminate the Assets Leasing Agreement with effect from the date (the “ Termination Date ”) of the approval of the Termination Agreement by the Shareholders at the EGM. Since CLFG is involved in the Termination Agreement, CLFG and its close associates will abstain from voting on the relevant resolution(s) approving the Termination Agreement. Other than the outstanding rental fee payable up to the Termination Date by Longhao Company to CLFG, neither party is required to pay any penalty or compensation to the other party in respect of the termination of the Assets Leasing Agreement.

For the avoidance of doubt, the Formal Agreement and the Termination Agreement are not interconditional with each other.

REASONS FOR ENTERING INTO THE TERMINATION AGREEMENT

Owing to the continuous downturn of the ordinary float glass industry and the unsatisfactory operating and financial performance of the glass production by the Leased Assets, the Board considers to discontinue the glass production by the Leased Assets and terminate the Assets Leasing Agreement by entering into the Termination Agreement.

The Board (including the independent non-executive Directors) is of the view that the terms of the Termination Agreement were arrived at after arm’s length negotiations, the Termination Agreement was entered into on normal commercial terms, and in the interests of the Company and the Shareholders as a whole. The Termination will not cause any material adverse impact on the existing business, operation or financial condition of the Group.

Mr. Ma Liyun, Mr. Xie Jun, Mr. Zhang Chengong and Mr. Zhang Chong, who are considered to have conflicts of interests in the Termination Agreement, have abstained from voting on the Board resolution(s) approving the Termination Agreement.

LISTING RULES IMPLICATIONS

Since the continuing connected transaction contemplated under the Assets Leasing Agreement is proposed to be terminated, the Company is subject to the announcement requirement under the Note to Rule 14A.35 of the Listing Rules.

— 52 —

LETTER FROM THE BOARD

EGM AND H SHARES CLASS MEETING

The EGM will be held to consider and, if thought fit, pass the resolutions to approve (i) the Formal Agreement and the transactions contemplated thereunder; (ii) the grant of the specific mandate for the issue of the Consideration Shares; (iii) the grant of the specific mandate for the issue of the new A Shares under the Proposed A Share Placing; (iv) the amendments to the Articles of Association; and (v) the Termination. The Class Meetings will be held to consider and, if thought fit, pass the resolutions to approve (i) the Formal Agreement and the transactions contemplated thereunder; (ii) the grant of the specific mandate for the issue of the Consideration Shares; and (iii) the grant of the specific mandate for the issue of the new A Shares under the Proposed A Share Placing. The voting at the EGM and the Class Meetings will be conducted by way of poll. As at the Latest Practicable Date, CLFG was interested in 159,018,242 Shares, representing approximately 31.80% of the issued share capital of the Company. As the same case of the Framework Agreement, CLFG and its close associates will abstain from voting on the relevant resolutions to be proposed at the EGM and the Class Meetings for approving the Formal Agreement and the transactions contemplated thereunder and the specific mandates. CLFG and its close associates will abstain from voting on the relevant resolution(s) to be proposed at the EGM for approving the Termination Agreement and the transactions contemplated thereunder.

A supplemental notice of the EGM to be held at 9:00 a.m. on 25 August 2015 at the conference room of the Company on 3rd Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC, which was published by the Company on 31 July 2015, is set out on pages 718 to 722 of this circular. A supplemental notice of the H Shares Class Meeting to be held at 11:00 a.m. on 25 August 2015 at the conference room of the Company on 3rd Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC, which was published by the Company on 31 July 2015, is set out on pages 723 to 726 of this circular.

Revised forms of proxy for use at the EGM and the H Shares Class Meeting were also despatched by the Company on 31 July 2015. Whether or not you are able to attend the EGM and/or the H Shares Class Meeting in person, you are requested to complete and return the accompanying revised forms of proxy in accordance with the instructions printed thereon to the Company’s share registrar in Hong Kong, Hong Kong Registrars Limited, at Rooms 17121716, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, or to the Company’s registered address 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 of the EGM and/or the H Shares Class Meeting or any adjournment thereof. Completion and return of the revised forms of proxy will not preclude you from attending and voting in person at the EGM and/or the H Shares Class Meeting or any adjournment thereof should you so wish.

— 53 —

LETTER FROM THE BOARD

RECOMMENDATION

The Independent Board Committee, having taken into account of the advice of Goldin, considers that the transactions contemplated under the Formal Agreement (including the allotment and issue of the Consideration Shares and the Proposed A Share Placing under the specific mandates) are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM and the H Shares Class Meeting in respect of the Formal Agreement.

The Directors are of the view that all of the transactions described in this circular are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the members of the Independent Board Committee) recommend all Shareholders to vote in favour of all resolutions to be proposed at the EGM and the H Shares Class Meeting.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

By order of the Board of LUOYANG GLASS COMPANY LIMITED* Ma Liyun Chairman

Luoyang, the PRC

For identification purposes only

— 54 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the transactions contemplated under the Formal Agreement.

==> picture [280 x 136] intentionally omitted <==

＊

10 August 2015

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS AND PROPOSED ISSUANCE AND PLACING OF A SHARES

We refer to the circular dated 10 August 2015 issued by 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 as members of the Independent Board Committee to consider the Formal Agreement and the transactions contemplated thereunder (including the allotment and issue of the Consideration Shares and the Proposed A Share Placing under the specific mandates) and to advise the Independent Shareholders as to the fairness and reasonableness of the same. Goldin has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

* For identification purposes only

— 55 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

After taking into account of the advice of Goldin as set out on pages 57 to 88 of the Circular, we are of the view that the transactions contemplated under the Formal Agreement (including the allotment and issue of the Consideration Shares and the Proposed A Share Placing under the specific mandates) are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the EGM and the H Shares Class Meeting to approve the Formal Agreement.

Yours faithfully,

For and on behalf of the Independent Board Committee of Mr. Huang Ping Mr. Dong Jiachun Independent non-executive Director Independent non-executive Director

Mr. Liu Tianni Mr. Jin Zhanping Independent non-executive Director Independent non-executive Director

— 56 —

LETTER FROM GOLDIN

The following is the full text of the letter from Goldin setting out the advice to the Independent Board Committee and the Independent Shareholders in respect of the Formal Agreement and the transactions contemplated thereunder and the specific mandates, which has been prepared for the purpose of incorporation in this circular.

==> picture [37 x 31] intentionally omitted <==

Goldin Financial Limited

23[rd ] Floor Two International Finance Centre 8 Finance Street Central Hong Kong

10 August 2015

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

Dear Sirs,

MAJOR AND CONNECTED TRANSACTIONS AND

PROPOSED ISSUANCE AND PLACING OF A SHARES

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Formal Agreement and the transactions contemplated thereunder and the specific mandates, details of which are set out in the letter from the board (the “ Letter from the Board ”) contained in the circular dated 10 August 2015 issued by the Company (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

— 57 —

LETTER FROM GOLDIN

Accordingly, the Formal Agreement comprising the Disposal, the Acquisition and the issue of the Consideration Shares is subject to the notification, announcement, circular and Independent Shareholders’ approval requirements of the Listing Rules.

— 58 —

LETTER FROM GOLDIN

THE INDEPENDENT BOARD COMMITTEE

We, Goldin, have been appointed as the independent financial adviser with the approval of the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders as to whether the Formal Agreement and the transactions contemplated thereunder and the specific mandates are fair and reasonable and in the interests of the Company and the Shareholders as a whole and make recommendations on voting in respect of the relevant resolutions at the EGM.

The EGM and the Class Meetings will be held to consider and, if thought fit, pass the resolutions to approve (i) the Formal Agreement and the transactions contemplated thereunder; (ii) the grant of the specific mandate for the issue of the Consideration Shares; and (iii) the grant of the specific mandate for the issue of the new A Shares under the Proposed A Share Placing. The voting in relation to the Formal Agreement and the specific mandates at the EGM and the Class Meetings will be conducted by way of poll. As at the Latest Practicable Date, CLFG was interested in 159,018,242 Shares, representing approximately 31.80% of the issued share capital of the Company. As the same case of the Framework Agreement, CLFG and its close associates will abstain from voting on the relevant resolutions to be proposed at the EGM and the Class Meetings for approving the Formal Agreement and the transactions contemplated thereunder and the specific mandates.

— 59 —

LETTER FROM GOLDIN

BASIS OF OUR ADVICE

In formulating our opinions and recommendations, we have reviewed, inter alia, the Announcement, the announcements of the Company dated 10 June 2015, 29 May 2015, 22 May 2015, 12 May 2015, 10 April 2015, 31 March 2015, 13 March 2015, 20 January 2015, 31 December 2014, 23 December 2014, 18 December 2014, 16 December 2014, 12 December 2014, 5 December 2014, 28 November 2014, 21 November 2014, 14 November 2014, 11 November 2014, 4 November 2014, 28 October 2014, 21 October 2014, 14 October 2014, 10 October 2014, 26 September 2014, 19 September 2014, 12 September 2014, 9 September 2014, 2 September 2014, 26 August 2014, 19 August 2014, 12 August 2014, 8 August 2014, 1 August 2014, 25 July 2014 and 18 July 2014 regarding the significant asset restructuring, the Framework Agreement, the Formal Agreement, the annual reports of the Company for the year ended 31 December 2013 and 2014 respectively (the “ Annual Report 2013 ” and “ Annual Report 2014 ” respectively) and the valuation reports of the Outgoing Entities, the amounts due from the Outgoing Entities to the Company and the Incoming Entity (collectively, the “ Valuation Report ”) prepared by the Valuer. We have also reviewed certain information provided by the management of the Company relating to the operations, financial condition and prospects of the Group. We have also (i) considered such other information, analyses and market data which we deemed relevant; and (ii) conducted verbal discussions with the management of the Company regarding the financials, businesses and future outlook of the Group. We have assumed that such information and statements, and any representation made to us, which we have relied upon in formulating our opinion, are true, accurate and complete in all material respects as of the date hereof and the Shareholders will be notified of any material changes as soon as possible.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading. We consider that we have been provided with, and that we have reviewed, all currently available information and documents under present circumstances to enable us to reach an informed view regarding the terms of, and the reasons for entering into, the Framework Agreement, the Formal Agreement and the transactions contemplated thereunder and the specific mandates, and to justify reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis of our opinion. We have no reason to suspect that any material facts or information have/has been withheld by the Directors or management of the Company, are/is misleading, untrue or inaccurate. We have not, however, for the purpose of this exercise, conducted any independent detailed investigation or audit into the businesses, affairs or future prospects of the Company. Our opinions were necessarily based on financial, economic, market and other conditions in effect, and the information made available to us at the Latest Practicable Date.

— 60 —

LETTER FROM GOLDIN

PRINCIPAL FACTORS AND REASONS CONSIDERED

In giving our recommendations to the Independent Board Committee and the Independent Shareholders in respect of the Formal Agreement and the transactions contemplated thereunder and the specific mandates, we have taken into account the following principal factors and reasons:

1. Business and financial information of the Group

The Group is principally engaged in (i) production and sales of float sheet glass; and (ii) sales of raw materials for production of float sheet glass, manufacturing, selling and distribution of silicon sand. Set out below is a summary of the audited financial information of the Group for each of the three financial years ended 31 December 2013 and 2014 as extracted from Annual Report 2013 and Annual Report 2014 respectively:

Table 1: Financial highlights of the Group

	For the year ended 31 December	For the year ended 31 December	For the year ended 31 December
	2012	2013	2014
	(audited)	(audited)	(audited)
	Approximately	Approximately	Approximately
	_RMB’000 _	_RMB’000 _	RMB’000
Revenue	553,687	375,735	612,541
Net profit/(Net loss) for the year	(8,088)	(110,854)	343
		As at 31 December
	2012	2013	2014
	(audited)	(audited)	(audited)
	Approximately	Approximately	Approximately
	_RMB’000 _	_RMB’000 _	RMB’000
Non-current assets	691,983	732,495	686,418
Current assets	610,799	494,034	370,649
Current liabilities	668,000	748,878	627,023
Net current assets (liabilities)	(57,201)	(254,844)	(256,374)
Net assets (liabilities)	70,640	(39,902)	(39,390)

— 61 —

LETTER FROM GOLDIN

For the year ended 31 December 2013

For the year ended 31 December 2013, the Group recorded revenue of approximately RMB375.74 million, representing a decrease of approximately 32.14%, compared to approximately RMB553.69 million recorded in the previous year; which was mainly attributable to, among other matters, (i) the halt of some of the common glass production lines, resulting in a decrease in production capacity and sales volume, as well as income; and (ii) the increasing fierce competition in the electronic glass market led to a decrease in sale price and income. The Group recorded net loss for the year of approximately RMB110.85 million, which is widened as compared to approximately RMB8.09 million in the previous year, which was mainly attributable to, among other matters, (i) an increase in impairment loss on assets; and (ii) a decrease in non-operating income.

As at 31 December 2013, the audited net current liabilities of the Group amounted to approximately RMB254.84 million, representing an increase by approximately RMB197.64 million from approximately RMB57.20 million as at 31 December 2012. In addition, the net liabilities of the Group as at 31 December 2013 amounted to approximately RMB39.90 million representing a turnaround from net assets of approximately RMB70.64 million as at 31 December 2012.

For the year ended 31 December 2014

For the year ended 31 December 2014, the Group recorded revenue of approximately RMB612.54 million, representing an increase of approximately 63.02% compared to approximately RMB375.74 million recorded in the previous year which was mainly attributable to the sales of glass products of the Company that recorded a significant growth due to the increase in production and hence the income from glass products increase attributable to the increase in sales. The results of the Group improved, where the net profit for the year amounted to approximately RMB0.34 million, while the Group recorded net loss for the previous year of approximately RMB110.85 million, mainly due to an increase in investment income and an increase in non-operating income.

As at 31 December 2014, the audited net current liabilities and net liabilities of the Group amounted to approximately RMB256.37 million and approximately RMB39.39 million, respectively.

— 62 —

LETTER FROM GOLDIN

2. Background of and reasons for entering into the Formal Agreement

2.1 Information on the Outgoing Entities and the Incoming Entities

The Outgoing Entities

The Outgoing Entities include Longhao Company, Longfei Company, Dengfeng Silicon Company, Yinan Huasheng and Mineral Products Company.

Longhao Company is a company established under the laws of the PRC with limited liability. It is principally engaged in the manufacturing and sales of float glass. As disclosed in the announcement of the Company dated 7 May 2015, the Company resolved that the 650 tons float glass of production line of Longhao Company would have phased suspension of production and reformation in order to further enhance the market competitiveness of its products and to meet the relevant requirements of the environmental protection authorities. As at the Latest Practicable Date, Longhao Company was a wholly-owned subsidiary of the Company. Upon completion of the Reorganisation, Longhao Company will cease to be a subsidiary of the Company.

Longfei Company is a company established under the laws of the PRC with limited liability. It is principally engaged in the manufacturing and sales of float sheet glass for construction and automobile uses. As at the Latest Practicable Date, Longfei Company was a 63.98% owned subsidiary of the Company and was interested in the entire equity interest in Longxiang Company, which is principally engaged in the manufacturing and sales of float sheet glass. Upon completion of the Reorganisation, Longfei Company and its subsidiary will cease to be subsidiaries of the Company.

Dengfeng Silicon Company is a company established under the laws of the PRC with limited liability. Dengfeng Silicon Company is principally engaged in the sales of silica sands and Dengfeng Hongzhai Silicon, being a 55.12% owned subsidiary of Dengfeng Silicon Company, is principally engaged in the sales of silica sands and the mining, processing and sales of quartzite. As at the Latest Practicable Date, Dengfeng Silicon Company was a 67.00% owned subsidiary of the Company. Upon completion of the Reogranisation, Dengfeng Silicon Company and its subsidiary will cease to be subsidiaries of the Company.

Yinan Huasheng is a company established under the laws of the PRC with limited liability. It is principally engaged in the manufacturing, selling and distribution services of silicon powder. As at the Latest Practicable Date, Yinan Huasheng was a 52.00% owned subsidiary of the Company. Upon completion of the Reorganisation, Yinan Huasheng will cease to be a subsidiary of the Company.

— 63 —

LETTER FROM GOLDIN

Mineral Products Company is a company established under the laws of the PRC with limited liability. Mineral Products Company is principally engaged in the mining of clay and other soil, sand and stone and Xinan Transport, being a 63.51% owned subsidiary of Mineral Products Company, is principally engaged in the provision of goods transportation services and is in the process of de-registration. As at the Latest Practical Date, Mineral Products Company was a 40.29% owned associate of the Company. Upon completion of the Reorganisation, Mineral Products Company and its subsidiary will cease to be associates of the Company.

Details of the financial positions of each of the Outgoing Entities are set out in the paragraphs under the section headed “Information of the Outgoing Entities” in the Letter from the Board.

The Incoming Entity

Bengbu Company is a company established under the laws of the PRC with limited liability. It is principally engaged in the research and development, production and sales of ultra-thin glass substrates. As at the Latest Practicable Date, Bengbu Company was a wholly-owned subsidiary of CLFG. Upon completion of the Reorganisation, Bengbu Company will become a wholly-owned subsidiary of the Company.

Table 2: Financial information of the Incoming Entity

	From 29
	September 2013	For the year	For the five
	to 31 December	ended 31	months ended 31
	2013	December 2014	May 2015
	(audited)	(audited)	(audited)
	RMB’000	RMB’000	RMB’000
Revenue	–	47,517	49,098
Profit before taxation	10	7,262	7,303
Net profit after taxation	8	5,155	5,616

The audited net asset value of the Incoming Entity was approximately RMB673,295,227 as at 31 May 2015.

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2.2 Future prospects of the glass industry in the PRC

As set out in the Letter from the Board, the ordinary float glass market in the PRC has been experiencing a structural excess supply in the recent years due to the slowing demand and increasing competition. The Company expects that such situation will not improve significantly in the near future due to the deteriorating industry trend in the ordinary float glass industry.

In October 2013, the PRC government published《國務院關於化解產能嚴重過剩矛盾的指導意見》(“ State Council’s Guidance on Resolution of Serious Overcapacity *”), which states that the Chinese float glass capacity utilisation was approximately 73.1% at the end of 2012, which was significantly lower than the international level. The report also states that there was a widespread in the overcapacity in plate glass, which is a glass category that float glass falls within, and such phenomenon has become increasingly prominent. Moreover, according to a monthly statistics report published by China Architectural and Industrial Glass Association in December 2014, the total production and total sales of float glass in the PRC in 2014 were approximately 635.58 million weight boxes and approximately 626.53 million weight boxes respectively, implying an excess supply in the industry.

In addition, while glass is usually being considered as one of the semi-products in a production process, ordinary float glass and ultra-thin glass substrate have different uses. Ordinary float glass is commonly used for construction whereas ultra-thin glass substrate is widely used in different areas including flat panel displays such as liquid-crystal display (“ LCD ”) and touch panel displays. Given the different functions of ordinary float glass and ultra-thin glass substrate, their market demands are driven by the demands of their respective finished products.

In contrast, it is expected that the ultra-thin glass substrate industry would develop rapidly in the coming years. In assessing the future outlook of the ultra-thin glass substrate industry in the PRC, we have conducted research from the public domains. According to《平板玻璃工業十二五發展規劃》(the Twelfth Five-year Development Plan for Plate Glass Industry) published by the Ministry of Industry and Information Technology of the People’s Republic of China in 2011, due to the continuous urbanisation and industrialisation in the PRC; the increasing national initiatives on green building development and energy saving; and the increase in costs of production factors such as resources and labour, there is an acceleration in the transformation of the glass industry which increasingly emphasises on efficiency and quality of glass products. In particular, the development of ultra-thin glass substrate would become one of the primary focuses of the glass industry. According to 《關於工業轉型升級規劃 (2011-2015)》(the “ About*

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Industrial Restructuring the Upgrading Plan 2011-2015 *”) published by the State Council in 2011, lagged glass productions would be eliminated whereas new material productions such as ultra-thin glass substrate production and other energy-saving glass production would be highly emphasised.

Based on《2014-2016年新型顯示產業創新發展行動計劃》(Development Action Plan for the New Model Display Equipment Industry 2014-2016) jointly issued by the National Development and Reform Commission of the PRC and the Ministry of Industry and Information Technology of the People’s Republic of China in 2014, it is part of the national plan to stimulate the development of the domestic manufacturers by raising the domestic procurement rate of the production of small and mid-size display units to 60% and that of the production of large-size LCD to 30% for 2016. Also, during the 《中國2014國際顯示產業高峰論壇》(China – Global Display Equipment Industry Summit 2014) on 14 October 2014, Dr. Ouyang Zhongcan, who has over thirty years of experience in conducting professional research in various areas including the area of LCD, stated that as at 2014, China was the only country who has recorded consistent growth in the market share of the flat panel display market, and that the domestic production capacity of thin film transistor LCD is expected to become the second highest globally by 2015. Accordingly, the domestic demand of flat panel displays and hence the demand of ultra-thin glass substrate in the PRC are expected to increase in the near future, further demonstrating the potential growth in the PRC ultra-thin glass substrate market.

2.3 Reasons for and benefits of entering into the Formal Agreement

As stated in the Letter from the Board, the downturn in the ordinary float glass industry in the PRC has adverse impacts on the economic efficiency and profitability of the Group and the Company expects such situation will not improve significantly in the near future. Given the anticipated industrial restructuring from ordinary float glass towards ultra-thin glass substrate and uncertainty on the prospect of the ordinary float glass market in light of the challenging operating environment, in order to sustain the business development and enhance the competitiveness and profitability, the Company decided to undertake the Reorganisation through (i) the injection of the more promising ultra-thin glass substrate business from the Incoming Entity to the Company; and (ii) the disposal of the ordinary float glass and related businesses so as to better reallocate the resources with the aim to restructure its asset portfolio to increase Shareholders’ value. After the Reorganisation, the Group will no longer produce ordinary float glass products and will concentrate on the production and sale of ultra-thin glass substrate products.

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LETTER FROM GOLDIN

Prior to the Reorganisation, the Company is principally engaged in the industries of silica sands and float glass, where the latter comprises two products, namely ordinary glass and ultra-thin glass. According to the Annual Report 2014, during the year ended 31 December 2014, the gross profit margins of the silica sand operation and the float glass operation recorded approximately 44.30% and approximately 3.58%, which decreased by approximately 9.59 percentage points and approximately 5.17 percentage points respectively as compared to the previous year. Despite the aforesaid overall year-on-year decrease in the gross profit margin of the float glass operation, the ultra-thin glass products within the float glass operation recorded a satisfactory gross profit margin of approximately 27.46% whereas the ordinary glass products within the float glass operation recorded a negative gross profit margin of approximately 28.56%, indicating that the ordinary glass products business was relatively underperforming during the reporting period. As stated in the section headed “2.1 Information on the Outgoing Entities and the Incoming Entities” above, the Outgoing Entities are principally engaged in the sales of silica sands, the manufacturing and sales of float sheet glass as well as other related businesses. Moreover, it is noted that all Outgoing Entities recorded a net loss position after taxation for the year ended 31 December 2014. In fact, except for Yinan Huasheng which only recorded a net profit after taxation of approximately RMB1.09 million for the year ended 31 December 2013, all other Outgoing Entities have been loss making since 2012. As a result, the disposal of the assets in the loss making ordinary float glass industry would enable the Company to reallocate its resources with the aim to restructure its asset portfolio to increase Shareholders’ value. Furthermore, the Company expects to recognise a net gain of approximately RMB174.87 million upon completion of the Disposal, which will be fully used to net off the consideration payable by the Company for the Acquisition as described below. Having considered (i) the challenging operating environment of the ordinary float glass industry in the PRC; (ii) the year-on-year decrease in the gross profit margin of the ordinary float glass business of the Company; (iii) the consecutive net loss positions of the Outgoing Entities; and (iv) the net gain to be recorded by the Group upon completion of the Disposal, we consider that the Disposal contemplated under the Formal Agreement is in the interests of the Company and the Shareholders as a whole.

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On the other hand, the Company has been gradually increasing its business focus on its ultra-thin glass substrate products during the last few years. According to the Annual Report 2014, Longhai Company, one of the wholly-owned subsidiaries of the Company, successfully launched the stable production of the 0.33mm ultra-thin electronic float glass, which was the thinnest of its kind in the PRC, in January 2014. Also, the Company launched the production of 0.40mm ultra-thin electronic float glass during the reporting period, which raised the ultra-thin glass varieties of the Company, strengthening the competitiveness of the Company. Furthermore, on 14 November 2014, the Group entered into a sale and purchase framework agreement with Anhui Fangxing Science & Technology Company Limited (“ Fangxing Science & Technology ”), pursuant to which the Company agreed to supply ultra-thin float glass to Fangxing Science & Technology and its subsidiaries. The expansion in the production capacity of ultra-thin glass products could therefore cater the demand from Fangxing Science & Technology and other potential down-stream customers, which would increase the income from the ultra-thin float glass business of the Company.

As stated in the Letter from the Board, the Incoming Entity is principally engaged in the research and development, production and sales of ultra-thin glass substrates. It currently operates a 150t/d electronic information display ultra-thin glass substrates production line which started business operation in October 2013 and commenced mass productions in August 2014. It is also one of the few manufacturers equipped with production technology of 0.55mm and 0.33mm ultra-thin glass substrates in the PRC. These achievements therefore demonstrate the expertise in ultra-thin glass substrate production and the capacity for mass production of the Incoming Entity and synergy effect is expected to be created between the Company’s existing ultra-thin glass substrate business and the Incoming Entity. Through the expansion of the ultra-thin glass substrate output, economies of scale would arise by gaining cost advantages and hence improving the profitability of the Company. Given the Company’s initiative to shift the business focus towards this category, the Acquisition would enable the Company to gain its market share and remain competitive in the ultra-thin glass substrate industry, which is in line with the Company’s strategy.

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LETTER FROM GOLDIN

Having considered (i) the optimistic future prospect of the ultra-thin glass substrate industry in the PRC; (ii) the satisfactory historical gross profit margin of the ultra-thin glass substrate business of the Company; (iii) the expertise, capacity for mass production and advanced production technology of ultra-thin glass substrates of the Incoming Entity; (iv) the potential economies of scales to be achieved by the Company through the Acquisition; and (v) the profit-making position of the Incoming Entity for the period from 29 September 2013 (date of incorporation) to 31 December 2013 and the year ended 31 December 2014, we concur with the view of the Directors that the Acquisition contemplated under the Formal Agreement is in the interests of the Company and the Shareholders as a whole.

Pursuant to the Formal Agreement, the Company and CLFG have agreed to settle the difference between the considerations of the Disposal and the Acquisition of RMB180,729,715 will be settled partially by cash of RMB90,729,715 from the proceeds of the Proposed A Share Placing within two months after the completion of the Proposed A Share Placing while the remaining balance of RMB90,000,000 will be settled by the allotment and issue of 15,000,000 Consideration Shares by the Company to CLFG at the issue price of RMB6.00 per Consideration Share. In the event that the net proceeds raised from the Proposed A Share Placing fell short of RMB90,729,715, the Company will settle the shortfall amount by internal funding or other settlement methods to be determined by commercial negotiations between the Company and CLFG however excluding the allotment and issue of new Shares by the Company to CLFG. The fund raising size is subject to the requirements of the New Measures which, among other things, require that the fund raising size in relation to the significant asset restructuring of PRC listed companies shall not be more than 100% of the consideration of proposed assets to be acquired. We noted that the size of the Proposed A Share Placing is in compliance with the requirements of the New Measures. Further, the proportion of the difference between the considerations of the Disposal and the Acquisition of RMB180,729,715 to be settled by the issue of the Consideration Shares and the Proposed A Share Placing respectively represents a ratio of approximately 1:1. According to Rule 8.08(1), the public float requirement for Hong Kong listed companies is at least 25% of the total number of issued shares at all times. Subsequent to completion of the Reorganisation and the Proposed A Share Placing, the percentage of shareholding of the Company being held by the public would be approximately 68.20%, being equivalent to that as at the Latest Practicable Date. As such, subsequent to the issue of the Consideration Shares to CLFG, the Proposed A Share Placing to independent specific investors could maintain the level of the public float of the Company. Having considered the aforesaid, we are of the view that the proportion of the difference between the considerations of the Disposal and the Acquisition to be settled by the issue of the Consideration Shares and the Proposed A Share Placing respectively is justifiable.

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Upon completion of the Acquisition, the Company would obtain 100% of controlling stake over the Incoming Entity. According to the Annual Report 2014, the total current assets of the Company was approximately RMB370.65 million whereas the total current liabilities of the Company was approximately RMB627.02 million as at 31 December 2014, leading to a net current liabilities position of approximately RMB256.37 million. The issue of the Consideration Shares would allow the Company to be benefited by the potential consolidated profit from the operation of the ultra-thin glass substrates products of the Incoming Entity as well as the abovementioned potential synergies without incurring any immediate cash outflow for the Acquisition. Accordingly, the issue of the Consideration Shares could enhance the financial flexibility and increase the capital base of the Company.

Furthermore, the shareholding of CLFG in the Company would increase from approximately 31.80% to approximately 33.79% upon completion of the Reorganisation, or together with that of Bengbu Institute, being a substantial shareholder and a fellow subsidiary of CLFG, would remain at approximately 31.80% upon completion of the Reorganisation, the Proposed A Share Placing and the transfer of the Transfer Shares. CLFG has over fifty years of establishment in the PRC. It is principally engaged in the production and sale of float glass, imports, exports and the domestic sale of processing technology of glass, design and subcontracting of engineering work, labour export and other businesses. According to the website of CLFG, CLFG has developed the first float glass production line in China and has been providing a variety of advanced technical services to float glass production lines. Bengbu Institute, on the other hand, is a national Class-A research institute with establishment of over sixty years in the PRC. Based on a press release on the website of Anhui Economic and Information Technology Commission (http://www.aheic.gov.cn/) on 7 July 2015, Bengbu Institute has advanced technology in glass production and has successfully launched mass production of ultra-thin electronic float glass in various thicknesses. Given the experience of CLFG and Bengbu Institute in the PRC glass industry, the potential increase in shareholding of CLFG in the Company upon completion of the Reorganisation or the potential increase in shareholding of Bengbu Institute upon completion of the Reorganisation, Proposed A Share Placing and the transfer of the Transfer Shares would enable the Company to gain a greater extent of access into the extensive resources and expertise of CLFG and Bengbu Institute, which would be beneficial to the development of the Company’s ultra-thin glass substrate products business.

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Having considered that (i) the issue of the Consideration Shares would allow the Company to own 100% of controlling stake in the Incoming Entity without incurring immediate cash outflow for the Acquisition; and (ii) the resources, technology and expertise of CLFG or Bengbu Institute would further facilitate the shift in major products of the Company, we concur with the view of the Directors that the issue of the Consideration Shares is in the interest of the Company and the Shareholders as a whole.

Subject to completion of the Disposal, the Acquisition and the issue of the Consideration Shares, the Company plans to undertake a proposed placing of not more than 32,137,519 new A shares at the minimum issue price of RMB6.69 per A Share to not more than 10 independent specific investors. The proceeds to be raised from the Proposed A Share Placing will be no more than RMB215,000,000 based on the minimum issue price of RMB6.69 per A Share. After the settlement of the cash portion of the difference between the considerations of the Disposal and the Acquisition and the deduction of the relevant cost of transaction (including relevant tax, expense, offering cost and intermediary fee, etc.), the remaining net proceeds, which shall not be more than 50% of the gross proceeds from the Proposed A Share Placing in accordance with the New Measures, will be used for general working capital of the Group. Taking into account that a considerable amount of funds might be required by the Company in order to facilitate its expansion in the ultra-thin glass substrate product business against its existing net current liabilities position, the Proposed A Share Placing therefore would help ease the Group’s current liquidity pressure and provide the Group with financial flexibility for any suitable investment opportunities arising in the future. As at 31 December 2014, the gearing ratio of the Group was approximately 103.73%, which was relatively high as compared to those of other listed competitors within the PRC glass industry, which ranged from approximately 18.98% to approximately 70.63%. By undertaking the Proposed A Share Placing, capital base of the Company would be broadened and the financial position of the Company would be improved, further enhancing the debt repaying capability and supporting the development of the Company in the long run. Having considered the aforesaid, we are of the view that the size of the Proposed A Share Placing, which the corresponding proceeds to be generated will be used for (i) settling the cash portion of the difference between the considerations of the Disposal and the Acquisition; (ii) the relevant cost of transaction; and (iii) general working capital of the Group, is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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In conclusion, taking into account the background and reasons as discussed above, we are of the view that the entering into of the Formal Agreement and the transactions contemplated thereunder are in the interest of the Company and the Shareholders as a whole.

3. Principal terms of the Formal Agreement

3.1 Consideration for the Disposal and the Acquisition

(1) Basis of the consideration for the Disposal

Pursuant to the Formal Agreement, the Company has conditionally agreed to transfer its Sale Interests in the Outgoing Entities and the amounts due from the Outgoing Entities to the Company to CLFG.

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(i) Valuation of the net assets/(liabilities) of the Outgoing Entities as at 31 October 2014

Company Longhao Company Longfei Company Dengfeng Silicon Company Yinan Huasheng Mineral Products Company Total	Audited book value of the net assets/ (liabilities) of the relevant company (RMB) (245,393,598) (205,684,970) 10,055,540 4,020,129 (32,310,825)	Valuation of the net assets/ (liabilities) of the relevant company (RMB) (178,305,058) (145,172,516) 30,056,144 37,793,155 24,298,793	Interest of the Company in the relevant company (%) 100.00 63.98 67.00 52.00 40.29	Consideration (RMB) 1 1 20,137,616 19,652,441 9,789,984 49,580,043

(ii) Valuation of the amounts due from the Outgoing Entities to the Company as at 31 October 2014

Amount due from Longhao Company Amount due from Longfei Company Amount due from Longxiang Company Amount due from Yinan Huasheng Amount due from Mineral Products Company Total	Audited book value (RMB) 247,559,310 107,843,480 63,129,231 20,987,425 1,341,990 440,861,436	Valuation Consideration (RMB) (RMB) 250,532,385 250,532,385 108,994,916 108,994,916 62,742,706 62,742,706 20,987,425 20,987,425 1,341,990 1,341,990 444,599,422 444,599,422

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(2) Basis of the consideration for the Acquisition

Pursuant to the Formal Agreement, CLFG has conditionally agreed to transfer its 100.00% equity interest in the Incoming Entity to the Company.

Set out below is a summary of the valuation of the net asset value of the Incoming Entity as at 31 October 2014:

(i) Valuation of the net asset value of the Incoming Entity as at 31 October 2014

			Interest in the
	Audited book	Valuation of	Incoming
	value of the net	the net assets	Entity
	asset value of	value of the	to be acquired
	the Incoming	Incoming	by the
Company	Entity	Entity	Company	Consideration
	(RMB)	(RMB)	(%)	(RMB)
Bengbu Company	665,486,742	674,909,180	100.00	674,909,180

(3) Valuation method

For our due diligence purpose and in compliance with Rule 13.80(2)(d) of the Listing Rules, we have reviewed the Valuer’s qualification and experience in relation to the performance of the valuation of the Target Group based on the information available. We noted that the Valuer has experience in performing valuation services for numerous sizeable enterprises covering a wide range of industries in the PRC and has the licences as a qualified valuer in the PRC. The Valuer confirmed that it is an independent third party to the Company. The Valuer also confirmed that all relevant material information provided by the Company had been incorporated in the Valuation Report. In addition, we have also reviewed the terms of the Valuer’s engagement and noted that the scope of work is appropriate to the opinion required to be given and we are not aware of any limitation on the scope of work which might have an adverse impact on the degree of assurance given by the Valuation Report. Based on the above, we are of the view that the scope of work of the Valuer is appropriate and the Valuer is qualified to perform the valuations of the Outgoing Entities, the amounts due from the Outgoing Entities to the Company and the Incoming Entity.

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We have reviewed the Valuation Report prepared by the Valuer as set out in Appendices X to XVI to the Circular, and discussed with the Valuer regarding the methodologies adopted, and bases and assumptions used in arriving at the valuations of the Outgoing Entities, the amounts due from the Outgoing Entities to the Company and the Incoming Entity. As advised by the Valuer, there are three common valuation approaches for determining the enterprise value of a company, namely the income approach, the market approach and asset-based approach. Regarding the Outgoing Entities, asset-based approach has been adopted by the Valuer to determine their enterprise values. Based on our understanding from the Valuer, the market approach was considered inappropriate for evaluating all of the Outgoing Entities because there were insufficient transaction cases or reference from enterprises in the relevant domestic capital market to assess the prevailing market values of the Outgoing Entities. The income approach was also considered to be inappropriate in the valuations of the Outgoing Entities given it was unable to reliably estimate the revenue and risks for the future years of the Outgoing Entities. The Valuer considered that the asset-based approach was the most appropriate for the valuation. The assets based approach reflects the value of the enterprise from the perspective of enterprise asset construction and provides a basis for the operation, management and assessment of the enterprise after the realisation of the economic behaviour. Having considered the respective downsides of the market approach and the income approach, we are of the view that the asset-based approach would be the preferred approach for the valuations of the Outgoing Entities.

Regarding the valuation of the amounts due from the Outgoing Entities to the Company, hypothetical settlement approach has been adopted by the Valuer. As stated in the Valuation Report, hypothetical settlement approach is a valuation method which assumes that the indebted enterprise would continue to operate its business on an ongoing basis and settle its debts in an order of repayment of debt. Having learnt the intentions of the management of the Outgoing Entities through thorough discussions, the Valuer is in the view that the Outgoing Entities will be operating on an ongoing basis and hence, hypothetical settlement approach would be an appropriate method for valuing the amounts due from the Outgoing Entities to the Company. Further, as confirmed with the Valuer, the hypothetical settlement approach falls within the category of cost approach. In arriving at the appraised amounts due from the Outgoing Entities to the Company, we noted that the Valuer first conducted a general estimation on the market value of each asset of the Outgoing Entities, then calculated the repayment rate based on such estimated market value as well as the order of repayment of debts, and finally determined the appraised value. Having considered the aforesaid, we are of the view that the hypothetical settlement approach would be the preferred approach for the valuations of the amounts due from the Outgoing Entities to the Company.

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The asset-based approach has been adopted for the valuation of the Incoming Entity. The market approach was considered to be not appropriate as there were insufficient transaction cases or reference from enterprises in the relevant domestic capital market to assess the prevailing market values of the Incoming Entity. As advised by the Valuer, considering the uncertainty in the scale and duration of the glass product structure adjustments to be made by the Incoming Entity due to its industrial and business nature, the income approach was not appropriate for the valuation of the Incoming Entity as the valuation under the income approach uses the expected income of assets as the valuation standards that would be affected by several conditions such as macro-economy, government control and effective utilisation of the assets. Furthermore, the relatively short operating period of the Incoming Entity may have adverse impacts on the accuracy of the estimates used in the income approach. The replacement values used in the asset-based approach, on the other hand, are based on the current assets of the enterprise and therefore are of higher quality. In addition, various assets and liabilities of the enterprise are estimated and calculated separately under the asset-based approach; therefore such approach is more precise. Having considered the respective downsides of the market approach and the income approach, we therefore consider that the asset-based approach would be the most appropriate for the valuation of the Incoming Entity.

During the course of our discussions with the Valuer and after reviewing the data and the calculation work provided by the Valuer, we have not identified any major factors which would lead us to cast doubt on the fairness and reasonableness of the methodology, principal bases and assumptions used in arriving the valuation. We are satisfied that the bases and assumptions have been made with due care and objectivity, and on a reasonable basis, and we believe the assumptions used under the Valuation Report are fair, reasonable and complete. Having considered the above, we are of the view that the principal basis, valuation methods and assumptions adopted for the valuation of the Outgoing Entities, the Incoming Entity and the amounts due from the Outgoing Entities to the Company are fair, reasonable and complete and hence the reliability of the Valuation Report. On such basis, we are of the view that the considerations for the Disposal and Acquisition are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

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(4) Payment method

In order to ensure the compliance with the New Measures of the PRC authorities governing the fund raising activities in relation to the significant asset restructuring of the PRC listed companies, both parties to the Formal Agreement have agreed that the difference between the considerations of the Disposal and the Acquisition of RMB180,729,715 will be partially settled by cash of RMB90,729,715 from the proceeds of the Proposed A Share Placing within two months after completion of the Proposed A Share Placing while the remaining balance of RMB90,000,000 will be settled by the allotment and issue of 15,000,000 Consideration Shares to CLFG at the issue price of RMB6.00 per Consideration Share.

3.2 The Consideration Share

Comparison of the Consideration Share

The issue price of the Consideration Shares is RMB6.00 (equivalent to approximately HK$7.50) per Consideration Share represents:

(a) a premium of approximately 10.78% over the closing price of HK$6.77 per H Share as quoted on the Stock Exchange on the date of the Formal Agreement;
(b) a premium of approximately 97.37% over the closing price of HK$3.80 per H Share as quoted on the Stock Exchange on the Last Trading Day;
(c) a premium of approximately 90.16% over the average closing price of approximately HK$3.94 per H Share as quoted on the Stock Exchange for the last five trading days up to and including the Last Trading Day;
(d) a premium of approximately 94.30% over the average closing price of approximately HK$3.86 per H Share as quoted on the Stock Exchange for the last ten trading days up to and including the Last Trading Day;
(e) a premium of approximately 150.36% over the average closing price of approximately HK$3.00 per H Share as quoted on the Stock Exchange for the last thirty trading days up to and including the Last Trading Day;
(f) a discount of approximately 74.39% to the closing price of RMB23.43 (equivalent to approximately HK$29.29) per A Share as quoted on the SSE on the date of the Formal Agreement;

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(g) a discount of approximately 17.13% to the closing price of RMB7.24 (equivalent to approximately HK$9.05) per A Share as quoted on the SSE on the Last Trading Day; and
(h) a premium of approximately 17,000.00% over the unaudited net assets attributable to the Shareholders per Share of approximately RMB0.03 (equivalent to approximately HK$0.04), calculated based on the Company’s unaudited net assets attributable to the Shareholders of approximately RMB17.38 million as at 31 March 2015.

We understand from the management of the Company that the issue price of the Consideration Share of RMB6.00 (equivalent to approximately HK$7.50) per Consideration Share is equivalent to 90% of the ratio of the total turnover over the total volume of the A Shares for the last 60 trading days as quoted on the SSE prior to the date of first board meeting in relation to the Reorganisation. As trading in the Shares was suspended during the period from 30 June 2014 to the date of first board meeting in relation to the Reorganisation, the issue price of the Consideration Shares was determined based on 90% of the ratio of the total turnover over the total volume of the A Shares for the last 60 trading days prior to 30 June 2014.

Historical H Share price performance

The trading of H Shares of the Company was suspended from 30 June 2014 to 31 December 2014 (the “ H Shares Suspension Period ”) prior to the announcement regarding the entering into of the Framework Agreement for the Reorganisation dated 31 December 2014 (the “ Reorganisation Announcement ”). Chart 1 below shows the daily closing price of the H Shares versus the issue price for the Consideration Shares for the period commencing from 1 July 2013, being the first trading day of the 18-month period prior to the date of the Framework Agreement dated 31 December 2014 up to the Latest Practicable Date (the “ H Share Review Period ”), and the first trading day of the 12-month period prior to the H Shares Suspension Period which, in our view, represents a reasonable period of time to provide a general overview of the recent price performance of the H Shares.

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Chart 1: Daily closing H Share price performance against the issue price during the H Share Review Period

==> picture [394 x 203] intentionally omitted <==

Source: The official website of the Stock Exchange (www.hkex.com.hk) Note: Trading in the H Shares was suspended from 30 June 2014 to 31 December 2014

Prior to the suspension of the trading in the H Shares during the H Share Review Period, the H Shares were traded from HK$1.26 to HK$4.00. During the H Share Review Period, the closing H Share price was generally on an upward trend with the highest and lowest closing prices of the H Shares being HK$8.29 and HK$1.26 respectively as quoted on the Stock Exchange. The average closing H Share price during the H Share Review Period was approximately HK$2.83. It is noted that the closing H Share price has been surging since 2 April 2015 at HK$5.29 with a peak at HK$8.29 on 9 April 2015 following the release of the summary annual report for 2014 of the Company dated 29 March 2015, which shows a net profit position of the Company of approximately RMB0.34 million for the year ended 31 December 2014. In light of the generally fluctuating trend of the closing H Share price following the Reorganisation Announcement as compared to relatively stable historical price trend as shown in Chart 1, we are of the view that the surge during such period is primarily due to market speculation on the Reorganisation. The issue price of the Consideration Share of RMB6.00 (equivalent to HK$7.50) falls above the average closing H Share price during the H Share Review Period and represents (i) a discount of approximately 9.53% to the highest closing price of the H Shares; (ii) a premium of approximately 495.24% over the lowest closing price of the H Shares; and (iii) a premium of approximately 164.67% over the average closing price of the H Shares during the H Share Review Period.

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Historical A Share price performance

The trading of A Shares of the Company was suspended from 30 June 2014 to 31 December 2014 (the “ A Shares Suspension Period ”) prior to the Reorganisation Announcement. Chart 2 below shows the daily closing price of the A Shares versus the issue price for the Consideration Shares for the period commencing from 1 July 2013, being the first trading day of the 18-month period prior to the date of the Framework Agreement dated 31 December 2014 up to the Latest Practicable Date (the “ A Share Review Period ”), and the first trading day of the 12-month period prior to the A Shares Suspension Period which, in our view, represents a reasonable period of time to provide a general overview of the recent price performance of the A Shares.

Chart 2: Daily closing A Share price performance against the issue price during the A Share Review Period

==> picture [397 x 147] intentionally omitted <==

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

25
20
15
Issue price of RMB6.00 (equivalent to HK$7.50) per Considera�on Share
10
5
0
Closing Price Issue Price
A Share price (RMB)
----- End of picture text -----

Source: The official website of the SSE (http://www.sse.com.cn/) Note: Trading in the A Shares was suspended from 30 June 2014 to 31 December 2014

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LETTER FROM GOLDIN

Prior to the suspension of the trading in A Shares during the A Share Review Period, the A Shares were traded from RMB4.38 to RMB7.77. The closing A Share price has been surging since 5 January 2015, being the first trading day after the publication of the announcement regarding the initial terms of the Reorganisation. It is also noted that the closing A Share price has been surging again since 15 May 2015. In view of such surges in the price movement, the Company declared such abnormal price fluctuations were not caused by any price sensitive information the Company aware of, save for the matters relating to the Reorganisation, in its announcements dated 20 January 2015 and 15 May 2015. As such, we consider that the abovementioned surges are mainly due to market speculation on the Reorganisation. During the A Share Review Period, the closing Share price was generally on an upward trend with the lowest and highest closing prices of the Shares being RMB4.38 and RMB26.05 respectively. The average closing A Share price during the A Share Review Period was approximately RMB8.55. The issue price of the Consideration Share of RMB6.00 represents (i) a discount of approximately 76.97% to the highest closing price of the A Shares; (ii) a premium of approximately 36.99% over the lowest closing price of the A Shares; and (iii) a discount of approximately 29.81% over the average closing price of the A Shares during the A Share Review Period. The issue price of the Consideration Share of RMB6.00 falls within the range of the closing A Share price during the A Share Review Period.

The Consideration Shares will be subject to the Lock-Up Period of 36 months after the issue. Also, CLFG undertakes that if the closing prices of the A Shares for 20 consecutive trading days are below the issue price of the Consideration Shares within the 6-month period from the issue date of the Consideration Shares or the closing price of the A Shares is below the issue price of the Consideration Shares as at the end of the 6-month period after completion of the issue of the Consideration Shares, the Lock-up Period will be automatically extended for at least 6 months (the “ CLFG Undertaking ”). We noted that the Lock-Up Period is established in compliance with Rule 46 of Article 3 of 《上市公司重大資產重組管理辦法》(Measures for Administration of Material Asset Reorganisation of Listed Companies) issued by the China Securities Regulatory Commission (the “ CSRC* ”), which requires that in the event that any controlling shareholder obtains shares of the PRC listed company through asset acquisition transaction, those shares shall not be transferred within 36 months from the completion of the issue. Further, the establishment of the Lock-Up Period and the CLFG Undertaking can avoid immediate disposal of the Consideration Shares which might affect the stability of the Share price and demonstrate CLFG’s confidence in the Company. Having considered the aforesaid, we are of the view that the establishment of the Lock-Up Period of 36 months is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

— 81 —

LETTER FROM GOLDIN

We understand from the Company that the issue price of RMB6.00 per Consideration Share was determined between the Company and CLFG after arm’s length negotiations. According to Article 45 of 《上市公司重大資產重組管理辦法》(Measures for Administration of Material Asset Reorganisation of Listed Companies) promulgated by the CSRC on 23 October 2014 and became effective on 23 November 2014, listed companies in the PRC are allowed to acquire assets by issuing shares at price not lower than 90% of the average trading price for 20, 60 or 120 trading days immediately preceding the date of the relevant board resolution. Based on the above, we are of the view that the Company’s proposed issue of Consideration Share at 90% of the average trading price of A Shares for the last 60 trading days as quoted on the SSE prior to the date of first board meeting in relation to the Reorganisation is in line with 《上市公司重大資產重組管理辦法》(Measures for Administration of Material Asset Reorganisation of Listed Companies).

In the case of the Consideration Shares, 90% of the market reference price represents RMB6.69 (based on the 20-day calculation method), RMB6.00 (based on the 60-day calculation method) and RMB5.73 (based on the 120-day calculation method). Upon enquiry with the management of the Company, we were given to understand that the Company and CLFG have agreed to adopt the median of the aforesaid range of the market reference price. In addition, in order to assess the fairness and reasonableness of the adoption of 90% of the market reference price, we have, to our best effort, identified companies which had conducted non-public issuance of A shares with fixed terms and with the issuance announced during the 3-month period prior to the date of the Framework Agreement and up to the Latest Practicable Date. We have identified seven comparable issuance (“ Comparable Issuance ”) conducted by the companies which shares are listed on the Stock Exchange and considered that the list of comparables is exhaustive based on the selection criteria as set out above. We consider that a review period of three months prior to the date of the Framework Agreement and up to the Latest Practicable Date is appropriate to capture the recent market practice as the Comparable Issuance are considered for the purpose of taking a general indication for the recent market practice in relation to the issue price under other non-public A Shares issuances as compared to the relevant prevailing market share prices under the recent market conditions and sentiments. The corresponding percentages of the issue prices to the market reference prices of the Comparable Issuance ranged from approximately 89.06% to approximately 100.00%, with an average of approximately 91.13%. As such, the basis of 90% of the market reference price adopted to the issue price of the Consideration Shares is approximate to the average of the Comparable Issuance. Further, we noted that six out of the seven Comparable Issuance adopted a basis of 90% or less of the market reference price. Coupled with the fact that 90% of the market reference price based on the 60-day calculation method represents the median of the abovementioned range of the market reference price based on 20-day, 60-day and 120-day calculation methods, we are of the view that the determination of the issue price of the Consideration Shares conforms to the common market practice and is reasonable.

— 82 —

LETTER FROM GOLDIN

Having considered that (i) the issue price of RMB6.00 per Consideration Share was determined between the Company and CLFG after arm’s length negotiations; (ii) the basis of determining the issue price of the Consideration Shares is in line with Measures for Administration of Material Asset Reorganisation of Listed Companies; (iii) the determination of the issue price of the Consideration Shares conforms to the common market practice; (iv) the issue price of the Consideration Share falls within the range of the closing A Share price during the A Share Review Period and is above the average closing H Share price during the H Share Review Period; (v) the issue price represents a significant premium over the unaudited net assets attributable to the Shareholders per Share; (vi) the Consideration Shares are subject to a lock-up period of 36 months from the date of issue; and (vii) the issue of the Consideration Shares forms part of the Reorganisation, which is beneficial to the Group as elaborated in the paragraphs under the section headed “2. Background of and reasons for entering into the Formal Agreement”, we concur with the view of the Directors that the issue price of the Consideration Shares is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

3.3 The new A Shares under the Proposed A Share Placing

As part of the Formal Agreement, the Company plans to undertake a proposed placing of not more than 32,137,519 new A Shares based on the minimum issue price of RMB6.69 per A Share to not more than 10 independent specific investors. The Proposed A Share Placing is non-legally binding and is conditional on the Disposal, the Acquisition and the issue of the Consideration Shares.

According to (《上市公司證券發行管理辦法》) (Measures for Administration of Issuance of Securities by Listed Companies*) issued by the CSRC, for any non-public issuance of shares by listed companies in the PRC for fund raising purposes, the issue price of the relevant shares shall be not less than 90% of the average share price for the preceding 20 trading days before the relevant price determination date. The pricing base date of the Proposed A Share Placing is the date of announcement of the resolution of the first board meeting in relation to the Reorganisation (i.e. 31 December 2014). Therefore, the issue price per A Share will not be less than 90% of the average trading price of the A Shares for the 20 trading days immediately preceding the pricing base date, i.e. not less than RMB6.69 per A Share. The exact issue price will be determined after obtaining the approval of the CSRC according to the relevant regulations of the CSRC for the Proposed A Share Placing with reference to bid prices offered by target subscribers. The issue price of the Proposed A Share Placement will be adjusted correspondingly in case of ex-rights or ex-dividend during the period from the pricing base date to the issue date.

— 83 —

LETTER FROM GOLDIN

Details of other terms of the Proposed A Share Placing are set out in the Letter from the Board.

Comparison of the new A Share under the Proposed A Share Placing

The minimum issue price of the new A Shares of RMB6.69 (equivalent to approximately HK$8.36) represents:

(a) a premium of approximately 23.49% over the closing price of HK$6.77 per H Share as quoted on the Stock Exchange on the date of the Formal Agreement;
(b) a premium of approximately 120.00% over the closing price of HK$3.80 per H Share as quoted on the Stock Exchange on the Last Trading Day;
(c) a premium of approximately 112.18% over the average closing price of approximately HK$3.94 per H Share as quoted on the Stock Exchange for the last five trading days up to and including the Last Trading Day;
(d) a premium of approximately 116.58% over the average closing price of approximately HK$3.86 per H Share as quoted on the Stock Exchange for the last ten trading days up to and including the Last Trading Day;
(e) a premium of approximately 178.67% over the average closing price of approximately HK$3.00 per H Share as quoted on the Stock Exchange for the last thirty trading days up to and including the Last Trading Day;

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LETTER FROM GOLDIN

(f) a discount of approximately 71.45% to the closing price of RMB23.43 (equivalent to approximately HK$29.29) per A Share as quoted on the SSE on the date of the Formal Agreement;
(g) a discount of approximately 7.60% to the closing price of RMB7.24 (equivalent to approximately HK$9.05) per A Share as quoted on the SSE on the Last Trading Day; and
(h) a premium of approximately 22,200.00% over the unaudited net assets attributable to the Shareholders per Share of approximately RMB0.03 (equivalent to approximately HK$0.04), calculated based on the Company’s unaudited net assets attributable to the Shareholders of approximately RMB17.38 million as at 31 March 2015.

The issue price of the new A Shares under the Proposed A Share Placing of RMB6.69 (equivalent to HK$8.36) falls above the highest closing prices of the H Shares during the H Share Review Period and represents (i) a premium of approximately 0.84% to the highest closing price of the H Shares; (ii) a premium of approximately 563.49% over the lowest closing price of the H Shares; and (iii) a premium of approximately 195.02% over the average closing price of the H Shares during the H Share Review Period.

The issue price of the new A Shares under the Proposed A Share Placing of RMB6.69 represents (i) a discount of approximately 74.32% to the highest closing price of the A Shares; (ii) a premium of approximately 52.74% over the lowest closing price of the A Shares; and (iii) a discount of approximately 21.74% to the average closing price of the A Shares during the A Share Review Period. The issue price of the new A Shares of RMB6.69 falls within the range of the closing A Share price during the A Share Review Period.

We noted from 《上市公司證券發行管理辦法》(Measures for Administration of Issuance of Securities by Listed Companies*) issued by the CSRC on 26 April 2006, for any non-public issuance of shares by listed companies in the PRC for fund raising purposes, the issue price of the relevant shares shall be not less than 90% of the average share price for the preceding 20 trading days before the relevant price determination date. Based on the above, and to be in compliance with the regulatory requirement as a listed company in the PRC, we are of the view that the Company’s proposed issue of new A Share at 90% of the average trading price of A Shares for the last 20 trading days as quoted on the SSE prior to the date of first board meeting in relation to the Reorganisation is in line with the Measures for Administration of Issuance of Securities by Listed Companies.

— 85 —

LETTER FROM GOLDIN

On the other hand, the new A Shares to be issued by the Company through the Proposed A Share Placing will be subject to a lock-up period of 12 months from the date of issue. We noted that such establishment of a lock-up period is in compliance with Rule 38(2) of Article 3 of《上市公司證券發行管理辦法》 (Measures for Administration of Issuance of Securities by Listed Companies*) issued by the CSRC, which requires that any shares to be issue by PRC listed companies through non-public share placement shall not be transferred within 12 months from the completion of the issue. In addition, the establishment of the lock-up period can avoid immediate disposal of A Shares which might affect the stability of the A Share price after the issue whilst signalling potential investors’ confidence in the Company. Having considered the aforesaid, we are of the view that the establishment of a lock-up-period of 12 months for the new A Shares to be issued through the Proposed A Share Placing is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Having considered that (i) the basis of determining the issue price of the new A Shares is in line with Measures for Administration of Issuance of Securities by Listed Companies; (ii) the issue price of the new A Share falls within the range of the closing A Share price during the A Share Review Period and above the highest closing H Share price during the H Share Review Period; (iii) the issue price represents a significant premium over the unaudited net assets attributable to the Shareholders per new A Share; (iv) the new A Shares are subject to a lock-up period of 12 months from the date of issue; and (v) the Proposed A Share Placing is expected to be carried out by the Company subsequent to the Disposal and the Acquisition, by which time the asset quality of the Group will be substantially improved, we concur with the view of the Directors that the issue price of the new A Shares to be issued under the Proposed A Share Placing of not less than RMB6.69 per A Shares is justifiable.

4. Potential dilution to the shareholding of the existing public H Shareholders

Your attention is drawn to the section headed “Effect of the Reorganisation, the Proposed A Share Placing and the transfer of the Transfer Shares on the shareholding structure of the Company” as set out in the Letter from the Board. We noted that the shareholding of the existing public H Shareholders would reduce from approximately 50.00% as at the Latest Practicable Date to (i) approximately 47.54% immediately after completion of the Reorganisation without taking into account the Proposed A Share Placing and the transfer of the Transfer Shares; (ii) approximately 45.69% immediately after completion of the Reorganisation and the Proposed A Share Placing without taking into account the transfer of the Transfer Shares; and (iii) approximately 45.69% immediately after completion of the Reorganisation, the Proposed A Share Placing and the transfer of the Transfer Shares.

— 86 —

LETTER FROM GOLDIN

Taking into account (i) the reasons for and benefits of entering into the Formal Agreement and the transactions contemplated thereunder as described above; and (ii) the principal terms of the Formal Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole, we consider that the possible dilution effect on the shareholding interests of the existing public H Shareholders is justifiable.

5. Financial effects of the entering into of the Formal Agreement

5.1 Assets and liabilities

According to the unaudited pro forma financial information of the enlarged Group as set out in Appendix IX to the Circular, the unaudited total assets of the enlarged Group would increase by approximately 21.76% from approximately RMB1,057.07 million as at 31 December 2014 to approximately RMB1,287.12 million, and the unaudited total liabilities of the enlarged Group would decrease by approximately 11.40% from approximately RMB1,096.46 million as at 31 December 2014 to approximately RMB971.41 million, upon completion of the Disposal, the Acquisition and the issue of the Consideration Shares.

5.2 Cash flow

According to the Annual Report 2014, the bank balance and cash as at 31 December 2014 was approximately RMB68.48 million. Upon completion of the Disposal, the Acquisition and the issue of the Consideration Shares, the unaudited total cash balance of the enlarged Group would increase by 18.66% from approximately RMB68.48 million as at 31 December 2014 to approximately RMB81.26 million.

5.3 Earnings

Upon completion of the Disposal, the Acquisition and the issue of the Consideration Shares, Bengbu Company will become a wholly-owned subsidiary of the Group and the financial results of the Bengbu Company will be consolidated into that of the Group. Based on the optimistic prospect of the ultra-thin glass industry in the PRC and the proven track record for the period since its incorporation to 31 December 2014 of Bengbu Company, it is expected that the entering into of the Formal Agreement would bring positive impacts to the performance of the Group.

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LETTER FROM GOLDIN

5.4 Gearing ratio

As at 31 December 2014, the gearing ratio of the Group was approximately 103.73%, calculated by dividing the total liabilities of the Group of approximately RMB1,096.46 million by the total assets of the Group of approximately RMB1,057.07 million as at 31 December 2014. Based on the unaudited pro forma financial information as set out in Appendix IX to the Circular, upon the completion of the Disposal, the Acquisition and the issue of the Consideration Shares, the gearing ratio of the Group would decrease by approximately 28.26% to approximately 75.47%, calculated by dividing the total liabilities of the Group of approximately RMB971.41 million by the total assets of the Group of approximately RMB1,287.12 million.

RECOMMENDATIONS

Based on the abovementioned principal factors and reasons for the Formal Agreement and the transactions contemplated thereunder and the specific mandates, we are of the view that the terms and conditions of the Formal Agreement and the transactions contemplated thereunder and the specific mandates are normal commercial terms and 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, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Formal Agreement and the transactions contemplated thereunder and the specific mandates.

Yours faithfully, For and on behalf of

Goldin Financial Limited

Billy Tang Director

— 88 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

Financial Information of the Group for each of the three years ended 31 December 2012, 2013 and 2014 and the three months ended 31 March 2015 are disclosed in the following documents which have been published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.zhglb.com):

the annual report of the Company for the year ended 31 December 2012 dated 27 March 2013 (pages 74 to 185) (http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0418/ LTN201304181079.pdf)
the annual report of the Company for the year ended 31 December 2013 dated 27 March 2014 (pages 73 to 187) (http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0417/ LTN20140417842.pdf)
the annual report of the Company for the year ended 31 December 2014 dated 27 March 2015 (pages 81 to 183) (http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0417/ LTN20150417019.pdf)
the first quarterly report of the Company for the three months ended 31 March 2015 dated 28 April 2015 (pages 2 to 33) (http://www.hkexnews.hk/listedco/listconews/ SEHK/2015/0428/LTN201504281862.pdf)

2. STATEMENT OF INDEBTEDNESS

Borrowings

At the close of business on 30 June 2015, being the latest practicable date for the purpose of this indebtednesses statement prior to the printing of this circular, the enlarged Group had outstanding borrowings as follows:

a) Other loan amounting to approximately RMB90,911,653.68 was repayable within one year, comprising RMB46,444,453.68 with interest charged at the annual rate ranging from 2.5% to 6.9% and the remaining balance was interest-free loans.
b) Secured guaranteed bank loans amounting to approximately RMB545,379,427.12, comprising short-term bank loans of approximately RMB27,930,000.00 and longterm bank loans of approximately RMB517,449,427.12, comprising approximately RMB79,709,027.12 with interest charged at the annual rate ranging from 2.5% to 6.9% and the remaining balance was interest-free loans. These bank loans are secured by the following:
guaranteed by a shareholder of the enlarged Group;
guaranteed by third parties of the enlarged Group;
mortgage guaranteed by certain assets of the enlarged Group;

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

c) Unsecured short-term bank loan amounting to RMB10,000,000.00, interest is charged at the rate of 5.4% per annum.

Capital commitments

As at 30 June 2015, the enlarged Group had capital commitments of RMB12,420,000.00 contracted but not provided for in the financial statements in respect of acquisition of property, plant and machinery.

Pledge of assets

As at 30 June 2015, certain assets of the enlarged Group were pledged to Far East Lease Corporation International, certain assets of the enlarged Group with an aggregate net book value of RMB16,232,218.75.

Operating lease commitments

As at 30 June 2015, the enlarged Group had no operating lease commitments.

Contingent liabilities

As at 30 June 2015, the enlarged Group had no contingent liabilities.

Disclaimers

Save as aforesaid, and apart from intra-group liabilities, and normal trade payables in the ordinary course of business, none of the companies in the enlarged Group had any outstanding debt securities, liabilities under acceptances, acceptance credits, finance lease or hire purchase commitments, mortgages, charges, loan capital and overdraft or other similar indebtedness, as at the close of business on 30 June 2015.

The Directors have confirmed that there has not been any material change in the indebtedness and contingent liabilities of the enlarged Group since 30 June 2015.

For the purpose of the above indebtedness statement, foreign currency amounts have been translated into Renminbi at the rates of exchange prevailing at the close of business on 30 June 2015.

3. WORKING CAPITAL STATEMENT

The Directors are of the opinion that, after taking into account of the financial resources currently available to the enlarged Group, in the absence of unforeseeable circumstance, the enlarged Group has sufficient working capital for its present requirements for at least the next twelve months following the date of this circular.

— 90 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

1. ACCOUNTANTS’ REPORT OF BENGBU COMPANY

The following is the text of the accountants’ report of Bengbu Company received from the independent reporting accountants of the Company, WUYIGE Certified Public Accountants LLP, for the sole purpose of inclusion in this circular.

Da Xin Shen Zi [2015] No. 2-00686

Dear Sirs or Madams,

**To Luoyang Glass Company Limited*,**

The purpose of this report

Set out below are reports prepared by us on the financial information of Bengbu China Building Information Display Materials Co. Ltd. (“Bengbu Company”) for the five months ended 31 May 2015, for the year ended 2014 and the period from 29 September 2013 (the “Establishment Date of Bengbu Company”) to 31 December 2013 (the “Relevant Period”). The financial information was prepared pursuant to the basis set out in Note II/1 of this report, for inclusion in the circular which will be issued by Luoyang Glass Company Limited, in respect of the material assets reorganization.

Financial Information

The financial information includes the balance sheets as at 31 December 2013, 31 December 2014 and 31 May 2015; income statements, cash flow statements, statements of changes in equity, and notes to financial statements during the period from 29 September 2013 (the “Establishment Date of Bengbu Company”) to 31 December 2013, for the year of 2014 and for the five months ended 31 May 2015.

Basic Information

The detailed basic information of Bengbu Company is set out to Note 1 of this report. Bengbu Company has adopted 31 December as its financial year-end date.

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FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Responsibility of Directors to financial statements

For the purpose of this report, the directors of Bengbu Company has made a true and fair presentation on the financial statements of Bengbu Company for the Relevant Period, under the basis set out in Note II/1 and in accordance with the “PRC Accounting Standards and Regulations”, the disclosure requirements of the Companies Ordinance of Hong Kong and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, and other relevant laws and regulations for the preparation. The directors of Bengbu Company must take the full responsibility of this.

Responsibility of reporting accountants

The financial information accompanying this report was prepared in accordance with relevant financial statements without any adjustments. Our responsibilities are to prepare financial information set out in this report in accordance with relevant financial statements, provide our independent opinion on the financial information, and report our opinion to you. For the purpose of this report, we have made necessary procedures in accordance with the China’s Certified Public Accountants Auditing Standards and the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants.

Audit Opinion

In our opinion, for the purpose of this report, the financial information has made true and fair presentations of the financial position of Bengbu Company as at 31 December 2013, 31 December 2014 and 31 May 2015, and the operating results and cash flows of Bengbu Company for the period from 29 September 2013 (the “Establishment Date of Bengbu Company”) to 31 December 2013, for the year of 2014 and for the period of five months ended 31 May 2015.

Review of Comparative Financial Information at the End of Reporting Period

We have reviewed the comparative financial information contained in this report, including income statement, cash flow statement, statement of changes in equity and notes to financial statements of Bengbu Company for the five months ended 31 May 2014 (“Comparative Financial Information”).

The directors of Bengbu Company prepared the Comparative Financial Information under the basis set out in Note II to this report and in accordance with the “PRC Accounting Standards for Business Enterprises”, the disclosure requirements of the Companies Ordinance of Hong Kong and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, and other relevant regulations.

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FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Our responsibility is to make a conclusion on the Comparative Financial Information based on our review. Our review has been made under the “China’s Certified Public Accountants Auditing Standards No. 2101 – Review of Financial Statements”. Our review procedures mainly include making inquiries to persons primarily responsible for financial and accounting matters, and applying analytical and other review procedures. Our review excludes audit procedures such as control tests and verification of assets and liabilities, and transactions. The scope of our review is substantially less than that of audit, and consequently we would not express any audit opinion on the Comparative Financial Information.

Review conclusion: Based on our review, we are not aware of any matter that causes us to believe that the Comparative Financial Information in all material respects was not prepared in accordance with the basis set out in Note II for the purpose of this report.

WUYIGE CERTIFIED PUBLIC ACCOUNTANTS LLP.

15 June 2015

— 93 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

BALANCE SHEET

Prepared by: Bengbu China Building Information Display Materials Co. Ltd.*

Unit: RMB

Item Note Current assets: Bank balance and cash V(I) Notes receivable V(II) Accounts receivable V(III) Prepayments V(IV) Other receivables V(V) Inventory V(VI) Other current assets V(VII) Total current assets Non-current assets: Fixed assets V(VIII) Construction in progress V(IX) Intangible assets V(X) Deferred income tax assets V(XI) Total non-current assets Total assets	31 May 2015 13,327,100.34 6,180,557.22 2,149,519.14 62,210.76 19,346,767.90 59,653,160.46 63,421,607.13 164,140,922.95 528,730,052.96 113,491.00 36,780,290.35 574,993.41 566,198,827.72 730,339,750.67	31 December 2014 24,268,862.99 500,000.00 2,638,906.36 96,263.17 864,413.75 37,477,691.08 66,108,813.49 131,954,950.84 545,893,445.13 – 37,145,174.20 671,919.67 583,710,539.00 715,665,489.84	31 December 2013 44,061,072.43 – 589,330.80 1,509,481.00 98,300.00 27,363,178.31 – 73,621,362.54 525,800.58 3,103,853.86 – – 3,629,654.44 77,251,016.98

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FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Prepared by: Bengbu China Building Information Display Materials Co. Ltd.*

Unit: RMB

Item Note Curent liabilities: Short-term loans V(XII) Notes payable V(XIII) Accounts payable V(XIV) Payments received in advance V(XV) Staff remuneration payables V(XVI) Taxes payable V(XVII) Other payables V(XVIII) Total current liabilities Non-current liabilities: Deferred income V(XIX) Total non-current liabilities Total liabilities Owners’ equity: Paid-up capital V(XX) Capital reserve V(XXI) Surplus reserve V(XXII) Retained earnings V(XXIII) Total owners’ equity Total liabilities and shareholders’ equities	31 May 2015 37,930,000.00 4,805,536.28 4,828,609.59 99,604.53 959,600.44 1,784,405.87 5,918,016.91 56,325,773.62 718,750.00 718,750.00 57,044,523.62 632,764,300.00 29,752,118.00 1,077,097.68 9,701,711.37 673,295,227.05 730,339,750.67	31 December 2014 10,000,000.00 19,657,336.88 6,910,165.24 716,648.95 919,981.00 3,164,165.56 5,868,426.55 47,236,724.18 750,000.00 750,000.00 47,986,724.18 632,764,300.00 29,752,118.00 515,451.54 4,646,896.12 667,678,765.66 715,665,489.84	31 December 2013 – – 5,111,520.45 821,000.00 – -3,823,551.93 5,134,216.23 7,243,184.75 – – 7,243,184.75 70,000,000.00 – – 7,832.23 70,007,832.23 77,251,016.98

— 95 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

INCOME STATEMENT

Prepared by: Bengbu China Building Information Display Materials Co. Ltd.*

Unit: RMB

							29 September 2013
							(“Establishment
							Date of the
					January to May		Company”)
				January to May	2014	For the year	to 31 December
Item			Note	2015	(unaudited)	2014	2013
I.	Operating revenue		V(XXIV)	49,098,177.42	–	47,517,070.48	–
	Less:	Operating costs	V(XXIV)	34,178,029.28	–	27,673,523.92	–
		Selling expenses	V(XXV)	260,885.46	–	520,035.05	–
		Administration expenses	V(XXVI)	5,574,471.38	232,707.02	8,645,172.11	–
		Finance expenses	V(XXVII)	802,093.77	-20,768.59	232,147.57	-10,442.98
		Impairment loss on assets	V(XXVIII)	1,350,552.91	–	4,184,244.54	–
II.	Operating Profit			6,932,144.62	-211,938.43	6,261,947.29	10,442.98
	Add:	Non-operating income	V(XXIX)	370,550.00	–	1,000,000.00	–
III.	Total profit			7,302,694.62	-211,938.43	7,261,947.29	10,442.98
	Less:	Income tax expenses	V(XXX)	1,686,233.23	–	2,107,431.86	2,610.75
IV.	Net profit			5,616,461.39	-211,938.43	5,154,515.43	7,832.23
V.	Net other	comprehensive income after taxes		–	–	–	–
VI.	Total com	prehensive income		5,616,461.39	-211,938.43	5,154,515.43	7,832.23

V.	Net other comprehensive income after taxes
VI.	Total comprehensive income

— 96 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

CASH FLOW STATEMENT

Prepared by: Bengbu China Building Information Display Materials Co. Ltd.*

Unit: RMB

Item Note I. Cash flows from operating activities: Cash received from sale of goods or rendering of services Other cash received from activities related to operation V(XXXI) Sub-total of cash inflow from operating activities Cash paid for goods purchased and services rendered Cash paid to and on behalf of employees Tax payments Other cash paid for activities related to operation V(XXXI) Sub-total of cash outflow from operating activities Net cash flow from operating activities II. Cash flows from investment activities: Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets Sub-total of cash outflow from investment activities Net cash flow from investment activities	January to May 2015 31,507,690.91 7,629,208.41 39,136,899.32 44,257,676.79 7,055,744.18 4,040,004.13 13,552,082.66 68,905,507.76 -29,768,608.44 1,008,152.56 1,008,152.56 -1,008,152.56	January to May 2014 (unaudited) – 430,651.45 430,651.45 17,441,196.78 – – 233,866.30 17,675,063.08 -17,244,411.63 6,540,841.21 6,540,841.21 -6,540,841.21	For the year 2014 29 September 2013 (“Establishment Date of the Company”) to 31 December 2013 47,926,540.44 – 2,842,677.37 5,102,561.48 50,769,217.81 5,102,561.48 31,789,777.75 15,638,747.18 6,205,813.26 – 7,500,581.84 – 5,019,217.62 62,922.59 50,515,390.47 15,701,669.77 253,827.34 -10,599,108.29 29,678,580.25 15,339,819.28 29,678,580.25 15,339,819.28 -29,678,580.25 -15,339,819.28	For the year 2014 29 September 2013 (“Establishment Date of the Company”) to 31 December 2013 47,926,540.44 – 2,842,677.37 5,102,561.48 50,769,217.81 5,102,561.48 31,789,777.75 15,638,747.18 6,205,813.26 – 7,500,581.84 – 5,019,217.62 62,922.59 50,515,390.47 15,701,669.77 253,827.34 -10,599,108.29 29,678,580.25 15,339,819.28 29,678,580.25 15,339,819.28 -29,678,580.25 -15,339,819.28
				5,102,561.48
				15,638,747.18 – – 62,922.59
				15,701,669.77
				-10,599,108.29

				15,339,819.28
				15,339,819.28
				-15,339,819.28

— 97 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Prepared by: Bengbu China Building Information Display Materials Co. Ltd.*

Unit: RMB

Item Note III. Cash flows from financing activities: Cash received from investments Proceeds from loans Other cash received from financing-related activities V(XXXI) Sub-total of cash inflow from financing activities Cash paid for dividends, profit, or interest payments Other cash paid for financing-related activities V(XXXI) Sub-total of cash outflow from financing activities Net cash flow from financing activities IV. Effects of changes in exchange rate on cash and cash equivalents V. Net increase in cash and cash equivalents Add: Opening balance of cash and cash equivalents VI. Closing balance of cash and cash equivalents	January to May 2015 – 27,930,000.00 – 27,930,000.00 669,101.34 – 669,101.34 27,260,898.66 – -3,515,862.34 14,340,194.54 10,824,332.20	January to May 2014 (unaudited) – – 22,000,000.00 22,000,000.00 – 35,000,000.00 35,000,000.00 -13,000,000.00 – -36,785,252.84 44,061,072.43 7,275,819.59	For the year 2014 29 September 2013 (“Establishment Date of the Company”) to 31 December 2013 – 70,000,000.00 10,000,000.00 – 25,000,000.00 – 35,000,000.00 70,000,000.00 296,124.98 – 35,000,000.00 – 35,296,124.98 – -296,124.98 70,000,000.00 – – -29,720,877.89 44,061,072.43 44,061,072.43 – 14,340,194.54 44,061,072.43	For the year 2014 29 September 2013 (“Establishment Date of the Company”) to 31 December 2013 – 70,000,000.00 10,000,000.00 – 25,000,000.00 – 35,000,000.00 70,000,000.00 296,124.98 – 35,000,000.00 – 35,296,124.98 – -296,124.98 70,000,000.00 – – -29,720,877.89 44,061,072.43 44,061,072.43 – 14,340,194.54 44,061,072.43
				70,000,000.00
				– –
				–
				70,000,000.00

				– 44,061,072.43 – 44,061,072.43

— 98 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

STATEMENT OF CHANGES IN OWNERS’ EQUITY

Prepared by: Bengbu China Building Information Display Materials Co. Ltd.*

Unit: RMB

					January to May 2015
			Paid-in				Total
			share	Capital	Surplus	Undistributed	owners’
Item			capital	reserve	reserve	profits	equity
I.	Balance at the end of last year		632,764,300.00	29,752,118.00	515,451.54	4,646,896.12	667,678,765.66
II.	Balance at the beginning of the year		632,764,300.00	29,752,118.00	515,451.54	4,646,896.12	667,678,765.66
III.	Increase/decreased in the period (decrease is represented by “–”)		–	–	561,646.14	5,054,815.25	5,616,461.39
	(I)	Total comprehensive income	–	–	–	5,616,461.39	5,616,461.39
	(II)	Owners’ contribution and decrease in capital	–	–	–	–	–
	(III)	Profit distribution	–	–	561,646.14	-561,646.14	–
		1. Appropriation to surplus reserve	–	–	561,646.14	-561,646.14	–
IV.	Balance at the end of the period		632,764,300.00	29,752,118.00	1,077,097.68	9,701,711.37	673,295,227.05

Prepared by: Bengbu China Building Information Display Materials Co. Ltd.*

Unit: RMB

		January to May 2014 (Unaudited)	January to May 2014 (Unaudited)
		Paid-in	Undistributed	Total owners’
Item		share capital	profits	equity
I.	Balance at the end of last year	70,000,000.00	7,832.23	70,007,832.23
II.	Balance at the beginning of the year	70,000,000.00	7,832.23	70,007,832.23
III.	Increase/decreased in the period (decrease is represented by “–”)	–	-211,938.43	-211,938.43
	(I) Total comprehensive income	–	-211,938.43	-211,938.43
IV.	Balance at the end of the period	70,000,000.00	-204,106.20	69,795,893.80

— 99 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Prepared by: Bengbu China Building Information Display Materials Co. Ltd.*

Unit: RMB

						For the year 2014
				Paid-in	Capital	Surplus	Undistributed		Total owners’
Item			share capital		reserve	reserve		profits	equity
I.	Balance at the end of last year		70,000,000.00		–	–		7,832.23	70,007,832.23
II.	Balance at the beginning of the year		70,000,000.00		–	–		7,832.23	70,007,832.23
III.	Increase/decreased in the period (decrease is
	represented by “–”)		562,764,300.00		29,752,118.00	515,451.54	4,639,063.89		597,670,933.43
	(I)	Total comprehensive income		–	–	–	5,154,515.43		5,154,515.43
	(II)	Owners’ contribution and decrease in capital	562,764,300.00		29,752,118.00	–		–	592,516,418.00
		1. Ordinary shares injection from owners	562,764,300.00		29,752,118.00	–		–	592,516,418.00
	(III)	Profit distribution		–	–	515,451.54	-515,451.54		–
		1. Appropriation to surplus reserve		–	–	515,451.54	-515,451.54		–
IV.	Balance at the end of the period		632,764,300.00		29,752,118.00	515,451.54	4,646,896.12		667,678,765.66
Prepared by: Bengbu China Building Information				Display	Materials Co.
		Ltd.*							Unit: RMB
				29 September 2013 (“Establishment Date				of the	Company”) to
						31 December 2013
					Paid-in	Undistributed			Total owners’
Item					share capital		profits		equity
I.		Balance at the end of last year			–		–		–
II.		Balance at the beginning of the year			–		–		–
III.		Increase/decreased in the period (decrease
		is represented by “–”)			70,000,000.00	7,832.23			70,007,832.23
		(I) Total comprehensive income			–	7,832.23			7,832.23
		(II) Owners’ contribution and
		decrease in capital			70,000,000.00		–		70,000,000.00
		1. Ordinary shares injection
		from owners			70,000,000.00		–		70,000,000.00
IV.		Balance at the end of the period			70,000,000.00	7,832.23			70,007,832.23

— 100 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Bengbu China Building Information Display Materials Co. Ltd.*

Notes to the Financial Statements

(In these notes, all amounts are expressed in RMB unless otherwise stated)

I. BASIC INFORMATION OF THE COMPANY

Bengbu China Building Information Display Materials Co. Ltd. (the “Company”) is a company incorporated by Bengbu Glass Industry Design Institute* ( 蚌埠玻璃工業設計研究院 ) (“Bengbu Institute”) with limited liability on 29 September 2013. At the time of establishment, the registered capital was RMB30 million and the paid-in capital was RMB30 million.

On 31 December 2013, pursuant to the resolutions of the shareholders’ general meeting of the Company, the registered capital of the Company changed to be RMB142.40 million, among which, Bengbu Institute subscribed for RMB42.72 million and China Luoyang Float Glass (Group) Company Limited (“CLFG”) subscribed for RMB99.68 million with the contribution to be paid within two years. At the same date, CLFG contributed RMB40 million in cash and the paid-in capital of the Company changed from RMB30 million to RMB70 million.

On 9 October 2014, pursuant to the resolutions of the shareholders’ general meeting of the Company, Bengbu Institute made capital increase to the Company by way of the 150t/d information display ultra-thin substrate-related assets which have been appraised by China United Assets appraisal Company Limited with the evidence of the Zhong Lian Ping Bao Zi [2014] No. 997 Assets Valuation Report. Upon the capital increase, the registered capital of the Company was RMB632,764,300, among which, CLFG contributed RMB40 million in cash, representing a shareholding of 6.32% and Bengbu Institute contributed RMB30 million in cash and RMB562,764,300 in-kind respectively, representing a shareholding of 93.68%.

— 101 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

On 28 October 2014, pursuant to the resolutions of the shareholders’ general meeting of the Company, Bengbu Institute transferred the 93.68% shareholding in the Company to CLFG. As at 31 May 2015, the shareholding structure of the Company is set out below:

	Contribution
Shareholder	Amount	Shareholding
	(RMB0’000)	(%)
China Luoyang Float Glass (Group)
Company Limited	63,276.43	100.00

Enterprise legal entity business license registered No.: 340300000109563

Domicile: No. 1 Factory, No. 751 Yard, Donghai Avenue, Bengbu City, Anhui Province

Legal representative: Peng Shou

Registered capital: RMB632,764,300

Scope of business: The Company operates in the glass manufacturing industry and the business of scope mainly includes the research and development, production, sales and value-added processing of ultra-thin glasses; import and export of various commodities and by-products on its own account or as agency; and related technical service.

The financial statements are approved by the Office of the General Manager of the Company.

II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

Basis of preparation: The financial statements of the Company have been prepared on a going concern basis in respect of the actual transactions and events in accordance with requirements of Account Standards for Enterprises – Basic Standards and specific standards (hereinafter referred to as “Account Standards for Enterprises”) issued by the Ministry of Finance, the Preparation Convention of Information Disclosure by Companies Offering Securities to the Public No.15 – General Provisions on Financial Reporting issued by the China Securities Regulatory Commission and relevant disclosures requirements under the Listing Rules of The Stock Exchange of Hong Kong Limited and the Hong Kong Companies Ordinance.
Going concern: None subsisting event or circumstance would cast material doubts to the going concern assumption of the Company for the 12 months from the end of the reporting period.

— 102 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

III. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

(I) DECLARATION ON COMPLIANCE WITH ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES

The financial statements of the Company were prepared in compliance with the requirements of Accounting Standards for Business Enterprises, reflecting the Company’s financial positions as at 31 December 2013, 31 December 2014 and 31 May 2015, and the operating results, cash flows and other relevant information for the period from 29 September 2013 (the “Establishment Date of the Company”) to 31 December 2013, for the year of 2014 and for the period of five months ended 31 May 2015 on a true and complete basis.

(II) Accounting period

Accounting year of the Company is the calendar year from January 1 to December 31.

The actual preparation period of the financial statements is from 29 September 2013 ( t h e “Establishment Date of the Company”) to 31 December 2013, for the year of 2014 and for the period of five months ended 31 May 2015.

(III) Operating cycle

The Company treats the 12-month as the normal operating cycle, and uses that as the criteria for the classification of the liquidity of assets and liabilities.

(IV) Measurement currency

The Company’s reporting currency is the Renminbi (“RMB”).

(V) Recognition standard of cash and cash equivalents

Cash determined during preparation of cash flow statement represents the Company’s treasury cash and deposit withdrawn on demand. Cash equivalents determined during preparation of cash flow statement refer to short-term, highly liquid investments held by the Company that are readily convertible to known amounts of cash and which are subject to an insignificant risk on change in value.

— 103 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(VI) Financial instruments

1. Classification and recognition of financial instruments

Financial instruments are classified as financial assets or financial liabilities. A financial asset or a financial liability is recognized when the Company becomes a contractual party of a financial instrument.

Upon initial recognition, financial assets are classified into financial assets at fair value through profit or loss, held-to-maturity investments, receivables and available-for-sale financial assets. Except for receivables, the classification of a financial asset is based on the purpose and capability of holding the financial asset of the Company and its subsidiaries. Upon initial recognition, financial liabilities are classified into financial liabilities at fair value through profit or loss and other financial liabilities.

Financial assets at fair value through profit or loss include financial assets held for the purpose of selling in the short term; receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market; available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories at initial recognition; held-to-maturity investments are non-derivative financial assets with fixed maturity and fixed or determinable payments that management has the positive intention and ability to hold to maturity.

— 104 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. Measurement of financial instruments

Financial assets and financial liabilities of the Company are initially recognized and measured at fair values. Subsequent measurement is dealt with based on different categories: financial assets at fair value through profit or loss, financial assets available for sale and financial liabilities at fair value through profit or loss are subsequently measured at fair values; held-to-maturity investments, loans and receivables and other financial liabilities are subsequently measured at amortized costs; Derivative financial assets or liabilities linked to and which must be settled by delivery of an unquoted equity instrument (without a quoted price in an active market) whose fair value cannot be measured reliably are subsequently measured at cost. Except for financial instruments held for hedging purposes, the gains or losses arising from the changes in fair values in subsequent measurements of the Company’s financial assets or financial liabilities are accounted for as follows: ① The gains or losses resulting from the changes in fair values of the financial assets or financial liabilities which are measured at fair values through profit and loss for the current period are recorded as change in fair value in profit or loss; ② Changes in fair values of available-for-sale financial assets are recorded in other comprehensive income.

3. Recognition of the fair value of financial assets and financial liabilities by the Company

As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to recognize the fair values thereof. Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques to determine its fair value. The value appraisal techniques mainly include market approach, income approach and cost approach.

— 105 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

4. Recognition and measurement of transfer of financial assets and liabilities

When the Company has transferred nearly all of the risks and rewards related to the ownership of a financial asset to the transferee, or neither transferred of financial assets nor retained nearly all of the risks and rewards related to the ownership of the financial asset but given up the control of the financial asset, the financial asset shall be derecognized. When the criteria for derecognition of a financial asset are met, the difference between the carrying value of the transferred financial asset and the sum of the consideration received from the transfer and the accumulated fair value changes previously recorded in other comprehensive income are recorded in profit or loss for current period. If the partial transfer satisfies the criteria for derecognition, the entire carrying value of the transferred financial asset shall proportionally allocated between the derecognized portion and the retained portion according to their respective relative fair value.

When all or part of the current obligation to a financial liability has been terminated, the entire or part of such financial liability shall be derecognized.

5. Impairment of financial assets

When an impairment loss on a financial asset carried at amortized cost has occurred, the amount of loss is provided for at the difference between the asset’s carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred). If there is objective evidence that the value of the financial asset recovered and the recovery is related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed and the amount of reversal is recognized in profit or loss.

When an impairment loss on a financial asset measured at cost has occurred, the amount of loss is provided for at the difference between the asset’s carrying amount and the present value of its estimated future cash flows. The impairment loss on such financial asset is not reversed once it is recognized.

— 106 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Where there is objective evidence that an impairment loss on available-for-sale financial assets occurs, the cumulative loss arising from the decline in fair value that had been recognized directly in equity is removed from equity and recognized in impairment loss. For en investment in debt instrument classified as available-forsale on which impairment losses have been recognized, if, in a subsequent period, its fair value increases and the increase can be objectively related to an even occurring after the impairment loss was recognized in profit or loss, the previously recognized impairment loss is reversed and recognized in profit or loss for the current period. For an investment in an equity instrument classified as availablefor-sale on which impairment losses have been recognized, the increase in its fair value in a subsequent period is recognized in equity directly.

For investments in equity instruments, the specific quantitative criteria for the Company to determine “serious” or “not temporary” decrease in their fair value, cost computing method, method for determining closing fair value, and basis for determining the continuous decrease period are set out below:

Specific quantitative criterion on Decrease in closing fair value relative to the “serious” decrease in cost has reached or exceeded 50% their fair value

Specific quantitative criterion on Fall for 12 consecutive months “not temporary” decrease

in their fair value

Cost computing method

Consideration of payment at acquisition (net of cash dividends declared but not yet paid or due but unpaid interest on bonds) and the relevant transaction cost are recognized as the investment cost.

— 107 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Method for determining closing fair value

As for a financial instrument for which there is an active market, the quoted prices in the active market shall be used to recognize the fair values thereof. Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques to determine its fair value.

Basis for determining the The rebound in the continuous fall or the continuous decrease period period with the tread of fall is less than 20% margin. Rebound duration not more than six months is treated as continuous decrease period.

(VII) Receivables

The receivables of the Company mainly included account receivables, long-term receivables and other receivables. If there is objective evidence that receivables have been impaired at the balance sheet date, impairment loss shall be recognized base on the differences between the carrying values and the present value of estimated future cash flows.

1. Receivables individually significant and with provision for bad debts on an individual basis

Basis and criteria for determining Balance of carrying amount of over RMB 1 whether a receivable is million individually significant Provision policies of bad debt To confirm according to the balance between provision for individually the carrying values and the present value of significant receivables estimated future cash flows

— 108 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. Receivables with provision for bad debts on a group basis

The group with provision for bad debts based on aging analysis

Apart from those for which no provision has been paid for bad debts, receivables which are unimpaired through separately test of impairment are divided into certain portfolios of credit risk in accordance with the aging analysis methods, and then the provision for bad debts is made in proportion to the balance of these receivable portfolios.

The group without provision for bad debts

(1) Various margins and deposits related to the production and operations that are fully recoverable upon maturity;
(2) Receivables due from related parties with good financial position;
(3) Other balances that have positive evidence indicating they are fully recoverable.

Provision methods for bad

debts in group

The group with provision for bad Aging analysis methods debts based on aging analysis

The group without provision for No provision for bad debts will be made bad debts

— 109 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

In the groups, the provision for bad debts based on aging analysis set out as follows:

	Provision rate for	Provision rate for
Age	accounts receivable	other receivables
	(%)	(%)
Within 1 year (including 1 year)	0	0
1-2 years	30	30
2-3 years	50	50
3-4 years	100	100
4-5 years	100	100
Over 5 years	100	100

3. Individually insignificant receivables with provision for bad debts on an individual basis

Basis for individual provision

Concrete evidence indicates that there is obvious difference in recoverability

Provision method

For the provision for bad debts by using individual determination method, provisions are made for receivables due from related parties that are estimated to be fully unrecoverable.

(VIII) Inventories

1. Classification of inventories

Inventories refer to the finished goods or commodities held for sale in daily activities, goods in progress in the production process, consumed materials and supplies in the production process or providing services of the Company, which mainly include raw materials, revolving materials, wrappage, low priced and easily worn articles, finished goods (merchandise inventory), etc.

— 110 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. Method of costing of sold inventories

The weighted average method is adopted to determine the actual cost of sold inventories.

3. Method of provision for falling prices of inventories

As at the date of the balance sheet, the inventories are calculated according to the lower one between the cost and the net realizable value, and provisions for falling prices are made by individual inventory item. However, as for inventories with many categories and lower basic price, provisions for falling prices are made by categories of inventories.

4. Inventory system

The inventory system adopted by the Company is the perpetual inventory system.

5. Amortization methods of low priced and easily worn articles and wrappage

The one-off fully charged method is used for amortization of low priced and easily worn articles and wrappage.

(IX) Fixed assets

1. Recognition methods of fixed assets

Fixed assets are tangible assets that are held by the Company for production of products or supply of services, for rental purposes, or for administrative purposes, and have useful lives more than one accounting year. They shall be recognized when satisfying all of the following conditions: the economic benefits in relation to the fixed assets are very likely to flow into the Company; and the cost of the fixed assets can be measured in a reliable way.

— 111 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. Classification and depreciation methods of fixed assets

The fixed assets of the Company can be divided into: buildings and constructions transportation equipment, etc. The straight-line method is used to measure depreciation. The useful lives and the expected net residual value of fixed assets are determined according to the nature and usage of various fixed assets. At the end of each year, the useful lives and depreciation method of fixed assets are reviewed, and adjusted if there is variance with original policies; The Company have made provisions for all of the fixed assets except for the fixed assets with full provision and used continuously and lands accounted individually.

		Expected	Annual
	Estimated	residual	depreciation
Category	useful lives	value rate	rate
	(year)	(%)	(%)
Buildings and structures	20-40	5	2.38-4.75
Machine and equipment	6-20	5	4.75-15.83
Transportation tools	10	5	9.50
Other equipment	4-28	5	3.39-24.25

3. Recognition and measurement of fixed assets under finance lease

Recognition of fixed assets under finance lease: the nature of this kind of lease is a transfer of all risk and rewards related to the ownership of assets. Measurement of fixed assets under finance lease: the initial amount of a fixed asset under finance lease should be recorded as the lower of fair value of the leased asset at the beginning date of lease term and the present value of minimum lease payment. Subsequent measurement of fixed assets under finance lease should be in accordance with the accounting policies adopted for self-owned fixed assets in respect of provision of depreciation and impairment.

— 112 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(X) Construction in progress

The construction in progress of the Company includes two categories, i.e. self-established construction and outsourced construction. Construction in progress is transferred to fixed assets when the project is completed and ready for its intended use, which shall satisfy one of the following conditions: The construction of the fixed assets (including installation) has been completed or substantially completed; The fixed asset has been used for trial operation and it is evidenced that the asset can operate ordinarily or produce steadily qualified products; or the result of trial operation proves that it can operate normally; Further expenditure incurred for construction is very minimal or remote; The constructed fixed asset reaches or almost reaches the design or the requirements of contract, or complies with the design or the requirements of contract.

(XI) Borrowing costs

1. Recognition principle for capitalization and expensing of borrowing costs. The Company’s borrowing costs that are directly attributable to the acquisition or production of an asset eligible for capitalization are capitalized and included in cost of the relevant asset. Other borrowing costs should be recognized as expenses when incurred in accordance with its amount through profit and loss account. Qualifying assets include fixed assets, investment property and inventories that necessarily take a substantial period of time for acquisition, construction or production to get ready for their intended use or sale.

2. Calculation method of capitalized amount

The capitalization method refer to the period from the time point commencing the capitalization of borrowing costs ended the time point of termination of capitalization, except for the period of suspending capitalization of borrowing costs. Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended.

— 113 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

To the extent that funds are borrowed specially for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization on that asset shall be determined as the actual borrowing costs incurred on that borrowing during the period less any interest income thereon or investment income on the temporary investment of those borrowings; Where funds are borrowed under general-purpose borrowings and are utilized for the acquisition, construction or production of a qualifying asset, the Company shall determine the amount of interest to be capitalized on such borrowings by applying a capitalization rate to the weighted average of the excess amounts of cumulative expenditures on the asset over and above the amounts of specific purpose borrowings. The capitalization rate shall be the weighted average of the interest rates applicable to the general-purpose borrowings; for borrowings with discount or premium, the discount or premium was amortized over the term of the borrowings to adjust the interest in every period using the effective interest rates.

The effective interest rate is based on the coupon rate of the borrowings to calculate the amortization of discount and premium. The effective interest rate is the rate in discounting the estimated future cash flows to the carrying value of the borrowings.

(XII) Intangible assets

1. Measurement of intangible assets

Intangible assets are initially recognized at costs. The actual costs of purchased intangible assets include the consideration and relevant expenses paid. For intangible asset contributed by investors, the price contained in the investment agreement or mutually agreed is the actual cost of the intangible asset. If the price contained in the investment agreement or mutually is not a fair value, the fair value of the intangible asset is regarded as the actual cost. The cost of a self-developed intangible asset is the total expenditure incurred in brings the asset to its intended use.

Subsequent measurement of intangible assets of the Company is: Intangible assets with finite useful lives are amortized on a straight-line basis over the useful lives of the intangible assets; at the end of each year, the useful lives and amortization policy are reviewed, and adjusted if there are variance with original policies; 2) Intangible assets with indefinite useful lives are not amortized and the useful lives are reviewed at each year end date. If there is objective evidence that the useful life of an intangible asset is finite, the intangible asset is amortized using the straight line method according to the estimated useful life.

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2. Criterion of determining infinite useful life

The useful life of an intangible asset is indefinite if the period of the future economic benefits generated by the intangible asset could not be reasonably determined, or the useful life could not be reasonably ascertained. Criterion of determining intangible assets with infinite useful lives: For intangible assets derived from contractual rights or other legal rights and there are no explicit years of use stipulated in the contract or laws and regulations; Useful life still could not be estimated after considering the industrial practice or relevant expert opinion.

At each year end date, the useful lives of the intangible assets with indefinite useful lives are reviewed. The assessment is performed by the departments that use the intangible assets, using the down-to-top approach, to determine if there are changes to the indefinite useful lives.

3. Specific standards for determining the research stage and development stage of an internal research and development project, and the specific standards of the expenditures at the development stage satisfying the capitalization condition

As for an internal research and development project, expenditure incurred in the research phase is recognized in profit or loss in the period as incurred. Expenses incurred in the development stage are recognized as intangible assets if all of the following conditions are met: (1) the technical feasibility of completing the intangible asset so that it will be available for use or for sale; (2) the intention to complete the intangible asset for use or for sale; (3) how the intangible asset will generate economic benefits including there is evidence that the products produced using the intangible asset has a market or the intangible asset itself has a market; if the intangible asset is for internal use, there is evidence that there exists usage for the intangible asset; (4) the availability of adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; and (5) the expenditures attributable to the development of the intangible asset could be reliably measured.

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The specific standards for the classification of the research stage and the development stage of an internal research and development project: research stage is the activities carried out for the planned investigation and search of new technology and knowledge, which has the characteristics of planning and exploration; the development stage can be determined as the stage where the research findings or other knowledge can be applied to the certain plan and design before commercial production or usage commences to produce new or substantially innovate material, equipment, product, which is characterized by pertinence and higher possibility to generate the results.

(XIII) Assets impairment

Fixed assets, construction in progress and intangible assets are tested for impairment if there is any indication that an asset may be impaired at the balance date. If the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount, a provision for impairment and an impairment loss are recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. Provision for asset impairment is determined and recognized on the individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows. Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.

(XIV) Long-term deferred expenses

Long-term deferred expenses of the Company are expenses which have been paid but the benefit period is over one year (not including one year). Long-term deferred expenses are amortized over the benefit period. If a long-term deferred expense cannot benefit the future accounting period, the residue value of such project not amortized yet shall be transferred to the profit or loss in the current period.

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(XV) Employee benefits

Employee benefits are all forms of considerations given by an entity in exchange for services rendered by employees or for the termination of employment. Employee benefits include short-term benefits, post-employment benefits, termination benefits and other long-term employee benefits.

1. Short-term benefits

In the period of employee services, short-term benefits are actually recognized as liabilities and charged to profit or loss, or if otherwise required or allowed by other accounting standards, to the related costs of assets for the current period. At the time of actual occurrence, The Company’s employee benefits are recorded into the profits and losses of the current year or assets associated costs according to the actual amount. The non-monetary employee benefits are measured at fair value. Regarding to the medical and health insurance, industrial injury insurance, maternity insurance and other social insurances, housing fund and labor union expenditure and personnel education that the Company paid for employees, the Company should recognize corresponding employees benefits payable according to the appropriation basis and proportion as stipulated by relevant requirements and recognize the corresponding liabilities and include these expenses in the profits or losses of the current period or recognized as respective assets costs.

2. Post-employment benefits

During the accounting period in which an employee provides service, the amount payable calculated under defined contribution scheme shall be recognized as a liability and recorded in profit and loss of the current period or in assets. In respect of the defined benefit scheme, the Company shall use the projected unit credit method and attribute the welfare obligations calculated using the formula stipulated by the defined benefit scheme to the service period of the employee, and record the obligation in the current profit and loss or related assets cost.

3. Termination benefits

The Company recognizes a liability and expenses in the current profit or loss for termination benefits at the earlier of the following dates: when the Company can no longer withdraw the offer of those benefits; and when the Company recognizes costs for restructuring involving the payment of termination costs.

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4. Other long-term employee benefits

The Company provides other long-term employee benefits to its employees. For those falling within the scope of defined contribution scheme, the Company shall account for them according to relevant requirements of the defined contribution scheme. In addition, the Company recognizes and measures the net liabilities or net assets of the other long-term employee benefits according to relevant requirements of the defined contribution scheme.

(XVI) Estimated liability

If an obligation in relation to contingency is the present obligation of the Company and the performance of such obligation is likely to lead to the outflow of economic benefits and its amount can be reliably measured, such obligation shall be recognized as estimated liability. The best estimate of the expenditure from current obligation is initially recorded as accrued liability. When the necessary expenditures falls within a range and the probability of each result in the range are identical, the best estimate is the median of the range; if there are severable items involved, every possible result and relevant probability are taken into account for the best estimation.

At the balance sheet date, the carrying value of provision is reviewed. If there is objective evidence that the carrying value could not reflect the current best estimate, the carrying value is adjusted to the best estimated value.

(XVII) Revenue

1. Sales of goods

Revenue from the sale of goods shall be recognized at the amount received or receivable from buyers based on contractual or agreed prices, only when all of the following conditions are satisfied: ➀ the significant risks and rewards of ownership of the goods have been passed to the buyer; ➁ the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; ➂ the amount of revenue can be measured reliably; ➃ it is probable that the associated economic benefits will flow to the enterprise; and ➄ and the associated costs incurred or to be incurred can be measured reliably.

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Specific method for revenue recognition: The sales revenue shall be recognized upon the goods are delivered, the client signs to acknowledge the receipt of such goods and the relevant papers such as invoices and bill of lading are handed to the purchasing client.

If there is deferred payment clause in the agreement or mutually agreed price, which in substance is a financing nature, the fair value of the receivables is recorded as sales amount.

2. Provision of labour services

At the balance sheet date, when the outcome of a transaction involving the rendering of services can be estimated reliably, revenue from provision of services shall be recognized using the percentage of completion method. The percentage of completion is determined by the Company based on the percentage of actual cost over estimated total cost. At the balance sheet date, when the outcome of the transaction involving the rendering of services cannot be estimated reliably, it shall be dealt with in the following ways: ➀ if the cost of services incurred is expected to be compensated, the revenue from the rendering of services is recognized to the extent of actual cost incurred to date, and the relevant cost is transferred to cost of service in profit or loss; ➁ if the cost of services incurred is not expected to be compensated, the cost incurred should be included in current profit or loss, and no revenue from the rendering of services may be recognized.

3. Abalienating the right to use an asset

When the inflow of economic benefits from the abalienation of assets is probable and the income can be measured reliably, the income from abalienating the right to use an asset is recognized.

(XVIII) Government grants

1. Accounting treatment for government grants related to assets

If the government grant received by the Company is used for construction or other project that forms a long term asset, it is regarded as asset-related government grant. Asset-related government grant is recognized as deferred income and is evenly amortized to profit or loss on a straight-line basis over the useful life of the relevant asset starting from the date the asset is available for use.

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2. Accounting treatment for government grants related to income

The government grants other than the government grants related to assets are recognized as government grants related to income. Government grants related to income shall be treated as follows: those used to compensate relevant expenses or losses to be incurred by the enterprise in subsequent periods are recognized as deferred income and recorded in profit and loss for the current period when such expenses are recognized; and those used to compensate relevant expenses or losses that have been incurred by the enterprise are recorded directly in profit or loss for the current period.

3. Specific standards for differentiating governmental subsidy relating to asset from that relating to income

Where there is no express regulation on subsidy object in government documents, the criteria for differentiating governmental subsidy relating to asset from that relating to income is as below: ➀ government grant subject to a certain project shall be separated according to the proportion of expenditure budget and capitalization budget, and the proportion shall be reviewed and modified if necessary on the balance sheet date; ➁ government grant shall be categorized as related to income if its usage is just subject to general statement but specific project in relevant document.

(XIX) Deferred tax assets and deferred tax liabilities

1. Deferred tax assets and liabilities are recognized based on the temporary difference between the carrying amount and the tax base amount of an asset or liability (asset or liability not recognized in balance sheet but the tax base is ascertained by the current tax laws and regulation, the tax base is the temporary difference), and the expected applicable tax rate at the time of recovering the relevant asset or discharge of relevant liability.

2. Deferred tax asset is recognized to the extent that there is enough future profit for the utilization of the deductible temporary difference. At the balance sheet date, if there is sufficient evidence that there would be enough future benefit for the utilization of the deductible temporary difference, the deferred asset not previously recognized is recognized in current period. If there is not sufficient evidence that there would be enough future benefit for the utilization of the deductible temporary difference, the carrying value of the deferred asset reduced in current period.

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(XX) Lease

1. Accounting treatment for operating lease: Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are either included in the cost of related asset or charged to profit or loss for the period.

2. Accounting treatment for finance lease: At the commencement of the lease term, the Group records the leased asset at an amount equal to the lower of the fair value of the leased asset and the present value of the minimum lease payments. The difference between the recorded amounts is accounted for as unrecognized finance charge, using the effective interest method amortization during the lease term. Minimum lease payments deducting unrecognized financing charges are listed as long-term payables.

(XXI) Changes in significant accounting policies and accounting estimates

Nil

IV. TAXES

(I) Major categories of taxes and tax rates

Category	Tax basis	Tax rate
Value-added tax	Assessable value-added part of sales	17%
	revenue, and revenue from processing
	and repair, fitting and labour services
City maintenance and	Value-added tax paid	7%
construction tax
Educational surcharges	Value-added tax paid	3%
Enterprise income tax	Taxable income	25%

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V. EXPLANATIONS OF SIGNIFICANT ITEMS OF THE FINANCIAL STATEMENTS

(I) Bank balance and cash

Item Cash Deposits at banks Other monetary funds Total	31 May 2015 61,215.90 10,763,116.30 2,502,768.14 13,327,100.34	31 December 2014 2,492.53 14,337,702.01 9,928,668.45 24,268,862.99	31 December 2013 3,202.26 44,057,870.17 – 44,061,072.43

Note: As at 31 May 2015, balance of other monetary funds amounting to RMB2,502,768.14 (31 December 2014: RMB9,928,668.45) was pledged at a bank for issuance of bank acceptance bills as deposits for bills.

(II) Bills receivable

Items Bank’s acceptance bills Total	31 May 2015 6,180,557.22 6,180,557.22	31 December 2014 500,000.00 500,000.00	31 December 2013 – –

Note: 1. As at 31 December 2013, 31 December 2014 and 31 May 2015, the Company had no bills receivable pledged at a bank as a guarantee for short-term loans.

As at 31 December 2013, 31 December 2014 and 31 May 2015, the Company did not transfer any notes into accounts receivable due to issuers’ failure in performance.
As at 31 December 2013, 31 December 2014 and 31 May 2015, bills receivable endorsed by the Company to other parties but outstanding were RMB1,800,000.00, RMB6,871,931.17 and RMB17,022,999.37, respectively. The Company ceased to recognize bills endorsed but outstanding.
As at 31 December 2013, 31 December 2014 and 31 May 2015, the Company has no bills receivable discounted but outstanding.

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(III) Amounts receivable

	31 May	31 December	31 December
Item	2015	2014	2013
Amounts receivable	2,149,519.14	2,638,906.36	589,330.80
Less: Provision for bad debts	–	–	–
Net receivables	2,149,519.14	2,638,906.36	589,330.80

Under normal conditions, the Company usually sells products by way of pre-collection of payments. The Company grants certain credit period to a few clients.

1. Aging analysis of receivables based on journal date is set out as follows:

Age Within one year Total	31 May 2015 2,149,519.14 2,149,519.14	31 December 2014 2,638,906.36 2,638,906.36	31 December 2013 589,330.80 589,330.80

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2. Categories of receivables

Category Account receivables with significant single amount and individual provision for bad debts Accounts receivable provided for bad debts in groups Account receivables with insignificant single amount and individual provision for bad debts Total Category Accounts receivable provided for bad debts in groups Total	Carrying Amount – 2,149,519.14 – 2,149,519.14 Carrying Amount 2,638,906.36 2,638,906.36	31 May 2015 amount Provision of bad debts Percentage Amount Percentage of provision (%) (%) – – – 100.00 – – – – – 100.00 – – 31 December 2014 amount Provision of bad debts Percentage Amount Percentage of provision (%) (%) 100.00 – – 100.00 – –

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31 December 2013

Category Accounts receivable provided for bad debts in groups Total	Carrying Amount 589,330.80 589,330.80	amount Percentage (%) 100.00 100.00	Provision of bad debts Amount Percentage of provision (%) – – – –	Provision of bad debts Amount Percentage of provision (%) – – – –
				–

(1) Receivables of which provision for bad debts is made on a group basis
① Accounts receivables with provision for bad debts based on aging analysis

Age Within one year Total	31 May 2015 Carrying amount Percentage of provision (%) – – – –	Provision for bad debts – –	31 December 2014 Carrying amount Percentage of provision Provision for bad debts (%) 918,126.40 – – 918,126.40 – –	31 December 2013 Carrying amount Percentage of provision Provision for bad debts (%) 589,330.80 – – 589,330.80 – –

② Accounts receivables without provision for bad debts based on aging analysis

Group name Receivables from related parties Total	Carrying amount 2,149,519.14 2,149,519.14	31 May 2015 Percentage of provision (%) – –	Provision for bad debts – –	31 December 2014 Carrying amount Percentage of provision Provision for bad debts (%) 1,720,779.96 – – 1,720,779.96 – –	31 December 2013 Carrying amount Percentage of provision Provision for bad debts (%) – – – – – –	31 December 2013 Carrying amount Percentage of provision Provision for bad debts (%) – – – – – –
						–

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3. As at 31 May 2015, top 5 entities with the largest balances of accounts receivable at the end of the year:

Name of unit Anhui Huaguang Photoelectricity Materials Technology Group Co., Ltd. (安徽華光光電材料科技集團有限公司) Anhui Bengbu Huayi Conductive Film Glass Co., Ltd. (安徽省蚌埠華益導電膜玻璃有限公司) Anhui Fangxing Science&Technology Co., Ltd. (安徽方興科技股份有限公司) Total	Closing balance 1,689,079.90 332,793.47 127,645.77 2,149,519.14	Proportion of the amount to the total account receivable (%) 78.58 15.48 5.94 100.00	Balance of provision for bad debts – – – –

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As at 31 December 2014, top 5 entities with the largest balances of accounts receivable at the end of the year

Name of unit Anhui Huaguang Photoelectricity Materials Technology Group Co., Ltd. (安徽華光光電材料科技集團有限公司) TG Anhui Glass Co., Ltd. (台玻安徽玻璃有限公司) Anhui Bengbu Huayi Conductive Film Glass Co., Ltd. (安徽省蚌埠華益導電膜玻璃有限公司) Total	Closing balance 1,689,079.90 918,126.40 31,700.06 2,638,906.36	Proportion of the amount to the total account receivable (%) 64.01 34.79 1.20 100.00	Balance of provision for bad debts – – – –

As at 31 December 2013, top 5 entities with the largest balances of accounts receivable at the end of the year

Name of unit TG Anhui Glass Co., Ltd. (台玻安徽玻璃有限公司) Total	Closing balance 589,330.80 589,330.80	Proportion of the amount to the total account receivable (%) 100.00 100.00	Balance of provision for bad debts – –

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(IV) Prepayments

1. The aging analysis of prepayments

Age Within 1 year (including 1 year) 1 to 2 years Total	31 May 2015 Amount Percentage (%) 60,660.76 97.51 1,550.00 2.49 62,210.76 100.00	31 December 2014 31 December 2013 Amount Percentage Amount Percentage (%) (%) 96,263.17 100.00 1,509,481.00 100.00 – – – – 96,263.17 100.00 1,509,481.00 100.00	31 December 2014 31 December 2013 Amount Percentage Amount Percentage (%) (%) 96,263.17 100.00 1,509,481.00 100.00 – – – – 96,263.17 100.00 1,509,481.00 100.00
			100.00

2. Top five prepayments by ending balance collection of the borrower as at 31 May 2015

Name of the Units Bengbu Kaisheng Engineering Technology Co., Ltd. (China Triumph Bengbu Engineering and Technology Company Limited) Shanghai Suhua Industrial Control Instrument Co., Ltd (上海蘇華工業控制設備有限公司) Wuhu Airuite Environment Protection Technology Co., Ltd (蕪湖愛瑞特環保科技有限公司) Shanghai Chuanyi Engineering Technology Co., Ltd. (上海川儀工程技術有限公司) SEW-Transmission Instruments (Suzhou) Co., Ltd (SEW-傳動設備（蘇州）有限公司) Total	Balance as at the end of the period 33,296.00 6,356.00 5,349.45 4,700.00 4,200.00 53,901.45	Proportion of the total amount of the prepayment (%) 53.52 10.22 8.60 7.55 6.75
		86.64

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Top five prepayments by ending balance collection of the borrower as at 31 December 2014

Name of the Units Nan Tong Sheng Xi Lu Renovation Construction and Ancilliary Services Co., Ltd. (南通勝喜路裝飾工程配套有限公司) Schneider Electric (China) Co., Ltd. (施耐德電氣（中國）有限公司) Shanghai Puxiang Insudtrial Leather Belt Co., Ltd. (上海普項工業皮帶有限公司) Wuxi Yuanfang Machinery Co., Ltd. (無錫市遠方機械有限公司) Laian Zhenxing Chemical Co., Ltd. (來安縣振興化工有限公司) Total	Balance as at the end of the period 49,300.00 16,000.00 9,888.00 9,457.26 4,888.04 89,533.30	Proportion of the total amount of the prepayment (%) 51.21 16.62 10.27 9.82 5.08 93.00

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Top five prepayments by ending balance collection of the borrower as at 31 December 2013

Name of the Units Zhong Yi Kai Sheng (Bengbu) Glass Cool-end Machinery Co., Ltd. (中意凱盛（蚌埠）玻璃冷端機械有限公司) China Electronic System Enginerring Second Construction Co., Ltd. (中國電子系統工程第二建設有限公司) Anhui Province Industrial Equipment Installation Co., Ltd. (Bengbu Branch) (安徽省工業設備安裝有限公司蚌埠分公司) Jinyuan Group Wuhu Zhongshan Carpentry Packaging Co., Ltd. (金源集團蕪湖鐘山木器包裝有限公司) Bengbu Zhongxing Information Technology Co., Ltd. (蚌埠市中興資訊科技有限公司) Total	Balance as at the end of the period 886,101.00 210,000.00 160,000.00 73,910.00 63,100.00 1,393,111.00	Proportion of the total amount of the prepayment (%) 58.70 13.91 10.60 4.90 4.18 92.29

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(V) Other receivables

Nature of the receivables Receivables from related parties Contingency provision Provisional import tax Others Net: provision for bad debts Total	31 May 2015 18,927,532.99 386,972.74 – 32,262.17 – 19,346,767.90	31 December 2014 – 448,341.00 416,072.75 – – 864,413.75	31 December 2013 – 98,300.00 – – – 98,300.00

1. *The aging analysis of other receivables is as follow:* Age 31 May 2015 31 December 2014 Within 1 year (including 1 year) 19,338,767.90 864,413.75 1 to 2 years 8,000.00 – Total 19,346,767.90 864,413.75	31 December 2013 98,300.00 – 98,300.00

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2. Other receivables analysis by categories

31 May 2015

Category Other receivables with significant single amount and individual Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total Category Other receivables with significant single amount and individual Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount – 19,346,767.90 – 19,346,767.90 Carrying Amount – 864,413.75 – 864,413.75	amount Provision for bad debts Percentage Amount Percentage (%) (%) – – – 100.00 – – – – – 100.00 – – 31 December 2014 amount Provision for bad debts Percentage Amount Percentage (%) (%) – – – 100.00 – – – – – 100.00 – –

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31 December 2013

Category Other receivables with significant single amount and individual Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying Percentage (%) – 98,300.00 – 98,300.00	amount Amount – 100.00 – 100.00	Provision for bad debts Percentage Amount (%) – – – – – – – –	Provision for bad debts Percentage Amount (%) – – – – – – – –
				–

(1) Receivables with provision for bad debts on a group basis
① The group with provision for bad debts based on aging analysis

Age

Within 1 year

Total

31 May 2015 Carrying amount Provision rate % 32,262.17 – 32,262.17 –	Provision for bad debts – –	31 December 2014 Carrying amount Provision rate Provision for bad debts % 416,072.75 – – 416,072.75 – –	31 December 2013 Carrying amount Provision rate Provision for bad debts % – – – – – –	31 December 2013 Carrying amount Provision rate Provision for bad debts % – – – – – –
				–

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② Other receivables without provision for bad debts on a group basis

Group names Amount receivable from related parties Contingency provision Total	Carrying amount 18,927,532.99 386,972.74 19,314,505.73	31 May 2015 Provision rate % – – –	Provision for bad debts – – –	31 December 2014 Carrying amount Provision rate Provision for bad debts % – – – 448,341.00 – – 448,341.00 – –	31 December 2013 Carrying amount Provision rate Provision for bad debts % – – – 98,300.00 – – 98,300.00 – –	31 December 2013 Carrying amount Provision rate Provision for bad debts % – – – 98,300.00 – – 98,300.00 – –
						–

3. Top five other receivables by ending balance collection of the borrower as at 31 May 2015

Names of debtors Nature of the receivables Luoyang Glass Company Limited Current borrowings Jia Zhiwei Contingency provision Chen Shuihua Contingency provision Yang Liu Contingency provision Bao Zhaochen Contingency provision Total	Balance as at the end of the period Age 18,927,532.99 Within 1 year 62,784.00 Within 1 year 61,884.00 Within 1 year 60,000.00 Within 1 year 58,925.00 Within 1 year 19,171,125.99	Proportion of the total amount of the other receivables Provision for bad debts (%) 97.83 – 0.32 – 0.32 – 0.31 – 0.30 – 99.08 –

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Top five other receivables by ending balance collection of the borrower as at 31 December 2014

Names of debtors Nature of the receivables Provisional import tax Import tax Bao Zhaochen Contingency provision Jiang Longyue Contingency provision Xia Meng Contingency provision Chen Shuihua Contingency provision Total	Balance as at the end of the period Age 416,072.75 Within 1 year 90,945.00 Within 1 year 82,245.00 Within 1 year 60,000.00 Within 1 year 53,817.00 Within 1 year 703,079.75	Proportion of the total amount of the other receivables Provision for bad debts (%) 48.13 – 10.52 – 9.51 – 6.94 – 6.23 – 81.33 –

Top five other receivables by ending balance collection of the borrower as at 31 December 2013

Names of debtors Nature of the receivables Jia Zhiwei Contingency provision Chen Shuihua Contingency provision Yang Liu Contingency provision Zhou Ming Contingency provision Fan Peng Contingency provision Total	Balance as at the end of the period Age 35,000.00 Within 1 year 30,000.00 Within 1 year 30,000.00 Within 1 year 3,000.00 Within 1 year 300.00 Within 1 year 98,300.00	Proportion of the total amount of the other receivables Provision for bad debts (%) 35.61 – 30.52 – 30.52 – 3.05 – 0.30 – 100.00 –

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APPENDIX II

(VI) Inventory

1. Classification of inventories

31 May 2015 Carrying Provision for Item amount falling prices Book value Raw material 18,827,197.11 577,405.53 18,249,791.58 Products in stock 42,407,187.00 1,003,818.12 41,403,368.88 Total 61,234,384.11 1,581,223.65 1,581,223.65 31 December 2014 Carrying Provision for Item amount falling prices Book value Raw material 18,794,006.02 – 18,794,006.02 Products in stock 20,621,363.72 1,937,678.66 18,683,685.06 Total 39,415,369.74 1,937,678.66 37,477,691.08

31 December 2013 Carrying Provision for Item amount falling prices Book Value Raw material 17,222,169.60 – 17,222,169.60 Products in stock 10,141,008.71 – 10,141,008.71 Total 27,363,178.31 – 27,363,178.31

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APPENDIX II

2. Changes or increase/decrease in provision for falling prices of inventories

			Amount of	Amount decrease in
Inventory			provision in	current period		31 December
categories	1 January	2014	current period	Reverse Write-off		2014
Products in stock		–	4,241,938.89	57,694.35 2,246,565.88		1,937,678.66
Total		–	4,241,938.89	57,694.35 2,246,565.88		1,937,678.66

			Amount of	Amount decrease in
Inventory			provision in	current period		31 December
categories	1 January	2015	current period	Reverse Write-off		2015
Raw material		–	577,405.53	–	–	577,405.53
Products in stock	1,937,678.66		773,147.38	– 1,707,007.92		1,003,818.12
Total	1,937,678.66		1,350,552.91	– 1,707,007.92		1,581,223.65

Other current assets
			31 May	31 December	31	December
Item			2015	2014		2013
Amount of deductible tax			63,421,607.13	66,108,813.49		–
Total			63,421,607.13	66,108,813.49		–

(VII) Other current assets

— 137 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(VIII) Fixed assets

1. Fixed assets

	1 January	Increase in	31 December
Item	2014	the period	2014
I. Total original book value	525,800.58	552,965,522.21	553,491,322.79
Including: Buildings	–	150,136,468.18	150,136,468.18
Machinery	72,957.62	401,756,891.19	401,829,848.81
Transportation equipment	314,634.91	–	314,634.91
Others	138,208.05	1,072,162.84	1,210,370.89
II. Total of accumulated depreciation	–	7,597,877.66	7,597,877.66
Including: Buildings	–	792,823.90	792,823.90
Machinery	–	6,567,966.33	6,567,966.33
Transportation equipment	–	74,719.44	74,719.44
Others	–	162,367.99	162,367.99
III. Total net book value of fixed assets	525,800.58	–	545,893,445.13
Including: Buildings	–	–	149,343,644.28
Machinery	72,957.62	–	395,261,882.48
Transportation equipment	314,634.91	–	239,915.47
Others	138,208.05	–	1,048,002.90
IV. Total provisions for impairment	–	–	–
V. Total book value of fixed assets	525,800.58	–	545,893,445.13
Including: Buildings	–	–	149,343,644.28
Machinery	72,957.62	–	395,261,882.48
Transportation equipment	314,634.91	–	239,915.47
Others	138,208.05	–	1,048,002.90

— 138 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

	1 January	Increase in	31 May
Item	2015	the period	2015
I. Total original book value	553,491,322.79	894,661.56	554,385,984.35
Including: Buildings	150,136,468.18	615,077.93	150,751,546.11
Machinery	401,829,848.81	242,377.04	402,072,225.85
Transportation equipment	314,634.91	–	314,634.91
Others	1,210,370.89	37,206.59	1,247,577.48
II. Total of accumulated depreciation	7,597,877.66	18,058,053.73	25,655,931.39
Including: Buildings	792,823.90	1,986,647.01	2,779,470.91
Machinery	6,567,966.33	15,916,541.25	22,484,507.58
Transportation equipment	74,719.44	31,133.10	105,852.54
Others	162,367.99	123,732.37	286,100.36
III. Total net book value of fixed assets	545,893,445.13		528,730,052.96
Including: Buildings	149,343,644.28		147,972,075.20
Machinery	395,261,882.48		379,587,718.27
Transportation equipment	239,915.47		208,782.37
Others	1,048,002.90		961,477.12
IV. Total provisions for impairment	–	–	–
V. Total book value of fixed assets	545,893,445.13		528,730,052.96
Including: Buildings	149,343,644.28		147,972,075.20
Machinery	395,261,882.48		379,587,718.27
Transportation equipment	239,915.47		208,782.37
Others	1,048,002.90		961,477.12

— 139 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(IX) Construction in progress

1. Basic information of construction in progress

Item Installation of engineering instrument 150/d oxygen-fuel combustion project of ultra-thin substrate for electronic information display Total	31 May 2015 Carrying amount Provision for impairments 113,491.00 – – – 113,491.00 –	Book value 113,491.00 – 113,491.00	31 December 2014 Carrying amount Provision for impairments Book value – – – – – – – – –	31 December 2013 Carrying amount Provision for impairments Book value – – – 3,103,853.86 – 3,103,853.86 3,103,853.86 – 3,103,853.86	31 December 2013 Carrying amount Provision for impairments Book value – – – 3,103,853.86 – 3,103,853.86 3,103,853.86 – 3,103,853.86
					3,103,853.86

(X) Intangible assets

	1 January	Increase in	Decrease in	31 December
Item	2014	the period	the period	2014
I. Total original book
value		37,363,247.62		37,363,247.62
Including: Land use
rights	–	37,363,247.62	–	37,363,247.62
II. Total accumulated
amortization		218,073.42		218,073.42
Including: Land use
rights	–	218,073.42	–	218,073.42
III. Total net book value
of intangible assets		37,145,174.20		37,145,174.20
Including: Land use
rights	–	37,145,174.20		37,145,174.20
IV. Total provisions for
impairment	–	–	–	–
V. Total book value of
intangible assets	–	37,145,174.20		37,145,174.20
Including: Land use
rights	–	37,145,174.20		37,145,174.20

— 140 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

	1 January	1 January	Increase in	31 May
Item	2014	2015	the period	2015
I. Total original book
value	–	37,363,247.62	–	37,363,247.62
Including: Land use
rights	–	37,363,247.62	–	37,363,247.62
II. Total accumulated
amortization	–	218,073.42	364,883.85	582,957.27
Including: Land use
rights	–	218,073.42	364,883.85	582,957.27
III. Total net book value
of intangible assets	–	37,145,174.20		36,780,290.35
Including: Land use
rights	–	37,145,174.20		36,780,290.35
IV. Total provisions for
impairment	–	–	–	–
V. Total book value of
intangible assets	–	37,145,174.20		36,780,290.35
Including: Land use
rights	–	37,145,174.20		36,780,290.35

— 141 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XI) Deferred tax assets and deferred tax liabilities

1. Net amount of deferred tax assets and deferred tax liabilities not offset

31 May 2015 31 December 2014 31 December 2013 Deferred Deductible/ Deferred Deductible/ Deferred Deductible/ income taxable income taxable income taxable tax assets/ temporary tax assets/ temporary tax assets/ temporary Item liabilities difference liabilities difference liabilities difference Deferred tax assets: Provision for assets – – depreciation 395,305.91 1,581,223.65 484,419.67 1,937,678.66 Deferred income 179,687.50 718,750.00 187,500.00 750,000.00 – – Subtotal 574,993.41 2,299,973.65 671,919.67 2,687,678.66 – –

(XII) Short-term loans

1. Classification of short-term borrowings

Lending condition Guaranteed loan Total	31 May 2015 37,930,000.00 37,930,000.00	31 December 2014 10,000,000.00 10,000,000.00	31 December 2013 – –

Note: 1. The guaranteed loan was guaranteed by Bengbu Glass Industry Design Institute

As at 31 May 2015, the weighted average annual interest rates of short-term loans was 6.5358%.

As at 31 December 2014, the weighted average annual interest rates of short-term loans was 6.900%.

— 142 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XIII) Notes payable

Item Bank acceptance Total Accounts payable Item Within 1 year (including 1 year) More than 1 year Total Payments received in advance Item Within 1 year (including 1 year) Total	31 May 2015 4,805,536.28 4,805,536.28 31 May 2015 3,921,399.08 907,210.51 4,828,609.59 31 May 2015 99,604.53 99,604.53	31 December 2014 19,657,336.88 19,657,336.88 31 December 2014 6,910,165.24 – 6,910,165.24 31 December 2014 716,648.95 716,648.95	31 December 2013 – – 31 December 2013 5,111,520.45 – 5,111,520.45 31 December 2013 821,000.00 821,000.00

(XIV) Accounts payable

(XV) Payments received in advance

— 143 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XVI) Staff remuneration payables

1. Staff remuneration payables by categories

Item I. Short-term remuneration II. Post-employment benefit – Defined contribution plans Total Item I. Short-term remuneration II. Post-employment benefit – Defined contribution plans Total	1 January 2014 – – – 1 January 2015 919,981.00 – 919,981.00	Increase in the period 13,992,419.93 864,171.91 14,856,591.84 Increase in the period 6,872,645.04 494,518.58 7,367,163.62	Decrease in the period 13,072,438.93 864,171.91 13,936,610.84 Decrease in the period 6,833,025.60 494,518.58 7,327,544.18	31 December 2014 919,981.00 – 919,981.00 31 May 2015 959,600.44 – 959,600.44

— 144 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. Short-term remuneration

Item 1. Staff salary, bonus, allowance and subsidies 2 Welfare provision 3. Social insurance Including: 1. Medical insurance premiums 2. Work-related injury insurance 3. Birth insurance premium 4. Housing reserve fund 5. Labor union expenditures and staff education expenditures Total Item 1. Staff salary, bonus, allowance and subsidies 2 Welfare provision 3. Social insurance Including: Medical insurance premiums Work-related injury insurance Birth insurance premium 4. Housing reserve fund 5. Labor union expenditures and staff education expenditures Total	1 January 2014 – – – – – – – – 1 January 2015 919,981.00 – – – – – – – 919,981.00	Increase in the period 12,733,699.76 671,530.61 397,067.32 325,553.37 39,742.76 31,771.19 188,937.24 1,185.00 13,992,419.93 Increase in the period 6,205,210.28 328,289.95 219,084.61 189,075.88 11,608.03 18,400.70 108,020.20 12,040.00 6,872,645.04	Decrease in the period 11,813,718.76 671,530.61 397,067.32 325,553.37 39,742.76 31,771.19 188,937.24 1,185.00 13,072,438.93 Decrease in the period 6,165,590.84 328,289.95 219,084.61 189,075.88 11,608.03 18,400.70 108,020.20 12,040.00 6,833,025.60	31 December 2014 919,981.00 – – – – – – – 919,981.00 31 May 2015 959,600.44 – – – – – – – 959,600.44

— 145 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

3. Defined contribution plans

Item 1. Basic endowment insurance premium 2. Unemployment Insurance premiums 3. Corporate annual payables Total Item 1. Basic endowment insurance premium 2. Unemployment Insurance premiums Total (XVII) Tax payable Tax Added-value tax Enterprise income tax Property tax Land use tax Individual income tax Total	1 January 2014 Increase in current period Decrease in the period – 794,858.45 794,858.45 – 68,219.00 68,219.00 – 1,094.46 1,094.46 – 864,171.91 864,171.91 1 January 2015 Increase in current period Decrease in the period – 460,017.20 460,017.20 – 34,501.38 34,501.38 – 494,518.58 494,518.58 31 May 2015 31 December 2014 – – 1,391,121.47 2,779,351.53 186,907.54 186,907.56 196,153.83 186,597.72 10,223.03 11,308.75 1,784,405.87 3,164,165.56	Decrease in the period 794,858.45 68,219.00 1,094.46		31 December 2014 – – – – 31 May 2015 – – – 31 December 2013 -3,842,775.69 2,610.75 – – 16,613.01 -3,823,551.93
		864,171.91

		Decrease in the period 460,017.20 34,501.38
		494,518.58

— 146 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XVIII) Other payables

Item natures Payables to related parties Others Total	31 May 2015 5,722,872.15 195,144.76 5,918,016.91	31 December 2014 5,505,077.69 363,348.86 5,868,426.55	31 December 2013 5,023,333.33 110,882.90 5,134,216.23

(XIX) Deferred income

1. Deferred income by categories

Item Government subsidies Total Item Government subsidies Total	1 January 2014 Increase in current period – 750,000.00 – 750,000.00 1 January 2015 Increase in the period 750,000.00 – 750,000.00 –	Decrease in the period 31 December 2014 Reason of deferral – 750,000.00 Received the special fund of enterprise development from the Bureau of Finance of Longzihu District, Bengbu City – 750,000.00 Decrease in the period 31 May 2015 Reason of deferral 31,250.00 718,750.00 31,250.00 718,750.00

— 147 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. Project with government subsidy

Item
1 January
2014
New
supplemental
amount in
the period
Calculated
as non-
operation
amount in
the period
Special fund of enterprise
development
–
750,000.00
–
Total
–
750,000.00
–
Item
1 January
2015
New
supplemental
amount in
the period
Calculated
as non-
operation
amount in
the period
Special fund of enterprise
development
750,000.00
–
31,250.00
Total
750,000.00
–
31,250.00
Paid-in capital
Name of investor
31 May 2015
China Luoyang Float Glass (Group)
Company Limited
632,764,300.00
Bengbu Glass Industry Design Institute
–
Total
632,764,300.00

Other
changes
31
December
2014
Asset
related/
Income
related
–
750,000.00
Related
to assets
–
750,000.00
–
Other
changes
31 May
2015
Asset
related/
Income
related
–
718,750.00
Related to
assets
–
718,750.00
–
31 December
2014
31 December
2013
632,764,300.00
30,000,000.00
–
40,000,000.00
632,764,300.00
70,000,000.00

(XX) Paid-in capital

— 148 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Note: On 9 October 2014, as resolved at the shareholders’ general meeting of the Company, Bengbu Institute made capital increase to the Company using the relevant assets of the 150t/d information display ultrathin substrate. According to the Assets Valuation Report (Zhong Lian Ping Bao Zi [2014 No. 997]) (中聯評報字[2014]第997號)issued by China United Asset Appraisal Company Limited , which took 31 August 2014 as the reference date, the appraised value of the assets in relation to the 150t/d information display ultra-thin substrate amounted to RMB592,516,400, among which, RMB35,926,200, RMB141,695,200 and RMB414,895,000 were attributed to land use right, buildings and production machinery, respectively. Bengbu Institute increased the capital of the Company using RMB592,516,400 of the appraised assets, among which, RMB562,764,300 was included into paid-in capital, while the remaining RMB29,752,100 was included into capital premium under capital reserve. On 28 October 2014, as resolved at the shareholders’ general meeting of the Company, Bengbu Institute transferred all the 93.68% equity interest held in the Company to CLFG and completed the change in the industrial and commercial registration on the same date.

(XXI) Capital reserve

Category I. Capital premium Total Category I. Capital premium Total	1 January 2014 – –	Increase in the period 29,752,118.00 29,752,118.00	Decrease in the period – – 1 January 2015 29,752,118.00 29,752,118.00	31 December 2014 29,752,118.00 29,752,118.00 31 May 2015 29,752,118.00 29,752,118.00

Note: For details, please refer to “(XX) Paid-in capital”.

(XXII) Surplus reserve

Category Statutory surplus reserve Total	1 January 2014 – –	Increase in the period 515,451.54 515,451.54	31 December 2014 515,451.54 515,451.54

— 149 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Category Statutory surplus reserve Total (XXIII) Undistributed profits	1 January 2015 515,451.54 515,451.54	Increase in the period 561,646.14 561,646.14	31 May 2015 1,077,097.68 1,077,097.68

		31 May	2015
			Proportion of
			withdrawal or
Item		Amount	distribution
Undistributed profits for the previous
year before adjustment		4,646,896.12	–
Adjusted undistributed profits at
the	beginning of the period	4,646,896.12	–
Add:	Net profit for the period	5,616,461.39	–
Less:	Amount withdrawn from statutory
	surplus reserve	561,646.14	10%
	Amount withdrawn from discretionary
	surplus reserve	–	–
	Appropriation to general risk provision	–	–
	Ordinary shares dividend payable	–	–
	Ordinary shares dividend converted
	into share capital	–	–
Undistributed profits at the end of the period		9,701,711.37	–

— 150 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

	31 December 2014	31 December 2014
		Proportion of
		withdrawal or
Item	Amount	distribution
Undistributed profits for the previous
year before adjustment	7,832.23	–
Adjusted undistributed profits at
the beginning of the period	7,832.23	–
Add: Net profit for the period	5,154,515.43	–
Less: Amount withdrawn from statutory
surplus reserve	515,451.54	10%
Undistributed profits at the end of the period	4,646,896.12	–
	31 December 2013
		Proportion of
		withdrawal or
Item	Amount	distribution
Add: Net profit for the period	7,832.23	–
Undistributed profits at the end of the period	7,832.23	–

(XXIV) Operating income and operating cost

Item I. Sub-total of principal operations Floating glass II. Sub-total of other operations Material Total	January Income 47,877,842.84 47,877,842.84 1,220,334.58 1,220,334.58 49,098,177.42	– May 2015 Cost 33,000,622.50 33,000,622.50 1,177,406.78 1,177,406.78 34,178,029.28	January Income – – – – –	– May 2014 Cost – – – – –	The year of 2014 Income Cost 45,742,337.14 25,591,239.59 45,742,337.14 25,591,239.59 1,774,733.34 2,082,284.33 1,774,733.34 2,082,284.33 47,517,070.48 27,673,523.92	29 September 2013 to 31 December 2013 Income Cost – – – – – – – – – –	29 September 2013 to 31 December 2013 Income Cost – – – – – – – – – –
							–

— 151 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XXV) Selling expenses

Item Staff’s salary and welfare Social Insurance Business trip expenses Transportation costs Total	January – May 2015 97,220.00 21,241.60 56,606.60 85,817.26 260,885.46	January – May 2014 – – – – –	The year of 2014 29 September 2013 to 31 December 2013 67,156.00 – 15,210.28 – 35,251.50 – 402,417.27 – 520,035.05 –

(XXVI) Administration expenses

Item Staff remuneration Fixed asset depreciation Amortization of intangible assets Office cost Travel and accommodation fees Fees for hiring intermediary institutions (including advisory fee) Tax R&D cost Other expenses Total	January – May 2015 1,595,919.44 382,911.74 364,883.85 65,906.84 83,701.00 41,743.38 1,072,023.19 1,157,896.26 809,485.68 5,574,471.38	January – May 2014 – – – – – – – – 232,707.02 232,707.02	The year of 2014 29 September 2013 to 31 December 2013 1,993,847.40 – 222,937.60 – 218,073.42 – 289,311.53 – 515,645.99 – 1,081,259.87 – 498,924.25 – 2,966,295.27 – 858,876.78 – 8,645,172.11 –

— 152 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XXVII) Financial expenses

Item Interest expense Less: interest income Others Total	January – May 2015 936,879.12 135,808.10 1,022.75 802,093.77	January – May 2014 – 21,999.37 1230.78 -20,768.59	The year of 2014 29 September 2013 to 31 December 2013 296,124.98 – 77,403.11 10,991.48 13,425.70 548.50 232,147.57 -10,442.98

(XXVIII) Assets impairment losses

Item I. Losses from inventory impairments Total	January – May 2015 1,350,552.91 1,350,552.91	The year of 2014 4,184,244.54 4,184,244.54

— 153 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XXIX) Non-operating income

1. Non-operating income by items

==> picture [451 x 189] intentionally omitted <==

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

29 September 2013 to 31
January – May 2015 January – May 2014 The year of 2014 December 2013
Amount Amount Amount Amount
recognized recognized recognized recognized
in the non- in the non- in the non- in the non-
recurring recurring recurring recurring
profit/loss of profit/loss of profit/loss of profit/loss of
Item Amounts the period Amounts the period Amounts the period Amounts the period
– – – –
Government grant 370,550.00 370,550.00 1,000,000.00 1,000,000.00
Total 370,550.00 370,550.00 – – 1,000,000.00 1,000,000.00 – –
----- End of picture text -----

2. Government grant recognized in profit/loss of the period

29 September 2013 to 31 January – May 2015 January – May 2014 The year of 2014 December 2013 Asset Asset Asset Asset related/ related/ related/ related/ Income Income Income Income Item Amounts related Amounts related Amounts related Amounts related Item Award for project of ultra-thin display glass substrate – – – – 1,000,000.00 Income related – – Grants for patent 48,000.00 Income related – – – – – – Employment subsidy from Bengbu Social Insurance Fund Collection and Payment Center 271,800.00 Income related – – – – – – Training subsidy from Bengbu Human Resources and Social Security Bureau 19,500.00 Income related – – – – – – Special fund of enterprise development 31,250.00 Income related – – – – – – Total 370,550.00 – 1,000,000.00 –

— 154 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XXX) Income tax expenses

1. Details of income tax expenses

Item Current income tax based on applicable tax laws and regulations Adjustment to deferred income tax Total	January – May 2015 1,589,306.98 96,926.25 1,686,233.23	January – May 2014 – – –	The year of 2014 29 September 2013 to 31 December 2013 2,779,351.53 2,610.75 -671,919.67 – 2,107,431.86 2,610.75

2. Reconciliation between accounting profit and income tax expenses

				29 September
				2013 to
	January –	January –	The year	31 December
Item	May 2015	May 2014	of 2014	2013
Total profit	7,302,694.62	-211,938.43	7,261,947.29	10,442.98
Income tax expenses charges
at statutory/applicable
tax rate	1,825,673.66	-52,984.61	1,815,486.82	2,610.75
Effect of expenses, fees
and losses which are not
deductible	5,296.60	52,984.61	565,609.75	–
Additional deduction for
R & D expenses	-144,737.03	–	-273,664.71	–
Income tax expense	1,686,233.23	–	2,107,431.86	2,610.75

— 155 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XXXI) Cash flow statement

1. Other cash received from or paid for activities related to operation

				29 September
				2013 to
		January –	The year	31 December
Item		May 2015	of 2014	2013
Other cash	received from
activities related to
operation		7,629,208.41	2,842,677.37	5,102,561.48
Including:	Notes deposit	7,425,900.31	–	–
	Government grant	67,500.00	1,750,000.00	–
	Interest income	135,808.10	42,223.57	10,991.48
	Bengbu Glass
	Industry Design
	Institute	–	–	4,000,000.00
	Others	–	1,050,453.80	1,091,570.00
Other cash	paid for activities
related to operation		13,552,082.66	5,019,217.62	62,922.59
Including:	Luoyang Glass
	Company
	Limited	12,000,000.00	–	–
	Contingency
	provision	–	1,104,904.89	–
	Others	1,552,082.66	3,914,312.73	62,922.59

2. Other cash received from or paid for financing-related activities

	The Year
Item	of 2014
Other cash received from
financing-related activities	25,000,000.00
Including: China Luoyang Float Glass
(Group) Company Limited	25,000,000.00
Other cash paid for financing-
related activities	35,000,000.00
Including: China Luoyang
Float Glass (Group)
Company Limited	35,000,000.00

— 156 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(XXXII) Supplementary information of cash flow statement

1. Supplementary information of cash flow statement

			29 September
			2013 to
	January –	The year	31 December
Item	May 2015	of 2014	2013
1. Net profit adjusted to cash
flow of operating
activities:
Net profit	5,616,461.39	5,154,515.43	7,832.23
Add: Provision for assets
impairment	1,350,552.91	4,184,244.54	–
Depreciation of fixed
assets, depletion of
oil and gas assets,
depreciation of
productive
biological assets	18,058,053.73	7,597,877.66	–
Amortization of
intangible assets	364,883.85	218,073.42	–
Amortization of
long-term deferred
expenses	–	1,115,424.42	–
Losses from disposal
of fixed assets,
intangible assets
and other long-term
assets (“-”for gains)	–	–	–
Losses on scrapping
of fixed assets
(“-”for gains)	–	–	–
Loss from fair value
change (“-”for
gains)	–	–	–
Finance expenses (“-
”for gains)	936,879.12	296,124.98	–
Investment losses
(“-”for gains)	–	–	–
Decrease in deferred
income tax assets
(“-” for increase)	96,926.26	–	–

— 157 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

			29 September
			2013 to
	January –	The year	31 December
Item	May 2015	of 2014	2013
Increase in deferred
income tax liabilities
(“-” for decrease)	–	–	–
Decrease in
inventories (“-” for
increase)	-23,526,022.29	-12,052,191.43	-15,145,697.67
Decrease in operating
receivables (“-” for
increase)	-13,526,365.07	-2,533,815.61	-2,197,111.80
Increase in operating
payables (“-” for
decrease)	-19,139,978.34	-3,726,426.07	6,735,868.95
Others
Net cash flow from
operating activities	-29,768,608.44	253,827.34	-10,599,108.29
2. Significant investing and
financing activities that
do not involve cash
receipts and payment
Conversion of debt into
capital	–	–	–
Convertible bond due
within one year	–	–	–
Fixed assets acquired under
finance leases	–	–	–
3. Net changes in cash and
cash equivalents:
Cash balance at the end of
the period	10,824,332.20	14,340,194.54	44,061,072.43
Less: Cash balance at the
beginning of the
year	14,340,194.54	44,061,072.43	–
Add: Balance of cash
equivalents at the
end of the period	–	–	–
Less: Balance of cash
equivalents at the
beginning of
the year	–	–	–
Net increase in cash and
cash equivalents	-3,515,862.34	-29,720,877.89	44,061,072.43

— 158 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. Cash and cash equivalents

		31 December	31 December
Item	31 May 2015	2014	2013
I. Cash	10,824,332.20	14,340,194.54	44,061,072.43
Including: Cash on hand	61,215.90	2,492.53	3,202.26
Bank deposit available for
payment at any time	10,763,116.30	14,337,702.01	44,057,870.17
II. Cash equivalents	–	–	–
Including: Bond investment
due in three
months	–	–	–
III.Cash and cash equivalents
at the end of the period	10,824,332.20	14,340,194.54	44,061,072.43

VI. RELATED PARTY RELATIONSHIP AND TRANSACTIONS

(I) Parent company

				Equity	Voting
			Registered	interest in	share in the
Name of parent company	Registered address	Principal activities	capital	the Company	Company
				(%)	(%)
China Luoyang Float Glass	Luoyang China	Production of glass, related raw	1,286,740,000.00	100	100
(Group) Company Limited		materials and equipment

The ultimate controller of the Company is China National Building Material Group Corporation.

— 159 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(II) Other related parties

Name of entity

Relationship with the Company

Bengbu Design & Research Institute Former shareholder, with same ultimate controller for Glass Industry China Triumph Bengbu Engineering With same ultimate controller and Technology Company Limited ( 蚌埠凱盛工程技術有限公司 ) Sino-Italian CTIEC (Bengbu) Glass With same ultimate controller Cold-End Machinery Company Limited ( 中意凱盛（蚌埠）玻璃冷端機械有限公司 ) Huali Glass Machines & Tools With same ultimate controller Factory of Bengbu Design & Research Institute for Glass Industry Anhui Huaguang Photoelectricity With same ultimate controller Materials Technology Group Co., Ltd. Anhui Bengbu Huayi Conducive With same ultimate controller Film Glass Co., Ltd. Anhui Fangxing Science & With same ultimate controller Technology Co., Ltd. Luoyang Glass Company Limited With same ultimate controller

— 160 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(III) Related party transactions

1. Purchase and sales of goods and providing and receiving of services

				29 September
				2013 to
	Content of connected	January –	The year	31 December
Name of related parties	transactions	May 2015	of 2014	2013
Commodities purchased/
services received:
Bengbu Design & Research	Purchase of fixed assets	–	82,039.67	–
Institute
Bengbu Design & Research	Purchase of raw materials	1,513,273.32	2,338,593.32	13,036,483.27
Institute
China Triumph Bengbu	Purchase of fixed assets	–	815,333.34	–
Engineering and Technology
Company Limited
China Triumph Bengbu	Purchase of raw materials	9,478.63	9,401.71	–
Engineering and Technology
Company Limited
Sino-Italian CTIEC (Bengbu)	Purchase of fixed assets	19,384.62	3,381,508.55	–
Glass Cold-End Machinery
Company Limited
Sino-Italian CTIEC (Bengbu)	Purchase of raw materials	33,893.17	39,263.25	–
Glass Cold-End Machinery
Company Limited
Huali Glass Machines & Tools	Purchase of raw materials	1,360,717.93	1,160,055.54	–
Factory of Bengbu Design &
Research Institute for Glass
Industry
Commodities sell/services
received:
Anhui Huaguang	Sale of cullet	–	2,719,555.43	–
Photoelectricity Materials
Technology Group Co., Ltd.
Anhui Bengbu Huayi	Sale of glass	6,897,312.76	17,510,157.77	–
Conducive Film Glass Co.,
Ltd.
Anhui Fangxing Science &	Sale of glass	665,556.90	275,823.66	–
Technology Co., Ltd.

Note: The above sales to related parties in 2014 contain the sales revenue in the commissioning period, of which, in the commissioning period, the revenue from selling cutlet to Anhui Huaguang Photoelectricity Materials Technology Group Co., Ltd. amounted to RMB1,729,545.51 and the revenue from selling glass to Anhui Bangbu Huayi Conducive Film Glass Co., Ltd. amounted to RMB7,347,181.37. Relevant sales in the commissioning period are included in construction in progress as net income and costs.

— 161 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. Related party guarantees

					Guarantee
		Guarantee	Start date of	End date of	fulfilled
Guarantor	The guaranteed	amount	guarantee	guarantee	or not
Bengbu Design &	Bengbu China	5,000,000.00	2014-7-17	2015-7-16	No
Research Institute	Building
for Glass Industry	Information Display
	Materials Co. Ltd.
Bengbu Design &	Bengbu China	5,000,000.00	2014-7-22	2015-7-16	No
Research Institute	Building
for Glass Industry	Information Display
	Materials Co. Ltd.
Bengbu Design &	Bengbu China	7,930,000.00	2015-4-22	2016-4-22	No
Research Institute	Building
for Glass Industry	Information Display
	Materials Co. Ltd.
Bengbu Design &	Bengbu China	10,000,000.00	2015-1-4	2016-1-4	No
Research Institute	Building
for Glass Industry	Information Display
	Materials Co. Ltd.
Bengbu Design &	Bengbu China	10,000,000.00	2015-3-19	2015-6-25	No
Research Institute	Building
for Glass Industry	Information Display
	Materials Co. Ltd.
*Inter-companies*	*lending of related parties*
	Amount of
Related parties	lending	Start date	End date	Explanation
January – May 2015
Lending from: Bengbu	Design 5,000,000.00	–	–	No fixed term, interest
& Research Institute	for			incurred in the
Glass Industry				period was RMB
				267,777.78
The year of 2014
Lending from: Bengbu	Design 5,000,000.00	–	–	–
& Research Institute	for
Glass Industry

3. Inter-companies lending of related parties

— 162 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

4. Remuneration of key management

			29 September
			2013 to
	January –	The year	31 December
Item	May 2015	of 2014	2013
Remuneration of key
management	200,456.00	332,180.00	28,040.00

(1) Remuneration of directors and supervisors

During January to May 2015, the year of 2014, and 29 September 2013 to 31 December 2013, only one supervisor in office received remuneration from the Company.

Remuneration of directors and supervisors during January to May 2015:

			Salary,	Defined
			allowance	contribution
			and benefit	Plan
Name	Remuneration	Bonus	in kind	contribution	Total	Note
Supervisor
Ren Hongcan	–	–	67,250.00	–	67,250.00

Remuneration of directors and supervisors during the year of 2014:

			Salary,	Defined
			allowance	contribution
			and benefit	Plan
Name	Remuneration	Bonus	in kind	contribution	Total	Note
Supervisor
Ren Hongcan	–	–	157,800.00	–	157,800.00

— 163 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Remuneration of directors and supervisors during 29 September 2013 to 31 December 2013:

			Salary,	Defined
			allowance	contribution
			and benefit	Plan
Name	Remuneration	Bonus	in kind	contribution	Total	Note
Supervisor
Ren Hongcan	–	–	67,250.00	–	67,250.00

(2) The five individuals whose remuneration are the highest

The five individuals whose remuneration are the highest during January to May 2015, 2014 included one supervisor. The remuneration of the five individuals whose remuneration are the highest are set out as below:

Item Salary, allowance and benefit in kind Defined contribution Plan contribution Total	January – May 2015 277,560.00 20,464.00 – 298,024.00	The year of 2014 29 September 2013 to 31 December 2013 662,442.00 103,729.08 31,111.50 – – – 693,553.50 103,729.08	The year of 2014 29 September 2013 to 31 December 2013 662,442.00 103,729.08 31,111.50 – – – 693,553.50 103,729.08
			103,729.08

Numbers of individuals with the highest remuneration in remuneration groups are set out as below:

				29 September
				2013 to
		January –	The year	31 December
Item		May 2015	of 2014	2013
HKD	0-1,000,000.00	5	5	5

— 164 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

5. Other connected transactions

On 30 September 2013, the Company and Bengbu Design & Research Institute for Glass Industry entered into the Agreement on Entrusted Operation and Management, pursuant to which, Bengbu Design & Research Institute for Glass Industry entrusted the Company to operate and manage the 150t/d oxygen-fuel combustion production line of ultra-thin glass substrate for electronic information display and relevant assets (including but not limited to land usage rights, building under construction, machinery and equipment) for free for the period from the date of ignition and commencement of pilot production of the project to the date of completing the contribution to the Company by Bengbu Design & Research Institute for Glass Industry with the project’s all assets owned by it. Within the period of entrustment, the Company is entitled to fully operate and management the project, to collect earnings in related to operation of the project, and to assume relevant expenditures and fee. In October 2014, Bengbu Design & Research Institute for Glass Industry made contribution to the Company with relevant assets of the 150t/d oxygen-fuel combustion production line of ultra-thin glass substrate for electronic information display and proceeded with assets delivery procedures.

(IV) Receivables from and payables to related parties

1. Accounts Receivable

		31 May 2015	31 December 2014	31 December 2013
Project name	Related parties	Book value	Book value	Book value
Amount receivable	Anhui Huaguang Photoelectricity Materials	1,689,079.90	1,689,079.90	–
	Technology Group
	Co., Ltd.
Amount receivable	Anhui Bengbu Huayi Conducive Film Glass	332,793.47	31,700.06	–
	Co., Ltd.
Amount receivable	Anhui Fangxing Science &	127,645.77	–	–
	Technology Co., Ltd.
Prepayments	China Triumph Bengbu Engineering and	33,296.00	–	11,000.00
	Technology Company Limited
Prepayments	Sino-Italian CTIEC	–	–	886,101.00
	(Bengbu) Glass Cold-
	End Machinery
	Company Limited
Other receivables	Luoyang Glass Company Limited	18,927,532.99	–	–

— 165 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. Payables

			31	31
		31 May	December	December
Project name	Related parties	2015	2014	2013
Amount payable	Bengbu Design & Research	358,762.88	1,286,716.77	963,526.61
	Institute for Glass Industry
Amount payable	Sino-Italian CTIEC (Bengbu)	753,725.56	1,104,693.85	–
	Glass Cold-End Machinery
	Company Limited
Amount payable	Huali Glass Machines & Tools	1,074,816.12	1,058,416.65	–
	Factory of Bengbu Design &
	Research Institute for Glass
	Industry
Amount payable	China Triumph Bengbu	–	191,380.55	–
	Engineering and Technology
	Company Limited
Other payables	Bengbu Design & Research	5,482,872.15	5,265,077.69	5,023,333.33
	Institute for Glass Industry
Other payables	Bengbu Branch of China Triumph	240,000.00	240,000.00	–
	International Engineering
	Co., Ltd.
Receipts in advance	Anhui Fangxing Science &	–	694.72	–
	Technology Co., Ltd.

VII. COMMITMENTS AND CONTINGENCIES

(I) COMMITMENTS

As at 31 May 2015, the Company had no material discloseable commitment.

(II) CONTINGENCIES

As at 31 May 2015, the Company had no discloseable contingency.

— 166 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

VIII. EVENTS AFTER BALANCE SHEET DATE

As at the date of this report, the Company had no discloseable events after balance sheet date.

IX. OTHER IMPORTANT MATTERS

(I) Segment Report

The principle source of the Company’s income and profit is sales of floating glass, thus the Company is of the view that it is not necessary to prepare segment report.

(II) There is no other discloseable important matter.

X. SUPPLEMENTARY INFORMATION

(I) Non-recurring profit or loss

Item 1. Government subsidy included in profit and loss for the period, except for those closely relevant to normal business of the company, conformed to requirements of State policy, granted on fixed amount basis or enjoyed on continuous fixed amount basis subject to certain standards 2. Affected income tax amount Total	January – May 2015 370,550.00 92,637.50 277,912.50	The year of 2014 1,000,000.00 250,000.00 750,000.00

— 167 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

(II) Yield on net assets

Weighted average yield on net assets

		(%)
				29 September
				2013 to
	January –	The	year	31 December
Profit in the reporting period	May 2015	of	2014	2013
Net profits attributable to the
ordinary shareholders of the
Company	0.84		7.10	0.01
Net profits attributable to the
ordinary shareholders of the
Company after non-recurring
profit or loss	0.80		6.07	0.01

Bengbu China Building Information Display Materials Co. Ltd.

15 June 2015

— 168 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

2. MANAGEMENT DISCUSSION AND ANALYSIS ON BENGBU COMPANY

Set out below is the management discussion and analysis on Bengbu Company for the period from 29 September 2013 (date of incorporation) to 31 December 2013, the year ended 31 December 2014 and the five months ended 31 May 2015:

Capital liquidity and financial resources

As at 31 December 2013, there was no realisation of short-term financial loans from Bengbu Company. As at 27 September 2013, Bengbu Institute carried out a capital contribution amounting to RMB30 million (Anhui Yong He Certified Public Accountants Ltd. (安徽永合會計師事務所有限公司) performed valuation for the above contribution, and prepared a capital contribution valuation report “Anhui Yong He Valuation of Capital Contribution [2013] No. 055”). As at 31 December 2013, CLFG carried out a capital contribution amounting to RMB40 million (Anhui Yong He Certified Public Accountants Ltd. performed valuation for the above contribution, and prepared a capital contribution valuation report “Anhui Yong He Valuation of Capital Contribution [2013] No. 076”).

As at 31 December 2014, Bengbu Company realised an amount of RMB10 million short-term financial loans. In July 2014, Bengbu Company entered into a loan agreement with Bengbu branch of China CITIC Bank Corporation Limited. The term of loans and amount thereof were RMB5 million from 17 July 2014 to 16 July 2015 and RMB5 million from 22 July 2014 to 16 July 2015, respectively, where the guarantor was Bengbu Institute.

As at 31 May 2015, Bengbu Company recorded short term financial borrowings of RMB37.93 million, including short term financial borrowings of RMB10 million in 2014 and RMB27.93 million in 2015. On 4 January 2015, Bengbu Company entered into a liquidity fund loan contract in respect of the loan amounted to RMB10 million with the Bengbu Branch of Huishang Bank Corporation Limited, with a borrowing period from 4 January 2015 to 4 January 2016. On 19 March 2015, Bengbu Company entered into a RMB-dominated liquidity fund loan in respect of the loan amounted to RMB10 million with the Bengbu Branch of China CITIC Bank Corporation Limited, with a borrowing period from 19 March 2015 to 25 June 2015. On 22 April 2015, Bengbu Company entered into a liquidity fund loan contract in respect of the loan amounted to RMB7.93 million with the Bengbu Branch of Huishang Bank Corporation Limited, with a borrowing period from 22 April 2015 to 22 April 2016. The guarantor of all such loans is Bengbu Institute.

— 169 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Bengbu Company, a creditworthy company, repaid the interest of loans on schedule, and guaranteed that the principal would be repaid on schedule. The demand of loans was generally at the beginning of the year or in the middle of the year.

As at 31 December 2013, there were neither financial resources nor government subsidiaries received by Bengbu Company.

As at 31 December 2014, Bengbu Company received RMB1 million government subsidiaries. On 8 October 2014, Bengbu Company received an award of RMB1 million from Bengbu Municipal Bureau of Finance (Beng (2014) No. 93) for commending the ultra thin glass substrate project. On 24 December 2014, Bengbu Company received the special fund of enterprise development of RMB0.75 million from the Bureau of Finance of Longzihu District, Bengbu City (Beng Jin Xin Ji Gai [2014] No. 257) for 150t/d electronic information display ultra-thin substrate project.

On 31 May 2015, Bengbu Company received the government subsidy of RMB370,550. On 9 January 2015, Bengbu Company received the municipal and district-level 2014 first-half patent fund of RMB16,000 from Yuhui District of Bengbu City. On 10 April 2015, it received the municipal and district-level 2014 second-half patent fund of RMB32,000 from Yuhui District of Bengbu City. On 14 April 2015, Bengbu Company received the training subsidy of RMB19,500 from the Human Resources and Social Security Bureau of Bengbu City. In April 2015, it received the additional employment subsidy of RMB271,800 funded by Bengbu Social Insurance Fund Collecting Center. The enterprise development special fund of RMB31,250 related to assets was the amortised amount in respect of the province-level enterprise development special fund of RMB750,000 in 2014.

Capital Structure of Bengbu Company

Bengbu Company was established on 29 September 2013 with a registered capital of RMB30 million when established. As resolved at the shareholders’ general meeting of Bengbu Company, the registered capital was changed to RMB142.4 million, among which: subscribed capital contribution of Bengbu Institute amounted to RMB42.72 million, and subscribed capital contribution of CLFG amounted to RMB99.68 million with a term of 2 years; on the same day, CLFG carried out a capital contribution amounting to RMB40 million. The paid-in capital of Bengbu Company was changed from RMB30 million to RMB70 million.

— 170 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

On 9 October 2014, as resolved at the shareholders’ general meeting of Bengbu Company, Bengbu Institute made capital increase to Bengbu Company using the relevant assets of the 150t/ d information display ultrathin substrate. According to the Assets Valuation Report (Zhong Lian Ping Bao Zi [2014 No. 997]) (中聯評報字[2014]第997號) issued by the Valuer. Upon the capital increase, the registered capital of Bengbu Company was RMB632,764,300, among which, CLFG contributed RMB40 million in cash, representing a shareholding of 6.32% and Bengbu Institute contributed RMB30 million in cash and RMB562.7643 million in-kind respectively, representing a shareholding of 93.68%. On 28 October 2014, pursuant to the resolutions of the shareholders’ general meeting of Bengbu Company, Bengbu Institute transferred the 93.68% shareholding in Bengbu Company to CLFG. As at 31 May 2015, CLFG held 100% of equity interest by contributing RMB632.7643 million.

Capital resources of Bengbu Company were from product loans, part of the short-term loans and cash contribution of investment parties, and were mainly used for construction and production of Bengbu Company. In order to enhance financial control, Bengbu Company set up financial system for payment, reimbursement, calculation of cost of products and management of fixed assets to achieve effective control of capital inflow and outflow, broadening sources of income and reducing expenditure, and optimise capital structure.

Bengbu Company borrowed a short-term loan of RMB37.93 million from financial industry denominated in Renminbi, and did not utilise financial instruments for hedging.

Order book and prospects of new products of Bengbu Company

Bengbu Company completed the trial production phase in late July 2014, and duly entering the production phase. As the quality of products was high, and ultra-thin products in the country were miraculously created, the order of products was good, resulting in a great increase in market competitiveness of Bengbu Company, which has been continuously optimising the quality of products, improving craftsmanship of products, and creating ultra-thin glass. Therefore, it has been staying in a leading position. Bengbu Company received an award of RMB1 million from Chinese Communist Party Bengbu Municipal Committee and People’s Government in Bengbu for commending the ultra thin glass substrate project and the special fund of enterprise development of RMB0.75 million from the Bureau of Finance of Longzihu District, Bengbu City, adequately affirming the development prospect and competitiveness of Bengbu Company.

— 171 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

On 31 December 2013, Bengbu Company was in the trial production phase for construction with no realisation of sales revenue. From August 2014 to December 2014, Bengbu Company realised sales revenue of RMB47.52 million with average gross profit margin of 41.76% and total profit of RMB7.26 million. In October 2014, Bengbu Company accepted the investment from CLFG by means of fixed assets, where the registered capital was changed to RMB632.7643 million and the total amount of assets increased. From 1 January 2015 to 31 May 2015, it recorded sales revenue of RMB49.1 million, with the average gross margin of 30.39% and the total profit of RMB7.3 million.

Major investment held

There was no major investment for Bengbu Company from its establishment to 31 May 2015.

Major acquisition and disposal in relation to subsidiary companies and affiliated companies carried out

There was neither major acquisition nor disposal for Bengbu Company from its establishment to 31 May 2015.

Comments on data by category provided in Directors’ report and statements

Bengbu Company reports data such as financial statements, financial indicators and statistical indicators to CLFG, truly reflecting the operation of Bengbu Company and market competitiveness of new products for CLFG to make reasonable decisions. Bengbu Company will propose financial accounts, reflecting the financial status, operating results and cash flow of Bengbu Company in an accounting year.

Relevant situation of employees

As at 31 December 2013, there were 232 employees in Bengbu Company with an average remuneration of RMB2,822. As at 31 December 2014, there were 259 employees in Bengbu Company with an average remuneration of RMB3,231. As at 31 May 2015, Bengbu Company has 261 employees, with the average employee remuneration of RMB3,449. All employees of Bengbu Company received training of safety knowledge, and part of the employees received training of professional knowledge. Training of Bengbu Company was integrated with external training, jointly improving employees’ professional level and skills.

Charge over the assets

There was no charge over the assets for Bengbu Company from its establishment to 31 May 2015.

— 172 —

FINANCIAL INFORMATION OF BENGBU COMPANY

APPENDIX II

Future plan of major investment or acquisition of capital assets

Bengbu Company has no future plan of major investment, and will purchase special equipment in relation to production. The specific purchase plan is in line with the production demand of Bengbu Company.

Gearing Ratio

On 31 December 2013, total amount of assets of Bengbu Company was RMB77.25 million, and total amount of liabilities was RMB7.24 million. The gearing ratio was 9.37%. On 31 December 2014, total amount of assets of Bengbu Company was RMB715.67 million, and total amount of liabilities was RMB47.99 million. The gearing ratio was 6.71%. Bengbu Company accepted the investment from CLFG by means of fixed assets in October 2014, where the registered capital was changed to RMB632.7643 million and the total amount of assets increased. As at 31 May 2015, the total assets of Bengbu Company amounted to RMB730.34 million, and the total liabilities and assetliability ratio are RMB57.04 million and 7.81%, respectively.

Fluctuation and risk of exchange rate and any relevant hedging

As at 31 December 2013, 31 December 2014 and 31 May 2015, there was no foreign currency transaction of Bengbu Company. As the fluctuation and risk of exchange rate were relatively low, there was no relevant hedging.

Details of contingent liabilities (if any)

As at 31 December 2013, 31 December 2014 and 31 May 2015, there were no contingent liabilities of Bengbu Company.

— 173 —

FINANCIAL INFORMATION OF LONGHAO COMPANY

APPENDIX III

The following is the text of the accountants’ report of Longhao Company received from the independent reporting accountants of the Company, WUYIGE Certified Public Accountants LLP.

Auditors’ Report

Daxin Shen Zi [2015] No. 2-00683

To Luoyang Glass Company Limited:

We have audited the accompanying financial statements of CLFG Longhao Glass Co. Ltd. (hereafter referred to as “Longhao Company”), including the balance sheet as of 31 May 2015, the income statement, the cash flow statement and the statement of the changes in owners’ equity for January to May 2015, and notes to the financial statements.

I. MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The management of Longhao Company is responsible for the preparation and fair presentation of the financial statements. The responsibility includes: (1) preparation of the financial statements in accordance with the Accounting Standards for Business Enterprises to give a fair view; (2) designing, implementing and maintaining necessary internal controls so that the financial statements are free from material misstatement whether due to fraud or error.

II. AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Auditing Standards for PRC Certified Public Accountants. Those standards require that we comply with the Code of Ethics for PRC Certified Public Accountants, plan and perform the audit to obtain a reasonable assurance as to whether the financial statements are free from material misstatement.

An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal controls relevant to the entity’s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

— 174 —

FINANCIAL INFORMATION OF LONGHAO COMPANY

APPENDIX III

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

III. AUDIT OPINION

In our opinion, the financial statements of Longhao Company have been prepared in accordance with the Accounting Standards for Business Enterprises in all material aspects, and they fairly present the financial position as of 31 May 2015 and the operating results and cash flows of Longhao Company for January to May 2015.

IV. EMPHASIS OF MATTERS

We remind users of the financial statements to the following matter: as mentioned in note 5 (XXIII), the accumulative unrecovered loss of Longhao Company as of 31 May 2015 is RMB402,085,326.00, and current liabilities exceeds total assets by RMB336,432,282.83. Longhao Company has fully disclosed the improvement measures to be implemented in note 2 (I), but there still exists a significant uncertainty to going-concern capability, which may lead to the failure in realizing assets and settling indebtness in the ordinary course of business. This passage has no impact on the audit opinion published.

WUYIGE Certified Public Accountants LLP.

Beijing • the PRC

15 June 2015

— 175 —

FINANCIAL INFORMATION OF LONGHAO COMPANY

APPENDIX III

BALANCE SHEET

31 May, 2015 Unit: RMB

Prepared by: CLFG Longhao Glass Co. Ltd.
31 May, 2015
Item
Notes
Balance as at
the end of
the period
Current assets:
Bank balance and cash
V(I)
5,810,752.32
Notes receivable
V(II)
1,683,000.00
Accounts receivable
V(III)
13,637,194.03
Prepayments
V(IV)
9,114,607.23
Other receivables
V(V)
5,766,118.69
Inventory
V(VI)
62,415,123.26
Other current assets
V(VII)
16,047,871.45
Total current assets
114,474,666.98
Non-current assets:
Fixed assets
V(VIII)
219,225,419.69
Construction in progress
V(IX)
27,500,557.23
Fuel assets
Intangible assets
V(X)
7,914,170.00
Other non-current assets
V(XI)
1,018,229.85
Total non-current assets
255,658,376.77
Total assets
370,133,043.75

Unit: RMB
Balance as at
the beginning of
the year
25,208.07
–
8,334,385.95
1,427,165.64
7,695,370.08
58,978,567.32
8,596,514.23
85,057,211.29
237,891,145.03
–
8,198,505.00
3,020,000.00
249,109,650.03
334,166,861.32

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Item Notes Current assets: Short-term loans V(XII) Notes payable V(XIII) Accounts payable V(XIV) Payments received in advance V(XV) Staff remuneration payables V(XVI) Taxes payable V(XVII) Other payables V(XVIII) Liabilities classified as held-for-sale Non-current liabilities due within one year V(XIX) Total current liabilities Non-current liabilities: Long-term loans V(XX) Total non-current liabilities Total liabilities Owners’ equity: Paid-up capital V(XXI) Surplus reserve V(XXII) Retained earnings V(XXIII) Total owners’ equity Total liabilities and shareholders’ equities	Balance as at the end of the period 135,089,000.00 5,000,000.00 435,433,513.81 7,284,195.57 10,122,187.54 908,014.73 111,288,414.93 1,440,000.00 706,565,326.58 13,760,000.00 13,760,000.00 720,325,326.58 50,000,000.00 1,893,043.17 -402,085,326.00 -350,192,282.83 370,133,043.75	Balance as at the beginning of the year 135,089,000.00 – 361,330,834.44 5,510,523.83 9,848,029.00 2,996,499.81 67,998,408.78 1,440,000.00 584,213,295.86 14,360,000.00 14,360,000.00 598,573,295.86 50,000,000.00 1,893,043.17 -316,299,477.71 -264,406,434.54 334,166,861.32

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APPENDIX III

INCOME STATEMENT

Prepared by: CLFG Longhao Glass Co. Ltd.

January to May 2015 Unit: RMB

				January to May	For the year
Item			Notes	2015	2014
I.	Operating revenue		V(XXIV)	95,099,317.46	245,962,102.68
	Less:	Operating costs	V(XXIV)	151,958,035.50	318,864,786.65
		Business taxes and surcharges	V(XXV)	15,583.33	42,323.08
		Selling expenses	V(XXVI)	4,837,612.71	9,483,448.27
		Administration expenses	V(XXVII)	8,485,647.92	21,454,547.99
		Finance expenses	V(XXVIII)	852,726.84	11,290,967.65
		Impairment loss on assets	V(XXIX)	13,874,495.65	22,691,023.41
II.	Operating Profit			-84,924,784.49	-137,864,994.37
	Add:	Non-operating income	V(XXX)	3,490.50	1,112,153.58
	Less:	Non-operating expenses	V(XXXI)	864,554.30	1,989,792.46
III.	Total	profit		-85,785,848.29	-138,742,633.25
IV.	Net profit			-85,785,848.29	-138,742,633.25
V.	Net other comprehensive income after taxes			–	–
VI.	Total	comprehensive income		-85,785,848.29	-138,742,633.25

VI. Total comprehensive income

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APPENDIX III

CASH FLOW STATEMENT

Prepared by: CLFG Longhao Glass Co. Ltd.

January to May 2015 Unit: RMB

			January to May	For the year
Item		Notes	2015	2014
I.	Cash flows from operating activities:
	Cash received from sale of goods or rendering
	of services		76,992,167.00	159,297,559.20
	Other cash received from activities related to
	operation		25,499,546.87	4,428,702.54
	Sub-total of cash inflow from operating
	activities		102,491,713.87	163,726,261.74
	Cash paid for goods purchased and services
	rendered		85,305,508.84	225,622,624.36
	Cash paid to and on behalf of employees		9,049,894.16	16,326,958.73
	Tax payments		488,836.29	76,160.00
	Other cash paid for activities related to
	operation		4,251,356.53	4,887,018.55
	Sub-total of cash outflow from operating
	activities		99,095,595.82	246,912,761.64
	Net cash flow from operating activities		3,396,118.05	-83,186,499.90
II.	Cash flows from investment activities:
	Cash paid for purchase and construction of
	fixed assets, intangible assets and other long-
	term assets		7,117,067.00	3,066,620.00
	Sub-total of cash outflow from investment
	activities		7,117,067.00	3,066,620.00
	Net cash flow from investment activities		-7,117,067.00	-3,066,620.00

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			January to May	For the year
Item		Notes	2015	2014
III.	Cash flows from financing activities:
	Other cash received from financing-related
	activities		10,000,000.00	87,661,100.01
	Sub-total of cash inflow from financing
	activities		10,000,000.00	87,661,100.01
	Cash paid for repayment of loans		480,000.00	1,440,000.00
	Other cash paid for financing-related activities		5,000,000.00	–
	Sub-total of cash outflow from financing
	activities		5,480,000.00	1,440,000.00
	Net cash flow from financing activities		4,520,000.00	86,221,100.01
IV.	Net cash flow from financing activities		–	–
V.	Net increase in cash and cash equivalents		799,051.05	-32,019.89
	Add: Opening balance of cash and cash
	equivalents		4,682.11	36,702.00
VI.	Closing balance of cash and cash equivalents		803,733.16	4,682.11

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APPENDIX III

STATEMENT OF CHANGES IN OWNERS’ EQUITY

Prepared by: CLFG Longhao Glass Co. Ltd.

January to May 2015 Unit: RMB

January to May 2015 Paid-in Surplus Undistributed Total owners’ Item share capital reserve profits equity I. Balance at the end of last year 50,000,000.00 1,893,043.17 -316,299,477.71 -264,406,434.54 II. Balance at the beginning of the year 50,000,000.00 1,893,043.17 -316,299,477.71 -264,406,434.54 III. Increase/decreased in the period – – (decrease is represented by “–”) -85,785,848.29 -85,785,848.29 – – (I) Total comprehensive income -85,785,848.29 -85,785,848.29 IV. Balance at the end of the period 50,000,000.00 1,893,043.17 -402,085,326.00 -350,192,282.83

For the year 2014 Paid-in Surplus Undistributed Total owners’ Item share capital reserve profits equity I. Balance at the end of last year 50,000,000.00 1,893,043.17 -177,556,844.46 -125,663,801.29 II. Balance at the beginning of the year 50,000,000.00 1,893,043.17 -177,556,844.46 -125,663,801.29 III. Increase/decreased in the period – – (decrease is represented by “–”) -138,742,633.25 -138,742,633.25 – – (I) Total comprehensive income -138,742,633.25 -138,742,633.25 IV. Balance at the end of the period 50,000,000.00 1,893,043.17 -316,299,477.71 -264,406,434.54

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APPENDIX III

NOTES TO THE FINANCIAL STATEMENTS

(In these notes, all amounts are expressed in RMB unless otherwise stated)

I. BASIC INFORMATION OF THE COMPANY

CLFG Longhao Glass Co. Ltd. (hereinafter referred to as the “Company”) is a company jointly established by Luoyang Glass Company Limited and China Luoyang Float Glass (Group) Company Limited by way of investment on 20 June 2005. The registered capital of the Company was RMB50 million, RMB40 million and RMB10 million out of which were contributed by Luoyang Glass Company Limited and China Luoyang Float Glass (Group) Company Limited respectively, representing 80% and 20% of share capital of the Company, respectively. On 16 December 2009, both these shareholders entered into an equity transfer agreement, pursuant to which, China Luoyang Float Glass (Group) Company Limited transferred 20% of equity interests in the Company to Luoyang Glass Company Limited. After the change in equity interests, the Company became a wholly-owned subsidiary of Luoyang Glass Company Limited. As of 31 May 2015, the capital structure of the Company is as follows:

Name of shareholder Contribution Ratio of contribution Luoyang Glass Company Limited* 50,000,000.00 100.00% Total 50,000,000.00 100.00% Address of the Company: Neibu Town, Ruyang County, Luoyang City Legal representative: Lv Yingcheng Registered Number of enterprise 410300110049620 business license: Scope of business: manufacturing and sales of float glass, processing of glass and raw materials, processing of raw materials of glass and sales of minerals; technical consultation and services. Operation period: long term

The financial statements were reported with approval of the person in charge of the Company.

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APPENDIX III

II. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

(I) Basis of preparation

The financial statements of the Company have been prepared based on the actual transactions and events on a going concern basis in accordance with requirements including Accounting Standards for Business Enterprises – Basic Standards and specific standards (hereinafter referred to as “Accounting Standards for Business Enterprises”) issued by the Ministry of Finance with the adoption of the following significant accounting policies and accounting estimates.

Despite the accumulated uncovered losses of RMB402,085,326.00 as at 31 May 2015 recorded in the financial statements of the Company and the amount of RMB336,432,282.83 that the current liabilities exceeded over the total assets, the Company believed that it would be able to operate on a going concern basis and repay such liabilities before the debts fall due, mainly due to the fact that the Company will continue to obtain financial support from shareholders, thus there will be sufficient cash resources to meet the needs of future working capital and other operations. Therefore, the financial statements were prepared on a going concern basis. If the above assumption shows to be false, adjustments will have to be made to reduce the assets of the Company to their realizable value and provide for any possible liabilities.

(II) Declaration on compliance with Accounting Standards for Business Enterprises

(III) Accounting period and operating cycle

Accounting year of the Company is the calendar year from January 1 to December 31.

(IV) Reporting currency

The Company’s reporting currency is Renminbi (“RMB”).

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APPENDIX III

(V) Standard for determining cash and cash equivalents

The cash determined in preparation of the Company’s statement of cash flow statement represents the Company’s cash on hand and available deposit.

Cash equivalents determined in preparation of the statement of cash flow refer to short-term investments with high liquidity that are readily convertible to known amounts of cash and subject to insignificant risk on change in value.

(VI) Receivables

1. Receivables individually significant and with provision for bad debts on an individual basis

Basis and criteria for determining whether Balance of carrying amount of over a receivable is individually significant RMB5 million

Provision policies of bad debt provision Impairment assessed individually, if for individually significant receivables there is no impairment, aging analysis shall prevail

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APPENDIX III

2. Receivables with provision for bad debts on a group basis

Basis for determining the groups

The group with provision Not individually significant receivables with for bad debts based on higher risk when it was grouped according to aging analysis credit risk characteristics.
The group without provision for bad debts
(1) Various margins and deposits related to the production and operations that are fully recoverable upon maturity;
(2) Receivables due from related parties with good financial position;
(3) Other balances that have positive evidence indicating they are fully recoverable.

Provision methods for bad debts in group

The group with provision Aging analysis methods
for bad debts based on aging analysis
The group without
provision for bad debts

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APPENDIX III

In the groups, the provision for bad debts based on aging analysis set out as follows:

	Provision rate for	Provision rate for
Age	accounts receivable	other receivables
	(%)	(%)
Within 1 year (including 1 year)	0	0
1–2 years	30	30
2–3 years	50	50
Over 3 years	100	100

3. Individually insignificant receivables with provision for bad debts on an individual basis

Basis for individual provision Receivables aged over three years exists impairment with objective evidence

Provision method Impairments assessed individually, if there is no impairment, aging analysis shall prevail

(VII) Inventories

1. Classification of inventories

Inventories refer to the finished goods or commodities held for sale in daily activities, goods in progress in the production process, consumed materials and supplies in the production process or providing services of the Company, which mainly include raw materials, revolving materials, wrappage, low-cost consumables, goods in progress, self-made semi-finished goods and finished goods (merchandise inventory), etc.

2. Method of costing of sold inventories

The raw materials are calculated according to the planned cost, and the difference between the actual cost and the planned cost of materials is carried forward monthly, which adjusts the planned cost of materials sold to actual cost. The weighted average method is adopted to determine the actual cost of sold inventories.

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APPENDIX III

3. Method of provision for falling prices of inventories

4. Inventory system

The inventory system adopted by the Company is the perpetual inventory system.

5. Amortization methods of low-cost consumables and wrappage

The low-cost consumables are amortized with one-off charge. Wrappage and materials for turnover are amortized with fifty percent amortization method.

(VIII) Fixed assets

1. Recognition methods of fixed assets

2. Classification and depreciation methods of fixed assets

The fixed assets of the Company can be divided into: buildings and constructions, machinery equipment, electronic equipment and transportation equipment, etc. The straight-line method is used to measure depreciation. The useful lives and the expected net residual value of fixed assets are determined according to the nature and usage of various fixed assets. At the end of each year, the useful lives and depreciation method of fixed assets are reviewed, and adjusted if there is variance with original policies; The Company have made provisions for all of the fixed assets except for the fixed assets with full provision and used continuously and lands accounted individually.

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APPENDIX III

		Expected	Annual
	Estimated	residual value	depreciation
Category	useful years	rate	rate
	(year)	(%)	(%)
Buildings and structures	30–50	3–5	1.90–3.23
Machinery equipment	4–28	3–5	3.39–24.25
Transportation equipment	6–12	3–5	7.92–16.17

(IX) Construction in progress

(X) Intangible assets

1. Measurement of intangible assets

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APPENDIX III

2. Criterion of determining infinite useful life

(XI) Assets impairment

Long-term equity investment, fixed assets, construction in progress and intangible assets are tested for impairment if there is any indication that an asset may be impaired at the balance date. If the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount, a provision for impairment and an impairment loss are recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.

Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.

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APPENDIX III

(XII) Employee benefits

1. Short-term benefits

2. Post-employment benefits and termination benefits

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APPENDIX III

3. Other long-term employee benefits

(XIII) Revenue

1. Sales of goods

If there is deferred payment clause in the agreement or mutually agreed price, which in substance is a financing nature, the fair value of the receivables is recorded as sales amount.

2. Provision of labour services

At the balance sheet date, when the outcome of the transaction involving the rendering of services cannot be estimated reliably, it shall be dealt with in the following ways: ➀ if the cost of services incurred is expected to be compensated, the revenue from the rendering of services is recognized to the extent of actual cost incurred to date, and the relevant cost is transferred to cost of service in profit or loss; ➁ if the cost of services incurred is not expected to be compensated, the cost incurred should be included in current profit or loss, and no revenue from the rendering of services may be recognized.

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APPENDIX III

3. Abalienating the right to use an asset

When the inflow of economic benefits from the abalienation of assets is probable and the income can be measured reliably, the income from abalienating the right to use an asset is recognized.

(XIV) Lease

The Company’s lease comprises finance lease and operating lease. The criteria for judgment of finance lease: lease that transfers all risks and return related to assets ownership is recognized as finance lease. The specific recognition shall meet one or more of the following conditions: ownership of leased assets is transferred to the lessee at the expiry of leasing period; the lessee has an option to purchase the leased assets and the consideration of such purchase is expected to be far lower than the fair value of the leased assets when the option is exercised, thus such option is reasonably determined to be exercised by the lessee at the commencement date of the lease; even though the ownership of assets is not transferred, leasing period accounts for a large portion of its useful life; the present value of minimum lease payment by the lessee at the commencement date of the lease is almost equivalent to the fair value of the leased assets at the commencement date of the lease, and the special nature of the leased assets determines that only the lessee can use it without substantial changes. As for the lease that fails to meet the above conditions, it is recognized as operating lease.

The accounting treatment of the leasing business of the Company shall be in compliance with the requirements of the Accounting Standards for Enterprises No. 21 – Leases.

III. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND EXPLANATION ON CORRECTION OF ACCOUNTING ERRORS

Nil

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APPENDIX III

IV. TAXES

(I) Major categories of taxes and tax rates

Category	Tax basis	Tax rate
Value-added tax	Sales revenue, and revenue from processing and
	repair, fitting and labour services	17%
Business tax	Turnover	5%
City maintenance and	Value added tax and business tax payable
construction tax		5%
Educational surcharges	Value added tax and business tax payable	3%
Enterprise income tax	Taxable income	25%

V. EXPLANATIONS OF SIGNIFICANT ITEMS OF THE FINANCIAL STATEMENTS

(I) Bank balance and cash

1. Bank balance and cash presented by categories

Item Cash Cash in bank Other monetary fund Total	Balance at the end of the period Amount 690,321.92 120,430.40 5,000,000.00 5,810,752.32	Balance at the beginning of the year Amount 1,422.81 23,785.26 –
		25,208.07

Note : Among the balance at the end of the period, bank balance and cash of RMB5,000,000.00 refers to bank acceptance deposit, and a bank deposit of RMB7,019.16 is frozen by the court.

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APPENDIX III

(II) Bills receivable

Category Bank acceptance Total	Balance at the end of the period 1,683,000.00 1,683,000.00	Balance at the beginning of the year –
		–

(III) Accounts receivable

Category Accounts receivable provided for bad debts in groups Total Category Accounts receivable provided for bad debts in groups Total	Balance at the end of the period Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 13,639,047.03 100.00 1,853.00 0.01 13,639,047.03 100.00 1,853.00 0.01 Balance at the beginning of the year Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 8,336,238.95 100.00 1,853.00 0.02 8,336,238.95 100.00 1,853.00 0.02	Balance at the end of the period Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 13,639,047.03 100.00 1,853.00 0.01 13,639,047.03 100.00 1,853.00 0.01 Balance at the beginning of the year Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 8,336,238.95 100.00 1,853.00 0.02 8,336,238.95 100.00 1,853.00 0.02
		0.02

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APPENDIX III

1. Receivables of which provision for bad debts is made on a group basis

(1) Accounts receivables with provision for bad debts based on aging analysis

Age Within 1 year Over 3 years Total	Balance Carrying amount 11,617,538.83 1,853.00 11,619,391.83	at the end of the period Percentage Provision for bad debts % 99.98 – 0.03 1,853.00 100.00 1,853.00	Balance at Carrying amount 6,314,730.75 1,853.00 6,316,583.75	the beginning of the year Percentage Provision for bad debts % 99.97 – 0.03 1,853.00 100.00 1,853.00	the beginning of the year Percentage Provision for bad debts % 99.97 – 0.03 1,853.00 100.00 1,853.00
					1,853.00

2. Other receivables not provided for bad debts

Reasons for no Carrying Bad debt provisions for Name of the debtor amount amount Age bad debts CLFG Longfei Glass Co. Ltd.* 2,019,655.20 – 1–3 years Related party Total 2,019,655.20 – – –

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APPENDIX III

(IV) Prepayments

1. Prepayments by aging analysis:

Age Within 1 year 1–2 years 2–3 years Total	Balance at the end of the period Amount Percentage (%) 9,064,545.57 99.45 48,161.66 0.53 1,900.00 0.02 9,114,607.23 100.00	Balance at the beginning of the year Amount Percentage (%) 1,425,265.64 99.87 1,900.00 0.13 – – 1,427,165.64 100.00	Balance at the beginning of the year Amount Percentage (%) 1,425,265.64 99.87 1,900.00 0.13 – – 1,427,165.64 100.00
			100.00

(V) Other receivables

Category Other receivables provided for bad debts in groups Total Category Other receivables provided for bad debts in groups Total	Balance at the end of the period Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 6,373,410.29 100.00 607,291.60 9.53 6,373,410.29 100.00 607,291.60 9.53 Balance at the beginning of the year Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 8,299,462.76 100.00 604,092.68 7.28 8,299,462.76 100.00 604,092.68 7.28	Balance at the end of the period Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 6,373,410.29 100.00 607,291.60 9.53 6,373,410.29 100.00 607,291.60 9.53 Balance at the beginning of the year Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 8,299,462.76 100.00 604,092.68 7.28 8,299,462.76 100.00 604,092.68 7.28
		7.28

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APPENDIX III

1. Other receivables of which provision for bad debts is made on a group basis

(1) Other receivables with provision for bad debts based on aging analysis

Age Within 1 year 1–2 years 2–3 years Over 3 years Total	Balance at the end of the period Carrying amount Percentage Provision for bad debts % 1,203,622.72 66.19 – 10,654.00 0.59 3,196.20 13.60 0.00 6.80 604,088.60 33.22 604,088.60 1,818,378.92 100.00 –	Balance at the beginning of the year Carrying amount Percentage Provision for bad debts % 782,215.20 56.42 – 13.60 – 4.08 – – – 604,088.60 43.58 604,088.60 1,386,317.40 100.00 604,092.68

2. Other receivables not provided for bad debts

Name of the debtor Estimated tax Dengfeng CLFG Silicon Co., Ltd. Total	Carrying amount Bad debt amount Age Reasons for no provisions for bad debts 4,319,428.43 Within 1 year VAT receipts to be certified 235,602.94 Within 1 year Related party 4,555,031.37

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APPENDIX III

(VI) Inventories

1. Classification of inventories

Item Raw materials Semi-finished goods and work in process Products in stock Revolving materials Total	Balance Carrying amount 28,435,525.09 4,328,212.73 47,250,170.73 7,560,152.88 87,574,061.43	at the end of the period Provision for impairment Book value 2,680,591.83 25,754,933.26 1,504,465.31 2,823,747.42 20,466,183.01 26,783,987.72 507,698.02 7,052,454.86 25,158,938.17 62,415,123.26	Balance at the beginning of the year Carrying amount Provision for impairment Book value 26,802,774.75 2,067,520.66 24,735,254.09 2,361,159.11 464,845.58 1,896,313.53 33,138,004.20 8,408,636.60 24,729,367.6 8,151,066.54 533,434.44 7,617,632.1 70,453,004.60 11,474,437.28 58,978,567.32

2. Provision for inventories written down

Item Raw materials Semi-finished goods and work in process Products in stock Revolving materials Total	Balance at the beginning of the year 2,067,520.66 464,845.58 8,408,636.60 533,434.44 11,474,437.28	Provision 613,071.17 1,039,619.73 12,218,605.83 – 13,871,296.73	Decrease in current period Written-off Reversal – – – – – 161,059.42 – 25,736.42 – 186,795.84	Balance at the end of the period 2,680,591.83 1,504,465.31 20,466,183.01 507,698.02
				25,158,938.17

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APPENDIX III

(VII) Other current assets

Item Deductible tax Total	Balance at the end of the period 16,047,871.45 16,047,871.45	Balance at the beginning of the year 8,596,514.23
		8,596,514.23

(VIII) Fixed assets

1. Classification of fixed assets

		Balance at			Balance at
		the beginning	Increase in	Decrease in	the end of
Item		of the year	current period	current period	the period
I. Total	original book value	367,175,228.42	398,069.08	12,805,150.92	354,768,146.58
Including: Buildings		97,123,696.77	–	–	97,123,696.77
	Machinery	268,423,252.26	236,339.57	12,805,150.92	255,854,440.91
	Transportation
	equipment	1,628,279.39	161,729.51	–	1,790,008.90
II. Total	of accumulated
depreciation		125,671,964.42	9,911,986.64	3,653,343.14	131,930,607.92
Including: Buildings		18,921,108.10	1,367,325.11	–	20,288,433.21
	Machinery	105,645,127.00	8,486,244.65	3,653,343.14	110,478,028.51
	Transportation
	equipment	1,105,729.32	58,416.88	–	1,164,146.20

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APPENDIX III

	Balance at			Balance at
	the beginning	Increase in	Decrease in	the end of
Item	of the year	current period	current period	the period
III. Total net book value of
fixed assets	241,503,264.00	–	–	222,837,538.66
Including: Buildings	78,202,588.67	–	–	76,835,263.56
Machinery	162,778,125.26	–	–	145,376,412.40
Transportation
equipment	522,550.07	–	–	625,862.70
IV. Total provisions for impairment	3,612,118.97	–	–	3,612,118.97
Including: Machinery	3,612,118.97	–	–	3,612,118.97
V. Total book value of fixed assets	237,891,145.03	–	–	219,225,419.69
Including: Buildings	78,202,588.67	–	–	76,835,263.56
Machinery	159,166,006.29	–	–	141,764,293.43
Transportation
equipment	522,550.07	–	–	625,862.70

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APPENDIX III

(IX) Construction in progress

Item Flue gas treatment and residual heat generation project Fuel substitute project for petroleum coke powder of No. 1 Line Fuel substitute project for petroleum coke powder of No. 2 Line Desulfurization and denitrification and waste heat boiler project of No. 1 Line Co-combustion project of coke oven gas and natural gas of No. 2 Line Additional air compressor project Green project Redevelopment project of staff canteen Redevelopment project of office building Upgrading and reconstruction project of No. 1 Line Total	Balance at the end of the Carrying amount Provision for impairments 156,237.20 156,237.20 2,559,611.00 – 1,000,000.00 – 21,938,016.67 – 242,324.00 – 402,127.00 – 1,007,886.00 – 261,000.00 – 1,600.00 – 87,992.56 – 27,656,794.43 156,237.20	period Book value – 2,559,611.00 1,000,000.00 21,938,016.67 242,324.00 402,127.00 1,007,886.00 261,000.00 1,600.00 87,992.56 27,500,557.23	Balance at the beginning of the period Carrying amount Provision for impairments Book value 156,237.20 156,237.20 – – – – – – – – – – – – – – – – – – – – – – – – – – – – 156,237.20 156,237.20 –	Balance at the beginning of the period Carrying amount Provision for impairments Book value 156,237.20 156,237.20 – – – – – – – – – – – – – – – – – – – – – – – – – – – – 156,237.20 156,237.20 –
				–

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APPENDIX III

(X) Intangible assets

		Balance at		Decrease in	Balance at
		the beginning	Increase in	current	the end of
Item		of the year	current period	period	the period
I. Total original amount		13,652,200.00	–	–	13,652,200.00
Including:	Land use rights	8,652,200.00	–	–	8,652,200.00
	Trademark rights	5,000,000.00	–	–	5,000,000.00
II. Total accumulated amortization		5,453,695.00	284,335.00	–	5,738,030.00
Including:	Land use rights	912,000.00	76,000.00	–	988,000.00
	Trademark rights	4,541,695.00	208,335.00	–	4,750,030.00
III. Total provisions for impairment
on intangible assets
IV. Total book value of intangible
assets		8,198,505.00	–	–	7,914,170.00
Including:	Land use rights	7,740,200.00	–	–	7,664,200.00
	Trademark rights	458,305.00	–	–	249,970.00

(XI) Other non-current assets

Item Prepayments for projects and equipments Total	Balance at the end of the period 1,018,229.85 1,018,229.85	Balance at the beginning of the year 3,020,000.00
		3,020,000.00

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APPENDIX III

(XII) Short-term borrowings

1. Classification of short-term borrowings

Lending condition Credit loans Total (XIII) Notes payable Item Bank acceptance Total (XIV) Accounts payable 1. *Aging analysis* Item Within 1 year (including 1 year) 1–2 years (including 2 years) 2–3 years (including 3 years) More than 3 years Total	Balance at the end of the period 135,089,000.00 135,089,000.00 Balance at the end of the period 5,000,000.00 5,000,000.00 Balance at the end of the period 118,345,424.25 222,083,291.32 83,976,447.79 11,028,350.45 435,433,513.81	Balance at the beginning of the year 135,089,000.00 135,089,000.00 Balance at the beginning of the year – – Balance at the beginning of the year 262,080,282.88 86,542,991.12 2,094,859.69 10,612,700.75 361,330,834.44

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APPENDIX III

2. Significant accounts payable aging over one year

Name of creditor Longyang Glass Company Limited China National Building Material International Engineering Group Company Limited Total	Balance due Age Reason for non-repayment 203,100,087.99 1 to 2 years Lack of liquidity 74,970,717.95 2 to 3 years Lack of liquidity 278,070,805.94 – –

(XV) Payments received in advance

1. By age

Item Within 1 year (including 1 year) More than 1 year Total	Balance at the end of the period 6,407,416.98 876,778.59 7,284,195.57	Balance at the beginning of the year 5,472,651.75 37,872.08
		5,510,523.83

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APPENDIX III

(XVI) Employee benefits payable

Item I. Staff salary, bonus, allowance and subsidies II. Welfare provision III. Social insurance Including: 1. Medical insurance premiums 2. Basic pension premiums 3. Unemployment premiums 4. Work-related injury insurance 5. Birth insurance premium IV. Housing reserve fund V. Labor union expenditures and staff education expenditures Total	Balance at the beginning of the year 3,129,450.78 – 222,259.15 52,024.37 170,234.78 – – – 4,316,403.50 2,179,915.57 9,848,029.00	Increase in current period 8,691,946.24 758,268.70 2,370,807.25 520,488.70 1,599,534.90 143,869.63 59,382.73 47,531.29 640,493.50 143,029.19 12,604,544.88	Decrease in current period 9,122,776.85 758,268.70 2,449,115.79 534,726.54 1,663,605.60 143,869.63 59,382.73 47,531.29 – 225.00 12,330,386.34	Balance at the end of the period 2,698,620.17 – 143,950.61 37,786.53 106,164.08 – – – 4,956,897.00 2,322,719.76
				10,122,187.54

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APPENDIX III

(XVII) Tax payable

Tax Business tax City maintenance and construction tax Property tax Land use tax Individual income tax Other taxes Total	Balance at the end of the period 14,166.67 708.33 230,199.64 584,527.53 18,650.72 59,761.84 908,014.73	Balance at the beginning of the year – – 828,718.68 2,104,299.06 4,428.56 59,053.51
		2,996,499.81

(XVIII) Other payables

Item Within 1 year (including 1 year) 1–2 years (including 2 years) 2–3 years (including 3 years) More than 3 years Total	Balance at the end of the period Amount Percentage (%) 74,358,701.01 66.81 15,086,876.99 13.56 13,087,391.58 11.76 8,755,445.35 7.87 111,288,414.93 100.00	Balance at the beginning of the year Amount Percentage (%) 44,526,916.36 65.48 13,588,947.09 19.98 2,874,997.73 4.23 7,007,547.60 10.31 67,998,408.78 100.00	Balance at the beginning of the year Amount Percentage (%) 44,526,916.36 65.48 13,588,947.09 19.98 2,874,997.73 4.23 7,007,547.60 10.31 67,998,408.78 100.00
			100.00

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APPENDIX III

1. Explanation on significant accounts payable aging over one year

Name of unit Longyang Glass Company Limited* Total	Amount Nature or content of other payables 26,368,430.01 Loan 26,368,430.01 –

(XIX) Non-current liabilities due within one year

Category Long-term borrowings due within one year Total	Balance at the end of the period 1,440,000.00 1,440,000.00	Balance at the beginning of the year 1,440,000.00 1,440,000.00

(XX) Long-term loans

Lending conditions Credit loans Total	Balance at the end of the period 13,760,000.00 13,760,000.00	Balance at the beginning of the year 14,360,000.00 14,360,000.00

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APPENDIX III

(XXI) Paid-up capital

Name of investor Longyang Glass Company Limited Total Surplus reserve Item* Statutory surplus reserve Total	Balance at the beginning of the year Increase in current period Decrease in current period Investment amount Percentage % 50,000,000.00 100.00% – – 50,000,000.00 100.00% – – Balance at the beginning of the year Increase in current period 1,893,043.17 – 1,893,043.17 –	Balance at the end of the period Investment amount Percentage % 50,000,000.00 100.00% 50,000,000.00 100.00% Decrease in current period Balance at the end of the period – 1,893,043.17 – 1,893,043.17	Balance at the end of the period Investment amount Percentage % 50,000,000.00 100.00% 50,000,000.00 100.00% Decrease in current period Balance at the end of the period – 1,893,043.17 – 1,893,043.17
			1,893,043.17

(XXII) Surplus reserve

(XXIII) Returned earnings

	Balance at the end of the period	Balance at the end of the period
		Proportion of
		withdrawal or
Item	Amount	distribution
Returned earnings for the previous year before
adjustment	-316,299,477.71	–
Returned earnings at the beginning of the year after
adjustment	-316,299,477.71	–
Add: Net profit for the period	-85,785,848.29	–
Retained earnings at the end of the period	-402,085,326.00	–

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APPENDIX III

(XXIV) Operating income and operating cost

Item I. Sub-total of principal operations Float glass II. Sub-total of other operations Including: Sales materials Rentals for premises Total	January–May 2015 Income Cost 94,053,277.44 151,300,031.15 94,053,277.44 151,300,031.15 1,046,040.02 658,004.35 762,706.69 658,004.35 283,333.33 – 95,099,317.46 151,958,035.50	The year Income 244,742,070.38 244,742,070.38 1,220,032.30 540,032.30 680,000.00 245,962,102.68	of 2014 Cost 318,342,552.56 318,342,552.56 522,234.09 522,234.09 –
			318,864,786.65

(XXV) Business taxes and surcharges

Item Payment basis Business tax 5% of rent income City maintenance and construction tax 5% of turnover tax Educational surcharges (including local education surcharge) 5% of turnover tax Total	January– May 2015 14,166.67 708.33 708.33 15,583.33	The year of 2014 34,000.00 4,161.54 4,161.54
		42,323.08

(XXVI) Selling expenses

Item Staff’s salary and welfare Social insurance Depreciation expenses Transportation costs Other selling expenses Total	January–May 2015 1,988,140.00 324,194.32 435,357.21 1,223,175.08 866,746.10 4,837,612.71	The year of 2014 4,334,274.71 747,519.95 919,108.66 1,163,081.88 2,319,463.07
		9,483,448.27

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APPENDIX III

(XXVII) Administration expenses

Item Staff’s salary and welfare Labor union expenditures Social Insurance Housing reserve fund Fixed asset depreciation Amortization of intangible assets Tax Other administration expenses Total (XXVIII) Financial expense Item Interest expense Less: interest income Interest from discounted bills Other expense Total	January–May 2015 2,279,244.64 143,029.19 754,709.94 119,255.00 1,279,389.64 284,335.00 814,727.17 2,810,957.34 8,485,647.92 January–May 2015 740,291.32 564.07 61,855.89 51,143.70 852,726.84	The year of 2014 5,758,421.82 309,850.50 1,954,298.45 263,273.50 3,354,855.71 682,404.00 1,958,605.16 7,172,838.85 21,454,547.99 The year of 2014 8,590,044.74 1,156.33 2,692,620.52 9,458.72 11,290,967.65

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APPENDIX III

(XXIX) Assets impairment losses

Item I. Losses on bad debts II. Losses on decrease in inventory III. Impairment loss on fixed assets IV. Impairment loss on construction in progress Total (XXX) Non-operating income Item Compensation from breaching of contracts Others Total (XXXI) Non-operating expenses Item Loss on asset retirement and damage Compensation, penalties and fines Others Total	January–May 2015 3,198.92 13,871,296.73 – – 13,874,495.65 January–May 2015 – 3,490.50 3,490.50 January–May 2015 – 864,554.30 – 864,554.30	The year of 2014 104,120.58 21,644,041.54 786,624.09 156,237.20 22,691,023.41 The year of 2014 20,800.00 1,091,353.58 1,112,153.58 The year of 2014 1,589,792.46 – 400,000.00 1,989,792.46

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FINANCIAL INFORMATION OF LONGHAO COMPANY

APPENDIX III

(XXXII) Cash flow statement

1. Supplementary information of cash flow statement

	January–May	The year of
Item	2015	2014
1. Net profit adjusted to cash flow of operating activities:
Net Profit	-85,785,848.29	-138,742,633.25
Add: Provision for assets impairment	13,874,495.65	22,691,023.41
Depreciation of fixed assets, depletion of oil and gas assets,
depreciation of productive biological assets	9,911,986.64	24,204,539.64
Amortization of intangible assets	284,335.00	682,404.00
Losses on scrapping of fixed assets (“–” for gains)	–	1,589,792.46
Finance expenses (“–” for gains)	740,291.32	11,282,665.26
Decrease in inventories (“–” for increase)	-17,121,056.83	-30,759,086.97
Decrease in operating receivables (“–” for increase)	-12,747,197.20	-108,588,939.06
Increase in operating payables (“–” for decrease)	94,239,111.76	134,453,734.61
Net cash flow from operating activities	3,396,118.05	-83,186,499.90
2. Significant investing and financing activities that do not
involve cash receipts and payment:
3. Net changes in cash and cash equivalents:
Cash balance at the end of the period	803,733.16	4,682.11
Less: Cash balance at the beginning of the year	4,682.11	36,702.00
Net increase in cash and cash equivalents	799,051.05	-32,019.89

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FINANCIAL INFORMATION OF LONGHAO COMPANY

APPENDIX III

2. Cash and cash equivalents

		Balance at	Balance at
		the end of	the beginning of
Item		the year	the year
I.	Cash	803,733.16	4,682.11
	Including: Cash on hand	690,321.92	1,422.81
	Bank deposit available for
	payment at any time	113,411.24	3,259.30
II.	Cash equivalents	–	–
III.	Cash and cash equivalents at
	the end of the period	803,733.16	4,682.11

VI. CONTINGENCIES

Nil

VII. COMMITMENTS

Nil

VIII. EVENTS AFTER BALANCE SHEET DATE

Nil

IX. RELATED PARTY RELATIONSHIP AND TRANSACTIONS

(I) Parent company

Name of parent			Registered	Equity interest	Voting share in
company	Registered address	Nature of business	capital	in the Company	the Company
				(%)	(%)
Luoyang Glass	Xigong District,	Float glass	500,018,242.00	100	100
Company Limited	Luoyang City	production, sales
		etc.

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FINANCIAL INFORMATION OF LONGHAO COMPANY

APPENDIX III

(II) Other related parties

Relationship with

	Relationship with
Name of other related parties	the Company	Organization code
China National Building Material Group	Ultimate controller	10000048-9
Corporation
China Luoyang Float Glass (Group)	Controlling shareholder of Parent	16995844-1
Company Limited	Company
CLFG Longfei Glass Co., Ltd.	Under the control of the same de	72183822-5
	facto controller
CLFG Longxiang Glass Co. Ltd.	Under the control of the same de	17484994-4
	facto controller
CLFG Longhai Electronic Glass Limited	Under the control of the same de	77650338-5
	facto controller
CLFG Longmen Glass Co. Ltd.	Under the control of the same de	70654225-8
	facto controller
Dengfeng CLFG Silicon Co. Ltd.	Under the control of the same de	66886639-X
	facto controller
CLFG Yuantong Energy Co., Ltd.	Enterprise in which the original	57247960-0
	director of the shareholders holds
	directorship
Shenzhen Kaisheng Science and	Under the control of the same de	73627908-3
Technology Engineering Company	facto controller
Limited
Triumph Bengbu Engineering and	Under the control of the same de	76476295-3
Technology Company Limited	facto controller
Bengbu Glass Industry Design Institute	Under the control of the same de	48522242-8
	facto controller
China Triumph International Engineering	Under the control of the same de	10201628-1
	facto controller
Dengfeng Delong Silicon Co., Ltd.	Other connected persons	56862517-7
Luoyang New Jingrun Engineering Glass	Under the control of the same de	67006782-9
Co., Ltd.	facto controller
Triumph Technology Group Company	Under the control of the same de	10192351-7
	facto controller

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FINANCIAL INFORMATION OF LONGHAO COMPANY

APPENDIX III

(III) Related party transactions

1. Purchase and sales of goods and providing and receiving of services

	Content of
	connected	January–	The year
Name of related parties	transactions	May 2015	of 2014
Luoyang Glass Company Limited	Sales of glass	3,113,317.67	215,853,984.02
Luoyang New Jingrun Engineering	Sales of glass	568,469.55	–
Glass Co., Ltd.
CLFG Longhai Electronic Glass	Sales of auxiliary	–	308,431.94
Limited	materials
Luoyang Glass Company Limited	Purchase of raw	10,760,616.14	113,347,258.20
	materials
Luoyang Glass Company Limited	Receive technical	–	3,495,724.96
	services
Luoyang Glass Company Limited	Purchase of pallet	–	2,583,248.89
	and auxiliary
	materials
Luoyang Glass Company Limited	Purchase of electric	–	10,535.63
	cabinet
CLFG Longhai Electronic Glass	Purchase of cullet	301,806.50	2,836,430.29
Limited	and pallet
CLFG Longmen Glass Co., Ltd.	Purchase of cullet,	–	2,315,632.55
	pallet and
	auxiliary materials
CLFG Yuantong Energy Co., Ltd.	Purchase of natural	64,324,496.24	112,263,947.26
	gas
China Luoyang Float Glass	Purchase of glass	–	6,350,523.35
(Group) Company
China Luoyang Float Glass	Purchase of materials	–	3,928,654.87
(Group) Company
CLFG Longfei Glass Co., Ltd.	Purchase of steel	–	28,464.61
	strip

— 215 —

FINANCIAL INFORMATION OF LONGHAO COMPANY

APPENDIX III

2. Lease of related party

==> picture [400 x 361] intentionally omitted <==

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

Effect of
profit or loss
of lease on
the Company
Basis for during the
Amount of the Starting date Ending date amounts determining reporting
Lesser Lessee Lease assets leased assets of lease of lease from lease such gain period
CLFG Longhao Glass China Luoyang Float Land use rights of RMB680,000 2015-1-1 2015-12-31 RMB680,000 cost plus 283,333.33
Co. Ltd. Glass (Group) Company 183.30 Mu /year
China Luoyang Float CLFG Longhao Glass 600t/d online LOW-E RMB31.90 2014-6-1 2017-5-31 RMB31.90 cost plus 11,684,493.80
Glass (Group) Company Co., Ltd. production line milion milion/year
3. Related party guarantees
Guarantee Start date End date of Guarantee
Guarantor The guaranteed amount of guarantee guarantee fulfilled or not
China National CLFG Longhao Glass 15,200,000.00 2013/9/26 2017/1/31 No
Building Material Co. Ltd.
Group Corporation
----- End of picture text -----

4. Inter-company lending of related parties

	Amount of
Related parties	lending	Start date	End date	Explanation
Inter-company lending:
Luoyang Glass Company	135,089,000.00	2015-1-1	2015-12-31	Accrued interest for the
Limited				period amounting to
				RMB729,565.44

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APPENDIX III

(IV) Receivables from and payables to related parties

			Balance at the
		Balance at the	beginning of
Project name	Related parties	end of the year	the year
Accounts receivable	CLFG Longfei Glass Co., Ltd.	2,019,655.20	2,019,655.20
Prepayments	CLFG Yuantong Energy Co., Ltd.	4,740,305.04	1,098,495.47
Prepayments	Dengfeng Delong Silicon Co., Ltd.	2,800,000.00	–
Other receivables	Dengfeng CLFG Silicon Co. Ltd.	235,602.94	235,602.94
Accounts payable	Luoyang Glass Company Limited	266,527,845.00	224,369,607.80
Accounts payable	China Triumph International Engineering	84,970,717.95	76,170,717.95
	Company Limited
Accounts payable	CLFG Longhai Electronic Glass Limited	1,037,580.80	684,467.20
Accounts payable	CLFG Longmen Glass Co., Ltd.	443,020.60	423,219.58
Accounts payable	Bengbu Glass Industry Design Institute	94,339.62	94,339.62
Accounts payable	Triumph Bengbu Engineering and Technology	71,820.00	85,820.00
	Company Limited
Accounts payable	CLFG Longxiang Glass Co. Ltd.	75,818.71	75,818.71
Accounts payable	China Luoyang Float Glass (Group) Company	9,392.00	9,392.00
	Limited
Accounts payable	Huali Glass Components Factory of Bengbu	4,517.95	4,517.95
	Glass Design Institute
Payments received in	Luoyang New Jingrun Engineering Glass Co.,	9,268.59	–
advance	Ltd.
Other payables	China Luoyang Float Glass (Group) Company	39,980,332.06	28,282,238.26
	Limited
Other payables	Luoyang Glass Company Limited	27,097,995.45	26,368,430.01
Other payables	Triumph Bengbu Engineering and Technology	936,100.00	936,100.00
	Company Limited
Other payables	China Triumph International Engineering Co.,	600,000.00	600,000.00
	Ltd.
Other payables	Shenzhen Triumph Technology Engineering	300,000.00	300,000.00
	Co., Ltd., Bengbu Branch
Other payables	Triumph Technology Group Company	18,000,000.00	–

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FINANCIAL INFORMATION OF LONGHAO COMPANY

APPENDIX III

X. OTHER IMPORTANT MATTERS

1. Litigation matters pending as at 31 May 2015

(1) Luoyang Sanyuan Packing Co., Ltd. applying for arbitrating Longhao Company for hired work contract disputes

On 1 April 2006 and 1 April 2007, Sanyuan Company signed a Contract of Hired Work on Wooden Case with Longhao Company. Sanyuan Company manufactured wooden cases for glass packing required by Longhao Company. Longhao Company has partial unpaid payment for goods. On July 2013, Sanyuan Company applied for arbitration as agreed in the contract. On 23 December 2013, Luoyang Arbitration Commission gave a ruling claiming Longhao Company to pay RMB6,087,381.18 for goods and interests thereof. As at 31 May 2015, there was still RMB4,975,203.18 unpaid debt.

(2) Luoyang Lvhuan Environment Engineering Company Limited ( 洛陽市綠環環保工程有限公司 ) sued Longhao Company and Yuan Xiao Fang ( 袁曉方 ) for default on payment

Luoyang Lvhuan Environment Engineering Company Limited contracted to purchase and install equipment for the flue gas desulfurisation system and for phenol waste-water and waste-water process system of the glass kiln of Longhao Company with partial accounts remained unpaid. On 20 October 2014, Luoyang Lvhuan Environment Engineering Company Limited filed a lawsuit at the People’s Court of Yanshi City, requiring Longhao Company to make the payment of RMB2,145,964.9. The two parties reached a settlement on payment in installation. As at 31 March 2015, balance of RMB1,784,382.45 remained unpaid.

CLFG Longhao Glass Co. Ltd.

15 June 2015

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

The following is the text of the accountants’ report of Longfei Company received from the independent reporting accountants of the Company, WUYIGE Certified Public Accountants LLP.

Auditor’s Report

Daxin Shen Zi [2015] No. 2-00682

To Luoyang Glass Company Limited:

We have audited the accompanying financial statements of CLFG Longfei Glass Co. Ltd. (hereafter referred to as “Longfei Company”), including consolidated balance sheet and balance sheet of the Company as of 31 May 2015, consolidated income statement, income statement of the Company, consolidated cash flow statement, cash flow statement of the Company, consolidated statement of the changes in equity and statement of changes in equity of the Company for January to May 2015, and notes to the financial statements.

I. MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The management of Longfei Company is responsible for the preparation and fair presentation of the financial statements. The responsibility includes: (1) preparation of the financial statements in accordance with the Accounting Standards for Business Enterprises to give a fair view; (2) designing, implementing and maintaining necessary internal controls so that the financial statements are free from material misstatement whether due to fraud or error.

II. AUDITORS’ RESPONSIBILITY

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

III. AUDIT OPINION

In our opinion, the financial statements of Longfei Company have been prepared in accordance with the Accounting Standards for Business Enterprises in all material aspects, and they fairly present the financial position as of 31 May 2015 and the operating results and cash flows of Longfei Company for January to May 2015.

IV. EMPHASIS OF MATTERS

We remind users of the financial statements to the following matter: as mentioned in note 6 (XVII), the accumulative unrecovered loss of Longfei Company as of 31 May 2015 is RMB343,026,367.77, and current liabilities exceeds total assets by RMB268,946,367.77. Longfei Company has fully disclosed the improvement measures to be implemented in note 2 (I), but there still exists a significant uncertainty to going-concern capability, which may lead to the failure in realizing assets and settling indebtness in the ordinary course of business. This passage has no impact on the audit opinion published.

WUYIGE Certified Public Accountants LLP.

Beijing • the PRC

15 June 2015

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

COMBINED BALANCE SHEET

Prepared by: CLFG Longfei Glass Co. Ltd.

31 May 2015 Unit: RMB

Item Note Current assets: Bank balance and cash VI(I) Notes receivable Accounts receivable VI(II) Prepayments Other receivables VI(III) Inventory VI(IV) Other current assets VI(V) Total current assets Non-current assets: Available-for-sale financial assets VI(VI) Fixed assets VI(VII) Construction in progress VI(VIII) Intangible assets VI(IX) Total non-current assets Total assets	Balance at the end of the period 246,928.70 30,000.00 75,818.71 9,690.54 55,914.10 11,646,815.92 6,662,499.50 18,727,667.47 4,343,500.00 87,597,190.66 698,734.75 2,130,000.00 94,769,425.41 113,497,092.88	Balance at the beginning of the year 90,097.51 – 106,774.28 6,129.21 73,537.31 11,870,069.46 6,710,794.92 18,857,402.69 4,343,500.00 92,543,290.28 698,734.75 2,285,000.00 99,870,525.03 118,727,927.72

— 221 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

Item Note Curent liabilities: Short-term loans VI(X) Accounts payable VI(XI) Payments received in advance VI(XII) Staff remuneration payables VI(XIII) Taxes payable VI(XIV) Other payables VI(XV) Total current liabilities Non-current liabilities: Total non-current liabilities Total liabilities Owners’ equity: Paid-up capital VI(XVI) Retained earnings VI(XVII) Equity attributable to owners of the parent company Total owners’ equity Total liabilities and shareholders’ equities	Balance at the end of the period 72,000,000.00 280,357,365.43 847,078.42 11,267,650.27 3,366,373.00 14,604,993.53 382,443,460.65 – – 382,443,460.65 74,080,000.00 -343,026,367.77 -268,946,367.77 -268,946,367.77 113,497,092.88	Balance at the beginning of the year 72,000,000.00 277,756,207.35 847,078.42 10,169,723.60 2,878,115.22 13,101,611.45 376,752,736.04 – – 376,752,736.04 74,080,000.00 -332,104,808.32 -258,024,808.32 -258,024,808.32 118,727,927.72

— 222 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

BALANCE SHEET OF THE PARENT COMPANY

Prepared by: CLFG Longfei Glass Co. Ltd.
31 May 2015
Item
Note
Balance at the
end of the period
Current assets:
Bank balance and cash
239,236.52
Notes receivable
30,000.00
Accounts receivable
XI(I)
–
Prepayments
9,690.54
Other receivables
XI(II)
52,414.10
Inventory
10,023,548.35
Other current assets
6,659,103.27
Total current assets
17,013,992.78
Non-current assets:
Available-for-sale financial assets
4,343,500.00
Fixed assets
50,966,938.94
Construction in progress
5,700.00
Intangible assets
2,130,000.00
Total non-current assets
57,446,138.94
Total assets
74,460,131.72

Unit: RMB
Balance at the
beginning of
the year
83,316.55
–
30,955.57
6,129.21
68,637.31
10,246,801.89
6,710,794.92
17,146,635.45
4,343,500.00
53,947,310.14
5,700.00
2,285,000.00
60,581,510.14
77,728,145.59

— 223 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

Item
Note
Balance at the
end of the period
Curent liabilities:
Short-term loans
72,000,000.00
Accounts payable
168,723,028.34
Payments received in advance
251,012.69
Staff remuneration payables
8,821,076.55
Taxes payable
2,102,541.51
Other payables
38,813,142.95
Total current liabilities
290,710,802.04
Non-current liabilities:
–
Total non-current liabilities
–
Total liabilities
290,710,802.04
Owners’ equity:
Paid-up capital
74,080,000.00
Capital reserve
23,834.78
Surplus reserve
2,881,170.00
Retained earnings
-293,235,675.10
Total owners’ equity
-216,250,670.32
Total liabilities and shareholders’ equities
74,460,131.72

Balance at the
beginning of
the year
72,000,000.00
166,145,167.37
251,012.69
8,115,551.50
1,692,594.29
38,575,913.48
286,780,239.33
–
–
286,780,239.33
74,080,000.00
23,834.78
2,881,170.00
-286,037,098.52
-209,052,093.74
77,728,145.59

— 224 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

COMBINED INCOME STATEMENT

January to May 2015 Unit: RMB


Prepared by: CLFG Longfei Glass Co. Ltd.	January to May 2015		Unit: RMB
		January to	For the
Item	Note	May 2015	year 2014
I. Operating revenue	VI(XVIII)	168,461.88	592,378.26
Less: Operating costs	VI(XVIII)	223,337.54	506,716.24
Business taxes and surcharges		–	3,080.11
Selling expenses	VI(XIX)	474,460.07	1,205,340.31
Administration expenses	VI(XX)	8,980,141.98	24,882,707.24
Finance expenses	VI(XXI)	1,605,638.90	3,883,851.68
Impairment loss on assets	VI(XXII)	49,578.78	6,600,961.25
Investment income	VI(XXIII)	–	5,447,976.24
II. Operating Profit		-11,164,695.39	-31,042,302.33
Add: Non-operating income	VI(XXIV)	252,413.61	484,239.99
Including: Gains from disposal of
non-current assets		–	463,202.60
Less: Non-operating expenses	VI(XXV)	9,277.67	3,266,615.24
Including: Loss from disposal of
non-current assets		–	647,671.51
III. Total profit		-10,921,559.45	-33,824,677.58
IV. Net profit		-10,921,559.45	-33,824,677.58
Including: Net profit attributable to owners
of the parent company		-10,921,559.45	-33,824,677.58
V. Net other comprehensive income after taxes		–	–
VI. Total comprehensive income		-10,921,559.45	-33,824,677.58
(I) Total comprehensive income attributable
to owners of the parent company		-10,921,559.45	-33,824,677.58
(II) Total comprehensive income attributable
to minority shareholders

— 225 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

INCOME STATEMENT OF PARENT COMPANY

Prepared by: CLFG Longfei Glass Co. Ltd.	January to May 2015	January to May 2015	Unit: RMB
		January to	For the
Item	Note	May 2015	year 2014
I. Operating revenue		168,461.88	348,175.81
Less: Operating costs		223,337.54	305,764.11
Business taxes and surcharges		–	2,669.75
Selling expenses		280,262.12	710,172.35
Administration expenses		5,462,411.35	14,302,618.10
Finance expenses		1,605,243.41	3,882,467.31
Impairment loss on assets		48,178.78	4,037,370.17
Investment income	XI(IV)	–	5,447,976.24
II. Operating Profit		-7,450,971.32	-17,444,909.74
Add: Non-operating income		252,413.61	338,921.50
Including: Gains from disposal of
non-current assets		–	326,471.43
Less: Non-operating expenses		18.87	3,266,615.24
Including: Loss from disposal of
non-current assets		–	647,671.51
III. Total profit		-7,198,576.58	-20,372,603.48
IV. Net profit		-7,198,576.58	-20,372,603.48
V. Net other comprehensive income after taxes		–	–
VI. Total comprehensive income		-7,198,576.58	-20,372,603.48

— 226 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

COMBINED CASH FLOW STATEMENT

Prepared by: CLFG Longfei Glass Co. Ltd.
January to May 2015
Item
Note
January to
May 2015
I.
Cash flows from operating activities:
Cash received from sale of goods or
rendering of services
168,461.88
Other cash received from activities
related to operation
1,649,943.88
Sub-total of cash inflow from
operating activities
1,818,405.76
Cash paid for goods purchased and
services rendered
19,158.00
Cash paid to and on behalf of employees
1,531,311.15
Tax payments
18,882.82
Other cash paid for activities related
to operation
92,222.60
Sub-total of cash outflow from
operating activities
1,661,574.57
Net cash flow from operating activities
156,831.19

Unit: RMB
For the
year 2014
42.32
6,580,522.05
6,580,564.37
1,449,252.58
5,077,567.63
21,123.80
1,278,272.11
7,826,216.12
-1,245,651.75

— 227 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

Item Note II. Cash flows from investment activities: Cash received from return of investments Sub-total of cash inflow from investment activities Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets Sub-total of cash outflow from investment activities Net cash flow from investment activities III. Cash flows from financing activities: Net cash flow from financing activities IV. Effects of changes in exchange rate on cash and cash equivalents V. Net increase in cash and cash equivalents Add: Opening balance of cash and cash equivalents VI. Closing balance of cash and cash equivalents	January to May 2015 – – – – – – – 156,831.19 90,097.51 246,928.70	For the year 2014 1,224,570.83 1,224,570.83 20,000.00 20,000.00 1,204,570.83 – – – -41,080.92 131,178.43 90,097.51

— 228 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

CASH FLOW STATEMENT OF PARENT COMPANY

Prepared by: CLFG Longfei Glass Co. Ltd.
January to May 2015
Item
Note
January to
May 2015
I.
Cash flows from operating activities:
Cash received from sale of goods or
rendering of services
168,461.88
Other cash received from activities
related to operation
1,649,939.37
Sub-total of cash inflow from
operating activities
1,818,401.25
Cash paid for goods purchased and
services rendered
19,158.00
Cash paid to and on behalf of employees
1,531,311.15
Tax payments
2,497.63
Other cash paid for activities related
to operation
109,514.50
Sub-total of cash outflow from
operating activities
1,662,481.28
Net cash flow from operating activities
155,919.97

Unit: RMB
For the
year 2014
42.32
6,922,291.42
6,922,333.74
1,424,252.58
5,063,887.63
18,064.65
1,662,297.11
8,168,501.97
-1,246,168.23

— 229 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

Item Note II. Cash flows from investment activities: Cash received from return of investments Sub-total of cash inflow from investment activities Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets Sub-total of cash outflow from investment activities Net cash flow from investment activities III. Cash flows from financing activities: Net cash flow from financing activities IV. Effects of changes in exchange rate on cash and cash equivalents V. Net increase in cash and cash equivalents Add: Opening balance of cash and cash equivalents VI. Closing balance of cash and cash equivalents	January to May 2015 – – – – – – – – 155,919.97 83,316.55 239,236.52	For the year 2014 1,224,570.83 1,224,570.83 20,000.00 20,000.00 1,204,570.83 – – – -41,597.40 124,913.95 83,316.55

— 230 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

COMBINED STATEMENT OF CHANGES IN OWNERS’ EQUITY

Prepared by: CLFG Longfei Glass Co. Ltd.

January to May 2015

Unit: RMB

January to May 2015

Item
I.
Balance at the end of last year
II. Balance at the beginning of the year
III. Increase/decreased in the period
(decrease is represented by “–”)
(I) Total comprehensive income
IV. Balance at the end of the period

Equity attributable to owners of the parent company
Total
owners’ equity
Paid-in
share capital
Undistributed
profits
Sub-total
74,080,000.00
-332,104,808.32
-258,024,808.32
-258,024,808.32
74,080,000.00
-332,104,808.32
-258,024,808.32
-258,024,808.32
–
-10,921,559.45
-10,921,559.45
-10,921,559.45
–
-10,921,559.45
-10,921,559.45
-10,921,559.45
74,080,000.00
-343,026,367.77
-268,946,367.77
-268,946,367.77

For the year 2014

Item
I. Balance at the end of last year
II. Balance at the beginning of the year
III. Increase/decreased in the period
(decrease is represented by “–”)
(I)
Total comprehensive income
IV. Balance at the end of the period

Equity attributable to owners of the parent company
Total
owners’ equity
Paid-in
share capital
Undistributed
profits
Sub-total
74,080,000.00
-298,280,130.74
-224,200,130.74
-224,200,130.74
74,080,000.00
-298,280,130.74
-224,200,130.74
-224,200,130.74
–
-33,824,677.58
-33,824,677.58
-33,824,677.58
–
-33,824,677.58
-33,824,677.58
-33,824,677.58
74,080,000.00
-332,104,808.32
-258,024,808.32
-258,024,808.32

— 231 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

STATEMENT OF CHANGES IN EQUITY OF THE PARENT COMPANY

Prepared by: CLFG Longfei Glass Co. Ltd.

January to May 2015 Unit: RMB

		January to May 2015	January to May 2015	January to May 2015
	Paid-in			Undistributed	Total
Item	share capital	Capital reserve	Surplus reserve	profits	owners’ equity
I. Balance at the end of last year	74,080,000.00	23,834.78	2,881,170.00	-286,037,098.52	-209,052,093.74
II. Balance at the beginning of the year	74,080,000.00	23,834.78	2,881,170.00	-286,037,098.52	-209,052,093.74
III. Increase/decreased in the period (decrease is
represented by “–”)	–	–	–	-7,198,576.58	-7,198,576.58
(I) Total comprehensive income	–	–	–	-7,198,576.58	-7,198,576.58
IV. Balance at the end of the period	74,080,000.00	23,834.78	2,881,170.00	-293,235,675.10	-216,250,670.32
			For the year 2014
	Paid-in			Undistributed	Total owners’
Item	share capital	Capital reserve	Surplus reserve	profits	equity
I. Balance at the end of last year	74,080,000.00	23,834.78	2,881,170.00	-265,664,495.04	-188,679,490.26
II. Balance at the beginning of the year	74,080,000.00	23,834.78	2,881,170.00	-265,664,495.04	-188,679,490.26
III. Increase/decreased in the period (decrease is
represented by “–”)	–	–	–	-20,372,603.48	-20,372,603.48
(I) Total comprehensive income	–	–	–	-20,372,603.48	-20,372,603.48
IV. Balance at the end of the period	74,080,000.00	23,834.78	2,881,170.00	-286,037,098.52	-209,052,093.74

— 232 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

NOTES TO THE FINANCIAL STATEMENTS

(In these notes, all amounts are expressed in RMB unless otherwise stated)

I. BASIC INFORMATION OF THE COMPANY

CLFG Longfei Glass Co. Ltd. (hereinafter referred to as the “Company”) is a company jointly established by China Luoyang Float Glass (Group) Company Limited, Luoyang Glass Company Limited and Henan Mianchi Float Glass Plant by way of investment on 27 September 2000. The registered capital of the Company was RMB74.08 million, RMB7.4 million, RMB40 million and RMB26.68 million out of which were contributed by China Luoyang Float Glass (Group) Company Limited, Luoyang Glass Company Limited and Henan Mianchi Float Glass Plant respectively, representing 9.99%, 53.99% and 36.02% of registered capital of the Company, respectively. On 16 December 2009, both these shareholders entered into an equity transfer agreement, pursuant to which, China Luoyang Float Glass (Group) Company Limited transferred 9.99% of equity interests in the Company to Luoyang Glass Company Limited*. The Company completed the registration of transfer of shares on 31 December 2009. As of 31 May 2015, the capital structure of the Company is as follows:

Name of shareholder Luoyang Glass Company Limited Henan Mianchi Float Glass Plant Total	Contribution 47,400,000.00 26,680,000.00 74,080,000.00	Ratio of contribution (%) 63.98 36.02 100.00

Registered address of the Company: Huanghua Industrial Park, Mianchi County

Registered Number of business license: 411221000007015

Legal representative: Song Jianming Scope of business: production and sale of float glass; processing and sale of glass and its related raw materials and mineral products; import and export of glass and its related products (goods for which permits are required subject to business licenses issued by the State). Operation period: from 27 September 2006 to 26 September 2016

— 233 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

CLFG Longxiang Glass Co. Ltd. (hereinafter referred to as “Longxiang”), a subsidiary of the Company, was jointly invested and established on 22 September 2005 by 14 shareholders including CLFG Longfei Glass Co. Ltd. ( 洛玻集團龍飛玻璃有限公司 ), Shaoyang Huaxing Building Material Co. Ltd. ( 邵陽市華星建築材料有限公司 ), Hunan Huaihua Hezhong Development Co. Ltd. ( 湖南懷化合眾發展有限公司 ), Henan Jinshan Chemical Co. Ltd. ( 河南金山化工有限責任公司 ), Hubei Yijun Trade Co. Ltd. ( 湖北億均貿易有限公司 ), Changzhou Daming Glass Co. Ltd. ( 常州市大明玻璃有限公司 ), Guangzhou Yuntong Materials Co. Ltd. ( 廣州市雲通物資有限公司 ), Ningbo Shuangning Building Material Glass Co. Ltd. ( 寧波雙寧建材玻璃有限公司 ), Shengli Glass Shop of western city of Yanhu District, Yuncheng Municipal ( 運城市鹽湖區西城勝利玻璃店 ), the Labor Union of CLFG Longfei Glass Co. Ltd.* ( 洛玻集團龍飛玻璃有限公司工會 ), Zheng Qinghong ( 鄭清洪 ), Yan Jun ( 閆軍 ), Wang Qiuping ( 王秋萍 ) and Xue Jiankui ( 薛建奎 ), with a registered capital of 50 million. Its registered address is Yingchi County, Huanghua Industrial Park and business registration number is 411221000007023 with Song Jianming ( 宋建明 ) as its legal representative. Its scope of business is production and sale of float glass, processing and sale of glass and its related raw materials and mineral products.

On 14 January 2008, it was resolved at the general meeting of Longxiang to agree the transfer of the 2% shares held by Wang Qiuping ( 王秋萍 ) in Longxiang to Wang Wenying ( 汪文英 ).

On 27 August 2008, the Company and 13 minority shareholders agreed to take over the 60% shares of Longxiang transferred by the aforesaid 13 shareholders. Longxiang completed the registration of such transfer on 15 January 2009 and has henceforth become a wholly-owned subsidiary of the Company.

The financial statements were reported with approval of the person in charge of the Company.

II. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

(I) Basis of preparation

— 234 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

Despite the accumulated uncovered losses of RMB343,026,367.77 as at 31 May 2015 recorded in the financial statements of the Company and the amount of RMB268,946,367.77 that the current liabilities exceeded over the total assets, the Company believed that it would be able to operate on a going concern basis and repay such liabilities before the debts fall due, mainly due to the fact that the Company will continue to obtain financial support from controlling company, thus there will be sufficient cash resources to meet the needs of future working capital and other operations. Therefore, the financial statements were prepared on a going concern basis. If the above assumption shows to be false, adjustments will have to be made to reduce the assets of the Company to their realizable value and provide for any possible liabilities.

(II) Declaration on compliance with Accounting Standards for Business Enterprises

(III) Accounting period and operating cycle

Accounting year of the Company is the calendar year from January 1 to December 31. One year with 12 months consists an ordinary operating cycle which is the classification criteria for the liquidity of assets and liabilities.

(IV) Reporting currency

The Company’s reporting currency is Renminbi (“RMB”).

(V) Basis of preparation of consolidated financial statement

1. Scope of consolidated financial statement

The Company includes all of its wholly-owned subsidiaries (including individual entities controlled by the Company) in the consolidated financial statement, including the enterprises, the separable components of investee units and structural entities controlled by the Company.

— 235 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

2. Consistency of the accounting policies, balance sheet date and accounting period between the parent company and its subsidiaries

Where the accounting period or accounting policies adopted by a subsidiary are different from those adopted by the Company, necessary adjustments shall be made to the financial statements of such subsidiary based on the accounting policies or accounting period of the Company in preparation of consolidated financial statements.

3. Offsettings in the consolidated financial statements

Based on the balance sheets of the Company and its subsidiaries, all the internal transactions between the parent company and its subsidiaries and those among the subsidiaries are offset in the consolidated financial statements. Owners’ equity of subsidiaries not attributable to the parent company is accounted as minority interest and presented in the “minority interest” under the owners’ equity in consolidated balance sheet. As a deduction of owners’ equity, the long-term equity investments held by subsidiaries in the parent company are regarded as the company group’s treasury shares and presented as ‘less: treasury shares’ under the owners’ equity in the consolidated balance sheet.

4. Accounting of subsidiaries acquired through business combination

Where a subsidiary was acquired during the reporting period, through a business combination involving enterprises under common control, the combination had occurred at the date that the ultimate controlling party first obtained control. The subsidiary’s assets, liabilities, operating results and cash flow have been included in the consolidated financial statement since the beginning of the period during which such combination occurred; where a subsidiary was acquired during the reporting period, through a business combination involving enterprises not under common control, adjustments shall be made to individual financial statements of such subsidiary based on the fair value of identifiable net assets as at the acquisition date in preparation of the consolidated financial statements.

(VI) Standard for determining cash and cash equivalents

The cash determined in preparation of the Company’s statement of cash flow statement represents the Company’s cash on hand and available deposit. Cash equivalents determined in preparation of the statement of cash flow refer to short-term investments with high liquidity that are readily convertible to known amounts of cash and subject to insignificant risk on change in value.

— 236 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(VII) Financial instruments

1. Classification and recognition of financial instruments

— 237 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

2. Measurement of financial instruments

3. Recognition of the fair value of financial assets and financial liabilities by the Company

— 238 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

4. Recognition and measurement of transfer of financial assets and liabilities

When all or part of the current obligation to a financial liability has been terminated, the entire or part of such financial liability shall be derecognized.

5. Impairment of financial assets

When financial assets measured at cost have impairment, the carrying amount of financial assets shall be written down to the present value of estimated future cash flows (excluding any future credit losses that have not been incurred) while provision is made for the difference. The impairment loss is not reversed once it is recognized.

— 239 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

Where there is objective evidence that an impairment loss on available-for-sale financial assets occurs, the cumulative loss arising from the decline in fair value that had been recognized directly in equity is removed from equity and recognized in impairment loss. For en investment in debt instrument classified as available-for-sale on which impairment losses have been recognized, if, in a subsequent period, its fair value increases and the increase can be objectively related to an even occurring after the impairment loss was recognized in profit or loss, the previously recognized impairment loss is reversed and recognized in profit or loss for the current period. For an investment in an equity instrument classified as available-for-sale on which impairment losses have been recognized, the increase in its fair value in a subsequent period is recognized in equity directly.

Specific quantitative criterion on “serious” decrease in their fair value

Decrease in closing fair value relative to the cost has reached or exceeded 50%.

Specific quantitative criterion on “not temporary” decrease in their fair value

Fall for 12 consecutive months.

Cost computing method

Consideration of payment at acquisition (net of cash dividends declared but not yet paid or due but unpaid interest on bonds) and the relevant transaction cost are recognized as the investment cost.

Method for determining closing fair value

Basis for determining the continuous decrease period

The rebound in the continuous fall or the period with the tread of fall is less than 20% margin. Rebound duration not more than six months is treated as continuous decrease period.

— 240 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(VIII) Receivables

1. Receivables individually significant and with provision for bad debts on an individual basis

Basis and criteria for

determining whether a receivable is individually significant
- Balance of carrying amount of over RMB1 million
Provision policies of bad debt It is recognized at the difference between provision for individually the carrying value and the present value of significant receivables estimated future cash flow

2. Receivables with provision for bad debts on a group basis

Basis for determining the groups Nature and risk characteristics

The group with provision for bad debts based on aging analysis

Not individually significant receivables with higher risk when it was grouped according to credit risk characteristics. Receivables with identical age have similar credit risk characteristics.

The group without provision for bad debts
(1) Various margins and deposits related to the production and operations that are fully recoverable upon maturity; (2) Receivables due from related parties with good financial position; (3) Other balances that have positive evidence indicating they are fully recoverable.

— 241 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

P rovision methods for bad debts in group

The group with provision for Aging analysis methods

bad debts based on aging

analysis

The group without provision

for bad debts

In the groups, the provision for bad debts based on aging analysis set out as follows:

	Provision rate	Provision rate	Provision rate
	for	accounts	for other
Age	receivable		receivables
		(%)	(%)
Within 1 year (including 1 year)		0	0
1–2 years		30	30
2–3 years		50	50
3–4 years		100	100
4–5 years		100	100
Over 5 years		100	100

3. Individually insignificant receivables with provision for bad debts on an individual basis

Basis for individual provision

There is objective evidence of impairment

Provision method

It is recognized at the difference between the carrying value and the present value of estimated future cash flow

(IX) Inventories

1. Classification of inventories

Inventories refer to the finished goods or commodities held for sale in daily activities, goods in progress in the production process, consumed materials and supplies in the production process or providing services of the Company, which mainly include raw materials, revolving materials, self-made semi-finished goods and finished goods, etc.

— 242 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

2. Method of costing of sold inventories

The weighted average method is adopted to determine the actual cost of sold inventories upon their delivery.

3. Method of provision for falling prices of inventories

The net realizable value of the inventories is determined based on ① for the finished goods, the net realizable value accounted at the estimated selling price less the estimated selling expenses and related taxes; ② for the items such as materials held for production the net realizable value measured at cost when the finished goods for which they are used in production have higher net realizable value than the cost, or at the estimated selling price after deducting the estimated costs and expected to incur over up to the completion of the production, the estimated selling expenses and related taxes when the decline in the price of materials indicates that the net realizable value of such finished goods is lower than the cost; ③ for items such as materials held for sale, the net realizable value accounted at the market price.

4. Inventory system

The inventory system adopted by the Company is the perpetual inventory system.

5. Amortization methods of low-cost consumables and wrappage

The low-cost consumables are amortized with one-off charge.

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(X) Long-term equity investments

1. Determination of initial investment cost

For a long-term equity investment obtained from business consolidation under common control, the initial cost is measured at the combining party’s share of the carrying amount of the equity of the combined party; for a long-term equity investment obtained from business consolidation not under common control, the initial cost is the consolidation cost at the date of acquisition. For a long-term equity investment acquired by cash, the initial investment cost shall be the total purchase price. For a long-term equity investment acquired by the issue of equity securities, the initial investment cost shall be the fair value of the securities issued. For a long-term equity investment acquired by debt restructuring, the initial investment cost is recognized according to relevant requirements of Accounting Standards for Business Enterprises No. 12 – Debt Restructuring. For a long-term equity investment acquired by exchange of non-monetary assets, the initial investment cost is recognized according to relevant standards and regulations.

2. Subsequent measurement and profit or loss recognition

Where the investor has a control over the investee, long-term equity investments are measured using cost method. Long-term equity investments in associates and joint ventures are measured using equity method. Where part of the equity investments of an investor in its associates are held indirectly through venture investment institutions, common fund, trust companies or other similar entities including investment linked insurance funds, such part of equity investments indirectly held by the investor shall be measured at fair value through profit or loss according to according to relevant requirements of Accounting Standards for Business Enterprises No. 22 – Recognizition and measurement of Financial Instruments regardless whether the above entities have significant influence on such part of equity investments, while the remaining part shall be measured using equity method.

— 244 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

3. Basis of conclusion for common control and significant influence over the investee

Joint control over an investee refers to where the activities which have a significant influence on return on certain arrangement could be decided only by mutual consent of the investing parties sharing the control, which includes the sales and purchase of goods or services, management of financial assets, acquisition and disposal of assets, research and development activities and financing activities, etc.; Significant influence on the investee refers to that: significant influence over the investee exists when holding more than 20% but less than 50% of the shares with voting rights or even if the holding is below 20%, there is still significant influence if any of the following conditions is met: there is representative in the board of directors or similar governing body of the investee; participation in the investee’s policy setting process; assign key management to the investee; the investee relies on the technology or technical information of the investing company; or major transactions with the investee.

(XI) Fixed assets

1. Recognition methods of fixed assets

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APPENDIX IV

2. Classification and depreciation methods of fixed assets

The fixed assets of the Company can be divided into: buildings and constructions, machinery equipment and transportation equipment, etc. The straight-line method is used to measure depreciation. The useful lives and the expected net residual value of fixed assets are determined according to the nature and usage of various fixed assets. At the end of each year, the useful lives and depreciation method of fixed assets are reviewed, and adjusted if there is variance with original policies; The Company have made provisions for all of the fixed assets except for the fixed assets with full provision and used continuously and lands accounted individually.

		Expected	Annual
	Estimated	residual	depreciation
Category	useful years	value rate	rate
	(year)	(%)	(%)
Buildings and structures	30–50	3–5	1.94–3.23
Machinery equipment	4–28	3–5	3.46–24.25
Transportation equipment	6–12	3–5	8.08–16.17

(XII) Construction in progress

— 246 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XIII) Intangible assets

1. Measurement of intangible assets

2. Criterion of determining infinite useful life

— 247 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XIV) Assets impairment

Long-term equity investment, investment properties measured based on cost model, fixed assets, construction in progress, productive biological assets measured based on cost model, oil and gas assets, intangible assets and goodwill are tested for impairment if there is any indication that an asset may be impaired at the balance date. If the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount, a provision for impairment and an impairment loss are recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.

Goodwill arising from a business combination is tested for impairment at least at each year end, irrespective of whether there is any indication that the asset may be impaired. For the purpose of impairment testing, the carrying amount of goodwill acquired in a business combination is allocated from the acquisition date on a reasonable basis to each of the related asset groups; if it is impossible to allocate to the related asset groups, it is allocated to each of the related set of asset groups. If the carrying amount of the asset group or set of asset groups is higher than its recoverable amount, the amount of the impairment loss first reduced by the carrying amount of the goodwill allocated to the asset group or set of asset groups, and then the carrying amount of other assets (other than the goodwill) within the asset group or set of asset groups, pro rata based on the carrying amount of each asset.

Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.

(XV) Employee benefits

— 248 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

1. Short-term benefits

2. Post-employment benefits and termination benefits

3. Other long-term employee benefits

— 249 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XVI) Estimated liability

(XVII) Revenue

Revenue from the sale of goods shall be recognized at the amount received or receivable from buyers based on contractual or agreed prices, only when all of the following conditions are satisfied: ① the significant risks and rewards of ownership of the goods have been passed to the buyer; ② the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; ③ the amount of revenue can be measured reliably; ④ it is probable that the associated economic benefits will flow to the enterprise; and ⑤ and the associated costs incurred or to be incurred can be measured reliably.

If there is deferred payment clause in the agreement or mutually agreed price, which in substance is a financing nature, the fair value of the receivables is recorded as sales amount.

(XVIII) Government grants

1. Type of government grants

Government grants represent monetary assets and non-monetary assets obtained by the Company from the government at no consideration, excluding capital contributions from the government as an owner to the Company, which are mainly divided into two types, i.e. government grants related to assets and government grants related to income.

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APPENDIX IV

2. Accounting treatment for government grants

Government grants related to assets shall be recognized as deferred income and included in the profit or loss evenly over the useful life of such assets Government grants related to income shall be treated as follows: those used to compensate relevant expenses or losses to be incurred by the enterprise in subsequent periods are recognized as deferred income and recorded in profit and loss for the current period when such expenses are recognized; and those used to compensate relevant expenses or losses that have been incurred by the enterprise are recorded directly in profit or loss for the current period.

3. Specific standards for differentiating governmental subsidy relating to asset from that relating to income

If the government grant received by the Company is used for construction or other project that forms a long term asset, it is regarded as asset-related government grant. The government grants other than the government grants related to assets are recognized as government grants related to income.

Where there is no express regulation on subsidy object in government documents, the criteria for differentiating governmental subsidy relating to asset from that relating to income is as below: ① government grant subject to a certain project shall be separated according to the proportion of expenditure budget and capitalization budget, and the proportion shall be reviewed and modified if necessary on the balance sheet date; ② government grant shall be categorized as related to income if its usage is just subject to general statement but specific project in relevant document.

4. The methods for the amortization of deferred income relating to governmental subsidy and the confirmation of amortization deadline

Asset-related government grant received by the Company is recognized as deferred income and is evenly amortized to profit or loss on a straight-line basis over the useful life of the relevant asset starting from the date the asset is available for use.

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APPENDIX IV

5. Acknowledging time of governmental subsidy

The governmental subsidy calculated in accordance with the amount receivable will be acknowledged when there is unambiguous evidence suggesting the conformance to related conditions as provided in financial support policies and financial support fund is expected to be received. Other governmental subsidies other than that counted in accordance with the amount receivable will be acknowledged at the actual time of receiving subsidy funds.

III. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND EXPLANATION ON CORRECTION OF ACCOUNTING ERRORS

Nil

IV. TAXES

(I) Major categories of taxes and tax rates

Category	Tax basis	Tax rate
Value-added tax	Sales revenue, and revenue from processing	17%
	and repair, fitting and labour services
Business tax	Turnover	5%
City maintenance and	Value added tax and business tax payable	5%
construction tax
Educational surcharges	Value added tax and business tax payable	3%
Enterprise income tax	Taxable income	25%

(II) Preferential tax treatment and approvals

Nil

— 252 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

V. ENTERPRISE MERGER AND CONSOLIDATED FINANCIAL STATEMENTS

(I) Subsidiaries and status of structured entities incorporated in the scope of consolidation

Principal place Shareholding Voting Method of No. Name of subsidiary Registered address of business Business scope percentage rights acquisition 1 CLFG Longxiang Huanghua Industrial Huanghua Industrial Production and sales 100% 100% establishment by Glass Co. Ltd. Park, Mianchi Park, Mianchi of float glass investment County County

VI. EXPLANATIONS OF SIGNIFICANT ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS

(I) Bank balance and cash

1. Bank balance and cash presented by categories

Item Cash Cash in bank Total	Balance at the end of the period Amount Including: foreign currency 233,025.21 – 13,903.49 – 246,928.70 –	Balance at the beginning of the year Amount Including: foreign currency 79,117.73 – 10,979.78 – 90,097.51 –

— 253 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(II) Accounts receivable

Balance at the end of the period

Category
Account receivables with
significant single amount
and individual provision
for bad debts
Accounts receivable provided
for bad debts in groups
Account receivables with
insignificant single amount
and individual provision
for bad debts
Total
Category
Account receivables with
significant single amount
and individual provision
for bad debts
Accounts receivable provided
for bad debts in groups
Account receivables with
insignificant single amount
and individual provision
for bad debts
Total

Carrying amount
Provision for bad debts
Amount
Percentage
Amount
Percentage
(%)
(%)
–
–
–
–
1,074,155.01
100.00
998,336.30
92.94
–
–
–
–
1,074,155.01
100.00
998,336.30
92.94
Balance at the beginning of the year
Carrying amount
Provision for bad debts
Amount
Percentage
Amount
Percentage
(%)
(%)
–
–
–
–
1,074,155.01
100.00
967,380.73
90.06
–
–
–
–
1,074,155.01
100.00
967,380.73
90.06

— 254 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

1. Receivables of which provision for bad debts is made on a group basis

(1) Accounts receivables with provision for bad debts based on aging analysis

Age Within 1 year 1–2 years 2–3 years Over 3 years Total	Balance at the end of the period Carrying amount Percentage Provision for bad debts (%) – – – – – – – – – 998,336.30 100.00 998,336.30 998,336.30 100.00 998,336.30	Balance at the beginning of the year Carrying amount Percentage Provision for bad debts (%) – – – – – – 61,911.15 6.20 30,955.58 936,425.15 93.80 936,425.15 998,336.30 100.00 967,380.73	Balance at the beginning of the year Carrying amount Percentage Provision for bad debts (%) – – – – – – 61,911.15 6.20 30,955.58 936,425.15 93.80 936,425.15 998,336.30 100.00 967,380.73
			967,380.73

(2) Account receivables not provided for bad debts

Item Amounts due from related parties Total	Balance at the end of the period 75,818.71 75,818.71	Balance at the beginning of the year 75,818.71 75,818.71

— 255 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(III) Other receivables

Balance at the end of the period

	Balance at the end of the period	Balance at the end of the period
Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 4,071,810.65 56.10 4,071,810.65 100.00 3,185,206.35 43.90 3,130,292.25 98.25 – – – – 7,258,017.00 100.00 7,202,102.90 99.23 Balance at the beginning of the year Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) 4,071,810.65 56.11 4,071,810.65 100.00 3,185,206.35 43.89 3,111,669.04 97.69 – – – – 7,257,017.00 100.00 7,183,479.69 98.99
		98.99

— 256 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

1. Other receivables of which provision for bad debts is made on a group basis

(1) Other receivables with provision for bad debts based on aging analysis

Age Within 1 year 1–2 years 2–3 years Over 3 years Total	Balance at the end of the period Carrying amount Percentage Provision for bad debts (%) 3,000.00 0.10 36,824.03 1.16 11,047.21 37,880.00 1.19 18,940.00 3,100,305.04 97.55 3,100,305.04 3,178,009.07 100.00 3,130,292.25	Balance at the beginning of the year Carrying amount Percentage Provision for bad debts (%) 38,824.03 1.23 37,880.00 1.19 11,364.00 3,100,305.04 97.58 3,100,305.04 3,177,009.07 100.00 3,111,669.04	Balance at the beginning of the year Carrying amount Percentage Provision for bad debts (%) 38,824.03 1.23 37,880.00 1.19 11,364.00 3,100,305.04 97.58 3,100,305.04 3,177,009.07 100.00 3,111,669.04
			3,111,669.04

(2) Other receivables not provided for bad debts

Item Petty cash Total	Balance at the end of the period 8,197.28 8,197.28	Balance at the beginning of the year 8,197.28
		8,197.28

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

2. Other receivables with individual provision for bad debts

(1) Other receivables with significant single amount and individual provision for bad debts at the end of the period

Name of the debtor Mianchi Glass Plant Total	Carrying amount 4,071,810.65 4,071,810.65	Bad debt amount Age Percentage of provision Reasons for provisions 4,071,810.65 Over 3 years 100% It is expected to be unrecoverable 4,071,810.65

(IV) Inventories

1. Classification of inventories

Item Raw materials Semi-finished goods and work in process Revolving materials Total	Balance Carrying amount 7,449,956.69 1,861,667.36 3,954,428.55 13,266,052.60	at the end of the period Provision for impairment Book value 1,619,236.68 5,830,720.01 – 1,861,667.36 – 3,954,428.55 1,619,236.68 11,646,815.92	Balance at the beginning of the year Provision for impairment Carrying amount Book value 7,673,210.23 1,619,236.68 6,053,973.55 1,861,667.36 – 1,861,667.36 3,954,428.55 – 3,954,428.55 13,489,306.14 1,619,236.68 11,870,069.46	Balance at the beginning of the year Provision for impairment Carrying amount Book value 7,673,210.23 1,619,236.68 6,053,973.55 1,861,667.36 – 1,861,667.36 3,954,428.55 – 3,954,428.55 13,489,306.14 1,619,236.68 11,870,069.46
				11,870,069.46

2. Provision for inventories written down

Item Balance at the beginning of the year Raw materials 1,619,236.68 Total 1,619,236.68	Provision – –	Decrease in current period Reversal Written off – – – –	Balance at the end of the period 1,619,236.68
			1,619,236.68

— 258 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(V) Other current assets

Item Input value added tax Total	Balance at the end of the period 6,659,103.27 6,659,103.27	Balance at the beginning of the year 6,710,794.92 6,710,794.92

(VI) Held-for-sale financial assets

1. Categories of held-for-sale financial assets

Item 1. Available-for-sale equity instruments measured at cost Investments in equity instruments Total	Balance at the end of the period 4,343,500.00 4,343,500.00 4,343,500.00	Balance at the beginning of the year 4,343,500.00 4,343,500.00 4,343,500.00

2. Breakdown of available-for-sale equity instruments measured at cost

==> picture [366 x 141] intentionally omitted <==

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

Balance at the Balance at
beginning of Increase/ the end of Shareholding Provision for
Item (investee) the year decrease the period percentage impairment
(%)
– – –
Investments in equity instruments 4,343,500.00 4,343,500.00
1. Zhongyuan Bank Company Limited 4,343,500.00 – 4,343,500.00 0.0457 –
Total 4,343,500.00 – 4,343,500.00 – –
----- End of picture text -----

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(VII) Fixed assets

1. Classification of fixed assets

		Balance at			Balance at
		the beginning	Increase in	Decrease in	the end of
Item		of the year	current period	current period	the period
I.	Total original book value	257,258,199.36	–	–	257,258,199.36
	Including: Buildings	81,980,207.29	–	–	81,980,207.29
	Machinery	171,867,547.59	–	–	171,867,547.59
	Transportation equipment	2,330,180.12	–	–	2,330,180.12
	Others	1,080,264.36	–	–	1,080,264.36
II.	Total of accumulated
	depreciation	152,796,867.12	4,946,099.62	–	157,742,966.74
	Including: Buildings	26,121,420.37	949,176.77	–	27,070,597.14
	Machinery	123,988,161.39	3,870,208.72	–	127,858,370.11
	Transportation equipment	1,668,281.62	121,467.43	–	1,789,749.05
	Others	1,019,003.74	5,246.70	–	1,024,250.44
III.	Total net book value of
	fixed assets	104,461,332.24	–	–	99,515,232.62
	Including: Buildings	55,858,786.92	–	–	54,909,610.15
	Machinery	47,879,386.20	–	–	44,009,177.48
	Transportation equipment	661,898.50	–	–	540,431.07
	Others	61,260.62	–	–	56,013.92
IV.	Total provisions for
	impairment	11,918,041.96	–	–	11,918,041.96
	Including: Buildings
	Machinery	11,918,041.96	–	–	11,918,041.96
	Transportation equipment
	Others
V.	Total book value of
	fixed assets	92,543,290.28	–	–	87,597,190.66
	Including: Buildings	55,858,786.92	–	–	54,909,610.15
	Machinery	35,961,344.24	–	–	32,091,135.52
	Transportation equipment	661,898.50	–	–	540,431.07
	Others	61,260.62	–	–	56,013.92

— 260 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(VIII) Construction in progress

1. General information of construction in progress

Item Longxiang – Furnace flue gas dust removal and desulfurization Longfei – smelting pits and secondary cold repair construction of 300t/d float glass production line Total	Balance at the end of the Carrying amount Provision for impairment 790,000.00 96,965.25 710,000.00 704,300.00 1,500,000.00 801,265.25	period Book value 693,034.75 5,700.00 698,734.75	Balance at the beginning of the period Provision for impairment Carrying amount Book value 790,000.00 96,965.25 693,034.75 710,000.00 704,300.00 5,700.00 1,500,000.00 801,265.25 698,734.75	Balance at the beginning of the period Provision for impairment Carrying amount Book value 790,000.00 96,965.25 693,034.75 710,000.00 704,300.00 5,700.00 1,500,000.00 801,265.25 698,734.75
				698,734.75

(IX) Intangible assets

	Balance at			Balance at
	the beginning	Increase in	Decrease in	the end of
Item	of the year	current period	current period	the period
I. Total original amount	7,400,000.00	–	–	7,400,000.00
Including: non-patented technology	7,400,000.00	–	–	7,400,000.00
II. Total accumulated amortization	5,115,000.00	155,000.00	–	5,270,000.00
Including: non-patented technology	5,115,000.00	155,000.00	–	5,270,000.00
III. Total provisions for impairment
on intangible assets	–	–	–	–
Including: non-patented technology	–	–	–	–
V. Total book value of intangible assets	2,285,000.00	–	–	2,130,000.00
Including: non-patented technology	2,285,000.00	–	–	2,130,000.00

— 261 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(X) Short-term borrowings

1. Classification of short-term borrowings

Lending condition Credit loans Total	Balance at the end of the period 72,000,000.00 72,000,000.00	Balance at the beginning of the year 72,000,000.00 72,000,000.00

Note: The balance of short-term borrowings amounted to RMB72,000,000.00 at the end of the period represented the entrusted loan granted by Luoyang Glass Company Limited through the bank to the Company.

(XI) Accounts payable

1. Presenting by age

Item Within 1 year (including 1 year) 1–2 years (including 2 years) 2–3 years (including 3 years) More than 3 years Total	Balance at the end of the period 3,296,873.23 16,859,187.55 11,646,320.17 248,554,984.48 280,357,365.43	Balance at the beginning of the year 16,859,187.55 11,646,320.17 16,269,506.46 232,981,193.17 277,756,207.35

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XII) Payments received in advance

1. Presenting by age

Item Within 1 year (including 1 year) More than 1 year Total	Balance at the end of the period 847,078.42 847,078.42	Balance at the beginning of the year 847,078.42
		847,078.42

(XIII) Employee benefits payable

Item I. Staff salary, bonus, allowance and subsidies II. Welfare provision III. Social insurance Including: 1. Medical insurance premiums 2. Basic pension premiums 3. Unemployment premiums 4. Work-related injury insurance 5. Birth insurance premium IV. Housing reserve fund V. Labor union expenditures and staff education expenditures Total	Balance at the beginning of the year Increase in current period Decrease in current period 1,094,510.00 1,966,780.88 1,562,414.88 57,375.00 57,375.00 4,296,756.68 2,039,625.41 1,588,065.88 482,239.31 396,755.45 331,056.21 3,261,213.76 1,437,184.82 1,118,304.77 209,010.32 109,636.58 82,807.80 261,580.80 64,806.98 35,964.62 82,712.49 31,241.58 19,932.48 3,409,393.91 321,546.50 145,722.70 1,369,063.01 66,177.34 10,169,723.60 4,451,505.13 3,353,578.46	Balance at the end of the period 1,498,876.00 4,748,316.21 547,938.55 3,580,093.81 235,839.10 290,423.16 94,021.59 3,585,217.71 1,435,240.35
		11,267,650.27

— 263 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XIV) Tax payable

Tax Value added tax City maintenance and construction tax Property tax Land use tax Individual income tax Education surcharge Other taxes Total	Balance at the end of the period – 20,337.00 1,802,908.08 1,508,162.44 – 20,337.01 14,628.47 3,366,373.00	Balance at the beginning of the year 16,086.34 20,452.18 1,624,803.88 1,180,301.04 1,224.54 20,394.19 14,853.05
		2,878,115.22

(XV) Other payables

Item Within 1 year (including 1 year) 1–2 years (including 2 years) 2–3 years (including 3 years) More than 3 years Total	Balance at the end of the period Amount Percentage (%) 1,660,877.08 11.37 6,250,519.38 42.80 3,120,500.00 21.37 3,573,097.07 24.46 14,604,993.53 100.00	Balance at the beginning of the year Amount Percentage (%) 6,408,014.38 48.91 3,120,500.00 23.82 200,580.00 1.53 3,372,517.07 25.74 13,101,611.45 100.00	Balance at the beginning of the year Amount Percentage (%) 6,408,014.38 48.91 3,120,500.00 23.82 200,580.00 1.53 3,372,517.07 25.74 13,101,611.45 100.00
			100.00

— 264 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XVI) Paid-up capital

Name of investor Longyang Glass Company Limited Mianchi Float Glass Plant Total	Balance at the beginning of the year Increase in current period Decrease in current period Investment amount Percentage (%) 47,400,000.00 63.98 – – 26,680,000.00 36.02 – – 74,080,000.00 100.00 – –	Balance at the end of the period Investment amount Percentage (%) 47,400,000.00 63.98 26,680,000.00 36.02 74,080,000.00 100.00	Balance at the end of the period Investment amount Percentage (%) 47,400,000.00 63.98 26,680,000.00 36.02 74,080,000.00 100.00
			100.00

(XVII) Undistributed profit

		Balance at the end of the period	Balance at the end of the period
			Proportion of
			withdrawal or
Item		Amount	distribution
Undistributed profit for the previous
year before adjustment		-332,104,808.32	–
Total	amount of adjustment of undistributed
profit at the beginning of the year
(adjusted increment +, adjusted decrease -)		–	–
Undistributed profit at the beginning of
the	year after adjustment	-332,104,808.32	–
Add:	Net profit attributable the owners of
	the parent company for the period	-10,921,559.45	–
Less:	Amount withdrawn from statutory
	surplus reserve	–	–
	Amount withdrawn from discretionary
	surplus reserve	–	–
	Appropriation to general risk provision	–	–
	Ordinary shares dividend payable	–	–
	Ordinary shares dividend converted
	into share capital	–	–
Undistributed profit at the end of the period		-343,026,367.77

— 265 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XVIII) Operating income and operating cost

1. Breakdown by items

Item I. Other business Total	January–May 2015 Revenue Cost 168,461.88 223,337.54 168,461.88 223,337.54	The year Revenue 592,378.26 592,378.26	of 2014 Cost 506,716.24
			506,716.24

(XIX) Selling expenses

Item Employee’s remuneration Depreciation expenses Other selling expenses Total	January– May 2015 352,793.63 110,713.70 10,952.74 474,460.07	The year of 2014 861,168.63 306,546.57 37,625.11
		1,205,340.31

(XX) Administration expenses

Item Employee’s remuneration Fixed asset depreciation Amortization of intangible assets Tax Other administration expenses Total	January– May 2015 3,166,261.42 4,866,385.92 124,000.000 505,965.60 317,529.04 8,980,141.98	The year of 2014 8,508,086.15 13,336,924.63 372,000.00 1,222,668.04 1,443,028.42
		24,882,707.24

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XXI) Financial expenses

Item Interest expense Less: interest income Service fee expense Other expenses Total (XXII)Assets impairment losses Item I. Losses on bad debts II. Losses on decrease in inventory III. Impairment loss on fixed assets IV. Impairment loss on construction in progress Total (XXIII)Investment income 1. *Breakdown of investment income* Item Investment income from holding of available-for-sale financial assets Investment income from disposal of available-for-sale financial assets Total	January– May 2015 1,603,620.00 16.10 – 1,635.00 1,605,638.90 January– May 2015 49,578.78 – – – 49,578.78 January– May 2015 – – –	The year of 2014 3,876,300.00 624.12 3,880.00 4,295.80 3,883,851.68 The year of 2014 465,216.39 720,379.83 4,614,099.78 801,265.25 6,600,961.25 The year of 2014 1,224,570.83 4,223,405.41 5,447,976.24

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XXIV) Non-operating income

Item Total gains on disposal of non-current assets Including: Gain on disposal of fixed assets Others Total	January– May 2015 – – 252,413.61 252,413.61	The year of 2014 463,202.60 463,202.60 21,037.39 484,239.99

(XXV) Non-operating expenses

Item Total loss on disposal of non-current assets Including: Loss on disposal of fixed assets Others Total	January– May 2015 – – 9,277.67 9,277.67	The year of 2014 647,671.51 647,671.51 2,618,943.73 3,266,615.24

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(XXVI) Consolidated cash flow statement

1. Supplementary information of cash flow statement

	January–	The year of
Item	May 2015	2014
1. Net profit adjusted to cash flow of
operating activities:
Net Profit	-10,921,559.45	-33,824,677.58
Add: Provision for assets impairment	49,578.78	6,600,961.25
Depreciation of fixed assets,
depletion of oil and gas assets,
depreciation of productive
biological assets	4,946,099.62	13,616,994.28
Amortization of intangible assets	155,000.00	372,000.00
Amortization of long-term
deferred expenses	–	–
Losses from disposal of fixed
assets, intangible assets and other
long-term assets (“–” for gains)	–	184,468.91
Losses on scrapping of fixed
assets (“–” for gains)	–	–
Loss from fair value change
(“–” for gains)	–	–
Finance expenses (“–” for gains)	1,603,620.00	3,876,300.00
Investment losses (“–” for gains)	–	-5,447,976.24
Decrease in deferred income tax
assets (“–” for increase)	–	–
Increase in deferred income tax
liabilities (“–” for decrease)	–	–
Decrease in inventories
(“–” for increase)	223,253.54	-3,677,810.90
Decrease in operating receivables
(“–” for increase)	1,301,591.28	2,827,252.27
Increase in operating payables
(“–” for decrease)	2,799,247.42	14,226,836.26
Others
Net cash flow from operating
activities	156,831.19	-1,245,651.75

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

		January–	The year of
	Item	May 2015	2014
	2. Net changes in cash and
	cash equivalents:
	Cash balance at the end of the period	246,928.70	90,097.51
	Less: Cash balance at the beginning
	of the year	90,097.51	131,178.43
	Add: Balance of cash equivalents at
	the end of the period	–	–
	Less: Balance of cash equivalents at
	the beginning of the year	–	–
	Net increase in cash and cash equivalents	156,831.19	-41,080.92
2.	*Cash and cash equivalents*
		Balance at	Balance at the
		the end of	beginning of
	Item	the period	the year
	I. Cash	246,928.70	90,097.51
	Including: Cash on hand	233,025.21	79,117.73
	Bank deposit available for
	payment at any time	13,903.49	10,979.78
	II. Cash equivalents
	Including: Bond investment due in
	three months	–	–
	III. Cash and cash equivalents at
	the end of the period	246,928.70	90,097.51

VII. CONTINGENCIES

Nil

VIII. COMMITMENTS

Nil

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

IX. EVENTS AFTER BALANCE SHEET DATE

Nil

X. RELATED PARTY RELATIONSHIP AND TRANSACTIONS

(I) Parent company

								Equity	Equity	Voting
							Registered	interest in the		share in the
	Name of parent company			Registered address	Nature of business		capital	Company		Company
								(%)		(%)
	Luoyang Glass	Company Limited*		Xigong District,	Float glass	production,	500,018,242.00	63.98		63.98
				Luoyang City	sales etc.
(II)	Subsidiary
								Proportion
	Type of	Type of	Registered	Legal	Nature of	Registered	Shareholding	of voting
Name of subsidiary	subsidiary	enterprise	address	representative	business	capital	percentage	rights	Organization code
							(%)	(%)
CLFG Longxiang	Wholly-owned	Company	Huanghua	Song Jianming	Production and	50,000,000.00	100	100	17484994-4
Glass Co. Ltd. *	subsidiary	Limited	Industrial	Park,	sales of float
			Mianchi County		glass

(III) Other related parties

Name of other related parties	Relationship with the Company	Organization code
CLFG Longhao Glass Co., Ltd.*	Under the control of the same	77651621-5
	de facto controller
CLFG Beijing International	Under the control of the same	67236379-5
Engineering Company Limited*	de facto controller
Henan Mianchi Float Glass Plant*	Shareholder	17487823-5

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(IV) Related party transactions

1. Inter-company lending of related parties

Amount Related parties of lending Start date End date Explanation Inter-company lending: Luoyang Glass Company Limited* 72,000,000.00 2015-1-31 2015-5-31 Accrued interest for the period amounting to 1,603,620.00

(V) Receivables from and payables to related parties

		Balance at	Balance at the
		the end of	beginning of
Project name	Related parties	the period	the year
Accounts receivable	CLFG Longhao Glass Co., Ltd.*	75,818.71	75,818.71
Other receivables	Henan Mianchi Float Glass Plant*	4,071,810.65	4,071,810.65
Accounts payable	Luoyang Glass Company Limited*	253,198,792.50	249,916,919.27
Accounts payable	CLFG Longhao Glass Co., Ltd.*	2,019,655.20	2,019,655.20
Accounts payable	CLFG Beijing International	77,000.00	77,000.00
	Engineering Company Limited*
Other payables	Luoyang Glass Company Limited*	9,142,202.00	7,538,582.00

— 272 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

XI. EXPLANATIONS OF SIGNIFICANT ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PARENT COMPANY

(I) Accounts receivable

Category
Account receivables with
significant single amount and
individual provision for bad debts
Accounts receivable provided
for bad debts in groups
Account receivables with
insignificant single amount and
individual provision for bad debts
Total
Category
Account receivables with
significant single amount and
individual provision for bad debts
Accounts receivable provided
for bad debts in groups
Account receivables with
insignificant single amount and
individual provision for bad debts
Total

Balance at the end of the period
Carrying amount
Bad debt provision
Amount
Percentage
Amount
Percentage of
provision
(%)
(%)
–
–
–
–
895,794.71
100.00
895,794.71
100.00
–
–
–
–
895,794.71
100.00
895,794.71
100.00
Balance at the beginning of the year
Carrying amount
Bad debt provision
Amount
Percentage
Amount
Percentage of
provision
(%)
(%)
–
–
–
–
895,794.71
100.00
864,839.14
96.54
–
–
–
–
895,794.71
100.00
864,839.14
96.54

— 273 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

1. Accounts receivable provided for bad debts in groups

(1) Accounts receivable with provision for bad debts based on the aging analysis

Age Within 1 year 1-2 years 2-3 years Over 3 years Total	Balance at the end of the Carrying amount Percentage % – – – – – – 895,794.71 100.00 895,794.71 100.00	period Bad debt provision – – – 895,794.71 895,794.71	Balance at the beginning of the year Carrying amount Percentage Bad debt provision % – – – – – – 61,911.15 6.91 30,955.58 833,883.56 93.09 833,883.56 895,794.71 100.00 864,839.14	Balance at the beginning of the year Carrying amount Percentage Bad debt provision % – – – – – – 61,911.15 6.91 30,955.58 833,883.56 93.09 833,883.56 895,794.71 100.00 864,839.14
				864,839.14

(II) Other receivables

Balance at the end of the period

Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount 4,071,810.65 2,709,500.63 – 6,781,311.28	amount Percentage (%) 60.04 39.96 – 100.00	Bad debt provision Amount Percentage of provision (%) 4,071,810.65 100.00 2,657,086.53 98.07 – – 6,728,897.18 99.23	Bad debt provision Amount Percentage of provision (%) 4,071,810.65 100.00 2,657,086.53 98.07 – – 6,728,897.18 99.23
				99.23

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

Balance at the beginning of the year

Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount 4,071,810.65 2,708,500.63 – 6,780,311.28	amount Percentage (%) 60.05 39.95 – 100.00	Bad debt provision Amount Percentage of provision (%) 4,071,810.65 100.00 2,639,863.32 97.47 – – 6,711,673.97 98.99	Bad debt provision Amount Percentage of provision (%) 4,071,810.65 100.00 2,639,863.32 97.47 – – 6,711,673.97 98.99
				98.99

1. Other receivables in groups with provisions for bad debts

(1) Other receivables with provisions for bad debts based on aging analysis

Age Within 1 year 1-2 years 2-3 years Over 3 years Total	Balance at the end of the Carrying amount Percentage % 3,000.00 0.12 36,824.03 1.36 30,880.00 1.14 2,630,599.32 97.38 2,701,303.35 100	period Bad debt provision – 11,047.21 15,440.00 2,630,599.32 2,657,086.53	Balance at the beginning of Carrying amount Percentage % 38,824.03 1.44 30,880.00 1.14 – – 2,630,599.32 97.42 2,700,303.35 100	the year Bad debt provision – 9,264.00 – 2,630,599.32
				2,639,863.32

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

2. Other receivables with individual provision for bad debts

(1) Other receivables with significant single amount and individual provision for bad debts at the end of the period

Percentage Name of debtor Carrying amount Bad debt Age of provision Reason for provision Mianchi Glass Factory Over 3 years 100% Not expected to be (澠池玻璃廠) 4,071,810.65 4,071,810.65 recovered Total 4,071,810.65 4,071,810.65

(III) Long-term equity investment

1. Category of long-term equity investment

Item Balance at the beginning of the year Increase in current period Decrease in current period Investment in subsidiaries 58,016,444.70 – – Sub-total 58,016,444.70 – – Less: impairment provision of long-term equity investment 58,016,444.70 – – Total – – –	Balance at the end of the period 58,016,444.70 58,016,444.70 58,016,444.70
	–

2. Breakdown of long-term equity investment

Name of investee Accounting method I. Subsidiary 1. CLFG Longxiang Glass Co., Ltd. cost approach Total –	investment cost 58,016,444.70 58,016,444.70	Balance at the beginning of the year 58,016,444.70 58,016,444.70	Increase/ decrease – –	Balance at the end of the period 58,016,444.70 58,016,444.70	Shareholding percentage (%) 100 –	Proportion of voting rights (%) 100 –	Provision for impairment at the end of the period 58,016,444.70 58,016,444.70	Provision for impairment during the period – –	Cash dividend during this period –
									–

— 276 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

(IV) Investment income

1.
Breakdown of investment income
Item
January–
May 2015
Investment income from holding of
available-for-sale financial assets
–
Investment income from disposal of
available-for-sale financial assets
–
Total
–
(V)
Supplementary information of cash flow statement
Item
January–
May 2015
1. Net profit adjusted to cash flow of
operating activities:
Net profit
-7,198,576.58
Add: Provision for assets impairment
48,178.78
Depreciation of fixed assets, depletion
of oil and gas assets, depreciation
of productive biological assets
2,980,371.20
Amortization of intangible assets
155,000.00
Amortization of long-term deferred
expenses
–
Losses from disposal of fixed assets,
intangible assets and other long-term
assets (“–” for gains)
–
Losses on scrapping of fixed assets
(“–” for gains)
–
Loss from fair value change (“–” for gains)
–
Finance expenses (“–” for gains)
1,603,620.00
Investment losses (“–” for gains)
–
Decrease in deferred income tax assets
(“–” for increase)
–

The year of
2014
1,224,570.83
4,223,405.41
5,447,976.24
The year of
2014
-20,372,603.48
4,037,370.17
7,217,388.25
372,000.00
–
321,200.08
–
–
3,876,300.00
-5,447,976.24
–

— 277 —

FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

	January–	The year of
Item	May 2015	2014
Increase in deferred income tax liabilities
(“–” for decrease)	–	–
Decrease in inventories (“–” for increase)	223,253.54	-3,879,018.27
Decrease in operating receivables
(“–” for increase)	-34,561.33	686,503.26
Increase in operating payables
(“–” for decrease)	2,378,634.36	11,942,668.00
Others	–	–
Net cash flow from operating activities	155,919.97	-1,246,168.23
2. Net changes in cash and cash equivalents:
Cash balance at the end of the period	239,236.52	83,316.55
Less: Cash balance at the beginning of the year	83,316.55	124,913.95
Add: Balance of cash equivalents at
the end of the period	–	–
Less: Balance of cash equivalents at
the beginning of the year	–	–
Net increase in cash and cash equivalents	155,919.97	-41,597.40

XII. OTHER INFORMATION DISCLOSURABLE IN ACCORDANCE WITH RELEVANT FINANCIAL AND ACCOUNTING RULES

Litigation matters pending as at 31 May 2015:

1. Jiangsu Teho Metal Industry Co., Ltd. sued CLFG Longfei Glass Co., Ltd. for default on payment

The two parties have had “copper oxide” business transaction for many times. Longfei Company has paid partial payment for goods, but there was still RMB1,996,350.96 remained outstanding. On 16 April 2013, Jiangsu Teho Metal Industry Co., Ltd. appealed to Intermediate People’s Court of Sanmenxia City, Henan Province, demanding Longfei Company to make payment for goods and accrued interest. In November 2014, the Court sealed the properties and lands of Longfei Company located in Huanghua Industrial Park, for a term of two years. Meanwhile, the Court sealed the glass frame amounting to 3,074 in the name of Longfei Company. As at 31 May 2015, the remaining amount of RMB1,996,350.96 was still in the process of performance.

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FINANCIAL INFORMATION OF LONGFEI COMPANY

APPENDIX IV

2. Luoyang Building Materials and Machinery Plant sued Longfei Company for default on payment

Longfei Company failed to make partial payment of goods to Luoyang Building Materials and Machinery Plant for the selling of equipment. On 8 January 2013, Luoyang Building Materials and Machinery Plant filed a lawsuit at the Intermediate People’s Court of Luoyang, requiring Longfei Company to make the payment for goods amounted to RMB3,027,346 and for redemption of losses amounted to RMB2,000,000, and claiming that Luoyang Glass Company Limited shall accept joint responsibilities. The Intermediate People’s Court of Luoyang gave a judgment that Longfei Company shall make the payment and pay for the interest accrued. In August 2014, the Intermediate People’s Court of Luoyang sealed the glass production line of Longfei Company. As at 31 May 2015, RMB2,896,000 remained unpaid.

CLFG Longfei Glass Co., Ltd. 15 June 2015

— 279 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

The following is the text of the accountants’ report of Dengfeng Silicon Company received from the independent reporting accountants of the Company, WUYIGE Certified Public Accountants LLP.

Auditor’s Report

Daxin Shen Zi [2015] No. 2-00680

To Luoyang Glass Company Limited:

We have audited the accompanying financial statements of Dengfeng CLFG Silicon Company Limited (hereafter referred to as “Dengfeng Company”), including consolidated balance sheet and balance sheet of the Company as of 31 May 2015, consolidated income statement, income statement of the Company, consolidated cash flow statement, cash flow statement of the Company, consolidated statement of the changes in equity and statement of changes in equity of the Company for January to May 2015, and notes to the financial statements.

I. MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The management of Dengfeng Company is responsible for the preparation and fair presentation of the financial statements. The responsibility includes: (1) preparation of the financial statements in accordance with the Accounting Standards for Business Enterprises to give a fair view; (2) designing, implementing and maintaining necessary internal controls so that the financial statements are free from material misstatement whether due to fraud or error.

II. AUDITORS’ RESPONSIBILITY

— 280 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

III. AUDIT OPINION

In our opinion, the financial statements of Dengfeng Company have been prepared in accordance with the Accounting Standards for Business Enterprises in all material aspects, and they fairly present the financial position as of 31 May 2015 and the operating results and cash flows of Dengfeng Company for January to May 2015.

WUYIGE Certified Public Accountants LLP.

Beijing • the PRC Chinese

15 June 2015

— 281 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

COMBINED BALANCE SHEET

Prepared by Dengfeng CLFG Silicon Company Limited
31 May 2015
Item
Note
Balance at
the end
of the period
Current assets:
Bank balance and cash
VI(I)
445,754.12
Accounts receivable
VI(II)
1,087,651.03
Prepayments
–
Other receivables
VI(III)
502,318.43
Total current assets
2,035,723.58
Non-current assets:
Fixed assets
VI(IV)
237,059.79
Intangible assets
VI(V)
6,603,529.49
Other non-current assets
VI(VI)
6,547,520.58
Total non-current assets
13,388,109.86
Total assets
15,423,833.44
Curent liabilities:
Accounts payable
VI(VII)
524,219.70
Staff remuneration payables
VI(VIII)
62,684.17
Taxes payable
VI(IX)
104,919.50
Other receivables
VI(X)
7,195,049.73
Total current liabilities
7,886,873.10

Unit: RMB
Balance at
the beginning
of the year
165,228.98
–
7,166.70
395,838.43
568,234.11
243,135.08
6,658,929.49
2,114,487.79
9,016,552.36
9,584,786.47
–
64,678.39
3,770.56
1,672,172.00
1,740,620.95

— 282 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

Item Note Non-current liabilities: Total non-current liabilities Total liabilities Owners’ equity: Paid-up capital VI(XI) Retained earnings VI(XII) Total equity attributable to owners of the parent company Minority equity Total owners’ equity Total liabilities and shareholders’ equities	Balance at the end of the period – 7,886,873.10 13,000,000.00 -5,062,554.93 7,937,445.07 -400,484.73 7,536,960.34 15,423,833.44	Balance at the beginning of the year – 1,740,620.95 13,000,000.00 -4,786,499.33 8,213,500.67 -369,335.15 7,844,165.52 9,584,786.47

— 283 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

BALANCE SHEET OF THE PARENT COMPANY

Prepared by Dengfeng CLFG Silicon Company Limited
31 May 2015
Item
Note
Balance at
the end
of the period
Current assets:
Bank balance and cash
190,289.44
Prepayments
–
Other receivables
XII(I)
8,106,842.01
Total current assets
8,297,131.45
Non-current assets:
Long-term equity investments
XII(II)
1,230,000.00
Fixed assets
230,863.44
Other non-current assets
1,044,326.00
Total non-current assets
2,505,189.44
Total assets
10,802,320.89
Curent liabilities:
Staff remuneration payables
62,684.17
Taxes payable
3,650.54
Other payables
1,076,680.18
Total current liabilities
1,143,014.89

Unit: RMB
Balance at the
beginning of
the year
115,507.91
7,166.70
8,507,842.01
8,630,516.62
1,230,000.00
241,842.44
108,560.00
1,580,402.44
10,210,919.06
64,678.39
3,530.56
245,605.30
313,814.25

— 284 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

Item Note Non-current liabilities: Total non-current liabilities Total liabilities Owners’ equity: Paid-up capital Retained earnings Total owners’ equity Total liabilities and shareholders’ equities	Balance at the end of the period – 1,143,014.89 13,000,000.00 -3,340,694.00 9,659,306.00 10,802,320.89	Balance at the beginning of the year – 313,814.25 13,000,000.00 -3,102,895.19 9,897,104.81 10,210,919.06

— 285 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

COMBINED INCOME STATEMENT

Prepared by Dengfeng CLFG Silicon Company Limited January to May 2015 Unit: RMB

		January to	For the
Item	Note	May 2015	year 2014
I. Operating revenue	VI(XIII)	929,616.27	–
Less: Operating costs	VI(XIII)	626,067.92	–
Business taxes and surcharges		113,279.68	–
Administration expenses		391,818.43	794,714.21
Finance expenses		91,535.42	2,377.90
Impairment loss on assets	VI(XIV)	14,120.00	1,188,510.00
II. Operating Profit		-307,205.18	-1,985,602.11
Add: Non-operating income		–	40,000.00
III. Operating Profit		-307,205.18	-1,945,602.11
IV. Net profit		-307,205.18	-1,945,602.11
including: Net profit attributable to owners
of the parent company		-276,055.60	-1,382,819.80
Profit or loss of minority
shareholders		-31,149.58	-562,782.31
V. Net other comprehensive income after taxes
VI. Total comprehensive income		-307,205.18	-1,945,602.11
(I) Total comprehensive income attributable
to owners of the parent company		-276,055.60	-1,382,819.80
(II) Total comprehensive income attributable
to minority shareholders		-31,149.58	-562,782.31

— 286 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

INCOME STATEMENT OF PARENT COMPANY

Prepared by Dengfeng CLFG Silicon Company Limited	January to May 2015	Unit: RMB
	January to	For the
Item Note	May 2015	year 2014
I. Operating revenue	–	–
Less: Operating costs	–	–
Administration expenses	225,499.55	691,112.45
Finance expenses	12,299.26	518.37
II. Operating Profit	-237,798.81	-691,630.82
Add: Non-operating income
III. Total profit	-237,798.81	-691,630.82
IV. Net profit	-237,798.81	-691,630.82
V. Net other comprehensive income after taxes	–	–
VI. Total comprehensive income	-237,798.81	-691,630.82

— 287 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

COMBINED CASH FLOW STATEMENT

Prepared by Dengfeng CLFG Silicon Company Limited	January to May 2015	Unit: RMB
	January to	For the
Item Note	May 2015	year 2014
I. Cash flows from operating activities:
Other cash received from activities related to
operation	146.13	101,733.56
Sub-total of cash inflow from operating
activities	146.13	101,733.56
Cash paid to and on behalf of employees	183,277.59	511,097.10
Tax payments	153,945.27	–
Other cash paid for activities related to
operation	290,254.34	329,041.55
Sub-total of cash outflow from operating
activities	627,477.20	840,138.65
Net cash flow from operating activities	-627,331.07	-738,405.09
II. Cash flows from investment activities:
Cash paid for purchase and construction of
fixed assets, intangible assets and other
long-term assets	3,442,102.79	1,600.00
Sub-total of cash outflow from investment
activities	3,442,102.79	1,600.00
Net cash flow from investment activities	-3,442,102.79	-1,600.00
III. Cash flows from financing activities:
Other cash received from financing-related
activities	5,039,959.00	–
Sub-total of cash inflow from financing
activities	5,039,959.00	–
Other cash paid for financing-related activities	690,000.00	–
Sub-total of cash outflow from financing
activities	690,000.00	–
Net cash flow from financing activities	4,349,959.00	–
IV. Effects of changes in exchange rate
on cash and cash equivalents
V. Net increase in cash and cash equivalents	280,525.14	-740,005.09
Add: Opening balance of cash and
cash equivalents	145,228.98	885,234.07
VI. Closing balance of cash and cash equivalents	425,754.12	145,228.98

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APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

CASH FLOW STATEMENT OF PARENT COMPANY

Prepared by Dengfeng CLFG Silicon Company Limited	January to May 2015	Unit: RMB
	January to	For the
Item Note	May 2015	year 2014
I. Cash flows from operating activities:
Other cash received from activities related to
operation	910,061.86	301,606.59
Sub-total of cash inflow from operating
activities	910,061.86	301,606.59
Cash paid to and on behalf of employees	174,077.59	511,097.10
Other cash paid for activities related to
operation	555,436.74	540,951.05
Sub-total of cash outflow from operating
activities	729,514.33	1,052,048.15
Net cash flow from operating activities	180,547.53	-750,441.56
II. Cash flows from investment activities:
Cash paid for purchase and construction of
fixed assets, intangible assets and other
long-term assets	935,766.00	1,600.00
Sub-total of cash outflow from investment
activities	935,766.00	1,600.00
Net cash flow from investment activities	-935,766.00	-1,600.00
III. Cash flows from financing activities:
Other cash received from financing-related
activities	1,520,000.00	–
Sub-total of cash inflow from financing
activities	1,520,000.00	–
Other cash paid for financing-related activities	690,000.00	–
Sub-total of cash outflow from financing
activities	690,000.00	–
Net cash flow from financing activities	830,000.00	–
IV. Effects of changes in exchange rate
on cash and cash equivalents	–	–
V. Net increase in cash and cash equivalents	74,781.53	-752,041.56
Add: Opening balance of cash and
cash equivalents	115,507.91	867,549.47
VI. Closing balance of cash and cash equivalents	190,289.44	115,507.91

— 289 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

CONSOLIDATED CHANGES IN OWNERS’ EQUITY

Prepared by Dengfeng CLFG Silicon Company Limited

January to May 2015 Unit: RMB

				January to May 2015
		Equity attributable to owners of the parent company
		Paid-in	Undistributed		Minority	Total
Item		share capital	profits	Subtotal	interests	owners’ equity
I.	Balance at the end of last year	13,000,000.00	-4,786,499.33	8,213,500.67	-369,335.15	7,844,165.52
II.	Balance at the beginning of the year	13,000,000.00	-4,786,499.33	8,213,500.67	-369,335.15	7,844,165.52
III.	Increase/decreased in the period
	(decrease is represented by “–”)	–	-276,055.60	-276,055.60	-31,149.58	-307,205.18
	(I) Total comprehensive income	–	-276,055.60	-276,055.60	-31,149.58	-307,205.18
IV.	Balance at the end of the period	13,000,000.00	-5,062,554.93	7,937,445.07	-400,484.73	7,536,960.34
				For the year 2014
		Equity attributable	to owners of the parent company
		Paid-in	Undistributed		Minority	Total
Item		share capital	profits	Subtotal	interests	owners’ equity
I.	Balance at the end of last year	13,000,000.00	-3,403,679.53	9,596,320.47	193,447.16	9,789,767.63
II.	Balance at the beginning of the year	13,000,000.00	-3,403,679.53	9,596,320.47	193,447.16	9,789,767.63
III.	Increase/decreased in the period
	(decrease is represented by “–”)	–	-1,382,819.80	-1,382,819.80	-562,782.31	-1,945,602.11
	(I) Total comprehensive income	–	-1,382,819.80	-1,382,819.80	-562,782.31	-1,945,602.11
IV.	Balance at the end of the period	13,000,000.00	-4,786,499.33	8,213,500.67	-369,335.15	7,844,165.52

— 290 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

CHANGES IN OWNERS’ EQUITY OF PARENT COMPANY

Prepared by Dengfeng CLFG Silicon Company Limited January to May 2015 Unit: RMB

		January to May 2015	January to May 2015
		Paid-in	Undistributed	Total
Item		share capital	profits	owners’ equity
I.	Balance at the end of last year	13,000,000.00	-3,102,895.19	9,897,104.81
II.	Balance at the beginning of the year	13,000,000.00	-3,102,895.19	9,897,104.81
III.	Increase/decreased in the period
	(decrease is represented by “–”)	–	-237,798.81	-237,798.81
	(I) Total comprehensive income	–	-237,798.81	-237,798.81
IV.	Balance at the end of the period	13,000,000.00	-3,340,694.00	9,659,306.00
			For the year 2014
		Paid-in	Undistributed	Total
Item		share capital	profits	owners’ equity
I.	Balance at the end of last year	13,000,000.00	-2,411,264.37	10,588,735.63
II.	Balance at the beginning of the year	13,000,000.00	-2,411,264.37	10,588,735.63
III.	Increase/decreased in the period
	(decrease is represented by “–”)	–	-691,630.82	-691,630.82
	(I) Total comprehensive income	–	-691,630.82	-691,630.82
IV.	Balance at the end of the period	13,000,000.00	-3,102,895.19	9,897,104.81

— 291 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

NOTES TO THE FINANCIAL STATEMENTS

(In these notes, all amounts are expressed in RMB unless otherwise stated)

I. BASIC INFORMATION OF THE COMPANY

Dengfeng CLFG Silicon Co. Ltd.* (hereinafter referred to as the “Company”) is a company with limited liability jointly established by CLFG Luoyang Longhai Electric Glass Company Limited and Dengfeng City Guo’an Silicon Company Limited by way of investment on 9 November 2007. The Company’s registered capital was RMB1 million when it was established, RMB0.51 million and RMB0.49 million out of which were contributed by CLFG Luoyang Longhai Electric Glass Company Limited and Dengfeng City Guo’an Silicon Company Limited respectively, representing 51% and 49% of registered capital of the Company, respectively.

CLFG Luoyang Longhai Electric Glass Company Limited and Dengfeng City Guo’an Silicon Company Limited increased their capital in the Company in the same proportion in 2009. After the capital increase, the registered capital of the Company was RMB3 million.

CLFG Luoyang Longhai Electric Glass Company Limited and Dengfeng City Guo’an Silicon Company Limited transferred 51% and 16% equity interests of Company held by them respectively to Luoyang Glass Company Limited. Upon the completion of the equity transfers, Luoyang Glass Company Limited and Dengfeng City Guo’an Silicon Company Limited increased their capital in the Company by RMB6,700,000.00 and RMB3,300,000.00 respectively. Upon the completion the capital increase, the registered capital of the Company was RMB13 million.

In 2013, Luoyang Glass Company Limited transferred all of its 67% equity interest in the Company to CLFG Luoyang Longhai Electric Glass Company Limited, and Dengfeng City Guo’an Silicon Company Limited transferred all of its 33% equity interest in Dengfeng CLFG Silicon Co. Ltd. to Dengfeng Longde Silicon Co. Ltd..

As of 31 May 2015, the equity structure of the Company was:

Name of shareholder CLFG Luoyang Longhai Electric Glass Company Limited Dengfeng Longde Silicon Co. Ltd.* Total	Contribution 8,710,000.00 4,290,000.00 13,000,000.00	Ratio of contribution 67% 33%
		100%

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APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

The Company is mainly engaged in sale of silicon.

Registration No.: 410185100001805

Registered address of the Company: Chengyao Village, Baiping Township, Dengfeng

Legal representative: Ni Zhisen

The financial statements were reported with approval of the person in charge of the Company.

II. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

(I) Basis of preparation

(II) Declaration on compliance with Accounting Standards for Business Enterprises

(III) Accounting period and operating cycle

Accounting year of the Company is the calendar year from 1 January to 31 December. One year with 12 months consists an ordinary operating cycle which is the classification criteria for the liquidity of assets and liabilities.

(IV) Reporting currency

The Company’s reporting currency is Renminbi (“RMB”).

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FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

(V) Basis of preparation of consolidated financial statement

1. Scope of consolidated financial statement

2. Consistency of the accounting policies, balance sheet date and accounting period between the parent company and its subsidiaries

3. Offsettings in the consolidated financial statements

Based on the balance sheets of the Company and its subsidiaries, all the internal transactions between the parent company and its subsidiaries and those among the subsidiaries are offset in the consolidated financial statements. Owners’ equity of subsidiaries not attributable to the parent company is accounted as minority interest and presented in the “minority interest” under the owners’ equity in consolidated balance sheet. As a deduction of owners’ equity, the long-term equity investments held by subsidiaries in the parent company are regarded as the company group’s treasury shares and presented as “less: treasury shares” under the owners’ equity in the consolidated balance sheet.

4. Accounting of subsidiaries acquired through business combination

— 294 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(VI) Standard for determining cash and cash equivalents

(VII) Financial instruments

1. Classification and recognition of financial instruments

— 295 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

2. Measurement of financial instruments

3. Recognition of the fair value of financial assets and financial liabilities by the Company

— 296 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

4. Recognition and measurement of transfer of financial assets and liabilities

When all or part of the current obligation to a financial liability has been terminated, the entire or part of such financial liability shall be derecognized.

5. Impairment of financial assets

— 297 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

Where there is objective evidence that an impairment loss on available-for-sale financial assets occurs, the cumulative loss arising from the decline in fair value that had been recognized directly in equity is removed from equity and recognized in impairment loss. For en investment in debt instrument classified as available-for-sale on which impairment losses have been recognized, if, in a subsequent period, its fair value increases and the increase can be objectively related to an even occurring after the impairment loss was recognized in profit or loss, the previously recognized impairment loss is reversed and recognized in profit or loss for the current period. For an investment in an equity instrument classified as available-for-sale on which impairment losses have been recognized, the increase in its fair value in a subsequent period is recognized in equity directly.

Specific quantitative criterion Decrease in closing fair value relative to the cost on “serious” decrease in has reached or exceeded 50%. their fair value

Specific quantitative criterion Fall for 12 consecutive months.

on “not temporary”
decrease in their fair value

Cost computing method

Consideration of payment at acquisition (net of cash dividends declared but not yet paid or due but unpaid interest on bonds) and the relevant transaction cost are recognized as the investment cost.

Method for determining

closing fair value

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FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

Basis for determining the The rebound in the continuous fall or the period continuous decrease period with the tread of fall is less than 20% margin. Rebound duration not more than six months is treated as continuous decrease period.

(VIII) Receivables

1. Receivables individually significant and with provision for bad debts on an individual basis

Basis and criteria for

determining whether a receivable is individually significant

Balance of carrying amount of over RMB1.00 million

Provision policies of bad debt provision for individually significant receivables

It is recognized at the difference between the carrying value and the present value of estimated future cash flow

2. Receivables with provision for bad debts on a group basis:

Basis for determining

Nature and risk characteristics

the groups

The group with provision for bad debts based on aging analysis

Not individually significant receivables with higher risk when it was grouped according to credit risk characteristics. Receivables with identical age have similar credit risk characteristics.

The group without provision for bad debts

(1) Various margins and deposits related to the production and operations that are fully recoverable upon maturity;

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FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

(2) Receivables due from related parties with good financial position;
(3) Other balances that have positive evidence indicating they are fully recoverable.

Provision methods for bad debts in group

The group with provision

Aging analysis methods

for bad debts based on

aging analysis

The group without provision

for bad debts

In the groups, the provision for bad debts based on aging analysis set out as follows

	Provision rate for	Provision rate for
Age	accounts receivable	other receivables
	(%)	(%)
Within 1 year (including 1 year)	0	0
1–2 years	30	30
2–3 years	50	50
3–4 years	100	100
4–5 years	100	100
Over 5 years	100	100

3. Individually insignificant receivables with provision for bad debts on an individual basis

Basis for individual provision There is objective evidence of impairment

Provision method

It is recognized at the difference between the carrying value and the present value of estimated future cash flow

— 300 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(IX) Inventories

1. Classification of inventories

Inventories refer to the finished goods or commodities held for sale in daily activities, goods in progress in the production process, consumed materials and supplies in the production process or providing services of the Company, which mainly include raw materials, revolving materials, self-made semi-finished goods and finished goods, etc.

2. Method of costing of sold inventories

The weighted average method is adopted to determine the actual cost of sold inventories upon their delivery.

3. Method of provision for falling prices of inventories

4. Inventory system

The inventory system adopted by the Company is the perpetual inventory system.

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FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

5. Amortization methods of low-cost consumables and wrappage

Low-value consumables and wrappage are amortized using one-off write-off method.

(X) Long-term equity investments

1. Determination of initial investment cost

2. Subsequent measurement and profit or loss recognition

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FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

3. Basis of conclusion for common control and significant influence over the investee

(XI) Fixed assets

1. Recognition methods of fixed assets

2. Classification and depreciation methods of fixed assets

— 303 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

		Expected	Annual
	Estimated	residual	depreciation
Category	useful years	value rate	rate
	(year)	(%)	(%)
Buildings and structures	30–50	3–5	1.94–3.23
Machinery equipment	4–28	3–5	3.46–24.25
Transportation equipment	6–12	3–5	8.08–16.17

(XII) Construction in progress

(XIII) Intangible assets

1. Measurement of intangible assets

— 304 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

The exploration right of the Company is included in other non-current liabilities as the cost less the provision for impairment. The charges for the use of the exploration rights, the cost of the exploration right and other costs paid by the Company for acquiring the exploration right is included into “the exploration and development cost” when it is actually incurred. Once it can be reasonably confirmed that the mine can be used for commercial production and the relevant mining right has been obtained, the exploration and development cost incurred can be transferred to “intangible assets – mining rights” and amortized based on mining volume. In the event that any project has been abandoned at the development stage or cannot proceed due to the failure to obtain the mining right, the total expenses shall be written-off and included in the expenses for the current period.

2. Criterion of determining infinite useful life

— 305 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(XIV) Assets impairment

Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.

(XV) Employee benefits

— 306 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

1. Short-term benefits

2. Post-employment benefits and termination benefits

3. Other long-term employee benefits

— 307 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(XVI) Revenue

Revenue from the sale of goods shall be recognized at the amount received or receivable from buyers based on contractual or agreed prices, only when all of the following conditions are satisfied: ① the significant risks and rewards of ownership of the goods have been passed to the buyer; ② the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; ③ the amount of revenue can be measured reliably; ④ it is probable that the associated economic benefits will flow to the enterprise; and ⑤ and the associated costs incurred or to be incurred can be measured reliably.

If there is deferred payment clause in the agreement or mutually agreed price, which in substance is a financing nature, the fair value of the receivables is recorded as sales amount.

(XVII) Government grants

1. Type of government grants

2. Accounting treatment for government grants

— 308 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

3. Specific standards for differentiating governmental subsidy relating to asset from that relating to income

Where there is no express regulation on subsidy object in government documents, the criteria for differentiating governmental subsidy relating to asset from that relating to income is as below: ① government grant subject to a certain project shall be separated according to the proportion of expenditure budget and capitalization budget, and the proportion shall be reviewed and modified if necessary on the balance sheet date; ② government grant shall be categorized as related to income if its usage is just subject to general statement but specific project in relevant document.

4. The methods for the amortization of deferred income relating to governmental subsidy and the confirmation of amortization deadline

5. Acknowledging time of governmental subsidy

— 309 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

III. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND EXPLANATION ON CORRECTION OF ACCOUNTING ERRORS

Nil

IV. TAXES

(I) Major categories of taxes and tax rates

Category	Tax basis	Tax rate
Value-added tax	It is calculated using the taxable sales amount	17%
	multiplied by the applicable tax rate less
	deductible VAT input of current period
City maintenance	Taxable turnover tax	1%
and construction tax
Educational surcharges	Taxable turnover tax	3%
Resources tax	Assessable volume of the taxable products	RMB3/ton
Enterprise income tax	Taxable income	25%

(II) Preferential tax treatment and approvals

Nil

V. ENTERPRISE MERGER AND CONSOLIDATED FINANCIAL STATEMENTS

(I) Subsidiaries and status of structured entities incorporated in the scope of consolidation

			Principal
		Registered	place	Business	Shareholding		Method of
No.	Name of subsidiary	address	of business	scope	percentage	Voting rights	acquisition
1	Dengfeng Hongzhai	Dengfeng	Dengfeng	Sale of	55.12%	55.12%	establishment
	Silicon Co. Ltd.*	City	City	silicon			by investment

— 310 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

VI. EXPLANATIONS OF SIGNIFICANT ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS

(I) Bank balance and cash

Item Cash Cash in bank Other monetary funds Total	Balance at the end of the period 71,128.76 354,625.36 20,000.00 445,754.12	Balance at the beginning of the year 33,258.06 111,970.92 20,000.00
		165,228.98

(II) Accounts receivable

Category Other receivables with significant single amount and individual provision for bad debts Other receivable provided for bad debts in groups Including: The group with provision for bad debts based on aging analysis Account receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount – 1,087,651.03 1,087,651.03 – 1,087,651.03	Balance at the end of the period amount Provision for bad debts Percentage Amount Percentage (%) (%) – – – 100.00 – – 100.00 – – – – – 100.00 – –	Balance at the end of the period amount Provision for bad debts Percentage Amount Percentage (%) (%) – – – 100.00 – – 100.00 – – – – – 100.00 – –
			–

— 311 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

1. Accounts receivables with provision for bad debts based on aging analysis

Age Within 1 year Total	Balance at the end of the Carrying amount Percentage (%) 1,087,651.03 100.00 1,087,651.03 100.00	period Provision for bad debts – –	Balance at Carrying amount – –	the beginning of Percentage (%) – –	the year Provision for bad debts –
					–

(III) Other receivables

Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Including: 1. The group with provision for bad debts based on aging analysis 2. The group without provision for bad debts Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount – 582,868.43 273,700.00 309,168.43 – 582,868.43	Balance at the end of the period amount Provision for bad debts Percentage Amount Percentage (%) (%) – – – 100.00 80,550.00 13.82 46.96 80,550.00 29.43 53.04 – – – – – 100.00 80,550.00 13.82	Balance at the end of the period amount Provision for bad debts Percentage Amount Percentage (%) (%) – – – 100.00 80,550.00 13.82 46.96 80,550.00 29.43 53.04 – – – – – 100.00 80,550.00 13.82
			13.82

— 312 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

Balance at the beginning of the year

Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Including: 1. The group with provision for bad debts based on aging analysis 2. The group without provision for bad debts Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount – 462,268.43 170,100.00 292,168.43 – 462,268.43	amount Percentage (%) – 100.00 36.80 63.20 – 100.00	Provision for bad debts Amount Percentage (%) – – 66,430.00 14.37 66,430.00 39.05 – – – – 66,430.00 14.37	Provision for bad debts Amount Percentage (%) – – 66,430.00 14.37 66,430.00 39.05 – – – – 66,430.00 14.37
				14.37

1. Other receivables of which provision for bad debts is made on a group basis

(1) Other receivables with provision for bad debts based on aging analysis

Age Within 1 year 1–2 years 2–3 years Total	Balance at the end of the period Carrying amount Percentage Provision for bad debts (%) 112,000.00 40.92 – 1,500.00 0.55 450.00 160,200.00 58.53 80,100.00 273,700.00 100.00 80,550.00	Balance at Carrying amount 2,000.00 88,100.00 80,000.00 170,100.00	the beginning of Percentage (%) 1.18 51.79 47.03 100.00	the year Provision for bad debts – 26,430.00 40,000.00
				66,430.00

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FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

(2) Other receivables not provided for bad debts

Item Petty cash Total	Balance at the end of the period 309,168.43 309,168.43	Balance at the beginning of the year 292,168.43
		292,168.43

(IV) Fixed assets

		Balance at			Balance at
		the beginning	Increase in	Decrease in	the end of
Item		of the year	current period	current period	the period
I.	Total original book value	259,102.94	5,111.11	–	264,214.05
	Including: Transportation
	equipment	235,602.94	–	–	235,602.94
	Others	23,500.00	5,111.11	–	28,611.11
II.	Total of accumulated
	depreciation	15,967.86	11,186.40	–	27,154.26
	Including: Transportation
	equipment	3,730.38	9,326.00	–	13,056.38
	Others	12,237.48	1,860.40	–	14,097.88
III.	Total net book value of
	fixed assets	243,135.08			237,059.79
	Including: Transportation
	equipment	231,872.56			222,546.56
	Others	11,262.52			14,513.23
IV.	Total provisions
	for impairment	–	–	–	–
	Including: Transportation
	equipment	–	–	–	–
	Others	–	–	–	–
V.	Total book value of
	fixed assets	243,135.08			237,059.79
	Including: Transportation
	equipment	231,872.56			222,546.56
	Others	11,262.52			14,513.23

— 314 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

(V) Intangible assets

		Balance at			Balance at
		the beginning	Increase in	Decrease in	the end of
Item		of the year	current period	current period	the period
I.	Total original amount	7,808,609.49	–	–	7,808,609.49
	Including: Mining right	7,808,609.49	–	–	7,808,609.49
II.	Total accumulated
	amortization	–	55,400.00	–	55,400.00
	Including: Mining right	–	55,400.00	–	55,400.00
III.	Total provisions for
	impairment on intangible
	assets	1,149,680.00	–	–	1,149,680.00
	Including: Mining right	1,149,680.00	–	–	1,149,680.00
V.	Total book value of
	intangible assets	6,658,929.49			6,603,529.49
	Including: Mining right	6,658,929.49			6,603,529.49

(VI) Other non-current assets

Item Mining right Total	Balance at the end of the period 6,547,520.58 6,547,520.58	Balance at the beginning of the year 2,114,487.79
		2,114,487.79

Note 1: The Company obtained a certificate with certificate No.: T41520100403040105 from the Department of Land and Resources of Henan Province on 5 July 2013. The certificate of exploration right with the exploration project name of Detailed Inspection of Quartzite Mineral in Mila Mountain Mining Area in Dengfeng City, Henan Province was expired in 8 April 2015. Material of application for extension has been submitted to the Department of Land and Resources of Henan Province for approval, and issued a Notice of approval for the application material of Tan Kuang Yan Xu Shou Zi [2015] No. 0023.
Note 2: The enterprise obtained a certificate with certificate No.: T4112008050308194 from the Department of Land and Resources of Henan Province on 29 July 2013. The certificate of exploration right with the exploration project name of Detailed Inspection of Glass-production in Xiaohongzhai Mining Area in Dengfeng City, Henan Province was expired in 23 May 2015. Currently the enterprise is applying for the mining right.

— 315 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(VII) Accounts payable

Item Within 1 year Total	Balance at the end of the period Amount Percentage (%) 524,219.70 100.00 524,219.70 100.00	Balance at the beginning of the year Amount Percentage (%) – – – –	Balance at the beginning of the year Amount Percentage (%) – – – –
			–

(VIII) Employee benefits payable

Item I. Staff salary, bonus, allowance and subsidies II. Welfare provision III. Social insurance Including: 1. Medical insurance premiums 2. Basic pension premiums 3. Unemployment premiums 4. Work-related injury insurance 5. Birth insurance premium IV. Housing reserve fund V. Labor union expenditures and staff education expenditures Total	Balance at the beginning of the year Increase in current period Decrease in current period 30,000.00 124,415.52 144,698.54 – 15,246.00 15,246.00 – 31,696.15 20,522.05 – 7,223.85 4,599.03 – 20,954.50 13,455.10 – 1,720.45 1,345.51 – 937.35 562.41 – 860.00 560.00 – 4,685.00 2,811.00 34,678.39 5,240.70 – 64,678.39 181,283.37 183,277.59	Balance at the end of the period 9,716.98 – 11,174.10 2,624.82 7,499.40 374.94 374.94 300.00 1,874.00 39,919.09
		62,684.17

— 316 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(IX) Tax payable

Tax Value added tax City maintenance and construction tax Resources tax Stamp duty Individual income tax Education surcharge Total	Balance at the end of the period 55,258.64 552.59 42,175.92 278.88 2,762.93 2,762.93 104,919.50	Balance at the beginning of the year – – – – 3,770.56 –
		3,770.56

(X) Other payables

Item Within 1 year (including 1 year) 1–2 years (including 2 years) Total	Balance at the end of the period Amount Percentage (%) 7,195,049.73 100.00 – – 7,195,049.73 100.00	Balance at the beginning of the year Amount Percentage (%) 235,605.30 14.09 1,436,566.70 85.91 1,672,172.00 100.00	Balance at the beginning of the year Amount Percentage (%) 235,605.30 14.09 1,436,566.70 85.91 1,672,172.00 100.00
			100.00

— 317 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(XI) Paid-up capital

Name of investor CLFG Luoyang Longhai Electric Glass Company Limited Dengfeng Longde Silicon Co. Ltd. * Total	Balance at the beginning of the year Investment amount Percentage % 8,710,000.00 67.00 4,290,000.00 33.00 13,000,000.00 100.00	Increase in current period – – –	Decrease in current period – – –	Balance at the end of the period Investment amount Percentage % 8,710,000.00 67.00 4,290,000.00 33.00 13,000,000.00 100.00	Balance at the end of the period Investment amount Percentage % 8,710,000.00 67.00 4,290,000.00 33.00 13,000,000.00 100.00
					100.00

(XII) Undistributed profit

	Balance at the end of the period	Balance at the end of the period
		Proportion of
		withdrawal or
Item	Amount	distribution
Undistributed profit for the previous
year before adjustment	-4,786,499.33
Undistributed profit at the beginning of
the year after adjustment	-4,786,499.33
Add: Net profit attributable the owners of
the parent company for the period	-276,055.60
Undistributed profit at the end of the period	-5,062,554.93

— 318 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(XIII) Operating income and operating cost

Item I. Subtotal of principal business Including: Sale of quartzite raw ore Total	January – May 2015 Revenue Cost 929,616.27 626,067.92 929,616.27 626,067.92 929,616.27 626,067.92	The year Revenue – – –	of 2014 Cost – –
			–

(XIV) Assets impairment losses

Item I. Losses on bad debts II. Impairment loss on intangible assets Total	January – May 2015 14,120.00 – 14,120.00	The year of 2014 38,830.00 1,149,680.00
		1,188,510.00

— 319 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(XV) Consolidated cash flow statement

1. Supplementary information of cash flow statement

	January –	The year of
Item	May 2015	2014
1. Net profit adjusted to cash flow of
operating activities:
Net Profit	-307,205.18	-1,945,602.11
Add: Provision for assets impairment	14,120.00	1,188,510.00
Depreciation of fixed assets, depletion
of oil and gas assets, depreciation of
productive biological assets	11,186.40	8,195.46
Amortization of intangible assets	55,400.00	–
Amortization of long-term deferred
expenses	–	–
Losses from disposal of fixed assets,
intangible assets and other long-term
assets (“–” for gains)	–	–
Losses on scrapping of fixed assets
(“–” for gains)	–	–
Loss from fair value change
(“–” for gains)	–	–
Finance expenses (“–” for gains)	88,968.55	–
Investment losses (“–” for gains)	–	–
Decrease in deferred income tax assets
(“–” for increase)	–	–
Increase in deferred income tax
liabilities (“–” for decrease)	–	–
Decrease in inventories
(“–” for increase)	–	–
Decrease in operating receivables
(“–” for increase)	-792,684.33	-41,000.00
Increase in operating payables
(“–” for decrease)	302,883.49	51,491.56
Others
Net cash flow from operating activities	-627,331.07	-738,405.09

— 320 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

				January –	The year of
	Item			May 2015	2014
	2.	Net changes in cash and cash equivalents:
		Cash balance at the end of the period		425,754.12	145,228.98
		Less: Cash balance at the beginning of
		the year		145,228.98	885,234.07
		Net increase in cash and cash equivalents		280,525.14	-740,005.09
2.	*Cash and*		*cash equivalents*
				Balance at	Balance at
				the end of	the beginning
	Item			the period	of the year
	I.	Cash		425,754.12	145,228.98
		Including: Cash on hand		71,128.76	33,258.06
			Bank deposit available for
			payment at any time	354,625.36	111,970.92
	II.	Cash	equivalents	–	–
	III. Cash		and cash equivalents at
		the	end of the period	425,754.12	145,228.98

— 321 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

VII. CONTINGENCIES

Nil

VIII. COMMITMENTS

Nil

IX. EVENTS AFTER BALANCE SHEET DATE

Nil

X. RELATED PARTY RELATIONSHIP AND TRANSACTIONS

(I) Parent company

				Equity	Voting
			Registered	interest in the	share in the
Name of parent company	Registered address	Nature of business	capital	Company	Company
				(%)	(%)
CLFG Luoyang Longhai	Luoyang City	Float glass	60,000,000.00	67	67
Electric Glass Company Limited		production, sales etc.

(II) Subsidiary

								Proportion
	Type of	Type of	Registered	Legal	Nature of	Registered	Shareholding	of voting
Name of subsidiary	subsidiary	enterprise	address	representative	business	capital	percentage	rights	Organization code
							(%)	(%)
Dengfeng	Controlling	Company	Dengfeng City	Zhang Yuandong	Sale of silicon
Hongzhai	subsidiary	with limited
Silicon Co. Ltd.*		liability				2,050,000.00	55.12	55.12	69995888-7

— 322 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(III) Other related parties

Name of other related parties	Relationship with the Company	Organization	code
CLFG Longhao Glass Co., Ltd.*	Under the control of	77651621-5
	the same de facto controller
Luoyang Glass Company Limited*	Controlling shareholder	61480889-9
	of the parent
Dengfeng Longde Silicon Co. Ltd.*	Shareholder	56862517-7
Related party transactions
		January to	Year
Name of related parties	Details of connected transaction	May 2015	2014
Dengfeng Longde Silicon Co. Ltd. *	Sale of commodity	929,616.27	–
Dengfeng Longde Silicon Co. Ltd. *	Interest of inter-companies lending	78,135.43	–

(IV) Related party transactions

(V) Receivables from and payables to related parties

		Balance at	Balance at
		the end	the beginning
Project name	Related parties	of the period	of the year
Accounts receivable	Dengfeng Longde Silicon Co. Ltd. *	1,087,651.03	–
Other payables	CLFG Longhao Glass Co. Ltd.*	235,602.94	235,602.94
Other payables	Dengfeng Longde Silicon Co. Ltd. *	6,850,804.25	–

— 323 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

XI. EXPLANATIONS OF SIGNIFICANT ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PARENT COMPANY

(I) Other receivables

Balance at the end of the period

Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Including: 1. The group with provision for bad debts based on aging analysis 2. The group without provision for bad debts Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount – 8,106,842.01 11,000.00 8,095,842.01 – 8,106,842.01	amount Percentage (%) – 100.00 0.14 99.86 – 100.00	Bad debt provision Amount Percentage of provision (%) – – – – – – – – – – – –

— 324 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Including: 1. The group with provision for bad debts based on aging analysis 2. The group without provision for bad debts Other receivables with insignificant single amount and individual provision for bad debts Total	Balance at the beginning of the year Carrying amount Bad debt provision Amount Percentage Amount Percentage of provision (%) (%) – – – – 8,507,842.01 100.00 – – 2,000.00 0.02 – – 8,505,842.01 99.98 – – – – – – 8,507,842.01 100.00 – –

1. Other receivables in groups with provisions for bad debts

(1) Other receivables with provisions for bad debts based on aging analysis

==> picture [337 x 125] intentionally omitted <==

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

Balance at the end of the period Balance at the beginning of the year
Carrying Bad debt Carrying Bad debt
Age amount Percentage provision amount Percentage provision
% %
Within 1 year 11,000.00 100.00 – 2,000.00 100.00 –
Total 11,000.00 100.00 – 2,000.00 100.00 –
----- End of picture text -----

— 325 —

FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

APPENDIX V

(2) Other receivables without provision for bad debts in the group

Name of debtor Dengfeng Hongzhai Silicon Co. Ltd.* Contingency provision and deposits Total	Balance at the end of the period 8,064,842.01 31,000.00 8,095,842.01	Balance at the beginning of the year 8,474,842.01 31,000.00
		8,505,842.01

(II) Long-term equity investment

1. Category of long-term equity investment

Item Balance at the beginning of the year Increase in current period Decrease in current period Investment in subsidiaries 1,230,000.00 – – Total 1,230,000.00 – –	Balance at the end of the period 1,230,000.00 1,230,000.00

2. Breakdown of long-term equity investment

Name of investee Accounting method I. Subsidiary 1. Dengfeng Hongzhai Silicon Co. Ltd.* cost approach Total ––	investment cost 1,230,000.00 1,230,000.00	Balance at the beginning of the year 1,230,000.00 1,230,000.00	Increase/ decrease – –	Balance at the end of the period 1,230,000.00 1,230,000.00	Shareholding percentage (%) 55.12 –	Proportion of voting rights (%) 55.12 –	Provision for impairment at the end of the period – –	Provision for impairment during the period – –	Cash dividend during this period –
									–

— 326 —

APPENDIX V FINANCIAL INFORMATION OF DENGFENG SILICON COMPANY

(III) Supplementary information of cash flow statement

	Amount for	Amount for
Item	the period	the last period
1. Net profit adjusted to cash flow of
operating activities:
Net profit	-237,798.81	-691,630.82
Add: Provision for assets impairment	–	–
Depreciation of fixed assets, depletion
of oil and gas assets, depreciation of
productive biological assets	10,979.00	7,697.70
Amortization of intangible assets	–	–
Amortization of long-term deferred
expenses	–	–
Losses from disposal of fixed assets,
intangible assets and other long-term
assets (“–” for gains)	–	–
Losses on scrapping of fixed assets
(“–” for gains)	–	–
Loss from fair value change
(“–” for gains)	–	–
Finance expenses (“–” for gains)	10,833.12	–
Investment losses (“–” for gains)	–	–
Decrease in deferred income tax assets
(“–” for increase)	–	–
Increase in deferred income tax liabilities
(“–” for decrease)	–	–
Decrease in inventories (“–” for increase)	–	–
Decrease in operating receivables
(“–” for increase)	408,166.70	-58,000.00
Increase in operating payables
(“–” for decrease)	-11,632.48	-8,508.44
Others	–	–
Net cash flow from operating activities	180,547.53	-750,441.56
2. Net changes in cash and cash equivalents:
Cash balance at the end of the period	190,289.44	115,507.91
Less: Cash balance at the beginning of the year	115,507.91	867,549.47
Net increase in cash and cash equivalents	74,781.53	-752,041.56
	Dengfeng CLFG Silicon Co. Ltd.*
	15 June 2015

— 327 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

The following is the text of the accountants’ report of Yinan Huasheng received from the independent reporting accountants of the Company, WUYIGE Certified Public Accountants LLP.

Auditors’ Report

Daxin Shen Zi [2015] No. 2-00678

To Luoyang Glass Company Limited:

We have audited the accompanying financial statements of Yinan Huasheng Mineral Products Industry Co. Ltd. (hereafter referred to as “Huasheng Company”), including the balance sheet as of 31 May 2015, the income statement, the cash flow statement and the statement of the changes in owners’ equity for January to May 2015, and notes to the financial statements.

I. MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The management of Huasheng Company is responsible for the preparation and fair presentation of the financial statements. The responsibility includes: (1) preparation of the financial statements in accordance with the Accounting Standards for Business Enterprises to give a fair view; (2) designing, implementing and maintaining necessary internal controls so that the financial statements are free from material misstatement whether due to fraud or error.

II. AUDITORS’ RESPONSIBILITY

— 328 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

III. AUDIT OPINION

In our opinion, the financial statements of Huasheng Company have been prepared in accordance with the Accounting Standards for Business Enterprises in all material aspects, and they fairly present the financial position as of 31 May 2015 and the operating results and cash flows of Huasheng Company for January to May 2015.

IV. EMPHASIS OF MATTERS

We remind users of the financial statements to the following matter: as mentioned in note V(XXVI), the accumulative unrecovered loss of Huasheng Company as at 31 May 2015 is RMB25,151,822.26, and current liabilities exceeds current assets by RMB19,390,897.36. Huasheng Company has fully disclosed the improvement measures to be implemented in note II(I), but there still exists a significant uncertainty to going-concern capability, which may lead to the failure in realizing assets and settling indebtness in the ordinary course of business. This passage has no impact on the audit opinion published.

WUYIGE Certified Public Accountants LLP.

Beijing • the PRC

15 June 2015

— 329 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

BALANCE SHEET

Prepared by: Yinan Huasheng Mineral Products Industry Co. Ltd.

31 May 2015 Unit: RMB

Item Note Current assets: Bank balance and cash V(I) Notes receivable V(II) Accounts receivable V(III) Prepayments V(IV) Other receivables V(V) Inventory V(VI) Total current assets Non-current assets: Fixed assets V(VII) Intangible assets V(VIII) Total non-current assets Total assets	Balance at the end of the period 383,369.32 1,230,000.00 13,345,219.48 349,104.02 3,994,550.83 2,844,104.25 22,146,347.90 15,120,650.77 8,092,564.85 23,213,215.62 45,359,563.52	Balance at the beginning of year 265,714.79 100,000.00 14,797,950.61 458,098.05 1,283,798.80 3,412,129.47 20,317,691.72 15,637,975.30 8,517,045.46 24,155,020.76 44,472,712.48

— 330 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

Item Note Curent liabilities: Accounts payable V(X) Payments received in advance Staff remuneration payables V(XI) Taxes payable V(XII) Other payables V(XIII) Total current liabilities Non-current liabilities: Total non-current liabilities Total liabilities Owners’ equity: Paid-up capital V(XIV) Capital reserve Special reserve V(XV) Retained earnings V(XVI) Total owners’ equity Total liabilities and shareholders’ equities	Balance at the end of the period 8,128,572.62 11,051.30 698,467.56 433,736.41 32,265,417.37 41,537,245.26 – 41,537,245.26 28,000,000.00 2,900.00 971,240.52 -25,151,822.26 3,822,318.26 45,359,563.52	Balance at the beginning of year 3,737,466.06 9,255.30 736,092.82 330,230.53 35,886,997.96 40,700,042.67 – 40,700,042.67 28,000,000.00 2,900.00 877,226.42 -25,107,456.61 3,772,669.81 44,472,712.48

— 331 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

INCOME STATEMENT

Prepared by: Yinan Huasheng Mineral Products Industry Co. Ltd. January to May 2015 Unit: RMB

				January to May	For the year
Item			Note	2015	2014
I.	Operating revenue		V(XVII)	16,825,992.83	31,092,391.21
	Less:	Operating costs	V(XVII)	8,731,714.85	17,608,757.23
		Business taxes and surcharges	V(XVIII)	713,914.83	1,831,679.64
		Selling expenses		4,847,433.37	6,767,550.09
		Administration expenses		1,727,353.13	7,042,267.67
		Finance expenses	V(XIX)	899,115.55	1,628,828.13
		Impairment loss on assets	V(XX)	-4,459.70	1,149,749.26
II.	Operating Profit			-89,079.20	-4,936,440.81
	Less:	Non-operating expenses	V(XXI)	92,084.20	53,586.56
		Including: Loss from disposal of
		non-current assets		–	34,701.04
III.	Total profit			-181,163.40	-4,990,027.37
	Less:	Income tax expenses	V(XXII)	-136,797.75	133,078.97
IV.	Net profit			-44,365.65	-5,123,106.34
V.	Net other comprehensive income after taxes			–	–
VI.	Total comprehensive income			-44,365.65	-5,123,106.34

— 332 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

CASH FLOW STATEMENT

Prepared by: Yinan Huasheng Mineral Products Industry Co. Ltd. January to May 2015 Unit: RMB

			January to May	For the year
Item		Note	2015	2014
I.	Cash flows from operating activities:
	Cash received from sale of goods or
	rendering of services		15,193,519.30	17,457,897.11
	Other cash received from activities
	related to operation		81,321.10	30,182.77
	Sub-total of cash inflow from operating activities		15,274,840.40	17,488,079.88
	Cash paid for goods purchased and services rendered		3,863,749.68	8,306,085.73
	Cash paid to and on behalf of employees		1,402,232.45	2,960,782.01
	Tax payments		2,391,662.46	4,815,743.47
	Other cash paid for activities related to operation		3,133,431.28	696,405.77
	Sub-total of cash outflow from operating activities		10,791,075.87	16,779,016.98
	Net cash flow from operating activities		4,483,764.53	709,062.90
II.	Cash flows from investment activities:
	Cash paid for purchase and construction of fixed
	assets, intangible assets and other long-term assets		8,216,110.00	698,792.12
	Sub-total of cash outflow from investment activities		8,216,110.00	698,792.12
	Net cash flow from investment activities		-8,216,110.00	-698,792.12
III.	Cash flows from financing activities:
	Other cash received from financing-related activities		3,850,000.00	–
	Sub-total of cash inflow from financing activities		3,850,000.00	–
	Net cash flow from financing activities		3,850,000.00	–
IV.	Effects of changes in exchange rate on cash
	and cash equivalents
V.	Net increase in cash and cash equivalents		117,654.53	10,270.78
	Add: Opening balance of cash and
	cash equivalents		265,714.79	255,444.01
VI.	Closing balance of cash and cash equivalents		383,369.32	265,714.79

— 333 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

CHANGES IN OWNERS’ EQUITY

Prepared by: Yinan Huasheng Mineral Products Industry Co. Ltd. January to May 2015 Unit: RMB

				January to May 2015	January to May 2015	January to May 2015
			Paid-in	Capital	Special	Undistributed	Total owners’
Item			capital	reserve	reserve	profits	equity
I.	Balance at the end of last year		28,000,000.00	2,900.00	877,226.42	-25,107,456.61	3,772,669.81
II.	Balance at the beginning of the year		28,000,000.00	2,900.00	877,226.42	-25,107,456.61	3,772,669.81
III.	Increase/decreased in the period
	(decrease is represented by “-”)		–	–	94,014.10	-44,365.65	49,648.45
	(I)	Total comprehensive income	–	–	–	-44,365.65	-44,365.65
	(II)	Owners’ contribution and
		decrease in capital	–	–	–	–	–
	(III)	Profit distribution	–	–	–	–	–
	(IV)	Accrued and utiliased specific reserve	–	–	94,014.10	–	94,014.10
		1. Accrued specific reserve	–	–	94,974.10	–	94,974.10
		2. Utilised specific reserve	–	–	-960.00	–	-960.00
	(V)	Internal carry-forward of
		owners’ equity	–	–	–	–	–
IV.	Balance at the end of the period		28,000,000.00	2,900.00	971,240.52	-25,151,822.26	3,822,318.26

IV. Balance at the end of the period

					For the year 2014	For the year 2014
							Total
			Paid-in	Capital	Special	Undistributed	owners’
Item			share capital	reserve	reserve	profits	equity
I.	Balance at the end of last year		28,000,000.00	2,900.00	707,489.47	-19,984,350.27	8,726,039.20
II.	Balance at the beginning of the year		28,000,000.00	2,900.00	707,489.47	-19,984,350.27	8,726,039.20
III.	Increase/decreased in the period
	(decrease is represented by “-”)		–	–	169,736.95	-5,123,106.34	-4,953,369.39
	(I)	Total comprehensive income	–	–	–	-5,123,106.34	-5,123,106.34
	(II)	Owners’ contribution and
		decrease in capital	–	–	–	–	–
	(III)	Profit distribution	–	–	–	–	–
	(IV)	Accrued and utiliased specific reserve	–	–	169,736.95	–	169,736.95
		1. Accrued specific reserve	–	–	252,146.95	–	252,146.95
		2. Utilised specific reserve	–	–	-82,410.00	–	-82,410.00
	(V)	Internal carry-forward of owners’
		equity	–	–	–	–	–
IV.	Balance at the end of the period		28,000,000.00	2,900.00	877,226.42	-25,107,456.61	3,772,669.81

— 334 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

NOTES TO THE FINANCIAL STATEMENTS

(In these notes, all amounts are expressed in RMB unless otherwise stated)

I. BASIC INFORMATION OF THE COMPANY

Yinan Huasheng Mineral Products Industry Co., Ltd. (hereinafter referred to as the “Company”) is a company jointly established by Luoyang Glass Company Limited, Qingdao Taiyang Glass Industry Co. Ltd. and Yinan Yangdu Asset Operation Co., Ltd. by way of investment on 11 October 2000. The registered capital of the Company was RMB28 million, RMB14.56 million and RMB7 million out of which were contributed by Luoyang Glass Company Limited and Qingdao Taiyang Glass Industry Co. Ltd. respectively, representing 52% and 25% of share capital of the Company, respectively. RMB6.44 million was contributed by Yinan Yangdu Asset Operation Co., Ltd., representing 23% of share capital of the Company.

Address of the Company: Shuanghou Town, Yinan

Legal representative: Ni Zhisen

Registered Number of enterprise business license: 371321018003974

Scope of business: Mining, processing and sales of quartz sand and rock

Operation period: From 21 October 2000 to 10 October 2045

The financial statements were reported with approval of the person in charge of the Company.

II. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

(I) Basis of preparation

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FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

The accumulated uncovered losses of RMB25,151,822.26 as at 31 May 2015 recorded in the statements of the Company and the amount of RMB19,390,897.36 that the current liabilities have exceeded over the total assets, the Company believed that it would be able to operate on a going concern basis and repay such liabilities before the debts fall due, mainly due to the fact that the Company will continue to obtain financial support from shareholding companies, thus there will be sufficient cash resources to meet the needs of future working capital and other operations. Therefore, the financial statements were prepared on a going concern basis.

(II) Declaration on compliance with Accounting Standards for Business Enterprises

(III) Accounting period and operating cycle

Accounting year of the Company is the calendar year from 1 January to 31 December.

Reporting currency

The Company’s reporting currency is Renminbi (“RMB”).

(IV) Standard for determining cash and cash equivalents

(V) Financial instruments

1. Classification and recognition of financial instruments

— 336 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

2. Measurement of financial instruments

— 337 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

3. Recognition of the fair value of financial assets and financial liabilities by the Company

4. Recognition and measurement of transfer of financial assets and liabilities

When all or part of the current obligation to a financial liability has been terminated, the entire or part of such financial liability shall be derecognized.

5. Impairment of financial assets

The carrying values of all financial assets except financial assets at fair value through profit or loss should be tested for impairment. If impairment is demonstrated by objective evidences, the provision of impairment should be prepared according to the impairment test.

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APPENDIX VI

The Company shall carry out independent impairment test for financial assets of significant single amounts. With regard to the financial assets with insignificant single amounts, an independent impairment test shall be included in a combination of financial assets with similar credit risk characteristics so as to carry out an impairment test. In the event, upon independent test, the financial asset (including those financial assets with significant single amounts and those with insignificant amounts) has not been impaired, it shall be included in a combination of financial assets with similar characteristics so as to conduct another impairment test. Financial assets that have conducted independent test as impairment loss shall not be included in a combination of financial assets with similar risk characteristics so as to conduct another impairment test.

When held-to-maturity investments, loans and accounts receivables have been impaired, the book value of the financial assets shall be written down to the current value of estimated future cash flow, the write-down amount is recorded as impairment loss and written into profit or loss of the current period. When there is impairment occurred in the available-for-sale financial assets, the accumulated losses that are originally recorded in the capital reserve due to the fall of fair value are reversed and recorded in profit or loss of the current period. The reversed accumulated loss is the balance of the initial income cost of the said asset less the recovered principal, amortized amounts, current fair value as well as impairment loss originally recorded into profit or loss of the current period.

Basis for recognition of impairment of held to maturity investments of the Company include:

① The issuer or debtor is experiencing significant financial difficulties;
② The debtor breaches the contractual terms, including default or delinquency in interest or principal payments;
③ The creditor, based on economic or legal or other factors, waive the debts;
④ It is highly probable that the debtor will enter bankruptcy or other financial reorganization;
⑤ The issuer is experiencing significant financial difficulties that the corresponding financial instruments could not be traded in an active market;

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FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

⑥ When it is unable to determine whether cash flows of a specific instrument in a group of financial assets decrease, but the cash flows since initial recognition of that group of financial assets would be measurable and decrease, or the ability to repay by the debtors in that group of financial asset deteriorate, or the unemployment rate of the country or region in which the debtors situate increases, or the price of the underlying collateral decreases significantly in its region, or the industry of the debtors is diminishing;
⑦ There are significant adverse changes in the technology, market, economy or legal environments in issuance place of the equity instrument so that the investor could not recover its investment costs;
⑧ There is significant or other than temporary decrease in fair value of equity instrument;
⑨ Other objective evidences show that the financial asset is impaired.

Specific quantitative criterion Decrease in closing fair value relative to the on “serious” decrease cost has reached or exceeded 50%. in their fair value

Specific quantitative criterion Fall for 12 consecutive months. on “not temporary” decrease in their fair value

Cost computing method

Consideration of payment at acquisition (net of cash dividends declared but not yet paid or due but unpaid interest on bonds) and the relevant transaction cost are recognized as the investment cost.

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APPENDIX VI

Method for determining As for a financial instrument for which there is closing fair value an active market, the quoted prices in the active market shall be used to recognize the fair values thereof. Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques to determine its fair value.

Basis for determining The rebound in the continuous fall or the period the continuous decrease period with the tread of fall is less than 20% margin. Rebound duration not more than six months is treated as continuous decrease period.

(VI) Receivables

The receivables of the Company mainly included accounts receivables, long-term receivables and other receivables. If there is objective evidence that receivables have been impaired at the balance sheet date, impairment loss shall be recognized base on the differences between the carrying values and the present value of estimated future cash flows.

1. Receivables individually significant and with provision for bad debts on an individual basis

Basis and criteria for determining Balance of carrying amount of over RMB1.00 whether a receivable million is individually significant Provision policies of bad debt Impairment assessed individually, if there is no provision for individually impairment, aging analysis shall prevail significant receivables

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APPENDIX VI

2. Receivables with provision for bad debts on a group basis

Basis for determining Nature of receivables and risk characteristics

the groups

The group with provision for Receivables with same ageing have similar bad debts based credit risk characteristics. on aging analysis

The group without provision for bad debts

(1) Various margins and deposits related to the production and operations that are fully recoverable upon maturity;
(2) Receivables due from related parties with good financial position;
(3) Other balances that have positive evidence indicating they are fully recoverable.

Provision methods for bad debts in group

The group with provision for Aging analysis methods bad debts based on aging analysis

The group without provision

for bad debts

Basis on the confirmation Nature of receivables and risk characteristics

of the group

The group with provision for Receivables with same ageing have similar bad debts based credit risk characteristics. on aging analysis

— 342 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

In the groups, the provision for bad debts based on aging analysis set out as follows:

	Provision rate	Provision rate	Provision rate
	for	accounts	for other
Age	receivable		receivables
		(%)	(%)
Within 1 year (including 1 year)		0	0
1–2 years		30	30
2–3 years		50	50
3–4 years		100	100
4–5 years		100	100
Over 5 years		100	100

3. Individually insignificant receivables with provision for bad debts on an individual basis

Basis for individual provision Receivables aged over three years exists impairment with objective evidence

Provision method

Impairments assessed individually, if there is no impairment, aging analysis shall prevail

(VII) Inventories

1. Classification of inventories

Inventories refer to the finished goods or commodities held for sale in daily activities, goods in progress in the production process, consumed materials and supplies in the production process or providing services of the Company, which mainly include raw materials, revolving materials, entrusted processed materials, wrappage, low-cost consumables, goods in progress, self-made semi-finished goods and finished goods (merchandise inventory), etc.

2. Method of costing of sold inventories

The weighted moving average method is adopted to determine the actual cost of sold inventories.

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FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

3. Method of provision for falling prices of inventories

4. Inventory system

The inventory system adopted by the Company is the perpetual inventory system.

5. Amortization methods of low-cost consumables and wrappage

The low-cost consumables and wrappage are amortized with one-off charge.

(VIII) Fixed assets

1. Recognition methods of fixed assets

2. Classification and depreciation methods of fixed assets

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APPENDIX VI

		Expected	Annual
	Estimated	residual	depreciation
Category	useful years	value rate	rate
	(year)	(%)	(%)
Buildings and structures	30–50	3–5	1.94–3.23
Machinery equipment	4–28	3–5	3.46–24.25
Transportation equipment	6–12	3–5	8.08–16.17

3. Recognition and measurement of fixed assets under finance lease

(IX) Construction in progress

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APPENDIX VI

(X) Intangible assets

1. Measurement of intangible assets

Subsequent measurement of intangible assets of the Company is: Intangible assets with finite useful lives are amortized on a straight-line basis over the useful lives of the intangible assets; at the end of each year, the useful lives and amortization policy are reviewed, and adjusted if there are variance with original policies; Intangible assets with indefinite useful lives are not amortized and the useful lives are reviewed at each year end date. If there is objective evidence that the useful life of an intangible asset is finite, the intangible asset is amortized using the straight line method according to the estimated useful life.

2. Criterion of determining infinite useful life

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APPENDIX VI

(XI) Assets impairment

Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.

(XII) Employee benefits

1. Short-term benefits

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APPENDIX VI

2. Post-employment benefits and termination benefits

3. Other long-term employee benefits

(XIII) Estimated liability

— 348 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

(XIV) Revenue

1. Sales of goods

Revenue from the sale of goods shall be recognized at the amount received or receivable from buyers based on contractual or agreed prices, only when all of the following conditions are satisfied: ① the significant risks and rewards of ownership of the goods have been passed to the buyer; ② the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; ③ the amount of revenue can be measured reliably; ④ it is probable that the associated economic benefits will flow to the enterprise; ⑤ the associated costs incurred or to be incurred can be measured reliably.

If there is deferred payment clause in the agreement or mutually agreed price, which in substance is a financing nature, the fair value of the receivables is recorded as sales amount.

2. Provision of labour services

At the balance sheet date, when the outcome of a transaction involving the rendering of services can be estimated reliably, revenue from provision of services shall be recognized using the percentage of completion method. The Company confirms the completion progress in accordance with the ratio of actual cost accounting for the total estimated cost. At the balance sheet date, when the outcome of the transaction involving the rendering of services cannot be estimated reliably, it shall be dealt with in the following ways: ① if the cost of services incurred is expected to be compensated, the revenue from the rendering of services is recognized to the extent of actual cost incurred to date, and the relevant cost is transferred to cost of service in profit or loss; ② if the cost of services incurred is not expected to be compensated, the cost incurred should be included in current profit or loss, and no revenue from the rendering of services may be recognized.

3. Abalienating the right to use an asset

When the inflow of economic benefits from the abalienation of assets is probable and the income can be measured reliably, the income from abalienating the right to use an asset is recognized.

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APPENDIX VI

(XV) Other significant accounting policies and accounting estimations

(1) The net realizable value of the inventories is determined based on ① for the finished goods, the net realizable value accounted at the estimated selling price less the estimated selling expenses and related taxes; ② for the items such as materials held for production the net realizable value measured at cost when the finished goods for which they are used in production have higher net realizable value than the cost, or at the estimated selling price after deducting the estimated costs and expected to incur over up to the completion of the production, the estimated selling expenses and related taxes when the decline in the price of materials indicates that the net realizable value of such finished goods is lower than the cost; ③ for items such as materials held for sale, the net realizable value accounted at the market price.
(2) The recoverable amount should base on the higher value between the net amount of the fair value less disposal expense and present value of estimated cash flow in the future. The net amount of the fair value less disposal expense shall be the sales agreement price less the amount which may be directly attributable to the asset disposal expense if the sales agreement price in fair transaction exists; or if the sale agreement for fair transaction does not exist but there is an active market of asset or trading prices for similar assets in the industry, it should be the market value less disposal expense.
(3) Estimated useful life of the intangible assets with limited useful lives: As for the intangible assets with limited useful life, the Company generally considers the following factors when estimating its useful life: ① the information about the ordinary useful life of the products made by using the assets and the useful life of the available similar assets; ② the estimates of the current conditions and future development trends in the technology and process, etc; ③ the market demand for the products made and labour services provided by the assets; ④ the action expected to be taken by the current and potential competitors; ⑤ the expected maintenance expenses for maintaining the economic benefits brought by such asset, and the estimated ability of the Company to pay the relevant expenses; ⑥ relevant legal provisions or similar restrictions for the control of such asset, such as franchised period and leasehold period; ⑦ the relevance to the useful life of other assets held by the Company, etc.

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APPENDIX VI

III. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND EXPLANATION ON CORRECTION OF ACCOUNTING ERRORS

Nil

IV. TAXES

(I) Major categories of taxes and tax rates

Category	Tax basis	Tax rate
Value-added tax	Sales revenue, and revenue from processing and	17%
	repair, fitting and labour services
Resources tax	Amount of original mine for tax payable	RMB3/tonne
	mine products
City maintenance and	Value added tax and business tax payable	5%
construction tax
Educational surcharges	Value added tax and business tax payable	3%
Enterprise income tax	Taxable income	25%

(II) Preferential tax treatment and approvals

NIL

(III) Other matters required explanation

NIL

— 351 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

V. EXPLANATIONS OF SIGNIFICANT ITEMS OF THE FINANCIAL STATEMENTS

(I) Bank balance and cash

1. Bank balance and cash presented by categories

Item Cash Cash in bank Total	Balance at the end of the period Amount Including: foreign currency 12,689.40 – 370,679.92 – 383,369.32 –	Balance at the beginning of the year Amount Including: foreign currency 869.82 – 264,844.97 – 265,714.79 –

(II) Bills receivable

Item Bank acceptance Total	Balance at the end of the period 1,230,000.00 1,230,000.00	Balance at the beginning of the year 100,000.00 100,000.00

As of 31 May 2015, the bills receivable endorsed but not yet due amounted to RMB14,039,573.73.

— 352 —

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APPENDIX VI

(III) Accounts receivable

1. Accounts receivable is categorized as follow:

Category 1. Accounts receivable with significant single amount and individual provision for bad debts 2. Accounts receivable provided for bad debts in groups The group with provision for bad debts based on aging analysis The group without provision for bad debts Sub-total in groups 3. Accounts receivable with insignificant single amount, but with individual provision for bad debts Total	Balance at the end of the period Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) – – – – 14,041,100.11 100.00 695,880.63 4.96 11,816,965.51 84.16 695,880.63 5.89 2,224,134.60 15.84 – – 14,041,100.11 100.00 695,880.63 4.96 – – – – 14,041,100.11 100.00 695,880.63 4.96	Balance at the end of the period Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) – – – – 14,041,100.11 100.00 695,880.63 4.96 11,816,965.51 84.16 695,880.63 5.89 2,224,134.60 15.84 – – 14,041,100.11 100.00 695,880.63 4.96 – – – – 14,041,100.11 100.00 695,880.63 4.96
		4.96
		–
		4.96

— 353 —

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APPENDIX VI

Balance at the beginning of the period

Category 1. Accounts receivable with significant single amount and individual provision for bad debts 2. Accounts receivable provided for bad debts in groups The group with provision for bad debts based on aging analysis The group without provision for bad debts Sub-total in groups 3. Accounts receivable with insignificant single amount, but with individual provision for bad debts Total	Carrying Amount – 10,413,067.18 5,087,133.00 15,500,200.18 – 15,500,200.18	amount Percentage (%) – 67.18 32.82 100.00 – 100.00	Provision for bad debts Amount Percentage (%) – – 702,249.57 6.74 – – 702,249.57 4.53 – – 702,249.57 4.53	Provision for bad debts Amount Percentage (%) – – 702,249.57 6.74 – – 702,249.57 4.53 – – 702,249.57 4.53
				4.53
				–
				4.53

Accounts receivable with provision for bad debts based on aging analysis in groups

Age Within 1 year 1–2 years 2–3 years Over 3 years Total	Balance at the end of the period Carrying amount Percentage Provision for bad debts (%) 11,121,084.88 94.12 – – – – – – – 695,880.63 5.88 695,880.63 11,816,965.51 100.00 695,880.63	Balance at Carrying amount 9,704,448.67 – 12,737.88 695,880.63 10,413,067.18	the beginning of Percentage (%) 93.20 – 0.12 6.68 100.00	the year Provision for bad debts – – 6,368.94 695,880.63
				702,249.57

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APPENDIX VI

2. Top five largest accounts receivable

Name Relationship with the Company Qingdao Nuokelai Industry & Trade Co., Ltd. Not related party Luoyang Glass Company Limited Controlling shareholder Yinan Lifuyuan Silica Sand Co., Ltd. Not related party Linyi Shengquan Mining Co., Ltd. Not related party Saint-Gobain Hanglas ClFG Qingdao Class Co., Ltd. Not related party Total –	Amount Age Ratio accounting for total amount of accounts receivable (%) 4,324,320.00 Within 1 year 30.80 2,224,134.60 Within 1 year 15.84 2,042,444.67 Within 1 year 14.55 1,628,804.82 Within 1 year 11.60 1,390,060.90 Within 1 year 9.90 11,609,764.99 – 82.69

(IV) Prepayments

1. Prepayments by aging analysis

Age Within 1 year Total	Balance at the end of the period Amount Percentage (%) 349,104.02 100.00 349,104.02 100.00	Balance at the beginning of the year Amount Percentage (%) 458,098.05 100.00 458,098.05 100.00	Balance at the beginning of the year Amount Percentage (%) 458,098.05 100.00 458,098.05 100.00
			100.00

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APPENDIX VI

2. Top five largest prepayments

Name Relationship with the Company National Grid Shandong Yinan Power Co. Ltd. Not related party Shandong Kangdi Taike Engineering Rubber Co., Ltd. Not related party Yinan Quartz Sand Industry Association Not related party Sinopec Shandong Linyi Petroleum Company Not related party Rizhao Port Yulang Terminal Co., Ltd.* (port charges) Not related party Total –	Amount Age Ratio accounting for total amount of accounts receivable (%) 298,172.86 Within 1 year 85.41 16,714.00 Within 1 year 4.79 15,000.00 Within 1 year 4.30 9,543.16 Within 1 year 2.73 7,774.00 Within 1 year 2.23 347,204.02 – 99.46

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APPENDIX VI

(V) Other receivables

1. Other receivables are categorized as follow:

Category 1. Accounts receivable with significant single amount and individual provision for bad debts 2. Accounts receivable provided for bad debts in groups The group with provision for bad debts based on aging analysis The group without provision for bad debts Sub-total in groups 3. Accounts receivable with insignificant single amount, but with individual provision for bad debts Total	Balance at the end of the period Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) – – – – – – – – 155,084.66 3.84 40,918.83 26.38 3,880,385.00 96.16 – – 4,035,469.66 100.00 40,918.83 1.01 – – – – 4,035,469.66 100.00 40,918.83 1.01	Balance at the end of the period Carrying amount Provision for bad debts Amount Percentage Amount Percentage (%) (%) – – – – – – – – 155,084.66 3.84 40,918.83 26.38 3,880,385.00 96.16 – – 4,035,469.66 100.00 40,918.83 1.01 – – – – 4,035,469.66 100.00 40,918.83 1.01
		1.01
		–
		1.01

— 357 —

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APPENDIX VI

Balance at the beginning of the period

				Carrying amount	Carrying amount	Carrying amount		Provision for bad debts	Provision for bad debts	Provision for bad debts	Provision for bad debts	Provision for bad debts	Provision for bad debts
Category				Amount		Percentage			Amount			Percentage
						(%)							(%)
1.	Accounts receivable with
	significant single amount
	and individual provision
	for bad debts			–		–			–				–
2.	Accounts receivable provided
	for bad debts in groups			–		–			–				–
	The group with provision
	for bad debts based
	on aging analysis			44,632.63		3.37		40,918.83					91.68
	The group without provision
	for bad debts			1,280,085.00		96.63			–				–
	Sub-total in groups			1,324,717.63		100.00		40,918.83					3.09
3.	Accounts receivable with
	insignificant single		amount,
	but with individual
	provision for bad debts			–		–			–				–
Total				1,324,717.63		100.00		40,918.83					3.09

Other receivables of			which provision for		bad debts is made on a group basis
			Balance at the end of the		period		Balance		at the beginning of the year
			Carrying		Provision for		Carrying					Provision for
Age			amount	Percentage		bad debts	amount		Percentage			bad debts
				(%)						(%)
Within		1 year	114,165.83	73.62		114,165.83	3,713.80			8.32			–
1–2	years		–	–		–		–			–		–
2–3	years		–	–		–		–			–		–
Over 3		years	40,918.83	26.38		40,918.83	40,918.83		91.68				40,918.83
Total			155,084.66	100.00		40,918.83	44,632.63		100.00				40,918.83

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APPENDIX VI

2. Top five largest other receivables

Name Relationship with the Company Linyi Municipal Bureau of Finance Not related party Yinan County Land Resources Bureau Not related party Xue Hongqi Not related party Shimen Power Station Not related party Yu Xingfeng Not related party Total –	Amount Age Ratio accounting for total amount of accounts receivable (%) 2,715,800.00 2-4 years 67.30 1,160,500.00 Over 5 years 28.76 105,294.53 Over 5 years 2.61 32,000.00 Within one year 0.79 6,437.70 Over 5 years 0.16 4,020,032.23 – 99.62

(VI) Inventories

Item Raw materials Goods in stock Total	Balance at the end of the period Carrying amount Provision for impairment Book value 1,342,452.38 – 1,342,452.38 1,501,651.87 – 1,501,651.87 2,844,104.25 – 2,844,104.25	Balance at Carrying amount 1,462,553.54 1,949,575.93 3,412,129.47	the beginning of Provision for impairment – – –	the year Book value 1,462,553.54 1,949,575.93
				3,412,129.47

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APPENDIX VI

(VII) Fixed assets

1. Classification of fixed assets

	Balance at			Balance at
	the beginning	Increase in	Decrease in	the end of
Item	of the year	current period	current period	the period
I. Total original book value	52,984,399.45	198,501.71	–	53,182,901.16
Including: Buildings	37,287,571.15	78,387.52	–	37,365,958.67
Machinery	14,913,315.53	27,568.52	–	14,940,884.05
Transportation equipment	679,094.20	80,666.33	–	759,760.53
Others	104,418.57	11,879.34	–	116,297.91
II. Total of accumulated depreciation	36,157,037.74	715,826.24	–	36,872,863.98
Including: Buildings	24,717,045.87	422,840.72	–	25,139,886.59
Machinery	10,867,998.83	264,491.88	–	11,132,490.71
Transportation equipment	523,382.89	20,719.24	–	544,102.13
Others	48,610.15	7,774.40	–	56,384.55
III. Total net book value of fixed assets	16,827,361.71			16,310,037.18
Including: Buildings	12,570,525.28			12,226,072.08
Machinery	4,045,316.70			3,808,393.34
Transportation equipment	155,711.31			215,658.40
Others	55,808.42			59,913.36
IV. Total provisions for impairment	1,189,386.41	–	–	1,189,386.41
Including: Buildings	1,026,589.66	–	–	1,026,589.66
Machinery	162,796.75	–	–	162,796.75
V. Total book value of fixed assets	15,637,975.30			15,120,650.77
Including: Buildings	11,543,935.62			11,199,482.42
Machinery	3,882,519.95			3,645,596.59
Transportation equipment	155,711.31			215,658.40
Others	55,808.42			59,913.36

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APPENDIX VI

(VIII) Intangible assets

	Balance at			Balance at
	the beginning	Increase in	Decrease in	the end of
Item	of the year	current period	current period	the period
I. Total original amount	15,121,900.00	–	100,000.00	15,021,900.00
Including: Land use rights	6,807,800.00	–		6,807,800.00
Mining rights	8,314,100.00	–	100,000.00	8,214,100.00
II. Total accumulated amortization	6,604,854.54	324,480.61	–	6,929,335.15
Including: Land use rights	2,484,846.68	56,731.65	–	2,541,578.33
Mining rights	4,120,007.86	267,748.96	–	4,387,756.82
III. Total provisions for impairment
on intangible assets	–	–	–	–
IV. Total book value of intangible assets	8,517,045.46			8,092,564.85
Including: Land use rights	4,322,953.32			4,266,221.67
Mining rights	4,194,092.14			3,826,343.18

(IX) Deferred tax assets and deferred tax liabilities

1. Details of deferred tax assets not recognized

Item Deductible temporary differences: Accounts receivable Fixed assets Total	Balance at the end of the period 736,799.46 1,189,386.41 1,926,185.87	Balance at the beginning of the year 743,168.40 1,189,386.41
		1,932,554.81

— 361 —

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APPENDIX VI

(X) Accounts payable

1. Aging analysis

Within 1 year (including 1 year) 1–2 years (including 2 years) 2–3 years (including 3 years) More than 3 years Total	Balance at the end of the period 7,957,634.77 66,761.77 3,200.00 100,976.08 8,128,572.62	Balance at the beginning of the year 3,597,952.21 35,337.77 3,200.00 100,976.08
		3,737,466.06

(XI) Employee benefits payable

Item I. Staff salary, bonus, allowance and subsidies II. Welfare provision III. Social insurance Including: 1. Medical insurance premiums 2. Basic pension premiums 3. Unemployment premiums 4. Work-related injury insurance 5. Birth insurance premium IV. Housing reserve fund V. Labor union expenditures and staff education expenditures Total	Balance at the beginning of the year 348,145.83 – – – – – – – – 387,946.99 736,092.82	Increase in current period 911,760.80 123,643.50 266,736.35 52,848.33 189,921.81 10,806.59 7,167.43 5,992.19 17,495.00 31,911.61 1,552,275.66	Decrease in current period 986,460.80 123,643.50 266,066.22 52,789.47 189,325.25 10,791.88 7,167.43 5,992.19 10,497.00 2,505.00 1,589,289.65	Balance at the end of the period 273,445.83 – 670.13 58.86 596.56 14.71 – – 6,998.00 417,353.60
				698,467.56

— 362 —

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APPENDIX VI

(XII) Tax payable

Tax Value-added tax Value-added tax Resources tax City maintenance and construction tax Property tax Land use tax Individual income tax Education surcharges Other taxes Total	Balance at the end of the period 382,097.56 140,361.00 -140,316.53 18,074.80 22,924.72 56,549.74 37.26 10,844.88 -56,837.02 433,736.41	Balance at the beginning of the year 215,311.49 -31,782.60 -3,438.78 13,183.31 34,767.27 84,824.63 52.14 7,909.99 9,403.08
		330,230.53

(XIII) Other payables

Item Within 1 year (including 1 year) 1–2 years (including 2 years) 2–3 years (including 3 years) More than 3 years Total	Balance at the end of the period Amount Percentage (%) 4,840,207.54 15.00 1,531,283.31 4.75 1,004,977.55 3.11 24,888,948.97 77.14 32,265,417.37 100.00	Balance at the beginning of the year Amount Percentage (%) 9,973,224.64 27.79 1,024,824.35 2.86 – – 24,888,948.97 69.35 35,886,997.96 100.00	Balance at the beginning of the year Amount Percentage (%) 9,973,224.64 27.79 1,024,824.35 2.86 – – 24,888,948.97 69.35 35,886,997.96 100.00
			100.00

— 363 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

1. Explanation on significant accounts payable aging over one year

Nature or content of other Name of unit Amount payables Longyang Glass Company Limited 26,862,229.97 Recurrent loans Yinan Yangdu Asset Operation Co., Ltd. 533,127.94 Recurrent loans Yinan Power Engineering Company 190,000.00 Recurrent loans Total 27,585,357.91 –

(XIV) Paid-up capital

Name of investor Longyang Glass Company Limited Qingdao Taiyang Glass Industry Co. Ltd. Yinan Yangdu Asset Operation Co., Ltd. Total Special reserve Item Safety production fees Total	Balance at the beginning of the year Increase in current period Decrease in current period Balance at the end of the period Investment amount Percentage Investment amount Percentage (%) (%) 52.00 14,560,000.00 – – 52.00 14,560,000.00 25.00 7,000,000.00 – – 25.00 7,000,000.00 23.00 6,440,000.00 – – 23.00 6,440,000.00 100.00 28,000,000.00 – – 100.00 28,000,000.00 Balance at the beginning of the year Increase in current period Decrease in current period Balance at the end of the period Remarks 877,226.42 94,974.10 960.00 971,240.52 877,226.42 94,974.10 960.00 971,240.52	Balance at the beginning of the year Increase in current period Decrease in current period Balance at the end of the period Investment amount Percentage Investment amount Percentage (%) (%) 52.00 14,560,000.00 – – 52.00 14,560,000.00 25.00 7,000,000.00 – – 25.00 7,000,000.00 23.00 6,440,000.00 – – 23.00 6,440,000.00 100.00 28,000,000.00 – – 100.00 28,000,000.00 Balance at the beginning of the year Increase in current period Decrease in current period Balance at the end of the period Remarks 877,226.42 94,974.10 960.00 971,240.52 877,226.42 94,974.10 960.00 971,240.52
		28,000,000.00

		Remarks

(XV) Special reserve

— 364 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

(XVI) Undistributed profits

	Balance at the end of the period	Balance at the end of the period
		Proportion of
		withdrawal or
Item	Amount	distribution
Returned earnings for the previous year
before adjustment	-25,107,456.61
Returned earnings at the beginning of the year
after adjustment	-25,107,456.61
Add: Net profit for the period	-44,365.65	–
Retained earnings at the end of the period	-25,151,822.26

(XVII) Operating income and operating cost

1. As shown in details

Item Income from principal operations Other operating income Total	January – May 2015 Income Cost 14,846,267.15 7,692,337.19 1,979,725.68 1,039,377.66 16,825,992.83 8,731,714.85	The year Income 25,683,522.83 5,408,868.38 31,092,391.21	of 2014 Cost 14,785,905.99 2,822,851.24
			17,608,757.23

2. Principal operations categorized by products

Name of products or labours quartz rock and sand Total	January – May 2015 Income from principal operations Cost of principal operations 14,846,267.15 7,692,337.19 14,846,267.15 7,692,337.19	The year Income from principal operations 25,683,522.83 25,683,522.83	of 2014 Cost of principal operations 14,785,905.99
			14,785,905.99

— 365 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

3. Top five clients’ operating income

Name of clients Saint-Gobain Hanglas ClFG Qingdao Class Co., Ltd. Qingdao Nuokelai Industry & Trade Co., Ltd. Henan Zhonglian Glass Co., Ltd. Longyang Glass Company Limited Linyi Shengquan Mining Co., Ltd. Total	Operating income 5,996,723.59 5,511,405.14 1,189,174.27 758,885.81 512,658.89 13,968,847.70	Ratio accounting for the total operating income of the Company (%) 35.64% 32.76% 7.07% 4.51% 3.05% 83.02%

(XVIII) Business taxes and surcharges

Item Payment basis Business tax 5% of non-taxable income Resources tax Productivity of original mine*RMB3 City maintenance and construction tax 5% of value added tax Educational surcharges 3% and 2% of value-added tax Total	January – May 2015 200.00 569,844.60 71,935.11 71,935.12 713,914.83	The year of 2014 – 1,512,881.70 159,398.97 159,398.97 1,831,679.64

— 366 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

(XIX) Financial expenses

Item Interest expense Less: interest income Interest from discounted bills Other expense Total	January – May 2015 654,288.03 542.76 242,037.28 3,333.00 899,115.55	The year of 2014 1,287,000.00 2,984.10 339,916.06 4,896.17
		1,628,828.13

(XX) Assets impairment losses

Item I. Losses on bad debts II. Impairment loss on fixed assets Total (XXI) Non-operating expenses Item Total loss on disposal of non-current assets Including: Loss on disposal of fixed assets Donation Indemnities, liquidated damages and penalties Others Total	January – May 2015 -4,459.70 – -4,459.70 January – May 2015 – – 60,000.00 30,000.00 2,084.20 92,084.20	The year of 2014 64,826.92 1,084,922.34
		1,149,749.26

		The year of 2014 34,701.04 34,701.04 – – 18,885.52
		53,586.56

— 367 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

(XXII) Income tax fees

Item Current income tax based on tax laws and relevant regulations Total	January – May 2015 -136,797.75 -136,797.75	The year of 2014 133,078.97
		133,078.97

(XXIII) Cash flow statement

1. Supplementary information of cash flow statement

	January –
Item	May 2015	The year of 2014
1. Net profit adjusted to cash flow
of operating activities:
Net Profit	-44,365.65	-5,123,106.34
Add: Provision for assets impairment	-4,459.70	1,149,749.26
Depreciation of fixed assets, depletion
of oil and gas assets, depreciation
of productive biological assets	715,826.24	1,776,114.63
Amortization of intangible assets	324,480.61	4,156,163.82
Amortization of long-term
deferred expenses	–	–
Losses from disposal of fixed assets,
intangible assets and other
long-term assets (“–” for gains)	–	–
Losses on scrapping of fixed assets
(“–” for gains)	–	34,701.04
Loss from fair value change
(“–” for gains)	–	–
Finance expenses (“–” for gains)	654,288.03	1,287,000.00
Investment losses (“–” for gains)	–	–
Decrease in deferred income tax
assets (“–” for increase)	–	–

— 368 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

			January –
	Item		May 2015	The year of 2014
		Increase in deferred income
		tax liabilities (“–” for decrease)	–	–
		Decrease in inventories
		(“–” for increase)	568,025.22	929,457.48
		Decrease in operating receivables
		(“–” for increase)	1,459,100.07	-466,941.48
		Increase in operating payables
		(“–” for decrease)	810,869.71	-3,034,075.51
		Others
		Net cash flow from operating activities	4,483,764.53	709,062.90
	2.	Significant investing and financing
		activities that do not involve
		cash receipts and payment:
	3.	Net changes in cash and cash equivalents:
		Cash balance at the end of the period	383,369.32	265,714.79
		Less: Cash balance at the beginning
		of the year	265,714.79	255,444.01
		Net increase in cash and cash equivalents	117,654.53	10,270.78
2.	*Cash and cash equivalents*
				Balance at
			Balance at the	the beginning
	Item		end of the period	of the year
	I.	Cash	383,369.32	265,714.79
		Including: Cash on hand	12,689.40	869.82
		Bank deposit available
		for payment at any time	370,679.92	264,844.97
	II.	Cash equivalents	–	–
	III.	Cash and cash equivalents at the end
		of the period	383,369.32	265,714.79

— 369 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

VI. RELATED PARTY RELATIONSHIP AND TRANSACTIONS

(I) Parent company

Name of			Registered	Equity interest	Voting share
parent company	Registered address	Nature of business	capital	in the Company	in the Company
				(%)	(%)
Luoyang Glass Company	Xigong District,	Float glass production,	500,018,242.00	52	52
Limited	Luoyang City	sales etc.

(II) Other related parties

Relationship with

	Relationship with
Name of other related parties	the Company	Organization code
CLFG Longmen Glass Co., Ltd.	Controlled by the same	70654225-8
	actual controller
Yinan Yangdu Asset	Shareholders	86311135-5
Operation Co., Ltd.

(III) Related party transactions

1. Purchase and sales of goods and providing and receiving of services

Name of related parties Type of connected transactions Content of connected transactions Luoyang Glass Company Limited Sale of goods quartz rock and sand Total	January – May 2015 Amount Ratio accounting for same type of goods sold Pricing policies and procedures of decision (%) 758,885.81 4.51 Market price 758,885.81

— 370 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

2. Inter-company lending of related parties

Amount of Related parties lending Start date End date Explanation Inter-company lending: Luoyang Glass Company Limited 20,000,000.00 2015-1-1 2015-12-31 Accrued interest for the year amounting to RMB536,250.00

3. Other related-party transactions

NIL

(IV) Receivables from and payables to related parties

		Balance at	Balance at
		the end of	the beginning
Project name	Related parties	the year	of the year
Accounts receivable	Luoyang Glass Company Limited	2,224,134.60	5,087,133.00
Other receivables	Luoyang Glass Company Limited	26,862,229.97	26,225,979.97
Other receivables	Yinan Yangdu Asset
	Operation Co., Ltd.*	533,127.94	533,127.94

VII. CONTINGENCIES

NIL

VIII. COMMITMENTS

NIL

IX. EVENTS AFTER BALANCE SHEET DATE

NIL

— 371 —

FINANCIAL INFORMATION OF YINAN HUASHENG COMPANY

APPENDIX VI

X. OTHER IMPORTANT MATTERS

NIL

Yinan Huasheng Mineral Products Industry Co. Ltd.

15 June 2015

— 372 —

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

The following is the text of the accountants’ report of Mineral Products Company received from the independent reporting accountants of the Company, WUYIGE Certified Public Accountants LLP.

Auditors’ Report

Daxin Shen Zi [2015] No. 2-00677

To Luoyang Glass Company Limited:

We have audited the accompanying financial statements of CLFG Mineral Products Company Limited (hereafter referred to as “Mineral Products Company”), including consolidated balance sheet and balance sheet of the Company as of 31 May 2015, consolidated income statement, income statement of the Company, consolidated cash flow statement, cash flow statement of the Company, consolidated statement of the changes in equity and statement of changes in equity of the Company for January to May 2015, and notes to the financial statements.

I. MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The management of Mineral Products Company is responsible for the preparation and fair presentation of the financial statements. The responsibility includes: (1) preparation of the financial statements in accordance with the Accounting Standards for Business Enterprises to give a fair view; (2) designing, implementing and maintaining necessary internal controls so that the financial statements are free from material misstatement whether due to fraud or error.

II. AUDITORS’ RESPONSIBILITY

– 373 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

III. AUDIT OPINION

In our opinion, the financial statements of Mineral Products Company have been prepared in accordance with the Accounting Standards for Business Enterprises in all material aspects, and they fairly present the financial position as of 31 May 2015 and the operating results and cash flows of Mineral Products Company for January to May 2015.

IV. EMPHASIS OF MATTERS

We remind users of the financial statements to the following matter: as mentioned in note 2, the accumulative unrecovered loss of Mineral Products Company as of 31 May 2015 is RMB64,544,314.91, and current liabilities exceeds total assets by RMB33,012,901.94. Mineral Products Company has fully disclosed the improvement measures to be implemented in note 2, but there still exists a significant uncertainty to going-concern capability, which may lead to the failure in realizing assets and settling indebtness in the ordinary course of business. This passage has no impact on the audit opinion published.

PKF DAXIN Certified Public Accountants LLP

Beijing • the PRC

15 June 2015

– 374 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

COMBINED BALANCE SHEET

Prepared by: CLFG Mineral Products Company Limited
31 May 2015
Item
Note
Balance at the
end of the period
Current assets:
Bank balance and cash
VIII(I)
18,032.59
Accounts receivable
VIII(II)
562,108.93
Other receivables
VIII(III)
1,875,807.25
Inventory
VIII(IV)
705,331.76
Including: Raw materials
VIII(IV)
705,331.76
Total current assets
3,161,280.53
Non-current assets:
Original value of fixed assets
VIII(V)
1,496,233.00
Less: accumulated depreciation
VIII(V)
1,397,920.78
Net value of fixed assets
98,312.22
Net fixed assets
98,312.22
Total non-current assets
98,312.22
Total assets
3,259,592.75

Unit: RMB
Balance at
the beginning
of the year
1,279.08
574,108.93
1,116,178.60
705,331.76
705,331.76
2,396,898.37
1,496,233.00
1,397,920.78
98,312.22
98,312.22
98,312.22
2,495,210.59

– 375 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

Prepared by: CLFG Mineral Products Company Limited
31 May 2015
Item
Note
Balance at the
end of the period
Curent liabilities:
Accounts payable
VIII(VI)
13,917,148.28
Payments received in advance
VIII(VII)
844,753.16
Staff remuneration payables
VIII(VIII)
1,898,811.12
Including: Salaries payable
VIII(VIII)
294,680.15
Taxes payable
VIII(IX)
3,291,761.54
Including: Tax payable
VIII(IX)
3,253,559.05
Other payables
VIII(X)
16,320,020.59
Total current liabilities
36,272,494.69
Non-current liabilities:
Total non-current liabilities
–
Total liabilities
36,272,494.69
Owners’ equity:
Paid-up capital
30,960,055.81
State-owned capital
VIII(XI)
30,960,055.81
Including: State-owned legal person capital
VIII(XI)
30,960,055.81
Net paid-in capital
30,960,055.81
Special reserve
VIII(XII)
187,472.79
Retained earnings
VIII(XIII)
-64,544,314.91
Total owners’ equity attributable
to the parent company
-33,396,786.31
Minority interests
383,884.37
Total owners’ equity
-33,012,901.94
Total liabilities and shareholders’ equities
3,259,592.75

Unit: RMB
Balance at
the beginning
of the year
13,989,928.28
794,753.16
1,874,861.21
222,349.15
3,218,178.07
3,187,865.74
14,545,028.98
34,422,749.70
–
34,422,749.70
30,960,055.81
30,960,055.81
30,960,055.81
30,960,055.81
187,472.79
-63,458,952.08
-32,311,423.48
383,884.37
-31,927,539.11
2,495,210.59

– 376 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

BALANCE SHEET OF PARENT COMPANY

Prepared by: CLFG Mineral Products Company Limited
31 May 2015
Item
Note
Balance at the
end of the period
Current assets:
Bank balance and cash
17,268.95
Accounts receivable
XII(I)
562,108.93
Dividends receivable
141,122.11
Other receivables
XII(II)
1,671,343.83
Inventory
705,331.76
Including: Raw materials
705,331.76
Total current assets
3,097,175.58
Non-current assets:
Long-term equity investments
XII(III)
767,277.20
Total non-current assets
767,277.20
Total assets
3,864,452.78

Unit: RMB
Balance at
the beginning
of the year
515.44
574,108.93
141,122.11
911,715.18
705,331.76
705,331.76
2,332,793.42
767,277.20
767,277.20
3,100,070.62

– 377 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

Prepared by: CLFG Mineral Products Company Limited
31 May 2015
Item
Note
Balance at the
end of the period
Current liabilities:
Accounts receivable
13,917,148.28
Prepayments
844,753.16
Staff remuneration payables
1,675,011.35
Including: Salaries payable
284,858.69
Taxes payable
3,291,761.54
Including: Taxes payable
3,253,559.05
Other payables
17,609,206.00
Total current liabilities
37,337,880.33
Total liabilities
37,337,880.33
Owners’ equity:
Paid-up capital
30,960,055.81
State-owned capital
30,960,055.81
Including: State-owned legal person capital
30,960,055.81
Net paid-in capital
30,960,055.81
Special reserve
187,472.79
Retained earnings
-64,620,956.15
Total owners’ equity
-33,473,427.55
Total liabilities and shareholders’ equities
3,864,452.78

Unit: RMB
Balance at
the beginning
of the year
13,989,928.28
794,753.16
1,651,061.44
212,527.69
3,218,178.07
3,187,865.74
15,834,214.39
35,488,135.34
35,488,135.34
30,960,055.81
30,960,055.81
30,960,055.81
30,960,055.81
187,472.79
-63,535,593.32
-32,388,064.72
3,100,070.62

– 378 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

CONSOLIDATED INCOME STATEMENT

Prepared by: CLFG Mineral Products Company Limited January to May 2015 Unit: RMB

		January to	For the year
Item	Note	May 2015	2014
I. Operating revenue		1,227,099.93	4,431,173.57
Including: Operating revenue	VIII(XIV)	1,227,099.93	4,431,173.57
II. Total operating cost		1,940,862.76	8,443,414.68
Including: Operating cost	VIII(XIV)	1,419,913.82	4,670,618.34
Business taxes and surcharges		15,780.32	–
Administration expenses	VIII(XV)	515,515.02	2,653,524.28
Finance expenses	VIII(XVI)	13,184.11	26,802.17
Interest income		2.57	20.67
Impairment loss on assets	VIII(XVII)	-23,530.51	1,092,469.89
Others
III. Operating Profit(losses are represented
by “–”)		-713,762.83	-4,012,241.11
Add: Non-operating income		–	352,882.02
Including: Gains from disposal of
non-current assets		–	352,882.02
Less: Non-operating expenses	VIII(XVIII)	371,600.00	4,989,678.21
Losses from debt restructure		–	4,539,753.44
IV. Total profit (total losses are represented
by “–”)		-1,085,362.83	-8,649,037.30
V. Net profit (net losses are represented
by “–”)		-1,085,362.83	-8,649,037.30
Net profit attributable to owners of
the parent company		-1,085,362.83	-8,641,671.40
Minority interests		–	-7,365.90
VI. Net other comprehensive income after taxes
VII.Total comprehensive income		-1,085,362.83	-8,649,037.30
Total comprehensive income attributable to
owners of the parent company		-1,085,362.83	-8,641,671.40
Total comprehensive income attributable to
minority shareholders		–	-7,365.90

– 379 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

INCOME STATEMENT OF PARENT COMPANY

Prepared by: CLFG Mineral Products Company Limited January to May 2015 Unit: RMB

			January to	For the year
Item		Note	May 2015	2014
I. Operating revenue		XII(IV)	1,227,099.93	4,431,173.57
Less:	Operating costs	XII(IV)	1,491,913.82	4,670,618.34
	Business taxes and surcharges		15,780.32	–
	Administration expenses		515,515.02	2,629,968.48
	Finance expenses		13,184.11	26,802.17
	Interest revenue		2.57	20.67
Impairment loss on assets			-23,530.51	1,092,469.89
II. Operating Profit (Loss is represented
by “–”)			-713,762.83	-3,988,685.31
Add:	Non-operating income		–	352,882.02
Including:	Gains from disposal of
	non-current assets		–	352,882.02
Less:	Non-operating expenses		371,600.00	4,989,678.21
	Loss from debt restructure		–	4,539,753.44
III. Total profit (Total loss is represented
by “–”)			-1,085,362.83	-8,625,481.50
IV. Net profit	(Loss is represented by “–”)		-1,085,362.83	-8,625,481.50
V. Net other comprehensive income after taxes			–	–
VI. Total comprehensive income			-1,085,362.83	-8,625,481.50

– 380 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

CONSOLIDATED CASH FLOW STATEMENT

Prepared by: CLFG Mineral Products Company Limited
January to May 2015
Item
Note
January to
May 2015
I.
Cash flows from operating activities:
Cash received from sale of goods or
rendering of services
320,000.00
Other cash received from activities related
to operation
1,102,476.68
Sub-total of cash inflow from operating
activities
1,422,476.68
Cash paid for goods purchased and services
rendered
–
Cash paid to and on behalf of employees
369,910.28
Tax payments
99,999.99
Other cash paid for activities related to
operation
935,812.90
Sub-total of cash outflow from investment
activities
1,405,723.17
Net cash flow from operating activities
16,753.51
II. Cash flows from investment activities:
III. Net increase in cash and cash equivalents
16,753.51
Add: Opening balance of cash and cash
equivalents
1,279.08
IV. Closing balance of cash and cash
equivalents
18,032.59

Unit: RMB
For the year
2014
3,433,470.99
417,466.48
3,850,937.47
1,428,730.11
973,606.88
–
1,448,974.52
3,851,311.51
-374.04
-374.04
1,653.12
1,279.08

– 381 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

CASH FLOW STATEMENT OF PARENT COMPANY

Prepared by: CLFG Mineral Products Company Limited January to May 2015 Unit: RMB

Item Note I. Cash flows from operating activities: Cash received from sale of goods or rendering of services Other cash received from activities related to operation Sub-total of cash inflow from operating activities Cash paid for goods purchased and services rendered Cash paid to and on behalf of employees Tax payments Other cash paid for activities related to operation Sub-total of cash outflow from operating activities Net cash flow from operating activities II. Cash flows from investment activities: III. Cash flows from financing activities: IV. Net increase in cash and cash equivalents Add: Opening balance of cash and cash equivalents V. Closing balance of cash and cash equivalents	January to May 2015 320,000.00 1,102,476.68 1,422,476.68 – 369,910.28 99,999.99 935,812.90 1,405,723.17 16,753.51 – – 16,753.51 515.44 17,268.95	For the year 2014 3,433,470.99 417,466.48
		3,850,937.47
		1,428,730.11 973,606.88 – 1,448,974.52
		3,851,311.51
		-374.04

		–

		–

		-374.04 889.48 515.44

– 382 –

FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

CONSOLIDATED STATEMENT OF CHANGE IN OWNERS’EQUITY

Prepared by: CLFG Mineral Products Company Limited January to May 2015

Unit: RMB

			January to May 2015	January to May 2015
	Equity attributable to owners’ of the parent company
	Paid-in share	Special	Undistributed		Minority	Total owners’
Item	capital	reserve	profits	Subtotal	equity	equity
I. Balance at the end of last year	30,960,055.81	187,472.79	-63,458,952.08	-32,311,423.48	383,884.37	-31,927,539.11
II. Balance at the beginning of the year	30,960,055.81	187,472.79	-63,458,952.08	-32,311,423.48	383,884.37	-31,927,539.11
III. Increase/decreased in the period (decrease is
represented by “–”)	–	–	-1,085,362.83	-1,085,362.83	–	-1,085,362.83
(I) Total comprehensive income	–	–	-1,085,362.83	-1,085,362.83	–	-1,085,362.83
IV Balance at the end of the period	30,960,055.81	187,472.79	-64,544,314.91	-33,396,786.31	383,884.37	-33,012,901.94

CONSOLIDATED STATEMENT OF CHANGE IN OWNERS’ EQUITY

Prepared by: CLFG Mineral Products Company	Prepared by: CLFG Mineral Products Company	Limited	January to May 2015	January to May 2015		Unit: RMB
			For the year 2014
	Equity attributable to owners’ of the parent company
	Paid-in	Special	Undistributed		Minority	Total
Item	share capital	reserve	profits	Subtotal	equity	owners’ equity
I. Balance at the end of last year	30,960,055.81	187,472.79	-54,817,280.68	-23,669,752.08	391,250.27	-23,278,501.81
II. Balance at the beginning of the year	30,960,055.81	187,472.79	-54,817,280.68	-23,669,752.08	391,250.27	-23,278,501.81
III. Increase/decreased in the period
(decrease is represented by “–”)	–	–	-8,641,671.40	-8,641,671.40	-7,365.90	-8,649,037.30
(I) Total comprehensive income	–	–	-8,641,671.40	-8,641,671.40	-7,365.90	-8,649,037.30
IV. Balance at the end of the period	30,960,055.81	187,472.79	-63,458,952.08	-32,311,423.48	383,884.37	-31,927,539.11

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CHANGE IN OWNERS’ EQUITY OF THE PARENT COMPANY

Prepared by: CLFG Mineral Products Company Limited

January to May 2015

Unit: RMB

				January to May 2015	January to May 2015
			Paid-in	Special	Undistributed	Total
Item			share capital	reserve	profits	owners’ equity
I.	Balance	at the end of last year	30,960,055.81	187,472.79	-63,535,593.32	-32,388,064.72
II.	Balance	at the beginning of the year	30,960,055.81	187,472.79	-63,535,593.32	-32,388,064.72
III.	Increase/decreased in the period
	(decrease is represented by “–”)		–	–	-1,085,362.83	-1,085,362.83
	(I)	Total comprehensive income	–	–	-1,085,362.83	-1,085,362.83
IV.	Balance	at the end of the period	30,960,055.81	187,472.79	-64,620,956.15	-33,473,427.55
				For the year 2014
			Paid-in	Special	Undistributed	Total owners’
Item			share capital	reserve	profits	equity
I.	Balance	at the end of last year	30,960,055.81	187,472.79	-54,910,111.82	-23,762,583.22
II.	Balance	at the beginning of the year	30,960,055.81	187,472.79	-54,910,111.82	-23,762,583.22
III.	Increase/decreased in the period
	(decrease is represented by “–”)		–	–	-8,625,481.50	-8,625,481.50
	(I)	Total comprehensive income	–	–	-8,625,481.50	-8,625,481.50
IV.	Balance	at the end of the period	30,960,055.81	187,472.79	-63,535,593.32	-32,388,064.72

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APPENDIX VII FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

CLFG Mineral Products Company Limited

NOTES TO THE FINANCIAL STATEMENTS

(In these notes, all amounts are expressed in RMB unless otherwise stated)

I. BASIC INFORMATION OF THE COMPANY

CLFG Mineral Products Company Limited (hereinafter referred to as the “Company”) is a company jointly established by China Luoyang Float Glass (Group) Company Limited (hereinafter referred to as “CLFG”) and Luoyang Glass Company Limited (hereinafter referred to as the “Luobo Holdings”) by way of capital contribution on 23 December 1998, with a term of operation from 23 December 1998 to 31 December 2019.

Legal representative: Zhang Dongyuan;

Domicile of the Company: Goutou Village, Tiemen Town, Xin’an County, Luoyang City; Business registration license No. of legal representative: 410300110027533; Registered capital: RMB30,960,055.81, among which, CLFG funded RMB18,484,742.18 (representing 59.71% of the registered capital), Luobo Holdings funded RMB12,475,313.63 (representing 40.29% of the registered capital). The controlling shareholder is China Luoyang Float Glass (Group) Company Limited.

The Company is engaged in manufacturing industry and the business scope mainly includes exploration, processing and sale of quartz sand and rock & minerals used in glass production; sale of aerated concrete products and silica-made products; repairing and maintenance of mining machinery; mining technological service.

The Company has set up the Board to manage and control the major decisions and daily work of the Company. The Company set up functional management departments including the office, accounting department, production department, sales department, etc.

The subsidiary includes Xin’an Province Mineral Transport Co. Ltd.*.

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II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

Despite the accumulated uncovered losses of RMB64,544,314.91 as at 31 May 2015 recorded in the financial statements of the Company and the amount of RMB33,012,901.94 that the current liabilities exceeded over the total assets, the Company believed that it would be able to operate on a going concern basis and repay such liabilities before the debts fall due in the forthcoming twelve months, mainly due to the fact that the Company will continue to obtain financial support from CLFG, controlling shareholder, to guarantee that there will be sufficient cash resources to meet the needs of future working capital and other operations. Therefore, the financial statements were prepared on a going concern basis. If the above assumption shows to be false, adjustments will have to be made to reduce the assets of the Company to their realizable value and provide for any possible liabilities.

III. DECLARATION ON COMPLIANCE WITH ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES

IV. IMPORTANT ACCOUNTING POLICIES AND ESTIMATES

(I) Accounting period

Accounting year of the Company is the calendar year from 1 January to 31 December.

(II) Reporting currency

The Company’s reporting currency is Renminbi (“RMB”).

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(III) Basis of accounting and principle of measurement

The Company has adopted the accrual basis of accounting. Except for financial assets are classified into financial assets/liabilities at fair value through profit or loss, derivative financial instruments available-for-sale financial assets and cost-settled share-based payment, etc. are measured by fair value, the others are carried at historical cost. Where assets are impaired, provisions for asset impairment are made in accordance with relevant requirements.

(IV) Basis of preparation of consolidated financial statement

1. Scope of consolidated financial statement

2. Consistency of the accounting policies, balance sheet date and accounting period between the parent company and its subsidiaries

3. Offsettings in the consolidated financial statements

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4. Accounting of subsidiaries acquired through business combination

(V) Standard for determining cash and cash equivalents

(VI) Financial instruments

1. Classification and recognition of financial instruments

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2. Measurement of financial instruments

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3. Recognition of the fair value of financial assets and financial liabilities by the Company

4. Recognition and measurement of transfer of financial assets and liabilities

When all or part of the current obligation to a financial liability has been terminated, the entire or part of such financial liability shall be derecognized.

5. Impairment of financial assets

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When financial assets measured at cost have impairment and there are objective evidence indicating there exists an impairment on such financial assets, impairment loss shall be recognized and credited to the profit and loss for the difference between the carrying amount of such financial assets and the present value of future cash flows discounted and determined according to the prevailing market yield of similar financial assets.

Where there is objective evidence that an impairment loss on available-for-sale financial assets occurs, the cumulative loss arising from the decline in fair value that had been recognized directly in equity is removed from equity and recognized in impairment loss. For en investment in debt instrument classified as available-for-sale on which impairment losses have been recognized, if, in a subsequent period, its fair value increases and the increase can be objectively related to an even occurring after the impairment loss was recognized in profit or loss, the previously recognized impairment loss is reversed and recognized in profit or loss for the current period. For an investment in an equity instrument classified as available-for-sale on which impairment losses have been recognized, the increase in its fair value in a subsequent period is recognized in equity directly.

Specific quantitative criterion Decrease in closing fair value relative to the on “serious” decrease cost has reached or exceeded 50%. in their fair value

Specific quantitative criterion Fall for 12 consecutive months. on “not temporary” decrease in their fair value

Cost computing method

Consideration of payment at acquisition (net of cash dividends declared but not yet paid or due but unpaid interest on bonds) and the relevant transaction cost are recognized as the investment cost.

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(VII) Receivables

1. Receivables individually significant and with provision for bad debts on an individual basis

Basis and criteria for determining Balance of carrying amount of over RMB1.00 whether a receivable is million individually significant Provision policies of bad debt It is recognized at the difference between provision for individually the carrying value and the present value of significant receivables estimated future cash flow

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2. Receivables with provision for bad debts on a group basis

Basis for determining the groups Nature and risk characteristics

The group with provision for bad Receivables with identical age have similar debts based on aging analysis credit risk characteristics

The group without provision for bad debts

(1) Various margins and deposits related to the production and operations that are fully recoverable upon maturity; (2) Receivables due from related parties with good financial position; (3) Other balances that have positive evidence indicating they are fully recoverable

Provision methods for bad

debts in group

The group with provision Aging analysis methods for bad debts based on aging analysis

The group without provision No provisions for bad debts for bad debts

In the groups, the provision for bad debts based on aging analysis set out as follows:

	Provision rate	Provision rate	Provision rate
	for	accounts	for other
Age	receivable		receivables
		(%)	(%)
Within 1 year (including 1 year)		0	0
1–2 years		30	30
2–3 years		50	50
3–4 years		100	100
4–5 years		100	100
Over 5 years		100	100

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3. Individually insignificant receivables with provision for bad debts on an individual basis

Basis for individual provision Receivables aging over 3 years and have objective evidence of impairment

Provision method

It is recognized at the difference between the carrying value and the present value of estimated future cash flow

(VIII) Inventories

1. Classification of inventories

2. Method of costing of sold inventories

The weighted average method is adopted to determine the actual cost of sold inventories upon their delivery.

3. Method of provision for falling prices of inventories

4. Inventory system

The inventory system adopted by the Company is the perpetual inventory system.

5. Amortization methods of low-cost consumables and wrappage

The low-cost consumables are amortized with one-off charge.

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APPENDIX VII

(IX) Long-term equity investments

1. Determination of initial investment cost

2. Subsequent measurement and profit or loss recognition

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APPENDIX VII

3. Basis of conclusion for common control and significant influence over the investee

(X) Fixed assets

1. Recognition methods of fixed assets

2. Classification and depreciation methods of fixed assets

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APPENDIX VII

		Expected	Annual
	Estimated	residual	depreciation
Category	useful years	value rate	rate
	(year)	(%)	(%)
Buildings and structures	30–50	3–5	3.17–1.90
Machinery equipment	4–20	3–5	23.75–4.75
Transportation equipment	6–12	3–5	15.83–7.92
Buildings and structures	5–12	3–5	19.00–7.92

(XI) Assets impairment

Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.

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(XII) Employee benefits

1. Short-term benefits

2. Post-employment benefits and termination benefits

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3. Other long-term employee benefits

(XIII) Estimated liability

(XIV) Revenue

Sales of goods: Revenue from the sale of goods shall be recognized at the amount received or receivable from buyers based on contractual or agreed prices, only when all of the following conditions are satisfied: ① the significant risks and rewards of ownership of the goods have been passed to the buyer; ② the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; ③ the amount of revenue can be measured reliably; ④ it is probable that the associated economic benefits will flow to the enterprise; ⑤ and the associated costs incurred or to be incurred can be measured reliably.

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Provision of labour services: at the balance sheet date, when the outcome of a transaction involving the rendering of services can be estimated reliably, revenue from provision of services shall be recognized using the percentage of completion method. The Company decides the completion progress based on the percentage of actual costs over the estimated total costs. At the balance sheet date, when the outcome of the transaction involving the rendering of services cannot be estimated reliably, it shall be dealt with in the following ways: ① if the cost of services incurred is expected to be compensated, the revenue from the rendering of services is recognized to the extent of actual cost incurred to date, and the relevant cost is transferred to cost of service in profit or loss; ② if the cost of services incurred is not expected to be compensated, the cost incurred should be included in current profit or loss, and no revenue from the rendering of services may be recognized.
Abalienating the right to use an asset: when the inflow of economic benefits from the abalienation of assets is probable and the income can be measured reliably, the income from abalienating the right to use an asset is recognized.

V. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND EXPLANATION ON CORRECTION OF ACCOUNTING ERRORS

Nil

VI. TAXES

(I) Major categories of taxes and tax rates

Category	Tax basis	Tax rate
Value-added tax	Sales revenue, and revenue from processing and	17%
	repair, fitting and labour services
Business tax	Income from taxable labour services, transfer of	5%
	intangible assets or sales of immovable property
City maintenance and	Revolving tax payable	5%
construction tax
Resources tax	Quartzite and quartzite sand used for glass	RMB5/tonne
Enterprise income tax	Taxable income	25%

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APPENDIX VII

(II) Preferential tax treatment and approvals

The Company does not enjoy the relevant preferential tax.

VII. ENTERPRISE MERGER AND CONSOLIDATED FINANCIAL STATEMENTS

(I) Subsidiaries

==> picture [399 x 120] intentionally omitted <==

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

Company Registered Principal place Paid-up Shareholding Voting Investment Method of
No. Name of subsidiary Class type address of business Business scope capital percentage rights amount acquisition
1 Xin’an Province 2 1 Guotuo Village, Xin’an County, Cargo 1,116,300.00 68.73 68.73 767,277.20 1
Mineral Transport Tiemen Town, Luoyang City transportation
Co. Ltd. Luoyang service industry
(新安縣礦產
運輸有限公司)
----- End of picture text -----*

Remarks: Company type: 1. domestic non-financial subsidiary; 2. domestic financial subsidiary; 3. Overseas subsidiary; 4. business unit; 5. infrastructure unit. Method of acquisition: 1. establishment by investment; 2. Business combination under common control; 3. Business combination not under common control; 4. Others.

VIII. EXPLANATIONS OF SIGNIFICANT ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS

(I) Bank balance and cash

Item Cash Cash in bank Total	Balance at the end of the period 16,837.46 1,195.13 18,032.59	Balance at the beginning of the year 86.52 1,192.56 1,279.08

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(II) Accounts receivable

Balance at the end of the period Carrying amount Provision for bad debts Category Amount Percentage Amount Percentage (%) (%) Account receivables with significant single amount – – – – and individual provision for bad debts Accounts receivable provided for bad debts in groups 1,609,083.97 100.00 1,046,975.04 65.07 Account receivables with insignificant single – – – – amount and individual provision for bad debts Total 1,609,083.97 100.00 1,046,975.04 65.07 Balance at the beginning of the year Carrying amount Provision for bad debts Category Amount Percentage Amount Percentage (%) (%) Account receivables with significant single amount – – – – and individual provision for bad debts Accounts receivable provided for bad debts in groups 1,609,083.97 100.00 1,034,975.04 64.32 Account receivables with insignificant single amount – – – – and individual provision for bad debts Total 1,609,083.97 100.00 1,034,975.04 64.32

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1. Receivables of which provision for bad debts is made on a group basis

(1) Accounts receivables with provision for bad debts based on aging analysis

Age Within 1 year 1–2 years 2–3 years 3–4 years 4–5 years Over 5 years Total	Balance at the end of the period Carrying amount Percentage Provision for bad debts (%) – – – – – – 1,124,217.86 69.87 562,108.93 44,469.65 2.76 44,469.65 61,962.21 3.85 61,962.21 378,434.25 23.52 378,434.25 1,609,083.97 100.00 1,046,975.04	Balance at the beginning of the year Carrying amount Percentage Provision for bad debts (%) – – – – – – 1,148,217.86 71.36 574,108.93 20,469.65 1.27 20,469.65 61,962.21 3.85 61,962.21 378,434.25 23.52 378,434.25 1,609,083.97 100.00 1,034,975.04	Balance at the beginning of the year Carrying amount Percentage Provision for bad debts (%) – – – – – – 1,148,217.86 71.36 574,108.93 20,469.65 1.27 20,469.65 61,962.21 3.85 61,962.21 378,434.25 23.52 378,434.25 1,609,083.97 100.00 1,034,975.04
			1,034,975.04

(III) Other receivables

Balance at the end of the period

Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount – 3,113,443.54 143,261.98 3,256,705.52	amount Percentage (%) – 95.60 4.40 100.00	Provision for bad debts Amount Percentage (%) – – 1,237,636.29 39.75 143,261.98 100.00 1,380,898.27 42.40	Provision for bad debts Amount Percentage (%) – – 1,237,636.29 39.75 143,261.98 100.00 1,380,898.27 42.40
				42.40

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Balance at the beginning of the year

Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount – 2,389,345.40 143,261.98 2,532,607.38	amount Percentage (%) – 94.34 5.66 100.00	Provision for bad debts Amount Percentage (%) – – 1,273,166.80 53.29 143,261.98 100.00 1,416,428.78 55.93	Provision for bad debts Amount Percentage (%) – – 1,273,166.80 53.29 143,261.98 100.00 1,416,428.78 55.93
				55.93

1. Other receivables of which provision for bad debts is made on a group basis

(1) Other receivables with provision for bad debts based on aging analysis

Age Within 1 year 1–2 years 2–3 years 3–4 years 4–5 years Over 5 years Total	Balance at the end of the period Carrying amount Percentage Provision for bad debts (%) 1,574,757.97 50.58 – 57,532.39 1.85 17,259.72 521,553.22 16.75 260,776.61 291,341.25 9.36 291,341.25 28,974.42 0.93 28,974.42 639,284.29 20.53 639,284.29 3,113,443.54 100.00 1,237,636.29	Balance at the beginning of the year Carrying amount Percentage Provision for bad debts (%) 732,993.27 30.68 – 174,046.25 7.28 52,213.88 522,705.92 21.88 261,352.96 291,341.25 12.19 291,341.25 28,974.42 1.21 28,974.42 639,284.29 26.76 639,284.29 2,389,345.40 100.00 1,273,166.80	Balance at the beginning of the year Carrying amount Percentage Provision for bad debts (%) 732,993.27 30.68 – 174,046.25 7.28 52,213.88 522,705.92 21.88 261,352.96 291,341.25 12.19 291,341.25 28,974.42 1.21 28,974.42 639,284.29 26.76 639,284.29 2,389,345.40 100.00 1,273,166.80
			1,273,166.80

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2. Other receivables with individual provision for bad debts

(1) Other receivables with significant single amount and individual provision for bad debts at the end of the period

Item Other receivables with individual provision Total	Carrying amount 143,261.98 143,261.98	Bad debt amount 143,261.98 143,261.98	Percentage of provision 100.00%
			100.00%

(IV) Inventories

1. Classification of inventories

Item Raw materials Commodities in stock Total	Balance at the end of the Carrying amount Provision for impairment 1,419,551.08 714,219.32 382,369.38 382,369.38 1,801,920.46 1,096,588.70	period Book value 705,331.76 – 705,331.76	Balance at the beginning of Carrying amount Provision for impairment 1,419,551.08 714,219.32 382,369.38 382,369.38 1,801,920.46 1,096,588.70	the year Book value 705,331.76 –
				705,331.76

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2. Provision for inventories written down

Item Balance at the beginning of the year Raw materials 180,438.90 Products in stock 382,369.38 Total 562,808.28	Provision 533,780.42 – 533,780.42	Decrease in current period Reversal Written off – – – – – –	Balance at the end of the period 714,219.32 382,369.38
			1,096,588.70

(V) Fixed assets

		Balance at the	Increase	Decrease	Balance at
		beginning of	in current	in current	the end of
Item		the year	period	period	the period
I.	Total original book value	1,496,233.00	–	–	1,496,233.00
	Machinery	1,496,233.00	–	–	1,496,233.00
II.	Total of accumulated depreciation	1,397,920.78	–	–	1,397,920.78
	Machinery	1,397,920.78	–	–	1,397,920.78
III.	Total net book value of fixed assets	98,312.22			98,312.22
	Machinery	98,312.22			98,312.22
IV.	Total provisions for impairment	–	–	–	–
V.	Total book value of fixed assets	98,312.22			98,312.22
	Machinery	98,312.22			98,312.22

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(VI) Accounts payable

Item Within 1 year (including 1 year) 1–2 years (including 2 years) 2–3 years (including 3 years) More than 3 years Total (VII) Payments received in advance Item Within 1 year (including 1 year) 1–2 years (including 2 years) 2–3 years (including 3 years) More than 3 years Total	Balance at the end of the period 900,000.00 70,437.58 4,954,270.85 7,992,439.85 13,917,148.28 Balance at the end of the period 50,000.00 300,800.00 315,398.21 178,554.95 844,753.16	Balance at the beginning of the year 900,000.00 70,437.58 4,963,170.85 8,056,319.85 13,989,928.28 Balance at the beginning of the year – 601,240.21 14,958.00 178,554.95 794,753.16

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(VIII) Employee benefits payable

Item I. Staff salary, bonus, allowance and subsidies II. Welfare provision III. Social insurance Including: 1. Medical insurance premiums 2. Basic pension premiums 3. Unemployment premiums 4. Work-related injury insurance 5. Birth insurance premium IV. Housing reserve fund Total	Balance at the beginning of the year 222,349.15 – 131,162.83 21,203.74 94,425.29 1,772.59 4,781.40 8,979.81 1,521,349.23 1,874,861.21	Increase in current period 277,100.00 61,874.11 54,886.08 15,379.23 30,902.88 4,870.11 2,435.10 1,298.76 – 393,860.19	Decrease in current period 204,769.00 61,874.11 54,886.08 15,379.23 30,902.88 4,870.11 2,435.10 1,298.76 48,381.09 369,910.28	Balance at the end of the period 294,680.15 – 131,162.83 21,203.74 94,425.29 1,772.59 4,781.40 8,979.81 1,472,968.14
				1,898,811.12

(IX) Tax payable

Tax Value added tax Business tax Resources tax City maintenance and construction tax Property tax Land use tax Education surcharge Total	Balance at the beginning of the year 293,246.20 537,255.00 1,690,660.39 21,436.55 140,936.84 504,330.76 30,312.33 3,218,178.07	Payable in the current period 157,803.14 – – 7,890.16 – – 7,890.16 173,583.46	Paid in the current period – – 99,999.99 – – – – 99,999.99	Balance at the end of the period 451,049.34 537,255.00 1,590,660.40 29,326.71 140,936.84 504,330.76 38,202.49
				3,291,761.54

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(X) Other payables

Item Within 1 year (including 1 year) 1–2 years (including 2 years) 2–3 years (including 3 years) More than 3 years Total	Balance at the end of the period Amount Percentage (%) 4,796,238.42 29.39 257,117.62 1.58 362,426.88 2.22 10,904,237.67 66.81 16,320,020.59 100.00	Balance at the beginning of the year Amount Percentage (%) 2,958,203.82 20.34 320,160.61 2.20 362,426.88 2.49 10,904,237.67 74.97 14,545,028.98 100.00	Balance at the beginning of the year Amount Percentage (%) 2,958,203.82 20.34 320,160.61 2.20 362,426.88 2.49 10,904,237.67 74.97 14,545,028.98 100.00
			100.00

Explanation on significant accounts payable aging over one year

Name of unit Luoyang Longxin Glass Company Limited* (洛陽龍新玻璃有限公司) Zhang Fusheng Luoyang Social Insurance Center (洛陽市社會保險中心) Total	Amount Nature or content of other payables 3,924,817.96 Rentals 1,920,251.67 Transaction amount 1,808,822.13 Insurance fee 7,653,891.76

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(XI) Paid-up capital

	Balance at the beginning of	Balance at the beginning of	the year				Balance at the	end of the period
	Investment			Increase in	Decrease	in	Investment
Name of investor	amount	Percentage		current period	current period		amount	Percentage
			(%)					(%)
China Luoyang Float Glass
(Group) Company Limited*
(中國洛陽浮法玻璃集團
有限責任公司)	18,484,742.18		59.71	–		–	18,484,742.18	59.71
Longyang Glass
Company Limited*	12,475,313.63		40.29	–		–	12,475,313.63	40.29
Total	30,960,055.81		100.00	–		–	30,960,055.81	100.00

Special reserve
	Balance at		Increase		Decrease		Balance
	the beginning		in current		in current		at the end
Item	of the year			period	period	of the period		Remarks
Safety production fee	187,472.79			–	–		187,472.79
Total	187,472.79			–	–		187,472.79

(XII) Special reserve

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APPENDIX VII

(XIII) Undistributed profit

	Amount for the	Amount for the
Item	current period	previous year
Balance for the current period and
at the beginning of the year	-63,458,952.08	-54,817,280.68
Increase in current period	-1,085,362.83	-8,641,671.40
Including: Reversal of net profits for
the current period	-1,085,362.83	-8,641,671.40
Balance at the end of the current period	-64,544,314.91	-63,458,952.08

(XIV) Operating income and operating cost

Item I. Sub-total of core businesses Silicon II. Sub-total of other businesses Total	January – May 2015 Revenue Cost – – – – 1,227,099.93 1,419,913.82 1,227,099.93 1,419,913.82	The year Revenue 2,467,326.53 2,467,326.53 1,963,847.04 4,431,173.57	of 2014 Cost 2,467,326.53 2,467,326.53 2,203,291.81
			4,670,618.34

(XV) Administration expenses

Item Employee’s remuneration Fixed asset depreciation Maintenance fee Entertainment fee Other administration expenses Total	January – May 2015 380,943.50 – 12,180.00 12,718.60 109,672.92 515,515.02	The year of 2014 885,355.67 367,065.26 102,849.00 24,550.00 1,273,704.35
		2,653,524.28

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APPENDIX VII

(XVI) Financial expenses

Item Interest expense Less: interest income Discounted interest on notes Other expenses Total (XVII) Assets impairment losses Item I. Losses on bad debts II. Losses on decrease in inventory Total (XVIII) Non-operating expenses Item Compensation, penalties and fines Total	January – May 2015 – 2.57 13,186.68 – 13,184.11 January – May 2015 -23,530.51 – -23,530.51 January – May 2015 371,600.00 371,600.00	The year of 2014 – 20.67 26,380.00 442.84 26,802.17 The year of 2014 558,689.47 533,780.42 1,092,469.89 The year of 2014 4,989,678.21 4,989,678.21

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APPENDIX VII

(XIX) Consolidated cash flow statement

1. Supplementary information of cash flow statement

	January –	The year of
Item	May 2015	2014
1. Net profit adjusted to cash flow of
operating activities:
Net Profit	-1,085,362.83	-8,649,037.30
Add: Provision for assets impairment	-23,530.51	1,092,469.89
Depreciation of fixed assets, depletion of
oil and gas assets, depreciation of
productive biological assets	–	367,065.26
Amortization of intangible assets	–	–
Amortization of long-term deferred expenses	–	–
Losses from disposal of fixed assets,
intangible assets and other long-term
assets (“–” for gains)	–	-352,882.02
Losses on scrapping of fixed assets
(“–” for gains)	–	–
Loss from fair value change (“–” for gains)	–	–
Finance expenses (“–” for gains)	–	–
Investment losses (“–” for gains)	–	–
Decrease in deferred income tax assets
(“–” for increase)	–	–
Increase in deferred income tax
liabilities (“–” for decrease)	–	–
Decrease in inventories (“–” for increase)	–	586,101.83
Decrease in operating receivables
(“–” for increase)	-724,098.14	18,063.11
Increase in operating payables
(“–” for decrease)	1,849,744.99	6,937,845.19
Others
Net cash flow from operating activities	16,753.51	-374.04

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APPENDIX VII

		January –	The year of
	Item	May 2015	2014
	2. Significant investing and financing activities that
	do not involve cash receipts and payment:
	3. Net changes in cash and cash equivalents:
	Cash balance at the end of the period	18,032.59	1,279.08
	Less: Cash balance at the beginning of the year	1,279.08	1,653.12
	Net increase in cash and cash equivalents	16,753.51	-374.04
2.	*Cash and cash equivalents*
		Balance at	Balance at
		the end of	the beginning
	Item	the period	of the year
	I. Cash	18,032.59	1,279.08
	Including: Cash on hand	16,837.46	86.52
	Bank deposit available for
	payment at any time	1,195.13	1,192.56
	II. Cash equivalents	–	–
	III. Cash and cash equivalents at
	the end of the period	18,032.59	1,279.08

IX. CONTINGENCIES

Nil

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APPENDIX VII

X. EVENTS AFTER BALANCE SHEET DATE

Nil

XI. RELATED PARTY RELATIONSHIP AND TRANSACTIONS

(I) Parent company

Name of parent			Registered	Equity interest	Voting share
company	Registered address	Nature of business	capital	in the Company	in the Company
				(%)	(%)
China Luoyang	No. 9 Tonggong	State-owned	1,286,740,000.00	59.71	59.71
Float Glass (Group)	Middle, Xigong
Company Limited*	District, Luoyang
(中國洛陽浮法玻璃	City
集團有限責任公司)

(II) Subsidiary

	Type of	Type of	Registered	Legal	Nature of	Registered	Shareholding	Proportion of	Organization
Name of subsidiary	subsidiary	enterprise	address	representative	business	capital	percentage	voting rights	code
							(%)	(%)
Xin’an Province Mineral	Company	Domestic	Guotuo Village,		Transportation	1,116,300.00	68.73	68.73	76167371-X
Transport Co. Ltd.*	Limited	non-financial	Tiemen Town,		industry
(新安縣礦產運輸		subsidiary	Luoyang
有限公司)

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FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

(III) Other related parties

Relationship with

Name of other related parties the Company Organization code CLFG Longmen Glass Company Under the control 70654225-8 (洛玻集團龍門玻璃有限責任公司) of the same parent company Longyang Glass Company Limited Shareholder 61480889-9

(IV) Receivables from related parties

			Balance at the
		Balance at the	beginning of
Project name	Related parties	end of the period	the year
Accounts receivable	CLFG Longmen Glass Company*	32,799.05	32,799.05
	(洛玻集團龍門玻璃有限責任公司)
Accounts payable	Longyang Glass Company Limited*	1,142,647.79	1,142,647.79
Other payables	Longyang Glass Company Limited*	199,341.72	199,341.72

XII. EXPLANATIONS OF SIGNIFICANT ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PARENT COMPANY

(I) Accounts receivable

Category Account receivables with significant single amount and individual provision for bad debts Accounts receivable provided for bad debts in groups Account receivables with insignificant single amount and individual provision for bad debts Total	Carrying Amount – 1,609,083.97 – 1,609,083.97	Balance at the end of the period amount Bad debt provision Percentage Amount Percentage of provision (%) (%) – – – 100.00 1,046,975.04 65.07 – – – 100.00 1,046,975.04 65.07	Balance at the end of the period amount Bad debt provision Percentage Amount Percentage of provision (%) (%) – – – 100.00 1,046,975.04 65.07 – – – 100.00 1,046,975.04 65.07
			65.07

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APPENDIX VII

Balance at the beginning of the year

==> picture [394 x 211] intentionally omitted <==

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

Carrying amount Bad debt provision
Percentage of
Category Amount Percentage Amount provision
(%) (%)
Account receivables with significant single amount
– – – –
and individual provision for bad debts
Accounts receivable provided for bad debts in groups 1,609,083.97 100.00 1,034,975.04 64.32
Account receivables with insignificant single amount
– – – –
and individual provision for bad debts
Total 1,609,083.97 100.00 1,034,975.04 64.32
----- End of picture text -----

1. Accounts receivable provided for bad debts in groups

(1) Accounts receivable with provision for bad debts based on the aging analysis

Age Within 1 year 1–2 years 2–3 years 3–4 years 4–5 years Over 5 years Total	Balance at the end of the Carrying amount Percentage % – – – – 1,124,217.86 69.87 44,469.65 2.76 61,962.21 3.85 378,434.25 23.52 1,609,083.97 100.00	period Bad debt provision – – 562,108.93 44,469.65 61,962.21 378,434.25 1,046,975.04	Balance at the beginning of Carrying amount Percentage % – – – – 1,148,217.86 71.36 20,469.65 1.27 61,962.21 3.85 378,434.25 23.52 1,609,083.97 100.00	the year Bad debt provision – – 574,108.93 20,469.65 61,962.21 378,434.25
				1,034,975.04

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APPENDIX VII

(II) Other receivables

Balance at the end of the period

Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total Category Other receivables with significant single amount and individual provision for bad debts Other receivables provided for bad debts in groups Other receivables with insignificant single amount and individual provision for bad debts Total	Carrying amount Bad debt provision Amount Percentage Amount Percentage of provision (%) (%) – – – – 2,832,946.16 95.19 1,161,602.33 41.00 143,261.98 4.81 143,261.98 100.00 2,976,208.14 100.00 1,304,864.31 43.84 Balance at the beginning of the year Carrying amount Bad debt provision Amount Percentage Amount Percentage of provision (%) (%) 143,261.98 6.36 143,261.98 100.00 2,108,848.02 93.64 1,197,132.84 56.77 – – – – 2,252,110.00 100.00 1,340,394.82 59.52	Carrying amount Bad debt provision Amount Percentage Amount Percentage of provision (%) (%) – – – – 2,832,946.16 95.19 1,161,602.33 41.00 143,261.98 4.81 143,261.98 100.00 2,976,208.14 100.00 1,304,864.31 43.84 Balance at the beginning of the year Carrying amount Bad debt provision Amount Percentage Amount Percentage of provision (%) (%) 143,261.98 6.36 143,261.98 100.00 2,108,848.02 93.64 1,197,132.84 56.77 – – – – 2,252,110.00 100.00 1,340,394.82 59.52
		59.52

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APPENDIX VII

1. Other receivables in groups with provisions for bad debts

(1) Other receivables with provisions for bad debts based on aging analysis

Age Within 1 year 1–2 years 2–3 years 3–4 years 4–5 years Over 5 years Total	Balance at the end of the Carrying amount Percentage % 1,370,294.55 48.38 57,532.39 2.03 521,553.22 18.41 291,341.25 10.28 28,974.42 1.02 563,250.33 19.88 2,832,946.16 100.00	period Bad debt provision – 17,259.72 260,776.61 291,341.25 28,974.42 563,250.33 1,161,602.33	Balance at the beginning of Carrying amount Percentage % 528,529.85 25.06 174,046.25 8.25 522,705.92 24.79 291,341.25 13.82 28,974.42 1.37 563,250.33 26.71 2,108,848.02 100.00	the year Bad debt provision – 52,213.88 261,352.96 291,341.25 28,974.42 563,250.33
				1,197,132.84

(III) Long-term equity investment

1. Category of long-term equity investment

==> picture [366 x 221] intentionally omitted <==

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

Balance at Increase Decrease Balance at
the beginning in current in current the end of
Item of the year period period the period
Investment in subsidiaries 767,277.20 – – 767,277.20
Sub-total 767,277.20 – – 767,277.20
Less: impairment provision of
– – – –
long-term equity investment
Total 767,277.20 – – 767,277.20
----- End of picture text -----

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FINANCIAL INFORMATION OF MINERAL PRODUCTS COMPANY

APPENDIX VII

2. Breakdown of long-term equity investment

Name of investee Accounting method investment cost Balance at the beginning of the year I. Subsidiary Xin’an Province Mineral Transport Co. Ltd.* (新安縣礦產運輸有限公司) cost approach 711,300.00 767,277.20 Total – 711,300.00 767,277.20	Increase/ decrease – –	Balance at the end of the period Shareholding percentage (%) 767,277.20 68.73 767,277.20 –	Proportion of voting rights Provision for impairment at the end of the period Provision for impairment during the period (%) 68.73 – – – – –	Cash dividend during this period –
				–

(IV) Operating income and operating cost

Item I. Sub-total of core businesses Silicon II. Sub-total of other businesses Total	January – May 2015 Revenue Cost – – – – 1,227,099.93 1,419,913.82 1,227,099.93 1,419,913.82	The year Revenue 2,467,326.53 2,467,326.53 1,963,847.04 4,431,173.57	of 2014 Cost 2,467,326.53 2,467,326.53 2,203,291.81
			4,670,618.34

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APPENDIX VII

(V) Supplementary information of cash flow statement

	January –	The year of
Item	May 2015	2014
1. Net profit adjusted to cash flow of operating activities:
Net profit	-1,085,362.83	-8,625,481.50
Add: Provision for assets impairment	-23,530.51	1,092,469.89
Depreciation of fixed assets, depletion of oil and
gas assets, depreciation of productive
biological assets		343,509.46
Amortization of intangible assets
Amortization of long-term deferred expenses
Losses from disposal of fixed assets,
intangible assets and other long-term assets
(“–” for gains)		-352,882.02
Losses on scrapping of fixed assets (“–” for gains)
Loss from fair value change (“–” for gains)
Finance expenses (“–” for gains)
Investment losses (“–” for gains)
Decrease in deferred income tax assets
(“–” for increase)
Increase in deferred income tax liabilities
(“–” for decrease)
Decrease in inventories (“–” for increase)		586,101.83
Decrease in operating receivables (“–” for increase)	-724,098.14	18,063.11
Increase in operating payables (“–” for decrease)	1,849,744.99	6,937,845.19
Others
Net cash flow from operating activities	16,753.51	-374.04

2. Significant investing and financing activities that do

not involve cash receipts and payment:

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APPENDIX VII

	January –	The year of
Item	May 2015	2014
3. Net changes in cash and cash equivalents:
Cash balance at the end of the period	17,268.95	515.44
Less: Cash balance at the beginning of the year	515.44	889.48
Net increase in cash and cash equivalents	16,753.51	-374.04

XIII. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved by the person in charge of the company.

CLFG Mineral Products Company Limited

15 June 2015

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REPORT ON THE AMOUNTS DUE FROM THE OUTGOING ENTITIES

APPENDIX VIII

The following is the text of the accountants’ report of the amounts due from the Outgoing Entities to the Company received from the independent reporting accountants of the Company, WUYIGE Certified Public Accountants LLP.

Luoyang Glass Company Limited*

Special Audit Report for Certain Creditor’s Rights

Da Xin Zhuan Shen Zi [2015] No. 2-00360

**To Luoyang Glass Company Limited*,**

We have been commissioned by Luoyang Glass Company Limited (the “Luoyang Glass”) to conduct special audit on receivable creditor’s rights from CLFG Longhao Glass Co. Ltd. (“Longhao Company”), CLFG Longfei Glass Co. Ltd. (“Longfei Company”), CLFG Longxiang Glass Co. Ltd. (“Longxiang Company”), Yinan Huasheng Mineral Products Industry Co. Ltd. (“Huasheng Mineral”) and CLFG Mineral Products Co., Ltd. (“CLFG Mineral”) as at 31 May 2015.

The responsibilities of the management of Luoyang Glass for the creditor’s rights include (1) treating the accounts according to requirements of Accounting Standards for Business Enterprises and making fair representation; (2) designing, implementing and maintaining internal control which is necessary to enable that they are free from material misstatement, whether due to fraud or error.

Our responsibility is to audit the creditor’s rights. We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants. Taking into account actual situation of Luoyang Glass in auditing, we implemented auditing procedures including spot check of accounting records and external confirmations which we considered as necessary.

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REPORT ON THE AMOUNTS DUE FROM THE OUTGOING ENTITIES

APPENDIX VIII

As the auditing is completed, the auditing results are reported as follows:

I. RECEIVABLE CREDITOR’S RIGHTS FROM LONGHAO COMPANY

1. Basic information of Longhao Company

Longhao Company was jointly established by Luoyang Glass and China Luoyang Float Glass (Group) Company Limited on 20 June 2005. Its registered capital amounted to RMB50 million, of which, RMB40 million and RMB10 million were contributed by Luoyang Glass and China Luoyang Float Glass (Group) Company Limited, representing 80% and 20% of equity interests in Longhao Company, respectively. On 16 December 2009, China Luoyang Float Glass (Group) Company Limited* transferred 20% of equity interests in Longhao Company to Luoyang Glass. After the changes in equity interests, Longhao Company is a wholly-owned subsidiary of Luoyang Glass.

2. Creditor’s rights

As at 31 May 2015, the audited original value and net value of debt owed by Longhao Company to Luoyang Glass amounted to RMB428,714,840.45 and RMB288,745,840.45, respectively. Luoyang Glass has made provisions for bad debts amounting to RMB139,969,000.00. The specific creditor’s rights are set out in the schedule.

II. RECEIVABLE CREDITOR’S RIGHTS FROM LONGFEI COMPANY

1. Basic information of Longfei Company

Longfei Company was jointly established by China Luoyang Float Glass (Group) Company Limited, Luoyang Glass and Henan Mianchi Float Glass Plant on 27 September 2000. Its registered capital amounted to RMB74.08 million, of which, RMB7.4 million, RMB40 million and RMB26.68 million were contributed by China Luoyang Float Glass (Group) Company Limited, Luoyang Glass and Henan Mianchi Float Glass Plant, representing 9.99%, 53.99% and 36.02% of registered capital, respectively. On 16 December 2009, China Luoyang Float Glass (Group) Company Limited* transferred 9.99% of equity interests in Longfei Company to Luoyang Glass. After the changes in equity interests, Luoyang Glass holds 63.98% equity interests in Longfei Company.

— 424 —

REPORT ON THE AMOUNTS DUE FROM THE OUTGOING ENTITIES

APPENDIX VIII

2. Creditor’s rights

As at 31 May 2015, the audited original value and net value of debt owed by Longfei Company to Luoyang Glass amounted to RMB236,713,810.92 and RMB113,364,086.22, respectively. Luoyang Glass has made provisions for bad debts amounting to RMB123,349,724.70. The specific creditor’s rights are set out in the schedule.

III. RECEIVABLE CREDITOR’S RIGHTS FROM LONGXIANG COMPANY

1. Basic information of Longxiang Company

Longxiang Company was jointly established by 14 shareholders including Longfei Company, Shaoyang Huaxing Building Materials Co., Ltd. ( 邵陽市華星建築材料有限公司 ), Hunan Huaihua Hezhong Development Co., Ltd. ( 湖南懷化合眾發展有限公司 ), Henan Jinshan Chemical Co., Ltd. ( 河南金山化工有限責任公司 ), Hubei Yijun Trade Co., Ltd. ( 湖北億均貿易有限公司 ), Changzhou Daming Glass Co., Ltd. ( 常州市大明玻璃有限公司 ), Guangzhou Yuntong Materials Co., Ltd. ( 廣州市雲通物資有限公司 ), Ningbo Shuangning Glass Building Materials Co., Ltd. ( 寧波雙寧建材玻璃有限公司 ), Xicheng Shengli Glass Store in Yanhu District, Yuncheng City ( 運城市鹽湖區西城勝利玻璃店 ), Labor Union of Longfei Company, Zheng Qinghong ( 鄭清洪 ), Yan Jun ( 閆軍 ), Wang Qiuping ( 王秋萍 ) and Xue Jiankui ( 薛建奎 ) on 22 September 2005. Its registered capital amounted to RMB50 million. At the general meeting held on 14 January 2008, Longxiang Company made a resolution approving Wang Qiuping to transfer 2% of equity interests in Longxiang Company to Wang Wenying ( 汪文英 ). On 27 August 2008, Longfei Company, as the transferee, reached an agreement with 13 minority interests to receive 60% of equity interests in Longxiang Company held by above 13 shareholders. After the changes in equity interests, Longxiang Company is a wholly-owned subsidiary of Longfei Company.

2. Creditor’s rights

As at 31 May 2015, the audited original value and net value of debt owed by Longxiang Company to Luoyang Glass amounted to RMB97,627,183.58 and RMB63,025,110.35, respectively. Luoyang Glass has made provisions for bad debts amounting to RMB34,602,073.23. The specific creditor’s rights are set out in the schedule.

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REPORT ON THE AMOUNTS DUE FROM THE OUTGOING ENTITIES

APPENDIX VIII

IV. RECEIVABLE CREDITOR’S RIGHTS FROM HUASHENG MINERAL

1. Basic information of Huasheng Mineral

Huasheng Mineral was jointly established by Luoyang Glass, Qingdao Taiyang Glass Industrial Company Limited and Yinan County Yangdu Assets Operation Company Limited on 11 October 2000. Its registered capital amounted to RMB28 million, of which, RMB14.56 million, RMB7 million and RMB6.44 million were contributed by Luoyang Glass, Qingdao Taiyang Glass Industrial Company Limited and Yinan County Yangdu Assets Operation Company Limited, representing 52%, 25% and 23% of equity interests, respectively.

2. Creditor’s rights

As at 31 May 2015, the audited original value and net value of debt owed by Huasheng Mineral to Luoyang Glass amounted to RMB24,638,095.37 and RMB24,638,095.37, respectively. The specific creditor’s rights are set out in the schedule.

V. RECEIVABLE CREDITOR’S RIGHTS FROM CLFG MINERAL

1. Basic information of CLFG Mineral

CLFG Mineral was jointly established by China Luoyang Float Glass (Group) Company Limited and Luoyang Glass on 23 December 1998. Its registered capital amounted to RMB30,960,055.81, of which, RMB18,484,742.18 and RMB12,475,313.63 were contributed by China Luoyang Float Glass (Group) Company Limited and Luoyang Glass, representing 59.71% and 40.29% of registered capital, respectively.

2. Creditor’s rights

As at 31 May 2015, the audited original value and net value of debt owed by CLFG Mineral to Luoyang Glass amounted to RMB1,341,989.51 and RMB1,341,989.51, respectively. The specific creditor’s rights are set out in the schedule.

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REPORT ON THE AMOUNTS DUE FROM THE OUTGOING ENTITIES

APPENDIX VIII

VI. RESTRICTIONS ON USE SCOPE OF THE AUDITOR’S REPORT

The auditor’s report is solely used for determination of creditors’ right between Luoyang Glass and Longhao Company, Longfei Company, Longxiang Company, Huasheng Mineral as well as CLFG Mineral as at 31 May 2015 and should not be used for other purposes. Any impact arising from an application for other purposes is not connected to the Certified Public Accountants or the signing certified public accountants.

Schedule: breakdown of receivable claim of the five companies including Longhao Company

WUYIGE Certified Public Accountants LLP.

Beijing • the PRC

15 June 2015

* For identification purposes only

— 427 —

REPORT ON THE AMOUNTS DUE FROM THE OUTGOING ENTITIES

APPENDIX VIII

SCHEDULE: BREAKDOWN TABLE OF AMOUNTS DUE FROM FIVE COMPANIES SUCH AS LONGHAO COMPANY

Prepared by: Luoyang Glass Company Limited Prepared to the date of 31 May 2015 Unit: RMB

No. Entity Item 1 CLFG Longhao Glass Co. Ltd. (洛玻集團洛陽龍昊玻璃有限公司) Account receivable Other receivable Held-to-maturity investment Sub-total 2 CLFG Longfei Glass Co. Ltd. (洛玻集團龍飛玻璃有限公司) Account receivable Other receivable Held-to-maturity investment Sub-total 3 CLFG Longxiang Glass Co. Ltd (洛玻集團龍翔玻璃有限公司) Account receivable Sub-total 4 Yinan Huasheng Mineral Products Industry Co. Ltd. (沂南華盛礦產實業有限公司) Other receivable Sub-total 5 CLFG Mineral Products Company Limited (中國洛陽浮法玻璃集團礦產有限公司) Account receivable Sub-total Total Legal representative:	Original value Bad debt provision 267,758,231.94 – 25,867,608.51 4,880,000.00 135,089,000.00 135,089,000.00 428,714,840.45 139,969,000.00 156,313,390.92 44,552,924.70 8,400,420.00 6,796,800.00 72,000,000.00 72,000,000.00 236,713,810.92 123,349,724.70 97,627,183.58 34,602,073.23 97,627,183.58 34,602,073.23 24,638,095.37 – 24,638,095.37 – 1,341,989.51 – 1,341,989.51 – 789,035,919.83 297,920,797.93 Chief accountant:	Net value Description 267,758,231.94 Material sales and technologcial service fee, etc. 20,987,608.51 Internal borrowings and interests on entrusted loans – Entrusted bank loans 288,745,840.45 111,760,466.22 Material sales and technologcial service fee, etc. 1,603,620.00 Interests on entrusted loans, etc. – Entrusted bank loans 113,364,086.22 63,025,110.35 Material sales and technologcial service fee, etc. 63,025,110.35 24,638,095.37 Internal borrowings 24,638,095.37 1,341,989.51 Material sales 1,341,989.51 491,115,121.90 Person in charge of accounting department:

— 428 —

APPENDIX IX UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the unaudited pro forma financial information of the enlarged Group as if the Disposal, the Acquisition and the issue of the Consideration Shares had been completed, for the sole purpose of inclusion in this circular, received from WUYIGE Certified Public Accountants LLP.

ASSURANCE REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

Dear Sir or Madam,

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Luoyang Glass Company Limited* (the “Company”) and its subsidiaries (hereafter collectively referred to as the “Group”) by the directors of the Company for inclusion in Appendix IX of the circular (the “Circular”) in relation to the proposed asset reorganisation (“Proposed Asset Reorganisation”) (as defined in the Circular) published by the Company on 10 August 2015. The unaudited pro forma financial information was compiled by directors to illustrate the impact of the Proposed Asset Reorganisation on the Group’s financial condition as at 31 December 2014 as if the Proposed Asset Reorganisation has been completed by 31 December 2014. The applicable criteria on the basis of which the unaudited pro forma financial information was compiled set out in the pages 431 to 433.

Directors’ Responsibility for the Pro Forma Financial Information

The directors of the Company are responsible for compiling the unaudited pro forma financial information at their sole discretion in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Reporting Accountant’s Responsibility

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IX

Basis of Opinion

We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company. The engagement did not involve independent examination of any of the underlying financial information.

Our work did not constitute an audit or review made in accordance with Hong Kong Standards on Auditing or Hong Kong Standards on Review Engagements issued by the HKICPA, and accordingly, we do not express any such audit or review assurance on the unaudited pro forma financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

The unaudited pro forma financial information is for illustrative purposes only, based on the judgments and assumptions of the directors of the Company, and because of its hypothetical nature, the unaudited pro forma financial information does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at 31 Decemebr 2014 or any future date.

Opinion:

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

WUYIGE Certified Public Accountants LLP

10 August 2015

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APPENDIX IX UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction of Unaudited Pro Forma Financial Information

The unaudited pro forma financial information of the enlarged Group (namely the Group upon completion of asset reorganisation) is set out below, as if the Proposed Asset Reorganisation has been completed on 31 December 2014 for the purpose of the unaudited pro forma balance sheet. Details of the Proposed Asset Reorganisation are set out in the section headed “Letter from the Board” of this circular.

The unaudited pro forma financial information of the enlarged Group has been prepared in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, to illustrate the impacts of the Proposed Asset Reorganisation conducted pursuant to the terms of reorganisation agreement between the Company and CLFG. Due to its hypothetical nature, the unaudited pro forma financial information may not give a true picture of the financial position or results of the enlarged Group upon completion of the Proposed Asset Reorganisation on 31 December 2014 or any future date.

Unaudited Pro Forma Consolidated Assets and Liabilities of the Enlarged Group

Prepared by: Luoyang Glass Company Limited

Unit: RMB

Item Audited assets and liabilities of the Group as at 31 December 2014(1) Note 1 Current assets: Bank balance and cash 68,478,221.61 Notes receivable 400,000.00 Accounts receivable 23,412,089.50 Prepayments 7,692,326.00 Other receivables 37,020,177.60 Inventory 211,781,486.51 Other current assets 21,865,034.21 Total current assets 370,649,335.43 Non-current assets: Available-for-sale financial assets 4,343,500.00 Long-term receivables 48,649,780.65 Fixed assets 568,040,126.38 Construction in progress 698,734.75 Construction materials 428,213.56 Intangible assets 54,815,729.68 Long-term deferred expenses 486,000.00	Assets and liabilities of The Incoming Entity as at 31 May 2015(2) Note2 13,327,100.34 6,180,557.22 2,149,519.14 62,210.76 19,346,767.90 59,653,160.46 63,421,607.13 164,140,922.95 – – 528,730,052.96 113,491.00 – 36,780,290.35 –	Assets and liabilities of The Outgoing Entities as at 31 December 2014 Longfei Company (consolidated)(3) Silicon Company (consolidated)(4) Yinan Company(5) Longhao Company(6) Note 3 Note 3 Note 3 Note 3 90,097.51 165,228.98 265,714.79 25,208.07 – – 100,000.00 – 106,774.28 – 14,797,950.61 8,334,385.95 6,129.21 7,166.70 458,098.05 1,427,165.64 73,537.31 395,838.43 1,283,798.80 7,695,370.08 11,870,069.46 – 3,412,129.47 58,978,567.32 6,710,794.92 – – 8,596,514.23 18,857,402.69 568,234.11 20,317,691.72 85,057,211.29 4,343,500.00 – – – – – – – 92,543,290.28 243,135.08 15,637,975.30 237,891,145.03 698,734.75 – – – – – – – 2,285,000.00 6,658,929.49 8,517,045.46 8,198,505.00 – – – –	Outgoing creditor’s rights and equity interests(7) Note 4 – – 398,445,687.59 – 41,396,890.04 – – – – – – – – – –	Issuance of Consideration Shares(8) Note 5 – – – – – – – – – – – – – – –	Pro forma adjustment(9) Unaudited pro forma consolidated assets and liabilities as at 31 December 2014 (10)=(1)+(2)-(3)-(4)-(5)- (6)-(7)+(8)+(9) Note 6 – 81,259,072.60 – 6,480,557.22 404,286,304.99 (a) 8,163,115.20 – 5,855,977.16 41,632,492.98 (a) 47,154,003.82 442,944.18 (b) 197,616,824.90 – 69,979,332.19 – 416,508,883.09 – – – 48,649,780.65 148,707.93 (c) 750,603,341.58 – 113,491.00 – 428,213.56 – 65,936,540.08 – 486,000.00	Pro forma adjustment(9) Unaudited pro forma consolidated assets and liabilities as at 31 December 2014 (10)=(1)+(2)-(3)-(4)-(5)- (6)-(7)+(8)+(9) Note 6 – 81,259,072.60 – 6,480,557.22 404,286,304.99 (a) 8,163,115.20 – 5,855,977.16 41,632,492.98 (a) 47,154,003.82 442,944.18 (b) 197,616,824.90 – 69,979,332.19 – 416,508,883.09 – – – 48,649,780.65 148,707.93 (c) 750,603,341.58 – 113,491.00 – 428,213.56 – 65,936,540.08 – 486,000.00
						416,508,883.09

						– 48,649,780.65 750,603,341.58 113,491.00 428,213.56 65,936,540.08 486,000.00

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IX

Item Audited assets and liabilities of the Group as at 31 December 2014(1) Note 1 Deferred income tax assets 3,821,811.59 Other non-current assets 5,134,487.79 Total non-current assets 686,418,384.40 Total assets 1,057,067,719.83 Current liabilities: Short-term loans 10,000,000.00 Notes payable 90,000,000.00 Accounts payable 266,198,092.81 Payments received in advance 57,399,049.54 Staff remuneration payables 48,625,920.94 Taxes payable 27,800,706.43 Other payables 80,705,153.66 Non-current liabilities due within one year 46,293,636.87 Total current liabilities 627,022,560.25 Non-current liabilites: Long-term loans 459,535,761.38 Deferred income 9,898,914.15 Total non-current liabilities 469,434,675.53 Total liabilities 1,096,457,235.78 Owners’ equity: Share capital 500,018,242.00 Other items related to equity -450,619,223.60 Total equity attributed to owners of the parent company 49,399,018.40 Minority interests -88,788,534.35 Total owners’ equity -39,389,515.95 Total liabilities and owners’ equities 1,057,067,719.83	Assets and liabilities of The Incoming Entity as at 31 May 2015(2) Note2 574,993.41 – 566,198,827.72 730,339,750.67 37,930,000.00 4,805,536.28 4,828,609.59 99,604.53 959,600.44 1,784,405.87 5,918,016.91 – 56,325,773.62 – 718,750.00 718,750.00 57,044,523.62 – 673,295,227.05 673,295,227.05 – 673,295,227.05 730,339,750.67	Assets and liabilities of The Outgoing Entities as at 31 December 2014 Longfei Company (consolidated)(3) Silicon Company (consolidated)(4) Yinan Company(5) Longhao Company(6) Note 3 Note 3 Note 3 Note 3 – – – – – 2,114,487.79 – 3,020,000.00 99,870,525.03 9,016,552.36 24,155,020.76 249,109,650.03 118,727,927.72 9,584,786.47 44,472,712.48 334,166,861.32 72,000,000.00 – – 135,089,000.00 – – – – 277,756,207.35 – 3,737,466.06 361,330,834.44 847,078.42 – 9,255.30 5,510,523.83 10,169,723.60 64,678.39 736,092.82 9,848,029.00 2,878,115.22 3,770.56 330,230.53 2,996,499.81 13,101,611.45 1,672,172.00 35,886,997.96 67,998,408.78 – – – 1,440,000.00 376,752,736.04 1,740,620.95 40,700,042.67 584,213,295.86 – – – 14,360,000.00 – – – – – – – 14,360,000.00 376,752,736.04 1,740,620.95 40,700,042.67 598,573,295.86 – – – – -258,024,808.32 8,213,500.67 3,772,669.81 -264,406,434.54 -258,024,808.32 8,213,500.67 3,772,669.81 -264,406,434.54 – -369,335.15 – – -258,024,808.32 7,844,165.52 3,772,669.81 -264,406,434.54 118,727,927.72 9,584,786.47 44,472,712.48 334,166,861.32	Outgoing creditor’s rights and equity interests(7) Note 4 – – – – – – – – – – – – – – – – – – – – – – –	Issuance of Consideration Shares(8) Note 5 – – – – – – – – – – – – – – – – – 15,000,000.00 – – – – –	Pro forma adjustment(9) Unaudited pro forma consolidated assets and liabilities as at 31 December 2014 (10)=(1)+(2)-(3)-(4)-(5)- (6)-(7)+(8)+(9) Note 6 – 4,396,805.00 – – – 870,614,171.87 – 1,287,123,054.96 207,089,000.00 (a) 47,930,000.00 – 94,805,536.28 477,489,687.76 (a) 105,691,882.31 – 51,131,796.52 – 28,766,997.57 – 23,376,496.18 151,098,294.92 (a) 119,062,275.30 – 44,853,636.87 – 515,618,621.03 – 445,175,761.38 – 10,617,664.15 – 455,793,425.53 – 971,412,046.56 – 515,018,242.00 – -199,307,233.60 – 315,711,008.40 – – – 315,711,008.40 – 1,287,123,054.96	Unaudited pro forma consolidated assets and liabilities as at 31 December 2014 (10)=(1)+(2)-(3)-(4)-(5)- (6)-(7)+(8)+(9) 4,396,805.00 –
						870,614,171.87

						1,287,123,054.96

						515,618,621.03

						445,175,761.38 10,617,664.15
						455,793,425.53

						971,412,046.56

						515,018,242.00 -199,307,233.60
						315,711,008.40

						– 315,711,008.40

						1,287,123,054.96

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IX

Note:

The Group’s assets and liabilities as at 31 December 2014 were extracted from the Group’s 2014 annual report without any adjustment.
The Incoming Entity’s assets and liabilities as at 31 May 2015 were extracted from Appendix II without any adjustment. According to requirements of the PRC GAAP, the Group prepared the unaudited pro forma financial information pursuant to the principle of combination of entities or business under common control.
The Outgoing Entities’ assets and liabilities as at 31 December 2014 were extracted from 2014 audit report of the Outgoing Entities without any adjustment.
Book value of outgoing creditor’s rights as at 31 December 2014 was extracted from creditor’s rights special audit report as at 31 December 2014 of outgoing creditor’s rights. Outgoing equity interests was equity interests invested in CLFG Mineral, a joint venture. The Company calculated the investment in CLFG Mineral with equity method according to requirements of the PRC GAAP. In accordance with audited financial statements of CLFG Mineral as at 31 December 2014, book value of long-term equity investment in CLFG Mineral by the Company amounted to RMB0.
Pursuant to valuation and pricing principle of incoming assets and outgoing assets, price difference of incoming assets and outgoing assets amounted to RMB180,729,700, RMB90,729,700 of which shall be paid in cash and recoganized as other payables, the remaining part shall be paid by way of issuance of shares. 15,000,000 shares were proposed to be issued. This pro forma financial information does not include proceeds for reorganization raised from the non-public issuance of shares.
6.(a) It refers to the offset of the provisions for bad debt between the Group and the Outgoing Entities and the connected transactions within the Outgoing Entities as at 31 December 2014.
6.(b) It refers to the offset of the inventory of the connected transactions between the Group and the Outgoing Entities which is not realized as gains or losses as at 31 December 2014.
6.(c) It refers to the offset of the unrealized gains or losses from the transfer of fixed assets between the Group and the Outgoing Entities as at 31 December 2014.

— 433 —

VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

The following is the text of the valuation report received from the Valuer in respect of the valuation of the net liabilities of Longhao Company as at 31 October 2014.

Asset Valuation Report

in respect of

**the Proposed Disposal of Equity Interest in CLFG Longhao Glass Co. Ltd.* (** 洛玻集團洛陽龍昊玻璃有限公司 )

by Luoyang Glass Company Limited by way of Assets Exchange

China United Appraisal Report [2015] No. 030

China United Assets Appraisal Group Co., Limited

15 April 2015

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

Declaration of the Registered Valuer

We complied with the relevant laws and regulations and valuation standards, adhered to the principles of independence, objectivity and fairness in the course of conducting this valuation assignment; according to the information collected during our assignment process, the contents stated in the valuation report are objective, and we take the relevant legal responsibility as to the reasonableness of the valuation conclusion.
The lists of assets and liabilities of the valuation target were submitted by the principals and valuation target company and were signed and sealed by them as confirmation; the principals and valuation target company are liable for the genuineness, legality, completeness of the information so provided and the proper usage of the valuation report.
We did not have any existing nor expected interest in the valuation target in the valuation report; and we did not have any existing nor expected interest with the parties concerned, and did not have any bias against the parties concerned.
We conducted on-site investigation on the valuation target of the valuation report and the assets involved; we paid the necessary concern with the legal ownership status of the valuation target and the assets involved, and carried out an inspection of the legal title information of the valuation target and the assets involved.
The analysis, judgment and conclusion in the valuation report that we issued were subject to the constraints of the assumptions and criteria of the valuation report, users of the valuation report should take into full consideration the assumptions, criteria, explanation of special items set out in the valuation report and their impact on the valuation conclusion.

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in CLFG Longhao Glass Co. Ltd.* ( 洛玻集團洛陽龍昊玻璃有限公司 )

by Luoyang Glass Company Limited by way of Assets Exchange

China United Appraisal Report [2015] No. 030

SUMMARY

China United Assets Appraisal Group Co., Limited accepted the mandate from China Luoyang Float Glass (Group) Company Limited and Luoyang Glass Company Limited to carry out a valuation assignment of the market value of the total shareholders’ equity of CLFG Longhao Glass Co. Ltd. involved in the economic behaviour of the proposed disposal of the equity interest of CLFG Longhao Glass Co. Ltd.* by assets exchange by Luoyang Glass Company Limited on the appraisal date.

The valuation target was the entire shareholders’ equity of CLFG Longhao Glass Co. Ltd., and the scope of valuation was all assets and the related liabilities of CLFG Longhao Glass Co. Ltd., including current assets and non-current assets and the related liabilities.

The appraisal date was 31 October 2014.

The type of valuation of this valuation assignment was market value.

The entire shareholders’ equity of CLFG Longhao Glass Co. Ltd.* was valued at RMB-178,305,100, representing an appreciation of RMB67,088,500 and an appreciation rate of 27.34% as compared to the book value of RMB-245,393,600.

Report users are reminded to pay special attention to the special events and significant events for subsequent periods set out in this report when applying the valuation conclusions.

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

According to the requirements of the appraisal management of state-owned assets, this valuation report can be used only after it has been filed (or approved) with competent authorities, and after the filing (or approval), the valuation results shall have a validity of one year commencing from 31 October 2014 (i.e., the appraisal date) and ending on 30 October 2015. Reappraisal of the assets shall be conducted after one year.

The above contents were extracted from the full text of the valuation report. In order to understand the details of the valuation and to have a reasonable understanding of the valuation conclusions, the full text of the valuation report must be read.

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in CLFG Longhao Glass Co. Ltd.*

( 洛玻集團洛陽龍昊玻璃有限公司 )

by Luoyang Glass Company Limited by way of Assets Exchange

China United Appraisal Report [2015] No. 030

**China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited:**

China United Assets Appraisal Group Co., Limited accepted the mandate from you to carry out a valuation assignment of the market value of the entire shareholders’ equity of CLFG Longhao Glass Co. Ltd. involved in the economic behaviour of the proposed disposal of the entire equity interest in CLFG Longhao Glass Co. Ltd. by Luoyang Glass Company Limited by assets exchange on the appraisal date (being 31 October 2014) in accordance with the relevant laws and regulations and valuation standards and under the asset-based approach by following the necessary valuation procedures. The contents of the valuation are as follows:

I. PRINCIPALS, VALUATION TARGET COMPANY AND OTHER USERS OF THE VALUATION REPORT

The principals of this valuation assignment were China Luoyang Float Glass (Group) Company Limited and Luoyang Glass Company Limited, and the valuation target company was CLFG Longhao Glass Co. Ltd..

(I) Basic information of Principal 1

Company name: China Luoyang Float Glass (Group) Company Limited* (hereinafter “CLFG”) Company address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang City Legal representative: Peng Shou Registered capital: RMB1,286,740,000 Paid-up capital: RMB1,286,740,000 Company type: limited liability company Business registration license no.: 410000100003003

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

Brief Historical Introduction

CLFG was established in 1991, which was formerly known as Luoyang Glass Factory, and was renamed as China Luoyang Float Glass Corporation Limited in 1993. In 1996, it was transformed into a wholly state-owned company in accordance with the Company Law and renamed as China Luoyang Float Glass (Group) Company Limited at the same time. After several times of capital increase and the gratuitous transfer of state-owned equity interest, as at the appraisal date, the registered capital was RMB1,286,740,000, of which China Building Materials Glass Company (now renamed as “Triumph Technology Group Company”) held a registered capital of RMB665,284,000 (accounted for 51.70% of the total registered capital), Bengbu Glass Industry Design Institute held a registered capital of RMB244,480,700, (accounted for 19.00% of the total registered capital), Luoyang State-owned Assets Operation Company ( 洛陽市國有資產經營公司 ) held a registered capital of RMB132,135,700, (accounted for 10.27% of the total registered capital), China Huarong Asset Management Company* ( 中國華融資產管理公司 ) held a registered capital of RMB110,000,000, (accounted for 8.55% of the total registered capital), China Great Wall Assets Management Corporation ( 中國長城資產管理公司 ) held a registered capital of RMB70,000,000, (accounted for 5.44% of the total registered capital), China Orient Asset Management Company ( 中國東方資產管理公司 ) held a registered capital of RMB39,840,000, (accounted for 3.10% of the total registered capital) and Henan Branch of China Construction Bank Corporation held a registered capital of RMB25,000,000, (accounted for 1.94% of the total registered capital).

CLFG has set up the Board and the general manager’s office to manage and control the major decisions and daily work of the Company. The Company set up functional management departments including the office, asset management department, finance department, audit department, human resources department, investment and development department, legal affairs department, disciplinary committee, labor union, party work department and cultural services company.

The actual controller of CLFG is China National Building Material Group Corporation.

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

2. Business Scope

The business scope mainly includes: manufacture of glass and related raw materials, and complete sets of equipment; deep processing of glass; technical services and consulting services for glass processing; export of self-made products and related technologies by the company or member entities of the company; import and export of the raw and ancillary materials, machinery equipment, instruments and meters, parts and components needed for production and scientific research by the company or member entities of the company as well as related technologies; undertaking business relating to Chinese foreign joint ventures, joint production and “three forms of OEM and compensation trade” of the company; undertaking overseas engineering projects and domestic engineering projects for international bidding in the building materials industry; export of the required equipment and materials for the above overseas engineering projects; dispatch of contract workers for the above projects, production and technical services (the catalogue for import and export commodities shall be subject to related national regulations).

(II) Basic information of Principal 2

Company name: Luoyang Glass Company Limited Company address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang City Legal representative: Ma Liyun Registered capital: RMB 500,018,200 Paid-up capital: RMB500,018,200 Company type: Company Limited (listed) Places of listing: Shanghai Stock Exchange, Hong Kong Stock Exchange Stock short name: 洛陽玻璃 Luoyang Glass Stock code: 600876.SH, 1108.HK Business registration license no.: 410300400003275 Date of establishment: 6 April 1994

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

1. Historical reform

Luoyang Glass was established in April 1994 with a registered capital of RMB400,000,000 upon establishment. In June 1994, with the approval of the Securities Commission of the State Council, the Company issued 250,000, 000 H shares. In September 1995, with the approval of China Securities Regulatory Commission, the Company issued 50,000,000 A shares. After the share trading reform and the repurchase of shares in 2006, as at the appraisal date, the registered capital of the Company was RMB500,018,200 and the share structure is as follows:

		The Amount	The percentage of
Type	of Shares	of Shares	the total shares
		(ten thousand
		shares)	(%)
I. Total circulating shares subject to
trading moratorium		–	–
II. Total circulating shares not subject to
trading moratorium		50,001.82	100.00
1.	Ordinary shares denominated
	in RMB_(A Shares)_	25,001.82	50.00
2.	Overseas listed foreign
	invested shares_(H shares)_	25,000.00	50.00
III. Total shares		50,001.82	100.00

Business Scope

Manufacture of glass and relevant deep processing goods, machinery equipment, electric appliances and accessories, sale of self-produced products, provision of technical consultancy and technical services.

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

(III) Basic information of the valuation target company

Company name: CLFG Longhao Glass Co. Ltd.* Company address: Neibu Village, Ruyang County, Luoyang Legal representative: Xie Jun Registered capital: RMB50,000,000 Paid-up capital: RMB50,000,000 Company type: limited liability company Business registration 4103001004962 license no.:

(1) Corporate Profile

On 7 March 2005, CLFG entered into the Articles of Association with Luoyang Glass and jointly make contributions to establish Longhao Company. The registered capital of Longhao Company was RMB50 million since the date of establishment, of which CLFG contributed RMB10 million, representing 20% of the registered capital, in which RMB5 million was contributed by cash. A contribution of RMB5 million was made with the use right of trademark of “Luoyang Floating Glass Workmanship Proprietary Technology” and “Luobo”; Luoyang Glass contributed RMB40 million, all of which was contributed by cash. On 3 December 2009, Longhao Company convened a shareholders’ meeting and unanimously resolved that CLFG would entirely transfer the 20% equity interests (equivalent to the contribution of RMB10 million) legally held by it in Longhao Company to Luoyang Glass. Luobo Holdings would make a payment of RMB7,300,356,93 to CLFG as a consideration of the equity transfer.

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

As at the appraisal date, shareholders and their respective capital contributions and contribution ratio are as follow:

Table 2-1 Shareholders and their respective capital contribution and contribution ratio

Shareholder Name Luoyang Glass Company Limited* Total	Capital contribution (RMB0’000) 5,000 5,000	Contribution ratio (%) 100 100

(2) Operation Conditions

Longhao Company currently owns three normal flat sheet glass product lines. As the business of flat sheet glass has been deteriorating recently, one of the product lines has been suspended during cold repair. For the two operating product lines, one is Longhao No. 1 650t/d product line, which is designed to produce quality floating glass that is colourless and transparent. The production was started in June 2013. Another is Luobo 600t/d online LOW-E product line, which is rented to Longhao Glass by CLFG for use at some consideration.

(3) Scope of Operation

Scope of operation: Production and sales of floating glass; processing of glass and raw materials; sales of materials of processed glass and mineral products; technical consultation and services.

(4) Assets, finance and operating status

As at the appraisal date (being 31 October 2014), the total assets of the company was RMB319,497,700, the total liabilities was RMB564,891,300, the net assets was RMB-245,393,600, the operating income from January to October of 2014 was RMB196,214,700 and net profit was RMB-119,729,800. The assets and financial position of the Company in the recent two years and on the appraisal date are set out in the table below:

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VALUATION REPORT OF LONGHAO COMPANY

APPENDIX X

Assets and financial position of the Company in the recent two years and on the benchmark date are as follows:

	31 October 2014	31 December 2013	31 December 2012
Total assets	31,949.77	32,743.75	20,292.82
Net assets	-24,539.36	-12,566.38	-9,092.91
	From January	For the year	For the year
	to October 2014	of 2013	of 2012
Revenues from
principal operations	19,621.47	5,678.11	5,806.15
Total profit	-11,972.98	-3,473.47	-5,950.18
Net profit	-11,972.98	-3,473.47	-5,950.18

Auditing firm PKF DAXIN Certified Public Accountants LLP (Special Ordinary Partnership) Auditing Opinion unqualified opinions with explanatory notes

Valuers noted that the audit report issued by the auditing firm was prepared with explanatory notes, disclosing that “the accumulated unrecovered loss of Longhao Company as at 31 October 2014 was RMB297,286,640.71 and the current liabilities of RMB477,885,149.59 was higher than current assets. Longhao Company has fully disclosed improving measures to be adopted in note 2 of the financial statement, but there are still full of uncertainties on whether it is able to operate on an ongoing basis. As a result, there may not be a realization of assets and repayment of debts in the normal course of business”.

(III) Relationship between the principals and the valuation target company

The principals of this asset valuation are China Luoyang Float Glass (Group) Company Limited and Luoyang Glass Company Limited. China Luoyang Float Glass (Group) Company Limited is the controlling shareholder of Luoyang Glass Company Limited; Luoyang Glass Company Limited is the controlling shareholder of CLFG Longhao Glass Co. Ltd.*.

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(IV) Principals, other users of the valuation report stipulated by the engagement letter

The users of this valuation report are the principals, the valuation target company, the relevant parties to the economic behavior and the relevant regulatory authorities with which filing has to be made according to the relevant regulations for the administration of state-owned assets.

Unless otherwise stipulated by the laws and regulations of the state, no organization or individual can become a user of the valuation report by virtue of possession of this valuation report unless they or he had been confirmed as such by the valuation firm and the principals.

II. PURPOSE OF THE VALUATION

Pursuant to the Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation and the Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited, the Proposal on the Material Asset Exchange, Issuance of Shares, Acquisition of Assets and Raising Supporting Funds of Luoyang Glass Company Limited was considered and passed at the meeting. The proposal set out the intention of Luoyang Glass to conduct an equivalent assets exchange with its 100% equity interest in Longhao Company, 63.98% equity interest in Longhao Company, 67% equity interest in Dengfeng Silicon, 52% equity interest in Huasheng Mineral and 40.29% equity interest in CLFG Mineral as well as the its liability assets in Longhao Company, Longxiang Company, Huasheng Material, CLFG Mineral for the 100% equity interest of Bengbu China National Building Materials Information Display Material Company* held by CLFG. The difference between the assets to be disposed and the assets to be acquired will be partly taken by Luoyang Glass under the non-public issuance of A Shares of CLFG.

The purpose of the assets valuation was to reflect the market value of the entire shareholders’ equity of CLFG Longhao Glass Co. Ltd.* on the appraisal date, so as to provide reference basis to the abovementioned economic behavior.

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III. VALUATION TARGET AND SCOPE OF VALUATION

The valuation target was the entire shareholders’ equity of Longhao Company. The scope of valuation was all the assets and related liabilities of Longhao Company on the appraisal date with the carrying values of RMB319,497,700for the total assets, RMB564,891,300 for the liabilities and RMB-245,393,600 for the net assets. In particular, they include current assets of RMB72,406,200, non-current assets of RMB247,091,600, current liabilities of RMB550,291,300 and non-current liabilities of RMB14,600,000.

The above information of assets and liabilities were extracted from the balance sheet as audited by Daxin Certified Public Accountants (Special general partnership). The valuation was based upon audited accounts of the enterprise.

The valuation target under mandate and the scope of the valuation were consistent with those involved in the economic behavior.

(I) Status of the major assets

The major assets in the scope of this valuation assignment were inventories and fixed assets.

The carrying value of the inventories of the enterprise amounted to RMB66,344,602.59, among which, the carrying values of the raw materials and finished products amounted to RMB27,329,628.65 and RMB28,618,898.11 respectively. The carrying value of unfinished products amounted to RMB2,220,179.85; the carrying value of turnover materials being used amounted to RMB8,175,895.98; the impairment provision for the decrease in inventories amounted to RMB14,580,665.63. The net carrying value of inventories amounted to RMB51,763,936.96. Fixed assets consist of property assets and equipment assets, among which, the original carrying value of the property assets was RMB86,704,759.57, while its net carrying value was RMB69,018,738.97. The original carrying value of the equipment assets was RMB277,337,059.00, while its net carrying value was RMB173,348,821.75. Provision for impairment losses made for fixed assets amounted to RMB3,612,118.97 and the net value of fixed assets amounted to RMB238,779,313.05.

Raw materials mainly included auxiliary materials for production, spare parts of equipment, low value consumables and standard components, which mostly function well and were operating at a normal turnover rate. There are certain backlog and defective products. The finished products mainly included flat glass of various models.

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Fixed assets mainly included houses and buildings, structures, channels and drainages among which, the houses were located in the plant area of Da’an industrial zone of Ruyang County with an aggregate gross floor area of 76,023.77 square meters. The houses were constructed with bricks and concrete and frame structures. A total of 15 houses with an area of 59,754.77 square meters have obtained property ownership certificates, whose owner is CLFG Longhao Glass Co. Ltd.*. No application for the property ownership certificate was made for nine houses with an area of 16,269.00 square meters. The houses and buildings mainly included main plants, converting stations, office buildings, warehouses, etc.. Channels and drainages mainly included water supply and sewerage pipelines and electric transmission lines. These houses were mostly completed in 1990s and before or after 2005 in this century with a better construction standard, which satisfy the needs for production. Equipment assets include machinery equipment, vehicles and electronic equipment. Regarding machinery equipments, there are mainly two float glass production lines, of which one is the original float line No. 2 with a melting capacity of 400 tonnes/day, which suspended production since April 2011. Certain parts of the production line have retired. Another line is the new float production line reformed from the original float line No. 1 with a melting capacity of 650tonnes/day and has commenced production since September 2013. There were five vehicles which were in good condition. Electronic equipments mainly included electronic equipments for office and most of the equipments have expired the usable life, which could basically satisfy the needs for normal workload.

(II) Book records submitted by the company or status of the intangible assets not recorded

The intangible asset in the reporting valuation scope of the valuation target were land use right of a land parcel, use right of proprietary technology and the conditional use right of “CLFG” brand combining with graphs and words.

The land is transferred under a land grant agreement and has obtained the state-owned land use permit, which has been reflected in accounting records without specifying other rights.

(III) Type, quantity of off-balance sheet assets submitted by the company

As of 31 October 2014, there were no off-balance sheet assets in the valuation scope reported by the valuation target.

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(IV) Type, quantity and carrying value of assets as stated in the conclusion of reports issued by other organizations which are adopted as reference hereof

The carrying value of all asset and liabilities on the appraisal date in the valuation report was the audit results of Daxin Certified Public Accountants (special general partnership). No other agencies’ reports were adopted except as mentioned above.

IV. TYPE OF VALUATION AND DEFINITION

Based on the purposes of this valuation assignment, it was determined that market value was the type of valuation for this valuation assignment.

Market value means the estimated amount of valuation for the target on the appraisal date in an arm’s length transaction between a voluntary buyer and a voluntary seller, each acting rationally free from compulsion.

V. APPRAISAL DATE

The benchmark date of the valuation for this assignment is 31 October 2014.

The benchmark date was determined by the principal after considering the scale of assets of the valuation target company, volume of work, expected time needed, compliance and other basis.

VI. BASIS OF THE VALUATION

The valuation basis followed in this valuation assignment were the economic behavior basis, basis of laws and regulations, basis of valuation standards, basis of ownership of assets, and the basis of obtaining prices and other reference materials were adopted in assessing estimates, the details are as follows:

(I) Economic behavior basis

Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation;
Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited.

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(II) Basis of laws and regulations

“Company Law of the People’s Republic of China” (28 December 2013 as amended by the Sixth Meeting of the Standing Committee of the Twelfth National People’s Congress);
“Interim Measures for the Administration of Valuation of Enterprise State-owned Assets” of the State-owned Assets Supervision & Administration Commission of the State Council Order No. 12 (25 August 2005);
Administrative Measures for the Assessment of State-owned Assets (Order No.91 of the State Council);
“Notice on Issues Related to the Strengthening of the Administration of Valuation of State-owned Assets” (Guo Zi Wei Chan Quan [2006] No. 274);
“Provisional Management Rules Governing the Transfer of State-owned Equity Interests of Corporations” (Order No. 3 issued by SASAC of the State Council and the Ministry of Finance (1 February 2004));
“Notice on Relevant Issues Concerning the Transfer of State-owned Property Rights of Enterprises” (Guo Zi Chan Quan Fa [2006] No. 306 issued by SASAC of the State Council);
The Land Management Law of the People’s Republic of China (as amended by Eleventh Meeting of the Standing Committee of the Tenth National People’s Congress on 28 August 2004);
Law of the People’s Republic of China on Administration of the Urban Real Estate (as amended in 2007);
“Notice on Relevant Issues Concerning Verification of State-owned Assets Valuation Report of Enterprise (Guo Zi Chan Quan [2009] of No. 941 issued by SASAC of the State Council);

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“Notice on Printing and Issuance of The Guidelines for Registration of State-owned Assets Valuation Projects of Enterprises ” (Guo Zi Fa Chan Quan [2013] No. 64);
“Administrative Measures for the Material Asset Reorganisations of Listed Companies” (Order No. 109 issued by CSRC);
“Regulations in Relation to Regulating Issues Arising from Significant Asset Restructuring of Listed Companies” (CSRC Announcement [2008] No. 14).

(III) Basis of valuation standards

“Asset Valuation Standards – Basic Standards” (Cai Qi (2004) No. 20);
“Asset Valuation Professional Ethics Standards – Basic Standards” (Cai Qi (2004) No. 20);
“Assets Valuation Ethics Code – Independence” (Zhong Ping Xie [2012] No. 248);
“Asset Valuation Standards – Valuation Report” (Zhong Ping Xie [2011] No. 230);
“Asset Valuation Standards – Valuation Procedures” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Machinery & Equipments” (Zhong Ping Xie [2007] No. 189);
“Asset Appraisal Standards – Property” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Enterprise Values” (Zhong Ping Xie [2011] No. 227) (Effective from 1 July 2012);
“Asset Valuation Standards – Making Use of Experts” (Zhong Ping Xie [2012] No. 244);
“Guide on Valuation Report of Enterprise State-owned Assets” (Zhong Ping Xie [2011] No. 230);

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“Numerical Guidelines on Assets Evaluation” (Zhong Ping Xie [2007] No. 189);
“Guidance Opinion on the Concern of Registered Valuers over the Legal Title of Valuation Target” (Kuai Xie [2003] No. 18);
“Code for Real Estate Appraisal” (GB/T50291-1999);
“Regulations for Valuation on Urban Land” (GB/T18508-2001);
“Regulations for Gradation and Classification on Urban Land” (GB/T18507-2001);
“Enterprise Accounting Standards – Basic Standards” (Order No. 33 of the Ministry of Finance);
38 Specific standards such as the “Enterprise Accounting Standards No. 1 – Inventory” (Cai Kuai [2006] No. 3);
“Enterprise Accounting Standards – Application Guide” (Cai Kuai [2006] No. 18).

(IV) Basis of ownership of assets

Property Ownership Certificates;
State-owned Land Usage Certificates;
Vehicle Registration Certificates;
Major assets purchase contracts or certificates;
Other references.

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(V) Basis for obtaining prices

Regulations on Financial Management of Capital Construction (Cai Jian [2002] No. 394);
Regulations on Pricing Management of Survey and Design Projects (Ji Jia Ge [2002] No. 10);
Supplementary Notice in relation to the Rules on Administration of Engineering Investigation and Design Charges (Ji Ban Jia Ge [2002] No. 1153);
Notice in relation to the Provisions on Administration of Charging on Engineering Project Supervision and Relevant Services (Fa Gai Jia Ge [2007] No. 670);
Interim Regulations on the Charging Administration of Bidding Agency Services (Ji Jia Ge [2002] No. 1980);
Notice in relation to Standardization of Relevant Issues Concerning Charging on Environmental Impacts (Ji Jia Ge [2002] No. 125);
Mechanical and Electrical Products Quotation Manual in 2014 (Machine Industry Information Research Institute);
List of Loan Interest Rate of the People’s Bank of China implemented on 6 July 2012;
Construction Project for Comprehensive Unit Price for Bill of Quantities of Construction Projects in Henan Province (2008);
Decoration Project for Comprehensive Unit Price for Bill of Quantities of Construction Projects in Henan Province (2008);
Installation Project for Comprehensive Unit Price for Bill of Quantities of Construction Projects in Henan Province (2008);

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Cost Engineering Information in Henan Province (the fifth edition of 2014);
Standard of Dangerous Building Appraisal (issued by the former Ministry of Urban and Rural Construction and Environmental Protection);
Standard Programme of Output District Integrated Land Price in Henan Province;
“Interim Regulations on Vehicle Purchase Tax in the People’s Republic of China” (Order [2000] No. 294 issued by the State Council);
Regulations on Compulsory Write-off Standard Requirements of Motor Vehicles (Order No. 12 in 2012 issued by the Ministry of Commerce, the NDRC, the Ministry of Public Security and the Ministry of Environmental Protection);
Relevant information in the price information database of China United Assets Appraisal Group Co., Limited;
Other references.

(VI) Other references

Accountant Statements and Audit Reports of Longhao Company as of 31 October 2011, 2012, 2013 and 2014;
Handbook on Common Methods and Parameters for Assets Valuation (China Machine Press 2011);
Technical information and geological exploration information related to constructions;
Other references.

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VII. VALUATION METHOD

(I) Selection of valuation method

According to the requirements of the valuation standards, there are three approaches for the appraisal of company valuation, namely the income approach, market approach and asset-based approach. The income approach is the quantification and conversion into present value of expected profitability of the entire assets of a company, the emphasis of which is the expected overall profitability of a company. Under the market approach, the prevailing market value of a valuation target is assessed by a reference object in the actual market, features of which are that the valuation data are taken directly from the market and the valuation results are convincing. For the assets-based approach, it is based on a rational appraisal of all the asset value and liabilities of a company to determine the value of the valuation target.

As the purpose of this valuation is the disposal of equity interest to CLFG by Luoyang Glass, the assets-based approach reflects the value of the enterprise from the perspective of enterprise construction and provides a basis for the operation, management and assessment of the enterprise after the economic behavior is realised. Therefore, the assets-based method is adopted for this valuation.

Longhao Company is engaged in the processing of flat glass. Given the massive over production capacity in the market, the flat glass industry is at the bottom, resulting in substantial operating losses of the enterprise in recent years uncertainties in whether it will operate on an ongoing basis. It is difficult to to estimate. Accordingly, the income approach is not appropriate for the evaluation on Longhao Company.

As it is still difficult to find sufficient transaction cases or reference from enterprises in the relevant domestic capital market, it is not necessary to adopt the market approach. Thus, it is not appropriate to adopt the market approach in this valuation.

On the basis of the foregoing, the assets-based approach was adopted for this valuation.

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(II) Introduction of the assets-based approach

The assets-based approach is based on the judgment of the overall asset value with the amount of investment needed to re-build an enterprise identical to the valuation target or an independent profit-making entity on the appraisal date. In particular, the enterprise value is arrived at by summing up the appraised values of each component asset forming the enterprise and then deducting the appraised values of its liabilities.

The valuation methods for all assets and liabilities are follows:

Current assets
(1) Monetary funds: including cash, bank deposits and other monetary funds.

The appraised value is the carrying value after verification.

(2) Bill Receivables

All bill receivables are non-interest bearing and the assessed value is determined with reference to the nominal principal amount after verification.

(3) Receivables

As for the valuation of receivables and other receivables, after checking that the receivables are correct, a detailed analysis is made on the amount, time and reasons for the outstanding amount, status of the recovery of the amount, present conditions of the funds, credibility and business management of the debtors etc. by referring to the historical information and the situations learnt from the investigation. For receivables, aging analysis is adopted to estimate and evaluate risks and losses with reference to the calculation of the provision for bad debts in enterprise accounting, and the risks and losses will be estimated in accordance with the aging analysis.

According to the above standards, the risks and losses on valuation are determined based on the total receivables deducting the amount after the valuation of risks and losses.

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(4) Prepayments

As for the valuation of prepayments, on the basis that the prepayments is verified correct, the valuers specifically analyzed the amount, period after due date and reasons thereof, recovery of amount, theliquidity of the borrowers, credit and operational management condition of the borrowers with reference to historical information and current research results. Where there are no indications that the suppliers are in bankruptcy nor revoke or fail to provide goods on time as required by contracts, the book values are adopted as the appraised values.

(5) Inventories

The valuation methods for all inventories are set out as follows:

1) Raw Materials

As the prices of these raw materials fluctuate frequently in the market, the appraised unit price of these raw materials on the appraisal date is determined by reviewing the online quotation on the appraisal date, the value added tax invoice of the raw materials purchased by the enterprise on the appraisal date, plus the freight and miscellaneous charges and other reasonable expenses. For the various auxiliary materials purchased for production, as they are easy to purchase and there are no obvious changes on their market prices due to a relatively faster turnover rate, the assessed values are determined with reference to the carrying value after verification. For non-performing assets with long backlog time or retired, the assessed values are determined with reference to the recoverable value in the parallel market.

2) Finished products

① Products with normal sales

The valuer conducted an analysis In accordance with the investigation and information analysis provided by enterprise, the valuer determines the valuation value as to the finished products based on the sales prices (excluding taxes) by deducting sales expenses, all taxes and a certain amount of sales profits on products.

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The appraised value = actual quantity × market price without taxation × (1 - sales tax and additional rate - sales expense rate - operating profit margin × income tax - operating profit margin × (1 - income tax) × r)

a. Sales price excluding tax: it is confirmed according to the market price before and after the appraisal date;
b. Sales tax and additional rate mainly include the urban construction tax and education surtax paid on the basis of VAT;
c. Sales expense rate is calculated averagely based on the proportion of various sales expense and sales revenue;
d. The operating profit margin = profit generated from primary business ÷ operating income;
e. The income tax rate is subject to the one implemented currently by the enterprise;
f. r is certain rate. Since the sale of finished products has certain market risk, which is confirmed based on the investigation status at the benchmark date and the sales status after the benchmark date. For popular products, r is zero; for common products, r is 50%; for products not sold well, r is 100%.
② Scraped products

Valuation is in accordance with the multiple of single price of scraped products and the weight of the scraped products.

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3) Products in process

Products in process are the unfinished products pending for processing in the enterprise.

In the valuation, valuers examined the accounts of products in process, performed analysis and review of the calculation of costs, and thus understood and verified the sum of the cost of products in process and the production fees arisen in the period in order to carry out allocation in accordance with the ratio between the number of finished products and the approximate output of the products in process at the end of the period. During the production process, along with the processing procedures of workmanship and gradual formation of products, various expenses for production will be accumulated accordingly. The valuation is in accordance with the average single price of products in process and the completion progress, and the confirmation of valued single price being calculated by specific expenses rate is taken into consideration.

4) Reusable materials in use

Reusable materials in use are mainly various tools and reusable materials for production. Valuers have performed on-site investigation, verifying the actual quantity, the usage and out-of-date level of reusable materials. The appraised value is determined subject to the result of thorough checking and the multiplication of the actual quantity in the appraisal date, the market price and residue ratio confirmed in accordance with the actual condition.

(6) Other current assets

Other current assets are input VAT recoverable. The valuers reviewed statements on asset valuation prepared by the appraised enterprises, verified the amounts against financial statements and accounts, and obtained information including final settlement and payment and the tax payment of the enterprises reported by the taxation department to examine the accuracy and truthfulness of the amounts listed in the statements and confirm the appraised value by the book value.

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Non-current assets
(1) Fixed assets

1) Buildings

The cost method is adopted for valuation of the buildings.

Cost method. The net appraised value of building is calculated by total replacement costs and the newness rate. The total replacement costs are calculated according to the information on construction works and budgets, building project quantity as well as the current quota standard, construction fee and loan interest rate. And the newness rate is determined by the service life of the buildings and the on-site inspection.

Appraised value = total replacement costs × newness rate

For other buildings, the replacement unit price and the net appraised value are determined and calculated by comprehensively considering each valuation factor on the basis of on-site inspection and by means of analogy.

① Total replacement costs

Total replacement costs have three components, namely construction & installation costs, preliminary and other expenses and capital cost.

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A. Determination of construction & installation costs

The construction & installation costs include the total costs of civil engineering projects, decoration and renovation projects, drainage, electrical engineering fire control and ancillary information system projects. Valuers estimate the workload of buildings in accordance with on-site investigation and other relevant information and with reference to general budget indicators of similar construction projects of buildings. Valuers make use of A construction project of Integrated Single Price of the Workload List of the Construction Project in Henan Province (2008)《河南省建設工程工程量清單綜合單價 (2008)》, B decoration and renovation projects, and C installation projects to calculate direct project fees. The manufacturing cost of construction installation projects is obtained in accordance with the information price of Information of Manufacturing Cost of Projects in Henan Province《河南省工程造價資訊》(Issue 5 in 2014) and province-related labour cost, tax adjustment documents, adjustment of labours, price differences of materials in Henan Province, and in accordance with relevant fixed amount of fees for charging.

B. Determination of preliminary and other expenses

The preliminary and other expenses include two components, namely construction expenses to be charged by local governments and other expenses input by the construction unit, other than construction & installation costs.

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C. Determination of capital cost

The capital cost is the loan interest of the capitals input for the project construction during the construction period. The interest rate is subject to the standard stipulated by the People’s Bank of China at the benchmark date, and the construction period is calculated by normal and reasonable construction cycle. The capital is deemed as even input.

Capital cost = (construction & installation costs + preliminary and other expenses) × reasonable construction cycle × loan interest × 50%

② Newness rate

The valuation of newness rate for buildings is determined and calculated by adopting the method of useful life newness rate. That is by calculating the usage of buildings in accordance with on-site inspection as well as integration of conditions usage of buildings, repair and maintenance to determine the remaining service life of buildings. The calculation formula of the newness rate is as follows:

Newness rate = remaining service life/(period of usage + remaining service life) × 100%

③ Determination of appraised value

Appraised values = total replacement costs × newness rate

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2) Equipment assets

Combining the characteristics of the equipment under this appraisal and the collected information, the appraisal was carried out mainly by applying cost method in accordance with the purpose of this appraisal, the principle of continued use and with reference to market prices.

Appraised values = total replacement costs × newness rate

A. Total replacement costs of equipment

1) Total replacement costs of machinery and equipment

The total replacement costs of machinery and equipment are based on the purchase price of equipment, considering various costs (including purchase price, transportation costs and sundry expenses, installation and testing fees, other construction expenses and cost of capital) allowing the equipment to keep normal service status, which is determined as:

Total replacement costs = purchase price of equipment (excluding tax) + transportation costs and sundry expenses (excluding tax) + installation and testing fees + other construction expenses + cost of capital

① Purchase price

It is determined mainly through obtaining quotation from manufacturers or trading companies, or referring to the “Mechanical and Electrical Products Quotation Manual 2014” and referring to recent contract prices of similar equipment. For a limited number of equipment which purchase prices are not available, the purchase prices are imputed based on the price variance rate for the equipment of the same age and same type.

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② Transportation costs and sundry expenses

Transportation costs and sundry expenses are calculated based on the purchase price (include tax) in accordance with loading and unloading fees, transportation fees, warehousing fees, insurance fees and other relevant fees incurred from the place of production plants and equipment, and subject to various transportation costs and sundry expenses ratios. Meanwhile, deductible VAT is deducted in accordance with VAT deductible ratio of 11%. Purchase price including transportation costs will no longer be subject to transportation costs and sundry expenses.

③ Installation and testing fees

Installation and testing fees are calculated in accordance with characteristics, weight, difficulty level of installation and based on the purchase price (include tax), subject to various installation fee ratios.

No installation fee is included for equipment which is small in size or does not require installation.

④ Other expenses

Other expenses include management fees, feasibility report and assessment fees, design fees, project supervision fees, etc, and are calculated based on other expense standards for construction projects at the place where the equipment is located and in light of the features of the equipment.

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⑤ Capital cost

The reasonable construction period is one year and the capital cost ratio is 6.00%.

Capital cost = (purchase price (including tax) + transportation costs and sundry expenses (including tax) + installation and testing fees + other expenses) × loan interest rate × construction period × 1/2

2) Total replacement costs of transportation vehicle

The prevailing prices of transportation vehicle (excluding tax) are determined according to the information of recent vehicle market prices such as vehicle market sales information, and the total replacement costs are determined by taking into account such factors as vehicle purchase tax and handling charges for new vehicle registration pursuant to Provisional Regulation on Vehicle Purchase Tax of the People’s Republic of China on this price basis. The calculation formula is set out in below:

Total replacement costs = current purchase price (excluding tax) + vehicle purchase tax + handling charges for new vehicle registration

3) Total replacement costs of electronic devices

The prices of electronic devices are determined according to local market information combining with specific situations. Also, deduct deductible VAT in compliance with the latest policies concerning VAT. In general, manufacturers or distributors provide transportation and installation for free, that is:

Total replacement costs = purchase price (excluding tax)

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B. Determination of newness rate
1) Newness rate of machinery and equipment and electronic devices

During this valuation procedure, the remaining service life of the equipment is estimated according to the economic service life of the equipment and on-site inspection to calculate the newness rate. Its formula is as follows:

Newness rate = remaining service life ÷ (period of actual usage + remaining service life) × 100%

For common equipment with small value or electronic equipment, the newness rate will be determined by age limit method.

Newness rate = (1 - period of actual usage ÷ economic service life) ×100%

2) Newness rate for vehicle transportation

For vehicle transportation, according to the Provisions on the Standards for Compulsory Retirement of Motor Vehicles, Order 2012 No. 12 jointly issued by the Ministry of Commerce, NDRC, the Ministry of Public Security and the Ministry of Environmental Protection, newness rate is determined as:

Newness rate = Min (Useful life newness rate, mileage newness rate)

Useful life newness rate = (1 - period of usage/designed or economic useful life) × 100%

Mileage newness rate = (1 - mileage travelled/designed mileage) × 100%

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Meanwhile, necessary inspection and assessment shall be performed for vehicles to be appraised. If the difference between results of the inspection and assessment and the newness rate determined by the above-mentioned method is relatively large, then appropriate adjustment will be carried out. If the results are similar, then no adjustment will be made.

C. Determination of appraised value

Appraised value = total replacement costs × newness rate

Land use right

The land use right adopts benchmark land price market comparison approach and the cost approach method for evaluation.

1) Market comparison approach

According to substitution rule, appraised objects and fungible objects are compared with the similar property transaction in the market near the appraised date, and in accordance with the known strike price of the latter objects, and with reference to transaction time, transaction conditions, transaction methods, term of land use, regional and particular factors to amend and evaluate comparative land price, and ultimately estimate the price of appraised target in the appraised date from the comparative land price of similar property in the transaction.

Formula: V = VB x A x B x C x D

Where:

V – Valuation of benchmark land price;
VB – Price determined by comparing actual examples;
A – Index of transaction of benchmark land pending for estimation/Index of transaction in the comparison of actual examples;

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B – Index of land price at the appraised date of benchmark land pending for estimation/Index of land price at the transaction date for comparison of actual examples;
C – Index of regional factors and conditions of benchmark land pending for estimation/Index of regional factors and conditions of comparison of actual examples;
D – Index of particular factors and conditions of benchmark land pending for estimation/Index of particular factors and conditions of comparison of actual examples;
2) Cost approximation method

Cost approximation method refers to the valuation method to determine land price by using the sum of various expenses incurred in the development of land as major reference, with a certain amount of profit, interest, tax payable and land value-added gain.

Its basic formula is: V=Ea+Ed+T+R1+R2+R3=VE+R3

In the formula: V – land price;

Ea – land acquisition cost;

Ed – land development cost;

T – tax;

R1 – interest;

R2 – profit;

R3 – land appreciation;

VE – land cost price.

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where,

Land acquisition costs and tax: Pursuant to the PRC Law on Land Management, land acquisition costs include land compensation costs, settlement subsidies, and compensation costs for young plants and attached structures. Tax includes tax on farmland occupied, farmland cultivation costs, management costs for acquired land, foundation for water works, land registration fee, etc.

Land development costs: Land development costs are calculated by various objective costs that are incurred in the area with land development progress based on the valuation.

Interest: Interest payable in each period is determined based on the normal development cycle with land development progress, period of various costs have been incurred, and the annual interest rate of capital.

Profit: Investment profit of land investment is determined by recognizing normal return rate of various investments under development based on development nature and the actual situations of land parcels.

Land value-added gain: Land value-added gain refers to apart from recovery of cost price by the government when transferring land parcels, the land ownership of the country has to be realized economically, i.e. obtaining certain value-added gain.

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Other intangible assets

Other intangible assets included in the scope of valuation are the use right of proprietary technology of “Luoyang Floating Glass Workmanship” held by CLFG, which belongs to Longhao Company and approval of trademark registered number 1204085 for the use of type 19 commodity “CLFG “conditional use right of brand combining with graphs and words. Valuers have reviewed relevant information of the intangible assets investment. As the time for contribution of capital is relatively long, the enterprise is not able to provide enough information, and valuers are not able to determine the scope of right, the types of right and the useful life of the use right of proprietary technology and compensation use right of trademark. Thus, valuers are not able to perform testing for the evaluation of intangible assets. Moreover, considering the economic behaviour was that Luoyang Glass disposed of its holding, Longhao equity projects, by transfer of assets. Upon realization of the economic behaviour, CLFG immediately became a shareholder of Longhao Company, and the equity holder of trademark and proprietary technology was CLFG, and therefore, the administration and development plans from CLFG to Longhao Company in the future will influence the license and use of its proprietary technology and trademark. Also, in view of the entire flat sheet glass market, there is an over capacity and severe competition in the market. As a result, there exists a great uncertainty from Longhao Company to the estimation in respect of the use of proprietary technology and licensing use right of trademark. Therefore, the appraised value is in accordance with the book value.

Liabilities

The actual debtor and amount of each liability upon the achievement of the valuation purposes are checked and verified to determine the appraised value, i.e. the actual items and amounts of the liabilities to be undertaken by the title owners upon the achievement of the valuation purposes.

VIII. IMPLEMENTATION PROCESS AND STATUS OF VALUATION PROCEDURES

The entire valuation work was carried out in four phases:

(I) Valuation preparation phase

On 31 October 2014, we discussed and obtained consensus with the principals such as the purposes of this valuation, appraisal date, scope of the valuation, etc, and drew up the working plan for this asset valuation.

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The inspection of assets, filling in the asset valuation declaration breakdown list, etc. were carried out with the enterprise. In early November 2014, the valuation project team understood the assets under valuation mandate in detail, allocated works for the valuation, assisted the enterprise in declaring assets under valuation mandate, and collected necessary documents and information for asset valuation.

(II) On-site valuation phase

The on-site valuation phase of the project team was from 31 October 2014 to 10 November 2014. The major works are as follows:

Listening to the overall situations of the enterprise and the history and present conditions of the assets under valuation mandate as explained by the relevant personnel of the principals and the valuation target company, and understanding the financial system, operating conditions, status of the fixed assets and technology, etc. of the enterprise.
Review and identification of the asset inspection and valuation declaration breakdown list provided by the enterprise; verification against the relevant financial records of the enterprise, coordinate with the enterprise to make adjustments for any problem identified.
Conducting a complete inspection and verification of the fixed assets against the asset inspection and valuation declaration breakdown list, conducting random sampling stock taking of the inventory physical assets among the current assets.
Inspection and collection of the documentary proof of titles of the assets under the valuation mandate.
Determining the specific valuation methods for each type of assets according to the actual conditions and characteristics of the assets under valuation mandate.
Referring to the technical information, final accounts information or completion acceptance information in respect of key equipment; collecting price information by way of market surveys and enquiries in respect of general equipment.
Verification of the ownership information provided by the enterprise.
Carrying out initial valuation and measurement of the assets and liabilities within the scope of the valuation after inspection and verification.

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APPENDIX X

(III) Valuation consolidation phase

From 11 November to 25 November 2014, an analysis and consolidation of the initial results of all assets valued and liabilities reviewed were made, and followed by the necessary adjustment, changes and improvement of the valuation results.

(IV) Report issuing phase

After the above tasks had been done, the asset valuation report was drafted, opinion on the valuation results was exchanged with the principals, then repeated changes and adjustments were made according to the internal asset valuation report three-tier review system and procedures of the valuation firm, and at last the formal asset valuation report was issued.

The working period of this phase was from 26 November 2014 to 15 April 2015.

IX. ASSUMPTIONS OF VALUATION

The valuers made the following valuation assumptions for this valuation:

1. Transaction assumption

Under the transaction assumption, it is assumed that all assets pending to be valued are in active trading, and valuers will appraise all assets according to the trading conditions for such assets as well as under simulated market conditions. The transaction assumption is the most basic prerequisite assumption in asset valuation.

2. Open market assumption

Under the open market assumption, it is assumed that the buyer and seller of the assets traded or proposed to be traded in the market are in equal bargaining position, and they both have the opportunities and time to obtain sufficient market information so as to reasonably determine the function, purpose and transaction price of the assets. The open market assumption is based on the situation where the assets can be bought and sold in the market in public.

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3. Going concern assumption for the assets

Under the going concern assumption, the methodology, parameters and basis of the appraisal is determined on the basis that the assets will continue to be used for their current purposes and on the current usage, scope, frequency and in the same environment. The methodology, parameters and basis of the appraisal will be revised accordingly if the usage of the assets changes.

When there are changes in the above conditions, the valuation results will be void in most cases.

X. VALUATION CONCLUSIONS

We have fulfilled the statutory and necessary procedures for asset valuation pursuant to the laws, regulations, rules and valuation principles in regard to asset valuation of the PRC, withheld independent, justice, scientific and objective principles, after adopting the generally accepted approach, and have carried out on-site investigation, market survey and enquiries and assessment, the following valuation results in respect of the assets within the scope of valuation of CLFG Longhao Glass Co. Ltd.* were obtained:

The book value of assets is RMB319,497,700 and the appraised value is RMB386,586,200. The appraised value is RMB67,088,500 higher than the book value with an appreciation rate of 21.00%.

The book value of liabilities is RMB564,891,300 and the appraised value is RMB564,891,300, with no appraisal appreciation or depreciation.

The book value of net asset is RMB-245,393,600 and the appraised value is RMB-178,305,100. The appraised value is RMB67,088,500 higher than the book value with an appreciation rate of 27.34 %. The table is set out below for details:

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APPENDIX X

Consolidation Table of the Asset Valuation Results

Valuation target company: CLFG Longhao Glass Co. Ltd.*

Appraisal date: 31 October 2014

Unit: RMB0’000

		Book	Appraised	Appreciation or	Appreciation
		Value	Value	Depreciation	Rate%
Item		B	C	D=C-B	E=D/B×100%
1	Current assets	7,240.62	8,388.97	1,148.35	15.86
2	Non-current assets	24,709.16	30,269.65	5,560.49	22.50
3	Including: Long-term
	equity investment	–	–	–
4	Property for investment purpose	–	–	–
5	Fixed assets	23,877.93	25,339.69	1,461.76	6.12
6	Construction in progress	–	–	–
7	Intangible assets	831.22	4,929.96	4,098.74	493.10
8	Including: Land use right	777.06	4,875.80	4,098.74	527.47
9	Other non-current assets	–	–	–
10	Total assets	31,949.77	38,658.62	6,708.85	21.00
11	Current liabilities	55,029.13	55,029.13	–	–
12	Non-current liabilities	1,460.00	1,460.00	–
13	Total liabilities	56,489.13	56,489.13	–	–
14	Net assets (Owners’ equity)	-24,539.36	-17,830.51	6,708.85	27.34

The value of shareholders’ total interest of Longhao Company on the appraisal date is RMB-178,305,100.

XI. REMARKS FOR SPECIAL ITEMS

As to the defects existed in the enterprise which may influence appraised value of assets, under the circumstances that the enterprises failed to make any special remarks during the mandate and the valuers had implemented the valuation procedures without knowing the information, the valuation firm and the valuers shall not assume any related responsibilities.

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APPENDIX X

(I) Defects in ownership of housings

As at the appraisal date, Longhao Glass had not applied for certificates of ownership for 9 buildings with the total area of 16,269.00m[2] included in the scope of the valuation. Details of the buildings without a certificate of ownership are set out below:

Detailed statement of buildings without a certificate of ownership

No. Name of building Structure Time of completion Unit of Measurement 1 Delivery Room Brick-concrete 2010-12 m2 2 Changing Room Brick-concrete 2013-12 m2 3 Hoisting Warehouse framed bent 2005-12 m2 4 Transformer Stations framed bent 2005-12 m2 5 Finished Products Warehouse Mixture 2005-12 m2 6 Coating Film Dispatch Room Brick-concrete 2007-12 m2 7 Warehouse of Newly Added Finished Products of 650 tonnes framed bent 2013-12 m2 8 Slope Warehouse Brick-concrete 2010-12 m2 9 Construction of 0#oxygen Lance Project Brick-concrete 2010-12 m2 Total	Carrying Value Floor area/ cubage Original Value Net Value 84.00 55,300.00 18,098.82 95.00 133,887.42 126,467.84 975.00 124,512.00 62,543.31 288.00 346,114.80 272,853.36 8,019.00 4,319,675.43 3,405,339.27 72.00 36,357.60 32,184.55 6,372.00 5,038,853.12 4,759,616.68 332.50 37,488.48 35,411.02 31.50 25,649.05 22,571.16 16,269 10,177,837.90 8,735,086.01	Carrying Value Floor area/ cubage Original Value Net Value 84.00 55,300.00 18,098.82 95.00 133,887.42 126,467.84 975.00 124,512.00 62,543.31 288.00 346,114.80 272,853.36 8,019.00 4,319,675.43 3,405,339.27 72.00 36,357.60 32,184.55 6,372.00 5,038,853.12 4,759,616.68 332.50 37,488.48 35,411.02 31.50 25,649.05 22,571.16 16,269 10,177,837.90 8,735,086.01
		8,735,086.01

The enterprise promised that the buildings without a certificate of ownership vested in it without disputes of the ownership involved. The valuation was estimated according to the measurement area reported by the enterprise after verification, which may differ from the actual area.

(II) Outstanding matters, legal disputes and other uncertain factors

Nil.

(III) Material subsequent events

According to knowledge acquired from the due diligence work of the valuer, after the appraisal date, on 22 November 2014, the People’s bank of China lowered the benchmark interest rate of both deposits and loans for financial institutions. The valuation results of the asset-based approach have not considered the impact of interest rate adjustment on the appraised value.

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(IV) Other matters need explanations

The legal responsibilities of the valuer and the valuation firm were to make professional judgment on the valuation of the assets for the valuation purposes stated in this report, and no judgment whatsoever is made by the valuer and the valuation firm with respect to the economic behaviour corresponding to the purposes of this valuation. To a large extent, the valuation assignment depended on the information provided by the principals and the valuation target company. Therefore, the prerequisite of valuation assignment was that ownership documents, licence and accounting vouchers and the relevant legal documents provided by the principals and the valuation target company were authentic and legal.
During the valuation process, the valuers observed the appearance, internal decoration, and usage of buildings as much as possible but did no test about structure or materials. When conducting inspection of the equipment, due to the restraints of the testing methods and the fact that some equipment were in operation, this task was mainly done by exterior observation by the valuers and the latest testing materials provided by the valuation target unit as well as the enquiries to the operators, etc. in order to judge the conditions of the equipment.
Valuers noted that the audit report issued by an auditing firm was the audit report with a paragraph of emphasis of matters, disclosing that “the accumulated unrecovered loss of Longhao Company as at 31 October 2014 was RMB297,286,640.71 and the current liabilities were RMB477,885,149.59 higher than current assets. Longhao Company has adequately disclosed improving measures to be adopted in note 2 of the financial statement, but its sustainable operating capability still remains materially uncertain, and as a result, liquidation of assets and debt redemption may not be performed in normal operating process”. The valuer also made an analysis on the historical operation results of Longhao Company. The enterprise shows a substantial loss and the consolidated gross profit margin becomes negative. There are greater uncertainties for the future operation of the enterprise, therefore, the income approach is not appropriate for the evaluation of Longhao Company.

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One of the intangible assets of Longhao Company represents an investment made by China Luoyang Float Glass (Group) Company Limited, comprising the use right of proprietary technology of “Luoyang Floating Glass Workmanship” and the licensed right to use “ 洛玻 CLFG”, the combination trademark of word and device with trademark registered number of 1204085, for the rectified products under type 19. Valuers have reviewed relevant information of the intangible assets. As it has been rather a long time from such investment, the valuers are not able to obtain enough information,and therefore are not able to determine the scope, type and useful life of the use right of such proprietary technology and the paid use right of the trademark. Thus, the book value of valuation is presented as the appraised value.
The principals and the valuation target company were held responsible for the truthfulness and completeness of data, statements and the relevant information provided by the valuation target company and which were used within the scope of this valuation assignment.
The principals and the valuation target company were held responsible for the truthfulness and legality of the ownership documentary proof and relevant information provided by the valuation target company in the valuation report.
The impacts on the valuation conclusions from relevant taxes incurred during the implementation process for the purposes of the valuation have not been considered.
During the validity period after the appraisal date, if there are changes in the quantity and pricing standards of the assets, they should be reflected according to the following principles:
(1) When there are changes in the quantity of the assets, the corresponding adjustments should be made to the amount of the assets using the original valuation method;
(2) When there are changes in the pricing standards of the assets, which will have a significant impact on the valuation results of the assets, the principals should appoint qualified valuation firm to re-determine the appraised value;
(3) When there are changes in the quantity and pricing standards of the assets after the appraisal date, the principal should take them into due account when actually pricing the assets and make the relevant adjustments.

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XII. EXPLANATION OF USAGE LIMITATION OF THE VALUATION REPORT

(1) This valuation report shall be used only for the valuation purposes and applications specified herein. In addition, the valuation conclusion reflects the current fair value of the valuation target determined according to the open market principles in the context of the valuation purposes, without taking into account of the impact of possible undertaking of guarantee, security and any special additional payment of the price by the parties upon the appraised price. Moreover, the impact of changes in the state macroeconomic policies, natural disaster and force majeure upon the prices of the assets are not considered in the report. If there are changes in the above-mentioned conditions and the other situations such as the going concern concept that had been applied in the valuation assignment, then the valuation conclusion will normally become void. The valuation firm is not liable for the relevant legal responsibilities for the invalidity of the valuation results due to changes in such conditions.

The prerequisite of this valuation report is that the economic behavior involved was in compliance with the relevant stipulations of the laws and regulations of the state, and with the approval by the relevant authorities.

(2) This valuation report is for the exclusive use by the users of the valuation report specified herein. The rights of use of the valuation report belong to the principals, and we shall not make it available to other parties without the consent of the principals.
(3) The entire or part of the contents of this valuation report shall not be extracted, referred to or disclosed to the public media without the consent of our valuation firm (and subject to our reviewing of the relevant contents), unless otherwise required by laws and regulations and or agreed among the parties concerned.
(4) Based on the state regulations on management of state-owned assets valuation, this valuation report shall be filed (or approved) before being used and the filed (or approved) valuation result is valid for one year (from the appraisal date of 31 October 2014 to 30 October 2015). The assets must be re-valuated if more than one year has lapsed.

XIII. DATE OF VALUATION REPORT

The valuation report is issued on 15 April 2015.

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INDEX OF THE FILES AVAILABLE FOR INSPECTION

Economic behaviour documents (photocopies);
Corporate legal person business licenses (photocopies) of the principals and the valuation target company;
Audit Report as at the appraisal date and accounting statement of Longhao Company for the year 2012, 2013 and as at 31 October 2014 (photocopies);
Main title proof information (photocopies) of the valuation target;
Letters of undertaking of the principals and the valuation target company;
Letters of undertaking of the registered valuer signatories;
Valuation Qualification Certificate (photocopy) of China United Assets Appraisal Group Co., Limited;
Corporate legal person business license (photocopy) of China United Assets Appraisal Group Co., Limited;
Engagement Letter of Asset Assessment;
Qualification certificates (photocopies) of the registered valuer signatories.

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VALUATION REPORT OF LONGFEI COMPANY

APPENDIX XI

The following is the text of the valuation report received from the Valuer in respect of the valuation of the net liabilities of Longfei Company as at 31 October 2014.

Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in

CLFG Longfei Glass Co., Ltd. ( 洛玻集團龍飛玻璃有限公司 )

by Luoyang Glass Company Limited by

way of Assets Exchange

China United Appraisal Report [2015] No. 031

China United Assets Appraisal Group Co., Limited

15 April 2015

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Declaration of the Registered Valuer

We complied with the relevant laws and regulations and valuation standards, adhered to the principles of independence, objectivity and fairness in the course of conducting this valuation assignment; according to the information collected during our assignment process, the contents stated in the valuation report are objective, and we take the relevant legal responsibility as to the reasonableness of the valuation conclusion.
The lists of assets and liabilities of the valuation target were submitted by the principals and valuation target company and were signed and sealed by them as confirmation; the principals and valuation target company are liable for the genuineness, legality, completeness of the information so provided and the proper usage of the valuation report.
We did not have any existing nor expected interest in the valuation target in the valuation report; and we did not have any existing nor expected interest with the parties concerned, and did not have any bias against the parties concerned.
We conducted on-site investigation on the valuation target of the valuation report and the assets involved; we paid the necessary concern with the legal ownership status of the valuation target and the assets involved, and carried out an inspection of the legal title information of the valuation target and the assets involved.
The analysis, judgment and conclusion in the valuation report that we issued were subject to the constraints of the assumptions and criteria of the valuation report, users of the valuation report should take into full consideration the assumptions, criteria, explanation of special items set out in the valuation report and their impact on the valuation conclusion.

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APPENDIX XI

Asset Valuation Report

in respect of the Proposed Disposal of Equity Interest in CLFG Longfei Glass Co., Ltd. ( 洛玻集團龍飛玻璃有限公司 ) by Luoyang Glass Company Limited by way of Assets Exchange

China United Appraisal Report [2015] No. 031

SUMMARY

China United Assets Appraisal Group Co., Limited accepted the mandate from China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited to carry out a valuation assignment of the market value of the total shareholders’ equity of CLFG Longfei Glass Co., Ltd. involved in the economic behaviour of the proposed disposal of the equity interest in CLFG Longfei Glass Co., Ltd. by way of assets exchange by Luoyang Glass Company Limited on the appraisal date.

The valuation target was the entire shareholders’ equity of CLFG Longfei Glass Co., Ltd., and the scope of valuation was all assets and the related liabilities of CLFG Longfei Glass Co., Ltd., including current assets and non-current assets and the related liabilities.

The appraisal date was 31 October 2014.

The type of valuation of this valuation assignment was market value.

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APPENDIX XI

The entire shareholders’ equity of CLFG Longfei Glass Co., Ltd. was valued at RMB-145,172,500, representing an appreciation of RMB60,512,500 and an appreciation rate of 29.42% as compared to the book value of RMB-205,685,000.

Report users are reminded to pay special attention to the special events and significant events for subsequent periods set out in this report when applying the valuation conclusions.

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APPENDIX XI

Asset Valuation Report

in respect of the Proposed Disposal of Equity Interest in CLFG Longfei Glass Co., Ltd. ( 洛玻集團龍飛玻璃有限公司 ) by Luoyang Glass Company Limited by way of Assets Exchange

China United Appraisal Report [2015] No. 031

**China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited:**

China United Assets Appraisal Group Co., Limited accepted the mandate from the Company to carry out a valuation assignment of the market value of the entire shareholders’ equity of CLFG Longfei Glass Co., Ltd. involved in the economic behaviour of the project of the proposed disposal of the entire equity interest in CLFG Longfei Glass Co., Ltd. by Luoyang Glass Company Limited by way of assets exchange on the appraisal date (being 31 October 2014) in accordance with the relevant laws and regulations and valuation standards and under the asset-based approach by following the necessary valuation procedures. The contents of the valuation are as follows:

I. PRINCIPALS, VALUATION TARGET COMPANY AND OTHER USERS OF THE VALUATION REPORT

The principals of this valuation assignment were China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited, and the valuation target company was CLFG Longfei Glass Co., Ltd..

(I) Basic information of Principal 1

Company name:

China Luoyang Float Glass (Group) Company Limited* (hereinafter “CLFG”)

Company address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang City Legal representative: Peng Shou Registered capital: RMB1,286,740,000 Paid-up capital: RMB1,286,740,000 Company type: limited liability company Business registration license No. : 410000100003003

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APPENDIX XI

1. Brief Historical Introduction

The actual controller of CLFG is China National Building Material Group Corporation.

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APPENDIX XI

2. Business Scope

(II) Basic information of Principal 2

Company name: Luoyang Glass Company Limited Company address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang City Legal representative: Ma Liyun Registered capital: RMB 500,018,200 Paid-up capital: RMB500,018,200 Company type: Company Limited (listed) Places of listing: Shanghai Stock Exchange, Hong Kong Stock Exchange Stock short name: 洛陽玻璃 , Luoyang Glass Stock code: 600876.SH, 1108.HK Business registration license No. : 410300400003275 Date of establishment: 6 April 1994

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APPENDIX XI

1. Company profile

Luoyang Glass was established in April 1994 with a registered capital of RMB400,000,000 upon establishment. In June 1994, with the approval of the Securities Commission of the State Council, the Company issued 250,000,000 H shares. In September 1995, with the approval of China Securities Regulatory Commission, the Company issued 50,000,000 A shares. After the share trading reform and the repurchase of shares in 2006, as at the appraisal date, the registered capital of the Company was RMB500,018,200 and the share structure is as follows:

			The percentage
		The Amount	of the total
Type of Shares		of Shares	shares
		(ten thousand
		shares)	(%)
I.	Total circulating shares subject
	to trading moratorium	–	–
II.	Total circulating shares not subject
	to trading moratorium	50,001.82	100.00
	1. Ordinary shares denominated
	in RMB_(A Shares)_	25,001.82	50.00
	2. Overseas listed foreign
	invested shares_(H shares)_	25,000.00	50.00
III.	Total shares	50,001.82	100.00

Business Scope

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APPENDIX XI

(III) Basic information of the valuation target company

Company name: CLFG Longfei Glass Co., Ltd. (hereinafter “Longfei Company”) Company address: Huanghua Industrial District, Mianchi County Legal representative: Song Jianming Registered capital: RMB74,080,000 Paid-up capital: RMB74,080,000 Company type: limited liability company (state-controlled) Business registration license No. : 411221000007015

(1) Company profile

On 27 September 2000, CLFG Yangshao Glass Co., Ltd. ( 洛玻集團仰韶玻璃有限公司 ) (later known as Longfei Company) was established with contributions jointly made by China Luoyang Float Glass (Group) Company Limited, Luoyang Glass Company Limited and Henan Mianchi Float Glass Plant, and it was renamed to CLFG Longfei Glass Co., Ltd. on 15 June 2005. When it was founded, the registered capital amounted to RMB74,080,000. On 7 December 2009, Longfei Company resolved at the shareholders’ meeting to transfer of 10% equity interests of Longfei Company held by CLFG to Luoyang Glass. As at the issue date of this report, shareholding structure of Longfei Company was as follows:

Shareholders’ names and their respective capital contribution and contribution ratio

Shareholder’s names Luoyang Glass Company Limited Henan Mianchi Float Glass Plant Total	Capital contribution (RMB0’000) 4,740 2,668 7,408	Contribution ratio (%) 63.98 36.02 100.00

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APPENDIX XI

(2) Operating conditions

The production line of Longfei Company was approved by Henan Development and Reform Commission with issue of Yu Jing Mao Gai [1996] No. 970 in 1996, pursuant to which, it was proposed to use certain obsolete equipment from float glass production line 1 of China Luoyang Float Glass (Group) Company Limited to restructure into a production line with a designed scale of daily melting capacity of 300 tonnes after necessary adjustments, with total investment of RMB112 million and annual output of 2 million loaded containers of 3mm–12mm glass in all colors. It mainly produced colored glass since it was put into production.

Longfei Company conducted two cold repairs since it was put into production in 2001 and had minor overhaul when it drew off water on 18 March 2006. It was ignited and put into production on 11 November 2006. It drew off water again on 8 August 2008. It commenced cold repair and restructure at the beginning of 2010 and ignited and put into production on 13 June 2010. Affected by the factors such as market and inflation of prices of raw materials and fuel since it was put into production, the enterprise recorded heavy losses, thus it suspended production from July 2011.

(3) Business scope

Business Scope: manufacture and sales of float glass; processing and sales of glass and related raw materials and fuel as well as minerals; import and export of glass and related products; and operation of business required license by the State in accordance with license.

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APPENDIX XI

(4) Assets, finance and operating status

As at the appraisal date (being 31 October 2014), the total assets of Longfeicompany was RMB79,372,700, the total liabilities was RMB285,057,700, and the net assets was RMB-205,685,000.From January to October 2014, the operating income from principal business was RMB102,200 and net profit was RMB-17,005,500. The assets and financial position in the recent two years are set out in the table below:

Assets, liabilities and financial position

Unit: RMB0’000

	31 October	31 December	31 October
Item	2014	2013	2012
Total assets	7,937.27	8,287.03	9,284.11
Liabilities	-20,568.50	-18,867.95	-17,009.12
	From
	January to	For the	For the
Item	October 2014	year of 2013	year 2012
Operating income	10.22	109.76	2,038.68
Total profit	-1,342.78	-1,858.83	-2,688.48
Net profit	-1,342.78	-1,858.83	-2,688.48
Auditing firm	PKF DAXIN Certified Public	Accountants LLP
Auditing Opinion	unqualified auditing opinions	with explanatory paragraphs

The valuers noted that the audit report issued by the auditor to Longfei Company contains the paragraph headed “Emphasis of Matters”, in which it is disclosed that “As at 31 October 2014, Longfei Company had accumulated losses of RMB327,010,617.44 while its current liabilities exceeded the current assets by RMB354,887,368.10. Although adequate disclosures on the proposed improvement measures have been made by Longfei Company in note 2 to the financial statements, there is still great uncertainty on its continuing operation. Longfei Company may not realize its assets to settle its liabilities in the ordinary course of business.”

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APPENDIX XI

(III) Relationship between the principals and the valuation target company

China Luoyang Float Glass (Group) Company Limited is a shareholder of Luoyang Glass Company Limited, which in turn is a shareholder of CLFG Longfei Glass Co., Ltd.*.

(IV) Principals, other users of the valuation report stipulated by the engagement letter

II. PURPOSE OF THE VALUATION

Pursuant to the Resolutions Passed at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation and the Resolutions Passed at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited, the Proposal on the Material Asset Exchange, Issuance of Shares, Acquisition of Assets and Raising Supporting Funds of Luoyang Glass Company Limited was considered and passed at the meetings. The proposal set out the intention of Luoyang Glass to conduct an equivalent asset exchange with its 100% equity interest in Longhao Company, 63.98% equity interest in Longfei Company, 67% equity interest in Dengfeng Silicon, 52% equity interest in Huasheng Mineral and 40.29% equity interest in CLFG Mineral as well as its liability assets in Longhao Company, Longfei Company, Longxiang Company, Huasheng Material, CLFG Mineral for the 100% equity interest of Bengbu China National Building Materials Information Display Material Company* held by CLFG. The difference between the assets to be disposed and the assets to be acquired will be partly taken by Luoyang Glass under the non-public issuance of A Shares of CLFG.

The purpose of the assets valuation was to reflect the market value of the entire equity interest of CLFG Longfei Glass Co., Ltd.* on the appraisal date, so as to provide reference basis to the abovementioned economic behavior.

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III. VALUATION TARGET AND SCOPE OF VALUATION

The valuation target was the entire equity interest of Longfei Company. The scope of valuation was all the assets and related liabilities of Longfei Company on the appraisal date with the carrying values of RMB79,372,700 for the total assets, RMB285,057,700 for the liabilities and RMB-205,685,000 for the net assets. In particular, they include current assets of RMB17,532,200 non-current assets of RMB61,840,600, and current liabilities of RMB285,057,700.

The valuation target under mandate and the scope of the valuation were consistent with those involved in the economic behavior.

(I) The major subject assets

The major assets in the scope of this valuation assignment were inventories, long-term equity investment and fixed assets.

All the inventories of the enterprise were raw materials, the carrying value of which amounted to RMB11,997,373.33, and the impairment provision of which was RMB1,504,181.85, while the net carrying value amounted to RMB10,493,191.48. Long-term equity investments were made on CLFG Longxiang Glass Co., Ltd.* and Bank of Sanmenxia Co., Ltd., the original carrying value of which amounted to RMB62,359,944.70 and the impairment provision of which was RMB58,016,444.70, while the net carrying value amounted to RMB4,343,500.00. Fixed assets consist of property assets and equipment assets. The original carrying value of the property assets was RMB49,452,254.85, while its net carrying value was RMB31,736,647.46. The original carrying value of the equipment assets was RMB92,793,937.20, while its net carrying value was RMB28,493,153.09. The provision for impairment of fixed assets was RMB5,085,444.28, and net value of fixed assets amounted to RMB55,144,356.27.

Raw materials mainly included auxiliary materials for production, spare parts of equipment, low value consumables and standard components, which were operating at a normal turnover rate. Most raw materials were kept too long in stock because the enterprise suspended production for years.

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Long-term equity investments were made on CLFG Longxiang Glass Co., Ltd. and Bank of Sanmenxia Co., Ltd. with shareholdings of 100% and 0.581% respectively. Fixed assets mainly included houses and buildings, structures, channels and drainages, houses of which were located in the plant area of Huanghua Village in Chencun Town, Mianchi County, covering an aggregate gross floor area of 52,972.98 square meters. The houses were constructed with brick and concrete, frames and bent frame structure. Only one house has obtained property ownership certificates, covering an area of 2,732.4 square meters, the registered holder of which was CLFG Longfei Glass Co., Ltd., while other houses have not obtained the property ownership certificates. Houses and buildings were mainly complex workshops, raw material workshop, office building and converting station. Channels and drainages mainly included water supply pipelines and oil supply lines. Most houses were successively constructed before and after 2001 under a better standard, which satisfy the needs for production. Equipment assets include machinery equipment, vehicles and electronic equipment. Machinery equipment was mainly a float glass production line, which was ignited and put into production in 2010, was conducted cold repair and renovation from the beginning of 2010, and was ignited and put into production again on 13 June 2010. The enterprise suffered heavy losses from the factors such as price inflation of market and raw materials since it went into operation for the second time, thus it suspended production since July 2011. Most equipments of the float glass production line were still useful. Four out of five vehicles can run normally, the remaining one was reported as unserviceable. Electronic equipments mainly included electronic equipments for office, all of which were used beyond the time limit and some of which were discarded as useless.

(II) Book records submitted by the company or status of the intangible assets not recorded

The intangible assets declared for evaluation included use right of an allotted land, use right of proprietary technology and conditional use right of the trademark “ 洛玻 CLFG” with a combination of image and text. In particular, the land use right had no carrying value. The property ownership certificate number was Mian Guo Yong 2000 Zi No. 0126 ( 澠國用2000字第0126號 ) and the area stated in the certificate is 131,133.552 square meters. The land was for industrial use in allotted nature and the proprietor stated in the certificate was CLFG Yangshao Glass Co., Ltd. (former name of Longfei Company). Longfei Company promised that proprietor of the land use right was Longfei Company. As at the appraisal date, no pledge or guarantee in relation to the land use right was found. The use right of proprietary technology and conditional use right of the trademark “ 洛玻 CLFG” with a combination of image and text were the use right of proprietary technology “Luoyang float glass process” and the conditional use right of the trademark “ 洛玻 CLFG” with a combination of image and text, which was registered under class 19 bearing registration No. 1204085, at a price of RMB7,400,000 contributed by the founder and shareholder, China Luoyang Float Glass (Group) Company Limited when Longfei Company was established. As at the appraisal date, the carrying value was RMB2,471,000.

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(III) Type, quantity of off-balance sheet assets submitted by the company

As at 31 October 2014, there were no off-balance sheet assets in the valuation scope reported by the valuation target.

(IV) Type, quantity and carrying value of assets as stated in the conclusion of reports issued by other organizations which are adopted as reference hereof

IV. TYPE OF VALUATION AND DEFINITION

Based on the purposes of this valuation assignment, it was determined that market value was the type of valuation for this valuation assignment.

V. APPRAISAL DATE

The benchmark date of the valuation for this assignment is 31 October 2014.

The benchmark date was determined by the principal after considering the scale of assets of the valuation target company, volume of work, expected time needed, compliance and other basis.

VI. BASIS OF THE VALUATION

(I) Economic behavior basis

Resolution Passed at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation*;
Resolutions Passed at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited*;

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(II) Basis of laws and regulations

“Company Law of the People’s Republic of China” (28 December 2013 as amended by the Sixth Meeting of the Standing Committee of the Twelfth National People’s Congress);
“Interim Measures for the Administration of Valuation of Enterprise State-owned Assets” of the State-owned Assets Supervision & Administration Commission of the State Council Order No. 12 (25 August 2005);
“Administrative Measures for the Assessment of State-owned Assets” (Order No. 91 issued by the State Council);
“Notice on Issues Related to the Strengthening of the Administration of Valuation of State-owned Assets” (Guo Zi Wei Chan Quan [2006] No. 274);
“Provisional Management Rules Governing the Transfer of State-owned Equity Interests of Corporations” (Order No. 3 issued by SASAC of the State Council and the Ministry of Finance (1 February 2004));
“Notice on Relevant Issues Concerning the Transfer of State-owned Property Rights of Enterprises” (Guo Zi Chan Quan Fa [2006] No. 306 issued by SASAC of the State Council);
The Land Management Law of the People’s Republic of China (as amended by Eleventh Meeting of the Standing Committee of the Tenth National People’s Congress on 28 August 2004);
Law of the People’s Republic of China on Administration of the Urban Real Estate (as amended in 2007);
“Notice on Relevant Issues Concerning Verification of State-owned Assets Valuation Report of Enterprise (Guo Zi Chan Quan [2009] of No. 941 issued by SASAC of the State Council);
“Notice on Printing and Issuance of The Guidelines for Registration of State-owned Assets Valuation Projects of Enterprises” (Guo Zi Fa Chan Quan [2013] No. 64);

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“Administrative Measures for the Material Asset Reorganisations of Listed Companies” (Order No. 109 issued by CSRC);
“Regulations in Relation to Regulating Issues Arising from Significant Asset Restructuring of Listed Companies” (CSRC Announcement [2008] No. 14).

(III) Basis of valuation standards

“Asset Valuation Standards – Basic Standards” (Cai Qi (2004) No. 20);
“Asset Valuation Professional Ethics Standards – Basic Standards” (Cai Qi (2004) No. 20)
“Assets Valuation Ethics Code – Independence” (Zhong Ping Xie [2012] No. 248);
“Asset Valuation Standards – Valuation Report” (Zhong Ping Xie [2011] No. 230);
“Asset Valuation Standards – Valuation Procedures” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Machinery & Equipments” (Zhong Ping Xie [2007] No. 189);
“Asset Appraisal Standards – Property” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Enterprise Values” (Zhong Ping Xie [2011] No. 227) (Effective from 1 July 2012);
“Asset Valuation Standards – Making Use of Experts” (Zhong Ping Xie [2012] No. 244)
“Guide on Valuation Report of Enterprise State-owned Assets” (Zhong Ping Xie [2011] No. 230);
“Numerical Guidelines on Assets Evaluation” (Zhong Ping Xie [2007] No. 189);
“Guidance Opinion on the Concern of Registered Valuers over the Legal Title of Valuation Target” (Kuai Xie [2003] No. 18);

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“Code for Real Estate Appraisal” (GB/T50291-1999);
“Regulations for Valuation on Urban Land” (GB/T18508-2001);
“Regulations for Gradation and Classification on Urban Land” (GB/T18507-2001);
“Enterprise Accounting Standards – Basic Standards” (Order No. 33 of the Ministry of Finance);
38 Specific standards such as the “Enterprise Accounting Standards No. 1-Inventory” (Cai Kuai [2006] No. 3);
“Enterprise Accounting Standards – Application Guide” (Cai Kuai [2006] No. 18).

(IV) Basis of ownership of assets

Property Ownership Certificates;
State-owned Land Usage Certificates;
Vehicle Registration Certificates;
Major assets purchase contracts or certificates;
Other references.

(V) Basis for obtaining prices

Regulations on Financial Management of Capital Construction (Cai Jian [2002] No. 394);
Regulations on Pricing Management of Survey and Design Projects (Ji Jia Ge [2002] No. 10);
Supplementary Notice in relation to the Rules on Administration of Engineering Investigation and Design Charges (Ji Ban Jia Ge [2002] No. 1153)
Notice in relation to the Provisions on Administration of Charging on Engineering Project Supervision and Relevant Services (Fa Gai Jia Ge [2007] No. 670)

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Interim Regulations on the Charging Administration of Bidding Agency Services (Ji Jia Ge [2002] No. 1980);
Notice in relation to Standardization of Relevant Issues Concerning Charging on Environmental Impacts (Ji Jia Ge [2002] No. 125);
Mechanical and Electrical Products Quotation Manual in 2014 (Machine Industry Information Research Institute);
List of Loan Interest Rate of the People’s Bank of China implemented on 6 July 2012;
Comprehensive Unit Price for Bill of Quantities of Construction Projects in Henan Province (2008);
Comprehensive Unit Price for Bill of Quantities of Decoration Projects in Henan Province (2008);
Comprehensive Unit Price for Bill of Quantities of Installation Projects in Henan Province (2008);
Information on Construction Costs in Henan Province (No. 5 in 2014);
Standard of Dangerous Building Appraisal (issued by the former Ministry of Urban and Rural Construction and Environmental Protection);
District Integrated Land Price on Land Acquisition in Henan Province – Fascicle for Mianchi County, Sanmenxia City;
“Interim Regulations on Vehicle Purchase Tax in the People’s Republic of China” (Order [2000] No. 294 issued by the State Council);
Regulations on Compulsory Write-off Standard Requirements of Motor Vehicles (Order No. 12 in 2012 issued by the Ministry of Commerce, the NDRC, the Ministry of Public Security and the Ministry of Environmental Protection);
Relevant information in the price information database of China United Assets Appraisal Group Co., Limited;
Other references.

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(VI) Other references

Accountant Statements and Audit Reports of LongfeiCompany as of 31 October 2012, 2013 and 2014;
Handbook on Common Methods and Parameters for Assets Valuation (China Machine Press 2011);
Technical information and geological exploration information related to constructions;
Other references.

VII. VALUATION METHOD

(I) Selection of valuation method

The assets-based approach reflects the value of the enterprise from the perspective of enterprise construction and provides a basis for the operation, management and assessment of the enterprise after the economic behavior is realised. Therefore, the assetsbased method is adopted for this valuation.

Longfei Company is mainly engaged in processing of flat glasses. The enterprise suffered heavy losses during the operating period due to the overcapacity in the market and has been suspended production since July 2011. Amidst the depression of flat glass industry, there will be great risks in operation. The incomes and risks of Longfei Company in the coming years therefore cannot be estimated reliably and thus it is inappropriate to adopt the income method for the valuation.

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On the basis of the foregoing, the assets-based approach was adopted for this valuation.

(II) Introduction of the assets-based approach

The valuation methods for all assets and liabilities are follows:

Current assets
(1) Monetary funds: including cash and bank deposits.

The appraised value is the carrying value after verification.

(2) Note receivable

All the notes receivable were interest free and their appraised value were determined at their verified principal.

(3) Receivables

As for the valuation of receivables and other receivables, after checking that the receivables are correct, a detailed analysis is made on the amount, time and reasons for the outstanding amount, status of recover of the amount, present conditions of the funds, credibility and business management of the debtors etc. by referring to the historical information and the situations learnt from the investigation. For receivables, aging analysis is adopted to estimate and evaluate risks and losses with reference to the calculation of the provision for bad debts in enterprise accounting, and the risks and losses will be estimated in accordance with the aging analysis.

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According to the above standards, the risks and losses on valuation are determined based on the total receivables deducting the amount after the valuation of risks and losses.

(4) Inventories

The inventories included in the valuation are all raw materials, mainly comprising fuel oil, petroleum coke powder, petroleum coke lumps, tin for tin bath and other auxiliary materials. Given the long period of suspension of Longfei Company, such raw materials are overstocked products most of which are defective goods. Therefore, the appraised value was determined at recovery value in the secondary market in the valuation.

(5) Other current assets

2. Non-current assets

(1) Long-term equity investments

The valuers initially performed evidence collection and verification in respect of the reasons for as well as book value and actual condition of long-term equity investments. Documents such as investment agreements, resolutions of general meetings, article of association and relevant accounting record were reviewed to make sure the truthfulness and completeness of the long-term equity investments, on the premise of which the appraisal target company was evaluated. Proper appraisal methods will be adopted respectively based on the specific condition of each long-term investment.

① For wholly-owned subsidiaries, overall appraisal was adopted to determine the net assets of the investee after the valuation and then the appraised value of long-term equity investments was determined by calculating its share of the net assets in proportion to the shareholdings.

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Appraised value of long-term investments = net assets of investee after overall valuation × proportion of shareholdings

② For invested companies, the appraised value of the long-term investments was determined by calculating the share attributable to it in the proportion to the shareholdings according to the financial statements provided by the investee.

In determining the appraised value of long-term investment, the valuers did not include the premiums and discounts due to factors such as controlling interest and minority interest.

(2) Fixed assets

1) Buildings

The cost method is adopted for valuation of the buildings.

Appraised value = total replacement costs × newness rate

① Total replacement costs

Total replacement costs have three components, namely construction & installation costs, preliminary and other expenses and capital cost.

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A. Determination of construction & installation costs

The construction & installation costs include the total costs of civil engineering projects, decoration and renovation projects, water supply and drainage, electrical engineering, and fire fighting and supporting information system projects. The valuers determined the work volume of the appraisal buildings based on the site survey and other relevant information and with reference to the budget indicators of local buildings of the same kind. A. constructional projects; B. decoration projects; C. installation projects specified in the Bill of Quantities and Comprehensive Unit Prices of Construction Projects in Henan Province (2008) (《河南省建設工程工程量清單綜合單價 (2008)》) were adopted when valuers calculated the direct costs of projects. The difference in labour costs and prices of materials were also adjusted according to cost information set out in the Construction Cost Information of Henan Province (Volume 5, 2014) (《河南省工程造價信息》) and relevant documents promulgated in Henan Province in respect of the adjustments to labour costs and taxations. After that, prices were determined based on such expense standard to calculation the costs of construction and installation projects.

B. Determination of preliminary and other expenses

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C. Determination of capital cost

Capital cost = (construction & installation costs + preliminary and other expenses) × reasonable construction cycle × loan interest × 50%

② Newness rate

Newness rate = remaining service life/(period of usage + remaining service life) × 100%

③ Determination of appraised value

Appraised values = total replacement costs × newness rate

2) Equipment assets

Appraised values = total replacement costs × integrated newness rate

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A. Total replacement costs of equipment

① Purchase price

② Transportation costs and sundry expenses

Transportation costs and sundry expenses are calculated based on the purchase price (include tax) in accordance with loading and unloading fees, transportation fees, warehousing fees, insurance fees and other relevant fees incurred from the place of production plants and equipment, and subject to various transportation costs and sundry expenses ratios. Meanwhile, deductible VAT shall bededucted. Purchase price including transportation costs will no longer be subject to transportation costs and sundry expenses.

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③ Installation and testing fees

No installation fee is included for equipment which is small in size or does not require installation.

④ Other expenses

⑤ Capital cost

The reasonable construction period of projects is one year with a capital cost rate of 6.00%.

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2) Total replacement costs of transportation vehicle

Total replacement costs = current purchase price (excluding tax) + vehicle purchase tax + handling charges for new vehicle registration

3) Total replacement costs of electronic devices

Total replacement costs = purchase price (excluding tax)

B. Determination of newness rate
1) Newness rate of machinery and equipment
- i Useful life newness rate

Useful life newness rate = remaining service life ÷ (period of actual usage + remaining service life) × 100%

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ii Economic Depreciation

In recently years, the capacity of flat glass industry increased rapidly from 808 million loaded containers in 2012 to 987 million loaded containers in 2013 and to 1,268 million loaded containers in 2014. As a result, from January 2014 to October 2014, 25 float glass production lines were suspended during cold repair, with daily melting capacity of 8,850 tons/day. The production of Longfei Company was suspended due to the above-mentioned external factors. Thus, the assets were idle which resulted in the loss of asset value. Accordingly, it is necessary to take into account the influence from economic depreciation to the integrated newness rate of machinery and equipment.

Economic depreciation rate = [1-(Actual production volume of the Market/Total production capacity of the glass industry)a]×100%

In which: a is economies of scale index. The normal range is 0.6–0.8.

iii Determination of integrated newness rate.

Integrated newness rate = Useful life newness rate × (1- Economic depreciation rate)

2) Newness rate of electronic devices

Electronic devices included in the valuation are all general equipment and electronic devices with comparatively less value. Their newness rate will be determined by age limit method.

Newness rate = (1 - period of actual usage ÷ economic service life) × 100%

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3) Newness rate for vehicle transportation

Newness rate = Min (Useful life newness rate, mileage newness rate)

Useful life newness rate = (1 – period of usage/designed or economic useful life) × 100%

Mileage newness rate = (1 – mileage travelled/designed mileage) × 100%

For non-motor vehicles or vehicles being used within the plants, the potential influence of mileage newness rate on the valuation of newness rate is not required to be considered.

C. Determination of appraised value

Appraised value = total replacement costs × newness rate

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(3) Construction in progress

The construction in progress involved in the valuation was evaluated based on the cost method. The valuers have checked relevant materials such as equipment purchase contracts and the accounting information of the paid amounts, and learnt about the current condition of the project in details from financial staff of such project. After verification, the appraisal construction in progress as part of the Melting Furnace Smoke Gas Desulphurisation and Dust Removal System was unusable and obsolescent. It was evaluated at residual value in the valuation.

3. Land use right

The land included in the valuation is an allocated land. In the valuation, the benchmark land price coefficient revision was initially adopted to estimate the land premium of the land parcel to be valued over the maximum term for the statutory use. Then the payable grant fee arising from conversion of the land from allocated land to granted land was deducted according to relevant requirements. After that, the land premium net of grant fee was converted from finite life to indefinite life, so as to derivate indirectly the price of allocated land use right of the land parcel to be valued. The cost approximation method was adopted to calculate the premium of the allocated land directly. With the consideration of the actual condition of the appraisal land and the applicability of these two methods, appropriate weight will be given to benchmark land price coefficient revision and cost approximation method respectively, to calculate the unit price of the allocated land.

(1) Benchmark land price coefficient revision was adopted to derivate the premium of the allocated land indirectly
① Determination of the value of the granted land with a term of 50 years

Benchmark land price coefficient revision method is an objective method to evaluate the prices of the appraised land parcels, in which the revision of benchmark land price of the same usage in the same level or the land in the same area which has been announced in various cities and towns. It is carried out through the analysis of the influence factors of prices of land parcels to be appraised and the use of coefficient revision of the prices of the land parcels. Its basic formula is as follows:

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Land price = [benchmark land price × K1 × (1 + ∑K) + revision value with development progress] × K2

Where: K1 – Revision coefficient on date

∑K – Sum of the revision coefficient on regional factors and specific factors affecting land price

K2 – the correction coefficient of the use term of the land which has a use term of 50 years

② Determination of premium of allocated land with fixed term

Pursuant to Clause 26 of the Temporary Measures on Management of Land Use Rights of Allocated Lands (《劃撥土地使用權管理暫行辦法》) issued and implemented by China Land Administration Bureau Order [1992] No. 1 on 8 March 1992, unlike other means such as transfer, lease and pledge of land use right, the grant fee of land use right shall be charged in proportion to and no less than 40% of the standardized premium. The standardized premium shall be determined by the land administration department of local municipal and county government based on the benchmark premium with reference to the term of transfer, lease or pledge of such land use right and the condition of the land parcel.

According to valuers’ enquiry to the local land administration department, the additional grant fee payable for the land of industrial allocation use is generally charged at 40% of the appraisal premium. The grant fee of the land was therefore deducted at 40% of the appraisal premium in the valuation.

Premium of allocated land with fixed term = Premium based on the benchmark land price coefficient revision (1-40%)

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③ Determination of premium of allocated land without fixed term

Correction coefficient for conversion of premium of land with fixed term to premium of land without fixed term = 1/[1 – 1/(1 + r) n] (r represents the capitalization rate of the land which is 6%; n represents the fixed term of the premium of the granted land, i.e. 50 years). i.e. premium of allocated land without fixed term = premium of allocated land with fixed term × correction coefficient for conversion of premium of land with fixed term to premium of land without fixed term

(2) Direct determination of premium of allocated land based on cost approximation method

The basic idea of cost approximation method is to take relevant investments in the land (including land acquisition fee, relevant taxes and land development fee, etc.) as primary investment cost, then plus correspondent profits and interest arising therefrom, so as to derivate the cost price of the land. On this basis, land value-added revenue will be on top of it to calculate the premium of the land after correcting the term based on the useful life determined according to the appraisal price of the appraisal target. As an allocated land, the valuation of the appraisal land has not included the land value-added revenue and correction of the useful life.

Its basic formula is:

Allotted land price = land acquisition cost + tax + land development cost + interest + profit

where,

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Land development costs: Land development costs are calculated by various objective costs that are incurred in the area with land development progress based on the valuation.

4. Other intangible assets

Other intangible assets included in the valuation comprise the usage right of Luoyang Float Glass Patent Technology (“ 洛陽浮法玻璃工藝 ” 專有技術 ) held by CLFG through Longfei Company and the conditional usage right of “ 洛玻 CLFG” trademark which represents the combination of words and device with registration certificate number 1204085 and certified application commodity category number 19. The valuers have referred to relevant information in relation to the investment in intangible assets. However, as such investment was made in a long time ago, the enterprise cannot provide sufficient information, due to which the valuers are unable to identify the scope, type and usage term of such patent technology usage right and the paid usage right of such trademark, and thus cannot estimate the appraisal intangible assets. In addition, given that this economic activity is to dispose the equity interests held by Luoyang Glass in Longfei Company by way of assets replacement upon completion of which CLFG will become a shareholder of Longfei Company, and that CLFG is the holder of such trademark and patent technology, the permission to use such patent technology and trademark depends on CLFG’s future governance and development plan for Longfei Company. In terms of the overall flat glass market, the existence of overcapacity and severe competition also pose huge uncertainty on Longfei Company’s entitlement to the appraisal usage rights of patent technology and trademark. The book value is therefore adopted as the appraised value.

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Liabilities

VIII. IMPLEMENTATION PROCESS AND STATUS OF VALUATION PROCEDURES

The entire valuation work was carried out in four phases:

(I) Valuation preparation phase

On 31 October 2014, we discussed and obtained consensus with the principals such as the purposes of this valuation, appraisal date, scope of the valuation, etc, and drew up the working plan for this asset valuation.
The inspection of assets, filling in the asset valuation declaration breakdown list, etc. were carried out with the enterprise. In early November 2014, the valuation project team understood the assets under valuation mandate in detail, allocated works for the valuation, assisted the enterprise in declaring assets under valuation mandate, and collected necessary documents and information for asset valuation.

(II) On-site valuation phase

The on-site valuation phase of the project team was from 31 October 2014 to 10 November 2014. The major works are as follows:

Listening to the overall situations of the enterprise and the history and present conditions of the assets under valuation mandate as explained by the relevant personnel of the principals and the valuation target company, and understanding the financial system, operating conditions, status of the fixed assets and technology, etc. of the enterprise.

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Review and identification of the asset inspection and valuation declaration breakdown list provided by the enterprise; verification against the relevant financial records of the enterprise, coordinate with the enterprise to make adjustments for any problem identified.
Conducting a complete inspection and verification of the fixed assets against the asset inspection and valuation declaration breakdown list, conducting random sampling stock taking of the inventory physical assets among the current assets.
Inspection and collection of the documentary proof of titles of the assets under the valuation mandate.
Determining the specific valuation methods for each type of assets according to the actual conditions and characteristics of the assets under valuation mandate.
Referring to the technical information, final accounts information or completion acceptance information in respect of key equipment; collecting price information by way of market surveys and enquiries in respect of general equipment;
Verification of the ownership information provided by the enterprise.
Carrying out initial valuation and measurement of the assets and liabilities within the scope of the valuation after inspection and verification.

(III) Valuation consolidation phase

From 4 November to 25 November 2014, an analysis and consolidation of the initial results of all assets valued and liabilities reviewed were made, and followed by the necessary adjustment, changes and improvement of the valuation results.

(IV) Report issuing phase

The working period of this phase was from 26 November 2014 to 15 April 2015.

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IX. ASSUMPTIONS OF VALUATION

The valuers made the following valuation assumptions for this valuation:

1. Transaction assumption

2. Open market assumption

3. Going concern assumption for the assets

When there are changes in the above conditions, the valuation results will be void in most cases.

X. VALUATION CONCLUSIONS

We have fulfilled the statutory and necessary procedures for asset valuation pursuant to the laws, regulations, rules and valuation principles in regard to asset valuation of the PRC, withheld independent, justice, scientific and objective principles, after adopting the assetbased approach, and have carried out on-site investigation, market survey and enquiries and assessment, the following valuation results in respect of the assets within the scope of valuation of Longfei Company were obtained:

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APPENDIX XI

The book value of assets is RMB79,372,700 and the appraised value is RMB139,885,200. The appraised value is RMB60,512,500 higher than the book value with an appreciation rate of 76.24%.

The book value of liabilities is RMB285,057,700 and the appraised value is RMB285,057,700, with no appraisal appreciation or depreciation.

The book value of net asset is RMB-205,685,000 and the appraised value is RMB-145,172,500. The appraised value is RMB60,512,500 higher than the book value with an appreciation rate of 29.42%. The table is set out below for details:

Consolidation Table of the Asset Valuation Results

Valuation target company: CLFG Longfei Glass Co., Ltd.*

Appraisal date: 31 October 2014

Unit: RMB0’000

				Appreciation
			Appraised	or	Appreciation
		Book Value	Value	Depreciation	Rate %
Item		B	C	D=C–B	*E=D/B100%**
1	Current assets	1,753.22	1,841.99	88.77	5.06
2	Non-current assets	6,184.06	12,146.53	5,962.47	96.42
3	Including: Long-term
	equity investment	434.35	1,208.56	774.21	178.25
4	Property for investment purpose	–	–	–
5	Fixed assets	5,514.44	7,849.26	2,334.82	42.34
6	Construction in progress	0.57	0.57	–	–
7	Intangible assets	234.70	3,088.14	2,853.44	1,215.78
8	Including: Land use right	–	2,853.44	2,853.44
9	Other non-current assets	–	–	–
10	Total assets	7,937.27	13,988.52	6,051.25	76.24
11	Current liabilities	28,505.77	28,505.77	–	–
12	Non-current liabilities	–	–	–
13	Total liabilities	28,505.77	28,505.77	–	–
14	Net assets (Owners’ equity)	-20,568.50	-14,517.25	6,051.25	29.42

The value of total shareholders’ equity of CLFG Longfei Glass Co., Ltd.* is RMB-145,172,500.

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VALUATION REPORT OF LONGFEI COMPANY

APPENDIX XI

XI. REMARKS FOR SPECIAL ITEMS

(I) Defects in ownership of housings

Defects in ownership of housings of Longfei Company
1) As at the Appraisal Date, only one out of the 33 housings of Longfei Company which are included in the valuation has property ownership certificate and the remains have not proceeded with relevant procedure. The valuation was estimated according to the measurement areas reported by the enterprise after verifying by random inspection, which may differ from the actual areas.
2) A located land use right involved in the valuation with the land certificate of Mian Guo Yong (2000) Zi No. 0126 ( 澠國用 (2000) 字第0126號 ) comprises an allocated land with an area of 131,133.552 square meters for industrial use. The holder specified in the certificate is CLFG Yangshao Glass Co. Ltd. which is different from the name of the appraisal enterprise.
Defects in ownership of housings of Longxiang Company

As at the Appraisal Date, all the housings of Longxiang Company which are included in the valuation have not applied for the property ownership certificate. The valuation was estimated according to the measurement areas reported by the enterprise after verifying by random inspection, which may differ from the actual areas.

Regarding the matters mentioned above, the enterprise confirmed that these housings and land use right which have no certificate of title are owned by itself without any disputes over ownership involved. Where any disputes arise from the ownership of such housings and land use right in the future, it has nothing to do with the valuation institution.

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APPENDIX XI

(II) Outstanding matters, legal disputes and other uncertain factors

On 26 August 2014 after the Appraisal Date, certain equipment of Longfei Company was sealed up by Intermediate People’s Court of Luoyang City in Henan Province due to its economic dispute (involving a loan of RMB2,896,000 and relevant interest thereon) with Luoyang Building Materials and Machinery Plant ( 洛陽建材機械廠 ). The valuers have checked the breakdown list enclosed in the written judgement issued by the court. However, as the enclosed list was prepared according to the drawing number, no one-toone correspondence can be made between it and the list presented in the valuation.

(III) Material subsequent events

On 26 November 2014 after the Appraisal Date, the lands, properties and glass stand of Longfei Company located in the Huanghua Industrial Park were sealed up by People’s Court of Taixing City due to its economic dispute (involving a loan of RMB1,996,400) with Jiangsu Teho Metal Industry Co., Ltd. ( 江蘇泰禾金屬工業有限公司 ).
According to knowledge acquired from the due diligence work of the valuer, after the appraisal date, on 22 November 2014, the People’s bank of China lowered the benchmark interest rate of both deposits and loans for financial institutions. The valuation results of the asset-based approach did not consider the impact of interest rate adjustment on the appraised value.

(IV) Other matters need explanations

The legal responsibilities of the valuer and the valuation firm were to make professional judgment on the valuation of the assets for the valuation purposes stated in this report, and no judgment whatsoever is made by the valuer and the valuation firm with respect to the economic behaviour corresponding to the purposes of this valuation. To a large extent, the valuation assignment depended on the information provided by the principals and the valuation target company. Therefore, the prerequisite of valuation assignment was that ownership documents, licence and accounting vouchers and the relevant legal documents provided by the principals and the valuation target company were authentic and legal.
The enterprise recorded material loss and has been suspended its production since July 2011 due to various factors including market influence and increase in prices of raw materials and fuels. In addition, as at the Appraisal Date, Longfei Company and CLFG Luoyang Longxiang Glass Company Limited ( 洛玻集團龍翔玻璃有限公司 ), its subsidiary, suffered heavy losses and became insolvency, posing great uncertainty on its continuing operation. Both the parties of the transaction considered that the appraisal target company could re-enable the relevant production lines to maintain continuing operation in the future.

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VALUATION REPORT OF LONGFEI COMPANY

APPENDIX XI

The long-term investment of Longfei Company in Bank of Sanmenxia Co., Ltd. ( 三門峽銀行股份有限公司 ). As approved by the Notice of the Leading Group for the Reform and Reorganization of Certain Municipal Commercial Banks of Henan Province on the Issuance of Reform and Reorganization Plan of Certain Municipal Commercial Banks of Henan Province (Yu Cheng Shang Gai [2013] No. 1) (《河南省部分城市商業銀行改革重組工作領導小組關於印發河南省部分城市商業銀行改革重組工作方案的通知》( 豫城商改 [2013]1號 )) issued by the Leading Group for the reform and reorganization of certain municipal commercial banks of Henan Province and the Special Resolution of the First Extraordinary General Meeting of Bank of Sanmenxia in 2013 (《2013年度第一次臨時股東大會特別決議》), the Bank of Sanmenxia intends to establish a new bank with other 12 municipal commercial banks in Henan. As at the Appraisal Date, such new bank was under preparation.
In the valuation, the granted land was appraised by deducting the land grant fee based on the benchmark land price coefficient revision, in which the deducted land grant fee may differ from the actual amount.
During the valuation process, the valuers observed the appearance, internal decoration, and usage of buildings as much as possible but did no test about structure or materials. When conducting inspection of the equipment, due to the restraints of the testing methods and the fact that some equipment were in operation, this task was mainly done by exterior observation by the valuers and the latest testing materials provided by the valuation target company as well as the enquiries to the operators, etc. in order to judge the conditions of the equipment.
The valuers noted that the audit report issued by the auditor to Longfei Company contains the paragraph headed “Emphasis of Matters”, in which it is disclosed that “As at 31 October 2014, Longfei Company had accumulated losses of RMB327,010,617.44 while its current liabilities exceeded the current assets by RMB354,887,368.10. Although adequate disclosures on the proposed improvement measures have been made by Longfei Company in note 2 to the financial statements, there is still great uncertainty on its continuing operation. Longfei Company may not realize its assets to settle its liabilities in the ordinary course of business.” According to the in-depth research on Longfei Company conducted by the valuers, the company has been suspended its production since July 2011 when the flat glass market is lacklustre. There is still great uncertainty on its operation in future, and thus the income approach cannot be adopted in the valuation.

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VALUATION REPORT OF LONGFEI COMPANY

APPENDIX XI

One of the intangible assets of Longfei Company represents an investment made by China Luoyang Float Glass (Group) Company Limited*, comprising the use right of proprietary technology of “Luoyang Floating Glass Workmanship” and the licensed right to use “ 洛玻 CLFG”, the combination trademark of word and device with trademark registered number of 1204085, for the rectified products under type 19. Valuers have reviewed relevant information of the intangible assets. As it has been rather a long time from such investment, the valuers are not able to obtain enough information, and therefore are not able to determine the scope, type and useful life of the use right of such proprietary technology and the paid use right of the trademark. Thus, the book amortized value of the valuation is presented as the appraised value.
The principals and the valuation target company were held responsible for the truthfulness and completeness of data, statements and the relevant information provided by the valuation target company and which were used within the scope of this valuation assignment.
The principals and the valuation target company were held responsible for the truthfulness and legality of the ownership documentary proof and relevant information provided by the valuation target company in the valuation report.
The impacts on the valuation conclusions from relevant taxes incurred during the implementation process for the purposes of the valuation have not been considered.
During the validity period after the appraisal date, if there are changes in the quantity and pricing standards of the assets, they should be reflected according to the following principles:
(1) When there are changes in the quantity of the assets, the corresponding adjustments should be made to the amount of the assets using the original valuation method;
(2) When there are changes in the pricing standards of the assets, which will have a significant impact on the valuation results of the assets, the principals should appoint qualified valuation firm to re-determine the appraised value;
(3) When there are changes in the quantity and pricing standards of the assets after the appraisal date, the principal should take them into due account when actually pricing the assets and make the relevant adjustments.

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APPENDIX XI

XII. EXPLANATION OF USAGE LIMITATION OF THE VALUATION REPORT

(1) This valuation report shall be used only for the valuation purposes and applications specified herein. In addition, the valuation conclusion reflects the current fair value of the valuation target determined according to the open market principles in the context of the valuation purposes, without taking into account of the impact of possible undertaking of guarantee, security and any special additional payment of the price by the parties upon the appraised price. Moreover, the impact of changes in the state macroeconomic policies, natural disaster and force majeure upon the prices of the assets are not considered in the report. If there are changes in the above-mentioned conditions and the other situations such as the going concern concept that had been applied in the valuation assignment, then the valuation conclusion will normally become void. The valuation firm is not liable for the relevant legal responsibilities for the invalidity of the valuation results due to changes in such conditions.

(2) This valuation report is for the exclusive use by the users of the valuation report specified herein. The rights of use of the valuation report belong to the principals, and we shall not make it available to other parties without the consent of the principals.
(3) The entire or part of the contents of this valuation report shall not be extracted, referred to or disclosed to the public media without the consent of our valuation firm (and subject to our reviewing of the relevant contents), unless otherwise required by laws and regulations and or agreed among the parties concerned.
(4) Based on the state regulations on management of state-owned assets valuation, this valuation report shall be filed (or approved) before being used and the filed (or approved) valuation result is valid for one year (from the appraisal date of 31 October 2014 to 30 October 2015). The assets must be re-valuated if more than one year has lapsed.

XIII. DATE OF VALUATION REPORT

The valuation report is issued on 15 April 2015.

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VALUATION REPORT OF LONGFEI COMPANY

APPENDIX XI

Index of the Files Available for Inspection

Economic behaviour documents (photocopies);
Corporate legal person business licenses (photocopies) of the principals and the valuation target company;
Auditor’s report of Longfei Company as at the appraisal date of the valuation and the audited accounting statement (photocopies) of Longfei Company as at 31 October 2012, 2013 and 2014;
Main title proof information (photocopies) of the valuation target;
Letters of undertaking of the principals and the valuation target company;
Letters of undertaking of the registered valuer signatories;
Valuation Qualification Certificate (photocopy) of China United Assets Appraisal Group Co., Limited;
Corporate legal person business license (photocopy) of China United Assets Appraisal Group Co., Limited;
Engagement Letter of Asset Assessment;
Qualification certificates (photocopies) of the registered valuer signatories.

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

The following is the text of the valuation report received from the Valuer in respect of the valuation of the net assets of Dengfeng Silicon Company as at 31 October 2014.

Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in Dengfeng

CLFG Silicon Co. Ltd.* ( 登封洛玻硅砂有限公司 )

by Luoyang Glass Company Limited by way of

Assets Exchange

China United Appraisal Report [2015] No. 034

China United Assets Appraisal Group Co., Limited

15 April 2015

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

Declaration of the Registered Valuer

We complied with the relevant laws and regulations and valuation standards, adhered to the principles of independence, objectivity and fairness in the course of conducting this valuation assignment; according to the information collected during our assignment process, the contents stated in the valuation report are objective, and we take the relevant legal responsibility as to the reasonableness of the valuation conclusion.
The lists of assets and liabilities of the valuation target were submitted by the principals and valuation target company and were signed and sealed by them as confirmation; the principals and valuation target company are liable for the genuineness, legality, completeness of the information so provided and the proper usage of the valuation report.
We did not have any existing nor expected interest in the valuation target in the valuation report; and we did not have any existing nor expected interest with the parties concerned, and did not have any bias against the parties concerned.
We conducted on-site investigation on the valuation target of the valuation report and the assets involved; we paid the necessary concern with the legal ownership status of the valuation target and the assets involved, and carried out an inspection of the legal title information of the valuation target and the assets involved.
The analysis, judgment and conclusion in the valuation report that we issued were subject to the constraints of the assumptions and criteria of the valuation report, users of the valuation report should take into full consideration the assumptions, criteria, explanation of special items set out in the valuation report and their impact on the valuation conclusion.

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in Dengfeng CLFG Silicon Co. Ltd.

by Luoyang Glass Company Limited by way of Assets Exchange

China United Appraisal Report [2015] No. 034

SUMMARY

China United Assets Appraisal Group Co., Limited accepted the mandate from China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited to carry out a valuation assignment of the market value of the total shareholders’ equity of Dengfeng CLFG Silicon Co. Ltd. involved in the economic behaviour of the proposed acquisition of the equity interest of Dengfeng CLFG Silicon Co. Ltd. by assets exchange by Luoyang Glass Company Limited on the appraisal date.

The valuation target was the entire shareholders’ equity of Dengfeng CLFG Silicon Co. Ltd., and the scope of valuation was all assets and the related liabilities of Dengfeng CLFG Silicon Co. Ltd., including current assets and non-current assets and the related liabilities.

The appraisal date was 31 October 2014.

The type of valuation of this valuation assignment was market value.

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APPENDIX XII VALUATION REPORT OF DENGFENG SILICON COMPANY

The entire shareholders’ equity of Dengfeng CLFG Silicon Co. Ltd was valued at RMB30,056,100, representing an appreciation of RMB20,000,600 and an appreciation rate of 198.90 % as compared to the book value of RMB10,055,500.

Report users are reminded to pay special attention to the special events and significant events for subsequent periods set out in this report when applying the valuation conclusions.

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in Dengfeng CLFG Silicon Co. Ltd.

by Luoyang Glass Company Limited by way of Assets Exchange

China United Appraisal Report [2015] No. 034

**China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited:**

China United Assets Appraisal Group Co., Limited accepted the mandate from you to carry out a valuation assignment of the market value of the entire shareholders’ equity of Dengfeng CLFG Silicon Co. Ltd. involved in the economic behaviour of the proposed disposal of equity interest in Dengfeng CLFG Silicon Co. Ltd. by Luoyang Glass Company Limited by assets exchange on the appraisal date (being 31 October 2014) in accordance with the relevant laws and regulations and valuation standards and under the asset-based approach by following the necessary valuation procedures. The contents of the valuation are as follows:

I. PRINCIPALS, VALUATION TARGET COMPANY AND OTHER USERS OF THE VALUATION REPORT

The principals of this valuation assignment were China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited, and the valuation target company was Dengfeng CLFG Silicon Co. Ltd.

(I) Basic information of Principal 1

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

1. Brief Historical Introduction

CLFG was established in 1991, which was formerly known as Luoyang Glass Factory, and was renamed as China Luoyang Float Glass Corporation Limited in 1993. In 1996, it was transformed into a wholly state-owned company in accordance with the Company Law and renamed as China Luoyang Float Glass (Group) Company Limited at the same time. After several times of capital increase and the gratuitous transfer of state-owned equity interest, as at the appraisal date, the registered capital was RMB1,286,740,000, of which China Building Materials Glass Company (now renamed as “Triumph Technology Group Company”) held a registered capital of RMB665,284,000 (accounted for 51.70% of the total registered capital), Bengbu Glass Industry Design Institute held a registered capital of RMB244,480,700, (accounted for 19.00% of the total registered capital), Luoyang State-owned Assets Operation Company ( 洛陽市國有資產經營公司 ) held a registered capital of RMB132,135,700, (accounted for 10.27% of the total registered capital), China Huarong Asset Management Company* ( 中國華融資產管理公司 ) held a registered capital of RMB110,000,000, (accounted for 8.55% of the total registered capital), China Great Wall Assets Management Corporation( 中國長城資產管理公司 ) held a registered capital of RMB70,000,000, (accounted for 5.44% of the total registered capital), China Orient Asset Management Company( 中國東方資產管理公司 ) held a registered capital of RMB39,840,000, (accounted for 3.10% of the total registered capital) and Henan Branch of China Construction Bank Corporation held a registered capital of RMB25,000,000, (accounted for 1.94% of the total registered capital).

The actual controller of CLFG is China National Building Material Group Corporation.

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

2. Business Scope

(II) Basic information of Principal 2

Company name: Luoyang Glass Company Limited (hereafter referred to as “Luoyang Glass”) Company address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang City Legal representative: Ma Liyun Registered capital: RMB 500,018,200 Paid-up capital: RMB500,018,200 Company type: Company Limited (listed) Places of listing: Shanghai Stock Exchange, Hong Kong Stock Exchange Stock short name: 洛陽玻璃 , Luoyang Glass Stock code: 600876.SH, 1108.HK Business registration license No. : 410300400003275 Date of establishment: 6 April 1994

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

1. Historical reform

Luoyang Glass was established in April 1994 with a registered capital of RMB400,000,000 upon establishment. In June 1994, with the approval of the Securities Commission of the State Council, the Company issued 250,000,000 H shares. In September 1995, with the approval of China Securities Regulatory Commission, the Company issued 50,000,000 A shares. After the share trading reform and the repurchase of shares in 2006, as at the appraisal date, the registered capital of the Company was RMB500,018,200 and the share structure is as follows:

			The percentage
		The Amount	of the total
Type of Shares		of Shares	shares
		(ten thousand
		shares)	(%)
I.	Total circulating shares subject
	to trading moratorium	–	–
II.	Total circulating shares not subject
	to trading moratorium	50,001.82	100.00
	1. Ordinary shares denominated
	in RMB_(A Shares)_	25,001.82	50.00
	2. Overseas listed foreign
	invested shares_(H shares)_	25,000.00	50.00
III.	Total shares	50,001.82	100.00

Business Scope

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

(III) Basic information of the valuation target company

Company name: Dengfeng CLFG Silicon Co. Ltd. (hereafter referred to as “Dengfeng Silicon”) Company address: Chengyao Village, Baiping Town, Dengfeng City Legal representative: Ni Zhisen Registered capital: RMB13 million Paid-up capital: RMB13 million Company type: limited liability company Business registration license No. : 410185100001805

(1) Company profile

On 9 November 2007, CLFG Longhai Electronic Glass Limited* ( 洛玻集團洛陽龍海電子玻璃有限公司 ) (“Longhai Company”) and Dengfeng City Guo’an Silicon Company Limited ( 登封市國安硅砂有限公司 ) (“Guo’an Silicon”) jointly contributed RMB1 million to establish Dengfeng CLFG Silicon Co. Ltd. At the time of establishment, Longhai Company held 51% shareholding and Guo’an Silicon held 49% shareholding respectively in CLFG Silicon Co. Ltd. After several equity transfers and capital increases, as at the appraisal date, shareholders and their respective capital contributions and contribution ratio are as follow:

Table 2-1 Shareholders and their respective capital contribution and contribution ratio

Shareholder CLFG Longhai Electronic Glass Limited Dengfeng City Guo’an Silicon Company Limited Total	Capital contribution (RMB0’000) 817.00 429.00 1,300.00	Contribution ratio (%) 67 33 100

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

In December 2014, at the 33rd meeting of the 7th session of the board of directors of Luoyang Glass, it is approved that Luoyang Glass will acquire the 67% equity interest in Dengfeng CLFG Silicon Co. Ltd held by Longhai Company. On the same date, Longhai Company entered into the equity transfer agreement with Luoyang Glass to transfer the 67% equity interest in Dengfeng CLFG Silicon Co. Ltd held by it to Luoyang Glass. As at the date of issue of the valuation report, the change in registration with relevant industrial and commerce authorities in respect of the aforesaid equity transfer has not been completed.

(2) Business scope

Business Scope: sales of silica sand.

(3) Assets, finance and operating status

As at the appraisal date (being 31 October 2014), the total assets of the company was RMB10,349,900, the total liabilities was RMB294,400, the net assets was RMB10,055,500, the operating income was nil and net loss was RMB533,200. The assets and financial position of the Company in the recent two years and the period from January to October 2014 are set out in the table below:

	31 October	31 December	31 December
	2014	2013	2012
Total assets	1,034.99	1,067.55	1,156.47
Net assets	1,005.55	1,058.87	1,152.09
	From
	January to	For the	For the
Item	October 2014	year of 2013	year of 2012
Operating income from
principal businesses
Total profit	-53.32	-93.22	-70.67
Net profit	-53.32	-93.22	-70.67
Auditing firm	PKF DAXIN Certified Public Accountants		LLP (Special
	Ordinary Partnership)

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

(III) Relationship between the principals and the valuation target company

The principals of this asset valuation are China Luoyang Float Glass (Group) Company Limited and Luoyang Glass Company Limited. China Luoyang Float Glass (Group) Company Limited is the shareholder of Luoyang Glass Company Limited. The valuation target company is Dengfeng CLFG Silicon Co. Ltd which is one second-tier subsidiary of Luoyang Glass Company Limited (one of the principals) and is connected with the other principal China Luoyang Float Glass (Group) Company Limited.

(IV) Principals, other users of the valuation report stipulated by the engagement letter

II. PURPOSE OF THE VALUATION

Pursuant to the Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation and the Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited, the Proposal on the Material Asset Exchange, Issuance of Shares, Acquisition of Assets and Raising Supporting Funds of Luoyang Glass Company Limited was considered and passed at the meeting. The proposal set out the intention of Luoyang Glass to conduct an equivalent assets exchange with its 100% equity interest in Longhao Company, 63.98% equity interest in Longfei Company, 67% equity interest in Dengfeng Silicon, 52% equity interest in Huasheng Mineral and 40.29% equity interest in CLFG Mineral as well as the its liability assets in Longhao Company, Longfei Company, Longxiang Company, Huasheng Material, CLFG Mineral for the 100% equity interest of Bengbu China National Building Materials Information Display Material Company* held by CLFG. The difference between the assets to be disposed and the assets to be acquired will be partly taken by Luoyang Glass under the non-public issuance of A Shares of CLFG.

The purpose of the assets valuation was to reflect the market value of the entire shareholders’ equity of Dengfeng CLFG Silicon Co. Ltd on the appraisal date, so as to provide reference basis to the abovementioned economic behavior.

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

III. VALUATION TARGET AND SCOPE OF VALUATION

The valuation target was the entire shareholders’ equity of Dengfeng Silicon. The scope of valuation was all the assets and related liabilities of Dengfeng Silicon on the appraisal date with the carrying values of RMB10,349,900 for the total assets, RMB294,400 for the liabilities and RMB10,055,500 for the net assets. In particular, they include current assets of RMB8,765,100, non-current assets of RMB1,584,800, and current liabilities of RMB294,400.

The valuation target under mandate and the scope of the valuation were consistent with those involved in the economic behavior.

(I) Status of the major assets

The major assets included in the scope of this valuation assignment were long-term equity investment and fixed assets.

Fixed assets mainly included vehicle and electronic equipment. There was one vehicle which was in normal condition. Electronic equipments mainly included computers for office which could basically satisfy the needs for normal workload.

(II) Book records submitted by the company or status of the intangible assets not recorded

There was one exploration right stated in the financial statements of the valuation target. Such exploration right was accounted for as other non-current assets pursuant to the requirements of accounting policies.

The consideration for the exploration right was paid to the Provincial Bureau of Land Resources in April 2010 and the certificate of exploration right has been issued with the title owner stated thereon being Dengfeng CLFG Silicon Co. Ltd. As at the appraisal date, the there was no any other rights set out on the certificate.

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APPENDIX XII VALUATION REPORT OF DENGFENG SILICON COMPANY

(III) Type, quantity of off-balance sheet assets submitted by the company

As at 31 October 2014, there were no off-balance sheet assets in the valuation scope reported by the valuation target.

(IV) Type, quantity and carrying value of assets as stated in the conclusion of reports issued by other organizations which are adopted as reference hereof

IV. TYPE OF VALUATION AND DEFINITION

Based on the purposes of this valuation assignment, it was determined that market value was the type of valuation for this valuation assignment.

V. APPRAISAL DATE

The benchmark date of the valuation for this assignment is 31 October 2014.

The benchmark date was determined by the principal after considering the scale of assets of the valuation target company, volume of work, expected time needed, compliance and other basis.

VI. BASIS OF THE VALUATION

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

(I) Economic behavior basis

Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation;
Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited.

(II) Basis of laws and regulations

“Company Law of the People’s Republic of China” (28 December 2013 as amended by the Sixth Meeting of the Standing Committee of the Twelfth National People’s Congress);
“Interim Measures for the Administration of Valuation of Enterprise State-owned Assets” of the State-owned Assets Supervision & Administration Commission of the State Council Order No. 12 (25 August 2005);
“Administrative Measures for the Assessment of State-owned Asset” (Order No. 91 of the State Council);
“Notice on Issues Related to the Strengthening of the Administration of Valuation of State-owned Assets” (Guo Zi Wei Chan Quan [2006] No. 274);
“Provisional Management Rules Governing the Transfer of State-owned Equity Interests of Corporations” ( Order No. 3 issued by SASAC of the State Council and the Ministry of Finance (1 February 2004));
“Notice on Relevant Issues Concerning the Transfer of State-owned Property Rights of Enterprises” (Guo Zi Chan Quan Fa [2006] No. 306 issued by SASAC of the State Council);
The Mineral Resource Law of the People’s Republic of China (as amended and issued on 29 August 1996);
The Administrative Measures on Registration of Tenement of Mineral Resources Exploration and Survey (Order No. 240 issued by the State Council (1998));
The Administrative Measures on Registration of Mineral Resources Exploitation (Order No. 241 issued by the State Council (1998));

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VALUATION REPORT OF DENGFENG SILICON COMPANY

APPENDIX XII

The Measures for Administration of the Transfer of Exploration and Mining Rights (Order No. 242 issued by the State Council (1998));
The Provisional Rules for Administration of the Transfer of Mineral Property Rights (Guo Tu Zi Fa [2000] No. 309);
The Tentative Provisions on Administration of Mining Industry Right Assessment (Guo Tu Zi Fa [2008] No. 174);
Classification of Solid Mineral Resources/Reserves (GB/T17766–1999);
General Requirements for Solid Mineral Exploration (GB/T13908–2002);
Coal & Peat Geology Exploration Regulation (DZ/T0215–2002);
Notice on Strengthen the Administration on the Supervision and Approval of Mineral Resource Reserves (Guo Tu Zi Fa [2003] No. 136);
Announcement on the Implementation of the Evaluation Criteria of Mining Rights (The Ministry of Land and Resources [2008] No. 6);
“Notice on Relevant Issues Concerning Verification of State-owned Assets Valuation Report of Enterprise (Guo Zi Chan Quan [2009] of No. 941 issued by SASAC of the State Council);
“Notice on Printing and Issuance of The Guidelines for Registration of State-owned Assets Valuation Projects of Enterprises” (Guo Zi Fa Chan Quan [2013] No. 64);
“Administrative Measures for the Material Asset Reorganisations of Listed Companies” (Order No. 109 issued by CSRC);
“Regulations in Relation to Regulating Issues Arising from Significant Asset Restructuring of Listed Companies” (CSRC Announcement [2008] No. 14).

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(III) Basis of valuation standards

“Asset Valuation Standards – Basic Standards” (Cai Qi (2004) No. 20);
“Asset Valuation Professional Ethics Standards – Basic Standards” (Cai Qi (2004) No. 20);
“Assets Valuation Ethics Code – Independence” (Zhong Ping Xie [2012] No. 248);
“Asset Valuation Standards – Valuation Report” (Zhong Ping Xie [2011] No. 230);
“Asset Valuation Standards – Valuation Procedures” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Machinery & Equipments” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Enterprise Values” (Zhong Ping Xie [2011] No. 227) (Effective from 1 July 2012);
“Asset Valuation Standards – Making Use of Experts” (Zhong Ping Xie [2012] No. 244)
“Guide on Valuation Report of Enterprise State-owned Assets” (Zhong Ping Xie [2011] No. 230);
“Numerical Guidelines on Assets Evaluation” (Zhong Ping Xie [2007] No. 189);
“Guidance Opinion on the Concern of Registered Valuers over the Legal Title of Valuation Target” (Kuai Xie [2003] No. 18);
“Basic Principles for Mining Rights Evaluation Technique (CMVS00001-2008)”;
“Procedure Specification for Assessment of Mining Rights (CMVS11000-2008)”
“Preparation Specification of Mining Rights Assessment Report (CMVS114002008)”;
“The Income Approach Evaluation Method and Specifications (CMVS121002008)”;

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“The Mining Right Transfer and Evaluation Application Instruction (CMVS202002010)”;
“Guidelines on the Evaluation of Mining Rights Based on the Mining Resources and Reserves (CMVS30300-2010)”;
“Guidelines on the Evaluation of Mining Rights Based on the Geological Prospecting Documents (CMVS30400-2010)”;
“Guidelines on the Evaluation of Mining Rights Based on the Mine Designing Documents (CMVS30700-2010)”;
“Mining Right Evaluation Parameter Determination Guiding Principles (CMVS30800-2008)”;
“Guidelines on the Evaluation of Mining Rights Based on the Enterprise Financial Reports (CMVS30900-2010)”;
“The Announcement on Implementing the ’Amendment Plan on the Evaluation Method of Income Approach for Mining Right’” and “The Amendment Plan on the Evaluation Method of Income Approach for Mining Right” (The Ministry of Land and Resources [2006] No. 18);
“Enterprise Accounting Standards – Basic Standards” (Order No. 33 of the Ministry of Finance);
“Enterprise Accounting Standards – Application Guide” (Cai Kuai [2006] No. 18).

(IV) Basis of ownership of assets

Copies of “Detailed Inspection License for Quartzit in Mines of Milashan Mountain of Henan Dengfeng”;
Copies of “Mining License for Quartzit in Dengfeng Kaijun”;
Copies of “Exploration License for Mine Resources Exploration of Dengfeng Hongzhai Silicon Co., Ltd.”;
Vehicle Registration Certificates;

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Major assets purchase contracts or certificates;
Other references.

(V) Basis for obtaining prices

“Report of Quartzite Mineral Resource Reserve in Dengfeng Kaijun” and “Resource and Reserve Report Filing Form of Scattering and Second-class Mineral Resources Reserve” (Deng Guo Tu Zi Chu Bei Zi [2008] No. 01);
“Development and Utilization Plan for Quartzite Mineral Resource in Dengfeng Kaijun, Henan Province” and “Development and Utilization Plan Filing Form of Scattering and Second-class Mineral Resources Reserve” (Deng Guo Tu Zi Chu Bei Zi [2008] No. 11);
“Filing Certificate of Mineral Resource Reserve Assessment by the Department of Land and Resources of Henan Province Regarding the ‘Detailed Inspectation Report of Quartzite Mineral for Glass-production in Xiaohongzhai Mining Areas of Henan Dengfeng’” (Yu Guo Tu Zi Chu Bei Zi [2013] No. 29);
“Mineral Resource Reserve Assessment Opinions by the Mineral Reource Reserve Assessment Center of Henan Province Regarding the ‘Detailed Inspectation Report of Quartzite Mineral for Glass-production in Xiaohongzhai Mining Areas of Henan Dengfeng’” (Yu Chu Ping Zi [2013] No. 20);
“‘Detailed Inspectation Report of Quartzite Mineral for Glass-production in Xiaohongzhai Mining Areas of Henan Dengfeng’ by Henan Academy of Land & Resources Science”;
“‘Feasibility Study Report of Xiaohongzhai’ by the Local Coal Mine Design and Research Institute of Pingdingshan City”;
“Interim Regulations on Vehicle Purchase Tax in the People’s Republic of China” (Order [2000] No. 294 issued by the State Council);
Regulations on Compulsory Write-off Standard Requirements of Motor Vehicles (Order No. 12 in 2012 issued by the Ministry of Commerce, the NDRC, the Ministry of Public Security and the Ministry of Environmental Protection);

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Relevant information in the price information database of China United Assets Appraisal Group Co., Limited;
Relevant information provided by the valuation target company and other information collected by the valuer.

(VI) Other references

Accountant Statements and Audit Reports of Dengfeng Silicon as of 2012, 2013 and 31 October 2014;
Handbook on Common Methods and Parameters for Assets Valuation (China Machine Press 2011);
Technical information and geological exploration information related to constructions;
Other references.

VII. VALUATION METHOD

(I) Selection of valuation method

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Dengfeng Silicon Company will be mainly engaged in mining of silica sand mine and processing and sales of silica sands in the future. At present, the company is still in the early stage of exploration and has not obtained any geological findings. Therefore, it is unable to reliably estimate the revenue and risks for the future years. Accordingly, the income approach is not proper for the evaluation of Dengfeng CLFG Silicon Co. Ltd..

On the basis of the foregoing, the assets-based approach was adopted for this valuation.

(II) Introduction of the assets-based approach

The valuation methods for all assets and liabilities are follows:

Current assets
(1) Monetary funds: including cash and bank deposits.

The appraised value is the carrying value after verification.

(2) Receivables

As for the valuation of other receivables, after checking that the receivables are correct, a detailed analysis is made on the amount, time and reasons for the outstanding amount, status of recover of the amount, present conditions of the funds, credibility and business management of the debtors etc. by referring to the historical information and the situations learnt from the investigation. For receivables, aging analysis is adopted to estimate and evaluate risks and losses with reference to the calculation of the provision for bad debts in enterprise accounting, and the risks and losses will be estimated in accordance with the aging analysis.

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According to the above standards, the risks and losses on valuation are determined based on the total receivables deducting the amount after the valuation of risks and losses.

(3) Prepayments

As for the valuation of prepayments, the valuers verified books and records, checked original vouchers, lease contracts and other relevant information, and verified the authenticity, aging, business contents, amount, etc. of transactions. The book values are adopted as the appraised values.

2. Non-current assets

(1) Long-term equity investment

The valuers first verified the causes, book value, actual situation, etc. of long term equity investment and referred to investment agreement, resolutions of general meetings, articles of association, relevant accounting records, etc. so as to check the authenticity and integrity of long-term equity investment, and performed evaluation of the investees on this basis. Appropriate valuation methods were adopted depending on the specific situation of long-term investments.

Appraised value of long-term equity investment = Net asset of the investee after overall evaluation × shareholding ratio

In determining the appraised value of long-term equity investment, the valuers did not consider the premium and discount arising from controlling interest, minority interest, and other factors.

(2) Fixed assets

Fixed assets include vehicles and electronic devices. According to the purpose of this valuation, the valuation of fixed assets was conducted in the principle of continued use with the market price as a basis as well as taking into account the characteristics of equipment to be valued and the data collected. The cost method was mainly adopted in the valuation.

Appraised value = total replacement costs × newness rate

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1) Determination of total replacement costs
① Total replacement costs of transportation vehicle

Total replacement costs = current purchase price (excluding tax) + vehicle purchase tax + handling charges for new vehicle registration

② Total replacement costs of electronic devices

The prices of electronic devices are determined according to local market information combining with specific situations. Also, deductible VAT is deducted. In general, manufacturers or distributors provide transportation and installation for free, that is:

Total replacement costs = purchase price (excluding tax)

2) Determination of newness rate
① Newness rate of electronic devices

For electronic devices, the newness rate will be determined by age limit method.

Newness rate = (1 – period of actual usage ÷ economic service life) × 100%

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② Newness rate for vehicle transportation

Newness rate = Min (Useful life newness rate, mileage newness rate)

Useful life newness rate = (1 – period of usage/designed or economic useful life) × 100%

Mileage newness rate = (1 – mileage travelled/designed mileage) × 100%

3) Determination of appraised value

Appraised value = total replacement costs × newness rate

(3) Other non-current assets

As to the mining rights as reflected in the books of Dengfeng CLFG Silicon Co. Ltd., as at the appraisal date, the company had not obtained any new exploration results subsequent to obtaining the mining rights. For the mining rights, the book values verified are adopted as the appraised value in this valuation.

3. Liabilities

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VIII. IMPLEMENTATION PROCESS AND STATUS OF VALUATION PROCEDURES

The entire valuation work was carried out in four phases:

(I) Valuation preparation phase

On 31 October 2014, we discussed and obtained consensus with the principals such as the purposes of this valuation, appraisal date, scope of the valuation, etc, and drew up the working plan for this asset valuation.
The inspection of assets, filling in the asset valuation declaration breakdown list, etc. were carried out with the enterprise. In early November 2014, the valuation project team understood the assets under valuation mandate in detail, allocated works for the valuation, assisted the enterprise in declaring assets under valuation mandate, and collected necessary documents and information for asset valuation.

(II) On-site valuation phase

The on-site valuation phase of the project team was from 31 October 2014 to 10 November 2014. The major works are as follows:

Listening to the overall situations of the enterprise and the history and present conditions of the assets under valuation mandate as explained by the relevant personnel of the principals and the valuation target company, and understanding the financial system, operating conditions, status of the fixed assets and technology, etc. of the enterprise.
Review and identification of the asset inspection and valuation declaration breakdown list provided by the enterprise; verification against the relevant financial records of the enterprise, coordinate with the enterprise to make adjustments for any problem identified.
Conducting a complete inspection and verification of the fixed assets against the asset inspection and valuation declaration breakdown list.
Inspection and collection of the documentary proof of titles of the assets under the valuation mandate.
Determining the specific valuation methods for each type of assets according to the actual conditions and characteristics of the assets under valuation mandate.

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Collecting price information by way of market surveys and enquiries in respect of electronic devices.
Verification of the ownership information provided by the enterprise.
Carrying out initial valuation and measurement of the assets and liabilities within the scope of the valuation after inspection and verification.

(III) Valuation consolidation phase

(IV) Report issuing phase

The working period of this phase was from 26 November 2014 to 15 April 2015.

IX. ASSUMPTIONS OF VALUATION

The valuers made the following valuation assumptions for this valuation:

1. Transaction assumption

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2. Open market assumption

3. Going concern assumption for the assets

When there are changes in the above conditions, the valuation results will be void in most cases.

X. VALUATION CONCLUSIONS

We have fulfilled the statutory and necessary procedures for asset valuation pursuant to the laws, regulations, rules and valuation principles in regard to asset valuation of the PRC, withheld independent, justice, scientific and objective principles, after adopting the assetbased approach, and have carried out on-site investigation, market survey and enquiries and assessment, the following valuation results in respect of the assets within the scope of valuation of Dengfeng CLFG Silicon Co. Ltd. were obtained:

The book value of assets is RMB10,349,900 and the appraised value is RMB30,350,500. The appraised value is RMB20,000,600 higher than the book value with an appreciation rate of 193.24%.

The book value of liabilities is RMB294,400 and the appraised value is RMB294,400, with no appraisal appreciation or depreciation.

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The book value of net asset is RMB10,055,500 and the appraised value is RMB30,056,100. The appraised value is RMB20,000,600 higher than the book value with an appreciation rate of 198.90 %. The table is set out below for details:

Table 6-1 Consolidation Table of the Asset Valuation Results

		Valuation target	company: Dengfeng CLFG	company: Dengfeng CLFG	Silicon Co., Ltd.
			Appraisal Date:		31 October 2014
					Unit: RMB0’000
			Appraised	Appreciation or	Appreciation
		Book Value	Value	Depreciation	Rate%
	Item	B	C	D=C-B	E=D/B×100%
1	Current assets	876.51	876.51	–	–
2	Non-current assets	158.48	2,158.54	2,000.06	1,262.03
3	Including: Long-term equity
	investment	123.00	2,131.94	2,008.94	1,633.28
4	Property for investment purpose	–	–	–
5	Fixed assets	24.62	15.74	-8.88	-36.07
6	Construction in progress	–	–	–
7	Intangible assets	–	–	–
8	Including: Land use right	–	–	–
9	Other non-current assets	10.86	10.86	–	–
10	Total assets	1,034.99	3,035.05	2,000.06	193.24
11	Current liabilities	29.44	29.44	–	–
12	Non-current liabilities	–	–	–
13	Total liabilities	29.44	29.44	–	–
14	Net assets (Owners’ equity)	1,005.55	3,005.61	2,000.06	198.90

Thus, the value of total shareholders’ equity of Dengfeng Silicon on the appraisal date is RMB30,056,100.

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XI. REMARKS FOR SPECIAL ITEMS

(I) Defects in ownership of housings

None.

(II) Outstanding matters, legal disputes and other uncertain factors

There are no outstanding matters, legal disputes and other uncertain factors in the report.

(III) Material subsequent events

According to knowledge acquired from the due diligence work of the valuer, after the appraisal date, on 22 November 2014, the People’s bank of China lowered the benchmark interest rate of both deposits and loans for financial institutions. The valuation results of mining rights and exploration rights in the asset-based approach have considered the impact of interest rate adjustment on the appraised value.

(IV) Other matters need explanations

The legal responsibilities of the valuer and the valuation firm were to make professional judgment on the valuation of the assets for the valuation purposes stated in this report, and no judgment whatsoever is made by the valuer and the valuation firm with respect to the economic behaviour corresponding to the purposes of this valuation. To a large extent, the valuation assignment depended on the information provided by the principals and the valuation target company. Therefore, the prerequisite of valuation assignment was that ownership documents, licence and accounting vouchers and the relevant legal documents provided by the principals and the valuation target company were authentic and legal.

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The mining rights of Dengfeng Hongzhai Silicon Co. Ltd., a subsidiary of the valuation target company, in the scope of valuation, are for Kaijun Quartzite Mine in Dengfeng City, and were purchased from Kaijun Quartzite Mine in Dengfeng City in December 2009. In accordance with the agreement on resource integration of quartzite mine, the consideration paid amounted to RMB1.20 million covering mining rights, roads in the mining area, ground buildings in the mining area, 100t wagon balance and other assets. According to the informal discussion with the company, the company only obtained mining rights and no detailed information on roads, ground buildings and wagon balance was provided at handover. The company was unable to inform the situation and location of such assets. As there was no unambiguous evidence proving the handover of such assets to the company and the valuers were unable to conduct site survey and check, only mining rights were valued and it was unable to value other assets stipulated under the integration agreement.
In accordance with the Reply to the Scheme for Implementation of Resources Integration of Provincial Key Minerals Other Than Coal in Zhengzhou City (《關於鄭州市省定非煤重點礦種資源整合實施方案的批覆》) issued by the Office of the Leading Group of Resources Integration of Henan Province, it was proposed to integrate the mining rights of Kaijun Quartzite Mine in Dengfeng City under the name of Dengfeng Hongzhai Silicon Co. Ltd., a subsidiary of Dengfeng CLFG Silicon Co. Ltd. and the exploration rights of quartzite for glass of Xiaohongzhai Mining Area. This matter may affect the company’s future development plan. As at the appraisal date, the integration was under progress.
Dengfeng CLFG Silicon Co. Ltd. is mainly engaged in mining, processing and sales of silica sand. The company is still in the early stage of exploration. Due to objective reasons, as at the appraisal date, it was still in the status of shutdown and had not obtained any geological findings. Therefore, it is unable to adopt the income approach for valuation of the company.
The principals and the valuation target company were held responsible for the truthfulness and completeness of data, statements and the relevant information provided by the valuation target company and which were used within the scope of this valuation assignment.
The principals and the valuation target company were held responsible for the truthfulness and legality of the ownership documentary proof and relevant information provided by the valuation target company in the valuation report.

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The impacts on the valuation conclusions from relevant taxes incurred during the implementation process for the purposes of the valuation have not been considered.
During the validity period after the appraisal date, if there are changes in the quantity and pricing standards of the assets, they should be reflected according to the following principles:
(1) When there are changes in the quantity of the assets, the corresponding adjustments should be made to the amount of the assets using the original valuation method;
(2) When there are changes in the pricing standards of the assets, which will have a significant impact on the valuation results of the assets, the principals should appoint qualified valuation firm to re-determine the appraised value;
(3) When there are changes in the quantity and pricing standards of the assets after the appraisal date, the principal should take them into due account when actually pricing the assets and make the relevant adjustments.

XII. EXPLANATION OF USAGE LIMITATION OF THE VALUATION REPORT

(1) This valuation report shall be used only for the valuation purposes and applications specified herein. In addition, the valuation conclusion reflects the current fair value of the valuation target determined according to the open market principles in the context of the valuation purposes, without taking into account of the impact of possible undertaking of guarantee, security and any special additional payment of the price by the parties upon the appraised price. Moreover, the impact of changes in the state macroeconomic policies, natural disaster and force majeure upon the prices of the assets are not considered in the report. If there are changes in the above-mentioned conditions and the other situations such as the going concern concept that had been applied in the valuation assignment, then the valuation conclusion will normally become void. The valuation firm is not liable for the relevant legal responsibilities for the invalidity of the valuation results due to changes in such conditions.

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APPENDIX XII

(2) This valuation report is for the exclusive use by the users of the valuation report specified herein. The rights of use of the valuation report belong to the principals, and we shall not make it available to other parties without the consent of the principals.
(3) The entire or part of the contents of this valuation report shall not be extracted, referred to or disclosed to the public media without the consent of our valuation firm (and subject to our reviewing of the relevant contents), unless otherwise required by laws and regulations and or agreed among the parties concerned.
(4) Based on the state regulations on management of state-owned assets valuation, this valuation report shall be filed (or approved) before being used and the filed (or approved) valuation result is valid for one year (from the appraisal date of 31 October 2014 to 30 October 2015). The assets must be re-valuated if more than one year has lapsed.

XIII. DATE OF VALUATION REPORT

The valuation report is issued on 15 April 2015.

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APPENDIX XII

INDEX OF THE FILES AVAILABLE FOR INSPECTION

Economic behaviour documents (photocopies);
Corporate legal person business licenses (photocopies) of the principals and the valuation target company;
Audit Report of Dengfeng Silicon as at the appraisal date and its Financial Statements for the years of 2012 and 2013 and as at 31 October 2014 (photocopies);
Main title proof information (photocopies) of the valuation target;
Letters of undertaking of the principals and the valuation target company;
Letters of undertaking of the registered valuer signatories;
Valuation Qualification Certificate (photocopy) of China United Assets Appraisal Group Co., Limited;
Corporate legal person business license (photocopy) of China United Assets Appraisal Group Co., Limited;
Engagement Letter of Assets Assessment;
Qualification certificates (photocopies) of the registered valuer signatories.

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Declaration of the Registered Valuer

We complied with the relevant laws and regulations and valuation standards, adhered to the principles of independence, objectivity and fairness in the course of conducting this valuation assignment; according to the information collected during our assignment process, the contents stated in the valuation report are objective, and we take the relevant legal responsibility as to the reasonableness of the valuation conclusion.
The lists of assets and liabilities of the valuation target were submitted by the principals and valuation target company and were signed and sealed by them as confirmation; the principals and valuation target company are liable for the genuineness, legality, completeness of the information so provided and the proper usage of the valuation report.
We did not have any existing nor expected interest in the valuation target in the valuation report; and we did not have any existing nor expected interest with the parties concerned, and did not have any bias against the parties concerned.
We conducted on-site investigation on the valuation target of the valuation report and the assets involved; we paid the necessary concern with the legal ownership status of the valuation target and the assets involved, and carried out an inspection of the legal title information of the valuation target and the assets involved.
The analysis, judgment and conclusion in the valuation report that we issued were subject to the constraints of the assumptions and criteria of the valuation report, users of the valuation report should take into full consideration the assumptions, criteria, explanation of special items set out in the valuation report and their impact on the valuation conclusion.

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Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in Yinan Huasheng Mineral Products Company Limited* ( 沂南華盛礦產實業有限公司 ) by Luoyang Glass Company Limited by way of Assets Exchange

China United Appraisal Report [2015] No. 033

SUMMARY

China United Assets Appraisal Group Co., Limited accepted the mandate from China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited to carry out a valuation assignment of the market value of the total shareholders’ equity of Yinan Huasheng Mineral Products Company Limited (“Huasheng Mineral”) involved in the economic behaviour of the proposed disposal of the equity interest of Yinan Huasheng Mineral Products Company Limited by way of assets exchange by Luoyang Glass Company Limited on the appraisal date.

The valuation target was the entire shareholders’ equity of Yinan Huasheng Mineral Products Company Limited, and the scope of valuation was all assets and the related liabilities of Yinan Huasheng Mineral Products Company Limited, including current assets and non-current assets and the related liabilities.

The appraisal date was 31 October 2014.

The type of valuation of this valuation assignment was market value.

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The entire shareholders’ equity of Yinan Huasheng Mineral Products Company Limited was valued at RMB37,793,200, representing an appreciation of RMB33,773,000 and an appreciation rate of 840.10% as compared to the book value of RMB4,020,100.

Report users are reminded to pay special attention to the special events and significant events for subsequent periods set out in this report when applying the valuation conclusions.

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Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in Yinan Huasheng Mineral Products Company Limited* ( 沂南華盛礦產實業有限公司 ) by Luoyang Glass Company Limited by way of Assets Exchanges

China United Appraisal Report [2015] No. 033

**China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited:**

China United Assets Appraisal Group Co., Limited accepted the mandate from you to carry out a valuation assignment of the market value of the entire shareholders’ equity of Yinan Huasheng Mineral Products Company Limited involved in the economic behaviour of the proposed disposal of the entire equity interest in Yinan Huasheng Mineral Products Company Limited by Luoyang Glass Company Limited by way of assets exchange on the appraisal date (being 31 October 2014) in accordance with the relevant laws and regulations and valuation standards and under the asset-based approach by following the necessary valuation procedures. The contents of the valuation are as follows:

I. PRINCIPALS, VALUATION TARGET COMPANY AND OTHER USERS OF THE VALUATION REPORT

The principals of this valuation assignment were China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited.

(I) Basic information of Principal 1

Company name:

China Luoyang Float Glass (Group) Company Limited* (hereinafter “CLFG”)

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1. Brief Historical Introduction

The actual controller of CLFG is China National Building Material Group Corporation.

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2. Business Scope

(II) Basic information of Principal 2

Company name: Luoyang Glass Company Limited (hereinafter referred to as “Luoyang Glass”) Company address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang City Legal representative: Ma Liyun Registered capital: RMB500,018,200 Paid-up capital: RMB500,018,200 Company type: Company Limited (listed) Places of listing: Shanghai Stock Exchange, Hong Kong Stock Exchange Stock short name: 洛陽玻璃 , Luoyang Glass Stock code: 600876.SH, 1108.HK Business registration license No. : 410300400003275 Date of establishment: 6 April 1994

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1. Historical reform

			The percentage
		The Amount	of the total
Type of Shares		of Shares	shares
		(ten thousand
		shares)	(%)
I.	Total circulating shares subject
	to trading moratorium	–	–
II.	Total circulating shares not subject
	to trading moratorium	50,001.82	100.00
	1. Ordinary shares denominated
	in RMB_(A Shares)_	25,001.82	50.00
	2. Overseas listed foreign
	invested shares_(H shares)_	25,000.00	50.00
III.	Total shares	50,001.82	100.00

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Business Scope

(III) Basic information of the valuation target company

Company name: Yinan Huasheng Mineral Products Company Limited (hereinafter referred to as “Huasheng Mineral”) Company type: limited liability company Domicile: Shuanghou Town, Yinan County Legal representative: Ni Zhishen Registered capital: RMB28,000,000 Date of establishment: 11 October 2000 Term of business: 11 October 2000 to 10 October 2045 Enterprise legal body business registration license No. : 371321018003974 Scope of business: Mining, processing and sales of quartz ore (subject to license where necessary, and except for items restricted or prohibited by the state, and ending on 20 March 2015) (validity term stated in the license shall prevail) (subject to approval by relevant authorities in accordance with laws, if any).

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1. Historical reform

On 11 October 2000, Yinan Huasheng Mineral Products Company Limited was established by the joint investment of Luoyang Glass Company Limited, Yinan County Yangdu Assets Operation Company Limited ( 沂南縣陽都資產運營有限公司 ) and Qingdao Taiyang Glass Industrial Company Limited ( 青島太陽玻璃實業有限公司 ). At the time of establishment, its registered capital was RMB28 million.

As at the appraisal date, shareholding structure of Huasheng Mineral are as follow:

Shareholders and their respective capital contribution and contribution ratio

Shareholder Luoyang Glass Company Limited Yinan County Yangdu Assets Operation Company Limited (沂南縣陽都資產運營有限公司) Qingdao Taiyang Glass Industrial Company Limited (青島太陽玻璃實業有限公司) Total	Capital contribution (RMB0’000) 1,456.00 644.00 700.00 2,800.00	Contribution ratio (%) 52% 23% 25% 100%

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APPENDIX XIII

Assets, finance and operating status

As at the appraisal date (being 31 October 2014), the total assets of Huasheng Mineral was RMB44,798,200, the total liabilities was RMB40,778,000, the net assets was RMB4,020,100, the operating income from principal businesses was RMB26,471,400 and net profit was RMB-4,870,600 for the period from January to October 2014. The assets and financial position of the company in the recent two years and for the period from January to October 2014 are set out in the table below:

Assets, liabilities and financial position of the company

			Unit: RMB0’000
	31 October	31 December	31 December
	2014	2013	2012
Total assets	4,479.82	4,326.07	4,209.60
Liabilities	402.01	872.60	732.29
	From January
	to October	For the year	For the year
	2014	of 2013	of 2012
Operating income	2,647.14	3,710.70	3,666.39
Total profit	-470.47	125.53	103.33
Net profit	-487.06	109.15	103.33
Auditing firm	PKF DAXIN Certified Public Accountants
	LLP (Special	Ordinary Partnership)
Auditing Opinion	unqualified auditing opinions including
	emphasis of matters paragraph

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The valuer notes that the auditing firm issued unqualified auditing opinions including emphasis of matters paragraph and disclosed that “Huasheng Mineral recorded accumulative losses of RMB24,854,966.57 as at 31 October 2014 and its current liabilities had exceeded its current assets by RMB20,542,832.19. Although Huasheng Mineral has made sufficient disclosure in respect of the improvement measures to be taken in Note II. 1 to the financial statements, there still exist material uncertainty in its ability to continue as a going concern and it may not be able to realize its assets or liquidate its debts in the ordinary course of business”.

(III) Relationship between the principals and the valuation target company

China Luoyang Float Glass (Group) Company Limited is the shareholder of Luoyang Glass Company Limited. Luoyang Glass Company Limited is the shareholder of Yinan Huasheng Mineral Products Company Limited.

(IV) Principals, other users of the valuation report stipulated by the engagement letter

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APPENDIX XIII

II. PURPOSE OF THE VALUATION

Pursuant to the Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation and the Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited, the Proposal on the Material Asset Exchange, Issuance of Shares, Acquisition of Assets and Raising Supporting Funds of Luoyang Glass Company Limited was considered and passed at the meeting. The proposal set out the intention of Luoyang Glass to conduct an equivalent assets exchange with its 100% equity interest in Longhao Company, 63.98% equity interest in Longhao Company, 67% equity interest in Dengfeng Silicon, 52% equity interest in Huasheng Mineral and 40.29% equity interest in CLFG Mineral as well as the its liability assets in Longhao Company, Longfei Company, Longxiang Company, Huasheng Material, CLFG Mineral for the 100% equity interest of Bengbu China National Building Materials Information Display Material Company* held by CLFG. The difference between the assets to be disposed and the assets to be acquired will be partly taken by Luoyang Glass under the non-public issuance of A Shares of CLFG.

The purpose of the assets valuation was to reflect the market value of the entire shareholders’ equity of Yinan Huasheng Mineral Products Company Limited on the appraisal date, so as to provide reference basis to the abovementioned economic behavior.

III. VALUATION TARGET AND SCOPE OF VALUATION

The valuation target was the entire shareholders’ equity of Huasheng Mineral. The scope of valuation was all the assets and related liabilities of Huasheng Mineral on the appraisal date with the carrying values of RMB44,798,200 for the total assets, RMB40,778,000 for the liabilities and RMB4,020,100 for the net assets. In particular, they include current assets of RMB20,235,200 non-current assets of RMB24,563,000, and current liabilities of RMB40,778,000.

The valuation target under mandate and the scope of the valuation were consistent with those involved in the economic behavior.

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(I) Status of the major assets

The major assets in the scope of this valuation assignment were inventories and fixed assets.

The inventories of the enterprise mainly included raw materials, finished products and work-in-process. The carrying values of the raw materials and finished products amounted to RMB1,534,003.72 and RMB1,962,457.30 respectively. Fixed assets consist of property assets and equipment assets. The original carrying value of the property assets was RMB33,183,969.70, while its net carrying value was RMB11,139,683.75. The original carrying value of the equipment assets was RMB18,835,232.18, while its net carrying value was RMB5,012,017.09. Impairment provision of RMB 1,189,386.41 was made for the fixed assets, and the net value of fixed assets amounted to RMB14,962,314.43.

Raw materials mainly included auxiliary materials for production, spare parts of equipment, low value consumables and standard components, most of which were in good working order and operating at a normal turnover rate: the finished products were silica sand.

Fixed assets mainly included houses and buildings, structures, channels and drainages, among which, buildings were located in the plant area of Huasheng Mineral with an aggregate gross floor area of 10,805.41 square meters square meters. All of the houses were constructed with brick-concrete, frames and simple structure, and most have obtained property ownership certificates with Yinan Huasheng Mineral Products Company Limited as the registered title owner in such certificates, while the others without property ownership certificate covering a total area of 726.88 square meters. Houses and buildings mainly include office buildings, storehouse of refined sand cranes homogenization silo and crushing workshop, etc. Channels and drainages mainly included network of water supply pipelines. Houses and buildings were constructed succesively during the period from 1890s to 1996, which can all be normally utilized. Equipment assets include machinery equipment, vehicles and electronic equipment. Equipment assets mainly include machinery equipment such as screw-type air compressors, down-the-hole drills, cone crushers, conveyers, hoists, jaw crusher, hydraulic grader, etc., electronic equipment such as copiers, printers and air-conditioners, etc. and office vehicles such as Buick commercial vehicles, Jinbei vans and Passats. Except for individual retirement, most of equipment assets are under normal operating as at the date of the appraisal date. Electronic equipment mainly included electronic equipments for office, which, though kept in service far longer than originally intended, could still basically satisfy the needs for normal workload.

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(II) Book records submitted by the company or status of the intangible assets not recorded

The intangible assets applied for valuation by the company were the land use rights of 10 land parcels with a total registered area of 322,070.00 square meters. Such lands were for industrial or traffic use which were obtained by way of transfer and Yinan Huasheng Mineral Products Company Limited was the registered right owner. As at the appraisal date, no other rights were set out in the relevant land use rights certificate.

The mining right involves the Manshan quartz-sandstone mine of Yinan Huasheng Mineral Products Company Limited with Yinan Huasheng Mineral Products Company Limited as the registered owner. As at the appraisal date, no pledge right was attached to the mining right. The mining permit expired on 20 March 2015 and the Linyi Municipal Bureau of Land and Resources had issued the Consideration Payment Notice to Huasheng Mineral for renewal of mining right. Huasheng Mineral had settled in full the consideration for the renewal of the mining right amounting to RMB8,214,100 on 5 March 2015 and completed the formalities for the renewed mining permit in April 2015.

(III) Type, quantity of off-balance sheet assets submitted by the company

As of the appraisal date, all the appraised assets reported by the company had been included in the book records. No off-balance sheet assets were reported.

(IV) Type, quantity and carrying value of assets as stated in the conclusion of reports issued by other organizations which are adopted as reference hereof

IV. TYPE OF VALUATION AND DEFINITION

Based on the purposes of this valuation assignment, it was determined that market value was the type of valuation for this valuation assignment.

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APPENDIX XIII

V. APPRAISAL DATE

The benchmark date of the valuation for this assignment is 31 October 2014.

The benchmark date was determined by the principal after considering the scale of assets of the valuation target company, volume of work, expected time needed, compliance and other basis.

VI. BASIS OF THE VALUATION

(I) Economic behavior basis

Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation;
Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited.

(II) Basis of laws and regulations

“Company Law of the People’s Republic of China” (28 December 2013 as amended by the Sixth Meeting of the Standing Committee of the Twelfth National People’s Congress);
“Interim Measures for the Administration of Valuation of Enterprise State-owned Assets” of the State-owned Assets Supervision & Administration Commission of the State Council Order No. 12 (25 August 2005);
“Administrative Measures for State-owned Assets Assessment” (Order No. 91 of the State Council);
“Notice on Issues Related to the Strengthening of the Administration of Valuation of State-owned Assets” (Guo Zi Wei Chan Quan [2006] No. 274);
“Provisional Management Rules Governing the Transfer of State-owned Equity Interests of Corporations” (Order No. 3 issued by SASAC of the State Council and the Ministry of Finance (1 February 2004));

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“Notice on Relevant Issues Concerning the Transfer of State-owned Property Rights of Enterprises” (Guo Zi Chan Quan Fa [2006] No. 306 issued by SASAC of the State Council);
The Land Management Law of the People’s Republic of China (as amended by Eleventh Meeting of the Standing Committee of the Tenth National People’s Congress on 28 August 2004);
Law of the People’s Republic of China on Administration of the Urban Real Estate (as amended in 2007);
Mineral Resources Law of the People’s Republic of China (as revised and promulgated on 29 August 1996);
“Administrative Measures on Registration for the Exploratory Regions of Mineral Resources” (Order No. 240 issued by the State Council in 1998);
“Administrative Measures on the Registration for Mineral Resources Exploration” (Order No. 241 issued by the State Council in 1998);
“Administrative Measures on the Transfer of Exploration Rights and Mining Rights” (Order No. 242 issued by the State Council in 1998);
“Interim Provisions for the Administration of the Assignment and Transfer of Mining Rights” (Guo Tu Zi Fa [2000] No. 309);
“Administrative Measures on the Appraisal of Mining Rights (Tentative)” (Guo Tu Zi Fa [2008] No. 174);
“Classification of Solid Mineral Resources/Reserves” (GB/T17766-1999);
“General Standards on Geological Exploration of Solid Minerals” (GB/T139082002);
“Standards on Geological Exploration of Coal and Peat” (DZ/T0215-2002);
“Notice on Enhancement of the Supervision and Management of the Appraisal of Mineral Resources and Reserves” (Guo Tu Zi Fa [2003] No. 136);

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APPENDIX XIII

“Announcement on Implementation of the Appraisal Criteria of Mining Rights” (Ministry of Land and Resources 2008 No. 6);
“Notice on Relevant Issues Concerning Verification of State-owned Assets Valuation Report of Enterprise (Guo Zi Chan Quan [2009] of No. 941 issued by SASAC of the State Council);
“Notice on Printing and Issuance of The Guidelines for Registration of State-owned Assets Valuation Projects of Enterprises” (Guo Zi Fa Chan Quan [2013] No. 64);
“Administrative Measures for the Material Asset Reorganisations of Listed Companies” (Order No. 109 issued by CSRC);
“Regulations in Relation to Regulating Issues Arising from Significant Asset Restructuring of Listed Companies” (CSRC Announcement [2008] No. 14).

(III) Basis of valuation standards

“Asset Valuation Standards – Basic Standards” (Cai Qi (2004) No. 20);
“Asset Valuation Professional Ethics Standards – Basic Standards” (Cai Qi (2004) No. 20);
“Assets Valuation Ethics Code – Independence” (Zhong Ping Xie [2012] No. 248);
“Asset Valuation Standards – Valuation Report” (Zhong Ping Xie [2011] No. 230);
“Asset Valuation Standards – Valuation Procedures” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Machinery & Equipments” (Zhong Ping Xie [2007] No. 189);
“Asset Appraisal Standards – Property” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Enterprise Values” (Zhong Ping Xie [2011] No. 227) (Effective from 1 July 2012);
“Asset Valuation Standards – Making Use of Experts” (Zhong Ping Xie [2012] No. 244);

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“Guide on Valuation Report of Enterprise State-owned Assets” (Zhong Ping Xie [2011] No. 230);
“Numerical Guidelines on Assets Evaluation” (Zhong Ping Xie [2007] No. 189);
“Guidance Opinion on the Concern of Registered Valuers over the Legal Title of Valuation Target” (Kuai Xie [2003] No. 18);
“Code for Real Estate Appraisal” (GB/T50291-1999);
“Regulations for Valuation on Urban Land” (GB/T18508-2001); “Primary Criteria on the Appraisal Techniques of Mining Rights (CMVS00001-2008)”;
“Standards on Appraisal Procedures of Mining Rights (CMVS11000-2008)”;
“Standards on Preparation of Appraisal Reports of Mining Rights (CMVS114002008)”;
“Standards on Income Approach of the Appraisal Methodologies (CMVS12100 -2008)”;
“Application Guidelines for Appraisal of the Transfer of Mining Rights (CMVS20200-2010)”;
“Guiding Opinions on Utilization of Mining Resources and Reserves for the Appraisal of Mining Rights (CMVS30300-2010)”;
“Guiding Opinions on Utilization of Geological Exploration Documents for the Appraisal of Mining Rights (CMVS30400-2010)”;
“Guiding Opinions on Utilization of Mine Design Documents for the Appraisal of Mining Rights (CMVS30700-2010)”;
“Guiding Opinions on Determination of the Parameters for the Appraisal of Mining Rights (CMVS30800-2008)”

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“Guiding Opinions on Utilization of the Corporate Financial Reports for the Appraisal of Mining Rights (CMVS30900-2010)”;
“Announcement on Implementation of the ‘Proposal in relation to the Amendments to the Income Approach of Appraisal Methodologies for the Appraisal of Mining Rights’” and “Proposal in relation to the Amendments to the Income Approach of Appraisal Methodologies for the Appraisal of Mining Rights” (Ministry of Land and Resources 2006 No. 18);
“Regulations for Gradation and Classification on Urban Land” (GB T18507-2001);
“Enterprise Accounting Standards – Basic Standards” (Order No. 33 of the Ministry of Finance);
38 Specific standards such as the “Enterprise Accounting Standards No. 1 – Inventory” (Cai Kuai [2006] No. 3);
“Enterprise Accounting Standards – Application Guide” (Cai Kuai [2006] No. 18).

(IV) Basis of ownership of assets

Property Ownership Certificates;
State-owned Land Usage Certificates;
Mining Permit;
Vehicle Registration Certificates;
Major assets purchase contracts or certificates;
Other references.

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(V) Basis for obtaining prices

Regulations on Financial Management of Capital Construction (Cai Jian [2002] No. 394);
Regulations on Pricing Management of Survey and Design Projects (Ji Jia Ge [2002] No. 10);
Supplementary Notice in relation to the Rules on Administration of Engineering Investigation and Design Charges (Ji Ban Jia Ge [2002] No. 1153);
Notice in relation to the Provisions on Administration of Charging on Engineering Project Supervision and Relevant Services (Fa Gai Jia Ge [2007] No. 670);
Interim Regulations on the Charging Administration of Bidding Agency Services (Ji Jia Ge [2002] No. 1980);
Notice in relation to Standardization of Relevant Issues Concerning Charging on Environmental Impacts (Ji Jia Ge [2002] No. 125);
Mechanical and Electrical Products Quotation Manual in 2014 (Machine Industry Information Research Institute);
List of Loan Interest Rate of the People’s Bank of China implemented on 6 July 2012;
Shandong Province Construction and Decoration Project Consumption Quota (2006);
Shandong Province Installation Project Consumption Quota (2006);
Shandong Province Construction and Installation Project Pricing List (2013-4);
Shandong Province Construction Project Pricing Information (2014-5);
Standard of Dangerous Building Appraisal (issued by the former Ministry of Urban and Rural Construction and Environmental Protection);

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“Approval of Shandong Provincial Government on the Adjustment to the Standards of the Comprehensive Land Price in the Expropriation Districts and Zones of Shandong Province” (Lu Zheng Zi [2012] No. 288);
“Notice of the General Office of Shandong Provincial Government on Adjustment to Annual Output and Compensation Standards of Expropriated Lands”;
“Interim Regulations on Vehicle Purchase Tax in the People’s Republic of China” (Order [2000] No. 294 issued by the State Council);
Regulations on Compulsory Write-off Standard Requirements of Motor Vehicles (Order No. 12 in 2012 issued by the Ministry of Commerce, the NDRC, the Ministry of Public Security and the Ministry of Environmental Protection);
“Letter on the Filing for Approval of the ‘Verification Report on the Quartzsandstone Resource Reserves (for Manufacturing Glass) in the Xiao Manshan Mining Section of Manshan Mine in Yinan County of Shandong Province’”;
“Verification Report on the Quartz-sandstone Resource Reserves (for Manufacturing Glass) in the Xiao Manshan Mining Section of Manshan Mine in Yinan County of Shandong Province”;
“Preliminary Design Document of the Manshan Quartz-sandstone Mine of Yinan Huasheng Mineral Products Company Limited”;
“Approval of the ‘Preliminary Design Document of the Manshan Quartz-sandstone Mine of Yinan Huasheng Mineral Products Company Limited’”;
“Feasibility Study Report on the Processing Project of Yinan Huasheng Mineral Products Company Limited”;

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APPENDIX XIII

“Verification Report on the Quartz-sandstone Resource Reserves (for Manufacturing Glass) in the Xiao Manshan Mining Section of Manshan Mine in Yinan County of Shandong Province” (Verification Base Date: 31 December 2014);
“Filing Proof of Appraisal Report on the Mining Rights of Manshan Quartzsandstone Mine of Yinan Huasheng Mineral Products Company Limited” (Lu Guo Tu Zi Cai Ping Bei Zi 2014 No. 43);
Relevant information in the price information database of China United Assets Appraisal Group Co., Limited;
Other references.

(VI) Other references

Accountant Statements and Audit Reports of Huasheng Mineral as of 31 October 2013 and 2014;
Handbook on Common Methods and Parameters for Assets Valuation (China Machine Press 2011);
Technical information and geological exploration information related to constructions;
Other references.

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APPENDIX XIII

VII. VALUATION METHOD

(I) Selection of valuation method

Huasheng Mineral is engaged in the mining of silicon sand ores, processing and sales of silica sand. Due to the excess production capacity, the glass market is in a trough and most traditional glass manufacturers suffer significant losses. The mining and processing industries for silicon sand, the integral raw material for manufacturing glass, were impacted as well and hence, rather significant uncertainties lay in the future development of such industries. To sum up, it is difficult to reliably estimate the income and risks of the company in the years to come and the income approach is therefore not appropriate for appraising Huasheng Mineral.

On the basis of the foregoing, the assets-based approach was adopted for this valuation.

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(II) Introduction of the assets-based approach

The valuation methods for all assets and liabilities are follows:

Current assets
(1) Monetary funds: including cash and bank deposits.

The appraised value is the carrying value after verification.

(2) Notes receivables

Notes receivable are interest-free and the principal amount set out thereon was adopted as the appraised value.

(3) Receivables

As for the valuation of receivables and other receivables, after checking that the receivables are correct, a detailed analysis is made on the amount, time and reasons for the outstanding amount, status of recover of the amount, present conditions of the funds, credibility and business management of the debtors etc. by referring to the historical information and the situations learnt from the investigation. For receivables, aging analysis is adopted to estimate and evaluate risks and losses with reference to the calculation of the provision for bad debts in enterprise accounting, and the risks and losses will be estimated in accordance with the aging analysis.

According to the above standards, the risks and losses on valuation are determined based on the total receivables deducting the amount after the valuation of risks and losses.

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(4) Prepayments

(5) Inventories

The valuation methods for all inventories are set out as follows:

1) Raw Materials

The raw materials are mainly self-produced quartz ores and various auxiliary materials, etc. As the aforesaid materials are consumed in large quantity and have a relatively faster turnover rate as a whole, and their carrying values are close to the market price as at the appraisal date, the assessed values are determined with reference to the carrying value.

2) Finished products

As analyzed by the valuers based on their investigations and the information provided by the enterprise, as to the finished products, the valuation value is determined based on the sales prices (excluding taxes) by deducting sales expenses, all taxes and a certain amount of sales profits on products.

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The appraised value = actual quantity× sales prices (excluding taxes) × (1 - sales tax and additional rate - sales expense rate - operating profit margin × income tax rate - operating profit margin × (1 - income tax rate) × r)

a. Sales price excluding tax: it is confirmed according to the market price before and after the appraisal date;
b. Sales tax and additional rate mainly include the urban construction tax and education surtax paid on the basis of VAT;
c. sales expense rate is averaged based on various types of selling expenses and sales incomes
d. The operating profit margin = profit generated from primary business ÷ operating income;

Profit generated from primary business = operating income - operating cost - operating tax and surcharge - sales expense - management expense - financial cost

e. The income tax rate is subject to the one implemented currently by the enterprise;
f. r is certain rate. Since the sale of finished products has certain market risk, which is confirmed based on the investigation status at the benchmark date and the sales status after the benchmark date. For popular products, r is zero; for common products, r is 50%; for products not sold well, r is 100%.

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Non-current assets
(1) Fixed assets

1) Buildings

The replacement cost method is adopted for valuation of the buildings based on the different uses, structure characteristics and utilization nature of such buildings.

For the valuation of major buildings, the appraised value of building is calculated by total replacement costs and the newness rate. The total replacement costs are calculated according to the information on construction works and settlement upon completion, building project quantity as well as the current local quota standard, construction fee and loan interest rate. And the newness rate is determined by the service life of the buildings and the on-site inspection.

Appraised value of buildings = total replacement costs × newness rate

For other buildings, the replacement unit price and the appraised value are determined and calculated by comprehensively considering each valuation factor on the basis of on-site inspection and by means of analogy.

A. Total replacement costs

Total replacement costs have three components, namely construction & installation costs, preliminary and other expenses and capital cost.

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a. Determination of construction & installation costs

The construction & installation costs include the total costs of civil engineering projects, decoration and renovation projects and drainage and electrical engineering projects. The construction & installation costs are calculated with the method of adjustment of principal materials’ price variance in budget (final accounts) according to the Consumption Quota for Architectural Decoration Projects in Shandong Province (2006) (《山東省建築裝飾工程消耗量定額》(2006)), Consumption Quota for Decoration Projects in Shandong Province (2006) (《山東省安裝工程消耗量定額》(2006)), Price List of Architectural Decoration Projects in Shandong Province (2013-2014) (《山東省建築安裝工程價目表》(2013-4)), etc., and the price variance of labour and materials is adjusted in accordance with the price information of Linyi City as published on the website of information on construction costs of Shandong Province in October 2014. The construction & installation costs will then be calculated through charging according to the fixed rate.

b. Determination of preliminary and other expenses

c. Determination of capital cost

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Capital cost = (construction & installation costs + preliminary and other expenses) × reasonable construction cycle × loan interest × 50%

B. Newness rate

In the valuation, the newness rate for buildings is calculated after estimating the remaining service life of buildings in accordance with the designed service life and on-site inspection. The calculation formula of the newness rate is as follows:

Newness rate = remaining service life / (actual in-service period + remaining service life) × 100%

C. Determination of appraised value

Appraised values = total replacement costs × newness rate

2) Equipment assets

Appraised values = total replacement costs × newness rate

A. Total replacement costs of equipment

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APPENDIX XIII

① Purchase price

② Transportation costs and sundry expenses

③ Installation and testing fees

No installation fee is included for equipment which is small in size or does not require installation.

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④ Other expenses

⑤ Capital cost

If the reasonable construction period of the project is one year, the capital cost rate is 6.00%.

2) Total replacement costs of transportation vehicle

Total replacement costs = current purchase price (excluding tax) + vehicle purchase tax + handling charges for new vehicle registration

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APPENDIX XIII

3) Total replacement costs of electronic devices

Total replacement costs = purchase price (excluding tax)

B. Determination of newness rate
1) Newness rate of machinery and equipment and electronic devices

Newness rate = remaining service life ÷ (period of actual usage + remaining service life) × 100%

For common equipment with small value or electronic equipment, the newness rate will be determined by age limit method.

Newness rate = (1 - period of actual usage ÷ economic service life) ×100%

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2) Newness rate for vehicle transportation

Newness rate = Min (Useful life newness rate, mileage newness rate)

Useful life newness rate = (1 - period of usage/designed or economic useful life) × 100%

Mileage newness rate = (1 - mileage travelled/designed mileage) × 100%

C. Determination of appraised value

Appraised value = total replacement costs × newness rate

3) Construction in progress

Within the scope of this valuation, the valuation method of the construction in progress adopts the cost method. The construction in progress commenced in June 2014 and had been fundamentally completed as at the appraisal date, and was subject to settlement and acceptance. As the construction period is short and there is no material change in price of commodities, the carrying value has basically reflected the value as at the appraisal date. The carrying value after checking and verification is taken as the assessed value.

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Intelligible assets
(1) Land use right

The land use right adopts market comparison method and cost approach method for evaluation.

① Market comparison method

Market comparison method is a valuation method to, based on substitution principle, compare the land to be evaluated with similar alternative land undergoing transaction on a day close to the appraisal date, figure out, based on the known transaction price, standard land price upon modification by reference to the transaction time, condition and method, land service life, area and individual factors, etc., and finally evaluate the price of the land to be evaluated based on the standard land price of similar land.

Formula: V = V × A × B × C × D B

Where:

V – Price of the land to be evaluated;
VB – Price of the land in comparative cases;

A – Normal transaction index of the land to be evaluated/transaction index of the land in comparative cases;

B – Price index of the land to be evaluated on the appraisal date/price index of land in comparative cases;

C – Area factor condition index of the land to be evaluated/area factor condition index of the land in comparative cases;

D – Individual factor condition index of the land to be evaluated/ individual factor condition index of the land in comparative cases;

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② Cost approximation method

Its basic formula is: V=Ea+Ed+T+R1+R2+R3=VE+R3

In the formula: V – land price; Ea – land acquisition cost; Ed – land development cost; T – tax; R1 – interest; R2 – profit; R3 – land appreciation; VE – land cost price.

where,

Land acquisition costs and tax: Pursuant to the PRC Law on Land Management, land acquisition costs include land compensation costs, settlement subsidies, and compensation costs for young plants and attached structures. Tax includes tax on farmland occupied, farmland cultivation costs, management costs for acquired land, funds for water conservancy construction, land registration fee, etc.

Land development costs: Land development costs are calculated by various objective costs that are incurred in the area with land development progress based on the valuation.

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(2) Mining right

The mining right under the valuation is those of the Manshan quartzsandstone mine.

Discounted cash flow approach is adopted for the mining right under the valuation. The formula is:

==> picture [163 x 27] intentionally omitted <==

Where: P – appraised value of mining rights;

CI – annual cash inflow; CO – annual cash outflow; i – discount rate; t – sequence number of the year; n – appraised number of years.

5. Liabilities

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APPENDIX XIII

VIII. IMPLEMENTATION PROCESS AND STATUS OF VALUATION PROCEDURES

The entire valuation work was carried out in four phases:

(I) Valuation preparation phase

On 31 October 2014, we discussed and obtained consensus with the principals such as the purposes of this valuation, appraisal date, scope of the valuation, etc, and drew up the working plan for this asset valuation.
The inspection of assets, filling in the asset valuation declaration breakdown list, etc. were carried out with the enterprise. In early November 2014, the valuation project team understood the assets under valuation mandate in detail, allocated works for the valuation, assisted the enterprise in declaring assets under valuation mandate, and collected necessary documents and information for asset valuation.

(II) On-site valuation phase

The on-site valuation phase of the project team was from 31 October 2014 to 10 November 2014. The major works are as follows:

Listening to the overall situations of the enterprise and the history and present conditions of the assets under valuation mandate as explained by the relevant personnel of the principals and the valuation target company, and understanding the financial system, operating conditions, status of the fixed assets and technology, etc. of the enterprise.
Review and identification of the asset inspection and valuation declaration breakdown list provided by the enterprise; verification against the relevant financial records of the enterprise, coordinate with the enterprise to make adjustments for any problem identified.
Conducting a complete inspection and verification of the fixed assets against the asset inspection and valuation declaration breakdown list, conducting random sampling stock taking of the inventory physical assets among the current assets.
Inspection and collection of the documentary proof of titles of the assets under the valuation mandate.

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Determining the specific valuation methods for each type of assets according to the actual conditions and characteristics of the assets under valuation mandate.
Referring to the technical information, final accounts information or completion acceptance information in respect of key equipment; collecting price information by way of market surveys and enquiries in respect of general equipment;
Verification of the ownership information provided by the enterprise.
Carrying out initial valuation and measurement of the assets and liabilities within the scope of the valuation after inspection and verification.

(III) Valuation consolidation phase

(IV) Report issuing phase

The working period of this phase was from 26 November 2014 to 15 April 2015.

IX. ASSUMPTIONS OF VALUATION

The valuers made the following valuation assumptions for this valuation:

1. Transaction assumption

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APPENDIX XIII

2. Open market assumption

3. Going concern assumption for the assets

When there are changes in the above conditions, the valuation results will be void in most cases.

X. VALUATION CONCLUSIONS

We have fulfilled the statutory and necessary procedures for asset valuation pursuant to the laws, regulations, rules and valuation principles in regard to asset valuation of the PRC, withheld independent, justice, scientific and objective principles, after adopting the assetbased approach, and have carried out on-site investigation, market survey and enquiries and assessment, the following valuation results in respect of the assets within the scope of valuation of Yinan Huacheng Minerals Enterprise Company Limited were obtained:

The book value of assets is RMB44,798,200 and the appraised value is RMB78,571,200. The appraised value is RMB33,773,000 higher than the book value with an appreciation rate of 75.39%.

The book value of liabilities is RMB40,778,000 and the appraised value is RMB40,778,000, with no appraisal appreciation or depreciation.

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APPENDIX XIII

The book value of net asset is RMB4,020,100 and the appraised value is RMB37,793,200. The appraised value is RMB33,773,000 higher than the book value with an appreciation rate of 840.10%. The table is set out below for details:

Consolidation Table of the Asset Valuation Results

Valuation target company:

Appraisal date: 31 October 2014

Yinan Huasheng Mineral Products Company Limited

Unit: RMB0’000

			Appraised	Appreciation	Appreciation
		Book Value	Value	or Depreciation	Rate%
	Item	B	C	D=C-B	E=D/B×100%
1	Current assets	2,023.52	2,036.66	13.14	0.65
2	Non-current assets	2,456.30	5,820.46	3,364.16	136.96
3	Including: Long-term
	equity investment	–	–	–
4	Property for investment
	purpose	–	–	–
5	Fixed assets	1,496.23	2,322.22	825.99	55.20
6	Construction in progress	96.52	96.52	–	–
7	Intangible assets	863.54	3,401.72	2,538.18	293.93
8	Including: Land use right	434.56	3,192.73	2,758.17	634.70
9	Other non-current assets	–	–
10	Total assets	4,479.82	7,857.12	3,377.30	75.39
11	Current liabilities	4,077.80	4,077.80	–	–
12	Non-current liabilities	–	–	–
13	Total liabilities	4,077.80	4,077.80	–	–
14	Net assets (Owners’ equity)	402.01	3,779.32	3,377.30	840.10

Thus, the value of total interest of the shareholders of Huasheng Minerals on the appraisal date is RMB37,793,200.

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APPENDIX XIII

XI. REMARKS FOR SPECIAL ITEMS

(I) Defects in ownership of housings

(1) As at the appraisal date, Huasheng Mineral had not applied for certificates of ownership for 4 buildings with the total area of 726.88m[2] included in the scope of the valuation. Details of the buildings without a certificate of ownership are set out below:

Detailed statement of buildings without a certificate of ownership

No. Name of building Time of completion Unit of measurement 1 Explosive magazine 1996-08 m2 2 Pump house 5# 1996-08 m2 3 Guard room of mine 2013-06 m2 4 Shed for fine powder equipment 2001-06 m2 Total	Floor area/ cubage 91 40 50 545.88 726.88	Carrying value Original value Net value (RMB) (RMB) 488,210.83 157,066.76 163,718.16 52,670.92 27,970.00 26,641.42 18,000.00 5,791.38 697,898.99 242,170.48	Carrying value Original value Net value (RMB) (RMB) 488,210.83 157,066.76 163,718.16 52,670.92 27,970.00 26,641.42 18,000.00 5,791.38 697,898.99 242,170.48
			242,170.48

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APPENDIX XIII

(2) Huasheng Mineral was established in 1996 and certain of its properties had been built for a rather long time. In its day-to-day operation, the Company had renovated or demolished certain properties in accordance with its operational needs, leading to the mismatch between the actual floor area and the area set out in the property ownership certificates of such properties. The valuers verified such information based on the company-wide inspection in a case-by-case manner.

(II) Outstanding matters, legal disputes and other uncertain factors

There are no outstanding matters, legal disputes and other uncertain factors in the report.

(III) Material subsequent events

According to knowledge acquired from the due diligence work of the valuer, after the appraisal date, on 22 November 2014, the People’s bank of China lowered the benchmark interest rate of both deposits and loans for financial institutions. The impact of this event on the appraised value of the mining value has been taken into account in calculating the said value.
As of the appraisal date, Huasheng Mineral had not settled the consideration of the mining rights. Linyi Municipal Bureau of Land and Resources had issued the Payment Notice for the Renewal of Mining Rights (Lin [2015] No. 1) to Huasheng Mineral, demanding it to settle the consideration of the mining rights. Huasheng Mineral had paid in full the consideration for the renewal of the mining rights in March 2015 and completed the formalities for the renewed mining permit in April 2015.

(IV) Other matters need explanations

The legal responsibilities of the valuer and the valuation firm were to make professional judgment on the valuation of the assets for the valuation purposes stated in this report, and no judgment whatsoever is made by the valuer and the valuation firm with respect to the economic behaviour corresponding to the purposes of this valuation. To a large extent, the valuation assignment depended on the information provided by the principals and the valuation target company. Therefore, the prerequisite of valuation assignment was that ownership documents, licence and accounting vouchers and the relevant legal documents provided by the principals and the valuation target company were authentic and legal.

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During the valuation process, the valuers observed the appearance, internal decoration, and usage of buildings as much as possible but did no test about structure or materials. When conducting inspection of the equipment, due to the restraints of the testing methods and the fact that some equipment were in operation, this task was mainly done by exterior observation by the valuers and the latest testing materials provided by the valuation target company as well as the enquiries to the operators, etc. in order to judge the conditions of the equipment.
The valuer notes that the auditing firm issued unqualified auditing opinions including emphasis of matters paragraph and disclosed that “Huasheng Mineral recorded accumulative losses of RMB24,854,966.57 as at 31 October 2014 and its current liabilities had exceeded its current assets by RMB20,542,832.19. Although Huasheng Mineral has made sufficient disclosure in respect of the improvement measures to be taken in Note II. 1 to the financial statements, there still exist material uncertainty in its ability to continue as a going concern and it may not be able to realize its assets or liquidate its debts in the ordinary course of business”. In addition, due to the excess production capacity, the glass market is in a trough and most major glass manufacturers suffer significant losses. The mining and processing industries for silicon sand, the integral raw material for manufacturing glass, were impacted as well and hence, rather significant uncertainties lay in the future development of such industries. Accordingly, the income approach cannot be adopted for appraisal and evaluation purposes.
The principals and the valuation target company were held responsible for the truthfulness and completeness of data, statements and the relevant information provided by the valuation target company and which were used within the scope of this valuation assignment.
The principals and the valuation target company were held responsible for the truthfulness and legality of the ownership documentary proof and relevant information provided by the valuation target company in the valuation report.
The impacts on the valuation conclusions from relevant taxes incurred during the implementation process for the purposes of the valuation have not been considered.

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APPENDIX XIII

During the validity period after the appraisal date, if there are changes in the quantity and pricing standards of the assets, they should be reflected according to the following principles:
(1) When there are changes in the quantity of the assets, the corresponding adjustments should be made to the amount of the assets using the original valuation method;
(2) When there are changes in the pricing standards of the assets, which will have a significant impact on the valuation results of the assets, the principals should appoint qualified valuation firm to re-determine the appraised value;
(3) When there are changes in the quantity and pricing standards of the assets after the appraisal date, the principal should take them into due account when actually pricing the assets and make the relevant adjustments.

XII. EXPLANATION OF USAGE LIMITATION OF THE VALUATION REPORT

(1) This valuation report shall be used only for the valuation purposes and applications specified herein. In addition, the valuation conclusion reflects the current fair value of the valuation target determined according to the open market principles in the context of the valuation purposes, without taking into account of the impact of possible undertaking of guarantee, security and any special additional payment of the price by the parties upon the appraised price. Moreover, the impact of changes in the state macroeconomic policies, natural disaster and force majeure upon the prices of the assets are not considered in the report. If there are changes in the above-mentioned conditions and the other situations such as the going concern concept that had been applied in the valuation assignment, then the valuation conclusion will normally become void. The valuation firm is not liable for the relevant legal responsibilities for the invalidity of the valuation results due to changes in such conditions.

(2) This valuation report is for the exclusive use by the users of the valuation report specified herein. The rights of use of the valuation report belong to the principals, and we shall not make it available to other parties without the consent of the principals.

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APPENDIX XIII

(3) The entire or part of the contents of this valuation report shall not be extracted, referred to or disclosed to the public media without the consent of our valuation firm (and subject to our reviewing of the relevant contents), unless otherwise required by laws and regulations and or agreed among the parties concerned.
(4) Based on the state regulations on management of state-owned assets valuation, this valuation report shall be filed (or approved) before being used and the filed (or approved) valuation result is valid for one year (from the appraisal date of 31 October 2014 to 30 October 2015). The assets must be re-valuated if more than one year has lapsed.

XIII. DATE OF VALUATION REPORT

The valuation report is issued on 15 April 2015.

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APPENDIX XIII

INDEX OF THE FILES AVAILABLE FOR INSPECTION

Economic behaviour documents (photocopies);
Corporate legal person business licenses (photocopies) of the principals and the valuation target company;
Audit report of Huasheng Mineral as at the appraisal date and the financial statements for the years of 2012 and 2013 and as at 31 October 2014 (photocopies);
Main title proof information (photocopies) of the valuation target;
Letters of undertaking of the principals and the valuation target company;
Letters of undertaking of the registered valuer signatories;
Valuation Qualification Certificate (photocopy) of China United Assets Appraisal Group Co., Limited;
Corporate legal person business license (photocopy) of China United Assets Appraisal Group Co., Limited;
Engagement Letter of Asset Assessment;
Qualification certificates (photocopies) of the registered valuer signatories.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

The following is the text of the valuation report received from the Valuer in respect of the valuation of the net assets of Mineral Products Company as at 31 October 2014.

Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in CLFG Mineral Company Limited* held by Luoyang Glass Company Limited by

Assets Exchange

China United Appraisal Report [2015] No. 032

China United Assets Appraisal Group Co., Limited

15 April 2015

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APPENDIX XIV

Declaration of the Registered Valuer

We complied with the relevant laws and regulations and valuation standards, adhered to the principles of independence, objectivity and fairness in the course of conducting this valuation assignment; according to the information collected during our assignment process, the contents stated in the valuation report are objective, and we take the relevant legal responsibility as to the reasonableness of the valuation conclusion.
The lists of assets and liabilities of the valuation target were submitted by the principals and valuation target company and were signed and sealed by them as confirmation; the principals and valuation target company are liable for the genuineness, legality, completeness of the information so provided and the proper usage of the valuation report.
We did not have any existing nor expected interest in the valuation target in the valuation report; and we did not have any existing nor expected interest with the parties concerned, and did not have any bias against the parties concerned.
We conducted on-site investigation on the valuation target of the valuation report and the assets involved; we paid the necessary concern with the legal ownership status of the valuation target and the assets involved, and carried out an inspection of the legal title information of the valuation target and the assets involved.
The analysis, judgment and conclusion in the valuation report that we issued were subject to the constraints of the assumptions and criteria of the valuation report, users of the valuation report should take into full consideration the assumptions, criteria, explanation of special items set out in the valuation report and their impact on the valuation conclusion.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in CLFG Mineral Company Limited* held by Luoyang Glass Company Limited by Assets Exchange

China United Appraisal Report [2015] No. 032

SUMMARY

China United Assets Appraisal Group Co., Limited accepted the mandate from China Luoyang Float Glass (Group) Company Limited and Luoyang Glass Company Limited to carry out a valuation assignment of the market value of the total shareholders’ equity of CLFG Mineral Company Limited involved in the economic behaviour of the proposed disposal of the equity interest of CLFG Mineral Company Limited* by assets exchange by Luoyang Glass Company Limited on the appraisal date.

The valuation target was the entire shareholders’ equity of CLFG Mineral Company Limited, and the scope of valuation was all assets and the related liabilities of CLFG Mineral Company Limited, including current assets and non-current assets and the related liabilities.

The appraisal date was 31 October 2014.

The type of valuation of this valuation assignment was market value.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

The entire shareholders’ equity of CLFG Mineral Company Limited* was valued at RMB24,298,800, representing an appreciation of RMB56,609,700 and an appreciation rate of 175.20% as compared to the book value of RMB-32,310,800.

Report users are reminded to pay special attention to the special events and significant events for subsequent periods set out in this report when applying the valuation conclusions.

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APPENDIX XIV

Asset Valuation Report

in respect of

the Proposed Disposal of Equity Interest in CLFG Mineral Company Limited* held by Luoyang Glass Company Limited by

Assets Exchange

China United Appraisal Report [2015] No. 032

**China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited:**

China United Assets Appraisal Group Co., Limited accepted the mandate from the Company to carry out a valuation assignment of the market value of the entire shareholders’ equity of CLFG Mineral Company Limited involved in the economic behaviour of the proposed disposal of the entire equity interest in CLFG Mineral Company Limited held by Luoyang Glass Company Limited by assets exchange on the appraisal date (being 31 October 2014) in accordance with the relevant laws and regulations and valuation standards and under the asset-based approach by following the necessary valuation procedures. The contents of the valuation are as follows:

I. PRINCIPALS, VALUATION TARGET COMPANY AND OTHER USERS OF THE VALUATION REPORT

The principals of this valuation assignment were China Luoyang Float Glass (Group) Company Limited and Luoyang Glass Company Limited, and the valuation target company was CLFG Mineral Company Limited.

(I) Basic information of Principal 1

Company name:

China Luoyang Float Glass (Group) Company Limited* (hereinafter “CLFG”)

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APPENDIX XIV

1. Brief Historical Introduction

CLFG was established in 1991, which was formerly known as Luoyang Glass Factory, and was renamed as China Luoyang Float Glass Corporation Limited in 1993. In 1996, it was transformed into a wholly state-owned company in accordance with the Company Law and renamed as China Luoyang Float Glass (Group) Company Limited at the same time. After several times of capital increase and the gratuitous transfer of state-owned equity interest, as at the appraisal date, the registered capital was RMB1,286,740,000, of which China Building Materials Glass Company (now renamed as “Triumph Technology Group Company”) held a registered capital of RMB665,284,000 (accounted for 51.70% of the total registered capital), Bengbu Glass Industry Design Institute held a registered capital of RMB244,480,700, (accounted for 19.00% of the total registered capital), Luoyang State-owned Assets Operation Company ( 洛陽市國有資產經營公司 ) held a registered capital of RMB132,135,700, (accounted for 10.27% of the total registered capital), China Huarong Asset Management Company* ( 中國華融資產管理公司 ) held a registered capital of RMB110,000,000, (accounted for 8.55% of the total registered capital), China Great Wall Assets Management Corporation( 中國長城資產管理公司 ) held a registered capital of RMB70,000,000, (accounted for 5.44% of the total registered capital), China Orient Asset Management Company( 中國東方資產管理公司 ) held a registered capital of RMB39,840,000, (accounted for 3.10% of the total registered capital) and Henan Branch of China Construction Bank Corporation held a registered capital of RMB25,000,000, (accounted for 1.94% of the total registered capital).

The actual controller of CLFG is China National Building Material Group Corporation.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

2. Business Scope

(II) Basic information of Principal 2

Company name: Luoyang Glass Company Limited Company address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang City Legal representative: Ma Liyun Registered capital: RMB500,018,200 Paid-up capital: RMB500,018,200 Company type: Company Limited (listed) Places of listing: Shanghai Stock Exchange, Hong Kong Stock Exchange Stock short name: 洛陽玻璃 , Luoyang Glass Stock code: 600876.SH, 1108.HK Business registration license No. : 410300400003275 Date of establishment: 6 April 1994

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APPENDIX XIV

1. Historical reform

Luoyang Glass was established in April 1994 with a registered capital of RMB400,000,000 upon establishment. In June 1994, with the approval of the Securities Commission of the State Council, the Company issued 250,000,000 H shares. In September 1995, with the approval of China Securities Regulatory Commission, the Company issued 50,000,000 A shares. After the share trading reform and the repurchase of shares in 2006, as at the appraisal date, the registered capital of the Company was RMB500,018,200 and the share structure is as follows:

			The percentage
		The Amount	of the total
Type of Shares		of Shares	shares
		(ten thousand
		shares)	(%)
I.	Total circulating shares subject
	to trading moratorium	–	–
II.	Total circulating shares not subject
	to trading moratorium	50,001.82	100.00
	1. Ordinary shares denominated
	in RMB_(A Shares)_	25,001.82	50.00
	2. Overseas listed foreign invested
	shares_(H shares)_	25,000.00	50.00
III.	Total shares	50,001.82	100.00

2. Business Scope

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

(III) Basic information of the valuation target company

Company name: CLFG Mineral Company Limited* Company address: Goutou Villiage, Tiemen Town, Xin’an County, Luoyang City Legal representative: Zhao Yanchang ( 趙彥昌 ) Registered capital: RMB30,960,000 Paid-up capital: RMB30,960,000 Company type: limited liability company Business registration license No. : 410300110027533 Date of establishment: 31 December 1998

Basic Information of the company

On 23 December 1998, CLFG and Luoyang Glass Company Limited jointly funded and established CLFG Mineral Products Company Limited. Upon its establishment, CLFG Mineral’s registered capital was RMB30.96 million. For the purpose of the funding, Luoyang China Certified Public Accountants has issued a “Capital Verification Report” (Luoyang China Certified Public Accountants, (1998), Characters “NEI YAN”, No. 43).

In 2013, according to the Executive Ruling of Luoyang Intermediate People’s Court of Henan Province (Characters LU ZHI, No. 00051, (2013)), the Mineral Company used its all fixed assets and constructions in progress as the compensation to CLFG.

As at the appraisal date, the equity structure of CLFG Mineral is set out as below:

Shareholder China Luoyang Float Glass (Group) Company Limited Luoyang Glass Company Limited Total	Capital contribution (RMB0’000) 1,848.47 1,247.53 3,096.00	Contribution ratio (%) 59.71 40.29 100.00

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APPENDIX XIV

2. Business scope

Business Scope: Processing and sale of quartz sand and rock & minerals used in glass production; sale of aerated concrete products and silica-made products; repairing and maintenance of mining machinery; mining technological service.

3. Assets, finance and operating status

As at the appraisal date (being 31 October 2014), the total assets of the company was RMB3,579,800, the total liabilities was RMB35,890,700, the net assets was RMB-32,310,800, the operating income was RMB4,031,800 and net profit was RMB-8,548,200. The assets and financial position of the Company in the recent two years date are set out in the table below:

Table 2-1 Assets, liabilities and financial position of the Company

			Unit: RMB0’000
	31 October	31 December	31 December
Item	2014	2013	2012
Total assets	357.98	1,952.07	2,538.42
Liabilities	-3,231.08	-2,376.26	-2,068.32
	January to
Item	October 2014	2013	2012
Operating income	403.18	288.40	1,162.05
Total profit	-854.82	-307.73	-270.14
Net profit	-854.82	-307.73	-270.14
Auditing firm	PKF DAXIN Certified Public Accountants LLP
	(Special Ordinary Partnership)
Auditing Opinion	unqualified auditing opinions with
	the paragraph	of emphasizing matter

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

The valuers notice that the audit report issued by the auditing firm was an audit report with highlighted matters section, which disclosed: “As at 31 October 2014, the losses to offset of CLFG Mineral was RMB63,381,713.07, and as at 31 October 2014, its current liabilities was RMB31,948,611.39 more than its current assets. CLFG Mineral has disclosed the improvement measures to be taken in Appendix II of its financial statement. However, there are still significant uncertainties over its competence in sustainable operation. Failing to realize assets and discharge debts are possible during normal course of business”.

(III) Relationship between the principals and the valuation target company

China Luoyang Float Glass (Group) Company Limited* is the shareholder of Luoyang Glass Company Limited and CLFG Mineral Products Company Limited; Luoyang Glass Company Limited is the shareholder of CLFG Mineral Products Company Limited.

(IV) Principals, other users of the valuation report stipulated by the engagement letter

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

II. PURPOSE OF THE VALUATION

Pursuant to the Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation and the Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited, the Proposal on the Material Asset Exchange, Issuance of Shares, Acquisition of Assets and Raising Supporting Funds of Luoyang Glass Company Limited was considered and passed at the meeting. The proposal set out the intention of Luoyang Glass to conduct an equivalent assets exchange with its 100% equity interest in Longhao Company, 63.98% equity interest in Longfei Company, 67% equity interest in Dengfeng Silicon, 52% equity interest in Huasheng Mineral and 40.29% equity interest in CLFG Mineral as well as the its liability assets in Longhao Company, Longfei Company, Longxiang Company, Huasheng Material, CLFG Mineral for the 100% equity interest of Bengbu China National Building Materials Information Display Material Company* held by CLFG. The difference between the assets to be disposed and the assets to be acquired will be partly taken by Luoyang Glass under the non-public issuance of A Shares of CLFG.

The purpose of the assets valuation was to reflect the market value of the entire shareholders’ equity of CLFG Mineral Company Limited* on the appraisal date, so as to provide reference basis to the abovementioned economic behavior.

III. VALUATION TARGET AND SCOPE OF VALUATION

The valuation target was the entire shareholders’ equity of CLFG Mineral. The scope of valuation was all the assets and related liabilities of CLFG Mineral on the appraisal date with the carrying values of RMB3,579,800 for the total assets, RMB35,890,700 for the liabilities and RMB-32,310,800 for the net assets. In particular, they include current assets of RMB2,812,600 non-current assets of RMB767,300, and current liabilities of RMB35,890,700.

The valuation target under mandate and the scope of the valuation were consistent with those involved in the economic behavior.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

(I) Status of the major assets

The major assets in the scope of this valuation assignment were inventories.

The inventories of the enterprise mainly included raw materials and finished products. The carrying values of the raw materials and finished products amounted to RMB1,274,015.29 and RMB382,369.38 respectively. The provision for depreciation amounted to RMB1,096,588.70 and the net carrying value amounted to RMB559,795.97.

Raw materials mainly included auxiliary materials for production, spare parts of equipment, low value consumables and standard components, which were operating at a normal turnover rate. As the company stopped its production, its inventories were in bad physical manner for being overstocked.

(II) Book records submitted by the company or status of the intangible assets not recorded

The intangible assets that not recorded in the financial statement of the Company were two land use rights of allocated lands. The land use permit numbers were: Characters SHENG GUO YONG, number 0087 (1999) and Characters SHENG GUO YONG, number 0088 (1999) respectively. The uses of lands stated in the permits were mining hills and railway respectively, with the nature of allocation. The right holder stated in the permits was CLFG Mineral Products Company Limited. As at the appraisal date, no other land use right was noticed to have been set for such lands. The lands abovementioned were originally mining areas of CLFG Mineral Products Company Limited. As the mining rights of the lands were transferred to CLFG in 2013, such mining areas have been idling since then.

(III) Type, quantity of off-balance sheet assets submitted by the company

Save for disclosed in the sheet applied by the company, there are two pieces of allocated land use right.

(IV) Type, quantity and carrying value of assets as stated in the conclusion of reports issued by other organizations which are adopted as reference hereof

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

IV. TYPE OF VALUATION AND DEFINITION

Based on the purposes of this valuation assignment, it was determined that market value was the type of valuation for this valuation assignment.

V. APPRAISAL DATE

The benchmark date of the valuation for this assignment is 31 October 2014.

The benchmark date was determined by the principal after considering the scale of assets of the valuation target company, volume of work, expected time needed, compliance and other basis.

VI. BASIS OF THE VALUATION

(I) Economic behavior basis

Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation;
Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited.

(II) Basis of laws and regulations

“Company Law of the People’s Republic of China” (28 December 2013 as amended by the Sixth Meeting of the Standing Committee of the Twelfth National People’s Congress);
“Interim Measures for the Administration of Valuation of Enterprise State-owned Assets” of the State-owned Assets Supervision & Administration Commission of the State Council Order No. 12 (25 August 2005);

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VALUATION REPORT OF MINERAL PRODUCTS COMPANY

APPENDIX XIV

Administrative Measures for the Assessment of State-Owned Assets (Order No. 91 of the State Council);
“Notice on Issues Related to the Strengthening of the Administration of Valuation of State-owned Assets” (Guo Zi Wei Chan Quan [2006] No. 274);
“Provisional Management Rules Governing the Transfer of State-owned Equity Interests of Corporations” (Order No. 3 issued by SASAC of the State Council and the Ministry of Finance (1 February 2004));
“Notice on Relevant Issues Concerning the Transfer of State-owned Property Rights of Enterprises” (Guo Zi Chan Quan Fa [2006] No. 306 issued by SASAC of the State Council);
The Land Management Law of the People’s Republic of China (as amended by Eleventh Meeting of the Standing Committee of the Tenth National People’s Congress on 28 August 2004);
Law of the People’s Republic of China on Administration of the Urban Real Estate (as amended in 2007);
“Notice on Relevant Issues Concerning Verification of State-owned Assets Valuation Report of Enterprise (Guo Zi Chan Quan [2009] of No. 941 issued by SASAC of the State Council);
“Notice on Printing and Issuance of The Guidelines for Registration of State-owned Assets Valuation Projects of Enterprises” (Guo Zi Fa Chan Quan [2013] No. 64);
“Administrative Measures for the Material Asset Reorganisations of Listed Companies” (Order No. 109 issued by CSRC);
“Regulations in Relation to Regulating Issues Arising from Significant Asset Restructuring of Listed Companies” (CSRC Announcement [2008] No. 14).

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

(III) Basis of valuation standards

“Asset Valuation Standards – Basic Standards” (Cai Qi (2004) No. 20);
“Asset Valuation Professional Ethics Standards -Basic Standards” (Cai Qi (2004) No. 20)
“Assets Valuation Ethics Code – Independence” (Zhong Ping Xie [2012] No. 248);
“Asset Valuation Standards – Valuation Report” (Zhong Ping Xie [2011] No. 230);
“Asset Valuation Standards – Valuation Procedures” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Enterprise Values” (Zhong Ping Xie [2011] No. 227) (Effective from 1 July 2012);
“Asset Valuation Standards – Making Use of Experts” (Zhong Ping Xie [2012] No. 244);
“Guide on Valuation Report of Enterprise State-owned Assets” (Zhong Ping Xie [2011] No. 230);
“Numerical Guidelines on Assets Evaluation” (Zhong Ping Xie [2007] No. 189);
“Guidance Opinion on the Concern of Registered Valuers over the Legal Title of Valuation Target” (Kuai Xie [2003] No. 18);
“Enterprise Accounting Standards – Basic Standards” (Order No. 33 of the Ministry of Finance);
38 Specific standards such as the “Enterprise Accounting Standards No. 1-Inventory” (Cai Kuai [2006] No. 3);
“Enterprise Accounting Standards – Application Guide” (Cai Kuai [2006] No. 18).

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

(IV) Basis of ownership of assets

State-owned Land Usage Certificates;
Major assets purchase contracts or certificates;
Other references.

(V) Basis for obtaining prices

Scheme on Integrate Land Price Standard for Levied Land in Henan Province《河南省徵地區片綜合地價標準方案》;
Relevant Information in Information Database of China United Assets Appraisal Group Co., Limited;
Other references.

(VI) Other references

Accountant Statements and Audit Reports of CLFG Mineral for 2012, 2013 and January to October 2014;
Handbook on Common Methods and Parameters for Assets Valuation (China Machine Press 2011);
Technical information and geological exploration information related to constructions;
Other references.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

VII. VALUATION METHOD

(I) Selection of valuation method

As the purpose of this valuation is the assets disposal of equity interest by Luoyang Glass to CLFG, the assets-based approach reflects the value of the enterprise from the perspective of enterprise construction and provides a basis for the operation, management and assessment of the enterprise after the economic behavior is realised. Therefore, the assets-based method is adopted for this valuation.

CLFG Mineral engages in processing and sale of quartz sand and rock & minerals used in glass production. The company stopped its production in 2012 due to its severe loss in operation period. Attributable to the downturn of the glass industry and severe overcapacity of the market, the future operation risks are serious. It is difficult to reliably estimate the revenue and risks for the future years. Accordingly, the valuation for CLFG Mineral is appropriate to adopt the income approach.

On the basis of the foregoing, the assets-based approach was adopted for this valuation.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

(II) Introduction of the assets-based approach

The valuation methods for all assets and liabilities are follows:

Current assets
(1) Monetary funds: including cash and bank deposits.

The appraised value is the carrying value after verification.

(2) Receivables

As for the valuation of receivables and other receivables, after checking that the receivables are correct, a detailed analysis is made on the amount, time and reasons for the outstanding amount, status of recover of the amount, present conditions of the funds, credibility and business management of the debtors etc. by referring to the historical information and the situations learnt from the investigation. For receivables, aging analysis is adopted to estimate and evaluate risks and losses with reference to the calculation of the provision for bad debts in enterprise accounting, and the risks and losses will be estimated in accordance with the aging analysis.

According to the above standards, the risks and losses on valuation are determined based on the total receivables deducting the amount after the valuation of risks and losses.

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APPENDIX XIV

(3) Inventories

The valuation methods for all inventories are set out as follows:

1) Raw Materials

Raw materials are those agreed to transfer to CLFG Mineral Products Company Limited by Luoyang Glass Company Limited at book value, for the purpose of vacating the warehouse of Luoyang Glass Company Limited due to its relocation in March 2011. Such assets are mainly material reserved for production and low-value consumables. The remaining raw materials were purchased by CLFG Mineral Products Company Limited before production ceased. Such assets are all reserved parts for equipment and industrial installation instruments. Upon enquiry, the company has ceased production for years and is now being leased out with Luoyang Chenxi Mining Company Limited ( 洛陽晨曦礦業有限公司 ) as the lessee. As a result, the raw materials in this valuation are prolonged accumulated, and currently could not be used as normal. Therefore, the valuation of such raw materials is based on their recoverable values.

2) Finished products

The finished products for valuation of the Company are aerated bricks. Valuers carried out on-site verification and stock taking for the finished products. The aerated bricks were produced years ago, thus could not be sold as normal. The valuation value of the finished products in this valuation is based on their recoverable value in the second-tier markets.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

2. Non-current assets

Long-term equity investment

First, the valuers collected the evidences and verified the reason, booked value and actual conditions of the long-term equity investment. Then the truthfulness and completeness of the long-term equity investment were determined after reviewing the investment agreements, resolutions in shareholders’ meeting, the Company’s articles and relevant accounting records. The valuation was then carried out based on the above principles. Upon determination of the appraised net assets of the investees, the valuation value of the long-term equity investment was determined by the attributable portion calculated by the percentage of ownership.

Long-term equity investment = Total appraised net assets of investees x Percentage of ownership

During the determination of the appraised value of the long-term equity investment, premium and discount due to factors such as shareholdings and minority interest are not considered by the valuers.

3. Land use right

The land concerned in this valuation is allocated land. Firstly, this valuation adopted the cost approach method to directly calculate the price of the allocated land. Then, it adopted the market comparison approach to measure and calculate the transfer price of the land to be valued under the maximum term, and deducted the payable transfer fee for the allocated land changing into the land to transfer pursuant to relevant requirements. In addition, the calculated land price after deducting the transfer fee would be changed from the limited term to no fixed term. Thus, the land usage right of the allocated land to be valued would be calculated. As last, we calculated the unit price of the allocated land with giving reasonable weight to the market comparison method and cost approach method respectively.

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APPENDIX XIV

(1) To directly calculate the price of the allocated land with adoption of the cost approach method

The basic idea of the cost approach method is to use the relevant investment to the land, such as land acquisition costs, relevant tax and land development costs, etc., as the basic investment costs, with the addition of corresponding profit and interest of the basic investments to calculate the land cost price. Based on the above, the land value-added revenue will also be considered, then to measure the land price after term adjustments according to the usage term set in the valuation of the valuation target. As the land to be valued is allocated land, the land value-added revenue and the adjustments on usage terms will not be taken into account.

The basic formula is as follows:

Price of the allocated land = Land acquisition costs + Tax + Land development costs + Interest + Profit

where,

Land development costs: Land development costs are calculated by various objective costs that are incurred in the area with land development progress based on the valuation;

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VALUATION REPORT OF MINERAL PRODUCTS COMPANY

APPENDIX XIV

(2) To indirectly calculate the price of the allocated land with adoption of the market comparison method
① To set the value of the land to transfer with a term of 50 years

Pursuant to the replacement principle, the benchmark land price is calculated based on the comparison between the replaceable and similar property of the valuation target which is being traded in the market around the appraisal date, according to the transaction price of the latter, and with reference to the transaction time, transaction situation, transaction method, land usage term, area and individual factors of the valuation target. As last, the price of the valuation target as at the appraisal date will be estimated with reference to the benchmark land price of the similar property to be traded.

Formula: V = VB × A × B × C × D

Where,

V – Price of the land to be valued;

VB – Price of the comparison case;

A – Trading index of the land to be valued/Trading index of the comparison case;
B – Land price index of the land to be valued as at the appraisal date/Land price index of the comparison case as at the appraisal date;
C – Condition index of regional factors of the land to be valued/ Condition index of regional factors of the comparison case;
D – Condition index of individual factors of the land to be valued/ Condition index of individual factors of the comparison case;

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VALUATION REPORT OF MINERAL PRODUCTS COMPANY

APPENDIX XIV

② To determine the price of the allocated land with a set term

Pursuant to the requirements of Rule 26 in the Interim Procedures of Usage and Management of Allocated Land (Order No. 1 [1992] Issued and Implemented by State Land Administration on 8 March 1992), different from other methods of transfer, lease, mortgage, etc. of land usage right transfer, the transfer fee of land usage right is received at certain percentage (not less than 40% of the stipulated land price) of the stipulated land price. The stipulated land price is checked and determined by the land administration authorities in the People’s Government of the local city and county in accordance with the benchmark land price and with reference to the transfer, lease, mortgage of the land usage right as well as the land situation.

In accordance with the consultation by the valuation staff to the local land administration department, the supplementary payment of the transfer fee of the industrial allocated land is generally collected at the percentage of 40% of the land after valuation. Accordingly, this valuation deducted 40% of the valued land price as the land transfer fee.

Price of the allocated land with a set term = the valued land price with the market comparison method × (1–40%)

③ To calculate the price of the allocated land with no fixed term

The adjustment index of the price of land transferred from a limited term to no fixed term is 1/[1 – 1/(1＋ r)n] (r refers to the capitalization rate of the land, which is calculated at the percentage of 6%; n refers to the price of the land to be transferred, with a fixed term of 50 years) That is, the price of the allocated land with no fixed term = the price of the allocated land with a fixed term × the adjustment index of the price of land transferred from a limited term to no fixed term

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VALUATION REPORT OF MINERAL PRODUCTS COMPANY

APPENDIX XIV

Liabilities

VIII. IMPLEMENTATION PROCESS AND STATUS OF VALUATION PROCEDURES

The entire valuation work was carried out in four phases:

(I) Valuation preparation phase

On 31 October 2014, we discussed and obtained consensus with the principals such as the purposes of this valuation, appraisal date, scope of the valuation, etc, and drew up the working plan for this asset valuation.
The inspection of assets, filling in the asset valuation declaration breakdown list, etc. were carried out with the enterprise. In early November 2014, the valuation project team understood the assets under valuation mandate in detail, allocated works for the valuation, assisted the enterprise in declaring assets under valuation mandate, and collected necessary documents and information for asset valuation.

(II) On-site valuation phase

The on-site valuation phase of the project team was from 31 October 2014 to 10 November 2014. The major works are as follows:

Listening to the overall situations of the enterprise and the history and present conditions of the assets under valuation mandate as explained by the relevant personnel of the principals and the valuation target company, and understanding the financial system, operating conditions, status of assets and technology, etc. of the enterprise.
Review and identification of the asset inspection and valuation declaration breakdown list provided by the enterprise; verification against the relevant financial records of the enterprise, coordinate with the enterprise to make adjustments for any problem identified.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

Conducting random sampling stock taking of the inventory physical assets among the current assets against the asset inspection and valuation declaration breakdown list.
Verification of the ownership information provided by the enterprise.
Carrying out initial valuation and measurement of the assets and liabilities within the scope of the valuation after inspection and verification.

(III) Valuation consolidation phase

(IV) Report issuing phase

The working period of this phase was from 26 November 2014 to 15 April 2015.

IX. ASSUMPTIONS OF VALUATION

The valuers made the following valuation assumptions for this valuation:

Transaction assumption

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

Open market assumption

Going concern assumption for the assets

When there are changes in the above conditions, the valuation results will be void in most cases.

X. VALUATION CONCLUSIONS

We have fulfilled the statutory and necessary procedures for asset valuation pursuant to the laws, regulations, rules and valuation principles in regard to asset valuation of the PRC, withheld independent, justice, scientific and objective principles, after adopting the assetbased approach, and have carried out on-site investigation, market survey and enquiries and assessment, the following valuation results in respect of the assets within the scope of valuation of CLFG Mineral Company Limited* were obtained:

The book value of assets is RMB3,579,800 and the appraised value is RMB60,189,500. The appraised value is RMB56,609,700 higher than the book value with an appreciation rate of 1,581.36%.

The book value of liabilities is RMB35,890,700 and the appraised value is RMB35,890,700, with no appraisal appreciation or depreciation changes.

The book value of net asset is RMB-32,310,800 and the appraised value is RMB24,298,800. The appraised value is RMB56,609,700 higher than the book value with an appreciation rate of 175.20 %. The table is set out below for details.

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VALUATION REPORT OF MINERAL PRODUCTS COMPANY

APPENDIX XIV

Consolidation Table of the Asset Valuation Results

Valuation target company: CLFG Mineral Company Limited*

Appraisal date: 31 October 2014

Unit: RMB0’000

			Appraised	Appreciation or	Appreciation
		Book Value	Value	Depreciation	Rate%
Item		B	C	D=C-B	E=D/B×100%
1	Current assets	281.26	281.26	–	–
2	Non-current assets	76.73	5,737.69	5,660.96	7,377.77
3	Including: Long-term
	equity investment	76.73	101.20	24.47	31.89
4	Property for investment purpose	–	–	–
5	Fixed assets	–	–	–
6	Construction in progress	–	–	–
7	Intangible assets	–	5,636.49	5,636.49
8	Including: Land use right	–	5,636.49	5,636.49
9	Other non-current assets	–	–	–
10	Total assets	357.98	6,018.95	5,660.97	1,581.36
11	Current liabilities	3,589.07	3,589.07	–	–
12	Non-current assets	–	–	–
13	Total Liabilities	3,589.07	3,589.07	–	–
14	Net assets (Owners’ interests)	-3,231.08	2,429.88	5,660.97	175.20

With reference to the above, the value of total interest of the shareholders of CLFG Mineral on the appraisal date is RMB24,298,800.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

XI. REMARKS FOR SPECIAL ITEMS

(I) Defects in ownership of housings

N/A

(II) Outstanding matters, legal disputes and other uncertain factors

On 25 August 2014, CLFG Mineral was sued by Luoyang Longxin Glass Company Limited to the People’s Court of Xin’an County for owning RMB12 million of land and mining equipment usage fee. CLFG Mineral lodged a jurisdiction objection with the People’s Court of Xin’an County, claiming that such case shall be adjudicated by Arbitration Commission of Luoyang City. On 15 October 2015, the Civil Trial Verdict ((2014) Xin Min Chu Zi No. 1743) issued by People’s Court of Xin’an County dismissed the jurisdiction objection filed by CLFG Mineral. On 23 October 2014, CLFG Mineral appealed to the Intermediate People’s Court of Luoyang City for the verdict against the jurisdiction objection. On 22 January 2015, the Civil Trial Verdict ((2015) Luo Min Li Zhong Zi No. 37) issued by the Intermediate People’s Court of Luoyang City revoked the Civil Trial Verdict ((2014) Xin Min Chu Zi No. 1743)issued by People’s Court of Xin’an County and dismissed the appeal of Luoyang Longxin Glass Company Limited. As of the issue date of this report, CLFG Mineral had not received any notice regarding any arbitration initiated by Longxin Glass for such lease disputes.

(III) Material subsequent events

According to knowledge acquired from the due diligence work of the valuer, after the appraisal date, on 22 November 2014, the People’s bank of China lowered the benchmark interest rate of both deposits and loans for financial institutions. The valuation results have not considered the impact of interest rate adjustment on the appraised value.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

(IV) Other matters need explanations

The legal responsibilities of the valuer and the valuation firm were to make professional judgment on the valuation of the assets for the valuation purposes stated in this report, and no judgment whatsoever is made by the valuer and the valuation firm with respect to the economic behaviour corresponding to the purposes of this valuation. To a large extent, the valuation assignment depended on the information provided by the principals and the valuation target company. Therefore, the prerequisite of valuation assignment was that ownership documents, licence and accounting vouchers and the relevant legal documents provided by the principals and the valuation target company were authentic and legal.
This valuation adopted the market comparison method to evaluate the allocated land by way of deducting the transfer fee. The deduction of transfer fee may have some differences between the actual situations.
The valuers notice that the audit report issued by the auditing firm was an audit report with highlighted matters section, which disclosed: “As at 31 October 2014, the losses to offset of CLFG Mineral was RMB63,381,713.07, and as at 31 October 2014, its current liabilities was RMB31,948,611.39 more than its current assets. CLFG Mineral has disclosed the improvement measures to be taken in appendix II of its financial statement. However, there are still significant uncertainties over its competence in sustainable operation. Failing to realize assets and discharge debts are possible during normal course of business”. The valuers also analyzed the historical operation and existing situation of CLFG Mineral. Due to the severe historical annual loss, the company has stopped its overall production since 2010. In 2013, the company repaid all of its fixed assets and construction in progress to CLFG for compensation, resulting in actual loss of productivity. Taking into account that there are uncertainties of the future normal operation of the company, this valuation cannot adopt the revenue approach to conduction its estimation.
The principals and the valuation target company were held responsible for the truthfulness and completeness of data, statements and the relevant information provided by the valuation target company and which were used within the scope of this valuation assignment.
The principals and the valuation target company were held responsible for the truthfulness and legality of the ownership documentary proof and relevant information provided by the valuation target company in the valuation report.

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VALUATION REPORT OF MINERAL PRODUCTS COMPANY

APPENDIX XIV

The impacts on the valuation conclusions from relevant taxes incurred during the implementation process for the purposes of the valuation have not been considered.
During the validity period after the appraisal date, if there are changes in the quantity and pricing standards of the assets, they should be reflected according to the following principles:
(1) When there are changes in the quantity of the assets, the corresponding adjustments should be made to the amount of the assets using the original valuation method;
(2) When there are changes in the pricing standards of the assets, which will have a significant impact on the valuation results of the assets, the principals should appoint qualified valuation firm to re-determine the appraised value;
(3) When there are changes in the quantity and pricing standards of the assets after the appraisal date, the principal should take them into due account when actually pricing the assets and make the relevant adjustments.

XII. EXPLANATION OF USAGE LIMITATION OF THE VALUATION REPORT

(1) This valuation report shall be used only for the valuation purposes and applications specified herein. In addition, the valuation conclusion reflects the current fair value of the valuation target determined according to the open market principles in the context of the valuation purposes, without taking into account of the impact of possible undertaking of guarantee, security and any special additional payment of the price by the parties upon the appraised price. Moreover, the impact of changes in the state macroeconomic policies, natural disaster and force majeure upon the prices of the assets are not considered in the report. If there are changes in the above-mentioned conditions and the other situations such as the going concern concept that had been applied in the valuation assignment, then the valuation conclusion will normally become void. The valuation firm is not liable for the relevant legal responsibilities for the invalidity of the valuation results due to changes in such conditions.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

(2) This valuation report is for the exclusive use by the users of the valuation report specified herein. The rights of use of the valuation report belong to the principals, and we shall not make it available to other parties without the consent of the principals.
(3) The entire or part of the contents of this valuation report shall not be extracted, referred to or disclosed to the public media without the consent of our valuation firm (and subject to our reviewing of the relevant contents), unless otherwise required by laws and regulations and or agreed among the parties concerned.
(4) Based on the state regulations on management of state-owned assets valuation, this valuation report shall be filed (or approved) before being used and the filed (or approved) valuation result is valid for one year (from the appraisal date of 31 October 2014 to 30 October 2015). The assets must be re-valuated if more than one year has lapsed.

XIII. DATE OF VALUATION REPORT

The valuation report is issued on 15 April 2015.

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APPENDIX XIV VALUATION REPORT OF MINERAL PRODUCTS COMPANY

INDEX OF THE FILES AVAILABLE FOR INSPECTION

Economic behaviour documents (photocopies);
Corporate legal person business licenses (photocopies) of the principals and the valuation target company;
Audit Report of GLFG Mineral as at the appraisal date and its Financial Statements for the years of 2012 and 2013 and as at 31 October 2014 (photocopies);
Main title proof information (photocopies) of the valuation target;
Letters of undertaking of the principals and the valuation target company;
Letters of undertaking of the registered valuer signatories;
Valuation Qualification Certificate (photocopy) of China United Assets Appraisal Group Co., Limited;
Corporate legal person business license (photocopy) of China United Assets Appraisal Group Co., Limited;
Engagement Letter of Asset Assessment;
Qualification certificates (photocopies) of the registered valuer signatories.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

The following is the text of the valuation report received from the Valuer in respect of the valuation of the amounts due from the Outgoing Entities to the Company as at 31 October 2014.

Asset Valuation Report

in respect of

the Proposed Disposal of Certain Debts by Luoyang Glass Company Limited by way of Assets Exchange

China United Appraisal Report [2015] No. 029

China United Assets Appraisal Group Co., Limited

15 April 2015

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

Declaration of the Registered Valuer

We complied with the relevant laws and regulations and valuation standards, adhered to the principles of independence, objectivity and fairness in the course of conducting this valuation assignment; according to the information collected during our assignment process, the contents stated in the valuation report are objective, and we take the relevant legal responsibility as to the reasonableness of the valuation conclusion.
The lists of assets of the valuation target were submitted by the principals and the equity holding company and were signed and sealed by them as confirmation; the principals and valuation target company are liable for the genuineness, legality, completeness of the information so provided and the proper usage of the valuation report.
We did not have any existing nor expected interest in the valuation target in the valuation report; and we did not have any existing nor expected interest with the parties concerned, and did not have any bias against the parties concerned.
We conducted on-site investigation on the valuation target of the valuation report and the assets involved; we paid the necessary concern with the legal ownership status of the valuation target and the assets involved, and carried out an inspection of the legal title information of the valuation target and the assets involved.
The analysis, judgment and conclusion in the valuation report that we issued were subject to the constraints of the assumptions and criteria of the valuation report, users of the valuation report should take into full consideration the assumptions, criteria, explanation of special items set out in the valuation report and their impact on the valuation conclusion.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

Asset Valuation Report

in respect of

the Proposed Disposal of Certain Debts by Luoyang Glass Company Limited

by way of Assets Exchange

China United Appraisal Report [2015] No. 029

SUMMARY

China United Assets Appraisal Group Co., Limited accepted the mandate from China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited to carry out a valuation assignment of the market value of the debts under valuation mandate involved in the economic behaviour of the proposed disposal of certain debts by assets exchange by Luoyang Glass Company Limited on the appraisal date.

The valuation target and the valuation scope were certain debts held by Luoyang Glass Company Limited.

The appraisal date was 31 October 2014.

The type of valuation of this valuation assignment was market value.

The proposed disposal of its certain debts to China Luoyang Float Glass (Group) Company Limited* was valued at RMB444,599,400.

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APPENDIX XV VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

Report users are reminded to pay special attention to the special events and significant events for subsequent periods set out in this report when applying the valuation conclusions.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

Asset Valuation Report

in respect of

the Proposed Disposal of Certain Debts by Luoyang Glass Company Limited

by way of

Assets Exchange

China United Appraisal Report [2015] No. 029

**China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited:**

China United Assets Appraisal Group Co., Limited accepted the mandate from you to carry out a valuation assignment of the market value of the debts under valuation mandate involved in the economic behaviour of the proposed disposal of certain debts of Luoyang Glass Company Limited by assets exchange on the appraisal date (being 31 October 2014) in accordance with the relevant laws and regulations and valuation standards and under the hypothetical settlement method by following the necessary valuation procedures. The contents of the valuation are as follows:

I. PRINCIPALS, EQUITY HOLDING COMPANY AND OTHER USERS OF THE VALUATION REPORT

The principals of this valuation assignment were China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited, and the equity holding company was Luoyang Glass Company Limited.

(I) Basic information of Principal 1

Company name:

China Luoyang Float Glass (Group) Company Limited* (hereinafter “CLFG”)

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APPENDIX XV

1. Brief Historical Introduction

CLFG was established in 1991, which was formerly known as Luoyang Glass Factory, and was renamed as China Luoyang Float Glass Corporation Limited in 1993. In 1996, it was transformed into a wholly state-owned company in accordance with the Company Law and renamed as China Luoyang Float Glass (Group) Company Limited at the same time. After several times of capital increase and the gratuitous transfer of state-owned equity interest, as at the appraisal date, the registered capital was RMB1,286,740,000, of which China Building Materials Glass Company (now renamed as “Triumph Technology Group Company”) held a registered capital of RMB665,284,000 (accounted for 51.70% of the total registered capital), Bengbu Glass Industry Design Institute held a registered capital of RMB244,480,700, (accounted for 19.00% of the total registered capital), Luoyang State-owned Assets Operation Company ( 洛陽市國有資產經營公司 ) held a registered capital of RMB132,135,700, (accounted for 10.27% of the total registered capital), China Huarong Asset Management Company* ( 中國華融資產管理公司 ) held a registered capital of RMB110,000,000, (accounted for 8.55% of the total registered capital), China Great Wall Assets Management Corporation( 中國長城資產管理公司 ) held a registered capital of RMB70,000,000, (accounted for 5.44% of the total registered capital), China Orient Asset Management Company( 中國東方資產管理公司 ) held a registered capital of RMB39,840,000, (accounted for 3.10% of the total registered capital) and Henan Branch of China Construction Bank Corporation held a registered capital of RMB25,000,000, (accounted for 1.94% of the total registered capital).

The actual controller of CLFG is China National Building Material Group Corporation.

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APPENDIX XV

Business Scope

(II) Basic information of Principal 2

Company name: Luoyang Glass Company Limited Company address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang City Legal representative: Ma Liyun Registered capital: RMB500,018,200 Paid-up capital: RMB500,018,200 Company type: Company Limited (listed) Places of listing: Shanghai Stock Exchange, Hong Kong Stock Exchange Stock short name: 洛陽玻璃 , Luoyang Glass Stock code: 600876.SH, 1108.HK Business registration license No.: 410300400003275 Date of establishment: 6 April 1994

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

Historical reform

Luoyang Glass was established in April 1994 with a registered capital of RMB400,000,000 upon establishment. In June 1994, with the approval of the Securities Commission of the State Council, the Company issued 250,000,000 H shares. In September 1995, with the approval of China Securities Regulatory Commission, the Company issued 50,000,000 A shares. After the share trading reform and the repurchase of shares in 2006, as at the appraisal date, the registered capital of the Company was RMB500,018,200 and the share structure is as follows:

			The percentage
		The Amount	of the total
Type of Shares		of Shares	shares
		(ten thousand
		shares)	(%)
I.	Total circulating shares subject to
	trading moratorium	–	–
II.	Total circulating shares not subject to
	trading moratorium	50,001.82	100.00
	1. Ordinary shares denominated
	in RMB_(A Shares)_	25,001.82	50.00
	2. Overseas listed foreign
	invested shares_(H shares)_	25,000.00	50.00
III.	Total shares	50,001.82	100.00

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

Business Scope

(III) Basic information of the equity holding company

The basic information of the equity holding company was the same as Principal 2.

(IV) Relationship between the principals and the equity holding company

CLFG is the shareholder of Luoyang Glass.

(V) Principals, other users of the valuation report stipulated by the engagement letter

The users of this valuation report are the principals, the equity holding company, the relevant parties to the economic behavior and the relevant regulatory authorities with which filing has to be made according to the relevant regulations for the administration of state-owned assets.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

II. PURPOSE OF THE VALUATION

Pursuant to the Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation and the Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited, the Proposal on the Material Asset Exchange, Issuance of Shares, Acquisition of Assets and Raising Supporting Funds of Luoyang Glass Company Limited was considered and passed at the meeting. The proposal set out the intention of Luoyang Glass to conduct an equivalent assets exchange with its 100% equity interest in Longhao Company, 63.98% equity interest in Longfei Company, 67% equity interest in Dengfeng Silicon, 52% equity interest in Huasheng Mineral and 40.29% equity interest in CLFG Mineral as well as the its liability assets in Longhao Company, Longfei Company, Longxiang Company, Huasheng Material, CLFG Mineral for the 100% equity interest of Bengbu China National Building Materials Information Display Material Company* held by CLFG. The difference between the assets to be disposed and the assets to be acquired will be partly taken by Luoyang Glass under the non-public issuance of A Shares of CLFG.

The purpose of the assets valuation was to reflect the market value of the debts under valuation mandate on the appraisal date, so as to provide reference basis to the abovementioned economic behavior.

III. VALUATION TARGET AND SCOPE OF VALUATION

The valuation target and scope were certain debts held by Luoyang Glass Company Limited (hereinafter “Luoyang Glass”). The book balance of debts was RMB718,819,187.22, the provision for bad debts was RMB277,957,751.37 and the book value is RMB440,861,435.85, among which: for the debts of Luoyang Glass to CLFG Longhao Glass Limited (hereinafter “Longhao Company”), the book balance was RMB369,571,300.95, the provision for bad debts was RMB122,011,991.44 and the book value was RMB247,559,309.51; for the debts to CLFG Longfei Glass Co., Ltd. (hereinafter “Longfei Company”), the book balance was RMB230,287,167.01, the provision for bad debts was RMB122,443,686.70 and the book value was RMB107,843,480.31; for the debts to CLFG Longxiang Glass Co,. Ltd. (hereinafter “Longxiang Company”), the book balance was RMB96,631,304.38, the impairment provision was RMB33,502,073.23 and the book value was RMB63,129,231.15; for the debts to CLFG Mineral Products Company Limited (hereinafter “Mineral Products Company”), the book value was RMB1,341,989.51; for the debts to Yinan Huacheng Mineral Enterprise Company Limited (hereinafter “Huasheng Mineral”), the book value was RMB20,987,425.37.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

The above financial information was extracted from the breakdown on certain debts and assets proposed to be disposed by Luoyang Glass as of 31 October 2014 as audited by Daxin Certified Public Accountants (Special general partnership). The valuation was based upon audited accounts of the enterprise.

The valuation target under mandate and the scope of the valuation were consistent with those involved in the economic behavior.

IV. TYPE OF VALUATION AND DEFINITION

Based on the purposes of this valuation assignment, it was determined that market value was the type of valuation for this valuation assignment.

V. APPRAISAL DATE

The benchmark date of the valuation for this assignment is 31 October 2014.

The benchmark date was determined by the principal after considering the scale of assets of the equity holding company, volume of work, expected time needed, compliance and other basis.

VI. BASIS OF THE VALUATION

(I) Economic behavior basis

Resolutions at the 21st Meeting of the Third Session of the Board of China National Building Material Group Corporation;
Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

(II) Basis of laws and regulations

“Company Law of the People’s Republic of China” (28 December 2013 as amended by the Sixth Meeting of the Standing Committee of the Twelfth National People’s Congress);
“Interim Measures for the Administration of Valuation of Enterprise State-owned Assets” of the State-owned Assets Supervision & Administration Commission of the State Council Order No. 12 (25 August 2005);
Administrative Measures for the Assessment of State-owned Assets (Order No. 91 of the State Council);
“Notice on Issues Related to the Strengthening of the Administration of Valuation of State-owned Assets” (Guo Zi Wei Chan Quan [2006] No. 274);
“Provisional Management Rules Governing the Transfer of State-owned Equity Interests of Corporations” ( Order No. 3 issued by SASAC of the State Council and the Ministry of Finance (1 February 2004));
“Notice on Relevant Issues Concerning the Transfer of State-owned Property Rights of Enterprises” (Guo Zi Chan Quan Fa [2006] No. 306 issued by SASAC of the State Council);
“Notice on Relevant Issues Concerning Verification of State-owned Assets Valuation Report of Enterprise (Guo Zi Chan Quan [2009] of No. 941 issued by SASAC of the State Council);
“Notice on Printing and Issuance of The Guidelines for Registration of State-owned Assets Valuation Projects of Enterprises ” (Guo Zi Fa Chan Quan [2013] No. 64);
“Administrative Measures for the Material Asset Reorganisations of Listed Companies” (Order No. 109 issued by CSRC);
“Regulations in Relation to Regulating Issues Arising from Significant Asset Restructuring of Listed Companies” (CSRC Announcement [2008] No. 14).

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

(III) Basis of valuation standards

“Asset Valuation Standards – Basic Standards” (Cai Qi (2004)No. 20);
“Asset Valuation Professional Ethics Standards – Basic Standards” (Cai Qi (2004) No. 20)
“Assets Valuation Ethics Code – Independence” (Zhong Ping Xie [2012] No. 248);
“Asset Valuation Standards – Valuation Report” (Zhong Ping Xie [2011] No. 230);
“Asset Valuation Standards – Valuation Procedures” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Making Use of Experts” (Zhong Ping Xie [2012] No. 244)
“Guide on Valuation Report of Enterprise State-owned Assets” (Zhong Ping Xie [2011] No. 230);
“Numerical Guidelines on Assets Evaluation” (Zhong Ping Xie [2007] No. 189);
“Guidance Opinion on the Concern of Registered Valuers over the Legal Title of Valuation Target” (Kuai Xie [2003] No. 18);
“Enterprise Accounting Standards – Basic Standards” (Order No. 33 of the Ministry of Finance);
“Enterprise Accounting Standards – Application Guide” (Cai Kuai [2006] No. 18).
(IV) Basis of ownership of assets
Borrowing Agreement, accounting certificates, etc.;
Other references.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

(V) Other references

Accountant Statements and Audit Reports of the indebted centerprise as of 31 October 2011, 2012, 2013 and 2014;
Other references.

VII. VALUATION METHOD

Firstly, the valuer investigated and checked the reasons for the liabilities and its carrying value and actual status. Then, a letter was given to such indebted enterprise to make clear the time occurred and reasons thereof. Besides, the valuer examined the financial statements of the same to ensure the truthfulness, completeness and accuracy of the debt.

Based on the above error-free works and considered the purpose of this valuation and the actual status of the indebted enterprise, creditors are still hopeful about the future of the enterprise despite of the dampened sentiment in the plate glass market and the upper stream industry. Moreover, shareholders of the indebted enterprise are also seeking for an open door for the future. Recognizing the intention of the owners and the management of the enterprise after thorough communication and discussion, we believe that the enterprise will be operating on an ongoing basis. As such, a hypothetical settlement method was adopted in this valuation which assumed such indebted enterprise would settle its debts in order in the course of business on an ongoing basis.

Steps for valuation: Conducting a general estimation on the market value of each asset of the indebted enterprise; and calculating the repayment ratio of the debts by order when respective repayments were made based on the market value of the asset (operating on an ongoing basis) so as to determine the value of the debts being appraised.

Basic calculation:

Debt repayment ratio = (assets available for debt redemption – debts entitled to priority of repayment) / (total debts – debts entitled to priority of repayment)

① Where the debt repayment ratio is less than 1, then:

Appraised value of debts = audited carrying value of debts x debt repayment ratio

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

② Where the debt repayment ratio is higher than or equal to 1, then:

Appraised value of debts = audited carrying value of debts

VIII. IMPLEMENTATION PROCESS AND STATUS OF VALUATION PROCEDURES

The entire valuation work was carried out in four phases:

(I) Valuation preparation phase

On 1 November 2014, we discussed and obtained consensus with the principals such as the purposes of this valuation, appraisal date, scope of the valuation, etc, and drew up the working plan for this asset valuation.
The inspection of assets, filling in the asset valuation declaration breakdown list, etc. were carried out with the enterprise. In early November 2014, the valuation project team understood the assets under valuation mandate in detail, allocated works for the valuation, assisted the enterprise in declaring assets under valuation mandate, and collected necessary documents and information for asset valuation.

(II) On-site valuation phase

The on-site valuation phase of the project team was from 1 November 2014 to 10 November 2014. The major works are as follows:

Listening to the overall situations of the enterprise and the history and present conditions of the debts under valuation mandate as explained by the relevant personnel of the principals and the equity holding company, and understanding the financial system, operating conditions, status of the fixed assets and technology, etc. of the indebted enterprise.
Review and identification of the asset inspection and valuation declaration breakdown list provided by the equity holding company and the indebted enterprise; verification against the relevant financial records of the enterprise, coordinate with the enterprise to make adjustments for any problem identified.
Conducting a complete inspection and verification of the fixed assets against the asset inspection and valuation declaration breakdown list of the indebted enterprise, conducting random sampling stock taking of the inventory physical assets among the current assets.

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APPENDIX XV VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

Inspection and collection of the documentary proof of titles of the assets of the indebted enterprise.
Determining the specific valuation methods for each type of assets according to the actual conditions and characteristics of the assets under valuation mandate of the indebted enterprise.
Referring to the technical information, final accounts information or completion acceptance information in respect of key equipment of the indebted enterprise; collecting price information by way of market surveys and enquiries in respect of general equipment.
Verification of the ownership information provided by the indebted enterprise.
Carrying out initial valuation and measurement of the assets and liabilities within the scope of the valuation after inspection and verification.

(III) Valuation consolidation phase

From 11 November to 30 November 2014, an analysis and consolidation of the initial results of all assets valued and liabilities reviewed were made, and followed by the necessary adjustment, changes and improvement of the valuation results.

(IV) Report issuing phase

The working period of this phase was from 1 December 2014 to 15 April 2015.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

IX. ASSUMPTIONS OF VALUATION

Transaction assumption

Open market assumption

Going concern assumption for the assets

X. VALUATION CONCLUSIONS

We have fulfilled the statutory and necessary procedures for asset valuation pursuant to the laws, regulations, rules and valuation principles in regard to asset valuation of the PRC, withheld independent, justice, scientific and objective principles, after adopting the hypothetical settlement method, and have carried out the valuation of the debts under valuation mandate, whose appraised value was RMB444,599,400 on the benchmark date (i.e. 31 October 2014), among which:

For the debts of Luoyang Glass to Longhao Company, the book balance was RMB369,571,300.95, the provision for bad debts was RMB122,011,991.44, the book value was RMB247,559,309.51 and the appraised value of debts was RMB250,532,384.91;

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

For the debts to Longfei Company, the book balance was RMB230,287,167.01, the provision for bad debts was RMB122,443,686.70, the book value was RMB107,843,480.31 and the appraised value of debts was RMB108,994,916.15;
For the debts to Longxiang Company, the book balance was RMB96,631,304.38, the impairment provision was RMB33,502,073.23, the book value was RMB63,129,231.15 and the appraised value of debts was RMB62,742,705.93;
For the debts to Mineral Products Company, the book value was RMB1,341,989.51 and the appraised value of debts was RMB1,341,989.51;
For the debts to Huasheng Mineral, the book value was RMB20,987,425.37 and the appraised value of debts was RMB20,987,425.37.

XI. REMARKS FOR SPECIAL ITEMS

The legal responsibilities of the valuer and the valuation firm were to make professional judgment on the valuation of the assets for the valuation purposes stated in this report, and no judgment whatsoever is made by the valuer and the valuation firm with respect to the economic behaviour corresponding to the purposes of this valuation. To a large extent, the valuation assignment depended on the information provided by the principals and the equity holding company. Therefore, the prerequisite of valuation assignment was that ownership documents, licence and accounting vouchers and the relevant legal documents provided by the principals and the equity holding company and the indebted enterprise were authentic and legal.
When calculating the value of assets available for debt redemption, the influence of related taxes on the debt repayment ratio was not taken into consideration in the process of realizing assets.
The paid value added tax of the enterprise was treated as assets for liquidation without taking into consideration the offset of respective tax payables.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

As to the scope of valuation and the information, statements and relevant materials provided by the equity holding enterprise adopted in the valuation, the principals and the equity holding company were held responsible for the truthfulness and completeness of the information it provided.
The impacts on the valuation conclusions from relevant taxes incurred during the implementation process for the purposes of the valuation have not been considered.
During the validity period after the appraisal date, if there are changes in the quantity and pricing standards of the assets, they should be reflected according to the following principles:
(1) When there are changes in the quantity of the assets, the corresponding adjustments should be made to the amount of the assets using the original valuation method;
(2) When there are changes in the pricing standards of the assets, which will have a significant impact on the valuation results of the assets, the principals should appoint qualified valuation firm to re-determine the appraised value;
(3) When there are changes in the quantity and pricing standards of the assets after the appraisal date, the principal should take them into due account when actually pricing the assets and make the relevant adjustments.

XII. EXPLANATION OF USAGE LIMITATION OF THE VALUATION REPORT

(1) This valuation report shall be used only for the valuation purposes and applications specified herein. In addition, the valuation conclusion reflects the current fair value of the valuation target determined according to the open market principles in the context of the valuation purposes, without taking into account of the impact of possible undertaking of guarantee, security and any special additional payment of the price by the parties upon the appraised price. Moreover, the impact of changes in the state macroeconomic policies, natural disaster and force majeure upon the prices of the assets are not considered in the report. If there are changes in the above-mentioned conditions and the other situations such as the going concern concept that had been applied in the valuation assignment, then the valuation conclusion will normally become void. The valuation firm is not liable for the relevant legal responsibilities for the invalidity of the valuation results due to changes in such conditions.

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APPENDIX XV VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

(2) This valuation report is for the exclusive use by the users of the valuation report specified herein. The rights of use of the valuation report belong to the principals, and we shall not make it available to other parties without the consent of the principals.
(3) The entire or part of the contents of this valuation report shall not be extracted, referred to or disclosed to the public media without the consent of our valuation firm (and subject to our reviewing of the relevant contents), unless otherwise required by laws and regulations and or agreed among the parties concerned.
(4) Based on the state regulations on management of state-owned assets valuation, this valuation report shall be filed (or approved) before being used and the filed (or approved) valuation result is valid for one year (from the appraisal date of 31 October 2014 to 30 October 2015). The assets must be re-valuated if more than one year has lapsed.

XIII. DATE OF VALUATION REPORT

The valuation report is issued on 15 April 2015.

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VALUATION REPORT OF THE AMOUNTS DUE FROM THE OUTGOING ENTITIES TO THE COMPANY

APPENDIX XV

Index of the Files Available for Inspection

Valuation breakdown list;
Economic behaviour documents (photocopies);
Corporate legal person business licenses (photocopies) of the principals and the equity holding company;
Audit reports on the debts under valuation mandate (photocopies);
Letters of undertaking of the principals and the equity holding company;
Letters of undertaking of the registered valuer signatories;
Valuation Qualification Certificate (photocopy) of China United Assets Appraisal Group Co., Limited;
Corporate legal person business license (photocopy) of China United Assets Appraisal Group Co., Limited;
Engagement Letter of Asset Assessment;
Qualification certificates (photocopies) of the registered valuer signatories.

— 654 —

VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

A. VALUATION REPORT OF BENGBU COMPANY

The following is the text of the valuation report received from the Valuer in respect of the valuation of the net asset value of Bengbu Company as at 31 October 2014.

Asset Valuation Report

in respect of

the Proposed Acquisition of Equity Interest in Bengbu China National Building Materials Information Display Material Company* by Luoyang Glass Company Limited by Assets Exchange and Issuance of Shares

China United Appraisal Report [2015] No. 035

China United Assets Appraisal Group Co., Limited

15 April 2015

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

Declaration of the Registered Valuer

We complied with the relevant laws and regulations and valuation standards, adhered to the principles of independence, objectivity and fairness in the course of conducting this valuation assignment; according to the information collected during our assignment process, the contents stated in the valuation report are objective, and we take the relevant legal responsibility as to the reasonableness of the valuation conclusion.
The lists of assets and liabilities of the valuation target were submitted by the principals and valuation target company and were signed and sealed by them as confirmation; the principals and valuation target company are liable for the genuineness, legality, completeness of the information so provided and the proper usage of the Valuation Report.
We did not have any existing nor expected interest in the valuation target in the Valuation Report; and we did not have any existing nor expected interest with the parties concerned, and did not have any bias against the parties concerned.
We conducted on-site investigation on the valuation target of the valuation report and the assets involved; we paid the necessary concern with the legal ownership status of the valuation target and the assets involved, and carried out an inspection of the legal title information of the valuation target and the assets involved.
The analysis, judgment and conclusion in the valuation report that we issued were subject to the constraints of the assumptions and criteria of the Valuation Report, users of the valuation report should take into full consideration the assumptions, criteria, explanation of special items set out in the valuation report and their impact on the valuation conclusion.

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

Asset Valuation Report

in respect of the Proposed Acquisition of Equity Interest in Bengbu CNBM Information Display Material Co. Ltd by Luoyang Glass Company Limited by Assets Exchange and Issuance of Shares

China United Appraisal Report [2015] No. 035

SUMMARY

China United Assets Appraisal Group Co., Limited accepted the mandate from China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited to carry out a valuation assignment of the market value of the total shareholders’ equity of Bengbu CNBM Information Display Material Co., Ltd. involved in the economic behaviour of the proposed acquisition of the equity interest of Bengbu CNBM Information Display Material Co., Ltd. by assets exchange and issuance of shares by Luoyang Glass Company Limited on the appraisal date.

The valuation target was the entire shareholders’ equity of Bengbu CNBM Information Display Material Co., Ltd., and the scope of valuation was all assets and the related liabilities of Bengbu CNBM Information Display Material Co., Ltd., including current assets and non-current assets and the related liabilities.

The appraisal date was 31 October 2014.

The type of valuation of this valuation assignment was market value.

This valuation assignment was based on the going concern concept and the open market principle, and took into consideration the actual situations of the valuation target under mandate and the impact of various factors. The overall valuation of Bengbu CNBM Information Display Material Co., Ltd. was carried out using the asset-based approach and the income approach respectively before checking and comparison were conducted. On the premise that the valuation method is appropriate and in order to fulfill the purposes of the valuation, the valuation adopted the results of the asset-based approach as the final valuation results.

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

The entire shareholders’ equity of Bengbu CNBM Information Display Material Co., Ltd. was valued at RMB674,909,200, representing an appreciation of RMB9,422,400 and an appreciation rate of 1.42% as compared to the book value of RMB665,486,700.

Report users are reminded to pay special attention to the special events and significant events for subsequent periods set out in this report when applying the valuation conclusions.

The above contents were extracted from the full text of the Valuation Report. In order to understand the details of the valuation and to have a reasonable understanding of the valuation conclusions, the full text of the valuation report must be read.

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

Asset Valuation Report

in respect of Information Display Material Co. Ltd by Luoyang Glass Company Limited by Assets Exchange and Issuance of Shares

the Proposed Acquisition of Equity Interest in Bengbu CNBM

China United Appraisal Report 2015 No. 035

**China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited:**

China United Assets Appraisal Group Co., Limited accepted the mandate from you to carry out a valuation assignment of the market value of the entire shareholders’ equity of Bengbu CNBM Information Display Material Co., Ltd. involved in the economic behaviour of the proposed acquisition of the entire equity interest in Bengbu CNBM Information Display Material Co., Ltd. by Luoyang Glass Company Limited by assets exchange and issuance of shares on the appraisal date (being 31 October 2014) in accordance with the relevant laws and regulations and valuation standards and under the asset-based approach and the income approach by following the necessary valuation procedures. The contents of the valuation are as follows:

I. PRINCIPALS, VALUATION TARGET COMPANY AND OTHER USERS OF THE VALUATION REPORT

The principals of this valuation assignment were China Luoyang Float Glass (Group) Company Limited* and Luoyang Glass Company Limited, and the valuation target company was Bengbu CNBM Information Display Material Co., Ltd.

(I) Basic information of Principal 1

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

1. Brief Historical Introduction

CLFG was established in 1991, which was formerly known as Luoyang Glass Factory, and was renamed as China Luoyang Float Glass Corporation Limited in 1993. In 1996, it was transformed into a wholly state-owned company in accordance with the Company Law and renamed as China Luoyang Float Glass (Group) Company Limited at the same time. After several times of capital increase and the gratuitous transfer of state-owned equity interest, as at the appraisal date, the registered capital was RMB1,286,740,000, of which China Building Materials Glass Company (now renamed as “Triumph Technology Group Company”) held a registered capital of RMB665,284,000 (accounted for 51.70% of the total registered capital), Bengbu Glass Industry Design Institute held a registered capital of RMB244,480,700, (accounted for 19.00% of the total registered capital), Luoyang State-owned Assets Operation Company ( 洛陽市國有資產經營公司 ) held a registered capital of RMB132,135,700, (accounted for 10.27% of the total registered capital), China Huarong Asset Management Company* ( 中國華融資產管理公司 ) held a registered capital of RMB110,000,000, (accounted for 8.55% of the total registered capital), China Great Wall Assets Management Corporation( 中國長城資產管理公司 ) held a registered capital of RMB70,000,000, (accounted for 5.44% of the total registered capital), China Orient Asset Management Company( 中國東方資產管理公司 ) held a registered capital of RMB39,840,000, (accounted for 3.10% of the total registered capital) and Henan Branch of China Construction Bank Corporation held a registered capital of RMB25,000,000, (accounted for 1.94% of the total registered capital).

The actual controller of CLFG is China National Building Material Group Corporation.

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

2. Business Scope

(II) Basic information of Principal 2

Company name: Luoyang Glass Company Limited (hereinafter “Luoyang Glass”) Company address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang City Legal representative: Ma Liyun Registered capital: RMB500,018,200 Paid-up capital: RMB500,018,200 Company type: Company Limited (listed) Places of listing: Shanghai Stock Exchange, Hong Kong Stock Exchange Stock short name: 洛陽玻璃 , Luoyang Glass Stock code: 600876.SH, 1108.HK Business registration license no.: 410300400003275 Date of establishment: 6 April 1994

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

1. Historical reform

Luoyang Glass was established in April 1994 with a registered capital of RMB400,000,000 upon establishment. In June 1994, with the approval of the Securities Commission of the State Council, the Company issued 250,000,000 H shares. In September 1995, with the approval of China Securities Regulatory Commission, the Company issued 50,000,000 A shares. After the share trading reform and the repurchase of shares in 2006, as at the appraisal date, the registered capital of the Company was RMB500,018,200 and the share structure is as follows:

			The percentage
		The Amount	of the total
Type of Shares		of Shares	shares
		(ten thousand
		shares)	(%)
I.	Total circulating shares subject to
	trading moratorium	–	–
II.	Total circulating shares not subject
	to trading moratorium	50,001.82	100.00
	1. Ordinary shares denominated
	in RMB_(A Shares)_	25,001.82	50.00
	2. Overseas listed foreign
	invested shares_(H shares)_	25,000.00	50.00
III.	Total shares	50,001.82	100.00

Business Scope

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

(III) Basic information of the valuation target company

Company name:

Company address:

Bengbu CNBM Information Display Material Co., Ltd. (hereinafter “Bengbu Company”)

Plant No. 1, No. 751 Yard, Donghai Avenue, Bengbu City, Anhui Province

Legal representative: Peng Shou Registered capital: RMB632,764,300.00 Paid-up capital: RMB632,764,300.00 Company type: limited liability company Business registration license no.: 340300000109563 Date of establishment: 29 September 2013

Historical reform

Bengbu Company was established on 29 September 2013, which was funded and established by Bengbu Glass Industry Design Institute (hereinafter “Bengbu Institute”). The registered capital of Bengbu Company was RMB30,000,000 upon establishment. On 31 December 2013, Bengbu Institute and CLFG increased capital in Bengbu Company. Bengbu contributed RMB42,720,000 and CLFG contributed RMB99,680,000, with the term of capital contribution for two years. CLFG invested RMB40,000,000 as the initial contribution, which resulted in an increase in the paid-up capital by RMB70,000,000. On 9 October 2014, Bengbu Company passed the resolution at the shareholder’s meeting in relation to the transfer of 41.9% shareholding in Bengbu Company by CLFG (correspondingly, CLFG has subscribed but not yet paid up the contribution of RMB59,680,000 to Bengbu Institute) to Bengbu Institute at the consideration of RMB0. An approval was granted for the capital increase by Bengbu Institute in Bengbu Company for the addition of related assets (including land, properties and equipment, etc.) of 150t/ d production line of ultra-thin glass panel for electronic information display, with an increased paid-up capital to RMB632,764,300 after the capital increase. On 28 October 2014, Bengbu Company passed the resolution at the shareholder’s meeting in relation to the transfer of 93.68% shareholding in Bengbu Company by Bengbu Institute to CLFG, which led to a change of the company type into a sole-proprietor company with limited liability.

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

As at the appraisal date, shareholders and their respective capital contributions and contribution ratio are as follow:

Shareholders and their respective capital contribution and contribution ratio

Shareholder China Luoyang Float Glass (Group) Company Limited Total	Capital contribution (RMB0’000) 63,276.43 63,276.43	Contribution ratio (%) 100.00 100.00

Business scope

Business Scope: Research and development, manufacturing, sales and deep processing of ultra-thin glass; import and export of various commodities and byproducts by itself or through agents; relevant technological services.

Assets, finance and operating status

As at the appraisal date (being 31 October 2014), the total assets of the company was RMB706,242,700, the total liabilities was RMB40,755,900, the net assets was RMB665,486,700, the operating income was RMB29,151,700 and net profit was RMB2,962,500. The assets and financial position of the Company in the recent two years and on the appraisal date are set out in the table below:

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VALUATION REPORT OF BENGBU COMPANY

APPENDIX XVI

Assets, liabilities and financial position of the Company

			Unit: RMB0’000
		31 October	31 December
Item		2014	2013
Total assets		70,624.27	7,725.10
Liabilities		66,548.67	7,000.78
		From January to	For the year
Item		August 2014	of 2013
Operating income		2,915.17	0.00
Total profit		395.23	1.04
Net profit		296.25	0.78
Auditing firm	PKF DAXIN Certified Public Accountants		LLP (Special
	Ordinary	Partnership)
Auditing Opinion	Unqualified auditing opinions

(III) Relationship between the principals and the valuation target company

The principals of this asset valuation are China Luoyang Float Glass (Group) Company Limited and Luoyang Glass Company Limited. The valuation target company is Bengbu CNBM Information Display Material Co., Ltd. China Luoyang Float Glass (Group) Company Limited is the shareholder of Bengbu CNBM Information Display Material Co., Ltd. and Luoyang Glass Company Limited.

(IV) Principals, other users of the valuation report stipulated by the engagement letter

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II. PURPOSE OF THE VALUATION

Pursuant to the Resumptions at the 21st Meeting of the Third Session of the Board of China National Building Group Corporation and the Resolutions at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited, the Proposal on the Material Asset Exchange, Issuance of Shares, Acquisition of Assets and Raising Supporting Funds of Luoyang Glass Company Limited was considered and passed at the meeting. The proposal set out the intention of Luoyang Glass to conduct an equivalent assets exchange with its 100% equity interest in Longhao Company, 63.98% equity interest in Longfei Company, 67% equity interest in Dengfeng Silicon, 52% equity interest in Huasheng Mineral and 40.29% equity interest in CLFG Mineral as well as the its liability assets in Longhao Company, Longfei Company, Longxiang Company, Huasheng Material, CLFG Mineral for the 100% equity interest of Bengbu CNBM Information Display Material Co., Ltd. held by CLFG. The difference between the assets to be disposed and the assets to be acquired will be partly taken by Luoyang Glass under the non-public issuance of A Shares of CLFG.

The purpose of the assets valuation was to reflect the market value of the entire shareholder’ equity of Bengbu CNBM Information Display Material Co., Ltd. on the appraisal date, so as to provide reference basis to the abovementioned economic behavior.

III. VALUATION TARGET AND SCOPE OF VALUATION

The valuation target was the entire shareholders’ equity of Bengbu Company. The scope of valuation was all the assets and related liabilities of Bengbu Company on the appraisal date with the carrying values of RMB70,624.27 for the total assets, RMB4,075.59 for the liabilities and RMB66,548.67 for the net assets. In particular, they include current assets of RMB11,557.18 non-current assets of RMB59,067.09, and current liabilities of RMB4,075.59.

The valuation target under mandate and the scope of the valuation were consistent with those involved in the economic behavior.

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(I) Status of the major assets

The major assets in the scope of this valuation assignment were inventories and fixed assets.

The inventories of the enterprise mainly included raw materials and finished products. The carrying values of the raw materials and finished products amounted to RMB18,633,512.64 and RMB10,383,764.86 respectively. Fixed assets consist of property assets and equipment assets. The original carrying value of the property assets was RMB150,136,468.18, while its net carrying value was RMB150,136,468.18. The original carrying value of the equipment assets was RMB402,650,024.20, while its net carrying value was RMB402,260,870.13.

Raw materials mainly included auxiliary materials for production, spare parts of equipment, low value consumables and standard components, which were operating at a normal turnover rate. The finished products mainly included glass of various specifications, which were operating at a normal turnover rate.

Fixed assets mainly included houses and buildings, structures, channels and drainages, which were all located in the plant area of Bengbu Company to the north of Donghai Avenue and to the west of Laoshan Road of Bengbu City, covering a total of 20 properties with an aggregate gross floor area of 43,728.20 square meters. All of the houses were constructed with frames and light-weight steels, and have obtained property ownership certificates except for a shift dormitory that was still applying for the property ownership certificate. Buildings to be evaluated mainly include silica homogenization silo, packaging warehouse, raw material workshop (burdening and mixture), cullet storage yard, burdening convey corridor, cullet system and other raw material equipments. Structures mainly included roads, building walls as well as temporary houses or simple sheds in the plant area. Channels and drainages mainly included water supply and sewerage pipelines and electric transmission lines. In overall, these houses were constructed under a better standard, which further satisfy the needs for production. Equipment assets include machinery equipment, vehicles and electronic equipment. The major equipment asset of the enterprise was an ultra-thin glass production line with a daily melting capacity of 150 tonnes and the related auxiliary equipment and production facilities as well as other equipments like production auxiliary tools, all of which were in proper function and could satisfy the needs for production. There were two vehicles which were in good condition. Electronic equipments mainly included electronic equipments for office which could basically satisfy the needs for normal workload.

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(II) Book records submitted by the company or status of the intangible assets not recorded

The intangible asset in the book records is a land use right.

As at the appraisal date on 31 October 2014, the intangible asset stated in the financial statements of the valuation target was the land use right of a land parcel which has obtained the land use permit. Such land was for industrial use and was transferred under a land grant agreement without specifying other rights.

(2) Off-balance-sheet intangible assets reported by the Company are proprietary assets and technologies for manufacturing ultra-thin glass. Of all the proprietary assets, 8 are authorized utility models and 8 are patent application rights.
(1) Patent technologies which have been authorized and of which the patent certificate has been acquired are as follows:

No.	Patent Number	Patent Number	Type	Status
1	201320820028	Transverse cutting machine for cutting	utility model	authorized
		ultra-thin sheet glass
2	201320820038	Transfer device for transversely	utility model	authorized
		cutting ultra-thin sheet glass
3	201420079258	Movable supporting plate for	utility model	authorized
		transverse cutting of ultra-thin sheet
		glass
4	201420078679	Inclined joist for transversely cutting	utility model	authorized
		ultra-thin sheet glass
5	201420078739	Wind power jacking device for	utility model	authorized
		transversely cutting of ultra-thin sheet
		glass
6	201420078850	Buoyancy supporting device for	utility model	authorized
		transversely cutting ultra-thin sheet
		glass
7	201420078509	Pneumatic jacking device for	utility model	authorized
		transversely cutting ultra-thin sheet
		glass
8	201420078680	Inclined roller path for transversely	utility model	authorized
		cutting ultra-thin sheet glass

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(2) Patent technologies which have been accepted but not authorized:

No.	Patent Number	Patent Number	Type	Status
1	201410061901	Movable supporting plate for	Invention	Accepted
		transversely cutting ultra-thin sheet
		glass
2	201410061940	Inclined roller path for transversely	Invention	Accepted
		cutting ultra-thin sheet glass
3	201410062103	Inclined joist for transverse cutting	Invention	Accepted
		ultra-thin sheet glass
4	201410061900	Wind power jacking device for	Invention	Accepted
		transversely cutting ultra-thin sheet
		glass
5	201410062103	Pneumatic jacking device for	Invention	Accepted
		transversely cutting ultra-thin sheet
		glass
6	201310678780	Transverse cutting machine for cutting	Invention	In substantive
		ultra-thin sheet glass		examination
7	20310678778	Transfer device for transversely	Invention	In substantive
		cutting ultra-thin sheet glass		examination
8	201410062933	Buoyancy supporting device for	Invention	In substantive
		transversely cutting ultra-thin sheet		examination
		glass

Note: The rights owners of the above patents are Bengbu Company, Bengbu Design & Research Institute for Glass Industry and China Triumph International Engineering Co., Ltd., all of which are under common legal ownership of the above patents.

(III) Type, quantity of off-balance sheet assets submitted by the company

As at 31 October 2014, the off-balance sheet assets in the valuation scope reported by the valuation target were proprietary assets and ultra-thin glass technologies.

(IV) Type, quantity and carrying value of assets as stated in the conclusion of reports issued by other organizations which are adopted as reference hereof

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IV. TYPE OF VALUATION AND DEFINITION

Based on the purposes of this valuation assignment, it was determined that market value was the type of valuation for this valuation assignment.

V. APPRAISAL DATE

The benchmark date of the valuation for this assignment is 31 October 2014.

The benchmark date was determined by the principal after considering the scale of assets of the valuation target company, volume of work, expected time needed, compliance and other basis.

VI. BASIS OF THE VALUATION

(I) Economic behavior basis

Resolutions Passed at the 21st Meeting of the Third Session of the Board of China National Building Group Corporation;
Resolutions passed at the 27th Meeting of the Second Session of the Board for 2014 of China Luoyang Float Glass (Group) Company Limited.

(II) Basis of laws and regulations

“Company Law of the People’s Republic of China” (28 December 2013 as amended by the Sixth Meeting of the Standing Committee of the Twelfth National People’s Congress);
“Securities Law of The People’s Republic of China” (as amended by the Tenth Meeting of the Standing Committee of the Twelfth Session of the National People’s Congress of the People’s Republic of China on 31 August 2014);

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“Administrative Measures for the Assessment of State-Owned Assets” (Order No. 91 issued by the State Council);
“Interim Measures for the Administration of Valuation of Enterprise State-owned Assets” of the State-owned Assets Supervision & Administration Commission of the State Council Order No. 12 (25 August 2005);
“Notice on Issues Related to the Strengthening of the Administration of Valuation of State-owned Assets” (Guo Zi Wei Chan Quan [2006] No. 274);
“Provisional Management Rules Governing the Transfer of State-owned Equity Interests of Corporations” ( Order No. 3 issued by SASAC of the State Council and the Ministry of Finance (1 February 2004));
“Notice on Relevant Issues Concerning the Transfer of State-owned Property Rights of Enterprises” (Guo Zi Chan Quan Fa [2006] No. 306 issued by SASAC of the State Council);
The Land Management Law of the People’s Republic of China (as amended by Eleventh Meeting of the Standing Committee of the Tenth National People’s Congress on 28 August 2004);
Law of the People’s Republic of China on Administration of the Urban Real Estate (as amended by the Twenty-ninth Meeting of the Standing Committee of the Tenth Session of the National People’s Congress on 30 August 2007);
“Notice on Relevant Issues Concerning Verification of State-owned Assets Valuation Report of Enterprise (Guo Zi Chan Quan [2009] of No. 941 issued by SASAC of the State Council);
“Notice on Printing and Issuance of The Guidelines for Registration of State-owned Assets Valuation Projects of Enterprises ” (Guo Zi Fa Chan Quan [2013] No. 64);
“Administrative Measures for the Material Asset Reorganisations of Listed Companies” (Order No. 109 issued by CSRC);
“Regulations in Relation to Regulating Issues Arising from Significant Asset Restructuring of Listed Companies” (CSRC Announcement [2008] No. 14).

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(III) Basis of valuation standards

“Asset Valuation Standards – Basic Standards” (Cai Qi (2004)No. 20);
“Asset Valuation Professional Ethics Standards – Basic Standards” (Cai Qi (2004) No. 20)
“Assets Valuation Ethics Code – Independence” (Zhong Ping Xie [2012] No. 248);
“Asset Valuation Standards – Valuation Report” (Zhong Ping Xie [2011] No. 230);
“Asset Valuation Standards – Valuation Procedures” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Machinery & Equipments” (Zhong Ping Xie [2007] No. 189);
“Asset Appraisal Standards – Property” (Zhong Ping Xie [2007] No. 189);
“Asset Valuation Standards – Intangible Assets” (Zhong Ping Xie [2008] No. 159);
“Asset Valuation Standards – Enterprise Values” (Zhong Ping Xie [2011] No. 227) (Effective from 1 July 2012);
“Asset Valuation Standards – Making Use of Experts” (Zhong Ping Xie [2012] No. 244)
“Guide on Valuation Report of Enterprise State-owned Assets” (Zhong Ping Xie [2011] No. 230);
“Guiding Opinions for Valuation of Business Enterprises (Trial) (Effective from 1 April 2005);
“Numerical Guidelines on Assets Evaluation” (Zhong Ping Xie [2007] No. 189);
“Guidance Opinion on the Concern of Registered Valuers over the Legal Title of Valuation Target” (Kuai Xie [2003] No. 18);
“Code for Real Estate Appraisal” (GB/T50291-1999);

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“Regulations for Valuation on Urban Land” (GB/T18508-2001);
“Regulations for Gradation and Classification on Urban Land” (GB T18507-2001);
“Enterprise Accounting Standards – Basic Standards” (Order No. 33 of the Ministry of Finance);
38 Specific standards such as the “Enterprise Accounting Standards No. 1 – Inventory” (Cai Kuai [2006] No. 3);
“Enterprise Accounting Standards – Application Guide” (Cai Kuai [2006] No. 18).

(IV) Basis of ownership of assets

Property Ownership Certificates;
State-owned Land Usage Certificates;
Vehicle Registration Certificates;
Utility Model Certificate;
Notice of Acceptance for Patent Applications;
Major assets purchase contracts or certificates;
Other references.

(V) Basis for obtaining prices

Regulations on Financial Management of Capital Construction (Cai Jian [2002] No. 394);
Regulations on Pricing Management of Survey and Design Projects (Ji Jia Ge [2002] No. 10);

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Supplementary Notice in relation to the Rules on Administration of Engineering Investigation and Design Charges (Ji Ban Jia Ge [2002] No. 1153);
Notice in relation to the Provisions on Administration of Charging on Engineering Project Supervision and Relevant Services (Fa Gai Jia Ge [2007] No. 670);
Interim Regulations on the Charging Administration of Bidding Agency Services (Ji Jia Ge [2002] No. 1980);
Notice in relation to Standardization of Relevant Issues Concerning Charging on Environmental Impacts (Ji Jia Ge [2002] No. 125);
Mechanical and Electrical Products Quotation Manual in 2014 (Machine Industry Information Research Institute);
List of Loan Interest Rate of the People’s Bank of China implemented on 6 July 2012;
Anhui Province Construction Project Pricing Quota (2009);
Anhui Province Decoration Project Pricing Quota (2009);
Anhui Province Installation Project Pricing Quota (2009);
Standard Quota of Construction and Installation Projects in China in 2000;
Anhui Province Construction Costs and Calculation Rules (2009);
Notice in relation to Adjustment on Labor Costs for Construction Quota issued by the Department of Housing and Urban-Rural of Anhui Province (Jian Biao <2013> No. 155);
Information on Local Building Costs (August 2014);
Document of the People’s Government of Anhui Province of Notice in relation to Adjustment on Compensation Standard for Land Acquisition in Anhui Province issued by the People’s Government of Anhui Province (Wan Zheng [2012] No. 67);

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Updated Results of Land Ranking and Benchmark Land Price of Urban Area of Bengbu City issued by Land and Resources Bureau of Bengbu City on 1 December 2012;
Standard of Dangerous Building Appraisal (issued by the former Ministry of Urban and Rural Construction and Environmental Protection);
“Interim Regulations on Vehicle Purchase Tax in the People’s Republic of China” (Order [2000] No. 294 issued by the State Council);
Regulations on Compulsory Write-off Standard Requirements of Motor Vehicles (Order No. 12 in 2012 issued by the Ministry of Commerce, the NDRC, the Ministry of Public Security and the Ministry of Environmental Protection);
2014 Manual of Quotation for Machinery and Electric Products (Information and Research Institute of Mechanical Industry);
Relevant information in the price information database of China United Assets Appraisal Group Co., Limited;
Other references.

(VI) Other references

Accountant Statements and Audit Reports of Bengbu Company as of 31 October 2013 and 2014;
Handbook on Common Methods and Parameters for Assets Valuation (China Machine Press 2011);
Technical information and geological exploration information related to constructions;
Other references.

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APPENDIX XVI

VII. VALUATION METHOD

(I) Selection of valuation method

As the purpose of this valuation is the assets exchange and the acquisition of equity interest by way of non-public issuance of shares, the assets-based approach reflects the value of the enterprise from the perspective of enterprise construction and provides a basis for the operation, management and assessment of the enterprise after the economic behavior is realised. Therefore, the assets-based method is adopted for this valuation.

Along with the injection of the 150 tonnes ultra-thin production line, the corporate governance structure and business of Bengbu Company, the valuation target, have tended to be stable gradually. With the same contents and scope of the existing business operating on an ongoing basis, it is reliable to estimate the revenue and risks for the future years. Accordingly, this valuation adopted the income approach to conduct the evaluation.

On the basis of the foregoing, the assets-based approach and the income approach were adopted for this valuation.

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(II) Introduction of the assets-based approach

The valuation methods for all assets and liabilities are follows:

Current assets
(1) Monetary funds: including cash, bank deposits and other monetary funds.

The appraised value is the carrying value after verification.

(2) Receivables

As for the valuation of receivables and other receivables, after checking that the receivables are correct, a detailed analysis is made on the amount, time and reasons for the outstanding amount, status of recover of the amount, present conditions of the funds, credibility and business management of the debtors etc. by referring to the historical information and the situations learnt from the investigation. For receivables, aging analysis is adopted to estimate and evaluate risks and losses with reference to the calculation of the provision for bad debts in enterprise accounting, and the risks and losses will be estimated in accordance with the aging analysis.

According to the above standards, the risks and losses on valuation are determined based on the total receivables deducting the amount after the valuation of risks and losses.

(3) Prepayments

As for the valuation of prepayments, on the basis that the prepayments is verified correct, the valuers specifically analyzed the amount, period after due date and reasons thereof, recovery of amount, the liquidity of the borrowers, credit and operational management condition of the borrowers with reference to historical information and current research results. Where there are no indications that the suppliers are in bankruptcy nor revoke or fail to provide goods on time as required by contracts, the book values are adopted as the appraised values.

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(4) Inventories

The valuation methods for all inventories are set out as follows:

1) Raw Materials

The raw materials in this valuation are various materials purchased by the enterprise for production, such as tin, sodium carbonate, silica, cullet, dolomite and other materials, as well as various auxiliary materials purchased for production, such as zirconic sealing materials exclusively for tin baths, spare parts, valves, electromechanical tools, electrical materials and appliances, tools, labour protection goods and other materials. The carrying value mainly consists of the purchasing price, transportation expenses, reasonable damages on materials during transportation, and the allocation and selection expenses before warehouse storage. According to the accounting method on raw materials, the adopted valuation methods are as follows:

For various materials purchased by the enterprise for production, such as tin, sodium carbonate, silica, cullet, dolomite and other materials, as the prices of these raw materials fluctuate frequently in the market, the appraised unit price of these raw materials on the appraisal date is determined by reviewing the online quotation on the appraisal date, the value added tax invoice of the raw materials purchased by the enterprise on the appraisal date, plus the freight and miscellaneous charges and other reasonable expenses. For the various auxiliary materials purchased for production, such as zirconic sealing materials exclusively for tin baths, spare parts, valves, electromechanical tools, electrical materials and appliances, tools, labour protection goods and other materials, as they are easy to purchase and there are no obvious changes on their market prices due to a relatively faster turnover rate, the assessed values are determined with reference to the carrying value after verification.

2) Finished products

The products for valuation are the finished products manufactured by the enterprise for sale which will be sold at a fixed market price set by the industry. The valuation value is determined based on the market price (excluding the value-added tax) by deducting certain amount of taxes.

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As to the finished products, the valuation value is determined based on the sales prices (excluding taxes) by deducting sales expenses, all taxes and a certain amount of sales profits on products. Valuers shall conduct an analysis based on the investigation results and the information provided by the enterprise. As at the appraisal date, the enterprise has just finished the trial production phase, and various indicators in the statements during the operation of the enterprise may not reflect the action condition of the enterprise and the market level, the information set out in the statements may not satisfy the needs for valuation. Valuers made reference to the average industrial level to determine the appraised relevant rates for finished products in the valuation.

The appraised unit value = market price × [1 – sales tax and additional rate – sales expense rate – operating profit margin × 25% – operating profit margin × (1-25%) × r]

a. Sales price excluding tax: it is confirmed according to the market price before and after the appraisal date;
b. Sales tax and additional rate mainly include the urban construction tax and education surtax paid on the basis of VAT;
c. Sales expense rate = sales expense ÷ operating income;
d. The operating profit margin = profit generated from primary business ÷ operating income;

Profit generated from primary business = operating income – operating cost – operating tax and surcharge – sales expense – management expense – financial cost;

e. The income tax rate is subject to the one implemented currently by the enterprise;
f. r is certain rate. Since the sale of finished products has certain market risk, which is confirmed based on the investigation status at the benchmark date and the sales status after the benchmark date. For popular products, r is zero; for common products, r is 50%; for products not sold well, r is 100%.

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(5) Other current assets

2. Non-current assets

(1) Fixed assets

1) Buildings

The cost method is adopted for valuation of the buildings.

Appraised value = total replacement costs × newness rate

① Total replacement costs

Total replacement costs have three components, namely construction & installation costs, preliminary and other expenses and capital cost.

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A. Determination of construction & installation costs

The construction & installation costs include the total costs of civil engineering projects, decoration and renovation projects and drainage and electrical engineering projects. The construction & installation costs are calculated according to Comprehensive Unit Price of Fixed Pricing of Construction, Decoration and Renovation Projects in Anhui Province in 2009 (《安徽省建築、裝飾裝修工程計價定額綜合單價》) (Jianding [2008] No. 259) in relation to construction projects, decoration projects and its comprehensive explanation on the calculation of construction & installation costs of the projects.

B. Determination of preliminary and other expenses

C. Determination of capital cost

The capital cost is the loan interest of the capitals input for the project construction during the construction period. The interest rate is subject to the standard of RMB loan interests stipulated by the People’s Bank of China at the benchmark date, and the construction period is calculated by normal project construction cycle. The capital is deemed as even input during the construction period.

Capital cost = (construction & installation costs + preliminary and other expenses) × reasonable construction cycle × loan interest × 50%

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② Newness rate

Newness rate = remaining service life / (period of usage + remaining service life) × 100%

③ Determination of appraised value

Appraised values = total replacement costs × newness rate

2) Equipment assets

Appraised values = total replacement costs × newness rate

A. Total replacement costs of equipment
1) Total replacement costs of machinery and equipment

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① Purchase price

② Transportation costs and sundry expenses

③ Installation and testing fees

No installation fee is included for equipment which is small in size or does not require installation.

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④ Other expenses

⑤ Capital cost

Capital cost is calculated in accordance with the loan interest rate over the reasonable construction period which is the same period of the project.

2) Total replacement costs of transportation vehicle

Total replacement costs = current purchase price (excluding tax) + vehicle purchase tax + handling charges for new vehicle registration

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3) Total replacement costs of electronic devices

Total replacement costs = purchase price (excluding tax)

B. Determination of newness rate
1) Newness rate of machinery and equipment and electronic devices

Newness rate = remaining service life ÷ (period of actual usage + remaining service life) × 100%

For common equipment with small value or electronic equipment, the newness rate will be determined by age limit method.

Newness rate = (1 – period of actual usage ÷ economic service life) ×100%

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2) Newness rate for vehicle transportation

Newness rate = Min (Useful life newness rate, mileage newness rate)

Useful life newness rate = (1 – period of usage/designed or economic useful life) × 100%

Mileage newness rate = (1 – mileage travelled/designed mileage) × 100%

C. Determination of appraised value

Appraised value = total replacement costs × newness rate

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Intangible assets – Land use right

The land use right adopts benchmark land price coefficient revision method and the cost approach method for evaluation.

① Benchmark land price revision method

Prices of the appraised land parcels with development progress under benchmark land price = [benchmark land price × K1 × (1 + ∑K) + revision value with development progress] × K2

Where: K1 – Revision coefficient on date

K2 – Revision coefficient on land useful life

∑K – Sum of the revision coefficient on regional factors and specific factors affecting land price

② Cost approximation method

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Its basic formula is: V = Ea + Ed + T + R1 + R2 + R3 = VE + R3

In the formula: V – land price; Ea – land acquisition cost; Ed – land development cost; T – tax; R1 – interest; R2 – profit; R3 – land appreciation; VE – land cost price.

where,

Land development costs: Land development costs are calculated by various objective costs that are incurred in the area with land development progress based on the valuation;

Intangible assets – other intangible assets

The patent assets and technologies of the ultra-thin production line as reported by the Company are categorized under “Intangible assets – other intangible assets”.

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Pursuant to the operational standards for the valuation of intangible assets, the cost approach, income approach or market approach can be used for the valuation of technologies according to the prerequisites for utilization and the actual circumstances of the valuation.

Generally speaking, there is usually no correlation between the research and development costs for the technologies and the value of the technologies themselves. Since the technologies to be evaluated are products of years of contribution and cross-sectional research, together with the reasons associated with the management, it is difficult to calculate the research and development costs and the valuation cannot be conducted by taking costs into account. The cost approach is therefore not adopted in this valuation.

In addition, due to the exclusivity of patent technologies and the confidentiality of proprietary technologies, identifying comparables from market transactions usually proves to be difficult and hence, the market approach is not adopted as well.

Accordingly, this valuation is made by taking income into account and the income approach is adopted as a result.

The ideology of the income approach is to estimate the income of products manufactured using the patent technologies in the upcoming years and based on a certain profit sharing ratio (which is the contribution ratio of the patent technologies to the income in the upcoming years), to calculate the appraised value by discounting and adding the estimated income using the appropriate discount ratio. The basic formula is as follows:

==> picture [69 x 30] intentionally omitted <==

Where:

P: the value of technology commissioned to be evaluated
Rt: the annual income from the technology in the T year
t: the sequence number of the year for valuation
k: the profit sharing ratio of the technology for the income
i: discount rate
n: the economic income period of the technology

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5. Deferred income tax assets

In assessing the deferred income tax assets, the balance in the breakdown and the general ledger is verified to see if they are consistent with those of the financial statements and the breakdown list of valuation target under mandate; and book records such as the amount and time of occurrence of the relevant amounts, and contents of the businesses etc. are examined in order to prove the truthfulness and completeness of the deferred income tax assets. If they are consistent upon verification, the appraised value is accordingly the carrying value after verification.

6. Liabilities

(III) Introduction of Income Approach

1. Overview

Pursuant to the Guiding Opinions for Valuation of Business Enterprises (Trial) (《企業價值評估指導意見（試行）》), the value of proposed transferred equity was assessed by adopting the discounted cash flow (the “DCF”) method based on the income approach.

DCF method is to assess the value of an enterprise by discounting its expected future cash flows into the present value, by which the value of an enterprise is derived by estimating the future cash flow of such enterprise and then discounting such future cash flows into their present value at a proper discount rate. The primary conditions for adopting the DCF method include: the enterprise with the foundation and conditions for continuing operation, relatively stable relationship between the operation and earnings, as well as predictable and measurable future earnings and risks. The keys for using DCF method include the estimation of future cash flows and the objectivity and reliability of data gathering and data processing. When an estimation on expected future cash flows is objective and just and the selection of discount rate is proper, the valuation results tend to be more objective and more acceptable to the market.

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Basic ideas of the valuation

Based on the due diligence of this valuation, and the asset structure and features of the principal businesses of the enterprise, the basic idea of this valuation is to estimate the value of the entire equity held by its shareholders (net assets) according to the audited financial statements of such enterprise for previous years, pursuant to which, the value of its operating assets as well as the value of nonoperating or surplus assets as at the benchmark date are measured by the DCF method based on the income approach, so as to derive the corporate value of the enterprise and to acquire the value of the entire equity held by its shareholders (net assets) by deducting the value of interest-bearing liabilities from its corporate value.

Valuation model
(1) Basic model

Basic model of the valuation is:

E = B–D (1)

where:

E: Value of the entire equity held by its shareholders (net assets);
B: Total corporate value;
B = P–ΣC (2)
P: Value of operating assets;

==> picture [126 x 29] intentionally omitted <==

where:

Ri: Expected earnings (free cash flow of the enterprise) for Year i in the future;
Rn: Expected earnings (free cash flow of the enterprise) for the earning period;
r: Discount rate;
n: Estimated future earning period;
ΣCi: Value of non-operating or surplus assets as at the benchmark date.

C=C+C+C+C (4)

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APPENDIX XVI

where:

C1: Value of wholly-owned, controlling or equity investments which are not reflected in the expected earnings (free cash flow);
C2: Value of cash assets (liabilities) as at the benchmark date;
C3: Value of construction in progress whose earnings are not included in the expected earnings (free cash flow);
C4: Value of assets such as obsolescent or idle equipment and properties as at the benchmark date;
D: Value of interest-bearing liabilities.
(2) Income Indicators

In this valuation, the free cash flow of the enterprise is used as the income indicator for the operating assets and the basic definition thereon is:

R = net profit + depreciation and amortization+ interest on interest-bearing debts after taxation-additional capital (5)

Where:

Additional capital = renewal of assets investment+increased amount of working capital+new long-term assets investment (new fixed assets or other long-term assets) (6)

The expected free cash flow for the future is estimated based on the operating history of the enterprise and the future development of the market, assuming the enterprise will still be operating for a period after the forecast period. The value of operating assets of the enterprise is measured by way of discounting and aggregating free cash flow over the future operating period.

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(3) Discount Rate

In the valuation, the model of weighted average cost of capital (WACC) is adopted to determine the discount rate (r).

r = r × w + r × w (7)

Where:

Wd: Debt ratio of the valuation target;

D w = (8) (E+D)

We: Equity capital ratio of the valuation target;

==> picture [91 x 29] intentionally omitted <==

re: Cost of equity capital, which is determined based on the capital asset pricing model (CAPM);

re = rf + βe×(rm – rf)+ε (10)

where:

rf: risk-free return rate;

rm: market expected return rate;

ε: adjustment coefficient of characteristics risk of the valuation target;

βe: expected market risk coefficient of the equity capital of the valuation target;

==> picture [106 x 27] intentionally omitted <==

βt: expected average market risk coefficient for stocks (assets) of comparable companies

==> picture [99 x 10] intentionally omitted <==

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APPENDIX XVI

Where:

K: average risk value of the stock market within a certain period; usually it is assumed that K=1;

βx: historical average market risk coefficient for stocks (assets) of comparable companies;

==> picture [126 x 30] intentionally omitted <==

Where:

Cov(Rx,RP): covariance between the yielding rate of sample stocks and the yielding rate offered by the overall stock market within a certain period;

σp: variance of the yielding rate offered by the overall stock market within a certain period.

VIII. IMPLEMENTATION PROCESS AND STATUS OF VALUATION PROCEDURES

The entire valuation work was carried out in four phases:

(I) Valuation preparation phase

On 31 October 2014, we discussed and obtained consensus with the principals such as the purposes of this valuation, appraisal date, scope of the valuation, etc, and drew up the working plan for this asset valuation.
The inspection of assets, filling in the asset valuation declaration breakdown list, etc. were carried out with the enterprise. In early November 2014, the valuation project team understood the assets under valuation mandate in detail, allocated works for the valuation, assisted the enterprise in declaring assets under valuation mandate, and collected necessary documents and information for asset valuation.

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APPENDIX XVI

(II) On-site valuation phase

The on-site valuation phase of the project team was from 31 October 2014 to 10 November 2014. The major works are as follows:

Listening to the overall situations of the enterprise and the history and present conditions of the assets under valuation mandate as explained by the relevant personnel of the principals and the valuation target company, and understanding the financial system, operating conditions, status of the fixed assets and technology, etc. of the enterprise.
Review and identification of the asset inspection and valuation declaration breakdown list provided by the enterprise; verification against the relevant financial records of the enterprise, coordinate with the enterprise to make adjustments for any problem identified.
Conducting a complete inspection and verification of the fixed assets against the asset inspection and valuation declaration breakdown list, conducting random sampling stock taking of the inventory physical assets among the current assets.
Inspection and collection of the documentary proof of titles of the assets under the valuation mandate.
Determining the specific valuation methods for each type of assets according to the actual conditions and characteristics of the assets under valuation mandate.
Referring to the technical information, final accounts information or completion acceptance information in respect of key equipment; collecting price information by way of market surveys and enquiries in respect of general equipment.
Verification of the ownership information provided by the enterprise.
Carrying out initial valuation and measurement of the assets and liabilities within the scope of the valuation after inspection and verification.

(III) Valuation consolidation phase

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APPENDIX XVI

(IV) Report issuing phase

The working period of this phase was from 26 November 2014 to 15 April 2015.

IX. ASSUMPTIONS OF VALUATION

The valuers made the following valuation assumptions for this valuation:

(I) General assumptions

Transaction assumption

Open market assumption

Going concern assumption for the assets

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APPENDIX XVI

(II) Special assumptions

The external economic conditions remain stable as of the appraisal date for this valuation, and the current macro-economic conditions of the PRC will not change in any material aspects;
There are no material changes in the social and economic environment under which relevant enterprise operates, and in its tax policy and tax rates;
The future operation and management team of the enterprise will fulfill their duties and maintain the existing model of operation and management;
The valuation is only based on the current operating capacity, while disregarding the potential increase of the operating capacity due to the management, business strategy and the increase in investment, nor the potential subsequent changes of production and operation;
The valuation is based on the actual amount of stocks of all the assets as on the appraisal date, and the current market prices of the relevant assets are based on the domestic effective prices on the appraisal date;
The basic information and financial data provided by the principals and the valuation target company is true, accurate and complete;
The scope of the valuation is based solely on the application for appraisal submitted by the principals and the valuation target company, without considering possible existence of contingent assets or contingent liabilities that are not listed in the application provided by the principals and the valuation target company;
The values of the various parameters used in the appraisal have disregarded the potential impact of inflation;

When there are changes in the above conditions, the valuation results will be void in most cases.

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APPENDIX XVI

X. VALUATION CONCLUSIONS

We have fulfilled the statutory and necessary procedures for asset valuation pursuant to the laws, regulations, rules and valuation principles in regard to asset valuation of the PRC, withheld independent, justice, scientific and objective principles, after adopting the asset-based approach, and have carried out on-site investigation, market survey and enquiries and assessment, the following valuation results in respect of the assets within the scope of valuation of Bengbu China National Building Materials Information Display Material Company were obtained:

(I) Valuation Conclusion under the Asset-based Approach

The book value of assets is RMB706,242,700 and the appraised value is RMB715,665,100. The appraised value is RMB9,422,400 higher than the book value with an appreciation rate of 1.33%.

The book value of liabilities is RMB40,755,900 and the appraised value is RMB40,755,900, with no appraisal appreciation or depreciation.

The book value of net asset is RMB665,486,700 and the appraised value is RMB674,909,200. The appraised value is RMB9,422,400 higher than the book value with an appreciation rate of 1.42%. The table is set out below for details.

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APPENDIX XVI

Consolidation Table of the Asset Valuation Results

Valuation target company: Bengbu China National Building Materials Information Display Material Company

Appraisal date: 31 October 2014

Unit: RMB0’000

			Appraised	Appreciation or	Appreciation
	Item	Book Value	Value	Depreciation	Rate%
		A	B	C=B–A	D=C/A
1	Current assets	11,557.18	12,627.68	1,070.50	9.26
2	Non-current assets	59,067.09	58,938.83	-128.26	-0.22
4	Including: Long-term
	equity investment	–	–	–
5	Property for
	investment purpose	–	–	–
6	Fixed assets	55,239.73	54,241.75	-997.98	-1.81
7	Construction in progress	–	–	–
8	Intangible assets	3,729.06	4,598.78	869.72	23.32
9	Including: Land
	use right	3,729.06	3,561.25	-167.81	-4.50
	Other non-current assets	–	–	–
11	Total assets	70,624.27	71,566.51	942.24	1.33
12	Current liabilities	4,075.59	4,075.59	–	–
13	Non-current liabilities	–	–	–
14	Total liabilities	4,075.59	4,075.59	–	–
15	Net assets
	(Owners’ equity)	66,548.67	67,490.92	942.24	1.42

(II) Valuation Conclusion under the Income Approach

A valuation of the entire shareholders’ equity of the enterprise was carried out using the Discounted Cash Flow method (DCF) after the valuation procedures of inspection, verification, on-site investigation, market survey and enquiries and assessment of estimates, etc. had been made. The book value of net asset of the Bengbu China National Building Materials Information Display Material Company is RMB665,486,700 and the appraised net asset value is RMB665,545,300 as at the appraisal date (i.e. 31 October 2014). The appraised value is RMB58,600 higher than the book value with an appreciation rate of 0.01%.

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(III) Analysis of the Difference of the Valuation Results

The value of the entire shareholders’ equity of the enterprise being obtained under income approach is RMB665,545,300, which is RMB9,363,900 or 1.39% lower than the value of the shareholders’ equity of the enterprise being obtained under asset-based approach (RMB674,909,200). The differences of the results from the two approaches are mainly due to:

The valuation under the asset-based approach uses the replacement costs of assets as the valuation standards, reflecting the labour of the society required and spent on the investment in the assets (costs of purchase and construction). Usually this type of costs of purchase and construction vary according to the changes in the economy of the PRC;
The valuation under the income approach uses the expected income of assets as the valuation standards, reflecting the degree of the operating capability (profitability) of the assets, and usually this type of profitability is affected by the several conditions such as the macro-economy, government control and effective utilization of the assets, etc.

The above factors lead to certain differences of the two valuation results.

(IV) The selection of the valuation results

Bengbu Company is mainly engaged in capital-intensive industries including production and sales of ultra-thin glass substrates, which have a relatively longer investment return period. Meanwhile, as manufacturing is a fundamental industry of the economy development of the PRC, the operating conditions of Bengbu Company are also significantly affected by macro-economy and changes and adjustment of the policies. According to the arrangements of adjustment, optimization and upgrade of the industry structure by the government of the PRC, the demand and supply relation of the market and industry scale, etc. of glass manufacturing industry and other industries will be affected. Thus, Bengbu Company will make corresponding adjustment of its business model, product structure and scope of business to the changing trend of the market in its future development. However, there are uncertainties about the scale and duration of such products structure adjustment.

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Bengbu Company was established in September 2013. The enterprise was in production adjustment and testing stage before August 2014. In view of the relatively short operating period of Bengbu Company, the accuracies of estimated data used in income approach such as operating income, cost structure, asset turnover efficiency and working capital, etc. may be affected. While asset-based approach reflects the replacement value based on the current assets of the enterprise. Therefore, the data being used in asset-based approach is of higher quality comparing with that in income approach. In addition, assetbased approach estimates and calculates various assets and liabilities of the enterprise separately, which is more precise.

In consideration of the above analysis, we have selected asset-based approach as the reference for the valuation of the net asset value of Bengbu China National Building Materials Information Display Material Company, from which the value of total interest of Bengbu Company on the appraisal date is RMB674,909,200.

XI. REMARKS FOR SPECIAL ITEMS

(I) Defects in ownership of housings

Bengbu Company had not applied for certificates of ownership for shifts dormitory with the total area of 3830.42m[2] included in the scope of the valuation. Valuation target company promise that the buildings vested in Bengbu Company without disputes of the ownership involved. The valuation was estimated according to the measurement area reported by the enterprise after verification, which may differ from the actual area.

(II) Outstanding matters, legal disputes and other uncertain factors

There are no outstanding matters, legal disputes and other uncertain factors in the report.

(III) Material subsequent events

According to knowledge acquired from the due diligence work of the valuer, after the appraisal date, on 22 November 2014, the People’s bank of China lowered the benchmark interest rate of both deposits and loans for financial institutions. The valuation results of the income approach have considered the impact of interest rate adjustment on the appraised value.

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(IV) Other matters need explanations

The legal responsibilities of the valuer and the valuation firm were to make professional judgment on the valuation of the assets for the valuation purposes stated in this report, and no judgment whatsoever is made by the valuer and the valuation firm with respect to the economic behaviour corresponding to the purposes of this valuation. To a large extent, the valuation assignment depended on the information provided by the principals and the valuation target company. Therefore, the prerequisite of valuation assignment was that ownership documents, licence and accounting vouchers and the relevant legal documents provided by the principals and the valuation target company were authentic and legal.
During the valuation process, the valuers observed the appearance, internal decoration, and usage of buildings as much as possible but did no test about structure or materials. When conducting inspection of the equipment, due to the restraints of the testing methods and the fact that some equipment were in operation, this task was mainly done by exterior observation by the valuers and the latest testing materials provided by the valuation target company as well as the enquiries to the operators, etc. in order to judge the conditions of the equipment.
The items categorized under “Intangible assets – patent right” are under common ownership of three parties. The rights owners are Bengbu Company, Bengbu Design & Research Institute for Glass Industry and China Triumph International Engineering Co., Ltd. Since the parties may enter into agreements or reach arrangements for the profit sharing of possible future income from the patents, the impact of the common ownership on the appraised value has not been taken into account in this valuation.
The principals and the valuation target company were held responsible for the truthfulness and completeness of data, statements and the relevant information provided by the valuation target company and which were used within the scope of this valuation assignment.
The principals and the valuation target company were held responsible for the truthfulness and legality of the ownership documentary proof and relevant information provided by the valuation target company in the valuation report.
The impacts on the valuation conclusions from relevant taxes incurred during the implementation process for the purposes of the valuation have not been considered.

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APPENDIX XVI

During the validity period after the appraisal date, if there are changes in the quantity and pricing standards of the assets, they should be reflected according to the following principles:
(1) When there are changes in the quantity of the assets, the corresponding adjustments should be made to the amount of the assets using the original valuation method;
(2) When there are changes in the pricing standards of the assets, which will have a significant impact on the valuation results of the assets, the principals should appoint qualified valuation firm to re-determine the appraised value;
(3) When there are changes in the quantity and pricing standards of the assets after the appraisal date, the principal should take them into due account when actually pricing the assets and make the relevant adjustments.

XII. EXPLANATION OF USAGE LIMITATION OF THE VALUATION REPORT

(1) This valuation report shall be used only for the valuation purposes and applications specified herein. In addition, the valuation conclusion reflects the current fair value of the valuation target determined according to the open market principles in the context of the valuation purposes, without taking into account of the impact of possible undertaking of guarantee, security and any special additional payment of the price by the parties upon the appraised price. Moreover, the impact of changes in the state macroeconomic policies, natural disaster and force majeure upon the prices of the assets are not considered in the report. If there are changes in the above-mentioned conditions and the other situations such as the going concern concept that had been applied in the valuation assignment, then the valuation conclusion will normally become void. The valuation firm is not liable for the relevant legal responsibilities for the invalidity of the valuation results due to changes in such conditions.

(2) This valuation report is for the exclusive use by the users of the valuation report specified herein. The rights of use of the valuation report belong to the principals, and we shall not make it available to other parties without the consent of the principals.

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APPENDIX XVI

(3) The entire or part of the contents of this valuation report shall not be extracted, referred to or disclosed to the public media without the consent of our valuation firm (and subject to our reviewing of the relevant contents), unless otherwise required by laws and regulations and or agreed among the parties concerned.
(4) Based on the state regulations on management of state-owned assets valuation, this valuation report shall be filed (or approved) before being used and the filed (or approved) valuation result is valid for one year (from the appraisal date of 31 October 2014 to 30 October 2015). The assets must be re-valuated if more than one year has lapsed.

XIII. DATE OF VALUATION REPORT

The valuation report is issued on 15 April 2015.

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APPENDIX XVI

INDEX OF THE FILES AVAILABLE FOR INSPECTION

Economic behaviour documents (photocopies);
Corporate legal person business licenses (photocopies) of the principals and the valuation target company;
Audited report and accounting statement (photocopies) of Bengbu Co., Ltd. for the year 2013 and as at 31 October 2014;
Main title proof information (photocopies) of the valuation target;
Letters of undertaking of the principals and the valuation target company;
Letters of undertaking of the registered valuer signatories;
Valuation Qualification Certificate (photocopy) of China United Assets Appraisal Group Co., Limited;
Corporate legal person business license (photocopy) of China United Assets Appraisal Group Co., Limited;
Engagement Letter of Asset Assessment;
Qualification certificates (photocopies) of the registered valuer signatories.

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APPENDIX XVI

B LETTER FROM WUYIGE CERTIFIED PUBLIC ACCOUNTANTS LLP.

Set out below is the text of the letter from WUYIGE Certified Public Accountants LLP. in connection with the Profit Forecast.

Letter from Reporting Accountants on Profit Forecast

The Board of Directors

Luoyang Glass Company Limited (the “ Company* ”)

10 August 2015

Dear Sirs,

We have been engaged to report on the arithmetical calculations of the profit forecast (the “ Profit Forecast ”) used in the valuation report of the net asset value of Bengbu China Building Information Display Materials Co. Ltd. (“ Bengbu Company ”) as at 31 October 2014 (the “ Valuation ”), dated 15 April 2015, prepared by China United Assets Appraisal Group Limited.

The Profit Forecast is regarded by the directors of the Company as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

Directors’ Responsibility for the Profit Forecast

The directors of the Company are responsible for the preparation of the Profit Forecast in accordance with the bases and assumptions determined by the directors and as set out in the Valuation. This responsibility includes applying an appropriate basis of preparation and making estimates that are reasonable in the circumstances.

Our Responsibility

It is our responsibility to report, as required by Rule 14.62(2) of the Listing Rules, on the arithmetical calculations of the Profit Forecast used in the Valuation.

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We conducted our work with reference to Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information”. This standard requires that we comply with ethical requirements and plan and perform the assurance engagement to obtain reasonable assurance on whether the Profit Forecast, so far as the arithmetical calculations are concerned, have been properly compiled in accordance with the bases and assumptions as set out in the Valuation. We have re-performed the arithmetical calculations and compared the compilation of the Profit Forecast with the bases and assumptions.

We are not reporting on the appropriateness and validity of the bases and assumptions on which the Profit Forecast are based and our work does not constitute any valuation of Bengbu Company or an expression of an audit or review opinion on the Valuation.

The Profit Forecast do not involve the adoption of accounting policies. The Profit Forecast depend on future events and on a number of assumptions which cannot be confirmed and verified in the same way as past results and not all of which may remain valid throughout the period. Our work has been undertaken for the purpose of reporting solely to you under Rule 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

Opinion

Based on the foregoing, in our opinion, the Profit Forecast, so far as the arithmetical calculations are concerned, have been properly compiled in all material respects in accordance with the bases and assumptions made by the directors of the Company as set out in the Valuation.

WUYIGE CERTIFIED PUBLIC ACCOUNTANTS LLP.

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APPENDIX XVI

C LETTER FROM TC CAPITAL ASIA LIMITED

Set out below is the text of the letter from TC Capital Asia Limited in connection with the Profit Forecast.

The Board of Directors

Luoyang Glass Company Limited*

10 August 2015

Dear Sirs,

We refer to the valuation report dated 15 April 2015 prepared by China United Assets Appraisal Group Limited (the “ Independent Valuer ”) in relation to the valuation of the net asset value of Bengbu China Building Information Display Materials Co. Ltd. (“ Bengbu Company ”) as at 31 October 2014 (the “ Valuation ”).

The principal assumptions upon which the Valuation is based are included in “APPENDIX XVI – VALUATION REPORT OF BENGBU COMPANY – IX. ASSUMPTIONS OF VALUATION” of this circular. Capitalised terms used herein shall have the same meanings as those defined in this circular unless the context requires otherwise.

We note that the Valuation has been developed based in part on the discounted cash flow analysis which is regarded as a profit forecast (the “ Profit Forecast ”) under Rule 14.61 of the Listing Rules.

We have discussed with the management of the Company and the Independent Valuer regarding the bases and assumptions of the Profit Forecast and have reviewed the letter dated 10 August 2015 issued by WUYIGE Certified Public Accountants LLP, the auditors of the Company, as set out in “APPENDIX XVI – VALUATION REPORT OF BENGBU COMPANY – B – LETTER FROM WUYIGE CERTIFIED PUBLIC ACCOUNTANTS LLP.” of this circular in regards to their work performed on the Profit Forecast.

On the basis of the foregoing, we are of the opinion that the Profit Forecast, for which the Directors are solely responsible, has been made after due and careful enquiry.

Yours faithfully, For and on behalf of

TC Capital Asia Limited Edward Wu

Managing Director

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GENERAL INFORMATION

APPENDIX XVII

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. SHARE CAPITAL

The total authorised, issued and fully paid up ordinary share capital of the Company (i) as at the Latest Practicable Date; (ii) immediately after the Reorganisation but before the Proposed A Share Placing; and (iii) immediately after the Reorganisation and the Proposed A Share Placing are as follows:

		Immediately after the	Immediately after the
		Reorganisation but	Reorganisation
	As at the Latest	before the Proposed	and the Proposed
	Practicable Date	A Share Placing	A Share Placing
Total share capital:	RMB500,018,242	RMB515,018,242	RMB547,155,761
	divided into	divided into	divided into
	500,018,242 Shares	515,018,242 Shares	547,155,761 Shares
	of RMB1.00 each	of RMB1.00 each	of RMB1.00 each

3. DISCLOSURE OF INTERESTS

(a) Interests of the Directors, supervisors and chief executives of the Company

As at the Latest Practicable Date, none of the Directors, supervisors or chief executives of the Company had an interest or short position in any Shares, underlying shares or debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which were 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 executives of the Company was taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, entered in the register kept by the Company; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

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GENERAL INFORMATION

APPENDIX XVII

As at the Latest Practicable Date, none of the Directors was a director or employee of a company which had an interest or short position in the Shares or 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.

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective close associates were considered to have interest in any business which competes or may compete with the business of the Group which would be required to be disclosed under Rule 8.10 of the Listing Rules as if each of them was a controlling Shareholder.

As at the Latest Practicable Date, none of the Directors had 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 2014, being the date to which the latest published audited consolidated financial statements of the Group were made up.

None of the Directors is materially interested in any contract or arrangement 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 executives of the Company, no other person had 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% 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.

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GENERAL INFORMATION

APPENDIX XVII

			Approximate
			percentage of	Approximate
			the total	percentage of
			issued	the total
			domestic	issued share
		Number of	share capital	capital
		domestic	of the	of the
Name of Shareholder	Capacity	Shares held	Company	Company
			(%)	(%)
CLFG	Beneficial owner	159,018,242	63.60	31.80
CNBMG_(Note)_	Interest in controlled corporation	159,018,242	63.60	31.80
Kaisheng Technology
Group Company* (凱盛
科技集團公司)(Note)	Interest in controlled corporation	159,018,242	63.60	31.80

Note:

The 159,018,242 A Shares are registered and owned by CLFG. CNBMG is the beneficial owner of CLFG, CNBMG holds 51.70% and 19.00% (totally holding 70.70%) equity interest in CLFG through wholly-owned subsidiaries, Kaisheng Technology Group Company* (凱盛科技集團公司) and Bengbu Institute respectively. CNBMG is therefore deemed to be interested in 159,018,242 A Shares held by CLFG under the SFO.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had any existing or proposed service contract with any member of the Group which does not expire or is not determinable by the Company within one year without payment of compensation (other than statutory compensation).

5. EXPERTS

The following sets out the qualifications of the experts which have given their opinion or advice as contained in this circular:

Name

Qualification

Goldin Financial Limited

A corporation licensed to carry on Type 6 (advising on corporate finance) regulated activity for the purpose of the SFO

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GENERAL INFORMATION

APPENDIX XVII

WUYIGE Certified Public PRC certified public accountants Accountants LLP

China United Assets Appraisal Group Co., Ltd.

PRC certified public valuer

TC Capital Asia Limited

A corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

The above experts have given and have not withdrawn their written consents to the issue of this circular with the inclusion of their reports or letters and/or references to their names in the form and context in which they are included.

As at the Latest Practicable Date, each of the experts above was not beneficially interested in the share capital of any member of the enlarged Group nor did they have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the enlarged Group.

As at the Latest Practicable Date, each of the experts above did not have any 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 or disposed of by, or leased to any member of the Group since 31 December 2014, being the date to which the latest published audited consolidated financial statements of the Group were made up.

6. MATERIAL CONTRACTS

The following contracts (being contracts not entered into in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the date of this circular and up to and including the Latest Practicable Date:

On 20 December 2013, the Company entered into Plant Transfer Agreement with Luoyang Hoisting Machinery Company Limited ( 洛陽起重機廠有限公司 ), pursuant to which, the Company transferred a property in idle to Machinery Company at a consideration of RMB33 million.
On 2 January 2014, the Company entered into Equity Transfer Agreement, pursuant to which, the Company transferred 100% equity interests in Industry Company to Luoyang Tianyuan Real Estate Co., Ltd. at a consideration of RMB122 million.

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GENERAL INFORMATION

APPENDIX XVII

On 17 April 2014, Longhao Company entered into Assets Leasing Agreement with CLFG, pursuant of which, Longhao Company leased a 600T/D online LOW-E production line, plants, equipment and all of the assets from CLFG. The term of leasing was 3 years, and the annual lease fees amounted to RMB31.9 million.
Longhao Glass entered into the Project Design and Construction and Installation Agreement and the Equipment Supply Contracting Agreement with Shenzhen Triumph Technology Engineering Co., Ltd. for a residual heat power generation project for float glass production lines. The total contracted amount was RMB13.94 million.
On 20 May 2014, Longhao Company entered into a Project Design and Construction and Installation Agreement and an Equipment Supply Contracting Agreement with Shenzhen Triumph Technology Engineering Co., Ltd. in relation to the smoke gas treatment system for the float glass production lines of Longhao Company, pursuant to which, Shenzhen Triumph Technology Engineering Co., Ltd. Has agreed to provide project design, construction and installation as well as the purchase services of relevant equipment for the project. Total contracted amount was RMB15.96 million.
On 10 July 2014, Longhao Company entered into Inventory Materials Purchase Agreement with CLFG, pursuant to which, CLFG will transfer inventory materials to Longhao Company at a consideration of RMB12,026,638.27.
On 14 November 2014, Longhai Company entered into Project Design, Construction and Installation Services for the Purpose of the Production Line Smoke Gas Dust Removal and Denitration Agreement with Jiangsu CNBM Environment Protection Research Institute Limited. Total contracted amount was RMB1.4 million.

Longhai Company entered into Project Design, Construction and Installation Services for the Purpose of the Production Line Smoke Gas Dust Removal and Denitration Agreement with CNBM Environment Protection Institute. Total contracted amount was RMB3.8 million.

On 14 November 2014, Longbo Company entered into Project Design, Construction and Installation Services for the Purpose of the Production Line Smoke Gas Dust Removal and Denitration Agreement with CNBM Environment Protection Institute. Total contracted amount was RMB4.5 million.

— 713 —

GENERAL INFORMATION

APPENDIX XVII

The Equity Interest Transfer Agreement III.
The Framework Agreement.
The Formal Agreement.
On 17 June 2015, Longhai Company entered into Leaseback Finance Lease Agreement with International Far Eastern Leasing Co., Ltd. ( 遠東國際租賃有限公司 ), including Ownership Transfer Agreement and Leaseback Agreement.

7. LITIGATION

As at the Latest Practicable Date, no member of the enlarged Group was engaged in any litigation or claims of material importance known to the Directors to be pending or threatened against any member of the enlarged Group.

8. GENERAL

(a) The registered and principal office of the Company is situated at No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC.
(b) The share registrar and transfer office of the H Shares is Hong Kong Registrars Limited at Rooms 1712-1716, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(c) The company secretary of the Company is Mr. Ip Pui-Sum. Mr. Ip is a certified public accountant in Hong Kong, a fellow member of the Association of Chartered Certified Accountants, and a member of the Hong Kong Institute of Certified Public Accountants, Chartered Institute of Management Accountants, Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered Secretaries.
(d) For the purpose of this circular, all amounts denominated in RMB have been translated (for information only) into HK$ using the exchange rate of RMB1:HK$1.25. No representation is made that any amounts in RMB or HK$ can be or could have been converted at the relevant dates at the above rate or any other rates at all.
(e) In the event of any inconsistency, the English text of this circular shall prevail over the Chinese text.

— 714 —

GENERAL INFORMATION

APPENDIX XVII

9. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2014, being the date to which the latest published audited consolidated financial statements of the Group were made up.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of TC Capital Asia Limited at Suite 1903 & 1904, 19/F, Tower 6, The Gateway, Harbour City, 9 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong during normal business hours on any weekday (except public holidays) for a period of 14 days from the date of this circular:

(a) the memorandum and articles of association of the Company;
(b) the contracts referred to in the section headed “Material contracts” in this appendix;
(c) the Equity Interest Transfer Agreement I;
(d) the Equity Interest Transfer Agreement II;
(e) the Equity Interest Transfer Agreement III;
(f) the Framework Agreement;
(g) the Formal Agreement;
(h) the letter from the Independent Board Committee, the text of which is set out on pages 55 to 56 of this circular;
(i) the letter from Goldin, the text of which is set out on pages 57 to 88 of this circular;
(j) the accountants’ report of Bengbu Company, the text of which is set out in Appendix II to this circular;
(k) the accountants’ report of Longhao Company, the text of which is set out in Appendix III to this circular;
(l) the accountants’ report of Longfei Company, the text of which is set out in Appendix IV to this circular;

— 715 —

GENERAL INFORMATION

APPENDIX XVII

(m) the accountants’ report of Dengfeng Silicon Company, the text of which is set out in Appendix V to this circular;
(n) the accountants’ report of Yinan Huasheng, the text of which is set out in Appendix VI to this circular;
(o) the accountants’ report of Mineral Products Company, the text of which is set out in Appendix VII to this circular;
(p) the accountants’ report of the amounts due from the Outgoing Entities to the Company, the text of which is set out in Appendix VIII to this circular;
(q) the unaudited pro forma financial information of the enlarged Group, the text of which is set out in Appendix IX to this circular;
(r) the valuation report of Longhao Company, the text of which is set out in Appendix X to this circular;
(s) the valuation report of Longfei Company, the text of which is set out in Appendix XI to this circular;
(t) the valuation report of Dengfeng Silicon Company, the text of which is set out in Appendix XII to this circular;
(u) the valuation report of Yinan Huasheng, the text of which is set out in Appendix XIII to this circular;
(v) the valuation report of Mineral Products Company, the text of which is set out in Appendix XIV to this circular;
(w) the valuation report of the amounts due from the Outgoing Entities to the Company, the text of which is set out in Appendix XV to this circular;
(x) the valuation report of Bengbu Company, the text of which is set out in Appendix XVI to this circular;

— 716 —

GENERAL INFORMATION

APPENDIX XVII

(y) the report on the Profit Forecast prepared by TC Capital, the text of which is set out on page 708 of this circular;
(z) the report on the Profit Forecast prepared by WUYIGE, the text of which is set out on pages 706 to 707 of this circular;
(aa) the written consents of the experts mentioned in the section headed “Experts” in this appendix;
(bb) the annual reports of the Company for the years ended 31 December 2013 and 31 December 2014 respectively and the first quarterly report of the Company for the three months ended 31 March 2015;
(cc) the Assets Leasing Agreement;
(dd) the Termination Agreement; and
(ee) this circular.

— 717 —

SUPPLEMENTAL NOTICE OF THE EGM

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＊

SUPPLEMENTAL NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING IN 2015

Reference is made to the notice (the “Original Notice”) of the first extraordinary general meeting in 2015 (the “EGM”) dated 25 June 2015 of Luoyang Glass Company Limited* (the “Company”). The Original Notice set out the time and address of the EGM and resolutions proposed to be approved by shareholders at the EGM.

As the EGM was postponed, the Company issued this supplemental notice (the “Supplemental Notice”). Save as the amendments to the date of the EGM, prolongation of suspending transfer of shares and the revisions made in the notes of this Supplemental Notice, other matters related to the EGM in the Original Notice of the EGM remain unchanged.

SUPPLEMENTAL NOTICE IS HEREBY given that the EGM will be rescheduled at 9:00 a.m. on 25 August 2015 at the conference room of the Company on 3rd Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the People’s Republic of China for the purpose of considering and, if thought fit, passing the following resolutions:

Unless otherwise indicated, capitalised terms used herein shall have the same meanings as those defined in the announcements of the Company dated 31 December 2014, 10 June 2015 and 17 June 2015.

I. SPECIAL RESOLUTIONS

The resolution, in compliance with the relevant laws and regulations, being in relation to the Company’s major asset swap, issuance of shares, acquisition of assets by cash and raising of supporting funds;

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SUPPLEMENTAL NOTICE OF THE EGM

The resolution in relation to the Company’s major asset swap, issuance of shares, acquisition of assets by cash and raising of supporting funds;
2.01 The subject, counterparty and mode of the transaction
2.02 The consideration for the transaction and method of payment
2.03 The types and face value of the shares to be issued
2.04 The method of share issuance and the target subscribers for the share issuance
2.05 The issue price
2.06 The number of shares to be issued
2.07 The use of the proceeds of the supporting funds raised
2.08 Subscription method
2.09 Arrangement for Lock-up Period
2.10 Payment by cash for this transaction
2.11 Vesting of loss/gains of the underlying asset from the valuation date to and until the asset settlement date
2.12 Place of listing
2.13 The proposal regarding the Company’s profits which are rolled over and remain undistributed prior to the issuance
2.14 Asset settlement
2.15 Effective term for the resolution regarding the issuance
The resolution regarding the adjustment in method of payment for the proceeds of supporting funds raised and for the differential of the asset swap constituting no material adjustment in the restructuring proposal;

— 719 —

SUPPLEMENTAL NOTICE OF THE EGM

The resolution regarding the major asset swap, issuance of shares and acquisition of assets by cash constituting the connected transaction(s);
The resolution regarding Luoyang Glass Company Limited’s report (draft) on the major asset swap, issuance of shares, acquisition of assets by cash and raising of supporting funds and connected transaction(s) (《洛陽玻璃股份有限公司重大資產置換及發行股份並支付現金購買資產並募集配套資金暨關聯交易報告書（草案）》) and the abstracted resolutions thereof;
The resolution regarding the Agreement between Luoyang Glass Company Limited and China Luoyang Float Glass (Group) Company Limited in respect of the major asset swap, issuance of shares, acquisition of assets by cash and raising of supporting funds (《洛陽玻璃股份有限公司與中國洛陽浮法玻璃集團有限責任公司關於重大資產置換及發行股份並支付現金購買資產並募集配套資金的協議》) subject to conditions precedent entered into by and between the Company and the counterparty;
The resolution regarding the compliance of prudent judgment stipulated in rule 4 of Regulations in Relation to Regulating Issues Arising from Significant Asset Restructuring of Listed Companies from the transaction of the Company;
The resolution regarding the approval of the relevant audit report and asset valuation report of the transaction;
The resolution regarding the mandate granted by the general meeting to the Board for proceeding with the matters related to the major asset swap, issuance of shares, acquisition of assets by cash and the raising of supporting funds;
The resolution regarding the amendment made to the Articles of Association;

As for the details of the foregoing resolutions, please refer to the Company’s announcements dated 10 June 2015.

II. ORDINARY RESOLUTION

The resolution regarding the termination of asset leasing by CLFG Longhao Glass Co., Ltd., the wholly-owned subsidiary of the Company.

— 720 —

SUPPLEMENTAL NOTICE OF THE EGM

As for the details of the foregoing resolution, please refer to the Company’s announcement dated 17 June 2015.

By order of the Board LUOYANG GLASS COMPANY LIMITED *

Ma Liyun

Chairman

Luoyang, the PRC 31 July 2015

As at the date of this notice, the Board comprises four executive Directors: Mr. Ma Liyun, Mr. Ni Zhisen, Ms. Sun Lei and Mr. Xie Jun; two non-executive Directors: Mr. Zhang Chengong and Mr. Zhang Chong; and four independent non-executive Directors: Mr. Huang Ping, Mr. Dong Jiachun, Mr. Liu Tianni and Mr. Jin Zhanping.

Notes:

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 10 July 2015, are entitled to attend and vote at the general meeting. The register of members of the Company’s H Shares will be closed from 10 July 2015 to 25 August 2015 (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 general meeting. Holders of H Shares of the Company who wish to attend the general meeting 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 1712-1716, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong by 4:00 p.m. on 9 July 2015.
Any shareholder entitled to attend and vote at the EGM may appoint a proxy or proxies (whether he/she is a shareholder of the Company or not) to attend and vote at the meeting 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 the event that the proxy form is signed by the attorney of the principal, the power of attorney or other authorisation documents must be notarised by the notary public. The proxy form together with the copies of such power of attorney or authorisation documents as notarised by the notary public shall be effective only if the same be delivered to the Company’s share registrar in Hong Kong, Hong Kong Registrars Limited, at Rooms 1712-1716, Hopewell Centre, 183 Queen’s Road East, Wan Chai, 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 the holding of the meeting 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 meeting to the registered address of the Company on or before 4 August 2015 by courier, mail or facsimile. The reply slip issued along with the Original Notice of the EGM is still valid for the postponed EGM.
Shareholders or their proxies shall produce their proofs of identity when attending the general meeting. A proxy of Shareholder who is appointed to attend the meeting shall produce the proxy form at the same time.

— 721 —

SUPPLEMENTAL NOTICE OF THE EGM

The general meeting is expected to last for no more than one day. Shareholders and proxies attending the general meeting should be responsible for their own travelling and accommodation expenses.
The registered address of the Company is as follows:

No. 9 Tang Gong Zhong Lu, Xigong District Luoyang Municipal, Henan Province the People’s Republic of China Postal Code: 471009 Telephone: 86-379-6390 8588 Facsimile: 86-379-6325 1984

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. A revised form of proxy will be sent together with this Supplemental Notice (the “Revised Form of Proxy”). The Revised Form of Proxy supersedes and replaces the form of proxy sent together with the Original Notice of the EGM (the “Previous Form of Proxy”). If a shareholder has completed and returned the Previous Form of Proxy in accordance with the instructions printed thereon, such Previous Form of Proxy will remain valid for use at the postponed EGM and such shareholder needs not re-submit the Revised Form of Proxy.

* For identification purposes only

— 722 —

SUPPLEMENTAL NOTICE OF THE H SHARES CLASS MEETING

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＊

SUPPLEMENTAL NOTICE OF THE FIRST H SHARE CLASS MEETING IN 2015

Reference is made to the notice (the “Original Notice”) of the first H share class meeting in 2015 (the “H Share Class Meeting”) dated 25 June 2015 of Luoyang Glass Company Limited* (the “Company”). The Original Notice set out the time and address of the H Share Class Meeting and resolutions proposed to be approved by shareholders at the H Share Class Meeting.

As the H Share Class Meeting was postponed, the Company issued this supplemental notice (the “Supplemental Notice”). Save as the amendments to the date of the H Share Class Meeting, prolongation of suspending transfer of shares and the revisions made in the notes of this Supplemental Notice, other matters related to the H Share Class Meeting in the Original Notice of the H Share Class Meeting remain unchanged.

SUPPLEMENTAL NOTICE IS HEREBY given that the H Share Class Meeting will be rescheduled at 11:00 a.m. on 25 August 2015 at the conference room of the Company on 3rd Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the People’s Republic of China for the purpose of considering and, if thought fit, passing the following resolutions:

Unless otherwise indicated, capitalised terms used herein shall have the same meanings as those defined in the announcements of the Company dated 31 December 2014, 10 June 2015 and 17 June 2015.

I. SPECIAL RESOLUTIONS

The resolution in relation to the Company’s major asset swap, issuance of shares, acquisition of assets by cash and raising of supporting funds;
1.01 The subject, counterparty and mode of the transaction

— 723 —

SUPPLEMENTAL NOTICE OF THE H SHARES CLASS MEETING

1.02 The consideration for the transaction and method of payment
1.03 The types and face value of the shares to be issued
1.04 The method of share issuance and the target subscribers for the share issuance
1.05 The issue price
1.06 The number of shares to be issued
1.07 The use of the proceeds of the supporting funds raised
1.08 Subscription method
1.09 Arrangement for Lock-up Period
1.10 Payment by cash for this transaction
1.11 Vesting of loss/gains of the underlying asset from the valuation date to and until the asset settlement date
1.12 Place of listing
1.13 The proposal regarding the Company’s profits which are rolled over and remain undistributed prior to the issuance
1.14 Asset settlement
1.15 Effective term for the resolution regarding the issuance
The resolution regarding Luoyang Glass Company Limited’s report (draft) on the major asset swap, issuance of shares, acquisition of assets by cash and raising of supporting funds and connected transaction(s) (《洛陽玻璃股份有限公司重大資產置換及發行股份並支付現金購買資產並募集配套資金暨關聯交易報告書（草案）》) and the abstracted resolutions thereof;

— 724 —

SUPPLEMENTAL NOTICE OF THE H SHARES CLASS MEETING

The resolution regarding the Agreement between Luoyang Glass Company Limited and China Luoyang Float Glass (Group) Company Limited in respect of the major asset swap, issuance of shares, acquisition of assets by cash and raising of supporting funds (《洛陽玻璃股份有限公司與中國洛陽浮法玻璃集團有限責任公司關於重大資產置換及發行股份並支付現金購買資產並募集配套資金的協議》) subject to conditions precedent entered into by and between the Company and the counterparty;

As for the details of the foregoing resolutions, please refer to the Company’s announcement dated 10 June 2015.

By order of the Board **LUOYANG GLASS COMPANY LIMITED* Ma Liyun**

Chairman

Luoyang, the PRC 31 July 2015

Notes:

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 10 July 2015, are entitled to attend and vote at the H Share Class Meeting. The register of members of the Company’s H Shares will be closed from 10 July 2015 to 25 August 2015 (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 meeting. Holders of H Shares of the Company who wish to attend the H Share Class Meeting 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 1712-1716, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong by 4:00 p.m. on 9 July 2015.
Any shareholder entitled to attend and vote at the H Share Class Meeting may appoint a proxy or proxies (whether he/she is a shareholder of the Company or not) to attend and vote at the H Share Class Meeting 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 the event that the proxy form is signed by the attorney of the principal, the power of attorney or other authorisation documents must be notarised by the notary public. The proxy form together with the copies of such power of attorney or authorisation documents as notarised by the notary public shall be effective only if the same be delivered to the Company’s share registrar in Hong Kong, Hong Kong Registrars Limited, at Rooms 1712-1716, Hopewell Centre, 183 Queen’s Road East, Wan Chai, 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 the holding of the H Share Class Meeting or any adjournment thereof.

— 725 —

SUPPLEMENTAL NOTICE OF THE H SHARES CLASS MEETING

Shareholders who intend to attend the H Share Class Meeting in person or by proxy should complete and return the signed reply slip for attending the meeting to the registered address of the Company on or before 4 August 2015 by courier, mail or facsimile. The reply slip issued along with the Original Notice of the H Share Class Meeting is still valid for the postponed H Share Class Meeting.
Shareholders or their proxies shall produce their proofs of identity when attending the H Share Class Meeting. A proxy of Shareholder who is appointed to attend the meeting shall produce the proxy form at the same time.
The H Share Class Meeting is expected to last for no more than one day. Shareholders and proxies attending the H Share Class Meeting should be responsible for their own travelling and accommodation expenses.
The registered address of the Company is as follows:

No. 9 Tang Gong Zhong Lu, Xigong District Luoyang Municipal, Henan Province the People’s Republic of China Postal Code: 471009 Telephone: 86-379-6390 8588 Facsimile: 86-379-6325 1984

Completion and return of the proxy form will not preclude Shareholders of the Company from subsequently attending and voting in person at the H Share Class Meeting or any adjourned meetings should you so wish. A revised form of proxy will be sent together with this Supplemental Notice (the “Revised Form of Proxy”). The Revised Form of Proxy supersedes and replaces the form of proxy sent together with the Original Notice of the H Share Class Meeting (the “Previous Form of Proxy”). If a shareholder has completed and returned the Previous Form of Proxy in accordance with the instructions printed thereon, such Previous Form of Proxy will remain valid for use at the postponed H Share Class Meeting and such shareholder needs not re-submit the Revised Form of Proxy.

* For identification purposes only

— 726 —

AI assistant

RoboSense Technology Co., Ltd — Proxy Solicitation & Information Statement 2015

50628_rns_2015-08-10_20850452-3e89-4d61-8801-bce29c6afbba.pdf

MAJOR AND CONNECTED TRANSACTIONS, PROPOSED ISSUANCE AND PLACING OF A SHARES, PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND TERMINATION OF EXISTING CONTINUING CONNECTED TRANSACTION

Financial adviser to Luoyang Glass Company Limited*

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

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

MAJOR AND CONNECTED TRANSACTIONS, PROPOSED ISSUANCE AND PLACING OF A SHARES, PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND

TERMINATION OF EXISTING CONTINUING CONNECTED TRANSACTION

INTRODUCTION

(I) THE REORGANISATION

Date

Parties

The Disposal

(i) Valuation of the net assets/(liabilities) of the Outgoing Entities as at 31 October 2014

The Acquisition

The Consideration Shares

The Proposed A Share Placing

Conditions precedent

Completion of the transactions contemplated under the Formal Agreement

Profit and loss of the Outgoing Entities and the Incoming Entity

SHAREHOLDING STRUCTURE

EFFECT OF THE REORGANISATION, THE PROPOSED A SHARE PLACING AND THE TRANSFER OF THE TRANSFER SHARES ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

INFORMATION ON THE COMPANY

INFORMATION ON CLFG

INFORMATION ON THE OUTGOING ENTITIES

Longhao Company

Longfei Company

Dengfeng Silicon Company

Yinan Huasheng

Mineral Products Company

INFORMATION ON THE INCOMING ENTITY

Bengbu Company

REASONS FOR AND BENEFITS OF THE REORGANISATION

REASONS FOR AND BENEFITS OF THE PROPOSED A SHARE PLACING

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

FINANCIAL EFFECTS OF THE DISPOSAL AND THE ACQUISITION AND THE USE OF THE CONSIDERATION FOR THE DISPOSAL

Effect on net assets

Effect on earnings

Effects on gearing and working capital

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

LISTING RULES IMPLICATIONS

INDEPENDENT BOARD COMMITTEE

(II) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

Article 6

Article 27

Article 50

Article 67

LETTER FROM THE BOARD

Article 70

Article 71

LETTER FROM THE BOARD

Article 73

Article 84

LETTER FROM THE BOARD

Article 85

Article 98

Article 105

Article 210

LETTER FROM THE BOARD

Article 211

(III) THE TERMINATION OF THE ASSETS LEASING AGREEMENT

REASONS FOR ENTERING INTO THE TERMINATION AGREEMENT

LISTING RULES IMPLICATIONS

EGM AND H SHARES CLASS MEETING

RECOMMENDATION

ADDITIONAL INFORMATION

＊

MAJOR AND CONNECTED TRANSACTIONS AND PROPOSED ISSUANCE AND PLACING OF A SHARES

Yours faithfully,

Goldin Financial Limited

MAJOR AND CONNECTED TRANSACTIONS AND

PROPOSED ISSUANCE AND PLACING OF A SHARES

THE INDEPENDENT BOARD COMMITTEE

BASIS OF OUR ADVICE

PRINCIPAL FACTORS AND REASONS CONSIDERED

RoboSense Technology Co., Ltd Proxy Solicitation & Information Statement 2015

**To Luoyang Glass Company Limited*,**