RoboSense Technology Co., Ltd - Proxy Solicitation & Information Statement 2018

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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CONTINUING CONNECTED TRANSACTIONS

Financial adviser to Luoyang Glass Company Limited*

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 38 of this circular. A letter from the Independent Board Committee is set out on pages 39 to 40 of this circular. A letter from the Independent Financial Adviser is set out on pages 41 to 82 of this circular.

A form of proxy for use at the EGM was published on the website of the Stock Exchange (http://www.hkexnews.hk) on 25 January 2018 and was also despatched to the Shareholders on 1 February 2018. Whether or not you are able to attend the EGM in person, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same 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 or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

13 April 2018

* For identification purposes only

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Appendix — General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	82
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	87

– i –

DEFINITIONS

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

“2014 CCT Agreements” the CNBMG Engineering Technical Services Framework Agreement, the Ultra-thin Float Glass Sale and Purchase Framework Agreement, the CLFG Raw Materials Sale Framework Agreement, the CNBMG Engineering Equipment and Materials Supply Framework Agreement and the CNBMG Financial Services Framework Agreement
“2018 CCT Agreements” the Non-exempt 2018 CCT Agreements, the Supply of Electricity Framework Agreement and the Financial Services Framework Agreement
“A Share(s)” the domestic ordinary share(s) of RMB1.00 each in the share capital of the Company, which are listed on the Shanghai Stock Exchange and subscribed for and traded in RMB
“Acquisition” the proposed acquisition of 100% equity interest in Hefei New Energy, 100% equity interest in Tongcheng New Energy and 70.99% equity interest in Yixing New Energy by the Company, details of which were set out in the circular of the Company dated 11 October 2017
“associate(s)” has the same meaning as ascribed to it under the Hong Kong Listing Rules
“Bengbu Chemical” 蚌埠化工機械製造有限公司 ( B e n g b u C h e m i c a l M a c h i n e r y Manufacturing Co., Ltd.*), a limited liability company incorporated in the PRC and an indirect wholly-owned subsidiary of CNBMG
“Bengbu Company” 蚌埠中建材信息顯示材料有限公司 (Bengbu China Building Information Display Materials Co. Ltd.*), a limited liability company incorporated in the PRC and a wholly-owned subsidiary of the Company
“Board” the board of Directors “CLFG” 中國洛陽浮法玻璃集團有限責任公司 (China Luoyang Float Glass (Group) Company Limited*), a company incorporated in the PRC with limited liability and the shareholder of the Company holding 19.94% equity interest in the Company

– ii –

DEFINITIONS

“CLFG Group”

CLFG, its controlling shareholder(s) and their respective controlled companies/entities (the “ Relevant Parties of CLFG ”) and/or the nonwholly owned subsidiaries of the Company in which the Relevant Parties of CLFG has 10% or more voting rights

“CLFG Raw Materials Sale Framework Agreement”
the raw materials sale framework agreement dated 14 November 2014 entered into between CLFG and the Company, pursuant to which the CLFG Group agreed to provide certain raw materials to the Group

“CNBMG”

中國建材集團有限公司 (China National Building Material Group Co.,Ltd.*), a wholly state-owned enterprise incorporated in the PRC and the ultimate controlling shareholder of the Company

“CNBMG Engineering the equipment supply framework agreement dated 14 November 2014 Equipment and Materials entered into between CNBMG and the Company, pursuant to which the Supply Framework CNBMG Group agreed to supply equipment for the float glass production Agreement” to the Group
“CNBMG Engineering Technical Services Framework Agreement”

the engineering technical services framework agreement dated 14 November 2014 entered into between CNBMG and the Company, pursuant to which the CNBMG Group agreed to provide certain technical services to the Group

“CNBMG Financial Services Framework Agreement”
the financial services framework agreement dated 14 November 2014 entered into between CNBMG and the Company, pursuant to which the CNBMG Group agreed to provide certain financial services to the Group
“CNBMG Group”
CNBMG and its subsidiaries
“Company”

洛陽玻璃股份有限公司 (Luoyang Glass Company Limited*), a joint stock limited company incorporated in the PRC with limited liability, the H Shares and A Shares of which are listed on the main board of the Stock Exchange (stock code: 1108) and the Shanghai Stock Exchange (stock code: 600876) respectively

“connected person(s)”
has the same meaning as ascribed to it under the Hong Kong Listing Rules
“Directors”

the directors of the Company, including the independent non-executive directors of the Company

– iii –

DEFINITIONS

“EGM”

the extraordinary general meeting of the Company to be convened and held at 9:00 a.m. on 27 April 2018 (or any adjourned meeting thereof) for the Independent Shareholders to consider and, if thought fit, approve, among other things, the 2018 CCT Agreements and their respective Proposed Annual Caps

“Engineering Equipment the engineering equipment procurement and installation framework Procurement agreement dated 24 January 2018 entered into between the Company and Installation and CNBMG, pursuant to which the CNBMG Group agreed to supply Framework Agreement” equipment materials, construction and installation services required for engineering projects to the Group

“Financial Services the financial services framework agreement dated 24 January 2018 Framework Agreement” entered into between CNBMG and the Company, pursuant to which the CNBMG Group agreed to provide certain financial services to the Group

“Group”

the Company and its subsidiaries

“H Share(s)” overseas listed foreign share(s) 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

“Hefei New Energy”

中建材（合肥）新能源有限公司 (CNBM (Hefei) New Energy Company Limited*), a company incorporated in the PRC with limited liability in 2011, which is principally engaged in the research and development, production and sales of solar photovoltaic glass and further processed glass
“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

“Hong Kong Listing Rules”

the Rules Governing the Listing of Securities on the Stock Exchange

“Independent Board the independent board committee of the Company comprising all of the Committee” independent non-executive Directors
“Independent Financial Goldin Financial Limited, a corporation licensed to carry out type 6 Adviser” or “Goldin” (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of each of the Non-exempt 2018 CCT Agreements and their respective proposed annual caps

– iv –

DEFINITIONS

“Independent Shareholders” Shareholders other than CNBMG and its associates
“Latest Practicable Date”
4 April 2018, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular
“Non-exempt 2018 CCT Agreements”
the Technical Services Framework Agreement, the Sale and Purchase of Glass Products Framework Agreement, the Sale of Raw Materials Framework Agreement, the Engineering Equipment Procurement and Installation Framework Agreement, the Sale and Purchase of Spare Parts Framework Agreement and the Sale and Purchase of Products Framework Agreement
“Payment Support Agreement” the payment support framework agreement dated 26 January 2018 entered in to between CLFG and the Company, pursuant to which CLFG agreed to provide payment settlement support to the Group for the period from 26 January 2018 to 31 March 2018, details of which were set out in the overseas regulatory announcement of the Company dated 26 January 2018
“PBOC” the People’s Bank of China
“percentage ratios” has the same meaning as ascribed to it under the Hong Kong Listing Rules, as applicable to a transaction
“PRC” The People’s Republic of China which, for the purpose of this circular, excludes Hong Kong and the Macau Special Administrative Region of the PRC and Taiwan
“Proposed Annual Cap(s)” the maximum aggregate annual transaction amounts for each of the continuing connected transactions contemplated under the 2018 CCT Agreements for each of the three years ending 31 December 2020
“RMB”
Renminbi, the lawful currency of the PRC
“Sale and Purchase of Glass the sale and purchase of glass products framework agreement dated 24 Products Framework January 2018 entered into between the Company and CNBMG, pursuant Agreement” to which the Group agreed to supply certain glass products to the CNBMG Group

– v –

DEFINITIONS

“Sale and Purchase of the sale and purchase of products framework agreement dated 24 January Products Framework 2018 entered into between Triumph and the Company, pursuant to which Agreement” the Triumph Group agreed to supply float glass and wooden packaging boxes to the Group
“Sale and Purchase of Sodium the sale and purchase of sodium carbonate framework agreement dated 1 Carbonate Agreement” February 2018 entered into between the Company and Triumph, pursuant to which Triumph agreed to supply sodium carbonate to the Group for the period from 1 February 2018 until the Sale of Raw Materials Framework Agreement takes effect and in any event, no later than 30 June 2018, details of which were set out in the announcement of the Company dated 1 February 2018
“Sale and Purchase of Spare the sale and purchase of spare parts framework agreement dated 24 Parts Framework January 2018 entered into between CNBMG and the Company, pursuant Agreement” to which the CNBMG Group agreed to supply certain equipment and spare parts to the Group
“Sale and Purchase of Ultra-thin the sale and purchase of ultra-thin glass framework agreement dated 1 Glass Agreement” February 2018 entered into between the Company and Triumph, pursuant to which the Group agreed to supply ultra-thin float glass products to the Triumph Group for the period from 1 February 2018 until the Sale and Purchase of Glass Products Framework Agreement takes effect and in any event, no later than 30 June 2018, details of which were set out in the announcement of the Company dated 1 February 2018
“Sale and Purchase of Wooden Boxes Agreement”
the sale and purchase of wooden boxes framework agreement dated 1 February 2018 entered into between Bengbu Chemical and Bengbu Company, pursuant to which Bengbu Chemical agreed to provide wooden packaging boxes to Bengbu Company for the period from 1 February 2018 until the Sale and Purchase of Products Framework Agreement takes effect and in any event, no later than 30 June 2018, details of which were set out in the overseas regulatory announcement of the Company dated 1 February 2018
“Sale of Raw Materials Framework Agreement”
the sale of raw materials framework agreement dated 24 January 2018 entered into between CNBMG and the Company, pursuant to which the CNBMG Group agreed to supply certain raw materials to the Group
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

– vi –

DEFINITIONS

“Shanghai Listing Rules”

Rules Governing the Listing of Stocks on Shanghai Stock Exchange

“Shareholder(s)” the shareholder(s) of the Company
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Supply Agreement” the sodium carbonate supply framework agreement dated 26 February 2016 entered into between the Company and Triumph, pursuant to which Triumph agreed to supply to the Company sodium carbonate procured from certain suppliers during the period from 26 February 2016 to 31 December 2017
“Supply of Electricity Framework Agreement”
the supply of electricity framework agreement dated 24 January 2018 entered into between CNBMG and the Company, pursuant to which the CNBMG Group agreed to supply photovoltaic electricity to the Group
“Target Companies under the Acquisition”
Hefei New Energy, Tongcheng New Energy and Yixing New Energy
“Technical Services Framework Agreement”
the technical services framework agreement dated 24 January 2018 entered into between CNBMG and the Company, pursuant to which the CNBMG Group agreed to provide certain technical services to the Group
“Tongcheng New Energy”
中國建材桐城新能源材料有限公司 (CNBM (Tongcheng) New Energy Materials Company Limited*), a company incorporated in the PRC with limited liability in 2010, which is principally engaged in the research and development, production and sales of solar photovoltaic glass and further processed glass
“Triumph”
凱盛科技集團有限公司 (Triumph Technology Group Company Limited*), a company incorporated in the PRC with limited liability and an indirect controlling shareholder of the Company
“Triumph Group”

Triumph and its subsidiaries

“Triumph Science & Technology”
凱盛科技股份有限公司 (Triumph Science & Technology Co Ltd) (formerly known as 安徽方興科技股份有限公司 (Anhui Fangxing Science & Technology Company Limited)), a joint stock limited company incorporated in the PRC with limited liability, the shares of which are listed on the Shanghai Stock Exchange (stock code: 600552)

– vii –

DEFINITIONS

“Ultra-thin Float Glass Sale and Purchase Framework Agreement”
the product sale framework agreement dated 14 November 2014 entered into between the Company and Triumph Science & Technology, pursuant to which the Group agreed to provide ultra-thin float glass to Triumph Science & Technology and its subsidiaries
“VAT”

value-added tax in the PRC

“Wooden Boxes Supply Agreement”

the wooden boxes supply framework agreement dated 28 April 2016 entered into between Bengbu Company and Bengbu Chemical, pursuant to which Bengbu Chemical agreed to supply to Bengbu Company wooden boxes and their accessories from 28 April 2016 to 31 December 2017

“Yixing New Energy”

中建材（宜興）新能源有限公司 (CNBM (Yixing) New Energy Company Limited*), a company incorporated in the PRC with limited liability in 2016, which is principally engaged in the research and development, production and sales of solar photovoltaic glass and further processed glass

“%” per cent

* For identification purposes only

– viii –

LETTER FROM THE BOARD

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Executive Directors: Mr. Zhang Chong (Chairman) Mr. Ni Zhisen (General Manager) Mr. Wang Guoqiang (Deputy General Manager) Mr. Ma Yan (Deputy General Manager and Financial Controller)

Registered and principal office: No. 9 Tang Gong Zhong Lu Xigong District Luoyang Municipal Henan Province The PRC

Non-executive Director: Mr. Xie Jun (Vice Chairman)

Independent non-executive Directors:

Mr. Jin Zhanping Mr. Liu Tianni Mr. Ye Shuhua Mr. He Baofeng

13 April 2018

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

References are made to (A) the announcements of the Company dated (i) 24 January 2018 in relation to the continuing connected transactions contemplated under the 2018 CCT Agreements and (ii) 1 February 2018 in relation to the Sale and Purchase of Sodium Carbonate Agreement and the Sale and Purchase of Ultra-thin Glass Agreement; and (B) the overseas regulatory announcements of the Company dated (i) 26 January 2018 in relation to the Payment Support Agreement, (ii) 30 January 2018 in relation to the financial guarantee services and (iii) 1 February 2018 in relation to the Sale and Purchase of Wooden Boxes Agreement.

– 1 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) details of the 2018 CCT Agreements and their respective Proposed Annual Caps; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in respect of the Non-exempt 2018 CCT Agreements and their respective proposed annual caps; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Non-exempt 2018 CCT Agreements and their respective proposed annual caps; and (iv) a notice of the EGM at which ordinary resolutions will be proposed for the Independent Shareholders to consider and, if thought fit, approve each of the 2018 CCT Agreements and their respective Proposed Annual Caps.

A. NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Set out below is a summary of the principal terms of each of the Non-exempt 2018 CCT Agreements, which are subject to the reporting, announcement and independent shareholders’ approval requirements under the Hong Kong Listing Rules:

1. TECHNICAL SERVICES FRAMEWORK AGREEMENT

On 24 January 2018, the Company and CNBMG entered into the Technical Services Framework Agreement.

Date: 24 January 2018 Parties: (1) CNBMG; and (2) the Company.

Term: The Technical Services Framework Agreement shall take effect upon signing with company seals by the authorised representatives of both parties and approval by the Independent Shareholders at the extraordinary general meeting of the Company, and shall be valid until 31 December 2020.

Nature of transaction:

Pursuant to the Technical Services Framework Agreement, the CNBMG Group agreed to provide technical services to the Group including but not limited to: (1) preparation of engineering project feasibility plans and feasibility study reports; (2) project design and project consultation; (3) implementation of the projects; (4) design, organisation and implementation of plans for environmental protection facilities; (5) substantial maintenance, organisation and implementation of the kiln and main equipment; (6) development, application and services of the project softwares; and (7) assistance to the organisation in resuming production in response to material incidents of operational accident.

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LETTER FROM THE BOARD

Pricing terms

Pursuant to the Technical Services Framework Agreement, as a general principle, the technical service fee under the Technical Services Framework Agreement shall be determined in the ordinary course of business on normal commercial terms and negotiated on arm’s length basis by both parties under the principle of justice, fairness and openness. The technical service fee charged by the CNBMG Group on the Group shall not be higher than that charged by them on independent third parties for provision of the same type of or the same technical services.

Pricing standards

The technical service fee under the Technical Services Framework Agreement will be determined with reference to:

(1) the applicable state price which refers to the engineering survey and design fee regulations* (工程勘察設計收費管理規定) issued by National Development and Reform Commission of the PRC;
(2) if there is no applicable state price for such services, the fair prices of the same or same type of technical services provided by independent third parties in the location of the Company or the nearby area, and the prevailing market price of the transaction. The Group will obtain relevant market price information through various channels, which include (i) considering at least three comparable transactions (if any) conducted by independent third parties during the same period on such services; and (ii) communication and exchange of price information with at least three independent suppliers by various means, including telephone conversations, emails and meetings, with peers and business partners within the glass production industry. The Company will conclude the relevant market price by (i) at least three comparable transactions with independent third parties; and (ii) the price offered by at least three independent suppliers to set the fair price; or
(3) where there are no available prevailing market prices or where it is impracticable to obtain the relevant market price information, the Group and the CNBMG Group will determine the price after arm’s length negotiations with reference to (i) the previous same or same type of the transactions concluded by the Group with independent third parties; and/or (ii) previous same or same type of the transactions concluded by the CNBMG Group with independent third parties; and/or (iii) the costs of equipment and materials required by the CNBMG Group for provision of the relevant technical services, manpower involved, complexity of the technical plans, level of technology advancement and duration of the construction.

According to the internal control policy of the Group, there are at least three historical transactions and enquiries and at least three participants in the tender when determining the price or fee for the products or services as the Group considers that is sufficient and the Group strictly follow the abovementioned requirement.

– 3 –

LETTER FROM THE BOARD

Proposed Annual Caps for the Technical Services Framework Agreement

The below summarises the annual cap amounts for the three years ended 31 December 2017 under the CNBMG Engineering Technical Services Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Annual cap amounts	15,000	20,000	20,000

The table below summarises the historical transaction amounts for the three years ended 31 December 2017 under the CNBMG Engineering Technical Services Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Historical transaction amounts	14,360	0	12,150

The Proposed Annual Caps under the Technical Services Framework Agreement for each of the three years ending 31 December 2020 are set out below:

	For	the year ending	For the year ending	For the year ending
	31	December 2018	31 December 2019	31 December 2020
		RMB’000	RMB’000	RMB’000
Proposed Annual Caps		24,000	24,000	20,000

The Proposed Annual Caps under the Technical Services Framework Agreement are determined based on the estimated need for the technical services to be expected by the Company in the future after taking into account (i) the implementation of one new development project for research and development center on the materials for photoelectric and one technical transformation project for ultra-thin glass production of the Group; (ii) higher services fee of the higher technologies involved on the development of the intelligent information management software and the complexity of the technical work for improving the production capacity and level of production technology of the Group; (iii) the implementation of two projects for addition two production lines of the Target Companies under the Acquisition; (iv) the expected price with reference to the prevailing market price for the provision of such services; (v) the decrease in the number of engineering projects in 2020 as the completion of several projects during 2020; and (vi) the implementation of an intelligent information management system for all glass production lines.

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LETTER FROM THE BOARD

Internal control on pricing

The Company will adopt the below internal control procedures in relation to its utilisation of the technical services provided by the CNBMG Group:

(i) the production department (including relevant administrative departments) of the Company and/or its subsidiaries are responsible to collect and analyse the price and terms of the transaction and review the annual caps under the Technical Services Framework Agreement on a monthly basis;
(ii) the technical services and their respective fees shall be reported to the management of the Group and will be implemented only upon approval of the management of the Group; and
(iii) Significant and important technical services shall be implemented upon approval by the general manager of the Group.

The written contract in relation to technical services shall be executed upon approval by the secretariat of the Board, chief financial controller and general manager of the Company after joint review by the legal consultant, internal control management department, financial department and secretariat of the Board of the Company.

2. SALE AND PURCHASE OF GLASS PRODUCTS FRAMEWORK AGREEMENT

On 24 January 2018, the Company and CNBMG entered into the Sale and Purchase of Glass Products Framework Agreement.

Date: 24 January 2018 Parties: (1) the Company; and (2) CNBMG.

Term: The Sale and Purchase of Glass Products Framework Agreement shall take effect upon signing with company seals by the authorised representatives of both parties and approval by the Independent Shareholders at the extraordinary general meeting of the Company, and shall be valid until 31 December 2020.

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LETTER FROM THE BOARD

Nature of transaction:

Pursuant to the Sale and Purchase of Glass Products Framework Agreement, the Group agreed to supply glass products including but not limited to ultra-thin glass, photovoltaic glass and further processed glass products to the CNBMG Group.

Pricing terms

Pursuant to the Sale and Purchase of Glass Products Framework Agreement, as a general principle, the price of glass products under the Sale and Purchase of Glass Products Framework Agreement shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis by both parties under the principle of justice, fairness and openness, and based on the prevailing market prices of the transaction. The price of glass products offered by the Group to the CNBMG Group shall not be less than that offered by the Group to independent third parties for provision of the same or similar glass products.

Pricing standards

The price of glass products under the Sale and Purchase of Glass Products Framework Agreement will be determined with reference to:

(i) at least three comparable transactions (if any) conducted by the Group with independent third parties during the same period on the same products; and/or
(ii) communication and exchange of price information with at least three independent customers by various means, including telephone conversations, emails and meetings with peers and business partners within the glass production industry; and/or
(iii) Sales staff will communicate and query with the customers, suppliers or trade partners through site visits to obtain the prices of comparable transactions on the same products or the products with same specification and grade in the same period and the prevailing market price at the time of a particular transaction; and/or
(iv) supply and demand information and price information in the PRC market obtained from China National Bureau of Statistics (www.stats.gov.cn) and the glass network/the official website of China glass industry (www.glass.org.cn) respectively. Relevant market price data will be used as the basis for the transactions with the CNBMG Group by the sales department.

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LETTER FROM THE BOARD

The final price will be implemented after the approval of the general manager or the deputy general manager of the Company’s subsidiaries with reference to (i) to (iv) above and the selling prices for relevant products shall not be lower than the prices approved by the general manager or the deputy general manager of the Company’s subsidiaries.

Proposed Annual Caps for the Sale and Purchase of Glass Products Framework Agreement

The below summarises the annual cap amounts for the three years ended 31 December 2017 under the Ultra-thin Float Glass Sale and Purchase Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Annual cap amounts
(inclusive of VAT)	214,000	224,000	234,000

The table below summarises the historical transaction amounts for the three years ended 31 December 2017 under the Ultra-thin Float Glass Sale and Purchase Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Historical transaction amounts
(inclusive of VAT)	6,410	102,320	18,410

The Proposed Annual Caps under the Sale and Purchase of Glass Products Framework Agreement for each of the three years ending 31 December 2020 are set out below:

	For the year ending	For the year ending	For the year ending
	31 December 2018	31 December 2019	31 December 2020
	RMB’000	RMB’000	RMB’000
Proposed Annual Caps
(inclusive of VAT)	363,620	452,570	490,690

– 7 –

LETTER FROM THE BOARD

The Proposed Annual Caps under the Sale and Purchase of Glass Products Framework Agreement are determined based on the Group’s internal projection on the estimated amount of ultra-thin glass, photovoltaic glass and further processed glass products to be sold to the CNBMG Group by the Group after taking into account (i) the historical transaction amounts between the Target Companies under the Acquisition and CNBMG of approximately RMB38 million, RMB49 million and RMB69 million for the three years ended 31 December 2017; (ii) the anticipated increase in demand of the CNBMG Group on the ultra-thin glass for their indium tin oxide conductive film business and photovoltaic glass for their photovoltaic construction business; and (iii) the production capacity increased by 528% by adding (a) the production lines from the Target Companies under the Acquisition, (b) upgraded ultra-thin electronic glass production line and (c) the new ultra-white light thermal material production line in 2018 and further increase 40% of the production capacity by expanding the business on photovoltaic glass in 2019.

As stated in the announcement of the Company dated 1 February 2018, in order to cope with the operational needs of the Group, the Company entered into the Sale and Purchase of Ultra-thin Glass Agreement with Triumph, pursuant to which the Group agreed to supply ultra-thin float glass products to the Triumph Group with the transaction cap amount of RMB8,000,000 for the six months ending 30 June 2018 (inclusive of VAT). The Proposed Annual Cap under the Sale and Purchase of Glass Products Framework Agreement for the year ending 31 December 2018 included the abovementioned transaction cap amount under the Sale and Purchase of Ultra-thin Glass Agreement.

Internal control on pricing

The Company will adopt the below internal control measures in relation to the sales of the glass products to the CNBMG Group:

(i) the marketing department of the Company or sale department of the subsidiaries of the Company are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Sale and Purchase of Glass Products Framework Agreement by monthly basis;
(ii) the marketing department of the Company will be responsible for collecting the market information including the supply and demand and the price fluctuation of each of the glass products on a monthly basis from China National Bureau of Statistics (www.stats.gov.cn) and the glass network/the official website of China glass industry (www.glass.org.cn) respectively on a monthly basis;

– 8 –

LETTER FROM THE BOARD

(iii) the marketing department of the Company will also communicate and query with the customers, suppliers or trade partners through telephone conversations, emails and site visits to obtain the prices of comparable transactions in the same period and the prevailing market price at the time of a particular transaction for verification of the prevailing market price implemented by the sales department;
(iv) the marketing department of the Company will set up the floor price to the subsidiaries for each of the glass products for internal measure after approval by the management of the Company according to the market price provided by the marketing department and the selling price offered to the CNBMG Group will not be less than the floor price; and
(v) the marketing department will review the sales of the glass products of the Company’s subsidiaries based on the floor price and report to the management of the Company on a monthly basis.

The Group will adopt the below measures to ensure the Sale and Purchase of Glass Products Framework Agreement to be carried out within reasonable range so as to control and remove the possibility of over reliance on the CNBMG Group.

(i) The finance department and the marketing department will monthly review the settlement amount of the Sale and Purchase of Glass Products Framework Agreement, and are responsible for counting, supervising and managing implementation of the transactions under the Sale and Purchase of Glass Products Framework Agreement;
(ii) The finance department conducts random supervision and evaluation on the terms offered to the CNBMG Group and other independent customers to ensure that the terms offered to the CNBMG Group is not less favourable to the terms offered to independent customers;
(iii) The marketing department will monthly report the overall sale of the glass products of the Group, including the number of customers, number of new customers and their corresponding transaction amounts to the Directors; and
(iv) The Directors will review the report from marketing department monthly and ensure the Sale and Purchase of Glass Products Framework Agreement to be carried out within reasonable range.

– 9 –

LETTER FROM THE BOARD

3. SALE OF RAW MATERIALS FRAMEWORK AGREEMENT

On 24 January 2018, the Company and CNBMG entered into the Sale of Raw Materials Framework Agreement.

Date: 24 January 2018 Parties: (1) CNBMG; and (2) the Company.

Term: The Sale of Raw Materials Framework Agreement shall take effect upon signing with company seals by the authorised representatives of both parties and approval by the Independent Shareholders at the extraordinary general meeting of the Company, and shall be valid until 31 December 2020.

Nature of transaction:

Pursuant to the Sale of Raw Materials Framework Agreement, the CNBMG Group agreed to supply raw materials such as silicon powder and sodium carbonate to the Group.

Pricing terms

Pursuant to the Sale of Raw Materials Framework Agreement, as a general principle, the price of the raw materials under the Sale of Raw Materials Framework Agreement shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis by both parties under the principle of justice, fairness and openness, and based on the prevailing market price of the transaction. The price of the raw materials offered by the CNBMG Group to the Group shall not be higher than that offered by the CNBMG Group to independent third parties for provision of the same or similar raw materials.

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LETTER FROM THE BOARD

Pricing standards

Silicon powder

The price of silicon powder under the Sale of Raw Materials Framework Agreement will be determined with reference to the prevailing market price at the time of a particular transaction.

The Company will obtain market price information through various channels, which include (i) reference made to comparable transactions (if any) conducted with independent third parties during the same period; (ii) regular visit to silicon powder manufacturers (including independent third parties) to understand production, sales and price information on-site; and (iii) the procurement price obtained by the way of open tender or invitation for bid. The major factors in relation to determination of market price are the supply and demand of silicon powder and other raw materials in the areas where the Group’s glass production lines are located, distance between the purchasers and vendors, and quality of silicon powder. Upon collection of market information, the relevant terms (including pricing and payment terms) will be used as the basis for the transactions with the CNBMG Group. The price offered by the CNBMG Group to the Group shall not be less favourable than those offered by other independent third parties for the same kind of the raw materials.

Sodium carbonate

The procurement of sodium carbonate by the Group is conducted via the centralised procurement platform adopted by the Triumph Group. In order to give play to the benefit of large scale procurement and further reduce the procurement costs of its glass manufacturers, the Triumph Group has built a centralised procurement platform of sodium carbonate, and prepared relevant management measures and implementation plan. The centralised procurement of sodium carbonate shall be conducted by means of unified tender by the Triumph Group for unified procurement from and unified payment to sodium carbonate suppliers. The price of sodium carbonate between the Group and the Triumph Group shall be the procurement price of sodium carbonate purchased by the Triumph Group after the Triumph Group selected the best tender submitted by the raw material suppliers plus the capital occupation costs (surcharge of 1% for 1-month contracts which is determined between the Triumph Group and the Group with reference to the purchase price of the Group from other raw material suppliers) as the Triumph Group generally settle the payment to the raw material supplier in advance and Group will pay to Triumph Group after receive the sodium carbonate from the Triumph Group and the overall cost (including the surcharge) is still lower than the price offered by other suppliers for sodium carbonate. The marketing department of the Company also collected market price information on a monthly basis. The deputy general manager in charge of centralised procurement of the Company approved the transaction price with Triumph Group to be lower than the market price with the reference to the quotations from different sodium carbonate manufacturers and China’s bulk commodity service providers such as www.chem365.net.

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LETTER FROM THE BOARD

Proposed Annual Caps for the Sale of Raw Materials Framework Agreement

The Company entered the CLFG Raw Materials Sale Framework Agreement with CLFG on for the procurement of certain raw materials and Supply Agreement with Triumph for the procurement of sodium carbonate. Since CLFG is one of the subsidiaries of Triumph, the Group entered the Sale of Raw Materials Framework Agreement with Triumph for simplicity, pursuant to which Triumph agreed to supply certain raw materials including sodium carbonate to the Group.

The below summarises the annual cap amounts for the three years ended 31 December 2017 under the CLFG Raw Materials Sale Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Annual cap amounts
(inclusive of VAT)	9,500	9,500	9,500

The table below summarises the historical transaction amounts for the three years ended 31 December 2017 under the CLFG Raw Materials Sale Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Historical transaction amounts
(inclusive of VAT)	5,780	3,600	900

The below summarises the annual cap amounts for the two years ended 31 December 2017 under the Supply Agreement:

	For the year ended	For the year ended
	31 December 2016	31 December 2017
	RMB’000	RMB’000
Annual cap amounts (inclusive of VAT)	43,000	43,000

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LETTER FROM THE BOARD

The table below summarises the historical transaction amounts for the two years ended 31 December 2017 under the Supply Agreement:

	For the year ended	For the year ended
	31 December 2016	31 December 2017
	RMB’000	RMB’000
Historical transaction amounts (inclusive of VAT)	17,820	22,860

The Proposed Annual Caps under the Sale of Raw Materials Framework Agreement for each of the three years ending 31 December 2020 are set out below:

For the year ending For the year ending For the year ending 31 December 2018 31 December 2019 31 December 2020 RMB’000 RMB’000 RMB’000 Proposed Annual Caps (inclusive of VAT) 347,370 571,370 580,230

The Company made a strategic transformation from ordinary float glass to optical electronic and information display ultra-thin glass through significant asset restructuring that the Group transferred the subsidiaries with ordinary float glass and mining business to CNBMG in December 2015 (the “ Restructure ”). After the Restructure, the Group has 3 production lines for ultra-thin float glass. The Group will implement a project for a production line for the ultra-white photothermal materials and a technical transformation project for the production line for ultra-thin glasses and the existing and new production lines of the Target Companies under the Acquisition will be included to the Group after the completion of the Acquisition, therefore, the Group expects that the annual purchase on the raw materials will be increased significantly.

The Proposed Annual Caps under the Sale of Raw Materials Framework Agreement are determined based on the estimated demand of silicon powder and sodium carbonate after taking into account (i) the historical transaction amounts between the Target Companies under the Acquisition and CNBMG of approximately RMB12 million, RMB99 million and RMB152 million for the three years ended 31 December 2017; (ii) the selling prices and consumed amounts of the raw materials and transportation fees in the previous three years; (iii) the need and the price of higher quality of silicon powder for photovoltaic glass production which is higher than the price of silicon powder for ultra-thin floating glass for two to three times and sodium carbonate for the new product development and production in the future; and (iv) the expected consumption of the silicon powder increase by over 1100% and sodium carbonate increase by 755% due to the increasing production capacity of the Group by 528% in 2018 and 40% in 2019.

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LETTER FROM THE BOARD

As stated in the announcement of the Company dated 1 February 2018, in order to cope with the operational needs of the Group, the Company entered into the Sale and Purchase of Sodium Carbonate Agreement with Triumph, pursuant to which Triumph agreed to supply sodium carbonate to the Group with the transaction cap amount of RMB13,500,000 for the six months ending 30 June 2018 (inclusive of VAT). The Proposed Annual Cap under the Sale of Raw Materials Framework Agreement for the year ending 31 December 2018 included the abovementioned transaction cap amount under the Sale and Purchase of Sodium Carbonate Agreement.

Internal control on pricing

The Group will adopt the below internal control procedures in relation to the procurement of the raw materials from the CNBMG Group:

(i) the marketing department of the Company or the procurement departments of the subsidiaries of the Company are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Sale of Raw Materials Framework Agreement by monthly basis;
(ii) the procurement departments of the subsidiaries of the Company shall conduct open tender or invitation for bid involving at least three independent suppliers at least on a yearly basis, and determine the silicon powder supplier and silicon powder procurement price based on the tender results;
(iii) for centralised procurement of sodium carbonate, the Company will appoint a deputy general manager in charge of marketing to directly participate in the centralised tender, bid negotiation and pricing for sodium carbonate of the Triumph Group. A centralised tender for sodium carbonate shall be performed once a month or every two months depending on the market situation, and the tender is open to domestic major sodium carbonate manufacturers in the market;
(iv) the marketing department of the Company will be responsible for collection of information on supply and demand and price fluctuation of silicon powder and sodium carbonate on a monthly basis from different sodium carbonate manufacturers and China’s bulk commodity service providers such as www.chem365.net. Relevant personnel of the business department will communicate and query with the silicon powder and sodium carbonate manufacturers or trade partners through telephone conversations, emails and site visits to obtain the prices of comparable transactions by independent suppliers in the same period and the prevailing market price at the time of a particular transaction; and

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LETTER FROM THE BOARD

(v) the deputy general manager in charge of marketing of the Company or the management of its subsidiaries will assess and determine the terms and pricing for procurement of raw materials with the CNBMG Group based on the market information collected with the abovementioned methods or through the abovementioned channels in order to ensure that the prices offered by the CNBMG Group shall not be less favourable than those offered by other independent third parties for the same kind of the raw materials.

The Group will adopt the below measures to ensure the Sale of Raw Materials Framework Agreement to be carried out within reasonable range so as to control and remove the possibility of over reliance on the CNBMG Group.

(i) The finance department and the procurement departments of the subsidiaries of the Company will monthly review the settlement amount of the Sale of Raw Materials Framework Agreement, and are responsible for counting, supervising and managing implementation of the transactions under the Sale of Raw Materials Framework Agreement;
(ii) The finance department conducts random supervision and evaluation on the terms offered by the CNBMG Group and other independent suppliers to ensure that the terms offered by the CNBMG Group is not less favourable to the terms offered by independent suppliers;
(iii) The marketing department will monthly report the overall purchase of the raw materials of the Group, including the number of suppliers, number of new suppliers and their corresponding transaction amounts to the Directors; and
(iv) The Directors will review the report from marketing department monthly and ensure the Sale of Raw Materials Framework Agreement to be carried out within reasonable range.

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LETTER FROM THE BOARD

4. ENGINEERING EQUIPMENT PROCUREMENT AND INSTALLATION FRAMEWORK AGREEMENT

On 24 January 2018, the Company and CNBMG entered into the Engineering Equipment Procurement and Installation Framework Agreement.

Date: 24 January 2018 Parties: (1) CNBMG; and (2) the Company.

Term: The Engineering Equipment Procurement and Installation Framework Agreement shall take effect upon signing with company seals by the authorised representatives of both parties and approval by the Independent Shareholders at the extraordinary general meeting of the Company, and shall be valid until 31 December 2020.

Nature of transaction:

Pursuant to the Engineering Equipment Procurement and Installation Framework Agreement, the CNBMG Group agreed to supply equipment materials, construction and installation services, etc. required for engineering projects to the Group.

Pricing terms

Pursuant to the Engineering Equipment Procurement and Installation Framework Agreement, as a general principle, the price of equipment materials, construction fee and installation fee under the Engineering Equipment Procurement and Installation Framework Agreement shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis by both parties under the principle of justice, fairness and openness, and based on the prevailing market price of the transaction. The price of equipment materials, construction fee and installation fee charged by the CNBMG Group on the Group shall not be higher than that charged by the CNBMG Group on independent third parties for the same type of or the same equipment materials, construction and installation services.

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LETTER FROM THE BOARD

Pricing standards

The pricing or consideration under the Engineering Equipment Procurement and Installation Framework Agreement will be determined with reference to:

(i) prices offered to other independent third party(ies) on the same or similar size of the engineering projects by CNBMG;
(ii) at least three comparable transactions (if any) with independent third parties by the Group during the same period on the same or similar size of the engineering projects; and
(iii) communication and exchange of price information by various means, including telephone conversations, emails and meetings with peers and business partners within the glass production industry.

Upon collection of market information of (i) to (iii) above, relevant terms (including pricing and payment terms) will be used as the basis for the transaction with the CNBMG Group. The written contract in relation to the engineering equipment procurement shall be executed with the approval of the secretary to the Board, chief financial controller and general manager of the Company after joint review by the company legal consultant, internal control management department, financial department and secretariat of the Board of the Company.

Where there are no available prevailing market prices or where it is impracticable to obtain such market prices, the Group and the CNBMG Group will determine the price through arm’s length negotiation with reference to (i) the previous same or similar size of the transactions concluded by the Group and independent third parties; and/or (ii) same or similar size of the transactions concluded by the CNBMG Group and third parties; and/or (iii) the costs of equipment and materials provided by the CNBMG Group for engineering projects and technical requirements on installation, manpower involved, complexity of technical plan, technology advancement and duration of the installation. The price offered by the CNBMG Group to the Group shall not be less favourable than those offered by the CNBMG Group to other independent third parties for provision of the same or similar size of the services.

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LETTER FROM THE BOARD

Proposed Annual Caps for the Engineering Equipment Procurement and Installation Framework Agreement

The below summarises the annual cap amounts for the three years ended 31 December 2017 under the CNBMG Engineering Equipment and Materials Supply Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Annual cap amounts
(inclusive of VAT)	50,000	300,000	300,000

The table below summarises the historical transaction amounts for the three years ended 31 December 2017 under the CNBMG Engineering Equipment and Materials Supply Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Historical transaction amounts
(inclusive of VAT)	32,540	0	257,000

The Proposed Annual Caps under the Engineering Equipment Procurement and Installation Framework Agreement for each of the three years ending 31 December 2020 are set out below:

	For the year ending	For the year ending	For the year ending
	31 December 2018	31 December 2019	31 December 2020
	RMB’000	RMB’000	RMB’000
Proposed Annual Caps
(inclusive of VAT)	1,137,000	1,105,000	685,000

The useful life of a glass production line is generally eight to ten years and its main facilities such as glass melting furnaces and thermal equipment will suffer from varying degrees of damage after a long-term operation. During the three years ended 31 December 2017, there was only one production line which needed the engineering services for the maintenance, therefore, the historical transaction amount for the three years ended 31 December 2017 were relatively less. For the three years ending 31 December 2020, the Group will implement one new development project for research and development center on the materials for photoelectric and one technical transformation project for ultra-thin glass production and two projects for addition two production lines of the Target Companies under the Acquisition.

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LETTER FROM THE BOARD

The Proposed Annual Caps under the Engineering Equipment Procurement and Installation Framework Agreement are determined based on the estimated value of the equipment material, construction and installation services to be required for future engineering projects after taking into account (i) the historical transaction amounts between the Group and the Target Companies under the Acquisition and CNBMG; (ii) the projected schedule of construction projects proposed to be implemented by the Group in 2018, 2019 and 2020; (iii) the complexity of the construction work and installation work for future projects; and (iv) the decrease in the numbers and amounts of construction projects in 2020.

Internal control on pricing

As mentioned above, there was only one production line which needed the engineering services for the maintenance during the three years ended 31 December 2017. Therefore, the historical transaction amount for the three years ended 31 December 2017 were relatively less than the proposed annual caps under the Engineering Equipment Procurement and Installation Framework Agreement. In order to maintain the Group’s competitiveness and consolidate the leading position in the industry, the Company has applied the workmanship, experience, key technology and operation processes accumulated in the long-term practice of glass production into the design and construction of new production lines and will implement a series of development projects, including one new development project for research and development center on the materials for photoelectric and one technical transformation project for ultra-thin glass production and two projects for addition two production lines of the Target Companies under the Acquisition for the three years ending 31 December 2020.

CNBMG is the largest comprehensive building material group corporation in China and its subsidiary has a few key strengths within the glass industry in the PRC, including but not limited to, its long history of establishment with over 10 years of experience on building and involvement in different domestic and international glass engineering projects. The general contract projects on several glass production lines undertaken by CNBMG have won excellent project design awards from the PRC or the glass industry. CNBMG has professional knowledge and competitiveness in glass production line construction projects and equipment manufacturing and installation.

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LETTER FROM THE BOARD

By considering the confidentiality for core technology in the construction of production lines, the Company will not conduct tenders for core equipment and facilities in the construction of production lines, including glass furnaces, tin baths and cooling kilns and the Board believes that entering into the Engineering Equipment Procurement and Installation Framework Agreement with CNBMG is beneficial to the Company and all of its Shareholders. The Company will adopt the below internal control procedures in relation to the procurement of the equipment materials, construction services and installation services provided by the CNBMG Group:

(i) the production or comprehensive management department of the Company and/or its subsidiaries are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Engineering Equipment Procurement and Installation Framework Agreement by monthly basis;
(ii) the Group implements project leader system for new, reconstruction and extension, relocation and construction, technical transformation projects. The project leader shall be assigned by the management of the Company and select professional technicians from production management department, financial department and project implementation unit of the Group to constitute a project team;
(iii) the project team shall review the offer price from the CNBMG Group and propose terms, pricing basis and plan on relevant equipment materials, construction fee and installation fees based on the design plan, amount of investment, quantity of buildings and advancement of technologies adopted, and submit the same to the meeting of general manager of the Group for discussion;
(iv) the general manager of the Group will consider the transaction with the market information from the production or comprehensive management department of the Company and/or its subsidiaries and the result after the discussion with the project team;
(v) The general manager of the Group conducts random supervision and evaluation on the terms offered by the CNBMG Group and other independent suppliers to ensure that the terms offered by the CNBMG Group is not less favourable to the terms offered to independent suppliers;
(vi) The general manager of the Group will monthly report the overall progress of the projects, including the aggregated settled transaction with the CNBMG Group under the Engineering Equipment Procurement and Installation Framework Agreement to the Directors; and
(vii) The Directors will review the report from general manager of the Group monthly and ensure the terms under the Engineering Equipment Procurement and Installation Framework Agreement to be not less favourable to independent suppliers.

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LETTER FROM THE BOARD

The written contract in relation to the transaction shall be executed with the approval of the secretary to the Board, chief financial controller and general manager of the Company after joint review by the company legal consultant, internal control management department, financial department and secretariat of the Board of the Company.

5. SALE AND PURCHASE OF SPARE PARTS FRAMEWORK AGREEMENT

On 24 January 2018, the Company and CNBMG entered into the Sale and Purchase of Spare Parts Framework Agreement.

Date: 24 January 2018

Parties: (1) CNBMG; and (2) the Company.

Term: The Sale and Purchase of Spare Parts Framework Agreement shall take effect upon signing with company seals by the authorised representatives of both parties and approval by the Independent Shareholders at the extraordinary general meeting of the Company, and shall be valid until 31 December 2020.

Nature of transaction:

Pursuant to the Sale and Purchase of Spare Parts Framework Agreement, the CNBMG Group agreed to supply the equipment and spare parts including large equipment, robot arms, crucible containers, trays, glass shelves, various hardware fittings, angle bead, pressure plate, column board, etc. to the Group.

Pricing terms

Pursuant to the Sale and Purchase of Spare Parts Framework Agreement, as a general principle, the price of the equipment and spare parts under the Sale and Purchase of Spare Parts Framework Agreement shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis by both parties under the principle of justice, fairness and openness, and based on the prevailing market price of the transaction. The price of equipment and spare parts offered by the CNBMG Group to the Group shall not be higher than that offered by the CNBMG Group to independent third parties for provision of the same or similar equipment and spare parts.

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LETTER FROM THE BOARD

Pricing standards

The price of the equipment and spare parts under the Sale and Purchase of Spare Parts Framework Agreement will be determined with reference to the prevailing market price at the time of a particular transaction and not be less favourable than those offered by other independent third party(ies) on the same products or the products with similar model and technical performance index. Procurement Department of the Company’s subsidiary will make reference price by inquiring at least three independent suppliers with the same or better quality of products and services, price, capabilities and experience as CNBMG Group or inviting at least three independent suppliers for tender to determine the price offered by the CNBMG Group.

Proposed Annual Caps for the Sale and Purchase of Spare Parts Framework Agreement

The Proposed Annual Caps under the Sale and Purchase of Spare Parts Framework Agreement for each of the three years ending 31 December 2020 are set out below:

	For the year ending	For the year ending	For the year ending
	31 December 2018	31 December 2019	31 December 2020
	RMB’000	RMB’000	RMB’000
Proposed Annual Caps
(inclusive of VAT)	22,000	25,290	22,730

The Proposed Annual Caps under the Sale and Purchase of Spare Parts Framework Agreement are determined based on the expected future consumption on the production equipment and spare parts after taking into account (i) the historical selling prices and consumed amounts of the production equipment and spare parts; (ii) the increasing scale of the future project; (iii) the need for the repair and maintenance on existing production capacity; (iv) the expected increase in the proportion of procurement of spare parts that are able to adopt to the technological upgrade of the Group; and (v) the expected repairment schedule on the equipment till 2020.

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LETTER FROM THE BOARD

Internal control on pricing

The Company will adopt the below internal control procedures in relation to the purchase of the equipment and spare parts from the CNBMG Group:

(i) the procurement department of the Company and/or its subsidiaries are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Sale and Purchase of Spare Parts Framework Agreement by monthly basis;
(ii) the business departments of the Company and/or its subsidiaries will be responsible for collection of information on market information and price changes of relevant products, and report the same to the deputy general manager in charge of business;
(iii) the deputy general manager in charge of business is responsible for verification of the pricing and payment terms for procurement of products. The final contract terms and pricing shall be subject to approval by the general managers of subsidiaries; and
(iv) the internal audit department will regularly supervise and evaluate the product orders or contract approval procedures in respect of their compliance with internal control requirements.

6. SALE AND PURCHASE OF PRODUCTS FRAMEWORK AGREEMENT

On 24 January 2018, the Company and Triumph entered into the Sale and Purchase of Products Framework Agreement.

Date: 24 January 2018

Parties: (1) Triumph; and (2) the Company.

Term: The Sale and Purchase of Products Framework Agreement shall take effect upon signing with company seals by the authorised representatives of both parties and approval by the Independent Shareholders at the extraordinary general meeting of the Company, and shall be valid until 31 December 2020.

Nature of transaction:

Pursuant to the Sale and Purchase of Products Framework Agreement, the Triumph Group agreed to supply float glass and wooden packaging boxes to the Group.

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LETTER FROM THE BOARD

Pricing terms

Pursuant to the Sale and Purchase of Products Framework Agreement, as a general principle, the price of the products under the Sale and Purchase of Products Framework Agreement shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis by both parties under the principle of justice, fairness and openness, and based on the prevailing market price of the transaction. The price of products offered by the Triumph Group to the Group shall not be higher than that offered by the Triumph Group to independent third parties for provision of the same or similar products.

Pricing standards

Glass products

The price of glass products under the Sale and Purchase of Products Framework Agreement will be determined with reference to:

(i) at least three comparable transactions (if any) conducted by the Group with independent third parties during the same period on the same products or the products with same specification and grade; and/or
(ii) communication and exchange of price information by various means, including telephone conversations, emails and meetings with peers and business partners within the glass production industry; and/or
(iii) supply and demand information and price information in the PRC market from China National Bureau of Statistics (www.stats.gov.cn) for the demand information and the glass network/the official website of China glass industry (www.glass.org.cn) for price information. Relevant market price data will be used as the basis for the transactions with the CNBMG Group by the sales department.

The final price will be implemented after the approval of the general manager or the deputy general manager of the Company’s subsidiaries with reference to (i) to (iii) above. For products with unified prices set by the Company, the selling prices for relevant products shall not be lower than the floor prices issued by the Group.

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LETTER FROM THE BOARD

Wooden packaging boxes

The Company will determine the market price thereof by inquiring no less than three independent suppliers with the same or better quality of products, price, capabilities and experience as CNBMG Group or through invitation for bid. The Company will also require the CNBMG Group to provide the sale and purchase contracts for wooden boxes between the CNBMG Group and the independent third parties for the same period to ensure that the transaction price thereof shall not be higher than that offered by the CNBMG Group to independent third parties for provision of the same products or the products with same specification.

Proposed Annual Caps for the Sale and Purchase of Products Framework Agreement

The below summarises the annual cap amounts for the two years ended 31 December 2017 under the Wooden Boxes Supply Agreement:

	For the year ended	For the year ended
	31 December 2016	31 December 2017
	RMB’000	RMB’000
Annual cap amounts (inclusive of VAT)	6,000	6,000

The table below summarises the historical transaction amounts for the two years ended 31 December 2017 under the Wooden Boxes Supply Agreement:

	For the year ended	For the year ended
	31 December 2016	31 December 2017
	RMB’000	RMB’000
Historical transaction amounts (inclusive of VAT)	4,660	4,350

The Proposed Annual Caps under the Sale and Purchase of Products Framework Agreement for each of the three years ending 31 December 2020 are set out below:

	For the year ending	For the year ending	For the year ending
	31 December 2018	31 December 2019	31 December 2020
	RMB’000	RMB’000	RMB’000
Proposed Annual Caps
(inclusive of VAT)	28,820	36,420	36,420

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LETTER FROM THE BOARD

Since the Group needs the float glass for deep processing, the Company entered the Sale and Purchase of Products Framework Agreement with Triumph for procurement of float glass and wooden products. The demand for float glass for the three years ending 31 December 2020 is mainly due to the demand for the float glass from one of the Target companies under the Acquisition which began production of high transparent double-glass modules in September 2017 and it began to build a new glass deep processing production line for high transparent doubleglass modules for photovoltaic glass. The deep processing production line with annual production capacity of approximately 4 million square meters is expected to be completed and commence operation in 2018.

The Proposed Annual Caps under the Sale and Purchase of Products Framework Agreement are determined based on the expected future consumption on the float glass and wooden packaging boxes after taking into account (i) the historical transaction amounts between the Group (including the Target Companies under the Acquisition) and the Triumph Group of approximately RMB4 million, RMB4.6 million and RMB4.4 million for the three years ended 31 December 2017; (ii) the anticipated increase in demand of the Group on the float glass for the production of high penetration dual-glass module for the component of photovoltaic module; and (iii) the expected need for wooden packaging boxes for glass and wooden products due to the increase in production capacity of glass products of the Group including the Target Companies under the Acquisition in the future.

As stated in the overseas regulatory announcement of the Company dated 1 February 2018, in order to cope with the operational needs of the Group, Bengbu Company, a wholly-owned subsidiary of the Company entered into the Sale and Purchase of Wooden Boxes Agreement with Bengbu Chemical, pursuant to which Bengbu Chemical agreed to provide wooden packaging boxes to Bengbu Company with the transaction cap amount of RMB2,400,000 for the six months ending 30 June 2018 (inclusive of VAT). The Proposed Annual Cap under the Sale and Purchase of Products Framework Agreement for the year ending 31 December 2018 included the abovementioned transaction cap amount under the Sale and Purchase of Wooden Boxes Agreement.

Internal control on pricing

The Company will adopt the below internal control procedures in relation to the purchase of the float glass and wooden products from the Triumph Group:

(i) the procurement department of the Company and/or its subsidiaries are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Sale and Purchase of Products Framework Agreement by monthly basis;

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LETTER FROM THE BOARD

(ii) the business departments of the Company and/or its subsidiaries will be responsible for collection of information on market information, price changes of relevant products and tenders result, and report the same to the deputy general manger in charge of business;
(iii) the deputy general manager in charge of business is responsible for verification of the pricing and payment terms for procurement of products. The final contract terms and pricing shall be subject to approval by the general managers of subsidiaries; and
(iv) the internal audit department will regularly supervise and evaluate the product orders or contract approval procedures in respect of their compliance with internal control requirements.

B. CONTINUING CONNECTED TRANSACTION SUBJECT TO THE REPORTING AND ANNOUNCEMENT REQUIREMENTS ONLY

Set out below is a summary of the principal terms of the Supply of Electricity Framework Agreement which is subject to the reporting and announcement requirements only as the applicable percentage ratios for the Supply of Electricity Framework Agreement exceed 0.1% but less than 5% under the Hong Kong Listing Rules:

SUPPLY OF ELECTRICITY FRAMEWORK AGREEMENT

On 24 January 2018, the Company and CNBMG entered into the Supply of Electricity Framework Agreement.

Date: 24 January 2018 Parties: (1) CNBMG; and (2) the Company.

Term:

The Supply of Electricity Framework Agreement shall take effect upon signing with company seals by the authorised representatives of both parties and approval by the Independent Shareholders at the extraordinary general meeting of the Company, and shall be valid until 31 December 2020.

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LETTER FROM THE BOARD

Nature of transaction:

Pursuant to the Supply of Electricity Framework Agreement, the CNBMG Group agreed to supply photovoltaic electricity to the Group.

Pricing terms

Pursuant to the Supply of Electricity Framework Agreement, as a general principle, the electricity fee under the Supply of Electricity Framework Agreement shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis by both parties under the principle of justice, fairness and openness, and based on the prevailing market price of the transaction. The electricity fee charged by the CNBMG Group on the Group shall not be higher than that charged by the CNBMG Group on independent third parties for provision of the same type of or the same services.

Pricing standards

The electricity fee under the Supply of Electricity Framework Agreement will be determined with reference to the electricity price of local State Grid Corporation of China with a discount rate determined by the service life of the photovoltaic power generation system and the cost of maintenance of the photovoltaic power generation station. The service life of the photovoltaic power generation system is generally 25 years and the discount offered by the CNBMG Group will be generally 10% off if the remaining service life of the photovoltaic power generation system is over 10 years and 20% off if the remaining service life of the photovoltaic power generation system is below 10 years to the electricity price of local State Grid Corporation of China.

Proposed Annual Caps for the Supply of Electricity Framework Agreement

The Proposed Annual Caps under the Supply of Electricity Framework Agreement for each of the three years ending 31 December 2020 are set out below:

	For the year ending	For the year ending	For the year ending
	31 December 2018	31 December 2019	31 December 2020
	RMB’000	RMB’000	RMB’000
Proposed Annual Caps
(inclusive of VAT)	3,600	6,480	6,480

– 28 –

LETTER FROM THE BOARD

The Proposed Annual Caps under the Supply of Electricity Framework Agreement are determined based on the expected future demand after taking into account (i) the electricity fee and amount of the electricity consumed by the operation lines in the previous three years; (ii) the production capacity of electricity of the completed photovoltaic plants and the photovoltaic plants under construction of the CNBMG Group; and (iii) the number of production units of the Group entered into the electricity supply arrangement with the CNBMG Group.

Internal control on pricing

The Company will adopt the below internal control procedures in relation to the procurement of the electricity from the CNBMG Group:

(i) the finance department of the Company and/or its subsidiaries are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Supply of Electricity Framework Agreement by monthly basis;
(ii) the financial department of the Group will review the electricity price of local state grid on a monthly basis, and the electricity fee under the Supply of Electricity Framework Agreement will be adjusted accordingly. The pricing preferential margin of photovoltaic electricity will remain unchanged during the contract term; and
(iii) the expiry date of the written contract entered into with the CNBMG Group will be on or before 31 December 2020 and the written contract shall be executed with the approval by the secretariat of the Board, chief financial controller and general manager of the Company after joint review by the legal consultant, internal control management department, financial department and secretariat of the Board of the Company.

C. CONTINUING CONNECTED TRANSACTION EXEMPTED FROM THE REPORTING, A N N O U N C E M E N T A N D I N D E P E N D E N T S H A R E H O L D E R S ’ A P P R O V A L REQUIREMENTS UNDER THE HONG KONG LISTING RULES

Set out below is a summary of the principal terms of the Financial Services Framework Agreement which is exempted from the reporting, announcement and independent shareholders’ approval requirements as the transactions contemplated under the Financial Services Framework Agreement constitute financial assistance provided for the benefit of the Company on normal commercial terms or better where no security over assets of the Group is granted in respect of such financial assistance under the Hong Kong Listing Rules:

– 29 –

LETTER FROM THE BOARD

FINANCIAL SERVICES FRAMEWORK AGREEMENT

On 24 January 2018, the Company and CNBMG entered into the Financial Services Framework Agreement.

Date: 24 January 2018 Parties: (1) CNBMG; and (2) the Company.

Term: The Financial Services Framework Agreement shall take effect upon signing with company seals by the authorised representatives of both parties and approval by the Independent Shareholders at the extraordinary general meeting of the Company, and shall be valid until 31 December 2020.

Services:

Pursuant to the Financial Services Framework Agreement, the CNBMG Group has agreed to provide financial services to the Group including:

(1) entrusted loan, where the CNBMG Group, the Group and the financial institution will enter into a contract, and the CNBMG Group will deposit its internal funds into the financial institution and entrust the financial institution to provide loan to the Group for the purpose of lending or lending projects under the contract;
(2) financing guarantee, where the CNBMG Group agreed to provide guarantee to the Group in respect of the financing activities of the Group, including but not limited to loans and financial leases; and
(3) payment by the CNBMG Group on behalf of the Group, where the CNBMG Group agreed to provide support in respect of the payment for order of goods and the settlement for goods of the Group with the suppliers by paying the payable price of goods first on behalf of the Group.

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LETTER FROM THE BOARD

Pricing terms

Pursuant to the Financial Services Framework Agreement, as a general principle, the financial services fee under the Financial Services Framework Agreement shall be determined in the ordinary course of business on normal commercial terms and negotiated on arm’s length basis by both parties under the principle of justice, fairness and openness, and based on the prevailing market price of the transaction. The Group will not provide any pledge or counter guarantee to the CNBMG Group for the financial services provided by the CNBMG Group under the Financial Services Framework Agreement. The financial services fee charged by the CNBMG Group on the Group shall not be higher than that charged by the CNBMG Group on independent third parties for provision of the same type of or the similar financial services.

Pricing standards

The pricing standards of the financial services provided by the CNBMG Group are as follows:

Entrusted loan

The interests of the entrusted loan provided by the CNBMG Group to the Group will not be higher than the interest rates for loans of same nature and under same terms set by the PBOC.

Financing guarantee

The fees charged by the CNBMG Group for the provision of financing guarantee to the Group will not be higher than the prevailing market price or rate from at least three commercial banks for providing the same financing guarantee.

Making payments on behalf of the Group for goods supplied by the Group’s suppliers

The interests of payments made by the CNBMG Group to the Group’s suppliers on behalf of the Group will not be higher than the interest rates for loans of same nature and under same terms charged on the Group by the PBOC.

The applicable fee or rate charged on the Group by the CNBMG Group shall not be less favourable than that charged on other independent third party(ies) on the same nature and under same terms. As the CNBMG provide a better financial fee or interest rate to the Group for the Group’s daily operation and business expansion, the finance cost charged by CNBMG will not be higher than the finance cost charged by other independent third party(ies). Therefore, the Group considers that entering into the Financial Services Framework Agreement is in the interests of shareholders as a whole.

– 31 –

LETTER FROM THE BOARD

Proposed Annual Caps for the Financial Services Framework Agreement

The below summarises the annual cap amounts, measured by the principal amount of the entrusted loan, financing guarantee and payments paid on behalf of the Group, for the three years ended 31 December 2017 under the CNBMG Financial Services Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Annual cap amounts	1,100,000	1,100,000	1,100,000

The table below summarises the historical transaction amounts, measured by the principal amount of the entrusted loan, financing guarantee and payments paid on behalf of the Group, for the three years ended 31 December 2017 under the CNBMG Financial Services Framework Agreement:

	For the year ended	For the year ended	For the year ended
	31 December 2015	31 December 2016	31 December 2017
	RMB’000	RMB’000	RMB’000
Historical transaction amounts	1,086,900	942,790	1,018,140

The Proposed Annual Caps under the Financial Services Framework Agreement, measured by the principal amount of the entrusted loan, financing guarantee and payments paid on behalf of the Group, for each of the three years ending 31 December 2020 are set out below:

	For	the year ending	For the year ending	For the year ending
	31	December 2018	31 December 2019	31 December 2020
		RMB’000	RMB’000	RMB’000
Proposed Annual Caps		3,456,360	5,509,830	5,387,610

– 32 –

LETTER FROM THE BOARD

The Proposed Annual Caps under the Financial Services Framework Agreement are determined based on the expected value of the entrusted loan, financing guarantee and payments paid on behalf of the Group after taking into account of (i) the business plans on adding new and transformation of production lines of the Group including the Target Companies under the Acquisition and capital requirements for such plans; (ii) the financial status of the Group including the Target Companies under the Acquisition during different stage of the Group’s business plan; (iii) the capital requirement in different stage of the projects as the projects usually last for one to two years; and (iv) the historical transaction amounts of the financial services provided by the CNBMG Group.

In order to cope with the operational needs of the Group, the Company entered into the Payment Support Agreement with CLFG, pursuant to which CLFG agreed to provide payment settlement support to the Group with the transaction cap amount of RMB200,000,000 for the period from 26 January 2018 to 31 March 2018, details of which are set out in the overseas regulatory announcement of the Company dated 26 January 2018. The Proposed Annual Cap under the Financial Services Framework Agreement for the year ending 31 December 2018 included the abovementioned transaction cap amount under the Payment Support Agreement.

As stated in the oversea regulatory announcement of the Company dated on 30 January 2018, the Triumph Group provide two financial guarantee services to the Company for two bank loans with amount of RMB57.60 million and RMB106.86 million respectively. The Proposed Annual Cap under the Financial Services Framework Agreement for the year ending 31 December 2018 included the abovementioned transaction amount.

Internal control on pricing

The Company will adopt the below internal control procedures in relation to the financial services provided by the CNBMG Group:

(i) the finance department of the Company and/or its subsidiaries are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Financial Services Framework Agreement by monthly basis;
(ii) the finance department will check and make reference to the benchmark interest rate stipulated by the PBOC for loans with the same maturity period as those provided by the CNBMG Group. The finance department regularly checks and inquires the interest rates at least once a month to ensure the fairness and reasonableness of the interest rates;

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LETTER FROM THE BOARD

(iii) the finance department will also check and make reference to the benchmark interest rate and guarantee fee published by other commercial banks which mainly include but not limited to Bank of China, Bank of Communications, China Construction Bank, Bank of Luoyang, China CITIC Bank and Huishang Bank. The finance department regularly checks and inquires the interest rates and guarantee fee published by other commercial banks at least once a month to ensure the fairness and reasonableness of the interest rates and guarantee fee;
(iv) interest and fee payable by the Group arising from its acceptance of borrowing will be reviewed and compared with the lending provided by the CNBMG Group to independent third parties on the interest and fee charged at least once a month; and
(v) the head of the finance department of the Group will review the interest and fee charged by the CNBMG Group to ensure that the interests and the fees charged by the CNBMG Group will be determined on a fair and reasonable basis before entering into any contract.

INTERNAL CONTROL MEASURES RELATING TO ANNUAL CAPS

The Group has implemented the following measures to ensure that the annual transaction amounts will not exceed the annual caps of the respective year:

(i) all subsidiaries of the Group develop management ledger for related party transactions and present the statistical tables in respect of related party transactions to the finance department at the beginning of each month. The finance department makes statistics and analysis on the amount of continuing connected transactions on a monthly basis and together with the secretariat of the Board, jointly supervise and control the amounts of related party transactions of subsidiaries. It will send warning on the transactions which are expected to exceed the annual transaction amounts and report the same to the management and the Board of the Company.
(ii) the internal control management department of the Group (with the Company’s audit department as the implementation department) will inspect, supervise and evaluate the product orders for daily transaction or contract approval procedures of the Company and its subsidiaries in respect of their compliance with internal control requirements of related party transactions on a quarterly basis, and report the issue discovered to the Audit (Examination) Committee under the Board in a timely manner.
(iii) the Company’s auditors report on the 2018 CCT Agreements annually confirming whether (a) the relevant transactions under the 2018 CCT Agreements have received approval by the Board; (b) the transactions are entered into, in all material respects, in accordance with the 2018 CCT Agreements governing them; and (c) with respect to the aggregate amount of the continuing connected transactions under the 2018 CCT Agreements, such transactions do not exceed the relevant annual caps.

– 34 –

LETTER FROM THE BOARD

INFORMATION ON AND RELATIONSHIP OF THE PARTIES TO THE 2018 CCT AGREEMENTS

The Company is principally engaged in the production and sales of ultra-thin electronic glass.

CNBMG, a wholly state-owned enterprise incorporated in the PRC and the ultimate controlling shareholder of the Company, is a comprehensive building materials industry group. It is deemed to be interested in 174,018,242 A Shares, representing approximately 33.04% of the total issued share capital of the Company as at the Latest Practicable Date.

Triumph, a company incorporated in the PRC with limited liability, an indirect controlling shareholder of the Company and a direct wholly-owned subsidiary of CNBMG, is principally engaged in glass sector, new materials sector, new energy sector, new equipment sector and project management sector.

BACKGROUND OF AND REASONS FOR ENTERING INTO THE 2018 CCT AGREEMENTS

The Company is principally engaged in the production and sales of ultra-thin electronic glass. The Company entered into the 2014 CCT Agreements with CLFG, CNBMG and Triumph Science & Technology respectively and the Supply Agreement with Triumph, and Bengbu Company entered into the Wooden Boxes Supply Agreement with Bengbu Chemical, all of which expired on 31 December 2017. In addition, after the completion of the Acquisition by the Company of 100% equity interest in Hefei New Energy, 100% equity interest in Tongcheng New Energy and 70.99% equity interest in Yixing New Energy which are expected to complete in mid-April 2018, the Company will expand its business development in the new energy glass sector in the glass related business. The Company expects that the Acquisition will allow the Group to leverage its experience in operation and management and its leading position established within the glass industry, expand its footprint within the glass related business and enrich the Group’s product structure relating to the new specialised functional glass sector, thereby enhancing the Company’s competitiveness. The Company entered into the 2018 CCT Agreements on 24 January 2018 for the purposes of (i) renewing the 2014 CCT Agreements, the Supply Agreement and the Wooden Boxes Supply Agreement (all of which expired on 31 December 2017) so as to ensure continuous provision of goods and services to and by the Group; (ii) coping with the operation needs and business development of the Group with an expected increase in production capacity and project development and an expected growth in the new specialised functional glass product sector in the coming years; and (iii) ensuring adequacy of capital to be required in different stages of various projects and business development of the Group.

Accordingly, the Directors are of the view that the 2018 CCT Agreements have been entered into on normal commercial terms and in the ordinary and usual course of business of the Group, the terms of the 2018 CCT Agreements and their respective Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Shareholders and the Company as a whole.

– 35 –

LETTER FROM THE BOARD

HONG KONG LISTING RULES IMPLICATIONS

CNBMG is deemed to be interested in 174,018,242 A Shares, representing approximately 33.04% of the total issued share capital of the Company as at the Latest Practicable Date, and Triumph is a direct whollyowned subsidiary of CNBMG. Therefore, each of CNBMG and Triumph is regarded as a connected person of the Company.

As the applicable percentage ratios for each of the Non-exempt 2018 CCT Agreements exceed 5%, the transactions contemplated thereunder will be subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules.

As the applicable percentage ratios for the Supply of Electricity Framework Agreement exceed 0.1% but less than 5%, the transactions contemplated thereunder will be subject to the reporting and announcement requirements only but exempt from the independent shareholders’ approval requirement under Chapter 14A of the Hong Kong Listing Rules.

The transactions contemplated under the Financial Services Framework Agreement constitute financial assistance provided for the benefit of the Company on normal commercial terms or better where no security over assets of the Group is granted in respect of such financial assistance, and are therefore exempted from the reporting, announcement and independent shareholders’ approval requirements pursuant to Rule 14A.90 of the Hong Kong Listing Rules.

Mr. Zhang Chong, the executive Director, and Mr. Xie Jun, the non-executive Director, have abstained from voting in respect of the 2018 CCT Agreements in the Board meeting due to the fact that they are connected with CNBMG and are not regarded as independent to make any recommendation to the Board. Save as mentioned above, all Directors have confirmed that they have no material interests in the 2018 CCT Agreements and the transactions contemplated thereunder.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all independent non-executive Directors has been formed by the Company in accordance with the Hong Kong Listing Rules to advise the Independent Shareholders on the Non-exempt 2018 CCT Agreements. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders as to whether the terms and conditions of the Non-exempt 2018 CCT Agreements, the transactions contemplated thereunder and their respective Proposed Annual Caps 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.

– 36 –

LETTER FROM THE BOARD

SHANGHAI LISTING RULES IMPLICATIONS

As the A Shares of the Company are listed on the Shanghai Stock Exchange, the Company is also required to comply with the relevant requirements of the Shanghai Listing Rules. Pursuant to the Shanghai Listing Rules, the Proposed Annual Caps of all the 2018 CCT Agreements should be aggregated and are subject to the Independent Shareholders’ approval at the EGM.

EGM

The Company will convene the EGM for the purposes of, among other things, seeking the Independent Shareholders’ approval for each of the 2018 CCT Agreements and the Proposed Annual Caps. At the EGM, voting on the proposed ordinary resolutions will be conducted by way of poll.

The EGM scheduled to be held at 9:00 a.m. on 29 March 2018 (Thursday) was postponed to 9:00 a.m. on 27 April 2018 (Friday). The notice for convening the EGM to be held at the conference room of the Company on 3rd Floor, No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC is set out on pages 87 to 90 of this circular. A form of proxy for use at the EGM was published on the website of the Stock Exchange (http://www.hkexnews.hk) on 25 January 2018 and was also despatched to the Shareholders on 1 February 2018. Whether or not you are able to attend the EGM in person, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same 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 or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

An announcement will be made by the Company following conclusion of the EGM to inform the Shareholders of the results of the EGM.

Pursuant to Rule 14A.36 of the Listing Rules, any shareholder who has a material interest in the transaction must abstain from voting on the resolution. Therefore, CNBMG and its associates, which have interests in the transactions contemplated under the 2018 CCT Agreements, will abstain from voting on the resolutions in respect of each of the 2018 CCT Agreements and their respective Proposed Annual Caps at the EGM.

– 37 –

LETTER FROM THE BOARD

RECOMMENDATIONS

The Directors (including the independent non-executive Directors) consider that the continuing connected transactions under the 2018 CCT Agreements are carried out in the ordinary and usual course of business of the Company and on normal commercial terms. The Directors (including the independent non-executive Directors) are of the view that the terms of the 2018 CCT Agreements, the transactions contemplated thereunder and the Proposed Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the ordinary resolutions with respect to the 2018 CCT Agreements and the Proposed Annual Caps to be proposed at the EGM.

The Independent Board Committee, having taken into account, among other things, the advice of the Independent Financial Adviser, is of the view that the terms of the Non-exempt 2018 CCT Agreements are on normal commercial terms, and the entering into of the Non-exempt 2018 CCT Agreements, the transactions contemplated thereunder and the proposed annual caps are fair and reasonable, in the ordinary and usual course of business of the Company 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 ordinary resolutions with respect to the Non-exempt 2018 CCT Agreements and the proposed annual caps to be proposed at the EGM.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information as set out in the appendix to this circular and the notice of the EGM.

Yours faithfully,

By order of the Board

Luoyang Glass Company Limited* Zhang Chong

Chairman

* For identification purposes only

– 38 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

＊

13 April 2018

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 13 April 2018 of the Company (the “ Circular ”) of which this letter forms part. Terms defined in the Circular have the same meanings herein unless the context otherwise requires.

We have been appointed as the members of the Independent Board Committee to consider the terms of the Non-exempt 2018 CCT Agreements and the proposed annual caps, and to advise the Independent Shareholders whether, in our opinion, the terms of the Non-exempt 2018 CCT Agreements, the transactions contemplated thereof and the proposed annual caps are fair and reasonable, in the ordinary and usual course of business of the Company, on normal commercial terms, and are in the interests of the Company and the Shareholders as a whole. Goldin has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

Your attention is drawn to (i) the “Letter from the Board”; (ii) the “Letter from the Independent Financial Adviser” to the Independent Board Committee and the Independent Shareholders which contains its advice in respect of the terms of the Non-exempt 2018 CCT Agreements, the transactions contemplated thereof and the proposed annual caps; and (iii) the additional information as set out in the appendix to the Circular.

– 39 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms and conditions of the Non-exempt 2018 CCT Agreements, the transactions contemplated thereof and the proposed annual caps, and having taken into account the opinion of the Independent Financial Adviser and, in particular, the factors, reasons and recommendations as set out in the “Letter from the Independent Financial Adviser” on pages 41 to 81 of the Circular, we are of the opinion that the Non-exempt 2018 CCT Agreements were entered into in the ordinary and usual course of business of the Company, on normal commercial terms and that the terms of the Non-exempt 2018 CCT Agreements, the transactions contemplated thereof and the proposed annual caps are fair and reasonable 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 ordinary resolutions concerning the same to be proposed at the EGM.

Yours faithfully,

For and on behalf of the Independent Board Committee

Mr. Jin Zhanping Mr. Liu Tianni Mr. Ye Shuhua Mr. He Baofeng Independent non-executive Directors

For identification purposes only

– 40 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from the Independent Financial Adviser setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the Non-exempt 2018 CCT Agreements and the transactions contemplated thereunder which has been prepared for the purpose of inclusion in this circular.

==> picture [28 x 24] intentionally omitted <==

Goldin Financial Limited

22/F Far East Finance Centre 16 Harcourt Road Hong Kong

13 April 2018

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the terms of the continuing connected transactions contemplated under the Non-exempt 2018 CCT Agreements, details of which are set out in the announcements of the Company dated 24 January 2018 and 1 February 2018 in relation to the continuing connected transactions contemplated under the 2018 CCT Agreements and the Sale and Purchase of Sodium Carbonate Agreement and the Sale and Purchase of Ultra-thin Glass Agreement, respectively and the overseas regulatory announcement of the Company dated 1 February 2018 in relation to the Sale and Purchase of Wooden Boxes Agreement (the “ Announcements ”) and the letter from the Board (the “ Letter from the Board ”) in the circular of the Company dated 13 April 2018 (the “ Circular ”) to the Shareholders, of which this letter forms part. Unless specified otherwise, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

CNBMG, the ultimate controlling shareholder of the Company, is deemed to be interested in 174,018,242 A Shares, representing approximately 33.04% of the total issued share capital of the Company as at the Latest Practicable Date. Triumph is an indirect controlling shareholder of the Company and a direct wholly-owned subsidiary of CNBMG. Therefore, each of CNBMG and Triumph is regarded as a connected person of the Company. As the applicable percentage ratios for each of the Non-exempt 2018 CCT Agreements exceed 5%, the transactions contemplated thereunder will be subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules. An EGM will be convened for the purposes of, among other things, seeking Independent Shareholders’ approval for each of the 2018 CCT Agreements and the Proposed Annual Caps. CNBMG

– 41 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

and its associates, which have interests in the transactions contemplated under the 2018 CCT Agreements, will abstain from voting on the resolutions in respect of each of the 2018 CCT Agreements and their respective Proposed Annual Caps at the EGM. At the EGM, voting on the proposed ordinary resolutions will be conducted by way of poll.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising Mr. Jin Zhanping, Mr. Liu Tianni, Mr. Ye Shuhua and Mr. He Baofeng, all being the independent non-executive Directors, has been formed in accordance with the Hong Kong Listing Rules to advise the Independent Shareholders on the Non-exempt 2018 CCT Agreements.

We, Goldin Financial Limited, have been appointed by the Company as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to, among others, whether the terms under each of the Non-exempt 2018 CCT Agreements, including their respective Proposed Annual Caps, are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole, and as to voting in respect of the relevant resolutions at the EGM.

We are independent pursuant to Rule 13.84 of the Hong Kong Listing Rules to act as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Non-exempt 2018 CCT Agreements. As at the Latest Practicable Date, we did not have any relationships or interests with the Company or any other parties that could reasonably be regarded as relevant to our independence. Within the two years prior to the Latest Practicable Date, we have not acted as an independent financial adviser or a financial adviser to the Company. Apart from the normal professional fees paid to us for our services to the Company in connection with the Non-exempt 2018 CCT Agreements, no arrangements exist whereby we will receive any fees or benefits from the Company or any other party to the transactions.

– 42 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

In formulating our opinion and recommendations, we have reviewed, inter alia , the Announcements, the Non-exempt 2018 CCT Agreements being (i) the Technical Services Framework Agreement; (ii) the Sale and Purchase of Glass Products Framework Agreement; (iii) the Sale of Raw Materials Framework Agreement; (iv) the Engineering Equipment Procurement and Installation Framework Agreement; (v) the Sale and Purchase of Spare Parts Framework Agreement and (vi) the Sale and Purchase of Products Framework Agreement, and the consolidated financial statements of the Group for the six months ended 30 June 2017 and for the years ended 31 December 2016 and 2017, respectively. We have also reviewed certain information provided by the management of the Company relating to the operations, financial conditions 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 Non-exempt 2018 CCT Agreements, and the businesses and future outlook of the Group. We have assumed that such information and statements, and any representation made to us, are true, accurate and complete in all material respects as at the Latest Practicable Date and we have relied upon them in formulating our opinion.

All Directors collectively and individually accept full responsibility for the purpose of giving information with regard to the Company in the Circular and, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading. We have assumed that all such statements, information, opinions and representations contained or referred to in the Circular or otherwise made to us by the Directors and the management of the Company for which they are solely responsible, were true, accurate and complete at the time they were made and continue to be true, accurate and complete in all material respects as at the Latest Practicable Date and the Shareholders will be notified of material changes (if any) of the information contained in the Circular. We consider that we have been provided with, and we have reviewed, all currently available information and documents which are available under present circumstances to enable us to reach an informed view regarding the Non-exempt 2018 CCT Agreements 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 reasons to suspect that any material information has been withheld by the Directors or management of the Company, or is misleading, untrue or inaccurate. We have not, however, for the purpose of this exercise, conducted any independent detailed investigation or audit into the business or affairs or future prospects of the Group. Our opinion is necessarily based on financial, economic, market and other conditions in effect, and the information made available to us, as at the Latest Practicable Date.

This letter is issued for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their considerations of the Non-exempt 2018 CCT Agreements, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

– 43 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In forming our recommendations to the Independent Board Committee and the Independent Shareholders in respect of the Non-exempt 2018 CCT Agreements, we have taken into account the following principal factors and reasons:

1. Information on the Company, CNBMG and Triumph Group

The Company is principally engaged in the production and sales of ultra-thin electronic glass.

2. Reasons for and benefits of entering into the Non-exempt 2018 CCT Agreements

The Company entered into the 2014 CCT Agreements with CLFG, CNBMG and Triumph Science & Technology respectively and the Supply Agreement with Triumph and Bengbu Company entered into the Wooden Boxes Supply Agreement with Bengbu Chemical, all of which expired on 31 December 2017. The entering into of each of the Technical Services Framework Agreement, the Sale and Purchase of Glass Products Framework Agreement, the Sale of Raw Materials Framework Agreement and the Engineering Equipment Procurement and Installation Framework Agreement by the Company with CNBMG are in substance the extension of the established business relationship between the Company and CNBMG under the 2014 CCT Agreements which will benefit the Group, by securing the provision of goods and services to and by the Group through leveraging on the extensive resources and well-developed technology of CNBMG under the Technical Services Framework Agreement, the Sale and Purchase of Glass Products Framework Agreement, the Sale of Raw Materials Framework Agreement and the Engineering Equipment Procurement and Installation Framework Agreement, which could maintain the quality and reliability of the Group’s products. The Company is generally satisfied with the quality of the products and services rendered by the CNBMG Group and the Triumph Group under the 2014 CCT Agreements, the Supply Agreement and the Wooden Boxes Supply Agreement and believe that the long term relationship between the Group and the CNBMG Group and Triumph Group and their familiarisation with the Company’s projects and business operations would enable the Company to enjoy stable and consistent supply of products and services. On the other hand, the sale of glass products by the Company to CNBMG under the Sale and Purchase of Glass Products Framework Agreement will continue to enhance the Company’s market share and provide stable source of revenue to the Group through the established prolonged business partnership with major clients.

– 44 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As noted from the circular of the Company dated 11 October 2017, the Company has entered into respective agreements for the acquisition of the entire equity interest in each of Hefei New Energy and Tongcheng New Energy and 70.99% equity interest in Yixing New Energy, which represents an enlargement of the Group’s footprint within the glass industry in the PRC while enriching its products relating to the new specialised functional glass sector within the new energy glass sector in the glass related business. The Acquisition is expected to complete in mid-April 2018 which will then effectively increase the overall production capacity of the Group in particular the photovoltaic glass production. The entering of each of the Non-exempt 2018 CCT Agreements therefore serve to more fully utilise the existing and the acquired production lines, which could then broaden the revenue stream and product portfolio of the Group upon completion of the Acquisition.

On the other hand, various risk control measures (as further discussed in the below section headed “3. Internal control measures within the Group”) will be adopted by the Group to govern the conduct of the continuing connected transactions under the Non-exempt 2018 CCT Agreements and safeguard the interests of the Independent Shareholders.

Taking into consideration that (i) the entering into of the Technical Services Framework Agreement, the Sale and Purchase of Glass Products Framework Agreement, the Sale of Raw Materials Framework Agreement and the Engineering Equipment Procurement and Installation Framework Agreement are in substance the renewal of the existing agreements between the Company and CNBMG; (ii) the Company would secure a constant and smooth supply of glass-related products for its business operation under the Non-exempt 2018 CCT Agreements (save for the Sale and Purchase of Glass Products Framework Agreement under which the Company will receive continuous income from CNBMG from the sale of glass products thereto); (iii) the entering of the Non-exempt 2018 CCT Agreements will cater the business growth and development of the Group in the coming years upon completion of the Acquisition; (iv) advanced technology and facilities of glass production from CNBMG will help the Company to improve its production technique; and (v) various internal control measures (as further discussed in the below section headed “3. Internal control measures within the Group”) will be put in place to monitor the conduct and ensure compliance of the transactions under the Non-exempt 2018 CCT Agreements, we are of the view that the entering into of the Non-exempt 2018 CCT Agreements are in the ordinary and usual course of business of the Group, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Internal control measures within the Group

As detailed in the Letter from the Board, various internal control measures will be adopted in connection with the Non-exempt 2018 CCT Agreements as follows:

Technical Services Framework Agreement

(a) The production department (including relevant administrative departments) of the Company and/or its subsidiaries are responsible to collect and analyse the price and terms of the transaction and review the annual caps under the Technical Services Framework Agreement on a monthly basis;
(b) The technical services and their respective fees shall be reported to the management of the Group and will be implemented only upon approval of the management of the Group; and
(c) Significant and important technical services shall be implemented upon approval by the general manager of the Group.

Sale and Purchase of Glass Products Framework Agreement

(a) The marketing department of the Company or sale department of the subsidiaries of the Company are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Sale and Purchase of Glass Products Framework Agreement by monthly basis;
(b) The marketing department of the Company will be responsible for collecting the market information including the supply and demand and the price fluctuation of each of the glass products on a monthly basis from China National Bureau of Statistics (www.stats.gov.cn) and the glass network/the official website of China glass industry (www.glass.org.cn) respectively on a monthly basis;
(c) The marketing department of the Company will also communicate and query with the customers, suppliers or trade partners through telephone conversations, emails and site visits to obtain the prices of comparable transactions in the same period and the prevailing market price at the time of a particular transaction for verification of the prevailing market price implemented by the sales department;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(d) The marketing department of the Company will set up the floor price to the subsidiaries for each of the glass products for internal measure after approval by the management of the Company according to the market price provided by the marketing department and the selling price offered to the CNBMG Group will not be less than the floor price; and
(e) The marketing department of the Company will review the sales of the glass products of the Company’s subsidiaries based on the floor price and report to the management of the Company on a monthly basis.

The Group will adopt the below measures, to ensure the Sale and Purchase of Glass Products Framework Agreement to be carried out within reasonable range, so as to control and remove the possibility of over reliance on the CNBMG Group.

(a) The finance department and the marketing department will monthly review the settlement amount of the Sale and Purchase of Glass Products Framework Agreement, and are responsible for counting, supervising and managing implementation of the transactions under the Sale and Purchase of Glass Products Framework Agreement;
(b) The finance department conducts random supervision and evaluation on the terms offered to the CNBMG Group and other independent customers to ensure that the terms offered to the CNBMG Group are not less favourable to the terms offered to independent customers;
(c) The marketing department will monthly report the overall sale of the glass products of the Group, including the number of customers, number of new customers and their corresponding transaction amounts to the Directors; and
(d) The Directors will review the report from marketing department monthly and ensure the Sale and Purchase of Glass Products Framework Agreement to be carried out within reasonable range.

Sale of Raw Materials Framework Agreement

(a) The marketing department of the Company or the procurement departments of the subsidiaries of the Company are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Sale of Raw Materials Framework Agreement by monthly basis;
(b) The procurement departments of the subsidiaries of the Company shall conduct open tender or invitation for bid involving at least three independent suppliers at least on a yearly basis, and determine the silicon powder supplier and silicon powder procurement price based on the tender results;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) For centralised procurement of sodium carbonate, the Company will appoint a deputy general manager in charge of marketing to directly participate in the centralised tender, bid negotiation and pricing for sodium carbonate of the Triumph Group. A centralised tender for sodium carbonate shall be performed once a month or every two months depending on the market situation, and the tender is open to domestic major sodium carbonate manufacturers in the market;
(d) The marketing department of the Company will be responsible for collection of information on supply and demand and price fluctuation of silicon powder and sodium carbonate on a monthly basis from different sodium carbonate manufacturers and China’s bulk commodity service providers such as www.chem365.net. Relevant personnel of the business department will communicate and query with the silicon powder and sodium carbonate manufacturers or trade partners through telephone conversations, emails and site visits to obtain the prices of comparable transactions by independent suppliers in the same period and the prevailing market price at the time of a particular transaction; and
(e) The deputy general manager in charge of marketing of the Company or the management of its subsidiaries will assess and determine the terms and pricing for procurement of raw materials with the CNBMG Group based on the market information collected with the abovementioned methods or through the abovementioned channels in order to ensure that the prices offered by the CNBMG Group shall not be less favourable than those offered by other independent third parties for the same kind of the raw materials.

The Group will adopt the below measures, to ensure the Sale of Raw Materials Framework Agreement to be carried out within reasonable range, so as to control and remove the possibility of over reliance on the CNBMG Group.

(a) The finance department and the procurement departments of the subsidiaries of the Company will monthly review the settlement amount of the Sale of Raw Materials Framework Agreement, and are responsible for counting, supervising and managing implementation of the transactions under the Sale of Raw Materials Framework Agreement;
(b) The finance department conducts random supervision and evaluation on the terms offered by the CNBMG Group and other independent suppliers to ensure that the terms offered by the CNBMG Group are not less favourable to the terms offered by independent suppliers;
(c) The marketing department will monthly report the overall purchase of the raw materials of the Group, including the number of suppliers, number of new suppliers and their corresponding transaction amounts to the Directors; and
(d) The Directors will review the report from marketing department monthly and ensure the Sale of Raw Materials Framework Agreement to be carried out within reasonable range.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Engineering Equipment Procurement and Installation Framework Agreement

(a) The production or comprehensive management department of the Company and/or its subsidiaries are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Engineering Equipment Procurement and Installation Framework Agreement by monthly basis;
(b) The Group implements project leader system for new, reconstruction and extension, relocation and construction, technical transformation projects. The project leader shall be assigned by the management of the Company and select professional technicians from production management department, financial department and project implementation unit of the Group to constitute a project team;
(c) The project team shall review the offer price from the CNBMG Group and propose terms, pricing basis and plan on relevant equipment materials, construction fee and installation fees based on the design plan, amount of investment, quantity of buildings and advancement of technologies adopted, and submit the same to the meeting of general manager of the Group for discussion;
(d) The general manager of the Group will consider the transaction with the market information from the production or comprehensive management department of the Company and/or its subsidiaries and the result after the discussion with the project team;
(e) The general manager of the Group conducts random supervision and evaluation on the terms offered by the CNBMG Group and other independent suppliers to ensure that the terms offered by the CNBMG Group is not less favourable to the terms offered to independent suppliers;
(f) The general manager of the Group will monthly report the overall progress of the projects, including the aggregated settled transaction with the CNBMG Group under the Engineering Equipment Procurement and Installation Framework Agreement to the Directors; and
(g) The Directors will review the report from general manager of the Group monthly and ensure the terms under the Engineering Equipment Procurement and Installation Framework Agreement to be not less favourable to independent suppliers.

The written contract in relation to the transaction shall be executed with the approval of the secretariat of the Board, chief financial controller and general manager of the Company after joint review by the Company legal consultant, internal control management department, financial department and secretariat of the Board of the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Sale and Purchase of Spare Parts Framework Agreement and Sale and Purchase of Products Framework Agreement

(a) The procurement department of the Company and/or its subsidiaries are responsible to collect and analyze the price and terms of the transaction and review the annual caps under the Sale and Purchase of Spare Parts Framework Agreement and the Sale and Purchase of Products Framework Agreement by monthly basis;
(b) The business departments of the Company and/or its subsidiaries will be responsible for collection of information on market information, price changes of relevant products and tenders result, and report the same to the deputy general manager in charge of business;
(c) The deputy general manager in charge of business is responsible for verification of the pricing and payment terms for procurement of products. The final contract terms and pricing shall be subject to approval by the general managers of subsidiaries; and
(d) The internal audit department will regularly supervise and evaluate the product orders or contract approval procedures in respect of their compliance with internal control requirements.

Taking into account (i) the above internal control measures, in particular, the ongoing monitoring and internal evaluation on the pricing terms under the Non-exempt 2018 CCT Agreements to ensure that the prices set will be no less favourable to the Company than those offered to/by independent third parties; and (ii) the respective annual review by the external auditors of the Company and the independent non-executive Directors regarding the compliance of the terms under the Non-exempt 2018 CCT Agreements, which are commonly adopted by companies listed on the Stock Exchange in carrying out continuing transactions with connected person(s), we are of the view that appropriate and adequate internal control measures will be in place to ensure compliance with the terms of the Non-exempt 2018 CCT Agreements in order to safeguard the interest of the Independent Shareholders.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Principal terms of the Non-exempt 2018 CCT Agreements and the Proposed Annual Caps

Technical Services Framework Agreement

Pricing and payment terms

Pursuant to the Technical Services Framework Agreement, the technical service fee will be determined with reference to:

(1) the applicable state price which refers to the engineering survey and design fee regulations* (工程勘察設計收費管理規定) issued by the National Development and Reform Commission of the PRC;
(2) if there is no applicable state price for such services, the fair prices of the same or same type of technical services provided by independent third parties in the location of the Company or the nearby area, and the prevailing market price of the transaction. The Group will obtain relevant market price information through various channels, which include (i) considering at least three comparable transactions (if any) conducted with independent third parties during the same period on such services; and (ii) communication and exchange of price information with at least three independent suppliers by various means, including telephone conversations, emails and meetings, with peers and business partners within the glass production industry. The Company will conclude the relevant market price by (i) at least three comparable transactions with independent third parties; and (ii) the price offered by at least three independent suppliers to set the fair price; or
(3) where there are no available prevailing market prices or where it is impracticable to obtain the relevant market prices information, the Group and the CNBMG Group will determine the price after arm’s length negotiations with reference to (i) the previous same or same type of the transactions concluded by the Group with independent third parties; and/or (ii) previous same or same type of the transactions concluded by the CNBMG Group with independent third parties; and/or (iii) the costs of equipment and materials required by the CNBMG Group for provision of the relevant technical services, manpower involved complexity of the technical plan, level of technology advancement level and duration of the construction.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Further, we understand that the technical service fee charged by the CNBMG Group on the Group shall not be higher than that charged by them on independent third parties for provision of the same type of or the same technical services pursuant to the Technical Services Framework Agreement. As advised by the management of the Company, we were advised that the detailed terms including the payment terms will be specified in separate individual agreements based on the respective business demand and technical requirement for the technical services to be provided thereunder. Moreover, such payment terms will be assessed and reviewed by the Company based on historical similar transactions of the Group and/or market practice to ensure that agreements of similar transactions are on normal commercial terms or better and are no less favourable to the Group than the terms available to independent third parties.

In assessing the fairness and reasonableness of the pricing terms under the Technical Services Framework Agreement, we have attempted to assess the pricing term through comparison with historical transaction between the Group as the purchaser and independent third parties as the supplier for the provision of similar technical services. However, we were advised that the Group had not carried out any similar technical transaction with independent third parties. Alternatively, we have reviewed the technical service agreement dated 14 November 2014 between CNBMG as the supplier of technical services and the Company as the purchaser (the “ Historical Technical Agreement ”), which represent all historical transactions between CNBMG as the supplier and the Company in respect of the provision of technical services. We noted that the technical service fee was determined with reference to (1) the applicable state price; or (2) the fair prices of the same or similar technical services and the prevailing market price if there was no applicable state price for any such services. We also noted that the Group shall pay for the services rendered by CNBMG Group during the year within one month upon the receipt of the payment notice in the first month of the following year from CNBMG Group.

We have also reviewed two sets of agreements dated 27 April 2015 and 15 December 2015 respectively provided by the Company which were carried out between CNBMG as supplier and independent third parties in respect of provision of technical services for ultra-thin glass production line and for industrial projects (the “ I3P Technical Agreements ”), which represent all agreements available to the Company entered into between the CNBMG Group and independent third parties for provision of similar technical services and we consider such I3P Technical Agreements to be representative. Considering that (i) the Historical Technical Agreement is the only historical agreement between CNBMG and the Company for the provision of the relevant technical services which is similar to the transactions under the Technical Services Framework Agreement; and (ii) the I3P Technical Agreements which represent all available similar agreements are representative, we are of the view that the referencing to the Historical Technical Agreement and the I3P Technical Agreements are sufficient for us to form our view on the fairness and reasonableness of the terms under the Technical Services Framework Agreement. We noted that the technical service fee under the I3P Technical Agreements was based on the applicable state price and if there was no state price available, such technical service fee will be negotiated by the parties on arm’s

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

length basis with reference to, among others, the cost of equipments and materials required for providing relevant technical services by CNBMG Group, complexity of technical plans, technology advancement level and duration of construction. We were further advised by the Company that, given the unique nature of technical services required for various kinds of glass production and the varying requirement for different types of technical services with regard to different specification, market prices for similar products are rarely available and it is the market practice to determine the technical service fee based on arm’s length negotiation between the relevant parties with reference to the individual project plans, type and nature of technical services and location of the production lines. In this connection, we have further enquired with the Company on the pricing mechanism under the Technical Services Framework Agreement, in particular, when neither applicable state price nor market price for such technical services is available. We were advised that in such event, the Company will make reference to the Engineering Investigation and Design Fees Management Regulations (工程勘察設計收費管理規定（計價格[2002]10號）) jointly published by the Ministry of Housing and Urban-Rural Development of the PRC and the State Development Planning Commission of the PRC which outlines the pricing mechanism for various engineering and technical related services. If such pricing are irrelevant due to the unique nature of technical service to be provided, the relevant parties to the Technical Services Framework Agreement will determine the technical service fee based on the same or same type of technical services agreements entered into between CNBMG Group as supplier and independent third parties, and ensure that the price for technical services provided by CNBMG Group under the Technical Services Framework Agreement will be no less favourable to the Group than the prices of the same or same type of technical services charged by CNBMG Group to independent third parties. In respect of the payment terms under the I3P Technical Agreements, we noted that the respective counterparties were required to settle the technical service fee by installments to CNBMG Group based on the completion of various stages of the project. We understand from the Company that the payment terms under the I3P Technical Agreements, which are one-off projects, are based on the project schedule and the completion time of relevant stages of services. On the contrary, we noted that the provision of technical services under the Technical Services Framework Agreement will be on a continuous basis for a term up to 31 December 2020. Considering that (i) the nature of provision of technical services under the Technical Services Framework Agreement is different from that of the I3P Technical Agreements; and (ii) the Company confirmed that the payment terms under the Technical Services Framework Agreement will be no less favourable to the Group than those offered by independent third parties to the Group, we are of the view that the terms of the Technical Services Framework Agreement including the pricing and payment terms are no less favourable to the Group than those offered by CNBMG Group to other independent third parties.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Considering that (i) the pricing of the technical service fees under the Technical Services Framework Agreement are generally in line with the pricing term under the Historical Technical Agreement and the I3P Technical Agreements; (ii) the technical service fees for the relevant technical services provided by the CNBMG Group will be no less favourable to the Group than the prices of the same or same type of technical services charged by the CNBMG Group to independent third parties; (iii) the Company confirmed that the payment terms under the Technical Services Framework Agreement will be no less favourable to the Group than those offered by independent third parties to the Group; and (iv) various internal control measures will be put in place within the Group to ensure compliance with the terms under the Technical Services Framework Agreement (as further discussed in the above section headed “3. Internal control measures within the Group”), we consider that the terms of the Technical Services Framework Agreement are normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Proposed Annual Caps

The table below summarises (i) the historical transaction amounts for the three years ended 31 December 2017; and (ii) the Proposed Annual Caps for the three years ending 31 December 2020.

Historical transaction amounts

Year ended	Year ended	Year ended	Proposed Annual Caps for
31 December	31 December	31 December	the three years ending 31 December
2015	2016	2017	2018 2019	2020
RMB’000	RMB’000	RMB’000	RMB’000 RMB’000	RMB’000
14,360	0	12,150	24,000 24,000	20,000

As stated in the Letter from the Board, the Proposed Annual Caps were determined based on the estimated need for the technical services to be expected by the Company in the future after taking into account (i) the implementation of one new development project for research and development center on the materials for photoelectric and one technical transformation project for ultra-thin glass production of the Group; (ii) higher services fee of the higher technologies involved on the development of the intelligent information management software and the complexity of the technical work for improving the production capacity and level of production technology of the Group; (iii) the implementation of two projects for addition two production lines of the Target Companies under the Acquisition; (iv) the expected price with reference to the prevailing market price for the provision of such services; (v) the decrease in number of engineering projects in 2020 as the completion of several projects during 2020; and (vi) the implementation of an intelligent information management system for all glass production lines.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Proposed Annual Cap for the year ending 31 December 2018 represents an increase of approximately 97.53% from the historical transaction amounts for the year ended 31 December 2017, while the Proposed Annual Cap for the year ending 31 December 2019 is the same as the Proposed Annual Cap for the year ending 31 December 2018 and the Proposed Annual Cap for the year ending 31 December 2020 represents a decrease of approximately 16.67% from the Proposed Annual Cap for the year ending 31 December 2019. We have reviewed the breakdown of the Proposed Annual Caps for the three years ending 31 December 2020 and noted that the Proposed Annual Caps are based on the expected number of ongoing and future projects of the Group and the estimated contract sum thereof for each of the respective years. It is notable that the Proposed Annual Cap for the year ending 31 December 2018 represents a significant increase from the historical transaction amount for the year ended 31 December 2017. We have enquired into the management of the Company and understand that such increase was mainly resulting from the consideration of the increase in scope and scale of technical services to be provided under the Technical Service Framework Agreement including but not limited to (a) construction design and feasibility reports compiling of production facilities and (b) development, application and services of the project softwares, as compared to the agreed service scope under the CNBMG Engineering Technical Services Framework Agreement. We have reviewed the project schedule (the “ Project Schedule ”) prepared by the Company which sets out the estimated contract values on a projectby-project basis entered or will potentially be entered into between the Company and the CNBMG Group during the three years ending 31 December 2020 and we noted that the number of new projects requiring the increased scope of technical services under the Technical Services Framework Agreement represented over 85% of the total number of projects expected to be carried out for the year ending 31 December 2018 and the aggregate amount of which accounted for a major portion of approximately 83.33% of the Proposed Annual Cap for the year ending 31 December 2018. As such, we consider that the increment of the Proposed Annual Cap for the year ending 31 December 2018 against the historical transaction amount in 2017 is justifiable to cater the increased scope of technical services to be rendered under the Technical Services Framework Agreement in order to satisfy the increased scope of technical requirements of the new projects under the Project Schedule.

In assessing the fairness and reasonableness of the Proposed Annual Caps, we have also taken into account the following factors:

(i) Number of projects launched and to be launched by the Group

We understand from the management of the Company that in the course of determination of the Proposed Annual Caps, they have made reference to, among others, the expected number of projects launched and to be launched for each of the three years ending 31 December 2020 based on the relevant agreements in effect and agreements currently under negotiation between the relevant parties in respect of provision of technical services to the Group. We have reviewed the Project Schedule and noted that the number of projects stay unchanged for the year ending 31 December 2019 as compared to that for the year ending 31 December 2018 and decrease by approximately 28.57% for the year ending 31 December 2020.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Expected fee for provision of technical services

The management of the Company has made reference to the expected technical service fee under the Technical Services Framework Agreement primarily based on (1) the budgeted engineering design fee for the relevant projects based on the experience and understanding of the management of the Company; (2) the cost for similar projects launched in the market and (3) historical contracts of similar provision of technical services to the Group. We have reviewed the Project Schedule which sets out the respective estimated annual fees derived based on the development stages of the ongoing and future projects and noticed that the monetary sizes of the potential projects are in general larger than that of the historical projects, and we were advised by the management of the Company that there are no completely identical projects because of the unique characteristic of technical services to be rendered. Furthermore, we have obtained and reviewed four samples contracts of the historical technical services of similar nature and size (“ Technical Contracts ”), which represents all similar technical contracts available to the Company and no other relevant contracts of similar nature and size could be obtained and therefore we consider the Technical Contracts to be exhaustive, sufficient and representative for our referencing purpose. We noted that the relevant technical fees for the engineering projects under the Technical Contracts are generally comparable with the estimated technical fees for the engineering projects adopted in the calculation of the Proposed Annual Caps.

Considering that (i) the high technologies involved in the development of intelligent information management software and the complexity of the technical work; (ii) the implement of an intelligent information management system for all glass production lines; (iii) the expected construction fee due to the Target Companies under the Acquisition represent 50% of the Proposed Annual Cap for the two years ending 31 December 2019 respectively and 60% of the Proposed Annual Cap for the year ending 31 December 2020; (iv) the business plan for the Group to upgrade the facilities; and (v) the technical services under the Project Schedule are in line with the Equipment Installation Schedule, we consider that the Proposed Annual Caps for the three years ending 31 December 2020 are fair and reasonable.

Sale and Purchase of Glass Products Framework Agreement

Pricing and payment terms

Pursuant to the Sale and Purchase of Glass Products Framework Agreement, the price of glass products will be determined based on the prevailing market price.

Further, we understand that the price of glass products offered by the Group to the CNBMG Group shall not be less than that offered by the Group to independent third parties for provision of the same type of or similar glass products. Pursuant to the Sale and Purchase of Glass Products

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Framework Agreement, we were advised by the Company that the payment terms thereunder will be with reference to the historical settlement pattern of the Group of sale and purchase of glass products, of which glass products were generally sold directly to downstream ITO conductive film glass producers and the payment for glass products shall be fully settled by the end of the respective month. As for the sale to screen protection glass producers and other downstream glass product producers, glass products of the Company were sold through distributors by way of payment to delivery.

In assessing the fairness and reasonableness of the pricing terms under the Sale and Purchase of Glass Products Framework Agreement, we have reviewed (i) the historical transaction between the Company as the supplier and the CNBMG Group as the purchaser for glass products under the Ultra-thin Float Glass Sale and Purchase Framework Agreement dated 14 November 2014 (the “ Historical Glass Products Agreement ”); and (ii) six sets of agreements entered between the Company as the supplier and independent third parties as the purchaser for glass products (the “ I3P Glass Products Agreements ”), which represents all relevant agreements in the past three years. We consider that the Historical Glass Products Agreement and the I3P Glass Products Agreements are representative and sufficient for us to form our view on the fairness and reasonableness of the terms of the Sale and Purchase of Glass Products Framework Agreement. We noted that the price of glass products under the Historical Glass Products Agreement and the I3P Glass Products Agreements was determined based on the then prevailing market price of glass products. Further, we noted that the price for the same type of glass products charged to the CNBMG Group under the Historical Glass Products Agreement were higher than that charged to independent third parties under the I3P Glass Products Agreement. In respect of the payment terms, we noted that the payment terms under the Sale and Purchase of Glass Products Framework Agreement are similar to those under the Historical Glass Products Agreement and the I3P Glass Products Agreement.

Considering that (i) the pricing of the glass products under the Sale and Purchase of Glass Products Framework Agreement is consistent with the pricing term under the Historical Glass Products Agreement and the I3P Glass Products Agreements; (ii) the historical prices of the glass products charged to the CNBMG Group under the Historical Glass Products Agreement were higher than those charged to independent third parties under the I3P Glass Products Agreements; (iii) the price of the glass products offered by the Group to the CNBMG Group shall not be less than that offered by the Group to independent third parties for provision of the same or similar glass products; (iv) the Company confirmed that the payment terms under the Sale and Purchase of Glass Products Framework Agreement will be no less favourable to the Group than those offered to independent third parties; and (v) various internal control measures will be put in place within the Group to ensure compliance with the terms under the Sale and Purchase of Glass Products Framework Agreement (as further discussed in the above section headed “3. Internal control measures within the Group”), we consider that the terms of the Sale and Purchase of Glass Products Framework Agreement are normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed Annual Caps

The table below summarises (i) the historical transaction amounts for the three years ended 31 December 2017; and (ii) the Proposed Annual Caps for the three years ending 31 December 2020.

Historical transaction amounts

Year ended	Year ended	Year ended	Proposed Annual Caps for
31 December	31 December	31 December	the three years ending 31 December
2015	2016	2017	2018 2019	2020
RMB’000	RMB’000	RMB’000	RMB’000 RMB’000	RMB’000
6,410	102,320	18,410	363,620 452,570	490,690

As stated in the Letter from the Board, the Proposed Annual Caps were determined based on the Group’s internal projection on the estimated amount of ultra-thin glass, photovoltaic glass and further processed glass products to be sold to the CNBMG Group by the Group after taking into account (i) the historical transaction amounts between the Target Companies under the Acquisition and CNBMG of approximately RMB38 million, RMB49 million and RMB69 million for the three years ended 31 December 2017; (ii) the anticipated increase in demand of the CNBMG Group on the ultra-thin glass for their indium tin oxide conductive film business and photovoltaic glass for their photovoltaic construction business; and (iii) the production capacity increased by 528% by adding (a) the production lines from the Target Companies under the Acquisition, (b) upgraded ultra-thin electronic glass production line and (c) the new ultra-white light thermal material production line in 2018 and further increase 40% of the production capacity by expanding the business on photovoltaic glass in 2019.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed Annual Cap for the year ending 31 December 2018

The Proposed Annual Cap for the year ending 31 December 2018 represents an increase of approximately 18.75 times from the historical transaction amounts for the year ended 31 December 2017. We have reviewed the breakdown of the Proposed Annual Caps for the three years ending 31 December 2020 and noted that the Proposed Annual Caps are based on the expected order quantities of glass products and the respective unit prices, and the expected quantities and unit prices of glass products are estimated based on the historical annual amount of production and annual average price of respective production line and respective type of products and the latest development of the existing and acquired production lines. It is notable that the Proposed Annual Cap for the year ending 31 December 2018 represents a significant increase from the historical transaction amount for the year ended 31 December 2017. We have enquired into the management of the Company and understand that such increase was mainly resulting from (i) the fact that the production of one of the ultra-thin electronic glass production line has been temporarily suspended from September 2016 for improvement in technology in cold-repair and re-construction such that the production of ultrathin glass for the year ended 31 December 2017 had declined accordingly; (ii) the consideration of the future operation plan of the Target Companies under the Acquisition which are principally engaged in the research and development, production and sales of solar photovoltaic glass and further processed glass which generally have higher unit price than the ultra-thin glass; and (iii) the substantial improvement of the production capacity and the quality of products after upgrading the production line, thereby potentially increase the demand of products with higher quality. We understand that the repair of the suspended production line will complete and fully commence operation again by July 2018. The Company currently has three production lines for ultra-thin glass with an existing production capacity amounting to 400 tons per day. We were given to understand that with (i) the new upgraded ultra-thin electronic glass production line in place in 2018; (ii) the new photovoltaic glass production lines after the completion of the Acquisition in mid-April 2018; and (iii) the new ultra-white solar thermal materials production line which is currently under construction and is expected to commence production in 2018, the total glass production capacity of the Group is expected to increase by about 457.5% and therefore the variety and quantity of glass products produced by the Group will increase accordingly. As such, we consider that the increment of the Proposed Annual Cap for the year ending 31 December 2018 against the historical transaction amount in 2017 is justifiable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In assessing the fairness and reasonableness of the Proposed Annual Cap for the year ending 31 December 2018, we have also taken into account the following factors:

(i) Expected sales quantity of glass products by the CNBMG Group

We understand from the management of the Company that the expected quantity of glass products to be sold to the CNBMG Group for the year ending 31 December 2018 was estimated based on (1) the monthly average of the respective glass products placed by the CNBMG Group in 2017; (2) the increased production capacity of the Group in respect of glass products in 2018 and (3) the expected demand of the photovoltaic glass produced by the Target Companies under under Acquisition for the year ending 31 December 2018 upon completion of the Acquisition by mid-April 2018. We have reviewed the quantity of glass products sold to the CNBMG Group for each month in 2017 and glass products expected to be sold to CNBMG Group (including the Target Companies under Acquisition) and noted that the transaction amount with respect to the Target Companies represents 71% of the Proposed Annual Cap for the year ending 31 December 2018. Further, we noted from the breakdown of the Proposed Annual Cap that the expected sales amount of glass by Tongcheng New Energy, one of the Target Companies under the Acquisition, increased significantly for the year ending 31 December 2018 from its historical sales amount over the period from 2015 to 2017 and remain relatively stable for the two years ending 31 December 2019 and 2020. We understand that such increment was associated with a new photovoltaic glass further processing production line of Tongcheng New Energy which has commenced construction in 2017 and will be completed and commence production in 2018. Such new photovoltaic glass further processing production line is expected to cater further glass production of Tongcheng New Energy by around 66.7% in addition to its existing glass production capacity under an ultra-white photovoltaic glass production line and several photovoltaic glass further processing production lines. Given the merits of dual-glass modules over traditional modules including light-weight, higher weatherability, prolonged lifetime and efficiency, the Group (including Tongcheng New Energy) will strengthen its effort in the production of dual-glass modules in the future. Since float glass is one of the major components of dualglass modules, Tongcheng New Energy with increased production capacity intends and will be capable to produce further processed float glass which is an intermediary base material for the production of dual-glass modules and we are of the view that it is reasonable for the Group to increase its effort in the production of further processed float glass, being a raw material of dual-glass modules, to cope with the future market trend in the photovoltaic glass industry in the PRC.

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Given that (i) a significant portion of Proposed Annual Cap for the year ending 31 December 2018 will be attributed to the Target Companies under the Acquisition and the completion of the Acquisition will take place by mid-April 2018; (ii) the expected transaction amount of Tongcheng New Energy for the year ending 31 December 2018 is in line with and within its increasing production capacity for the production of dual-glass module; and (iii) the production capacity of the Group will increase significantly by around 457.5% in 2018 from the Group’s current production capacity, we consider that the determination of the Proposed Annual Cap for the year ending 31 December 2018 is fair and reasonable.

(ii) Expected price of glass products

The management of the Company has made reference to the expected market price for the respective glass products to be offered under the Sale and Purchase of Glass Products Framework Agreement. We were advised that such market prices were based on the average market price of the same or similar glass products sold by the Group. We have therefore obtained and reviewed the historical average price list in 2017 for the sale of glass products under the Historical Glass Products Agreement and noted that the price for glass products used for the determination of the Proposed Annual Cap for the year ending 31 December 2018 is generally in line with the average price for the same or similar glass products in 2017.

Proposed Annual Caps for the two years ending 31 December 2020

The Proposed Annual Cap for the year ending 31 December 2019 and 2020 represents year-on-year increase of approximately 24.46% and 8.42% from the respective previous year. In assessing the fairness and reasonableness of the Proposed Annual Caps for the two years ending 31 December 2020, we have taken into account the following factors:

(i) Expected order quantity of glass products by the CNBMG Group

As noted from the breakdown of the Proposed Annual Caps for the two years ending 31 December 2020, the total quantities of the glass products demonstrated a moderate yearon-year increasing trend. We were given to understand that such increase is attributable to the increase in demand for both ultra-thin electronic glass and the photovoltaic glass. The anticipated increase in demand of the CNBMG Group for ultra-thin electronic glass was due to the expected increasing downstream demand for TN-LCD, STN-LCD and OLED and other types of display panels, as well as touch screen and window protection screen, while for the photovoltaic glass, it is generally used as key components in solar cells and photovoltaic components, etc. We have therefore conducted research from public domain regarding the prospect of downstream products of ultra-thin glass and photovoltaic glass. According to Touch Screen Display Market-Global Industry Analysis, Size, Share, Growth, Trends and Forecast 2016–2024 conducted by Transparency Market Research, a global market research,

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analysis, and intelligence firm, the global touch screen display market is projected to rise at a compound annual growth rate (“ CAGR ”) of 8.90% between 2016 and 2024 to increase from US$44.4 billion in 2015 to US$93.8 billion by 2024. Based on New Display Industry Development White Paper (2017) conducted by CCID Thinktank Information Research Center, an authoritative research institution in new display material market, demand area for new display panel will continue an upward trend with a CAGR of 5% from 2015 and reach 2.24 billion square meters by 2020, particularly when the OLED market is expected to have an explosive growth with highly penetrating applications. Upon our review on the general market trend on the prospect of ultra-thin electronic glass as described above, we consider that the expected demand for ultra-thin electronic glass for the determination of the Proposed Annual Caps for the two years ending 31 December 2019 and 2020 is consistent with the overall demand growth of ultra-thin electronic glass over the period. With reference to the “太陽能發展‘十三五’規劃” (13th five-year plan regarding the development of solar energy industry) published by the National Energy Administration of the PRC in December 2016, the PRC government aimed to further boost up the growth of photovoltaic and solar energy industry through setting up various guidelines and launching supportive schemes and policies, including but not limited to promotion of application of photovoltaic and solar products, broadening of the overseas photovoltaic market, promoting the solar industrial upgrading, and providing more sufficient financial supports. Moreover, series of notices issued by the State Council of the PRC including but not limited to the “光伏扶貧實施方案編製大綱的通知” (Notice of implementation of photovoltaic poverty alleviation program), “‘十三五’控制溫室氣體排放工作方案” (Work plan under the 13th five-year plan regarding the control of greenhouse gas emissions), “‘十三五’生態環境保護規劃” (Ecological environment protection plan under the 13th five-year plan) and “能源發展‘十三五’規劃” (13th five-year plan regarding the development of energy*) published by the National Development and Reform Commission of the PRC are aiming to speed up and widen the application of photovoltaic and solar energy nationally for the purpose of rural construction and environment protection, and the scale of solar power generation is expected to exceed 110 GW in 2020. Accordingly, the domestic demand of display panels as well as other solar energy and photovoltaic products and hence the demand of ultra-thin glass and photovoltaic glass in the PRC are expected to increase in the near future.

(ii) Expected market price of glass products

We noted that the expected price for each type of glass products under the Sale and Purchase of Glass Products Framework Agreement for the two years ending 31 December 2020 remains the same as the price for the year ending 31 December 2018. As advised by management of the Company, the Company expected that the market price of the respective glass products will remain stable for the three years ending 31 December 2020. According to the understanding and experience of the management of the Company, the supply of ultrathin glass in the future market will remain relatively stable, despite some fluctuation due to

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increasing downstream demand and increasing competition arising from imported ultra-thin glass. Based on the 2017 Market Prospect Forecast of Photovoltaic Glass Industry in the PRC published in August 2017 by China Industry Information Network, a professional information provider providing data and industry information from the PRC government and other authorised institutions, the production capacity of photovoltaic glass in the PRC showed a year-on-year increasing trend in the past five years and is expected to grow by around 7% per year in 2018 and 2019 and reach approximately 466.1 million square metres per day by the end of 2019. As a result, despite the rising trend in demand of photovoltaic glass in the PRC between 2018 and 2020, the price of photovoltaic glass is expected to remain stable given the consistent growth of production capacity over the period. Overall, the prospective annual average price of ultra-thin glass and photovoltaic glass in the PRC is expected to remain stable for the three years ending 31 December 2020. We also noted that the expected price of each glass product under the Proposed Annual Caps are close to the average selling price for the corresponding glass products during 2015 to 2017.

Considering that (i) the production capacity will be significantly increased by 528% after taking account of the commencement of the upgraded production line and new production line (including production lines of Target Companies under the Acquisition; (ii) the average unit price of photovoltaic and deep processed glass products produced by the Target Companies under the Acquisition is around 2 times than that of the ultra-thin glass products produced by the Group; (iii) the total production capacity of the Group is expected to increased by about 457.5% after the commencement of the new ultra-white solar thermal materials production line and the upgraded ultra-thin electronic glass production and therefore the variety and quality of the products and the expected demand of products with higher quality will increase accordingly; (iv) the expected demand of photovoltaic glass products and double-glass modules products produced by the Target Companies under the Acquisition from Junxin Technology represents over 60% of the respective Proposed Annual Cap for the three years ending 31 December 2020; and (v) the expected high demand of glass products particularly the photovoltaic glass products in the PRC in the near future, we consider that the Proposed Annual Caps for the three years ending 31 December 2020 are fair and reasonable.

Sale of Raw Materials Framework Agreement

Pricing and payment terms

Pursuant to the Sale of Raw Materials Framework Agreement, the price of raw materials such as silicon powder and sodium carbonate will be determined with reference to the prevailing market price at the time of a particular transaction. Further, we understand that the price of the raw

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materials offered by the CNBMG Group to the Group shall not be higher than that offered by the CNBMG Group by independent third parties for provision of the same type or similar raw materials. Pursuant to the Sale of Raw Materials Framework Agreement, the Company shall settle the payment of raw materials by the end of the following month, or otherwise mutually agreed by the parties.

In assessing the fairness and reasonableness of the pricing terms under the Sale of Raw Materials Framework Agreement, we have reviewed (i) the historical transaction between the Company as the purchaser and the CNBMG Group as the supplier for silicon powder under the CLFG Raw Materials Sale Framework Agreement dated 14 November 2014 and sodium carbonate under the Supply Agreement dated 26 February 2016 (collectively, the “ Historical Raw Materials Agreements ”); and (ii) 32 sets of purchase orders and invoices between the Company as the purchaser and independent third parties as the supplier for silicon powder of same category and quality (the “ I3P Raw Materials Invoices ”), the aggregate transaction amount of which represents over 85% of the total transaction amount in 2017 with respect to purchase of relevant raw materials from independent third parties. In view of the aforesaid sample size, we consider that the Historical Raw Materials Agreements and the I3P Raw Materials Invoices are representative and sufficient for us to form our view on the fairness and reasonableness of the terms of the Sale of Raw Materials Framework Agreement. We noted that the price of raw materials under the Historical Raw Materials Agreements and the I3P Raw Materials Invoices were determined based on the prevailing market price at the time of particular transaction. Further, we have obtained and reviewed 10 sets of purchase orders and invoices issued in 2017 under the Historical Raw Materials Agreement, which represents all relevant purchase orders and invoices in 2017 with respect to the sale and purchase of silicon powder in 2017 under the Historical Raw Materials Agreement, and therefore we consider the aforesaid 10 sets of purchase orders and invoices are sufficient and representative for our comparison purpose. We noted that the prices for silicon powder charged to the Group under the Historical Raw Materials Agreements were lower than or equal to the prices charged by independent third parties under the I3P Raw Materials Invoices. In respect of the payment terms, we noted that the payment terms under the Sale of Raw Materials Framework Agreement are similar to those under the Historical Raw Materials Agreements.

Considering that (i) the pricing of the raw materials under the Sale of Raw Materials Framework Agreement is consistent with the pricing term under the Historical Raw Materials Agreements and that under the I3P Raw Materials Invoices; (ii) the historical prices of silicon powder charged to the Group under the Historical Raw Materials Agreements were lower than those charged by independent third parties under the I3P Raw Materials Invoices; (iii) the price of the raw materials offered by the CNBMG Group to the Group shall not be higher than that offered by the CNBMG Group to independent third parties for provision of the same or similar raw materials; and (iv) various internal control measures will be put in place within the Group to ensure compliance with the terms under the Sale of Raw Materials Framework Agreement (as further discussed in the above section headed “3. Internal control measures within the Group”), we consider that the terms of the Sale of Raw Materials Framework Agreement are normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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Proposed Annual Caps

The table below summarises (i) the historical transaction amounts for the three years ended 31 December 2017; and (ii) the Proposed Annual Caps for the three years ending 31 December 2020.

	Historical transaction	Historical transaction	amounts
	Year ended	Year ended	Year ended	Proposed Annual Caps for
	31 December	31 December	31 December	the three years ending 31 December
	2015	2016	2017	2018	2019	2020
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
CLFG Raw Materials Sale
Framework Agreement	5,780	3,600	900
Supply Agreement	–	17,820	22,860
Total Amount	5,780	21,420	23,760	347,370	571,370	580,230

As stated in the Letter from the Board, the Company made a strategic transformation from ordinary float glass to optical electronic and information display ultra-thin glass through significant asset restructuring that the Group transferred the subsidiaries with ordinary float glass and mining business to CNBMG in December 2015 (the “ Restructure ”). After the Restructure, the Group has three production lines for ultra-thin float glass. The Group will implement a project for a production line for the ultra-white photothermal materials and a technical transformation project for the production line for the ultra-thin glasses and the existing and new production lines of the Target Companies under the Acquisition will be included to the Group after the completion of the Acquisition, therefore, the Group expects that the annual purchase on the raw materials will be increased significantly. The Proposed Annual Caps were determined based on the estimated demand of silicon powder and sodium carbonate after taking into account (i) the historical transaction amounts between the Target Companies under the Acquisition and CNBMG of approximately RMB12 million, RMB99 million and RMB152 million for the three years ended 31 December 2017; (ii) the selling prices and consumed amounts of the raw materials and transportation fees in the previous three years; (iii) the need and the price of higher quality of silicon powder for photovoltaic glass production which is higher than the price of silicon powder for ultra-thin floating glass for two to three times and sodium carbonate for the new product development and production in the future; and (iv) the expected consumption of the silicon powder increase by over 1100% and sodium carbonate increase by 755% due to the increasing production capacity of the Group by 528% in 2018 and 40% in 2019.

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Proposed Annual Cap for the year ending 31 December 2018

The Proposed Annual Cap for the year ending 31 December 2018 represents an increase of approximately 13.62 times from the historical transaction amounts for the year ended 31 December 2017. We have reviewed the breakdown of the Proposed Annual Caps for the three years ending 31 December 2020 and noted that the Proposed Annual Caps are based on the expected purchase amount of silicon powder and sodium carbonate and the respective price per unit. It is notable that the Proposed Annual Cap for the year ending 31 December 2018 represents a significant increase from the historical transaction amount for the year ended 31 December 2017. We have enquired into the management of the Company and understand that such increase was mainly due to the anticipated increase in demand of the raw materials in 2018 resulting from (i) nil procurement of raw materials for one of the ultra-thin electronic glass production line for the year ended 31 December 2017 which has been temporarily suspended from September 2016 for cold repair transformation; and (ii) the consideration of the future operation plan of the Target Companies under the Acquisition which are principally engaged in the research and development, production and sales of solar photovoltaic glass and further processed glass. We understand that raw materials such as silicon powder and sodium carbonate are the major raw materials for the production of glass products. We have reviewed the respective historical procurement amounts by the Group in respect of silicon powder and sodium carbonate for the year ended 31 December 2017 and the expected demand of silicon powder and sodium carbonate from the Group as well as the respective amounts expected to be procured from the CNBMG Group for the year ending 31 December 2018. Taking into consideration (i) the resumption of operation of the suspended ultra-thin electronic glass production line in 2018; and (ii) the increased capacity of the Group (as further discussed below) is able to satisfy the expected demand for raw materials, we are of the view that the respective expected demand for silicon powder and sodium carbonate for the production of glass products are fair and reasonable. Given that the Target Companies under the Acquisition are principally engaged in the production of solar photovoltaic glass which is different from the ordinary ultrathin glass that the Group has been manufacturing, we have enquired with the management on the expected demand of raw materials required by the Target Companies under the Acquisition for their operation and understand that the tonnage of melting furnace for the production of solar photovoltaic glass will require larger amount of such raw materials as compared to those required for ultra-thin glass. We were further advised by the management of the Company that the expected demand for raw materials were mainly based on the production capacity and production level of the

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Target Companies under the Acquisition, and the management of the Company have considered the production capacity operation plan of the Group including (i) the 180t/d production line which was suspended for cold repair will be resumed production in 2018; (ii) two new 1000t/d production lines of Hefei New Energy and Yixing New Energy to be constructed in 2018 and 2019 respectively; (iii) the increase of production capacity due to three production lines from the Target Companies under the Acquisition including a 650t/d production line of Hefei New Energy, a 320t/d production line of Tongcheng New Energy and a 280t/d production line of Yixing New Energy; and (iv) the production capacity of a new 280t/d production line of Yixing New Energy which was commenced into production at the end of 2017 will increase to over 90% during 2018 and 2019. Coupled with the resumption of production of the suspended ultra-thin electronic glass production line in 2018 and a new ultra-white solar thermal materials production line which is expected to commence production in 2018, the aggregate capacity of the Group is expected to increase significantly by approximately 528%. It is therefore expected that the raw materials required by the Group after the Acquisition will be significantly increased to facilitate the operation of the Target Companies under the Acquisition for production of photovoltaic glass. On the other hand, the unit prices of certain raw materials required for the production of photovoltaic glass by the Target Companies under the Acquisition are higher than that of the original type of raw materials as raw materials with higher quality will be used. We noted that the respective transaction amounts from the Target Companies under the Acquisition represent approximately 86.48% of the total transaction amount for the year ended 31 December 2017 and 70.86% of the Proposed Annual Cap for the year ending 31 December 2018.

In assessing the fairness and reasonableness of the Proposed Annual Cap for the year ending 31 December 2018, we have also taken into account the following factors:

(i) Expected amount of raw materials required by the Group

We understand from the management of the Company that the expected quantity of glass products to be sold to the CNBMG Group for the year ending 31 December 2018 was estimated based on, among others, (1) the current monthly order amount of raw materials; and (2) increasing production capacity of the Group. We have reviewed the amount of raw materials procured by the Group from the CNBMG Group and Triumph for each month in 2017. As discussed with the management of the Company, we were given to understand that the Company currently has a total of three ultra-thin electronic glass production lines (namely, the production lines of Bengbu China Building Information Display Materials Co. Ltd. (蚌埠中建材資訊顯示材料有限公司), CLFG Longhai Electronic Glass Limited (洛玻集團洛陽龍海電子玻璃有限公司) and CLFG Longmen Glass Company* (洛玻集團龍門玻璃有限責任公司) at present capable of producing 0.15mm–2.0mm series of electronic glass in large scale, which would demand for silicon powder and sodium carbonate of approximately 4,790 and 1,474 tons per month respectively under full production capacity. Taking into account the

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increasing demand for raw materials by the Group after completion of the Acquisition and the substantial growth of production capacity of the Group of around 528% in aggregate, the Group is expected to demand a significantly higher amount of raw materials for production of its glass products.

(ii) Expected unit price of raw materials

The management of the Company has made reference to the expected market price for the silicon powder and sodium carbonate in determination of the Proposed Annual Caps. We understand that such market prices were based on the average market price and recent bidding price of the same or similar raw materials. We have therefore obtained from the Company the bidding price for sodium carbonate in October 2017 and historical price list in 2017 for the purchase of raw materials under the Historical Raw Materials Agreements and noted that the price for raw materials used for the determination of the Proposed Annual Cap for the year ending 31 December 2018 is generally in line with the average price for the same or similar raw materials in 2017.

Considering that (i) the resumption of the suspended ultra-thin electronic glass production line will resume production in 2018 and together with the commencement of the new production lines of the Group (including those of the Target Companies under the Acquisition), will increase the production capacity of the Group significantly by 528%; (ii) the substantial larger amount of raw materials required for the production lines of solar photovoltaic glass of the Target Companies under the Acquisition which represent an increase of 337.50% in terms of t/d under full operation mode as compared to the production lines of ultra-thin glass which the Group is currently operating; (iii) the raw material procurement amount by the Target Companies under the Acquisition represents around 86.48% and 70.86% of the respective total procurement amount of the Group (including the Target Companies under the Acquisition) in 2017 and 2018 which indicates a relatively stable engagement between the Target Companies and the CNBMG Group; and (iv) excluding the procurement by the Target Companies under the Acquisition and those to be procured for the suspended ultra-thin electronic glass production line upon resumption in 2018, the Proposed Annual Cap for the year ending 31 December 2018 would represent a mere increase of 6.33%, we consider that the determination of the Proposed Annual Cap for the year ending 31 December 2018 is fair and reasonable and the increment of the Proposed Annual Cap for the year ending 31 December 2018 against the historical transaction amount in 2017 is justifiable.

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Proposed Annual Caps for the two years ending 31 December 2020

The Proposed Annual Cap for the year ending 31 December 2019 and 2020 represents year-on-year increase of approximately 64.48% and 1.55% from the respective previous year. In assessing the fairness and reasonableness of the Proposed Annual Caps for the two years ending 31 December 2020, we have taken into account the following factors:

(i) Expected amount of raw materials required by the Group

We were given to understand that the anticipated increase in purchase order of the CNBMG Group for raw materials for the year ending 31 December 2019 was based on the commencement of operation of the second phase of production base in 2019 which is expected to operate at full mode and will increase the production capacity of the Group by around 40% as compared to 2018. We noted that it is standard for glass production line to reach a capacity close to full mode in the first year of operation with reference to the operation of other glass production lines of the Group. As such, the production capacity of the second phase of production base in 2019 is consistent with the overall capacity growth of the production lines of the Group. It is therefore expected that the consumption of raw materials for glass production will increase accordingly for the year ending 31 December 2019. After reaching the target production capacity of the new production lines, the expected amount of raw materials required by the Group will remain stable for the year ending 31 December 2020.

(ii) Expected unit price of raw materials

We noted that the expected price for the raw materials under the Sale of Raw Materials Framework Agreement for the two years ending 31 December 2020 remains the same as the price for the year ending 31 December 2018. As advised by management of the Company, the Company expected that the market price of silicon powder and sodium carbonate will remain stable for the three years ending 31 December 2020. We have carried out independent research on the public domain in respect of the market price of silicon powder and sodium carbonate in the PRC. Based on the National Bureau of Statistics of China, the purchasing price index for industrial producers for chemical raw materials in China have been decreasing by around 4.7% from 2014 to 2015 and recovered by 4.2% from 2015 to 2016. Given the year-on-year change of historical movement of purchasing price index for chemical raw materials was less than 5% in recent years which we consider narrow, we consider that it is fair and reasonable for the Company to estimate the unit price of silicon powder and sodium carbonate based on that for the year ending 31 December 2018 for the determination of the Proposed Annual Caps for the two years ending 31 December 2020.

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Considering that (i) the commencement of operation of the second phase of production base in 2019 would increase the aggregate production capacity of the Group by 40%; and (ii) the expected stable market price for the relevant raw materials in 2019 and 2020, we consider that the Proposed Annual Caps for the two years ending 31 December 2020 are fair and reasonable.

Engineering Equipment Procurement and Installation Framework Agreement

Pricing and payment terms

Pursuant to the Engineering Equipment Procurement and Installation Framework Agreement, the CNBMG Group has agreed to supply equipment and provide installation thereof to the Group for its engineering projects at the price determined with reference to the prevailing market price at the time of particular transaction. Further, we understand that the price of equipment materials, construction fee and the installation fee offered by the CNBMG Group to the Group shall not be higher than that offered by the CNBMG Group to independent third parties for provision of the same type of or the same equipment materials, construction and installation services. Pursuant to the Engineering Equipment Procurement and Installation Framework Agreement, we were given to understand that the payment terms thereunder will base on the historical similar transactions and market practice such that the equipment and installation fee shall be paid by stages according to the installation and construction schedule of the relevant projects.

In assessing the fairness and reasonableness of the pricing terms under the Engineering Equipment Procurement and Installation Framework Agreement, we have obtained (i) the historical transaction between the Company as the purchaser and the CNBMG Group as the supplier for equipments and provision of installation service under the CNBMG Engineering Equipment and Materials Supply Framework Agreement dated 14 November 2014 (the “ Historical Equipment Agreement ”); and (ii) two sets of agreements entered in 2013 provided by the Company which were carried out between CNBMG Group as supplier for equipments and provision of installation services and independent third parties (the “ I3P Equipment Agreements ”), which represent all agreements available to the Company entered by the CNBMG Group and independent third parties for provision of similar equipment and installation services. We consider the Historical Equipment Agreement to be representative and sufficient for us to form our view on the fairness and reasonableness of the terms of the Engineering Equipment Procurement and Installation Framework Agreement. Considering that the I3P Equipment Agreements were entered into in 2013 which is more than four years ago prior to the date of the Engineering Equipment Procurement and Installation Framework Agreement, we consider the I3P Equipment Agreements to be irrelevant for our assessment on the fairness of the Engineering Equipment Procurement and Installation Framework Agreement. We noted that the price of equipments under the Historical Equipment Agreement was determined based on the market price of similar equipment and the complexity of equipment and installation service. In respect of the payment terms, we noted the payment terms under the Engineering Equipment Procurement and Installation Framework Agreement are similar to those under the Historical Equipment Agreement.

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Upon our review on the pricing and payment terms under the Historical Equipment Agreement and considering that (i) the pricing term of the equipments under the Engineering Equipment Procurement and Installation Framework Agreement is consistent with the pricing term under the Historical Equipment Agreement; (ii) the price of equipment and the installation fee offered by the CNBMG Group to the Group shall not be higher than that offered by the CNBMG Group to independent third parties for provision of the same type of or the same equipment materials, construction and installation services; (iii) the Company confirmed that the payment terms under the Engineering Equipment Procurement and Installation Framework Agreement will be no less favourable to the Group than those offered by the CNBMG Group to independent third parties; and (iv) various internal control measures will be put in place within the Group to ensure compliance with the terms under the Engineering Equipment Procurement and Installation Framework Agreement (as further discussed in the above section headed “3. Internal control measures within the Group”), we consider that the terms of the Engineering Equipment Procurement and Installation Framework Agreement are normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Proposed Annual Caps

The table below summarises (i) the historical transaction amounts for the three years ended 31 December 2017; and (ii) the Proposed Annual Caps for the three years ending 31 December 2020.

Historical transaction amounts

Year ended	Year ended	Year ended	Proposed Annual Caps for
31 December	31 December	31 December	the three years ending 31 December
2015	2016	2017	2018 2019	2020
RMB’000	RMB’000	RMB’000	RMB’000 RMB’000	RMB’000
32,540	0	257,000	1,137,000 1,105,000	685,000

As stated in the Letter from the Board, the useful life of a glass production line is generally eight to ten years and its main facilities such as glass melting furnaces and thermal equipment will suffer from varying degrees of damage after a long-term operation. During the three years ended 31 December 2017, there was only one production line which needed the engineering services for the maintenance, therefore, the historical transaction amount for the three years ended 31 December 2017 were relatively less. For the three years ending 31 December 2020, the Group will implement one new development project for research and development center on the materials for photoelectric and one technical transformation project for ultra-thin glass production and two projects for addition two production lines of the Target Companies under the Acquisition. The Proposed Annual Caps were determined based on the estimated value of the equipment material, construction and installation services to be required for future engineering projects after taking into account (i) the historical transaction amounts between the Group and the Target Companies under the

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Acquisition and the CNBMG Group; (ii) the projected schedule of construction projects proposed to be implemented by the Group in 2018, 2019 and 2020; (iii) the complexity of the construction work and installation work for future projects; and (iv) the decrease in numbers and amounts of construction projects in 2020.

Proposed Annual Cap for the year ending 31 December 2018

The Proposed Annual Cap for the year ending 31 December 2018 represents an increase of approximately 3.42 times from the historical transaction amounts for the year ended 31 December 2017. We have reviewed the breakdown of the Proposed Annual Caps for the three years ending 31 December 2020 and noted that the Proposed Annual Caps are based on the expected construction fees for the respective engineering projects of the Group. It is notable that the Proposed Annual Cap for the year ending 31 December 2018 represents a significant increase from the historical transaction amount for the year ended 31 December 2017. We understand that such increase was mainly resulting from (i) the launch of new engineering projects mainly in 2018 over the period from 2018 to 2020; (ii) the respective contract sums under the relevant agreements entered by the Group and the CNBMG Group in 2017; (iii) the significant portion of engagement between the Target Companies under the Acquisition with the CNBMG Group in respect of the purchase of equipments and installation thereof from the CNBMG Group; and (iv) the demand to improve the facilities and production capacity of the Company for performing its core business operation. We have reviewed the schedule of new engineering projects provided by management of the Company (the “ Equipment Installation Schedule ”) for the three years ending 31 December 2020 and the relevant similar agreements for engineering projects entered into by the Group and the CNBMG Group in 2017 and noted that the agreed contract sums thereof including the related construction fee are comparable to the transaction amount of similar projects under the Equipment Installation Schedule. Given that the Target Companies under the Acquisition have been purchasing equipment and installation service from the CNBMG Group in 2017, we noted that the Proposed Annual Cap for the year ending 31 December 2018 represents an increase of approximately 38.95% from the aggregate historical transaction amount between (i) the Target Companies under the Acquisition with the CNBMG Group and (ii) the Group and the CNBMG Group for the year ended 31 December 2017. We noticed from the Equipment Installation Schedule that the transaction amount between Hefei New Energy, being one of the Target Companies under the Acquisition, and the CNBMG Group, represents over 57% of the Proposed Annual Cap for the year ending 31 December 2018. Excluding such transaction amount, the Proposed Annual Cap for the year ending 31 December 2018 would represent an increase of 89.49% from the historical transaction amount for the year ended 31 December 2017, against the increase of 3.42 times from the historical transaction amounts for the year ended 31 December 2017 which is mainly resulting from the relatively high transaction amount from Hefei New Energy.

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Based on the Equipment Installation Schedule, we noted that four equipment purchase and installation projects will be conducted in 2018, among which the amount of the project conducted by Hefei New Energy and the cold repair project for one ultra-thin glass production line which had been suspended since September 2016 and to be resumed production in July 2018 after the cold repair transformation together accounted for 94.11% of the Proposed Annual Cap for the year ending 31 December 2018. Moreover, we compared the two projects mentioned above with similar historical project of the Company and noted that such projects cost higher fee due to the uniqueness of equipments and installation services.

Considering that (i) the Proposed Annual Caps mainly comprised the contract sum of engineering projects between the Group and the CNBMG Group and such contract sum of the respective projects as outlined in the Equipment Installation Schedule are comparable to those stated under the contracts for similar engineering projects between the Group and the CNBMG Group in 2017; and (ii) excluding the contract amount for the construction of the second phase of Hefei New Energy project line which is targeted to complete and operate at full capacity in 2019, the Proposed Annual Cap for the year ending 31 December 2018 would represent an increase of 89.49% from the historical transaction amount in 2017, we consider that the determination of the Proposed Annual Cap for the year ending 31 December 2018 is fair and reasonable.

Proposed Annual Caps for the two years ending 31 December 2020

The Proposed Annual Caps for the years ending 31 December 2019 and 2020 represents year-onyear decreases of approximately 2.81% and 38.01% from the respective previous year. We were advised that the transaction amounts in respect of the purchase of equipments and installation fees are based on the expected schedule of project contracting agreements to be entered by the Group in 2018, 2019 and 2020, respectively, according to the Equipment Installation Schedule. We noted that the Company has adopted a prudent approach by including the expected amounts for the purchase of equipments under the anticipated projects across 2018 and 2019 and across 2019 and 2020 for the determination of the Proposed Annual Caps.

Based on the above, we consider that the Proposed Annual Caps for the two years ending 31 December 2020 are fair and reasonable.

Sale and Purchase of Spare Parts Framework Agreement

Pricing and payment terms

Pursuant to the Sale and Purchase of Spare Parts Framework Agreement, the CNBMG Group has agreed to supply the equipment and spare parts including large equipment, robot arms, crucibles containers, trays, glass shelves, various hardware fittings, angle bead, pressure plate, column board, etc to the Group based on the prevailing market price at the time of particular transaction. Further,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

we understand that the price of spare parts offered by the CNBMG Group to the Group shall not be higher than that offered by the CNBMG Group to independent third parties for provision of the same or similar equipment and spare parts. Pursuant to the Sale and Purchase of Spare Parts Framework Agreement, the Company shall settle the payment of spare parts by the end of the following month, or otherwise mutually agreed by the parties. We were advised that for spare parts without common standards such as refractory bricks, manipulators and crucibles will require customization for further processing thus have a longer production cycle, and that the Group shall pre-pay certain sum as deposit and settle the payment in full upon delivery of the relevant products, which is of market practice.

In assessing the fairness and reasonableness of the pricing terms under the Sale and Purchase of Spare Parts Framework Agreement, we have reviewed eight historical agreements between the Group as the purchaser and the CNBMG Group as the supplier for spare parts which represent all relevant agreements issued in 2017 (the “ Historical Spare Parts Agreements ”) and noted that the prices are determined based on relevant quotations issued by the CNBMG Group which stated the recent market prices of such spare parts. We have also reviewed two samples of purchase orders and invoices issued by CNBMG Group as supplier of similar spare parts and independent third parties (the “ I3P Spare Parts Agreements ”) issued in 2016 and 2017, which represents all relevant invoices available to the Company on a best-effort basis and no other relevant sale and purchase of similar spare parts could be obtained for comparison and therefore we consider the I3P Spare Parts Agreements to be representative and sufficient for us to form our view on the fairness and reasonableness of the terms of the Sale and Purchase of Spare Parts Framework Agreement. We were advised that the agreements for spare parts issued by the CNBMG Group are standard agreements and the pricing terms and payment terms stated on both the Historical Spare Parts Agreements and the I3P Spare Parts Agreements are determined on the same basis, therefore the price of spare parts under the I3P Spare Parts Agreements was determined based on the prevailing market price at the time of particular transaction. In respect of the payment terms, we noted from the Historical Spare Parts Agreements that the purchasers are required to settle the payment of spare parts before delivery of the relevant products.

Considering that (i) the pricing of the spare parts under the Sale and Purchase of Spare Parts Framework Agreement is consistent with the pricing term under the I3P Spare Parts Agreements; (ii) the price of spare parts offered by the CNBMG Group to the Group shall not be higher than that offered by the CNBMG Group to independent third parties for provision of the same or similar equipment and spare parts; (iii) the payment terms under the Sale and Purchase of Spare Parts Framework Agreement are no less favourable to the Group than that under the I3P Spare Parts Agreements; and (iv) various internal control measures will be put in place within the Group to ensure compliance with the terms under the Sale and Purchase of Spare Parts Framework Agreement (as further discussed in the above section headed “3. Internal control measures within the Group”), we consider that the terms of the Sale and Purchase of Spare Parts Framework Agreement are normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed Annual Caps for the three years ending 31 December 2020

As stated in the Letter from the Board, the Proposed Annual Caps for the three years ending 31 December 2020 will be RMB22,000,000, RMB25,290,000 and RMB22,730,000 respectively. The Proposed Annual Caps were determined based on the expected future consumption on the production equipment and spare parts taking into account (i) the historical selling prices and consumed amounts of the production equipment and spare parts; (ii) the increasing scale of the future projects; (iii) the need for the repair and maintenance on existing production capacity; (iv) the expected increase in the proportion of procurement of spare parts that are able to adopt to the technological upgrade of the Group; and (v) the expected repairment schedule on the equipment till 2020.

We noted that the Proposed Annual Cap for the year ending 31 December 2019 represents an increase of approximately 14.95% from the Proposed Annual Cap for the year ending 31 December 2018 while the Proposed Annual Cap for the year ending 31 December 2020 represents a decrease of approximately 10.12% from the Proposed Annual Cap for the year ending 31 December 2019. In assessing the fairness and reasonableness of the Proposed Annual Caps, we have reviewed the breakdown of the Proposed Annual Caps for the three years ending 31 December 2020 provided by the Company and noted that the Proposed Annual Caps are based on (i) the attrition rate of the glass production equipments of the Group; (ii) the historical quantities of respective spare parts procured by the Group for its glass production equipments and machineries; and (iii) the average market price for the relevant spare parts. We have reviewed the actual procurement pattern of spare parts by the Group for each of the year ended 31 December 2015 to 2017 and the respective estimated useful lives of the list of relevant equipments of the Group and noted that the relevant equipments will reach the end of their respective useful life schedule during the period from 2018 to 2020, leading to potentially higher rate of repairment for the relevant equipments during the period. Accordingly, the Company has adopted a prudent approach for the estimated purchase amount of spare parts by the Group for the three years ending 31 December 2020. As the demand of spare parts under the Proposed Annual Caps will be mainly contributed by the Target Companies under the Acquisition, we have reviewed (a) the historical order quantities of various spare parts by the Target Companies under the Acquisition for the two years ended 31 December 2016 and 2017 and (b) the market price for the relevant spare parts in 2017. We noticed that the purchase amount of spare parts by the Target Companies under the Acquisition has increased significantly across 2016 and 2017 by approximately 14.43 times, and such purchase amount in 2017 represent 36.15% of the total purchase amount of the Group (including the Target Companies) during the same period, while the expected purchase amount of spare parts by the Target Companies under the Acquisition represents a significant portion of about 80% of the Proposed Annual Cap for the year ending 31 December 2018. In respect of the expected price of spare parts, we have obtained the list of market price of relevant spare parts in 2017 from the Company and noted that the estimated unit price for the spare parts under the Proposed Annual Cap for the year ending 31 December 2018 are in line with the respective market price in 2017.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

On the other hand, we noted that the Proposed Annual Cap increases for the year ending 31 December 2019 and decreases for the year ending 31 December 2020. We have enquired into the management of the Company and were given to understand that the increase of Proposed Annual Cap for the year ending 31 December 2019 was due to the full processing capacity of second phase of the Hefei New Energy project line and the Yixing New Energy project line for producing further processed glass which are generally in line with the production schedule of the Group based on our review, leading to significant increase for packaging materials for glass products in 2019 and therefore the consumption and the attrition rate of the respective equipments. In respect of the decrease of the Proposed Annual Cap for the year ending 31 December 2020, we understand that the Group plans to promote paperless packaging of iron pallets and reduce the use of disposable packaging materials which is expected to lower the attrition rate of the relevant equipments. Accordingly, the estimated order quantities for the respective spare parts by the Group for the year ending 31 December 2020 were adjusted and lowered.

Considering that (i) the expected purchase amount of spare parts by the Target Companies under the Acquisition represents a significant portion of about 80% of the Proposed Annual Cap for the year ending 31 December 2018 and over 90% of the Proposed Annual Cap for the two years ending 31 December 2020 respectively; (ii) the increase in consumption of packaging materials and the attrition rate of corresponding spare parts due to the increasing production capacity of the Target Companies under the Acquisition; and (iii) the relevant equipments of the Group are expected to reach the end of their respective estimated useful lives during the period from 2018 to 2020, we consider that the Proposed Annual Caps for the three years ending 31 December 2020 are fair and reasonable.

Sale and Purchase of Products Framework Agreement

Pricing and payment terms

Pursuant to the Sale and Purchase of Products Framework Agreement, the Triumph Group has agreed to supply float glass and wooden packaging boxes to the Group based on the prevailing market price at the time of particular transaction. Further, we understand that the price of products offered by the Triumph Group to the Group shall not be higher than that offered by the Triumph Group to independent third parties for provision of the same or similar products. Pursuant to the Sale and Purchase of Products Framework Agreement, the Company shall settle the payment of products by the end of the following month, or otherwise mutually agreed by the parties.

In assessing the fairness and reasonableness of the pricing terms under the Sale and Purchase of Products Framework Agreement, considering that there were no historical agreement entered by the Group as purchaser of similar wooden boxes and independent third parties, we have reviewed (i) the Wooden Boxes Supply Agreement dated 28 April 2016 and forty-three samples of sale

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

orders and invoices thereunder which represent (a) all historical similar agreement and (b) sale orders and invoices issued in 2017 entered between the CNBMG Group as the supplier of wooden boxes and the Group (the “ Historical Products Agreement ”); and (ii) one sample agreement and one sample of sale order and invoice issued by the CNBMG Group as supplier of wooden packaging boxes to independent third parties (the “ I3P Products Agreements ”) during the term of the Historical Products Agreement, which represents all relevant sale orders and invoices issued by the CNBMG Group in 2017 available to the Company on a best-effort basis and no other relevant sale and purchase of wooden boxes of similar nature could be obtained for comparison and therefore we consider that the Historical Products Agreement and the I3P Products Agreements are representative and sufficient for us to form our view on the fairness and reasonableness of the terms of the Sale and Purchase of Products Framework Agreement. We noted that the price of products including wooden packaging boxes under the Historical Products Agreement and the I3P Products Agreements was determined based on the prevailing market price at the time of particular transaction. Nonetheless, given the price fluctuation of the float glass and wooden packaging boxes and the price of such relevant products will be determined based on the prevailing market price at the time when the particular transaction takes place, we understand that the Company will ensure that the market price charged to the Group to be no less favourable than the price charged to independent third parties by the Triumph Group with reference to the price charged by the Triumph Group to independent third parties during the same period, i.e. at least one month before the relevant purchase. Upon our review, we noted that the price of the relevant products offered to the Group by the CNBMG Group under the Historical Products Agreements is lower than that offered to independent third parties under the I3P Products Agreements during the same period. In respect of the payment terms, we noted that the payment terms under the Sale and Purchase of Products Framework Agreement are similar to those under the Historical Products Agreements and the I3P Products Agreements.

Considering that (i) the pricing of the products under the Sale and Purchase of Products Framework Agreement is consistent with the pricing term under the Historical Products Agreement and the I3P Products Agreements; (ii) the price offered to the Group under the Historical Products Agreement was lower than that offered to independent third parties by the CNBMG Group under the I3P Products Agreements during the same period; (iii) the price of products offered by the Triumph Group to the Group, being the prevailing market price of the relevant product at the time of particular transaction, shall not be higher than that offered by the Triumph Group to independent third parties for provision of the same or similar products during the same period; (iv) the payment terms under the Sale and Purchase of Products Framework Agreement are no less favourable to the Group than that under the I3P Products Agreements; and (v) various internal control measures will be put in place within the Group to ensure compliance with the terms under the Sale and Purchase of Products Framework Agreement (as further discussed in the above section headed “3. Internal control measures within the Group”), we consider that the terms of the Sale and Purchase of Products Framework Agreement are normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed Annual Caps for the three years ending 31 December 2020

The table below summarises (i) the historical transaction amounts for the two years ended 31 December 2016 and 2017; and (ii) the Proposed Annual Caps for the three years ending 31 December 2020.

Historical transaction amounts

Year ended	Year ended	Proposed Annual Caps for
31 December	31 December	the three years ending 31 December
2016	2017	2018 2019	2020
RMB’000	RMB’000	RMB’000 RMB’000	RMB’000
4,660	4,350	28,820 36,420	36,420

Note: The historical transaction amounts are for purchasing wooden boxes for the two years ended 31 December 2016 and 2017 respectively under the Wooden Boxes Supply Agreement, while the Proposed Annual Caps include the expected transaction amounts of both wooden boxes and float glass for the three years ending 31 December 2018, 2019 and 2020 respectively.

As stated in the Letter from the Board, since the Group needs the float glass for deep processing, the Company entered the Sale and Purchase of Products Framework Agreement with Triumph for procurement of float glass and wooden products. The demand for float glass for the three years ending 31 December 2020 is mainly due to the demand for the float glass from one of the Target Companies under the Acquisition which began production of high transparent double-glass modules in September 2017 and it began to build a new glass deep processing production line for high transparent double-glass modules for photovoltaic glass. The deep processing production line with annual production capacity of approximately 4 million square meters is expected to be completed and commence operation in 2018. The Proposed Annual Caps were determined based on the expected future consumption on the float glass and wooden packaging boxes taking into account (i) the historical transaction amounts between the Group (including the Target Companies under the Acquisition) and the Triumph Group of approximately RMB4 million, RMB4.6 million and RMB4.4 million for the three years ended 31 December 2017; (ii) the anticipated increase in demand of the Group on the float glass for the production of high penetration dual-glass module for the component of photovoltaic module; and (iii) the expected need for wooden packaging boxes for glass and wooden products due to the increase in production capacity of glass products of the Group including the Target Companies under the Acquisition in the future.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

June 2018 (inclusive of VAT). The Proposed Annual Cap under the Sale and Purchase of Products Framework Agreement for the year ending 31 December 2018 included the abovementioned transaction cap amount under the Sale and Purchase of Wooden Boxes Agreement.

The estimated transaction amount for the purchase of wooden packaging boxes under the Proposed Annual Cap for the year ending 31 December 2018 represents an increase of approximately 38.02% from the historical transaction amounts for the year ended 31 December 2017 under the Wooden Boxes Supply Agreement, the Proposed Annual Cap for the year ending 31 December 2019 represents an increase of approximately 26.37% from the Proposed Annual Cap for the year ending 31 December 2018 while the Proposed Annual Cap for the year ending 31 December 2020 is equivalent to the Proposed Annual Cap for the year ending 31 December 2019. In assessing the fairness and reasonableness of the Proposed Annual Caps, we have reviewed the breakdown of the Proposed Annual Caps for the three years ending 31 December 2020 provided by the Company and noted that the Proposed Annual Caps are principally based on (i) the expected amount of float glass required by one of the Target Companies under the Acquisition which is expected to complete by mid-April 2018; (ii) the historical quantities of wooden packaging boxes for glass consumed by the Group and the future expected demand for float glass and wooden products by the Group including the Target Companies under the Acquisition; and (iii) the market price for the float glass and wooden packaging boxes. In this connection, we have reviewed the historical order quantities of wooden packaging boxes under the Wooden Boxes Supply Agreement for the year ended 31 December 2017 as well as the market prices for the float glass and wooden packaging boxes in 2017 and noted that the expected quantity of wooden boxes for the year ending 31 December 2018 increases by around 40% while the expected quantity of float glass increases significantly as compared with that of 2017. We were advised that such increase in purchase order of float glass was due to (i) Tongcheng New Energy has only commenced trial production of high penetration dualglass module in September 2017 and will operate at full mode in 2018 with initial annual production capacity of 4,000,000 square meters of 2.0 to 2.8mm high penetration dual-glass module solar glass, therefore the amount of float glass to be ordered in 2018 will increase significantly as compared to 2017; (ii) the production of dual-glass module requires significant larger portion and surface area of float glass per unit; and (iii) dual-glass module is expected to become the future major development trend of photovoltaic modules in terms of improved efficiency and durability and the overall market demand for such component is expected to increase in the near future. Furthermore, we were advised that Tongcheng New Energy has been identified as the supplier of upstream products required by Junxin Technology Limited (the “ Junxin Technology ”) given their close vicinity thereby lowering the transaction costs. We have also enquired into the management of the Company in respect of the amount of dual-glass module required by Junxin Technology to meet its annual demand of the specific dual-glass module, being the key components of photovoltaic cell, and noted that the expected purchase quantities of float glass for each of the three years ending 31 December 2020 are within the amount of float glass required by Junxin Technology for its annual dual-glass battery module production. In respect of the price of float glass and wooden packaging boxes, we have obtained from the Company and reviewed the market price list for wooden packaging

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

boxes and float glass across 2015 to 2017 and noted that the estimated price for the determination of the Proposed Annual Cap for the year ending 31 December 2018 is in line with the relevant historical price throughout 2015 to 2017. We further noted that the estimated prices for float glass and wooden packaging boxes remain the same for the two years ending 31 December 2020. In the connection, we have performed independent research on the trend of market price in respect of float glass and wooden packaging boxes in the PRC. Based on the National Bureau of Statistics of China, the purchasing price index for wood processing products in China have been fluctuating in a range between 99.7 and 102.2 from 2012 to 2016, and the range narrowed to 99.7 and 100.9 from 2014 to 2016. The purchasing price index for non-metallic mineral products has been fluctuating between 96.5 and 100 from 2012 to 2016. Thus, it is uncertain as to whether the price of float glass will fluctuate for the two years ending 31 December 2020. Given the historical purchasing price index for wood processing products was relatively stable and the index for non-metallic mineral products has been fluctuating in recent years, we consider that it is fair and reasonable for the Company to estimate the unit price of both wooden packaging boxes and float glass based on that for the year ending 31 December 2018 for the determination of the Proposed Annual Caps for the two years ending 31 December 2020.

Considering that (i) there is no historical transaction for purchase of float glass by the Group from CNBMG Group therefore the historical transaction amount in 2017 is substantially less as compared to the Proposed Annual Cap for the year ending 31 December 2018 which includes the purchase of both the wooden packaging boxes and float glass; (ii) the transaction amount for the purchase of wooden packaging boxes in 2018 represents an increase of around 38.02% from that in 2017; (iii) the significant purchase amount of float glass was to cater the full operation mode of Tongcheng New Energy in 2018, which will increase the total production capacity of dual-glass module of the Group by around 4 million square meters in 2018; (iv) the production of dual-glass module by the Target Companies under the Acquisition requires significantly larger portion and surface area of float glass per unit as compared to the ultra-thin glass currently produced by the Group; (v) the estimated unit price of wooden packaging boxes and float glass in 2018 are with reference to the market price throughout 2015 to 2017 and stay the same in 2019 and 2020; and (vi) the demand of dual-glass module is expected to have a significant growth for being the future major development trend of photovoltaic modules, we consider that the Proposed Annual Caps for the three years ending 31 December 2020 are fair and reasonable.

5. Annual review

The respective Proposed Annual Caps under the Non-exempt 2018 CCT Agreements will be subject to the annual review by the independent non-executive Directors, details of which must be included in the Company’s subsequent published annual report and accounts. In addition, pursuant

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

to the Hong Kong Listing Rules, the auditors of the Company must provide a letter to the Board confirming, among others, that each of the Non-exempt 2018 CCT Agreements are conducted in accordance with their terms and that the respective Proposed Annual Caps not being exceeded. Moreover, pursuant to the Hong Kong Listing Rules, the Company shall publish an announcement if it knows or has reason to believe that the independent non-executive Directors and/or its auditors will not be able to confirm the terms of such transactions or the relevant annual caps not being exceeded. We are of the view that there are appropriate measures in place to govern the conduct of the Non-exempt 2018 CCT Agreements and safeguard the interests of the Independent Shareholders.

RECOMMENDATIONS

Taking into consideration of the principal factors and reasons as set out in this letter, we consider that the continuing connected transactions under the Non-exempt 2018 CCT Agreements will be conducted in the ordinary and usual course of business of the Company, and the terms (including the respective Proposed Annual Caps) of the Non-exempt 2018 CCT Agreements are on normal commercial terms, fair and reasonable and are in the interests of the Company and the 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 resolutions to be proposed for approving the Nonexempt 2018 CCT Agreements at the EGM.

Yours faithfully, For and on behalf of Goldin Financial Limited Billy Tang Director

Note:

Mr. Billy Tang is a licensed person registered with the Securities and Futures Commission and a responsible officer of Goldin Financial Limited to carry out type 6 (advising on corporate finance) regulated activity under the SFO. He has over 10 years of experience in the corporate finance profession.

For identification purpose only

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GENERAL INFORMATION

APPENDIX

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. 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.

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 Company 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 had been acquired or disposed of by, or leased to any member of the Group, or were proposed to be acquired or disposed of by, or leased to any member of the Group since 31 December 2017, being the date to which the latest published audited consolidated financial statements of the Group were made up.

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GENERAL INFORMATION

APPENDIX

None of the Directors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date and which was 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.

			Number of
			underlying		Percentage of	Percentage of
			Shares held	Total number	the relevant	the total issued
		Number of	under equity	of Shares	issued class of	share capital of
Name	Capacity	Shares held1	derivatives1	interested1	share capital	the Company	Type of Share
					(%)	(%)
CNBMG2	Interest in	201,076,897 (L)	/	201,076,897 (L)	72.65	38.17	A Share
	controlled
	corporation
Triumph2	Beneficial	200,368,287 (L)	/	200,368,287 (L)	72.40	38.04	A Share
	owner/Interest in
	controlled
	corporation
Bengbu Institute	Beneficial owner	71,365,976 (L)	/	71,365,976 (L)	25.79	13.55	A Share
CLFG	Beneficial owner	115,115,830 (L)	/	115,115,830 (L)	41.59	21.85	A Share

Note 1: (L) – Long position

Note 2: CNBMG is the controlling shareholder of China National Building Material Company Limited, which is the controlling shareholder of China Triumph International Engineering Co., Ltd. (“ International Engineering ”). Triumph, which is a whollyowned subsidiary of CNBMG, is the controlling shareholder of Anhui Huaguang Photoelectricity Materials Technology Group Co., Ltd. (“ Huaguang Group ”), (CNBM) Bengbu Design & Research Institute for Glass Industry Co., Ltd. (中建材蚌埠玻璃工業設計研究院有限公司)(“ Bengbu Institute* ”) and CLFG. Therefore, CNBMG is deemed to have the same interests in the Company as those owned by International Engineering, Triumph, Huaguang Group, Bengbu Institute and CLFG by virtue of the SFO; and Triumph is deemed to have the same interest in the Company as those owned by Huaguang Group, Bengbu Institute and CLFG by virtue of the SFO.

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GENERAL INFORMATION

APPENDIX

3. 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).

4. 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 2017, being the date to which the latest published audited consolidated financial statements of the Group were made up.

5. QUALIFICATION OF EXPERT

The following is the qualification of the expert whose letter is contained in this circular:

Name Qualification

Goldin Financial Limited

a corporation licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO

6. CONSENT OF EXPERT

The Independent Financial Adviser has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and reference to its name in the form and context in which they appear.

7. INTERESTS OF EXPERT

As at the Latest Practicable Date, the Independent Financial Adviser had no shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group and had no direct or indirect interest in any assets which had been acquired or disposed of by, or leased to any member of the Group, or were proposed to be acquired or disposed of by, or leased to any member of the Group since 31 December 2017, being the date to which the latest published audited consolidated financial statements of the Group were made up.

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GENERAL INFORMATION

APPENDIX

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of TC Capital International 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 CNBMG Engineering Technical Services Framework Agreement;
(b) the Ultra-thin Float Glass Sale and Purchase Framework Agreement;
(c) the CLFG Raw Materials Sale Framework Agreement;
(d) the CNBMG Engineering Equipment and Materials Supply Framework Agreement;
(e) the CNBMG Financial Services Framework Agreement;
(f) the Supply Agreement;
(g) the Wooden Boxes Supply Agreement;
(h) the Technical Services Framework Agreement;
(i) the Sale and Purchase of Glass Products Framework Agreement;
(j) the Sale of Raw Materials Framework Agreement;
(k) the Engineering Equipment Procurement and Installation Framework Agreement;
(l) the Sale and Purchase of Spare Parts Framework Agreement;
(m) the Sale and Purchase of Products Framework Agreement;
(n) the Supply of Electricity Framework Agreement;
(o) the Financial Services Framework Agreement;

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GENERAL INFORMATION

APPENDIX

(p) the Sale and Purchase of Sodium Carbonate Agreement;
(q) the Sale and Purchase of Ultra-thin Glass Agreement;
(r) the Payment Support Agreement;
(s) the Sale and Purchase of Wooden Boxes Agreement;
(t) the letter from the Independent Board Committee, the text of which is set out on pages 39 to 40 of this circular;
(u) the letter from the Independent Financial Adviser, the text of which is set out on pages 41 to 81 of this circular; and
(v) the written consent of the Independent Financial Adviser mentioned in the section headed “6. Consent of expert” in this appendix.

9. MISCELLANEOUS

(a) All references to times and dates in this circular refer to Hong Kong times and dates.
(b) The English text of this circular shall prevail over its Chinese text.

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NOTICE OF EGM

IMPORTANT NOTICE:

As stated in the announcements of the Company dated 28 February 2018 and 12 March 2018, the EGM originally scheduled to be held at 9:00 a.m. on 16 March 2018 (Friday) was postponed to 9:00 a.m. on 29 March 2018 (Thursday), and was further postponed to 9:00 a.m. on 27 April 2018 (Friday), and the venue, the attendance eligibility, the resolutions to be considered at and other relevant matters of the EGM will remain unchanged. For details, please refer to the notice of the EGM of the Company dated 25 January 2018 set out below.

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

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NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY given that an extraordinary general meeting (the “ EGM ”) of Luoyang Glass Company Limited (the “ Company ”) will be held 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 (the “ PRC* ”) at 9:00 a.m. on 16 March 2018 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 announcement of the Company dated 24 January 2018 (the “ Announcement ”).

ORDINARY RESOLUTIONS

To consider and approve the Technical Services Framework Agreement (a copy of which has been produced to the EGM marked “ 1 ” and signed by the chairman of the EGM for the purpose of identification), the terms and conditions thereof, its proposed annual caps, the transactions contemplated thereunder and the implementation thereof;
To consider and approve the Sale and Purchase of Glass Products Framework Agreement (a copy of which has been produced to the EGM marked “ 2 ” and signed by the chairman of the EGM for the purpose of identification), the terms and conditions thereof, its proposed annual caps, the transactions contemplated thereunder and the implementation thereof;

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NOTICE OF EGM

To consider and approve the Sale of Raw Materials Framework Agreement (a copy of which has been produced to the EGM marked “ 3 ” and signed by the chairman of the EGM for the purpose of identification), the terms and conditions thereof, its proposed annual caps, the transactions contemplated thereunder and the implementation thereof;
To consider and approve the Engineering Equipment Procurement and Installation Framework Agreement (a copy of which has been produced to the EGM marked “ 4 ” and signed by the chairman of the EGM for the purpose of identification), the terms and conditions thereof, its proposed annual caps, the transactions contemplated thereunder and the implementation thereof;
To consider and approve the Sale and Purchase of Spare Parts Framework Agreement (a copy of which has been produced to the EGM marked “ 5 ” and signed by the chairman of the EGM for the purpose of identification), the terms and conditions thereof, its proposed annual caps, the transactions contemplated thereunder and the implementation thereof;
To consider and approve the Sale and Purchase of Products Framework Agreement (a copy of which has been produced to the EGM marked “ 6 ” and signed by the chairman of the EGM for the purpose of identification), the terms and conditions thereof, its proposed annual caps, the transactions contemplated thereunder and the implementation thereof;
To consider and approve the Supply of Electricity Framework Agreement (a copy of which has been produced to the EGM marked “ 7 ” and signed by the chairman of the EGM for the purpose of identification), the terms and conditions thereof, its proposed annual caps, the transactions contemplated thereunder and the implementation thereof;
To consider and approve the Financial Services Framework Agreement (a copy of which has been produced to the EGM marked “ 8 ” and signed by the chairman of the EGM for the purpose of identification), the terms and conditions thereof, its proposed annual caps, the transactions contemplated thereunder and the implementation thereof; and

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NOTICE OF EGM

To approve, ratify and confirm any one of the Directors for and on behalf of the Company, among other matters, to sign, execute, perfect, deliver or to authorize signing, executing, perfecting and delivering all such documents and deeds, to do or authorize doing all such acts, matters and things as they may in their discretion consider necessary, expedient or desirable giving effect to and implement the Technical Services Framework Agreement, the Sale and Purchase of Glass Products Framework Agreement, the Sale of Raw Materials Framework Agreement, the Engineering Equipment Procurement and Installation Framework Agreement, the Sale and Purchase of Spare Parts Framework Agreement, the Sale and Purchase of Products Framework Agreement, the Supply of Electricity Framework Agreement and the Financial Services Framework Agreement.

(For details of the foregoing resolutions, please refer to the Announcement.)

By order of the Board **LUOYANG GLASS COMPANY LIMITED* Zhang Chong** Chairman

Luoyang, the PRC 25 January 2018

As at the date of this notice, the Board comprises four executive Directors: Mr. Zhang Chong, Mr. Ni Zhisen, Mr. Wang Guoqiang and Mr. Ma Yan; one non-executive Director: Mr. Xie Jun; and four independent non-executive Directors: Mr. Jin Zhanping, Mr. Liu Tianni, Mr. Ye Shuhua and Mr. He Baofeng.

For identification purposes only

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 13 February 2018, are entitled to attend and vote at the EGM. The register of members of the Company’s H shares will be closed from 14 February 2018 to 16 March 2018 (both days inclusive), during which period no transfer of H shares will be effected in order to determine the list of holders of H shares eligible to attend the EGM. Holders of H shares of the Company who wish to attend the EGM must lodge all share transfer forms accompanied by the relevant H share certificates with the registrar of the Company’s H shares, namely Hong Kong Registrars Limited at Rooms 1712–1716, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong by 4:00 p.m. on 13 February 2018.
Any Shareholder entitled to attend and vote at the EGM may appoint a proxy or proxies (who need not be a Shareholder of the Company) to attend and vote at the EGM on his/her behalf. A proxy of a Shareholder who has appointed more than one proxy may only vote on a poll.

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NOTICE OF EGM

The principal Shareholder 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 authorising the signatories must be notarised by the notary public. The proxy form together with such power of attorney or other 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, Wanchai, 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 EGM or any adjournment thereof.
Shareholders who intend to attend the EGM in person or by proxy should complete and return the signed reply slip for attending the EGM to the registered address of the Company on or before 23 February 2018 by courier, mail or facsimile.
Shareholders or their proxies shall produce their proofs of identity when attending the EGM. A proxy of Shareholder who is appointed to attend the EGM shall produce the proxy form at the same time.
The EGM is expected to last for no more than one day. Shareholders and their proxies attending the EGM 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 from subsequently attending and voting in person at the EGM or any adjourned meetings should you so wish.

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AI assistant

RoboSense Technology Co., Ltd — Proxy Solicitation & Information Statement 2018

50628_rns_2018-04-13_4fa05fe7-a70e-4673-8fd1-f3e730a80c81.pdf

CONTINUING CONNECTED TRANSACTIONS

Financial adviser to Luoyang Glass Company Limited*

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

CONTENTS

DEFINITIONS

“CNBMG”

DEFINITIONS

DEFINITIONS

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE BOARD

A. NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

1. TECHNICAL SERVICES FRAMEWORK AGREEMENT

Nature of transaction:

Pricing terms

Pricing standards

Proposed Annual Caps for the Technical Services Framework Agreement

Internal control on pricing

2. SALE AND PURCHASE OF GLASS PRODUCTS FRAMEWORK AGREEMENT

Nature of transaction:

Pricing terms

Pricing standards

Proposed Annual Caps for the Sale and Purchase of Glass Products Framework Agreement

LETTER FROM THE BOARD

Internal control on pricing

3. SALE OF RAW MATERIALS FRAMEWORK AGREEMENT

Nature of transaction:

Pricing terms

Pricing standards

Silicon powder

Sodium carbonate

Proposed Annual Caps for the Sale of Raw Materials Framework Agreement

Internal control on pricing

4. ENGINEERING EQUIPMENT PROCUREMENT AND INSTALLATION FRAMEWORK AGREEMENT

Nature of transaction:

Pricing terms

Pricing standards

Proposed Annual Caps for the Engineering Equipment Procurement and Installation Framework Agreement

LETTER FROM THE BOARD

Internal control on pricing

LETTER FROM THE BOARD

5. SALE AND PURCHASE OF SPARE PARTS FRAMEWORK AGREEMENT

Nature of transaction:

Pricing terms

Pricing standards

Proposed Annual Caps for the Sale and Purchase of Spare Parts Framework Agreement

Internal control on pricing

6. SALE AND PURCHASE OF PRODUCTS FRAMEWORK AGREEMENT

Nature of transaction:

Pricing terms

Pricing standards

Glass products

Wooden packaging boxes

Proposed Annual Caps for the Sale and Purchase of Products Framework Agreement

LETTER FROM THE BOARD

Internal control on pricing

B. CONTINUING CONNECTED TRANSACTION SUBJECT TO THE REPORTING AND ANNOUNCEMENT REQUIREMENTS ONLY

SUPPLY OF ELECTRICITY FRAMEWORK AGREEMENT

Nature of transaction:

Pricing terms

Pricing standards

Proposed Annual Caps for the Supply of Electricity Framework Agreement

Internal control on pricing

C. CONTINUING CONNECTED TRANSACTION EXEMPTED FROM THE REPORTING, A N N O U N C E M E N T A N D I N D E P E N D E N T S H A R E H O L D E R S ’ A P P R O V A L REQUIREMENTS UNDER THE HONG KONG LISTING RULES

FINANCIAL SERVICES FRAMEWORK AGREEMENT

Services:

Pricing terms

Pricing standards

Entrusted loan

Financing guarantee

Making payments on behalf of the Group for goods supplied by the Group’s suppliers

Proposed Annual Caps for the Financial Services Framework Agreement

LETTER FROM THE BOARD

Internal control on pricing

INTERNAL CONTROL MEASURES RELATING TO ANNUAL CAPS

INFORMATION ON AND RELATIONSHIP OF THE PARTIES TO THE 2018 CCT AGREEMENTS

BACKGROUND OF AND REASONS FOR ENTERING INTO THE 2018 CCT AGREEMENTS

RoboSense Technology Co., Ltd Proxy Solicitation & Information Statement 2018

By order of the Board **LUOYANG GLASS COMPANY LIMITED* Zhang Chong** Chairman