RoboSense Technology Co., Ltd - Proxy Solicitation & Information Statement 2022

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, 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, 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.

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

＊

DISCLOSEABLE AND CONNECTED TRANSACTION–

DISPOSAL OF ENTIRE EQUITY INTEREST IN LONGHAI GLASS, LONGMEN GLASS AND BENGBU CNBM INFORMATION DISPLAY, WHOLLY-OWNED SUBSIDIARIES

OF THE COMPANY

Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

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Unless the context requires otherwise, capitalised terms used herein shall have the same meanings as those set out in the section headed “Definitions” of this circular.

A letter from the Board is set out on pages 1 to 30 of this circular.

A notice convening the EGM to be held at 9:00 a.m. on 25 January 2022 (Tuesday) 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 EGM-1 to EGM-3 of this circular.

The forms of proxy for use at the EGM were despatched to the Shareholders and published on the website of The Stock Exchange of Hong Kong Limited (http://www.hkexnews.hk) on 6 January 2022. Whether or not you are able to attend the EGM in person, you are requested to complete and return the forms of proxy in accordance with the instructions printed thereon to the Company’s H share registrar in Hong Kong, Hong Kong Registrars Limited, at 17M Floor, 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 forms of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

6 January 2022

For identification purposes only

CONTENTS

			Page
DEFINITIONS.	. . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
LETTER FROM	THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM	THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . .		31
LETTER FROM	THE INDEPENDENT FINANCIAL ADVISER. . . . . . . . . . . . . . . . . . . . . . .		33
APPENDIX I	–	SUMMARY OF ASSET VALUATION REPORT ON LONGHAI
		GLASS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II	–	SUMMARY OF ASSET VALUATION REPORT ON LONGMEN
		GLASS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III	–	SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM
		INFORMATION DISPLAY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	–	REPORT FROM THE REPORTING ACCOUNTANT OF THE
		COMPANY ON THE CALCULATIONS OF DISCOUNTED
		FUTURE CASH FLOWS IN CONNECTION WITH THE
		VALUATION ON LONGHAI GLASS AND VALUATION ON
		BENGBU CNBM INFORMATION DISPLAY. . . . . . . . . . . . . . . . . .	IV-1
APPENDIX V	–	LETTER FROM THE BOARD IN RELATION TO THE ASSET
		VALUATION REPORT ON LONGHAI GLASS AND THE ASSET
		VALUATION REPORT ON BENGBU CNBM INFORMATION
		DISPLAY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1
APPENDIX VI	–	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VI-1
NOTICE OF EGM.		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

– i –

DEFINITIONS

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

“A Share(s)” domestic ordinary share(s) with a par value of RMB1.00 each in the share capital of the Company which are listed on the SSE and traded in RMB
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Asset Valuer” Zhongjing Minxin (Beijing) Assets Appraisal Co., Ltd.* (中京民信（北京）資產評估有限公司), an independent professional valuer in the PRC
“Asset Valuation Report(s)” the asset valuation report of Longhai Glass, Longmen Glass and Bengbu CNBM Information Display prepared by the Asset Valuer in respect of the appraisal value of the entire equity interest attributable to Longhai Glass, Longmen Glass and Bengbu CNBM Information Display as of 31 December 2020, the summary of the Asset Valuation Reports are set out in Appendix I, II and III to this circular
“Articles of Association” the articles of association of the Company, as amended from time to time
“Bengbu CNBM Information Bengbu China National Building Materials Information Display Display” Materials Company Limited* (蚌埠中建材信息顯示材料有限公司), a company incorporated in the PRC with limited liability and a direct wholly-owned subsidiary of the Company as at the Latest Practicable Date
“Bengbu Institute” 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 ), a company incorporated in the PRC with limited liability, the substantial shareholder of the Company and a wholly-owned subsidiary of Triumph Group
“Board” the board of Directors of the Company
“CLFG”
China Luoyang Float Glass (Group) Company Limited* (中國洛陽浮法玻璃集團有限責任公司), a company incorporated in the PRC with limited liability, and the substantial shareholder of the Company

– ii –

DEFINITIONS

“CNBMG” China National Building Material Group Co., Ltd. (中國建材集團有限公司), a wholly state-owned enterprise incorporated in the PRC and an ultimate controlling shareholder of the Company “Company” Luoyang Glass Company Limited (洛陽玻璃股份有限公司), a joint stock limited company incorporated in the PRC with limited liability, the H Shares and A Shares of which are listed on the main board of the Stock Exchange (stock code: 1108) and the SSE (stock code: 600876) respectively “Completion” the completion of the Disposal according to the terms and conditions under the Share Transfer Agreement “connected person(s)” has the same meaning as ascribed to it under the Listing Rules “Director(s)” director(s) of the Company, including the independent nonexecutive director(s) of the Company “Disposal” or “Share Transfer” the disposal of 100% equity interest held in the Target Companies to Triumph Group by the Company according to the terms and conditions under the Share Transfer Agreement “EGM” the extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve, the Share Transfer Agreement and the transactions contemplated thereunder “H Share(s)” the overseas listed foreign share(s) with a par value of RMB1.00 each in the share capital of the Company which are listed on the main board of Stock Exchange and traded in HK$ “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Huaguang Group” Anhui Huaguang Photoelectricity Materials Technology Group Co., Ltd.* (安徽華光光電材料科技集團有限公司), a company incorporated in the PRC with limited liability

– iii –

DEFINITIONS

“Independent Board Committee”

the independent board committee of the Company comprising Mr. Jin Zhanping, Mr. Ye Shuhua, Mr. He Baofeng and Ms. Zhang Yajuan, being all the independent non-executive Directors of the Company, which is formed to advise the Independent Shareholders in respect of the Share Transfer Agreement and the transactions contemplated thereunder in accordance with the Listing Rules

“Independent Financial Adviser”
Veda Capital Limited ( 智略資本有限公司 ) ， a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, and the independent financial adviser appointed in accordance with Listing Rules to advise the Independent Board Committee and the Independent Shareholders in respect of the Share Transfer Agreement and the transactions contemplated thereunder
“Independent Shareholders”
Shareholders other than (i) Triumph Group and its associate(s); and (ii) all other parties (if any) who are materially interested or involved in the Share Transfer Agreement and the transactions thereunder
“International Engineering”
China Triumph International Engineering Co., Ltd.* (中國建材國際工程集團有限公司), a company incorporated in the PRC with limited liability
“Latest Practicable Date” 31 December 2021, being the latest practicable date for the purpose of ascertaining certain information contained in this circular prior to its publication
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange
“Longhai Glass”
CLFG Longhai Electronic Glass Limited* (洛玻集團洛陽龍海電子玻璃有限公司), a company incorporated in the PRC with limited liability, and a direct wholly-owned subsidiary of the Company as at the Latest Practicable Date
“Longmen Glass”
CLFG Longmen Glass Co. Ltd.* (洛玻集團龍門玻璃有限責任公司), a company incorporated in the PRC with limited liability, and a direct wholly-owned subsidiary of the Company as at the Latest Practicable Date

– iv –

DEFINITIONS

“percentage ratios”	has the same meaning as ascribed to it under the Listing Rules, as
	applicable to a transaction
“PRC”	the People’s Republic of China, for the purpose of this circular,
	excluding Hong Kong, the Macau Special Administrative Region
	of the PRC and Taiwan
“RMB”	Renminbi, the lawful currency of the PRC
“Share(s)”	ordinary share(s) of nominal value of RMB1.00 each in the share
	capital of the Company, including A Shares and H Shares
“Shareholder(s)”	the holder(s) of the Shares
“Share Transfer Agreement”	the Share Transfer Agreement in relation to the Disposal entered
	into between Triumph Group and the Company on 26 November
	2021
“SSE”	the Shanghai Stock Exchange
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiary (ies)”	has the same meaning as ascribed to it under the Listing Rules
“Target Company(ies)”	Longhai Glass, Longmen Glass and Bengbu CNBM Information
	Display
“Triumph Group”	Triumph Technology Group Co., Ltd.* (凱盛科技集團有限公司),
	a company incorporated in the PRC with limited liability and an
	indirect controlling shareholder of the Company
“Valuation Benchmark Date”	31 December 2020, being the valuation benchmark date of the
	Target Companies
“%”	per cent

For the purposes of this circular, unless the context otherwise requires or expressly specified, an exchange rate of RMB1.00 to HK$1.22 has been used for currency conversion, where applicable. Such exchange rate is for illustration purposes only and does not constitute any representation that any amount in RMB or HK$ has been, could have been or may be converted at such rate.

– v –

LETTER FROM THE BOARD

＊

Executive Directors:

Mr. Zhang Chong (Chairman) Mr. Xie Jun (Vice Chairman) Mr. Ma Yan (General Manager) Mr. Wang Guoqiang Mr. Zhang Rong

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

Non-executive Directors:

Mr. Ren Hongcan

Mr. Chen Yong

Independent Non-executive Directors:

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

Ms. Zhang Yajuan

6 January 2022

To the Shareholders,

DISCLOSEABLE AND CONNECTED TRANSACTION –

DISPOSAL OF ENTIRE EQUITY INTEREST IN LONGHAI GLASS, LONGMEN GLASS AND BENGBU CNBM INFORMATION DISPLAY, WHOLLY-OWNED SUBSIDIARIES OF THE COMPANY

I. INTRODUCTION

References are made to the announcement of the Company dated 26 November 2021 in relation to the Disposal (the “ Announcement ”).

– 1 –

LETTER FROM THE BOARD

As disclosed in the Announcement, the Company entered into the Share Transfer Agreement with Triumph Group on 26 November 2021, pursuant to which, the Company intended to transfer its 100% equity interest held in the Target Companies to Triumph Group at a total consideration of RMB536,116,000 (equivalent to approximately HK$654,061,500).

Immediately after the Completion, the Company will cease to hold any interest in the Target Companies. The Target Companies will cease to be the subsidiaries of the Company and the financial results of the Target Companies will no longer be consolidated into the financial statements of the Company.

The purpose of this circular is to provide you with details of, among others:

(a) details of the Share Transfer Agreement and the transactions contemplated thereunder;
(b) a letter from the Independent Board Committee to Independent Shareholders containing its recommendation in respect of the Share Transfer Agreement and the transactions contemplated thereunder;
(c) a letter from Independent Financial Adviser to the Independent Board Committee and Independent Shareholders containing its recommendation in respect of the Share Transfer Agreement and the transactions contemplated thereunder;
(d) the notice of EGM, for the purpose of considering, and if thought fit, approving the items listed above.

II. THE DISPOSAL

The Company entered into the Share Transfer Agreement with Triumph Group on 26 November 2021, pursuant to which, the Company intended to transfer its 100% equity interest held in the Target Companies to Triumph Group at a total consideration of RMB536,116,000 (equivalent to approximately HK$654,061,500).

– 2 –

LETTER FROM THE BOARD

SHARE TRANSFER AGREEMENT

Set out below are the principal terms of the Share Transfer Agreement in respect of the Disposal:

Date: 26 November 2021 Parties: (1) the Company (as the transferor); and (2) Triumph Group (as the transferee).

Share Transfer

The Company agreed to transfer its 100% equity interest held in the Target Companies to Triumph Group in accordance with the terms and conditions agreed in the Share Transfer Agreement, and Triumph Group agreed to acquire the 100% equity interest in the Target Companies to be transferred by the Company in accordance with the terms and conditions agreed in the Share Transfer Agreement. The names of the Target Companies and proportion of the equity interest to be transferred are as follows:

		Proportion of
		equity interest to
No.	Target Companies	be transferred
1	CLFG Luoyang Longhai Electronic Glass Company Limited*(洛玻集團	100%
	洛陽龍海電子玻璃有限公司) (“Longhai Glass”)
2	CLFG Longmen Glass Co. Ltd.* (洛玻集團龍門玻璃有限責任公司)	100%
	(“Longmen Glass”)
3	Bengbu China National Building Materials Information Display Materials	100%
	Company Limited (蚌埠中建材信息顯示材料有限公司) (“Bengbu*
	CNBM Information Display”)

From the date on which the registration of changes with the industry and commerce administration authority for the Share Transfer of each of the Target Companies is completed (“ Registration Completion Date ”), Triumph Group will become the legal owner of the equity interest of the corresponding Target Companies and will enjoy all rights and assume all obligations in relation to such equity interest.

– 3 –

LETTER FROM THE BOARD

Share Transfer Price

The price for the transfer of the equity interest in the Target Companies has been determined after arm’s length negotiations between the Company and Triumph Group on normal commercial terms, with reference to, among others, (1) the audit report issued by the PRC registered accountants in respect of each of the Target Companies with 31 December 2020 as the audit valuation benchmark date; and (2) the assets appraisal reports determining the appraisal value of the entire equity interest attributable to the shareholders of each of the Target Companies issued by Zhongjing Minxin (Beijing) Assets Appraisal Co., Ltd.* (中京民信（北京）資產評估有限公司), an independent asset appraiser, based on the appraisal results through the cost method (asset-based method) as the appraisal conclusion. Both of the Company and Triumph Group are satisfied with such audit results and valuation results.

Based on the aforementioned valuation results, it is determined that the total price for the transfer of the equity interest in the Target Companies is RMB536,116,000 (the “ Share Transfer Price ”), details of which are as follows:

No. Target Companies 1 Longhai Glass 2 Longmen Glass 3 Bengbu CNBM Information Display Total	Appraisal value of net assets (RMB0’000) 18,786.09 -44,139.32 78,964.83 53,611.6	Proportion of equity interest to be transferred 100% 100% 100% –	Share Transfer Price (RMB0’000) 18,786.09 -44,139.32 78,964.83 53,611.6

Payment of the Share Transfer Price

The Share Transfer Price of the Target Companies shall be paid by Triumph Group in instalments as follows:

(1) Within five working days from the date of the Share Transfer Agreement becoming effective, Triumph Group shall pay the first instalment of the Share Transfer Price of RMB268,058,000 to the Company.
(2) Within five working days from the date on which 100% of the equity interests in the three Target Companies are changed to the name under Triumph Group, Triumph Group shall pay the remaining Share Transfer Price to the Company.

– 4 –

LETTER FROM THE BOARD

The main considerations of the Board for selecting 31 December 2020 as the Valuation Benchmark Date are: 31 December 2020 is the timing for conducting the audit of the financial year, which allows the use of the Target Companies’ annual audit report and is more efficient for moving forward the project of the Disposal; furthermore, the Board believes that the operating conditions of the Target Companies have no material change from the Valuation Benchmark Date to the signing date of the Share Transfer Agreement (the details of the financial information of the Target Companies are set out in the circular under the heading of “Financial Information on the Target Companies”). The main business of each of the Target Companies is production and sale of ultra-thin electronic glass substrates. In recent years, the supply and demand in the domestic and regional markets are basically balanced and have not experienced any major fluctuations. From the Valuation Benchmark Date to the signing date of the Share Transfer Agreement, no significant changes have occurred in the external market environment. Longmen Glass has been in a state of suspended production since 2 January 2020; the production line of Longhai Glass started normal production in April 2019 after upgrading and transformation, and the production line equipment has reached the design level in 2020 after commissioning and technical research and has been in continuous and stable operation. Longhai Glass has no major investment projects from the Valuation Benchmark Date to the signing date of the Share Transfer Agreement; Bengbu CNBM Information Display production line has been put into operation since 2013, and is currently in continuous and stable operation within the designed kiln age, and Bengbu CNBM Information Display has not made any large-scale investment in technical transformation of the production line from the Valuation Benchmark Date to the signing date of the Share Transfer Agreement. Based on the analysis of the above factors, the Board is of the view that there has been no significant change in the operating conditions of the Target Companies of this Disposal from the Valuation Benchmark Date to the signing date of the Share Transfer Agreement. At the same time, according to the relevant provisions of the Share Transfer Agreement, the profits and losses incurred by the Target Companies will be enjoyed and borne by the Company from the Valuation Benchmark Date to the Completion date of the Share Transfer. Therefore, the valuation results with 31 December 2020 as the Valuation Benchmark Date are adopted as one of the pricing bases, which is determined on an arm’s length basis for transactions between both parties, and the pricing basis is fair and reasonable.

– 5 –

LETTER FROM THE BOARD

Moreover, according to the valuation conclusion as derived from the Asset Valuation Reports and as advised by the Asset Valuer, considering the asset structure of the Target Companies, of which the fixed assets and the intangible assets account for the largest proportion. For the fixed assets, the replacement cost method was mainly adopted to assess the cost required to reconstruct the entire glass kiln production line, which has not changed significantly between the Valuation Benchmark Date and the date of the Asset Valuation Reports; for the intangible assets, the benchmark land price coefficient correction method and the market method were mainly adopted to assess the land use rights, but the benchmark land price coefficient has not been updated as of the date of the Asset Valuation Reports, and no significant changes in the price of industrial land has been observed by the Asset Valuer in land auctions. As such, the Asset Valuer is of the view that the valuation conclusion derived through the cost method (asset-based method) with 31 December 2020 as the Valuation Benchmark Date will not have a significant impact on the Share Transfer Price at the time of entering into of the Share Transfer Agreement.

In summary, the Board is of the view that adopting the valuation conclusion (for which, 31 December 2020 is the Valuation Benchmark Date) as the basis for the consideration is fully relevant and valid to the final Share Transfer Price of the Disposal.

Handover and Profit and Loss during the Period

The handover completion date for the Share Transfer of each Target Company shall be the end of the preceding month or the month (to be determined by the Company and Triumph Group through negotiation) of the Registration Completion Date of such enterprise (the “ Handover Completion Date ”). Since the Registration Completion Date, Triumph Group and its authorized persons will be entitled to take over the Target Companies, and be entitled to carry out production and operation activities or other disposals through the Target Companies as a shareholder. At the same time, the Company and Triumph Group will appoint an audit institution to audit the financial position of the Target Companies for the period from 1 January 2021 to the Handover Completion Date and issue an audit report accordingly. Upon the completion of the relevant handover matters, the Company, Triumph Group and the Target Companies will jointly sign a handover agreement (the “ Handover Agreement ”).

The staffing of the directors, supervisors and senior management of the Target Companies upon the Share Transfer shall be separately determined by Triumph Group, and the Company will cooperate accordingly.

– 6 –

LETTER FROM THE BOARD

The Company and Triumph Group shall assist all the Target Companies to complete the registration procedures of changes with the industry and commerce administration authority for the Share Transfer within three months after the Share Transfer Agreement becomes effective.

For each Target Company, if the net profit achieved by the Target Company during the relevant period from 1 January 2021 to the Handover Completion Date (the “ Relevant Period ”) is negative, the Company shall make a compensatory payment in cash to the Target Company in an amount equal to the amount of the loss no later than one month after the Handover Agreement is signed. If the net profit realized by the Target Company during the Relevant Period is positive, the same shall belong to the Company and be paid to the Company in the form of dividend by the Target Company. The profit and loss for the aforementioned Relevant Period shall be confirmed by the audit institution through handover audit. If the undistributed book profit of Longmen Glass is not sufficient to pay the above dividend, both parties agree that the corresponding dividend from Longmen Glass shall be paid by the other two Target Companies from their undistributed profits. As a shareholder of the Target Companies after the Share Transfer, Triumph Group shall make a decision to distribute the net profit realized during the Relevant Period to the shareholders of the Company within three months after the Handover Agreement is signed and complete dividend distribution (in cash) within 15 working days after the relevant shareholder’s decision is made.

Liability for Breach

If the Company fails to transfer the equity interests in the Target Companies to Triumph Group in breach of the provisions of the Share Transfer Agreement, which causes the Share Transfer Agreement unable to be performed, it shall, if it has received payment from Triumph Group, return such payment to Triumph Group within ten working days after the occurrence of such event and at the same time compensate Triumph Group for the direct economic losses arising therefrom, except in the case of a prior breach by Triumph Group.

If Triumph Group breaches the provisions of the Share Transfer Agreement by failing to pay the Share Transfer Price on time, it shall rectify the breach within ten working days after the occurrence of such event of breach, and at the same time compensate the Company for the direct economic losses arising therefrom, except in the case of a prior breach by the Company.

If a party to the agreement breaches the provisions of the Share Transfer Agreement but it is not sufficient to cause the Share Transfer Agreement to be unable to be performed, the parties to the Share Transfer Agreement shall undertake to continue to perform the Share Transfer Agreement. If the breaching party causes losses to the observing party, the breaching party shall bear the corresponding direct economic losses of the observing party.

– 7 –

LETTER FROM THE BOARD

Conditions Precedent for the Share Transfer Agreement to Take Effect

Share Transfer Agreement shall become effective from the date on which all the following conditions have been satisfied:

(1) the Share Transfer Agreement has been signed by the legal representatives of the Company and Triumph Group or their respective authorized representative(s), with company seals of both parties affixed thereon;
(2) the Share Transfer contemplated under the Share Transfer Agreement has been approved at the general meeting of the Company; and
(3) the Share Transfer contemplated under the Share Transfer Agreement has been approved by CNBMG.

Arrangements on Employees and Credit and Debt Treatment

Upon the completion of the Share Transfer, the qualification of the Target Companies as legal persons shall subsist, the labor relationship between the Target Companies and their employees shall remain unchanged; and the creditor’s rights and debts formed during the course of production and operation of the Target Companies shall continue to be enjoyed and assumed by the Target Companies upon the Share Transfer.

Upon the entering into of the Share Transfer Agreement, the Company and the Target Companies shall settle the mutual indebtedness incurred prior to the Valuation Benchmark Date (subject to the audit report as at the Valuation Benchmark Date, including but not limited to the current accounts payable) (the “ Accounts Payable ”) before the Handover Completion Date; after the audit institution has audited the financial position of the Target Companies for the Relevant Period, if the Company and the Target Companies incur new mutual indebtedness during the Relevant Period (the “ New Accounts Payable ”), the parties shall settle them within 30 working days after the relevant amount is determined (subject to the audit report as at the Handover Completion Date, including but not limited to the current accounts payable), i.e. within 30 working days after the audit report as at the Handover Completion Date is issued (the “ New Accounts Payable Repayment Date ”). If the Target Companies fail to repay the corresponding amount to the Company on time, i.e. before the Handover Completion Date and the New Accounts Payable Repayment Date, Triumph Group shall repay the Accounts Payable and the New Accounts Payable to the Company on behalf of the Target Companies within 15 working days from the date of Handover Completion Date or the New Accounts Payable Repayment Date (as the case may be), Triumph Group shall collect the Account Payable and the New Accounts Payable from the Target Companies on its own behalf.

– 8 –

LETTER FROM THE BOARD

Longmen Glass, one of the Target Companies, has suspended production since 2 January 2020. As of the Valuation Benchmark Date, the total amount of accounts payable by Longmen Glass to the Company was RMB524,886,037.28; as of the date of the announcement in relation to the Disposal (i.e. 26 November 2021), the total amount of accounts payable by Longmen Glass to the Company was RMB540,461,882.22. Pursuant to the arrangement under the Share Transfer Agreement, if Longmen Glass fails to repay the corresponding amount to the Company on time, i.e. before the Handover Completion Date and the New Accounts Payable Repayment Date, Triumph Group shall repay the same on behalf of Longmen Glass in the aforesaid manner.

Details of the accounts payable of Longmen Glass are as follows:

1. Accounts payable as of the Valuation Benchmark Date

As of the Valuation Benchmark Date, i.e. 31 December 2020, the total amount of accounts payable by Longmen Glass to the Company was approximately RMB524,886,000, of which: accounts payable amounted to RMB234,474,700, mainly attributable to the accumulated losses of Longmen Glass and its own cash flow cannot support continuous operation, and therefore, the Company has prepaid for the raw fuel and materials such as soda ash for Longmen Glass, and since these are advancements for the daily operation of Longmen Glass, there is no repayment date for such accounts payable. Other accounts payables amounted to RMB290,411,300, which was mainly (i) loans and interests provided by the Company to Longmen Glass for the purpose of its production and operation which amounted to RMB274,914,600, and according to the relevant loan agreements, the loans can be partially repaid during the drawdown period and there are no specific due date; and (ii) wages and related expenses advanced during the suspension of production of the Longmen Glass which amounted to RMB15,496,700.

Accounts payable during the transition period

During the period from January 2021 to November 2021, the additional amount of other accounts payables by Longmen Glass to the Company amounted to RMB15,575,800, which was mainly for the payment of wages and other relevant fees, taxes, electricity charges and other charges for Longmen Glass in 2021.

Save for the aforesaid, as at the Latest Practicable Date, other Target Companies, Longhai Glass and Bengbu CNBM Information Display have no accounts payable to the Company.

– 9 –

LETTER FROM THE BOARD

In the event that Longmen Glass fails to repay the corresponding payables to the Company on a timely basis in the aforesaid manner, the Company has assessed the repayment ability of Triumph Group to repay to the Company on behalf of Longmen Glass. Triumph Group is a wholly-owned subsidiary of CNBMG, which is a de facto controller of the Company and an enterprise directly under State-owned Asset Supervision and Administration Commission of the State Council of the PRC. Triumph Group focuses on high-tech manufacturing business including new glass, new energy, new materials, etc., and focuses on related industrial services. It is a business platform that performs financing management, investment management, integration, merger and acquisition, etc. The Company has also reviewed the financial information of Triumph Group as of 31 December 2020. As of 31 December 2020, the audited total assets of Triumph Group was RMB52.894 billion, the gearing ratio was 68%, the operating income was RMB20.005 billion and the net profit was RMB1.468 billion. Based on the above assessment of the background and financial position of Triumph Group, the Board of the Company is of the view that the operation of Triumph Group is in a stable condition and in a sound financial position with capability to perform the agreement.

In order to protect the interests of the Company in the Disposal, in particular, to ensure that Longmen Glass and Triumph Group will repay the corresponding payables to the Company on a timely basis in the aforesaid manner, the Company has considered the following factors and taken the following measures:

The Company has taken into account the “Opinions of the State Council for Further Improving the Quality of Listed Companies” (No. 14 [2020] of the State Council)* (《國務院關於進一步提高上市公司質量的意見》國發[2020]14號文件) promulgated by the State Council of the PRC, which expressly provided that “controlling shareholders, de facto controllers and relevant parties shall not encroach on the interests of listed company, and focus on exercising its supervisory by law and handling based on different categories, and existing issues of occupation of funds and illegal external guarantee shall be paid off or resolved within a specific deadline.” Therefore, during the negotiations regarding the Disposal, the Company and Triumph Group have confirmed the aforesaid requirements of the State Council of the PRC and reached a consensus. According to the Share Transfer Agreement, if Longmen Glass fails to repay the corresponding amount to the Company on time, Triumph Group shall undertake to repay the same on behalf of Longmen Glass. Such provision guarantees that, after the completion of the Disposal, there will not be funds or assets of listed company (namely the Company) being occupied by the de facto controller or other related parties. Otherwise, it will be constituted as a violation of regulation, which is a situation that the Company and Triumph Group are determined to forbid to happen.

In case the aforementioned payables are failed to be settled in accordance with the provisions of the Share Transfer Agreement, the Board of the Company will urge Triumph Group to perform the relevant arrangements under the Share Transfer Agreement or to take effective measures including legal procedures (if necessary). According to the Share Transfer Agreement, if the breaching party causes losses to the observing party, the breaching party shall bear the corresponding direct economic losses of the observing party. As a result, under the Share Transfer Agreement, if the aforesaid debts fail to be settled under the provisions of the Share Transfer Agreement, it may constitute as a breach of the agreement, and the Company shall be entitled to require Triumph Group to bear the corresponding direct economic losses of the Company.

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LETTER FROM THE BOARD

The basis for adopting the valuation results of the asset-based approach to be the conclusion of the valuation of the Target Companies

Based on the Asset Valuer’s opinion, the consideration of adopting the results of the asset-based approach by the Asset Valuer for each Target Company and the consideration of alternative valuation methods are as follows:

1. For the valuation of Longmen Glass, only the asset-based approach has been used:

There are three common valuation methods in enterprise value evaluation:

The market approach: it refers to the valuation method whereby the value of the valuation target is determined by comparing the valuation target with comparable listed companies or comparable transaction cases. The basic condition for using the market approach is as follows: there is a relatively active market, and market cases and indicators and parameters comparable to the valuation target can be collected and quantified. For market approach, since the principal business of Longmen Glass is the manufacture of ultra-thin electronic glass substrate, and the Asset Valuer has considered that the number of listed companies sharing the same principal business of manufacture of ultra-thin electronic glass substrate is relatively small in the PRC market, therefore, the number of comparable cases are not sufficient to adopt market approach for the valuation of Longmen Glass.

The income approach: although it does not directly use the reference in the actual market to explain the current fair market value of the valuation target, it is the fundamental basis for determining the current fair market value from the perspective of the expected profitability of the assets. The prerequisites for applying the income approach to evaluate: continuous operation; future income periods can be determined; and there is a stable relationship between shareholder equity and business income; the future operating income can be correctly predicted and measured; and the risk return related to the expected income of the enterprise can be estimated and measured. However, as Longmen Glass failed to meet the following prerequisites for the application of the income approach to evaluate: Longmen Glass had ceased production and could not continue as a going concern; future income period could not be determined; future operating revenue could not be correctly forecasted and the risk of return associated with the expected revenue of the business could not be estimated. Therefore, the income approach is not suitable for the valuation of Longmen Glass.

The cost approach (asset-based approach): it refers to the valuation method whereby the value of the valuation target is determined by valuation of identifiable on- and off-balance sheet assets and liabilities based on the balance sheet of the appraised entity as of the valuation benchmark date. This evaluation item, Longmen Glass, can meet the conditions required by the cost approach (asset-based approach), that is, the appraised asset is in a state

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LETTER FROM THE BOARD

of continued use or is assumed to be in a state of continued use, and has available historical data. Moreover, the cost approach (asset-based approach) can meet the requirements of the value type of the evaluation. For the above reasons, the Asset Valuer has only adopted the asset-based approach for the valuation of Longmen Glass.

2. Both the cost approach and the income approach were adopted for the valuation of both Bengbu CNBM Information Display and Longhai Glass, and results of the cost approach were ultimately adopted as the final conclusion of this valuation:

For market approach, since the principal business of Bengbu CNBM Information Display and Longhai Glass are the manufacture of ultra-thin electronic glass substrate, and the Asset Valuer has considered that the number of listed companies sharing the same principal business of manufacture of ultra-thin electronic glass substrate is relatively small in the PRC market, therefore, the number of comparable cases are not sufficient to adopt the market approach for the valuation of Bengbu CNBM Information Display and Longhai Glass. Therefore, the market approach was not adopted for both Bengbu CNBM Information Display and Longhai Glass, but the cost approach and the income approach were adopted, and finally both have adopted the valuation results of the cost approach as the final valuation conclusion of this valuation. The reasons are as follows:

The cost approach (asset-based approach) in the enterprise value evaluation refers to the valuation method whereby the value of the valuation target is determined by valuation of identifiable on- and off-balance sheet assets and liabilities based on the balance sheet of the appraised entity as of the valuation benchmark date. This evaluation item, Bengbu CNBM Information Display and Longhai Glass, can meet the conditions required by the cost approach (asset-based approach), that is, Bengbu CNBM Information Display and Longhai Glass are in a state of continued use or are assumed to be in a state of continued use, and have available historical data. Moreover, the cost approach (asset-based approach) can meet the requirements of the value type of the evaluation. For the above reasons, the Asset Valuer has adopted the cost approach as one of the valuation methods for the valuation of Bengbu CNBM Information Display and Longhai Glass.

The reason for adopting cost approach as the final conclusion of the valuation of Bengbu CNBM Information Display: Bengbu CNBM Information Display is in the stage of product transformation. The 0.33mm series glass changes to 0.7mm series glass is the product focus, however as at the date of the Asset Valuation Report, the quality of target products still have room for improvement in its planned transformation, therefore the sale unit price of the products are relatively lower. Concurrently it requires large scale investment in technological transformation of fixed assets in the later stage to reach the quality of target products. There are uncertainties as to whether the target products can be launched as planned, whether such product can reach the targeted quality, and whether the fixed asset investment can be

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LETTER FROM THE BOARD

completed on schedule, there are many situations which cannot be estimated accurately. Based on the above analysis, the Asset Valuer is of the view that the quality of data based on cost approach is better than that based on income approach, therefore, the result obtained from cost approach is selected as the final conclusion.

The reason for adopting cost approach as the final conclusion of the valuation of Longhai Glass: the production line of Longhai Glass has been suspended for upgrading since 2016 and resumed in the first half of 2019. The operation scale and net income shall recover steadily and reach or close to the best level in history due to the recovery of the market in 2020. However, it is uncertain to make clear judgments at this stage about the duration and speed of the recovery and the sustainability of the subsequent profitability of Longhai Glass. At the same time, the electronic glass substrate is expanding in its production capacity and the sale price greatly fluctuates, there are many situations which cannot be estimated accurately. Based on the above analysis, the Asset Valuer is of the view that the quality of data based on cost approach is better than that based on income approach, so the result obtained from cost approach is selected as the final conclusion.

Profit Forecast for the Valuation Approach of Longhai Glass and Bengbu CNBM Information Display

In the process of reaching valuation conclusions of the equity interests of Longhai Glass and Bengbu CNBM Information Display, their intangible assets are appraised by income approach respectively in their asset valuation reports. Accordingly, the valuation based on income approach is deemed as a profit forecast under Rule 14.61 of the Listing Rules. Therefore, the Company discloses the following valuation details pursuant to Rule 14.62 of the Listing Rules.

Details of the principal assumptions upon which the Asset Valuation Report of the Longhai Glass were based are as follows:

(I) Basic Assumptions

1. Transaction assumption

Transaction assumption assumes that all assets to be valued are in the process of transaction, and the valuer will conduct the valuation with reference to a simulated market based on the transaction conditions of assets to be valued. The transaction assumption is a fundamental prerequisite for the further implementation of the asset valuation.

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LETTER FROM THE BOARD

Open market assumption

Open market assumption assumes that with respect to the asset traded or to be traded in the market, the transaction parties are equal and have opportunity and time to access enough market information so as to make a rational judgment on the function, intended purpose and transaction price of the assets. The open market assumption is made on the basis that the assets are available for trading openly in the market.

Assumption on continuing operation

Assumption on continuing operation of asset is based on the assumption that the appraised enterprise continues to operate in accordance with its original business purpose and operating methods after the valuation benchmark date.

(II) General Assumptions

It is assumed that there are no material changes in the relevant existing laws, regulations and policies, and macroeconomic conditions of the PRC as well as in the local political, economic and social environment of such places where the parties to the transaction are operating after the valuation benchmark date;
It is assumed that the person operating the appraised entity under valuation is accountable, and the management is capable of performing their duties after the valuation benchmark date;
It is assumed that the appraised entity has fully complied with all relevant laws and regulations;
It is assumed that the interest rate, exchange rate, tax base, tax rate, policy-imposed charges and others related to the appraised entity will not change significantly after the valuation benchmark date;
It is assumed that there are no other human force majeure and unforeseen factors that have a significant adverse impact on the enterprise after the valuation benchmark date.

(III) Specific Assumptions

It is assumed that the accounting policies to be adopted by the appraised entity after the valuation benchmark date are basically consistent with the accounting policies adopted when the valuation report is prepared in respect of significant aspects;

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LETTER FROM THE BOARD

It is assumed that the business scope and method of the appraised entity will remain consistent with the current directions after the valuation benchmark date with its existing management method and management level;
The type of this valuation is the market value, regardless of the impact of the economic behavior involved in the valuation purpose on the business operation of the enterprise;
It is assumed that the appraised unit does not change its business direction and that there are no major changes in the major import channels and prices in the future;
It is assumed that the cash inflow and cash outflow of the appraised entity after the valuation benchmark date are even;
This valuation assumes that the basic information and financial information provided by the client and the appraised enterprise are true, accurate, and complete.

Details of the principal assumptions upon which the Asset Valuation Report of Bengbu CNBM Information Display were based are as follows:

(I) Basic Assumptions

Transaction assumption

Open market assumption

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LETTER FROM THE BOARD

Assumption on continuing operation

(II) General Assumptions

It is assumed that the appraised entity is a going concern after the valuation benchmark date;
It is assumed that there are no material changes in the relevant existing laws, regulations and policies, and macroeconomic conditions of the PRC as well as in the local political, economic and social environment of such places where the parties to the transaction are operating after the valuation benchmark date;
It is assumed that the person operating the appraised entity under valuation is accountable, and the management is capable of performing their duties after the valuation benchmark date;
It is assumed that the appraised entity has fully complied with all relevant laws and regulations;
It is assumed that the interest rate, exchange rate, tax base, tax rate, policy-imposed charges and others related to the appraised entity will not change significantly after the valuation benchmark date;
It is assumed that there are no other human force majeure and unforeseen factors that have a significant adverse impact on the enterprise after the valuation benchmark date.

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LETTER FROM THE BOARD

(III) Specific Assumptions

It is assumed that the accounting policies to be adopted by the appraised entity after the valuation benchmark date are basically consistent with the accounting policies adopted when the report is prepared in respect of significant aspects;
It is assumed that the business scope and method of the appraised entity will remain consistent with the current directions after the valuation benchmark date with its existing management method and management level;
The type of this valuation is the market value, regardless of the impact of the economic behaviour involved in the valuation purpose on the business operation of the enterprise;
It is assumed that the cash inflow and cash outflow of the appraised entity after the valuation benchmark date are even;
There will be no material changes in the prevailing bank rates, foreign exchange rates, tax bases and tax rates, as well as policy-imposed levies;
There will be no force majeure factors and unpredictable factors materially and adversely affecting the operation of the enterprise;
The appraised entity will not change its business direction and its operation on a going concern;
There will be no material changes in the business mode, management and technical team of the appraised entity, and there will be no material changes in the inventory procurement and sales channels;
The evaluation information and asset rights information provided by the client and the appraised entity are true, legal and complete, and the assessment information collected by the appraiser within its ability is true and reliable;
The appraised entity is in full compliance with all relevant laws, regulations and policies;
The accounting policies to be adopted by the appraised entity in the future are consistent in substantially all aspects of the accounting policies applied in the current assessment;

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LETTER FROM THE BOARD

This assessment assumes that the basic information and financial information provided by the client and appraised enterprise are true, accurate, and complete;
It is assumed that the appraised entity continues to invest in research and development; it will be able to continue to obtain the certificate of high and new technology enterprise and enjoy the income tax rate of 15% for high and new enterprises in 2021 and beyond;
It is assumed that other intangible assets within the evaluation scope will continue to be available for normal use at maturity;
There will be no material changes in the current technical standards of products related to proprietary technology owned by property holder that are issued by relevant government authorities, and there is no leakage of proprietary technology by property holder.

The Board has reviewed the principal assumptions upon which the profit forecasts were based and is of the view that the profit forecasts were made after careful consideration and enquiry.

WUYIGE Certified Public Accountants LLP has been engaged by the Company to review the calculation and compilation of the discounted future cash flows upon which the asset valuation report of Longhai Glass and the asset valuation report of Bengbu CNBM Information Display were based.

A report from WUYIGE Certified Public Accountants LLP and a letter from the Board are included in Appendix IV and Appendix V to this circular respectively for the purpose of Rule 14.62 of the Listing Rules.

The calculation process and key parameters of the Asset Valuer’s valuation using the income approach are as follows:

Value of all shareholders’ equity = discounted value of free cash flow of the enterprise + value of non-operating assets + surplus assets – non-operating liabilities – interest-bearing debt

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LETTER FROM THE BOARD

The results of the free cash flow forecasts for Longhai Glass are shown in the table below:

Unit: RMB0’000

						Perpetual
Item	2021	2022	2023	2024	2025	period
1. Operating income	28,232.48	28,258.23	28,340.56	28,423.26	28,506.32	28,506.32
Less: Operating cost	15,525.43	15,539.72	15,585.12	15,630.71	15,676.50	15,676.50
Business tax and surcharge	416.25	438.92	439.50	440.08	440.66	440.66
Sales expense	921.55	1,000.69	1,086.95	1,102.00	1,117.63	1,117.63
Management expense	4,166.58	4,263.07	4,336.18	4,358.08	4,380.14	4,380.14
Finance expense	0.61	0.61	0.61	0.61	0.61	0.61
2. Op erating profit (“-”
indicating loss)	7,202.05	7,015.22	6,892.21	6,891.78	6,890.78	6,890.78
Add: Non-operating income
Less: Non-operating expense						0.00
3. To tal profit (“-” indicating
total loss)	7,202.05	7,015.22	6,892.21	6,891.78	6,890.78	6,890.78
Less: Income tax expense	661.41	628.41	608.72	607.42	606.02	606.02
4. Ne t profit (“-” indicating
net loss)	6,540.64	6,386.81	6,283.48	6,284.36	6,284.76	6,284.76
Add: De preciation and
amortization
Interest expenses	2,503.66	2,507.26	2,507.26	2,507.26	2,507.26	2,507.26
Less: Capital expenditure	2,029.78	2,029.78	2,029.78	2,029.78	2,029.78	2,507.26
Less: In crease in working
capital		6,761.42	8.17	24.54	24.62	24.69
V. Operating cash flow	253.10	6,856.12	6,736.42	6,737.22	6,737.55	6,284.76

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LETTER FROM THE BOARD

The results of the free cash flow forecasts for Bengbu CNBM Information Display are shown in the table below:

Unit: RMB0’000

						Perpetual
Year	2021	2022	2023	2024	2025	year
1. Operating income	15,949.87	16,009.78	17,116.87	21,337.46	26,513.49	26,513.49
Income from principal
operations	15,949.87	16,009.78	17,116.87	21,337.46	26,513.49	26,513.49
Other business income	0.00	0.00	0.00	0.00	0.00	0.00
2. Operating cost	11,375.22	10,991.80	10,799.07	11,218.02	14,447.47	14,447.47
Cost from principal operations	11,375.22	10,991.80	10,799.07	11,218.02	14,447.47	14,447.47
Other business cost	0.00	0.00	0.00	0.00	0.00	0.00
Business tax and surcharge	440.46	406.52	336.49	492.82	566.73	510.98
Operating expense	81.35	83.23	85.16	87.14	89.18	89.18
Management expense	2,866.53	2,882.79	3,002.19	3,465.96	3,492.01	3,492.01
Finance expense	254.99	254.99	254.99	254.99	254.99	254.99
Impairment loss on assets	0.00	0.00	0.00	0.00	0.00	0.00
Gains on change in fair value	0.00	0.00	0.00	0.00	0.00	0.00
Investment gains	0.00	0.00	0.00	0.00	0.00	0.00
3. Operating profit	931.34	1,390.45	2,638.97	5,818.53	7,663.11	7,718.86
Supplementary income	0.00	0.00	0.00	0.00	0.00	0.00
Non-operating income	0.00	0.00	0.00	0.00	0.00	0.00
Non-operating expenses	0.00	0.00	0.00	0.00	0.00	0.00
4. Net profit	931.34	1,390.45	2,638.97	5,818.53	7,663.11	7,718.86
Less: Income tax expense	139.70	208.57	395.85	872.78	1,149.47	1,157.83
5. Net Profit	791.64	1,181.88	2,243.12	4,945.75	6,513.64	6,561.03
Add: De preciation of fixed
assets	3,299.46	3,299.46	3,299.46	3,672.80	3,672.80	3,672.80
Add: Lo ng-term deferred
amortization of
intangible assets	99.80	99.80	99.80	99.80	99.80	99.80
Add: Interest on borrowings	216.74	216.74	216.74	216.74	216.74	216.74
Less: Capital expenditure	302.49	302.49	5,902.49	151.24	151.24	3,672.80
Less: In crease in working
capital	-1,474.46	31.75	586.76	2,236.91	2,743.30	0.00
6. Free cash flow	5,579.61	4,463.65	-630.12	6,546.93	7,608.44	6,877.57

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LETTER FROM THE BOARD

Supplementary Information on the Valuation of the Target Companies

Valuation method in relation to intangible assets of Longhai Glass – land use rights

According to the opinion of the Asset Valuer, the Asset Valuer is of the opinion that the land market within the appraisal area of Longhai Glass is relatively active with more comparable cases of recent land transactions (within the same supply and demand circle, for the same use and in the same vicinity); in addition, Longhai Glass is located in a city where the benchmark land price has been updated and is located in the area covered by the benchmark land price, and the corresponding benchmark land price can better reflect the normal land price level of Longhai Glass after the update. Therefore, both the market comparison method and the benchmark land price coefficient method can better reflect the market value of Longhai Glass. The results of the two methods have little difference and reflect the formation process of land price from different perspectives, and the land price is justified and reasonable. Therefore, for the land use right appraisal of Longhai Glass, the weight of the appraisal result of the market comparison method is 50%, and the weight of the appraisal result of the benchmark land price coefficient method is 50%, that is, the simple arithmetic average of the two is used to determine the final appraisal result of Longhai Glass.

Valuation of unrecorded assets in the books of Bengbu CNBM Information Display

According to the opinion of the Asset Valuer, the Asset Valuer points out that the meaning of “off-book assets” in the Asset Valuation Report of Bengbu CNBM Information Display refers to unrecorded assets in the financial statements provided by the appraisal unit. The patent is not recorded but is included in the valuation scope because Bengbu CNBM Information Display’s patent asset is formed through the investment of Bengbu CNBM Information Display’s research and development personnel and research and development cost for a certain period of time and is expected to bring excess revenue to Bengbu CNBM Information Display. Although there is no book record for this asset, the production process of Bengbu CNBM Information Display’s products requires the use of the patented technology, which can bring excess revenue to Bengbu CNBM Information Display in the process of applying the patent.

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LETTER FROM THE BOARD

INFORMATION ON THE COMPANY AND TRIUMPH GROUP

The principal activities of the Company are production and sales of information display glass and new energy glass. The scope of business includes development, production, manufacture and installation of information display glass, new energy glass, photoelectric material for functionalglass category and its processed products and components, relevant materials, mechanical equipment and its electric appliances and accessories, relevant technical consultancy and technical services, as well as sales and after-sales services of self-produced products.

Triumph Group is a company incorporated in the PRC with limited liability and the indirect controlling Shareholder of the Company, which is principally engaged in glass sector, new materials sector, new energy sector, new equipment sector and project management sector. As at the Latest Practicable Date, the ultimate beneficial owner of Triumph Group is CNBMG. CNBMG is a wholly state-owned enterprise incorporated in the PRC and the ultimate controlling shareholder of the Company, and is a comprehensive building materials industry group.

INFORMATION ON THE TARGET COMPANIES

Longhai Glass

As of the Latest Practicable Date, Longhai Glass is a wholly-owned subsidiary of the Company, its principal business is production and sales of information display glass and its scope of business includes production, sale of, electronic glass, flat panel display devices and materials; processing of glass and raw materials.

Longmen Glass

As of the Latest Practicable Date, Longmen Glass is a wholly-owned subsidiary of the Company, its principal business is production and sales of information display glass and its scope of business includes production and sale of ultra-thin glass, processing and sales of glass and related raw materials, mineral products; glass craftsmanship technology and services.

Bengbu CNBM Information Display

As of the Latest Practicable Date, Bengbu CNBM Information Display is a wholly owned subsidiary of the Company, its principal business is production and sales of information display glass and its scope of business includes the research and development, production, sales and deep processing of ultra-thin glass; import and export of various commodities and by-products of its own and on agency basis; and sales of glass-related primary materials, auxiliary materials and other glass products and relevant technical services.

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LETTER FROM THE BOARD

FINANCIAL INFORMATION ON THE TARGET COMPANIES

The following is the audited financial information of the Target Companies for the two financial years ended 31 December 2019 and 31 December 2020 and the unaudited financial information of the Target Companies for the nine months ended 30 September 2021 prepared under the China’s Accounting Standards for Business Enterprises:

Longhai Glass

The audited net assets and total assets of Longhai Glass as at 31 December 2019 and 2020 and the unaudited net assets and total assets of Longhai Glass as at 30 September 2021 are set out below, respectively:

			As at
	As at 31	December	30 September
	2019	2020	2021
	Audited	Audited	Unaudited
	(RMB)	(RMB)	(RMB)
Net assets	138,093,675.15	138,573,037.01	190,649,882.23
Total assets	501,369,565.39	499,922,962.15	464,928,662.55

The audited net profit of Longhai Glass before and after taxation and operating income for the years ended 31 December 2019 and 2020 and the unaudited net profit before and after taxation and operating income for the nine months ended 30 September 2021 are set out below, respectively:

			For
			the nine months
			ended
	For the year ended	31 December	30 September
	2019	2020	2021
	Audited	Audited	Unaudited
	(RMB)	(RMB)	(RMB)
Net profit before taxation	-17,192,042.60	477,056.16	51,791,390.16
Net profit after taxation	-17,390,739.52	479,361.86	52,076,845.32
Operating income	1,178,311.74	176,863,063.92	192,458,136.53

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LETTER FROM THE BOARD

Longmen Glass

The audited net assets and total assets of Longmen Glass as at 31 December 2019 and 2020 and the unaudited net assets and total assets of Longmen Glass as at 30 September 2021 are set out below, respectively:

			As at
	As at 31	December	30 September
	2019	2020	2021
	Audited	Audited	Unaudited
	(RMB)	(RMB)	(RMB)
Net assets	-496,639,730.87	-501,829,201.49	-516,462,151.26
Total assets	130,940,510.43	87,044,589.98	81,291,773.35

The audited net profit of Longmen Glass before and after taxation and operating income for the years ended 31 December 2019 and 2020 and the unaudited net profit before and after taxation and operating income for the nine months ended 30 September 2021 are set out below, respectively:

			For
			the nine months
			ended
	For the year ended	31 December	30 September
	2019	2020	2021
	Audited	Audited	Unaudited
	(RMB)	(RMB)	(RMB)
Net profit before taxation	298,145.99	-16,256,395.62	-14,632,949.77
Net profit after taxation	298,145.99	-16,256,395.62	-14,632,949.77
Operating income	134,607,503.96	45,766,964.56	22,424.39

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LETTER FROM THE BOARD

Bengbu CNBM Information Display

The audited net assets and total assets of Bengbu CNBM Information Display as at 31 December 2019 and 2020 and the unaudited net assets and total assets of Bengbu CNBM Information Display as at 30 September 2021 are set out below, respectively:

			As at
	As at 31	December	30 September
	2019	2020	2021
	Audited	Audited	Unaudited
	(RMB)	(RMB)	(RMB)
Net assets	747,341,936.37	772,920,821.54	778,332,759.59
Total assets	875,806,332.62	848,882,553.53	817,584,648.66

The audited net profit of Bengbu CNBM Information Display before and after taxation and operating income for the years ended 31 December 2019 and 2020 and the unaudited net profit before and after taxation and operating income for the nine months ended 30 September 2021 are set out below, respectively:

			For
			the nine months
			ended
	For the year ended	31 December	30 September
	2019	2020	2021
	Audited	Audited	Unaudited
	(RMB)	(RMB)	(RMB)
Net profit before taxation	13,090,219.35	28,327,386.39	6,366,985.94
Net profit after taxation	11,122,219.54	25,578,885.17	5,411,938.05
Operating income	140,914,723.70	191,608,449.40	100,781,017.62

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LETTER FROM THE BOARD

REASONS FOR AND BENEFIT OF THE DISPOSAL

In accordance with the medium and long-term strategic plan of the Company, the Company has been actively deploying the photovoltaic glass business which has promising development prospects in the industry in recent years. With the strong support of major Shareholders, the Company has become a platform for capital operation and industry integration specializing in the new energy materials business within the group. The transfer of the information display glass business which is less related to the new energy materials business through the Disposal, is conducive to accelerating the recovery of funds, concentrating superior resources, focusing on the core business development, maintaining the stable operation of the existing photovoltaic glass business and expanding the strategic lay-out of new energy materials related business of the Company; and is conducive to continuously enhancing the profitability and income quality of the core businesses, which is in line with the long-term development objectives of the Company.

Since the information display glass business of this transfer accounts for a relatively small proportion of the main business of the Company, it is not expected to have material impact on the Company and can reduce operational risks to a certain extent, coordinate the scale and quality of development of the business and give more prominence to the main business of new energy materials, without prejudice to the interests of the Company and all Shareholders, especially the minority Shareholders.

The terms of Share Transfer Agreement have been determined after the arm’s length negotiations between the parties thereto. Based on the abovementioned, the Board, including the Independent Board Committee but excluding Mr. Zhang Chong, Mr. Xie Jun, Mr. Chen Yong and Mr. Ren Hongcan who are connected with the Triumph Group and have abstained from voting at the Board resolution on approving the Disposal, after considering the above reasons and the advice of the Independent Financial Adviser, considers that the terms of the Share Transfer Agreement are on normal commercial terms, and the Disposal contemplated thereunder is fair and reasonable and in the interest of the Group and the Shareholders as a whole.

FINANCIAL EFFECTS OF THE DISPOSAL

Upon Completion of the Disposal, the Company expects to realize a gain of approximately RMB126 million, which is the difference between the Share Transfer Price for disposal of 100% equity interest in the Target Companies and the audited net assets of the Target Companies as at 31 December 2020. The actual gain from the Disposal is subject to the audit result.

– 26 –

LETTER FROM THE BOARD

USE OF PROCEEDS FROM THE DISPOSAL

The Company intends to use the proceeds from the Disposal for the future development of the Group’s core business, including but not limited to accelerating the construction of new projects, maintaining the stable operation of the existing photovoltaic glass business and actively expanding the business related to new energy materials.

LISTING RULES IMPLICATIONS

According to Rules 14.22 and 14A.81 of the Listing Rules, the Disposal shall be calculated on an aggregated basis since the Share Transfer of the three Target Companies under the Share Transfer Agreement are entered into by the Company and the same party.

As at the Latest Practicable Date, Triumph Group directly and indirectly holds 204,363,711 A shares of the Company, representing approximately 31.65% of the total issued share capital of the Company. Therefore, Triumph Group is the indirect controlling shareholder of the Company and also a connected person of the Company. According to Chapter 14A of the Listing Rules, the Disposal constitutes a connected transaction of the Company.

As one or more of the applicable percentage ratios in respect of the Disposal exceed 5% but are all lower than 25%, the Disposal constitutes a discloseable transaction and connected transaction of the Company and is therefore subject to the reporting, announcement, circular and independent shareholders’ approval requirements under the Listing Rules.

As Mr. Zhang Chong, an executive Director of the Company, and Mr. Chen Yong and Mr. Ren Hongcan, non-executive Directors of the Company, serve as senior management in Bengbu Institute, a wholly-owned subsidiary of Triumph Group, and Mr. Xie Jun, an executive Director of the Company, serves as a director and senior management in CLFG, a controlled subsidiary of Triumph Group, the aforesaid four Directors are therefore connected with Triumph Group and its associates and not regarded as independent to make any recommendation to the Board, and thus they have abstained from voting on the approval of the Share Transfer Agreement and the transactions thereunder at the Board meeting. Save as disclosed above, there are no other Directors who have material interest in the Share Transfer Agreement and the transactions contemplated thereunder, and hence no other Director has abstained from voting on such Board resolutions.

– 27 –

LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE

The Company has set up an Independent Board Committee composed of all independent nonexecutive Directors (i.e. Mr. Jin Zhanping, Mr. Ye Shuhua, Mr. He Baofeng and Ms. Zhang Yajuan), to consider the terms of the Share Transfer Agreement and the transactions contemplated thereunder, and advise the Independent Shareholders on whether it is conducted in accordance with the normal commercial terms, fair and reasonable, and in the interests of the Company and the Shareholders as a whole. No member of the Independent Board Committee has any interest or participation in the transactions contemplated under the Share Transfer Agreement.

Completion is subject to and conditional upon the fulfillment of the terms and conditions precedent set out in the Share Transfer Agreement and the Disposal may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the securities of the Company.

III. EGM

The EGM will be held by the Company to consider and seek the approval of Independent Shareholders in respect of the resolutions in relation to the Share Transfer Agreement and the transactions contemplated thereunder. At the EGM, voting on the proposed resolutions will be conducted by way of poll.

Pursuant to Rule 14A.36 of the Listing Rules, any Shareholder who has a material interest in the transaction shall abstain from voting on the resolution. Since Triumph Group is the controlling shareholder of the Company, according to the Listing Rules, Triumph Group and its associates are interested in the Disposal. Therefore, Triumph Group and its associates, which held or are entitled to exercise control over the voting rights in respect of 204,750,081 A Shares of the Company, accounting for approximately 31.71% of the issued share capital of the Company as at the Latest Practicable Date, will abstain from voting on the resolutions on the Share Transfer Agreement at the EGM. Save as disclosed above, as at the Latest Practicable Date, to the best of the Directors’ knowledge, no other Shareholders are required to abstain from voting on the resolutions on the Share Transfer Agreement at the EGM.

– 28 –

LETTER FROM THE BOARD

The forms of proxy for use at the EGM were dispatched on 6 January 2022 and published on the website of the Stock Exchange (http://www.hkexnews.hk). Whether or not you are able to attend the EGM in person, you are requested to complete and return the forms of proxy in accordance with the instructions printed thereon to the Company’s H share registrar in Hong Kong, Hong Kong Registrars Limited, at 17M Floor, 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 forms of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

IV. RECOMMENDATIONS

The Directors (including the Independent Board Committee and excluding Mr. Zhang Chong, Mr. Xie Jun, Mr. Chen Yong and Mr. Ren Hongcan who are connected with the Triumph Group and have abstained from voting at the Board resolution on approving the Disposal) are of the view that although the Disposal is not conducted in the ordinary and usual course of business of the Group, the Share Transfer Agreement is carried out in accordance with normal commercial terms, the terms of the Share Transfer Agreement (including the Disposal) and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Therefore, the Directors (including the Independent Board Committee) recommended that the Independent Shareholders to vote in favour of the relevant ordinary resolutions to be proposed at the EGM to approve the Share Transfer Agreement and the transactions contemplated thereunder.

V. 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.

– 29 –

LETTER FROM THE BOARD

VI. ADDITIONAL INFORMATION

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

Yours faithfully,

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

Chairman

For identification purposes only

– 30 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

＊

6 January 2022

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION –

DISPOSAL OF ENTIRE EQUITY INTEREST IN LONGHAI GLASS, LONGMEN GLASS AND BENGBU CNBM INFORMATION DISPLAY, WHOLLYOWNED SUBSIDIARIES OF THE COMPANY

We refer to the circular of the Company dated 6 January 2022 (the “ Circular ”), of which this letter forms part. Unless otherwise defined, capitalised terms used herein shall have the same meanings as those defined in the Circular.

We have been appointed as members of the Independent Board Committee to advise you on whether the Share Transfer Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole. Details are set out in the Letter from the Board of the Circular. Veda Capital Limited has been appointed as an Independent Financial Adviser to provide recommendations to the Independent Board Committee and Independent Shareholders on such contents.

We wish to draw your attention to the (i) “Letter from the Board”; (ii) “Letter from the Independent Financial Adviser” to the Independent Board Committee and the Independent Shareholders, containing their advice on the terms of the Share Transfer Agreement and the transactions contemplated thereunder; and (iii) other information set out in the appendices of the Circular.

– 31 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms of the Share Transfer Agreement and the transactions (including the Disposal) contemplated thereunder, and taken into account the advice of the Independent Financial Adviser, in particular the factors, reasons and recommendations set out in the “Letter from the Independent Financial Adviser” on pages 33 to 53 of the Circular, we are of the view that although the Share Transfer Agreement is not entered into in the ordinary and usual course of business of the Group, the Share Transfer Agreement (including the Disposal) is entered into in accordance with the normal commercial terms, which is fair and reasonable so far as the Independent Shareholders are concerned, and the Disposal is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant ordinary resolutions to be submitted at the EGM.

Yours faithfully,

Mr. Jin Zhanping,

For and on behalf of Independent Board Committee Mr. Ye Shuhua, Mr. He Baofeng, Ms. Zhang Yajuan Independent Non-executive Directors

For identification purposes only

– 32 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice from Veda Capital to the Independent Board Committee and the Independent Shareholders in relation to the Share Transfer Agreement and the transactions contemplated thereunder, which has been prepared for the purpose of inclusion in this circular.

==> picture [198 x 55] intentionally omitted <==

Suites 1001-1002, 10/F., 299 QRC 299 Queen’s Road Central, Hong Kong

6 January 2022

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

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO

DISPOSAL OF ENTIRE EQUITY INTEREST IN LONGHAI GLASS, LONGMEN GLASS AND BENGBU CNBM INFORMATION DISPLAY, WHOLLY-OWNED SUBSIDIARIES OF THE COMPANY

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Disposal, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 6 January 2022 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 26 November 2021 (after trading hours), the Company entered into the Share Transfer Agreement with Triumph Group, pursuant to which, the Company intended to transfer its 100% equity interest held in the Target Companies to Triumph Group at a total consideration of RMB536,116,000 (equivalent to approximately HK$654,061,500).

According to the Board Letter, Triumph Group directly and indirectly holds 204,363,711 A shares in the Company, representing approximately 31.65% of the total issued share capital of the Company as at the Latest Practicable Date. Therefore, Triumph Group is the indirect controlling shareholder of the Company and also a connected person of the Company. According to Chapter 14A of the Listing Rules, the Disposal constitutes a connected transaction of the Company.

– 33 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to Rule 14.22 and 14A.81 of the Listing Rules, the Disposal would be calculated on an aggregated basis since the Share Transfer of the three Target Companies under the Share Transfer Agreement are entered into by the Company and the same party. As one or more of the applicable percentage ratios in respect of the Disposal exceed 5% but are all lower than 25%, the Disposal constitutes a discloseable and connected transaction for the Company and is therefore subject to the reporting, announcement, circular and the Independent Shareholders’ approval requirements under the Listing Rules.

Since Mr. Zhang Chong, the chairman of the Company, Mr. Xie Jun, an executive Director, and Mr. Chen Yong and Mr. Ren Hongcan, both being non-executive Directors, are connected with Triumph Group and its associates, and are deemed to be unable to provide recommendations to the Board in an independent capacity. Therefore, they have abstained from voting on approving the Share Transfer Agreement and the transactions thereunder at the Board meeting.

The Independent Board Committee, which currently comprises all the independent non-executive Directors, Mr. Jin Zhanping, Mr. Ye Shuhua, Mr. He Baofeng and Ms. Zhang Yajuan, has been formed by the Company to provide recommendation to the Independent Shareholders in respect of the Share Transfer Agreement and the transactions contemplated thereunder.

We, Veda Capital, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Share Transfer Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and whether the entering of the Share Transfer Agreement is in the interests of the Company and the Shareholders as a whole.

OUR INDEPENDENCE

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. Save for this appointment as the Independent Financial Adviser in respect of the Share Transfer Agreement and the transactions contemplated thereunder, there were no other engagements between us and the Group in the past two years. Apart from normal professional fees paid or payable to us in connection with this transaction, no other arrangement exists whereby we had received or would receive any fees or benefits from the Company or any parties that could reasonably be regarded as relevant to our independence. Accordingly, we consider ourselves independent in accordance with Rule 13.84 of the Listing Rules.

– 34 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied upon the accuracy of the information and representations contained in the Circular and information provided to us by the Company and the management of the Company (the “ Management ”). We have assumed that all statements, information and representations made or referred to in the Circular and all information and representations which have been provided by the Company and the Directors and the Management, for which they are solely and wholly responsible, were true at the time they were made and continue to be true as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration and there are no other facts not contained in the Circular, the omission of which make any such statement contained in the Circular misleading. The Shareholders will be notified of material changes as soon as possible, if any, to the information and representations provided and made to us after the Latest Practicable Date and up to and including the date of the EGM.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries that, to the best of their knowledge and belief, there are no omission of other facts that would make any statements in the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter. We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have no reason to believe that any information and representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any omission of any material facts that would render the information provided and the representations made to us untrue, inaccurate or misleading. We have not, however, conducted any independent in-depth investigation into the business affairs, financial position or future prospects of the Group, nor have we carried out any independent verification of the information provided by the Directors and/or the Management.

This letter is issued to the Independent Board Committee and the Independent Shareholders, solely in connection for their consideration of the Share Transfer Agreement and the transactions contemplated thereunder, and 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 purpose without our prior written consent.

– 35 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendations to the Independent Board Committee and the Independent Shareholders, we have taken into consideration the following principal factors and reasons. Our conclusions are based on the results of all analyses taken as a whole.

1. Information on the Company

The principal activities of the Company are production and sales of information display glass (the “ Display Glass Segment ”) and new energy glass (the “ Photovoltaic Glass Segment ”). The scope of business includes development, production, manufacture and installation of information display glass, new energy glass, photoelectric material for functional-glass category and its processed products and components, relevant materials, mechanical equipment and its electric appliances and accessories, relevant technical consultancy and technical services, as well as sales and after-sales services of self-produced products.

Set out below is a summary of the Group’s unaudited consolidated financial information for the six months ended 30 June 2020 and 2021 as extracted from the Company’s interim report for the six months ended 30 June 2021.

	For the six months ended	For the six months ended
	30 June 2021	30 June 2020	Changes
	RMB’000	RMB’000	%
	(unaudited)	(unaudited)
Revenue	1,594,837	957,734	66.52
– the Display Glass Segment	195,138	135,307	44.22
– the Photovoltaic Glass Segment	1,395,802	821,826	69.84
Profit attributable to Shareholders	198,051	16,145	1,126.73
	As at
	30 June 2021	30 June 2020	Changes
	RMB’000	RMB’000	%
	(unaudited)	(unaudited)
Total assets	6,514,521	5,506,588	18.30
Net assets	1,974,141	1,437,007	37.38
Net assets attributable to
Shareholders	1,824,629	1,315,361	38.72

– 36 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the six months ended 30 June 2021, the Group recorded a revenue in the amount of approximately RMB1,594.8 million, representing an increase of approximately 66.5% as compared to that of the six months ended 30 June 2020 in the amount of approximately RMB957.7 million. As advised by the Company, the increase in the revenue was mainly generated from the Photovoltaic Glass Segment in the amount of approximately RMB574.0 million due to the increase in overall demands of photovoltaic glass in the PRC which has led to the increase of the price of photovoltaic glass in the market since the fourth quarter of year 2020.

For the six months ended 30 June 2021, the Group recorded a profit attributable to Shareholders in the amount of approximately RMB198.1 million, representing a notably increase of approximately 1,126.73% as compared to that for the six months ended 30 June 2020 in the amount of approximately RMB16.1 million. As advised by the Company, the increase in profit was mainly due to the increase in revenue and profit margin in the Photovoltaic Glass Segment due to the positive performance of the Photovoltaic Glass Segment as mentioned in the above.

The Group’s unaudited total assets and net assets as at 30 June 2021 amounted to approximately RMB6,514.5 million and approximately RMB1,974.1 million respectively. The Group’s unaudited net assets attributable to Shareholders increased by approximately 38.72% to approximately RMB1,824.6 million as at 30 June 2021 from approximately RMB1,315.4 million as at 30 June 2020.

Set out below is a summary of the Group’s audited consolidated financial information for the financial years ended 31 December 2020 and 2019 as extracted from the Company’s annual report for the financial year ended 31 December 2020.

	For the financial years ended	For the financial years ended
	31 December 2020	31 December 2019	Changes
	RMB’000	RMB’000	%
	(audited)	(audited)
Revenue	3,045,615	1,854,842	64.20
– the Display Glass Segment	398,585	280,258	42.22
– the Photovoltaic Glass Segment	2,645,908	1,574,207	68.08
Profit attributable to Shareholders	327,362	54,000	506.23

– 37 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	As	at
	31 December 2020	31	December 2019	Changes
	RMB’000		RMB’000	%
	(audited)		(audited)
Total assets	5,604,576		5,241,040	6.94
Net assets	1,795,282		1,413,943	26.97
Net assets attributable to
Shareholders	1,626,578		1,299,216	25.20

For the year ended 31 December 2020, the Group recorded a revenue of approximately RMB3,045.6 million, representing an increase of approximately 64.2% as compared to that of the year ended 31 December 2019 of approximately RMB1,854.8 million. As advised by the Company, the increase in revenue was mainly attributable to the Photovoltaic Glass Segment, which is due to the increased sales volume and product price as a result of the constant positive performance in the photovoltaic glass market in 2020.

The Group recorded a profit attributable to Shareholders for the year ended 31 December 2020 in the amount of approximately RMB327.4 million, representing an increase of approximately 506.2% as compared to that for the year ended 31 December 2019 in the amount of approximately RMB54.0 million. As advised by the Company, the increase in profit was mainly due to the increase in revenue of the Photovoltaic Glass Segment as mentioned in the above.

The Group’s audited total assets and net assets as at the year ended 31 December 2020 amounted to approximately RMB5,604.6 million and approximately RMB1,795.3 million respectively. The Group’s audited net assets attributable to Shareholders increased by approximately 25.2% to approximately RMB1,626.6 million as at the year ended 31 December 2020 from approximately RMB1,299.2 million as at the year ended 31 December 2019.

– 38 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is a summary of the Group’s audited consolidated financial information for the financial years ended 31 December 2019 and 2018 as extracted from the Company’s annual report for the financial year ended 31 December 2019.

	For the financial years ended	For the financial years ended
	31 December 2019	31 December 2018	Changes
	RMB’000	RMB’000	%
	(audited)	(audited)
Revenue	1,854,842	1,402,748	32.23
– the Display Glass Segment	280,258	343,891	(18.50)
– the Photovoltaic Glass Segment	1,574,207	1,081,897	45.50
Profit attributable to Shareholders	54,000	15,645	245.16
	As	at
	31 December 2019	31 December 2018	Changes
	RMB’000	RMB’000	%
	(audited)	(audited)
Total assets	5,241,040	4,504,182	16.36
Net assets	1,413,943	1,345,341	5.10
Net assets attributable to
Shareholders	1,299,216	1,245,216	4.34

For the year ended 31 December 2019, the Group recorded a revenue of approximately RMB1,854.8 million, representing an increase of approximately 32.2% as compared to that of the year ended 31 December 2018 of approximately RMB1,402.7 million. As advised by the Company, the increase in revenue was mainly attributable to the growth in both sales volume and prices of photovoltaic glass products in the Group, which is due to (i) the gradual recovery in the domestic market of photovoltaic industry in 2019; and (ii) the increase in overseas market demand.

The Group recorded a profit attributable to Shareholders for the year ended 31 December 2019 in the amount of approximately RMB54.0 million, representing an increase of approximately 245.2% as compared to that for the year ended 31 December 2018 in the amount of approximately RMB15.6 million. As advised by the Company, the increase in profit was mainly due to the increase in revenue generated from the Photovoltaic Glass Segment as mentioned in the above.

– 39 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group’s audited total assets and net assets as at the year ended 31 December 2019 amounted to approximately RMB5,241.0 million and approximately RMB1,413.9 million respectively. The Group’s audited net assets attributable to Shareholders increased by approximately 4.3% to approximately RMB1,299.2 million as at the year ended 31 December 2019 from approximately RMB1,245.2 million as at the year ended 31 December 2018.

2. Reasons for and benefits of the Disposal

According to the Board Letter, in accordance with the medium and long-term strategic plan of the Company, the Company has been actively deploying the photovoltaic glass business which has promising development prospects in the industry in recent years. With the strong support of the major Shareholders, the Company has become a platform for capital operation and industry integration specializing in the new energy materials business within the group. The transfer of the information display glass business which is less related to the new energy materials business through the Disposal, is conducive to accelerating the recovery of funds, concentrating superior resources, focusing on the core business development, maintaining the stable operation of the existing photovoltaic glass business and expanding the strategic lay-out of new energy materials related business of the Company; and is conducive to continuously enhancing the profitability and income quality of the core businesses, which is in line with the long-term development objectives of the Company.

As stated in the Board Letter, the Company intends to use the proceeds from the Disposal for the future development of the Group’s core business, including but not limited to accelerating the construction of new projects, maintaining the stable operation of the existing photovoltaic glass business and actively expanding the business related to new energy materials.

We have noted that the Group’s Photovoltaic Glass Segment had been contributing more than 80% of the Company’s total revenue in the recent years. Further to our discussion with the Management, we were given to understand that that it is the intention of the Company to commit on optimize, enhance and expand its new energy glass business in the following years.

– 40 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Given the abovesaid understanding from the Company, we have conducted researches on the glass market in the PRC, photovoltaic power generation capacity as such power generation would have to make use of photovoltaic glasses comparable to the Group’s photovoltaic glass products.

==> picture [426 x 221] intentionally omitted <==

Source: NBSC (http://www.stats.gov.cn)

Based on information obtained from the National Energy Administrations of the PRC (http://www.nea.gov.cn), we noted that solar photovoltaic power generation is, currently the third largest renewable energy power generation capacity in the PRC, contributing approximately 14.2% of the total energy power generation in the PRC, behind water energy and wind energy. As illustrated in the graph above, sourcing from the NBSC, solar photovoltaic power generation capacity illustrated a strong growing trend from 2016 to 2020. The photovoltaic power generation capacity in the PRC increased from approximately 39.4 billion kilowatt-hours (“ kWh ”) in 2016 to approximately 142.1 billion kWh in 2020, representing a compounded annual growth rate of approximately 37.8%.

Furthermore, the PRC government has been encouraging the development of low-carbon economy and green industry, especially regarding renewable energy as an important part of the future lowcarbon economy in the recent years. From the 14th Five-Year Plan which covers the years from 2021 to 2025, endorsed by the National People’s Congress we noted that the PRC government continues to promote the development of renewable energy industry including solar photovoltaic energy. On 24 October 2021, the Central Committee of the Communist Party of China also published a working guidance, the “Carbon Dioxide Peaking and Carbon Neutrality (碳達峰碳中和)”, to encourage the development and the implementation of new energy power generation in the PRC, for instance, by the exploration of and/or upgrading ways for new energy power generations and the acceleration of the constructions of wind and solar photovoltaic power generation bases to increase total installed capacity.

– 41 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered that (i) the Company’s strengths in producing glass products in the Photovoltaic Glass Segment, being one of the leaders in the industry and the recent notable growth in the revenue contribution of the Photovoltaic Glass Segment to the Company; (ii) the Company’s intention to commit and expand its new energy glass business; (iii) the relatively growing photovoltaic power generation capacity in the PRC; and (iv) the policies of the PRC government continuously encourages the development of low-carbon economy and green industry with the uses of new energy including the solar photovoltaic energy, we are of the view that, the Disposal is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

3. Information of the Triumph Group

As at the Latest Practicable Date, Triumph Group is a company incorporated in the PRC with limited liability and the indirect controlling Shareholder, which is principally engaged in glass sector, new materials sector, new energy sector, new equipment sector and project management sector. The ultimate beneficial owner of Triumph Group is CNBMG, which is a wholly state-owned enterprise incorporated in the PRC and the ultimate controlling Shareholder, and is a comprehensive building materials industry group.

4. Information of the Target Companies

Longhai Glass

Longhai Glass is a wholly-owned subsidiary of the Company, its principal business in production and sales of information display glass and its scope of business includes production, sale of, electronic glass, flat panel display devices and materials; processing of glass and raw materials.

The summary of the financial information of Longhai Glass for the two financial years ended 31 December 2019 and 2020 and for the nine months ended 30 September 2021 is as follows:

	For the nine months	For the years ended	For the years ended
	ended 30 September	31 December
	2021	2020	2019
	RMB’000	RMB’000	RMB’000
	(unaudited)	(audited)	(audited)
Operating income	192,458.1	176,863.1	1,178.3
Profit/(loss) after taxation	52,076.8	479.4	(17,390.7)

– 42 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	As at 30 September	As at 31 December	As at 31 December
	2021	2020	2019
	RMB’000	RMB’000	RMB’000
	(unaudited)	(audited)	(audited)
Total assets	464,928.7	499,923.0	501,369.6
Net assets	190,649.9	138,573.0	138,093.7

Longhai Glass recorded a profit after taxation for the financial year ended 31 December 2020 in the amount of approximately RMB0.5 million from a loss after taxation in the amount of approximately RMB17.4 million for the financial year ended 31 December 2019.

The unaudited total assets and net assets of Longhai Glass as at 30 September 2021 amounted to approximately RMB464.9 million and approximately RMB190.6 million respectively.

Longmen Glass

Longmen Glass is a wholly-owned subsidiary of the Company, its principal business in production and sales of information display glass and its scope of business includes production and sale of ultra-thin glass, processing and marketing of glass and related raw materials, mineral products; glass craftsmanship technology and services.

The summary of the financial information of Longmen Glass for the two financial years ended 31 December 2019 and 2020 and for the nine months ended 30 September 2021 is as follows:

	For the nine months	For the years ended	For the years ended
	ended 30 September	31 December
	2021	2020	2019
	RMB’000	RMB’000	RMB’000
	(unaudited)	(audited)	(audited)
Operating income	22.4	45,767.0	134,607.5
Profit/(loss) after taxation	(14,632.9)	(16,256.4)	298.1
	As at 30 September	As at 31 December
	2021	2020	2019
	RMB’000	RMB’000	RMB’000
	(unaudited)	(audited)	(audited)
Total assets	81,291.8	87,044.6	130,940.5
Net assets	(516,462.2)	(501,829.2)	(496,639.7)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Longmen Glass recorded a loss after taxation for the financial year ended 31 December 2020 in the amount of approximately RMB16.3 million from a profit after taxation for the financial year ended 31 December 2019 in the amount of approximately RMB0.3 million.

The unaudited total assets and net liabilities of Longmen Glass as at 30 September 2021 amounted to approximately RMB81.3 million and approximately RMB516.5 million respectively.

Bengbu CNBM Information Display

Bengbu CNBM Information Display is a wholly-owned subsidiary of the Company, its principal business is production and sales of information display glass and its scope of business includes research and development, production, sale and deep processing of ultra-thin glass; import and export of various commodities and by-products of its own and on agency basis; and sale of glassrelated primary materials, auxiliary materials and other glass products and relevant technical services.

The summary of the financial information of Bengbu CNBM Information Display for the two financial years ended 31 December 2019 and 2020 and for the nine months ended 30 September 2021 is as follows:

	For the nine months	For the years ended	For the years ended
	ended 30 September	31 December
	2021	2020	2019
	RMB’000	RMB’000	RMB’000
	(unaudited)	(audited)	(audited)
Operating income	100,781.0	191,608.4	140,914.7
Profit after taxation	5,411.9	25,578.9	11,122.2
	As at 30 September	As at 31 December
	2021	2020	2019
	RMB’000	RMB’000	RMB’000
	(unaudited)	(audited)	(audited)
Total assets	817,584.6	848,882.6	875,806.3
Net assets	778,332.8	772,920.8	747,341.9

Bengbu CNBM Information Display recorded a profit after taxation for the financial year ended 31 December 2020 in the amount of approximately RMB25.6 million from a profit after taxation for the financial year ended 31 December 2019 in the amount of approximately RMB11.1 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The unaudited total assets and net assets of Bengbu CNBM Information Display as at 30 September 2020 amounted to approximately RMB817.6 million and approximately RMB778.3 million respectively.

5. Summary of the principal terms of the Share Transfer Agreement

Date: 26 November 2021

Parties: (1) the Company (as the transferor); and

(2) Triumph Group (as the transferee).

Share Transfer Price

The Share Transfer Price in the amount of RMB536,116,000 shall be payable by the Triumph Group to the Company according to the payment arrangement as stated in the Board Letter under the section headed “Payment of the Share Transfer Price”.

The Share Transfer Price was arrived at after arm’s length negotiations between the Company and Triumph Group on normal commercial terms, with reference to, among others, (i) the audit report issued by the PRC registered accountants in respect of each of the Target Companies with 31 December 2020 as the audit valuation benchmark date; and (ii) the assets appraisal reports determining the appraisal value of the entire equity interest attributable to the shareholders of each of the Target Companies issued by the Asset Valuer, based on the appraisal results through the cost method (asset-based method).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Arrangements on Employees and Credit and Debt Treatment

Upon the entering into of the Share Transfer Agreement, the Company and the Target Companies shall settle the mutual indebtedness incurred prior to the Valuation Benchmark Date (subject to the audit report as at the Valuation Benchmark Date, including but not limited to the current accounts payable) (the “ Accounts Payable ”) before the Handover Completion Date; after the audit institution has audited the financial position of the Target Companies for the Relevant Period, if the Company and the Target Companies incur new mutual indebtedness during the Relevant Period (the “ New Accounts Payable ”), the parties shall settle them within 30 working days after the relevant amount is determined (subject to the audit report as at the Handover Completion Date, including but not limited to the current accounts payable), i.e. within 30 working days after the audit report as at the Handover Completion Date is issued (the “ New Accounts Payable Repayment Date ”). If the Target Companies fail to repay the corresponding amount to the Company on time, i.e., before the Handover Completion Date and the New Accounts Payable Repayment Date, the Triumph Group shall repay the Accounts Payable and the New Accounts Payable to the Company on behalf of the Target Companies within 15 working days from the date of Handover Completion Date or the New Accounts Payable Repayment Date (as the case may be), then Triumph Group shall collect the Accounts Payable and the New Accounts Payable from the Target Companies on its own behalf.

As stated in the Board Letter, Longmen Glass has suspended production since 2 January 2020. As at the date of the announcement in relation to the Disposal, the total amount of accounts payables by Longmen Glass to the Company was RMB540,461,882.22. Pursuant to the arrangement under the Share Transfer Agreement, if Longmen Glass fails to repay the corresponding amount to the Company on time, i.e. before the Handover Completion Date and the New Accounts Payable Repayment Date, Triumph Group shall repay the same on behalf of Longmen Glass.

We considered that the above arrangement with Triumph Group undertaking to repay the overdue repayment by the Target Companies to the Company may provide additional financial security to the Company and is therefore in the interest of the Company and the Shareholders as a whole.

Evaluation of the consideration for the Target Companies

According to the Asset Valuation Report, the valuation of the Target Companies (the “ Valuation ”) as at the Valuation Benchmark Date was RMB536,116,000. In preparing the Asset Valuation Report, the Asset Valuer selected asset-based approach to conclude the Valuation. The consideration for the Disposal is about equivalent to the Valuation. Please also refer to the Appendices I, II and III of the Circular for more information on the Asset Valuation Report.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have reviewed the Asset Valuation Report and held telephone interviews with the Asset Valuer to enquire into the methodology adopted for and the basis and assumptions used in the Valuation. For our due diligence purpose, we have also reviewed and enquired into (i) the terms of engagement of the Asset Valuer with the Company; (ii) the Asset Valuer’s qualification and experience in relation to the preparation of the Asset Valuation Report; and (iii) the steps and due diligence measures taken by the Asset Valuer to arrive at the Valuation. From the mandate letter and other relevant information provided by the Asset Valuer and based on our telephone interviews with them, we are satisfied with the terms of engagement of the Asset Valuer as well as their qualification and experience for preparation of the Asset Valuation Report. The Asset Valuer also confirmed that they are independent to the Company, the Target Companies and Triumph Group and their respective associates.

In the course of our discussion with the Asset Valuer, we understand that there are three commonly adopted valuation approaches for assets valuation, namely market approach, income approach and asset-based approach. We noted from the Asset Valuer that (i) market approach and income approach were not suitable for the valuation of Longmen Glass; and (ii) market approach was not suitable for the valuations of Longhai Glass and Bengbu CNBM Information Display, and the reasons being are stated in the sub-section headed “The basis for adopting the valuation results of the asset-based approach to be the conclusion of the valuation of the Target Companies” in the Board Letter. As the Asset Valuer considers that (i) in respect of income approach, certain prerequisites could not be met by the Target Companies, such as future operating revenue could not be correctly forecasted, products undergoing transformation and/or change in operation scale due to production line upgrading; and (ii) in respect of market approach, the transaction in the market of the Target Companies is relatively inactive and the fact that there are limited companies in the market that produce/manufacture information display glasses as their only principal business with public information to be collected and quantified, the asset-based approach is selected as the final conclusion of the valuation of the Target Companies.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the above, we are of the view that (i) the income approach requires subjective assumptions to which the valuation is highly sensitive, and detailed operational information and long-term financial projections are also needed to arrive at an indication of value which involves high level of uncertainties; (ii) the market approach requires sufficient recent market comparable transactions; and (iii) given the asset-intensive characteristics of the Target Companies, the asset-based approach is a more preferable methodology as compared to the other approaches. We agree with the Asset Valuer’s adoption on asset-based approach, which values the fair market value of assets from the replacement cost perspective, can reflect the intrinsic value of the enterprises’ assets. The asset-based approach is one of the commonly adopted approaches for concluding valuation of companies and is also consistent with normal market practice. We have reviewed each of the balance sheet items of the Target Companies as at 31 December 2020 and considered that the Target Companies’ assets and liabilities, mainly including property, plant and equipment, inventory, intangible assets, cash and cash equivalents, receivables and payables are clearly identifiable, the Asset Valuer can value each of the assets and liabilities in the balance sheet of Target Companies as at the Valuation Date by appropriate valuation methodologies under the adoption of asset-based approach.

In assessing the appraised value of Longhai Glass, the Asset Valuer obtained Longhai Glass’ detailed audited balanced sheet related information and collected the relevant information which fulfills the asset-based approach requirement to comprehensively assess the market value of Longhai Glass’ assets and liabilities as at the Valuation Benchmark Date. For the property, plant and equipment, as they mainly include buildings and equipment, the Asset Valuer considered that it is appropriate to adopt the replacement cost method in the absence of a known market of comparable sales transactions. For the intangible asset, as it mainly includes the land use rights on land parcels in Yanshi City of Henan Province, the Asset Valuer adopted the land datum value method and market comparable approach in assessing its value. As discussed with the Asset Valuer, we understand that the land datum value method is commonly used in the land valuation in the PRC. The land datum value method refers to an approach to arrive at the land value of valuation subject by determining the correction coefficient and correcting land value based on the benchmark land price published by a local government, with reference to the correction standard to make adjustments on the value of the land to be evaluated based on its conditions such as development, land usage, tenure, plot ratio, etc. We noted that the Asset Valuer has made reference to recent comparable land transactions in terms of, among other factors, usage, proximity and date. The market value of the land parcels is estimated by referencing 3 relevant land transactions of general land in the locality used for industrial purposes. For the other assets and liabilities, mainly including cash and cash equivalent, other receivables, accounts payable, advanced payment and borrowings, the Asset Valuer has taken into consideration their existence, ownership and recoverability and hence adopted their book value in the audited accounts as at the Valuation Benchmark Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In assessing the appraised value of Longmen Glass, the Asset Valuer obtained Longmen Glass’ detailed audited balanced sheet related information and collected the relevant information which fulfills the asset-based approach requirement to comprehensively assess the market value of Longmen Glass’ assets and liabilities as at the Valuation Benchmark Date. For the property, plant and equipment, as they mainly include buildings and equipment, the Asset Valuer considered that it is appropriate to adopt the replacement cost method in the absence of a known market of comparable sales transactions. For the intangible asset, as it mainly includes the land use rights on land parcels in Luoyang City of Henan Province, the Asset Valuer adopted the land datum value method in assessing its value. As discussed with the Asset Valuer, we understand that the land datum value method is commonly used in the land valuation in the PRC. However, we understood from the Asset Valuer that as the urban area of Luoyang City has restricted the listing and sale of industrial land, and the existing industrial land is under the delisting and relocation plan, the Asset Valuer was not able to find any similar transaction cases and the market comparable method is not applicable. We understood from the Asset Valuer that as the land of Longmen Glass was expropriated by the local government, Longmen Glass received a land compensation during the year ended 31 December 2020 which had been reflected in the cash balance of Longmen Glass, while recording a corresponding deferred income in its non-current liabilities. Such deferred income will be amortized into other income of Longmen Glass periodically. Therefore, such deferred income is not an actual liability payable by Longmen Glass and the Asset Valuer has adopted its appraised value as zero. For the other assets and liabilities, mainly including cash and cash equivalent, other receivables, accounts payable, advanced payment and borrowings, the Asset Valuer has taken into consideration their existence, ownership and recoverability and hence adopted their book value in the audited accounts as at the Valuation Benchmark Date.

In assessing the appraised value of Bengbu CNBM Information Display, the Asset Valuer obtained Bengbu CNBM Information Display’s detailed audited balanced sheet related information and collected the relevant information which fulfills the asset-based approach requirement to comprehensively assess the market value of Bengbu CNBM Information Display’s assets and liabilities as at the Valuation Benchmark Date. For the property, plant and equipment, as they mainly include buildings and equipment, the Asset Valuer considered that it is appropriate to adopt the replacement cost method in the absence of a known market of comparable sales transactions. For the intangible asset, as it mainly includes the land use rights on land parcels in Bengbu City of Anhui Province, the Asset Valuer adopted the land datum value method and market comparable approach in assessing its value. As discussed with the Asset Valuer, we understand that the land datum value method is commonly used in the land valuation in the PRC. We noted that the Asset Valuer has made reference to recent comparable land transactions in terms of, among other factors, usage, proximity and date. The market value of the land parcels is estimated by referencing 3 relevant land transactions of general land in the locality used for industrial purposes. We understood from the Asset Valuer that Bengbu CNBM Information Display received government subsidies during the year ended 31 December 2020 which had been reflected in the cash balance of Bengbu CNBM Information Display, while recording a corresponding deferred income in its non-current

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

liabilities. Such deferred income will be amortized into other income of Bengbu CNBM Information Display periodically. Therefore, such deferred income is not an actual liability payable by Bengbu CNBM Information Display and the Asset Valuer has adopted its appraised as zero. For the other assets and liabilities, mainly including cash and cash equivalent, other receivables, accounts payable, advanced payment and borrowings, the Asset Valuer has taken into consideration their existence, ownership and recoverability and hence adopted their book value in the audited accounts as at the Valuation Benchmark Date.

Based on the above, as the Asset Valuer has considered different nature of the assets and liabilities of the Target Companies and adopted appropriate valuation methodologies and assumptions in assessing their fair values under the asset-based approach, we are of the view that the adoption of asset-based approach to determine the Valuation are reasonable. Based on our review and analysis of the Asset Valuation Reports, having considered the competence of the Asset Valuer and the reasonableness of the valuation approaches, basis and assumptions being adopted, we are of the view that the consideration for the Disposal is fair and reasonable.

Alternative approach – Comparing with comparable companies in the glass industry

In addition to the assets-approach we have discussed in the sections above, considering the Target Companies are assets intensive, we have also performed a trading multiples analysis using the priceto-book ratio (the “ P/B Ratio ”), as it is one of the most commonly used benchmarks, to compare the P/B Ratio of the Target Companies to further evaluate the fairness and reasonableness of the consideration of the Disposal from an alternative approach which we considered is for illustrative purposes.

To perform such analysis, we have searched for companies based on criteria of (i) having listed on the Stock Exchange; (ii) engaged in similar and comparable principal businesses as the Target Companies (i.e. having not less than 50% of total revenue generated from the production and sales of glass related products, including but not limited to, information display glasses); and (iii) with market capitalization being not more than HK$1,500 million given that the consideration of the Disposal was RMB536,116,000 (equivalent to approximately HK$654,061,520), and have identified 5 listed companies (the “ Comparable Companies ”), which are considered as exhaustive on best effort basis. It should also be noted that the subject companies involved in the Comparable Companies may have different nature of business operations, financial performances and financial position as compared with those of the Target Companies; however, having considered that the Comparable Companies share similar size and comparable business of the Target Companies in the glass industry, we consider the Comparable Companies sufficient and representative to provide general reference in assessing the fairness and reasonable of the consideration of the Disposal.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Details of our analysis are set out in the following table:

			Market
	Company (stock code)	Business Description	Capitalisation	P/B Ratio
			(HK$’ million)	(times)
			(Note 1)	(Note 2)
1	China Display	Production and sales in liquid	1,163	1.29
	Optoelectronics	crystal display module
	Technology Holdings
	Limited (334)
2	China Singyes New	Production and sales of	252	0.87
	Materials Holdings	indium thin oxide film
	Limited (8073)	and glass-related products
		that are primarily used
		in the manufacture of
		smart phones and other
		touch-screen devices and
		equipment
3	ZMFY Automobile Glass	Production and sales	167	0.83
	Services Limited (8135)	of automobile glass,
		photovoltaic system,
		business consultancy
		services and finance lease
		services
4	Perfect Optronics Limited	Production and sales of	326	2.20
	(8311)	display products and optics
		products
5	China Hongguang Holdings	Production and sales of	111	0.52
	Limited (8646)	energy-efficient safety
		glass products and smart
		glass products
			Maximum:	2.20
			Minimum:	0.52
			Average:	1.14
	Target Companies (Note 4)			1.31

Source: The Stock Exchange

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

The exchange rates of (i) RMB1=HK$1.22 was applied respectively in the comparable analysis.
These P/B Ratios are calculated with reference to the closing prices as quoted on the Stock Exchange on the date of the Share Transfer Agreement 26 December 2021. The net asset values are extracted from their respective latest relevant financial reports/results of the Comparable Companies prior to the date of the Share Transfer Agreement.
The P/B Ratio of the Target Companies is calculated based on the consideration for the Disposal of RMB536,116,000 divided by the audited net asset value of the Target Companies as at 31 December 2020 of approximately RMB409,664,657.

As shown in the table above, the P/B Ratios of the Comparable Companies ranged from approximately 0.52 times to approximately 2.20 times with an average of approximately 1.14 times. We noted that the implied P/B Ratio for the Target Companies of approximately 1.31 times (the “ Implied P/B Ratio ”) is higher than the average and lies within the range of the P/B Ratios of the Comparable Companies and such results have served to provide additional assurance on our view that the consideration of the Disposal is fair and reasonable.

Further to the above, taking into account that (i) the methodology adopted for and the basis and assumptions used in the Valuation are fair and reasonable; (ii) Valuation is fair and reasonable so far as the Independent Shareholders are concerned; and (iii) the consideration for the Disposal is about equivalent to the Valuation, we are of the view that the Consideration is fair and reasonable so far as the Independent Shareholders are concerned and the terms of the Share Transfer Agreement are on normal commercial terms, and are fair and reasonable so far as the Independent Shareholders are concerned and in the interest of the Company as a whole.

6. Possible financial effects of the Disposal

Immediately after the Completion, the Company will cease to hold any interest in the Target Companies. The Target Companies will cease to be subsidiaries of the Company and the financial results of the Target Companies will no longer be consolidated into the financial statements of the Company.

Effect on earnings

As stated in the section headed “Financial effects of the Disposal” in the Board Letter, upon Completion, the Company expects to realize a gain of approximately RMB126 million, which is the difference between the Share Transfer Price for disposal of 100% equity interest in the Target Companies and the audited net assets of the Target Companies as at 31 December 2020.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Effect on net asset value

With reference to the Company’s interim report, the unaudited consolidated net assets value of the Group was approximately RMB1,974.1 million as at 30 June 2021. Upon Completion, the Company will no longer hold any interest in the Target Companies and the Target Companies will cease to be subsidiaries of the Company. As advised by the Company, the Disposal would increase the consolidated net assets value of the Group.

Effect on cash flow

With reference to the Company’s interim report, the bank balance and cash of the Company as at 30 June 2021 amounted to approximately RMB705.4 million. Given that the consideration for the Disposals will be paid in cash to the Company, it is expected that there will be a positive impact on the cash flow of the Company arising from the Disposal and the bank balances and cash would increase.

It should be noted that the above mentioned financial effects are for illustrative purposes only and do not purport to represent how the financial position of the Group will be upon completion of the Disposal. The actual financial effects may differ and are subject to audit.

RECOMMENDATIONS

Having considered the above principal factors and reasons, we are of the view that (i) although the Disposal is not in the ordinary and usual course of the business of the Group, the terms of the Share Transfer Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the entering into the Share Transfer Agreement is in the interests of the Company and the Shareholders as a whole.

Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders, and we also recommend Independent Shareholders to vote in favor of the relevant resolution for approving the Share Transfer Agreement and the transactions contemplated thereunder at the EGM.

Yours faithfully, For and on behalf of Veda Capital Limited Julisa Fong Managing Director

Ms. Julisa Fong is a licensed person registered with the SFC and a responsible officer of Veda Capital which is licensed under the SFO to carry out type 6 (advising on corporate finance) regulated activity and has over 25 years of experience in corporate finance industry.

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SUMMARY OF ASSET VALUATION REPORT ON LONGHAI GLASS

APPENDIX I

The following is an English translation of the summary of the Asset Valuation Report. The Asset Valuation Report was prepared in Chinese only. In case of any discrepancies between the Chinese and English versions of the summary, the Chinese version shall prevail.

ASSET VALUATION REPORT ON THE VALUE OF ALL EQUITY INTERESTS HELD BY SHAREHOLDERS OF CLFG LONGHAI ELECTRONIC GLASS LIMITED INVOLVED IN THE PROPOSED TRANSFER OF EQUITY BY LUOYANG GLASS COMPANY LIMITED-SUMMARY

Jing Xin Ping Bao Zi (2021) No. 421

Zhongjing Minxin (Beijing) Assets Appraisal Co., Ltd. was engaged by Luoyang Glass Company Limited and Triumph Technology Group Co., Ltd. to appraise the value of all equity interests of shareholders involved in the proposed transfer of equity by Luoyang Glass Company Limited, by way of adopting the asset-based approach and carrying out necessary valuation procedures in accordance with laws, administrative regulations and asset valuation standards while adhering to the principles of independence, objectivity and impartiality.

Details of the asset valuation are reported as follows:

CHAPTER I BASIC INFORMATION

I. THE CLIENT, APPRAISED ENTITY AND OTHER USERS OF THE VALUATION REPORT

(I) Overview of the Client I

Name:

Triumph Technology Group Co., Ltd.*

Legal Residence and No. 2, Zizhuyuan South Road, Haidian District, Beijing Business Premise: Legal Representative: Peng Shou Registered Capital: RMB5,025,129,793 Nature of Company: Limited liability company (sole proprietorship of legal person)

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SUMMARY OF ASSET VALUATION REPORT ON LONGHAI GLASS

APPENDIX I

Business Scope:

Research, manufacture and sales of building materials and complete equipment for light industry; development, transfer, consultation and service of new technology for light industry and the relevant import and export businesses; engineering design and consultation; tendering agency business; applied research and production of green energy technology products; consultation, design, assessment for energy saving and overall contract for construction of green energy projects; development, transfer, consultation and service of technology within the field of new energy; development, promotion, application and installation of new energy and energy saving products; technological development, production, assembly, sales and installation of components of solar energy and building integration houses, integrated houses and new-type houses; research and development, manufacture and sales of glass, raw materials and complete equipment; deep processing, manufacture and sales of glass products; processing and sales of nonmetallic mineral resources and products; development of computer software, technology consultation, physical and chemical analysis, and heat determination; and research and development, manufacture, sales and technology service of electromechanical equipment for building materials, coal mines, electricity, chemical engineering, metallurgy and municipal engineering. (The market entity shall legally and independently select business items and carry out business activities. For items subject to approval according to laws, the business activities shall be carried out according to the approved content after the approval of the relevant authorities has been obtained. Business activities prohibited and restricted by the state and local industrial policies shall not be engaged in.)

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SUMMARY OF ASSET VALUATION REPORT ON LONGHAI GLASS

APPENDIX I

(II) Overview of the Client II

Name:

Luoyang Glass Company Limited*

Legal Residence and Business Premises:

No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang

Legal Representative: Zhang Chong Registered Capital: RMB548,540,430

Nature of Company: Joint-stock limited company (Taiwan, Hong Kong or Macau and domestic joint venture, listed company) (Stock Code: 600876)

Business Scope:

Development, production, manufacture and installation of information display glass, new energy glass, photoelectric material for functional-glass category and its processed products and components, relevant materials, mechanical equipment and its electric appliances and accessories, relevant technical consultancy and technical services, as well as sales and after-sales services of self-produced products.

(III) Overview of the Appraised Entity

Name:

CLFG Longhai Electronic Glass Limited

Legal Residence and Shouyangshan Town, Yanshi City, Henan Province Business Premises:

Legal Representative: Ma Yan

Registered Capital: RMB100 million

Nature of Company: Limited liability company (sole proprietorship of legal person，not invested or controlled by natural person)

Business Scope: Production and sales of float glass, electronic glass, flat panel device and materials; processing of glass and raw materials.

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SUMMARY OF ASSET VALUATION REPORT ON LONGHAI GLASS

APPENDIX I

1. Shareholding Structure and Development History

In June 2005, CLFG Longhai Electronic Glass Limited was jointly established by China Luoyang Float Glass (Group) Company Limited (“ CLFG ”) and Luoyang Glass Company Limited (“ Luoyang Glass ”). On 16 December 2009, Luoyang Glass and CLFG entered into an agreement, pursuant to which, Luoyang Glass acquired 20% equity interests in CLFG Longhai Electronic Glass Limited held by CLFG, and the equity change registration was completed on 31 December 2009. The capital contribution of Luoyang Glass was RMB100 million, representing 100% of CLFG’s registered capital. Details of the capital contribution are as follows:

Name of shareholders Luoyang Glass Company Limited Total	Capital contribution (RMB0’000) 10,000.00 10,000.00	Percentage of capital contribution (%) 100.00 100.00

2. Main Assets

As of the valuation benchmark date, the main assets of CLFG Longhai Electronic Glass Limited are current assets and non-current assets, among which current assets include monetary funds, financing receivables, prepayment, other receivables, inventories and other current assets, etc., and non-current assets include fixed assets, construction in progress, intangible assets and deferred income tax assets, etc.

3. Main Products and Relevant Production and Sales

As of the valuation benchmark date, the principal business of CLFG Longhai Electronic Glass Limited is production and sales of electronic glass substrate. The company has established an ultra-thin glass production line, which commenced construction in March 2005 and was put into operation on 19 January 2006, with a daily melting capacity of 250 tonnes and non-cold repair annual production of float glass of 827,500 weight cases; After 10 years and 8 months of operation, Longhai Glass suspended production on 10 September 2016 in accordance with the development strategy of Luoyang Glass Company Limited and entered a new stage of cold repair and modification and technology upgrading. The company built an 180T/D production line for high-end electronic glass product with international

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SUMMARY OF ASSET VALUATION REPORT ON LONGHAI GLASS

APPENDIX I

leading and domestic first-class level at its original location. The production line started its technical transformation in March 2017. It was put into production in April 2019, and successfully produced glass sheets on the first attempt in June. In 2020, the sales volume of the company is 14,607,425.00 square meters, the sales revenue is RMB176,863,100 and the net profit is RMB479,400.

4. Assets, Liabilities, and Operation for the Recent Three Years

The Balance Sheet

Unit: RMB

Item Current assets Fixed assets Construction in progress Intangible assets Deferred income tax assets Other non-current assets Total non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets	At the end of December 2018 37,845,724.16 13,493,044.49 311,051,242.83 13,081,353.05 606,300.06 150,000.00 338,381,940.43 376,227,664.59 220,743,249.92 220,743,249.92 155,484,414.67	At the end of December 2019 87,508,686.94 396,878,833.53 3,705,168.77 12,769,273.01 407,603.14 100,000.00 413,860,878.45 501,369,565.39 363,275,890.24 363,275,890.24 138,093,675.15	At the end of December 2020 77,893,196.18 407,647,836.79 1,514,827.37 12,457,192.97 409,908.84 422,029,765.97 499,922,962.15 361,349,925.14 361,349,925.14 138,573,037.01

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SUMMARY OF ASSET VALUATION REPORT ON LONGHAI GLASS

APPENDIX I

Income Statement

Unit: RMB

Item Operating income Operating profit Total profit Net profit	2018 14,723,531.72 -9,543,977.24 -9,762,500.44 -10,363,369.75	2019 1,178,311.74 -17,252,528.31 -17,192,042.60 -17,390,739.52	2020 176,863,063.92 -100,097.53
			477,056.16

			479,361.86

The data in the financial statements of the appraised entity for 2018 was audited by WUYIGE Certified Public Accountants LLP and the WUYIGE Shenzi [2019] No. 2–00716 audit report was issued; the data in the financial statements of the appraised entity for 2019 was audited by WUYIGE Certified Public Accountants LLP and [2020] No. 2–00520 audit report was issued; and the data in the financial statements of the appraised entity for 2020 was audited by WUYIGE Certified Public Accountants LLP and [2021] No. 2–10112 audit report was issued.

(IV) Relationship among Clients and the Appraised Entity

Triumph Technology Group Co., Ltd.* is the receiver of this equity transfer, and Longhai Company is wholly-owned by Luoyang Glass. The largest shareholder of Luoyang Glass is China Luoyang Float Glass (Group) Company Limited (CLFG), and Triumph Technology Group is the controlling shareholder of CLFG. Triumph Technology Group, Luoyang Glass, Longhai Company and CLFG are subsidiaries of China National Building Materials Group Co. Ltd., and also their de facto controller is China National Building Materials Group Co. Ltd.

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SUMMARY OF ASSET VALUATION REPORT ON LONGHAI GLASS

APPENDIX I

(V) Other Users of the Valuation Report

1. Other users of the valuation report agreed in the asset valuation contract

The asset valuation entrustment contract does not stipulate other users of the valuation report.

2. Users of the valuation report stipulated by laws and administrative regulations

Users of the valuation report stipulated by laws and administrative regulations shall be subject to the provisions of relevant laws and administrative regulations.

II. PURPOSE OF THE VALUATION

Luoyang Glass Company Limited intended to transfer its equity interests in CLFG Longhai Electronic Glass Limited to Triumph Technology Group Co., Ltd. Therefore, Luoyang Glass Company Limited and Triumph Technology Group Co., Ltd. engaged Zhongjing Minxin (Beijing) Asset Appraisal Co., Ltd. to assess the value of all equity interests held by shareholders of CLFG Longhai Electronic Glass Limited, which forms the value reference of the share transfer.

The above share transfer has been resolved and approved by the general manager office meeting of CLFG.

III. VALUATION TARGET AND SCOPE

(I) The valuation target is the value of all equity interests held by shareholders of CLFG Longhai Electronic Glass Limited.
(II) The valuation scope covers all assets and liabilities of CLFG Longhai Electronic Glass Limited, including current assets, non-current assets such as fixed assets, construction in progress, intangible assets, and deferred income tax assets, and current liabilities. As of the valuation benchmark date, the book value of total assets, total liabilities and net assets amounted to RMB499,923,000, RMB361,349,900 and RMB138,573,100, respectively.

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APPENDIX I

The book value of assets and liabilities included in the valuation scope is set out in the below table:

Unit: RMB0’000

Items Current assets Non-current assets Including: Fixed assets Construction in progress Intangible assets Deferred income tax assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets (Owners’ equity)	Book value 7,789.32 42,202.98 40,764.78 151.48 1,245.72 40.99
	49,992.30

	36,134.99 0.00
	36,134.99

	13,857.31

The assets and liabilities included in the valuation scope have been audited by WUYIGE Certified Public Accountants LLP and the [2021] No. 2–10112 audit report has been issued.

(III) The entrusted valuation target and the valuation scope are consistent with the valuation target and the valuation scope involved in the economic behavior.

(IV) Main Physical Assets

The physical assets of the appraised entity are inventories, buildings, machinery and equipment, electronic equipment, vehicles and construction in progress.

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1. Inventories

The inventories of the appraised entity are raw materials, finished products (commodities in stock) and low-value consumables in use. Raw materials are mainly the main and auxiliary raw materials purchased by the enterprise for the production of glass, which are stored in each specialized warehouse. The commodities in stock are glass of various specifications, with total book amount of 80,799.59 weight boxes. The existing commodities in stock are normal market products.

2. Equipment

The fixed assets of machinery and equipment included in this valuation are mainly the production equipment for float glass products, with a total of 716 units (sets). It includes core equipment, control equipment, power distribution equipment and other auxiliary equipment of float glass production line, waste heat boiler, steam turbine, forklift, single beam crane, air compressor, power transmission and transformation equipment, various dry transformers, testing equipment, etc.

Vehicle equipment includes 1 passenger car and 1 virescence spraying vehicle.

106 electronic equipment (sets) mainly include all kinds of office computers, air conditioners, printers, copiers, cameras, monitoring system equipment, mass flowmeters, ammonia nitrogen on-line analyzers, etc.

As of the valuation benchmark date, all machine devices covered by the estimated valuation scope are in normal service condition.

3. Buildings and structures

The plant area of CLFG Longhai Electronic Glass Limited is located in the north of Beihuan Road and the west of Shoumang Road, with one production line. The buildings and structures within the scope of this valuation are plants and its auxiliary housing facilities of float glass production line, with a total GFA of 77,768.50 m[2] .

4. Construction in progress

The construction in progress is a civil engineering project, which is the ongoing plant area virescence renovation and upgrading project of the production line of Longhai ultrathin substrate for information display.

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(V) Intangible Assets

The intangible assets are a transfer of land use rights, which is located in the north of Beihuan Road and the west of Shoumang Road and used for industrial purposes, with an area of 126,605.98 m[2] . The land use certificate number is Yan Guo Yong (2010) No. 100122.

(VI) Unrecorded Assets Included in the Valuation Scope

The assets that have been listed in the Valuation List of Assets provided by the appraised entity but not recorded in the book are patent assets.

(VII) Recorded Non-physical Assets Included in the Valuation Scope

No recorded non-physical assets are found in the Valuation List of Assets provided by the appraised entity.

IV. VALUE TYPE AND DEFINITION OF VALUATION

Through analysis on the purpose of the valuation and the understanding of the market conditions on which the valuation is based, the status of the valuation target itself, etc., we judge that the asset valuation does not have any special restrictions and requirements on the appraisal market conditions and the use conditions of the valuation target, so the market value is adopted as the value type of valuation conclusion.

The market value is the estimated value of the valuation target on the valuation benchmark date on which the transactions are conducted on arms length basis by the voluntary purchaser and the voluntary vendor who act sensibly without being subject to any undue influence.

V. VALUATION BENCHMARK DATE

(I) The valuation benchmark date for this project is 31 December 2020.
(II) The above valuation benchmark date is selected by the client considering the realization of this economic behavior.

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CHAPTER II BASIS OF VALUATION

I. BASIS OF ECONOMIC ACTIVITY

Minutes of the General Manager Office Meeting of CLFG (22 September 2021).

II. BASIS OF LAWS AND REGULATIONS

(I) Asset Appraisal Law of the People’s Republic of China (passed at the 21st Meeting of the Standing Committee of the 12th National People’s Congress on 2 July 2016);
(II) Measures for Financial Supervision and Administration of the Asset Valuation Sector (Order No. 86 of the Ministry of Finance);
(III) Company Law of the People’s Republic of China (passed at the 6th Meeting of the Standing Committee of the 13th National People’s Congress on 26 October 2018);
(IV) Law of the People’s Republic of China on Enterprise Income Tax (passed at the 26th Meeting of the Standing Committee of the 12th National People’s Congress on 24 February 2017);
(V) The Detailed Rules for the Implementation of the Provisional Regulations on Value-added Tax of the People’s Republic of China (Order No. 50 of Ministry of Finance and State Taxation Administration);
(VI) The Notice on the Comprehensive Launch of the Pilot Program for the Change from Imposing Business Tax to Value-added Tax (Ministry of Finance, State Taxation Administration, Caishui [2016] No. 36);
(VII) The Announcement on the Policies in relation to Deepening Value-added Tax Reform (Announcement No. 39 of 2019 of the Ministry of Finance, Taxation State Administration and General Administration of Customs);
(VIII) The Patent Law of the People’s Republic of China (amended at the 6th Meeting of the Standing Committee of the 11th National People’s Congress on 27 December 2008);
(IX) The Enterprise State-owned Asset Law of the People’s Republic of China (passed at the 5th session of the 11th Standing Committee of the National People’s Congress on 28 October 2008);
(X) The Interim Regulations on the Supervision and Administration of State-owned Assets of Enterprises (Order No. 378 of the State Council);

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(XI) The Administrative Measures for Valuation of State-owned Assets (Order No. 91 of the State Council);
(XII) The Supervisory and Administrative Measures of the Transactions of Enterprise State-owned Assets) (Order No. 32 of SASAC and the Ministry of Finance);
(XIII) The Interim Measures for the Administration of Valuation of Enterprise State-owned Assets (Order No. 12 of (SASAC);
(XIV) The Notice on Matters Concerning Strengthening the Administration of State-owned Assets Appraisal of Enterprises (Guo Zi Wei Chan Quan [2006] No. 274);
(XV) The Notice on Matters Concerning the Review of Valuation Report of the State-owned Assets of Enterprise (Guo Zi Chan Quan [2009] No. 941);
(XVI) The Notice on Publishing the Guidelines for the Filing for Recordation of the Valuation Projects of Enterprise State-owned Assets (Guo Zi Fa Chan Quan [2013] No. 64);
(XVII) Measures for Supervision and Administration of State-owned Equity of Listed Companies (SASAC, the Ministry of Finance and SFC, [2018] No. 36);
(XVIII) The Securities Law of the People’s Republic of China (passed at the 15th Meeting of the Standing Committee of the 13th National People’s Congress on 28 December 2019);
(XIX) Risk Warning for Accounting Supervision No. 5 – Asset Appraisal of Listed Companies’ Equity Transaction (Zheng Jian Ban [2013] No. 6);
(XX) Civil Code of the People’s Republic of China (passed at the 3rd session of the 13th National People’s Congress on 28 May 2020);
(XXI) The Law of the People’s Republic of China on the Administration of Urban Real Estate (passed at the 29th Meeting of the Standing Committee of the 10th National People’s Congress on 30 August 2007);
(XXII) The Land Administration Law of the People’s Republic of China (passed at the 11th Meeting of the Standing Committee of the 10th National People’s Congress on 28 August 2004);
(XXIII) Interim Regulations on Urban Land Use Tax of the People’s Republic of China (passed at the 163rd Executive Meeting of the State Council on 30 December 2006);
(XXIV) Other laws and regulations related to the valuation.

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III. BASIS OF VALUATION CRITERIA

(I) Asset Valuation Basic Standards (Cai Zi [2017] No. 43);
(II) Code of Professional Ethics for Assets Assessment (CAS [2017] No. 30);
(III) Terminology of Asset Appraisal Criteria 2020 (CAS [2020] No. 31);
(IV) Asset Valuation Practicing Standards – Asset Valuation Methods (CAS [2019] No. 35);
(V) Asset Valuation Practicing Standards – Asset Valuation Procedures (CAS [2018] No. 36);
(VI) Asset Valuation Practicing Standards – Asset Valuation Report (CAS [2018] No. 35);
(VII) Asset Valuation Practicing Standards – Contract on Asset Valuation Entrustment (CAS [2017] No. 33);

(VIII) Asset Valuation Practicing Standards – Asset Valuation Files (CAS [2018] No. 37);

(IX) Asset Valuation Practicing Standards –Use of Expert Work and Related Reports (CAS [2017] No. 35);
(X) Asset Valuation Practicing Standards – Enterprise Value (CAS [2018] No. 38);
(XI) Asset Valuation Practicing Standards – Intangible Assets (CAS [2017] No. 37);
(XII) Asset Valuation Practicing Standards – Real Estate (CAS [2017] No. 38);
(XIII) Asset Valuation Practicing Standards – Machinery Equipment (CAS [2017] No. 39);
(XIV) The Guidelines for the Enterprise State-owned Asset Valuation Reports (CAS [2017] No. 42);
(XV) Guidelines for Valuation of Intellectual Property Rights (CAS [2017] No. 44);
(XVI) Guidelines for Business Quality Control of Asset Valuation Institutions (CAS [2017] No. 46);
(XVII) Guidance on Value Type for Asset Valuation (CAS [2017] No. 47);

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APPENDIX I

(XVIII) Guidance on Legal Ownership of Asset Valuation Target (CAS [2017] No. 48);

(XIX) Guidelines on the Valuation of Patent Assets (CAS [2017] No. 49);
(XX) Guiding Opinions No. 8 from Asset Valuation Expert – Check and Verification in Asset Valuation (CAS [2019] No. 39);
(XXI) Guiding Opinions No. 12 from Asset Valuation Expert – Measurement of Discount Rates in the Valuation of Enterprise Values by the Income Approach (CAS [2020] No. 38);
(XXII) Code for Real Estate Appraisal (National Standard GB/T50291–2015);

(XXIII) Regulations for Valuation on Urban Land (GB/T 18508–2014);

(XXIV) Other valuation criteria and norms related to the valuation;

(XXV) Other valuation criteria and norms related to the valuation.

IV. BASIS OF ASSET OWNERSHIP

(I) State-owned land use certificate (or land use right grant contract), house ownership certificate;
(II) Vehicle registration certificate;
(III) Certificate of patent for invention, certificate of patent for utility model;
(IV) Other ownership certificates, etc.

V. PRICING BASIS

(I) Price Information Inquiry System for Mechanical and Electrical Products (2021);
(II) Specialized equipment trading price information websites including Alibaba, ZOL Zhongguancun Online IT Product Quotation and IT168-IT Mainstream Information Platform about on the valuation benchmark date;
(III) Manual of Common Data and Parameters of Asset Evaluation (Second Edition);

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APPENDIX I

(IV) Interim Regulations of the People’s Republic of China on Vehicle Purchase Tax (Decree of the State Council [2000] No. 294);
(V) Valuation List of Equipment Fixed Assets;
(VI) Purchase invoices, contracts and other relevant materials collected by the valuers;
(VII) Financial statements and audit reports of previous years provided by the enterprise;
(VIII) Other information related to this asset valuation.

VI. OTHER BASIS AND REFERENCES

(I) Accounting statements and detailed list of declaration for asset valuation on the valuation benchmark date provided by the appraised entity;
(II) Audit reports and financial statements of the last three years provided by the appraised entity;
(III) Bank statements, explanatory notes, financial documents and other materials provided by the appraised entity;
(IV) Other evaluation materials collected by the valuers.

CHAPTER III VALUATION METHODS COST APPROACH (ASSET-BASED APPROACH)

The cost approach (asset-based approach) refers to the general term for various valuation techniques that determine the value of the valuation target on the basis of a reasonable evaluation of the value of the assets and liabilities of the enterprise. The valuation scope includes current assets, fixed assets, projects under construction, intangible assets, deferred income tax assets and current liabilities. The valuation methods mainly adopt the cost approach. The specific valuation methods for various types of assets are as follows:

I. CURRENT ASSETS

Current assets include monetary capital, receivables financing, prepayments, other receivables, inventories.

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APPENDIX I

(I) Monetary Capital

Monetary capital includes cash, bank deposits.

Cash: perform an on-site inventory, verify the cash balance on the valuation benchmark date using the reverse method, and check with the cash journal and general ledger cash account balance to determine the evaluation value with the verified amount.

Bank deposits: check the data obtained from the statement, balance adjustment statement and letter of confirmations with its book value, and determine the appraised value with the verified amount.

(II) Accounts Receivables

Accounts receivables include receivables financing, prepayments and other receivables.

Receivables financing: refers to bank’s acceptance bills; determine whether there is a possibility of bad debts from receivables financing on the basis of consulting account books, investigating and understanding the relationship with the counterparty and the credit of the counterparty; determine the evaluation value of the receivables financing having become bad debts with evidence based on zero value, and determine the evaluation value of the normal receivables financing based on the verified book value.

Other receivables: carry out letter verification for continuing transactions, affiliates and large sums of money, and confirm the appraisal value with the verified book value in accordance with the letter verification; for internal personal payment, determine the appraisal value with the verified book value; for the money that has been confirmed as loss by conclusive evidence, determine the appraisal value by zero value; for other funds, investigate the credit and operation status of the counterparty, judge whether there is possible bad debt loss and estimate the amount of bad debt loss in combination with the account age, so as to verify the balance after deducting the estimated risk loss from the verified book value and confirm the evaluation value; for the bad debt provision, evaluate as zero since the risk loss problem has been considered in the evaluation.

Prepayments: carry out letter verification for large sums of money, determine the appraisal value according to the value of the corresponding assets recoverable or the corresponding rights realizable; for the funds that cannot recover the corresponding assets or realize the corresponding rights, determine the appraisal value by zero value.

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APPENDIX I

(III) Inventory

The inventory of the evaluation includes raw materials, finished products (commodities in stock), low-value consumables in use.

For raw materials, the appraisal value is calculated by multiplying inventory quantity on the valuation benchmark date by the market purchase price on the valuation benchmark date and plus costs such as reasonable transportation and miscellaneous expenses.

For finished products (commodities in stock), the appraisal value is calculated according to the following formula (where part of the profit is determined in accordance with the sales situation):

Appraisal value = inventory quantity × ex-factory unit price without tax × 1- (all taxes + sales expenses + partial profits)/sales revenue

For low-value consumables in use, the appraisal value shall be determined with the verified book value.

II. EQUIPMENT

Equipment within the valuation scope includes machinery and equipment, vehicles and electronic equipment.

In accordance with the Practice Guidelines for Asset Valuation – Machinery and Equipment, the assessment of machinery and equipment shall generally be carried out by the cost approach, market approach and income approach. Appropriate approaches shall be adopted based on the relevant conditions such as the valuation target, value type and information collection.

The market approach is a valuation methodology which determines the value of the valuation target by comparing the valuation target with the existing transaction cases in the market and revising the comparative factors. The basic condition of using the market approach is that a more active trading market is needed, and the comparable indicators and parameters of the market cases and the valuation target can be collected and quantified. Due to difficulties in collecting detailed information of the case and the inability to understand the details of the transaction, market approach is not adopted.

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APPENDIX I

The income approach refers to the valuation methodology which determines the value of the valuation target by capitalizing or discounting the expected revenue of the appraised assets. When using the income approach for assessment, the valued asset must have independent profitability or its profitability can be quantified, and the future income period can also be reasonably quantified. Due to the failure of quantifying the income of the machinery and equipment and other fixed assets in this assessment, income approach is not adopted.

The cost approach is resorting to reproduction or replacement of the valued assets. The price that any potential investors are willing to pay upon their decision of investment in certain assets shall not exceed the current construction cost of the assets during the acquisition and construction. This assessment project satisfies the conditions required for the cost approach, i.e. the valued assets are in the condition for continuing use or assumed to be in the condition for continuing use with available historical information, thus cost approach is adopted.

In view of the evaluation purpose and asset type of the evaluation, we adopt the cost approach for the evaluation. Its basic calculation formula is as follows:

Assessed value of equipment = replacement cost × comprehensive newness rate

(I) Determination of Replacement Costs

1. Determination of replacement costs of machinery and equipment

Replacement costs = purchase price of equipment + transportation and miscellaneous cost + installation and commissioning cost + foundation cost + capital cost – deductible input value-added tax

(1) Determination of purchase price of equipment

Valuers determine the purchase price with appropriate adjustments by directly inquiring the sellers or the manufacturers about the prices, or referring to the price lists provided by various distributors, recent price information (2021 version of the Mechanical and Electrical Products Price Information Query System(《机电產品价格信息查询系统》)), the price information published on the internet (Alibaba, Makepolo, Chuli, China.cn and other websites) and considering the possible floating factors. In the event that the current market no longer disposes the equipment or the purchase price unavailable, while alternative standard equipment and general equipment available, corresponding adjustments are determined through the market inquiry and the review to the relevant price manual with fully considering the alternative factors.

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(2) Determination of transportation and miscellaneous cost

Transportation and miscellaneous cost = purchase price of the equipment × rate of transportation and miscellaneous cost

(3) Determination of foundation cost

With reference to the Manual of Data and Parameters Commonly Used in Asset Appraisal, an appropriate fee rate is adopted.

Foundation cost = purchase price of the equipment × rate of foundation cost

(4) Determination of installation and commissioning cost

With reference to the Manual of Data and Parameters Commonly Used in Asset Appraisal, an appropriate fee rate is adopted.

Installation and commissioning cost = purchase price of the equipment × rate of installation and commissioning cost

(5) Determination of preliminary cost

Preliminary cost includes management cost of the contractor, project feasibility research cost, cost of investigation and design, cost of construction supervision, agent service cost for bidding and environmental appraisal cost. The relevant rate of preliminary cost shall be recorded according to the rate corresponding to the overall investment scale of machinery processing production enterprise. The calculation formula of preliminary cost is as follows:

Preliminary cost = (purchase price of the equipment with taxes included + transportation and miscellaneous cost + installation cost + foundation cost) × rate of preliminary cost

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APPENDIX I

(6) Determination of capital cost

According to the loan interest rate corresponding to the valuation benchmark date and the reasonable construction period, it shall be one-off investment for preliminary and other cost and it shall be evenly invested for the purchase price of the equipment, transportation and miscellaneous cost, foundation cost, installation and commissioning cost. The calculation formula is as follows:

Capital cost = (purchase price of the equipment with taxes included + transportation and miscellaneous cost + installation cost + foundation cost + preliminary cost) × reasonable construction cycle × loan interest rate/2

For equipment using a small amount of capital or within six months of acquisition and construction, cost of capital is not included.

(7) Deductible input value-added tax

The appraised entity is a VAT-based general taxpayer. According to the relevant provisions of the “The Announcement on the Policies in relation to Deepening Value-added Tax Reform of the Ministry of Finance, State Administration of Taxation and General Administration of Customs” (Announcement No. 39 of 2019 of the Ministry of Finance, State Administration of Taxation and General Administration of Customs), the purchased production equipment is subject to the deductible input tax. The calculation formula is as follows:

Deductible input value-added tax = (purchase price of the equipment/1.13×13%) + (transportation and miscellaneous cost/1.09×9%) + (installation and commissioning cost/1.09×9%) + (foundation cost/1.09×9%) + (preliminary cost (excluding management cost of unit)/1.06×6%)

2. Determination of replacement costs of electronic equipment

The replacement cost of electronic equipment is determined by inquiring the quotation from the distributors and “ZOL Zhongguancun Online IT Product Quotation” (《ZOL 中關村在線IT產品報價》), “IT168-IT mainstream information platforms” (《IT168IT主流資訊平臺》) and other professional electronic equipment price information websites. The replacement cost of equipment which the purchase price cannot be obtained by inquiries from market, manufacturer and relevant price data, is determined by the purchase price of similar equipment inquired through the above-mentioned methods with analogy approach and the adjustment based on the variation of the equipment. The calculation formula of replacement cost is as follows:

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APPENDIX I

Replacement cost = purchase price of the equipment – deductible input value-added tax

3. Determination of replacement costs for vehicles

1) Determination of replacement costs for passenger vehicles

The replacement cost of taxable vehicles that can drive on the highway with vehicle registration certificate is determined according to the market price of a vehicle with the same model number, the same basic configuration on the valuation benchmark date, plus vehicle purchase tax and other reasonable cost (such as license fees). The basic calculation formula of replacement cost is as follows:

Replacement cost = vehicle purchase price + vehicle purchase tax + other cost of vehicle – deductible input value-added tax

Where, vehicle purchase tax is calculated in accordance with the relevant tax regulations.

2) Determination of replacement costs for vehicles without vehicle registration certificate

The replacement cost of water sprinkle trucks without vehicle registration certificate is determined according to the market price on the valuation benchmark date deducting value-added tax.

Replacement cost of vehicles without vehicle registration certificate = purchase price of the equipment with taxes included ÷ 1.13

(II) Determination of Newness Rate

1. The newness rate of important machinery and equipment is determined by observation approach (i.e. investigation scoring approach), combined with age limit approach.

Newness rate = newness rate under the service life approach × 40% + newness rate by observation approach ×60%

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Observation approach is the judgment made by the valuer based on experience on the technical status and extent of deterioration of the subject matter (such as vibration, noise, temperature, processing precision, production capacity, energy consumption and failure).

The weight of the determination of newness rate under the service life approach is 40%, and the weight of the determination of newness rate by observation approach is 60%, of which the calculation formula of newness rate under the service life approach is as follows:

Newness rate under the service life approach = Newness rate under the service life approach =	Economic service life – Serviced life ×100% Economic service life Durable years ×100% Durable years + Serviced life

The “durable years” in the formula is the professional judgment made by the valuer based on the actual technical condition of the machinery and equipment taking into account the effective age of the machinery and equipment, and the value of “durable years” is positive.

2. For general and smaller value equipment, newness rate is determined primarily using the service life method. For that equipment featuring short life-span, rapid change in price and substantial functional depreciation, the newness rate is determined according to a combination of factors including the economic service life of equipment and the technical upgrading cycle of products.

Newness rate = Newness rate under the service life approach =

Economic service life – Serviced life ×100%

Economic service life

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APPENDIX I

When the technological conditions of the equipment deviate significantly, causing a great difference between the actual newness rate and the newness rate under the service life approach, the newness rate shall be calculated according to the following formula:

Newness rate = Newness rate under the service life approach =

Durable years ×100%

Durable years + Serviced life

3. Electronic equipment is a kind of common equipment with small value, in which the newness rate is mainly determined by the service life approach, i.e. according to a combination of factors including the economic service life of equipment and the technical upgrading cycle of products. The formula for determining the newness rate based on the service life is:

Newness rate = Newness rate under the service life approach =

Economic service life – Serviced life

×100%

Economic service life

4. Determining the newness rate of vehicles

(1) Theoretical newness rate:
A. Passenger vehicles

For non-operating small and mini passenger vehicles, large sedans, etc., it refers to the vehicles with no age limit, including non-operating small and mini passenger vehicles, large sedans and self-propelled wheeled machines, as stipulated in the Provisions on the Criteria for Compulsory Discard of Motor Vehicles (Order [2012] No. 12 jointly issued by the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Public Security and the Ministry of Environmental Protection) to determine theoretical newness rate by vehicle mileage.

Useful life of a motor vehicle shall begin from the date of registration, or in case of failure in registration formalities for over 2 years from the exfactory date, from the ex-factory date.

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The theoretical newness rate is determined by mileage-based newness rate. The formula is:

Mileage-based newness rate = (Designated mileage – Mileage already traveled)/Designated mileage×100%

Theoretical newness rate = Mileage-based newness rate

B. Vehicles without vehicle registration certificate

The theoretical newness rate of vehicles without vehicle registration certificate is determined by newness rate under the service life approach;

Newness rate under the service life approach=(Designated service life of vehicles without road-worthiness certificate – serviced life)/Designated service life × 100%

(2) Observed newness rate

The observed newness rate of vehicles is determined through comprehensive analysis based on the on-site technical inspection and observation of vehicles, combined with the statistical data of vehicle appearance, actual technical status, energy consumption, original manufacturing quality of vehicles and car accidents, as well as the opinions of vehicle managers and drivers as understood by the valuer.

(3) Comprehensive newness rate

The final formula for calculating the comprehensive newness rate which determined by weight of theoretical newness rate and observed newness rate is:

Comprehensive newness rate = theoretical newness rate × 40% + observed newness rate × 60%

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APPENDIX I

III. BUILDINGS AND STRUCTURES

Since the nature of the object to be evaluated is mainly for the self-use of assessed entity and lack of sufficient basis from the market due to little transaction cases of similar buildings (structures), and it cannot separately generate incomes, so it is not appropriate to choose the market approach and income approach. Therefore, the replacement cost approach was adopted.

The cost approach is to obtain the replacement cost of the valuation target at the valuation benchmark date, after deducting depreciation, to estimate an objective and reasonable value for the valuation target. Among them, the replacement cost is the normal value of the buildings, in its new state and with the same function of the valuation target, at the price level at the valuation benchmark date, using construction materials and construction techniques at valuation benchmark date.

Calculation formula is as follows: Estimated value = replacement cost×newness rate

Where: Replacement cost = construction and installation cost + preliminary costs and other expenses + capital costs

(I) Determination of Replacement Cost

1. Determination of construction and installation work cost

The cost of construction and installation is generally determined by the method of work settlement adjustment method, analogy method and index adjustment method.

Since the appraised entity has provided the complete final account data of the valuation target, the construction and installation cost of this evaluation is determined by the reorganization project settlement adjustment method.

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Reconstruction of works settlement adjustment method is based on the as-built information, drawings and final account information of the project to be estimated. It is adjusted for the original work (budget), final account price, namely based original (budget) final account price, and the work cost is comprehensively estimated to the level at valuation benchmark date through adjusting difference of the existing local construction materials, labour and machinery unit price.

2. The preliminary costs and other expenses

The preliminary costs and other expenses of the house and building consist of two components, namely, fees charged at a certain rate of the whole work cost and fees charged on a gross floor area basis; and the preliminary costs and other expenses of the building and structure is the costs charged at a certain rate of the whole work cost. According to the “Notice on Further Relaxation on Professional Services Charges for Construction Projects (Fa Gai Jia Ge [2015] No.299)” issued by the National Development and Reform Commission(國家發展改革委關於進一步放開建設項目專業服務價格的通知（發改價格[2015]299號)), the preliminary cost is determined according to experience with reference to the market situation.

3. Capital costs

In this valuation, the capital costs are calculated based on the reasonable duration of the construction works. In other words, the normal funding costs or the capital opportunity cost for the buildings (structures) construction works period is based on the aggregate of construction cost and preliminary cost and other expenses of the construction and installation work. It is assumed that the capital is equally invested when the building and structures are reconstructed, and the interest rate is determined based on the loan prime rate (LPR) as announced by the national inter-bank funding center with authorization at the valuation benchmark date.

(II) Determination of Newness Rate

For buildings, the newness rate is determined by using two methods, namely scoring method and service life method, respectively. For the valuation target, the newness rate is determined by the comprehensive newness rate through taking weights of results of these two methods. For structures, the newness rate is assessed by using service life method.

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1. Scoring method:

With reference to the proportion of each part to the cost of the building, which includes structural elements of the building, like foundation, load structure, facade, estate surface and floor structure, decoration parts like internal and external walls, and equipment parts like doors, windows and ceilings, toilet, the standard score is determined. Then, scores will be given based on on-site survey. The full score rate will be determined based on the scoring.

The calculation formula is: Newness rate = Total scores of structural part × weight of structural part + total scores of decoration part × weight of decoration part ＋total score of equipment: part ×weight of equipment parts

2. Service life approach:

Based on the durability and useful life of the building and structures, the newness rate of them are determined based on the following formula:

Newness rate = 1 – (serviced years/durable years) × 100%

3. Comprehensive newness rate:

The weighted rate of return calculated by the service life approach is 0.5 and the weighted rate of scoring method is also 0.5.

Comprehensive newness rate = 0.5 × newness rate under service life approach + 0.5 × newness rate under scoring method

IV. CONSTRUCTION IN PROGRESS

Construction in progress is for a civil engineering project, which is a plant greening transformation and upgrading project for information display ultra-thin glass substrate production line project of Longhai Company that is under construction.

Book value of construction in progress (civil work) consists of construction and installation costs, administration costs related to engineering and other costs.

The valuer checked the commencement date of construction and its progress and verified payment of corresponding book value to judge the reasonableness of the accounting amount. Due to the short term of construction, the valuer needs not to check the cost of capital of the construction in progress.

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The formula is as below：

Valuation value of construction in progress = book value of cost of construction and installation of construction in progress – unreasonable costs.

V. INTANGIBLE ASSETS – LAND USE RIGHTS

(I) Valuation Methods

According to Regulations for Valuation on Urban Land《城鎮土地估價規程》, the Practicing Guidelines for Asset Valuation –Real Estate, the generally accepted valuation methods for land price include market comparison approach, income approach, benchmark land price coefficient correction approach, cost approach. The selection of valuation methods should be based on the specific characteristics of the object to be evaluated, the surrounding market conditions and the applicability and the viability of the valuation method.

The market comparison method is a method to evaluate the value or price of an object through processing the transaction price of comparable cases based on the differences between them after selecting a certain number of comparable cases for the evaluation object. The basic conditions for using the market comparison approach are: a relatively active trading market is necessary; market cases and comparative indicators and parameters can be collected and quantified against an evaluation object. As the appraised object is proved to be the grant of industrial land, it is easy to check similar listing land transaction cases in Yanshi City, Luoyang City, and it is appropriate to adopt the market comparison method in this assessment.

Benchmark land price coefficient correction approach is a method to determine the value of the subject land as at the valuation benchmark date by using valuation results such as benchmark land price of cities and towns as well as benchmark land price coefficient through comparing the regional and individual conditions of the subject land with the average conditions of the region where it is located in accordance with the substitution principle, and adjusting the benchmark land price by applying the corresponding correction coefficient selected from the adjusted coefficient table. In 2018, Yanshi City issued the Notice on Publishing the Results of Rating of Urban Lands and Benchmark Land Price Renewal《關於公佈城鎮土地定級與基準地價更新成果的通知》. The land to be appraised is located in the coverage area under benchmark land price and can be appraised by the benchmark land price coefficient correction approach.

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APPENDIX I

As it is difficult to obtain the rent data of pure land in the market, and the land of the appraised entity is and will not used for lease, the income approach is not applicable to this valuation. The appraised object is included as land for industrial purpose, and the vacated land based on the “Relocation to Industrial Parks from Urban Areas” will be recovered by the government. The land is not subject to hypothetical development method for appraising due to the lack of specific planning indicators. The land to be appraised is located within benchmark land price coverage of Luoyang urban area and is not subject to the cost approach for appraising.

Based on the purpose of this valuation, the land use right of the appraised entity is appraised by the market method and the benchmark land price coefficient correction approach, and the results are determined as the value of the appraised entity.

(II) Assessment Formula

1. The benchmark land price coefficient correction approach

Land parcel price under the benchmark land price coefficient correction approach (land parcel price with development progress under benchmark land price)= benchmark land price × K1 × K2 × K3 ×(1+∑K)

Where, K1- Correction coefficient on date

K2-Correction coefficient on land useful life

K3- Correction coefficient on floor area ratio

∑K- Sum of the correction coefficients on regional factors and individual factors affecting land price

If there is difference between the level of development progress under benchmark land price adopted in this valuation and that of the land parcel to be valued it is necessary to make correction with development progress, so as to get the land parcel price with development progress of the land parcel to be valued. Therefore,

Land parcel price under set development progress level = land parcel price with set development progress level under benchmark land price ± correction range of development progress.

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APPENDIX I

2. Market comparison approach

Based on the replacement principle, the land parcel price is derived by comparison made between the land parcel and the alternative similar land parcel that transacted near the valuation reference date in the market and make corrections to transaction price for the similar land parcel. The formula is as follows:

P＝PB × A × B × C × D × E

Where, P – price of appraisal target;

PB – price of comparable land case;
A – transaction index of the appraisal target/transaction index of the comparable land parcel;
B – land price index of the appraisal target on the valuation date/land price index of the comparable land parcel on the transaction date;
C – regional factor index of the appraisal target/regional factor index of the comparable land parcel;
D – individual factor index of the appraisal target/individual factor index of the comparable land parcel;
E – term of years correction index of the appraisal target/term of years correction index of the comparable land case.

VI. INTANGIBLE ASSETS – OTHER INTANGIBLE ASSETS

Other intangible assets of other appraised entity are patents.

(I) Selection of Valuation Methods

It is generally considered the value of technology (especially the value of high-tech achievements) can be barely reflected by the replacement cost. As the value of such assets are generally reflected by the intellectual labour of high-tech personnel, the outcome of such labour can be barely measured by the labour cost and is not repeatable. Therefore, we didn’t follow the replacement cost approach in this valuation.

For assets valuation, the market approach is applicable to both tangible assets and intangible assets, provided that there is same or similar precedents and the transactions should be fair. In consideration of the technical characteristics of this valuation and the market transactions and based on our market investigation and the information from some relevant industry insiders, we find no similar transfer of technologies in China and we cannot follow market approach in this valuation without the historical comparative cases and price data.

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APPENDIX I

The income approach is also called the income capitalization approach, which is based on a generally accepted principle. The principle is that the value of an asset can be measured by the present value of its future cash flows. The income capitalization approach is usually also called discounted cash flow method, which is to reasonably predict the net cash flow of the asset in each period of the future, convert it to present value at an appropriate discount rate, and take the sum of the present value of each period as the value of the evaluated asset. This evaluation has the conditions for the adoption of income approach.

Due to the lack of comparable transaction case, it is difficult to use market approach to estimate the net value of fair value less disposal costs. The cost approach is also not applicable to the valuation of technology-related assets. Therefore, in light of the purpose of this evaluation and the characteristics of the assets, we adopt income approach in this valuation.

(II) Definition and Formula of Income Approach

Income capitalization approach is an asset assessment approach by estimating the expected income of the valuation asset in the future and discounting to its present value in order to determine the value of the valuation asset.

By this method, this valuation should be carried out in the following steps:

to determine the economic life of patents to estimated sales revenue of the products during the economic lifetime;
to analyze and determine the share rate (contribution rate) of patents to the cash flow and to determine the contribution of patents to the cash flow of products;
to translate cash flow into present value at an appropriate discount rate;
to add up the present value of the cash flow within the economic lifetime and to determine the valuation value of patents.

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APPENDIX I

The specific calculation formula for this evaluation is as follows:

==> picture [80 x 26] intentionally omitted <==

Where, A–Patent valuation value

i–year n–economic life of patent Qi–Pre-tax income of appraised patent during the i Year Ri–Discount rate (before tax).

VII. DEFERRED INCOME TAX ASSETS

Deferred income tax assets are the amount arising from provision for bad debt recognised by the appraised entity as per accounting policies that affects income tax due to a difference in timing.

In the evaluation, first of all, the reasonableness of the provision, the accounting method of deferred income tax, the applicable tax rate, the period of interest, etc., are verified to judge whether the deduction of income tax can be realized in the future; then the debt assets involved are evaluated according to evaluation requirements, and provisions for bad debt are treated with zero value; and finally the evaluation result is compared with the original carrying amount to assess the risk losses identified, and to adjust the book entry of the deferred income tax assets, so as to obtain the evaluation value.

VIII. LIABILITIES

Liabilities are current liabilities, including accounts payable, other payables, taxes payable, staff remuneration payable.

In the evaluation, the business, carrying amount, date of occurrence, cause of formation, the company’s recognition basis and the agreed repayment period and method of major amounts of all types of liabilities are investigated and verified; the main content, provision basis, provision method, provision amount, etc., of all types of expected liabilities are reviewed; for significant liabilities, necessary investigations or inquiries are conducted to related personnel or the counterparties; and necessary analysis on the likelihood of performance of liabilities is conducted to confirm whether there are debts not required to be settled or provisions not required to pay, and debts not required to be settled and liabilities not required to pay are evaluated at zero value.

With full consideration of the authenticity of its debts and obligations, the verified amount of liabilities is regarded as the evaluation value.

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CHAPTER IV IMPLEMENTATION PROCESS AND STATUS OF VALUATION

I. PRE-INVESTIGATION

After receiving the notice from the client, the Company shall arrange for the relevant responsible person to communicate with the person in charge and relevant personnel of the client and the appraised entity, and conduct appropriate investigation, to understand the purpose of the valuation and the economic behavior, target and scope of the valuation, to understand the basic information of the valuation target, the specific types, distribution and characteristics of the assets included in the scope of assessment, to understand the industry, legal environment and accounting policies of the enterprise, and to understand the client’s consideration of the valuation benchmark date and the requirements for the completion date of the report. After comprehensive analysis and valuation, it is determined that the appraisal institution can independently assess with the professional competence to undertake such appraisal, negotiate with the client and enter into the asset appraisal entrustment contract if the business risk is within the controllable scope.

II. PREPARATION OF VALUATION PLANS

Based on the needs of this assessment, the person in charge of the project shall be identified and the asset valuer and appraisal support personnel shall be arranged to form the appraisal project team. The assessment plan shall be prepared by the person in charge of the project and implemented after being reviewed by the responsible person of the appraisal organization.

The assessment plan covers the whole process of implementation assessment, such as on-site investigation, collection of evaluation information, evaluation of estimates, preparation and submission of evaluation reports, preliminary determination of the basic method used for assessing the estimates, and corresponding scheduling of the various stages of the evaluation.

III. CONDUCT OF ON-SITE INVESTIGATION

(I) Arranging and providing guidance for the relevant personnel to complete the asset valuation declaration schedule of the appraised entity. At the same time, guiding the appraised entity to conduct asset inventory.
(II) Submitting the due diligence list to the appraised entity and collecting documents required for valuation, including property rights certificates of fixed assets and intangible assets, equipment purchase contracts or invoices and financial statements, production and operation statistics, audit reports in recent years, development plans, etc.

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APPENDIX I

(III) Conducting asset verification and on-site investigation in accordance with the requirements of the valuation criteria:
Checking whether there are any errors, omissions or duplicates in the asset and liability examination and appraisal schedules completed by the appraised entity, comparing the asset and liability examination and appraisal schedules with the financial general ledger category by category; Spot checking the key items of the assets or liabilities, checking the data recorded in the financial statements, and making the accounts and statements consistent;
The quantity of all kinds of physical assets listed in the examination and appraisal schedules of assets shall be carried out on the spot by means of a key full inspection and general spot check, and shall be checked with the book records; At the same time, we conduct on-site inspections of buildings, key structures and key equipment to form detailed survey records, conduct conversations with asset management personnel and operational personnel, and inspect buildings maintenance records, equipment operation logs and records of large and medium-sized repairs; for construction in progress, we check the on-site progress, the construction quality, and the actual payment of construction cost; for inventory, we check the storage of raw materials, low-value consumable, understand the receiving (using) system, and check the completion progress and understand the accounting process, and understand the sales of finished products and the composition of sales cost;
Comparing with the land information, and checking the topography and geomorphology on the spot, and understanding the surrounding area, environment, transportation and land development and utilization, practical use, etc.; for other intangible assets, understanding the formation or acquisition process, its role in the production process, and its contribution to the revenue of the enterprise;
Verifying the issuance of letter confirmation for receivables in large and key amount, we understood the business transactions and the credit status of the counterparties, to consult the relevant agreements and contracts of major liabilities, to understand the duration of occurrence, the process of formation, and the situation of debt repayment;
Consulting and identifying the property right certification documents and materials provided by the appraised entity, ascertain the property right status of the fixed assets and intangible assets, and investigate the major matters that may affect the asset evaluation.

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APPENDIX I

(IV) Forming an interview record after listening to the introduction of the relevant personnel of the appraised entity on the enterprise, key assets, history and current situation of the major products by the means of symposiums and interviews, and made an understanding of the production, operation and management of the enterprise.
(V) Conducting research activities outside the appraised entity, including visiting the market or enquiring market information to understand the sales situation, price trend, market share and the corresponding situation of other enterprise products in the same industry, as well as the market competition situation; Understanding the relevant industrial policies, financial policies, market analysis of industry authorities or industry organizations, industry development opinions and industry statistics through the websites, professional publications and other media, etc.

IV. COLLECTION OF VALUATION INFORMATION

The appraisal professionals conducted appraisal information collection based on the specific circumstances of the appraisal project, including information obtained directly and independently from the market and other channels, information obtained from relevant parties such as the client and the appraised entity, as well as information obtained from government departments, various professional institutions and other relevant departments, categorized such information according to the needs of the appraisal work, i.e. by categories such as current assets, fixed assets, construction in progress, intangible assets, deferred income tax assets, liabilities and the valuation of income approach, and conducted necessary analysis, summarization and organization of the collected appraisal information to form the basis for the evaluation of estimates.

V. VALUATION AND ESTIMATION

Collected the information reflected by various types of appraisal data, and obtained the various data and parameters that were needed for valuation through analysis and measurement, which could not be obtained directly in the process of valuation. These valuation approaches were then used to assess the estimates.

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APPENDIX I

VI. FORMATION OF VALUATION CONCLUSIONS

The preliminary valuation results of various assets and liabilities in the cost approach (asset-based approach) were reviewed, and the valuation process and results of individual asset projects were modified appropriately if necessary. In the case of confirming that the valuation results of individual assets and liabilities were basically compliant and reasonable and there was no reassessment or omission of the assessment of the assets and liabilities, the valuation results of the cost approach (asset-based approach) were obtained.

VII. PREPARATION AND ISSUANCE OF VALUATION REPORTS

The Asset Valuation Report was drafted based on the valuation work and the preliminary report was formed after three-level review within the evaluation institution. It shall seek opinions from the client on the preliminary report, and shall make necessary communication with the client on relevant matters involved. Without prejudice to the independent judgment of the evaluation institution on the final valuation conclusion, the client’s reasonable opinion or recommendation on the valuation report shall be adopted. Then, after the asset evaluation institution and its asset valuation professionals have completed the above asset valuation procedures, the asset evaluation institution will issue and submit an asset valuation report.

CHAPTER V VALUATION ASSUMPTIONS

The basic objective of asset valuation is to have a fair valuation conclusion and all fair valuation conclusions are bound by conditions. An important form of such binding conditions for asset valuation is the asset valuation assumptions.

I. THE ASSUMPTIONS USED IN THIS VALUATION

(I) Basic Assumptions

1. Transaction assumption

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APPENDIX I

2. Open market assumption

3. Assumption on continuing operation

(II) General Assumptions

It is assumed that there are no material changes in the relevant existing laws, regulations and policies, and macroeconomic conditions of the PRC as well as in the local political, economic and social environment of such places where the parties to the transaction are operating after the valuation benchmark date;
It is assumed that the person operating the appraised entity under valuation is accountable, and the management is capable of performing their duties after the valuation benchmark date;
It is assumed that the appraised entity has fully complied with all relevant laws and regulations;
It is assumed that the interest rate, exchange rate, tax base, tax rate, policy-imposed charges and others related to the appraised entity will not change significantly after the valuation benchmark date;
It is assumed that there are no other human force majeure and unforeseen factors that have a significant adverse impact on the enterprise after the valuation benchmark date.

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(III) Specific Assumptions

It is assumed that the accounting policies to be adopted by the appraised entity after the valuation benchmark date are basically consistent with the accounting policies adopted when the valuation report is prepared in respect of significant aspects;
It is assumed that the business scope and method of the appraised entity will remain consistent with the current directions after the valuation benchmark date with its existing management method and management level;
The type of this valuation is the market value, regardless of the impact of the economic behavior involved in the valuation purpose on the business operation of the enterprise;
It is assumed that the cash inflow and cash outflow of the appraised entity after the valuation benchmark date are even;
This valuation assumes that the basic information and financial information provided by the client and the appraised enterprise are true, accurate, and complete.

II. THE IMPACT OF THE ASSUMPTIONS OF THE VALUATION ON THE CONCLUSION OF THE VALUATION

The valuation conclusion of this Valuation Report is established at the valuation benchmark date under the above assumptions, and in the event of a significant change in the above assumptions, the undersigning Asset Valuer and this valuation agency shall not be liable for deriving a different valuation conclusion because of the change in the assumptions.

CHAPTER VI CONCLUSION OF THE VALUATION

The book value of total assets of CLFG Longhai Electronic Glass Limited as at the valuation benchmark date on 31 December 2020 was RMB499,923,000, the appraised value was RMB549,210,800, the appreciation value was RMB49,287,800, and the appreciation rate was 9.86%; the book value of total liabilities was RMB361,349,900, the appraised value was RMB361,349,900 (while changes have not been appraised); the book value of net assets was RMB138,573,100, the appraised value of net assets was RMB187,860,900, the appreciation value was RMB49,287,800, and the appreciation rate was 35.57%.

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APPENDIX I

Details of the summary of valuation result under cost approach (asset-based approach) are set out in the following table:

Unit: RMB0’000

Item Current assets Non-current assets Including: Fixed assets Construction in progress Intangible assets Deferred income tax assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets (Owners’ equity)	Book Value A 7,789.32 42,202.98 40,764.78 151.48 1,245.72 40.99 49,992.30 36,134.99 36,134.99 13,857.31	Appraisal Value B 8,185.48 46,735.60 42,689.97 151.48 3,853.15 40.99 54,921.08 36,134.99 36,134.99 18,786.09	Appreciation/ Depreciation C＝B－A 396.16 4,532.62 1,925.19 2,607.43 4,928.78 4,928.78	Appreciation Rate％ D＝C/A×100% 5.09 10.74 4.72 209.31 9.86 35.57

The details of the valuation results under the cost approach (asset-based approach) are set out in the detailed statement of assets and liabilities assessment.

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APPENDIX I

CHAPTER VII NOTES ON SPECIAL MATTERS

I. In appraising the assets within the valuation scope, we have not considered the possible expenses and taxes that may be borne by the assets used in the purpose of valuation, nor the appraised value of appreciation of certain assets for tax purposes; not considered such matters as mortgage assumed by assets, guaranty that may be assumed, litigation compensation, etc. likely to be borne in the future and of the effect of additional payment by special transaction party on the valuation conclusions.
II. According to the “Notice on the Comprehensive Rollout of the Business Tax to Value Added Tax Transformation Pilot Program” (Caishui [2016] No. 36) (《關於全面推開營業稅改徵增值稅試點的通知》 (財稅[2016]36號)), since 1 May 2016, the pilot program of the transformation from business tax to value-added tax (the “VAT Program”) has been comprehensively promoted nationwide, and the VAT can be deducted when the appraised entity engages in the acquisition and construction of assets, therefore, the appraisal value of deductible assets involved in this valuation does not include VAT.

CHAPTER VIII STATEMENT OF LIMITATION ON THE USE OF THE ASSET VALUATION REPORT

I. This Asset Valuation Report shall only be used for the purposes of valuation as stated herein, and shall be used by the client, the other users of the Asset Valuation Report as agreed in the asset valuation engagement contract and the users of the Asset Valuation Report as required by laws and administrative regulations.
II. This asset valuation conclusion is valid for one year from 31 December 2020 to 30 December 2021. However, if there is material change in the conditions of the valuation target or there is material movement in the market during this period, the conclusion of this valuation will be invalid. We take no responsibility towards the client, other users of the Asset Valuation Report as agreed and the users of the Asset Valuation Report required by laws and administrative regulations who use the report after its valid period. We also take no responsibility for any use of the report when the valuation target experiences material changes or the market experiences material movements within its valid period.
III. If the client or other users of Asset Valuation Report fails to use the Asset Valuation Report in accordance with the scope of use specified in laws, administrative regulations and the Asset Valuation Report, the asset valuation institution and its valuers shall not be held liable.
IV. With the exception of the client and the users of the Asset Valuation Report required by laws and administrative regulations, no other institution or individual shall become the user of the Asset Valuation Report.

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V. User of the Asset Valuation Report shall correctly interpret and use the valuation conclusion, which is not equivalent to the realizable value of the valuation target and should not be considered as a guarantee for the realizable value of the valuation target.
VI. Without the consent of our company, content of the Asset Valuation Report shall not be extracted, quoted or disclosed on public media, unless otherwise permitted by laws, administrative regulations or agreed among relevant parties.
VII. The valuation conclusion shall not be used unless the Asset Valuation Report has been approved by SASAC (including the companies contributing funds).

CHAPTER IX DATE OF VALUATION REPORT AND OTHERS

I. The date of this Asset Valuation Report is 4 November 2021. The date of Asset Valuation Report refers to the date on which the valuation conclusion is drawn.
II. The Asset Valuation Report contains a number of appendices (see list of appendices), which are an important part of the Asset Valuation Report.

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APPENDIX II

ASSET VALUATION REPORT ON THE VALUE OF ALL EQUITY INTERESTS HELD BY SHAREHOLDERS OF CLFG LONGMEN GLASS CO. LTD. INVOLVED IN THE PROPOSED TRANSFER OF EQUITY BY LUOYANG GLASS COMPANY LIMITED-SUMMARY

Jing Xin Ping Bao Zi (2021) No. 428

Zhongjing Minxin (Beijing) Assets Appraisal Co., Ltd. was engaged by Luoyang Glass Company Limited and Triumph Technology Group Co., Ltd. to appraise the value of all equity interests of shareholders in CLFG Longmen Glass Co. Ltd. involved in the proposed transfer of equity by Luoyang Glass Company Limited, by way of adopting the asset-based approach and carrying out necessary valuation procedures in accordance with laws, administrative regulations and asset valuation standards while adhering to the principles of independence, objectivity and impartiality.

Details of the asset valuation are reported as follows:

CHAPTER I BASIC INFORMATION

I. THE CLIENT, APPRAISED ENTITY AND OTHER USERS OF THE VALUATION REPORT

(I) Overview of the Client

Name of Company: Triumph Technology Group Co., Ltd.* Registered Address: No. 2, Zizhuyuan South Road, Haidian District, Beijing Legal Representative: Peng Shou Registered Capital: RMB5,025,129,793 Type of Company: Limited liability company

Unified Social Credit Code: 91110000101923517F

Date of Establishment: 9 May 1988

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APPENDIX II

Business Scope:

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(II) Overview of the Client

Name of Company:

Luoyang Glass Company Limited*

Registered Address: No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang Legal Representative: Zhang Chong Registered Capital: RMB548,540,432 Type of Company: Joint-stock limited company (Taiwan, Hong Kong or Macau and domestic joint venture, listed company)

Unified Social Credit Code: 914103006148088992

Date of Establishment: 6 April 1994

Business Scope:

Development, production, manufacture and installation of information display glass, new energy glass, photoelectric material for functional-glass category and its deeply processed products and components, relevant materials, mechanical equipment and its electric appliances and accessories, relevant technical consultancy and technical services, as well as sales and after-sales services of self-produced products.

(III) Overview of the Appraised Entity

Name: CLFG Longmen Glass Co. Ltd.

Legal Residence and Longmen Glass is located in Zhuge Town Industrial Zone, Business Premises: Yibin District, Luoyang, Henan Province Legal Representative: Ma Yan Registered Capital: RMB70 million Nature of Company: Limited liability company Business Scope: Production and sale of float glass; processing and sales of glass and related raw materials and mineral products; glass technology services.

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APPENDIX II

1. Shareholding Structure

Name of shareholders Luoyang Glass Company Limited Total	Capital Contribution (RMB0’000) 7000 7000	Percentage of capital contribution (%) 100.00%
		100.00%

2. Development History

CLFG Longmen Glass Co. Ltd.(“ Longmen Glass ”), a wholly-owned subsidiary of Luoyang Glass Company Limited, is a central enterprise under China National Building Materials Group and Triumph Technology Group. Longmen Glass is located in Zhuge Town Industrial Zone, Yibin District, Luoyang, Henan Province. It was established in March 1994 and covers an area of 151.37 acres. Longmen Ultra-thin and ultra-white glass production line is the first production line with completely independent intellectual property rights in China, specializing in ultra-thin and ultrawhite glass. It was rebuilt and put into operation in January 2011. The production line has a daily melting capacity of 250 tonnes and a designed annual output of 1 million heavy containers. It has production capability of 0.55mm–3.5mm float glass. The product quality has reached the domestic advanced level and can completely replace imported products. Commercial production of 0.55mm, 0.7mm, 0.9mm, 1.1mm highquality glass can meet the needs of emerging industries such as photovoltaic solar energy, TCO coating, high-end glasses production, high-end architectural decoration, advanced medical glass, ITO electronic glass, etc. The demand for ultra-white ultrathin float glass is distributed in the Pearl River Delta and the Yangtze River Delta. In September 2005, Longmen Glass was recognized as a “high-tech enterprise” by the Science and Technology Department of Henan Province, and 2 mm and below ultrathin float glass products were recognized as “high-tech products”. In February 2007, Longmen Glass “Ultra-thin Float Glass Complete Technology and Key Equipment in the Industrialized Production, Development and Application of Electronic Glass” project won the first prize of 2006 National Science and Technology Progress Award, which is the only award won by China’s building materials industry, but also the only industrial first prize won by Henan province since the reform and opening up.

As of the valuation benchmark date, according to the Luohuan Poverty Relief Office [2019] No. 101 document, Longmen Glass has been included in “Relocation of Industries from City Urban Area to Industrial Parks” plan. The company completely suspended production in January 2020, and the relocation compensation for Relocation of Industries from City Urban Area to Industrial Parks” is still under negotiation. At present, there are only a few left-behind staff in the factory.

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APPENDIX II

3. Assets, Liabilities, and Operation for the Recent Three Years

The Balance Sheet

Unit: RMB0’000

	At the end of	At the end of	At the end of
Item	December 2020	December 2019	December 2018
Current assets	2,668.28	6,012.12	4,116.14
Fixed assets	5,444.65	6,472.82	8,228.85
Intangible assets	591.53	609.12	647.25
Total assets	8,704.46	13,094.05	12,992.24

Current liabilities	58,678.44	62,543.69	62,446.05
Non-current liabilities	208.94	214.33	239.98
Total liabilities	58,887.38	62,758.02	62,686.02

Net assets	-50,182.92	-49,663.97	-49,693.79

Income Statement
			Unit: RMB0’000
Item	2020	2019	2018
Operating income	4,576.70	13,460.75	16,447.55
Operating profit	-1,610.68	227.48	120.59
Total profit	-1,625.64	29.81	10.09

Net profit	-1,625.64	29.81	10.09

The data in the financial statements of the appraised entity for 2020 and 2019 were audited by WUYIGE Certified Public Accountants LLP and the WUYIGE Shenzi [2021] No. 2–10111 audit report was issued.

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APPENDIX II

(III) Relationship among Client and the Appraised Entity

Luoyang Glass is a shareholder of the appraised entity Longmen Glass, and holds 100% equity interest of the appraised entity. The largest shareholder of Luoyang Glass is China Luoyang Float Glass Group Co., Ltd. (“ CLFG ”), and Triumph Technology Group is the controlling shareholder of CLFG. Triumph Technology Group, Luoyang Glass, Longmen Glass, and CLFG are all subsidiaries of China National Building Materials Group Co., Ltd., and also their de facto controllers is China National Building Materials Group Co., Ltd.

(IV) Other Users of the Valuation Report

Other users of the valuation report agreed in the asset valuation contract
Users of the valuation report stipulated by laws and administrative regulations

Users of the asset valuation report stipulated by laws and administrative regulations shall be subject to the provisions of relevant laws and administrative regulations.

II. PURPOSE OF THE VALUATION

Luoyang Glass Company Limited intends to transfer its equity interests in CLFG Longmen Glass Co. Ltd. to Triumph Technology Group Co., Ltd. Therefore, Luoyang Glass Company Limited and Triumph Technology Group Co., Ltd. engaged Zhongjing Minxin (Beijing) Asset Appraisal Co., Ltd. to assess the value of all equity interests of the shareholders in CLFG Longmen Glass Co. Ltd., which forms the value reference of the share transfer.

The above share transfer has been resolved and approved by the general manager office meeting of CLFG.

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III. VALUATION TARGET AND SCOPE

(I) The valuation target is the value of all equity interests held by shareholders of CLFG Longmen Glass Co. Ltd.
(II) The valuation scope covers all assets and liabilities of CLFG Longmen Glass Co. Ltd., including current assets, non-current assets, current liabilities and non-current liabilities. As of the valuation benchmark date, the book value of total assets, total liabilities and net assets amounted to RMB87,044,600, RMB588,873,800 and RMB-501,829,200, respectively.

The book value of assets and liabilities included in the valuation scope is set out in the below table:

Items Current assets Non-current assets Fixed assets Intangible assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets (Owners’ equity)	Unit: RMB0’000 Book value 2,668.28 6,036.18 5,444.65 591.53
	8,704.46

	58,678.44 208.94
	58,887.38

	-50,182.92

The assets and liabilities included in the valuation scope have been audited by WUYIGE Certified Public Accountants LLP and the WUYIGE Shenzi [2021] No.2–10111 unqualified audit report has been issued.

(III) The entrusted valuation target and the valuation scope are consistent with the valuation target and the valuation scope valuation involved in the economic behavior.

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(IV) Major assets

Major assets of the appraised entity include inventories, buildings (structures), machinery and equipment, electronic equipment, and vehicles.

Inventories are raw materials. Raw materials are mainly the main and auxiliary raw materials purchased by the enterprise for production of glass, and raw materials are stored in various specialized warehouses.

Buildings (structures) are mainly plants, office buildings, fences, roads and other production and living rooms and auxiliary facilities, which have obtained house ownership certificates and none of them have been mortgaged. The buildings (structures) within the scope of valuation are all self-built houses, mainly located in the south of Gulong Road, Xihan Village, Zhuge Town, Luoyang, and east of Erguang Expressway (the plant area of CLFG Longmen Glass Co., Ltd.). All the plants were built in 1990–2010.

Machinery and equipment are mainly float glass production line and ancillary equipment. CLFG Longmen Glass Co., Ltd. responded to the government’s call of relocation to industrial parks from urban areas. The production line has been fully suspended since January 2020. The machinery and equipment included in this valuation are mainly float glass production line and ancillary equipment. Main equipment include: raw material batching system, blender mixer, calcinations system, edge roller, tin tank transformer, cutting machine and stacking manipulator, and supporting fans, water pumps, control cabinets and other equipment for the production line; vehicles mainly include various types industrial vehicles, such as forklifts, loading vehicles, unloading vehicles; electronic equipment mainly include general office equipment, such as computers, printers, photocopiers, air conditioners, and daily office furniture.

As of the valuation benchmark date, the machinery and equipment have been idle.

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APPENDIX II

(V) Intangible Assets

Land use right Land use right Location of Date of Area of Type of owner certificate No. land parcel acquisition Useful life Purpose tenure use right (m2) CLFG Longmen Yan Guo Yong (2010) Xihan Village, 2010/1/9 50 years Industrial use 92,392.92 Transfer of Glass Co. Ltd. Di No. 100002 Zhuge Town, state-owned 02–38 land Yan Guo Yong (2010) Xihan Village, 2010/1/9 50 years Industrial use 8,404.45 Transfer of Di No. 100003 Zhuge Town, state-owned 02–39 land Yan Guo Yong (2010) Xihan Village, 2010/1/9 50 years Industrial use 114.10 Transfer of Di No. 100004 Zhuge Town, state-owned 02–40 land Total 100,911.47

(VI) Unrecorded assets included in the valuation scope

The assets have been listed in the Valuation List of Assets provided by the appraised entity.

(VII) The accounts included in the scope of valuation

No recorded non-physical assets are found in the Valuation List of Assets provided by the appraised entity.

IV. VALUE TYPE AND DEFINITION OF VALUATION

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V. VALUATION BENCHMARK DATE

(I) The valuation benchmark date for this project is 31 December 2020.
(II) The above valuation benchmark date is selected by the client considering the realization of this economic behavior.

CHAPTER II BASIS OF VALUATION

I. BASIS OF ECONOMIC ACTIVITY

Minutes of the General Manager Office Meeting of CLFG (22 September 2021).

II. BASIS OF LAWS AND REGULATIONS

(I) Asset Appraisal Law of the People’s Republic of China (passed at the 21st Meeting of the Standing Committee of the 12th National People’s Congress on 2 July 2016);
(II) Company Law of the People’s Republic of China (amended at 6th Meeting of the Standing Committee of the 13th National People’s Congress on 26 October 2018);
(III) Law of the People’s Republic of China on Enterprise Income Tax (amended for the second time in accordance with the Decision on Amending the Electricity Law of the People’s Republic of China and other Four Laws passed at the 7th Meeting of the Standing Committee of the 13th National People’s Congress on 29 December 2018);
(IV) The Enterprise State-owned Asset Law of the People’s Republic of China (passed at the 5th session of the 11th Standing Committee of the National People’s Congress on 28 October 2008);
(V) The Interim Regulations on the Supervision and Administration of State-owned Assets of Enterprises (Order No. 709 of the State Council);
(VI) The Administrative Measures for Valuation of State-owned Assets (Order No. 91 of the State Council, amended by Order No. 732 of the State Council of the People’s Republic of China);
(VII) The Supervisory and Administrative Measures of the Transactions of Enterprise State-owned Assets) (Order No. 32 of SASAC and the Ministry of Finance);

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APPENDIX II

(VIII) The Interim Measures for the Administration of Valuation of Enterprise State-owned Assets (Order No. 12 of the SASAC);
(IX) The Notice on Matters Concerning Strengthening the Administration of State-owned Assets Appraisal of Enterprises (Guo Zi Wei Chan Quan [2006] No. 274);
(X) The Notice on Matters Concerning the Review of Valuation Report of the State-owned Assets of Enterprise (Guo Zi Chan Quan [2009] No. 941);
(XI) The Notice on Publishing the Guidelines for the Filing for Recordation of the Valuation Projects of Enterprise State-owned Assets (Guo Zi Fa Chan Quan [2013] No. 64);
(XII) The Securities Law of the People’s Republic of China (amended for the second time at the 15th Meeting of the Standing Committee of the 13th National People’s Congress on 28 December 2019);
(XIII) Guidelines on the Application of Regulatory Rules – Evaluation Category No. 1 (China Securities Regulatory Commission);
(XIV) Civil Code of the People’s Republic of China (passed at the 3rd session of the 13th National People’s Congress on 28 May 2020);
(XV) The Law of the People’s Republic of China on the Administration of Urban Real Estate (passed at the 12th Meeting of the Standing Committee of the 13th National People’s Congress on 26 August 2019);
(XVI) The Land Administration Law of the People’s Republic of China (passed at the 12th Meeting of the Standing Committee of the 13th National People’s Congress on 26 August 2019);
(XVII) Interim Regulations on Urban Land Use Tax of the People’s Republic of China (amended by Order No. 709 of the State Council of the PRC);

(XVIII) Other laws and regulations related to the valuation.

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APPENDIX II

III. BASIS OF VALUATION CRITERIA

(I) Asset Valuation Basic Standards (Cai Zi [2017] No. 43);
(II) Code of Professional Ethics for Assets Assessment (CAS [2017] No. 30);
(III) Asset Valuation Practicing Standards – Asset Valuation Procedures (CAS [2018] No. 36);
(IV) Asset Valuation Practicing Standards – Asset Valuation Report (CAS [2018] No. 35);
(V) Asset Valuation Practicing Standards – Contract on Asset Valuation Entrustment (CAS [2017] No. 33);
(VI) Asset Valuation Practicing Standards – Asset Valuation Files (CAS [2018] No. 37);
(VII) Asset Valuation Practicing Standards – Enterprise Value (CAS [2018] No. 38);
(VIII) Asset Valuation Practicing Standards – Real Estate (CAS [2017] No. 38);
(IX) Asset Valuation Practicing Standards – Machinery Equipment (CAS [2017] No. 39);
(X) The Guidelines for the Enterprise State-owned Asset Valuation Reports (CAS [2017] No. 42);
(XI) Guidelines for Business Quality Control of Asset Valuation Institutions (CAS [2017] No. 46);
(XII) Guidance on Value Type for Asset Valuation (CAS [2017] No. 47);
(XIII) Guidance on Legal Ownership of Asset Valuation Target (CAS [2017] No. 48);
(XIV) Asset Valuation Practicing Standards –Asset Valuation Method (CAS [2019] No. 35);
(XV) Code for Real Estate Appraisal (National Standard GB/T50291–2015);
(XVI) Regulations for Valuation on Urban Land (GB/T 18508–2014);
(XVII) Other valuation criteria and norms related to the valuation.

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APPENDIX II

IV. BASIS OF ASSET OWNERSHIP

State-owned land use certificate, property ownership certificate, vehicle registration certificate;

Other ownership certificates.

V. PRICING BASIS

(I) Specialized equipment trading price information websites including Alibaba, ZOL Zhongguancun Online IT Product Quotation and IT168-IT Mainstream Information Platform about on the valuation benchmark date;
(II) Professional car price information websites including chinacar.com.cn, auto18.com, qiche100.com.cn, and pcauto.com.cn;
(III) Latest Manual of Common Data and Parameters of Asset Evaluation (Second Edition) (edited by Lv Faqin);
(IV) Global Quotation System for Mechanical and Electrical Products (2020), Mechanical and Electrical Products Quotation Manual (2020);
(V) Price Information Inquiry System for Mechanical and Electrical Products (2020);
(VI) Luoyang city benchmark land price information and Luoyang city land transaction information;
(VII) Other relevant information collected by the evaluation agency.

VI. OTHER BASIS AND REFERENCES

(I) Accounting statements and detailed list of declaration for asset valuation on the valuation benchmark date provided by the appraised entity;
(II) Audit reports and financial statements of the last three years provided by the appraised entity;
(III) Bank statements, explanatory notes, financial documents and other materials provided by the appraised entity;
(IV) Other evaluation materials collected by the valuers.

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APPENDIX II

CHAPTER III VALUATION METHODS COST APPROACH (ASSET-BASED APPROACH)

The cost approach (asset-based approach) refers to the general term for various valuation techniques that determine the value of the valuation target on the basis of a reasonable evaluation of the value of the assets and liabilities of the enterprise. The valuation scope includes current assets, fixed assets, intangible assets and current liabilities, non-current liabilities. The valuation methods mainly adopt the cost approach. The specific valuation methods for various types of assets are as follows:

I. CURRENT ASSETS

Current assets include monetary capital, receivables financing, account receivables, other receivables, inventories.

(I) Monetary Capital

Monetary capital includes cash, bank deposits.

Bank deposits: check the data obtained from the statement, balance adjustment statement and letter of confirmations with its book value, and determine the appraised value with the verified amount.

(II) Account Receivables

Accounts receivables include receivables financing, account receivables and other receivables.

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APPENDIX II

Account receivables and other receivables: carry out letter verification for continuing transactions, affiliates and large sums of money, and confirm the appraisal value with the verified book value in accordance with the letter verification; for internal personal payment, determine the appraisal value with the verified book value; for the money that has been confirmed as loss by conclusive evidence, determine the appraisal value by zero value; for other funds, investigate the credit and operation status of the counterparty, judge whether there is possible bad debt loss and estimate the amount of bad debt loss in combination with the account age, so as to verify the balance after deducting the estimated risk loss from the verified book value and confirm the evaluation value; for the bad debt provision, evaluate as zero since the risk loss problem has been considered in the evaluation.

(III) Inventory

The inventory of the evaluation is raw materials.

II. EQUIPMENT

Equipment within the valuation scope includes machinery and equipment, vehicles and electronic equipment.

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APPENDIX II

The income approach refers to the valuation methodology which determines the value of the valuation target by capitalizing or discounting the expected revenue of the appraised assets. When using the income approach for valuation, the appraised asset must have independent profitability or its profitability can be quantified, and the future income period can also be reasonably quantified. Due to the failure of quantifying the income of the machinery and equipment and other fixed assets in this valuation, income approach is not adopted.

The cost approach is resorting to reproduction or replacement of the appraised assets. The price that any potential investors are willing to pay upon their decision of investment in certain assets shall not exceed the current construction acquisition and cost of the assets. This assessment project is able to satisfy the conditions required for the cost, i.e. the appraised assets are in the condition for continuing use or assumed to be in the condition for continuing use with available historical information, thus cost approach is adopted.

In view of the evaluation purpose and asset type of the evaluation, we adopt the cost approach for the evaluation. Its basic calculation formula is as follows:

Assessed value of equipment = replacement cost ×newness rate

For some equipment in use that has exceeded its economic service life and has been discontinued in the market, the appraisal value is directly determined by the recoverable price in the market.

(I) Determination of Replacement Costs

1. Determination of replacement costs of machinery and equipment

Replacement costs = purchase price of equipment + transportation and miscellaneous cost + installation and commissioning cost + foundation cost + preliminary and other cost + capital cost – deductible input value-added tax

General equipment mainly refers to the price of equipment which is relatively low in value and common in the market. As most of these types of equipment are common equipment, the transportation and miscellaneous cost, installation and commissioning cost are included in the purchase price of equipment and are not separately calculated. The calculation formula of replacement cost is as follows:

Replacement cost= purchase price of the equipment – deductible input value-added tax

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APPENDIX II

(1) Determination of purchase price of equipment

Valuers determine the replacement cost with appropriate adjustments by directly inquiring the sellers or the manufacturers about the prices, or referring to the price lists provided by various distributors, recent price information on the valuation benchmark date (2020 version of the Mechanical and Electrical Products Price Information Query System(《機電產品價格信息查詢系統》)), the price information published on the internet (Alibaba,Chuli, China.cn and other websites) and considering the possible floating factors. In the event that the current market no longer disposes the equipment or the purchase price unavailable, while alternative standard equipment and general equipment available, corresponding adjustments are determined through the market inquiry and the review to the relevant price manual having fully considered the alternative factors.Where the market price of the equipment on the valuation benchmark date can be found in the open market, the price shall prevail.

(2) Determination of transportation and miscellaneous cost

Transportation and miscellaneous cost = purchase price of the equipment × rate of transportation and miscellaneous cost

(3) Determination of foundation cost

With reference to the Manual of Data and Parameters Commonly Used in Asset Appraisal, an appropriate fee rate is adopted.

Foundation cost = purchase price of the equipment × rate of foundation cost

The foundation of the equipment has been considered separately in the part of the building and structures, and will not be calculated repeatedly.

(4) Determination of installation and commissioning cost

With reference to the Manual of Data and Parameters Commonly Used in Asset Appraisal, an appropriate fee rate is adopted.

Installation and commissioning cost = purchase price of the equipment × rate of installation and commissioning cost

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(5) Determination of preliminary and other cost

Preliminary and other cost includes management cost of the contractor, cost of investigation and design, cost of construction supervision, environmental appraisal cost,feasibility research cost, etc., which are calculated according to the overall investment scale of the project and with reference to relevant charging regulations of national, local and industry. The calculation formula is as follows:

Preliminary and other cost = (purchase price of the equipment + transportation and miscellaneous cost + foundation cost + installation and commissioning cost) × fee rate

(6) Determination of capital cost

According to the loan interest rate corresponding to the valuation benchmark date and the reasonable construction period, the investment shall be made evenly according to the purchase price of the equipment, transportation and miscellaneous cost, foundation cost, installation and commissioning cost and preliminary and other cost. The calculation formula is as follows:

For equipment using a small amount of capital or within six months of acquisition and construction, cost of capital is not included.

(7) Deductible input value-added tax

The appraised entity is a VAT-based general taxpayer. According to the relevant provisions of the “The Notice on the Comprehensive Launch of the Pilot Program for the Change from Imposing Business Tax to Value-added Tax”(Caishui [2016] No. 36) and “The Announcement on the Policies in relation to Deepening Value-added Tax Reform of the Ministry of Finance, State Taxation Administration and General Administration of Customs” (Announcement No. 39 of 2019 of the Ministry of Finance, State Taxation Administration and General Administration of Customs) (1 April 2019), the purchased production equipment is subject to the deductible input tax. The calculation formula is as follows:

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APPENDIX II

D e d u c t i b l e i n p u t v a l u e - a d d e d t a x = ( p u r c h a s e p r i c e o f t h e equipment/1.13×13%) + (transportation and miscellaneous cost/1.09×9%) + (installation and commissioning cost/1.09 × 9%) + (foundation cost/1.09×9%) + (preliminary cost (excluding management cost of project construction)/1.06×6%)

2. Determination of replacement costs of electronic equipment

Replacement cost = purchase price of the equipment – deductible input value-added tax

3. Determination of replacement costs for vehicles

In addition to passenger vehicles, the vehicles included in the Asset Valuation include minivans and medium and small professional vehicles. The replacement cost of all types of taxable vehicles that can drive on the highway with vehicle registration certificate is determined according to the market price of a vehicle, the basic configuration on the valuation benchmark date, plus vehicle purchase tax and other reasonable cost (such as license fees). The basic calculation formula of replacement cost is as follows:

Replacement cost = (vehicle purchase price with taxes included + vehicle purchase tax + other cost) – deductible input value-added tax Where: vehicle purchase tax, passenger vehicle purchase tax rate is 10%.

The replacement cost of vehicle, such as special vehicles in the factory that are not on the road, is determined according to general equipment. The basic calculation formula of replacement cost is as follows:

Replacement cost (excluding tax) = replacement cost of equipment with taxes included – deductible input value-added tax

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APPENDIX II

(II) Determination of Newness Rate

1. Determining the newness rate of machinery equipment

(1) The newness rate by observation approach of important or large equipment is determined by observation approach (i.e. investigation scoring approach), and comprehensive newness rate is determined by combining with the newness rate under the service life approach determined by service life approach.

Comprehensive newness rate = newness rate under the service life approach×40% + newness rate by observation approach ×60%

The calculation formula of newness rate under the service life approach is as follows:

Newness rate under the service life approach = Or： Newness rate under the service life approach =	Economic service life – Serviced life ×100% Economic service life Durable years ×100% Durable years + Serviced life

The observed newness rate is determined by the evaluator based on experience on the technical condition of the subject and extent of deterioration, such as vibration, noise, temperature, processing precision, production capacity, energy consumption and failure.

(2) For those equipment of smaller value, depreciate rate is determined primarily using the service life method.

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APPENDIX II

2. Determining the newness rate of vehicles

Except for one passenger vehicle, most of the vehicles included in the Asset Valuation Report are in fact construction machinery and forklifts. For non-operating small and mini passenger vehicles, large sedans, etc., it refers to the vehicles with no age limit, including non-operating small and mini passenger vehicles, large sedans and self-propelled wheeled machines, as stipulated in the Provisions on the Criteria for Compulsory Discard of Motor Vehicles (Order [2012] No. 12 jointly issued by the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Public Security and the Ministry of Environmental Protection) to determine theoretical newness rate by vehicle mileage.

Useful life of a motor vehicle shall begin from the date of registration, or in case of failure in registration formalities for over 2 years from the ex-factory date, from the ex-factory date.

(1) Theoretical newness rate

The calculation formula of theoretical newness rate is as follows: Mileage-based newness rate = (Designated mileage – Mileage already traveled)/Designated mileage×100%

Theoretical newness rate = Mileage-based newness rate

The newness rate of vehicles in such depots or are not on roads is determined on the basis of general machinery and equipment. Therefore, the theoretical newness rate is the newness rate under the service life approach. The formula for calculating the newness rate under the service life approach is:

Newness rate under the service life approach= (economic service life – serviced life) ÷ economic service life×100%

(2) Observed newness rate

The observed newness rate determined based on the scoring of the analysis of the actual conditions of the vehicle or technical status and extent of deterioration, such as vibration, noise, temperature, processing precision, production capacity, energy consumption and failure.

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APPENDIX II

(3) Comprehensive newness rate

The final formula for calculating the comprehensive newness rate is:

Comprehensive newness rate = theoretical newness rate × 40% + observed newness rate × 60%

3. Determining the newness rate of electronic equipment

Electronic equipment, including general office furniture, is a kind of common equipment with small value, in which the newness rate is mainly determined by the service life approach, i.e. according to a combination of factors including the economic service life of equipment and the technical upgrading cycle of products. The formula for determining the newness rate based on the useful life is:

Newness rate = Newness rate under the service lief approach =

Economic service life – Serviced life

×100%

Economic service life

III. BUILDINGS AND STRUCTURES

(I) Selection of Valuation Method

According to the Practicing Guidelines for Asset Valuation – Real Estate 《資產評估執業準則––不動產》, Code for Real Estate Appraisal 《房地產估價規範》 (China National Standard (GB/T 50291–2015)) (for determining the Real Estate Valuation System) and Standard for Basic Terminology of Real Estate Valuation (GB/T 50899– 2013) 《房地產估價基本術語標準》 (for determining the description of real estate valuation), the generally accepted valuation methods for real estate valuation include market comparison approach, income approach, cost approach and hypothetical development method. The selection of valuation methods should be based on the purpose of the valuation and the specific characteristics of the valuation target, the surrounding market conditions and the applicability and the viability of the valuation method. The cost approach is generally used for industrial property; the income approach is generally used for commercial property and is appropriate for evaluating properties with income or with potential income; the market approach is usually applicable to target with similar trading cases in the same area or in the vicinity.

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APPENDIX II

Since the valuated buildings are self-built industrial properties, it is appropriate to adopt cost approach for valuation. As it is not easy to collect sufficient comparable property lease cases with the same size in the real estate market in the region where the valuation assets are located, the income approach is not used; as it is not easy to collect similar property trading with the same size in the real estate market in the region where the valuation assets are located, the income approach is not used.

The formula of the cost approach is: Appraised value = replacement cost × integrated newness rate

(I) Determination of Replacement Cost

Replacement costs = preliminary construction fees + construction and installation cost + management fee + capital costs – deductible value-added tax

1. Preliminary construction fees

The preliminary construction fees include feasibility study, survey and design, bidding agency fees, city infrastructure facilities ancillary fees, project supervision fees, etc. Based on asset sizes reported by a enterprise at valuation benchmark date, the preliminary fee and other fees will be determined according to the requirements of Ministry of Construction and the local government.

2. Construction and installation cost

Since the appraised buildings and structures are self-constructed, like plants, and Henan Engineering Cost Information Network releases various typical engineering cost data on a quarterly basis, accordingly, this valuation is based on a re-budgeting method for the construction of construction installation works.

3. Management fee

It refers to the necessary expenses of the development enterprise for the organisation and management of construction activities, including staff salaries and benefits, office expenses, travel expenses, etc. It accounts for approximately 2%-4% of the development costs. After our survey of similar industrial construction projects combined with the complexity of the property being assessed, the management costs are determined at 2%.

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APPENDIX II

4. Capital costs

The capital costs are the normal funding costs or the capital opportunity cost for the construction works period is based on the construction cost and preliminary cost and other expenses. It is assumed that the capital is equally invested when the building and structures are reconstructed, and the interest rate is determined based on the loan prime rate (LPR) as announced by the national inter-bank funding center at the valuation benchmark date.

5. Deductible input value-added taxes

As the various types of costs in the development and construction process can be used for deducting enterprise’s input VAT, such input tax should be excluded before the full replacement price can be assessed, and the input tax should be calculated on the basis of the preliminary costs and the construction and installation cost of the project.

(II) Determination of Newness Rate

In this valuation, the service life method and the observation method are adopted to ascertain the newness rate.

1. Service life method

The service life method is based on the ratio of the expected durable years of a building to its total useful life. The formula is:

Newness rate under the useful life method = Durable years/(serviced life + Durable years) x 100%

Or: Newness rate under the service life method = (economic durable years– the serviced life)/economic durable years x 100%

2. Observation method

The observation method is applied to assess each main part of the appraised equipment by site inspections, and analyze factors such as design, manufacturing, usage, wear and tear, maintenance, repair, and improvement of asset as well as physical life on a consolidated basis. The impacts on the function, efficiency of asset as a result of wear in service and natural deterioration will be assessed by comparing the appraisal subject with the one in new condition. As such, the newness rate of the appraised equipment would be determined.

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APPENDIX II

3. Comprehensive newness rate

Comprehensive newness rate =newness rate under service life approach× 50% + newness rate under scoring method × 50%

IV. INTANGIBLE ASSETS – LAND USE RIGHTS

(I) Selection of Valuation Methods

According to Regulations for Valuation on Urban Land《城鎮土地估價規程》, the Practicing Guidelines for Asset Valuation –Real Estate, the generally accepted valuation methods for land price include market comparison approach, income approach, benchmark land price coefficient correction approach, cost approach. The selection of valuation methods should be based on the purpose of the valuation and the specific characteristics of the valuation target, the surrounding market conditions and the applicability and the viability of the valuation method.

The market comparison method is a method to evaluate the value or price of an object through conversing the transaction price of comparable cases based on the differences between them after selecting a certain number of comparable cases for the valuation object. The basic conditions for using the market comparison approach are: a relatively active trading market is necessary; market cases and comparative indicators parameters can be collected and quantified against an evaluation object. The appraised object is proved to be the grant of industrial land, but the urban area of Luoyang City has restricted the listing and sale of industrial land, and the existing industrial land is under the delisting and relocation plan. We can not find any similar transaction cases at China Land Market Portal, hence market comparison method is not applicable for this valuation.

Benchmark land price coefficient correction approach is a method to determine the value of the subject land as at the valuation benchmark date by using valuation results such as benchmark land price of cities and towns through comparing the regional and individual conditions of the subject land with the average conditions of the region where it is located in accordance with the substitution principle, and adjusting the benchmark land price by applying the corresponding correction coefficient selected from the adjusted coefficient table with reference to adjusted coefficient of benchmark land price table. In 2018, Luoyang City issued the Notice on Publishing the Results of Rating of Urban Lands and Benchmark Land Price Renewal《關於公佈城鎮土地定級與基準地價更新成果的通知》. The land to be appraised is located in the coverage area under benchmark land price and can be appraised by the benchmark land price coefficient correction approach.

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APPENDIX II

Based on the purpose of this valuation, the land use right of the appraised entity is appraised by the benchmark land price coefficient correction approach, and the results are determined as the value of the appraised entity.

(II) Valuation Formula

The benchmark land price coefficient correction approach

Where, K1- Correction coefficient on date K2-Correction coefficient on land useful life K3- Correction coefficient on floor area ratio ∑K- Sum of the correction coefficients on regional factors and individual factors affecting land price

If there is difference between the level of development progress under benchmark land price adopted in this valuation and that of the land parcel under this valuation, it is necessary to make correction with development progress, so as to get the land parcel price with development progress under the valuation. Therefore,

Land parcel price under set development progress level = land parcel price with development progress under benchmark land price ± correction range of development progress.

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APPENDIX II

V. LIABILITIES

Liabilities are current liabilities and long-term liabilities, including accounts payable, staff remuneration payable, taxes payable, other payables, deferred income.

In the valuation, the business, carrying amount, date of occurrence, cause of formation, the company’s recognition basis and the agreed repayment period and method of major amounts of all types of liabilities are investigated and verified; the main content, provision basis, provision method, provision amount, etc., of all types of expected liabilities are reviewed; for significant liabilities, necessary investigations or inquiries are conducted to related personnel or the counterparties; and necessary analysis on the likelihood of performance of liabilities is conducted to confirm whether there are debts not required to be settled or provisions not required to pay, and debts not required to be settled and liabilities not required to pay are valuated at zero value.

With full consideration of the authenticity of its debts and obligations, the verified amount of liabilities is regarded as the valuation value.

CHAPTER IV IMPLEMENTATION PROCESS AND STATUS OF VALUATION

I. PRE-INVESTIGATION

II. PREPARATION OF VALUATION PLANS

Based on the needs of this assessment, the person in charge of the project shall be identified and the asset appraiser and appraisal support personnel shall be arranged to form the appraisal project team. The assessment plan shall be prepared by the person in charge of the project and implemented after being reviewed by the responsible person of the appraisal organization.

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APPENDIX II

III. CONDUCT OF ON-SITE INVESTIGATION

(I) Arranging and providing guidance for the relevant personnel to complete the asset valuation declaration schedule of the appraised entity. At the same time, guiding the appraised entity to conduct asset inventory.
(II) Submitting the due diligence list to the appraised entity and collecting documents required for valuation, including property rights certificates of fixed assets and intangible assets, equipment purchase contracts or invoices and financial statements, production and operation statistics, audit reports in recent years, development plans, etc.
(III) Conducting asset verification and on-site investigation in accordance with the requirements of the valuation criteria:
Checking whether there are any errors, omissions or duplicates in the asset and liability examination and appraisal schedules completed by the appraised entity, comparing the asset and liability examination and appraisal schedules with the financial general ledger category by category; Spot checking the key items of the assets or liabilities, checking the data recorded in the financial statements, and making the accounts and statements consistent;
The quantity of all kinds of physical assets listed in the examination and appraisal schedules of assets shall be verified on the spot by means of a key full inspection and general spot check, and shall be checked with the book records; At the same time, we conduct on-site inspections of buildings, key structures and key equipment to form detailed survey records, conduct conversations with asset management personnel and operational personnel, and inspect buildings maintenance records, equipment operation logs and records of large and medium-sized repairs; for construction in progress, we check the on-site progress, the construction quality, and the actual payment of construction cost; for inventory, we check the storage of raw materials, low-value consumable, understand the receiving (using) system, and check the completion progress and understand the accounting process, and understand the sales of finished products and the composition of sales cost;

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APPENDIX II

Comparing with the land information, and checking the topography and geomorphology on the spot, and understanding the surrounding area, environment, transportation and land development and utilization, practical use, etc.; for other intangible assets, understanding the formation or acquisition process, its role in the production process, and its contribution to the revenue of the enterprise;
Verifying the issuance of letter confirmation for receivables in large and key amount, we understood the business transactions and the credit status of the counterparties, to consult the relevant agreements and contracts of major liabilities, to understand the duration of occurrence, the process of formation, and the situation of debt repayment;
Consulting and identifying the property right certification documents and materials provided by the appraised entity, ascertain the property right status of the fixed assets and intangible assets, and investigate the major matters that may affect the asset evaluation.
(IV) Forming an interview record after listening to the introduction of the relevant personnel of the appraised entity on the enterprise, key assets, history and current situation of the major products by the means of symposiums and interviews, and made an understanding of the production, operation and management of the enterprise.
(V) Conducting research activities outside the appraised entity, including visiting the market or enquiring market information to understand the sales situation, price trend, market share and the corresponding situation of other enterprise products in the same industry, as well as the market competition situation; Understanding the relevant industrial policies, financial policies, market analysis of industry authorities or industry organizations, industry development opinions and industry statistics through the websites, professional publications and other media;etc.

IV. COLLECTION OF VALUATION INFORMATION

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APPENDIX II

V. VALUATION AND ESTIMATION

VI. FORMATION OF VALUATION CONCLUSIONS

VII. PREPARATION AND ISSUANCE OF VALUATION REPORTS

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APPENDIX II

CHAPTER V VALUATION ASSUMPTIONS

I. THE ASSUMPTIONS USED IN THIS VALUATION

(I) Basic Assumptions

1. Transaction assumption

2. Open market assumption

3. Assumption on continuous use of assets

The assumption on continuous use of assets assumes that the appraisal methods, parameters and basis are to be determined in accordance with the condition that the assets being evaluated will be used in consistent with their current function, method, scale, frequency and environment, or used on the basis of certain changes.

(II) General Assumptions

It is assumed that there are no material changes in the relevant existing laws, regulations and policies, and macroeconomic conditions of the PRC as well as in the local political, economic and social environment of such places where the parties to the transaction are operating after the valuation benchmark date;

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APPENDIX II

It is assumed that the person operating the appraised entity under valuation is accountable, and the management is capable of performing their duties after the valuation benchmark date;
It is assumed that the appraised entity has fully complied with all relevant laws and regulations;
It is assumed that the interest rate, exchange rate, tax base, tax rate, policy-imposed charges and others related to the appraised entity will not change significantly after the valuation benchmark date;
It is assumed that there are no other human force majeure and unforeseen factors that have a significant adverse impact on the enterprise after the valuation benchmark date.

(III) Specific Assumptions

It is assumed that the accounting policies to be adopted by the appraised entity after the valuation benchmark date are basically consistent with the accounting policies adopted when the valuation report is prepared in respect of significant aspects;
It is assumed that the business scope and method of the appraised entity will remain consistent with the current directions after the valuation benchmark date with its existing management method and management level;
The type of this valuation is the market value, regardless of the impact of the economic behavior involved in the valuation purpose on the business operation of the enterprise;
This valuation assumes that the basic information and financial information provided by the client and the appraised enterprise are true, accurate, and complete.

II. THE IMPACT OF THE ASSUMPTIONS OF THE VALUATION ON THE CONCLUSION OF THE VALUATION

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APPENDIX II

CHAPTER VI CONCLUSION OF THE VALUATION

The book value of total assets of CLFG Longmen Glass Co. Ltd. as of the valuation benchmark date on 31 December 2020 was RMB87,044,600, the appraised value was RMB145,391,200, the appreciation value was RMB58,346,600, and the appreciation rate was 67.03%; the book value of total liabilities was RMB588,873,800, the appraised value was RMB586,784,400, the appreciation value was RMB2,089,400, and the appreciation rate was 0.35%; the book value of net assets was RMB-501,829,200, the appraised value was RMB-441,393,200, the appreciation value was RMB60,436,000, and the appreciation rate was 12.04%.

Details of the summary of valuation result under cost approach (asset-based approach) are set out in the following table:

Unit: RMB0’000

Item Current assets Non-current assets Fixed assets Intangible assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets (Owners’ equity)	Book Value A 2,668.28 6,036.18 5,444.65 591.53 8,704.46 58,678.44 208.94 58,887.38 -50,182.92	Appraisal Value B 2,684.39 11,854.73 6,698.15 5,156.58 14,539.12 58,678.44 58,678.44 -44,139.32	Appreciation/ Depreciation C＝B－A 16.11 5,818.55 1,253.50 4,565.04 5,834.66 -208.94 -208.94 6,043.60	Appreciation Rate％ D＝C/A×100% 0.60 96.39 23.02 771.73 67.03 -100.00 -0.35 12.04

The details of the valuation results are set out in the detailed statement of assets and liabilities assessment.

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APPENDIX II

CHAPTER VII NOTES ON SPECIAL MATTERS

I. In appraising the assets within the valuation scope, we have not considered the possible expenses and taxes that may be borne by the assets in the process of property right registration or ownership change, nor the appraised value of appreciation of certain assets for tax purposes; not considered such matters as mortgage assumed by assets, guaranty, litigation compensation, etc. likely to be borne in the future and of the effect of additional payment by special transaction party on the valuation conclusions.
II. According to the “Notice on the Comprehensive Rollout of the Business Tax to Value Added Tax Transformation Pilot Program” (Caishui [2016] No. 36) (《關於全面推開營業稅改徵增值稅試點的通知》 (財稅[2016]36號)), since 1 May 2016, the pilot program of the transformation from business tax to value-added tax (the “VAT Program”) has been comprehensively promoted nationwide, and the VAT can be deducted when the appraised entity engages in the acquisition and construction of assets, therefore, the appraisal value of deductible assets involved in this valuation does not include VAT.
III. According to Luohuan Poverty Relief Office [2019] No.101 document, Longmen Glass has been included in “Relocation of Industries from City Urban Area to Industrial Parks(退城入園)” plan, and the Company completely suspended production in January 2020. The relocation compensation for”Relocation of Industries from City Urban Area to Industrial Parks”is still under negotiation and the amount of compensation is highly uncertain. Therefore, the impact of the relocation compensation agreement reached between Longmen Glass and the government on the appraisal value has not been considered in the Asset Valuation Report. The report users are advised to pay more attention.
IV. The appraised parcels are currently in a state of pending purchase and storage, and the certificated use of the land is for industrial use. This appraisal is based on the existing certificated land use rights, without considering the impact of future land expropriation factors on the appraisal value.
V. At the end of 2019, the above-ground buildings have been demolished on some of the apprised parcels due to road widening and some parcels have been expropriated. However, the land certificate has not been renewed to deduct this part of the land area, and this part of the land area has been deducted according to the demolition compensation report in the appraisal calculation.

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APPENDIX II

VI. During the asset liquidation and verification, the valuer found that there are one 3.5t forklift, seven 4t forklifts, two 5t forklifts, two Nanjing dump trucks and one 3t ST dump truck among the fixed asset vehicles, which have been purchased for more than 20 years. These assets are now idle and some parts of the vehicle are missing and need to be repaired before use. The breakdown is as follows:

						Commencement	Original	Net book
	Name	Model	Manufacturer	Units	Volume	date	book value	value
1	Forklift	5t	Dalian Forklift Co., Ltd.	unit	1	1993/10/10	163,321.00	8,166.05
2	Forklift	4t	Heli Forklift Co., Ltd.	unit	1	1993/10/10	49,466.70	2,473.34
3	Forklift	4t	Heli Forklift Co., Ltd.	unit	1	1993/10/10	49,466.66	2,473.33
4	Forklift	4t	Heli Forklift Co., Ltd.	unit	1	1993/10/10	49,466.66	2,473.33
5	Forklift	4t	Heli Forklift Co., Ltd.	unit	1	1993/10/10	49,466.66	2,473.33
6	Forklift	4t	Heli Forklift Co., Ltd.	unit	1	1993/10/10	49,466.66	2,473.33
7	Forklift	4t	Heli Forklift Co., Ltd.	unit	1	1993/10/10	49,466.66	2,473.33
8	Forklift	3.5t	Heli Forklift Co., Ltd.	unit	1	1994/4/1	92,240.00	4,612.00
9	Forklift	4t	Heli Forklift Co., Ltd.	unit	1	1994/9/1	91,500.00	4,575.00
10	Forklift	5t	Heli Forklift Co., Ltd.	unit	1	1995/9/1	175,400.00	8,770.00
11	Nanjing dump truck		Nanjing Yuejin Automobile Co.,Ltd.	unit	1	1996/8/1	50,500.00	2,525.00
12	Nanjing dump truck		Nanjing Yuejin Automobile Co.,Ltd.	unit	1	1996/8/1	50,500.00	2,525.00
13	ST dump truck	3t		unit	1	2000/9/1	335,000.00	16,750.00

VII. As of the valuation benchmark date, certain housing and buildings of Longmen Glass have yet to be issued with title certificates. The valuation was conducted on the assumption that the title of the building belongs to the appraised entity. The appraised value has not taken into account the costs to be incurred in future certification. The evaluation of the structure of the housing and building shall be subject to field investigation, and the building area shall be subject to the area verified or declared by the property title certificate provided by the enterprise. The valuer has verified that as the work amount of certain underground construction cannot be verified, the evaluation was based on the area declared by the enterprise. The appraised value shall be adjusted correspondingly in accordance with the building area verified by the property title certificate after the property title certificate has been obtained within the validity period of the report.

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APPENDIX II

CHAPTER VIII STATEMENT OF LIMITATION ON THE USE OF THE ASSET VALUATION REPORT

I. This Asset Valuation Report shall only be used for the purposes of valuation as stated herein, and shall be used by the client, the other users of the Asset Valuation Report as agreed in the asset valuation engagement contract and the users of the Asset Valuation Report as required by laws and administrative regulations.
II. This asset valuation conclusion is valid for one year from 31 December 2020 to 30 December 2021. However, if there is material change in the conditions of the valuation target or there is material movement in the market during this period, the conclusion of this valuation will be invalid. We take no responsibility towards the client, other users of the Asset Valuation Report as agreed and the users of the Asset Valuation Report required by laws and administrative regulations who use the report after its valid period. We also take no responsibility for any use of the report when the valuation target experiences material changes or the market experiences material movements within its valid period.
III. If the client or other users of Asset Valuation Report fails to use the Asset Valuation Report in accordance with the scope of use specified in laws, administrative regulations and the Asset Valuation Report, the asset valuation institution and its valuers shall not be held liable.
IV. With the exception of the client, other users of the Asset Valuation Report stipulated in the asset valuation engagement contract and the users of the Asset Valuation Report required by laws and administrative regulations, no other institution or individual shall become the user of the Asset Valuation Report.
V. User of the Asset Valuation Report shall correctly interpret and use the valuation conclusion, which is not equivalent to the realizable value of the valuation target and should not be considered as a guarantee for the realizable value of the valuation target.
VI. Without the consent of our company, content of the Asset Valuation Report shall not be extracted, quoted or disclosed on public media, unless otherwise permitted by laws, administrative regulations or agreed among relevant parties.
VII. The valuation conclusion shall not be used unless the Asset Valuation Report has been approved by SASAC (including the companies contributing funds).

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APPENDIX II

CHAPTER IX DATE OF VALUATION REPORT AND OTHERS

I. The date of this Asset Valuation Report is 4 November 2021. The date of Asset Valuation Report refers to the date on which the valuation conclusion is drawn.
II. The Asset Valuation Report contains a number of appendices (see list of appendices), which are an important part of the Asset Valuation Report.

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

ASSET VALUATION REPORT ON THE VALUE OF ALL EQUITY INTERESTS HELD BY SHAREHOLDERS OF BENGBU CHINA NATIONAL BUILDING MATERIALS INFORMATION DISPLAY MATERIALS COMPANY LIMITED INVOLVED IN THE PROPOSED TRANSFER OF EQUITY BY LUOYANG GLASS COMPANY LIMITED-SUMMARY

Jing Xin Ping Bao Zi (2021) No. 246

Zhongjing Minxin (Beijing) Assets Appraisal Co., Ltd. was engaged by Triumph Technology Group Co., Ltd. and Luoyang Glass Company Limited to appraise the value of all equity interests in Bengbu China National Building Materials Information Display Materials Company Limited involved in the proposed transfer of equity by Luoyang Glass Company Limited, by way of adopting the asset-based approach and carrying out necessary valuation procedures in accordance with laws, administrative regulations and asset valuation standards while adhering to the principles of independence, objectivity and impartiality.

Details of the asset valuation are reported as follows:

CHAPTER I BASIC INFORMATION

I. THE CLIENT, APPRAISED ENTITY AND OTHER USERS OF THE VALUATION REPORT

(I) Overview of the Client I

Name: Triumph Technology Group Co., Ltd*.

Unified Social Credit Code: 91110000101923517F

Legal Residence and No. 2, Zizhuyuan South Road, Haidian District, Beijing Business Premise:

Legal Representative: Peng Shou Registered Capital: RMB3,154,477,893 Nature of Company: Limited liability company (sole proprietorship of legal person)

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

Business Scope:

Research, manufacture and sales of building materials and complete equipment for light industry; development, transfer, consultation and service of new technology for light industry and the relevant import and export businesses; engineering design and consultation; tendering agency business; applied research and production of green energy technology products; consultation, design, assessment for energy saving and overall contract for construction of green energy projects; development, transfer, consultation and service of technology within the field of new energy; development, promotion, application and installation of new energy and energy saving products; technological development, production, assembly, sales and installation of components of solar energy and building integration houses, integrated houses and new-type houses; research and development, manufacture and sales of glass, raw materials and complete equipment; deep processing, manufacture and sales of glass products; processing and sales of nonmetallic mineral resources and products; development of computer software, technology consultation, physical and chemical analysis, and heat determination; and research and development, manufacture, sales and technology service of electromechanical equipment for building materials, coal mines, electricity, chemical engineering, metallurgy and municipal engineering. (The market entity shall legally and independently select business items and carry out business activities. For items subject to approval according to laws, the business activities shall be carried out according to the approved content after the approval of the relevant authorities has been obtained. Business activities prohibited and restricted by local industrial policies shall not be engaged in.)

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(II) Overview of the Client II

Name:

Luoyang Glass Company Limited*

Unified Social Credit Code: 914103006148088992

Legal Residence and No. 9, Tang Gong Zhong Lu, Xigong District, Luoyang Business Premises: Legal Representative: Zhang Chong Registered Capital: RMB548,540,432.00 Nature of Company: Joint-stock limited company (Taiwan, Hong Kong or Macau and domestic joint venture, listed company)

Business Scope: Development, production, manufacture and installation of information display glass, new energy glass, photoelectric material for functional-glass category and its processed products and components, relevant materials, mechanical equipment and its electric appliances and accessories, relevant technical consultancy and technical services, as well as sales and after-sales services of self-produced products.

(III) Overview of the Appraised Entity

Name: Bengbu China National Building Materials Information Display Materials Company Limited

Legal Residence and No.123, Longjin Road, Longzi Lake, Bengbu City, Anhui Business Premises: Province Legal Representative: Ma Yan Registered Capital: RMB632,764,300 Nature of Company: Limited liability company (sole proprietorship of legal person，not invested or controlled by natural person)

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

Business Scope:

Research and development, production, sale and deep processing of ultra-thin glass; import and export of various commodities and by-products of its own and on agency basis; and sale of glass-related primary materials, auxiliary materials and other glass products and relevant technical services (projects subject to being approved by the law and business activities that can only be carried out after obtaining approval from relevant authorities).

1. Shareholding Structure

As of the valuation benchmark date, the shareholding structure of Bengbu China National Building Materials Information Display Materials Company Limited* is as follows:

Name of shareholders Luoyang Glass Company Limited Total	Capital contribution (RMB0’000) 63,276.43 63,276.43	Percentage of capital contribution (%) 100% 100%

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

2. Development History

(1) Bengbu China National Building Materials Information Display Materials Company Limited (“ Bengbu CNBM Information Display* ”), a wholly-owned subsidiary of Bengbu Design and Research Institute for Glass Industry with an investment of RMB30 million, was established in 2013 and obtained the business license for legal person from Bengbu Administration for Industry and Commerce on 29 September 2013.

Name of shareholders Bengbu Design and Research Institute for Glass Industry Total	Capital contribution (RMB0’000) 3,000.00 3,000.00	Percentage of capital contribution (%) 100% 100%

(2) On 3 January 2014, Bengbu Design and Research Institute for Glass Industry increased its investment in Bengbu CNBM Information Display by RMB12.72 million, and China Luoyang Float Glass Group Co., Ltd. contributed RMB99.68 million to Bengbu CNBM Information Display. Therefore, Bengbu CNBM Information Display was changed into a limited liability company jointly invested by Bengbu Design and Research Institute for Glass Industry and China Luoyang Float Glass Group Co., Ltd. with the registered capital changing to RMB142.40 million. Bengbu CNBM Information Display obtained the business license for legal person from Bengbu Administration for Industry and Commerce on 3 January 2014.

Name of shareholders Bengbu Design and Research Institute for Glass Industry China Luoyang Float Glass Group Co., Ltd. Total	Capital contribution (RMB0’000) 4,272.00 9,968.00 14,240.00	Percentage of capital contribution (%) 30% 70% 100%

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APPENDIX III

(3) On 8 October 2014, China Luoyang Float Glass Group Co., Ltd. entered into an equity transfer agreement with Bengbu Design and Research Institute for Glass Industry, pursuant to which, China Luoyang Float Glass Group Co., Ltd. agreed to transfer its 41.9% equity interests in Bengbu CNBM Information Display (i.e. RMB59.68 million in total, not yet fully paid up) to Bengbu Design and Research Institute for Glass Industry. The registered capital of Bengbu CNBM Information Display changed from RMB142.40 million to RMB632,764,300. Bengbu CNBM Information Display was held as to 93.68% by Bengbu Design and Research Institute for Glass Industry with a contribution of RMB592,764,300, and 6.32% by China Luoyang Float Glass Group Co., Ltd. with a contribution of RMB40.00 million.

Name of shareholders Bengbu Design and Research Institute for Glass Industry China Luoyang Float Glass Group Co., Ltd. Total	Capital contribution (RMB0’000) 59,276.43 4,000.00 63,276.43	Percentage of capital contribution (%) 93.68% 6.32% 100%

(4) On 28 October 2014, Bengbu Design and Research Institute for Glass Industry transfered all of its 93.68% equity interests in Bengbu CNBM Information Display (i.e. RMB592,764,300 in total) to China Luoyang Float Glass Group Co., Ltd., and Bengbu CNBM Information Display therefore became a whollyowned subsidiary of China Luoyang Float Glass Group Co., Ltd. Bengbu CNBM Information Display obtained the business license for legal person from Bengbu Administration for Industry and Commerce on 22 October 2014.

Name of shareholders China Luoyang Float Glass Group Co., Ltd. Total	Capital contribution (RMB0’000) 63,276.43 63,276.43	Percentage of capital contribution (%) 100% 100%

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(5) On 9 December 2015, China Luoyang Float Glass Group Co., Ltd. transferred its 100% equity interests in Bengbu CNBM Information Display to Luoyang Glass Company Limited, and Bengbu CNBM Information Display therefore became a wholly-owned subsidiary of Luoyang Glass Company Limited. Bengbu CNBM Information Display obtained the business license for legal person from Bengbu Administration for Industry and Commerce on 14 December 2015.

Name of shareholders Luoyang Glass Company Limited Total*	Capital contribution (RMB0’000) 63,276.43 63,276.43	Percentage of capital contribution (%) 100% 100%

As of the valuation benchmark date, Bengbu CNBM Information Display was a wholly-owned subsidiary of Luoyang Glass Company Limited*.

3. Main Assets

The company’s main asset is a 150t/d E-glass production line with supporting land and buildings (structures), which was built in 2014. The equipment mainly consists of (1) raw materials supply system; (2) melting section system assembly (150t/ d glass furnaces); (3) molding section system assembly (tin bath); (4) annealing furnace section system assembly (annealing furnace); (5) cutting cool-end system assembly; (6) distributed control system assembly (DCS system); (7) auxiliary section equipment; (8)150t/d glass furnaces dedusting flue gas denitrification desulphurization and denitrification engineering equipment; buildings include raw material storage workshop, homogenizing silo, float glass joint workshop, raw material workshop, manufacturing building, heat regeneration chamber, hydrogen station, oil station, circulating water pump house, bromine cold station, nitrogen station and ancillary diesel generator room, general electric power substation, shift dormitory and guard room; intangible assets consist of patent, proprietary technology and land use rights, and no trademark rights; current assets are current accounts and money borrowed and lent interbank required by the company’s operation.

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

4. Main Products and Relevant Production and Sales

The main products of Bengbu China National Building Materials Information Display Materials Company Limited* are ultra-thin float electronic glass of 0.20mm, 0.15mm and 0.12mm. Since its incorporation, the company has taken National Key Laboratory of Float Glass New Technology as its core, and conducted industry-universityresearch institute Collaboration with Bengbu Glass Industry Design and Research Institute, China Triumph International Engineering Co., Ltd, Anhui Vocational College of Electronics & Information Technology, the First Light Industry School of Anhui Province, achieving the stable industrial-scale production of ultra-thin float electronic glass, which set a new record of the development of electronic glass in China. The ultra-thin float electronic glass features good thickness uniformity, little warpage, few surface defects, high-precision of cutting dimension, quality edges, and high transmittance. The 0.12mm to 1.1mm ultra-thin electronic glass produced by the company, which met the international advanced standards, has broken the monopoly of foreign products in the domestic market.

5. Assets, Liabilities, and Operation for the Recent Three Years

The Balance Sheet

Unit: RMB0’000

Item Current assets Fixed assets Intangible assets Long-term deferred expenses Deferred income tax assets Total non-current assets Total assets	At the end of December 2018 51,196.95 40,757.20 3,283.42 295.00 98.10 44,433.73 95,630.68	At the end of December 2019 46,399.14 37,624.60 3,189.31 183.33 174.74 41,181.49 87,580.63	At the end of December 2020 46,246.00 35,342.57 3,097.70 108.33 93.65
			38,642.26

			84,888.26

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

Item Current liabilities Non-current liabilities Total liabilities Net assets Income Statement Item Operating income Operating profit Total profit Net profit	At the end of December 2018 9,013.61 6,995.10 16,008.71 79,621.97 2018 14,706.06 3,553.50 3,703.50 3,372.17	At the end of December 2019 9,071.41 3,775.03 12,846.44 74,734.19 2019 14,091.47 1,308.86 1,309.02 1,112.22	At the end of December 2020 5,763.89 1,832.29
			7,596.17

			77,292.08

			Unit: RMB0’000 2020 19,160.84 2,834.63
			2,832.74

			2,578.89

WUYIGE Certified Public Accountants LLP audited the figures for the financial statements from 2018 to 2020 of the appraised entity and issued the audit reports of Daxin Shen Zi [2019] No. 2–00718, Daxin Shen Zi [2020] No. 2–00516 and Daxin Shen Zi [2021] No.2–10084.

(III) Relationship among Client I, Client II and the Appraised Entity

Bengbu CNBM Information Display is a wholly-owned subsidiary of Luoyang Glass. The largest shareholder of Luoyang Glass is China Luoyang Float Glass (Group) Company Limited (“ CLFG ”), and Triumph Technology Group is the controlling shareholder of CLFG. Triumph Technology Group, Luoyang Glass, Bengbu CNBM Information Display and CLFG are subsidiaries of China National Building Materials Group Co., Ltd, and also their de facto controller is China National Building Materials Group Co., Ltd.

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(IV) Other Users of the Valuation Report

1. Other users of the valuation report agreed in the asset valuation contract

The asset valuation entrustment contract does not stipulate other users of the valuation report.

2. Users of the asset valuation report stipulated by laws and administrative regulations

Users of the asset valuation report stipulated by laws and administrative regulations shall be subject to the provisions of relevant laws and administrative regulations.

II. PURPOSE OF THE VALUATION

Luoyang Glass Company Limited intends to transfer its shares in Bengbu China National Building Material Information Display Materials Company Limited to Triumph Technology Group Co., Ltd. Therefore, Triumph Technology Group Co., Ltd. and Luoyang Glass Company Limited engaged Zhongjing Minxin (Beijing) Assets Appraisal Co., Ltd. to assess the entire shareholders’ equity value of Bengbu China National Building Material Information Display Materials Company Limited, which forms the value reference of the share transfer for Luoyang Glass Company Limited*.

The above share transfer has been resolved and approved by the general manager office meeting of CLFG.

III. VALUATION TARGET AND SCOPE

(I) The valuation target is the value of all equity interests held by the shareholders of Bengbu China National Building Material Information Display Materials Company Limited.
(II) The valuation scope covers all assets and liabilities of Bengbu China National Building Material Information Display Materials Company Limited, including current assets, fixed assets, intangible assets, long-term deferred expenses, deferred tax assets, current liabilities and non-current liabilities. As of the valuation benchmark date, the book value of total assets, total liabilities and net assets amounted to RMB848,882,600, RMB75,961,700 and RMB772,920,800, respectively.

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

The book value of assets and liabilities included in the valuation scope is set out in below table:

Item Current assets Non-current assets Including: Fixed assets Intangible assets Long-term deferred expenses Deferred income tax assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets (Owners’ equity)	Unit: RMB0’000 Book value 46,246.00 38,642.26 35,342.57 3,097.70 108.33 93.65
	84,888.26

	5,763.89 1,832.29
	7,596.17

	77,292.08

The assets and liabilities included in the valuation scope have been audited by WUYIGE Certified Public Accountants LLP and the WUYIGE Shenzi [2021] No.2–10084 unqualified audit report has been issued.

(III) The entrusted valuation target and the valuation scope are consistent with the valuation target and the valuation scope involved in the economic behavior.

(IV) Main Asset

The main assets of the appraised entity are inventories and fixed assets. Among them, inventories consist of raw materials and finished products, with a book value of RMB36,609,000; fixed assets include buildings, structures, pipelines and trenches, machinery and equipment, transportation equipment, electronic equipment, etc., with a book value of RMB353,425,700.

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(V) Intangible Assets

Intangible Assets within the valuation scope are classified into land use rights and other intangible assets.

The land use right is the transferred industrial land acquired on 31 October 2014, with a total area of 111,355.33m[2] . The original land certificate number is 2014285.

Other intangible assets are purchased software, including patent right-static forming method of flat glass ring rotating plate (平板玻璃環形旋轉板靜態成型法) and software use right – Ctiec Luculent – EPC engineering management software V1.0.

(VI) Unrecorded Asset Included in the Valuation Scope

After checking, 46 patents of the appraised entity are off-book assets, as follows:

			Date of
			authorization
Type of patent	Patent No.	Patent name	proclamation	Valid period
Utility Model	ZL201520208081.4	Glass density meter (一種玻璃密度儀)	2015.07.08	2025.04.09
Utility Model	ZL201520208194.4	Feeding device of water-cooled feeder	2015.07.22	2025.04.09
		(一種水冷式投料機推料裝置)
Invention	ZL201510163649.X	Sealing device at the outlet end of tin	2017.07.28	2025.04.09
		bath (一種錫槽出口端密封裝置)
Utility Model	ZL201520202123.4	Improved special running device made	2015.07.29	2025.04.09
		of ultra-thin flat glass (一種改良型超
		薄平板玻璃專用運轉裝置)
Utility Model	ZL201520208192.5	Assembled wooden box for packaging	2015.08.05	2025.04.09
		ultra-thin flat glass (一種用於包裝超
		薄平板玻璃的拼裝式木箱)
Invention	ZL201410062103.0	Pneumatic jacking device for cross-	2016.01.20	2034.02.22
		cutting of ultra-thin flat glass (一種用
		於超薄平板玻璃橫切的氣力頂托裝)
Invention	ZL201310678778.3	Conveyor for cross-cutting of ultra-thin	2016.05.04	2034.02.22
		flat glass (一種用於超薄平板玻璃橫
		切的輸送裝置)
Invention	ZL201410062102.6	Inclined joist for cross-cutting of ultra-	2016.06.01	2034.02.22
		thin flat glass (一種用於超薄平板玻
		璃橫切的斜置托梁)

– III-12 –

APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

			Date of
			authorization
Type of patent	Patent No.	Patent name	proclamation	Valid period
Invention	ZL201410062932.9	Buoyancy jacking device for cross-	2016.06.01	2034.02.22
		cutting of ultra-thin flat glass (一種用
		於超薄平板玻璃橫切的浮力頂托裝)
Invention	ZL201410061900.7	Mobile pallet device for cross-cutting of	2016.08.03	2034.02.22
		ultra-thin flat glass (一種用於超薄平
		板玻璃橫切的移動托板裝)
Invention	ZL201410061940.1	Diagonal roller for cross-cutting of ultra-	2016.11.30	2034.02.22
		thin flat glass (一種用於超薄平板玻
		璃橫切的斜置輥道)
Invention	ZL201410061899.8	Wind-powered jacking device for cross-	2016.11.23	2034.02.22
		cutting of ultra-thin flat glass (一種用
		於超薄平板玻璃橫切的風力頂托裝)
Utility Model	ZL201621045793.X	Range measuring device for ultra-thin	2017.03.01	2026.09.09
		flat glass stacking manipulator (一種
		超薄平板玻璃堆垛機械手測距裝置)
Utility Model	ZL201621045926.3	Material guide device of broken glass	2017.03.15	2026.09.09
		scale (一種碎玻璃秤的導料裝置)
Utility Model	ZL201621045792.5	Packing and turning platform for ultra-	2017.03.15	2026.09.09
		thin flat glass (一種超薄平板玻璃的
		打包翻轉平臺)
Utility Model	ZL201621045791.0	A shaft-removing device for removing	2017.03.15	2026.09.09
		paper shafts (一種用於去除紙軸的去
		軸裝置)
Utility Model	ZL201621045915.5	Protective gas top cover of ultra-thin	2017.03.29	2026.09.09
		float glass tin bath (一種超薄浮法玻
		璃錫槽保護氣體頂蓋)
Invention	ZL201610812703.3	Outlet device for forming tin bath of	2019.04.12	2036.09.09
		ultra-thin float glass (一種超薄浮法玻
		璃成型錫槽出口裝置)
Invention	ZL201610812520.1	Sealing device for lower part of roller	2018.09.04	2036.09.09
		table (一種輥道下部的密封裝置)
Invention	ZL201610812515.0	Flat glass aligning roller table (一種平	2018.11.27	2036.09.09
		板玻璃對齊輥道)

– III-13 –

APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

			Date of
			authorization
Type of patent	Patent No.	Patent name	proclamation	Valid period
Invention	ZL201610812563.X	A horizontal breaking method for flat	2018.12.14	2036.09.09
		glass (一種平板玻璃橫向掰斷方法)
Utility Model	ZL201721341489.4	Anti-scratch device for ultra-thin glass	2018.04.20	2027.10.18
		(一種超薄玻璃防劃傷裝置)
Utility Model	ZL201721323645.4	Material cleaning device for mixed	2018.04.20	2027.10.18
		material conveyor belt (一種混合料輸
		送帶清料裝置)
Utility Model	ZL201721323671.7	A manipulator safety station (一種機械	2018.04.20	2027.10.18
		手安全工位)
Utility Model	ZL201721340751.3	A special wooden packaging box for	2018.04.20	2027.10.18
		ultra-thin glass (一種超薄玻璃專用木
		質包裝箱)
Utility Model	ZL201721323674.0	Insulation device for soft connection of	2018.05.01	2027.10.16
		machine rod of edge-drawing machine
		(一種拉邊機機桿軟連接的保溫裝置)
Utility Model	ZL201721341993.4	Sealing device for barrier curtain of	2018.05.18	2017.10.18
		transition roller platform (一種過渡輥
		臺擋簾密封裝置)
Utility Model	ZL201721340777.8	Transition roller table for ultra-thin glass 2018.05.25		2027.10.18
		production (一種超薄玻璃生產用過
		渡輥臺)
Utility Model	ZL201721341855.6	Sulfur dioxide gasification device for	2018.05.29	2027.10.18
		float glass production line (一種浮法
		玻璃生產線二氧化硫氣化裝置)
Invention	ZL201610812564.4	Float forming device for producing	2019.02.15	2036.09.09
		ultra-thin glass (一種用於生產超薄玻
		璃的浮法成型裝置)
Utility Model	ZL201821586278.1	Pollution mitigation device for rollers of	2019.04.26	2028.09.28
		transition roller table(一種過渡輥臺
		輥子的污染減緩裝置)
Utility Model	ZL201821612930.2	Glass belt edge cooler (玻璃帶邊部冷郤	2019.05.03	2028.09.30
		器)

– III-14 –

APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

			Date of
			authorization
Type of patent	Patent No.	Patent name	proclamation	Valid period
Utility Model	ZL201821612941.0	Packing device for ultra-thin flat glass	2019.05.07	2028.09.30
		finished products (一種超薄平板玻璃
		成品裝箱裝置)
Utility Model	ZL201821611703.8	Homogenizing library cloth trolley (均	2019.05.10	2028.09.30
		化庫布料小車)
Utility Model	ZL201821586277.7	Gas sealing device at outlet end of tin	2019.05.10	2028.09.30
		bath (一種錫槽出口端的氣封裝置)
Utility Model	ZL201821611702.3	Lifting and aligning device (一種抬升對	2019.05.10	2028.09.30
		齊裝置)
Utility Model	ZL201821611713.1	Float forming tin bath with top cover	2019.05.14	2028.09.30
		structure (帶有頂蓋結構的浮法成型
		錫槽)
Utility Model	ZL201821611712.7	Inner partition wall structure of float	2019.05.14	2028.09.30
		formed tin bath (一種浮法成型錫槽內
		分隔墻結構)
Utility Model	ZL201921901889.5	Glass ribbon temperature and image	2020.05.15	2029.11.06
		monitoring device (一種玻璃帶溫度
		與圖像監測裝置)
Utility Model	ZL201921901028.7	A new type of curtain sealing device (一	2020.06.19	2029.11.06
		種新型擋簾密封裝置)
Utility Model	ZL201921901905.0	On-line purification temperature control	2020.06.19	2029.11.06
		device for tin liquid (一種錫液在線凈
		化溫控裝置)
Utility Model	ZL201921901842.9	A new type of vibrating feeder (一種新	2020.06.30	2029.11.06
		型震動給料機)
Utility Model	ZL201921901843.3	Discharge anti-blocking device of	2020.06.30	2029.11.06
		blending machine (一種調合機排料防
		堵裝置)
Utility Model	ZL201921901886.1	Glass flow channel sealing device (一種	2020.07.10	2029.11.06
		玻璃流道密封裝置)
Utility Model	ZL201921901046.5	Spare roller device for roller table	2020.08.21	2029.11.06
		maintenance (一種輥道維修時的備用
		托輥裝置)
Utility Model	ZL201921901024.9	Breaking device for ultra-thin glass (一	2020.09.04	2029.11.06
		種用於超薄玻璃的掰斷裝置)

– III-15 –

APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

IV. VALUE TYPE AND DEFINITION OF VALUATION

The market value is the estimated value of the valuation target on the valuation benchmark date on which the transactions are conducted on arms length basis by the willing purchaser and the willing vendor who act sensibly without being subject to any undue influence.

V. VALUATION BENCHMARK DATE

(I) The valuation benchmark date for this project is 31 December 2020.
(II) The above valuation benchmark date is selected by the client considering the realization of this economic behavior.

CHAPTER II BASIS OF VALUATION

I. BASIS OF ECONOMIC ACTIVITY

Minutes of the General Manager Office Meeting of CLFG (22 September 2021).

II. BASIS OF LAWS AND REGULATIONS

(I) Asset Appraisal Law of the People’s Republic of China (passed at the 21st Meeting of the Standing Committee of the 12th National People’s Congress on 2 July 2016);
(II) Measures for Financial Supervision and Administration of the Asset Valuation Sector (amended in accordance with the Decision of the Ministry of Finance on the Amendment of Two Departmental Rules including the Measures for the Practice Licensing and Supervision and Administration of Accounting Firms (Order No. 97 of the Ministry of Finance of the People’s Republic of China) on 2 January 2019);
(III) Company Law of the People’s Republic of China (passed at the 6th Meeting of the Standing Committee of the 13th National People’s Congress on 26 October 2018);
(IV) Law of the PRC on Enterprise Income Tax (passed at the 7th Meeting of the Standing Committee of the 13th National People’s Congress on 29 December 2018);

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(V) The Detailed Rules for the Implementation of the Provisional Regulations on Value-added Tax of the People’s Republic of China (Order No. 50 of Ministry of Finance and State Taxation Administration);
(VI) The Notice on the Comprehensive Launch of the Pilot Program for the Change from Imposing Business Tax to Value-added Tax (Ministry of Finance, State Taxation Administration, Caishui [2016] No. 36);
(VII) The Announcement on the Policies in relation to Deepening Value-added Tax Reform (Announcement No. 39 of 2019 of the Ministry of Finance, State Taxation Administration and General Administration of Customs);
(VIII) The Patent Law of the PRC (amended at 6th Meeting of the Standing Committee of the 11th National People’s Congress on 27 December 2008);
(IX) The Enterprise State-owned Asset Law of the People’s Republic of China (passed at the 5th session of the 11th Standing Committee of the National People’s Congress on 28 October 2008);
(X) The Interim Regulations on the Supervision and Administration of State-owned Assets of Enterprises (Order No. 709 of the State Council);
(XI) The Administrative Measures for Valuation of State-owned Assets (Order No. 91 of the State Council, amendment to Order No. 732 of the State Council of the PRC);
(XII) The Supervisory and Administrative Measures of the Transactions of Enterprise State-owned Assets) (Order No. 32 of SASAC and the Ministry of Finance);
(XIII) The Interim Measures for the Administration of Valuation of Enterprise State-owned Assets (Order No. 12 of SASAC);
(XIV) The Notice on Matters Concerning Strengthening the Administration of State-owned Assets Appraisal of Enterprises (Guo Zi Wei Chan Quan [2006] No. 274);
(XV) The Notice on Matters Concerning the Review of Valuation Report of the State-owned Assets of Enterprise (Guo Zi Chan Quan [2009] No. 941);
(XVI) The Notice on Publishing the Guidelines for the Filing for Recordation of the Valuation Projects of Enterprise State-owned Assets (Guo Zi Fa Chan Quan [2013] No. 64);

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(XVII) The Notice on Issues Concerning the Development of Publication System for Assets Valuation Projects of the Central Enterprises (Guo Zi Fa Chan Quan [2016] No. 41);
(XVIII) The Notice on Issues Concerning Enhancement of Administration of Alternative Pools of Appraisal Institutions for Central Enterprises (Guo Zi Fa Chan Quan [2016] No. 42);
(XIX) The Securities Law of the People’s Republic of China (passed at the 15th Meeting of the Standing Committee of the 13th National People’s Congress on 28 December 2019);
(XX) Risk Warning for Accounting Supervision No. 5 – Asset Appraisal of Listed Companies’ Equity Transaction (Zheng Jian Ban [2013] No. 6);
(XXI) Regulatory Regulations Guidance – No.1 of Appraisal Type (Issued by China Securities Regulatory Commission on 22 January 2021);
(XXII) The Law of the People’s Republic of China on the Administration of Urban Real Estate (passed at the 12th session of the 13th National People’s Congress on 26 August 2019);
(XXIII) The Land Administration Law of the People’s Republic of China (passed at the 12th session of the 13th National People’s Congress on 26 August 2019);
(XXIV) Interim Regulations on Urban Land Use Tax of the People’s Republic of China (passed at the 163rd Executive Meeting of the State Council on 30 December 2006);
(XXV) Other laws and regulations related to the valuation.

III. BASIS OF VALUATION CRITERIA

(I) Asset Valuation Basic Standards (Cai Zi [2017] No. 43);
(II) Code of Professional Ethics for Assets Assessment (CAS [2017] No. 30);
(III) Terminology of Asset Appraisal Criteria 2020 (CAS [2020] No. 31);
(IV) Asset Valuation Practicing Standards – Asset Valuation Methods (CAS [2019] No. 35);
(V) Asset Valuation Practicing Standards – Asset Valuation Procedures (CAS [2018] No. 36);
(VI) Asset Valuation Practicing Standards – Asset Valuation Reports (CAS [2018] No. 35);

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(VII) Asset Valuation Practicing Standards – Contract on Asset Valuation Entrustment (CAS [2017] No. 33);
(VIII) Asset Valuation Practicing Standards – Asset Valuation Files (CAS [2018] No. 37);
(IX) Asset Valuation Practicing Standards – Enterprise Value (CAS [2018] No. 38);
(X) Asset Valuation Practicing Standards – Intangible assets (CAS [2017] No. 37);
(XI) Asset Valuation Practicing Standards – Real Estate (CAS [2017] No. 38);
(XII) Asset Valuation Practicing Standards – Machinery Equipment (CAS [2017] No. 39);
(XIII) The Guidelines for the Enterprise State-owned Asset Valuation Reports (CAS [2017] No. 42);
(XIV) Guidelines for Valuation of Intellectual Property Rights (CAS [2017] No. 44);
(XV) Guidelines for Business Quality Control of Asset Valuation Institutions (CAS [2017] No. 46);
(XVI) Guidance on Value Type for Asset Valuation (CAS [2017] No. 47);
(XVII) Guidance on Legal Ownership of Asset Valuation Target (CAS [2017] No. 48);

(XVIII) Guidelines on the Valuation of Patent Assets (CAS [2017] No. 49);

(XIX) Guiding Opinions No. 8 from Asset Valuation Expert – Check and Verification in Asset Valuation (CAS [2019] No. 39);
(XX) Guiding Opinions No. 11 from Asset Valuation Expert – Evaluation of Goodwill Impairment Test (CAS [2020] No. 37);
(XXI) Guiding Opinions No. 12 for Asset Valuation Expert – Measurement of Discount Rates in the Valuation of Enterprise Values by the Income Approach (CAS [2020] No. 38);
(XXII) Code for Real Estate Appraisal (National Standard GB/T50291–2015);
(XXIII) Regulations for Valuation on Urban Land (GB/T 18508–2014);
(XXIV) Other valuation criteria and norms related to the valuation.

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

IV. BASIS OF ASSET OWNERSHIP

(I) Real estate ownership certificate;
(II) Vehicle registration license;
(III) Equipment purchase invoice;
(IV) Patent certificate;
(V) Other asset ownership.

V. PRICING BASIS

(I) The Notice of Anhui Province Price Bureau, Anhui Provincial Department of Finance, Anhui Provincial Department of Construction on Further Improving the Collection and Usage Management of Supporting Fees for Urban Infrastructure jointly issued by Anhui Province Price Bureau, Anhui Provincial Department of Finance, Anhui Provincial Department of Construction on 14 September 2020;
(II) The published loan prime rate (LPR) on valuation benchmark date authorized by the National Interbank Funding Center;
(III) Market price information of building materials, labor and machinery of Bengbu City on the valuation benchmark date published at WWW.ZJTCN.COM platform;
(IV) Regulations for Valuation on Urban Land (GB/T 18508–2014);
(V) Regulations for Valuation on Urban Land (GB/T 18508–2014);
(VI) Newest Manual of Data and Parameters Commonly Used in Asset Appraisal (the 2nd version) (edited by Faqin Lu);
(VII) The 2020 edition of the Mechanical and Electrical Products Quotation Manual;
(VIII) Car transaction price information websites including ZOL Zhongguancun Online IT Product Quotation, IT168-IT Mainstream Information Platform and Pacific Automobile Net near the valuation benchmark date;
(IX) Equipment purchase invoice, vehicle registration certificate and other relevant documentation;

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(X) Statistical analysis data of national macro-economy, industry market and enterprises;
(XI) The audit report on valuation benchmark date of Bengbu China National Building Materials Information Display Materials Company Limited;
(XII) Operating information such as marketing sales provided by Bengbu China National Building Materials Information Display Materials Company Limited;
(XIII) Business plan and forecast data provided by Bengbu China National Building Materials Information Display Materials Company Limited;
(XIV) The asset valuation schedule on the valuation benchmark date provided by Bengbu China National Building Materials Information Display Materials Company Limited;
(XV) Analysis data of the Company’s position in the industry and market competition;
(XVI) Industrial data inquired by WIND information, the Internet and the newspapers;

(XVII) Financial data of listed companies in the glass industry;

(XVIII) Other pricing basis.

CHAPTER III VALUATION METHODS COST APPROACH (ASSET-BASED APPROACH)

The cost approach (asset-based approach) refers to the general term for various valuation techniques that determine the value of the valuation target on the basis of a reasonable evaluation of the value of the assets and liabilities of the enterprise. The valuation scope includes current assets, fixed assets, long-term deferred expenses, intangible assets and deferred income tax assets, as well as current liabilities and noncurrent liabilities. The valuation methods mainly adopt the cost approach. The specific valuation methods for various types of assets are as follows:

I. CURRENT ASSETS

Current assets include monetary capital, accounts receivable – financing, accounts receivables, prepayments, other receivables, inventories.

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(I) Monetary Capital

Monetary capital includes cash, bank deposits.

Bank deposits: check the data obtained from the statement, balance adjustment statement and letter of confirmations with its book value, and determine the appraised value with the verified amount.

(II) Accounts Receivables

Accounts receivables include accounts receivable – financing, accounts receivable, prepayments and other receivables.

Accounts receivable – financing: refers to financing receivables; determine whether there is a possibility of bad debts from financing receivables on the basis of consulting account books, investigating and understanding the relationship with the counterparty and the credit of the counterparty; determine the evaluation value of the financing receivables having become bad debts with evidence based on zero value, and determine the evaluation value of the normal financing receivables based on the verified book value.

Accounts receivable and other receivables: carry out letter verification for continuing transactions, affiliates and large sums of money, and confirm the appraisal value with the verified book value in accordance with the letter verification; for internal personal payment, determine the appraisal value with the verified book value; for the money that has been confirmed as loss by conclusive evidence, determine the appraisal value by zero value; for other funds, investigate the credit and operation status of the counterparty, judge whether there is possible bad debt loss and estimate the amount of bad debt loss in combination with the account age, so as to verify the balance after deducting the estimated risk loss from the verified book value and confirm the evaluation value; for the bad debt provision, evaluate as zero since the risk loss problem has been considered in the evaluation.

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APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

(III) Inventory

The inventory of the evaluation includes raw materials, commissioned processing materials, finished products (commodities in stock).

For commissioned processing materials, the appraisal value shall be determined with the verified book value.

For finished products (commodities in stock), the appraisal value is calculated according to the following formula (where part of the profit is determined in accordance with the sales situation):

Appraisal value = inventory quantity × ex-factory unit price without tax × [1- (all taxes + sales expenses + partial profits)/sales revenue]

II. EQUIPMENT

Equipment within the valuation scope includes machinery and equipment, vehicles and electronic equipment.

– III-23 –

APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

The cost approach is resorting to reproduction or replacement of the valued assets. The price that any potential investors are willing to pay upon their decision of investment in certain assets shall not exceed the current construction cost of the assets during the acquisition and construction. This assessment project is able to satisfy the conditions required for the cost approach, i.e. the valued assets are in the condition for continuing use or assumed to be in the condition for continuing use with available historical information, thus cost approach is adopted.

In view of the evaluation purpose and asset type of the evaluation, we adopt the cost approach for the evaluation. Its basic calculation formula is as follows:

Assessed value of equipment = replacement cost × newness rate

In terms of some equipment beyond economic service life and with no more production in the market, the assessed value is directly determined by the recoverable price in the market.

(I) Determination of Replacement Costs

The replacement cost of equipment generally includes all direct costs and reasonable indirect costs required for re-purchasing or building new assets with the same efficacy of the evaluation subject, such as purchase price of equipment (ex-factory price of equipment), transportation and miscellaneous cost, installation and commissioning cost, equipment foundation costs, etc.

1. Determination of replacement costs of machinery and equipment

The calculation formula of the replacement cost of important machinery and equipment is as follows:

Replacement costs = purchase price of equipment + transportation and miscellaneous cost + installation and commissioning cost + foundation cost + preliminary cost + capital cost – deductible input value-added tax

– III-24 –

APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

Since some projects, such as renovation of workshop and other structures, which are reflected in the listing of the machinery and equipment, has already been included in the assessment of the buildings and structures, the appraised value will not be calculated repeatedly in the equipment this time.

(1) Determination of purchase price of equipment

Valuers determine the replacement cost with appropriate adjustments by directly inquiring the sellers or the manufacturers about the prices, or referring to the price lists provided by various distributors, recent price information (2020 version of the Mechanical and Electrical Products Price Information Query System(《機電產品價格信息查詢系統》)), the price information published on the internet (Alibaba, Makepolo, Chuli, China.cn and other websites) and considering the possible floating factors. In the event that the current market no longer disposes the equipment or the purchase price is unavailable, while alternative standard equipment and general equipment are available, corresponding adjustments are determined through the market inquiry and the review to the relevant price manual with comprehensive consideration of the alternative factors.

(2) Determination of transportation and miscellaneous cost

Transportation and miscellaneous cost refers to the loading and unloading, transportation, storage and insurance incurred before the equipment arrives at the place of use, which is generally calculated by a certain ratio of the purchase price of the equipment. The calculation formula is as follows: Transportation and miscellaneous cost = purchase price of the equipment with taxes included × rate of transportation and miscellaneous cost

(3) Determination of installation and commissioning cost

With reference to the Manual of Data and Parameters Commonly Used in Asset Appraisal, an appropriate fee rate is adopted.

Installation and commissioning cost = purchase price of the equipment with taxes included × rate of installation and commissioning cost

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(4) Determination of foundation cost

With reference to the Manual of Data and Parameters Commonly Used in Asset Appraisal, an appropriate fee rate is adopted.

Foundation cost = purchase price of the equipment with taxes included × rate of foundation cost

The foundation of the equipment has been considered separately in the part of the building and structures, and will not be calculated repeatedly.

(5) Preliminary cost

Preliminary cost includes management cost of the contractor, cost of investigation and design, cost of construction supervision and agent service cost for bidding. The relevant rate of preliminary cost shall be recorded according to the rate corresponding to the overall investment scale of the special glass production enterprise.

The calculation formula of preliminary cost is as follows:

Preliminary cost = (purchase price of the equipment with taxes included + transportation and miscellaneous cost + installation cost + foundation cost) × rate of preliminary cost

(6) Capital cost

According to the loan interest rate corresponding to the valuation benchmark date and the reasonable construction period, it shall be evenly invested according to the purchase price of the equipment, transportation and miscellaneous cost, foundation cost, installation and commissioning cost and preliminary and other cost. The calculation formula is as follows:

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(7) Deductible input value-added tax

The appraised entity is a VAT-based general taxpayer. According to the relevant provisions of the “Notice on Adjusting Value-Added Tax Rates” (Caishui [2018] No. 32) issued by the Ministry of Finance and the State Administration of Taxation (《財政部稅務總局關於調整增值稅稅率的通知》財稅[2018]32號), the purchased production equipment is subject to the deductible input tax. The calculation formula is as follows:

General equipment mainly refers to the price of which is relatively low in value and common in the market. As most of these types of equipment are common equipment, the transportation and miscellaneous cost, installation and commissioning cost are included in the purchase price of equipment and are not separately calculated. The calculation formula of replacement cost is as follows:

Replacement cost (excluding tax) = replacement cost of equipment with taxes included – deductible input value-added tax

2. Determination of replacement costs for vehicles

The replacement cost of general passenger vehicles is determined according to the market price of a vehicle with the same model number, the same basic configuration on the valuation benchmark date, plus vehicle purchase tax and other reasonable cost (such as license fees). The basic calculation formula of replacement cost is as follows:

Replacement cost = vehicle purchase price + vehicle purchase tax + other cost of vehicle – deductible input value-added tax

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3. Determination of replacement costs of electronic equipment

Replacement cost = purchase price of the equipment – deductible input value-added tax or

Replacement cost = purchase price of the equipment with taxes excluded (rounding)

(II) Determination of Newness Rate

1. The newness rate of important machinery and equipment is determined by observation approach (i.e. investigation scoring approach), combined with service life approach.

Newness rate = newness rate under the service life approach×40% + newness rate by observation approach ×60%

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==> picture [367 x 30] intentionally omitted <==

Newness rate under the service Durable years = ×100% life approach Durable years + Serviced life

Newness rate = Newness rate under the service life approach =

Economic service life – Serviced life ×100% Economic service life

Newness rate = Newness rate under the service life approach =

Economic service life – Serviced life

×100%

Economic service life

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4. Determining the newness rate of vehicles

(1) For construction machinery and forklifts:
A. Newness rate under the service life approach:

The newness rate of vehicles in depots or are not on roads is determined on the basis of general machinery and equipment. Therefore, the theoretical newness rate is the newness rate under the service life approach. The formula for calculating the newness rate under the service life approach is:

Theoretical newness rate = newness rate under the service life approach = (economic service life – serviced life) ÷ economic service life×100%

B. Observed newness rate:

The observed newness rate is determined based on the scoring of the analysis of the actual conditions of the vehicle or technical status and extent of deterioration, such as vibration, noise, temperature, processing precision, production capacity, energy consumption and failure.

C. Comprehensive newness rate:

The final formula for calculating the comprehensive newness rate is:

Comprehensive newness rate = theoretical newness rate × 40% + adjustment coefficient × 60%

(2) For passenger vehicles:

Comprehensive newness rate is adopted for this kind of vehicles. The calculation formula is as follows:

Comprehensive newness rate = theoretical newness rate × adjustment coefficient

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III. BUILDINGS AND STRUCTURES

(I) Selection of Valuation Method

According to the Practicing Guidelines for Asset Valuation – Real Estate 《資產評估執業準則––不動產》, Code for Real Estate Appraisal 《房地產估價規範》 (China National Standard (GB/T 50291–2015)) (for determining the Real Estate Valuation System) and Standard for Basic Terminology of Real Estate Valuation (GB/T 50899–2013) 《房地產估價基本術語標準》 (for determining the description of real estate valuation), the generally accepted valuation methods for real estate valuation include market comparison approach, income approach, cost approach and hypothetical development method. The selection of valuation methods should be based on the specific characteristics of the subject to be evaluated, the surrounding market conditions and the applicability and the viability of the valuation method.

The market comparison approach is an approach to evaluate the value or price of an object through processing the transaction price of comparable cases based on the differences between them after selecting a certain number of comparable cases for the evaluation object. The basic conditions for using the market comparison approach are: a relatively active trading market is necessary; market cases and comparative indicators and parameters can be collected and quantified against an evaluation object. Since it is difficult to gather transaction cases, the comparison approach cannot be adopted.

The income approach is a method to estimate the future income of the object by using a return rate or a capitalisation rate or income multipliers to estimate the value or price of the object. Since the nature of the object to be evaluated is for the self-use of assessed entity and cannot generate income separately, it is not appropriate to choose the income approach.

The methodology of the cost approach is that in terms of reconstructing or replacing of an assessed asset, the price that any potential investors are willing to pay upon their decision of investment in certain assets shall not exceed the current construction cost of the assets. This evaluation meets the condition required for the cost approach evaluation, that is, the assessed asset continuing to be in use or being assumed to continuing in use, the construction and installation fees can be calculated and accumulated on a case basis with reference to objective criteria, and the relevant quota standard are well-established. Hence, it is appropriate to adopt the cost approach.

In conclusion, the cost approach is adopted for this evaluation based on the evaluation objective, use of assets, actual survey situation, and information available.

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(II) Valuation Method

The methodology of cost approach is obtaining the replacement value of the assessed object at the valuation benchmark date, after deducting the various types of depreciation, to estimate an objective and reasonable value for the building and structure. Among them, the replacement value is the normal value of the building and structure, in its new state and with the same function of the reconstructed building and structure, at the price level at the valuation benchmark date, using construction materials and construction techniques at valuation benchmark date.

Applicable formula:

Estimated value of buildings and structure = full replacement price × comprehensive newness rate

Among them: Replacement cost = construction and installation cost + preliminary costs and other expenses + capital costs

1. Determination of full replacement price

(1) Determination of construction and installation work cost

The cost of construction and installation is generally determined by the method of work settlement adjustment method, analogy method and index adjustment method.

1) Work settlement adjustment method:

Reconstruction of work settlement adjustment method is based on the as-built information, drawings and final account information of the project to be estimated. It is adjusted for the original work (budget), final account price, namely based original (budget) final account price, and the work cost is comprehensively estimated to the level at valuation benchmark date through adjusting difference of the existing local construction materials, labour and machinery unit price.

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2) Analogy method:

The analogy method is to obtain the price of construction and installation works based on recent cases with similar structural characteristics, construction floor area (size), number of floor, story height and decoration level, etc.

3) Index adjustment method:

That is, based on the reviewed price of the construction works provided by the appraised entity, to adjust the impact on the price of construction works due to price changes in labour and construction materials during the period from the construction date to the valuation benchmark date, by using the relevant construction price index, to estimate the construction cost of the construction and installation work to be evaluated. For those buildings and structures which lack information for settlement audit or final account audit once completion, and do not have comparative building and structure comparative information, the adjustment method is generally used.

As final account information is not provided by the appraised entity, the analogy method is adopted for this evaluation of the construction cost of the construction and installation work.

(2) Preliminary costs and other expenses

The preliminary costs and other expenses of the house and building consist of two components, namely, fees charged at a certain rate of the whole work cost and fees charged on a gross floor area basis; and the preliminary costs and other expenses of the building and structure is the costs charged at a certain rate of the whole work cost. According to the “Notice on Further Relaxation on Professional Services Charges for Construction Projects (Fa Gai Jia Ge [2015] No.299)” issued by the National Development and Reform Commission(國家發展改革委關於進一步放開建設項目專業服務價格的通知（發改價格[2015]299 號)), the preliminary cost is determined according to experience with reference to the market situation.

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(3) Capital costs

In this valuation, the capital costs are calculated based on the reasonable duration of the construction works. In other words, the normal funding costs or the capital opportunity cost for the construction works period is based on the aggregate of construction cost and preliminary cost and other expenses of the construction and installation work. It is assumed that the capital is equally invested when the building and structures are reconstructed, and the interest rate is determined based on the loan prime rate (LPR) as announced by the national inter-bank funding center with authorization at the valuation benchmark date.

2. Determination of newness rate

For buildings, the newness rate is determined by using two methods, namely scoring method and service life method, respectively, and taking the weights to calculate the comprehensive newness rate. For structures, pipelines and channels, the newness rate is assessed directly by using service life method.

(1) Scoring method

With reference to the proportion of each part to the cost of the building, which includes structural elements of the building, like foundation, load structure, facade, estate surface and floor structure, decoration parts like internal and external walls, and equipment parts like doors, windows and ceilings, and equipment like water, heating, electricity and sanitation equipment, the standard score is determined. Then, scores will be given based on on-site survey. The full score rate will be determined based on the scoring.

(2) Service life approach

Based on the durability and useful life of the building and structures, pipeline and channels, the newness rate of which are determined based on the following formula:

Newness rate = 1 – (serviced years/durable years) × 100%

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(3) Comprehensive newness rate

The weighted rate of return calculated by the service life approach is 0.5 and the weighted rate of scoring method is also 0.5.

Comprehensive newness rate = 0.5 × newness rate under service life approach + 0.5 × newness rate under scoring method

IV. INTANGIBLE ASSETS – LAND USE RIGHTS

According to Regulations for Valuation on Urban Land《城鎮土地估價規程》, the Practicing Guidelines for Asset Valuation –Real Estate, Code for Real Estate Appraisal (China National Standard (GB/T 50291–2015)) (for determining the real estate valuation system) and Standard for Basic Terminology of Real Estate Valuation (GB/T 50899–2013) (for determining the description of real estate valuation), the generally accepted valuation methods for land price include market comparison approach, income approach, benchmark land price coefficient correction approach, cost approach. The selection of valuation methods should be based on the specific characteristics of the object to be evaluated, the surrounding market conditions and the applicability and the viability of the valuation method.

The market comparison method is a method to evaluate the value or price of an object through conversing the transaction price of comparable cases based on the differences between them after selecting a certain number of comparable cases for the evaluation object. The basic conditions for using the market comparison approach are: a relatively active trading market is necessary; market cases and comparative indicators parameters can be collected and quantified against an evaluation object. As the appraised object is the grant of industrial land, the land transaction market in Bengbu city is relatively active, it is easy to obtain similar land transaction cases from the land administration department in Bengbu city, and the relevant indicators and parameters are similar to each other, it is appropriate to adopt the market comparison method in this assessment.

Benchmark land price coefficient correction approach is a method to determine the value of the subject land as at the valuation benchmark date by using valuation results such as benchmark land price of cities and towns as well as benchmark land price coefficient through comparing the regional and individual conditions of the subject land with the average conditions of the region where it is located in accordance with the substitution principle, and adjusting the benchmark land price by applying the corresponding correction coefficient selected from the adjusted coefficient table. In 2016, Bengbu City issued the Notice on Publishing the Results of Rating of Urban Lands and Benchmark Land Price Renewal《關於公佈城鎮土地定級與基準地價更新成果的通知》. The land to be appraised is located in the coverage area under benchmark land price, which is industrial tertiary land and can be appraised by the benchmark land price coefficient correction approach.

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As it is difficult to obtain the rent data of pure industrial land in the market, and the land of the appraised entity is not used for lease, the income approach is not applicable to this valuation. The land to be appraised is located within the developed industrial park and is not subject to the cost approach for appraising.

In conclusion, according to the purpose of this valuation, the use of assets, on-site inspection and the information available, the land use right of the appraised entity is appraised by the market method and the benchmark land price coefficient correction approach, and the weighted average value of the appraisal results of the two methods is determined as the value of the appraised entity.

The connotation and formula of the selected assessment approach

1. The benchmark land price coefficient correction approach

Where,

K1- Correction coefficient on date

K2-Correction coefficient on land useful life

K3- Correction coefficient on floor area ratio

∑K- Sum of the correction coefficients on regional factors and individual factors affecting land price

If there is difference between the level of development progress under benchmark land price adopted in this valuation and that of the land parcel to be valued, it is necessary to make correction with development progress, so as to get the land parcel price with development progress of the land parcel to be valued. Therefore,

Land parcel price under set development progress level = land parcel price with set development progress level under benchmark land price ± correction range of development progress.

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2. Market comparison approach

Based on the replacement principle, the land parcel price is derived by comparison made between the land parcel and the alternative similar land parcel that transacted in recent market as at the valuation reference date and make corrections to transaction price for the similar land parcel. The formula is as follows:

P＝PB × A × B × C × D × E

Where,

P – price of appraisal target;

PB – price of comparable land case;;
A – transaction index of the appraisal target/transaction index of the comparable land parcel;
B – land price index of the appraisal target on the valuation date/land price index of the comparable land parcel on the transaction date;
C – regional factor index of the appraisal target/regional factor index of the comparative recent land case;
D – individual factor index of the appraisal target/individual factor index of the comparable land parcel;
E – term of years correction index of the appraisal target/term of years correction index of the the comparable land case.

V. INTANGIBLE ASSETS – OTHER INTANGIBLE ASSETS

Other intangible assets within the scope of this valuation are use rights and patent rights of the selfpurchased software.

For use rights of outsourced software, market price method is adopted in this valuation. For outsourced software with no upgrade version sold on the market on the valuation benchmark date, the valuation is determined based on market price of similar software on the valuation benchmark date.

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For other intangible assets such as patent rights, they are generally the results of creative intelligence of scientific and technological personnel whose values and costs are not commensurate and the cost approach are not suitable for evaluation. However, for use rights of the software purchased in the market, the adoption of replacement cost approach is appropriate as the software is purchased in the market and wear and tear of the software can be determined based on the purchase time.

Market approach is not appropriate for evaluation as well because of the lack of identical or similar transaction cases.

The income approach is also called the present value of income approach, which is based on a generally accepted principle. The principle is that the value of an asset can be measured by the present value of its future cash flows. The present value of income approach is usually also called discounted cash flow method, which is to reasonably predict the net cash flow of the asset in each period of the future, convert it to present value at an appropriate discount rate, and take the sum of the present value of each period as the value of the evaluated asset. This evaluation has the conditions for the adoption of income approach.

In light of the purpose of this evaluation and the characteristics of the assets, and considering the functions, characteristics and required conditions of various evaluation methods, we adopt cost approach and income approach to calculate the market value of software use rights and patents and proprietary technologies in the intangible assets evaluated by entrustment respectively.

The basic calculation formula is as follows:

The specific calculation formula for this evaluation is as follows:

==> picture [80 x 34] intentionally omitted <==

Where,

P – Evaluation value
n – Economic life of proprietary technology evaluated
r- Discount rate before tax

Ri – Share of income generated by proprietary technology evaluated in year i Ri = Ii × γ

Ii – Income generated by other intangible assets evaluated in year i

Γ – Share rate of income from intangible assets derived from proprietary technology

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VI. DEFERRED INCOME TAX ASSETS

Deferred income tax assets are the amount arising from provision for bad debt recognised by the appraised entity as per accounting policies that affects income tax due to a difference in timing.

VII. LONG-TERM DEFERRED EXPENSES

Long-term deferred expenses are the amortised balance of the financial leasing expenses incurred by the appraised entity. In the evaluation, the content, original amount and amortisation period of long-term deferred expenses are known, and assets or rights formed are checked whether they have been reflected in other types of assets.

If it is confirmed that the long-term deferred expenses that have not been fully amortised have remaining assets or rights, reasonable amortisation period and correct amortisation balance, the verified carrying amount is regarded as evaluation value.

VIII. LIABILITIES

Liabilities are current liabilities and non-current liabilities, including short-term borrowings, accounts payable, contract liabilities, other payables, taxes payable, staff remuneration payable, non-current liabilities due within one year, other current liabilities, long-term borrowings and deferred income.

With full consideration of the authenticity of its debts and obligations, the verified amount of liabilities is regarded as the evaluation value.

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CHAPTER IV IMPLEMENTATION PROCESS AND STATUS OF VALUATION

I. PRE-INVESTIGATION

II. PREPARATION OF VALUATION PLANS

III. CONDUCTING ON-SITE INVESTIGATION

(I) Arranging and providing guidance for the relevant personnel to complete the asset valuation declaration schedule of the appraised entity. At the same time, guiding the appraised entity to conduct asset inventory.
(II) Submitting the due diligence list to the appraised entity and collecting documents required for valuation, including property rights certificates of current assets and physical assets, machinery and equipment purchase contracts or invoices and financial statements, production and operation statistics, audit reports in recent years, development plans, etc.

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(III) Conducting asset verification and on-site investigation in accordance with the requirements of the valuation criteria:
Checking whether there are any errors, omissions or duplicates in the asset and liability appraisal schedules completed by the appraised entity, comparing the asset and liability evaluation schedule with the financial general ledger category by category; Spot checking the key items of the assets or liabilities, checking the data recorded in the financial statements, and making the accounts and statements consistent;
The quantity of all kinds of physical assets listed in the valuation list of assets shall be carried out on the spot by means of a key full inspection and general spot check, and shall be checked with the book records; At the same time, we conduct on-site inspections of buildings, key structures and key equipment to form detailed survey records, conduct conversations with asset management personnel and operational personnel, and inspect buildings maintenance records, equipment operation logs and records of large and medium-sized repairs; for inventory, we check the storage of raw materials, understand the receiving (using) system, and understand the sales of finished products and the composition of sales cost;
Comparing with the land information, and checking the topography and geomorphology on the spot, and understanding the surrounding area, environment, transportation and land development and utilization, practical use, etc.; for other intangible assets, understanding the formation or acquisition process, its role in the production process, and its contribution to the revenue of the enterprise;
Verifying the issuance of letter confirmation for receivables in large and key amount, understanding the business transactions and the credit status of the counterparties, consulting the relevant agreements and contracts of major liabilities, understanding the duration of occurrence, the process of formation, and the situation of debt repayment;
Consulting and identifying the property right certification documents and materials provided by the appraised entity, ascertain the property right status of the fixed assets and intangible assets, and investigate the major matters that may affect the asset evaluation.
(IV) Forming an interview record after listening to the introduction of the relevant personnel of the appraised entity on the enterprise, key assets, history and current situation of the major products by the means of symposiums and interviews, and made an understanding of the production, operation and management of the enterprise.

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(V) Conducting research activities outside the appraised entity, including visiting the market or enquiring market information to understand the sales situation, price trend, market share and the corresponding situation of other enterprise products in the same industry, as well as the market competition situation; Understanding the relevant industrial policies, financial policies, market analysis of industry authorities or industry organizations, industry development opinions and industry statistics through the websites, professional publications and other media; visiting the management department and market to grasp information and materials of prices, conduct market research in the form of telephone inquiries and on-site consultation, and obtain price information.

IV. COLLECTION OF VALUATION INFORMATION

The appraisal professionals conducted appraisal information collection based on the specific circumstances of the appraisal project, including information obtained directly and independently from the market and other channels, information obtained from relevant parties such as the client and the appraised entity, as well as information obtained from government departments, various professional institutions and other relevant departments, categorized such information according to the needs of the appraisal work, i.e. by categories such as current assets, fixed assets, intangible assets, long-term deferred expenses, deferred income tax assets, liabilities and the valuation of income approach, and conducted necessary analysis, summarization and organization of the collected appraisal information to form the basis for the evaluation of estimates.

V. VALUATION AND ESTIMATION

VI. FORMATION OF VALUATION CONCLUSIONS

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VII. PREPARATION AND ISSUANCE OF VALUATION REPORTS

CHAPTER IV VALUATION ASSUMPTIONS

I. THE ASSUMPTIONS USED IN THIS VALUATION

(I) Basic Assumptions

1. Transaction assumption

2. Open market assumption

3. Assumption on continuing operation

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(II) General Assumptions

It is assumed that the appraised entity is a going concern after the valuation benchmark date;
It is assumed that there are no material changes in the relevant existing laws, regulations and policies, and macroeconomic conditions of the PRC as well as in the local political, economic and social environment of such places where the parties to the transaction are operating after the valuation benchmark date;
It is assumed that the person operating the appraised entity under valuation is accountable, and the management is capable of performing their duties after the valuation benchmark date;
It is assumed that the appraised entity has fully complied with all relevant laws and regulations;
It is assumed that the interest rate, exchange rate, tax base, tax rate, policy-imposed charges and others related to the appraised entity will not change significantly after the valuation benchmark date;
It is assumed that there are no other human force majeure and unforeseen factors that have a significant adverse impact on the enterprise after the valuation benchmark date.

(III) Specific Assumptions

It is assumed that the accounting policies to be adopted by the appraised entity after the valuation benchmark date are basically consistent with the accounting policies adopted when the valuation report is prepared in respect of significant aspects;
It is assumed that the business scope and method of the appraised entity will remain consistent with the current directions after the valuation benchmark date with its existing management method and management level;
The type of this valuation is the market value, regardless of the impact of the economic behaviour involved in the valuation purpose on the business operation of the enterprise;
It is assumed that the cash inflow and cash outflow of the appraised entity after the valuation benchmark date are even;

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There will be no material changes in the prevailing bank rates, foreign exchange rates, tax bases and tax rates, as well as policy-imposed levies;
There will be no force majeure factors and unpredictable factors materially and adversely affecting the operation of the enterprise;
The appraised entity will not change its business direction and its operation on a going concern;
There will be no material changes in the business mode, management and technical team of the appraised entity, and there will be no material changes in the inventory procurement and sales channels;
The evaluation information and asset rights provided by the client and the appraised entity are true, legal and complete, and the assessment information collected by the appraiser within its ability is true and reliable;
The appraised entity is in full compliance with all relevant laws, regulations and policies;
The accounting policies to be adopted by the appraised entity in the future are consistent in substantially all aspects of the accounting policies applied in the current assessment;
This valuation assumes that the basic information and financial information provided by the client and the appraised enterprise are true, accurate, and complete;
It is assumed that the appraised entity continues to invest in research and development; it will be able to continue to obtain the certificate of high and new technology enterprise and enjoy the income tax rate of 15% for high and new enterprises in 2021 and beyond;
It is assumed that other intangible assets within the evaluation scope will continue to be available for normal use at maturity;
There will be no material changes in the current technical standards of products related to proprietary technology owned by property holder that are issued by relevant government authorities, and there is no leakage of proprietary technology by property holder.

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II. THE IMPACT OF THE ASSUMPTIONS OF THE VALUATION ON THE CONCLUSION OF THE VALUATION

CHAPTER V CONCLUSION OF THE VALUATION

The book value of total assets of Bengbu China National Building Materials Information Display Materials Company Limited* as at the valuation benchmark date on 31 December 2020 was RMB848,882,600, the appraised value was RMB863,351,100, the appreciation value was RMB14,468,500, and the appreciation rate was 1.70%; the book value of total liabilities was RMB75,961,800, the appraised value was RMB73,702,800, the impairment amount was RMB2,258,900, and the impairment rate was 2.97%; the book value of net assets was RMB772,920,800, the appraised value of net assets was RMB789,648,300, the appreciation value was RMB16,727,500, and the appreciation rate was 2.16%.

Details of the summary of valuation result under cost approach (asset-based approach) are set out in the following table:

Unit: RMB0’000

Item Current assets Non-current assets Including: Fixed assets Intangible assets Long-term deferred expenses Deferred income tax assets Total assets	Book Value A 46,246.00 38,642.26 35,342.57 3,097.70 108.33 93.65 84,888.26	Appraisal Value Appreciation/ Depreciation Appreciation Rate％ B C=B-A D=C/A×100% 46,685.53 439.53 0.95 39,649.58 1,007.32 2.61 35,611.69 269.12 0.76 3,835.91 738.20 23.83 108.33 93.65 86,335.11 1,446.85 1.70

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Item Current liabilities Non-current liabilities Total liabilities Net assets (Owners’ equity)	Book Value A 5,763.89 1,832.29 7,596.18 77,292.08	Appraisal Value B 5,763.89 1,606.39 7,370.28 78,964.83	Appreciation/ Depreciation Appreciation Rate％ C=B-A D=C/A×100% -225.89 -12.33 -225.89 -2.97 1,672.75 2.16

The details of the valuation results under the cost approach (asset-based approach) are set out in the detailed statement of assets and liabilities assessment.

CHAPTER VI NOTES ON SPECIAL MATTERS

I. In appraising the assets within the valuation scope, we have not considered the possible expenses and taxes that may be borne by the assets used in the transfer of the equity interest, nor the appraised value of appreciation of certain assets for tax purposes; not considered such matters as mortgage, guaranty that may be assumed, litigation compensation, etc. likely to be borne in the future and of the effect of additional payment by special transaction party on the valuation conclusions.
II. According to the “Notice on the Comprehensive Rollout of the Business Tax to Value Added Tax Transformation Pilot Program” (Caishui [2016] No. 36) (《關於全面推開營業稅改徵增值稅試點的通知》 (財稅[2016]36號)), since 1 May 2016, the pilot program of the transformation from business tax to value-added tax (the “VAT Program”) has been comprehensively promoted nationwide, and the VAT can be deducted when the appraised entity engages in the acquisition and construction of assets, therefore, the appraisal value of machinery and equipment does not include VAT.
III. The 150 t/d electronic glass original production line and supporting equipment within the valuation scope of evaluation of the appraised entity have entered into finance lease contract with Suyin Financial Leasing Co., Ltd. The contract numbers are “Su Yin {2017} Leasing Zi No.48” (蘇銀 {2017}租賃字第48號) and “Su Yin {2017} Leasing Zi No.130” (蘇銀{2017}租賃字第130號) respectively. The lease term under the contract is from 20 April 2017 to 20 April 2022, and the leased property is owned by Suyin Financial Leasing Co., Ltd. during the lease term.

– III-47 –

APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

IV. The equipment within the valuation scope of the appraised entity was mortgaged to Bengbu Branch of Anhui Commercial Bank, and the maximum mortgage contract No. 1308272002261, has been signed. The collateral term of the contract is from 24 February 2020 to 24 February 2021.

CHAPTER VII STATEMENT OF LIMITATION ON THE USE OF THE ASSET VALUATION REPORT

I. This Asset Valuation Report shall only be used for the purposes of valuation as stated herein, and shall be used by the client and the users of the Asset Valuation Report as required by laws and administrative regulations.
II. This asset valuation conclusion is valid for one year from 31 December 2020 to 30 December 2021. However, if there is material change in the conditions of the valuation target or there is material movement in the market during this period, the conclusion of this valuation will be invalid. We take no responsibility towards the client and the users of the Asset Valuation Report required by laws and administrative regulations who use the report after its valid period. We also take no responsibility for any use of the report when the valuation target experiences material changes or the market experiences material movements within its valid period.
III. If the client or other users of Asset Valuation Report fails to use the Asset Valuation Report in accordance with the scope of use specified in laws, administrative regulations and the Asset Valuation Report, the asset valuation institution and its valuers shall not be held liable.
IV. With the exception of the client and the users of the Asset Valuation Report required by laws and administrative regulations, no other institution or individual shall become the user of the Asset Valuation Report.
V. User of the Asset Valuation Report shall correctly interpret and use the valuation conclusion, which is not equivalent to the realizable value of the valuation target and should not be considered as a guarantee for the realizable value of the valuation target.
VI. Without the consent of our company, content of the Asset Valuation Report shall not be extracted, quoted or disclosed on public media, unless otherwise permitted by laws, administrative regulations or agreed among relevant parties.
VII. The valuation conclusion shall not be used unless the Asset Valuation Report has been approved by SASAC (including the companies contributing funds).

– III-48 –

APPENDIX III SUMMARY OF ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

CHAPTER VIII DATE OF VALUATION REPORT AND OTHERS

I. The date of this Asset Valuation Report is 4 November 2021. The date of Asset Valuation Report refers to the date on which the valuation conclusion is drawn.
II. The Asset Valuation Report contains a number of appendices (see list of appendices), which are an important part of the Asset Valuation Report.

– III-49 –

REPORT FROM THE REPORTING ACCOUNTANT OF THE COMPANY ON THE CALCULATIONS OF DISCOUNTED FUTURE CASH FLOWS IN CONNECTION WITH THE VALUATION ON LONGHAI GLASS AND VALUATION ON BENGBU CNBM INFORMATION DISPLAY

APPENDIX IV

The following is the text of a report received from the reporting accountant WUYIGE Certified Public Accountants LLP for the purpose of incorporation in this circular.

Independent Reporting Accountant’s Assurance Report on the Calculations of Discounted Future Cash Flows in connection with the Business Valuation of CLFG Longhai Electronic Glass Limited and Bengbu China National Building Materials Information Display Materials Company Limited

To the Board of Directors of Luoyang Glass Company Limited (“Luoyang Glass”)

We have been engaged to report on the arithmetical calculations of the discounted future cash flows used in the valuation report of the value of the entire equity interests of CLFG Longhai Electronic Glass Limited as at 31 December 2020 and in the valuation report of the value of the entire equity interests of Bengbu China National Building Materials Information Display Materials Company Limited as at 31 December 2020 (the “ Valuations ”), dated 4 November 2021, prepared by Zhongjing Minxin (Beijing) Asset Appraisal Co., Ltd. The Valuation based on the discounted future cash flows is regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

Responsibilities of Directors

The Directors of Luoyang Glass (the “ Directors ”) are responsible for the preparation of discounted future cash flows in accordance with the bases and assumptions determined by the Directors and as set out in the Valuations. This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future cash flows for the Valuations and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

Independence and quality control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”), which is based on the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional conduct. The firm maintains a comprehensive quality control system, including documented policies and procedures for compliance with ethical requirements, professional standards and applicable laws and regulatory requirements, using Hong Kong Standard on Quality Control 1 “Quality Control for Firms That Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagement” issued by the HKICPA.

– IV-1 –

APPENDIX IV

The accountant’s responsibilities

Our responsibility is to report on the calculation of discounted future cash flows used in the Valuations, as required by Rule 14.62(2) of the Listing Rules. The discounted future cash flows do not involve the adoption of any accounting policies.

Basis of opinion

We have carried out our work in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised), “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the HKICPA. This standard requires us to plan and implement procedures to obtain reasonable assurance as to whether the Directors have properly compiled the discounted future cash flows in accordance with the bases and assumptions adopted by the Directors as set out in the Valuations. We performed procedures for the compilation and arithmetic calculation of the discounted future cash flows in accordance with the bases and assumptions adopted by the Directors. Since our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Therefore, we do not express an audit opinion.

Opinions

We consider that discounted future cash flows, so far as the arithmetical calculations are concerned, have been properly compiled in all material respects in accordance with the bases and assumptions adopted by the Directors as set out in the Valuations.

Other matters

Without qualifying our opinion, we would like to draw your attention that we are not reporting on the appropriateness and validity of the bases and assumptions on which the discounted future cash flows are based, nor does our work constitute any valuation or audit or review opinion of the valuations of CLFG Longhai Electronic Glass Limited and Bengbu China National Building Materials Information Display. The discounted future cash flows depend on future events and a number of assumptions that cannot be confirmed and verified in the same way as past results, and not all assumptions may remain valid throughout the period. In addition, because discounted future cash flows depend on future events, the actual results are likely to differ from the discounted future cash flows because future events and circumstances may not develop as expected, and the difference may be significant. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of our work, or arising out of or in connection with our work.

WUYIGE Certified Public Accountants LLP.

Certified Public Accountants

10 December 2021

– IV-2 –

LETTER FROM THE BOARD IN RELATION TO THE ASSET VALUATION REPORT ON LONGHAI GLASS AND THE ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

APPENDIX V

＊

The Stock Exchange of Hong Kong Limited 12/F, Two Exchange Square 8 Connaught Place Central

Hong Kong

14 December 2021

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION – DISPOSAL OF ENTIRE EQUITY INTEREST IN LONGHAI GLASS, LONGMEN GLASS AND BENGBU CNBM INFORMATION DISPLAY, WHOLLY-OWNED SUBSIDIARIES OF THE COMPANY

We refer to the asset valuation report (the “ Asset Valuation Report on Longhai Glass ”) dated 4 November 2021 prepared by Zhongjing Minxin (Beijing) Assets Appraisal Co., Ltd. (中京民信（北京）資產評估有限公司) (the “ Asset Valuer ”) in relation to the valuation (the “ Valuation on Longhai Glass ”) of the entire equity interest attributable to CLFG Longhai Electronic Glass Limited (洛玻集團洛陽龍海電子玻璃有限公司) (“ Longhai Glass ”) with the valuation reference date of 31 December 2020 and the asset valuation report (the “ Asset Valuation Report on Bengbu CNBM Information Display ”) dated 4 November 2021 prepared by the Asset Valuer in relation to the valuation (the “ Valuation on Bengbu CNBM Information Display ”) of Bengbu China National Building Materials Information Display Materials Company Limited (蚌埠中建材信息顯示材料有限公司) (“ Bengbu CNBM Information Display* ”) with the valuation reference date of 31 December 2020.

– V-1 –

APPENDIX V LETTER FROM THE BOARD IN RELATION TO THE ASSET VALUATION REPORT ON LONGHAI GLASS AND THE ASSET VALUATION REPORT ON BENGBU CNBM INFORMATION DISPLAY

We have reviewed the Asset Valuation Report on Longhai Glass, the Valuation on Longhai Glass has included the adoption of the valuation method of the income method, which included the discounted future cash flow of the intangible assets of Longhai Glass, thus regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

We have reviewed the Asset Valuation Report on Bengbu CNBM Information Display, the Valuation on Bengbu CNBM Information Display has included the adoption of the valuation method of the income method, which included the discounted future cash flow of the intangible assets of Bengbu CNBM Information Display, thus regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

We have discussed with the Asset Valuer about different aspects including the bases and assumptions based upon which the Valuation on Longhai Glass and Valuation on Bengbu CNBM Information Display have been prepared, and reviewed the Valuation on Longhai Glass and Valuation on Bengbu CNBM Information Display for which the Asset Valuer is responsible. We have also considered the report from WUYIGE Certified Public Accountants LLP regarding whether the profit forecasts, so far as the calculations are concerned, have been properly complied with the bases and assumptions set out in the Asset Valuation Report on Longhai Glass and Asset Valuation Report on Bengbu CNBM Information Display. We have noted that the calculations of the profit forecasts in the Valuation on Longhai Glass and Valuation on Bengbu CNBM Information Display are mathematically accurate, and fulfilled the bases and assumptions set out in the Asset Valuation Report on Longhai Glass and Asset Valuation Report on Bengbu CNBM Information Display.

Pursuant to the requirements of Rule 14.62(3) of the Listing Rules, based on the aforesaid, the Board of the Company confirmed that the profit forecasts as contained in the Asset Valuation Report on Longhai Glass and Asset Valuation Report on Bengbu CNBM Information Display have been made after due and careful enquiry.

Yours faithfully,

For and on behalf of the Board

Luoyang Glass Company Limited*

Zhang Chong

Chairman

For identification purpose only

– V-2 –

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(a) Interests of the Directors, supervisors and chief executive 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 was 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, so far as the Directors were aware, none of the Directors or their respective close associates were considered to have interest in any business which competes or may compete with the business of the Group which would be required to be disclosed under Rule 8.10 of the Listing Rules as if each of them was a controlling Shareholder.

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which 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 2020, being the date to which the latest published audited consolidated financial statements of the Group were prepared.

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.

– VI-1 –

GENERAL INFORMATION

APPENDIX VI

(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 member of the Group.

						Number of	Number of			Percentage
						underlying		Total	Percentage	of the total
						shares held		number	of the relevant	issued
				Number of		under equity		of Shares	issued class of	share capital of	Type of
Name			Capacity	Shares held	1	derivatives	1	interested 1	share capital	the Company	Share
									（Approximately）（Approximately）
									(%)	(%)
CNBMG	2		Interest in controlled	204,750,081 (L)			/	204,750,081 (L)	51.75	31.71	A Share
			corporation
Triumph	Group	2	Beneficial owner/	204,363,711 (L)			/	204,363,711 (L)	51.65	31.65	A Share
			interest in controlled
			corporation
Bengbu Institute			Beneficial owner	70,290,049 (L)			/	70,290,049 (L)	17.76	10.89	A Share
CLFG			Beneficial owner	111,195,912 (L)			/	111,195,912(L)	28.10	17.22	A Share

Note 1: (L) – Long position

Note 2: CNBMG is the controlling shareholder of China National Building Company Limited* （中國建材股份有限公司）, which is also the controlling shareholder of International Engineering. Triumph Group, a wholly-owned subsidiary of CNBMG, is the controlling shareholder of Bengbu Institute, CLFG and Huaguang Group.

Therefore, CNBMG is deemed to have the same interests in the Company as those owned by International Engineering, Bengbu Institute, CLFG, Triumph Group and Huaguang Group by virtue of the SFO; and Triumph Group is deemed to have the same interest in the Company as those owned by Bengbu Institute, CLFG and Huaguang Group by virtue of the SFO.

– VI-2 –

GENERAL INFORMATION

APPENDIX VI

As at the Latest Practicable Date, so far as is known to the Directors, supervisors or chief executives of the Company, the following Directors are directors or employees of the substantial shareholders set out above:

	Name of substantial
Name of Director	shareholder entity	Position held
Zhang Chong (executive	Bengbu Institute	Vice dean, General engineer
Director of the Company)
Xie Jun (executive Director	CLFG	Legal representative, Vice
of the Company)		Chairman, Deputy secretary to
		the Party committee, General
		Manager, General engineer
Chen Yong (non-executive	Bengbu Institute	Vice dean, Chief accountant
Director of the Company)
Ren Hongcan (non-executive	Bengbu Institute	Deputy general engineer
Director of the Company)

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the Directors, supervisors or chief executives of the Company, no other Director 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.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or supervisors had any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable by the Group within one year without payment of compensation, other than statutory compensation).

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, to the best of the Directors’ knowledge, there has been no material adverse change in the financial or trading position of the Group since 31 December 2020, being the date to which the latest published audited consolidated financial statements of the Group were prepared.

– VI-3 –

GENERAL INFORMATION

APPENDIX VI

5. QUALIFICATION OF EXPERT

The following are the qualifications of the experts which are contained in this circular:

Name

Qualification

Veda Capital Limited

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

Zhongjing Minxin (Beijing) Assets Appraisal Co., Ltd.

an independent professional valuer in the PRC

WUYIGE Certified Public Certified Public Accountants Accountants LLP

6. CONSENT OF EXPERT

Each of the above experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and/or opinion (as the case may be) and reference to its letter and name in the form and context in which they appear.

7. INTERESTS OF EXPERT

As at the Latest Practicable Date, each of the above experts 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 2020, being the date to which the latest published audited consolidated financial statements of the Group were prepared.

8. MISCELLANEOUS

(a) Mr. Ip Pui Sum is the company secretary of the Company. Mr. Ip is a certified public accountant in Hong Kong, a fellow member of the Association of Chartered Certified Accountants, and a member of the Hong Kong Institute of Certified Public Accountants, Chartered Institute of Management Accountants, Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries.

– VI-4 –

GENERAL INFORMATION

APPENDIX VI

(b) The address of the registered office and principal place of business of the Company is located at No. 9 Tang Gong Zhong Lu, Xigong District, Luoyang Municipal, Henan Province, the PRC.
(c) The address of the Hong Kong Share Registrar of H Shares is located at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Electronic copies of the following documents will be published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://clfg.wsfg.hk/) for a period of 14 days from the date of this circular (both days inclusive):

(a) Share Transfer Agreement;
(b) the letter from the Board, the full text of which is set out in the section headed “Letter from the Board” of this circular;
(c) the letter from the Independent Board Committee to the Independent Shareholders, the full text of which is set out in the section headed “Letter from the Independent Board Committee” of this circular;
(d) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the full text of which is set out in the section headed “Letter from the Independent Financial Adviser” of this circular;
(e) the written consents referred to in the paragraph headed “Consent of Expert” in this Appendix;
(f) the Summary of Asset Valuation Reports, the full text of which are set out in Appendix I, Appendix II and Appendix III of this circular; and
(g) this circular.

– VI-5 –

NOTICE OF EGM

＊

NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING 2022

NOTICE IS HEREBY given that the First Extraordinary General Meeting 2022 (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 25 January 2022 (Tuesday) for the purpose of considering and, if thought fit, passing the following resolutions:

Ordinary Resolutions

To consider and approve the resolution in relation to the transfer of the entire equity interest in CLFG Luoyang Longhai Electronic Glass Company Limited (洛玻集團洛陽龍海電子玻璃有限公司), CLFG Longmen Glass Co. Ltd. (洛玻集團龍門玻璃有限責任公司) and Bengbu China National Building Materials Information Display Materials Company Limited (蚌埠中建材信息顯示材料有限公司) to Triumph Technology Group Co., Ltd. (凱盛科技集團有限公司) by the Company, including the entering into of the Share Transfer Agreement and the transactions contemplated thereunder.
To consider and approve the resolution in relation to the grant of authorisation to the Board of the Company to handle the relevant matters in relation to the transfer of the entire equity interest in CLFG Luoyang Longhai Electronic Glass Company Limited (洛玻集團洛陽龍海電子玻璃有限公司), CLFG Longmen Glass Co. Ltd. (洛玻集團龍門玻璃有限責任公司) and Bengbu China National Building Materials Information Display Materials Company Limited (蚌埠中建材信息顯示材料有限公司) to Triumph Technology Group Co., Ltd. (凱盛科技集團有限公司) by the Company, including the entering into of the Share Transfer Agreement and the transactions contemplated thereunder.

– EGM-1 –

NOTICE OF EGM

(For details of the above resolutions, please refer to the relevant announcement of the Company dated 26 November 2021 and the circular dated 6 January 2022 (the “ Circular ”). Unless otherwise specified, capitalized terms used in this notice shall have the same meanings as those defined in the Circular.)

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

Luoyang, the PRC 6 January 2022

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

For identification purposes only

– EGM-2 –

NOTICE OF EGM

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 4:30 p.m. on 19 January 2022, are entitled to attend and vote at the EGM. The register of members of the Company’s H Shares will be closed from 20 January 2022 to 25 January 2022 (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 Shops 1712–1716, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong by 4:30 p.m. on 19 January 2022.
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.
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 case that the proxy form is signed by the attorney of the principal, the power of attorney or other authorisation documents must be notarised by the notary public. The proxy form together with such power of attorney or other authorisation documents as notarised by the notary public must be lodged at the Company’s H share registrar in Hong Kong, Hong Kong Registrars Limited, at 17M Floor, 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 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 traveling and accommodation expenses.
The Company’s registered address is as follows:

No. 9 Tang Gong Zhong Lu, Xigong District Luoyang Municipal, Henan Province the People’s Republic of China Postal Code: 471009 Tel: 86-379-6390 8588 Fax: 86-379-6325 1984

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

– EGM-3 –

AI assistant

RoboSense Technology Co., Ltd — Proxy Solicitation & Information Statement 2022

50628_rns_2022-01-05_c82b652c-8922-4c22-94c8-6069f13edf16.pdf

DISCLOSEABLE AND CONNECTED TRANSACTION–

OF THE COMPANY

DEFINITIONS

DEFINITIONS

DEFINITIONS

DISCLOSEABLE AND CONNECTED TRANSACTION –

DISPOSAL OF ENTIRE EQUITY INTEREST IN LONGHAI GLASS, LONGMEN GLASS AND BENGBU CNBM INFORMATION DISPLAY, WHOLLY-OWNED SUBSIDIARIES OF THE COMPANY

I. INTRODUCTION

II. THE DISPOSAL

SHARE TRANSFER AGREEMENT

Share Transfer

Share Transfer Price

Payment of the Share Transfer Price

LETTER FROM THE BOARD

Handover and Profit and Loss during the Period

LETTER FROM THE BOARD

Liability for Breach

Conditions Precedent for the Share Transfer Agreement to Take Effect

Arrangements on Employees and Credit and Debt Treatment

LETTER FROM THE BOARD

1. Accounts payable as of the Valuation Benchmark Date

LETTER FROM THE BOARD

1. For the valuation of Longmen Glass, only the asset-based approach has been used:

2. Both the cost approach and the income approach were adopted for the valuation of both Bengbu CNBM Information Display and Longhai Glass, and results of the cost approach were ultimately adopted as the final conclusion of this valuation:

LETTER FROM THE BOARD

Profit Forecast for the Valuation Approach of Longhai Glass and Bengbu CNBM Information Display

(I) Basic Assumptions

1. Transaction assumption

(II) General Assumptions

(III) Specific Assumptions

(I) Basic Assumptions

(II) General Assumptions

(III) Specific Assumptions

Supplementary Information on the Valuation of the Target Companies

Valuation method in relation to intangible assets of Longhai Glass – land use rights

Valuation of unrecorded assets in the books of Bengbu CNBM Information Display

INFORMATION ON THE COMPANY AND TRIUMPH GROUP

INFORMATION ON THE TARGET COMPANIES

Longhai Glass

Longmen Glass

Bengbu CNBM Information Display

FINANCIAL INFORMATION ON THE TARGET COMPANIES

Longhai Glass

Longmen Glass

Bengbu CNBM Information Display

REASONS FOR AND BENEFIT OF THE DISPOSAL

FINANCIAL EFFECTS OF THE DISPOSAL

USE OF PROCEEDS FROM THE DISPOSAL

LISTING RULES IMPLICATIONS

INDEPENDENT BOARD COMMITTEE

III. EGM

LETTER FROM THE BOARD

IV. RECOMMENDATIONS

V. RESPONSIBILITY STATEMENT

VI. ADDITIONAL INFORMATION

Yours faithfully,

DISCLOSEABLE AND CONNECTED TRANSACTION –

DISPOSAL OF ENTIRE EQUITY INTEREST IN LONGHAI GLASS, LONGMEN GLASS AND BENGBU CNBM INFORMATION DISPLAY, WHOLLYOWNED SUBSIDIARIES OF THE COMPANY

Yours faithfully,

Mr. Jin Zhanping,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO

DISPOSAL OF ENTIRE EQUITY INTEREST IN LONGHAI GLASS, LONGMEN GLASS AND BENGBU CNBM INFORMATION DISPLAY, WHOLLY-OWNED SUBSIDIARIES OF THE COMPANY

INTRODUCTION

OUR INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Information on the Company

2. Reasons for and benefits of the Disposal

3. Information of the Triumph Group

4. Information of the Target Companies

Longhai Glass

Longmen Glass

Bengbu CNBM Information Display

5. Summary of the principal terms of the Share Transfer Agreement

Share Transfer Price

Arrangements on Employees and Credit and Debt Treatment

Evaluation of the consideration for the Target Companies

RoboSense Technology Co., Ltd Proxy Solicitation & Information Statement 2022