RoboSense Technology Co., Ltd — Regulatory Filings 2017

Jan 9, 2017

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

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ANNOUNCEMENT ON REPLY TO THE ENQUIRY LETTER FROM THE SHANGHAI STOCK EXCHANGE ON RECEIPT OF GOVERNMENT SUBSIDIES, LOAN INTERESTS SUBSIDY AND TRANSFER ON CREDITOR’S RIGHTS

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

Reference are made to the announcements of the Company dated 30 December 2016 in respect of receipt of the government subsidies and loan interests subsidy and in respect of transfer of the creditor’s rights (the “ Announcements ”).

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As required in the Enquiry Letter on Receipt of Government Subsidies and Loan Interests Subsidy and Transfer of the Creditor’s Rights by the Company (《關於對本 公司獲得有關政府補助、財政貼息和轉讓債權事宜的問詢函》) (Shang Zheng Gong Han [2017] No. 0002) (the “ Enquiry Letter ”) issued by the Shanghai Stock Exchange, the Company hereby replies to the relevant enquiries in the Enquiry Letter as follows:

1. IN RESPECT OF GOVERNMENT SUBSIDIES

As disclosed in the Announcements, the Company and its wholly-owned subsidiary, CLFG Longhai Electronic Glass Company Limited (洛玻集團洛陽 龍海電子玻璃有限公司) (“ Longhai Company ”), recently received government subsidies of RMB66,474,750 and RMB10,000,000 from the People’s Government of Puyang County of the People’s Republic of China (the “ PRC* ”) and the People’s Government of Yanshi City of the PRC respectively, which will be included in profit and loss for the current period of the Company for the year of 2016. Please supplement the disclosure of (1) time of receipt of the notice or document regarding the government subsidies; (2) reasons for and basis of the recognition of the abovementioned government subsidies as government subsidies relating to earnings by the Company and the compliance of relevant regulations of the “Accounting Standard for Business Enterprises – Government Subsidies”. The auditor’s opinion is required to be included.

Reply:

1. Time of receipt of the notice or document regarding the government subsidies

The Company received “The Notice of the People’s Government of Puyang County on Granting Industrial Supporting Funds to Luoyang Glass Company Limited (Pu Xian Zheng Wen [2016] No. 290)* (《濮陽縣人民政府關於 給予洛陽玻璃股份有限公司產業扶持資金的通知》（濮縣政文[2016] 290 號）)” from the People’s Government of Puyang County of the PRC on 27 December 2016.

Longhai Company received “The Notice of the People’s Government of Yanshi City on Granting Supporting Funds for Enterprise Development to CLFG Longhai Electronic Glass Company Limited (Yan Zheng Wen [2016] No. 83)* (《偃師市人民政府關於給予洛玻集團洛陽龍海電子玻璃有限 公司企業發展扶持資金的通知》（偃政文[2016] 83號）)” from the People’s Government of Yanshi City of the PRC on 26 December 2016.

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1. Reasons for and basis of the recognition of the abovementioned government subsidies as government subsidies relating to earnings by the Company

The “Accounting Standards for Business Enterprises No. 16 – Government subsidy* ( 《企業會計準則第 16 號－政府補助》 )”, states that “the government subsidies obtained by the Company for the purpose of acquisition, construction or forming of long-term assets in other ways shall be recognized as the government subsidies related to assets, and all the government subsidies except those related to assets shall be recognized as government subsidies related to earning. If there is no explicit object of subsidies indicated in the government document, namely in case of general description without specifying any project in such document, the subsidies are classified as government subsidies related to earnings.

The Company and accountants agree that the two abovementioned documents require that the supporting funds are for the development of the Company and Longhai Company, and are not designated for purchase or construction of long-term assets or used for specific projects, therefore not being assets-related. Thus, the Company agree that the abovementioned government subsidies being recognized as government subsidies relating to earnings complies with the requirements under the “Accounting Standards for Business Enterprises No. 16 – Government subsidy* (《企業會計準則第 16號－政府補助》)”.

2. IN RESPECT OF LOAN INTERESTS SUBSIDY

As disclosed in the Announcements, the Company received the “Notice in respect of Granting Loan Interests Subsidy to CLFG Longhai Electronic Glass Company Limited (《關於給予洛玻集團洛陽龍海電子玻璃有限公司貸市款貼息支持的通 知》)” issued by the People’s Government of Yanshi City of the PRC, pursuant to which, loan interests subsidy with an amount of RMB50,000,000 will be granted to Longhai Company for consecutive four years from 2017. Please supplement the disclosure of the accountant treatment of the loan interests subsidy and its impact on the profit and loss for this year and the subsequent accounting periods, and the reasons for the accounting treatment. The auditor’s opinion is required to be included.

Reply:

The aforementioned preferential policies are only undertakings given by the People’s Government of Yanshi City of the PRC for which no specific plan for implementation is made. The Company and accountants agree that the policies will not affect the profit and loss of this year. According to relevant requirements under the Accounting Standards for Business Enterprises regarding the

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government subsidies, the accounting treatment of the loan interest subsidies shall be generally made as government subsidies related to earnings. Its impact on the profit and loss for the subsequent years shall be subject to principal and interest rate of subsidized loans actually obtained by Longhai Company every year.

3. IN RESPECT OF TRANSFER OF CREDITOR’S RIGHTS

As disclosed in the Announcements, the Company has entered into the Creditor’s Rights Transfer Agreement with its controlling shareholder, China Luoyang Float Glass (Group) Company Limited (中國洛陽浮法玻璃集團有限責任公 司) (the “ Controlling Shareholder ”), pursuant to which, the creditor’s right of the Company in connection with Luoyang Crane Factory Company Limited (洛 陽起重機廠有限公司), including all rights of the Company arising from such creditor’s rights, will be transferred to the Controlling Shareholder at a transfer price of RMB9,930,000. The transfer price will be determined based on the valuation assessed by China United Assets Appraisal Group Co., Ltd.* (中聯資 產評估集團有限公司) as at 1 December 2016 as the reference date under the cost approach, with the valuation of the creditor’s rights of RMB9,930,000 or a value-added ratio of 100%. Upon this transfer of creditor’s rights, it is expected that the Company will reverse bad debt loss of RMB4,965,000, resulting in an increase in profit of RMB4,965,000. Please supplement the disclosure of the following aspects:

1. Reasons for the formation of the credit assets, particulars on the counterparty Luoyang Crane Factory Company Limited* (洛陽起重機廠有限公司), aging analysis on the credit assets, basis for provision for impairment of the credit assets made by the Company in previous periods, and analysis on recoverability of creditor’s rights based on the counterparty’s debt paying ability. Please itemize the basis for and estimation process of recoverable amount of the creditor’s rights. The auditor’s opinion is required to be included.

Reply:

1. Formation of the creditor’s rights

2. On 20 December 2013, the Company and Luoyang Crane Factory Company Limited (洛陽起重機廠有限公司) (the “ Crane Factory* ”) entered into the Contract for Transfer of Plants, pursuant to which the plant located in No. 10 Tanggong East Road, Old Town District, Luoyang has been transferred to the Crane Factory with a consideration of RMB33,000,000. Since December 2013, the Crane Factory has paid RMB23,070,000 in total of the consideration for the transfer of the plant to the Company. As of 1 December 2016, the Crane Factory owed RMB9,930,000 to the Company.

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1. Particulars of Crane Factory

Crane Factory was established through bankruptcy reorganization of the former Luoyang Crane Factory with the registered capital of RMB102.66 million on 29 May 2013. Its shareholders include Gao Qingxiu, Yang Jianli and Li Jianyou, who hold 70%, 10% and 10% equity interests in it, respectively. Its scope of business covers design, manufacture, development and technical consulting of hoisting machinery, installation, repair and transformation of cranes, and design and manufacture of engineering machinery.

1. Basis for provision for impairment of the credit assets made by the Company in previous periods, and analysis on recoverability of creditor’s rights

On 31 December 2015, the Company separately conducted impairment test for the creditor’s rights as receivables that are individually significant. After the test, it was expected that the book balance of the creditor’s rights was possible to be recovered in full in the future. Therefore, no provision was made for bad debts on an individual basis. However, according to the principle of prudence and the accounting policy of the Company, provision was made for bad debts based on aging analysis. As at 31 December 2015, the aging of such creditor’s rights is 2 to 3 years. 50% of provision was made for bad debts based on aging analysis. Please refer to the reply to Question 3 below for details about aging analysis and basis for impairment.

The Company and accountants agree that the Company has made impairment test to the creditor’s right receivable and made impairment provision pursuant to accounting policies, which is in compliance with relevant requirements.

At present, Crane Factory is in normal production and operation. The Crane Factory was consistently profitable in recent years. Its gearing ratio is 63.8%, liquidity ratio is 1 and quick ratio is 0.94. Its overall financial conditions seem good and it has certain repaying capability. Therefore, the Company estimates that the creditor’s rights are still recoverable.

1. Please explain the reasons for the Company to transfer the assets to the Controlling Shareholder at the book value after provision for impairment of the credit assets. Please further disclose the results of evaluation of the credit assets with two evaluation methods, list important evaluation assumptions and parameters, further disclose the calculation process of evaluation, and explain the reasons for and reasonableness of adopting cost method. The auditor’s opinion is required to be included.

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Reply:

• (1) Reason for the transfer

In recent years, the Company pressed for repayment of debt from Crane Factory. Since the predecessor of Crane Factory was under entrusted management by the Controlling Shareholder, Crane Factory delayed the repayment under the pretext that the Controlling Shareholder had yet to resolve certain outstanding historical issues. As such, the transfer of creditor’s rights is conducive to revitalizing the Company’s assets, improving the quality of its existing assets and increasing its cash flow.

Moreover, given that Crane Factory needs to coordinate with the Controlling Shareholder in addressing the outstanding historical issues such as the social welfare of retired employees and that the Controlling Shareholder also has other creditor’s rights over Crane Factory, it is decided that aforementioned creditor’s rights be transferred to the Controlling Shareholder for its centralized debt collection, which will help strengthen the debt collection effort, improve the debt collection effect and save the debt collection costs and thus maximize the interests of both parties as a whole.

• (2) Evaluation method

This evaluation was conducted using only the cost method.

(3) Evaluation assumptions used

In this evaluation, the valuer employed the following evaluation assumptions:

① Trading assumption

The trading assumption assumes that all the assets to be evaluated appraised have been in the course of transaction, and the valuer will conduct the evaluation based on simulated market conditions such as the terms of transaction of the assets to be evaluated. The trading assumption is one of the most fundamental prerequisites for the asset evaluation.

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• ② Open market assumption

The open market assumption assumes that the parties to an asset transaction or a proposed asset transaction in the market are dealing with each other at arm’s length and have the opportunities and time to obtain sufficient market information in order to make rational and informed judgment on the functions, uses and transaction prices of the underlying assets. The basis of the open market assumption is that the assets can be traded openly in the market.

• ③ Going-concern assets assumption

The going-concern assets assumption means that the evaluation method, parameters and basis are to be determined according to the precondition that the target assets will be used in ways consistent with their current function, use method, scale, frequency and environment, or be used after certain adjustments.

• (4) Evaluation calculation process and parameters used in the evaluation

According to the feature, value type and information collected about the appraised subject, cost method is adopted in the valuation. The appraised value of the creditor’s rights to be transferred is then determined based on the analysis of the enterprise operating and debts repayment status.

In view of the value of the creditor’s rights, coupled with the operating position and repayment capability of Crane Factory, the debtor has the solvency to repay its debts and hence no impairment exists. The

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appraised value of the appraised creditor’s rights is RMB9,930,000, which is calculated and analyzed as follows:

The appraisal of the creditor’s rights is conducted in two aspects:

• 1) Operating position analysis of the debtor

According to the information provided by the client and the debtor, the debtor’s operating results in recent years are as follows:

Table of Operating Results of Luoyang Crane Factory Company Limited* (洛陽起重機廠有限公司) from 2013 to November 2016

Currency: RMB yuan

	As at	As at	As at	As at
	31 December	31 December	31 December	30 November
	2013	2014	2015	2016
Total assets	170,766,476.29	211,865,633.13	218,938,286.43	221,097,024.57
Total liabilities	100,528,375.09	139,328,452.13	142,050,918.77	141,102,420.47
Net assets	70,238,101.20	72,537,181.00	76,887,367.66	79,994,604.10
				January to
				November
	2013	2014	2015	2016
Operating revenue	66,604,051.80	65,371,460.31	71,323,079.04	27,511,724.13
Total profit	5,682,433.21	5,014,223.09	5,067,783.90	3,611,422.20
Net profit	4,247,612.00	3,816,916.34	4,147,920.39	2,824,760.40

As shown in the above operating results, the debtor enjoyed stable corporate development and had sufficient net assets. Judging from its asset structure and asset quality as at the reference date as well as its operating results and profitability in recent years, the debtor has the solvency to repay its debts when due.

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2) Solvency Analysis Of the Debtor

Solvency represents the ability of an enterprise to repay due debts (including principles and interests). The valuer conducted analyses on the solvency of the Crane Factory from both short term and long term aspects.

• ① Short term solvency:

Short term solvency depends on whether the current assets of an enterprise can fully repay its current liabilities in a timely manner when due. It is an important indicator of the current capital strength, especially the ability to monetise the current assets of an enterprise.

Quick ratio represents the ratio between the quick assets and current liabilities of an enterprise. Quick assets include monetary fund, short term investment, bills receivable, accounts receivable and other receivables. It measures the portion of the current assets of an enterprise that can be immediately monetised to repay current liabilities.

Quick ratio = quick assets/current liabilities x 100%

Quick assets = current assets – inventory

The quick ratios of Luoyang Crane Factory Company Limited* (洛陽起重機廠有限公司) for the latest three years are as follows:

			Historical	data	Average of
					general equipment
				January to	manufacturing
No.	Indicator/Year	2014	2015	November 2016	industry (2016)
1	Quick ratio_(%)_	78.35	88.87	93.74	82.2

In this regard, quick ratios are all above the industry average (except in 2014, which is slightly below average). Therefore, the debtor has short term solvency.

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• ② Long term solvency:

Long term solvency mainly represents the ability of an enterprise to repay long-term loans as scheduled, the indicators of which mainly include gearing ratio and interest coverage ratio.

• a. Gearing ratio

Gearing ratio is the ratio between total liabilities and total assets of an enterprise at the end of the year, representing the amount of total assets funded through liabilities of an enterprise, which is a comprehensive indicator of liability level of an enterprise.

Gearing ratio = total liabilities/total assets x 100%

• b. Interest coverage ratio

Interest coverage ratio or times interest earned is the ratio of Earnings before Interest and Tax (EBIT) from production and operation of a company to its interest expenses. It is an indicator to measure the ability of a company to honor its interest of debt payments. When dividing Earnings before Interest and Tax (EBIT) from production and operation of a company by the interest payable, higher times of the calculation indicates stronger ability of a company to pay off its interest expenses and hence more secure creditor’s rights.

Interest coverage ratio = (total profits + interest expenses)/interest expense

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Gearing ratios and interest coverage ratios for the preceding three years of Luoyang Crane Factory Company Limited* (洛陽起重機廠有限公司) is set out as below:

Historical data

					Average of
					general
					equipment
				January to	manufacturing
				November	industry
No.	Indicator/year	2014	2015	2016	(2016)
1	Gearing ratio_(%)_	65.76	64.88	63.82	60
2	Interest coverage	8.50	4.59	3.71	3.1
	ratio_(%)_

In view of the gearing ratios (being the average level in the industry) and interest coverage ratios (higher than the average value in the industry) of the debtor, Crane Factory is relatively solvent in the long run.

Upon analysis on the long and short term solvency, it is concluded that Crane Factory is relatively solvent and therefore the there is minimal to be incapable of recovering the creditor’s rights entrusted for evaluation as at the reference date.

In view of the above, based on analysis on the operation conditions and solvency, Crane Factory is capable of paying its debts when they fall due. The assessed value of the creditor’s rights entrusted for evaluation amounts to RMB9.93 million.

• (5) Reasons for and Rationality of Adopting the Cost Method

As the assets to be appraised involve creditor’s rights only, cost method is adopted according to features, value type and information collected of the appraised subject based on the operation and solvency of the enterprise, in the determination of the appraised value of the creditor’s rights proposed to be transferred.

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Reasons for Failure to Adopt the Income Approach and Market Approach in the evaluation:

• ① As the economic behavior has no direct relationship with the debtor whose creditor’s rights will be transferred, the valuer cannot easily get a deeper understanding of the enterprise in debt so as to make judgments with respect to its future cash flows and risk exposures. Therefore, income approach is not appropriate for valuing the enterprise in debt in determination of the value of the creditor’s rights to be appraised. From the perceptive of actual practice, there is rare occasion where income approach is adopted to appraise the creditor’s rights.

• ② There are not sufficient similar transaction cases in the current domestic capital market, therefore with no necessary preconditions for the market approach. As a result, the market approach is not appropriate.

Hence, based on the information accessible to the valuer and the cooperation willingness of the debtor, the cost method can reasonably reflect the value of the creditor’s rights.

Upon examination, the valuer is of the view that reply (1) gives an objective elaboration of the necessity and reasonableness of the transfer of creditor’s rights. For the purpose of the evaluation of creditor’s rights, due to the failure of adopting the income approach and market approach in the evaluation given the limitations of objective conditions, cost method is adopted based on the operation and solvency of the debtor, in the determination of the appraised value of the creditor’s rights proposed to be transferred. The appraised value reflects the actual value of the creditor’s rights and thus is reasonable.

1. Please explain the fairness of the transaction’s valuation based on the previous provision for impairment of assets. Please disclose the differences between the valuation of the creditor’s rights and the recoverable amount of assets and the reasonableness thereof, itemize the estimated differences of both in terms of determination basis, major parameters and assumptions and the reasons and reasonableness thereof. Please let the auditor and valuer issue opinions on the abovementioned issues.

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Reply:

• (1) The fairness of the assessed value in this transaction

• ① Statements of accounting policy for bad debt provision

The Company formulated the accounting policy for impairment of assets in accordance with the relevant provisions. The policy of impairment is as follows:

At the balance sheet date, if there is objective evidence shows that the impairment occurred, the Company shall recognize the impairment loss based on the difference between its carrying amount and the present value of estimated future cash flows.

• a. Accounts receivable of items with significant individual amounts and provide for bad debts individually

Judgment basis and amount The book balance of standard for items with accounts receivable is significant individual more than RMB5 million amount

The provision methods for Determination is made items with significant based on the difference individual amounts and between its carrying provide for bad debts amount and the present individually value of estimated future cash flows

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• b. Accounts receivable of items provide for bad debts by groups

Basis for groups	The	nature of the accounts and its
determination	risk	characteristics
Groups using aging	In addition to the accounts
analysis method for	receivable with no provision
bad debts provision	for bad debts, the accounts
	receivable which have not been
	impaired after individual tests
	are divided into several credit
	risk groups using aging analysis
	method, and then provide for bad
	debts based on certain ratios of
	the balance of relevant accounts
	receivable groups.
Groups not to provide	(1)	Margins and deposits related
for bad debts		to the production and
		operation projects and can
		be fully recovered upon
		expiration;
	(2)	The accounts receivable
		occurred between the
		Company and the related
		parties, and the financial
		status of the related parties
		is good;
	(3)	Other amounts with conclusive
		evidence shows that can be
		fully recovered.
Methods of provision
for bad debts by
groups
Groups using aging	Aging analysis method
analysis method for
bad debts provision
Groups not to provide	Not	to provide for bad debts
for bad debts

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Groups using aging analysis method for debts provision are as follows:

		Provision Provision
		percentage of percentage of
		accounts other account
	Aging	receivable receivable
		(%) (%)
	Within 1 year
	(including 1 year)	0 0
	1 to 2 years	30 30
	2 to 3 years	50 50
	3 to 4 years	100 100
	4 to 5 years	100 100
	Above 5 years	100 100
c.	Accounts receivable of items with non-significant individual
	amount but provide for bad debts individually
	Reasons of providing for	Conclusive evidence shows
	bad debts individually	that there are significant
		differences in its
		recoverability.
	Method for bad debt	The provision for bad debts
	provision	shall be made on a case-by-
		case basis, and provision for
		bad debts may also be made
		in full for those receivables
		from related parties that are
		expected fully unrecovered.

In accordance with the above accounting policies, the Company made provision for the corresponding impairment of Crane Factory. The determination of accounting policy for impairment provision is based on the principle of prudence considerations.

② Assessed value

Assessed value is calculated through a comprehensive analysis of the debtor’s operating conditions and solvency. It gives an objective reflection of the debtor’s ability to pay off due debts.

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• ③ Fairness of the assessed value

Through the above comparison, the provision for impairment was made by the enterprise from the perspective of creditor, and the accounting treatment reflects its principle of prudence. The appraised value, determined from the perspective of debtor, objectively reflects whether the debtor has the capacity of repaying due debts. After the comparison of both, the appraised value can better reflect the value of the creditor’s rights in an objective way, which is fair.

• (2) Reasonableness analysis of the differences between the valuation of the creditor’s rights and the recoverable amount of assets

• ① Basis and parameters for determination of the recoverable amount

The determination of enterprise accounting system is mainly based on “Enterprise Accounting Standards” and the proportions of provision for bad debts of accounts receivables based on aging analysis are determined taking into consideration of the conditions of the Company and with reference to the proportions of provision for bad debts adopted by the peers. The policies for provision for bad debts and related proportions have been stated in the section (1). Aging analysis method is adopted by the enterprise for provision for bad debts of the creditor’s rights to be appraised. Based the formation time of the creditor’s rights to be appraised, 50% of provision was made for bad debts aged 2–3 years in accordance with the accounting policies for business enterprises. Therefore, the provision for bad debts of the creditor’s rights to be appraised to be made is RMB4,965,000. The recoverable amount of the creditor’s rights to be appraised as determined in accordance with enterprise accounting system is RMB4,965,000. Therefore, the basis and parameters for determination of the recoverable amount are in compliance with the requirements of Enterprise Accounting Standards.

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• ② Basis, parameters and assumptions for determination of valuation

The determination of assessed value is mainly based on the “Assets Appraisal Criterion – Basic Standard”, “Assets Appraisal Criterion – Evaluation Report”, “Assets Appraisal Criteria – Evaluation Procedures” and “Guidelines for Evaluation of State-owned Assets of Enterprises”. The assessment assumptions are mainly based on transaction assumptions, open market assumptions and asset sustainable management assumptions; parameter is mainly based on the financial operation data of the debtor confirmed by the debtor and relevant parties; the selection of comparable indicators is mainly based on “2016 enterprise performance evaluation standard value”. The basis, parameters and assumptions of the assessment are in accordance with the requirements of the evaluation criteria and the practice of the assessment industry, which are reasonable.

• ③ The difference between the appraised value and the recoverable amount of the creditor’s rights to be appraised and its reasonableness

The creditor’s rights to be appraised have a recoverable book value of RMB4,965,000 and were valuated at RMB9,930,000, representing evaluation appreciation of RMB4,965,000.

Reason for the difference: The recoverable book value of the creditor’s rights represents the net value of such creditor’s rights for which the creditor has made bad-debt provision in the principle of prudence and in accordance with its accounting policy. The valuation, however, reflects the value of the creditor’s rights calculated based on the debtor’s solvency and willingness to repay the debts as judged from the information provided by the parties concerned. The two figures represent the value of the creditor’s rights from different perspectives and thus the difference is reasonable.

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The accountants and valuer are of the view that, as the provision for bad debts was made by the Company mainly in the principle of prudence according to its accounting policies and the evaluation was based on the actual repaying capability of the debtor using judgment and calculation, the valuation can reflect the debtor’s solvency in a more objective manner and has greater fairness. Therefore the differences between the evaluation results and carrying amount of creditor’s rights are reasonable. As indicated in the above analysis, the debtor has both the solvency and the willingness to repay its debts, so no difference between the valuation and the recoverable amount is reasonable.

1. Pursuant to the “Response to the Regulation Issues of the Listed Companies for the Application of the Accounting Standard for Business Enterprises (《上市公司執行企業會計準則監管問題解答》)”, for unilateral transfer of benefits, including direct or indirect donation and debt exemption, to a listed company from its controlling shareholder, gains from such benefits shall be accounted for in the owner’s equity of the company as the transaction takes place based solely on the two parties’ particular capacities and prominently and unilaterally benefits the company. As the counterparty is the Controlling Shareholder of the Company, please specify whether this transaction is a unilateral transfer of benefits to the Company and whether relevant gains from this transaction being accounted for in the current gains/losses of the Company meets the requirements of the above Response. The auditor’s opinion is required to be included.

Reply:

The pricing basis for the Company’s transfer of its creditor’s rights due from the Crane Factory to the controlling shareholder, as a related party transaction, was determined based on the evaluation results of the creditor’s rights. As at 31 December 2016, the Company had received RMB9.93 million from the controlling shareholder for the creditor’s rights. After the transaction, the receivables are expected to be recovered due to the centralized repayment by the controlling shareholder. Therefore, the transaction does not represent the controlling shareholder’s unilateral transfer of benefits, including direct or indirect donation and debt exemption, to a listed company.

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Accordingly, the Company is of the view that the pricing for the related party transaction is fair and the transfer of creditor’s rights at fair value is not a donation. Thus, the provision for bad debts arising from the transaction is reversed and recognized in profit or loss for the current period, which is in line with the requirements of the above replies to the regulatory questions.

The accountants’ view: Based on the reason for the Company’s transfer of its creditor’s rights due from the Crane Factory to the Controlling Shareholder, and judging from the content of the evaluation report, the pricing for the related party transaction is fair and the transfer of creditor’s rights at fair value is not a donation. During the subsequent on-site audit for annual reports, the focus of the accountants will be placed on evaluating whether Crane Factory possesses debt repaying ability and the progress of the Controlling Shareholder’s repayment of creditor’s rights. If Crane Factory pays its debt in a timely manner, the accountants are of the view that the abovementioned bad debts can be recorded as the profit and loss of such current period.

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

Luoyang, the PRC 9 January 2017

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

• For identification purposes only

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