09:52 ZHEJIANG GLASS<00739> - Announcement (5) According to the construction schedule currently contemplated by the Group, the construction of three float flat glass production lines are expected to commence in early 2005, among which one of them is expected to complete by the end of 2005 with the remaining two to complete by the end of March 2006. In addition, the construction of a new production line of ultra-thick glass is scheduled to commence in early 2006 and complete by the end of March 2007 while the construction of another new production line for the production of automotive-grade flat glass is expected to commence in early 2007 and complete by the end of 2007. REASONS FOR THE ONGOING CONNECTED TRANSACTION Having regard to the growth and expansion of the Group, certain construction work is anticipated in the next few years and it is expected that there will be an increasing demand for cement by the Group for the purpose of constructing new production lines and other related facilities. Some of the new production lines will be located in the existing factory area of the Group while some of them will be located in other areas of Zhejiang Province such as Pinghu and Tao Yan. New buildings and other ancillary facilities in connection with the new production lines including the administrative offices, production houses and warehouse will be constructed on the land owned by the Group (including the Relevant Land upon obtaining the land use right certificate). Save as the Relevant Land, no acquisition of land or buildings is currently contemplated by the Group for the purpose of constructing the new production lines, buildings and other related facilities. All such new buildings and ancillary facilities will be owned by the Group upon completion of their construction. The Directors (including the independent non-executive Directors) consider that the terms of the Master Supply Agreement were negotiated between the Company and Zhejiang Cement on an arm's length basis and on normal commercial terms. Zhejiang Cement is principally engaged in the manufacturing and sale of cement in the PRC. The Directors believe that in view of the close association between the Company and Zhejiang Cement in the sense that both of their majority interest are owned by our chairman, Mr Feng Guangcheng, the Group can have a better control over the quality of the cement supplied by Zhejiang Cement and can have a greater assurance over the timely supply of cement for the Group's construction purposes. The Directors (including the independent non-executive Directors) consider that the terms and conditions of the Master Supply Agreement are fair and reasonable and are on normal commercial terms and that the Ongoing Connected Transaction is in the best interest of the Group and its shareholders as a whole. REPORTING AND DISCLOSURE REQUIREMENTS Hua Hong is a wholly owned subsidiary of Zhejiang Cement, the registered capital of which is in turn owned as to 61.11% by Mr Feng Guangcheng, the chairman and a substantial shareholder of the Company who is interested in approximately 66.36% in the issued share capital of the Company. Accordingly, the Acquisition and the Ongoing Connected Transaction constitute connected transactions for the Company under the Listing Rules. Pursuant to Rules 14A.32 and 14A.34 of the Listing Rules, the Acquisition and the Ongoing Connected Transaction are only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Listing Rules and no independent shareholders' approval is required. Details of the Acquisition and the Ongoing Connected Transaction will be respectively included in the Company's annual report and financial statements for the year ended 31 December 2004 and for the financial years during which the Ongoing Connected Transaction is undertaken by the Group. DEFINITIONS In this announcement, unless the context otherwise requires, the following terms shall have the meanings set out below: "Acquisition" : the acquisition of the Land Use Rights by the Company from Hua Hong as contemplated by the Agreement "Agreement" : the agreement dated 29 December 2004 entered into between the Company and Hua Hong in relation to the Acquisition "Company" : #(Zhejiang Glass Company, Limited), a joint stock limited company established in the PRC, whose H shares are listed on the main board of the Stock Exchange