09:57 ANHUI CONCH<00914> - Announcement (5) Located in Yulin City of Guangxi, Xingye Company is a limited liability company established in the PRC on 7 September 2003. It is principally engaged in the production, warehousing, sales and provision of after-sales service of cement and clinker. Xingye Company possesses abundant limestone reserves and it is approximately 268 million tonnes of limestone reserves at the first phase of its limestone mine and it could plan to construct two new dry process clinker production lines with a daily capacity of 5, 000 tonnes. The first phase of the project consists of a 1.5 million tonnes per annum clinker production line and 1.6 million tonnes per annum cement grinding mill. The acquisition of the Xingye Project includes phase one of the project and the shared facilities of phases one and two of the project. Located in Chongzuo City of Guangxi, Fusui Company is a limited liability company established in the PRC on 6 September 2003. It is principally engaged in the production, warehousing, sales and provision of after-sales service of cement and clinker. Fusui Company possesses abundant limestone reserves and it is approximately 153 million tonnes of limestone reserves at the first phase of its limestone mine and it could plan to construct three new dry process clinker production lines with a daily capacity of 5,000 tonnes. The first phase of the project consists of a 1.5 million tonnes per annum clinker production line and 1.6 million tonnes per annum cement grinding mill The acquisition of the Fusui Project includes phase one of the project and the shared facilities of phases one, two and three of the project. The Company does not contemplated the limestone mining rights to be transferred under the Xingye Project and Fusui Project to be affected by the transfer of ownership from Xingye Company to Kuiyang Conch and by the transfer of ownership from Fusui Company to Xinning Conch. The acquisitions will be beneficial to the Group's expansion in the Southern China market. Upon the completion of the construction of the two dry process clinker production lines under the Xingye Project and Fusui Project which is expected to be in July 2005, the annual clinker production capacity of the Group will be increased by 3 million tonnes, the annual cement grinding capacity of the Group will be increased by 3.2 million tonnes, the estimated annual clinker sales of the Group will be increased by 800,000 tonnes and the estimated annual cement sales of the Group will be increased by 3.2 million tonnes. The Group intends to take advantage of the close proximity of the convenient transportation system by Xingye Company and Fusui Company to expand the cement markets of the Group in southeast of Guangxi and southwest of Guangdong as well as the ASEAN (Association of Southeast Asian Nations) markets, which extend to Vietnam from the nexus at Nanning of Guangxi. It is expected that the Group will increase its sales in these areas. At the same time, the Group can also promote structural adjustment in the cement industry in Guangxi and Southern China through consolidating the cement markets there. Kuiyang Conch and Xinning Conch will employ the original official staff in relation to the cement and clinker production of Xingye Company and Fusui Company after the completion of the Xingye Project and Fusui Project. Each of the aforesaid staff will enter into a new employment contract with Kuiyang Conch and Xinning Conch respectively on a voluntary basis. Save for the aforesaid arrangement and the consideration to be paid for the Xingye Project and Fusui Project, there is no further commitment by the Group in respect of the Xingye Project and Fusui Project. The Board considered and approved the Xingye Project and the Fusui Project on 24 May 2005. The Board believed that the Xingye Project and Fusui Project had been conducted on normal commercial terms, and the terms of the Xingye Project and Fusui Project were fair and reasonable and based on the principles of fairness and justice, no harmful acts against the interests of the Company and its shareholders exist, and the Xingye Project and Fusui Project are in the interest of the Group and the Company's shareholders as a whole. III. REPORTING AND DISCLOSURE REQUIREMENTS Xingye Company has a registered capital of RMB200 million, 32.62%, 64.01% and 3.37% of which is owned by the Company, Yuanheng Company and Fusui Company respectively. Fusui Company has a registered capital of RMB200 million, 21.26%, 74.80% and 3.94% of which is owned by the Company, Yuanheng Company and Xingye Company respectively. Each of Xingye Company and Fusui Company has three directors, among whom two are common directors of Xingye Company and Fusui Company. Both Xingye Company and Fusui Company are associated company of the Company, while Kuiyang Conch and Xinning Conch are wholly-owned subsidiaries of the Company. To the best of the Directors' knowledge, information and belief and having made all reasonable enquiries, save for the respective equity interest of the Company and Xingye Company in Fusui Company and the respective equity interest of the Company and Fusui Company in Xingye Company as aforesaid, each of Yuanheng Company, Xingye Company and Fusui Company and their respective ultimate beneficial owners is a third party which is not connected person of the Company under the Listing Rules and is independent of the Company, its directors, its chief executive, its substantial shareholders and its subsidiaries and their respective associates. Accordingly, none of the Xingye Project and Fusui Project constitutes connected transactions under the Listing Rules.