09:28     LUOYANG GLASS<01108> - Announcement (2)                             

    The Directors announcement that, on 26 May 2005, the Company entered      
    into the Long Hai Agreement and Long Hao Agreement to set up Long Hai     
    and Long Hao.                                                             
                                                                              
    ESTABLISHMENT OF LONG HAI                                                 
                                                                              
    The principal terms of the Long Hai Agreement are as follows:             
                                                                              
    Date 26 May 2005                                                          
                                                                              
    Parties The Company and CLFG                                              
                                                                              
    Initial registered  RMB60 million (approximately HK$56.6 million), of     
    which RMB48                                                               
    capital of Long Hai million (approximately HK$45.28 million)              
    (representing 80% of the registered capital thereof) will be              
    contributed by the Company in cash with its internal resources and        
    RMB12 million (approximately HK$11.32 million) (representing 20% of       
    the registered capital thereof) will be contributed by CLFG, of which     
    RMB6 million in cash and the remaining RMB6 million in the form of the    
    specialized usage right of * (Luoyang Float                               
    Glass Patent Technology) and usage right of the "*" registered            
    trademark.                                                                
                                                                              
    CLFG has engaged *, an independent                                        
    third party, to value the specialized usage right of * (Luoyang Float     
    Glass Patent Technology) and the usage right                              
    of the "*" registered trademark as at 31 March 2005 to be                 
    contributed by CLFG as intangible assets. The valuation of specialized    
    usage right of * (Luoyang Float Glass Patent                              
    Technology) and the usage right of the "*" registered                     
    trademark is approximately RMB7.03 million (approximately HK$6.63         
    million) for the Long Hai Project as at 31 March 2005 on the basis of     
    generally accepted valuation methodology, being the income approach,      
    details of which shall be set out in the circular to be issued to the     
    H Shares' Shareholders. The value of the intangible assets to be          
    contributed by CLFG into Long Hai is determined as matter of              
    commercial decision after arms length negotiation between the Company     
    and CLFG and being 10% of the total initial registered capital of Long    
    Hao contributed by the parties.                                           
                                                                              
    According to the Long Hai Agreement, the initial payment of RMB18         
    million (approximately HK$16.98 million) in the registered capital of     
    Long Hai shall be paid by its respective shareholders in a proportion     
    to their respective shareholding interest in Long Hai when Long Hai       
    applies its business license immediately after the execution of the       
    Long Hai Agreement by the Company and CLFG. The remainder of the          
    initial registered capital shall be fulfilled in full within one year     
    from the issuance date of the business registration license of Long       
    Hai.                                                                      
                                                                              
    Total amount of  The total capital commitment including the amount        
    contributed by the                                                        
    investment of the  Company and CLFG for Long Hai Project is currently     
    estimated to amount                                                       
    Long Hai Project RMB300 million (approximately HK$283.02 million),        
    which is based on the estimated amount of capital investment and the      
    general working capital required by Long Hai Project. Save for the        
    initial registered capital contribution, there is currently no            
    timetable for the contribution of the remaining amount of investment      
    which shall be financed by Long Hai depending on the progress of the      
    Long Hai Project. The Company estimated the Long Hai Project will be      
    completed by the end of year 2005 and the remaining amount of             
    investment will be totally invested into the Long Hai Project by that     
    time.                                                                     
                                                                              
    Save as disclosed in this announcement, there is no other capital         
    commitment, guarantee or indemnity required from the Group under the      
    Long Hai Agreement.                                                       
                                                                              
    Business scope principally engaged in (i) the production and sale of      
    untra-thin glass and (ii) processing raw materials for the production     
    of glass related products                                                 
                                                                              
    Board representation The board of Long Hai shall comprise seven           
    directors, of which, the Company shall nominate five directors and        
    chairman of the board of Long Hai and CLFG shall nominate the             
    remaining two directors of Long Hai.                                      
                                                                              
    Supervisory committee The supervisory committee of Long Hai shall         
    comprise three supervisors, of which the Company shall nominate two       
    supervisors and CLFG shall nominate the remaining one superviser. The     
    term of supervisory committee is three years for each term.               
                                                                              
    Profit sharing The Company and CLFG shall share the profit and loss of    
    Long Hai in accordance with their respective equity interest in Long      
    Hai. Long Hai will be treated as a subsidiary of the Company.             
                                                                              
    Pre-emptive right Upon the formation of Long Hai, if any party intends