09:29 LUOYANG GLASS<01108> - Announcement (3) to transfer its equity interest in Long Hai, it has to obtain the prior consent of the other party and on the same terms and conditions, the other party shall have the pre-emptive option to purchase the party's interest in Long Hai. ESTABLISHMENT OF LONG HAO The principal terms of the Long Hao Agreement are as follows: Date 26 May 2005 Parties The Company and CLFG Initial registered RMB50 million (approximately HK$47.17 million), of which RMB40 capital of Long Hao million (approximately HK$37.74 million) (representing 80% of the registered capital thereof) will be contributed by the Company in cash with its internal resources and RMB10 million (approximately HK$9.43 million) (representing 20% of the registered capital thereof) will be contributed by CLFG of which RMB5 million in cash and the remaining RMB5 million in the form of contribution of CLFG's specialized 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 RMB8.11 million (approximately HK$7.65 million) for the Long Hao 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 Hao 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 Hao Agreement, the initial registered capital shall be fulfilled in full within ten days from the date of execution of the Long Hao Agreement. Business license will be applied immediately after the execution of the Long Hao Agreement. Total amount of The total capital commitment including the amount contributed by the investment of the Company and CLFG as initial registered capital for Long Hao Project is Long Hao Project currently estimated to amount RMB250 million (approximately HK$235.85 million) which is based on the estimated amount of capital investment and the general working capital required by Long Hao 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 Hao depending on the progress of the Long Hao 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 Hao Agreement. Business scope principally engaged in (i) the production and sale of float glass and (ii) the provision of related consultancy and technical support services. Board representation The board of Long Hao shall comprise seven directors, of which, the Company shall nominate five directors and chairman of the board of Long Hao and CLFG shall nominate the remaining two directors of Long Hao. Supervisory committee The supervisory committee of Long Hao 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 Hao in accordance with their respective equity interest in Long Hao. Long Hao will be treated as a subsidiary of the Company. Pre-emptive right Upon the formation of Long Hao, if any party intends to transfer its equity interest in Long Hao, it has to obtain the prior consent of the other party and on the same terms and conditions, the other party shall have the pre-emptive option to purchase the party's interest in Long Hao.