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

洛陽玻璃股份有限公司
LUOYANG GLASS COMPANY LIMITED
(Incorporated in the People’s Republic of China with limited liability)

Connected transactions and Practice Note 19 Disclosure

For the two years ended 31st December, 1999, Luoyang Glass Company Limited (the “Company”, together with its subsidiaries, the “Group”) had provided advances, financial asistance and guarantees to its ultimate holding company, China Luoyang Float Glass (Group) Company Limited (“CLFG”), and the Company’s fellow subsidiaries, all of which are associates of CLFG under the Rules (the “Listing Rules”) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (the “CLFG Group”). As at 31st December, 1998 and 31st December, 1999, the aggregate amount of advances, financial assistance and guarantees provided to the CLFG Group amounted to approximately RMB378,771,000 and RMB901,808,000 respectively, representing approximately 26.5% and 60.7% of the Group’s audited net asset value as at the respective year end dates. As at 30th June, 2000, the aggregate amount of advances, financial assistance and guarantees provided to the CLFG Group amounted to approximately RMB851,956,000, representing approximately 56.1% of the Group’s unaudited net asset value as at 30th June, 2000.

The above advances, financial assistance and guaratees to the CLFG Group constituted connected transactions for the Company under Rules 14.26(6) of the Listing Rules and also gave rise to a disclosure obligations under paragraphs 3.2.1 of the Practice Note 19 of the Listing Rules.

The directors of the Company (the “Directors”) confirm that the Company has been providing advances, financial assistance and guarantees to the CLFG Group subsequent to 31st December, 1999 and believe that such connected transactions will be of an ongoing nature (the “Ongoing Connected Transactions”). The Company will apply to the Stock Exchange for the grant of a waiver (the “Waiver Application”) from strict compliance with the relevant requirements under the Listing Rules with respect to the Ongoing Connected Transactions, subject to, among other things, the approval by independent shareholders of the Company (other than those prohibited from voting under the Listing Rules) at an extraordinary general meeting of the Company to be held. Details of the Ongoing Connected Transactions and the Waiver Application and the actions to be taken by the Company as required under the Listing Rules will be announced as soon as possible.

Despite disclosures of the aggregate balances of the above advances, financial assistance and guarantees have been made in its annual reports (which, however, did not fully comply with the disclosure requirement unde Practice Note 19 of the Listing Rules), the Company failed to make any disclosure of the above advances, financial assistance and guarantees to the CLFG Group in accordance with paragraph 3.2.1 of the Practice Note 19 of the Listing Rules in a press annoucement earlier due to an oversight. The Directors admit that the delay of the Company in making this announcement may constitute a breach of the general disclosure obligation under Practice Note 19 of the Listing Rules and connected transaction disclosure and independent shareholders- approval requirement under Chapter 14 of the Listing Rules. The Stock Exchange indicated that it reserved its rights to take any action, if appropriate under the Listing Rules, against the Company for the failure to comply with the Listing Rules.

For the two years ended 31st December, 1999, the Group had provided advances, financial assistance and guarantees to the CLFG Group. As at 31st December, 1998 and 31st December, 1999, the aggregate amount of advances, financial assistance and guarantees provided to the CLFG Group amounted to approximately RMB378,771,000 and RMB901,808,000 respectively, representing approximately 26.5% and 60.7% of the Group’s audited net asset value as at the respective year end date. As at 30th June, 2000, the aggregate amount of advances, financial assistance and guarantees provided to the CLFG Group amounted to approximately RMB851,956,000, representing approximately 56.1% of the Group’s unaudited net asset value as at 30th June, 2000.

The above advances, financial assistance and guarantees to CLFG Group constituted connected transactions for the Company under Rules 14.26(6) of the Listing Rules and also gave rise to disclosure obligations under paragraph 3.2.1 of the Practice Note 19 of the Listing Rules.

Advances and/or financial assistance to CLFG

As at 31st December, 1998, 31st December, 1999 and 30th June, 2000, the Group advanced a total sum of approximately RMB167,129,000, approximately RMB227,979,000 and approximately RMB231,506,000 respectively to CLFG, most of the advances were made before the year of 1998. Details of the advances are as follows:

		Commence	Terms of repayment	Audited balance as	Audited balance as	Unaudited balance as
Nature of transaction	Interest Rate	year	 and status	at 31st December, 1998	at 31st December, 1999	at 30th June, 2000
				RMB	RMB	RMB

Accounts receivable relating to 	6.5%	1998	Due on 31st August,	31,459,000	26,692,000	26,692,000
  advances to Baolaiwei Development 	per annum		2000
  Limited (a wholly owned subsidiary of			(not yet repaid)
  the CLFG) on behalf of CLFG			 Not secured

Trade receivable relating to sales of 	Interest free	Before 1994	No fixed repayment	111,413,000	127,735,000	126,114,000
  finished goods			Not secured

Accounts receivable relating to  	Interest free	Before 1994	No fixed repayment	2,000,000	2,000,000	2,000,000
  transfer of loans			Not secured

Accounts receivable relating to 	Interest free	Before 1994	No fixed repayment	9,326,000	9,326,000	9,326,000
  transfer of loans			Not secured

Other accounts receivable mainly relating	Interest free	Before 1994	No fixed repayment	12,931,000	62,226,000	67,374,000
  to building of staff quarters			Not secured

Total				167,129,000	227,979,000	231,506,000
						
Advances and/or financial assistance to Fellow Subsidiaries

As at 31st December, 1998, 31st December, 1999 and 30th June, 2000, the Group advanced a total sum of approximately RMB181,642,000 , approximately RMB518,829,000 and approximately RMB484,750,000 respectively to the fellow subsidiaries, the details of which are as follows:

	CLFG’s interest 	Company’s interest				Terms of	Audited 	Audited 	Unaudited
	in these 	in these	Nature of		Commence	repayment 	balance as at	balance as at	balance as at
Company names	companies	companies	transaction	Interest rate	year	and status	31st December, 1998	31st December, 1999	30th June, 2000
							RMB	RMB	RMB

Qingdao Taiyang (note 1)	55%	-	Advance	6.53%-7.84%	1999	Due on 2004	-	376,898,000	330,431,000
				per annum		Secured
				
China Luoyang Float Glass Group 	50%	40%	Account receivable	Interest free	Before 1994	No fixed repayment 	122,000	-	-
  Finance Company of Limited 						Not secured
  Liabilities (note 2)

CLFG Mineral Products Co 	100%	-	Account receivable	Interest free	Before 1994	No fix repayment	12,476,000	11,595,000	3,851,000
  (note 3)						Not secured

Jingbao Co (notes 3 and 4)	50%	50%	Account receivable	Interest free	1998	No fixed repayment	1,188,000	981,000	3,059,000
						Not secured

Hoisting Machinery Co. 	63.32%	36.68%	Account receivable	Interest free	1994	No fixed repayment	33,197,000	19,552,000	19,552,000
  (notes 3 and 4)						Not secured

New Illuminating Source Company 	70.55%	29.45%	Account receivable	Interest free	Before 1994	No fixed repayment	483,000	621,000	963,000
  Limited (notes 3 and 4)						Not secured

Jingwei Glass Fibre Co. Limited 	64.1%	35.9%	Account receivable	Interest free	1994	No fixed repayment	48,224,000	50,281,000	42,603,000
  (notes 3 and 4)						Not secured

Jingjiu Glass Container Co. Limited	68.92%	31.08%	Account receivable	Interest free	Before 1994	No fixed repayment	13,798,000	16,115,000	14,376,000
  (notes 3 and 4)						Note secured

Others			Account receivable	Interest free	Before 1994	No fixed repayment	72,154,000	42,786,000	69,915,000
						Not secured

Total 							181,642,000	518,829,000	484,750,000

Notes:

(1)	The Company disposed (the “Disposal”) of all its 55% shareholding interest in Qingdao Taiyang Glass Industries Co. Ltd. (“Qingdao Taiyang”) to CLFG under an agreement dated on 13th September, 1999. The Disposal was approved at the extraordinary general meeting of the Company on 2nd November, 1999. Details of the Disposal were published on 23rd July, 1999. The loan to Qingdao Taiyang commenced before the Disposal, at which time Qingdao Taiyang was a 55% owned subsidiary of the Company. The outstanding balance is secured by fixed assets of Qingdao Taiyang in the amount of approximately RMB234,854,000 as at 31st December, 1999.

(2)	The Company acquired a 40% shareholding interest in China Luoyang Float Glass Group Finance Company of Limited Liabilities from CLFG on 22nd July, 1999. Details of the transaction were published on 22nd July, 1999. China Luoyang Float Glass Group Finance Company of Limited Liabilities is an affiliated company of the Company under paragraph 1.2 of the Practice Note 19 of the Listing Rules. Since the total amount of advance and/or financial assistance to the affiliated companies did not exceed 25% of the Company’s net assets as at 31st December, 1998, 31st December, 1999 and 30th June, 2000, paragraph 3.3 of the Practice Note 19 of the Listing Rules did not apply.

(3)	The balances of the advances and/or financial assistance provided by the Group to the fellow subsidiaries represent the trade receivables due from the fellow subsidiaries resulting from supply of water electricity, heat steam services, transportation services and raw materials to those companies. Such transactions constituted connected transactions for the Company under the Listing Rules, details of which have been disclosed in the prospectus of the Company dated 21st June, 1994 and its annual reports. Waivers from strict compliance with the disclosure requirement under the Listing Rules were granted by the Stock Exchange upon listing of the shares of the Company in July 1994.

(4)	These companies represent the Group’s non-controlling equity investments which are mainly engaged in manufacturing or trading activities. The Group’s share of results attributable to these interests for the two years ended 31st December, 1999 and the six month period ended 30th June, 2000 was not material in relation to the profit or loss of the Group for the said period and therefore was not equity accounted for. As such, all these companies are not affiliated companies of the Company under paragraph 1.2 of the Practice Note 19 of the Listing Rules.

Guarantees in favour of CLFG and a fellow subsidiary
	31st December, 1998		31st December, 1999		30th June, 2000
	RMB		RMB		RMB
Guarantees issued to banks in favour of
CLFG	30,000,000		41,000,000		6,000,000
Qingdao Taiyang 	-		114,000,000		129,700,000

The Company has provided guarantees to banks in respect of banking facilities granted to CLFG and one of the fellow subsidiaries, Qingdao Taiyang, which amounted in total to approximately RMB30,000,000 as at 31st December, 1998, approximately RMB155,000,000 as at 31st December, 1999 and approximately RMB135,700,000 as at 30th June, 2000. The aforesaid banking facilities have been fully utilised by CLFG and Qingdao Taiyang. At the time when the Group commenced to provide the guarantees, Qingdao Taiyang was a 55% subsidiary of the Company. See note 1 under the section headed “Advances and/or financial assistance to fellow subsidiaries” above for details. The banking facilities are unsecured with interest rate ranging from approximately 5.33% to approximately 7.67% per annum.

Despite disclosures of the aggregate balances of the above advances, financial assistance and guarantees have been made in its annual reports (which, however, did not fully comply with the disclosure requirement under Practice Note 19 of the Listing Rules), the Company failed to make any disclosure of the above advances, financial assistance and guarantees to the CLFG Group in accordance with paragraph 3.2.1 of the Practice Note 19 of the Listing Rules in a press announcement earlier due to an oversight. The Directors admit that the delay of the Company in making this announcement may constitute a breach of the general disclosure obligation under Practice Note 19 and connected transaction disclosure and independent shareholders- approval requirement under Chapter 14 of the Listing Rules. The Stock Exchange indicated that it reserved its rights to take any action, if appropriate under the Listing Rules, against the Company for the failure to comply with the Listing Rules.

As at 31st December, 1999, the amount due to CLFG from the Group was approximately RMB260,141,000 (which is unsecured) while the amount due from CLFG to the Group was approximately RMB227,979,000. There was a net amount due to CLFG from the Group of approximately RMB32,162,000.

On 10th August, 1999, CLFG issued a guarantee letter to the Company to guarantee the receivables due from the fellow subsidiaries (excluding Qingdao Taiyang, the amount due from which to the Company is secured by fixed assets of Qingdao Taiyang) to the Group in the amount of approximately RMB113,110,000, representing approximately 79.69% and 73.30% of the amount due from the fellow subsidiaries as at 31st December, 1999 and 30th June, 2000 respectively.

The Ongoing connected transactions

The Directors confirm that the Company has been providing advances, financial assistance and guarantees to the CLFG Group subsequent to 31st December, 1999 and believe that such connected transactions will be of an ongoing nature.The Company will apply to the Stock Exchange for the grant of the Waiver Application from strict compliance with the relevant requirements under the Listing Rules with respect to the Ongoing Connected Transactions, subject to, among other things, the approval by independent shareholders of the Company (other than those prohibited from voting under the Listing Rules) at an extraordinary general meeting of the Company to be held. Details of the Ongoing Connected Transactions and the Waiver Application and the actions to be taken by the Company as required under the Listing Rules will be announced as soon as possible.

General

The Company is principally engaged in the production and marketing of float sheet glass and processed vehicle glass of various size and color. It is one of the largest manufactures of float sheet glass in the PRC.

	By the order of the Board
	Guo Xizohuan
	Chairman
Hong Kong, 27th December, 2000