LUOYANG GLASS<1108> - Announcement
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.
LUOYANG GLASS COMPANY LIMITED
(A joint stock limited company incorporated in the Peoples'
Republic of China)
Connected Transactions
Summary
The directors ("Directors") of Luoyang Glass Company Limited (the
"Company") wish to announce that the Company has entered into
certain connected transactions (which had not been disclosed by
way of a press announcement under Rule 14.25 of the Listing Rules)
with China Luoyang Float Class Group Company of Limited Liability
("CLFG").
On 12th December, 1997, the Company converted its unsecured
receivables due by four companies (all were then subsidiaries of
CLFG) in an aggregate amount of approximately RMB12.79 million
(equivalent to approximately HK$11.95 million, based on the
exchange rate of HK$1.00 to RMB1.07) (the "Receivables") into
equity interests of these companies (the "Conversions"). The
aggregate amount of the transactions represented less than 3% of
the consolidated net asset value of the Company and its
subsidiareis as at 31st December, 1996. The conversions were
recorded in the financial statements of the Company for the year
ended 31st December, 1997.
CLFG is the holding company of the Company holding approximately
57% of the issued share capital and was a connected person of the
Company under the Listing Rules at the time of the transactions.
Therefore, the above transactions constituted connected
transactions of the Company and were subject to the disclosure
requirements set out under Rule14.25 of the Listing Rules.
Breaches of the Listing Rules have occurred and the Stock Exchange
has indicated it will reserve the right to take any further action
as may be appropriate in respect of this matter.
During the year ended 31st December, 1997, the Company converted
unsecured receivables amounted to approximately RMB5 million
(equivalent to approximately HK$4.67 million), RMB4 million
(equivalent to approximately HK$3.74 million), RMB2.29 million
(equivalent to approximately HK$2.14 million) and RMB1.5 million
(equivalent to approximately HK$1.4 million) owned to it by CLFG
Luoyang Hoisting Machinery Company Limited, CLFG Luoyang Jingwei
Glass Fibre Company Limited, CLFG Luoyang New Illuminating Source
Company and CLFG Luoyang Jingjiu Glass Container Company Limited
(together referred to as the "Acquired Companies" and were all
then subsidiaries of CLFG) respectively into equity interests of
these companies. The Conversions were recorded as long term
investments in the financial statements of the Company for the
year ended 31st December, 1997.
The conversions of the Receivables into equity interests of the
Acquired Company were in direct proportion to the amount of
registered capital of the respective Acquired Companies. The
following table sets out the registered capital and the last
audited results of the Acquired Companies and their business
scopes:
Name of company Registered capital 1998 PRC- audited Business
results (loss) scope
(RMB*000) (RMB*000)
CLFG Luoyang Hoisting 13,631.4 (1,784.5) Manufacture and
Machinery Company Limited sale of hoisting machinery
and glass processing
equipment
CLFG Luoyang Jingwei Glass 11,141.7 (9,470.9) Manufacture and sale of
Fibre Company Limited fibre glass and fibre
glass products
CLFG Luoyang New Illuminating 7,780.5 (1,135.1) Manufacture and sale of
Source Company Limited lighting equipment
and light source
materials
CLFG Luoyang Jingjiu 4,826.4 (3,889.9) Manufacture and sale of
Glass Container glass products
Company Limited
The following table further sets out the Company's investment
amounts and percentage of equity shareholdings in the Acquired
Companies upon completion of the above conversions as disclosed
in the annual report of the Company for the year ended 31st December,
1997 (the "1997 Annual Report"):
Name of company Amount of investment Percentage of equity
(RMB*000) (%)
CLFG Luoyang Hoisting Machinery Company Limited 5,000 36.68
CLFG Luoyang Jingwei Glass Fibre Company Limited 4,000 35.9
CLFG Luoyang New Illuminating Source Company Ltd 2,291.3 29.45
CLFG Luoyang Jingjiu Glass Container Company Ltd 1,500 31.08
The conversions of the Receivables into equity interests of the
Acquired Companies were made with the intention of converting the
Receivables which had been outstanding for an average of over 3
years at the time of the conversions into equity shareholdings
in the Acquired Companies to further develop the Company's
business scope and increase its profitability. Although the
Acquired Companies are experiencing financial difficulties, the
management of the Company is confident about their future
prospects.
On 20th December, 1998, CLFG entered into an undertaking agreement
with each of the Acquired Companies pursuant to which CLFG, in
view of the fact that the losses suffered by the Acquired Companies
during the two years ended 31st December, 1998 were resulted from
operation issues existed prior to the Conversions, undertakes to
bear the whole amount of such losses. Consequently, no provision
has been made by the Company in respect of the losses of the Acquired
Companies for the two years ended 31st December, 1998 and such
losses have not had any financial impact to the Company. For the
year ending 31st December, 1999 and thereafter, the Acquiring
Companies are to distribute profits and allocate losses to the
shareholders in proportion to their respective equity interests
in them. Accordingly, the Company, in consistent with the Company's
accounting policy on long term investments, will consider
making provisions for any permanent diminution in value of the
Acquiring Companies by referencing to the respective losses of
the Acquiring Companies attributable to the Company's equity
interests in them and to record as income any dividends to be
declared by the Acquiring Companies attributable to the Company's
equity interests therein.
Connected Transactions
CLFG is the holding company of the Company holding approximately
57% of the issued share capital and is a connected person of the
Company under the Listing Rules. Therefore, the above transactions
constituted connected transactions of the Company. The aggregate
amount of the Company's investments (which equals the amount of
the Receivables) in the Acquired Companies mentioned above was
less than 3% of the book value of the consolidated net tangible
assets of the Company and its subsidiaries as at 31st December,
1996. Pursuant to Rule 14.25 of the Listing Rules, the Company
is required to disclose by way of a press announcement containing
the brief details of the transactions.
The Company confirms that a press announcement pursuant to the
Listing Rules in respect of the above transactions was not made
as it intended to disclose such transactions in the 1997 Annual
Report which was under preparation at the time of the transactions
and nevertheless acknowledges that such non-compliance of Rule
14.25 of the Listing Rules is due to oversight.
The Company further confirms that the Company has suffered no
financial loss as a result of the above transactions.
As such, breaches of the Listing Rules have occurred in respect
of the Company's conversion of the Receivables into the equity
interests of the Acquired Companies and the Stock Exchange has
indicated it will reserve the right to take any further action
as may be appropriate in respect of this matter.
By order of the Board
WANG JIE
Secretary to the Board of Directors
6th May, 1999
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