Progress in Significant Lawsuits

In order to speed up the restructuring of the company, to resolve historical debts and to enforce the rulings of the Zhengzhou Intermediate People's Court and the China International Economic and Trade Arbitration Commission (CIETAC), the company recently reached a settlement agreement with Henan Founder Information Technology Co., Ltd. and Centra Intertraco Limited. Details of the agreement is as follows:

1. the ownership of the #9 plant, located at the Capstone Industrial City and underlying land-use rights, both seized by the courts, will be transferred to Henan Founder's designated company based upon the assessed value
2. the balance of the auction price of certain properties of the company and the funds provided by Henan Founder, both temporarily seized by the Zhengzhou Intermediate People's Court, will be reimbursed to Centra Intertraco, additionally, a 30% stake in Shenzhen Capstone Food Co., Ltd., currently held by the company, will be transferred to Centra Intertraco
3. the company will give up its creditors' rights and debt obligations to Shenzhen Capstone Food, meanwhile, Shenzhen Capstone Food and Centra Intertraco commit to abandon their creditors' rights and debt obligations to the company
4. the Guangdong Puning People's Court has terminated the No. 76 Adjudication Order issued by the CIETAC

Based on the aforementioned facts, the creditors' rights and debt obligations of the company to both Shenzhen Capstone Food and Centra Intertraco are terminated, and there still remain certain debts to Henan Founder yet to be settled.

Board of Directors
8 Oct 2008


Source: Shanghai Stock Exchange

Date: 8 Oct 2008

CN01/FL/JL/BT/KM