At present, the company is working on solutions for major lawsuits and asset restructuring.

The lawsuits pertain to contract disputes among Zhongtian Construction Group Co., Ltd.(ZCG), Xi'an Seastar Real Estates Comprehensive Development Co., Ltd.(XSRECD), a subsidiary of the company, Xi'an Seastar Scien-tech Investment Holding (Group) Co., Ltd.(XSSIH) and the company. It is estimated that the company will not suffer any losses due to the fact that it did not sign any contracts, guarantees or other legal documents related to the case and the fact that it was neither a contracted body nor a guarantor. Nevertheless, whether the company will have to assume related responsibilities is subject to the court's ruling.

As for the court case involving China Railway 15th Construction Bureau Co., Ltd., XSSIH, XSRECD, Henan Seastar Expressway Development Co., Ltd. and the company, the court has not yet made a final ruling. It is speculated that the company runs a risk of assuming certain responsibilities.

Because plaintiffs in the cases have all applied to the People's Court for property preservation, both for rights to state-owned land and three residential properties of the company, No.62, Keji Road2, Xi'an Hi-tech Development Zone has been seized and frozen. Furthermore, the court has ordered all properties of XSRECD sealed and frozen. XSRECD is currently operating normally.

At present, both Zhuhai Gree Group Corp. and XSSIH expressed a supportive attitude towards the company's major asset restructuring. XSSIH also pointed out that it would assume related responsibilities it had committed to and help settle the aforementioned cases.

To date, it is difficult to estimate the impact of these cases on the company's asset restructuring. The China Securities Journal, the Shanghai Securities News and the website of the Shanghai Stock Exchange (www.sse.com.cn) are the company's designated media for information disclosure.

Board of Directors
20 Oct 2008


Source: Shanghai Stock Exchange

Date: 21 Oct 2008

CN01/NW/RL/NK/KM