Investment Strategy Report

February 2, 2009

Consideration super-

addition is one important measure to protect investors’ rights; it arises from equity

division reform. Super-

addition commitment means one “option” return

to circulated shares holders by thoseof non-circulated shares to get ahead on the equity division reform.

From May 2005, equity division reform was officially introduced, when China’s economy was in a prosperity

phase; net profit acceleration of listed companies was growing rapidly; shareholders showed upsurgingconfidence and they dared to make a promise on the future performance growth.

China’s economy

experienced cyclical adjustment from 2008; acceleration of GDP and listed companies’

profit sharply went down and assets restructuring of some companies was put on hold; as a result, thecommitment in equity division reform plans of some companies was not fulfilled in due time, which triggersthe consideration super-addition in the equity division reform.In view of consideration super-addition form, if cash consideration is paid, then holders of circulated sharescan gain steadfast superior earnings; while if it is paid in stock consideration, since shares super-addition

won’t change total equ

ity, but just give partial own shares of non-circulated share holders to holders of

circulated shares, which can’t lead diluted profit. It increases bargaining chip and lowers the cost for holders

of circulated shares. On the other hand, if too much consideration is super-added, holders of non-circulated

shares will be motivated to sharply release companies’ performance so as to avoid triggering super

-addition.From the three angles above, it can be stated that investment opportunities may arise from considerationshares super-addition.As for the active strategy, it starts with the transaction opportunity and controls the short-term superiorearnings from consideration shares super-addition. Active investment portfolio: Yihua Real Estate (000150),Hubei Bothwin Investment (000760), Tianjin Tianbao Infrastructure (000965) and Youngor Group (600177).Steady investment strategy starts with investment opportunities and grasps opportunities of addedbargaining chip, diluted cost and valuation advantage promotion from consideration super-addition. Steadyinvestment portfolio: Nanjing Central Emporium (600280), Bright Oceans Inter-Telecom (600289), ZhejiangChina Light & Textile Industrial City Group (600790) and Xinjiang Baihuacun (600721).

By Zhou Ronghua

Investment Strategy Research on ConsiderationShares Super-addition --- Important Report