The global impact of the financial tsunami will inevitably affect our export-oriented hi-tech manufacturing business.Economic downturn has caused customers’ requests for price cut or even cancellation of orders, which has in turn generated tremendous pressure to the hi-tech manufacturing business. It is anticipated that deeper impact may be encountered in 2009, changing the growth momentum of the hi-tech manufacturing business.

To cope with the global economic downturn and the shrinkage of the market, specific contingent measures have been implemented for the hi-tech manufacturing business. Those include stepping up our marketing efforts in Mainland China, Europe, Japan etc. with a view to maintaining the turnover of the business at a stable level. Meanwhile, internal control and management capabilities will be enhanced for the business, especially in terms of quality control and cost control, in order to maintain our competitiveness and profit margin. In the aspect of financial monitoring, appropriate measures will be taken for the hi-tech manufacturing business to adjust the scale of operations, cut down inventory and stringently follow up the receivables from customers, with a view to maintaining normal inflow of cash to the greatest possible extent.

The establishment of the business of science and technology park complex development is one of the important development strategies of the Company. To cope with the entering into the stages of planning and implementation of the projects of Aerospace International Centre and the land development for the Complex Zone of the Launching Site in Hainan Province, the Company will further improve its management systems, facilitate the allocation of internal resources and devote additional efforts in implementing and supervising the projects. Being encountered by the global financial crisis, the Company will conduct thorough analysis of the market positioning, development plan, financing plan and implementation plan for each of the projects under this segment, taking into account the changes of the external economic environment and the policies in various regions, so as to plan meticulously and to implement in full force, and adjust and refine the development plans for individual projects in a timely manner.

Following the completion of business promotions in respect of the one square kilometre project in Shanghai Aerospace Technology Industrial Park, Shanghai Aerospace Technology Investment Management Company Limited (“Shanghai Aerospace”) will expedite the construction of ancillary facilities and landscape planning at the Park. The preliminary research and analysis in respect of the future development direction of part of the owner occupied land in the Park will also be conducted. In addition, Shanghai Aerospace will discuss with the local government concerning the subsequent development plans of the Park, taking into account the latest development of the economy and relevant policies.

Upon finalization of the design plan of the Aerospace International Centre, Shenzhen Aerospace will speed up the process to seek proper approvals, engage in the expansion and commencement plan design, and formulate the overall construction plans and plans for different stages and for specific items. It is expected that site levelling of the project, pre-commencement preparation and tendering processes will commence in mid-2009.

The pre-commencement work in respect of land development for the Complex Zone of the Launching Site is planned to commence within the year. The Company will invite internationally renowned architects, theme park designers, and real estate consultants to form consultant teams, who will conduct further research and analysis in determining the feasibility of various development plans, and formulate long-term development planning and business models for the project.

Though encountered with the downturn in global economy, the Company is cautiously optimistic about its future development prospects. The Chinese Government, in order to achieve its target to maintain economic growth with full effort, has put forward a series of measures in stimulating the economy. These include the proposal of huge investments in stimulating the economy, the implementation of enterprising fiscal policy and appropriate loosened monetary policy etc., with an aim of increasing domestic demands and booming the economy. The Company believes that these new policies will help to create an advantageous investment environment. Besides, the fall in market value of quality assets caused by the global economic downturn and credit tightening will bring along investment opportunities to those strong enterprises. The Company possesses a healthy and stable cash flow with relatively low gearing. Through the utilization of loosened monetary policy in China while maintaining stable operation and strict risk control policy, the Company will take the opportunity to adopt appropriate financial leverage and seek investment opportunities of acquiring quality assets so as to push forward a new breakthrough in the business of science and technology park complex development.