10:04     JIAODA HIGHTECH<00300> - Announcement (3)                           

    a.      To review financial statements, proposal for                      
    division of profit, settlement of losses and provides                     
    its comments to the Parties;                                              
                                                                              
    b.      To review the fulfillment of tasks given by the                   
    board of directors to the general manager; and                            
                                                                              
    c.      To review the bookkeeping, assets, liabilities and                
    debts of the JV Company.                                                  
                                                                              
    Each of the Parties could nominate 2 members with the                     
    chairman being appointed by the Company while the                         
    vice-chairman being appointed by Tos Varnsdorf, A.S.                      
    Each member of the control committee shall be entitled                    
    to one vote on any matter put to the committee for                        
    decision.                                                                 
                                                                              
    (8)     Tos Varnsdorf, A.S. undertakes not to open                        
    negotiation on investment, transfer of technology or                      
    production license in Chinese market for the same                         
    machine tools as being produced by the JV Company in                      
    the framework of the JV Agreement or sold to the                          
    Chinese market similar products manufactured by                           
    overseas companies in which it has a majority stake.                      
                                                                              
    (9)     The board of directors of the JV Company shall                    
    decide the form of distribution of profit and subject                     
    to the approval of the control committee.                                 
                                                                              
    (10)    Except for the inability to fulfill the JV                        
    Agreement or continuously incurring heavy losses due                      
    to force majeure events, each of the Parties shall                        
    have the full right to terminate the JV Agreement and                     
    claim damages against the other Party if the JV                           
    Company is unable to continue its operations or                           
    achieve the business purpose due to the other Party's                     
    serious violation or non-implementation of the                            
    contractual obligations or failure to fulfill all its                     
    responsibilities and commitment.                                          
                                                                              
    For accounting purposes, the JV Company will be                           
    accounted for as an investment in jointly controlled                      
    entity in the accounts of the Company. The cash                           
    portion of the registered capital to be injected by                       
    the Company will be financed by internal resource of                      
    the Company. There is currently no further capital,                       
    guarantees nor other commitments provided under the                       
    JV Agreement. It is the understanding between the                         
    Parties that the profit sharing shall be in proportion                    
    to the contribution of registered capital of each of                      
    the Parties.                                                              
                                                                              
    REASONS FOR THE ACQUISITION AND THE JOINT VENTURE                         
    The Directors are of the view that to team up with                        
    Tos Varnsdorf, A.S., an internationally renowned                          
    horizontal boring and milling machine manufacturer,                       
    could not only bring potential profits, resulting                         
    from the future operation of the JV Company, to the                       
    Group but it could also give valuable experience to                       
    the Group in cooperating with international                               
    corporation, which is crucial for the Group to lay                        
    a solid foundation for an international strategy.                         
    Moreover, the Group could learn from the foreign                          
    partner international management and operating                            
    standards so as to improve the effectiveness and                          
    efficiency of the Group's business operation as a                         
    whole. Further, such cooperation could improve the                        
    profile and popularity of the Group's products in the                     
    PRC market.                                                               
                                                                              
    INFORMATION ON THE COMPANY AND TOS VARNSDORF, A.S.                        
    The Company, formerly known as Kunming Machine Tool                       
    Company Limited and with its shares listed on both