History of Chongqing Titanium Industry Co., Ltd.

1.On May 9, 2006, the company and Panzhihua Iron and Steel (Group) Co., Ltd. signed the Asset Purchase Contract of Panzhihua Iron and Steel Group Co., Ltd. Chongqing Titanium Co., Ltd. On June 25, 2006, the 11th meeting of the fourth board of directors of the company deliberated and passed the Proposal on the Company's Asset Purchase by Capital Increase. The share-trading reform of the company and the acquisition of assets by new shares are "announced at the same time and implemented step by step"

2. Panyu Titanium Industry will hold the first extraordinary general meeting of shareholders in 2006 on July 27th, 2006 to consider all matters related to this acquisition; The implementation of this transaction by Pangang Group still needs the approval of the State Council State-owned Assets Supervision and Administration Commission; The appraisal results of the assets to be acquired need to be filed or confirmed in SASAC the State Council.

3. The acquisition of assets by new shares still needs the approval of China Securities Regulatory Commission, and when and whether it can be approved is uncertain.

4. The profit forecast of the simulated merger of Panyu Titanium Industry is based on the assumption that the company completed the major asset purchase on June 30, 2006. According to the Asset Purchase Contract between Chongqing Titanium Industry Co., Ltd. and Panzhihua Iron and Steel (Group) Co., Ltd., the delivery audit date is June 30, 2006, and the business of Panyu Titanium Industry and Panzhihua Titanium Industry merged from July/KLOC-0, 2006. Investors should pay attention to the compilation basis of this simulated consolidated profit forecast when using this simulated consolidated profit forecast.

5. The net assets of this major asset purchase account for more than 50% of the company's net assets in the audited consolidated statements in 2005, and the main business income generated from the purchase of assets in 2005 accounts for more than 50% of the company's main business income in the audited consolidated statements in 2005. According to the China Securities Regulatory Commission's Securities Regulatory Permission Word [200 1] 105 "On Major Purchase of Listed Companies

6. After the newly-added shares of Panyu Titanium Industry join Pangang Group, the change in the proportion of shares held by Pangang Group in Panyu Titanium Industry will meet the conditions of comprehensive tender offer, and China Securities Regulatory Commission needs to approve Pangang Group's application for exemption from tender offer. If approved, Pangang Group does not need to make a tender offer.