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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

[  ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 25, 2010

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[  ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report
_________________________

For the transition period from ___________to ___________.

Commission file number: 000-52132

CHINA OUMEI REAL ESTATE INC.(Exact name of Registrant as specified in its charter)

Not Applicable(Translation of
Registrants name into English)

Cayman Islands(Jurisdiction of
incorporation or organization)

Floor 28, Block C Longhai Mingzhu Building No.182
Haier Road, Qingdao 266000 Peoples Republic of China(Address
of principal executive offices)

Mr. Zhaohui John Liang 634 Donna Ct.River
Vale, NJ 07675 Phone: (201) 497-5400Email: john.liang@chinaoumeirealestate.com(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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Securities registered or to be registered pursuant to Section
12(b) of the Act:

None(Title of Class)

Securities registered or to be registered pursuant to Section
12(g) of the Act.

Ordinary shares, par value $0.002112 per share(Title
of Class)

Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.

None(Title of Class)

Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report (December 25, 2010): 31,020,062 ordinary
shares.

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [  ]      No [X]

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.

Yes [  ]      No [X]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]      No [  ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files)

Yes [  ]      No [  ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer.

|Large Accelerated Filer [  ] | Accelerated Filer [  ] | Non-Accelerated Filer [X]
|---------------------------- | ---------------------- | -------------------------

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|U.S. GAAP [X] | International Financial Reporting [
       ]   | Other [  ]
|------------- | ---------------------------------------------- | ----------
|              | Standards as issued by the
      International |           
|              | Accounting Standards
      Board               |           

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow.

[  ] Item 17      [  ] Item
18

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).

Yes [  ]      No [X]

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Annual Report on Form 20-F For the
Fiscal Year Ended December 25, 2010

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TABLE OF CONTENTS

|          |                                                                                      |  | Page
|--------- | ------------------------------------------------------------------------------------ |  | ----
|PART I   
|          |                                                                                      |  |     
|Item 1.   | Identity of Directors,
      Senior Management and Advisers                          |  | 2   
|Item 2.   | Offer Statistics and Expected Timetable                                              |  | 2   
|Item 3.   | Key Information                                                                      |  | 2   
|Item 4.   | Information on the Company                                                           |  | 15  
|Item 4A.  | Unresolved Staff
      Comments                                                      |  | 43  
|Item 5.   | Operating and Financial Review and
      Prospects                                   |  | 43  
|Item 6.   | Directors, Senior
      Management and Employees                                     |  | 57  
|Item 7.   | Major Shareholders and Related Party
      Transactions                              |  | 66  
|Item 8.   | Financial Information                                                                |  | 66  
|Item 9.   | The Offer and Listing                                                                |  | 67  
|Item 10.  | Additional Information                                                               |  | 67  
|Item 11.  | Quantitative and Qualitative Disclosures
      About Market Risk                     |  | 79  
|Item 12.  | Description of
      Securities Other Than Equity Securities                         |  | 80  
|          |                                                                                      |  |     
|          |                                                                                      |  |     
|PART II  
|          |                                                                                      |  |     
|Item 13.  | Defaults, Dividend Arrearages and
      Delinquencies                                |  | 80  
|Item 14.  | Material Modifications
      to the Rights of Securities Holders and Use of Proceeds |  | 80  
|Item 15.  | Controls and Procedures                                                              |  | 80  
|Item 16A. | Audit Committee
      Financial Expert                                               |  | 82  
|Item 16B. | Code of Ethics                                                                       |  | 82  
|Item 16C. | Principal Accountant
      Fees and Services                                         |  | 82  
|Item 16D. | Exemptions from the Listing Standards
      for Audit Committees                     |  | 82  
|Item 16E. | Purchases of Equity
      Securities by the Issuer and Affiliated Purchasers         |  | 82  
|Item 16F. | Change in Registrants Certifying
      Accountant                                   |  | 83  
|Item 16G. | Corporate Governance                                                                 |  | 83  
|          |                                                                                      |  |     
|          |                                                                                      |  |     
|PART III 
|          |                                                                                      |  |     
|Item 17.  | Financial Statements                                                                 |  | 83  
|Item 18.  | Financial Statements                                                                 |  | 83  
|Item 19.  | Exhibits                                                                             |  | 83  

i

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USE OF CERTAIN DEFINED TERMS

Except as otherwise indicated by the context, references in
this annual report to:

- we, us, our, our Company, or the Company are to the combined
  business of China Oumei Real Estate Inc., a Cayman Islands company, and its
  consolidated subsidiaries, Leewell, Oumei, Oumei Weiye, Caoxian Industrial,
  Longhai Hotel, Longhai Real Estate, Qingdao Xudong, Weifang Longhai Industry,
  Weifang Longhai Zhiye, Weifang Qilu, Weihai Economic and Weihai Mingwei;
- Leewell are to Leewell Investment Group Limited, a Hong Kong company;
- Oumei are to Qingdao Oumei Real Estate Development Co., Ltd., a PRC
  limited company;
- Oumei Weiye are to Qingdao Oumei Weiye Project Management Co., Ltd., a
  PRC limited company;
- Caoxian Industrial are to Caoxian Industrial Properties Co., Ltd., a PRC
  limited company;
- Longhai Hotel are to Longhai Hotel Co., Ltd., a PRC limited company;
- Longhai Real Estate are to Longhai Real Estate Properties Co., Ltd., a
  PRC limited company;
- Qingdao Xudong are to Qingdao Xudong Real Estate Development Co., Ltd.,
  a PRC limited company;
- Weifang Longhai Industry are to Weifang Longhai Industry Co., Ltd., a
  PRC limited company;
- Weifang Longhai Zhiye are to Weifang Longhai Zhiye Co., Ltd., a PRC
  limited company;
- Weifang Qilu are to Weifang Qilu Guotai Properties Co., Ltd., a PRC
  limited company;
- Weihai Economic are to Weihai Economic & Technology Development Zone
  Longhai Properties Co., Ltd., a PRC limited company;
- Weihai Mingwei are to Weihai Mingwei Industry Co., Ltd., a PRC limited
  company;
- Hong Kong are to the Hong Kong Special Administrative Region of the
  Peoples Republic of China;
- PRC and China are to the Peoples Republic of China;
- Renminbi and RMB are to the legal currency of China;
- U.S. dollars, dollars and $ are to the legal currency of the United
  States;

In addition, at present, there is no uniform standard to
categorize the different types and sizes of cities in China. In this annual
report, we refer to Beijing, Shanghai, Guangzhou and Shenzhen as tier one
cities, which are the most populous, affluent and competitive cities in the
country. Tier two cities are cities that generally meet the following criteria,
excluding the four aforementioned tier one cities: (1) Gross Domestic Product,
or GDP, over RMB 200 billion (US$29 billion); (2) GDP per capita over RMB 14,000
(US$2,050); (3) population with permanent residency in urban area over 1
million; (4) urban area over 100 km2; (5) annual sales in residential real
estate over 1.5 million square meters; and (6) average unit selling price of
residential real estate over RMB 3,000 (US$439) per square meter. Tier three
cities are the cities that do not meet one or more criteria listed above.

FORWARD-LOOKING INFORMATION

In addition to historical information, this annual report
contains forward-looking statements. These statements involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from any future results,
performances or achievements expressed or implied by the forward-looking
statements. These risks and uncertainties include, but are not limited to, the
factors described in Item 3, Key informationRisk Factors below. In some
cases, you can identify forward-looking statements by terms such as
anticipates, believes, could, estimates, expects, intends, may,
plans, potential, predicts, projects, should, would and similar
expressions intended to identify forward-looking statements. Forward-looking
statements reflect our current views with respect to future events and are based
on assumptions and subject to risks and uncertainties. Given these
uncertainties, you should not place undue reliance on these forward-looking
statements.

Also, forward-looking statements represent our estimates and
assumptions only as of the date of this annual report. You should read this
annual report and the documents that we reference and filed as exhibits to this
report completely and with the understanding that our actual future results may
be materially different from what we expect. Except as required by law, we
assume no obligation to update any forward-looking statements publicly, or to
update the reasons actual results could differ materially from those anticipated
in any forward-looking statements, even if new information becomes available in
the future.

1

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PART I

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS

Not applicable.

ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.     KEY INFORMATION

Selected Financial Data

Selected Consolidated Financial Data

The following table presents selected financial data regarding
our business. It should be read in conjunction with our consolidated financial
statements and related notes contained elsewhere in this annual report and the
information under Item 5, Operating and Financial Review and Prospects. The
financial statements contained elsewhere fully represent our financial condition
and operations; however, they are not indicative of our future performance.

The selected consolidated statement of operations data for the
years ended December 25, 2008, 2009 and 2010 and the consolidated balance sheet
data as of December 31, 2008, 2009 and 2010 have been derived from our audited
consolidated financial statements included in this annual report. The selected
consolidated statement of operations data for the years ended December 25, 2006
and 2007 and the selected consolidated balance sheet data as of December 25,
2006 and 2007 have been derived from our unaudited financial statements not
included in this annual report. Our consolidated financial statements are
prepared and presented in accordance with generally accepted accounting
principles in the United States, or U.S. GAAP.

|                                                       |   | Fiscal Year Ended December 25, |  
|------------------------------------------------------ | - | ------------------------------ | -
|                                                       |   | 2006                           |  
|Statements of Operations Data                          |   | (unaudited)                    |  
|Total sales                                            | $ | 54,291,244                     |  
|Total cost of sales                                    |   | (33,703,168                    | )
|Gross profit                                           |   | 20,588,076                     |  
|Advertising expenses                                   |   | (47,051                        | )
|Commission expenses                                    |   | (789,497                       | )
|Selling expenses                                       |   | (6,192                         | )
|Bad debt recovery (expense)                            |   | (154,710                       | )
|General and administrative expenses                    |   | (4,092,355                     | )
|Income from operations                                 |   | 15,498,271                     |  
|Miscellaneous income (expense)                         |   | 16,022                         |  
|Interest expense                                       |   | (121,597                       | )
|Income before income taxes and extraordinary item      |   | 15,392,696                     |  
|Income taxes                                           |   | (5,130,644                     | )
|Income before extraordinary item                       |   | 10,262,052                     |  
|Extraordinary item, net                                |   |                               |  
|Net income                                             |   | 10,262,052                     |  
|Foreign currency translation adjustment                |   | 687,566                        |  
|Comprehensive income                                   | $ | 10,949,618                     |  
|Earnings per common share basic                        | $ | 0.34                           |  
|Earnings per common share diluted                      | $ | 0.34                           |  
|Weighted average common shares outstanding
      basic |   | 30,235,062                     |  
|Weighted average common shares outstanding diluted     |   | 30,235,062                     |  
|Cash Flow Data                                         |   |                                |  
|Net cash provided by (used in)                         |   |                                |  
|Operating Activities                                   | $ | (5,953,059                     | )
|Investing Activities                                   |   | (59,164                        | )
|Financing Activities                                   |   | 5,759,286                      |  
|Effect of exchange rate changes on cash                |   | (57,807                        | )
|Net increase (decrease) in cash                        | $ | (310,744                       | )

2

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|                      |   |                    |  |   |             |  |   |             |  |   |             |  |   |             | 
|--------------------- | - | ------------------ |  | - | ----------- |  | - | ----------- |  | - | ----------- |  | - | ----------- | 
|                      |   | As of December 25, | 
|                      |   | 2006               |  |   | 2007        |  |   | 2008        |  |   | 2009        |  |   | 2010        | 
|Balance Sheet Data    |   | (unaudited)        |  |   | (unaudited) |  |   |             |  |   |             |  |   |             | 
|Current assets        | $ | 92,211,870         |  | $ | 69,443,412  |  | $ | 105,072,009 |  | $ | 133,002,971 |  | $ | 194,356,501 | 
|Total assets          |   | 94,711,799         |  |   | 87,822,788  |  |   | 178,648,355 |  |   | 196,332,843 |  |   | 260,120,259 | 
|Current liabilities   |   | 57,741,400         |  |   | 59,977,634  |  |   | 86,240,752  |  |   | 88,795,899  |  |   | 91,775,418  | 
|Long-term liabilities |   | 7,686,000          |  |   |            |  |   | 29,160,895  |  |   | 13,185,998  |  |   | 23,703,855  | 
|Total liabilities     |   | 65,427,400         |  |   | 59,977,634  |  |   | 115,401,647 |  |   | 101,981,897 |  |   | 115,479,273 | 
|Stockholders equity  |   | 29,284,399         |  |   | 27,845,154  |  |   | 63,246,708  |  |   | 94,350,946  |  |   | 144,640,986 | 

Exchange Rate Information

Our reporting and financial statements are expressed in the
U.S. dollar, which is our reporting and functional currency. However,
substantially all of the revenues and expenses of our consolidated operating
subsidiaries are denominated in RMB. This annual report contains translations of
RMB amounts into U.S. dollars at specific rates solely for the convenience of
the reader. The conversion of RMB into U.S. dollars in this annual report is
based on daily RMB to U.S. Dollar Interbank Exchange Rates published on
OANDA.com. Unless otherwise noted, all translations from RMB to U.S. dollars and
from U.S. dollars to RMB in this annual report were made at a rate of RMB1 to
US$0.1507, the rate in effect as of December 25, 2010. We make no representation
that any RMB or U.S. dollar amounts could have been, or could be, converted into
U.S. dollars or RMB, as the case may be, at any particular rate, the rates
stated below, or at all. The Chinese government imposes control over its foreign
currency reserves in part through direct regulation of the conversion of RMB
into foreign exchange. On June 19, 2011, the exchange rate was RMB1 to
US$0.1546.

The following table sets forth information concerning exchange
rates between the RMB and the U.S. dollar for the periods indicated. These rates
are provided solely for your convenience and are not necessarily the exchange
rates that we used in this annual report or will use in the preparation of our
periodic reports or any other information to be provided to you. The source of
these rates is daily RMB to U.S. Dollar Interbank Exchange Rates published on
OANDA.com.

|                                                |  | InterBank Buying Rate | 
|----------------------------------------------- |  | --------------------- | 
|                                                |  | Period End            | 
|                                                |  |                       | 
|Fiscal Year Ended:                              |  |                       | 
|December 25, 2006                               |  | 0.1281                | 
|December 25, 2007                               |  | 0.1360                | 
|December 25, 2008                               |  | 0.1462                | 
|December 25, 2009                               |  | 0.1468                | 
|December 25, 2010                               |  | 0.1507                | 
|December 25, 2011 (through June 19,
      2011) |  | 0.1546                | 
|                                                |  |                       | 
|Most Recent Six Months Ended:                   |  |                       | 
|December 25, 2010                               |  | 0.1507                | 
|January 25, 2011                                |  | 0.1522                | 
|February 25, 2011                               |  | 0.1523                | 
|March 25, 2011                                  |  | 0.1527                | 
|April 25, 2011                                  |  | 0.1542                | 
|May 25, 2011                                    |  | 0.1539                | 
|June 25, 2011 (through June 19, 2011)           |  | 0.1546                | 

___________
(1) Annual averages are calculated using the average of the
rates on each calendar day of each month during the relevant year. Monthly
averages are calculated using the average of the daily rates during the relevant
month.

3

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Capitalization and Indebtedness

Not applicable.

Reasons for the Offer and Use of Proceeds

Not applicable.

Risk Factors

An investment in our ordinary shares involves a high
degree of risk. You should carefully consider the risks described below,
together with all of the other information included in this annual report,
before making an investment decision. If any of the following risks actually
occurs, our business, financial condition or results of operations could suffer.
In that case, the trading price of our ordinary shares could decline, and you
may lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS

The recent financial crisis could negatively affect our
business, results of operations, and financial condition.

The recent credit crisis and turmoil in the global financial
system may have an impact on our business and our financial condition, and we
may face challenges if conditions in the financial markets do not improve. Our
ability to access the capital markets may be restricted at a time when we would
like, or need, to raise capital, which could have an impact on our flexibility
to react to changing economic and business conditions. Our business requires
access to substantial financing. If we are not able to obtain adequate financing
in a timely manner, our ability to complete existing projects and expand our
business could be materially adversely affected. In addition, these economic
conditions also impact levels of consumer spending, which have recently
deteriorated significantly and may remain depressed for the foreseeable future.
Real estate market generally declines during recessionary periods and other
periods where disposable income is adversely affected. If demand for our
products fluctuates as a result of economic conditions or otherwise, our revenue
and gross margin could be harmed.

Our business is susceptible to fluctuations in the real
estate market of China, especially in certain areas of eastern China where our
operations are concentrated, which may adversely affect our sales and results of
operations.

Our business depends substantially on the conditions of the PRC
real estate market. Demand for real estate in China has grown rapidly in the
recent decade but such growth is often coupled with volatility in market
conditions and fluctuations in real estate prices. For example, the rapid
expansion of the real estate market in major provinces and cities in China in
the early 1990s, such as Shanghai, Beijing and Guangdong province, led to an
oversupply in the mid-1990s and a corresponding fall in real estate values and
rentals in the second half of the decade. Following a period of rising real
estate prices and transaction volume in most major cities, the industry
experienced a severe downturn in 2008, with transaction volume in many major
cities declining by more than 40% compared to 2007.

Average selling prices also declined in many cities during
2008. Fluctuations of supply and demand in Chinas real estate market are caused
by economic, social, political and other factors. To the extent fluctuations in
the real estate market adversely affect real estate transaction volumes or
prices, our financial condition and results of operations may be materially and
adversely affected.

We are heavily dependent on the performance of the
residential property market in China, which is at a relatively early development
stage.

The residential property industry in the PRC is still in a
relatively early stage of development. Although demand for residential property
in the PRC has been growing rapidly in recent years, such growth is often
coupled with volatility in market conditions and fluctuation in property prices.
It is extremely difficult to predict how much and when demand will develop, as
many social, political, economic, legal, and other factors, most of which are
beyond our control, may affect the development of the market. The level of
uncertainty is increased by the limited availability of accurate financial and
market information and the overall low level of transparency in the
PRC, especially in tier-two cities that have lagged in progress in these aspects
when compared to tier-one cities.

4

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The lack of a liquid secondary market for residential property
may discourage investors from acquiring new properties. The limited amount of
property mortgage financing available to PRC individuals may further inhibit
demand for residential developments.

The PRC government has recently introduced certain policy
and regulatory measures to control the rapid increase in housing prices and cool
down the real estate market and our business may be materially and adversely
affected by these government measures.

Since the second half of 2009, the PRC real estate market has
experienced strong recovery from the financial crisis and housing prices rose
rapidly in certain cities. In response to concerns over the scale of the
increase in property investments, the PRC government has implemented measures
and introduced policies to curtail property speculation and promote the healthy
development of the real estate industry in China. On January 7, 2010, the PRC
State Council issued a circular to control the rapid increase in housing prices
and cool down the real estate market in China. It reiterated that the purchasers
of a second residential property for their households must make down payments of
no less than 40% of the purchase price and real estate developers must commence
the sale within the mandated period as set forth in the pre-sale approvals and
at the publicly announced prices. The circular also requested the local
government to increase the effective supply of low-income housing and ordinary
commodity housing and instructed the Peoples Bank of China, or PBOC, and the
China Bank Regulatory Commission to tighten the supervision of the bank lending
to the real estate sector and mortgage financing. On February 25, 2010, the PBOC
increased the reserve requirement ratio for commercial banks by 0.5% to 16.5%
and has further increased it from 16.5% to 17.0% effective May 10, 2010.
Further, in order to implement the requirements set out in the State Councils
circular, the Ministry of Land and Resources, or the MLR, issued a notice on
March 8, 2010 in relation to increasing the supply of, and strengthening the
supervision over, land for real estate development purposes. MLRs notice
stipulated that the floor price of a parcel of land must not be lower than 70%
of the benchmark land price set for the area in which the parcel is located, and
that real estate developers participating in land auctions must pay a deposit
equivalent to 20% of the land parcels floor price.

In April 2010, the PRC State Council issued a further circular,
which provided as follows: purchasers of a first residential property for their
households with a gross floor area of greater than 90 square meters must make
down payments of no less than 30% of the purchase price; purchasers of a second
residential property for their households must make down payments of no less
than 50% of the purchase price and the interest rate of any mortgage for such
property must equal at least the benchmark interest rate plus 10%; and for
purchasers of a third residential property, both the minimum down payment amount
and applied interest rate must be significantly higher than the relevant minimum
down payment and interest rate which would have been applicable prior to the
issuance of the circular (the specific figures shall be decided by the relevant
bank on a case-by-case based on the principle of proper risk management).
Moreover, the circular provided that banks can decline to provide mortgage
financing to either a purchaser of a third residential property or a
non-resident purchaser.

It is possible that the government agencies may adopt further
measures to implement the policies outlined in the January and April circulars.
The full effect of the circulars on the real estate industry and our business
will depend in large part on the implementation and interpretation of the
circulars by governmental agencies, local governments and banks involved in the
real estate industry. The PRC governments policies and regulatory measures on
the PRC real estate sector could limit our access to required financing and
other capital resources, adversely affect the property purchasers ability to
obtain mortgage financing or significantly increase the cost of mortgage
financing, reduce market demand for our properties and increase our operating
costs. We cannot be certain that the PRC government will not issue additional
and more stringent regulations or measures or that agencies and banks will not
adopt restrictive measures or practices in response to PRC governmental policies
and regulations, which could substantially reduce pre-sales of our properties
and cash flow from operations and substantially increase our financing needs,
which would in turn materially and adversely affect our business, financial
condition, results of operations and prospects.

Our sales will be affected if mortgage financing becomes
more costly or otherwise becomes less attractive.

Substantially all purchasers of our residential properties rely
on mortgages to fund their purchases. An increase in interest rates may
significantly increase the cost of mortgage financing, thus affecting the
affordability of residential properties. Since October 20, 2010, PBOC has raised
the lending rates four times. As a result, the benchmark lending rate for loans
with a term of over five years, which affects mortgage rates, was increased to
6.80% on April 6, 2011. The PRC government and commercial banks may also
increase the down payment requirement, impose other conditions or otherwise change the regulatory framework in a manner that would make
mortgage financing unavailable or unattractive to potential property purchasers.
If the availability or attractiveness of mortgage financing is reduced or
limited, many of our prospective customers may not be able to purchase our
properties and, as a result, our business, liquidity and results of operations
could be adversely affected.

5

---

If we are prevented from guaranteeing loans to
prospective home purchasers, our sales and pre-sales may decline.

In line with industry practice, we provide guarantees to PRC
banks with respect to loans procured by the purchasers of our properties, in the
form of a transfer of 5% of the home purchasers loan amount from our bank
account to a bank designated account, as collateral for the home purchasers
timely debt service payments. The bank will release these deposits after
construction is completed, final deliveries are made, and home purchasers have
obtained the ownership documents necessary to secure a mortgage loan. If there
are changes in laws, regulations, policies, and practices that would prohibit
property developers from providing guarantees to banks in respect of mortgages
offered to property purchasers and as a result, banks would not accept any
alternative guarantees by third parties, or if no third party is available or
willing in the market to provide such guarantees, it may become more difficult
for property purchasers to obtain mortgages from banks and other financial
institutions during sales and pre-sales of our properties. Such difficulties in
financing could result in a substantially lower rate of sale and pre-sale of our
properties, which would adversely affect our cash flow, financial condition, and
results of operations. We are not aware of any impending changes in laws,
regulations, policies, or practices that will prohibit such practice in China.
However, there can be no assurance that such changes in laws, regulations,
policies, or practices will not occur in China in the future.

We may be unable to acquire land use rights from the
government through Longhai Group as we currently do which could increase our
cost of sales.

Our revenue depends on the completion and sale of our projects,
which in turn depends on our ability to acquire land use rights for such
projects. Our land use rights costs are a major component of our cost of real
estate sales and increases in such costs could diminish our gross margin. From
time to time, we acquire our land use rights through companies owned by Longhai
Group, a company wholly-owned by Mr. Antoine Cheng, our Chairman. Longhai
Groups primary business is infrastructure and building construction. Through
its infrastructure construction business, Longhai Group works with local
governments and often finances (by agreeing to be paid sometime following the
completion of construction instead of being paid as construction progresses) the
governments public infrastructure projects that can include old city relocation
projects. In exchange for such financing, the local governments invite Longhai
Group to bid for premium parcels of land for residential use at public auction
as a preferred candidate or grant Longhai Group the right of first refusal to
bid for industrial parcels for which the Longhai Group already has land use
rights, but whose use has been changed to real estate development. Since Longhai
Group does not have the necessary license to engage in residential development
in China, it typically sold companies owning these land use rights to us so that
we could develop these parcels using our real estate development license.

Although we believe that the aforementioned way in which
Longhai Group obtains land use rights is consistent with the PRC governments
long-term policy to develop healthy real estate market, we cannot assure you
that the local government will continue to provide Longhai Group land use rights
in this way in the future. If this happens, we will have to acquire our land use
rights primarily through a public tender, auction or listing-for-sale.
Competition in these bidding processes can result in higher land use rights
costs for us. In addition, we may not successfully obtain desired land use
rights at commercially reasonable costs due to the increasingly intense
competition in the bidding processes. We may also need to acquire land use
rights through acquisition, which could increase our costs.

We have significant short-term debt obligations, which
mature in less than one year. Failure to extend those maturities of, or to
refinance, that debt could result in defaults, and in certain instances,
foreclosures on our assets. Moreover, we may be unable to obtain financing to
fund ongoing operations and future growth.

The real estate development industry is capital intensive, and
development requires significant up-front expenditures to acquire land and begin
development. Accordingly, we incur substantial indebtedness to finance our
development activities.

At December 25, 2010, we had short-term bank loans outstanding
of $1,417,264, long-term bank loans of $35,414,500 maturing within one year,
long-term bank loans of $0 maturing in more than one year, and notes payable of
$0, which were secured by our land use rights and projects under construction.
Failure to obtain extensions of the maturity dates of, or to refinance, these
obligations or to obtain additional equity financing to meet these debt
obligations would result in an event of default with respect to such obligations
and could result in the foreclosure on the collateral. The sale of such
collateral at foreclosure would significantly disrupt our business, which
could significantly lower our sales and profitability. We may be able to
refinance or obtain extensions of the maturities of all or some of such debt
only on terms that significantly restrict our ability to operate, including
terms that place additional limitations on our ability to incur other
indebtedness, to pay dividends, to use our assets as collateral for other
financing, to sell assets or to make acquisitions or enter into other
transactions. Such restrictions may adversely affect our ability to finance our
future operations or to engage in other business activities. If we finance the
repayment of our outstanding indebtedness by issuing additional equity or
convertible debt securities, such issuances could result in substantial dilution
to our stockholders.

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While we believe that our revenue growth projections and our
ongoing cost controls will allow us to generate cash and achieve profitability
in the foreseeable future, there is no assurance as to when or if we will be
able to achieve our projections. Our future cash flows from operations, combined
with our accessibility to cash and credit, may not be sufficient to allow us to
finance ongoing operations or to make required investments for future growth. We
may need to seek additional credit or access capital markets for additional
funds. There is no assurance that we would be successful in this regard.

Our practice of pre-selling projects may expose us to
substantial liabilities.

It is common practice by property developers in China,
including us, to pre-sell properties (while still under construction), which
involves certain risks. For example, we may fail to complete a property
development that may have been fully or partially pre-sold, which would leave us
liable to purchasers of pre-sold units for losses suffered by them without
adequate resources to pay the liability if funds have been used on the project.
In addition, if a pre-sold property development is not completed on time, the
purchasers of pre-sold units may be entitled to compensation for late delivery.
If the delay extends beyond a certain period, the purchasers may be entitled to
terminate the pre-sale agreement and pursue a claim for damages that exceeds the
amount paid and our ability to recoup the resulting liability from future
sales.

We may not be able to successfully execute our strategy
of expanding into new geographical markets in China, which could have a material
adverse effect on our business and results of operations.

We plan to continue to expand our business into new
geographical areas in China. Since China is a large and diverse market, consumer
trends and demands may vary significantly by region and our experience in the
markets in which we currently operate may not be applicable in other parts of
China. As a result, we may not be able to leverage our experience to expand into
other parts of China. When we enter new markets, we may face intense competition
from companies with greater experience or an established presence in the
targeted geographical areas or from other companies with similar expansion
targets. Therefore, we may not be able to grow our sales in the new cities we
enter due intense competitive pressures and or the substantial costs
involved.

We are dependent on third-party subcontractors,
manufacturers, and distributors for all architecture, engineering and
construction services, and construction materials. A discontinued supply of such
services and materials will adversely affect our projects.

We are dependent on third-party subcontractors, manufacturers,
and distributors for all architecture, engineering and construction services,
and construction materials. Services and materials purchased from our five
largest subcontractors or suppliers accounted for 86.9% for the year ended
December 25, 2010. A discontinued supply of such services and materials will
adversely affect our construction projects and the success of the Company.

We are subject to extensive government regulation that
could cause us to incur significant liabilities or restrict our business
activities.

Regulatory requirements could cause us to incur significant
liabilities and operating expenses and could restrict our business activities.
We are subject to statutes and rules regulating, among other things, certain
developmental matters, building and site design, and matters concerning the
protection of health and the environment. Our operating expenses may be
increased by governmental regulations, such as building permit allocation
ordinances and impact and other fees and taxes, that may be imposed to defray
the cost of providing certain governmental services and improvements. Any delay
or refusal from government agencies to grant us necessary licenses, permits, and
approvals could have an adverse effect on our operations.

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We depend on the availability of additional human
resources for future growth.

We are currently experiencing a period of significant growth in
our sales volume. We believe that continued expansion is essential for us to
remain competitive and to capitalize on the growth potential of our business.
Such expansion may place a significant strain on our management and operations
and financial resources. As our operations continue to grow, we will have to
continually improve our management, operational, and financial systems,
procedures and controls, and other resources infrastructure, and expand our
workforce. There can be no assurance that our existing or future management,
operating and financial systems, procedures, and controls will be adequate to
support our operations, or that we will be able to recruit, retain, and motivate
our employees. Further, there can be no assurance that we will be able to
establish, develop, or maintain the business relationships beneficial to our
operations, or to do so or to implement any of the above activities in a timely
manner. Failure to manage our growth effectively could have a material adverse
effect on our business and the results of our operations and financial
condition.

We may be adversely affected by the fluctuation in raw
material prices and selling prices of our products.

The land and raw materials used in our projects have
experienced significant price fluctuations in the past. There is no assurance
that they will not be subject to future price fluctuations or pricing control.
The land and raw materials used in our projects may experience price volatility
caused by events such as market fluctuations or changes in governmental
programs. The market price of land and raw materials may also experience
significant upward adjustment, if, for instance, there is a material
under-supply or over-demand in the market. These price changes may ultimately
result in increases in the selling prices of our products, and may, in turn,
adversely affect our sales volume, sales, operating income, and net income.

We face intense competition from other real estate
developers.

The property industry in the PRC is highly competitive. In the
tier-two cities we focus on, local and regional property developers are our
major competitors, and an increasing number of large state-owned and private
national property developers have started entering these markets. Many of our
competitors, especially the state-owned and private national property
developers, are well capitalized and have greater financial, marketing, and
other resources than we have. Some also have larger land banks, greater
economies of scale, broader name recognition, a longer track record, and more
established relationships in certain markets. In addition, the PRC governments
recent measures designed to reduce land supply further increased competition for
land among property developers.

Competition among property developers may result in increased
costs for the acquisition of land for development, increased costs for raw
materials, shortages of skilled contractors, oversupply of properties, decrease
in property prices in certain parts of the PRC, a slowdown in the rate at which
new property developments will be approved and/or reviewed by the relevant
government authorities and an increase in administrative costs for hiring or
retaining qualified personnel, any of which may adversely affect our business
and financial condition. Furthermore, property developers that are better
capitalized than we are may be more competitive in acquiring land through the
auction process. If we cannot respond to changes in market conditions as
promptly and effectively as our competitors, or effectively compete for land
acquisition through the auction systems and acquire other factors of production,
our business and financial condition will be adversely affected.

In addition, risk of property over-supply is increasing in
parts of China, where property investment, trading and speculation have become
overly active. We are exposed to the risk that in the event of actual or
perceived over-supply, property prices may fall drastically, and our revenue and
profitability will be adversely affected.

We may have to suffer monetary losses by reducing up to
$0.80 of the excise price of the warrants that we issued to our investors in the
April 2010 private placement since the registration statement has not been
declared effective within the time periods specified.

In connection with the April 2010 private placement described
elsewhere in this report, we entered into a subscription agreement with the
investors, or the Subscription Agreement. Under the terms of the Subscription
Agreement, if a registration statement is not declared effective by the SEC
within 180 days following the closing of the April 2010 private placement, then
we are required to pay the investors, as liquidated damages, 1.0% of the amount
invested for each 30-day period during which such failure continues, for up to a
maximum of 10% of each investors investment pursuant to the Subscription
Agreement. On October 11, 2010, we entered into Amendment No. 1 to the
Subscription Agreement with certain investors, pursuant to which we amended
Section 8.1 of the Subscription Agreement with respect to the liquidated damages
that we may be liable for. Pursuant to Amendment No. 1, in lieu of the cash
liquidated damages amount that would otherwise have been payable by us for our failure to
cause the registration statement to be declared effective within the prescribed
period, we are required to reduce the initial exercise price of the warrants
issued to each investor by $0.08 per calendar month, or portion thereof, until
such time that this registration statement is declared effective by the SEC;
provided that, in no event will we be obligated to reduce the initial exercise
price of the warrants by more than $0.80 in aggregate. We have failed to cause
the registration statement to be declared effective by the SEC with the
prescribed period. There can be no assurance that the registration statement
will be declared effective by the SEC in the coming future. Therefore, we may
have to suffer monetary losses by reducing up to $0.80 of the exercise price of
the warrants.

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We could be adversely affected by the occurrence of
natural disasters.

From time to time, our developed sites may experience strong
winds, storms, flooding and earth quakes. Natural disasters could impede
operations, damage infrastructure necessary to our constructions and operations.
The occurrence of natural disasters could adversely affect our business, the
results of our operations, prospects and financial condition.

We have limited insurance coverage against damages or
loss we might suffer.

The insurance industry in China is still in an early stage of
development and business interruption insurance available in China offers
limited coverage compared to that offered in many developed countries. We carry
insurance for potential liabilities related to our vehicles, but we do not carry
business interruption insurance and therefore any business disruption or natural
disaster could result in substantial damages or losses to us. In addition, there
are certain types of losses (such as losses from forces of nature) that are
generally not insured because either they are uninsurable or insurance cannot be
obtained on commercially reasonable terms. Should an uninsured loss or a loss in
excess of insured limits occur, our business could be materially adversely
affected. If we were to suffer any losses or damages to our properties, our
business, financial condition and results of operations would be materially and
adversely affected.

Our operating subsidiaries must comply with environmental
protection laws that could adversely affect our profitability.

We are required to comply with the environmental protection
laws and regulations promulgated by the national and local governments of the
PRC. Some of these regulations govern the level of fees payable to government
entities providing environmental protection services and the prescribed
standards relating to construction. Although our construction technologies allow
us to efficiently control the level of pollution resulting from our construction
process, due to the nature of our business, wastes are unavoidably generated in
the processes. If we fail to comply with any of these environmental laws and
regulations in the PRC, depending on the types and seriousness of the violation,
we may be subject to, among other things, warning from relevant authorities,
imposition of fines, specific performance and/or criminal liability, forfeiture
of profits made, or an order to close down our business operations and
suspension of relevant permits.

Our business depends substantially on the continuing
efforts of our senior executives and other key personnel, and our business may
be severely disrupted if we lost their services.

Our future success heavily depends on the continued service of
our senior executives and other key employees. In particular, we rely on the
expertise and experience of Mr. Antoine Cheng, our Chairman, Mr. Weiqing Zhang,
our Chief Executive Officer, Mr. Zhaohui John Liang, our Chief Financial
Officer, and Mr. Yang Chen, our President. If one or more of our senior
executives are unable or unwilling to continue to work for us in their present
positions, we may have to spend a considerable amount of time and resources
searching, recruiting, and integrating the replacements into our operations,
which would substantially divert managements attention from our business and
severely disrupt our business. This may also adversely affect our ability to
execute our business strategy. Moreover, if any of our senior executives joins a
competitor or forms a competing company, we may lose customers, suppliers,
know-how, and key employees.

Failure to achieve and maintain an effective system of
internal control over financial reporting could have a material and adverse
effect on the trading price of our ordinary shares.

We are subject to reporting obligations under the U.S.
securities law. The Securities and Exchange Commission, or SEC, as required by
Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, adopted rules
requiring every public company to include a management report on such companys
internal control over financial reporting in its annual report, which must also
contain managements assessment of the effectiveness of the companys internal
control over financial reporting. In addition, the independent registered public
accounting firm auditing the financial statements of a company that is not a
non-accelerated filer under Rule 12b-2 of the Securities Exchange Act of 1934,
as amended, or the Exchange Act, must also attest to the operating effectiveness
of the companys internal controls.

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Our management has concluded that our internal control over
financial reporting was effective as of December 25, 2010. Our independent
registered public accounting firm was not required to attest to the operating
effectiveness of our internal controls since we are a non-accelerated filer.
However, if we fail to maintain effective internal control over financial
reporting in the future, our management and our independent registered public
accounting firm (when required) may not be able to conclude that we have
effective internal control over financial reporting at a reasonable assurance
level. This could negatively affect the reliability of our financial information
and reduce investors confidence in our reported financial information, which in
turn could result in lawsuits being filed against us by our shareholders,
otherwise harm our reputation or negatively impact the trading price of our
ordinary shares. Furthermore, we have incurred and anticipate that we will
continue to incur considerable costs and use significant management time and
other resources in an effort to comply with SOX 404 and other requirements of
the Sarbanes-Oxley Act.

RISKS RELATED TO DOING BUSINESS IN CHINA

Uncertainties with respect to the PRC legal system could
limit the legal protections available to you and us.

We conduct substantially all of our business through our
operating subsidiaries in the PRC. Our operating subsidiaries are generally
subject to laws and regulations applicable to foreign investments in China and,
in particular, laws applicable to foreign-invested enterprises. The PRC legal
system is based on written statutes, and prior court decisions may be cited for
reference but have limited precedential value. Since 1979, a series of new PRC
laws and regulations have significantly enhanced the protections afforded to
various forms of foreign investments in China. However, since the PRC legal
system continues to evolve rapidly, the interpretations of many laws,
regulations, and rules are not always uniform, and enforcement of these laws,
regulations, and rules involve uncertainties, which may limit legal protections
available to you and us. In addition, any litigation in China may be protracted
and result in substantial costs and diversion of resources and management
attention. In addition, most of our executive officers and directors are
residents of China and not of the United States, and substantially all the
assets of these persons are located outside the United States. As a result, it
could be difficult for investors to affect service of process in the United
States or to enforce a judgment obtained in the United States against our
Chinese operations and subsidiaries.

You may have difficulty enforcing judgments against
us.

Most of our assets are located outside of the United States and
most of our current operations are conducted in the PRC. In addition, most of
our directors and officers are nationals and residents of countries other than
the United States. A substantial portion of the assets of these persons is
located outside the United States. As a result, it may be difficult for you to
effect service of process within the United States upon these persons. It may
also be difficult for you to enforce in U.S. courts judgments on the civil
liability provisions of the U.S. federal securities laws against us and our
officers and directors, most of whom are not residents in the United States and
the substantial majority of whose assets are located outside of the United
States. In addition, there is uncertainty as to whether the courts of the PRC
would recognize or enforce judgments of U.S. courts. Our counsel as to PRC law
has advised us that the recognition and enforcement of foreign judgments are
provided for under the PRC Civil Procedures Law. Courts in China may recognize
and enforce foreign judgments in accordance with the requirements of the PRC
Civil Procedures Law based on treaties between China and the country where the
judgment is made or on reciprocity between jurisdictions. China does not have
any treaties or other arrangements that provide for the reciprocal recognition
and enforcement of foreign judgments with the United States. In addition,
according to the PRC Civil Procedures Law, courts in the PRC will not enforce a
foreign judgment against us or our directors and officers if they decide that
the judgment violates basic principles of PRC law or national sovereignty,
security, or the public interest. So it is uncertain whether a PRC court would
enforce a judgment rendered by a court in the United States.

The PRC government exerts substantial influence over the
manner in which we must conduct our business activities.

The PRC government has exercised and continues to exercise
substantial control over virtually every sector of the Chinese economy through
regulation and state ownership. Our ability to operate in China may be harmed by
changes in its laws and regulations, including those relating to taxation,
import and export tariffs, environmental regulations, land use rights, property,
and other matters. We believe that our operations in China are in material
compliance with all applicable legal and regulatory requirements. However, the
central or local governments of the jurisdictions in which we operate may impose
new, stricter regulations or interpretations of existing regulations that would
require additional expenditures and efforts on our part to ensure our compliance
with such regulations or interpretations.

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Accordingly, government actions in the future, including any
decision not to continue to support recent economic reforms and to return to a
more centrally planned economy or regional or local variations in the
implementation of economic policies, could have a significant effect on economic
conditions in China or particular regions thereof and could require us to divest
ourselves of any interest we then hold in Chinese properties or joint
ventures.

Future inflation in China may inhibit our ability to
conduct business in China.

In recent years, the Chinese economy has experienced periods of
rapid expansion and highly fluctuating rates of inflation. During the past ten
years, the rate of inflation in China has been as high as 5.9% and as low as
-0.8%. These factors have led to the adoption by the Chinese government, from
time to time, of various corrective measures designed to restrict the
availability of credit or regulate growth and contain inflation. High inflation
may in the future cause the Chinese government to impose controls on credit
and/or prices, or to take other action, which could inhibit economic activity in
China, and thereby harm the market for our products and our company.

Restrictions on currency exchange may limit our ability
to receive and use our sales effectively.

The majority of our sales will be settled in RMB and U.S.
dollars, and any future restrictions on currency exchanges may limit our ability
to use revenue generated in RMB to fund any future business activities outside
China or to make dividend or other payments in U.S. dollars. Although the
Chinese government introduced regulations in 1996 to allow greater
convertibility of the RMB for current account transactions, significant
restrictions still remain, including primarily the restriction that
foreign-invested enterprises may only buy, sell or remit foreign currencies
after providing valid commercial documents, at those banks in China authorized
to conduct foreign exchange business. In addition, conversion of RMB for capital
account items, including direct investment and loans, is subject to governmental
approval in China, and companies are required to open and maintain separate
foreign exchange accounts for capital account items. We cannot be certain that
the Chinese regulatory authorities will not impose more stringent restrictions
on the convertibility of the RMB.

Fluctuations in exchange rates could adversely affect our
business and the value of our securities.

Because our business transactions are denominated in RMB and
our funding and results of operations will be denominated in USD, fluctuations
in exchange rates between USD and RMB will affect our balance sheet and
financial results. Since July 2005, RMB is no longer solely pegged to the USD
but instead is pegged against a basket of currencies as a whole in order to keep
a more stable exchange rate for international trading. With the very strong
economic growth in China in the last few years, RMB is facing very high pressure
to appreciate against USD. Such pressure could result more fluctuations in
exchange rates and in turn our business would be suffered from higher exchange
rate risk. There are very limited hedging tools available in China to hedge our
exposure in exchange rate fluctuations. The hedging tools that are available are
also ineffective in the sense that these hedges cannot be freely preformed in
the PRC financial market, and more important, the frequent changes in PRC
exchange control regulations would limit our hedging ability for RMB.

Restrictions under PRC law on our PRC subsidiaries
ability to make dividends and other distributions could materially and adversely
affect our ability to grow, make investments or acquisitions that could benefit
our business, pay dividends to you, and otherwise fund and conduct our
business.

Substantially all of our sales are earned by our PRC
subsidiaries. However, as discussed more fully under Item 4, Information on the
CompanyBusiness OverviewPRC Government RegulationsDividend Distributions,
PRC regulations restrict the ability of our PRC subsidiaries to make dividends
and other payments to their offshore parent company. Any limitations on the
ability of our PRC subsidiaries to transfer funds to us could materially and
adversely limit our ability to grow, make investments or acquisitions that could
be beneficial to our business, pay dividends and otherwise fund and conduct our
business.

Failure to comply with PRC regulations relating to the
establishment of offshore special purpose companies by PRC residents may subject
our PRC resident shareholders to personal liability, limit our ability to
acquire PRC companies or to inject capital into our PRC subsidiaries, limit our
PRC subsidiaries ability to distribute profits to us or otherwise materially
adversely affect us.

In October 2005, the PRC State Administration of Foreign
Exchange, or SAFE, issued the Notice on Relevant Issues in the Foreign Exchange
Control over Financing and Return Investment Through Special Purpose Companies
by Residents Inside China, generally referred to as Circular 75. Circular 75 and
its implementing guidelines, issued in June 2007 (known as Notice 106), require
PRC residents to register with the competent local SAFE branch before
establishing or acquiring control over an offshore special purpose company, or SPV, for
the purpose of engaging in an equity financing outside of China. See Item 4,
Information on the CompanyBusiness OverviewPRC Government
RegulationsCircular 75 for a detailed discussion of Circular 75 and its
implementation.

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We have asked our shareholders, who are PRC residents as
defined in Circular 75, to register with the relevant branch of SAFE, as
currently required, in connection with their equity interests in us and our
acquisitions of equity interests in our PRC subsidiaries. However, we cannot
provide any assurances that they can obtain the above SAFE registrations
required by Circular 75 and Notice 106. Moreover, because of uncertainty over
how Circular 75 will be interpreted and implemented, and how or whether SAFE
will apply it to us, we cannot predict how it will affect our business
operations or future strategies. For example, our present and prospective PRC
subsidiaries ability to conduct foreign exchange activities, such as the
remittance of dividends and foreign currency-denominated borrowings, may be
subject to compliance with Circular 75 and Notice 106 by our PRC resident
beneficial holders.

In addition, such PRC residents may not always be able to
complete the necessary registration procedures required by Circular 75 and
Notice 106. We also have little control over either our present or prospective
direct or indirect shareholders or the outcome of such registration procedures.
A failure by our PRC resident beneficial holders or future PRC resident
shareholders to comply with Circular 75 and Notice 106, if SAFE requires it,
could subject these PRC resident beneficial holders to fines or legal sanctions,
restrict our overseas or cross-border investment activities, limit our
subsidiaries ability to make distributions or pay dividends or affect our
ownership structure, which could adversely affect our business and
prospects.

Our business and financial performance may be materially
adversely affected if the PRC regulatory authorities determine that our
acquisition of Oumei constitutes a Round-trip Investment without MOFCOM
approval.

On August 8, 2006, six PRC regulatory agencies promulgated the
Regulation on Mergers and Acquisitions of Domestic Companies by Foreign
Investors which were further amended by PRC Ministry of Commerce, or MOFCOM, on
June 22, 2009, or the 2006 M&A Rule. Among other things, the 2006 M&A
Rule regulates Round-trip Investments, defined as having taken place when a
PRC business that is owned by PRC individual(s) is sold to a non-PRC entity that
is established or controlled, directly or indirectly, by those same PRC
individual(s). See Item 4, Information on the CompanyBusiness OverviewPRC
Government RegulationsMergers and Acquisitions for a detailed discussion of
the 2006 M&A Rule.

Leewell acquired Oumei in 2007 from Mr. Weiqing Zhang and Ms.
Xiaoyan Cheng. At the time of the acquisition, Leewell was owned and controlled
by Mr. Li Zhou, a citizen of the Commonwealth of Australia, who was acting as a
nominee for Mr. Zhang and Ms. Cheng. The PRC authorities could take the position
that this transaction therefore constituted a Round-Trip Investment requiring
the prior approval of the central office of MOFCOM in Beijing, which we did not
obtain. If the PRC authorities take this position, they could invalidate our
acquisition and ownership of our Chinese subsidiaries. If this were to happen,
we would replace our ownership structure of Oumei with a series of contractual
arrangements which would give us control over, and the economic benefit of, the
operations of our Chinese subsidiaries. These arrangements are described more
fully under Item 4, Information on the CompanyBusiness OverviewPRC Government
RegulationsMergers and Acquisitions.

Additionally, the PRC regulatory authorities may take the view
that these transactions require the prior approval of the China Securities
Regulatory Commission, or CSRC, before MOFCOM approval is obtained. If we cannot
obtain MOFCOM or CSRC approval if required by the PRC regulatory authorities to
do so, the PRC regulatory authorities may impose fines and penalties on our
operations in the PRC, limit our operating privileges in the PRC, delay or
restrict the repatriation of the proceeds from our financing activities in other
countries into the PRC, restrict or prohibit payment or remittance of dividends
to us or take other actions that could have a material adverse effect on our
business, financial condition, results of operations, reputation and prospects,
as well as the trading price of our shares.

Under the New Enterprise Income Tax Law, we may be
classified as a resident enterprise of China. Such classification will likely
result in unfavorable tax consequences to us and our non-PRC
shareholders.

China passed a New Enterprise Income Tax Law, or the EIT Law,
and its implementing rules, both of which became effective on January 1, 2008.
Under the EIT Law, an enterprise established outside of China with de facto
management bodies within China is considered a resident enterprise, meaning
that it can be treated in a manner similar to a Chinese enterprise for
enterprise income tax purposes. See Item 4, Information on the CompanyBusiness
OverviewPRC Government RegulationsDividend Distributions for a detailed
discussion of the EIT Law.

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It remains unclear whether the PRC tax authorities would
require or permit our overseas registered entities to be treated as PRC resident
enterprises. We do not currently consider our company to be a PRC resident
enterprise. However, if the PRC tax authorities determine that we are a
resident enterprise for PRC enterprise income tax purposes, a number of
unfavorable PRC tax consequences could follow. First, we may be subject to the
enterprise income tax at a rate of 25% on our worldwide taxable income as well
as PRC enterprise income tax reporting obligations. In our case, this would mean
that our non-China source income would be subject to PRC enterprise income tax
at a rate of 25%. Second, although under the EIT Law and its implementing rules
dividends paid to us from our PRC subsidiaries would qualify as tax-exempt
income, we cannot guarantee that such dividends will not be subject to a 10%
withholding tax, as the PRC foreign exchange control authorities, which enforce
the withholding tax, have not yet issued guidance with respect to the processing
of outbound remittances to entities that are treated as resident enterprises for
PRC enterprise income tax purposes. Finally, it is possible that future guidance
issued with respect to the new resident enterprise classification could result
in a situation in which a 10% withholding tax is imposed on dividends we pay to
our non-PRC shareholders and with respect to gains derived by our non-PRC
shareholders from transferring our shares.

We may be exposed to liabilities under the Foreign
Corrupt Practices Act and Chinese anti-corruption laws, and any determination
that we violated these laws could have a material adverse effect on our
business.

We are subject to the Foreign Corrupt Practices Act, or FCPA,
and other laws that prohibit improper payments or offers of payments to foreign
governments and their officials and political parties by U.S. persons and
issuers as defined by the statute, for the purpose of obtaining or retaining
business. We have operations, agreements with third parties, and make most of
our sales in China. The PRC also strictly prohibits bribery of government
officials. Our activities in China create the risk of unauthorized payments or
offers of payments by the employees, consultants, sales agents, or distributors
of our Company, even though they may not always be subject to our control. It is
our policy to implement safeguards to discourage these practices by our
employees. However, our existing safeguards and any future improvements may
prove to be less than effective, and the employees, consultants, sales agents,
or distributors of our Company may engage in conduct for which we might be held
responsible. Violations of the FCPA or Chinese anti-corruption laws may result
in severe criminal or civil sanctions, and we may be subject to other
liabilities, which could negatively affect our business, operating results and
financial condition. In addition, the U.S. government may seek to hold our
Company liable for successor liability FCPA violations committed by companies in
which we invest or that we acquire.

RISKS RELATED TO THE MARKET FOR OUR ORDINARY SHARES

There is no current trading market for our ordinary
shares, and there is no assurance of an established public trading market, which
would adversely affect the ability of our investors to sell their securities in
the public market.

Our ordinary shares are not currently listed or quoted for
trading on any national securities exchange or national quotation system. We
have applied for the listing of our ordinary shares on the NASDAQ Global Market
under the symbol OMEI. There is no guarantee that the NASDAQ Global Market, or
any other exchange or quotation system, will permit our shares to be listed and
traded. If we fail to obtain a listing on the NASDAQ Global Market, we may seek
quotation on the OTC Bulletin Board. FINRA has enacted changes that limit
quotations on the OTC Bulletin Board to securities of issuers that are current
in their reports filed with the SEC. The effect on the OTC Bulletin Board of
these rule changes and other proposed changes cannot be determined at this time.
The OTC Bulletin Board is an inter-dealer, over-the-counter market that provides
significantly less liquidity than the NASDAQ Global Market. The quotation of our
shares on the OTC Bulletin Board may result in a less liquid market available
for existing and potential stockholders to trade our shares, could depress the
trading price of our ordinary shares and could have a long-term adverse impact
on our ability to raise capital in the future.

The price of our ordinary shares could be volatile and
could decline at a time when you want to sell your holdings.

We have applied to have our ordinary shares listed on the
NASDAQ Global Market under the symbol OMEI. Although we believe that the
NASDAQ listing will improve the liquidity for our ordinary shares, there is no
assurance that the listing will improve volume, reduce volatility and stabilize
our share price. Numerous factors, many of which are beyond our control, may
cause the market price of our ordinary shares to fluctuate significantly. These
factors include:

- our earnings releases, actual or anticipated changes in our earnings,
  fluctuations in our operating results or our failure to meet the expectations
  of financial market analysts and investors;
- changes in financial estimates by us or by any securities analysts who
  might cover our stock;
- speculation about our business in the press or the investment community;

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- significant developments relating to our relationships with our customers
  or suppliers;
- stock market price and volume fluctuations of other publicly traded
  companies and, in particular, those that are in the real estate industry;
- customer demand for our projects;
- investor perceptions of the real estate industry in general and our
  company in particular;
- the operating and stock performance of comparable companies;
- general economic conditions and trends;
- major catastrophic events;
- announcements by us or our competitors of new products, significant
  acquisitions, strategic partnerships or divestitures;
- changes in accounting standards, policies, guidance, interpretation or
  principles;
- loss of external funding sources;
- failure to maintain compliance with NASDAQ rules;
- sales of our ordinary shares, including sales by our directors, officers
  or significant shareholders; and
- additions or departures of key personnel.

Securities class action litigation is often instituted against
companies following periods of volatility in their stock price. This type of
litigation could result in substantial costs to us and divert our managements
attention and resources.

Moreover, securities markets may from time to time experience
significant price and volume fluctuations for reasons unrelated to operating
performance of particular companies. For example, from September 2008 until June
2009, securities markets in the United States, China and throughout the world
experienced a historically large decline in share price. These market
fluctuations may adversely affect the price of our ordinary shares and other
interests in our company at a time when you want to sell your interest in
us.

We may be subject to penny stock regulations and
restrictions and you may have difficulty selling our ordinary
shares.

The SEC has adopted regulations which generally define
so-called penny stocks as an equity security that has a market price of less
than $5.00 per share or an exercise price of less than $5.00 per share, subject
to certain exemptions. If our ordinary shares become a penny stock, we may
become subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule.
This rule imposes additional sales practice requirements on broker-dealers that
sell such securities to persons other than established customers and accredited
investors (generally, individuals with a net worth in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by Rule 15g-9, a broker-dealer must make a special
suitability determination for the purchaser and receive the purchasers written
consent to the transaction prior to sale. As a result, this rule may affect the
ability of broker-dealers to sell our securities and may affect the ability of
purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock market.
Disclosure is also required to be made about sales commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock.

There can be no assurance that our ordinary shares will qualify
for exemption from the Penny Stock Rule. In any event, even if our ordinary
shares were exempt from the Penny Stock Rule, we would remain subject to Section
15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any
person from participating in a distribution of penny stock if the SEC finds that
such a restriction would be in the public interest.

We do not intend to pay dividends for the foreseeable
future.

For the foreseeable future, we intend to retain any earnings to
finance the development and expansion of our business, and we do not anticipate
paying any cash dividends on our ordinary shares. Accordingly, investors must be
prepared to rely on sales of their ordinary shares after price appreciation to
earn an investment return, which may never occur. Investors seeking cash
dividends should not purchase our ordinary shares. Any determination to pay
dividends in the future will be made at the discretion of our board of directors
and will depend on our results of operations, financial condition, contractual
restrictions, restrictions imposed by applicable law and other factors our board
of directors deems relevant.

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Holders of our ordinary shares may face difficulties in
protecting their interests because we are incorporated under Cayman Islands
law.

Our corporate affairs are governed by our amended and restated
memorandum and articles of association, and by the Companies Law (2010 Revision)
and the common law of the Cayman Islands. The rights of our shareholders and the
fiduciary responsibilities of our directors under Cayman Islands law are not as
clearly established as under statutes or judicial precedent in existence in
jurisdictions in the United States. Therefore, shareholders may have more
difficulty in protecting their interests in the face of actions by our
management or board of directors than would shareholders of a corporation
incorporated in a jurisdiction in the United States, due to the comparatively
less developed nature of Cayman Islands law in this area.

Shareholders of Cayman Islands exempted companies have no
general rights under Cayman Islands law to inspect corporate records and
accounts or to obtain copies of lists of our shareholders. Our directors have
discretion under our amended and restated memorandum and articles of association
to determine whether and to what extent and at what times and places and under
what conditions or regulations our accounts, books and documents, or any of
them, shall be open to the inspection of shareholders not being directors, and
no shareholder (not being a director) shall have any right of inspecting any
account, book or document except as conferred by applicable law or the relevant
code, rules and regulations of the exchange on which our shares are listed (if
any), or authorized by our directors or by ordinary resolution of our
shareholders. This may make it more difficult for you to obtain the information
needed to establish any facts necessary for a shareholder motion or to solicit
proxies from other shareholders in connection with a proxy contest.

Provisions of our articles of association and Cayman
Islands corporate law may impede a takeover or make it more difficult for
shareholders to change the direction or management of the Company, which could
reduce shareholders opportunity to influence management of the
Company.

Our articles of association permit our board of directors to
issue up to 20,000,000 preference shares from time to time, with such rights and
preferences as they consider appropriate. These terms may include voting rights
including the right to vote as a series on particular matters, preferences as to
dividends and liquidation, conversion rights and redemption rights provisions.
The issuance of any preference shares could reduce the value of such ordinary
shares. In addition, specific rights granted to future holders of preference
shares could be used to restrict our ability to merge with, or sell assets to, a
third party. The ability of the board of directors to issue preference shares
could make it more difficult, delay, discourage, prevent or make it more costly
to acquire or effect a change-in-control, which in turn could prevent
shareholders from recognizing a gain in the event that a favorable offer is
extended and could materially and negatively affect the market price of our
ordinary shares.

ITEM 4.     INFORMATION ON THE COMPANY

History and Development of the Company

General

We are a Cayman Islands exempted company and our affairs are
governed by our amended and restated memorandum and articles of association, the
Companies Law (2010 Revision) and the common law of the Cayman Islands. We
organized in the Cayman Islands on March 10, 2006 under the name Dragon
Acquisition Corporation as a blank check development stage company formed for
the purpose of acquiring an operating business, through a stock exchange, asset
acquisition or similar business combination. From our inception until we
completed the reverse acquisition of Leewell described below, our operations
consisted entirely of identifying, investigating and conducting due diligence on
potential businesses for acquisition. As a result of our reverse acquisition of
Leewell, we assumed the business and operations of Leewell and its Chinese
subsidiaries. On August 6, 2010, we changed our name from Dragon Acquisition
Corporation to China Oumei Real Estate Inc. to more accurately reflect our
new business operations.

Our principal business office is located in China at Floor 28,
Block C, Longhai Mingzhu Building, No.182 Haier Road, Qingdao 266000. The
telephone number at our executive offices is (86) 532 8099 7969. Our registered
office is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands and
our registered agent is Maples Corporate Services Limited. We maintain a website
at www.chinaoumeirealestate.com that contains
information about our company, but that information is not part of this
report.

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Reverse Acquisition of Leewell

On April 14, 2010, we completed a reverse acquisition
transaction through a share exchange with Leewell whereby we acquired 100% of
the issued and outstanding capital stock of Leewell in exchange for 29,235,000
ordinary shares, which shares constituted 94.31% of our issued and outstanding
shares on a fully-diluted basis as of and immediately after the consummation of
the reverse acquisition. The share exchange transaction with Leewell was treated
as a reverse acquisition, with Leewell as the acquirer and China Oumei Real
Estate Inc. as the acquired party.

As a result of our acquisition of Leewell, we now own all of
the issued and outstanding capital stock of Leewell, which in turn owns Oumei
and its Chinese subsidiaries and Oumei Weiye. Leewell was established in Hong
Kong on August 10, 2007 to serve as an investment holding company. Oumei was
established in the PRC on May 15, 2001. Its principal activities include the
development and sales of residential and commercial properties in Qingdao and
its nearby cities, or Greater Qingdao, and other cities in Shandong Province,
China.

On September 20, 2007, Leewell acquired 100% of the equity
interests in Oumei from its shareholders for RMB 97,010,000 (approximately $13.1
million). In October 2007, the acquisition was approved by the appropriate
Chinese authorities, and Oumeis status changed from a Chinese domestic company
to a wholly-owned foreign enterprise.

Oumei has three branch offices, located in Jimo, Pingdu, and
Laixi, and has purchased the following nine Chinese subsidiaries:

- Weihai Mingwei, purchased on January 19, 2008 for RMB 110,000,000
  (approximately $15 million);
- Longhai Hotel, purchased on January 22, 2008 for RMB 110,000,000
  (approximately $15 million);
- Weihai Economic, purchased on January 23, 2008 for RMB 140,000,000
  (approximately $19 million);
- Qingdao Xudong, purchased on January 24, 2008 for RMB 60,000,000
  (approximately $8.3 million);
- Weifang Longhai Industry, purchased on August 27, 2008 for RMB 30,000,000
  (approximately $4.4 million);
- Weifang Longhai Zhiye, purchased on August 28, 2008 for RMB 30,000,000
  (approximately $4.4 million);
- Weifang Qilu, purchased on August 29, 2008 for RMB 40,000,000
  (approximately $5.8 million);
- Caoxian Industrial, purchased on June 25, 2009 for RMB 15,000,000
  (approximately $2.2 million); and
- Longhai Real Estate, purchased on September 25, 2009 for RMB 20,000,000
  (approximately $2.9 million).

On March 5, 2010, Leewell established Oumei Weiye in the PRC as
a vehicle to seek future acquisition opportunities in Laoshan District.

See Item 4, Information on the CompanyCorporate Structure
below for more details of our current organizational structure.

Financing Transaction

On April 14, 2010, we also completed a private placement
transaction with a group of accredited investors. Pursuant to the Subscription
Agreement, we issued to the investors an aggregate of 2,774,700 units for a
purchase price of $11,098,800, or $4.00 per unit. Each unit consists of one 6%
Convertible Preference Share, or Preference Share, and one warrant to purchase
0.5 ordinary shares, or the Warrants. See Item 10, Additional
InformationMemorandum and Articles of AssociationRights and Obligations of
Shareholders below for a description of our Preference Shares. The Warrants
have a term of 5 years, are exercisable on a net exercise or cashless basis and
are exercisable by investors at any time after the closing date. The Warrants
had an initial exercise price of $6.00 per share (subject to customary
adjustments), however, the exercise price of the Warrants has been adjusted as
described below.

Pursuant to the Subscription Agreement, we were obligated to
file a registration statement covering the resale of the ordinary shares
underlying the Preference Shares and the Warrants no later than thirty (30) days
following the closing date and use our best efforts to cause the registration
statement to be declared effective under the Securities Act as promptly as
possible, but in no event later than 180 days following the closing date, or
October 11, 2010. Under the Subscription Agreement, if we did not timely file
the required registration statement, or if it was not declared effective by the
SEC in a timely manner, then we were obligated to pay to each investor a
liquidated damages fee of 1% of such investors investment per month, for up to
a maximum of 10% of each investors investment pursuant to the Subscription
Agreement. Pursuant to an amendment to the Subscription Agreement that we
entered into with the investors on October 11, 2010, we amended the Subscription
Agreement to provide that, in lieu of the cash liquidated damages amount that
would otherwise have been payable by us for our failure to cause the
registration statement to be declared effective within the prescribed period, we are required to reduce the initial exercise price of
the Warrants issued to each investor in the private placement by $0.08 per
calendar month, or portion thereof, until such time that the registration
statement is declared effective by the SEC; provided that, in no event will we
be obligated to reduce the initial exercise price of the Warrants by more than
$0.80 in aggregate. The partial reduction of the initial exercise price of the
Warrants began on October 11, 2010 and applies on a daily pro-rata basis for any
portion of a calendar month prior to the effectiveness of the registration
statement.

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In connection with the private placement, we entered into a
make good escrow agreement, or the Make Good Escrow Agreement, with Longhai
Holdings Company Limited, or Longhai Holdings, our controlling shareholder,
Collateral Agents, LLC, the escrow agent, and Access America Investments, LLC,
as representative of the investors, pursuant to which the parties agreed to
certain make good provisions in the event that we do not meet certain
financial performance thresholds for fiscal years 2010 and 2011. Pursuant to the
Make Good Escrow Agreement, the parties agreed to the establishment of an escrow
account and Longhai Holdings delivered into escrow certificates evidencing
7,500,000 ordinary shares held by it, to be held for the benefit of the
investors. Under the Make Good Escrow Agreement, we established minimum after
tax net income thresholds (as determined in accordance with GAAP and excluding
any non-cash expenses and one-time expenses related to the reverse acquisition
of Leewell and the private placement transaction) of $40 million for fiscal year
2010 and $60 million for fiscal year 2011 and minimum earnings per share
thresholds (calculated on a fully diluted basis and including adjustment for any
stock splits, stock combinations, stock dividends or similar transactions, and
for shares issued in one public offering or pursuant to the exercise of any
warrants, options, or other securities issued during or prior to the calculation
period) of $1.13 for fiscal year 2010 and $1.70 for fiscal year 2011. If our
after tax net income or earnings per share for either fiscal year 2010 or fiscal
year 2011 is less than 90% of the applicable performance threshold, then the
performance threshold will be deemed not to have been achieved, and the
investors will be entitled to receive ordinary shares based upon a pre-defined
formula agreed to between the parties. The parties agreed that, for purposes of
determining whether or not any of the performance thresholds is met, the release
of any of the escrowed shares and any related expense recorded under GAAP shall
not be deemed to be an expense, charge, or any other deduction from revenues
even if GAAP requires contrary treatment or the annual report for the respective
fiscal years filed with the SEC by the Company may report otherwise. We met such
financial performance thresholds for fiscal year 2010.

In connection with the private placement, we also entered into
a lockup agreement with Longhai Holdings and each of our directors and officers,
pursuant to which each of them agreed not to transfer any of our capital stock
held directly or indirectly by them for an eighteen-month period following the
closing of the private placement.

Business Overview

Overview

We are one of the leading real estate development companies
located in Qingdao, Shandong province, China. We began operations in 2001, and
in 2010 we were recognized in the official City of Qingdao Commission of
Development & Constructions evaluation as one of the ten most outstanding
real estate developers in Qingdao, measured by a combination of revenue,
customer satisfaction, as well as several other factors.

We develop and sell residential and commercial properties,
targeting middle and upper income customers in the coastal region of the
Shandong peninsula (Greater Qingdao) located in northeastern China, including
the cities of Qingdao, Weihai and Yantai, as well as other inland locations,
such as Weifang.

Since our inception, we have completed 17 projects having a
gross floor area, or GFA, of 1,461,996 square meters, of which approximately 96%
has been sold. In addition, we have seven projects under construction with a
total GFA of 540,201 square meters.

In fiscal year 2010, our total sales increased 17.2% to $110.5
million from $94.3 million in fiscal year 2009. Our gross profit decreased 7.5%
to $33.3 million in fiscal year 2010 from $36.0 million in fiscal year 2009,
while our net income increased 65.2% to $34.9 million in fiscal year 2010 from
$21.2 million in fiscal year 2009

Our mission is to provide high-quality, comfortable, and
convenient living space to middle and upper income customers, primarily in
Shandong Province and in other provinces in China, while also earning for our
shareholders an internal rate of return that exceeds our cost of capital. We
expect to increase our market share through aggressive internal growth and
prudent acquisitions in Shandong Province and in other provinces in China. Our
goal is to be one of the top two real estate developers in Greater Qingdao in
the next five years by capturing and exploiting the growth opportunities in
Shandong Province and by providing the most desirable coastal and inland
apartments to middle and upper income customers, as well as by increasing our
development of commercial properties.

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Our Industry

The Real Estate Industry in China

Chinas real estate sector is in the early stage of a long-term
growth cycle, supported by growth in its gross domestic product, or GDP, rising
demand for housing, and substantial structural changes.

China has experienced rapid economic growth in the last 20
years. According to the National Bureau of Statistics, from 2004 to 2009,
Chinas GDP achieved an annualized growth rate of 16.4% and its GDP per capita
achieved an annualized growth rate of 15.7%. In 2009, Chinas GDP was RMB 34.1
trillion and its per capita GDP was RMB 25,575. In 2010, Chinas GDP was RMB
39.8 trillion. The official per capita GDP data for 2010 is not yet available as
of the date of this report.



Despite the recent global economic recession, China is expected
to achieve relatively good economic growth in the next several years, compared
to many other major economies in the world.



Chinas real estate bull market began more than six years ago.
Despite the moderations in growth caused by the global economic weakness in 2008
and 2009, we believe the structural forces in China support continuing good
demand for real estate in China during the next 10 years. The two primary
drivers for this long-term real estate demand in China are urbanization (which
includes both the expansion and development of cities and the dramatic migration
of people from rural to urban areas) and the rising disposable income per capita
in the cities.

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Increasing Urbanization

At the end of 2009, 621 million people were living in urban
areas, accounting for 46.6% of total population of 1.33 billion, according to
the National Bureau of Statistics of China. The Ministry of Housing and
Urban-Rural Development of China estimated in 2007 that Chinas urban population
in 2015 would exceed 800 million people.

Another source, the United Nations State of World
Population 2007, reported that approximately 18 million people in China are
expected to migrate from rural to urban areas each year, and that the urban
population would reach about 870 million people in the next 10 years.



The rural to urban migration is likely to continue, both
because of the potential for higher income and greater wealth accumulation, and
because of the evolution of Chinas farming toward larger-scale and more
efficient methods that require fewer people to do the agricultural work.

With the substantial housing demand created by the structural
shift of the migration, the urban real estate market has been thriving. That
long-term trend is expected to continue.

Increasing Disposable Incomes

According to the 2010 annual report of the National Bureau of
Statistics of China, disposable income per capita in urban areas between 2000
and 2009 has grown at a compound average annual growth rate of 11.8%, from RMB
6,280 (approximately $919) in 2000 to RMB 17,175 (approximately $2,583) in 2009.
As disposable income per capital increases, urban residents are motivated to
improve their living conditions by purchasing new or larger properties,
demonstrated by urban living expenses per capita in the same years that have
steadily increased at a compound annual growth rate of 10.5%, from RMB 4,998
(approximately $732) in 2000 to RMB 12,265 (approximately $1,845) in 2009, which
is the most recent year available for this measurement in the governments
official database.

Rural dwellers are drawn to cities primarily by the potential
of higher incomes and greater wealth, because urban jobs generally pay higher
wages and salaries.

The latest data from the National Bureau of Statistics of China
shows that both disposable income and wealth accumulation are higher for urban
dwellers and confirms the economic attractiveness of the migration from rural to
urban areas.

|Annual per capita disposable income and expenses (RMB) |  | 2002  |  | 2003  |  | 2004  |  | 2005   |  | 2006   |  | 2007   |  | 2008   |  | 2009  
|------------------------------------------------------ |  | ----- |  | ----- |  | ----- |  | ------ |  | ------ |  | ------ |  | ------ |  | ------
|Urban per capita                                       |  |       |  |       |  |       |  |        |  |        |  |        |  |        |  |       
|Disposable income of urban households                  |  | 7,703 |  | 8,472 |  | 9,422 |  | 10,493 |  | 11,760 |  | 13,786 |  | 15,781 |  | 17,175
|Consumption expenditures of urban households           |  | 6,030 |  | 6,511 |  | 7,182 |  | 7,943  |  | 8,697  |  | 9,998  |  | 11,243 |  | 12,265
|Net increase in wealth, urban                          |  | 1,673 |  | 1,961 |  | 2,240 |  | 2,550  |  | 3,063  |  | 3,789  |  | 4,538  |  | 4,910 
|Rural per capita                                       |  |       |  |       |  |       |  |        |  |        |  |        |  |        |  |       
|Net income of rural households                         |  | 2,476 |  | 2,622 |  | 2,936 |  | 3,255  |  | 3,587  |  | 4,140  |  | 4,761  |  | 5,153 
|Living expenditures of rural households                |  | 1,834 |  | 1,943 |  | 2,185 |  | 2,555  |  | 2,829  |  | 3,224  |  | 3,661  |  | 3,993 
|Net increase in wealth, rural                          |  | 642   |  | 679   |  | 751   |  | 700    |  | 758    |  | 917    |  | 1,100  |  | 1,160 

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Growth of the Chinese Real Estate Industry

The growth in Chinas real estate industry is reflected in the
growth of investment in real estate development, total GFA sold, and average
home prices. According to the National Bureau of Statistics of China, total
investment on real estate development in 2009 was RMB 4.307 trillion
(approximately $630 billion), up 19.9% from 2008.

According to the National Bureau of Statistics of China, the
total GFA of residential and commercial properties sold increased from 224.1
million square meters in 2001 to 937.1 million square meters in 2009, a CAGR of
19.6%.



Rising disposable income in the second-tier cities has lured
top luxury goods manufacturers, including LVMH Group (one of the worlds largest
luxury goods companies), to expand aggressively into key second-tier cities. The
Chinese government has also been instrumental in stimulating regional growth by
designating certain second-tier regions as priority zones. These actions are
benefitting the Greater Qingdao area, our primary market. According to the
Qingdao Municipal Bureau of Statistics, between 2000 and 2009, Qingdaos urban
disposable income per capita grew by a compound annual growth rate of 12.1% to
RMB 22,368.

Recent Efforts by the Chinese Government to Cool Down the
Real Estate Industry

In response to concerns over the scale of the increase in
property investments, the PRC government has implemented measures and introduced
policies to curtail property speculation and promote the healthy development of
the real estate industry in China. On January 7, 2010, the PRC State Council
issued a circular to control the rapid increase in housing prices and cool down
the real estate market in China. It reiterated that the purchasers of a second
residential property for their households must make down payments of no less
than 40% of the purchase price and real estate developers must commence the sale
within the mandated period as set forth in the pre-sale approvals and at the
publicly announced prices. The circular also requested the local government to
increase the effective supply of low-income housing and ordinary commodity
housing and instructed the PBOC and the China Bank Regulatory Commission to
tighten the supervision of the bank lending to the real estate sector and
mortgage financing.

On February 25, 2010, the PBOC increased the reserve
requirement ratio for commercial banks by 0.5% to 16.5% and has further
increased it from 16.5% to 17.0% effective May 10, 2010. Further, in order to
implement the requirements set out in the State Councils circular, the MLR
issued a notice on March 8, 2010 in relation to increasing the supply of, and
strengthening the supervision over, land for real estate development
purposes.

In April 2010, the PRC State Council issued a further circular,
which provided as follows: purchasers of a first residential property for their
households with a gross floor area of greater than 90 square meters must make
down payments of no less than 30% of the purchase price; purchasers of a second
residential property for their households must make down payments of no less
than 50% of the purchase price and the interest rate of any mortgage for such
property must equal at least the benchmark interest rate plus 10%; and for
purchasers of a third residential property, both the minimum down payment amount
and applied interest rate must be significantly higher than the relevant minimum
down payment and interest rate which would have been applicable prior to the
issuance of the circular (the specific figures shall be decided by the relevant bank on a case-by-case based on the principle of proper risk
management). Moreover, the circular provided that banks can decline to provide
mortgage financing to either a purchaser of a third residential property or a
non-resident purchaser.

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In September, 2010, the PRCs seven state ministries and
regulatory agencies jointly issued a further circular, which provided that
commercial banks should suspend loans to third home buyers across the country
and buyers who fail to provide proof of at least one year of local social
security tax payments. It also provided that a 30% down payment requirement is
applied to all purchasers of a first residential property. The circular also
adjusted property transaction taxes and personal income taxes. It cut in half
the transaction tax for buyers of non-luxury homes which are used as sole
residence. The rate will be 1% for residential units of 90 square meters or
smaller. In addition, for those who purchase a new home within one year of old
home sales, income tax will be applied (it was previously exempted). The new
policy limits the total number of properties bought by a single family within a
certain period in some cities where price inflation is rapid, such as Beijing,
Shanghai, Shenzhen and Hangzhou, etc. Property tax may start piloting in select
cities in the near future, though we still expect issues relating to property
tax implementation. Our major markets are not among the cities currently subject
to the policy limits.

The purpose of these measures appears to be to curb price
speculations in certain housing markets from two sides. On the demand side, the
objective appears to be to constrain speculative trends by requiring tighter
conditions and stricter bank loans for second, third, fourth, or more homes
than are typical for primary home buyers. The policy makes it more difficult and
more costly to purchase homes only for price speculation.

On the supply side, the government is endeavoring to push for a
higher quantity of homes to meet the needs of low-income and middle-income
buyers of primary homes.

In considering all the governments housing policies, given (a)
the supply of affordable housing is likely to increase in the next year, (b) the
government regulation of loans to developers to reduce speculative building for
speculative buyers, (c) pressures for supplying affordable housing for primary
buyers, (d) possible competitive market pressures for lower pricing as
speculative owners of existing but unoccupied homes try to sell before the
market weakens, and (e) bank loan restrictions that reduce the cash available
for non-primary homes, we believe that the likely result will be incentives for
and market pressures on developers to supply affordable housing in higher
volumes, while at the same time moderating or lowering both the prices and the
number of housing units available in the speculative portion of the housing
market.

Shandong Province

We conduct most of our operations in Shandong Province,
including the city of Qingdao and two other smaller cities, Weihai and Weifang.
Shandong Province, which includes Greater Qingdao, is located in northeastern
China, on the gulf called the Bohai Sea and on the Yellow Sea. It includes the
Shandong peninsula in the east and a central hilly complex surrounded by part of
the intensively cultivated northern China Plain. The flood-prone Yellow River
crosses northern sections. Wheat and soybeans are the chief crops, and wild silk
is important on the peninsula. Major resources are the Shengli petroleum fields
in the north and extensive coal deposits at Zibo, Boshan, and Zaozhuang. Jinan,
the capital, and the Qingdao and Zibo municipalities are major urban areas.
Settled as early as the 3rd century BC, Shandong was part of China during the
Shang dynasty and played a major role in ancient Chinese history. It was
venerated as the birthplace of the philosophers Confucius and Mencius. Shandong
Province is approximately 153,300 square kilometers in area, with a population
density of 1,859.9 people per square kilometer.



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Greater Qingdao

Greater Qingdao includes the cities of Qingdao, Jimo, Laixi,
Pingdu, and three smaller cities. Located in the China-Japan-Korea triangle,
Qingdao is a one-hour flight from Seoul and a two-hour flight from Tokyo.



Qingdao is a major naval base, an industrial center, and a port
on the Yellow Sea at the entrance to sheltered Jiaozhou Bay. The port, which
rarely freezes over, serves the industrialized northern China Plain and was
expanded in 1976 to include an oil terminal for large tankers on Huang
Island.

The leading manufactured goods of the city include textiles,
railroad equipment, rubber goods, fertilizer, and chemicals. Tsingtao beer,
brewed here since Germany leased the Kiaochow territory (1898  1914), is sold
around the world. Qingdao was transformed by the Germans from a small fishing
village into a modern European-style industrial port in the early 20th century.
As a result of the reform and industrial restructuring in the past two decades,
major industries, including electronics and information technology, appliances,
engineered materials, brewing, automobiles, and shipbuilding, have grown
dramatically in Qingdao. The Shandong Oceanography College is also located
here.

Qingdao is considered one of the most livable cities in China
as reported by various Chinese media outlets including CCTV. As one of Chinas
top ten economically dynamic cities ranked by the National Bureau of Statistics
of China, Qingdao has an excellent environment for investment and living. It
offers fairly priced markets, good infrastructure facilities, comfortable living
conditions, efficient government operations, sound public security, good
personal and property safety, and glorious days in the city, at the beach,
sailing, or hiking in the mountains.

Economic Growth

Shandong has experienced rapid economic growth in the last 20
years. According to National Bureau of Statistics of China, Shandongs GDP per
capita increased from RMB 10,195 (approximately $1,492) in 2001 to 35,796
(approximately $5,232) in 2009, a compound annual growth rate of 17.0%.

Qingdao is the leading city in the Shandong peninsula, measured
by GDP and GDP growth rate. As one of Chinas top ten economically dynamic
cites, GDP per capita in Qingdao exceeded $8,000 in 2009, making it the seventh
most economically competitive city in China, according to the Qingdao Municipal
Commission of Development and Reform.

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Compared to tier-one cities, we believe Qingdao will continue
its growth momentum for quite a few years. Its strong economic fundamentals
should provide a solid foundation for growth in the real estate sector.



Qingdao hosted the sailing competitions of the Olympic and
Paralympic Games in August and September 2008, which boosted the citys economy
due to the Olympic participants and visitors, as well as to the new fixed assets
built to support the Olympic games and festivities, especially the Qingdao
International Marina & Olympic Sailing Center. Built on the site of the
former Beihai shipyard on Fushan Bay, the new Qingdao International Marina &
Olympic Sailing Center covers a total area of 450,000 square meters, plus major
and secondary breakwaters, an embankment, a quay, and the renovation of the
shore wall. The facility serves as the home port of several sailing
organizations. Qingdao hosted the Volvo Ocean Race 2008  2009 as the Chinese
port city on the world circuit.

Economic Stimulus Plans

In response to the global financial and economic crisis, the
Chinese government announced a RMB 4 trillion stimulus program on November 27,
2008. Subsequently, on March 6, 2009, the National Development and Reform
Commission Director announced a reshaping of that economic stimulus package that
retained the investment total of RMB 4 trillion but adjusted its focus. Within
the RMB 4 trillion package, about RMB 400 billion will go toward civil works,
including low-income housing and renovation, which we believe will benefit
Shandong Province. Two additional categories (technology advances & industry
restructuring for RMB 370 billion and infrastructure for RMB 1.5 trillion) are
also expected to benefit industries in Qingdao, Weihai, Weifang, and the entire
Shandong Province.

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Source: Zhang Ping, National Development and Reform
Commission Press Conference, March 6, 2009.

On February 26, 2009, Chinas State Council reinforced Chinas
2008 stimulus package by further measures to stimulate specific industries in
2009. The industries include automobile, iron and steel, textiles, equipment
manufacturing, shipbuilding, electronics and information technology,
petrochemicals, light industries, nonferrous metals, and logistics.

We believe Chinas RMB 4 trillion stimulus package and its
further efforts focused on 10 industries will improve Qingdaos economy, further
strengthen the regions long-term competitive ability, and support the demand
for middle and upper income housing, as well as the need for better commercial
and office space, and a few world-class hotels. However, although individuals
and governments around the world hope that government stimulus efforts will have
the desired effects, the true benefit from these and perhaps additional stimulus
efforts by local, provincial, and national governments in China, as well as by
other countries, still remain uncertain.

The Qingdao Real Estate Market

Qingdaos real estate market has experienced strong growth
since 2001. The table below shows housing demand in Qingdao between 2003 and
2009. In 2009, GFA completed was 8.14 million square meters, and GFA sold was
12.62 million square meters, with an average price per square meter of RMB
5,576.

|                                                                                               |  | 2003  |  |  | 2004  |  |  | 2005  |  |  | 2006  |  |  | 2007  |  |  | 2008  |  |  | 2009  |  |  | CAGR  | 
|---------------------------------------------------------------------------------------------- |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- | 
|GFA completed (millions m2)                                                                    |  | 5.52  |  |  | 6.35  |  |  | 8.11  |  |  | 6.54  |  |  | 6.41  |  |  | 6.72  |  |  | 8.14  |  |  | 6.7%  | 
|GFA sold (millions m2)                                                                         |  | 4.69  |  |  | 5.16  |  |  | 7.40  |  |  | 7.19  |  |  | 8.33  |  |  | 7.70  |  |  | 12.62 |  |  | 17.9% | 
|Average price per sq. meter (RMB)                                                              |  | 2,392 |  |  | 2,967 |  |  | 3,604 |  |  | 4,249 |  |  | 5,202 |  |  | 5,096 |  |  | 5,576 |  |  | 15.1% | 
|Source: Qingdao Statistics Yearbook 2004 
      2010 & Qingdao Municipal Bureau of Statistics | 

Good demographic and economic factors, including emerging
high-tech industries and increasing foreign capital inflow, bode well for
Qingdaos future growth.



Growth factors include the transition of certain industries to
higher value-added business (especially high-technology and services), rising
GDP per capita, increasing foreign investment, and expanding foreign retailing
and hotel operations. Between 2000 and 2009, Qingdaos GDP per capita achieved a
15.2% compound annual growth rate, while Qingdaos urban disposable income per capita grew at a point-to-point
compound annual growth rate of 12.1% from 2000 to 2009. The official GDP per
capita data for 2010 is not yet available as of the date of this report.

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In addition, efforts by Qingdaos local government to create
clear strategies, institute attractive policies, and invest in the necessary
infrastructure are focused on creating favorable investment environments.

Qingdao is focused on expanding its three relatively new
industries: its modernized seaport, tourism, and marine science. The city also
continues to enlarge its traditional industries of electronics and home
appliances; petrochemicals; automobile; locomotive; ship building; and
engineered materials. With Qingdaos base as a seaport, this robust city is also
building a regional shipping center, a logistics center, a service center, a
financial center, and a high-technology industry development center.

Qingdaos thrust to expand its industries and its recent
experience as the worlds host for the sailing events of the Olympics and
Paralympics are combining to grow this energetic city as it increases its role
in the global marketplace. Qingdaos development is based on the concept of
three-point layout, one-line planning, and group development strategy.

The three-point layout refers to the development of the
Jiaozhou Bay region relying on the three basic points of the old urban districts
of Qingdao, Huangdao, and Hongdao, and the construction of the new urban
district by connecting the three points with a transoceanic bridge or undersea
tunnel and the Jiaozhou Bay Expressway.

The one-line planning refers to building a coastal highway
from Langyatai in Jiaonan to Tianhengdao Island in Jimo, which will connect all
parts of the city to form a main urban development belt.

The group development strategy refers to the expansion of
business groups on both sides of the coastal highway. There will be seven
development groups respectively in Tianhengdao Island, Aoshan, Zhucheng,
Hongdao, Huangdao, Jiaonan, and Langyatai, which will push forward the
urbanization of the adjacent regions. To carry out the west coast development
strategy and construct those seven areas, the municipal government will relocate
ports to the western coast, and plans to establish an international port and an
international transshipment port.

The Qingdao Economic and Technological Development Zone, or
QETDZ, is one of the state-level economic and technological development zones
approved by Chinas State Council. The zone is located on the west coast of
Jiaozhou Bay, which is connected to the Bohai Sea Economic Belt. It is in the
center of the Greater Qingdao strategy that aims to create huge development
potential. In the recent assessment report by the Department of Commerce of
China, the Qingdao Economic Technology Development Zone was ranked fifth
overall. The Qingdao Economic Technology Development Zone was regarded among the
top ten in the areas of comprehensive competitiveness, infrastructure
facilities, human resources supply, social and environment protection, and
environment for technical innovation.

According to the official website of the Qingdao Economic
Technology Development Zone, so far, a total of more than RMB 30 billion has
been invested in the construction of infrastructure facilities in the zone. The
Qianwan international port, inside the QETDZ, has a 100 million ton capacity, is
the largest modern container deep-water dock in China, and links with more than
100 shipping routes to all parts of the world.

With the approval of the Shandong Provincial Government,
Qingdao has established six provincial-level economic and technological
development zones, including the development zones in Jimo, Laixi, Pingdu,
Jiaonan, and Jiaozhou, and the Coastal economic and technology development zone.
These development zones have complete infrastructure facilities with beneficial
investment policies and convenient transportation.

The Weihai Real Estate Market

According to the Weihai Bureau of Statistics, approximately 4.0
million square meters of GFA were sold in Weihai in 2007, up 57.5% from 2006;
approximately 4.0 million square meters were sold in 2008, down 1.0% from 2007;
and approximately 5.7 million square meters were sold in 2009, up 42.1% from
2008.

The table below shows Weihais recent GFA completed, GFA sold,
and average price per square meter for all commercial and residential property
transactions in the city.

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|                            |  | 2003  |  |  | 2004  |  |  | 2005  |  |  | 2006  |  |  | 2007  |  |  | 2008  |  |  | 2009  |  |  | CAGR  | 
|--------------------------- |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- |  |  | ----- | 
|GFA completed (millions m2) |  | 1.73  |  |  | 1.55  |  |  | 2.39  |  |  | 2.66  |  |  | 3.91  |  |  | 4.06  |  |  | 5.82  |  |  | 22.4% | 
|GFA sold (millions m2)      |  | 1.64  |  |  | 1.96  |  |  | 2.25  |  |  | 2.55  |  |  | 4.02  |  |  | 3.98  |  |  | 5.66  |  |  | 22.9% | 
|Average price (RMB)         |  | 1,590 |  |  | 1,800 |  |  | 2,028 |  |  | 2,301 |  |  | 2,915 |  |  | 2,993 |  |  | 3,472 |  |  | 13.9% | 

Source: Weihai Statistical Yearbooks 2004 to 2010 &
Weihai Municipal Bureau of Statistics

As reflected in the above chart, supply and demand have been
almost matched in Weihais property market and both have increased over the last
five years.

With total GFA sold of about 4.0 million square meters in 2008,
the Weihai housing market has grown at a compound annual growth rate of 19.4% in
the six years between 2003 and 2009.

Our Competitive Strengths

We believe the following strengths allow us to compete
effectively in the Chinese real estate development industry:

- We have a proven track record of successful large-scale properties
  development. Since our inception in 2001, we have successfully completed
  17 projects having a GFA of 1,461,996 square meters, of which approximately
  96% has been sold. In addition, we have seven projects under construction with
  a total GFA of 540,201 square meters. All of our projects have featured modern
  facilities and attractive landscaping that provides comfortable and convenient
  lifestyles. Since our inception, we have focused on providing mid-sized
  apartments for middle-income residents and have gained an in-depth
  understanding of the preferences of our target customers. Most of the
  apartments we develop are units ranging from 40 square meters to 100 square
  meters, with an average price of less than RMB 4,000 per square meter
  (approximately $585 per square meter). Our ability to cater to our customers
  preferences has been a major factor in the growth of our business. By
  leveraging our experience and track record, we believe that we can penetrate
  into the real estate markets in other tier two and tier three cities in China.
- We have a widely recognized brand name in an attractive coastal
  market. We have received many awards that acknowledge the quality of our
  real estate developments. For example, in 2010, we were recognized in the
  official City of Qingdao Commission of Development & Constructions
  evaluation as one of the ten most outstanding real estate developers in
  Qingdao, measured by a combination of revenue, customer satisfaction, as well
  as several other factors. In March 2007, the Company was named one of the
  nations elite Trustworthy Homebuilders by the National Commission of
  Housing Market Oversight and National Commission of Consumer Right Protection.
  In the same year, the Companys Jiangnan Garden development project was voted
  one of the countrys Top 100 Housing Development Projects in terms of
  consumer satisfaction. In December 2006, the Company was ranked among Chinas
  top 500 developers by the National Bureau of Statistics Department of Fixed
  Asset Statistics. We believe that the quality of our real estate developments
  and the recognition of our brand name by our customers are important to our
  success.
- We have an experienced management team. Our management team has
  extensive operating experience and industry knowledge. Our Chairman, Mr.
  Antoine Cheng, has many years of experience in working with businesses and has
  developed good business contacts, including in the real estate development
  business in China. Our Chief Executive Officer, Mr. Weiqing Zhang, has more
  than 15 years of experience in real estate development, during which he has
  successfully developed more than two million square meters of GFA and has also
  served in strategic planning and general administration functions. Our Chief
  Financial Officer, Mr. Zhaohui John Liang, has over 15 years of experience in
  real estate finance, investment and development, and previously oversaw the
  real estate portfolio of one of the largest U.S. retail chains with $9 billion
  in annual sales. This extensive industry experience is combined with extensive
  operating experience. For example, Mr. Yang Chen, our President, has more than
  17 years of experience in accounting and financial management. All of
  executive officers have bachelors or masters degrees in business
  administration or accounting. In addition, our staff is well trained and is
  motivated by our incentive programs. We offer employees a variety of relevant
  training programs.
- We have substantial land reserves at premier locations for use as new
  development projects. We believe that our ownership of premium land
  reserves and the fact that we have already planned the development of specific
  projects for some of those land reserves gives us an advantage over our
  competitors who do not have similar reserves and must acquire land before
  commencing their next projects. We characterize our locations as premier or
  premium because they have the following attributes: (1) irreplaceable
  location and high barrier to entry resulting from a very involved zoning
  process (a good example is the Longhai International Hotel site, located 10 meters away from the biggest city public beach
  of Northern China and on the very last commercial parcel on this stretch of
  beachfront); (2) location in high-density, downtown or center-city areas, with
  close proximity to commercial activity within the inner circles of traditional
  and established urban settings, with convenient transportation; and (3) land
  that commands considerably higher prices than its acquisition cost. Please see
  Projects for details about our land reserves.

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- We have a strong financial profile and excellent credit record.
  Through credit facilities with top Chinese banks, including Industrial and
  Commercial Bank of China, who has given us a AA rating, we are able to
  prudently leverage our business and take advantage of business opportunities.
- We have a compelling growth strategy. We expect to continue our
  growth by: (i) achieving higher returns on projects by developing hotels and
  villas for upper income customers; (ii) continuing development of large middle
  income residential projects; (iii) expanding operations to other tier two and
  tier three cities in the Shandong Province and in other provinces in China;
  and (iv) acquiring projects from distressed developers.

Our Growth Strategy

We intend to increase our market share through aggressive
internal growth and prudent acquisitions that are primarily focused on
outstanding land or projects in the Shandong Province and in other provinces in
China. We intend to achieve this objective by pursuing the following
strategies:

- We plan to continue to expand in Shandong Province through new urban
  development projects. In the next five years we will continue to focus on
  real estate development along the coastline of the Shandong peninsula,
  particularly in the Qingdao and Weihai regions. Given our knowledge and
  experience, we expect to increase our market share in those areas. For
  example, our strategic plan includes construction of an office building and a
  large upper-income community of villas in coastal Weihai. We also plan to
  create a high-rise resort hotel on the Stone Old Man beach in Qingdao, where
  we already own the land rights. We believe that the Qingdao-Weihai region is
  one of the most suitable and beautiful living areas in China. The region also
  features good economic growth. We believe that the real estate market in the
  Qingdao-Weihai region will remain strong over the next several years, not only
  due to the market awareness created by the global media coverage of Qingdao
  and its Olympic sailing events, but also because of the unique attraction the
  region holds for international customers, travelers and investors.
- We plan to continue to provide cost-effective properties for middle
  income customers. The growing number of middle- income consumers in China
  has provided attractive and sustainable growth opportunities for real estate
  developers. As disposable incomes for urban residents increase, we believe
  they have strong motivation and sufficient financial capacity to improve their
  living conditions by purchasing new or better properties. We intend to
  capitalize on the growth opportunities by continuing to offer high-quality
  mid-sized residential units featuring modern designs and convenient facilities
  at competitive prices.
- We plan to penetrate the high-end real estate market. We intend to
  penetrate into the high-end real estate market by developing villas, hotels,
  and commercial and office buildings that generate high returns. We have three
  projects in planning in that category. The first is a large community of
  villas and hotel-serviced apartments on the beach in Weihai. The second is an
  office building in Weihai, the Weihai International Plaza, that we believe
  will generate both sales and continuing rental income for us. The third, the
  most interesting of our plans, is the luxury resort hotel, the Longhai Hotel,
  which will be located just across the street from the Stone Old Man beach in
  Qingdao. Construction for the hotel is expected to start in August 2011. The
  construction of Weihai International Plaza is nearly finished and we have
  obtained all necessary permits and licenses for this project. The other two
  projects are still in the planning stage and we have obtained the certificates
  for land use right regarding these two projects. We will obtain all other
  necessary permits and licenses when we move to the development phase. We do
  not anticipate any significant impediments to beginning construction of these
  two projects. The architectural and engineering firm we have selected is
  Epstein, headquartered in Chicago, a city famous for innovative architecture.
  We believe the upscale business and tourist volume in Qingdao will provide the
  sustained demand for such a beautiful luxury hotel. These high-end projects
  should generate higher returns on investment than middle-income residential
  properties.
- We plan to improve project management and cost control. We will
  improve our project management by adopting more stringent financial
  disciplines in our operations at each stage that will help us to increase our
  returns on our project investments. We will use our capital more effectively
  by better managing our assets, receivables and expenditures to attain pre-set targets.
We will better anticipate the best land rights reserves for development and will
be able to capture them at the lowest prices to maximize our potential returns
on our land and on our project investments. Further benefits should include a
more consistent cash flow from our pre-sales to achieve both better cash
availability for our projects and a prudent debt-to-total-capital ratio that
will keep us in the optimum range for our cost of capital. The results should be
lower effective interest rates on our debt and better cost competitiveness for
our company.

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Project Development Process

Acquisition of Land Use Rights

We acquire land rights by (1) participating in public tender,
auction, and listing for sales of land; (2) mergers or acquisitions of
companies, including related companies, owning land use rights; and (3)
purchasing distressed projects that have not been completed. After we have
obtained the development rights for land, we usually are required to pay a land
premium to acquire the land rights, in accordance with laws and regulations.

Specifically, we acquire many of our land rights from companies
owned by Longhai Group, a company wholly-owned by Mr. Antoine Cheng, our
Chairman. Longhai Holdings and Longhai Group are under common control, but do
not have any other relationship. Longhai Groups primary business is
infrastructure and building construction. Through its infrastructure
construction business, Longhai Group works with local governments and often
finances (by agreeing to be paid sometime following the completion of
construction instead of being paid as construction progresses) the governments
public infrastructure projects that can include old city relocation projects. In
exchange for such financing, the local governments invite Longhai Group to bid
for premium parcels of land for residential use at public auction or grant
Longhai Group the right of first refusal to bid for industrial parcels for which
Longhai Group already has land use rights, but whose use has been changed to
real estate development. Such rights are provided to Longhai Group on a
continuous basis by local governments, which is consistent with the governments
long-term policy. Since Longhai Group does not have the necessary license to
engage in residential development in China, it often sells companies owning
these land use rights to us so that we may develop these parcels using our real
estate development license.

We acquired the following four subsidiaries that were
wholly-owned or majority-owned by our affiliate, Longhai Group: Qingdao Xudong;
which owns the land use rights for Dongli Garden Phase 1 and Phase 2; Weifang
Longhai Industry, which owns the land use rights for Fuxiang Huayuan 1 & 2;
Caoxian Industrial, which owns the land use rights for Xingfu Renjia 1 & 2;
and Longhai Real Estate, which owns the land use rights for Longhai Mingzhu. The
purchase terms for these four acquisitions are summarized as follows:

- On January 24, 2008, we acquired from Longhai Group and other unaffiliated
  shareholders of Qingdao Xudong 100% of their equity interests in Qingdao
  Xudong for RMB 60,000,000 (approximately $8.3 million). Longhai Group owned
  approximately 74% of Qingdao Xudong.
- On August 27, 2008, we acquired from the shareholders of Weifang Longhai
  Industry 100% of their equity interests in Weifang Longhai Industry for RMB
  30,000,000 (approximately $4.4 million). Longhai Group owned approximately 95%
  of Weifang Longhai Industry. Mr. Antoine Cheng had substantive control over
  100% of the acquired entity.
- On June 25, 2009, we acquired from the shareholders of Caoxian Industrial
  100% of their equity interests in Caoxian Industrial for RMB 15,000,000
  (approximately $2.2 million). Mr. Antoine Cheng had substantive control over
  100% of the acquired entity.
- On September 25, 2009, we acquired from the shareholders of Longhai Real
  Estate 100% of their equity interest in Longhai Real Estate for RMB20,000,000
  (approximately $2.9 million). Longhai Group funded the purchase. Mr. Antoine
  Cheng had substantive control over 100% of the acquired entity.

See Note 2, Acquisition of Subsidiaries, to our audited
consolidated financial statements for detailed description of these
transactions. Because the above acquisitions are considered as acquisitions from
a related party, Mr. Antoine Cheng, the controlling person of both Longhai Group
and our Company, determined the purchase price in each instance. In each case,
Mr. Cheng determined that the purchase price should be at least the book value
of each subsidiary (i.e., the total assets minus its intangible assets and
liabilities), as adjusted for reasonable historical carrying costs and other
expenses.

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Longhai Group has not sold land use rights to other entities
since our inception. Longhai Group is not obligated to present land use rights
to us for purchase.

We also directly acquired the land use rights for the following
projects from public auctions: Jiangnan Garden 1, 2, 3, 6 & 7, Decorative
Materials Center, Shanghai Garden 1  3, Fenglin Oasis, Yuyuan Fengjing, Longze
Yuyuan, Jiangshan Dijing, Shanshui Longyuan, Sunshine, and Huashan Town. In some
cases, because Longhai Group does not have the necessary license to engage in
residential development in China, and we hold the Level 1 Certificate of the
Qualifications of Real Property Development Enterprises, Longhai Group allows us
to directly participate in these auctions on its behalf as a related party under
common control. The Company did not pay consideration to Longhai Group or
parties related to Longhai Group for its right to participate in the public
auctions on Longhai Groups behalf. In these cases, the governmental land bureau
holding the auction is given full disclosure that Longhai Group and the Company
are related parties under common control, and that Longhai Group wishes to have
us participate in the auction on its behalf. Our projects that utilize or
utilized land use rights that we won from in this manner include: Jiangnan
Garden 1, 2, 3, 6 & 7, Decorative Materials Center, Shanghai Garden 1  3,
Fenglin Oasis, Yuyuan Fengjing, Longze Yuyuan, Jiangshan Dijing, and Shanshui
Longyuan. The land use rights for the projects of Sunshine and Huashan Town were
acquired solely by us from public auctions. We do not have any other related
parties under common control that have the requisite licenses to develop
residential property.

In addition, we acquired the following four subsidiaries, which
own land use rights, through arms-length transactions from entities not related
to Longhai Group or Antoine Cheng: Weihai Economic, which owns land use rights
of Longhai International Plaza and Longhai Lidu 1&2; Weihai Mingwei, which
owns land use right of Weihai Beach Resort; Weifang Longhai Zhiye, which owns
land use right of Oumei Complex 1 & 2; and Weifang Qilu, which owns land use
right of Qilu Textile Centre. See Note 2, Acquisition of Subsidiaries, to our
audited consolidated financial statements for more details.

The governments long term policy is to engage in on-going
cooperation relationships with trusted and qualified contractors, such as
Longhai Group, who has a proven track record in public projects, in order to
meet the local municipalities long-term urban development, redevelopment and
revitalization needs. Typically, the public projects involved are large-scale
urban development, redevelopment, relocation, or revitalization undertakings
that include land development, build-out of major highway systems, bridges and
other infrastructure networks, and major public/governmental buildings. As part
of these projects master planning, a portion of the land in the overall
projects is zoned for real estate development uses. Due to insufficient
governmental/public funding resources, many local governments enter into
agreements with selected contractors, such as Longhai Group and its
subsidiaries, in which the contractors agree to receive deferred payments for
the development costs of the public portion. As the public portion of the
projects is completed, the government proceeds to an auction process on the land
use rights in connection with the land zoned for development uses. In Longhai
Groups case, the local governments invite Longhai Group to bid for parcels of
land as a preferred candidate or grant Longhai Group the right of first refusal
to bid for industrial parcels for which the Longhai Group already has land use
rights, but whose use has been changed to real estate development. Very often we
participate in these auctions on behalf of Longhai Group as a related party
under common control. Regardless of who wins the auction, part of the
governments proceeds from the auction is returned to Longhai Group to repay its
pre-paid development costs. As long as these needs exist, and as long as Longhai
Group provides financial benefit, we believe that the government will continue
to consider Longhai Group and us preferred candidates in the bidding process of
land parcels. Currently, Longhai Groups subsidiaries continue to be engaged by
local governments in on-going infrastructure projects.

Longhai Group always has to compete with other contractors and
developers to participate in the development of public portions of development
and redevelopment plans. The construction industry in China does not require a
formal public bidding process for each development project. Local government
agencies in various municipalities have different processes in selecting
contractors to participate in public projects. Sometimes the process involves
competitive formal bidding, in which case Longhai Group has to compete with
other contractors based on various government-set criteria and participate in
formal public bidding processes, while at other times local authorities simply
select contractors based on specific qualification criteria, such as track
record, experience in cooperating with the government in public projects, and/or
financial capability in providing financing to local governments. In the latter
case, there is no formal public bidding process involved. As a result, in both
cases Longhai Group has to compete with other contractors for development of the
public portions although a formal bidding process is not involved when the local
government agencies select contractors simply based on specific qualification
criteria as described above. Due to its long-term track record and deep
experience in cooperating with the government in public projects, as well as its
rare financial capability in providing financing to local governments from its
own resources, in many cases, Longhai Group is very competitive and often
selected by local governments.

29

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Based upon our experience in the market in which we operate,
while the government previously allowed land to be transferred from the
government to private holders by agreement, regulations now provide that all
land use rights are granted by way of a public auction, held by the land bureau
of the relevant local government. A public invitation to bid is published in
major newspapers and a deadline is set. The land bureau then appoints a
project-specific task team to evaluate qualifications and bids submitted by
developers. Qualification credentials examined by the government typically
include: track record of development activity, financial strength, development
qualification level under Certificates of the Qualifications of Real Property
Development Enterprises issued by the Ministry of Housing and Urban-Rural
Development (levels are 1  4), and experience/history in cooperating with the
government in public projects. There is typically a comprehensive ranking system
with points assigned to each qualification category. Bidders who do not meet all
of the qualification requirements are disqualified. Both the bid amount and the
overall points received in the ranking system are used to select which bidder is
to be granted the land use rights. In many cases, the Company is one of very few
bidders who meets all the requirements and scores very high in the ranking
system. For example, in the markets we operate in, only a very small percentage
of registered developers have been able to achieve the Level 1 Certificate of
the Qualifications of Real Property Development Enterprises, which is the
highest level of certificate granted by the Ministry of Housing and Urban-Rural
Development. According to recent statistics conducted by the City of Qingdao
Center of Housing Trade, as of November 1, 2010, there are 631 real estate
developers registered in the City of Qingdao, while according to a December 2009
report by the governmental agency China Real Estate Association, only 9 real
estate development companies (including us) in Qingdao have obtained the Level 1
Certificate. Nationwide, only 696 real estate development companies (including
us) in China have obtained the Level 1 Certificate (the National Bureau of
Statistics most recently published statistics shows that as of December 2008,
there were 87,562 registered real estate developers in China). In addition, we
have a long history of cooperating with Longhai Group in urban redevelopment
projects that had public portions. In the scoring system, we also benefit from
the fact that Longhai Group is our related entity under common control and we
often participate in public auctions on behalf of Longhai Group. All of these
factors, along with Longhai Groups long-term track record with local
governments, enable us to have a competitive advantage over other real estate
developers in the public auction process. The successful bidder will be asked to
enter into a written contract providing for the grant of the land use rights.
Upon signing the contract, the grantee is required to pay the land premium and
the contract is submitted to the local bureau, which then issues the land use
right certificate.

Project Financing

We usually finance our real estate development projects through
a combination of four sources: company cash, capital from investors, bank loans,
and cash paid by customers when they sign pre-sales purchase agreements for
their apartments. The proportion of the funding sources varies by project.

First, we select the site, acquire the land use rights, and
cover the preliminary development costs using our own cash and capital from
investors.

We next obtain loans from commercial banks and/or from
investors to continue the project.

As our construction progresses, we reach the stage where we are
permitted to begin selling the apartments and to complete pre-sales agreements
with our customers. Our customers, in most cases, pay 100% of the apartment
price in cash (including their mortgage financing, if needed) when they sign the
purchase agreement. We have access to 95% of that cash, with 5% of the price
retained by the bank until the apartment ownership is transferred to the buyer.
The cash payments by our customers provide the remaining cash needed to complete
the project.

The net proceeds from the sales of the properties are used to
compensate investors and to add to our retained earnings. The cash cycle then
begins again with the selection of new sites and the acquisition of the
development and land rights.

Projects

Since our inception, we have completed 17 projects having a GFA
of 1,461,996 square meters, of which approximately 96% has been sold. All of our
housing projects have featured secured parking, cable TV access, hot water,
heating systems and access to natural gas. Sales from those 17 projects have
totaled $357 million.

We have seven residential and commercial project phases under
construction with a total GFA of 540,201 square meters and expected sales of
$333 million.

30

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We have significant land use rights, consisting of three
properties with a total land area of 192,505 square meters. On these properties,
we plan to construct, among others, a luxury high-rise beach hotel, high-rise
residential and commercial buildings and residential villas.

We classify our projects into three categories:

- Projects in planning, where we have obtained the land use rights and the
  construction has yet to start;
- Projects under construction, in which all buildings have not been
  completed; and
- Completed projects, where the construction of all buildings has been
  finished.

Projects in Planning

Our projects in planning, including land reserves, total three
properties with a land area of 192,505 square meters.

The table below titled Projects in Planning shows estimates
of our total sales, estimated total gross profit and estimated gross profit
margin for each project currently in planning. The estimates are based on
typical selling prices and costs per square meter, which are reasonably
predictable in Chinas current economy, as well as based on our experience in
projects completed and under construction.

In regard to sales projections relating to each project
described in the section headed Projects in Planning, the basis for these
projections is comprised of two variables: each projects total GFA in square
meters to be sold and the projected unit sales price in dollars per square
meters. The total projected sales for each project is therefore calculated by
the following formula:

Projected sales = Projected GFA × Projected unit price

For properties that are under planning, the total projected GFA
is calculated based on the following factors:

- the floor area ratio approved by governmental regulatory agencies in the
  land grant contract, which is the ratio of the total floor area of buildings
  on each particular site to the size of the land of that location, or the limit
  imposed by zoning regulations and the regulatory agencies on such a ratio.
  Expressed as a formula, floor area ratio equals total covered area on all
  floors of all buildings on a certain parcel divided by area of the parcel.
  Therefore, the maximum allowable GFA that can be constructed on each
  particular site is calculated by multiplying the floor area ration by the size
  of the parcel.
- physical and design adjustments, which are typically applied to the
  maximum allowable GFA in order to arrive at a projected GFA to be constructed
  and sold. These adjustments are typically provided through a combination of
  the Companys Engineering Department and professional
  engineering/architectural services that we use. The projected GFA is typically
  subject to further adjustment upon completion of construction blueprints.

For unit price projections, we use the market comparable method
and take into consideration site-specific zoned uses. The primary basis for such
estimates is our proprietary internal projections. We use our internal database
of historical comparable selling prices in the same market for the same product
type (residential, office, commercial, etc.), in arriving at the unit price
estimates for each project. In addition, we typically interview experienced
local real estate brokers and gather comparable data of similar properties in
the same trade area being traded within a reasonable period of time, in coming
up with comparable unit prices. However, these brokers do not typically engage
in a thorough review process with us and do not provide written reports.

In regard to profit projections, we deduct our pro forma
development costs (including acquisition cost for land use rights, construction
cost, design/engineering cost, legal fees, governmental approval costs and other
costs of sales) from the sales projection discussed above, and arrive at the
estimated gross profit. The projected profit for each project is therefore
calculated by the following formula:

Projected profit = Projected sales  Pro forma development
costs

The basis for projecting the pro forma development costs is our
proprietary database of historical development costs of similar projects in the
same or comparable markets. In making these cost projections, we also follow
guidelines provided in the Construction Cost Budget Standard Index published by
the Government of Shandong Province, a widely accepted construction cost index in the real estate industry in our
markets. The accuracy of the projections is helped by the fact that acquisition
cost for land use rights, one of the primary components of development costs, is
already known. We do not typically retain outside firms in making development
cost projections.

31

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In regard to sales projections, we use the market comparable
method, taking into consideration site-specific zoned uses, in computing the
total sales projection for each of these projects. We typically apply our local
knowledge based on our substantial past experience in the specific market, as
well as consult experienced local real estate brokers and gather comparable data
of similar properties in the same trade area being traded within a reasonable
period of time, in coming up with comparable prices.

In regard to gross profit projections, we deduct our pro forma
development costs (including land cost, construction cost and other costs of
sales) from the sales projection, and arrive at the estimated gross profit.

Estimated total sales, total gross profit, and gross profit
margin shown in projects in planning assume that 100% of the total available
gross floor area will be sold during the projects selling period, which
typically extends up to two years or so after construction has been completed,
although in some cases we may further extend the selling period until all units
are sold. In some cases, after most of the apartments or commercial space have
been sold, a few units will remain unsold, at which point we typically lease out
the space to have it generate revenue while still keeping the unit listed as
available for sale but under lease. After some period of leasing, we typically
will sell the unit at a large discount to complete the sales of all the
units.

Our projections are subject to a number of limitations. Our
projects in planning do not yet have specific dates for the commencement and
completion of construction. These dates are primarily determined by the
availability of funds to initiate and complete the projects. The projects
typically take from 1.5 to 3.5 years to complete, depending mainly on the square
meters to be constructed, height of the buildings, number of buildings, and
complexity of the projects. Our Longhai Hotel project is also subject to
securing a luxury global hotel company that would be the buildings long-term
tenant. The hotels design, construction, fittings, and finish would be jointly
made final by the global hotel company and us before construction begins. This
long-term tenant has not yet been secured.

Because the dates of the commencement and completion of
construction for the projects in planning have not yet been determined and we do
not know the number of ordinary shares that would be outstanding in the future
years when the projects may be under construction and reach completion, we have
not provided potential or estimated earnings per share contributions for each
project because they are unlikely to be accurate and could be misleading. We did
not retain an outside firm to review the projections. The numbers shown are
single best estimates. We expect to update the data in the Projects in Planning
table at least annually in our earnings news release, related Report on Form 6-K
and our Annual Report on Form 20-F. If the projects in planning change
materially during the year, we expect to update the table in our quarterly
earnings news release and its related Report on Form 6-K.

Projects in Planning

|U.S. dollars in millions |  |               |  |  |          |  |  |             |  |  |         | Estimated | 
|------------------------ |  | ------------- |  |  | -------- |  |  | ----------- |  |  | ------- | --------- | 
|                         |  |               |  |  |          |  |  |             |  |  |         |           | 
|                         |  |               |  |  |          |  |  |             |  |  |         |           | 
|                         |  |               |  |  |          |  |  |             |  |  | Land    |           | 
|                         |  | Project Name  |  |  | Location |  |  | Type        |  |  | sq. m.  |           | 
|1                        |  | Longhai Hotel |  |  | Qingdao  |  |  | Hotel       |  |  | 7,572   |           | 
|2                        |  | Weihai Beach  |  |  | Weihai   |  |  | Low Density |  |  |         |           | 
|                         |  | Resort        |  |  |          |  |  | Residential |  |  | 127,082 |           | 
|                         |  |               |  |  |          |  |  |             |  |  |         |           | 
|                         |  |               |  |  |          |  |  |             |  |  | 134,654 |           | 

|(1) | See discussions in Projects in Planning above for the
      methodology we used in estimating the sales prices. We use our internal
      database of historical comparable selling prices in the same market for
      the same product type, combined with comparable sales data provided by
      local brokers and widely used Web-based real estate brokerage firms, such
      as Soufun.com and Cityhouse.cn, in arriving at the unit price estimates
      for each project.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(2) | See Projects in Planning above for discussions of our
      estimation of cost of sales. Estimated cost of sales is comprised of our
      pro forma development costs, including land acquisition cost, construction
      cost, legal, approval and permitting fees, project financing cost,
      professional fees, infrastructure cost and fees imposed by municipalities,
      and various other soft costs. Excluded from the cost of sales estimations
      are selling, general and administrative expenses and other
      non-project-specific costs. The land acquisition cost
is the price (historical cost or book value) we paid at the time
of purchase of the land use right, and therefore has already been established.
All other costs are estimations. Please refer to Projects under Construction
for discussions on the finalization of the construction cost during the
development process. The duration of the projects may affect certain costs,
particularly project financing cost if the project experiences unexpected delays
and we have to incur extra borrowing cost. However, since we typically
pre-negotiate lump-sum construction contracts with our contractors, the
construction cost is usually not affected by the delay.

32

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Land reserves are essential for our future developments.
Currently we have in inventory three parcels for which we own the land use
rights. Those land use rights were acquired mainly through our purchase in 2008
of our project companies and subsidiaries that already owned the rights. The
registration of those land use rights was completed in August 2008. Some of the
land has been selected for specific projects while the projects for the other
parcels are to be determined. The following table lists the land rights we
own.

Our land reserves shown below include some of the projects in
planning shown in the table above.

Land Reserves for Projects in Planning

|U.S. dollars in millions |  |                      |  |  |          |  |  |                         |  |  |               |  |  |         |  | 
|------------------------ |  | -------------------- |  |  | -------- |  |  | ----------------------- |  |  | ------------- |  |  | ------- |  | 
|                         |  |                      |  |  |          |  |  |                         |  |  |               |  |  |         |  | 
|                         |  |                      |  |  |          |  |  |                         |  |  |               |  |  | Land    |  | 
|                         |  | Land or Project Name |  |  | Location |  |  | Type                    |  |  | Date Acquired |  |  | sq. m.  |  | 
|1                        |  | Longhai Hotel        |  |  | Qingdao  |  |  | Hotel                   |  |  | November 2006 |  |  | 7,572   |  | 
|2                        |  | Weihai Beach Resort  |  |  | Weihai   |  |  | Low Density Residential |  |  | May 2000      |  |  | 127,082 |  | 
|3                        |  | Huashan Town         |  |  | Jimo     |  |  | Industrial              |  |  | April 2007    |  |  | 57,851  |  | 
|                         |  |                      |  |  |          |  |  |                         |  |  |               |  |  |         |  | 
|                         |  |                      |  |  |          |  |  |                         |  |  |               |  |  | 192,505 |  | 

_______
(1) Land cost reflects the price (historical cost or book
value) we paid at the time of purchase of the land.

Projects Under Construction

We have seven residential and commercial project phases under
construction with a total GFA of 540,201 square meters and expected sales of
$333 million.

The table below titled Projects Under Construction includes
our estimated total sales, estimated total gross profit, and estimated gross
profit margin for each project currently under construction.

The estimates are based on the following factors: At the time
construction starts, the costs per square meter for each project under
construction are reasonably predictable because the construction costs are
generally specified in the construction contracts. The selling prices per square
meter are estimated using a combination of (1) a selection from a typical range
of estimated percentage markups from the estimated costs per square meter, (2)
the selling prices per square meter for comparable properties currently selling
in the market, and (3) the estimated potential change in the selling prices
during the period in which the apartments are being sold. The period of sales
for each project can range from six months to approximately six years. We
estimate that approximately 80 percent of the units will be sold in the first
three years and the remaining 20 percent will be sold in years four through six.
Typically, projects with a longer construction/sales period are often those
constructed in sequential phases. Additionally, in China, apartments are
generally pre-sold during construction, unlike in the United States where
apartments are usually sold only after the construction has been completed. This
sales method often accounts for the higher percentage of sales in the earlier
years of the multi-phase projects.

In estimating potential changes in selling prices during
construction and prior to sales, we also consider our estimate of the direction
and magnitude for the economy in China and in the local geographic region where
each project is located, the change in consumers buying power that result from
potential economic changes, and potential changes in taxation, available
purchase financing, and government policies that influence housing and
commercial property purchases, as well as likely changes in the market inventory
of apartments or commercial space to be sold. We also consider our experience in
selling prices and construction costs for projects that have been recently
completed and for our other projects currently under construction.

Estimated total sales, total gross profit, and gross profit
margin shown in projects under construction assume that 100% of the total
available gross floor area will be sold during the projects selling period,
which can extend up to two years or so after construction has been completed. In
some cases, after most of the apartments or commercial space have been sold, a
few units will remain unsold, at which point we typically lease out the space to
have it generate revenue while still keeping the unit listed as available for sale but under lease. After a
period of leasing, we typically will sell the unit at a large discount to
complete the sales of all the units.

33

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Because the estimated gross profit for projects under
construction is subject to changes in selling prices, market demand, and the
other factors listed above, and because we do not know the number of ordinary
shares that would be outstanding in the future years when the projects under
construction may reach completion, we have not provided potential or estimated
earnings per share contributions for each project because they are unlikely to
be accurate and could be misleading. We did not retain an outside firm to review
the projections. The numbers shown are single best estimates. We expect to
update the data in the Projects Under Construction table at least annually in
our earnings news release, related Report on Form 6-K and our Annual Report on
Form 20-F. If the Projects Under Construction change materially during the year,
we expect to update the table in our quarterly earnings news release and our
related Report on Form 6-K.

Projects Under Construction

|U.S. dollars in millions |  |                                 |  |  |              |  |  |           |  |  |         |  |  |         |  |  |         |  |  |       | As of |  |       |  |  |                |  |  |                 |  | 
|------------------------ |  | ------------------------------- |  |  | ------------ |  |  | --------- |  |  | ------- |  |  | ------- |  |  | ------- |  |  | ----- | ----- |  | ----- |  |  | -------------- |  |  | --------------- |  | 
|                         |  |                                 |  |  |              |  |  |           |  |  |         |  |  |         |  |  |         |  |  |       |       |  |       |  |  | March 25, 2011 |  |  | Estimated Total | 
|                         |  |                                 |  |  |              |  |  |           |  |  |         |  |  |         |  |  |         |  |  |       |       |  |       |  |  |                |  |  |                 |  | 
|                         |  |                                 |  |  |              |  |  |           |  |  |         |  |  |         |  |  |         |  |  |       |       |  |       |  |  |                |  |  | Total           |  | 
|                         |  |                                 |  |  |              |  |  |           |  |  |         |  |  |         |  |  |         |  |  |       |       |  |       |  |  | Total          |  |  | **gross**       |  | 
|                         |  |                                 |  |  |              |  |  |           |  |  |         |  |  | Land    |  |  | GFA     |  |  | Total |       |  | Units |  |  | **sales**      |  |  | **profit**      |  | 
|                         |  | Project Name                    |  |  | **Location** |  |  | **Start** |  |  | Finish  |  |  | sq. m.  |  |  | sq. m.  |  |  | units |       |  | sold  |  |  | **$**          |  |  | **$**           |  | 
|1                        |  | Qilu Textile Centre residential |  |  | Weifang      |  |  | 2007.03   |  |  | 2011.04 |  |  | 72,056  |  |  | 67,942  |  |  | 705   |       |  | 665   |  |  | 18.3           |  |  | 9.7             |  | 
|2                        |  | Weihai International Plaza      |  |  | Weihai       |  |  | 2009.09   |  |  | 2011.06 |  |  | 9,058   |  |  | 45,828  |  |  | 447   |       |  | 165   |  |  | 13.6           |  |  | 5.1             |  | 
|3                        |  | Oumei Complex 2                 |  |  | Weifang      |  |  | 2010.03   |  |  | 2012.12 |  |  | 42,544  |  |  | 70,587  |  |  | 556   |       |  | 133   |  |  | 65             |  |  | 3.0             |  | 
|4                        |  | Dongli Garden Phase 1           |  |  | Qingdao      |  |  | 2008.12   |  |  | 2012.12 |  |  | 175,508 |  |  | 213,315 |  |  | 2,280 |       |  | 1,370 |  |  | 71.7           |  |  | 42.4            |  | 
|5                        |  | Longhai Mingzhu                 |  |  | Qingdao      |  |  | 2006.09   |  |  | 2011.06 |  |  | 9,700   |  |  | 51,902  |  |  | 356   |       |  | 261   |  |  | 59.7           |  |  | 31.3            |  | 
|6                        |  | Xingfu Renjia 2                 |  |  | Caoxian      |  |  | 2010.05   |  |  | 2011.09 |  |  | 99,234  |  |  | 58,768  |  |  | 540   |       |  | 283   |  |  | 11.2           |  |  | 5.7             |  | 
|7                        |  | Jiangshan Dijing                |  |  | Laixi        |  |  | 2010.10   |  |  | 2012.04 |  |  | 27,626  |  |  | 31,859  |  |  | 224   |       |  | -     |  |  | -              |  |  | -               |  | 
|                         |  |                                 |  |  |              |  |  |           |  |  |         |  |  |         |  |  |         |  |  |       |       |  |       |  |  |                |  |  |                 |  | 
|                         |  |                                 |  |  |              |  |  |           |  |  |         |  |  | 435,726 |  |  | 540,201 |  |  | 5,180 |       |  | 2,877 |  |  | 181            |  |  | 97.2            |  | 

|(1) | The gross profit margin for each project is subject to
      fluctuation during the development and selling periods, due to various
      factors such as general trends in selling prices discussed above,
      promotional campaigns in certain stages of the selling process, unit price
      variances caused by different design features from unit to unit and
      various selling schedules for different types of units in different stages
      of the development but within the same project.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Completed Projects

Since our inception, we had completed 17 projects having a
total GFA of 1,461,996 square meters, of which approximately 96% has been sold.
Sales from those projects totaled $357 million, gross profit was $134 million,
and the projects earned a consolidated return on investment of 60.1%.

Although our typical selling period lasts no more than 2 years
after the completion of construction, which is evidenced by the selling history
of the majority of our completed projects, we have extended the selling period
of the Fenglin Oasis, Yuyuan Fengjing, Longze Yuyuan, and Shanghai Garden 3
projects. The remaining GFA for these projects still remains in the prolonged
selling period as of March 25, 2011, and the selling period will end as soon as
they are sold.

All projects have included secured parking, cable TV, hot
water, heating systems, and access to natural gas.

34

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|Completed
      Projects | 
|------------------------ | 
|U.S. dollars in millions | 
|                         | 
|                         | 
|                         | 
|                         | 
|1                        | 
|2                        | 
|3                        | 
|4                        | 
|5                        | 
|6                        | 
|7                        | 
|8                        | 
|9                        | 
|10                       | 
|11                       | 
|12                       | 
|13                       | 
|14                       | 
|15                       | 
|16                       | 
|17                       | 
|                         | 

Architecture, Engineering and Construction

We outsource the architecture, engineering, and construction of
our projects.

We work with several architecture and engineering companies. We
collaborate with them on the site and building designs and rely on them for the
detailed execution of the design concepts.

We also outsource our project construction to qualified
subcontractors who are the winners in our competitive bidding process, which is
based on required quality and lowest price. Our contracts, typically
fixed-priced, provide for periodic payments during construction.

Below is a list of some of the key companies to whom we
outsource these services.

|Name of
      Company               |  | Services Provided | 
|----------------------------------- |  | ----------------- | 
|Qingdao Zhongxing Construction Ltd. |  | Construction      | 
|Longhai Construction Ltd.           |  | Construction      | 

35

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Quality and Performance

We and our chosen architects and engineers supervise the
construction by our contractors. In addition to the construction, our
contractors are responsible for purchasing all building materials, including the
two main building materials, steel and concrete. Contractors are required to
perform to their working plan and adhere to the specifications in our
construction plans and contracts. We have delivered all our projects to our
customers on or before the due date and at or above the quality specified in the
customers purchase agreements.

Our finished construction includes the completed buildings with
all public portions of the buildings fully finished and all of the common
grounds landscaped. The apartment interiors typically are finished to the gray
shell stage. This permits the apartment buyers to select their own interior
design and finishing companies, so they can get all the features, fixtures,
fittings, furnishings, textures, and colors they prefer. This separation of
responsibilities between the real estate developer and the independent interior
designers and finishers is traditional in China.

Sales and Marketing

In marketing our properties, we use our own marketing team, but
occasionally outsource our marketing and sales efforts to independent sales
agents. To market our properties, we use a combination of advertisements in
newspapers, magazines, television, and outdoor billboards, in addition to news
releases that generate media stories about our projects.

To help customers choose among the apartment layouts that we
offer, we usually create fully finished and furnished show rooms that give them
a sound basis for deciding exactly what they want. We pay for the completion of
these marketing show rooms. After most of the units in the development have been
sold, we sell the show rooms as residences, usually at premium prices.

Competition

The real estate development business in China is organized into
four qualification levels under Certificates of the Qualifications of Real
Property Development Enterprises issued by the Ministry of Housing and
Urban-Rural Development.

The starting qualification level is Level 4 (see table below).
A company may rise in its qualification level, depending on its registered
capital, the number of years of industry experience, the area of land it has
developed, and its safety record. Only one level may be ascended each year.

|        |  | Registered   |  |  |            |  |  | Developed      |  |  |                    |  |  | Time for      | 
|------- |  | ------------ |  |  | ---------- |  |  | -------------- |  |  | ------------------ |  |  | ------------- | 
|        |  | Capital      |  |  | Experience |  |  | Area           |  |  | Other              |  |  | License to be | 
|        |  | ($ millions) |  |  | (years)    |  |  | (square feet)  |  |  | Requirements       |  |  | Authorized    | 
|Level 1 |  | 6.25         |  |  | 5          |  |  | 3,229,278      |  |  | No Severe Accident |  |  | 20 Days       | 
|Level 2 |  | 2.5          |  |  | 3          |  |  | 1,614,639      |  |  | No Severe Accident |  |  | 20 Days       | 
|Level 3 |  | 1.0          |  |  | 2          |  |  | 538,213        |  |  | No Severe Accident |  |  | 20 Days       | 
|Level 4 |  | 0.125        |  |  | 1          |  |  | not applicable |  |  |                    |  |  |               | 

We obtained the Level 1 Certificate of the Qualifications of
Real Property Development Enterprises on November 11, 2008, which is valid until
November 7, 2011. We gained Level 2 Qualification in 2006.

The real estate market in which we operate is highly
competitive. Typically, the housing and land development industry is a regional
business with mostly local players competing with us for small- to medium-size
projects. Our major competitors are other large-scale local real estate
companies that include state-owned and private real estate developers. In
addition, some large-scale national real estate developers are entering the
Greater Qingdao market. Based on the City of Qingdao Commission of Development
& Constructions evaluation, in 2010 we were recognized as one of the ten
most outstanding real estate developers in Qingdao, measured by a combination of
sales, customer satisfaction, and several other factors.

Our major competitors include:

- Hisense Real Estate Development Co., Ltd.Hisense Real Estate
  Development Co., Ltd., or Hisense, was founded in 1995 and is the strongest
  real estate company with the highest development capacity among the top 10 in
  the Qingdao market. Hisense holds a Level 1 Qualification Certificate for real
  estate development, a Level 1 Qualification for property management, and Class
  A Certificate for design. It has developed more than 1 million square meters of projects each year for
  several years. Its completed development projects include Hisense-Huiyuan
  housing, Hisense-Yandao international apartments, Hisense-Qingquan villas, a
  high-end office building, and the Hisense information technology industrial
  park, plus other similar developments. Hisense is focused on land reserves and
  projects in Qingdao and is absent in other cities in the Shandong Province and
  in other provinces in China.

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- Haier Real Estate Development Co., Ltd.Established in 2002, Haier
  Real Estate Development Co., Ltd., or Haier, is engaged in real estate
  development and investment within the Haier Group and has embraced the Haier
  groups beliefs, spirit, style, focus on clients, and objectives that include
  creating a solid foundation for long-term development. At the end of 2007, the
  company had seven real estate development subsidiaries, one property
  management company, and one branch company. Haiers real estate development
  and investment projects are located in Qingdao, as well as in Jinan, Beijing,
  Chongqing, Taiyuan, Suzhou, and other locations. In these cities, Haier owns a
  number of land reserves and has more than 10 projects competed or under
  construction. Haier ranks second in Qingdaos top 10 real estate development
  companies, according to the governments comprehensive competitiveness
  evaluation. We believe that Haiers real estate weaknesses include (1) its
  relative inexperience in real estate in Greater Qingdao due to a rather recent
  start in the region and (2) its subordination to the Haier Group, which we
  believe has led to a complicated management structure and a decision-making
  system burdened by unnecessary complexity and lengthy processing time, both of
  which are likely to limit Haiers effectiveness and growth in the Qingdao real
  estate market.
- Qingdao Construction Corporation of China. Qingdao Construction
  Corporation of China, or Qingdao Construction, is a government owned
  construction company. In the last few years, Qingdao Construction has expanded
  into real estate development, which has become the companys second biggest
  operation, but is still a modest business. It mainly focuses on the
  construction of affordable low-income and low-rent apartments. Although it has
  been ranked by the government among the top 10 developers in Qingdao recently,
  primarily due to its construction business, Qingdao Construction still lacks
  extensive experience in real estate development. We believe the company will
  continue to expand its real estate development operations, but its market
  share in real estate development appears to be insufficient at the moment for
  sustainable operations as a stand-alone business.
- Tiantai Group.Tiantai Group, or Tiantai, was an early participant
  in the real estate development business and is quite mature in its operations
  in Qingdao. It ranks about fifth among Qingdaos top 10 developers, according
  to the government. Tiantai has focused on a branding and high-level
  development strategy, therefore its output and market share are relatively
  low. Founded 15 years ago, Tiantai has developed only seven projects with a
  total GFA of 1.3 million square meters. So far, Tiantai has kept its focus on
  the Qingdao city market.

Some of our competitors have greater financial and marketing
resources than we do. Some also have larger land reserves, greater economies of
scale, broader name recognition, and longer track records. For example, a major
rival, Tiantai, is a large-scale private real estate developer engaged in real
estate development and real estate management, with a proven track record and
annual development GFA of about 700,000 square meters.

We differentiate ourselves from our competitors by (1)
conducting much of our operations in second-tier and third-tier cities, (2)
focusing on middle-income families in those second-tier and third-tier cities,
(3) offering mid-sized apartments that range from 40 to 100 square meters and
(4) leveraging our relationship with our affiliate.

We believe that these four strategies have given us a
competitive advantage over other companies that can result in sustainable
long-term growth and attractive returns on investment. The first three
strategies make us significantly less vulnerable to the risks associated with
the fast growing Chinese residential property market. Targeting middle-income
customers in the tier two and tier three cities and offering affordable products
make our properties less of a target for real estate speculation. Providing
bread and butter type of housing for the vast majority of the population in
under-served markets makes our sales more sustainable. The advantage of the
fourth strategy is reflected in our unique ability to acquire premium land in a
time and cost effective way, as described above under Project Development
Process.

We expect to increase our market share and return on investment
by leveraging our premium land reserves by (1) continuing to build middle income
housing, (2) developing high-end residential and commercial projects and
landmark buildings, (3) broadening our geographic diversification, and (4)
strengthening our brand recognition and reputation for high quality.

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Intellectual Property

We do not own or license any material intellectual property
rights.

Foreign Corrupt Practices Act (FCPA)

We are subject to the FCPA, and other laws that prohibit
improper payments or offers of payments to foreign governments and their
officials and political parties by U.S. persons and issuers as defined by the
statute for the purpose of influencing any act or decision of the foreign entity
in order to assist the individual or business in obtaining or retaining
business. The FCPA also requires public companies to make and keep books and
records that accurately and fairly reflect their transactions and to devise and
maintain an adequate system of internal accounting controls. The anti-bribery
provisions of the FCPA are enforced primarily by the U.S. Department of Justice.
The SEC is involved with enforcement of the books and records provisions of the
FCPA.

Our business activities in China create the risk of
unauthorized payments or offers of payments by our employees, consultants, sales
agents or distributors, because these parties are not always subject to our
control. It is our policy to implement safeguards to discourage these practices
by our employees. However, our existing safeguards and any future improvements
may prove to be less than effective, and the employees, consultants, sales
agents or distributors of our Company may engage in conduct for which we might
be held responsible. Violations of the FCPA may result in severe criminal or
civil sanctions, and we may be subject to other liabilities, which could
negatively affect our business, operating results and financial condition. In
additions, the U.S. government may seek to hold our Company liable for successor
liability of FCPA violations committed by companies in which we invest or that
we acquire.

PRC Government Regulations

We operate our business in China. This section summarizes the
major PRC regulations relating to our business.

Permits and Certificates

As part of the project development process, we are required to
obtain a number of certificates, permits, and licenses from different government
agencies, including among others:

- Land Use Rights Certificate that certifies the right of a party to use
  land;
- Construction Land Planning Permit that authorizes a developer to begin the
  land survey, planning, and design for the land;
- Construction Works Planning Permit that indicates the governments
  approval of a developers overall planning and design for the project and
  allows the developer to apply for a Work Commencement Permit;
- Work Commencement Permit that authorizes a developer to begin excavation
  and construction; and
- Pre-sales Permit that authorizes a developer to begin completing pre-sales
  purchase agreements with customers and collect their cash for the apartments
  still under construction.

Housing and land development sales companies, including us, are
regulated by the Ministry of Land & Natural Resources and authorized by the
local office of the Ministry. Each project also has to be authorized and must
obtain a Commercial License for Housing Sale from the Real Estate Bureau.

Environmental Regulations

Our business in China is subject to various pollution control
regulations in China with respect to noise, water and air pollution and the
disposal of waste. Specifically, the major environmental regulations applicable
to us include the PRC Environmental Protection Law, the PRC Law on the
Prevention and Control of Water Pollution, the PRC Law on the Prevention and
Control of Air Pollution, the PRC Law on the Prevention and Control of Solid
Waste Pollution, and the PRC Law on the Prevention and Control of Noise
Pollution.

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Taxation

On March 16, 2007, the National Peoples Congress of China
passed the EIT Law, and on November 28, 2007, the State Council of China passed
the EIT Law Implementing Rules which took effect on January 1, 2008. The EIT Law
and its implementing rules impose a unified earned income tax, or EIT, rate of
25.0% on all domestic-invested enterprises and foreign invested enterprises, or
FIEs, unless they qualify under certain limited exceptions. As a result, our PRC
operating subsidiaries are subject to an earned income tax of 25.0%. Before the
implementation of the EIT Law, FIEs established in the PRC, unless granted
preferential tax treatments by the PRC government, were generally subject to an
EIT rate of 33.0%, which included a 30.0% state income tax and a 3.0% local
income tax.

In addition to the changes to the current tax structure, under
the EIT Law, an enterprise established outside of China with de facto
management bodies within China is considered a resident enterprise, meaning
that it can be treated in a manner similar to a Chinese enterprise for
enterprise income tax purposes. The implementing rules of the EIT Law define de
facto management as substantial and overall management and control over the
production and operations, personnel, accounting, and properties of the
enterprise. In addition, a recent circular issued by the State Administration of
Taxation on April 22, 2009 regarding the standards used to classify certain
Chinese-invested enterprises controlled by Chinese enterprises or Chinese group
enterprises and established outside of China as resident enterprises clarified
that dividends and other income paid by such resident enterprises will be
considered to be PRC source income, subject to PRC withholding tax, currently at
a rate of 10%, when recognized by non-PRC enterprise shareholders. This recent
circular also subjects such resident enterprises to various reporting
requirements with the PRC tax authorities.

In addition, the recent circular mentioned above sets out
criteria for determining whether de facto management bodies are located in
China for overseas incorporated, domestically controlled enterprises. However,
as this circular only applies to enterprises established outside of China that
are controlled by PRC enterprises or groups of PRC enterprises, it remains
unclear how the tax authorities will determine the location of de facto
management bodies for overseas incorporated enterprises that are controlled by
individual PRC residents like us and some of our subsidiaries. If the PRC tax
authorities determine that we are a resident enterprise for PRC enterprise
income tax purposes, we may be subject to the enterprise income tax at a rate of
25% on our worldwide taxable income as well as PRC enterprise income tax
reporting obligations. In addition, dividends paid to us from our PRC
subsidiaries and dividends we pay to our non-PRC shareholders may be subject to
a 10% withholding tax.

Foreign Currency Exchange

All of our sales revenue and expenses are denominated in RMB.
Under the PRC foreign currency exchange regulations applicable to us, RMB is
convertible for current account items, including the distribution of dividends,
interest payments, trade and service-related foreign exchange transactions.
Currently, our PRC operating subsidiaries may purchase foreign currencies for
settlement of current account transactions, including payments of dividends to
us, without the approval of SAFE, by complying with certain procedural
requirements. Conversion of RMB for capital account items, such as direct
investment, loan, security investment and repatriation of investment, however,
is still subject to the approval of SAFE. In particular, if our PRC operating
subsidiaries borrow foreign currency through loans from us or other foreign
lenders, these loans must be registered with SAFE, and if we finance the
subsidiaries by means of additional capital contributions, these capital
contributions must be approved by certain government authorities, including the
MOFCOM, or their respective local branches. These limitations could affect our
PRC operating subsidiaries ability to obtain foreign exchange through debt or
equity financing.

Dividend Distributions

Our revenues are earned by our PRC subsidiaries. However, PRC
regulations restrict the ability of our PRC subsidiaries to make dividends and
other payments to their offshore parent company. PRC legal restrictions permit
payments of dividend by our PRC subsidiaries only out of their accumulated
after-tax profits, if any, determined in accordance with PRC accounting
standards and regulations. Each of our PRC subsidiaries is also required under
PRC laws and regulations to allocate at least 10% of our annual after-tax
profits determined in accordance with PRC GAAP to a statutory general reserve
fund until the amounts in such fund reaches 50% of its registered capital. These
reserves are not distributable as cash dividends. Our PRC subsidiaries have the
discretion to allocate a portion of their after-tax profits to staff welfare and
bonus funds, which may not be distributed to equity owners except in the event
of liquidation.

In addition, under the New EIT law, the Notice of the State
Administration of Taxation on Negotiated Reduction of Dividends and Interest
Rates, or Notice 112, which was issued on January 29, 2008, the
Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance
of Double Taxation and Prevention of Fiscal Evasion, or the Double Taxation
Arrangement (Hong Kong), which became effective on December 8, 2006,and the
Notice of the State Administration of Taxation Regarding Interpretation and
Recognition of Beneficial Owners under Tax Treaties, or Notice 601, which
became effective on October 27, 2009, dividends from our PRC operating
subsidiaries paid to us through our Hong Kong subsidiary may be subject to a
withholding tax at a rate of 10%, or at a rate of 5% if our Hong Kong subsidiary
is considered a beneficial owner that is generally engaged in substantial
business activities and entitled to treaty benefits under the Double Taxation
Arrangement (Hong Kong). Furthermore, the ultimate tax rate will be determined
by treaty between the PRC and the tax residence of the holder of the PRC
subsidiary. Dividends declared and paid from before January 1, 2008 on
distributable profits are grandfathered under the EIT Law and are not subject to
withholding tax.

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Circular 75

In October 2005, SAFE issued the Notice on Relevant Issues in
the Foreign Exchange Control over Financing and Return Investment Through
Special Purpose Companies by Residents Inside China, generally referred to as
Circular 75, which required PRC residents to register with the competent local
SAFE branch before establishing or acquiring control over an SPV for the purpose
of engaging in an equity financing outside of China on the strength of domestic
PRC assets originally held by those residents. Internal implementing guidelines
issued by SAFE, which became public in June 2007 (known as Notice 106), expanded
the reach of Circular 75 by (1) purporting to cover the establishment or
acquisition of control by PRC residents of offshore entities which merely
acquire control over domestic companies or assets, even in the absence of
legal ownership; (2) adding requirements relating to the source of the PRC
residents funds used to establish or acquire the offshore entity; (3) covering
the use of existing offshore entities for offshore financings; (4) purporting to
cover situations in which an offshore SPV establishes a new subsidiary in China
or acquires an unrelated company or unrelated assets in China; and (5) making
the domestic affiliate of the SPV responsible for the accuracy of certain
documents which must be filed in connection with any such registration, notably,
the business plan which describes the overseas financing and the use of
proceeds. Amendments to registrations made under Circular 75 are required in
connection with any increase or decrease of capital, transfer of shares, mergers
and acquisitions, equity investment or creation of any security interest in any
assets located in China to guarantee offshore obligations, and Notice 106 makes
the offshore SPV jointly responsible for these filings. In the case of an SPV
which was established, and which acquired a related domestic company or assets,
before the implementation date of Circular 75, a retroactive SAFE registration
was required to have been completed before March 31, 2006. This date was
subsequently extended indefinitely by Notice 106, which also required that the
registrant establish that all foreign exchange transactions undertaken by the
SPV and its affiliates were in compliance with applicable laws and regulations.
Failure to comply with the requirements of Circular 75, as applied by SAFE in
accordance with Notice 106, may result in fines and other penalties under PRC
laws for evasion of applicable foreign exchange restrictions. Any such failure
could also result in the SPVs affiliates being impeded or prevented from
distributing their profits and the proceeds from any reduction in capital, share
transfer or liquidation to the SPV, or from engaging in other transfers of funds
into or out of China.

As we stated under Item 3, Key InformationRisk FactorsRisks
Related to Doing Business in ChinaFailure to comply with PRC regulations
relating to the establishment of offshore special purpose companies by PRC
residents may subject our PRC resident shareholders to personal liability, limit
our ability to acquire PRC companies or to inject capital into our PRC
subsidiaries, limit our PRC subsidiaries ability to distribute profits to us or
otherwise materially adversely affect us, we have asked our shareholders, who
are PRC residents as defined in Circular 75, to register with the relevant
branch of SAFE, as currently required, in connection with their equity interests
in us and our acquisitions of equity interests in our PRC subsidiaries. However,
many of the terms and provisions in Circular 75 and Notice 106 remain unclear
and implementation by central SAFE and local SAFE branches of Circular 75 and
Notice 106 have been inconsistent since their adoption. Therefore, we cannot
predict how Circular 75 and Notice 106 will affect our business operations or
future strategies. For example, our present and prospective PRC subsidiaries
ability to conduct foreign exchange activities, such as the remittance of
dividends and foreign currency-denominated borrowings, may be subject to
compliance with Circular 75 and Notice 106 by our PRC resident beneficial
holders.

Mergers and Acquisitions

As we stated under Item 3, Key InformationRisk FactorsRisks
Related to Doing Business in ChinaOur business and financial performance may be
materially adversely affected if the PRC regulatory authorities determine that
our acquisition of Oumei constitutes a Round-trip Investment without MOFCOM
approval, Leewell acquired Oumei in 2007 from Mr. Weiqing Zhang and Ms. Xiaoyan
Cheng. Prior to the acquisition, Leewell was owned and controlled by Mr. Li
Zhou, an Australian citizen. Mr. Zhou acted as a nominee for Mr. Weiqing Zhang
and Ms. Xiaoyan Cheng, the daughter of Mr. Antoine Cheng. Mr. Cheng was a PRC
citizen at the time, but has since become a Philippine citizen. The acquisition was approved by the local counterpart of the MOFCOM. Mr. Zhou
also founded Longhai Holdings, a BVI company. In September 2009, ownership of
Longhai Holdings was transferred to Mr. Cheng. After Mr. Cheng acquired
ownership of Longhai Holdings, Longhai Holdings acquired all of Mr. Zhous
equity interest in Leewell. We did not seek or obtain the approval from the
central office of MOFCOM in Beijing because we believed that Mr. Zhous role in
the transaction was only transient and that the ultimate substance of the
transaction was the acquisition of Oumei by Mr. Cheng, our Chairman, who is no
longer a PRC citizen. As a foreign citizen, Mr. Chengs ultimate ownership of
Oumei is not prohibited by the 2006 M&A Rule. Although Mr. Zhou did not
deliberately avoid compliance with the 2006 M&A Rule and believed in good
faith that, given the transient nature of his ownership interest, no legal issue
arose under the 2006 M&A Rule, the PRC regulatory authorities may still take
the view that these transactions required the approval of the central office of
MOFCOM in Beijing because Mr. Zhou was acting as a nominee for Mr. Zhang and Ms.
Cheng, two PRC citizens, and avoided compliance with the 2006 M&A Rule
(i.e., failure to obtain the approval of the central office of MOFCOM in Beijing
as opposed to MOFCOMs local office) through the use of a nominee arrangement,
trust or similar means, which is prohibited. In other words, the PRC regulatory
authorities may believe that, notwithstanding the transient nature of Mr. Zhous
ownership, these transactions and the reverse acquisition of Leewell are part of
an overall series of arrangements which constitute a Round-trip Investment and
as a result, these transactions may be deemed invalid by the PRC regulatory
authorities.

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If this were to take place, we would replace our ownership of
Oumei with a series of contractual arrangements, which we refer to as the
Contractual Arrangements. On January 21, 2010, Mr. Weiqing Zhang and Ms. Xiaoyan
Cheng, or the Oumei Shareholders, entered into an agreement with Leewell that
requires them to enter into the Contractual Arrangements if the PRC regulatory
authorities invalidate the acquisition of Oumei by Leewell. The Contractual
Arrangements would be implemented by first transferring ownership of Oumei from
Leewell to the Oumei Shareholders, if that had not already occurred by
regulatory action. We would then establish a new wholly-owned subsidiary in
China, referred to as a wholly foreign-owned enterprise or WFOE. The WFOE would
enter into a series of agreements with Oumei and the Oumei Shareholders,
including an exclusive management, technical and consulting services agreement,
an equity pledge agreement, an equity purchase option agreement and a power of
attorney. Taken together, these agreements would give the WFOE complete control
over and all of all the economic benefits of the operations of Oumei and its
subsidiaries, or collectively, the Operating Entities. These agreements are
described in more detail in the following paragraphs.

Under the exclusive management, technical and consulting
services agreement, or the Service Agreement, our WFOE would act as the
exclusive provider of a comprehensive set of services to the Operating Entities
in exchange for the payment by the Operating Entities of service fees in an
amount equal to up to the entire pre-tax profits of the Operating Entities.
Oumei would agree to accept the corporate policy advice and guidance provided by
the WFOE on Oumeis daily operations, financial management and employment
issues.

Under the equity pledge agreement, the Oumei Shareholders would
pledge all of their equity interests in Oumei to the WFOE as collateral security
for the WFOEs collection of the consulting and service fees under the Service
Agreement. During the term of the equity pledge agreement, the Oumei
Shareholders would agree that without the WFOEs prior written consent, they
would not transfer any equity interest, create or permit to exist any pledge
that may damage the WFOEs rights or interests in the pledged equity interests,
or cause Oumeis meeting of shareholders or board of directors to pass any
resolutions about the sale, transfer, pledge or other disposal of the lawful
right to derive income from any equity interest in Oumei or about the permission
of the creation of any other security interests thereon. The term of this
agreement would be the same as the term of the Service Agreement. If the term of
the Service Agreement is renewed, the term of this agreement will extend
accordingly.

Under the equity purchase option agreement, the Oumei
Shareholders would irrevocably, unconditionally and exclusively grant the WFOE a
purchase option whereby, to the extent permitted under Chinese law, the WFOE
would have the right to request the Oumei Shareholders to transfer to it or its
designated entity or person, the total equity interests held by them in Oumei.
The WFOE would have sole discretion to decide the specific time, method and
number of the exercise of the purchase option. At the time of each exercise of
the purchase option by the WFOE, the total consideration to be paid to the Oumei
Shareholders would be the book value of Oumei. The equity purchase option
agreement would have the same term as the Service Agreement. In connection with
the equity purchase option agreement, each Oumei Shareholder would execute a
power of attorney, which would grant the WFOE a power to exercise on his or her
behalf all voting rights as a shareholder at the shareholders meetings of Oumei
that have been given to him or her by law and by the Articles of Association of
Oumei.

Through these agreements, we would receive all or substantially
all of the pre-tax profits of the Operating Entities and have substantial if not
complete control over their daily operations and financial affairs, election of
senior executives and all matters requiring shareholder approval. Furthermore, we believe
the Contractual Arrangements would satisfy the requirements of Section 210.3A
-02 of Regulation S-X for consolidation of the Operating Entities financial
results with ours under U.S. GAAP.

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Seasonality

Our operating results and operating cash flows historically
have not been subject to dramatic seasonal variations, although there is an
increase in advertising and selling expenses when we begin pre-sales of new
projects under construction. New market opportunities or new project
introductions could change any perceived patterns, seasonal or operational.

Organizational Structure

All of our business operations are conducted through our
Chinese subsidiaries. The chart below presents our corporate structure:



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Property, Plants and Equipment

All urban land in China is owned by the State. Pursuant to
Interim Regulations of the Peoples Republic of China Concerning the
Assignment and Transfer of the Right to the Use of the State-owned Land in the
Urban Areas, which became effective on May 19, 1990, individuals and
companies are permitted to acquire rights to use urban land or land use rights
for specific purposes, including residential, industrial and commercial
purposes. The land use rights are granted for a period of 70 years for
residential purposes, 50 years for industrial purposes and 40 years for
commercial purposes. These periods may be renewed at the expiration of the
initial and any subsequent terms. Upon approval by both the land administrative
authorities and city planning authorities, industrial parcel uses may be
converted to other uses, and the duration and other clauses in the land use
right granting agreement will be revised to match the new use. Granted land use
rights are transferable and may be used as security for borrowings and other
obligations.

We have a bank of land use rights, consisting of three
properties with a total land area of 192,505 square meters. On these properties,
we plan to construct, among others, a luxury high-rise beach hotel, high-rise
residential and commercial buildings, residential villas, and a high-rise office
building. Land use rights relating our projects under construction and completed
projects are not included in our bank of land use rights, as it is a generally
accepted practice that as soon as a new project commences on the land reserve,
the land use right is immediately re-categorized from intangible assets into
work in progress inventory, and eventually into finished inventory when the
project is completed. Therefore, land associated with projects under
construction and completed projects are treated separately from our bank of land
use rights. Please see Item 4, Information on the CompanyBusiness
OverviewOur Projects for details about our land reserves and projects.

ITEM 4A.   UNRESOLVED STAFF COMMENTS

Not Applicable

ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of our
financial condition and results of operations in conjunction with our
consolidated financial statements and the related notes included elsewhere in
this annual report on Form 20-F. This discussion may contain forward-looking
statements. Our actual results may differ materially from those anticipated in
these forward-looking statements because of various factors, including those set
forth under Item 3, Key InformationRisk Factors or in other parts of this
annual report on Form 20-F. See also Forward-looking Information.

Operating Results

Overview

We are one of the leading real estate development companies
located in Qingdao, Shandong province, China. We began operations in 2001, and
in 2010 we were recognized in the official City of Qingdao Commission of
Development & Constructions evaluation as one of the ten most outstanding
real estate developers in Qingdao, measured by a combination of revenue,
customer satisfaction, as well as several other factors.

We develop and sell residential and commercial properties,
targeting middle and upper income customers in the coastal region of the
Shandong peninsula (Greater Qingdao) located in northeastern China, including
the cities of Qingdao, Weihai and Yantai, as well as other inland locations,
such as Weifang.

Since our inception, we have completed 17 projects having a GFA
of 1,461,996 square meters, of which approximately 96% has been sold. In
addition, we have seven projects under construction with a total GFA of 540,201
square meters.

In fiscal year 2010, our total sales increased 17.2% to $110.5
million from $94.3 million in fiscal year 2009. Our gross profit decreased 7.5%
to $33.3 million in fiscal year 2010 from $36.0 million in fiscal year 2009,
while our net income increased 65.2% to $34.9 million in fiscal year 2010 from
$21.2 million in fiscal year 2009.

Our mission is to provide high-quality, comfortable, and
convenient living space to middle and upper income customers, primarily in
Shandong Province and in other provinces in China, while also earning for our
shareholders an internal rate of return that exceeds our cost of capital. We
expect to increase our market share through aggressive internal growth and
prudent acquisitions in Shandong Province and in other provinces in China. Our
goal is to be one of the top two real estate developers in Greater Qingdao in the next five years by
capturing and exploiting the growth opportunities in Shandong Province and by
providing the most desirable coastal and inland apartments to middle and upper
income customers, as well as by increasing our development of commercial
properties.

43

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Financial Performance Highlights

The following summarizes certain key financial information for
the fiscal year ended December 25, 2010:

- Total Sales: Total sales were approximately $110.5 million for
  fiscal year 2010, an increase of $16.2 million, or 17.2%, from $94.3 million
  last year.
- Gross Profit and Margin: Gross profit was $33.3 million for fiscal
  year 2010, a decrease of $2.7 million, or 7.5%, from $36.0 million last year.
  Gross margin was 30.1% for the 2010 fiscal year as compared to 38.2% for the
  2009 fiscal year.
- Net Income: Net income was $34.9 million for fiscal year 2010, an
  increase of $13.7 million, or 65.2%, from $21.2 million last year.
- Fully diluted net income per share: Fully diluted net income per
  share was approximately $1.07 for fiscal year 2010, as compared to
  approximately $0.70 last year.

Principal Factors Affecting Our Financial Performance

Our operating results are primarily affected by the following
factors:

- Growth in the Chinese economy. We operate in China and derive
  almost all of our revenues from sales to customers in China. Economic
  conditions in China, therefore, affect virtually all aspects of our
  operations, including the demand for our properties, the availability and
  prices of our raw materials, and our other expenses. China has experienced
  significant economic growth, achieving a compound annual growth rate of more
  than 10% in gross domestic product from 1996 through 2008. In 2009 the annual
  growth rate was 9.2% and in 2010 it was 10.3%. China is expected to experience
  continued growth in all areas of investment and consumption. However, if the
  global economic recession were to become more protracted, Chinas growth might
  be somewhat more modest, since China has not been entirely immune to the
  global economic slowdown and has been experiencing a slowing in its growth
  rate.
- Growth of the Chinese real estate market and the local markets in which
  our properties are sold. Chinas real estate bull market began more than
  six years ago. According to the National Bureau of Statistics of China, the
  total GFA of residential and commercial properties sold increased from 224.1
  million square meters in 2001 to 937.1 million square meters in 2009, a
  compound annual growth rate, or CAGR, of 19.6%.Qingdaos real estate market
  has also experienced strong growth. According to the Qingdao Statistics
  Yearbooks 2004  2010 and the Qingdao Municipal Bureau of Statistics, the CAGR
  in Qingdao from 2003 to 2009 for GFA completed was 6.7% and the CAGR for GFA
  sold was 17.9%. Weihais real estate market has seen similar increases.
  According to the Weihai Statistics Yearbooks 2004  2010 and the Weihai
  Municipal Bureau of Statistics, the CAGR from 2003 to 2009 for GFA completed
  was 22.4% and for the GFA sold was 22.9%. Despite moderations in growth caused
  by the current global economic weakness in 2008 and 2009, we believe the
  structural forces in China and in the markets in which we sell our properties
  support continuing good demand for real estate during the next 10 years,
  however there can be no assurance that current trends will continue.
- Chinas Economic Stimulus Programs. In response to the global
  financial and economic crisis, the Chinese government announced an RMB 4
  trillion stimulus program on November 27, 2008. Within the RMB 4 trillion
  package, about RMB 400 billion will go toward civil works, including
  low-income housing and renovation, which we believe will benefit Shandong
  Province. Two additional categories (technology advances and industry
  restructuring, which together will be allocated RMB 370 billion, and
  infrastructure, which will be allocated RMB 1.5 trillion) are also expected to
  benefit industries in Qingdao, Weihai, Weifang, and the entire Shandong
  Province. On February 26, 2009, Chinas State Council reinforced Chinas 2008
  stimulus package by announcing further measures to stimulate specific
  industries in 2009. The industries included automobile, iron and steel,
  textiles, equipment manufacturing, shipbuilding, electronics and information
  technology, petrochemicals, light industries, nonferrous metals, and
  logistics. We believe that the stimulus plan will benefit us both directly and
  indirectly in three ways. First, from a macro-economic perspective, the RMB
  400 billion will mainly be invested in the development of infrastructure in China, which
  will most likely create more jobs, improve peoples living standard, and
  accelerate the process of Chinese urbanization, which will in turn increase
  demand for urban housing at all income levels and continue to bolster the
  long-term growth of Chinas real estate market. Second, we also believe that
  the stimulus package and its further efforts focused on 10 industries will
  improve Greater Qingdaos economy, further strengthen the regions long-term
  competitive ability, and support the demand for middle and upper income
  housing, as well as the need for better commercial and office space, and a few
  world-class hotels. Third, increased government spending on low-income housing
  will provide us with various opportunities for development, even though our
  general strategy focuses on middle and upper income customers. For example, as
  indicated under Item 4, Information on the CompanyBusiness OverviewProject
  Development Process, the governments public infrastructure projects,
  including old city relocation projects, afford us the opportunity to acquire
  additional land for our future development projects, which would normally not
  have been otherwise available. Although individuals and governments around the
  world hope that government stimulus efforts are starting to have the desired
  effects, the true benefits of these and perhaps additional stimulus efforts by
  local, provincial, and national governments in China, as well as by other
  countries, is not yet assured, since the sustainability of the global economic
  recovery is yet to be proven.

44

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- Recent Efforts by the Chinese Government to Cool Down the Real Estate
  Industry. As discussed in Item 4, Information on the CompanyBusiness
  OverviewOur IndustryThe Real Estate Industry in ChinaRecent Efforts by the
  Chinese Government to Cool Down the Real Estate Industry, in response to
  concerns over the scale of the increase in property investments, the PRC
  government has implemented certain measures and introduced policies to curtail
  property speculation and promote the healthy development of the real estate
  industry in China. We believe that we have the ability, willingness, and
  flexibility to provide housing across all the price ranges in our target
  markets in China. We believe that demand will continue to grow reasonably for
  primary housing across the range of incomes, as Chinas overall economy grows
  at a more sustainable pace and the government continues its nationwide policy
  to promote urbanization. In addition, we believe that targeting middle-income
  customers in second-tier and third-tier cities and offering affordable
  products make our properties less of a target for real estate speculation.
  Moreover, because we have consistently adopted a strategy of conducting much
  of our operations in second-tier and third-tier cities, focusing on
  middle-income families in these second-tier and third-tier cities, and
  offering affordable, bread and butter type of housing for the vast majority
  of the population in under-served markets, we believe that our properties have
  been and will continue to be less of a target for real estate speculation. We
  also believe that the governments efforts to curb speculative activity in the
  housing market will in fact benefit us in that they provide a long-term,
  healthy, and sustainable policy environment for our growth strategy. However,
  there can be no assurance that Chinas current more restrictive approach to
  the economics of housing, especially in the speculative or over-invested parts
  of the housing market, would not have a negative influence on our business,
  especially in the near term.

Taxation

The Government of the Cayman Islands does not, under existing
legislation, impose any income, corporate or capital gains tax, estate duty,
inheritance tax, gift tax or withholding tax upon us or our shareholders. The
Cayman Islands are not party to a double tax treaty with any country that is
applicable to any payments made to or by us. We have received an undertaking
from the Governor-in-Cabinet of the Cayman Islands that, in accordance with
section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, for
a period of 20 years from April 2006 no law which is enacted in the Cayman
Islands imposing any tax to be levied on profits, income, gains or appreciations
shall apply to us or our operations and, in addition, that no tax to be levied
on profits, income, gains or appreciations or which is in the nature of estate
duty or inheritance tax shall be payable (i) on or in respect of our shares,
debentures or other obligations or (ii) by way of the withholding in whole or in
part of a payment of dividend or other distribution of income or capital by us
to our shareholders or a payment of principal or interest or other sums by us
due under a debenture or other obligation.

Our direct subsidiary, Leewell, was incorporated in Hong Kong
and under the current laws of Hong Kong, is subject to Profits Tax of 16.5%. No
provision for Hong Kong Profits Tax has been made as Leewell has no taxable
income.

Under the EIT Law, Oumei and its subsidiaries are subject to an
earned income tax of 25.0%. See Item 4, Information on the CompanyBusiness
OverviewPRC Government RegulationsTaxation for a detailed description of the
EIT Law and tax regulations applicable to our Chinese subsidiaries.

45

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Our future effective income tax rate depends on various
factors, such as tax legislation, the geographic composition of our pre-tax
income and non-tax deductible expenses incurred. Our management carefully
monitors these legal developments to determine if there will be any change in
the statutory income tax rate.

Critical Accounting Policies

We prepare our financial statements in conformity with U.S.
GAAP, which requires us to make estimates and assumptions that affect our
reporting of, among other things, assets and liabilities, contingent assets and
liabilities and revenues and expenses. We continually evaluate these estimates
and assumptions based on the most recently available information, our own
historical experiences and other factors that we believe to be relevant under
the circumstances. Since our financial reporting process inherently relies on
the use of estimates and assumptions, our actual results could differ from our
expectations. This is especially true with some accounting policies that require
higher degrees of judgment than others in their application. We consider the
policies discussed below to be critical to an understanding of our audited
consolidated financial statements because they involve the greatest reliance on
our managements judgment.

Revenue Recognition

Real estate sales are reported in accordance with the
provisions of ASC 360-20, Property, Plant and Equipment, Real Estate Sales,
Sales Other Than Retail Land Sales. Revenue from the sales of development
properties where the construction period is twelve months or less is recognized
by the full accrual method when the sale is consummated. A sale is not
considered consummated until (1) the parties are bound by the terms of a
contract or agreement, (2) all consideration has been exchanged, (3) any
permanent financing of which the seller is responsible has been arranged, (4)
all conditions precedent to closing have been performed, (5) the seller does not
have substantial continuing involvement with the property, and (6) the usual
risks and rewards of ownership have been transferred to the buyer. Revenue
recognized to date in excess of amounts received from customers is classified as
current assets under contracts receivable. Sales transactions not meeting all
the conditions of the full accrual method are accounted for using the deposit
method of accounting. Under the deposit method, all costs are capitalized as
incurred, and payments received from the buyer are recorded as a deposit
liability.

Effective December 26, 2008, the Company adopted the
percentage-of-completion method of accounting for revenue recognition for all
building construction projects in progress in which the construction period was
expected to be more than twelve months at that date. The full accrual method was
used before that date for all of our residential and commercial projects. The
Company changed to the percentage-of-completion method for contracts longer than
one year as this method more accurately reflects how revenue is earned on these
contracts, particularly for interim reporting purposes.

ASC 250, Accounting Changes and Error Corrections,
requires retrospective application of a change in accounting principle unless
impracticable. The change to the percentage-of-completion method had no material
effect on our December 25, 2008 financial statements.

Revenue and profit from the sale of development properties
where the construction period is more than twelve months is recognized by the
percentage-of-completion method on the sale of individual units when the
following conditions are met: (1) construction is beyond a preliminary stage;
(2) the buyer is committed to the extent of being unable to require a refund
except for non-delivery of the unit; (3) sufficient units have already been sold
to assure that the entire property will not revert to rental property; (4) sales
prices are collectible and (5) aggregate sales proceeds and costs can be
reasonably estimated. If any of these criteria are not met, proceeds are
accounted for as deposits until the criteria are met and/or the sale
consummated.

Under the percentage of completion method, revenues from units
sold and related costs are recognized over the course of the construction
period, based on the completion progress of a project. In relation to any
project, revenue is determined by calculating the ratio of completion and
applying that ratio to the contracted sales amounts. This ratio of completion is
determined by the Company using data reported by licensed independent third
party construction supervising firms hired by the Company as the contractors
employed by the Company request advance payments and do not specifically
allocate these costs to the various projects. Cost of sales is recognized by
multiplying the ratio by the total budgeted costs. Changes to total estimated
contract costs or losses, if any, are recognized in the period in which they are
determined. Revenue recognized to date in excess of cash received from customers
is classified as current assets under revenue in excess of billings. Amounts
received from customers in excess of revenue recognized to date are classified
as current liabilities under customer deposits.

Any losses incurred or identified on a real estate transaction
are recognized in the period in which the transaction occurs.

46

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From time to time, the Company participates in
government-sponsored old city redevelopment projects, which typically involve
villager relocation programs. Because of the fact that the relocated residents,
who are the purchasers of new apartment units, are not assigned their units and
do not make payments until the completion of the particular project according to
the agreement with the government, it is impractical to use the percentage of
completion method even though the construction period usually exceeds twelve
months. In such cases, revenues are recognized under the full accrual method for
the residential portion of the project.

Real Estate Capitalization and Cost Allocation

Properties under construction or held for sale consist of
residential and commercial units under construction and units completed.

Properties under construction or held for sale are stated at
cost or estimated net realizable value, whichever is lower. Costs include costs
of land use rights, direct development costs, including predevelopment costs,
interest on indebtedness, construction overhead and indirect project costs.
Total estimated costs of multi-unit developments are allocated to individual
units based upon specific identification methods.

Costs of land use rights include land premiums and deed tax and
are allocated to projects on the basis of acreage and GFA.

Allowance for Doubtful Accounts

The Company recognizes an allowance for doubtful accounts to
ensure contracts receivable, revenue in excess of billings, related party
receivables and other receivables are not overstated due to uncollectability.
Bad debt reserves are maintained for all customers based on a variety of
factors, including the length of time the receivables are past due, significant
one-time events and historical experience. An additional reserve for individual
accounts is recorded when the Company becomes aware of a customers or debtors
inability to meet its financial obligation, such as in the case of bankruptcy
filings or deterioration in the customers or debtors operating results or
financial position. If circumstances related to customers or debtors change,
estimates of the recoverability of receivables would be further adjusted. All
accounts receivable are reviewed periodically, and if the Company determines
that a specific doubtful account has become uncollectible, the account is
written off by removing the amount from the receivable account. For the years
ended December 25, 2010 and 2009, we have not recorded such write-off for
uncollectability. As of December 25, 2010 and December 25, 2009, the allowances
for doubtful accounts are $786,353 and $1,617,114 for contracts receivable and
revenue in excess of billings, and $146,980 and $272,361 for other receivables,
respectively.

An allowance for contracts receivable is established as
follows: 50% of the balances aged between one and two years and over RMB100,000
(approximately $15,000); 10% of the balances aged between one and two years and
under RMB100,000 (approximately $15,000); and 100% of the balances aged over two
years.

Land Appreciation Tax (LAT)

In accordance with the relevant taxation laws in the PRC, the
Company is subject to LAT based on progressive rates ranging from 30% to 60% on
the appreciation of land value, which is calculated as the proceeds of sales of
properties less deductible expenditures, including borrowing costs and all
property development expenditures. The tax rules to implement the laws stipulate
that the whole project must be completed before the LAT obligation can be
assessed. Accordingly, the Company records the liability and the related expense
at the completion of a project, unless the tax authorities impose an assessment
at an earlier date. Deposits made against the eventual obligation are included
in prepaid expenses.

Recently Issued Accounting Standards

See Note 18 (Recent Pronouncements) to the consolidated
financial statements included elsewhere in this report.

47

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Our Results of Operations

Comparison of Fiscal Years Ended December 25, 2010 and
December 25, 2009

The following table shows key components of our results of
operations during the fiscal years ended December 25, 2010 and 2009, in both
dollars and as a percentage of our total sales.

|                                                                    |   | Fiscal Year Ended |   |  | Fiscal Year Ended |   
|------------------------------------------------------------------- | - | ----------------- | - |  | ----------------- | --
|U.S. dollars, except percentages                                    |   | December 25, 2010 |   |  | December 25, 2009 |   
|                                                                    |   |                   |   |  | Percent of        |   
|                                                                    |   | Dollars           |   |  | Total Sales       |   
|Sales                                                               | $ | 109,816,618       |   |  | 99.4              | % 
|Sales to related party                                              |   | 701,803           |   |  | 0.6               | % 
|Total sales                                                         |   | 110,518,421       |   |  | 100.0             | % 
|Cost of sales                                                       |   | (77,065,740       | ) |  | (69.8             | )%
|Cost of sales to related party                                      |   | (144,074          | ) |  | (0.1              | )%
|Total cost of sales                                                 |   | (77,209,814       | ) |  | (69.9             | )%
|Gross profit                                                        |   | 33,308,607        |   |  | 30.1              | % 
|Advertising expenses                                                |   | (217,596          | ) |  | (0.2              | )%
|Commission expenses                                                 |   | (214,566          | ) |  | (0.2              | )%
|Selling expenses                                                    |   | (61,967           | ) |  | (0.1              | )%
|Bad debt recovery (expense)                                         |   | 987,374           |   |  | 0.9               | % 
|General and administrative expenses                                 |   | (7,390,963        | ) |  | (6.6              | )%
|Income from operations                                              |   | 26,410,889        |   |  | 23.9              | % 
|Miscellaneous income                                                |   | 23,899,865        |   |  | 21.6              | % 
|Interest expense and finance charges (net
      of interest income) |   | (325,969          | ) |  | (0.3              | )%
|Income before income taxes                                          |   | 49,984,785        |   |  | 45.2              | % 
|Income taxes                                                        |   | (15,042,327       | ) |  | (13.6             | ) 
|Net income                                                          |   | 34,942,458        |   |  | 31.6              | % 
|Foreign currency translation
      adjustment                       |   | 3,470,209         |   |  | 3.1               | % 
|Comprehensive income                                                | $ | 38,412,667        |   |  | 34.7              | % 

Sales. Our total sales increased 17.2% to $110.5
million in the fiscal year ended December 25, 2010 from $94.3 million in the
fiscal year ended December 25, 2009, primarily as a result of our sales of new
units in our Weihai International Plaza and Xingfu Renjia projects in the 2010
fiscal year. No revenue was recognized for these projects in 2009.

We apply the percentage of completion method of accounting for
revenue recognition of our development properties. See Critical Accounting
Policies  Revenue Recognition below for a detailed discussion of how we
recognize revenue under the percentage of completion method of accounting.

The following table sets forth the aggregate GFA and the
related revenues recognized by project (finished projects) for the fiscal years
ended December 25, 2010 and 2009:

|                            |  |         |  |  | GFA Delivered |  |  | Percentage of    |  |  |                                     |  |  |      |  |   |            |  |  |      | 
|--------------------------- |  | ------- |  |  | ------------- |  |  | ---------------- |  |  | ----------------------------------- |  |  | ---- |  | - | ---------- |  |  | ---- | 
|                            |  |         |  |  | for Twelve    |  |  | Total GFA        |  |  |                                     |  |  |      |  |   |            |  |  |      | 
|                            |  |         |  |  | Months Ended  |  |  | Delivered as of  |  |  | Revenues recognized
      for       | 
|                            |  | Total   |  |  | December 25,  |  |  | December 25, (2) |  |  | Twelve Months Ended December 25,(3) | 
|                            |  | GFA(1)  |  |  | 2010          |  |  | 2009             |  |  | 2010                                |  |  | 2009 |  |   | 2010       |  |  | 2009 | 
|                            |  | m2      |  |  | m2            |  |  | m2               |  |  | %                                   |  |  | %    |  |   | US$        |  |  | %    | 
|Fuxiang Huayuan 1           |  | 52,830  |  |  |              |  |  |                 |  |  |                                    |  |  |     |  |   | 101,999    |  |  | 0.1% | 
|Fuxiang Huayuan 2           |  | 18,392  |  |  |              |  |  | 18,392           |  |  |                                    |  |  | 100  |  |   |           |  |  |     | 
|Xingfu Renjia 1             |  | 85,551  |  |  |              |  |  | 85,551           |  |  |                                    |  |  | 100  |  |   | 11,605,811 |  |  | 11%  | 
|Oumei Complex 1             |  | 91,778  |  |  |              |  |  | 39,624           |  |  |                                    |  |  | 100  |  |   | 2,015,980  |  |  | 2%   | 
|Longhai Lidu1               |  | 51,451  |  |  |              |  |  |                 |  |  |                                    |  |  |     |  |   | 270,591    |  |  | 0.2% | 
|Longhai Lidu 2              |  | 79,308  |  |  | 65,491        |  |  | 13,817           |  |  | 100                                 |  |  | 17   |  |   | 6,261,968  |  |  | 6%   | 
|Qilu Textile Centre (comm.) |  | 139,510 |  |  | 2,204         |  |  | 6,735            |  |  | 100                                 |  |  | 99   |  |   | 2,827,457  |  |  | 3%   | 
|Total                       |  | 518,820 |  |  | 67,695        |  |  | 164,119          |  |  |                                     |  |  |      |  | $ | 23,083,806 |  |  |      | 

48

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(1) The amounts for total GFA in this table and the other
tables in this section are the amounts of total saleable GFA and are derived on
the following basis: (a) for properties that are sold, since total GFA of
buildings includes sellable GFA and unsellable GFA (such as common areas and
property management spaces, etc.), the total GFA is based on the sale contracts
relating to such property; (b) for unsold properties that are completed or under
construction, the total GFA is calculated based on the detailed construction
blueprint and the calculation method approved by the PRC government for saleable
GFA, after necessary adjustments; and (c) for properties that are under
planning, the total GFA is calculated based on the floor area ratio approved in
the land grant contract and our internal projections, subject to adjustments
upon completion of construction blueprints.

(2) Percentage of total GFA delivered is the total GFA
delivered as of a period end divided by the projects total GFA. This
calculation does not apply to projects in which 100% of GFA had been completed
and delivered prior to the current period.

(3) Percentage of all real estate sales revenues for the
financial period, including finished goods and work-in-process inventory.

The following table sets forth the percentage of completion,
the percentage sold and related revenues for our projects for the fiscal years
ended December 25, 2010 and 2009.

|                                  |  |         |  |  |               |  |  |                 |  |  | Percentage Sold                      |  |  |      |  |   |            |  |  |      |  |   |            | 
|--------------------------------- |  | ------- |  |  | ------------- |  |  | --------------- |  |  | ------------------------------------ |  |  | ---- |  | - | ---------- |  |  | ---- |  | - | ---------- | 
|                                  |  |         |  |  | Percentage of |  |  |                |  |  |                                      |  |  |      |  |   |            |  |  |      | 
|                                  |  |         |  |  | Completion    |  |  | Accumulated     |  |  |                                      |  |  |      |  |   |            |  |  |      | 
|                                  |  |         |  |  | as of         |  |  | as of           |  |  | Revenues recognized
      for        | 
|                                  |  | Total   |  |  | December 25,  |  |  | December 25,(1) |  |  | Twelve Months Ended December 25, (2) | 
|                                  |  | GFA     |  |  | 2010          |  |  | 2009            |  |  | 2010                                 |  |  | 2009 |  |   | 2010       |  |  | 2009 | 
|                                  |  | m2      |  |  | %             |  |  | %               |  |  | %                                    |  |  | %    |  |   | US$        |  |  | %    |  |   | US$        | 
|Qilu Textile Centre (Residential) |  | 67,942  |  |  | 98%           |  |  | 90%             |  |  | 90%                                  |  |  | 86%  |  |   | 2,024,932  |  |  | 2%   |  |   | 8,342,029  | 
|Weihai International Plaza        |  | 45,828  |  |  | 75%           |  |  |                |  |  | 27%                                  |  |  |     |  |   | 11,956,609 |  |  | 11%  |  |   |           | 
|Dongli Garden 1                   |  | 213,315 |  |  | 69%           |  |  | 48%             |  |  | 55%                                  |  |  | 17%  |  |   | 29,708,882 |  |  | 27%  |  |   | 16,142,992 | 
|Longhai Mingzhu                   |  | 51,902  |  |  | 97%           |  |  | 80%             |  |  | 74%                                  |  |  | 40%  |  |   | 31,856,112 |  |  | 29%  |  |   | 21,961,666 | 
|Oumei Complex 2                   |  | 70,587  |  |  | 68%           |  |  |                |  |  | 4%                                   |  |  |     |  |   | 1,361,844  |  |  | 1%   |  |   |           | 
|Xingfu Renjia 2                   |  | 58,768  |  |  | 95%           |  |  |                |  |  | 37%                                  |  |  |     |  |   | 7,672,692  |  |  | 7%   |  |   |           | 
|Total                             |  | 508,342 |  |  |               |  |  |                 |  |  |                                      |  |  |      |  | $ | 84,581,071 |  |  |      |  | $ | 46,446,687 | 

(1) Percentage sold is calculated by dividing contracted sales
value from property sales by total estimated sales value of the relevant
project, estimated as of the time of preparation of our interim financial
statements as of and for the applicable period.

(2) Percentage of all real estate sales revenues for the
financial period, including finished goods and work-in-process inventory.

The following table sets forth the square meters sold and
average selling price per square meter by each project on a consolidated basis
for the fiscal years ended December 25, 2010 and 2009.

|                                  |  | For Twelve Months Ended December 25, 2010 |  |  | For Twelve Months Ended December 25, 2009 | 
|--------------------------------- |  | ----------------------------------------- |  |  | ----------------------------------------- | 
|                                  |  |                                           |  |  |                                           | 
|                                  |  |                                           |  |  | Revenues                                  | 
|                                  |  |                                           |  |  | recognized                                | 
|                                  |  |                                           |  |  | from prior                                | 
|                                  |  | Contract                                  |  |  | contract                                  | 
|                                  |  | Sales(1)                                  |  |  | sales(2)                                  | 
|                                  |  | US$                                       |  |  | US$                                       | 
|Fuxiang Huayuan                   |  | 101,999                                   |  |  |                                          | 
|Fuxiang Huayuan                   |  |                                          |  |  |                                          | 
|Xingfu Renjia                     |  | 11,605,811                                |  |  |                                          | 
|Xingfu Renjia                     |  | 8,076,518                                 |  |  |                                          | 
|Longhai Lidu                      |  | 270,591                                   |  |  |                                          | 
|Longhai Lidu                      |  | 22,789,841                                |  |  | 16,527,873                                | 
|Qilu Textile Centre (Comm)        |  | 2,908,901                                 |  |  | 81,444                                    | 
|Qilu Textile Centre (Residential) |  | 2,717,852                                 |  |  | 573,737                                   | 
|Weihai International Plaza        |  | 15,942,145                                |  |  |                                          | 
|Dongli Garden                     |  | 29,708,882                                |  |  |                                          | 
|Longhai Mingzhu                   |  | 55,676,839                                |  |  | 22,150,422                                | 
|Oumei Complex                     |  | 2,082,483                                 |  |  |                                          | 
|Oumei Complex                     |  | 1,361,844                                 |  |  |                                          | 
|Sales of Inventory(7)             |  | 2,853,544                                 |  |  |                                          | 
|Total                             |  | 156,097,250                               |  |  | 39,333,476                                | 

49

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(1) Contract Sales are comprised of two sub-groups: (a)
contracts entered into prior to the current period that, as of the beginning of
the current period, still have unrecognized portions (these are the total
amounts, including previously recognized and unrecognized); and (b) brand new
contracts entered into in the current period.

(2) Revenues recognized from prior contract sales are
revenues recognized prior to the current period from prior contracts. In this
column, we demonstrate the portion within the above-listed sub-group (1) that
had previously been recognized as revenues prior to the current period. In other
words, the amount shown in this column is part of the amount in the above-listed
sub-group (1). We think this disclosure is relevant because it enables the
reader to focus on the potential revenues as of the beginning of the current
period, by eliminating previously recognized revenues from the total contract
sales stated in the first column.

(3) Revenues recognized in current period include the
revenues recognized in the current period, both from the un-recognized portion
of previous contracts and from new contracts signed in the current period.

(4) Remaining contract amounts to be recognized represents
the revenues that remain to be recognized as of the end of the current period,
ie., (4) = (1)  (2)  (3)

(5) Square meters sold are the total GFA of all
contract sales reflected in (1) above.

(6) Average selling price is defined as (1) divided by (5)
above.

(7) The sales of inventory are defined as the sale of unsold
properties from projects completed prior to the applicable period, in which a
very small number of units remained unsold at the beginning of the current
period and the Company had withdrawn active selling activity.

Cost of sales. Our total cost of sales increased
32.4% to $77.2 million in fiscal year 2010 from $58.3 million in fiscal year
2009, mainly due to the increase in sales and an increase of certain costs
described more fully under Gross profit and gross profit margin below.

Gross profit and gross profit margin. Our gross
profit decreased 7.5% to $33.3 million in fiscal year 2010 from $36.0 million in
fiscal year 2009. Gross profit as a percentage of total sales (gross margin) was
30.1% for fiscal year 2010 and 38.2% for fiscal year 2009. The decrease in the
gross profit margin was partially due to sales of new properties related to
villager relocation efforts for our Dongli Garden project, which contributed
approximately 26% of total sales in 2010 (compared with only 12% in 2009). The
project was a joint effort between us and local government agencies, and Phase I
of the project mainly involved relocating villagers previously residing on the
parcel designated for Phase II. Therefore, as part of the governments urban
modernization initiatives, the government strictly regulated the selling prices
of all Phase I units, which were on average considerably below would-be market
prices and in turn resulted in a lower profit margin. Meanwhile, we are required
by the government to offer pricing concessions to relocated former villagers
based on the sizes of parcels they previously resided on. In addition, in fiscal
year 2010, for the Longhai Mingzhu project, we booked an additional $2.1 million
in cost of sales to account for a portion of the difference between book value
and the fair market value of the assets when we acquired the entity that owned
the project, which significantly contributed to the decrease in the gross
profit margin. Another contributing factor is the fact that in fiscal year 2009
we sold a significantly higher amount of accessory spaces (storage and garages),
to which no construction cost was allocated, leading to a higher gross profit
margin in fiscal year 2009 than in 2010.

Advertising expenses. Advertising expenses
decreased 18.9% to $0.22 million in fiscal year 2010 from $0.27 million in
fiscal year 2009, mainly due to the fact that most of the existing projects were
completed by the end of 2009 and we reduced our advertising efforts in the 2010
fiscal year on existing projects.

Commission expenses. Commission paid to
independent sales agents amounted to $0.21 million in fiscal year 2010, as
compared to $0.08 million in fiscal year 2009, an increase of 152.5%. In
addition to our salaried internal salespersons, we used temporary independent
sales agents to maximize our pre-sales in the first phase of sales for our Weihai International Plaza project in the 2010 fiscal year. We did not rely as
heavily on these temporary sales agents during fiscal year 2009.

Selling expenses. Our selling expenses increased
24.4% to $0.06 million in fiscal year 2010 from $0.05 million in fiscal year
2009, mainly due to selling expenses related to our Weihai International Plaza,
Longhai Mingzhu and Xingfu Renjia projects. Most of our projects are residential
projects. As commercial/office projects, our Weihai International Plaza and
Longhai Mingzhu projects naturally involved more selling and marketing efforts
and costs than a typical residential project, including rental and fit out of
the sales center, production of posters, brochures and other media
advertisement, and hiring and training of sales personnel.

Bad debt recovery (expense). Our bad debt
recovery in fiscal year 2010 was $0.99 million, compared to bad debt expense of
$0.20 million in fiscal year 2009, primarily due to the fact that management has
been putting more effort in receivables collection, particularly focusing on
those projects that previously had high receivable amounts such as Qilu Textile
Centre, Fuxiang Huayuan, and Longhai Lidu, during the past year, while
during 2009, we made a provision for doubtful accounts receivable in accordance
with our bad debt allowance policy.

50

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General and administrative expenses. General and
administrative expenses increased 58.8% to $7.4 million in fiscal year 2010 from
$4.7 million in fiscal year 2009, primarily due to expenses related to new
subsidiaries that we acquired since 2009, including Caoxian Industrial and
Longhai Real Estate, and expenses related to the April 14, 2010 reverse
acquisition and private placement transactions, as well as our public offering
registration.

Miscellaneous income. Included in miscellaneous
income for the fiscal year ended December 25, 2010 is the sale of land use
rights. On December 16, 2010, we executed a buyout transaction with the
government of Licang District, Qingdao, in which the government agreed to pay us
approximately $23.7 million in exchange for the pre-development land use right
in connection with our planned Dongli Garden 2 project. We had previously
planned to build residential units on the land, subject to the governments
re-zoning procedure. Prior to the transaction, the historical cost of the land
use right was zero due to the fact that it was categorized as state allocated
land, which had no value until zoned by the government for commercial
development. Therefore, no cost was incurred in connection with this
transaction, and the income of approximately $23.7 million was included in
miscellaneous income.

Interest expense and finance charges (net of interest
income). Interest expense decreased 62.4% to $0.3 million in fiscal year
2010 from $0.9 million in fiscal year 2009, primarily due to a decrease in the
average balance of our borrowings and an increase in the proportion of
capitalized interest among all interest paid as more projects went into the
construction phase. Please refer to Notes 12 and 13 to our consolidated
financial statements for detailed information on our short-term and long-term
borrowings.

Income taxes. Income taxes increased 66.1% to
$15.0 million in fiscal year 2010 from $9.1 million in the fiscal year 2009, due
to higher income before taxes.

Net income. Net income increased 65.2% to $34.9
million in fiscal year 2010 from $21.2 million in 2009, mainly due to the
increase in total sales and the sale of land use rights noted above.

Comparison of Fiscal Years Ended December 25, 2009 and
December 25, 2008

The following table shows key components of our results of
operations during the fiscal years ended December 25, 2009 and 2008, in both
dollars and as a percentage of our total sales.

|                                                   |   | Fiscal Year Ended |   |  | Fiscal Year Ended |   
|-------------------------------------------------- | - | ----------------- | - |  | ----------------- | --
|U.S. dollars, except percentages                   |   | December 25, 2009 |   |  | December 25, 2008 |   
|                                                   |   |                   |   |  | Percent of        |   
|                                                   |   | Dollars           |   |  | Total Sales       |   
|Sales                                              | $ | 91,041,042        |   |  | 96.5              | % 
|Sales to related party                             |   | 3,274,458         |   |  | 3.5               | % 
|Total sales                                        |   | 94,315,500        |   |  | 100.0             | % 
|Cost of sales                                      |   | (57,442,457       | ) |  | (60.9             | )%
|Cost of sales to related party                     |   | (853,951          | ) |  | (0.9              | )%
|Total cost of sales                                |   | (58,296,408       | ) |  | (61.8             | )%
|Gross profit                                       |   | 36,019,092        |   |  | 38.2              | % 
|Advertising expenses                               |   | (268,222          | ) |  | (0.3              | )%
|Commission expenses                                |   | (84,982           | ) |  | (0.1              | )%
|Selling expenses                                   |   | (49,800           | ) |  | (0.1              | )%
|Bad debt expense                                   |   | (207,523          | ) |  | (0.2              | )%
|General and administrative expenses                |   | (4,655,596        | ) |  | (4.9              | )%
|Income from operations                             |   | 30,752,969        |   |  | 32.6              | % 
|Miscellaneous income                               |   | 327,294           |   |  | 0.3               | % 
|Interest expense                                   |   | (866,751          | ) |  | (0.9              | )%
|Income before income taxes and extraordinary items |   | 30,213,512        |   |  | 32.0              | % 
|Income taxes                                       |   | (9,058,226        | ) |  | (9.6              | )%
|Income before extraordinary items                  |   | 21,155,286        |   |  | 22.4              | % 
|Extraordinary items, net                           |   |                  |   |  |                  |   
|Net income                                         |   | 21,155,286        |   |  | 22.4              | % 
|Foreign currency translation adjustment            |   | 474,414           |   |  | 0.5               | % 
|Comprehensive income                               | $ | 21,629,700        |   |  | 22.9              | % 

51

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Sales. Our total sales increased 22.4% to $94.3
million in the fiscal year ended December 25, 2009 from $77.0 million in the
fiscal year ended December 25, 2008, mainly due to sales by two project
development companies that we acquired during this period, the completion and
sales of the Xingfu Renjia project phase 1 and the Fuxiang Huayuan project phase
2, in addition to a higher average selling price per square meter for both
residential and commercial properties delivered in fiscal year 2009 compared
with fiscal year 2008.

Effective December 26, 2008, we adopted the percentage of
completion method of accounting for revenue recognition for all building
construction projects in progress in which the construction period was expected
to be more than 12 months at that date. The full accrual method was used before
that date for all of our residential and commercial projects. We changed to the
percentage of completion method for contracts longer than one year because this
method more accurately reflects how revenue is earned on these contracts,
particularly for interim reporting purposes. ASC 250 requires retrospective
application of a change in accounting principle unless impracticable. The change
to the percentage of completion method had no effect on our December 25, 2008
financial statements. See  Critical Accounting Policies  Revenue Recognition
below for a detailed discussion of how we recognize revenue under the percentage
of completion method of accounting.

The following table sets forth the aggregate GFA and the
related revenues recognized by project (finished projects) for the fiscal years
ended December 25, 2009 and 2008:

|                  |  |         |  |  | GFA Delivered |  |  | Percentage of   |  |  |                                     |  |  |      |  |   |            |  |  |      | 
|----------------- |  | ------- |  |  | ------------- |  |  | --------------- |  |  | ----------------------------------- |  |  | ---- |  | - | ---------- |  |  | ---- | 
|                  |  |         |  |  | for Twelve    |  |  | Total GFA       |  |  |                                     |  |  |      |  |   |            |  |  |      | 
|                  |  |         |  |  | Months Ended  |  |  | Delivered as of |  |  | Revenues recognized
      for       | 
|                  |  | Total   |  |  | December 25,  |  |  | December 25,(2) |  |  | Twelve Months Ended December 25,(3) | 
|                  |  | GFA(1)  |  |  | 2009          |  |  | 2008            |  |  | 2009                                |  |  | 2008 |  |   | 2009       |  |  | 2008 | 
|                  |  | m2      |  |  | m2            |  |  | m2              |  |  | %                                   |  |  | %    |  |   | US$        |  |  | %    | 
|Fuxiang Huayuan 1 |  | 52,830  |  |  |              |  |  | 52,830          |  |  |                                    |  |  | 100% |  |   |           |  |  |     | 
|Fuxiang Huayuan 2 |  | 18,392  |  |  | 18,392        |  |  |                |  |  | 100%                                |  |  |     |  |   | 5,530,847  |  |  | 6%   | 
|Xingfu Renjia 1   |  | 85,551  |  |  | 85,551        |  |  |                |  |  | 100%                                |  |  |     |  |   | 11,664,726 |  |  | 12%  | 
|Oumei Complex 1   |  | 91,778  |  |  | 39,624        |  |  | 52,154          |  |  | 100%                                |  |  | 57%  |  |   | 7,093,081  |  |  | 8%   | 
|Total             |  | 248,551 |  |  | 143,567       |  |  | 104,984         |  |  |                                     |  |  |      |  | $ | 24,288,654 |  |  |      | 

(1) The amounts for total GFA in this table and the other
tables in this section are the amounts of total saleable GFA and are derived on
the following basis: (a) for properties that are sold, since total GFA of
buildings includes sellable GFA and unsellable GFA (such as common areas and
property management spaces, etc.), the total GFA is based on the sale contracts
relating to such property; (b) for unsold properties that are completed or under
construction, the total GFA is calculated based on the detailed construction
blueprint and the calculation method approved by the PRC government for saleable
GFA, after necessary adjustments; and (c) for properties that are under
planning, the total GFA is calculated based on the floor area ratio approved in
the land grant contract and our internal projections, subject to adjustments
upon completion of construction blueprints.

(2) Percentage of total GFA delivered is the total GFA
delivered as of a period end divided by the projects total GFA. This
calculation does not apply to projects in which 100% of GFA had been completed
and delivered prior to the current period.

(3) Percentage of all real estate sales revenues for the
financial period, including finished goods and work-in-process inventory.

The following table sets forth the percentage of completion,
the percentage sold and related revenues for our projects for the fiscal years
ended December 25, 2009 and 2008.

|                                  |  |         |  |  |               |  |  |                 |  |  | Percentage Sold                     |  |  |      |  |   |            |  |  |      |  |   |            | 
|--------------------------------- |  | ------- |  |  | ------------- |  |  | --------------- |  |  | ----------------------------------- |  |  | ---- |  | - | ---------- |  |  | ---- |  | - | ---------- | 
|                                  |  |         |  |  | Percentage of |  |  |                |  |  |                                     |  |  |      |  |   |            |  |  |      | 
|                                  |  |         |  |  | Completion    |  |  | Accumulated     |  |  |                                     |  |  |      |  |   |            |  |  |      | 
|                                  |  |         |  |  | as of         |  |  | as of           |  |  | Revenues recognized
      for       | 
|                                  |  | Total   |  |  | December 25,  |  |  | December 25,(1) |  |  | Twelve Months Ended December 25,(2) | 
|                                  |  | GFA     |  |  | 2009          |  |  | 2008            |  |  | 2009                                |  |  | 2008 |  |   | 2009       |  |  | 2008 | 
|                                  |  | m2      |  |  | %             |  |  | %               |  |  | %                                   |  |  | %    |  |   | US$        |  |  | %    |  |   | US$        | 
|Longhai Lidu 1                    |  | 51,450  |  |  | 100%          |  |  | 100%            |  |  | 96%                                 |  |  | 95%  |  |   | 192,788    |  |  | 0.2% |  |   | 17,787,318 | 
|Longhai Lidu 2                    |  | 79,308  |  |  | 86%           |  |  | 67%             |  |  | 80%                                 |  |  |     |  |   | 20,508,323 |  |  | 22%  |  |   |           | 
|Qilu Textile Centre (Comm)        |  | 139,510 |  |  | 99%           |  |  | 98%             |  |  | 79%                                 |  |  | 78%  |  |   | 488,946    |  |  | 0.5% |  |   | 25,720,880 | 
|Qilu Textile Centre (Residential) |  | 67,942  |  |  | 90%           |  |  | 37%             |  |  | 79%                                 |  |  | 37%  |  |   | 8,342,029  |  |  | 9%   |  |   | 7,049,269  | 
|Weihai International Plaza        |  | 45,828  |  |  |              |  |  |                |  |  |                                    |  |  |     |  |   |           |  |  |     |  |   |           | 
|Dongli Garden 1                   |  | 213,315 |  |  | 48%           |  |  |                |  |  | 17%                                 |  |  |     |  |   | 16,142,992 |  |  | 17%  |  |   |           | 
|Longhai Mingzhu                   |  | 51,902  |  |  | 80%           |  |  |                |  |  | 40%                                 |  |  |     |  |   | 21,961,666 |  |  | 23%  |  |   |           | 
|Oumei Complex 2                   |  | 70,587  |  |  |              |  |  |                |  |  |                                    |  |  |     |  |   |           |  |  |     |  |   |           | 
|Total                             |  | 719,842 |  |  |               |  |  |                 |  |  |                                     |  |  |      |  | $ | 67,636,744 |  |  |      |  | $ | 50,557,467 | 

52

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(1) Percentage sold is calculated by dividing contracted sales
value from property sales by total estimated sales value of the relevant
project, estimated as of the time of preparation of our interim financial
statements as of and for the applicable period.

(2) Percentage of all real estate sales revenues for the
financial period, including finished goods and work-in-process inventory.

The following table sets forth the square meters sold and
average selling price per square meter by each project on a consolidated basis
for the fiscal years ended December 25, 2009 and 2008.

|                                  |  | For Twelve Months Ended December 25, 2009 |  |  | For Twelve Months Ended December 25, 2008 | 
|--------------------------------- |  | ----------------------------------------- |  |  | ----------------------------------------- | 
|                                  |  |                                           |  |  |                                           | 
|                                  |  |                                           |  |  | Revenues                                  | 
|                                  |  |                                           |  |  | recognized                                | 
|                                  |  |                                           |  |  | from prior                                | 
|                                  |  | Contract                                  |  |  | contract                                  | 
|                                  |  | Sales(1)                                  |  |  | sales(2)                                  | 
|                                  |  | US$                                       |  |  | US$                                       | 
|Fuxiang Huayuan 1                 |  |                                          |  |  |                                          | 
|Fuxiang Huayuan 2                 |  | 5,530,848                                 |  |  |                                          | 
|Xingfu Renjia 1                   |  | 11,664,726                                |  |  |                                          | 
|Oumei Complex 1                   |  | 7,093,081                                 |  |  |                                          | 
|Longhai Lidu 1                    |  | 192,788                                   |  |  |                                          | 
|Longhai Lidu 2                    |  | 23,917,534                                |  |  |                                          | 
|Qilu Textile Centre (Comm)        |  | 523,563                                   |  |  |                                          | 
| 108,373                         |  |                                          
|Qilu Textile Centre (Residential) |  | 8,585,811                                 |  |  |                                          | 
|Weihai International Plaza        |  |                                          |  |  |                                          | 
|Dongli Garden 1                   |  | 16,142,992                                |  |  |                                          | 
|Longhai Mingzhu                   |  | 27,452,082                                |  |  |                                          | 
|Oumei Complex 2                   |  |                                          |  |  |                                          | 
|Sales of Inventory(7)             |  | 2,390,102                                 |  |  |                                          | 
|Total                             |  | 103,493,527                               |  |  |                                          | 

(1) Contract Sales are comprised of two sub-groups: (a)
contracts entered into prior to the current period that, as of the beginning of
the current period, still have unrecognized portions (these are the total
amounts, including previously recognized and unrecognized); and (b) brand new
contracts entered into in the current period.

(2) Revenues recognized from prior contract sales are
revenues recognized prior to the current period from prior contracts. In this
column, we demonstrate the portion within the above-listed sub-group (1) that
had previously been recognized as revenues prior to the current period. In other
words, the amount shown in this column is part of the amount in the above-listed
sub-group (1). We think this disclosure is relevant because it enables the
reader to focus on the potential revenues as of the beginning of the current
period, by eliminating previously recognized revenues from the total contract
sales stated in the first column.

(3) Revenues recognized in current period include the
revenues recognized in the current period, both from the un-recognized portion
of previous contracts and from new contracts signed in the current period.

(4) Remaining contract amounts to be recognized represents
the revenues that remain to be recognized as of the end of the current period,
ie., (4) = (1)  (2)  (3)

(5) Square meters sold are the total GFA of all
contract sales reflected in (1) above.

(6) Average selling price is defined as (1) divided by (5)
above.

(7) The sales of inventory are defined as the sale of unsold
properties from projects completed prior to the applicable period, in which a
very small number of units remained unsold at the beginning of the current
period and the Company had withdrawn active selling activity.

53

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Cost of sales. Our total cost of sales increased
25.9% to $58.3 million in the fiscal year 2009 from $46.3 million in the fiscal
year 2008, mainly in support of the increase in sales, plus higher costs in
constructing high rise tower office buildings in fiscal year 2009, which are
more expensive to construct than the low rise buildings completed in fiscal year
2008.

Gross profit and gross profit margin. Our gross
profit increased 17.3% to $36.0 million in the fiscal year 2009 from $30.7
million in the fiscal year 2008. Gross profit as a percentage of total sales
(gross margin) was 38.2% for the fiscal year 2009 and 39.9% for the fiscal year
2008. The decline in the gross margin was primarily due to the Fuxiang Garden
Phase 2 and the Xingfu Renjia Phase 1 projects, both of which had lower than
average selling prices. Additionally, the costs of construction of high rise
office tower buildings in fiscal year 2009 are relatively higher than the
projects sold in fiscal year 2008.

Advertising expenses. Advertising expenses
increased 138.9% to $0.3 million in the fiscal year 2009 from $0.1 million in
the fiscal year 2008, mainly due to our increased advertising efforts to create
buyer awareness and interest in our newly available properties at our Qilu
Textile Center and Weihai Longhai International Plaza projects, as well as in
our Xingfu Renjia residential project.

Commission expenses. Commissions paid to
independent sales agents decreased 85.2% between fiscal year 2009 ($0.1 million)
and fiscal year 2008 ($0.6 million) since we used temporary independent sales
agents to maximize our pre-sales in the first phase of sales for residential and
commercial properties in 2008. In 2009, we did not rely as heavily on these
temporary sales agents.

Selling expenses. Our selling expenses decreased
38.8% to $0.05 million in the fiscal year 2009 from $0.08 million in the fiscal
year 2008, mainly due to the absence in 2009 of the sales and marketing
materials purchased for the intense selling effort in the first phase of
pre-sales for residential and commercial properties in 2008.

Bad debt expense. Our bad debt expense declined
82.7% in fiscal year 2009 ($0.2 million) from fiscal year 2008 ($1.2 million),
primarily due to the write back of an allowance against other receivables which
was recorded in 2008. This was partially offset by an additional provision for
doubtful accounts receivable made in accordance with the Companys bad debt
allowance policy.

General and administrative expenses. General and
administrative expenses increased 103.9% in fiscal year 2009 ($4.7 million) from
fiscal year 2008 ($2.3 million), primarily due to the increase in Land
Appreciation Tax and the expenses incurred in anticipation of the reverse
acquisition transaction with Leewell and related private placement.

Interest expense. Interest expense decreased
10.5% to $0.9 million in the fiscal year 2009 from $1.0 million in fiscal year
2008, primarily due to lower average borrowings in 2009.

Income taxes. Income taxes increased 37.2% to
$9.1 million in the fiscal year 2009 from $6.6 million in the fiscal year 2008,
mainly due to higher income before taxes.

Income before extraordinary items. Income before
extraordinary items was up 11.5% to $21.2 million in the fiscal year 2009
compared with $19.0 million in 2008, as a result of the factors described
above.

Extraordinary items, net. In fiscal year 2008, we
acquired four project companies (Qingdao Xudong, Weifang Longhai Industry,
Weifang Longhai Zhiye and Weifang Qilu) and recorded a gain of $12.5 million as
an extraordinary item, based on the differences between our purchase prices and
the estimated fair market values of the acquisitions.

Net income. Net income decreased 32.7% to $21.2
million in fiscal year 2009 from $31.5 million in 2008, primarily due the
absence in fiscal year 2009 of a gain from extraordinary items that occurred in
fiscal year 2008, and due to higher income taxes in 2009.

Inflation

Inflation and changing prices have not had a material effect on
our business, and we do not expect that inflation or changing prices will
materially affect our business in the foreseeable future. However, our
management will closely monitor price changes in the Chinese economy and the
real estate industry and continually maintain effective cost controls in
operations.

54

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Liquidity and Capital Resources

As of December 25 ,2010, we had cash and cash equivalents of
approximately $33.6million. The following table provides a summary of our net
cash flows from operating, investing, and financing activities. To date, we have
financed our operations primarily through net cash flow from operations,
augmented by cash proceeds from recent financing activities, short-term bank
borrowings and equity contributions by our shareholders.

|U.S. Dollars                                               |   | Fiscal Year Ended December 25, |  
|---------------------------------------------------------- | - | ------------------------------ | -
|                                                           |   | 2010                           |  
|Net cash provided by operating
      activities            | $ | 27,325,191                     |  
|Net cash provided by (used in) investing activities        |   | (136,156                       | )
|Net cash provided by (used in)
      financing activities  |   | 3,435,399                      |  
|Effects of exchange rate change in cash                    |   | 701,545                        |  
|Net increase (decrease) in cash and
      cash equivalents |   | 31,325,979                     |  
|Cash and cash equivalents at beginning of the period       |   | 2,264,438                      |  
|Cash and cash equivalents at end of
      the period       | $ | 33,590,417                     |  

Net cash flow from operating activities

In accordance with Accounting Standards Codification, or ASC,
230, Statement of Cash Flows, cash flows from our operations are
calculated based upon the local currencies. As a result, amounts related to
assets and liabilities reported on the statement of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheet.

Net cash provided by operating activities was $27.3 million in
fiscal year 2010, compared with $11.3 million in fiscal year 2009. Net income
after adjustment for noncash items was $49.9 million in fiscal year 2010. This
increase was augmented by a reduction in inventories of $37.6 million, an
increase in taxes incurred but not paid of $4.2 million, a reduction of $1.3
million of loans to a related party, an increase in accounts payable of $1.3
million, and an increase of $0.8 million in deposits received from customers.
This total increase of $95.1 million was offset by an increase in income
recognized but not billed of $15.0 million, an increase of $23.1 million of
other receivables, a decrease in other payables and other current liabilities of
$3.4 million, an increase of $1.4 million in prepaid expenses, a $24.4 million
income recognized but where no payment was received, and an increase of $0.3
million in restricted cash.

Net cash provided by operating activities was $11.3 million in
fiscal year 2009, compared with $61.0 million in fiscal year 2008. Net income
after adjustment for noncash items was $30.3 million in fiscal year 2009. This
increase was augmented by a reduction in inventories of $24.6 million, related
party receivables collected of $7.3 million, expenditures made in previous years
but expensed in fiscal year 2009 of $2.3 million, and an increase in taxes
incurred but not paid of $3.8 million. This total increase of $68.3 million was
offset by a decrease in deposits received from customers of $38.0 million,
income recognized of $10.7 million but either not billed or received in cash,
and payments for accounts payable of $9.3 million.

Net cash flow from investing activities

Net cash used in investing activities in fiscal year 2010 was
$0.1 million, compared with $0.2 million net cash provided by investing
activities in fiscal year 2009. The decrease in net cash provided by investing
activities was mainly due to more expenditures on purchasing fixed assets in
fiscal year 2010, compared with fiscal year 2009.

Net cash provided by investing activities in fiscal year 2009
was $0.2 million, compared with $58.5 million net cash used in investing
activities in fiscal year 2008. The increase was mainly due to the absence in
fiscal year 2009 of the purchase of four subsidiaries acquired in fiscal year
2008.

Net cash flow from financing activities

Net cash provided by financing activities in fiscal year 2010
was $3.4 million, compared with $9.9 million net cash used in financing
activities in fiscal year 2009. The increase in net cash provided by financing
activities was mainly from cash proceeds from the April 14, 2010 private
placement transaction, partially offset by repayments of short-term and
long-term borrowings.

55

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Net cash used in financing activities in fiscal year 2009 was
$9.9 million, compared with $3.8 net cash used in financing activities in fiscal
year 2008. The increase was mainly due to repayments of long-term borrowings in
fiscal year 2009, partly offset by proceeds received from long-term borrowings
in 2009.

Loan Commitments

As of December 25, 2010, the amount outstanding, maturity date
and term of each of our loans were as follows:

|Lender                                                    | Amount                                            | Interest Rate | Maturity Date     | Duration
|--------------------------------------------------------- | ------------------------------------------------- | ------------- | ----------------- | --------
|Rural Credit Cooperatives Fangzi Branch                   | RMB 9,000,000
      (approximately $1,356,300)    | 8.59%         | December 07, 2011 | 1 year  
|Employee Loan (China Agricultural Bank Laixi Branch)      | RMB 404,540 (approximately $60,964)               | 10.47%        | December 25, 2011 | 1 year  
|China Industry and Commercial Bank
      Chengyang Branch | RMB 195,000,000
      (approximately $29,386,500) | 7.15%         | November 25, 2011 | 3 years 
|China Construction Bank Weihai Branch                     | RMB 40,000,000 (approximately $6,028,000)         | 5.60%         | December 2, 2011  | 2 years 
|TOTAL                                                     | RMB 244,404,540
      (approximately $36,831,764) |               |                   |         

Capital Expenditures

Our capital expenditures were $58.5 million, $0.2 million and
$0.2 million in fiscal years 2008, 2009, and 2010, respectively. Our capital
expenditures in fiscal years 2008, 2009 and 2010 were mainly used for
acquisition of subsidiaries, building improvements, purchase of vehicles,
fixtures and furniture, and computer network equipment. The source of our
capital expenditures is primarily the cash flow generated from operating
activities.

As the majority of our outstanding loans are real estate
development loans, we believe that our operating cash provided by general sales
is sufficient to repay the portion of such loans that is due within the next 12
months. We also believe that our currently available working capital should be
adequate to sustain our operations at our current levels through at least the
next twelve months. We may, however, in the future require additional cash
resources due to changed business conditions, implementation of our strategy to
expand our business, or other investments or acquisitions we may decide to
pursue. If our own financial resources are insufficient to satisfy our capital
requirements, we may seek to sell additional equity or debt securities or obtain
additional credit facilities. The sale of additional equity securities could
result in dilution to our shareholders. The incurrence of indebtedness would
result in increased debt service obligations and could require us to agree to
operating and financial covenants that would restrict our operations. Financing
may not be available in amounts or on terms acceptable to us, if at all. Any
failure by us to raise additional funds on terms favorable to us, or at all,
could limit our ability to expand our business operations and could harm our
overall business prospects.

Research and Development, Patents and Licenses, Etc.

We have not engaged in any significant research and development
activities for the last three years.

Trend Information

Other than as disclosed elsewhere in this annual report, we are
not aware of any trends, uncertainties, demands, commitments or events that are
reasonably likely to have a material effect on our net sales, income from
continuing operations, profitability, liquidity or capital resources, or that
would cause reported financial information not necessarily to be indicative of
future operating results or financial condition.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, sales or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to an investment in our securities.

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Tabular Disclosure of Contractual Obligations

The table below shows our contractual obligations as of
December 25, 2010.

|U.S. Dollars                                      |   | Payments Due by Period | 
|------------------------------------------------- | - | ---------------------- | 
|                                                  |   |                        | 
|Contractual Obligations                           |   | Total                  | 
|Long-term and short-term debt obligations         | $ | 36,831,764             | 
|Interest expense obligations for outstanding debt |   | 2,383,753              | 
|Other obligations*                                |   | 452,100                | 
|                                                  |   |                        | 
|Total                                             | $ | 39,667,617             | 

__________________* Operating lease for company cafeteria.  See Note 22 to our
consolidated financial statements

Safe Harbor

See the section headed Forward-Looking Information.

ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

The following table sets forth certain information regarding
our directors and executive officers, as well as employees upon whose work we
are dependent, as of the date of this annual report.

|NAME               | AGE | POSITION                                                                
|------------------ | --- | ------------------------------------------------------------------------
|Antoine Cheng      | 56  | Chairman of the Board of
      Directors                                
|Weiqing Zhang      | 39  | Chief Executive Officer and Director                                    
|Zhaohui John Liang | 42  | Chief Financial Officer                                                 
|Yang Chen          | 40  | President                                                               
|Lawrence Lee       | 47  | Director                                                                
|Dr. Peter Linneman | 60  | Director                                                                
|Ruiping Tao        | 60  | Director                                                                
|Zhongbo Zhou       | 36  | Vice General Manager of Engineering
      Department of Oumei           
|Yalei Chen         | 35  | Vice General Manager of
      Development Strategies Department of Oumei

Mr. Antoine Cheng. Mr. Cheng has been the Chairman of
our board of directors since the closing of our reverse acquisition of Leewell
on April 14, 2010 and has served as the Chairman of Oumei since 2009. Since
September 22, 2009, Mr. Cheng has been the sole shareholder and director of
Longhai Holdings, our controlling shareholder, and since 2006 he has also been
sole shareholder and director of Longhai Group, a PRC infrastructure and
building construction company, and our related party. Longhai Holdings and
Longhai Group are under common control, but do not have any other relationship.
Prior to his retirement from governmental service in 2006, Mr. Cheng served as
Chief Director of the Industry and Commerce Department of the Qingdao (Pingdu
and Jimo) Municipal Government from 1998 to 2006 and as Vice Chief Director of
the Public Security Bureau of the Pingdu Municipal Government from 1992 to 1998.
Mr. Cheng received his Masters degree in economics from Shandong Public
Administration College in 2005.

Mr. Weiqing Zhang. Mr. Zhang has served as our Chief
Executive Officer since the closing of our reverse acquisition of Leewell on
April 14, 2010 and became a member of our board of directors on May 1, 2010. Mr.
Zhang also served as our President from the closing of our reverse acquisition
of Leewell on April 14, 2010 until June 22, 2010. Mr. Zhang has held the same
positions with Oumei since its formation in May 2001. Prior to joining Oumei, he
was responsible for properties development for Longhai Real Estate Development
Co., Ltd., between August 1994 and May 2001. With more than 15 years of
experience in real estate development, Mr. Zhang has successfully developed more
than two million square meters of GFA and has also served in strategic planning
and general administration functions. He graduated from Qingdao Construction
Engineering College in 1994 with a Bachelors degree in Business.

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Mr. Zhaohui John Liang. Mr. Zhaohui John Liang has
served as our Chief Financial Officer since June 22, 2010. He has over 15 years
of experience in real estate finance, investment and development. From June 2009
to June 2010, Mr. Liang was Senior Director of Real Estate at The Great Atlantic
& Pacific Tea Company, Inc. (NYSE: GAP), where he oversaw the real estate
portfolio of one of the largest U.S. retail chains with $9 billion in annual
sales, managed real estate-oriented corporate financing, accounting and
reporting, led major corporate divestures and acquisitions, and developed and
implemented the companys strategic real estate plan. Prior to that, he served
in key positions at Lerner Heidenberg Properties, Inc., a real estate investment
and development company, including Chief Financial Officer from January 2006 to
February 2009 and Director of Finance and Acquisitions from December 2004 to
January 2006. From May 2004 to December 2004, Mr. Liang was Senior Financial
Analyst & Asset Manager at General Growth Properties, Inc. (NYSE: GGP), a
public real estate investment trust. From May 2003 to September 2003, he served
as an Equity Analyst in the Real Estate Group of Friedman Billings Ramsey &
Co., an investment bank, and from January 1994 to April 2002, he was a
Development Project Manager at THSSW Architects, P.C., an architectural and
construction project management firm. Mr. Liang earned his Bachelor of
Architecture from the University of Arkansas, and his MBA with a dual major in
finance and real estate from the Wharton School at the University of
Pennsylvania. He is a member of a number of professional organizations including
the Chinese Finance Association, Zell/Lurie Real Estate Center of the Wharton
School, Urban Land Institute, the American Institute of Architects, and the
International Council of Shopping Centers. He is also a licensed architect.

Mr. Yang Chen. Mr. Chen has served as our President
since June 22, 2010 and previously served as our Chief Financial Officer and
Vice President from the closing of our reverse acquisition of Leewell on April
14, 2010 until June 22, 2010. He has also served as the Chief Financial Officer
of Oumei since January 2008. Mr. Chen has more than 17 years of experience in
accounting and financial management. Prior to joining Oumei, he served as chief
financial officer for several companies, including Mudanjiang Dongxing Group
Corporation, a retail-oriented diversified company (hotels, supermarkets,
villas, and electrical equipment) from 2004 to 2008 and Harbin Guangyun
Electrical Appliance Co., Ltd. prior to joining Mudanjiang Dongxing in 2004. Mr.
Chen graduated from Harbin Institute of Technology with a Bachelors degree in
industrial accounting in 1992.

Mr. Lawrence Lee. Mr. Lawrence Lee has been a member of
our board of directors since June 22, 2010. He is the founder and managing
director of the Boardroom Advisors Company Limited, a Beijing-based financial
advisory firm. He is currently also serving as a director of Universal Travel
Group (NYSE: UTA), an online travel service company operating in China. From
October 2007 to November 2009, Mr. Lee served as chief financial officer of
Synutra International, Inc. (NASDAQ: SYUT), a consumer product company operating
in China. From August 2004 to September 2007, Mr. Lee was a vice president and
chief financial officer of Kasen International Holdings Limited, a public
company listed on the Hong Kong Stock Exchange. Prior to that, Mr. Lee served as
chief financial officer at Eagle Brand Holdings Limited, a company listed on the
Singapore Stock Exchange. Mr. Lees experience also includes serving as a
financial controller at the Korean division of Exel Plc, a multinational supply
chain management firm, and serving as a senior auditor at Waste Management
Inc.s international department in London. Mr. Lee is a fellow member of the
Association of Chartered Certified Accountants (ACCA). Mr. Lee received a
bachelors degree in management and engineering from Beijing Institute of
Technology, a masters degree in economics from Renmin University of China, and
a masters degree in accounting and finance from the London School of
Economics.

Dr. Peter Linneman. Dr. Peter Linneman has been a member
of our board of directors since June 22, 2010. He is widely recognized as one of
the leading strategic thinkers in the real estate industry, and was cited as one
of the 25 most influential people in real estate by Realtor Magazine, and one of
the 100 most powerful people in NY real estate by the NY Observer. For 30 years
he has been the managing principal of Linneman Associates, providing strategic
and financial advice to leading corporations, and also serves as the Albert
Sussman Professor of Real Estate, Finance, and Public Policy at the Wharton
School of Business, the University of Pennsylvania. A member of Whartons
faculty since 1979, he served as the founding chairman of Whartons Real Estate
Department and was the Director of Whartons Zell-Lurie Real Estate Center for
13 years. He is the founding co-editor of The Wharton Real Estate Review. His
teaching and research focuses on real estate and investment strategies. He has
published over 80 articles during his career and is a highly sought-after
speaker, appearing as the keynote speaker at numerous major industry
conferences. He is also a co-coordinator/sponsor/moderator (with Sam Zell) of
the prestigious industry roundtable, The Marshall Bennett Classic. His quarterly
research publication, The Linneman Letter, is widely read throughout the real
estate industry and is viewed as a major thought leader in the business. His
book, Real Estate Finance and Investments: Risks and Opportunities, has
been adopted at over 50 leading universities and is the leading primary
reference source for those interested in real estate finance and investment. Dr.
Linneman holds both Masters and Doctorate degrees in economics from the
University of Chicago. He currently serves on the Board of Directors and executive, compensation and
governance committees of Equity One, Inc. (NYSE: EQY), an owner, developer and
operating of shopping centers, and on the Board of Directors and executive and
audit committees of JER Investors Trust Inc. (JERT), a commercial real estate
finance company.

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Mr. Ruiping Tao. Mr. Ruiping Tao has been a member of
our board of directors since June 22, 2010. He is regarded as one of the
pioneers in shaping the City of Qingdaos urban planning strategy, and widely
recognized in China as a leading expert in the field of urban planning,
development and public policy. He currently serves as the Chairman of the City
of Qingdao Urban Planning Association. As a life-long public servant, Mr. Tao
served as the Chief of Qingdao Urban Planning Bureau from February 2007 to March
2008, and as Vice Chief from April 2001 to February 2007. In April 2008, Mr. Tao
was appointed by the Government of Qingdao to head a special task force in
charge of developing a comprehensive urban development plan for Yongwan Bay,
which is the geographic and strategic focal point of the citys next 5-year
development strategy. Mr. Tao previously served as a Navy officer from December
1970 to April 2001. He officially retired from all governmental positions in
March 2010. Mr. Tao is frequently invited to speak at national and international
urban planning industry conferences, such as the International Society of City
and Regional Planners Convention, and provides advisory service to numerous
governmental and educational institutions in China. Mr. Tao received his
Bachelor of Electrical and Mechanical Engineering from the College of Naval
Engineering, and his EMBA from the Cheung Kong Graduate School of Business.

Mr. Zhongbo Zhou. Mr. Zhou has served as Oumeis Vice
General Manager of Engineering Department since 2007 and is responsible for
project and sales management. From the closing of our reverse acquisition of
Leewell on April 14, 2010 until June 22, 2010, he served as a member of our
board of directors. He joined Oumei in 2001 and served as its Vice General
Manager of Administration from 2005 to 2007. Mr. Zhou holds a Bachelors degree
in civil engineering from Qingdao Technical University.

Mr. Yalei Chen. Mr. Chen has served as Oumeis Vice
General Manager of Development Strategies Department since 2007 and is in charge
of its development strategies. He joined Oumei in 2001 as a technician and
assistant to General Manager. Prior to that, Mr. Chen worked as a technician in
Qingdao Pingdu Construction Group Company Factory and ZTE Corporation. He
graduated from China Agricultural University in 1997 with a college diploma.

No family relationship exists between any of our directors and
executive officers. There are no arrangements or understandings with major
shareholders, customers, suppliers or others pursuant to which any person
referred to above was selected as a director or member of senior management.

Compensation

In 2010, the aggregate cash compensation to our executive
officers was approximately $139,333 and the aggregate cash compensation to our
non-executive directors was approximately $29,334.

Employment Agreements

Except for our Chief Financial Officer, each of our executive
officers has entered into our standard employment agreement. Under these
agreements, each of our executive officers is employed for a specified time
period, but we may terminate his or her employment for cause, at any time,
without notice or remuneration, for certain acts, including but not limited to,
his or her conviction of crimes, his or her breach of material corporate policy
and his or her failure to perform his or her duties to our material detriment.
Furthermore, either we or an executive officer may terminate his or her
employment at any time without cause upon advance written notice to the other
party. Other than necessary social benefits required by the PRC government,
which are defined in the employment agreements, we currently do not provide
other benefits to these officers under our standard employment at this time.
These officers are not entitled to severance payments upon the termination of
their employment agreements or following a change in control.

On June 15, 2010, we entered into a separate employment
agreement with our Chief Financial Officer, Mr. Zhaohui John Liang. In addition
to his base salary specified in the agreement, we also agreed to provide Mr.
Liang and his direct family members with medical insurance and Mr. Liang is also
eligible to participate in any bonus, incentive and benefit plans established by
us. The term of the employment agreement is for two (2) years and may be
terminated by us for cause upon thirty (30) days notice and by either party
without cause upon sixty (60) days notice. Mr. Liang will also receive four
months salary, accrued benefits, and an opportunity to vest and exercise all
stock options if he resigns for good reason or is terminated without cause or
after a change in control (as such terms are defined in the employment
agreement).

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Equity Incentive Plan

On October 12, 2010, our board of directors, compensation
committee and shareholders adopted the China Oumei Real Estate Inc. 2010 Equity
Incentive Plan, the 2010 Plan, which became effective on November 4, 2010. The
2010 Plan permits the grant of incentive share options, nonstatutory share
options (i.e., options not intended to qualify as incentive share options),
restricted shares, share grants, restricted share units, share appreciation
rights, performance units and performance shares to employees, directors, and
consultants of the Company and its affiliates.

Up to 3,000,000 ordinary shares may be issued under the 2010
Plan; provided that the number and class of shares available under the 2010 Plan
are subject to adjustment in the event of certain reorganizations, mergers,
combinations, recapitalizations, share splits, share dividends, or other similar
events which change the number or kind of shares outstanding. Our board of
directors may at any time amend, alter, suspend or terminate the 2010 Plan,
provided that we will obtain shareholder approval of any amendment to the extent
necessary and desirable to comply with applicable laws. No amendment,
alteration, suspension or termination of the 2010 Plan will impair the rights of
any participant, unless agreed to by the participant.

The 2010 Plan is administered by our compensation committee.
The compensation committee has the authority to determine the specific terms and
conditions of all awards granted under the 2010 Plan, including, without
limitation, the number of shares subject to each award, the price to be paid for
the shares and the applicable vesting criteria. The compensation committee, in
its sole discretion, may impose vesting schedules, limitations on
transferability and forfeiture conditions on any award granted under the 2010
Plan as it may deem advisable or appropriate, on the basis of such conditions,
including but not limited to, achievement of Company-wide, business unit, or
individual goals (including, but not limited to, continued status as a service
provider), or any other basis the compensation committee may determine in its
discretion. The compensation committee, in its discretion, may accelerate the
time at which any such restrictions will lapse or be removed. The compensation
committee may also provide for such complete or partial exceptions to an
employment or service restriction as it deems equitable.

The compensation committee may reprice or terminate options or
share appreciation rights at a lower purchase price per share than the original
grant without prior shareholder approval. The compensation committee may also
authorize the Company to issue new option or share appreciation right awards in
exchange for the surrender and cancellation of any or all outstanding awards,
subject to the consent of the holder whose rights would be impaired. In
addition, the compensation committee may at any time repurchase options with
payment in cash, shares or other consideration, based on such terms and
conditions as the compensation committee and the holder shall agree.

Following is a description of the types of awards that may be
issued under the 2010 Plan.

- Option Grants. An option is the right to purchase our
  ordinary shares at a future date at a specified price. Options granted under
  the 2010 Plan may be either incentive share options, within the meaning of
  section 422 of the Internal Revenue Code of 1986, as amended, or nonstatutory
  share options (i.e., options not intended to qualify as incentive share
  options). The compensation committee determines the terms of each option at
  the time of grant, including the number of shares covered by, the exercise
  price of, and the conditions and limitations applicable to the exercise of
  each option (including vesting criteria); provided that (i) the exercise price
  of an option may not be less than the fair market value of a share or the par
  value of a share on the grant date and the term may not exceed ten years, (ii)
  incentive share options may only be granted to employees of the Company and of
  any parent or subsidiary of the Company; (iii) if the optionee owns more than
  10% of the total combined voting power of all classes of our shares, the
  exercise price of an incentive share options may not be less than 110% of the
  fair market value of a share on the grant date and the option term may not
  exceed five years.
- Restricted Share Awards. The compensation committee may, in
  its discretion, award restricted shares and may determine the number of shares
  awarded and the terms and conditions (including vesting criteria) of, and the
  amount of payment to be made by the recipient for such restricted shares.
  During the period of restriction determined by the compensation committee,
  restricted shares shall be subject to vesting or forfeiture (including a right
  of the Company to repurchase restricted shares at less than the then fair
  market value per share) arising on the basis of such conditions as the
  compensation committee may determine in its sole discretion. Any such risk of
  forfeiture may be waived or terminated, or the period of restriction
  shortened, at any time by the compensation committee on such basis as it deems
  appropriate.

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- Share Grants. Share grants not subject to risk of forfeiture
  or restrictions on transferability are awarded solely in recognition of
  significant contributions to the success of the Company or its affiliates, in
  lieu of compensation otherwise already due and in such other limited
  circumstances as the compensation committee deems appropriate (provided that
  payment of not less than the par value per share shall be required). Share
  grants are made without forfeiture conditions of any kind.
- Restricted Share Units. A restricted share unit is the right
  to receive one share at the end of a specified period of time. The
  compensation committee may, in its discretion, award restricted share units in
  such number and upon such terms and conditions (including vesting criteria) as
  determined by the compensation committee. During the period of restriction,
  restricted share unites shall be subject to vesting or forfeiture arising on
  the basis of such conditions as the compensation committee may determine in
  its sole discretion. Any such risk of forfeiture may be waived or terminated,
  or the period of restriction shortened, at any time by the compensation
  committee on such basis as it deems appropriate.
- Share Appreciation Rights. A share appreciation right is the
  right to receive payment from the Company in an amount no greater than the
  excess of the fair market value of a share at the date the share appreciation
  right is exercised over a specified price fixed by the compensation committee,
  which shall not be less than the fair market value of a share on the date of
  grant. In the case of a share appreciation right which is granted in
  connection with an option, the specified price shall be the option exercise
  price. The compensation committee may award share appreciation rights in such
  number and upon such terms and conditions (including vesting criteria) as it
  may determine. At the discretion of the compensation committee, the payment
  upon exercise of a share appreciation right may be in cash, shares of
  equivalent value or some combination thereof.
- Performance Units and Performance Shares. Performance shares
  and performance units are awards that may vest in whole or in part upon
  attainment of performance goals or other vesting criteria as the compensation
  committee may determine. Each performance share will have an initial value
  equal to the fair market value of a share on the grant date. Each performance
  unit will have an initial value established by the compensation committee on
  or before the grant date. The compensation committee shall, at its discretion,
  determine the performance objectives or other vesting provisions which will
  determine the number or value of the performance units or shares granted.
  After the applicable performance period has ended, the holder of performance
  units or performance shares will be entitled to receive a payout of the number
  of performance units or performance shares earned by the holder over the
  performance period as determined by the extent to which performance objectives
  were achieved.

As of December 25, 2010, a total of 1,430,000 ordinary shares
remain available for issuance under the 2010 Plan.

Share Options

As of December 25, 2010, options to purchase a total of
1,550,000 of our ordinary shares have been granted under the 2010 Plan, all of
which remained outstanding. The following table summarizes, as of December 25,
2010, the outstanding options granted to our executive officers, directors and
to other individuals as a group under our 2010 Plan.

|                   |  | Ordinary   |  |   |             |  |  |               |  |  |                 | 
|------------------ |  | ---------- |  | - | ----------- |  |  | ------------- |  |  | --------------- | 
|                   |  | Shares     |  |   | Exercise    |  |  |               |  |  |                 | 
|                   |  | Underlying |  |   | Price       |  |  |               |  |  |                 | 
|Name               |  | Options    |  |   | (US$/Share) |  |  | Date of Grant |  |  | Expiration Date | 
|Weiqing Zhang      |  | 434,000    |  | $ | 5.00        |  |  | 11/04/2010    |  |  | 11/03/2020      | 
|Zhaohui John Liang |  | 372,000    |  | $ | 5.00        |  |  | 11/04/2010    |  |  | 11/03/2020      | 
|Yang Chen          |  | 434,000    |  | $ | 5.00        |  |  | 11/04/2010    |  |  | 11/03/2020      | 

Each option vests with respect to 50% of the shares underlying
the option on December 15, 2010, and thereafter with respect to 5% of such
shares on each successive one-month anniversary thereof, commencing with the
first such anniversary; provided, however, that the executive officer remains an
employee of the Company or any affiliate of the Company as of each vesting date.
Mr. Liangs option also vests in full if he is terminated without cause.

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Board Practices

Terms of Directors and Executive Officers

Our board of directors currently consists of five directors,
who were elected to serve until their successors are duly elected and qualified.
Directors may be elected by shareholders at any general meeting by a majority of
votes cast. Each director so elected holds office for the term, if any, as may
be specified in the resolution appointing him or until his earlier death,
resignation or removal. The directors may appoint one or more directors to fill
a vacancy on the board of directors. We do not have any contracts with our
directors providing for benefits upon termination of employment.

Our executive officers are appointed by our board of directors.
The executive officers shall hold office until their successors are duly elected
and qualified, but any officer elected or appointed by the directors may be
removed at any time, with or without cause, by a majority vote of the
directors.

Board Committees

Our board of directors is currently composed of five members:
Mr. Antoine Cheng, Mr. Weiqing Zhang, Mr. Lawrence Lee, Dr. Peter Linneman and
Mr. Ruiping Tao. Mr. Lawrence Lee, Dr. Peter Linneman and Mr. Ruiping Tao are
our independent directors within the meaning of applicable rules of the NASDAQ
Stock Market LLC. All board action requires the approval of a majority of the
directors in attendance at a meeting at which a quorum is present. We may
increase the size of our board of directors in the future but have not
determined the approximate time to take such action.

On June 22, 2010, our board of directors established three
Committees: the Audit Committee, the Compensation Committee, and the Governance
and Nominating Committee. Each of the Audit Committee, Compensation Committee
and Governance and Nominating Committee is comprised entirely of our independent
directors, Mr. Lawrence Lee, Dr. Peter Linneman and Mr. Ruiping Tao. From time
to time, our board of directors may establish other committees. The board of
directors has adopted a written charter for each of the committees which is
available on our website at www.chinaoumeirealestate.com.

Audit Committee

Our Audit Committee consists of our three independent
directors, Mr. Lee, Dr. Linneman and Mr. Tao. Mr. Lee serves as the Chair of the
Audit Committee. The Audit Committee oversees our accounting and financial
reporting processes and the audits of the financial statements of our Company.
The Audit Committee is responsible for, among other things:

- selecting our independent auditors and pre-approving all auditing and
  non-auditing services permitted to be performed by our independent auditors;
- reviewing with our independent auditors any audit problems or difficulties
  and managements response;
- reviewing and approving all proposed related-party transactions;
- discussing the annual audited financial statements with management and our
  independent auditors;
- reviewing major issues as to the adequacy of our internal controls and any
  special audit steps adopted in light of significant internal control
  deficiencies;
- annually reviewing and reassessing the adequacy of our Audit Committee
  charter;
- meeting separately and periodically with management and our internal and
  independent auditors;
- reporting regularly to the full board; and
- such other matters that are specifically delegated to our Audit Committee
  by our Board from time to time.

Compensation Committee

Our Compensation Committee consists of our three independent
directors, Mr. Lee, Dr. Linneman and Mr. Tao. Mr. Tao serves as the Chair of the
Compensation Committee. Our Compensation Committee assists our board of
directors in reviewing and approving the compensation structure of our executive
officers, including all forms of compensation to be provided to our executive
officers. Our Chief Executive Officer may not be present at any committee
meeting during which his compensation is deliberated. The Compensation Committee
is responsible for, among other things:

62

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- approving and overseeing the compensation package for our executive
  officers;
- reviewing and approving corporate goals and objectives relevant to the
  compensation of our Chief Executive Officer, evaluating the performance of our
  chief executive officer in light of those goals and objectives, and setting
  the compensation level of our chief executive officer based on this
  evaluation; and
- reviewing periodically and making recommendations to the board of
  directors regarding any long-term incentive compensation or equity plans,
  programs or similar arrangements, annual bonuses, employee pension and welfare
  benefit plans; and reviewing and making recommendations to the board of
  directors regarding succession plans for the chief executive officer and other
  senior officers.

Governance and Nominating Committee

Our Governance and Nominating Committee consists of our three
independent directors, Mr. Lee, Dr. Linneman and Mr. Tao. Dr. Linneman serves as
the Chair of the Governance and Nominating Committee. The Governance and
Nominating Committee assists our board of directors in identifying individuals
qualified to become our directors and in determining the composition of the
board and its committees. The Governance and Nominating Committee is responsible
for, among other things:

- identifying and recommending to the board nominees for election or
  re-election to the board, or for appointment to fill any vacancy;
- reviewing annually with the board the current composition of the board in
  light of the characteristics of independence, skills, experience and
  availability of service to us;
- reviewing periodically the compensation paid to non-employee directors for
  annual retainers and meeting fees, if any, and making recommendations to the
  board for any adjustments; and
- identifying and recommending to the board the directors to serve as
  members of the boards committees.

Employees

As of December 25, 2010, we had a total of 203 employees. The
following table shows the number of our employees by function.

|Function                          |  | Number of Employees
|--------------------------------- |  | -------------------
|Senior Management                 |  | 13                 
|Sales and Marketing               |  | 34                 
|Development Strategies Department |  | 12                 
|Engineering Department            |  | 45                 
|Quality Control                   |  | 10                 
|Human Resource & Administration   |  | 52                 
|Accounting                        |  | 37                 
|Total                             |  | 203                

Subdivided by educational achievement, 2% of our employees hold
advanced degrees, 21% have bachelors degrees, and 27% hold technical or
vocational training certificates.

To increase the knowledge and performance of our employees, we
have established an employee training and development program, which ranges from
recruiting to advanced training. Our employee incentive plans and programs
encourage and reward superior performance. In the next five years, three major
employee development plans will be implemented to attract more talented and
bilingual management staff and experienced sales people, to enhance employees
on-the-job training, and to establish company-wide, performance-oriented
incentive plans that may include stock awards or stock options.

We maintain a satisfactory working relationship with our
employees, and we have not experienced any significant labor disputes or any
difficulty in recruiting staff for our operations. None of our employees is
represented by a labor union.

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Our employees in China participate in a state pension plan
organized by Chinese municipal and provincial governments. We are required to
make monthly contributions to the plan for each employee at the rate of 23% of
his or her average assessable salary. In addition, we are required by Chinese
law to cover employees in China with various types of social insurance. We
believe that we are in material compliance with the relevant PRC laws.

Share Ownership

The following table sets forth information regarding beneficial
ownership of each class of our voting securities as of June 17, 2011 (i) by each
person who is known by us to beneficially own more than 5% of our voting
securities; (ii) by each of our officers and directors; and (iii) by all of our
officers and directors as a group. Unless otherwise specified, the address of
each of the persons set forth below is in care of the Company, Floor 28, Block
C, Longhai Mingzhu Building, No.182 Haier Road, Qingdao 266000, Peoples
Republic of China.

|                                                                                                         |  |                  |  |  | Shares Beneficially Owned(1) | 
|-------------------------------------------------------------------------------------------------------- |  | ---------------- |  |  | ---------------------------- | 
|                                                                                                         |  |                  |  |  | Ordinary Shares(2)           | 
|                                                                                                         |  |                  |  |  |                              | 
|Name and
      Address of Beneficial Owner                                                               |  | Office, If Any   |  |  | Shares                       | 
|Directors and Officers                                                                                   | 
|Antoine
      Cheng (5)                                                                                  |  | Chairman         |  |  | 27,143,000                   | 
|Weiqing Zhang (6)                                                                                        |  | CEO and Director |  |  | 248,700                      | 
|Zhaohui
      John Liang (7)                                                                             |  | CFO              |  |  | 204,600                      | 
|Yang Chen (8)                                                                                            |  | President        |  |  | 248,700                      | 
|Lawrence
      Lee                                                                                       |  | Director         |  |  | 0                            | 
|Dr. Peter Linneman (9)                                                                                   |  | Director         |  |  | 10,000                       | 
|Ruiping Tao                                                                                              |  | Director         |  |  | 0                            | 
|All officers and directors as a group (7 persons named above)                                            |  |                  |  |  | 27,855,000                   | 
|5% Security Holders                                                                                      | 
|Longhai Holdings Company Limited (5)                                                                     |  |                  |  |  | 27,143,000                   | 
|Jayhawk Private
      Equity Fund II, L.P. (10) 930 Tahoe Blvd., 802-281 Incline
      Village, NV 89451 |  |                  |  |  | 375,000                      | 
|Access America Fund, LP (11)11200 Westheimer
      Rd., Suite 508 Houston, TX 77042                      |  |                  |  |  | 404,164                      | 
|Hua-Mei 21st
      Century Partners, LP (12)237 Park Avenue, 9th Floor
      New York, NY 10017          |  |                  |  |  | 446,500                      | 
|Guerrilla Partners, LP (13)237 Park Avenue, 9th
      Floor New York, NY 10017                           |  |                  |  |  | 258,500                      | 
|Taylor
      International Fund, Ltd. (14)714 S. Dearborn Street, 2nd
      Floor Chicago, IL 60605      |  |                  |  |  | 404,164                      | 

* Less than 1%

|(1) | Beneficial Ownership is determined in accordance with the
      rules of the SEC and generally includes voting or investment power with
      respect to securities. Each of the beneficial owners listed above has
      direct ownership of and sole voting power and investment power with
      respect to our ordinary shares. For each beneficial owner above, any
      options exercisable within 60 days have been included in the
      denominator.                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | Based on 31,020,062 ordinary shares issued and
      outstanding as of June 17, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) | Based on 2,774,700 Preference Shares issued and
      outstanding as of June 17, 2011. Each Preference Share is convertible into
      one (1) ordinary share (subject to customary adjustments for stock splits,
      combinations, or equity dividends on ordinary shares). Holders of
      Preference Shares vote with the holders of ordinary shares on all matters
      on an as converted basis. See Item 10, Additional
      InformationMemorandum and Articles of AssociationRights and Obligations
      of Shareholders below for more information regarding our Preference Shares.

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|(4)  | Percentage of Total Voting Power represents total
      ownership with respect to all shares of our ordinary shares and Preference
      Shares, as a single class and on an as converted basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(5)  | Includes 27,143,000 ordinary shares held by Longhai
      Holdings. Mr. Antoine Cheng is the sole shareholder and director of
      Longhai Holdings and has voting and dispositive control over the
      securities held by it. Pursuant to a lock-up agreement, all of the
      ordinary shares held by Longhai Holdings are subject to an eighteen-month
      lock-up period following the closing of the private placement on April 14,
      2010. In addition, pursuant to the Make Good Escrow Agreement, Longhai
      Holdings deposited 7,500,000 ordinary shares held by it into an escrow
      account for the benefit of the investors in the event that we fail to meet
      certain financial performance thresholds.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(6)  | Includes 238,700 ordinary shares underlying an option to
      purchase our ordinary shares that may vest within 60 days. On November 4,
      2010, we granted to Mr. Zhang an option to purchase 434,000 ordinary
      shares for an exercise price of $5.00 per share. The option vests with
      respect to 50% of such shares on December 15, 2010, and thereafter with
      respect to 5% of such shares on each successive one-month anniversary
      thereof, commencing with the first such anniversary; provided, however,
      that Mr. Zhang remains an employee of the Company or any affiliate of the
      Company as of each vesting date; and provided further, that the option
      cannot begin vesting until the consummation of our public offering.
      However, upon the consummation of the public offering, the option will
      have an immediate vesting of all shares that would have otherwise vested
      at such time. Pursuant to a lock-up agreement, all of the ordinary shares
      held by Mr. Zhang are subject to an eighteen-month lock-up period
      following the closing of the private placement on April 14,
2010.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(7)  | Includes 204,600 ordinary shares underlying an option to
      purchase our ordinary shares that may vest within 60 days. On November 4,
      2010, we granted to Mr. Liang an option to purchase 372,000 ordinary
      shares for an exercise price of $5.00 per share. The option vests with
      respect to 50% of such shares on December 15, 2010, and thereafter with
      respect to 5% of such shares on each successive one-month anniversary
      thereof, commencing with the first such anniversary; provided, however,
      that Mr. Liang remains an employee of the Company or any affiliate of the
      Company as of each vesting date; and provided further, that the option
      cannot begin vesting until the consummation of our public offering.
      However, upon the consummation of the public offering, the option will
      have an immediate vesting of all shares that would have otherwise vested
      at such time. The option will vest in full if Mr. Liang is terminated
      without cause.                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(8)  | Includes 238,700 ordinary shares underlying an option to
      purchase our ordinary shares that may vest within 60 days. On November 4,
      2010, we granted to Mr. Chen an option to purchase 434,000 ordinary shares
      for an exercise price of $5.00 per share. The option vests with respect to
      50% of such shares on December 15, 2010, and thereafter with respect to 5%
      of such shares on each successive one-month anniversary thereof,
      commencing with the first such anniversary; provided, however, that Mr.
      Chen remains an employee of the Company or any affiliate of the Company as
      of each vesting date; and provided further, that the option cannot begin
      vesting until the consummation of our public offering. However, upon the
      consummation of the public offering, the option will have an immediate
      vesting of all shares that would have otherwise vested at such time.
      Pursuant to a lock-up agreement, all of the ordinary shares held by Mr.
      Chen are subject to an eighteen-month lock-up period following the closing
      of the private placement on April 14, 2010.   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(9)  | Includes 10,000 ordinary shares that may vest within 60
      days. On November 4, 2010, we granted 20,000 ordinary shares to Mr.
      Linneman. 50% of the shares vest on the date of grant and the remaining
      shares shall vest on the twelve-month anniversary of the date of grant;
      provided, that the shares cannot begin vesting until the consummation of
      our public offering. However, upon the consummation of the public
      offering, all shares that would have otherwise vested at such time will
      vest in full.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(10) | Includes 375,000 shares underlying a warrant to purchase
      our ordinary shares. Kent C. McCarthy has sole voting and dispositive
      power over securities held by Jayhawk Private Equity Fund II, L.P.
      Pursuant to a lock-up agreement, all of the shares held by Jayhawk Private
      Equity Fund II, L.P. are subject to a lock-up period beginning from the
      date of the lock-up agreement and continuing to and including 90 days
      after the date of the prospectus for our public offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(11) | Includes 187,500 shares underlying a warrant to purchase
      our ordinary shares. Christopher Efird is the Managing Partner of Access
      America Fund, LP and has voting and dispositive control over securities
      held by it. Pursuant to a lock-up agreement, all of the shares held by
      Access America Fund, LP are subject to a lock-up period beginning from the
      date of the lock-up agreement and continuing to and including 90 days
      after the date of the prospectus for our public offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(12) | Includes 237,500 shares underlying a warrant to purchase
      our ordinary shares. Peter Siris is the Managing Director of Hua-Mei 21st
      Century Partners, LP and has voting and dispositive control over
      securities held by it. Pursuant to a lock-up agreement, all of the shares
      held by Hua-Mei 21st Century Partners, LP are subject to a lock-up period
      beginning from the date of the lock-up agreement and continuing to and
      including 90 days after the date of the prospectus for our public
      offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(13) | Includes 137,500 shares underlying a warrant to purchase
      our ordinary shares. Peter Siris is the Managing Director of Guerrilla
      Partners, LP and has voting and dispositive control over securities held
      by it. Pursuant to a lock-up agreement, all of the shares held by
      Guerrilla Partners, LP are subject to a lock-up period beginning from the
      date of the lock-up agreement and continuing to and including 90 days
      after the date of the prospectus for our public offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(14) | Includes 187,500 shares underlying a warrant to purchase
      our ordinary shares. Robert J. Kirkland is the President of Taylor Asset
      Management, Inc., the general partner of Taylor International Fund, Ltd.,
      and has voting and dispositive control over securities held by it.
      Pursuant to a lock-up agreement, all of the shares held by Taylor
      International Fund, Ltd. are subject to a lock-up period beginning from
      the date of the lock-up agreement and continuing to and including 90 days
      after the date of the prospectus for our public offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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None of our major shareholders have different voting rights
from other shareholders. We are not aware of any arrangement that may, at a
subsequent date, result in a change of control of our company.

See Item 6, Directors, Senior Management and
EmployeesCompensationShare Options for the options granted to our directors,
officers and employees and a description of our 2010 Plan.

ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS

Major Shareholders

Please refer to Item 6, Directors, Senior Management and
EmployeesShare Ownership.

Related Party Transactions

As of December 25, 2010 and December 25, 2009, we had a total
of $1,159,577 and $2,949,102, respectively, due from Longhai Group and its
subsidiaries. Longhai Group is wholly-owned by Mr. Antoine Cheng, our Chairman.
These balances had no stated terms for repayment and were not interest bearing.
As of May 3, 2011, these loans have all been repaid. The Company has no
intention to extend similar loans to related parties in the future.

One of our major contractors for our construction services and
construction materials is Longhai Construction Ltd., a subsidiary of Longhai
Group. In the fiscal years ended December 25, 2010 and 2009, we made payments to
Lonhgai Construction Ltd. of approximately $14,170,029 and $13,784,000,
respectively.

For the fiscal years ended December 25, 2010, 2009 and 2008, we
received rent payments of approximately $384,436, $381,160 and $372,962,
respectively, from Longhai Group for a restaurant and banquet facility it leases
from us. The lease is renewable annually. The annual rent may be subject to
adjustments at the time of the renewal.

For the fiscal years ended December 25, 2010 and 2009, we sold
two floors of a project for office use to Longhai Construction Ltd., a
subsidiary of Longhai Group, recognizing revenues of approximately $702,000 and
$3,274,000, respectively. We did not make any related party sales in the fiscal
year 2008.

See also Item 6, Directors, Senior Management and
EmployeesCompensation.

Interests of Experts and Counsel

Not applicable.

ITEM 8.     FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

Financial Statements

We have appended consolidated financial statements filed as
part of this annual report. See Item 18, Financial Statements.

Legal Proceedings

We may be subject to legal proceedings, investigations and
claims incidental to the conduct of our business from time to time. We are
currently not party to any legal or arbitration proceedings, including those
relating to bankruptcy, receivership or similar proceedings and those involving
any third party, which may have, or have had in the recent past, significant
effects on our financial position or profitability.

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Dividend Policy

Any future decisions regarding dividends will be made by our
board of directors. We currently intend to retain and use any future earnings
for the development and expansion of our business and do not anticipate paying
any cash dividends on our ordinary shares in the foreseeable future. Our board
of directors has complete discretion on whether to pay dividends on our ordinary
shares. Even if our board of directors decides to pay dividends, the form,
frequency and amount will depend upon our future operations and earnings,
capital requirements and surplus, general financial condition, contractual
restrictions and other factors that the board of directors may deem relevant.

Significant Changes

No significant change has occurred since the date of our
consolidated financial statements filed as part of this annual report.

ITEM 9.     THE OFFER AND LISTING

Offer and Listing Details

There currently is no market for our ordinary shares. We have
applied to list our ordinary shares on the NASDAQ Global Market as soon as
practicable. However, we cannot assure you that we will be able to meet the
initial listing standards of the NASDAQ Global Market, or that we will be able
to maintain any such listing. If we determine that we will not be able to meet
the initial listing standards of the NASDAQ Global Market, we may apply to have
our ordinary shares listed on the NASDAQ Capital Market or another stock
exchange or for a quotation on an over-the-counter quotation service. If we
determine to apply for a quotation on an over-the-counter quotation service,
however, an investor may find it difficult to obtain accurate quotations as to
the market value of our ordinary shares and trading of our ordinary shares may
be extremely sporadic. For example, several days may pass before any shares may
be traded. A more active market for our ordinary shares may never develop. In
addition, if we failed to meet the criteria set forth in SEC regulations,
various requirements would be imposed by law on broker-dealers who sell our
securities to persons other than established customers and accredited investors.
Consequently, such regulations may deter broker-dealers from recommending or
selling our ordinary shares, which may further affect its liquidity and could
make it more difficult for us to raise additional capital.

Plan of Distribution

Not applicable.

Markets

See our disclosures above under Offer and Listing Details.

Selling Shareholders

Not applicable.

Dilution

Not applicable.

Expenses of the Issue

Not applicable.

ITEM 10.     ADDITIONAL INFORMATION

Share Capital

Not applicable.

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Memorandum and Articles of Association

The following are summaries of material terms and provisions of
our amended and restated memorandum and articles of association and the
Companies Law (2010 Revision) of the Cayman Islands, or the Companies Law,
insofar as they relate to the material terms of our ordinary shares. This
summary is not complete, and you should read our amended and restated memorandum
and articles of association, which has been filed as Exhibit 3.1 to our current
report on Form 8-K filed on August 6, 2010.

As used in this section, an ordinary resolution means a
written resolution passed by a simple majority of shareholders (calculated on an
as-if converted basis) or a resolution passed by a simple majority of
shareholders as, being entitled to do so, vote in person or by proxy at a
general meeting of shareholders. A special resolution means an unanimous
written resolution or a resolution passed by not less than two-thirds of
shareholders (calculated on an as-if converted basis) as, being entitled to do
so, vote in person or by proxy at a general meeting of shareholders of which
notice specifying the intention to propose the resolution as a special
resolution has been duly given.

Register

We were incorporated as an exempted company with limited
liability under the Companies Law on March 10, 2010 (Registrar of Companies
#164013). A Cayman Islands exempted company:

- is a company that conducts its business outside the Cayman Islands;
- is exempted from certain requirements of the Companies Law, including the
  filing of an annual return of its shareholders with the Registrar of
  Companies;
- is not required to open its register of shareholders for inspection; and
- may obtain an undertaking against the imposition of any future taxation
  (such undertakings are usually given for twenty years in the first instance).

We were originally incorporated under the name Dragon
Acquisition Corporation. On August 6, 2010, we changed our name to China Oumei
Real Estate Inc.

Objects and Purposes

Our amended and restated memorandum of association grants us
full power and capacity to carry out any object not prohibited by the Companies
Law or any other law of the Cayman Islands.

Directors

Our board of directors consists of a single class of directors
who will serve until they resign or are removed in accordance with our amended
and restated memorandum and articles of association. Directors are elected at a
general meeting each year by an ordinary resolution of shareholders. Our board
has the power at any time to appoint a person as a director either to fill a
casual vacancy or as an addition to the existing board. A director may be
removed from office, with or without cause, by an ordinary resolution of
shareholders.

Directors have the powers necessary for managing, and for
directing and supervising our business and affairs. Directors may engage in
transactions with us and vote on such transactions, provided the nature of the
interest is disclosed to the entire board of directors. With the prior or
subsequent approval by an ordinary resolution of shareholders, the directors
may, by a resolution of directors, fix the emoluments of directors with respect
to services to be rendered in any capacity to us. The directors may exercise all
the powers of the Company to borrow money and to mortgage or charge its
undertaking, property and uncalled capital or any part thereof and to issue
debentures, debenture stock, mortgages, bonds and other such securities whether
outright or as security for any debt, liability or obligation of the Company or
of any third party. There are no age limit requirements for our directors and
they are not required to hold shares in the Company.

Rights and Obligations of Shareholders

Our authorized share capital consists of 100,000,000 ordinary
shares, par value $0.002112 per share, and 20,000,000 preference shares, par
value $0.002112 per share. On April 14, 2010, our board of directors established
a series of our preference shares, designated as 6% Convertible Preference
Shares (which we refer to herein as the Preference Shares).

68

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With respect to rights upon liquidation, winding-up or
dissolution, the Preference Shares rank senior to our ordinary shares and any
other classes or series of stock of the Company not designated as ranking senior
to or pari passu with the Preference Shares. As of the date of this
annual report, there are 31,020,062 ordinary shares and 2,774,700 Preference
Shares issued and outstanding.

Dividends

The holders of our ordinary shares are entitled to such
dividends as may be declared or paid by our board of directors subject to our
amended and restated memorandum and articles of association and the Companies
Law. No dividend may be declared or paid unless our directors determine that
immediately after the payment, we will be able to satisfy our liabilities as
they become due in the ordinary course of business, and we have funds lawfully
available for such purpose.

Each Preference Share is entitled to receive cumulative
dividends at the annual rate of six percent (6%) accruing on a daily basis on
the purchase price of the Preference Share. Such dividends will be payable in
cash annually on January 1 beginning with the first such date after April 14,
2010. If the six percent (6%) dividend is not timely paid in full, any such
unpaid dividend amount will be increased by 6% per year, accruing on a daily
basis.

Voting Rights

The holders of our ordinary shares have identical rights, as
provided by our amended and restated memorandum and articles of association, and
are entitled to one vote per share.

The holders of our Preference Shares vote on an as converted
basis, together with the ordinary shares, as a single class, in connection with
any proposal submitted to our shareholders. Each Preference Share is optionally
convertible into one (1) fully paid and non-assessable ordinary share. We also
have the right to convert outstanding Preference Shares into ordinary shares if,
for a period of at least twenty (20) consecutive business days, (i) the volume
weighted average price of our ordinary shares equals or exceeds US$6.00, (ii)
average daily trading volume of our ordinary shares equals or exceeds 50,000
shares per day, and (iii) trading volume of our ordinary shares equals or
exceeds 30,000 shares on every business day during this period. The number of
ordinary shares into which each Preference Share may be converted into will be
proportionally adjusted in the event of any stock splits, combinations, or
equity dividends on ordinary shares. Upon certain reorganizations,
reclassifications, mergers, or consolidations, the holders of Preference Shares
may convert their shares into the securities or property that they would have
been entitled to upon the consummation of such transaction if the holder had
converted the Preference Shares immediately prior to such transaction.

Liquidation

On a return of capital on winding up or otherwise (other than
on conversion, redemption or purchase of shares), after payment in full of the
amounts required to be paid to creditors and holders of any issued and
outstanding preference shares, if any, all holders of ordinary shares are
entitled to receive the same amount per share with respect to any distribution
of assets to holders of ordinary shares.

In the event of the liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, the holders of the
Preference Shares then outstanding will be entitled to receive, out of the
assets of the Company available for distribution to its shareholders, an amount
equal to the amount credited as paid up on the Preference Shares plus accrued
but unpaid dividends, before any payment shall be made or any assets distributed
to the holders of the ordinary shares or any other class or series of stock
issued by the Company not designated as ranking senior to or pari passuwith the Preference Shares in respect of the right to participate in
distributions or payments upon a liquidation event.

Redemption

Our ordinary shares are not redeemable but, subject to the
provisions of the Companies Law, we may issue shares on terms that are subject
to redemption, at our option or at the option of the holders, on such terms and
in such manner as may be determined pursuant to our amended and restated
memorandum and articles of association.

Our Preference Shares are not redeemable.

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Changes Rights of Shareholders

All or any of the special rights attached to any class of
shares may, subject to the provisions of the Companies Law, be varied either
with the consent of the holders of two-thirds of the issued shares of that class
or with the sanction of a special resolution passed at a general meeting of the
holders of the shares of that class.

Meetings

General meetings of shareholders are expected to be held
annually and may be convened by the board of directors as it may consider
necessary or desirable or upon a request of one or more shareholders holding in
the aggregate not less than 331/3% of our voting share capital. If
the board of directors does not convene a requisitioned meeting within 60 days
of the deposit of the requisition notice, the requisitionists may themselves
convene the general meeting.

Notice shall be given of any general meeting at least ten (10)
days and not more than sixty (60) days in advance of the date of such general
meeting. Such notice shall state the date, time, place and purposes of the
general meeting to which it relates. The notice convening an annual general
meeting shall specify the meeting as such, and the notice convening a meeting to
pass a special resolution shall specify the intention to propose the resolution
as a special resolution. Notice of every general meeting shall be given to all
shareholders other than such as, under the provisions our amended and restated
articles of association or the terms of issue of the shares they hold, are not
entitled to receive such notice from the Company. The accidental omission to
give notice of a general meeting to, or the non-receipt of notice of a meeting
by, any person entitled to receive notice shall not invalidate the proceedings
of that meeting.

A quorum for a general meeting of shareholders is considered
present if there are one or more shareholders entitled to vote and present in
person or by proxy holding in aggregate more than 50% of our voting share
capital. If a quorum is not present within one hour after the time appointed for
the general meeting, the general meeting shall stand adjourned to the same day
in the next week at the same time and place. If at such adjourned general
meeting a quorum is not present within one hour from the time appointed for
holding the general meeting, the shareholder or shareholders present in person
or by proxy shall be a quorum and may transact the business for which the
general meeting was called.

An ordinary resolution to be passed by the shareholders
requires the affirmative vote of a simple majority of the votes attaching to our
shares cast in a general meeting, while a special resolution requires the
affirmative vote of no less than two-thirds of the votes cast attaching to our
shares. Pursuant to the Companies Law, special resolution is required for
important matters such as amending the amended and restated memorandum and
articles of association, a change of name and winding up. Holders of our shares
may affect certain changes by ordinary resolution, including electing and
removing directors.

A member may be represented at a meeting of members by a proxy
(who need not be a member) who may speak and vote on behalf of the member. A
written instrument giving the proxy such authority must be produced at the place
appointed for such purpose before the time for holding the meeting.

Limitations on Ownership of Securities

There are no limitations on the right of non-residents or
foreign persons to own our securities imposed by Cayman Islands law or by our
amended and restated memorandum and articles of association

Change in Control of Company

Some provisions of our amended and restated memorandum and
articles of association may discourage, delay or prevent a change in control of
our company or management that shareholders may consider favorable, including
provisions that authorize our board of directors to issue preference shares in
one or more series and to designate the price, rights, preferences, privileges
and restrictions of such preference shares without any further vote or action by
our shareholders.

Ownership Threshold

There are no provisions governing the ownership threshold above
which shareholder ownership must be disclosed imposed by Cayman Islands law or
by our amended and restated memorandum and articles of association.

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Changes in Capital

Subject to the provisions of the amended and restated
memorandum and articles of association and the Companies Law, our unissued
shares shall be at the disposal of the directors who may, without prejudice to
any rights previously conferred on the holders of any existing shares or class
or series of shares, offer, allot, grant options over or otherwise dispose of
the shares to such persons, at such times and upon such terms and conditions as
we may by resolution of directors determine.

Subject to the provisions of the Companies Law, we may by an
ordinary resolution of shareholders:

- increase the share capital by such sum as the resolution shall prescribe
  and with such rights, priorities and privileges annexed thereto;
- consolidate and divide all or any of our share capital into shares of
  larger amount than our existing shares;
- by subdivision of our existing shares or any of them divide the whole or
  any part of our share capital into shares of smaller amount than is fixed by
  our amended and restated memorandum of association or into shares without par
  value; and
- cancel any shares that at the date of the passing of the resolution have
  not been taken or agreed to be taken by any person.

Subject to the provisions of the Companies Law, we may also by
a special resolution of shareholders reduce our share capital and any capital
redemption reserve fund.

Differences in Corporate Law

The Companies Law is modeled after similar laws in the United
Kingdom but does not follow recent changes in United Kingdom laws. In addition,
the Companies Law differs from laws applicable to United States corporations and
their shareholders. Set forth below is a summary of the significant differences
between the provisions of the Companies Law applicable to us and the laws
applicable to companies incorporated in the United States.

Transactions with Interested Directors

Cayman Islands laws do not restrict transactions with
directors, requiring only that directors exercise a duty of care and owe a
fiduciary duty to the companies for which they serve. Under our memorandum and
articles of association, so long as a director discloses the nature of his
interest in any contract or arrangement which he is interested in, such a
director may vote in respect of any contract or proposed contract or arrangement
in which such director is interested and may be counted in the quorum at such
meeting.

Indemnification of Directors and Executive Officers and
Limitation of Liability

Cayman Islands law does not limit the extent to which a
companys memorandum and articles of association may provide for indemnification
of officers and directors, except to the extent any such provision may be held
by the Cayman Islands courts to be contrary to public policy, such as a
provision purporting to provide indemnification against civil fraud or the
consequences of committing a crime. Our amended and restated memorandum and
articles of association provide for indemnification of our directors and
officers to the fullest extent permitted by law against any expenses, including
attorneys fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by them in connection with any threatened, pending, or
completed action, suit or proceeding; provided, however, that no director or
officer is indemnified against any liability arising out of (a) any actual fraud
or dishonesty in the performance of such persons duty to us, or (b) such
persons conscious, intentional or willful breach of his or her obligation to
act honestly, lawfully and in good faith with a view to our best interests. This
standard of conduct is generally the same as permitted under the Delaware
General Corporation Law for a Delaware corporation.

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers or persons
controlling us under the foregoing provisions, we have been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable as a matter of United States
law.

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Directors' Fiduciary Duties

As a matter of Cayman Islands law, a director of a Cayman
Islands company is in the position of a fiduciary with respect to the company,
and therefore it is considered that he owes the following duties to the company:
(i) a duty to act bona fide in the best interests of the company, (ii) a duty
not to make a profit based on his position as director (unless the company
permits him or her to do so) and (iii) a duty not to put himself or herself in a
position where the interests of the company conflict with his or her personal
interest or his or her duty to a third party. The duty of a director not to put
himself or herself in a position of conflict may be modified by the company's
articles of association. Our articles of association permit our directors to
have such a conflict and to participate and vote in respect of any decision in
which they may have a conflict, provided their conflicting interests are
adequately disclosed. This does not modify the directors' duty to act in a way
they consider to be bona fide in the best interests of the Company.

A director of a Cayman Islands company owes to the company a
duty to act with skill and care. It was previously considered that a director
need not exhibit in the performance of his duties a greater degree of skill than
may reasonably be expected from a person of his knowledge and experience.
However, English and Commonwealth courts have moved towards a dual
objective/subjective standard with regard to the required skill and care, to the
effect that a director must exercise the skill and care of a reasonably diligent
person having both (a) the general knowledge, skill and experience that may
reasonably be expected of a person carrying out the same actions as our carried
out by that direction in relation to the company and (b) the general knowledge,
skill and experience that that particular director has. These authorities are
likely to be followed in the Cayman Islands.

Variation of Rights of Shares

Under the Delaware General Corporation Law, a corporation may
vary the rights of a class of shares with the approval of a majority of the
outstanding shares of such class, unless the certificate of incorporation
provides otherwise. Under Cayman Islands law and our amended and restated
memorandum and articles of association, if our share capital is divided into
more than one class of shares, we may vary the rights attached to any class only
with the written consent of two-thirds of the holders of the issued shares of
that class or with the solution of special resolution passed at general meeting
of the holders of shares of that class.

Shareholder Proposals

Under the Delaware General Corporation Law, a shareholder has
the right to put any proposal before the annual meeting of shareholders,
provided it complies with the notice provisions in the governing documents. A
special meeting may be called by the board of directors or any other person
authorized to do so in the governing documents, but shareholders may be
precluded from calling special meetings. Cayman Islands law and our amended and
restated articles of association allow our shareholders holding not less than
331/3% of our voting share capital to requisition a shareholder's
meeting. As an exempted Cayman Islands company, we are not obliged by law to
call shareholders annual general meetings.

Cumulative Voting

Under the Delaware General Corporation Law, cumulative voting
for elections of directors is not permitted unless the corporations certificate
of incorporation specifically provides for it. Cumulative voting potentially
facilitates the representation of minority shareholders on a board of directors
since it permits the minority shareholder to cast all the votes to which the
shareholder is entitled on a single director, which increases the shareholders
voting power with respect to electing such director. There are no prohibitions
in relation to cumulative voting under the laws of the Cayman Islands, but our
amended and restated memorandum and articles of association do not provide for
cumulative voting. As a result, our shareholders are not afforded any fewer
protections or rights on this issue than shareholders of a Delaware
corporation.

Removal of Directors

Under the Delaware General Corporation Law, a director of a
corporation with a classified board may be removed only for cause with the
approval of a majority of the outstanding shares entitled to vote, unless the
certificate of incorporation provides otherwise. Under our amended and restated
memorandum and articles of association, directors can be removed by an ordinary
resolution of shareholders.

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Transactions with Interested Shareholders

The Delaware General Corporation Law contains a business
combination statute applicable to Delaware public corporations whereby, unless
the corporation has specifically elected not to be governed by such statute by
amendment to its certificate of incorporation, it is prohibited from engaging in
certain business combinations with an interested shareholder for three years
following the date that such person becomes an interested shareholder. An
interested shareholder generally is a person or a group who or which owns or
owned 15% or more of the target's outstanding voting stock within the past three
years. This has the effect of limiting the ability of a potential acquirer to
make a two-tiered bid for the target in which all shareholders would not be
treated equally. The statute does not apply if, among other things, prior to the
date on which such shareholder becomes an interested shareholder, the board of
directors approves either the business combination or the transaction which
resulted in the person becoming an interested shareholder. This encourages any
potential acquirer of a Delaware public corporation to negotiate the terms of
any acquisition transaction with the target's board of directors.

Cayman Islands law has no comparable statute. As a result, we
cannot avail ourselves of the types of protections afforded by the Delaware
business combination statute. However, although Cayman Islands law does not
regulate transactions between a company and its significant shareholders, it
does provide that such transactions must be entered into bona fide in the best
interests of the company and not with the effect of constituting a fraud on the
minority shareholders.

Anti-takeover Provisions

Some provisions of our memorandum and articles of association
may discourage, delay or prevent a change in control of our company or
management that shareholders may consider favorable, including provisions that
authorize our board of directors to issue preference shares in one or more
series and to designate the price, rights, preferences, privileges and
restrictions of such preference shares without any further vote or action by our
shareholders.

However, under Cayman Islands law, our directors may only
exercise the rights and powers granted to them under our memorandum and articles
of association, as amended and restated from time to time, for what they believe
in good faith to be in the best interests of our company.

Dissolution; Winding Up

Under the Delaware General Corporation Law, unless the board of
directors approves the proposal to dissolve, dissolution must be approved by
shareholders holding 100% of the total voting power of the corporation. Only if
the dissolution is initiated by the board of directors may the dissolution be
approved by a simple majority of the corporation's outstanding shares. Delaware
law allows a Delaware corporation to include in its certificate of incorporation
a supermajority voting requirement in connection with dissolutions initiated by
the board. Under the Companies Law and our amended and restated memorandum and
articles of association, our Company may be dissolved, liquidated or wound up by
a special resolutions, or by an ordinary resolution on the basis that we are
unable to pay our debts as they fall due.

Amendment of Governing Documents

Under the Delaware General Corporation Law, a corporation's
governing documents may be amended with the approval of a majority of the
outstanding shares entitled to vote, unless the certificate of incorporation
provides otherwise. As permitted by Cayman Islands law, our memorandum and
articles of association may only be amended with a special resolution at a
meeting of shareholders.

Mergers and Similar Arrangements

In certain circumstances, the Cayman Islands Companies Law
allows for mergers or consolidations between two Cayman Islands companies or
between a Cayman Islands company and a company incorporated in another
jurisdiction (provided that it is permitted by the laws of that other
jurisdiction).

Where the merger or consolidation is between two Cayman Islands
companies, the directors of each company must approve a written plan of merger
or consolidation containing certain prescribed information. That plan of merger
or consolidation must then be authorized by either (a) a special resolution
(usually a majority of 66 2/3% in value) of the shareholders of each company
voting together as one class if the shares to be issued to each shareholder in
the consolidated or surviving company will have the same rights and economic
value as the shares held in the relevant constituent company or (b) a
shareholder resolution of each company passed by a majority in number
representing 75% in value of the shareholders voting together as one class. A shareholder has the right to
vote on a merger or consolidation regardless of whether the shares that he or
she holds otherwise give him or her voting rights. No shareholder resolution is
required for a merger between a parent company (i.e., a company that owns at
least 90% of the issued shares of each class in a subsidiary company) and its
subsidiary company. The consent of each holder of a fixed or floating security
interest of a constituent company must be obtained unless the court waives such
requirement. If the Cayman Islands Registrar of Companies is satisfied that the
requirements of the Companies Law (which includes certain other formalities)
have been complied with, the Registrar of Companies will register the plan of
merger or consolidation.

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Where the merger or consolidation involves a foreign
constituent company, and where the surviving company is a Cayman Islands
company, the procedure is similar, save that, with respect to the foreign
constituent company, the director of the surviving or consolidated company is
required to make a declaration to the effect that, having made due enquiry, he
or she is of the opinion that the requirements set out below have been met: (i)
that the merger or consolidation is permitted, or not prohibited, by the
constitutional documents of the foreign company and by the laws of the
jurisdiction in which the foreign company is incorporated, and that those laws,
and any requirements of those constitutional documents have been, or will be,
complied with; (ii) that no petition or other similar proceeding has been filed
and remains outstanding or order made or resolution adopted to wind up or
liquidate the foreign company in any jurisdictions; (iii) that no receiver,
trustee, administrator or other similar person has been appointed in any
jurisdiction and is acting in respect of the foreign company, its affairs or its
property or any part thereof; (iv) that no scheme, order, compromise or other
similar arrangement has been entered into or made in any jurisdiction whereby
the rights of creditors of the foreign company are, and continue to be,
suspended or restricted; (v) that the foreign company is able to pay its debts
as they fall due and that the merger or consolidation is bona fide and not
intended to defraud unsecured creditors of the foreign company; (vi) that in
respect of the transfer of any security interest granted by the foreign company
to the surviving or consolidated company (a) consent or approval to the transfer
has been obtained, released or waived; (b) the transfer is permitted by, and has
been approved in accordance with, the constitutional documents of the foreign
company; and (c) the laws of the jurisdiction of the foreign company with
respect to the transfer have been ,or will be, complied with; (vii) that the
foreign company will, upon the merger or consolidation becoming effective, cease
to be incorporated, registered or exist under the laws of the relevant foreign
jurisdiction; and (viii) that there is no other reason why it would be against
the public interest to permit the merger or consolidation.

Where the above procedures are adopted, the Companies Law
provides for a right of dissenting shareholders to receive a payment of the fair
value of their shares upon their dissenting to the merger or consolidation if
they follow a prescribed procedure. In essence, that procedure is as follows:
(a) the shareholder must give his or her written objection to the merger or
consolidation to the constituent company before the vote on the merger or
consolidation, including a statement that the shareholder proposes to demand
payment for his or her shares if the merger or consolidation is authorized by
the vote; (b) within 20 days following the date on which the merger or
consolidation is approved by the shareholders, the constituent company must give
written notice to each shareholder who made a written objection; (c) a
shareholder must, within 20 days following receipt of such notice from the
constituent company, give the constituent company a written notice of his or her
intention to dissent, including, among other details, a demand for payment of
the fair value of his or her shares; (d) within seven days following the date of
the expiration of the period set out in paragraph (b) above, or seven days
following the date on which the plan of merger or consolidation is filed,
whichever is later, the constituent company, the surviving company or the
consolidated company must make a written offer to each dissenting shareholder to
purchase his or her shares at a price that the company determines is the fair
value and, if the company and the shareholder agree the price within 30 days
following the date on which the offer was made, the company must pay the
shareholder such amount; and (e) if the company and the shareholder fail to
agree a price within such 30-day period, within 20 days following the date on
which such 30-day period expires, the company (and any dissenting shareholder)
must file a petition with the Cayman Islands Grand Court to determine the fair
value and such petition must be accompanied by a list of the names and addresses
of the dissenting shareholders with whom agreements as to the fair value of
their shares have not been reached by the company. At the hearing of that
petition, the court has the power to determine the fair value of the shares
together with a fair rate of interest, if any, to be paid by the company upon
the amount determined to be the fair value. Any dissenting shareholder whose
name appears on the list filed by the company may participate fully in all
proceedings until the determination of fair value is reached. These rights of a
dissenting shareholder may not be available in certain circumstances, for
example, to dissenters holding shares of any class in respect of which an open
market exists on a recognized stock exchange or recognized interdealer quotation
system at the relevant date or where the consideration for such shares to be
contributed are shares of any company listed on a national securities exchange
or shares of the surviving or consolidated company.

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Moreover, Cayman Islands law also has separate statutory
provisions that facilitate the reconstruction or amalgamation of companies and,
in certain circumstances, schemes of arrangement will generally be more suited
for complex mergers or other transactions involving widely-held companies, commonly
referred to in the Cayman Islands as a scheme of arrangement, which may be
tantamount to a merger. In the event that a merger was sought pursuant to a
scheme of arrangement (the procedures of which are more rigorous, and take
longer to complete, than the procedures typically required to consummate a
merger in the United States), the arrangement in question must be approved by a
majority in number of each class of shareholders and creditors with whom the
arrangement is to be made and who must in addition represent three-fourths in
value of each such class of shareholders or creditors, as the case may be, that
are present and voting either in person or by proxy at a meeting. The convening
of the meetings and, subsequently, the terms of the arrangement, must be
sanctioned by the Grand Court of the Cayman Islands.

While a dissenting shareholder would have the right to express
to the court the view that the transaction should not be approved, the court can
be expected to approve the arrangement if it satisfies itself that:

- we are not proposing to act illegally or beyond the scope of our corporate
  authority, and the statutory provisions as to majority vote have been complied
  with;
- the shareholders have been fully informed and were fairly represented at
  the meeting in question;
- the arrangement is such as a businessperson could reasonably approve; and
- the arrangement would not amount to a fraud on the minority.

If a scheme of arrangement or takeover offer (as described
below) is approved, any dissenting shareholder would have no rights comparable
to appraisal rights, which would otherwise ordinarily be available to dissenting
shareholders of United States corporations, providing rights to receive payment
in cash for the judicially determined value of the shares.

Further, transactions similar to a merger, reconstruction
and/or an amalgamation may, in some circumstances, be achieved through other
means to these statutory provisions, such as a share capital exchange, asset
acquisition or control, through contractual arrangements, of an operating
business.

Shareholders' Suits

Our Cayman Islands counsel is not aware of any reported class
action having been brought in a Cayman Islands court. Derivative actions have
been brought in the Cayman Islands courts, and the Cayman Islands courts have
confirmed their availability for such actions. In most cases, we will be the
proper plaintiff in any claim based on a breach of duty owed to us, and a claim
against (for example) our officers or directors usually may not be brought by a
shareholder. However, based on English authorities, which would in all
likelihood be of persuasive authority and be applied by a court in the Cayman
Islands, exceptions to the foregoing principle apply in circumstances in which:

- a company is acting, or proposing to act, illegally or beyond the scope of
  its authority;
- the act complained of, although not beyond the scope of the authority,
  could be effected if duly authorized by more than the number of votes which
  have actually been obtained; or
- those who control the company are perpetrating a fraud on the minority.

A shareholder may have a direct right of action against us
where the individual rights of that shareholder have been infringed or are about
to be infringed.

Material Contracts

We have not entered into any material contracts other than in
the ordinary course of business and other than those described in Item 4,
Information on the Company, Item 7, Major Shareholders and Related Party
Transactions, or Item 5, Operating and Financial Review and ProspectsTabular
Disclosure of Contractual Obligations, or filed (or incorporated by reference)
as exhibits to this annual report or otherwise described or referenced in this
annual report.

Exchange Controls

There are no material exchange controls restrictions on payment
of dividends, interest or other payments to the holders of our ordinary or on
the conduct of our operations in the Cayman Islands, where we were incorporated.
There are no material Cayman Islands laws that impose any material exchange
controls on us or that affect the payment of dividends, interest or other payments to nonresident holders of our ordinary or
preferred shares. Cayman Islands law and our amended and restated memorandum and
articles of association do not impose any material limitations on the right of
non-residents or foreign owners to hold or vote our ordinary.

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See Item 4, Information on the CompanyBusiness OverviewPRC
Government RegulationsForeign Currency Exchange for a description of PRC
regulations on foreign exchange.

Taxation

The following is a general summary of certain material
Cayman Islands, PRC and U.S. federal income tax considerations. The
discussion is not intended to be, nor should it be construed as, legal or
tax advice to any particular prospective shareholder. The discussion is
based on laws and relevant interpretations thereof in effect as of the
date hereof, all of which are subject to change or different
interpretations, possibly with retroactive effect.

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or
corporations based upon profits, income, gains or appreciation and there is no
taxation in the nature of inheritance tax or estate duty or withholding tax
applicable to us or to any holder of our ordinary shares. There are no other
taxes likely to be material to us levied by the Government of the Cayman Islands
except for stamp duties which may be applicable on instruments executed in, or
after execution brought within the jurisdiction of the Cayman Islands. No stamp
duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies except those which hold interests in land in the Cayman Islands. The
Cayman Islands is not party to any double tax treaties that are applicable to
any payments made to or by the Company. There are no exchange control
regulations or currency restrictions in the Cayman Islands.

Pursuant to Section 6 of the Tax Concessions Law (1999
Revision) of the Cayman Islands, we have obtained an undertaking from the
Governor-in-Council:

|(1) | that no law which is enacted in the Cayman Islands
      imposing any tax to be levied on profits or income or gains or
      appreciation shall apply to us or our operations; and
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                    
|(2) | that the aforesaid tax or any tax in the nature of estate
      duty or inheritance tax shall not be payable on our shares, debentures or
      other obligations.                 

The undertaking for us is for a period of twenty years from
April 2006.

PRC Taxation

In 2007, the PRC government promulgated the EIT Law and the
relevant implementation rules, which became effective on January 1, 2008. Under
the EIT Law and its implementation rules, all domestic and foreign investment
companies will be subject to a uniform enterprise income tax at the rate of 25%
and dividends from PRC subsidiaries to their non-PRC shareholders will be
subject to a withholding tax at a rate of 20%, which is further reduced to 10%
by the implementation rules, if the non-PRC shareholder is considered to be a
non-PRC tax resident enterprise without any establishment or place within China
or if the dividends payable has no connection with the non-PRC shareholders
establishment or place within China, unless any such non-PRC shareholders
jurisdiction of incorporation has a tax treaty with China that provides for a
different withholding arrangement.

Under the Arrangement between the Mainland and the Hong Kong
Special Administrative Region for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to Taxes on Income, or the Double
Taxation Arrangement, effective as of January 1, 2007, such dividend withholding
tax rate is reduced to 5% if a Hong Kong resident enterprise owns over 25% of
the PRC company distributing the dividends. As Leewell is a Hong Kong company
and owns 100% of Oumei, under the aforesaid arrangement, any dividends that
Oumei pays Leewell may be subject to a withholding tax at the rate of 5% if
Leewell is no considered to be a PRC resident enterprise as described below.
However, if Leewell is not considered to be the beneficial owner of such
dividends under the Notice Regarding Interpretation and Recognition of
Beneficial Owners under Tax Treaties promulgated by the State Administration of
Taxation on October 27, 2009, and not a PRC resident enterprise, such
dividends would be subject to the withholding tax rate of 10%. The withholding
tax rate of 5% or 10% applicable to Leewell will have a significant impact on
the amount of dividends to be received by the Company and ultimately by
shareholders.

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Pursuant to the EIT Law, enterprises established under the laws
of non-PRC jurisdictions, but whose de facto management body is located in the
PRC, should be treated as resident enterprises for PRC tax purposes. However, it
is currently uncertain whether we may be deemed a resident enterprise, or how to
interpret whether any income or gain is derived from sources within China. See
Item 3, Key informationRisk FactorsRisks Related to Doing Business in
ChinaUnder the Enterprise Income Tax Law, we may be classified as a resident
enterprise of China. Such classification will likely result in unfavorable tax
consequences to us and our non-PRC shareholders. If we, as a Cayman Islands
company with substantially all of our management located in China, were treated
as a resident enterprise for PRC tax purposes, we will be subject to PRC tax on
our worldwide income at the 25% uniform tax rate, which would have an impact on
our effective tax rate.

U.S. Federal Income Taxation

The following is a discussion of the material U.S. federal tax
consequences of the ownership of our ordinary shares by U.S. Holders (as
described below). It does not purport to be a comprehensive description of all
of the tax considerations that may be relevant to a particular persons
situation. The discussion applies to investors in shares that hold the shares as
capital assets for U.S. federal income tax purposes and it does not describe all
of the tax consequences that may be relevant to holders subject to special
rules, such as:

- certain financial institutions;
- insurance companies;
- dealers and traders in securities or foreign currencies;
- persons holding shares as part of a hedge, straddle, integrated
  transaction or similar transaction;
- persons whose functional currency for U.S. federal income tax purposes is
  not the U.S. dollar;
- partnerships or other entities classified as partnerships for U.S. federal
  income tax purposes;
- persons liable for the alternative minimum tax;
- tax-exempt organizations;
- persons holding shares that own or are deemed to own 10% or more of our
  voting stock;
- persons who hold the shares in connection with a trade or business outside
  the United States; or
- persons who acquired our shares pursuant to the exercise of any employee
  stock option or otherwise as compensation.

PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX
ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR
CIRCUMSTANCES AS WELL AS THE STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ORDINARY SHARES.

This discussion is based on the U.S. Internal Revenue Code of
1986, as amended, or the Code, administrative pronouncements, judicial decisions
and final, temporary and proposed Treasury regulations, all as of the date
hereof. These laws are subject to change, and can change on a retroactive basis.
U.S. Holder means a beneficial owner of shares that, for U.S. federal income
tax purposes, is: a citizen or resident of the United States; a corporation, or
other entity taxable as a corporation, created or organized in or under the laws
of the United States or any political subdivision thereof; or an estate or trust
the income of which is subject to U.S. federal income taxation, regardless of
its source. This discussion assumes that we are not, and will not become, a PFIC
for U.S. federal income tax purposes, as described below.

Taxation of Dividends

The gross amount of any distributions paid with respect to
shares, other than certain pro rata distributions of shares, generally will be
treated as foreign source dividend income for U.S. federal income tax purposes.
U.S. Holders will not be entitled to claim a dividends-received deduction with
respect to distributions paid by us. Dividends will be included in a U.S.
Holders income on the date of such U.S. Holders receipt of the dividend.

If you are a non-corporate U.S. Holder, subject to applicable
limitations, you may be eligible to be taxed at a maximum rate of 15% in respect
of dividends received in taxable years beginning before January 1, 2011. Please
consult your tax advisors to determine whether you are subject to any special
rules that limit your ability to be taxed at this favorable rate.

77

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In the event that we are deemed to be a Chinese resident
enterprise under PRC tax law, you may be subject to PRC withholding taxes on
dividends paid to you with respect to the ordinary shares. In addition, subject
to certain conditions and limitations, PRC withholding taxes on dividends not in
excess of the rate allowed under the income tax treaty between the United States
and the PRC, or the Treaty, if applicable, may be treated as foreign taxes
eligible for credit against your U.S. federal income tax liability. The rules
governing the foreign tax credit are complex. You are urged to consult your tax
advisors regarding the availability of the foreign tax credit in light of your
particular circumstances.

Taxation of Capital Gains

Upon sale or other disposition of the ordinary shares, a U.S.
Holder will generally recognize capital gain or loss for U.S. federal income tax
purposes in an amount equal to the difference between such holders tax basis in
the shares sold or disposed of and the amount realized on the sale or other
disposition. Such gain or loss will be long-term capital gain or loss if the
U.S. Holder has held the shares for more than one year and will generally be
U.S. source gain or loss for foreign tax credit purposes. However, if we are
deemed to be a Chinese resident enterprise under PRC tax law, gains on
disposal may be subject to PRC tax. In that event, a U.S. Holder may be eligible
for the benefits of the Treaty. Under the Treaty, if any PRC tax were to be
imposed on any gain from the disposition of the shares, the gain would be
treated as PRC source income. We urge you to consult your tax advisors regarding
the tax consequences if a foreign tax is imposed on gain on a disposition of our
shares, including the availability of the foreign tax credit in light of your
particular circumstances.

Passive Foreign Investment Company Rules (PFIC)

We believe that we were not a PFIC for United States federal
income tax purposes for our taxable year ended December 25, 2010. However, since
PFIC status depends upon the composition of a companys income and assets and
the market value of its assets (including goodwill) from time to time, there can
be no assurance that we will not be a PFIC for any taxable year.

In general, if we were a PFIC for any taxable year during which
a U.S. Holder held shares, gain recognized by such U.S. Holder on a sale or
other disposition (including certain pledges) of the shares would be allocated
ratably over the U.S. Holders holding period for the shares. The amounts
allocated to the taxable year of the sale or other disposition and to any year
before we became a PFIC would be taxed as ordinary income. The amount allocated
to each other taxable year would be subject to tax at the highest rate in effect
for individuals or corporations, as appropriate, for such taxable year, and an
interest charge would be imposed on the amount allocated to such taxable year.
Similar rules would apply to any distribution in respect of shares in excess of
125% of the average of the annual distributions on shares received by a U.S.
Holder during the preceding three years or such holders holding period,
whichever is shorter. Certain elections may be available that would result in
alternative treatments (such as a mark-to-market treatment) of the shares. U.S.
Holders should consult their tax advisers to determine whether such elections
are available and, if so, what the consequences of the alternative treatments
would be in those holders' particular circumstances.

Information Reporting and Backup Withholding

Payment of dividends and sales proceeds that are made within
the United States or through certain U.S.-related financial intermediaries
generally are subject to information reporting and to backup withholding unless
(i) the U.S. Holder is a corporation or other exempt recipient or (ii) in the
case of backup withholding, the U.S. Holder provides a correct taxpayer
identification number and certifies that backup withholding does not apply.

The amount of any backup withholding from a payment to a U.S.
Holder will be allowed as a credit against the U.S. Holders U.S. federal income
tax liability and may entitle the U.S. Holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.

Dividends and Paying Agents

Not applicable.

Statement by Expert

Not applicable.

78

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Documents on Display

We have filed this annual report on Form 20-F with the SEC
under the Exchange Act. Statements made in this annual report as to the contents
of any document referred to are not necessarily complete. With respect to each
such document filed as an exhibit to this annual report, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.

We are subject to the informational requirements of the
Exchange Act as a foreign private issuer and file reports and other information
with the SEC. Reports and other information filed by us with the SEC, including
this annual report on Form 20-F, may be inspected and copied at the public
reference room of the SEC at 100 F. Street, N.E., Washington D.C. 20549. You can
also obtain copies of this annual report on Form 20-F by mail from the Public
Reference Section of the SEC, 100 F. Street, N.E., Washington D.C. 20549, at
prescribed rates. Additionally, copies of this material may be obtained from the
SECs Internet site at http://www.sec.gov. The SECs telephone number is
1-800-SEC-0330.

As a foreign private issuer, we are exempt from the rules under
the Exchange Act prescribing the furnishing and content of quarterly reports and
proxy statements, and officers, directors and principal shareholders are exempt
from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act.

Subsidiary Information

Not applicable.

ITEM 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Interest Rate Risk

We are exposed to interest rate risk primarily with respect to
our short-term bank loans and long-term bank loans. Although the interest rates,
which are based on the banks prime rates with respect to our short-term loans,
are fixed for the terms of the loans, the terms are typically three to twelve
months for short-term bank loans and interest rates are subject to change upon
renewal. There were no material changes in interest rates for short-term bank
loans renewed during the fiscal year ended December 25, 2010.

A hypothetical 1.0% increase in the annual interest rates for
all of our credit facilities under which we had outstanding borrowings as of
December 25, 2010 would decrease net income before provision for income taxes by
approximately $368,318 for the fiscal year ended December 25, 2010. Management
monitors the banks prime rates in conjunction with our cash requirements to
determine the appropriate level of debt balances relative to other sources of
funds. We have not entered into any hedging transactions in an effort to reduce
our exposure to interest rate risk

Foreign Exchange Risk

While our reporting currency is the U.S. Dollar, all of our
consolidated sales and virtually all our consolidated costs and expenses are
denominated in RMB. All of our assets are denominated in RMB, except for a small
portion of cash, which is denominated in U.S. dollars. As a result, we are
exposed to foreign exchange risk as our sales and results of operations may be
affected by fluctuations in the exchange rate between U.S. Dollars and RMB. If
RMB depreciates against the U.S. Dollar, the value of our RMB sales, earnings
and assets as expressed in our U.S. Dollar financial statements will decline.
Assets and liabilities are translated at exchange rates at the balance sheet
dates and revenue and expenses are translated at the average exchange rates and
shareholders equity is translated at historical exchange rates. Any resulting
translation adjustments are not included in determining net income but are
included in determining other comprehensive income, a component of shareholders
equity. We have not entered into any hedging transactions in an effort to reduce
our exposure to foreign exchange risk.

The value of the RMB against the U.S. dollar and other
currencies is affected by, among other things, changes in Chinas political and
economic conditions. Since July 2005, the RMB has not been pegged to the U.S.
dollar. Although the Peoples Bank of China regularly intervenes in the foreign
exchange market to prevent significant short-term fluctuations in the exchange
rate, the RMB may appreciate or depreciate significantly in value against the
U.S. dollar or Euro in the medium to long term. Moreover, it is possible that in
the future, PRC authorities may lift restrictions on fluctuations in RMB
exchange rate and lessen intervention in the foreign exchange market.

79

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Inflation

Inflationary factors such as increases in the cost of our
product and overhead costs may adversely affect our operating results. Although
we do not believe that inflation has had a material effect on our financial
position or results of operations to date, a high rate of inflation in the
future may have an adverse effect on our ability to maintain current levels of
gross margin and selling, general and administrative expenses as a percentage of
net sales if the selling prices of our products do not increase with these
increased costs.

ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES

Debt Securities

Not applicable.

Warrants and Rights

Not applicable.

Other Securities

Not applicable.

American Depositary Shares

We do not have any American Depositary Shares.

PART II

ITEM 13.     DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES

None.

ITEM 14.     MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES
HOLDERS AND USE OF PROCEEDS

None.

ITEM 15.     CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) that are designed to ensure that
information that would be required to be disclosed in Exchange Act reports is
recorded, processed, summarized and reported within the time period specified in
the SECs rules and forms, and that such information is accumulated and
communicated to our management, including to our chief executive officer and
chief financial officer, as appropriate, to allow timely decisions regarding
required disclosure.

As required by Rule 13a-15 under the Exchange Act, our
management, including our chief executive officer and chief financial officer,
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of December 25, 2010. Based on that evaluation, our
chief executive officer and chief financial officer concluded that as of
December 25, 2010, our disclosure controls and procedures were effective.

Managements Annual Report on Internal Control Over
Financial Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. The Exchange Act defines internal control
over financial reporting as a process designed by, or under the supervision of,
our principal executive and principal financial officers and effected by our board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America and includes those policies and procedures that:

80

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- Pertain to the maintenance of records that in reasonable detail accurately
  and fairly reflect the transactions and dispositions of the assets of the
  Company;
- Provide reasonable assurance that transactions are recorded as necessary
  to permit preparation of financial statements in accordance with accounting
  principles generally accepted in the United States of America, and that our
  receipts and expenditures are being made only in accordance with
  authorizations of our management and directors; and
- Provide reasonable assurance regarding prevention or timely detection of
  unauthorized acquisition, use or disposition of our assets that could have a
  material effect on our financial statements.

All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control
over financial reporting as of December 25, 2010. In making this assessment,
management used the framework set forth in the report entitled Internal Control
- Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission, or COSO. The COSO framework summarizes each of the
components of a companys internal control system, including (i) the control
environment, (ii) risk assessment, (iii) control activities, (iv) information
and communication, and (v) monitoring. Based on our assessment we determined
that, as of December 25, 2010, our internal control over financial reporting was
effective according to those criteria.

During its evaluation of the effectiveness of internal control
over financial reporting as of December 25, 2010, management identified the
following significant deficiency:

There is a lack of sufficient staff with the appropriate level
of experience or knowledge of U.S. GAAP to be able to prepare U.S. GAAP
financial statements without outside consultants.

Management believes that this deficiency is related to our
relatively small scale of business operations. Management does not believe that
this deficiency had a material effect on our financial condition or results of
operations or caused our financial statements for the fiscal year ended December
25, 2010 to contain a material misstatement. We are in the process of
implementing certain initiatives to address this deficiency such as arranging
necessary training for our accounting department staff and recruiting qualified
personnel to bolster our internal audit functions. In addition, in January 2011
we engaged PricewaterhouseCoopers Consultants (Shenzhen) Limited to provide
advisory services in order to enhance our internal control practices and
procedures. We believe that the foregoing steps will remediate the significant
deficiency identified above, and we will continue to monitor the effectiveness
of these steps and make any changes that our management deems appropriate.

Attestation Report of the Registered Public Accounting
Firm

Because the Company is a non-accelerated filer, this annual
report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by our registered public
accounting firm.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over
financial reporting during the fourth quarter of fiscal year 2010 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

81

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ITEM 16A.     AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Mr. Lawrence Lee,
the Chair of our Audit Committee, is an audit committee financial expert. Mr.
Lee is an independent director as defined by the rules and regulations of the
NASDAQ Stock Market LLC and under Rule 10A-3 under the Exchange Act.

ITEM 16B.     CODE OF ETHICS

On June 22, 2010, our Audit Committee adopted a Code of Ethics
that applies to all of the directors, officers and employees of the Company and
its subsidiaries, including our principal executive officer, principal financial
officer and principal accounting officer. The Code of Ethics addresses, among
other things, honesty and ethical conduct, conflicts of interest, compliance
with laws, regulations and policies, including disclosure requirements under the
federal securities laws, confidentiality, trading on inside information, and
reporting of violations of the code. A copy of the Code of Ethics is filed as
Exhibit 14 to our current report on Form 8-K filed on June 23, 2010 and is also
available on our website at www.chinaoumeirealestate.com.

ITEM 16C.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees by categories
specified below in connection with services rendered by our principal external
auditors for the periods indicated. We did not pay any other fees to our
auditors during the periods indicated below.

|                   |   | Fiscal Year Ended December 25, | 
|------------------ | - | ------------------------------ | 
|                   |   | 2010                           | 
|Audit Fees         | $ | 156,344                        | 
|Audit-Related Fees |   | 30,000                         | 
|Tax Fees           |   | -                              | 
|All Other Fees     |   | -                              | 
|TOTAL              | $ | 186,344                        | 

Audit Fees consisted of the aggregate fees billed for
professional services rendered for the audit of our annual financial statements
or services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements.

Audit Related Fees consisted of the aggregate fees billed for
professional services rendered for assurance and related services that were
reasonably related to the performance of the audit or review of our regulatory
filings and were not otherwise included in Audit Fees.

Tax Fees consisted of the aggregate fees billed for
professional services rendered for tax compliance, tax advice and tax planning.
Included in such Tax Fees were fees for preparation of our tax returns and
consultancy and advice on other tax planning matters.

All Other Fees consisted of the aggregate fees billed for
products and services provided and not otherwise included in Audit Fees, Audit
Related Fees or Tax Fees.

Our Audit Committee pre-approves all auditing services and
permitted non-audit services to be performed for us by our independent auditor,
including the fees and terms thereof (subject to the de minimums exceptions for
non-audit services described in Section 10A(i)(l)(B) of the Exchange Act that
are approved by our Audit Committee prior to the completion of the audit).

ITEM 16D.     EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES

We have not asked for nor have we been granted an exemption
from the applicable listing standards for our Audit Committee.

ITEM 16E.     PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASERS

There were no purchases of our equity securities by us or by
any of our affiliates during the period covered by this annual

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report.

ITEM 16F.     CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT

None.

ITEM 16G.     CORPORATE GOVERNANCE

Rule 5615(a)(3) of the NASDAQ Listing Rules permits foreign
private issuers like us to follow home country practice with respect to
certain corporate governance matters. We have not elected to follow any home
country practice in lieu of any requirement of the NASDAQ Listing Rules.

We intend to satisfy our requirement under Rule 5250(d)(1) of
the NASDAQ Listing Rules to distribute to shareholders copies of our annual
report by posting our annual reports on Form 20-F on our company website at:
www.chinaoumeirealestate.com, providing a hard
copy of our annual report free of charge to shareholders upon request with a
reasonable period following such request, and including a prominent undertaking
to this effect. Simultaneous with such posting we will issue a press release
containing this and certain other information required by NASDAQ to distribute
annual reports to shareholders in this manner. Domestic company issuers listed
on NASDAQ may satisfy this requirement by furnishing a copy of their annual
report to shareholders in the manner provided by Rule 14a-16 under the Exchange
Act. As a foreign private issuer, we are not subject to the requirements of Rule
14a-16. We have determined that this requirement under the NASDAQ Listing Rules
would be most efficiently addressed in the manner described above.

PART III

ITEM 17.     FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to
Item 18.

ITEM 18.     FINANCIAL STATEMENTS

The full text of our audited consolidated financial statements
begins on page F-1 of this annual report.

ITEM 19.     EXHIBITS

|Exhibit
      No. |  | Description                                                                                                                                                                                                                                                                                                                      
|----------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1               |  | Amended and Restated Memorandum
      and Articles of Association of the Company [incorporated by reference to
      Exhibit 3.1 to the Companys Current Report on Form 8-K filed on August 6,
      2010]                                                                                                                      
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|2.1               |  | Form of Investor Warrant,
      issued April 14, 2010 [incorporated by reference to Exhibit 4.1 to the
      Companys Current Report on Form 8-K filed on April 19, 2010]                                                                                                                                                       
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.1               |  | Share Exchange Agreement, dated
      April 14, 2010, by and among the Company, Leewell Investment Group
      Limited, Longhai Holdings Company Limited and its shareholder
      [incorporated by reference to Exhibit 2.1 to the Companys Current Report
      on Form 8-K filed on April 19, 2010]                          
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.2               |  | Form of Subscription Agreement,
      dated April 14, 2010 [incorporated by reference to Exhibit 10.1 to the
      Companys Current Report on Form 8-K filed on April 19, 2010]                                                                                                                                                 
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.3               |  | Amendment No.1 to Subscription
      Agreement, dated October 11, 2010, by and among the Company and the
      subscribers identified therein [incorporated by reference to Exhibit 10.1
      to the Companys Current Report on Form 8-K filed on October 13, 2010]                                                            
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.4               |  | Make Good Escrow Agreement,
      dated April 14, 2010, by and among the Company, Longhai Holdings Company
      Limited, Access America Investments, LLC and Collateral Agents, LLC, as
      escrow agent [incorporated by reference to Exhibit 10.2 to the Companys
      Current Report on Form 8-K filed on April 19, 2010]
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.5               |  | Holdback Escrow Agreement,
      dated April 14, 2010, by and among the Company, Brean Murray, Carret &
      Co., LLC, Access America Investments, LLC and Collateral Agents, LLC, as
      escrow agent [incorporated by reference to Exhibit 10.3 to the Companys
      Current Report on Form 8-K filed on April 19, 2010]  

83

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|Exhibit
      No. |  | Description                                                                                                                                                                                                                                                                                                                                                            
|----------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.6               |  | Investor Relations Escrow
      Agreement, dated April 14, 2010, by and among the Company, Brean Murray,
      Carret & Co., LLC, Access America Investments, LLC and Collateral
      Agents, LLC, as escrow agent [incorporated by reference to Exhibit 10.4 to
      the Companys Current Report on Form 8-K filed on April 19, 2010]                              
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.7               |  | Lockup Agreement, dated April
      14, 2010, between the Company and Longhai Holdings Company Limited
      [incorporated by reference to Exhibit 10.5 to the Companys Amendment No .
      1 to Registration Statement on Form S-1/A filed on June 21, 2010]                                                                                                        
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.8               |  | Lockup Agreement, dated April
      14, 2010, between the Company and Antoine Cheng [incorporated by reference
      to Exhibit 10.6 to the Companys Amendment No . 1 to Registration
      Statement on Form S-1/A filed on June 21, 2010]                                                                                                                           
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.9               |  | Lockup Agreement, dated April
      14, 2010, between the Company and Weiqing Zhang [incorporated by reference
      to Exhibit 10.7 to the Companys Amendment No . 1 to Registration
      Statement on Form S-1/A filed on June 21, 2010]                                                                                                                           
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.10              |  | Lockup Agreement, dated April
      14, 2010, between the Company and Yang Chen [incorporated by reference to
      Exhibit 10.8 to the Companys Amendment No . 1 to Registration Statement
      on Form S-1/A filed on June 21, 2010]                                                                                                                               
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.11              |  | Lockup Agreement, dated April
      14, 2010, between the Company and Zhongbo Zhou [incorporated by reference
      to Exhibit 10.9 to the Companys Amendment No . 1 to Registration
      Statement on Form S-1/A filed on June 21, 2010]                                                                                                                            
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.12              |  | Form of Lockup Agreement
      [incorporated by reference to Exhibit 10.49 to the Companys Amendment No.
      8 to Registration Statement on Form S-1/A filed on March 22, 2011]                                                                                                                                                                                     
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.13              |  | Share Purchase Agreement, dated
      September 5, 2007, between Zhang Weiqing and Leewell Investment Group
      Limited (English Translation) [incorporated by reference to Exhibit 10.6
      to the Companys Current Report on Form 8-K filed on April 19, 2010]                                                                                                  
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.14              |  | Share Purchase Agreement, dated
      September 5, 2007, between Cheng Xiaoyan and Leewell Investment Group
      Limited (English Translation) [incorporated by reference to Exhibit 10.7
      to the Companys Current Report on Form 8-K filed on April 19, 2010]                                                                                                  
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.15              |  | Share Purchase Agreement, dated
      January 19, 2008, among Cheng Defeng, Wang Yingchun and Qingdao Oumei Real
      Estate Development Co., Ltd. (English Translation) [incorporated by
      reference to Exhibit 10.8 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                  
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.16              |  | Share Purchase Agreement, dated
      January 22, 2008, between Zhang Weiqing and Qingdao Oumei Real Estate
      Development Co., Ltd. (English Translation) [incorporated by reference to
      Exhibit 10.9 to the Companys Current Report on Form 8-K filed on April
      19, 2010]                                                                              
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.17              |  | Share Purchase Agreement, dated
      January 23, 2008, among Cheng Defeng, Miao Shuangji and Qingdao Oumei Real
      Estate Development Co., Ltd. (English Translation) [incorporated by
      reference to Exhibit 10.10 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                 
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.18              |  | Share Purchase Agreement, dated
      January 24, 2008, among Li Jie, Li Keyu, Liu Fangyu, Wang Meiling, Jiang
      Guo, Qingdao Longhai Investment Group and Qingdao Oumei Real Estate
      Development Co., Ltd. (English Translation) [incorporated by reference to
      Exhibit 10.11 to the Companys Current Report on Form 8-K filed on April
      19, 2010]
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.19              |  | Share Purchase Agreement, dated
      August 27, 2008, among Qingdao Longhai Investment Group, Qingdao Longhai
      Luqiao Co., Ltd, Gao Xuling and Qingdao Oumei Real Estate Development Co.,
      Ltd. (English Translation) [incorporated by reference to Exhibit 10.12 to
      the Companys Current Report on Form 8-K filed on April 19, 2010]                
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.20              |  | Share Purchase Agreement, dated
      August 28, 2008, between Qingdao Pingdu Xinyuan Real Estate Development
      Co., Ltd and Qingdao Oumei Real Estate Development Co., Ltd. (English
      Translation) [incorporated by reference to Exhibit 10.13 to the Companys
      Current Report on Form 8-K filed on April 19, 2010]                                    

84

---

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                          
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.21        |  | Share Purchase
      Agreement, dated August 29, 2008, among Qingdao Hexiang Fuzhuang Ltd,
      Qingdao Fuhai Fangzhi Ltd and Qingdao Oumei Real Estate Development Co.,
    Ltd. (English Translation) [incorporated by reference to Exhibit 10.4 to the
    Companys Current Report on Form 8-K filed on April 19, 2010]                                                         
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.22        |  | Share Purchase Agreement, dated
      June 25, 2009, among Qingdao Longhai Investment Group, Wang Hongde and
      Qingdao Oumei Real Estate Development Co., Ltd. (English Translation)
      [incorporated by reference to Exhibit 10.15 to the Companys Current
      Report on Form 8-K filed on April 19, 2010]                                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.23        |  | Share Purchase Agreement, dated
      September 25, 2009, among Wang Yingchun, Wang Jinghua and Qingdao Oumei
      Real Estate Development Co., Ltd. (English Translation) [incorporated by
      reference to Exhibit 10.16 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                             
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.24        |  | Construction Contact, dated
      April 11, 2009, between Weihai Economic & Technology Development Zone
      Longhai Properties Co., Ltd. and Shanghai Baogang Construction Engineering
      Corporation (English Translation) [incorporated by reference to Exhibit
      10.17 to the Companys Current Report on Form 8-K filed on April 19, 2010]                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.25        |  | Construction Contract, dated
      October 8, 2006, between Qingdao Xudong Real Estate Development Co., Ltd.
      and Qingdao Longhai Construction Group Co., Ltd. (English Translation)
      [incorporated by reference to Exhibit 10.18 to the Companys Current
      Report on Form 8-K filed on April 19, 2010]                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.26        |  | Construction Contract, dated
      July 26, 2006, between Weihai Economic & Technology Development Zone
      Longhai Properties Co., Ltd. and Qingdao Longhai Construction Group Co.,
      Ltd. (English Translation) [incorporated by reference to Exhibit 10.19 to
      the Companys Current Report on Form 8-K filed on April 19, 2010]                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.27        |  | Construction Contract, dated
      April 23, 2004, between Weifang Longhai Zhiye Co., Ltd. and Qingdao
      Zhongxin Construction Group Co., Ltd. (English Translation) [incorporated
      by reference to Exhibit 10.20 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.28        |  | Construction Supervision
      Contract, dated August 21, 2009, between Weihai Economic & Technology
      Development Zone Longhai Properties Co., Ltd. and Weihai Tianhen Project
      Consulting Management Co., Ltd. (English Translation) [incorporated by
      reference to Exhibit 10.21 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]         
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.29        |  | Loan Agreement, dated November
      30, 2009, between Weihai Economic & Technology Development Zone
      Longhai Properties Co., Ltd. and China Construction Bank, Weihai Branch
      (English Translation) [incorporated by reference to Exhibit 10.24 to the
      Companys Current Report on Form 8-K filed on April 19, 2010]                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.30        |  | Loan Agreement, dated November
      21, 2008, between Caoxian Industrial Properties Co., Ltd. and China
      Construction Bank, Caoxian Branch (English Translation) [incorporated by
      reference to Exhibit 10.25 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.31        |  | Loan Agreement, dated May 28,
      2007, between Qingdao Xudong Real Estate Development Co., Ltd. and
      Industrial and Commercial Bank of China, Qingdao Chengyang Branch (English
      Translation) [incorporated by reference to Exhibit 10.26 to the Companys
      Current Report on Form 8-K filed on April 19, 2010]                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.32        |  | Loan Term Extension Agreement,
      dated May 20, 2010, between Qingdao Xudong Real Estate Development Co.,
      Ltd. and Industrial and Commercial Bank of China, Qingdao Chengyang Branch
      (English Translation) [incorporated by reference to Exhibit 10.30 to the
      Companys Amendment No. 5 to Registration Statement on Form S-1/A filed on
      November 2, 2010]
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.33        |  | China Oumei Real Estate Inc.
      2010 Equity Incentive Plan [incorporated by reference to Exhibit 10.1 to
      the Companys Current Report on Form 8-K filed on October 15, 2010]                                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.34        |  | Form of Share Option Agreement
      relating to China Oumei Real Estate Inc. 2010 Equity Incentive Plan
      [incorporated by reference to Exhibit 10.2 to the Companys Current Report
      on Form 8-K filed on October 15, 2010]                                                                                                                                               

85

---

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                  
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.35        |  | Form of Restricted Share Award
      Agreement relating to China Oumei Real Estate Inc. 2010 Equity Incentive
      Plan [incorporated by reference to Exhibit 10.3 to the Companys Current
      Report on Form 8-K filed on October 15,
      2010]                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.36        |  | Employment Agreement, dated
      June 28, 2007, between Qingdao Oumei Real Estate Development Co., Ltd. and
      Weiqing Zhang (English Translation) [incorporated by reference to Exhibit
      10.28 to the Companys Current Report on Form 8-K filed on April 19, 2010]                                                
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.37        |  | Employment Agreement, dated
      June 15, 2010, between the Company and Zhaohui John Liang [incorporated by
      reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.38        |  | Employment Agreement, dated
      July 23, 2007, between Qingdao Oumei Real Estate Development Co., Ltd. and
      Yang Chen (English Translation) [incorporated by reference to Exhibit
      10.29 to the Companys Current Report on Form 8-K filed on April 19, 2010]                                                    
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.39        |  | Independent Director Agreement,
      dated June 22, 2010, between the Company and Lawrence Lee [incorporated by
      reference to Exhibit 10.2 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.40        |  | Independent Director Agreement,
      dated June 22, 2010, between the Company and Dr. Peter Linneman
      [incorporated by reference to Exhibit 10.3 to the Companys Current Report
      on Form 8-K filed on June 23, 2010]                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.41        |  | Independent Director Agreement,
      dated June 22, 2010, between the Company and Ruiping Tao [incorporated by
      reference to Exhibit 10.4 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.42        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Antoine Cheng [incorporated
      by reference to Exhibit 10.8 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.43        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Weiqing Zhang [incorporated
      by reference to Exhibit 10.9 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.44        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Zhaohui John Liang
      [incorporated by reference to Exhibit 10.11 to the Companys Current
      Report on Form 8-K filed on June 23, 2010]                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.45        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Yang Chen [incorporated by
      reference to Exhibit 10.10 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.46        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Lawrence Lee [incorporated by
      reference to Exhibit 10.5 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.47        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Dr. Peter Linneman
      [incorporated by reference to Exhibit 10.6 to the Companys Current Report
      on Form 8-K filed on June 23, 2010]                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.48        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Ruiping Tao [incorporated by
      reference to Exhibit 10.7 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.49        |  | Letter Agreement to Enter into
      Contractual Arrangements, dated January 21, 2011, among Leewell Investment
      Group Limited, Weiqing Zhang and Xiaoyan Chen [Incorporated by reference
      to Exhibit 10.50 to the Companys Amendment No. 9 to Registration
      Statement on Form S-1/A filed on April 15, 2010]
|            |  |                                                                                                                                                                                                                                                                                                                              
|8.1         |  | Subsidiaries of the Company
      [incorporated by reference to Exhibit 21 to the Companys Amendment No. 8
      to Registration Statement on Form S-1/A filed on March 22, 2011]                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                              
|11.1        |  | Code of Ethics, adopted June
      22, 2010 [incorporated by reference to Exhibit 14.1 to the Companys
      Current Report on Form 8-K filed on June 23, 2010]                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                                              
|12.1*       |  | Certifications of Chief
      Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)                                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                              
|12.2*       |  | Certifications of Chief
      Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)                                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                              
|13.1*       |  | Certifications of Chief
      Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                              
|13.2*       |  | Certifications of Chief
      Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002                                                                                                                                                                                                              

86

---

|Exhibit No. |  | Description                                                                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|15.1        |  | Audit Committee Charter,
      adopted June 22, 2010 [incorporated by reference to Exhibit 99.1 to the
      Companys Current Report on Form 8-K filed on June 23, 2010]                                                                                          
|            |  |                                                                                                                                                                                                                                                                    
|15.2        |  | Compensation Committee Charter,
      adopted June 22, 2010 [incorporated by reference to Exhibit 99.2 to the
      Companys Current Report on Form 8-K filed on June 23, 2010]                                                                                   
|            |  |                                                                                                                                                                                                                                                                    
|15.3        |  | Governance and Nominating
      Committee Charter, adopted June 22, 2010 [incorporated by reference to
      Exhibit 99.3 to the Companys Current Report on Form 8-K filed on June 23,
      2010]                                                                
|            |  |                                                                                                                                                                                                                                                                    
|15.4        |  | Nominee Agreement, adopted
      September 5, 2007, by and among Li Zhou, Weiqing Zhang and Xiaoyan Cheng
      [incorporated by reference to Exhibit 99.5 to the Companys Amendment No.
      3 to Registration Statement on Form S-1/A filed on August 27, 2010]
|            |  |                                                                                                                                                                                                                                                                    
|15.5        |  | Cayman Islands Government
      Undertaking as to Tax Concessions, dated April 4, 2006 [incorporated by
      reference to Exhibit 99.1 to the Companys Amendment No. 1 to Registration
      Statement on Form S-1/A filed on June 21, 2010]                     

*Filed herewith.

87

---

SIGNATURE

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.

|Date: June 20, 2011 |  | CHINA OUMEI REAL ESTATE
      INC.
|------------------- |  | ----------------------------------
|                    |  |                                   
|                    |  | /s/ Weiqing Zhang                 
|                    |  | Weiqing Zhang                     
|                    |  | Chief Executive Officer           

88

---

CHINA OUMEI REAL ESTATE INC.

FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 25, 2010, 2009 AND 2008

****

F-1

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of China Oumei
Real Estate Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of
China Oumei Real Estate Inc. and Subsidiaries (the Company) as of December 25,
2010 and 2009, and the related consolidated statements of income and
comprehensive income, changes in shareholders' equity, and cash flows for each
of the three years in the period ended December 25, 2010. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
China Oumei Real Estate Inc. and Subsidiaries as of December 25, 2010 and 2009,
and the results of their operations and their cash flows for each of the three
years in the period ended December 25, 2010, in conformity with United States
generally accepted accounting principles.

MSPCCertified Public Accountants and Advisors, A
Professional Corporation

New York, New York March 22, 2011

F-2

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF DECEMBER 25, 2010 AND
2009

|                                                                                                                                                               |   | DECEMBER 25, | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------ | 
|                                                                                                                                                               |   | 2010         | 
|                                                                                                                                                               |   |              | 
|ASSETS                                                                                                                                                         |  
|CURRENT ASSETS                                                                                                                                                 |   |              | 
|Cash                                                                                                                                                           | $ | 33,590,417   | 
|Restricted cash                                                                                                                                                |   | 2,285,490    | 
|Revenue in excess of
      billings, net                                                                                                                       |   | 19,458,718   | 
|Contracts
      receivable, net                                                                                                                                |   | 38,615,085   | 
|Related party receivable                                                                                                                                       |   | 1,159,577    | 
|Inventories                                                                                                                                                    |   | 70,410,310   | 
|Other receivables, net                                                                                                                                         |   | 25,867,452   | 
|Prepaid
      expenses                                                                                                                                         |   | 2,969,452    | 
|Total Current Assets                                                                                                                                           |   | 194,356,501  | 
|                                                                                                                                                               |   |              | 
|PROPERTY, PLANT AND EQUIPMENT, NET                                                                                                                             |   | 4,283,108    | 
|PROPERTY, PLANT AND
      EQUIPMENT, IDLE                                                                                                                      |   | 1,808,401    | 
|GOODWILL                                                                                                                                                       |   | 3,716,859    | 
|LAND USE RIGHTS, NET                                                                                                                                           |   | 54,973,721   | 
|DEFERRED TAX ASSETS                                                                                                                                            |   | 981,669      | 
|TOTAL ASSETS                                                                                                                                                   | $ | 260,120,259  | 
|                                                                                                                                                               |   |              | 
|LIABILITIES AND
      SHAREHOLDERS' EQUITY                                                                                                                     |  
|CURRENT LIABILITIES                                                                                                                                            |   |              | 
|Current
      portion of long-term debt                                                                                                                        | $ | 35,414,500   | 
|Short term loans                                                                                                                                               |   | 1,417,264    | 
|Notes
      payable                                                                                                                                            |   |             | 
|Accounts payable                                                                                                                                               |   | 1,810,919    | 
|Customer
      deposits                                                                                                                                        |   | 21,149,526   | 
|Other payables                                                                                                                                                 |   | 875,866      | 
|Taxes
      payable                                                                                                                                            |   | 30,971,901   | 
|Other current liabilities                                                                                                                                      |   | 135,442      | 
|                                                                                                                                                               |   |              | 
|Total Current Liabilities                                                                                                                                      |   | 91,775,418   | 
|                                                                                                                                                               |   |              | 
|LONG TERM DEBT                                                                                                                                                 |   |             | 
|                                                                                                                                                               |   |              | 
|LONG TERM DEFERRED TAX LIABILITIES                                                                                                                             |   | 23,703,855   | 
|COMMITMENTS AND CONTINGENCIES
      (Note 22)                                                                                                                  |   |              | 
|SHAREHOLDERS' EQUITY                                                                                                                                           |   |              | 
|Preference stock, par value
      $0.002112 per share, 20,000,000 shares
      authorized,      2,774,700 shares issued
      and outstanding                  |   | 5,860        | 
|Common stock,
      par value $0.002112 per share, 100,000,000 shares
      authorized,      31,020,062 shares
      issued and outstanding (2009: 30,235,062) |   | 65,514       | 
|Additional paid in capital                                                                                                                                     |   | 17,641,864   | 
|Warrants outstanding                                                                                                                                           |   | 3,177,032    | 
|Appropriated retained earnings                                                                                                                                 |   | 17,370,972   | 
|Unappropriated retained
      earnings                                                                                                                         |   | 95,871,921   | 
|Accumulated other comprehensive income                                                                                                                         |   | 10,507,823   | 
|Total
      Shareholders' Equity                                                                                                                               |   | 144,640,986  | 
|TOTAL LIABILITIES AND
      SHAREHOLDERS' EQUITY                                                                                                               | $ | 260,120,259  | 

See accompanying notes to the consolidated financial statements.

F-3

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOMETHE YEARS ENDED DECEMBER 25, 2010, 2009, AND 2008

|                                                       |   | DECEMBER 25 |  
|------------------------------------------------------ | - | ----------- | -
|                                                       |   | 2010        |  
|SALES                                                  | $ | 110,518,421 |  
|                                                       |   |             |  
|COST OF SALES                                          |   | (77,209,814 | )
|                                                       |   |             |  
|GROSS PROFIT                                           |   | 33,308,607  |  
|                                                       |   |             |  
|ADVERTISING                                            |   | (217,596    | )
|COMMISSION                                             |   | (214,566    | )
|SELLING EXPENSES                                       |   | (61,967     | )
|BAD DEBT RECOVERY (EXPENSE)                            |   | 987,374     |  
|GENERAL AND ADMINISTRATIVE EXPENSES                    |   | (7,390,963  | )
|INCOME FROM OPERATIONS                                 |   | 26,410,889  |  
|                                                       |   |             |  
|OTHER INCOME (EXPENSES)                                |   |             |  
|Miscellaneous
      income (expenses) (Note 5 and 21)  |   | 23,899,865  |  
|Interest expense                                       |   | (325,969    | )
|                                                       |   | 23,573,896  |  
|                                                       |   |             |  
|INCOME BEFORE INCOME TAXES                             |   | 49,984,785  |  
|                                                       |   |             |  
|INCOME TAXES                                           |   |             |  
|Current                                                |   | (932,016    | )
|Deferred                                               |   | (14,110,311 | )
|                                                       |   | (15,042,327 | )
|INCOME BEFORE EXTRAORDINARY ITEM                       |   | 34,942,458  |  
|                                                       |   |             |  
|EXTRAORDINARY ITEM                                     |   |            |  
|NET INCOME                                             |   | 34,942,458  |  
|                                                       |   |             |  
|OTHER COMPREHENSIVE INCOME:                            |   |             |  
|FOREIGN CURRENCY TRANSLATION ADJUSTMENT                |   | 3,470,209   |  
|COMPREHENSIVE INCOME                                   | $ | 38,412,667  |  
|                                                       |   |             |  
|EARNINGS PER COMMON SHARE BASIC                        | $ | 1.14        |  
|EARNINGS PER COMMON SHARE DILUTED                      | $ | 1.07        |  
|                                                       |   |             |  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
      BASIC |   | 30,770,172  |  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING DILUTED     |   | 32,708,661  |  

See accompanying notes to the consolidated financial
statements.

F-4

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITYFOR THE YEARS ENDED DECEMBER 25, 2010, 2009, AND 2008

AccumulatedAdditional
      Paid
    
    
    
    
    
    Appropriated
    
    
    Unappropriated
    
    
    OtherOrdinary Shares
    
    
    Preference Shares
    
    
    in Capital
    
    
    Warrants
    
    
    Retained
    
    
    Retained
    
    
    Comprehensive
    
    
    Shareholders'Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Amount
    
    
    outstanding
    
    
    Earnings
    
    
    Earnings
    
    
    Income
    
    
    EquityRecapitalization at December 25, 2007
    
    30,235,062
    
    
    63,856
    
    
    
    
    
    
    
    
    12,188,748
    
    
    
    
    
    4,234,863
    
    
    21,428,985
    
    
    3,076,996
    
    
    40,993,448Due to acquisitions of
      subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,714,245
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,714,245
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,481,301
    
    
    
    
    
    31,481,301Foreign currency translation
      adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,486,204
    
    
    3,486,204Earnings
      appropriated in accordance with Chinese law
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,407,705
    
    
    (2,407,705
    )
    
    
    
    
    Balance at December 25, 2008
    
    30,235,062
    
    
    63,856
    
    
    
    
    
    
    
    
    (525,497
    )
    
    
    
    
    6,642,568
    
    
    50,502,581
    
    
    6,563,200
    
    
    63,246,708Due to
      acquisitions of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,474,538
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,474,538Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,155,286
    
    
    
    
    
    21,155,286Foreign currency
      translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    474,414
    
    
    474,414Earnings appropriated in
      accordance with Chinese law
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,656,132
    
    
    (3,656,132
    )
    
    
    
    
    Balance at
      December 25, 2009
    
    30,235,062
    
    
    63,856
    
    
    
    
    
    
    
    
    8,949,041
    
    
    
    
    
    10,298,700
    
    
    68,001,735
    
    
    7,037,614
    
    
    94,350,946Issuance of ordinary shares
    
    785,000
    
    
    1,658
    
    
    
    
    
    
    
    
    1,574,734
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,576,392Issuance of
      preference shares (See Note 1)
    
    
    
    
    
    
    
    2,774,700
    
    
    5,860
    
    
    7,118,089
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,123,949Issuance of warrants (See Note
      1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,177,032
    
    
    
    
    
    
    
    
    
    
    
    3,177,032Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,942,458
    
    
    
    
    
    34,942,458Earnings appropriated in
      accordance with Chinese law
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,072,272
    
    
    (7,072,272
    )
    
    
    
    
    Foreign currency
      translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,470,209
    
    
    3,470,209Balance at December 25, 2010
    
    31,020,062
    
    
    65,514
    
    
    2,774,700
    
    
    5,860
    
    
    17,641,864
    
    
    3,177,032
    
    
    17,370,972
    
    
    95,871,921
    
    
    10,507,823
    
    
    144,640,986


See accompanying notes to the consolidated financial statements.

F-5

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED
DECEMBER 25, 2010, 2009 AND 2008

|                                                                                        |   | DECEMBER 25, |  
|--------------------------------------------------------------------------------------- | - | ------------ | -
|                                                                                        |   | 2010         |  
|CASH FLOWS FROM OPERATING
      ACTIVITIES                                              |   |              |  
|Net income                                                                              | $ | 34,942,458   |  
|Adjustments to reconcile net
      income to net cash provided by operating activities: |   |              |  
|Bad debt expense (recovery)                                                             |   | (987,374     | )
|Depreciation expense                                                                    |   | 290,728      |  
|Gain on disposal of assets                                                              |   | (50,836      | )
|Common stock issued for services                                                        |   | 1,576,392    |  
|Deferred tax expense                                                                    |   | 14,110,311   |  
|Extraordinary item                                                                      |   |             |  
|Decrease (increase) in operating assets:                                                |   |              |  
|Restricted cash                                                                         |   | (362,186     | )
|Revenue in excess of billings                                                           |   | (15,026,379  | )
|Contracts receivable                                                                    |   | (24,377,598  | )
|Related party receivable                                                                |   | 1,283,924    |  
|Inventories                                                                             |   | 37,618,320   |  
|Other receivables                                                                       |   | (23,142,569  | )
|Prepaid expenses                                                                        |   | (1,441,267   | )
|Increase (decrease) in operating liabilities:                                           |   |              |  
|Accounts payable                                                                        |   | 1,286,035    |  
|Related party payable                                                                   |   |             |  
|Advance from customers                                                                  |   | 827,655      |  
|Other payables                                                                          |   | (3,254,856   | )
|Taxes payable                                                                           |   | 4,150,168    |  
|Other current liabilities                                                               |   | (117,735     | )
|Net cash provided by operating
      activities                                         |   | 27,325,191   |  
|                                                                                        |   |              |  
|CASH FLOWS FROM INVESTING
      ACTIVITIES                                              |   |              |  
|Purchase of fixed assets                                                                |   | (246,345     | )
|Cash received from sale of assets                                                       |   | 90,269       |  
|Purchase of subsidiaries                                                                |   |             |  
|Merger of Dragon Acquisition Corporation                                                |   | 19,920       |  
|Cash received from acquisition of subsidiaries                                          |   |             |  
|Net cash provided (used) by investing
      activities                                  |   | (136,156     | )
|                                                                                        |   |              |  
|CASH FLOWS FROM FINANCING
      ACTIVITIES                                              |   |              |  
|Net change in short-term borrowing                                                      |   | (1,348,513   | )
|Repayments of long-term debt                                                            |   | (6,638,914   | )
|Proceeds from long-term borrowing                                                       |   | 1,478,600    |  
|Repayments of notes payable                                                             |   | (147,860     | )
|Cash receipts from financing through private placement                                  |   | 10,323,040   |  
|Restricted cash in holdback account                                                     |   | (230,954     | )
|Net cash provided (used) by financing activities                                        |   | 3,435,399    |  
|                                                                                        |   |              |  
|Effect of exchange rate changes on cash                                                 |   | 701,545      |  
|                                                                                        |   |              |  
|NET INCREASE IN CASH                                                                    |   | 31,325,979   |  
|                                                                                        |   |              |  
|CASH AT BEGINNING OF THE YEAR                                                           |   | 2,264,438    |  
|                                                                                        |   |              |  
|CASH AT END OF THE YEAR                                                                 | $ | 33,590,417   |  

F-6

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED
DECEMBER 25, 2010, 2009 AND 2008

|SUPPLEMENTAL DISCLOSURES:                                                                                                                |   |            |  |   |            |  |   |            | 
|---------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | ---------- | 
|Interest paid                                                                                                                            | $ | 2,544,506  |  | $ | 3,195,886  |  | $ | 3,737,121  | 
|Income taxes paid                                                                                                                        | $ | 10,369,157 |  | $ | 260,255    |  | $ | 1,301,525  | 
|Non-cash investing and financing activities:                                                                                             |   |            |  |   |            |  |   |            | 
|Common stock issued for services                                                                                                         | $ | 1,576,392  |  | $ |           |  | $ |           | 
|Warrants
      issued for services in connection with the private placement transactions
      and charged to additional paid-in capital | $ | 235,850    |  | $ |           |  | $ |           | 
|Land use rights transferred to inventory as project development cost cost                                                                | $ | 522,986    |  | $ | 11,036,630 |  | $ |           | 
|Inventory transferred to fixed asset (corporate
      offices)                                                                           | $ | 1,052,613  |  | $ |           |  | $ |           | 
|Cash consideration paid by Longhai Group for subsidiaries acquisition,
      resulting in a decrease in related party receivables       | $ |           |  | $ | 5,131,000  |  | $ | 14,344,712 | 

See accompanying notes to the consolidated financial statements.

F-7

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 1 - Organization

China Oumei Real Estate Inc., formerly Dragon Acquisition
Corporation (the Company), was organized under the laws of the Cayman Islands
on March 10, 2006 as a blank check development stage company formed for the
purpose of acquiring an operating business, through a stock exchange, asset
acquisition or similar business combination. From its inception until completion
of the reverse acquisition of Leewell Investment Group Limited (Leewell) on
April 14, 2010, the Companys operations consisted entirely of identifying,
investigating and conducting due diligence on potential businesses for
acquisition.

On April 14, 2010, the Company completed a reverse acquisition
transaction through a share exchange with Leewell whereby the Company acquired
100% of the issued and outstanding capital stock of Leewell. As a result of the
reverse acquisition, Leewell became the Companys wholly-owned subsidiary and
Longhai Holdings Company Limited (Longhai Holdings), the former shareholder of
Leewell, became the Companys controlling shareholder. The share exchange
transaction with Leewell was treated as a reverse acquisition for accounting
purposes, with Leewell as the acquirer and the Company as the acquired
party.

Leewell is a Hong Kong based company with an authorized capital
of HK$10,000 (approximately $1,282), and it was wholly owned by Mr. Zhou Li as
nominee for Mr. Antoine Cheng, the father of Ms. Cheng, until October 2, 2009.
On that date, all the outstanding shares of Leewell were sold to Longhai
Holdings, a company controlled by Mr. Cheng (See Note 5). Leewell owns all of
the equity interests of Qingdao Oumei Real Estate Development Co., Ltd
(Oumei).

Oumei was incorporated as a limited liability company in
Qingdao under the laws of the Peoples Republic of China (PRC or China). It
is engaged in the development and sale of residential and commercial real estate
properties located primarily in Pingdu, Laixi and Jimo cities of Shandong
Province, China.

Oumei was established by Mr. Zhang Weiqing (51%) and Mr. Wang
Shengguo (49%) on May 15, 2001 with a registered capital of approximately
$604,000. On February 9, 2002, Mr. Wang Shengguo sold his interest in Oumei to
Ms. Cheng Xiaoyan. Mr. Zhang and Ms. Cheng then increased their contribution to
Oumei in proportion to their ownership interests by approximately $6,200,000 and
$5,089,200 in 2003 and 2006, respectively. The equity interests percentages held
by these individuals were 51% and 49%, respectively.

On September 20, 2007, Mr. Zhang and Ms. Cheng sold all their
interests in Oumei to Leewell for $13,167,110.

On April 14, 2010, the Company also completed a private
placement transaction with a group of accredited investors. Pursuant to a
subscription agreement with the investors (the Subscription Agreement), the
Company issued to the investors an aggregate of 2,774,700 Units for a purchase
price of $11,098,800, or $4.00 per Unit. Each Unit consists of one 6%
Convertible Preference Share of the Company (the Preference Shares), and one
warrant to purchase 0.5 ordinary shares of the Company (the Warrants). The
Warrants have a term of 5 years, bear an exercise price of $6.00 per share
(subject to customary adjustments), are exercisable on a net exercise or
cashless basis and are exercisable by investors at any time after the closing
date.

Net proceeds to the Company, after deducting placement agent
expenses of $775,760 incurred by Brean Murray, Carret & Co., LLC (Brean
Murray), were $10,323,040. These net proceeds were allocated $5,860 to the
Preference Shares, $7,375,998 to additional paid-in capital and $2,941,182 to
the Warrants. The Company also issued 300,000 ordinary shares and warrants to
Brean Murray for the purchase of an aggregate of 138,735 ordinary shares. The
warrants have an exercise price of $5.00 per share and are exercisable for a
period of three years. In addition, the Company issued 465,000 ordinary shares
to Beijing Allstar Business Consulting, Inc. (Allstar) as compensation for
advising on the transaction. The shares and warrants issued to Brean Murray were
considered direct expenses of the offering and their value of $1,230,791
($994,941 for the shares and $235,850 for the warrants) was charged to
additional paid-in capital. The shares issued to Allstar were valued at
$1,576,350 and were charged to general and administrative expense. All of the
warrants are outstanding at December 25, 2010

F-8

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 1 - Organization (Continued)

A summary of the Preference Shares is set forth below:

Ranking. With respect to rights upon liquidation,
winding-up or dissolution, the Preference Shares rank senior to the Companys
ordinary shares and any other classes or series of stock of the Company not
designated as ranking senior to or pari passu with the Preference
Shares.

Voting. The holders of the Preference Shares will
vote on an as converted basis, together with the ordinary shares, as a single
class, in connection with any proposal submitted to shareholders.

Conversion. Each Preference Share is optionally
convertible into one (1) fully paid and non-assessable ordinary share.

Mandatory Conversion. The Company has the right
to convert outstanding Preference Shares into ordinary shares if, for a period
of at least twenty (20) consecutive business days, (i) the volume weighted
average price of the Companys ordinary shares equals or exceeds US$6.00, (ii)
average daily trading volume of the ordinary shares equals or exceeds 50,000
shares per day, and (iii) trading volume of the ordinary shares equals or
exceeds 30,000 shares on every business day during this period.

Anti-Dilution. The number of ordinary shares into
which each Preference Share may be converted into will be proportionally
adjusted in the event of any stock splits, combinations, or equity dividends on
ordinary shares. Upon certain reorganizations, reclassifications,
mergers, or consolidations, the holders of Preference Shares may convert their
shares into the securities or property that they would have been entitled to
upon the consummation of such transaction if the holder had converted the
Preference Shares immediately prior to such transaction.

Dividends.Each Preference Share will be
entitled to receive cumulative dividends at the annual rate of six percent (6%)
accruing on a daily basis on the purchase price of the Preference Share. Such
dividends will be payable in cash annually on January 1 beginning with the first
such date after April 14, 2010. If the six percent (6%) dividend is not timely
paid in full, any such unpaid dividend amount will be increased by 6% per year,
accruing on a daily basis (See Note 23).

Liquidation.In the event of the
liquidation, dissolution or winding up of the affairs of the Company, whether
voluntary or involuntary, the holders of the Preference Shares then outstanding
will be entitled to receive, out of the assets of the Company available for
distribution to its shareholders, an amount equal to the amount credited as paid
up on the Preference Shares plus accrued but unpaid dividends, before any
payment shall be made or any assets distributed to the holders of the ordinary
shares or any other class or series of stock issued by the Company not
designated as ranking senior to or pari passu with the Preference Shares
in respect of the right to participate in distributions or payments upon a
liquidation event.

On October 11, 2010, the Company entered into an amendment of
the Subscription Agreement (the Amendment). Pursuant to the original
Subscription Agreement, the Company was obligated to file a registration
statement covering the resale of the ordinary shares underlying the Preference
Shares and the Warrants no later than thirty (30) days following the closing
date and use its best efforts to cause the registration statement to be declared
effective under the Securities Act of 1933, as amended (the Securities Act) as
promptly as possible, but in no event later than 180 days following the closing
date. Under the Subscription Agreement, if the Company did not timely file the
required registration statement, or if it was not declared effective by the
Securities and Exchange Commission (SEC) in a timely manner, then the Company
was obligated to pay to each investor a liquidated damages fee of 1% of such
investors investment per month, for up to a maximum of 10% of each investors
investment pursuant to the Subscription Agreement. Pursuant to the Amendment, in
lieu of the cash liquidated damages amount that would otherwise have been
payable by the Company for failure to cause the registration statement to be
declared effective within the prescribed period, the Company is required to
reduce the initial exercise price of the Warrants issued to each investor in the
private placement by $0.08 per calendar month, or portion thereof, until such
time that the registration statement is declared effective by the SEC; provided
that, in no event will the Company be obligated to reduce the initial exercise
price of the Warrants by more than $0.80 in aggregate. The partial reduction of
the initial exercise price of the Warrants will apply on a daily pro-rata basis
for any portion of a calendar month prior to the effectiveness of the
registration statement. The agreement is without regard to the continued
employment of Mr. Cheng and is therefore not compensatory. As of December 25,
2010, none of the warrants have been exercised.

F-9

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 1 - Organization (Continued)

In connection with the private placement, the Company entered
into a make good escrow agreement with Longhai Holdings, the Companys
controlling shareholder, Collateral Agents, LLC, the escrow agent, and Access
America Investments, LLC, as representative of the investors (the Make Good
Escrow Agreement), pursuant to which the parties agreed to certain make good
provisions in the event that the Company does not meet certain financial
performance thresholds for fiscal years 2010 and 2011. Pursuant to the Make Good
Escrow Agreement, the parties agreed to the establishment of an escrow account
and Longhai Holdings delivered into escrow certificates evidencing 7,500,000
ordinary shares held by it, to be held for the benefit of the investors. Under
the Make Good Escrow Agreement, the Company established minimum after tax net
income thresholds (as determined in accordance with US GAAP and excluding any
non-cash expenses and one-time expenses related to the reverse acquisition of
Leewell and the private placement transaction) of $40 million for fiscal year
2010 and $60 million for fiscal year 2011 and minimum earnings per share
thresholds (calculated on a fully diluted basis and including adjustment for any
stock splits, stock combinations, stock dividends or similar transactions, and
for shares issued in one public offering or pursuant to the exercise of any
warrants, options, or other securities issued during or prior to the calculation
period) of $1.13 for fiscal year 2010 and $1.70 for fiscal year 2011. If the
Companys after tax net income or earnings per share for either fiscal year 2010
or fiscal year 2011 is less than 90% of the applicable performance threshold,
then the performance threshold will be deemed not to have been achieved, and the
investors will be entitled to receive ordinary shares based upon a pre-defined
formula agreed to between the parties. The parties agreed that, for purposes of
determining whether or not any of the performance thresholds is met, the release
of any of the escrowed shares and any related expense recorded under US GAAP
shall not be deemed to be an expense, charge, or any other deduction from
revenues even if US GAAP requires contrary treatment or the annual report for
the respective fiscal years filed with the SEC by the Company may report
otherwise. As of December 25, 2010, the Companys financial results have met the
applicable performance threshold for fiscal year 2010.

Note 2 - Acquisition of Subsidiaries

On January 19, 2008, Oumei reached agreements with the
shareholders of Weihai Huancui District Mingwei Industry Co., Ltd (Mingwei) to
acquire 100% of its equity interest by paying Chinese Yuan (CNY) 110,000,000
(approximately $15 million).

The following table summarizes the approximate estimated fair
values of the assets and liabilities acquired from Mingwei at acquisition date.

|Intangible assets          | $ | 37,242,000  |  
|-------------------------- | - | ----------- | -
|Current liabilities        |   | (21,591,000 | )
|Net assets acquired at FMV |   | 15,651,000  |  
|Cash consideration         |   | 14,960,000  |  
|Difference                 | $ | (691,000    | )

100% of the above difference was allocated to land use rights
and reduced the fair market value recorded.

F-10

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 2 - Acquisition of Subsidiaries (Continued)

On January 22, 2008, Oumei reached an agreement with the sole
shareholder of Longhai Hotel Co., Ltd (Longhai Hotel), to acquire 100% of its
equity interest by paying CNY110,000,000 (approximately $15 million). Longhai
Hotel is owned by Mr. Zhang Weiqing, who is also the former shareholder of Oumei
(See Note 1). The acquisition is a business combination under common control,
therefore, the Company accounted for this acquisition using the as if pooling of
interest method. The acquired businesses and net assets are recorded at book
value as if the businesses and net assets of Longhai Hotel have been owned by
the Group from the earliest comparative period presented. Accordingly, the
financial information for 2007 has been restated as follows:

|                                                |   | Year ended December 25, 2007 |  
|----------------------------------------------- | - | ---------------------------- | -
|                                                |   |                              |  
|                                                |   | Originally                   |  
|                                                |   | stated                       |  
|Sales                                           | $ | 51,850,312                   |  
|Net income                                      |   | 9,334,303                    |  
|Net cash inflow from
      operating activities |   | 1,212,951                    |  
|Net cash outflow from investing activities      |   | (13,689,661                  | )
|Net cash inflow from
      financing activities |   | 14,167,583                   |  
|Total current assets                            |   | 69,443,412                   |  
|Total assets                                    |   | 73,677,803                   |  
|Total current liabilities                       |   | 46,112,906                   |  
|Shareholders equity                            |   | 27,564,897                   |  

The following table summarizes the carryover historical costs
of the assets and liabilities of Longhai Hotel at acquisition date.

|Fixed assets                           | $ | 2,782,000   |  
|-------------------------------------- | - | ----------- | -
|Intangible assets                      |   | 11,367,000  |  
|Current liabilities                    |   | (13,869,000 | )
|Net asset acquired at historical costs |   | 280,000     |  
|Cash consideration                     |   | 14,960,000  |  
|Difference                             | $ | 14,680,000  |  

100% of the above difference was recorded in additional paid-in
capital as it was acquired from a related party with common interest.

F-11

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 2 - Acquisition of Subsidiaries (Continued)

On January 23, 2008, Oumei reached agreements with the
shareholders of Weihai Economic & Technology Development Zone Longhai
Properties Co., Ltd (Longhai Properties) to acquire 100% of its equity
interest by paying CNY140,000,000 (approximately $19 million).

The following table summarizes the approximate estimated fair
values of the assets and liabilities of Longhai Properties at acquisition date.

|Current assets             | $ | 41,339,000  |  
|-------------------------- | - | ----------- | -
|Fixed assets               |   | 15,000      |  
|Intangible assets          |   | 10,224,000  |  
|Current liabilities        |   | (32,901,000 | )
|Long-term debt             |   | (2,992,000  | )
|Net assets acquired at FMV |   | 15,685,000  |  
|Cash consideration         |   | 19,040,000  |  
|Difference                 | $ | 3,355,000   |  

100% of the above difference was recorded as goodwill.

On January 24, 2008, Oumei reached agreements with the
shareholders of Xudong Real Estate Development Co., Ltd (Xudong) to acquire
100% of its equity interest by paying CNY60,000,000 (approximately $8.3
million). Longhai Group, a related party, owned approximately 74% of Xudong (See
Notes 1 and 5).

The following table summarizes the approximate estimated fair
values of the assets and liabilities of Xudong at acquisition date.

|Current assets             | $ | 54,319,000  |  
|-------------------------- | - | ----------- | -
|Current liabilities        |   | (17,599,000 | )
|Long-term debt             |   | (27,700,000 | )
|Net assets acquired at FMV |   | 9,020,000   |  
|Cash consideration         |   | 8,310,000   |  
|Difference                 | $ | (710,000    | )

74% of the above difference, approximately $525,000, was
recorded in additional paid-in capital as it was acquired from a related party;
the remaining 26%, approximately $185,000, was recorded as extraordinary item in
2008.

F-12

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 2 - Acquisition of Subsidiaries (Continued)

On August 27, 2008, Oumei reached agreements with the
shareholders of Weifang Longhai Industry Co., Ltd. (Weifang Industry) to
acquire 100% of their equity interest by paying CNY30,000,000 (approximately
$4.4 million). Longhai Group, a related party (See Note 5), owned approximately
95% of Weifang Industry. Mr. Gao Xuling, acting as a trustee shareholder on
behalf of Mr. Antoine Cheng, held 5% of Weifang Industry.

The following table summarizes the approximate estimated fair
values of the assets and liabilities of Weifang Industry at acquisition date.

|Current assets             | $ | 23,147,000  |  
|-------------------------- | - | ----------- | -
|Fixed assets               |   | 9,000       |  
|Current liabilities        |   | (15,983,000 | )
|Net assets acquired at FMV |   | 7,173,000   |  
|Cash consideration         |   | 4,386,000   |  
|Difference                 | $ | (2,787,000  | )

$9,000 of the above difference was allocated to fixed assets
and reduced the fair market value recorded. 100% of the remaining difference was
recorded in additional paid-in capital as it was acquired from related parties.

On August 28, 2008, Oumei reached an agreement with the sole
shareholder of Weifang Longhai Zhiye Co., Ltd. (Weifang Zhiye) to acquire 100%
of its equity interest by paying CNY30,000,000 (approximately $4.4 million).

The following table summarizes the approximate estimated fair
values of the assets and liabilities of Weifang Zhiye at acquisition date.

|Current assets             | $ | 21,707,000  |  
|-------------------------- | - | ----------- | -
|Fixed assets               |   | 10,000      |  
|Current liabilities        |   | (13,034,000 | )
|Net assets acquired at FMV |   | 8,683,000   |  
|Cash consideration         |   | 4,392,000   |  
|Difference                 | $ | (4,291,000  | )

$10,000 of the above difference was allocated to fixed assets
and reduced the fair market value recorded. The remaining difference,
approximately $4,281,000, was recorded as an extraordinary item in 2008.

F-13

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 2 - Acquisition of Subsidiaries (Continued)

On August 29, 2008, Oumei reached agreements with the
shareholders of Weifang Qi Lu Guo Tai Zhiye Co., Ltd. (Qi Lu Guo Tai) to
acquire 100% of its equity interest by paying CNY40,000,000 (approximately $5.8
million).

The following table summarizes the approximate estimated fair
values of the assets and liabilities of Qi Lu Guo Tai at acquisition date.

|Current assets             | $ | 50,076,000  |  
|-------------------------- | - | ----------- | -
|Fixed assets               |   | 24,000      |  
|Current liabilities        |   | (32,032,000 | )
|Long-term debt             |   | (3,897,000  | )
|Net assets acquired at FMV |   | 14,171,000  |  
|Cash consideration         |   | 5,860,000   |  
|Difference                 | $ | (8,311,000  | )

$24,000 of the above difference was allocated to fixed assets
and reduced the fair market value recorded. The remaining difference,
approximately $8,287,000, was recorded as an extraordinary item in 2008.

The assets and liabilities of the acquired companies were
recorded at full fair value at the acquisition dates except Longhai Hotel. The
acquisition of Longhai Hotel was considered as an acquisition from a related
party under common control. Assets and liabilities are recognized at historical
carryover costs. No goodwill or extraordinary item was recognized. The
acquisitions of Xudong and Weifang Industry are considered as acquisitions from
a related party; therefore, the cash consideration paid did not represent the
market value that would have been paid had the transaction been at arms length.
The excess of net assets over the purchase price has been recorded as an
extraordinary item for the non-related party portion and as additional
paid-in-capital for the related party portion.

The assets and liabilities of Mingwei, Longhai Properties,
Weifang Zhiye and Qi Lu Guo Tai were recorded at fair values at the acquisition
dates. Goodwill is recognized for the acquisition of Longhai Property as the
Company believes the value of Longhai Property was higher than the market price
at the date of acquisition. Longhai Property maintains a high profit level and
owns land in the city center of Weihai, which the Company considers a strategic
location for construction that has the potential to significantly increase the
profits of the Company. The combination of these factors is the reason for the
excess of the purchase price over the fair value of the tangible assets and
liabilities acquired. Extraordinary items are recognized for the acquisitions of
Weifang Zhiye and Qi Lu Guo Tai due to the excess of fair values over the
purchase prices. No extraordinary item is recognized for Mingwei since the
excess of fair value over the purchase price was absorbed by non-current assets.
The acquisitions of Mingwei, Weifang Zhiye and Qi Lu Guo Tai were conducted
through arms-length negotiations. Oumei was able to achieve a bargain purchase
due to the fact that shareholders in the selling entity wanted to withdraw
quickly and the transaction was on an all-cash basis in an expedited fashion.

The acquisition increased the land reserve and expanded the
market share of the Company in Shandong Province.

F-14

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 2 - Acquisition of Subsidiaries (Continued)

On June 25, 2009, Oumei reached agreement with the shareholder
of Caoxian Industrial Co., Ltd (CXSY) to acquire 100% of its equity interest
by paying CNY15,000,000 (approximately $2.2 million). Longhai Group, a related
party (see Note 5), funded the purchase. This funding reduced the receivable due
from Longhai Group at the time of the acquisition. Longhai Group owned
approximately 90% of Caoxian Industry; Mr. Wang Hongde, acting as a trustee
shareholder on behalf of Mr. Antoine Cheng, held 10% of Caoxian Industrial.

The following table summarizes the approximate estimated fair
values of the assets and liabilities of CXSY at acquisition date.

|Current assets             | $ | 16,396,000 |  
|-------------------------- | - | ---------- | -
|Fixed assets               |   | 10,000     |  
|Current liabilities        |   | (4,092,000 | )
|Long-term debt             |   | (5,128,000 | )
|Net assets acquired at FMV |   | 7,186,000  |  
|Cash consideration         |   | 2,197,000  |  
|Difference                 | $ | (4,989,000 | )

100% of the above difference, approximately $4,989,000, was
recorded in additional paid in capital as Mr. Antoine Cheng had substantive
control over 100% of the acquired entity (See Note 5).

On September 25, 2009, Oumei reached agreement with the
shareholder of Longhai Real Estate Development Co., Ltd (LHFDC) to acquire
100% of its equity interest by paying CNY20,000,000 (approximately $2.9
million). Longhai Group, a related party (See Note 5), funded the purchase. This
funding reduced the receivable due from Longhai Group at the time of the
acquisition. Ms. Wang Jinhua, Mr. Antoine Chengs wife, owned 40% of LHFDC; Ms.
Wang Yingchun, acting as a trustee shareholder on behalf of Mr. Antoine Cheng,
owned 60% of LHFDC.

The following table summarizes the approximate estimated fair
values of the assets and liabilities of LHFDC at acquisition date.

|Current assets             | $ | 28,262,000  |  
|-------------------------- | - | ----------- | -
|Current liabilities        |   | (20,842,000 | )
|Net assets acquired at FMV |   | 7,420,000   |  
|Cash consideration         |   | 2,934,000   |  
|Difference                 | $ | (4,486,000  | )

100% of the above difference, approximately $4,486,000, was
recorded in additional paid in capital as Mr. Antoine Cheng had substantive
control over 100% of the acquired entity (See Note 5).

The acquisitions of CXSY and LHFDC are considered as
acquisitions from a related party; therefore, the cash consideration paid did
not represent the market value that would have been paid had the transaction
been at arms length.

F-15

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 2 - Acquisition of Subsidiaries (Continued)

The amounts of revenue and earnings of CXSY since June 25, 2009
which were included in the Consolidated Statement of Income and Comprehensive
Income for 2009 were approximately $6,447,000 and $1,491,000, respectively.

The amounts of revenue and earnings of LHFDC since September
25, 2009 which were included in the Consolidated Statement of Income and
Comprehensive Income for 2009 were approximately $21,962,000 and $7,862,000,
respectively.

For the year ended December 25, 2008, the Consolidated
Statements of Income and Comprehensive Income included twelve months results of
operations of Mingwei, Longhai Hotel, Longhai Properties, Xudong and four months
results of operations of Weifang Industry, Weifang Zhiye and Qi Lu Guo Tai.

For the year ended December 25, 2009, the Consolidated
Statement of Income and Comprehensive Income included twelve months results of
operations of Mingwei, Longhai Hotel, Longhai Properties, Xudong, Weifang
Industry, Qi Lu Guo Tai, Weifang Zhiye and six months results of operations of
CXSY and three months results of operations of LHFDC.

For the twelve months ended December 25, 2010, the Consolidated
Statement of Income and Comprehensive Income include 12 months results of
operations of Mingwei, Longhai Hotel, Longhai Properties, Xudong, Weifang
Industry, Qi Lu Guo Tai, Weifang Zhiye, CXSY and LHFDC.

Supplemental information on an unaudited pro forma basis, as if
the acquisitions of the subsidiaries had been consummated at the beginning of
each of the years presented, is as follows:

| |            |   | 2009       |  |   | 2008       | 
| | ---------- | - | ---------- |  | - | ---------- | 
| | Sales      | $ | 94,315,500 |  | $ | 77,032,561 | 
| | Net income | $ | 20,811,790 |  | $ | 30,485,677 | 

The unaudited pro forma supplemental information is based on
estimates and assumptions which the Company believes are reasonable. It is not
necessarily indicative of the consolidated financial position or results of
income in future periods or the results that actually would have been realized
had the Company been a combined company as of the beginning of the years
presented.

Note 3 - Summary of Significant Accounting Policies

Basis of Presentation

The balance sheets as of December 25, 2010 and 2009 include
Leewell and the Company. The total shareholders equity includes 31,020,062
shares of issued and outstanding common stock and 2,774,700 shares of issued and
outstanding Preference Shares, as a result of the reverse acquisition
transaction on April 14, 2010 described in Note 1.

The consolidated statements of income and comprehensive income
for the years ended December 25, 2010, 2009 and 2008 include Leewell for the
full years, and the Company for the period from April 14, 2010 through December
25, 2010. The weighted average common shares outstanding (both basic and
diluted) are calculated based on the reverse acquisition transaction on April
14, 2010 described in Note 1.

All significant intercompany transactions and balances are
eliminated on consolidation.

F-16

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 3 - Summary of Significant Accounting Policies
(Continued)

Use of Estimates

The preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Significant estimates used
in the preparation of the financial statements include the selection of the
useful lives of property and equipment and the provision necessary for
uncollectible receivables. Management believes that the estimates utilized in
preparing its financial statements are reasonable and prudent. Actual results
could differ from those estimates.

Fair Value of Financial Instruments

Accounting Standards Codification (ASC) 820, Fair Value
Measurements and Disclosures, requires disclosing fair value to the extent
practicable for financial instruments that are recognized or unrecognized in the
balance sheet. Fair value of financial instruments is the amount at which the
instruments could be exchanged in a current transaction between willing parties.
The Company considers the carrying amounts of cash, restricted cash, revenue in
excess of billings, contracts receivable, related party and other receivables,
accounts payable, notes payable, related party and other payables, customer
deposits, and short term loans approximate their fair values because of the
short period of time between the origination of such instruments and their
expected realization. The Company considers the carrying amount of long term
bank loans to approximate their fair values based on the interest rates of the
instruments and the current market rate of interest.

Reporting Currency and Foreign Currency Translation

The functional currency of Oumei and its subsidiaries is the
Chinese Yuan (CNY) and the Companys reporting currency is the United States
Dollar (USD). The assets and liabilities of Oumei and its subsidiaries are
translated at the exchange rate on the balance sheet date, shareholders equity
is translated at the historical rates and the revenues and expenses are
translated at the weighted average exchange rate for the year. The resulting
translation adjustments are reported under other comprehensive income in the
Statements of Income and Comprehensive Income in accordance with ASC 220,
Comprehensive Income. Transaction gains and losses that arise from
exchange rate fluctuations from transactions denominated in a currency other
than the functional currency are included in the Statements of Income and
Comprehensive Income as incurred. The transaction gains and losses were
immaterial for the all periods presented.

Since July 2005, the CNY is no longer pegged to the USD.
Although the Peoples Bank of China regularly intervenes in the foreign exchange
market to prevent significant short-term fluctuations in the exchange rate, the
CNY may appreciate or depreciate significantly in value against the USD in the
medium to long term. Moreover, it is possible that in the future, PRC
authorities may lift restrictions on fluctuations in the CNY exchange rate and
lessen intervention in the foreign exchange market. Therefore, the Companys
foreign currency exchange gains and losses may be magnified by PRC exchange
control regulations that restrict the Companys ability to convert CNY into
foreign currencies.

F-17

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 3 - Summary of Significant Accounting Policies
(Continued)

Revenue Recognition

Real estate sales are reported in accordance with the
provisions of ASC 360-20, Property, Plant and Equipment, Real Estate Sales,
Sales Other Than Retail Land Sales. Revenue from the sales of development
properties where the construction period is twelve months or less is recognized
by the full accrual method when the sale is consummated. A sale is not
considered consummated until (1) the parties are bound by the terms of a
contract or agreement, (2) all consideration has been exchanged, (3) any
permanent financing of which the seller is responsible has been arranged, (4)
all conditions precedent to closing have been performed, (5) the seller does not
have substantial continuing involvement with the property, and (6) the usual
risks and rewards of ownership have been transferred to the buyer. Revenue
recognized to date in excess of amounts received from customers is classified as
current assets under contracts receivable. Sales transactions not meeting all
the conditions of the full accrual method are accounted for using the deposit
method of accounting. Under the deposit method, all costs are capitalized as
incurred, and payments received from the buyer are recorded as a deposit
liability.

Effective December 26, 2008, the Company adopted the
percentage-of-completion method of accounting for revenue recognition for all
building construction projects in progress in which the construction period was
expected to be more than twelve months at that date. The full accrual method was
used before that date for all of the Companys residential and commercial
projects. The Company changed to the percentage-of-completion method for
contracts longer than one year as this method more accurately reflects how
revenue is earned on these contracts, particularly for interim reporting
purposes.

ASC 250, Accounting Changes and Error Corrections,
requires retrospective application of a change in accounting principle unless
impracticable. The change to the percentage-of-completion method had no material
effect on the Companys December 25, 2008 financial statements.

Revenue and profit from the sale of development properties
where the construction period is more than twelve months is recognized by the
percentage-of-completion method on the sale of individual units when the
following conditions are met: (1) construction is beyond a preliminary stage;
(2) the buyer is committed to the extent of being unable to require a refund
except for non-delivery of the unit; (3) sufficient units have already been sold
to assure that the entire property will not revert to rental property; (4) sales
prices are collectible and (5) aggregate sales proceeds and costs can be
reasonably estimated. If any of these criteria are not met, proceeds are
accounted for as deposits until the criteria are met and/or the sale
consummated.

Under the percentage of completion method, revenues from units
sold and related costs are recognized over the course of the construction
period, based on the completion progress of a project. In relation to any
project, revenue is determined by calculating the ratio of completion and
applying that ratio to the contracted sales amounts. This ratio of completion is
determined by the Company using data reported by licensed independent third
party construction supervising firms hired by the Company as the contractors
employed by the Company request advance payments and do not specifically
allocate these costs to the various projects. Cost of sales is recognized by
multiplying the ratio by the total budgeted costs. Changes to total estimated
contract costs or losses, if any, are recognized in the period in which they are
determined. Revenue recognized to date in excess of cash received from customers
is classified as current assets under revenue in excess of billings. Amounts
received from customers in excess of revenue recognized to date are classified
as current liabilities under customer deposits.

Any losses incurred or identified on a real estate transaction
are recognized in the period in which the transaction occurs.

From time to time, the Company participates in
government-sponsored old city redevelopment projects, which typically involve
villager relocation programs. Because of the fact that the relocated residents,
who are the purchasers of new apartment units, are not assigned their units and
do not make payments until the completion of the particular project according to
the agreement with the government, it is impractical to use the percentage of
completion method even though the construction period usually exceeds twelve
months. In such cases, revenues are recognized under the full accrual method for
the residential portion of the project.

F-18

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 3 - Summary of Significant Accounting Policies
(Continued)

Real Estate Capitalization and Cost Allocation

Properties under construction or held for sale consist of
residential and commercial units under construction and units completed.

Properties under construction or held for sale are stated at
cost or estimated net realizable value, whichever is lower. Costs include costs
of land use rights, direct development costs, including predevelopment costs,
interest on indebtedness, construction overhead and indirect project costs.
Total estimated costs of multi-unit developments are allocated to individual
units based upon specific identification methods.

Costs of land use rights include land premiums and deed tax and
are allocated to projects on the basis of acreage and gross floor area.

Capitalization of Interest

In accordance with ASC 360, Property, Plant and
Equipment, interest incurred during construction is capitalized to
properties under construction. All other interest is expensed as incurred.

For the years ended December 25, 2010, 2009 and 2008, total
interest incurred by the Company was $2,544,506, $3,195,886 and $3,737,121,
respectively, of which capitalized interest was $2,234,184, $2,329,135 and
$2,768,411, respectively.

Concentration of Risks

The Company sells residential and commercial units to residents
and small business owners. In 2010, the Company recorded approximately
$27,264,000 of sales and contracts receivable from the sales of affordable
housing to City Government of Qingdao for the Real-Estate Development Management
Bureau for a relocation program. Such sales are approximately 24.3% of the total
sales in 2010. Contracts receivable due from the government comprise about 64.6%
of the total contracts receivable and revenue in excess of billings as of
December 25, 2010.

For the year ended December 25, 2010, the Company, through its
subsidiary LHFDC, recorded a transaction in the amount of approximately
$13,725,252 of contract value from the sales of commercial units and 97% was
recognized, which is approximately $13,313,494. This represented 12.0% of sales
for the twelve months ended December 25, 2010. This transaction was made with
one customer, who purchased multiple commercial units totaling 9,597 square
meters of GFA. The account receivable in connection with this transaction as of
December 25, 2010 is $8,480,397, which represented 14.6% of total contracts
receivable and revenue in excess of billings as of December 25, 2010.

For the year ended December 25, 2010, the Company had two major
contractors for most of its construction services and construction materials:
Qingdao Zhongxing Construction Ltd and Longhai Construction Ltd., a related
party. In the years ended December 25, 2010, 2009 and 2008, Oumei made payments
to Longhai Construction Ltd. (See Note 5) of approximately $13,903,000,
$13,784,000 and $9,008,000, respectively.

The Companys operations are carried out in the PRC.
Accordingly, the Companys business, financial condition and results of
operations may be influenced by the political, economic and legal environments
in the PRC and by the general state of the PRCs economy. The Companys business
may be influenced by changes in governmental policies with respect to laws and
regulations, anti-inflationary measures, currency conversion and methods of
taxation, among other things.

The Company has a credit risk exposure of uninsured cash in
banks of $35,616,050 as of December 25, 2010 and $3,906,216 as of December 25,
2009. The Company has not experienced any losses in such accounts and believes
it is not exposed to any risks on its cash in bank accounts. The Company does
not require collateral or other securities to support financial instruments that
are subject to credit risk.

F-19

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 3 - Summary of Significant Accounting Policies
(Continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments with
original maturities of three months or less when purchased to be cash
equivalents. The Company maintains bank accounts in the PRC and Hong Kong. All
PRC bank balances are denominated in CNY. Hong Kong bank balances are
denominated in USD. As of December 25, 2010 and December 25, 2009, the Company
had no cash equivalents.

Cash includes cash on hand and demand deposits in accounts
maintained with state-owned and private banks within the PRC and Hong Kong.

Restricted Cash

PRC banks grant mortgage loans to home purchasers and will
credit these amounts to the Companys bank account once title passes to the
purchasers. If the condominiums are not completed and the new homeowners have no
ownership documents to secure the loan, the bank will deduct 5% of the
homeowners loan from the Companys bank account and transfer that amount to a
designated bank account classified on the balance sheet as restricted cash.
Interest earned on the restricted cash is credited to the Companys normal bank
account. The bank will release the restricted cash after home purchasers have
obtained the ownership documents to secure the mortgage loan. Total restricted
cash amounted to $2,285,490 as of December 25, 2010 and $1,641,778 as of
December 25, 2009.

Allowance for Doubtful Accounts

The Company recognizes an allowance for doubtful accounts to
ensure contracts receivable, revenue in access of billings, related party
receivables and other receivables are not overstated due to uncollectability.
Bad debt reserves are maintained for all customers based on a variety of
factors, including the length of time the receivables are past due, significant
one-time events and historical experience. An additional reserve for individual
accounts is recorded when the Company becomes aware of a customer's or debtor's
inability to meet its financial obligation, such as in the case of bankruptcy
filings or deterioration in the customer's or debtors operating results or
financial position. If circumstances related to customers or debtors change,
estimates of the recoverability of receivables would be further adjusted. All
accounts receivable are reviewed periodically, and if the Company determines
that a specific doubtful account has become uncollectible, the account is
written off by removing the amount from the receivable account. For the years
ended December 25, 2010 and 2009, the Company has not recorded such write-off
for uncollectability. As of December 25, 2010 and December 25, 2009, the
allowances for doubtful accounts are $786,353 and $1,617,114 for contracts
receivable and revenue in excess of billings, and $146,980 and $272,361 for
other receivables, respectively.

An allowance for contracts receivable is established as
follows: 50% of the balances aged between one and two years and over CNY100,000
(approximately $15,000); 10% of the balances aged between one and two years and
under CNY100,000 (approximately $15,000); and 100% of the balances aged over two
years.

Inventory

Inventory is stated at the lower of cost or market, on a
specific identification basis. In addition to direct land acquisition, land
development and construction costs, costs include interest and direct overhead
which are capitalized to inventories during the period beginning with the
commencement of construction and ending with the completion of construction.

F-20

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 3 - Summary of Significant Accounting Policies
(Continued)

Property, Plant and Equipment, Net

Property, plant and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows:

| |                             |  | Estimated Useful Lives | 
| | --------------------------- |  | ---------------------- | 
| | Buildings and improvements  |  | 20 years               | 
| | Vehicles                    |  | 5 years                | 
| | Office equipment and others |  | 5 years                | 

Maintenance, repairs and minor renewals are charged directly to
expenses as incurred. Major additions and betterments to property, plant and
equipment are capitalized and depreciated over the remaining useful life of the
asset.

Impairment of Long-lived Assets

The Company reviews its long-lived assets other than goodwill
whenever events or changes in circumstances indicate that the carrying amount of
an asset may no longer be recoverable. When these events occur, the Company
measures impairment by comparing the carrying value of the long-lived assets to
the estimated undiscounted future cash flows expected to result from the use of
the assets and their eventual disposition. If the sum of the expected
undiscounted cash flows is less than the carrying amount of the assets, the
Company would recognize an impairment loss based on the fair value of the
assets. There was no impairment loss recognized for long-lived assets for the
years ended December 25, 2010, 2009 and 2008.

Goodwill

The Company accounts for acquisitions of business in accordance
with ASC 805, Business Combinations, which results in the recognition of
goodwill when the purchase price exceeds the fair value of net assets acquired.
Goodwill is not subject to amortization but will be subject to at least an
annual evaluation for impairment. The Company has performed such annual
evaluation in 2010 and determined that goodwill was not impaired as of December
25, 2010.

Goodwill is stated in the consolidated balance sheet at cost
less accumulated impairment loss. An analysis of changes in goodwill is as
follows:

| |                                |   | December 25, 2010 |  |   | December 25, 2009 | 
| | ------------------------------ | - | ----------------- |  | - | ----------------- | 
| | Opening balance                | $ | 3,620,670         |  | $ | 3,596,117         | 
| | Effect of exchange rate change | $ | 96,189            |  | $ | 24,553            | 
| | Closing balance                | $ | 3,716,859         |  | $ | 3,620,670         | 

F-21

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 3 - Summary of Significant Accounting Policies
(Continued)

Land Use Rights

Land use rights are related to the development rights for acres
of land in various projects. These rights are capitalized until a development
project commences on the land for which the rights have been acquired. At this
time, the rights are transferred to properties under construction inventory.
Land use rights are not subject to amortization but are subject to at least an
annual evaluation for impairment. The Company has performed such annual
evaluation in 2010 and determined that its land use rights were not impaired as
of December 25, 2010.

Land use rights are stated in the consolidated balance sheet at
cost less accumulated impairment loss. An analysis of changes in Land use rights
is as follows:

| |                                |   | December 25, 2010 |   |   | December 25, 2009 |  
| | ------------------------------ | - | ----------------- | - | - | ----------------- | -
| | Opening balance                | $ | 54,060,495        |   | $ | 64,655,669        |  
| | Transfer to WIP inventory      |   | (522,986          | ) |   | (11,036,630       | )
| | Effect of exchange rate change |   | 1,436,212         |   |   | 441,456           |  
| | Closing balance                | $ | 54,973,721        |   | $ | 54,060,495        |  

Income Taxes

The Company follows ASC 740, Income Taxes, which require
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the
tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each period end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.

The Company is governed by the Income Tax Laws of the PRC
concerning Chinese registered limited liability companies. Under the Income Tax
Laws of the PRC, Chinese enterprises are generally subject to an income tax at
an effective rate of 25% since January 1, 2008 and 33% prior to that date on
taxable income.

According to the Income Tax Laws of the PRC for real estate
developers, income tax of the Company is calculated by project. When all units
of a project are sold, the PRC tax department will assess the tax due on the
project and issue a tax due notification to the Company. The Company has to pay
the tax by the due date on the notification. If the Company does not pay the tax
by the due date, the tax department will charge the Company interest. The
Company includes any interest and penalties in general and administrative
expenses.

Deferred tax assets and liabilities are included in the
financial statements at currently enacted income tax rates applicable to the
period in which the deferred tax assets and liabilities are expected to be
realized or settled. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income taxes.

ASC 740 clarifies the accounting for uncertainty in income
taxes recognized in an enterprises financial statements and it prescribes a
recognition threshold and measurement attributable for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. ASC 740 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosures and
transitions.

F-22

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 3 - Summary of Significant Accounting Policies
(Continued)

Income Taxes (Continued)

The Company recognizes that virtually all tax positions in the
PRC are not free of some degree of uncertainty due to tax law and policy changes
by the PRC government. However, the Company cannot reasonably quantify political
risk factors and thus must depend on guidance issued by current PRC government
officials. Based on all known facts and circumstances and current tax law, the
Company believes that the total amount of unrecognized tax benefits as of
December 25, 2010 is not material to its results of operations, financial
condition or cash flows. The Company also believes that the total amount of
unrecognized tax benefits as of December 25, 2010, if recognized, would not have
a material effect on its effective tax rate. The Company further believes that
there are no tax positions for which it is reasonably possible, based on current
Chinese tax law and policy, that the unrecognized tax benefits will
significantly increase or decrease over the next 12 months producing,
individually or in the aggregate, a material effect on the Companys results of
operations, financial condition or cash flows.

Land Appreciation Tax (LAT)

In accordance with the relevant taxation laws in the PRC, the
Company is subject to LAT based on progressive rates ranging from 30% to 60% on
the appreciation of land value, which is calculated as the proceeds of sales of
properties less deductible expenditures, including borrowing costs and all
property development expenditures. The tax rules to implement the laws stipulate
that the whole project must be completed before the LAT obligation can be
assessed. Accordingly, the Company records the liability and the related expense
at the completion of a project, unless the tax authorities impose an assessment
at an earlier date. Deposits made against the eventual obligation are included
in prepaid expenses.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income is defined to include
all changes in equity except those resulting from investments by owners and
distributions to owners. The Companys only components of comprehensive income
during the years ended December 25, 2010, 2009 and 2008 were net income and the
foreign currency translation adjustment.

Statement of Cash Flows

In accordance with ASC 230, Statement of Cash Flows,
cash flows from the Companys operations are calculated based upon the local
currencies. As a result, amounts related to assets and liabilities reported on
the statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet.

Advertising Expenses

Advertising costs are expensed as incurred, or the first time
the advertising takes place, in accordance with ASC 720-35,

Advertising Costs.

For the years ended December 25, 2010, 2009 and 2008, the
Company recorded an advertising expense of $217,596, $268,222 and $112,263,
respectively.

F-23

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CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 3 - Summary of Significant Accounting Policies
(Continued)

Property Warranty

The Company and its subsidiaries provide customers with
warranties which cover major defects of building structure and certain fittings
and facilities of properties sold as stipulated in the relevant sales contracts.
The warranty period is one year. The Company constantly estimates potential
costs for materials and labor with regard to warranty-type claims expected to be
incurred subsequent to the delivery of a property.

Reserves are determined based on historical data and trends
with respect to similar property types and geographical areas. The Company
monitors the warranty reserve and makes adjustments to its pre-existing
warranties, if any, in order to reflect changes in trends and historical data as
information becomes available. The Company may seek further recourse against its
contractors or any related third parties if it can be proved that the faults are
caused by them. In addition, the Company also withholds up to 5% of the contract
cost from subcontractors for periods of two to five years. These amounts are
included in current liabilities, and are only paid to the extent that there have
been no warranty claims against the Company relating to the work performed or
materials supplied by the subcontractors. For the years ended December 25, 2010,
2009 and 2008, the Company has not recognized any warranty liability or incurred
any warranty costs in excess of the amount retained from subcontractors.

Earnings Per Share

Basic earnings per share is computed by dividing the earnings
for the period by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution of
securities by including other potential common stock equivalents, including
preference shares and warrants, in the weighted average number of common shares
outstanding for the period, if dilutive.

Note 4 - Contracts Receivable and Revenue in Excess of
Billings

Contracts receivable and revenue in excess of billings (see
Note 3) consist of balances due from customers for the sale of residential and
commercial units. In cases where the customers deposit more than 50% of the
total purchase price, the Company may defer the remaining purchase price. These
deferred balances are unsecured, bear no interest and are due within 360 days
from the date of the sale. Contracts receivable and revenue in excess of
billings are presented net of an allowance for doubtful accounts of $786,353 as
of December 25, 2010 and $1,617,114 as of December 25, 2009 respectively.

Note 5 - Related Party Transactions

As of December 25, 2010 and December 25, 2009, the Company has
a total of $1,159,577 and $2,949,102, respectively, due from Longhai Group and
its subsidiaries. Mr. Antoine Cheng is the controlling shareholder of Longhai
Group (See Notes 1 and 2). These balances have no stated terms for repayment and
are not interest bearing (See Note 23).

For the years ended December 25, 2010, 2009 and 2008, the
Company received rent payments of approximately $384,436, $381,160 and $372,962,
respectively, from Longhai Group (See Notes 1 and 2) for a restaurant and
banquet facility it leases from the Company. The lease is renewable annually.
The annual rent may be subject to adjustments at the time of the renewal.

One of the Companys major contractors for its construction
services and construction materials is Longhai Construction Ltd., a subsidiary
of Longhai Group. In the fiscal years ended December 25, 2010 and 2009, the
Company made payments to Longhai Construction Ltd. of approximately $14,170,029
and $13,784,000, respectively.

For the fiscal years ended December 25, 2010 and 2009, the
Company sold two floors of a project for office use to Longhai Construction
Ltd., a subsidiary of Longhai Group, recognizing revenues of approximately
$702,000 and $3,274,000, respectively. The Company did not make any related
party sales in the fiscal year 2008.

F-24

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 6 - Inventories

Inventories include properties held for sales and properties
under construction. The following summarizes the components of real estate
inventories at December 25, 2010 and December 25, 2009 (See Note 13):

| |                                                            |   | December 25, 2010 |  |   | December 25, 2009 | 
| | ---------------------------------------------------------- | - | ----------------- |  | - | ----------------- | 
| | Properties held for sale                                   | $ | 21,915,174        |  | $ | 35,549,529        | 
| | Properties under construction                              |   | 25,183,959        |  |   | 33,552,748        | 
| | Properties held for sale pledged for
      long-term loans |   | 1,350,499         |  |   | 2,132,197         | 
| | Properties under construction pledged for long-term loans  |   | 21,960,678        |  |   | 35,218,228        | 
| | Total                                                      | $ | 70,410,310        |  | $ | 106,452,702       | 

Note 7 - Other Receivables, Net

Other receivables consist of various cash advances to employees
and unrelated companies with which the Company has business relationships, as
well as an amount due from the government of Licang District, Qingdao (See Note
21). These amounts are unsecured, non-interest bearing and generally short term
in nature. As of December 25, 2010 and December 25, 2009, the balance of other
receivables was $25,867,452 and $1,634,987, respectively, which is net of an
allowance for doubtful accounts of $146,980 and $272,361, respectively.

Note 8 - Property and Equipment, Net

Property and equipment consist of the following at December 25,
2010 and December 25, 2009:

| |                             |   | December 25, 2010 |   |   | December 25, 2009 |  
| | --------------------------- | - | ----------------- | - | - | ----------------- | -
| | Buildings and improvements  | $ | 4,863,023         |   | $ | 3,756,672         |  
| | Vehicles                    |   | 629,693           |   |   | 392,615           |  
| | Office equipment and others |   | 94,173            |   |   | 67,938            |  
| | Idle assets                 |   | 1,808,401         |   |   | 1,761,600         |  
| |                             | $ | 7,395,290         |   | $ | 5,978,825         |  
| | Accumulated depreciation    |   | (1,303,781        | ) |   | (987,118          | )
| | Property and equipment, net | $ | 6,091,509         |   | $ | 4,991,707         |  

Depreciation expense for the years ended December 25, 2010,
2009 and 2008 was $290,728, $245,388 and $246,400, respectively, and is included
in general and administrative expenses on the Statements of Income and
Comprehensive Income.

Note 9 - Customer Deposits

Customer deposits consist of amounts received from customers
relating to the sale of residential and commercial units in the PRC. In the PRC,
customers will generally obtain permanent financing for the purchase of their
residential unit prior to the completion of the project. The lending institution
will provide the funding to the Company upon the completion of the financing
rather than the completion of the project. The Company receives these funds and
recognizes them as a current liability until the revenue can be recognized. As
of December 25, 2010, the Company has received $21,149,526 in deposits from
customers compared to $19,780,472 as of December 25, 2009.

F-25

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 10 - Other Payables

Other payables consist of various cash advances from unrelated
companies and individuals with which management of the Company has business
relationships. These amounts are unsecured, non-interest bearing and short term
in nature. As of December 25, 2010 and December 25, 2009, the balances of other
payables are $875,866 and $4,186,745, respectively.

Note 11 - Taxes Payable

Taxes payable consist of the following at December 25, 2010 and
December 25, 2009:

| |              |   | December 25, 2010 |  |   | December 25, 2009 | 
| | ------------ | - | ----------------- |  | - | ----------------- | 
| | Business tax | $ | 10,316,360        |  | $ | 6,461,389         | 
| | Income tax   |   | 19,142,802        |  |   | 18,847,145        | 
| | Others       |   | 1,512,739         |  |   | 741,422           | 
| | Total        | $ | 30,971,901        |  | $ | 26,049,956        | 

The Company prepaid LAT and other taxes of $2,762,239 and
$1,461,670 as of December 25, 2010 and December 25, 2009, respectively, which
are classified as prepaid expenses.

Note 12 - Short-term Loans

As of December 25, 2010 and December 25, 2009, the Company has
several short-term loans from banks and employees totaling $1,417,264 and
$2,719,432, respectively. The weighted average interest rate for the short-term
bank loans was approximately 7.29% and 5.82% as of December 25, 2010 and 2009,
respectively. The weighted average interest rate for employee loans was
approximately 9.14% on December 25, 2010 and 5.64% as of December 25, 2009.

The short-term loans were borrowed from several financial
institutions and employees. Interest expense incurred was $310,322, $149,502 and
$110,719 for the years ended December 25, 2010, 2009 and 2008, respectively.
There was approximately $0, $0, and $3,751 capitalized interest from short-term
loans for the years ended December 25, 2010, 2009 and 2008, respectively.

As of December 25, 2010, the amount, maturity date and term of
each the Companys short-term loans were as follows:

|Lender                                               |  | Amount Outstanding                             |  | Interest Rate |  |  | Maturity Date     |  |  | Duration | 
|---------------------------------------------------- |  | ---------------------------------------------- |  | ------------- |  |  | ----------------- |  |  | -------- | 
|Rural Credit Cooperatives Fangzi Branch              |  | RMB 9,000,000
      (approximately $1,356,300) |  | 8.59%         |  |  | December 07, 2011 |  |  | 1 year   | 
|Employee Loan (China Agricultural Bank Laixi Branch) |  | RMB 404,540 (approximately $60,964)            |  | 10.47%        |  |  | December 25, 2011 |  |  | 1 year   | 
|Total                                                |  | RMB 9,404,540
      (approximately $1,417,264) |  |               |  |  |                   |  |  |          | 

F-26

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 13 - Long-term Debt

The Company has long-term loans from various financial
institutions totaling $35,414,500 as of December 25, 2010 and $39,621,320 as of
December 25, 2009 (See Note 6). The payment schedule for the long-term loans is
as follows:

| | February 25, 2011 | $ | 753,500    | 
| | ----------------- | - | ---------- | 
| | May 25, 2011      | $ | 904,200    | 
| | August 25, 2011   | $ | 1,205,600  | 
| | November 25, 2011 | $ | 26,523,200 | 
| | December 25, 2011 | $ | 6,028,000  | 

All long-term loans are borrowed for construction projects. The
interest rates of the long term loans ranged from approximately 5.60% to 7.15%
in the year ended December 25, 2010, 5.31% to 14.74% in the year ended December
25, 2009 and 6.48% to 8.49% in the year ended December 25, 2008.

Total interest incurred was $2,234,184, $3,046,384 and
$3,626,402 in the years ended December 25, 2010, 2009 and 2008, respectively, of
which capitalized interest was $2,234,184, $2,329,135 and $2,764,660,
respectively.

As of December 25, 2010, the amount, maturity date and term of
each the Companys long-term loans are as follows:

|Lender                                                    |  | Amount Outstanding                                |  | Interest Rate |  |  | Maturity Date     |  |  | Duration | 
|--------------------------------------------------------- |  | ------------------------------------------------- |  | ------------- |  |  | ----------------- |  |  | -------- | 
|China Industry and Commercial Bank
      Chengyang Branch |  | RMB 195,000,000
      approximately $29,386,500)  |  | 7.15%         |  |  | November 25, 2011 |  |  | 3 years  | 
|China Construction Bank Weihai Branch                     |  | RMB 40,000,000 (approximately $6,028,000)         |  | 5.60%         |  |  | December 2, 2011  |  |  | 2 years  | 
|Total                                                     |  | RMB 235,000,000
      (approximately $35,414,500) |  |               |  |  |                   |  |  |          | 

F-27

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 14 - Income Taxes

Beginning January 1, 2008, the new Chinese Enterprise Income
Tax (EIT) law replaced the former income tax laws for Domestic Enterprises
(DEs) and Foreign Invested Enterprises (FIEs). The new standard EIT rate of
25% replaced the 33% rate previously applicable to both DEs and FIEs.

A reconciliation for the years ended December 25, 2010, 2009
and 2008 between approximate taxes computed at the PRC statutory rate of 25% and
the Company's effective tax rate is as follows:

|                                                      |   | 2010       |   |   | 2009      |  |   | 2008      |  
|----------------------------------------------------- | - | ---------- | - | - | --------- |  | - | --------- | -
|At PRC statutory rate of 25%                          | $ | 12,496,000 |   | $ | 7,553,000 |  | $ | 6,396,000 |  
|Tax effect of permanent difference                    |   | 2,080,000  |   |   | 988,000   |  |   |          |  
|Effect of statutory rate difference                   |   | 627,000    |   |   | 29,000    |  |   |          |  
|Change in valuation allowance                         |   | (148,000   | ) |   | 243,000   |  |   | 498,000   |  
|Expiration of net operating loss carry
      forwards |   |           |   |   | 195,000   |  |   |          |  
|Others                                                |   | (13,000    | ) |   | 50,000    |  |   | (292,000  | )
|Income tax at effective rate                          | $ | 15,042,000 |   | $ | 9,058,000 |  | $ | 6,602,000 |  

The tax effects of temporary differences that give rise to the
following approximate deferred tax assets and liabilities are presented below.

|                                                                             |   | December 25, |  
|---------------------------------------------------------------------------- | - | ------------ | -
|                                                                             |   | 2010         |  
|Deferred tax assets                                                          |   |              |  
|Short term deferred tax assets:                                              |   |              |  
|Allowance
      for bad debt                                                 | $ | 233,000      |  
|Less: Valuation allowance                                                    |   | (233,000     | )
|                                                                             |   |             |  
|Long term deferred tax assets:                                               |   |              |  
|Net
      operating loss carryforwards                                       | $ | 453,000      |  
|Combined effect due to
      reporting revenues and expenses differently for |   |              |  
|financial
      statement and income tax purposes                            |   | 888,000      |  
|Less: Valuation allowance                                                    |   | (360,000     | )
|                                                                             | $ | 981,000      |  
|Deferred tax liabilities                                                     |   |              |  
|Combined
      effect due to reporting revenues and expenses differently for |   |              |  
|financial statement and
      income tax purposes                            | $ | 23,704,000   |  

As of December 25, 2010, the Company has net operating loss
carryforwards of approximately $1,271,420 which expire at varying years through
2013, and net operating loss carryforwards of approximately $750,000, which will
not expire.

F-28

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 15 - Appropriated Retained Earnings

In accordance with the PRC Company Law, the Company is required
to transfer 15% of its profit after tax, as determined in accordance with PRC
accounting standards and regulations, to the statutory surplus reserve (the
SSR) until such reserve reaches 50% of the registered capital of the
subsidiaries. Subject to certain restrictions set out in the PRC Company Law,
the SSR may be distributed to stockholders in the form of share bonus issues to
increase share capital, provided that the remaining balance after the
capitalization is not less than 25% of the registered capital.

The Company appropriates retained earnings at the end of each
quarter and will determine the annual appropriation to the reserve funds at the
year end when the annual net income is finalized.

Note 16  Basic and Diluted Weighted Average Number of
Shares

The following table summarizes the basic and diluted weighted
average number of shares.

|                                          |  | December 25, | 
|----------------------------------------- |  | ------------ | 
|                                          |  | 2010         | 
|Basic weighted average number of shares   |  | 30,770,172   | 
|Assumed conversion of preference shares   |  | 1,938,489    | 
|Diluted weighted average number of shares |  | 32,708,661   | 

Note 17 - Employee Welfare Plan

Regulations in the PRC require the Company to contribute to a
defined contribution retirement plan for all permanent employees. Pursuant to
the mandatory requirement from the local authority in the PRC, the retirement
pension insurance, unemployment insurance, health insurance, injury insurance
and pregnancy insurance are established for the employees during the term of
employment. For the year ended December 25, 2010, the Company contributed
$159,840 (2009: $87,776, 2008: $50,759).

F-29

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 18 - Recent Pronouncements

ASU No. 2010-06,Fair Value Measurements and
Disclosures (Topic 820)  Improving Disclosures about Fair Value Measurements

This ASU affects all entities that are required to make
disclosures about recurring and nonrecurring fair value measurements under FASB
ASC Topic 820, originally issued as FASB Statement No. 157, Fair Value
Measurements. The ASU requires certain new disclosures and clarifies two
existing disclosure requirements. The new disclosures and clarifications of
existing disclosures are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements. Those disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years.

ASU No. 2010-08,Technical Corrections to Various
Topics

This ASU eliminates certain inconsistencies and outdated
provisions and provides needed clarifications. The changes are generally non
substantive in nature and will not result in pervasive changes to current
practice. However, the amendments that clarify the guidance on embedded
derivatives and hedging (ASC Subtopic 815-15) may cause a change in the
application of that Subtopic. The clarifications of the guidance on embedded
derivatives and hedging (Subtopic 815-15) are effective for fiscal years
beginning after December 15, 2009. The other amendments are effective as of the
first reporting period (including interim periods) beginning after February 2,
2010.

ASU No. 2010-13,Compensation - Stock Compensation
(Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment
Award in the Currency of the Market in Which the Underlying Equity Security
Tradesa consensus of the FASB Emerging Issues Task Force

This ASU clarifies that an employee share-based payment award
with an exercise price denominated in the currency of a market in which a
substantial portion of the entitys equity securities trades should not be
considered to contain a condition that is not a market, performance, or service
condition. Therefore, an entity would not classify such an award as a liability
if it otherwise qualifies as equity. This ASU is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2010.

ASU No. 2010-17,Revenue RecognitionMilestone
Method (Topic 605) - Milestone Method of Revenue Recognition - a consensus of
the FASB Emerging Issues Task Force

This ASU provides guidance to vendors on the criteria that
should be met for determining whether the milestone method of revenue
recognition is appropriate. This ASU is effective on a prospective basis for
milestones achieved in fiscal years, and interim periods within those years,
beginning on or after June 15, 2010.

ASU 2010-20,Disclosures about the Credit Quality
of Financing Receivables and the Allowance for Credit Losses

This ASU requires companies to provide more information in
their disclosures about the credit quality and risk exposures of their financing
receivables and the credit reserves held against them. For public companies, the
amendments that require disclosures as of the end of a reporting period are
effective for periods ending on or after December 15, 2010. The amendments that
require disclosures about activity that occurs during a reporting period are
effective for periods beginning on or after December 15, 2010.

F-30

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 18 - Recent Pronouncements (Continued)

ASU 2010-28,IntangiblesGoodwill and Other (Topic
350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units
with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues
Task Force)

This ASU modifies Step 1 of the goodwill impairment test for
reporting units with zero or negative carrying amounts. For those reporting
units, an entity is required to perform Step 2 of the goodwill impairment test
if it is more likely than not that a goodwill impairment exists. In determining
whether it is more likely than not that a goodwill impairment exists, an entity
should consider whether there are any adverse qualitative factors indicating
that an impairment may exist. For public entities, the amendments are effective
for fiscal years, and interim periods within those years, beginning after
December 15, 2010.

ASU 2010-29,Business Combinations
(Topic 805): Disclosure of Supplementary Pro Forma
Information for Business Combinations (a consensus of the FASB EITF)

This ASU specifies that if a public entity presents comparative
financial statements, the entity should disclose revenue and earnings of the
combined entity as though the business combination(s) that occurred during the
current year had occurred as of the beginning of the comparable prior annual
reporting period only. The ASU also expands the supplemental pro forma
disclosures under ASC Topic 805. The amendments are effective prospectively for
business combinations for which the acquisition date is on or after December 15,
2010.

None of these recent pronouncements are expected to have a
material effect on the Companys financial position or results of operations.

F-31

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 19  Stock Options  Equity Incentive Plan

On October 12, 2010, the Companys board of directors,
compensation committee and shareholders adopted the China Oumei Real Estate Inc.
2010 Equity Incentive Plan (the Equity Incentive Plan), which became effective
on November 4, 2010. The Equity Incentive Plan permits the grant of incentive
share options, nonstatutory share options (i.e., options not intended to qualify
as incentive share options), restricted shares, share grants, restricted share
units, share appreciation rights, performance units and performance shares to
employees, directors, and consultants of the Company and its affiliates. Up to
3,000,000 ordinary shares may be issued under the Equity Incentive Plan;
provided that the number and class of shares available under the Equity
Incentive Plan are subject to adjustment in the event of certain
reorganizations, mergers, combinations, recapitalizations, share splits, share
dividends, or other similar events which change the number or kind of shares
outstanding.

The following table sets forth information regarding equity
grants to named executive officers during the fiscal year ended December 25,
2010.

Name
    Grant Date
    All other option
      awards: Number of securities underlying
      options (#)
    Exercise or base
      price of option awards ($/Sh)
    Grant date fair
      value of stock and option awardsWeiqing Zhang
    11/04/2010
    434,000
    $5.00
    $2.36Zhaohui John Liang
    11/04/2010
    372,000
    $5.00
    $2.36Yang Chen
    11/04/2010
    434,000
    $5.00
    $2.36


On November 4, 2010, the Company granted to Mr. Weiqing Zhang
(Chief Executive Officer), Mr. Zhaohui John Liang (Chief Financial Officer) and
Mr. Yang Chen (President) options to purchase 434,000, 372,000 and 434,000
ordinary shares, respectively, under the Equity Incentive Plan. In addition, the
Company granted options to purchase an additional 310,000 ordinary shares to
employees of the Company. Each option has an exercise price of $5.00 per share
and vests with respect to 50% of the shares underlying the option on December
15, 2010, and thereafter with respect to 5% of such shares on each successive
one-month anniversary thereof, commencing with the first such anniversary;
provided, however, that such person remains an employee of the Company or any
affiliate of the Company as of each vesting date; and provided further, that the
option cannot begin vesting until the consummation of the Companys public
offering, which has not yet been completed. However, upon the consummation of
the public offering, the option will have an immediate vesting of all shares
that would have otherwise vested at such time. Mr. Liangs option also vests in
full if he is terminated without cause.

Estimated future compensation costs in connection with these
stock options, based on the grant date fair value, are estimated at $3,658,000
in total.

The grant date value for options granted was calculated in
accordance with FASB ASC Topic 718. The fair value of each option is estimated
on the date of grant using the Dividend Adjusted Black-Scholes option-pricing
model using the assumptions noted below.

Option GrantedAverage risk-free rate of return
    1.21%Expected term
    5.5 YearsVolatility rate
    105%Dividend yield
    0%


F-32

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 19  Stock Options  Equity Incentive Plan (Continued)

The risk-free rate for periods within the expected life of the
option is based on the implied yield rates of the Federal Reserve Bank U.S.
Treasury Yield as of the valuation date. The expected life of options represents
the period of time the granted options are expected to be outstanding. As the
Company had not granted options before, no historical exercising pattern could
be followed in estimating the expected life. Therefore, the expected life is
estimated as the average of the contractual term and the vesting period. The
Company has not paid dividends in the past nor does it expect to pay dividends
on its ordinary shares in the foreseeable future. Because the Company lacks
sufficient trading history, the expected volatility was based on the historical
volatilities of comparable publicly traded companies engaged in similar
businesses.

Between the grant date of the stock options discussed and
December 25, 2010, none of the options have expired or have been exercised,
repurchased or cancelled.

The following table sets forth the equity awards outstanding at
December 25, 2010 for each named executive officer.

Name
    OPTION AWARDSNumber of
      securities underlying unexercised
      options (#) exercisable
    Number of
      securities underlying unexercised
      options (#) unexercisable
    Equity incentive
      plan awards: number of securities
      underlying unexercised unearned options
      (#)
    Option
      exercise price ($)
    Option
      expiration dateWeiqing Zhang
    
    434,000
    
    $5.00
    11/03/2020Zhaohui John Liang
    
    372,000
    
    $5.00
    11/03/2020Yang Chen
    
    434,000
    
    $5.00
    11/03/2020


F-33

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 20 - Condensed Financial Information of Parent Company

Payments of dividends may be subject to some restrictions due
to the fact that the operating activities are conducted in subsidiaries residing
in the PRC. The laws and regulations of the PRC currently permit the payment of
dividends only out of accumulated profits as determined in accordance with
Chinese accounting standards and regulations. The Companys subsidiaries in the
PRC are also required to set aside a portion of their after tax profits
according to Chinese accounting standards and regulations to fund certain
reserve funds. Currently, subsidiaries in China are the only sources of revenues
or investment holdings for the payment of dividends. If they do not accumulate
sufficient profits under Chinese accounting standards and regulations to first
fund certain reserve funds as required, the Company will be unable to pay any
dividends. The Company currently intends to retain any future earnings for use
in the operation and expansion of its business. No cash dividends have been paid
to the parent company for the last three fiscal years. In accordance with Rule
504/4.08 (e) (3) of Regulation S-X, the following are condensed parent company
only financial statements as of and for the three years ended December 25, 2010,
2009 and 2008.

CHINA OUMEI REAL ESTATE INC.CONDENSED PARENT
COMPANY ONLYBALANCE SHEETS

|                                                                                                                                                    |   | December 25, | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------ | 
|                                                                                                                                                    |   | 2010         | 
|Current assets                                                                                                                                      |   |              | 
|Cash and cash equivalents                                                                                                                           | $ | 611,669      | 
|Restricted cash                                                                                                                                     |   | 230,954      | 
|Related party receivable                                                                                                                            |   | 8,785,041    | 
|Total
      current assets                                                                                                                          |   | 9,627,664    | 
|Investment in subsidiary                                                                                                                            |   | 89,973,117   | 
|Total
      assets                                                                                                                                  | $ | 99,600,781   | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                |   |              | 
|CURRENT LIABILITIES                                                                                                                                 |   |              | 
|Payable to affiliate                                                                                                                                | $ | 28,977       | 
|Accounts payable                                                                                                                                    |   | 13,004       | 
|Other payables                                                                                                                                      |   | 80,000       | 
|Total current liabilities                                                                                                                           |   | 121,981      | 
|SHAREHOLDERS EQUITY                                                                                                                                |   |              | 
|Preference
      stock, $0.002112 par value, 20,000,000 shares authorized, 2,774,700 shares
      issued and outstanding                            |   | 5,860        | 
|Common stock, par value
      $0.002112 per share, 100,000,000 shares authorized, 31,020,062 shares
      issued and outstanding (2009: 30,235,062) |   | 65,514       | 
|Additional paid
      in capital                                                                                                                    |   | 8,651,349    | 
|Warrants outstanding                                                                                                                                |   | 3,177,032    | 
|Unappropriated
      retained earnings                                                                                                              |   | 87,579,045   | 
|Total shareholders equity                                                                                                                          |   | 99,478,800   | 
|Total liabilities and
      shareholders equity                                                                                                    | $ | 99,600,781   | 

F-34

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 20 - Condensed Financial Information of Parent Company
(Continued)

CHINA OUMEI REAL ESTATE INC.CONDENSED PARENT
COMPANY ONLYSTATEMENTS OF INCOME AND COMPREHENSIVE INCOME

|                                          |   | DECEMBER 25, |  
|----------------------------------------- | - | ------------ | -
|                                          |   | 2010         |  
|Revenues                                  | $ |             |  
|Expenses                                  |   |              |  
|General and
      administrative expenses |   | 2,371,688    |  
|Total operating expenses                  |   | 2,371,688    |  
|Operating loss                            |   | (2,371,688   | )
|Interest income, net of interest expense  |   |             |  
|Equity in earnings of
      subsidiary    |   | 37,314,146   |  
|Net income                                | $ | 34,942,458   |  

F-35

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 20 - Condensed Financial Information of Parent Company
(Continued)

CHINA OUMEI REAL ESTATE INC.CONDENSED PARENT
COMPANY ONLYSTATEMENTS OF CASH FLOWS

|                                                                              |   | DECEMBER 25, |  
|----------------------------------------------------------------------------- | - | ------------ | -
|                                                                              |   | 2010         |  
|Cash flows from operating
      activities                                    |   |              |  
|Net income                                                                    | $ | 34,942,458   |  
|Adjustments
      to reconcile net loss to cash used in operating activities: |   |              |  
|Pre-merger
      loss of Dragon Acquisition Corporation                       |   | (12,182      | )
|Shares issued for services                                                    |   | 1,576,392    |  
|Equity in
      earnings of subsidiary                                        |   | (37,314,146  | )
|Changes in operating assets and liabilities                                   |   |              |  
|Related party receivables                                                     |   | (8,785,041   | )
|Payable to affiliate                                                          |   | 5,024        |  
|Accounts payable                                                              |   | 7,158        |  
|Other payables                                                                |   | 80,000       |  
|Net cash used in operating
      activities                                   |   | (9,500,337   | )
|Cash flows from financing
      activities                                    |   |              |  
|Cash receipts from financing
      through private placement                  |   | 10,323,040   |  
|Restricted cash
      in holdback account                                     |   | (230,954     | )
|Net cash provided by financing
      activities                               |   | 10,092,086   |  
|Net increase (decrease) in
      cash                                         |   | 591,749      |  
|Cash at beginning of the year                                                 |   | 19,920       |  
|Cash at end of the year                                                       | $ | 611,669      |  
|Supplemental disclosures of cash flow
      information:                      |   |              |  
|Interest paid                                                                 | $ |             |  
|Income taxes paid                                                             | $ |             |  

F-36

---

CHINA OUMEI REAL ESTATE INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER
25, 2010, 2009 AND 2008

Note 21  Other Income

On December 16, 2010, the Company executed a buyout transaction
with the government of Licang District, Qingdao, in which the government agreed
to pay the Company approximately $23,657,600 in exchange for the pre-development
land use right in connection with the planned Dongli Garden 2 project. The
Company had previously planned to build residential units on the land, subject
to the governments re-zoning procedure. Prior to the transaction, the
historical cost of the land use right was zero due to the fact that it was
categorized as state allocated land, allocated to the Company at no cost by
the local government for helping the government relocate and provide affordable
housing for villagers previously residing on the parcel, as part of a
government-sponsored master-planned urban modernization project. The parcel had
no value until re-zoned by the government for commercial development. Therefore,
no cost was incurred in connection with this transaction, and the income of
approximately $23,657,600 was included in Other Income in the Consolidated
Statement of Income and Comprehensive Income for the year ended December 25,
2010. The account receivable in connection with this transaction as of December
25, 2010 was approximately $21,098,000, which was included in Other
receivables, net in the Consolidated Balance Sheet for the year ended December
25, 2010.

Note 22  Commitments and Contingencies

Contractual obligations as of December 25, 2010 include an
operating lease for a company cafeteria, for which the lease payment schedule is
approximately $38,000, $226,000 and $188,000 for the years ended December 25,
2011, 2012 and 2013, respectively. The Company does not have other material
lease commitments. The Company does not participate in, or secure financing for,
any unconsolidated limited purpose entities. There is no significant legal
proceeding as of December 25, 2010.

Note 23 - Subsequent Events

On December 31, 2010, the Company paid a preference dividend to
the holders of the Preference Shares, in the amount of $476,184, pursuant to the
Subscription Agreement.

In January 2011, the Company made an advance in the amount of
RMB 190,000,000 (approximately $28.6 million) to Longhai Group. This was in
addition to the total of $1,159,577 due from Longhai Group and its subsidiaries
as of December 25, 2010. As of March 14, 2011, these loans have all been paid
back. Mr. Antoine Cheng is the controlling shareholder of Longhai Group (See
Notes 1 and 2). These balances had no stated terms for repayment and were not
interest bearing. The Company has no intention to extend similar loans to
related parties in the future.

Note 24  Reclassifications

Certain reclassifications have been made to the December 25,
2009 and 2008 figures in order to conform them to the current years
presentation.

F-37

---

EXHIBIT INDEX

|Exhibit
      No. |  | Description                                                                                                                                                                                                                                                                                                                      
|----------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1               |  | Amended and Restated Memorandum
      and Articles of Association of the Company [incorporated by reference to
      Exhibit 3.1 to the Companys Current Report on Form 8-K filed on August 6,
      2010]                                                                                                                      
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|2.1               |  | Form of Investor Warrant,
      issued April 14, 2010 [incorporated by reference to Exhibit 4.1 to the
      Companys Current Report on Form 8-K filed on April 19, 2010]                                                                                                                                                       
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.1               |  | Share Exchange Agreement, dated
      April 14, 2010, by and among the Company, Leewell Investment Group
      Limited, Longhai Holdings Company Limited and its shareholder
      [incorporated by reference to Exhibit 2.1 to the Companys Current Report
      on Form 8-K filed on April 19, 2010]                          
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.2               |  | Form of Subscription Agreement,
      dated April 14, 2010 [incorporated by reference to Exhibit 10.1 to the
      Companys Current Report on Form 8-K filed on April 19, 2010]                                                                                                                                                 
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.3               |  | Amendment No.1 to Subscription
      Agreement, dated October 11, 2010, by and among the Company and the
      subscribers identified therein [incorporated by reference to Exhibit 10.1
      to the Companys Current Report on Form 8-K filed on October 13, 2010]                                                            
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.4               |  | Make Good Escrow Agreement,
      dated April 14, 2010, by and among the Company, Longhai Holdings Company
      Limited, Access America Investments, LLC and Collateral Agents, LLC, as
      escrow agent [incorporated by reference to Exhibit 10.2 to the Companys
      Current Report on Form 8-K filed on April 19, 2010]
|                  |  |                                                                                                                                                                                                                                                                                                                                  
|4.5               |  | Holdback Escrow Agreement,
      dated April 14, 2010, by and among the Company, Brean Murray, Carret &
      Co., LLC, Access America Investments, LLC and Collateral Agents, LLC, as
      escrow agent [incorporated by reference to Exhibit 10.3 to the Companys
      Current Report on Form 8-K filed on April 19, 2010]  

---

|Exhibit
      No. |  | Description                                                                                                                                                                                                                                                                                                                                                            
|----------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.6               |  | Investor Relations Escrow
      Agreement, dated April 14, 2010, by and among the Company, Brean Murray,
      Carret & Co., LLC, Access America Investments, LLC and Collateral
      Agents, LLC, as escrow agent [incorporated by reference to Exhibit 10.4 to
      the Companys Current Report on Form 8-K filed on April 19, 2010]                              
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.7               |  | Lockup Agreement, dated April
      14, 2010, between the Company and Longhai Holdings Company Limited
      [incorporated by reference to Exhibit 10.5 to the Companys Amendment No .
      1 to Registration Statement on Form S-1/A filed on June 21, 2010]                                                                                                        
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.8               |  | Lockup Agreement, dated April
      14, 2010, between the Company and Antoine Cheng [incorporated by reference
      to Exhibit 10.6 to the Companys Amendment No . 1 to Registration
      Statement on Form S-1/A filed on June 21, 2010]                                                                                                                           
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.9               |  | Lockup Agreement, dated April
      14, 2010, between the Company and Weiqing Zhang [incorporated by reference
      to Exhibit 10.7 to the Companys Amendment No . 1 to Registration
      Statement on Form S-1/A filed on June 21, 2010]                                                                                                                           
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.10              |  | Lockup Agreement, dated April
      14, 2010, between the Company and Yang Chen [incorporated by reference to
      Exhibit 10.8 to the Companys Amendment No . 1 to Registration Statement
      on Form S-1/A filed on June 21, 2010]                                                                                                                               
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.11              |  | Lockup Agreement, dated April
      14, 2010, between the Company and Zhongbo Zhou [incorporated by reference
      to Exhibit 10.9 to the Companys Amendment No . 1 to Registration
      Statement on Form S-1/A filed on June 21, 2010]                                                                                                                            
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.12              |  | Form of Lockup Agreement
      [incorporated by reference to Exhibit 10.49 to the Companys Amendment No.
      8 to Registration Statement on Form S-1/A filed on March 22, 2011]                                                                                                                                                                                     
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.13              |  | Share Purchase Agreement, dated
      September 5, 2007, between Zhang Weiqing and Leewell Investment Group
      Limited (English Translation) [incorporated by reference to Exhibit 10.6
      to the Companys Current Report on Form 8-K filed on April 19, 2010]                                                                                                  
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.14              |  | Share Purchase Agreement, dated
      September 5, 2007, between Cheng Xiaoyan and Leewell Investment Group
      Limited (English Translation) [incorporated by reference to Exhibit 10.7
      to the Companys Current Report on Form 8-K filed on April 19, 2010]                                                                                                  
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.15              |  | Share Purchase Agreement, dated
      January 19, 2008, among Cheng Defeng, Wang Yingchun and Qingdao Oumei Real
      Estate Development Co., Ltd. (English Translation) [incorporated by
      reference to Exhibit 10.8 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                  
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.16              |  | Share Purchase Agreement, dated
      January 22, 2008, between Zhang Weiqing and Qingdao Oumei Real Estate
      Development Co., Ltd. (English Translation) [incorporated by reference to
      Exhibit 10.9 to the Companys Current Report on Form 8-K filed on April
      19, 2010]                                                                              
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.17              |  | Share Purchase Agreement, dated
      January 23, 2008, among Cheng Defeng, Miao Shuangji and Qingdao Oumei Real
      Estate Development Co., Ltd. (English Translation) [incorporated by
      reference to Exhibit 10.10 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                 
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.18              |  | Share Purchase Agreement, dated
      January 24, 2008, among Li Jie, Li Keyu, Liu Fangyu, Wang Meiling, Jiang
      Guo, Qingdao Longhai Investment Group and Qingdao Oumei Real Estate
      Development Co., Ltd. (English Translation) [incorporated by reference to
      Exhibit 10.11 to the Companys Current Report on Form 8-K filed on April
      19, 2010]
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.19              |  | Share Purchase Agreement, dated
      August 27, 2008, among Qingdao Longhai Investment Group, Qingdao Longhai
      Luqiao Co., Ltd, Gao Xuling and Qingdao Oumei Real Estate Development Co.,
      Ltd. (English Translation) [incorporated by reference to Exhibit 10.12 to
      the Companys Current Report on Form 8-K filed on April 19, 2010]                
|                  |  |                                                                                                                                                                                                                                                                                                                                                                        
|4.20              |  | Share Purchase Agreement, dated
      August 28, 2008, between Qingdao Pingdu Xinyuan Real Estate Development
      Co., Ltd and Qingdao Oumei Real Estate Development Co., Ltd. (English
      Translation) [incorporated by reference to Exhibit 10.13 to the Companys
      Current Report on Form 8-K filed on April 19, 2010]                                    

---

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                          
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.21        |  | Share Purchase
      Agreement, dated August 29, 2008, among Qingdao Hexiang Fuzhuang Ltd,
      Qingdao Fuhai Fangzhi Ltd and Qingdao Oumei Real Estate Development Co.,
    Ltd. (English Translation) [incorporated by reference to Exhibit 10.4 to the
    Companys Current Report on Form 8-K filed on April 19, 2010]                                                         
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.22        |  | Share Purchase Agreement, dated
      June 25, 2009, among Qingdao Longhai Investment Group, Wang Hongde and
      Qingdao Oumei Real Estate Development Co., Ltd. (English Translation)
      [incorporated by reference to Exhibit 10.15 to the Companys Current
      Report on Form 8-K filed on April 19, 2010]                                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.23        |  | Share Purchase Agreement, dated
      September 25, 2009, among Wang Yingchun, Wang Jinghua and Qingdao Oumei
      Real Estate Development Co., Ltd. (English Translation) [incorporated by
      reference to Exhibit 10.16 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                             
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.24        |  | Construction Contact, dated
      April 11, 2009, between Weihai Economic & Technology Development Zone
      Longhai Properties Co., Ltd. and Shanghai Baogang Construction Engineering
      Corporation (English Translation) [incorporated by reference to Exhibit
      10.17 to the Companys Current Report on Form 8-K filed on April 19, 2010]                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.25        |  | Construction Contract, dated
      October 8, 2006, between Qingdao Xudong Real Estate Development Co., Ltd.
      and Qingdao Longhai Construction Group Co., Ltd. (English Translation)
      [incorporated by reference to Exhibit 10.18 to the Companys Current
      Report on Form 8-K filed on April 19, 2010]                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.26        |  | Construction Contract, dated
      July 26, 2006, between Weihai Economic & Technology Development Zone
      Longhai Properties Co., Ltd. and Qingdao Longhai Construction Group Co.,
      Ltd. (English Translation) [incorporated by reference to Exhibit 10.19 to
      the Companys Current Report on Form 8-K filed on April 19, 2010]                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.27        |  | Construction Contract, dated
      April 23, 2004, between Weifang Longhai Zhiye Co., Ltd. and Qingdao
      Zhongxin Construction Group Co., Ltd. (English Translation) [incorporated
      by reference to Exhibit 10.20 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.28        |  | Construction Supervision
      Contract, dated August 21, 2009, between Weihai Economic & Technology
      Development Zone Longhai Properties Co., Ltd. and Weihai Tianhen Project
      Consulting Management Co., Ltd. (English Translation) [incorporated by
      reference to Exhibit 10.21 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]         
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.29        |  | Loan Agreement, dated November
      30, 2009, between Weihai Economic & Technology Development Zone
      Longhai Properties Co., Ltd. and China Construction Bank, Weihai Branch
      (English Translation) [incorporated by reference to Exhibit 10.24 to the
      Companys Current Report on Form 8-K filed on April 19, 2010]                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.30        |  | Loan Agreement, dated November
      21, 2008, between Caoxian Industrial Properties Co., Ltd. and China
      Construction Bank, Caoxian Branch (English Translation) [incorporated by
      reference to Exhibit 10.25 to the Companys Current Report on Form 8-K
      filed on April 19, 2010]                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.31        |  | Loan Agreement, dated May 28,
      2007, between Qingdao Xudong Real Estate Development Co., Ltd. and
      Industrial and Commercial Bank of China, Qingdao Chengyang Branch (English
      Translation) [incorporated by reference to Exhibit 10.26 to the Companys
      Current Report on Form 8-K filed on April 19, 2010]                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.32        |  | Loan Term Extension Agreement,
      dated May 20, 2010, between Qingdao Xudong Real Estate Development Co.,
      Ltd. and Industrial and Commercial Bank of China, Qingdao Chengyang Branch
      (English Translation) [incorporated by reference to Exhibit 10.30 to the
      Companys Amendment No. 5 to Registration Statement on Form S-1/A filed on
      November 2, 2010]
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.33        |  | China Oumei Real Estate Inc.
      2010 Equity Incentive Plan [incorporated by reference to Exhibit 10.1 to
      the Companys Current Report on Form 8-K filed on October 15, 2010]                                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                      
|4.34        |  | Form of Share Option Agreement
      relating to China Oumei Real Estate Inc. 2010 Equity Incentive Plan
      [incorporated by reference to Exhibit 10.2 to the Companys Current Report
      on Form 8-K filed on October 15, 2010]                                                                                                                                               

---

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                  
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.35        |  | Form of Restricted Share Award
      Agreement relating to China Oumei Real Estate Inc. 2010 Equity Incentive
      Plan [incorporated by reference to Exhibit 10.3 to the Companys Current
      Report on Form 8-K filed on October 15,
      2010]                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.36        |  | Employment Agreement, dated
      June 28, 2007, between Qingdao Oumei Real Estate Development Co., Ltd. and
      Weiqing Zhang (English Translation) [incorporated by reference to Exhibit
      10.28 to the Companys Current Report on Form 8-K filed on April 19, 2010]                                                
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.37        |  | Employment Agreement, dated
      June 15, 2010, between the Company and Zhaohui John Liang [incorporated by
      reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.38        |  | Employment Agreement, dated
      July 23, 2007, between Qingdao Oumei Real Estate Development Co., Ltd. and
      Yang Chen (English Translation) [incorporated by reference to Exhibit
      10.29 to the Companys Current Report on Form 8-K filed on April 19, 2010]                                                    
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.39        |  | Independent Director Agreement,
      dated June 22, 2010, between the Company and Lawrence Lee [incorporated by
      reference to Exhibit 10.2 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.40        |  | Independent Director Agreement,
      dated June 22, 2010, between the Company and Dr. Peter Linneman
      [incorporated by reference to Exhibit 10.3 to the Companys Current Report
      on Form 8-K filed on June 23, 2010]                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.41        |  | Independent Director Agreement,
      dated June 22, 2010, between the Company and Ruiping Tao [incorporated by
      reference to Exhibit 10.4 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.42        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Antoine Cheng [incorporated
      by reference to Exhibit 10.8 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.43        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Weiqing Zhang [incorporated
      by reference to Exhibit 10.9 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.44        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Zhaohui John Liang
      [incorporated by reference to Exhibit 10.11 to the Companys Current
      Report on Form 8-K filed on June 23, 2010]                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.45        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Yang Chen [incorporated by
      reference to Exhibit 10.10 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.46        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Lawrence Lee [incorporated by
      reference to Exhibit 10.5 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.47        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Dr. Peter Linneman
      [incorporated by reference to Exhibit 10.6 to the Companys Current Report
      on Form 8-K filed on June 23, 2010]                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.48        |  | Indemnification Agreement,
      dated June 22, 2010, between the Company and Ruiping Tao [incorporated by
      reference to Exhibit 10.7 to the Companys Current Report on Form 8-K
      filed on June 23, 2010]                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                              
|4.49        |  | Letter Agreement to Enter into
      Contractual Arrangements, dated January 21, 2011, among Leewell Investment
      Group Limited, Weiqing Zhang and Xiaoyan Chen [Incorporated by reference
      to Exhibit 10.50 to the Companys Amendment No. 9 to Registration
      Statement on Form S-1/A filed on April 15, 2010]
|            |  |                                                                                                                                                                                                                                                                                                                              
|8.1         |  | Subsidiaries of the Company
      [incorporated by reference to Exhibit 21 to the Companys Amendment No. 8
      to Registration Statement on Form S-1/A filed on March 22, 2011]                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                              
|11.1        |  | Code of Ethics, adopted June
      22, 2010 [incorporated by reference to Exhibit 14.1 to the Companys
      Current Report on Form 8-K filed on June 23, 2010]                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                                              
|12.1*       |  | Certifications of Chief
      Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)                                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                              
|12.2*       |  | Certifications of Chief
      Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)                                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                              
|13.1*       |  | Certifications of Chief
      Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                              
|13.2*       |  | Certifications of Chief
      Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002                                                                                                                                                                                                              

---

|Exhibit No. |  | Description                                                                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|15.1        |  | Audit Committee Charter,
      adopted June 22, 2010 [incorporated by reference to Exhibit 99.1 to the
      Companys Current Report on Form 8-K filed on June 23, 2010]                                                                                          
|            |  |                                                                                                                                                                                                                                                                    
|15.2        |  | Compensation Committee Charter,
      adopted June 22, 2010 [incorporated by reference to Exhibit 99.2 to the
      Companys Current Report on Form 8-K filed on June 23, 2010]                                                                                   
|            |  |                                                                                                                                                                                                                                                                    
|15.3        |  | Governance and Nominating
      Committee Charter, adopted June 22, 2010 [incorporated by reference to
      Exhibit 99.3 to the Companys Current Report on Form 8-K filed on June 23,
      2010]                                                                
|            |  |                                                                                                                                                                                                                                                                    
|15.4        |  | Nominee Agreement, adopted
      September 5, 2007, by and among Li Zhou, Weiqing Zhang and Xiaoyan Cheng
      [incorporated by reference to Exhibit 99.5 to the Companys Amendment No.
      3 to Registration Statement on Form S-1/A filed on August 27, 2010]
|            |  |                                                                                                                                                                                                                                                                    
|15.5        |  | Cayman Islands Government
      Undertaking as to Tax Concessions, dated April 4, 2006 [incorporated by
      reference to Exhibit 99.1 to the Companys Amendment No. 1 to Registration
      Statement on Form S-1/A filed on June 21, 2010]                     

*Filed herewith.

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