This report presents substantial,overwhelming, and conclusive evidencethat Tianhe is one of the largest stockmarket frauds ever conceived. SAIC filings and third-party documentsshow that Tianhe generates a fraction ofthe revenues and profits it reports. We present smoking gun evidence thatTianhe does not pay the taxes it claims,and therefore could not have generatedthe profits it claims. Site visits show that most of Tianhe’s SFCcustomers are related parties that shareoffices and overlapping management.

After taking more than a week, Tianhe released a half-baked response to our 67 page report dated 2September 2014, questioning its accounts. The 10 September release of Tianhe’s “clarification” was rather unceremonious, with Tianhe Management claiming its email system had been “hacked into” andwas therefore compelled to release the clarification response immediately. This is despite the fact thatthe language of the clarification announcement makes clear that the HKex appears to have requestedinformation and explanations from Tianhe and had still not received satisfactory answers.For the record, we have no knowledge of any attempted hack. We seriously doubt there was ever any attempted hacking. We’re not even sure we understand the rationale behind why the supposedattempted hacking necessitated Management’s release of a clarification announcement while therewere still outstanding queries from the HKex.

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Following the release of our initial report, there was a noticeable divide in sentiment between Westerninvestors and Chinese/Hong Kong investors.Western investors remembered names like Lubrizol and DuPont and Solvay, and saw Tianhe as anotherglowing chemical company – after all, the financial statements looked amazing. But we saw much moreskepticism among Chinese and Hong Kong investors.The idea here is that those who understand and live with the reality of Chinese frauds on a daily basiswere much more skeptical of Tianhe than the Western funds that applied a 10X multiple to 50% marginsand a 50% growth rate. This may also explain why on the same day that we released our initial report,Tianhe's management team was not in China or Hong Kong, but in Boston trying to promote the stock toUS investors.