Chairman's Statement

Dear Shareholders,

During the year under review, Asia Environment was affected by rising prices and the global financial tsunami, and the profit for the year shrank by 27% in 2008 as compared to the previous year. Nevertheless, all businesses of the Group, including project operation and project construction, had made remarkable progress. We are pleased to report that the Group's operation is sound and normal.

REVIEW ON 2008

In respect of project operations, the Group secured BOT projects with a total investment of RMB250 million, which included the 140,000 tons/day BOT sewage treatment plant in Danyang and the 80,000 tons/day BOT sewage treatment plant in Jingdezhen Development Zone.

As for the constructions of various projects, the Group's biggest BOT project, the 200,000 tons/ day water supply treatment in Nantong, has finally been completed. The sewage treatment plant in Jingdezhen and the sewage treatment plant in Nanjing have also been completed and commenced testing and commissioning phase. The Group has pushed on with the construction at Jiangning Project, Suzhou Fenhu Project, Shanghai Jinshan Project, Xiuning Project, Jingdezhen Development Zone Project, Wangcheng Project and Danyang Project. With most of these projects more than 50% completed, the target is to commence operation in the second quarter of 2009.

The Nanchang sewage treatment plant (a project wholly invested by the Group) commenced operation in February, since then, the sewage treatment volume has increased gradually and operations were satisfactory with stable tariff collection. In addition, the Group's first TOT project Xining sewage plant, which completed its assets transfer in July, has operated smoothly with sewage treatment volume close to its full capacity. Accordingly, the capacity expansion is planned in 2009 to meet the sewage treatment requirement of Xining City. The successful commencement of the two aforesaid projects signifies that the operation mode of the Group will gradually shift from a pure project construction mode to a twin turbo mode which emphasizes both project construction and water operation management.

SHAREHOLDER RETURNS

As a result of the impact of the financial tsunami in 2008 and taking into account the capital requirements for the Company's sustainable growth, the Company resolves that no dividend will be paid and hopes that its shareholders will understand.

OUTLOOK FOR 2009

Our primary work for this year is to utilize all our resources to accelerate the construction of our projects, and aim to complete all the projects in progress and put them into operation in the second quarter to generate income for the Group. We will also focus on the management of these completed projects to ensure that they are being run smoothly in order to reap the returns of these projects.

In respect of the undertaking of projects, the Group will, depending on the global economic situation and its liquidity position, control the number and quality of projects to be undertaken, so as to ensure the Group can develop better despite the economic downturn.

2009 marks a milestone for the Group as the operation and management of water projects will become its focus of management, and the Group will secure stable revenue from its water projects from now on. We believe that with ever-increasing revenue from the water projects, the Group will enter a more promising phase of development.

ACKNOWLEDGEMENT

We are grateful to all our employees and in particular the management for their hard work and great contribution in the past year. In addition, we would like to thank all our strategic investment partners, financing institutions, bankers and shareholders for their trust and support to us. Last but not least, we would like to thank our fellow Directors on the Board for their involvement and guidance.