Asia Environment

Dear Shareholders,

For the past 6 years, Asia Environment embarked on its strategy to secure BOT projects as the next league in the Group's development. As of todate, we have completed 13 out of the 16 projects which we have procured. This could not have happened without the support of our experience and expertise in equipment manufacturing and engineering, procurement and contract management ("EPC"). We will continue to explore new BOT project opportunities while increasing our focus on operation and management ("O&M") of wastewater treatment plant ("WWTP").

Despite the difficult economic and financial environment which exist through 2010, through the concerted efforts of staff and management, we managed to overcome the obstacle of funding and shorten construction dateline to complete the work objectives for 2010.

Review On 2010

In 2010, the Group completed the Yueyang EC, Danyang and Zhoukou projects and is currently at the testing and commissioning phase. When commissioned, this will add on an additional of 175,000 metric tonnes per day of processing capacity. Our existing capacity as at 31 December 2010 stands at 685,000 metric tonnes per day which is fully owned by the Group and another 345,000 metric tonnes capacity which the Group owns a minority interest. Revenue contribution from O&M to total revenue in 2010 has increased to 21.7% as compared to 11.3% in 2009. We would expect that this segment will continue to play a significant role moving forward to provide a stream of stable income for the Group.

During the year, due to urbanization master plan of the government, we will relocate and consolidate our operations under a new industrial park. With this new development and tax incentives granted by the government, we will expect the Group to enter into a rapid and exponential stage of development.

During the year, we had managed a private placement to raise approximately RMB67.6 million which was injected into our projects. We have also been able to rollover certain loans and procure an additional RMB103 million of new loans to finance the operations of the Group.

Shareholder Returns

With the Group's development ahead, we continue to manage our funds under extremely tight conditions diligently. In this regard, we will not consider issuing dividend to our Shareholders, we hope to procure the understanding of shareholders.

Outlook For 2011

China in 2011 has set the 12th 5-year plan and has earmarked RMB4.0 million to develop the water infrastructure. Especially in the south west region and smaller and mid tier cities. The budget committed by the Chinese Government is estimated at RMB4 trillion for these projects which will be to improve existing water infrastructure and development. These developments will be focused in the smaller and mid tier cities and townships for water supply, wastewater treatment and recycling projects. In addition, with the increase in the standard of discharge affluent, there will also be a market for these developments in the next 5 years.

We believe the implementation of the 12th 5-year plan will set the stage for an enormous market moving forward.

Acknowledgement

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