Financials

Profit and Loss

Review of Performance

Compared to 142007, the Group's revenue increased by 40.49% or RMB 19.06 million from RMB 47.07 million in 142007 to RMB 66.13 million in 142008. This was primarily due to the following:-

1. increase in revenue recognised from turnkey services rendered to various BOT projects amounting to RMB 13.98 million;
2. increase in sales of manufactured equipment amounting to RMB 3.74 million;
3. increase in revenue from operations and maintenance amounting to RMB 1.34 million.

The increase in revenue was contributed by turnkey services rendered to Nantong, Jinshan, Jiangning and Lishui BOT projects.

Gross Margin

The Group's overall gross margin decrease marginally from 35.0 % in 142007 to 33.3% in 142008. The decrease in overall gross profit margin was primarily due to the increase in costs associated with rising material prices.

Profitability

Compared to 142007, the Group's net profit for the period increased by 95.2% to RMB 11.92 million in 142008. The increase in net profits was mainly attributed to increased profits generated from operations.

Commentary

The Group has started construction on the Nantong and Pizhou BOT projects in FY 2005 and FY 2006 respectively. The construction work of these two projects have been progressing as planned in FY 2007 and the Group targets to complete construction work for both project before end of FY 2008. In addition, the Group has commenced construction of the Fenhu, Jinshan, Jingdezhen, Wangcheng, Jiangning and Lishui BOT projects. The Group will commence construction work for Anqing BOT project in 242008.

The Group has also won in the tender of the acquisition and expansion of a wastewater treatment plant in Xining, Qinghai Province.

All the 10 projects mentioned above are expected to contribute positively to the Group's earnings in FY 2008. In China, the growth of the water and wastewater treatment sector has been dynamic, given the government's aggressive environmental targets to arrest a mounting water crisis. Underpinned by the huge demand for a cleaner environment and cleaner water, there is no shortage of projects in China. With the momentum gain in securing the above mentioned projects in FY 2007, the Group will continue to aggressively pursue viable projects and is confident that it will be able to secure more new projects in the next three quarters of FY 2008.

Barring any unforeseen circumstances, the directors expect the Group to continue to be profitable for FY 2008.

Balance Sheet