For 1HFY2008, the Group's revenue rose by 11% from RMB712.7 million in 1HFY2007 to RMB792.6 million in 1HFY2008, whereas net profit decreased by 2.9% from RMB156.5 million in 1HFY2007 to RMB151.9 million in 1HFY2008.

Revenue from wastewater treatment services in 1HFY2008 increased by 12% from RMB563.7 million in 1HFY2007 to RMB630.3 million in 1HFY2008, representing 80% of the total revenue. The remaining 20% came from i) discharging fees received from BOT/TOT projects and ii) the sale of BMS product.

The decrease in distribution expenses by 35% from RMB21.3 million in 1HFY2007 to RMB13.9 million in 1HFY2008 was due to the decrease in transportation cost which the vendors and distributors had agreed to absorb in 1HFY2008.

The decrease in administrative expenses by 18% from RMB39.4 million in 1HFY2007 to RMB32.2 million in 1HFY2008 was mainly due to the the improved cost control in 1HFY2008.

The decrease in research and development cost by 30% from RMB22.4 million in 1HFY2007 to RMB15.6 million in 1HFY2008 was mainly related to reduction of fees paid to research institutions in 1HFY2008.

The increase in other operating expenses from RMB20.8 million in 1H2007 to RMB23.4 million in 1H2008 was mainly due to the provision of foreign exchange (forex) loss as a result of flunctuation of RMB against SGD and HKD. During the period under review, there was an unrealized forex loss resulting from weakening of RMB vs SGD (related to CB payable in SGD) as well as strengthening of RMB vs HKD (related to HKD deposit in HK).

The increase in finance expense from RMB27.3 million in 1HFY2007 to RMB31.0 million in 1HFY2008 was mainly due to the notional interest expense related to the CB and the interest expense related to the bank loans.

The increase in tax expense by 182% from RMB28.1 million in 1HFY2007 to RMB79.3 million in 1HFY2008 was mainly due to the expiry of the tax concession granted to our subsidiaries in the PRC.

Balance Sheet

Trade and other receivables decreased by 6% from RMB874.8 million as at 30 June 2007 to RMB823.0 million as at 31 Dec 2007 mainly due to prompt payments from the municipal project clients.

Contracts work-in-progress decreased by 27% from RMB125.8 million as at 30 June 2007 to RMB91.4 million as at 31 Dec 2007 because the costs incurred on existing and newly secured projects as at 31 Dec 2007 were less than those in previous period.

Inventories increased by RMB1 million as at 30 June 2007 to RMB5.4 million as at 31 Dec 2007 mainly due to the increase in orders of BMS products as at 31 December 2007.

Construction in progress increased by 30.0% from RMB617.5 million as at 30 June 2007 to RMB803.0 million as at 31 Dec 2007 mainly due to the increase in the construction works of Suzhou, Lianyungang, Beijing and Nanjing BOT projects for the period ended 31 Dec 2007.

Cashflow Statement

The Group had a cash position of RMB936.0 million as at 31 Dec 2007. Net increase in cash and cash equivalents was mainly due to the net cash inflow/ (outflow) from operating activities of RMB345.5 million, net cash outflow from investing activities of RMB198.5 million and net cash outflow from financing activities of RMB31.8 million in 1HFY2008.

Commentary

We believe the growing emphasis placed by the PRC Government on environmental protection, coupled with stringent enforcement of regulatory requirements, will continue to spur demand for waste and wastewater treatment solutions in the PRC. As stated previously, our Group will continue to focus its business in the largescale municipal wastewater treatment sector and further our R&D in developing new commercial application for our BMS Technology. We will also continue to seek suitable strategic partners in developing new business for the Group.