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Chairman Statement

BUSINESS REVIEW

Looking back on year 2021, China's domestic economy and business activities remained effected by the COVID-19 Novel Coronavirus (COVID-19) pandemic. In the first half of the year, the economy improved significantly. Although policy adjustment and economic easing were in progress, the downward pressure on the economy during the second half of the year remained substantial due to various compounding risk factors.

Under the rolling national anti-smoking campaign and tobacco control publicity operations, the number of domestic smokers had maintained a downward trajectory, thus demand for tobacco declined. Nonetheless, the aggregate cigarette production in China for 2021 still achieved positive growth compared to last year. In our water environment restoration and comprehensive treatment business, the Group continued to partake in water environmental development projects in Huizhou this year, including the construction of drainage pipe network, etc., we firmly stood in the front line of the national campaign for water pollution prevention and control.

VISION FORWARD

Forward looking to year 2022, the Group will continue to explore new opportunities; the Chinese government had announced a major strategic decision in "reaching carbon peak in 2030 and achieving carbon neutrality in 2060" ("Double Carbon"). This creates new growth proposition for the environmental treatment industry, and also new challenges. As an entity operative in the service industry, we must evolve with our clients, envision and innovate a sustainable business model, and always primed to respond quickly to an everchanging business environment.

The "Opinions of the Central Committee of the Communist Party of China and the State Council on Comprehensively Strengthening Ecological and Environmental Protection and Resolutely Winning the Battle Against Pollution", promulgated near the end of year 2021, stated that: "By year 2025, the nation's rural areas should largely have eliminated black and odorous water bodies. Treatment action plans need to flexibly accommodate different types of rural areas, natural environments, population size, analysis of water catchment conditions et cetera." A new battle has initiated in the frontier of rural black and odorous water body treatment. The Group will continue to develop and innovate low-carbon emitting water treatment technology and continue to expand our business activities in Guangdong.

On October 12th, 2021, the 15th Conference of the Parties on Biological Diversity was held in Kunming. During the conference, China announced to the world the official establishment of the Giant Panda National Park. The giant panda "industry value chain", from ecological protection to cultivating giant panda intellectual property, from "garden city" construction to forestry regulation reform, can deliver tangible benefits to the people, and provide momentum for social and economic development. The Group is also exploring expansion into related projects.

The current business environment quite challenging. Nonetheless, we expect the central government to start introducing easing policies to accommodate economic recovery, we thereby remain cautiously optimistic on the recovery prospect of the Group's businesses.



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