In order to keep abreast of technological advancement and our customers' requirements, we view research and development as an integral part of our work. For a given project, we assemble an ad-hoc research and development team, consisting of 2 to 3 members, who are engineers holding degrees or post-graduation qualifications . This research and development team caters to the design, development and improvement of a specific project and will disband after 3 to 6 months upon completion of their research and development activities. The costs of such research and development are not recorded as research expenses but are instead accounted for in the costs of each respective project.

The PRC (under the coveted Rule 863 research grant) and Wuhan City Science and Technology bureaus awarded us a total of RMB8 million in research grant, towards the cost of the "Dynamic Cyclic Active Sludge" research project undertaken by our subsidiary, Wuhan Kaidi Water Services. When this in-house biochemical wastewater treatment technology is successfully developed and patented, it will mean cost savings and better efficiency for our future projects. We are one of only two water treatment companies in China to have been awarded this grant.

We also conduct research and development to address technical faults arising from our projects after obtaining feedback from our teams working on each respective project. An ad-hoc research and development team, comprising 5 to 7 engineers, will be formed to work on specific research and development projects. We have also entered into collaboration arrangements with Wuhan University and Wuhan Zhongwei Electric Power and Technology Co., Ltd. to carry out tests on our resin separation and regeneration equipment to assess its suitability and effectiveness.