(Extracted from Annual Report 2007)

Dear Shareholders,

I would like to offer my sincere apology to all our respected shareholders for the poor performance we had in 2007 as a result of the ongoing macroeconomic control effected by the Chinese government, especially the monetary tightening, coupled by the continuous hike in the price of energy, oil, raw materials, power and natural gas as well as the unprecedented fierce competition from the local low and mid-end ceramics manufacturers rising in China.

Due to the environmental protection requirements in Shanghai and the needs of costs management, the production base was moved to Shandong Province. In the meantime, we changed our sales channels from branch office system to distributorship system for the purpose of cost control. These adjustments led to drastic decline of the performance, largescale disposal of goods from warehouse and cutting down of the number of employees, thus causing the cost to increase and the gross margin ratio to come down, eventually a loss to incur.

Definitely, the management should be responsible for reviewing all this and find ways for improvement by drawing a lesson from this bitter experience. This is a task of great urgency, which, as a matter of fact, it is being implemented. In addition, the Board of Directors has closed down a number of subsidiaries with bad performance, including HK ASA Ceramic Company Ltd., Beijing ASA Fortune Construction Building Material Ltd. and Shanghai ASA Laticrete Adhesive Co, Ltd.

I would like to express my gratitude to Mr. Ong Kian Min, Mr. Su Chien-Cheng, Mr. Huang Ching-Hsien and Mr. Yeo Choon Tat for their contribution and support to the company over the past year. My thanks should also go to Mr. Fu Haw, Mr. Kuan Cheng Tuck and Ms. Koh Ngin Joo, who joined us and lent their firm support. All of you worked hard and meticulously over the past year and devoted yourself to improving the conditions of our company. I do admire you and appreciate it. On 1 March, we appointed Mr. I Shu-Te as CFO of the Group to take charge of all its financial affairs. I believe that with his rich experience and professional background in finance, Mr. I will be able to help the Group to take on a new look.

No word can express the painful feeling and regret. I only wish that everyone could do his or her best to enhance the overall competitiveness of ASA. For the successive loss, I'm well aware that something should be done about it in order to be responsible to the investors.

What is the most important for our company now is the support and understanding of all our shareholders. I believe that it is only with your support that our company will have the opportunity to go forward. I also hope that all employees can work diligently to live up to the expectations of shareholders. Your persistent support and care will be highly appreciated!

Chan Chun-Hsiung
President and Executive Chairman