Chairman's Statement

Extracted from 2006 Annual Report

Dear Shareholders,

As we present our third annual report since our listing in 2004, I
am proud to say that we have and will continue to strive for the
greater benefi t of you – our loyal shareholders – as part of our
ongoing quest to become a leading pharmaceutical company
working towards improving the quality of human life.

Year In Retrospect
The financial year ended 31 December 2006 (“FY2006”) was one
in which the PRC pharmaceutical market experienced much
turbulence due to a series of health care sector reform policies
introduced by the authorities. Reflecting the tighter operating
environment, the Group reported a 10.5% decline in revenue
to RMB 308.3 million and net profit attributable to shareholders
of RMB 83.7 million, a decline of 6.6%. While the regulatory
changes will have near-term impact on the market conditions
and, subsequently, the results of the Group, we nonetheless
believe that these new policies are a mandatory step towards
a better regulated market which will allow AsiaPharm Group Ltd. (“AsiaPharm”) to better distinguish itself by building on its competitive advantages as an all-rounded pharmaceutical group. Our enlarged market presence following the successful acquisitions and integration of operations will further allow AsiaPharm to better compete in this new operating environment which emphasizes research and development and establish our leadership position within the industry.

Our domestic distribution network continues to expand and now covers approximately 2,500 hospitals in 30 provinces across China, a 25.0% increase over FY2005.

On the international front, our Group continues its rapid growth momentum, having successfully expanded into Vietnam in FY2005, we made further progress within the region with the sealing of exclusive distribution agreements for our proprietary drugs in Pakistan through local distributors. The initial 3-year agreement is valued at approximately RMB 10.0 million and marks the next milestone in our international expansion strategy.

I am pleased to report that in FY2006 we continued to deliver on our commitments with the launch of three new products namely Otong (which is used as an external pain relief natural drug) Sailimai (a new formulation for treating acute and chronic diarrhea) and Pantoprazole Sodium Enteric-coated Pellet Capsule (our new oral formulation for the treatment of Chronic Peptic and Gastric ulcers). These new products, which will begin commercial production in 2007, possess great market potential as hospital distribution drugs and further reinforce our core product segments in the fields of orthopedics and gastroenterology. In addition, Otong and Sailimai possess further potential to be developed into key products within our Over-the-counter (“OTC”) product portfolio.

The year under review has been an exciting and challenging one for AsiaPharm. Following our successful placement of 80 million new shares to strategic investors in May 2006, we raised net
proceeds of RMB 322.0 million [approximately S$64.4 million] which were used to fund our acquisitions throughout the year.

The first step of our merger and acquisition strategy was the acquisition of the business of the only approved chemical sensitizer for radiotherapy in the world – CMNa® – for RMB 80.0
million in October 2006. This acquisition of a “Class One” new Liu Dian Bo Executive Chairman
March 24, 2006 drug with international patents will spearhead our existing efforts in the Oncology business segment and will significantly contribute to the Group’s future developments.

Subsequent to the end of the year, AsiaPharm entered into our second corporate acquisition in January 2007 and took over Solid Success Limited and its subsidiaries, including the two Nanjing-based specialized oncology drug manufacturers, Nanjing Kanghai (“Kanghai”) and Nanjing Sike (“Sike”) for RMB 345.0 million. This acquisition will serve to further enhance our position as a leader within the People’s Republic of China (“PRC”) oncology drug sector and will increase our competitive advantage and enhance our future financial performance.

To date, all the proceeds raised in 2006 have been used in our acquisition activities which will further consolidate AsiaPharm’s position as a leading pharmaceutical group in the PRC. Riding
on the rapid demand growth for oncology products worldwide, we are confident that our expansion into the oncology sector will yield much benefit for our loyal shareholders in the
foreseeable future.

Future Expectations

With the projected introduction of additional measures to restructure the pharmaceutical industry over the next few years – which include measures to expand hospital coverage through
community hospitals/clinics, increased government expenditure in the pharmaceutical industry and doubling the total number of participants under the National Health Insurance Scheme
to 300 million by 2010 – the operating environment will take on a new dimension. This competitive environment will lead to possible consolidation within the industry and presents
unique opportunities for technology driven manufacturers like AsiaPharm to excel within the market through the execution of its long term development strategies.

The pharmaceutical market in China is still one of the fastest growing markets in the global industry. We believe that Asiapharm is in a favorable position to leverage on the changes and play an important role within this newly consolidated market.

In line with our development initiatives, we will complete the integration of our newly acquired businesses in the coming year. Leveraging on the expanded capacity and synergistic benefits of
these acquisitions, we will further develop our competencies in production, management and development to further expand our market presence.

Capitalising on our expanded distribution network, we will seek to cross-sell our products which had not been marketed to some of the hospitals in our network such as our oncology portfolio
of products. Our expanded sales force of 500 sales specialists following our recent acquisitions will also enable the Group to target a wider market, and serve to boost future sales volumes
for our products.

Preparation of subsidiaries for our international expansion initiatives will be a key focus for the Group over the next few years. To ensure that AsiaPharm will be able to compete on equal
footing with international pharmaceutical companies, we seek to strengthen our internal operating procedures and upgrade the technical and managerial competencies of our staff.

Research and Development of natural and new DDS drugs will continue to be a cornerstone of the Group’s strategy.

Through our successful acquisitions, we now have an additional Drug Delivery System (“DDS”) – Liposome Technology – in our DDS R&D portfolio. Complementing our existing delayed micro-sphere technology, this new DDS will enhance our R&D capabilities in new drug formulations and consolidate our foothold as a leading drug manufacturer in the PRC. Utilising our expanded R&D capabilities, we will seek out strategic collaborations with international pharmaceutical companies to boost our international recognition and to jointly develop new drugs which can be marketed globally.

In 2006, SFDA instituted additional criterias to tighten the new drug approval process. While these tighter approval processes will slow down the introduction of new drugs to the market, it will also serve to better enforce patent protections and encourage R&D efforts by pharmaceutical companies; benefiting established manufacturers such as AsiaPharm which have established strengths in the R&D and help to safeguard the quality of our new drug patents.

Subsequent to the end of FY2006, we announced an exclusive development agency agreement for our newly acquired Oncology drug, CMNa®, that will serve to expand our reach into the market of Korea; the arrangements will widen our regional presence and serve as a springboard to launch our other international expansion initiatives.

Riding on our international collaboration and certification initiatives in FY2005, we will continue to enter into suitable collaborative agreements with international parties for knowledge and technology transfers to increase our global presence, strengthen our familiarity with international manufacturing and research processes. We will also target to obtain the Therapeutic Goods Administration (“TGA”) certification from Australia in the years ahead. Once the certifi cate is successfully obtained, we will be able to commence sales in Australia, and pave the way for our
eventual expansion into the highly regulated markets of North America and Europe.

M&A remains one of the key strategies of the Group’s future expansion, we will fully utilise the favorable market conditions and to secure target companies that fit our long term group
portfolio and create additional value for our shareholders through an enlarged scale of operation and improved overall performance.

Rewarding Shareholders

To reward our loyal shareholders for the performance for the year under review, the Board of Directors (the “Board”) has proposed a first and fi nal dividend of 0.5 US cents per ordinary share.

Appreciation

The performance in the past year against the backdrop of the tighter operating environment could not have been possible without the strong support from our loyal shareholders, our
customers our business partners, and the hard work and diligence from our management and staff. On behalf of the Board, I would like to once again extend our sincere appreciation and thanks for your enduring support in the past year and look forward to your continued support as we chart a new and dynamic era of growth for AsiaPharm.

Liu Dian Bo
Executive Chairman
30 March 2007