Muddy Waters Initiating Coverage on DGW – Strong Sell

April 4, 2011

Muddy Waters LLC has initiated coverage on Duoyuan Global Water Inc. (DGW) with a Strong Sell rating and an estimated value of less than $1.00.

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We estimate DGW’s actual revenue is no greater than US$800,000 annually, versus the US$154.4 million it claims. Our estimate is based on DGW’s PRC audit report, which is highly reliable.

Muddy Waters caught DGW red handed forging its PRC audit report. DGW’s actions validate the audit report’s significance.

Our extensive surveillance of DGW’s factory confirms our revenue estimates.

We identified four errors in DGW’s US audit, which indicates the auditor was sloppy.

DGW has much in common with its troubled sister company, DYP. We believe these commonalities further DGW’s fraud.

DGW engages in improper undisclosed related party transactions that transfer money to its chairman.

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