Dear Shareholders:

Before I discuss our business activities at Diguang, please allow me to extend our sympathy to the victims and survivors of the recent catastrophic earthquake in the Chengdu region of China. Some of us have friends and relatives in the area, but all of us share a burden of grief for our fellow citizens. We are deeply touched by the outpouring of concern by our shareholders, as well as by our customers and business partners from all parts of the world.

Diguang employees and members of management have initiated a campaign to send relief resources to the region. While our gifts are relatively small in the overall scheme of things, we know that every bit of help is needed. We feel a great sense of responsibility to help our fellow citizens not only survive, but rebuild their lives.? Consequently, our combined contributions are being sent as fast as possible to rapid response relief organizations, such as the Red Cross.

Many shareholders have asked: we are pleased to report that none of Diguang’s factories, assembly, research and development, marketing and distribution, or administration facilities suffered any damage from the earthquake. To our knowledge, none of our customers were adversely impacted. Except for our grieving for the thousands of lives lost, business is being conducted as usual at our company.

Our corporate mission at Diguang is to increase shareholder value by growing our business and increasing corporate profits.? In reporting a 139% increase in net sales in the first quarter of 2008 compared to the year ago period, as well as reporting a return to profitability on both a GAAP and non-GAAP basis, we made significant strides toward achieving our mission.

We expect to look back at 2007 as a pivotal, even transition year for our business. In response to numerous market challenges that were having an adverse impact on our ability to grow the business and earn profits, we undertook several strategic steps.

As you know, the LCD industry has become extremely competitive in the last few years, worldwide. Because volumes shipped have increased, consumers are paying less for products with display features, from telephones to televisions. In order to compete, display manufacturers are pressuring component vendors, such as backlights, to sell to them at lower prices.? These pricing pressures are offset somewhat by higher volumes of units sold, but margins are getting squeezed nonetheless. To our benefit, many international manufacturers are turning to low-cost, technically capable suppliers in China to supply an increasing portion of their component needs because companies like Diguang have inherent operating advantages.

At the same time, prices for the raw materials from which we manufacture and assemble our backlight products are skyrocketing. So we are trapped in a difficult operating situation. It is costing us more to make a unit, but we are receiving less for the sale of that unit.

In such an environment, we are compelled to create a “lean” operating company, finding productivity enhancements and cost efficiencies everywhere in the organization.? This was a major goal in 2007, to find these sources of profitability.

To transfer a portion of our raw materials risk, we created a consignment model with major OEM customers for liquid crystal modules, or what we call LCMs.? We receive an assured mark-up (gross profit) for a high volume of products.? The OEM bears the risk of raw materials’ costs.

But there is another benefit to this strategy: by producing liquid crystal modules for our OEM customers, we are doing more for them than just making backlights. We are creating additional value for the customers and securing our role in their respective manufacturing processes.

We also implemented another strategic plan in 2007: restructuring our company into individual business units that are independently responsible for their financial performance.? Consequently, our many talented employees and managers have been incentive-ized to find the kind of productivity enhancements and cost efficiencies that result in profits, from marketing to purchasing to manufacturing.

These steps are having the desired effect. In the first quarter of 2008, all three of our operating regions were not only profitable, but better prepared to profitably grow their respective operations.

The world is moving steadily from CCFL display technologies to LED-based backlight solutions. Because of our early investments in LED solutions, we are taking advantage of this global trend toward energy efficiency and more environmentally-friendly consumer electronic products. The marketplace is discovering that while LEDs have generally higher costs, when used they also result in significant cost savings through energy efficiencies and longer product lives. Toward this end, Diguang is now demonstrating its significant abilities in the LED backlight market.

But our abilities do not end with backlights. We have already discussed liquid crystal modules as one way we are expanding the utilization of our display lighting expertise. However, one of the most exciting initiatives that we have ever undertaken recently resulted in a pilot program to supply our LED general lighting technology to a 6,000 square meter area in Xiangfan, a city of 6.5 million people and the second largest city in Hubei Province.? Per the agreement, we will apply our lighting technologies to road and scenic lighting, as well as provide lighting for government agencies, schools, hospitals, and commercial buildings in the selected area.

Once this model project is proven successful there is significant potential for broadening the use of our skills, technologies and solutions – not just in the broader metropolitan area of Xiangfan, but to other areas of Hubei Province and to China as a whole.?? The National Ministry of Science and Technology anticipates achieving energy savings of more than $37 billion nationwide by 2015. Because of the national government mandates to deploy LED and other energy-saving lighting solutions that are less harmful to the environment, Diguang has an opportunity to bring its leadership in LED general lighting to many other municipalities and government departments in the weeks, months and years just ahead.? We think that the use of LED lighting solutions during the Beijing Olympics will bring increased visibility to the advantages of LED general lighting technologies.

Again, we want to thank our investors who were so patient during the turbulent, transition period we knew as 2007. Rest assured that every single one of us at Diguang is committed to the growth and profitability of our company as the surest path toward increasing shareholder value.

Best regards,

Song Yi, Chief Executive Officer

May 26, 2008

Safe Harbor Statements
This document contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of Diguang’s management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the uncertainty of future Company results, the course of the Company’s relationships with customers, business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which Diguang is engaged; fluctuations in customer demand; management of rapid growth; intensity of competition from other providers of backlights; timing approval and market acceptance of new product introductions; general economic conditions; geopolitical events and regulatory changes, as well as other relevant risks, including but not limited to risks outlined in the Company’s periodic filings with the U.S. Securities and Exchange Commission. Diguang does not assume any obligation to update the information contained in this document.