China Shoto plc

                                ("China Shoto" or the "Group")

                         Interim results for the six months to 30th June 2008

Highlights

Chairman's Statement 

Despite the snowstorms across China, the Sichuan Wenchuan Earthquake and the pressure of growing inflation in H1 2008, China's economy has sustained its recent rapid growth. According to a report issued by the National Bureau of Statistics of China, the Gross Domestic Product growth was 10.4% for the first half of 2008.

In the six months ending 30 June 2008, China Shoto plc has achieved results which have exceeded expectations. In particular, the Group has made progress in overseas sales and in the OEM market, highlighting a successful strategy focusing on core markets involving an assessment of the market, renovating current products and developing new products.

Operational Review

Back up batteries£º

During the first half of the year the revenue from back up batteries increased by 142% to¡ê59.3 million compared to ¡ê24.5 million in the same period last year, representing 86% of the Group's total revenue. The division realised a profit of¡ê4.3 million, an increase of 30% compared with¡ê3.3 million in H1 2007.

China Mobile, China Unicom, China Telecom, China Netcom and China Tietong remain the main customers of the Group. Sales revenues from telecommunication service operators are up 91% compared to the same period last year.

The Group achieved £11.7million of overseas sales in H1 2008, 23 times the figure of £0.5 million in H1 2007. In particular, sales to India represented 82.8% of overseas sales. As the Indian telecommunications market is the second largest telecommunications market after China amongst developing countries, the Group has focused on marketing to this market following the successful cooperation with Reliance Communications. An active program and cooperation with Indian's key telecommunications operators is in place.

Power type batteries:

In H1 2008 the Group adjusted its manufacturing configuration because of capacity shortage for back up batteries, and the margin are more attractive in Back up batteries. This resulted in a decrease of 31% in PTB business compared to the same period of 2007.

Research and Development 

R&D for back up batteries has focused on creating smaller products to meet demand; the Group successfully developed four types of 12V series Narrow Front Terminal AGM Batteries, and two types of 12V series Narrow Front Terminal Gel Batteries. These new products are more compact and save space in the installation. 

In R&D program for power type batteries, the Group successfully finished the development of 12V 25AH and a series of new power batteries used in electric motorcycles.  

An environmentally friendly super energy storage system-super capacitor developed and produced by the research laboratory in the first half of the year was successfully installed and used in solar-energy street lighting systems at the Beijing Olympic Village. 

A large capacity spiral wound battery used by heavy machines has been introduced into the market. Revenues of 8 million RMB are anticipated. 

Financial Review

The sales revenue in H1 2008 increased by 81% to £68.6 million compared to £38.0 million in H1 2007. The net profit achieved of £3.9 million was an increase of 29% compared to the £3.0 million achieved in H1 2007. The overseas sales for H1 2008 were £11.7million which is 23 times the sales in H1 2007 which were £0.5 million. 

Principal risks and uncertainties 

In overseas markets, the Group has adjusted the price of its products in line with RMB appreciation and adopted exchange rate risk avoidance mechanisms such as export finance under letter of credits and bill discounts and other methods to reduce risks in exchange rates. 

Changes in national monetary policy have limited the growth of bank loans which is slowing down cash flows from our customers.

Interim Dividend 

The Board recommends an interim dividend for 2008 of 1.5 pence per share.

Outlook 

The Government has an investment plan of over 300 billion RMB in the telecom networks following the corporate restructurings of China's Telecom Operators and the issuance of 3G license. The plan could bring new market opportunities for the Group in the next 2 years. The Group continues to seek opportunities to achieve continuous and sustainable growth, both organically and, where appropriate, through acquisitions. Our core objective to increase shareholder value remains unchanged and the whole of our team is committed to achieving this.

Our objective of becoming the largest lead acid battery producer in Asia continues. We plan to gradually enter into renewable energy industries to become a powerful green energy solution provider.

Cao Guifa 

Chairman

Consolidated income statement 

For the six months ended 30 June 2008

Consolidated balance sheet 

As at 30 June 2008

Consolidated statement of changes in equity 

For the period ended 30 June 2008

Consolidated cash flow statements     

For the period ended 30 June 2008 

Notes to the interim consolidated financial information 

For the six months ended 30 June 2008 

1.  General information 

China Shoto plc is a company incorporated in the United Kingdom on 10 May 2005 under the Companies Act 1985. The interim consolidated financial information of the Company for the six months ended 30 June 2008 comprises China Shoto plc (the 'Company') and its subsidiary undertakings (the 'Group'). 

The interim consolidated financial information was authorised for issue on 17 Sep 2008. 

2.  Accounting policies

Basis of preparation 

This unaudited consolidated interim financial information has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively EU IFRSs). The principal accounting policies used in preparing the interim results are unchanged from those disclosed in the group's financial statements for the year ended 31 December 2007.

While the financial information included in this interim consolidated financial information has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards as adopted by the EU (IFRSs), this interim consolidated financial information does not itself contain sufficient information to comply fully with IFRSs. 

The financial information for the six months ended 30 June 2008 and 30 June 2007 is unreviewed and unaudited and does not constitute the group's statutory financial statements for those periods. The comparative financial information for the full year ended 31 December 2007 has, however, been derived from the statutory financial statement for that period. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 237(2)-(3) of the Companies Act 1985. 

Foreign currencies

The functional currency of the subsidiary undertakings is Renminbi ('RMB'), and the unaudited interim consolidated financial information of the subsidiary undertakings have been drawn up in RMB. The presentation currency of the Group is pounds sterling and therefore the interim consolidated financial information has been translated from RMB to pounds sterling at the following exchange rates: 

Assets and liabilities are translated into sterling at the closing rate, and all income and expenses are translated at the average rate during the financial period, being an approximation for the actual rates at the date of the transactions. All resulting exchange differences are taken to the Foreign Currency Translation within equity. 

3.  Segment reports

Reporting format 

The primary segment reporting format is determined to be business segments as the Group's risks and rates of return are affected predominantly by differences in the products and services produced. The operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The operating businesses are all located in the People's Republic of China, and therefore geographic information is provided only in respect of the destination of sales. 

Business segments

The Group is comprised of the following business segments:

The Back up batteries business segment includes Value Regulated Lead Acid Batteries and Flooded and Gel Batteries. 

The Turbine business segment includes the development and construction of new turbines and the refurbishment and reconstruction of existing turbines. On 7 November 2007 the Group disposed of Beijing Full Three Dimension Engineering Co. Ltd which carried out all of the Group's turbine manufacturing operation.

Allocation basis and transfer pricing

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.  

Business segments 

The following tables present certain sales, profit regarding the Group's business segments for the period ended 30 June 2007 and 2008 and 31 December 2007.  

Geographical segments 

Six months to 30 June 2008 (Unaudited) 

Twelve months to 31 December 2007 (Audited) 

All export sales originate from the Back up Batteries segment. 

4. Income tax

5. Dividends

China Shoto plc declared a dividend of 4.5p per ordinary share amounting to £1,050,000 on 22 April 2008 and the dividend was approved by the shareholders on 22 May 2008. China Shoto plc declared a dividend of 3p per ordinary share amounting to £700,000 on 26 April 2007 and the dividend was approved by the shareholders on 12 June 2007. 

6. Earnings per share from continuing operations 

Earnings for the purpose of basic and diluted earnings per share are the net profit attributable to equity holders of the parent for the six months ended 30 June 2008 of £3,813,000 (30 June 2007: £2,870,000) and twelve months ended 31 December 2007 of £5,618,000. 

The profit from continuing operations for the financial period attributable to equity holders of the parent is as follows: 

The weighted average number of ordinary shares used in the calculation of earnings per share from continuing operations has been derived as follows: