Highlights

Chairman's Statement

Despite the continued uncertainties overhanging the global economy, China's GDP grew by 7.1% during the first six months of 2009 over the same period a year earlier, driven by the Chinese Government's Renminbi 4 trillion (£375 billion) economic stimulus package. The package has seen massive investment in new domestic infrastructure projects, underpinning continued strong growth for China Shoto plc (the Company). Sales revenue during the six-month period to 30th June 2009 increased to £96.46 million, up 41% from £68.59 million for the first half of 2008. Profit for the period increased by 43% to £5.56 million (£3.88 million) while basic earnings per share rose 43% to 23.37 p (16.33 p). During the half year, we maintained our objective of becoming a leading supplier of green energy products, and continued our work on the development and testing of new environmentally-friendly storage products, which we believe will position us to maintain our strong growth as we move forward. In particular, the Company is planning to invest in a new lead acid battery recycling project, which we anticipate will provide recycling capacity of 100,000 tons of used batteries per year after completion, further underpinning our growth plans.

Operating Review

Back up batteries

During the first half of the year, revenues from the sale of back up batteries increased by 52% to £90.09 million (£59.31 million) accounting for 93% of the Company's total revenue.

Various subsidiaries or branches of all three of China's telecommunication operators, China Mobile, China Unicom and China Telecom operating in 31 of China's provinces, autonomous regions and municipalities, remain the Company's main customers. Sales to these customers accounted for 94% of the total revenues from back up batteries.

Total revenues from sales to branches of China Unicom grew by 374% compared with the same period of 2008, accounting for 47 % of the total revenues from back up batteries.

Power type batteries

The rapid development of back up battery sales has meant a reduction in the production of power type batteries. Revenue decreased from £9.28 million to £6.38 million - a decline of 31%.

Patents Granted

During first half of 2009, the Company was granted two new patents by the State Intellectual Property Office of the People's Republic of China, so that as of 30th June 2009 it held a total of 117 patents.

Market

Partly as a result of the Chinese Government's stimulus investment in major infrastructure projects, domestic sales of back up batteries rose to £86.63 million, an increase of 82% over £47.61 million for the same period of 2008.

As we have reported previously, the Company works constantly to maintain good business relationships with its major clients, which, along with our strong after-sales service, we believe plays a major part in underpinning our strong market position. To mitigate the impact of fluctuating lead prices, the Company has initiated a price linkage scheme with major clients. Recognising the large telecom operators' requirement to cut energy usage and adopt high-efficiency environmental protection measures, the Company also became one of the first to enter a "Green Action Plan" with China Mobile. The Company was awarded the accolade of Best Global Partner of ZTE Telecommunication for 2008-2009. In first half of 2009, China Shoto was the biggest single supplier to China Unicom and China Telecom, with revenues from these sales to be realised during the second half of the year.

Fairs

Overseas there has been a slow-down in growth in the Company's main market, India. As a result revenue from exports was sharply down during the first half of 2009. The Company continues its programme to penetrate international markets. The Board believes demands from foreign markets will yield strong revenues in the future. To further enhance the Company's overseas reputation and exploration of foreign markets, the Company participated in many fairs during first half of the year, such as the 22nd Sviaz Expo Comm Moscow 2009, 2009 Middle East (Abu Dhabi) International Communications Exhibition, Mobile World Congress 2009(Spain), Communic Asia 2009 in Singapore and the 7th International Lead Acid Battery Fair/Technical Communication-- ILBF CHINA 2009.

Financial Review

Sales revenue in the first half of 2009 increased by 41 % to £96.46 million compared with £68.59 million in the same period last year. Profit for the period increased by 43% to £5.56 million, up from £3.88 million during the same period last year. Basic earnings per share increased 43% to 23.37 p compared with 16.33 p in the same period last year. Due to a lower average lead price and a greater proportion of sales of higher margin back up batteries during the period, the gross margin for the half year increased to 30.8% from the 24.9% in the first half of 2008.

Principal Risks and Uncertainties

The turbulent global economy and stronger competition from local and overseas companies could reduce margins. The Chinese government may adjust policies particularly interest and exchange rates.

Lead Acid Battery Recycling Project

The Company is preparing plans to invest in a major recycling plant for lead acid batteries that will provide regenerated raw material to sell to major users of lead or other battery manufacturers. Since the Company is mainly engaged in the manufacture and supply of lead acid battery products in China, the construction of a lead acid battery recycling project represents a logical extension of our current battery product supply chain structure which will both help meet the tendering requirements of our key customers and contribute towards national recycling efforts. The Board believes the investment will promote the development of the Company's main business and become a key growth driver but also promote and strengthen our leading position with the three large telecom operators. We estimate that after completion of the project the annual recycling capacity will reach 100,000 tons of used batteries.

Dividend Policy

In the light of the Company's planned battery recycling project which will require a major capital investment and the change in certain clients payment delivery times during this current year due to global economic conditions, the Board does not recommend an interim dividend. In undertaking a major investment and funding the continued expansion of the Company's business, the Board believes it would be prudent to determine a dividend at the year's end. The intention would be to review and if possible, pay a dividend at a level within the parameters of the Company's policy.

Outlook

The Board believes that the completion of our planned lead acid battery recycling project will have a significant beneficial impact on raw material cost savings, as well as contributing to environmental protection and the implementation of a sustainable development strategy. As such, the project is expected to become the main driving force of the Company's revenue growth. The Board believes that the Company's new types of back up batteries such as the 2V Gel Battery, 12V AGM Battery and 12V Spiral Wound Battery are being well received by the market. Domestic market competition has at the same time become more intense as a result of the financial crisis and, although our existing key customers are large and well resourced, we are constantly re-appraising our client base and expanding our product range to maintain our strong historic growth. World economic difficulties have and will continue to affect our business but we remain confident that our relationships with existing customers should ensure the maintenance of goodwill and underpin our objective of becoming a worldwide supplier of green energy products.

China Shoto has already become the largest back up battery manufacturer in China, and maintains its target of becoming the largest lead-acid battery producer in Asia. As a China Environment Friendly Enterprise-an important award by government, the Company intends to become a worldwide green energy solution provider. We are confident that this will further enhance our opportunities for growth.

Cao Guifa

Chairman

Consolidated statement of comprehensive income

For the 6 months ended 30 June 2009

Earnings per share for profit attributable to the equity holders of the parent during the year

Consolidated balance sheet

As at 30 June 2009

Consolidated statement of changes in equity

For the six months ended 30 June 2009

Notes to the interim consolidated financial information

For the six months ended 30 June 2009

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 2009 comprises China Shoto plc (the 'Company') and its subsidiary undertakings (the 'Group').

2. Accounting policies

Basis of presentation

The financial information has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and interpretations adopted for the use in the European Union. The principle Accounting Policies used in preparing the interim statements are those the group expects to apply in its financial statements for the year ended 31 December 2009 and are unchanged from those disclosed in the group's report and financial statements for the year ended 31 December 2008, except that the requirements of IAS 1(revised), Presentation of Financial Statements, have been adopted, resulting in the presentation of a consolidated statement of changes in owners' equity. This presentation has been applied to comparative information in this report. Financial information for the six months ended 30 June 2009 and for the six months ended 30 June 2008 is unaudited and does not constitute the group's statutory financial statements for those periods. Comparative financial information for the full year ended 31 December 2008 has, however, been derived from the audited statutory financial statements 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. The Board of Directors approved this interim statement on 15 September 2009.

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:

3. Business segments

The Group is comprised of the following business segments:

The Power Type Batteries ('PTB') business segment is comprised of power-aided bicycle batteries.

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

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 2008 and 2009.

Geographical segments

Six months to 30 June 2009 (Unaudited)

Twelve months to 31 Dec 2008 (audited)

All export sales originate from the Back up Batteries segment.

4. Income tax

5. Dividends

China Shoto plc declared an annual dividend of 3.5p per ordinary share amounting to £817,031 on 28 April 2009, which was approved by the shareholders on the AGM on 16 June 2009 and was paid on 30 June 2009. The group's subsidiary Yangzhou Zhenghe Power Supply Co., Ltd declared an annual dividend amounting to Rmb 6,059,652, of which Rmb2,484,457 (equivalent to £242,271) was paid to the minority shareholder on 19 February 2009, which was approved by the board of director on 3 February 2009.

6. Earnings per share from continuing operations

Earnings for the purpose of basic and diluted earnings per share are the net profit for six months ended 30 June 2009 attributable to equity holders of the parent of £5,455,000 (for six months ended 30 June 2008: £3,813,000, 2008: £10,070,000)

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: