Half Yearly Report

Vmoto Limited

Audited interim financial report

Vmoto Limited ("Vmoto" or "the Company") (AIM/ASX:VMT) today announces its audited interim financial report for the six months to 31 December 2012.

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About Vmoto

Vmoto is a global scooter manufacturing and distribution group and has been listed on the Australian Stock Exchange (ASX) since October 2001 and the AIM Market of the London Stock Exchange since November 2012. The Company specialises in high quality "green" electric powered scooters and manufactures a range of western designed electric (and some petrol) scooters from its low cost manufacturing facilities in Nanjing, China, marketed in Europe through its operation in Barcelona, Spain and marketed outside Europe through its operations in Australia. Vmoto combines low cost Chinese manufacturing capabilities with European design. The group operates through two primary brands: Vmoto (aimed at the value market in Asia) and E-Max (targeting the Western markets, with a premium end product). As well as operating under its own brands, the Company also sells to a number of customers on an original equipment manufacturer ("OEM") basis.

corporate directory

CHAIRMAN'S letter

Dear Shareholder

I am pleased to present Vmoto's Annual Report for the audited six month period ended 31 December 2012. This represents our change in financial year end to 31 December and my first letter as Chairman, having joined the Board on 29 January 2013.

The last six months of 2012 saw a number of important operational and corporate activities take place. Significant contracts signed and announced included the Strategic Cooperation Agreement with Shanghai PowerEagle (potentially 270,000 units to the end of 2015) and a manufacturing and supply agreement with E-Tropolis GmbH in Germany (minimum of 15,000 units over 3 years). If forecasts are achieved, these contracts would be worth approximately A$86 million and A$24 million respectively in revenue. Both contracts are on track to produce the contracted quantities for 2013.

Corporately, on 9 November 2012, the Company successfully listed on the UK's AIM market, raising gross proceeds of approximately £1.6 million with UK institutions and sophisticated investors. The purpose of the dual listing is to give the Company access to broader equity capital markets and also in recognition of the Company's current and globally expanding customer base.

For the six months ended 31 December 2012, the Company achieved total sales of A$4.6 million, an increase of 53% compared to the six months ended 31 December 2011. The Company reports a net loss for the six months ended 31 December 2012 of A$1.2 million, which represents a decrease of approximately 24% when compared to the net loss for the six months ended 31 December 2011 (excluding impairment of goodwill).

The Company has delivered electric scooters to PowerEagle in excess of the units forecasted, whilst production of our own branded products slightly lower than expectations, due to a general drop in orders from international customers due to global economic conditions.

The Company continues to receive interest from Business to Business and retail customers around the world who are seeking more cost efficient and environmentally friendly means of transporting goods and providing services.

Vmoto still has one of the widest global distribution networks of any electric scooter manufacturer in the world, being represented by more than 27 distributors in 26 countries in the geographic regions of Australia and New Zealand, Asia, Europe, South America, South Africa and the USA. New markets where we are focused on entering into in 2013 include India, Indonesia and the UK.

More and more international business groups such as postal services, courier and delivery companies, fast food companies and government fleets continue to evaluate our products. Any significant fleet change from petrol to electric takes time: from the initial trialling of new bikes, making adaptations where required and ensuring compliance with the relevant domestic authorities and we have a number in the pipeline. New significant customers who ordered Vmoto or E-Max electric scooters during the half year included Correios in Brazil, Sailpost in Italy, Nimag in the Netherlands and Belgium Post.

Whilst some of these are only trial orders, we are greatly encouraged by the interest shown across our 7 electric models, which also goes a long way to validate where the electric scooter and transportation market is heading.

In summary, 2012 was a strong year for Vmoto both corporately and operationally and the signing of significant contracts is evidence of the progress the Company has made since it changed its strategy to focus on the electric scooter market. An enormous amount of work has been put in by all involved with the Company over the last 12 months, which has positioned it strongly for further growth during 2013 as we strive towards a maiden profit.

We anticipate holding our Annual General Meeting in Perth on 17 May 2013 and I look forward to further updating shareholders then.

Yours faithfully

Simon Farrell

Chairman

operations review

OVERVIEW

Vmoto Limited (ASX:VMT, AIM:VMT), the global scooter manufacturing and distribution group specialising in "green" electric powered scooters, provides the following operations review for the six months ended 31 December 2012.

The timing of this report reflects the change in the Company's financial year end from 30 June to 31 December, effective 31 December 2012, as announced on 13 August 2012. This change was made to bring in line the year ends of the Company with annual business planning of its customers and suppliers.

As a result of the Company's delivery on its production estimates, the Company's financial performance for the six months ended 31 December 2012 was in line with market expectations.

Overall, the Company reports a net loss of A$1.2 million for the six month period ended 31 December 2012, which represents a 24% decrease in comparison to the net loss reported for the six months ended 31 December 2011 (excluding impairment of goodwill). The improved financial performance for the six months ended 31 December 2012 was mainly due to lower operating costs as a result of ongoing rationalisation and optimisation of the current operations and more streamlined processes.

On 9 November 2012, Vmoto successfully dual listed on the UK's AIM market in conjunction with a share placement to UK institutions and sophisticated investors, raising gross proceeds of £1.6 million (approximately A$2.4 million). The Company paid a number of one off costs in relation to the AIM listing, including to its advisors with regard to professional assistance provided to Vmoto to dual list on the UK's AIM market.

Operating Facility

Vmoto has a working capital operating facility of RMB34 million (approximately $5.3 million). As at 31 December 2012, the total operating facility drawn down was RMB26.9 million (approximately AUD4.2 million) and the total undrawn operating facility was RMB7.1 million (approximately AUD1.1 million).

In January 2013, the Company repaid RMB13 million (approximately AUD2 million) and drew down RMB13 million (approximately AUD2 million) from its operating facility.

EXISTING CUSTOMERS

PowerEagle: On 3 July 2013, Vmoto signed a strategic Cooperation Agreement with PowerEagle, a Chinese company specialising in the manufacture and development of electric bicycles, electric scooters, electric motorcycles and go carts, selling domestically and into 30 countries worldwide, pursuant to which Vmoto has agreed to produce all of PowerEagle's electric vehicle models on an Original Equipment Manufacture ("OEM") basis.

The Company produced approximately 7,000 units of electric scooters for PowerEagle in 2012 and, as at 31 December 2012, approximately 6,300 units had been delivered to PowerEagle. Production for Power Eagle continued to ramp up during the period with the finalisation of Stage 2 of the Company's Nanjing manufacturing facility where all Power Eagle production lines are housed. With PowerEagle production now working efficiently, the Company is confident about improving the production rates into the 2013 financial year.

E-Tropolis: On 7 November 2012, Vmoto announced it had signed a Manufacturing and Supply Agreement with E-Tropolis GmbH, a prestigious electric scooter company in Germany, to produce 3 of E-Tropolis' electric scooter models on an OEM basis, for a minimum of 15,000 units over 3 years, representing a total sales value of approximately $24 million over 3 years.

Manufacture of the E-Tropolis electric scooters remains on course and delivery of E-Tropolis scooters commenced in February 2013.

USA: During the period, Vmoto was pleased to take its first container order from new USA distributor, Tharo EV, part of Tharo Systems, which is a hi-tech company founded in 1982 with a very strong service ethic and a network across USA. The distributor exhibited Vmoto scooters at CES, the largest technology show in the world, in Las Vegas in January 2013.

operations review (cont'd)

South Africa: The Company, on the back of the very positive start made by our South African distributor took orders from several fleet customers for 120LD and 120LD+ models. Successful trials have taken place with the leading pizza delivery company in South Africa, Debonairs, with 400 stores. The scooters from the container arriving Q1 2013 (all lithium powered delivery versions) have been sold to them.

Denmark: DAO Distribution continues to use their fleet of 230 Vmoto electric scooters 7 days per week, 365 days per year in their delivery of newspapers from 36 depots across Denmark. Customer feedback, by which they are judged and paid by the newspaper publishers, has been extremely positive as a result of the silent and emission free deliveries in the early hours to residential areas. Agreement has been reached with partnering distributors to expand the roll out of our scooters in 2013.

Sweden: EON Sweden agreed to market Vmoto's range of electric scooters to 150,000 of its private customers and over 14,000 of its business customers with a special offer for the 2013 season.

Vietnam: The Company discontinued the supply of petrol scooters to its Vietnamese customer as the Company understands that the Vietnamese customer has ceased its scooter division. The Company will continue selling its existing petrol scooter stocks to other customers and have received a 200 unit order from its Korean customer.

The Company has continued to supply, albeit in smaller numbers in the low season for our main markets, to our network of distributors across the world. The preparations for larger orders both to end customer and major fleets which have had successful trials have been made ahead of the 2013 season.

NEW AND POTENTIAL SIGNIFICANT CUSTOMERS

Brazil: The trials with Correios Brazil continued during the reporting period and the initial phase was completed in December 2012, with positive feedback from riders and technicians in the 5 cities where the trials took place.

Italy: Sailpost, one of the main Italian post operators, began trials with 120SD and 120LD+ models in Milan on 8th October 2012.

Netherlands: Vmoto's products are to be marketed as Nimoto Pro range. Nimag is a well established electric scooter distributor in Netherlands and has the no. 1 selling scooter there already. It is also the importer for Suzuki cars, motorcycles and marine and is part of the Louwmann Group, a multi-billion Euro turnover giant in the automotive sector.

Belgium: The 120LD+ model continued to take part in the testing for public tender of Belgium Post alongside 3 other electric scooter manufacturers.

NEW DISTRIBUTORS

The Company continued to expand its network of distributors during the period and now has distributors in a total of 26 countries, including:

Luxembourg: The distributor in Luxembourg is Electric Vehicle Luxembourg, the leader in the market and part of Group Louisiana which, for example, is the importer for Phillips and Samsung brands.

Norway: REEL AS is the leading distributor of 2 wheel electric and is already a supplier to fleets such as Posten Norge (Norway Post).

Slovakia: Elektromobility SK is a new company for distribution of EVs. It is part of a large automotive supplier group with existing sales through more than 50 dealer locations.

Egypt: SINTRAC, a large importing business with over 25 years experience in introducing international brands to the Egyptian market. Have purchased electric scooters, petrol scooter and Scartt 600cc from Vmoto in their first order.

operations review (cont'd)

NEW MODELS/VERSIONS

The Company completed the development of newer versions of its electric scooters including new versions of the 80L, 80S, 120S and 120L models, which have more advanced and sophisticated settings, new lithium battery packs that are inter-changeable with silicone battery packs and will continue working on research and development to perfect the technology of electric scooters.

Compliance is underway in Australia for Vmoto's new E-Milan, an electric version of its popular petrol Milan scooter, which is expected to launch in Australia in Q2 2013, subject to compliance approval.

EXHIBITIONS

The Company showcased its products at a number of important exhibitions during the period.

Vmoto's Brazilian distributor participated in the "5th Edition of the ECO Business Exhibition" held in Sao Paulo, Brazil in August 2012. This year, the event was backed and supported by the major energy players in Brazil and South America. Vmoto's Brazilian distributor presented the Company's E-Max Electric Scooters at several stands with several major energy players including Compahia Energética de Minas Gerais, CPFL Energia, Eletrocell and Cegasa International as an invited guest. The Brazilian distributor also exhibited E-Max electric scooters with a franchise company for an electric-rent-a-scooter, using reformed containers as rental office and charging stations to be promoted in centres such as São Paulo, Florianópolis, Rio de Janeiro, Curitiba, Brasília, Porto Alegre, Natal and Salvador.

Vmoto exhibited at the international Post & Logistics Expo in Brussels in September 2012 in the EV section alongside brands such as Daimler. Several high level decision makers from new fleet customers were found and discussions continue.

Vmoto was a leading exhibitor with 100sqm in the "e-motion" hall of the Intermot show held in Cologne, Germany 3-7 October 2012, the largest motorcycle and scooter show in the world in 2012 with over 200,000 visitors. Vmoto held a distributor meeting with over 18 of our countries represented and also met potential new distributors.

Vmoto also shared a 90sqm booth with E-Tropolis, for the EICMA show in Milan from 15 to 18 November 2012 which is similar in size and attendance to Intermot. Our booth was situated in the Green Planet Zone and a full 3 days of meetings with potential customers were held.

CORPORATE

On 27 September 2012, the Company completed a placement of 54,070,654 ordinary shares at an issue price of $0.012 per share and one free attaching listed option (exercisable at $0.04 and expiring on 31 December 2014) to raise approximately $650,000. The funds raised from the placement were and will be applied to fast track production lines for the Company's PowerEagle contract and general working capital.

On 9 November 2012, the Company successfully listed on the UK's AIM market. The purpose of the dual listing is to give access to broader equity capital markets and in recognition of the Company's current and globally expanding customer base.

In conjunction with the AIM listing, the Company completed a placement of 121,075,002 ordinary shares to UK institutions and sophisticated investors at an issue price of 1.3 pence (2 cents) per share, raising approximately £1.6 million. The placement was approved by Vmoto shareholders on 23 October 2012. The net proceeds of the placement were and will be applied to meet the Company's current order book from existing customers (including the significant PowerEagle Strategic Cooperation agreement), expand its product range, expand its distribution base across Europe and the rest of the world, increase its workforce, extend its programme to continuously improve quality control, improve after sales service and complete the fit out of Stage 2 manufacturing facility in Nanjing, China.

On 12 October 2012, following the successful capital raising completed in September 2012, Mr Blair Sergeant resigned as a non-executive Director.

On 29 January 2013 the Company announced the appointment of Mr Simon Farrell and Mr Ivan Teo as Non-Executive Chairman and Finance Director respectively.

operations review (cont'd)

2013 OUTLOOK

2013 will be another extremely busy year for Vmoto as it looks to continue and improve on the significant operational and corporate events of 2012. With PowerEagle production now ramping up, the Company's focus is to ensure those orders are met.

Maintaining good relationships with existing customers will be important as will the work behind the scenes to win new customers in China and around the world.

The continuous interest in Vmoto's manufacturing capacity and electric scooters by customers has demonstrated their confidence in Vmoto's infrastructure, capabilities and products. This progression bodes well for the Company and its position within the global electric scooter market.

directors' reporT

The Directors present their report together with the consolidated financial statements of Vmoto Limited ("Vmoto" or the "Company") and its controlled entities (the "Consolidated Entity") for the financial period 1 July 2012 to 31 December 2012.

Directors

The Directors of the Company at any time during or since the end of the period ended 31 December 2012 are:

directors' report (cont'd)

directors' report (cont'd)

Director Resignation

Directorships in other listed entities

Directorships in other listed entities held by Directors of the Company during the last 3 years immediately before 31 December 2012 are as follows:

Directors' Meetings

The number of Directors' meetings and the number of meetings attended by each of the Directors of the Company during the period ended 31 December 2012 are:

1. Mr Farrell and Mr Teo were appointed post the end of the period, on 29 January 2013.

There is presently no separate Audit, Nomination or Remuneration Committee, with all committee functions being addressed by the full Board.

directors' report (cont'd)

Principal Activity

The principal activity of the Consolidated Entity during the period ended 31 December 2012 was the development and manufacture, and international marketing and distribution of electric powered scooters, petrol scooters and all terrain vehicles.

Operating and Financial Review

Results

The Consolidated Entity incurred a loss of A$1,219,581 after income tax for the period ended 31 December 2012.

Operating review

A review of operations for the period ended 31 December 2012 is set out in the Operations Review preceding the Directors' Report.

Significant Changes in the State of Affairs

Total consolidated sales of A$4.6 million were recorded for the Consolidated Entity during the period ended 31 December 2012. The revenue of the Consolidated Entity has increased by 53% as compared to the period ended 31 December 2011, largely as a result of the Company's expansion into the Chinese electric scooter market.

The Consolidated Entity's net assets have increased by approximately A$600,000 during the period ended 31 December 2012 mainly due to the Company's successful placement and listing on the AIM market of the London Stock Exchange.

Fully paid ordinary share capital increased during the period as follows:

·; On 9 August 2012, 3,600 shares were issued pursuant to exercise of listed options;

·; On 27 September 2012, 54,070,654 shares and one free attaching option (exercisable at $0.04 and expiring on 31 December 2014) were issued in a placement pursuant to the Company's 15% placement capacity, raising an amount of A$648,848 (before costs).

·; On 12 November 2012, the Company successfully listed on AIM market of the London Stock Exchange and completed a share placement, issuing 121,075,002 shares and raising A$2.4 million (approximately £1.6 million) (before costs).

Other than the above, there was no significant change in the state of affairs of the Consolidated Entity during the period ended 31 December 2012.

Review of Financial Condition

The Consolidated Entity had the following interest bearing liabilities as at 31 December 2012:

·; Bank operating facility of A$4,158,486 including interest accrued.

Impact of legislation and other external requirements

The Consolidated Entity's operations are not subject to any significant environmental regulations. The Board believes that the Consolidated Entity has adequate systems in place for the management of its environmental regulations and is not aware of any breach of those environmental requirements as they apply to the Consolidated Entity.

Clean Energy Legislative Package

The Clean Energy Legislative Package, which included the Clean Energy Act 2011, was passed by the Australian Government in November 2011. It sets out the way that the government will introduce a carbon price to reduce Australia's carbon pollution and move to a clean energy future.

The Consolidated Entity's manufacturing activities are primarily carried out in China and the Directors believe that the Group will not be significantly affected by this legislation passed. The Consolidated Entity has not incorporated the effect of any carbon price implementation in its impairment testing at 31 December 2012.

directors' report (cont'd)

The Directors' view is that there were no changes in environmental or other legislative requirements during the period that have significantly affected the results or operations of the Consolidated Entity.

Dividends

No dividend has been declared or paid by the Company to the date of this Report in respect of the period ended 31 December 2012 and the year ended 30 June 2012.

Events Subsequent to Balance Date

Board Appointment

On 29 January 2013, the Company announced that it had appointed Mr Simon Farrell as Non-Executive Chairman of the Company. Mr Farrell has over 30 years' experience in private and public corporate business especially in the mining industry at senior management and board level, principally in the areas of finance, marketing and general management. He was previously managing director of ASX and AIM listed Coal of Africa Limited which he was responsible for growing to a market capitalisation of more than £1 billion. He holds a BCom degree from the University of Western Australia and an MBA from the Wharton School at the University of Pennsylvania. He is a Fellow of both the Australian Society of Accountants and the Australian Institute of Company Directors. Mr Farrell currently resides in London and has very strong relationships with brokers and fund managers in the UK.

The Company's Chief Financial Officer, Mr Ivan Teo, have been appointed as Finance Director of the Company, effective 29 January 2013. Based in Nanjing, China, Mr Teo holds a BCom from the University of Adelaide, is a Chartered Accountant and has experience in accounting, audit and corporate finance.

Relocation of Vmoto's Europe After Sales Centre

The Company has entered into a new arrangement to relocate its European after sales and service centre from Barcelona, Spain to Bremen, Germany. The relocation commenced mid March 2013 and is expected to be in operation from early April 2013.

Other than the above and as noted elsewhere in the financial statements, there has not arisen in the interval between the end of the financial period and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in future financial years.

Likely Developments

Further information about likely developments in the operations of the Consolidated Entity and the expected results of those operations in future financial years are discussed in the Operations Review.

Directors' Interests

The relevant interests of each Director in the shares, options and performance rights issued by the Company at the date of this report are as follows:

directors' report (cont'd)

Options

On 27 September 2012, 54,070,654 unlisted options (exercisable at $0.04 and expiring on 31 December 2014) were issued pursuant to a placement.

On 23 November 2012, the Company granted 11,500,000 unlisted options (exercisable at $0.03 each on or before 23 November 2015) to certain employees pursuant to the Company's Employee Share Option Plan.

On 23 November 2012, 5,725,385 listed options (exercisable at $0.04 and expiring on 31 December 2014) were issued in part consideration for the provision of professional services with respect to the Company's AIM listing.

At the date of this report, options over unissued ordinary shares of the Company are:

(a) These options do not confer the right to participate in any share issue or interest issue of the Company or any other entity.

Performance Rights

On 6 August 2012, following shareholder approval at the Company's general meeting held on 31 July 2012, the Company granted a total of 32,000,000 performance rights to Directors Charles Chen, Blair Sergeant and Oliver Cairns.

The performance rights comprise:

a) 2,000,000 performance rights issued to Mr Blair Sergeant pursuant to his Non-Executive Director Appointment Agreement; and

b) 30,000,000 performance rights issued under the Company's Performance Rights Plan (10,000,000 each to Mr Charles Chen, Mr Blair Sergeant, Mr Oliver Cairns), subject to the following performance conditions:

directors' report (cont'd)

On 12 October 2012, Mr Blair Sergeant resigned as Non-Executive Director. Mr Sergeant's 2,000,000 performance rights issued pursuant to his Non-executive Director appointment and 10,000,000 performance rights issued under the Company's Performance Rights Plan lapsed upon his resignation in accordance with the applicable terms of his appointment and the terms and conditions of Vmoto Ltd's Performance Rights Plan.

All performance rights convert to fully paid ordinary shares for nil cash consideration, subject to performance based vesting conditions. At the date of this report, performance rights over unissued ordinary shares of the Company are:

directors' report (cont'd)

Indemnification and Insurance of Officers and Auditors

The Company has agreed to indemnify the current Directors and Officers of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors and Officers of the Company, except where the liability arises out of conduct involving a lack of good faith.

The agreement stipulates that the Company will meet, to the maximum extent permitted by law, the full amount of any such liabilities, including costs and expenses.

The Company has not agreed to indemnify their current auditors, William Buck Audit (WA) Pty Ltd.

Insurance Premiums

As at the date of this report, a Directors and Officers insurance policy has been secured. The insurance premium for this policy during the period ended 31 December 2012 was A$12,379.

Contingent Liabilities

The Company is currently a defendant in a proceeding brought against the Company by a former employee in relation to the employee's past employment. Having considered legal advice, the Directors believe that the claim can be successfully defended, without any losses (including for costs) being incurred by the Company.

Non-audit services

During the period, William Buck Audit (WA) Pty Ltd, the Company's auditor, did not perform any non-audit services in addition to their statutory duties.

Auditor's Independence Declaration

The Auditor's Independence Declaration is set out on page 70 and forms part of the Directors' Report for the period ended 31 December 2012.

remuneration report

This remuneration report outlines the Director and executive remuneration arrangements of the Company and the Consolidated Entity.

Director and Key Management Personnel details

The following persons acted as Directors of the Company during or since the end of the financial period:

Mr Simon Farrell (appointed 29 January 2013)

Mr Charles Chen (appointed 5 January 2007)

Mr Ivan Teo (appointed Finance Director 29 January 2013; appointed Chief Financial Officer 17 June 2009)

Mr Oliver Cairns (appointed 1 September 2011)

Mr Kaijian Chen (appointed 1 September 2011)

Mr Blair Sergeant (appointed 18 January 2012, resigned 12 October 2012)

The term 'key management personnel' is used in this remuneration report to refer to the Directors and the following persons. Except as noted, the named persons held their current position for the period ended 31 December 2012 and since the period ended 31 December 2012:

Mr Michael Fulton (International Sales Manager)

Mr Klaus Rheinschmitt (Quality Control and After Sales Service Manager)

Mr George Hou (General Manager)

Mr Zhengjie Wu (Vice General Manager)

Overview of remuneration policies

The Board as a whole is responsible for considering remuneration policies and packages applicable both to Directors and executives of the Company and the Consolidated Entity.

Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company and the Consolidated Entity, including Directors of the Company and other executives. Key management personnel comprise the Directors of the Company, and executives for the Company and the Consolidated Entity including the key management personnel.

Broadly, remuneration levels for key management personnel of the Company and key management personnel of the Consolidated Entity are competitively set to attract and retain appropriately qualified and experienced Directors and executives and reward the achievement of strategic objectives. The Board obtains independent advice on the appropriateness of remuneration packages of both the Company and the Consolidated Entity given trends in comparative companies both locally and internationally, and the objectives of the Company's remuneration strategy.

Remuneration packages consist of fixed remuneration including base salary, employer contributions to superannuation funds and non-cash benefits.

The Company has a variable remuneration package for Directors, which is known as the Performance Rights Plan. This plan allows Directors to convert performance rights to fully paid ordinary shares for nil cash consideration, subject to performance based vesting conditions.

Fixed remuneration

Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges related to employee benefits including motor vehicle), as well as employer contributions to superannuation funds.

Remuneration levels are reviewed annually by the Board through a process that considers individual, segment and overall performance of the Consolidated Entity. The Board has regard to remuneration levels external to the Consolidated Entity to ensure the Directors' and executives' remuneration is competitive in the market place.

remuneration report (cont'd)

Executive Directors are employed full time and receive fixed remuneration in the form of salary and statutory superannuation or consultancy fees, commensurate with their required level of services.

Non-Executive Directors receive a fixed monthly fee for their services. Where Non-Executive Directors provide services materially outside their usual Board duties, they are remunerated on an agreed daily rate basis.

Service agreements

It is the Consolidated Entity's policy that service agreements for key management personnel are unlimited in term but capable of termination on 3 months' notice and that the Consolidated Entity retains the right to terminate the service agreements immediately, by making payment equal to 3 months' pay in lieu of notice.

The service agreement outlines the components of compensation paid to key management personnel but does not prescribe how remuneration levels are modified year to year. Remuneration levels are reviewed annually on a date as close as possible to 31 December of each year to take into account key management personnel's performance.

Non-Executive Directors

Total remuneration for all Non-Executive Directors, last voted upon by shareholders at the 2012 Annual General Meeting, is not to exceed A$300,000 per annum and has been set at a level to enable the Company to attract and retain suitably qualified Directors. The Company does not have any scheme relating to retirement benefits for Non-Executive Directors.

Relationship between the remuneration policy and company performance

The remuneration policy has been tailored to increase goal congruence between shareholders, Directors and executives. Two methods have been applied to achieve this aim, the first being a performance-based rights subject to performance based vesting conditions, and the second being the issue of options to key management personnel to encourage the alignment of personal and shareholder interests. The Company believes this policy was effective in increasing shareholder wealth.

The tables below set out summary information about the Consolidated Entity's earnings and movements in shareholder wealth for the last five reporting periods:

remuneration report (cont'd)

Directors' and executive officers' remuneration

Details of the nature and amount of each major element of the remuneration of each Director of the Company and the named officers of the Company and the Consolidated Entity for the period ended 31 December 2012 are:

remuneration report (cont'd)

remuneration report (cont'd)

Share-based payment arrangements

Options

The Company operates an Employee Share Option Plan ("ESOP") for executives and senior employees of the Consolidated Entity. In accordance with the provisions of the plan, executives and senior employees may be granted options to purchase ordinary shares at an exercise price to be determined by the Board with regard to the market value of the shares when it resolves to offer the options. The options may only be granted to eligible persons after the Board considers the person's seniority, position, length of service, record of employment, potential contribution and any other matters which the Board considers relevant.

Each employee share option converts into one ordinary share of Vmoto Limited on exercise. No amounts are paid or payable to the Company by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

The number of options granted is determined by the Board.

To date, options granted under the ESOP expire within thirty six months of their issue, or immediately on the resignation of the executive or senior employee, whichever is the earlier.

During the period ended 31 December 2012, the following ESOP arrangements were in existence:

There is no further service or performance criteria that need to be met in relation to ESOP options granted before the beneficial interest vests in the recipient.

The following grants of share-based payment compensation to key management personnel relate to the six month period ended 31 December 2012:

remuneration report (cont'd)

The following table summarises the value of options to key management personnel granted, exercised or lapsed during the period ended 31 December 2012:

(i) The value of options granted during the period is recognised in compensation over the vesting period of the grant, in accordance with Australian Accounting Standards.

(ii) The value of options lapsing during the period due to the failure to satisfy a vesting condition is determined assuming the vesting condition had been satisfied.

Performance Rights

On 6 August 2012, following shareholder approval at the Company's general meeting held on 31 July 2012, the Company granted a total of 32,000,000 performance rights to Directors Charles Chen, Blair Sergeant and Oliver Cairns.

The performance rights comprise:

a) 2,000,000 performance rights issued to Mr Blair Sergeant pursuant to his Non-Executive Director Appointment Agreement; and

b) 30,000,000 performance rights issued under the Company's Performance Rights Plan (10,000,000 each to Mr Charles Chen, Mr Blair Sergeant, Mr Oliver Cairns), subject to the following performance conditions:

remuneration report (cont'd)

On 12 October 2012, Mr Blair Sergeant resigned as non-executive director. Mr Sergeant's 2,000,000 performance rights issued pursuant to his Non-executive Director appointment and 10,000,000 performance rights issued under the Company's Performance Rights Plan lapsed upon his resignation in accordance with the applicable terms of his appointment and the terms and conditions of Vmoto Ltd's Performance Rights Plan.

All performance rights convert to fully paid ordinary shares for nil cash consideration, subject to the above performance based vesting conditions. At the date of this report, performance rights over unissued ordinary shares of the Company are:

This report is made with a resolution of the Directors pursuant to s298(2) of the Corporations Act 2001:

Charles Chen

Managing Director

Dated at Perth, Western Australia this 27th day of March 2013.

corporate governance statement

The Board of Directors of Vmoto Limited is responsible for the establishment of a corporate governance framework that has regard to the best practice recommendations set by the ASX Corporate Governance Council. Vmoto's objective is to achieve best practice in corporate governance and the Company's Board, senior executives and employees are committed to achieving this objective.

This statement summarises the corporate governance practices that have been adopted by the Board. In addition to the information contained in this statement, the Company's website at www.vmoto.com contains additional details of its corporate governance procedures and practices.

ASX Best Practice Recommendations

The ASX Listing Rules require listed companies to include in their Annual Report a statement disclosing the extent to which they have complied with the ASX best practice recommendations in the reporting period. The recommendations are not prescriptive and if a company considers that a recommendation is inappropriate having regard to its particular circumstances, the company has the flexibility not to adopt it. Where Vmoto considered it was not appropriate to presently comply with a particular recommendation the reasons are set out in the relevant section of this statement.

The Board has adopted a Corporate Governance policy that (except where expressly noted below) complies with the Principles set out in the Second Edition of the "Corporate Governance Principles and Recommendations", established by the ASX Corporate Governance Council and published by the ASX in August 2007. Other than as noted below, this Corporate Governance policy has been in effect for the entire reporting period.

During the period, the Board revised its Securities Trading Policy and provided this to ASX for release to the market, as required by Listing Rule 12.9.

Board of Directors

Role and Responsibilities of the Board

The Board is responsible for guiding and monitoring the Company on behalf of shareholders. The specific responsibilities of the Board include:

(a) appointment, evaluation, rewarding and if necessary the removal of the Managing Director, and Chief Financial Officer (or equivalent) and the Company Secretary;

(b) in conjunction with management, development of corporate objectives, strategy and operations plans and approving and appropriately monitoring plans, new investments, major capital and operating expenditures, capital management, acquisitions, divestitures and major funding activities;

(c) establishing appropriate levels of delegation to the Managing Director to allow him tomanage the business efficiently;

(d) monitoring actual performance against planned performance expectations and reviewing operating information at a requisite level, to understand at all times the financial and operating conditions of the Company;

(e) monitoring the performance of senior management including the implementation of strategy, and ensuring appropriate resources are available;

(f) via management, an appreciation of areas of significant business risk and ensuring that the Company is appropriately positioned to manage those risks;

(g) overseeing the management of safety, occupational health and environmental matters;

(h) satisfying itself that the financial statements of the Company fairly and accurately set out the financial position and financial performance of the Company for the period under review;

corporate governance statement (cont'd) 

(i) satisfying itself that there are appropriate reporting systems and controls in place to assure the Board that proper operational, financial, compliance, and internal control processes are in place and functioning appropriately;

(j) to ensure that appropriate internal and external audit arrangements are in place and operating effectively;

(k) having a framework in place to help ensure that the Company acts legally and responsibly on all matters consistent with the code of conduct; and

(l) reporting to shareholders.

In accordance with ASX Principle 1, the Board has established a Board Charter which sets out functions reserved to Board and those delegated to senior executives. This Charter is available on the Company's website. The Board has delegated responsibilities and authorities to management to enable management to conduct the Company's day to day activities. Matters which are not covered by these delegations, such as approvals which exceed certain limits, require Board approval.

Board composition

As at the date of this Report, the Board is comprised of two Executive Directors and three Non-Executive Directors.

The Company's website contains details on the procedures for the selection and appointment of new Directors and the re-election of incumbent Directors, together with the Board's policy for the nomination and appointment of Directors.

ASX Principle 2 recommends the Board establish a Nomination Committee to focus on the selection and appointment practices of the Company. It is further recommended that the Nomination Committee have a formal Charter.

The Company has adopted a formal Nomination Committee Charter, available on the Company's website, which includes information on the Company's approach to selection and appointment of Directors. However the Company does not presently have a separate Nomination Committee. As the Board is small, the full Board conducts the function of such a committee, in accordance with the Charter.

The composition of the Board is reviewed at least annually to ensure the balance of skills and experience is appropriate. The current Directors have a broad range of qualifications, experience and expertise in scooter and motorcycle distribution and marketing and in the finance and corporate advisory industries. The skills, experience and expertise of Directors are set out in the Directors' Report. The Board considers that the current composition of the Board is adequate for the Company's current size and operations, and includes the appropriate mix of skills and expertise, relevant to the Company's business.

The names of the Directors in office at the date of this Report, the year they were first appointed, their status as non-executive, executive or independent Directors and whether they are retiring by rotation and seeking re-election by shareholders at the 2013 Annual General Meeting, are set out in the Directors' Report.

Independence of Non-Executive Directors

ASX Principle 2 recommends that a majority of the Board should be independent. The Board considers an independent Director to be a Non-Executive Director who meets the criteria for independence included in Principle 2 of the ASX Corporate Governance Principles and Recommendations. Materiality for these purposes is based on quantitative and qualitative bases. An amount of over 5% of the annual turnover of the Company or 5% of the individual directors' net worth is considered material for these purposes.

The Board has reviewed and considered the positions and associations of each of the Directors in office at the date of this report and consider that a majority of the Directors are independent. Mr Simon Farrell, Mr Oliver Cairns and Mr Kaijian Chen are considered independent.

corporate governance statement (cont'd) 

Independent professional advice

The Board has adopted a formal policy on access to independent professional advice which provides that Directors are entitled to seek independent professional advice for the purposes of the proper performance of their duties. The advice is at the Company's expense and advice so obtained is to be made available to all Directors.

Meetings

The Board held 3 scheduled meetings during the reporting period and no unscheduled meetings were held during that period. Senior management attended and made presentations at the Board Meetings as considered appropriate and were available for questioning by Directors.

The attendance of Directors at Board meetings during the period ended 31 December 2012 is detailed in the Directors' Report.

Evaluation of Board and Senior Executive performance

A process has been established to review and evaluate the performance of the Board, individual Directors and senior executives. The Board is required to meet annually with the specific purpose of reviewing the role of the Board, assessing the performance of the Board and individual Directors over the previous 12 months and examining ways in which the Board can better perform its duties. The Company conducted a Board review process in Q1 2013.

The Managing Director is responsible for assessing the performance of the key executives within the Company. This is performed through a formal process involving a formal meeting with each senior executive.

Remuneration

ASX Principle 8 recommends the Board establish a Remuneration Committee to focus on appropriate remuneration policies. It is further recommended that the Remuneration Committee have a formal Charter.

The Company has adopted a formal Remuneration Committee Charter, available on the Company's website, which includes information on the Company's approach to remuneration of Directors (executive and non-executive) and senior executives. However the Company does not presently have a separate Remuneration Committee. Given the small size of the Board, the full Board conducts the function of such a committee, in accordance with the Charter.

In accordance with Principle 8, Executive Directors and key executives are remunerated by way of a salary or consultancy fees, commensurate with their required level of services. Non-Executive Directors receive a fixed monthly fee for their services. Non-Executive Directors' fees are currently capped at $300,000 per annum.

As approved by shareholders at the General Meeting held on 31 July 2012, the Company's Non-Executive Director Mr Blair Sergeant was issued 2,000,000 Performance Rights.

Further, at the same meeting shareholders approved the Company's Performance Rights Plan and 10,000,000 Performance Rights were issued to each of Mr Charles Chen, Mr Olly Cairns and Mr Blair Sergeant. Following his resignation on 12 October 2012, the Performance Rights issued to Mr Sergeant lapsed.

As announced to the ASX on 29 January 2013, and subject to shareholder approval, Mr Simon Farrell is entitled to 10,000,000 Options as part consideration for his services as non-executive Chairman.

The Company acknowledges that the guidelines to ASX Principle 8 recommend that non-executive directors do not receive options. However the Directors considered the issue to be a cost effective and efficient means for the Company to provide a reward and incentive, as opposed to alternative forms of incentive, such as the payment of additional cash consideration.

The Company does not have any scheme relating to retirement benefits for Non-Executive Directors.

See the Remuneration Report for details of remuneration paid to Directors and key executives during the period.

corporate governance statement (cont'd) 

Risk Management

In accordance with ASX Principle 7, the Company has a policy for the oversight and management of material business risks, which is available on the Company's website.

Management determines the Company's risk profile and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. The Company's process of risk management and internal compliance and control includes:

(a) establishing the Company's goals and objectives, and implementing and monitoring strategies and policies to achieve these goals and objectives;

(b) continuously identifying and reacting to risks that might impact upon the achievement of the Company's goals and objectives, and monitoring the environment for emerging factors and trends that affect these risks;

(c) formulating risk management strategies to manage identified risks and designing and implementing appropriate risk management policies and internal controls; and

(d) monitoring the performance of, and continuously improving the effectiveness of, risk management systems and internal compliance and controls, including an ongoing assessment of the effectiveness of risk management and internal compliance and control.

Within the identified risk profile of the Company, comprehensive practices are in place that are directed towards achieving the following objectives:

(a) effectiveness and efficiency in the use of the Company's resources;

(b) compliance with applicable laws and regulations; and

(c) preparation of reliable published financial information.

The Board oversees an ongoing assessment of the effectiveness of risk management and internal compliance and control, requiring management appraise the Board of changing circumstances within the Company and within the international business environment. During the reporting period, the Managing Director regularly reported to the Board as to the effectiveness of the Company's management of its material business risks. Further, in accordance with Principle 7, the Managing Director and Chief Financial Officer have confirmed in writing to the Board that:

(a) the Company's financial reports present a true and fair view, in all material respects, of the Company's financial condition and operational results are in accordance with relevant accounting standards;

(b) the above confirmation is founded on a sound system of risk management and internal compliance and control which implements the policies of the Board; and

(c) the Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

Financial Reporting

ASX Principle 4 recommends the Board establish an Audit Committee to focus on issues relevant to the integrity of the Company's financial reporting. It is further recommended the Audit Committee have a formal Charter.

The Company has prepared a formal Audit Committee Charter, available from the Company's website, which promotes an environment consistent with best practice financial reporting and includes information on procedures for the selection and appointment of the external auditor and for the rotation of external audit engagement partners. However due to the small size of the Board, the Company does not presently have a separate Audit Committee. The full Board conducts the function of such a committee, in accordance with the Charter.

corporate governance statement (cont'd) 

Code of Conduct

The Board encourages appropriate standards of conduct and behaviour from Directors, officers, employees and contractors of the Company.

The Board has adopted a Code of Conduct in relation to Directors and employees, available from the Company's website. This Code of Conduct is regularly reviewed and updated as necessary to ensure that it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Company's integrity.

A fundamental theme is that all business affairs are conducted legally, ethically and with strict observance of the highest standards of integrity and propriety.

ASX Principle 3 recommends companies establish a policy concerning diversity and disclose the policy or a summary of that policy. It further recommends companies should disclose in each annual report measurable objectives for achieving gender diversity set by the Board in accordance with the diversity policy and progress towards achieving them. Due to the current nature and scale of Vmoto's activities, the Board has not established a diversity policy or measurable objectives for achieving gender diversity to report against in this report for the period ending 31 December 2012. Notwithstanding, the Company notes that as at the date of this report, the proportion of women associated with the Company is:

a) Board: Nil

b) Senior Executive: 17%

c) Employees: 23%

Securities Trading

In compliance with Listing Rule 12.12, the Board has adopted a Securities Trading Policy which regulates dealings by Directors, offices and employees in securities issued by the Company. During the period, and following the Company's successful listing on the United Kingdom's AIM market, the Policy was updated to reflect the requirements of the AIM Rules.

Under the policy, which is available on the Company's website, general restrictions are imposed on Directors and employees when in possession of inside information, while additional trading restrictions apply to Directors and some employees.

The policy also regulates trading by key management personnel within defined closed periods, as well as providing details of trading that is not subject to the policy, exceptional circumstances in which key management personnel may be permitted to trade during a prohibited period with prior written clearance and the procedure for obtaining such clearance.

Privacy

The Company has resolved to comply with the National Privacy Principles contained in the Privacy Act 1988, to the extent required for a company the size and nature of Vmoto.

Continuous Disclosure

In accordance with ASX Principle 5, the Board has an established Continuous Disclosure Policy which is available from the Company's website.

The Company is committed to:

(a) complying with the general and continuous disclosure principles contained in the Corporations Act and the ASX Listing rules;

(b) preventing the selective or inadvertent disclosure of material price sensitive information;

(c) ensuring shareholders and the market are provided with full and timely information about the Company's activities;

corporate governance statement (cont'd) 

(d) ensuring that all market participants have equal opportunity to receive externally available information issued by the Company.

Shareholder Communication

In accordance with ASX Principle 6, the Board has established a communications strategy which is available from the Company's website. The Board aims to ensure that shareholders are kept informed of all major developments affecting the Company.

The Managing Director and Company Secretary have primary responsibility for communication with shareholders. Information is communicated through:

(a) continuous disclosure to relevant stock markets of all material information;

(b) periodic disclosure through the annual report (or concise annual report), half year financial report and quarterly reporting of corporate activities;

(c) notices of meetings and explanatory material;

(d) the annual general meeting;

(e) periodic newsletters or letters from the Chairman or Managing Director; and

(f) the Company's web-site at www.vmoto.com

The Company is committed to the promotion of investor confidence by ensuring that trading in the Company's securities takes place in an efficient, competitive and informed market.

Shareholders are encouraged at annual general meetings to ask questions of Directors and senior management and also the Company's external auditors, who are required to attend the Company's annual general meetings.

conSOLIDATED STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOMe

for the PERIOD ended 31 DECEMBER 2012

conSOLIDATED STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOMe

(continued)

for the period ended 31 DECEMBER 2012

The consolidated statement of profit or loss and other comprehensive income

should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 DECEMBEr 2012

The consolidated statement of financial position is to be read in conjunction with the accompanying notes.

cONSOLIDATED STATEMENT OF CASH FLOWS

for the PERIOD ended 31 DECEMBER 2012

The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.

CONSOLIDATED statements of changes in equity

for the period ended 31 DECEMBER 2012