Half Yearly Report

AUHUA CLEAN ENERGY PLC

(the "Company", "Auhua" or the "Group")

INTERIM RESULTS

Auhua Clean Energy plc, the AIM quoted (AIM: ACE) environmental technology group based in the Shandong Province of Eastern China, today announces its unaudited results for the six months ended 30 June 2012.

A strong financial performance

Highlights

·; Revenue for the period increased by 35% to RMB 95.6 million: GBP 9.7 million (30 June 2011: RMB 71.0 million: GBP 6.8 million).

·; Net profit after tax grew strongly by 20% to RMB 23.7 million: GBP 2.4 million (30 June 2011: RMB 19.7 million: GBP 1.9 million).

·; Cash balances at 30 June 2012 of RMB 32.7 million: GBP 3.3 million (30 June 2011: RMB 5.1 million: GBP 0.49 million).

·; Earnings per share of RMB 0.38: 3.8 pence (30 June 2011: RMB 0.33: 3.2 pence).

·; Net assets of RMB 110.3 million: GBP 11.2 million (30 June 2011: RMB 64.2 million: GBP 6.2 million).

·; 31,000 units sold in the first 6 months. Book orders as at 30 June 2012 amounted to RMB 74.8 million (GBP 7.6 million).

·; China's property market appears to be recovering. Sales swung into positive growth in 1H 2012 to 6.9% year-on-year. The growth continued in July 2012 to 26.3% while investment in residential properties increased 10.7% to RMB2.5 trillion from January to July. New residential property launches amounted to a gross floor area of 771 million square metres from January to July this year. At an average of 100 square metres per apartment, this equates to an estimated 7.71 million apartments launched in the first seven months of this year.

* All RMB amounts translated using an exchange rate:

RMB 1 : GBP 0.10114 (as at 30 June 2012)

RMB 1 : GBP 0.09631 (as at 30 June 2011)

Mr Raphael Tham, Chairman of Auhua said, "Our strong performance in the first half confirms our ability to execute projects within schedule and budget while delivering quality products to our clients. Regulatory changes in the industry and the recognition of Auhua's strengths by the property related government agencies will provide us with a strong foundation towards further growth in second half of 2012."

For further information:

Notes to Editors:

Auhua Clean Energy is an environmental technology group based in the Shandong Province of Eastern China specialising in the development and application of green energy and energy efficient solar water heating solutions. In particular, the Group is focused on the manufacture and sale of solar energy water heating systems.

Auhua Clean Energy operates through its wholly owned subsidiaries Shandong Auhua New Energy Co., Ltd and Weihua Auhua New Energy Co., Ltd., of which Auhua Holdings Pte Ltd is the intermediate holding company.

Chairman's Statement

Introduction

I am very pleased to report that demand for our split solar-powered water heating systems remains robust and that this has been reflected in the performance of the Group, with revenue rising by 35% to RMB 95.6 million (GBP 9.7 million) and net profit after tax increasing by 20% to RMB 23.7 million (GBP 2.4 million), in each case over the same period last year.

Our strategy remains focused on capitalising on the growing demand for efficient renewable energy solutions in China, supported by local government policies and incentives together with the country's firm commitment to reduce carbon emissions by 45% per unit of GDP from 2005 levels by 2020. We benefited in the first half from the growth in real estate investments of 16.6% year-on-year.

We operate in a growth industry and one which continues to progress and gain government and industry recognition. Post half year end, we announced the implementation of new industry standards for the split-unit solar water heater industry in Shandong, China. Auhua, as a technological leader, was a key adviser in the creation of the new regulatory framework. The standards have been established to form professional regulatory guidelines for industry players to adhere to and to ensure product quality and implement a grading system to evaluate the quality of a product. The establishment of the industry standards will also assist property developers and government agencies in assessing which product to purchase and promote respectively.

We have made excellent progress in establishing new relationships with property developers, a key strategic aim of the Group. In recognition of our leadership in the sector, several large conglomerates have signed memorandums of understanding with the Group to work in partnership to promote solar energy products and, significantly, the conglomerates will exclusively choose Auhua's products in all their property development projects. In return, Auhua will provide such products at highly competitive prices. The conglomerates include YanKuang Group, China Construction Eighth Engineering Division Corp Ltd and China Railway Tenth Group Co Ltd.

Auhua places great importance on technological innovation and it is therefore pleasing that we have been awarded "Official Recommended Building and Engineering Product" by the Building Materials Department from the China Association for Engineering Construction Standardisation, a national level association under the umbrella of the Ministry of Housing and Rural-Urban Development of China.

Financial Performance

A 26% increase in gross profit to RMB 42.8 million: GBP 4.3 million (1H 2011: RMB 33.9 million: GBP 3.3 million) reflected a strong performance by the business, with sales increasing by 35%. Gross profit margin was 45% for the period, slightly down from 48% in the corresponding period ending 30 June 2011. This was due to higher cost of sales from higher material costs and increased direct costs from our new factory in Rushan , Weihai City. Profit before tax rose by 22% to RMB 32.1 million (GBP 3.2 million), with EPS of RMB 0.38, an increase of 19%.

Administrative expenses increased during the period largely due to the overheads of our new factory in Rushan, Weihai City, which started production in September 2011 with a potential production capacity of 40,000 units per annum.

The Group has maintained a strong financial position with a balance sheet debt ratio of approximately 29%. Cash and cash equivalents held at 30 June 2012 were RMB 32.7 million (GBP 3.3 million) as compared to RMB 5.1 million (GBP 0.49 million) at 30 June 2011.

With the Rushan factory commissioned, the Group has a combined capacity of 90,000 units per annum, an 80% increase in capacity over the same period last year. In terms of revenue by units, the Group sold 31,000 units in the first half, an increase of 24% over the previous year, fuelled by an increase in demand and the ability to fulfil those orders due to our increased capacity. Based on this growth, we expect to reach full production in 2H FY 2013.

Outlook

China's property market appears to be recovering. Sales swung into positive growth in 1H 2012 to 6.9% year-on-year. The growth continued in July 2012 to 26.3% while investment in residential properties increased 10.7% to RMB2.5 trillion from January to July. New residential property launches amounted to a gross floor area of 771 million square metres from January to July this year. At an average of 100 square metres per apartment, this equates to an estimated 7.71 million apartments launched in the first seven months of this year.

Environmental friendly developments with higher plot ratios are expected to show the strongest growth in the property sector. Unibody solar water systems will not be able to provide the same level of efficiency and effectiveness as the split-unit solar water heater systems. It is expected that the growth of split-unit solar water heater systems will outgrow that of unibody systems.

With the listing on AIM completed in April, the Group focused its attention on securing recognition from the industry and the relevant government agencies as the de facto split-unit solar water heater provider and believes that the various industry standard and other developments announced earlier this month show that this has been achieved.

The Group is well placed to consolidate its market leadership in Shandong and other provinces and will continue to invest in research and development to improve the quality of its products.

These strong foundations make us confident of further growth in the second half of 2012.

Tham Wai Mun Raphael

Non-executive Chairman

Auhua Clean Energy Plc

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Changes in Equity

For the six month period ended 30 June 2012

Condensed Consolidated Statement of Financial Position

As at 30 June 2012

Condensed Consolidated Statement of Cash Flows

For the six month period ended 30 June 2012

Basis of Presentation and Summary of Significant Accounting Policies

1. General information and principal activities

The Company was incorporated in Jersey, the Channel Islands, on 21 November 2011. The Company's registered office is at Queensway House, Hilgrove Street, St. Helier, Jersey JE1 1ES, Channel Islands. The nature of the Company's operations and its principal activities are to act as the holding company of a group engaged in technology research and development of solar energy to facilitate household energy appliances for sale and services.

The interim financial information has not been reviewed nor audited by the Company's auditors. The comparatives for the year ended 31 December 2011 are not the Company's full statutory financial statements. These have been prepared by consolidating the Company and the consolidated financial statements of Auhua Holdings Pte Ltd, the subsidiary of the Company. Both the Company only and the consolidated financial statements of Auhua Holdings Pte Ltd have been audited for the period ended 31 December 2011, both audit reports were unqualified. On this basis, the consolidated results of the Company for the year ended 31 December 2011 have been described as audited.

The interim consolidated financial statements for the six months ended 30 June 2012 have been prepared in accordance with IAS 34, Interim Financial Reporting.

The operations of the Group are not affected by seasonal variations.

The Directors do not propose a dividend for the period.

The interim report for the six months ended 30 June 2012 was approved by the Directors on 14 September 2012.

The financial statements have been prepared in accordance with International Financial Report Standards ("IFRS") as adopted by the European Union. The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statements for the year ending 31 December 2012 and are unchanged from those disclosed in the non-statutory consolidated financial statements of Auhua Holdings Pte Ltd except for the following additional accounting policies:

Acquisition of Auhua Holdings Group

On 12 December 2011, a share purchase agreement was entered into with shareholders of Auhua Holdings whereby the Company agreed to acquire the entire issued share capital of Auhua Holdings in consideration for the issue and allotment of 59.8 million ordinary shares of the Company.

Due to the relative values of the companies, the former shareholders, management and advisers of Auhua Holdings maintained control over the enlarged ordinary share capital in the Company. Further, the executive management of Auhua Holdings became that of the Company. A qualitative and quantitative analysis of these factors leads the Directors to conclude that in this transaction Auhua Holdings have the controlling interest and should be treated as the accounting acquirers in each transaction.

In determining the appropriate accounting treatment for the acquisition, the Directors have considered the Application Supplement to IFRS 3, Business Combinations. However, they have concluded that this transaction falls outside of the scope of IFRS 3, since the Company, whose activities prior to the acquisition were limited to the management of cash resources, did not constitute a business. It has therefore been determined that the transaction should be accounted for in a manner that is similar to the reverse accounting as described in IFRS 3, but without recognising goodwill.

In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, in developing an appropriate accounting policy, the Directors have considered the pronouncements of other standard-setting bodies and specifically looked to accounting principles generally accepted in the United States of America ("US GAAP") for guidance (FAS 141, Business Combinations) as well as SEC rules. Under US GAAP, in a reverse acquisition, the target company (Auhua Holdings) is treated as the acquiring company for financial reporting purposes (no purchase accounting adjustments) and the fair value of the acquisitions is recognised, together with adjustments necessary to reflect the net tangible and identifiable intangible assets at their fair value with any remainder assigned to goodwill (full application of purchase accounting).

Under US GAAP, such a transaction is treated as an issuance by the operating group (in this case, Auhua Holdings Group). As a result, the cost of the combination is deemed to equal the net monetary assets of the acquiree plus transaction costs. Only costs incurred by the "target" company can be capitalised.

Comparative figures

The comparative figures for the six months ended 30 June 2011 and the year ended 31 December 2011 present the proforma consolidated results of the Shandong Auhua New Energy Co., Ltd, Weihai Auhua New Energy Co. Ltd, Auhua Holdings Pte Limited and the Company as if they had always been combined. As not all entities were in the group during the accounting period, the comparative information has been prepared on a proforma basis.

2. Operating segments

For the purpose of IFRS 8, the chief operating decision-maker ("CODM"), who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. Auhua is an environmental technology group specialising in the development and application of green energy and energy efficient solar water heating solutions. The Group's revenue and profit before taxation were all derived from its principal activity. Revenues from all periods were derived from external customers based in China. The operations are based in China and its assets and liabilities related to this single business segment.

3. Taxation

3.1 Auhua Holdings is subject to a Singapore Tax rate of 17%. As Auhua Holdings has no trading income, the expenses incurred cannot be carried forward as tax losses.

Auhua Trading Group is subject to a PRC Enterprise Income tax rate of 25%.

3.2 A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rates is as follows:-

No deferred tax assets or liability is recognised, principally as result of the taxable profit for the Group equating to accounting profit.

4. Property, plant and equipment

5. Share capital

6. Reserves

6.1 Capital reserve

According to the relevant PRC regulations and the Articles of Association, a company is required to transfer 10% of its profit after income tax to the statutory surplus reserve until the reserve balance reaches 50% of its registered capital. The transfer to this reserve must be made before the distribution of dividends to equity owners. Statutory surplus reserve can be used to make good previous years' losses, if any, and may be converted into paid-in capital in proportion to the existing interests of equity owners, provided that the balance after such conversion is not less than 25% of the registered capital.

6.2 Reconstruction reserve

The group reconstruction, whereby Auhua Holdings acquired Weihai Auhua New Energy Co., Ltd and Shandong Auhua New Energy Co., Ltd in July and November 2011 respectively, gave rise to the reconstruction reserve which represents the difference between (i) the cost of the investment in the subsidiaries and (ii) the share capital and share premium of those subsidiaries on acquisition.

7. Related party transactions

a) Related parties are entities with common direct or indirect shareholders and/or previous and/or current directors. Parties are considered to be related if one party has the ability to control the other party in making financial and operating decisions.

Certain of the Group's transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in these non statutory financial statements. The balances are unsecured, interest-free and repayable on demand unless otherwise stated.

During the financial period, in addition to those disclosed elsewhere in this proforma aggregated financial information, the following significant transactions took place at terms agreed between the parties:

b) Key management personnel compensation is analysed as follows:

Key management personnel are considered to be the previous and/or current executive directors and their emoluments are included above.

Augrains Capital Pte. Ltd. is controlled by Raphael Tham, non-executive Chairman of Auhua Group as at the balance sheet date.

8. Commitments

As at 30 June 2012, the capital commitment for the Group amounted to RMB 38.3 million (31 December 2011: RMB 16.9 million). This was mainly for purchasing of new equipment and construction of new office building at Weihai Auhua New Energy Co., Ltd. The Group capital commitments as at 30 June 2011 amounted to RMB 4.9 million.

9. Earnings per share

The financial information has been prepared as set out in note 1. Accordingly, a proforma earnings per share has been included based on the relevant number of shares in the Company following the Group reorganisation (whereby the Company acquired the whole of the issued share capital of Auhua Holdings) but prior to the issue of shares to raise new funds at the time of the AIM listing. The calculation of earnings per share is based on the following earnings and number of shares.

-Ends-