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Chairman's Speech

Chairman’s Statement
Words from the Chairman: Leoch International — a Leader
in Battery Power Supply Innovation and Reliability

2010 was a very important milestone for the Company. We successfully listed on the main board of the Stock Exchange of Hong Kong Limited on 16 November 2010, being a strong endorsement of our corporate strategy, strong employee driven culture and management team by very high profile local and international investors. On 7 March 2011, we became a omponent stock of the Hang Seng Small to Mid Cap Composite Index, which is another important milestone for the Company and a symbol of our increasing profile with investors. We have taken and will continue to take full advantage of our broad capital platform as a public company to further expand our global sales network, reinforce our team’s structure and management capability, and enhance our research and development ability and innovation, which allow us to lead our markets and the industry. We continue to strive towards our main goal, which is to become the world’s leading lead acid battery manufacturer.

Due to the global financial crisis, many industries and many of our competitors have struggled. The Company not only survived the financial crisis, but delivered continuous and significant growth through the crisis. The global financial crisis forced our existing and potential customers to focus on cost control, and given our more favorable position as compared to our competitors in this end, we have seen a significant increase in request for quotations. Importantly, over the same period governments across our markets have generally put in place much more stringent requirements relating to environmental and safety standards on imported products. The Company, given its unique positioning in China in providing customers with higher value-added products, was able to grasp this opportunity more fully and faster than its competitors and grew quickly.

Future Prospects: Growth Underpinned by Four Key Drivers

Technology and industry upgrade in China battery industry

Since our establishment in 1999, we initially focused on the international market and by 2009 had quickly grown to become a leading Chinese lead-acid battery exporter. Technology improvement, development and innovation have brought vitality and visibility to the Leoch brand and in the recent years we are proud to have become the supplier for top world brands such as Eaton, Emerson, BMW, and Mattel. Our products are viewed by our bluechip customer base as world-class in terms of reliability and innovation, and our technology and production ability has reached leading position. We are uniquely positioned to fully leverage these advantages over the near-term with both local and international customers.

Urbanization and national income increase in China

China’s economy is clearly in a rapidly growing period. This economic growth and the parallel growth in consumer demand keeps expanding the demand for core infrastructure and power generation related products that we supply such as substations, telephone exchange power supply, and UPS. Due to continuing urbanization in China, the secular growth in demand will continue for many years and we believe is a great opportunity for the Company. We will positively respond to this rapid market evolution, providing more advanced, exacting and high quality products in order to expand market share in our important domestic market.

Consolidation of China battery industry

The current battery industry in China is highly fragmented with a significant number of players who operate highly inefficiently consuming excessive raw materials and power. This phenomenon has already been recognized by main industry association and the central government. Saving energy, reducing emissions and the consumption of key natural resources will be main themes for the future. We expect in the coming few years to see significant consolidation in the battery industry. The PRC Ministry of Environmental Protection has already implemented more stringent regulations focusing on environmental protection with an aim to eliminating low-end producers. We have an experienced and outstanding management team who are well placed with all the key stakeholders from customers to government authorities to act as consolidators and have the financing platform as a public company to effect this consolidation.

Renewable energy is supported by governments worldwide with increasing application in the future

Governments around the world, especially in developed countries, pay great attention to renewable energies such as solar and wind energies. The PRC government has also stepped up its effort to support the renewable energy industry recently resulting in a growing demand for a number of products, including offline power systems such as offline solar energy. This will lead to significantly growing demand for energy-storage batteries, a main component in offline energy systems. We believe this is another great future growth opportunity for us.

Our future strategies

In order to fully capture the enormous market opportunities facing us, we implement the following strategies:

1. Strengthen our team structure and human resources: We have built an excellent culture focused on our management team and employees which lays our foundation to be a world class enterprise. To solidify this foundation, we will continue to invest in staff training and identification, recruitment and retention of talents. Human resources are very important for our development. We were founded in 1999 with only 10 staff and have evolved to be an enterprise with over 7,500 employees worldwide. We continuously recruit outstanding college graduates and experienced personnel and provide training and promotion to our employees. All these measures are critical to our rapid growth and development. We strive to make the best use of every employee.

2. Strengthen our research and development capabilities: We continue to invest in research and development of technology. We will expand our research and technology team and continue to cooperate with world’s leading institutes and experts in order to enhance the quality, effectiveness and leadership of our research and development capabilities. We aim toestablish ourselves as an enterprise with innovative research and technology, leading techniques and advanced products with which customers seek to cooperate to design and produce their key products. 3. Increase our investment in equipments and facilities: custom-designed capital equipment and facilities are a key strategy pillar and an important factor to our product quality. We continue to upgrade our existing equipment and facilities. We also introduce new and advanced equipment and machinery. As we roll out our new products, processes and facilities related to the pure lead areas, our target is to standardise our operation and maintenance process across all of our facilities, which requires us to continue to upgrade the knowledge and transform the concept of our equipment maintenance and operation staff.

4. Become a world leading battery manufacturer: We will increase our investment in infrastructure, which is important as we move to full utilisation of our production capacity at our three main production plants in Zhaoqing, Anhui and Jiangsu. We have and will continue to increase the productivity of these three production plants, while at the same time looking to invest appropriately in new production facilities worldwide to increase our production capacity.

Conclusion

The listing on The Stock Exchange of Hong Kong Lmited is just the beginning of a new and exciting chapter for the Company. Our aim is to provide customers with competitive prices, reliable quality, timely delivery and comprehensive services and these efforts are being recognised by them and reflect in our order intake and sales growth. We will continue to promote our corporate image, increase our customer’s satisfactory level to build a world-class company. In the coming years, we will focus and invest to increase our research and development capability and expand our scale. At the same time we will pay more effort to expand our sales in domestic and international markets, in order to build the Company into a truly multi-national company. The rapid growth of the Company depends on our loyal and diligent management and employees. I, hereby, on behalf of the Board of Directors, am sincerely grateful for the contributions of all our employees and the support and trust of our shareholders and other key stakeholders.

2011 is going to be a key year for the Company to the implementation of its strategic target to become a world class company. We shoulder great responsibilities. But we will draw from the spirit of Dr. Sun Yatsen, who said: “I will be pursue my ambitions without any hesitation and work towards the goal unyieldingly”. We will continue to work and we believe that our effort will bring the name of “Leoch International” to the forefront of world battery manufacturing industry.

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