1
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007

CONTENTS PAGE(S)
CORPORATE INFORMATION 2
MANAGEMENT DISCUSSION AND ANALYSIS 4
REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION 21
CONDENSED CONSOLIDATED INCOME STATEMENT 23
CONDENSED CONSOLIDATED BALANCE SHEET 24
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY 27
CONDENSED CONSOLIDATED CASH FLOW STATEMENT 29
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS 30

2
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
CORPORATE INFORMATION

Board of Directors
Executive Directors Mr. Ben FAN (Chairman)
Ms. Michelle WONG
Mr. FAN Pong Yang
Mr. JANG Jann Huan
Mr. TONG Yee Ming
Independent non-executive Mr. WU Tak Lung
Directors Ms. FUNG Siu Wan Stella
Mr. LAM Yin Ming
Mr. ZHAO Shan Xiang
Qualified accountant and Mr. TONG Yee Ming, ACMA, CGA, CPA
company secretary
Authorized representatives Ms. Michelle WONG
Mr. TONG Yee Ming
Audit committee Mr. WU Tak Lung (Chairman)
Ms. FUNG Siu Wan Stella
Mr. LAM Yin Ming
Remuneration committee Ms. FUNG Siu Wan Stella (Chairman)
Ms. Michelle WONG
Mr. WU Tak Lung
Mr. LAM Yin Ming
Nomination committee Mr. LAM Yin Ming (Chairman)
Ms. Michelle WONG
Mr. WU Tak Lung
Ms. FUNG Siu Wan Stella

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NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007

CORPORATE INFORMATION (Continued)
Principal share registrar Butterfield Fund Services (Cayman) Limited
Butterfield House
68 Fort Street
P.O Box 705
George Town
Grand Cayman
Cayman Islands
British West Indies
Hong Kong branch Tricor Investor Services Limited
share registrar 26/F, Tesbury Centre
28 Queen’s Road East
Wanchai
Hong Kong
Auditor Deloitte Touche Tohmatsu
Compliance advisor ICEA Capital Limited
Principal bankers The Hongkong and Shanghai Banking
Corporation Limited
Bank of China
Registered office Cricket Square
Hutchins Drive
P. O. Box 2681
Grand Cayman KY1-1111
Cayman Islands
Principal place of business 13/F, Tower A
in Hong Kong New Mandarin Plaza
14 Science Museum Road
Kowloon
Hong Kong
Company website address www.neo-neon.com
Stock Code 1868

4
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
FINANCIAL REVIEW

The board of directors (the “Directors”, collectively, the “Board”) of Neo-Neon
Holdings Limited (the “Company”) presents the interim result and the unaudited
condensed consolidated interim financial information of the Company and its
subsidiaries (the “Group”) for the six months ended 30 June 2007 (“Review Period”),
together with the comparative figures.
During the Review Period, the Group has recorded a turnover of approximately
HK$505.1 million, representing an increase of 32.4% as compared to approximately
HK$381.6 million in the corresponding period last year. Gross profit margin achieved
34.5%, compared to 37.8% in the corresponding period last year. Net profit of the
Group was recorded at approximately HK$80.3 million, compared to a profit of
HK$61.2 million in the corresponding period last year. Basic earnings per share was
HK$0.11, compared to the basic earnings per share of HK$0.10 in the corresponding
period last year.
These encouraging results in the first half of 2007 were mainly attributable to
continued favourable sales of the Group’s LED decorative lighting products. Effective
cost and operational expenses control also contributed to the rise in net profit.
TURNOVER

Incandescent-based decorative lighting products
The sales revenue of incandescent-based decorative lighting products increased from
HK$140.7 million for the six months ended 30 June 2006 to HK$151.8 million for
the six months ended 30 June 2007. As the era for replacement of LED-based
decorative lighting products has begun, the increase in sales was deviated from our
expectation. We believe that we have gained market share in the incandescent
decorative lighting market due to many less sizeable manufacturers went out of
business in the last twelve months.
LED-based decorative lighting products
The sales revenue of LED-based decorative lighting products grew significantly from
HK$118.6 million for the six months ended 30 June 2006 to HK$201.7 million for
the six months ended 30 June 2007, an increase of 70.1%. The revenue of one of our
patented products, the LEDNEON-FLEX, continued to increase in the first half of
2007.

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NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007

LED-based illumination lighting products
This is the first year that we launched LED-based illumination lighting products. The
sales revenue of LED-based illumination lighting products was HK$7.6 million and
was approximately 1.5% of the total revenue in the first half of 2007. During the first
half of the year, a lot of our customers ordered samples from us. They spent time on
testing the quality of these new products. The feedbacks from our customers were
positive and encouraging. In fact, we began to receive concrete sales orders in July
and August and we are confident that there will be more sales coming through for
the rest of the year. For those orders that we received recently, a significant portion
are LED street lighting products. That indicates governments are taking the initiative
to use clean and energy saving products. We expect the increase in sales of LED-
based illumination lighting products will mitigate the seasonality effect on decorative
lighting products in the longer run. Nevertheless, we foresee that the overall revenue
from LED-based illumination lighting products will only contribute a small percentage
of our total revenue in 2007. We expect sales in LED-based illumination lighting
products will grow significantly next year.
Entertainment lighting products
The sales revenue of entertainment lighting products increased slightly from HK$114.5
million for the six months ended 30 June 2006 to HK$114.9 million for the six
months ended 30 June 2007, an increase of 0.4%. The sales growth of the
entertainment lighting business was not too encouraging in the first half and we
expect better growth in the second half of 2007.
COST OF SALES

The Group’s total cost of sales increased from HK$237.3 million for the six months
ended 30 June 2006 to HK$330.7 million for the six months ended 30 June 2007.
Cost of sales represented 65.5% of the Group’s total turnover for the six months
ended 30 June 2007, which increased by 3.3% compared to 62.2% for the six months
ended 30 June 2006. In 2007, the price of copper, being a major component of our
cost, stabilized and which to a certain extent, help to improve our sales performance.
The cost of LED chips, being another major component of our cost, declined in
2007 which is a general phenomenon in the industry. However, in view of the
increase in demand of LED chips, we expect this cost decreasing trend for the LED
chips will reverse beginning in 2008. We further anticipated that there will be a
shortage of supply of LED chips in 2009.

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NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
GROSS PROFIT AND GROSS PROFIT MARGIN

The Group’s gross profit increased by 20.8% from HK$144.4 million for the six
months ended 30 June 2006 to HK$174.4 million for the six months ended 30 June
2007 as a result of the increase in sales during the year.
The Group’s overall gross profit margin decreased by 3.3% from 37.8% in 2006 to
34.5% for the six months ended 30 June 2007. The increase in percentage in cost of
sales in the first half of 2007 was mainly due to higher depreciation expenses as a
result of our expansion of production facilities and more lower margin products
being manufactured in the first half of 2007.
OPERATING EXPENSES

Operating expenses include distribution expenses and administrative expenses. For
the six months ended 30 June 2007, the Group’s operating expenses were HK$133.3
million, an increase of 35.7%, compared to HK$98.2 million in 2006. The increase
was mainly attributable to the growth in production volumes, the administrative
expenses associated with the listing, and an increase in professional costs. Operating
expenses accounted for 26.4% of the Group’s turnover for the period, up 0.7
percentage points as compared with 25.7% for the six months ended 30 June 2006.
The change was mainly due to the incurring of apportioned share-based payments of
HK$13.1 million of employee share option related expenses in the first half of 2007.
It is expected that the employee share option related expenses will be amounted to
approximately HK$21.8 million for the whole year of 2007.
NET FINANCING COST

For the six months ended 30 June 2007, the Group’s financing cost was HK$1.5
million, representing a decrease of 63.4% compared with HK$4.1 million in 2006,
which was mainly attributable to repayment of our bank loans drawn beginning of
the year.
NET PROFIT

For the six months ended 30 June 2007, the Group’s net profit was HK$80.3 million,
representing an increase of 31.2% compared with HK$61.2 million in 2006. The
increase was mainly attributable to increase in sales and the Group’s success in
controlling costs and overhead expenses. The net profit margin was 15.9% compared
with 16.0% in 2006.

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NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
FINANCIAL RESOURCES AND LIQUIDITY

The Company listed on the Stock Exchange on 15 December 2006. A total of
160,000,000 shares of nominal value of HK$0.1 each were issued at a price of
HK$6.90. The net proceeds from the initial public offering (“IPO”) were HK$1.06
billion.
The Group’s major liquidity and capital resources are the cash inflow from operating
activities. Net cash used in operating activities during the year was HK$48.8 million,
respectively a decrease of HK$85.2 million compared to HK$134.0 million in 2006.
Cash and cash equivalents as of 30 June 2007 was HK$814.6 million.
ASSETS AND LIABILITIES

As of 30 June 2007, the Group’s total assets were HK$2,558.2 million, an increase of
HK$1,067.5 million compared with HK$1,490.7 million as of 30 June 2006.
The Group’s total liabilities as of 30 June 2007 were HK$425.9 million, a decrease of
HK$244.5 million compared to that as of 30 June 2006. The main reason for the
decrease in total liabilities was due to the repayment of bank borrowings at the
beginning of 2007.
As of 30 June 2007, the Group’s outstanding bank loans was nil, compared with
HK$194.2 million as of 30 June 2006.
The Group’s shareholders’ equity as of 30 June 2007 was HK$2,125.1 million, an
increase of HK$1,313.1 million compared with HK$812.0 million as of 30 June 2006.
The increase was mainly due to the net proceeds from the IPO and the net profit
for the six months ended 30 June 2007.
The Group’s gearing ratio decreased substantially to 0% as of 30 June 2007 compared
with 23.7% as of 30 June 2006 as a result of the increase in capital after the listing.

8
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
TAXATION

Taxation of the Group for the six months ended 30 June 2007 was HK$5.4 million.
The effective tax rate was 6.3% which was 4.3% for the six months ended 30 June
2007 higher than that of in the first half of 2006. Our LED-based decorative and
entertainment lighting products required the input and contribution from research
and development as well as distribution and marketing functions. The Group’s (i)
research and development and (ii) distribution and marketing functions, among other
things, have contributed to our success principally. To enhance the efficiency of these
functions and preserve the value and contribution of these functions to the Group,
it was desirable that they together with the related risks and uncertainties of the
markets be undertaken by companies in the Group, which are separated from the
manufacturing operations. As it is not mandatory for relevant companies in the
Group undertaking such activities to be incorporated in the PRC or Hong Kong,
they were set up in overseas jurisdictions. While operating in the PRC/Macau as
non-resident enterprises, they have been taxed according to the relevant regulations
of these jurisdictions, where required. The relevant intra-group transactions were
carried out on the above-mentioned basis.
FOREIGN EXCHANGE RISK

The Group’s sales were mainly denominated in United States Dollars, no significant
currency risk exposure was expected in this respect. The Group currently does not
have a foreign currency hedging policy in respect of foreign currency debt. However,
management monitors the related foreign currency exposure closely and will consider
hedging significant foreign currency exposure should the need arise.
PLEDGE OF ASSETS

As of 30 June 2007, there were no pledge of assets for the Group.
CONTINGENT LIABILITIES

The Group had no contingent liabilities as of 30 June 2007 and 30 June 2006.

9
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
INTERIM DIVIDEND

The Board has declared the payment of an interim dividend of HK$0.027 per ordinary
share of the Company.
The interim dividend will be paid on or about 13 November 2007 to the Company’s
shareholders whose names appear on the Register of Members of the Company on
7 November 2007.
CLOSURE OF REGISTER OF MEMBERS

The Register of Members of the Company will be closed from 1 November 2007 to
Wednesday, 7 November 2007, both days inclusive, during which period no transfer
of shares will be effected. In order to qualify for the proposed interim dividend, all
transfers documents accompanied by the relevant share certificates must be lodged
with the Company’s branch share registrars in Hong Kong, Tricor Investor Services
Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong not later
than 4:30 p.m. on Wednesday, 31 October 2007.
BUSINESS REVIEW

Production Facilities and Production Capacity
In 2007, the Group’s LED light bulbs capacity expansion progressed smoothly. Monthly
capacity reached 200 million LED light bulbs at the end of August 2007 compared
with 30 million LED light bulbs at the end of 2006.
The production capacity of our incandescent light bulb will continue to maintain a
moderate utilization rate. The Group will not invest new resources in the incandescent
lighting products business in the near future.
The new LED production plant with a gross floor area of 60,000 sq.m. has already
commenced production in April 2007. We expect that as a result of our expansion
plan, by the end of 2007, our production capacity of LED-based light bulbs will
increase to 250 million per month.
In the first half of 2007, the Group continued to expand the LED-based decorative
lighting products market of which impressive results were achieved during the year.

10
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007

Quality Control
Product quality has always been the most important objective for the Group since
its establishment. The Group implemented strict quality controls throughout the
entire processes of procurement, production, sales and logistics. Our standards and
compliance department is responsible for obtaining certifications for our products
with certification agencies, some of which are country specific. Our products have
to comply with the standards of the country in which our customers conduct
business. We ensure full compliance with the required standards in the manufacturing
and sales process for our products.
Sales and Distribution
As of 30 June 2007, the Group had a sales team of 565 staff. We believe that the
demand for LED-based decorative lighting products will continue to increase and
that the LED-based illumination lighting market has shown substantial growth potential.
Our sales effort in 2007 was aimed to strengthen our current market position in
LED-based decorative lighting and to capture the growth opportunities of the LED-
based illumination lighting market.
RESEARCH & DEVELOPMENT
Our research and development capabilities are important in maintaining our position
as one of the world’s leading manufacturers in the decorative lighting industry. Our
research and development efforts focus on product design, new product development
and improving production efficiency of our products to reduce overall manufacturing
costs while maintaining the quality. In 2007, we allocated significant resources in the
research and development of LED-based illumination lighting application technology
and products. We believe there is a huge market potential in the LED-based
illumination lighting market and that LED-based lighting will replace traditional lighting
such as incandescent lighting and fluorescent lighting in the future.

11
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
HUMAN RESOURCES

The basic remunerations of the employees are determined with reference to the
industry remuneration benchmark, the employees’ experience and their performance.
Salaries of employees are maintained at a competitive level and are reviewed annually,
with close reference to the relevant labour market and economic situation. Directors’
remuneration is determined based on a variety of factors such as market conditions
and responsibilities assumed by each director. Apart from the basic remuneration
and statutory benefits required by laws, the Group also provides discretionary bonuses
based upon the Group’s results and the individual performance of the staff.
The Group has not experienced any significant problems with its employees or
disruption to its operations due to labour disputes nor has it experienced any
difficulty in the recruitment and retention of experienced staff. The Group maintains
a good relationship with its employees. Most members of senior management have
been working for the Group for more than 10 years.
The Group also adopts an employee share option scheme at the time of IPO.
FUTURE PLANS AND PROSPECTS

In view of promising sales prospects and growing market demand of LED products,
Neo-Neon plans to further vertically integrate our production facilities to include
LED chips manufacturing in order to satisfy the market demands. A team of our R &
D engineers has been assigned to study the feasibility of this project.
We also plan to set up a plant in Vietnam and the first stage of the investment will
be effected in the fourth quarter of 2007. In the future, some of the labour intensive
works will be transferred to the new factory in Vietnam.
Neo-Neon will continue to pursue new business opportunities in the lighting industry.
We will carefully look for acquisition opportunities to enhance our technology in
order to maintain our leadership in the industry and maximise returns to our
shareholders.

12
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
SHARE OPTION SCHEME

A share option scheme was adopted by the Company pursuant to a board resolution
passed on 20 November 2006 (the “Scheme”) for the primary purpose of providing
incentives to Directors and eligible employees. The Scheme became effective on 15
December 2006 and the options issued pursuant to the Scheme will expire no later
than 10 years from the date of grant of the option. Under the Scheme, the Board
may grant options to any employees of the Company or any of its subsidiaries to
subscribe shares of the Company.
For any options granted to directors, chief executives or substantial shareholders of
the Company, options to be granted shall be approved by the independent non-
executive Directors of the Company (excluding any independent non-executive
Director who is the proposed grantee of options).
The total number of shares in respect of which options may be granted under the
Scheme is not permitted to exceed 10% of the shares of the Company on 15
December 2006 (representing 76,000,000 shares of the Company) without prior
approval from the Company’s shareholders. The number of shares issued and to be
issued in respect of options granted and may be granted to any individual in any one
year is not permitted to exceed 1% of the total shares of the Company in issue at
any point in time, without prior approval from the Company’s shareholders.
The amount payable on acceptance of an option is HK$1.00. In relation to any
options granted under the Scheme, the exercise price is determined by the directors
of the Company, and will not be less than the higher of (i) the closing price of the
Company’s shares on the date of grant, (ii) the average closing price of the shares
for the five business days immediately preceding the date of grant; and (iii) the
nominal value of the Company’s share.

13
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007

During the six months ended 30 June 2007, 15,110,000 share options were granted
to eligible employees of the Group. The option period is 8 years whereas the vesting
period is 5 years in which only 3,022,000 shares can be exercised by the employees
each year. Details of movement of these options are described in the table below:
Number of share options
Exercise Balance Granted Exercised Cancelled Balance
Date Category of price as at during during during as at
of grant participants HK$ 1.1.2007 the period the period the period 30.6.2007
15.2.2007 Employees 8.72 0 15,110,000 626,500 218,000 14,265,500
The weighted average closing price of the shares immediately before the dates on
which the options were exercised was HK$14.59.
Save as disclosed above and in note 12 to the condensed consolidated financial
statements, during the period, no right has been granted to, or exercised by, the
following persons, to subscribe for shares in or debentures of the Company under
the Scheme and no option granted to such persons under the Scheme has been
cancelled and lapsed:
(i) any Director, chief executive or substantial shareholders of the Company, or
their respective associates;
(ii) any participant under the Scheme with options granted in excess of the individual
limit;
(iii) any employee working under employment contract that is regarded as
“continuous contract” for the purpose of the Employment Ordinance;
(iv) any supplier of goods or services; and
(v) any other participants under the Scheme.

14
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007

DIRECTORS AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN
SHARES, UNDERLYING SHARES AND DEBENTURES

As at 30 June 2007, the interests and short positions of the Directors and chief
executives in the shares, underlying shares and debentures of the Company and its
associated corporations (within the meaning of Part XV of the Securities and Futures
Ordinance (the “SFO”)) (the “Associated Corporations”) as recorded in the register
required to be kept by the Company under Section 352 of the SFO or as otherwise
notified to the Company and

22
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review
Engagements 2410 “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified
Public Accountants. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially less in
scope than an audit conducted in accordance with Hong Kong Standards on Auditing
and consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit. Accordingly we
do not express an audit opinion.
CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe
that the interim financial information is not prepared, in all material respects, in
accordance with HKAS 34.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
14th September, 2007

23
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30TH JUNE, 2007
1.1.2007 1.1.2006

to to
30.6.2007 30.6.2006

Notes HK$’000 HK$’000
(unaudited) (audited)
Turnover 505,112 381,634
Cost of goods sold (330,721) (237,268)
Gross profit 174,391 144,366
Other income 44,898 17,622
Distribution and selling expenses (23,437) (17,556)
Administrative expenses (109,870) (80,651)
Finance costs (1,469) (4,128)
Share of profits of associates 490 639
Share of profits of a jointly
controlled entity 723 2,189
Profit before taxation 5 85,726 62,481
Taxation 6 (5,393) (1,275)
Profit for the period 80,333 61,206
Attributable to
– equity holders of the Company 83,327 60,614
– minority interests (2,994) 592
80,333 61,206

Dividend recognised as distribution
during the period – 60,000
Proposed interim dividend 7 20,549 –
Earnings per share 8
– Basic HK$0.110 HK$0.101
– Diluted HK$0.109 N/A

24
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
CONDENSED CONSOLIDATED BALANCE SHEET
AT 30TH JUNE, 2007
30.6.2007 31.12.2006

Notes HK$’000 HK$’000
(unaudited) (audited)
Non-current assets
Investment properties 17,231 17,381
Property, plant and equipment 9 546,961 459,234
Land use rights 13,088 12,871
Intangible assets 12,952 12,583
Interests in associates 17,547 16,803
Interest in a jointly controlled entity 23,505 22,782
Deposits made on acquisition of property,
plant and equipment 27,384 4,152
Deferred tax assets 13,017 15,247
671,685 561,053

Current assets
Inventories 741,840 495,729
Trade and other receivables 10 311,544 226,435
Investments held for trading 18,470 –
Pledged bank deposits – 1,985
Bank balances and cash 814,642 1,158,158
1,886,496 1,882,307

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NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007

CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
AT 30TH JUNE, 2007
30.6.2007 31.12.2006

Note HK$’000 HK$’000
(unaudited) (audited)
Current liabilities
Trade and other payables 11 405,139 219,518
Amount due to a director – 2,126
Taxation 20,789 19,854
Mortgage loan due within one year – 5,747
Current portion of long-term bank loans – 18,000
Secured short-term bank loans – 52,635
425,928 317,880

Net current assets 1,460,568 1,564,427
Total assets less current liabilities 2,132,253 2,125,480
Non-current liabilities
Mortgage loan due after one year – 45,999
Long-term bank loans due after one year – 55,500
– 101,499
Net assets 2,132,253 2,023,981

26
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007

CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
AT 30TH JUNE, 2007
30.6.2007 31.12.2006

HK$’000 HK$’000
(unaudited) (audited)
Capital and reserves
Share capital 76,063 76,000
Reserves 2,049,048 1,937,845
Equity attributable to equity holders of the
Company 2,125,111 2,013,845
Minority interests 7,142 10,136
Total equity 2,132,253 2,023,981
The Interim Financial Information on pages 23 to 38 was approved and authorised
for issue by the Board of Directors on 14th September, 2007 and are signed on its
behalf by:
MR. BEN FAN MR. TONG YEE MING
CHAIRMAN EXECUTIVE DIRECTOR

27
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30TH JUNE, 2007

Attributable
to equity
Share Share holders
Share Share Special compensation options Translation Retained of the Minority
capital premium reserve reserve reserve reserve profits Company interests Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1st January, 2006 (audited) 7,740 70,225 5,891 48,100 – 966 678,296 811,218 603 811,821
Exchange differences arising on
translation of foreign operations,
recognised directly in equity – ––––182–182–182
Profit for the period – –––––60,1460,614 592 61,206
Total recognised income
for the period – ––––18260,1460,796 592 61,388
Capital contributions from
minority owners of subsidiaries – –––––––7,083 7,083
Dividend declared – –––––(60,000) (60,000) – (60,000)
At 30th June, 2006 (audited) 7,740 70,225 5,891 48,100 – 1,148 678,910 812,014 8,278 820,292
At 1st January, 2007 (audited) 76,000 1,013,987 53,856 48,100 – 3,641 818,261 2,013,845 10,136 2,023,981
Exchange differences arising on
translation of foreign operations
and net investments – ––––8,214 – 8,214 – 8,214
Share of translation reserve of
associates – ––––1,190 – 1,190 – 1,190
Net income recognised directly
in equity 76,000 1,013,987 53,856 48,100 – 13,045 818,261 2,023,249 10,136 2,033,385
Profit for the period – –––––83,2783,327 (2,994) 80,333
Total recognised income
for the period 76,000 1,013,987 53,856 48,100 – 13,045 901,588 2,106,576 7,142 2,113,718
Recognition of equity-settled
share-based payments – – – – 13,071 – – 13,071 – 13,071
Exercise of share options 63 6,911 – – (1,510) – – 5,464 – 5,464
At 30th June, 2007 (unaudited) 76,063 1,020,898 53,856 48,100 11,561 13,045 901,588 2,125,111 7,142 2,132,253

28
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Continued)
The special reserve represents the differences between the nominal amount of the
shares issued by the Company and the Group’s former holding company, Neo-Neon
Holdings (BVI) Limited (“NNH”), and the aggregate amount of share capital and
share premium of the subsidiaries acquired pursuant to a corporate reorganisation
in 1996 and a group reorganisation in preparation for the listing of the Company’s
shares in 2006.
Share compensation reserve represents the difference of fair value of certain NNH’s
shares (the ‘’Shares’’) transferred to the Group’s certain senior management by the
Company’s shareholders and the consideration paid by the senior management in
obtaining the Shares in 2004.
As stipulated by the relevant laws and regulations for foreign investment enterprises
in Mainland China (the “PRC”), the Company’s PRC subsidiaries are required to
maintain a statutory surplus reserve fund. Appropriation to such reserve is made
out of net profit after taxation as reflected in the statutory financial statements of
the PRC subsidiaries while the amounts and allocation basis are decided by their
board of directors annually. The statutory surplus reserve fund can be used to make
up prior year losses, if any, and can be applied in conversion into capital by means of
capitalisation issue. Since the date of establishment, there was no appropriation to
the statutory surplus reserve fund as no dividends have been distributed by any of
the PRC subsidiaries.

29
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30TH JUNE, 2007
1.1.2007 1.1.2006

to to
30.6.2007 30.6.2006

HK$’000 HK$’000
(unaudited) (audited)
Net cash used in operating activities (48,814) (134,008)
Investing activities
Purchase of property, plant and equipment (117,644) (70,329)
Other investing cash flows (3,067) (2,532)
Net cash used in investing activities (120,711) (72,861)
Financing activities
Dividend paid – (41,170)
Repayment of mortgage loans (51,746) (2,873)
Bank loans raised – 87,000
Repayment of bank loans (126,135) (20,212)
Other financing cash flows 1,869 1,817
Net cash (used in) from financing activities (176,012) 24,562
Net decrease in cash and cash equivalents (345,537) (182,307)
Cash and cash equivalents at 1st January 1,158,158 293,774
Effect of foreign exchange rate changes 2,021 182
Cash and cash equivalents at 30th June 814,642 111,649

30
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30TH JUNE, 2007
1. GENERAL AND BASIS OF PRESENTATION OF INTERIM FINANCIAL
STATEMENTS

The Company was incorporated and registered as an exempted company with limited
liability on 11th August, 2006 under the Companies Law of the Cayman Islands and acts
as an investment holding company.
Through a group reorganisation to rationalise the structure of the Company and its
subsidiaries (hereinafter collectively referred to as the “Group”) in preparation for the
listing of the Company’s shares (the “Group Reorganisation”), the Company became the
holding company of the Group on 20th November, 2006. Details of the Group
Reorganisation are more fully explained in Appendix VII to the prospectus of the Company
dated 4th December, 2006. The Group resulting from the Group Reorganisation is regarded
as a continuing entity. Accordingly, the condensed consolidated financial statements for
the six months ended 30th June, 2006 have been prepared using the principles of merger
accounting. The condensed consolidated income statement, the condensed consolidated
statement of changes in equity and the condensed consolidated cash flow statement for
the six months ended 30th June, 2006 have been prepared on the basis as if the current
group structure had been in existence throughout that period. The condensed consolidated
balance sheet of the Group as at 30th June, 2006 has been prepared to present the
assets and liabilities of the companies now comprising the Group as if the current group
structure had been in existence as at that date.
The Company’s shares were listed on the Main Board of
The condensed consolidated financial statements have been prepared in accordance with
the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing
of Securities on the Stock Exchange (the “Listing Rules”) and Hong Kong Accounting
Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute
of Certified Public Accountants (“HKICPA”).

31
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
2. SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared under the historical
cost convention except for investments held for trading which are carried at fair value.
The principal accounting policies adopted in the condensed consolidated financial
statements are consistent with those followed in the preparation of the Group’s annual
financial statements for the year ended 31st December, 2006.
3. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS

In the current interim period, the Group has applied, for the first time, a new Standard,
an Amendment and Interpretations (“INT”s) (new “HKFRS”s) issued by the HKICPA,
which are effective for the Group’s financial year beginning 1st January, 2007. The adoption
of these new HKFRSs had no material effect on the results or financial position for the
current or prior accounting periods. Accordingly, no prior period adjustment is required.
The Group has not early applied the following new and revised Standards and INTs that
have been issued but are not yet effective. The directors of the Company anticipate that
the application of these Standards or INTs will have no material impact on the results
and financial position of the Group.
HKAS 23 (Revised) Borrowing costs
1
HKFRS 8 Operating segments
1
HK(IFRIC) – INT 11 HKFRS 2: Group and treasury share transactions
2
HK(IFRIC) – INT 12 Service concession arrangements
3
1
Effective for annual periods beginning on or after 1st January, 2009.
2
Effective for annual periods beginning on or after 1st March, 2007.
3
Effective for annual periods beginning on or after 1st January, 2008.

32
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
4. SEGMENT INFORMATION

Business segment
The Group’s operation is regarded as a single business segment, being an enterprise
engaged in the research and development, manufacture and distribution of lighting products
including incandescent-based decorative lighting products, light emitting diode (“LED”) –
based decorative lighting products and entertainment lighting products.
The geographical market is considered by the directors as the Group’s primary reporting
segment.
Geographical segment
1.1.2007 1.1.2006

to to
30.6.2007 30.6.2006

HK$’000 HK$’000
(unaudited) (audited)
Turnover
America 171,813 116,964
Europe 179,371 150,055
The PRC 53,226 31,963
Asia Pacific, Middle East and Russia
(excluding PRC) 98,408 80,820
Others 2,294 1,832
505,112 381,634

Results
Profit from operations
– America 27,968 23,990
– Europe 32,163 31,096
– PRC 2,518 3,123
– Asia Pacific, Middle East and Russia
(excluding PRC) 21,866 21,394
– Others 417 401
84,932 80,004

Unallocated other income 44,898 17,622
Unallocated expenses (43,848) (33,845)
Finance costs (1,469) (4,128)
Share of profits of associates 490 639
Share of profits of a jointly controlled entity 723 2,189
Profit before taxation 85,726 62,481
Taxation (5,393) (1,275)
Profit for the period 80,333 61,206

33
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
5. PROFIT BEFORE TAXATION
1.1.2007 1.1.2006

to to
30.6.2007 30.6.2006

HK$’000 HK$’000
(unaudited) (audited)
Profit before taxation has been arrived at
after charging:
Depreciation of property, plant and equipment 40,902 31,212
Less: Depreciation included in research and
development costs (573) (104)
40,329 31,108

Amortisation of intangible assets 1,159 1,049
Net exchange loss – 1,920
and after crediting:
Change in fair value of investments held for trading 713 2,351
Dividend income from listed investments
held for trading 125 659
Gain on disposal of investments held for trading – 6,589
Interest income 16,838 2,767
Net exchange gain 19,676 –

34
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
6. TAXATION
1.1.2007 1.1.2006

to to
30.6.2007 30.6.2006

HK$’000 HK$’000
(unaudited) (audited)
The charge comprises:
Hong Kong Profits Tax calculated at 17.5% on the
estimated assessable profit for the period (11) (2,779)
Overprovision in prior periods 259 92
248 (2,687)
PRC enterprise income tax (3,000) (1,937)
Taxation in other overseas jurisdictions 20 (255)
(2,980) (2,192)
Deferred taxation
– current year (1,500) 3,604
– attributable to change in tax rate (1,161) –
(2,661) 3,604
(5,393) (1,275)
Pursuant to the relevant laws and regulations in the PRC, certain PRC subsidiaries are
entitled to exemption from PRC enterprise income tax for two years commencing from
their first profit making year of operation and thereafter, these PRC subsidiaries will be
entitled to a 50% relief from PRC enterprise income tax for the subsequent three years.
This exemption concession will expire in years 2007 and 2008 for most of the relevant
PRC subsidiaries.
The PRC enterprise income tax and overseas taxation are calculated at the rates prevailing
in the respective jurisdictions.
On 16th March, 2007, the Law of the PRC on Enterprise Income Tax was promulgated
which will change the tax rate applicable to the relevant PRC subsidiaries from 27% to
25% commencing on 1st January, 2008. The deferred tax balance has been adjusted to
reflect the tax rate that is expected to apply to the respective periods when the asset is
realised.

35
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
7. DIVIDEND

The proposed interim dividend of HK$0.027 per share for the six months ended 30th
June, 2007 is calculated on the basis of 761,063,500 shares in issue at the date of
approval of this report.
8. EARNINGS PER SHARE

The calculation of basic and diluted earnings per share attributable to the equity holders
of the Company is based on the following data:
1.1.2007 1.1.2006

to to
30.6.2007 30.6.2006

HK$’000 HK$’000
(unaudited) (audited)
Earnings
Earnings for the purposes of basic and diluted
earnings per share 83,327 60,614
Number of shares
Weighted average number of ordinary shares for the
purposes of basic earnings per share 760,137,992 600,000,000
Effect of dilutive potential ordinary shares
– share options 2,941,321
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 763,079,313
The shares in issue in 2006 is based on the assumption that the Group Reorganisation
and the capitalisation issue have been effective on 1st January, 2006.
No diluted earnings per share was presented in 2006 as there were no potential shares
during that period.

36
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
9. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT

During the period, the Group incurred HK$117,644,000 (2006: HK$76,223,000) on
additions to property, plant and equipment to expand and upgrade its manufacturing
capabilities.
10. TRADE AND OTHER RECEIVABLES
30.6.2007 31.12.2006

HK$’000 HK$’000
(unaudited) (audited)
Trade receivables
– related companies in which a family member of
a director of the Company has beneficial interests – 1,042
– associates – 29,702
– others 144,822 112,106
Bills receivables 61,931 27,868
206,753 170,718

Deposits paid to suppliers 49,204 18,440
Amounts due from shareholders – 5,879
Receivable from disposal of a subsidiary 2,086 2,000
Other receivables 53,501 29,398
311,544 226,435

Payment terms with customers are mainly on credit together with deposits. Invoices are
normally payable from 60 days to 90 days of issuance, except for certain well established
customers in which the credit terms are up to 180 days. The following is an aged analysis
of trade and bills receivables at the balance sheet date:
30.6.2007 31.12.2006

HK$’000 HK$’000
(unaudited) (audited)
Age
0 to 60 days 142,063 66,514
61 to 90 days 13,207 16,074
91 to 180 days 14,457 63,897
181 to 360 days 33,320 17,809
Over 1 year 3,706 6,424
206,753 170,718

37
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
11. TRADE AND OTHER PAYABLES
30.6.2007 31.12.2006

HK$’000 HK$’000
(unaudited) (audited)
Trade payables
– related companies, in which a family member of
a director of the Company has beneficial interests 115 9,181
– associates 1,973 3,333
– others 240,575 87,985
Bills payables 11,775 2,543
254,438 103,042

Customers’ deposits 85,317 54,361
Payroll and welfare payables 27,653 32,226
Other tax payables 4,500 9,237
Other payables 33,231 20,652
405,139 219,518

The following is an aged analysis of trade and bills payables at the balance sheet date:
30.6.2007 31.12.2006

HK$’000 HK$’000
(unaudited) (audited)
Age
0 to 30 days 97,783 41,126
31 to 60 days 72,976 21,610
61 to 90 days 33,860 8,801
91 to 120 days 26,506 15,473
121 days to 360 days 23,313 16,032
254,438 103,042

38
NEO-NEON HOLDINGS LIMITED
INTERIM REPORT 2007
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
12. SHARE OPTIONS

The Company has a share option scheme for eligible employees of the Group. Details of
the share options outstanding during the current period are as follows:
Number of
share options
Outstanding at 1st January, 2007 –
Granted during the period 15,110,000
Exercised during the period (626,500)
Cancelled during the period (218,000)
Outstanding at 30th June, 2007 14,265,500
The share options granted have an exercise price of HK$8.72 with various vesting
periods between February 2007 and February 2011.
The closing price of the Company’s shares immediately before 15th February, 2007, the
date when the share options were granted was HK$8.5 per share. On 15th February,
2007, share options were granted with an estimated fair value of HK$42,036,000.
During the period, the Group recognised the total expense of HK$13,071,000 (2006:
Nil) in relation to share options granted by the Company.
13. CAPITAL COMMITMENTS
30.6.2007 31.12.2006

HK$’000 HK$’000
(unaudited) (audited)
Capital expenditure contracted for but not provided
in the condensed consolidated financial statements
in respect of acquisition of property, plant
and equipment 121,536 10,420
14. RELATED PARTY TRANSACTIONS

During the period, the Group sold goods totalling HK$29,150,000 (2006: HK$19,794,000)
to its associates.
The emoluments to the Company’s directors, who are the Group’s key management, are
HK$4,606,000 (2006: HK$3,936,000).