Led International Holdings Regulatory News (LED)

LED International Holdings Limited

("LED" or the "Company")

Final Results for the year ended 30 June 2013

The board of directors of LED is pleased to present the Company's annual report and audited financial statements for the year ended 30 June 2013 (the "Accounts").

The Accounts are currently being sent to shareholders and will shortly be available for download from the Company's website, www.led-intl.com, in accordance with AIM Rule 20.

**Ends**

For further information:

Notes to Editors:

LED International Holdings Limited and its subsidiaries specialize in the provision of EMC contracts under which the Group installs energy saving products in its customers' premises, including lighting and reactance filtering equipment supplied by the Group, and the subsequent savings made by the customers in their electricity charges are then shared between the Group and the customers thereby enabling the Group to generate recurring revenue rather than one-off sales revenue. Historically, the Group's business has been the development, manufacture and sale of low-powered light-emitting diode ("LED") display screens and modules.

Under EMC contracts, the Group provides energy efficiency solutions, including LED lighting, reactance filtering energy saving and other energy efficiency solutions.Specifically, the Group overhauls its customers' existing lighting and power consumption systems (which are based on traditional lighting technology and power generation equipment) with proprietary LED lighting products, reactance filtering equipment and other solutions provided by the Group. These energy efficiency products are installed in customers' premises. The Group bears all the upfront costs associated with the supply and installation of the energy efficiency solutions and these costs are then recouped by sharing in the monthly energy savings generated by the customers' use of the energy efficiency solutions over the period of the contracts. The Group receives revenue from customers on several different payment terms including on a pre-payment, monthly or quarterly basis.

For more information, please visit: http://www.led-intl.com

FINANCIAL HIGHLIGHTS

CHAIRMAN'S STATEMENT

LED International Holdings Limited (AIM: LED) (the "Company") and its subsidiaries (together the "Group") specialize in the provision of energy management contract services ("EMC contracts") or energy performance contracting services under which the Group installs energy saving products in its customers' premises, including lighting and reactance filtering equipment supplied by the Group, and the subsequent savings made by customers in their electricity charges are then shared between the Group and the customers thereby enabling the Group to generate recurring revenue rather than one-off sales revenue. Historically, the Group's business has been the development, manufacture and sale of low-powered light-emitting diode ("LED") display screens and modules. The Board of Directors (the "Board") is pleased to report on the final results of the Group for the year ended 30 June 2013.

INDEPENDENT AUDITOR'S DISCLAIMER OF OPINION

The shareholders should note that BDO Limited, our independent auditor, has issued a disclaimer of opinion on the consolidated financial statements for the year ended 30 June 2013. Further details of the basis for disclaimer of opinion and disclaimer of opinion are contained on the Independent Auditor's Report on pages 27 to 33.

Without further modifying their opinion, our independent auditor also draws attention to note 39(b) to the Accounts to the consolidated financial statements, which describes a contingency relating to the Company in relation to the fire at the Harbour Grand Hotel, North Point, Hong Kong, further details of which were announced on 23 April 2013. Further background on this issue is contained in the Operating Review section below.

MARKET REVIEW

According to its 12th Five-Year Plan (the "Five-Year Plan"), China plans to lower its energy consumption by 16 per cent. and cut its carbon dioxide emission by 17 per cent. by 2015. Against the background of the Chinese government's introduction of a series of policies and regulations designed to promote, encourage and regulate energy conservation within the People's Republic of China (the "PRC"), the Chinese government will continue to build its economic growth on energy sustainability and ecological conservation. This signifies energy savings and conservation, promising opportunities in the energy management market and the Group aims to become one of the leading energy management service providers in the PRC.

OPERATING REVIEW

During the financial year under review, the global economy continued to recover slowly from an unenthusiastic investment and consumption environment following the economic recession in the Euro-zone and the uncertain recovery of the USA. At the same time, China further marked its slowest economic growth since the start of the 21st Century after its implementation of a financial tightening policy during the financial year. This resulted in continued difficult trading conditions for the Group and,domestically, our operation was also burdened by rising inflation, appreciating Renminbi ("RMB") and slowing economic growth within the PRC. These factors impacted on the Group's gross margin and resulted in an operating loss for the financial year ended 30 June 2013.

Over the past few years the Group has been transforming its operating business to provide EMC services in the PRC. Previously, the Group's EMC company ("EMCO") was operated through Strongbase New Opto-Electronics Technology Company Limited ("Strongbase New"), a specialist in LED and LED related products, accessories and appliances. In 2012, the Group secured contracts to support the Group's strategy and mark the commencement of the successful implementation of its energy efficiency solutions under the EMC business model. To enable the Group to more rapidly take advantage of certain favorable policies and terms for the EMC industry within the PRC during the period, the Group acquired the entire share capital of Shenzhen Lamp Energy Management Investment Company Limited (now Shenzhen Green Pearl Energy Management Services Company Limited ("GPEMCO")), a company with a valid and effective EMCO registration with the National Development and Reform Commission ("NDRC"). Since the acquisition, the Group's EMCO has operated through GPEMCO. Further smaller contracts have been signed and additional ones continue to be negotiated, details of which will be announced as appropriate.

In response to the above, the Board is continuing to gradually drive the Group to secure meaningful revenue from the growing domestic EMC market, as well as implementing measures to reduce overhead expenditure and assessing the future of its manufacturing operations. The Board remains convinced that the Group's overall operations remain sound.

As previously announced on 23 April 2012, at that time media reported that a fire at Harbour Grand Hotel (the "Hotel"), North Point, Hong Kong, may have started at the giant LED display screen (the "LED Screen") supplied by the Company. Prior to the fire incident, the Hotel had inspected the LED Screen,was satisfied with its quality and there was subsequently a formal handover of the LED Screen by the Company to the Hotel on 13 June 2011 with a warranty provided by the Company. To date, the Company has not received any communications from the investigator in relation to this fire.

However, on 25 September 2013 the Company received a letter from an adjudicator alleging that its principal and its principal's insured have suffered substantial losses in the form of property damage, consequential loss and public liability (the "Potential Claim") from the fire. The Company's legal advisor has made repeated requests to the adjudicator to disclose any reports compiled by the Hotel and/or government investigator but, to date, the adjudicator has failed to respond to these requests.

In the absence of any response from the adjudicator, the Directors consider that the Potential Claim is without legal basis or merit and intend to defend any attempts by the adjudicator to seek recourse for the fire from the Company. Further updates will be made at the appropriate time.

FINANCIAL REVIEW

Revenue and loss for the year attributable to shareholders of the Company for the financial year ended 30 June 2013 amounted to HK$22,223,000 (approximately £1,726,000) (2012: HK$19,832,000) and HK$12,864,000 (approximately £999,000) (2012: HK$34,597,000) respectively. During the financial year ended 30 June 2013, the Group recorded a slight rise in operating revenue by HK$2,391,000 (approximately £185,000) over 2012. The rise in operating revenue was brought about mainly by general demand for LED element products and the Group entering into the EMC market within the PRC. Furthermore, the Group generated a gross profit in the amount of HK$380,000 (approximately £29,000) for the financial year as a result of strengthening controls over manufacturing and production costs.

Operating revenue for the financial year generated from LED element products mainly supplied to major home appliance manufacturers in the PRC, increased by HK$2,408,000 (approximately £187,000) from the same period in 2012. The Group strengthened its product quality controls and customer relationships with existing major customers and attempted to diversify these sources of revenue and customers during the financial year. The Group's operating revenue from EMC contracts decreased by HK$17,000 (approximately £1,000) over 2012.

An operating gross profit for LED element products of approximately 1.6% was attained during the financial year, 4.7% higher than 2012, as a result of lowering manufacturing and production costs. The operating gross margin of EMC contracts was approximately 53.8% (2012: 57.1%) for the financial year.

During the financial year under review, the Group recorded a non-recurring item of a loss on disposal of subsidiaries in the amount of HK$2,463,000 (approximately £191,000) (2012: Nil). Other than this non-recurring item, the Group's major operating expenses, comprising administrative expenses and other operating expenses, were HK$15,113,000 (approximately £1,174,000) and HK$2,512,000 (approximately £195,000) respectively (2012: HK$15,902,000 and HK$23,557,000 respectively). Such expenses mainly comprised (i) employee benefits expense in the sum of HK$6,793,000 (approximately £527,000) (2012: HK$12,405,000); (ii) depreciation in the sum of HK$1,285,000 (approximately £99,000) (2012: HK$2,487,000); (iii) operating lease rental in the sum of HK$919,000 (approximately £71,000) (2012: HK$2,464,000); and impairment losses in the sum of HK$918,000 (approximately £71,000) (2012: HK$21,504,000).

The aggregate amounts of approximately HK$7,815,000 (approximately £607,000) (2012: HK$7,796,000) relating to the employee benefits expense, depreciation and operating lease rental were included in cost of sales for the financial year.

The Group continued to strengthen its controls on continuing operating expenditures during the financial year.

CORPORATE RESTRUCTURING

1. The Company disposed of its interest in LED International Energy Conservation Holdings Limited and LED International Green Energy Corporation Limited to an unconnected third party for a consideration of approximately HK$303,000 (approximately £23,000) on 11 January 2013.

2. The Company acquired an interest in Shenzhen Lamp Energy Management Investment Company Limited (now renamed as Shenzhen Green Pearl Energy Management Services Company Limited "GPEMCO")) and disposed of an interest in Strongbase New on 21 March 2013, further details of which were contained in the Company's announcement on 28 March 2013.

FORMATION OF GREEN PEARL LEASING (CHINA) COMPANY LIMITED

The Shanghai Municipal Commission of Commerce ("SMCC") granted the Company a highly sought after leasing finance license to enable the Company to provide lease financing to customers. The Company formed a new wholly owned direct subsidiary, Green Pearl Leasing (China) Company Limited ("GP Leasing Co"), in order to carry on this business. GP Leasing Co has been granted approval for the commencement of leasing finance services on 20 August 2013 for an operating period of 30 years.

GP Leasing Co was formed as the Directors believe that the Group's EMC business model will be financed substantially by debt capital finance, mainly bank finance for the Group or equipment leasing finance for its customers. The Board believes that equipment leasing finance will become one of the major sources of finance for EMC contracts in the foreseeable future.

In accordance with the SMCC's approval document, the Company is obliged to contribute 20 per cent. of GP Leasing Co's registered capital of RMB100 million, to be contributed in US$ (approximately HK$128,680,000 or £10 million), within 3 months from the date of approval by the SMCC. The remaining 80 per cent. of the registered capital must be contributed within 2 years from the date of approval by the SMCC. The Company has applied to the SMCC for an extension of the deadline for the first capital contribution. There can be no guarantee as to whether this extension will in fact be granted.

The Board considers that GP Leasing Co will assist the Group in the development of its EMC business model for the foreseeable future.

FINANCING

1. Loan facility with Ping An Bank Company, Limited

On 15 January 2013, Ping An Bank Company, Limited granted a new loan facility of approximately HK$3,603,000 (RMB2,800,000 or approximately £279,000) (the "New Loan") to Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu"). The New Loan was granted on similar terms to the original loan granted in the previous year, further details of which were announced previously (the "Original Loan"), and used to augment Kepu's working capital position and facilitate its organic growth plans. The Original Loan was repaid in full in accordance with its terms.

The New Loan expires twelve months from drawdown and attracts interest at 12 per cent above the prevailing lending rate per annum determined by the People's Bank of China. Kepu is required to repay the New Loan by monthly installments of approximately HK$103,000 (RMB80,000 or approximately £8,000) commencing two months from drawdown with the remaining balance (plus accrued interest) payable at the end of the New Loan facility. The New Loan is secured by a charge over office property currently occupied and used by Strongbase New, but owned by the family of Mr. Thomas Li ("Mr. Li"), a former Executive Director and Chairman of the Board.

2. Provision and conversion of working capital loan and placing of new ordinary shares

As announced post-period end on 16 December 2013, the Company entered into a working capital loan in the sum of RMB 6,000,000 (approximately HK$7,720,000 or £599,000) provided by Rubyfield Holdings Limited and Speedy Dragon Holdings Limited (collectively, the "Investors") in equal tranches (the "Loan"). The Loan, which is unsecured, is interest free and is repayable on demand.

As further announced post-period end on 30 December 2013, the Company completed a conditionalplacing of new ordinary shares with investors, raising RMB31 million (approximately HK$39.89 million or £3.09 million) (including fees and expenses) (the "Placing"). The RMB31 million (approximately HK$39.89 million or £3.09 million) shall be satisfied as to the first RMB25 million (approximately HK$32.17 million or £2.50 million) by way of new funds and, as to the balance, by the application of the current outstanding balance of the Loan (currently RMB6.0 million, approximately HK$7,720,000 or £599,000) (the "Conversion").

The Placing is conditional upon, inter alia, the: (i) consolidation of every 100 existing authorised issued and unissued ordinary shares of HK$0.10 each in the capital of the Company into 1 new ordinary share of HK$10.00 each in the capital of the Company ("New Ordinary Share") (the "Share Consolidation"); (ii) passing of resolutions to give the Directors the authority to issue shares pursuant to the Placing and Conversion free of any rights of pre-emption at the forthcoming 2013 Annual General Meeting of the Company, which is expected to be held in late February 2014; and (iii) the Securities and Futures Commission ruling that the Hong Kong Codes on Takeovers and Mergers and Share Repurchases does not apply to the Company.

Pursuant to the Placing, and subject to the Share Consolidation, the Investors will subscribe for 3,875,000 New Ordinary Shares (the "Placing Shares") at aprice of HK$10.29(being approximately 79.96pence) per Placing Share (the "Placing Price"). The Conversion is taking place at the Placing Price. The net proceeds of the Placing will be used bythe Company for generalworking capital purposes and to provide the necessary capital contribution to Green Pearl Leasing (China) Company Limited, the Group's new lease finance company.

The Board is currently evaluating opportunities to raise further equity or debt funding in order to assist the Company in the development of its energy management contract and leasing business model as well as for additional working capital.

CONVERSION OF LOAN

In ensuring the alignment of the Company's interests with Mr. So, the key joint venture partner in the Group's EMC business model within the PRC, and in strengthening the Company's balance sheet, Mr. So took an assignment of an outstanding debt of approximately HK$6,156,000 (approximately £478,000) (the "Loan") from Mr. Chan, on 15 January 2013 at book value. On 17 January 2013, Mr. So converted the Loan into 61,561,201 new ordinary shares of the Company.

BOARD CHANGES

In order to provide the Company with valuable assistance and guidance as it seeks to develop its EMC business model in the PRC, the Company appointed Mr. Hao, Bo ("Mr. Hao") as a Non-Executive Director on 10 October 2012. The Board considers that Mr. Hao possesses significant knowledge, experience and contacts in the energy industry and the Company wishes to leverage Mr. Hao's expertise to capitalize on the market opportunities of its EMC business model in the PRC.

On 10 October 2012, Mr. Li also decided to step down as Executive Director and Chairman of the Board to pursue other business opportunities. Mr. Li had been an integral part of the Board and had overseen the successful growth of the Company since its admission to the AIM Market. On the same day, Mr. Stephen Weatherseed was appointed to the position of Non-Executive Chairman.

Post-period end on 15 November 2013, Mr. Harby Janagol resigned as a Non-Executive Director with immediate effect.

CHANGE OF REGISTERED OFFICE

As announced on 8 October 2012, the Company changed its registered office address to Unit A1, 6/F., One Capital Place, 18 Luard Road, Wan Chai, Hong Kong.

DIVIDENDS

The Directors do not recommend the payment of any dividend for the year and the Board is committed to an ongoing review of the Company's dividend policy.

CURRENT OUTLOOK AND PROSPECTS

Realizing the persistently uncertain recovery in overseas markets, the Group adopts a conservative but proactive approach towards entering into the growing domestic EMC market opportunities under the brand name of "Green Pearl" in the PRC. Notwithstanding the recent slowdown in China's national growth, the Board believes that the Chinese government will implement fiscal and monetary policies to stimulate steady economic growth in the PRC.

The energy saving and environmental protection industry ranks top among the seven strategic emerging industries outlined in the 12th Five-Year Plan. Following the gradual import and sale of incandescent lamps complemented by fiscal subsidies, this presents a tremendous market opportunity for green lighting. In view of rising national power consumption, the Directors believe that measures that the Chinese government has taken to reduce energy consumption and carbon emissions will lead to increasing opportunities for energy saving and carbon reduction products, services and solutions within the PRC.

In addition to the supply of LED lighting and reactance filtering equipment to the domestic PRC market, the Group is also considering the introduction of other energy saving and carbon reduction solutions to carry out its total energy efficiency solution under the EMC business model within the PRC.

The Group is also exploring the possible export of its energy saving and carbon reduction products, services and solutions, mainly solar lighting products and solutions, to the emerging markets in the Atlantic and Pacific regions, where potential demand for solar related products and services is prominent.

The Board remains cautiously optimistic and confident in the Group's business, market and products as well as its long-term growth potential in the PRC. Furthermore, the Board considers that the overall operations of the Group remain sound and that the transformation of the Group into an energy management service provider in the PRC is the correct strategy.

a. Gradual disposal of manufacturing plant

As announced in previous years, the Directors intend to continue the gradual disposal of Kepu will allow the Group to focus on becoming an energy management service provider in the PRC.

b. EMCO registration with the NDRC

In April 2010 the State Council announced the promotion of the development of well-established EMCOs by 2012 and the establishment of comprehensive EMC management systems to implement energy management services by 2015. Having registered with the NDRC, EMCOs enjoy tax concessions, government subsidies, bank finance and other benefits. On 21 March 2013, the Group's acquisition of GPEMCO allowed the Group to immediately obtain an EMCO registration with the NDRC. Since acquisition, the Group has started to pursue its EMC business model under the brand name of "Green Pearl" within the PRC.

APPRECIATION

Finally, on behalf of the Board, I would like to thank all of our management team and staff members for their valuable contribution and dedication to the Group. I am delighted to welcome Mr. Hao who joined as a Non-Executive Director and brings us a wide spread of knowledge and network from the energy industry in China. I would also like to thank Mr. Li for his invaluable contribution to the Group during his tenure. I also express my gratitude to our customers, suppliers and government authorities for their continuous support.

Stephen Weatherseed

Non-Executive Director and Chairman

Hong Kong, 30 December 2013

INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS OF LED INTERNATIONAL HOLDINGS LIMITED

(incorporated in Hong Kong with limited liability)

Report on the financial statements

We were engaged to audit the consolidated financial statements of LED International Holdings Limited (the "Company") and its subsidiaries (together the "Group") set out on pages 34 to 95, which comprise the consolidated and the company statements of financial position as at 30 June 2013, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors' responsibility for the consolidated financial statements

The directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Except for the inability to obtain sufficient appropriate audit evidence as explained below, we conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Because of the matters described in the Basis for Disclaimer of Opinion paragraphs, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Basis for Disclaimer of Opinion

1. Scope limitation - Prior year's audit scope limitation affecting opening balances and corresponding figures

(a) Acquisition of a subsidiary

As set out in note 34 tothe Accounts, on 14 November 2011 the Group completed the acquisition of the entire equity interests in Shenzhen Strongbase New Opto-Electronics Technology Company Limited ("Strongbase New"). The fair values of the assets and liabilities of Strongbase New as at the acquisition date were based on the management accounts of Strongbase New, prepared by Strongbase New's management, as set out in note 34 to the Accounts. During the course of the audit of the Company's financial statements of the financial year ended on 30 June 2012, the management of Strongbase New who were responsible for the preparation of these management accounts were not available and as such the Group's management had not been able to provide us with all the underlying supporting information and documentary evidence which we considered necessary for our audit purpose in relation to Strongbase New's management accounts as at the acquisition date. Accordingly, we were unable i) to satisfy ourselves as to the ownership, existence and accuracy of the assets and liabilities of Strongbase New (except for the current account balances due to the Company and LED International Green Energy Corporation Limited), ii) to determine whether all identifiable assets and liabilities of Strongbase New had been stated at their fair values in accordance with International Financial Reporting Standard 3 (Revised) Business Combinations and iii) to determine whether the goodwill of HK$12,794,000 arising from the acquisition of Strongbase New, and its subsequent impairment loss recognised during the year ended 30 June 2012 of HK$12,794,000, have been fairly stated. Any adjustment considered necessary to the carrying amounts of the assets and liabilities of Strongbase New so acquired as at 14 November 2011 would have a consequential effect on the Group's consolidated statement of financial position as at 1 July 2012, its loss and total comprehensive income for the year ended 30 June 2012 and the elements making up the consolidated statement of cash flows.

(b) Assets and liabilities of Strongbase New as at 1 July 2012

Included in the consolidated statement of financial position of the Group as at 1 July 2012 are inventories of approximately HK$6,978,000, trade and other receivables of approximately HK$2,235,000, and trade and other payables of approximately HK$9,058,000 attributable to Strongbase New ("Strongbase New Balances"). As explained in the paragraph above the management of Strongbase New who were responsible for the preparation of the management accounts of Strongbase New were not available during the course of our audit. This imposed limitations on our audit as to the Strongbase New Balances because the current management accounts information of Strongbase New that was made available to us during the course of our audit was not in sufficient detail for the purpose of our carrying out certain audit procedures including circularization of trade receivables, circularization of trade payables and an inventory pricing test. There were no other satisfactory audit procedures that we could adopt in order to satisfy ourselves as to the existence, completeness and valuation of these items. Any adjustments which might have been found necessary in respect of these items would have a consequential effect on the Group's consolidated statement of financial position as at 1 July 2012, its loss and total comprehensive income for the year ended 30 June 2012 and the elements making up the consolidated statement of cash flows.

In addition to the above, the scope of our audit on asset impairment assessment has been limited. The Group's management have assessed that the goodwill arising from the acquisition of Strongbase New has been fully impaired as at 1 July 2012. However the Group's management have not provided us with their impairment assessment and we were unable to review whether their assessment has been properly performed in accordance with the requirements in International Accounting Standard 36 Impairment of Assets. There were no other alternative audit procedures which we could adopt to satisfy ourselves as to the appropriate amount of the impairment loss, and hence the carrying amount of this goodwill after the impairment loss, as set out in note 16 to the Accounts.

(c) Sales of Strongbase New for the year ended 30 June 2012

Included in the consolidated statement of comprehensive income of the Group for the year ended 30 June 2012 is revenue of approximately HK$370,000 attributable to Strongbase New ("Strongbase New Sales"). As explained in the paragraph above the management of Strongbase New who were responsible for the preparation of the management accounts of Strongbase New were not available during the course of our audit. This imposed limitations on our audit as to the Strongbase New Sales because the current management accounts information of Strongbase New that was made available to us during the course of our audit was not in sufficient detail for the purpose of our carrying out certain audit procedures including procedures on the completeness of Strongbase New Sales. There were no other satisfactory audit procedures that we could adopt in order to satisfy ourselves as to the completeness of Strongbase New Sales. Any adjustments which might have been found necessary in respect of Strongbase New Sales and trade receivables would have a consequential effect on the Group's loss and total comprehensive income for the year ended 30 June 2012, consolidated statement of financial position as at 1 July 2012 and the elements making up the consolidated statement of cash flows.

We disclaimed our opinion on the Company's consolidated financial statements of the financial year ended 30 June 2012. Any adjustments to the assets and liabilities of Strongbase New as at 1 July 2012 would also have a consequential effect on the results and related disclosures in the notes to the consolidated financial statements of the Group for the year ended 30 June 2013. The comparative figures showed in the consolidated financial statements may not be comparable with the figures for the current reporting period.

2. Disposal of subsidiaries, Yanford Limited and Shenzhen Strongbase New Opto-Electronics Technology Company Limited ("Strongbase New") (together referred to as "Yanford Group") and assets and liabilities and profit or loss of energy management contracts services

As set out in note 35(b) to the Accounts, on 21 March 2013 the Group completed the disposal of the entire equity interests in Yanford Limited with certain energy management business related assets and liabilities being retained by the Group ("EMC Assets and Liabilities"). Included in the carrying amounts of the assets and liabilities of Yanford Group (excluding EMC Assets and Liabilities) as at the disposal date were Strongbase New's net liabilities of HK$6,657,000, represented by property, plant and equipment of HK$78,000, inventories of HK$5,943,000, trade and other receivable of HK$2,887,000, cash and bank balances of HK$383,000 and trade and other payables of HK$2,592,000. The EMC Assets and Liabilities included in the consolidated statement of financial position of the Group as at 30 June 2013 are property, plant and equipment of approximately HK$39,000, inventories of approximately HK$2,468,000, trade and other receivables of approximately HK$3,967,000, cash and bank balances of approximately HK$15,000 and trade and other payables of approximately HK$5,306,000 ("EMC Balances"). As Yanford Group was disposed of during the year, the Group's management had no access to the accounting records subsequent to the disposal. As such the Group's management was unable to allow us access to the books and records of Strongbase New without the consent and cooperation from the new owner of Yanford Group, which the new owner of Yanford Group had no obligation to provide and in fact did not provide. As such the Group's management had not been able to provide us with all the underlying supporting information and documentary evidence which we considered necessary for our audit purpose in relation to Strongbase New's management accounts as at the disposal date and the EMC Balances as at 30 June 2013 and the performance and cash flows attributable to the Yanford Group up to the date of disposal ("Disposal Group Results and Cash Flows"). Accordingly, we were unable to satisfy ourselves as to whether i) the amount of distribution to a shareholder on disposal of Yanford Group has been arrived at properly and ii) the completeness and carrying amounts of the EMC Balances as at 30 June 2013 and Disposal Group Results and Cash Flows (which formed part of the EMC contracts segment) for the year then ended have been appropriately arrived at, in addition, without the authorization from Yanford Group's management and information of the nature of the items making up the EMC Balances, we were unable to carry out audit procedures that we would normally perform, including inventory observation and circularization of debtors/creditors, to verify the existence of the EMC Balances as at 30 June 2013. Any adjustment considered necessary to i) the carrying amounts of the assets and liabilities of Strongbase New so disposed of as at 21 March 2013 would have a consequential effect on the amount of the Company's distribution to a shareholder on disposal of subsidiaries for the year ended 30 June 2013 and the elements making up the consolidated statement of cash flows and ii) the EMC Balances as at 30 June 2013 and Disposal Group Results and Cash Flows for the year then ended would have a consequential effect on the Group's consolidated statement of financial position as at 30 June 2013, its loss and total comprehensive income for the year then ended and the elements making up the consolidated statement of cash flows.

3. Deconsolidation of a subsidiary

As explained in note 3(c) to the Accounts, the directors of the Company considered that the Group's control over Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED") had been lost and therefore, the Company had deconsolidated Shenzhen LED as from 17 April 2010, prior to our appointment as auditor. Same as last year, during the course of our audit, we were unable to obtain satisfactory documentary evidence from the Group's management regarding the loss of control. The Group's management represented to us that they no longer had possession of the accounting and other records of Shenzhen LED and had lost contact with the then management of Shenzhen LED which might have provided the necessary alternative evidence. Other than the representation, the Group's management have not provided to us other evidence regarding their loss of control. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves that the control of Shenzhen LED has been lost and therefore, with regard to the deconsolidation of Shenzhen LED, we were unable to determine whether any adjustment might be necessary to consolidate Shenzhen LED as part of the Group as at 1 July 2012 and 30 June 2013. We disclaimed our opinion on the Company's consolidated financial statements for the financial year ended 30 June 2012. Any adjustment considered necessary to the consolidation of Shenzhen LED would have a consequential effect on the Group's consolidated statement of financial position as at 1 July 2012 and 30 June 2013, its loss and total comprehensive income for the years ended 30 June 2012 and 30 June 2013, and the elements making up the consolidated statement of changes in equity and consolidated statement of cash flows.

In addition, due to the limitation as explained above, we have been unable to carry out any audit procedures to satisfy ourselves as to the existence and correctness of the amounts of contingent liabilities attributable to Shenzhen LED as set out in note 39(a) to the Accounts.

4. Trade receivables and sales of a subsidiary, Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu")

Included in the consolidated statement of financial position of the Group as at 30 June 2013 are trade receivables of Kepu of approximately HK$4,939,000 due from a major group customer whereas included in the consolidated statement of comprehensive income for the year ended 30 June 2013 are sales of Kepu to this major group customer of approximately HK$16,845,000. These balances and amounts were mainly attributable to Kepu's sales to the major group customer in the PRC on a consignment basis. The local management of Kepu had not maintained satisfactory accounting records on these consignment sales and there were no other satisfactory audit procedures that we could adopt in order to satisfy ourselves as to the existence and accuracy of such trade receivables and the existence of such sales. Any adjustments which might have been found necessary in respect of these items would have a consequential effect on the Group's consolidated statement of financial position as at 30 June 2013, its loss and total comprehensive income for the year then ended and the elements making up the consolidated statement of cash flows.

5. Going concern

The Group incurred a loss of approximately HK$19,205,000 for the year ended 30 June 2013 and, as of that date, the Group had net current liabilities and net liabilities of approximately HK$46,895,000 and HK$47,967,000 respectively. These conditions indicate the existence of material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern, with a potential consequence that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

As explained in note 3(b) to the Accounts, the management have taken certain measures ("Measures") including to secure further contracts, which the management have assessed to be profitable, negotiate with certain directors to obtain their undertakings not to demand repayments of amounts due to them until there are funds available for repayment, secure new funding from existing shareholders and/or new investors, and negotiate with its banker to renew bank facilities of the Group. The directors of the Company are of the opinion that the Measures will be successfully executed after 30 June 2013.

These financial statements have been prepared on a going concern basis, the validity of which depends upon the successful execution of the Measures so that the Group will have sufficient working capital to finance its operations and/or settle or arrange its financial obligations. However, the Company's directors have not provided us with a cash flow forecast in sufficient detail to satisfy ourselves that the Group has sufficient resources to satisfy the demand for repayment of liabilities. Due to this limitation on our scope of work, we are unable to obtain sufficient appropriate audit evidence to assess whether the Group has the ability to settle liabilities that are due for repayment, and therefore whether it is appropriate to use going concern basis in preparing the consolidated financial statements. There were no other satisfactory audit procedures that we could adopt in this regard.

Should the use of the going concern basis in preparing the consolidated financial statements be determined to be inappropriate, adjustments might have to be made to reduce the value of assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities.

Disclaimer of Opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion and, accordingly, we do not express an opinion on the consolidated financial statements of the Company, and whether the financial statements have been properly prepared in accordance with the Hong Kong Companies Ordinance.

Emphasis of matter

Without further modifying our opinion, we draw your attention to note 39(b) to the Accounts, which describes a contingency relating to the Company.

Report on matter under section 141(4) and 141(6) of the Hong Kong Companies Ordinance 

In respect alone of the inability to obtain sufficient appropriate audit evidence about the matters described in the Basis for Disclaimer of Opinion paragraphs above:

- We have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and

- We were unable to determine whether proper books of account had been kept.

Hong Kong, 30 December 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2013

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2013

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

30 JUNE 2013

1. BASIS OF PREPARATION

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with all applicable IFRSs, which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards, ("IAS") and Interpretations issued by the International Accounting Standards Board and the Hong Kong Companies Ordinance. The consolidated financial statements also comply with IFRS as issued by the IASB as adopted by the European Union. The differences between IFRS as adopted by the European Union and IFRS as issued by the IASB have not had a material impact on the consolidated financial statements for the years presented.

(b) Basis of measurement

The financial statements have been prepared under the historical cost convention. The measurement bases are fully described in the accounting policies below.

The Group incurred a loss of approximately HK$19,205,000 for the year ended 30 June 2013 and, as of that date, the Group had net current liabilities and net liabilities of approximately HK$46,895,000 and HK$47,967,000 respectively. These conditions indicate the existence of material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern, with a potential consequence that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

The management have taken certain measures ("Measures") including to secure further contracts, which the management have assessed to be profitable, negotiate with certain directors to obtain their undertakings not to demand repayments of amounts due to them until there are funds available for repayment, secure new funding from existing shareholders and/or new investors, and negotiate with its banker to renew bank facilities of the Group. On 16 December 2013, the first tranche of a working capital loan (the "Working Capital Loan") amounting to RMB6,000,000 (equivalent to HK$7,500,000) has been received from the two independent third parties (collectively, the "Investors"). As further announced post-period end on 30 December 2013, the Company completed a conditional placing of new ordinary shares with investors, raising RMB31,000,000 (approximately HK$39,890,000) (including fees and expenses) (the "Placing"). The RMB31,000,000 (approximately HK$39,890,000) shall be satisfied as to the first RMB25,000,000 (approximately HK$32,170,000) by way of new funds and, as to the remaining balance, by the application of the first tranche of the Working Capital Loan (currently RMB6,000,000 or approximately HK$7,720,000). In the opinion of the Directors, based on the successful execution of the Measures, the Group will have sufficient cash resources to satisfy its working capital and other financing requirements for the foreseeable future. Accordingly, the Directors are of the opinion that it is appropriate to prepare the consolidated financial statements on a going concern basis.

These financial statements have been prepared on a going concern basis, the validity of which depends upon the ongoing financial support from the Company's substantial shareholder and successful execution of the Group's business plan, attainment of profitable operations and securing of new financing. These include successful securing of further EMC contracts which the management have assessed to be profitable, obtaining of undertakings from certain Directors and a former director not to demand repayments of amounts due to them until there are funds available for the repayment, and the renewal of bank facilities after the reporting date.

Should the use of the going concern basis in preparing the consolidated financial statements be determined to be inappropriate, adjustments might have to be made to reduce the value of assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities.

(c) Deconsolidation of a subsidiary, Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED")

The Group entered into a preliminary sale and purchase agreement dated 11 February 2009 to dispose of its entire interest in a wholly-owned subsidiary, Shenzhen LED. The assets and liabilities of Shenzhen LED had been reclassified as held for sale as at 30 June 2009 and the results of Shenzhen LED were previously presented under discontinued operation in the consolidated financial statements for the year ended 30 June 2009. However, the disposal of Shenzhen LED did not proceed. The sale and purchase agreement dated 11 February 2009 was effectively terminated on 17 April 2010.

Notwithstanding that the Group owned the entire equity interests in Shenzhen LED, Shenzhen LED was no longer regarded as a subsidiary of the Group as the directors of the Company are of the opinion that the control of Shenzhen LED had been lost in the prior year.

The directors of Company considered that Shenzhen LED is not under control by the Company given (i) the Company was unable to obtain any books and records from Shenzhen LED; (ii) the Company had not been provided with any up-to-date financial reports of Shenzhen LED and thus had no information as to the current financial situation of Shenzhen LED and (iii) the current management of the Group had lost contact with the then management of Shenzhen LED. As a result, the Company expressed a lack of confidence in its ability to properly control and manage Shenzhen LED. In light of this situation, the directors of the Company resolved to deconsolidate Shenzhen LED with the effective date on 17 April 2010.

(d) Use of estimation and judgements

It should be noted that accounting estimates and assumptions are used in preparation of these financial statements. Although these estimates and assumptions are based on management's best knowledge and judgement of current events and actions, actual results may ultimately differ from those estimates and assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 5 to the Accounts.

2. SEGMENT INFORMATION

Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess their performance.

Segment information reported was analysed on the basis of the types of products sold by the Group's operating division (i.e. LED element products and energy management contracts services). The Group's reportable segments are as follows:

Operations:

- LED element products

- Energy management contracts services

Information regarding the above segments is presented below:

Segment revenues and results

The following is an analysis of the Group's revenue and results from operations by reportable segment.

Revenue reported above represents revenue generated from external customers. There were no inter-segment sales during the years ended 30 June 2013 and 2012.

The accounting policies of the reportable segment are the same as the Group's accounting policies described in note 4(s) to the Accounts.

Segment loss represents the loss incurred by each segment without allocation of certain administration costs including directors' salaries, finance costs and income tax expense. This is the measure reported to the chief operation decision maker for the purposes of resource allocation and assessment of segment performance.

Segment assets and liabilities

For the purposes of monitoring segment performance and allocating resources between segments:

· all assets are allocated to reportable segments other than unallocated assets including amount due from a director. Goodwill is allocated to respective reportable segment as described in note 16 to the Accounts. Assets used jointly by reportable segments are allocated on the basis of the revenue earned by individual reportable segments; and

· all liabilities are allocated to reportable segment other than current tax liabilities and unallocated liabilities including interest payables, amount due to a director and loans from directors. Liabilities for which a reportable segment are jointly liable are allocated in proportion to segment assets.