Final Results and Notice of AGM

29 December 2011

LED International Holdings Limited

("LED" or the "Company")

Final Results for the year ended 30 June 2011 and Annual General Meeting ("AGM")

The board of directors of LED (the "Board") is pleased to present the Company's annual report and audited financial statements for the year ended 30 June 2011 (the "Accounts").

In addition, the Board also gives notice that its AGM will be held at Room 1013, Shen Hua Commercial Building, 2018 Jia Bin Road, Luo Wu, Shenzhen, the People's Republic of China at 5:00pm (local time) on 20 January 2012.

The Accounts and Notice of AGM 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 specialise in the development, manufacture and sale of low powered led screens, outdoor signs, lamps, lighting and building illumination; and high powered / medium powered led energy efficient indoor and outdoor lighting products.

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 development, manufacture and sale of lower powered light-emitting diode ("LED") screens, outdoor signs, lamps, lighting and building illumination; and high powered/medium powered LED energy efficient indoor and outdoor lighting products. The Board of Directors (the "Board") is pleased to report on the final results of the Group for the year ended 30 June 2011.

The shareholders should note that our independent auditor, PKF, has qualified certain comparative figures of the consolidated financial statements for the year ended 30 June 2011.

QUALIFICATION OF INDEPENDENT AUDITOR'S REPORT

In preparing the consolidated financial statements of the Group for the year ended 30 June 2010, the Company had deconsolidated Shenzhen China-LED Photo Technology Limited ("Shenzhen LED") as from 17 April 2010. The Board considered that the Group's control over Shenzhen LED has been lost, further details of which are set out in note 2(h) to the Accounts.

Due to the effect of the limitation described in note 2(h) to the Accounts, the auditor's opinion on the Accounts is also modified because of the possible effect of this matter on the comparability of the current year's figures and the corresponding figures.

The Board wishes to reassure shareholders that the independent auditor's qualification on the opening balances and corresponding figures has no financial impact on the Group's financial position at 30 June 2011 and the Accounts. The Board expects that the auditor's same qualification on opening balances and corresponding figures will be removed from the Group's subsequent financial statements.

MARKET REVIEW

A LED is a compound semiconductor device that converts electricity to light. Early LEDs are used as indicator lamps in many devices and modern versions of LEDs are available across the visible, ultraviolet, and infrared wavelengths with high brightness. LEDs are increasingly used for other lighting.

LEDs present many advantages over incandescent light sources including lower energy consumption, longer lifetime, improved robustness, smaller size, and faster switching. LEDs powerful enough for indoor and outdoor lighting are relatively expensive and require more precise current and heat management than compact fluorescent lamp and other lamp sources of comparable output.

The Chinese government has introduced a series of policies and regulations designed to promote, encourage and regulate energy conservation in the country and clearly stated its desire to promote energy conservation in its 12th Five-Year Plan. On 4 November 2011, the National Development and Reform Commission published a notice to gradually replace the import and sale of incandescent lamps in the People's Republic of China (the "PRC"). Phasing out the incandescent lamps offers a lot of market opportunities for the lighting industry in the PRC. In view of this changing background, the Group targets becoming one of the leading energy management service providers in the PRC.

OPERATING REVIEW

The global business environment has picked up slowly from the economic recessions especially in Europe and the US throughout the year under review. The Group has expanded its business scope, focused on the domestic market and provided higher value-added products and services in the PRC. During the year under review, and as announced on 10 June 2011, the Group was awarded a significant energy management contract from Hotel Novotel Shenzhen Bauhinia and Golden Gala Restaurant based in Shenzhen, the PRC.

The slowing down of the market demands in the domestic market and rising costs in the PRC posed the major challenge to the Group during the financial year, and it was made worse by further wage rises and Renminbi appreciation. These factors impacted on the Group's gross margin and resulted in an operating loss for the year ended 30 June 2011.

In responding to the above factors, the Board is continuing to implement measures to diversify sources of revenue and to reduce expenditure, control production costs and expand the customer base in different areas, such as overseas markets, where there is demand for higher value products. The Board considers that the overall Group's operations remainsound.

FINANCIAL REVIEW

Revenue and total comprehensive expense attributable to shareholders of the Company for the year ended 30 June 2011 amounted to approximately HK$27,517,000 (approximately £2,264,000) (2010 : HK$36,267,000) and HK$26,618,000 (approximately £2,190,000) (2010 : HK$27,493,000) respectively. During the financial year ended 30 June 2011, the Group achieved a slight reduction in operating revenue by HK$8,750,000 (approximately £720,000) over 2010. The drop in operating revenue was caused mainly by the slowing down of the market demands in the domestic market in the PRC. Furthermore, the reduction in gross profit by HK$2,191,000 (approximately £180,000) from the previous yearwas a result of rising manufacturing and production costs compounded by wage rises and Renminbi appreciation.

Operating revenue for the year generated from LED element products mainly supplied to major home appliance manufacturers in the PRC, decreased by HK$13,428,000 (approximately £1,105,000) from the same period in 2010. The Group strengthened its product quality controls and customer relationships with the existing major customers and attempted to diversify these sources of revenue and customers during the financial year. The Group generated operating revenue from LED lighting products of HK$4,678,000 (approximately £385,000) during the year.

The operating gross margin for LED element products of approximately 6.4% was achieved during the financial year, 5.8% lower than 2010, due to rising manufacturing and production costs. Moreover, the operating gross margin of LED lighting products was approximately 16.9%.

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

In response to the intense competition in LED products in the PRC, the Group has worked to strengthen its research and development capabilities through the acquisition of Shenzhen Strongbase New Opto-Electronics Technology Co. Ltd. ("Strongbase New") to further raise its brand profile to distinguish itself from generic LED product suppliers, as contained under the heading of Corporate Restructuring below.

CONTRACT UPDATE

1. Completion of construction of LED Screen for the North Point Project

The Board was pleased to announce the completion of construction and official commercial operation on 21 July 2011 of a giant LED display screen (the "LED Screen") at Harbour Grand Hotel, North Point, Hong Kong (the "Hotel").

The Company first announced the development of the LED Screen and outdoor façade lighting (the "Façade") for the Hotel on 23 April 2008 (the "North Point Project"). The LED Screen was completed within budget. However, due to additional requirements and new specifications from the developer, the original completion date of the LED Screen was postponed to 13 June 2011. The LED Screen is now displayed in a prominent position on the front of the Hotel where it can be viewed from across Victoria Harbour.

The completion of the LED Screen marks the end of the first phase of the North Point Project and the beginning of its second phase: the construction of the Façade. The Company is currently testing samples of the LED lights to be used in the Façade and expects the Façade to be completed in early 2012.

2. Major energy management contract secured

As announced on 10 June 2011, the Company's indirect subsidiary, Strongbase New was awarded a significant energy management contract (the "EMC Contract") from Hotel Novotel Shenzhen Bauhinia and Golden Gala Restaurant based in Shenzhen, the PRC (collectively, the "Hotel"). The projected revenue under the EMC Contract to Strongbase New is approximately RMB5,500,000 (approximately £550,000).

Under the EMC Contract, Strongbase New provides lighting and reactance filtering energy-saving solutions to the Hotel. Specifically, Strongbase New overhauls the Hotel's existing lighting and power consumption systems (which are based on traditional lighting technology and power generation equipment) with new energy-saving LED light bulbs and reactance filtering equipment provided by it. Strongbase New's LED light bulbs and reactance filtering equipment are installed in all interior, public, car park and outdoor areas, and power facility respectively of the Hotel. Strongbase New bears all the upfront costs associated with the supply and installation of the LED light bulbs and equipment at the Hotel's premises and then recoups these costs by sharing in the actual monthly energy savings generated by the Hotel's use of the energy-saving solutions for the next 6 years the Hotel will pay these to Strongbase New on a monthly basis.

The Hotel entered into the EMC Contract after the successful completion of a ten-month period of testing. As of the date of this report, Strongbase New has successfully completed the installation and the testing of energy efficiency of its reactance filtering equipment for the Hotel. Strongbase New expects to complete the full installation of LED light bulbs and lighting solutions by the end of 2011 and start collecting its sharing of monthly energy savings from the Hotel in early 2012.

3. Major supply contract awarded

Strongbase New was awarded a significant contract by Beijing Wei Cheng Xin De Decoration Engineering Limited (the "Purchaser") for the supply and installation of LED light bulbs (the "Contract"), further details of which were announced on 30 June 2011. The projected revenue under the Contract to Strongbase New is approximately RMB2,730,000 (approximately £273,000).

The Purchaser is a major engineering company in the business of renovation, fitting-out works and maintenance works for property developments in the PRC. As of the date of this report, Strongbase New has almost completed the supply and installation of LED light bulbs under the Contract. Strongbase New has received approximately 80% of the payments under the Contract and it will begin a 3-year warranty period upon completion of the Contract. The delay in completion of the Contract is caused by the supply of certain parts and components not in accordance with the products specification of the Contract by the supplier. Strongbase New has been negotiating with the Purchaser and requesting the supplier to rectify the products specification in accordance with the Contract. The Group expects it would be resolved in early 2012.

CORPORATE RESTRUCTURING

1. Acquisition of subsidiary

On 29 July 2008, the Company entered into an agreement to acquire a 100 per cent. equity interest in Strongbase New, a specialist in LED and LED related products, accessories and appliances. The acquisition was completed on 14 November 2011. Strongbase New has both research and development and manufacturing expertise in relation to LED related products and possesses numerous patents and other intellectual property rights for LED products and LED applications. Its product offering includes LED devices, displays, lighting and appliances. The acquisition of Strongbase New allows the Group to broaden its product offering to include higher specification products for both its domestic markets and international customers. It also provides the Group with access to new intellectual property for further product development.

Furthermore, Strongbase New is being used to develop and expand the Group's existing business in developing LED lighting solutions.

Yanford Limited, a wholly-owned subsidiary of Green Pearl Energy Conservation Holdings Limited, recently obtained from the Chinese government authorities the certificate of approval in relation to the legal ownership title transfer and change of business scope of Strongbase New on 14 November 2011. On 27 June 2011, Strongbase New was granted a reservation of company name registration of Green Pearl Energy Management Services (Shenzhen) Co., Ltd. ("Green Pearl"). This name reservation expires on 29 May 2012. As of the date of this report, the Group has sought to change Strongbase New to Green Pearl. Moreover, Green Pearl Energy Conservation Holdings Limited is used as a corporate vehicle for the new joint venture, the details of which are set out under the heading of Joint Ventures below.

2. Joint Ventures

As announced on 27 September 2011, the Company entered into a new joint venture agreement with one of its existing joint venture partners, Mr. So Hing Chung ("Mr. So"), to develop and expand its existing business in developing LED lighting solutions in the PRC (the "New Joint Venture").

As previously announced on 2 July 2010, the Company had entered into a joint venture agreement with Mr. So and various other joint venture partners to initially expand the Company's existing business in developing LED lighting products (the "Existing Joint Venture"). The Existing Joint Venture has been used to procure a source of supplies from CREE, Inc. at a competitive cost in Hong Kong.

The Board considers that Mr. So possesses significant knowledge, experience and industry contacts in the LED lighting business and the Company wishes to leverage Mr. So's expertise to capitalize on the market opportunities of energy management contract ("EMC") business model in the PRC. With Mr. So's proactive participation in the product designs and contract negotiations, Strongbase New was awarded a significant EMC from Hotel Novotel Shenzhen Bauhinia and Golden Gala Restaurant and another significant contract from Beijing Wei Cheng Xin De Decoration Engineering Limited, as announced on 10 June 2011 and 30 June 2011 respectively. Following the growing popularity of the EMC business model among customers, the Company has entered into the New Joint Venture to meet the demand for its energy-saving solutions.

The Company's wholly-owned subsidiary, Green Pearl Energy Conservation Holdings Limited is being used as the corporate vehicle for the New Joint Venture (the "Corporate Vehicle"). The Company has a majority stake (60 per cent.) in the New Joint Venture and, together with Mr. So (40 per cent.), have invested an initial sum of HK$1,000,000 (approximately £82,500) as seed capital for upcoming projects.

Pursuant to the New Joint Venture, the Corporate Vehicle and its subsidiaries have adopted the "Green Pearl" brand name in a corporate renaming exercise. The Company has also carried out a restructuring exercise whereby the beneficial interest in its wholly-owned direct subsidiary, Yanford Limited has been transferred to the Corporate Vehicle. As a part of the restructuring exercise, Strongbase New is now owned by the Corporate Vehicle.

The Company has a majority stake of 60 per cent. in both the Existing Joint Venture and the New Joint Venture.

SHARE CAPITAL

1. Authorized share capital

On 12 July 2010, the authorized share capital of the Company was increased from HK$35,000,000 divided into 350,000,000 ordinary shares of the Company of HK$0.10 each to HK$70,000,000 divided into 700,000,000 ordinary shares of HK$0.10 each.

2. Placing of new ordinary shares

On 9 October 2011, the Company placed 12,500,000 new ordinary shares of HK$0.10 each (the "Placing Shares") at a placing price of RMB0.20 (approximately 2.0 pence) per ordinary share, raising RMB2,500,000 (approximately £250,000) (the "Subscription Funds"), further details of which were announced on 11 October 2011. The placing price represented a 321 per cent. premium to the closing mid-market price of 0.475 pence on 7 October 2011, being the last practical date before the placing. The placing proceeds were used to augment the Company's working capital position and assisted in the continued development of the Company's EMC business. On 18 October 2011, the Company received the full Subscription Funds in respect of the Placing Shares.

Following the issue of the Placing Shares, the Company's issued share capital is 366,238,267 ordinary shares of HK$0.10 each.

BANK BORROWINGS

1. Loan facility with Ping An Bank Company, Limited

On 24 February 2011 the Group announced that Ping An Bank Company, Limited had provided a loan of RMB3,000,000 (approximately £300,000) (the " First Loan") to the Company's wholly-owned subsidiary, Kepu Electronic Technology (Shenzhen) Company, Limited ("Kepu"). The First Loan was used to augment Kepu's working capital position and facilitate its organic growth plans.

The First Loan expires twelve months from drawdown and attracts interest at 10.0 per cent. above the prevailing lending rate per annum determined by the People's Bank of China. Kepu is required to repay the First Loan by monthly instalments of RMB50,000 (approximately £5,000) commencing six months from drawdown with the remaining balance (plus accrued interest) payable at the end of the First Loan facility. The First Loan is secured by a first charge over Rooms 1014-1016, Shen Hua Commercial Building, 2018 Jia Bin Road, Luohu District, Shenzhen, the PRC (the "Property"), currently occupied and used by Strongbase New.

The Property is owned by the family of the Company's Chairman, Mr. Thomas Li.

2. Further loan facility with Ping An Bank Company, Limited

On 15 June 2011 the Group announced that Ping An Bank Company, Limited had provided a further loan of RMB1,600,000 (approximately £160,000) (the "Second Loan") to Kepu, in addition to the First Loan of RMB3,000,000 (approximately £300,000) granted on 24 February 2011. The Second Loan was used to meet the working capital requirements of Kepu's manufacturing operations.

The Second Loan expires twelve months from drawdown and attracts interest at 20 per cent. above the prevailing lending rate per annum determined by the People's Bank of China. Interest on the Second Loan is payable monthly and Kepu is required to repay the principal of the Second Loan by monthly instalments of RMB50,000 (approximately £5,000) commencing seven months from drawdown with the remaining balance payable at the end of the Second Loan facility. The Second Loan is secured by a first charge over Flat 2002, Block A, Guang Cai Xin Shi Ji, No.1136 Nan Shan Da Dao, Shenzhen, the PRC, currently owned by Mr. Fu Wei, a director of Kepu.

BOARD CHANGES

Mr. Stephen Chan was promoted to Chief Executive Officer of the Company with effect from 30 December 2010.

CHANGE OF PRINCIPAL PLACE OF BUSINESS

With effect from 1 October 2010, Kepu changed its principal place of business to 1st Phase of Zhongxinbao Hi-Tech Park, Xixiang Town, Baoan District, Shenzhen City, Guangdong Province, the PRC.

CHANGE OF NOMINATED ADVISOR AND BROKER

On 1 December 2010, the Board appointed Allenby Capital Limited as the Company's Nominated Adviser and Broker.

CHANGE OF AUDITOR

On 26 August 2011, the Board appointed PKF Hong Kong ("PKF"), a member firm of PKF International Limited, to replace HLB Hodgson Impey Cheng ("HLB") and hold office as auditor of the Company with immediate effect until the conclusion of the next general meeting of the Company. The Company and HLB, the previous auditor, could not reach an agreement on the audit fee for the audit of the Company's financial statements for the year ended 30 June 2011. The Board confirms that there are no matters in addition to the above in respect of the change of auditor that the Board considers should be brought to the attention of the shareholders of the Company.

DIVIDENDS

The Board is not recommending payment of a dividend for the year under review, and the Board is committed to an ongoing review of the Company's dividend policy.

REGISTRATION OF CORPORATE LOGO

On 11 March 2011, the Trade Marks and Designs Registration Office of the European Union granted the registration of the Company's corporate logo. The trademark registration expires on 8 July 2020.

CURRENT OUTLOOK AND PROSPECTS

Realizing the short-term uncertainties in the global economy, the Group adopts a conservative approach towards its exploration of market opportunities. In light of the sovereign debt crises in Europe and the high unemployment in the US, the Group primarily focuses on the growing domestic EMC market opportunities in the PRC. The Group is also optimistic of exporting its LED lighting products under its brand name "Green Pearl" to Japan. The Board remains cautiously optimistic and confident in the Group's business, market and product penetration with long-term growth potential in the PRC. Furthermore, the Board considers that the overall operations of the Group remain sound. The Group has endeavoured to diversify its sources of revenues and customers in both the domestic market in the PRC and overseas. In view of recent fast and dynamic developments in the markets, the Group will pursue different strategies towards different products and markets for the foreseeable future, as set out below.

1. Low power LED display screens and modules

In order to equip and facilitate the Group in meeting customers' orders and demands, Kepu's manufacturing facility has relocated to new production plant and location. The Group intends to strengthen its customer relationship with major customers in the PRC. Currently, Kepu supplies LED display screens and modules for major customers' exports of air-conditioners and microwave ovens. Kepu has also expanded its products to supply displays for refrigerators bound for the export market. As a result, the Group expects the new business will contribute to the Group's operating revenue for the current financial year and for the future. The Group plans to continue to expand the business with its existing major customers and business opportunities with other major potential customers in the market.

2. High power and mid power LED lightings

Following the formation of the New Joint Venture, as set out under the heading of Joint Ventures above, the Group endeavours to develop and expand its existing LED lighting solutions under the EMC business model.

The Group is currently developing and expanding its existing business through the development of LED energy saving lighting solutions by offering a series of LED light bulbs, LED spot lights, LED candle lights, LED par lights, LED tubes and LED panels under its registered trademark of "Green Pearl". The Group is in negotiations with a number of additional potential customers under EMC in the hotel, real estate, education and retail (bookstores, chain stores, petrol stations etc.) sectors and also with state-owned enterprises to supply street lights on a joint basis in some major cities in the PRC. In order to launch the EMC business model more widely, the Group is in negotiations with certain banks, both regional and Chinese, to provide debt financing. Further announcements will be made in relation to this at the appropriate time.

The Board believes that the Group's expertise in the LED sector, as well as its focus on higher value added CREE, Inc. based products, can help the Group to focus on the niche markets such as LED street lights integrating with solar power supply and specialized power storage devices. In addition, the Board believes it is a positive indication of the Group's progress in the development of its higher-end LED products. The Group is developing higher value added LED products, such as LED lighting business and to focus on areas, for instance, Japan, where demand will remain strong.

3. LED real estate advertising screens

Another key objective of the Board is to further develop the Group's expertise in producing high quality, reliable and innovative LED products and solutions and the Board intends to exploit this expertise in the LED sector to explore business opportunities in the LED related media business. China has a comparatively low per capita spending in outdoor advertising and, coupled with the Chinese government's determination to promote domestic consumption in 2012, the Board believes there are good opportunities for the Group to enter the outdoor media market and to leverage its LED products and established relationships with leading media players in the PRC. The Group is also looking for other sources of outdoor media markets overseas.

APPRECIATION

Finally, on behalf of the Board, I would like to thank our customers, suppliers and shareholders for their continued support of LED International Holdings Limited. I would also like to acknowledge the hard work of the management and all the staff for their contribution and dedication to the Group.

Thomas Li (Sgd.)

Thomas Li

Executive Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30JUNE 2011

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE2011

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2011

LED INTERNATIONAL HOLDINGS LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

1. BASIS OF PREPARATION 

(a) Compliance with International Financial Reporting Standards

These consolidated financial statements have been prepared in accordance withall applicable International Financial Reporting Standards ("IFRSs"), which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards ("IASs") and Interpretations issued by the International Accounting Standards Board and the requirements of the Hong Kong Companies Ordinance.

(b) Correction of errors

Deconsolidation of a subsidiary

In relation to the deconsolidation of a wholly-owned subsidiary, Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED") on 17 April 2010 as described in Note 2(h), to the Accounts the exchange reserve relating to Shenzhen LED of HK$10,184,000 was not reclassified from equity to the determination of loss on deconsolidation and the PRC statutory reserve of HK$104,000 was not transferred to accumulated losses for the year ended 30 June 2010. Accordingly, the consolidated financial statements have been restated to correct these errors and, for the year ended 30 June 2010, the net loss on deconsolidation of a subsidiary and loss of the Group decreased by HK$10,184,000 and the other comprehensive expense increased by HK$10,184,000. The comparative figures, including the segmental information, have accordingly been restated.

(c) Reclassifications

Deposit for acquisition of a subsidiary

On 21 July 2008, the Company entered into an agreement to acquire the entire equity interests in Shenzhen Strongbase New Opto-Electronics Technology Co. Ltd. ("Strongbase New") from a related company, Strong Base Electronic Factory Limited, at a consideration of HK$5,500,000. Strongbase New is a specialist in research and development and production of LED related products. During the year ended 30 June 2009, a deposit of HK$4,500,000 paid by the Company for acquisition of Strongbase New was incorrectly classified as current assets of the Company and the Group. Accordingly, a reclassification was made retrospectively to reclassify the deposit from current assets to non-current assets in the consolidated statement of financial position of the Group and the statement of financial position of the Company as at 1 July 2009 and 30 June 2010. The comparative figures, including the segmental information, have accordingly been restated.

(d) Initial application of International Financial Reporting Standards

In the current year, the Group initially applied the following IFRSs which are effective for the Group's financial year on beginning 1 July 2010 :-

Amendment to IAS 32 Classification of Rights Issues

Amendments to IFRS 2 Share-based payment - Group Cash-settled

Share-based Payment Transactions

Improvements to IFRSs (2009) Amendments to IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 18, IAS 36 and IAS 39

Improvements to IFRSs (2010) Amendments to IFRS 3, IAS 21, IAS 28,

IAS 31, IAS 32, IAS 39.

The initial application of these IFRSs does not necessitate material changes in the Group's accounting policies or retrospective adjustments of the comparatives presented.

(e) International Financial Reporting Standards in issue but not yet effective

The following IFRSs in issue at 30 June 2011 have not been applied in the preparation of the consolidated financial statements for the year then ended since they were not yet effective for the annual period beginning on 1 July 2010 :-

IAS 19 (Revised 2011) Employee Benefits

IAS 24 (Revised) Related Party Disclosures

IAS 27 Separate Financial Statements

IAS 28 Investments in Associates and Joint Ventures

IFRS 9 Financial Instruments

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IFRS 13 Fair Value Measurement

IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments

Amendments to IAS 1 Presentation of Items of Other Comprehensive Income

Amendments to IAS 12 Deferred Tax : Recovery of Underlying Assets

Amendment to IFRS 7 Disclosures - Transfers of Financial Assets

Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement

Improvements to IFRSs 2010 Amendments to IFRS 1, IFRS 7, IAS 1, IAS 34,

IFRIC 13

The Group is required to initially apply these IFRSs in its annual consolidated financial statements beginning on 1 July 2011, except that the Group is required to initially apply Amendments to IAS 1 and IAS 12 in its annual consolidated financial statements beginning on 1 July 2012 and IAS 19, IAS 27, IAS 28, IFRS 9, IFRS 10, IFRS 11, IFRS 12 and IFRS 13 in its annual consolidated financial statements beginning on 1 July 2013.

The directors of the Company anticipate that the application of new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

(f) Use of estimates and judgements

The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

(g) Going concern

The Group incurred a consolidated net loss from operations attributable to the owners of the Company of approximately HK$26,887,000 for the year ended 30 June 2011 and had net current liabilities of approximately HK$10,980,000 at that date. The Group is currently undertaking a number of measures to improve its liquidity and financial position. The consolidated 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 shareholders to finance the Group's future working capital for its continuing operations.

During the year ended 30 June 2011 and subsequently, management has taken measures to improve the liquidity and financial position of the Group as follows :-

1. The Group has been discussing with prospective investors to obtain new working capital and completed a placing of 12,500,000 new ordinary shares with gross proceed of RMB2,500,000 on 9 October 2011;

2. The management has taken action to tighten cost controls over various operating and general and administrative expenses; and

3. The Group has been negotiating with its principal bankers to obtain banking facilities to secure its financial support for the working capital of the Group.

Accordingly, the directors are of the opinion that it is appropriate to prepare the consolidated financial statements for the year ended 30 June 2011 on a going concern basis notwithstanding the Group's liquidity and financial position as at 30 June 2011. However, if these measures were not to be successful or insufficient, or if the going concern basis were not be appropriate, adjustments would have to be made to write down the value of assets to their recoverable amounts, to provide for further liabilities which might arise and to reclassify non-current assets as non-current liabilities as current assets and current liabilities respectively. The effect of these adjustments has not been reflected in the consolidated financial statements.

(h) Deconsolidation of Shenzhen LED

The Group entered into a preliminary sale and purchase agreement dated 11 February 2010 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 during the 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 company search of Shenzhen LED stating that its license had been suspended on 6 September 2009. 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. The consolidated statement of comprehensive income presented a loss of HK$958,000 on deconsolidation of Shenzhen LED. Details of the deconsolidation of Shenzhen LED are stated in note 34 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 segments and to assess their performance.  

Segment information reported was analysed on the basis of the typesof products sold by the Group's operating divisions (i.e. LED display screens, LED element products, and LED signboards, LED lighting and lighting engineering). The Group's reportable segments are as follows:-

Operations

Ÿ LED display screens

Ÿ LED element products

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 2011 and 2010.

The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 3 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 operating 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 :-

Ÿ all assets are allocated to reportable segments other than unallocated assets including deposit for acquisition of Strongbase New and certain bank balances. Goodwill is allocated to reportable segments as described in note 16 to the Accounts. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments; and

Ÿ all liabilities are allocated to reportable segments other than current tax liabilities and unallocated liabilities including interest payable, amount due to a director and loan from a director. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.

Other segment information

Revenue from major products

The analysis of the Group's revenue from operations from its major products is disclosed in "segment revenues and results".

Geographical information

The Group operates in two principal geographical areas - Hong Kong and the People's Republic of China (the "PRC") excluding Hong Kong. The Group's revenue from operations from external customers and information about its non-current assets by geographical location are detailed below.

Note :-

(a) Non-current assets excluding goodwill.

Information about major customers

Revenues from customers of the corresponding years contributing over 10% of the total revenue of the Group are as follows :-

1 Revenue from sales of LED element products.

3. LOSS PER SHARE

The calculation of the basic and diluted loss per share attributable to owners of the Company is based on the following data :-

The denominators used are the same as those detailed above for both basic and diluted loss per share.

Diluted loss per share has not been disclosed as no dilutive potential equity shares in existence as at 30 June 2010 and 2011.

4. EVENTS AFTER THE REPORTING PERIOD

(a) On 27 September 2011, the Company entered into a joint venture agreement with Mr. So Hing Chung to develop and expand the existing business in developing LED lighting solutions in the PRC. The initial investment for the joint venture is HK$1,000,000, of which the Company has 60% equity interest (equivalent to initial investment of HK$600,000).

(b) On 9 October 2011, the Company placed 12,500,000 new ordinary shares of HK$0.10 each at a placing price of RMB0.20 per ordinary share, raising RMB2,500,000.

(c) As mentioned in notes 18 and 36 to the Accounts, the acquisition of Strongbase New was completed on 14 November 2011 and the remaining consideration of HK$1,000,000 was still outstanding at the date of this report. Details of disclosure for the acquisition of Strongbase New in accordance with IFRS 3 (Revised) could not be made as the initial accounting for business combination was incomplete at the time the consolidated financial statements were authorised for issue.

STATEMENT

This statement was approved by the directors on 28 December 2011. This statement does not constitute the Group's statutory accounts for the year ended 30 June 2011. Statutory accounts for the year ended 30 June 2010 have been delivered to the Hong Kong Registrar of Companies. The auditor's report on those accounts was qualified. The auditor's report for the accounts for the year ended 30 June 2011 is qualified in the manner set out above.