Final Results

GOWIN NEW ENERGY GROUP LIMITED 

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

CHAIRMAN'S STATEMENT

Macro Environment

China's large and growing domestic economy continued to be the Group's primary marketplace in 2013. The central government's key economic policy is a domestic spending-led growth model. Though GDP growth rates have slowed somewhat, they remain impressive, and this coupled with the government's key focus on pollution and greenhouse gas emission reduction, points to a continuing opportunistic environment for the Group's business prospects in China focused on LED-based new energy efficient solutions.

Conversely, rising labour costs, banking institutions' increasing conservatism in relation to SME lending practices and reforms in many fiscal areas such as taxation (e.g. VAT) are factors all Chinese businesses must manage.

The LED lighting sector in China has been given great impetus by initiatives contained within the central government's 12th Five-Year Plan (2012-2016). This has led to many new supplier entrants, rationalisation and consolidation which are already under-way.

The growth of LED technologies worldwide means that buyers need to be prudent in supplier selection and ensure after market product failures and unforeseen additional costs are minimised. The Group is in a class of Chinese LED technology companies that have more than 10 years' history and with strength across the supply chain (circuit boards, LED chips, cooling technologies through to Quality Assurance, testing sophistication and customer service). Such companies should increasingly be the suppliers of choice in this market. The Group will continue to seek to prosper from this market advantage.

Financial Results

During the financial year ended 31 December 2013, the Group recorded a rise in revenue of 125% to RMB 161 million (2012: RMB 71 million). The rise in turnover arose from the increased demand for LED outdoor lighting products. Profit after tax of the Group for the financial year ended 31 December 2013 amounted to RMB 19 million (2012: RMB 4 million).

The outdoor lighting segment comprised around 77% of the total turnover of the year 2013. The Group achieved a gross profit margin of 21% in 2013, an increase of 2% compared with last year (2012: 19%); the improvement arose from better cost controls and increasing economies of scale.

The Group's major operating expenses, comprising research and development and administration, amounted to RMB 11.6 million (2012: RMB 6.7 million). Such expenses mainly comprised (i) research and development to the sum of RMB 3.3 million (2012: RMB 3.0 million); (ii) staff salaries to the sum of RMB 2.4 million (2012: RMB 0.7 million); and (iii) social security to the sum of RMB 1.4 million (2012: RMB 0.6 million). The Group continued to strengthen its business controls on continuing operating expenditures during the financial year.

As announced on 22 May and 20 June 2014, the Group has experienced delays with debtor recoverability from PRC customers, which is one of the reasons for seeking to grow the Group's export customer base and implement accounts receivables financing solutions. Given the working capital-intensive nature of the Group's business, the length of time it takes to collect debts can impact the amount of new business the Group can take on.

The basic and diluted Earnings per Share is RMB0.08 (2012: RMB0.02).

Dividend

In line with the Group's residual theory dividend policy, where dividends will only be paid after business opportunities are financed, the Board is recommending no dividend payment for the year.

Key Developments

The Board is delighted with the Group's successful admission to the AIM Market of the London Stock Exchange (AIM) on 7 November, 2013. Preparing for this key milestone was a key project for the Group throughout 2013 and provides many opportunities for the Group going forward. It is a credit to management's abilities that it was able to achieve the IPO and robust annual financial results simultaneously.

Due to China's government policy to promote green energy, domestic public sector LED work orders grew significantly in street lights, tunnel lights and lighting projects. As expected, differences in standards of product and solution acceptance criteria between traditional lighting and new LED lighting resulted in some forward disruption. Given the green energy imperative, cooperation between government and the LED industry is strong and will see a breakthrough in the operational challenges. The Group was placed in the year's Top Ten fastest growing companies in Dongguan and as announced on 22 May 2014 won a prestigious WIFI 'smart controller' award from the Mayor of Dongguan, a reflection of the R&D leadership exhibited by the Group.

The comprehensive development of urban and rural construction, especially in some mountainous provinces, has led to a high demand for street (highway) lighting. The Group is a pioneer in aspects of highway tunnel lighting, giving it an advantage in competing for local government highway lighting projects.

Regarding the Group's emphasis on export business growth, it has had detailed discussions with prominent global retail stores in Europe regarding jointly developing and selling all types of household and commercial lighting lamp bulbs to consumers. The Group expects to increase production in this segment significantly in 2014.

The Group also exhibited at the 2013 Las Vegas lighting show and generated much interest with visitors, including special lighting and stage lighting opportunities with European companies. Germany and France are key market development opportunities for the Group in the years ahead.

The Group is committed to its traditional focus on research and development and is striving for a leading brand image in the future, with goals to develop special products like plant lighting, railway lighting, commercial lighting, home lighting and promoting existing products with better economies and lighting effectiveness.

Corporate Governance

The new Board came into effect on admission to AIM in November 2013, comprising three Executive Directors and two experienced Non Executive Directors. In line with best practice, the Board is chaired by one of the Non Executive Directors.

The Board has instituted monthly Audit Committee meetings for 2014, designed to add value to management in the attainment of the highest standards of financial management.

The Board has adopted the new QCA Corporate Governance Code for Small and Mid-Size Quoted Companies 2013, with focus on 12 principles and a set of minimum disclosures. The Group continues to enhance its application of the stated principles.

The Board has committed itself to a strong agenda on business strategy, aimed at ensuring the Group maintains and increases its differentiation in the market place, enhancing export sales and increasing the quality and scale of its clients and eco-system of partners along with its products and service delivery

Current Trading and Outlook

In 2014, the Directors anticipate continued growth in revenues and profits, and the first few months of 2014 have been encouraging in this regard. As at the end of the first quarter 2014, total sales, gross margins and net profit before tax have grown year on year, fuelled particularly by local government contracts. We have confidence in a future of sustainable profit improvement in 2014 and beyond. As already mentioned, the current sales emphasis is on increasing export sales (with commensurate attractive trading terms and reduction in accounts receivable collection days) and high profit margin products.

The Group will continue to focus on quality and cost effectiveness. As previously announced, the Directors are endeavoring to improve the Group's working capital efficiency, including reducing its cash conversion cycle by better controlling credit terms and cooperating with financial institutions on debt collection and account receivables financing.

The Group's near term growth focus will be fundamentally organic but the Group will evaluate opportunistic acquisitions or mergers continually and/or make investments in synergistic companies as they arise.

The Group will continue to capitalise on the ongoing developments in LED lighting technologies, with particular emphasis on exploiting its own R&D and innovation advantages, which reflect the heritage of the Group since its inception. Often a new innovation will stem from a particular customer requirement which can then be replicated.

The Group will capitalise on its increasing industry recognition and from its presence on AIM, to attract strategic and institutional investors as well as new clients in Europe.

The Group will continue its commitment to its people and the environment through, for example, deployment of its own energy efficiency programs.

Notes of Appreciation

I wish to thank the Board of Directors for their wise counsel and leadership during and since the admission process to AIM. We are grateful to our shareholders, customers and business partners for their unfailing support and trust over the years. On behalf of the Board and senior management, I would like to extend our sincere appreciation to all our indispensable staff for their loyalty, dedication, ingenuity and hard work which has been instrumental to the Group's success for some years and will ensure that the success continues.

Garry Willinge

Non-Executive Chairman

30 June 2014

- ENDS -

For further information please visit www.gowinyichia.com or contact the following:

All operations of the Group are continuing operations.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 31 DECEMBER 2013

The Consolidated Financial Statements were approved by the board of directors and authorised for issue on 30 June 2014 and were signed on its behalf by:

Garry Willinge Chinlung Hsieh

Director Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2013

1. GENERAL INFORMATION

Gowin New Energy Group Limited ("Gowin") was incorporated on the 11 March 2013 in the Cayman Islands. The registered office of the Company is located at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands and the principal place business is located at Xiakeng Village, Tangjiano Management Zone, ChaShan Town, DongGuan, GuangDong, China

The principal activity of the Company is investment holding. The principal activity of the Company's subsidiaries (together with the Company referred as to the "Group") is engaged in the research and development (R&D), manufacturing and sales of LED lighting products in the PRC.

On 7 November 2013, the Company was admitted to trading on the AIM Market ("AIM") of the London Stock Exchange.

The consolidated financial statements are presented in Renminbi ("RMB"), which is the functional currency of the Group, and all values are rounded to the nearest thousand except when indicated otherwise. 

2. BASIS OF PREPARATION

The consolidated Financial Statements of Gowin New Energy Group Limited has been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) Interpretations as adopted by the European Union. .

The consolidated Financial Statements have been prepared under the historical cost convention. The measurement bases are described in the accounting policies below. 

The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies. 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.

GOING CONCERN

The Group meets its day-to-day working capital requirements through its bank facilities and operational cash flows. The current economic conditions continue to create uncertainty, particularly over (a) the delays in receiving payments from its trading counter-parties; (b) the availability of existing or new bank finance on acceptable terms; (c) whether the expired bank loan will be called for re-payment by the lending institution; and (d) whether the Group's suppliers will continue to provide extended payment terms.

Note 21 details the amounts due from trade receivables and the ageing of those trade receivables. Since the year end, cash collections from these counter-parties have not been in accordance with the agreed terms of trade. A number of the trade receivables are related to government building projects, and there have been significant delays in contractors receiving payment for such projects from the government, which has in turn led to delays in the Group receiving payments. However, Management remains confident, after discussions with the counter-parties, that payment will eventually be received by the counter-parties who will then be able to meet their obligations to the Group.

Note 24 details the bank borrowings of the Group. Certain loans are past their agreed redemption date, but the lender has not formally sought repayment of these sums and a higher rate of interest continues to be charged. General conditions in the PRC banking sector have been constrained over recent months. The PRC government has made it harder for banks to lend to SMEs which has had an impact on both competitors and customers, has led to the above-mentioned increase in accounts receivable and the availability of new or additional borrowing to the Group. These factors may have a bearing on whether existing borrowings will be renewed or renewed on terms acceptable to the Group.

The Directors have prepared cash flow forecasts for the Group which reflect reasonably possible changes in trading performance. These show that the Group should be able to operate within the level of its current borrowing facilities. Management has taken certain measures including the securing of further contracts, which Management has assessed to be profitable, negotiating with certain Directors to obtain their undertaking not to demand repayment of amounts owed to them until there are funds available for repayment, securing new funding from existing shareholders and/or new investors and negotiating with its bank to renew bank facilities of the Group.

The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated Financial Statements.

Changes in accounting policies and disclosures

New Standards, amendments and interpretations adopted by the Group

A number of new standards and amendments to standards and interpretations are effective for the accounting periods beginning on or after 1 January 2013 and have been applied in preparing these financial statements.

Amendment to IAS 1 "Financial Statement Presentation" regarding other comprehensive income effective during the period. Items in the statement of comprehensive income that may be reclassified to profit or loss in subsequent periods are now presented separately from items that will not be reclassified to profit or loss in subsequent periods.

IFRS 13 "Fair Value Measurement" improves consistency and reduces complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs.

IAS 27 "Separate Financial Statements" replaces the current version of IAS 27, 'Consolidated and Separate Financial Statements' as a result of the issue of IFRS 10. The revised standard includes the requirements relating to separate financial statements.

IFRS 10 "Consolidated Financial Statements" builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess.

Amendments to IFRS 1 "First-time Adoption of International Financial Reporting Standards" require that first-time adopters apply the requirements in IFRS 9 "Financial Instruments" and IAS 20 "Accounting for Government Grants and Disclosure of Government Assistance" prospectively to government loans, with a below-market rate of interest, existing at the date of transition to IFRSs. Entities may choose to apply the requirements retrospectively if the information needed to do so had been obtained at the time of initially accounting for the loan.

New Standards, amendments and interpretations mandatory for the first time for the financial year beginning 1 January 2013 but not currently relevant to the Group

A number of new standards and amendments to standards and interpretations are effective for accounting periods beginning on or after 1 January 2013, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Group.

Amendments to IFRS 7 "Financial Instruments: Disclosures" require disclosure of information that will enable users of financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity's recognized financial assets and recognized financial liabilities, on the entity's financial position.

"Annual Improvements 2009-2011 Cycle" sets out amendments to various IFRSs as follows:

An amendment to IFRS 1 "First-time Adoption" clarifies whether an entity may apply IFRS 1:

- If the entity meets the criteria for applying IFRS 1 and has applied IFRS 1 in the previous reporting period; or

- If the entity meets the criteria for applying IFRS 1 and has applied IFRSs in a previous reporting period.

An amendment to IAS 1 "Presentation of Financial Statements" clarifies the requirements for providing comparative information when an entity provides Financial Statements beyond the minimum comparative information requirements.

An amendment to IAS 16 "Property, Plant and Equipment" addresses a perceived inconsistency in the classification requirements for servicing equipment.

An amendment to IAS 32 "Financial Instruments: Presentation" addresses perceived inconsistencies between IAS 12 "Income Taxes" and IAS 32 with regard to recognising the consequences of income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction.

An amendment to IAS 34 "Interim Financial Reporting" clarifies the requirements on segment information for total assets and liabilities for each reportable segment.

Amendments to IAS 19 "Employment Benefits" eliminate the option to defer the recognition of gains and losses, known as the "corridor method"; streamline the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income; and enhance the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans.

New and amended standards and interpretations issued but not yet effective for the financial year beginning 1 January 2013 and not early adopted

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements are disclosed below. The Group intend to adopt these standards, if applicable, when they become effective.

IFRS 9 "Financial Instruments" addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics for the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.

Amendments to IAS 32 "Financial Instruments: Presentation" add application guidance to address inconsistencies identified in applying some of the criteria when offsetting financial assets and financial liabilities. This includes clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement.

Amendments to IAS 36 "Impairment of Assets" require additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. The amendments also incorporate the requirement for an entity to disclose the discount rates that have been used in the current and previous measurements if the recoverable amount of impaired assets based on fair value less costs of disposal was measured using a present value technique.

Amendments to IAS 39 "Financial Instruments: Recognition and Measurement" introduce a narrow-scope exception to the requirement for the discontinuation of hedge accounting. The amendments allow hedge accounting to continue in a situation where a derivative that has been designated as a hedging instrument is novated from one counterparty to a central counterparty, as a consequence of new laws or regulations if specific conditions are met. This relief has been introduced in response to legislative change across many jurisdictions that would lead to the widespread novation of over-the-counter derivatives.

Amendments to IAS 19 "Employee Benefits: Defined Benefit Plans: Employee Contributions: clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, the amendments permit a practical expedient if the amount of the contributions is independent of the number of years of service.

"Annual Improvements 2010 - 2012 Cycle" sets out amendments to various IFRSs and provides a vehicle for making non-urgent but necessary amendments to IFRSs:

- IFRS 2 "Share-based Payment": amendment to the definition of a vesting condition.

- IFRS 3 "Business Combinations": amendments to the accounting for contingent consideration in a business combination.

- IFRS 8 "Operating Segments": amendments to the aggregation of operating segments and the reconciliation of the total of the reportable segments' assets to the entity's assets.

- IFRS 13 "Fair Value Measurement": amendments to short-term receivables and payables.

- IAS 16 "Property, Plant and Equipment": amendments to the revaluation method in relation to the proportionate restatement of accumulated depreciation.

- IAS 24 "Related Party Disclosures": amendments regarding key management personnel.

- IAS 38 "Intangible Assets": amendments to the revaluation method in relation to the proportionate restatement of accumulated depreciation.

Annual Improvements 2011 - 2013 Cycle" sets out amendments to various IFRSs and provides a vehicle for making non-urgent but necessary amendments to IFRSs:

- IFRS 1 "First-time Adoption of International Financial Reporting Standards": amendment to the meaning of 'effective IFRSs'.

- IFRS 3 "Business Combinations": amendments to the scope exceptions for joint ventures.

- IFRS 13 "Fair Value Measurement": amendments to the scope of paragraph 52 (portfolio exception).

- IAS 40 "Investment Property": amendments clarifying the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property.

Where the impact on the Group's Financial Statements of the future standards, amendments and interpretations is still under review, the Group does not currently expect any of these changes to have a material impact on the results or the net assets of the Group.

3. SIGNIFICANT ACCOUNTING POLICIES 

 (a) Business combination and basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Inter-company transactions and balances between group companies together with unrealized profits are eliminated in full in preparing the consolidated financial statements. Unrealized losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognized in profit or loss.

On 25 September 2013, Gowin New Energy Group Limited (incorporated in Cayman Islands) acquired the entire share capital of Gowin New Energy International Limited (incorporated in British Virgin Islands) and its subsidiaries including Gowin New Energy Holdings Limited (incorporated in Hong Kong) and Dongguan Gowin Yichia New Energy Limited (incorporated in People's Republic of China).

Dongguan Gowin Yichia New Energy Limited has ultimate control over Dongguan Yichia Optoelectronics Technology Co., Limited through:

- A Technical Consultancy and Service Agreement;

-An Equity Pledge Agreement between Cao Juping and Dongguan Gowin Yichia New Energy Limited to pledge all of her Equity Interests in Dongguan Yichia Optoelectronics Technology Co., Limited as a guarantee for the payment of the consulting and services fees under the Technical Consultancy and Service Agreement.

A Call Option Agreement has been signed between Gowin New Energy Group Limited and Cao Juping for Gowin New Energy Group Limited to have the exclusive right to acquire the entire or part of the equity interests in Dongguan Yichia Optoelectronics Technology Co., Limited. The Call Option Agreement specifies that the price for the equity of Dongguan Yichia Optoelectronics Technology Co., Limited shall be the lowest price permitted by PRC law.

The above agreements have given Gowin New Energy Group Limited the ultimate control of Dongguan Yichia Optoelectronics Technology Co., Limited. The transaction on 25 September 2013 has been accounted for as a reverse acquisition in accordance with IFRS Business Combination, where Gowin New Energy Group Limited is the legal parent.

The following accounting treatment was applied in respect of the reverse acquisition:

• The assets and liabilities of the legal subsidiary, Gowin New Energy International Limited, were recognized and measured in the consolidated financial statements at their pre-combination carrying amounts without restatement to fair value;

• The equity structure appearing in the consolidated financial statements reflects the equity structure of the legal parent, Gowin New Energy Group Limited, including the equity instruments issued to effect the business combination; and

• The cost of acquisition was measured as the fair value of the assets acquired, equity instruments issued and liabilities incurred or assumed at the date of exchange.

Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de facto control. De facto control may arise in circumstances where the size of the Group's voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies etc.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

(b) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group's executive directors that makes strategic decisions.

(c) Transaction expenses

The transaction costs  of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

(d) Foreign currency translation

Functional and presentation currency

Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("functional currency").

The consolidated Financial Statements are presented in Renminbi (RMB), which is the Company's functional and the Group's presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions, or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognized the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Foreign exchange gains and losses relating to borrowings and cash and cash equivalents are presented in the income statement within "Finance Income" or "Finance Costs". All other foreign exchange gains and losses are presented in the income statement within "Gains/ (Losses) on foreign exchange".

Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

· assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the date of that Statement of Financial Position;

· income and expenses for each Statement of Comprehensive Income presented are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

· all resulting exchange differences are recognized in other comprehensive income

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognized in other comprehensive income.

(e) Financial instruments

(i) Non-derivative financial assets

The Group initially recognizes payables and receivables on the date that they are originated. All other financial assets (including assets designated as at fair value through profit or loss) are recognized initially on the trade date, which is the date that the company becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognized as separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when and only when the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

The Group has classified all of its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

Loans and receivables comprise cash and cash equivalents, and trade and other receivables.

(ii) Non-derivative financial liabilities

The Group initially recognizes all financial liabilities on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

The Group has classifies its non-derivative financial liabilities into loans and receivables, which comprise of borrowings and trade and other payables. Such financial liabilities are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.

(f) Cash and cash equivalents:

Cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.

(g) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.

(h) Property, plant and equipment 

Property, plant and equipment are stated at cost less accumulated depreciation. Cost includes expenditure that is directly attributable to the acquisition of the assets and bringing the asset to its working condition and location for its intended use.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the income statement in the period in which they are incurred.

Depreciation on assets is calculated using the straight-line method to write down their cost to their residual values over their estimated useful lives, as follows:

Plant and machinery 5 -10 years

Office equipment 5 -10 years

Furniture and fixtures 5 -10 years

Motor vehicle 5 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the income statement.

(i)  Trade and Other Receivables

Trade receivables are amounts due from customers for goods sold or services provided in the ordinary course of business. Receivables, including trade and other receivables and amounts due from equity holders, are classified as current assets if collection of receivables is expected in one year or less (or in the normal operations cycle of the business if longer). If not, they are presented as non-current assets.

Trade and Other Receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is recognized in administrative and other operating expenses. When a receivable is uncollectible, it is written off against the allowance account for receivables. Subsequent recoveries of amounts previously written off are credited against administrative and other operating expenses. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

(j) Impairment of non-financial assets

Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

(k) Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

(l) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work-in-progress comprises raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity). Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

(m) Trade and other payables

Trade payables are obligations to pay for goods that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

(n) Borrowings

Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

Borrowing costs are charged to the income statement in the accounting period in which they are incurred

(o) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts returns and value added taxes. The Group recognizes revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Group. The Group bases its estimates of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

(i) Revenue from sale of goods is recognized when the goods are delivered and titles are transferred.

(ii) Interest income is recognized when it accrues using the effective interest method.

(p) Government grants

Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognized in the income statement over the period necessary to match them with the costs that they are intended to compensate.

(q) Employee benefits

(i) Employee leave entitlement

Employee

Employee entitlements to annual leave and long service leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the end of the reporting period.

Employee entitlements to sick leave and maternity leave are not recognized until the time of leave.

(ii) Retirement benefit

In accordance with the rules and regulations in the PRC, employees participate in various defined contribution retirement benefit plans organized by the relevant municipal and provincial governments in the PRC under which the Group and employees are required to make monthly contributions to these plans calculated as a percentage of the employees' salaries.

(q) Employee benefits (continued)

The municipal and provincial governments undertake to assume the retirement benefit obligations of all existing and future retired employees payable under the plans described above. Other than the monthly contributions, the Group has no further obligation for the payment of retirement and other post retirement benefits of its employees. The assets of these plans are held separately from those of the Group in independently administrated funds managed by the PRC government.

The Group's contributions to the defined contribution plan are expensed as incurred.

(r)  Finance income and costs

Finance income includes interest in regard to invested amounts, gains from changes in the exchange rates and interest income that are recognized upon accrual using the effective interest method.

Finance costs include interest on loans received and bank charges.

Gains and losses from exchange rate differences are reported net.

(s) Current and deferred income tax

Tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in the income statement except to the extent that it relates to items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(t)  Earnings per shares

Earnings per RMB of shares are calculated by dividing profit attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the period.

(u) Related parties

(i) A person, or a close member of that person's family, is related to the Group if that person:

(a) has control or joint control over the Group;

(b) has significant influence over the Group; or

(c) is a member of the key management personnel of the Group or the Group's parent.

(ii) An entity is related to the Group if any of the following conditions applies:

(a) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

(b) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);

(c) Both entities are joint ventures of the same third party;

(d) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;

(e) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;

(f) The entity is controlled or jointly controlled by a person identified in (i); or

(g) A person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity:

(a) that person's children and spouse or domestic partner;

(b) children of that person's spouse or domestic partner; and

(c) dependents of that person or that person's spouse or domestic partner.

(v) Provisions and contingent liabilities

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. All provisions are reviewed at the end of each of the relevant periods and adjusted to reflect the current best estimate. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(w) Financial guarantees

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the "holder") for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues or receives a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognized as deferred income within other payables or deferred expenditure within other receivables respectively. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognized in accordance with the Group's policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognized in the income statement on initial recognition of any deferred income. Where consideration is paid or payable for the receipt of the guarantee, the consideration is recognized in accordance with the Group's policies applicable to that category of liability. The amount of the guarantee initially recognized as deferred income or deferred expenditure is amortized in the income statement over the term of the guarantee as income from or expenses for the financial guarantees as appropriate.

Provisions are recognized in accordance with note 3(v) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in other payables in respect of that guarantee i.e. the amount initially recognized, less accumulated amortization.

4. FINANCIAL RISK MANAGEMENT

The Group conducts its operations in the PRC and accordingly is subject to special considerations and significant risks. These include risks associated with, among others, the political, economic and legal environment, influence of national authorities over pricing regulation and competition in the industry.

The Group's major financial instruments are set forth in the consolidated statement of financial position. The Group's activities expose it to a variety of financial risk and market risk including: credit risk; interest rate risk; liquidity risk and foreign exchange risk.

The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Groupmainly relies on sales of LED and bank and other borrowings to fund its operations. The Group has alternative plans to monitor liquidity risk should there be significant adverse changes on the Group's cash flow projections.

Risk management is carried out by the management under the supervision of the board of directors. The Group's management identifies, evaluates and manages significant financial risks and the Board provides guidance for overall risk management.

(i) Credit risk 

The Group's credit risk mainly arises from the trade and other receivables as set out in the consolidated statement of financial position. The Group reviews the recoverable amount of trade receivables, deposits and other receivables on a regular basis and an allowance for doubtful debts is made where there is an identified loss.

In respect of trade receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customers' past history of making payment when due and current ability to pay, and take into account information specific to the customer. The Group will make specific provision for those balances which cannot be recovered. Normally, the Group does not obtain collateral from customers. In the opinion of the directors, the relevant credit risk is considered to be low.

The credit risk on cash and cash equivalents is limited because the counterparties are reputable and creditworthy banks.

The Group holds bank accounts with banks in the People's Republic of China with the following credit ratings:

As at 31 December 2012 and 2013, the Group had a concentration of credit risk from its trade receivables as 82% and 59% respectively of the total trade receivable balances due from its five largest customers.

Except for the financial guarantees given by the Group as set out in note 24, the Group did not provide any other guarantees which would expose the Group to credit risk.

(ii) Interest rate risk

The Grouphas no significant interest-bearing assets except for certain bank deposits. Management considers the interest rate is minimal since the interest income from bank deposits is insignificant and the interest rate for the bank borrowing is fixed. The interest rates and terms of repayment of the borrowings are disclosed in Note 24.

(iii) Liquidity risks

Prudent liquidity risk management involves maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group aims to maintain flexibility in funding by keeping sufficient cash and bank balances.

The tables below detail the remaining contractual maturities at the end of each financial yearof the Group's non-derivative financial liabilities, which has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate effective at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group can be required to make payment. The amounts were either repayable within one year or on demand.

(iv) Foreign exchange risks 

The Group operates primarily in the PRC with most of the transactions settled in RMB. The transactional currency exposures arise from export transactions with the Group's related parties and minor trade and other payables in US dollars.

The Group has not used any forward contracts to hedge its exposure to foreign currency risk. However, Management monitors the foreign exchange exposures and will consider hedging the significant foreign currency exposures should the need arise.

The following table details the Group's sensitivity to a 5% increase/decrease in RMB against US dollars. 5% represents Management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity includes only outstanding US dollars denominated monetary items (balances with related parties and trade creditors) and adjusts their translation at the period end for a 5% change in foreign exchange rate.

(v) Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders. The Group's capital structure primarily consists of equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of consolidated financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Upon formulation of accounting estimates used in preparation of the consolidated financial statements, Management is required to make assumptions in regard to circumstances and events that are significantly uncertain. Management arrives at these decisions based on prior experiences, various facts, external items and reasonable assumptions in accordance with the circumstances related to each assumption.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

The Group makes provision for impairment of receivables based on an assessment of the recoverability of receivables, including amounts due from customers, other counter-parties and equity holders. Provisions are applied to receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of impairment requires the use of judgment and estimates. Where expectation is different from the original estimate, such difference will impact the carrying value of receivables and provision for impaired receivables in the period in which such estimate has been changed.

6. REVERSE ACQUISITION OF GOWIN NEW ENERGY GROUP LIMITED

On 25 September 2013, the Company acquired 100% of the issued share capital of Gowin New Energy International Limited, a LED research, development and production group operating in the People's Republic of China, for a consideration of RMB 30,000,000 to be satisfied by the issue of 299,999,999 new shares to the Sellers.

In accordance with IFRS 3 (Revised), the acquisition represents a reverse acquisition as discussed in Note 3 Basis of consolidation section. The details of the reverse acquisition are below:

In a reverse acquisition, the acquisition date fair value of the consideration transferred by the Company is based on the number of equity instruments that the Company would have had to issue to the owners of Gowin New Energy International Limited to give the owners of Gowin New Energy International Limited the same percentage of equity interests that result from the reverse acquisition.

The cost of the combination was calculated using the fair value of all the pre-acquisition issued equity instruments of Gowin New Energy International Limited at the date of acquisition.

The costs of the reverse acquisition of Gowin New Energy International Limited totaled RMB 30 million.

No revenue or profits attributable to the Company prior to acquisition were included in the Group Statement of Comprehensive Income to 31 December 2013. Had Gowin New Energy International Limited been consolidated from 1 January 2013 the Group Statement of Comprehensive Income would show the same levels of revenue and profits.

7. REVENUE

An analysis of the revenue from the Group's principal activities (note 1), which is also the Group's turnover, is as follows:

The Group's revenue is as follows:

Information about major customers

Revenue from customers contributing over 10% of total revenue of the Group is as follows:

* Revenue from each of Customer A and Customer B did not contribute over 10% of total revenue of the Group during the year ended 31 December 2013 whereas Customer C and Customer D did not contribute over 10% of total revenue of the Group during the year ended 31 December 2012.

8. SEGMENT INFORMATION

For the years presented, the Group as a whole is an operating segment since the Groupis only engaged in optoelectronic products and related business. No Group's geographical information has been disclosed as the majority of the Group's operating activities are carried out in the PRC (for the purpose of preparing the financial statements, the PRC refers to the Mainland China and Hong Kong) and the Group's assets are all located in the PRC.

9. OTHER INCOME

10. FINANCE COSTS AND FINANCE INCOME

11. EXPENSES BY NATURE

12. STAFF COST

13. INCOME TAX

The Group is not subject to taxation in the Cayman Islands and British Virgin Islands.

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profits of the year.

The Group is accredited as a State-encouraged High and New Technology Enterprise and is subjected to a preferential tax rate of 15% in the PRC.

The income tax on the Group's profit become income tax differs from the theoretical amount that would arise using the enacted tax rate of home country of the companies comprising the Group as follows:

14. EARNINGS PER SHARE/PAID IN CAPITAL

(a) Basic earnings per share/ paid in capital

The 2012 comparative disclosure is of the trading subsidiary registered in China and the capital is not divided into shares under PRC business registration. Earnings per share for the year ended 31 December 2013 is calculated by dividing RMB 19,022,028 profit for the period attributable to the equity holders of the Group by the weighted number of shares of 233,346,681. Earnings per share for the year ended 31 December 2012 has been based on the weighted number of shares of 233,346,681 of 2013 for the purpose of comparison.

(b) Diluted earnings per share

As there were no potential dilutive ordinary shares during the financial years presented in these consolidated financial statements, the diluted earnings per share is the same when undiluted.

15. DIRECTORS' REMUNERATION

Directors' emoluments comprise

Note:

(a) During the year ended 31 December 2013, three executive directors waived emoluments of approximately RMB 2,300,000 (2012: Nil).

16. DIVIDEND

No divided has paid or declared by the Company during the year (2012: Nil). 

17. PROPERTY, PLANT AND EQUIPMENT

18. SUBSIDIARIES

Details of the subsidiaries are as follows:

* Dongguan Yichia Optoelectronics Technology Company Limited is controlled by Dongguan Gowin Yichia New Energy Limited under an Exclusive Technical Consultancy and Service Agreement.

19. DEFERRED TAX ASSETS

The deferred tax assets recognized by the Group and their movements thereon during the years are as following:

20. INVENTORIES

Cost of inventories recognized as an expense and included in cost of sales amounted to approximately RMB126,245,000 and RMB50,975,000and research and development expense amounted to approximately RMB2,141,000 and RMB1,661,000 for the years ended 31 December 2013 and 2012respectively.

21. TRADE AND OTHER RECEIVABLES

The aging analysis of the Group's trade receivables after impairment based on delivery date is as follows:

31 December

31 December