Half Yearly Report

LED International Holdings Limited

(the "Company")

Interim Results

For the six-month period ended 31 December 2012

LED International Holdings Limited (AIM: LED) and its subsidiaries (together the "Group") announces its interim results for the six-month period ended 31 December 2012.

Overview

·; Increase in Revenue of HK$10,062,000 (approximately £860,000) over H1 2011 (HK$9,958,000)

·; Decrease in Loss Attributable to Shareholders of HK$5,699,000 (approximately £487,000) (2011: HK$7,389,000)

·; Gross Profit of HK$18,000 (approximately £1,000) (2011: HK$367,000) as a result of increased manufacturing and production costs compounded by wage rises and Renminbi appreciation

Post-period end

·; Acquisition of Shenzhen Lamp Energy Management Investment Company Limited, an EMCO registered with the National Development and Reform Commissionto be satisfied by the issue of 75,494,024 new ordinary shares of HK$0.10 each in the Company to Mr. Jerry So, to enable the Group to pursue its EMC business model more widely

·; Disposal of Strongbase New Opto-Electronics Technology Company Limited for a consideration of RMB500,000 (approximately £53,000)

·; Strengthening of balance sheet through conversion of loan by key joint venture partner, Mr. Jerry So

Stephen Weatherseed, Chairman, commented: "Trading conditions have remained challenging although for the first time in a number of years we are pleased to report a slight increase in the revenue achieved in the first half of our previous financial year.

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

Following 31 December 2012 we have completed a number of positive developments and were pleased to be able to announce the strengthening of our balance sheet in mid-January."

For further information:

Notes to Editors:

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

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

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

CHAIRMAN'S STATEMENT

LED International Holdings Limited (AIM: LED) (the "Company") and its subsidiaries (together the "Group") specialize in the provision of energy management contract services ("EMC contracts") or energy performance contracting services under which the Group installs energy saving products in its customers' premises, including lighting and reactance filtering equipment supplied by the Group, and the subsequent savings made by customers in their electricity charges are then shared between the Group and the customers thereby enabling the Group to generate recurring revenue rather than one-off sales revenue. Historically, the Group's business has been the development, manufacture and sale of low-powered light-emitting diode ("LED") display screens and modules. The Board of Directors (the "Board") is pleased to report on the unaudited interim results of the Group for the six-month period ended 31 December 2012.

MARKET REVIEW

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

OPERATING REVIEW

During the six-month period under review, the global business economy recovered slowly from an unenthusiastic investment and consumption environment following the global financial crisis and the sovereign debt crisis, especially in the Euro-zone and the US. At the same time, China marked its slowest economic growth since the start of the 21st Century. This resulted in continued difficult trading conditions for the Group and, domestically, our operation was also burdened by rising inflation, appreciating Renminbi ("RMB") and slowing economic growth within the PRC. These factors have impacted on the Group's gross margin and resulted in an operating loss for the six-month period ended 31 December 2012.

Over the past few years the Group has been transforming its operating business to provide EMC services in the PRC. During the six-month period under review, the Group's EMC company ("EMCO") was being run through Strongbase New Opto-Electronics Technology Company Limited ("Strongbase New"), a specialist in LED and LED related products, accessories and appliances. As announced on 24 July 2012, the Group secured an EMC contract for a projected revenue of approximately HK$2,640,000 (RMB2,100,000 or approximately £225,000) with Li Xian Hua Xiang Yin Sheng Textiles Limited ("Hua Xiang Yin Sheng") and on 2 November 2012 secured a further key supply contract for a projected revenue of approximately HK$1,912,000 (RMB1,521,000 or approximately £163,000) for reactance filtering equipment to be installed in and used by China National Petroleum Corporation in Karamay, Xinjiang Province, the PRC, a major Chinese state-owned enterprise. These contracts support the Group's strategy and mark the commencement of the successful implementation of its energy efficiency solution offering under the EMC business model. Further smaller contracts have been signed and additional ones continue to be negotiated, details of which will be announced as appropriate.

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

As previously announced on 23 April 2012 that a fire at Harbour Grand Hotel, North Point, Hong Kong, might have started at a giant LED display screen ("LED Screen") supplied by the Company. To date, the Company has not received any communications from the investigator in relation to this fire and, in the circumstances, the Group has not made any provision in relation to any potential claim, damage or loss for the financial period.

FINANCIAL REVIEW

Revenue and total comprehensive loss attributable to shareholders of the Company for the six-month period ended 31 December 2012 amounted to HK$10,062,000 (approximately £860,000) (2011: HK$9,958,000) and HK$5,699,000 (approximately £487,000) (2011: HK$7,389,000) respectively. During the six-month period ended 31 December 2012, the Group recorded a slight rise in operating revenue by HK$104,000 (approximately £9,000) over 2011. The rise in operating revenue was brought about mainly by entering into the EMC market within the PRC. Furthermore, the Group generated a gross profit in the amount of HK$18,000 (approximately £1,000) for the six-month period as a result of rising manufacturing and production costs compounded by wage rises and RMB appreciation.

Operating revenue for the six-month period generated from LED element products mainly supplied to major home appliance manufacturers in the PRC, decreased by HK$103,000 (approximately £8,000) from the same period in 2011. The Group strengthened its product quality controls and customer relationships with existing major customers and attempted to diversify these sources of revenue and customers during the financial period. The Group generated operating revenue from EMC contracts of HK$207,000 (approximately £17,000) during the six-month period.

An operating gross loss for LED element products of approximately 0.5% was attained during the financial period, 5% lower than 2011, as a result of rising manufacturing and production costs. The operating gross margin of EMC contracts was approximately 33% (2011: Nil) for the six-month period.

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

CORPORATE RESTRUCTURING

1. Disposal of interest in LED International Energy Conservation Holdings Limited ("LED Energy") and LED International Green Energy Corporation Limited ("LED Green")

As announced on 2 July 2010 the Company entered into a joint venture agreement with Mr. Jerry So ("Mr. So") and other various joint venture partners to form LED Energy, in which the Company had a 60 per cent. equity interest. LED Green, the wholly owned subsidiary of LED Energy, was used to procure a source of supplies from CREE, Inc. in expanding the Company's lighting business. Following a dispute with WPI International (Hong Kong) Limited ("WPI") in relation to an alleged breach of contract, the Board had seriously considered the joint venture, comprising LED Energy and LED Green, no longer fundamentally existed.

Subsequent to the six-month period ended 31 December 2012, the Board decided to continue to focus on the Group's EMC business model by disposing of this procurement arm. Following the agreement of a settlement agreement with WPI on 29 March 2012 in relation to litigation proceedings brought by WPI against LED Green, further details of which have been announced previously, the Company disposed of all of its equity interest (60 per cent.) in LED Energy, including LED Green, to an unconnected third party for a consideration of approximately HK$303,000 (approximately £25,000), on 11 January 2013.

2. Acquisition of interest in Shenzhen Lamp Energy Management Investment Company Limited ("Shenzhen Lamp") and disposal of interest in Strongbase New

Since completion of the acquisition of Strongbase New on 14 November 2011, the Group had undertaken several measures to integrate Strongbase New's pre-acquisition operation and new business model including replacing its board members and expanding its business scope to include LED lighting solutions, reactance filtering equipment etc. Notwithstanding these efforts however, the Board subsequently determined that it had not managed to achieve effective business integration with Strongbase New. In consequences, the Board resolved to replace Strongbase New as the vehicle through which it would carry out its EMC business through an orderly disposal.

The Company disposed of its effective equity interest in Strongbase New to Mr. So for a consideration of RMB500,000 (approximately HK$628,000 or approximately £53,000). Included within the sale was Yanford Limited, the immediate holding company of Strongbase New and a wholly owned subsidiary of Green Pearl Energy Conservation Holdings Limited ("Green Pearl Energy") in which the Company owned 60% and in which Mr. So already held the remaining 40 per cent. equity interest.

The Group intends to primarily focus on the growing domestic Chinese EMC market opportunities, which it will do under the brand name of "Green Pearl", and in so doing continues to work with Mr. So in order to develop this aspect of the Group's business further and identify how the Group can leverage Mr. So's knowledge, experience and contacts. In so doing, the Board is pleased to announce that the Group has acquired the entire share capital of Shenzhen Lamp, a company with a valid and effective EMCO registration with the National Development and Reform Commission ("NDRC"), from Mr. So as a replacement for Strongbase New. The Board envisages that this will enable the Group to take advantage of certain favorable policies and terms for the EMC industry within the PRC more rapidly without the need to apply for its own EMCO registration for Strongbase New, a process which can be quite lengthy. On 14 March 2013, Shenzhen Lamp applied to change its company name to Shenzhen Green Pearl Energy Management Company Limited ("GPEMCO"). On 21 March 2013, the Market Supervision Administration of Shenzhen Municipality approved the change of company name. The Group's EMCO will run through GPEMCO.

The transaction was structured so that Green Pearl Energy acquired the entire issued share capital of Shenzhen Lamp via either the direct acquisition of its immediate parent company, Shenzhen Green Pearl Energy Management Technology Development Company Limited ("Shenzhen GP Energy"), or its ultimate parent company, Richmen Corporation Limited ("Richmen") (at the Group's election depending on the completion of the registration of various share transfers in Shenzhen GP Energy or Richmen). Included within the group is Richmen's immediate wholly owned subsidiary, Shenzhen GP Energy, which itself owns 100 per cent. of Shenzhen Lamp. The acquisition agreement was signed on 21 March 2013 and the consideration for the acquisition was the issue and allotment of the 75,494,024 new ordinary shares of HK$0.10 each in the Company to Mr. So.

It is also a term of the acquisition that Strongbase New's business and assets, including patents and intellectual property rights, inventories, EMC contracts, will be transferred into Shenzhen Lamp.

CONVERSION OF LOAN

In ensuring the alignment of the Company's interests with Mr. So, key joint venture partner in the Group's EMC business model within the PRC, and strengthening the Company's balance sheet, Mr. So took an assignment of an outstanding debt of approximately HK$6,156,000 (approximately £526,000) (the "Loan") from Mr. Stephen Chan, the Company's Chief Executive Officer, on 15 January 2013 at book value. On 17 January 2013, Mr. So converted the Loan into 61,561,201 new ordinary shares of HK$0.10 each in the Company.

BOARD CHANGES

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

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

CHANGE OF REGISTERED OFFICE

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

DIVIDENDS

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

CURRENT OUTLOOK AND PROSPECTS

In dealing with softening of the global economy, the Group adopts a conservative but proactive approach towards entering into the energy management market. In light of the Euro-zone debt crises and the new round of monetary policy, the Group intends to focus primarily on the growing domestic EMC market opportunities under the brand name of "Green Pearl" in the PRC. Notwithstanding the recent slowdown in China's national growth, the Board believes that the Chinese government will implement fiscal and monetary policies to stimulate economic growth in the PRC.

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

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

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

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

a. Gradual disposal of manufacturing plant

In past years, Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu") contributed to the Group by facilitating the manufacture and sale (mainly of LED display screens and modules) for its major customers' exports of air-conditioners, microwave ovens and refrigerators. These LED element products are lower value added but are otherwise highly competitive in the market in terms of price and quality. However, owing to the global slowdown of market demand, and accompanied by rising manufacturing costs, the Group had experienced operating losses in these product and market segments for the last three financial years. Continued gradual disposal of Kepu will allow the Group to focus on becoming an energy management service provider in the PRC.

b. EMCO registration with the NDRC

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

c. Financing arrangements

The Group's EMC business model is financed substantially by debt capital finance, mainly bank finance for the Group or equipment leasing finance for its customers. In order to launch its EMC business model more widely, the Group has been in negotiations with local Chinese banks to provide EMC finance and with domestic leasing companies to provide EMC customer finance. The Board believes that equipment leasing finance will become one of the major sources of finance for EMC contracts in the foreseeable future. Further announcements on these arrangements will be made at the appropriate time.

APPRECIATION

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

Stephen Weatherseed

Non-Executive Director and Chairman

Hong Kong, 28 March 2013

LED INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER 2012

LED INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2012

LED INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER 2012

LED INTERNATIONAL HOLDINGS LIMITED

NOTES TO THE INTERIM FINANCIAL INFORMATION

FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER 2012

1. GENERAL INFORMATION

LED International Holdings Limited (the "Company") is domiciled and incorporated in Hong Kong with limited liability under the Hong Kong Companies Ordinance. The address of the Company's registered office and principal place of business was changed to Unit A1, 6/F., One Capital Place, 18 Luard Road, Wan Chai, Hong Kong from Suite 911, 9/F., Exchange Tower, 33 Wag Chiu Road, Kowloon Bay, Kowloon.

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

LEDs are one of the energy efficiency solutions that the Group proposes as part of its EMC offering to the market within the People's Republic of China (the "PRC"). On 2 April 2010 the State Council of the PRC first approved the development of energy servicescompaniesor EMC companies supplemented by tax concessions and government subsidies and, in view of the large potential opportunity of the EMC market within the PRC, the Group is re-orientating its business from manufacturing and distribution to an EMC business model. Under this model, the Group provides energy efficiency solutions, including LED lighting, reactance filtering energy saving and other energy efficiency solutions.Specifically, the Group overhauls its customers' existing lighting and power consumption systems (which are based on traditional lighting technology and power generation equipment) with proprietary LED lighting products, reactance filtering equipment and other solutions provided by the Group. These energy efficiency products are installed in customers' premises. The Group bears all the upfront costs associated with the supply and installation of the energy efficiency solutions and these costs are then recouped by sharing in the monthly energy savings generated by the customers' use of the energy efficiency solutions over the period of the contracts. The Group receives revenue from customers on several different payment terms including on a pre-payment, monthly or quarterly basis. The Board believes that these EMC contracts are also capable of generating tradable carbon credits but as yet the Group has not earned any revenue from this.

On 23 October 2006, the Company was admitted to trading on the Alternative Investment Market ("AIM") of the London Stock Exchange.

The interim financial information is presented in Hong Kong dollars ("HK$"), which is the same as the functional currency of the Company, and all values are rounded to the nearest thousand except when otherwise indicated.

2. BASIS OF PREPARATION

(a) Compliance with International Financial Reporting Standards ("IFRSs")

The interim financial information has been prepared in accordance with all applicable IFRSs, which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards ("IAS") and Interpretations issued by the IASB and the Hong Kong Companies Ordinance.

(b) Basis of preparation of interim financial information

The interim financial information for the six-month period ended 31 December 2012 comprises the Company and its subsidiaries (together referred to as the "Group"). The 2013 interim financial report of the Company has not been audited or reviewed by the Company's independent auditor.

(c) Basis of measurement

The interim financial information has been prepared under the historical cost convention.

The Group incurred a loss of approximately HK$7,976,000 for the six-month period ended 31 December 2012 and, as of that date, the Group had net current liabilities and a capital deficiency of approximately HK$43,952,000 and HK$42,755,000 respectively. As at 31 December 2012, cash and cash equivalents and pledged deposits of the Group amounted to approximately HK$1,418,000 and HK$10,092,000 respectively. As at 31 December 2012, trade and other payables of approximately HK$52,264,000 were due for repayment within the next twelve months. These conditions indicate the existence of material uncertainty which may cast doubt on the Group's ability to continue as a going concern, with a potential consequence that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

The management have taken certain measures ("Measures") including to secure further contracts, which the management have assessed to be profitable, negotiate with certain directors to obtain their undertakings not to demand repayments of amounts due to them until there are funds available for repayment and negotiate with its banker to renew bank facilities of the Group. In the opinion of the Directors, based on the successful execution of the Measures, the Group will have sufficient cash resources to satisfy its working capital and other financing requirements for the foreseeable future. Accordingly, the Directors are of the opinion that it is appropriate to prepare the interim financial information on a going concern basis.

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

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

(d) Use of estimation and judgements

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

The condensed interim financial statements have been prepared in accordance with the requirements of the AIM Rules for Companies. As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this interim financial information. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 30 June 2012, which have been prepared in accordance with IFRSs as adopted by the European Union.

The interim financial information set out above does not constitute statutory accounts. It has been prepared on a going concern basis in accordance with the recognition and measurement criteria of IFRSs as adopted by the European Union.

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. Judgments made by management in the application of IFRSs that have significant effect on the interim financial information and major sources of estimation uncertainty are discussed in Note 4.

3. SIGNIFICANT ACCOUNTING POLICIES

(a) Subsidiaries

A subsidiary is an entity over which the Company is able to exercise control. Control is achieved where the Company, directly or indirectly, has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently exercisable are taken into account.

The interim financial information comprises the financial statements of the Company and its subsidiaries. Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the interim financial information. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated statement of comprehensive income from the effective dates of acquisition or up to the effective dates of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

Acquisition of subsidiaries or businesses is accounted for using the acquisition method. The cost of an acquisition is measured at the aggregate of the acquisition-date fair value of assets transferred, liabilities incurred and equity interests issued by the Group, as the acquirer. The identifiable assets acquired and liabilities assumed are principally measured at acquisition-date fair value. The Group's previously held equity interest in the acquiree is re-measured at acquisition-date fair value and the resulting gains or losses are recognised in profit or loss. The Group may elect, on a transaction-by-transaction basis, to measure the non-controlling interest that represent present ownership interests in the subsidiary either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs incurred are expensed.

Any contingent consideration to be transferred by the acquirer is recognised at acquisition-date fair value. Subsequent adjustments to consideration are recognised against goodwill only to the extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value at the acquisition date. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss.

Changes in the Group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interest and the non-controlling interest are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interest. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of.

Subsequent to acquisition, the carrying amount of non-controlling interest that represent present ownership interests in the subsidiary is the amount of those interests at initial recognition plus the non-controlling interest's share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interest having a deficit balance.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may ultimately 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.

Consolidation of a subsidiary

In May 2012, the Group and a holder of non-controlling interests entered into a licensing agreement whereby the holder of non-controlling interests assumed all the responsibilities of the daily operations and management of Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu"). Management needed to judge whether the Group controls Kepu with reference to all relevant facts and circumstances of the licensing agreement. Since the Group's approval is required for all significant decisions, management consider the Group controls Kepu and, therefore, continues to consolidate Kepu in its financial statements.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

Impairment of property, plant and equipment

The Group assesses impairment by evaluating conditions specific to the Group that may lead to impairment of the assets. If such condition exists, the recoverable amounts of the assets would be determined by reference to value in use and net selling price. Value in use is determined using the discounted cash flow method. Owing to inherent risks associated with estimations in the timing and magnitude of the future cash flows and net selling prices, the estimated recoverable amount of the assets may be different from its actual recoverable amount and profit or loss could be affected by accuracy of the estimations.

Impairment of trade and other receivables

The Group determines impairment losses for bad and doubtful debts resulting from the inability of the customers/debtors to make the required payments. A considerable amount of estimate and judgement is required in assessing the ultimate realisation of these receivables which is based on the ageing of the accounts receivable balance, customer credit-worthiness, and historical write-off experience. If the financial conditions of customers/debtors deteriorate, additional allowance for bad and doubtful debts may be required.

Estimate of current tax and deferred tax

The Group is subject to income taxes mainly in the PRC. Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the income tax provisions in the period in which such determination is made.

Inventory valuation

In determining the amount of allowance required for obsolete and slow-moving inventories, the Group assesses the realisability of the inventories and the Group makes reference to the ageing analysis of the inventories. A considerable amount of judgement and estimation is required in determining such allowance. If conditions which have an impact on the net realisable value of inventories deteriorate, additional allowances may be required.

5. REVENUE

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

6. 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 types of products sold by the Group's operating division (i.e. LED display screens, LED element products and EMC contracts). The Group's reportable segments are as follows:

Operations

• LED display screens

• LED element products

• EMC contracts

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 six-month period ended 31 December 2012 and 2011.

Segment loss represents the loss incurred by each segment without allocation of central 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:

• all assets are allocated to reportable segments other than unallocated assets including deposit for acquisition of Strongbase New, certain bank balances and amount due from a director. Goodwill is allocated to respective reportable segments. Assets used jointly by reportable segments are allocated on the basis of the revenue earned by individual reportable segments; and

• all liabilities are allocated to reportable segments other than current tax liabilities and unallocated liabilities including interest payable, amounts due to directors and loans from directors. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.

7. LOSS PER SHARE

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

In calculating the diluted losses per share attributable to the owners of the Company for the period ended 31 December 2012, the potential issue of shares arising from the exercise of share options would decrease the losses per share attributable to the owners of the Company and is not taken into account as they have an anti-dilutive effect. Therefore, the diluted losses per share attributable to the owners of the Company for the period ended 31 December 2012 is based on the loss attributable to the owners of the Company of approximately HK$5,540,000 (2011: HK$7,687,000) and on the weighted average of 366,238,269 (2011: 358,901,311) ordinary shares outstanding during the period ended 31 December 2012, which are the amounts used in calculating the basic losses per share for the period.

8. SUBSIDIARIES

The particulars of the subsidiaries at 31 December 2012 are as follows:

9. CASH AND CASH EQUIVALENTS

10. BORROWINGS

Notes:

(a) All of the bank borrowings were denominated in RMB. The carrying amounts were equivalent to RMB 4,830,000 as at 31 December 2012 (2011: RMB 5,000,000) .The secured bank borrowings were secured by a charge over property owned by key management personnel of a subsidiary.

(b) The bank overdrafts were denominated in HK$ and obtained under banking facilities granted to the Group. The bank overdrafts were interest bearing at fixed deposit rates plus 2.25% per annum. The banking facilities were secured by a pledged deposit of approximately HK$10,092,000 and the Group is required to ensure that (i) Mr. Stephen Chan to hold directorship of the Company and (ii) Mr. Stephen Chan to hold not less than 20% shareholding of the Company.

11. SHARE CAPITAL

12. SHARE-BASED PAYMENT TRANSACTIONS

The Company's management option agreement is established for the purpose of providing incentives to the Directors and the employees of the Group. The following table discloses the movement of share options granted during the period ended 31 December 2012:

For the six-month period ended 31 December 2012

13. CAPITAL MANAGEMENT

The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group's overall strategy remained unchanged for the six-month ended 31 December 2012.

The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

In order to safeguard the Group's ability to continue as a going concern, the Group has adopted certain measures as disclosure in note 2(c).

The capital structure of the Group consists of net debt (which includes bank overdrafts, bank borrowings, convertible loan notes and loan from a director), cash and bank balances and equity attributable to owners of the Company (comprising issued share capital, share premium, reserves and accumulated losses) and non-controlling interests.

As at 31 December 2012, the Group had net current liabilities and a capital deficiency of approximately HK$43,952,000 and HK$42,755,000 respectively. Details of the consideration of the Group's going concern basis of preparing the interim financial information is provided in note 2(c).

14. FINANCIAL INSTRUMENTS

Categories of financial instruments

The carrying amounts of each of the categories of the financial instruments as at 31 December 2012 and 30 June 2012 are as follows:

Financial risk management and objectives

The Group's major financial instruments include derivative financial instruments, trade and other receivables, pledged bank deposit, amount due from a director, cash and bank balances, trade and other payables, bank overdrafts, bank borrowings, amount due to a director, amounts due to non-controlling interests and loan from a director. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. These risks include market risk (including foreign currency risk, interest rate risk and other price risks), credit risk and liquidity risk. Management manage and monitor these exposures to ensure appropriate measures are implemented in a timely and effective manner.

Foreign currency risk management

The Group has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities and denominated in a functional currency of the operations (i.e. HK$ and RMB). The Group currently does not have a foreign currency hedging policy in respect of foreign currency operation transactions, assets and liabilities. The Group monitors its foreign currency exposure closely and considers hedging significant foreign currency exposure should the need arise.

Interest rate risk management

The Group's cash flow interest rate risk relates primarily to variable-rate borrowings. The Group's cash flow interest rate risk is mainly concentrated on the fluctuation of the fixed deposit rate arising from the Group's HK$ bank overdrafts and benchmark lending rate of the PRC from the Group's RMB bank borrowing. The Group does not use derivative financial instruments to hedge its interest rate risk.

The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. The analysis is prepared assuming the financial instruments outstanding at the end of the reporting period were outstanding for the whole year. A 50 basis point (2012: 50 basis point) increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible change in interest rates.

Other price risks

The Group has minimal exposure to price risk as the Group did not have any listed equity securities investment at 31 December 2012 and 30 June 2012.

Credit risk

Credit risk refers to the risk that the counterparty to a financial instrument would fail to discharge its obligation under the terms of the financial instrument and cause a financial loss to the Group.

In order to minimise the credit risk, management of the Group have delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group regularly reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, management of the Group consider that the Group's credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit rating, the Group has a certain concentration of credit risk of the total trade receivables was due from the Group's largest customer and the five largest customers respectively.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework to meet the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by monitoring adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Liquidity tables

The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities based on the agreed repayment terms. The tables have 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.

Maturities of the financial liabilities of the Company as at 31 December 2012 and 30 June 2012 were as follows:

As at 31 December 2012, the Group had net current liabilities and a capital deficiency of approximately HK$43,952,000 and HK$42,755,000 respectively. Details of the consideration of the Group's going concern basis of preparing the interim financial information is provided in note 2(c).

15. MATERIAL RELATED PARTY TRANSACTIONS

In addition to the transactions and balances disclosed elsewhere in the interim financial information, the Group had the following significant transactions with the related parties during the period respectively:

Notes:

(a) Subcontracting income represented the income for the subcontract of the operations of Kepu to a holder of a non-controlling interest with effect from 1 June 2012 and the terms of the subcontract arrangement are that the holder of the non-controlling interest will be entitled to the profits/losses of the subcontracted operations fully for one year from 1 June 2012 in return for annual fee of approximately HK$732,000.

(b) Loan interest payable was accrued to the Directors of the Company and the imputed interest was credited to the liabilities component in respect of the loans from Directors.

(c) Consultancy fee expense was charged to a non-controlling interest for the provision of consultancy services in relation to EMC contracts.

The Directors of the Company are of the opinion that the above related party transactions were conducted on normal commercial terms and in the ordinary course of business.

Compensation to key management personnel

The remuneration of Directors and other members of key management during the six-month period were as follows:

16. OPERATING LEASES

The Group as lessee

At the end of the reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

Operating lease payments represent rentals payables by subsidiaries for manufacturing plants and office premises. Leases are negotiated, and rentals fixed, for an average term from one to three years. No arrangements have been entered into for contingent rental agreements.

17. CONTINGENT LIABILITIES

From financial year 2006 onward, the Group's former subsidiary, Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED"), qualified as a small-scale VAT taxpayer by Shenzhen Municipal Nanshan District State Tax Bureau under the PRC tax laws and continued to be subject to 6% VAT on its taxable sales revenues. VAT was payable when the right to receive sales proceeds was established when delivery of goods was made to the buyer. Shenzhen LED had not been paying VAT to the state tax bureau since financial year 2006 and had carried VAT payables of approximately HK$19,000,000, equivalent to RMB15,177,000 as at 31 December 2012 (2012: approximately HK$18,668,000, equivalent to RMB15,177,000). According to the tax laws, a penalty of up to a maximum of five times the VAT tax liability plus late payment interest of 0.05% per day on unpaid VAT amounts might be imposed by the state tax bureau. In addition, those persons involved could be subject to criminal proceedings. In the absence of any reliable information on penalties and/or late payment interest that the state tax bureau might charge against the Group, the Directors of the Company are unable to estimate the amount of penalty potentially payable for the late payment of VAT as at 31 December 2012 and consider that the probability of incurring such penalty is remote.

18. NON-ADJUSTING POST BALANCE SHEET EVENTS

·; Acquisition of Shenzhen Lamp, an EMCO registered with the NDRC to be satisfied by the issue of 75,494,024 new ordinary shares of HK$0.10 each in the Company to Mr. So, to enable the Group to pursue its EMC business model more widely;

·; Disposal of Strongbase New for a consideration of RMB500,000 (approximately £53,000); and

·; Strengthening of balance sheet through conversion of loan by key joint venture partner, Mr. So.

- End of Notes -