LED International Holdings Limited

("LED" or the "Company")

Final Results for the year ended 30 June 2014

The board of directors of LED is pleased to present the Company's annual report and audited financial statements for the year ended 30 June 2014 (the "Accounts").

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

**Ends**

For further information:

Notes to Editors:

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

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

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

FINANCIAL HIGHLIGHTS

CHAIRMAN'S STATEMENT

LED International Holdings Limited (AIM: LED) (the "Company") and its subsidiaries (together the "Group") specialise 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. Over the past years, the Group has transformed its business to the provision of EMC contracts in the People's Republic of China (the "PRC"). The Board of Directors (the "Board") is pleased to report on the final results of the Group for the year ended 30 June 2014.

INDEPENDENT AUDITOR'S DISCLAIMER OF OPINION

The shareholders should note that BDO Limited, our independent auditor, has issued a disclaimer of opinion on the consolidated financial statements for the year ended 30 June 2014. Further details of the basis of the disclaimer of opinion and disclaimer of opinion are contained on the Independent Auditor's Report on pages 27 to 33 of the Accounts.

Without further modifying their opinion, our independent auditor also draws attention to note 38(b) to the Accounts, which describes a contingency relating to the Company in relation to the fire at the Harbour Grand Hotel, North Point, Hong Kong, further details of which were announced on 23 April 2012. Further background on this issue is contained in the Operating Review section below.

MARKET REVIEW

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

OPERATING REVIEW

During the financial year under review, the global economy continued to struggle in an uphill battle against the lingering effects of an unenthusiastic investment and consumption environment following the economic recession over the last few years in Europe and the USA. At the same time, China's economic growth was gradually slowing as the structural transformation of the economy continued during the financial year. This resulted in continued difficult trading conditions for the Group and, domestically, our operation was also burdened by rising inflation, appreciating Renminbi ("RMB") and slowing economic growth for the first half of the financial year, but the impacts of these factors were reversed at the second half of the financial year, within the PRC. These factors impacted on the Group's gross margin and resulted in an operating loss for the financial year ended 30 June 2014.

Over the past few years, the Group has provided EMC services in the PRC. The Group's EMC company ("EMCO") has been operated through Shenzhen Green Pearl Energy Management Services Company Limited ("GPEMCO"), a company with a valid and effective EMCO registration with the National Development and Reform Commission. Operating through GPEMCO enables the Group to take advantage of certain favorable policies and terms for the EMC industry within the PRC. In previous periods, the Group secured a number of contracts to support the Group's strategy and mark the commencement of the successful implementation of its energy efficiency solutions under the EMC business model. Post year-end on 5 December 2014, GPEMCO was awarded a EMC contract by Tianjin Tian Gang United Special Steels Company Limited, a subsidiary of Tianjin Iron & Steel Group Company Limited, based in Tianjin, the PRC, for a contract amount of RMB1,830,000 (approximately £189,095) over a six-year period. Further contracts continue to be negotiated, details of which will be announced as appropriate.

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

On 25 September 2013 the Company received a letter from an adjudicator alleging that its principal and its principal's insured have suffered substantial losses in the form of property damage, consequential loss and public liability (the "Potential Claim") from a fire at Harbour Grand Hotel (the "Hotel"), North Point, Hong Kong, that may have started at the giant LED display screen supplied by the Company, further details of which were announced on 23 April 2012. The Company's legal advisor has made repeated requests to the adjudicator to disclose any reports compiled by the Hotel and/or government investigator but, to date, the adjudicator has failed to respond to these requests or communicated with the Company. Further, to date, the Company has not received any communications from the investigator in relation to this fire.

In the absence of any response from the adjudicator since late 2013, the Board considers that the Potential Claim is without legal basis or merit and intends to defend any attempts by the adjudicator to seek recourse for the fire from the Company. Further updates will be made at the appropriate time.

FINANCIAL REVIEW

Revenue and loss attributable to shareholders of the Company for the financial year ended 30 June 2014 amounted to HK$21,936,000 (approximately £1,729,000) (2013: HK$22,223,000) and HK$13,733,000 (approximately £1,082,000) (2013: HK$12,864,000) respectively. During the financial year ended 30 June 2014, the Group recorded a slight decrease in operating revenue by HK$287,000 (approximately £23,000) over 2013. The decrease in operating revenue was brought about mainly by the slowing growth in the domestic market in the PRC. Furthermore, the Group generated a gross profit in the amount of HK$709,000 (approximately £56,000) for the financial year.

Operating revenue for the financial year ended 30 June 2014 generated from LED element products mainly supplied to major home appliance manufacturers in the PRC, decreased by HK$281,000 (approximately £22,000) from the same period in 2013. The Group strengthened its product quality controls and customer relationships with existing major customers and attempted to diversify these sources of revenue and customers during the financial year. The Group's operating revenue from EMC contracts decreased by HK$6,000 (approximately £500) over 2013.

An operating gross profit for LED element products of approximately 3.1 per cent., excluding impairment losses for inventories totaling HK$3,184,000 (approximately £251,000) (2013: HK$1,363,000) contained under other operating expenses, was attained during the financial year, 1.5 per cent. higher than 2013. The operating gross margin of EMC contracts was approximately 100 per cent. (2013: 53.8 per cent.) for the year ended 30 June 2014.

During the financial year under review, the Group's major operating expenses, comprising administrative expenses, other operating expenses and finance costs, were HK14,512,000(approximately £1,144,000), HK$4,868,000(approximately £384,000) and HK$3,595,000(approximately £283,000) respectively (2013: HK$15,113,000, HK$2,512,000 and HK$2,099,000 respectively). Such expenses mainly comprised (i) employee benefits expense in the sum of HK$11,392,000(approximately £898,000) (2013: HK$6,793,000); (ii) depreciation in the sum of HK$284,000 (approximately £22,000) (2013: HK$1,285,000); (iii) operating lease rental in the sum of HK$3,134,000(approximately £247,000) (2013: HK$919,000); (iv) cost of defective inventories in the sum of HK$1,796,000(approximately £142,000) (2013: HK$649,000) and (v) impairment losses in the sum of HK$2,346,000(approximately £185,000) (2013: HK$918,000).

The aggregate amount of approximately HK$8,713,000 (approximately £687,000) (2013: HK$7,815,000) relating to the employee benefits expense, depreciation and operating lease rental were included in cost of sales for the financial year.

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

CAPITALISATION OF LIABILITIES

As announced on 31 March 2014 (the "March Announcement"), the Company agreed to allot 3,536,606 ordinary shares in the Company (the "Ordinary Shares") at a price per Ordinary Share of HK$2.50 (approximately 19.37 pence) in settlement and/or in reduction of its liability in the outstanding loans, service fees and salaries owed to various directors, employees and other creditors.

In the event, as further announced post-year end on 30 September 2014, the arrangements outlined in the March Announcement did not take place since, as specified in the March Announcement, these were conditional on the calling of an Extraordinary General Meeting of the Company which was not subsequently called.

The Company has subsequently agreed revised arrangements in settlement and/or in reduction of its certain liabilities in the outstanding sums owed to various creditors and has resolved to allot a total of 532,875 ordinary shares at a price per ordinary share of HK$6.496 (approximately 51.00 pence) (the "Settlement"). An aggregate amount of HK$3,461,499 (approximately £274,940) is treated as paid to the various creditors under the Settlement.

FINANCING

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

As announced on 16 December 2013, the Company had entered into a working capital loan in the sum of RMB6,000,000 (approximately HK$7,720,000 or £600,000) provided by Rubyfield Holdings Limited and Speedy Dragon Holdings Limited (collectively, the "Subscribers") in equal tranches (the "Loan"). The Loan, which was unsecured, was interest free and was repayable on demand. It was also announced that it is the intention of the parties that the Loan would be converted on the issue of any equity raised as part of the fundraising process.

As further announced on 30 December 2013, the Company completed a conditional placing of new ordinary shares with the Subscribers, raising RMB31 million (approximately HK$39.89 million or £3.09 million) (including fees and expenses) (the "Placing"). The RMB31 million (approximately HK$39.89 million or £3.09 million) would be satisfied as to the first RMB25 million (approximately HK$32.17 million or £2.50 million) by way of new funds and, as to the balance, by the application of the current outstanding balance of the Loan (currently RMB6.0 million, approximately HK$7,720,000 or £600,000) (the "Conversion"). The net proceeds of the Placing would be used by the Company for general working capital purposes and to provide the necessary capital contribution to Green Pearl Leasing (China) Company Limited ("GP Leasing Co"), the Company's new lease finance company.

The Placing was conditional upon, inter alia, the: (i) consolidation of every 100 existing authorised issued and unissued ordinary shares of HK$0.10 each in the capital of the Company into 1 new ordinary share of HK$10.00 each in the capital of the Company ("New Ordinary Share") (the "Share Consolidation"); (ii) passing of resolutions to give the Directors the authority to issue shares pursuant to the Placing and Conversion free of any rights of pre-emption at the 2013 Annual General Meeting of the Company, which was held on  26 February 2014 (the "2013 AGM"); and (iii) the Hong Kong Securities and Futures Commission ruling that The Codes on Takeovers and Mergers and Share Repurchases did not apply to the Company.

On 26 February 2014, the consolidation of every 100 existing authorised issued and unissued ordinary shares of HK$0.10 each in the capital of the Company into 1 new ordinary share of HK$10.00 each in the capital of the Company was approved at the 2013 AGM of the Company. Pursuant to the Placing, the Subscribers were to subscribe for 3,875,000 new ordinary shares (the "Placing Shares") at a price of HK$10.29 (being approximately 79.96 pence) per Placing Share (the "Placing Price"). The Conversion was also to take place at the Placing Price.

As announced on 11 July 2014, the Company and the Subscribers reached a supplementary agreement in relation to the placing of the Placing Shares and the conversion of the Loan under the terms of which payment of the Subscription Funds to the Company had been made in full and final settlement of all of the Subscribers' legal obligations under the Placing. The Placing Shares were issued at a price of 75 pence per share representing a premium of 780 per cent. to the closing mid-price on 10 July 2014 and the Company, via its indirect subsidiary, Shenzhen Green Pearl Energy Management Services Company Limited, received the subscription funds of RMB25,000,000 (approximately HK$32.17 million or £2.35 million) (the "Subscription Funds") from the Subscribers at that time. The Company will utilise the proceeds of the Subscription Funds for general working capital purposes.

2.     Issue of convertible loan notes and placing of new ordinary shares

As announced on 31 March 2014, the Company entered into agreements with Best Merchant Ventures Limited (the "Noteholder"), Legend Giant Ventures Limited ("LGV"), Talent Plus Ventures Limited ("TPV") and Y&C International Holding Group Limited ("Y&C") (collectively, the "Investors") for the issue of convertible loan notes and the conditional placing of new ordinary shares, raising a total sum of RMB100 million (approximately HK$128.68 million or £9.68 million) (the "Transaction").

Pursuant to the terms of the Transaction, the Company's new wholly-owned subsidiary, Osmar Limited ("Osmar") would issue convertible loan notes to the Noteholder (the "Loan Notes"), raising RMB95,000,000 (approximately HK$122.25 million or £9.20 million) (the "Osmar Loan"). The net proceeds of the Osmar Loan would be used by the Company to provide the necessary capital contribution to GP Leasing Co and also for general working capital purposes. The Company would also carry out a restructuring exercise whereby the beneficial interest in GP Leasing Co shall be transferred to Osmar.

Pursuant to the terms of the Transaction, the Company had also conditionally placed 2,500,000 shares with LGV, TPV and Y&C at a placing price of RMB2 per share (approximately 19.37 pence) raising RMB5,000,000 (approximately £484,000) (the "Subscription Funds"). The Subscription Funds would be used to assist in continued development of the Company's EMC business model and to augment the Company's working capital position.

However, as further announced on 16 May 2014, the Company did not receive any of the funds from the Noteholder and the Investors in relation to the Transaction. Due to the non-receipt of the funds from the Noteholder and the Investors, the Transaction did not, in the event, proceed.

Post year-end on 22 December 2014, the Company disposed off its entire interest in Osmar at net book value to a connected party, in which a director, Mr. Stephen Chan has an interest.

3.     Renewal of loan facility with Ping An Bank Company, Limited

As announced on 10 March 2014, Ping An Bank Company, Limited granted a new loan facility of RMB2,800,000 (approximately HK$3,600,000 or £280,000) (the "New Loan") to the Company's 60 per cent. owned subsidiary, Kepu Electronic Technology (Shenzhen) Company, Limited ("Kepu"). The New Loan was granted on mostly identical terms to the original loan granted on 15 January 2013 (the "Original Loan"), and has been used to augment Kepu's working capital position and facilitate its organic growth plans. The Original Loan was repaid in full by Kepu in accordance with its terms.

The New Loan expires twelve months from drawdown and attracts interest at a 40 per cent. increase to the prevailing lending rate per annum determined by the People's Bank of China (currently 6 per cent. per annum) which is currently 8.4 per cent. per annum. Kepu is required to repay the New Loan by monthly instalments of RMB80,000 (approximately HK$102,000 or £8,000) commencing one month from drawdown with the remaining balance (plus accrued interest) payable at the end of the New Loan facility. The New Loan is secured by a first charge over Rooms 1013-15, Shen Hua Commercial Building, 2018 Jia Bin Road, Luo Wu, Shenzhen, the PRC, a property owned by a third party, together with personal guarantees given by Mr. Fu Wei, the general manager and legal representative of Kepu, and his wife, Ms. Huang Yu Feng.

BOARD CHANGES

On 15 November 2013, Mr. Harby Janagol resigned as a Non-Executive Director with immediate effect.

Post year-end on 30 August 2014, Mr. Kevin Miu resigned as a Non-Executive Director with effect from 30 November 2014.

DIVIDENDS

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

CURRENT OUTLOOK AND PROSPECTS

EMC business

The Group is focused on the domestic PRC economy and adopts a conservative but proactive approach towards entering into the growing EMC market under the brand name "Green Pearl". In order to focus primarily on its EMC business model, the Company disposed its remaining effective equity interest (60 per cent.) in LED International (Far East) Limited, the immediate holding company of Kepu and the Group's different business model of development, manufacture and sale of LED element products,to Mr. Fu Wei post year-end on 17 December 2014.

Notwithstanding the recent slowdown in China's GDP growth, the Board believes that the Chinese government will implement fiscal and monetary policies to stimulate steady economic growth in the PRC.

The energy saving and environmental protection industry ranks top among the seven strategic emerging industries outlined in the 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 Board believes that measures that the Chinese government has taken to reduce energy consumption and carbon emissions will lead to increasing opportunities for energy saving and carbon reduction products, services and solutions within the PRC.

In addition to the supply of LED lighting and reactance filtering equipment to the domestic PRC market, the Group has also been considering the introduction of other carbon reduction solutions to offer a total carbon reduction solution to the PRC. Post-year end on 22 December 2014, the Company entered into a conditional agreement subject to shareholder approval to acquire a distribution network in the PRC. The Board envisages that the acquisition will enable the Group to take advantage of the operating cash flows, market its "Green Pearl" green products and give the Group immediate access to this distribution network through which the Group will be able to promote its EMC business in the PRC.

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

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

Green Pearl Leasing (China) Company Limited

As announced previously the Shanghai Municipal Commission of Commerce granted the Group a highly sought after leasing finance license to enable the Company to provide lease financing to customers. The Company formed a new wholly owned direct subsidiary, Green Pearl Leasing (China) Company Limited ("GP Leasing Co"), in order to carry on this business.

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

As announced on 5 December 2014, the Company made the required capital contribution to GP Leasing Co in an amount of USD2,691,900 (approximately RMB16,535,000, HK$20,996,000 or GBP1,700,000) (the "Contribution"). An independent certified public accounting firm in China confirmed that the Company had made the Contribution as required.

In order to focus on its EMC business model, the Company has been considering forming joint ventures in order to develop this aspect of the business further and identify how the Company can leverage knowledge, experience and contacts.

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 would also like to thank Mr. Miu 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, 29 December 2014

INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS OF LED INTERNATIONAL HOLDINGS LIMITED

(incorporated in Hong Kong with limited liability)                                                              

Report on the financial statements

We were engaged to audit the consolidated financial statements of LED International Holdings Limited (the "Company") and its subsidiaries (together the "Group") set out on pages 34 to 96 of the Accounts, which comprise the consolidated and the company statements of financial position as at 30 June 2014, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors' responsibility for the consolidated financial statements

The directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the Hong Kong Companies Ordinance, Cap.32 by operation of the transitional and saving provisions in Schedule 11 to the Hong Kong Companies Ordinance, Cap.622, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on the Accounts based on our audit. This report is made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies Ordinance, Cap.32 by operation of the transitional and saving provisions set out in section 80 of Schedule 11 to the Hong Kong Companies Ordinance, Cap.622, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. 

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