22 June 2016

LED International Holdings Limited

("LED" or the "Company")

Final Results for the year ended 30 June 2015

The board of directors of LED presents the Company's annual report and audited financial statements for the year ended 30 June 2015 (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.

The Company's shares will remain suspended from trading pending the announcement of LED's half-yearly report in respect of the six months to 31 December 2015. The Board anticipates that the Company's half-yearly report in respect of the six months to 31 December 2015 will be announced during the first half of July 2016, and at that point the board will seek a return from the suspension of trading of the Company's shares on the AIM. However, if the Company's half-yearly report in respect of the six months to 31 December 2015 is not announced by 30 September 2016, then the admission of the Company's shares to AIM will be cancelled.

For further information:

CHAIRMAN'S STATEMENT

The Board of Directors (the "Board") of LED International Holdings Limited (AIM: LED) (the "Company") is pleased to report on the final results of the Company and its subsidiaries (together the "Group") for the year ended 30 June 2015.

INDEPENDENT AUDITOR'S DISCLAIMER OF OPINION

The Company's independent auditor issued a report containing a disclaimer of opinion on the consolidated financial statements for the year ended 30 June 2014 in respect of a number of matters. In the past months, the Board had been working to resolve the matters leading to the auditor's disclaimer of opinion in the preparation of the Company's consolidated financial statements for the year ended 30 June 2015.

However, 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 2015, in respect of a number of matters, which has been reproduced below. Further details of the basis of the disclaimer of opinion and disclaimer of opinion are contained on the Independent Auditor's Report.

EMC Assets and Liabilities and EMC business retained from the disposal of Yanford Limited and Shenzhen Strongbase New Opto-Electronics Technology Company Limited (together referred to as "Yanford Group")

The Group completed the disposal of the entire interest in the Yanford Group and certain energy management business ("EMC business") related assets and liabilities being retained by the Group ("EMC Assets and Liabilities") during the year ended 30 June 2013. After the disposal of the Yanford Group, Shenzhen Green Pearl Energy Management Services Company Limited ("GPEMCO") has provided EMC services in the People's Republic of China, the further details of information in relation to GPEMCO are contained in the Operating Review section. The EMC Assets and Liabilities should have been dealt with mostly in the books and records of GPEMCO. However, the acquisition of GPEMCO has yet to be completed, the details are contained in the Shenzhen Lamp Energy Management Investment Company Limited section. Therefore, the independent auditor is unable to access the underlying supporting information and documentary evidence in relation to these EMC Assets and Liabilities and the performance of EMC business and the subsequent realization of such EMC Assets and Liabilities and the subsequent carrying out of the EMC business. Moreover, there was no movement in the EMC Assets and Liabilities per the Group's accounting records during the year ended 30 June 2015. As such, notwithstanding the disposal of the Yanford Group on 21 March 2013, the Group retained EMC Assets and Liabilities. Due to the limitations on the scope of audit in relation to these EMC Assets and Liabilities and the performance of EMC business, the independent auditor has qualified its opinion in this respect.

The Board believes that should the acquisition of GPEMCO be completed in the future, the independent auditor will then be able to access to the books and records of GPEMCO in relation to the EMC Assets and Liabilities and the performance of EMC business. As such, these limitations should potentially be resolved in the subsequent financial years. Owing to the recent downturn of the Chinese economy, the Board is considering whether the acquisition of GPEMCO is an appropriate near-term strategy.

Disposal of interests in LED International (Far East) Limited ("LED Far East"), Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu") and Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED")(together referred to "LED Far East Group")

On 17 December 2014, the Company entered into a sale and purchase agreement with Mr. Fu Wei relating to the disposal by the Group of the equity interests (60%) in LED Far East and it subsidiaries, Kepu and Shenzhen LED. On 13 April 2015, the Group completed the disposal of the equity interests (60%) in LED Far East, the details are contained in the Disposal of Kepu section.

Subsequent to the disposal, as the Group's management had no access to the accounting records of LED Far East Group, the Group's management was unable to allow the independent auditor access to the books and records of the LED Far East Group without the consent and cooperation from the new owner of the LED Far East Group, which the new owner of LED Far East Group had no obligation to provide and in fact did not provide. As such, the Group's management had not been able to provide the independent auditor with all the underlying supporting information and documentary evidence in relation to LED Far East Group's management accounts as at the disposal date and the performance and cash flows attributable to LED Far East Group up to the date of disposal.

The Board believes that the disposal is completed, and the LED Far East Group shall not be consolidated into the Group's consolidated financial statements in the future, these limitations shall be resolved in the subsequent financial years.

Going Concern

The Group incurred a loss for the year ended 30 June 2015, as of that date, the Group had net current liabilities and net liabilities. These conditions indicate the existence of material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern, with a potential consequence that the Group may not be able to realise its assets and discharge its liabilities in the normal course of business. The Board has prepared a cash flow forecast (the "Forecast") on which their assessment of the appropriateness of the preparation of the Group's consolidated financial statements on a going concern basis was based. These financial statements have been prepared on a going concern basis, the validity of which depends upon the future successful attainment of the Forecast so that the Group will have sufficient working capital to finance its operations and/or settle or arrange its financial obligations.  However, the independent auditor has not been able to obtain sufficient appropriate audit evidence to assess whether it is appropriate to use going concern basis in preparing the consolidated financial statements. As a result, the independent auditor has qualified the aspect of the use of the going concern basis.

The Board believes with the formation of the joint venture with Shanghai Guang Dian Asset Management Company Limited dated 27 May 2016, the details of which are contained in the Current Outlook and Prospect section, the Group shall have sufficient working capital to finance its operations and/or settle or arrange its financial obligations. Therefore, these limitations shall be resolved in the subsequent financial years.

Without further modifying their opinion, our independent auditor also draws attention to note 41(a) to the consolidated financial statements, which describes a contingency relating to the Company in relation to the fire at the Harbour Grand Hotel, North Point, Hong Kong, further details of which were announced on 23 April 2012. Further background on this issue is contained in the Operating Review section below.

LATE PUBLICATION OF THE FINAL RESULTS

The Company acknowledges that the audited financial statements should have been published by no later than 31 December 2015. However, due to a number of issues out of the control of the Board, the Company was unable to publish its audited financial statements by 31 December 2015. The Board sincerely apologises to the shareholders for late publication of the final results and has undertaken measures to avoid a similar situation from arising again in the future.

As announced on 8 February 2016, the Company was seeking to publish its audited report and accounts for the year ended 30 June 2015 during the second quarter of 2016. The delay was primarily due to the fact that the Board has been negotiating, finalising and closing the shareholder agreement with Shanghai Guan Dian Asset Management Company Limited, details of which are contained in the Current Outlook and Prospects/Green Pearl Leasing (China) Company Limited section.

HALF-YEARLY REPORT

The Board anticipates that the Company's half-yearly report in respect of the six months to 31 December 2015 will be announced during the first half of July 2016. 

ABOUT THE GROUP

The Group specialises in the provision of energy management contract services 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. The Group is also engaged in the provision of equipment leasing finance to its customers in the People's Republic of China (the "PRC"). A finance lease is one where the risks and rewards of an asset have been substantially transferred from the Group to its customers. The payments received under the equipment leasing finance contracts are no longer recorded as sales, but are split into receipt of repayments for finance lease receivables, finance lease interest income and lease service income, if any. 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 and equipment leasing finance in the PRC.

MARKET REVIEW

According to its 13^th Five-Year Plan (the "Five-Year Plan"), China targets a 15 per cent. reduction in energy consumption and a cut in its carbon dioxide emission by 18 per cent. on 2015 levels by 2020. 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. The Board believes that this should provide for 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 

The Chinese economy has slowed in recent years, due to sharp slowdowns in the growth rates and fixed investments. This has also coincided with the Chinese government's attempts to steer the economy to a "new normal" of slower, but more stable and sustainable economic growth. China's growth depends largely on the ability of the Chinese government to implement comprehensive economic reforms and other initiatives to alter its economic models. Issues within the Chinese economy 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, although the impact of these factors was to a certain extent reversed at the second half of the financial year, within the PRC. These factors impacted on the Group's revenues and gross margin and resulted in an operating loss for the financial year ended 30 June 2015.

Over the past few years, GPEMCO, a company, which the Group intended to acquire as a subsidiary, with a valid and effective energy management services registration with the National Development and Reform Commission, has provided EMC Services in the PRC. Operating with GPEMCO enables the Group to take advantage of certain favorable policies and terms for the EMC industry within the PRC. In previous periods, GPEMCO secured a number of contracts to support and implement the Group's strategy of its energy efficiency solutions under the EMC business model. Owing to the recent downturn of the Chinese economy, the Board is considering whether the acquisition of GPEMCO is an appropriate near-term strategy. As announced previously on 2 January 2015, the Shanghai Municipal Commission of Commerce permitted the Company to form a new wholly owned direct subsidiary, Green Pearl Leasing (China) Company Limited ("Green Pearl China"), in order to enable the Group to provide lease financing to customers. During the financial year, Green Pearl China has entered into its first two-year period leasing finance contract with Jiangsu Siyuan Port Company Limited ("Siyuan"), based in Jiangsu, China. Owing to downturn of the Chinese economy, some customers of EMC contracts and leasing finance contract are unable to meet their obligations in accordance with the terms of the contracts.

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 and leasing finance market, and as well as implementing measures to reduce the Group's overhead expenditure.

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 from continuing operations for the financial year ended 30 June 2015 amounted to HK$7,000 (approximately £1,000) (2014: HK$33,000). The loss attributable to shareholders of the Company for the financial year ended 30 June 2015 amounted to HK$5,190,000 (approximately £450,000) (2014: HK$13,237,000).

During the financial year ended 30 June 2015, the Group recorded a decrease in operating revenue by HK$26,000 (approximately £2,000) from the previous year. This decrease in operating revenue was mainly brought about by the set off of the inception of the first leasing finance contract with Siyuan and provision for impairment against the leasing contract receivable. The Group generated a gross profit in the amount of HK$3,000 (approximately £1,000) for the financial year.

The Group reported a profit from discontinued operations which amounted to HK$20,494,000 (approximately £1,782,000) (2014: loss of HK$11,906,000), which related to the disposal of its effective equity interest in Kepu, a provider of LED element products. The disposal of Kepu allows the Group to focus on its EMC business model and leasing finance model.

An operating gross profit for leasing finance contracts of 11.0 per cent. The operating gross margin of EMC contracts was approximately 100.0 per cent. (2014: 100.0 per cent.) for the year ended 30 June 2015.

During the financial year under review, the Group's major operating expenses, comprising administrative expenses, other operating expenses and finance costs, were HK7,158,000 (approximately £622,000), HK$22,603,000 (approximately £1,965,000) and HK$2,121,000 (approximately £184,000) respectively (2014: HK$9,358,000, Nil and HK$1,324,000 respectively). Such expenses mainly comprised (i) employee benefits expense in the sum of HK$605,000 (approximately £52,000) (2014: HK$1,191,000); (ii) depreciation in the sum of HK$95,000 (approximately £8,000) (2014: HK$218,000); (iii) operating lease rental in the sum of HK$350,000 (approximately £30,000) (2014: HK$1,006,000); (iv) impairment losses in the sum of HK$20,191,000 (approximately £1,755,000) (2014: Nil).

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

CAPITALISATION OF LIABILITIES UPDATE

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.

As further announced 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$6.5 (approximately 51.00 pence) (the "Settlement"). Under the Settlement, 457,443 Ordinary Shares and 75,432 Ordinary Shares of HK$6.5 per Ordinary Share were issued to settle financial liabilities of approximately HK$2,971,000 and HK$490,000 on 30 September 2014 and 30 January 2015 respectively. An aggregate amount of HK$3,461,000 (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 million (approximately HK$7.72 million or £0.60 million) 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 RMB6.00 million, approximately HK$7.72 million or £0.60 million) (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 China, 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 received the subscription funds of RMB25 million (approximately HK$32.17 million or £2.35 million) (the "Subscription Funds") from the Subscribers at that time. The Company utilised 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 million (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 Green Pearl China and also for general working capital purposes. The Company would also carry out a restructuring exercise whereby the beneficial interest in Green Pearl China 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 million (approximately £0.48 million) (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.

On 22 December 2014, the Company disposed of its entire interest in Osmar at net book value to a connected party, in which a director, Dr. Stephen Chan has an interest.

LEASING FINANCE CONTRACT

As announced on 2 January 2015, the Company's wholly-owned direct subsidiary, Green Pearl China, entered into a leasing finance contract (the "Contract") with Siyuan. The projected total interest receivable by Green Pearl China under the Contract is approximately RMB1,320,000 (approximately £137,000) over a two-year period.

Pursuant to the Contract, Green Pearl China purchased various port loading and reloading equipment (the "Equipment") from Siyuan at a consideration of RMB12,000,000 (approximately £1,246,000) and the Equipment shall be leased back to Siyuan for a term of two years from 25 December 2014 to 25 December 2016 (the "Lease Period").

Owing to the personal detention of the major owner by the PRC authorities, Siyuan's operations have not gained traction and Siyuan has been in default in respect of payments of leasing rentals to the Group since February 2015. The Group issued a legal letter demanding the immediate payment of approximately RMB7,211,000 (approximately £627,000) on 9 November 2015. The Board has adopted a conservative approach in respect of this matter and has made a full provision for an impairment loss of finance lease receivables of HK$7,159,000 (approximately £622,000) in these consolidated financial statements, the Board has currently been negotiating and working out with the management of Siyuan on the collection of the outstanding lease contract receivables plus default interest receivables. Further updates will be made at the appropriate time.

EMC CONTRACTS

As announced on 5 December 2014, GPEMCO has been awarded an energy management contract (the "EMC Contract") by Tianjin Tian Gang United Special Steels Co., Ltd. ("TG United"), a subsidiary of Tianjin Iron & Steel Group Co., Ltd., based in Tianjin, China. The projected revenue under the EMC Contract to GPEMCO is approximately RMB1,830,000.00 (approximately £190,000.00) over a six year period.

Owing to the sudden downturn of the Chinese economy during the year, GPEMCO and TG United have yet to execute the EMC Contract. As such, GPEMCO has already held up the purchase of the relevant equipment under the EMC Contract. Meanwhile, GPEMCO has been negotiating with TG United on the execution of the EMC Contract. The Board is also considering whether the acquisition of GPEMCO is an appropriate near-term strategy. Further updates will be made at the appropriate time. 

DISPOSAL OF KEPU

As announced on 17 December 2014, the Company entered into sale and purchase agreements with Mr. Fu Wei ("Fu") relating to the disposal by the Group of the remaining effective equity interest (60 per cent.) in Kepu.

As announced on 17 May 2012 and as a part of its ongoing business review, the Board had determined that the activities of Kepu present considerable, but different, opportunities from LED's primary focus on its EMC business model. As currently structured, the Company does not have the resources to take full advantage of the opportunities available to Kepu nor does the Board foresee Kepu becoming a profitable member of the Group in the foreseeable future. For this reason, the Company has taken the decision to sell its remaining interest in Kepu. This will provide the Company with further resources to promote and focus on its EMC business model.

In pursuance of this strategy, the Company has disposed of its effective equity interest in Kepu to Fu for a consideration of RMB360,000 (approximately HK$450,000 or £37,000).

Shenzhen Lamp Energy Management Investment Company Limited

On 25 March 2013, LED announced the acquisition of Shenzhen Lamp Energy Management Investment Company Limited (subsequently renamed to Shenzhen Green Pearl Energy Management Services Company Limited). This acquisition was structured as a direct acquisition of GPEMCO's immediate parent company, Shenzhen Green Pearl Energy Management Technology Development Company Limited ("Shenzhen GP Energy"), by the Company's 60% subsidiary, Green Pearl Energy Conservation Holdings Limited ("GP Energy Holdings") (the "Acquisition").

The Acquisition has been restructured in such a way such that GP Energy Holdings had set up Carten International Limited, a wholly owned subsidiary in Hong Kong, as an investment company to acquire Shenzhen GP Energy, which will subsequently be restructured and transformed from a domestic PRC company to a Wholly Foreign Owned Enterprise ("WFOE") under the laws of the PRC.

GP Energy Holdings signed the relevant acquisition agreement with Mr. So Hing Chung (the "Acquisition Agreement") on 21 March 2013. One of the terms of the Acquisition Agreement is that the business and assets, including patents and intellectual property rights, inventories and energy management contracts of Strongbase New Opto-Electronics Technology Company Limited (a former subsidiary of the Company, the disposal of which was announced on 25 March 2013) (together the "Assets") be transferred to GPEMCO.

As announced on 8 February 2016, the Acquisition has yet to be fully completed as the Company is in the process of obtaining consent from the PRC government for the transformation of Shenzhen GP Energy into a WFOE. To date, the validity of the previous submission documents, including the formal applications, attestations and contracts etc., has lapsed. Furthermore, the Group has been working through its process agents, including a local accounting firm, to progress the transformation. Owing to the recent downturn of the Chinese economy, the Board is considering whether the acquisition of GPEMCO is an appropriate near-term strategy. Further updates will be made at the appropriate time.

BOARD CHANGES

On 30 November 2014, Mr. Kevin Miu resigned as a Non-Executive Director.

CHANGE IN REGISTRAR

As announced on 3 June 2015, the Company's share register will be administered by Computershare Investor Services (BVI) Limited with effect from 1 June 2015.

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 approach towards entering into the growing EMC market under the brand name "Green Pearl".

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.

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. Owing to the recent downturn of the Chinese economy, the Board is considering whether the transformation of the Group into an energy management service provider in the PRC is an appropriate near-term 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 China, in order to carry on this business.

Green Pearl China was formed as the Board believes that the Group's EMC business model will be financed substantially by debt 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 Green Pearl China 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.

In this regard and as announced on 31 May 2016, the Company has entered into an agreement with Shanghai Guang Dian Asset Management Company Limited ("SHGD") dated 27 May 2016 (the "Shareholders' Agreement"), under which LED and SHGD will make a total capital contribution of RMB200.0 million (being approximately £21.3 million) to Green Pearl China. Green Pearl China is currently a 100% owned subsidiary of LED. 

The required capital contribution shall be made by LED and SHGD in equal shares of RMB100.0 million (being approximately £10.7 million) each.  LED's contribution shall be inclusive of the previous capital contributions made by LED, being approximately RMB16.5 million (being approximately £1.7 million). Further details of LED's previous capital contribution to Green Pearl China are contained in the Company's announcement of 5 December 2014. LED intends to fund its approximately RMB83.5 million (being approximately £9.0 million) by raising the required relevant fund from the potential investors, including SHGD, within twelve months as stipulated in the Shareholders' Agreement. SHGD's capital contribution will be by way of a cash investment in Green Pearl China, in return for which they will receive new shares in Green Pearl China which represent 50% of Green Pearl China's enlarged issued share capital. Further updates regarding progress in respect of the above matters will be provided as appropriate. 

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, 22 June 2016

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 41 to 106, which comprise the consolidated statement of financial position as at 30 June 2015, 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, Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit, conducted in accordance with International Standards on Auditing. This report is made solely to you, as a body, in accordance with Section 405 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. 

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

Basis for Disclaimer of Opinion

1.     EMC Assets and Liabilities and EMC business retained from the disposal of subsidiaries, Yanford Limited and Shenzhen Strongbase New Opto-Electronics Technology Company Limited ("Strongbase New") (together referred to as "Yanford Group")

On 21 March 2013, the Group completed the disposal of the entire equity interests in Yanford Limited and its subsidiary, Strongbase New (the "Yanford Group") to a substantial shareholder of the Company with certain energy management business ("EMC business") related assets and liabilities being retained by the Group ("EMC Assets and Liabilities").

As at 30 June 2014 and 2015, the EMC Assets and Liabilities included in the consolidated statement of financial position of the Group were property, plant and equipment of approximately HK$39,000, inventories of approximately HK$2,468,000, trade and other receivables of approximately HK$3,967,000, cash and bank balances of approximately HK$15,000 and trade and other payables of approximately HK$5,306,000 ("EMC Balances"). There was no movement in the EMC Balances per the Group's accounting records during the year ended 30 June 2015.

As Yanford Group was disposed of on 21 March 2013, in the course of our audit of the financial statements for the year ended 30 June 2014, the Group's management, had no access to the accounting records subsequent to the disposal and the Group's management was unable to allow us access to the books and records of the Yanford Group without the consent and cooperation from the new owner of Yanford Group, which the new owner of Yanford Group had no obligation to provide and in fact did not provide and did not provide information as to the subsequent realization of such EMC Assets and Liabilities and the subsequent carrying out of the EMC business that we considered necessary for the purpose of our audit. As such the Group's management had not been able to provide us with all the underlying supporting information and documentary evidence which we considered necessary for our audit purpose in relation to the items making up the assets and liabilities of the Yanford Group at the date of disposal, the EMC Balances as at 30 June 2014 and the performance of EMC business for the year then ended. 

Due to the limitations on our scope of audit in relation to these EMC Assets and Liabilities and the performance of EMC business, together with other matters we disclaimed our opinion on the consolidated financial statements for the year ended 30 June 2014.

These limitations were unresolved in the current year. As a result, we have not been able to obtain information and evidence relating to the existence and correctness of the EMC Balances as at 30 June 2015 and the EMC activities during the financial year then ended as we considered necessary for the purpose of our audit of the consolidated financial statements. There were no other satisfactory audit procedures that we could adopt in order to satisfy ourselves as to the EMC Balances as at 30 June 2015 and the performance of EMC business for the year then ended. Any adjustment considered necessary to the EMC Balances as at 30 June 2015 and to the performance of EMC business for the year then ended would have a consequential effect on the Group's consolidated statement of financial position as at 30 June 2015 and its results for the year then ended.

2.     Disposal of interests in LED International (Far East) Limited ("LED Far East"), Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu"), and Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED") (together referred to as "LED Far East Group")

(a)  Disposal of of LED Far East Group

As set out in notes 14 and 37(a) to the consolidated financial statements, on 17 December 2014, the Company entered into a sale and purchase agreement with Mr. Fu Wei ("Fu"), a director of Kepu, relating to the disposal by the Group of the equity interests (60%) in LED Far East and its wholly owned subsidiary, Kepu, and its interest in Shenzhen LED, at a consideration of RMB360,000. On 13 April 2015, the Group completed the disposal of the equity interests (60%) in LED Far East.

In the course of our audit of the financial statements for the year ended 30 June 2015, which was subsequent to the disposal, as the Group's management had no access to the accounting records of LED Far East Group, the Group's management was unable to allow us access to the books and records of LED Far East Group without the consent and cooperation from the new owner of the LED Far East Group, which the new owner of LED Far East Group had no obligation to provide and in fact did not provide. As such the Group's management had not been able to provide us with all the underlying supporting information and documentary evidence which we considered necessary for our audit purpose in relation to LED Far East Group's management accounts as at the disposal date and the performance and cash flows attributable to LED Far East Group up to the date of disposal ("LED Far East Group Disposal Results and Cash Flows"). Accordingly, and together with the audit scope limitations that we had in prior year and during the course of our audit for the year ended 30 June 2015 as explained in (b) and (c) below, we were unable to satisfy ourselves as to whether i) the gain on disposal of LED Far East Group of approximately HK$26,382,000 has been arrived at properly and ii) LED Far East Group Disposal Results and Cash Flows, which represented LED element products segment and included as discontinued operation, for the year ended 30 June 2015 have been appropriately arrived at. Any adjustment considered necessary to i) the carrying amount of the assets and liabilities of LED Far East Group so disposed of as at 13 April 2015 would have a consequential effect on the gain on disposal of LED Far East Group for the year ended 30 June 2015 and the elements making up the consolidated statement of cash flows and ii) the LED Far East Group Disposal Results for the year ended 30 June 2015 would have a consequential effect on the Group's loss and total comprehensive income for the year ended 30 June 2015 and the elements making up the consolidated statement of cash flows.

(b)  Trade receivables, inventories and sales of Kepu

Included in the consolidated statement of financial position of the Group as at 30 June 2014 are trade receivables of Kepu, a subsidiary of the Company at that time, of approximately HK$4,750,000 due from its major customers whereas included in the consolidated statement of comprehensive income for the year ended 30 June 2014 were sales of Kepu to these major customers of approximately HK$19,471,000. These balances and amounts were mainly attributable to Kepu's sales to the major customers in the PRC on a consignment basis. In relation to the consignment sales, no consignment stock was included in the inventories of approximately HK$6,338,000 in the consolidated statement of financial position of the Group as at 30 June 2014. In the course of our audit of the financial statements for the year ended 30 June 2014, we noted that the local management of Kepu had not maintained satisfactory accounting records on these consignment sales and stocks. Together with other matters, we disclaimed our opinion on the Company's consolidated financial statements for the year ended 30 June 2014.

These limitations were unresolved in current year. There were no other satisfactory audit procedures that we could adopt in order to satisfy ourselves as to the existence and accuracy of such trade receivables, the completeness of such inventories and the existence of such sales.  Any adjustments which might have found necessary in respect of these items would have a consequential effect on the gain on disposal of LED Far East Group for the year ended 30 June 2015, the Group's loss and total comprehensive income for the year ended 30 June 2015 and the elements making up the consolidated statement of cash flows.

(c)  Deconsolidation of Shenzhen LED

As explained in note 3(c) to the consolidated financial statements, the directors of the Company considered that the Group's control over Shenzhen LED had been lost and therefore, the Company had deconsolidated Shenzhen LED as from 17 April 2010, prior to our appointment as auditor. Same as last year, during the course of our audit, we were unable to obtain satisfactory documentary evidence from the Group's management regarding the loss of control. The Group's management represented to us that they no longer had possession of the accounting and other records of Shenzhen LED and had lost contact with the then management of Shenzhen LED which might have provided the necessary alternative evidence. Other than the representation, the Group's management have not provided to us other evidence regarding their loss of control. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves that the control of Shenzhen LED has been lost and therefore, with regard to the deconsolidation of Shenzhen LED, we were unable to determine whether any adjustment might be necessary to consolidate Shenzhen LED as part of the Group as if no deconsolidation had happened before. Together with other matters, we disclaimed our opinion on the Company's consolidated financial statements for the financial year ended 30 June 2014. Any adjustment considered necessary to the consolidation of Shenzhen LED would have a consequential effect on the gain on disposal of LED Far East Group for the year ended 30 June 2015, the Group's loss and total comprehensive income for the year ended 30 June 2015 and the elements making up the consolidated statement of cash flows.

In addition, due to the limitation as explained above, we have been unable to carry out any audit procedures to satisfy ourselves as to the existence and correctness of the amounts of contingent liabilities attributable to Shenzhen LED as at 30 June 2014 as set out in note 41(b) to the consolidated financial statements.

3.     Going concern

The Group incurred a loss from continuing operations of approximately HK$31,564,000 for the year ended 30 June 2015 and, as of that date, the Group had net current liabilities and net liabilities of approximately HK$18,701,000 and HK$18,662,000 respectively. These conditions indicate the existence of material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern, with a potential consequence that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. 

As explained in note 3(b) to the consolidated financial statements, the directors of the Company have prepared a cash flow forecast (the "Forecast") on which their assessment of the appropriateness of the preparation of the Group's consolidated financial statements on a going concern basis was based.  These financial statements have been prepared on a going concern basis, the validity of which depends upon the future successful attainment of the Forecast so that the Group will have sufficient working capital to finance its operations and/or settle or arrange its financial obligations.  However, the Company's directors have not provided us with an cashflow forecast of up to date details and information relating to the basis of the preparation of the Forecast including the underlying assumptions made and supporting information thereof that we consider necessary to satisfy ourselves as to the reasonableness of the Forecast and there was no other satisfactory evidence on which we could rely for the purpose of our assessment of the appropriateness of the preparation of the Group's consolidated financial statements on a going concern basis. Due to this limitation on our scope of work, we are unable to obtain sufficient appropriate audit evidence to assess whether it is appropriate to use going concern basis in preparing the consolidated financial statements.

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

Disclaimer of Opinion

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

Emphasis of matter

Without further modifying our disclaimer of opinion, we draw your attention to note 41(a) to the consolidated financial statements, which describes a contingency relating to the Company.

REPORT ON MATTER UNDER SECTIONS 407(2) AND 407(3) OF THE HONG KONG COMPANIES ORDINANCE

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

-     We were unable to determine whether adequate accounting records had been kept; and

-     We have not obtained all the information and explanations that, to the best of our knowledge and belief, are necessary and material for the purpose of our audit.

Hong Kong, 22 June 2016

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2015

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2015

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2015

On behalf of the Board