Synagistics Limited — Annual Report 2006

Jul 17, 2006

==> picture [57 x 56] intentionally omitted <==

CONCEPTA INVESTMENTS LIMITED 正奇投資有限公司[*]

(Incorporated as an exempted company in the Cayman Islands with limited liability)

(Stock Code: 1140)

ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 MARCH 2006

RESULTS

The Board of Directors (the “Board”) of Concepta Investments Limited (the “Company”) is pleased to announce the audited results of the Company for the year ended 31 March 2006 (the “Year”), together with the comparative figures for the year ended 31 March 2005 as follows:

INCOME STATEMENT

For the year ended 31 March 2006

Note Turnover 3 Cost of financial assets at fair value through profit or loss/other investments sold Other income – interest income Net unrealised gain on financial assets at fair value through profit or loss/ (Net unrealised loss on other investments) – listed Impairment losses in relation to investment securities Administrative expenses Profit/(Loss) before taxation 5 Taxation 6 Profit/(Loss) for the year Basic earnings/(loss) per share 7	2006 HK$ 50,380,185 (40,159,889) 10,220,296 430,828 786,463 – (3,255,330) 8,182,257 (307,090) 7,875,167 7.9 cents	2005 HK$ (Restated) 127,627,534 (122,785,929) 4,841,605 8,534 (7,470,723) (75,000) (2,743,140) (5,438,724) 1,226 (5,437,498) (5.4)cents

– 1 –

BALANCE SHEET At 31 March 2006

Note Non-current assets Property, plant and equipment Available-for-sale financial assets Investment securities Current assets Financial assets at fair value through profit or loss Other investments Prepayments Bank balances Current liabilities Accrued charges Amount due to a broker Tax payable Net current assets Total assets less current liabilities Non-current liabilities Deferred taxation NET ASSETS Capital and reserves Share capital Reserves SHAREHOLDERS’ FUNDS Net asset value per share 8	2006 HK$ 7,077 778,000 – 785,077 18,579,025 – 114,382 34,768,451 53,461,858 748,433 – 308,340 1,056,773 52,405,085 53,190,162 835 53,189,327 10,000,000 43,189,327 53,189,327 0.53	2005 HK$ 14,797 – 778,000
		792,797
		– 18,087,200 126,167 29,037,553
		47,250,920
		234,221 1,894,930 598,321
		2,727,472
		44,523,448
		45,316,245 2,085
		45,314,160
		10,000,000 35,314,160
		45,314,160
		0.45

– 2 –

Notes:

1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

• These financial statements have been prepared in accordance with the Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and by the Hong Kong Companies Ordinance.

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain investments which are carried at their fair values.

• 2 ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Company has adopted all the new and revised HKFRSs that are relevant to its operations and effective for accounting periods beginning on or after 1 January 2005. The adoption of these new and revised HKFRSs did not result in substantial changes to the Company’s accounting policies and amounts reported for the current year and prior years excepted as stated below.

Financial instruments

The adoption of Hong Kong Accounting Standard (“HKAS”) 32 “Financial Instruments: Disclosure and Presentation” and HKAS 39 “Financial Instruments: Recognition and Measurement” has resulted in a change in the accounting policy relating to the classification of financial assets at fair value through profit or loss and available-for-sale financial assets. HKAS 39 does not permit to recognise, derecognise and measure financial assets and liabilities in accordance with this standard on a retrospective basis.

The Company applied the benchmark treatment of the previous Statement of Standard Accounting Practice 24 “Accounting for Investments in Securities” to investments in equity securities for the 2005 comparative information. The Company’s investments in equity securities are classified as investment securities or other investments. Investment securities are carried at cost less any impairment losses while other investments are measured at fair value, with unrealised gains or losses included in the income statement.

From 1 April 2005 onwards, the Company classifies and measures its investments in equity securities in accordance with HKAS 39. Investments in equity securities are classified as either financial assets at fair value through profit or loss or available-for-sale financial assets and are measured at subsequent reporting dates at fair value, except for certain investments in unlisted equity securities which are carried at cost less any impairment losses when there are absence of quoted market prices in an active market and whose fair value cannot be reliably measured. The Company has applied the transitional rules in HKAS 39. At 1 April 2005, the Company reclassified its investment securities with a carrying amount of HK$778,000 to available-for-sale financial assets and its other investments with a carrying amount of HK$18,087,200 to financial assets at fair value through profit or loss. The adoption of the requirements of HKAS 39 in respect of equity investments has had no material effect on the Company’s results for the current or prior accounting periods.

The Company has not applied the new HKFRSs that have been issued but are not yet effective. The Company is in the process of making an assessment of what the impact of the new HKFRSs is expected to be in the period of initial application but it is not yet in a position to ascertain how the new HKFRSs may affect the preparation and presentation of the results of operations and financial position of the Company.

– 3 –

3 TURNOVER

The Company is principally engaged in medium to long-term investments in listed and unlisted securities in the Greater China. An analysis of the Company’s turnover is as follows:

Proceeds from sale of financial assets at fair value through profit or loss/other investments Dividend income from listed investments	2006 HK$ 50,018,690 361,495 50,380,185	2005 HK$ (Restated) 127,357,656 269,878
		127,627,534

In previous years, the Company’s net gain on disposal of investments in listed equity securities was classified as a component of other income. During the current year, the Company included the proceeds from sale of investments in listed equity securities as a component of the Company’s turnover with the corresponding carrying amount of listed equity securities disposed of being reported as cost of sales to better reflect the business nature of the Company and allow a more appropriate presentation of the Company’s results. These changes in presentation have been applied retrospectively with comparatives restated as shown in the above and the income statement.

4 SEGMENT INFORMATION

No segment information is presented as all of the turnover, contribution to operating results, assets and liabilities of the Company are attributable to investment activities which are carried out or originated principally in Hong Kong.

5 PROFIT/(LOSS) BEFORE TAXATION

Profit/(Loss) before taxation is stated after charging the following:

PROFIT/(LOSS) BEFORE TAXATION Profit/(Loss) before taxation is stated after charging the following:
	2006	2005
	HK$	HK$
Auditors’ remuneration	165,000	150,000
Contributions to retirement benefits scheme
(included in staff costs)	25,000	23,000
Depreciation	7,720	7,720
Investment management fee	757,594	729,346
Performance fee	308,710	–
Operating lease payments in respect of office premises	108,000	108,000
Staff costs (including directors’ emoluments)	937,000	896,370

6 TAXATION

Hong Kong profits tax is provided at 17.5% (2005:17.5%) based on the estimated assessable profit for the Year.

The amount of taxation charged to the income statement represents:

Current – Hong Kong profits tax Charge for the year Underprovision in previous year Deferred taxation Relating to reversal of temporary differences Taxation	2006 HK$ 308,340 – (1,250) 307,090	2005 HK$ – 598,320 (599,546) (1,226)

– 4 –

7 BASIC EARNINGS/(LOSS) PER SHARE

The calculation of basic earnings/(loss) per share is based on the Company’s profit for the Year of HK$7,875,167 (2005: loss of HK$5,437,498) divided by the weighted average number of ordinary shares outstanding during the Year, being 100,000,000 (2005: 100,000,000).

There were no dilutive potential shares during the years ended 31 March 2006 and 2005, therefore, no diluted earnings/(loss) per share has been presented.

8 NET ASSET VALUE PER SHARE

The net asset value per share is calculated by dividing the net asset value of the Company at 31 March 2006 of HK$53,189,327 (2005: HK$45,314,160) by the number of ordinary shares in issue at that date, being 100,000,000 (2005: 100,000,000).

DIVIDEND

The Board has resolved not to pay a final dividend for the Year (2005: nil).

MANAGEMENT DISCUSSION AND ANALYSIS

Business review and Prospects

During the Year, the Hang Seng China Enterprises Index fluctuated between the range of 4,460 to 5,541 points. The Company retained the strategy of buying H shares when they overshoot on the downside and selling them in the period of relatively high valuations. The net profit for the Year was approximately HK$7.9 million which comprised realised gain on listed securities of approximately HK$10.2 million and net unrealized gain on fair value adjustments through profit and loss on listed securities of HK$0.8 million. Administrative expenses for the year were approximately HK$3.3 million.

The need for Chinese policy makers to focus on generating approximately 9 million new jobs a year implies that the Chinese economy will primarily be export and investment driven. However, the Chinese leadership also realised that growth rate of these two main engines of the Chinese economy cannot continuously be sustained at a high level and have indicated that growth need to be rebalanced with an increasing bias towards domestic consumption. The Board views that consumption will grow at a reasonable margin and provide investment opportunities, however, it will not be able to replace export and investment as the main economy driver in a short period of time. The Board believes those that are pushing for more government spending on healthcare and pension are justifiable as it is the lack of these provision that is contributing to the high savings rate and depressed consumption growth rate. For the near future, the Board is optimistic about the sustainable growth in China GDP as well corporate earnings.

While the Board is optimistic about the corporate earnings growth in the near term, China’s stock market is also supported by strong liquidly flows on the back of ongoing speculation about Renmenbi revaluation. The Board will take into account of the potential impact of forthcoming Renmenbi revaluation when evaluating investment opportunities.

The Board expects that Hong Kong listed China shares will be well supported at current levels due to the positive factors mentioned and will remain overweight in the property, consumption and utility sector.

Liquidity and financial resources

As at 31 March 2006, the Company had bank balances of HK$34,768,451 (2005: HK$29,037,553). The Board believes that the Company has sufficient financial resources to satisfy its immediate investments and working capital requirements.

The Company had net current assets of HK$52,405,085 (2005: HK$44,523,448) and no borrowings as at 31 March 2006, which positions the Company advantageously to pursue its investment strategies and new investment opportunities.

– 5 –

The gearing ratio, which was calculated on the basis of total liabilities over total shareholders’ funds as at 31 March 2006, was 0.02 (2005: 0.06).

Capital structure

There has been no change in the Company’s capital structure during the Year.

Investment portfolios

The Company’s investment portfolio comprised of unlisted investment and listed securities investments. The Company held minority stakes of unlisted companies which are believed to have sound prospects of long-term growth in profits and capital appreciation in the future. As at 31 March 2006, the Company’s unlisted investments, valued at cost less impairment, totalling HK$778,000 (2005: HK$778,000).

As at 31 March 2006, all of the Company’s listed securities investments are Hong Kong listed securities. The Company held listed investments, at market value, of HK$18,579,025 (2005: HK$18,087,200) at 31 March 2006.

Employees

During the Year, the Company had 3 (2005: 3) employees, including executive directors. Total staff costs, including directors’ emoluments for the Year amounted to HK$937,000 (2005: HK$896,370). The Company’s remuneration policies are in line with the market practice and are determined on the basis of the performance and experience of individual employees.

Exposure to fluctuations in exchange rates and related hedges

The Company’s assets and liabilities are denominated in Hong Kong Dollars and, therefore, the Company had no significant exposure to foreign exchange fluctuation.

Charges on the Company’s assets and contingent liabilities

As at 31 March 2006, there were no charges on the Company’s assets and the Company did not have any significant contingent liabilities.

PURCHASE, SALE OR REDEMPTION OF SHARES

The Company has not purchased, sold or redeemed any of its shares during the Year.

CORPORATE GOVERNANCE

The Board recognises the importance of corporate governance to the Company’s healthy growth and is dedicated to maintaining good standards of corporate governance so as to enhance corporate transparency and protect the interests of shareholders.

The Company has complied with the Code on Corporate Governance Practices as set out in Appendix 14 of the Listing Rules during the Year.

AUDIT COMMITTEE

The Company established an audit committee in accordance with rule 3.21 of the Listing Rules. Amongst other duties, the principal duties of the audit committee are to review and supervise the financial reporting process and internal control system of the Company.

The Company’s audit committee comprised three independent non-executive Directors, namely, Mr. KWONG Che Keung, Gordon, Prof. HE Jia and Mr. WANG Xiaojun. Three meetings were held during the Year.

The audited financial statements for the Year have been reviewed by the audit committee.

– 6 –

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Listing Rules. All directors have confirmed, following specific enquiry by the Company, that they have fully complied with the Model Code throughout the Year.

DISCLOSURE OF INFORMATION ON THE STOCK EXCHANGE’S WEBSITE

All the information required by 45(1) to 45(3) of Appendix 16 of the Listing Rules will be published on the Stock Exchange’s website in due course.

BOARD OF DIRECTORS

As at the date of this announcement, the Board comprises of executive directors, Mr. Zhang Zhi Ping, Mr. Zhang Gaobo, non-executive director, Mr. Liu Hongru and independent non-executive directors, Mr. Kwong Che Keung, Gordon, Prof. He Jia and Mr. Wang Xiaojun.

On behalf of the Board ZHANG Gaobo Executive Director

Hong Kong SAR, 17 July, 2006

• For identification purposes only

Please also refer to the published version of this announcement in The Standard.

– 7 –