Synagistics Limited — Annual Report 2011

Jun 20, 2011

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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OP FINANCIAL INVESTMENTS LIMITED 東英金融投資有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1140)

ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2011

RESULTS

The board of directors (the “Board” or the “Directors”) of OP Financial Investments Limited (the “Company” or “OP Financial”) and its subsidiaries (the “Group”) is pleased to present to the shareholders the audited consolidated results of the Group for the financial year ended 31 March 2011 (the “Year”) together with comparative figures for the last financial year as follows:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2011

Note Revenue 3 Other income Net (loss)/gain on financial assets at fair value through profit or loss – Classified as held for trading – Designated as such upon initial recognition Gain on disposal of subsidiaries Fair value gain on other financial liabilities Net loss on disposals of available-for-sale financial assets Impairment loss on available-for-sale financial assets Equity-settled share-based payments Administrative expenses (Loss)/Profit from operations Share of results of associates (Loss)/Profit before tax Income tax 5 (Loss)/Profit for the Year 6		2011 HK$’000 47,934 771	2010 HK$’000 458,201 4
		(146,743) 10,283	102,308 6,255
		(136,460) 1,861 – – (80,141) (17,060) (53,448) (236,543) 3,216 (233,327) – (233,327)	108,563 – 7,760 (16,183) – – (102,923) 455,422 22,946 478,368 (5,298) 473,070

• for identification purpose only

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED) FOR THE YEAR ENDED 31 MARCH 2011

Note Other comprehensive income Exchange differences Available-for-sale financial assets: Fair value changes during the Year Reclassification adjustments relating to redemption of available-for-sale financial assets during the Year Impairment loss on available-for-sale financial assets Share of other comprehensive income of associates Net other comprehensive income for the Year Total comprehensive income for the Year (Loss)/Earnings per share Basic 7(a) Diluted 7(b)	2011 HK$’000 26 (38,918) – 80,141 132 41,381 (191,946) (25.85) cents (25.85) cents	2010 HK$’000 – 154,921 (34,664) – – 120,257 593,327 60.3 cents 60.3 cents

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 MARCH 2011

Note Non-current assets Property, plant and equipment Investments in associates Available-for-sale financial assets Financial assets at fair value through profit or loss Loans receivable 8 Interest receivables Current assets Financial assets at fair value through profit or loss Accounts and loans receivable 8 Interest receivables Fund subscription Prepayments and other receivables Tax recoverable Bank deposits Bank and cash balances TOTAL ASSETS Capital and reserves Share capital Reserves TOTAL EQUITY Current liabilities Other payables Tax payable TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES NET ASSETS Net asset value per share 9	2011 HK$’000 661 85,991 662,653 38,491 5,000 14,817 807,613 333,890 72,197 933 – 457 4,762 11,584 365,328 789,151 1,596,764 94,140 1,494,148 1,588,288 4,303 4,173 8,476 1,596,764 1,588,288 HK$1.69	2010 HK$’000 108 82,643 689,918 162,920 – 4,972
		940,561
		332,824 8,377 48 7,734 3,490 – – 261,365
		613,838
		1,554,399
		78,450 1,401,649
		1,480,099
		69,002 5,298
		74,300
		1,554,399
		1,480,099
		HK$1.89

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NOTES

1 BASIS OF PREPARATION

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

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

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

(a) New and amended standards adopted by the Group

In the current year, the Group has adopted all the new and revised HKFRSs issued by the Hong Kong Institute of Certified Public Accountants that are currently in issue and effective for its accounting year beginning on 1 April 2010. HKFRSs comprise all applicable individual Hong Kong Financial Reporting Standards (“HKFRS”); Hong Kong Accounting Standards (“HKAS”); and Interpretations. The following new and revised HKFRSs are relevant to the Group’s operations. The adoption of these new and revised HKFRSs had no material impact on the Group’s results and financial position for the current or prior years, and did not result in any significant changes in the accounting policies of the Group.

(i) Business Combination

HKFRS 3 (Revised), “Business Combinations”, and consequential amendments to HKAS 27, “Consolidated and Separate Financial Statements”, HKAS 28, “Investments in Associates”, and HKAS 31, “Interests in Joint Ventures”, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009.

The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with HKFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs are expensed.

HKAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss.

(ii) Leases

HKAS 17 (amendment), “Leases”, deletes specific guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating lease using the general principles of HKAS 17, i.e. whether the lease transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Prior to the amendment, land interest which title is not expected to pass to the Group by the end of the lease term was classified as operating lease under “Leasehold land and land use rights”, and amortised over the lease term. The amendments have no material financial impact on the Group.

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(iii) Reassessment of Embedded Derivatives

The amendment to HK(IFRIC) 9, “Reassessment of Embedded Derivatives and HKAS 39, Financial instruments: Recognition and measurement”, effective 1 July 2009, requires an entity to assess whether an embedded derivative should be separated from a host contract when the entity reclassifies a hybrid financial asset out of the “fair value through profit or loss” category. This assessment is to be made based on circumstances that existed on the later of the date the entity first became a party to the contract and the date of any contract amendments that significantly change the cash flows of the contract. If the entity is unable to make this assessment, the hybrid instrument must remains classified as at fair value through profit or loss in its entirety. The amendments have no material financial impact on the Group.

(iv) Impairment of Assets

HKAS 36 (amendment), “Impairment of Assets”, effective 1 January 2010, clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment, as defined by HKFRS 8, “Operating Segments”. The amendments have no financial material impact on the Group.

(b) New standards, amendments and interpretations have been issued but not yet effective for the financial year beginning 1 January 2010 and have not been early adopted

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements:

• HKFRS 9 Financial Instruments

• – HKAS 24 (Revised) Related Party Disclosures

• – HK(IFRIC) — Int 19 Extinguishing Financial Liabilities with Equity Instruments

• (i) HKFRS 9, ‘Financial Instruments’. The first part of HKFRS 9 was issued in November 2009 and will replace those parts of HKAS 39 relating to the classification and measurement of financial assets. In November 2010, a further pronouncement was published to address financial liabilities and derecognition. Key features are as follows:

Classification and Measurement

Financial assets are required to be classified into one of the following measurement categories: (1) those to be measured subsequently at fair value or (2) those to be measured subsequently at amortised cost. Classification is to be made on transition, and subsequently on initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument.

A financial instrument is subsequently measured at amortised cost only if it is a debt instrument, and the objective of the entity’s business model is to hold the asset to collect the contractual cash flows, and the asset’s contractual cash flows represent only unleveraged payments of principal and interest. All other debt instruments are to be measured at fair value through profit or loss.

All equity instruments are to be measured subsequently at fair value. Equity instrument that are held for trading will be measured at fair value through profit or loss. For all other equity investments, an irrevocable election can be made at initial recognition to recognise unrealised and realised fair value gains and losses through other comprehensive income rather than consolidated statement of comprehensive income. Once elected to be recognised through other comprehensive income, there will be no reclassification of fair value gains and losses to consolidated statement of comprehensive income. Dividends are to be presented in consolidated statement of comprehensive income as long as they represent a return on investment.

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Financial Liabilities and Derecognition

Except for the two substantial changes described below, the classification and measurement requirements of financial liabilities have been basically carried forward with little amendments from HKAS 39. For the derecognition principles, they are consistent with that of HKAS 39.

The requirements related to the fair value option for financial liabilities were changed to address own credit risk. It requires the amount of change in fair value attributable to changes in the credit risk of the liability be presented in other comprehensive income. The remaining amount of the total gain or loss is included in consolidated statement of comprehensive income. If this requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in consolidated statement of comprehensive income. The determination of whether there will be a mismatch will need to be made at initial recognition of individual liabilities and will not be re-assessed. Amounts presented in other comprehensive income are not subsequently reclassified to consolidated statement of comprehensive income but may be transferred within equity.

The standard eliminates the exception from fair value measurement contained in HKAS 39 for derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument.

• (ii) HKAS 24 (revised), “Related Party Disclosures”, issued in November 2009, is mandatory for periods beginning on or after 1 January 2011. Earlier application, in whole or in part, is permitted.

The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The amendments may not have any financial impact on the Group.

• (iii) HK(IFRIC) — Int 19, “Extinguishing Financial Liabilities with Equity Instruments”, effective 1 July 2010, clarifies the accounting by an entity when the terms of a financial liabilities are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. The new interpretation is unlikely to have any financial impact on the Group.

3. REVENUE

Revenue, which is also the Group’s turnover, represents the income received and receivable on investments during the Year as follows:

Dividend income from listed investments Dividend income from unlisted investments Performance premium from co-investment partners Interest income	2011 HK$’000 – – 35,003 12,931 47,934	2010 HK$’000 241 330,416 121,097 6,447
		458,201

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4. SEGMENT INFORMATION

The chief operating decision maker has been identified as the Board. The Board assesses the operating segments using a measure of operating profit. The Group’s measurement policies for segment reporting under HKFRS 8 are the same as those used in its HKFRS financial statements.

On adopting of HKFRS 8, based on the internal financial information reported to the Board for decisions about resources allocation to the Group’s business components and review of these components’ performance, the Group has identified only one operating segment, being investment holding. Accordingly, segment disclosures are not presented.

Geographical information:

Revenue Hong Kong Mainland China	2011 HK$’000 12,275 35,659 47,934	2010 HK$’000 337,104 121,097
		458,201

In presenting the geographical information, revenue is based on the location of the investments or the coinvestment partners.

Non-current assets other than financial instruments

Hong Kong Mainland China	2011 HK$’000 86,065 587 86,652	2010 HK$’000 82,751 –
		82,751

Information about major investments and co-investment partners:

During the Year, interest income derived from one of the Group’s investments (2010: dividend income and loan interest income derived from one of the Group’s investments) which accounted for 10% or more of the Group’s revenue amounted to approximately HK$9,551,000 (2010: HK$322,383,000).

During the Year, performance premium derived from one (2010: one) of the Group’s co-investment partners which accounted for 10% or more of the Group’s revenue amounted to approximately HK$35,003,000 (2010: HK$83,988,000).

5. INCOME TAX

Hong Kong Profits Tax has been provided at a rate of 16.5% (2010: 16.5%) on the estimated assessable profit for the Year.

	2011	2010
	HK$’000	HK$’000
Provision for the Year	–	5,298

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6. (LOSS)/PROFIT FOR THE YEAR

The Group’s (loss)/profit for the Year is stated after charging the following:

Auditor’s remuneration Audit Others Depreciation Investment management fee Performance fee Operating lease payments in respect of office premises Equity-settled share-based payments, other than those included in staff costs Staff costs (including directors’ emoluments) Salaries and other benefits Retirement benefits scheme contributions Equity-settled share-based payments	2011 2010 HK$’000 HK$’000
	716 500 68 110
	784 610 202 59 23,808 17,637 – 65,363 1,388 941 10,607 –
	14,197 11,740 191 108 6,453 –
	20,841 11,848

7. (LOSS)/EARNINGS PER SHARE

(a) Basic (loss)/earnings per share

Basic (loss)/earnings per share is calculated by dividing the (loss)/profit for the Year by the weighted average number of ordinary shares in issue during the Year.

(Loss)/earnings for the Year Weighted average number of ordinary shares in issue (in thousand) Basic (loss)/earnings per share	2011 HK$’000 (233,327) 902,712 (25.85) cents	2010 HK$’000 473,070
		784,500
		60.30 cents

(b) Diluted (loss)/earnings per share

Diluted (loss) per share for the year ended 31 March 2011 was the same as the basic (loss) per share as the Company’s outstanding share options had anti-dilutive effect for the year ended 31 March 2011 as assumed issue of ordinary shares would reduce (loss) per share.

Diluted earnings per share for the year ended 31 March 2010 was the same as the basic earnings per share as the Company’s outstanding share options had anti-dilutive effect for the year ended 31 March 2010 as the exercise prices of those share options were higher than the average market price for shares.

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8. ACCOUNTS AND LOANS RECEIVABLE

Note Accounts receivable (a) Amounts due from associates (b) Loan to an investee, repayable within one year (c) Loan to an associate, not repayable within one year (d) Other loan, not repayable within one year (e)	2011 HK$’000 11,060 37 61,100 1,500 3,500 77,197	2010 HK$’000 8,377 – – – –
		8,377

• (a) At 31 March 2011, the Group’s accounts receivable represented performance premium receivable from a co-investment partner. The credit period on services rendered is 90 days. The Group does not hold any collateral or other credit enhancements over the accounts receivable.

The aging analysis of accounts receivable based on the invoice date is as follows:

			2011	2010
			HK$’000	HK$’000
Within	3	months	11,060	8,377

At 31 March 2011, the accounts receivable was neither past due nor impaired.

• (b) Amounts due from associates arise mainly from administrative expenses payments made by the Group on behalf of the associates. The amounts are unsecured, interest–free and have no fixed repayment terms. No provision has been made on the balances.

• (c) Loan to an investee is unsecured, bearing interest at 4% per annum and repayable within one year.

• (d) Loan to an associate is unsecured, interest–free and not repayable within one year.

• (e) Other loan represents loan to the major shareholder of one of the Group’s associates. It is unsecured, interest–free and not repayable within one year.

9. NET ASSET VALUE PER SHARE

The net asset value per share is calculated by dividing the net asset value of the Group at 31 March 2011 of approximately HK$1,588,288,000 (2010: HK$1,480,099,000) by the number of ordinary shares in issue at that date, being 941,400,000 (2010: 784,500,000).

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EXTRACT OF INDEPENDENT AUDITOR’S REPORT

BASIS FOR QUALIFIED OPINION

As shown in note 17 and 18 to the consolidated financial statement, as at 31 March 2011, the Group’s investment in Crown Honor Holdings Ltd. (“Crown Honor”), an investee, comprises ordinary shares, non-voting preference shares and the profit guarantee of Crown Honor which were stated at fair value of approximately HK$230,545, HK$95,529,850 and HK$6,860,388, respectively. In addition, the Group had a loan to Crown Honor of approximately HK$61,100,000 as at 31 March 2011. We were unable to obtain sufficient appropriate audit evidence or to carry out alternative audit procedures that we considered necessary to assess the fair value of the investment in and the recoverable amount of the loan to Crown Honor as at 31 March 2011. Consequently, we were unable to determine whether any adjustments to these amounts were necessary. Any adjustments to the fair value of the investment in and the recoverable amount of the loan to Crown Honor would have a material effect on the net assets of the Group and the Company as at 31 March 2011 and the Group’s loss attributable to the equity holders for the year then ended.

QUALIFIED OPINION

In our opinion, except for the possible effects of the matter described in the basis for qualified opinion paragraph, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2011, and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

EXTRACT OF NOTE 17, 18 TO THE CONSOLIDATED FINANCIAL STATEMENT

The audit of the consolidated financial statements of CHHL (equivalent to Crown Honor Holdings Limited) for the year ended 31 December 2010 is not yet finalised as of the date of this report and the management accounts of CHHL as at 31 March 2011 may be subject to change. After taking into account the most recent relevant financial information of CHHL, the directors consider the valuation result as recognised in the interim report as of 30 September 2010 that was based on an independent valuation report still represents the best estimated fair value of the CHHL-related financial assets as at 31 March 2011.

FINAL DIVIDEND

The Board has resolved not to pay a final dividend for the Year (2010: Nil).

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MANAGEMENT DISCUSSION AND ANALYSIS

OP Financial is a Hong Kong listed investment company with the mandate allowing us to invest in various assets, financial instruments, and businesses globally. We produce medium to long term shareholder returns by developing customized investment solutions for and alongside institutional and corporate investors in the region. Our co-investors are mainly large financial institutions and organizations who target either high growth opportunities within China or strategic investments outside the region. We also invest in funds of listed and unlisted equities to generate diversified returns. Over time, these funds will serve as the foundation of a marketable proprietary financial services platform catered towards attracting new investment partners.

Our two main investment focuses include Direct Investment Solutions and the development of our Financial Services Platform. Direct Investment Solutions includes both our proprietary investments as well as the managed investments on behalf of other investors. These investments target strategic resources and related businesses globally, but they may also include high growth medium sized businesses in China. The Financial Services Platform includes: (i) “Partnerships with Major Players”; these are joint ventures with financial institutions, and (ii) “Integrated Fund Solutions”; which focuses on developing asset managers, and fund incubation strategies.

Investment holdings by source Total assets HK$1.597 billion (as at 31 March 2011)

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Cash, accounts receivable, and Kaisun Energy
prepayments HK$207.8 million
HK$393.2 million 13.01%
24.62%
Interest receivables
HK$15.7 million Nobel Oil
0.99% HK$332.2 million
20.81%
Loans receivable
HK$66.1 million
4.14%
Property, plant and equipment Meichen Finance
HK$0.7 million HK$102.6 million
0.04% 6.43%
Glory Wing
HK$17.5 million
Intergrated Fund Solutions 1.09%
HK$281.0 million
Jin Dou
17.60%
HK$9.6 million
0.60%
Partnerships with Major Players China Data
HK$161.6 million HK$8.8 million
10.12% 0.55%
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DIRECT INVESTMENT SOLUTIONS

Kaisun Energy

Kaisun Energy Group Limited (“Kaisun Energy”) is an integrated coking coal producer which operates a coal mine in Inner Mongolia with total resources reserves of 130.65 million tonnes (based on recent studies conducted under JORC standards). This represents an increase of approximately 32% from the previously estimated 99.6 million tonnes (based on the PRC coal resource standard). As at 31 March 2011, Kaisun Energy’s share price closed at HK$0.41 per share down from HK$1.12 per share as at 31 March 2010. While we had sold down a substantial portion of our shares in 2009, the contraction in the remaining holdings negatively impacted the net asset value (“NAV”) by HK$230.18 million. The equity portion fell 63% from HK$144.77 million to HK$53.00 million. The stock price decline also reduced the convertible bond valuation by 47% from HK$293.23 million to HK$154.82 million.

It is worth noting that Kaisun Energy has adjusted its accounting period ending 31 March to 31 December to accommodate its subsidiary jurisdiction accounting practice in Mengxi. Therefore, Kaisun Energy’s 2010 annual report recorded turnover of HK$59.62 million only accounts for 9 months of the results. Compared to a turnover for the year ending 31 March 2010 of HK$14.35 million, the company is progressing well, since this is the company’s first year of operational income from its new mining operations in Inner Mongolia. Reported delays during the period were largely a result of government cessations unrelated to the company’s operation – such as the flooding incident in neighbouring mines and national gaming events.

In March 2011, Kaisun Energy completed the acquisition of Saddleback Mining Ltd. (“Saddleback”), which owns a bituminous coal mine and an anthracite mine with resources of 17.5 million tonnes and 158 million tonnes reserves respectively. The transaction completed for a consideration of HK$174.98 million, a combination of cash and shares. Saddleback’s assets are located near Xinjiang on the ancient Silk Road, where the PRC government has targeted for redevelopment. Conveniently, the mines have access to developed transport infrastructure routes to China, making it an excellent addition to Kaisun Energy’s portfolio.

Nobel Oil

The Group successfully arranged a co-investment with China Investment Corporation (“CIC”), cumulatively representing a 50% equity interest in Nobel Holdings Investments Ltd (“Nobel Oil”) in September 2009. Nobel Oil is one of the largest independent upstream producers in Russia. Located in highly developed and prolific oil provinces in Russia close to infrastructure, Nobel Oil’s principal assets are its nine subsoil licenses covering seven oil fields, in varying stages of development and production, and two exploration areas. It holds aggregated proven reserves of 117 mmbbl of proved, 238 mmbbl of proved and probable and 467 mmbbl of proved, probable and possible reserves. It is considered a high-quality significant oil-weighted portfolio with well productivity rates higher than Russian averages.

Held via investment holding vehicle, Thrive World Ltd, OP Financial’s 5% effective holding increased slightly from HK$323.82 million to HK$332.23 million as at 31 March 2011. With its average selling price per barrel recovering from an approximate 2010 average of US$70 per barrel to an around US$100 per barrel in Q1 of 2011 during the Year, we believe Nobel Oil’s target listing by the end of 2011 looks promising.

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Meichen Finance

In 2009, we invested HK$45.45 million in Meichen Finance Group Ltd., (“Meichen Finance”), a rapidly growing insurance agency and brokerage in China. In addition to our initial investment, OP Financial facilitated a shareholder’s loan of RMB52 million, which was then used to finance acquisitions. Held via investment vehicle, Crown Honor Holdings Ltd, our net position has since grown to HK$102.62 million as at 31 March 2011 (31 March 2010: HK$98.99 million) reflecting the company’s accelerated progress.

As of the date of this report, the audit of the consolidated financial statement of Meichen Finance for its year ended 31 December 2010 was not yet finalised, so there was no reliable financial data to apply commonly used valuation techniques for Meichen Finance as at 31 March 2011 as required by the Hong Kong Financial Reporting Standards. Thus, the Board considers the results adopted in our interim report 30 September 2010, which was based on the most recent independent valuation report, as the best estimated fair value of Meichen Finance’s assets.

According to its unaudited financial statements for the year ended 31 December 2010, Meichen Finance performed admirably having sold policies of approximately RMB1.45 billion in insurance premiums from RMB830 million representing a year-on-year growth of 74%, translating into approximately RMB240 million in revenues.

Meichen Finance distributes insurance products from (currently) 21 leading insurance companies in the country including Ping An, China Life, and China Pacific. Primarily operating in the automotive insurance sector, agents use an in-house assessment system to effectively match clients with appropriate products. Given China is home to the fastest growing auto industry in the world, Meichen Finance is in a unique position to capitalise on consumer demand. While focused on Guangdong province, with a growing population of over 95 million, Meichen Finance has already begun expanding across the country.

Meichen Finance’s management has outlined three basic strategies for improvement: (1) to install proprietary technology to improve customer care efficiencies, (2) to cross-sell new insurance products to the current client base, thereby increasing average revenue per customer, and (3) to identify acquisition targets for consolidation across China.

Meichen Finance increased the number of licensed sales hubs (including agencies, brokerages, and assessment centres) companies under its portfolio from 7 in 2009 to 54 as at 31 March 2011. Newly acquired assets contributed to 35% of Meichen Finance’s revenues this year. The company has also improved sales in non-automotive insurance (excluding accidental), increasing revenues from RMB163 million in 2009 to RMB420 million in 2010, which now represents over 27.5% of their total revenues versus 19.6% in 2009, evidence that their product strategy is progressing well.

We expect Meichen Finance may be seeking capital through the equity markets before 2012 to finance its expansion plans. We will continue to monitor its performance in 2011 and provide strategic support as needed.

– 13 –

Glory Wing

Glory Wing International Ltd (“Glory Wing”) is an investment vehicle whose core position is an Iron Ore mining operation called the Taolegai Mine, located in Inner Mongolia. Glory Wing has financed the mining operations by issuing convertible bonds for a total of HK$70 million, of which OP Financial’s allocation is HK$10 million.

Based on John T. Boyd Company’s (JTB) current reports, the Mine holds measured and inferred resources of 5.73 million tonnes at an average grade of 50.2% Fe. With estimated production of 800,000 tonnes per year, the mine has a healthy potential schedule of over 5 years.

Jin Dou Investment Partnership

In September 2010, we formed a partnership with CIC, Jin Dou Development Fund L.P., to explore agricultural investment opportunities in Kazakhstan. CIC and OP Financial contributed US$15 million and US$1.5 million respectively for the purpose of conducting feasibility projects to diversify and expand the crop yield in Kazakhstan to service the growing demand for food in the region.

The project’s feasibility studies are on-going and while preliminary results are positive, expansion plans to build a larger scale operation will not be assessed until August 2011. Depending on projected yield, the project will require significant financing to build out a commercially viable production platform. CIC continues to fully support this joint venture with a long term investment horizon.

FINANCIAL SERVICES PLATFORM

Partnerships with Major Players

We have investments in four asset management companies with total assets under management and advisory of approximately HK$6.24 billion. Aggregate results of the four companies attributable to the Group totalled approximately HK$3.22 million for the Year.

With their managed funds invested mostly in listed equities, our partnering fund managers faced a challenging market in May 2010, when volatility combined with high correlated hedges rendered defensive trading strategies ineffective as the MSCI World Index slid 9.91% during the month. The Eurekahedge Hedgefund Index was down 2.33%, its worst performance since October 2008. Despite unpredictable markets, our partnering fund managers recovered in strength. CSOP also launched a new RMB Bond Fund in March 2011 to capture a growing demand for RMB denominated products. OP Financial also holds non-controlling preference shares in the investment management companies, namely OP Calypso Capital Limited and OP Calypso Capital (Cayman) Limited (together “OP Calypso”). Our position appreciated to HK$75.86 million from HK$34.05 million during the Year; such revaluation gains are due to additional income streams from three new funds.

– 14 –

Integrated Fund Solutions

Part of the Group’s strategy is to build a proprietary asset management platform and incubate or acquire funds with a strong track record and sound management. We provide seed capital infrastructure, technology, and administrative support to fund managers, allowing them to focus on building performance. The Group maintains investments in four funds managed by the OP Calypso, which fell slightly by approximately HK$5.33 million from HK$286.29 million as at 31 March 2010 to HK$280.96 million as at 31 March 2011. The funds performed admirably in the second half of the year recovering from a market-wide dip in May of 2010.

As part of an on-going branding exercise and to emphasise the relationship with OP Financial, OP Calypso Capital Limited changed its name to OP Investment Management Limited (OPIM) in May 2011.

Investor sentiment remained cautious and markets volatile during the Year. Even so OPIM continued on its expansion phase with the launch of the Eurasia Fund on 3rd January 2011. This Fund will focus on the Greater China and Russia markets, BRIC countries (Brazil, Russia, India, and China) and other Eurasian markets. In addition, it will be their first hybrid fund which makes pre-IPO and private equity investments. Work continues on a new China Organic Growth Fund, a Luxembourg domiciled UCITS, which is now scheduled for launch on 15th September, 2011.

The OPIM incubated manager platform continues to grow with one manager being awarded a mandate for a 130/30 fund by a prestigious Swedish institution. Such fund is scheduled for a launch in September 2011. OPIM will continue to seek out managers to incubate under its platform.

IN CLOSING

Our direct investments are quickly approaching their next stage in development, and while the financial year was clearly a challenging one for most of our investments, our efforts to reinstate value into underperforming assets whilst doubling our efforts to endorse promising ones are starting to show results. Firstly, Kaisun Energy is fundamentally strong; and while consolidation policies have created uncertainty we remain opportunistic. Secondly, we anticipate an exciting year ahead as we make final preparations to bring several key investments to the public markets. Finally, our co-operation with CIC in Kazakhstan proves to the market our commitment to the sovereign and institutional market, and it is a prime example of how our regional insight can help our investment partners, and ultimately our shareholders, discover opportunities where others cannot.

FINANCIAL REVIEW

Financial position

Net asset value : The Group’s net assets as at 31 March 2011 increased by 7.31% to HK$1.59 billion from HK$1.48 billion one year ago. Meanwhile, the NAV per share decreased from HK$1.89 to HK$1.69 during the Year since the total issued ordinary shares increased from 784.50 million to 941.40 million after the completion of new share placement completed in July 2010 and loss for the Year.

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Gearing : The gearing ratio, which is calculated on the basis of total liabilities over total equity as at 31 March 2011, was 0.005 (31 March 2010: 0.05). We are currently maintaining a low leverage policy for our investments. While some debt financing instruments may be used at the investment level, we still expect to maintain debt to a minimum at the Group level in the coming year.

Investments in associates : Representing mainly our share of the net assets of joint venture asset management companies, CSOP Asset Management Limited (“CSOP”), and Guotai Junan Fund Management Limited (“Guotai Junan”). Assets increased by 4% to HK$85.99 million as at 31 March 2011 (31 March 2010: HK$82.64 million) reflecting stable operating performance of our investees for the Year.

Available-for-sale financial assets : Though relatively unchanged at HK$662.65 million (31 March 2010: HK$689.92 million), satisfactory performance in all holdings combined with the addition of the Jin Dou Development Fund mitigated the substantial decline in mark-to-market value of our investment in the ordinary shares in Kaisun Energy.

Financial assets at fair value through profit or loss : The decrease to HK$372.38 million from HK$495.74 million during the Year was primarily due to a significant decrease in the value of the derivative component in the convertible bond tied to Kaisun Energy. This instrument fell by 87.23% from HK$162.69 million to HK$20.78 million for an unrealized loss of HK$141.91 million. Investment in Meichen Finance via Crown Honor Holdings Ltd. increased approximately 5.71% from HK$42.01 million to HK$44.41 million. Total fair value of Funds changed from HK$286.29 million to HK$280.96 million. Glory Wing convertible bond is a new addition to our investment portfolio. Other than the above, valuation of the remaining long term assets remained relatively stable during the Year.

Loans receivable: Our shareholder’s loan to Meichen Finance of HK$61.1 million due 31 December 2011, accounted for most of the HK$66.1 million loans receivable. Proceeds were used to fund Meichen Finance’s acquisitions throughout the Year.

Interest receivables : With the addition of a new convertible bond investment via Glory Wing in an iron ore mine in Inner Mongolia, accrued interests increased significantly from HK$5.02 million as at 31 March 2010 to HK$15.75 million as at 31 March 2011. The accrued interests also include interest receivable from our investment in Kaisun Energy’s convertible bond.

Bank and cash balances : As at 31 March 2011, the Group had bank deposits and cash balances of HK$365.33 million (31 March 2010: HK$261.37 million). The increase in bank and cash balances is the net sum of the issue of new shares of HK$283.07 million, cash carried forward of HK$261.37 million, less cash used in investing activities of approximately HK$76.55 million, and cash used in operating activities of HK$102.56 million.

Other payables : This mainly represents the investment management fees payable to our investment manager calculated based on the NAV of the Group. Performance fee payable to the investment manager amounted to HK$65.36 million as at 31 March 2010. As a result, other payables have been reduced significantly from HK$69.00 million to HK$4.30 million as at 31 March 2011.

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RESULTS

The Group made significant developments in new arrangements and partnerships. However, challenging market conditions created a difficult environment for our main investments in Kaisun Energy and investment funds, directly impacting our performance for the Year. The Group incurred a net loss of HK$233.33 million (2010: profit of HK$473.07 million), which included an impairment of HK$80.14 million on Kaisun Energy ordinary shares as well as a fair value loss of HK$141.91 million on Kaisun Energy’s convertible bond conversion portion. The Group also completed the placement of new ordinary shares in July, increasing the cash balance by HK$283.07 million. Consequently, we grew our net assets to approximately HK$1.59 billion during the Year, representing a net increase of 7.31%. The Group incurred a basic loss per share of HK$25.85 cents in 2011 compared to a profit of HK$60.30 cents in 2010.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Revenue , during the Year was as follows:

Dividend income from listed investments Dividend income from unlisted investments Performance premiums from co-investment partners(1) Interest income(2) Total	2011 HK$’000 – – 35,003 12,931 47,934	2010 HK$’000 241 330,416 121,097 6,447
		458,201

• (1) Co-investment partner, CIC, in both the Agriculture partnership and Nobel Oil projects awarded performance premiums totalling HK$35.00 million to the Group in return for our resources devoted to the investment projects. Jin Dou Development Fund accounted for approximately HK$12.96 million, while Nobel Oil accounted for the remaining HK$22.04 million.

• (2) Interest income increased to approximately HK$12.93 million (2010: HK$6.45 million) is derived from a new convertible bond investment via Glory Wing and our existing Kaisun Energy, both of which are held as convertible bonds, including term deposits in banks.

Net (loss)/gain on financial assets at fair value through profit or loss : This mainly represents (i) the loss in fair value of the conversion option embedded in the convertible bonds of Kaisun Energy of approximately HK$141.91 million and (ii) the net gain of HK$5.45 million from the Group’s remaining financial assets at fair value.

Impairment loss on available-for-sale financial assets : Due to the prolonged decrease in the fair value of the Group’s investment in the ordinary shares of Kaisun Energy from its investment cost, an impairment loss of HK$80.14 million which represented the difference between the investment cost and the mark-to-market value of Kaisun Energy shares as at 31 March 2011 was made. Such movement in fair value was reflected in the Investment revaluation reserve previously.

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Equity-settled share-based payments : This represents the value of 28,800,000 and 13,000,000 share options granted to certain directors, employees and consultants at 20 April 2010 and 18 February 2011 respectively, recognised during the Year.

Administrative expenses : The decrease in expenses of HK$53.45 million from HK$102.92 million is a result of (i) no performance fee paid to the investment manager, which is determined by the growth in NAV per share, and (ii) staff costs and expenses such as travelling and other costs directly related to our new investment projects. However, expenses include investment management fees that incur monthly.

Share of results of associates : A net amount of approximately HK$3.22 million (2010: HK$22.95 million) accounted for our share of results of associates from joint ventures such as CSOP, and Guotai Junan. These companies generate revenue based on management and performance fees according to assets under management.

Income tax : The Group incurred no income taxes as there were no assessable profits for the Year (2010: HK$5.30 million).

Other comprehensive income : Changes to the Group’s NAV, otherwise not accounted for in the income statement, are found in other comprehensive income. The loss of HK$233.33 million for the Year is carried through from the income statement. Combined with unrealized losses from long term investments, otherwise identified as “available-for-sale financial assets” totalling HK$38.92 million, gains in exchange difference of HK$0.026 million, impairment loss on available-for-sale financial assets charged to income statement of HK$80.14 million and gains in the share of other comprehensive income of associates of HK$0.13 million, the total comprehensive income for the Year was a loss of HK$191.95 million.

FAIR VALUE CHANGES FOR THE YEAR ENDING 31 MARCH

OP Calypso Kaisun Energy – Ordinary Shares Kaisun Energy – CB Borrowing Portion Nobel Oil Meichen Finance Jin Dou Development Fund, L.P. Fair value (decrease)/increase	2011 HK$’000 41,800 (91,774) 3,493 8,403 1,233 (2,073) (38,918)	2010 HK$’000 4,661 11,633 7,435 91,176 40,016 –
		154,921

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NET ASSET VALUE PER SHARE (IN HK$)

HK$

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2.0 1.89
1.69
1.5
1.13
1.07
1.0
0.5
0.0
2008 2009 2010 2011
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LIQUIDITY AND FINANCIAL RESOURCES

Dividend income from investments held, performance premiums, and interest income from bank deposits and financial instruments held are currently the Group’s major source of revenue.

During the Year, the Group continued to maintain a significant balance of cash and cash equivalents. As at 31 March 2011, the Group had cash and bank balances of HK$365.33 million (31 March 2010: HK$261.37 million).

The Group had no bank borrowings and did not pledge any assets as collateral for overdrafts or other loan facilities during the period under review. The debt-to-equity ratio (interest bearing external borrowings divided by shareholders’ equity) stood at zero while the current ratio (current assets divided by current liabilities) was 93 times (2010: 8 times). For further analysis of the Group’s cash position, current assets and gearing, please refer to paragraphs under sub-sections headed “Financial position” above.

The Board believes that the Group has sufficient financial resources to satisfy its immediate investments and working capital requirements.

CAPITAL STRUCTURE

In July 2010, the Company issued 156,900,000 new ordinary shares of HK$0.10 each at an issue price of HK$1.90 per share to independent third party investors pursuant to the general mandate granted to the Board by resolution of the shareholders passed at the annual general meeting of the Company held on 28 August 2009.

After the deduction of the related expenses, the issue of 156,900,000 new shares raised net proceeds of approximately HK$283.07 million which will be applied to finance future investments opportunities.

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As at 31 March 2011, the Group’s shareholders’ equity and total number of shares in issue for the Company stood at HK$1.59 billion (2010: HK$1.48 billion) and 941.40 million (2010: 784.50 million), respectively.

EMPLOYEES

During the Year, the Group had 18 (2010: 15) employees, inclusive of the two executive directors. Total staff costs for the Year amounted to HK$20.84 million (2010: HK$11.85 million). The Group’s remuneration policies are in line with the market practice and are determined on the basis of the performance and experience of individual employee.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES

Except for the Group’s investment in and loan to Meichen Finance described in the “Direct Investment Solutions” section above, the Group’s assets and liabilities are mainly denominated in Hong Kong Dollars or United States Dollars and, therefore, the Group had no significant exposure to foreign exchange fluctuations.

CHARGES ON THE GROUP’S ASSETS AND CONTINGENT LIABILITIES

As at 31 March 2011, there were no charges on the Group’s assets and the Group did not have any significant contingent liabilities.

PURCHASE, SALE OR REDEMPTION OF SECURITIES

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

EVENT AFTER THE REPORTING PERIOD

On 16 June 2011 and up to the date of this announcement, one of the Group’s investments – Kaisun Energy – has suspended its trading in the Stock Exchange pending the release of an announcement relating to a very substantial disposal, which is price sensitive in nature.

CORPORATE GOVERNANCE

The Board recognises the importance of corporate governance to the Group’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 Group has complied with the Code on Corporate Governance Practices as set out in Appendix 14 to 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.

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The Company’s audit committee comprised three independent non-executive directors, namely, Mr. KWONG Che Keung, Gordon, Prof. HE Jia and Mr. WANG Xiaojun.

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

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.

PUBLICATION OF FINANCIAL INFORMATION

This results announcement is published on the websites of the Stock Exchange (www.hkex.com.hk) and the Company (www.opfin.com.hk). The Group’s annual report for the Year will be dispatched to the shareholders of the Company and available on the above websites in due course.

BOARD OF DIRECTORS

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

By order of the Board OP Financial Investments Limited Zhang Gaobo Executive Director and CEO

Hong Kong SAR, 20 June 2011

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