Synagistics Limited — Capital/Financing Update 2011

Jan 13, 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)

CONTINUING CONNECTED TRANSACTIONS – RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT

CONTINUING CONNECTED TRANSACTIONS – NEW INVESTMENT MANAGEMENT AGREEMENT

On 13 January 2011, to ensure continuity in the provision of the investment management and administrative services currently provided by the Investment Manager to the Company under the Existing Investment Management Agreement which is to expire on 31 March 2011, the Company entered into the New Investment Management Agreement with the Investment Manager on the principal terms and conditions disclosed in this announcement.

IMPLICATIONS UNDER THE LISTING RULES

Given that the Investment Manager is a connected person of the Company under the Listing Rules, the transactions contemplated under the New Investment Management Agreement constitute continuing connected transactions for the Company. As the relevant Percentage Ratio for the transactions contemplated under the New Investment Management Agreement, on an annual basis, is expected to be more than 25%, the Continuing Connected Transactions therefore constitute non-exempt continuing connected transactions of the Listing Rules and are subject to the reporting, announcement and Independent Shareholders’ approval as well as the annual review requirements.

CIRCULAR

A circular containing, among other matters, further details of (i) the Continuing Connected Transactions (including the Annual Caps), (ii) a letter of advice from the Independent Financial Adviser containing their advice to the Independent Board Committee and the Independent Shareholders, (iii) a letter of advice from the Independent Board Committee to the Independent Shareholders and (iv) a notice of the EGM will be despatched to the Shareholders on or before 14 January 2011.

*For identification purposes only

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CONTINUING CONNECTED TRANSACTIONS – NEW INVESTMENT MANAGEMENT AGREEMENT

Reference is made to the announcement of the Company dated 14 September 2007 and the circular of the Company dated 22 October 2007 regarding the entering into of the Existing Investment Management Agreement by the Company with the Investment Manager for the provision of investment management and administration services for a three-year period from 1 April 2008 and ending 31 March 2011.

The Board wishes to announce that on 13 January 2011, the Company entered into the New Investment Management Agreement with the Investment Manager in relation to, subject to the Independent Shareholders’ approval at the EGM, the appointment of the Investment Manager immediately following the expiration of the term of the Existing Investment Management Agreement on 31 March 2011 to ensure continuity in the provision of the investment management and administration services to the Group.

Principal terms of the New Investment Management Agreement

Except for the time period covered, the terms of the Existing Investment Management Agreement and the New Investment Management Agreement are substantially the same in all material respects.

The principal terms of the New Investment Management Agreement, among others, include:

Duration

From 1 April 2011 to 31 March 2014

Services to be provided

The Investment Manager shall provide investment management and administration services to the Group under the New Investment Management Agreement.

Management and performance fees

Under the New Investment Management Agreement, the Investment Manager will be entitled to:

• (a) a monthly investment management fee at 1.5% per annum (based on a 360-day year) of the Net Asset Value as at the immediately preceding Valuation Date, calculated and accrued daily and payable in Hong Kong dollars in arrears on or before the seventh Business Day of the immediately following month; and

• (b) a performance fee calculated by reference to the increase in the Net Asset Value per Share (as defined below) as at the relevant Performance Fee Valuation Day.

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A performance fee will be payable to the Investment Manager if the Net Asset Value per Share (as defined below), calculated on the relevant Performance Fee Valuation Day, is greater than the Base Net Asset Value per Share (as defined below). Under the New Investment Management Agreement, such performance fee is payable as soon as practicable after the end of each Relevant Performance Period. The fee payable shall be 10% of the appreciation in the Net Asset Value per Share (as defined below), calculated as at the relevant Performance Fee Valuation Day over the Base Net Asset Value per Share (as defined below) for each Share then in issue, calculated as follows:

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where:

“A” is the Net Asset Value per Share, calculated on the relevant Performance Fee Valuation Day, before the deduction of any provision for the performance fee and the underwriting fee and provided that for the purpose of this calculation only, the Net Asset Value shall be calculated by including any distribution which has been declared or paid during the Relevant Performance Period.

“B” is the Base Net Asset Value per Share which shall be the greater of the Net Asset Value per Share as at the Commencement Date and the value for “A” as at the immediately preceding Relevant Performance Period in relation to which a performance fee was calculated and paid (after deduction of all fees including any performance fee and the underwriting fee in respect of such preceding Relevant Performance Period).

“C” is the aggregate number of Shares in issue during the Relevant Performance Period, calculated by adding the total number of Shares in issue on each Business Day of the Relevant Performance Period.

“D” is 10% or, subject to the approval of the Shareholders by ordinary resolution in general meeting (which approval shall, for the avoidance of doubt, only be required in connection with a proposal to increase such rate), such other percentage figure agreed from time to time between the Investment Manager and the Directors.

“E” is the number of Business Days in the Relevant Performance Period.

The amount of fees (being management fees and performance fees) payable under the New Investment Management Agreement will be determined in accordance with the provisions and formula as set out above.

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Historical caps and transaction records under the Existing Investment Management Agreement

The capped amount of the fees payable to the Investment Manager under the Existing Investment Management Agreement for the three years ending 31 March 2011 as approved by the then Independent Shareholders at the 2007 EGM are set out below:

**Year **	ended 31 March	ended 31 March
2009	2010	2011
(HK$’000)	(HK$’000)	(HK$’000)
60,000	83,000	115,000

Set out below is a summary of the aggregate amount of fees paid by the Company to the Investment Manager under the Existing Investment Management Agreement for each of the two financial years ended 31 March 2010:

Investment management fees Performance fees Total	Year ended 31 March 2009 (HK$’000) (Audited) 13,395 4,990 18,385	Year ended 31 March 2010 (HK$’000) (Audited) 17,637 65,363
		83,000

The historical aggregate amount of fees paid by the Company to the Investment Manager under the Existing Investment Management Agreement for each of the two financial years ended 31 March 2010 represent approximately 30.64% and 100% of the approved annual cap amount for the respective financial years.

Caps for the fees payable to the Investment Manager under the New Investment Management Agreement

The following table sets out the expected capped amounts of the fees payable to the Investment Manager under the New Investment Management Agreement for each of the three years ending 31 March 2014:

**Year **	ending 31 March	ending 31 March
2012	2013	2014
(HK$’000)	(HK$’000)	(HK$’000)
150,000	195,000	260,000

The basis of the Annual Caps is determined with reference to the historical aggregate amount of fees paid by the Company to the Investment Manager under the Existing Investment Management Agreement for year ended 31 March 2010 of HK$83 million and the compound annual growth rate of the audited Net Asset Value per Share of approximately 32.90% for the two-year period from 1 April 2008 to 31 March 2010.

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Such basis has been adopted after taking into account the market-driven nature of the Group’s investment business. The precise performance of the Group’s future net asset value is considered to be difficult to estimate and may vary significantly due to unexpected fluctuations of the financial markets. In particular noting that the actual total management fee and performance fee for year ended 31 March 2009 was only 30.64% of the relevant annual cap while the actual total management fee and performance fee for year ended 31 March 2010 reached 100% of the relevant annual cap. Such material volatility is largely in line with the unfolding of adverse events of global financial crisis during the year ended 31 March 2009. The Hong Kong stock market represented by the Hang Seng Index dropped from height of 31,000 level in November 2007 down to 13,576 on 31 March 2009 and rebound 56.44% to 21,239 on 31 March 2010.

Conditions of the New Investment Management Agreement

The New Investment Management Agreement is conditional upon the approval by the Independent Shareholders at the EGM.

In the event that the condition referred to above cannot be satisfied on or before the Longstop Date, this Agreement shall terminate and none of the parties hereto shall have any rights or obligations against the other except for any antecedent breach of the New Investment Management Agreement in respect of which the right of the party not in default shall remain unaffected.

Reasons for entering into the New Investment Management Agreement

The Company is an investment company under Chapter 21 of the Listing Rules, with the mandate allowing the Group to invest in various assets, financial instruments, and businesses globally.

The Group produces medium to long term shareholder returns by developing customized investment solutions for and alongside institutional and corporate investors in the region. The Group’s co-investors are mainly large financial institutions and organizations targeting either high growth opportunities within the PRC or strategic investments outside the region. The Group also invests 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.

The Investment Manager is a corporation licensed to carry out regulated activities of dealing in securities, advising on corporate finance and asset management under the SFO. The Investment Manager has been appointed to act as the Investment Manager since the listing of the Shares on the Stock Exchange on 20 March 2003 and the Board is of the view that it would be in the interest of the Group and the Shareholders as a whole to continue with the existing relationship with the Investment Manager. The transactions contemplated under the New Investment Management Agreement will continue to be conducted in the ordinary and usual course of business of the Group.

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The Directors (excluding the independent non-executive Directors whose opinion will be included in the Circular after taking into consideration the opinion from the Independent Financial Adviser) consider that:

• (a) the terms and conditions of the New Investment Management Agreement were negotiated between the parties to it on an arm’s length basis and are normal commercial terms that are fair and reasonable;

• (b) the Annual Caps are fair and reasonable; and

• (c) the transactions contemplated under the New Investment Management Agreement are in the ordinary and usual course of business of the Group and in the interest of the Group and the Shareholders.

Implication under the Listing Rules

The Investment Manager is regarded as a connected person of the Company by virtue of Rule 21.13 of the Listing Rules. In addition, the Investment Manager is a wholly owned subsidiary of OPFSGL, a Shareholder holding 29,800,000 Shares, representing approximately 3.17% of the issued share capital of the Company as at the date of this announcement. Each of Messrs Zhang Gaobo and Zhang Zhi Ping, being the Directors, are also the controlling shareholders of each of OPFSGL and Ottness (a substantial Shareholder holding 330,000,000 Shares representing approximately 35.05% of the issued share capital of the Company as at the date of this announcement). In this regard, each of OPFSGL and Ottness are associates of Messrs. Zhang Gaobo and Zhang Zhi Ping. The transactions contemplated under the New Investment Management Agreement constitute continuing connected transactions for the Company.

As the relevant Percentage Ratio for the transactions contemplated under the New Investment Management Agreement, on an annual basis, is expected to be more than 25%, the Continuing Connected Transactions therefore constitute non-exempt continuing connected transactions of the Listing Rules and are subject to the reporting, announcement and Independent Shareholders’ approval as well as the annual review requirements.

The New Investment Management Agreement and the Continuing Connected Transactions (including the proposed Annual Caps) are conditional upon the approval by the Independent Shareholders at the EGM by ordinary resolution(s). At the EGM, votes will be taken by way of poll. The Investment Manager, OPFSGL, Ottness and their respective associates, holding in aggregate of 359,800,000 Shares representing approximately 38.22% of the issued share capital of the Company as at the date of this announcement, shall abstain from voting on the resolution(s) in relation to the Continuing Connected Transactions (including the Annual Cap(s)) at the EGM.

In addition, as mentioned above, the Investment Manager is a wholly owned subsidiary of OPFSGL which 95% issued share capital is owned by Oriental Patron Financial Group Limited ( “OPFGL” ). The entire issued share capital of OPFGL is beneficially owned as to 51% by Mr. Zhang Zhi Ping and 49% by Mr. Zhang Gaobo. Hence, Messrs. Zhang Gaobo and Zhang Zhi Ping were materially interested in the New Investment Management Agreement entered into by the Company and they had abstained from voting on the relevant board resolutions approving, among other matters, the New Investment Management Agreement, passed on 7 January 2011.

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THE INVESTMENT MANAGER

The Investment Manager is a licensed corporation under the SFO to carry on type 1 (dealing in securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities. As at the date of this announcement, the Investment Manager did not provide investment management services to any company other than the Group.

The background and experience of the responsible officers and / or directors who are responsible for asset management business of the Investment Manager are as follows:

CHAN Nap Kee, Joseph , aged 50, is an executive director and a responsible officer of the Investment Manager. Mr. Chan has close to 25 years of experience in commercial and investment banking and asset management. Mr. Chan is also an executive director of Oriental Patron Securities Limited ( “OPSL” ) and Vigor Capital Limited ( “VCL” ). Mr. Chan was the deputy manager of Credit Agricole from 1986 to 1994, where he was in charge of the China business. From 1992 to 1994, he was also the co-head of Credit Agricole Asset Management South East Asia Limited. Mr. Chan obtained a master degree majoring in international marketing from the University of Strathclyde, the United Kingdom in July 1995, and a diploma in China investment and Trade Study from Peking University (北京大學) in November 1989. Mr. Chan is currently a holder of the SFC licences under the SFO to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities.

CHAN Lap Tak, Jeffrey , aged 46, is an executive director and a responsible officer of the Investment Manager. Mr. Chan has 20 years experience in securities and investment industry. Mr. Chan is also an executive director of OPSL and VCL and a non-executive director of Guotai Junan Fund Management Limited. Mr. Chan obtained a Bachelor of Commerce degree from the University of Queensland, Australia in 1986. He is currently serving as a vice chairman of Hong Kong Securities Association Limited and he is also a member of Hong Kong Institute of Certified Public Accountants and Hong Kong Securities Institute. Mr. Chan is currently a holder of the SFC licences under the SFO to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities.

ZHENG Juan, Christine , aged 38, is a responsible officer of the Investment Manager. Ms. Zheng has gained more than 10 years financial industry experiences from major international institutions. She is also a responsible officer of OPSL. Ms. Zheng holds a Master of Arts degree from Shanghai Fudan University, a Master of Science degree in Finance from the Hong Kong University of Science and Technology and is a Chartered Financial Analyst. Ms. Zheng is currently a holder of the SFC licences under the SFO to carry on type 1 (dealing in securities), type 4 (advising on securities) and type 9 (asset management) regulated activities.

POTENTIAL CONFLICTS OF INTEREST

Given the Investment Manager is wholly owned by OPFSGL, a company which is indirectly controlled by Messrs. Zhang Gaobo and Zhang Zhi Ping, the executive Directors of the Company, conflicts may arise in the allocation of investment opportunities identified by Messrs. Zhang Gaobo and Zhang Zhi Ping between the Company and the funds administered by the Investment Manager.

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However, it should be noted that such conflicts of interest will rarely occur. The reasons are as follows:

1. As at the date of this announcement, the Investment Manager did not provide investment management services to any company other than the Group.

2. Messrs. Zhang Gaobo and Zhang Zhi Ping are merely investors of the Investment Manager. They are neither directors nor responsible officers of the Investment Manager and they do not participate in formulating investment strategies, monitoring investment performance and approving investment decisions of the Investment Manager.

Nonetheless, if such conflicts arise, Messrs. Zhang Gaobo and Zhang Zhi Ping shall present all identified investment opportunities to the Company and the Investment Manager on an equitable basis and abstain from voting on transactions where such conflicts arise.

GENERAL

The Company has established the Independent Board Committee to advise the Independent Shareholders as to whether the Continuing Connected Transactions (including the proposed Annual Caps) are on normal commercial terms, in the ordinary and usual course of business, fair and reasonable and whether the Continuing Connected Transactions are in the interests of the Group and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote, taking into account the recommendations of the Independent Financial Adviser. In this connection, Ample Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee (comprising Mr. Kwong Che Keung, Gordon, Professor He Jia and Mr. Wang Xiaojun, being all the independent non-executive Directors) and the Independent Shareholders.

CIRCULAR

A circular containing, among other matters, further details of (i) the Continuing Connected Transactions (including the Annual Caps), (ii) a letter of advice from the Independent Financial Adviser containing their advice to the Independent Board Committee and the Independent Shareholders, (iii) a letter of advice from the Independent Board Committee to the Independent Shareholders and (iv) a notice of the EGM will be despatched to the Shareholders on or before 14 January 2011.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions shall have the following respective meanings:

“Ample Capital” or Ample Capital Limited, a corporation licensed under the “Independent Financial SFO to carry on type 4 (advising on securities), type 6 Adviser” (advising on corporate finance) and type 9 (asset management) regulated activities

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“Annual Cap(s)”

• the expected maximum amount of the fees payable to the Investment Manager under the New Investment Management Agreement for each of the three years ending 31 March 2014, as defined in the section headed “Continuing Connected Transactions – New Investment Management Agreement – Caps for the fees payable to the Investment Manager under the New Investment Management Agreement” above

• “Articles” the articles of association of the Company, as amended from time to time

• “associate(s)” has the meaning ascribed to it under the Listing Rules

• “Board” the board of Directors

• “Business Day” a day (other than Saturday) on which banks in Hong Kong are generally open for business

• “Circular” a circular containing, among other matters, further details of (i) the Continuing Connected Transactions (including the Annual Caps), (ii) a letter of advice from the Independent Financial Adviser containing their advice to the Independent Board Committee and the Independent Shareholders, (iii) a letter of advice from the Independent Board Committee to the Independent Shareholders and (iv) a notice of the EGM to be despatched to the Shareholders on or before 14 January 2011

• “Commencement Date”

• 1 April 2011, the commencement date of the New Investment Management Agreement

• “Company”

• OP Financial Investments Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the main board of the Stock Exchange

• “connected person”

• has the meaning ascribed to it under the Listing Rules

• “Continuing Connected Transactions”

• the continuing connected transactions to be entered into between the Company and the Investment Manager under the New Investment Management Agreement

• “Director(s)”

• the director(s) of the Company

• “EGM”

extraordinary general meeting of the Company to be convened for the purpose of approving, among others, the Continuing Connected Transactions (including the Annual Caps) by the Independent Shareholders, the notice of which will be set out in the Circular

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• “Existing Investment Management Agreement”

• “Group“

• “Hong Kong”

• “Independent Board Committee”

• “Independent Shareholders”

• “Investment Manager”

• “Listing Rules”

• ”Longstop Date”

• “Net Asset Value”

• “New Investment Management Agreement”

• “OPFSGL”

• the investment management agreement entered into between the Company and the Investment Manager for the period from 1 April 2008 to 31 March 2011 as disclosed in the announcement of the Company dated 14 September 2007 and the circular of the Company dated 22 October 2007

• the Company and its subsidiaries

• the Hong Kong Special Administrative Region of the PRC

• the independent board committee of the Company (comprising Mr. Kwong Che Keung, Gordon, Professor He Jia and Mr. Wang Xiaojun, being all the independent non-executive Directors) formed by the Company to advise the Independent Shareholders as to whether the terms of the Continuing Connected Transactions (including the Annual Caps) are fair and reasonable and whether the Continuing Connected Transactions (including the Annual Caps) are in the interests of the Group and the Shareholders as a whole

• Shareholders other than the Investment Manager, OPFSGL, Ottness and their respective associates

• Oriental Patron Asia Limited, trading in the name of “Oriental Patron Fund Management” in fund management activities for the purposes of the Existing Investment Management Agreement and the New Investment Management Agreement

• the Rules Governing the Listing of Securities on the Main Board of the Stock Exchange

• 31 March 2011

• the consolidated net asset value of the Company calculated in accordance with the provisions of the Articles

• the new investment management agreement date 13 January 2011 entered into between the Company and the Investment Manager to be effective on the Commencement Date, following the expiry of the Existing Investment Management Agreement on 31 March 2011 in respect of the provision of investment management and administration services by the Investment Manager to the Group for the period from 1 April 2011 to 31 March 2014

• Oriental Patron Financial Services Group Limited, a Shareholder

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“Ottness”	Ottness Investments Limited, a substantial Shareholder
“Percentage Ratio”	the applicable percentage ratio (other than the profit ratio
	and equity capital ratio) under Rule 14.07 of the Listing
	Rules
“Performance Fee Valuation	the last Business Day of each financial year of the Company,
Day”	being the period of 12 calendar months from 1 April of each
	year to 31 March of the following year
“PRC”	the People’s Republic of China, which for the purposes of
	this announcement, does not include Hong Kong, the Macau
	Special Administrative Region of the PRC and Taiwan
“Relevant Performance	the period commencing on 1 April of each year to 31 March
Period”	of the following year (both dates inclusive)
“SFC”	the Securities and Futures Commission in Hong Kong
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.10 each in the share capital of the
	Company
“Shareholder(s)”	the holder(s) of the issued Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“substantial shareholder”	has the meaning ascribed to it under the Listing Rules
“Valuation Date”	the last dealing day of the Stock Exchange in each calendar
	month or such other dealing day as considered appropriate
	by the Board for the purpose of calculating the Net Asset
	Value
“2007 EGM”	the extraordinary general meeting of the Company held on 7
	November 2007 at which the continuing connected
	transactions contemplated under the Existing Investment
	Management Agreement and the expected maximum amount
	of the fees payable to the Investment Manager thereunder
	for each of the three years ending 31 March 2011 were
	approved by the then Independent Shareholders

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“HK$”

Hong Kong dollars, the lawful currency of Hong Kong

“%”

percent

By order of the Board ZHANG Gaobo Executive Director and Chief Executive Officer

Hong Kong, 13 January 2011

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

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