Synagistics Limited — Interim / Quarterly Report 2020

Nov 29, 2019

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 LIMITED 東英金融有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1140)

ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2019

The Board of Directors (the “Board” or the “Directors”) of OP Financial Limited (the “Company” or “OP Financial”) is pleased to announce the unaudited condensed results of the Company and its subsidiaries (the “Group”) for the six months ended 30 September 2019 (the “Period”) with comparative figures for the corresponding period in 2018 and selected explanatory notes as follows.

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the Six Months Ended 30 September 2019

Note Turnover 3 Revenue 3 Net change in unrealized gain/(loss) on financial assets at fair value through profit or loss – arising from listed investments – arising from unlisted investments Net realized (loss)/gain on disposal/distribution of investments – arising from listed investments – arising from unlisted investments	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 174,182 1,292,204 106,134 135,230 (43,192) (142,377) 407,888 (82,030) 364,696 (224,407) (7,198) 114,622 4,660 60,928 (2,538) 175,550	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 174,182 1,292,204 106,134 135,230 (43,192) (142,377) 407,888 (82,030) 364,696 (224,407) (7,198) 114,622 4,660 60,928 (2,538) 175,550
		(142,377) (82,030)
		(224,407)
		114,622 60,928
		175,550

• For identification purposes only

– 1 –

Note Net change in unrealized gain on financial liabilities at fair value through profit or loss Realized loss on financial liabilities at fair value through profit or loss Realized gain on disposal of a subsidiary Realized gain on deemed disposal of an associate Exchange difference Provision for expected credit losses Equity-settled share-based payments Operating and administrative expenses Profit from operations Finance costs Share of results of investments accounted for using equity method Profit/(loss) before tax Taxation 5 Profit/(loss) for the Period 6 Other comprehensive income Items that may be reclassified to profit or loss Share of other comprehensive income of investments accounted for using equity method: Investment revaluation reserve Exchange differences Other comprehensive income for the Period Total comprehensive income for the Period Earnings/(loss) per share Basic 7(a) Diluted 7(b)

Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 46,701 41,491 (321) – 2 – 1,859 – (6,784) (54,475) (61,503) (16,461) (3,069) (6,715) (67,294) (48,417) 377,883 1,796 (7,017) (8,899) (145,568) (26,875) 225,298 (33,978) 40,766 (979) 266,064 (34,957) – (13) (152) (365) (152) (378) 265,912 (35,335) 9.17 cents (1.19) cents 9.14 cents (1.19) cents

– 2 –

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 September 2019

Note Non-current assets Fixed assets Right-of-use assets Deferred tax assets Investments accounted for using equity method Financial assets at fair value through profit or loss Debt investments Current assets Financial assets at fair value through profit or loss Debt investments Accounts and loans receivable 8 Prepaid tax Interest receivables Prepaid consideration Prepayments and other receivables Bank and cash balances TOTAL ASSETS Capital and reserves Share capital Reserves TOTAL EQUITY	30 September 2019 (Unaudited) HK$’000 19,302 99,596 48,991 977,273 2,056,063 1,690,558 4,891,783 488,405 275,727 87,121 – 37,763 479,626 19,870 48,685 1,437,197 6,328,980 290,094 5,461,091 5,751,185	31 March 2019 (Audited) HK$’000 4,118 – 8,234 1,147,289 1,604,321 1,423,674
		4,187,636
		653,869 601,805 172,402 12,837 29,640 – 23,763 193,800
		1,688,116
		5,875,752
		290,094 5,340,369
		5,630,463

– 3 –

Note Current liabilities Accounts payable Other payables Lease liabilities Loan payable Financial liabilities at fair value through profit or loss Tax payable Non-current liabilities Lease liabilities Financial liabilities at fair value through profit or loss TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES NET ASSETS Net asset value per share 9	30 September 2019 (Unaudited) HK$’000 – 15,097 34,555 367,357 27,074 40,334 484,417 65,204 28,174 93,378 577,795 6,328,980 5,751,185 HK$1.98	31 March 2019 (Audited) HK$’000 11,000 20,491 – 71,558 37,295 40,249
		180,593
		– 64,696
		64,696
		245,289
		5,875,752
		5,630,463
		HK$1.94

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

For the six months ended 30 September 2019

1 BASIS OF PREPARATION OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

The unaudited condensed consolidated interim financial information for the six months ended 30 September 2019 (the “Period”) have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2019, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by HKICPA. The accounting policies and methods of computation used in the preparation of these condensed consolidated interim financial information are consistent with those used in the annual financial statements for the year ended 31 March 2019, except as stated in note 2 below.

2 ACCOUNTING POLICIES

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2019, as described in those annual financial statements, except:

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

Application of new and amendments to HKFRSs

In the current interim period, the Group has applied, for the first time, the following new and amendments to HKFRSs issued by the HKICPA which are mandatorily effective for the annual period beginning on 1 April 2019 for the preparation of the Group’s condensed consolidated interim financial information:

HKFRS 16 Leases Amendments to HKFRSs Annual Improvements to HKFRSs 2015–2017 Cycle HK(IFRIC)-Int 23 Uncertainty over income tax treatments

The new and amendments to HKFRSs have been applied in accordance with the relevant transition provisions in the respective standards and amendments which results in changes in accounting policies, amounts reported and/or disclosures as described below.

2.1 Impacts and changes in accounting policies on application of HKFRS 16 “Leases”

The Group leases various offices. Rental contracts are typically made for fixed periods. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Until 31 March 2019, payments made under operating leases were charged to profit or loss on a straight-line basis over the period of the lease.

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From 1 April 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed payments (including in-substance fixed payments).

The lease payments are discounted using incremental borrowing rate of the Group which the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability;

• any lease payments made at or before the commencement date;

• any initial direct costs; and

• restoration costs.

Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

The Group has adopted HKFRS 16 “Leases” from 1 April 2019, but has not restated comparatives for the 2019 reporting period, as permitted under the simplified transition approach in the standard on a modified retrospective basis. The reclassifications and the adjustments arising from the new leasing standards are therefore recognized in the opening condensed consolidated statement of financial position on 1 April 2019.

On adoption of HKFRS 16, the Group recognized lease liabilities in relation to leases which had previously been classified as “operating leases” under the principles of HKAS 17 “Leases”. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 April 2019 in each territory or region where the lease assets are located. The incremental borrowing rate applied to the lease liabilities on 1 April 2019 was 3.85%.

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Set out below is a reconciliation of the operating lease commitments disclosed at 31 March 2019 to lease liabilities recognized on 1 April 2019:

Operating lease commitments disclosed as at 31 March 2019 Adjustment on including building management fee in lease component (note 1) Less: Short-term leases to be recognized on a straight-line basis as expense Effect of discounting at incremental borrowing rate at the date of initial adoption Lease liabilities recognized upon initial adoption of HKFRS 16 Representing: Current lease liabilities Non-current lease liabilities

HK$’000 111,704 9,395 (10) 121,089 (7,709) 113,380 33,038 80,342 113,380

note 1: The Company has applied practical expedient on including building management fee in lease component.

The right-of-use assets were measured on a retrospective basis as if the new rules had always been applied, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the condensed consolidated statement of financial position as at 31 March 2019. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

The recognized right-of-use assets relate to the following types of assets:

	30 September	1 April
	2019	2019
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Leased office premises	99,596	119,810

The change in accounting policy affected the following items in the condensed consolidated statement of financial position on 1 April 2019:

	31 March 2019	Effect of the
Condensed consolidated statement of	(As originally	adoption of	1 April 2019
financial position (extract)	presented)	HKFRS 16	(Restated)
	HK$’000	HK$’000	HK$’000
Non-current asset
Right-of-use assets	–	119,810	119,810
Non-current liability
Lease liabilities	–	80,342	80,342
Current liabilities
Other payables	20,491	6,430	26,921
Lease liabilities	–	33,038	33,038

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2.1.1 Practical expedients applied

In applying HKFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

• the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;

• reliance on previous assessments on whether leases are onerous;

• the accounting for operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short-term leases;

• the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and

• the use of hindsight in determining the lease term where the contract contains options to extend the lease.

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying HKAS 17 “Lease” and HKFRIC 4 “Determining whether an Arrangement contains a Lease”.

2.2 New and amended standards and interpretations not yet adopted

The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning on 1 April 2019 and have not been early adopted by the Group:

		Effective for annual
		periods beginning
		on or after
Amendments to HKFRS 10	Sale or Contribution of Assets	To be determined
and HKAS 28	Between an Investor and Its
	Associate or Joint Venture
Amendments to HKFRS 3	Definition of a Business	1 January 2020

The Group is assessing the full impact of the new standards, new interpretations and amendments to standards and interpretations.

There are no other HKFRSs or HK (IFRIC) interpretations that are not yet effective that would be expected to have a material impact on the Group.

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3 TURNOVER AND REVENUE

Turnover represents the aggregate of dividend income, interest income and gross sales proceeds from disposal of equity investments.

Dividend income Interest income Revenue Gross sales proceeds from disposal of equity investments Turnover	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 3,078 6,483 103,056 128,747 106,134 135,230 68,048 1,156,974 174,182 1,292,204	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 3,078 6,483 103,056 128,747 106,134 135,230 68,048 1,156,974 174,182 1,292,204
		135,230 1,156,974
		1,292,204

4 SEGMENT INFORMATION

The chief operating decision maker has been identified as the executive directors, subject to requirements of the Listing Rules. The executive directors assess 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 executive directors 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 United States of America	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 61,762 95,445 4,358 1,039 40,014 38,746 106,134 135,230	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 61,762 95,445 4,358 1,039 40,014 38,746 106,134 135,230
		135,230

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

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	30 September	31 March
	2019	2019
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Non-current assets other than financial instruments
Hong Kong	291,927	118,095
Mainland China	853,235	1,041,546

Information about major investments

During the Period, interest income received from four of the Group’s debt investments, which individually accounted for 10% (2018: 10%) or more of the Group’s revenue amounted to approximately HK$22,047,000, HK$14,846,000, HK$12,519,000 and HK$11,395,000 respectively (2018: interest income received from three of the Group’s debt investments and an investment relating to one of the Group’s listed equity securities amounted to approximately HK$26,667,000, HK$18,630,000, HK$14,841,000 and HK$18,277,000 respectively).

5 TAXATION

Hong Kong Profits Tax: Current tax Deferred tax Total tax (credit)/expense	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 85 23,452 (40,851) (22,473) (40,766) 979

Under the two-tiered profits tax rates regime, the first HK$2 million of profits of qualifying corporation will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at the flat rate of 16.5%.

Taxation on overseas profit has been calculated on the estimated assessable profit for the Period/year at the rates of taxation prevailing in that overseas country.

Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the condensed consolidated financial statements.

As at 30 September 2019, the Group has deferred tax assets of HK$10,019,000 (31 March 2019: HK$3,159,000) arising from unused tax losses of approximately HK$60,724,000 (31 March 2019: HK$19,146,000) available to offset against future profits.

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6 PROFIT/LOSS FOR THE PERIOD

The Group’s profit/loss for the Period is stated after charging the followings:

	Six months ended	Six months ended	Six months ended	Six months ended
	30 September
	2019				2018
	(Unaudited)		(Unaudited)
	HK$’000		HK$’000
Auditor’s remuneration	1,477				1,455
Depreciation of fixed assets	2,458				223
Depreciation of right-of-use assets	20,214				–
Investment management fee	6,900				6,900
Operating lease payments in respect of office premises	633				5,409
Staff costs (including directors’ emoluments)
Salaries and other benefits	26,777			20,383
Retirement benefits scheme contributions	335				312
Equity-settled share based compensation	3,069				6,715
	30,181			27,410

7 EARNINGS/LOSS PER SHARE

(a) Basic earnings/loss per share

Basic earnings/loss per share is calculated by dividing the profit/loss for the Period by the weighted average number of ordinary shares in issue less treasury shares during the Period.

Profit/(loss) for the Period (HK$’000) Weighted average number of ordinary shares in issue less treasury shares (in thousand) Basic earnings/(loss) per share (HK$)	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) 266,064 (34,957) 2,900,940 2,937,634 9.17 cents (1.19)cents

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(b) Diluted earnings/loss per share

Diluted earnings/loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of share options. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the company’s shares during the Period) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

Profit/(loss) for the Period (HK$’000) Weighted average number of ordinary shares in issue less treasury shares (in thousand) Adjustment for shares options (in thousand) Weighted average number of ordinary shares for diluted earnings/(loss) per share (in thousand) Diluted earnings/(loss) per share (HK$)	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) 266,064 (34,957) 2,900,940 2,937,634 9,793 – 2,910,733 2,937,634 9.14 cents (1.19)cents

Diluted loss per share for the period ended 30 September 2018 was the same as the basic loss per share. The Company’s outstanding share options had anti-dilutive effect as assumed issue of ordinary shares would reduce loss per share.

8 ACCOUNTS AND LOANS RECEIVABLE

Note Unsecured loan to a potential investee (a) Consideration receivables (b) Accounts receivable (c) Amounts due from associates, joint ventures, and related companies (d) Dividend receivable (e) Represented by: Accounts and loans receivable, gross Provision for ECL	30 September 2019 (Unaudited) HK$’000 19,009 39,182 105 27,570 1,255 87,121 140,955 (53,834) 87,121	31 March 2019 (Audited) HK$’000 20,195 59,778 136 26,893 65,400 172,402 222,248 (49,846) 172,402

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(a)		30 September	31 March
		2019	2019
		(Unaudited)	(Audited)
		HK$’000	HK$’000
	Unsecured loan	19,009	20,195

Unsecured loan of RMB60,000,000, approximately HK$65,928,000 (31 March 2019: HK$70,041,000), is provided to a potential investee established in the PRC. The Group assesses the feasibility of the potential investment from time to time.

Impairment loss of RMB42,700,000, approximately HK$46,919,000 (31 March 2019: HK$49,846,000) is recognized against unsecured loan at the reporting date based on estimated recoverable amount determined by reference to an analysis of the counterparty’s current financial position.

• (b) As at 30 September 2019, consideration receivables included balances of HK$46,097,000 (31 March 2019: HK$59,778,000) in respect of the disposal of equity investments. Provision for ECL of approximately HK$6,915,000 (31 March 2019: Nil) is recognized in profit or loss.

• (c) The aging analysis of accounts receivable is as follows:

	30 September	31 March
	2019	2019
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Unbilled	105	136

As at 30 September 2019 and 31 March 2019, the accounts receivable were neither past due nor impaired.

• (d) Amounts due from associates, joint ventures and related companies are interest-free, unsecured and repayable on demand.

• (e) Dividend receivable represents dividend declared by one of our listed securities (31 March 2019: CSOP).

9 NET ASSET VALUE PER SHARE

The net asset value per share is calculated by dividing the net asset value of the Group as at 30 September 2019 of approximately HK$5,751,185,000 (31 March 2019: HK$5,630,463,000) by the number of ordinary shares in issue less treasury shares at that date, being 2,900,940,000 (31 March 2019: 2,900,940,000).

10 DIVIDEND

The Board has resolved not to pay any interim dividend in respect of the Period (2018: Nil).

The Board recommended the payment of a final dividend of HK$0.046 per share for the year ended 31 March 2019 to the shareholders whose names are registered on the register of members of the Company at the close of business on 30 August 2019. It was approved at the Annual General Meeting held on 27 August 2019 and total final dividends of HK$133,443,240 was paid on 4 September 2019.

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MANAGEMENT DISCUSSION AND ANALYSIS

INVESTMENT REVIEW

Investment Activities

During the Period, we continued to carry out the investment strategy of focusing on China’s fast-growing industries and identifying market leaders or potential leaders thereof as core holding portfolio. Considering the uncertainty and volatility in global macro economy and capital markets, we remained prudent on new equity investments and endeavored to make maximum value of our capital and the financing capability as a public company.

We invested HK$1,217.45 million during the six months ended 30 September 2019, mainly through private equity and debt instruments. Apart from the new investment, our divestment amounted to HK$833.77 million for the Period, mainly derived from some short-term debt instruments, listed securities and private equity investment.

Portfolio Breakdown

Our investment strategy is comprised of three parts based on holding period, namely longterm core holding, medium-term private equity and venture capital, and short-term arbitrage and others. As our primary focus, the core holding strategy fully leverages the long-term investment horizon enabled by our own capital as a public company. We identify and invest in companies with high growth potential as core holding portfolio supporting their long-term development with patient capital. The medium-term private equity and venture capital strategy targets not only various opportunities in emerging industries but also fostering ecosystem for our core holding companies. The short-term arbitrage and others strategy mainly focuses on opportunities that emerge from short-term financing needs and other opportunistic deals.

As of 30 September 2019, the top three sectors of our existing portfolio were medical & health, finance and TMT. Our leading position in the medical & health sector in terms of valuation was the investment in iCarbonX, while in the finance sector, Beijing International Trust Co., Ltd. accounted for the biggest share. Our major investments in the TMT sector included Didi Chuxing and Wacai.

By Sector

By Holding Period

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Debt and Other Instruments 35.8% < 1 year 12.6%
Medical & Health 32.5% 1-2 years 62.1%
Finance 15.4% 2-3 years 5.9%
TMT 8.3% 3-4 years 14.4%
Materials & Industry 2.3% > 5 years 5.0%
Energy & Environment 2.1%
Consumer 1.9%
Others 1.7%
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MAJOR INVESTMENT PORTFOLIO

Long-Term Core Holding

As of 30 September 2019, the value of OP Financial’s position in the core holding companies amounted to HK$1,810.35 million. The portfolio comprised iCarbonX, which focuses on digital health management, CSOP Asset Management Limited (“CSOP”), the largest RQFII manager globally, and OPIM Holdings Limited (“OPIM”), which is Asia’s leading hedge fund platform. OP Financial will hold the core holding companies supporting their development in the long run and pursuing long-term investment return correspondingly.

iCarbonX Group Limited

Date of initial investment: 2018 Type of deal: Core Holding Equity ownership: ~5%, plus award Carrying value: HK$1,591.73 million Location: China Industry: Medical & Healthcare

In 2018, OP Financial invested in iCarbonX as one of its core holding companies and established a joint venture with iCarbonX named iCarbonX OP Investment Limited to capture potential investment opportunities within the healthcare industry. In June 2019, the Company entered an award agreement with iCarbonX who awarded the Company an aggregate of approximately 3% of its total equity, as a result of which the Company will own approximately 8% equity interests of iCarbonX in total upon completion of the procedures stipulated in the agreement.

iCarbonX is a global pioneer in artificial intelligence and precision health management and aims to build an ecosystem of digital life based on a combination of individuals’ life data, the Internet and artificial intelligence. Its main founding team comprises the world’s top biologists with extensive experience in multi-omics technology, medical service, biological data analysis, artificial intelligence and data mining.

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iCarbonX established the Digital Life Alliance with a number of cutting-edge health-tech companies in 2016, and has been actively carrying out crossborder collaborations in order to maximize synergy and promote mutual growth within the Alliance. OP Financial believes that iCarbonX’s expertise in life science and artificial intelligence equips the company with unparalleled competitive advantages. Going forward, the Company will continue to take an active role in bridging opportunities between iCarbonX and industry leaders to foster its development within the healthcare industry and attain capital appreciation. The investment in iCarbonX is believed to benefit OP Financial over the long run, therefore iCarbonX is held as a core holding company within OP Financial’s investment portfolio.

CSOP Asset Management Limited (“CSOP”)

Date of initial investment: 2008 Type of deal: Core Holding Equity ownership: 22.5% Carrying value: HK$116.97 million Location: Hong Kong Industry: Finance

CSOP was jointly established by OP Financial and China Southern Asset Management Co., Ltd. in 2008. As at 30 September 2019, OP Financial’s equity ownership of CSOP decreased to 22.5% from 30% as at 31 March 2019 as a result of the allotting of 66,666,667 ordinary shares by CSOP to its staff during the Period.

CSOP is a well-known asset management company based in Hong Kong, which manages private and public funds, and provides investment advisory services to Asian and global investors with a dedicated focus on China investing. As a leading cross-border asset management expert in terms of Asset Under Management (AUM), CSOP once held the world’s largest RMB Qualified Foreign Institutional Investor (RQFII) quota of RMB46.10 billion. It is also one of the best offshore asset managers in China. To capture opportunities in the fast-changing market, CSOP launched innovative products during the Period, including leverage/ reverse ETFs, Hong Kong dollar and US dollar Money Market ETFs, GAMA quantitative index strategy products, etc.

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China has been accelerating the reforms and opening-up of its financial market in recent years and it remains one of the most attractive investment destinations for international investors despite the trade dispute with the US. CSOP will continue to bridge investment opportunities in China for overseas investors with its innovative fund products and expertise, achieving decent returns for investors and at the same time enhancing its leading position in the RQFII product management sector. OP Financial believes that CSOP will continue to bring solid returns and therefore will hold it as a long-term core holding company.

OPIM Holdings Limited

Date of initial investment: 2008 Type of deal: Core Holding Equity ownership: 30% Carrying value: HK$101.65 million Location: Hong Kong Industry: Finance

As at 30 September 2019, OP Financial owned 30% of the issued share capital in OPIM Holdings Limited and also owned 100% of the issued nonvoting preference shares of its subsidiaries (together “OPIM”).

OPIM is a leading hedge fund platform in Asia serving both global and Asia-based managers to develop funds across diversified strategies for institutional and professional investors. It has built a whole ecosystem linking up fund managers, service providers and capital allocators, which enables the managers to launch offshore funds with efficient and affordable structures. With the ecosystem, managers are able to focus on fund performance and build a proven track record for future expansion.

With the acceleration of the entrance of China’s private equity funds to the overseas market, OPIM is expected to maintain a steady rise in the asset of the momentum, in terms of the growth of the number of funds and the overall scale. At the same time, China is accelerating the opening-up of its capital market, which will improve foreign managers’ access to the Chinese market and as a result, OPIM is expected to benefit from it. OP Financial believes that OPIM has great potential to continue to grow its business, and therefore will hold it as a long-term core holding company.

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Medium-Term Private Equity and Venture Capital

As of 30 September 2019, OP Financial’s holding in the medium-term private equity and venture capital category amounted to HK$1,579.28 million. The Company added two investments amounting to HK$14.14 million and exited from a few projects in this category during the Period. OP Financial is expected to benefit from medium-term asset appreciation and as a result will maintain the holding as reserve for future divestment. Apart from certain listed equity investments, the major investments are listed as below:

Treasure Up Ventures Limited (Beijing International Trust Co., Ltd., “BITIC”)

Date of initial investment: 2016 Type of deal: Private Equity Equity ownership: 25% Carrying value: HK$506.88 million Location: China Industry: Finance

OP Financial acquired 25% equity interest in Treasure Up Ventures Limited, which in turn participates in a minority economic interest in BITIC.

BITIC is a China-based large-scale non-banking financial institution, which primarily engages in trusts, investment funds, financial services, brokerage and advisory business.

The trust industry has been playing an irreplaceable role in China’s economic development and financial resource allocation. In recent years, the rapid development of wealth management business driven by the accumulation of private wealth has brought the industry with historic opportunities. Quickly adapting to the changes in macroeconomic situation and national policy environment, BITIC implemented the strategy of focusing on quality rather than quantity and adjusted its service offerings in 2018, which enabled the steady growth in its trust assets. OP Financial believes that BITIC will benefit from the continuous opening-up and improvement of China’s financial system and the upgrading of the trust industry, as a result of which BITIC is expected to deliver a decent return on investment to the Company.

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Victorian Investment Limited Partnership

Date of initial investment: 2018 Type of deal: Private Equity Equity ownership: 46.15% Carrying value: HK$183.96 million Location: China Industry: Medical & Healthcare

In 2018, OP Financial made the investment in Victorian Investment Limited Partnership to participate in the investment regarding the healthcare business of a Chinese company.

The investment has a duration of 3 years and OP Financial plans to divest the investment upon maturity. The investment in Victorian Investment Limited Partnership allows OP Financial to further benefit from the potential upside in the Chinese healthcare sector, echoing the Company’s investment focus.

Xiaoju Kuaizhi Inc. (Didi Chuxing)

Date of initial investment: 2016 Type of deal: Private Equity Equity ownership: <1% Carrying value: HK$156.71 million Location: China Industry: TMT

Xiaoju Kuaizhi Inc. (“Xiaoju Kuaizhi”) is the Cayman Island SPV of Didi Chuxing. OP Financial subscribed less than 1% preferred shares issued by Xiaoju Kuaizhi.

Didi Chuxing is the world’s leading one-stop mobile transportation platform by offering a full range of app-based mobility options for 550 million registered users.

With the development of urbanization and the evolution of consumption habits, mobile transportation is playing an increasingly important role in urban society. In the past few years, Didi Chuxing has been actively exploring the application of artificial intelligence, big data and other technologies in the transportation industry to continuously optimize its service offerings and has been making significant progress in expanding its global footprints. OP Financial believes that with Didi Chuxing’s leading position in the industry and its penetration in the smart transportation sector, the Company will benefit from the prospects of Didi Chuxing, which in turn will drive the capital appreciation of the investment.

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OP EBS Fintech Investment L.P. (Wacai Holdings Limited, or “Wacai”)

Date of initial investment: 2017 Type of deal: Private Equity Equity ownership: 40% Carrying value: HK$158.17 million Location: China Industry: TMT

OP EBS Fintech Investment L.P. was jointly formed by OP Financial and China Everbright Securities International Structured Finance Company Limited, for the subscription of preferred shares issued by Wacai.

As one of the earliest established fin-tech companies in China, Wacai has gradually evolved into an integrated internet finance platform, offering its customers tools and services on personal financial management, wealth management and credit solution.

OP Financial expects the Internet finance industry will continue to be driven by the technological advancement. The industry regulation in China is becoming increasingly standardized. It is expected that major players, including Wacai, will benefit from the gradual consolidation of the currently fragmented market. OP Financial will continue to monitor the dynamic development of China’s Internet financial industry in an effort to capture the potential investment opportunities thereof.

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BE Financial Service (Beijing) Investment Holdings Limited

Date of initial investment: 2017 Type of deal: Private Equity Equity ownership: 20% Carrying value: HK$50.39 million Location: China Industry: Environment

OP Financial partnered with Beijing Enterprises Water Group Limited (“BEWG”, stock code: 371. HK) to facilitate the establishment of BE Financial Service (Beijing) Investment Holdings Limited ( 北 控金服 ( 北京 ) 投資控股有限公司 , “BEFS”). OP Financial committed RMB200 million for 20% registered capital in BEFS and has paid up the first capital call of RMB40 million (equivalent to HK$46.64 million) in August 2017.

BEFS works along with its subsidiaries to provide comprehensive services of fund investment, financing and management for BEWG’s PPP projects in relation to environmental protection. As a China-based large-scale water treatment and environmental protection group with strong core competency, BEWG has achieved a nationwide strategic deployment and penetrated into overseas markets successfully. OP Financial believes that with Chinese government’s continuous support for the environmental protection industries and the market-leading position of BEWG, BEFS will continue to develop its business and bring mid-term investment returns to the Company.

Short-Term Arbitrage and Others

As of 30 September 2019, OP Financial’s holdings in listed securities that fall into this category amounted to HK$132.11 million, while the holdings in debt and other instruments amounted to approximately HK$1,966.29 million. During the Period, OP Financial made new investment in and divestment from some debt instruments and listed securities to enhance the capital liquidity and generated returns from interests, dividends and capital gains. At the same time, our portfolio of debt instruments recorded provision for expected credit losses following the adoption of HKFRS 9, while some listed securities recorded market price change for the Period.

The Company invests in debt instruments with the consideration of return, risk and liquidity. For the Period, the interest rate we charged for the debt instruments, of which the borrowers were mainly investment companies, ranged from 6% to 20% as compared to 8% to 24% for the same period last year. The total interest income generated from debt instruments was HK$102.26 million with loan tenures ranging from 3 months to 3 years, while the corresponding amount and range were HK$107.78 million and 3 months to 1 year respectively for the same period last year.

OP Financial maintains close communication with debt issuers and loan borrowers. As at the end of the Period, management have assessed the repayment ability of the issuers/borrowers for the determination of expected loss provisions.

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FINANCIAL REVIEW

Financial position

Net asset value: The Group’s net asset value as at 30 September 2019 was HK$5,751.19 million or HK$1.98 per share, increasing from HK$5,630.46 million and HK$1.94 per share respectively as at 31 March 2019.

Gearing: The gearing ratio, which was calculated on the basis of total liabilities over total equity as at 30 September 2019, was 0.10 (31 March 2019: 0.04).

Investments accounted for using equity method: It mainly represents our interest in companies held under the strategy of mid-term private equity and venture capital, including Treasure Up and Wacai, and the share of the core holding company CSOP. Assets decreased by 14.8% to HK$977.27 million as at 30 September 2019 (31 March 2019: HK$1,147.29 million), which was mainly due to the valuation decrease of BITIC as a result of the impact by the unfavorable market environment during the Period. The decrease was partially offset by the increase in the carrying value of several associates including CSOP due to their robust performance.

Financial assets at fair value through profit or loss: The HK$286.28 million or 12.7% of increase from HK$2,258.19 million as at 31 March 2019 to HK$2,544.47 million was mainly attributable to the increase in the fair value of iCarbonX, which was driven by a share award agreement granting OP Financial the rights to receive approximately 3% of iCarbonX’s equity interests. The increase was partially offset by a number of divestments and the decrease in the valuation of some listed securities, equity investments/exchangeable bond and investment funds.

Debt investments: It represents the investments in debt instruments during the Period, which amounted to HK$1,966.29 million as at 30 September 2019 (31 March 2019: HK$2,025.48 million).

Bank and cash balances: As of 30 September 2019, our bank and cash balances stood at HK$48.69 million (31 March 2019: HK$193.80 million). We manage our bank and cash balances principally on the basis of making good use of capital to achieve returns for shareholders and ensuring sufficient liquidity for the Company’s working capital requirements. Majority of the cash was utilized for several investments during the Period while at the same time we also partially disposed of or divested some investments and some debt instruments upon maturity.

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RESULTS

Despite the challenging economic environment and volatile stock markets, which exerted pressure on the valuation of our portfolio during the Period, we achieved very solid financial performance thanks to our prudent and diversified investment strategy as well as the rigorous risk management approach. The total comprehensive income recorded a gain of HK$265.91 million as compared to a loss of HK$35.34 million for the same period last year, primarily attributable to the contribution from the net change in unrealized gain on financial assets at fair value through profit or loss and the interest income from debt instruments.

Condensed consolidated statement of profit or loss and other comprehensive income

Revenue represents the income received and receivable on investments during the Period as follows:

Dividend income(1) Interest income(2)	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 3,078 6,483 103,056 128,747 106,134 135,230	Six months ended 30 September 2019 2018 (Unaudited) (Unaudited) HK$’000 HK$’000 3,078 6,483 103,056 128,747 106,134 135,230
		135,230

• (1) Dividends received and receivable from listed securities during the Period.

• (2) Interest income of HK$103.06 million were mainly generated from the Group’s debt instruments as well as term deposit in banks.

Net change in unrealized gain/(loss) on financial assets at fair value through profit or loss: The net change in unrealized gain of HK$364.70 million (1H FY2018/19: loss of HK$224.41 million) represents the net unrealized gain of HK$407.89 million on unlisted investments, which was largely attributable to the award shares to be received from iCarbonX, partially offset by the unrealized loss of HK$43.19 million on listed investments due to the volatile stock market during the Period.

Net change in unrealized gain on financial liabilities at fair value through profit or loss: The net change in unrealized gain of HK$46.70 million (1H FY2018/19: gain of HK$41.49 million) mainly represents the share of unrealized loss by our co-investment partners.

Realized (loss)/gain on disposal/distribution of investments: The realized loss of HK$2.54 million (1H FY2018/19: gain of HK$175.55 million) during the Period mainly represents the realized loss on the disposal of listed securities, which was partially offset by the realized gain on the partial disposal of an investment fund, divestment of a private equity investment and a debt instrument classified as financial asset at fair value through profit or loss.

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Provision for expected credit losses (“ECL”): The HK$61.50 million (1H FY2018/19: HK$16.46 million) represents the provision for ECL on debt instruments for the Period following the adoption of HKFRS 9 by the Group.

Equity-settled share-based payments: The HK$3.07 million (1H FY2018/19: HK$6.72 million) represents the cost of share options amortized during the Period. These share options were granted to certain Directors, employees and consultants on 20 May 2016 and 1 February 2018 respectively, which are allowed to be vested over five years from the grant dates.

Operating and administrative expenses: The total amount of HK$67.29 million (1H FY2018/19: HK$48.42 million) was mainly the result of staff costs, investment management fee, depreciation, service fee expense as well as legal and professional fees. The year-overyear increase in operating and administrative expenses was primarily driven by the HK$20.21 million of depreciation on Right-of-Use (ROU) asset upon the adoption of HKFRS 16 since 1 April 2019, while there was no such depreciation cost for the same period last year. The increase was partially offset by the decrease in rent & rates and legal & professional fee.

Share of results of investments accounted for using equity method: A net loss of approximately HK$145.57 million (1H FY2018/19: loss of HK$26.88 million) mainly represents our share of loss of Treasure Up during the Period, which was primarily due to the impact by the unfavorable market environment resulting the decrease in BITIC’s valuation during the Period. The share of loss was partially offset by the shared gain of CSOP, Wacai and a number of other associates thanks to their robust performance.

Other comprehensive income: Changes in the Group’s NAV, which are not accounted for in the “profit/(loss) for the Period”, are recorded under “other comprehensive income”. The net loss of HK$152,000 (1H FY2018/19: loss of HK$378,000) represents the exchange differences. Including the “profit/(loss) for the Period”, the total comprehensive income for the Period was a gain of HK$265.91 million.

DIVIDEND POLICY AND PROPOSED INTERIM DIVIDEND

The Board has resolved not to pay any interim dividend in respect of the six months ended 30 September 2019 (1H FY2018/19: Nil).

LIQUIDITY AND FINANCIAL RESOURCES

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

During the Period, the Group had cash and bank balances of HK$48.69 million (31 March 2019: HK$193.80 million). The Group had an aggregate of HK$367.36 million of bank loans from our principal bankers and interest-free borrowings from one of the associates for a PRC potential investment as at 30 September 2019 (31 March 2019: HK$71.56 million). The debtto-equity ratio (interest-bearing external borrowings divided by shareholders’ equity) was 5.2% (31 March 2019: zero) while the current ratio (current assets divided by current liabilities) was 3 times (31 March 2019: 9 times). For further analysis of the Group’s cash position, current assets and gearing, please refer to paragraphs under subsections headed “Financial Position” above. The Board believes that the Group has sufficient financial resources to satisfy its immediate investments and working capital requirements.

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CAPITAL STRUCTURE

As at 30 September 2019, shareholders’ equity and the total number of shares in issue less treasury shares of the Company stood at HK$5.75 billion (31 March 2019: HK$5.63 billion) and 2,900,940,000 (31 March 2019: 2,900,940,000), respectively.

MATERIAL ACQUISITIONS AND DISPOSALS OF INVESTMENTS

The Company had the following material acquisitions as well as disposals of investments during the Period.

Medium-term private equity and venture capital Short-term arbitrage opportunities – Listed securities – Debt instruments Prepaid consideration Total	New/ Additional Investment (HK$ million) 14.14(1) 0.11 708.74 494.46(4) 1,217.45	Divestment/ Disposal (HK$ million) 87.88(2) 7.89(3) 738.00 N/A 833.77

• (1) The HK$14.14 million represents two investments in our unlisted partnership interest during the Period.

• (2) The HK$87.88 million mainly represents the dividend declared by Treasure Up, the divestment from a few investments and partial redemption of Greater China Select Fund during the Period.

• (3) The HK$7.89 million represents the divestment from two listed securities in our portfolio during the Period.

• (4) The HK$494.46 million represents the prepaid consideration made pursuant to “股份轉讓交易協議” dated 18 June 2019 and “股份轉讓交易協議之補充協議” dated 28 June 2019, signed between the Group, through one of its subsidiaries, and the seller, under which the Group determined to purchase a total of 63,202,590 shares, or 19.9% of total capital of Xi’an Dagang Road Machinery Co., Ltd. (stock code: 300103.SZ). The total consideration of RMB695.23 million, equivalent to HK$763.92 million, is agreed to be paid in instalments based on certain contractual terms. Up to 30 September 2019, RMB450 million was prepaid according to plan.

SEGMENT INFORMATION

Segment information of the Group is set out in note 4 on page 9 and 10 of this announcement.

EMPLOYEES

As of 30 September 2019, the Group had 49 employees (31 March 2019: 47), inclusive of all Directors of the Group and its subsidiaries. Total staff costs including equity-settled sharebased payments for the Period amounted to HK$30.18 million (1H FY2018/19: HK$27.41 million). The Group’s remuneration policies are in line with market practices and are determined on the basis of the performance and experience of individual employees.

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SHARE OPTION SCHEME

During the Period, the Board had not granted any share option under the Company’s share option scheme to any Directors or eligible employees of the Group and there were no granted share options exercised (1H FY2018/19: 300,000). As at 30 September 2019, there were 72,700,000 (31 March 2019: 72,700,000) share options that remained outstanding under the share option scheme.

The detailed disclosures relating to the Company’s share option scheme and valuation of options are set out in the section headed “Share Option Scheme” under Notes to the condensed consolidated interim financial information.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES

As at 30 September 2019, the Group was exposed to foreign exchange risk arising from financial instruments that are monetary items including investments recognized as financial assets at fair value through profit or loss, prepaid consideration for equity investment, loan and other receivables, bank balances and other payables (31 March 2019: financial assets at fair value through profit or loss, loan and other receivables, bank balances and other payables). These assets were denominated in RMB and the maximum exposure to foreign exchange risk was RMB625,206,000, equivalent to HK$686,977,000 (31 March 2019: RMB284,589,000, equivalent to HK$332,215,000).

As at 30 September 2019, the Group held certain financial assets which were denominated in USD. The Board is of the opinion that the Group’s exposure to USD foreign exchange risk is minimal as HKD is pegged to USD based on the Linked Exchange Rate System in Hong Kong.

CHARGES ON THE GROUP’S ASSETS AND CONTINGENT LIABILITIES

As at 30 September 2019, the Group had given guarantee in respect of the settlement of RMB20 million (equivalent to HK$21,976,000) (31 March 2019: HK$23,347,000) of loan provided by 博石資產管理股份有限公司 to 上海幸福九號網絡科技有限公司. Due to the financial difficulties of 上海幸福九號網絡科技有限公司, 博石資產管理股份有限公司 agreed to extend the loan repayment from 上海幸福九號網絡科技有限公司 until 31 December 2019. In the opinion of the directors of the Company, the fair values of the financial guarantee contract of the Group are insignificant at initial recognition and the directors of the Company consider that the probability of being liable to settle the loan and the liable amount to be 50% of the loan principal, which is RMB10 million, given we have not demanded by 博石資產管理 股份有限公司 to settle the loan on behalf of 上海幸福九號網絡科技有限公司 as at the date of this announcement. As such, a provision for loan guarantee of RMB10 million (equivalent to HK$10,988,000) was recognized as at 30 September 2019.

FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS AND THEIR EXPECTED SOURCES OF FUNDING

As at 30 September 2019, there were no plans for material investments or capital assets, but the Company may, at any point, be negotiating potential investments. The Company considers new investments as part of its daily business, and therefore management may publically announce these plans as they become necessarily disclosable to shareholders during the course of the financial year.

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PURCHASE, SALE OR REDEMPTION OF SECURITIES

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

CORPORATE GOVERNANCE CODE

Except otherwise stated herein, none of the Directors is aware of any information that would reasonably indicate that the Company is not, or was not, at any time during the Period, in compliance with the Corporate Governance Code set out in Appendix 14 to the Listing Rules.

Code Provision A.6.7 provided that, the independent non-executive Directors and other nonexecutive Directors, as equal Board members, should give the Board and any committees on which they serve the benefit of their skills, expertise and varied backgrounds and qualifications through regular attendance and active participation. They should also attend general meetings and develop a balanced understanding of the views of shareholders. During the Period, each of Mr. ZHANG Gaobo, Mr. ZHANG Weidong, Dr. FU Weigang and Mr. KWONG Che Keung Gordon attended the annual general meeting held on 27 August 2019 (“AGM”). However, due to other business commitment on urgent basis, Mr. ZHANG Zhi Ping, Dr. LIU Zhiwei, Dr. WU Zhong, Mr. CHEN Yuming, Prof. HE Jia and Mr. WANG Xiaojun did not attend the AGM.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS

The Company has adopted a “Policy for Director and Employee Dealings in the Company’s Securities” which supplements the Model Code for Securities Transactions by Directors of Listed Issuers (“Model Code”) set out in Appendix 10 of the Listing Rules and is available on the Company’s website. Following specific enquiry by the Company, all Directors have confirmed, that they have fully complied with the Model Code and the aforesaid internal policy regarding directors’ securities transactions throughout the Period.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES AND DEBENTURES

At no time during the Period was the Company or its associated corporation(s) a party to any arrangements to enable the Directors or chief executive of the Company to acquire any interests or short positions in the shares, underlying shares or debentures of the Company or its associated corporation(s).

AUDIT COMMITTEE

The Company’s audit committee, comprising three independent non-executive Directors, has reviewed with management the accounting principles and practices adopted by the Group and discussed auditing and financial reporting matters including a review of the condensed consolidated interim financial information for the Period before recommending them to the Board for approval.

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REVIEW OF INTERIM FINANCIAL INFORMATION

The external auditor has reviewed the condensed consolidated interim financial information for the Period in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants.

FORWARD-LOOKING STATEMENTS

This announcement contains certain statements that are forward-looking or which use certain forward-looking terminologies. These forward-looking statements are based on the current beliefs, assumptions and expectations of the Board of the Company regarding the industry and markets in which it invests. These forward-looking statements are subject to risks, uncertainties and other factors beyond the Company’s control which may cause actual results or performance to differ materially from those expressed or implied in such forward-looking statements.

PUBLICATION OF INTERIM RESULTS AND INTERIM REPORT ON THE WEBSITES OF THE STOCK EXCHANGE AND THE COMPANY

The interim results announcement is published on the website of the Stock Exchange (www.hkexnews.hk) and that of the Company (www.opfin.com.hk). The interim report will be dispatched to the shareholders of the Company and will be available on the websites of the Stock Exchange and that of the Company in due course.

By order of the Board OP Financial Limited ZHANG Gaobo Executive Director and Chairman

Hong Kong SAR, 29 November 2019

As at the date of this announcement, the Board comprises four executive Directors, namely, Mr. Zhang Zhi Ping, Mr. Zhang Gaobo, Dr. Liu Zhiwei and Mr. Zhang Weidong; one nonexecutive Director, namely Dr. Wu Zhong; and four independent non-executive Directors, namely, Professor He Jia, Mr. Wang Xiaojun, Mr. Chen Yuming and Dr. Fu Weigang.

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