Oi Wah Pawnshop Credit : ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2017

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.

(Incorporated in the Cayman Islands with limited liability)

Note 1: Net interest margin during the year refers to our interest income in respect of our pawn loans and mortgage loans less our finance costs, divided by the average of month-end gross loan receivables balances of the corresponding loans during the year.

The board of directors (the "Board") of Oi Wah Pawnshop Credit Holdings Limited (the "Company") is pleased to announce the consolidated results of the Company and its subsidiaries (collectively, the "Group") for the year ended 28 February 2017, together with the comparative figures for the preceding financial year, as follows:

For the year ended 28 February 2017 (Expressed in Hong Kong dollars)

For the year ended 28 February 2017

(Expressed in Hong Kong dollars unless otherwise indicated)

1. GENERAL INFORMATION

   Oi Wah Pawnshop Credit Holdings Limited (the "Company") was incorporated in the Cayman Islands on 5 June 2012. The Company and its subsidiaries (together referred to as the "Group") are principally engaged in secured financing business in Hong Kong, including pawn loans and mortgage loans. The shares of the Company have been listed on the Main Board of the Stock Exchange of Hong Kong Limited ("the Stock Exchange") since 12 March 2013.

2. SIGNIFICANT ACCOUNTING POLICIES
3. Statement of compliance

   These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards ("HKFRSs"), which collective term includes all applicable individual HKFRSs, Hong Kong Accounting Standards and Interpretations issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the applicable disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules").

4. Revenue recognition

   Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

5. Interest income

   Interest income for all interest-bearing financial instruments is recognised in profit or loss on an accruals basis using the effective interest method.

   The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

   For impaired financial assets, the accrual of interest income based on the original terms of the financial assets is discontinued.

6. Fee income

   Fee income is recognised when the corresponding service is provided, except where the fee is charged to cover the costs of a continuing service to, or risk borne for, the customer, or is interest in nature. In these cases, the fee is recognised as income in the accounting period in which the costs or risk are incurred or is accounted for as interest income.

7. Disposal of repossessed assets

   Disposal gain or loss is recognised when the buyer of the repossessed assets has accepted the goods and the related risks and rewards of ownership.

8. Rental income from operating leases

   Rental income receivable under operating leases is recognised in profit or loss in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payment receivable. Contingent rentals are recognised as income in the accounting period in which they are earned.

9. Financial instruments

10. Initial recognition

    The Group classifies its financial instruments into different categories at inception, depending on the purpose for which the assets were acquired or the liabilities were incurred. The categories are: loans and receivables and other financial liabilities.

    Financial instruments are measured initially at fair value, which normally will be equal to the transaction price plus transaction costs that are directly attributable to the acquisition of the financial asset or issuance of the financial liability.

    The Group recognises financial assets and financial liabilities on the date it becomes a party to the contractual provisions of the instrument. Other financial assets and financial liabilities are recognised using settlement date accounting.

11. Classification

    Loans and receivables

    Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than (1) those that the Group intends to sell immediately or in the near term, which are classified as held for trading; (2) those that the Group, upon initial recognition, designates as at fair value through profit or loss or as available-for-sale; or (3) those where the Group may not recover substantially all of its initial investment, other than because of credit deterioration, which will be classified as available-for-sale. Loans and receivables mainly comprise pawn loans, mortgages and unsecured loans. Pawn loans are loans provided whereby personal property such as gold, jewellery and diamonds, watches and consumer electronic products are used as collateral for the security of the loans. Mortgages are loans secured by real estates and unsecured loans are loans without collateral.

    Loans and receivables are carried at amortised cost using the effective interest method, less impairment losses, if any (see note 2(d)).

    Other financial liabilities

    Financial liabilities are measured at amortised cost using the effective interest method.

12. Derecognition

    A financial asset is derecognised when the contractual rights to receive the cash flows from the financial asset expire, or where the financial asset together with substantially all the risks and rewards of ownership, have been transferred.

    A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired.

13. Impairment of assets

14. Financial assets

    The carrying amounts of the Group's assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. Objective evidence that financial assets are impaired includes observable data that comes to the attention of the Group about one or more of the following loss events which has an impact on the future cash flows on the assets that can be estimated reliably:

    • significant financial difficulty of the issuer or borrower;

    • a breach of contract, such as a default or delinquency in interest or principal payments;

    • it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; and

    • significant changes in the technological, market, economic or legal environment that have an adverse effect on the borrower.

      If any such evidence exists, the carrying amount is reduced to the estimated recoverable amount by means of a charge to profit or loss.

      Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of loans and receivables, which are measured at amortised cost, whose recovery is considered doubtful but not remote. In this case, the impairment losses are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against loans and receivables directly and any amounts held in the allowance account relating to that borrower are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

      Loans and receivables

      Impairment losses on loans and receivables are measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets). Receivables with a short duration are not discounted if the effect of discounting is immaterial.

      The total allowance for impairment losses consists of two components: individual impairment allowances, and collective impairment allowances.

      The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. Assets that are not individually significant are collectively assessed for impairment by grouping together financial assets with similar risk characteristics.

      The individual impairment allowance is based upon management's best estimate of the present value of cash flows which are expected to be received discounted at the original effective interest rate. In estimating these cash flows, management make judgements about the borrower's financial situation and the net realisable value of any underlying collateral or guarantees in favour of the Group. Each impaired asset is assessed on its merits.

      In assessing the need for collective impairment allowances, management uses statistical modelling and considers historical trends of factors such as credit quality, portfolio size, concentrations, and economic factors. In order to estimate the required allowance, the Group makes assumptions both to define the way the Group models inherent losses and to determine the required input parameters, based on historical experience and current economic conditions.

      Where there is no reasonable prospect of recovery, the loan and the related interest receivables are written off.

15. Other assets

    Internal and external sources of information are reviewed at each reporting date to identify indications that other assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased.

    If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.

    • Calculation of recoverable amount

      The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

    • Recognition of impairment losses

      An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount.

    • Reversals of impairment losses

      An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

      A reversal of impairment losses is limited to the asset's carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to the statement of comprehensive income in the year in which the reversals are recognised.

16. Repossessed assets

    In the recovery of impaired loan receivables granted under the Pawnbrokers Ordinance (Chapter 166 of the laws of Hong Kong), the Group takes possession of the collateral assets from the customers. This possession takes place once a loan becomes overdue, subject to a grace period granted at the discretion of the Group in certain cases.

    Repossessed assets are initially recognised at the amortised cost of the related outstanding loans on the date of repossession, which is generally below the net realisable value of the repossessed assets. Upon repossession of the assets, the related loans and advances together with the related impairment allowances, if any, are derecognised from the statement of financial position. Subsequently, repossessed assets are carried at the lower of the amount initially recognised or net realisable value and are therefore written down if and when the net realisable value falls to below the carrying amount of the asset. The excess/shortfall of the net proceeds over the carrying amount of the repossessed assets is recognised as a gain/loss upon the disposal of the assets.

17. Interest-bearing borrowings

    Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

18. Related parties

19. A person, or a close member of that person's family, is related to the Group if that person:

20. has control or joint control over the Group;

21. has significant influence over the Group; or

22. is a member of the key management personnel of the Group or the Group's parent.

23. An entity is related to the Group if any of the following conditions applies:

24. The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

25. One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

26. Both entities are joint ventures of the same third party.

27. One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

28. The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.

29. The entity is controlled or jointly controlled by a person identified in (a).

30. A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

31. The entity, or any member of a group of which it is a part, provides key management personnel services to the group or to the group's parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

32. Segment reporting

    Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial statements provided regularly to the Group's most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group's various lines of businesses and geographical locations.

    Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type of class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

33. REVENUE

    The principal activities of the Group are the granting of pawn loans and mortgage loans in Hong Kong.

    Revenue represents interest income earned on pawn loans and mortgage loans, and results on disposal of repossessed assets. The amount of each nature of business of revenue recognised in revenue during the year are as follows:

    2017 $'000	2016 $'000
    Revenue from pawn loan business - Interest earned on loan receivables	61,808	61,877
    - Disposal of repossessed assets	4,801	(814)
    Total revenue from pawn loan business	66,609	61,063
    Revenue from mortgage loan business - Interest earned on loan receivables	148,541	125,595
    Total	215,150	186,658

    Cost of repossessed assets disposed for the year ended 28 February 2017 amounted to $50.9 million (29 February 2016: $59.8 million).

    The Group's customer base is diversified and includes only one customer (29 February 2016: one customer) with whom transactions have exceeded 10% of the Group's revenues. During the year ended 28 February 2017, revenues from interest earned on mortgage loan receivables from this customer, including interest earned from entities which are known to the Group to be under common control with this customer, amounted to approximately $37.2 million (29 February 2016: $32.5 million).

34. SEGMENT REPORTING

The Group has one reportable segment, which is the provision of secured financing business in Hong Kong, including pawn loans and mortgage loans. Therefore, no additional reportable segment and geographical information have been presented.

5	OTHER REVENUE AND OTHER NET LOSS	2017	2016
$'000	$'000
Other revenue
Rental income	1,080	1,292
Interest earned on unsecured loans	84	248
Credit related fee income	2,483	2,846
Bank interest income	1	1
Others	412	274
4,060	4,661
Other net loss
Net loss on disposal of property, plant and equipment	-	(2)
6	PROFIT BEFORE TAXATION
Profit before taxation is arrived at after charging:
2017 $'000	2016 $'000
(a) Finance costs Finance charges on obligations under finance leases	21	29
Interest on loans from the ultimate holding company	5,764	4,980
Interest on bank loans and overdrafts	1,214	5,344
Interest on other loans	19,219	6,537
Interest on debt securities issued	7,915	5,769
34,133	22,659

2017 $'000	2016 $'000
(b)	Staff costs Salaries and other benefits	18,090	17,297
Directors' remuneration	8,425	7,471
Contributions to defined contribution scheme	575	505
Charge for provision for long service payment	108	196
27,198	25,469
(c)	Other operating expenses Premises and equipment expenses excluding depreciation: - rental of premises	11,906	11,385
- maintenance, repairs and others	993	1,369
12,899	12,754
Auditors' remuneration	1,111	1,020
Depreciation	534	488
Advertising expenses	11,603	9,865
Legal and professional fees	2,170	2,918
Others	5,548	6,285
20,966	20,576
61,063	58,799

7 IMPAIRMENT LOSSES ON LOAN RECEIVABLES 2017 2016

$'000 $'000

Impairment losses on loan receivables

• Individual impairment losses charged/(released) to

  profit or loss (note 10(a)) 996 (38)

• Collective impairment losses (released)/charged to profit or loss

(note 10(a)) (496) 529

500 491