Aceso Life Science Group Limited — Proxy Solicitation & Information Statement 2017

May 11, 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser for independent advice.

If you have sold or transferred all your Shares in Hao Tian Development Group Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker, or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

==> picture [19 x 51] intentionally omitted <==

==> picture [18 x 62] intentionally omitted <==

==> picture [19 x 64] intentionally omitted <==

==> picture [237 x 42] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00474)

MAJOR TRANSACTION ACQUISITION OF 75% EQUITY INTEREST IN THE TARGET COMPANY

A letter from the Board is set out on pages 5 to 14 of this circular.

12 May 2017

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
APPENDIX I	– FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . . .	15
APPENDIX II	– FINANCIAL INFORMATION OF THE TARGET GROUP. . . . . . .	19
APPENDIX III	– UNAUDITED PRO FORMA FINANCIAL
	INFORMATION OF THE ENLARGED GROUP . . . . . . . . . . . . .	92
APPENDIX IV	– GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	101

– i –

DEFINITIONS

In this circular and the appendices to it, unless the context otherwise requires, the following terms and expressions have the following meanings:

• “Acquisition”

the acquisition of the Sale Shares by the Purchaser pursuant to the SP Agreement;

“Announcement” the announcement of the Company dated 16 January 2017 regarding the Acquisition;

• “Applicable Laws” any constitutions, enactments, ordinances, regulations, orders, administrative or judicial notices, judgments, common law, treaties and any other legislations or laws of any relevant jurisdictions;

“Board”

the board of Directors;

• “Business Day(s)” a day on which the Stock Exchange is open for the transaction of business;

• “BVI” the British Virgin Islands; “Company” Hao Tian Development Group Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Stock Exchange (stock code:474);

• “Completion” the completion of the SP Agreement;

• “Completion Date” the third Business Day after the fulfillment (or waiver) of last of the Conditions of the SP Agreement or such other date as the Vendor and the Purchaser may agree, being 6 February 2017;

• “Conditions”

the conditions precedent to the Completion;

• “connected person(s)”

has the meaning as ascribed to it under the Listing Rules;

• “Director(s)”

the directors of the Company;

– 1 –

DEFINITIONS

“Encumbrances” a mortgage, charge, pledge, lien, option, restriction, right of first refusal, right of pre-emption, third-party right or interest, other encumbrance or security interest of any kind, or another type of preferential arrangement (including, without limitation, a title transfer or retention arrangement) having similar effect; “Enlarged Group” the Group and the Target Group upon Completion; “Executive” the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director; “Facilities” the loan facilities of up to HK$495,000,000 with interest rate of prime rate plus 3% per annum provided by Haitong International Securities to the Purchaser on 16 January 2017, which is secured by the Share Charge and a corporate guarantee given by the Company and is available for 120 days from the date of the Facilities (or another date as specified in the facility agreement);

• “Group” the Company and its subsidiaries; “Haitong International Haitong International Securities Company Limited, a Securities” fellow subsidiary of Haitong International Capital, and is a licensed corporation to carry out Type 1 (dealing in securities), Type 3 (leveraged foreign exchange trading) and Type 4 (advising on securities) regulated activities under the SFO, being the agent making the Share Offer on behalf of the Offeror;

“HK$” Hong Kong dollars, the lawful currency of Hong Kong; “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China; “Latest Practicable Date” 9 May 2017, being the latest practicable date for the purpose of ascertaining certain information contained herein; “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange;

– 2 –

DEFINITIONS

“Long Stop Date”	the 30th calendar day immediately following the date of the
	SP Agreement, or another date as agreed by the parties to
	the SP Agreement in writing;
“Offer Share(s)”	Issued share(s) in the Target Company other than those
	shares in the Target Company already owned or agreed to
	be acquired by the Purchaser and parties acting in concert
	with it;
“percentage ratios”	as defined in the Listing Rules;
“PRC”	People’s Republic of China, excluding Hong Kong, the
	Macau Special Administrative Region and Taiwan for the
	purpose of this circular;
“Purchaser” or “Offeror”	Hao Tian Management (China) Limited, a company
	incorporated in Hong Kong with limited liability, which is
	an indirectly wholly-owned subsidiary of the Company;
“RMB”	Renminbi, the lawful currency of Hong Kong;
“Sale Shares”	the 750,000,000 Target Shares, representing approximately
	75.00% of the total issued share capital of the Target
	Company as at the date of the Announcement;
“SFC”	the Securities and Futures Commission of Hong Kong;
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong);
“Share Charge”	the share charge given by the Purchaser in respect of (i)
	750,000,000 Sale Shares that it will hold in the Target
	Company immediately after Completion in favour of
	Haitong International Securities; and (ii) the Offer Share(s)
	it will acquire through the Share Offer pursuant to the
	Facilities;
“Shareholder(s)”	holders of the share(s) in the Company;

– 3 –

DEFINITIONS

“Share Offer”	the mandatory unconditional cash offer to be made by
	Haitong International Securities for and on behalf of the
	Purchaser to acquire all of the issued Target Shares in the
	entire share capital of the Target Company (other than those
	Target Shares already owned or agreed to be acquired by
	the Purchaser and parties acting in concert with it);
“SP Agreement”	the agreement dated 16 January 2017 entered into by the
	Vendor, the Warrantor and the Purchaser for the sale and
	purchase of the Sale Shares;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Takeovers Code”	The Code on Takeovers and Mergers published by the SFC,
	as amended, supplemental or otherwise modified from time
	to time;
“Target Company”	Clear Lift Holdings Limited, a company incorporated under
	the laws of the Cayman Islands, the shares of which are
	listed on the Stock Exchange (stock code: 1341);
“Target Group”	the Target Company and its subsidiaries;
“Target Shares”	the ordinary share(s) of HK$0.01 each in the share capital
	of the Target Company;
“Vendor”	Tang J F T Company Limited, a company incorporated in
	the BVI with limited liability and the owner of the Sale
	Shares where Mr. Tang Kwok Kan holds 90.04% equity
	interest in it, being its largest ultimate beneficial owner;
“Warrantor”	Tang Yiu Chi James, the sole director of the Vendor and
	a director of the Target Company as at the date of the
	Announcement; and
“%”	per cent.

– 4 –

LETTER FROM THE BOARD

==> picture [19 x 51] intentionally omitted <==

==> picture [18 x 62] intentionally omitted <==

==> picture [19 x 64] intentionally omitted <==

==> picture [237 x 43] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00474)

Executive Directors Registered office: Mr. Xu Hai Ying Cricket Square, Dr. Zhiliang Ou, J.P. (Australia) Hutchins Drive, Mr. Fok Chi Tak P.O. Box 2681 Grand Cayman KY1-1111 Independent non-executive Directors Cayman Islands Mr. Chan Ming Sun, Jonathan Mr. Lam Kwan Sing Principal place of business Mr. Lee Chi Hwa, Joshua in Hong Kong: Rooms 4917-4932, 49/F., Sun Hung Kai Centre, 30 Harbour Road, Wan Chai, Hong Kong 12 May 2017

To the Shareholders

Dear Sir/Madam,

MAJOR TRANSACTION ACQUISITION OF 75% EQUITY INTEREST IN THE TARGET COMPANY

INTRODUCTION

Reference is made to the Announcement in relation to the SP Agreement. On 16 January 2017 (after trading hours of the Stock Exchange), the Purchaser, the Vendor and the Warrantor entered into the SP Agreement in relation to the Acquisition.

– 5 –

LETTER FROM THE BOARD

Completion took place on 6 February 2017. The Target Company has become a subsidiary of the Company.

The purpose of this circular is to provide you with, among other things, further details of the Acquisition, and other information as required under the Listing Rules.

SP AGREEMENT

The principal terms of the SP Agreement are summarised as follows:

Date : 16 January 2017 Parties : (a) The Purchaser; (b) The Vendor; and (c) The Warrantor.

Subject matter

Pursuant to the SP Agreement, the Purchaser conditionally agreed to purchase and the Vendor have conditionally agreed to sell the Sale Shares, being 750,000,000 Target Shares in aggregate, representing approximately 75.00% of the total issued share capital of the Target Company as at the date of the Announcement, free from all Encumbrances thereto as at the Completion Date.

Immediately after the Completion, the Purchaser (by itself or through its nominee(s)) held 750,000,000 Target Shares.

Consideration for the Sale Shares and basis of determination

The aggregate consideration for the Sale Shares is HK$592,500,000, equivalent to approximately HK$0.79 per Sale Share and was fully settled upon Completion. The aggregate consideration was arrived at after arm’s length negotiations between the Purchaser and the Vendor with reference to the trend of closing prices of the shares in the Target Company as quoted on the Stock Exchange.

The HK$0.79 per Sale Share represents:

• (i) a discount of approximately 12.22% to the closing price of HK$0.90 per share in the Target Company as quoted on the Stock Exchange on 16 January 2017; and

– 6 –

LETTER FROM THE BOARD

• (ii) a premium of approximately 17.91% to the closing price of HK$0.67 per share in the Target Company as quoted on the Stock Exchange on the Latest Practicable Date.

The Purchaser financed the consideration payable by the Purchaser under the SP Agreement by internal resources and the Facilities.

Conditions Precedent of the SP Agreement

Completion of the SP Agreement is subject to all of the following Conditions being and remaining satisfied as at Completion (or waived as described below):

• (a) the passing of the necessary resolutions by the Target Company and the Vendor approving the SP Agreement and all other transactions contemplated under the SP Agreement and the granting of such regulatory approvals as may be necessary, including without limitation in accordance with the Listing Rules, the Takeovers Code and other Applicable Laws;

• (b) all necessary authorisations, consents, licences, agreements, approvals or permissions of any kind of, from or by third parties and/or government or regulatory authorities required to implement all the transactions contemplated under the SP Agreement having been obtained by the Vendor and/or the Target Group on terms acceptable to the Purchaser and remaining in full force and effect (with evidence provided to the Purchaser to the Purchaser’s satisfaction in its absolute judgement);

• (c) the listing status of the Target Company on the Stock Exchange not having been revoked or withdrawn at any time prior to Completion, the Target Shares continuing to be traded on the Stock Exchange at any time prior to the Completion (save for any temporary suspension for no longer than five (5) consecutive trading days or such other period as the Purchaser may agree in writing or the temporary suspension in connection with transactions contemplated under the SP Agreement) and there being no indication from the Stock Exchange or the Executive that the listing status of the Target Company will be suspended, cancelled, revoked or withdrawn at any time after Completion as a result of the transactions contemplated under the SP Agreement;

• (d) the representation, warranties and/or undertakings given by the Vendor and the Warrantor under the SP Agreement shall remain true, accurate and not misleading throughout the period from the date of the SP Agreement to the Completion Date, and there having been no breach by any party of the SP Agreement;

– 7 –

LETTER FROM THE BOARD

• (e) there being no indication from the Stock Exchange that the listing status of the Target Company will be suspended, cancelled, revoked or withdrawn at any time after Completion as a result of the transactions contemplated under the SP Agreement;

• (f) since the date of the SP Agreement there being no material adverse change in the principal business, operations, properties, conditions (financial or otherwise), personnel or prospects of the Target Group nor the happening of events which may have a material adverse effect;

• (g) the purchase of the Sale Shares and other transactions as contemplated under the SP Agreement having been approved by the Shareholders in accordance with the requirements under the Listing Rules; and

• (h) (if required) all requisite waivers, consents and approvals from any relevant governments or regulatory authorities or other relevant third parties in connection with the transactions contemplated by the SP Agreement required to be obtained on the part of the Purchaser having been obtained.

Other than the Conditions (a), (b), (c), (e), (g) and (h) set out above, the Purchaser might waive any of the Conditions at its sole discretion.

Completion is conditional upon all the Conditions being fulfilled (or, where applicable, waived) at or before 12:00 noon (Hong Kong time) of the Long Stop Date. Completion shall take place on the third Business Day after the day on which the last of the Conditions is fulfilled (or, otherwise waived) or such other date as the parties to the SP Agreement may agree.

In the event that the Conditions are not fulfilled (or waived in accordance with the terms of the SP Agreement) at or before 12:00 noon (Hong Kong time) of the Long Stop Date, the SP Agreement shall lapse and be of no further effect (save for the confidentiality and other general provisions under the SP Agreement which shall continue to take effect), and no party to the SP Agreement shall have any liability and obligation to the other parties, save in respect of any antecedent breaches of the SP Agreement.

– 8 –

LETTER FROM THE BOARD

Completion

The Completion took place on 6 February 2017.

Upon Completion, the Target Company became an indirect subsidiary of the Group and the financial results of the Target Group would be consolidated into the Group’s financial information.

INFORMATION ABOUT THE PURCHASER AND THE GROUP

The Purchaser is an investment holding company incorporated in Hong Kong with limited liability, and is an indirect wholly-owned subsidiary of the Company.

The Company is an investment holding company. As at the date of this Circular, the Group is principally engaged in the business of financial services, securities investment, trading of futures, logistics and warehousing, rental and trading of construction machinery.

INFORMATION ABOUT THE VENDOR AND THE WARRANTOR

The Vendor is a company incorporated in the BVI and is principally engaged in investment holding. The Warrantor, a resident in Hong Kong, is the sole director of the Vendor and a director of the Target Company.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Vendor, its ultimate beneficial owners and the Warrantor are third parties independent of the Company and its connected persons.

INFORMATION ABOUT THE TARGET GROUP

The Target Company is a company incorporated in the Cayman Islands with limited liability and its Shares have been listed on the Stock Exchange since 10 December 2015. The Target Group is principally engaged in the construction machinery business, serving primarily the construction sector in Hong Kong. The Target Group’s principal activities include (i) rental of construction machinery, such as crawler cranes, aerial platforms and foundation equipment; (ii) trading of new or used construction machinery and parts; and (iii) provision of machinery transportation services.

– 9 –

LETTER FROM THE BOARD

Financial information of the Target Group

Set out below are certain audited consolidated financial information of the Target Company for the two years ended 31 December 2015 and 2016 respectively as extracted from the audited financial statements of the Target Group set out in Appendix II:

	For the year ended 31	March
	2015	2016
	HK$’000	HK$’000
Profit/(loss) before income tax	31,336	(11,983)
Profit/(loss) and total comprehensive income/(expense)	24,364	(11,245)
	As at 31 March
	2015	2016
	HK$’000	HK$’000
Total assets	464,130	390,785
Net assets	238,441	243,841

FINANCIAL EFFECTS OF THE ACQUISITION

Upon Completion, the Target Company will become an indirect non-wholly owned subsidiary of the Group and accordingly, the financial results of the Target Company will be consolidated into the Group’s consolidated financial statements.

Effects on assets and liabilities

As set out in the unaudited pro forma financial information on the Enlarged Group in Appendix III to this circular, had the Acquisition been completed on 30 September 2016, the total assets of the Enlarged Group would have been increased by approximately HK$215.5 million from approximately HK$7,229.6 million as at 30 September 2016 to approximately HK$7,445.1 million, and total liabilities of the Enlarged Group would have been increased by approximately HK$159.0 million from approximately HK$1,425.3 million as at 30 September 2016 to approximately HK$1,584.3 million.

– 10 –

LETTER FROM THE BOARD

Effects on earnings

Upon Completion, the Target Group had become non-wholly owned subsidiaries of the Company and the financial results of the Target Group will be consolidated into the consolidated financial statements of the Group. According to the interim report published by the Target Group as enclosed in Appendix II to the Circular, the Target Group recorded a loss attributable to owners of the Target Company of approximately HK$498,000 for the six months ended 30 September 2016, together with the estimated legal and professional fees and other direct expenses in relation to the Acquisition of approximately HK$4,600,000. The effects on earnings on our Group had the Acquisition been completed on 30 September 2016 would be approximately HK$5,098,000.

REASONS FOR AND BENEFITS DERIVED FROM THE ACQUISITION

The Directors consider that the Acquisition will broaden the Group’s range of investment and source of income and will potentially increase the Group’s revenue and enhance the Group’s profitability.

The Directors consider that the deteriorated financial performance of the Target Group for the year ended 31 March 2016 and the six months ended 30 September 2016 is mainly due to (i) the further delay in commencement of certain public projects and public-related projects (the “ Delayed Projects ”), under which the main contractors have further delayed and revised their commencement dates of certain Delayed Projects; (ii) the general market fluctuation in the construction industry; and (iii) one-off listing expenses incurred in relation to the listing of the shares of the Target Group.

The construction industry in Hong Kong has grown significantly in past few years due to the substantial increase in demand for construction works performed by contractors at construction sites in Hong Kong. The total gross output value of construction works, the total investment value in construction projects and the public expenditure on infrastructure in Hong Kong all recorded a significant growth in past few years. The government of Hong Kong has increased its infrastructure investment in order to achieve the objective of promoting economic growth through infrastructural development in Hong Kong, including Ten Major Infrastructure Projects and Operation Building Bright and Revitalising Historic Building. Further development of the Hong Kong International Airport, including the construction of the 3rd Runway has also been approved.

– 11 –

LETTER FROM THE BOARD

However, the delay in the approval for funding applications for some development plans and public works, such as the North East New Territories New Development Areas Project, affected the expenditure on government projects to be granted during the Year, as well as the commencement of the relevant projects operated by the construction work companies. Any delay in government funding approval process may adversely affect the expenditure on government projects which may affect the construction companies. It thus created pressure on the construction industry as well as the construction machinery rental and trading industry.

Despite the challenges faced by the industry in the past 2 years due to the local political environment, such should be relatively short-lived. As the Government is expected to continue its investment on infrastructure and public housing in the long run, the construction machinery rental service industry in Hong Kong is likely to grow moderately.

The government policies are conducive to the growth of construction machinery market. With regard to public infrastructure, the “Ten Major Infrastructure Projects” plans, the extension of MTR railways as well as 3rd Runway of Hong Kong International Airport will continue to drive the market as more machinery will be required to fulfill the huge construction demand. Moreover, concerning residential properties, in order to cool down the overheated property market and cope with the increasing population, the Government has committed to providing more public housing in the near future. Supportive government policies will lead to a higher number of construction projects, and thereby boost demand for construction machinery rental services in Hong Kong.

Based on the above, the Directors consider that the Target Group is likely to benefit from the favourable marco environment and its competitive edges in the longer run, and the recent decline in the revenue and profitability of the Target Group should be mainly due to the overall industry situation. Such could in fact create a window for strong players like the Target Company to capture bigger market share in the near term, and therefore the Directors are of the view that the Acquisition would increase the Group’s revenue and enhance the Group’s profitability.

Having considered the above, the Directors are of the view that the terms set out in the SP Agreement are fair and reasonable and the transaction as contemplated under the SP Agreement is in the interest of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios under Chapter 14 of the Listing Rules exceed(s) 25% but less than 100%, the Acquisition constitutes a major transaction for the Company and is therefore subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

– 12 –

LETTER FROM THE BOARD

Pursuant to Rule 14.44 of the Listing Rules, (i) as no Shareholder has material interest in the Acquisition, none of the Shareholders is required to abstain from voting if the Company were to convene a general meeting for the approval of the Acquisition; and (ii) the Company has obtained a written approval dated 16 January 2017 from Asia Link Capital Investment Holdings Limited, being the controlling Shareholder, holding 2,581,498,949 Shares (representing approximately 61.76% of the issued share capital of the Company as at the date of the Announcement) for the approval of the Acquisition. As such, no extraordinary general meeting will be convened by the Company to approve the Acquisition.

In accordance with Rule 14.67(6)(a)(i) of the Listing Rules, this circular should include an accountant’s report on the Target Company. However, given that the shares of the Target Company are listed on the Stock Exchange, the Company is exempted from including the accountant’s report on the Target Company in this circular pursuant to Rule 4.01(3) of the Listing Rules.

UNCONDITIONAL MANDATORY CASH OFFER

Immediately after the Completion, the Purchaser and parties acting in concert with it held a total of 750,000,000 Target Shares, representing approximately 75.00% of the total issued share capital of the Target Company.

Accordingly, pursuant to Rule 26.1 of the Takeovers Code, the Purchaser would be required to make the Share Offer. The Share Offer made by Haitong International Securities for and on behalf of the Offeror, closed at 4:00 p.m. on Monday, 13 March 2017 and was not revised or extended by the Offeror.

Below are the details of the Purchaser’s acquisition and disposal of the shares in the Target Company during the offer period of the Share Offer:

		Number of
	Acquisition/	shares in the
Date	Disposal	Target Company	Consideration
			(HK$)
6 February 2017	Acquisition	750,000,000	592,500,000
20 February to 13 March 2017	Acquisition	57,947,000	45,778,130
21 April 2017	Disposal	57,947,000	35,927,140

– 13 –

LETTER FROM THE BOARD

For further details of the Share Offer, please refer to the announcement dated 16 January 2017 jointly issued by the Target Company and the Offeror, the composite offer and response document dated 20 February 2017 jointly issued by the Target Company, the Offeror and the Company and the announcement dated 13 March 2017 jointly issued by the Target Company, the Offeror and the Company.

RECOMMENDATION

The Directors consider the terms of the SP Agreement and the transactions contemplated therein are fair and reasonable and in the interests of the Company and the Shareholders as a whole and recommend the Shareholders to vote in favour of the resolutions if the Company were to convene a general meeting to approve the SP Agreement and the transactions contemplated therein.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully, By order of the Board Hao Tian Development Group Limited Fok Chi Tak Executive Director

– 14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for the three years ended 31 March 2014, 2015 and 2016 and the six months ended 30 September 2016 are disclosed on pages 36 to 146 of the annual report of the Company for the year ended 31 March 2014, pages 38 to 143 of the annual report of the Company for the year ended 31 March 2015, pages 51 to 168 of the annual report of the Company for the year ended 31 March 2016 and pages 25 to 80 of the interim report of the Company for the six months ended 30 September 2016, all of which are published on the website of the Stock Exchange at www.hkexnews.hk, and the website of the Company at www.haotianhk.com. Quick links to the annual reports and the interim report of the Company are set out below:

annual report of the Company dated 27 June 2014 for the year ended 31 March 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0718/LTN20140718183.pdf

annual report of the Company dated 26 June 2015 for the year ended 31 March 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0713/LTN20150713217.pdf

annual report of the Company dated 28 June 2016 for the year ended 31 March 2016:

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0721/LTN20160721535.pdf

interim report of the Company dated 29 November 2016 for the six months ended 30 September 2016:

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/1220/LTN20161220215.pdf

2. WORKING CAPITAL

After taking into account the available credit facilities, the Group’s internally generated funds and cash flows impact of the Acquisition, in the absence of unforeseeable circumstance, the Directors are of the opinion that the Enlarged Group has sufficient working capital for its present requirements for at least the next twelve months following the date of this circular.

– 15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. STATEMENT OF INDEBTEDNESS

Indebtedness

As at 31 March 2017, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had outstanding indebtedness as follows:

Borrowings, finance lease and pledged Assets

• I. The Enlarged Group had an outstanding loan with principal amount of HK$20.0 million due to a bank. The borrowing was secured by a bank deposit of HK$10.0 million, bore interest at Prime Rate plus 1.0% per annum and were repayable in August 2017;

• II. The Enlarged Group had an outstanding loan with principal amount of HK$10.0 million due to a bank. The borrowing was secured by a bank deposit of HK$10.0 million, bore interest at Prime Rate minus 1.0% per annum and was repayable in April 2018;

• III. The Enlarged Group had an outstanding bank overdraft with principal amount of HK$10.0 million due to a bank. The borrowing was secured by a bank deposit of HK$10.0 million, bore interest at Prime Rate per annum and was repayable on demand.

• IV. The Enlarged Group had an outstanding secured loan with a principal amount of HK$142.0 million due to a bank. The borrowing was secured by certain of the Enlarged Group’s assets, including certain of the Enlarged Group’s availablefor-sale investments, investment held for trading of HK$400.0 million, the entire issued capital of Hao Tian Finance Co. Ltd. and its immediate holding company, Guo Guang Limited, both of which are owned subsidiaries of the Company, certain bank accounts of Hao Tian Finance Co. Ltd. The borrowing bore interest at HIBOR plus 4.0% per annum and was repayable in September 2017;

• V. The Enlarged Group had certain outstanding corporate bonds and notes with principal amount of HK$164.5 million due to certain independent third parties. The notes were unsecured, unguaranteed, bore interest at fixed rate of ranging from 3.25% to 7.5% per annum and were repayable between 2018 and 2021; and

– 16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• VI. The Enlarged Group had an outstanding secured note with a principal amount of US$20.0 million (equivalent to approximately HK$155.3 million) to an independent third party. The note was secured by certain of the Group’s investment held for trading of HK$300.3 million as at 31 March 2017 and was repayable in July 2017.

• VII. The Enlarged Group had an outstanding bank loan with a principal amount of HK$50 million to a bank. The loan was secured by the Group’s investment held for trading of HK$73.0 million as at 31 March 2017 and was repayable in January 2018.

• VIII. The Enlarged Group had an outstanding bank loan with a principal amount of HK$70 million to a bank. The loan was secured by the Group’s investment held for trading of HK$297 million as at 31 March 2017 and was repayable in March 2018.

• IX. The Enlarged Group had an outstanding loan with a principal amount of HK$320 million under the Facilities.

• X. The Enlarged Group had outstanding borrowings and finance lease payables of approximately HK$91.1 million and HK$68.0 million respectively. The borrowings and finance lease payables were secured by (1) leasehold land and building with net carrying amount of approximately HK$0.6 million; (2) bank deposits of approximately HK$4.6 million and (3) machinery and motor vehicles with net carrying amount of approximately HK$85.1 million.

Contingent liabilities

The Group provided corporate guarantees amounting to approximately HK$2.3 million to the banks in respect of finance lease obligations of certain third party customers. Under the guarantees, the Group would be liable to make payments to the banks if the banks are unable to recover the amounts under these finance leases from those customers.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the Group and the Target Company did not have outstanding at the close of business on 31 March 2017 any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, hire purchases commitments, guarantees or other contingent liabilities.

– 17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. MATERIAL CHANGE

Pursuant to the Company’s profit warning announcement dated 3 April 2017 (the “ Profit Warning Announcement ”), based on a preliminary review and assessment of the Group’s unaudited management accounts, the Enlarged Group expected to record a loss for the year ended 31 March 2017 (the “ Year ”) as compared with a profit for the corresponding period in 2016. The expected loss for the Year was mainly attributable to the net realized loss from the disposal of certain available-for-sale investments and investments held for trading of approximately HK$760 million, together with the fair value loss on investments held for trading of approximately HK$1,730 million during the Year. The figures stated above had considered the impact from deferred taxation. The Enlarged Group is still in the process of finalizing its consolidated final results for the Year. As such, the Profit Warning Announcement was made solely on the basis of assessment by the Board with reference to the unaudited management accounts of the Enlarged Group available for the time being, which may be subject to further adjustments after further internal review by the Board and review by the external auditors of the Company.

As at the Latest Practicable Date, save as disclosed in the Profit Warning Announcement, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 March 2016, being the date to which the latest published audited financial statements of the Group were made up.

5. PROSPECTS

Upon completion of the Acquisition, the Group will continue to be principally engaged in the business of financial services, securities investment, trading of futures, logistics and warehousing, rental and trading of construction machinery.

– 18 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

1. FINANCIAL INFORMATION OF THE TARGET COMPANY

Financial information, together with the accompanying notes to the financial statements, of the Target Company for the years ended 31 March 2014 and 31 March 2015 is disclosed on pages I-4 to I-55 of the prospectus of the Company dated 30 November 2015.

Financial information, together with the accompanying notes to the financial statements, of the Target Company for the year ended 31 March 2016 is disclosed on pages 37 to 98 of the annual report of the Target Company for the year ended 31 March 2016 published on 29 July 2016.

Financial information, together with the accompanying notes to the financial statements, of the Target Company for the six months ended 30 September 2016 is disclosed on pages 16 to 40 of the interim report of the Target Company for the six months ended 30 September 2016.

Quick links to the prospectus, the annual report and the interim report of the Target Company are set out below:

prospectus of the Target Company dated 30 November 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/1130/LTN20151130055.pdf

annual report of the Target Company for the year ended 31 March 2016:

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0729/LTN20160729240.pdf

interim report of the Target Company for the six months ended 30 September 2016:

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/1215/LTN20161215345.pdf

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE TARGET COMPANY

The following management discussion and analysis of the results of the Target Company is extracted from the prospectus of the Target Company dated 30 November 2015, the annual report for the years ended 31 March 2016, and the interim report for the six months ended 30 September 2016.

– 19 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Management discussion and analysis of the results of the Target Company for the years ended 31 March 2014 and 31 March 2015

FINANCIAL INFORMATION

You should read the following discussion and analysis in conjunction with our combined financial information and notes thereto set forth in the Accountant’s Report included as Appendix I and our selected historical consolidated financial information and operating data included elsewhere in this prospectus. Our consolidated financial information has been prepared in accordance with HKFRSs issued by Hong Kong Institute of Certified Public Accountants. Our financial information and the discussion and analysis below assume that our current structure had been in existence throughout the Track Record Period. For further information in relation to our Group’s structure, please refer to the section headed ‘‘History, development and Reorganisation’’ in this prospectus.

The following discussion and analysis contain certain forward-looking statements that reflect our current views with respect to future events and our financial performance. These statements are based on assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual outcomes and developments will meet our expectations and predictions depends on a number of risks and uncertainties over which we do not have control. Please refer to the sections headed ‘‘Risk factors’’ and ‘‘Forward-looking statements’’ for discussions of those risks and uncertainties.

Our financial year begins from 1 April and ends on 31 March. All references to ‘‘FY2013’’, ‘‘FY2014’’ and ‘‘FY2015’’ mean the financial years ended 31 March 2013, 31 March 2014 and 31 March 2015, respectively.

OVERVIEW

Our Group engaged in the construction machinery business, serving primarily the construction sector in Hong Kong. We offer a comprehensive range of services including (i) rental of construction machinery, such as crawler cranes, aerial platforms and foundation equipment; (ii) trading of new or used construction machinery and spare parts; and (iii) transportation services.

During FY2013, FY2014 and FY2015, we have experienced revenue growth mainly from our rental and trading business. Our revenue for FY2014 was approximately HK$316.8 million, representing an increase of approximately 30.4% as compared with the corresponding figure of approximately HK$242.9 million for FY2013. Our revenue for FY2015 was approximately HK$368.9 million, representing an increase of approximately 16.4% as compared with the corresponding figure of approximately HK$316.8 million for FY2014. Our revenue for the five months ended 31 August 2015 was approximately HK$140.1 million, representing a decrease of approximately 13.9% as compared with the corresponding figure of approximately HK$162.7 million for the five months ended 31 August 2014.

In FY2013 and FY2014, our net profit was approximately HK$33.1 million and HK$39.3 million, respectively. Our net profit for FY2015 was approximately HK$24.4 million, representing a decrease of approximately 37.9% as compared with the corresponding figure of approximately HK$39.3 million for FY2014. Our net profit for the five months ended 31 August 2015 was approximately HK$3.7 million, representing a decrease of approximately 80.7% as compared with the corresponding figure of approximately HK$19.2 million for the five months ended 31 August 2014.

– 192 –

– 20 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Our Directors believe that our growth was and will be attributable to our well-established market presence, our wide variety of products and services, and our experienced management team.

BASIS OF PRESENTATION

The combined financial statements of our Group for the Track Record Period has been prepared in conform with HKFRSs issued by the Hong Kong Institute of Certified Public Accountants. The combined statements of comprehensive income, combined statements of changes in equity and combined statements of cash flows of our Group for the Track Record Period have been prepared using the financial information of the entities now comprising our Group, as if the current group structure had been in existence throughout the Track Record Period, or since the respective dates of incorporation of the relevant entities now comprising our Group where this is a shorter period. The combined statements of financial position of our Group as at 31 March 2013, 31 March 2014 and 31 March 2015, and 31 August 2014 and 31 August 2015 have been prepared to present the assets and liabilities of the entities now comprising our Group which were in existence at those dates, as if the current group structure had been in existence as at the respective dates. The net assets and results of our Group were combined using the carrying value from the perspective of the Active Shareholders. All significant intra-group transactions and balances have been eliminated on combination.

Further details on the basis of presentation are set out in Note 2 in the Accountant’s Report.

PRINCIPAL FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our financial condition and results of operations have been and will continue to be affected by a number of factors, including those discussed below, some of which are beyond our control.

Market demand

The demand of rental and trading of construction machinery is driven by the level of construction and infrastructure projects. As majority of our revenue derived from rental and trading of construction machinery in Hong Kong, our profitability is depended on the level of constructions and infrastructure projects in Hong Kong.

The timing, size and nature of these projects will, on the other hand, be determined by the interplay of a number of factors such as the government’s spending patterns on the construction projects, the investment of property developers and the general conditions and prospects of the local economy. These factors may affect the availability of construction projects from both the private and public sector.

According to the IPSOS Report, the revenue of construction machinery rental and trading service industry in Hong Kong was estimated to continue to grow at a CAGR of approximately 10.8% and 6.9% from 2015 to 2019, respectively. Our Directors believe that our Group will be benefited from the continuous growth in demand for rental and trading of construction machinery.

Our relationship with stakeholders and reputation in the industry

Our Group has more than 50 years of experience within the construction industry, among which, over 18 years of experience in rental of construction machinery, we have a long cooperation history with most of our customers, suppliers and stakeholders.

– 193 –

– 21 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Our Directors believe that our business development will continue to benefit by our long established relationship with our stakeholders and good reputation in the industry. Should there be any major disruption to our operations due to events such as industrial accidents, major or frequent breakdowns of our rental construction machineries, inability of our servicing teams or our third party service suppliers to provide timely service to our customers, or due to circumstances beyond our control, we may face adverse publicity and hence our reputation with customers may be adversely affected. Consequently, we may risk losing customers’ confidences for our rental and trading business, and our profitability and financial performance may be adversely affected.

Staff costs

We experienced an increase in staff costs during the Track Record Period. Staff costs for FY2013, FY2014 and FY2015 were approximately HK$53.7 million, HK$57.2 million and HK$56.8 million, representing approximately 22.1%, 18.1% and 15.4% of our total revenue, respectively. Staff costs for the five months ended 31 August 2014 and 2015 were approximately 14.4% and 16.0% of our total revenue, respectively.

Our staff costs increased from approximately HK$53.7 million for FY2013 to approximately HK$57.2 million for FY2014, representing an increase of approximately 6.5%. The increase was mainly attributable to the salary increment to retain our experienced staffs. Our staff costs slightly decreased from approximately HK$57.2 million for FY2014 to approximately HK$56.8 million for FY2015, representing a decrease of approximately 0.7%. The decrease was mainly attributable to the decrease in the number of operations staff in FY2015. Our staff costs decreased from approximately HK$23.4 million for the five months ended 31 August 2014 to approximately HK$22.4 million for the five months ended 31 August 2015, representing a decrease of approximately 4.1%. The decrease was mainly due to the decrease in number of operating hours of our operators in rental of construction machinery, which was in line with the decrease in the utilisation rate of our rental fleet. As at 31 August 2015, we had a total of 127 employees out of which 106 employees were operations staff. Our operations staff consists of experienced machinery operators and other mechanics, such employees are highly demanded in the market. Should we failed to retain such staff and to control our staff costs, our operational result and condition may be adversely affected.

The following sensitivity analysis illustrates the impact of hypothetical fluctuations in staff costs on our profit before tax and our profit for the year/period during the Track Record Period. Fluctuations are assumed to be approximately 5.0%, 8.0% and 10.0% for FY2013, FY2014, FY2015, and for the five months ended 31 August 2014 and 2015, which corresponded to the range of historical fluctuations of our staff costs during the Track Record Period.

– 194 –

– 22 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

			(HK$’000, except	percentage)
Hypothetical Fluctuation	+5%	–5%	+8%	–8%	+10%	–10%
Impact on Certain Combined Income Statement Items
for the year ended 31 March 2013
Change in staff costs	2,687	(2,687)	4,298	(4,298)	5,373	(5,373)
Change in profit before tax	2,687	(2,687)	4,298	(4,298)	5,373	(5,373)
Change in profit after tax	2,243	(2,243)	3,589	(3,589)	4,486	(4,486)
Impact on Certain Combined Income Statement Items
for the year ended 31 March 2014
Change in staff costs	2,858	(2,858)	4,573	(4,573)	5,716	(5,716)
Change in profit before tax	2,858	(2,858)	4,573	(4,573)	5,716	(5,716)
Change in profit after tax	2,386	(2,386)	3,818	(3,818)	4,773	(4,773)
Impact on Certain Combined Income Statement Items
for the year ended 31 March 2015
Change in staff costs	2,838	(2,838)	4,540	(4,540)	5,675	(5,675)
Change in profit before tax	2,838	(2,838)	4,540	(4,540)	5,675	(5,675)
Change in profit after tax	2,369	(2,369)	3,791	(3,791)	4,739	(4,739)
Impact on Certain Combined Income Statement Items
for the five months ended 31 August 2014
Change in staff costs	1,168	(1,168)	1,868	(1,868)	2,335	(2,335)
Change in profit before tax	1,168	(1,168)	1,868	(1,868)	2,335	(2,335)
Change in profit after tax	975	(975)	1,560	(1,560)	1,950	(1,950)
Impact on Certain Combined Income Statement Items
for the five months ended 31 August 2015
Change in staff costs	1,119	(1,119)	1,791	(1,791)	2,239	(2,239)
Change in profit before tax	1,119	(1,119)	1,791	(1,791)	2,239	(2,239)
Change in profit after tax	935	(935)	1,495	(1,495)	1,869	(1,869)

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Property, plant and equipment are depreciated so as to write-off their cost net of expected residual value over their estimated useful lives on a straight-line basis. The useful lives, residual value and depreciation method are reviewed, and adjusted if appropriate, at the end of each of the Track Record Period. The estimated useful lives are as follows:

Leasehold land and building Over the lease terms Leasehold improvements Shorter of lease terms and 10 years Machinery 10 years Furniture and equipment 4 years Motor vehicles 4 years

In determining the useful life and residual value of an item of property, plant and equipment, our Group has to consider various factors, such as technical or commercial obsolescence arising from changes or improvement in production, or from a change in the market demand for the products or service output of the asset, expected usage of the asset, expected physical wear and tear, the care and

– 195 –

– 23 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

maintenance of the asset, and legal or similar limits on the use of the asset. The estimation of the useful life of the asset is based on the experience of our Group with similar assets that are used in similar way. Our Group will revise the depreciation charge where useful lives are different to those previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is calculated using first-in-first-out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Impairment loss on financial assets

Our Group assesses, at the end of each of the Track Record Period, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (as incurred ‘‘loss event’’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Objective evidence of impairment may include:

• . significant financial difficulty of the debtor or the group of debtors;

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

• . granting concession to a debtor because of debtor’s financial difficulty; or

• . it becoming probable that the debtor or the group of debtors will enter bankruptcy or other financial reorganisation.

For certain categories of financial assets such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include our Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the general credit period, observable changes in national or local economic conditions that correlate with default on receivables.

The amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. The amount of the loss is recognised in profit or loss of the period in which the impairment occurs.

Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

– 196 –

– 24 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Provision and contingent liabilities

A provision is recognised when our Group has a present obligation (legal or constructive) as a result of a past event, it is probable that our Group will be required to settle the obligation, and a reliable estimate can be made of the amount of obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confined by the occurrence or non-occurrence of one or more future uncertain events not wholly within the control of our Group are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services and the use by others of our Group’s assets yielding interest, dividend and rentals, net of rebates and discounts. Provided it is probable that the economic benefits will flow to our Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised as follows:

• (a) Revenue from rental of construction machinery classified under operating leases is recognised in profit or loss on a straight-line basis over the periods covered by the lease term, except where an alternative basis is more representative of the time pattern of benefits to be derived from the use of the leased asset.

• (b) Revenue from trading of construction machinery and parts is recognised when the significant risks and rewards of ownership have been transferred to the customers. Normally, risk is transferred upon dispatch of goods and customer has accepted the goods.

• (c) Service income is recognised when the services are rendered.

• (d) Interest income is recognised on a time-proportion basis using the effective interest method.

• (e) Revenue attributable to finance leases is recognised over the lease term on a systematic and rational basis so as to produce a constant rate of return on the net investment in the finance lease.

– 197 –

– 25 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Our Directors consider our Group’s accounting estimates are accurate in the past comparing with actual results, we have not experienced material change in accounting estimates in the past and we do not consider these accounting estimates are likely to change in the future.

RESULTS OF OPERATIONS

The following is a summary of the combined statements of comprehensive income of our Group for FY2013, FY2014, FY2015, and for the five months ended 31 August 2014 and 2015, respectively, as extracted from the Accountant’s Report set out in Appendix I to this prospectus.

Combined statements of comprehensive income

Revenue Cost of sales and services rendered Gross profit Other income and gains Loss on foreign currency forward contracts Impairment of trade receivables Listing expenses Administrative expenses Finance costs Profit before income tax expense Income tax expense Profit and total comprehensive income for the year/period Attributable to: Owners of our Company Non-controlling interests	For the year ended 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 242,948 316,810 368,942 (172,933) (245,860) (306,422) 70,015 70,950 62,520 4,135 2,847 6,239 — — (527) (12,099) — — — — (8,352) (15,184) (19,085) (21,707) (7,755) (7,786) (6,837) 39,112 46,926 31,336 (5,992) (7,661) (6,972) 33,120 39,265 24,364 33,086 39,232 24,324 34 33 40 33,120 39,265 24,364	For the five months ended 31 August 2014 2015 HK$’000 HK$’000 (unaudited) 162,699 140,084 (125,717) (124,300 36,982 15,784 1,414 1,771 — — — — (3,141) (1,242 (7,695) (9,204 (2,926) (2,646 24,634 4,463 (5,454) (779 19,180 3,684 19,159 3,686 21 (2 19,180 3,684	For the five months ended 31 August 2014 2015 HK$’000 HK$’000 (unaudited) 162,699 140,084 (125,717) (124,300 36,982 15,784 1,414 1,771 — — — — (3,141) (1,242 (7,695) (9,204 (2,926) (2,646 24,634 4,463 (5,454) (779 19,180 3,684 19,159 3,686 21 (2 19,180 3,684
			15,784 1,771 — — (1,242 (9,204 (2,646
			4,463 (779
			3,684
			3,686 (2
			3,684

– 198 –

– 26 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

DESCRIPTION OF SELECTED LINE ITEMS OF COMBINED STATEMENTS OF COMPREHENSIVE INCOME

Revenue

We generated our revenue from provision of construction machinery rental services, trading of construction machinery and parts and transportation services during the Track Record Period.

During the Track Record Period, our Group’s revenue has experienced a growth through expansion of trading business. Our revenue increased from approximately HK$242.9 million for FY2013 to approximately HK$316.8 million for FY2014, representing approximately 30.4% growth. Our revenue further increased from approximately HK$316.8 million for FY2014 to approximately HK$368.9 million for FY2015, representing an increase of approximately 16.4%. Our revenue decreased from approximately HK$162.7 million for the five months ended 31 August 2014 to approximately HK$140.1 million for the five months ended 31 August 2015, representing a decrease of approximately 13.9%.

Set forth below are the details of our Group’s revenue by business segments during the Track Record Period:

Rental of construction machinery Trading of construction machinery and parts Transportation services Total	For the year ended 31 March 2013 2014 2015 HK$’000 % HK$’000 % HK$’000 % 197,335 81.2 196,526 62.0 174,749 47.4 40,580 16.7 117,037 37.0 191,425 51.9 5,033 2.1 3,247 1.0 2,768 0.7 242,948 100.0 316,810 100.0 368,942 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % 88,000 54.1 47,809 34.1 73,469 45.1 91,242 65.1 1,230 0.8 1,033 0.8 162,699 100.0 140,084 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % 88,000 54.1 47,809 34.1 73,469 45.1 91,242 65.1 1,230 0.8 1,033 0.8 162,699 100.0 140,084 100.0
			100.0

Rental of construction machinery

Construction machinery rental services mainly involve rental of crawler cranes, aerial platform and foundation equipment. For FY2013, FY2014 and FY2015, construction machinery rental services contributed approximately HK$197.3 million, HK$196.5 million and HK$174.7 million, or approximately 81.2%, 62.0% and 47.4% of our total revenue, respectively. For the five months ended 31 August 2014 and 2015, construction machinery rental services contributed approximately HK$88.0 million and HK$47.8 million, or approximately 54.1% and 34.1% of our total revenue, respectively.

– 199 –

– 27 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Set forth below are the details of our Group’s construction machinery rental revenue by project types during the Track Record Period:

Building Infrastructure Transport system (Note) Others Total	For the year ended 31 March 2013 2014 2015 HK$’000 % HK$’000 % HK$’000 % 56,091 28.4 41,975 21.4 76,696 43.9 17,113 8.7 17,824 9.1 14,963 8.6 114,864 58.2 130,672 66.5 77,256 44.2 9,267 4.7 6,055 3.0 5,834 3.3 197,335 100.0 196,526 100.0 174,749 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % 40,029 45.4 17,731 37.1 7,103 8.1 6,090 12.7 37,563 42.7 21,871 45.7 3,305 3.8 2,117 4.5 88,000 100.0 47,809 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % 40,029 45.4 17,731 37.1 7,103 8.1 6,090 12.7 37,563 42.7 21,871 45.7 3,305 3.8 2,117 4.5 88,000 100.0 47,809 100.0
			100.0

Note: Transport system includes railway, underground train and highspeed train.

Our rental revenue from building projects contributed to approximately 28.4%, 21.4% and 43.9%, from infrastructure projects contributed to approximately 8.7%, 9.1% and 8.6% and from transport system projects contributed to approximately 58.2%, 66.5% and 44.2% of our construction machinery rental revenue for FY2013, FY2014 and FY2015, respectively. Our revenue from building projects contributed to approximately 45.4% and 37.1%, from infrastructure projects contributed to approximately 8.1% and 12.7% and from transport system projects contributed to approximately 42.7% and 45.7% of our construction machinery rental revenue for the five months ended 31 August 2014 and 2015, respectively.

Set forth below are the details of our Group’s construction machinery rental services revenue by business sub-segments during the Track Record Period:

Rental income from rental fleet Rental income from sub- leasing of machinery Other service income (Note) Total	For the year ended 31 March 2013 2014 2015 HK$’000 % HK$’000 % HK$’000 % 122,010 61.8 129,058 65.7 111,406 63.7 66,058 33.5 61,367 31.2 57,432 32.9 9,267 4.7 6,101 3.1 5,911 3.4 197,335 100.0 196,526 100.0 174,749 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % 55,897 63.5 32,869 68.8 28,774 32.7 12,795 26.7 3,329 3.8 2,145 4.5 88,000 100.0 47,809 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % 55,897 63.5 32,869 68.8 28,774 32.7 12,795 26.7 3,329 3.8 2,145 4.5 88,000 100.0 47,809 100.0
			100.0

Note: Other service income mainly derives from maintenance services and provision of operators.

– 200 –

– 28 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Our rental income from rental fleet contributed to approximately 61.8%, 65.7% and 63.7% while the rental income from sub-leasing of machinery contributed to approximately 33.5%, 31.2% and 32.9% for FY2013, FY2014 and FY2015, respectively, of the total revenue from our construction machinery rental business. Our rental income from rental fleet contributed to approximately 63.5% and 68.8% while the rental income from sub-leasing of machinery contributed to approximately 32.7% and 26.7% of the total revenue from our construction machinery rental services for the five months ended 31 August 2014 and 2015, respectively.

Trading of construction machinery and parts

Trading of construction machinery and parts mainly involves sale of crawler cranes, aerial platforms and foundation equipment to customers. For FY2013, FY2014 and FY2015, trading of construction machinery and parts contributed to approximately HK$40.6 million, HK$117.0 million and HK$191.4 million, or approximately 16.7%, 37.0% and 51.9% of our total revenue, respectively. For the five months ended 31 August 2014 and 2015, trading of construction machinery and parts contributed to approximately HK$73.5 million and HK$91.2 million, or approximately 45.1% and 65.1% of our total revenue, respectively.

Transportation services

Transportation services mainly involve provision of transportation services to construction work companies. For FY2013, FY2014 and FY2015, transportation services contributed to approximately HK$5.0 million, HK$3.2 million and HK$2.8 million, or approximately 2.1%, 1.0% and 0.7% of our total revenue, respectively. For the five months ended 31 August 2014 and 2015, transportation services contributed to approximately HK$1.2 million and HK$1.0 million, or approximately 0.8% and 0.8% of our total revenue, respectively.

– 201 –

– 29 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Cost of sales and services rendered

Set forth below are the details of the cost of sales and services rendered during the Track Record Period:

Purchase of machinery and spare parts Staff costs Sub-leasing expenses Depreciation Repair and maintenance Fuel and oil Insurance Removal fee and truck cost Impairment of inventories Others	For the year ended 31 March 2013 2014 2015 HK$’000 % HK$’000 % HK$’000 % 33,544 19.4 102,021 41.5 161,361 52.6 48,628 28.2 50,853 20.7 49,274 16.1 39,463 22.8 32,981 13.4 38,233 12.5 30,102 17.4 34,262 13.9 35,114 11.5 8,264 4.8 11,702 4.8 10,153 3.3 3,165 1.8 2,842 1.2 1,256 0.4 2,988 1.7 4,935 2.0 5,496 1.8 3,664 2.1 4,579 1.9 4,267 1.4 1,735 1.0 — 0.0 — 0.0 1,380 0.8 1,685 0.6 1,268 0.4 172,933 100.0 245,860 100.0 306,422 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % (unaudited) 59,881 47.6 73,617 59.2 20,826 16.6 18,974 15.3 19,826 15.8 8,920 7.2 14,607 11.6 14,856 12.0 4,577 3.6 3,204 2.5 663 0.5 497 0.4 2,634 2.1 2,209 1.8 2,130 1.7 1,551 1.2 — 0.0 — 0.0 573 0.5 472 0.4 125,717 100.0 124,300 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % (unaudited) 59,881 47.6 73,617 59.2 20,826 16.6 18,974 15.3 19,826 15.8 8,920 7.2 14,607 11.6 14,856 12.0 4,577 3.6 3,204 2.5 663 0.5 497 0.4 2,634 2.1 2,209 1.8 2,130 1.7 1,551 1.2 — 0.0 — 0.0 573 0.5 472 0.4 125,717 100.0 124,300 100.0
			100.0

For FY2013, FY2014 and FY2015, our cost of sales and services rendered was approximately HK$172.9 million, HK$245.9 million and HK$306.4 million, respectively. For FY2013, we have impaired inventory of approximately HK$1.7 million which was mainly due to write-down of obsoleted inventories.

For the five months ended 31 August 2014 and 2015, our cost of sales and services rendered was approximately HK$125.7 million and HK$124.3 million, respectively.

– 202 –

– 30 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Set forth below are the details of our cost of sales and services rendered by business segments during the Track Record Period:

Rental of construction machinery Trading of construction machinery and parts Transportation services Total	For the year ended 31 March 2013 2014 2015 HK$’000 % HK$’000 % HK$’000 % 134,783 77.9 140,122 57.0 142,408 46.5 35,279 20.4 103,148 42.0 161,616 52.7 2,871 1.7 2,590 1.0 2,398 0.8 172,933 100.0 245,860 100.0 306,422 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % 64,395 51.2 46,017 37.0 59,940 47.7 77,393 62.3 1,382 1.1 890 0.7 125,717 100.0 124,300 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % 64,395 51.2 46,017 37.0 59,940 47.7 77,393 62.3 1,382 1.1 890 0.7 125,717 100.0 124,300 100.0
			100.0

Our cost of sales and services rendered from construction machinery rental contributed to approximately 77.9%, 57.0% and 46.5%, from trading of construction machinery and parts contributed to approximately 20.4%, 42.0% and 52.7% and from transportation services contributed to approximately 1.7%, 1.0% and 0.8% of our total cost of sales and services rendered for FY2013, FY2014 and FY2015, respectively.

Our cost of sales and services rendered from construction machinery rental contributed approximately 51.2% and 37.0%, from trading of construction machinery and parts contributed approximately 47.7% and 62.3% and from transportation services contributed approximately 1.1% and 0.7% of our total cost of sales and services rendered for the five months ended 31 August 2014 and 2015, respectively.

Gross profit and gross profit margin

Our gross profit for FY2013, FY2014 and FY2015 amounted to approximately HK$70.0 million, HK$71.0 million and HK$62.5 million, representing gross profit margin of approximately 28.8%, 22.4% and 16.9%, respectively.

Our gross profit for the five months ended 31 August 2014 and 2015 amounted to approximately HK$37.0 million and HK$15.8 million, representing gross profit margin of approximately 22.7% and 11.3%, respectively.

– 203 –

– 31 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Set forth below are the details of our Group’s gross profit by business segments during the Track Record Period:

Rental of construction machinery Trading of construction machinery and parts Transportation services Total	For the year ended 31 March 2013 2014 2015 Gross profit margin Gross profit margin Gross profit margin HK$’000 % HK$’000 % HK$’000 % 62,552 31.7 56,404 28.7 32,341 18.5 5,301 13.1 13,889 11.9 29,809 15.6 2,162 43.0 657 20.2 370 13.4 70,015 28.8 70,950 22.4 62,520 16.9	For the five months ended 31 August 2014 2015 Gross profit margin Gross profit margin HK$’000 % HK$’000 % 23,605 26.8 1,792 3.7 13,529 18.4 13,849 15.2 (152) (12.4) 143 13.8 36,982 22.7 15,784 11.3	For the five months ended 31 August 2014 2015 Gross profit margin Gross profit margin HK$’000 % HK$’000 % 23,605 26.8 1,792 3.7 13,529 18.4 13,849 15.2 (152) (12.4) 143 13.8 36,982 22.7 15,784 11.3
			11.3

Our gross profit margin for construction machinery rental services was approximately 31.7%, 28.7% and 18.5%, and trading of construction machinery and parts was approximately 13.1%, 11.9% and 15.6% for FY2013, FY2014 and FY2015, respectively. Our transportation services recorded a gross profit margin of approximately 43.0%, 20.2% and 13.4% for FY2013, FY2014 and FY2015, respectively.

Our gross profit margin for construction machinery rental services was approximately 26.8% and 3.7%, and gross profit margin for trading of construction machinery and parts was approximately 18.4% and 15.2% for the five months ended 31 August 2014 and 2015, respectively. Our transportation services recorded a gross loss for the five months ended 31 August 2014 and a gross profit margin of approximately 13.8% for the five months ended 31 August 2015.

Set forth below are the details of our Group’s gross profit by sub-segments of rental of construction machinery during the Track Record Period:

Own rental fleet Sub-leasing Other service income (Note) Total	For the year ended 31 March 2013 2014 2015 Gross profit margin Gross profit margin Gross profit margin HK$’000 % HK$’000 % HK$’000 % 44,507 36.5 44,667 34.6 29,281 26.3 12,046 18.2 8,035 13.1 813 1.4 5,999 64.7 3,702 60.7 2,247 38.0 62,552 31.7 56,404 28.7 32,341 18.5	For the five months ended 31 August 2014 2015 Gross profit margin Gross profit margin HK$’000 % HK$’000 % 21,533 38.5 1,342 4.1 127 0.4 370 2.9 1,945 58.4 80 3.7 23,605 26.8 1,792 3.7	For the five months ended 31 August 2014 2015 Gross profit margin Gross profit margin HK$’000 % HK$’000 % 21,533 38.5 1,342 4.1 127 0.4 370 2.9 1,945 58.4 80 3.7 23,605 26.8 1,792 3.7
			3.7

Note: Other service income mainly derives from maintenance services and provision of operators.

– 204 –

– 32 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Our gross profit margin for our own rental fleet was approximately 36.5%, 34.6% and 26.3%, subleasing of machinery was approximately 18.2%, 13.1% and 1.4% and other service income was approximately 64.7%, 60.7% and 38.0% for FY2013, FY2014 and FY2015, respectively. Our gross profit margin for sub-leasing of machinery has decreased from approximately 18.2% for FY2013 to approximately 1.4% for FY2015, which attributable to (i) the decrease in rental revenue from subleasing; and (ii) that we had rented six construction machineries from one construction machinery manufacturer with a minimum rental period of 12 months during the Track Record Period, however, the machines were not fully rented out as expected due to the delay in commencement of some government construction projects engaged by our customers.

Our gross profit margin for our own rental fleet was approximately 38.5% and 4.1%, and subleasing of machinery was approximately 0.4% and 2.9% and other service income was approximately 58.4% and 3.7% for the five months ended 31 August 2014 and 2015, respectively.

For details of our Group’s sub-leasing arrangements, please refer to the section headed ‘‘Business — Sub-leasing arrangements’’ in this prospectus.

Other income and gains

Set forth below are the details of our Group’s other income and gains during the Track Record Period:

Interest income Finance lease income Gain on disposal of property, plant and equipment Rental income from leasing warehouse property and a motor vehicle Gain on disposal of an investment property Government allowance for retirement of motor vehicles Net exchange gain Others Total	For the year ended 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 631 — 3 — — 628 636 80 111 2,313 2,019 1,122 — — 1,999 — — 1,181 — — 667 555 748 528 4,135 2,847 6,239	For the five months ended 31 August 2014 2015 HK$’000 HK$’000 (unaudited) — 9 202 274 91 57 379 230 — — 520 225 — 696 222 280 1,414 1,771	For the five months ended 31 August 2014 2015 HK$’000 HK$’000 (unaudited) — 9 202 274 91 57 379 230 — — 520 225 — 696 222 280 1,414 1,771
			1,771

– 205 –

– 33 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Administrative expenses

Set forth below are the details of our Group’s administrative expenses during the Track Record Period:

Staff costs Utilities and management fees Office expenses Rent and rates Depreciation Entertainment expenses Transportation expenses Professional fees Exchange loss Others Total	For the year ended 31 March 2013 2014 2015 HK$’000 % HK$’000 % HK$’000 % 5,131 33.9 6,454 33.9 7,477 34.5 685 4.5 466 2.4 794 3.7 641 4.2 344 1.8 505 2.3 3,389 22.3 3,934 20.7 3,754 17.3 574 3.8 939 4.9 1,656 7.6 619 4.1 654 3.4 996 4.6 1,444 9.5 1,986 10.4 2,137 9.8 1,872 12.3 3,287 17.2 3,956 18.2 36 0.2 713 3.7 — 0.0 793 5.2 308 1.6 432 2.0 15,184 100.0 19,085 100.0 21,707 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % (unaudited) 2,526 32.8 3,411 37.1 298 3.9 230 2.5 263 3.4 380 4.1 1,341 17.4 1,197 13.0 624 8.1 912 9.9 258 3.4 472 5.1 946 12.3 982 10.7 1,299 16.9 1,303 14.2 108 1.4 — 0.0 32 0.4 317 3.4 7,695 100.0 9,204 100.0	For the five months ended 31 August 2014 2015 HK$’000 % HK$’000 % (unaudited) 2,526 32.8 3,411 37.1 298 3.9 230 2.5 263 3.4 380 4.1 1,341 17.4 1,197 13.0 624 8.1 912 9.9 258 3.4 472 5.1 946 12.3 982 10.7 1,299 16.9 1,303 14.2 108 1.4 — 0.0 32 0.4 317 3.4 7,695 100.0 9,204 100.0
			100.0

Our administrative expenses were approximately HK$15.2 million, HK$19.1 million and HK$21.7 million, representing approximately 6.3%, 6.0% and 5.9% of our total revenue for FY2013, FY2014 and FY2015, respectively, and were approximately HK$7.7 million and HK$9.2 million, representing approximately 4.7% and 6.6% of our total revenue for the five months ended 31 August 2014 and 2015 respectively.

Finance costs

Set forth below are the details of our Group’s finance costs during the Track Record Period:

Interest charges on: Bank borrowings Finance lease payables Bank overdrafts	For the year ended 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 2,382 2,800 2,902 4,961 4,834 3,928 412 152 7 7,755 7,786 6,837	For the five months ended 31 August 2014 2015 HK$’000 HK$’000 (unaudited) 1,317 1,346 1,609 1,300 — — 2,926 2,646	For the five months ended 31 August 2014 2015 HK$’000 HK$’000 (unaudited) 1,317 1,346 1,609 1,300 — — 2,926 2,646
			2,646

– 206 –

– 34 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Our finance cost were approximately HK$7.8 million, HK$7.8 million and HK$6.8 million, representing approximately 3.2%, 2.5% and 1.8% of our total revenue for FY2013, FY2014 and FY2015, respectively, and were approximately HK$2.9 million and HK$2.6 million, representing approximately 1.8% and 1.9% of our total revenue for the five months ended 31 August 2014 and 2015 respectively.

Impairment of trade receivables

Our impairment of trade receivables for FY2013 was approximately HK$12.1 million, which contributed to the full provision of trade receivable from a customer under litigation case as disclosed in the section headed ‘‘Business — Legal proceedings and compliance’’ in this prospectus. Based on (i) the uncertainty of the recoverability of the receivable; (ii) long outstanding of the trade receivable; (iii) default in payment from the customer; and (iv) unable to estimate timing of the litigation case, our Directors considered that the impairment of trade receivables was reasonable.

Income tax expense

Income tax expense primarily consists of provision for Hong Kong current and deferred income tax expenses. Our effective tax rates were approximately 15.3%, 16.3% and 22.2% for FY2013, FY2014 and FY2015, respectively, and were approximately 22.1% and 17.5% for the five months ended 31 August 2014 and 2015, respectively.

Our Company and subsidiaries are incorporated in different jurisdictions, with different taxation requirements illustrated as follows:

The BVI and the Cayman Islands

Pursuant to the applicable laws, rules and regulations of the BVI and the Cayman Islands, our Group is not subject to any income tax in the BVI and the Cayman Islands.

Hong Kong

All our Hong Kong subsidiaries were subject to Hong Kong profits tax at 16.5% during the Track Record Period.

Macau

Under the applicable Macau laws, rules and regulations, our Macau subsidiary is subject to corporate tax which is levied at progressive rates ranging from 9% to 12%.

During the Track Record Period, our Group rented construction machinery to six customers based in Hong Kong that have used the construction machinery for their construction projects in Macau. Our Group has also rented construction machinery to another customer, a related company incorporated in Macau, which sub-leased the machinery to its customer for construction projects in Macau.

On 15 December 2014, our Group has acquired Hightion to capture business opportunities in Macau and is subject to Macau corporate tax.

– 207 –

– 35 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Our Group has made adequate tax provision on the assessable profit based on the tax rates prevailing in the countries in which our Group operates in during the Track Record Period. Payments of taxes are made in accordance with the payment schedule stipulated by the relevant tax authorities.

Our Directors confirm that we have made all required tax filings in all relevant jurisdictions and paid all tax liabilities that have become due. We are not subject to any dispute or potential dispute with any tax authorities.

PERIOD-TO-PERIOD COMPARISON OF RESULTS OF OPERATIONS

Five months ended 31 August 2015 compared to five months ended 31 August 2014

Revenue

Our total revenue decreased by approximately HK$22.6 million, or 13.9%, from approximately HK$162.7 million for the five months ended 31 August 2014 to approximately HK$140.1 million for the five months ended 31 August 2015. Such decrease was mainly attributable to the decrease in revenue generated from rental of construction machinery.

Rental of construction machinery

Our revenue from construction machinery rental services decreased by approximately HK$40.2 million, or 45.7%, from approximately HK$88.0 million for the five months ended 31 August 2014 to approximately HK$47.8 million for the five months ended 31 August 2015. Such decrease was mainly due to (i) the decrease in number of crawler cranes rented-out attributable to the delay in commencement of several Delayed Projects; and (ii) the completion of two substantial private projects in FY2015 which accounted for approximately 44.9% of revenue from private projects for the five months ended 31 August 2014.

For the details of the Delayed Projects, please refer to the section headed ‘‘Business — Overview’’ in this prospectus.

Trading of construction machinery and parts

Our revenue from trading of construction machinery and parts increased by approximately HK$17.7 million, or 24.1%, from approximately HK$73.5 million for the five months ended 31 August 2014 to approximately HK$91.2 million for the five months ended 31 August 2015. Such increase was mainly attributable to the increase in number of crawler cranes sold as a result of our marketing effort to promote our dealership for a Japanese manufacturer.

Transportation services

Our revenue from transportation services decreased by approximately HK$0.2 million, or 16.7%, from approximately HK$1.2 million for the five months ended 31 August 2014 to approximately HK$1.0 million for the five months ended 31 August 2015. Such decrease was mainly due to the decrease in operation scale as a result of the retirement of certain transportation fleet.

– 208 –

– 36 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Cost of sales and services rendered

Our cost of sales and services rendered slightly decreased by approximately HK$1.4 million, or 1.1%, from approximately HK$125.7 million for the five months ended 31 August 2014 to approximately HK$124.3 million for the five months ended 31 August 2015, which was mainly attributable to the decrease in cost of services rendered for rental of construction machinery as a result of the decrease in sub-leasing expenses paid to suppliers.

Purchase of machinery and spare parts

Our cost of purchase of machinery and spare parts increased by approximately HK$13.7 million, or 22.9%, from approximately HK$59.9 million for the five months ended 31 August 2014 to approximately HK$73.6 million for the five months ended 31 August 2015. Such increase was mainly attributable to the increase in the revenue from trading of construction machinery and parts for the five months ended 31 August 2015.

Staff costs

Our staff costs decreased by approximately HK$1.8 million, or 8.7%, from approximately HK$20.8 million for the five months ended 31 August 2014 to approximately HK$19.0 million for the five months ended 31 August 2015. Such decrease was mainly attributable to the decrease in number of operating hours of our operators in rental of construction machinery services.

Sub-leasing expenses

Our sub-leasing expenses decreased by approximately HK$10.9 million, or 55.1%, from approximately HK$19.8 million for the five months ended 31 August 2014 to approximately HK$8.9 million for the five months ended 31 August 2015. Such decrease was mainly attributable to the decrease in number of machinery under the sub-leasing arrangement.

Gross profit and gross profit margin

Our gross profit decreased by approximately HK$21.2 million, or 57.3%, from approximately HK$37.0 million for the five months ended 31 August 2014 to approximately HK$15.8 million for the five months ended 31 August 2015. In addition, our gross profit margin was approximately 11.3% for the five months ended 31 August 2015 which decreased from approximately 22.7% for the five months ended 31 August 2014. The gross profit and gross profit margin had decreased because the significant decline of the gross profit margin of construction machinery rental services.

Rental of construction machinery

Our gross profit of construction machinery rental services decrease by approximately HK$21.8 million from approximately HK$23.6 million for the five months ended 31 August 2014 to approximately HK$1.8 million for the five months ended 31 August 2015. In addition, our gross profit margin of construction machinery rental services decreased from approximately 26.8% for the five months ended 31 August 2014 to approximately 3.7% for the five months ended 31 August 2015. The

– 209 –

– 37 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

decrease in gross profit margin of construction machinery rental services was mainly attributable to the high level of fixed cost to be maintained given the lower revenue and utilisation rate recorded for the five months ended 31 August 2015.

Trading of construction machinery and parts

Our gross profit for trading of construction machinery and parts segment increase by approximately HK$0.3 million from approximately HK$13.5 million for the five months ended 31 August 2014 to approximately HK$13.8 million for the five months ended 31 August 2015.

In addition, our gross profit margin for trading of construction machinery and parts decreased from approximately 18.4% for the five months ended 31 August 2014 to approximately 15.2% for the five months ended 31 August 2015. The decrease in gross profit margin for trading of construction machinery and parts was mainly attributable to the increase in trading of new machineries, which usually has a lower profit margin than the used machineries for the five months ended 31 August 2015.

Transportation services

For the transportation services, we recorded a gross loss of approximately HK$0.2 million for the five months ended 31 August 2014 turned into a gross profit of approximately HK$0.1 million for the five months ended 31 August 2015.

In addition, our gross profit margin of transportation services improved from approximately -12.4% for the five months ended 31 August 2014 to approximately 13.8% for the five months ended 31 August 2015.

Such improvement in gross profit margin of transportation services segment was mainly attributable to decrease in repair and maintenance expenses on certain transportation fleet for the five months ended 31 August 2015.

Other income and gains

Our other income and gains increased by approximately HK$0.4 million, or 28.6%, from approximately HK$1.4 million for the five months ended 31 August 2014 to approximately HK$1.8 million for the five months ended 31 August 2015. The increase in other income and gains was mainly attributable to the gains on the foreign exchange of approximately HK$0.7 million.

Administrative expenses

Our administrative expenses increased by approximately HK$1.5 million, or 19.5%, from approximately HK$7.7 million for the five months ended 31 August 2014 to approximately HK$9.2 million for the five months ended 31 August 2015. The increase in administrative expenses was mainly attributable to the salary increment.

– 210 –

– 38 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Finance costs

Our finance costs slightly decreased by approximately HK$0.3 million, or 10.3%, from approximately HK$2.9 million for the five months ended 31 August 2014 to approximately HK$2.6 million for the five months ended 31 August 2015. The decrease in finance costs was mainly attributable to the decrease in bank borrowings and finance lease payables.

Income tax expense

Our income tax expense decreased by approximately HK$4.7 million, or 85.5%, from approximately HK$5.5 million for the five months ended 31 August 2014 to approximately HK$0.8 million for the five months ended 31 August 2015. The decrease in income tax expense was in line with the decrease in profit.

Effective tax rate

Our effective tax rate decreased from approximately 22.1% for the five months ended 31 August 2014 to approximately 17.5% for the five months ended 31 August 2015 which was mainly due to the decrease in non-deductible Listing expenses from approximately HK$3.1 million for the five months ended 31 August 2014 to HK$1.2 million for the five months ended 31 August 2015.

FY2015 compared to FY2014

Revenue

Our total revenue slightly increased by approximately HK$52.1 million, or 16.4%, from approximately HK$316.8 million for FY2014 to approximately HK$368.9 million for FY2015. Such increase was mainly attributable to the increase in revenue generated from trading of construction machinery and parts.

Rental of construction machinery

Our revenue from construction machinery rental segment decreased by approximately HK$21.8 million, or 11.1%, from approximately HK$196.5 million for FY2014 to approximately HK$174.7 million for FY2015. Such decrease was mainly attributable to the substantial completion of construction phase which required our construction machineries by our Group’s major rental customers in FY2014 and the delay in the commencement of new projects as a result of delay in funding approval by the Hong Kong Government for certain development plans. Such delay is in-line with the decrease in revenue contributed from public-related projects which are relating to transportation system from approximately HK$130.7 million in FY2014 to approximately HK$77.3 million in FY2015, which represent a decrease of approximately 40.9% for the foregoing period.

According to the IPSOS Report, due to the delays in the approval for funding applications for some development plans, which affect the expenditure on government projects to be granted during the financial year of 2014, as well as the commencement of the relevant projects operating by the construction work companies, such as our potential and existing customers. Moreover, the estimated public expenditure of spending around HK$78.2 billion in 2014 stated in 2014–15 Budget Speech was revised to around HK$73.9 billion for the same period in 2015–16 Budget Speech which represents a

– 211 –

– 39 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

shortfall of approximately 5.5%. Such decrease was partly attributed to the negative impact of the delay in funding approval by the Legislative Council of Hong Kong. It thus created pressure on the construction industry as well as the construction machinery rental industry.

Trading of construction machinery and parts

Our revenue from trading of construction machinery and parts increased by approximately HK$74.4 million, or 63.6%, from approximately HK$117.0 million for FY2014 to approximately HK$191.4 million for FY2015. Such increase was mainly attributable to the increase in trading volume of construction machineries due to (i) the depreciation of Yen which cause the purchase cost of our crawler cranes manufactured from Japan would be relatively more competitive in the selling price; and (ii) the increase in marketing effort by our Group. For details of the marketing and sales activities of our Group, please refer to the section headed ‘‘Business — Sales and marketing’’ in this prospectus.

Transportation services

Our revenue from transportation services decreased by approximately HK$0.4 million, or 12.5%, from approximately HK$3.2 million for FY2014 to approximately HK$2.8 million for FY2015. Such decrease were mainly attributable to the decrease in operation scale due to the retirement of certain transportation fleet which are eligible for ex-gratia payment under the Hong Kong government policy of phasing out pre-Euro IV diesel commercial vehicles. In FY2015, our Group recognised such ex-gratia payment as other income in an aggregate amount of approximately HK$1.2 million.

Cost of sales and services rendered

Our cost of sales and services rendered increased by approximately HK$60.5 million, or 24.6%, from approximately HK$245.9 million for FY2014 to approximately HK$306.4 million for FY2015, which was mainly attributable to the increase in cost for purchase of machinery as a result of the increase in number of construction machineries purchased for trading.

Purchase of machinery and spare parts

Our cost of purchase of machinery and spare parts for trading increased by approximately HK$59.4 million, or 58.2%, from approximately HK$102.0 million for FY2014 to approximately HK$161.4 million for FY2015. Such increase was mainly attributable to the increase in number of construction machineries purchased for trading.

Staff costs

Our staff costs decreased by approximately HK$1.6 million, or 3.1%, from approximately HK$50.9 million for FY2014 to approximately HK$49.3 million for FY2015. Such decrease was mainly attributable to the decrease in number of operating hours of our operators in rental of construction machinery.

Sub-leasing expenses

Our sub-leasing expenses increased by approximately HK$5.2 million, or 15.8%, from approximately HK$33.0 million for FY2014 to approximately HK$38.2 million for FY2015. Such increase was mainly attributable to the six construction machineries we rented from one construction

– 212 –

– 40 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

machinery manufacturer with a minimum rental period of 12 months during the Track Record Period, however, the machines were not fully rented out as expected due to the delay in commencement of several government construction projects engaged by our customers.

Gross profit and gross profit margin

Our gross profit decreased by approximately HK$8.5 million, or 12.0%, from approximately HK$71.0 million to approximately HK$62.5 million for FY2015. In addition, our gross profit margin was approximately 16.9% for FY2015 which decreased from approximately 22.4% for FY2014. The gross profit and gross profit margin had decreased because of the decline in gross profit contributed from rental of construction machinery.

Rental of construction machinery

Our gross profit of construction machinery rental services decreased by approximately HK$24.1 million from approximately HK$56.4 million for FY2014 to approximately HK$32.3 million for FY2015. In addition, our gross profit margin of construction machinery rental services decreased from approximately 28.7% for FY2014 to approximately 18.5% for FY2015.

The decrease in gross profit margin of construction machinery rental services was mainly attributable to the combined effect of (i) the decrease in revenue from rental of construction machinery from rental fleet; (ii) the decrease in gross profit from sub-leasing; and (iii) costs such as depreciation, repair and maintenance, and insurance remained at similar level as FY2014 in order to maintain the construction machinery fleet size.

Trading of construction machinery and parts

Our gross profit of trading of construction machinery and parts segment increased by approximately HK$15.9 million from approximately HK$13.9 million for FY2014 to approximately HK$29.8 million for FY2015.

In addition, our gross profit margin for trading of construction machinery and parts increased from approximately 11.9% for FY2014 to approximately 15.6% for FY2015.

The increase in gross profit margin for trading of construction machinery and parts was mainly attributable to the increase in trading volume of used machineries, which normally has higher gross profit margin than new machineries.

Transportation services

Our gross profit of trading of transportation services segment decreased by approximately HK$0.3 million from approximately HK$0.7 million for FY2014 to approximately HK$0.4 million for FY2015.

In addition, our gross profit margin of transportation services segment decreased from approximately 20.2% for FY2014 to approximately 13.4% for FY2015.

– 213 –

– 41 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

The decrease in gross profit margin of transportation services segment was mainly attributable to the combined effect of (i) the decrease in revenue from transportation services; and (ii) costs such as staff costs, licence fee and insurance cost remained at similar level as FY2014 in order to maintain the transportation fleet size for operation.

Other income and gains

Our other income and gains increased by approximately HK$3.4 million, or 121%, from approximately HK$2.8 million for FY2014 to approximately HK$6.2 million for FY2015. The increase in other income and gains was mainly attributable to the government allowance for retirement of commercial vehicles of our transportation fleet of approximately HK$1.2 million and gain on disposal of investment property of approximately HK$2.0 million.

Listing expenses

For FY2015, our Group incurred Listing expenses of approximately HK$8.4 million. For details, please refer to the paragraph headed ‘‘Listing expenses’’ in this section.

Administrative expenses

Our administrative expenses increased by approximately HK$2.6 million, or 13.6%, from approximately HK$19.1 million for FY2014 to approximately HK$21.7 million for FY2015. The increase in administrative expenses was mainly attributable to (i) the increase in staff costs due to the increase in the number of staff; and (ii) the increase in depreciation expenses due to additional motor vehicles purchased and leasehold improvement.

Finance costs

Our finance costs slightly decreased by approximately HK$1.0 million, or 12.8%, from approximately HK$7.8 million for FY2014 to approximately HK$6.8 million for FY2015. The decrease in finance costs was mainly attributable to the decrease in finance lease payables.

Income tax expense

Our income tax expense decreased by approximately HK$0.7 million, or 9.1%, from approximately HK$7.7 million for FY2014 to approximately HK$7.0 million for FY2015. The decrease in income tax expense was mainly attributable to the decrease in profit.

Effective tax rate

Our effective tax rate increased from 16.3% for FY2014 to 22.2% for FY2015 which was mainly due to non-tax deductible Listing expenses of approximately HK$8.4 million.

– 214 –

– 42 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

FY2014 compared to FY2013

Revenue

Our total revenue increased by approximately HK$73.9 million, or 30.4%, from approximately HK$242.9 million for FY2013 to approximately HK$316.8 million for FY2014. Such increase was mainly attributable to the increase in revenue generated from trading of construction machinery and parts.

Rental of construction machinery

Our revenue from construction machinery rental remained stable at approximately HK$197.3 million and approximately HK$196.5 million for FY2013 and FY2014, respectively.

Trading of construction machinery and parts

Our revenue from trading of construction machinery and parts increased by approximately HK$76.4 million, or 188.2%, from approximately HK$40.6 million for FY2013 to approximately HK$117.0 million for FY2014. Such increase was mainly attributable to the increase in trading of crawler cranes due to our increase in sales and marking effort through our dealership and increase in demand in the market.

Transportation services

Our revenue from transportation services decreased by approximately HK$1.8 million, or 36.0%, from approximately HK$5.0 million for FY2013 to approximately HK$3.2 million for FY2014. Such decrease was mainly attributable to the decrease in operation scale due to the retirement of certain transportation fleet.

Cost of sales and services rendered

Our cost of sales and services rendered increased by approximately HK$73.0 million, or 42.2%, from approximately HK$172.9 million for FY2013 to approximately HK$245.9 million for FY2014, which was mainly attributable to (i) the increase in cost of services rendered for construction machinery rental which was in line with the increase in revenue for that segment; and (ii) the significant increase in cost of purchase of construction machinery for trading mainly due to the increase in number of sales of crawler cranes.

Purchase of machinery and spare parts

Our cost of purchase of machinery and spare parts increased by approximately HK$68.5 million, or 204.5%, from approximately HK$33.5 million for FY2013 to approximately HK$102.0 million for FY2014. Such increase was in line with the increase in revenue from trading of construction machinery and parts.

– 215 –

– 43 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Staff costs

Our staff costs increased by approximately HK$2.3 million, or 4.7%, from approximately HK$48.6 million for FY2013 to approximately HK$50.9 million for FY2014. Such increase was mainly attributable to the salary increment.

Sub-leasing expenses

Our sub-leasing expenses decreased by approximately HK$6.5 million, or 16.5%, from approximately HK$39.5 million for FY2013 to approximately HK$33.0 million for FY2014. Such decrease was mainly attributable to the decrease in number of sub-leasing machinery engaged as we could perform the engagements by using our own rental fleet.

Gross profit and gross profit margin

Our gross profit increased by approximately HK$1.0 million, or 1.4%, from approximately HK$70.0 million for FY2013 to approximately HK$71.0 million for FY2014. In addition, our gross profit margin was approximately 22.4% in FY2014 which decreased from approximately 28.8% in FY2013.

Rental of construction machinery

Our gross profit of construction machinery rental services decreased by approximately HK$6.2 million, or 9.9%, from approximately HK$62.6 million for FY2013 to approximately HK$56.4 million for FY2014. In addition, our gross profit margin of construction machinery rental services segment decreased from approximately 31.7% in FY2013 to approximately 28.7% in FY2014.

The decrease in gross profit margin of construction machinery rental services was mainly attributable to the increase in staff costs, repair and maintenance of machinery and depreciation of machinery.

Trading of construction machinery and parts

The gross profit of our trading of construction machinery and parts increased by approximately HK$8.6 million, or 162.3%, from approximately HK$5.3 million for FY2013 to approximately HK$13.9 million for FY2014.

In addition, the gross profit margin for our trading of construction machinery and parts decreased from approximately 13.1% in FY2013 to approximately 11.9% in FY2014.

The decrease in gross profit margin for trading of construction machinery and parts segment was mainly attributable to the increase in number of sale of new construction machinery with lower gross profit margin than that of the used construction machinery.

Transportation services

The gross profit of our transportation services decreased by approximately HK$1.5 million, or 68.2%, from approximately HK$2.2 million for FY2013 to approximately HK$0.7 million for FY2014.

– 216 –

– 44 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

In addition, our gross profit margin of transportation services decreased from approximately 43.0% in FY2013 to approximately 20.2% in FY2014.

The decrease in gross profit margin of transportation services was mainly attributable to the decrease in gross profit while part of the direct cost such as staff costs, licence fee and insurance cost were fixed.

Other income and gains

Our other income and gains decreased by approximately HK$1.3 million, or 31.7%, from approximately HK$4.1 million for FY2013 to approximately HK$2.8 million for FY2014. The decreased in other income and gains was mainly attributable to (i) the decrease in interest income mainly due to the decrease in interest-bearing loans from related companies in FY2014; and (ii) the decrease in rental income from leasing warehouse property mainly due to termination of some rental contracts in FY2014.

Administrative expenses

Our administrative expenses increased by approximately HK$3.9 million, or 25.7%, from approximately HK$15.2 million for FY2013 to approximately HK$19.1 million for FY2014. The increase in administrative expenses was mainly attributable to the increase in staff costs mainly due to salary increment and professional fees mainly due to legal fee for litigation case as disclosed in the section headed ‘‘Business — Legal proceedings and compliance’’ in this prospectus.

Finance costs

Our finance costs remained stable at approximately HK$7.8 million for FY2013 and FY2014.

Income tax expense

Our income tax expense increased by approximately HK$1.7 million, or 28.3%, from approximately HK$6.0 million for FY2013 to approximately HK$7.7 million for FY2014. The increase in income tax expense was in line with the increase in profit.

Effective tax rate

Our effective tax rate increased from approximately 15.3% for FY2013 to approximately 16.3% for FY2014 which was mainly due to an non-taxable income of approximately HK$3.7 million from the sales proceeds for disposal of fixed assets, which was capital gain in nature in FY2013.

LIQUIDITY AND CAPITAL RESOURCES

During the Track Record Period, we principally financed our working capital and other liquidity requirements through a combination of cash flow from operations, bank loans, bank overdraft and finance leases.

Our principal uses of cash have been, and are expected to continue to be, operational costs and purchase of construction machinery and parts for trading and rental purposes.

– 217 –

– 45 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Cash flows

The following table sets forth a summary of our cash flows during the Track Record Period:

Net cash generated from operating activities Net cash used in investing activities Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year/period Cash and cash equivalents at end of the year/period	For the year ended 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 64,548 105,515 125,391 (42,476) (64,139) (86,711) (33,793) (2,751) (13,885) (11,721) 38,625 24,795 1,453 (10,268) 28,357 (10,268) 28,357 53,152	For the five months ended 31 August 2014 2015 HK$’000 HK$’000 66,876 32,795 (37,261) (6,125 (21,813) (30,165 7,802 (3,495 28,357 53,152 36,159 49,657	For the five months ended 31 August 2014 2015 HK$’000 HK$’000 66,876 32,795 (37,261) (6,125 (21,813) (30,165 7,802 (3,495 28,357 53,152 36,159 49,657
			(3,495 53,152
			49,657

Cash flow generated from operating activities

We derive our cash generated from operating activities principally from receipt of payments from rental and trading of construction machinery and parts. Cash used in operating activities is principally for purchase of construction machinery and parts for trading purpose and operational expenses such as staff cost, sub-leasing and repair and maintenance expenses.

Net cash flows generated from operating activities for the five months ended 31 August 2015 were approximately HK$32.8 million while our profit before tax was approximately HK$4.5 million. The net cash generated from operating activities was mainly the result of operating profits of approximately HK$22.5million and net working capital inflow of approximately HK$10.5 million. The net working capital inflow primarily consisted of decrease in trade receivables, amounts due from related companies and trade payable.

Net cash flows generated from operating activities for FY2015 were approximately HK$125.4 million while our profit before tax was approximately HK$31.3 million. The net cash generated from operating activities was mainly the result of operating profits of approximately HK$72.2 million and net working capital inflow of approximately HK$60.5 million. The net working capital inflow primarily consisted of decrease in inventories and decrease in amounts due from related companies, but partially offset by increase in trade receivables.

Net cash flows generated from operating activities for FY2014 were approximately HK$105.5 million while our profit before tax was approximately HK$46.9 million. The net cash generated from operating activities was mainly the result of operating profit of HK$89.8 million and net working capital

– 218 –

– 46 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

inflow of approximately HK$17.8 million. The net working capital inflow primarily consisted of decrease in trade receivables and prepayments, deposits and other receivables, partially offset by decrease in accruals, deposits received and other payables and amount due from related companies.

Net cash flows generated from operating activities for FY2013 were approximately HK$64.5 million while our profit before tax was approximately HK$39.1 million. The net cash generated from operating activities was mainly the result of operating profit of approximately HK$90.1 million and net working capital outflow of approximately HK$20.3 million. The net working capital outflow primarily consisted of increase in trade receivables, prepayments, deposits and other receivables, partially offset by decrease in amounts due from related companies and accruals, deposits received and other payables.

Cash flow used in investing activities

Our investing activities during the Track Record Period primarily included investing in construction machinery for rental purpose, amounts due from a shareholder and a director and finance lease receivables.

Net cash flows used in investing activities for the five months ended 31 August 2015 were approximately HK$6.1 million which were mainly attributable to purchase of property, plant and equipment and increase in amount due from a shareholder.

Net cash flows used in investing activities for FY2015 were approximately HK$86.7 million which were mainly attributable to purchase of property, plant and equipment, increase in amount due from a shareholder and increase in finance lease receivables.

Net cash flows used in investing activities for FY2014 were approximately HK$64.1 million which were mainly attributable to purchase of property, plant and equipment and increase in amount due from a shareholder.

Net cash flows used in investing activities for FY2013 were approximately HK$42.5 million which were mainly attributable to purchase of property, plant and equipment.

Cash flow used in financing activities

Our financing activities during the Track Record Period mainly included proceeds from and repayments of bank borrowings and finance lease.

Net cash flows used in financing activities for the five months ended 31 August 2015 were approximately HK$30.2 million which were mainly attributable to repayments of bank borrowings and finance lease payables, partially offset by proceeds from borrowings and finance lease.

Net cash flows used in financing activities for FY2015 were approximately HK$13.9 million which were mainly attributable to repayments of bank borrowings and finance lease payables, partially offset by proceeds from borrowings and finance lease.

Net cash flows used in financing activities for FY2014 were approximately HK$2.8 million which were mainly attributable to repayment of bank borrowings and finance lease payables, partially offset by the proceeds from borrowings.

– 219 –

– 47 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Net cash flows used in financing activities for FY2013 were approximately HK$33.8 million which were mainly attributable to the repayment of bank borrowings and finance lease payables.

CAPITAL EXPENDITURES

Historical Capital Expenditures

Our capital expenditures, which were funded out of the bank loans, finance leases, and cash flows from our operations have been primarily used to expand our rental fleet. The following table sets out our historical capital expenditures during the Track Record Period:

Property, plant and equipment Leasehold improvements Machinery Furniture and equipment Motor vehicles Total	For the year ended 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 — — 1,958 89,498 38,689 44,029 29 53 336 1,987 2,389 2,740 91,514 41,131 49,063	For the five months ended 31 August 2015 HK$’000 161 3,275 57 283
		3,776

Planned capital expenditures

For the years ending 31 March 2016 and 2017, we estimate that the capital expenditures will amount to approximately HK$41.5 million and HK$60.1 million, respectively, primarily for expanding our construction machinery rental fleet and introducing centralised digital fleet management system to our Group.

Our Group’s planned capital expenditures are subject to revision based upon any future changes in our business plan, market conditions, and economic and regulatory environment. Please refer to the section headed ‘‘Future plans and use of proceeds’’ in this prospectus for further information.

We plan to finance future capital expenditures mainly through the net proceeds of the Share Offer, bank loans, as well as from cash flows generated from operations. We believe that these sources of funding will be sufficient to finance our contractual commitments and capital expenditure needs for the next 12 months.

– 220 –

– 48 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

CAPITAL AND CONTRACTUAL COMMITMENTS

Capital commitments

Our capital commitments consist primarily of purchase of construction machinery for rental purpose. Our capital commitments of plant and construction machinery, and leasehold improvements contracted for but not provided amounted to nil, HK$11.3 million, HK$66,000 and nil as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015 respectively.

Operating lease commitments

The table below sets forth the outstanding commitments under these non-cancellable lease agreements as of the dates indicated:

Not later than one year Later than one year and not later than five years	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 1,533 647 315 1,759 1,123 84 3,292 1,770 399	As at 31 August 2015 HK$’000 3,081 1,588
		4,669

Our operating lease commitments represented the leases of various warehouse and construction machineries under non-cancellable operating lease agreements. The lease terms were between one and five years. As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, our lease commitments amounted to approximately HK$3.3 million, HK$1.8 million, HK$0.4 million and HK$4.7 million, respectively.

– 221 –

– 49 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

NET CURRENT ASSETS/LIABILITIES

The following table sets forth the breakdown of our current assets, current liabilities, and net current assets/liabilities as at 31 March 2013, 31 March 2014, 31 March 2015, 31 August 2015 and 30 September 2015, being the latest practicable date for determining our Group’s indebtedness:

Current assets Inventories Trade receivables Prepayments, deposits and other receivables Finance lease receivables Amounts due from related companies Amount due from a shareholder Amount due from a director Pledged bank deposits Cash and cash equivalents Current tax recoverable Current liabilities Trade payables Accruals, deposits received and other payables Amounts due to related companies Bank overdrafts Borrowings Finance lease payables Current tax liabilities Net current (liabilities)/assets	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 510 4,379 887 80,371 66,630 71,783 20,702 11,728 12,926 — — 4,010 27,109 30,462 10,502 1,200 16,200 57,980 3,745 12,721 1,125 — — 4,550 9,263 28,357 53,152 4,620 3,649 3,411 147,520 174,126 220,326 7,998 10,961 18,765 18,662 12,745 15,099 347 661 3,965 19,531 — — 34,160 67,041 81,884 90,531 66,076 42,989 458 3,158 739 171,687 160,642 163,441 (24,167) 13,484 56,885	As at 31 August 2015 HK$’000 5,580 51,011 20,321 4,100 7 — 402 4,560 49,657 3,411 139,049 8,092 14,902 — — 67,520 40,349 2,266 133,129 5,920	As at 30 September 2015 HK$’000 (unaudited) 5,588 57,670 26,338 4,118 4 — 576 4,566 47,222 3,411
			149,493
			7,697 13,616 — — 68,625 37,748 4,495
			132,181
			17,312

As at 31 March 2013, our Group had net current liabilities of approximately HK$24.2 million. Due to the nature of our business, we purchased construction machinery for our rental business and we financed our purchase by the combination of cash, bank borrowings, bank overdrafts and finance lease.

– 222 –

– 50 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

While our construction machinery was classified as non-current assets, our bank borrowings which finance the purchases of construction machinery was classified as current liabilities due to the repayment on demand clause.

As at 31 March 2014, the net current assets of our Group were approximately HK$13.5 million. Our net current assets increased by approximately HK$37.7 million from approximately net current liabilities of approximately HK$24.2 million as at 31 March 2013 to net current assets of approximately HK$13.5 million as at 31 March 2014. Such increase was mainly attributable to the increase in cash and cash equivalents of approximately HK$19.1 million and decrease in current finance lease payables of approximately HK$24.5 million, partially offset by decrease in trade receivables of approximately HK$13.7 million and increase in trade payables of approximately HK$3.0 million.

As at 31 March 2015, the net current assets of our Group were approximately HK$56.9 million. Our net current assets increased by approximately HK$43.4 million from approximately HK$13.5 million as at 31 March 2014 to approximately HK$56.9 million as at 31 March 2015. Such increase was mainly attributable to the increase in amount due from a shareholder of approximately HK$41.8 million and partially offset by increase in borrowings of approximately HK$14.8 million.

As at 31 August 2015, the net current assets of our Group were approximately HK$5.9 million. Our net current assets decreased by approximately HK$51.0 million from approximately HK$56.9 million as at 31 March 2015 to approximately HK$5.9 million as at 31 August 2015. Such decrease was mainly due to the settlement of the amount due from a shareholder of approximately HK$58.0 million by setting off against dividend payable to the shareholder on 30 June 2015 of HK$62.0 million.

As at 30 September 2015, being the latest practicable date for determining our Group’s indebtedness, the net current assets of our Group were approximately HK$17.3 million. Our net current assets increased by approximately HK$11.4 million from approximately HK$5.9 million as at 31 August 2015 to approximately HK$17.3 million as at 30 September 2015. Such increase was mainly attributable to the increase in trade receivables and prepayment, deposits and other receivables of approximately HK$6.7 million and HK$6.0 million, respectively.

ANALYSIS OF SELECTED COMBINED STATEMENT OF FINANCIAL POSITION ITEMS

Property, plant and equipment

During the Track Record Period, our property, plant and equipment mainly represented construction machineries, leasehold land and building, motor vehicles, furniture and fixtures. As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, our property, plant and equipment amounted to approximately HK$248.6 million, HK$249.4 million, HK$234.4 million and HK$216.2 million, respectively. Our property, plant and equipment maintained at a stable level as at 31 March 2013, 2014 and 2015, and 31 August 2015.

– 223 –

– 51 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Inventories

Our inventories consist primarily machinery and spare parts for trading. The following table sets forth our inventories as at the indicated dates:

Machinery Spare parts	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 — 3,518 180 510 861 707 510 4,379 887	As at 31 August 2015 HK$’000 4,837 743
		5,580

As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, our inventories amounted to approximately HK$0.5 million, HK$4.4 million, HK$0.9 million and HK$5.6 million, respectively. During the Track Record Period, the inventories were maintained at a stable level, except for FY2014. The increase in inventories of approximately HK$3.9 million from HK$0.5 million as at 31 March 2013 to approximately HK$4.4 million as at 31 March 2014, which was mainly attributable to one machine ordered by our customer but not yet collected as at 31 March 2014. The inventory as at 31 March 2015 mainly comprised of spare parts which was maintained at similar level as compared with as at 31 March 2014. As at 31 August 2015, the inventory was mainly attributable to the machines ordered by our customers but not yet collected.

The following table sets forth our average inventory turnover days as of the indicated dates:

Average inventory turnover days (Note)	As at 31 March 2013 2014 2015 3 4 3	As at 31 August 2015 4

Note: Average inventory turnover days is equal to the average inventory divided by total cost of sale and services rendered and multiplied by 365 days for year ended 31 March 2013, 31 March 2014 and 31 March 2015, and by 153 days for the five months ended 31 August 2015. Average inventory equals inventory at the beginning of the year/period plus inventory at the end of the year/period and divided by two.

Our average inventory turnover days remained stable at approximately 3, 4, 3 and 4 days as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, respectively.

– 224 –

– 52 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Trade receivables

Our trade receivables consist primarily of receivables from provision of rental and transportation services from customers. The following table sets forth our trade receivables as at the indicated dates:

Trade receivables, gross Less: Provision for impairment Trade receivables, net	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 92,470 78,729 83,882 (12,099) (12,099) (12,099) 80,371 66,630 71,783	As at 31 August 2015 HK$’000 63,110 (12,099
		51,011

As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, our trade receivables amounted to approximately HK$80.4 million, HK$66.6 million, HK$71.8 million and HK$51.0 million, respectively. The decrease in trade receivables of approximately HK$13.8 million from HK$80.4 million as at 31 March 2013 to approximately HK$66.6 million as at 31 March 2014, which was mainly attributable to increased effort in credit control. The increase in trade receivables of approximately HK$5.2 million from HK$66.6 million as at 31 March 2014 to approximately HK$71.8 million as at 31 March 2015, which was in line with our increase in revenue. The decrease in trade receivables of approximately HK$20.8 million from HK$71.8 million as at 31 March 2015 to approximately HK$51.0 million as at 31 August 2015 was mainly due to decrease in revenue in rental of construction machinery.

				As at
	As at	31 March		31 August
	2013	2014	2015	2015
Average trade receivable turnover days
by business segments (Note)
Rental of construction machinery	122	135	126	152
Trading of construction machinery and parts	0	0	16	22
Transportation services	74	100	63	39
Overall	101	85	68	67

Note: Average trade receivables turnover days is are equal to the average trade receivables divided by revenue and multiplied by 365 days for year ended 31 March 2013, 31 March 2014 and 31 March 2015, and by 153 days for the five months ended 31 August 2015. Average trade receivables are equal to trade receivables at the beginning of the year/period plus trade receivables at the end of the year/period and divided by two.

The average trade receivable turnover days decreased from approximately 101 days as at 31 March 2013 to approximately 85 days as at 31 March 2014, and further decreased to approximately 68 days as at 31 March 2015 and subsequently decreased to approximately 67 days as at 31 August 2015.

The average trade receivable turnover days in rental of construction machinery increased from approximately 122 days as at 31 March 2013 to approximately 135 days as at 31 March 2014, and decreased to approximately 126 days as at 31 March 2015 and further increased to approximately 152

– 225 –

– 53 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

days as at 31 August 2015, which was mainly attributable to several major customers who required longer time to receive payments from their onward customers (i.e. the main constructors) before processing and making payments to our Group.

The average trade receivable turnover days in rental of construction machinery is beyond the standard credit period of 30 days mainly attributable to (i) several customers which are more sizeable construction companies were in a better position to negotiate with us on credit terms; and (ii) we allow longer settlement time to those sizeable construction companies as a mean to maintain business relationship. We considered it is an industry norm as our average trade receivable turnover days is similar to other construction companies in our industry.

As at 31 March 2013, 2014 and 2015, and 31 August 2015, the average trade receivable turnover days in trading of construction machinery and parts were nil, nil, approximately 16 days and approximately 22 days respectively. The average trade receivable turnover days in trading of construction machinery and parts increased from nil in FY2014 to approximately 16 days in FY2015 was attributable to: (i) one of the rental customers subsequently purchased the construction machinery rented from our Group in which we granted a credit period of 30 days to the said customer for this purchase. The amount due from the said customer was still outstanding as at 31 March 2015 and has been settled before the Latest Practicable Date; and (ii) as at 31 March 2015, our Group granted credit period of 90 days to one of our major customers in view of its close business relationship with our Group. The average trade receivable turnover days in trading of construction machinery and parts further increased to approximately 22 days as at 31 August 2015 which was attributable to the payments of three purchased construction machineries not being settled by our customers as at 31 August 2015. As at the Latest Practicable Date, payments of two of the said machineries have been fully settled and the remaining machinery, with a credit period of 90 days granted to the customer, has not yet become due.

The table below sets forth the ageing analysis of our trade receivables, based on invoice date and net of impairment as at the indicated dates:

Within 1 month More than 1 month but not more than 3 months More than 3 months but not more than 6 months More than 6 months but not more than a year More than a year	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 24,726 16,263 24,966 39,288 30,502 29,589 5,565 10,975 3,090 5,546 7,302 11,255 5,246 1,588 2,883 80,371 66,630 71,783	As at 31 August 2015 HK$’000 19,389 15,863 5,739 4,645 5,375
		51,011

The trade receivables that were past due but not impaired relate to a number of independent clients that have a good track record with us. Based on past experience, we believe no provision for impairment is necessary in respect of these balances as there has not been a significant change in the credit quality of these clients and the balances are still considered fully recoverable. We do not hold any collateral over these balances.

– 226 –

– 54 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, the balance of our provisions for impairment of trade receivables amounted to approximately HK$12.1 million. For details of the impairment of trade receivable during the Track Record Period, please refer to the paragraph headed ‘‘Description of selected line items of combined statements of comprehensive income — Impairment of trade receivables’’ in this section. During the Track Record Period, no written off of provision of trade receivable has been recorded.

As at 30 September 2015, being the latest practicable date for determining our Group’s indebtedness, trade receivables of approximately HK$16.7 million or approximately 32.7% as at 31 August 2015 had been subsequently settled.

Prepayments, deposits and other receivables

The following table sets forth our prepayments, deposits and other receivables as at the indicated dates:

Prepayments Deposits Other receivables	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 815 1,242 3,858 19,169 9,829 7,986 718 657 1,082 20,702 11,728 12,926	As at 31 August 2015 HK$’000 6,748 12,660 913
		20,321

Our prepayments consist primarily of insurance prepayment for employee and construction machinery. As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, our prepayments amounted to approximately HK$0.8 million, HK$1.2 million, HK$3.9 million and HK$6.7 million, respectively. The increase in prepayment from approximately HK$0.8 million as at 31 March 2013 to approximately HK$6.7 million as at 31 August 2015 was mainly attributable to the increase in the insurance payment in advance for employees.

Our deposits consist primarily of deposit for purchase of construction machinery, rental deposit, utilities deposits and other deposits. As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, our deposits amounted to approximately HK$19.2 million, HK$9.8 million, HK$8.0 million and HK$12.7 million, respectively. The decrease in deposits from approximately HK$19.2 million as at 31 March 2013 to approximately HK$8.0 million as at 31 March 2015 was mainly attributable to the significant trading orders placed by our Group in FY2013 when the dealership was first introduced by our Group. The amount of deposits remained stable for FY2014 and FY2015.

The balances of other receivables are unsecured, interest-free and with no fixed repayment terms. Our Group’s other receivables were neither past due nor impaired as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015. Our other receivables consist primarily of cash advance to staffs and insurance claims receivable. As at 31 March 2013 and 31 March 2014, our other receivables remained stable at approximately HK$0.7 million for both dates. Our other receivables increased from approximately HK$0.7 million as at 31 March 2014 to HK$1.1 million as at 31 March 2015 which was

– 227 –

– 55 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

mainly due to the increase in receivables due from the insurance company regarding the employment claim which concluded the compensation amount in January 2015. Our other receivables decreased from approximately HK$1.1 million as at 31 March 2015 to HK$0.9 million as at 31 August 2015 which was mainly due to the receipt from the insurance company regarding the employment claim.

Finance lease receivables

Our finance lease receivables consist primarily of leasing out of certain machineries for a period ranging from 3.5 years to 5 years. The following table sets forth our finance lease receivables as at the indicated dates:

			As at
As	at 31 March		31 August
2013	2014	2015	2015
HK$’000	HK$’000	HK$’000	HK$’000

Present value of minimum lease payments receivable: Not later than one year Later than one year and not later than five years	— — —	— — —	4,010 9,420	4,100 7,685
			13,430	11,785

Finance lease receivables bore interest at fixed interest rates. The effective interest rates of finance lease receivables were ranging from approximately 4.6% to 5.9%. We have started the finance lease arrangement to our customers since April 2014.

Trade payables

Our trade payables consist primarily of payables to suppliers. The following table sets forth our trade payables as at the indicated dates:

Trade payables	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 7,998 10,961 18,765	As at 31 August 2015 HK$’000 8,092

As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, our trade payables amounted to approximately HK$8.0 million, HK$11.0 million, HK$18.8 million and HK$8.1 million, respectively. The increase in trade payables of approximately HK$3.0 million from approximately HK$8.0 million as at 31 March 2013 to approximately HK$11.0 million as at 31 March 2014, which was mainly attributable to the increase in repair and maintenance of machineries. The trade payables increased from approximately HK$11.0 million as at 31 March 2014 to approximately HK$18.8 million as at 31 March 2015 which was mainly attributable to the increase in purchase cost of construction machinery for trading. The trade payables decreased from approximately HK$18.8 million as at 31

– 228 –

– 56 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

March 2015 to approximately HK$8.1 million as at 31 August 2015 which was mainly due to the settlement of payment within the credit period granted for the purchase of construction machinery for trading.

Average trade payables turnover days (Note)	As at 31 March 2013 2014 2015 16 14 18	As at 31 August 2015 16

Note: Average trade payables turnover days is equal to the average trade payables divided by cost of sales and services rendered and multiplied by 365 days for year ended 31 March 2013, 31 March 2014 and 31 March 2015, and by 153 days for the five months ended 31 August 2015. Average trade payables equals trade payables at the beginning of the year/period plus trade payables at the end of the year/period and divided by two.

Our average trade payables turnover days slightly decreased from approximately 16 days as at 31 March 2013 to approximately 14 days as at 31 March 2014, and increased to approximately 18 days as at 31 March 2015, and further decreased to approximately 16 days as at 31 August 2015. Such decrease as at 31 March 2014 was mainly attributable to the increase in cost of services from trading of construction machinery and spare parts which was paid before delivery. The increase in trade payable days as at 31 March 2015 was mainly attributable to the increase in purchase cost for trading of construction machinery. The decrease in trade payable days as at 31 August 2015 was mainly due to the settlement of payment within the credit period granted for the purchase of construction machinery for trading.

The table below sets forth the ageing analysis of the trade payables as at the indicated dates based on invoice dates:

Within 1 month More than 1 month but not more than 2 months More than 2 months but not more than 6 months More than 6 months but not more than a year Over a year	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 3,054 5,521 10,769 1,893 2,116 3,443 1,642 1,116 944 354 — 997 1,055 2,208 2,612 7,998 10,961 18,765	As at 31 August 2015 HK$’000 2,489 1,389 2,880 890 444
		8,092

The credit period granted by suppliers was ranged from 0 to 45 days and the trade payables were non-interest-bearing.

As at 30 September 2015, being the latest practicable date for determining our Group’s indebtedness, trade and other creditors of approximately HK$2.6 million or 31.7% as at 31 August 2015 had been settled.

– 229 –

– 57 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Accruals, deposits received and other payables

The following table sets forth our accruals, deposits received and other payables as at the indicated dates:

Accruals Deposits received Other payables	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 4,101 4,373 4,781 14,323 7,643 9,560 238 729 758 18,662 12,745 15,099	As at 31 August 2015 HK$’000 4,535 9,850 517
		14,902

Our accruals consist primarily of accrued expense for salary, audit fee and other expenses. As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, our accruals amounted to approximately HK$4.1 million, HK$4.4 million, HK$4.8 million and HK$4.5 million, respectively. The increase in accruals from approximately HK$4.1 million as at 31 March 2013 to approximately HK$4.8 million as at 31 March 2015 and further decrease to approximately HK$4.5 million as at 31 August 2015 was mainly attributable to the decrease in overall staff costs.

Our deposits received consist primarily of customers’ deposit for purchase of construction machinery. As at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, our deposit received amounted to approximately HK$14.3 million, HK$7.6 million, HK$9.6 million and HK$9.9 million, respectively. The decrease in deposit from approximately HK$14.3 million as at 31 March 2013 to approximately HK$7.6 million as at 31 March 2014 was mainly attributable to the significant trading deposits received in FY2013 when the dealership was first introduced by our Group. The increase in deposit from approximately HK$7.6 million as at 31 March 2014 to approximately HK$9.6 million as at 31 March 2015 was mainly attributable to the additional deposit in response to our surge in trading of construction machineries. The further increase in deposit received of approximately HK$9.9 million as at 31 August 2015 was mainly attributable to the increase in deposit from customers regarding the trading of construction machineries.

Our other payables consist primarily of provision of long service payment. As at 31 March 2013, 31 March 2014 and 31 March 2015, our other payables amounted to approximately HK$0.2 million, HK$0.7 million and HK$0.8 million, respectively. The other payables increased from approximately HK$0.2 million as at 31 March 2013 to approximately HK$0.8 million as at 31 March 2015; it then decreased to approximately HK$0.5 million, which was mainly attributable to the decrease in the provision of sundry creditors.

– 230 –

– 58 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Amounts due from/to related parties

The following table sets forth our amounts due from/to related companies and a shareholder as at the indicated dates:

Amounts due from related companies and a shareholder

Related companies CHIM K SOCIEDADE UNIPESSOAL LDA. Chim Kee Crane Company Limited Chim Kee Group Limited L B Machinery Co Ltd(Note) Link Bright Consultants Limited Minji Machinery Limited(Note) Profit Principle Limited Robinson — Chim Kee Joint Venture Limited Shareholder Mr. Tang Kan	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 6,634 7,686 4,052 5 5 5 5 5 — 3,447 3,535 — 6,276 9,862 3 1,268 — — 2,940 2,940 — 6,534 6,429 6,442 27,109 30,462 10,502 1,200 16,200 57,980 28,309 46,662 68,482	As at 31 August 2015 HK$’000 — — — — 7 — — —
		7
		—
		7

Note: No longer a related party since 3 October 2014.

The amounts due from related parties are unsecured and with no fixed repayment terms. The balances with CHIM K SOCIEDADE UNIPESSOAL LDA., L B Machinery Co Ltd, Link Bright Consultants Limited and Robinson — Chim Kee Joint Venture Limited as at 31 March 2013 were interest-bearing at 3% per annum.

The balance with Minji Machinery Limited as at 31 March 2013 was interest-bearing at 8% per annum.

All other balances were interest-free as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015.

All the amounts due from related companies were trade in nature, except for cash advances to related companies of approximately HK$9.4 million, HK$9.4 million, HK$6.4 million and nil as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015 which were not trade in nature.

– 231 –

– 59 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Amounts due to related companies

King Era Industrial Limited Minji Machinery Limited Chim Kee Group Limited Profit Principle Limited	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 347 386 —(Note) — 275 —(Note) — — 3,953 — — 12 347 661 3,965	As at 31 August 2015 HK$’000 — — — —
		—

Note: No longer a related party since 3 October 2014.

As at 31 March 2013 and 2014, all the amounts due to related companies were trade in nature. As at 31 March 2015, the amounts due to related companies were mainly relating to Listing expenses of our Group.

Amount due from a director

The balance with a director is unsecured, interest-free and repayable on demand.

Mr. James Tang	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 3,745 12,721 1,125	As at 31 August 2015 HK$’000 402

Our Directors confirm that all non-trade balances with the related companies, shareholder and director will be settled upon Listing.

– 232 –

– 60 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

INDEBTEDNESS

The following table sets forth the amounts of indebtedness as at 31 March 2013, 31 March 2014, 31 March 2015, 31 August 2015 and 30 September 2015, being the latest practicable date for determining our Group’s indebtedness:

Current liabilities Amounts due to related companies Bank overdrafts Borrowings Finance lease payables Non-current liabilities Finance lease payables	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 347 661 3,965 19,531 — — 34,160 67,041 81,884 90,531 66,076 42,989 23,444 22,284 31,554 168,013 156,062 160,392	As at 31 August 2015 HK$’000 — — 67,520 40,349 21,405 129,274	As at 30 September 2015 HK$’000 (unaudited) — — 68,625 37,748
			19,899
			126,272

Borrowings and bank overdrafts

We obtained short term financing from the banks in the form of bank overdrafts and bank loans during the Track Record Period. Our bank overdrafts are revolving borrowing drawn down against bank facility provide by the banks repayable within one year and our bank loans are drawn down against bank facility provide by the banks with fixed repayment schedule.

The following table sets forth repayment schedule of our bank borrowings as at the end of year/ period indicated:

Repayable on demand or within one year Repayable after one year which contain a repayable on demand clause Total borrowings	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 7,738 32,983 39,226 26,422 34,058 42,658 34,160 67,041 81,884	As at 31 August 2015 HK$’000 30,627 36,893 67,520	As at 30 September 2015 HK$’000 (unaudited) 32,900 35,725
			68,625

– 233 –

– 61 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Bank overdrafts that were repayable within one year amounted to approximately HK$19.5 million, nil, nil, nil and nil as at 31 March 2013, 31 March 2014, 31 March 2015, 31 August 2015 and 30 September 2015, respectively.

Our bank borrowings increased from approximately HK$34.2 million as at 31 March 2013 to approximately HK$67.0 million as at 31 March 2014 which was mainly due to the increase of proceeds from new borrowing. Our bank borrowings increased from approximately HK$67.0 million as at 31 March 2014 to approximately HK$81.9 million as at 31 March 2015 and further decrease to approximately HK$67.5 million as at 31 August 2015 which was mainly due to the increase of the repayment of bank borrowings.

Our bank borrowings were denominated in HK$ and JPY. The effective interest rate of bank borrowings are ranging from approximately 3.0% to 5.0%, 3.0% to 6.8%, 3.0% to 5.0%, 3.0% to 5.0% and 3.0% to 5.0% per annum as at 31 March 2013, 31 March 2014, 31 March 2015, 31 August 2015 and 30 September 2015, respectively.

As at 31 March 2013, 31 March 2014, 31 March 2015, 31 August 2015 and 30 September 2015, all our bank borrowings were secured bank borrowings.

As at 31 March 2013, 31 March 2014, 31 March 2015, 31 August 2015 and 30 September 2015, our bank loans, finance lease payables, bank overdrafts and other banking facilities were secured by (i) pledge of leasehold land and building, investment property and bank deposits held by us; (ii) pledge of bank deposits amounting to HK$2.0 million and HK$5.1 million held by director, Mr. James Tang and his father, Mr. Tang Kan as at 31 March 2013, 2014 and 2015, 31 August 2015 and 30 September 2015, respectively; (iii) pledge of leasehold land and buildings held by Mr. Tang Kan; (iv) personal guarantees executed by Mr. James Tang, Mr. Tang Kan, Mr. Tang Yiu Chung Andrew and Mr. Tang Yiu Wai Stephen; and (v) guarantees to the extent of approximately HK$17.2 million, HK$10.8 million, HK$6.0 million, HK$6.0 million and HK$6.0 million as at 31 March 2013, 2014 and 2015, 31 August 2015 and 30 September 2015, respectively, under The SME Loan Guarantee Scheme, The SME Financing Guarantee Scheme and The Special Loan Guarantee Scheme operated by Government of the Hong Kong Special Administrative Region. The guarantees (ii) to (iv) above will be released upon Listing. Our Directors confirmed that there had been no enforcement of or liabilities arising from any of the foregoing guarantees during the Track Record Period and up to the Latest Practicable Date.

Set out below is a breakdown of utilised and unutilised bank borrowing facilities of our Group:

Total bank borrowing facilities granted to our Group Less: Amount of bank borrowing facilities utilised Total unutilised bank borrowing facilities	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 133,460 171,216 192,492 76,775 97,115 124,319 56,685 74,101 68,173	As at 31 August 2015 HK$’000 192,492 121,200 71,292	As at 30 September 2015 HK$’000 (unaudited) 192,492 124,401
			68,091

– 234 –

– 62 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Our Directors confirmed that there were no material covenants or any breach in financial covenants relating to our Group’s outstanding bank borrowings and no material defaults by our Group in payment of its bank borrowings during the Track Record Period. During the Track Record Period, we have not experienced difficulties in obtaining bank borrowings. As at the Latest Practicable Date, our Directors confirmed that we had no material external financing plan.

Finance lease payables

We leased a number of motor vehicles and machinery under finance lease during the Track Record Period. The following table sets forth outstanding finance lease payables as at the end of year/period indicated:

Present value of minimum lease payments: Not later than one year Later than one year and not later than five years	As at 31 March 2013 2014 2015 HK$’000 HK$’000 HK$’000 90,531 66,076 42,989 23,444 22,284 31,554 113,975 88,360 74,543	As at 31 August 2015 HK$’000 40,349 21,405 61,754	As at 30 September 2015 HK$’000 (unaudited) 37,748 19,899
			57,647

The amount of finance leases was HK$114.0 million, HK$88.4 million, HK$74.5 million, HK$61.8 million and HK$57.6 million as at 31 March 2013, 31 March 2014, 31 March 2015, 31 August 2015 and 30 September 2015, respectively. Such decrease was primarily due to early repayment of existing finance lease.

Our average finance lease term ranges from 2 to 5 years. At the end of the lease term, we have the option to purchase the leased equipment at a price that is expected to be sufficiently lower than the fair value of the leased asset at the end of the lease for it to be reasonably certain, at the inception of the lease, that the option will be exercised. None of the leases include contingent rentals. Finance lease payables bore interest at fixed or variable interest rates. The effective interest rates on our Group’s finance lease payables were ranging from approximately 3.0% to 9.7%, 2.3% to 9.6%, 3.3% to 9.8%, 2.2% to 9.1% and 2.2% to 9.1% per annum as at 31 March 2013, 31 March 2014, 31 March 2015, 31 August 2015 and 30 September 2015, respectively.

Corporate guarantees

As at 31 March 2013, 31 March 2014, 31 March 2015, 31 August 2015 and 30 September 2015, we provided corporate guarantees amounting to approximately nil, nil, HK$6.1 million, HK$5.3 million and HK$5.0 million, respectively, to a bank in respect of finance lease obligations of certain third party customers.

– 235 –

– 63 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Disclaimer

Save as aforesaid or as otherwise disclosed herein, we did not have any outstanding loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances, or acceptable credits, debentures, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities at the close of business on 30 September 2015, being the latest practicable date for determining our Group’s indebtedness.

Our Directors have confirmed that there has not been any material adverse change in our Group’s indebtedness and contingent liabilities since 30 September 2015, being the latest practicable date for determining our Group’s indebtedness.

OFF-BALANCE SHEET ARRANGEMENTS

As at Latest Practicable Date, our Directors confirm that we had not entered any off-balance sheet arrangements.

WORKING CAPITAL

Our Directors confirm that there had not been any material defaults in payment of trade and nontrade payables and bank borrowings or any material covenants relating to our Group’s outstanding borrowing during the Track Record Period.

Our Directors confirm that we have sufficient working capital for our requirements for at least the next 12 months from the date of this prospectus, taking into account the estimated net proceeds from the Share Offer, available banking facilities, and cash flows from our operations. The Sole Sponsor concurs with our Directors’ views in this regard.

OTHER KEY FINANCIAL RATIOS

				As at/For the
				five months
				ended
	As at/For the	year ended	31 March	31 August
	2013	2014	2015	2015
Key financial ratios
Current ratio(Note 1)	0.9 times	1.1 times	1.3 times	1.0 times
Gearing ratio(Note 2)	95.9%	72.6%	67.3%	71.8%
Debt to equity ratio(Note 3)	90.6%	59.3%	45.0%	44.2%
Interest coverage(Note 4)	6.0 times	7.0 times	5.6 times	2.7 times
Return on total assets(Note 5)	8.3%	9.2%	5.2%	1.0%
Return on equity(Note 6)	18.9%	18.3%	10.2%	2.0%
Net profit margin(Note 7)	13.6%	12.4%	6.6%	2.6%

– 236 –

– 64 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Notes:

1. Current ratio is calculated based on the total current assets divided by the total current liabilities as at the respective year/ period end.

2. Gearing ratio is calculated based on the total debt (included finance lease payables) divided by the total equity as at the respective year/period end and multiplied by 100%.

3. Debt to equity ratio is calculated by the net debt (all borrowings (included finance lease payables) net of cash and cash equivalents) divided by the total equity as at the respective year/period end and multiplied by 100%.

4. Interest coverage ratio is calculated by profit before interest and tax divided by interest expense for the respective year/ period end.

5. Return on total assets is calculated by net profit for the year/period divided by the total assets and multiplied by 100%.

6. Return on equity is calculated by net profit for the year divided by the total equity as at the respective year/period end and multiplied by 100%.

7. Net profit margin is calculated by net profit for the year divided by the revenue for the respective year/period and multiplied by 100%.

Current ratio

Our Group’s current ratio remained stable during the Track Record Period, which was approximately 0.9 times, 1.1 times, 1.3 times and 1.0 times as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, respectively.

Gearing ratio

Our Group’s gearing ratio was approximately 95.9%, 72.6%, 67.3% and 71.8% as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, respectively. Our Group’s gearing ratio decreased from approximately 95.9% as at 31 March 2013 which primarily reflected the decrease in bank borrowings. The decrease in gearing ratio from approximately 72.6% as at 31 March 2014 to approximately 67.3% as at 31 March 2015 and approximately 71.8% as at 31 August 2015 primarily reflected the increase in total asset due to an increase in cash and cash equivalents and amount due from a shareholder.

Debt to equity ratio

Our Group’s debt to equity ratio was approximately 90.6%, 59.3%, 45.0% and 44.2% as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, respectively. The decrease from approximately 90.6% as at 31 March 2013 to approximately 59.3% as at 31 March 2014 primarily reflected the increase in cash and cash equivalents. The decrease in debt to equity ratio from approximately 59.3% as at 31 March 2014 to approximately 45.0% as at 31 March 2015 and approximately 44.2% as at 31 August 2015 primarily reflected the increase in cash and cash equivalents.

– 237 –

– 65 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Interest coverage

Our Group’s interest coverage was approximately 6.0 times, 7.0 times, 5.6 times and 2.7 times as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, respectively. The increase from approximately 6.0 times as at 31 March 2013 to approximately 7.0 times as at 31 March 2014 primarily reflected the increase in profits for the year while the interest charge remained stable. The increase in interest coverage from approximately 7.0 times as at 31 March 2014 to approximately 5.6 times as at 31 March 2015 and approximately 2.7 times as at 31 August 2015 primarily reflected the decrease in profit after tax.

Return on total assets

Our Group’s return on total assets was approximately 8.3%, 9.2%, 5.2% and 1.0% as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, respectively. The increase from approximately 8.3% as at 31 March 2013 to approximately 9.2% as at 31 March 2014 primarily reflected the increase in profit in FY2014. The decrease in return on total assets from approximately 9.2% as at 31 March 2014 to approximately 5.2% as at 31 March 2015 and approximately 1.0% as at 31 August 2015 primarily reflected the increase in current assets, particularly cash and cash equivalent, while profit decreased.

Return on equity

Our Group’s return on equity was approximately 18.9%, 18.3%, 10.2% and 2.0% as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, respectively. Our Group’s return on equity as at 31 March 2013 and 2014 remained stable. The decrease in return on equity from approximately 18.3% as at 31 March 2014 to approximately 10.2% as at 31 March 2015 and approximately 2.0% as at 31 August 2015 primarily reflected the increase in current assets, particularly cash and cash equivalents, while profit decreased.

Net profit margin

Our Group’s net profit margin was approximately 13.6%, 12.4%, 6.6% and 2.6% as at 31 March 2013, 31 March 2014, 31 March 2015 and 31 August 2015, respectively. The net profit margin remained stable for the year ended 31 March 2013 and 31 March 2014. The decrease in net profit margin from approximately 12.4% as at 31 March 2014 to approximately 6.6% as at 31 March 2015 and approximately 2.6% as at 31 August 2015 primarily reflected the decrease in gross profit margin in rental of construction machinery and the increase in non-recurring and non-tax deductible expenses incurred in relation to the Listing.

DIVIDENDS

During the Track Record Period, we have declared a dividend of HK$62.0 million on 30 June 2015.

The dividends were declared to reward the Shareholders’ investments in our Group. Our Directors consider the level of distribution appropriate and in the best interests of our Group as a portion of the net profits from ordinary activities attributable to the Shareholders have also been retained to support

– 238 –

– 66 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

our Group’s expansion. Our Directors are of the view that it is beneficial to utilise a combination of retained profits and borrowings to finance our Group’s working capital needs rather than solely rely on retained profits for the following reasons:

1. it maximises the return on equity;

2. it maintains the commercial relationship with banks; and

3. it rewards the Shareholders for their investments in our Company and the Shareholders may be inclined to invest further in our Company.

Our Board has not adopted any dividend policy for the time being and does not have any predetermined dividend ratio. Our Board has absolute discretion as to whether to declare any dividend for any year end and if any, the amount of dividend and the means of payment. Such discretion is subject to any applicable laws and regulations including the Companies Law, and our Articles which requires also the approval of our Shareholders. The amount of any dividends to be declared and paid in the future will depend on, among other things, our dividend policy that may be adopted, results of operations, cash flows and financial condition, operating and capital requirements and other relevant factors. There will be no assurance that our Company will be able to declare or distribute any dividend in the amount set out in any plan of our Board or at all. The dividend distribution record in the past may not be used as a reference or basis to determine the level of dividends that may be declared or paid by our Board in the future.

DISTRIBUTABLE RESERVES

As our Company was incorporated on 24 September 2014, we had no distributable reserves available for distribution to our Shareholders as at 31 August 2015.

RELATED PARTY TRANSACTIONS

With respect to the related party transactions set out in Note 32 of the Accountant’s Report in Appendix I to this prospectus, our Directors confirm that these transactions were conducted on arm’s length basis, on normal commercial terms and in the ordinary course of business. Our Directors consider that these related party transactions would not distort our results during the Track Record Period, and would not make our historical results not reflective of our future performance.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Our Group’s major financial instruments include trade and other receivables, bank balances and cash, trade and other payables, obligations under financial leases and bank loans. The risks associated with these financial instruments include interest rate risk, credit risk, liquidity risk and foreign exchange risk. The policies on how to mitigate these risks are set out below. Our Directors manage and monitor these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– 239 –

– 67 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Interest rate risk

Our Group’s exposure to risk relating to changes in interest rates is mainly due to the interestbearing loans and borrowings as part of the financial resources for our Group’s business operations. Our Group currently does not have an interest rate hedging policy. Higher interest rates will increase the borrowing costs of our Group and may adversely affect the profitability of our Group’s operations. However, our Directors monitor interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

Credit risk

At the end of each reporting period, our Group’s maximum exposure to credit risk which will cause a financial loss to our Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the combined statements of financial position.

In order to minimise the credit risk, our Directors closely monitor the overall level of credit exposure and the management is responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, our Group reviews the recoverable amount of each individual trade debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, our Directors consider that our Group’s credit risk is significantly reduced.

Our Group has no significant concentration of credit risk on trade receivables, with exposure spread over a number of clients.

The credit risk on liquid funds is limited because the counterparties are banks with good reputation or high credit ratings assigned by international credit-rating agencies.

Liquidity risk

Our Directors have established an appropriate liquidity risk management framework to meet our Group’s short, medium and long-term funding and liquidity management requirements. Our Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance our Group’s operations and mitigate the effects of fluctuations in cash flows.

Foreign exchange risk

In light of the nature of our Group’s business, we are exposed to various foreign currencies including JPY, EUR and US$. Nevertheless, our operations are predominately subject to the fluctuations of EUR and JPY since HK$ is pegged to each of US$. Set out in Note 35 (d) to the financial information in the Accountant’s Report is our Group’s policy on the foreign exchange risk. Our Directors expect that HK$, JPY, EUR and US$ will continue to be mostly used in our business in the foreseeable future.

Our Directors believe that we will have sufficient foreign exchange, primarily from the conversion of HK$ generated from our operations, to meet our foreign exchange liabilities as they become due.

– 240 –

– 68 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Hedging

During the Track Record Period, our Group had entered into a foreign exchange forward contract on 18 September 2014 to buy JPY100 million for HKD7.2 million on 18 November 2014 (the ‘‘Forward Contract’’). Our Group entered into the Forward Contract to hedge against the fluctuation of JPY against HK$. The Forward Contract was a one-off transaction during the Track Record Period to cover purchase of two construction machines in JPY from our supplier. Our Group has not adopted any hedging strategy in the long run, however we will review our Group’s foreign exchange risk exposure and might enter into foreign exchange forward contract on a case-by-case basis. Our Group has not used and will not use any hedging contracts to engage in speculative activities.

For details of our Group’s risk management policy and procedures, please refer to section headed ‘‘Business — Risk management’’ in this prospectus.

LISTING EXPENSES

Assuming the Adjustment Options are not exercised and assuming the Offer Price of HK$0.40 per Offer Share, being the mid-point of the indicative Offer Price range, the total amount of Listing expenses and commissions in connection with the Share Offer is estimated to be approximately HK$29.4 million of which approximately HK$19.6 million will be borne by our Company and approximately HK$9.8 million will be borne by the Selling Shareholder.

The portion of Listing expenses borne by the Selling Shareholder in connection with the Sale Shares of approximately HK$3.7 million will be set-off against the Listing expenses of our Company. The portion of Listing expenses of approximately HK$6.1 million reimbursed by the Selling Shareholder in its capacity of a Shareholder will be accounted for as capital contribution to our Company.

Of the aggregate Listing expenses of HK$29.4 million, approximately HK$7.4 million directly attributable to the issue of Offer Shares will be accounted for as a deduction from equity upon Listing. Of the remaining HK$22.0 million, approximately HK$3.7 million will be borne by the Selling Shareholder as stated above and approximately HK$18.3 million will be charged to our profit or loss. Listing expenses of approximately HK$8.4 million were charged to the profit or loss for the year ended 31 March 2015 and approximately HK$1.2 million were charged to the profit or loss for the five months ended 31 August 2015 and the remaining amount of approximately HK$8.7 million will be charged to the profit or loss for the year ending 31 March 2016. Expenses in relation to the Listing are nonrecurring in nature.

UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

Please see the section headed ‘‘Unaudited pro forma financial information’’ in Appendix II to this prospectus for details.

DISCLOSURE REQUIRED UNDER THE LISTING RULES

Our Directors have confirmed that as at the Latest Practicable Date, there were no circumstances which, had our Group been required to comply with Rules 13.13 to 13.19 of the Listing Rules, would have given rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.

– 241 –

– 69 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

RECENT DEVELOPMENT

Deteriorated financial performance for the five months ended 31 August 2015

Our total revenue decreased by approximately HK$22.6 million, or 13.9%, from approximately HK$162.7 million for the five months ended 31 August 2014 to approximately HK$140.1 million for the five months ended 31 August 2015. Such decrease was mainly attributable to the decrease in revenue generated from rental of construction machinery. Our revenue from construction machinery rental services decreased by approximately HK$40.2 million, or 45.7%, from approximately HK$88.0 million for the five months ended 31 August 2014 to approximately HK$47.8 million for the five months ended 31 August 2015. Such decrease was mainly due to (i) the decrease in number of crawler cranes rented attributable to the delay in commencement of several Delayed Projects; and (ii) the completion of two substantial private projects in FY2015 which accounted for approximately 44.9% of revenue from private projects for the five months ended 31 August 2014.

For details of the Delayed Projects, please refer to the section headed ‘‘Business — Overview’’ in this prospectus.

Our gross profit decreased by approximately HK$21.2 million, or 57.3%, from approximately HK$37.0 million for the five months ended 31 August 2014 to approximately HK$15.8 million for the five months ended 31 August 2015. In addition, our gross profit margin was approximately 11.3% for the five months ended 31 August 2015 which decreased from approximately 22.7% for the five months ended 31 August 2014. The gross profit and gross profit margin had decreased because of the significant decrease of the gross profit margin of construction machinery rental services.

Our gross profit of construction machinery rental services decreased by approximately HK$21.8 million from approximately HK$23.6 million for the five months ended 31 August 2014 to approximately HK$1.8 million for the five months ended 31 August 2015. In addition, our gross profit margin of construction machinery rental services decreased from approximately 26.8% for the five months ended 31 August 2014 to approximately 3.7% for the five months ended 31 August 2015. The decrease in gross profit margin of construction machinery rental services was mainly attributable to the high level of fixed cost to be maintained given the lower revenue or utilisated rates were recorded for the five months ended 31 August 2015.

Our gross profit for trading of construction machinery and parts segment increased by approximately HK$0.3 million from approximately HK$13.5 million for the five months ended 31 August 2014 to approximately HK$13.8 million for the five months ended 31 August 2015. In addition, our gross profit margin for trading of construction machinery and parts decreased from approximately 18.4% for the five months ended 31 August 2014 to approximately 15.2% for the five months ended 31 August 2015. The decrease in gross profit margin for trading of construction machinery and parts was mainly attributable to the increase in trade of new machineries, which usually has a lower profit margin than the used machineries for the five months ended 31 August 2015.

For the transportation service segment, our gross loss of approximately HK$0.2 million for the five months ended 31 August 2014 turned into a gross profit of approximately HK$0.1 million for the five months ended 31 August 2015. In addition, our gross profit margin of the transportation service segment increased from approximately 12.4% for the five months ended 31 August 2014 to approximately 13.8%

– 242 –

– 70 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

for the five months ended 31 August 2015. The increase in gross profit margin of transportation services segment was mainly attributable to decrease in repair and maintenance expenses on certain transportation fleet for the five months ended 31 August 2015.

Without taking into consideration the financial impact of the Listing expenses, our Group’s adjusted net profit for the five months ended 31 August 2015 was approximately HK$4.9 million.

For details, please refer to the paragraph headed ‘‘Period-to-period comparison of results of operation — Five months ended 31 August 2015 compared to five months ended 31 August 2014’’ in this section.

For the five months ended 31 August 2015, we recorded a significant decrease in the gross profit margin and net profit margin. The gross profit margin dropped from approximates 22.7% for the five months ended 31 August 2014 to approximately 11.3% for the five months ended 31 August 2015. The gross profit margin dropped from approximately 16.9% for the year ended 31 March 2015 to approximately 11.3% for the five months ended 31 August 2015 which was mainly due to the significant decrease in the revenue which lowered the gross profit margin from construction machinery rental segment, from approximately 18.5% for the year ended 31 March 2015 to approximately 3.7% for the five months ended 31 August 2015. The revenue generated from our trading business during FY2013, FY2014 and FY2015 has recorded steady growth. The revenue generated from our rental business in the respective periods has however drove down the overall gross profit margin given that the gross profit margin of our trading business is normally lower than that of our rental business. Subsequently, the overall gross profit margin for the five months ended 31 August 2015 has been further driven down due to the significant decrease in the gross profit of our rental business for the respective period. The decrease in gross profit margin has also led to a decrease in net profit margin.

Our Directors are of the view that the deteriorated financial performance for the five months ended 31 August 2015 as compared to the same period in 2014 was mainly due to (i) the main contractors have further delayed and revised their commencement dates of certain Delayed Projects; (ii) the general market fluctuation in the construction industry; and (iii) higher fixed cost to be maintained given the lower utilisation rate. Given the short lead time between our engagement with our customers and the potential termination of contracts by our customers, the expected commencement dates of the construction projects are mainly determined by the indication and estimation of the main contractors, and it is not uncommon to see delay of projects in the construction industry. Our Directors also consider that the general market fluctuations affecting the construction industry include but are not limited to the adverse weather conditions, fluctuation on macro factors such as exchange rate risk, interest rate, inflation rate, labor strike, accidents on site, unknown site condition, changes of building or structure design and change of government policy. Those factors would affect the progress of projects which might negatively affect our Group and lead to decrease in revenue and utilisation rate, while our Group has to maintain certain fixed costs such as depreciation expenses, our Group’s financial performance is therefore negatively impacted.

Our Directors consider that the deteriorated financial performance for the five months ended 31 August 2015 as compared to that of 2014 will affect our profitability for the year ending 31 March 2016. Without taking into consideration the financial impact of the Listing expenses, our Group’s net profit for the year ending 31 March 2016 will decline as compared to that of the prior financial year.

– 243 –

– 71 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

Subsequent to the Track Record Period and up to the Latest Practicable Date

Our business model, revenue and cost structure remain unchanged subsequent to the Track Record Period.

Subsequent to the Track Record Period and up to the Latest Practicable Date, we have received 31 confirmed orders but not yet delivered the construction machineries under our trading business with a total contract sum of approximately HK$61.0 million. Those construction machineries are expected to be delivered and the relevant revenue will be recognised for the year ending 31 March 2016. For our construction machineries rental services, as at the Latest Practicable Date, the total number of construction machinery in our rental fleet was 195, among which, 60 of them were rented out with the rent-out rate of approximately 30.8%. The total monthly rental income of the said rented out machineries was approximately HK$6.9 million.

The following is a summary of our Group’s unaudited financial information for the six months ended 30 September 2015, prepared in accordance with Hong Kong Accounting Standard 34 ‘‘Interim Financial Reporting’’, which was reviewed by our reporting accountant in accordance with the Hong Kong Standard on Review Engagement 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’. Based on the unaudited financial information of our Group for the six months ended 30 September 2015, our revenue for the six months ended 30 September 2015 amounted to approximately HK$174.9 million, representing a slight decrease of approximately 3.4% compared to approximately HK$181.0 million for the six months ended 30 September 2014. Our unaudited gross profit was approximately HK$22.3 million for the six months ended 30 September 2015, representing (i) a decrease of approximately 42.2% compared to approximately HK$38.6 million for the six months ended 30 September 2014; and (ii) an increase of approximately 41.1% as compared with the gross profit of approximately HK$15.8 million for the five months ended 31 August 2015. The unaudited gross profit margin decreased from approximately 21.3% for the six months ended 30 September 2014 to approximately 12.7% for the six months ended 30 September 2015. The unaudited gross profit margin for the six months ended 30 September 2015 was approximately 12.7%, which was slightly higher than approximately 11.3% for the five months ended 31 August 2015.

Most of the Delayed Projects were major infrastructure public or public related projects of our Group that cover major infrastructure and public facilities in Hong Kong and it is very unlikely that those projects would be terminated or delayed infinitely. Our Directors are of the view that the impact of the Delayed Projects and the completion of these substantial private projects shall be positively mitigated based on the following factors:

• (i) the government has taken active and positive approach in seeking funding approval of these projects and actual fundings were received for public works projects in the 2014–15 legislative session;

• (ii) despite the delay in commencement of these projects, such delay shall be temporary and considering that these infrastructure and public facilities are important to the overall development in Hong Kong, they would be resumed and would not be terminated or delayed infinitely and therefore the impact of such delay shall also be temporary;

– 244 –

– 72 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

• (iii) considering the recent measure ‘‘tendering before funding approval’’ as adopted by the government, the construction contractors in relation to the Delayed Projects have obtained respective funding approval accordingly as at the Latest Practicable Date and the Delayed Projects shall be resumed in the near future without any major interferences;

• (iv) up to the Latest Practicable Date, our Group has not received any indication from the construction contractors that the Delayed Projects will be aborted, our Directors conclude that our Group will be able to capture the rental income to be generated by the Delayed Projects once those projects commence and therefore it would not cause material adverse impact to our Group’s business operations and financial performance for the long term; and

• (v) according to the IPSOS Report, (a) despite that the delay in funding approval of the government has led to temporary decline in the overall demand for construction machinery rental and trading services in Hong Kong, the competitiveness of our Group remains strong, due to our well-established reputation and solid financial results in FY2013, FY2014 and FY2015; (b) given our unrivalled competitive advantages in the area, it is expected our Group will remain as a preferred service provider once the construction projects receive the funding to start in the future; and (c) the delay of funding approval of the government led to only delay, but not decline nor removal, of demand for construction machinery rental and trading services in Hong Kong in the long term. In addition, in order to strengthen our position as a major rental provider of construction machinery in Hong Kong and to further expand our presence in other potential markets, our Group intends to (a) strengthen our position as a market leader through the expansion and diversification of our construction machinery fleet; (b) strengthen the cooperation with construction machinery manufacturers and other suppliers to meet the needs of the dynamic market environment; (c) increase our operational efficiency and enhance our quality of service; (d) recruit and expand our team of skilled and technical personnel and strengthen staff training; and (e) expand our sales and marketing team.

For details, please refer to the section headed ‘‘Business — Business strategies and future plans’’ in this prospectus.

As extracted from the IPSOS Report, according to the opening statement of the Chief Executive, Mr. Leung Chun-ying, on 9 July 2015 attending the Chief Executive’s Question and Answer Session in the Legislative Council, the projects applied for funding in the previous legislative session delayed for more than six months on average and it is envisaged that these projects will be commenced in the fourth quarter of 2015 or first quarter of 2016. From the information presented by the Development Bureau, a total of 23 construction projects which failed to obtain funding approval in the 2013–14 legislative session have managed to secure the approval in the 2014–15 legislative session, which include study works relating to the Hong Kong boundary crossing facilities of the Hong Kong-Zhuhai-Macao Bridge as well as a number of schools, hospitals and other civil engineering projects. Moreover, according to the 2015 Policy Agenda of the Development Bureau, the spending on the capital works programme including public works projects in 2014–15 is maintained at the level of approximately HK$70 billion which is similar to the actual expenditure of HK$70 billion in 2013–14. Of the approximately HK$370 billion approved by the Finance Committee of the Legislative Council over the last five years, about 70% is devoted to the Ten Major Infrastructure Projects and the remaining 30% to other projects of varying scales. The Development Bureau expects that based on the planned infrastructure programme,

– 245 –

– 73 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

FINANCIAL INFORMATION

the annual capital works expenditure in the next few years will be at the HK$70 billion level. To mitigate the impact of delay in funding approval, various practicable measures including ‘‘tendering before funding approval’’ after conducting comprehensive risk assessment for expediting the commencement of works have also been considered by the Development Bureau. Our Directors consider that, given the active and positive approach taken by the government and the actual fundings approved for public works projects in the 2014–15 legislative session, more rental income will be recognised during the remaining period of the year ending 31 March 2016 and the year ending 31 March 2017. Subsequent to the Track Record Period and up to the Latest Practicable Date, save for expenses incurred in relation to the Listing as disclosed in the paragraph headed ‘‘Listing expenses’’ in this section, we did not have any significant non-recurrent items in our consolidated statement of comprehensive income.

Our Group is expected to record a decrease in profit for the year ending 31 March 2016, which is mainly due to (i) the non-recurring and non-tax deductible expense in relation to the Listing to be incurred; (ii) the expected increase in administrative expenses (including remuneration of our Directors, additional staff in administration, accounting and finance department and professional fees) of our Group; (iii) the expected decrease in other income and gain due to decrease in the expected number of vehicles to be retired under the government allowance scheme and the absent of expected gain from disposal of investment property; and (iv) the revision of commencement dates of the Delayed Projects. For details, please refer to the section headed ‘‘Risk factors — Our financial performance and results of operations for the year ending 31 March 2016 will be significantly and adversely affected by our Listing expenses, which are non-recurring in nature, and the expected increase in administrative expenses of our Group’’ in this prospectus and the paragraph headed ‘‘Listing expenses’’ in this section.

NO MATERIAL ADVERSE CHANGE

Our Directors, upon review of the audited financial information of our Group up to the five months ended 31 August 2015 in terms of revenue, gross profit and gross profit margin and based upon our Directors’ observation noted in the market, save for (i) the impact of the delayed in funding approval from Hong Kong government resulted the delayed in public projects; (ii) the significant decline in the financial performance of our Group for the five months 31 August 2015 as disclosed in the paragraph headed ‘‘Recent development — Deteriorated financial performance for the five months ended 31 August 2015’’ in this section; and (iii) the impact of the Listing expenses as disclosed in the paragraph headed ‘‘Listing expenses’’ in this section, our Directors have confirmed that there has been no material adverse change in our financial or trading position or prospects subsequent to the Track Record Period and there has been no event subsequent to the Track Record Period which would materially affect the information shown in our consolidated financial statements included in the Accountant’s Report as set forth in Appendix I to this prospectus.

– 246 –

– 74 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management discussion and analysis of the results of the Target Company for the years ended 31 March 2016

Management Discussion and Analysis

MARKET REVIEW

Our Group is principally engaged in the construction machinery business, serving primarily the construction sector in Hong Kong. We offer a comprehensive range of services including: (i) rental of construction machinery, such as crawler cranes, aerial platforms and foundation equipment; (ii) trading of new or used construction machinery and parts; and (iii) transportation services.

The construction industry in Hong Kong has grown significantly in past few years due to the substantial increase in demand for construction works performed by contractors at construction sites in Hong Kong. The total gross output value of construction works, the total investment value in construction projects and the public expenditure on infrastructure in Hong Kong all recorded a significant growth in past few years. The government of Hong Kong has increased its infrastructure investment in order to achieve the objective of promoting economic growth through infrastructural development in Hong Kong, including Ten Major Infrastructure Projects and Operation Building Bright and Revitalising Historic Building. Further development of the Hong Kong International Airport, including the construction of the third runway has also been approved.

However, the delay in the approval for funding applications for some development plans and public works, such as the North East New Territories New Development Areas Project, affected the expenditure on government projects to be granted during the Year, as well as the commencement of the relevant projects operated by the construction work companies. Any delay in government funding approval process may adversely affect the expenditure on government projects which may affect the construction companies. It thus created pressure on the construction industry as well as the construction machinery rental and trading industry.

From the perspective of lessee, one of the major benefits of construction machinery rental is effective risk control. Arrangements can be adjusted to the user’s unique market conditions, cash flow expectations, equipment needs, and tax situation. Such rental also allows the lessee to defer the risk of losses caused by obsolescence inherent in the purchase of heavy equipment. Furthermore, it frees up the lessee’s capital for investment in other ventures that would normally be consumed by the hefty down payment and debt burden usually required by purchase agreements. On the other hand, the recent growth of trading of construction machinery and parts had also been promising because of the launch of the series of infrastructure projects outlined by the Hong Kong government which continued to fuel the market demand. As a result of the promising future and sufficiently high capital, more contractors were willing to buy construction machinery as an investment.

BUSINESS REVIEW

Regarding to our rental of construction machinery, we principally offer crawler cranes of different sizes, other mobile cranes, aerial platforms and foundation equipment as our rental fleet. For crawler cranes, the mix in our rental fleet ranges from 2.9-tonne mini crawler cranes to 450-tonne massive crawler cranes. We also carry a range of different types of construction machinery including other mobile cranes, aerial platforms and foundation equipment. We source these construction machinery mainly through the manufacturers of construction machinery located in developed countries in Western Europe and in Northern Asia as well as traders of used construction machinery around the world.

We are also engaged in trading of new construction machinery and parts, and used construction machinery. To accommodate different customers’ needs, we offer a wide range of construction machinery to customers for sale including crawler cranes with lifting capacity of up to 450 tonnes, aerial platforms and foundation equipment. We have entered into dealership arrangements with construction machinery manufacturers in Europe, Japan and Korea. Customers who need to purchase construction machinery from those brands may place order to us. To satisfy customers’ need, we also sell spare parts to our customers for their maintenance purpose or upon request.

Clear Lift Holdings Limited Annual Report 2016

– 75 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management Discussion and Analysis

In addition to rental and trading of construction machinery, we offer transportation services to our customers. Our transportation services include local container delivery, site construction delivery and heavy machinery transport. According to customers’ requests, we arrange and provide these services with our range of transportation vehicles and equipment including 44-tonne heavy load trucks, 8-tonne to 25-tonne crane lorries, 20-feet to 40feet trailers, and below 38-tonne trucks.

During the Year, the breakdown of revenue of our overall business operations by business segments is shown as follow:

Rental of construction machinery Trading of construction machinery and parts Transportation services	For the year ended 31 March 31 March 2016 2015 HK$’000 HK$’000
	121,299 174,749 153,668 191,425 2,308 2,768
	277,275 368,942

We have generated revenue of approximately HK$121.3 million from rental of construction machinery for the Year, which was a decrease of HK$53.5 million, or 30.6% as compared with the Previous Year. Such decrease was mainly due to the decrease in number of crawler cranes rented due to the delay in commencement of several public projects and public-related projects (the “ Delayed Projects ”).

In 2012, a customer commenced litigation against Chim Kee Machinery Co., Ltd. (the “ Subsidiary ”), one of the subsidiary of the Group (the “ Legal Proceeding ”) for alleged breach of rental contract. On 24 March 2016, the Court of First Instance found for the Subsidiary and the customer was ordered to compensate the Subsidiary for unpaid hire. On 26 April 2016, the customer lodged an appeal to the Court of Appeal. At the date of this report, the final outcomes of the appeal are not yet concluded. The Group has sought legal advice on the merits of the claim.

Based on the aforesaid legal advice, after considering the evidence and the background facts in relation to the Legal Proceeding, this customer’s allegations and assertions are not cogent and convincing and therefore, the Group will be likely to succeed in the Legal Proceeding. Accordingly, no provision for claim in respect of such litigation was made by the Group. For details of the Legal Proceeding, please refer to the prospectus of the Company dated 30 November 2015 (the “ Prospectus ”).

Further announcement(s) will be made by the Company if there is any significant updates to the Legal Proceeding as and when appropriate.

Clear Lift Holdings Limited Annual Report 2016

– 76 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management Discussion and Analysis

RENTAL FLEET

We have maintained over 200 construction machines in our rental fleet during the Year. The construction machinery we carry as part of our rental fleet includes crawler cranes and other mobile cranes, aerial platforms and foundation equipment. Details of construction machinery carried by us available for our rental operations are summarised as follows:

Crawler cranes and other mobile cranes Aerial platforms Foundation equipment	As at 31 March 31 March 2016 2015 Number Number in fleet in fleet
	82 80 74 78 52 77
	208 235

In order to maintain younger fleet of construction machinery with wider variety of models, our Group has replaced and will replace, from time to time, our construction machinery. Our Directors will continue to monitor and review our operation and needs, our expansion plan of our rental fleet and the capital requirements of our Group regularly. We will consider to reschedule such expansion according to our operation and needs, the preference of our target customers and market conditions if necessary. We will also revise the timing and financing arrangement for the purchase of additional and replacement of existing construction machinery if, amongst others, the market condition has been changed.

RISKS AND UNCERTAINTIES

There are certain risks and uncertainties involved in the operations of our Group which are summarised as below:

• The demand for our construction machinery would be adversely affected by the delay in commencement of previous public and public-related projects which is led by: (i) toppling of funding proposals for public works due to lawmakers’ filibustering and protests by affected residents; (ii) technical and legal challenges; and (iii) cooperation problems amongst different government authorities;

• Our Group’s business performance is dependent on the general market condition and the level of public expenditure on general infrastructure in Hong Kong;

• Our engagements with our customers are project based. There is no guarantee that our existing customers will engage us again in future construction projects among our competitors;

• If we fail to retain our senior management team or fail to maintain a skilled labour force, our operations and future profits may be adversely affected;

• We engage third parties to carry out some of the tasks in our operations cycle such as maintenance, delivery for construction machinery to customers’ construction sites and assembly/disassembly of our construction machinery at customers’ construction sites. The sub-standard or delayed performance of these third parties may adversely affect our Group’s reputation; and

• Our trading operations are dependent on the quality and supply of the major suppliers of our Group.

Clear Lift Holdings Limited Annual Report 2016

– 77 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management Discussion and Analysis

FINANCIAL REVIEW

REVENUE

Our total revenue decreased by approximately HK$91.6 million, or 24.8%, from approximately HK$368.9 million for the Previous Year to approximately HK$277.3 million for the Year. Such decrease was mainly attributable to the decrease in revenue generated from rental of construction machinery.

Rental of construction machinery

Our revenue from construction machinery rental segment decreased by approximately HK$53.5 million, or 30.6%, from approximately HK$174.8 million for the Previous Year to approximately HK$121.3 million for the Year. Such decrease was mainly attributable to the delay in the commencement of new projects as a result of delay in funding approval by the Hong Kong Government for certain development plans.

Trading of construction machinery and parts

Our revenue from trading of construction machinery and parts decreased by approximately HK$37.7 million, or 19.7%, from approximately HK$191.4 million for the Previous Year to approximately HK$153.7 million for the Year. Such decrease was mainly attributable to the decrease in trading volume of construction machinery due to the delay in commencement of several public projects and public-related projects which reduced the demand of construction machinery in the industry.

Transportation services

Our revenue from transportation services decreased by approximately HK$0.5 million, or 16.6%, from approximately HK$2.8 million for the Previous Year to approximately HK$2.3 million for the Year. Such decrease was mainly attributable to the decrease in operation scale due to the retirement of certain transportation fleet which is eligible for ex-gratia payment under the Hong Kong government policy of phasing out pre-Euro IV diesel commercial vehicles.

GROSS PROFIT AND GROSS PROFIT MARGIN

Our gross profit decreased by approximately HK$30.7 million, or 49.2%, from approximately HK$62.5 million for the Previous Year to approximately HK$31.8 million for the Year, while our gross profit margin decreased from approximately 16.9% for the Previous Year to approximately 11.5% for the Year. The decrease in gross profit and gross profit margin was due to the decline in gross profit contributed from rental of construction machinery.

Rental of construction machinery

Our gross profit of construction machinery rental services decreased by approximately HK$20.3 million, or 62.9%, from approximately HK$32.3 million for the Previous Year to approximately HK$12.0 million for the Year. In addition, our gross profit margin of construction machinery rental services decreased from approximately 18.5% for the Previous Year to approximately 9.9% for the Year.

The decrease in gross profit margin of construction machinery rental services was mainly attributable to the combined effect of (i) the decrease in revenue from rental of construction machinery from rental fleet and (ii) costs such as depreciation, repair and maintenance, and insurance for the Year remained at similar level as the Previous Year in order to maintain the construction machinery fleet size.

Clear Lift Holdings Limited Annual Report 2016

– 78 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management Discussion and Analysis

Trading of construction machinery and parts

Our gross profit of trading of construction machinery and parts segment decreased by approximately HK$10.1 million, or 33.8%, from approximately HK$29.8 million for the Previous Year to approximately HK$19.7 million for the Year. In addition, our gross profit margin for trading of construction machinery and parts decreased from approximately 15.6% for the Previous Year to approximately 12.8% for the Year.

The decrease in gross profit margin for trading of construction machinery and parts was mainly attributable to the decrease in trading volume of used machinery, which normally has higher gross profit margin than trading of new machinery.

Transportation services

Our gross profit of transportation services segment decreased by approximately HK$0.3 million, or 91.6%, from approximately HK$0.4 million for the Previous Year to approximately HK$31,000 for the Year. In addition, our gross profit margin of transportation services segment decreased from approximately 13.4% for the Previous Year to approximately 1.4% for the Year.

The decrease in gross profit margin of transportation services segment was mainly attributable to the combined effect of (i) the decrease in revenue from transportation services; and (ii) costs such as staff costs, license fee and insurance for the Year remained at similar level as the Previous Year in order to maintain the transportation fleet size for operation.

OTHER INCOME AND GAINS

Our other income and gains decreased by approximately HK$1.7 million, or 27.8%, from approximately HK$6.2 million for the Previous Year to approximately HK$4.5 million for the Year. The decrease in other income and gains was mainly attributable to the one-off gain on disposal of investment property of approximately HK$2.0 million for the Previous Year.

ADMINISTRATIVE EXPENSES

Our administrative expenses increased by approximately HK$10.5 million, or 48.4%, from approximately HK$21.7 million for the Previous Year to approximately HK$32.2 million for the Year. The increase in administrative expenses was mainly attributable to (i) the impairment of trade receivables of approximately HK$4.1 million, (ii) the legal fee incurred from the Legal Proceeding and (iii) the increase in professional fees since the Company listed on the Listing Date.

FINANCE COSTS

Our finance cost decreased by approximately HK$1.3 million, or 19.8%, from approximately HK$6.8 million for the Previous Year to approximately HK$5.5 million for the Year. The decrease in finance costs was mainly attributable to the decrease in bank borrowings and finance lease payables.

NET (LOSS)/PROFIT

Our Group’s net loss for the Year was approximately HK$11.2 million. The loss was mainly due to the decrease in our revenue and increase of listing expenses and professional fees. Excluding the listing expenses, our Group’s net loss for the Year would be approximately HK$0.7 million (2015: net profit of HK$32.7 million) and the net loss margin would be approximately 0.3% (2015: net profit margin of 8.9%).

Clear Lift Holdings Limited Annual Report 2016

– 79 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management Discussion and Analysis

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Our Group had a solid financial position and continued to maintain a steady cash inflow from operating activities. During the Year, our Group’s primary sources of funding included cash generated from operating activities, the credit facilities provided by our Group’s principal banks in Hong Kong.

As at 31 March 2016, our Group had cash and cash equivalents and pledged bank deposits of approximately HK$91.7 million (2015: HK$53.2 million) and HK$4.6 million (2015: HK$4.6 million) respectively. The increase in cash and cash equivalents was mainly due to the issue of new shares upon listing of the Company’s shares on the Stock Exchange on the Listing Date.

As at 31 March 2016, our Group had total assets of approximately HK$390.8 million (2015: HK$464.1 million), net current assets of approximately HK$65.4 million (2015: HK$56.9 million) and equity of approximately HK$243.8 million (2015: HK$238.4 million).

Our Group continued to maintain a healthy liquidity position. As at 31 March 2016, our Group’s current assets and current liabilities were approximately HK$169.2 million (2015: HK$220.3 million) and HK$103.7 million (2015: HK$163.4 million) respectively. Our Group’s current ratio increased to approximately 1.6 times as at 31 March 2016 (2015: 1.3 times).

Management believes that our Group’s current cash and cash equivalents, together with available credit facilities and expected cash flow from operations, will be sufficient to satisfy its current operational requirements.

GEARING RATIO AND INDEBTEDNESS

Gearing ratio is calculated by dividing total debts (including bank borrowings, finance lease payables, amounts due to related companies and amount due to a Director) with total equity and was approximately 40.2% (2015: 67.3%). The decrease was mainly due to the decrease in bank borrowings and finance lease payables.

As at 31 March 2016, our bank borrowings and finance lease payables amounted to approximately HK$97.4 million (2015: HK$156.4 million) which will be repayable within five years from the end of the reporting period.

CHARGES ON GROUP ASSETS

As at 31 March 2016, our bank borrowings and finance lease payables were secured by (1) leasehold land and building with net carrying amount of approximately HK$0.6 million (2015: HK$0.7 million); (2) bank deposits of approximately HK$4.6 million (2015: HK$4.6 million); and (3) machinery and motor vehicles with net carrying amount of approximately HK$160.3 million (2015: HK$181.4 million).

CAPITAL EXPENDITURE

The total capital expenditure incurred for the Year was approximately HK$27.6 million (2015: HK$49.1 million), which was mainly used in purchase of machinery for our rental business.

INTEREST RATE RISK

Our Group’s pledged bank deposits and finance lease receivables bear fixed interest rates. Our Group’s cash at bank balances bear floating interest rates. Our Group also has bank borrowings and finance lease payables which bear interests at fixed and floating interest rates. Exposure to interest rate risk exists on those balances subject to floating interest rate when there are unexpected adverse interest rate movements. Our Group’s policy is to manage its interest rate risk, working within an agreed framework, to ensure that there are no unduly exposures to significant interest rate movements and rates are approximately fixed when necessary.

Clear Lift Holdings Limited Annual Report 2016

– 80 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management Discussion and Analysis

CURRENCY RISK

Our Group mainly operates in Hong Kong with most of the transactions denominated and settled in HK$, Japanese Yen (“ JPY ”) and Euro Dollar (“ EURO ”). Our Group’s exposure to foreign currency risk primarily arises from certain financial instruments including trade receivables, cash and cash equivalents, trade payables, deposits received and finance lease payables which are denominated in JPY, EURO and United States Dollar (“ US$ ”). Our Group has not adopted any hedging strategy in the long run but management continuously monitors the foreign exchange risk exposure and might enter into foreign exchange forward contract on a case-by-case basis. Our Group has not used any hedging contracts to engage in speculative activities.

CREDIT RISK AND LIQUIDITY RISK

Our Group has adopted a prudent financial management approach towards its treasury policies and thus maintained a healthy liquidity position throughout the year. Our Group strives to reduce exposure to credit risk by performing ongoing credit assessments and evaluations of the financial status of its customers. To manage liquidity risk, the Board closely monitors our Group’s liquidity position to ensure that the liquidity structure of our Group’s assets, liabilities and other commitments can meet its funding requirements from time to time.

CAPITAL COMMITMENTS

Our capital commitments consist primarily of purchase of construction machinery for rental purpose. As at 31 March 2016, our capital commitments of property, plant and equipment contracted for but not provided amounted to approximately HK$10.9 million (2015: HK$0.1 million).

CONTINGENT LIABILITIES

As at 31 March 2016, our Group provided corporate guarantees amounting to approximately HK$4.2 million (2015: HK$6.1 million) to the banks in respect of finance lease obligations of certain third party customers. Under the guarantees, our Group would be liable to pay the banks if the banks are unable to recover the amounts under these finance leases. As at 31 March 2016, no provision for our Group’s obligation under the guarantee contracts has been made as the Directors considered that it was not probable that the repayment of the finance lease obligation would be in default.

EMPLOYEES AND REMUNERATION POLICY

As at 31 March 2016, our Group had 134 staff (2015: 130). The total staff costs incurred by our Group for the Year were approximately HK$56.9 million (2015: HK$56.8 million).

We generally recruit our employees from the open market or by referral and enter into employment contracts with our employees. We offer attractive remuneration packages to our employees. In addition to salaries, our employees would be entitled to bonuses subject to company and employees’ performance. We provide a defined contribution to the Mandatory Provident Fund as required under the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) for our eligible employees in Hong Kong.

Our operations staff consists of experienced machinery operators and other mechanics. While such employees are highly demanded in the market, we manage to maintain a relatively stable workforce by continuous recruitment from the market or through referrals. New employees are required to attend induction courses to ensure that they are equipped with the necessary skills and knowledge to perform their duties. In order to promote overall efficiency, we also offer technical trainings to our existing employees on the operation of more advanced construction machinery. Selected operation staff are chosen to attend external trainings which are conducted by the manufacturers to acquire up-to-date technical skills and knowledge on the products we rent and sell out to our customers.

Clear Lift Holdings Limited Annual Report 2016

– 81 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management Discussion and Analysis

PROPOSED FINAL DIVIDEND

The Board does not recommend the payment of final dividend to shareholders of the Company for the Year.

SIGNIFICANT INVESTMENTS HELD, MATERIAL ACQUISITIONS OR DISPOSALS OF SUBSIDIARIES AND AFFILIATED COMPANIES, AND PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS

Apart from the reorganisation in relation to the Listing, there were no significant investments held, material acquisitions or disposals of subsidiaries and affiliated companies during the Year. Save for the business plan as disclosed in the Prospectus, there is no other plan for material investments or capital assets as at 31 March 2016.

USE OF NET PROCEEDS FROM LISTING

The Company’s shares have been listed on the Main Board of the Stock Exchange since the Listing Date. The receipt of proceeds, net of listing expenses (including underwriting fee), including both recognised in the consolidated statement of comprehensive income and deducted from the share premium (“ net proceeds ”) from the Company’s listing were approximately HK$59.8 million. As at 31 March 2016, the net proceeds had been utilised as follows:

Use of net proceeds Acquisition of machinery Recruitment of operations staff System development Working capital	Actual Unutilised Net utilisation amounts proceeds up to as at from the 31 March 31 March share offer 2016 2016 HK$ million HK$ million HK$ million
	39.0 13.9 25.1 11.3 0.9 10.4 3.5 – 3.5 6.0 1.5 4.5
	59.8 16.3 43.5

The unutilised amounts of the net proceeds will be applied in the manner consistent with that mentioned in the Prospectus. The unutilised net proceeds had been deposited into licensed bank in Hong Kong.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed securities since the Listing Date.

Clear Lift Holdings Limited Annual Report 2016

– 82 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management Discussion and Analysis

PROSPECTS

Our Group remains cautious of the macroeconomic dynamics in Hong Kong. Our Group believes growth opportunities exist in the long run due to the rapid infrastructure development in Hong Kong.

The public expenditure on infrastructure in Hong Kong is expected to increase steadily, with a growth rate of approximately 8% each year. The growth is mainly due to the on-going Shatin to Central Link and South Island Line projects and “Ten Major Infrastructure Projects” that start in the coming years or enter the next stages, which will therefore continue to create a great demand for construction machinery in Hong Kong.

All of the Delayed Projects were public or public related projects of our Group that cover major infrastructure and public facilities in Hong Kong and it is very unlikely that those projects would be terminated or delayed infinitely. Our Directors consider that, given the active and positive approach taken by the government and the actual fundings approved for public works projects in the legislative session, more rental income will be recognised for the years ending 31 March 2017 and 2018.

We believe that we possess business strengths and competitive advantages that set us apart from our rivals and enable us to continue to grow and enhance our profitability. Such strengths and competitive advantages include (1) well established reputation and long operation history in the construction machinery rental service industry; (2) experienced and dedicated management team; (3) possession of over 200 construction machines and equipment for rental; and (4) long term relationships with major customers.

In view of the above, there are positive prospects for our Group and it is expected that our business and revenue will continue to grow steadily in the foreseeable future.

Clear Lift Holdings Limited Annual Report 2016

– 83 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Management discussion and analysis of the results of the Target Company for the six months ended 30 September 2016

MANAGEMENT DISCUSSION AND ANALYSIS

The board (the “ Board ”) of directors (the “ Directors ”) of Clear Lift Holdings Limited (the “ Company ”) is pleased to announce the unaudited consolidated interim results of the Company and its subsidiaries (collectively, the “ Group ”) for the six months ended 30 September 2016 (the “ Period ”) together with the unaudited comparative figures for the corresponding period ended 30 September 2015 (the “ Previous Period ”). These information should be read in conjunction with the prospectus of the Company dated 30 November 2015 (the “ Prospectus ”).

MARKET REVIEW

During the Period, the economy of Hong Kong faced challenges. According to the Report on the Quarterly Survey of Construction Output prepared by the Census and Statistics Department of the Hong Kong Government, the total gross value of construction works performed by main contractors of construction works in Hong Kong in the second quarter of 2016 decreased by 1.5% in nominal terms over the same period of 2015, while the gross value of construction works performed at public sector sites decreased by 8.3% in nominal terms over the same period of 2015. The Group is engaged in construction machinery business and it has inevitably been affected by the decrease in value and number of construction works.

BUSINESS REVIEW

The Group is principally engaged in the construction machinery business, serving primarily the construction sector in Hong Kong. The Group’s principal activities include (i) rental of construction machinery, such as crawler cranes, aerial platforms and foundation equipment; (ii) trading of new or used construction machinery and parts; and (iii) provision of machinery transportation services.

Rental of construction machinery

The Group offers crawler cranes of different sizes, other mobile cranes, aerial platforms and foundation equipment as the rental fleet. For crawler cranes, the mix in the rental fleet ranges from 2.9-tonne mini crawler cranes to 450-tonne massive crawler cranes. The Group sources these construction machinery mainly through the manufacturers of construction machinery located in developed countries in Western Europe and in Northern Asia as well as traders of used construction machinery around the world.

The Group has maintained over 200 pieces of construction machinery in the rental fleet during the Period. Details of construction machinery carried by the Group available for the rental operations are summarised as follows:

As at As at 30 September 31 March 2016 2016 Number in fleet Number in fleet	As at As at 30 September 31 March 2016 2016 Number in fleet Number in fleet
Crawler cranes and other mobile cranes Aerial platforms Foundation equipment	84 82 79 74 48 52
	211 208

Clear Lift Holdings Limited Interim Report 2016

– 84 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

In order to maintain younger fleet of construction machinery with wider variety of models, the Group has replaced and will replace, from time to time, the construction machinery. The Directors will continue to monitor and review the operation and needs, the expansion plan of the rental fleet and the capital requirements of the Group regularly. The Group will consider to reschedule such expansion according to the operation and needs, the preference of the target customers and market conditions if necessary. The Group will also revise the timing and financing arrangement for the purchase of additional and the replacement of existing construction machinery if, amongst others, the market condition has been changed.

Trading of construction machinery and parts

The Group is also engaged in trading of new construction machinery and parts, and used construction machinery. To accommodate different customers’ needs, the Group offers a wide range of construction machinery to customers for sale including crawler cranes with lifting capacity of up to 450 tonnes, aerial platforms and foundation equipment. The Group has entered into several dealership arrangements with construction machinery manufacturers in Europe, Japan and Korea. To satisfy customers’ need, the Group also sells spare parts to the customers for their maintenance purpose or upon their request.

Transportation services

The transportation services include local container delivery, site construction delivery and heavy machinery transport. According to customers’ requests, the Group arranges and provides these services with the range of transportation vehicles and equipment including 44-tonne heavy load trucks, 8-tonne to 25-tonne crane lorries, 20-feet to 40-feet trailers, and below 38-tonne trucks.

FINANCIAL REVIEW

REVENUE

The total revenue decreased by approximately HK$79.3 million, or 45.3%, from approximately HK$175.0 million for the Previous Period to approximately HK$95.6 million for the Period. Such decrease was mainly attributable to the decrease in revenue generated from trading of construction machinery and parts.

Rental of construction machinery

The revenue from construction machinery rental segment increased by approximately HK$2.4 million, or 4.2%, from approximately HK$58.0 million for the Previous Period to approximately HK$60.4 million for the Period.

Trading of construction machinery and parts

The revenue from trading of construction machinery and parts decreased by approximately HK$81.3 million, or 70.3%, from approximately HK$115.6 million for the Previous Period to approximately HK$34.3 million for the Period. Such decrease was mainly attributable to the decrease in trading volume of construction machinery due to the delay in commencement of several public projects and public-related projects which reduced the demand of construction machinery in the industry.

Clear Lift Holdings Limited Interim Report 2016

– 85 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Transportation services

The revenue from transportation services decreased by approximately HK$0.4 million, or 33.3%, from approximately HK$1.3 million for the Previous Period to approximately HK$0.9 million for the Period. Such decrease was mainly attributable to the decrease in operation scale due to the retirement of certain transportation fleet which is eligible for ex-gratia payment under the Hong Kong government policy of phasing out Pre-Euro IV diesel commercial vehicles.

GROSS PROFIT AND GROSS PROFIT MARGIN

The gross profit decreased by approximately HK$12.4 million, or 55.5%, from approximately HK$22.3 million for the Previous Period to approximately HK$9.9 million for the Period, while the gross profit margin decreased from approximately 12.7% for the Previous Period to approximately 10.4% for the Period. The decrease in gross profit was mainly due to the decline in gross profit contributed from trading of construction machinery and parts while the decrease in gross profit margin was mainly due to the decline in gross profit margin contributed from rental of construction machinery.

Rental of construction machinery

The gross profit of construction machinery rental services decreased by approximately HK$1.9 million, or 69.5%, from approximately HK$2.8 million for the Previous Period to approximately HK$0.8 million for the Period. In addition, the gross profit margin of construction machinery rental services decreased from approximately 4.8% for the Previous Period to approximately 1.4% for the Period.

The decrease in gross profit margin of construction machinery rental services was mainly attributable to the increase in removal fee and truck costs during the Period.

Trading of construction machinery and parts

The gross profit of trading of construction machinery and parts decreased by approximately HK$10.3 million, or 53.5%, from approximately HK$19.2 million for the Previous Period to approximately HK$8.9 million for the Period. In addition, the gross profit margin for trading of construction machinery and parts increased from approximately 16.6% for the Previous Period to approximately 26.0% for the Period.

The increase in gross profit margin for trading of construction machinery and parts was mainly attributable to the increased proportion in trading of used machinery, which normally has higher gross profit margin than trading of new machinery.

Transportation services

The gross profit of transportation services decreased by approximately HK$0.2 million, or 68.2%, from approximately HK$0.3 million for the Previous Period to approximately HK$0.1 million for the Period. In addition, the gross profit margin of transportation services decreased from approximately 22.4% for the Previous Period to approximately 14.8% for the Period.

The decrease in gross profit margin of transportation services was mainly attributable to the combined effect of (i) decrease in revenue from transportation services; and (ii) costs such as repair and maintenance, license fee and insurance for the Period remained at similar level as the Previous Period in order to maintain the transportation fleet size for operation.

Clear Lift Holdings Limited Interim Report 2016

– 86 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

OTHER INCOME AND GAINS

The other income and gains increased by approximately HK$2.5 million, or 107.7%, from approximately HK$2.3 million for the Previous Period to approximately HK$4.8 million for the Period. The increase in other income and gains was mainly attributable to the one-off refund on taxed cost from a litigation with a customer of approximately HK$2.5 million. For details of the litigation, please refer to “Corporate Governance and Other Information” in this report.

ADMINISTRATIVE EXPENSES

The administrative expenses increased by approximately HK$2.9 million, or 27.7%, from approximately HK$10.6 million for the Previous Period to approximately HK$13.5 million for the Period. The increase in administrative expenses was mainly attributable to the increase in salaries of administrative staffs of approximately HK$2.5 million.

FINANCE COSTS

The finance cost decreased by approximately HK$0.7 million, or 23.2%, from approximately HK$3.2 million for the Previous Period to approximately HK$2.5 million for the Period. The decrease in finance costs was mainly attributable to the decrease in bank borrowings.

NET (LOSS)/PROFIT

The Group’s net loss for the Period was approximately HK$0.5 million (Previous Period: net profit of HK$8.0 million) and the net loss margin would be approximately 0.5% (Previous Period: net profit margin of 4.6%).

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The Group had a solid financial position and continued to maintain a strong and steady cash inflow from operating activities. During the Period, the Group’s primary sources of funding included cash generated from operating activities, the credit facilities provided by the Group’s principal banks in Hong Kong.

As at 30 September 2016, the Group had cash and cash equivalents and pledged bank deposits of approximately HK$97.6 million (31 March 2016: HK$91.7 million) and HK$4.6 million (31 March 2016: HK$4.6 million) respectively.

As at 30 September 2016, the Group had total assets of approximately HK$402.4 million (31 March 2016: HK$390.8 million), net current assets of approximately HK$90.4 million (31 March 2016: HK$65.4 million) and equity of approximately HK$243.3 million (31 March 2016: HK$243.8 million).

The Group continued to maintain a healthy liquidity position. As at 30 September 2016, the Group’s current assets and current liabilities were approximately HK$182.7 million (31 March 2016: HK$169.2 million) and HK$92.3 million (31 March 2016: HK$103.7 million) respectively. The Group’s current ratio increased to approximately 2.0 times as at 30 September 2016 (31 March 2016: 1.6 times).

Management believes that the Group’s current cash and cash equivalents, together with the credit facilities available and the expected cash flow from operations, will be sufficient to satisfy its current operational requirements.

Clear Lift Holdings Limited Interim Report 2016

– 87 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

GEARING RATIO AND INDEBTEDNESS

Gearing ratio is calculated by dividing total debts (including bank borrowings, finance lease payables and amount due to a director) with total equity and was approximately 45.8% as at 30 September 2016 (31 March 2016: 40.2%). The increase was mainly due to the increase in finance lease payables.

As at 30 September 2016, the bank borrowings and finance lease payables amounted to approximately HK$111.1 million (31 March 2016: HK$97.4 million) which will be repayable within five years from the end of the reporting period.

CHARGES ON GROUP ASSETS

As at 30 September 2016, the bank borrowings and finance lease payables are secured by (1) leasehold land and building with net carrying amount of approximately HK$0.6 million (31 March 2016: HK$0.6 million); (2) bank deposits of approximately HK$4.6 million (31 March 2016: HK$4.6 million) and (3) machinery and motor vehicles with net carrying amount of approximately HK$102.4 million (31 March 2016: HK$99.6 million).

CAPITAL EXPENDITURE

The total capital expenditure incurred for the Period was approximately HK$21.2 million (Previous Period: HK$3.9 million), which was mainly used in purchase of machinery for the rental business.

INTEREST RATE RISK

The Group’s pledged bank deposits and finance lease receivables bear fixed interest rates. The Group’s cash at bank balances bear floating interest rates. The Group also has bank borrowings and finance lease payables which bear interests at fixed and floating interest rates. Exposure to interest rate risk exists on those balances subject to floating interest rate when there are unexpected adverse interest rate movements. The Group’s policy is to manage its interest rate risk, working within an agreed framework, to ensure that there are no unduly exposures to significant interest rate movements and rates are approximately fixed when necessary.

CURRENCY RISK

The Group mainly operates in Hong Kong with most of the transactions denominated and settled in HK$, Japanese Yen (“ JPY ”) and Euro Dollar (“ EURO ”). The Group’s exposure to foreign currency risk primarily arises from certain financial instruments including trade receivables, cash and cash equivalents, trade payables, deposits received and finance lease payables which are denominated in JPY, EURO and United Stated Dollar (“ US$ ”). The Group has not adopted any hedging strategy in the long run but management continuously monitors the foreign exchange risk exposure and might enter into foreign exchange forward contract on a case-by-case basis. The Group has not used any hedging contracts to engage in speculative activities.

Clear Lift Holdings Limited Interim Report 2016

– 88 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

CREDIT RISK AND LIQUIDITY RISK

The Group has adopted a prudent financial management approach towards its treasury policies and thus maintained a healthy liquidity position throughout the Period. The Group strives to reduce exposure to credit risk by performing ongoing credit assessments and evaluations of the financial status of its customers. To manage liquidity risk, the Board closely monitors the Group’s liquidity position to ensure that the liquidity structure of the Group’s assets, liabilities and other commitments can meet its funding requirements.

CAPITAL COMMITMENTS

The capital commitments consist primarily of purchase of construction machinery for rental purpose. As at 30 September 2016, the capital commitments of property, plant and equipment contracted for but not provided amounted to approximately HK$23.8 million (31 March 2016: HK$10.9 million).

CONTINGENT LIABILITIES

As at 30 September 2016, the Group provided corporate guarantees amounting to approximately HK$3.2 million (31 March 2016: HK$4.2 million) to the banks in respect of finance lease obligations of certain third party customers. Under the guarantees, the Group would be liable to pay the banks if the banks are unable to recover the amounts under these finance leases. As at 30 September 2016, no provision for the Group’s obligation under the guarantee contracts has been made as the Directors considered that it was not probable that the repayment of the finance lease obligation would be in default.

EVENTS AFTER THE REPORTING PERIOD

On 22 November 2016, Chim Kee Crane Company Limited, an indirect wholly-owned subsidiary of the Company, entered into a provisional agreement for sale and purchase with an independent third party to purchase a parcel of land situated in Hong Kong at a consideration of HK$51,749,100. For details, please refer to the announcement on “Discloseable Transaction in Relation to the Acquisition of Land” dated 22 November 2016.

Save as disclosed above, there are no significant events subsequent to 30 September 2016 which would materially affect the Group’s operating and financial performance as of the date of this report.

EMPLOYEES AND REMUNERATION POLICY

As at 30 September 2016, the Group had 123 staff (31 March 2016: 134). The total staff costs incurred by the Group for the Period were approximately HK$30.0 million (Previous Period: HK$26.7 million).

The Group generally recruits its employees from the open market or by referral and enters into service contracts with its employees. The Group offers attractive remuneration packages to the employees. In addition to salaries, the employees would be entitled to bonuses subject to Company and employees’ performance. The Group provides a defined contribution to the Mandatory Provident Fund as required under the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) for the eligible employees.

Clear Lift Holdings Limited Interim Report 2016

– 89 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The operations staff consists of experienced machinery operators and other mechanics. While such employees are highly demanded in the market, the Group manages to maintain a relatively stable workforce by continuous recruitment from the market or through referrals. New employees are required to attend induction courses to ensure that they are equipped with the necessary skills and knowledge to perform their duties. In order to promote overall efficiency, the Group also offers technical trainings to the existing employees on the operation of more advanced construction machinery from time to time. Selected operation staff are required to attend external trainings which are conducted by the manufacturers of the construction machines to acquire up-to-date technical skills and knowledge on the products the Group rents and sells.

INTERIM DIVIDEND

The Board does not recommend the payment of an interim dividend to shareholders of the Company for the Period.

USE OF NET PROCEEDS FROM LISTING

The Company’s shares have been listed on the Main Board of the Stock Exchange since 10 December 2015. The receipt of proceeds, net of listing expenses (including underwriting fee), including both recognised in the consolidated statement of comprehensive income and deducted from the share premium (“ net proceeds ”) from the Company’s listing were approximately HK$59.8 million. As at 30 September 2016, the net proceeds had been utilised as follows:

Actual Unutilised utilisation amounts Net proceeds up to as at from the 30 September 30 September Use of net proceeds Share offer 2016 2016 HK$ million HK$ million HK$ million	Actual Unutilised utilisation amounts Net proceeds up to as at from the 30 September 30 September Use of net proceeds Share offer 2016 2016 HK$ million HK$ million HK$ million
Acquisition of machinery Recruitment of operations staff System development Working capital	39.0 28.2 10.8 11.3 2.7 8.6 3.5 – 3.5 6.0 3.0 3.0
	59.8 33.9 25.9

The unutilised amounts of the net proceeds will be applied in such manner consistent with that mentioned in the Prospectus. The unutilised net proceeds had been deposited into licensed bank in Hong Kong.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed securities during the Period.

Clear Lift Holdings Limited Interim Report 2016

– 90 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

MATERIAL ACQUISITION AND DISPOSAL

No material acquisition and disposal of subsidiaries were conducted by the Group during the Period.

PROSPECTS

Despite the challenged Hong Kong faced during the Period, the Group remained confident about the opportunities for growth in the long run given the rapid infrastructure development in Hong Kong. According to the Construction Expenditure Forecast prepared by the Construction Industry Council, the total construction expenditure in public and private section in Hong Kong is estimated to increase from HK$215.4 billion for the year ended 31 March 2015 to approximately HK$240 billion for the year ended 31 March 2020. In April 2016, the construction of three-runway system in Chek Lap Kok Airport was approved and the total estimated construction cost is approximately HK$141.5 billion.

The Group believes that it possesses the business strengths and competitive advantages that enable the Group to grow continuously and enhance the profitability. Such strengths and competitive advantages include (1) well established reputation and long operation history in the construction machinery rental service industry; (2) experienced and dedicated management team; (3) possession of over 200 construction machines and equipment for rental; and (4) long term relationships with major customers.

On 3 November 2016, K B Leasing Limited, an indirect wholly-owned subsidiary of the Company that is newly incorporated, has been granted the Money Lenders License issued by the Licensing Court in order to compliment the trading of construction machinery business of the Group. Currently, existing customers are required to source for their own financing when purchasing construction machineries from the Group. With the grant of the Money Lenders License, the Group can now finance the construction machinery purchases of the customers, providing convenience to the customers and drive additional sales of construction machinery to the Group which would otherwise be lost.

In view of the above, there are positive prospects for the Group and it is expected that the business and revenue will continue to grow steadily in the foreseeable future.

Clear Lift Holdings Limited Interim Report 2016

– 91 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

(A) INTRODUCTION TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

In connection with the major acquisition of 750,000,000 shares, representing approximately 75% of the total issued share capital in Clear Lift Holdings Limited (“Target Company” and together with its subsidiaries collectively referred as the “Target Group”) by Hao Tian Management (China) Limited, a wholly-owned subsidiary of the Company (the “Acquisition”), the unaudited pro forma consolidated statement of assets and liabilities of the Company and its subsidiaries and the Target Group (collectively referred as the “Enlarged Group”) (the “Unaudited Pro Forma Consolidated Statement of Assets and Liabilities”) has been prepared by the Directors in accordance with paragraph 4.29 of the Listing Rules and is solely for the purpose to illustrate the effect of the Acquisition on the Group’s financial position as at 30 September 2016 as if the Acquisition had been completed on 30 September 2016.

The Unaudited Pro Forma Consolidated Statement of Assets and Liabilities is prepared based on (i) the unaudited condensed consolidated statement of financial position of the Group as at 30 September 2016 which has been extracted from the Group’s interim report for the six months ended 30 September 2016 issued on 29 November 2016; and (ii) the unaudited condensed consolidated statement of financial position of the Target Group as at 30 September 2016 which has been extracted from the Target Group’s interim report for the six months ended 30 September 2016 issued on 30 November 2016, and after making other pro forma adjustments relating to the Acquisition that are (i) directly attributable to the Acquisition; and (ii) factually supportable as if the Acquisition had been undertaken as at 30 September 2016.

The Unaudited Pro Forma Consolidated Statement of Assets and Liabilities is prepared by the Directors based on the aforesaid historical data after giving effect to the pro forma adjustments described in the accompanying notes. Narrative description of the pro forma adjustments of the Acquisition that are (i) directly attributable to the transactions; and (ii) factually supportable, is summarised in the accompanying notes.

The Unaudited Pro Forma Consolidated Statement of Assets and Liabilities has been prepared by the Directors based on certain assumptions, estimates and uncertainties for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group. Accordingly, the Unaudited Pro Forma Consolidated Statement of Assets and Liabilities does not purport to describe the financial position of the Enlarged Group that would have been attained had the Acquisition been completed on 30 September 2016, nor to predict the future financial position of the Enlarged Group.

– 92 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Unaudited Pro Forma Consolidated Statement of Assets and Liabilities of the Enlarged Group as at 30 September 2016

Non-current assets Property, plant and equipment Prepaid lease payment Premium over prepaid lease payment Intangible assets Available-for-sale investments Financial assets designated at fair value through profit or loss Goodwill Finance lease receivables Deferred tax assets Loan receivables Investment in an associate Deposits Current assets Inventories Trade and bills receivables Other receivables, deposits and prepayments Loan receivables Finance lease receivables Consideration receivables Investments held for trading Prepaid lease payment Amount due from a related company Tax recoverable Pledged bank deposits Bank balances, trust and segregated accounts Bank balances and cash	The Group HK$’000 (Note 1) 82,150 15,763 129,182 11,000 1,229,612 22,727 – – – 120,237 2,080 1,132 1,613,883 3,023 67,167 381,281 920,981 – 585,888 3,026,182 370 – – 35,229 38,195 557,407 5,615,723	The Target Group Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 2) (Note 3) (Note 4) 209,716 – – – – – – 410,175 5,819 4,185 – – – 219,720 775 61,107 11,994 – 3,028 – – – 2 3,607 4,591 – 97,581 (592,500) (4,600) 182,685	The Enlarged Group HK$’000 291,866 15,763 129,182 11,000 1,229,612 22,727 410,175 5,819 4,185 120,237 2,080 1,132
			2,243,778
			3,798 128,274 393,275 920,981 3,028 585,888 3,026,182 370 2 3,607 39,820 38,195 57,888
			5,201,308

– 93 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Current liabilities Trade payables Other payables, deposits received and accruals Amount due to a director of the Target Group Borrowings Secured notes Derivative financial instruments Tax payables Deferred tax liabilities Finance lease payables Net current assets Total assets less current liabilities Non-current liabilities Borrowings Other long term liability Finance lease payables Deferred tax liabilities Net assets	The Group HK$’000 (Note 1) 53,915 51,353 – 339,877 214,483 145,088 14,613 338,863 – 1,158,192 4,457,531 6,071,414 164,550 102,525 – – 267,075 5,804,339	The Target Group Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 2) (Note 3) (Note 4) 7,634 9,842 325 39,881 – – 418 – 34,150 92,250 90,435 310,155 – – 37,056 29,758 66,814 243,341	The Enlarged Group HK$’000 61,549 61,195 325 379,758 214,483 145,088 15,031 338,863 34,150
			1,250,442
			3,950,866
			6,194,644
			164,550 102,525 37,056 29,758
			333,889
			5,860,755

Notes:

• (1) Figures are extracted from the unaudited condensed consolidated statement of financial position of the Group as set out in the interim report of the Company for the six months ended 30 September 2016.

• (2) Figures are extracted from the unaudited condensed consolidated statement of financial position of the Target Group as set out in the interim report of the Target Group for the six months ended 30 September 2016.

– 94 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

• (3) The adjustment in connection with the Acquisition represents:

Fair value of consideration (note a) Less: Pro forma fair value of identifiable assets acquired and liabilities assumed (note b) Add: Non-controlling interests of subsidiaries of the Target Group (note c) Add: Non-controlling interest of 25% of the Target Group (note d) Goodwill (note e) Notes:	HK$’000 592,500 (243,341) 241 60,775
	410,175

• (a) The cash consideration of HK$592,500,000, equivalent to HK$0.79 per share of the Target Company, which will be settled upon the completion of the Acquisition.

• (b) For the purpose of the preparation of the Unaudited Pro Forma Consolidated Statement of Assets and Liabilities, the fair value of the identifiable assets acquired and liabilities assumed is assumed to be the same as the carrying amount of the assets and liabilities of the Target Group as at 30 September 2016. The fair value of the identifiable assets and liabilities used in the preparation of the Unaudited Pro Forma Consolidated Statement of Assets and Liabilities may be different from their fair values on the completion date of the Acquisition and are subject to change upon the completion of the valuation of all identifiable assets acquired and liabilities assumed.

• (c) The amount represents the non-controlling interests of subsidiaries of the Target Group.

• (d) The amount represents 25% of the recognised amounts of identifiable net assets attributable to owners of the Target Group.

• (e) The excess amount of aggregated amount of the consideration transferred and the amount of noncontrolling interest over fair value of the net identifiable assets of the Target Group is recognised as goodwill. For the purpose of the unaudited pro forma financial information, the management of the Group has assessed the goodwill impairment in accordance with Hong Kong Accounting Standard 36 “Impairment of Assets”. The management of the Group has estimated the recoverable amount based on the higher of fair value less costs of disposal and value in use of the underlying cash-generating units as at 30 September 2016. Based on the recoverable amount, no impairment loss on goodwill is considered necessary in the unaudited pro forma financial information. Since the fair value of the identifiable assets and liabilities of the Target Group at the completion of the Acquisition may be substantially different from the fair value used in the preparation of the Unaudited Pro Forma Consolidated Statement of Assets and Liabilities, the final amount of goodwill to be recognised in connection with the Acquisition could be different from the estimated amount stated herein.

– 95 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

• (4) Estimated legal and professional fees and other direct expenses in relation to the Acquisition of approximately HK$4.6 million.

• (5) No adjustments has been made to reflect any trading results or other transactions of the Enlarged Group entered into subsequent to 30 September 2016.

– 96 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

(B) INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of the assurance report received from Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, the reporting accountants of our Company, in respect of the Group’s unaudited pro forma financial information prepared for the purpose of incorporation in this prospectus.

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the Directors of Hao Tian Development Group Limited

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Hao Tian Development Group Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of assets and liabilities as at 30 September 2016 and related notes as set out on pages 92 to 96 of the circular issued by the Company dated 12 May 2017 (the “Circular”) in connection with the acquisition of 75% equity interest of the Clear Lift Holdings Limited (the “Acquisition”). The applicable criteria on the basis of which the Directors have compiled the unaudited pro forma financial information are described on pages 92 to 96 of the Circular.

The unaudited pro forma financial information has been compiled by the Directors to illustrate the impact of the Acquisition on the Group’s financial position as at 30 September 2016 as if the Acquisition had taken place at 30 September 2016. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s condensed consolidated financial statements for the six months ended 30 September 2016, on which a review report has been published.

德勤百年慶 開創新紀元

– 97 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Directors’ Responsibilities for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the “Code of Ethics for Professional Accountants” issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– 98 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the unaudited pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the unaudited pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information.

The purpose of unaudited pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 September 2016 would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

• the related unaudited pro forma adjustments give appropriate effect to those criteria; and

• the unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

– 99 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

• (a) the unaudited pro forma financial information has been properly compiled on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

12 May 2017

– 100 –

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm, that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Interests of Directors and chief executive

As at the Latest Practicable Date, so far as is known to, or can be ascertained after reasonable enquiry by any Directors or the chief executive of the Company, the following Directors had an interests and short positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO) or were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or were required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies of the Listing Rules to be notified to the Company and the Stock Exchange:

			Approximately
		Number of Shares	percentage of
		and underlying	issued share
		Shares held	capital of the
Name of Director	Capacity	(Long Position)	Company
			(note 1)
Fok Chi Tak	Beneficial owner	21,798,604	0.52%
Xu Hai Ying	Beneficial owner	628,931	0.02%
Ou Zhiliang	Beneficial owner	628,931	0.02%
Chan Ming Sun, Jonathan	Beneficial owner	628,931	0.02%
Lam Kwan Sing	Beneficial owner	628,931	0.02%
Lee Chi Hwa, Joshua	Beneficial owner	628,931	0.02%

Note:

1. The percentage of shareholding is calculated on the basis of 4,186,167,450 shares in issue as at 31 March 2017.

– 101 –

GENERAL INFORMATION

APPENDIX IV

As at the Latest Practicable Date, none of the Directors was a director or an employee of a company which had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Interests of Substantial Shareholders

As at the Latest Practicable Date, so far as is known to, or can be ascertained after reasonable enquiry by any Directors or the chief executive of the Company, the following persons had an interests or short positions in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of the Divisions 2 and 3 of Part XV of the SFO, or, who were, directly or indirectly, as deemed to be interested in 5% or more of the value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group and the amount of each of such persons’ interests in such securities, together with particulars of any options in respect of such capital were as follows:

			Approximately
		Number of Shares	percentage of
		or underlying	issued share
		Shares held	capital of the
Name of Director	Capacity	(Long Position)	Company
			(note 1)
Li Shao Yu	Beneficial owner	4,780,322	61.78%
	Interests in a controlled	2,581,498,949
	corporation	(note 2)
Asia Link Capital Investment	Beneficial owner	2,581,498,949	61.67%
Holdings Limited
Central Hujin Investment Ltd.	Interests in a controlled	389,940,000	9.31%
	corporation	(note 3)
China Construction Bank	Interests in a controlled	389,940,000	9.31%
Corporation	corporation	(note 3)
China Innovative Finance	Interests in a controlled	330,000,000	7.88%
Group Limited	corporation	(note 4)
Safe Castle Limited	Beneficial owner	330,000,000	7.88%
		(note 4)

– 102 –

GENERAL INFORMATION

APPENDIX IV

Notes:

1. The percentage of shareholding is calculated on the basis of 4,186,167,450 shares in issue as at 31 March 2017.

2. These shares were held directly by Asia Link Capital Investment Holdings Limited, which is beneficially wholly-owned by Ms. Li Shao Yu.

3. Vandi Investments Limited was directly interested in 389,940,000 underlying Shares. Vandi Investments Limited was directly wholly-owned by CCBI Investments Limited which was in turn directly wholly-owned by CCB International (Holdings) Limited. CCB International (Holdings) Limited was directly wholly-owned by CCB Financial Holdings Limited which was in turn directly wholly-owned by CCB International Group Holdings Limited. CCB International Group Holdings Limited was directly wholly-owned by China Construction Bank Corporation which was held by Central Hujin Investment Limited as to 57.13%.

4. Safe Castle Limited was directly interested in 330,000,000 Shares. Safe Castle Limited was directly wholly-owned by Coupeville Limited which was in turn directly wholly-owned by China Innovative Finance Group Limited.

Save as disclosed above, as at the Latest Practicable Date, the Directors or chief executive were not aware of any other person (other than the Directors and the chief executive of the Company) who had interests or short positions in the Shares or underlying Shares (including any interests in options in respect of such capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who are, directly or indirectly, interested in 5% or more of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered or was proposing to enter into a service contract with any member of the Group which was not expiring or determinable by the Group within 1 year without payment of compensation, other than statutory compensation.

– 103 –

GENERAL INFORMATION

APPENDIX IV

4. DIRECTORS’ INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 31 March 2016, the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

5. DIRECTORS’ INTERESTS IN CONTRACTS

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group which was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

6. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, so far as is known to the Directors, none of the Directors or their respective associates had any business or interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

7. MATERIAL CONTRACTS

As at the Latest Practicable Date, the following contracts (not being contracts entered into in the ordinary course of business) were entered into by member(s) of the Enlarged Group within the two years immediately preceding the date of this circular and are, or may be, material:

• (a) On 6 July 2015, the Company and Sea Venture Investments Limited entered into a subscription agreement, pursuant to which the Company agreed to issue, and Sea Venture Investments Limited agreed to subscribe for the US$30 million 9 per cent. senior secured notes due 2017;

• (b) On 21 July 2015, Asia Link Capital Investment Holdings Limited, the Company, Haitong International Securities Company Limited and Grand Cartel Securities Co. Ltd. (Haitong International Securities Company Limited and Grand Cartel Securities Co. Ltd. collectively as the “ Placing Agents ”) entered into a placing agreement (the “ Placing Agreement ”), pursuant to which Asia Link Capital Investment Holdings Limited appointed the Placing Agents, and the Placing Agents agreed to act as the placing agents for Asia Link Capital Investment Holdings Limited, to procure a minimum of six placees to purchase up to 240,000,000 existing shares (the “ Placing Shares ”) in the Company held by Asia Link Capital Investment Holdings Limited at the placing price of HK$0.90 per share;

– 104 –

GENERAL INFORMATION

APPENDIX IV

• (c) On 21 July 2015, Asia Link Capital Investment Holdings Limited, the Company and the Placing Agents entered into a supplemental placing agreement to supplement the Placing Agreement;

• (d) On 21 July 2015, Asia Link Capital Investment Holdings Limited and the Company entered into a subscription agreement, pursuant to which Asia Link Capital Investment Holdings Limited conditionally agreed to subscribe for, and the Company conditionally agreed to allot and issue, such number of new shares in the Company that is equal to the number of Placing Shares to be sold by the Vendor pursuant to the Placing Agreement at the subscription price of HK$0.90 per share;

• (e) On 1 November 2015, Hao Tian Capital Company Limited, a wholly-owned subsidiary of the Company, entered into a sale and purchase agreement with independent third parties to acquire the entire issued share capital of Paul Securities Limited, a corporation licensed to carry out Type 1 activity (Dealing in Securities) under the SFO, at an aggregate consideration of (i) a fixed premium of HK$11,000,000 and (ii) the net assets value of the Paul Securities Limited as at the date of completion;

• (f) On 22 May 2016, Hao Tian Management (Hong Kong) Limited, a then indirect wholly-owned subsidiary of the Company, entered into a conditional subscription agreement (the “ Subscription Agreement ”) with Vandi Investments Limited, pursuant to which Vandi Investments Limited agreed to subscribe for, and Hao Tian Management (Hong Kong) Limited agreed to issue, 821 new ordinary shares in Hao Tian Management (Hong Kong) Limited at the consideration of US$40,000,000;

• (g) On 31 May 2016, the Company, Hao Tian Management (Hong Kong) Limited and Vandi Investments Limited entered into a supplemental deed to the Subscription Agreement to clarify that Vandi Investments Limited was then an indirect and whollyowned special purpose vehicle of CCB International (Holdings) Limited;

• (h) On 7 June 2016, 昊天投資（中國）有限公司 (Hao Tian Investments (China) Co. Limited, “ Hao Tian Investment ”) entered into an investment framework agreement with 中華人民共和國福建省清流縣人民政府 (The People’s Government of Qingliu County, Fujian Province, the Peoples’s Republic of China) relating to the project known as “Innovative Camellia Oleifera Health Industry Project（創新型油茶健康產 業項目）” (the “ Project* ”) and pursuant to the investment framework agreement, Hao Tian Investment planned to invest a total sum of not more than RMB380,000,000 in the Project;

– 105 –

GENERAL INFORMATION

APPENDIX IV

• (i) On 20 July 2016, in connection with the Subscription Agreement, the Company, Hao Tian Management (Hong Kong) Limited and Vandi Investments Limited entered into a call option deed, pursuant to which the Company, without additional consideration, granted to Vandi Investments Limited a call option to, require the Company to allot and issue certain new shares in the Company to Vandi Investments Limited at the price of HK$0.80 per share;

• (j) On 22 July 2016, a restructuring agreement was entered into between Hao Tian Investment (China) Company Limited (“ Hao Tian China ”), an indirect wholly-owned subsidiary of the Company, and Fujian Nuoqi Co., Ltd. (“ Fujian Nuoqi ”), pursuant to which, among others, (i) Hao Tian China conditionally agreed to participate in the restructuring of Fujian Nuoqi, in replacement of a third party, as the party responsible for the restructuring under the reorganisation proposal of Fujian Nuoqi; and (ii) for the retention of the assets in Fujian Nuoqi and the transfer of 311,504,940 domestic invested shares in Fujian Nuoqi to Hao Tian China, Hao Tian China conditionally agreed to pay the an aggregate sum of RMB150,583,125.05;

• (k) On 23 September 2016, Hao Tian Management (Hong Kong) Limited, a non whollyowned subsidiary of the Company, entered into a sale and purchase agreement with an independent third party, pursuant to which Hao Tian Management (Hong Kong) Limited agreed to sell, and the independent third party agreed to purchase, 1,737,940,350 shares in China Innovative Finance Group Limited (share of which are listed on the Stock Exchange with stock code 412) held by Hao Tian Management (Hong Kong) Limited at the consideration of HK$0.297 per share;

• (l) On 16 January 2017, the Purchaser and Haitong International Securities Company Limited entered into a facility agreement (the “ Facility Agreement ”) in respect of loan facilities of up to HK$495,000,000 provided by Haitong International Securities Company Limited to the Purchaser;

• (m) On 16 January 2017, the Purchaser executed a share charge in favour of Haitong International Securities Company Limited pursuant to which the Purchaser charged certain shares in the Target Company to Haitong International Securities Company Limited as a security to the Facility Agreement;

• (n) On 16 January 2017, the Company executed a corporate guarantee in favour of Haitong International Securities Company Limited pursuant to which the Company granted a guarantee to Haitong International Securities Company Limited as a guarantee to the Facility Agreement in respect of loan facilities of up to HK$495,000,000;

– 106 –

GENERAL INFORMATION

APPENDIX IV

• (o) On 5 April 2017, Fortune Jumbo Limited, an indirect wholly-owned subsidiary of the Company placed an order with Haitong Securities, pursuant to which Haitong Securities shall subscribe the Interest in the Fund Portfolio Company on behalf of the Subsidiary at the Subscription Amount of US$30,000,000 (approximately HK$234,000,000).

• (p) On 20 October 2015, Crawler Krane Business Limited, Tang J F T Company Limited and the eight then shareholders of the Target Company entered into the sales and purchase agreement, pursuant to which the eight then shareholders of the Target Company agreed to sell and Crawler Krane Business Limited agreed to acquire an aggregate of 9,990 ordinary shares of Chim Kee Company Limited, representing 99.9% of the issued share capital of Chim Kee Company Limited at a consideration of 9,999 ordinary shares issued by Tang J F T Company Limited in total to the eight then shareholders of the Target Company;

• (q) On 23 October 2015, Tang Kan, Tang J F T Company Limited and Tang Yiu Chi James entered into a Deed of Indemnity in favour of the Target Company and its subsidiaries containing certain indemnities;

• (r) On 23 October 2015, Tang Kan, Tang J F T Company Limited and Tang Yiu Chi James entered into a Deed of Non-competition in favour of the Target Company and its subsidiaries;

• (s) On 23 October 2015, Chim Kee Group Limited entered into a Deed of Trademark Assignment in favour of the Target Company in relation to the assignment of the Hong Kong Trademarks;

• (t) On 27 November 2015, the Target Company, the then executive Directors of the Target Company, the then controlling shareholders of the Target Company, RHB Capital Hong Kong Limited, RHB Securities Hong Kong Limited, China Industrial Securities International Capital Limited, China Investment Securities International Brokerage Limited, Convoy Investment Services Limited, Cinda International Securities Limited, Gransing Securities Co., Limited and Guangdong Securities Limited entered into a Public Offer Underwriting Agreement; and

• (u) On 8 December 2016, Chim Kee Crane Company Limited and the landlord entered into a sales and purchase agreement in relation to the acquisition of a parcel of land situated in Yuen Long.

– 107 –

GENERAL INFORMATION

APPENDIX IV

8. LITIGATION

Claim against Inner Mongolia Shuangxin Resources Group Co. Ltd. (“Shuangxin”)

In connection with the sale and purchase agreement (the “ Menggang Agreement ”) entered into between the Group and Inner-Mongolia Shuangxin Resources Group Co., Ltd, (“ Shuangxin ”) for the sale and purchase of Wuhai City Menggang Industrial Development Co., Ltd. and its subsidiaries, which operated the Group’s coal mines in the Inner-Mongolia Autonomous Region in the PRC, on 16 May 2013, the Group filed an arbitration claim to the China International Economic and Trade Arbitration Commission (the “ CIETAC ”) for the outstanding amount of RMB80 million payable by Shuangxin under the Menggang Agreement.

Shuangxin withheld the payment of RMB80 million initially on the ground of a tax demand note issued from the local tax bureau, and after revocation of the tax demand note, on the ground of non-fulfillment by the Group of certain terms and obligations under the Menggang Agreement. Shuangxin filed a counter-claim for RMB65 million on 8 October 2013. An arbitral award was delivered in favour of the Group on 27 June 2014 and Shuangxin filed an application to the Beijing Second Intermediate People’s Court to set aside the arbitral award. Beijing Second Intermediate People’s Court issued a civil ruling on 18 December 2014 dismissing Shuangxin’s application for the revocation of the arbitral award. On 6 February 2015, the Group applied for the mandatory enforcement at the Ordos City Intermediate People’s Court, and the Ordos City Intermediate People’s Court has formally accepted the application on 14 May 2015. As at the date of this report, the Group had received RMB20 million and the execution procedures for enforcing the court order are still in progress.

– 108 –

APPENDIX IV

GENERAL INFORMATION

As for the final instalment in the amount of RMB40.5 million payable by Shuangxin, which is in addition to the aforementioned RMB80 million, under the Menggang Agreement (as supplemented by a supplemental agreement dated 19 November 2012), the Group filed an arbitration claim to the CIETAC in January 2014 and an arbitral award was delivered in favour of the Group on 3 August 2015. The Group then applied for the mandatory enforcement at the Ordos City Intermediate People’s Court on 8 September 2015. Shuangxin had paid the Group an aggregate sum of RMB34,264,934.36 in full and final settlement of the case pursuant to the determination made by the CIETAC.

On 21 August 2014, Shuangxin filed a legal action at the Inner-Mongolia Autonomous Regional High People’s Court claiming against the Group for damages in an aggregate amount of RMB102,978,100 (the “ Case ”). On 8 May 2015, the Group submitted an application of objection to the jurisdiction at the Inner-Mongolia Autonomous Regional High People’s Court. On 2 June 2015, the Mongolia Autonomous Regional High People’s Court issued a civil ruling dismissing the Group’s application. The Group then submitted an application for leave to appeal against such civil ruling at the Supreme People’s Court of the People’s Republic of China and the appeal was dismissed. On 22 March 2016, Shuangxin applied to the High People’s Court of Mongolia Autonomous Region for the temporary suspension of execution with regard to the mandatory enforcement applied by the Group on 6 February 2015 and the decision is in favour of Shuangxin. The Group then filed an appeal against such ruling and is waiting for the court’s decision. The High People’s Court of Mongolia Autonomous Region commenced the hearing of the Case on 13 April 2016 and the court hearing is still in progress. The Board will provide updates on the legal position of the Group as and when appropriate.

Claim against Up Energy Development Group Limited

On 12 August 2016, the Company claimed against Up Energy Mining Limited and Up Energy Development Group Limited (the “ Defendants ”) for (i) issuance of the top-up consideration shares of Up Energy Development Group Limited (“ Up Energy ”) and (ii) cash payment pursuant to an agreement entered into between the Company as a vendor and the Defendants for the sale and purchase of shares in and assignment of shareholder’s loan due from Champ Universe Limited on 12 October 2012. Details of the claim are disclosed in the announcements of the Company dated 29 June 2016 and 12 August 2016.

– 109 –

GENERAL INFORMATION

APPENDIX IV

Claim against Chim Kee Machinery Co., Ltd

In 2012, a customer commenced litigation against Chim Kee Machinery Co., Ltd. (the “ Subsidiary ”), one of the subsidiary of the Enlarged Group (the “ Legal Proceeding ”) for alleged breach of rental contract. On 24 March 2016, the Court of First Instance found for the Subsidiary and the customer was ordered to compensate the Subsidiary for unpaid hire. On 26 April 2016, the customer lodged an appeal to the Court of Appeal. At as the Latest Practicable Date, the final outcomes of the Appeal are not yet concluded. The Enlarged Group has sought legal advice on the merits of the claim. Based on the aforesaid legal advice, after considering the evidence and the background facts in relation to the Legal Proceeding, the customer’s allegations and assertions are not cogent and convincing and therefore, the Enlarged Group will likely to succeed in the Legal Proceeding. Tang J F T Company Limited, Mr. Tang Kan and Mr. James Tang, the previous controlling shareholders of the Target Company, have agreed to jointly and severally indemnify the Target Company against all loses, liabilities, costs, fees, expenses and fines suffered or incurred by the Enlarged Group in relation to the Legal Proceeding initiated by the customer. Accordingly, no provision for claim in respect of such litigation was made by the Enlarged Group.

Save as disclosed above, as at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation or claims of material importance and no litigation or claims of material importance was known to the Directors to be pending or threatened by or against any member of the Enlarged Group.

9. QUALIFICATION AND CONSENTS OF EXPERTS AND EXPERTS’ INTERESTS

The following is the qualification of the experts who have given opinion or advice which is contained in this circular:

Name Qualification Deloitte Touche Tohmatsu Certified Public Accountants (the “ Expert ”)

As at the Latest Practicable Date, the Expert has confirmed that it did not have any shareholding, directly or indirectly, in any member of the Enlarged Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group.

– 110 –

GENERAL INFORMATION

APPENDIX IV

The Expert has given and has not withdrawn its written consent to the issue of this circular, with the inclusion therein of their letters and the references to their name in the form and context in which they respectively appear in this circular.

As at the Latest Practicable Date, the Expert did not have any direct or indirect interest in any assets which have been acquired, or disposed of by, or leased to any member of the Enlarged Group, or were proposed to be acquired, or disposed of by, or leased to any member of the Enlarged Group since 31 March 2016, being the date to which the latest published audited accounts of the Group were made up.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of the Company at Rooms 4917-4932, 49/F., Sun Hung Kai Centre, 30 Harbour Road, Wan Chai, Hong Kong during normal business hours from 9:00 a.m. to 5:00 p.m. (except Saturdays and public holidays) from the date of this circular until 14 days hereafter:

• (a) the memorandum and articles of association of the Company;

• (b) the interim report of the Company for the six months ended 30 September 2016 and the annual reports of the Company for the three years ended 31 March 2014, 2015 and 2016;

• (c) the letter from the Board, the text of which is set out on pages 5 to 14 of this circular;

• (d) the assurance report on the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular;

• (e) the consent letters from the Expert; and

• (f) the material contracts as referred to in the section headed “Material Contracts” in this appendix.

11. GENERAL

• (a) The registered office of the Company is at Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands.

• (b) The principal place of business in Hong Kong of the Company is at Rooms 49174932, 49/F., Sun Hung Kai Centre, 30 Harbour Road, Wan Chai, Hong Kong.

– 111 –

GENERAL INFORMATION

APPENDIX IV

• (c) The share registrar and transfer office in the Cayman Islands of the Company is Royal Bank of Canada Trust Company (Cayman) Limited at 4th Floor, Royal Bank House 24 Shedden Road, George Town Grand Cayman KY1-1110 Cayman Islands and the share registrar and transfer office in Hong Kong of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre 183 Queen’s Road East, Wan Chai Hong Kong.

• (d) The company secretary of the Company is Mr. Sit Hon Wing. Mr. Sit received a bachelor’s degree in accountancy from the Hong Kong Polytechnic University in 1999 and he is a fellow member of both the Hong Kong Institute of Certified Public Accountants (HKICPA) and Association of Chartered Certified Accountants (ACCA).

• (e) The English text of this circular shall prevail over the Chinese text in case of inconsistency except where English translations of Chinese terms are stated to be provided for identification purposes only, in which case the Chinese terms shall prevail.

• For identification purpose only

– 112 –