Century Plaza Hotel Group — Proxy Solicitation & Information Statement 2014

May 27, 2014

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, 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 Application Proof.

Application Proof of

King Force Security Holdings Limited (the “Company”)

(a company incorporated in the Cayman Islands)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “ Exchange ”)/the Securities and Futures Commission (the “ Commission ”) solely for the purpose of providing information to the public in Hong Kong.

This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sponsor, advisers or member of the underwriting syndicate that:

• (a) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document;

• (b) the publication of this document or supplemental, revised or replacement pages on the Exchange’s website does not give rise to any obligation of the Company, its sponsor, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering;

• (c) the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document;

• (d) the Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the GEM Listing Rules;

• (e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities;

• (f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended;

• (g) neither the Company nor any of its affiliate, advisers or underwriters is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document;

• (h) no application for the securities mentioned in this document should be made by any person nor would such application be accepted;

• (i) the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States;

• (j) as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and

• (k) the application to which this document relates has not been approved for listing and the Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company’s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period.

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

IMPORTANT

If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.

King Force Security Holdings Limited 冠輝保安控股有限公司

(Incorporated in the Cayman Islands with limited liability)

LISTING ON THE GROWTH ENTERPRISE MARKET OF THE STOCK EXCHANGE OF HONG KONG LIMITED BY WAY OF PLACING

Number of Placing Shares : [REDACTED] Shares Placing Price : Not more than HK$[REDACTED] per Placing Share and expected to be not less than HK$[REDACTED] per Placing Share, payable in full upon application, plus brokerage of 1%, SFC transaction levy of 0.003% and Stock Exchange trading fee of 0.005% Nominal Value : HK$0.01 per Share Stock Code : [ � ]

Sponsor [REDACTED]

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TC Capital Asia Limited

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

A copy of this prospectus, having attached thereto the documents specified in the paragraph headed “Documents Delivered to the Registrar of Companies in Hong Kong” in Appendix VI to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents referred to above.

The Placing Price is expected to be fixed by agreement between the Company and the Lead Manager (for itself and on behalf of the Underwriters) on the Price Determination Date, which is currently scheduled on or around [REDACTED] (Hong Kong time). The Placing Price will be not more than HK$[REDACTED] and is expected to be not less than HK$[REDACTED] per Share. If the Company and the Lead Manager are unable to reach an agreement on the Placing Price by that date or such later date as agreed by the Company and the Lead Manager (for itself and on behalf of the Underwriters), the Placing will not become unconditional and will not proceed.

Prospective investors should read the entire document carefully and, in particular, should consider the matters discussed in the section headed “Risk Factors” in this prospectus.

[REDACTED]

3 July 2014

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

EXPECTED TIMETABLE

[REDACTED]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

CONTENT

IMPORTANT NOTICE TO INVESTORS This prospectus is issued by the Company solely in connection with the Placing and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the Placing Shares offered by this prospectus pursuant to the Placing. This prospectus may not be used for the purpose of, and does not constitute, an offer to sell of a solicitation of an offer in any other jurisdiction or in any other circumstances. You should rely only on the information contained in this prospectus to make your investment decision. The Company, the Sponsor, the Lead Manager, the Bookrunner, and the Underwriters have not authorised anyone to provide you with information that is different from what is contained in this prospectus. Any information or representation not made in this prospectus must not be relied on by you as having been authorised by the Company, the Sponsor, the Lead Manager, the Bookrunner, the Underwriters, any of their respective directors, advisers, officers, employees, agents or representatives or any other person involved in the Placing.

	Page
Characteristics of GEM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Content. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	iii
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Forward-Looking Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Information About this Prospectus and the Placing . . . . . . . . . . . . . . . . . . . . . . . . .	28
Directors and Parties Involved in the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Regulatory Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48
History, Reorganisation and Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . .	58
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	67
Relationship with Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	100

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

CONTENT

		Page
Directors and Senior Management . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	104
Substantial Shareholders . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	115
Connected Transaction . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	117
Share Capital . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	119
Financial Information . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	122
Business Strategies and Use of Proceeds	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	152
Sponsor’s Interests. . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	157
Underwriting . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	158
Structure and Conditions of the Placing	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	164
Appendix I – Accountant’s Report	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II – **Unaudited Pro Forma **	Financial Information . . . . . . . . . . . . . . .	II-1
Appendix III – Property Valuation . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV – Summary of the Constitution of the Company and
**the Cayman Islands **	Company Law . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V – Statutory and General Information . . . . . . . . . . . . . . . . . . . . . . .		V-1
Appendix VI – Documents Delivered to the Registrar of Companies in
Hong Kong and Available for Inspection . . . . . . . . . . . . . . . . .		VI-1

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

SUMMARY

This summary aims to give you an overview of the information contained in this prospectus and should be read in conjunction with full text of this prospectus. As this is a summary, it does not contain all of the information which may be important to you. You should read the whole prospectus before you decide to invest in the Placing Shares.

OVERVIEW

The Group is a manned security guarding services provider and it is licensed to provide security guarding services in Hong Kong under Type I security work in accordance with the SCL regime. The Group operates under the name “KING FORCE” and the services it offers aim to protect the safety and assets of its customers, prevent crime and offence and maintain order. The security guarding services offered by the Group include, patrolling, access control at the lobby entrance, making entrance records of visitors and stopping trespassers, handling complaints, settling and reporting disputes. The Group also provides guarding and personal escorting services in various events, occasions, exhibitions, ceremonies and press conferences and crowd management services. With over nine years experience in manned security guarding services, the Group has established goodwill in its security guarding services. The Group is delegated to providing quality manned security guarding services and it is accredited with ISO 9001:2008 (quality management system standard) for its design and provision of security guarding services awarded by the Hong Kong Quality Assurance Agency. To ensure quality of services, the Group provides guidance and trainings to its security guards and conducts supervision on its security guards. With continued effort, the Group has established a broad customer base. During the two years ended 31 March 2013 and 2014, the Group had 352 and 366 customers, respectively. The Group’s customers during the Track Record Period include property management companies, schools, warehouse operators, property redevelopers, and construction companies. The Group has, as at the Latest Practicable Date, over 1,000 full-time and part-time qualified security guards trained to provide quality manned security guarding services to its customers.

For the two years ended 31 March 2013 and 2014, the Group’s revenue was approximately HK$90.6 million and HK$111.1 million, respectively. The profit and total comprehensive income during the Track Record Period was approximately HK$9.0 million and HK$8.4 million, respectively.

REVENUE

The Group provided the manned security guarding services at places such as commercial, construction sites, warehouse, schools and residential premises. The following table sets forth a breakdown of the Group’s revenue by property type during the Track Record Period:

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SUMMARY

Type of premises Commercial (Note 1) Construction site Warehouse School Residential Exhibition Others (Note 2) Total	Year ended 2013 (HK$’000) % 25,373 27.9 16,585 18.3 17,368 19.2 14,455 16.0 12,795 14.1 3,954 4.4 75 0.1 90,605 100.0	31 March 2014 (HK$’000) % 31,390 28.3 22,881 20.6 22,099 19.9 14,049 12.6 14,113 12.7 6,165 5.6 362 0.3 111,059 100.0	31 March 2014 (HK$’000) % 31,390 28.3 22,881 20.6 22,099 19.9 14,049 12.6 14,113 12.7 6,165 5.6 362 0.3 111,059 100.0
			100.0

Notes:

• (1) Commercial includes industrial and commercial buildings, hotels, shopping malls and retail shops

• (2) Others include the services rendered in other property types and the provision of personal escorting services.

The following table sets forth the breakdown of the Group’s revenue by types of contracts during the Track Record Period:

Type of contracts Manned security guarding services – Fixed – Temporary −Event Total	Year ended 2013 HK$’000 % 73,055 80.6 4,830 5.3 12,720 14.1 90,605 100.0	31 March 2014 HK$’000 % 90,025 81.1 2,400 2.1 18,634 16.8 111,059 100.0	31 March 2014 HK$’000 % 90,025 81.1 2,400 2.1 18,634 16.8 111,059 100.0
			100.0

Note: Fixed positions refer to contract for a term over 6 months and for temporary positions, they refer to contract for a term less than 6 months.

The Group has two general types of service contracts with the customers, namely quotations and tender contracts. During the Track Record Period, the Group derived a significant percentage of 89.0% and 87.1% of the revenue from quotations. The service periods of the contract periods are generally from one day to 36 months. For details of the tender contracts and quotations, please refer to the paragraph headed “Business – The Workflow of the Group” for details.

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SUMMARY

THE COMPETITIVE STRENGTHS

The Group believes the following key strengths distinguish itself from its competitors and position it for significant growth in the future:

• Strong and experienced management team

• Stringent internal control and business process system

• Well-established and stable relationship with customers

BUSINESS STRATEGIES AND PLANS

The Group intends to achieve expansion in business and maintain its competitiveness in the security guarding services industry in Hong Kong by pursuing the following strategies and plans:

• Recruiting and expanding the security guarding and patrol team

• Strengthening of staff recruitment and training

• Expanding the sales and marketing department and uplifting marketing effect

• Continuing to increase operational efficiency and enhance quality of service

STAFF COSTS

The Group’s business is relatively labour-intensive. As at the Latest Practicable Date, the Group had a total of 1,061 full-time and part-time guards providing manned security guarding and related services and cost of services rendered which mainly consist of direct guard cost has been and will continue to affect its results of operations significantly. For the years ended 31 March 2013 and 2014, cost of services rendered was approximately HK$75.3 million and HK$88.0 million, respectively, representing approximately 83.1% and 79.3% of its revenue, respectively. According to the government policy, the statutory minimum wage has been increased from HK$28.0 per hour to HK$30.0 per hour since 1 May 2013 and will be reviewed at least every two years. All the fixed positions contracts with customers allow for potential fee adjustment with reference to statutory minimum wage requirement. The Group also takes into account potential increase in statutory minimum wage during preparation of budgets in tendering and quotations.

RECENT DEVELOPMENTS

The Directors observed and noted that the market in which the Group’s operation remained stable after 31 March 2014 as reflected by the continued stable operation of the Group during the period from 1 April 2014 to the Latest Practicable Date.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

SUMMARY

Unaudited financial performance for the one month ended 30 April 2014

Based on the financial information as extracted from the unaudited consolidated financial statements for the one month ended 30 April 2014, the unaudited total revenue of the Group for the one month ended 30 April 2014 was approximately HK$9.7 million, representing an increase of approximately 22.5% as compared with the one month ended 30 April 2013. Gross margin for the one month ended 30 April 2014 was approximately 19.4%.

Subsequent to 31 March 2014, the Group entered into 11 new or renewed contracts. The aggregate contract sum of such 11 new or renewed contracts is approximately HK$314,000 per month. The Directors confirm that there was no material adverse change in the Group’s financial status subsequent to 31 March 2014.

As at the Latest Practicable Date, the Group had 234 unexpired services contracts ranging from 1 month to 3 years on hand and the information of these contracts including their contract value are summarised in the table below:

Contract expiring	HK$ million
on or before 30 September 2014	4.3
on or before 31 March 2015	22.3
after 31 March 2015	41.9

Certain financial information of the Group, including the Group’s revenue for the one month ended 30 April 2014, information of the Group’s net current assets and indebtedness as at 30 April 2014, is extracted from the Group’s unaudited consolidated financial statements for the one month ended 30 April 2014 prepared by the Directors, and have been reviewed by the Group’s reporting accountant, BDO Limited, in accordance with the Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA.

Listing expenses

The Group’s financial performance for the year ending 31 March 2015 will be affected by the non-recurring expenses incurred in relation to the Listing. The Listing expenses to be borne by the Group are estimated to be approximately HK$[REDACTED] (assuming a Placing Price of HK$[REDACTED], being the midpoint of the indicative Placing Price range of HK$[REDACTED] to HK$[REDACTED] per Placing Share), of which (i) approximately HK$[REDACTED] is directly attributable to the issue of Placing Shares which is to be accounted for as a deduction from equity; (ii) approximately HK$[REDACTED] is charged to profit and loss of the Group for the year ending 31 March 2014; and approximately HK$[REDACTED] is to be charged to profit and loss of the Group for the year ending 31 March 2015. Such cost is a current estimate and for reference only. The final amount to be recognized to the profit and loss of the Group or to be capitalised is subject to adjustment based on audit and the changes in variables and assumptions.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

SUMMARY

MATERIAL ADVERSE CHANGE

The impact of the Listing expenses on the profit and loss accounts has posed a material adverse change in the financial or trading position or prospect of the Group since 31 March 2014 (being the date of the latest audited consolidated financial statements made up). Prospective investors should be aware of the impact of the Listing expenses on the financial performance of the Group for the year ending 31 March 2015.

Save as disclosed above, the Directors have confirmed that, up to the date of this prospectus, there had been no material adverse change in the financial or trading positions or prospect of the Company or its subsidiaries since 31 March 2014 (being the date of which the Group’s latest audited consolidated financial statements were made up as set out in the Accountant’s Report in Appendix I to this prospectus) and there had been no event since 31 March 2014 which would materially affect the information shown in the Accountant’s Report in Appendix I to this prospectus.

MARKET AND COMPETITION

According to the Ipsos Report, there were about 967 licensed security service providers in Hong Kong by the end of 2013. The total number of security service providers increased at a CAGR of about 2.3% from about 884 units in 2009 to about 967 units in 2013. The total number of security service providers for Type I rose at a CAGR of about 2.0% from about 516 units in 2009 to about 558 units in 2013. For detailed information on the market conditions of security services industry, please refer to the section headed “Industrial Overview” of this prospectus. Among the 967 licensed security service providers in Hong Kong, the top 5 security service providers accounted for about 32.4% of the total industry revenue in 2013, while the Group and the rest of service providers in the market took up the majority of the market share. The Group accounted for approximately 1% of the total industry revenue in 2013. The Directors consider the security guarding services industry in Hong Kong to be fragmented and various types of services offered by each type of the licensed security service providers where competition is mainly based on scale of establishment, competitive pricing, qualification and track record of the management and staff.

RISK FACTORS

There are risks associated with any investment. Some of the relatively material risks relating to the Group include:

• The Group is required to obtain a license for the security services provided and the Group focuses only on limited security guarding services and the Group relies entirely on the Hong Kong market

• With the implementation of the Minimum Wage Ordinance, the Group may fail to transfer the rising labour costs to its customers or fail to retain the labour force in a cost effective way

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

SUMMARY

• The Group is exposed to risks related to litigious claims that may affect the Group’s operation and financial positions

• The Group relies on key management personnel and its business operation may be adversely affected if the Group is unable to retain them without suitable replacement

• The Group may not have adequate insurance coverage and the Group is affected by increasing insurance costs and reduction of insurance coverage by its insurers

You should read the entire section carefully before you decide to invest in the Placing Shares.

SELECTED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME AND CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ITEMS

	**Year ended **	31 March	Percentage
	2013	2014	change
	HK$’000	HK$’000	%
Revenue	90,605	111,059	22.6
Gross profit	15,317	23,033	50.4
Profit for the year	9,046	8,362	(7.6)
	**As at 31 **	March	Percentage
	2013	2014	change
	HK$’000	HK$’000	%
Current assets	38,444	29,626	(22.9)
Current liabilities	35,308	20,318	(42.5)
Net current assets	3,136	9,309	196.8
Net assets	11,351	19,714	73.7
Total assets	47,064	40,326	(14.3)

SELECTED CONSOLIDATED STATEMENTS OF CASH FLOWS

		**Year ended **	31 March
		2013	2014
		HK$’000	HK$’000
Net	cash generated from operating activities	6,442	13,562
Net	cash used in investing activities	(4,030)	(1,792)
Net	cash used in financing activities	(8,278)	(7,483)
Net	(decrease)/increase in cash and cash equivalents	(5,865)	4,287

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

SUMMARY

DIVIDEND POLICY

In June 2014, an interim dividend of HK$7,000,000 was declared to Optimistic King and Gloria Power, the then shareholders of Million Joyce (which is a direct wholly-owned subsidiary of the Company). The payment and the amount of any future dividends will be at the discretion of the Directors and will depend on the future operations and earnings, capital requirements and surplus, general financial condition and other factors that the Directors deem relevant. Investors should note that historical dividend distributions are not indicative of the Company’s future dividend distribution policy. The Company does not have any predetermined dividend payout ratio.

SHAREHOLDER INFORMATION

Immediately following the completion of the Placing, Optimistic King will hold [REDACTED] Shares (representing [REDACTED]% of the enlarged issued share capital of the Company). Please refer to the section headed “Relationship with Controlling Shareholders” for details.

REASONS FOR THE PLACING

The Directors believe that the Listing will enhance the Group’s profile and recognition. In addition, the Board is also of the view that the Listing and the Placing will provide the Group with additional avenues to raise capital for future business expansion and long-term development, and expand and diversify the capital base and Shareholders base as institutional funds and retail investors in Hong Kong can easily participate in the equity of the Company. The net proceeds from the Placing of the Placing Shares will strengthen the financial position of the Group.

PLACING STATISTICS

Market capitalisation at : HK$[REDACTED] Listing (note 1) Offer size : [REDACTED]% of the enlarged issued share capital of the Company Placing Price per Placing : HK$[REDACTED] to HK$[REDACTED] Share Number of Placing Shares [REDACTED] Shares Board lot : [REDACTED] Shares Unaudited pro forma net : HK$[REDACTED] based on a Placing Price of tangible assets per HK$[REDACTED] per Placing Share; and Share (note 2)

HK$[REDACTED] based on a Placing Price of HK$[REDACTED] per Placing Share

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

SUMMARY

Notes:

• (1) The calculation of the market capitalisation of the Shares is based on [REDACTED] Shares in issue and to be issued immediately after completion of the Placing.

• (2) The unaudited pro forma adjusted net tangible assets per Share has been arrived at after the adjustments referred to under the paragraph headed “Unaudited pro forma adjusted consolidated net tangible assets” in the section headed “Unaudited pro forma financial information” in Appendix II to this prospectus and on the basis of [REDACTED] Shares in issue at the respective Placing Prices of HK$[REDACTED] and HK$[REDACTED] per Share immediately following completion of the Placing.

USE OF PROCEEDS

Assuming the Placing Price is HK$[REDACTED] per Placing Share, being the mid-point of the indicative Placing Price range, net proceeds to the Company from the issue of Placing Shares will be approximately HK$[REDACTED], after deducting the underwriting fees and commissions and estimated expenses payable by the Company.

	Approximate	Approximate
Plan	amount	percentage
	(HK$’000)	(%)
Repayment of bank borrowing	[REDACTED]	[REDACTED]
Recruiting and expanding the security guarding
and patrol team	[REDACTED]	[REDACTED]
Strengthening staff recruitment and training	[REDACTED]	[REDACTED]
Expanding the sales and marketing department and
uplifting marketing effort	[REDACTED]	[REDACTED]
Continuing to increase operational efficiency and
enhance quality of service	[REDACTED]	[REDACTED]
General working capital	[REDACTED]	[REDACTED]

Please refer to the section headed “Business Strategies and Use of Proceeds” for details.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

DEFINITIONS

In this prospectus, unless the context otherwise requires, the following expressions shall have the following meanings.

“Articles of Association” or	the articles of association of the Company, as amended
“Articles”	from time to time, a summary of which is set out in
	“Appendix IV – Summary of the Constitution of the
	Company and the Cayman Islands Company Law” to
	this prospectus
“associate(s)”	has the meaning ascribed thereto in the GEM Listing
	Rules
“Audit Committee”	the audit committee of the Board
“Board”	the board of Directors
“Business Day”	a day (other than a Saturday, a Sunday or a public
	holiday) on which banks in Hong Kong are generally
	open for normal banking business
“BVI”	the British Virgin Islands
“CAGR”	compound annual growth rate
“CAMS”	central alarm monitoring station
“CCASS”	the Central Clearing and Settlement System established
	and operated by HKSCC
“CCASS Clearing Participant”	a person admitted to participate in CCASS as a direct
	clearing participant or general clearing participant
“CCASS Custodian Participant”	a person admitted to participate in CCASS as a
	custodian participant
“CCASS Investor Participant”	a person admitted to participate in CCASS as an
	investor participant who may be an individual or joint
	individuals or a corporation
“CCASS Operational Procedures”	the operation procedures of HKSCC in relation to
	CCASS, containing the practices, procedures and
	administrative requirements relating to the operations
	and functions of CCASS, as from time to time in force
“CCASS Participant”	a CCASS Clearing Participant, a CCASS Custodian
	Participant or a CCASS Investor Participant
“Chairman”	the chairman of the Board, namely, Mr. Fu

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

DEFINITIONS

• “Chief Executive Officer”

• the chief executive officer of the Company, namely, Ms. Liu

• “Companies Law” the Companies Law (as revised) of the Cayman Islands, as amended, supplemented or otherwise modified from time to time

• “Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

• “Companies (Winding Up and Miscellaneous Provisions) Ordinance”

• the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

• “Company”

• King Force Security Holdings Limited（冠輝保安控股有 限公司）, an exempted company incorporated in the Cayman Islands with limited liability on 2 January 2014

• “connected person(s)” has the meaning ascribed thereto under the GEM Listing Rules

• “Controlling Shareholder(s)”

• has the meaning ascribed thereto under the GEM Listing Rules and, in the context of this prospectus, means the controlling shareholders of the Company, namely Mr. Fu and Optimistic King

• “Deed of Indemnity”

• the deed of indemnity dated [�] 2014 executed by the Controlling Shareholders in favour of the Company (for itself and as trustee for its subsidiaries), particulars of which are summarised in the paragraph headed “Tax and Other Indemnities” in Appendix V to this prospectus

• “Deed of Non-competition”

• the deed of non-competition dated [�] 2014 entered into among the Controlling Shareholders and the Company, particulars of which are summarised in the section headed “Relationship with Controlling Shareholders – Non-Competition Undertakings” in this prospectus

• “Director(s)” the director(s) of the Company

• “Employees’ Compensation Ordinance”

• the Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

	DEFINITIONS
“Existing Shareholders”	Optimistic King and Gloria Power
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”	the Rules Governing the Listing of Securities on GEM,
	as amended, supplemented or otherwise modified from
	time to time
“General Rules of CCASS”	the terms and conditions regulating the use of CCASS,
	as may be amended or modified from time to time and
	where the context so permits, shall include the CCASS
	Operational Procedures
“GFA”	gross floor area
“Gloria Power”	Gloria Power Limited （榮力有限公司）, a company
	incorporated in the BVI with limited liability on 1
	October 2013, which is wholly-owned by Mr. Chiu, and
	a substantial shareholder of the Company
“Government”	the Government of Hong Kong
“Group”	the Company and its subsidiaries, at the relevant time,
	or where the text refers to any time before the
	Company became the holding company of its present
	subsidiaries, the Company’s present subsidiaries and
	the respective business currently operated by such
	subsidiaries (as the case may be)
“HKEx website”	the internet website at www.hkexnews.hk operated by
	the Stock Exchange
“HKFRS”	Hong Kong Financial Reporting Standards (including
	Hong Kong Accounting Standards and interpretations)
	issued by the Hong Kong Institute of Certified Public
	Accountants
“HKSCC”	Hong Kong Securities Clearing Company Limited, a
	wholly-owned subsidiary of Hong Kong Exchanges and
	Clearing Limited

• “HKSCC Nominees” HKSCC Nominees Limited “HK$” or “HK cents” Hong Kong dollars and cents, respectively, the lawful currency of Hong Kong

“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the People’s Republic of China

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

• DEFINITIONS

• “Independent Third Party(ies)” an individual or a company which is independent from and not connected with (within the meaning of the GEM Listing Rules) any directors, chief executive, substantial shareholders of the Company, its subsidiaries or any of their respective associates

• “Ipsos” Ipsos Hong Kong Limited, an Independent Third Party, being a professional market research company

• “Ipsos Report” an independent market research report commissioned by the Company prepared by Ipsos on security services in Hong Kong issued in 8 May 2014

• “ISO 9001” ISO 9001 is an internationally recognised standard for a quality management system. It aims at effectiveness of the quality management system in meeting customer requirements. It prescribes requirements for ongoing improvement of quality assurance in design, development, production, installation and servicing

• “I.T.” information technology

• “King Force Security” King Force Security Limited （冠輝警衛有限公司）, a company incorporated in Hong Kong with limited liability on 28 February 2003, and an indirect wholly-owned subsidiary of the Company

• “King Force Service” King Force Service Limited （冠輝管理有限公司）, a company incorporated in Hong Kong with limited liability on 4 October 2013, and an indirect wholly-owned subsidiary of the Company

• “Latest Practicable Date” 15 May 2014, being the latest practicable date prior to the printing of this prospectus for ascertaining certain information in this prospectus

• “Listing”

• the listing of the Shares on GEM

• “Listing Date”

• the date on which dealings in the Shares first commence on GEM, which is expected to be on [REDACTED]

• “Listing Division” the Listing Division of the Stock Exchange

• “Main Board”

the stock market operated by the Stock Exchange, which excludes GEM of the Stock Exchange and the options market

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

DEFINITIONS

• “Mandatory Provident Fund the Mandatory Provident Fund Schemes Ordinance Schemes Ordinance” (Chapter 485 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

• “Memorandum” the memorandum of association of the Company, as amended from time to time

• “Million Joyce” Million Joyce Global Limited, a company incorporated in the BVI with limited liability on 8 August 2013, and a direct wholly-owned subsidiary of the Company

• “Minimum Wage Ordinance”

• the Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

• “MPF” mandatory provident fund

• “Mr. Chiu”

• Mr. Chiu Chun Keung（趙春強）, the sole shareholder of Gloria Power, which is in turns, a substantial shareholder of the Company

• “Mr. Fu” Mr. Fu Yik Lung（傅奕龍）, an executive Director, the Chairman, a Controlling Shareholder and the spouse of Ms. Liu

• “Ms. Liu” Ms. Liu Lai Ying（廖麗瑩）, an executive Director, the Chief Executive Officer and the spouse of Mr. Fu

• “Nomination Committee” the nomination committee of the Board

• “Optimistic King”

• Optimistic King Limited, a company incorporated in the BVI with limited liability on 1 October 2013, which is wholly-owned by Mr. Fu, and a Controlling Shareholder

• “Placing” the conditional placing by the Underwriters of the Placing Shares on behalf of the Company for cash at the Placing Price, as further described under the section headed “Structure and Conditions of the Placing” in this prospectus

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

DEFINITIONS

• “Placing Price” the final placing price per Placing Share (excluding brokerage fee, SFC transaction levy and Stock Exchange trading fee) which will be not more than HK$[REDACTED] and is expected to be not less than HK$[REDACTED], such price to be determined on Price Determination Date, as may be agreed between the Company and the Lead Manager (for itself and on behalf of the Underwriters)

• “Placing Shares” the [REDACTED] new Shares being offered by the Company for subscription at the Placing Price pursuant to the Placing

• “Pre-IPO Investment”

• the investment in Million Joyce by Gloria Power pursuant to a sale and purchase agreement dated 15 November 2013, as further described in the section headed “History, Reorganisation and Corporate Structure – Introduction of Strategic Investor” in this prospectus

• “Predecessor Companies Ordinance”

• the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) as in force from time to time before 3 March 2014

• “Price Determination Agreement”

• the agreement to be entered into by the Lead Manager (for itself and on behalf of the Underwriters) and the Company on the Price Determination Date to record and fix the Placing Price

• “Price Determination Date”

• the date on which the Placing Price is determined, which is expected to be on or around [REDACTED]

• “QAS”

• Quality Assurance System

• “Remuneration Committee”

• the remuneration committee of the Board

• “Reorganisation”

• the reorganisation of the Group in preparation for the Listing as described in the section headed “History, Reorganisation and Corporate Structure – Reorganisation” in this prospectus and the paragraph headed “Corporate Reorganisation” in Appendix V to this prospectus

• “SFC”

the Securities and Futures Commission of Hong Kong

• “Security and Guarding Services Industry Authority” or “SGSIA”

• the Security and Guarding Services Industry Authority

• （保安及護衞業管理委員會）established under the SGSO

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

	DEFINITIONS
“Security and Guarding Services	the Security and Guarding Services Ordinance (Chapter
Ordinance” or “SGSO”	460 of the Laws of Hong Kong), as amended,
	supplemented or otherwise modified from time to time
“Security Companies Inspection	the Security Companies Inspection Unit（保安公司監察
Unit”	小組）of the Crime Prevention Bureau of the Hong
	Kong Police Force of the Government of Hong Kong
“Security Company License” or	the license issued or renewed by SGSIA under the
“SCL”	SGSO
“Security Personnel Permit” or	the permit issued or renewed by the Commissioner of
“SPP”	Police (or any police officer acting under and in
	accordance with an authorisation conferred on him by
	such Commissioner of Police) under the SGSO
“SFO”	the Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong), as amended, supplemented or
	otherwise modified from time to time
“Share(s)”	ordinary share(s) in the share capital of the Company
	with a nominal value of HK$0.01 each
“Shareholder(s)”	holder(s) of the Share(s)
“Share Option Scheme”	the share option scheme conditionally approved and
	adopted by the Company, the principal terms of which
	are summarised in the section headed “Share Option
	Scheme” in Appendix V to this prospectus
“sq.ft.”	square feet
“sq.m.”	square meter
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiary(ies)”	a company which is for the time being and from time
	to time a subsidiary (within the meaning of the
	Companies Ordinance) of the Company
“substantial shareholder(s)”	has the meaning ascribed thereto under the GEM
	Listing Rules
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers, as
	amended, supplemented or otherwise modified from
	time to time

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

• DEFINITIONS

• “TC Capital” or “Sponsor” TC Capital Asia Limited, a licensed corporation for [REDACTED] carrying on type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, the sponsor, [REDACTED], and an Independent Third Party

• “Track Record Period” the period comprising the two financial years ended 31 March 2013 and 2014

• “Underwriters” the underwriters of the Placing whose names are set out in the paragraph headed “Underwriters” in the section headed “Underwriting” in this prospectus

• “Underwriting Agreement” the conditional underwriting agreement dated [�] 2014 entered into among the Company, the executive Directors, the Controlling Shareholders, the Sponsor, the Lead Manager and the Underwriters, particulars of which are summarised in the section headed “Underwriting” in this prospectus

• “United States” the United States of America “US$” United States dollars, the lawful currency of the United States

• “%” per cent.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

FORWARD-LOOKING STATEMENTS

This prospectus contains certain forward-looking statements that are based on the beliefs, intentions, expectations or predictions of the management of the Company for the future as well as assumptions made by and information currently available to the management of the Company as of the date of this prospectus. These forward-looking statements are, by their nature, subject to significant risks and uncertainties. These forward-looking statements include, without limitation, statements relating to:

• the Group’s operations and business prospects, plans and the Group’s ability to implement them;

• the Group’s future developments, trends and conditions in the industry;

• geographical market in which the Group operates;

• the Group’s strategies, plans, objectives and goals;

• changes to regulatory and operating conditions and environment in the industry and geographical market in which the Group operates;

• the Group’s ability to control costs;

• the Company’s dividend policy;

• scale and nature of, and potential for, future development of the Group’s business;

• certain statements in the section headed “Financial Information” in this prospectus with respect to trends in prices, volumes, operations, margins, overall market trends and risk management; and

• general economic trends and conditions.

When used in this prospectus, the words “anticipate”, “believe”, “could”, “estimate”, “expect”, “going forward”, “intend”, “may”, “ought to”, “plan”, “project”, “potential”, “seek”, “should”, “will”, “would” and similar expressions, as they relate to the Group or the management of the Group, are intended to identify forward-looking statements. These forward-looking statements reflect the views of the management of the Company as of the date of this prospectus with respect to future events and are not a guarantee of future performance or developments. You are strongly advised to caution that reliance on any forward-looking statements involves known and unknown risks and uncertainties. Actual results and events may differ materially from information contained in the forward-looking statements as a result of a number of factors, including:

• any changes in the laws, rules and regulations relating to any aspects of the Group’s business operations;

• general economic, market and business conditions, including capital market developments;

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

FORWARD-LOOKING STATEMENTS

• changes or volatility in interest rates, equity prices or other rates or prices;

• the actions and developments of the Group’s competitors and the effects of competition in the security guarding industry on the demand for, and price of, the Group’s services;

• various business opportunities that the Group may or may not pursue;

• persistency levels;

• the Group’s ability to identify, measure, monitor and control risks in the Group’s business, including the Company’s ability to manage and adapt the Group’s overall risk profile and risk management practices;

• the Group’s ability to properly price the Group’s services and establish reserves for future policy benefits;

• the Group’s ability to meet customer expectations and respond to changing customer preferences; and

• the risk factors discussed in this prospectus as well as other factors beyond the Company’s control.

Subject to the requirements of the applicable laws, rules (including the GEM Listing Rules) and regulations, the Group does not intend to update or otherwise revise the forward-looking statements in this prospectus, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus might not occur in the way the Group expects, or at all. Accordingly, you should not place undue reliance on any forward-looking information or statements. All forward-looking statements in this prospectus are qualified by reference to the cautionary statements set forth in this section. The Directors confirm that these forward-looking statements are made after due and careful consideration.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RISK FACTORS

Investors should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making any investment in the Placing Shares. If any of the possible events described below or any other risk factors or uncertainties that the Group is unaware of, occur or materialised, the business operation, financial condition, results of operation or prospects of the Group could be materially and adversely affected and the market price of the Shares could fall significantly and you may lose all or part of your investment.

There are certain risks involved in the operations of the Group, some of which are beyond the Group’s control. These risks can be broadly categorised into: (i) risks relating to the operation of the Group; (ii) risks relating to the Group’s industry; (iii) risks relating to the Placing; and (iv) risks relating to the statements made in this prospectus. Prospective investors in the Shares should consider carefully all the information set forth in this prospectus and, in particular, this section in connection with an investment with the Group.

RISKS RELATING TO THE OPERATION OF THE GROUP

The Group is required to obtain a license for the security guarding services provided and the Group focuses only on limited security guarding services and the Group relies entirely on the Hong Kong market

The Group is a manned security guarding services provider, and King Force Security, its principal operating company, is licensed to provide “Type I” security work (namely provision of security guarding services) in Hong Kong in accordance with its SCL. The Group is not licensed to carry out “Type II” security work (namely provision of armoured transportation services), or “Type III” security work (namely installation, maintenance and/or repairing of a security device and/or designing (for any particular premises or place) a security system incorporating a security device). In addition, all of the Group’s security guarding services are provided only in Hong Kong during the Track Record Period and the Group has no plan to provide security guarding services in other territories in near future.

In the event that the Group’s SCL to carry out “Type I” security work is revoked or not renewed nor granted, or if there are circumstances leading to sharp decrease in demand for “Type I” security work in Hong Kong, the Group’s operation and business performance may be adversely affected.

With the implementation of the Minimum Wage Ordinance, the Group may fail to transfer the rising labour costs to its customers or fail to retain the labour force in a cost effective way

The Group relies heavily on human resources for the provision of its security guarding services, and therefore a substantial proportion of the Group’s operating expenses are labour costs. Hong Kong introduced the minimum wage legislation under the Minimum Wage Ordinance which dictated a statutory minimum wage of HK$28 per hour with effect from 1 May 2011. On 1 May 2013, the statutory minimum wage has been revised to HK$30 per hour. Pursuant to the Minimum Wage Ordinance, the Minimum Wage Commission must report its recommendation about the amount of the statutory minimum wage at least once in every 2 years. The statutory minimum wage may be adjusted having regard to such

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RISK FACTORS

recommendation. For the two years ended 31 March 2013 and 2014, the total staff costs (including director’s remuneration) of the Group amounted to approximately HK$77.0 million and HK$90.0 million, respectively, representing approximately 85.0% and 81.1% of the Group’s revenue. The Directors anticipate that if the Group is unable to transfer future rising labour costs to its customers, its operating results and hence its profitability will be adversely affected.

In addition, the Group’s front-line staffs are security guards with SPP. As a result of the Minimum Wage Ordinance, it may be more difficult for the Group to retain employees such as security guards, due to other jobs available to staff with less qualification requirements. In such case, the Group may be forced to offer more competitive salary to its employees, or the quality of its services could be affected if no suitable and capable replacement is found in time.

The Group is exposed to risks related to litigious claims that may affect the Group’s operation and financial positions

Like all operators in the security services industry, the Group faces an inherent risk of litigious claims. In carrying out its ordinary course of business, the Group may be subject to the risk of being named as a party in regulatory or legal actions, claims and disputes in connection with its business activities. In addition, due to the job nature, the Group’s security guards may face danger or risks in providing security services to its customers and they may suffer personal injury or death as a result of accident or occupational diseases arising out of and in the course of their employment and they may be entitled to claim damages against the Group under the Employee’s Compensation Ordinance as well as the common law. Furthermore, the Group also faces claims from third parties from time to time, including those who suffer personal injuries at premises where the Group provides security services. Also, the Group may also be subject to adverse employee relationships and the employees may initiate employment-related claims and contractual dispute claims. These litigations, if initiated, may have adverse impact on the operation, financial positions and reputation of the Group.

The Group relies on key management personnel and its business operation may be adversely affected if the Group is unable to retain them without suitable replacement

The Group’s success, to a great extent, is largely attributable to the continued commitment, service and contribution of the Group’s Directors and senior management and the Group’s ability to retain and motivate the Directors and senior management. Their extensive knowledge, skill and experience in the provision of security guarding services, as well as their established relationships with the customers and their ability to develop new clientele have played an important role in the Group’s attainments. However, there can be no assurance that the Group will be able to retain the services of the Group’s Directors and senior management and if there is any material change in the senior management team, it may result in the loss of strategic leadership, disruption or delay to business operation, which should have a material adverse effect on the Group’s business, operations and financial condition.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RISK FACTORS

The Group may not have adequate insurance coverage and the Group is affected by increasing insurance costs and reduction of insurance coverage by its insurers

The Group has maintained insurance coverage for various risks in relation to its operations. However, the Group does not carry any insurance policies against certain risks, such as acts of terrorism. Furthermore, for risks currently covered, adequate insurance cover may not be available in the future on reasonable terms or may only be available at significantly higher premiums. Should any major claims in these regards be made on the Group which are not covered by adequate insurance, the Group’s business and financial performance may be materially and adversely affected. During the Track Record Period, the insurance costs of the Group have continued to increase and for each of two years ended 31 March 2013 and 2014, the aggregate expenses of the Group’s insurances were approximately HK$1.3 million and HK$1.6 million respectively. The Group cannot control if there are reduction or limitation of insurance coverage by insurers upon the expiry of its current policies. Any further increase in insurance costs (such as an increase in insurance premiums) or reduction in coverage may materially and adversely affect the Group’s business operations and financial results.

System disruptions to the Group’s I.T. systems could have an adverse effect on its business operations

The performance and reliability of the Group’s I.T. system is important to its business operation. The Group has relied on the computer system in human resources management and other administrative matters. However, the Group’s I.T. systems and operations could be vulnerable to interruption or malfunction due to events beyond the Group’s control, and the Directors provide no assurance that the Group will not incur any damage or interruption caused by power outages, computer viruses, hardware and software failures, telecommunications failures, fires and other similar events in the future. Any interruption to any of the Group’s I.T. system or operations could have an adverse effect on its business operations.

The Group’s I.T. systems may also be vulnerable to unauthorised access, computer hackers, computer viruses and other security problems. A user who circumvents security measures could misappropriate proprietary information or cause interruptions or malfunctions in operations. Any leakage or misappropriation of information from the Group’s system could have a material and adverse effect on its reputation and business operations. As a result, the Group may be required to expend significant resources to guard against the threat of these security breaches or to alleviate problems caused by these breaches.

Any outbreak of communicable disease in Hong Kong, including but not limited to severe acute respiratory syndrome, swine influenza, etc., could have a material and adverse effect on the Group’s business

Any outbreak of communicable disease in Hong Kong could have a material and adverse effect on the Group’s business. If any of the Group’s employees are affected by any communicable disease outbreaks, the Group may be required to temporarily shut down its offices and to prohibit its staff from going to work to circumvent the spread of the disease. Such closures could severely disrupt the Group’s business operations and materially

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RISK FACTORS

adversely affect its results of operations. In addition, any outbreak of communicable disease in Hong Kong could also adversely affect the Group’s clients’ business activities. Functions or promotional activities such as exhibitions, concerts, annual meetings and gatherings and press release functions of which security guards are required may be cancelled and places requiring security guarding services may be closed down resulting in decrease in demand in security guarding services and therefore, the Group’s business and also its financial conditions could be adversely affected.

Damage to the Group’s brand name or failure to protect its brand name may affect the attractiveness of its services

The Group’s business is sensitive to customers’ perception of the reliability and quality of its services. The Group operates under the name “KING FORCE” and as at the Latest Practicable Date, it has applied for one trademark in Hong Kong. However, if there is any misuse by third parties of its brand, if the Group is unable to detect, deter and prevent misbehaviour and misconduct by its employees or if it fails to effectively protect its brand and trademark, the Group’s reputation could be damaged and its business and financial performance may be materially and adversely affected.

There is no assurance that the Group’s future business plans will materialise, or result in the conclusion or execution of any agreement within the planned time frame

The Group’s future business plans are based on existing intention of the Directors and some of them are at conceptual or preliminary stages. These business plans and intention are based on assumption as to the occurrence of certain future events, which may or may not materialise, and the real situation might differ materially. Furthermore, the Group’s future business plans may be hindered by other factors beyond its control, such as competition from other security guarding services companies. Therefore, there is no assurance that the Group’s future business plans will materialise, or result in the conclusion or execution of any agreement within the planned time frame, or that the Group’s objectives will be fully or partially accomplished.

The Group cannot guarantee that the Group’s dividend policy will remain at the similar level declared and paid during the Track Record Period

In June 2014, an interim dividend of a total HK$7,000,000 was declared to Optimistic King and Gloria Power, the then shareholders of Million Joyce (which is a direct wholly-owned subsidiary of the Company). During the Track Record Period, the Company’s subsidiaries did not propose any dividend. The dividend payments were financed by cash generated from the Group’s operating profits. Potential investors should note that such prior distributions should not be considered as interpretation of the Group’s dividend policy. The Group may not be able to record profits or have sufficient funds in excess of its funding requirements, other obligations and business plans to declare dividends to the Shareholders.

The Group expects that future proposals on dividend distribution will be based on the Group’s profitability, financial condition, cash demand and cash flow and other relevant factors as assessed at the time dividends are considered.

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RISK FACTORS

If the customers terminate the services contracts with the Group prior to the expiry date, the Group’s revenue stream and profitability may be adversely affected

The Group has entered into services contracts with all its customers for security guarding services rendered. The term of these services contracts may last for a period of time, and a few of them are of longer duration up to 3 years. However, the customers may terminate the services contracts if the Group is in breach of the terms or conditions of the services contracts. In addition, customers may in general terminate the services contracts by serving 1 month’s written notice to the Group. If services contracts are terminated by the customers, whether by serving written notice or for the reason of breach or material breach of the terms or conditions thereunder, the Group’s revenue stream and profitability may be adversely affected.

If the Group fails to collect trade receivables from customers in a timely manner or at all, the Group’s working capital and cash flow may be adversely affected

The Group’s revenue is derived from provision of security guarding services payable by the Group’s customers. As such, the Group is subject to the credit risks of its customers.

A credit term of 7 to 30 days is generally granted in services contracts with customers. If there is a delay in payment by its customers, the Group will still need to remunerate its employees. Therefore, the Group’s working capital and cash flow may be adversely affected. Furthermore, there are no assurances that the Group will be able to collect all or any part of its trade receivables in a timely manner or at all. This will inevitably negatively affect the Group’s financial performance. During the year ended 31 March 2014, the Group has written off trade receivables of HK$95,200 directly to the profit or loss for the year.

RISKS RELATING TO THE GROUP’S INDUSTRY

The Group operates in a competitive industry and a high competitive market may put downward pricing pressures on the Group

According to the Ipsos Report, there is a large number of competitors in the security guarding service industry in Hong Kong with approximately 967 licensed security service providers by the end of 2013. Due to the large number of competitors, the Group faces significant downward pricing pressure thereby reducing its profit margins. Furthermore, if the Group does not provide a competitive bid as compared to its competitors, its services may not be attractive to customers and its profitability may be materially and adversely affected. The Group’s success depends on its ability to compete effectively against these competitors in terms of services the Group provides, pricing, ability to manage its employees, marketing, brand awareness and reputation. There is no assurance that the Group will continue to compete successfully in the future, and if fails to do so, the Group’s business and financial results would be adversely affected.

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RISK FACTORS

Changes in the social and economic landscape of Hong Kong may materially affect the Group’s business

All of the Group’s operations are based in and revenue is derived from Hong Kong. Currently the Group has no plans to expand into foreign markets. Any major changes to Hong Kong’s social and economic landscape will have a huge impact on the Group’s business.

If there were any material adverse changes in the social and economic conditions in Hong Kong including:

• change in local government policies, rules or regulations, which may lead to an increase in the Group’s operating costs; or

• a sudden downturn in the economy or customer demands which may lead to a decrease in the Group’s profit and materially affect the Group’s business and expansion strategy,

the Group’s operations, financial results and profitability may be adversely affected.

RISKS RELATING TO THE PLACING

An active trading market of the Shares may not develop

Prior to the Placing, there has been no public market for any of the Shares. The initial Placing Price range for the Placing Shares was the result of negotiations among the Company and the Lead Manager (for itself and on behalf of the Underwriters). The Placing Price may differ significantly from the market price for the Shares following the Placing. However, even if approved, being listed on GEM does not guarantee that an active trading market for the Shares will develop following the Placing or that the Shares will always be listed and traded on GEM. The Group cannot assure that an active trading market will develop or be maintained following completion of the Placing, or that the market price of the Shares will not fall below the Placing Price.

There has been no prior public market for the Shares, and the liquidity, market price and trading volume of the Shares may be volatile

Upon Listing, the trading volume and market price of the Shares may be affected or influenced by a number of factors from time to time, including but not limited to, the revenue, earnings and cash flows of the Group and announcements of new services and/or investments of the Group, strategic alliances and/or acquisitions, fluctuations in market prices for the Group’s services or fluctuations in market prices of comparable companies, changes of senior management of the Group, and general economic conditions. Any such developments may result in large and sudden changes in the volume and price at which the Shares will trade. There is no assurance that such developments will or will not occur and it is difficult to quantify the impact on the Group and on the trading volume and market price of the Shares. In addition, shares of other companies listed on GEM have experienced

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RISK FACTORS

substantial price volatility in the past. It is likely that from time to time, the Shares will be subject to changes in price that may not be directly related to the Group’s financial or business performance.

Purchasers of the Placing Shares will experience an immediate dilution and may experience further dilution if the Company issues additional Shares or other securities in the future

Based on the Placing Price range, the Placing Price is expected to be higher than the net tangible asset value per Share immediately prior to the Placing. Therefore, the purchasers of the Placing Shares will experience an immediate dilution in unaudited pro forma net tangible asset value to approximately HK$[REDACTED] per Share and approximately HK$[REDACTED] per Share based on the Placing Price of HK$[REDACTED] per Placing Share and HK$[REDACTED] per Placing Share respectively. Additional funds may be required in the future to finance the expansion or new developments of the business and operations of the Group or new acquisitions. If additional funds are raised through the issuance of new equity or equity-linked securities of the Company other than on a pro rata basis to existing Shareholders, the percentage ownership of the Shareholders in the Company may be diluted or such new securities may confer rights and privileges that take priority over those conferred by the Placing Shares.

Future sales by existing Shareholders of a substantial number of the Shares in the public market could materially and adversely affect the prevailing market price of the Shares

The Shares held by Optimistic King, a Controlling Shareholder, are subject to lock-up beginning on the date on which trading in the Shares commences on GEM. Please refer to the section headed “Underwriting” in this prospectus for further details of such lock-up and restrictions. There is no assurance that the Controlling Shareholders will not dispose of the Shares held by them after these restrictions lapse. The Group cannot predict the effect, if any, of any future sales of the Shares by any substantial Shareholder or Controlling Shareholder, or the availability of Shares for sale by any substantial Shareholder or Controlling Shareholder may have on the market price of the Shares. Sales of a substantial amount of Shares by any substantial Shareholder or Controlling Shareholder or the issuance of a substantial amount of new Shares by the Company, or the market perception that such sales or issuance may occur, could materially and adversely affect the prevailing market price of the Shares.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RISK FACTORS

Any options granted under the Share Option Scheme may dilute the Shareholders’ equity interests

The Company has conditionally adopted the Share Option Scheme. As at the Latest Practicable Date, no option had been granted to subscribe for Shares under the Share Option Scheme. Following any issue of new Shares upon exercise of any options which may be granted under the Share Option Scheme, there will be an increase in the number of issued Shares. As such, there may be a dilution or reduction of shareholding of the Shareholders which results in a dilution or reduction of the earnings per Share or net asset value per Share. In addition, the fair value of the options to be granted to the eligible participants under the Share Option Scheme will be charged to the consolidated comprehensive income statement of the Group over the vesting periods of the options. The fair value of the options shall be determined on the date of granting of the options. Accordingly, the financial results and profitability of the Group may be adversely affected.

The laws of the Cayman Islands relating to the protection of the interests of minority shareholders may differ from those in Hong Kong

The corporate affairs are governed by the Memorandum and the Articles and by the Companies Law and common law of the Cayman Islands. The laws of the Cayman Islands relating to the protection of the interests of minority shareholders may differ in some respects from those established under statutes or judicial precedent in existence in Hong Kong. This may mean that the remedies available to the Company’s minority shareholders may be different from those they would have under the laws of other jurisdictions. A summary of the Cayman Islands company law is set out in Appendix IV to this prospectus.

RISKS RELATING TO THE STATEMENTS MADE IN THIS PROSPECTUS

Statistics and facts in this prospectus have not been independently verified

This prospectus includes certain statistics and facts that have been extracted from Government official sources and publications or other sources. The Company believes the sources of these statistics and facts are appropriate for such statistics and facts and has taken reasonable care in extracting and reproducing such statistics and facts. The Company has no reason to believe that such statistics and facts are false or misleading or that any fact has been omitted that would render such statistics and facts false or misleading. These statistics and facts from these sources have not been independently verified by the Company, the Sponsor, the Lead Manager, the Bookrunner, the Underwriters, any of their respective directors or any other parties involved in the Placing and therefore, the Company makes no representation as to the accuracy or completeness of these statistics and facts, as such these statistics and facts should not be unduly relied upon.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RISK FACTORS

Forward-looking statements contained in this prospectus may prove inaccurate and therefore investors should not place undue reliance on such information

This prospectus contains certain forward-looking statements relating to the plans, objectives, expectations and intentions of the Directors and the Group. Such forward-looking statements are based on numerous assumptions as to the present and future business strategies of the Group and the development of the environment in which the Group operates. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual financial results, performance or achievements of the Group to be materially different from the anticipated financial results, performance or achievements of the Group expressed or implied by these statements. The actual financial results, performance or achievements of the Group may differ materially from those discussed in this prospectus.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

[REDACTED]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

[REDACTED]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

[REDACTED]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

[REDACTED]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

DIRECTORS AND PARTIES INVOLVED IN THE PLACING

DIRECTORS
Name	Residential address	Nationality
Executive Directors
Mr. Fu Yik Lung（傅奕龍）	Flat C, 42/F	Chinese
(Chairman)	Block 3, Tierra Verde
	33 Tsing King Road
	Tsing Yi
	New Territories
	Hong Kong
Ms. Liu Lai Ying（廖麗瑩）	Flat C, 42/F	Chinese
(Chief Executive Officer)	Block 3, Tierra Verde
	33 Tsing King Road
	Tsing Yi
	New Territories
	Hong Kong
Ms. Chung Pui Yee Shirley（鍾佩儀）	Flat B, 14/F	Chinese
	Tower 3
	Ma On Shan Centre
	Ma On Shan
	New Territories
	Hong Kong
Independent non-executive Directors
Mr. Law Yiu Sing（羅耀昇）	Flat C, 6th Floor	Canadian
	Marlborough House
	154 Tai Hang Road
	Tai Hang
	Hong Kong
Professor Lam Sing Kwong Simon	Flat 5A, Block 2	Chinese
（林誠光）	Pine Court
	23 Sha Wan Drive
	Pok Fu Lam
	Hong Kong
Mr. Ong Chi King（王子敬）	Flat D, 8/F	Chinese
	Yee Hoi Mansion
	Tower 11
	Lei King Wan
	Sai Wan Ho
	Hong Kong

Please also refer to the section headed “Directors and Senior Management” for further details of the Directors.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

DIRECTORS AND PARTIES INVOLVED IN THE PLACING

PARTIES INVOLVED IN THE PLACING

Sponsor TC Capital Asia Limited Suite 1904, 19th Floor Tower 6, The Gateway Harbour City 9 Canton Road Kowloon Hong Kong (A licensed corporation carrying on type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO) Bookrunner and Lead Manager [REDACTED] Underwriters [REDACTED] Legal advisers to the Company as to Hong Kong law: Loong & Yeung Suites 2001-2005, 20th Floor Jardine House 1 Connaught Place Central Hong Kong (Solicitors of Hong Kong SAR)

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

DIRECTORS AND PARTIES INVOLVED IN THE PLACING

	as to Cayman Islands law:
	Appleby
	2206-19 Jardine House
	1 Connaught Place
	Central
	Hong Kong
	(Cayman Islands attorneys-at-law)
Legal advisers to the Sponsor	as to Hong Kong law:
[REDACTED]	[REDACTED]
Auditor and reporting	BDO Limited
accountant	Certified Public Accountants
	25th Floor, Wing On Centre
	111 Connaught Road Central
	Hong Kong
Property valuer	Ascent Partners Valuation Service Limited
	Suite 2102, 21st Floor
	Hong Kong Trade Centre
	161-167 Des Voeux Road Central
	Hong Kong
	(Property valuer)
Compliance adviser	TC Capital Asia Limited
	Suite 1904, 19th Floor
	Tower 6, The Gateway
	Harbour City
	9 Canton Road
	Kowloon
	Hong Kong
	(A licensed corporation carrying on type 1
	(dealing in securities) and type 6
	(advising on corporate finance)
	regulated activities under the SFO)

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

CORPORATE INFORMATION

Registered office in the Cayman	Clifton House
Islands	75 Fort Street
	P.O. Box 1350
	Grand Cayman
	KY1-1108
	Cayman Islands
Headquarter	18th Floor
	So Tao Centre
	Nos. 11-15 Kwai Sau Road
	Kwai Chung
	New Territories
	Hong Kong
Principal place of business in	Suites 2001-2005, 20th Floor
Hong Kong registered under	Jardine House
Part 16 of the Companies	1 Connaught Place
Ordinance	Central
	Hong Kong
Company’s website	www.kingforce.com.hk (information contained in this
	website does not form part of this prospectus)
Company secretary	Ms. So Hau Kit（蘇巧潔）, ACIS, ACS
	Suites 2001-2005, 20th Floor
	Jardine House
	1 Connaught Place
	Central
	Hong Kong
Compliance officer	Mr. Fu Yik Lung
	Flat C, 42/F
	Block 3, Tierra Verde
	33 Tsing King Road
	Tsing Yi
	New Territories
	Hong Kong
Audit committee	Mr. Law Yiu Sing (Chairman)
	Professor Lam Sing Kwong Simon
	Mr. Ong Chi King
Remuneration committee	Mr. Ong Chi King (Chairman)
	Mr. Fu Yik Lung
	Mr. Law Yiu Sing
	Professor Lam Sing Kwong Simon

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

CORPORATE INFORMATION

Nomination committee Mr. Fu Yik Lung (Chairman) Mr. Law Yiu Sing Professor Lam Sing Kwong Simon Mr. Ong Chi King Authorised representatives Mr. Fu Yik Lung Flat C, 42/F Block 3, Tierra Verde 33 Tsing King Road Tsing Yi New Territories Hong Kong Ms. Liu Lai Ying Flat C, 42/F Block 3, Tierra Verde 33 Tsing King Road Tsing Yi New Territories Hong Kong Principal share registrar and [REDACTED] transfer office in the Cayman Islands Branch share registrar and [REDACTED] transfer office in Hong Kong

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CORPORATE INFORMATION

Principal bankers

DBS Bank (Hong Kong) Limited Kwai Chung Branch Ground Floor 1001 Kwai Chung Road Kwai Chung New Territories Hong Kong Standard Chartered Bank Kwai Chung Branch Unit A, Ground Floor Effort Industrial Building 2-8 Kung Yip Street Kwai Chung New Territories Hong Kong

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

INDUSTRY OVERVIEW

This section contains certain information which is derived from official government publications and industry sources as well as a commissioned report from Ipsos, an Independent Third Party. The information extracted from the Ipsos Report reflects estimates of market conditions based on samples, and is prepared primarily as a market research tool. References to Ipsos should not be considered as the opinion of Ipsos as to the value of any security or the advisability of investing in the Group. The Directors believe that the sources of information extracted from the Ipsos Report are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. The Directors have no reason to believe that such information is false or misleading or that any material fact has been omitted that would render such information false or misleading. The information extracted from the Ipsos Report has not been independent verified by the Group, or any of its affiliates or advisers, nor by the Sponsor, the Bookrunner or the Lead Manager or any of their affiliates or advisers or any other party involved in the Placing and no representation is given as to its accuracy.

THE IPSOS REPORT

The Group has commissioned Ipsos, an independent market research company, to analyse and report on, among other things, the trends of the security guarding service industry, in Hong Kong at a fee of HK$288,000 and the Directors consider that such fee reflects market rates. To provide the above analysis, Ipsos combined the following data and intelligence gathering methodology: (a) performing client consultation to facilitate the research including in-house background information of the client such as the business of the Group; (b) conducting desk research to gather background information and to obtain the relevant information and statistics on the industry; and (c) conducting in-depth interviews including face to face, phone interviews with key stakeholders and industry experts of security guarding service related players in Hong Kong. The information and statistics as set forth in this section have been extracted from the Ipsos Report. Ipsos is wholly-owned by Ipsos SA. Founded in Paris, France, in 1975 and publicly-listed on the NYSE Euronext Paris in 1999, Ipsos SA acquired Synovate Limited in October 2011 and then became the third largest research company in the world which employs approximately 16,000 personnel worldwide across 85 countries. Ipsos SA conducts research on market profiles, market size, share and segmentation analyses, distribution and value analyses, competitor tracking and corporate intelligence.

SECURITY GUARDING SERVICE INDUSTRY IN HONG KONG

Overview

Security guarding service industry has a long history in Hong Kong starting from the early 20th century with the Watchmen Ordinance to provide for the registration and regulation of watchmen in 1956. In 1995, the Security and Guarding Services Industry Authority (SGSIA) was established under the Security and Guarding Services Ordinance (SGSO) to administer a licensing scheme to regulate the security industry. As the public awareness in personal safety, property and privacy protection in daily living and working condition rises, the security service providers expanded their scale within the regulatory framework and continue to develop.

According to the SGSO, security work means the following activities: guarding any property, guarding any person or place for the purpose of preventing or detecting the occurrence of any offence, installing, maintaining or repairing a security device and designing for any particular premises or place a system incorporating a security device.

All companies supplying individuals to do security work for another person for reward must hold a valid Security Company Licence (SCL). Any person other than a company acting under and in accordance with a valid SCL who supplies, agrees to supply, or holds himself out as supplying any individual to do security work for another person for reward commits an offence under the SGSO. Application for SCL is made to the statutory body assigned under the Security Bureau known as the SGSIA.

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INDUSTRY OVERVIEW

It is against the law in Hong Kong for any individual to do security work for another person unless he is in accordance with a permit and not doing it for reward. The Commissioner of Police is in charge of issuing the SPP to persons that is fit and proper to do security work.

Revenue of security guarding service industry in Hong Kong

The following chart sets forth the total revenue of security guarding service industry in Hong Kong from 2009 to 2013 and the projected figures from 2014 to 2018:

==> picture [332 x 172] intentionally omitted <==

----- Start of picture text -----

18,000 16,659.1
15,283.6
16,000
13,290.1
14,000
12,081.9
10,983.6
12,000
9,895.1
HK$ 10,000 8,220.7 [8,884.9 ]
million 8,000 6,677.1 [6,978.8 ]
6,000
4,000
2,000
0
2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F
Total revenue
----- End of picture text -----

Source: Ipsos Report

The total revenue of security service industry in Hong Kong increased from about HK$6,677.1 million in 2009 to about HK$9,895.1 million in 2013, representing a CAGR of about 10.3%. The revenue grew because the demand for the security services and the increase in the operation costs, such as the constant increase in the average wages of security service workers in Hong Kong. The total revenue of security service industry in Hong Kong is expected to increase from about HK$10,983.6 million in 2014 to about HK$16,659.1 million in 2018 at a CAGR of about 11.0%.

In terms of the 2013-14 policy address, the Government is looking into diversifying tourism areas to Kai Tak Development Area and the possibility of building new leisure tourism facilities on Lantau Island. These new developments are expected to create the opportunities for the demand for security services to increase. The total number of hotels and tourist guesthouses in Hong Kong is expected to increase from about 1,175 buildings in 2014 to about 1,519 buildings in 2018 at a CAGR of about 6.6%, which will fuel additional demand for security guarding services to grow from 2014 to 2018.

In 2013, Type I licensed security service providers formed the majority of the security service industry and claimed about 71.6% of the total industry revenue. The following chart sets forth the revenue of security service industry by license types in Hong Kong from 2009 to 2013 and the projected figures from 2014 to 2018:

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INDUSTRY OVERVIEW

	Type I	Type I	Type II	Type II	**Type **	III	Total	Total
		Percentage		Percentage		Percentage		Percentage
Year	Value	to total	Value	to total	Value	to total	Value	to total
	(HK$		(HK$		(HK$		(HK$
	million)	(%)	million)	(%)	million)	(%)	million)	(%)
2009	4,940.4	74.0%	171.0	2.6%	1,565.7	23.4%	6,677.1	100.0%
2010	5,157.3	73.9%	178.0	2.6%	1,643.5	23.5%	6,978.8	100.0%
2011	6,025.8	73.3%	195.4	2.4%	2,001.7	24.3%	8,220.7	100.0%
2012	6,441.6	72.5%	200.0	2.3%	2,243.4	25.2%	8,884.9	100.0%
2013	7,084.9	71.6%	193.0	2.0%	2,617.2	26.4%	9,895.1	100.0%
2014F	7,813.4	71.1%	219.7	2.0%	2,950.5	26.9%	10,983.6	100.0%
2015F	8,602.3	71.2%	229.6	1.9%	3,250.0	26.9%	12,081.9	100.0%
2016F	9,449.3	71.1%	225.9	1.7%	3,614.9	27.2%	13,290.1	100.0%
2017F	10,853.1	71.0%	229.3	1.5%	4,201.2	27.5%	15,283.6	100.0%
2018F	11,794.6	70.8%	216.6	1.3%	4,647.9	27.9%	16,659.1	100.0%

Source: Ipsos Report

Number of licensed security companies in Hong Kong

According to the Ipsos Report, there were about 967 licensed security service providers in Hong Kong by the end of 2013. Among these licensed security service providers, 558, 13, and 454 of them hold Type I, Type II and Type III SCL, respectively. About 55 of these licensed security service providers operated with multiple service scopes.

==> picture [256 x 155] intentionally omitted <==

----- Start of picture text -----

1,200
1,000 884 905 933 953 967
800
411 425 441 448 454
Companies 600 12 12 13 13 13
400
516 523 535 549 558
200
0
2009 2010 2011 2012 2013
Number of Type I security service providers
Number of Type II security service providers
Number of Type III security service providers
Total number of security service providers
----- End of picture text -----

Source: Ipsos Report

The total number of security service providers increased at a CAGR of about 2.3% from 884 companies in 2009 to 967 companies in 2013. The total number of security service providers for Type I rose at a CAGR of about 2.0% from 516 companies in 2009 to 558 companies in 2013. The total number of security services providers for Type II increased at a CAGR of about 2.0% from 12 companies in 2009 to 13 companies in 2013. In addition, the total number of security services providers for Type III increased at a CAGR of about 2.5% from 411 companies in 2009 to 454 companies in 2013.

The total number of security service providers increased gradually because the growth in demand of security services from the increases in the total numbers of buildings and all possible privately-owned or public-owned places, such as public venues, facilities and shopping malls in Hong Kong.

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INDUSTRY OVERVIEW

Number of workers in security guarding service industry in Hong Kong

The security guarding service industry in Hong Kong is fragmented and is characterised by a large number of companies. As set out in the above section, there were 967 security companies licensed under SGSO by the end of 2013. The chart below shows the total number of workers in security guarding service industry in Hong Kong from 2009 to 2013:

==> picture [344 x 146] intentionally omitted <==

----- Start of picture text -----

160,000 147,400
133,500 135,700 139,500 142,200
140,000
120,000
100,000
Persons 80,000
60,000
40,000
20,000
0
2009 2010 2011 2012 2013
Number of workers
----- End of picture text -----

Source: Ipsos Report

The total of number of workers in security guarding service industry in Hong Kong grew from about 133,500 persons in 2009 to about 147,400 persons in 2013 at a CAGR of about 2.5%. Among which, Type I licensed security service providers grew from about 98,782 persons in 2009 to about 108,978 persons in 2013, while Types I and III combined licensed security service providers grew from about 15,561 persons in 2009 to about 17,656 persons in 2013. As at 2013, Type I licensed security service providers and Type I and III combined licensed security service providers accounted for 85.9% of the total number of workers. Of the Type I licensed security service providers, about 40.1% worked under 3-shifts rotation scheme, 52.9% worked under 2-shifts rotation scheme and the remaining 7.0% worked on an irregular basis.

GROWTH OF THE SECURITY GUARDING SERVICE INDUSTRY IN HONG KONG

The development of the security guarding service industry is related to the expansion of real estate activities. Generally the numbers of residential, office buildings, hotel, tourist guesthouses, shopping malls, parks, recreation venues, schools, universities, and public venues would be able to provide hints on the growth potential of the industry.

(i) Residential and office buildings (including Government offices)

The following chart sets forth the number of residential and office buildings (including Government offices) from 2009 to 2013 and the projected figures from 2014 to 2018:

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----- Start of picture text -----

8,000
7,000 5,992 6,039 6,090 6,140 6,284 6,323 6,469 6,615 6,761 6,907
6,000
5,000
Unit 4,000
3,000
1,832 1,837 1,847 1,860 1,876 1,879 1,888 1,898 1,909 1,919
2,000
1,000
0
2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F
Number of residential buildings
Number of office buildings (including Government offices)
----- End of picture text -----

Source: Ipsos Report

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INDUSTRY OVERVIEW

The total number of residential buildings and office buildings (including government offices) in Hong Kong increased from about 5,992 units and 1,832 units in 2009 to about 6,284 units and 1,876 units in 2013, implying a CAGR of about 1.2% and 0.6%, respectively. The total number of residential and office buildings in Hong Kong increased steadily and supported the demand and ongoing development of the security guarding service industry. The total number of residential buildings and office buildings (including government offices) in Hong Kong is expected to increase from about 6,323 units and 1,879 units in 2014 to about 6,907 units and 1,919 units in 2018, respectively.

According to Public Consultation on Long Term Housing Strategy done by the Hong Kong government in September 2013, private housing supply is targeted to increase from about 13,550 units in 2013 to about 20,000 units in 2016. Furthermore, as set out in the 2013-14 Policy Address, the Hong Kong government will continue to adopt a multi-pronged approach, such as developing Kowloon East and Kai Tak Development Area, to increase the supply of residential and commercial land to facilitate the further development of different economic activities in Hong Kong. Such future increase in residential housing and commercial properties supply shall lead to an increase in the demand for multiple categories of security services.

(ii) Hotel and tourist guesthouses

The following chart sets forth the number of hotel and tourist guesthouses from 2009 to 2013 and the projected figures from 2014 to 2018:

==> picture [403 x 168] intentionally omitted <==

----- Start of picture text -----

1,600 1,473 1,519
1,385
1,400 1,303
1,175 1,180 1,220
1,200 1,043 1,035 1,100
929
1,000 920
758 794 836 818
Unit 800 718
591 619 646
600
400 167 175 190 211 225 255 268 285 293 299
200
0
2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F
Number of hotel buildings
Number of tourist guesthouses
Total number of hotels and tourist guesthouses
----- End of picture text -----

Source: Ipsos Report

The total number of hotels and tourist guesthouses in Hong Kong grew from about 758 in 2009 to about 1,043 in 2013, at a CAGR of about 8.3%. The growth in the total number of hotels and tourist guesthouses in Hong Kong is supported by the increase in number of tourists with the majority as inbound mainland Chinese of about 40.7 million visitors in 2013, accounting for about 75.0% of total arrivals. In order to cater for the high volume of visitors with limited supply of hotels and tourist guesthouses, residential and industrial buildings were redeveloped or converted for commercial uses such as licensed tourist guesthouses.

The total number of hotels and tourist guesthouses in Hong Kong is expected to increase from about 1,175 in 2014 to about 1,519 in 2018 at a CAGR of about 6.6%. The total occupancy rate of hotels in 2013 was about 89.0%, such high demand shall encourage real estate investors and developers to capture the market opportunity and further support the supply of hotel and tourist guesthouses in 2014 to 2018. There are already a number of sites designated for hotel construction in different parts of Hong Kong.

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INDUSTRY OVERVIEW

(iii) Shopping malls and centres

The following chart sets forth the number and space of shopping malls and centres from 2009 to 2013 and the projected figures from 2014 to 2018:

==> picture [383 x 158] intentionally omitted <==

----- Start of picture text -----

500 10,660 10,740 10,790 10,900 10,933 11,033 11,103 11,166 11,237 11,306 12,000
400 340 350 350 350 351 357 360 363 367 370 10,000
8,000
300
Unit 6,000 GFA
200 in thousand
4,000 square
metres
100
2,000
0 0
2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F
Number of shopping malls and centres
GFA of shopping mall and centre space
----- End of picture text -----

Source: Ipsos Report

The total number of shopping malls and centres in Hong Kong increased from about 340 in 2009 to about 351 in 2013, at a CAGR of about 0.8% from 2009 to 2013. The number of inbound mainland Chinese tourists of about 40.7 million in 2013, grew at a rate of about 16.7% from 2012. The inflow of tourists led to an increase in the redevelopment of existing shopping malls to expand retail space from about 10,900 thousand sq.m. in 2012 to about 10,933 thousand sq.m. in 2013. Due to limited land supply, there will be relatively flat growth in the number of new shopping malls and centres in Hong Kong. The total number of shopping malls and centres in Hong Kong is projected to expand to about 357 in 2014 to 370 in 2018, at a CAGR of about 0.9% from 2014 to 2018.

According to 2013-14 Policy Address, the Hong Kong government is looking into diversifying tourism areas to Kai Tak Development Area and the possibility of building leisure tourism facilities on the Lantau Island would lead to the construction of new shopping facilities. After completion of additional shopping malls and centres, security services will also be needed for these new shopping malls and centres, such as the security guarding services and monitoring of visitors.

(iv) Public venues and facilities

The following chart sets forth the number of parks and recreation venues from 2009 to 2013:

==> picture [365 x 129] intentionally omitted <==

----- Start of picture text -----

6,000
4,847 4,873 4,879 4,868 4,871
5,000
4,000
Unit 3,000
2,000
1,000
0
2009 2010 2011 2012 2013
----- End of picture text -----

Number of parks and recreation venues, schools, universities and public venues that demand for security guarding services

Source: Ipsos Report

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INDUSTRY OVERVIEW

The number of parks, recreation venues, schools, universities and public venues that demand for security services in Hong Kong increased from about 4,847 units in 2009 to about 4,871 units in 2013, at a CAGR of about 0.1%. The major increase was driven by the growth in the number of museums, sports centers, parks and gardens. According to the Census and Statistics Department, the number of parks and gardens increased from about 1,514 units in 2009 to about 1,552 units in 2013 at a CAGR of about 0.6%. For instance, the Kai Tak Cruise Terminal started its operation in 2013 and created demand for additional security services such as building security, traffic and crowd control when various cruises ships park at the terminal.

One of the future drivers for the increase of the public facilities is the reconstruction of Kwun Tong swimming pool and playground complex, Yuen Long library and sports complex to be finished by end of 2014 and construction of the West Kowloon Cultural District and Kai Tak Development Area. The Kai Tak Development Area includes a mix of community housing, business, tourism and infrastructural uses, which demand for additional security services is expected.

IMPLEMENTATION OF STATUTORY MINIMUM WAGE

In 2011, the minimum wage legislation under the Minimum Wage Ordinance came into force which dictated a statutory minimum wage rate of HK$28.0 per hour. With effect from 2013, the statutory minimum wage rate was revised to HK$30.0 per hour. Compensation packages offering rates below the statutory level were required to be adjusted in order to comply with the said ordinance. For a labour-intensive industry like security services, the said ordinance is likely to put pressure on the profitability of security service companies.

The following chart illustrates the average monthly wages of workers in security service industry in Hong Kong from 2009 to 2013:

==> picture [287 x 132] intentionally omitted <==

----- Start of picture text -----

12,000
9,790
9,112
10,000 8,594
7,294 7,500
8,000
HK$
per month 6,000
4,000
2,000
0
2009 2010 2011 2012 2013
Average monthly wage
----- End of picture text -----

Source: Ipsos Report

The average monthly wage of workers in security guarding service industry in Hong Kong grew from about HK$7,294 in 2009 to about HK$9,790 in 2013 at a CAGR of 7.6%. The increase is mainly caused by the statutory minimum wage implemented since 2011. The increase in wage has increased operational costs of most security services providers and a part of such increment may be transferred to the service users. The Minimum Wage Committee will recommend that the statutory minimum wage rate be revised to about HK$32.0 per hour to the Chief Executive in the 4th quarter of 2014 and decision is to be made in mid 2015.

MARKET GROWTH DRIVERS OF SECURITY GUARDING SERVICE INDUSTRY IN HONG KONG

Ongoing development and hosting of exhibitions, trade fairs and events in Hong Kong will drive the development of security guarding service and personnel protection services

Hong Kong continues to be the destination for trade fairs and international exhibitions, concerts and performances with about 1,743 individual events held in 2013. These events were labor intensive with a focus in security guarding and control, such as authorised access

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INDUSTRY OVERVIEW

security measures, crowd and traffic control and anti-theft control that would require local expertise in security services.

Increase in supply of residential properties and hotel properties will drive increase in demand for multiple variety of security services

The Government has implemented plans to increase the supply of residential properties and hotels. In 2014 to 2015, there will be about 43 hotels to be completed and about 34 residential sites capable of providing about 15,500 private residential flats. These would provide more business opportunities for the security guarding service industry in security guarding, security consultation, training of security personnel, installation and application of security systems such as CCTV and alarms.

COMPETITIVE LANDSCAPE

The security guarding service industry in Hong Kong is fragmented with the division according to license categories.

Among the 967 licensed security service providers in Hong Kong, the top 5 security service providers accounted for about 32.4% of the total industry revenue in 2013, while the rest of the service providers in the market took up the remaining of the market share. This reflects that market of security service industry in Hong Kong is fragmented because of the large number of licensed security service provider accounting for large portion of the market. 4 out of the top 5 security service providers obtain licenses of type I and 1 out of the top 5 security service providers obtain licenses of type I and III.

The top 5 security service providers in Hong Kong stood out largely due to their scale of establishment, industrial recognition in Hong Kong. Their abilities to meet the requirements and standards of existing contracts with the government or real estate developers of both commercial and residential properties.

Top 5 security service providers in Hong Kong

				Share of
				Total
		Headquarters	Revenue in	industry			Type of
**Rank **	Name of company	location	2013	revenue	**Key **	service range	license
		(HK$ million)		(%)
1	Company A	Denmark	865.3	8.7	•	Provision of security guarding services	Types I &
					•	Installation, maintenance and/or	III
						repairing of a security device and/or
						designing (for any particular premises
						or place) a security system
						incorporating a security device
					•	Provision of property management
						services
2	Company B	Hong Kong	830.5	8.4	•	Provision of security guarding services	Type I
					•	Provision of property management
						services
3	Company C	USA	599.4	6.1	•	Provision of security guarding services	Type I
					•	Provision of property management
						services
4	Company D	United	477.3	4.8	•	Provision of security guarding services	Type I
		Kingdom			•	Provision of property management
						services
5	Company E	United	436.4	4.4	•	Provision of security guarding services	Type I
		Kingdom			•	Provision of property management
						services
Others			6,686.2	67.6%
Total			9,895.1	100.0%

Source: Ipsos Report

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INDUSTRY OVERVIEW

Entry barriers of security service industry in Hong Kong

Increasing operational costs pressure resulted from increasing wages of the workers

The security service industry is labour-intensive, and wage expense plays an important factor on influencing the profitability of the business. The statutory minimum wage, which is now implemented at HK$30.0 per hour, has been effective since 1 May 2013, and it is expected to further increase operational costs pressure and raise the barrier of entry for new entrants.

Necessary qualification requirement poses entry barriers of security guarding service industry

The qualifications and required trainings to work in Type I and Type II security service provider keep certain entry barrier for the security service industry, for example, the training costs involved, the hiring and maintenance of a team of professionals would impose challenges at the setting up stage of security service providers.

Track record and relevant experiences pose entry barriers of security service industry

The track record and relevant experiences of the security service providers in Type I and Type II work keep certain entry barrier, for example, the potential clients are likely to search for security service providers with relevant experiences in each category of services. Thus, this would pose entry barriers for new entrants with little or no experience.

Factors of competition of security guarding service industry in Hong Kong

Scale of Establishment

The security service providers with larger number of on-site contracts and number of employees can enjoy economies of scale. Large-scale security services provider tends to have strong capital assets to grow its presence and would be more likely to secure larger contracts from sizable organisations or governments. Those with more access to manpower and capital assets will have a better chance to seize business opportunities.

Competitive Pricing

Due to the large number of licensed security service providers, the ones providing similar type and scope of security guarding services or security system implementation services with lower price usually win the contract in the private sector. To remain at a competitive pricing, security service providers also face increased pressure to reduce cost by optimising manpower and other resources. Effective cost control is essential to maintain competitive pricing.

Qualification and track record of the management and staff

The qualification, good track record and relevant experiences of the service providers are convincing factors to winning security services contracts, for instance, recently constructed residential and commercial buildings would prefer to employ a team of qualified management, younger and well-trained security guarding staff to station at their properties.

OPPORTUNITY AND THREATS OF SECURITY GUARDING SERVICE INDUSTRY IN HONG KONG

Opportunity

Increasing establishments of owner’s corporations of residential buildings

The increasing number of owners’ corporations for residential buildings and estates opened up business opportunities for Type I and Type III licensed security service providers. Most security services were assigned to the real estate developers’ subsidiaries, but the increasing number of owners’ corporations creates more opportunities for both Type I and Type III licensed security service providers to approach representatives of owners’ corporations to promote their service offerings with appropriate pricing.

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INDUSTRY OVERVIEW

Growth opportunities in China

Security service providers in Hong Kong can expand to China to capture the growth opportunities. In 2013, the current security service providers in China reached more than 3,700. There are about 450 million workers in this industry, with a growth rate of nearly 20%. As the management and the service standard of the security services in Hong Kong are perceived as of higher quality and well-structured, the economic growth in China, together with the increasing demand for security services will bring opportunities to security service providers in Hong Kong.

Threats

Limited supply of young, skilled and qualified labour for security service workers

Statistics from the Security and Guarding Services Industry Authority showed that as at March 2014 there were about 291,078 permits granted for security personnel, and out of which about 38.3% of these workers are aged over 55 and about 23.1% fall within the age range of 41-50. There is a need for recruitment of younger professionals to takeover the physically demanding duties and responsibilities. However, the long hours and the need to be on overnight shifts deterred the younger generation from working in security guarding service industry, the group at age 21-30 only consisted of about 12.1% of the security personnel permits. The shortage of younger and experienced labor may pose a threat to the growth of security service industry in Hong Kong.

Popular usage of electronic surveillance and automatic car park security systems

The popular use of electronic surveillance and automatic car park security systems in commercial and residential buildings may reduce the demand for security guarding service in person such as patrolling efforts and registration tasks at the entrances and exits of car parks. Therefore, the advancement and the increase use of electronic surveillance may pose a threat on the demand for security service workers.

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REGULATORY OVERVIEW

This section summarises certain aspects of the principal laws and regulations of Hong Kong which are relevant to the Group’s business and operations. As this is a summary, it does not contain the detailed analysis of the Hong Kong laws which are relevant to the Group’s business and operations.

SECURITY INDUSTRY

Established on 1 June 1995 under the SGSO, SGSIA administers a licensing scheme to regulate the security industry in Hong Kong. The main functions of SGSIA, among others, as set out in the SGSO are summarised as follows:

• (a) to consider and determine applications made to SGSIA under the SGSO; and

• (b) to specify:

• (i) the criteria that must be satisfied by a person before the Commissioner of Police (or any police officer acting under and in accordance with an authorisation conferred on him by such Commissioner of Police) (the “ Commissioner ”) may issue a SPP to him;

• (ii) the conditions subject to which a SPP is to be issued;

• (iii) the matters to which SGSIA shall have regard when determining an application for a SCL;

• (iv) the criteria that must be satisfied before the Commissioner may grant a person an exemption from the SGSO; and

• (v) the matters to which SGSIA shall have regard when determining whether SGSIA should specify any, and if so what, period for the purpose of investigation in relation to application for a SCL (or for a variation of conditions of SCL).

SGSIA administers a licensing scheme to regulate the security industry in Hong Kong. In particular, companies offering security services and individuals providing security work are regulated under a license regime (i.e. for SCL, the “ SCL Regime ”) and a permit regime (i.e. for SPP, the “ SPP Regime ”), respectively, under the SGSO.

SCL Regime

Under section 11 of the SGSO, no person other than a company acting under and in accordance with a SCL issued by SGSIA in accordance with the SGSO shall supply, agree to supply, or hold itself out as supplying any individual to do security work for another person for reward.

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REGULATORY OVERVIEW

Pursuant to section 12 of the SGSO, no person shall authorise or require another person to do any type of security work for him unless the other person:

• (a) is a holder of a SPP that is valid for that type of work, a holder of SCL, or an individual supplied by a holder of SCL; or

• (b) is authorised or required to do the work otherwise than for reward.

Application for a SCL shall be made to SGSIA. Under the SGSO, only body corporate incorporated under the Companies Ordinance, incorporated under the Predecessor Companies Ordinance, or incorporated by any other ordinance of the laws of Hong Kong may apply for a SCL.

Under the SCL Regime, the following are the three types of security work in which a company holding a SCL may perform:

Type I security work Provision of security guarding services Type II security work Provision of armoured transportation services Type III security work Installation, maintenance and/or repairing of a security device and/or designing (for any particular premises or place) a security system incorporating a security device

Matters to which SGSIA shall have regard in considering an application for SCL for Type I security work

Pursuant to section 21 of the SGSO, SGSIA shall only issue a SCL if it is satisfy that:

• (a) the applicant is a fit and proper person to supply individuals to do security work of the type proposed;

• (b) any person who is a controller of the applicant is a fit and proper person to be a controller of a company that supplies individuals to do security work of the type proposed;

• (c) the security equipment and methods used or proposed to be used by the applicant are adequate; and

• (d) the applicant’s proposed method of supervising the individuals it supplies to do security work is suitable.

The following are, among others, matters which SGSIA will have regard when determining an application for a SCL for Type I security work:

• (a) the applicant must be a company registered in Hong Kong;

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REGULATORY OVERVIEW

• (b) the applicant should have a sound financial background and be able to furnish an appropriate financial reference from a Hong Kong bank or similar institutions;

• (c) the controller(s), the directors and executives are of good character, having regard to his criminal record and other relevant factors;

• (d) the applicant is appropriately insured for the extent of its business subject to a minimum of HK$10 million per incident for public liability. Insurance should also include employee compensation;

• (e) the applicant should have a place of business, the size, layout, and facilities of which is commensurate with its scale and nature of operations;

• (f) the applicant, if required by nature of its work, should have a control room of adequate size which meets SGSIA’s requirements;

• (g) the applicant, when monitoring remote alarms off site, should have a CAMS which meets SGSIA’s requirements;

• (h) the armoury should, if required, in all respects, fully comply with the requirements as laid down in the Firearms and Ammunition Ordinance (Chapter 238 of the Laws of Hong Kong);

• (i) all personnel engaged in security work must have a valid permit;

• (j) the applicant must carry out its own employment vetting, which includes, where possible, employment history, reference check or other acceptable modes of character check and residential address check;

• (k) the applicant must have a nominated training officer responsible for the training of all operational staff;

• (l) all training must be held in a suitable training facility;

• (m) all employees, before performing operational duties, must undergo and pass an initial basic training course of not less than 16 hours (except when he produces a valid certificate issued to him in respect of a training course accepted by SGSIA within 5 years);

• (n) all employees deployed to operate a CAMS must undergo and pass relevant training in addition to that prescribed under item (m) above before performing related operational duties;

• (o) results of these courses must be recorded in the employee personnel files;

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REGULATORY OVERVIEW

• (p) the applicant must maintain 2 full copies of assignment instructions for each duty post (one in management records and one at the duty area), which should cover, among others, name of the employer, address of the duty area, telephone procedures, action in emergencies, fire precautions and crime prevention;

• (q) the applicant must supervise all patrols on a shift basis through a minimum of one visit per week by supervisor from an off-site location if teleprotection is available, and one visit per shift if otherwise;

• (r) occurrence books must be maintained at every duty post;

• (s) all incidents must be recorded and investigated;

• (t) confidential documents no longer required must be shredded before being discarded; and

• (u) the applicant should have contingency plans for fire and other disasters.

Conditions for Issuing a SCL

The issuance of SCL will be subject to the following conditions (together with any such conditions SGSIA may impose):

The licensee must:

• (a) display its SCL in a prominent position inside its principal place of business;

• (b) only supply individuals to perform the type of security work as specified in its SCL;

• (c) enter its name and the period of employment on the SPP of security personnel under its employ;

• (d) notify the Commissioner in writing of:

• (i) any criminal proceedings against the controller(s), directors and executives, and all SPP holders of the company within 14 days after the licensee has become aware of the institution of such proceedings;

• (ii) the name of the persons whom it employs to do security work and the date on which the employment commenced within 14 days after the commencement of the employment; and

• (iii) the name of the persons whom it ceases to employ to do security work and the date on which the employment ceased within 14 days after the cessation of the employment (items (ii) and (iii) are collectively referred to as the “Notification Requirements”);

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REGULATORY OVERVIEW

(e) not act contrary to the requirements of its work as a security company.

A SCL is not assignable or transmissible, and is valid for five years (or such shorter period as SGSIA may specify, and subject to payment of prescribed fee). An application for renewal of a SCL shall be made to SGSIA within 3 to 6 months before the SCL is due to expire.

Penalties

Under section 31(1) of the SGSO, any person who operates a company which supplies, agrees to supply, or holds itself out as supplying any individual to do security work for another person for reward without a valid SCL commits an offence and is liable on conviction to a fine of HK$100,000 and to imprisonment for 2 years.

Pursuant to section 31(2) of the SGSO, any person who fails to notify the Commissioner of the Notification Requirements (together with the relevant date of commencement/cessation giving rise to such Notification Requirements) commits an offence and is liable on conviction to a fine of HK$10,000 and to imprisonment for 3 months.

SPP Regime

Under section 10 of the SGSO, no individual shall do, agree to do, or hold himself out as doing or as available to do, security work for another person unless he does so (i) under and in accordance with a SPP issued by the Commissioner in accordance with the SGSO; or (ii) otherwise than for reward.

As set out above, pursuant to section 12 of the SGSO, no person shall authorise or require another person to do any type of security work for him unless the other person, among others, is a holder of a SPP that is valid for that type of work, a holder of SCL, or an individual supplied by a holder of SCL.

Application for a SPP shall be made to the Commissioner. Under the SGSO, SPP shall not be issued to a body of persons, whether corporate or unincorporated.

Under the current SPP Regime, the following are the four categories of security work in which a person holding a SPP may perform:

Category A Guarding work restricted to a “single private residential building”, the performance of which does not require the carrying of arms and ammunitions Note: A “single private residential building” means an independent structure (i) covered by a roof and enclosed by walls extending from the foundation to the roof; (ii) used substantially for private residential purpose; and (iii) with only one main access point. Category B Guarding work in respect of any persons, premises or properties, the performance of which does not require the carrying of arms and ammunition and which does not fall within Category A

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REGULATORY OVERVIEW

Category C Guarding work, the performance of which requires the carrying of arms and ammunitions

Category D Installation, maintenance and/or repairing of a security device and/or designing (for any particular premises or place) a system incorporating a security device

Criteria for Issuing a SPP

A SPP applicant has to satisfy the Commissioner that he is a fit and proper person to do a type of security work pursuant to section 14(5) of the SGSO.

Set out below are major criteria in relation to a Category A and Category B of security work, which must be satisfied by a person before the Commissioner may issue to him a SPP under the SGSO to do that type of security work:

• (A) Guarding work in respect of Category A

• (a) Age

• (i) The applicant must be 18 years of age or above on the date of application.

• (ii) If the applicant or SPP holder is 65 years of age or above, he must produce a medical certificate issued by a registered medical practitioner to certify that he is fit to undertake the duties required every 2 years.

• (b) Fitness

• The applicant must be physically fit to perform the job. A medical certificate issued by a registered medical practitioner may be required if the Commissioner reasonably considers necessary.

• (c) Good Character

• The applicant must be of good character having regard to his employment history, criminal records and other relevant factors.

• (d) Proficiency in Security Work

• The applicant must satisfy one of the followings:

• (i) He must have sat and passed a trade test recognised by SGSIA and announced in a manner that it thinks fit, within 1 year before submitting his application; or

• (ii) He must have not less than 3 years of cumulative working experience in performing security work lawfully in Hong Kong over the past 5 years immediately before submitting his application; or

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REGULATORY OVERVIEW

  - (iii) He must have not less than 1 year of cumulative working experience in performing security work lawfully in Hong Kong over the past 2 years immediately before submitting his application; or

  - (iv) He must have sat and passed a course-end examination, within 1 year before submitting his application, of a security training course that has met the requirements of a scheme for quality assurance that has been endorsed by SGSIA and announced in a manner that it thinks fit.

• (B) Guarding work in respect of Category B

• (a) Age

• The applicant must be 18 years of age or above. The upper age limit for engaging in this type of security work is 65.

• (b) Fitness The applicant must be physically fit to perform the job. A medical certificate issued by a registered medical practitioner may be required if the Commissioner reasonably considers necessary.

• (c) Good Character

• The applicant must be of good character having regard to his employment history, criminal records and other relevant factors.

• (d) Proficiency in Security Work

• The applicant must satisfy one of the followings:

• (i) He must have sat and passed a trade test recognised by SGSIA and announced in a manner that it thinks fit, within 1 year before submitting his application; or

• (ii) He must have not less than 3 years of cumulative working experience in performing security work lawfully in Hong Kong over the past 5 years immediately before submitting his application; or

• (iii) He must have not less than 1 year of cumulative working experience in performing security work lawfully in Hong Kong over the past 2 years immediately before submitting his application; or

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REGULATORY OVERVIEW

• (iv) He must have sat and passed a course-end examination, within 1 year before submitting his application, of a security training course that has met the requirements of a scheme for quality assurance that has been endorsed by SGSIA and announced in a manner that it thinks fit.

Conditions for Issuing a SPP

The issuance of a SPP is subject to the following conditions (together with any such conditions the Commissioner may impose).

The SPP holder must:

• (a) carry his SPP at all times when he is on duty;

• (b) produce his SPP for inspection on demand by any police officer;

• (c) notify the Commissioner in writing of:

• (i) any change of employer, unless he is employed by a licensed security company; and

• (ii) any institution of criminal proceedings against him,

within 14 days after the relevant event has occurred;

• (d) only perform the type of security work as specified in his SPP;

• (e) not work over 372 hours per month and not normally work over 12 hours per day; and

• (f) not act contrary to the requirements of his duties as a security personnel or remiss in the execution of his duties.

A SPP is not assignable or transmissible, and is valid for a period of 5 years (or such shorter period as the Commissioner may specify). Holder of a SPP should apply to the Commissioner for renewal not earlier than 6 months and not later than 3 months before his SPP is due to expire.

Penalties

Under section 31(2) of the SGSO, any person who do, agree to do, or hold himself out as doing or as available to do, security work for another person for reward without a valid SPP commits an offence and is liable on conviction to a fine of HK$10,000 and to imprisonment for 3 months.

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REGULATORY OVERVIEW

As disclosed in the section headed “Risk Factors – Risks Relating to the Operation of the Group” in this prospectus, King Force Security, a principal operating company of the Group, is a holder of SCL licensed to carry out Type I security work. In the event such SCL is revoked or not renewed or granted, the Group’s operation and business performance may be adversely affected.

MINIMUM WAGE ORDINANCE (CHAPTER 608 OF THE LAWS OF HONG KONG)

The Minimum Wage Ordinance establishes a statutory minimum wage regime to provide for a minimum wage at an hourly rate for employees employed under a contract of employment under the Employment Ordinance (Chapter 57 of the Laws of Hong Kong), save for stipulated exceptions.

Statutory minimum wage becomes effective on 1 May 2011 and with effect from 1 May 2013, the minimum wage rate is currently set at HK$30 per hour.

The Minimum Wage Commission must report on any recommended changes in statutory minimum wage at least once in every 2 years to the Chief Executive in Hong Kong, and the Chief Executive may adjust the statutory minimum wage having regard to such recommendation.

As disclosed in the section headed “Risk Factors – Risks Relating to the Operation of the Group” in this prospectus, the Group relies heavily on human resources for the provision of its security guarding services, and therefore a substantial proportion of the Group’s operating expenses are labour costs and the Group is susceptible to the changes in the statutory minimum wage. The Directors anticipate that if the Group is unable to transfer future rising labour costs resulting from any increase in the statutory minimum wage to its customers, its operating results and hence its profitability will be adversely affected.

MANDATORY PROVIDENT FUND SCHEMES ORDINANCE (CHAPTER 485 OF THE LAWS OF HONG KONG)

Employers are required to enroll their regular employees (except for certain exempt persons) aged between at least 18 but under 65 years of age and employed for 60 days or more in a MPF scheme within the first 60 days of employment.

For both employees and employers, it is mandatory to make regular contributions into an MPF scheme. For an employee, subject to the maximum and minimum levels of income (HK$25,000 and HK$7,100 per month respectively before 1 June 2014 or HK$30,000 and HK$7,100 per month respectively on or after 1 June 2014), an employer will deduct 5% of the relevant income on behalf of an employee as mandatory contributions to a registered MPF scheme with a ceiling of HK$1,250 before 1 June 2014 or HK$1,500 on or after 1 June 2014. Employer will also be required to contribute an amount equivalent to 5% of an employee’s relevant income to the MPF scheme, subject only to the maximum level of income (HK$25,000 per month before 1 June 2014 or HK$30,000 on or after 1 June 2014).

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REGULATORY OVERVIEW

OCCUPATIONAL SAFETY AND HEALTH ORDINANCE (CHAPTER 509 OF THE LAWS OF HONG KONG)

The Occupational Safety and Health Ordinance provides for the safety and health protection of employee at work. Among others, employer must, as far as reasonably practicable, ensure the safety and health at work of all its employees by:

• (a) providing and maintaining plant and work systems that are, so far as reasonably practicable, safe and without risks to health;

• (b) making arrangement for ensuring, so far as reasonably practicable, safety and absence of risks to health in connection with the use, handling, storage or transport of plant or substances;

• (c) providing all necessary information, instruction, training and supervision to employees as may be necessary to ensure, so far as reasonably practicable, safety and health;

• (d) providing and maintaining the workplace, and safe access to and egress from the workplace that are, so far as reasonably practicable, safe and without risks to health; and

• (e) providing and maintaining work environment that is, so far as reasonably practicable, safe and without risks to health.

EMPLOYEES’ COMPENSATION ORDINANCE (CHAPTER 282 OF THE LAWS OF HONG KONG)

The Employees’ Compensation Ordinance provides for payment of compensation to employees who are injured in the course of employment.

• (a) An employer is liable to pay compensation in respect of personal injuries sustained by his employees by accident arising out of and in the course of employment; or in respect of total or partial incapacity or death of employee results from occupational diseases and is due to the nature of any employment in which the employee was employed at any time within the prescribed period immediately preceding such incapacity or death.

• (b) The Employees’ Compensation Ordinance in general applies to all full-time and part-time employees who are employed under a contract of service or apprenticeship in any employment.

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HISTORY, REORGANISATION AND CORPORATE STRUCTURE

GENERAL

The Company was incorporated in the Cayman Islands on 2 January 2014 and, as part of the Reorganisation, became the holding company of the Group with its business being conducted through the Group’s principal operating subsidiary, King Force Security, which is principally engaged in the provision of security guarding services under Type I security work in accordance with the SCL Regime in Hong Kong.

The founding of the Group can be traced back to 2005 when Mr. Fu acquired 50% shareholding in King Force Security. From 2006 to 2007, Mr. Fu acquired the remaining 50% shareholding in King Force Security. Mr. Fu had been an employee working in the security guarding services industry since 2000. In 2005, Mr. Fu was invited by the former shareholders of King Force Security to invest in King Force Security as the former shareholders wished to retire. Mr. Fu, being confident in the prospects of the market, decided to cooperate with his friend, Ms. Choi Ming Fung Alison (“ Ms. Choi ”) and invested in King Force Security with his own savings accumulated from his previous employments.

IMPORTANT BUSINESS MILESTONES

The following illustrates certain key milestones and achievements in the business development of the Group:

Year	Event
2005	Mr. Fu acquired 50% of the issued share capital of King Force Security
2007	Mr. Fu became interested in the entire issued share capital of King Force
	Security
2008	King Force Security was accredited with ISO 9001: 2008 quality
	management system standard for its design and provision of security
	guarding service awarded by the Hong Kong Quality Assurance Agency
2008	King Force Security was first awarded with the Caring Company Award
	by The Hong Kong Council of Social Service
2008	King Force Security received an award of “Heart to heart company”
	from The Hongkong Federation of Youth Groups
2009	King Force Security acquired its first premises at So Tao Centre, Hong
	Kong
2012	King Force Security moved to its current premises with total gross floor
	area of approximately 4,132 sq.ft.

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HISTORY, REORGANISATION AND CORPORATE STRUCTURE

THE CORPORATE HISTORY

The Group has a number of direct and indirect subsidiaries incorporated in the BVI and Hong Kong. Details of the members of the Group and their respective corporate history are set out below.

THE COMPANY

The Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on 2 January 2014 with an authorised share capital of HK$380,000 divided into 38,000,000 Shares of HK$0.01 each. The Company is an investment holding company.

THE SUBSIDIARIES

King Force Security

King Force Security was incorporated in Hong Kong with limited liability on 28 February 2003 with an issued share capital of HK$10,000. King Force Security has been engaged in the provision of security guarding services since its incorporation. Upon the incorporation, King Force Security was held as to 51% and 49% by Mr. Lo Ka Fai and Ms. Lee Lai Ngor, respectively.

As advised by Mr. Fu, Mr. Lo Ka Fai was his former co-worker at a security guarding company and to the best knowledge, information and belief of Mr. Fu, Ms. Lee Lai Ngor is the spouse of Mr. Lo Ka Fai. Save as being the former shareholders and directors of King Force Security, each of Mr. Lo Ka Fai and Ms. Lee Lai Ngor are Independent Third Parties.

On 30 June 2005, Mr. Lo Ka Fai transferred his 50% and 1% shareholdings in King Force Security to Ms. Choi and Mr. Fu at a consideration of HK$5,000 and HK$100, respectively. On the same day, Ms. Lee Lai Ngor transferred her 49% shareholding in King Force Security to Mr. Fu at a consideration of HK$4,900. The considerations were arrived at after arm’s length negotiations between the parties, taking into account the loss-making status of King Force Security at the relevant time and the nominal value of the shares of King Force Security. As confirmed by Mr. Fu, the aforesaid share transfers have been completed and the considerations were settled by Ms. Choi and Mr. Fu, respectively, by way of cash on 30 June 2005. The shareholding structure of King Force Security after the aforesaid transfers was as follows:

Name of shareholders Mr. Fu Ms. Choi Total	Shareholding % 50% 50%
	100%

Save as being a former shareholder and director of King Force Security, Ms. Choi is an Independent Third Party.

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HISTORY, REORGANISATION AND CORPORATE STRUCTURE

On 23 June 2006, each of Mr. Fu and Ms. Choi transferred his/her 5% shareholding in King Force Security to Ms. Nighat Shaheen (a friend of Mr. Fu) (“ Ms. Shaheen ”) at a nominal consideration of HK$500 and HK$500, respectively. As advised by Mr. Fu, the considerations were arrived at after arm’s length negotiations between the parties and taking into account the broad human network and connections among Pakistani working as security guards in Hong Kong which Ms. Shaheen and her family had, and the benefits expected to be brought by Ms. Shaheen to King Force Security, in particular, making use of Ms. Shaheen’s network to recruit and manage Pakistani security guards for King Force Security. As confirmed by Mr. Fu, the aforesaid share transfers have been completed and Ms. Shaheen settled the considerations by way of cash on 23 June 2006. The shareholding structure of King Force Security after the aforesaid transfers was as follows:

Name of shareholders Mr. Fu Ms. Choi Ms. Shaheen Total	Shareholding % 45% 45% 10%
	100%

Save as being a former shareholder of King Force Security, Ms. Shaheen is an Independent Third Party.

Since Ms. Choi had not actively participated in the management of King Force Security and wished to realise her investment, on 12 October 2006, Ms. Choi transferred all her 45% shareholding in King Force Security to Mr. Fu at a consideration of HK$140,000, which was arrived at after arm’s length negotiations between the parties and taking into account, among others, the net asset value of King Force Security at the relevant time. As confirmed by Mr. Fu, the aforesaid share transfer has been completed and the consideration was settled by him by way of cash on 12 October 2006. The shareholding structure of King Force Security after the aforesaid transfer was as follows:

Name of shareholders Mr. Fu Ms. Shaheen Total	Shareholding % 90% 10%
	100%

As Ms. Shaheen believed that her contribution to King Force Security was not as significant as expected, on 27 February 2007, Ms. Shaheen transferred all her 10% shareholding in King Force Security to Mr. Fu at a nominal consideration of HK$1,000. The consideration was arrived at after arm’s length negotiations between the parties and based on the original cost of investment of Ms. Shaheen. As confirmed by Mr. Fu, the aforesaid share transfer has been completed and the consideration was settled by him by way of cash on 27 February 2007. King Force Security became wholly-owned by Mr. Fu after the aforesaid transfer.

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HISTORY, REORGANISATION AND CORPORATE STRUCTURE

As part of the Reorganisation, on 14 November 2013, Million Joyce (indirectly wholly-owned by Mr. Fu through Optimistic King at the relevant time) acquired from Mr. Fu the entire issued share capital in King Force Security at a nominal consideration of HK$10,000. The aforesaid share transfer has been completed and the consideration was settled by Million Joyce by way of cash on 14 November 2013. Following completion of the aforesaid share transfer, King Force Security became a direct wholly-owned subsidiary of Million Joyce.

Million Joyce

Million Joyce was incorporated in the BVI with limited liability on 8 August 2013 and is authorised to issue a maximum of 50,000 shares of one class with a par value of US$1 each. On 26 September 2013, one share of Million Joyce (representing the entire issued share capital of Million Joyce at the relevant time) was allotted and issued to Mr. Fu at a consideration of US$1 (equivalent to the par value in respect of such share).

As part of the Reorganisation, on 13 November 2013, Mr. Fu transferred the entire issued share capital of Million Joyce at a nominal consideration of US$1 (equivalent to the par value in respect of such share at the relevant time) to Optimistic King an investment holding company wholly-owned by Mr. Fu.

Million Joyce is an investment holding company and it did not and had not carried on any substantive business activities during the Track Record Period and up to the Latest Practicable Date.

King Force Service

King Force Service was incorporated in Hong Kong with limited liability on 4 October 2013 with an issued share capital of HK$1. King Force Service is wholly-owned by Million Joyce since its establishment.

King Force Service is an investment holding company and it did not and had not carried on any substantive business activities during the Track Record Period and up to the Latest Practicable Date. It will be used for administrative purpose.

INTRODUCTION OF STRATEGIC INVESTOR

On 15 November 2013, Optimistic King (wholly-owned by Mr. Fu) (as vendor), Gloria Power (wholly-owned by Mr. Chiu) (as purchaser), Mr. Fu (as warrantor of Optimistic King) and Mr. Chiu (as guarantor of Gloria Power) entered into a sale and purchase agreement (the “ Investment Agreement ”), pursuant to which Gloria Power agreed to acquire 250 shares of Million Joyce, representing 25% of the issued share capital of Million Joyce from Optimistic King, at a consideration of HK$7,000,000.

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HISTORY, REORGANISATION AND CORPORATE STRUCTURE

A summary of key particulars of the Pre-IPO Investment is set out below:

Name of investor:	Gloria Power Limited （榮力有限公司）,	Gloria Power Limited （榮力有限公司）,	Gloria Power Limited （榮力有限公司）,	an
	investment holding	company wholly-owned		by
	Mr. Chiu which	has no substantive business
	activities as at the	Latest Practicable Date other
	than the Pre-IPO Investment
Date of the Investment	15 November 2013
Agreement:
Number of shares of Million	250 shares (representing 25% of		the issued share
Joyce acquired:	capital of Million Joyce at the relevant time)
Amount of consideration paid:	HK$7,000,000, which, as advised by Mr. Chiu,
	was funded by	Mr. Chiu’s	own resources
	accumulated from	his other	business	and
	investment in the past
Date of payment of the	14 November 2013
consideration:
Investment cost per Share	[REDACTED]
(Note 1):
Percentage of shareholding upon	[REDACTED]	Shares,	representing
Listing (Note 2):	[REDACTED]% of	the issued share capital of		the
	Company upon Listing

Notes:

1. For illustration purposes only. Based on the indicative Placing Price range, representing a discount of approximately [REDACTED]% to HK$[REDACTED] per Share, being the lower end of the stated Placing Price range, and a discount of approximately [REDACTED]% to HK$[REDACTED] per Share, being the upper end of the stated Placing Price range.

2. Assuming completion of the Placing (without taking into account any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme).

The said consideration was arrived at after arm’s length negotiations between Optimistic King and Gloria Power with reference to the unaudited consolidated net assets value of Million Joyce at the relevant time of approximately HK$19.5 million and the prospect of Million Joyce and its subsidiaries.

Mr. Chiu, who is principally engaged in the insurance business, has been providing insurance brokerage and consultancy services to King Force Security since 2006. As advised by Mr. Chiu, learning about King Force Security and its business through provision of insurance services, he, through his wholly-owned company Gloria Power, invested in the Group due to his confidence in the business prospects of the security guarding services industry in Hong Kong and in the management and potentials of the Group. The Directors believe that the Pre-IPO Investment would strengthen the shareholder base of the Group and

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HISTORY, REORGANISATION AND CORPORATE STRUCTURE

enhance the corporate governance practices of the Group. Please also refer to the section headed “Connected Transaction” in this prospectus for more information of insurance services provided to the Group by Mr. Chiu and/or his associates. Save as aforesaid and the Pre-IPO Investment (and thus its shareholding interests in the Company), each of Gloria Power and Mr. Chiu is not otherwise connected with (as defined in the GEM Listing Rules) the Group or any of its connected persons (including the Controlling Shareholders).

The Pre-IPO Investment was completed on 15 November 2013. As a result of the completion of the Pre-IPO Investment, the shareholding structure of Million Joyce (which held the entire issued share capital of King Force Security and King Force Service at the time of such completion) was as follows:

Name of shareholders Optimistic King (wholly-owned by Mr. Fu) Gloria Power (wholly-owned by Mr. Chiu) Total	Shareholding % 75% 25%
	100%

Following completion of the Reorganisation and immediately before completion of the Placing, Gloria Power became interested in 25% of the issued share capital of the Company. Upon Listing, Gloria Power would be interested in [REDACTED]% of the issued share capital of the Company. Considering Gloria Power will become a substantial Shareholder upon Listing, its shareholding in the Company will not be counted as part of the “public float” for the purpose of Rule 11.23 of the GEM Listing Rules.

Gloria Power and Mr. Chiu are not involved in the management and daily operation of the Group.

Pursuant to the Investment Agreement, Gloria Power does not enjoy any special right in connection with the Pre-IPO Investment, and Gloria Power undertakes to hold all the Shares issued to it pursuant to the Reorganisation for a period of twelve months commencing from the completion date of the Investment Agreement (i.e. 15 November 2013) or the Listing Date (whichever is earlier).

The Sponsor is of the view that the Pre-IPO Investment is in compliance with the Guidance Letters HKEx-GL29-12, HKEx-GL43-12 and HKEx-GL44-12 in respect of guidance on pre-IPO investments issued by the Stock Exchange, as the Pre-IPO Investment has been completed at least 28 clear days before the date of the Company’s first submission of the listing application.

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HISTORY, REORGANISATION AND CORPORATE STRUCTURE

REORGANISATION

The Company completed the Reorganisation on [�] 2014 in preparation for the Listing, pursuant to which the Company became the ultimate holding company of the Group. Details of the Reorganisation are set out in the paragraph headed “Corporate Reorganisation” in Appendix V to this prospectus.

As advised by the Directors, the change of shareholdings in King Force Security under the Reorganisation would not require any approval or permit from any relevant government authorities in Hong Kong.

THE CORPORATE STRUCTURE OF THE GROUP

As part of the Reorganisation, a number of share transfers had been effected and pursuant to which the Company became the holding company of the Group. Set out below the corporate structure of the Group immediately before the Reorganisation:

==> picture [125 x 170] intentionally omitted <==

----- Start of picture text -----

Mr. Fu
100%
King Force Security
(incorporated in Hong Kong)
(Note 3)
----- End of picture text -----

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HISTORY, REORGANISATION AND CORPORATE STRUCTURE

The following diagram sets out the corporate structure of the Group immediately after completion of the Reorganisation but before completion of the Placing:

==> picture [360 x 436] intentionally omitted <==

----- Start of picture text -----

Mr. Fu Mr. Chiu
100% 100%
Optimistic King Gloria Power
(incorporated in the BVI) (incorporated in the BVI)
75% 25%
The Company
(incorporated in the
Cayman Islands)
100%
Million Joyce
(incorporated in the BVI)
(Note 1)
100% 100%
King Force Service King Force Security
(incorporated in (incorporated in
Hong Kong) Hong Kong)
(Note 2) (Note 3)
----- End of picture text -----

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HISTORY, REORGANISATION AND CORPORATE STRUCTURE

The following diagram sets out the corporate structure of the Group immediately after completion of the Placing (without taking into account any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme):

==> picture [358 x 365] intentionally omitted <==

----- Start of picture text -----

Mr. Fu Mr. Chiu
100% 100%
Optimistic King Gloria Power
(incorporated in (incorporated in Public
the BVI) the BVI)
[REDACTED]% [REDACTED]% [REDACTED]%
The Company
(incorporated in the Cayman
Islands)
100%
Million Joyce
(incorporated in the BVI)
(Note 1)
100% 100%
King Force Service King Force Security
(incorporated in (incorporated in
Hong Kong) Hong Kong)
(Note 2) (Note 3)
----- End of picture text -----

Notes:

1. Million Joyce is an investment holding company, it has no substantive business activities as at the Latest Practicable Date.

2. King Force Service will be used for administrative purpose, it has no substantive business activities as at the Latest Practicable Date.

3. King Force Security is engaged in the provision of security guarding services under Type I security work in accordance with its SCL in Hong Kong.

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BUSINESS

OVERVIEW

The Group is a manned security guarding services provider and it is licensed to provide security guarding services in Hong Kong under Type I security work in accordance with the SCL Regime. The Group operates under the name “KING FORCE” and the services it offers aim to protect the safety and assets of its customers, and to prevent crime and offence and maintain order. The security guarding services offered by the Group include, patrolling, access control at the lobby entrance, making entrance records of visitors and stopping trespassers, handling complaints, settling and reporting disputes. The Group also provides guarding and personal escorting services in various events, occasions, exhibitions, ceremonies and press conferences and crowd management services. With over nine years experience in manned security guarding services, the Group has established goodwill in its security guarding services. The Group is dedicated to providing quality manned security guarding services and it is accredited with ISO 9001:2008 (quality management system standard) for its design and provision of security guarding services awarded by the Hong Kong Quality Assurance Agency. To ensure quality of services, the Group provides guidance and trainings to its security guards and conducts supervision on its security guards. With continued effort, the Group has established a broad customer base. During the two years ended 31 March 2013 and 2014, the Group had 352 and 366 customers, respectively. The Group’s customers during the Track Record Period include property management companies, schools, warehouse operators, property redevelopers, and construction companies. The Group has, as at the Latest Practicable Date, over 1,000 full-time and part-time qualified security guards trained to provide quality manned security guarding services to its customers.

For the two years ended 31 March 2013 and 2014, the Group’s revenue was approximately HK$90.6 million and HK$111.1 million, respectively. The profit and total comprehensive income during the Track Record Period was approximately HK$9.0 million and HK$8.4 million, respectively.

BUSINESS STRATEGIES AND EXPANSION PLANS

The Group intends to achieve expansion in business and maintain its competitiveness in the security guarding services industry in Hong Kong by pursuing the following strategies and plans:

Recruiting and expanding the security guarding and patrol team

As the security service industry is labour-intensive, the Group plans to strengthen and expand its security guarding and patrol team to expand its business in the industry. As at the Latest Practicable Date, the Group has a total 1,061 guards, including part-time and full-time. The Group plans to recruit approximately an additional 25 security guards and 2 patrol officers to increase the security service capacity of the Group.

Total expenditure is estimated at about HK$9.5 million for the aforesaid recruitment of new security guards and patrol officers. The Group plans to spend such expenditure by stages up to 31 March 2017. The Group plans to finance such expenditure by the net proceeds from the Placing.

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BUSINESS

Strengthening staff recruitment and training

The Group is committed to enhancing the knowledge and skills of its employees. As security services can be diversified and different assignment may have different requirements in terms of skills and manpower, and under certain circumstances, customers may have additional requests on various aspects, such as privacy, image and timing, the Group is committed to use its best endeavour to satisfy its customers’ needs and requests on the manned security guarding services to be provided. The Group has provided and shall continue to provide on-the-job trainings to its employees in relation to security guard skills, supervisory skills, work place safety, operational skills, customer service and quality control in different aspects of the operations based on their job duties to improve their practical skills. Briefing are given to the security guards before duty and special requests of customers are cautioned. The Group is planning to establish a new staff recruitment and training centre to enhance its operational competitiveness and its capacity to cater for new business opportunities with a view to strengthening the training of its guards, increasing the frequency of training provided and enhancing the facilities of its training centre. It is the Group’s plan to recruit 2 additional operation managers and 2 trainers which are mainly responsible for supervising and training its guards. The Group also plans to invest more resources in job advertisements, participation in employment fairs, recruitment websites and referrals from outside training centre to facilitate the recruitment of staff.

Total expenditure is estimated at about HK$11.3 million for the aforesaid strengthening of staff recruitment and training. The Group plans to spend such expenditure by stages up to 31 March 2017. The Group plans to finance such expenditure by the net proceeds from the Placing.

Expanding the sales and marketing department and uplifting marketing effect

With the aim to developing new clientele and to building up the confidence of existing clients, and to enhance public awareness of the Group’s name “KING FORCE”, the Group plans to strengthen its marketing efforts in promoting its reputation and corporate image. The marketing activities of the Group shall aim to enhance its reputation in providing quality security guarding services. In order to achieve such objective, the Group plans to promote its services through various marketing activities, including the launching of promotion campaigns, distribution of brochures to target customers, and improving the existing website with better navigation, design and photo. The Group will also enhance its reputation and corporate image by participating into various corporate social responsibility functions. Following Listing, the Group will also expand and enhance its sales and marketing team by recruiting 2 more experienced sales personnel to broaden its sales network and customer base.

Total expenditure is estimated at about HK$2.3 million for the aforesaid promotion of the Group’s brand and increase of market penetration. The Group plans to spend such expenditure by stages up to 31 March 2017. The Group plans to finance such expenditure by the net proceeds from the Placing.

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BUSINESS

Continuous increasing of operational efficiency and enhancing quality of service

With continuous growth in business scale, the Group plans to improve and increase operational efficiency and enhance quality of services by upgrading its network backbone, hardware and other information technology applications. In addition, the Group plans to continue investing on device with global positioning system and radio-frequency identification technology that can be used to keep track of the locations of the security guards. By upgrading the information technology and management systems and subscribing devices with advanced technology, the Group expects that its operational efficiency would be increased and its administrative costs would be reduced in the long term. Furthermore, the Group plans to invest in patrol vehicles embedded with the global positioning system to facilitate monitoring.

Total expenditure is estimated at about HK$2.0 million for the aforesaid increase in operational efficiency and enhancement of quality of service. The Group plans to spend such expenditure by stages up to 31 March 2017. The Group plans to finance such expenditure by the net proceeds from the Placing.

These plans are to enhance the organic growth of the growth and as at the Latest Practicable Date, the Group has no plan to acquire any target. For further details in relation to the Group’s use of proceeds to implement the plans set out above, please refer to the section headed “Business Strategies and Use of Proceeds” in this prospectus.

COMPETITIVE STRENGTHS

The Directors believe that the following competitive strengths of the Group have contributed to its success and enabled the Group to compete effectively in the manned security guarding services industry in Hong Kong.

Strong and experienced management team

The Group has an experienced management team, which focuses on different business areas and possesses extensive operating experience and industry knowledge. Mr. Fu, the Chairman and the executive Director, has over 13 years of experience in the security guarding services industry. Ms. Liu, the Chief Executive Officer, has nearly 11 years of experience in marketing, accounting and administrative management. Other management members are also well-experienced and capable. For example, Ms. Lee Christine, the general manager of the Group, has nearly 17 years of extensive experience in the security guarding industry. This gives the Group a distinctive competitive edge over its competitors as the management team is able to effectively maintain and enhance the Group’s reputation with a particular emphasis on the quality of manned security guarding, to ensure the quality and qualification of the Group’s security guards are maintained, and to maintain good relationship with existing clients and develop new clients. For detailed information about the industry experience of the Group’s senior management, please refer to the section headed “Directors and Senior Management” in this prospectus.

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Stringent internal control and business process system

The Group maintains a stringent internal control and business processing system. The Group’s design and provision of security guarding services have been accredited with ISO 9001:2008 (quality management system standard). The Group has put in place detailed work procedures and control mechanisms at each position so that its staff would have a clear understanding of their scope of work and its quality standards in order to deliver quality services to customers to meet their requirements. In addition, briefing sessions are given to the Group’s staff from time to time. For details, please refer to the paragraph headed “Quality Control” in this section.

Well-established and stable relationship with customers

The Group has well-established and maintained stable relationships with its customers. The Group’s clients range from property management companies, property redevelopers, construction companies, retailers, schools, hotels and warehouse operators in Hong Kong, hence the Group does not rely on customers of a particular industry. Although the Group only provides manned security guarding services under Type I security work in accordance with the SCL Regime of Hong Kong, the Group aims to provide reliable and trustworthy manned guarding services to its customers. The Group also maintains a database of clients that facilitates contact with them and is dedicated to providing quality security guarding services to them. The Group invites comments from its customers on the services it provided and follows up these comments seriously and proactively. The Directors believe that quality of services is the key to retaining its customers and the stable and continuous relationships has contributed to the success of the Group with a solid recurrent income base.

THE GROUP’S BUSINESS AND OPERATIONS

The Group is principally engaged in the provision of manned security guarding services under Type I security work in accordance with the SCL Regime in Hong Kong. The services it offers focus on the protection of the safety and assets of its customers with the aim to preventing crime and offence and maintaining order. During the Track Record Period, all of the Group’s revenue was derived from the provision of manned security guarding services.

Typical duties and responsibilities of the manned security guarding services provided by the Group are set out below:

Access control	–	Pay attention to suspicious persons	who
		follow occupants into the premises.
	–	Make enquiry to strangers as to their identity
		and purpose of entry and deny access in
		suspicious cases.
Registering visitors	–	Ask visitors or delivery people for details of
		the premises they intend to visit.
	–	Make entrance records of visitors and	stop
		trespassers.

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Reporting and recording incidents	–	Record all significant events, such as
		handover of shifts, any failures of public
		facilities and follow-up actions, in the
		occurrence book with the exact time of
		occurrence.
Handling emergencies	–	Keep alerted to the need to provide prompt
		assistance in emergency situations and
		inform supervisors and police for assistance.
Monitoring security systems	–	Familiarise with the locations of closed
		circuit television and the areas being
		monitored.
Safe-keeping of keys	–	Ensure all service rooms and general purpose
		rooms are properly locked and checked
		during security patrols.
	–	Record the particulars of any person who
		takes out, uses and returns the keys in a
		registration book.
Preventing and detecting offences	–	Conduct frequent inspections to prevent any
		trespassing.
	–	Check if anti-burglar protection on pipes
		function properly and report any damage or
		tampering.
Patrolling	–	Record defects in premises that may cause
		danger to the safety of occupants.
	–	Identify any suspicious person and object
		and inform the supervisors for appropriate
		actions to be taken.
Ensuring fire safety	–	Ensure common corridors and fire escape
		routes are free from obstruction at all times.
	–	Check and ensure the exit signs are
		illuminated and visible and emergency
		lighting and fire extinguishers function
		properly.

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Settling and reporting disputes

• Promptly handle and report all complaints at site.

• Details of the complaints which cannot be resolved immediately should be recorded in the occurrence book and follow up actions are to be taken.

In addition to the above security guarding services, the Group also provides security guarding services in various events, occasions, exhibitions, ceremonies and press conferences, where its typical duties and responsibilities include formulating and implementing security plans and strategies for the events, preventing disruption of events and protecting safety of person or protecting property against damage or loss. In some situations, the Group also needs to provide crowd management services in the event security guarding services that requires skilled co-ordination and planning and high degree of care is expected. The Group would discuss with its clients in order to formulate a feasible plan and the Group would provide suggestions on the points of security to be strengthened based on its experience. Patrol officer would then brief its security guards on the specific requirements to ensure clients goals and instructions are met. During the Track Record Period, at the request of the customers, the Group also provided personal escorting services. The revenue of personal escorting services amounted to approximately HK$47,000 and HK$293,000, respectively during the two years ended 31 March 2013 and 2014.

The Group provides manned security guarding services at places such as commercial, construction site, warehouse, school, and residential premises, The following table sets forth a breakdown of the Group’s revenue by property type during the Track Record Period:

Type of property Commercial (1) Construction site Warehouse School Residential Exhibition Others (2) Total	Year ended 2013 HK$’000 % 25,373 27.9 16,585 18.3 17,368 19.2 14,455 16.0 12,795 14.1 3,954 4.4 75 0.1 90,605 100.0	31 March 2014 HK$’000 % 31,390 28.3 22,881 20.6 22,099 19.9 14,049 12.6 14,113 12.7 6,165 5.6 362 0.3 111,059 100.0	31 March 2014 HK$’000 % 31,390 28.3 22,881 20.6 22,099 19.9 14,049 12.6 14,113 12.7 6,165 5.6 362 0.3 111,059 100.0
			100.0

Notes:

(1) Commercial properties include industrial and commercial buildings, hotels, shopping malls and retail shops

• (2) Others include the services rendered in other property types and the provision of personal escorting services.

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The Group has established a broad customer base for its services, and for the two years ended 31 March 2013 and 2014, the Group had 352 and 366 customers respectively.

The following table sets forth the breakdown of the Group’s revenue by types of contracts during the Track Record Period:

Type of contracts Manned security guarding services – Fixed – Temporary −Event Total	Year ended 2013 HK$’000 % 73,055 80.6 4,830 5.3 12,720 14.1 90,605 100.0	31 March 2014 HK$’000 % 90,025 81.1 2,400 2.1 18,634 16.8 111,059 100.0	31 March 2014 HK$’000 % 90,025 81.1 2,400 2.1 18,634 16.8 111,059 100.0
			100.0

Note: Fixed positions refer to contract for a term over 6 months and for temporary positions, they refer to contract for a term less than 6 months.

Depending on the nature of security guarding services and the requests of customers, the contract period varies from one day to 36 months. The following table sets forth the breakdown of the contract period for security works for different property types:

	**Year ended **	31 March
Type of premises	2013		2014
Commercial	1 day(2) to 12 months	1 day(2) to	12 months
Construction site	1 day(2) to 24 months	1 day(2) to	24 months
Warehouse	1 month to 24 months	1 month to 24 months
School	12 months to 36 months	12 months	to 36 months
Residential	1 day(2) to 12 months	1 day(2) to	12 months
Exhibition	1 day(2) to 1 month	1 day(2) to	1 month
Others (1)	1 day(2) to 12 months	1 day(2) to	12 months

Notes:

• (1) Commercial includes industrial and commercial buildings, hotels, shopping malls and retail shops

• (2) Others include the services rendered in other property types and the provision of personal escorting services.

• (3) Some works carried out include short term contract for temporary replacement of security guards and therefore they accounted for only 1 day.

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The workflow of the Group

The diagram below illustrates the general workflow of the operation of the Group in general:

==> picture [331 x 300] intentionally omitted <==

----- Start of picture text -----

Receipt of tender or quotation invitations
Site visit and assessment (if necessary)
Preparation of tender or quotation
Not successful If successful
Post-tender evaluations Preparation of security guarding services
Review and adjust tendering strategy Provision of security guarding services
Quality check
----- End of picture text -----

Tender or quotation offers

The Group has devoted its resources in electronic platforms such as search engines to promote its guarding services. Other than that, the Group has not devoted substantial marketing effort in advertisements or other promotional activities. Mainly through search engines, the Group has, from time to time, received invitations for tenders or quotations from potential customers for the provision of manned security guarding services. Tender invitations are related mainly to the provision of regular guarding services to institutions, such as schools, commercial institutions, construction sites and the customers are normally large corporations, rather than individuals and they are all fixed position. For quotations, clients are more diversified and they include event organisers, shops, celebrities and construction companies. The positions for quotations could be both fixed positions or temporary positions.

For the two years ended 31 March 2013 and 2014, 89% and 87.1% of the revenue are derived from quotations, and 11% and 12.9% of the revenue are derived from tender. The following table sets forth the percentage for tender and quotation contracts in different types of premises for the two years ended 31 March 2013 and 2014:

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		**Year ended **	31 March
	2013		2014
	% of	% of	% of	% of
	revenue	revenue	revenue	revenue
	from	from	from	from
	quotation	tender(3)	quotation	tender(3)
Type of premises
Commercial(1)	99.9%	0.1%	94.1%	5.9%
Construction site(1)	100.0%	0.0%	91.7%	8.3%
Warehouse	100.0%	0.0%	99.9%	0.1%
School	31.5%	68.5%	26.2%	73.8%
Residential	99.6%	0.4%	99.0%	1.0%
Exhibition	100.0%	0.0%	100.0%	0.0%
Others(2)	100.0%	0.0%	100.0%	0.0%
All Properties	89.0%	11.0%	87.1%	12.9%

Notes:

• (1) For the year ended 31 March 2014, the Group has received 3 tenders for commercial premises and 3 tenders for construction site.

• (2) Others include the services rendered in other property types and the provision of personal escorting services.

• (3) The successful rate of tender for the two years ended 31 March 2013 and 2014 are 27.3% and 31.0%.

A standard tender process takes approximately 2 to 16 weeks from the receipt of tender invitation to the announcement of the tender result while a standard quotation takes approximately 1 to 30 days from quotation to the entering into of a service contract. Upon the receipt of tender or quotation invitation for a new project, the Group’s sales and marketing department will decide whether to accept the invitation after considering various factors such as location of services to be provided, risk associated, client’s special instructions and requests and the ability of the Group to meet such instructions and requests. If it is decided that the Group has the capacity to deliver the security guarding services, and that the invitation is to be accepted, the sales and marketing department will then complete a notice for quotation setting out general information of the potential project including the name of the potential customers, service location, scope of services, period of service rendered, number of guards required, special requests from clients and any other factors that should be noted. The notice for quotation will be sent to the Group’s senior management for further assessment.

Site visit and assessment

Upon receiving the notice prepared by the sales and marketing department, the Group’s general manager will contact the client to confirm the instructions and requirements, and in order to better facilitate execution of duties, the Group will try to fix an on-site inspection and further discuss with the client, if necessary. At the same time, background check will also be conducted for new clients to ensure they operate bona fide businesses with actual

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need for manned security services. The Group will then reaffirm the number of guards required and record the relevant requirements and details as requested by its clients, which are endorsed by its general manager.

Preparation of tender or quotation

After the on-site inspection, the Group’s general manager will then pass the information to the sales and marketing department for the preparation of tenders and quotations for submission to potential customers. In order to prepare for a competitive bidding proposal or quotation, the Group will assess its available resources and the expected manpower required for the job and take into account various factors including the location, urgency of services, prevailing market rates and market trend, budget, potential customer’s specific instructions and special requirements and the working environment. The Group will provide its tenders or quotation setting out the scope of services it offers, the duration, the contract terms, service fee proposed to be charged, the payment terms, the number of security guards it will deploy to fulfill the job requirements and other miscellaneous terms. The Group’s tenders and service proposals will then be submitted to its management for approval, after which it will be forwarded to potential customer for its consideration. In some occasions when client requires manned guarding services urgently such as malfunction of existing security system, the Group will provide a verbal quotation to the potential customer followed by a formal written quotation or confirmation. The said customer will have to acknowledge or sign-off to confirm the service.

For those quotations the Group prepared for the renewal of expiring contracts, the Group would prepare the bidding proposals or quotations with reference to the existing contract terms and service fees, the prevailing market conditions and make appropriate adjustments for any revised service scope or fees by its sales and marketing department.

Preparation and provision of security guarding services

The preparation stage consists of preliminary allocation of resources required and ensuring the Group has sufficient resources for current and future works. Where additional manpowers are required, the Group recruits qualified security guards who can fulfill the requirements of the clients. In some occasions, additional training will be provided to security guards prior to the execution of the project. The patrol team will also take appropriate precautions and measures to eliminate or mitigate the risks identified. A risk assessment report with follow-up security measures are disseminated to the clients for their reference by the operations department. The Group’s operations department will also compile an operational manual for each fixed position. The manual generally consists of (i) the Group’s requirements on the security guards including the schedules on duties and reporting requirements; (ii) the client’s specific instructions and requirements; (iii) health and safety control; (iv) procedures in handling emergency situations; and (v) client’s emergency contact list.

The Group will distribute the manual to the guards assigned to the post and briefings will be given to them prior to the commencement of the projects. The Group’s operations department is responsible for supplying the required items such as log books and attendance recording device that oversees the guards attendance and that the services are conducted in

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accordance with the contract terms and the operational manuals. The Group’s operations department and human resources department are responsible for the recruitment or allocation of personnel to ensure that the Group has sufficient manpower, and the security guards assigned are capable, to deliver its services under the service contracts.

Quality check

The Group closely monitors the quality of its manned security guarding services provided to its customers. To ensure its services meet its customers’ expectations and requirements, the Group’s management holds regular meetings with the general manager and operations department to review and discuss various aspects of operations and follow up with its security guards on the service standard. An emergency contact number will be provided for its clients to facilitate communications. In addition, the Group’s area customer service managers perform on-site inspections regularly to familiarise with the circumstances of the position and the control measures to make sure that the security guards are in the right order as assigned. The Group’s general manager will take initiative to follow up with its clients on their feedbacks and comments.

Evaluation and reviews

The Group’s management also holds meetings to review and evaluate any unsuccessful tender and adjust the tendering or quotation strategy.

CUSTOMERS, SALES AND MARKETING

Pricing policy

The Group determines its service fee mainly with reference to the expected costs to be involved, such as staff cost, other operation costs (including transportation cost and cost of equipment and uniform) and administrative fees, whereas the administrative fees were typically determined based on a certain percentage of the staff costs. The Group also takes into consideration the location of the services rendered, the length of contract, relevant skills required, special requests from customers (such as uniform, language skills, manner and equipment) and the urgency of the tasks.

In order to mitigate the effect of the increase in statutory minimum wage, the Group has specified in its service contracts that its fee will be adjusted in accordance with the change in statutory minimum wage. Customers will be informed in advance in the event if the Group’s fees are to be adjusted due to the increase in statutory minimum wage.

Credit policy

The Group usually allows credit period ranging from 7 to 30 days to its major customers. For some ad hoc or urgent tasks, the Group may require the clients to settle full payment prior to the provision of service guarding services. The Group’s trade receivables turnover days was 39.8 days and 43.6 days for the years ended 31 March 2013 and 2014, respectively.

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The Group closely reviews its trade receivables balance and any overdue balances on an ongoing basis and assessments are made by its management on the collectability of overdue balances to consider whether a provision for impairment of trade receivables will be made in accordance with its internal guideline. For the year ended 31 March 2014, the Group wrote off bad debts of HK$95,200. The Group did not make any provision for the bad and doubtful debts for the year ended 31 March 2013.

Customers

The Group’s customers include property management companies, property redevelopers, construction companies, retailers and schools, hotels and warehouse operators. Below table sets out the revenue from the Group’s top five customers for the year ended 31 March 2013 and 2014:

For the year ended 31 March 2013

				Years of
				relationship
				with the
				Group up to		As a
				31 March		percentage
			Background of	2014		of total
			the customer	(approximate)	Revenue	revenue
					HK$ million	%
Customer	A	(1)	Property management	6	8.5	9.4
			company
Customer	B	(2)	Warehouse operator	2	3.2	3.5
Customer	C	(3)	Property redeveloper	4	3.1	3.4
Customer	D	(4)	Property management	3	3.0	3.3
			company
Customer	E	(5)	Construction company	2	2.4	2.7
Total					20.2	22.3

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For the year ended 31 March 2014

				Years of
				relationship
				with the
				Group up to		As a
				31 March		percentage
			Background of	2014		of total
			the customer	(approximate)	Revenue	revenue
					HK$ million	%
Customer	A	(1)	Property management	6	10.7	9.6
			company
Customer	C	(3)	Property redeveloper	4	4.7	4.2
Customer	B	(2)	Warehouse operator	2	4.5	4.1
Customer	E	(5)	Construction company	2	4.0	3.6
Customer	F	(6)	Construction company	3	3.4	3.1
Total					27.3	24.6

Note:

• (1) A world’s leading facility services company which is mainly engaged in provision of wide range of facility management services, including security services. It settled the bill for the guarding services rendered by the Group by cheque and the credit term is 7 days after the completion of each month’s service rendered. It is an Independent Third Party.

• (2) Hong Kong office of a Japanese company involved in logistics and international merchandise distribution. It settled the bill for the guarding services rendered by the Group by cheque and the credit term is 30 days after the completion of each month’s service rendered. It is an Independent Third Party.

• (3) A local property redeveloper listed on the Stock Exchange. It settled the bill for the guarding services rendered by the Group by cheque and the credit term is 7 days after the completion of each month’s service rendered. It is an Independent Third Party.

• (4) A local property management company which provides general property management services, including security services. It settled the bill for the guarding services rendered by the Group by cheque and is requested to pay the Group by end of each month. It is an Independent Third Party.

• (5) A joint venture formed by three contractors, acts as a contractor of the construction of West Kowloon Terminus underneath the West Kowloon Cultural District area. It settled the bill for the guarding services rendered by the Group by cheque and the credit term is 30 days after the completion of each month’s service rendered. It is an Independent Third Party.

• (6) A local construction company and a subsidiary of a property developer which is listed on the Stock Exchange. It settled the bill for the guarding services rendered by the Group by cheque and the credit term is 30 days after the completion of each month’s service rendered. It is an Independent Third Party.

The revenue of the Group for the two years ended 31 March 2013 and 2014 amounted to approximately HK$90.6 million and HK$111.1 million, respectively. The increase was mainly due to the increase in numbers of contracts and the increase of pricing quoted by the Group. The Group can usually pass on the increase in business costs to customers as they are receptive of a gradual increase in prices that is in line with the increase in labour cost,

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such as the statutory minimum wage. During the Track Record Period, all of its revenue was derived from its security guarding services in Hong Kong. The Group has established a broad customer base for its services. For the two years ended 31 March 2013 and 2014, the Group had 352 and 366 customers, respectively, with its five largest customers of the Group in aggregate accounted for approximately 22.3% and 24.6%, respectively and its largest customer accounted for approximately 9.4% and 9.6%, respectively of its total revenue during the Track Record Period.

All of the five largest customers during the Track Record Period are Independent Third Parties and none of them is also a supplier to the Group. None of the Directors, their respective associates or Shareholders who own more than 5% of the issued share capital of the Company (immediately following completion of the Placing to the best of Directors’ knowledge and taking no account of any shares to be issued upon exercise of any options which may be granted under the Share Option Scheme) has any interest in any of the five largest customers of the Group during the Track Record Period. All of the above mentioned customers continued to have service contracts with the Group subsequent to the Track Record Period.

For the two years ended 31 March 2013 and 2014, the Group has executed 899 and 1,026 service contracts for the provision of manned guarding services with its customers, and the table below sets out the number of security guarding service contract for different property types.

Type of property Commercial Construction site Warehouse School Residential Exhibition Other (Note)	Year ended 2013 357 82 68 77 33 270 12 899	31 March 2014 488 99 66 65 33 256 19
		1,026

Note: Others include the services rendered in other property types and the provision of personal escorting services.

Marketing

The Group adopts a word-of-mouth marketing strategy and its business relies considerably on the referral and continuity of existing customers. Instead of relying heavily on traditional promotional channels, the Group has devoted its resources in electronic platforms to promote its services, such as various web search engines and online advertisements and in the Group’s own website. However, the Group has managed to build a portfolio of 352 and 366 customers for the two years ended 31 March 2013 and 2014. The Directors believe that this is attributable to its marketing strategy which focuses more on

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building the Group’s reputation and customer service. The Directors consider that if the customers are satisfied with the services of the Group, they may recommend the Group to other customers looking for quality manned guarding services.

As at the Latest Practicable Date, the Group’s sales and marketing department consisted of 2 personnel responsible for liaising and managing relationship with its customers, designing marketing materials and pricing strategies, and preparation of bidding proposals for tendering and quotations. Ms. Liu is responsible for overseeing the sales and marketing department. Apart from the sales and marketing department, the Group’s senior management staff are also responsible for maintaining good customer relationships with its existing customers.

I.T. systems

The Group has installed an I.T. system in managing its operations particularly its human resources management system, customer relationship management system and attendance system. The human resources management system and the attendance system contain the records of employee personal details, licences held, salary payments, mandatory provident fund payments, rosters, attendances and leaves. The systems allow the Group to keep track of the sizeable work force and reduce the manpower for administrative purpose. The customer relationship management system, on the other hand, facilitates the Group to organise, track, and automate key aspects of the sales activities by keeping a database of all client visitation reports, risk assessment reports, contracts and quotations. The Group also maintains a record of complaints and incidents so that all complaints and incidents are properly dealt with and to provide the customers with updates of such complaints and incidents.

In addition, the Group has subscribed for a system with global positioning system and radio-frequency identification technology that is used for the purpose of keeping track of security guards of the Group, and such system will be introduced in daily work in August 2014.

Major contractual terms and conditions

The agreements for quotations and tender contracts with customers that are legally binding, are negotiated independently and the contractual terms vary among different services contracts. Major contractual terms that are generally contained in a security guarding services contract are summarised below:

Terms of services:	one-off services or	a fixed period up to 36 months
Payment terms:	service charges shall be payable within 7 to 30 days		after the
	completion of each	month’s service or per service rendered
Insurance:	the Group shall	be responsible for maintaining	relevant
	insurance

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• Deployment of the guards arranged by the Group shall be physically and guards: mentally fit to carry out security duties and have to hold valid SPP and have participated in a 2-day QAS training prior to their duties

• Supervision duties the Group shall arrange a 24-hour patrol team carrying out during the post of frequent and irregular visits to client’s premises and provide the Company: assistance where necessary. The patrol officers shall be dispatched to the premises to investigate if the Company failed to receive regular calls from or make contacts with the guard during their security duties

• Minimum wage: should there be any change to the statutory minimum wage, the Group shall adjust the service package with customers with reference to the revised statutory minimum wage

Termination:

• either party to the services contract may terminate the service contract provided a 30 days prior notification in writing is served

As at 31 March 2014, all of the service contracts for fixed position contain terms allowing for adjustment of services fees if there are changes to the statutory minimum wage.

In the event if the Group cannot fulfill its obligation, the customers may ask for a replacement of security guards or terminate the service contract in accordance with the termination clause. The Group shall enter into new services contracts with its customers before the expiry of relevant contracts to secure a renewal of expiring contracts. The Group prepares the new service contracts with reference to the existing contract terms and any change in scope of required work and makes appropriate adjustments for revised service scope, if any.

During the Track Record Period and up to the Latest Practicable Date, there was no record of any dispute concerning the amount of services fees to be paid and the terms of the services contract and none of the contracts entered with the Group were terminated by reason of material breach by the Group.

Seasonality

The Group has not experienced material seasonal fluctuations in its revenue given that most of its revenue during the Track Record Period are generated from its security guarding services for fixed position where the Group provides monthly invoice to its customers for a fixed amount.

SUPPLIERS

During the Track Record Period, due to the Group’s business nature being a service-oriented industry, apart from individual persons as security guards, the Group had several suppliers in Hong Kong who sold uniforms of the security guarding staff to the

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Group. These suppliers are mainly retailers. The Group has not experienced any shortage or delay caused by the uniform suppliers and the Directors are of the view that it is not difficult to find other suppliers making uniforms at similar prices. The Group has not entered into long-term agreement with those suppliers selling uniforms of the security guarding staff as the Group considers that it is not necessary taking into account the availability of substitute. The amounts of uniforms purchased from those uniform suppliers by the Group in each of the years ended 31 March 2013 and 2014 were approximately HK$235,000 and HK$182,000, respectively. Those suppliers are Independent Third Parties. During the Track Record Period, the Group’s purchases were all settled in Hong Kong dollars and most of them were settled by cash.

None of the Directors, their respective associates and shareholders who own more than 5% of the issued share capital of the Company (immediately following completion of the Placing to the best of the Directors’ knowledge and taking no account of any shares to be issued upon exercise of any option which may be granted under the Share Option Scheme) had any interest in the major supplier of the Group mentioned during the Track Record Period and as at the Latest Practicable Date.

COMPLAINT HANDLING PROCEDURE

The Group has implemented complaint handling policy, and all of the complaints lodged by the customers in respect of the services provided will be handled seriously by the sales and marketing department and reported and considered by the Directors, who will, depending on the nature, degree of seriousness and circumstances of the complaint and other relevant factors such as the relationship with the complainant, consider appropriate remedial actions for the customers. When handling complaints, the Group will follow the standard complaint handling procedures in the ISO 9001:2008 to carry out investigation by retrieving the conversation recordings of the complaint case and then having an interview with the relevant staff. Once appropriate remedial actions have been determined, the member of the sales team will follow up with the relevant customer in respect of remedial arrangements.

In the event if any customer is not satisfied with the security guarding services provided, the Group may on demand and to the extent appropriate replace the security guard for its customer.

During the Track Record Period, the Group received 128 and 113 cases of complaints that were not material. The majority of the complaints were about staff being impolite, poor awareness and engaging in personal matters while on duty. No compensation or penalty was paid to resolve the complaints, and such complaints did not result and have not resulted in any material adverse impact on the operations or financial conditions of the Group. During the Track Record Period, the Group did not experience any material complaints made by its clients or any disciplinary actions imposed by any government authorities in respect of the quality of its services provided.

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QUALITY CONTROL

It is the Directors’ belief that the quality of services is an important way to establish a solid foundation for the Group’s business. As at the Latest Practicable Date, the management of the Group including Mr. Fu, Ms. Liu, Ms. Chung Pui Yee Shirley and Ms. Lee Christine are responsible for the quality control of the Group’s security guarding services. Please refer to the section headed “Directors and Senior Management” for the qualifications and experience of Mr. Fu, Ms. Liu, Ms. Chung Pui Yee Shirley and Ms. Lee Christine. The Group is dedicated to providing quality manned security guarding services and it is accredited with ISO 9001:2008 quality management system standard for its design and provision of security guarding services awarded by the Hong Kong Quality Assurance Agency by participating in the scheme of certifying corporate as having a managing system that complies with the applicable standards under the regulations as published by the International organisation for Standardisation. HKQAA conducts a review of the Group’s management system in the provision of security guarding services generally every six months. The Group maintains strict quality control system and has formulated a policy manual covering various operational aspects.

Service standard of security guards

The Group has stringent standards for its security guards. Unless otherwise requested by clients, the Group’s security guards are uniformed and they are required to discharge their duties in accordance with the operation manual and to maintain good service standard. All the guards are required to attend a 16-hour training organised by independent training institutions in accordance with the relevant regulatory requirements prior to their employment (or produce a valid certificate issued to him in respect of training course accepted by SGSIA within 5 years) and obtain either category A or category B SPP in order to fulfil the relevant regulatory requirements prior to their joining of the Group. Please also refer to the paragraph headed “Employees” of this section for further information of recruitment and screening process of the Group.

In addition, the Group provides briefings and workshop sessions to its staff from time to time. Briefing sessions will be arranged for every new post to ensure their services would reach the required standard. The security guards are required to carry their permits with them at all times while on duty and produce them for inspection on demand by the police officers. The Group has established a 24-hour support centre which is responsibility of coordinating communications between the security guards and the headquarters, monitoring their timing and location of duty, handling of customer’s enquiries and complaints and assigning tasks of security guards in cases of emergency. All security guards are required to report regularly to the support centre during their duties. Disciplinary actions may be taken against the security guards for failing to report to the support centre.

Established system to monitor term of SPP of employees

Under section 10 of the SGSO, no individual shall do, agree to do, or hold himself out as doing or as available to do, security work for another person unless he does so (i) under and in accordance with a SPP issued by the Commissioner in accordance with the SGSO; or (ii) otherwise than for reward. A SPP is not assignable or transmissible, and is valid for a

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period of 5 years (or such shorter period as the Commissioner may specify). Holder of a SPP should apply to the Commissioner for renewal not earlier than 6 months and not later than 3 months before his SPP is due to expire. According to section 31(2) of the SGSO, any person who does, agrees to do, or holds himself out as doing or as available to do so, security work for another person for reward without a valid SPP commits an offence and is liable on conviction to a fine of HK$10,000 and to imprisonment for 3 months.

To ensure the above regulatory requirements (and such other relations and rules as applicable) are fully complied with by the Group and its security guards, the Group maintains a control system that monitors and updates the permit and registration status of the Group’s relevant employees. Not earlier than 6 months and not later than 3 months before the SPP of the Group’s security guards is due to expire, the Group’s computer generates report reminding the relevant staff to renew the SPP. Any security guard who fails to timely renew his or her SPP will not be retained for service until the SPP has been duly renewed.

Regular inspection by management

In addition to the 24-hour support centre, a 24-hour patrol team consisting of 9 officers with 7 vehicles as at the Latest Practicable Date performs on-site inspection frequently and irregularly as a control measure to make sure that the security guards are in right order as assigned and the customers’ requirements are well addressed. The major functions of an on-site inspection include:

• (i) to have random and unexpected inspection of the security guards;

• (ii) a supervisory function for the management to ensure the performance standard of manned security guarding services provided has been met;

• (iii) to ensure the customers’ requirements and special requests are well addressed and fulfilled;

• (iv) to obtain feedback from customers and provide follow up or improvement, if required; and

• (v) to deliver cautioning and/or record misconduct of the security guards.

Monitoring by top management on all issues

Patrol team reports serious and important issues to the top management. Operation meetings are held with the Group’s senior management, including executive Directors, and to discuss the status of and solutions to the issues. Important issues are regularly followed-up in operation meeting in order to uphold the standard of services.

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Stringent staff selection process

The Group also has a comprehensive recruitment and screening process, which is designed to enable the management to assess the background, skill and experience against the demands of the clients. The Group pursues a selective approach aiming to build a quality staff team with strong capability to properly carry out respective duties. Factors considered include (i) education background and training attended; (ii) whether the applicant has been registered with Police Licensing Office for the security personnel permit for the Group’s security guards; (iii) criminal records, if any; (iv) employment history and experience; (v) health and physical fitness; (vi) reference check and residential address check and (vii) such other factors that may be of relevance.

QUALIFICATIONS, CERTIFICATIONS AND AWARDS

Qualifications

In order to provide security guarding services, a security company has to obtain the SCL under the laws of Hong Kong. Details of the above are set forth under the section headed “Regulatory Overview” in this prospectus. The following table sets out the qualifications and licence held by members of the Group as at the Latest Practicable Date:

Relevant Hong Kong

Relevant Hong Kong
government
departments or				Period of
statutory bodies	Description	Qualification	Holder	validity
Security and Guarding	Security	Type I –	King Force	28 July 2013
Services Industry	Company	Provision	Security	to 27 July
Authority	Licence	of security		2018
		guarding
		services

For the permit, registration or qualifications of security guard of the Group, please refer to the paragraph headed “Employees” of this section.

The Directors confirmed that the Group had obtained all the approvals, permits, consents, licences and registrations required for its business and operations during the Track Record Period and as at the Latest Practicable Date. The Group has assigned a member of the management to keep track of the expiry dates of the relevant licence and apply for timely renewal. The Directors confirmed that King Force Security has been in compliance with conditions of such SCL, and so far as they are aware of, there is no impediment to renew the above SCL as at the Latest Practicable Date.

Certifications

The following table sets forth the Group’s major certification:

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		Awarding
		organisation		Period of
Nature	Certification	or authority	Recipient	validity
Quality Management	ISO 9001:2008	Hong Kong	King Force	28 January
System		Quality	Security	2008 to 27
Accreditation		Assurance		January
		Agency		2017

CORPORATE SOCIAL RESPONSIBILITIES

The Group profoundly realises the success of enterprise and corporate social responsibilities are closely linked. As part of its endeavour to assume corporate social responsibilities, the Group offers job opportunities for the disadvantaged community. Having been recognised for its community involvement, the Group has been awarded as a Caring Company by the Hong Kong Council of Social Service since 2008 and a Heart to Heart Company by the Hongkong Federation of Youth Groups since 2008.

Awards and recognitions

The following table sets forth the Group’s major awards and recognitions obtained in recent years:

			Awarding
			organisation and
Year(s) of award	Recipient	Award	authority
2008 to 2014	King Force Security	Heart to Heart	The Hongkong
		Company	Federation of
			Youth Groups
2008 to 2014	King Force Security	Caring Company	The Hong Kong
			Council of
			Social Service

MARKET AND COMPETITION

According to the Ipsos Report, there were about 967 licensed security service providers in Hong Kong by the end of 2013. The total number of security service providers increased at a CAGR of about 2.3% from about 884 units in 2009 to about 967 units in 2013. The total number of security service providers (Type I) rose at a CAGR of about 2.0% from about 516 units in 2009 to about 558 units in 2013. For detailed information on the market conditions of security services industry, please refer to the section headed “Industrial Overview” of this prospectus. Among the 967 licensed security service providers in Hong Kong, the top 5 security service providers accounted for about 32.4% of the total industry revenue in 2013, while the Group and the rest of service providers in the market took up the majority of the market share. The Group accounted for approximately 1% of the total industry revenue in 2013. The Directors consider the security guarding services industry in Hong Kong to be fragmented and various types of services offered by each type of the

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licensed security service providers where competition is mainly based on scale of establishment, competitive pricing, qualification and track record of the management and staff.

The entry barrier to setting up a security guarding service company is considered by the Directors not to be high as substantial capital investment is not required. Nevertheless, the Directors consider that entry barrier may be posed for new entrants due to (i) increasing operational costs pressure resulted from increased wages of the workers; (ii) necessary qualification requirement on security services providers in Hong Kong; and (iii) client’s preference on searching for security service providers with track record and relevant experiences. Although the Group may face competition from smaller or newly established security guarding service providers which compete in terms of pricing, the Directors consider itself in a prominent position compared with most of its competitors and it can maintain such position as it has the following competitive advantages:

• the Group’s experience and reputation in providing security guarding services;

• the Group’s established, broad and stable relationship with its major clients; and

• the Group’s strong and experienced management team.

Each of the Directors has confirmed that he or she and his or her respective associates had not had any interest in a business which competes or may compete with the Group’s business nor do they have any conflicts of interests with the Group from the commencement of the Track Record Period and up to the Latest Practicable Date.

INSURANCE

The Group maintains insurance for employees’ compensation liability for personal injuries or death by accident occurring or disease contracted to cover all eligible employees in Hong Kong, including its security guards, in the course of their employment in accordance with the Employees’ Compensation Ordinance with a policy limit of indemnity of HK$200 million per event. The insurance maintained covers compensation and damage to the Group’s employees in respect of bodily injury, death or disease suffered in the course of this employment in Hong Kong and the insurance policy for employees’ compensation is renewed every year and may be revised upon renewal.

The Group also maintains a public liability insurance policy to indemnify its customers in respect of any liability, loss, claim or proceedings for any accidental death of or bodily injury to third party and physical damage to tangible property belonging to third party arising out of the performance of its services under the services contracts. Pursuant to the insurance policy currently effective, the Group is generally responsible for any public liability claims of which the amount incurred is less than HK$5,000, or the greater of HK$10,000 or 10% of adjusted loss for water damage in respect of third party property damage.

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As Mr. Fu, the Chairman, is perceived by the Board as key to the rejuvenation and growth of the Company, the Group takes out a “key man insurance” for Mr. Fu for a one-off premium of HK$1.1 million, of which the Group is the beneficiary under the policy. The purpose of taking out the insurance is to mitigate the impact for the potential loss of income, growth and other replacement that the Group may incur in the event of Mr. Fu’s demise. The Group is entitled to terminate the policies at any time and receive cash based on the cash value of the policies at the date of withdrawal. Mr. Fu will not personally benefit from the key man insurance policy and there is no financial impact on the Group if Mr. Fu retires or leaves the Group before the relevant maturity date.

For the years ended 31 March 2013 and 2014, aggregate expenses of the Group’s employees’ compensation insurance, public liability insurance, key man insurance and other insurance (e.g. fire, medical and motor insurance) were approximately HK$1.3 million and HK$1.6 million, respectively. The Group considers that its insurance coverage is sufficient for its operation and comparable to that maintained by other security guarding services companies and it is in line with the industry norm. The Group had not made any material claim under its insurance policies during the Track Record Period.

High insurance premiums and limited insurance coverage is a common threat in the security guarding industry. Please refer to the section “Risk Factors – Risks relating to the operation of the Group – The Group may not have adequate insurance coverage and the Group is affected by increasing insurance costs and reduction of insurance coverage by its insurers” of this prospectus for further details.

RETIREMENT PLAN

The Group participates in a provident fund scheme registered under the Mandatory Provident Fund Schemes Ordinance for all eligible employees of the Group and it has complied with all the relevant requirements of the Mandatory Provident Fund Schemes Ordinance during the Track Record Period.

PROPERTY INTEREST

Owned property

During the Track Record Period and as at the Latest Practicable Date, the Group owned the following property in Kwai Chung, New Territories, Hong Kong for use as its office, warehouse and recruitment centre, details of which are set out below:

Property	Total gross floor area	Usage
18/F, So Tao Centre, 11-15	Approximately 4,132 sq.ft.	Office,
Kwai Sau Road, Kwai Chung,		warehouse,
New Territories, Hong Kong		recruitment
		centre and
		workshop

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Leased properties

During the Track Record Period, the Group leased the following property for use from Ms. Liu, the Chief Executive Officer and an executive Director, as its warehouse, details of which are set out below:

	Total gross floor	Monthly rental
Property	area	expenses	Term
A portion of 19/F,	Approximately	HK$30,000	From 1 December
So Tao Centre,	2,000 sq.ft.	(inclusive of	2012 to 30
11-15 Kwai Sau Road,		management	November 2014
Kwai Chung,		charges, water,
New Territories,		electricity and
Hong Kong		rates)

The lease of the above properties had been terminated and discontinued with effect from 31 March 2014.

In addition to the lease of the above properties, the Group also leased the following properties for from Independent Third Parties as at the Latest Practicable Date, details of which are set out below:

Properties	Monthly rental expenses	Term
Parking Spaces Nos. P1 and P3	HK$5,600	From 1 January
on Ground Floor, So Tao		2014 to 31
Centre, 11-15 Kwai Sau Road,		December 2014
Kwai Chung, New Territories,		(both days
Hong Kong		inclusive)

For details of the properties owned or leased by the Group as at the Latest Practicable Date, please refer to the property valuation report from the independent professional valuer as included in Appendix III to this prospectus.

COMPLIANCE

The Directors confirm that the Group complied with all applicable laws and regulations in Hong Kong where the Group operates and had obtained all the necessary licences for its operation during the Track Record Period and up to the Latest Practicable Date.

LITIGATION

During the Track Record Period and as at the Latest Practicable Date, the Group had been or is involved in a number of claims. None of the claims (whether settled or ongoing) were results of the non-compliance of any regulation or laws during the Track Record Period.

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Set out below are the details of (i) the outstanding employees’ compensation claims, claims submitted to the Labour Department against the Group of amount claimed over HK$10,000 as at the Latest Practicable Date, (ii) potential claims, litigations in relation to employees’ compensation claims and common law personal injury claims against the Group arising from work-related incidents and injuries as at the Latest Practicable Date; and (iii) claims, litigation against the Group of amount claimed over HK$10,000 settled during the Track Record Period and up to the Latest Practicable Date:

1. Outstanding employees’ compensation claims/claims submitted to the Labour Department against the Group of amount claimed over HK$10,000

Name of the company King Force Security King Force Security King Force Security King Force Security	Particular of the claims On 3 September 2012 the employee’s back sustained injuries in the course of his employment On 10 September 2013 the employee’s feet sustained injuries in the course of his employment On 8 October 2013 the employee’s fingers sustained injuries in the course of his employment On 22 January 2014 the employee’s feet sustained injuries in the course of his employment	Total amount claimed by employee (HK$) 74,560 10,153 10,080 10,530	Status Ongoing and is dealt with and handled by the insurer Ongoing and awaiting for issue of Certificate of Compensation Assessment (Form 5) from the Labour Department Ongoing and awaiting for diagnosis results from the Labour Department Ongoing and awaiting for diagnosis results from the Labour Department	Covered by insurance
				Covered by the Group’s insurance policy Covered by the Group’s insurance policy Covered by the Group’s insurance policy Covered by the Group’s insurance policy

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2. Potential claims litigations in relation to employees’ compensation claims and common law personal injury claims against the Group arising from work-related incidents and injuries

		Number
Item	Nature	of claims
Work-related incidents and injuries that had been settled by the Group’s
employees’ compensation insurance but potential common law personal injury
_legal _	actions have not been commenced against the Group
1.	Slipped and fell	6
2.	Struck by objects	1
3.	Injured whilst lifting, carrying or handling gates	4
4.	Others	9
Work-related incidents and injuries that had not been settled by the Group’s
employees’ compensation insurance and potential employees’ compensation
_and/or _	common law personal injury legal actions have not been commenced
_against _	the Group

1. Slipped and fell 2. Injured whilst lifting, carrying or handling gates 3. Others Total:	4 3 2
	29

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3. Claims, litigation against the Group of amount paid over HK$10,000 settled

Name of the company King Force Security King Force Security King Force Security King Force Security King Force Security King Force Security	Date of Incident 30 September 2012 11 April 2013 13 June 2013 28 July 2013 17 August 2013 24 October 2013	Particulars of the claims Amount settled (approximately HK$) Employee’s feet sustained injuries in the course of his employment 22,075 Employee’s knees, arms, facial and teeth sustained injures in the course of her employment 63,297 Employee’s fingers sustained injures in the course of his employment 19,794 Employee’s waist and fingers sustained injures in the course of his employment 56,496 Employee’s waist sustained injures in the course of his employment 11,733 Employee’s feet sustained injures in the course of his employment 17,206	Settlement date
			11 April 2013 8 January 2014 7 December 2013 12 March 2014 7 January 2014 15 May 2014

During the Track Record Period and up to the Latest Practicable Date, the Group had encountered 32 and settled 23 claims and litigations with an aggregate settlement amount of approximately HK$225,500. All cases were in relation to the Group’s employees or ex-employees. Out of the settled 23 claims, 7 claims were covered by insurance and 16 claims were settled by its internal resources. To avoid subsequent increment of insurance fees, the Group has decided not to report minor claims to its insurance company. Generally, the Group’s insurance fully covered all the claims reported the Group to its insurance company. The Directors are of the view that the above mentioned claims and litigations have no material impact on the Group’s operations, financials and reputation after considering the sums claimed and the insurance policies maintained by the Group.

The Directors are of the view that occurrence of personal injury claims and employees’ compensation claims is not uncommon in the industry. None of the Directors has been involved in the Group’s material litigation rendering he or she unable to comply with Rules 5.01 and 5.02 of the GEM Listing Rules.

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INTERNAL CONTROLS

The Directors are responsible for the formulation of and overseeing the implementation of the internal control measures and effectiveness of risk management system, which is designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance.

On 6 December 2013, the Group appointed an internal control consultancy firm (the “IC Consultant”) to perform an internal control review of the management and accounting system of the Group. The internal control consultant is a professional accounting firm which has been providing internal audit, internal controls, compliance review services to a number of listed company and listing applicants since 2008. The scope of internal control review includes corporate governance, listing rules compliance control system, major business cycles of the company, inclusive of sales, human resources, payroll, treasury activities.

The internal control consultant has performed walkthrough and necessary control testing and, on that basis, made a number of recommendations to the Directors. Accordingly, for enhancing the effectiveness of management and accounting system of the Group, the management of the Group has designed and implemented certain new and revised controls which are further reviewed and observed by the internal control consultant in May 2014.

Details of the new and revised measures implemented by the Company are as below:

1. The Company has circulated a number of corporate governance polices, including code of conduct, Directors’ securities trading policy, inside information disclosure and confidentiality policy, shareholders communication policy, for enhancing the governance and compliance readiness of the Company.

2. The Group has established a whistle blowing policy requiring an independent Director and management to collect, review, maintain and follow up on received suggestions or complaints on a timely basis.

3. The Group has implemented a more systematic and documented monthly closing procedures to ensure major items of financial statements and journal entries are properly reconciled, reviewed and supported.

4. The Group has adopted a practice of preparing and circulating among all Directors a reporting package on a monthly basis. The monthly reporting package includes necessary financial figures, operational information and compliance status of the company, such as connected transactions, material contracts and assessment of inside information.

5. The Group has further enhanced its pricing control by establishing a reference price for various type of works and requiring co-approval from Directors and management over unusual transactions.

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1. The Group has further enhanced its accounts receivable controls by requiring proper documentation of the accounts receivables ageing analysis and follow up action.

ENVIRONMENTAL PROTECTION, HEALTH AND SAFETY

Due to the nature of its business, the Group’s operational activities do not directly generate industrial pollutants, and it did not incur directly any cost of compliance with applicable environmental protection rules and regulations during the Track Record Period. The Directors expect that the Group will not directly incur significant costs for compliance with applicable environmental protection rules and regulations in the future. As at the Latest Practicable Date, the Group had not come across any material non-compliance issues in respect of any applicable laws and regulations on environmental protection.

Pursuant to the Occupational Safety Health Ordinance, employers must, so far as reasonably practicable, ensure the safety and health at work of all their employees. The Group’s emphasis on creating and sustaining healthy and safe work environment reflects its respect for its employees and others. The Group believes high standards in these areas underpin a critical aspect of operating effectiveness and, in turn, help the Group compete effectively. Through internal training and memorandum, the Group educates and reminds its employees of the importance of workplace health and safety. The Group has designated personnel to record any accidents or injuries of its security guards and employees and follow up with them (including insurance claims, treatment and avoidance measures) afterward. For the two years ended 31 March 2013 and 2014, the injury suffered by security guards or staff members are minor and there was no material injury incident recorded.

PROCEDURE FOR HANDLING EMPLOYEE INJURIES AND ACCIDENTS AT WORK

It is common in the security guarding service industry, due to the nature of work that the security guards may be exposed to risks when they carry out their duties with the aim to maintaining order and preventing crimes, or managing crowd, the Group may be subject to claims from employees for work-related injuries. The Group’s human resources department is responsible for recording details of the injuries, the claims and handling claims for accidents and injuries from its staff. They are also responsible for liaising with the relevant insurance company, the claimant and in case of more serious claims as considered appropriate by the management, obtaining advice from external legal adviser.

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The Group’s step by step procedure for handling these matters are as follows:

Step 1: Recording and filing The employee injured normally informs the Group of the injury and the human resources department will make record in the Group’s system with details of the claim including date and time, cause of accident, employee’s details as well as updates from time to time concerning claim amount, rectification measures and current status of claim or litigation. All the relevant documents will also be recorded in the Group’s system. The system will notify the responsible officer consistently for necessary follow-up action. Step 2: Fact finding and The human resources department will report to the reporting insurance company and if applicable, external legal adviser once it has gathered all relevant information. Furthermore, the Group will, if it is an employee injury or occupational disease case, notify the Labour Department in accordance with the Employees’ Compensation Ordinance, within 14 days (seven days for fatal cases) after the incident comes to its knowledge. Correspondences with the Labour Department will also be provided to the insurance company. Furthermore, it may use paper medical clearance to speed up settlement of work injury cases and facilitate the Labour Department’s assessment as to compensation.

The Group’s management will assess whether the Group’s safety measures are sufficient or any additional improvements may be necessary. Step 3: Settlement or litigation If the Group agrees on the compensation, it will settle with the injured staff directly or if covered by insurance and agreed by the insurer, the claim will be paid by the insurer. If the Group does not accept the liability or it cannot agree on the compensation amount, the matter may be litigated.

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EMPLOYEES

Employees

As at 31 March 2013 and 2014 and the Latest Practicable Date, the Group had a total of 859, 1,086 and 1,061 security guards, respectively. The following table sets forth the number of the group’s full-time and part-time security guards as at 31 March 2013 and 2014 and the Latest Practicable Date:

Full-time security guards Part-time security guards Total	31 March 2013 531 328 859	As at 31 March 2014 Latest Practicable Date 597 568 489 493 1,086 1,061	As at 31 March 2014 Latest Practicable Date 597 568 489 493 1,086 1,061
			1,061

The following table sets forth a breakdown of the Group’s employees by function as at Latest Practicable Date:

	As at the
	Latest
	Practicable
Function	Date
Management	3
Operations	18
Security guards	1,061
Sales and marketing	2
Human resources	4
Accounts and finance	3
Administration and others	4
Total	1,095

As the security service industry is a labour-intensive industry, the Group believes that its success of the Group depends in part upon the ability to maintain a stable team of operational workforce to deliver consistent and quality services to the customers.

The Group recruits or appoints its personnel from open market, mainly from publication of job advertisements, participation of employment fairs, recruitment websites and referrals from training centre, and enters into employment contracts with them. In order to assign a suitable guard to every post, the Group has a comprehensive recruitment and screening procedures, training program and job knowledge requirements.

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BUSINESS

For the years ended 31 March 2013 and 2014, the Group’s average monthly staff turnover rates, including its full-time and part-time staff, were approximately 8.3% and 8.8%, respectively.

The Directors believe the staff turnover rate is mainly due to a number of factors, including but not limited to (i) the high mobility of part-time staff, which comprised a significant portion of the Group’s staff during the Track Record Period, as part-time jobs are generally temporary in nature; (ii) the nature of manned security guarding services with characteristic of manual labour work, long working hours, relatively low pay and the requirement to work in shifts; (iii) as the Group’s operation is on project basis, additional staff may be hired to fulfill additional manpower requirements for new projects whereas existing staff may be discharged or released upon completion of projects if no other suitable projects are identified for relocation.

The largest component of the Group’s cost was cost of services rendered, which was approximately HK$75.3 million and HK$88.0 million, respectively, representing approximately 83.1% and 79.3% of its revenue for the years ended 31 March 2013 and 2014. Since the Minimum Wage Ordinance came into force on 1 May 2011, the statutory minimum wage was HK$28.0 per hour with effect from 1 May 2011. With effect from 1 May 2013, the statutory minimum wage rate has been adjusted to HK$30.0 per hour. As all of the Group’s existing fixed position contracts contain a service fee adjustment clause to address the increment of the statutory minimum wage, the Directors expect that the increase in the statutory minimum wage from HK$28.0 per hour to HK$30.0 per hour would not have material impact on its direct labour cost. The average wage paid for the years ended 31 March 2013 and 2014 was approximately HK$32.4 per hour and HK$35.0 per hour. The Directors confirm that the Group has fulfilled the Minimum Wage Ordinance during the Track Record Period.

For illustrative purpose only, the following table illustrates the sensitivity to the changes in the Group’s profit for the relevant years due to the change in its cost of services rendered during the Track Record Period:

		Year ended 31 March	Year ended 31 March
	2013		2014
Hypothetical fluctuation	+5.0%	-5.0%	+5.0%	-5.0%
Change in cost of services
rendered (HK$’000)	+3,764	-3,764	+4,401	-4,401
Change in profit before tax
(HK$’000)	-3,764	+3,764	-4,401	+4,401

The Directors consider that the Group’s employees are important assets of the Group. New employees are required to attend induction training to familiarise themselves with the rules, regulations and policies of the Group and the requirements of their job.

The Group also places emphasis on the continuing enhancement in skills of its staff. Regular briefings and workshops are held from time to time to reinforce and update the Group’s employees’ knowledge on government regulations and the requirement of the

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BUSINESS

Group. Upon any complaint received directing to particular employees, extra briefings will be arranged in order to improve the quality of services of the concerned employees so as to achieve the mutual benefit for both the Group and its employees.

The remuneration package the Group offers to its employees includes salary and allowances. In general, the Group determines employee salaries based on their individual qualifications, position, experience and seniority. The Group has designed an annual review system to assess the performance of its employees, which forms the basis of its decisions with respect to salary raises and promotions.

The Directors confirm that the Group does not have any major labour dispute and had not experienced any material labour shortage which have a material impact on its operation and financial positions during the Track Record Period and up to the Latest Practicable Date.

INTELLECTUAL PROPERTY RIGHTS

As at the Latest Practicable Date, the Group has applied for registration of the following trademark in Hong Kong:

Trademark	**Place **	of application	Applicant
	Hong	Kong	King Force Security

This trademark is displayed on the uniforms of the Group’s staff, equipment, website, letterheads, brochures, souvenirs of the Group and patrol cars to foster its corporate image. Please also refer to the section headed “Further Information about the Business – Intellectual Property Rights of the Group” in Appendix V to this prospectus for further details.

As at the Latest Practicable Date, the Group was not aware of any infringement (i) by it of any intellectual property rights owned by third parties, or (ii) by any third parties of any intellectual property rights owned by the Group or it was also not aware of any pending or threatened claims against the Group or any of its subsidiaries in relation to the infringement of any intellectual property rights of third parties.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

OVERVIEW

Immediately following completion of the Placing, Mr. Fu and Optimistic King will control [REDACTED] of the Company’s issued share capital. For the purpose of the GEM Listing Rules, Mr. Fu and Optimistic King (an investment holding company wholly-owned by Mr. Fu, which has not commenced any substantive business activities as at the Latest Practicable Date) are the Controlling Shareholders.

Each of Mr. Fu and Optimistic King confirms that he/it does not hold or conduct any business which competes, or is likely to compete, either directly or indirectly, with the business of the Group.

INDEPENDENCE OF THE GROUP

In the opinion of the Directors, the Group is capable of carrying on its businesses independently of, and does not place undue reliance on, the Controlling Shareholders, their respective associates or any other parties, taking into account the following factors:

(i) Financial independence

The Group has an independent financial system and makes financial decisions according to its business needs. During the Track Record Period, the Group has certain non-trade related amount due from Mr. Fu, please refer to the section headed “Financial Information – Certain Balance Sheet Items – Amount Due From a Director” in this prospectus for further details. The amounts due from Mr. Fu, were approximately HK$21.3 million and HK$9.7 million as at 31 March 2013 and 2014, respectively. Mr. Fu and/or Ms. Liu (the spouse of Mr. Fu) also provide guarantees for bank borrowings of the Group during the Track Record Period, and bank borrowing guaranteed by Mr. Fu and/or Ms. Liu (the spouse of Mr. Fu) was in aggregate approximately HK$26.3 million and HK$6.3 million, respectively, as at 31 March 2013 and 2014. Please also refer to the section headed “Financial Information – Indebtedness – Bank Borrowings” in this prospectus. The Group has procured the release of all guarantees provided to the Group by Mr. Fu and his associates (including Ms. Liu) before Listing. All loans and advances due from the Controlling Shareholders and their associates will be fully settled before Listing. The Group has sufficient capital to operate its business independently, and has adequate internal resources and credit profile to support its daily operations.

(ii) Operational independence

The Group has established its own organisational structure comprising of individual departments, each with specific areas of responsibilities. The Group has not shared its operational resources, such as suppliers, customers, marketing, sales and general administration resources with the Controlling Shareholders and/or their associates. The Directors are of the view there is no operational dependence on the Controlling Shareholders.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

(iii) Management independence

The Company aims at establishing and maintaining a strong and independent Board to oversee the Group’s business. The main function of the Board includes the approval of its overall business plans and strategies, monitoring the implementation of these policies and strategies and the management of the Company. The Company has an independent management team, which is led by a team of senior management with substantial experience and expertise in its business, to implement the Group’s policies and strategies.

The Board consists of six Directors, comprising three executive Directors and three independent non-executive Directors. Each of Mr. Fu and Ms. Liu (the spouse of Mr. Fu) is an executive Director. Mr. Fu is the Chairman and Ms. Liu is the Chief Executive Officer. Mr. Fu, who is the sole director of Optimistic King, is the only overlapping director between the Group and the Controlling Shareholders. None of the other Directors nor members of senior management hold any directorship or position in the Controlling Shareholders.

Each of the Directors is aware of his or her fiduciary duties as a director which require, among other things, that he or she acts for the benefit and in the best interests of the Company and does not allow any conflict between his or her duties as a Director and his or her personal interest to exist. In the event that there is a potential conflict of interest arising out of any transaction to be entered into between the Group and the Directors or their respective associates, the interested Director(s) shall abstain from voting at the relevant Board meeting in respect of such transactions and shall not be counted in the quorum. In addition, the senior management team of the Group are independent from the Controlling Shareholders. The Directors are of the view that the Board and senior management are capable of managing the Group’s business independently from the Controlling Shareholders.

(iv) Discontinued related party transactions – Tenancy agreements

Previously during the Track Record Period, the Group entered into the related party transactions below with Ms. Liu (the spouse of Mr. Fu), the details of which are set out under note 26 of the Accountant’s Report in Appendix I to this prospectus.

King Force Security (as tenant) entered into 3 tenancy agreements all dated 1 December 2012 with Ms. Liu (as landlord) (the “ Tenancy Agreements ”) to lease each of the premises of Rooms 19, 20 and 21, 19th Floor, So Tao Centre, Nos. 11-15 Kwai Sau Road, Kwai Chung, New Territories, Hong Kong, at a monthly rental of, in aggregate, HK$30,000 (inclusive of management charges, water and electricity and rates) for an original term of 2 years from 1 December 2012 to 30 November 2014.

During the year ended 31 March 2013 and 2014, the total rental paid by King Force Security to Ms. Liu was HK$120,000 and HK$360,000, respectively, under the Tenancy Agreements. The Directors confirm that the Tenancy Agreements were on normal commercial terms. The Tenancy Agreements had been terminated and discontinued with effect from 31 March 2014.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

Please also refer to the section headed “Business – Property Interest – Leased Properties” for further information.

All related party transactions with the Controlling Shareholders as disclosed under note 26(a) of the Accountant’s Report in Appendix I to this prospectus had been discontinued as at the Latest Practicable Date.

RULE 11.04 OF THE GEM LISTING RULES

The Controlling Shareholders, the Directors and their respective associates do not have any interest in a business apart from the Group’s business which competes and is likely to compete, directly or indirectly, with the Group’s business and would require disclosure under Rule 11.04 of the GEM Listing Rules.

NON-COMPETITION UNDERTAKINGS

In order to avoid any possible future competition between the Group and the Controlling Shareholder, Mr. Fu and Optimistic King (each a “ Covenantor ” and collectively the “ Covenantors ”) have entered into the Deed of Non-competition with the Company (for itself and for the benefit of each other member of the Group) on [�]. Pursuant to the Deed of Non-competition, each of the Covenantors has irrevocably and unconditionally undertaken to the Company (for itself and as trustee for its subsidiaries) that, during the period that the Deed of Non-competition remain effective, he/it shall not, and shall procure that his/its associates (other than any member of the Group) not to develop, acquire, invest in, participate in, carry on or be engaged, concerned or interested or otherwise be involved, whether directly or indirectly, in any business in competition with or likely to be in competition with the existing business activity of any member of the Group.

Each of the Covenantors further undertakes that if he/it or his/its associates other than any member of the Group is offered or becomes aware of any business opportunity which may compete with the business of the Group, he/it shall (and he/it shall procure his/its associates to) notify the Group in writing and the Group shall have a right of first refusal to take up such business opportunity. The Group shall, within 6 months after receipt of the written notice (or such longer period if the Group is required to complete any approval procedures as set out under the GEM Listing Rules from time to time), notify the Covenantor(s) whether the Group will exercise the right of first refusal or not.

The Group shall only exercise the right of first refusal upon the approval of all the independent non-executive Directors (who do not have any interest in such opportunity). The relevant Covenantor(s) and the other conflicting Directors (if any) shall abstain from participating in and voting at and shall not be counted as quorum at all meetings of the Board where there is a conflict of interest or potential conflict of interest including but not limited to the relevant meeting of the independent non-executive Directors for considering whether or not to exercise the right of first refusal.

The undertakings contained in the Deed of Non-competition are conditional upon the Listing Division granting approval for the listing of and permission to deal in the Shares on the Stock Exchange and all conditions precedent under the Underwriting Agreement having

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

been fulfilled (or where applicable, waived) and the Underwriting Agreement not having been terminated in accordance with its terms. If any such condition is not fulfilled on or before the date falling 30 days after the date of this prospectus (or if such date is not a Business Day, the immediate preceding Business Day), the Deed of Non-competition shall lapse and cease to have any effect whatsoever and no party shall have any claim against the other under the Deed of Non-competition.

The Deed of Non-competition shall terminate on (i) in relation to any Covenantor, the date on which he/it together with his/its associates, whether individually or taken together, ceases to be interested in 30% (or such other amount as may from time to time be specified in the GEM Listing Rules as being the threshold for determining a controlling shareholder of a company) or more of the entire issued share capital of the Company; or (ii) the date on which the Shares shall cease to be listed and traded on the Stock Exchange (except for temporary trading halt or suspension of trading of the Shares on the Stock Exchange due to any reason).

CORPORATE GOVERNANCE MEASURES

To avoid potential conflicts of interest, the Group will implement the following measures:

• (i) in the event that there is a potential conflict of interest arising out of any transaction to be entered into between the Group and the Directors (or their associates), the interested Directors shall abstain from voting at the relevant Board meeting and shall not be counted in the quorum;

• (ii) the Covenantors will make an annual confirmation as to compliance with his/its undertaking under the Deed of Non-Competition for inclusion in the annual report of the Company;

• (iii) the Company has appointed TC Capital as its compliance adviser, which will provide advice and guidance to the Company in respect of compliance with the applicable laws and the GEM Listing Rules including various requirements relating to directors’ duties and internal controls. Please refer to the section headed “Directors and Senior Management – Compliance Adviser” in this prospectus for further details in relation to the appointment of compliance adviser;

• (iv) the Controlling Shareholders undertake to provide all information requested by the Group which is necessary for the annual review by the independent non-executive Directors and the enforcement of the Deed of Non-Competition; and

• (v) the independent non-executive Directors will, based on the information available to them, review on an annual basis (a) the compliance with the Deed of Non-Competition; and (b) all the decisions taken in relation to whether to pursue the new opportunity under the Deed of Non-Competition. Findings of such review will be disclosed in the Company’s annual report after Listing.

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DIRECTORS AND SENIOR MANAGEMENT

BOARD OF DIRECTORS

The Board is responsible and has general powers for the management and conduct of the Group’s business. The Board consists of six Directors, including three executive Directors and three independent non-executive Directors. The following table sets forth certain information of the Directors:

				Date of
			Time of joining	appointment as
Name	Age	Present position	the Group	Director	Roles and responsibilities	Note
Executive Directors
Mr. Fu Yik	38	Chairman and	June 2005	2 January 2014	Overall strategic	The spouse of
Lung（傅奕龍）		executive			management and	Ms. Liu
		Director			development of the
					Group’s business
					operations
Ms. Liu Lai	32	Chief Executive	April 2010	12 May 2014	Overseeing the Group’s	The spouse of Mr.
Ying（廖麗瑩）		Officer and			operation, business	Fu
		executive			development, customer
		Director			support, quality assurance,
					public affairs, finance and
					administration
Ms. Chung Pui	40	Executive	December 2010	12 May 2014	Overseeing the Group’s	N/A
Yee Shirley		Director			operation and customer
（鍾佩儀）					support
_Independent Non-executive _		Directors
Mr. Law Yiu	46	Independent	[�] 2014	[�] 2014	Serving on the Audit	N/A
Sing（羅耀昇）		non-executive			Committee, the
		Director			Remuneration Committee
					and the Nomination
					Committee, and providing
					independent judgment on
					the issues of strategy,
					performance, resources and
					standard of conduct of the
					Company

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DIRECTORS AND SENIOR MANAGEMENT

				Date of
			Time of joining	appointment as
Name	Age	Present position	the Group	Director	Roles and responsibilities	Note
Professor Lam	55	Independent	[�] 2014	[�] 2014	Serving on the Audit	N/A
Sing Kwong		non-executive			Committee, the
Simon（林誠		Director			Remuneration Committee
光）					and the Nomination
					Committee, and providing
					independent judgment on
					the issues of strategy,
					performance, resources and
					standard of conduct of the
					Company
Mr. Ong Chi	40	Independent	[�] 2014	[�] 2014	Serving on the Audit	N/A
King（王子敬）		non-executive			Committee, the
		Director			Remuneration Committee
					and the Nomination
					Committee, and providing
					independent judgment on
					the issues of strategy,
					performance, resources and
					standard of conduct of the
					Company

The following table sets forth certain information of the senior management of the Group:

				Date of appointment as
Name	Age	Position	Date of joining the Group	senior management	Roles and responsibilities
Mr. Tam Tak Kei	51	Chief financial officer	May 2014	May 2014	Oversees corporate finance,
Raymond（譚德機）					investor relations and
					financial management of the
					Group
Ms. Lee Christine	45	General manager	March 2011	March 2011	Responsible for day-to-day
（李嘉慧）					operations and customer
					support of the Group
Mr. Lui Ka Lok	39	Manager, human resources	October 2010	October 2010	Oversees human resources
（呂家樂）		department			function and handles
					compliance matter relating
					to the Group

EXECUTIVE DIRECTORS

Mr. Fu Yik Lung（傅奕龍） , aged 38, is the Chairman, the founder of the Group and a Controlling Shareholder. He was first appointed as a Director on 2 January 2014, and was redesignated as an executive Director on 12 May 2014. Mr. Fu is responsible for the overall strategic management and development of the Group’s business operations.

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DIRECTORS AND SENIOR MANAGEMENT

Mr. Fu completed his secondary education (up to the Hong Kong Certificate of Education Examination level) in Hong Kong in 1995. Mr. Fu has over 13 years of extensive experience in the security guarding services industry. Before setting up his own business by acquiring interests in King Force Security and founded the Group in 2005, Mr. Fu worked as an assistant operations manager at Underwriter Security Limited from August 2000 to July 2004 and was responsible for planning and overseeing of daily operations of security guards, handling customers complaints and disciplinary actions, and the establishment and implementation of corrective measures.

Mr. Fu is currently a holder of SPP for category A and category B security work.

Mr. Fu was a director of the following companies which were incorporated in Hong Kong prior to their respective dissolution pursuant to section 291(6) of the Predecessor Companies Ordinance:

	Principal business
	activity prior to	Date of
Name of company	cessation of business	dissolution
Keen Dragon Industrial Limited	Sales of eye glasses	25 June 2004
（威龍實業有限公司）
Luxury Development Limited	Sales of eye glasses	20 August 2004
（濠華發展有限公司）

Mr. Fu confirmed that the said companies were solvent and inactive at the time of they being struck off and that their dissolutions have not resulted in any liability or obligation imposed against him.

Mr. Fu is a director of all subsidiaries of the Group.

Mr. Fu is the spouse of Ms. Liu.

Ms. Liu Lai Ying（廖麗瑩） , aged 32, is the Chief Executive Officer. She was appointed as an executive Director on 12 May 2014. Ms. Liu is responsible for overseeing the Group’s operation, business development, customer support, quality assurance, finance and administration.

Ms. Liu completed her secondary education in Hong Kong in 2000. Ms. Liu has nearly 11 years of experience in marketing, accounting and administrative management. From September 2002 to April 2004, Ms. Liu had worked as a marketing assistant at Underwriter Security Limited and a senior account executive at Guangdong United Progress Wooltex Hong Kong Office Limited from May 2004 to February 2010. In previous jobs, she was responsible for identifying potential clients and the preparation of tenders and quotations for the provision of security guarding services and customer handling.

Ms. Liu is the spouse of Mr. Fu.

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DIRECTORS AND SENIOR MANAGEMENT

Ms. Chung Pui Yee Shirley（鍾佩儀） , aged 40, was appointed as an executive Director on 12 May 2014. She completed her secondary education in Hong Kong in 1991.

Ms. Chung has over 14 years of experience in operational and administrative management. The following table summarises Ms. Chung’s experience from 1998 to 2010 prior to joining the Group:

Name of company	Role	Period of services
Right Point (Hong Kong)	Administrative assistant	January 1998 to July 1998
Limited
GSI Genius International	Administrative assistant	July 1998 to March 1999
Limited
Ad Marketing Limited and	Storekeeper and operations	July 1999 to July 2000
eZVan Limited	administrator
Parking Management and	Operations officer	November 2000 to June
Consultancy Services		2008
Limited (formerly known
as Vinci Park Services
Hong Kong Limited) and
Wilson Parking
(Holdings) Limited
Phoenix Satellite	Administration assistant	October 2008 to January
Television Company		2009
Limited
Eugene International	Administrative secretary	March 2009 to August
Limited		2009
Ego Finance Limited	Administration assistant	December 2009 to June
		2010

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Law Yiu Sing（羅耀昇） , aged 46 was appointed as an independent non-executive Director on [�]. Mr. Law has been a certified practising accountant of the CPA Australia since 2005, a certified public accountant of the Hong Kong Institute of Certified Public Accountants since 2006, and a certified tax adviser of the Taxation Institute of Hong Kong since 2013.

Mr. Law obtained a bachelor’s degree of engineering from the Concordia University in Canada in 1990. He later completed a master degree in business administration in the University of Hong Kong in 1999 and completed a master degree of practicing accounting in Monash University in Australia in 2004. Mr. Law also obtained a graduate diploma in

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DIRECTORS AND SENIOR MANAGEMENT

English and Hong Kong law (Common Professional Examination) from the Manchester Metropolitan University in 2009. Mr. Law is also a founding member of the Institute of Accountants Exchange.

Mr. Law has over 20 years of experience in the field of financial and business management. From October 1995 to October 1997, Mr. Law was the general manager in the corporate development department of COSCO Pacific Limited (stock code: 1199), the shares of which are listed on the Main Board. From August 2000 to May 2002, Mr. Law was the deputy general manager of business development of China Chengtong Development Group Limited (stock code: 217), the issued shares of which are listed on the Main Board. From January 2003 to November 2004, Mr. Law served as the director of corporate finance and the assistant to the chief financial officer of Capisces International (H.K.) Limited. From January 2006 to January 2007, Mr. Law worked at the Official Receiver’s Office as Insolvency Officer II. From February 2007 to March 2009, Mr. Law served as the vice president of Yangtze Capital Management Limited. From July 2009 to July 2010, Mr. Law served as the chief financial officer of Jimei Development Holdings Ltd.

Mr. Law is currently the treasury and merger & acquisition manager of Brightoil Petroleum (Holdings) Limited (stock code: 933), the shares of which are listed on the Main Board.

Mr. Law is currently an independent non-executive director of JC Group Holdings Limited (stock code: 8326), the shares of which are listed on GEM.

Professor Lam Sing Kwong Simon （林誠光） , aged 55, was appointed as an independent non-executive Director on [�].

Professor Lam obtained a doctorate degree in commerce from the Faculty of Economics and Commerce at The Australian National University in Australia in April 1996. Professor Lam joined The University of Hong Kong as a full-time teaching staff in September 1989 and is now the Professor of Management at the Faculty of Business and Economics of The University of Hong Kong. He has published a number of academic papers and case analysis in the topics of corporate strategy, organization development and operations management.

Before joining The University of Hong Kong, Professor Lam had worked as a Regional Support Manager for the Canadian Imperial Bank of Commerce from 1987 to 1989.

Professor Lam is currently an independent non-executive director of Overseas Chinese Town (Asia) Holdings Limited (stock code: 3366) and Jin Cai Holdings Company Limited (stock code: 1250), the shares of both of which are listed on the Main Board, respectively.

Professor Lam was a director of AS & T Consultants Limited which was incorporated in Hong Kong and was dissolved by means of striking off on 8 March 2002 pursuant to section 291(6) of the Predecessor Companies Ordinance. Professor Lam confirmed that the said company was solvent and inactive at the time of it being struck off and that its dissolution has not resulted in any liability or obligation imposed against him.

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DIRECTORS AND SENIOR MANAGEMENT

Mr. Ong Chi King （王子敬） , aged 40, is a member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants. Mr. Ong received a bachelor degree in business administration from The Hong Kong University of Science and Technology in Hong Kong and a master degree in corporate finance from The Hong Kong Polytechnic University in Hong Kong. Mr. Ong has over 18 years of experience in accounting, finance and company secretarial fields and held senior positions in finance and company secretarial departments in various listed companies listed on the Main Board of the Stock Exchange.

Mr. Ong is currently the company secretary of Yue Da Mining Holdings Limited (stock code: 629), the shares of which are listed on the Main Board. He is currently also an independent non-executive director of Capital VC Limited (stock code: 2324), China Environmental Resources Group Limited (stock code: 1130) and Hong Kong Education (Int’l) Investments Limited (stock code: 1082), the shares of all of which are listed on the Main Board, respectively.

Mr. Ong was a director of Fitness Concept International Holdings Limited, which was incorporated in the Cayman Islands and was dissolved on 30 June 2005. Mr. Ong confirm that the said company was solvent and inactive at the time of it being struck off and that its dissolution has not resulted in any liability or obligation imposed against him.

SENIOR MANAGEMENT

Mr. Tam Tak Kei, Raymond（譚德機） , aged 51, was appointed as the chief financial officer of the Group on 12 May 2014. Mr. Tam graduated from University of Kent at Canterbury in the United Kingdom with a bachelor of arts degree in accounting with computing in July 1985. He has been a member of The Institute of Chartered Accountants in England and Wales since 1990 and a member of the Hong Kong Institute of Certified Public Accountants since 1995. Mr. Tam acted as the financial controller of international law firms for nine years and has over 27 years of professional accounting experience and is currently the finance director of a Hong Kong-based auction company and the company secretary of Branding China Group Limited (stock code: 8219), the shares of which are listed on GEM.

Mr. Tam currently also acted as an independent non-executive director of the following companies whose shares are listed on the Main Board, Sunley Holdings Limited (stock code: 1240), Jin Cai Holdings Company Limited (stock code: 1250), Vision Fame International Holding Limited (stock code: 1315), Tianjin Jinran Public Utilities Company Limited (stock code: 1265) and Ngai Shun Holdings Limited (stock code: 1246). He is also an independent non-executive director of Zebra Strategic Holdings Limited (stock code: 8260), a company whose shares are listed on GEM.

Mr. Tam had acted as an independent non-executive director of Digital Domain Holdings Limited (formerly known as Sun Innovation Holdings Limited), a company whose shares of which are listed on the Main Board (stock code: 547) during the period from 10 September 2009 to 9 August 2013.

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DIRECTORS AND SENIOR MANAGEMENT

Ms. Lee Christine（李嘉慧） , aged 45, was appointed as the general manager of King Force Security on 15 March 2011. Ms. Lee graduated from the University of Victoria, Canada with a bachelor of arts degree in 1989.

Ms. Lee has completed various trainings and programmes as follow:

	Awarding body/	Awarding body/
Programme	organization			Date of completion
Train the trainers (Part	SITO			November 1998
one) & (Part two – static
and patrol guarding)
Professional Security	Co-organised by:–			September 2001
Guarding Supervisor
	� Caritas	Institute	for
	further	and	adult
	education – Chai		Wan
	Night School; and
	� Group 4	Falck	(HK)
	Limited
Accident Theories and	The Open University of			April 2003
Accident Investigations	Hong Kong
Introduction to	The Open University of			April 2003
Occupational Health and	Hong Kong
Safety
Two day basic fire fighting	Hong Kong Fire Services			June 2003
course	Department
Health and Safety	The Open University of			December 2003
Management	Hong Kong
Legislative Context in	The Open University of			April 2004 (*date of issue)
Occupational Health and	Hong Kong
Safety
Quality security training	Lion Training	Centre		March 2011
course (the SGSIA	Limited
recognized training
course – quality
assurance system
compliance)

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DIRECTORS AND SENIOR MANAGEMENT

Ms. Lee is also an approved trainer for the “Basic security and guarding services recognition training programme” (a SGSIA recognized training course) for Sentry Training & Consulting Limited and a holder of SPP for category A and category B security work.

Ms. Lee has nearly 17 years of extensive experience in the security guarding industry. Prior to joining the Group in March 2011, Ms. Lee was an executive director of Underwriter Security Limited during the year 1997 to 2007. She had worked as a general manager of Brink’s Hong Kong Limited from November 2007 to April 2010 and Force Services International Limited from April 2010 to March 2011, respectively.

Ms. Lee was a director of Hong Kong Institute of International Professional Education Limited（香港國際專業進修學會有限公司）which was incorporated in Hong Kong prior to its dissolution on 30 December 2011. The said company was principally engaged in provision of training course. Ms. Lee confirmed that the said company was solvent and inactive at the time of its deregistration.

Mr. Lui Ka Lok （呂家樂） , aged 39, was appointed as the manager of the human resources department of King Force Security on 20 October 2010. Mr. Lui completed his secondary education in Hong Kong in 1994 and the quality security training course (including the SGSIA recognised training course – quality assurance system compliance) provided by the Lion Training Centre Limited in 2012. Mr. Lui has over 17 years of extensive experience in human resources management. Prior to joining the Group in 2010, Mr. Lui had worked in the following companies:

Name of company	Role	Period of services
	(last position in the
	company)
Chubb Hong Kong	Human Resources	November 2004 to June 2010
Limited	Supervisor
Security Cares	Operation Manager of	July 2004 to September 2004
Consultancy Limited	Guarding Department
Underwriter Security	Group Personnel	September 1997 to April 2004
Limited	Manager
	Operation Clerk	September 1996 to August 1997

As confirmed by Mr. Lui, in his past employment in various security companies, he was responsible for managing the recruitment, selection and interviewing process, preparation of forecast and monitor the recruitment budgets, provision of market information in relation to the salary trends and the review and execution of human resources policies in order to ensure full compliance and sufficient workforce for business operations.

Mr. Lui currently is a holder of SPP for category A and category B security work.

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DIRECTORS AND SENIOR MANAGEMENT

COMPANY SECRETARY

Ms. So Hau Kit （蘇巧潔）, aged 36, was appointed as the company secretary of the Company on 12 May 2014. Ms. So is a director of Wonder World Corporate Services Limited with over 9 years of experience in company secretarial services and commercial solutions.

Ms. So is an associate member of The Hong Kong Institute of Chartered Secretaries and also an associate member of The Institute of Chartered Secretaries and Administrators. She obtained a Master of Corporate Governance and a Bachelor of Business Administration from the Open University, Hong Kong.

COMPLIANCE OFFICER

Mr. Fu is the compliance officer of the Company. For details of his biographical details, please refer to the paragraph headed “Executive Directors” of this section.

COMPLIANCE ADVISER

The Company has appointed TC Capital as its compliance adviser pursuant to Rule 6A.19 of the GEM Listing Rules and TC Capital assumes responsibility for acting as the Company’s compliance adviser. Pursuant to Rule 6A.23 of the GEM Listing Rules, the compliance adviser will advise the Company in the following circumstances:

• (1) before the publication of any regulatory announcement, circular or financial report;

• (2) where a transaction, which might be a notifiable or connected transaction under the GEM Listing Rules, is contemplated including share issues and share repurchases;

• (3) where the Company proposes to use the proceeds of the Placing in a manner different from that detailed in this prospectus or where the business activities, developments or results of the Company deviate from any forecast, estimate, or other information in this prospectus; and

• (4) where the Stock Exchange makes an inquiry of the Company under Rule 17.11 of the GEM Listing Rules.

The term of the appointment shall commence on the Listing Date and end on the date on which the Company distributes the annual report of its financial results for the second full financial year commencing after the Listing Date and such appointment may be subject to extension by mutual agreement.

Except for (i) TC Capital’s role as the sponsor in relation to the Listing; (ii) the compliance adviser agreement entered into between the Company and TC Capital; and (iii) the Underwriting Agreement, TC Capital does not have any other contractual arrangement with the Group as at the Latest Practicable Date.

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DIRECTORS AND SENIOR MANAGEMENT

AUDIT COMMITTEE

The Company has established the Audit Committee on [�] 2014 with written terms of reference in compliance with paragraphs C.3.3 and C.3.7 of the Corporate Governance Code (the “Corporate Governance Code”) as set out in Appendix 15 to the GEM Listing Rules. The primary duties of the Audit Committee are, among other things, to review and supervise the financial reporting process and internal control system of the Group. The Audit Committee comprises three members, namely Mr. Law Yiu Sing, Professor Lam Sing Kwong Simon and Mr. Ong Chi King, of whom Mr. Law Yiu Sing is the chairman of the Audit Committee.

REMUNERATION COMMITTEE

The Company has established the Remuneration Committee on [�] 2014 with written terms of reference in compliance with paragraph B.1.2 of the Corporate Governance Code. The Remuneration Committee comprises four members, namely Mr. Fu, Mr. Law Yiu Sing, Professor Lam Sing Kwong Simon and Mr. Ong Chi King. Mr. Ong Chi King is the chairman of the Remuneration Committee. The primary duties of the Remuneration Committee are, amongst other things, to make recommendations to the Board on the terms of remuneration packages, bonuses and other compensation payable to the Directors and senior management and on the Group’s policy and structure for all remuneration of the Directors and senior management.

NOMINATION COMMITTEE

The Company has established the Nomination Committee on [�] 2014 with written terms of reference in compliance with paragraph A.5.2 of the Corporate Governance Code. The Nomination Committee comprises four members, namely Mr. Fu, Mr. Law Yiu Sing, Professor Lam Sing Kwong Simon and Mr. Ong Chi King. Mr. Fu is the chairman of the Nomination Committee. The Nomination Committee is mainly responsible for making recommendations to the Board on appointment of Directors and succession planning for the Directors.

CORPORATE GOVERNANCE

The Directors recognise the importance of good corporate governance in management and internal procedures so as to achieve effective accountability. The Company will comply with the Corporate Governance Code and the associated GEM Listing Rules.

DIRECTORS AND SENIOR MANAGEMENT’S REMUNERATION

The aggregate amount of compensation (including fees, salaries, contributions to pension schemes, housing and other allowances, benefits in kind and discretionary bonuses) which were paid to the Directors for the two years ended 31 March 2013 and 2014 was approximately, HK$1.3 million and HK$1.3 million, respectively.

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DIRECTORS AND SENIOR MANAGEMENT

The aggregate amount of compensation (including fees, salaries, contributions to pension schemes, housing and other allowances, benefits in kind and discretionary bonuses) which were paid to the above senior management of the Group for each of the two years ended 31 March 2013 and 2014 was approximately HK$614,000 and HK$666,000, respectively.

The aggregate amount of contributions to retirement benefits scheme paid by the Group to the Directors for each of the two years ended 31 March 2013 and 2014 was approximately HK$38,000 and HK$43,000, respectively.

The Company’s policy concerning the remuneration of the Directors is that the amount of remuneration is determined by reference to the relevant Director’s experience, responsibilities, workload, performance and the time devoted to the Group. Further details of the remuneration of the Directors are set out in the paragraph headed “Further Information About Substantial Shareholders, Directors and Experts – Remuneration of Directors” in Appendix V to this prospectus.

The emoluments paid to the Group’s five highest paid individuals (including Directors) in aggregate for each of the two years ended 31 March 2013 and 2014 were approximately HK$1.9 million and HK$2.0 million, respectively. During the Track Record Period, no emolument was paid by the Group to any of the Directors or the five highest paid individuals (including Directors and employees) as an inducement to join or upon joining the Group or as compensation for loss of office. None of the Directors has waived any emoluments during the Track Record Period.

Except as disclosed above, no other payments of remuneration have been made, or are payable, in respect of the Track Record Period, by the Group to or on behalf of any of the Directors.

For additional information on Directors’ remuneration during the Track Record Period as well as information on the highest paid individuals, please refer to note 12 in the Accountant’s Report set out in Appendix I to this prospectus.

The Group participates in the mandatory provident fund prescribed by the Mandatory Provident Fund Schemes Ordinance and the Directors confirm that the Group has made the relevant contributions in accordance with the aforesaid laws and regulations. Save as the aforesaid, the Group did not participate in any other pension schemes during the Track Record Period.

SHARE OPTION SCHEME

The Share Option Scheme was conditionally adopted pursuant to the written resolutions of the Existing Shareholders of the Company passed on [�] 2014. The purpose of the Share Option Scheme is to enable the Company to grant options to selected participants as incentives or rewards for their contribution to it. The Directors consider the Share Option Scheme, with its broadened basis of participation, will enable the Group to reward the employees, the Directors and other selected participants for their contributions to the Group. This will be in accordance with Chapter 23 of the GEM Listing Rules and other relevant rules and regulations. Further details of the Share Option Scheme are set forth in the section headed “Statutory and General Information – Share Option Scheme” in Appendix V to this prospectus.

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SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors, the following persons (i) are, as at 21 May 2014, or (ii) will, immediately following completion of the Placing (without taking into account any Shares which may be taken up under the Placing, and Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme), have interests or short positions in Shares or underlying Shares 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 will be directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any of its subsidiaries:

Long position in the Shares

						Number of
		Number of				Shares held/	Percentage of
		nil-paid				interested	shareholding
		Shares		Percentage of		immediately	immediately
		held/interested		shareholding		following	following
Name	Capacity/nature	as at 21 2014	May (Note 5)	as at 21 2014	May (Note 5)	completion of the Placing	completion of the Placing
Optimistic King	Beneficial owner		750		75%	[REDACTED]	[REDACTED]%
Mr. Fu (Note 1)	Interest of controlled		750		75%	[REDACTED]	[REDACTED]%
	corporation
Ms. Liu (Note 2)	Interest of spouse		750		75%	[REDACTED]	[REDACTED]%
Gloria Power	Beneficial owner		250		25%	[REDACTED]	[REDACTED]%
Mr. Chiu (Note 3)	Interest of controlled		250		25%	[REDACTED]	[REDACTED]%
	corporation
Ms. Yung Wing	Interest of spouse		250		25%	[REDACTED]	[REDACTED]%
Tao (Note 4)

Notes:

1. These [REDACTED] Shares are held by Optimistic King. Mr. Fu beneficially owns the entire issued share capital of Optimistic King. Therefore, Mr. Fu is deemed, or taken to be, interested in all the Shares held by Optimistic King for the purpose of the SFO. Mr. Fu is the sole director of Optimistic King.

2. Ms. Liu is the spouse of Mr. Fu. Accordingly, Ms. Liu is deemed, or taken to be, interested in all the Shares in which Mr. Fu is interested in for the purpose of the SFO.

3. These [REDACTED] Shares are held by Gloria Power. Mr. Chiu beneficially owns the entire issued share capital of Gloria Power. Therefore, Mr. Chiu is deemed, or taken to be, interested in all the Shares held by Gloria Power for the purpose of the SFO. Mr. Chiu is the sole director of Gloria Power.

4. Ms. Yung is the spouse of Mr. Chiu. Accordingly, Ms. Yung is deemed, or taken to be, interested in all the Shares in which Mr. Chiu is interested in for the purpose of the SFO.

5. The date of filing of application proof and prior to completion of the Reorganisation.

Save as disclosed above, the Directors are not aware of any other persons who will, immediately following completion of the Placing (without taking into account any Shares which may be taken up under the Placing, and Shares to be issued upon exercise of any option which may be granted under the Share Option Scheme or repurchased by the

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SUBSTANTIAL SHAREHOLDERS

Company pursuant to the mandate as referred to in the paragraph headed “Further information about the Company” in Appendix V to this prospectus), have interests or short positions in Shares or underlying Shares 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 will be directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any of its subsidiaries.

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CONNECTED TRANSACTION

During the Track Record Period, members of the Group entered into certain related party transactions, the details of which are set out in Note 26 of the Accountant’s Report in Appendix I to this prospectus.

The following transactions are expected to continue after Listing, and will be regarded as connected transactions exempt from the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules.

EXEMPT CONNECTED TRANSACTIONS – INSURANCE SERVICES

As disclosed in the section headed “History, Reorganisation and Corporate Structure – Introduction of Strategic Investor”, Mr. Chiu, through his wholly-owned company Gloria Power, became interested in the Group in November 2013 through the Pre-lPO Investment. Immediately following completion of the Placing (without taking into account any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme), Gloria Power will be interested in [REDACTED]% of the issued share capital of the Company, and thus be a substantial Shareholder. Mr. Chiu and his associates will become connected persons of the Company for the purpose of the GEM Listing Rules.

Mr. Chiu is principally engaged in the insurance business. During the Track Record Period, Realife Insurance Brokers Limited (“ Realife Insurance ”, which is wholly-owned by Mr. Chiu) and its associates (including Realife Financial Services Limited, which is wholly-owned by Mr. Chiu, Realife Insurance Services Limited and Realife Insurance Advisors Limited, both of which are wholly-owned by Ms. Yung Wing Tao (the spouse of Mr. Chiu)) have been providing insurance brokerage and insurance consultation services (including negotiating or arranging contracts of insurance) (“ Insurance Services ”) to the Group. Insurance maintained by members of the Group in respect of Insurance Services provided by Realife Insurance and its associates during the Track Record Period includes, employees’ compensation insurance, public liability insurance, motor vehicles insurance (including third party insurance) and medical insurance for employees of the Group.

The total fee paid by the Group to Realife Insurance and its associates in relation to the Insurance Services during the Track Record Period is set out below:

Historical figures

For the year ended
31 March
2013 2014
HK$1,457,000 HK$1,737,000

The Directors (including the independent non-executive Directors) confirm that the arrangements for the Insurance Services are in the ordinary and usual business of the Group, on arm’s length basis and are on normal commercial terms, and on terms which are no less favourable than terms for similar transactions offered by Independent Third Parties.

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CONNECTED TRANSACTION

The Group expects to continue using the Insurance Services from Realife Insurance and/or its associates following Listing, and will continue to do so on an arm’s length basis, on normal commercial terms and on terms no less favourable than the terms offered to the Group by Independent Third Parties. The Directors (including the independent non-executive Directors) are of the view that the arrangements are in the ordinary and usual course of business, are fair and reasonable, and in the interests of the Shareholders as a whole.

As it is expected that the highest relevant percentage ratio (other than the profit ratio) in respect of the Insurance Services provided by Realife Insurance and its associates will be, on an annual basis, less than 5% and the total consideration will be less than HK$3,000,000 in aggregate by reference to the historical figures, and is on normal commercial terms, it will constitute a de minimis continuing connected transaction exempt pursuant to Rule 20.74(1)(c) of the GEM Listing Rules (which has come into effect from 1 July 2014) from reporting, announcement, annual review and independent shareholders’ approval requirements in Chapter 20 of the GEM Listing Rules.

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SHARE CAPITAL

SHARE CAPITAL

The share capital of the Company immediately following completion of the Placing is set out in the table below. The table is prepared on the basis of the Placing becoming unconditional and the issue of Placing Shares pursuant thereto is made as described herein. It takes no account of any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme or of any Shares which may be allotted and issued or repurchased by the Company under the general mandates for the allotment and issue or repurchase of Shares granted to the Directors as referred to below or otherwise.

HK$

Authorised share capital:

2,000,000,000 Shares 20,000,000

Issued and to be issued, fully paid or credited as fully paid upon completion of the Placing:

[REDACTED]	Shares	in issue as at the date of this prospectus	[REDACTED]	[REDACTED]
[REDACTED]	Placing	Shares to be issued pursuant to the Placing	[REDACTED]
[REDACTED]	Shares		[REDACTED]

MINIMUM PUBLIC FLOAT

Pursuant to Rule 11.23(7) of the GEM Listing Rules, at least 25% of the total issued share capital of the Company must at all times be held by the public. The [REDACTED] Placing Shares represent [REDACTED]% of the issued share capital of the Company upon Listing.

RANKING

The Placing Shares will rank pari passu in all respects with all the Shares now in issue or to be allotted and issued as mentioned in this Prospectus and will qualify for all dividends or other distributions declared, made or paid on the Shares in respect of a record date which falls after the Listing Date.

SHARE OPTION SCHEME

The Company has conditionally adopted the Share Option Scheme, the major terms of which are set out in the paragraph headed “Share Option Scheme” in Appendix V to this prospectus.

GENERAL MANDATE TO ISSUE SHARES

Subject to the Placing becoming unconditional, the Directors have been granted a general unconditional mandate to allot, issue and deal with the Shares or securities convertible into Shares or options, warrants or similar rights to subscribe for Shares or such

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SHARE CAPITAL

securities convertible into Shares, and to make or grant offers, agreements or options which might require such Shares to be allotted and issued or dealt with subject to the requirement that the aggregate nominal value of the Shares so allotted and issued or agreed conditionally or unconditionally to be allotted and issued (otherwise than pursuant to a rights issue, or scrip dividend scheme or similar arrangements, or a specific authority granted by the Shareholders) shall not exceed:

• (a) 20% of the aggregate nominal value of the share capital of the Company in issue immediately following the completion of the Placing (not including Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme); and

• (b) the aggregate nominal value of the share capital of the Company repurchased by the Company (if any) pursuant to the general mandate to repurchase Shares referred to in the paragraph headed “General Mandate to Repurchase Shares” below.

This mandate does not cover Shares to be allotted, issued, or dealt with under a rights issue or pursuant to the exercise of the options which may be granted under the Share Option Scheme. This general mandate to issue Shares will remain in effect until whichever is the earliest of:

• (a) the conclusion of the next annual general meeting of the Company;

• (b) the expiration of the period within which the next annual general meeting of the Company is required by the Articles or the Companies Law or any other applicable laws of the Cayman Islands to be held; or

• (c) the time when such mandate is revoked or varied by an ordinary resolution of the Shareholders at a general meeting.

For further details of this general mandate, please refer to the sub-paragraph headed “Written resolutions of the Existing Shareholders passed on [�] 2014” under the paragraph “Further information about the Company” in Appendix V to this prospectus.

GENERAL MANDATE TO REPURCHASE SHARES

Subject to the Placing becoming unconditional, the Directors have been granted a general unconditional mandate to exercise all the powers of the Company to repurchase Shares with an aggregate nominal value of not more than 10% of the aggregate nominal value of the share capital of the Company in issue following the completion of the Placing (without taking into account any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme).

This mandate only relates to repurchases made on GEM, or on any other stock exchange on which the securities of the Company may be listed and which is recognised by the SFC and the Stock Exchange for this purpose, and such repurchases are made in accordance with all applicable laws and the requirements of the GEM Listing Rules. A

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SHARE CAPITAL

summary of the relevant GEM Listing Rules is set out in the paragraph headed “Further information about the Company – Repurchase of shares by the Company” in Appendix V to this prospectus.

The general mandates to issue and repurchase Shares will remain in effect until whichever is the earliest of:

• (a) the conclusion of the next annual general meeting of the Company;

• (b) the expiration of the period within which the next annual general meeting of the Company is required by the Articles or the Companies Law or any other applicable law of the Cayman Islands to be held; or

• (c) the time when such mandate is revoked or varied by an ordinary resolution of the Shareholders in general meeting,

For further details of this general mandate, please refer to the paragraph headed “Further information about the Company – Repurchase of shares by the Company” in Appendix V to this prospectus.

CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE REQUIRED

As a matter of the Companies Law, an exempted company is not required by law to hold any general meetings or class meetings. The holding of general meeting or class meeting is prescribed for under the articles of association of a company. Accordingly, the Company will hold general meetings as prescribed for under the Articles, a summary of which is set out in “Appendix IV – Summary of the Constitution of the Company and the Cayman Islands Company Law” to this prospectus.

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FINANCIAL INFORMATION

You should read the following discussion and analysis in conjunction with the audited financial information together with the accompanying notes thereto, as set forth in the Accountant’s Report in Appendix I to this prospectus. The audited consolidated financial information has been prepared in accordance with HKFRS. You should read the entire Accountant’s Report and not merely rely on the information contained in this section.

The following discussion and analysis contains certain forward-looking statements that reflect the current views with respect to future events and financial performance. These statements are based on the assumptions and analyses made by the Group in light of the Group’s experience and perception of historical trends, current conditions and expected future developments, together with other factors the Group believes are appropriate under the circumstances. However, whether actual outcomes and developments will meet the Group’s expectations and projections depend on a number of risks and uncertainties over which the Group does not have control. For further information, you should refer to the section headed “Risk Factors” in this prospectus.

OVERVIEW OF THE GROUP’S OPERATIONS

The Group is a manned security guarding services provider and it is licensed to provide security guarding services in Hong Kong under Type I security work in accordance with the SCL regime. The Group operates under the name “KING FORCE” and the services it offers aim to protect the safety and assets of its customers, prevent crime and offence and maintain order. The security guarding services offered by the Group include, patrolling, access control at the lobby entrance, making entrance records of visitors and stopping trespassers, handling complaints, settling and reporting disputes. The Group also provides guarding and personal escorting services in various events, occasions, exhibitions, ceremonies and press conferences and crowd management services. With over nine years experience in manned security guarding services, the Group has established goodwill in its security guarding services. The Group is delegated to providing quality manned security guarding services and it is accredited with ISO 9001:2008 (quality management system standard) for its design and provision of security guarding services awarded by the Hong Kong Quality Assurance Agency. To ensure quality of services, the Group provides guidance and trainings to its security guards and conducts supervision on its security guards. With continued effort, the Group has established a broad customer base. During the two years ended 31 March 2013 and 2014, the Group had 352 and 366 customers, respectively. The Group’s customers during the Track Record Period include property management companies, schools, warehouse operators, property redevelopers, and construction companies. The Group has, as at the Latest Practicable Date, over 1,000 full-time and part-time qualified security guards trained to provide quality manned security guarding services to its customers.

During the Track Record Period, all of the Group’s revenue was derived from its security guarding services in Hong Kong. For the two years ended 31 March 2013 and 2014, the Group’s revenue was approximately HK$90.6 million and HK$111.1 million, respectively. The profit and total comprehensive income during the Track Record Period was approximately HK$9.0 million and HK$8.4 million, respectively. The Group achieved growth in revenue mainly by the expansion of scope of services and expanded client base.

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FINANCIAL INFORMATION

BASIS OF PRESENTATION

The Company was incorporated as an exempted company in the Cayman Islands on 2 January 2014. To rationalise the corporate structure in the preparation of the Placing, the Group underwent the Reorganisation as detailed in the section headed “History, Reorganisation and Corporate Structure” in this prospectus and the paragraph headed “Corporate Reorganisation” in Appendix V to this prospectus.

Pursuant to the Reorganisation, the Company became the holding company of the companies now comprising the Group on [�] 2014. The Group has been under the control and beneficially owned by Mr. Fu throughout the Track Record Period or since their respective dates of incorporation up to 31 March 2014. The Group comprising the Company and its subsidiaries resulting from the Reorganisation is regarded as a continuity entity. Accordingly, the financial statements of the Group has been prepared on the basis as if the Company had always been the holding company of the companies comprising the Group throughout the Track Record Period, using the principles of merger accounting as set out below.

The consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows, include the results and cash flows of the companies throughout the Track Record Period or since their respective dates of incorporation or establishment up to 31 March 2014. The consolidated statements of financial position of the Group as at 31 March 2013 and 2014 have been prepared to present the assets and liabilities of the companies comprising the Group as if the current group structure had been in existence as at those dates.

SIGNIFICANT FACTORS AFFECTING THE GROUP’S RESULTS OF OPERATIONS

The results of the Group’s operations and financial condition have been, and will continue to be, affected by a number of factors, including those as set forth below.

Renewal and tendering of contracts

Most of the Group’s service contracts ranged from one-off services to a term of one year. Accordingly, the Group’s revenue and business growth will depend on its ability to expand its customer base, renew existing service contracts and secure new service contracts with existing and new customers. Some of its contracts awarded to the Group were through tendering process or bidding process that highly depends on the Group’s ability to prepare and submit competitive tender or quotation. The Group prepares its tender and quotation based on its estimated labour costs plus a margin which the Group considers would be acceptable to its customers. If its quotation is too high, the Group may lose the tender or bid to its competitors. Therefore, there is no assurance that the Group can renew the expiring contracts and/or secure new contracts on a continual basis. For the years ended 31 March 2013 and 2014, the renewal rates of its expired fixed manned security guarding service contracts were approximately 77.0% and 75.0%, respectively. Furthermore, there is no assurance that the Group will be able to submit the most competitive tender or quotation without affecting its profitability. The Group endeavoured to secure more new contracts and enhance its contract renewal rate while maintaining its profitability and the Group will study

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FINANCIAL INFORMATION

information such as historical service fees for providing similar type of services and/or at similar locations and recent staff salaries, to ensure competitive proposals are delivered for tendering.

Wages of guards

The Group’s business is relatively labour-intensive. As at the Latest Practicable Date, the Group had a total of 1,061 full-time and part-time guards providing manned security guarding and related services and cost of services rendered which mainly consist of direct guard cost has been and will continue to affect its results of operations significantly. For the years ended 31 March 2013 and 2014, cost of services rendered was approximately HK$75.3 million and HK$88.0 million, respectively, representing approximately 83.1% and 79.3% of its revenue, respectively. According to the government policy, the statutory minimum wage has been increased from HK$28.0 per hour to HK$30.0 per hour since 1 May 2013 and will be reviewed at least every two years. All the fixed position contracts with customers allow for potential fee adjustment with reference to statutory minimum wage requirement. The Group also takes into account potential increase in statutory minimum wage during preparation of budgets in tendering and quotations. Any change to the level of staff compensation in the market, for example, the adjustment in statutory minimum wage, will have a direct impact on the Group’s results of operations. The Group’s direct guard cost may increase in the future and if the Group could not transfer such increment to its customers, its profitability and results of operations may be adversely affected.

Competition

According to the Ipsos Report, the manned security guarding services industry in Hong Kong is fragmented and the competition is keen with over 900 licensed security service providers in Hong Kong and top five security service providers accounted for about 32.4% of the total industry revenue in 2013. The ability to sustain the Group’s profitability and business expansion will depend on its ability to compete with and differentiate itself from its competitors. If the competition intensifies and the Group is not able to compete successfully with existing and potential competitors, its business, market share and financial performance may be adversely affected.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Group has identified certain critical accounting policies that are significant to the preparation of its consolidated financial statements and important for an understanding of its financial condition and results of operation. The Group’s principal accounting policies are set forth in note 3 to the Accountant’s Report attached under Appendix I to this prospectus.

Accounting estimates are those that require management to exercise judgment and make estimates that yield materially different results if management were to apply different assumptions or make different estimates.

The Group adopted accounting policies and make estimates that the Directors believe are the most appropriate in the circumstances for the purpose of giving a true and fair view of its results and financial position. The Group believes the most complex and sensitive

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FINANCIAL INFORMATION

judgments, because of their significance to its results of operations and financial condition, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Actual results in these areas could differ from the Group’s estimates. The critical accounting policies and estimates the Group has adopted are described below.

Revenue and other income recognition

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

• Revenue from provision of security guarding services are recognised in the accounting period in which the services are rendered.

• Interest income from bank deposits is accrued on a time apportionment basis using the effective interest method.

• Interest income from investment in a life insurance policy is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. The cost of property, plant and equipment includes its purchase price and the costs directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other costs, such as repairs and maintenance are charged to profit or loss during the period in which they are incurred.

Property, plant and equipment are depreciated so as to write off their cost over their estimated useful lives on a straight-line basis. The estimated useful lives are, at the following rates per annum:

Leasehold land and buildings	4%
Leasehold improvements	4%
Furniture and equipment	20%
Motor vehicles	25%

The assets’ depreciation method and estimated useful lives are reviewed, and adjusted if appropriate, at each reporting date.

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FINANCIAL INFORMATION

An asset is written down immediately to its recoverable amount if its carrying amount is higher than the asset’s estimated recoverable amount.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the relevant lease.

The gain or loss on disposal of an item of property, plant and equipment is the difference between the net sale proceeds and its carrying amount, and is recognised in profit or loss on disposal.

Impairment of receivables

The policy for the impairment of receivables of the Group is based on the evaluation of collectability and ageing analysis of accounts and on the management’s judgement. A considerable amount of judgment is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each customer.

At each reporting date, the Group reviews receivables for evidence of impairment on both individual and collective basis. During the year ended 31 March 2014, the Group has written off trade receivables of HK$95,200 directly to the profit or loss for the year. None of the trade receivables as at 31 March 2013 and 2014 has been identified by the Group as having an impairment issue.

Depreciation

The Group depreciated the property, plant and equipment on a straight-line basis over the estimated useful lives of four to twenty-five years, starting from the date on which the assets are placed into productive use. The estimated useful lives reflect the directors’ best estimate of the periods that the Group intends to derive future economic benefits from the use of the Group’s property, plant and equipment.

Estimated current tax and deferred tax

The Group is subject to income taxes in Hong Kong. There are certain transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax based on estimates. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax provisions in the period in which such final tax liabilities determination is made.

REVIEW OF HISTORICAL OPERATING RESULTS

The following table sets out the Group’s consolidated statements of profit or loss and other comprehensive income for the years end 31 March 2013 and 2014. This information is derived and should be read in conjunction with the consolidated financial information contained in the Accountant’s Report in Appendix I to this prospectus.

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FINANCIAL INFORMATION

Consolidated statements of profit or loss and other comprehensive income

Revenue Cost of services rendered Gross profit Other income Administrative expenses Other operating expenses Operating profit Finance costs Profit before income tax Income tax expense Profit and total comprehensive income for the year attributable to owners of the Company	For the year ended 31 March 2013 2014 (HK$’000) (HK$’000) 90,605 111,059 (75,288) (88,026) 15,317 23,033 2,670 510 (6,884) (7,747) – (3,806) 11,104 11,990 (809) (1,054) 10,295 10,936 (1,249) (2,574) 9,046 8,362

DESCRIPTION OF SELECTED LINE ITEMS FROM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Revenue

During the Track Record Period, the Group’s revenue was principally generated from the provision of manned security guarding services in Hong Kong. The Group’s service fees are determined on a cost-plus basis with reference to factors such as the expected costs to be involved, the location of the services rendered, the length of contract, relevant skills required and special requests from customers (such as uniform, language skills, manner and equipment) and the urgency of the tasks. The administrative fees were typically determined based on a certain percentage of the staff costs.

The service fees are normally billed monthly or upon completion of services with a credit period ranging from 7 to 30 days to the Group’s major customers. Revenue from provision of security guard services are recognised when the services are performed.

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FINANCIAL INFORMATION

Revenue by property

The following table sets forth a breakdown of the Group’s revenue derived from services rendered in premises of different sectors for the years ended 31 March 2013 and 2014:

Commercial (1) Construction site Warehouse School Residential Exhibition Others (2) Total	For the year ended 31 March 2013 (HK$’000) 25,373 16,585 17,368 14,455 12,795 3,954 75 90,605	Percentage % 27.9 18.3 19.2 16.0 14.1 4.4 0.1 100.0	For the year ended 31 March 2014 (HK$’000) 31,390 22,881 22,099 14,049 14,113 6,165 362 111,059	Percentage % 28.3 20.6 19.9 12.6 12.7 5.6 0.3
				100.0

Notes:

• (1) Commercial includes industrial and commercial buildings, hotels, shopping malls and retail shops

• (2) Others include the services rendered in other property types and the provision of personal escorting services.

The following table sets forth the breakdown of the Group’s revenue by types of contracts for the years ended 31 March 2013 and 2014:

Manned security guarding services −Fixed −Temporary – Event Total	For the year ended 31 March 2013 (HK$’000) 73,055 4,830 12,720 90,605	Percentage % 80.6 5.3 14.1 100.0	For the year ended 31 March 2014 (HK$’000) 90,025 2,400 18,634 111,059	Percentage % 81.1 2.1 16.8
				100.0

Note: Fixed positions refer to contract for a term over 6 months and for temporary positions, they refer to contract for a term less than 6 months.

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FINANCIAL INFORMATION

Fixed manned security guarding services

Revenue of the Group’s fixed security guarding services accounted for 80.6% and 81.1% of the total revenue, respectively during the Track Record Period. The fixed positions refer to contract for a term of at least six months. The Group mainly provides fixed manned security guarding services in multi-storey commercial buildings, schools, construction sites and warehouses.

Temporary manned security guarding services

Revenue of the Group’s temporary manned security guarding services accounted for 5.3% and 2.1% of the total revenue, respectively during the Track Record Period. The temporary positions refer to contract for a term last from one month to six months. During the Track Record Period, the Group mainly provides temporary manned security guarding services in multi-storey commercial buildings, schools, construction sites and warehouses.

Event security guarding services

Revenue of the Group’s event security guarding services is considered to be one-off or ad hoc in nature, including the temporary replacement of security guards, usually last for one day to less than one month. During the Track Record Period, the Group mainly provided event security guarding services in multi-storey commercial buildings, construction sites, shops, schools, and exhibition venues. In addition, personnel escorting services to its clients are also included in this category. During the Track Record Period, the revenue of the Group’s event manned security guarding services accounted for 14.1% and 16.8%.

Cost of services rendered

During the Track Record Period, the Group’s cost of services rendered primarily comprised wages and staff costs incurred for the Group’s front-line security guards, patrol team and operations department which mainly included salaries and wages, staff bonus, contributions to defined contribution retirement and provision for unused annual leaves and long service payment.

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FINANCIAL INFORMATION

Gross profit and gross margin

The following table sets forth an analysis of the Group’s gross profit and gross margin by different types of contracts during the Track Record Period:

Manned security guarding services −Fixed −Temporary – Event Total	For the year ended 31 March 2013 2014 Gross profit Gross margin Gross profit Gross margin (HK$’000) % (HK$’000) % 10,159 13.9 16,322 18.1 1,994 41.3 1,171 48.8 3,164 24.9 5,540 29.7 15,317 16.9 23,033 20.7

Fixed manned security guarding services

Gross profit of the Group’s fixed manned security guarding services is the lowest among the different types of guarding services mainly because (i) the competition of fixed manned security guarding services is keen; (ii) fixed manned security guarding services are usually planned ahead by the clients who have sufficient time to obtain quotations from various competitors; and (iii) the regular and stable nature, people tend to accept a lower pay. As a result, margins from such services are much lower than the other two categories.

Temporary manned security guarding services

Gross profit of the Group’s temporary manned security guarding services is the highest compared to other types of services as clients are more willing to pay for the convenience of the shorter term service, which would otherwise cost the client additional time and effort to recruit and hire a security guard just for a short term or for emergency purpose. Furthermore, short term employment may not be attractive for security guards resulting in difficulty in finding a suitable candidate by the client.

Event security guarding services

Gross profit of the Group’s event security guarding services is a mix of planned and unplanned events, which mixes low and high margins. Planned events such as exhibitions would generally entail lower profit margins, while unplanned and emergency situations such as the malfunction of the existing security system requiring the presence of a security guard would result in clients’ willingness to pay a high fee to ensure that a security guard can be present at the location as soon as possible.

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FINANCIAL INFORMATION

Other income

Other income during the Track Record Period consisted of (i) gain on disposal of property, plant and equipment; (ii) bank loan interest recharged to a director; and (iii) sundry income. During the financial year ended 31 March 2013, the Group disposed of certain property, plant and equipment which resulted in an one-off gain on the disposal of approximately HK$2.4 million. The following table sets forth the breakdown of other income during the Track Record Period:

Gain on disposal of property, plant and equipment Bank loan interest recharged to a director Sundry income Total	For the year ended 31 March 2013 2014 (HK$’000) (HK$’000) 2,441 – 56 218 173 292 2,670 510	For the year ended 31 March 2013 2014 (HK$’000) (HK$’000) 2,441 – 56 218 173 292 2,670 510
		510

Administrative expenses

During the Track Record Period, the Group’s administrative expenses primarily comprised remuneration and employee benefit expenses relating to administrative staff, rental expenses, insurance expenses, advertising expenses, motor expenses, depreciation and other administrative expenses. The following table sets forth the breakdown of administrative expenses during the Track Record Period:

Remuneration and employee benefit Rental expenses Insurance expenses Advertising expenses Motor expenses Depreciation Uniform expenses Consumable storage expenses Legal and professional fee Printing and stationery expenses Telecommunication expenses Other administrative expenses Total	For the year ended 31 March 2013 2014 (HK$’000) (HK$’000) 1,985 2,342 260 451 1,277 1,629 383 373 539 586 736 794 235 182 130 146 26 72 107 47 63 100 1,142 1,025 6,883 7,747	For the year ended 31 March 2013 2014 (HK$’000) (HK$’000) 1,985 2,342 260 451 1,277 1,629 383 373 539 586 736 794 235 182 130 146 26 72 107 47 63 100 1,142 1,025 6,883 7,747
		7,747

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FINANCIAL INFORMATION

Other operating expenses

The Group’s other operating expenses primarily consist of listing expenses in relation to the Listing. The expenses incurred for the Listing are non-recurring in nature and mainly comprise professional fees paid to the Sponsor, legal advisers, reporting accountant, internal control consultant, market research consultant and other parties for their services in connection with the Placing. Please also refer to the paragraphs headed “Listing Expenses” below in this section for details of the expenses incurred for the Listing.

Finance costs

Finance costs primarily comprise interest charges on bank borrowings, amount due to a related party and finance leases. The bank borrowings during the Track Record Period were resulted from the purchase of property, plant and equipment. The following table sets forth the breakdown of finance costs during the Track Record Period:

Interest charge on: Bank borrowings Amount due to a related party Finance leases Total	For the year ended 31 March 2013 2014 (HK$’000) (HK$’000) 751 1,026 27 – 31 28 809 1,054	For the year ended 31 March 2013 2014 (HK$’000) (HK$’000) 751 1,026 27 – 31 28 809 1,054
		1,054

Income tax expenses

Income tax expenses primarily consist of provision for current income tax expenses incurred in Hong Kong. During the Track Record Period, all of the Group’s revenue was derived from Hong Kong and the Group was subject to profits tax in Hong Kong. During the two years ended 31 March 2013 and 2014, the effective tax rate of the Group was approximately 12.1% and 23.5%, respectively. The increase of the effective tax rate was mainly due to the listing expenses incurred for the Listing which are not deductible for taxation.

The Company and its subsidiaries are incorporated in different jurisdictions, with different taxation requirements illustrated below:

The Cayman Islands and the BVI

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

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FINANCIAL INFORMATION

Hong Kong

All the Company’s Hong Kong incorporated subsidiaries were subject to Hong Kong profits tax rate at 16.5% of the estimated assessable profits during the Track Record Period.

PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS

Year ended 31 March 2014 compared to year ended 31 March 2013

Revenue

The Group’s overall revenue increased by approximately HK$20.5 million or 22.6% from HK$90.6 million for the year ended 31 March 2013 to approximately HK$111.1 million for the year ended 31 March 2014. The increase in revenue is mainly due to (i) the increase in number of contracts; (ii) the general increase in the service fees quoted by the Group following the increase of the statutory minimum wage from HK$28.0 per hour to HK$30.0 per hour since 1 May 2013; and (iii) the corresponding increase in the administrative fee quoted as the administrative fee is expressed as a percentage of the estimated guard cost. In particular, revenue from the construction site increased by approximately 38.0% which is mainly because of the Group having obtained new contracts for this kind of premises through successful tendering of three projects during the period.

Cost of services rendered

The Group’s cost of services increased by approximately HK$12.7 million or 16.9% from approximately HK$75.3 million for the year ended 31 March 2013 to approximately HK$88.0 million for the year ended 31 March 2014. Such increase was primarily attributable to the increase in the number of contracts and the general increase in guard costs as a result of the increase of statutory minimum wage since 1 May 2013 from HK$28.0 per hour to HK$30.0 per hour.

Gross profit and gross margin

The Group’s gross profit increased by approximately HK$7.7 million or 50.4% from approximately HK$15.3 million for the year ended 31 March 2013 to approximately HK$23.0 million for the year ended 31 March 2014 and the Group’s gross margin also increased from approximately 16.9% for the year ended 31 March 2013 to approximately 20.7% for the year ended 31 March 2014. The increase in gross profit was due to the increase in revenue which outweighed the effect of the increase in cost of services rendered and the higher gross margin was due to the increase in service fees quoted and the increase in administrative fee charged by the Group.

Gross profit for the Group’s fixed manned security guarding services increased by approximately HK$6.1 million or approximately 60.7% from approximately HK$10.2 million for the year ended 31 March 2013 to approximately HK$16.3 million for the year ended 31 March 2014, which was mainly attributable to the increase in the number of contracts of the Group’s fixed manned security guarding services. Gross margin of the Group’s fixed manned security guarding services increased from approximately 13.9% for the year ended 31 March 2013 to approximately 18.1% for the year ended 31 March 2014, which was mainly attributable to the Group increased in service fees quoted to its clients.

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FINANCIAL INFORMATION

Gross profit for the Group’s temporary manned security guarding services decreased by approximately HK$0.8 million or approximately 41.3% from approximately HK$2.0 million for the year ended 31 March 2013 to approximately HK$1.2 million for the year ended 31 March 2014. The decrease in gross profit from temporary manned security guarding services was mainly due to the decreased number of contracts of the Group’s temporary manned security guarding services for the year ended 31 March 2014. Nevertheless, gross margin of the Group’s temporary manned security guarding services increased from approximately 41.3% for the year ended 31 March 2013 to approximately 48.8% for the year ended 31 March 2014, which was mainly attributable to the fee adjustment on quotations of the Group’s temporary manned security guarding services for the year ended 31 March 2014.

Gross profit for the Group’s event security guarding services increased by approximately HK$2.3 million or approximately 75.1% from approximately HK$3.2 million for the year ended 31 March 2013 to approximately HK$5.5 million for the year ended 31 March 2014, which was mainly attributable to the increase in the number of contracts and the increase in service fee charged. Gross margin of the Group’s event security guarding services increased from approximately 24.9% for the year ended 31 March 2013 to approximately 29.7% for the year ended 31 March 2014, which was mainly attributable to the increase in fees charged under the Group’s event security guarding services for the year ended 31 March 2014.

Other income

Other income decreased by approximately HK$2.2 million or approximately 80.9% from approximately HK$2.7 million for the year ended 31 March 2013 to approximately HK$0.5 million for the year ended 31 March 2014, which was mainly due to the one-off gain on disposal of property, plant and equipment of HK$2.4 million for the year ended 31 March 2013.

Administrative expenses

The administrative expenses increased by approximately HK$0.8 million for the year ended 31 March 2014, from that of approximately HK$6.9 million for 2013 to approximately HK$7.7 million, representing a growth of 12.5%. The increase was mainly due to increase in staff salaries, employee benefit expenses and the increase in the insurance expenses following the growth in the Group’s revenue and the policy expense charged due to the acquisition of the “key men insurance”.

Other operating expenses

A listing expense of HK$[REDACTED] was incurred by the Group for the year ended 31 March 2014 for the preparation of an application for the Listing, which mainly consisted of legal and professional fees.

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FINANCIAL INFORMATION

Finance costs

The Group incurred increased finance costs for the year ended 31 March 2014 of approximately HK$0.3 million or 30.2% from approximately HK$0.8 million for the year ended 31 March 2013 to approximately HK$1.1 million for the year ended 31 March 2014. The increase in finance costs was mainly attributable to higher interest expenses due to the bank borrowings during the year ended 31 March 2014.

Income tax expense

The Group’s income tax expense increased by HK$1.3 million or 106.1% from approximately HK$1.2 million for the year ended 31 March 2013 to approximately HK$2.6 million for the year ended 31 March 2014. The Group’s effective tax rate increased from 12.1% for the year ended 31 March 2013 to 23.5% for the year ended 31 March 2014. The increase in income tax expenses was mainly attributable to the increase in the profit before income tax while the increase in effective tax rate was mainly attributable to the non-deductible nature of the listing expenses incurred.

Profit for the year

As a result of the foregoing, the Group’s profit for the year decreased by approximately HK$0.6 million or 7.6% from approximately HK$9.0 million for the year ended 31 March 2013 to HK$8.4 million for the year ended 31 March 2014. The Group’s net profit margin decreased from approximately 10.0% for the year ended 31 March 2013 to approximately 7.5% for the same period of 2014. The decrease in the Group’s profit for the year was mainly due to the increase in the listing expenses and income tax expenses while partly offset by the increase in gross profit as discussed above.

RECENT DEVELOPMENTS

The Directors observed and noted that the market in which the Group’s operation remained stable after 31 March 2014 as reflected by the continued stable operation of the Group during the period from 1 April 2014 to the Latest Practicable Date.

Unaudited financial performance for the one month ended 30 April 2014

Based on the financial information as extracted from the unaudited consolidated financial statements for the one month ended 30 April 2014, the unaudited total revenue of the Group for the one month ended 30 April 2014 was approximately HK$9.7 million, representing an increase of approximately 22.5% as compared with the one month ended 30 April 2013. Gross margin for the one month ended 30 April 2014 was approximately 19.4%.

Subsequent to 31 March 2014, the Group entered into 11 new or renewed contracts. The aggregate contract sum of such 11 new or renewed contracts is approximately HK$314,000 per month. The Directors confirm that there was no material adverse change in the Group’s financial status subsequent to 31 March 2014.

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FINANCIAL INFORMATION

As at the Latest Practicable Date, the Group had 234 unexpired services contracts ranging from 1 month to 3 years on hand and the information of these contracts including their contract value are summarised in the table below:

Contract expiring	HK$ million
on or before 30 September 2014	4.3
on or before 31 March 2015	22.3
after 31 March 2015	41.9

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Overview

Since the commencement of its business, the Group has generally relied on internal cash flows, banking and other loan facilities available from its principal bankers to meet the requirements for its operations. The Group expects to meet its anticipated cash needs, including capital commitments, repayment of borrowings and working capital, principally through cash generated from operations and the net proceeds from the Placing.

Cash Flow

The following table sets forth the selected cash flow data from the consolidated statements of cash flows for the period as indicated. This information should be read together with the consolidated financial information contained in the Accountant’s Report in Appendix I to this prospectus.

Net cash inflow from operating activities Net cash outflow from investing activities Net cash outflow from financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year	For the year ended 31 March 2013 2014 (HK$’000) (HK$’000) 6,443 13,562 (4,030) (1,792) (8,278) (7,483) (5,865) 4,287 4,993 (872) (872) 3,415	For the year ended 31 March 2013 2014 (HK$’000) (HK$’000) 6,443 13,562 (4,030) (1,792) (8,278) (7,483) (5,865) 4,287 4,993 (872) (872) 3,415
		4,287 (872)
		3,415

Cash flow from operating activities

Cash flow from operating activities reflects profit for the year adjusted for non-cash items such as depreciation, finance costs, written off of bad debts, gain or loss on property, plant and equipment and listing expenses. Cash flow generated from operating activities are the major source of funds of the Group during the Track Record Period.

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FINANCIAL INFORMATION

Net cash from operating activities of approximately HK$13.6 million for the year ended 31 March 2014 primarily consisted of operating profit before working capital changes of approximately HK$16.5 million, net increase in trade receivables of approximately HK$3.0 million, net increase in prepayments and deposits of approximately HK$0.1 million, net increase in accrued expenses and other payables of approximately HK$1.9 million, and income tax paid of approximately HK$1.7 million.

Net cash from operating activities of approximately HK$6.4 million for the year ended 31 March 2013 primarily consisted of operating profit before working capital changes of approximately HK$9.8 million, net increase in trade receivables of approximately HK$3.9 million, net increase in prepayments and deposits of approximately HK$0.3 million, net increase in accrued expenses and other payables of approximately HK$1.8 million, and income tax paid of approximately HK$1.0 million.

Cash flow from investing activities

For the year ended 31 March 2014, the Group experienced net cash used in investing activities of approximately HK$1.8 million was primarily due to the payments for acquisition of an intangible asset under development of HK$1.2 million, premium payment for acquisition of a life insurance policy of HK$1.1 million, purchase of property, plant and equipment of HK$0.5 million and the decrease in pledged bank deposit of HK$1.0 million.

For the year ended 31 March 2013, the Group experienced net cash used in investing activities of approximately HK$4.0 million was primarily due to the payments for acquisition of an intangible asset under development of HK$0.4 million, the proceeds from disposal of property, plant and equipment of HK$3.8 million and purchase of property, plant and equipment of HK$7.4 million. Cash flow from financing activities Net cash used in financing activities of approximately HK$7.5 million for the year ended 31 March 2014 primarily reflected the repayments of bank loans and other bank borrowings, net of new proceeds from bank borrowings, in total of approximately HK$15.1 million, interest paid of approximately HK$1.0 million, the decrease in amount due from a director of approximately HK$11.8 million, the payment of listing expenses of approximately HK$2.9 million and payment of finance lease liabilities of approximately HK$0.3 million.

Net cash used in financing activities of approximately HK$8.3 million for the year ended 31 March 2013 primarily reflected the proceeds from bank loans and other bank borrowings, net of repayment of bank loans and other bank borrowings, in total of approximately HK$14.2 million, interest paid of approximately HK$0.8 million, the increase in amount due from a director of approximately HK$20.9 million, the decrease in amount due from a related company of approximately HK$0.5 million and payment of finance lease liabilities of approximately HK$0.3 million.

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FINANCIAL INFORMATION

WORKING CAPITAL SUFFICIENCY

Taking into consideration the Group’s cash resources, cash flows from its operations, unutilised banking facilities and estimated net proceeds from the Placing, the Directors believe, after due and careful inquiry, that the Group has sufficient working capital for at least 12 months commencing from the date of this prospectus.

NET CURRENT ASSETS

The following table sets forth details of the Group’s current assets and liabilities as at the dates indicated:

Current assets Trade receivables Prepayment and deposits Amount due from a director Pledged bank deposit Cash at banks and in hand Current liabilities Accrued expenses and other payables Bank borrowings Obligations under finance leases Tax payables Net current assets	As at 31 2013 (HK$’000) 11,825 280 21,283 1,001 4,054 38,443 8,083 26,261 251 712 35,307 3,136	March 2014 (HK$’000) 14,693 1,838 9,680 – 3,415
		29,626
		12,247 6,286 207 1,578
		20,318
		9,308

The Group’s current assets represented mainly trade receivables, prepayment and deposits, amount due from a director, pledged bank deposit and cash at banks and in hand during the Track Record Period. The Group’s current liabilities mainly included accrued expenses and other payables, bank borrowings, obligations under finance leases and tax payables during the Track Record Period. Two installment loans with principal amounts of HK$9.1 million in total were borrowed by King Force Security and advanced to Mr. Fu during the year ended 31 March 2013. The carrying amount in total as at 31 March 2013 was HK$9.0 million. Interest expenses incurred on these two loans was recharged to Mr. Fu. The loans were fully repaid during the year ended 31 March 2014. Any outstanding amounts due from a director will be fully settled prior to the Listing.

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FINANCIAL INFORMATION

As at 31 March 2014, being the latest practicable date for the Group’s net current assets position in this prospectus before the Listing, the Group had net current assets of HK$9.3 million as compared to HK$3.1 million as at 31 March 2013. The improvement was mainly caused by net cash inflow from operations and the settlement of amount due from a director, partially offset by the repayment of bank borrowings.

CERTAIN BALANCE SHEET ITEMS

Trade receivables

The Group’s trade receivables primarily represent amounts receivable from its customers for its services rendered. As at 31 March 2013 and 2014, the balance of the Group’s trade receivables was HK$11.8 million and HK$14.7 million, respectively. The increase in the trade receivables was mainly attributable to the increase in the Group’s revenue during the period.

As at 30 April 2014, 50% of the balances of trade receivables as at 31 March 2014 has been settled.

Ageing analysis of trade receivables

The following table sets forth a summary of ageing of the Group’s trade receivables as at the dates indicated:

Not more than 30 days 31 to 90 days Over 90 days Total trade receivables	As at 31 2013 (HK$’000) 6,918 4,637 270 11,825	March 2014 (HK$’000) 8,400 5,694 599
		14,693

Trade receivables turnover days

The Group normally allows credit period ranging from 7 to 30 days to its major customers. Trade receivables turnover days equals average trade receivables divided by revenue for the corresponding period multiplied by 365 days. The Group’s trade receivable turnover days were 39.8 days and 43.6 days for the year ended 31 March 2013 and 2014, respectively. The Directors considered that the slight increase of the trade receivables turnover days was mainly due to the increase of fixed manned security guarding services. As at the Latest Practicable Date, the Group has established system for accounts receivables ageing analysis and staff from sales and marketing department is responsible for pursuing long overdue accounts receivables.

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FINANCIAL INFORMATION

During the Track Record Period, the Group reviewed receivables for evidence of impairment on both individual and collective basis. During the year ended 31 March 2014, the Group has written off trade receivables of HK$95,200. None of the trade receivables as at 31 March 2013 and 2014 has been identified by the Group as having an impairment issue.

An intangible asset under development

The intangible asset under development represents a computerised operating system with global positioning system and radio-frequency identification technology, being developed by a service provider starting from 1 November 2012. Upon completion of the development and successful test for implementation, the system will be transferred to intangible asset with finite useful life being measured initially at cost and subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

As at 31 March 2013 and 2014, the carrying value of the intangible asset under development are HK$0.4 million and HK$1.6 million, respectively.

Investment in a life insurance policy

Investment in life insurance represents an investment in life insurance policies for an executive Director. There is no market price for such equity investment. The return of the investment is based on the guarantee minimum return rate commencing on the second year of the policy. The insurance policies are pledged to banks for banking facilities.

As at 31 March 2014, the balance or the fair value of the investment in the life insurance policy, which is determined based on the carrying amount of the insurance policy at the end of each reporting period, was HK$1.1 million. Details of the life insurance policy are contained in the paragraph headed “Insurance” contained in the section headed “Business” in this prospectus.

Prepayment and deposit

The following table sets forth the breakdown of prepayment and deposit:

Current Prepayments Deposits	As at 31 2013 (HK$’000) 189 91 280	March 2014 (HK$’000) 1,746 92
		1,838

The balance of prepayment and deposits as at 31 March 2013 and 2014 was approximately HK$0.3 million and HK$1.8 million, respectively. The increase in the Group’s prepayment and deposit was primarily attributable to the increase in prepayments of expenses incurred in relation to the Listing, which mainly comprise professional fees paid to various parties for their services in connection with the Listing.

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FINANCIAL INFORMATION

Amount due from a director

The amount due from a director was advance from an operating subsidiary of the Company to Mr. Fu and amounted to approximately HK$21.3 million and HK$9.7 million as at 31 March 2013 and 2014, respectively. The following table sets forth the amount due from a director during the Track Record Period:

			Maximum amount
			outstanding during the
	**As at 31 **	March	year ended 31 March
Name of director	2013	2014	2013 2014
	(HK$’000)	(HK$’000)	(HK$’000) (HK$’000)
Mr. Fu	21,283	9,680	21,283 30,930

Apart from the two installment loans borrowed by King Force Security and advanced to Mr. Fu, the Group made advances to Mr. Fu during the above period in lieu of payment of dividends to him since this allows the Group to request for repayment when cash is needed. The amount due from Mr. Fu was non-trade in nature, unsecured, interest free and repayable on demand. The Directors consider that the carrying amounts of the balances approximate to their fair values. The Directors have confirmed that the amount due from Mr. Fu will be fully settled prior to the Listing.

Pledge bank deposit

During the year ended 31 March 2013, HK$1.0 million of bank deposit is charged for banking facilities. The charges were released upon the settlement of the relevant bank borrowings during the year ended 31 March 2014.

Cash at banks or in hand

Cash at banks or in hand amounted to approximately HK$4.1 million (while the bank overdrafts were HK$4.9 million) and HK$3.4 million as at 31 March 2013 and 2014, respectively. Taking into consideration that the increase of cash and cash equivalents of approximately HK$4.2 million for the year ended 31 March 2014 while offsetted by the repayment of the bank overdrafts amounted approximately HK$4.9 million during the year ended 31 March 2014, the cash at banks or in hand recorded a slightly decrease.

Accrued expenses and other payables

Accrued expenses and other payables mainly included accrual of staff costs such as salaries, allowances, bonus and employee benefits and accrued listing expenses. As at 31 March 2013 and 2014, the balance of the Group’s accrued expenses and other payables was approximately HK$8.1 million and HK$12.2 million, respectively.

The increase in the balance of accrued expenses and other payables as at 31 March 2014 was mainly due to the increase in the accrual of staff costs as a result of the increased number of services provided and the increase in the statutory minimum wage rate from HK$28.0 per hour to HK$30.0 per hour during the year ended 31 March 2014.

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FINANCIAL INFORMATION

INDEBTEDNESS

Bank borrowings

The following table sets forth a breakdown of the Group’s bank borrowings as at the dates indicated:

Current Secured −Bank overdrafts −Bank loans due for repayment within one year −Bank loans due for repayment after one year which contain a repayment on demand clause −Other bank borrowings due for repayment within one year	As at 31 2013 (HK$’000) 4,926 2,075 12,031 7,229 26,261	March 2014 (HK$’000) – 1,413 4,873 –
		6,286

The Group’s bank borrowings were primarily used in financing the working capital requirement of its operations and the purchase of the existing premises. The Group had bank borrowings of approximately HK$26.3 million and HK$6.3 million as at 31 March 2013 and 2014, respectively. The decrease in bank borrowings during the Track Record Period was primarily due to the repayment of loans advanced to a director of HK$9.0 million for the repayment of bank borrowings. Such secured bank borrowings bore interests at rates ranged from 3.5% to 8.25% and are secured by (i) legal charges on the Group’s leasehold land and buildings; (ii) legal charges on a director’s life insurance policy; (iii) legal charges on properties owned by certain directors; (iv) charges over a bank deposit; (v) joint and several personal guarantee by certain directors of the Group; and (vi) guarantee by the Hong Kong Government under the Special Loan Guarantee Scheme.

As at 31 March 2014, the Group, through King Force Security, had unutilised banking facility of approximately HK$5.0 million available for drawdown.

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FINANCIAL INFORMATION

The Group’s bank borrowings contain covenants that the Group has to maintain its operating account with a bank and channel not less than 50% of its sales receipts to the bank for each period of 12 consecutive calendar months.

The Director has confirmed that the Group had not defaulted or delayed in any payment, and/or breached any of the finance covenants of its banking facilities during the Track Record Period and up to the Latest Practicable Date.

Obligation under finance leases

As at 31 March 2013 and 2014, the Group has entered into finance leases for certain motor vehicles for patrol uses. These lease periods ranged from two years to five years with effective interest rate ranging from 4.27% to 4.28% per annum and from 3.8% to 4.28% per annum, respectively. These leases do not have option to renew or contingent rental provision. The following table sets forth a breakdown of the Group’s obligation under finance leases as at the dates indicated:

Due within one year Due in the second to fifth years Future finance charges on finance lease	As at 31 2013 (HK$’000) 274 434 (52) 656	March 2014 (HK$’000) 224 308 (31) 501

Save as disclosed above in this paragraph headed “Indebtedness”, the Group did not have any other outstanding mortgages or charges, borrowings or indebtedness including bank overdrafts, loans or debentures, loan capital, debt securities or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptances or acceptance credits or any guarantees outstanding as at 31 March 2014. Save as disclosed above, the Group has no existing plan on making additional external debt financing.

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FINANCIAL INFORMATION

COMMITMENTS

Operating leases commitment

During the Track Record Period, the Group leases a number of premises under operating leases. The leases run for an initial period of one to two years. None of the leases includes contingent rentals. The following table sets forth the Group’s commitments for operating lease payments under non-cancellable operating leases as at the dates indicated:

Within one year In the second to fifth years	As at 31 2013 (HK$’000) 411 240 651	March 2014 (HK$’000) 50 –
		50

The decrease in the operating leases commitment as at 31 March 2014 was primarily due to the early termination of certain leases in respect of premises under operating leases from a Director on 28 March 2014.

Capital commitments

The Group’s capital commitments primarily relate to the acquisition of a certain operation system and software, which is still under development as at 31 March 2014. The following table sets forth the total amounts of the Group’s capital commitments as at the dates indicated:

					**As at 31 **	March
					2013	2014
					(HK$’000)	(HK$’000)
Acquisition	of	an	intangible	asset	2,000	800

CONTINGENT LIABILITIES

At the end of each of the year ended 31 March 2013 and 2014, the Group did not have any material contingent liabilities.

OFF-BALANCE SHEET ARRANGEMENT

As at the Latest Practicable Date, the Group had not entered into any off-balance sheet arrangement.

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FINANCIAL INFORMATION

SELECTED KEY FINANCIAL RATIOS

The following table sets out a summary of key financial ratios respect of the Group’s results during the Track Record Period:

	**Year ended or **	as of
	31 March
	2013	2014
Profitability ratios
Gross margin(1) (%)	16.9	20.7
Net profit margin(2) (%)	10.0	7.5
Return on assets(3) (%)	19.2	20.7
Return on equity(4) (%)	79.7	42.4
Liquidity ratios
Current ratio(5) (times)	1.1	1.5
Capital adequacy ratios
Gearing ratio(6) (%)	237.1	34.4
Interest coverage(7) (times)	13.7	11.4

Notes:

• (1) Gross margin is calculated based on the gross profit for the year divided by the revenue of the respective year.

• (2) Net profit margin is calculated based on the profit for the year divided by the revenue of the respective year.

• (3) Return on assets is calculated based on the profit for the year divided by the total assets at the end of the respective year and multiplied by 100%.

• (4) Return on equity is calculated based on the profit for the year divided by the total equity at the end of the respective year multiplied by 100%.

• (5) Current ratio is calculated based on the total current assets at the end of the year divided by the total current liabilities at the end of the respective year.

• (6) Gearing ratio is calculated based on the total debt at the end of the year divided by total equity at the end of the respective year. Total debt includes bank borrowings, bank overdrafts and obligations under finance leases.

• (7) Interest coverage is calculated based on the net profit before interest and tax for the year divided by the interest expenses for the respective year.

Profitability ratios

Gross margin

For the years ended 31 March 2013 and 2014, the Group’s gross margin amounted to 16.9% and 20.7%, respectively. The increased gross margin is mainly attributable to the increase of fee charged by the Group as a result of the increase of guard costs following the increase of minimum wages and the corresponding increase in administrative fee quoted.

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FINANCIAL INFORMATION

Net profit margin

For the years ended 31 March 2013 and 2014, the Group’s net profit margin amounted to 10.0% and 7.5%, respectively. The decreased net profit margin is mainly because the Group experienced a one-off gain on disposal of property, plant and equipment of HK$2.4 million for the year ended 31 March 2013 and expenses of HK$3.8 million relating to the Listing was incurred for the year ended 31 March 2014.

Return on assets

Return on assets was approximately 19.2% and 20.7% for the two years ended 31 March 2014, respectively. The increase of return on assets was mainly due to the decrease in total assets as at 31 March 2014. Total assets decreased as Mr. Fu settled the advance to him and the Group’s bank borrowings were repaid from the settlement of the advance during the year ended 31 March 2014.

Return on equity

Return on equity for the two years ended 31 March 2014 was approximately 79.7% and 42.4%, respectively. The decrease of return on equity was mainly due to the significant increase in the shareholders’ equity as at 31 March 2014. The increase in the shareholders’ equity as at 31 March 2014 is mainly attributable to the accumulated net profit for the year ended 31 March 2014.

Liquidity ratios

Current ratio

As of 31 March 2013 and 2014, current ratio was approximately 1.1 times and 1.5 times, respectively. The increase in current ratio as at 31 March 2014 was mainly due to the decrease in current liabilities is greater than the decrease in current assets mainly because the Group used the proceeds repaid from Mr. Fu and the profit generated for the year ended 31 March 2014 to repay most of the outstanding bank loans for the year ended 31 March 2014.

Capital adequacy ratios

Gearing ratio

Gearing ratio, calculated by dividing total debt by total equity as at 31 March 2013 and 2014 was approximately 237.1% and 34.4%, respectively. The significant decrease in the gearing ratio is mainly attributable to the Group’s repayment of its bank loans and overdrafts during the year ended 31 March 2014 and the increase in the shareholder’s equity resulting from the net profit generated from the year ended 31 March 2014.

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FINANCIAL INFORMATION

Interest coverage

The Group’s interest coverage was approximately 13.7 times and 11.4 times for the two years ended 31 March 2013 and 2014, respectively. The interest coverage decreased as the Group had incurred more interest expenses for the year ended 31 March 2014 and the profit before interest and tax is affected by the Listing expenses of HK$3.8 million.

FINANCIAL RISK MANAGEMENT

Foreign currency risk

The Group does not have any exposure on currency risk as most of the Group’s transactions are conducted in HK$. The Group does not have a foreign currency hedging policy.

Credit risk

Credit risk arises from cash and cash equivalents and trade and other receivables. The carrying amounts or the undiscounted nominal amounts, where applicable, of each class of these financial assets represent the Group’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations as of the reporting dates.

To manage the risk with respect to cash and cash equivalents, bank deposits are placed with highly reputable financial institutions.

All amounts due from a director will be settled prior to the Listing. Besides, the Group did not have any contingent liabilities or provide any financial guarantees which would expose the Group to credit risk.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying business, the Group aims at maintaining flexibility in funding by maintaining adequate amount of cash and cash equivalents.

Interest rate risk

Other than bank balances with variable interest rate and interest-bearing bank borrowings, the Group has no other significant interest-bearing assets or liabilities. The management does not anticipate significant impact to interest-bearing assets or liabilities resulted from the changes in interest rates, because the interest rates of bank balances and bank borrowings are not expected to change significantly in the foreseeable future.

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FINANCIAL INFORMATION

PROPERTY INTERESTS AND VALUATION OF PROPERTIES

For the purpose of the listing of the Shares on GEM, the Group’s properties were revalued at HK$11,970,000 as at 30 April 2014 by Ascent Partners Valuation Service Limited, an independent professional property valuer. Details of the valuation are summarised in the property valuation report in Appendix III to this prospectus.

There is a net valuation surplus, representing the excess market value of the properties over their book value, approximately HK$5,220,000 of which will not be included in the Group’s accounts for the year ending 31 March 2015. In accordance with the Group’s accounting policy, all properties are stated at cost less accumulated depreciation. As such, the net valuation surplus arising from the valuation of properties has not been included in the unaudited pro forma adjusted net tangible assets statement under the section headed “Financial Information – Unaudited Pro Forma Adjusted Consolidated Net Tangible Assets” in Appendix II to this prospectus.

Disclosure of the reconciliation of the property interests of the Group’s and the valuation of such property interests as required under Rule 8.30 of the GEM Listing Rules is set out below.

Net book value of properties as at 31 March 2014 as set out in the Accountant’s Report included in Appendix I to this prospectus: Leasehold land and buildings Leasehold improvements Total as at 31 March 2014 Movements during the one month ended 30 April 2014 (unaudited): Depreciation or amortisation Net book value of properties as at 30 April 2014 Valuation surplus Valuation as at 30 April 2014 as set out in the property valuation report included in Appendix III to this prospectus

HK$’000 5,790 985 6,775 (25) 6,750 5,220 11,970

DIVIDEND POLICY AND DISTRIBUTABLE RESERVES

In June 2014, an interim dividend of HK$7,000,000 was declared to Optimistic King and Gloria Power, the then shareholders of Million Joyce (which is a direct wholly-owned subsidiary of the Company). The payment and the amount of any future dividends will be at the discretion of the Directors and will depend on the future operations and earnings, capital requirements and surplus, general financial condition and other factors that the Directors

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FINANCIAL INFORMATION

deem relevant. Investors should note that historical dividend distributions are not indicative of the Company’s future dividend distribution policy. The Company does not have any predetermined dividend payout ratio.

The Company was incorporated on 2 January 2014 and has not carried out any business since the date of its incorporation, save for the transactions related to the Reorganisation. Accordingly, there was no reserve available for distribution to the Shareholders as at 31 March 2014.

RELATED PARTY TRANSACTIONS

Related parties are those parties that have the ability to control the other party or exercise significant influence in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Please refer to notes 26 to the financial information as contained in the Accountant’s Report appended as Appendix I to this prospectus for more information on related party transactions of the Group.

LISTING EXPENSES

The Group’s financial performance for the year ending 31 March 2015 will be affected by the non-recurring expenses incurred in relation to the Listing. The Listing expenses to be borne by the Group are estimated to be approximately HK$[REDACTED] (assuming a Placing Price of HK$[REDACTED], being the midpoint of the indicative Placing Price range of HK$[REDACTED] to HK$[REDACTED] per Placing Share), of which (i) approximately HK$[REDACTED] is directly attributable to the issue of Placing Shares which is to be accounted for as a deduction from equity; (ii) approximately HK$[REDACTED] is charged to profit and loss of the Group for the year ending 31 March 2014; and approximately HK$[REDACTED] is to be charged to profit and loss of the Group for the year ending 31 March 2015. Such cost is a current estimate and for reference only. The final amount to be recognised to the profit and loss of the Group or to be capitalised is subject to adjustment based on audit and the changes in variables and assumptions.

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FINANCIAL INFORMATION

UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The unaudited pro forma adjusted consolidated net tangible assets of the Group has been prepared, on the basis of the notes set forth below, for the purpose of illustrating the effect of the Placing as if it had taken place on 31 March 2014. It has been prepared for illustrative purpose only and, because of its hypothetical nature, may not give a true picture of the financial position of the Group after the Placing or at any future dates.

Based on the Placing Price of HK$[REDACTED] per Share Based on the Placing Price of HK$[REDACTED] per Share	Adjusted consolidated net tangible assets of the Group as at 31 March 2014 HK$’000 (Note 1) [REDACTED] [REDACTED]	Add: Estimated net proceeds from the Placing HK$’000 (Note 2) [REDACTED] [REDACTED]	Unaudited pro forma adjusted consolidated net tangible assets HK$’000 [REDACTED] [REDACTED]	Unaudited pro forma adjusted consolidated net tangible assets per Share HK$ (Note 3) [REDACTED]
				[REDACTED]

Notes:

1. The adjusted consolidated net tangible assets of the Group as at 31 March 2014 were determined as follows:

HK$’000 Audited consolidated net assets of the Group as at 31 March 2014 as shown in the Accountant’s Report as set out in Appendix I to this prospectus [REDACTED] Less: Intangible assets as at 31 March 2014 [REDACTED] Adjusted consolidated net tangible assets of the Group as at 31 March 2014 [REDACTED]

1. The estimated net proceeds from the Placing are based on the minimum and maximum Placing Price of HK$[REDACTED] and HK$[REDACTED] per Share, respectively, after deduction of estimated expenses for the Listing.

2. The unaudited pro forma adjusted consolidated net tangible assets per Share are determined after the adjustments as described in notes 1 and 2 above and on the basis that [REDACTED] Shares are issued and outstanding as set out in the section headed “Share Capital” to this prospectus.

3. The unaudited pro forma financial information presented above does not take account of any trading or other transactions subsequent to the date of the financial statements included in the unaudited pro forma financial information (i.e. 31 March 2014).

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FINANCIAL INFORMATION

MATERIAL ADVERSE CHANGE

The impact of the listing expenses on the profit and loss accounts has posted a material adverse change in the financial or trading position or prospect of the Group since 31 March 2014 (being the date of the latest audited consolidated financial statements were made up). Prospective investors should be aware of the impact of the listing expenses on the financial performance of the Group for the year ending 31 March 2015.

Save as disclosed above, the Directors have confirmed that, up to the date of this prospectus, there had been no material adverse change in the financial or trading positions or prospect of the Company or its subsidiaries since 31 March 2014 (being the date of which the Group’s latest audited consolidated financial statements were made up as set out in the Accountant’s Report in Appendix I to this prospectus) and there had been no event since 31 March 2014 which would materially affect the information shown in the Accountant’s Report in Appendix I to this prospectus.

DISCLOSURE REQUIRED UNDER CHAPTER 17 OF THE GEM LISTING RULES

The Directors have confirmed that, as at the Latest Practicable Date, they were not aware of any circumstances that would give rise to a disclosure requirement under Rules 17.15 to 17.21 of the GEM Listing Rules.

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BUSINESS STRATEGIES AND USE OF PROCEEDS

BUSINESS OBJECTIVES

The Group’s principal activity is the provision of security guarding services. The Group’s primary objectives are to strengthen its position in the security industry in Hong Kong and further expand its business operations with a view to create shareholders’ value.

BUSINESS STRATEGIES

The Group intends to further expand its security guarding services by pursuing the following strategies: (i) recruiting and expanding the security guarding and patrol team; (ii) strengthening staff recruitment and training; (iii) enhancing its marketing and promotions; and (iv) continuing to increase operational efficiency and enhancing quality of service. Please refer to the section headed “Business – Business Strategies and Expansion Plans” in this prospectus for a detailed description of the Group’s future plans.

IMPLEMENTATION PLANS

The Group will endeavor to achieve the following milestone events during the period from the Latest Practicable Date to 31 March 2017, and the respective scheduled completion time are based on certain bases and assumptions as set out in paragraph headed “Bases and Assumptions” in this section. These bases and assumptions are inherently subject to many uncertainties and unpredictable factors, in particular the risk factors as set out in the section headed “Risk Factors” in this prospectus. Therefore, there is no assurance that the Group’s business plans will materialise in accordance with the estimated time frame and that the Group’s future plans will be accomplished at all.

(a) Recruiting and expanding the security guarding and patrol team

Recruitment of new security guards Recruitment of new patrol officers	From the Listing Date to 31 March 2015 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	For the six months ending 30 September 2015 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	For the six months ending 31 March 2016 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	For the six months ending 30 September 2016 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	For the six months ending 31 March 2017 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	Total (HK$’000) [REDACTED] [REDACTED]
						[REDACTED]

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BUSINESS STRATEGIES AND USE OF PROCEEDS

(b) Strengthening staff recruitment and training

Enhancement of the recruitment centre Recruitment of trainers Recruitment of operation managers Investment in job advertisements, participation in employment fairs, recruitment websites and referrals from outside training centre	From the Listing Date to 31 March 2015 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	For the six months ending 30 September 2015 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	For the six months ending 31 March 2016 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	For the six months ending 30 September 2016 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	For the six months ending 31 March 2017 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	Total (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED]
						[REDACTED]

(c) Expanding the sales and marketing department and uplifting marketing effort

From the	For the six	For the six	For the six	For the six
Listing Date	months	months	months	months
to	ending	ending	ending	ending
31 March	30 September	31 March	30 September	31 March
2015	2015	2016	2016	2017	Total
(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)

Recruitment of two new sales and marketing staff [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Strengthen marketing efforts such as to place printed and online advertisements, promote brands and services via different channels [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

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BUSINESS STRATEGIES AND USE OF PROCEEDS

(d) Continuous increasing of operational efficiency and enhancing quality of service

Acquisition of patrol vehicles Maintenance of I.T. System	From the Listing Date to 31 March 2015 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	For the six months ending 30 September 2015 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	For the six months ending 31 March 2016 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	For the six months ending 30 September 2016 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	For the six months ending 31 March 2017 (HK$’000) [REDACTED] [REDACTED] [REDACTED]	Total (HK$’000) [REDACTED] [REDACTED]
						[REDACTED]

BASES AND ASSUMPTIONS

The business objectives and strategies set out by the Directors are based on the following general assumptions:

• there will be no significant economic change in respect of inflation, interest rate, tax rate and currency exchange rate in Hong Kong which will adversely affect the Group’s business;

• the Group will have sufficient financial resources to meet the planned capital expenditure and business development requirements during the period to which the business objectives relate;

• there will be no material adverse changes in the existing laws and regulations, policies or industry or regulatory treatment relating to the Group, or in the political, economic, fiscal or market conditions in which the Group operates;

• there will be no change in the funding requirement for each of the near term business objectives described in this prospectus from the amount as estimated by the Directors;

• there will be no disasters, natural, political or otherwise, which would materially disrupt the business or operations of the Group or cause substantial loss, damage or destruction to its property or facilities;

• there will be no change in the effectiveness of the licenses and permits obtained by the Group; and

• the Group will not be adversely affected by the risk factors as set out under the section headed “Risk Factors” in this prospectus.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

BUSINESS STRATEGIES AND USE OF PROCEEDS

Reasons for the Placing and use of proceeds

The Directors believe that the Listing will enhance the Group’s profile and recognition. In addition, the Board is also of the view that despite the estimated net proceeds from the Placing (based on the mid-point of the indicative Placing Price range) only amount to approximately HK$[REDACTED], the Listing and the Placing will provide the Company with additional avenues to raise capital for its future business expansion and long-term development, and expand and diversify its capital base and Shareholders base as institutional funds and retail investors in Hong Kong can easily participate in the equity of the Company. The net proceeds from the Placing of the Placing Shares will strengthen the Group’s financial position and provide us with additional working capital to implement the future plans set out in the section headed “Business – Business Strategies and Expansion Plans”.

Use of proceeds

The Company intends to raise funds by the Placing in order to pursue its business objectives as set out in the paragraph headed “Business Objectives” in this section.

The Directors believe that the Listing will enhance the Group’s profile and recognition and the net proceeds from the Placing will strengthen the Group’s financial position such that the Group is fully equipped to pursue the business plans set out in this section.

Assuming a Placing Price of HK$[REDACTED] per Placing Share, being the mid-point of the indicative Placing Price range of HK$[REDACTED] to HK$[REDACTED] per Placing Share, the net proceeds from the Placing, after deducting related expenses, are estimated to amount to approximately HK$[REDACTED]. The Company expects approximately [REDACTED] of the net proceeds, or approximately HK$[REDACTED], would be used for repayment of the Group’s bank loans, thereby saving interest expenses and improving the financial position of the Group. The bank loans to be repaid using the net proceeds were used for the acquisition of the Group’s premises and general working capital. Such loans currently bear interest rates with reference to the Hong Kong Prime Rate (as at 31 March 2014, the interest rates of such loans are both approximately 1.75% per annum below Prime Rate) and are subject to payment schedule of 138 monthly instalments and 60 monthly instalments. The cash in bank and on hand as at the Latest Practicable Date together with the projected cash flow from operations will be sufficient to finance the implementation of the Company’s future plans up to 31 March 2017.

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BUSINESS STRATEGIES AND USE OF PROCEEDS

The Group intends to apply such net proceeds from the Placing as follows:

Repayment of bank borrowing Recruiting and expanding the security guarding and patrol team Strengthening staff recruitment and training Expanding the sales and marketing department and uplifting marketing effort Continuous increasing of operational efficiency and enhancing quality of service General working capital	From the Listing Date to 31 March 2015 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	For the six months ending 30 September 2015 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	For the six months ending 31 March 2016 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	For the six months ending 30 September 2016 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	For the six months ending 31 March 2017 (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	Total (HK$’000) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	Approximate percentage (%) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
							[REDACTED]

If the final Placing Price is set at the highest or lowest point of the indicative Placing Price range, the net proceeds of the Placing will increase or decrease by approximately HK$[REDACTED], respectively. In such event, the net proceeds will be used in the same proportions as disclosed above irrespective of whether the Placing Price is determined at the highest or lowest point of the indicative Placing Price range.

To the extent that the net proceeds from the issue of the Placing Shares are not immediately required for the purposes above, it is the present intention of the Directors that such net proceeds will be placed on short-term interest bearing deposits with authorised financial institutions in Hong Kong.

The Company will issue an announcement in accordance with the GEM Listing Rules requirement if there is any material change in the use of proceeds as described above.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

SPONSOR’S INTERESTS

Save as provided for under the Underwriting Agreement, neither the Sponsor nor any of its associates has or may, as a result of the Placing, have any interest in any securities of the Company or any other member of the Group (including rights to subscribe for such securities).

Neither the Sponsor nor any of its associates has accrued any material benefit as a result of the successful outcome of the Placing, other than the following:

• (a) in taking up the underwriting obligations under the Underwriting Agreement;

• (b) by way of an underwriting commission to be paid to the Sponsor for acting as one of the Underwriters to the Placing pursuant to the Underwriting Agreement;

• (c) by way of documentation and financial advisory fee to be paid to the Sponsor for acting as the sponsor of the Placing; and

• (d) in the usual and ordinary courses of business of the Sponsor and its associates which involve trading of and dealing in securities may derive commissions from the trading of and dealing in securities of the Company or provide margin financing in connection thereto or purchase or sell securities of the Company or hold securities of the Company for investment purposes after its Listing on GEM.

None of the directors and employees of the Sponsor has any directorship in the Company or any other companies comprising the Group.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

UNDERWRITING

UNDERWRITERS

[REDACTED]

UNDERWRITING ARRANGEMENTS AND EXPENSES

Underwriting Agreement

Pursuant to the Underwriting Agreement, the Company is offering the Placing Shares for placing to professional, institutional and private investors at the Placing Price. Subject to, among other conditions, (i) the Stock Exchange granting the listing of and permission to deal in the Shares in issue and to be issued as mentioned in this prospectus and such grant and permission not subsequently being revoked prior to the Listing Date; and (ii) certain other conditions set out in the Underwriting Agreement being satisfied or waived on or before the date and time specified therein and shall in any event not later than the 30th day after the date of this prospectus (or if such date is not a Business Day, the immediate preceding Business Day), the Underwriters have agreed to procure subscribers for and/or purchase the Placing Shares subject to the terms and conditions of this prospectus and the Underwriting Agreement.

Grounds for termination

[REDACTED]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

UNDERWRITING

[REDACTED]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

UNDERWRITING

[REDACTED]

Undertakings

[REDACTED]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

UNDERWRITING

[REDACTED]

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UNDERWRITING

[REDACTED]

Total commission, fee and expenses

The Underwriters will receive an underwriting commission of an amount equal to [REDACTED]% of the aggregate Placing Price of all Placing Shares, out of which they will pay any sub-underwriting commission, and the Sponsor will receive a financial advisory and documentation fee in relation to the Listing and the Sponsor, the Lead Manager, the Bookrunner and the Underwriters will be reimbursed for their expenses properly incurred in connection with the Placing. Such commission, advisory and documentation fee and expenses, together with the GEM listing fees, legal and other professional fees, and printing and other expenses relating to the Placing and Listing, are estimated to amount in aggregate to approximately [REDACTED] (assuming that the underwriting commission is calculated with reference to the mid-point of the indicative Placing Price range of [REDACTED] to [REDACTED] per placing share) and are to be borne by the Company.

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UNDERWRITING

Sub-underwriting Arrangement

[REDACTED]

Underwriter’s interests in the Company

Save for their obligation under the Underwriting Agreement as disclosed in this prospectus, none of the Lead Manager, the Bookrunner and the Underwriters is interested legally or beneficially in the shares of any member of the Group or has any right or option (whether legally enforceable or not) to subscribe for or purchase or to nominate persons to subscribe for or purchase securities in any member of the Group nor any interest in the Placing or has any other business relationship with the Group.

SPONSOR’S INTEREST AND INDEPENDENCE

Save for advisory fee paid and to be paid to TC Capital as the Sponsor in connection with the Listing and the advisory fee to be paid to TC Capital as the compliance adviser of the Company pursuant to the requirements under Rule 6A.19 of the GEM Listing Rules, neither TC Capital nor any of its associates has or may, as a result of the Listing and the Placing, have any interest in any class of securities of the Company or any other members of the Group (including options or rights to subscribe for such securities).

No director or employee of TC Capital who is involved in providing advice to the Company has or, as a result of the Listing and/or the Placing, may have any interest in any class of securities of the Company or any other members of the Group (including options or rights to subscribe for such securities). No director or employee of TC Capital has any directorship in the Company or any other members of the Group.

The Sponsor satisfies the independence criteria applicable to sponsors as set forth in Rule 6A.07 of the GEM Listing Rules.

MINIMUM PUBLIC FLOAT

The Directors and the Lead Manager will ensure that there will be a minimum 25% of the total issued Shares held in public hands in accordance with Rule 11.23(9) of the GEM Listing Rules after completion of the Placing.

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STRUCTURE AND CONDITIONS OF THE PLACING

[REDACTED]

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STRUCTURE AND CONDITIONS OF THE PLACING

[REDACTED]

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STRUCTURE AND CONDITIONS OF THE PLACING

[REDACTED]

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APPENDIX I

ACCOUNTANT’S REPORT

The following is the text of a report, prepared for the sole purpose of inclusion in this prospectus, from the independent reporting accountant of the Company, BDO Limited, Certified Public Accountants, Hong Kong.

==> picture [80 x 64] intentionally omitted <==

==> picture [100 x 56] intentionally omitted <==

The Directors King Force Security Holdings Limited Suites 2001-2005, 20th Floor Jardine House 1 Connaught Place Central Hong Kong

3 July 2014

Dear Sirs,

We set out below our report on the financial information regarding King Force Security Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) including the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Group for each of the two years ended 31 March 2013 and 2014 (the “Track Record Period”) and the consolidated statements of financial position of the Group as at 31 March 2013 and 2014, and the statement of financial position of the Company as at 31 March 2014, together with explanatory notes thereto (the “Financial Information”), for inclusion in the prospectus of the Company dated 3 July 2014 (the “Prospectus”) in connection with the initial listing of the shares of the Company on the Growth Enterprise Market (“GEM”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company was incorporated in the Cayman Islands on 2 January 2014 as an exempted company with limited liability under the Companies Law of the Cayman Islands. Pursuant to a group reorganisation (the “Reorganisation”) as described in the note 2 of section II of this report, the Company has since [�] become the holding company of the subsidiaries now comprising the Group which is principally engaged in the provision of security guarding services. The Company has not carried on any business since the date of its incorporation saved for the Reorganisation.

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APPENDIX I ACCOUNTANT’S REPORT

At the date of this report, the Company has direct or indirect interests in the following subsidiaries, all of which are private companies with limited liability, the particulars of which are set out as follows:

		Particulars of	Effective
		issued and fully	interest		Name of the
	Country/Place and date	paid share	held by the		auditor for
Name	of incorporation	capital	Company	Principal activities	2013 and 2014
Interests held directly
Million Joyce Global Limited	The British Virgin	US$1,000	100%	Investment holding	Not applicable
(“Million Joyce”)	Islands (the “BVI”)	1,000 ordinary
	8 August 2013	shares of
		US$1 each
Interests held indirectly
King Force Security Limited	Hong Kong	10,000 ordinary	100%	Provision of security	BDO Limited
(“King Force Security”)	28 February 2003	shares		guarding services
		totalling
		HK$10,000
King Force Service Limited	Hong Kong	1 ordinary share	100%	Investment holding	BDO Limited
(“King Force Service”)	4 October 2013	totalling
		HK$1

All companies now comprising the Group have adopted 31 March as their financial year end date.

No audited financial statements have been prepared for the Company since its date of incorporation as there are no statutory audit requirements under relevant rules and regulation in its jurisdictions of incorporation and it has not been involved in any business transaction other than the Reorganisation.

No audited financial statements have been prepared for Million Joyce since its date of incorporation as it was incorporated in a country where it is not subject to statutory audit requirements.

No audited financial statements have been prepared for King Force Service since its date of incorporation yet as it is only required to produce the first set of audited financial statements covering a maximum period of 18 months under the relevant statutory audit requirements in Hong Kong. BDO Limited has been appointed to carry out the audit of the financial statements of King Force Service.

For the purpose of the Financial Information of this report, the directors of the Company have prepared the consolidated financial statements (the “Underlying Financial Statements”) of the Group for the Track Record Period in accordance with the basis as set out in note 2 of Section II and in accordance with the accounting policies set out in note 3 of Section II which conform with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The Financial Information set out in this report has been prepared by the directors of the Company based on the Underlying Financial Statements with no adjustments made thereon.

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APPENDIX I

ACCOUNTANT’S REPORT

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND REPORTING ACCOUNTANT

The directors of the Company are responsible for the preparation and the true and fair presentation of the Financial Information prepared in accordance with the basis of presentation set out in note 2 of section II below and the accounting policies set out in note 3 of section II below and the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on the GEM of the Stock Exchange (the “GEM Listing Rules”), and the contents of this Prospectus in which this report is included. The directors of the Company are also responsible for such internal control as they determine is necessary to enable the preparation of Financial Information that is free from material misstatements, whether due to fraud or error.

Our responsibility is to form an independent opinion, based on our examination, on the Financial Information and to report our opinion to you. For the purpose of this report, we have carried out appropriate audit procedures on the Underlying Financial Statements for the Track Record Period in accordance with Hong Kong Standards on Auditing issued by the HKICPA. We have examined the Financial Information in accordance with the Auditing Guideline – Prospectuses and the Reporting Accountant (Statement 3.340) issued by the HKICPA and have carried out such additional procedures on the Financial Information as we considered necessary.

OPINION IN RESPECT OF THE FINANCIAL INFORMATION

In our opinion, for the purpose of this report, the Financial Information prepared on the basis as set out in note 2 of Section II and in accordance with the accounting policies set out in note 3 of Section II, gives a true and fair view of the state of affairs of the Company as at 31 March 2014 and the state of affairs of the Group as at 31 March 2013 and 2014 and of the results and cash flows of the Group for the Track Record Period.

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APPENDIX I

ACCOUNTANT’S REPORT

I. FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Revenue 6 Cost of services rendered Gross profit Other income 6 Administrative expenses Other operating expenses Operating profit Finance costs 7 Profit before income tax 8 Income tax expense 9 Profit for the year Other comprehensive income for the year Total comprehensive income for the year attributable to owners of the Company Earnings per share for profit attributable to owners of the Company – Basic and Diluted 11

For the year ended 31 March 2013 2014 HK$ HK$ 90,605,281 111,059,188 (75,288,187) (88,026,336) 15,317,094 23,032,852 2,670,371 509,666 (6,883,650) (7,746,647) – (3,805,838) 11,103,815 11,990,033 (809,132) (1,053,856) 10,294,683 10,936,177 (1,248,677) (2,573,818) 9,046,006 8,362,359 – – 9,046,006 8,362,359 0.02 0.02

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APPENDIX I ACCOUNTANT’S REPORT

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at 31 2013 Notes HK$ ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 13 8,220,430 An intangible asset under development 16 400,000 Investment in a life insurance policy 15 – 8,620,430 Current assets Trade receivables 14 11,825,338 Prepayments and deposits 17 280,206 Amount due from a director 18 21,283,420 Pledged bank deposit 19 1,000,825 Cash at banks and in hand 4,054,091 38,443,880 Current liabilities Accrued expenses and other payables 20 8,083,592 Bank borrowings 21 26,261,549 Obligations under finance leases 22 250,566 Tax payables 712,022 35,307,729 Net current assets 3,136,151 Total assets less current liabilities 11,756,581 Non-current liabilities Obligations under finance leases 22 405,105 Net assets 11,351,476 EQUITY Equity attributable to the Company’s owners Share capital 23 7,800 Reserves 24 11,343,676 Total equity 11,351,476	March 2014 HK$ 8,023,073 1,600,000 1,076,058
	10,699,131
	14,693,161 1,838,270 9,680,067 – 3,414,944
	29,626,442
	12,246,520 6,285,573 207,493 1,578,166
	20,317,752
	9,308,690
	20,007,821
	293,986
	19,713,835
	7,800 19,706,035
	19,713,835

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APPENDIX I ACCOUNTANT’S REPORT

STATEMENT OF FINANCIAL POSITION Notes ASSETS AND LIABILITIES Current assets Current liabilities Net current assets Total assets less current liabilities Net assets EQUITY Share capital 23 Retained earnings Total equity	As at 31 March 2014 HK$ –
	–
	–
	–
	–
	– –
	–

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ACCOUNTANT’S REPORT

APPENDIX I

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

At 1 April 2012 Profit and total comprehensive income for the year At 31 March 2013 and 1 April 2013 Profit and total comprehensive income for the year At 31 March 2014	Share capital HK$ 7,800 – 7,800 – 7,800	Merger reserve* HK$ 2,200 – 2,200 – 2,200	Retained earnings* HK$ 2,295,470 9,046,006 11,341,476 8,362,359 19,703,835	Total equity HK$ 2,305,470 9,046,006
				11,351,476
				8,362,359
				19,713,835

• The total of these balances represents “Reserves” in the consolidated statements of financial position.

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APPENDIX I

ACCOUNTANT’S REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

Notes Cash flows from operating activities Profit before income tax Adjustments for: Bad debts written off 8 Depreciation of property, plant and equipment 8 (Gain)/Loss on disposal of property, plant and equipment 8 Interest charges on obligations under finance leases 7 Interest expenses 7 Bank Interest income 6 Bank loan interest recharged to a director 6 Listing expenses 8 Write-off of property, plant and equipment 8 Operating profit before working capital changes Increase in trade receivables Increase in prepayments and deposits Increase in accrued expenses and other payables Cash generated from operations Interest received Income tax paid Net cash generated from operating activities Cash flows from investing activities Payments for acquisition of an intangible asset under development Premium payment for a life insurance policy 15 Proceeds from disposal of property, plant and equipment Purchase of property, plant and equipment 27 Decrease in pledged bank deposit Net cash used in investing activities

For the year ended 31 March 2013 2014 HK$ HK$ 10,294,683 10,936,177 – 95,200 736,403 794,193 (2,441,159) 16,891 31,028 28,037 778,104 1,025,819 – (124) (55,924) (217,540) – 3,805,838 407,444 – 9,750,579 16,484,491 (3,894,962) (2,963,023) (261,206) (119,368) 1,827,420 1,867,927 7,421,831 15,270,027 – 124 (979,664) (1,707,674) 6,442,167 13,562,477 (400,000) (1,200,000) – (1,132,693) 3,768,260 1,000 (7,398,037) (461,622) – 1,000,825 (4,029,777) (1,792,490)

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APPENDIX I

ACCOUNTANT’S REPORT

Notes Cash flows from financing activities Proceeds from new bank loans Repayment of bank loans New proceeds from other bank borrowings Repayment of other bank borrowings (Increase)/Decrease in amount due from a director Decrease in amount due to a related party Interest paid Payment of listing expenses Capital element of finance lease liabilities Interest element of finance lease payments Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Analysis of balances of cash and cash equivalents Cash at banks and in hand Bank overdrafts 21

For the year ended 31 March 2013 2014 HK$ HK$ 13,645,000 7,023,063 (2,537,481) (14,844,531) 28,848,677 – (25,773,386) (7,228,808) (20,923,402) 11,820,893 (466,665) – (778,104) (1,025,819) – (2,892,898) (261,491) (307,297) (31,028) (28,037) (8,277,880) (7,483,434) (5,865,490) 4,286,553 4,993,881 (871,609) (871,609) 3,414,944 4,054,091 3,414,944 (4,925,700) – (871,609) 3,414,944

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ACCOUNTANT’S REPORT

APPENDIX I

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION

King Force Security Holdings Limited was incorporated in the Cayman Islands on 2 January 2014 as an exempted company with limited liability under the Companies Law of the Cayman Islands. The Company’s registered office is located at Clifton House, 75 Fort Street, P.O. Box 1350, Grand Cayman, KY1-1108, Cayman Islands. The Company’s principal place of business is located at Suites 2001-2005, 20th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong.

The principal activity of the Company is investment holding. The principal activity of the Company and its subsidiaries is the provision of security guarding services.

2. REORGANISATION AND BASIS OF PRESENTATION

2.1 Group reorganisation

King Force Security, the principal operating company in the Group during the Track Record Period, became wholly-owned by Mr. Fu Yik Lung (“Mr. Fu” or “Controlling shareholder”) in February 2007. Pursuant to the Reorganisation as described below, the Company has since [date] become the holding company of its subsidiaries now comprising the Group. Details of the Reorganisation are summarised below:

• (i) On 8 August 2013, Million Joyce was incorporated in the BVI and is authorised to issue a maximum of 50,000 shares of US$1.00 each. 1 share of Million Joyce (representing the entire issued share capital of Million Joyce at the relevant time) was allotted and issued to Mr. Fu on 26 September 2013.

• (ii) On 1 October 2013, Optimistic King Limited (“Optimistic King”) was incorporated in the BVI and is authorised to issue a maximum of 50,000 shares of US$1.00 each. 1 share of Optimistic King (representing the entire issued share capital of Optimistic King) was allotted and issued to Mr. Fu on 17 October 2013.

• (iii) On 4 October 2013, King Force Service was incorporated in Hong Kong. 1 ordinary share of King Force Service (representing the entire issued share capital of King Force Service) was allotted and issued to Million Joyce on 4 October 2013.

• (iv) On 13 November 2013, Optimistic King acquired 1 share of Million Joyce (representing the entire issued share capital of Million Joyce at the relevant time) from Mr. Fu at a nominal consideration of US$1. After the aforesaid share transfer, Optimistic King held 1 share of Million Joyce, (representing the entire issued share capital of Million Joyce at the relevant time).

• (v) On 14 November 2013, 999 shares of US$1.00 each of Million Joyce were allotted and issued to Optimistic King at an issue price of US$999, being US$1.00 each per share. After the aforesaid allotment and issue of shares, Optimistic King held 1,000 shares in Million Joyce, (representing the entire issued share capital of Million Joyce).

• (vi) On 14 November 2013, Million Joyce acquired 10,000 ordinary shares in King Force Security, (representing the entire issued share capital of King Force Security), from Mr. Fu, and at a nominal consideration of HK$10,000. The consideration have been settled by Million Joyce in cash. After the aforesaid share transfer, Million Joyce held 10,000 shares in King Force Security, representing the entire issued share capital of King Force Security.

• (vii) On 15 November 2013, Optimistic King as vendor and Gloria Power Limited (“Gloria Power”) as purchaser entered into a sale and purchase agreement (with Mr. Fu being the warrantor of Optimistic King, and Mr. Chiu Chun Keung (“Mr. Chiu”) being the guarantor of Gloria Power), pursuant to which Optimistic King sold and Gloria Power acquired 250 shares of

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APPENDIX I ACCOUNTANT’S REPORT

Million Joyce (representing 25% of the entire issued share capital of Million Joyce) at a cash consideration of HK$7,000,000. The aforesaid sale and purchase was completed on 15 November 2013 and the consideration was settled and paid to Optimistic King in cash.

• (viii) On 2 January 2014, the Company was incorporated in the Cayman Islands with an authorised share capital of HK$380,000 divided into 38,000,000 ordinary shares with a par value of HK$0.01 per share. 1 nil-paid share was allotted and issued to the subscriber to the memorandum and articles of association of the Company, and was subsequently transferred to Optimistic King on the same day. On the same date, each of Optimistic King and Gloria Power further subscribed for 749 and 250 nil-paid shares, resulting them holding 750 and 250 nil-paid shares, respectively, as at the date of incorporation.

• (ix) On [�], Optimistic King and Gloria Power each as a vendor, the Company as purchaser, and Mr. Fu and Mr. Chiu as warrantors entered into a sale and purchase agreement, pursuant to which the Company acquired 750 shares (representing 75% of the issued share capital of Million Joyce) and 250 shares (representing 25% of the issued share capital of Million Joyce) of Million Joyce from Optimistic King and Gloria Power, respectively, and as consideration for which (i) the 750 and 250 nil-paid shares held by Optimistic King and Gloria Power were credited as fully-paid respectively, and (ii) [REDACTED] and [REDACTED] Shares were issued and allotted to each of Optimistic King and Gloria Power respectively, all credited as fully- paid.

Immediately after the completion of the share transfer referred to in item (ix) above, the Company became the holding company of the Group.

2.2 Basis of presentation

The Reorganisation involved only inserting new holding companies on top of the existing company and has not resulted in any change of economic substance with continuous common control by the Controlling Shareholder. Accordingly, the Financial Information has been prepared using the principles of merger accounting as if the current group structure had been in existence throughout the Track Record Period.

The consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Group for the Track Record Period have been prepared to present the results, changes in equity and cash flows of the Company and its subsidiaries as if the current group structure had been in existence throughout the Track Record Period, or since their respective dates of incorporation, whichever was shorter. The consolidated statements of financial position of the Group as at 31 March 2013 and 2014 have been prepared to present the assets and liabilities of the Company and its subsidiaries as if the current group structure had been in existence at those dates.

The assets and liabilities of the companies comprising the Group are consolidated using the existing book values from the Controlling Shareholder’s perspective. No amount is recognised as consideration of goodwill or excess of acquirer’s interest in the fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination.

All significant intra-group transactions, balances and unrealised gains on transactions have been eliminated on consolidation.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation

The Financial Information have been prepared in accordance with the accounting policies set out below, which conform to HKFRSs which collective term includes Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the HKICPA. The Financial Information also comply with the applicable disclosure requirements of the Hong Kong Companies Ordinance and the GEM Listing Rules.

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APPENDIX I ACCOUNTANT’S REPORT

The Financial Information has been prepared under the historical cost convention. The measurement bases are fully described in the accounting policies below.

It should be noted that accounting estimates and assumptions are used in the preparation of the Financial Information. Although these estimates are based on management’s best knowledge and judgement of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information, are disclosed in note 4.

The HKICPA has issued a number of new and revised HKFRSs which were relevant to the Group and became effective during the Track Record Period. In preparing the Financial Information, the Group has adopted all these new and revised HKFRSs consistently throughout the Track Record Period.

At the date of this report, the HKICPA has issued certain new or amended HKFRSs, that are potentially relevant to the Group, that have been issued but are not yet effective and have not been adopted early by the Group. The directors anticipate that all of the pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on those new or amended HKFRSs that are expected to have impact on the Group’s accounting policies is provided below. Certain other new or amended HKFRSs have been issued but are not expected to have a material impact on the Group’s financial statements.

Amendments to HKAS 32 – Offsetting Financial Assets and Financial Liabilities

The amendments clarify the offsetting requirements by adding appliance guidance to HKAS 32 which clarifies when an entity “currently has a legally enforceable right to set off” and when a gross settlement mechanism is considered equivalent to net settlement.

HKFRS 9 – Financial instruments

Under HKFRS 9, financial assets are classified into financial assets measured at fair value or at amortised cost depending on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Fair value gains or losses will be recognised in profit or loss except for those non-trade equity investments, which the entity will have choice to recognise the gains and losses in other comprehensive income. HKFRS 9 carries forward the recognition, classification and measurement requirements for financial liabilities from HKAS 39, except for financial liabilities that are designated at fair value through profit or loss, where the amount of change in fair value attributable to change in credit risk of that liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, HKFRS 9 retains the requirements in HKAS 39 for derecognition of financial assets and financial liabilities.

The Group is in the process of making an assessment of the potential impact of these new or amended HKFRSs and the directors so far concluded that the adoption of these new or amended HKFRSs will have no material impact on the Group’s financial information.

3.2 Subsidiaries

A subsidiary is an investee over which the Company is able to exercise control. The Company controls an investee if all three of the following elements are present: power over the investee, exposure, or rights, to variable returns from the investee, and the liability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

In the Company’s statement of financial position, investments in subsidiaries are stated at cost less any impairment loss, if any. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

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3.3 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses (note 3.4). The cost of property, plant and equipment includes its purchase price and the costs directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other costs, such as repairs and maintenance are charged to profit or loss during the period in which they are incurred.

Property, plant and equipment are depreciated so as to write off their cost over their estimated useful lives on a straight-line basis. The estimated useful lives are, at the following rates per annum:

Leasehold land and buildings	4%
Leasehold improvements	4%
Furniture and equipment	20%
Motor vehicles	25%

The assets’ depreciation method and estimated useful lives are reviewed, and adjusted if appropriate, at each reporting date.

An asset is written down immediately to its recoverable amount if its carrying amount is higher than the asset’s estimated recoverable amount.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the relevant lease.

The gain or loss on disposal of an item of property, plant and equipment is the difference between the net sale proceeds and its carrying amount, and is recognised in profit or loss on disposal.

3.4 Impairment of non-financial assets

Property, plant and equipment and intangible assets are tested for impairment whenever there are indications that the assets’ carrying amount may not be recoverable.

An impairment loss is recognised as an expense immediately for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of time value of money and the risk specific to the asset.

For the purposes of assessing impairment, where an asset does not generate cash inflows largely independent from those from other assets, the recoverable amount is determined for the smallest group of assets that generate cash inflows independently (i.e. a cash-generating unit). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the asset’s recoverable amount and only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

3.5 Intangible assets

Intangible assets acquired separately are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. The cost of an intangible asset under development is not subject to amortisation until it is completed and available for use.

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Intangible assets not yet available for use are tested for impairment annually by comparing their carrying amounts with their recoverable amounts, irrespective of whether there is any indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.

An impairment loss is recognised as an expense immediately. When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.

Intangible assets with finite lives are tested for impairment when there is an indication that an asset may be impaired (see the accounting policies in respect of impairment losses for non-financial assets above).

3.6 Financial assets

The Group’s financial assets mainly comprise available-for-sale financial assets including investment in a life insurance policy; and loans and receivables including trade receivables, deposits, amount due from a director, pledged bank deposits and cash at banks and in hand.

Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and where allowed and appropriate, re-evaluates this designation at every reporting date.

All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instrument. Regular way purchases of financial assets are recognised on trade date. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all the risks and rewards of ownership have been transferred.

At each reporting date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidence exists, impairment loss is determined and recognised based on the classification of the financial asset.

Available-for-sale financial assets

These assets are non-derivative financial assets that are designated as available-for-sale or are not included in other categories of financial assets. Subsequently to initial recognition, these assets (including investment in a life insurance policy) are carried at fair value with changes in fair value recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses on monetary instruments, which are recognised in profit or loss.

Where a decline in the fair value constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognised in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently measured at amortised cost using the effective interest method, less any impairment losses. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction cost.

At each reporting date, financial assets other than at fair value through profit or loss are reviewed to determine whether there is any objective evidence of impairment.

Objective evidence of impairment of individual financial assets includes observable data that comes to the attention of the Group about one or more of the following loss events:

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ACCOUNTANT’S REPORT

APPENDIX I

• significant financial difficulty of the debtor;

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

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

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

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

Loss events in respect of a group of financial assets include observable data indicating that there is a measurable decrease in the estimated future cash flows from the group of financial assets. Such observable data includes but not limited to adverse changes in the payment status of debtors in the group and, national or local economic conditions that correlate with defaults on the assets in the group.

If any such evidence exists, the impairment loss is measured and recognised as follows:

If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss is recognised in profit or loss of the period in which the impairment occurs.

If, in subsequent period, the amount of the impairment loss on loans and receivables decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount of the financial asset exceeding what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss for the period in which the reversal occurs.

Financial assets other than trade receivables that are stated at amortised cost, impairment losses are written off against the corresponding assets directly. Where the recovery of trade receivables is considered doubtful but not remote, the impairment losses for doubtful receivables are recorded using an allowance account. When the Group is satisfied that recovery of trade receivables is remote, the amount considered irrecoverable is written off against trade receivables directly and any amounts held in the allowance account in respect of that receivable are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

3.7 Cash and cash equivalents

Cash and cash equivalents include cash at banks and in hand. For the purpose of the consolidated statement of cash flows presentation, cash and cash equivalents include bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

3.8 Financial liabilities

The Group’s financial liabilities include accrued expenses and other payables, bank borrowings and obligation under finance leases, which are financial liabilities at amortised cost.

Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. All interest related charges are recognised in accordance with the Group’s accounting policy for borrowing costs (note 3.14). A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

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ACCOUNTANT’S REPORT

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in profit or loss.

Accrued expenses and other payables

These are recognised initially at their fair values and subsequently measured at amortised cost, using the effective interest method.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

Finance lease liabilities

Financial lease liabilities are measured at initial value less the future finance charges of lease repayments (note 3.11), and subsequently measured at amortised cost using the effective interest method.

3.9 Share capital

Ordinary shares are classified as equity. Share capital is determined using the nominal value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share premium (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction.

3.10 Revenue and other income recognition

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

Revenue from provision of security guarding services are recognised in the accounting period in which the services are rendered.

Interest income from bank deposits is accrued on a time apportionment basis using the effective interest method.

Interest income from investment in a life insurance policy is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.

3.11 Leases

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

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APPENDIX I

ACCOUNTANT’S REPORT

Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases.

Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased assets, or, if lower, the present value of the minimum lease payments (the “initial value”), of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance lease charges, are recorded as finance lease liabilities.

Subsequent accounting for assets held under finance lease agreements corresponds to those applied to comparable acquired assets. The corresponding finance lease liability is reduced by lease payments less finance lease charges.

Finance lease charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the finance lease liabilities for each accounting period.

Operating lease charges as the lessee

Where the Group has the right to use of assets held under operating leases, payments made under the leases are charged to profit or loss on a straight line basis over the lease terms except where an alternative basis is more representative of the time pattern of benefits to be derived from the leased assets. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the period in which they are incurred.

3.12 Employee benefits

Long service payment and employee leave entitlements

Employee entitlements to long service payment and annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for long service payment and annual leave as a result of services rendered by employees up to each reporting date. Non-accumulating compensated absences are not recognised until the time of leave.

Pension obligations

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all of its employees. Contributions are made based on a percentage of the employees’ basic salaries and are charged to profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into MPF Scheme.

3.13 Foreign currencies

The financial statements are presented in Hong Kong Dollars (“HK$”), which is also the functional currency of the Company.

In the individual financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary assets and liabilities denominated in foreign

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APPENDIX I ACCOUNTANT’S REPORT

currencies are translated at the foreign exchange rates ruling at that date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the reporting date retranslation of monetary assets and liabilities are recognised in profit or loss.

3.14 Borrowing costs

Borrowing costs are expensed when incurred.

3.15 Accounting for income tax

Income tax comprises current tax and deferred tax. Current income tax assets and/or liabilities comprise those claims from, or obligations to, tax authorities relating to the current or prior reporting period, that are unpaid at each reporting date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the period. All changes to current tax assets or liabilities are recognised as a component of tax expense in profit or loss.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for tax purposes. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is measured at the tax rates appropriate to the expected manner in which the carrying amount of the asset or liability is realised or settled and that have been enacted or substantively enacted at the end of reporting period.

Income taxes are recognised in profit or loss except when they relate to items recognised in other comprehensive income in which case the taxes are also recognised in other comprehensive income.

3.16 Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated.

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, the existence will only be confirmed by the occurrence or non-occurrence of one or more future events not wholly within the control of the Group are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

3.17 Segment reporting

The Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the executive directors for their decisions about resources allocation to the Group’s business components and for their review of the performance of those components. The business components in the internal financial information reported to the executive directors are determined following the Group’s line of business.

The measurement policies the Group uses for reporting segment results under HKFRS 8 Operating Segments are the same as those used in its financial statements prepared under HKFRSs.

3.18 Related parties

A party is considered to be related to the Group if:

• (a) A person or a close member of that person’s family is related to the Group if that person:

• (i) has control or joint control over the Group;

• (ii) has significant influence over the Group; or

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ACCOUNTANT’S REPORT

• (iii) is a member of the key management personnel of the Group or the Company’s parent.

• (b) An entity is related to the Group if any of the following conditions apply:

• (i) the entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

• (ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);

• (iii) both entities are joint ventures of the same third party;

• (iv) one entity is a joint venture of a third party and the other party is an associate of the third entity;

• (v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;

• (vi) the entity is controlled or jointly controlled by a person identified in (a); and

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

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

• (i) that person’s children and spouse or domestic partner;

• (ii) children of that person’s spouse or domestic partner; and

• (iii) dependents of that person or that person’s spouse or domestic partner.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Impairment of receivables

The policy for the impairment of receivables of the Group is based on the evaluation of collectability and ageing analysis of accounts and on the management’s judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each customer.

Depreciation

The Group depreciated the property, plant and equipment on a straight-line basis over the estimated useful lives of four to twenty-five years, starting from the date on which the assets are placed into productive use. The estimated useful lives reflect the directors’ best estimate of the periods that the Group intends to derive future economic benefits from the use of the Group’s property, plant and equipment.

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Estimated current tax and deferred tax

The Group is subject to income taxes in Hong Kong. There are certain transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax based on estimates. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax provisions in the period in which such final tax liabilities determination is made.

5. SEGMENT INFORMATION

An operating segment is a component of the Group that is engaged in business activities from which the Group may earn revenue and incur expenses, and is defined on the basis of the internal management reporting information that is provided to and regularly reviewed by the executive directors in order to allocate resources and assess performance of the segment. For the Track Record Period, executive directors regularly review revenue and operating results derived from provision of security guarding services and consider as one single operating segment.

The Company is an investment holding company and the principal place of the Group’s operation is in Hong Kong. For the purpose of segment information disclosures under HKFRS 8, the Group regarded Hong Kong as its country of domicile. All the Group’s non-current assets are principally attributable to Hong Kong, being the single geographical region.

The geographical location of customers is based on the location at which the services are provided. The total revenue from external customers is wholly sourced from Hong Kong.

Information about major customers

There is no single customer contributed to 10% or more revenue to the Group’s revenue for the years ended 31 March 2013 and 2014.

6. REVENUE AND OTHER INCOME

An analysis of the revenue from the Group’s principal activities (note 1), which is also the Group’s turnover, and other income are as follows:

Revenue Security guarding services Other income Bank interest income Gain on disposal of property, plant and equipment Bank loan interest recharged to a director Sundry income	For the year ended 31 March 2013 2014 HK$ HK$ 90,605,281 111,059,188 – 124 2,441,159 – 55,924 217,540 173,288 292,002 2,670,371 509,666 93,275,652 111,568,854	For the year ended 31 March 2013 2014 HK$ HK$ 90,605,281 111,059,188 – 124 2,441,159 – 55,924 217,540 173,288 292,002 2,670,371 509,666 93,275,652 111,568,854
		124 – 217,540 292,002
		509,666
		111,568,854

– I-20 –

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

7. FINANCE COSTS

Interest charges on: Bank borrowings, which contain a repayment on demand clause, wholly repayable within five years Amount due to a related party wholly repayable within five years Finance leases	For the year ended 31 March 2013 2014 HK$ HK$ 750,842 1,025,819 27,262 – 31,028 28,037 809,132 1,053,856

8. PROFIT BEFORE INCOME TAX

Profit before income tax is arrived at after charging/(crediting):

Auditor’s remuneration Bad debts written off Cost of services rendered Depreciation: – Owned assets – Leased assets Employee benefits expenses (including directors’ remuneration): Salaries, allowances and benefits in kind included in – Cost of services rendered – General and administrative expenses Retirement benefits – defined contribution plans1 included in – Cost of services rendered – General and administrative expenses (Gain)/Loss on disposal of property, plant and equipment Listing expenses2 Operating lease charges in respect of: – Rented premises – Office equipment Write-off of property, plant and equipment

For the year ended 31 March 2013 2014 HK$ HK$ 80,000 80,000 – 95,200 75,288,187 88,026,336 490,203 515,211 246,200 278,982 736,403 794,193 71,906,177 84,208,665 1,665,936 1,952,819 3,378,671 3,813,699 55,853 72,837 77,006,637 90,048,020 (2,441,159) 16,891 – 3,805,838 225,700 425,600 11,822 42,843 237,522 468,443 407,444 –

1 no forfeited contributions available for offset against existing contributions during the Track Record Period

2 included in “other operating expenses” in the consolidated statement of profit or loss and other comprehensive income

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

9. INCOME TAX EXPENSE

Current tax – Hong Kong Profits Tax – charged for the year – under provision in prior years	For the year ended 31 March 2013 2014 HK$ HK$ 1,248,677 2,521,105 – 52,713 1,248,677 2,573,818	For the year ended 31 March 2013 2014 HK$ HK$ 1,248,677 2,521,105 – 52,713 1,248,677 2,573,818
		2,573,818

No provisions for Hong Kong Profits Tax were made by the Company, Million Joyce and King Force Service as they did not derive any assessable profit in Hong Kong during the Track Record Period.

A provision for Hong Kong Profits Tax was made at the rate of 16.5% for King Force Security’s estimated assessable profit derived in Hong Kong for each of the financial years during the Track Record Period.

Reconciliation between income tax expense and accounting profit at applicable tax rate is as follows:

Profit before income tax Income tax at Hong Kong Profits Tax rate of 16.5% Tax effect of non-deductible expenses Tax effect of non-taxable income Utilisation of deductible temporary difference previously not recognised Under provision in prior years Income tax expense for the year	For the year ended 31 March 2013 2014 HK$ HK$ 10,294,683 10,936,177 1,698,623 1,804,469 94,180 739,332 (416,298) (5,383) (127,832) (17,313) – 52,713 1,248,677 2,573,818	For the year ended 31 March 2013 2014 HK$ HK$ 10,294,683 10,936,177 1,698,623 1,804,469 94,180 739,332 (416,298) (5,383) (127,832) (17,313) – 52,713 1,248,677 2,573,818
		1,804,469 739,332 (5,383) (17,313) 52,713
		2,573,818

No deferred tax has been provided in the consolidated financial statements as those are no material temporary difference.

10. DIVIDENDS

No dividends has been paid or declared by the Company or any of the subsidiaries during the Track Record Period.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

ACCOUNTANT’S REPORT

APPENDIX I

11. EARNINGS PER SHARE

The calculations of basic earnings per share for the Track Record Period are based on the profit attributable to the owners of the Company for the years ended 31 March 2013 and 2014 amounting to HK$9,046,006 and HK$8,362,359 respectively, and on the basis of [REDACTED] shares of the Company in issue, being the number of shares in issue immediately after Reorganisation as described in the section headed “Further information about the Company” in Appendix V to the Prospectus, throughout the Track Record Period.

The Group had no potential dilutive ordinary shares in issue during the Track Record Period.

12. REMUNERATION OF DIRECTOR AND EMOLUMENTS OF EMPLOYEES

Director’s remuneration

The aggregate amount of remuneration paid and payable to the director of the Company as at the date of this report during the Track Record Period are as follows:

Year ended 31 March 2013 Executive director: Mr. Fu Year ended 31 March 2014 Executive director: Mr. Fu	Fees HK$ – –	Salaries, allowances and benefits in kind Discretionary bonus HK$ HK$ 720,000 – 720,000 –	Retirement benefit costs HK$ 13,750 17,500	Total HK$ 733,750
				737,500

There was no arrangement under which a director waived or agreed to waive any remuneration during the Track Record Period.

The amounts represent remuneration of Mr. Fu who is a sole director of the principal operating subsidiary, King Force Security during the Track Record Period and was appointed as a director of the Company on 2 January 2014 and exclude those of other directors of the Company who were not appointed during the Track Record Period.

Five highest paid individuals

Of the five highest paid individuals with the highest emoluments in the Group, one was a director of the Company, Mr Fu, whose remuneration are reflected in the analysis presented above for the Track Record Period. Details of remuneration of the remaining four individuals including another director of the Company, Ms Liu Lai Ying (“Ms Liu”) who was appointed as a director of the Company on 12 May 2014 for both of the Track Record Period are as follows:

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

Salaries, allowances and benefits in kind Discretionary bonus Retirement benefits – defined contribution plans Total	For the year ended 31 March 2013 2014 HK$ HK$ 1,087,912 1,194,749 63,081 35,000 52,578 57,784 1,203,571 1,287,533	For the year ended 31 March 2013 2014 HK$ HK$ 1,087,912 1,194,749 63,081 35,000 52,578 57,784 1,203,571 1,287,533
		1,287,533

The remuneration paid to each of the above four individuals for the Track Record Period fell within the following bands:

	Number of individuals
	For the year ended
	31 March
	2013 2014
Nil-HK$1,000,000	4 4

No emolument was paid by the Group to the directors or any of the five highest paid individuals as an inducement to join or upon joining the Group, or compensation for loss of office.

Senior management’s emoluments

The emoluments paid or payable to members of senior management for the Track Record Period fell within the following bands:

Nil-HK$1,000,000	Number of individuals For the year ended 31 March 2013 2014 2 2

– I-24 –

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

13. PROPERTY, PLANT AND EQUIPMENT

At 1 April 2012 Cost Accumulated depreciation Net carrying amount Year ended 31 March 2013 Opening net carrying amount Additions Depreciation Disposal/write off Closing net carrying amount At 31 March 2013 and 1 April 2013 Cost Accumulated depreciation Net carrying amount Year ended 31 March 2014 Opening net carrying amount Additions Depreciation Disposal/write off Closing net carrying amount At 31 March 2014 Cost Accumulated depreciation Net carrying amount	Leasehold land and buildings HK$ 1,508,070 (180,969) 1,327,101 1,327,101 6,293,135 (251,725) (1,327,101) 6,041,410 6,293,135 (251,725) 6,041,410 6,041,410 – (251,726) – 5,789,684 6,293,135 (503,451) 5,789,684	Leasehold improvements HK$ 131,150 (13,770) 117,380 117,380 939,320 (37,573) (117,380) 901,747 939,320 (37,573) 901,747 901,747 126,000 (42,613) – 985,134 1,065,320 (80,186) 985,134	Furniture and equipment HK$ 644,018 (330,775) 313,243 313,243 533,694 (116,565) (290,064) 440,308 584,952 (144,644) 440,308 440,308 312,891 (159,340) – 593,859 897,843 (303,984) 593,859	Motor vehicles HK$ 992,794 (666,177) 326,617 326,617 840,888 (330,540) – 836,965 1,312,159 (475,194) 836,965 836,965 175,836 (340,514) (17,891) 654,396 1,380,648 (726,252) 654,396	Total HK$ 3,276,032 (1,191,691)
					2,084,341
					2,084,341 8,607,037 (736,403) (1,734,545)
					8,220,430
					9,129,566 (909,136)
					8,220,430
					8,220,430 614,727 (794,193) (17,891)
					8,023,073
					9,636,946 (1,613,873)
					8,023,073

As at 31 March 2013 and 2014, the carrying amount of Group’s leasehold land and buildings amounting to HK$6,041,410 and HK$5,789,684 were pledged to secure general banking facilities granted to the Group (note 25).

All leasehold land and buildings are held on medium term leases between 10 to 50 years in Hong Kong.

As at 31 March 2013 and 2014, the net carrying amount of motor vehicles included the amount of HK$647,620 and HK$452,493 held for motor vehicles under finance leases respectively (note 22).

– I-25 –

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

14. TRADE RECEIVABLES

The Group normally allows credit period ranging from 7 to 30 days to its major customers. At each reporting date the Group reviews receivables for evidence of impairment on both an individual and collective basis.

The ageing analysis of trade receivables (net of impairment losses) based on invoice dates, as of the end of the reporting periods is as follows.

Not more than 30 days 30-90 days Over 90 days	As at 31 2013 HK$ 6,918,043 4,637,086 270,209 11,825,338	March 2014 HK$ 8,400,620 5,694,002 598,539
		14,693,161

The ageing analysis of trade receivables (net of impairment losses), based on past due date, as of the end of the reporting periods is as follows:

Neither past due nor impaired Not more than 30 days past due 30-90 days past due Over 90 days past due	As at 31 2013 HK$ 8,644,391 1,572,184 1,455,846 152,917 3,180,947 11,825,338	March 2014 HK$ 10,546,044 1,732,099 2,168,355 246,663
		4,147,117
		14,693,161

Trade receivables that were neither past due nor impaired and that were past due but not impaired related to a number of customers that the Group had continuing business relationships with these customers including services to and settlements from these customers in general, in the opinion of the directors, has no indication of default. Based on past credit history, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered to be fully recoverable. The Group did not hold any collateral in respect of trade receivables past due but not impaired.

At each reporting date, the Group reviews receivables for evidence of impairment on both individual and collective basis. During the year ended 31 March 2014, the Group has written off trade receivables of HK$95,200 directly to the profit or loss for the year (note 8). None of the trade receivables as at 31 March 2013 and 2014 have been identified by the Group as having an impairment issue.

The directors consider that the carrying amounts of trade receivables approximate their fair values.

– I-26 –

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

15. INVESTMENT IN A LIFE INSURANCE POLICY

On 30 May 2013, King Force Security entered into a life insurance policy with an insurance company to insure an executive director, Mr. Fu, (the “Insured”). Under the policy, the beneficiary and policy holder is King Force Security and the total insured sum is US$550,000 (equivalent to HK$4,290,000). King Force Security is required to pay a one-off premium of US$145,217 (equivalent to HK$1,132,693) including an expense charge at inception of the policy amounting to US$8,713 (equivalent to HK$67,962). King Force Security can terminate the policy at any time and receive cash back based on the cash value of the policy at the date of withdrawal, which is determined by the premium payment of US$145,217 (equivalent to HK$1,132,693) plus accumulated interest earned and minus the accumulated insurance charge and policy expense charge (“Cash Value”). For the maturity date of the life insurance policy, the policy provides for continuation of the policy at the Insured’s age 100. A policy that is in force on the policy anniversary when the Insured is aged 100 will remain in force until the death of the Insured, unless there is full cash surrender or a loan causes the policy to lapse. The insurance charge is the cost of insurance that the insurance company charged for provision of the insurance benefits on the death of the insured at range from 0.084% to 35.93% per annum throughout the policy. In addition, if withdrawal and termination of the Policy are made between the 1st to 15th policy year, there is a specified amount of surrender charge. The surrender charge on full or partial termination would be calculated based on the number of years the policy in force which is charged at the range from 0.9% to 13.5% of the premium. The surrender charge of withdrawal is calculated by the insurance company based on the Insured’s issue age and the number of years the policy has been in force and will be deducted from the Cash Value if withdrawal is made within the 1st to 15th policy year which is charged at the range from 1% to 4% of the withdrawal amount. The insurance company will pay King Force Security an interest on the outstanding Cash Value of the policy on 13th month. Commencing on the 2nd year, a minimum guaranteed interest of 1.8% per annum is guaranteed by the Insurance Company.

As at 31 March 2014, the life insurance policy was pledged to a bank to secure banking facilities granted to the Group.

The investment in a life insurance policy is denominated in US$, a currency other than the functional currency of the Group.

The directors consider that the carrying amount of investment in a life insurance policy approximate their fair values.

16. AN INTANGIBLE ASSET UNDER DEVELOPMENT

					**As at 31 **	March
					2013	2014
					HK$	HK$
An	intangible	asset	under	development	400,000	1,600,000

The intangible asset under development represents a computerised operating system being developed by a service provider starting from 1 November 2012. Upon completion of the development and successful test for implementation, the system will be transferred to intangible asset with finite useful life being measured initially at cost and subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

17. PREPAYMENTS AND DEPOSITS

Current Prepayments Deposits	As at 31 2013 HK$ 188,782 91,424 280,206	March 2014 HK$ 1,746,146 92,124
		1,838,270

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

18. AMOUNT DUE FROM A DIRECTOR

Particulars of amount due from a director disclosed pursuant to section 161B of the Hong Kong Companies Ordinance are as follows:

Mr. Fu Year ended 31 March 2013 Mr. Fu Year ended 31 March 2014 Mr. Fu	Maximum amount outstanding during the year HK$ 21,283,420 30,930,015	As at 31 2013 HK$ 21,283,420 Opening outstanding balance HK$ 304,094 21,283,420	March 2014 HK$ 9,680,067
			Closing outstanding balance HK$ 21,283,420
			9,680,067

The amount is unsecured, interest free and repayable on demand. The directors consider that the carrying amounts of the balances approximate their fair values. The directors have confirmed that the amount due from a director will be settled prior to the listing of the Company’s shares on the Stock Exchange.

19. PLEDGED BANK DEPOSIT

Pledged bank deposits represent the Group’s bank deposits pledged to secure for its banking facilities (note

25).

20. ACCRUED EXPENSES AND OTHER PAYABLES

					**As at 31 **	March
					2013	2014
					HK$	HK$
Accrued	expenses	and	other	payables	8,083,592	12,246,520

The directors consider that the carrying amounts of accrued expenses and other payables approximate their fair values.

– I-28 –

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

21. BANK BORROWINGS

Current Secured – Bank overdrafts – Bank loans due for repayment within one year – Bank loans due for repayment after one year which contain a repayment on demand clause – Other bank borrowings due for repayment within one year	As at 31 2013 HK$ 4,925,700 2,075,420 12,031,621 7,228,808 26,261,549	March 2014 HK$ – 1,412,762 4,872,811 –
		6,285,573

The interest-bearing bank borrowings are carried at amortised cost. The current bank borrowings include bank loans that are not fully scheduled for repayment within one year. They are classified as current liabilities as the loan agreements give the lenders an unconditional right to demand repayment at any time at their own discretion. None of the bank borrowings due for repayment after one year, which contains a repayment on demand clause and classified as a current liability, is expected to be settled within one year.

The analysis of bank borrowings by scheduled repayment is as follows:

Portion due within one year – Bank overdrafts – Bank loans – Other bank borrowings Portion due for repayment after one year After one year but within two years – Bank loans After two years but within five years – Bank loans After five years – Bank loans	As at 31 2013 HK$ 4,925,700 2,075,420 7,228,808 1,217,270 1,980,321 8,834,030 26,261,549	March 2014 HK$ – 1,412,762 – 921,352 2,504,694 1,446,765
		6,285,573

The above amounts are based on the scheduled repayment dates in the loan agreements and ignore the effect of any repayment on demand clause.

The borrowings were secured by the pledge of the Company’s leasehold land and buildings under property, plant and equipment with carrying amount of HK$6,041,410 and HK$5,789,684 as at 31 March 2013 and 2014 (note 13) respectively.

Included in bank borrowings are two instalment loans with carrying amount of HK$9,011,240 in total as at 31 March 2013. Principal amounts totalling HK$9,100,000 was borrowed by a subsidiary, King Force Security and advanced to a director, Mr. Fu. Interest expense on these two loans was recharged to a director (note 6). The loans were fully repaid during the year ended 31 March 2014.

– I-29 –

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

Details of the bank borrowings denominated in HK$ are stated below.

	Amount	Interest rate	Repayment terms
	HK$
As at 31 March 2013
Bank overdrafts	4,925,700	0.75% p.a. over Hong Kong Prime	Payable on demand
		Rate
Other bank borrowings	7,228,808	Bank’s standard finance rate	Payable within 90 days
Bank loans	13,482,388	1.75%-2.75% p.a. below Hong	Payable within 20 years
		Kong Prime Rate to 2%-3% p.a.
		over Hong Kong Prime Rate
Bank loan	194,444	Higher of Hong Kong Prime Rate	Payable within 3 years
		or Bank’s cost of fund
Bank loan	430,209	Fixed rate of 3.85% p.a.	Payable within 2 years
As at 31 March 2014
Bank loans	6,285,573	1.75% p.a. below Hong Kong	Payable within 12 years
		Prime Rate to 3% p.a. over Hong
		Kong Prime Rate

22. OBLIGATIONS UNDER FINANCE LEASES

The analysis of the obligations under finance leases is as follows:

Due within one year Due in the second to fifth years Future finance charges on finance lease	As at 31 2013 HK$ 273,718 433,875 707,593 (51,922) 655,671	March 2014 HK$ 224,424 307,952 532,376 (30,897) 501,479

The present value of finance lease liabilities is as follows:

Due within one year Due in the second to fifth years Less: Current portion due within one year included under current liabilities Non-current portion included under non-current liabilities	As at 31 2013 HK$ 250,566 405,105 655,671 (250,566) 405,105	March 2014 HK$ 207,493 293,986 501,479 (207,493) 293,986

Finance lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

As at 31 March 2013 and 2014, the Group has entered into finance leases for certain motor vehicles respectively. The lease periods are ranged from two years to five years with effective interest rate ranged from 4.27% to 4.28% per annum and from 3.8% to 4.28% per annum respectively. These leases do not have option to renew or contingent rental provision.

23. SHARE CAPITAL

The Group

As at 31 March 2013 and 2014, the balance of share capital represented the paid-up capital of Million Joyce.

The Company

The Company was incorporated on 2 January 2014 with authorised share capital of HK$380,000 divided into 38,000,000 ordinary shares of HK$0.01 each. 1 nil-paid share was allotted and issued to the subscriber to the memorandum and articles of association of the Company, and was subsequently transferred to Optimistic King on the same day. On the same date, each of Optimistic King and Gloria Power further subscribed for 749 and 250 nil-paid shares, resulting them holding 750 and 250 nil-paid Shares, respectively, as at the date of incorporation.

On [�], Optimistic King and Gloria Power each as a vendor, the Company as purchaser, and Mr. Fu and Mr. Chiu as warrantors entered into a sale and purchase agreement, pursuant to which the Company acquired 750 shares (representing 75% of the issued share capital of Million Joyce) and 250 shares (representing 25% of the issued capital of Million Joyce) in Million Joyce from Optimistic King and Gloria Power, respectively, and as consideration for which (i) the 750 and 250 nil-paid Shares held by Optimistic King and Gloria Power were credited as fully paid respectively, and (ii) [REDACTED] and [REDACTED] Shares were issued and allotted to each of Optimistic King and Gloria Power respectively, all credited as fully paid.

24. RESERVES

Merger reserve represents the difference between the share capital of King Force Security held by the Group and the share capital of Million Joyce.

25. BANKING FACILITIES

At 31 March 2013 and 2014, the Group, through King Force Security, had banking facilities of approximately HK$33,375,000 and HK$12,545,000 in aggregate respectively. The Group borrowed approximately HK$13,645,000 and HK$7,023,063 from banks during the year ended 31 March 2013 and 2014 respectively. Balance of HK$26,261,549 and HK$6,285,573 were outstanding as at 31 March 2013 and 2014 respectively.

At the reporting dates, the Group’s general banking facilities were secured by the following:

• (a) legal charges on the Group’s leasehold land and buildings (note 13);

• (b) legal charges on a director’s life insurance policy (note 15);

• (c) legal charges on properties owned by certain directors*;

• (d) charges over a bank deposit* (note 19);

• (e) joint and several personal guarantees by certain directors of the Group; and

• (f) guarantee issued by The Government of Hong Kong Special Administrative Region under the Special Loan Guarantee Scheme.

• The charges were released upon the settlement of the relevant bank borrowings during the year ended 31 March 2014

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

26. RELATED PARTY TRANSACTIONS

• (a) During the Track Record Period, the Group entered into the following transactions:

Compensation of a director’s dependent Salaries and allowances Defined contribution plans Operating lease and related charges paid to a director, Ms. Liu Bank loan interest recharged to a director, Mr. Fu	Group For the year ended 31 March 2013 2014 HK$ HK$ 30,000 – 1,500 – 31,500 – 120,000 360,000 (55,924) (217,540)	Group For the year ended 31 March 2013 2014 HK$ HK$ 30,000 – 1,500 – 31,500 – 120,000 360,000 (55,924) (217,540)
		– 360,000 (217,540)

• (b) Compensation of key management personnel

Total remuneration of directors and other members of key management during the year was as follows: Fees, salaries and staff welfare benefits (short-term employee benefits) Defined contribution plans (post employment benefits)	Group For the year ended 31 March 2013 2014 HK$ HK$ 1,811,578 1,874,219 63,832 72,090 1,875,410 1,946,309	Group For the year ended 31 March 2013 2014 HK$ HK$ 1,811,578 1,874,219 63,832 72,090 1,875,410 1,946,309
		1,946,309

(c) During the Track Record Period, the Group entered into the following connected transactions:

			Group
			**For the year **	ended
			31 March
			2013	2014
			HK$	HK$
Realife	Financial	Services Limited	–	33,416
Realife	Insurance	Advisors Limited	5,650	7,184
Realife	Insurance	Brokers Limited	1,183,030	1,433,932
Realife	Insurance	Services Limited	79,060	90,373

Either Mr. Chiu Chun Keung, (“Mr. Chiu”), the sole shareholder of Gloria Power, or his spouse is a director or has beneficial interests in the above related companies for provision of insurance consultation and brokerage services to the Group during the Track Record Period. The insurance services have been entered into in the ordinary and usual business of the Group, and are on normal commercial terms.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

(d) Balances with related parties

			Group
			For the year ended
			31 March
			2013	2014
			HK$	HK$
Realife	Financial	Services Limited	–	–
Realife	Insurance	Advisors Limited	–	2,866
Realife	Insurance	Brokers Limited	188,782	117,468
Realife	Insurance	Services Limited	–	51,657

The above balances are included in prepayments.

27. MAJOR NON-CASH TRANSACTIONS

A deposit of HK$609,000 paid during the year ended 31 March 2012 formed part of the additions of property, plant and equipment during the year ended 31 March 2013.

A portion of HK$600,000 and HK$153,105 of the addition of property, plant and equipment is financed through an arrangement of a finance lease during the year ended 31 March 2013 and 2014 respectively.

28. OPERATING LEASE COMMITMENTS

Future minimum lease payments under a non-cancellable operating lease in respect of rented premise are payable as follows:

Within one year In the second to fifth years	As at 31 2013 HK$ 411,000 240,000 651,000	March 2014 HK$ 50,400 –
		50,400

The Group leases a number of premises under operating leases. The leases run for an initial period of one to two years. The above lease commitments only include commitments for basic rental and none of the lease includes any contingent rental.

On 28 March 2014, certain leases in respect of premises under operating leases from a director have been earlier terminated.

29. CAPITAL COMMITMENTS

			**As at 31 **	March
			2013	2014
			HK$	HK$
Contracted	but	not provided for:
Acquisition	of	an intangible asset	2,000,000	800,000

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

ACCOUNTANT’S REPORT

APPENDIX I

30. FINANCIAL RISK MANAGEMENT

The Group is exposed to a variety of financial risks which result from the use of financial instruments in its ordinary course of operations. The financial risks include market risks (mainly foreign currency risk and interest rate risk), credit risk and liquidity risk. Details of these financial instruments are disclosed in the notes below. The Group’s overall risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The directors meet regularly to identify and evaluate risks and to formulate strategies to manage financial risks on timely and effective manner. The risks associated with these financial instruments and the policies applied by the Group to mitigate these risks are set out below.

Categories of financial assets and liabilities

The carrying amounts of the Group’s financial assets and liabilities recognised in the consolidated statements of financial position at the reporting date may also be categorised as follows (see notes 3.6 and 3.8 for explanations on how the category of financial instruments affects their subsequent measurement):

Financial assets Non-current Available-for-sale financial assets: Investment in a life insurance policy Current Loans and receivables: Trade receivables Deposits Amount due from a director Pledged bank deposit Cash at banks and in hand Financial liabilities Non-current Financial liabilities at amortised cost: Obligations under finance leases Current Financial liabilities at amortised cost: Accrued expenses and other payables Bank borrowings Obligations under finance leases	As at 31 2013 HK$ – 11,825,338 91,424 21,283,420 1,000,825 4,054,091 38,255,098 38,255,098 As at 31 2013 HK$ 405,105 8,083,592 26,261,549 250,566 34,595,707 35,000,812	March 2014 HK$ 1,076,058 14,693,161 92,124 9,680,067 – 3,414,944
		27,880,296
		28,956,354
		March 2014 HK$ 293,986 12,246,520 6,285,573 207,493
		18,739,586
		19,033,572

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

ACCOUNTANT’S REPORT

APPENDIX I

Foreign currency risk

The Group’s exposure to risk resulting from changes in foreign currency exchange rates is minimal as most of the transactions are conducted in HK$.

Interest rate risk

Interest rate risk relates to the risk that the fair value or cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk relates principally to its bank deposits and interest-bearing bank borrowings. The Group’s policy is to minimise interest rate risk exposure. To achieve this, the Group regularly assesses and monitors its needs for cash with reference to its business plans and day-to-day operations. As at 31 March 2014, all bank deposits and interest-bearing bank borrowings bear floating interest rates whereas one of the bank loans of comparatively insignificant amount as at 31 March 2013 was subject to fixed interest rate. Therefore, the fair value interest rate risk arising from such bank loan bearing fixed interest rate is minimal. The interest rates and/or terms of repayment of interest-bearing bank borrowings of the Group are disclosed in note 21. The Group currently does not have an interest rate hedging policy.

In respect of cash flow interest rate risk, the following table illustrates the sensitivity of the Group’s profit for the years ended 31 March 2013 and 2014, and other components of equity at those dates due to a possible change in interest rates on its floating rate bank deposits and bank borrowings with all other variables held constant at each reporting date:

Increase/(Decrease) in profit for the year and retained profits Increase/Decrease in basis points (“bp”) + 50 bp – 50 bp	For the year ended 31 March 2013 2014 HK$ HK$ (63,225) (13,305) 63,225 13,305

The above sensitivity analysis is prepared based on the assumption that the bank deposits and bank borrowings as at reporting dates existed throughout the whole financial year.

The assumed changes in interest rates are considered to be reasonably possible based on observation of current market conditions and represents management’s assessment of a reasonably possible change in interest rates over the next twelve months period.

Credit risk

The Group’s exposure to credit risk relates to the financial assets summarised in the note above. Please refer to note 14 for further details of the Group’s exposures to credit risk on trade receivables.

The Group’s trade receivables are actively monitored to avoid concentration of credit risk with exposure spread over a number of customers.

The Group continuously evaluates the credit risk of its customers to ensure appropriateness of the amount of credit granted. Credit terms are extended to certain customers based on the evaluation of individual customer’s financial conditions. In addition, the Group reviews the recoverable amount of each individual trade debt at each reporting date to ensure that adequate impairment losses are made for irrecoverable amounts. The credit policies have been followed by the Group during the Track Record Period and are considered to have been effective in limiting the Group’s exposure to credit risk to a desirable level. The Group’s bank balances are all deposited with licensed banks in Hong Kong.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I

ACCOUNTANT’S REPORT

Liquidity risk

Liquidity risk relates to the risk that the Group will not be able to meet its obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group is exposed to liquidity risk in respect of settlement of accrued expenses, other payables and its financing obligations, and also in respect of its cash flow management. The Group’s objective is to maintain an appropriate level of liquid assets and committed lines of funding to meet its liquidity requirements in the short and longer term.

The liquidity policies have been followed by the Group during the Track Record Period and are considered by the directors to have been effective in managing liquidity risks.

Analysed below is the Group’s remaining contractual maturities for its financial liabilities as at 31 March 2013 and 2014. When the creditor has a choice of when the liability is settled, the liability is included on the basis of the earliest date on when the Group can be required to pay. Where the settlement of the liability is in instalments, each instalment is allocated to the earliest period in which the Group is committed to pay.

Accrued expenses and other payables Bank loans Bank overdrafts Other bank borrowings Obligations under finance leases Accrued expenses and other payables Bank loans Obligations under finance leases	Within 3 months or on demand HK$ 8,083,592 14,107,041 4,925,700 7,228,808 77,400 34,422,541 Within 3 months or on demand HK$ 12,246,520 6,285,573 56,106 18,588,199	As More than 3 months but less than 1 year HK$ – – – – 196,318 196,318 As More than 3 months but less than 1 year HK$ – – 168,318 168,318	at 31 March 2013 More than 1 year but less than 5 years Total undiscounted amount HK$ HK$ – 8,083,592 – 14,107,041 – 4,925,700 – 7,228,808 433,875 707,593 433,875 35,052,734 at 31 March 2014 More than 1 year but less than 5 years Total undiscounted amount HK$ HK$ – 12,246,520 – 6,285,573 307,952 532,376 307,952 19,064,469	Carrying amount HK$ 8,083,592 14,107,041 4,925,700 7,228,808 655,671
				35,000,812
				Carrying amount HK$ 12,246,520 6,285,573 501,479
				19,033,572

Specifically, for bank borrowings which contain a repayment on demand clause which can be exercised at the bank’s sole discretion, the above analysis shows the cash outflow based on the earliest period in which the Company can be required to pay, that is if the lenders were to invoke their unconditioned rights to call the loans with immediate effects.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I ACCOUNTANT’S REPORT

The table below summarises the maturity analysis of the bank borrowings with repayment on demand clause based on the agreed scheduled repayments set out in the loan agreements. The amounts included interest payments computed using contractual rates. As a result, these amounts are greater than the amounts disclosed in the “on demand” time band in the above maturity analysis. Taking into account the Group’s financial position, the directors do not consider that it is probable that the banks will exercise their discretion to demand immediate repayment. The directors believe that such bank borrowings will be repaid in accordance with the scheduled repayment dates as set out in the respective loan agreements.

		More than 3			Total
	Within 3	months but	More than 1		contractual
	months or on	less than 1	year but less		undiscounted	Carrying
	demand	year	than 5 years	Over 5 years	cash flows	amount
	HK$	HK$	HK$	HK$	HK$	HK$
Bank loans subject to
repayment on demand
clause based on
scheduled repayments:
As at 31 March 2013	733,198	1,772,324	4,336,353	10,273,733	17,115,608	14,107,041
As at 31 March 2014	408,031	1,224,094	3,865,806	1,426,205	6,924,136	6,285,573

The Group’s policy is to monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and readily realisable marketable securities to meet its liquidity requirements in the short and long term.

31. FAIR VALUE MEASUREMENTS

Fair values of the Group’s financial assets and liabilities at amortised cost are not materially different from their carrying amounts because of the immediate or short-term maturity of these financial instruments as at 31 March 2013 and 2014.

The fair value of the available-for-sale assets, i.e. the investment in a life insurance policy, is provided by the Insurance Company which is determined with reference to the Cash Value.

Financial instruments measured at fair value

Fair value hierarchy

The following table presents the fair value of the Group’s financial instruments measured at the end of the Track Record Period on a recurring basis, categorised into the three-level fair value hierarchy as defined in HKFRS 13, Fair value measurement. The level into which a fair value measurement is classified and is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

� Level 1: Fair value measured using only Level 1 inputs, i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date; � Level 2: Fair value measured using Level 2 inputs, i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available; � Level 3: Fair value measured using significant unobservable inputs (i.e. not derived from market data).

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I ACCOUNTANT’S REPORT

At the end of the Track Record Period, the Group’s investment in a life insurance policy is grouped into Level 2 category.

There were no transfers between the three levels during the Track Record Period.

32. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged throughout the Track Record Period.

The Group sets the amount of capital in proportion to its overall financing structure. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debts.

The gearing ratios of the Group as at 31 March 2013 and 2014 are as follows:

Borrowings and obligations under finance leases Equity Gearing ratio	As at 31 2013 HK$ 26,917,220 11,351,476 237%	March 2014 HK$ 6,787,052 19,713,835 34%

33. CONTINGENT LIABILITIES

At the end of each of the years during the Track Record Period, the Group did not have any significant contingent liabilities.

[34. SUBSEQUENT EVENTS

[Pursuant to a shareholder resolution passed on [date], and subject to the same conditions to the Placing as set out in the section headed “Structure and Conditions of the Placing” in the Prospectus, (i) the authorised share capital of the Company was increased from [HK$380,000] to HK$[20,000,000] by the creation of an additional [1,962,000,000] shares of HK$[0.01] each; and (ii) the share option scheme of the Company was approved, the principal terms of which are set out in the section headed “Share Option Scheme” in Appendix V to the Prospectus.

[On [date], King Force Security declared and paid interim dividends of HK$700 per share amounted to HK$7,000,000 to Million Joyce. On the same date, Million Joyce declared and paid dividends of HK$7,000 per share with an aggregate amount of HK$7,000,000 to its then shareholders, Optimistic King (of HK$5,250,000) and Gloria Power (of HK$1,750,000).]

Save as disclosed above and elsewhere in this report, no other significant events took place subsequent to 31 March 2014.]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

ACCOUNTANT’S REPORT

APPENDIX I

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company and its subsidiaries in respect of any period subsequent to 31 March 2014.

Yours faithfully

BDO Limited

Certified Public Accountants

Tsui Ka Che, Norman

Practising Certificate number P05057 Hong Kong

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set out in this appendix does not form part of the Accountants’ Report prepared by BDO Limited, Certified Public Accountants, as set out in Appendix I to this prospectus, and is included in this prospectus for information only.

The following unaudited pro forma financial information prepared in accordance with paragraph 7.31 of the GEM Listing Rules is for illustrative purposes only, and is set out here to provide investors with further information about how the proposed listing might have affected the net tangible assets of the Group as if the Placing had occurred on 31 March 2014. Although reasonable care has been exercised in preparing the said information, prospective investors who read the information should bear in mind that these figures are inherently subject to adjustments and may not give a complete picture of the Group’s financial results and positions of the financial periods concerned.

A. UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group has been prepared, on the basis of the notes set forth below, for the purpose of illustrating the effect of the Placing as if it had taken place on 31 March 2014. It has been prepared for illustrative purpose only and, because of its hypothetical nature, may not give a true picture of the financial position of the Group after the Placing or at any future dates.

Based on the Placing Price of HK$[REDACTED] per Share Based on the Placing Price of HK$[REDACTED] per Share	Adjusted consolidated net tangible assets of the Group as at 31 March 2014 HK$’000 (Note 1) [REDACTED] [REDACTED]	Add: Estimated net proceeds from the Placing HK$’000 (Note 2) [REDACTED] [REDACTED]	Unaudited pro forma adjusted consolidated net tangible assets HK$’000 [REDACTED] [REDACTED]	Unaudited pro forma adjusted consolidated net tangible assets per Share HK$ (Note 3) [REDACTED]
				[REDACTED]

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Notes:

1. The adjusted consolidated net tangible assets of the Group as at 31 March 2014 were determined as follows:

HK$’000 Audited consolidated net assets of the Group as at 31 March 2014 as shown in the Accountant’s Report as set out in Appendix I to this prospectus [REDACTED] Less: Intangible assets as at 31 March 2014 [REDACTED] Adjusted consolidated net tangible assets of the Group as at 31 March 2014 [REDACTED]

1. The estimated net proceeds from the Placing are based on the minimum and maximum Placing Price of HK$[REDACTED] and HK$[REDACTED] per Share, respectively, after deduction of estimated expenses for the Listing.

2. The unaudited pro forma adjusted consolidated net tangible assets per Share are determined after the adjustments as described in notes 1 and 2 above and on the basis that [REDACTED] Shares are issued and outstanding as set out in the section headed “Share Capital” to this prospectus.

3. The unaudited pro forma financial information presented above does not take account of any trading or other transactions subsequent to the date of the financial statements included in the unaudited pro forma financial information (i.e. 31 March 2014).

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

[REDACTED]

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

[REDACTED]

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

[REDACTED]

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APPENDIX III

PROPERTY VALUATION

The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in this prospectus received from Ascent Partners Valuation Service Limited, an independent valuer, in connection with its valuation as at 30 April 2014 of the property interests of the Group.

==> picture [19 x 26] intentionally omitted <==

Suite 2102, Hong Kong Trade Centre 161-167 Des Voeux Road Central Hong Kong Tel: 3679-3890 Fax: 3579-0884

Date: 30 April 2014

The Board of Directors King Force Security Holdings Limited Suites 2001-2005, 20th Floor Jardine House 1 Connaught Place Central Hong Kong

Dear Sir/Madam,

INSTRUCTIONS

In accordance with your instructions for us to value the various property in which King Force Security Holdings Limited (the “ Company ”) and its subsidiaries (hereinafter together referred to as the “ Group ”) have interests in Hong Kong, we confirm that we have carried out property inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the property interests as at 30 April 2014 (referred to as the “ Valuation Date ”).

This letter which forms part of our valuation report explains the basis and methodology of valuation, clarifying assumptions, valuation considerations, title investigation and limiting conditions of this valuation.

BASIS OF VALUATION

Our valuation of the property interests represents the market value which we would define as intended to mean “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’slength transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

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PROPERTY VALUATION

APPENDIX III

PROPERTY INTERESTS CATEGORISATION

The property interests are categorised as follows:

Group I – Property interests held and occupied by the Group in Hong Kong

Group II – Property interests leased by the Group in Hong Kong

VALUATION METHODOLOGY

We have valued the property interests of property in which held and occupied by the Group in Hong Kong in market basis and the direct comparison method is adopted where comparison based on prices realised on actual sales price of comparable property is made. Comparable properties of similar size, character, and location are analysed and carefully weighted against all the respective advantages and disadvantages of each property in order to arrive at a fair comparison of values.

We have attributed no commercial value to the property interests in Group II which is leased by the Group due to the prohibition against assignment and subletting or otherwise to the lack of substantial profit rents.

VALUATION CONSIDERATIONS

In valuing the property interests, we have complied with all the requirements contained in Chapter 8 of the Rules Governing the Listing of Securities on the Growth Enterprise Market issued by The Stock Exchange of Hong Kong Limited and the HKIS Valuation Standards (2012 Edition) published by The Hong Kong Institute of Surveyors.

VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the seller sells the property interests on the open market in their existing states without the benefit of a deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements, which could serve to affect the values of the property interests.

Unless stated as otherwise, we have assumed that the Property has been constructed, occupied and used in full compliance with, and without contravention of all laws, except only where otherwise stated. We have further assumed that, for any use of the Property upon which this report is based, all required licenses, permit, certificate and authorizations have been obtained.

We have assumed that the owners of the Property have free and uninterrupted rights to use and dispose of the Property for the whole of the unexpired term of Land Grant.

Other special assumptions of the property interests, if any, have been stated out in the footnotes of the valuation certificate attached herewith.

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PROPERTY VALUATION

APPENDIX III

TITLE INVESTIGATION

We have carried out searches to be made at the Land Registry for the Property located in Hong Kong.

We have been, in some instances, provided with the extracts of the documents relating to the Property. However, we have not verified ownership of the Property of to verify the existence of any amendments which do not appear on the copies handed to us. All documents have been used for reference only.

LIMITING CONDITIONS

We have inspected the exterior, and wherever possible, the interior of the properties but no structural survey had been made. In the course of our inspection, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. Further, no test has been carried out on any of the building services. All dimensions, measurements and areas are only approximates. We have not been able to carry out detailed on-site measurements to verify the site and floor areas of the properties and we have assumed that the areas shown on the copies of documents handed to us are correct.

The site inspection of the property was carried out by Mr. Charles Choi ASc (Estate Surveying) on 11 April 2014.

We have not carried out any soil investigations to determine the suitability of the soil conditions and the services etc. for any future development. Our valuations are prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period. We do not make any allowance for contamination or pollution of the land, if any, which may have been caused by past usage.

We have relied to a considerable extent on information provided by the Group and have accepted advice given to us on such matters, in particular, but not limited to, the sales records, tenure, planning approvals, statutory notices, easements, particulars of occupancy, site and floor areas and all other relevant matters in the identification of the property interests.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also been advised by the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and we have no reason to suspect that any material information has been withheld.

No allowance has been made in our valuation for any charges, mortgages or amount owing on any property interests nor for any expense or taxation which may be incurred in effecting a sale. We have assumed that the Property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX III

PROPERTY VALUATION

Liability in connection with this valuation report is limited to the client to whom this report is addressed and for the purpose for which it is carried out only. We will accept no liability to any other parties or any other purposes.

This report is to be used only for the purpose stated herein, any use or reliance for any other purpose, by you or third parties, is invalid. No reference to our name or our report in whole or in part, in any document you prepare and/or distribute to third parties may be made without written consent.

EXCHANGE RATE

Unless otherwise stated, all monetary amounts stated in this report are in Hong Kong Dollar (HKD).

Our summary of values and valuation certificates in respect of the property interests are herewith attached.

Yours faithfully,

For and on behalf of

Ascent Partners Valuation Service Limited

Stephen Y. W. Yeung

MFin BSc(Hons) Land Adm. MHKIS MRICS CREA RPS(GP) Principal

Mr. Stephen Y. W. Yeung is a Registered Professional Surveyor with over 10 years’ experience in valuation of properties in HKSAR and mainland China. Mr. Yeung is a Professional Member of The Hong Kong Institute of Surveyors as well as a chartered surveyor of The Royal Institution of Chartered Surveyors.

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APPENDIX III

PROPERTY VALUATION

SUMMARY OF VALUES

			Value
	Market Value in	Interest	Attributable
	Existing State	Attributable	to the Group
	as at	to the	as at
Property	30 April 2014	Group	30 April 2014
	HKD	(%)	HKD

Group I – Property interests held and occupied by the Group in Hong Kong

1 Workshop Nos. A, B, C & D on 18th Floor, So Tao Centre, Nos. 11-15 Kwai Sau Road, Kwai Chung, New Territories 11,970,000 100 11,970,000 Sub-total: 11,970,000 11,970,000 Group II – Property interests leased by the Group in Hong Kong 2 Parking Space Nos. P1 and P3 on Ground Floor, So Tao Centre, Nos. 11-15 Kwai Sau Road, Kwai Chung, New Territories No Commercial Value No Commercial Value Sub-total: Nil Nil Grand Total: 11,970,000 11,970,000	1 Workshop Nos. A, B, C & D on 18th Floor, So Tao Centre, Nos. 11-15 Kwai Sau Road, Kwai Chung, New Territories 11,970,000 100 11,970,000 Sub-total: 11,970,000 11,970,000 Group II – Property interests leased by the Group in Hong Kong 2 Parking Space Nos. P1 and P3 on Ground Floor, So Tao Centre, Nos. 11-15 Kwai Sau Road, Kwai Chung, New Territories No Commercial Value No Commercial Value Sub-total: Nil Nil Grand Total: 11,970,000 11,970,000	1 Workshop Nos. A, B, C & D on 18th Floor, So Tao Centre, Nos. 11-15 Kwai Sau Road, Kwai Chung, New Territories 11,970,000 100 11,970,000 Sub-total: 11,970,000 11,970,000 Group II – Property interests leased by the Group in Hong Kong 2 Parking Space Nos. P1 and P3 on Ground Floor, So Tao Centre, Nos. 11-15 Kwai Sau Road, Kwai Chung, New Territories No Commercial Value No Commercial Value Sub-total: Nil Nil Grand Total: 11,970,000 11,970,000
		11,970,000
		No Commercial Value
		Nil
		11,970,000

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APPENDIX III

PROPERTY VALUATION

VALUATION CERTIFICATE

Property interests held and occupied by the Group in Hong Kong

				Market Value in
			Particular of	Existing State as at
	Property	Description and Tenure	Occupancy	30 April 2014
1	Workshop Nos. A,	The property comprises the whole of	The property is	HKD11,970,000
	B, C & D on 18th	18th Floor of a 23-storey industrial	occupied by the
	Floor, So Tao	building completed in 1990.	Group for office,	(Hong Kong Dollar
	Centre, Nos. 11-15		warehouse,	Eleven Million Nine
	Kwai Sau Road,	As shown on and scaled off from the	recruitment centre,	Hundred Seventy
	Kwai Chung, New	building plans, the total gross floor	workshop	Thousand)
	Territories	area and saleable area are about 4,132	purposes.
		sq.ft. and 3,420 sq.ft. respectively.		100% interest
	35/1163 equal and			Attributable to the
	undivided shares of	The property is held under New Grant		Group:
	and in Kwai Chung	No. 4561 for a term of 99 years		HKD11,970,000
	Town Lot No. 92	commencing from 1 July 1898 and
		statutorily renewed until 30 June
		2047. The government rent payable
		for the property is at 3% of the
		rateable value of the time being of the
		property per annum.

Notes:

• (1) The registered owner of the property is King Force Security Limited vide Memorial No. 12050401680081 dated 23 April 2012, a wholly-owned subsidiary of the Group.

• (2) The property is subject to encumbrances as follows:

• (i) An Occupation Permit No. NT22/90 vide Memorial No.TW655238 dated 9 March 1990;

• (ii) A Deed of Mutual Covenant vide Memorial No.TW660789 dated 31 March 1990; and

• (iii) A Mortgage in favour of DBS Bank (Hong Kong) Limited vide Memorial No. 12050401680090 dated 23 April 2012.

• (3) According to the Company, the Group holds 100% attributable interest in the property

• (4) In undertaking our valuation of the property, we have made reference to some transaction price references of the same industrial development which have characteristics comparable to the property. The unit rates of those transaction price references are about HKD3,461 to HKD4,000 for industrial developments. The unit rates assumed by us are consistent with the said transaction price references. Due to adjustments to the unit rates of those transaction price references have been made to reflect factors including but not limited to time, location, size, floor difference and quality in arriving at the key assumption.

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APPENDIX III

PROPERTY VALUATION

VALUATION CERTIFICATE

Group II – Property interests leased by the Group in Hong Kong

			Market Value	Market Value
			in Existing State
				as at
	Property	Description and Tenancy Particulars	**30 **	April 2014
2	Parking Space Nos.	The property comprises two car parking spaces on the Ground	No Commercial
	P1 and P3 on	Floor of a 23-storey industrial building completed in 1990 and is		Value
	Ground Floor, So	occupied by the Group for car parking use.
	Tao Centre, Nos.
	11-15 Kwai Sau	The property is currently leased to the Group for a term of 1year
	Road, Kwai	from 1 January 2014 to 31 December 2014 (both days inclusive)
	Chung, New	at a total monthly rent of HKD5,600 exclusive of utility charges.
	Territories

Notes:

• (1) Pursuant to a tenancy agreement entered into between Loyal Luck International Development Limited （鴻裕國際發展有限公司）represented by Siu Yim Ling（蕭艷玲）(the Landlord) and King Force Security Limited（冠輝警衛有限公司）(the Tenant), Parking Space No. P1 on Ground floor, So Tao Centre, Nos. 11-15 Kwai Sau Road, Kwai Chung, New Territories was leased to the latter party for a term of one year from 1 January 2014 to 31 December 2014 at a monthly rental of HKD2,800 exclusive of utility charges.

• (2) Pursuant to a tenancy agreement entered into between Loyal Luck International Development Limited （鴻裕國際發展有限公司）represented by Siu Yim Ling（蕭艷玲）(the Landlord) and King Force Security Limited（冠輝警衛有限公司）(the Tenant), Parking Space No. P3 on Ground floor, So Tao Centre, Nos. 11-15 Kwai Sau Road, Kwai Chung, New Territories was leased to the latter party for a term of one year from 1 January 2014 to 31 December 2014 at a monthly rental of HKD2,800 exclusive of utility charges.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

Set out below is a summary of certain provisions of the Memorandum and Articles of Association of the Company and of certain aspects of Cayman Islands company law.

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 2 January 2014 under the Companies Law. The Company’s constitutional documents consist of its Amended and Restated Memorandum of Association (the “Memorandum”) and the Amended and Restated Articles of Association (the “Articles”).

1. MEMORANDUM OF ASSOCIATION

• (a) The Memorandum provides, inter alia , that the liability of members of the Company is limited and that the objects for which the Company is established are unrestricted (and therefore include acting as an investment company), and that the Company shall have and be capable of exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate whether as principal, agent, contractor or otherwise and since the Company is an exempted company that the Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands.

• (b) By special resolution the Company may alter the Memorandum with respect to any objects, powers or other matters specified therein.

2. ARTICLES OF ASSOCIATION

The Articles were adopted on [�]. The following is a summary of certain provisions of the Articles:

(a) Shares

(i) Classes of shares

The share capital of the Company consists of ordinary shares.

(ii) Share certificates

Every person whose name is entered as a member in the register of members shall be entitled to receive a certificate for his shares. No shares shall be issued to bearer.

Every certificate for shares, warrants or debentures or representing any other form of securities of the Company shall be issued under the seal of the Company, and shall be signed autographically by one Director and the Secretary, or by 2 Directors, or by some other person(s) appointed by the Board for the purpose. As regards any certificates for shares or debentures or other securities of the Company, the Board may by resolution determine that such signatures or either of them shall be dispensed with or affixed by some method or system of mechanical

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

signature other than autographic or may be printed thereon as specified in such resolution or that such certificates need not be signed by any person. Every share certificate issued shall specify the number and class of shares in respect of which it is issued and the amount paid thereon and may otherwise be in such form as the Board may from time to time prescribe. A share certificate shall relate to only one class of shares, and where the capital of the Company includes shares with different voting rights, the designation of each class of shares, other than those which carry the general right to vote at general meetings, must include the words “restricted voting” or “limited voting” or “non-voting” or some other appropriate designation which is commensurate with the rights attaching to the relevant class of shares. The Company shall not be bound to register more than 4 persons as joint holders of any share.

(b) Directors

(i) Power to allot and issue shares and warrants

Subject to the provisions of the Companies Law, the Memorandum and Articles and without prejudice to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the Board may determine). Any share may be issued on terms that upon the happening of a specified event or upon a given date and either at the option of the Company or the holder thereof, they are liable to be redeemed.

The Board may issue warrants to subscribe for any class of shares or other securities of the Company on such terms as it may from time to time determine.

Where warrants are issued to bearer, no certificate thereof shall be issued to replace one that has been lost unless the Board is satisfied beyond reasonable doubt that the original certificate thereof has been destroyed and the Company has received an indemnity in such form as the Board shall think fit with regard to the issue of any such replacement certificate.

Subject to the provisions of the Companies Law, the Articles and, where applicable, the rules of any stock exchange of the Relevant Territory (as defined in the Articles) and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in the Company shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

Neither the Company nor the Board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others whose registered addresses are in any particular territory or territories where, in the absence of a registration statement or other special formalities, this is or may, in the opinion of the Board, be unlawful or impracticable. However, no member affected as a result of the foregoing shall be, or be deemed to be, a separate class of members for any purpose whatsoever.

(ii) Power to dispose of the assets of the Company or any subsidiary

While there are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries, the Board may exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Articles or the Companies Law to be exercised or done by the Company in general meeting, but if such power or act is regulated by the Company in general meeting, such regulation shall not invalidate any prior act of the Board which would have been valid if such regulation had not been made.

(iii) Compensation or payments for loss of office

Payments to any present Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually or statutorily entitled) must be approved by the Company in general meeting.

(iv) Loans and provision of security for loans to Directors

There are provisions in the Articles prohibiting the making of loans to Directors and their associates which are equivalent to provisions of Hong Kong law prevailing at the time of adoption of the Articles.

The Company shall not directly or indirectly make a loan to a Director or a director of any holding company of the Company or any of their respective associates, enter into any guarantee or provide any security in connection with a loan made by any person to a Director or a director of any holding company of the Company or any of their respective associates, or if any one or more of the Directors hold (jointly or severally or directly or indirectly) a controlling interest in another company, make a loan to that other company or enter into any guarantee or provide any security in connection with a loan made by any person to that other company.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

(v) Disclosure of interest in contracts with the Company or with any of its subsidiaries

With the exception of the office of auditor of the Company, a Director may hold any other office or place of profit with the Company in conjunction with his office of Director for such period and, upon such terms as the Board may determine, and may be paid such extra remuneration therefor (whether by way of salary, commission, participation in profits or otherwise) in addition to any remuneration provided for by or pursuant to any other Articles. A Director may be or become a director or other officer or member of any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration or other benefits received by him as a director, officer or member of such other company. The Board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company.

No Director or intended Director shall be disqualified by his office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason only of such Director holding that office or the fiduciary relationship thereby established. A Director who is, in any way, materially interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the earliest meeting of the Board at which he may practically do so.

There is no power to freeze or otherwise impair any of the rights attaching to any Share by reason that the person or persons who are interested directly or indirectly therein have failed to disclose their interests to the Company.

A Director shall not vote (nor shall he be counted in the quorum) on any resolution of the Board in respect of any contract or arrangement or other proposal in which he or his associate(s) is/are materially interested, and if he shall do so his vote shall not be counted nor shall he be counted in the quorum for that resolution, but this prohibition shall not apply to any of the following matters namely:

• (aa) the giving of any security or indemnity to the Director or his associate(s) in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries;

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

• (bb) the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his associate(s) has/have himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;

• (cc) any proposal concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;

• (dd) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death or disability benefits scheme or other arrangement which relates both to Directors, his associate(s) and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his associate(s), as such any privilege or advantage not generally accorded to the employees to which such scheme or fund relates; or

• (ee) any contract or arrangement in which the Director or his associate(s) is/ are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/ their interest in shares or debentures or other securities of the Company.

(vi) Remuneration

The Directors shall be entitled to receive, as ordinary remuneration for their services, such sums as shall from time to time be determined by the Board, or the Company in general meeting, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided amongst the Directors in such proportions and in such manner as they may agree or failing agreement, equally, except that in such event any Director holding office for only a portion of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he has held office. The Directors shall also be entitled to be repaid all travelling, hotel and other expenses reasonably incurred by them in attending any Board meetings, committee meetings or general meetings or otherwise in connection with the discharge of their duties as Directors. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment or office.

Any Director who, at the request of the Company performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such special or extra remuneration (whether by way of salary, commission,

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

participation in profits or otherwise) as the Board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the Board may from time to time decide. Such remuneration shall be in addition to his ordinary remuneration as a Director.

The Board may establish, either on its own or jointly in concurrence or agreement with other companies (being subsidiaries of the Company or with which the Company is associated in business), or may make contributions out of the Company’s monies to, such schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or former Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and former employees of the Company and their dependents or any class or classes of such persons.

In addition, the Board may also pay, enter into agreements to pay or make grants of revocable or irrevocable, whether or not subject to any terms or conditions, pensions or other benefits to employees and former employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or former employees or their dependents are or may become entitled under any such scheme or fund as mentioned above. Such pension or benefit may, if deemed desirable by the Board, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

(vii) Appointment, retirement and removal

At any time or from time to time, the Board shall have the power to appoint any person as a Director either to fill a casual vacancy on the Board or as an additional Director to the existing Board subject to any maximum number of Directors, if any, as may be determined by the members in general meeting. Any Director appointed by the Board to fill a casual vacancy shall hold office only until the first general meeting of the Company after his appointment and be subject to re-election at such meeting. Any Director appointed by the Board as an addition to the existing Board shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election.

At each annual general meeting, one third of the Directors for the time being will retire from office by rotation. However, if the number of Directors is not a multiple of three, then the number nearest to but not less than one third shall be the number of retiring Directors. The Directors who shall retire in each year will

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

be those who have been longest in the office since their last re-election or appointment but as between persons who become or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot.

No person, other than a retiring Director, shall, unless recommended by the Board for election, be eligible for election to the office of Director at any general meeting, unless notice in writing of the intention to propose that person for election as a Director and notice in writing by that person of his willingness to be elected shall have been lodged at the head office or at the registration office. The period for lodgment of such notices will commence no earlier than the day after the despatch of the notice of the meeting appointed for such election and end no later than 7 days prior to the date of such meeting and the minimum length of the period during which such notices to the Company may be given must be at least 7 days.

A Director is not required to hold any shares in the Company by way of qualification nor is there any specified upper or lower age limit for Directors either for accession to the Board or retirement therefrom.

A Director may be removed by an ordinary resolution of the Company before the expiration of his term of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) and the Company may by ordinary resolution appoint another in his place. The number of Directors shall not be less than two.

In addition to the foregoing, the office of a Director shall be vacated:

• (aa) if he resigns his office by notice in writing delivered to the Company at the registered office or head office of the Company for the time being or tendered at a meeting of the Board;

• (bb) if he dies or becomes of unsound mind as determined pursuant to an order made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs and the Board resolves that his office be vacated;

• (cc) if, without special leave, he is absent from meetings of the Board for six (6) consecutive months, and the Board resolves that his office is vacated;

• (dd) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally;

• (ee) if he is prohibited from being a director by law;

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

• (ff) if he ceases to be a director by virtue of any provision of law or is removed from office pursuant to the Articles;

• (gg) if he has been validly required by the stock exchange of the Relevant Territory (as defined in the Articles) to cease to be a Director and the relevant time period for application for review of or appeal against such requirement has lapsed and no application for review or appeal has been filed or is underway against such requirement; or

• (hh) if he is removed from office by notice in writing served upon him signed by not less than three-fourths in number (or, if that is not a round number, the nearest lower round number) of the Directors (including himself) then in office.

From time to time the Board may appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the Board may determine and the Board may revoke or terminate any of such appointments. The Board may also delegate any of its powers to committees consisting of such Director or Directors and other person(s) as the Board thinks fit, and from time to time it may also revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed upon it by the Board.

(viii) Borrowing powers

Pursuant to the Articles, the Board may exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and uncalled capital of the Company and, subject to the Companies Law, to issue debentures, debenture stock, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. The provisions summarized above, in common with the Articles of Association in general, may be varied with the sanction of a special resolution of the Company.

(ix) Register of Directors and officers

Pursuant to the Companies Law, the Company is required to maintain at its registered office a register of directors, alternate directors and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within 30 days of any change in such directors or officers, including a change of the name of such directors or officers.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

(x) Proceedings of the Board

Subject to the Articles, the Board may meet anywhere in the world for the despatch of business and may adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have a second or casting vote.

(c) Alterations to the constitutional documents

To the extent that the same is permissible under Cayman Islands law and subject to the Articles, the Memorandum and Articles of the Company may only be altered or amended, and the name of the Company may only be changed by the Company by special resolution.

(d) Variation of rights of existing shares or classes of shares

Subject to the Companies Law, if at any time the share capital of the Company is divided into different classes of shares, all or any of the special rights attached to any class of shares may (unless otherwise provided for by the terms of issue of the shares of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Articles relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be not less than two persons together holding (or in the case of a shareholder being a corporation, by its duly authorized representative) or representing by proxy not less than one-third in nominal value of the issued shares of that class. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him, and any holder of shares of the class present in person or by proxy may demand a poll.

Any special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(e) Alteration of capital

The Company may, by an ordinary resolution of its members, (a) increase its share capital by the creation of new shares of such amount as it thinks expedient; (b) consolidate or divide all or any of its share capital into shares of larger or smaller amount than its existing shares; (c) divide its unissued shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions; (d) subdivide its shares or any of them into shares of an amount smaller than that fixed by the Memorandum; and (e) cancel shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

any person and diminish the amount of its share capital by the amount of the shares so cancelled; (f) make provision for the allotment and issue of shares which do not carry any voting rights; (g) change the currency of denomination of its share capital; and (h) reduce its share premium account in any manner authorized and subject to any conditions prescribed by law.

Reduction of share capital – subject to the Companies Law and to confirmation by the court, a company limited by shares may, if so authorised by its Articles of Association, by special resolution, reduce its share capital in any way.

(f) Special resolution – majority required

In accordance with the Articles, a special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or by proxy or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than 21 clear days’ notice, specifying the intention to propose the resolution as a special resolution, has been duly given. However, except in the case of an annual general meeting, if it is so agreed by a majority in number of the members having a right to attend and vote at such meeting, being a majority together holding not less than 95% in nominal value of the shares giving that right and, in the case of an annual general meeting, if so agreed by all members entitled to attend and vote thereat, a resolution may be proposed and passed as a special resolution at a meeting of which less than 21 clear days’ notice has been given.

Under Companies Law, a copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within 15 days of being passed.

An “ordinary resolution”, by contrast, is defined in the Articles to mean a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than 14 clear days’ notice has been given and held in accordance with the Articles. A resolution in writing signed by or on behalf of all members shall be treated as an ordinary resolution duly passed at a general meeting of the Company duly convened and held, and where relevant as a special resolution so passed.

(g) Voting rights (generally and on a poll) and right to demand a poll

Subject to any special rights, restrictions or privileges as to voting for the time being attached to any class or classes of shares at any general meeting on a show of hands, every member who is present in person or by proxy or being a corporation, is present by its duly authorised representative shall have one vote, and on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for every share which is fully

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

paid or credited as fully paid registered in his name in the register of members of the Company but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated for the foregoing purpose as paid up on the share. Notwithstanding anything contained in the Articles, where more than one proxy is appointed by a member which is a Clearing House (as defined in the Articles) (or its nominee(s)), each such proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one vote need not use all his votes or cast all the votes he does use in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded or otherwise required under the rules of the stock exchange of the Relevant Territory (as defined in the Articles). A poll may be demanded by:

• (i) the chairman of the meeting; or

• (ii) at least two members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or

• (iii) any member or members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

• (iv) a member or members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Should a Clearing House or its nominee(s), be a member of the Company, such person or persons may be authorised as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised in accordance with this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same rights and powers on behalf of the Clearing House or its nominee(s), as if such person were an individual member including the right to vote individually on a show of hands.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

Where the Company has knowledge that any member is, under GEM, required to abstain from voting on any particular resolution of the Company or restricted to voting only for or only against any particular resolution of the Company, any votes cast by or on behalf of such member in contravention of such requirement or restriction shall not be counted.

(h) Annual general meetings

The Company must hold an annual general meeting each year. Such meeting must be held not more than 15 months after the holding of the last preceding annual general meeting, or such longer period as may be authorised by the Stock Exchange at such time and place as may be determined by the Board.

(i) Accounts and audit

The Board shall cause proper books of account to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place, and of the assets and liabilities of the Company and of all other matters required by the Companies Law necessary to give a true and fair view of the state of the Company’s affairs and to show and explain its transactions.

The books of accounts of the Company shall be kept at the head office of the Company or at such other place or places as the Board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any account or book or document of the Company except as conferred by the Companies Law or ordered by a court of competent jurisdiction or authorised by the Board or the Company in general meeting.

The Board shall from time to time cause to be prepared and laid before the Company at its annual general meeting balance sheets and profit and loss accounts (including every document required by law to be annexed thereto), together with a copy of the Directors’ report and a copy of the auditors’ report not less than 21 days before the date of the annual general meeting. Copies of these documents shall be sent to every person entitled to receive notices of general meetings of the Company under the provisions of the Articles together with the notice of annual general meeting, not less than 21 days before the date of the meeting.

Subject to the rules of the stock exchange of the Relevant Territory (as defined in the Articles), the Company may send summarized financial statements to shareholders who has, in accordance with the rules of the stock exchange of the Relevant Territory (as defined in the Articles), consented and elected to receive summarized financial statements instead of the full financial statements. The summarized financial statements must be accompanied by any other documents as may be required under the rules of the stock exchange of the Relevant Territory (as defined in the Articles), and must be sent to the shareholders not less than 21 days before the general meeting to those shareholders that have consented and elected to receive the summarized financial statements.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

The Company shall appoint auditor(s) to hold office until the conclusion of the next annual general meeting on such terms and with such duties as may be agreed with the Board. The auditors’ remuneration shall be fixed by the Company in general meeting or by the Board if authority is so delegated by the members.

The auditors shall audit the financial statements of the Company in accordance with generally accepted accounting principles of Hong Kong, the International Accounting Standards or such other standards as may be permitted by the Stock Exchange.

(j) Notices of meetings and business to be conducted thereat

An annual general meeting and any extraordinary general meeting at which it is proposed to pass a special resolution must be called by at least 21 days’ notice in writing, and any other extraordinary general meeting shall be called by at least 14 days’ notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and must specify the time, place and agenda of the meeting, and particulars of the resolution(s) to be considered at that meeting, and, in the case of special business, the general nature of that business.

Except where otherwise expressly stated, any notice or document (including a share certificate) to be given or issued under the Articles shall be in writing, and may be served by the Company on any member either personally or by sending it through the post in a prepaid envelope or wrapper addressed to such member at his registered address as appearing in the Company’s register of members or by leaving it at such registered address as aforesaid or (in the case of a notice) by advertisement in the newspapers. Any member whose registered address is outside Hong Kong may notify the Company in writing of an address in Hong Kong which for the purpose of service of notice shall be deemed to be his registered address. Where the registered address of the member is outside Hong Kong, notice, if given through the post, shall be sent by prepaid airmail letter where available. Subject to the Companies Law and GEM, a notice or document may be served or delivered by the Company to any member by electronic means to such address as may from time to time be authorised by the member concerned or by publishing it on a website and notifying the member concerned that it has been so published.

Although a meeting of the Company may be called by shorter notice than as specified above, such meeting may be deemed to have been duly called if it is so agreed:

• (i) in the case of a meeting called as an annual general meeting, by all members of the Company entitled to attend and vote thereat; and

• (ii) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the issued shares giving that right.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

All business transacted at an extraordinary general meeting shall be deemed special business and all business shall also be deemed special business where it is transacted at an annual general meeting with the exception of the following, which shall be deemed ordinary business:

• (aa) the declaration and sanctioning of dividends;

• (bb) the consideration and adoption of the accounts and balance sheet and the reports of the directors and the auditors;

• (cc) the election of Directors in place of those retiring;

• (dd) the appointment of auditors;

• (ee) the fixing of the remuneration of the Directors and of the auditors;

• (ff) the granting of any mandate or authority to the Board to offer, allot, grant options over, or otherwise dispose of the unissued shares of the Company representing not more than 20% in nominal value of its existing issued share capital (or such other percentage as may from time to time be specified in the rules of the Stock Exchange) and the number of any securities repurchased by the Company since the granting of such mandate; and

• (gg) the granting of any mandate or authority to the Board to repurchase securities in the Company.

(k) Transfer of shares

Subject to the Companies Law, all transfers of shares shall be effected by an instrument of transfer in the usual or common form or in such other form as the Board may approve provided always that it shall be in such form prescribed by the Stock Exchange and may be under hand or, if the transferor or transferee is a Clearing House or its nominee(s), under hand or by machine imprinted signature or by such other manner of execution as the Board may approve from time to time.

Execution of the instrument of transfer shall be by or on behalf of the transferor and the transferee provided that the Board may dispense with the execution of the instrument of transfer by the transferor or transferee or accept mechanically executed transfers in any case in which it in its discretion thinks fit to do so, and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members of the Company in respect thereof.

The Board may, in its absolute discretion, at any time and from time to time remove any share on the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

Unless the Board otherwise agrees, no shares on the principal register shall be removed to any branch register nor shall shares on any branch register be removed to the principal register or any other branch register. All removals and other documents of title shall be lodged for registration and registered, in the case of shares on any branch register, at the relevant registration office and, in the case of shares on the principal register, at the place at which the principal register is located.

The Board may, in its absolute discretion, decline to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or any share issued under any share option scheme upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which the Company has a lien.

The Board may decline to recognize any instrument of transfer unless a fee of such maximum sum as the Stock Exchange may determine to be payable or such lesser sum as the Board may from time to time require is paid to the Company in respect thereof, the instrument of transfer is properly stamped (if applicable), is in respect of only one class of share and is lodged at the relevant registration office or the place at which the principal register is located accompanied by the relevant share certificate(s) and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The register of members may, subject to the Listing Rules (as defined in the Articles), be closed at such time or for such period not exceeding in the whole 30 days in each year as the Board may determine.

Fully paid shares shall be free from any restriction with respect to the right of the holder thereof to transfer such shares (except when permitted by the Stock Exchange) and shall also be free from all liens.

(l) Power of the Company to purchase its own shares

The Company is empowered by the Companies Law and the Articles to purchase its own shares subject to certain restrictions and the Board may only exercise this power on behalf of the Company subject to any applicable requirement imposed from time to time by the Articles, code, rules or regulations issued from time to time by the Stock Exchange and/or the Securities and Futures Commission of Hong Kong.

Where the Company purchases for redemption a redeemable Share, purchases not made through the market or by tender shall be limited to a maximum price, and if purchases are by tender, tenders shall be available to all members alike.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

(m) Power of any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to the ownership of shares in the Company by a subsidiary.

(n) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the Board.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide:

• (i) all dividends shall be declared and paid according to the amounts paid up on the shares in respect whereof the dividend is paid, although no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share; and

• (ii) all dividends shall be apportioned and paid pro rata in accordance with the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. The Board may deduct from any dividend or other monies payable to any member all sums of money (if any) presently payable by him to the Company on account of calls, instalments or otherwise.

Where the Board or the Company in general meeting has resolved that a dividend should be paid or declared on the share capital of the Company, the Board may resolve:

• (aa) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the members entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment; or

• (bb) that the members entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit.

Upon the recommendation of the Board, the Company may by ordinary resolution in respect of any one particular dividend of the Company determine that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to members to elect to receive such dividend in cash in lieu of such allotment.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

Any dividend, bonus or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his registered address, but in the case of joint holders, shall be addressed to the holder whose name stands first in the register of members of the Company in respect of the shares at his address as appearing in the register, or addressed to such person and at such address as the holder or joint holders may in writing so direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent and shall be sent at the holder’s or joint holders’ risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends or other monies payable or property distributable in respect of the shares held by such joint holders.

Whenever the Board or the Company in general meeting has resolved that a dividend be paid or declared, the Board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

The Board may, if it thinks fit, receive from any member willing to advance the same, and either in money or money’s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced may pay interest at such rate (if any) not exceeding 20% per annum, as the Board may decide, but a payment in advance of a call shall not entitle the member to receive any dividend or to exercise any other rights or privileges as a member in respect of the share or the due portion of the shares upon which payment has been advanced by such member before it is called up.

All dividends, bonuses or other distributions unclaimed for one year after having been declared may be invested or otherwise made use of by the Board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends, bonuses or other distributions unclaimed for six years after having been declared may be forfeited by the Board and, upon such forfeiture, shall revert to the Company.

No dividend or other monies payable by the Company on or in respect of any share shall bear interest against the Company.

The Company may exercise the power to cease sending cheques for dividend entitlements or dividend warrants by post if such cheques or warrants remain uncashed on two consecutive occasions or after the first occasion on which such a cheque or warrant is returned undelivered.

(o) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

at a class meeting. A proxy need not be a member of the Company and shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member. On a poll or on a show of hands, votes may be given either personally (or, in the case of a member being a corporation, by its duly authorized representative) or by proxy.

The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised. Every instrument of proxy, whether for a specified meeting or otherwise, shall be in such form as the Board may from time to time approve, provided that it shall not preclude the use of the two-way form. Any form issued to a member for use by him for appointing a proxy to attend and vote at an extraordinary general meeting or at an annual general meeting at which any business is to be transacted shall be such as to enable the member, according to his intentions, to instruct the proxy to vote in favour of or against (or, in default of instructions, to exercise his discretion in respect of) each resolution dealing with any such business.

(p) Calls on shares and forfeiture of shares

The Board may from time to time make such calls as it may think fit upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times. A call may be made payable either in one sum or by instalments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20% per annum as the Board shall fix from the day appointed for the payment thereof to the time of actual payment, but the Board may waive payment of such interest wholly or in part. The Board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced the Company may pay interest at such rate (if any) not exceeding 20% per annum as the Board may decide.

If a member fails to pay any call or instalment of a call on the day appointed for payment thereof, the Board may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve not less than 14 days’ notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment. The notice will name a further day (not earlier than the expiration of 14 days from the date of the notice) on or before which the payment required by the notice is

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

to be made, and it shall also name the place where payment is to be made. The notice shall also state that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, nevertheless, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares together with (if the Board shall in its discretion so require) interest thereon from the date of forfeiture until payment at such rate not exceeding 20% per annum as the Board may prescribe.

(q) Inspection of corporate records

Members of the Company have no general right under the Companies Law to inspect or obtain copies of the register of members or corporate records of the Company. However, the members of the Company will have such rights as may be set forth in the Articles. The Articles provide that for so long as any part of the share capital of the Company is listed on the Stock Exchange, any member may inspect any register of members of the Company maintained in Hong Kong (except when the register of member is closed) without charge and require the provision to him of copies or extracts thereof in all respects as if the Company were incorporated under and were subject to the Hong Kong Companies Ordinance.

An exempted company may, subject to the provisions of its articles of association, maintain its principal register of members and any branch registers at such locations, whether within or outside the Cayman Islands, as its directors may, from time to time, think fit.

(r) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, and continues to be present until the conclusion of the meeting.

The quorum for a general meeting shall be two members present in person (or in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

(s) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles concerning the rights of minority members in relation to fraud or oppression. However, certain remedies may be available to members of the Company under Cayman Islands law, as summarized in paragraph 3(f) of this Appendix.

(t) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares:

• (i) if the Company shall be wound up and the assets available for distribution amongst the members of the Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, then the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively; and

• (ii) if the Company shall be wound up and the assets available for distribution amongst the members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up, on the shares held by them respectively.

In the event that the Company is wound up (whether the liquidation is voluntary or compelled by the court) the liquidator may, with the sanction of a special resolution and any other sanction required by the Companies Law divide among the members in specie or kind the whole or any part of the assets of the Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members and the members within each class. The liquidator may, with the like sanction, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator shall think fit, but so that no member shall be compelled to accept any shares or other property upon which there is a liability.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

(u) Untraceable members

The Company may exercise the power to cease sending cheques for dividend entitlements or dividend warrants by post if such cheques or warrants remain uncashed on two consecutive occasions or after the first occasion on which such a cheque or warrant is returned undelivered.

In accordance with the Articles, the Company is entitled to sell any of the shares of a member who is untraceable if:

• (i) all cheques or warrants, being not less than three in total number, for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years;

• (ii) upon the expiry of the 12 years and 3 months period (being the 3 months notice period referred to in sub-paragraph (iii)), the Company has not during that time received any indication of the existence of the member; and

• (iii) the Company has caused an advertisement to be published in accordance with the rules of the stock exchange of the Relevant Territory (as defined in the Articles) giving notice of its intention to sell such shares and a period of three months has elapsed since such advertisement and the stock exchange of the Relevant Territory (as defined in the Articles) has been notified of such intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds, it shall become indebted to the former member of the Company for an amount equal to such net proceeds.

(v) Subscription rights reserve

Pursuant to the Articles, provided that it is not prohibited by and is otherwise in compliance with the Companies Law, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of the shares to be issued on the exercise of such warrants, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of such shares.

3. CAYMAN ISLANDS COMPANY LAW

The Company was incorporated in the Cayman Islands as an exempted company on 2 January 2014 subject to the Companies Law. Certain provisions of Cayman Islands company law are set out below but this section does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of the Companies Law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

(a) Company operations

As an exempted company, the Company must conduct its operations mainly outside the Cayman Islands. Moreover, the Company is required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorized share capital.

(b) Share capital

In accordance with the Companies Law, a Cayman Islands company may issue ordinary, preference or redeemable shares or any combination thereof. The Companies Law provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the “share premium account”. At the option of a company, these provisions may not apply to premiums on shares of that company allotted pursuant to any arrangements in consideration of the acquisition or cancellation of shares in any other company and issued at a premium. The Companies Law provides that the share premium account may be applied by the company subject to the provisions, if any, of its memorandum and articles of association, in such manner as the company may from time to time determine including, but without limitation, the following:

• (i) paying distributions or dividends to members;

• (ii) paying up unissued shares of the company to be issued to members as fully paid bonus shares;

• (iii) any manner provided in section 37 of the Companies Law;

• (iv) writing-off the preliminary expenses of the company; and

• (v) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company.

Notwithstanding the foregoing, the Companies Law provides that no distribution or dividend may be paid to members out of the share premium account unless, immediately following the date on which the distribution or dividend is proposed to be paid, the company will be able to pay its debts as they fall due in the ordinary course of business.

It is further provided by the Companies Law that, subject to confirmation by the court, a company limited by shares or a company limited by guarantee and having a share capital may, if authorized to do so by its articles of association, by special resolution reduce its share capital in any way.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

The Articles include certain protections for holders of special classes of shares, requiring their consent to be obtained before their rights may be varied. The consent of the specified proportions of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares is required.

(c) Financial assistance to purchase shares of a company or its holding company

There are no statutory prohibitions in the Cayman Islands on the granting of financial assistance by a company to another person for the purchase of, or subscription for, its own, its holding company’s or a subsidiary’s shares. Therefore, a company may provide financial assistance provided the directors of the company when proposing to grant such financial assistance discharge their duties of care and acting in good faith, for a proper purpose and in the interests of the company. Such assistance should be on an arm’s-length basis.

(d) Purchase of shares and warrants by a company and its subsidiaries

A company limited by shares or a company limited by guarantee and having a share capital may, if so authorized by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a member and, for the avoidance of doubt, it shall be lawful for the rights attaching to any shares to be varied, subject to the provisions of the company’s articles of association, so as to provide that such shares are to be or are liable to be so redeemed. In addition, such a company may, if authorized to do so by its articles of association, purchase its own shares, including any redeemable shares. Nonetheless, if the articles of association do not authorize the manner and terms of purchase, a company cannot purchase any of its own shares without the manner and terms of purchase first being authorized by an ordinary resolution of the company. A company may not redeem or purchase its shares unless they are fully paid. Furthermore, a company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any issued shares of the company other than shares held as treasury shares. In addition, a payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business.

Under Section 37A(1) the Companies Law, shares that have been purchased or redeemed by a company or surrendered to the company shall not be treated as cancelled but shall be classified as treasury shares if (a) the memorandum and articles of association of the company do not prohibit it from holding treasury shares; (b) the relevant provisions of the memorandum and articles of association (if any) are complied with; and (c) the company is authorised in accordance with the company’s articles of association or by a resolution of the directors to hold such shares in the name of the company as treasury shares prior to the purchase, redemption or surrender

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

of such shares. Shares held by a company pursuant to section 37A(1) of the Companies Law shall continue to be classified as treasury shares until such shares are either cancelled or transferred pursuant to the Companies Law.

A Cayman Islands company may be able to purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. Thus there is no requirement under Cayman Islands law that a company’s memorandum or articles of association contain a specific provision enabling such purchases. The directors of a company may under the general power contained in its memorandum of association be able to buy and sell and deal in personal property of all kinds.

Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in certain circumstances, may acquire such shares.

(e) Dividends and distributions

With the exception of sections 34 and 37A(7) of the Companies Law, there are no statutory provisions relating to the payment of dividends. Based upon English case law which is likely to be persuasive in the Cayman Islands, dividends may be paid only out of profits. In addition, section 34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the company’s memorandum and articles of association, the payment of dividends and distributions out of the share premium account (see sub-paragraph 2(n) of this Appendix for further details). Section 37A(7)(c) of the Companies Law provides that for so long as a company holds treasury shares, no dividend may be declared or paid, and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) may be made to the company, in respect of a treasury share.

(f) Protection of minorities and shareholders’ suits

It can be expected that the Cayman Islands courts will ordinarily follow English case law precedents (particularly the rule in the case of Foss v. Harbottle and the exceptions thereto) which permit a minority member to commence a representative action against or derivative actions in the name of the company to challenge:

• (i) an act which is ultra vires the company or illegal;

• (ii) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of the company; and

• (iii) an irregularity in the passing of a resolution the passage of which requires a qualified (or special) majority which has not been obtained.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

Where a company (not being a bank) is one which has a share capital divided into shares, the court may, on the application of members thereof holding not less than one-fifth of the shares of the company in issue, appoint an inspector to examine the affairs of the company and, at the direction of the court, to report thereon.

Moreover, any member of a company may petition the court which may make a winding up order if the court is of the opinion that it is just and equitable that the company should be wound up.

In general, claims against a company by its members must be based on the general laws of contract or tort applicable in the Cayman Islands or be based on potential violation of their individual rights as members as established by a company’s memorandum and articles of association.

(g) Disposal of assets

There are no specific restrictions in the Companies Law on the power of directors to dispose of assets of a company, although it specifically requires that every officer of a company, which includes a director, managing director and secretary, in exercising his powers and discharging his duties must do so honestly and in good faith with a view to the best interest of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(h) Accounting and auditing requirements

Section 59 of the Companies Law provides that a company shall cause proper records of accounts to be kept with respect to (i) all sums of money received and expended by the company and the matters with respect to which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company and (iii) the assets and liabilities of the company.

Section 59 of the Companies Law further states that proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.

If the Company keeps its books of account at any place other than at its registered office or at any other place within the Cayman Islands, it shall, upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2009 Revision) of the Cayman Islands, make available, in electronic form or any other medium, at its registered office copies of its books of account, or any part or parts thereof, as are specified in such order or notice.

(i) Exchange control

There are no exchange control regulations or currency restrictions in effect in the Cayman Islands.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

(j) Taxation

Pursuant to section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, the Company has obtained an undertaking from the Governor-in-Cabinet:

• (i) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to the Company or its operations; and

• (ii) in addition, that no tax be levied on profits, income gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable by the Company:

• (aa) on or in respect of the shares, debentures or other obligations of the Company; or

• (bb) by way of withholding in whole or in part of any relevant payment as defined in section 6(3) of the Tax Concessions Law (2011 Revision).

The undertaking for the Company is for a period of twenty years from 21 January 2014.

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments.

(k) Stamp duty on transfers

There is no stamp duty payable in the Cayman Islands on transfers of shares of Cayman Islands companies save for those which hold interests in land in the Cayman Islands.

(l) Loans to directors

The Companies Law contains no express provision prohibiting the making of loans by a company to any of its directors. However, the Articles provide for the prohibition of such loans under specific circumstances.

(m) Inspection of corporate records

The members of the company have no general right under the Companies Law to inspect or obtain copies of the register of members or corporate records of the company. They will, however, have such rights as may be set out in the company’s articles of association.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

(n) Register of members

A Cayman Islands exempted company may maintain its principal register of members and any branch registers in any country or territory, whether within or outside the Cayman Islands, as the company may determine from time to time. The Companies Law contains no requirement for an exempted company to make any returns of members to the Registrar of Companies in the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register of member, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2009 Revision) of the Cayman Islands.

(o) Winding up

A Cayman Islands company may be wound up either by (i) an order of the court; (ii) voluntarily by its members; or (iii) under the supervision of the court.

The court has authority to order winding up in a number of specified circumstances including where, in the opinion of the court, it is just and equitable that such company be so wound up.

A voluntary winding up of a company occurs where the Company so resolves by special resolution that it be wound up voluntarily, or, where the company in general meeting resolves that it be wound up voluntarily because it is unable to pay its debt as they fall due; or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum or articles expires, or where the event occurs on the occurrence of which the memorandum or articles provides that the company is to be wound up. In the case of a voluntary winding up, such company is obliged to cease to carry on its business from the commencement of its winding up except so far as it may be beneficial for its winding up. Upon appointment of a voluntary liquidator, all the powers of the directors cease, except so far as the company in general meeting or the liquidator sanctions their continuance.

In the case of a members’ voluntary winding up of a company, one or more liquidators shall be appointed for the purpose of winding up the affairs of the company and distributing its assets.

As soon as the affairs of a company are fully wound up, the liquidator must make a report and an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof.

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

When a resolution has been passed by a company to wind up voluntarily, the liquidator or any contributory or creditor may apply to the court for an order for the continuation of the winding up under the supervision of the court, on the grounds that (i) the company is or is likely to become insolvent; or (ii) the supervision of the court will facilitate a more effective, economic or expeditious liquidation of the company in the interests of the contributories and creditors. A supervision order shall take effect for all purposes as if it was an order that the company be wound up by the court except that a commenced voluntary winding up and the prior actions of the voluntary liquidator shall be valid and binding upon the company and its official liquidator.

For the purpose of conducting the proceedings in winding up a company and assisting the court, there may be appointed one or more persons to be called an official liquidator or official liquidators; and the court may appoint to such office such person or persons, either provisionally or otherwise, as it thinks fit, and if more than one persons are appointed to such office, the court shall declare whether any act required or authorized to be done by the official liquidator is to be done by all or any one or more of such persons. The court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the court.

(p) Reconstructions

Reconstructions and amalgamations are governed by specific statutory provisions under the Companies Law whereby such arrangements may be approved by a majority in number representing 75% in value of members or creditors, depending on the circumstances, as are present at a meeting called for such purpose and thereafter sanctioned by the courts. Whilst a dissenting member would have the right to express to the court his view that the transaction for which approval is being sought would not provide the members with a fair value for their shares, nonetheless the courts are unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management and if the transaction were approved and consummated the dissenting member would have no rights comparable to the appraisal rights (i.e. the right to receive payment in cash for the judicially determined value of their shares) ordinarily available, for example, to dissenting members of a United States corporation.

(q) Take-overs

Where an offer is made by a company for the shares of another company and, within four months of the offer, the holders of not less than 90% of the shares which are the subject of the offer accept, the offeror may at any time within two months after the expiration of the said four months, by notice require the dissenting members to transfer their shares on the terms of the offer. A dissenting member may apply to the court of the Cayman Islands within one month of the notice objecting to the transfer. The burden is on the dissenting member to show that the court should exercise its

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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND THE CAYMAN ISLANDS COMPANY LAW

discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority members.

(r) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, save to the extent any such provision may be held by the court to be contrary to public policy, for example, where a provision purports to provide indemnification against the consequences of committing a crime.

4. GENERAL

Appleby, the Company’s legal adviser on Cayman Islands law, has sent to the Company a letter of advice which summarises certain aspects of the Cayman Islands company law. This letter, together with a copy of the Companies Law, is available for inspection as referred to in the paragraph headed “Documents Available for Inspection” in Appendix VI. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX V

STATUTORY AND GENERAL INFORMATION

A. FURTHER INFORMATION ABOUT THE COMPANY

1. Incorporation

The Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on 2 January 2014. The Company has established a principal place of business in Hong Kong at Suites 2001-2005, 20th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong and was registered as a non-Hong Kong company in Hong Kong under Part 16 of the Companies Ordinance on 9 April 2014. Loong & Yeung has been appointed as the authorised representative of the Company for the acceptance of service of process and notices on behalf of the Company in Hong Kong.

As the Company is incorporated in the Cayman Islands, it is subject to the Cayman Islands law and to its constitution, which comprises the Memorandum and the Articles. A summary of various provisions of its constitution and relevant aspects of the Companies Law is set out in “Appendix IV – Summary of the Constitution of the Company and the Cayman Islands Company Law” to this prospectus.

2. Changes in share capital of the Company

• (a) As at the date of incorporation, the Company has an authorised share capital of HK$380,000 divided into 38,000,000 Shares of HK$0.01 each. 1 Share was allotted and issued nil-paid to the subscriber on 2 January 2014, and was subsequently transferred to Optimistic King on the same day. On the same date, each of Optimistic King and Gloria Power further subscribed for 749 and 250 nil-paid Shares, resulting them holding 750 and 250 nil-paid Shares, respectively, as at the date of incorporation.

• (b) On [�], the Existing Shareholders resolved to increase the authorised share capital of the Company from HK$380,000 to HK$20,000,000 by the creation of an additional of 1,962,000,000 Shares, each ranking pari passu with the Shares then in issue in all respects.

• (c) Pursuant to the Reorganisation and as consideration for the acquisition by the Company of the entire issued share capital of Million Joyce from Optimistic King and Gloria Power, respectively, on [�], (i) the 750 and 250 nil-paid Shares held by Optimistic King and Gloria Power, respectively, were credited as fully-paid, and (ii) [REDACTED] and [REDACTED] Shares, all credited as fully-paid, were allotted and issued to Optimistic King and Gloria Power, respectively.

• (d) Immediately following completion of the Placing, and taking no account of any Share which to be issued upon exercise of any options which may be granted under the Share Option Scheme, [REDACTED] Shares will be issued fully-paid or credited as fully-paid, and [REDACTED] Shares will remain unissued.

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APPENDIX V STATUTORY AND GENERAL INFORMATION

• (e) Other than pursuant to the general mandate to issue Shares referred to in the paragraph headed “Written resolutions of the Existing Shareholders passed on [�]” in this appendix and pursuant to the Share Option Scheme, the Company does not have any present intention to issue any of the authorised but unissued share capital of the Company and, without prior approval of the Shareholders in general meeting, no issue of Shares will be made which would effectively alter the control of the Company.

• (f) Save as disclosed in this prospectus, there has been no alteration in the Company’s share capital since its incorporation.

3. Written resolutions of the Existing Shareholders passed on [ � ]

On [�], resolutions in writing were passed by the Existing Shareholders pursuant to which, among other things:

• (a) the Company approved and adopted the Memorandum and the Articles, the terms of which are summarised in Appendix IV to this prospectus;

• (b) conditional on the Listing Division granting the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus (including any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme) and on the obligations of the Underwriters under the Underwriting Agreement becoming unconditional and the Underwriting Agreement not being terminated in accordance with its terms or otherwise, in each case on or before the date falling 30 days after the date of the issue of this prospectus:

• (i) the Placing was approved and the Directors were authorised to allot and issue the Placing Shares pursuant to the Placing to rank pari passu with the then existing Shares in all respects;

• (ii) the rules of the Share Option Scheme, the principal terms of which are set out in the paragraph headed “Share Option Scheme” below in this appendix, were approved and adopted and the Directors were authorised, subject to the terms and conditions of the Share Option Scheme, to grant options to subscribe for Shares thereunder and to allot, issue and deal with the Shares pursuant to the exercise of subscription rights attaching to any options which may be granted under the Share Option Scheme and to take all such actions as they consider necessary or desirable to implement the Share Option Scheme;

• (c) a general unconditional mandate was given to the Directors to exercise all powers of the Company to allot, issue and deal with, otherwise than by way of rights issue or an issue of Shares upon exercise of any options which may be granted under the Share Option Scheme or any other share option scheme of the Company or any Shares allotted and issued in lieu of the whole or part of a dividend on Shares or similar arrangement in accordance with the

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APPENDIX V STATUTORY AND GENERAL INFORMATION

Articles or pursuant to a specific authority granted by the Shareholders in general meeting or pursuant to the Placing, Shares or securities convertible into Shares or options, warrants or similar rights to subscribe for Shares or such securities convertible into Shares, and to make or grant offers, agreements or options which might require the exercise of such power, with an aggregate nominal value not exceeding 20% of the aggregate nominal value of the share capital of the Company in issue immediately following completion of the Placing but excluding any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme, such mandate to remain in effect until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Articles or the Companies Law or any other applicable laws of the Cayman Islands to be held; or

• (iii) the time when such mandate is revoked or varied by an ordinary resolution of the Shareholders in general meeting; and

• (d) a general unconditional mandate was given to the Directors authorising them to exercise all powers of the Company to repurchase on GEM or on any other stock exchange on which the securities of the Company may be listed and which is recognised by the SFC and the Stock Exchange for this purpose, such number of Shares as will represent up to 10% of the aggregate nominal value of the share capital of the Company in issue immediately following completion of the Placing but excluding any Shares which may be issued pursuant to the exercise of the options which may be granted under the Share Option Scheme, such mandate to remain in effect until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Articles or the Companies Law or any other applicable laws of the Cayman Islands to be held; or

• (iii) the time when such mandate is revoked or varied by an ordinary resolution of the Shareholders in general meeting; and

• (e) the general unconditional mandate mentioned in sub-paragraph (c) above was extended by the addition to the aggregate nominal value of the share capital of the Company which may be allotted or agreed to be allotted by the Directors pursuant to such general mandate of an amount representing the aggregate nominal value of the share capital of the Company repurchased by the Company pursuant to the mandate to repurchase Shares referred to in sub-paragraph (d) above, provided that such extended amount shall not exceed 10% of the aggregate nominal value of the share capital of the

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APPENDIX V STATUTORY AND GENERAL INFORMATION

Company in issue immediately following completion of the Placing but excluding any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme.

4. Corporate reorganisation

In preparing for the Listing, the companies comprising the Group underwent the Reorganisation to rationalise the corporate structure of the Group and the Company became the holding company of the Group. The Reorganisation involved the following major steps:

• (a) On 8 August 2013, Million Joyce was incorporated in the BVI and is authorised to issue a maximum of 50,000 shares of US$1 each. 1 share of Million Joyce (representing the entire issued share capital of Million Joyce at the relevant time) was allotted and issued to Mr. Fu on 26 September 2013.

• (b) On 1 October 2013, Optimistic King was incorporated in the BVI and is authorised to issue a maximum of 50,000 shares of US$1 each. 1 share of Optimistic King (representing the entire issued share capital of Optimistic King) was allotted and issued to Mr. Fu on 17 October 2013.

• (c) On 4 October 2013, King Force Service was incorporated in Hong Kong. 1 ordinary share of King Force Service (representing the entire share capital of King Force Service) was allotted and issued to Million Joyce on 4 October 2013.

• (d) On 13 November 2013, Optimistic King acquired 1 share of Million Joyce (representing the entire issued share capital of Million Joyce at the relevant time) from Mr. Fu at a nominal consideration of US$1. After the aforesaid share transfer, Optimistic King held 1 share of Million Joyce (representing the entire issued share capital of Million Joyce at the relevant time).

• (e) On 14 November 2013, 999 shares of US$1 each in Million Joyce were allotted and issued to Optimistic King at an issue price of US$999, being US$1 each per share. After the aforesaid allotment and issue of shares, Optimistic King held 1,000 shares of Million Joyce (representing the entire issued share capital of Million Joyce).

• (f) On 14 November 2013, Million Joyce acquired 10,000 ordinary shares of King Force Security (representing the entire share capital of King Force Security) from Mr. Fu at a nominal consideration of HK$10,000. The consideration have been settled by Million Joyce in cash. After the aforesaid share transfer, Million Joyce held 10,000 ordinary shares of King Force Security (representing the entire share capital of King Force Security).

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APPENDIX V STATUTORY AND GENERAL INFORMATION

• (g) Pursuant to the sale and purchase agreement dated 15 November 2013 referred to in item (d) of the paragraph headed “Summary of material contracts” in this appendix, Gloria Power agreed to acquire 250 shares of Million Joyce (representing 25% of the entire issued share capital of Million Joyce) from Optimistic King at a cash consideration of HK$7,000,000. The aforesaid sale and purchase was completed on 15 November 2013.

• (h) On 2 January 2014, the Company was incorporated in the Cayman Islands with an authorised share capital of HK$380,000 divided into 38,000,000 Shares of HK$0.01 each. 1 nil-paid Share was allotted and issued to the subscriber, and was subsequently transferred to Optimistic King on the same day. On the same date, each of Optimistic King and Gloria Power further subscribed for 749 and 250 nil-paid Shares, resulting them holding 750 and 250 nil-paid Shares, respectively, as at the date of incorporation.

• (i) Pursuant to the sale and purchase agreement dated [�] referred to in item (f) of the paragraph headed “Summary of material contracts” in this appendix, the Company acquired 750 shares (representing 75% of the issued share capital of Million Joyce) and 250 shares (representing 25% of the issued share capital of Million Joyce) of Million Joyce from Optimistic King and Gloria Power, respectively, and as consideration for which (i) the 750 and 250 nil-paid Shares held by Optimistic King and Gloria Power, respectively, were credited as fully-paid, and (ii) [REDACTED] and [REDACTED] Shares were issued and allotted to each of Optimistic King and Gloria Power, respectively, all credited as fully-paid.

Immediately after completion of the share transfer referred to in item (i) above, the Company then became the holding company of the Group.

5. Changes in share capital of subsidiaries

The subsidiaries of the Company are listed in the Accountant’s Report of the Company, the text of which is set out in Appendix I to this prospectus.

Save as disclosed in the paragraph headed “Corporate Reorganisation” in this appendix and in the section headed “History, Reorganisation and Corporate Structure” in this prospectus, there has been no alteration in the share capital of any of the subsidiaries of the Company within the two years immediately preceding the date of this prospectus.

6. Repurchase of Shares by the Company

This section contains information required by the Stock Exchange to be included in this prospectus concerning the repurchase of Shares by the Company.

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APPENDIX V

STATUTORY AND GENERAL INFORMATION

(a) Provisions of the GEM Listing Rules

The GEM Listing Rules permit companies whose primary listing is on GEM to repurchase their securities on GEM subject to certain restrictions, a summary of which is set out below:

(i) Shareholders’ approval

The GEM Listing Rules provide that all proposed repurchases of shares, which must be fully paid up in the case of shares, by a company with a primary listing on GEM must be approved in advance by an ordinary resolution of the shareholders, either by way of general mandate or by specific approval of a particular transaction.

• Note: Pursuant to the written resolutions passed by the Existing Shareholders on [�], a general unconditional mandate (the “ Repurchase Mandate ”) was granted to the Directors authorising them to exercise all powers of the Company to repurchase on GEM or on any other stock exchange on which the securities of the Company may be listed and which is recognised by the SFC and the Stock Exchange for this purpose, such number of Shares as will represent up to 10% of the aggregate nominal value of the share capital of the Company in issue immediately following completion of the Placing but excluding any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme, and the Repurchase Mandate shall remain in effect until whichever is the earliest of the conclusion of the next annual general meeting of the Company, or the expiration of the period within which the next annual general meeting of the Company is required by the Articles or the Companies Law or any other applicable laws of the Cayman Islands to be held or the time when the Repurchase Mandate is revoked or varied by an ordinary resolution of the Shareholders in a general meeting.

(ii) Source of Funds

Any repurchase by the Company must be funded out of funds legally available for the purpose in accordance with the Articles, the applicable laws of the Cayman Islands and the GEM Listing Rules. The Company may not repurchase its own Shares on GEM for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time.

Any repurchases by the Company may be made out of profits or out of the proceeds of a fresh issue of Shares made for the purpose of the repurchase or, if authorised by the Articles and subject to the Companies Law, out of capital and, in the case of any premium payable on the repurchase, out of profits of the Company or out of the Company’s share premium account before or at the time the Shares are repurchased or, if authorised by the Articles and subject to the Companies Law, out of capital.

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APPENDIX V STATUTORY AND GENERAL INFORMATION

(iii) Connected parties

The GEM Listing Rules prohibit the Company from knowingly repurchasing the Shares on GEM from a connected person, which includes a Director, chief executive or substantial shareholder of the Company or any of its subsidiaries or an associate of any of them, and a connected person shall not knowingly sell Shares to the Company on GEM.

(b) Exercise of the Repurchase Mandate

On the basis of [REDACTED] Shares in issue immediately after completion of the Placing, the Directors would be authorised under the Repurchase Mandate to repurchase up to [REDACTED] Shares during the period in which the Repurchase Mandate remains in force. Any Shares repurchased pursuant to the Repurchase Mandate must be fully paid-up.

(c) Reasons for repurchases

The Directors believe that it is in the best interests of the Company and the Shareholders for the Directors to have a general authority from Shareholders to enable the Company to repurchase Shares in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the Company’s net asset value and/or earnings per Share and will only be made when the Directors believe that such repurchases will benefit the Company and the Shareholders.

(d) Funding of repurchases

In repurchasing the Shares, the Company may only apply funds legally available for such purpose in accordance with the Articles, the GEM Listing Rules and the applicable laws and regulations of the Cayman Islands.

The Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

(e) General

None of the Directors or to the best of their knowledge, having made all reasonable enquiries, any of their associates of any Director, has any present intention to sell any Shares to the Company if the Repurchase Mandate is exercised.

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the GEM Listing Rules, the Articles and the applicable law and regulations from time to in force in the Cayman Islands.

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APPENDIX V

STATUTORY AND GENERAL INFORMATION

If as a result of a repurchase of Shares pursuant to the Repurchase Mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of the Takeovers Code. In certain circumstances, a Shareholder or a group of Shareholders acting in concert (as defined in the Takeovers Code) depending on the level of increase of the Shareholders’ interest, could obtain or consolidate control of the Company and may become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code as a result of any such increase.

Save as disclosed above, the Directors are not aware of any consequences which may arise under the Takeovers Code as a consequence of any repurchase of Shares if made immediately after the listing of the Shares pursuant to the Repurchase Mandate. At present, so far as is known to the Directors, no Shareholder may become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code in the event that the Directors exercise the power in full to repurchase the Shares pursuant to the Repurchase Mandate.

The Directors will not exercise the Repurchase Mandate if the repurchase would result in the number of Shares which are in the hands of the public falling below 25% of the total number of Shares in issue (or such other percentage as may be prescribed as the minimum public shareholding under the GEM Listing Rules).

No connected person has notified the Company that he has a present intention to sell Shares to the Company, or has undertaken not to do so, if the Repurchase Mandate is exercised.

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APPENDIX V

STATUTORY AND GENERAL INFORMATION

B. FURTHER INFORMATION ABOUT THE BUSINESS

1. Summary of material contracts

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Group within the two years preceding the date of this prospectus and are or may be material in relation to the business of the Company taken as a whole:

• (a) an instrument of transfer dated 13 November 2013 entered into between Optimistic King and Mr. Fu for the transfer of 1 share of Million Joyce from Mr. Fu to Optimistic King at a consideration of US$1;

• (b) an instrument of transfer dated 14 November 2013 entered into between Million Joyce and Mr. Fu for the transfer of 10,000 ordinary shares of King Force Security from Mr. Fu to Million Joyce at a consideration of HK$10,000;

• (c) bought and sold notes dated 14 November 2013 executed by Million Joyce and Mr. Fu for the transfer of 10,000 ordinary shares of King Force Security as referred to item (b) above;

• (d) a sale and purchase agreement dated 15 November 2013 entered into between Optimistic King, Gloria Power, Mr. Fu and Mr. Chiu, pursuant to which Gloria Power agreed to acquire 250 shares of Million Joyce from Optimistic King at a consideration of HK$7,000,000;

• (e) an instrument of transfer dated 15 November 2013 entered into between Optimistic King and Gloria Power for the transfer of 250 shares of Million Joyce as referred to item (d) above;

• (f) a sale and purchase agreement dated [�] entered into among Optimistic King, Gloria Power, the Company, Mr. Fu and Mr. Chiu, pursuant to which the Company agreed to acquire 750 and 250 shares of Million Joyce from Optimistic King and Gloria Power, respectively, and as consideration (i) the 750 and 250 nil-paid Shares held by Optimistic King and Gloria Power, respectively, were credited as fully-paid, and (ii) [REDACTED] and [REDACTED] Shares were issued and allotted to each of Optimistic King and Gloria Power, respectively, all credited as fully-paid;

• (g) an instrument of transfer dated [�] entered into between Optimistic King and the Company for the transfer of 750 shares of Million Joyce as referred to item (f) above;

• (h) an instrument of transfer dated [�] entered into between Gloria Power and the Company for the transfer of 250 shares of Million Joyce as referred to item (f) above;

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• (i) the Deed of Indemnity dated [�] executed by Mr. Fu and Optimistic King containing indemnities referred to in the paragraph headed “Tax and other indemnities” in this appendix;

• (j) the Deed of Non-competition in Chinese dated [�] executed among Mr. Fu, Optimistic King and the Company, details of which are set out in the section headed “Relationship with Controlling Shareholders – Non-competition Undertakings” in this prospectus; and

• (k) the Underwriting Agreement.

2. Intellectual property rights of the Group

(a) Trademark

As at the Latest Practicable Date, the Group has applied for registration of the following trademark:

		Application	Place of
Trademark	Classes	number	application	Applicant
	36, 45	302820447	Hong Kong	King Force
				Security

(b) Domain name

As at the Latest Practicable Date, the Group has registered the following domain name which is material to the business of the Group:

		Registration
Domain name	Registrant	date	Expiry date
kingforce.com.hk	King Force Security	5 December	5 December
		2008	2019

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C. FURTHER INFORMATION ABOUT SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND EXPERTS

1. Disclosure of Interests

• (a) Interests of Directors and chief executive in shares, underlying shares and debentures of the Company and its associated corporations

Immediately following completion of the Placing (without taking account any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme), the interests and short positions of the Directors or chief executive of the Company in shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which, once the Shares are listed on GEM, would have to be notified to the Company and the Stock Exchange under Divisions 7 and 8 of Part XV of the SFO (including any interests and short positions which they are taken or deemed to have under such provisions of the SFO) or would be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or would be required pursuant to the Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors to be notified to the Company and the Stock Exchange, will be as follows:

• (i) Long position in the Shares

		Number of
Name of	Capacity/	Shares held/	Percentage of
Director	nature	interested	shareholding
Mr. Fu	Interest of	[REDACTED]	[REDACTED]%
	controlled
	corporation
	(Note 1)
Ms. Liu	Interest of	[REDACTED]	[REDACTED]%
	spouse
	(Note 2)

Notes:

1. These [REDACTED] Shares are held by Optimistic King. Mr. Fu beneficially owns the entire issued share capital of Optimistic King. Therefore, Mr. Fu is deemed, or taken to be, interested in all the Shares held by Optimistic King for the purpose of the SFO. Mr. Fu is the sole director of Optimistic King.

2. Ms. Liu is the spouse of Mr. Fu. Accordingly, Ms. Liu is deemed or taken to be interested in all the Shares in which Mr. Fu is interested in for the purpose of the SFO.

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(ii) Long position in the share of associated corporations

	Name of		Number of	Percentage
Name of	associated	Capacity/	share held/	of
Director	corporation	nature	interested	shareholding
Mr. Fu	Optimistic	Beneficial	1	100%
	King	owner
		(Note 1)
Ms. Liu	Optimistic	Interest of	1	100%
	King	spouse
		(Note 2)

Note: Ms. Liu is the spouse of Mr. Fu. Accordingly, Ms. Liu is deemed or taken to be interested in such share of Optimistic King in which Mr. Fu is interested in for the purpose of the SFO.

(b) Interests of substantial and other Shareholders in the Shares and Underlying Shares

So far as is known to the Directors (without taking into account any Shares which may be taken up under the Placing, and Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme), the following persons (not being a Director or chief executive of the Company) will, immediately following completion of the Placing, have interests or short positions in Shares or underlying Shares 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 will be directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any of its subsidiaries:

Long position in the Shares

		Number of	Percentage
		Shares held/	of
Name	Capacity/nature	interested	shareholding
Optimistic King	Beneficial owner	[REDACTED]	[REDACTED]%
Gloria Power	Beneficial owner	[REDACTED]	[REDACTED]%
Mr. Chiu	Interest of	[REDACTED]	[REDACTED]%
	controlled
	corporation
	(Note 1)
Ms. Yung Wing Tao	Interest of spouse	[REDACTED]	[REDACTED]%
	(Note 2)

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Notes:

1. These [REDACTED] Shares are held by Gloria Power. Mr. Chiu beneficially owns the entire issued share capital of Gloria Power. Therefore, Mr. Chiu is deemed, or taken to be, interested in all the Shares held by Gloria Power for the purpose of the SFO. Mr. Chiu is the sole director of Gloria Power.

2. Ms. Yung Wing Tao is the spouse of Mr. Chiu. Accordingly, Ms. Yung is deemed, or taken to be, interested in all the Shares in which Mr. Chiu is interested in for the purpose of the SFO.

2. Particulars of service agreements

None of the Directors has or is proposed to have any service agreement with the Company or any of its subsidiaries (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

3. Remuneration of Directors

• (a) The aggregate amount of compensation paid by the Group to the Directors in respect of the two financial years ended 31 March 2013 and 2014 were approximately HK$1.3 million and HK$1.3 million respectively.

• (b) Under the arrangements currently in force, the aggregate emoluments (excluding payment pursuant to any discretionary benefits or bonus or other fringe benefits) payable by the Group to the Directors for the financial year ending 31 March 2015 will be approximately HK$1.5 million.

• (c) Under the arrangements currently proposed, conditional upon the Listing, the basic annual remuneration (excluding payment pursuant to any discretionary benefits or bonus or other fringe benefits) payable by the Group to each of the Directors will be as follows:

Executive Directors	HK$
Mr. Fu	720,000
Ms. Liu	300,000
Ms. Chung Pui Yee Shirley	240,000
Independent non-executive Directors	HK$
Mr. Law Yiu Sing	120,000
Professor Lam Sing Kwong Simon	120,000
Mr. Ong Chi King	120,000

• (d) Each of the Directors has entered into a service contract with the Company for a term of three years commencing from the Listing Date, which may be terminated by not less than three months notice served by either party on the

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APPENDIX V STATUTORY AND GENERAL INFORMATION

other, and is subject to termination provisions therein and provisions on retirement by rotation of Directors as set out in the Memorandum and the Articles.

4. Agency fees or commissions received

Save as disclosed in the section headed “Underwriting – Total Commission, Fee and Expenses” in this prospectus, and in the paragraph headed “Sponsor” in this appendix, none of the Directors or the experts named in the paragraph headed “Consents of Experts” in this appendix had received any agency fee or commissions from the Group within the two years preceding the date of this prospectus.

5. Related party transactions

Details of the related party transactions are set out under Note 26 to the Accountant’s Report of the Company set out in Appendix I to this prospectus.

6. Disclaimers

Save as disclosed in this prospectus:

• (a) taking no account of any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme or repurchased by the Company pursuant to the mandate as referred to in the paragraph headed “Further information about the Company” in this appendix, and taking no account of Shares which may be taken up under the Placing, the Directors are not aware of any person (not being a Director or chief executive of the Company) who will, immediately following completion of the Placing, have an interest or short position in Shares or underlying Shares 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 will be directly or indirectly interested in 10% or more of the nominal value or any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any of its subsidiaries;

• (b) taking no account of any Shares to be issued upon exercise of any options which may be granted under the Share Option Scheme none of the Directors or chief executive of the Company has any interest or short position in shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange under Divisions 7 and 8 of Part XV of the SFO (including any interests and short positions which they are taken or deemed to have under such provisions of the SFO) or would be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or would be required, pursuant to

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Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors, to be notified to the Company and the Stock Exchange, in each case once the Shares are listed on GEM;

• (c) none of the Directors or the experts named in the paragraph headed “Qualifications of experts” in this appendix is interested in the promotion of, or in any assets which have been, within the two years immediately preceding the issue of this prospectus, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group;

• (d) none of the Directors or the experts named in the paragraph headed “Qualifications of experts” in this appendix is materially interested in any contract or arrangement subsisting at the date of this prospectus which is significant in relation to the business of the Group taken as a whole;

• (e) none of the Directors or the experts named in the paragraph headed “Qualifications of experts” in this appendix has any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group;

• (f) so far as is known to the Directors, none of the Directors, their respective associates (as defined under the GEM Listing Rules) or Shareholders who are interested in more than 5% of the issued share capital of the Company has any interests in the five largest customers or the five largest suppliers of the Group;

• (g) none of the Directors has any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)); and

• (h) no remuneration or other benefits in kind have been paid by any member of the Group to any Director since the date of incorporation of the Company, nor are any remuneration or benefits in kind payable by any member of the Group to any Director in respect of the current financial year under any arrangement in force as at the Latest Practicable Date.

D. SHARE OPTION SCHEME

The Company has conditionally adopted the Share Option Scheme on [�]. The following is a summary of the principal terms of the Share Option Scheme but does not form part of, nor was it intended to be, part of the Share Option Scheme nor should it be taken as affecting the interpretation of the rules of the Share Option Scheme.

The terms of the Share Option Scheme are in accordance with the provisions of Chapter 23 of the GEM Listing Rules.

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APPENDIX V STATUTORY AND GENERAL INFORMATION

(a) Definitions

For the purpose of this section, the following expressions have the meanings set out below unless the context requires otherwise:

• “Adoption Date” [�], the date on which the Share Option Scheme is conditionally adopted by the Shareholders by way of written resolutions

“Business Day” any day on which the Stock Exchange is open for the business of dealing in securities

“Board” the board of Directors or a duly authorised committee of the board of Directors

“Group” the Company and any entity in which the Company, directly or indirectly, holds any equity interest

“Scheme Period” the period commencing on the Adoption Date and expiring at the close of business on the Business Day immediately preceding the tenth anniversary thereof

(b) Summary of terms

The following is a summary of the principal terms of the rules of the Share Option Scheme conditionally adopted by the written resolutions of the Existing Shareholders passed on [�]:

(i) Purpose of the Share Option Scheme

The purpose of the Share Option Scheme is to attract and retain the best available personnel, to provide additional incentive to employees (fulltime and part-time), directors, consultants, advisers, distributors, contractors, suppliers, agents, customers, business partners and services providers of the Group and to promote the success of the business of the Group.

(ii) Who may join and basis of eligibility

The Board may, at its absolute discretion and on such terms as it may think fit, grant any employee (full-time or part-time), director, consultant or adviser of the Group, or any substantial shareholder of the Group, or any distributor, contractor, supplier, agent, customer, business partner or services provider of the Group, options to subscribe at a price calculated in accordance with paragraph (iii) below for such number of Shares as it may determine in accordance with the terms of the Share Option Scheme. The basis of eligibility of any participant to the grant of any option shall be determined by the Board (or as the case may be,

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APPENDIX V STATUTORY AND GENERAL INFORMATION

the independent non-executive Directors) from time to time on the basis of his contribution or potential contribution to the development and growth of the Group.

(iii) Price of Shares

The subscription price of a Share in respect of any particular option granted under the Share Option Scheme shall be a price solely determined by the Board and notified to a participant and shall be at least the higher of: (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant of the option, which must be a Business Day; (ii) the average of the closing prices of the Shares as stated in the Stock Exchange’s daily quotations sheets for the five Business Days immediately preceding the date of grant of the option; and (iii) the nominal value of a Share on the date of grant of the option, provided always that for the purpose of calculating the subscription price, where the Company has been listed on the Stock Exchange for less than five Business Days, the new issue price shall be used as the closing price for any Business Day fall within the period before listing.

(iv) Grant of options and acceptance of offers

An offer for the grant of options must be accepted within seven days inclusive of the day on which such offer was made. The amount payable by the grantee of an option to the Company on acceptance of the offer for the grant of an option is HK$1.

(v) Maximum number of Shares

• (aa) subject to sub-paragraphs (bb) and (cc) below, the maximum number of Shares issuable upon exercise of all options to be granted under the Share Option Scheme and any other share option schemes of the Company as from the Adoption Date (excluding, for this purpose, Shares issuable upon exercise of options which have been granted but which have lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company) must not in aggregate exceed 10% of all the Shares in issue as at the Listing Date. Therefore, it is expected that the Company may grant options in respect of up to [REDACTED] Shares (or such numbers of Shares as shall result from a sub-division or a consolidation of such [REDACTED] Shares from time to time) to the participants under the Share Option Scheme.

• (bb) The 10% limit as mentioned above may be refreshed at any time by obtaining approval of the Shareholders in general meeting provided that the total number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other share option schemes of the Company must not exceed 10% of the Shares in issue as at the date of approval of the refreshed limit. Options

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APPENDIX V

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previously granted under the Share Option Scheme and any other share option schemes of the Company (including those outstanding, cancelled or lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company) will not be counted for the purpose of calculating the refreshed 10% limit. A circular must be sent to the Shareholders containing the information as required under the GEM Listing Rules in this regard.

• (cc) the Company may seek separate approval of the Shareholders in general meeting for granting options beyond the 10% limit provided the options in excess of the 10% limit are granted only to grantees specifically identified by the Company before such approval is sought. In such event, the Company must send a circular to the Shareholders containing a generic description of such grantees, the number and terms of such options to be granted and the purpose of granting options to them with an explanation as to how the terms of the options will serve such purpose, such other information required under the GEM Listing Rules.

• (dd) The aggregate number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not exceed 30% of the Shares in issue from time to time. No options may be granted under the Share Option Scheme or any other share option schemes of the Company if this will result in such 30% limit being exceeded.

(vi) Maximum entitlement of each participant

The total number of Shares issued and to be issued upon exercise of options granted to any participant (including both exercised and outstanding options) under the Share Option Scheme, in any 12-month period up to the date of grant shall not exceed 1% of the Shares in issue. Any further grant of options in excess of such limit must be separately approved by Shareholders in general meeting with such grantee and his associates abstaining from voting. In such event, the Company must send a circular to the Shareholders containing the identity of the grantee, the number and terms of the options to be granted (and options previously granted to such grantee), and all other information required under the GEM Listing Rules. The number and terms (including the subscription price) of the options to be granted must be fixed before the approval of the Shareholders and the date of the Board meeting proposing such further grant should be taken as the date of grant for the purpose of calculating the subscription price.

(vii) Grant of options to certain connected persons

• (aa) Any grant of an option to a Director, chief executive or Substantial Shareholder (or any of their respective associates) must be approved by the independent non-executive Directors (excluding any independent non-executive Director who is the grantee of the option).

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• (bb) Where any grant of options to a substantial Shareholder or an independent non-executive Director (or any of their respective associates) will result in the total number of Shares issued and to be issued upon exercise of all options already granted and to be granted to such person under the Share Option Scheme and any other share option schemes of the Company (including options exercised, cancelled and outstanding) in any 12-month period up to and including the date of grant:

• (i) representing in aggregate over 0.1% of the Shares in issue; and

• (ii) having an aggregate value, based on the closing price of the Shares at the date of each grant, in excess of HK$5,000,000, such further grant of options is required to be approved by Shareholders at a general meeting of the Company, with voting to be taken by way of poll. The Company shall send a circular to the Shareholders containing all information as required under the GEM Listing Rules in this regard. All connected persons of the Company shall abstain from voting (except where any connected person intends to vote against the proposed grant). Any change in the terms of an option granted to a substantial Shareholder or an independent non-executive Director or any of their respective associates is also required to be approved by Shareholders in the aforesaid manner.

(viii) Restrictions on the times of grant of options

• (aa) An offer for the grant of options may not be made after any inside information (as defined in the SFO) has come to the knowledge of the Company until such inside information has been announced pursuant to the requirements of the GEM Listing Rules and the SFO. In particular, no options may be granted during the period commencing one month immediately preceding the earlier of:

• (i) the date of the Board meeting (such date to first be notified to the Stock Exchange in accordance with the GEM Listing Rules) for the approval of the Company’s results for any year, half-year, quarterly or other interim period (whether or not required under the GEM Listing Rules); and

• (ii) the deadline for the Company to publish an announcement of the results for any year, half-year or quarterly under the GEM Listing Rules, or other interim period (whether or not required under the GEM Listing Rules).

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APPENDIX V STATUTORY AND GENERAL INFORMATION

• (bb) Further to the restrictions in paragraph (aa) above, no option may be granted to a Director on any day on which financial results of the Company are published and:

• (i) during the period of 60 days immediately preceding the publication date of the annual results or, if shorter, the period from the end of the relevant financial year up to the publication date of the results; and

• (ii) during the period of 30 days immediately preceding the publication date of the quarterly results and half-year results or, if shorter, the period from the end of the relevant quarterly or half-year period up to the publication date of the results.

(ix) Time of exercise of option

An option may be exercised in accordance with the terms of the Share Option Scheme at any time during a period as the Board may determine which shall not exceed ten years from the date of grant subject to the provisions of early termination thereof.

(x) Performance targets

Save as determined by the Board and provided in the offer of the grant of the relevant options, there is no performance target which must be achieved before any of the options can be exercised.

(xi) Ranking of Shares

The Shares to be allotted upon the exercise of an option will be subject to all the provisions of the Articles for the time being in force and will rank pari passu in all respects with the fully paid Shares in issue on the date of allotment and accordingly will entitle the holders to participate in all dividends or other distributions paid or made after the date of allotment other than any dividend or other distribution previously declared or recommended or resolved to be paid or made with respect to a record date which shall be on or before the date of allotment, save that the Shares allotted upon the exercise of any option shall not carry any voting rights until the name of the grantee has been duly entered on the register of members of the Company as the holder thereof.

(xii) Rights are personal to grantee

An option shall not be transferable or assignable and shall be personal to the grantee of the option.

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(xiii) Rights on cessation of employment by death

In the event of the death of the grantee (provided that none of the events which would be a ground for termination of employment referred to in (xiv) below arises within a period of 3 years prior to the death, in the case the grantee is an employee at the date of grant), the legal personal representative(s) of the grantee may exercise the option up to the grantee’s entitlement (to the extent which has become exercisable and not already exercised) within a period of 12 months following his death provided that where any of the events referred to in (xvii), (xviii) and (xix) occurs prior to his death or within such period of six months following his death, then his personal representative(s) may so exercise the option within such of the various periods respectively set out therein.

(xiv) Rights on cessation of employment by dismissal

In the event that the grantee is an employee of the Group at the date of grant and he subsequently ceases to be an employee of the Group on any one or more of the grounds that he has been guilty of serious misconduct, or has committed an act of bankruptcy or has become insolvent or has made any arrangement or composition with his creditors generally, or has been convicted of any criminal offence involving his integrity or honesty or (if so determined by the Board) on any other ground on which an employer would be entitled to terminate his employment at common law or pursuant to any applicable laws or under the grantee’s service contract with the Group, his option shall lapse automatically (to the extent not already exercised) on the date of cessation of his employment with the Group.

(xv) Rights on cessation of employment for other reasons

In the event that the grantee is an employee of the Group at the date of grant and he subsequently ceases to be an employee of the Group for any reason other than his death or the termination of his employment on one or more of the grounds specified in (xiv) above, the option (to the extent not already exercised) shall lapse on the expiry of 3 months after the date of cessation of such employment (which date will be the last actual working day with the Company or the relevant member of the Group whether salary is paid in lieu of notice or not).

(xvi) Effects of alterations to share capital

In the event of any alteration in the capital structure of the Company whilst any option remains exercisable, whether by way of capitalisation of profits or reserves, rights issue, consolidation, subdivision or reduction of the share capital of the Company (other than an issue of Shares as consideration in respect of a transaction to which any member of the Group is a party), such corresponding adjustments (if any) shall be made in the number of Shares subject to the option so far as unexercised; and/or the subscription prices, as the auditors of or independent financial adviser to the Company shall certify or confirm in writing (as the case may be) to the Board to be in their opinion fair and reasonable in

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compliance with the relevant provisions of the GEM Listing Rules, or any guideline or supplemental guideline issued by the Stock Exchange from time to time (no such certification is required in case of adjustment made on a capitalisation issue), provided that any alteration shall give a grantee the same proportion of the issued share capital of the Company as that to which he was previously entitled, but no adjustment shall be made to the effect of which would be to enable a Share to be issued at less than its nominal value.

(xvii) Rights on a general offer

In the event of a general offer (whether by way of takeover offer or scheme of arrangement or otherwise in like manner) being made to all the Shareholders (or all such holders other than the offeror and, or any persons controlled by the offeror and, or any person acting in association or concert with the offeror) and such offer becoming or being declared unconditional, the grantee (or, as the case may be, his legal personal representative(s)) shall be entitled to exercise the option in full (to the extent not already exercised) at any time within one month after the date on which the offer becomes or is declared unconditional.

(xviii) Rights on winding-up

In the event a notice is given by the Company to the members to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up the Company, the Company shall on the same date as or soon after it despatches such notice to each member of the Company give notice thereof to all grantees and thereupon, each grantee (or, as the case may be, his legal personal representative(s)) shall be entitled to exercise all or any of his options at any time not later than 2 Business Days prior to the proposed general meeting of the Company by giving notice in writing to the Company, accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given whereupon the Company shall as soon as possible and, in any event, no later than the Business Day immediately prior to the date of the proposed general meeting referred to above, allot the relevant Shares to the grantee credited as fully paid.

(xix) Rights on compromise or arrangement

In the event of a compromise or arrangement between the Company and the Shareholders or the creditors of the Company being proposed in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies pursuant to the Companies Law, the Company shall give notice thereof to all the grantees (or, as the case may be, their legal personal representatives) on the same day as it gives notice of the meeting to the Shareholders or the creditors to consider such a compromise or arrangement and the options (to the extent not already exercised) shall become exercisable in whole or in part on such date not later than two Business Days prior to the date of the general meeting directed to be convened by the court for the purposes of considering such compromise or arrangement (“Suspension Date”), by giving

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APPENDIX V

STATUTORY AND GENERAL INFORMATION

notice in writing to the Company accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given whereupon the Company shall as soon as practicable and, in any event, no later than 3:00 p.m. on the Business Day immediately prior to the date of the proposed general meeting, allot and issue the relevant Shares to the grantee credited as fully paid. With effect from the Suspension Date, the rights of all grantees to exercise their respective options shall forthwith be suspended. Upon such compromise or arrangement becoming effective, all options shall, to the extent that they have not been exercised, lapse and determine. The Board shall endeavour to procure that the Shares issued as a result of the exercise of options hereunder shall for the purposes of such compromise or arrangement form part of the issued share capital of the Company on the effective date thereof and that such Shares shall in all respects be subject to such compromise or arrangement. If for any reason such compromise or arrangement is not approved by the court (whether upon the terms presented to the court or upon any other terms as may be approved by such court), the rights of grantees to exercise their respective options shall with effect from the date of the making of the order by the court be restored in full but only up to the extent not already exercised and shall thereupon become exercisable (but subject to the other terms of the Share Option Scheme) as if such compromise or arrangement had not been proposed by the Company and no claim shall lie against the Company or any of its officers for any loss or damage sustained by any grantee as a result of such proposal, unless any such loss or damage shall have been caused by the act, neglect, fraud or willful default on the part of the Company or any of its officers.

(xx) Lapse of options

An option shall lapse automatically on the earliest of:

• (aa) the expiry of the period referred to in paragraph (ix) above;

• (bb) the date on which the Board exercises the Company’s right to cancel, revoke or terminate the option on the ground that the grantee commits a breach of paragraph (xii);

• (cc) the expiry of the relevant period or the occurrence of the relevant event referred to in paragraphs (xiii), (xiv), (xv), (xvii), (xviii) or (xix) above;

• (dd) subject to paragraph (xviii) above, the date of the commencement of the winding-up of the Company;

• (ee) the occurrence of any act of bankruptcy, insolvency or entering into of any arrangements or compositions with his creditors generally by the grantee, or conviction of the grantee of any criminal offence involving his integrity or honesty;

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STATUTORY AND GENERAL INFORMATION

• (ff) where the grantee is only a substantial shareholder of any member of the Group, the date on which the grantee ceases to be a substantial shareholder of such member of the Group; or

• (gg) subject to the compromise or arrangement as referred to in paragraph (xix) become effective, the date on which such compromise or arrangement becomes effective.

(xxi) Cancellation of options granted but not yet exercised

Any cancellation of options granted but not exercised may be effected on such terms as may be agreed with the relevant grantee, as the Board may in its absolute discretion sees fit and in manner that complies with all applicable legal requirements for such cancellation.

(xxii) Period of the Share Option Scheme

The Share Option Scheme will remain in force for a period of ten years commencing on the date on the Adoption Date and shall expire at the close of business on the Business Day immediately preceding the tenth anniversary thereof unless terminated earlier by the Shareholders in general meeting.

(xxiii) Alteration to the Share Option Scheme

• (aa) The Share Option Scheme may be altered in any respect by resolution of the Board except that alterations of the provisions of the Share Option Scheme which alters to the advantage of the grantees of the options relating to matters governed by Rule 23.03 of the GEM Listing Rules shall not be made except with the prior approval of the Shareholders in general meeting.

• (bb) Any amendment to any terms of the Share Option Scheme which are of a material nature or any change to the terms of options granted, or any change to the authority of the Board in respect of alteration of the Share Option Scheme must be approved by Shareholders in general meeting except where the alterations take effect automatically under the existing terms of the Share Option Scheme.

• (cc) Any amendment to any terms of the Share Option Scheme or the options granted shall comply with the relevant requirements of the GEM Listing Rules or any guidelines issued by the Stock Exchange from time to time.

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APPENDIX V STATUTORY AND GENERAL INFORMATION

(xxiv) Termination to the Share Option Scheme

The Company by resolution in general meeting or the Board may at any time terminate the operation of the Share Option Scheme and in such event no further options will be offered but options granted prior to such termination shall continue to be valid and exercisable in accordance with provisions of the Share Option Scheme.

(xxv)Conditions of the Share Option Scheme

The Share Option Scheme is conditional on the Listing Division of the Stock Exchange granting the listing of, and permission to deal in, the Shares may be issued pursuant to the exercise of any options which may be granted under the Share Option Scheme, and commencement of dealings in the Shares on the Stock Exchange.

(c) Present status of the Share Option Scheme

Application has been made to the Listing Division for the listing of, and permission to deal in [REDACTED] Shares which fall to be issued upon exercise of any options which may be granted under the Share Option Scheme.

As at the date of this prospectus, no option has been granted or agreed to be granted under the Share Option Scheme.

E. OTHER INFORMATION

1. Tax and other indemnities

Mr. Fu and Optimistic King (collectively, the “Indemnifiers”) have, under the Deed of Indemnity referred to in paragraph (i) of the paragraph headed “Summary of material contracts” in this appendix, given joint and several indemnities to the Company (for itself and as trustee for its subsidiaries) in connection with, among other things, (a) any taxation falling on any member of the Group (i) in respect of or by reference to any income, profits or gains earned, accrued or received or deemed or alleged to have been earned, accrued or received on or before the date on which the Placing becomes unconditional; or (ii) in respect of or by reference to any transaction, act, omission or event entered into or occurring or deemed to enter into or occur on or before the date on which the Placing becomes unconditional; and (b) any claims, actions, demands, proceedings, judgments, losses, liabilities, damages, costs, charges, fees, expenses and fines of whatever nature suffered or incurred by any member of the Group as a result of or in connection with any litigation, arbitrations, claims (including counter-claims), complaints, demands and/or legal proceedings instituted by or against any member of the Group in relation to events occurred on or before the date on which the Placing becomes unconditional. The Indemnifiers will, however, not be liable under the Deed of Indemnity to the extent that, among others:

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APPENDIX V STATUTORY AND GENERAL INFORMATION

• (a) specific provision, reserve or allowance has been made for such liability in the audited consolidated accounts of the Company for the Track Record Period; or

• (b) the taxation liability arises or is incurred as a result of a retrospective change in law or a retrospective increase in tax rates coming into force after the date on which the Placing becomes unconditional; or

• (c) the taxation liability arises in the ordinary course of business of any members of the Group after 31 March 2014 up to and including the date on which the Placing becomes unconditional.

The Directors have been advised that no material liability for estate duty under the laws of the Cayman Islands is likely to fall on the Group.

2. Litigation

The Directors confirmed that save as disclosed in the section headed “Business − Litigations” of this prospectus as at the Latest Practicable Date, no member of the Group is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is pending or threatened by or against any member of the Group.

3. Sponsor

The Sponsor has made an application on behalf of the Company to the Listing Division for listing of and permission to deal in the Shares in issue and to be issued as mentioned herein and any Shares which may fall to be issued pursuant to the exercise of the options which may be granted under the Share Option Scheme.

The Sponsor has confirmed to the Stock Exchange that it satisfies the independence test as stipulated under Rule 6A.07 of the GEM Listing Rules.

Sponsor’s fees

The Sponsor will receive financial advisory and documentation fee of HK$3,300,000 in relation to the Listing, and will be reimbursed for their expenses properly incurred in connection with the Placing.

4. Preliminary expenses

The preliminary expenses relating to the incorporation of the Company are approximately HK$38,000 and are payable by the Company.

5. Promoter

The Company has no promoter for the purpose of the GEM Listing Rules.

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APPENDIX V STATUTORY AND GENERAL INFORMATION

6. Qualifications of experts

The following are the respective qualifications of the experts who have given their opinion or advice which is contained in this prospectus:

Name	Qualifications
TC Capital Asia Limited	A licensed corporation for carrying		on type 1
	(dealing in securities)	and type 6	(advising
	on corporate finance)	regulated	activities
	under the SFO
BDO Limited	Certified Public Accountants
Ascent Partners Valuation Service	Property Valuer
Limited
Appleby	Cayman Islands attorneys-at-law

7. Consents of experts

Each of TC Capital Asia Limited, BDO Limited, Ascent Partners Valuation Service Limited and Appleby has given and has not withdrawn its written consents to the issue of this prospectus, with the inclusion of its letters and/or reports and/or opinions and/or summary thereof (as the case may be) and/or references to its name included herein in the form and context in which they respectively appear.

8. Binding effect

This prospectus shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.

9. Registration procedures

The principal register of members of the Company in the Cayman Islands will be maintained by [REDACTED] and a branch register of members of the Company will be maintained by [REDACTED]. Save where the Directors otherwise agree, all transfers and other documents of title to Shares must be lodged for registration with, and registered by, the Company’s branch share registrar in Hong Kong and may not be lodged in the Cayman Islands. All necessary arrangements have been made to enable the Shares to be admitted into CCASS.

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APPENDIX V STATUTORY AND GENERAL INFORMATION

10. No material adverse change

Save as disclosed in the section headed “Financial Information – Material Adverse Change”, the Directors confirm that there has been no material adverse change in the financial or trading position or prospects of the Company or its subsidiaries since 31 March 2014 (being the date to which the latest audited consolidated financial statements of the Group were made up) and up to the Latest Practicable Date.

11. Taxation of holders of Shares

(a) Hong Kong

Dealings in Shares registered on the Company’s Hong Kong branch register of members will be subject to Hong Kong stamp duty.

Profits from dealings in Shares arising in or derived from Hong Kong may also be subject to Hong Kong profits tax.

(b) Cayman Islands

No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands.

(c) Consultation with professional advisers

Intending holders of the Shares are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or disposing of or dealing in the Shares. It is emphasised that none of the Company, the Directors or parties involved in the Placing accepts responsibility for any tax effect on, or liabilities of holders of Shares resulting from their subscription for, purchase, holding or disposal of or dealing in Shares.

12. Miscellaneous

• (a) Save as disclosed in this prospectus:

• (i) Within the two years immediately preceding the date of this prospectus:

  • (aa) no share or loan capital of the Company or any of its subsidiaries has been issued, agreed to be issued or is proposed or intended to be issued fully or partly paid either for cash or for a consideration other than cash;

  • (bb) no commissions, discounts, brokerages or other special terms have been granted or agreed to be granted in connection with the issue or sale of any share or loan capital of the Company or any of its

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APPENDIX V

STATUTORY AND GENERAL INFORMATION

subsidiaries and no commission has been paid or is payable in connection with the issue or sale of any capital of the Company or any of its subsidiaries; and

• (cc) no commission has been paid or payable (except to sub-underwriter) for subscribing or agreeing to subscribe, procuring or agreeing to procure subscriptions, for any shares or debenture of the Company or any of its subsidiaries;

• (ii) no founders, management or deferred shares or any debentures of the Company have been issued or agreed to be issued;

• (iii) no share or loan capital of the Company is under option or is agreed conditionally or unconditionally to be put under option.

• (iv) there has not been any interruption in the business of the Group which may have or have had a significant effect on the financial position of the Group in the 12 months immediately preceding the date of this prospectus;

• (v) none of TC Capital Asia Limited, BDO Limited, Ascent Partners Valuation Service Limited and Appleby:

• (aa) is interested beneficially or non-beneficially in any securities in any member of the Group, including the Shares; or

• (bb) has any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities in any member of the Group, including the Shares.

• (vi) the Company and its subsidiaries do not have any debt securities issued or outstanding, or authorised or otherwise created but unissued, or any term loans whether guaranteed or secured as at the Latest Practicable Date;

• (vii) the Directors have been advised that, under Cayman Islands laws, the use of a Chinese name pre-approved by the Registrar of Companies in the Cayman Islands by the Company in conjunction with the English name does not contravene Cayman Islands laws;

• (viii) no company within the Group is presently listed on any stock exchange or traded on any trading system;

• (ix) the Group has no outstanding convertible debt securities; and

• (x) the English text of this prospectus shall prevail over the Chinese text.

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APPENDIX V STATUTORY AND GENERAL INFORMATION

13. Bilingual Prospectus

The English language and Chinese language versions of this prospectus are being published separately in reliance upon the exemption provided in section 4 of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE. THE INFORMATION IN THIS DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG AND AVAILABLE FOR INSPECTION

APPENDIX VI

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG

The documents attached to a copy of this prospectus delivered to the Registrar of Companies in Hong Kong for registration were copies of the written consents referred to in the paragraph headed “Consents of experts” in Appendix V to this prospectus, copies of the material contracts referred to in the paragraph headed “Summary of material contracts” in Appendix V to this prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Loong & Yeung of Suites 2001-2005, 20th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this prospectus:

• (a) the Memorandum and the Articles;

• (b) the accountant’s report prepared by BDO Limited, the text of which is set out in Appendix I to this prospectus;

• (c) the report on the unaudited pro forma financial information of the Group prepared by BDO Limited, the text of which is set out in Appendix II to this prospectus;

• (d) the audited statutory financial statements of King Force Security for each of the two financial years ended 31 March 2013 and 2014;

• (e) the material contracts referred to in the paragraph headed “Summary of material contracts” in Appendix V to this prospectus;

• (f) the service agreements referred to in the paragraph headed “Particulars of service agreements” in Appendix V to this prospectus;

• (g) the rules of the Share Option Scheme referred to in the paragraph headed “Share Option Scheme” in Appendix V to this prospectus;

• (h) the written consents referred to in the paragraph headed “Consents of experts” in Appendix V to this prospectus;

• (i) the Companies Law; and

• (j) the letter prepared by Appleby summarising certain aspects of the Cayman Islands company law referred to in Appendix IV to this prospectus.

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