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

Yield Go Holdings Ltd. 耀高控股有限公司

(the “ Company ”)

(incorporated in the Cayman Islands with limited liability)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) and the Securities and Futures Commission (the “ SFC ”) 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 members 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 Stock 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 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 affiliates, 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 Stock Exchange and the SFC 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 AND THAT THE INFORMATION 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 document, you should obtain independent professional advice.

Yield Go Holdings Ltd. 耀高控股有限公司

(incorporated in the Cayman Islands with limited liability)

[REDACTED]

Total number of [REDACTED] : [REDACTED] Shares (subject to the [REDACTED]) Number of [REDACTED] : [REDACTED] Shares (subject to re-allocation) Number of [REDACTED] : [REDACTED] Shares (subject to re-allocation and the [REDACTED]) [REDACTED] : Not more than HK$[REDACTED] per [REDACTED] and expected to be not less than HK$[REDACTED] per [REDACTED], plus brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005% (payable in full on application and subject to refund) Nominal value : HK$0.01 per Share Stock code : [REDACTED] Sole Sponsor

==> picture [111 x 50] intentionally omitted <==

[REDACTED]

[•] [•]

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 document, 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 document.

A copy of this document, having attached thereto the documents specified in the paragraph headed “Documents delivered to the Registrar of Companies in Hong Kong” in Appendix V to this document, has been registered by the Registrar of Companies in Hong Kong as required under section 342C of the Companies (WUMP) Ordinance. The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this document or any other documents referred to above.

The [REDACTED] is expected to be determined by agreement between our Company and the [REDACTED] (for itself and on behalf of the [REDACTED] ) on the [REDACTED] or such later date as may be agreed between our Company and the [REDACTED] (for itself and on behalf of the [REDACTED] ) but in any event no later than [REDACTED] , [REDACTED] . The [REDACTED] will be not more than HK$ [REDACTED] per [REDACTED] and is expected to be not less than HK$ [REDACTED] per [REDACTED] , unless otherwise announced.

The [REDACTED] may, with our Company’s consent, reduce the number of [REDACTED] under the [REDACTED] and/or the [REDACTED] stated in this document at any time prior to the morning of the last day for lodging applications under the [REDACTED] . In such a case, a notice of reduction in the number of [REDACTED] and/or the [REDACTED] will be published on the website of the Stock Exchange at www.hkexnews.hk and website of our Company at www.yield-go.com not later than the morning of the last day for lodging applications under the [REDACTED] . Details of the arrangement will then be announced by our Company as soon as practicable. Further details are set out in the sections headed “Structure and conditions of the [REDACTED] ” and “How to apply for [REDACTED] ”.

If, for any reason, the [REDACTED] is not agreed between the [REDACTED] (for itself and on behalf of the [REDACTED] ) and our Company on or before [REDACTED] , [REDACTED] , the [REDACTED] will not become unconditional and will lapse immediately.

Prior to making an investment decision, prospective investors should consider carefully all the information set out in this document, including risk factors set out in the section headed “Risk factors”. Pursuant to the [REDACTED] [REDACTED] , the [REDACTED] has the right in certain circumstances to terminate the obligations of the [REDACTED] [REDACTED] at any time prior to 8:00 a.m. (Hong Kong time) on the [REDACTED] . Further details of such circumstances are set out in the section headed “ [REDACTED] – [REDACTED] arrangements and expenses – The [REDACTED] – Grounds for termination”.

[REDACTED]

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

EXPECTED TIMETABLE

[REDACTED]

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EXPECTED TIMETABLE

[REDACTED]

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EXPECTED TIMETABLE

[REDACTED]

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

You should rely only on the information contained in this document to make your
investment decision. Our Company has not authorised anyone to provide you with information
that is different from what is contained in this document. Any information or representation
not contained or made in this document must not be relied on by you as having been
authorised by our Company, the Sole Sponsor, the [REDACTED], the [REDACTED], any of
the [REDACTED], any of their respective directors, affiliates, employees or representatives
or any other person or party involved in the [REDACTED].
Page
EXPECTED TIMETABLE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i
CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iv
SUMMARY
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
. . . . . . . . . . . . . . . . . .
13
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
RISK FACTORS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]
. . . . . . . . .
35
DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] . . . . . . . . . . . . . .
39
CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42
INDUSTRY OVERVIEW
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
REGULATORY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57
HISTORY, DEVELOPMENT AND REORGANISATION . . . . . . . . . . . . . . . . . . . . . .
73
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80
CONNECTED TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES . . . . . . . . . . . . . . . . . .
130
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS . . . . . . . . . . . . .
142
SUBSTANTIAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149
SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150

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			Page
FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			154
FUTURE PLANS AND [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			195
[REDACTED]	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		205
STRUCTURE AND CONDITIONS OF THE [REDACTED] . . . . . . . . . . . . . . . . . . .			213
HOW TO APPLY FOR [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			224
APPENDIX I	—	ACCOUNTANTS’ REPORT . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II	—	UNAUDITED PRO FORMA
		FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III	—	SUMMARY OF THE CONSTITUTION
		OF OUR COMPANY AND
		CAYMAN ISLANDS COMPANY LAW . . . . . . . . . . . . . . .	III-1
APPENDIX IV	—	STATUTORY AND GENERAL INFORMATION . . . . . . . . .	IV-1
APPENDIX V	—	DOCUMENTS DELIVERED TO THE REGISTRAR
		OF COMPANIES AND AVAILABLE FOR
		INSPECTION IN HONG KONG . . . . . . . . . . . . . . . . . . . . .	V-1

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SUMMARY

This summary aims to give you an overview of the information contained in this document. As this is a summary, it does not contain all the information that may be important to you. You should read this document in its entirety before you decide to invest in the [REDACTED] . There are risks associated with any investment. Some of the particular risks in investing in the [REDACTED] are set out in the section headed “Risk factors” in this document. You should read that section carefully before you decide to invest in the [REDACTED] . Various expressions used in this summary are defined in the section headed “Definitions and glossary of technical terms” in this document.

BUSINESS OVERVIEW

We are an established fitting-out contractor in Hong Kong with over 22 years of experience since the establishment of one of our principal operating subsidiaries, Hoi Sing Decoration, in 1995. Our fitting-out services cover both (i) fitting-out works conducted on new buildings; and (ii) interior renovation works on existing buildings that involve upgrades, makeovers and demolition of existing works. Our fitting-out services are mainly provided for residential and commercial properties in Hong Kong on a project basis. To a lesser extent, we also engage in supply of fitting-out materials such as timber products upon customers’ requests in Hong Kong. Our landmark projects undertaken throughout our operating history included providing fitting-out services for various residential and commercial development projects in Hong Kong. Our major customers include leading property developers. According to the Ipsos Report, the respective holding companies of some of our top five customers during the Track Record Period, namely Customer A, Customer B and Customer C (as referred to in the section headed “Business – Our customers”), are among the top 10 property developers in Hong Kong based on their revenue derived from property development in 2017. We pride ourselves in our project management capability and our ability to strategically subcontract on-site labour intensive works to our subcontractors, while maintaining overall project management and implementation. We act as the project manager and principal coordinator for the works we are responsible for which encompasses planning, coordinating, monitoring and supervising the project from project implementation to completion as well as monitoring rectification of defects during the defects liability period.

The following table sets forth a breakdown of our revenue by business operations during the Track Record Period:

Fitting-out services Supply of fitting-out materials Total	FY2015/16 HK$’000 % 238,823 99.4 1,326 0.6 240,149 100.0	FY2016/17 HK$’000 % 346,099 99.9 292 0.1 346,391 100.0	FY2017/18 HK$’000 % 560,283 100.0 – – 560,283 100.0	FY2017/18 HK$’000 % 560,283 100.0 – – 560,283 100.0
				100.0

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SUMMARY

Fitting-out services

Our fitting-out projects are awarded through either competitive tenders or quotation invitations. We offer an array of fitting-out services such as ceiling, metal and glass works, as well as installation of built-in furniture, timber flooring, kitchen cabinetries and timber doors. The installation of timber flooring, kitchen cabinetries and timber doors under our fitting-out services portfolio are generally provided for new residential buildings. For FY2015/16, FY2016/17 and FY2017/18, revenue attributable to fitting-out services amounted to approximately HK$238.8 million, HK$346.1 million and HK$560.3 million, representing approximately 99.4%, 99.9% and 100.0% of our total revenue, respectively.

Supply of fitting-out materials

To a lesser extent, we also engage in supply of fitting-out materials upon customers’ requests in Hong Kong. Fitting-out materials supplied included timber products without the provision of corresponding fitting-out services. For FY2015/16, FY2016/17 and FY2017/18, revenue attributable to supply of fitting-out materials amounted to approximately HK$1.3 million, HK$0.3 million and nil, representing approximately 0.6%, 0.1% and nil of our total revenue, respectively.

Our customers

Our customers are from the private sector and mainly include (i) property developers; (ii) contractors; and (iii) property owners. Our services are provided on a project basis and we do not enter into long-term agreements with our customers. The following table sets forth a breakdown of our revenue by customer type during the Track Record Period:

Property developers_(Note 1) Contractors Property owners Others(Note 2)_ Total	FY2015/16 HK$’000 % 237,284 98.8 – – 1,539 0.6 1,326 0.6 240,149 100.0	FY2016/17 HK$’000 % 344,264 99.4 – – 1,835 0.5 292 0.1 346,391 100.0	FY2017/18 HK$’000 % 424,400 75.8 89,281 15.9 22,900 4.1 23,702 4.2 560,283 100.0	FY2017/18 HK$’000 % 424,400 75.8 89,281 15.9 22,900 4.1 23,702 4.2 560,283 100.0
				100.0

Note:

The category “Property developers” includes both property developers and their subsidiaries.
The category “Others” comprise transactions with Hoi Sing International which formerly engaged in retail trading of timber flooring and Customer I which engages in provision of residential care services for the elderly. For details, please refer to the section headed “Business – Our customers – Top customers” in this document.

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SUMMARY

For FY2015/16, FY2016/17 and FY2017/18, our largest customer accounted for 67.7%, 65.9% and 65.4% of our total revenue, respectively, while our five largest customers in aggregate accounted for 99.2%, 99.6% and 97.0% of our total revenue, respectively. Our Directors are of the view that based on the Ipsos Report, customer concentration within the fitting-out industry is not uncommon and that our business is sustainable despite our customer concentration during the Track Record Period due to the fact that: (i) a small number of projects can contribute to a substantial amount of our revenue; (ii) sizeable fitting-out projects are concentrated among the top 10 property development in Hong Kong; (iii) revenue concentration among our major customers was a result of careful selection of our projects from quality customers; and (iv) we have demonstrated a downward trend on reliance on our major customers.

During the course of our business, there may be occasions where our customers pay on our behalf for fitting-out materials used under our projects and subsequently deduct such payments when settling our project payments. Such arrangements are commonly known as “contra-charge arrangement” and the amounts involved are known as “contra-charge”. For FY2015/16, FY2016/17 and FY2017/18, our contra-charge incurred amounted to approximately HK$0.4 million, HK$1.1 million and HK$52.4 million, representing approximately 0.2%, 0.4% and 10.5% of our total direct costs for the same period, respectively.

For details of our customers, please refer to the section headed “Business – Our customers” in this document.

Sales and marketing and pricing strategy

We do not maintain a sales and marketing team. During the Track Record Period, we secured new businesses mainly through direct invitation for tendering by customers, which is considered by our Directors to be attributable to our proven track record and presence in the fitting-out industry. We adopt a cost-plus pricing model in order to determine our tender price. We take into account several factors such as (i) the cost; (ii) our overheads; (iii) the size of the project; (iv) our capacity; (v) our liquidity; (vi) our past working relationship with the potential customer; (vii) the reputation of the potential customer; and (viii) the financial strength and repayment record of the potential customer. We would then calculate the final cost estimation and price the bills of quantity.

For details of our pricing strategy, please refer to the section headed “Business – Our customers – pricing strategy” in this document.

Our suppliers

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SUMMARY

miscellaneous services such as rental of machinery and equipment (which mainly include scaffold for use at our fitting-out worksites), transportation services and consultancy services (which mainly include outsourced safety consultancy services). While our subcontractors may during the course of performing their services supply certain materials, our material suppliers do not provide any installation or technical services and only supply materials directly sourced by us. For FY2015/16, FY2016/17 and FY2017/18, the subcontracting charges incurred by us amounted to approximately HK$134.5 million, HK$203.1 million and HK$276.9 million, respectively. For FY2015/16, FY2016/17 and FY2017/18, our largest supplier accounted for 16.7%, 14.2% and 12.7% of our total purchases, respectively, while our five largest suppliers (including our subcontractors) in aggregate accounted for 55.1%, 60.3% and 43.5% of our total purchases, respectively.

For details of our suppliers, please refer to the section headed “Business – Our suppliers” in this document.

Licences and qualifications

As advised by our HK Legal Counsel, there is no particular licence required to be obtained by our Group before we commence provision of fitting-out services except for the relevant business registration. All the necessary licences required for fitting-out projects in which our Group is involved are to be obtained by the relevant property developer and main contractor. Nevertheless, Hoi Sing Decoration and Milieu are registered under the voluntary Subcontractor Registration Scheme of the Construction Industry Council. This is because based on our Directors’ experience, some of our customers prefer to engage or would only engage subcontractors who are registered under the Subcontractor Registration Scheme of the Construction Industry Council. For details of such registration, please refer to the section headed “Business – Licences and qualifications” in this document.

COMPETITIVE LANDSCAPE AND OUR COMPETITIVE STRENGTHS

According to the Ipsos Report, the top five fitting-out contractors (in terms of market share in the fitting-out industry in Hong Kong in 2017) in aggregate accounted for approximately 15.6% of the total market share. The total revenue of the fitting-out industry in Hong Kong in 2017 was approximately HK$28.5 billion, according to the Ipsos Report. The total revenue of our Group for FY2016/17 was HK$346.4 million. Based on these figures, it is estimated that our Group’s market share in the fitting-out industry in Hong Kong is approximately 1.2%.

For details of the respective background of the top five fitting-out contractors, please refer to the section headed “Industry overview – Competitive landscape and entry barriers” in this document.

We believe the competitive strengths which contribute to our historical success and future potential growth include: (i) our established reputation and proven track record in the fitting-out industry; (ii) our established long-term business relationships with leading property developers; and (iii) our strong management team with in-depth knowledge in the fitting-out industry.

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SUMMARY

For details of our competitive strengths, please refer to the section headed “Business – Competitive strengths’ in this document.

BUSINESS STRATEGIES

The strategies we aim to pursue to further strengthen our market position in the fitting-out industry in Hong Kong include: (i) strengthening our financial position and expanding our workforce in order to expand our market share through undertaking more sizeable fitting-out projects; (ii) continue to emphasise and maintain high standards of project planning, management and implementation; and (iii) adhere to prudent financial management to ensure sustainable growth and capital sufficiency.

For details of our business strategies, please refer to the section headed “Business – Business strategies and future plans” in this document.

RISK FACTORS

There are certain risks involved in our Group’s operations, many of which are beyond our Group’s control. Material risks we face include: (i) concentration of revenue among our top five customers; (ii) the non-recurring nature of our revenue; (iii) the payment practice applied to our projects which may result in a cash flow gap; (iv) the risk of estimating time and costs involved in our projects inaccurately; (v) the risk of our subcontractors underperforming or becoming unavailable; (vi) the risk of not receiving our progress payments on time and in full or retention money not being fully released to us after expiry of the defects liability period; (vii) our historical growth rate, revenue and profit margin may not be indicative of our future financial performance; (viii) our dependence on key management and additional technical and management staff for our success; (ix) the risk of our projects being delayed due to factors beyond our control; (x) the risk of not being able to implement our business strategies and future plans successfully; (xi) our exposure to disputes, claims or litigation; and (xii) the risk not having sufficient insurance coverage to cover all losses or potential claims we may be exposed to.

For details of the various risks and uncertainties we face, please refer to the section headed “Risk factors” in this document.

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SUMMARY

KEY OPERATIONAL AND FINANCIAL DATA

The following table sets forth our key operational and financial data during the Track Record Period:

(Expressed in HK$’000 except tender statistics and financial ratios) Results of operations Revenue_(Note 1) Gross profit Profit before income tax Profit for the year Financial position Non-current assets Current assets Non-current liabilities Current liabilities Net current assets(Note 2) Tender/quotations statistics Number of tenders/quotations submitted Number of successful tenders/quotations Success rate(Note 3) Key financial ratios Gross profit margin Net profit margin Return on equity Return on total assets Current ratio Trade receivables turnover days(Note 4) Trade payables turnover days(Note 5) Gearing ratio(Note 6)_	FY2015/16 or as at 31 March 2016 240,149 23,772 14,427 11,860 1,123 118,921 429 106,324 12,597 106 30 28.3% 9.9% 4.9% 89.2% 9.9% 1.1 29.2 101.6 181.3%	FY2016/17 or as at 31 March 2017 346,391 42,237 33,049 27,139 690 147,449 – 117,709 29,740 74 20 27.0% 12.2% 7.8% 89.2% 18.3% 1.3 26.1 88.0 101.3%	FY2017/18 or as at 31 March 2018 560,283 61,434 46,921 38,594
			262 160,345 – 91,583 68,762
			91 31 38.3%
			11.0% 6.9% 55.9% 24.0% 1.8 16.2 37.6 50.6%

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SUMMARY

(Expressed in HK$’000 except tender statistics and financial ratios) Cash flows Net cash from operating activities_(Note 7) Net cash used in investing activities Net cash (used in)/generated from financing activities(Note 8)_ Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year	FY2015/16 or as at 31 March 2016 20,234 – (13,611) 6,623 5,110 11,733	FY2016/17 or as at 31 March 2017 4,610 (2) 13,819 18,427 11,733 30,160	FY2017/18 or as at 31 March 2018 5,487 (6) (8,875) (3,394) 30,160 26,766

Notes:

The increase in our total revenue from FY2015/16 to FY2016/17 was attributable to (i) the increase in the number of relatively sizeable fitting-out services projects with revenue contribution of HK$1 million to below HK$50 million in FY2016/17; and (ii) the revenue contributed by some of our major fitting-out projects undertaken or commenced during FY2016/17. The increase in our total revenue for FY2016/17 to FY2017/18 was attributable to (i) the increase in the number of sizeable fitting-out services projects with revenue contribution of HK$50 million or above in FY2017/18; and (ii) the revenue contributed by some of our major fitting-out services projects undertaken or commenced during FY2017/18.
The increase in our net current assets was mainly due to the increase in our current assets as a result of our business growth and our profitable operation during the Track Record Period, with the combined effect of the decrease in our current liabilities.
In the above table, success rate for a financial year is calculated based on the number of contracts awarded (regardless of whether they were awarded in the same financial year or subsequently) in respect of the tenders/quotations submitted during that financial year. As at the Latest Practicable Date, 10 out of 91 tenders/quotations submitted in FY2017/18 had not expired and the results were pending. These tenders/quotations were excluded for the purpose of determining the success rate.
The credit period that we granted to customers generally ranged from 21 to 30 days. Fluctuation in our trade receivables turnover days during the Track Record Period was mainly due to the fluctuation of the amounts settled by different customers to us as at the respective reporting dates due to the different settlement practices of different customers as well as the different credit periods granted by us.
The decrease in trade payables turnover days during the Track Record Period was primarily because we expedited the process of settling our trade payables in order to enhance business relationship with various suppliers.

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

SUMMARY

Gearing ratio is calculated as total borrowings (including bank borrowings, finance lease liabilities and amount due to a director) divided by the total equity as at the respective reporting dates. The decrease in our gearing ratio during the Track Record Period was mainly due to repayment of amount due to a director and the increase in our total equity, despite the increasing amount of total bank borrowings.
For FY2015/16, we recorded profit before income tax of approximately HK$14.4 million and net cash from operating activities of approximately HK$20.2 million. The difference was mainly due to the amount and timing of receipts from our customers as well as the amount and timing of payments to our suppliers as at 31 March 2016. For FY2016/17, we recorded profit before income tax of approximately HK$33.0 million and net cash from operating activities of approximately HK$4.6 million. The difference was mainly due to (i) the cash advances by us to our Director (i.e. Mr. Man) for his personal use; and (ii) substantial net cash outflows for working capital needs due to major fitting-out projects undertaken or commenced during the year. For FY2017/18, we recorded profit before income tax of approximately HK$46.9 million and net cash from operating activities of approximately HK$5.5 million. The difference was mainly due to substantial net cash outflows for working capital needs due to major fitting-out projects undertaken or commenced during the year, as well as substantial cash outflow for tax payment during the year.
For FY2015/16, we recorded net cash used in financing activities of approximately HK$13.6 million, which was mainly attributable to the repayments of bank borrowings, partially offset by the proceeds from bank borrowings. For FY2016/17, we recorded net cash generated from financing activities of approximately HK$13.8 million, which was mainly attributable to the proceeds from bank borrowings, partially offset by the repayments of bank borrowings. For 2017/18, we recorded net cash used in financing activities of approximately HK$8.9 million, which was primarily due to the dividends paid and the repayments of bank borrowings, partially offset by the proceeds from bank borrowings.

SHAREHOLDER INFORMATION

Immediately following completion of the [REDACTED] and the [REDACTED] and taking no account any Shares that may be allotted and issued pursuant to the exercise of the [REDACTED] and any option that may be granted under the Share Option Scheme, Hoi Lang will hold [REDACTED] of our Shares in issue. The principal business of Hoi Lang is investment holding. On 4 June 2018, Mr. Man, Mrs. Man and Mr. Ho have entered into an acting in concert confirmation and undertaking, which they confirm and declare that, since 28 August 2014 the date on which Mr. Ho became a shareholder of Hoi Sing Decoration, (i) they have and shall continue to actively cooperate and communicate with each other, and have and shall continue to adopt a consensus building approach to reach decisions on a unanimous basis; (ii) they have and shall continue to vote as a group (by themselves and/or through companies controlled by them) in respect of all corporate matters relating to the financials and operations of the Group at the shareholder and board levels of each member company of the Group; and (iii) in relation to all corporate matters that require the decisions of them, they have been given and shall continue to give sufficient time and information to consider and discuss in order to reach consensus. Accordingly, Mr. Man, Mrs. Man, Mr. Ho and Hoi Lang are regarded as our Controlling Shareholders.

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

SUMMARY

STATISTICS OF THE [REDACTED]

	Based on an	Based on an
	[REDACTED] of	[REDACTED] of
	HK$[REDACTED]	HK$[REDACTED]
	HK$’000	HK$’000
Market capitalisation_(Note 1)_	[REDACTED] million	[REDACTED] million
Unaudited pro forma adjusted combined net tangible assets
per Share_(Note 2)_	[REDACTED]	[REDACTED]

Notes:

The calculation of the market capitalisation of our Shares is based on [REDACTED] Shares in issue immediately after completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares that may be allotted and issued upon the exercise of the [REDACTED] and any option which may be granted under the Share Option Scheme).
The unaudited pro forma adjusted consolidated net tangible assets per Share has been arrived at with reference to certain bases and assumptions. Please refer to Appendix II to this document for further details.

[REDACTED] EXPENSES

Our Directors estimate that the total amount of expenses in relation to the [REDACTED] is approximately HK$ [REDACTED] million. Out of the amount of approximately HK$ [REDACTED] million, approximately HK$ [REDACTED] million is directly attributable to the issue of the Shares and is expected to be accounted for as a deduction from equity upon [REDACTED] . The remaining amount of approximately HK$ [REDACTED] million, which cannot be so deducted, shall be charged to profit or loss. Of the approximately HK$ [REDACTED] million that shall be charged to profit or loss, nil, nil and approximately HK$ [REDACTED] million, has been charged for FY2015/16, FY2016/17 and FY2017/18 respectively, and approximately HK$ [REDACTED] million is expected to be incurred for FY2018/19. Expenses in relation to the [REDACTED] are non-recurring in nature. Our Group’s financial performance and results of operations for FY2018/19 will be adversely affected by the estimated expenses in relation to the [REDACTED] .

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

SUMMARY

FUTURE PLANS AND [REDACTED]

Our Directors believe that the [REDACTED] of our Shares on the Stock Exchange will facilitate the implementation of our strategies and will further strengthen our market position and market share in the fitting-out industry in Hong Kong. We estimate the [REDACTED] from the [REDACTED] which we will receive, assuming an [REDACTED] of HK$ [REDACTED] per [REDACTED] (being the mid-point of the [REDACTED] range), will be approximately HK$ [REDACTED] million, after deduction of [REDACTED] and estimated expenses payable by us in connection with the [REDACTED] and assuming the [REDACTED] is not exercised. We intend to apply the [REDACTED] of the [REDACTED] for the following purposes: (i) approximately [REDACTED] % of the [REDACTED] (approximately HK$ [REDACTED] million) for payment of upfront costs for new projects such as payment of subcontracting fees and costs of materials; (ii) approximately [REDACTED] % of the [REDACTED] (approximately HK$ [REDACTED] million) for obtaining performance bond; (iii) approximately [REDACTED] % of the [REDACTED] (approximately HK$ [REDACTED] million) for repaying our bank borrowings; (iv) approximately [REDACTED] % of the [REDACTED] (approximately HK$ [REDACTED] million) for expanding our workforce; and (v) approximately [REDACTED] % of the [REDACTED] (approximately HK$ [REDACTED] million) for general working capital of our Group.

For details of our future plans and [REDACTED] , please refer to the section headed “Future plans and [REDACTED] ” in this document.

LEGAL PROCEEDINGS AND CLAIMS

Save for two of our recorded work injury accidents which might give rise to potential employees’ compensation and/or personal injury claims, our Directors confirm that no member of our Group was engaged in any litigation, claim or arbitration of material importance and no litigation, claim or arbitration of material importance was known to our Directors to be pending or threatened against any member of our Group during the Track Record Period and up to the Latest Practicable Date.

For details, please refer to the section headed “Business – Legal proceedings and claims” in this document.

DIVIDEND

For FY2015/16, FY2016/17 and FY2017/18, we declared dividends of nil, HK$10.0 million and nil, respectively to our then shareholders. All such dividends had been fully paid and we financed the payment of such dividends by internal resources. The declaration and payment of future dividends will be subject to the decision of the Board having regard to various factors, including but not limited to our operation and financial performance, profitability, business development, prospects, capital requirements, and economic outlook. It is also subject to any applicable laws. The historical dividend payments may not be indicative of future dividend trends. We do not have any predetermined dividend payout ratio.

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SUMMARY

RECENT DEVELOPMENT

As at the Latest Practicable Date, we had a total of 29 projects on hand (which represent projects that have commenced but not completed and projects that have been awarded to us but works have not yet been commenced) among which 21 were major projects with total contract sum exceeding HK$10.0 million each and 8 were projects with total contract sum less than HK$10.0 million each. The aggregate total contract sum of these 8 projects each with total contract sum less than HK$10.0 million was approximately HK$34.7 million. The following table sets forth the details of our major projects on hand with total contract sum exceeding HK$10.0 million each as at the Latest Practicable Date (in descending order by contract sum):

						Total	Revenue recognised	Revenue recognised
					Expected project	contract	during the Track Record Period
Project	Customer		Location	Type of project	duration (Note 1)	sum (Note 2)	FY2015/16	FY2016/17	FY2017/18
						(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
1	Customer	A	Nam Cheong	Fitting-out services for	June 2016 to	190,005	–	22,587	130,086
				a residential	December 2018
				development project
2	Customer	A	Nam Cheong	Fitting-out services for	June 2016 to	179,261	–	22,587	122,730
				a residential	December 2018
				development project
3	Customer	A	Nam Cheong	Fitting-out services for	December 2017 to	177,033	–	–	–
				a residential	December 2019
				development project
4	Customer	H	Kau To Shan	Fitting-out services for	May 2017 to	140,300	–	–	83,202
				a residential	March 2019
				development project
5	Customer	A	Nam Cheong	Fitting-out services for	October 2015 to	63,097	3,468	10,366	35,684
				a residential	December 2018
				development project
6	Customer	B	Tsim Sha Tsui	Fitting-out services for	May 2018 to	55,103	–	–	–
				a shopping mall	November 2019
7	Customer	A	Ma On Shan	Fitting-out services for	July 2017 to	44,060	–	–	4,311
				a residential	March 2019
				development project
8	Customer	A	Nam Cheong	Fitting-out services for	July 2017 to	37,984	–	–	–
				a residential	December 2019
				development project
9	Customer	A	Yuen Long	Fitting-out services for	February 2016 to	30,727	–	26,434	3,808
				a residential	August 2018
				development project
10	Customer	B	North Point	Fitting-out services for	August 2016 to	26,991	–	7,167	15,567
				a residential	December 2018
				development project
11	Customer	C	Fanling	Fitting-out services for	September 2017 to	26,981	–	–	2,114
				a residential	March 2019
				development project

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

SUMMARY

						Total	Revenue recognised	Revenue recognised
				Expected project	contract		during the Track Record Period
Project	Customer	Location	Type of project	duration (Note 1)	sum	(Note 2)	FY2015/16	FY2016/17	FY2017/18
					(HK$’000)		(HK$’000)	(HK$’000)	(HK$’000)
12	Customer B	Tai Wai	Fitting-out services for	February 2018 to	26,718		–	–	–
			a residential	June 2019
			development project
13	Customer A	Ma On Shan	Fitting-out services for	September 2017 to	24,357		–	–	2,383
			a residential	March 2019
			development project
14	Customer A	Sai Wan	Fitting-out services for	April 2016 to	23,503		–	14,203	7,429
			a residential	June 2018
			development project
15	Customer A	Tung Chung	Fitting-out services for	August 2014 to	18,132		5,827	11,039	492
			a residential	March 2019
			development project
16	Customer B	Ma On Shan	Fitting-out services for	October 2014 to	16,815		10,801	3,194	55
			a residential	August 2018
			development project
17	Customer A	Tuen Mun	Fitting-out services for	July 2017 to	16,043		–	–	10,476
			a residential	October 2018
			development project
18	Non top five	Lei Yue Mun	Fitting-out services for	May 2018 to	15,800		–	–	–
	customer		a residential	February 2019
			development project
19	Customer C	Ma On Shan	Fitting-out services for	April 2015 to	13,622		8,606	3,355	86
			a residential	August 2018
			development project
20	Customer A	Yuen Long	Fitting-out services for	September 2016 to	11,568		–	2,880	5,811
			a residential	March 2019
			development project
21	Customer C	Fanling	Fitting-out services for	October 2018 to	10,736		–	–	–
			a residential	March 2019
			development project

Notes:

The project start date is determined based on the date of the letter of award or contract or first invoice to customer or our Directors’ estimation and the project completion date is determined based on our Directors’ estimation and may be subject to change taking into account the actual work schedule and variation orders (if any) as at the Latest Practicable Date.
The total contract sum represents the original estimated contract sum stated in the contract taking into account subsequent adjustments due to variation orders.

Our Directors confirm that, save for the expenses in connection with the [REDACTED] , up to the date of this document, there has been no material adverse change in our financial or trading position or prospects since 31 March 2018, and there had been no events since 31 March 2018 which would materially affect the information shown in our combined financial statements included in the accountants’ report set out in Appendix I to this document.

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

DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

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

“Application Form(s)” WHITE Application Form(s) and YELLOW Application Form(s), or where the context so requires, any of them, relating to the [REDACTED]
“Articles” or “Articles of the amended and restated articles of association of our Association” Company adopted on [•], a summary of which is set out in Appendix III to this document, and as amended from time to time
“associate(s)” has the meaning ascribed thereto it under the Listing Rules
“Board” or “Board of Directors” the board of Directors of our Company
“Building Authority” has the meaning ascribed thereto under the Buildings Ordinance and, as at the Latest Practicable Date, means the Director of Buildings of the Government
“Buildings Ordinance” the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong), as amended, modified and supplemented from time to time
“business day” any day (other than a Saturday, and Sunday or public holidays in Hong Kong) on which banks in Hong Kong are generally open for normal banking business
“BVI” the British Virgin Islands
“CAGR” compounded annual growth rate

[REDACTED]

“Cayman Companies Law” or The Companies Law, Cap 22 (Law 3 of 1961, as “Companies Law” consolidated and revised) of the Cayman Islands
“CCASS” the Central Clearing and Settlement System established and operated by HKSCC

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DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

“CCASS Clearing Participant”

a person permitted to participate in CCASS as a direct clearing participant or general clearing participant

“CCASS Custodian Participant”

a person permitted 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 Participants”

a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant

“Chun Shing Development”

Chun Shing Development Co., Limited (晉勝發展有限公司), a limited liability company incorporated in Hong Kong on 29 January 2015 and is an indirectly wholly-owned subsidiary of our Company

“close associate(s)”
has the meaning ascribed to it under the Listing Rules
“Companies Ordinance”
the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, modified and supplemented from time to time
“Companies (WUMP) Ordinance” the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, modified and supplemented from time to time
“Company” or “our Company” Yield Go Holdings Ltd. (耀高控股有限公司), a company incorporated in the Cayman Islands as an exempted company with limited liability on 9 May 2018
“connected person(s)”
has the meaning ascribed to it under the Listing Rules
“connected transaction(s)”
has the meaning ascribed to it under the Listing Rules
“Construction Industry Council”
the Construction Industry Council, a body corporate established under the Construction Industry Council Ordinance (Chapter 587 of the Laws of Hong Kong)
“Controlling Shareholder(s)”
has the meaning ascribed to it under the Listing Rules and unless the context otherwise requires, means Mr. Man, Mrs. Man, Mr. Ho and Hoi Lang

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DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

“core connected person(s)”

has the meaning ascribed to it under the Listing Rules

“Corporate Governance Code”

the Corporate Governance Code as set out in Appendix 14 to the Listing Rules

“Deed of Indemnity”

the deed of indemnity dated [•] 2018 given by our Controlling Shareholders in favour of our Company (for itself and as trustee for its subsidiaries) regarding certain indemnities, details of which are set out in the paragraph headed “Statutory and general information – E. Other information – 1. Tax and other indemnities” in Appendix IV to this document

“Deed of Non-Competition”

the deed of non-competition dated [•] given by our Controlling Shareholders and our executive Directors in favour of our Company (for itself and as trustee for its subsidiaries) regarding certain non-competition undertakings, details of which are set out in the section headed “Relationship with our Controlling Shareholders” in this document

“DEVB”

the Development Bureau of the HKSAR

“Director(s)” or “our Director(s)” the director(s) of our Company

“Employees’ Compensation Employees’ Compensation Ordinance (Chapter 282 of the Ordinance” Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time “FY2015/16” the financial year ended 31 March 2016 “FY2016/17” the financial year ended 31 March 2017 “FY2017/18” the financial year ended 31 March 2018 “FY2018/19” the financial year ending 31 March 2019 “Government” the government of Hong Kong “Great Gold Development” Great Gold Development Limited (金浩發展有限公司), a limited liability company incorporated in Hong Kong on 12 May 2004 and is currently wholly-owned by an independent third party

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DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

Great Gold Huizhou

“Group”, “our Group”, “we, “us” or “our”
Great Gold Wujin Furniture (Huizhou) Company Limited* (金浩五金家私制品(惠州)有限公司), a limited liability company established in the PRC on 18 June 2007 and is wholly-owned by Great Gold Development our Company and our subsidiaries at the relevant time or, where the context otherwise requires, in respect of the period prior to our Company becoming the holding company of our present subsidiaries, our present subsidiaries and the businesses operated by such subsidiaries (as the case may be)
“Haicheng Huizhou”

Haicheng Wujin Furniture (Huizhou) Company Limited* (海城五金家私制品(惠州)有限公司), a limited liability company established in the PRC on 15 December 2009 and is wholly-owned by Great Gold Development

Haicheng Sichuan Haicheng (Sichuan) Decoration Engineering Company Limited* (海城(四川)裝飾工程有限公司), a limited liability company established in the PRC on 28 January 2008 and is wholly-owned by Great Gold Development
“HKD” or “HK$” and “cents”
Hong Kong dollars and cents respectively, the lawful currency of Hong Kong
“HKFRSs”
Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants
“HK Legal Counsel”
Mr. Chan Chung, barrister-at-law, legal counsel to our Company as to Hong Kong law
“Hoi Lang”
Hoi Lang Holdings Ltd. (凱朗控股有限公司), a limited liability company incorporated in the BVI on 8 May 2018 and is owned by Mr. Man, Mrs. Man and Mr. Ho as to 50%, 30% and 20%, respectively
“Hoi Sing Construction”
Hoi Sing Construction (H.K.) Limited (海城建築(香港)有限公司), a limited liability company incorporated in Hong Kong on 21 February 2001 and is an indirectly wholly-owned subsidiary of our Company

“Hoi Sing Decoration” Hoi Sing Decoration Engineering Company Limited (海城裝飾工程有限公司), a limited liability company incorporated in Hong Kong on 21 September 1995 and is an indirectly wholly-owned subsidiary of our Company

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DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

“Hoi Sing Holdings”

Hoi Sing Holdings (HK) Limited (海城集團(香港)有限公司), a limited liability company incorporated in Hong Kong on 29 January 2007 and is owned by Mr. Man and Mrs. Man as to 50% and 50%, respectively

“Hoi Sing International”

Hoi Sing International (HK) Limited (海城國際(香港)有限公司), a limited liability company incorporated in Hong Kong on 25 March 2014 and is wholly-owned by Mr. Man Hoi Wang, Michael, the son of Mr. Man and Mrs. Man

“HKSCC”

Hong Kong Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited

“HKSCC Nominees”

HKSCC Nominees Limited

“Hong Kong”, “HKSAR” or “HK” the Hong Kong Special Administrative Region of the PRC

[REDACTED]

“independent third party(ies)”
a person or entity who is not a connected person of our Company under the Listing Rules
“Ipsos”
Ipsos Limited, an independent market research agency
“Ipsos Report”
a market research report commissioned by us and prepared by Ipsos on the overview of the industry in which our Group operates
“Latest Practicable Date”
4 June 2018, being the latest practicable date prior to the printing of this document for the purpose of ascertaining certain information in this document prior to its publication
“Link Shing”
Link Shing Holdings Ltd. (領成控股有限公司), a limited liability company incorporated in the BVI on 11 May 2018 and is a wholly-owned subsidiary of our Company

[REDACTED]

“Listing Committee”

the Listing sub-committee of the board of director of the Stock Exchange

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DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

[REDACTED]

“Listing Rules”
The Rules Governing the Listing of Securities on the Stock Exchange, as amended, modified and supplemented from time to time
“Main Board” the Main Board of the Stock Exchange
“Memorandum of Association” or “Memorandum”
the amended and restated memorandum of association of our Company, conditionally adopted on [•] which will become effective upon [REDACTED] , a summary of which is set forth in Appendix III to this document, and as amended from time to time
“Milieu”
“Mr. Ho”
“Mr. Man”
Milieu Wooden Company Limited (美耐雅木業製品有限公司), a limited liability company incorporated in Hong Kong on 16 December 2010 and is a indirectly wholly-owned subsidiary of our Company Mr. Ho Chi Hong (何志康), an executive Director, our chief executive officer and one of the Controlling Shareholders Mr. Man Hoi Yuen (文海源), an executive Director, the chairman of our Board, one of the Controlling Shareholders and spouse of Mrs. Man
“Mrs. Man”
Ms. Ng Yuen Chun (吳婉珍), an executive Director, one of the Controlling Shareholders and spouse of Mr. Man

[REDACTED]

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DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

[REDACTED]

“PRC” or “China”

the People’s Republic of China, and for the purpose of this document, excludes Hong Kong, Macau and Taiwan

[REDACTED]

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DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

“private sector”

a sector within the construction industry in which the project owner of the construction projects is not the Government nor a statutory body

[REDACTED]

“public sector” a sector within the construction industry in which the project owner of the construction projects is the Government or a statutory body “Regulation S” Regulation S under the U.S. Securities Act “Reorganisation” the corporate reorganisation of our Group in preparation for the [REDACTED] as described in the section headed “History, development and reorganisation” in this document

“Repurchase Mandate” the general unconditional mandate to repurchase Shares given to our Directors by our Shareholder, further details of which are contained in the paragraphs headed “A. Further information about our Company – 3. Written resolutions of our sole Shareholder passed on [•]” in Appendix IV to this document

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DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

“SFC”

the Securities and Futures Commission of Hong Kong

“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) with nominal value of HK$0.01 each in the share capital of our Company

“Shareholder(s)”

holder(s) of the Share(s)

[REDACTED]

“Share Option Scheme” the share option scheme conditionally adopted by the written resolutions of our sole shareholder passed on [•] 2018, the principal terms of which are summarised in the paragraph headed “Statutory and general information – D. Share Option Scheme” in Appendix IV to this document
“Sole Sponsor”

Grande Capital Limited, the sole sponsor for the [REDACTED] and a licensed corporation to engage in type 6 (advising on corporate finance) regulated activity under the SFO

“sq.ft.”

square foot

“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“subcontractor”

in respect of a construction project, a contractor who is appointed by the main contractor or by another subcontractor involved in the construction and who generally carries out specific work tasks of the construction

“subsidiary(ies)” has the meaning ascribed to it under the Listing Rules
“Substantial Shareholder(s)” has the meaning ascribed to it under the Listing Rules and details of our Substantial Shareholders are set out in the section headed “Substantial Shareholders” in this document

“Takeovers Code” The Codes on Takeovers and Mergers and Share Buy-backs, as amended, supplemented or otherwise modified from time to time

“Track Record Period” FY2015/16, FY2016/17 and FY2017/18

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DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

[REDACTED]

“United States” or “U.S.”

the United States of America

“U.S. Securities Act”

United States Securities Act of 1933, as amended, modified and supplemented from time to time

“US$”

United States dollars, the lawful currency of the United States of America

“variation order(s)”

an order placed by customer during the course of project execution concerning variation to part of the works that is necessary for the completion of the project, which may include (i) additions, omissions, substitutions, alterations, and/or changes in the quality, form, character, kind, position, dimension or other aspect of the works; (ii) changes to any sequence, method or timing of construction specified in the main contract; and (iii) changes to the site or entrance to and exit from the site

[REDACTED]

“%” per cent

The English names of the PRC entities mentioned in this document which are marked with “*” are translation or transliteration from their Chinese names and are for identification purposes only. If there is any inconsistency, the Chinese names shall prevail.

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

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. In some cases the words such as “aim”, “anticipate”, “believe”, “estimate”, “expect”, “going forward”, “intend”, “may”, “plan”, “potential”, “predict”, “propose”, “seek”, “should”, “will”, “would” and other similar expressions are used to identify forward-looking statements. These forward-looking statements include, without limitation, statements relating to:

our Group’s business and operating strategies and plans of operation;
the amount and nature of, and potential for, future development of our Group’s business;
our Company’s dividend distribution plans;
the regulatory environment as well as the general industry outlook for the industry in which our Group operates;
future developments in the industry in which our Group operates; and
the trend of the economy of Hong Kong and the world in general.

These statements are based on various assumptions, including those regarding our Group’s present and future business strategy and the environment in which our Group will operate in the future.

Our Group’s future results could differ materially from those expressed or implied by such forward-looking statements. In addition, our Group’s future performance may be affected by various factors including, without limitation, those discussed in the sections headed “Risk factors” and “Financial information” of this document.

Should one or more risks or uncertainties stated in the aforesaid sections materialise, or should any underlying assumptions prove to be incorrect, actual outcomes may vary materially from those indicated. Prospective investors should therefore not place undue reliance on any of the forward-looking statements. All forward-looking statements contained in this document are qualified by reference to the cautionary statements as set out in this section.

In this document, statements of, or references to, our Group’s intentions or those of any of our Directors are made as at the date of this document. Any such intentions may change in light of future developments.

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

RISK FACTORS

Potential investors should carefully consider all of the information set out in this document and, in particular, should consider the following risks and special consideration associated with an investment in our Company before making any investment decision in relation to the [REDACTED] . If any of the possible events as described below materialises, our Group’s business, financial position and prospects could be materially and adversely affected and the trading prices of the Shares could decline due to any of these risks, and you may lose all or part of your investment.

RISKS RELATING TO OUR BUSINESS

Our top five customers accounted for a major portion of our revenue and any significant decrease in the number of projects with our major customers may materially and adversely affect our financial performance

Our top five customers accounted for 99.2%, 99.6% and 97.0% of our revenue for FY2015/16, FY2016/17 and FY2017/18, respectively, among which 67.7%, 65.9% and 65.4% of our total revenue were attributable to our largest customer for the same period. We do not enter into any long-term agreements with our customers as contracts are awarded to us on a project basis either through a tender process or a quotation invitation.

We cannot assure you that we will be able to retain our major customers in the future. Our results of operations, profitability and liquidity may be materially and adversely affected if we are unable to secure new projects from our major customers or fail to procure similar level of business from new customers on comparable commercial terms to offset the loss of revenue from our major customers.

In addition, our business, financial condition and results of operations also depend on the financial condition and commercial success of our major customers. If any of our top five customers shall become unwilling or unable to make payments, we may be unable to recover significant amounts of trade receivables and our cash flow and financial position may be materially and adversely affected.

Our revenue is mainly derived from projects which are non-recurring in nature and there is no guarantee that our customers will provide us with new businesses

Our revenue is typically derived from projects which are non-recurring in nature and our customers are under no obligation to award projects to us. During the Track Record Period, we secured new businesses mainly through direct invitation for quotation or tender by customers. We cannot assure you that (i) we will be invited to provide quotations or participate in the tendering process for new projects; and (ii) our submitted quotations and tenders will be selected by customers. Accordingly, the number and scale of projects and the amount of revenue we are able to derive therefrom may vary significantly from period to period, and it may be difficult to forecast the volume of future business.

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

RISK FACTORS

For FY2015/16, FY2016/17 and FY2017/18, we recorded a tender/quotation success rate of approximately 28.3%, 27.0%, 38.3%, respectively. Our Directors consider that our tender/quotation success rate depends on a range of factors, which primarily include our tender/quotation price and our track records. We cannot assure you that we can achieve the same or higher tender/quotation success rate in the future as we did in the past. In the event that we fail to secure new contracts or there is a significant decrease in the number of tender/quotation invitations or contracts available for bidding in the future, our business, financial position and prospects may materially and adversely affected.

We face liquidity risk in relation to working capital requirements associated with undertaking contract works and possible failure by customers to make timely or full payments

When undertaking contract works, our Group may incur net cash outflows at the early stage of carrying out our works when we are required to pay the initial expenditures (such as purchase of materials) and/or our subcontractors prior to payment received from our customers. Our customers will pay progress payments after our works commence and after such works and payments have been confirmed and certified by our customers. Therefore, there are often time lags between making payments to our suppliers and receiving payments from our customers, resulting in possible liquidity risk. If we choose to pay our suppliers only after receiving payments from our customers, we will risk our reputation in being able to make payments on a timely manner, which could harm our ability to engage capable and quality suppliers for our business in the future. On the other hand, after we apply for payment from our customers, there is generally an examination process on works completed and we cannot guarantee that our customers will pay in a timely manner or pay the full amount invoiced by us.

If we fail to properly manage our liquidity position in view of such working capital requirements associated with undertaking contract works, our cash flows and financial position could be materially and adversely affected.

We determine our quotation or tender price based on the estimated time and costs involved in a project and any material inaccurate estimation or cost overrun may adversely affect our financial results

When determining our quotation or tender price, our management would estimate the time and costs involved in a project. We cannot assure you that the actual amount of time and costs during the performance of our projects will not exceed our estimation. The actual amount of time and costs incurred in completing a project may be adversely affected by many factors, including unforeseen site conditions, adverse weather conditions, accidents, non-performance by our subcontractors, unexpected significant increase in costs of construction materials agreed to be borne by us, and other unforeseen problems and circumstances.

Any material inaccurate estimation in the time and costs involved in a project may give rise to delays in completion of works and/or cost overruns, which in turn may materially and adversely affect our financial condition, profitability and liquidity.

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

RISK FACTORS

Underperformance or unavailability of our subcontractors may materially and adversely affect our operation and profitability

We have in the past relied on and expect to continue to rely on our subcontractors to complete a substantial part of our projects. For FY2015/16, FY2016/17 and FY2017/18, our subcontracting fees amounted to HK$134.5 million, HK$203.1 million and HK$276.9 million, respectively. We maintain an internal list of approved subcontractors, which is updated on an ongoing basis. Changes in our subcontracting fees may be resulted from changes in labour costs and materials or project-specific requirements. Therefore, we may suffer from cost overrun or even losses in the relevant projects if the subcontracting fees we need to pay exceed our initial estimation due to project delays.

Moreover, we cannot assure you that the quality of works completed by our subcontractors can always meet our customers’ requirements. We rely on the due and timely performance of our subcontractors for timely delivery of our works. If our subcontractors’ performance are not up to standard, we may not be able to rectify the substandard works or engage another subcontractor in time or at all. We may also not be able to replace materials of inferior quality procured by our subcontractors in time or at all or unless at extra costs. Any material non-performance, delayed performance or substandard performance of our subcontractors could result in deterioration of our service quality or unexpected delays in our scheduled completion time or even our ability to complete our projects, which could in turn damage our reputation, and potentially expose us to liability under the main contracts with our customers.

In addition, we cannot assure you that we can secure suitable subcontractors when required or obtain acceptable fees and terms of service with our subcontractors, as these may be affected by factors beyond our control, such as the number of available or on-going projects in the market or pricing policy and business strategies of our subcontractors. In such event, our operation and profitability may be adversely affected.

If we are unable to receive progress payments on time and in full, or that retention money is not fully released to us after expiry of the defects liability period, our liquidity and financial position may be materially and adversely affected

We generally receive monthly progress payments from our customers according to the work done or service rendered. Such monthly progress payments are assessed and agreed to by our customers before we issue an invoice to them. For further details of the key payment terms of our projects, please refer to the section headed “Business – Our customers – Principal terms of engagement with our customers” in this document.

Some of our fitting-out contracts provide that our customers shall be entitled to retain up to 10% of each progress payment, in aggregate subject to a maximum retention of 5% of the total contract sum as retention money. As at 31 March 2016, 2017 and 2018, our retention receivable amounted to HK$2.9 million, HK$8.9 million and HK$4.8 million, respectively.

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

RISK FACTORS

We cannot assure you that the financial position of our customers will remain solvent or that our customers will settle our progress payments or release the retention money on time in full or at all in the future. If we are unable to receive our progress payments and retention money, our liquidity and financial position may be materially and adversely affected.

Our historical growth rate, revenue and profit margin may not be indicative of our future financial performance

For FY2015/16, FY2016/17 and FY2017/18, our revenue amounted to HK$240.1 million, HK$346.4 million and HK$560.3 million, respectively. For the same period, our net profit amounted to HK$11.9 million, HK$27.1 million and HK$38.6 million while our gross profit amounted to HK$23.8 million, HK$42.2 million and HK$61.4 million, respectively, whereas our gross profit margin was 9.9%, 12.2% and 11.0%, respectively. For a detailed discussion of our results of operation, please refer to the section headed “Financial information”.

There is an inherent risk in using our historical financial information to project our future financial performance, as they do not have any positive implication or may only reflect on our past performance under certain conditions. Our future performance will depend on, among others, our ability to secure new contracts, control our costs, market conditions in Hong Kong, and competition among contractors. All these may reduce the number of projects awarded to us and/or limit profit margin of our projects.

In addition, our profit margin may also fluctuate from period to period due to factors such as (i) our ability to accurately estimate our costs when submitting a tender; (ii) the complexity and size of the project; (iii) subcontracting fees; and (iv) our pricing strategy. We cannot assure you that our profit margin will remain stable in the future and that we can maintain our current level of performance.

Our success depends significantly on our key management and our ability to attract and retain additional technical and management staff

Our success and growth depend to a large extent on our ability to retain the services of our key management personnel. Our Directors believe that our key management personnel possess the relevant knowledge, experience and skills, especially in their familiarity with our business, relationship with our customers and expertise and therefore is essential to us in carrying out our business and future plans.

The expertise of our project management staff is crucial in improving our overall project management and implementation in a cost-effective manner so as to improve our profit margin. Our success and growth also depends on our ability to identify, hire, train and retain suitable skilled and qualified employees. We cannot assure you that we will be able to attract and retain our key management personnel or project management staff. If we fail to retain capable and experienced employees or find suitable replacements in a timely manner, our business, financial condition and results of operation may be materially and adversely affected.

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

RISK FACTORS

Project delays may materially affect our reputation and financial position

Our projects are subject to specific completion schedule requirements with liquidated damages levied against us if we fail to meet the schedule. Liquidated damages are typically levied at an agreed rate of the contract sum for each day of delay, in which the delay is caused by us. The actual time to complete a project may be adversely affected by various factors which are beyond our control, including typhoon and other natural disasters, shortage of materials and labour, additional variations to the original project plan as a result of additional requests from our customers or technical needs, disputes with our subcontractors, accidents and other unforeseen problems or circumstances. We cannot assure you that the time extension, if granted by our customers, will be sufficient for the actual work to be carried out. We had not been required to pay any material liquidated damages in our projects undertaken during the Track Record Period and up to the Latest Practicable Date. We cannot assure you that we will not be charged with any liquidated damages in the future. Any failure to meet the time requirements in our contracts could lead to significant liquidated damages payable by us, which may materially and adversely affect our reputation and financial position.

We may not be able to implement our business strategies and future plans successfully

Whether we can successfully implement our business strategies and future plans as described in the section headed “Future plans and [REDACTED] ” in this document are based on current estimates and assumptions and depend on a number of factors including the availability of funds, market competition and our ability to retain and recruit competent employees. Some of the factors are beyond our control and by nature, are subject to uncertainty, such as general market conditions in Hong Kong and changes in government policy or regulatory regime of the fitting-out industry in Hong Kong. We cannot assure you that we can implement our business strategies and future plans successfully. If we fail to do so, our profitability and prospects may be materially and adversely affected.

We are exposed to disputes, claims or litigation

As a fitting-out contractor, we are subject to claims in respect of various matters from our customers, suppliers, subcontractors, workers and other parties concerned with our projects from time to time. Such claims may include claims for compensation due to late completion of works or delivery of substandard works, disputes relating to late or insufficient payment and claims in respect of personal injuries and labour compensation in relation to the works. In addition, we may, from time to time, face prosecutions relating to labour safety offences arising from our or our subcontractors’ failure to comply with relevant work safety legislation or other health or environmental offences. Any of such claims may cause us to incur material costs or losses hence materially and adversely affect our business, financial condition and results of operations. Further, the outcome of a claim is subject to relevant parties’ negotiation, decision of the court or relevant arbitration organisation and it can be unfavourable to us. Should such claims fall outside of the scope and/or limit of our insurance coverage or retention moneys retained from our subcontractors, our financial position and results of operation may be materially and adversely affected.

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

RISK FACTORS

Our insurance coverage may not be sufficient to cover all losses or potential claims that we may be exposed to in the future

We are generally protected by both the contractor’s all risks and third party liability insurance and employees’ compensation insurance which, depending on the terms of the relevant contracts, are taken out either by the project owners or their main contractors. We cannot assure you that the current level of insurance we maintain is sufficient to cover all potential risks and losses that we may be potentially exposed to. Should any significant property damage or personal injury occur in our worksites due to accidents, natural disasters, or similar events which are not wholly or sufficiently covered by insurance, our business may be materially and adversely affected, potentially leading to a loss of assets, lawsuits, employee compensation obligations, or other form of economic loss. In the event that we incur unexpected losses or losses that far exceed the policy limits, our business, financial position, results of operation and prospects may be materially and adversely affected.

RISKS RELATING TO OUR INDUSTRY

Our industry is fragmented and competitive

According to the Ipsos Report, the fitting-out industry in Hong Kong is fragmented and competitive and there are no particular licensing requirements for carrying out fitting-out works in the private sectors. According to the Construction Industry Council, as of 1 April 2018, there were 680 companies registered as subcontractor under the category of renovation and fitting-out with the Construction Industry Council. Some of our competitors may have more resources, longer operating histories, stronger relationship with customers and reputable brand names and therefore we may face competition from other existing and/or new contractors in the tender process for fitting-out projects. Due to the large number of competitors, we may face significant downward pricing pressure thereby reducing our profit margins. We cannot assure you that our profit margin will not decline as a result of the price pressure. If we cannot adapt effectively to market conditions and customer preferences or otherwise fail to provide a competitive bid as compared to our competitors, our services may not be attractive to customers and our business may be materially and adversely affected. Our competitors may also adopt aggressive pricing policies or develop relationships with our customers in a manner that could significantly harm our ability to secure contracts. If we fail to maintain our competitiveness in the future, our business, financial condition and results of operation may be materially and adversely affected.

Escalating labour costs and an aging labour force may materially and adversely affect our profit margin

According to the Ipsos Report, similar to the construction industry in Hong Kong, fitting-out contractors also face the problem of increasing construction costs due to the inflation of labour costs. The average daily wages of workers in the fitting-out industry in Hong Kong increased by 36.7% between 2013 and 2017, reaching HK$1,285.0 per day in 2017. The significant increase in labour costs may result in an increase in subcontracting fees, thereby reducing our profit margin.

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

RISK FACTORS

In addition, according to the Ipsos Report, an aging labour force may threaten the development of the fitting-out industry. According to the Construction Industry Council, as of 31 March 2018, nearly 43.1% of 466,737 registered workers in Hong Kong were aged 50 or above. This implies potential labour shortage problems in the future, which may further escalate labour costs in the industry. Our subcontractors may pass on the increase in their labour costs to us by increasing their subcontracting fees. In the event labour costs continue to increase and we fail to pass on the increased costs to our customers, our profitability may be materially and adversely affected.

Personal injuries, property damages or fatal accidents may occur at work sites

Notwithstanding our occupational health and safety measures that are required to be followed by employees of our Group and our subcontractors, accidents leading to personal injuries, property damages and/or fatal accidents remain an inherent risk at work sites. There is no assurance that there will not be any violation of our safety measures or other related rules and regulations by the employees of our Group or our subcontractors. Any such violation may lead to higher probability of occurrences, and/or increased seriousness, of personal injuries, property damages and/or fatal accidents at work sites, which may materially and adversely affect our business operations as well as our financial position to the extent not covered by insurance policies.

In addition, any personal injuries and/or fatal accidents to the employees of our Group and our subcontractors may lead to claims or other legal proceedings against our Group. Any such claims or legal proceedings could adversely and materially affect our financial position to the extent not covered by insurance policies. Also, notwithstanding the merits of any such claims or legal proceedings, we need to divert management resources and incur extra costs to handle these matters. Any such claims or legal proceedings could therefore have a material and adverse impact on our business operations.

Any future changes in existing laws, regulations and Government policies, including but not limited to the introduction of more stringent laws and regulations on licensing, environment protection, labour safety, etc. may cause us to incur substantial additional expenditure

Many aspects of our business operation are governed by various laws and regulations and Government policies. There is no assurance that we will be able to respond to any such changes in a timely manner. Such changes may also increase our costs and burden in complying with them, which may materially and adversely affect our business, financial condition and results of operation. If there are any changes to and/or imposition of the requirements for qualification in the fitting-out industry in relation to environment protection and labour safety, and we fail to meet the new requirements in a timely manner or at all, our business operation will be materially and adversely affected.

RISKS RELATING TO CONDUCTING BUSINESS IN HONG KONG

Conducting business in Hong Kong involve certain political risks

Hong Kong is a special administrative region of the PRC and enjoys a high level of autonomy under the principle of “one country, two systems”. However, we cannot assure you that the implementation of the “one country, two systems” principle and the level of autonomy

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RISK FACTORS

as currently in place will be maintained in the future. Any change of such political arrangements may have an impact on the economy in Hong Kong, thereby directly affecting our Hong Kong operation. Our business, financial condition and results of operation may as a result be materially and adversely affected.

Our financial performance may be adversely affected by any downturn in the Hong Kong market

During the Track Record Period, our revenue was solely derived from our operation in Hong Kong. We specialise in providing fitting-out services to residential properties in the private sector in Hong Kong. To a lesser extent, we also engage in supply of fitting-out materials such as timber products upon customers’ requests in Hong Kong. Any unforeseen circumstances, such as natural disasters, economic recession, outbreak of an epidemic and any other incidents in Hong Kong may hinder the economic growth in Hong Kong, thereby materially and adversely affecting our business, financial condition and results of operation.

RISKS RELATING TO THE [REDACTED] AND OUR SHARES

There has not been any prior public market for our Shares and an active trading market may not develop

An active trading market for our Shares may not develop and the trading price of our Shares may fluctuate significantly. Prior to the [REDACTED] , there has been no public market for our Shares. The [REDACTED] was the result of negotiation between our Company and the [REDACTED] (for itself and on behalf of the [REDACTED] ), and the [REDACTED] may not be indicative of the price at which our Shares will be traded following completion of the [REDACTED] . In addition, we cannot assure you that an active trading market for our Shares will develop, or, if it does develop, that it will be sustained following completion of the [REDACTED] , or that the trading price of our Shares will not fall below the [REDACTED] .

Shareholders’ interests may be diluted as a result of additional equity financing or additional Shares being issued by us in the future

We may need to raise additional funds in the future to finance further expansion of our business. If additional funds are raised through the issuance of new equity or equity-linked securities of our Group other than on a pro rata basis to existing Shareholders, the percentage of ownership of such Shareholders in our Company may be reduced, and such new securities may confer rights and privileges that take priority over those conferred by our Shares.

In addition, we may issue additional Shares upon exercise of options to be granted under the Share Option Scheme in the future. The increase in the number of Shares outstanding after the issue would result in the reduction in the percentage ownership of the Shareholders and may result in a dilution in the earnings per Share and net asset value per Share.

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

RISK FACTORS

The trading volume and price of our Shares may fluctuate. Further, any disposal of a substantial number of Shares by our Controlling Shareholders in the public market may adversely affect market price of our Shares

The trading volume and price of our Shares may be highly volatile. Factors such as variations in our revenue, earnings and cash flow, announcements of business development, strategic alliances or acquisitions, new projects, industrial or environmental accidents suffered by us, loss of key personnel, changes in ratings by financial analysts and credit rating agencies or litigation may cause large and sudden changes in the volume and price at which our Shares will trade. In addition, the Stock Exchange and other securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of any particular company. These fluctuations may also materially and adversely affect the market price of our Shares.

Further, we cannot assure you that our Controlling Shareholders will not dispose of, in part or in whole of, their Shares following the expiration of their respective lock-up periods after the [REDACTED] . We cannot predict the effect, if any, of any future sale of our Shares by any of our Controlling Shareholders on the market price of the Shares. Sale of our Shares by any of our Controlling Shareholders may materially and adversely affect the prevailing market price of our Shares.

The Sole [REDACTED] is entitled to terminate the [REDACTED]

Prospective investors should note that the [REDACTED] (for itself and on behalf of other [REDACTED] ) is entitled to terminate its obligations under the [REDACTED] by giving notice in writing to us upon the occurrence of any of the events set out in the section headed “ [REDACTED] – Grounds for termination” in this document at any time prior to 8:00 a.m. (Hong Kong time) on the [REDACTED] . Such event may include, without limitation, any acts of God, wars, riots, public disorder, civil commotion, economic sanction, epidemic, fire, flood, explosions, acts of terrorism, earthquakes, strikes or lock-outs.

Difficulties in enforcing Shareholder rights due to difference in jurisdictions

Our Company is an exempted company incorporated in the Cayman Islands with limited liability. Our corporate affairs are governed by, among others, the Articles of Association, the Companies Law and common law of the Cayman Islands. The rights of our Shareholders to take action against our Directors, action by minority Shareholders and the fiduciary responsibilities of our Directors to our Company are to a large extent governed by the common law of the Cayman Islands and the Articles of Association. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The laws of the Cayman Islands relating to the protection of the interests of minority shareholders differ in some respects from those in Hong Kong and other jurisdictions. Furthermore, shareholders of Cayman Islands companies may not have standing to initiate a shareholder derivative action in Hong Kong courts.

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RISK FACTORS

Granting options under the Share Option Scheme may affect our Group’s result of operation and dilute Shareholders’ percentage of ownership

Our Company may grant share options under the Share Option Scheme in the future. The fair value of the options on the date on which they are granted with reference to the valuer’s valuation will be charged as share-based compensation, which may adversely affect our Group’s results of operation. Issuance of Shares for the purpose of satisfying any award made under the Share Option Scheme will also increase the number of Shares in issue after such issuance and thus may result in the dilution to the percentage of ownership of the Shareholders and the net asset value per Share. No option has been granted pursuant to the Share Option Scheme as at the Latest Practicable Date. For a summary of the terms of the Share Option Scheme, please see the paragraph headed “D. Share Option Scheme” in Appendix IV to this document.

RISKS RELATING TO THIS DOCUMENT

We cannot assure you that we will declare or distribute any dividend in the future

Any decision to declare and pay any dividends would require the recommendations of our Board and approval of our Shareholders. Any decision to pay dividends will be made having regard to factors such as the results of operation, financial condition and position, and other factors deemed relevant. Any distributable profits that are not distributed in any given year may be retained and available for distribution in subsequent years. To the extent profits are distributed as dividends, such portion of profits will not be available to be reinvested in our operation. We cannot assure you that we will be able to declare or distribute any dividend. Our future declarations of dividends will be at the absolute discretion of our Board.

Certain facts, statistics and data contained in this document have not been independently verified and may not be reliable

Certain facts, statistics and data in this document are derived from various sources including various official government sources that we believe to be reliable and appropriate for such information. However, we cannot guarantee the quality or reliability of such source materials. We believe that the sources of the said information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted rendering such information false or misleading. Nevertheless, such information has not been independently verified by us, the Sole Sponsor, the [REDACTED] , the [REDACTED] , the [REDACTED] or any of their respective directors, affiliates or advisers and therefore, none of them makes any representation as to the accuracy or completeness of such facts, statistics and data. Furthermore, we cannot assure you that they are stated or compiled on the same basis or with the same degree of accuracy as similar statistics presented elsewhere. In all cases, investors should give consideration as to how much weight or importance they should attach to, or place on, such information or statistics.

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RISK FACTORS

Investors should read the entire document and we strongly caution you not to place any reliance on any information contained in press articles, other media and/or research reports

There may be press and media coverage regarding our Group or the [REDACTED] , which may include certain events, financial information, financial projections and other information about our Group that do not appear in this document. We have not authorised the disclosure of any other information not contained in this document. We do not accept any responsibility for any such press or media coverage and make no representation as to the accuracy or completeness or reliability of any such information or publication. To the extent that any such information appearing in publications other than this document is inconsistent or conflicts with the information contained in this document, our Group disclaims responsibility for them. Accordingly, investors should not rely on any such information. In making your decision as to whether to subscribe for and/or purchase our Shares, you should rely only on the financial, operational and other information included in this document.

Forward-looking statements contained in this document are subject to risks and uncertainties.

This document contains certain statements and information that are “forward-looking” and uses forward-looking terminologies such as “anticipate”, “believe”, “could”, “estimate”, ”expect”, “may”, “ought to”, “should” or “will” or similar terms. Those statements include, among other things, the discussion of our growth strategy and expectations concerning our future operations, liquidity and capital resources. Investors of our Shares are cautioned that reliance on any forward-looking statements involves risks and uncertainties and that any or all of those assumptions could prove to be inaccurate and as a result, the forward-looking statements based on those assumptions could also be incorrect. The uncertainties in this regard include, but are not limited to, those identified in this section, many of which are beyond our control. In light of these and other uncertainties, the inclusion of forward-looking statements in this document should not be regarded as representations by us that our plans or objectives will be achieved and investors should not place undue reliance on such forward-looking statements. We do not undertake any obligation to update publicly or release any revisions of any forward-looking statements, whether as a result of new information, future events or otherwise.

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

INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

– 38 –

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

DIRECTORS
Name	Residential address	Nationality
Executive Directors
Mr. MAN Hoi Yuen	House 3	Chinese
(文海源)	8 Yau Lai Road, Grandview Villa
	Yau Kom Tau, Tsuen Wan
	New Territories
	Hong Kong
Ms. NG Yuen Chun	House 3	Chinese
(吳婉珍)	8 Yau Lai Road, Grandview Villa
	Yau Kom Tau, Tsuen Wan
	New Territories
	Hong Kong
Mr. HO Chi Hong	Flat A, 17/F, Block 2	Chinese
(何志康)	The Long Beach
	8 Hoi Fai Road
	Tai Kwok Tsui, Kowloon
	Hong Kong
_Independent non-executive _	Directors
Mr. CHAN Ka Yu	Flat B, 25/F, Block 13	Chinese
(陳家宇)	Laguna City
	Kwun Tong, Kowloon
	Hong Kong
Mr. LO Ki Chiu	Flat F, 7/F	Chinese
(盧其釗)	Tower 10
	21 Fo Chun Road, Mayfair By The Sea II
	Pak Shek Kok, Tai Po
	New Territories
	Hong Kong
Mr. LEUNG Wai Lim	House 75	Chinese
(梁唯廉)	Boulevard De Fontaine
	The Beverly Hills
	Tai Po, New Territories
	Hong Kong

Please refer to the section headed “Directors, senior management and employees” in this Document for further details.

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

PARTIES INVOLVED

Sole Sponsor

Grande Capital Limited

A licensed corporation under the SFO to engage in type 6 (advising on corporate finance) regulated activities Room 1204B, 12/F Tower 2, Lippo Centre 89 Queensway Hong Kong

[REDACTED]

Legal advisers to our Company

[•]

As to Hong Kong law Sidley Austin Solicitors, Hong Kong 39/F Two Int’l Finance Centre Central Hong Kong

As to Cayman Islands law

Conyers Dill & Pearman

Cayman Islands attorneys-at-law Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Legal advisers to the Sole Sponsor, the [REDACTED], the [REDACTED] and the [REDACTED]

As to Hong Kong law David Fong & Co. Solicitors, Hong Kong Unit A, 12/F China Overseas Building 139 Hennessy Road Wanchai Hong Kong

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

Auditors and reporting accountants	HLB Hodgson Impey Cheng Limited
	Certified Public Accountants
	31/F, Gloucester Tower
	The Landmark
	11 Pedder Street
	Central
	Hong Kong
Industry consultant	Ipsos Limited
	22/F, Leighton Centre
	77 Leighton Road
	Causeway Bay
	Hong Kong
Compliance adviser	Grande Capital Limited
	A licensed corporation under the SFO to engage
	in type 6 (advising on corporate finance)
	regulated activities
	Room 1204B, 12/F
	Tower 2, Lippo Centre
	89 Queensway
	Hong Kong
[REDACTED]	[•]

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CORPORATE INFORMATION

Registered office


Registered office	Cricket Square
	Hutchins Drive
	P.O. Box 2681
	Grand Cayman KY1-1111
	Cayman Islands
Headquarters and principal place of	Unit 8, 39/F
business in Hong Kong	Cable TV Tower
	No. 9 Hoi Shing Road
	Tsuen Wan, New Territories
	Hong Kong
Company website	www.yield-go.com
	(information on this website does not form part of
	this document)
Company secretary	Mr. SIU Wing Kin
	Certified Public Accountant
	Room 3203, Hiu Lai Court
	Hiu Wo House
	Kwun Tong, Kowloon
	Hong Kong
Authorised representatives	Mr. HO Chi Hong
	Flat A, 17/F, Block 2
	The Long Beach
	8 Hoi Fai Road
	Tai Kwok Tsui, Kowloon
	Hong Kong
	Mr. SIU Wing Kin
	Certified Public Accountant
	Room 3203, Hiu Lai Court
	Hiu Wo House
	Kwun Tong, Kowloon
	Hong Kong
Audit committee	Mr. CHAN Ka Yu (Chairman)
	Mr. LO Ki Chiu
	Mr. LEUNG Wai Lim
Remuneration committee	Mr. LEUNG Wai Lim (Chairman)
	Mr. CHAN Ka Yu
	Mr. LO Ki Chiu

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CORPORATE INFORMATION

Nomination committee

Mr. MAN Hoi Yuen (Chairman) Mr. CHAN Ka Yu Mr. LEUNG Wai Lim

[REDACTED]

Principal bank

Bank of China (Hong Kong) Limited 1 Garden Road Hong Kong

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

INDUSTRY OVERVIEW

This and other sections of this document contain information relating to the industry in which we operate. Certain information and statistics contained in this section have been derived from various official and publicly available sources. In addition, certain information and statistics set forth in this section have been extracted from a market research report commissioned by us and prepared by Ipsos, an independent market research agency. We believe that the sources of such information and statistics are appropriate and have taken reasonable care in extracting and reproducing such information and statistics. We have no reason to believe that such information or statistics is false or misleading in any material respect or that any fact has been omitted that would render such information or statistics false or misleading in any material respect. However, such information and statistics have not been independently verified by us, the Sole Sponsor, the [REDACTED] , the [REDACTED] , any of the [REDACTED] , our or their respective directors and officers or any other parties involved in the [REDACTED] . No representation is given as to the accuracy.

SOURCE AND RELIABILITY OF INFORMATION

We commissioned Ipsos, an independent market research consulting firm, to conduct an analysis of, and to report on fitting-out works industry in Hong Kong. A total fee of HK$478,000 was charged by Ipsos for the preparation of the Ipsos Report. Except as otherwise noted, the information and statistics set forth in this section have been extracted from the Ipsos Report. The payment of such amount was not conditional on our Group’s successful [REDACTED] or on the results of the Ipsos Report. Our Directors confirm that, after making reasonable enquiries, there is no adverse change in the market information since the date of the Ipsos Report which may qualify, contradict or have an impact on the information in this section.

Ipsos has been engaged in a number of market assessment projects in connection with initial public offerings in Hong Kong. Ipsos is part of a group of companies which employs approximately 16,600 personnel worldwide across 88 countries. Ipsos conducts research on market profiles, market sizes and market shares and performs segmentation analysis, distribution and value analysis, competitor tracking and corporate intelligence.

The Ipsos Report includes information on the fitting-out works industry in Hong Kong. The information contained in the Ipsos Report is derived by means of data and intelligence gathering which include: (i) desktop research; and (ii) primary research, including interviews with key stakeholders including fitting-out and building works service providers, architects, quantity surveyors and industry experts and associations in Hong Kong, etc.

Information gathered by Ipsos has been analysed, assessed and validated using Ipsos in-house analysis models and techniques. According to Ipsos, this methodology ensures a full circle and multilevel information sourcing process, where information gathered can be cross-referenced to ensure accuracy. All statistics are based on information available as at the date of the Ipsos Report. Other sources of information, including government, trade associations or marketplace participants, may have provided some of the information on which the analysis or data is based.

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INDUSTRY OVERVIEW

Ipsos developed its estimates or forecasts on the following principal bases and assumptions: (i) it is assumed that the global economic growth remains steady across the forecast period; and (ii) it is assumed that there is no external shock such as financial crisis or natural disasters to affect the demand and supply of the construction industry in Hong Kong during the forecast period.

CONSTRUCTION INDUSTRY OVERVIEW

The construction industry in Hong Kong recorded a stable growth from 2013 to 2017. The total gross output value of construction works increased from approximately HK$135.6 billion in 2013 to approximately HK$194.7 billion in 2017 at a CAGR of approximately 9.5%.

Gross output value of construction works in Hong Kong from 2013 to 2022

==> picture [423 x 133] intentionally omitted <==

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

250.0 217.2 223.6 229.4 234.3
209.4
192.9 194.7
200.0 175.1
155.2
135.6
150.0
100.0
50.0
0
2013 2014 2015 2016 2017E 2018F 2019F 2020F 2021F 2022F
HK$ billion
----- End of picture text -----

==> picture [22 x 6] intentionally omitted <==

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

Note:
----- End of picture text -----

(1) The letter “E” denotes as estimated figures
(2) The letter “F” denotes as forecasted figures

Source(s): Hong Kong Census and Statistics Department; The Ipsos Report

Construction projects in Hong Kong can be generally categorised into public sector projects and private sector projects. Public sector projects refer to projects of which the main contractors are employed by the Government or other statutory bodies, while private sector projects refer to projects that are not public sector projects. Public sector has contributed to a larger gross output value with an aggregate amount of approximately HK$457.1 billion as compared to the aggregate amount of private sector with a value of approximately HK$396.4 billion from 2013 to 2017.

The construction industry experienced a stable growth in the past few years mainly due to the rising demand for commercial and residential buildings as well as for infrastructure. The public sector was supported by some large public infrastructure projects such as the Public Housing Development Program and Ten Major Infrastructure Projects, which include the South Island Line, Sha Tin to Central Link, Lok Ma Chau Loop, Guangzhou-Shenzhen-Hong Kong Express Rail Link, Tuen Mun-Chek Lap Kok Link and Tuen Mun Western Bypass, West

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INDUSTRY OVERVIEW

Kowloon Cultural District, Kai Tak Development, Hong Kong-Zhuhai-Macao Bridge, North East New Territories New Development Areas, and Hong Kong-Shenzhen Western Express Line. In private sector, the growth was attributable to the Government’s initiative to increase private residential units supply and land supply for commercial and economic activities.

To cater for the continuous demand in residential units and commercial sites, the government has announced in the 2017 Policy Address to further provide approximately 460,000 housing supply for the next decade; which includes approximately 200,000 public rental housing (PRH) units, approximately 80,000 subsidized sale flats and approximately 180,000 private housing units. To address the latter, suitable Government, Institution or Community (GIC) sites will be converted to commercial use and to develop Kowloon East as a secondary core business district. Such plans will further facilitate the construction industry and the gross output value of construction is thus forecasted to grow at a CAGR of about 2.8% from 2018 to 2022.

FITTING-OUT INDUSTRY OVERVIEW

In the Hong Kong construction industry, main contractors are primarily in charge of the entire construction project and typically outsource construction works to subcontractors in accordance to their specialties and knowledge.

Fitting-out industry is one of the specific areas of the Hong Kong construction industry, while the development of fitting-out industry and construction industry are correlated. Fitting-out works are commonly demanded in commercial and residential construction projects. In 2017, the total gross output value of fitting-out industry accounted for approximately 14.6% of the total gross output value of construction works in Hong Kong. From 2013 to 2017, the total gross output value of fitting-out industry grew from approximately HK$22.4 billion to approximately HK$28.5 billion, at a CAGR of approximately 6.2%.

Gross output value of fitting-out industry in Hong Kong from 2013 to 2022

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

45.0
38.4 39.2
40.0 36.7
34.0 2.0 1.9
35.0 31.3 2.0
30.0 25.8 28.5 1.8 1.8 12.6 12.6
25.0 22.4 22.7 23.1 1.6 1.7 10.1 11.0 12.0
20.0 1.4 1.4 1.4 7.7 8.9
15.0 6.7 7.7 6.9
10.05.0 14.3 13.6 14.8 16.5 18.0 19.4 21.1 22.8 23.9 24.7
0.0
2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F
Commercial Residential Others
HK$ billion
----- End of picture text -----

Source(s): Ipsos research and analysis

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INDUSTRY OVERVIEW

Residential fitting-out works mainly include fitting-out works which apply to residential buildings and their attached facilities such as clubhouse. Commercial fitting-out works mainly include fitting-out works which apply to commercial buildings such as offices, shopping malls and hotels. Other fitting-out works are fitting-out works which neither fall into the category of residential or commercial, which mainly include fitting-out works which apply to industrial buildings, hospital, airport terminal, etc.

The growth of fitting-out industry from 2013 to 2017 was mainly supported by constant demand of fitting-out work due to continuing new building construction completion and the launch of Mandatory Building Inspection Scheme (MBIS) and the Mandatory Window Inspection Scheme (MWIS) by the Buildings Department in 2012, being schemes that require inspection, repair and maintenance to be performed on old buildings which are over 30 years old and 10 years old respectively. In addition, Rating and Valuation Department recorded a total commercial completion area of 161,100 m[2] in 2013 to 400,200 m[2] in 2017 at a CAGR of approximately 25.5%. Other noteworthy landmark property development projects that contributed to the gross output value of the fitting-out industry over the past years include YOHO Mall, a North-West New Territories flagship shopping mall, that was completed in 2015, and the redevelopment of Shanghai Commercial Bank Tower that was completed in 2016, all of which that supported growth in commercial fitting-out value.

Moving forward, the total gross output value of fitting-out industry is forecasted to increase from approximately HK$31.3 billion to approximately HK$39.2 billion at a CAGR of about 5.8% from 2018 to 2022 due to the expected growth in both residential and commercial fitting-out industry.

The gross output value generated from residential fitting-out works is forecasted to increase from approximately HK$10.1 billion in 2018 to approximately HK$12.6 billion in 2022 at a CAGR of about 5.7%. The residential property market in Hong Kong is expected to remain resilient in the coming years due to shortage of residential units. According to Rating and Valuation Department, 19,526 private residential units are forecasted to be completed in 2018. More residential projects to look forward to from 2019 to 2022 include Astro Far East Estate at Cheung Sha Wan, Kwun Tung Town Centre, and Lohas Park Phase V and VI at Tseung Kwan O which is expected to contribute to the growth of residential fitting-out industry.

The gross output value generated from commercial fitting-out works is forecasted to increase from approximately HK$19.4 billion in 2018 to approximately HK$24.7 billion in 2022 at a CAGR of about 6.2%. There has recently been a growing establishment of new and secondary business districts outside of the Central area due to the Government initiated to energise Kowloon East in accordance to the 2011–2012 Policy Address, which will increase the number of new office, so will increase the demand for fitting-out works. Also, there are several luxury hotel projects that are expected to be completed in the coming years, such as The Hong Kong Ocean Park Marriott Hotel and the Fullerton Hotel, which are expected to be opened in 2018 and 2020 respectively, which are likely to contribute to the output value of fitting-out industry.

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INDUSTRY OVERVIEW

According to the Ipsos Report, fitting-out works usually involve wall, ceiling finishes, partition, furniture finishing, and common installation services like doors, and flooring. In addition, some fitting-out contractors may also provide related services such as renovation, interior design and repair, maintenance alteration and addition (RMAA) work. While often property developers and property owners will directly engage fitting-out contractors for fitting-out works, main contractors that win tenders from customers may also engage fitting-out contractors to subcontract partial or majority of the undertaken fitting-out works according to its own capacity, the timeline and complexity of the projects.

INDUSTRY DRIVERS

Since the development of fitting-out industry is correlated with the construction industry, the fitting-out industry in Hong Kong is expected to benefit from the following industry drivers:

1. Redeveloping old and dilapidated buildings

The Government is taking on a basket of strategies to refurbish and redevelop old and dilapidated buildings for a better living environment. As addressed in the 2017 Policy Address, the Government will launch “Operation Building Bright 2.0”, where HK$3.0 billion funds will be used to subsidize owner-occupiers for undertaking rehabilitation works on aged buildings in need of repair. Based on the “Hong Kong 2030+” report, it is expected that the number of residential and composite buildings aged 30 or more will reach approximately 40,000 by 2046. As of November 2017, there were approximately 6,863 private buildings aged over 50 in Hong Kong. Many of these neglect and decay buildings that need redevelopment will drive the demand for fitting-out works in the future.

2. Increase in demand for micro residential units

The demand and supply for micro residential units have been increasing in recent years. Micro residential units have been growing in popularity in Hong Kong due to its slightly more affordable price in a smaller size as compared to the high end large property units. Nevertheless, these types of micro flats typically have small space area, i.e. less than 200 square feet per unit, such as T Plus in Tuen Mun. This trend creates more residential units under the same developed gross floor area, which leads to an increase in the demand of fitting-out works. Also, due to the lack in space, property developers will engage fitting-out services to maximise space utilisation for each unit by applying more complex fitting-out works. The demand on higher value-added fitting-out works is likely to increase the value generated by the fitting-out industry.

3. Government’s plan to increase land supply for residential and commercial uses

As announced in the 2017–2018 Land Sale Program, there will be a total of 28 residential sites capable of providing nearly 19,000 flats. Besides, railway property development projects by the MTR Corporation at LOHAS Park, Ho Man Tin Station, Wong Chuk Hang Station, Yao Tong Ventilation Building and West Rail project is expected to

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INDUSTRY OVERVIEW

further provide about 8,030 flats. For commercial buildings, there will be three commercial/business sites and one hotel site which can provide nearly 172,000 square metres of floor area and 550 rooms at Kai Tak and Cheung Sha Wan. Besides exploring new sites, the Government is also converting suitable Government sites for commercial use while relocating their Government offices from core business districts. Some notable Government building area include the three Government towers at Wan Chai, TID Tower in Mong Kok, Murray Road public carpark in Central and the middle road carpark in Tsim Sha Tsui. The additional sites provided by the Government will increase the supply of land for development, which will lead to the increase in the demand for the construction industry, subsequently benefitting the fitting-out industry.

COMPETITIVE LANDSCAPE AND ENTRY BARRIERS

The five largest players in the Hong Kong fitting-out industry in 2017

According to the Ipsos Report, the top five fitting-out contractors (in terms of market share in the fitting-out industry in Hong Kong in 2017) and their respective backgrounds are as follows:

			Approximate
Ranking	Contractor	Key type of works performed	market share
1	A contractor based in Hong	Fitting-out works, alteration	5.3%
	Kong, which is listed on	and addition; manufacturing,
	the Main Board of the	sourcing and distribution of
	Stock Exchange	interior materials
2	A contractor based in Hong	Fitting-out works, including	3.4%
	Kong, which is listed on	design and building; alteration
	the Main Board of the	and addition
	Stock Exchange
3	A contractor based in Hong	Fitting-out works, including	2.9%
	Kong, which is a subsidiary	design and building
	of a company listed on the
	Main Board of the Stock
	Exchange
4	A contractor based in Hong	Fitting-out works, interior	2.2%
	Kong	design and building, alteration
		and addition, interior
		contracting

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INDUSTRY OVERVIEW

Ranking Contractor Key type of works performed 5 A contractor based in Hong Kong Fitting-out works, including initial feasibility studies, cost estimation, design to management, construction and maintenance Total	Approximate market share 1.8%
	15.6%

Factors influencing competition among fitting-out contractors

Business relationships, industry reputation and experience in fitting-out project management are major factors of competition among contractors in the fitting-out industry in Hong Kong.

Fitting-out contractors with a proven track record and positive reputation in the industry are more competitive based on their proven reliability and experience in completing fitting-out works. Main contractors usually prefer to work with subcontractors whom they have long standing relationships with and have proven high-quality work to be delivered on time. Established long-term business relationships with construction materials suppliers and main contractors provide subcontractors with better flexibility in negotiating prices, allocating resources and executing projects compared with their competitors.

In addition, a fitting-out contractor’s experience in fitting-out project management will determine its efficiency and effectiveness in sourcing and allocating resources including labour and construction materials to complete works on time and within a competitive budget. Technical expertise and experience in fitting-out project management are also important to meet project timeline, quality and budget. With an experienced project management team having good technical understanding of fitting-out works, a contractor is able to address different issues that may arise during project execution, and foresee potential problems during the project.

Our Group’s market share in the fitting-out industry

The total revenue of the fitting-out industry in Hong Kong in 2017 was approximately HK$28.5 billion according to the Ipsos Report. The total revenue of our Group for FY2016/17 was HK$331.9 million. Based on these figures, it is estimated that our Group’s market share in the fitting-out industry in Hong Kong is approximately 1.2%.

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INDUSTRY OVERVIEW

Entry barriers of the fitting-out industry in Hong Kong

1. High and stable capital requirement

Construction industry is a high operating expense industry in nature including fitting-out services. A large amount of capital is needed for project initiation and operating management such as surety bond payment, engaging subcontractors, recruitment of skilled labours, experience management and raw materials purchase. Particularly, a large amount of upfront cost payment is often involved when undertaking fitting-out projects, which require substantial working capital and healthy cash flow. Hence, new entrants who do not have an adequate amount of capital may face consequences of delayed project executions and ultimately, losing their reputations.

2. An experienced team of industry expertise

An experienced team of industry expertise could provide advices and customise solutions on fitting-out projects that best fulfil the needs of the clients. Due to the competitive environment in the fitting-out industry, it is challenging for companies to recruit an experienced team. Therefore, having and maintaining an experienced team will be a significant entry barrier for new entrants in the fitting-out industry to handle projects effectively.

3. Proven track records

In general, customers award tenders based on the contractors’ track record and experience to assess their abilities in undertaking projects. Customers of fitting-out works will evaluate contractor’s ability to meet the technical, safety, time and budget requirements of a project. Thus, new entrants with little fitting-out work track record would undergo a lack of proven project management and work experience to support their capabilities during tender.

4. Relationship with property developers and main contractors

Fitting-out works of large property projects are usually awarded through an invitation to tender process. Customers, such as property developers or main contractors of the construction projects, may send tender invitation to those contractors with good working relationship and track record in the past. New entrants of the fitting-out industry may find it difficult to blend into the market and obtain tender invitations as they have yet to build up cooperative relationship and network with main contractors and property developers.

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INDUSTRY OVERVIEW

Potential challenges

1. Labour shortage

The ageing workforce and the decreasing number of youngsters joining the construction and fitting-out industry have led to the problem of labour shortage. According to the Construction Industry Council (CIC), about 43.1% of the 466,737 registered workers were aged over 50 as of March 2018. Separately, shortage of both general welders and plasterers is expected from 2018 to 2022 with only around 500-1500 labour supply in the fitting-out market as reported in the Report on Manpower Research for the Construction Industry in Hong Kong by CIC December 2017 issue.

2. Increase in operating cost

The issue of high operating cost has long ensued the overall construction industry. The average wages of construction workers has been driven up by the need to retain skilled labour and attract young entrant workers, resulting in an overall higher operating cost in the construction industry. The average daily wage of fitting-out workers has increased from approximately HK$939.9 in 2013 to approximately HK$1,285.0 in 2017, at a CAGR of 8.1%. Please refer to the paragraph headed “Price trend of major fitting-out cost components” in this section for further information.

3. Increasing competition

Competition has intensified in Hong Kong’s fitting-out industry. Specifically, some contractors are now raising capital by way of [REDACTED] in the Stock Exchange to expand the scope of their services and business volume. Such business expansion plans of fitting-out contractors in Hong Kong has led to an increase in competition for available fitting-out projects.

PRICE TREND OF MAJOR FITTING-OUT COST COMPONENTS

The major fitting-out cost components of our Group’s operation include, among others, direct labour cost, and main materials such as glass and timber products.

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INDUSTRY OVERVIEW

Average wages of fitting-out workers in Hong Kong

The average daily fitting out worker wage is computed using the average wages of bricklayers, general welders, joiners, painters and decorators, plasterers and general workers. The average wages of fitting out workers has increased from approximately HK$939.9 in 2013 to approximately HK$1,285.0 in 2017, at a CAGR of approximately 8.1%.

Average wages of fitting-out workers in Hong Kong from 2013 to 2017

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

1,400.0 1,285.0
1,206.9
1,170.1
1,200.0
1,020.5
939.9
1,000.0
800.0
600.0
400.0
200.0
0
2013 2014 2015 2016 2017
HK$ per day per worker
----- End of picture text -----

Source(s): Hong Kong Census and Statistics Department; The Ipsos Report

According to the Ipsos Report, the increasing trend in average wages for fitting-out workers was caused by a lack of new entrant workers and an ageing labour force. The Government is encouraging youngsters to enter the industry by providing funds for training schemes and the increase in wages aims to attract more skilled and young labour to join the workforce. However, it only had a limited effect due to a lack of career prospect. The problem of labour shortage in the fitting-out industry is exacerbated by an aging workforce, as old and skilled construction workers approach retirement and leave the industry. For these reasons, it is expected that the average daily wage of fitting-out worker in Hong Kong will continue to rise in the coming years.

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INDUSTRY OVERVIEW

Average wholesale price of glass in Hong Kong

From 2013–2017, the average wholesale prices for glass exhibited a modest growth with a recorded CAGR of approximately 1.0%, an increase from approximately HK$151.0 to approximately HK$157.0 per square metre.

Average wholesale price of glass in Hong Kong from 2013 to 2017

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

200.0
175.0
151.0 153.4 157.0 157.0 157.0
150.0
125.0
100.0
75.0
50.0
25.0
0
2013 2014 2015 2016 2017
HK$ per square metre
----- End of picture text -----

Source(s): Hong Kong Census and Statistics Department; The Ipsos Report

The modest price trend could be attributed to the tight competition among glass suppliers. A slight increase in price will drive customers to seek for other supplier or product substitution considering glass is a product with minimal product variance and easily substitute product. Hence, the average wholesale price of glass has remained relatively stable over the years.

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INDUSTRY OVERVIEW

Average import prices of timber products in Hong Kong

The major fitting-out timber products of our Group’s operation include, among others, wooden furniture, timber door and timber flooring.

Average import price of wooden furniture in Hong Kong from 2013 to 2017

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

523.6
474.5 477.9
500.0
452.1
395.5
400.0
300.0
200.0
100.0
0
2013 2014 2015 2016 2017
HK$ per piece
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Note(s): Historical price trend of wooden furniture is weighted average import price based on import quantity of fitting-out wooden furniture which include; (i) wooden furniture used in the bedroom, such as wardrobes and beds (SITC code: 82155); (ii) other wooden furniture, such as desk tables and bookcases (SITC code: 82159); and (iii) wooden furniture for kitchen use (SITC code: 82153)

Source(s): Hong Kong Census and Statistics Department; The Ipsos Report

The average import price for per piece of wooden furniture in Hong Kong increased from approximately HK$395.5 to approximately HK$523.6 per piece from 2013 to 2017, at a CAGR of approximately 7.3%, which was mainly attributable to the increased demand for wooden furniture using solid wood due to users’ rise of taste and living standard. As wooden furniture that use solid wood is generally more expensive, the increasing trend of using solid wood furniture has driven up the average import price of wooden furniture. Also, solid wood used for manufacturing wooden furniture, such as the Mongolian Oak and Chinese Ash, were limited in supply and without close substitutes, which has further increase the average price of solid wood furniture when facing an increasing demand.

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INDUSTRY OVERVIEW

Average import prices of timber wood for flooring and timber doors in Hong Kong from 2013 to 2017

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25.0
21.3 21.1
19.5 19.7
19.0
20.0
15.0
15.6
14.1 14.2 14.4
13.4
10.0
5.0
0
2013 2014 2015 2016 2017
Timber wood for flooring (per kg) Timber door (per kg)
HK$
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Note(s): Historical price trend of timber wood for flooring is weighted average import price based on import quantity of (i) wood of non-coniferous species (including strips and friezes of parquet flooring, not assembled) (SITC code: 24850); and (ii) assembled flooring panels (SITC code: 63534)

Source(s): Hong Kong Census and Statistics Department; The Ipsos Report

The average import price of timber flooring changed from approximately HK$19.5 per kg to approximately HK$21.1 per kg, at a CAGR of approximately 2.0% from 2013 to 2017; while the average import price of timber door changed from approximately HK$13.4 per kg to approximately HK$14.4 per kg, at a CAGR of approximately 1.8% from 2013 to 2017. The price of both timber flooring and timber door was in a steady trend, while the little fluctuation in price trend for both timber door and timber flooring was mainly due to the varied demand from Hong Kong and the increasing supply of cheaper alternative imported from the PRC.

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REGULATORY OVERVIEW

A. LAWS AND REGULATIONS IN RELATION TO THE BUILDING WORKS

Under the Buildings Ordinance, there are three contractors’ registers being kept by the Building Authority. They are: (i) the general building contractors’ register; (ii) the specialist contractors’ register and; (iii) the minor works contractors’ register.

Under section 14 of the Building Ordinance, approval and consent is required from the Building Authority for the commencement of building works.

Under section 9(1) of the Buildings Ordinance, a person is required to appoint a registered general building contractor to carry out general building works and street works which do not include any specialised works designated for registered specialist contractors and minor works. Under section 9(2) of the Buildings Ordinance, a person is required to appoint a registered specialist contractor to carry out specialised works (including sub-registers of demolition works, foundation works, site formation works, ventilation works and ground investigation works) in their corresponding categories which they have been registered.

Building works have a wide definition. Under section 41(3) of the Buildings Ordinance, works in a building are exempted if they do not involve the structure of a building. So there will be no need to engage a registered general/specialist contractor for such building works.

B. LAWS AND REGULATIONS IN RELATION TO CONSTRUCTION LABOUR, HEALTH AND SAFETY

Factories and Industrial Undertakings Ordinance (Chapter 59 of the Laws of Hong Kong)

The Factories and Industrial Undertakings Ordinance provides for the safety and health protection to workers in an industrial undertaking (which is defined to include construction work). The Factories and Industrial Undertakings Ordinance prescribes a duty on a proprietor (including person for the time being having the management or control of the business carried on in such industrial undertaking and also the occupier of any industrial undertaking) of an industrial undertaking to take care of, so far as is reasonably practicable, the health and safety at work of all persons employed by him at the industrial undertaking. The duties of a proprietor extend to include:

(a) providing and maintaining plant and work systems that do not endanger safety or health;
(b) making arrangements for ensuring safety and health in connection with the use, handling, storage and transport of articles and substances;
(c) providing all necessary information, instructions, training and supervision for ensuring safety and health;

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(d) providing and maintaining safe access to and egress from the workplaces; and
(e) providing and maintaining a safe and healthy working environment.

It is a criminal offence for a proprietor who contravenes any of these duties and the maximum penalty is a fine of HK$500,000. Further for contraventions of these requirements by the proprietor wilfully and without reasonable excuse the maximum penalty is a fine of HK$500,000 and to imprisonment for 6 months.

Subsidiary regulations of the Factories and Industrial Undertakings Ordinance, include, among others, the Construction Sites (Safety) Regulations (Chapter 59I of the Laws of Hong Kong), Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear Regulations (Chapter 59J of the Laws of Hong Kong), Factories and Industrial Undertakings (Protection of Eyes) Regulations (Chapter 59S of the Laws of Hong Kong).

The Construction Sites (Safety) Regulations provide for (i) the prohibition of employment of persons under 18 years of age (save for certain exceptions); (ii) the maintenance and operation of hoists; (iii) the duty to ensure safety of places of work; (iv) prevention of falls; (v) safety of excavations; (vi) the duty to comply with miscellaneous safety requirements; and (vii) provision of first aid facilities. Non-compliance with any of these rules constitutes an offence and different levels of penalty will be imposed and a contractor guilty of the relevant offence could be liable to a fine up to HK$200,000 and imprisonment up to 12 months. The Construction Sites (Safety) Regulation is applicable to all construction work, all construction sites and all machine, plant and materials which construction work is carried on.

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 to employees in workplaces, covering both industrial and non-industrial workplaces.

Under the Occupational Safety and Health Ordinance, employers must as far as reasonably practicable ensure the safety and health in their workplaces by:

(a) provision and maintenance of plant and systems of work that are safe and without risks to health;
(b) making arrangements for ensuring safety and absence of risks to health in connection with the use, handling, storage or transport of plant or substances;
(c) as regards any workplace under the employer’s control:
(i) maintenance of the workplace in a condition that is safe and without risks to health; and

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REGULATORY OVERVIEW

(ii) provision and maintenance of means of access to and egress from the workplace that are safe and without any such risks;
(d) providing all necessary information, instructions, training and supervision for ensuring safety and health;
(e) provision and maintenance of a working environment that is safe and without risks to health; and
(f) provision and maintenance of means of access to and egress from the workplace that are safe and without any such risks.

Non-compliance with any of the above provisions is a criminal offence and the maximum penalty of the employer is a maximum fine of HK$200,000. For intentional, knowing or reckless contraventions, the maximum penalty is a fine of HK$200,000 and to imprisonment for 6 months.

The Commission for Labour has power to issue an improvement notice against non-compliance of this Ordinance or the Factories and Industrial Undertakings Ordinance or suspension notice against activity or condition of workplace which may create imminent risk of death or serious bodily injury. Failure to comply with such notices without reasonable excuse constitutes an offence and the maximum penalty is a fine of HK$200,000 and HK$500,000 respectively and imprisonment of up to 12 months.

Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong)

There is a no-fault and non-contributory employee compensation system for work injuries established under the Employees’ Compensation Ordinance. Further this Ordinance also set out the rights and obligations of employers and employees in respect of injuries or death caused by accidents arising out of and in the course of employment, or by prescribed occupational diseases.

Under the Employees’ Compensation Ordinance, if an employee sustains an injury or dies as a result of an accident arising out of and in the course of his employment, his employer is generally liable to pay compensation even if the employee might have at faults or negligent when the accident occurred. Similarly, an employee who suffers incapacity arising from an occupational disease is entitled to receive the same compensation as that payable to employees injured in occupational accidents.

As prescribed under section 15 of the Employees’ Compensation Ordinance, an employer must notify the Commissioner for Labour of any work accident by submitting Form 2 (within 14 days for general work accidents and within 7 days for fatal accidents), irrespective of whether the accident gives rise to any liability to pay compensation. If the employer did not know the happening of such accident or did not otherwise come to his knowledge within such periods of 7 or 14 days (as the case may be) then such notice shall

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REGULATORY OVERVIEW

be given not later than 7 days or, as may be appropriate, 14 days after the happening of the accident is first brought to the notice of the employer or otherwise came to his knowledge.

According to Section 24 of the Employees’ Compensation Ordinance, the main contractor shall be liable to pay compensation to subcontractors’ employees who are injured in the course of their employment to the subcontractor. The main contractor is, nonetheless, entitled to be indemnified by the subcontractor who would have been liable to pay compensation to the injured employee independently of this section. The employees in question are required to serve a notice in writing on the main contractor before making any claim or application against such main contractor.

All employers (including contractors and subcontractors) are required to take out insurance policies to cover their liabilities both under the Employees’ Compensation Ordinance and at common law for injuries at work in respect of all their employees (including full-time and part-time employees) in accordance with section 40 of the Employees’ Compensation Ordinance. For compliance with such obligation, under section 40(1B) of the Employees’ Compensation Ordinance, where a main contractor has undertaken to perform any construction work, it may take out an insurance policy for an amount not less than HK$200 million per event to cover his liability and that of its subcontractor(s) under the Employees’ Compensation Ordinance and at common law. Where a main contractor has taken out a policy of insurance under Section 40(1B) of the Employees’ Compensation Ordinance, the main contractor and a subcontractor insured under the policy shall be regarded as in compliance with section 40(1) of the Employees’ Compensation Ordinance.

An employer who fails to comply with the Employees’ Compensation Ordinance to secure an insurance cover is liable on conviction upon indictment to a maximum fine at level 6 (currently at HK$100,000) and imprisonment for 2 years.

Employment Ordinance (Chapter 57 of the Laws of Hong Kong)

The Employment Ordinance sets out and regulates the rights and duties between the employer and employee. Under the Employment Ordinance, the employees are entitled to some statutory rights such as rest days, sick leave, etc.

Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong)

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

For both employees and employers, it is mandatory to make regular contributions into a 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

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REGULATORY OVERVIEW

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).

Industry Scheme

Industry Schemes were established under the MPF system for employers in the construction and catering industries in view of the high labour mobility in these two industries, and the fact that most employees in these industries are “casual employees” whose employment is on a day-to-day basis or for a fixed period of less than 60 days.

For the purpose of the Industry Schemes, the construction industry covers the following eight major categories:

(1) foundation and associated works;
(2) civil engineering and associated works;
(3) demolition and structural alteration works;
(4) refurbishment and maintenance works;
(5) general building construction works;
(6) fire services, mechanical, electrical and associated works;
(7) gas, plumbing, drainage and associated works; and
(8) interior fitting-out works.

It is not requirement under the Mandatory Provident Fund Schemes Ordinance that employers in these two industries must join the Industry Schemes. The Industry Schemes provide convenience to the employers and employees in the construction and catering industries. Casual employees do not have to switch schemes when they change jobs within the same industry, so long as their previous and new employers are registered with the same Industry Scheme. This is convenient for scheme members and saves administrative costs.

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REGULATORY OVERVIEW

Occupiers Liability Ordinance (Chapter 314 of the Laws of Hong Kong)

The Occupiers Liability Ordinance sets out the obligations of a person occupying or having control of premises on injury resulting to persons or damage caused to goods or other property lawfully on the land.

There is a common duty of care under this Ordinance on an occupier of premises to take such care as in all the circumstances of the case is reasonable to see that the visitor will be reasonably safe in using the premises for the purposes for which he is invited or permitted by the occupier to be there.

Immigration Ordinance (Chapter 115 of the Laws of Hong Kong)

Under section 38A of the Immigration Ordinance, there is a duty on a construction site controller (i.e. the principal or main contractor and includes a subcontractor, owner, occupier or other person who has control over or is in charge of a construction site) to take all practicable steps to (i) prevent having illegal immigrants from being on site or (ii) prevent illegal workers who are not lawfully employable from taking employment on site.

Where it is proved that (i) an illegal immigrant was on a construction site or (ii) such illegal worker who is not lawfully employable took employment on a construction site, the construction site controller is liable to a maximum fine of HK$350,000.

Construction Workers Registration Ordinance (Chapter 583 of the Laws of Hong Kong)

The Construction Workers Registration Ordinance provides, among others, for registration and regulation of construction workers. The principal objective of the Construction Workers Registration Ordinance is to set up a system of registration of construction workers and to regulate construction workers who personally carry out construction work on construction sites.

Under section 3(1) and section 5 of the Construction Workers Registration Ordinance, unless the person is a registered construction worker of the Register of Construction Workers, that person shall not personally carry on a construction site construction work. In the premises, the principal contractors, subcontractors, employers, and/or controllers of construction sites should only employ registered construction workers to personally carry out construction works on construction sites.

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REGULATORY OVERVIEW

Under section 58 of the Construction Workers Registration Ordinance, a main contractor for a construction site is required to provide device(s) that enables the data stored in a registration card in electronic form to be retrieved, and the main contractor may apply for exemption of the above requirement from the Construction Industry Council. Section 58 of the Construction Workers Registration Ordinance further requires a controller of a construction site to:

(a) establish and maintain a daily record in the specified form that contains information of the registered construction workers who are employed by the controller or a subcontractor of the controller and personally carrying out on the site construction work; and
(b) furnish the Registrar of Construction Workers in such manner as directed by the Registrar of Construction Workers with a copy of the record (i) for the period of seven days after any construction work begins on the site; and (ii) for each successive period of seven days, within two Business Days following the last day of the period concerned.

A person who, without reasonable excuse, contravenes section 58 of the Construction Workers Registration Ordinance commits an offence and is liable on conviction to a fine at level 3, which is currently fixed at HK$10,000.

Under the Construction Workers Registration Ordinance, “construction work” means, inter alia , any building operation involved in preparing for any operation such as laying of foundations, excavation of earth and rock before laying of foundations, site clearance, site investigation, site restoration, earthmoving, tunnelling, boring, scaffolding and provision of access. “Construction site” means (subject to certain exceptions) a place where construction works is, or is to be, carried out.

C. LAWS AND REGULATIONS IN RELATION TO ENVIRONMENTAL PROTECTION

Air Pollution Control Ordinance (Chapter 311 of the Laws of Hong Kong)

The Air Pollution Control Ordinance is the principal legislation in Hong Kong for controlling emission of air pollutants and noxious odour from construction, industrial and commercial activities and other polluting sources. Subsidiary regulations of the Air Pollution Control Ordinance impose control on air pollutant emissions from certain operations through the issue of licences and permits.

The Air Pollution Control Ordinance requires that the owner of any premises, which includes a contractor who has possession of a site for the purpose of construction work, used for conduct of any process specified in the Air Pollution Control Ordinance shall use best practicable means for preventing the emission of noxious or offensive emissions from such premises.

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REGULATORY OVERVIEW

A contractor shall observe and comply with the Air Pollution Control Ordinance and its subsidiary regulations, including without limitation the Air Pollution Control (Smoke) Regulations (Chapter 311C of the Laws of Hong Kong), the Air Pollution Control (Open Burning) Regulation (Chapter 311O of the Laws of Hong Kong) and the Air Pollution Control (Construction Dust) Regulation (Chapter 311R of the Laws of Hong Kong). The contractor responsible for a construction site shall devise, arrange methods of working and carry out the works in such a manner so as to minimise dust impacts on the surrounding environment, and shall provide experienced personnel with suitable training to ensure that these methods are implemented. Asbestos control provisions in the Air Pollution Control Ordinance require that building works involving asbestos must be conducted only by registered qualified personnel and under the supervision of a registered consultant.

Air Pollution Control (Construction Dust) Regulation (Chapter 311R of the Laws of Hong Kong)

Under section 3 of the Air Pollution Control (Construction Dust) Regulation, the contractor responsible for a construction site where any notifiable work is proposed to be carried out shall give notice to the public officer appointed under the Air Pollution Control Ordinance of the proposal to carry out the work. Such “notifiable work” include site formation, reclamation, demolition of a building, work carried out in any part of a tunnel that is within 100m of any exit to the open air, construction of the foundation of a building, construction of the superstructure of building or road construction work.

Under section 4(1) of the Air Pollution Control (Construction Dust) Regulation, the contractor responsible for the construction site where a notifiable work is being carried out shall ensure that the work is carried out in accordance with the Schedule of the Air Pollution Control (Construction Dust) Regulation. Any person who contravenes with section 4(1) of the Air Pollution Control (Construction Dust) Regulation commits an offence and is liable to a fine at level 5 (which is currently fixed at HK$50,000) on conviction of a first offence and to a fine at level 6 (which is currently fixed at HK$100,000) and to imprisonment for 3 months on conviction of a second or subsequent offence, and in addition, if the offence is a continuing offence, to a fine of HK$10,000 for each day during the whole or any part of which the offence continues.

Noise Control Ordinance (Chapter 400 of the Laws of Hong Kong)

The Noise Control Ordinance controls, among others, the noise from construction, industrial and commercial activities. A contractor shall comply with the Noise Control Ordinance and its subsidiary regulations in carrying out construction works. For construction activities that are to be carried out during the restricted hours and for percussive piling during the daytime, not being a general holiday, construction noise permits are required from the Director of the Environmental Protection Department in advance.

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REGULATORY OVERVIEW

Under the Noise Control Ordinance, construction works that produce noises and the use of powered mechanical equipment (other than percussive piling) in populated areas are not allowed between 7:00 p.m. and 7:00 a.m. or at any time on general holidays, unless prior approval has been granted by the Director of the Environmental Protection Department through the construction noise permit system. The use of certain equipment is also subject to restrictions. Hand-held percussive breakers and air compressors must comply with noise emissions standards and be issued with a noise emission label from the Director of the Environmental Protection Department.

Any person who carries out any construction work except as permitted is liable on first conviction to a fine of HK$100,000 and on subsequent convictions to a fine of HK$200,000, and in any case to a fine of HK$20,000 for each day during which the offence continues.

Water Pollution Control Ordinance (Chapter 358 of the Laws of Hong Kong)

The Water Pollution Control Ordinance controls the effluent discharged from all types of industrial, manufacturing, commercial, institutional and construction activities into public sewers, rainwater drains, river courses or water bodies. For any industry/trade generating wastewater discharge (except domestic sewage that is discharged into communal foul sewers or unpolluted water to storm drains), they are subject to licencing control by the Director of the Environmental Protection Department.

All discharges, other than domestic sewage to a communal foul sewer or unpolluted water to a storm drain, must be covered by an effluent discharge licence. The licence specifies the permitted physical, chemical and microbial quality of the effluent. The general guidelines are that the effluent does not damage sewers or pollute inland or inshore marine waters.

According to the Water Pollution Control Ordinance, unless being licenced under the Water Pollution Control Ordinance, a person who discharges any waste or polluting matter into the waters of Hong Kong in a water control zone or discharges any matter, other than domestic sewage and unpolluted water, into a communal sewer or communal drain in a water control zone commits an offence and is liable to imprisonment for 6 months and (a) for a first offence, a fine of HK$200,000; (b) for a second or subsequent offence, a fine of HK$400,000 and (c) in addition, if the offence is a continuing offence, a fine of HK$10,000 for each day during which it is proved to the satisfaction of the court that the offence has continued.

Waste Disposal Ordinance (Chapter 354 of the Laws of Hong Kong)

The Waste Disposal Ordinance controls the production, storage, collection, treatment, reprocessing, recycling and disposal of wastes. At present, livestock waste and chemical waste are subject to specific controls whilst unlawful deposition of waste is prohibited. Import and export of waste is generally controlled through a permit system.

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REGULATORY OVERVIEW

A contractor shall observe and comply with the Waste Disposal Ordinance and its subsidiary regulations, including without limitation the Waste Disposal (Charges for Disposal of Construction Waste) Regulation (Chapter 354N of the Laws of Hong Kong) and the Waste Disposal (Chemical Waste) (General) Regulation (Chapter 354C of the Laws of Hong Kong).

Under the Waste Disposal (Charges for Disposal of Construction Waste) Regulation, construction waste can only be disposed at designated prescribed facilities and a main contractor who undertakes construction work with a value of HK$1 million or above will be required, within 21 days after being awarded the contract, to establish a billing account in respect of that particular contract with the Director of the Environmental Protection Department to pay any disposal charges for the construction waste generated from the construction work under that contract.

Under the Waste Disposal (Chemical Waste) (General) Regulation, a person who produces chemical waste or causes it to be produced has to register as a chemical waste producer. Any chemical waste produced must be packaged, labelled and stored properly before disposal. Only a licenced waste collector can transport the waste to a licenced chemical waste disposal site for disposal. Chemical waste producers also need to keep records of their chemical waste disposal for inspection by the Environmental Protection Department.

Under the Waste Disposal Ordinance, a person shall not use, or permit to be used, any land or premises for the disposal of waste unless he has a licence from the Director of the Environmental Protection Department. A person who except under and in accordance with a permit or authorisation, does, causes or allows another person to do anything for which such a permit or authorisation is required commits an offence and is liable to a fine of HK$200,000 and to imprisonment for 6 months for the first offence, and to a fine of HK$500,000 and to imprisonment for 2 years for a second or subsequent offence.

Public Health and Municipal Services Ordinance (Chapter 132 of the Laws of Hong Kong)

The Public Health and Municipal Services Ordinance regulates, amongst other things, activities that are carried out in Hong Kong that may be considered a nuisance or injurious or dangerous to health, including construction works.

Pursuant to section 127 of the Public Health and Municipal Services Ordinance, where a nuisance notice is served on the person by reason of whose act, default or sufferance the nuisance arose or continues, or of that person cannot be found, on the occupier or owner of the premises or vessel on which the nuisance exists, then if either the nuisance to which the notice relates arose by reason of the wilful act or default of that person; or that person fails to comply with any of the requirements of the notice within the period specified therein, that person shall be guilty of an offence.

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REGULATORY OVERVIEW

Any person by reason of whose act, default or sufferance the nuisance arose or continues, or, if that person cannot be found, the occupier or owner of the premises on which the nuisance exists, who does not observe and comply with the nuisance notice could be held liable, where the premises is found to be in such a state so as to be a nuisance and injurious to health, or where the emission of dust from any building under construction or demolition is found to be in such a manner so as to be a nuisance, to a fine of up to HK$10,000 and a daily fine of HK$200.

Any accumulation of refuse which is a nuisance or injurious to health is actionable under the Public Health and Municipal Services Ordinance. The maximum penalty is HK$10,000 upon conviction and a daily fine of HK$200.

Further, pursuant to section 27 of the Public Health and Municipal Services Ordinance, it provides that if any larvae or pupae of mosquitoes are found on any premises consisting of a building site of which there is the appointed contractor, the appointed contractor of the site shall be guilty of an offence. The appointed contractor in relation to the site means the person who is the registered contractor appointed in respect of the site in accordance with the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong) or where the site is owned by the Government, the person who has been appointed the contractor in respect of the site, if he has entered on the site at the relevant time. Pursuant to section 150 and the Ninth Schedule of the Public Health and Municipal Services Ordinance, any person who is guilty of an offence shall be liable on summary conviction to the level 4 penalty (currently fixed at HK$25,000) and where the offence is a continuing offence, the person shall be liable, in addition, to a fine of HK$450 for each day during which it is proved to the satisfaction of the court that the offence has continued.

D. LAWS AND REGULATIONS IN RELATION TO LEVY

Construction Industry Council Ordinance (Chapter 587 of the Laws of Hong Kong)

According to section 32 of the Construction Industry Council Ordinance, construction industry levy (“ CIL ”) is payable by registered contractors appointed under section 9 of the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong) or any persons who carry out construction operations in Hong Kong to the Construction Industry Council. “Construction operation” is exhaustively defined under Schedule 1 of the Construction Industry Council Ordinance, which include building works and street works as defined in section 2(1) of the Building Ordinance.

The CIL chargeable is 0.5% of the total value of the construction operation (as defined under section 53 of the Construction Industry Council Ordinance). Pursuant to section 32 and Schedule 5 of the Construction Industry Council Ordinance, no CIL is chargeable for any construction operation not exceeding HK$1,000,000.

According to section 34 of the Construction Industry Council Ordinance, the contractor and authorised person each are required to inform the Construction Industry

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Council in a specified form (Form 1) in respect of the construction operations within 14 days after its commencement. It is an offence if a person without reasonable excuse failed to give such notice and liable to a fine at level 1, which is currently fixed at HK$2,000. Notice is only required for term contract or if the reasonable estimation of the total value of construction operations exceeds HK$1,000,000.

Pursuant to section 35 of the Construction Industry Council Ordinance, a contractor is required to give a notice of payment in a specified form (Form 2) to the Construction Industry Council within 14 days after the contractor receives a payment in respect of the construction operation. It is an offence if a person without reasonable excuse fails to give the notice of payment and liable to a fine at level 3, which is currently fixed at HK$10,000.

Pursuant to section 36 of the Construction Industry Council Ordinance, a contractor is required to give a notice of completion in a specified form (Form 3) to the Construction Industry Council within 14 days after the completion of the construction operation. It is an offence if a person without reasonable excuse fails to give the notice of completion and liable to a fine at level 3, which is currently fixed at HK$10,000.

The Construction Industry Council shall assess the CIL payable upon receiving the notice of payment or notice of completion and give a notice of assessment in writing specifying the amount of CIL. The Construction Industry Council can also make the assessment notwithstanding no notice of payment or notice of completion has been given. According to section 41 of Construction Industry Council Ordinance, if a contractor fails to give notice of payment or notice of completion without a reasonable excuse, a surcharge not exceeding twice the amount of the CIL payable may be imposed and a notice of surcharge in writing shall be given by the Construction Industry Council.

According to section 46 of the Construction Industry Council Ordinance, if the contractor fails to pay in full the amount of levy or surcharge within 28 days after the notice of assessment or notice of surcharge is given, a 5% penalty of the unpaid amount shall be imposed. If the contractor still fails to pay the unpaid amount within 3 months after the expiry of 28 days, a further 5% penalty of the unpaid amount shall be imposed.

CIL, surcharge, penalty or further penalty is recoverable by the Construction Industry Council as civil debt under the jurisdiction of the District Court. The time limits for the Construction Industry Council to make the assessment or imposing the surcharge under sections 42 to 45 of the Construction Industry Council Ordinance are, whichever is the last of the following periods:

(a) 2 years after the completion of all construction operation under the contract, or without term contract, 2 years after the completion of the construction operations;
(b) 2 years after the expiry of the period within which the contract stipulates that all such construction operations have to be completed; and

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REGULATORY OVERVIEW

(c) one year after evidence, sufficient in the opinion of the Construction Industry Council to justify the making of the assessment, comes to its knowledge.

E. PROPOSED LEGISLATION ON SECURITY OF PAYMENT FOR THE CONSTRUCTION INDUSTRY

Security of Payment Legislation for the Construction Industry (the “SOPL”)

The Government has consulted the public on the proposed introduction of the SOPL to address unfair payment terms, payment delays and disputes. The rationale behind the new legislation is to improve payment practice and enable rapid dispute resolution in the construction industry.

Based on the consultation document of the SOPL, when it comes into force, the SOPL will apply to all written and oral contracts where construction works or plant and materials are being supplied for works in Hong Kong. All public sector construction contracts will be caught by the legislation, whereas only construction and supply contracts for a “new building” (as defined in the Buildings Ordinance) which has an original value in excess of HK$5 million (or HK$0.5 million for professional services and supply only contracts) will be caught in the private sector contracts. However, where the SOPL applies to the main contract, it will automatically apply to all subcontracts in the contractual chain.

Based on the consultation document of the SOPL, the SOPL will include the following key obligations, rights and limits:

(a) The SOPL will prohibit “pay when paid” and similar clauses in contracts. Payers will not be able to rely on such clauses in dispute resolution forums.
(b) The SOPL will prohibit payment periods of more than 60 calendar days for interim payments or 120 calendar days for final payments.
(c) The SOPL will provide a party who is entitled to a claim under a contract with a right to claim the payment by means of a statutory payment claim, upon receipt of which the payer has 30 calendar days to serve a payment response, and either party has a statutory right to refer the matter to adjudication which is a process for decision in 55 working days from the date of appointment of an adjudicator.
(d) The SOPL will give parties who have not been paid amounts admitted as due the right to suspend or reduce the rate of progress of work until payment is made.

Possible impact on our Group

During the Track Record Period, all of our Group’s revenue was derived from private sector projects. When the SOPL comes into force, it will apply to our private sector projects for new buildings which has an original value in excess of HK$5 million and all

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related subcontracts in the contractual chain. For FY2017/18, our trade payables turnover days was approximately 37.6 days. Therefore, our Directors are of the view that the implementation of the SOPL will not have any significant impact on our business or cash flow management. Our Director will ensure that terms of our contracts and payment periods with our subcontractors comply with the legislation in this regard when the SOPL comes into force.

F. SUBCONTRACTOR REGISTRATION SCHEME

Subcontractors undertaking building works in Hong Kong may make an application for registration under the Subcontractor Registration Scheme managed by the Construction Industry Council which is a body corporate established under the Construction Industry Council Ordinance (Chapter 587 of the Laws of Hong Kong) in February 2007.

Subcontractors may apply for registration on the Subcontractor Registration Scheme in one or more of 52 trades which further branch out into around 94 specialties.

The followings are the entry requirements for Applications for registration under the Primary Register of the Subcontractor Registration Scheme:

(a) completion of at least one job within five years as a main contractor/subcontractor in the areas which it applies or to have acquired comparable experience by itself/its proprietors, partners or directors within the last five years;
(b) listings on one or more government registration schemes operated by policy bureaus or departments of the Hong Kong Government relevant to the trades and specialties for which registration is sought;
(c) the applicant or its proprietor, partner or director having been employed by a registered subcontractor for at least five years with experience in the trade/specialty applying for and having completed all the modules of the Project Management Training Series for Sub-contractors (or equivalent) conducted by the Construction Industry Council; or
(d) the applicant or its proprietor, partner or director having registered as Registered Skilled Worker under the Construction Workers Registration Ordinance (Chapter 583 of the Laws of Hong Kong) for the relevant trade/specialty with at least five years’ experience in the trade/specialty applying for and having completed the Senior Construction Workers Trade Management Course (or equivalent) conducted by the Construction Industry Council.

A registered subcontractor shall apply for renewal within three months before the expiry date of its registration by submitting an application to the Construction Industry Council in a specified format providing information and supporting documents as required to show compliance with the entry requirements. An application for renewal shall be subject to approval

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by the management committee which oversees the Subcontractor Registration Scheme (the “ Management Committee ”). If some of the entry requirements covered in an application can no longer be satisfied, the Management Committee of the Construction Industry Council may give approval for renewal based on those trades and specialties where the requirements are met. An approved renewal shall be valid for two years from the expiry of the current registration.

A registered subcontractor shall observe the Codes of Conduct for Registered Subcontractor (Schedule 8 of the Rules and Procedures for the Primary Register of the Subcontractor Registration Scheme) (the “ Codes of Conduct ”). Failing to comply with the Codes of Conduct may result in regulatory actions taken by the Management Committee. The circumstances pertaining to a registered subcontractor that may call for regulatory actions include, but are not limited to:

(a) supply of false information when making an application for registration, renewal of registration or inclusion of additional trades;
(b) failure to give timely notification of changes to the registration particulars;
(c) serious violations of the registration rules and procedures;
(d) convictions of senior management staff (including but not limited to proprietors, partners or directors) for bribery or corruption under the Prevention of Bribery Ordinance (Chapter 201 of the Laws of Hong Kong);
(e) convictions for failure to pay wages on time to workers in accordance with the relevant provisions contained in the Employment Ordinance;
(f) wilful misconducts that may bring the Subcontractor Registration Scheme into serious disrepute;
(g) civil awards/judgments in connection with the violation of or convictions under the relevant sections of the Mandatory Provident Fund Schemes Ordinance;
(h) convictions under the Factories and Industrial Undertakings Ordinance or Occupational Safety and Health Ordinance in relation to serious construction site safety incidents resulting in one or more of the following consequence:
(i) loss of life; or
(ii) serious bodily injury resulting in loss or amputation of a limb or had caused or was likely to cause permanent total disability;
(i) conviction of five or more offences under the Factories and Industrial Undertakings Ordinance and/or Occupational Safety and Health Ordinance each arising out of separate incidents in any six months period (according to the date of committing the

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offence but not the date of conviction), committed by the Registered Subcontractor at each of a construction site under a contract;

(j) convictions for employment of illegal worker under the Immigration Ordinance; or
(k) late payment of workers’ wages and/or late payment of contribution under the Mandatory Provident Fund Schemes Ordinance over ten days with solid proof of such late payment of wages and/or contribution.

Regulatory actions includes:

A. written strong direction and/or warning be given to a registered subcontractor;
B. a registered subcontractor to submit an improvement plan with the contents as specified and within a specified period;
C. a registered subcontractor be suspended from registration for a specified duration; or
D. the registration of a registered subcontractor be revoked.

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HISTORY, DEVELOPMENT AND REORGANISATION

OVERVIEW

We are a contractor of fitting-out services in Hong Kong. Our history can be traced back to the incorporation of our major operating subsidiary, Hoi Sing Decoration, in 1995. Mr. Man, our executive Director and chairman of our Board, together with Mrs. Man, our executive Director and the spouse of Mr. Man, established Hoi Sing Decoration in 1995. Subsequently, Mr. Ho, our executive Director and chief executive officer, joined our Group in May 2001. For the background and relevant industry experience of Mr. Man, Mrs. Man and Mr. Ho, please refer to the section headed “Directors, senior management and employees” in this document.

Our Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law on 9 May 2018 in anticipation of the [REDACTED] . The operating subsidiaries of our Group comprise Hoi Sing Decoration, Hoi Sing Construction, Milieu and Chun Shing Development. Details of these subsidiaries and the corporate structure of our Group are set out in the paragraph headed “Our corporate development” below in this section. Prior to the [REDACTED] , our Group underwent the Reorganisation and immediately following the completion of the Reorganisation, the entire issued share capital of our Company was owned by Hoi Lang, a company incorporated in the BVI which is owned by Mr. Man, Mrs. Man and Mr. Ho as to 50%, 30% and 20%, respectively. Immediately following the completion of the [REDACTED] and the [REDACTED] , Hoi Lang will own [REDACTED] of the entire issued share capital of our Company (without taking into account of any Share which will be allotted and issued upon exercise of [REDACTED] and any option which may be granted under the Share Option Scheme).

KEY BUSINESS MILESTONES

Since establishment, we, among other things, participated in the following key property development projects in Hong Kong as one of the fitting-out contractors:

2006 – a residential development project on Po Lun Street, Lai Chi Kok. 2008 – a commercial development project for an office building on Wang Chiu Road, Kowloon Bay.
a commercial development project for an office building on Hing Fong Road, Kwai Fong.
2009 – a residential development project on Yuen Lung Street, Yuen Long. 2011 – a residential development project on Hoi Fai Road, Tai Kok Tsui.
a private hospital project on Happy Valley for one of the leading private hospitals in Hong Kong.

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HISTORY, DEVELOPMENT AND REORGANISATION

2012 – a residential development project on Heung Sze Wui Road, Tuen Mun. – a residential development project on Ying Ho Road, Yuen Long.
2013 – a residential development project on Austin Road West, West Kowloon.

2014 – a residential development project on Clear Water Bay Road, Clear Water Bay. 2015 – a residential development project on Sham Mong Road, Tai Kok Tsui. 2016 – a residential development project on Kai Yuen Street, North Point. 2017 – a residential development project on Yiu Sha Road, Ma On Shan.

OUR CORPORATE DEVELOPMENT

The following sets forth the corporate history of each our Company and subsidiaries.

Our Company

Our Company was incorporated in the Cayman Islands as an exempted company with limited liability on 9 May 2018. On 9 May 2018, the initial subscribing shareholder transferred one Share to Hoi Lang. A further allotment and issuance of 99 Shares were made on 9 May 2018 to Hoi Lang. After the aforesaid and allotment of Shares, our Company was wholly-owned by Hoi Lang. As a result of the Reorganisation, our Company became the holding company of our Group, directly holding the entire issued share capital of Link Shing. The principal business of our Company is investment holding.

Our subsidiaries

Hoi Sing Decoration

Hoi Sing Decoration was incorporated in Hong Kong as a limited lability company on 21 September 1995. Upon incorporation, one subscriber share of Hoi Sing Decoration of HK$1 each was allotted and issued at par value, to each of Mr. Man and Mrs. Man, who were the initial subscribers of such shares. Subsequently, 69,999 and 29,999 new shares were allotted and issued on 26 September 1995 to Mr. Man and Mrs. Man, respectively, following which Mr. Man and Mrs. Man held 70,000 and 30,000 shares of Hoi Sing Decoration, respectively. On 28 August 2014, Mr. Man transferred 20,000 shares of Hoi Sing Decoration to Mr. Ho at a nominal consideration of HK$20,000. The aforesaid transfer was properly and legally completed and settled. Immediately before the Reorganisation, Hoi Sing Decoration was owned by Mr. Man, Mrs. Man and Mr. Ho as to 50%, 30% and 20%, respectively. As a result of the Reorganisation, Hoi Sing Decoration became an indirect wholly-owned subsidiary of our Company. The principal business of Hoi Sing Decoration is the provision of fitting-out services.

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HISTORY, DEVELOPMENT AND REORGANISATION

Hoi Sing Construction

Hoi Sing Construction was incorporated in Hong Kong with limited liability on 21 February 2001. On 21 February 2001, one share of Hoi Sing Construction of HK$1 each was allotted and issued to each of Mr. Man and Mrs. Man, respectively. Immediately before the Reorganisation, Hoi Sing Construction was owned by Mr. Man and Mrs. Man as to 50% and 50%, respectively. As a result of the Reorganisation, Hoi Sing Construction became an indirect wholly-owned subsidiary of our Company. The principal business of Hoi Sing Construction is the provision of fitting-out services.

Milieu

Milieu was incorporated in Hong Kong with limited liability on 16 December 2010. On 16 December 2010, 70,000 and 30,000 shares of Milieu were allotted and issued to Mr. Man and Mrs. Man, respectively. Since the time of its establishment, Milieu has been owned by Mr. Man and Mrs. Man as to 70% and 30%, respectively. As a result of the Reorganisation, Milieu became an indirect wholly-owned subsidiary of our Company. The principal business of Milieu is the provision of fitting-out services and supply of fitting-out materials.

Chun Shing Development

Chun Shing Development was incorporated in Hong Kong with limited liability on 29 January 2015. On 29 January 2015, one share of Chun Shing Development was allotted and issued to Mr. Man. Since the time of its establishment, Chun Shing Development has been wholly-owned by Mr. Man. As a result of the Reorganisation, Chun Shing Development became an indirect wholly-owned subsidiary of our Company. The principal business of Chun Shing Development is the provision of fitting-out services and supply of fitting-out materials.

Link Shing

Link Shing is an investment holding company for the purpose of holding interest in our subsidiaries. It was incorporated in the BVI with limited liability on 11 May 2018. Upon incorporation, 100 shares were allotted and issued, credited as fully paid, to our Company at par. Link Shing became a direct wholly-owned subsidiary of our Company. As a result of the Reorganisation, Link Shing became the intermediate holding company of our subsidiaries directly holding the entire issued share capital of Hoi Sing Decoration, Hoi Sing Construction, Milieu and Chun Shing Development. Please refer to the paragraph headed “Reorganisation” in this section for the summary of the major Reorganisation steps.

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HISTORY, DEVELOPMENT AND REORGANISATION

REORGANISATION

The following diagrams show the shareholding and corporate structure of our Group immediately before the Reorganisation:

A. Hoi Sing Decoration

==> picture [306 x 148] intentionally omitted <==

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

Mr. Man Mrs. Man Mr. Ho
50% 30% 20%
Hoi Sing Decoration
(HK)
----- End of picture text -----

B. Hoi Sing Construction and Milieu

==> picture [434 x 133] intentionally omitted <==

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

Mr. Man Mrs. Man Mr. Man Mrs. Man
50% 50% 70% 30%
Hoi Sing Construction Milieu
(HK) (HK)
----- End of picture text -----

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HISTORY, DEVELOPMENT AND REORGANISATION

C. Chun Shing Development

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

Mr. Man
100%
Chun Shing Development
(HK)
----- End of picture text -----

In contemplation of the [REDACTED] , members of our Group have undergone the Reorganisation. The Reorganisation involved the following steps:

Incorporation of Hoi Lang, our Company and Link Shing; and
Acquisition of Hoi Sing Decoration, Hoi Sing Construction, Milieu and Chun Shing Development by Link Shing.

Please refer to the paragraph headed “A Further information about our Company – 5. Reorganisation” in Appendix IV to this document for further details of the abovementioned Reorganisation steps.

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HISTORY, DEVELOPMENT AND REORGANISATION

As at [•], the Reorganisation has been legally completed. The following diagram shows the shareholding and corporate structure of our Group immediately after completion of the Reorganisation but before completion of the [REDACTED] and the [REDACTED] :

==> picture [440 x 416] intentionally omitted <==

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

Mr. Man Mrs. Man Mr. Ho
50% 30% 20%
Hoi Lang
(BVI)
100%
The Company
(Cayman Islands)
100%
Link Shing
(BVI)
100%
Hoi Sing Hoi Sing Chun Shing
Milieu
Decoration Construction Development
(HK)
(HK) (HK) (HK)
----- End of picture text -----

[REDACTED]

On [•] 2018, the Company increased its authorised share capital to HK$10,000,000 through the creation of 962,000,000 additional Shares. Conditional upon the share premium account of the Company being credited as a result of the issue of the [REDACTED] by the Company pursuant to the [REDACTED] , the Directors will be authorised to capitalise the amount of HK$ [REDACTED] from the share premium account of the Company by applying such sum towards the paying up in full at par a total of [REDACTED] Shares for the allotment and issue to the then shareholder of the Company, being Hoi Lang.

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HISTORY, DEVELOPMENT AND REORGANISATION

CORPORATE STRUCTURE

The corporate and shareholding structure of our Group immediately following completion of the [REDACTED] and the [REDACTED] (without taking into account any Share which may be issued upon exercise of the [REDACTED] or Share which may be issued upon exercise of any option which may be granted under the Share Option Scheme) is set forth as below:

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

Mr. Man Mrs. Man Mr. Ho Public
50% 30% 20%
Hoi Lang
(BVI)
[REDACTED] [REDACTED]
The Company
(Cayman Islands)
100%
Link Shing
(BVI)
100%
Hoi Sing Hoi Sing Chun Shing
Milieu
Decoration Construction Development
(HK)
(HK) (HK) (HK)
----- End of picture text -----

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BUSINESS

OVERVIEW

We are an established fitting-out contractor in Hong Kong with over 22 years of experience since the establishment of one of our principal operating subsidiaries, Hoi Sing Decoration, in 1995.

Revenue by business operations

The following table sets forth a breakdown of our revenue by business operations during the Track Record Period:

Fitting-out services Supply of fitting-out materials Total	FY2015/16 HK$’000 % 238,823 99.4 1,326 0.6 240,149 100.0	FY2016/17 HK$’000 % 346,099 99.9 292 0.1 346,391 100.0	FY2017/18 HK$’000 % 560,283 100 – – 560,283 100.0	FY2017/18 HK$’000 % 560,283 100 – – 560,283 100.0
				100.0

Revenue under fitting-out services by property type

The following table sets forth a breakdown of our revenue under fitting-out services by property type during the Track Record Period:

Residential Non-residential_(Note)_ Total	FY2015/16 HK$’000 % 222,789 93.3 16,034 6.7 238,823 100.0	FY2016/17 HK$’000 % 341,776 98.8 4,323 1.2 346,099 100.0	FY2017/18 HK$’000 % 530,355 94.7 29,928 5.3 560,283 100.0	FY2017/18 HK$’000 % 530,355 94.7 29,928 5.3 560,283 100.0
				100.0

Note: Non-residential properties mainly include (i) commercial properties; and (ii) a residential care home for the elderly.

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BUSINESS

Revenue by customer type

During the Track Record Period, we focus on providing fitting-out services to customers from the private sector in Hong Kong. Our customers mainly include (i) property developers; (ii) contractors; and (iii) property owners.

The following table sets forth a breakdown of our revenue by customer type during the Track Record Period:

Property developers_(Note 1) Contractors Property owners Others(Note 2)_ Total	FY2015/16 HK$’000 % 237,284 98.8 – – 1,539 0.6 1,326 0.6 240,149 100.0	FY2016/17 HK$’000 % 344,264 99.4 – – 1,835 0.5 292 0.1 346,391 100.0	FY2017/18 HK$’000 % 424,400 75.8 89,281 15.9 22,900 4.1 23,702 4.2 560,283 100.0	FY2017/18 HK$’000 % 424,400 75.8 89,281 15.9 22,900 4.1 23,702 4.2 560,283 100.0
				100.0

Notes:

The category “Property developers” includes both property developers and their subsidiaries.
The category “Others” comprise transactions with Hoi Sing International which formerly engaged in retail trading of timber flooring and Customer I which engages in the provision of residential care services for the elderly. For details, please refer to the paragraph headed “Our customers – Top customers” in this section.

During the Track Record Period, we have established business relationship with over 40 customers, among which, Customer A, being our largest property developer customer during the Track Record Period, has over 12 years of business relationship with us. Our major customers include leading property developers. According to the Ipsos Report, the respective holding companies of some of our top five customers during the Track Record Period, namely Customer A, Customer B and Customer C, are among the top 10 property developers in Hong Kong based on their revenue derived from property development in 2017. Our landmark projects undertaken throughout our operating history included providing fitting-out services for various residential and commercial development projects in Hong Kong. For some of our landmark projects undertaken throughout our operating history, please refer to the section headed “History, development and reorganisation – Key business milestones” in this document.

We pride ourselves in our project management capability and our ability to strategically subcontract on-site labour intensive works to our subcontractors, while maintaining overall project management and implementation. We act as the project manager and principal coordinator for the works we are responsible for which encompasses planning, coordinating, monitoring and supervising the project from project implementation to completion as well as monitoring rectification of defects during the defects liability period. For FY2015/16, FY2016/17 and FY2017/18, the subcontracting charges incurred by us amounted to approximately HK$134.5 million, HK$203.1 million and HK$276.9 million, respectively.

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BUSINESS

Suppliers of goods and services which are specific to our business and are required on a regular basis to enable us to continue to carry on our business mainly include (i) our subcontractors; (ii) suppliers of materials required for performing our fitting-out services such as finished furniture products, timber products, glass and metal; and (iii) suppliers of other miscellaneous services such as rental of machinery and equipment, transportation services and consultancy services. For further information regarding our suppliers, please refer to the section headed “Business – Suppliers” in this document. The major cost components of our Group’s operation include subcontracting charges and cost of materials, which in aggregate accounted for approximately 94.2%, 93.9% and 94.1% of our total direct costs for FY2015/16, FY2016/17 and FY2017/18 respectively.

As advised by our HK Legal Counsel, there is no particular licence required to be obtained by our Group before we commence provision of fitting-out services except for the relevant business registration. All the necessary licences required for fitting-out projects in which our Group is involved are to be obtained by the relevant property developer and main contractor. Although not required under Hong Kong law, during the Track Record Period, Hoi Sing Decoration and Milieu are registered under the Subcontractor Registration Scheme of the Construction Industry Council. For further details of such registration, please refer to the paragraph headed “Licences and qualifications” in this section.

COMPETITIVE STRENGTHS

We believe the following competitive strengths contribute to our historical success and future potential growth:

We have an established reputation and a proven track record in the fitting-out industry

Our first operating subsidiary, namely Hoi Sing Decoration, was incorporated in 1995 for the provision of fitting-out services in Hong Kong and we have since then accumulated more than 22 years of experience. Our landmark projects undertaken throughout our operating history included providing fitting-out services for various residential and commercial development projects in Hong Kong. For some of our landmark projects undertaken throughout our operating history, please refer to the section headed “History, development and reorganisation – Key business milestones” in this document. During the Track Record Period and up to the Latest Practicable Date, we had undertaken over 80 fitting-out projects with an aggregate accumulated revenue recognised amounting to over HK$900 million. As an award of a project is usually based on industry reputation and proven track record according to the Ipsos Report, our Directors are of the view that the above would enable us to be capable of competing with both current and potential new competitors. With the support from our professional staff, suppliers and subcontractors, we believe we have established a good reputation in the fitting-out industry and have demonstrated a proven track record of completing projects on time as well as to the satisfaction of our customers.

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BUSINESS

We are one of the local fitting-out contractors in Hong Kong with established long-term business relationships with leading property developers

The fitting-out industry in Hong Kong is fragmented and competitive. According to the Ipsos Report, as at 1 April 2018, there were 680 companies registered as subcontractors under the category of renovation and fitting-out with the Construction Industry Council. Nevertheless, we have accumulated more than 22 years of operating history in Hong Kong with an established network of customers, suppliers and subcontractors. Our customers include property developers, contractors and property owners, with property developers contributing most of our revenue. For FY2015/16, FY2016/17 and FY2017/18, our revenue attributable to property developers amounted to approximately HK$237.3 million, HK$344.3 million and HK$424.4 million, representing approximately 98.8%, 99.4% and 75.8% of our revenue, respectively. During the Track Record Period, we have established business relationship with over 40 customers, among which, Customer A, being our largest property developer customer during the Track Record Period, has over 12 years of business relationship with us. Our major customers include leading property developers. According to the Ipsos Report, the respective holding companies of some of our top five customers during the Track Record Period, namely Customer A, Customer B and Customer C, are among the top 10 property developers in Hong Kong based on their revenue derived from property development in 2017. Our Directors are of the view that our established long-term business relationships with our major property developer customers differentiate us from our competitors.

Strong management team with in-depth knowledge in the fitting-out industry

With an experienced team of executive Directors and senior management, in which most of them have been working with our Group for over 16 years, we pride ourselves in our project management capability, in particular in (i) sourcing quality fitting-out materials from our suppliers and engaging suitable subcontractors; (ii) monitoring the quality of works in each project; and (iii) completing our projects on time and efficiently. Taking into consideration the daily operation such as implementing and supervising our works in efficient and timely manners, our Directors are of the view that our high calibre management team plays a vital role in our Group’s historical success and future potential growth. Our executive Directors and senior management have extensive industry knowledge, project management experience and industry expertise in the fitting-out industry. We believe that the combination of our management’s collective expertise and knowledge of the industry, together with our experienced employees, have been, and will continue to be, our valuable assets. For details of the experience of our Directors and senior management, please refer to the section headed “Directors, senior management and employees” in this document.

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BUSINESS

BUSINESS STRATEGIES AND FUTURE PLANS

We aim to further strengthen our market position in the fitting-out industry in Hong Kong by pursuing the following strategies. For further details on how we intend to implement the below business strategies, please refer to the section headed “Future plans and [REDACTED] ” in this document.

Expanding our market share through undertaking more sizeable fitting-out projects

According to the Ipsos Report, the total gross output value of the fitting-out industry is forecasted to increase from approximately HK$31.3 billion to approximately HK$39.2 billion at a CAGR of 5.8% from 2018 to 2022 due to the expected growth in both residential and commercial fitting-out industry. During the Track Record Period, fitting-out services contributed approximately 99.4%, 99.9% and 100.0% of our revenue for FY2015/16, FY2016/17 and FY2017/18, respectively. We intend to expand our market share through undertaking more sizeable fitting-out projects with contract sum ranging from approximately HK$100 million to HK$150 million per project with an aim to generate strong revenue stream. With our established reputation and proven track record in the fitting-out industry, we believe we are well-positioned to undertake more sizeable fitting-out projects in Hong Kong to cater for the emerging business opportunities driven by the forecasted growth in the industry. Our Directors take the view that we can achieve this through (i) strengthening our financial position; and (ii) expanding our workforce.

Strengthening our financial position

We believe it is of paramount importance to maintain financially sound and stable in order to take on extra sizeable fitting-out projects as the upfront costs will tie up our resources. Our Directors believe that we can strengthen our financial position through reserving cash for our projects and minimising interest cost expenses.

The upfront costs of our projects generally include subcontracting fees and costs of materials. We target to undertake sizeable projects with contract sum ranging from approximately HK$100 million to HK$150 milion per project. These sizeable projects are generally cashflow demanding. Based on our operation history during the Track Record Period, a sizeable project with total contract sum ranging from HK$100 million to HK$150 million with a new customer generally requires us to pay upfront costs representing approximately 10% of the total contract sum before such costs can be recovered from our customers after a period of approximately 3 to 4 months. We believe [REDACTED] from the [REDACTED] will strengthen our available financial resources to satisfy the requirements for the upfront costs of our projects in the future and allow us to undertake more sizeable projects.

In addition, although we were only required to obtain a performance bond from a bank under one of our projects in order to secure our due and timely performance during the Track Record Period, as at the Latest Practicable Date, we had submitted a tender for a residential development fitting-out project with a new customer, being a subsidiary of a property

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development and investment group listed on the Stock Exchange, with original tender contract sum amounting to approximately HK$129.0 million, which, if our tender bid were successful, would require us to obtain a performance bond amounting to approximately HK$12.9 million, representing approximately 10% of the original contract sum. Our Directors therefore consider that if we intend to expand our market share through undertaking more sizeable fitting-out projects, in particular from new customers, we may inevitably encounter tender/quotation invitations that require us to obtain performance bonds to secure our performance and it will be optimal to reserve our cash for projects of this kind in this regard.

During the Track Record Period, we have become increasingly more reliant on our bank borrowings for financing our business operations. As at 31 March 2016, 2017, 2018 and 30 April 2018, our bank borrowings amounted to HK$15.2 million, HK$30.4 million, HK$33.6 million and 35.9 million, respectively, with effective interest rates of bank borrowings ranging from HKD Prime Rate minus 0.5% to HKD Prime Rate plus 0.5% per annum, flat rate of 4.2% and flat rate of 4.8%, while our interest paid on our bank borrowings for FY2015/2016, FY2016/17 and FY2017/18 amounted to approximately HK$1.2 million, HK$1.0 million and HK$1.7 million, respectively. As at 30 April 2018, we had approximately HK$7.0 million of unutilised banking facilities. Given the anticipated increase in interest rates, we expect interest incurred from our bank borrowings will continue to surge at the same gearing level. Our Directors therefore consider that it will be beneficial for us to minimise our future interest cost expenses through repaying our existing bank borrowings.

Expanding our workforce

As at the Latest Practicable Date, we had 67 full-time employees, of which 39 were from our project department comprising 10 project managers and 29 site supervisors. Limited by the manpower of our current project management team, in particular project managers and site supervisors who supervise our subcontractors at the project sites, we believe it is crucial to expand our in-house team of staff in order to cater for a larger number of sizeable fitting-out projects to be undertaken by us. In addition, although we strategically subcontract on-site labour intensive works to our subcontractors in order to optimise our business operation, our Directors consider that going forward, depending on the project nature and the particular customer, it may be beneficial for us to carry out the labour intensive works using our own direct labour resources rather than subcontracting. Our Directors consider that we may be able to achieve a higher profit margin for our projects through using our own labour resources rather than through subcontracting since we have more control as to the profit markup.

Continue to emphasise and maintain high standards of project planning, management and implementation

We pride ourselves in our project management capability and maintain overall project management and implementation at our project sites. We will continue to collaborate with our subcontractors in our pursuit of overall project quality. More importantly, we will continue to apply our systematic approach to project management to further standardise and streamline different areas of our operations. We believed that with an expanded team of project

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management professionals, we are well-positioned to enhance the project planning and management process so that we can closely monitor various activities at the project site as well as the resources required at different stages of the project. In addition, our professional team will ensure that our projects are completed in strict adherence to project timetables and specifications and within the budget. We will also continue to implement strict quality control measures to monitor our product quality and workmanship throughout the entire process. We believe that our ability to maintain high standard services will improve customer comfort and satisfaction and in turn enhance our capability to compete with other industry peers in the future.

Adhere to prudent financial management to ensure sustainable growth and capital sufficiency

We will continue to closely monitor our capital and cash positions and carefully manage key areas such as subcontracting fees and cash flow. In the process of identifying and capturing emerging opportunities, we will continue to focus on projects on a selective and prudent basis which are profitable and sizeable in nature. In addition, we will continue to focus on our internal control system to maintain adequate cash flow for our ongoing capital requirements and to achieve maximum cost savings.

OUR PRINCIPAL BUSINESS AND BUSINESS MODEL

Fitting-out services

Our fitting-out services cover both (i) fitting-out works conducted on new buildings; and (ii) interior renovation works on existing buildings that involve upgrades, makeovers and demolition of existing works. Our fitting-out services are mainly provided for residential and commercial properties in Hong Kong on a project basis. Our fitting-out projects are awarded through either competitive tenders or quotation invitations. We offer an array of fitting-out services such as ceiling, metal and glass works, as well as installation of built-in furniture, timber flooring, kitchen cabinetries and timber doors. The installation of timber flooring, kitchen cabinetries and timber doors under our fitting-out services portfolio are generally provided for new residential buildings. Timber flooring fitting-out services mainly include supply and installation of timber flooring and skirting. Kitchen cabinetry installation services mainly include supply and installation of kitchen cabinetries and relevant kitchen materials such as sinks and hook rails. Timber door installation services mainly include supply and installation of timber doors, doorframes, doorframe lines and relevant materials such as door holdfasts, door hinges and doorknobs.

We pride ourselves in our project management capability. We strategically subcontract on-site labour intensive works to our subcontractors, while maintaining overall project management and implementation. We act as the project manager and principal coordinator for the works we are responsible for which encompasses planning, coordinating, monitoring and supervising the project from project implementation to completion as well as monitoring rectification of defects during the defects liability period. We assign adequate project managers

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to monitor different aspects of our projects in order to ensure the quality of our subcontractors’ works and adhere to contract specifications and timetable. Depending on the contractual terms, we may also be responsible for assigning adequate safety officers and/or safety supervisors to monitor the safety matters of our projects.

During the Track Record Period and up to the Latest Practicable Date, we had undertaken over 80 fitting-out projects with an aggregate accumulated revenue recognised amounting to over HK$900 million, and fitting-out services contributed most of our revenue. For FY2015/16, FY2016/17 and FY2017/18, revenue attributable to fitting-out services amounted to approximately HK$238.8 million, HK$346.1 million and HK$560.3 million, representing approximately 99.4%, 99.9% and 100.0% of our total revenue, respectively. Our fitting-out services covered both residential properties and non-residential properties, with a primary focus on residential properties, representing approximately 93.3%, 98.8% and 94.7% of our revenue from fitting-out services for FY2015/16, FY2016/17 and FY2017/18, respectively.

Supply of fitting-out materials

Operation flow

In order to optimise our overall project management on quality and adherence to timetable, we assign our project managers and site supervisors to supervise our subcontractors at the project site. As at the Latest Practicable Date, we had 10 project managers and 29 site supervisors. We engage subcontractors for our project works in the form of quotations. As at the Latest Practicable Date, we had more than 140 suppliers and subcontractors on our internal approved suppliers and subcontractors list. In addition, we procure some fitting-out materials from our suppliers through making purchase orders. With the long-term and stable support from our subcontractors and suppliers, we believe we are able to satisfy our customers’ needs and secure continuing business opportunities.

Our projects are awarded through either competitive tenders or quotation invitations. The execution of our projects involves different stages and the duration of our projects varies depending on customer specifications and project complexity. During the Track Record Period, our fitting-out projects were generally completed within 20 to 36 months from a project being awarded to us.

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The diagram below illustrate the general steps involved in executing our projects awarded through tenders:

==> picture [236 x 506] intentionally omitted <==

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

Receiving tender invitation and
assessing project particulars
Preparing tender documents
1 to 2 weeks
and budget estimation
Reviewing and submitting
tender documents
3 to 20 weeks
Award of contract
Forming a project
management team
Reviewing and finalising
specific project requirements
20 to 36 months
Sourcing materials from suppliers
and engaging subcontractors
Issuing progress payments
Project completion
Defects liability period and
release of retention money
12 to 36 months
Issuing final accounts
----- End of picture text -----

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Receiving tender invitation and assessing project particulars

Our customers generally send us tender invitations with general information of the potential projects. We will conduct preliminary assessment on whether the potential projects are commercially viable. If we have accepted the invitation, our customers will provide us with a tender package which specifies the project requirements including, among other things, specifications, schedule of rates, drawings, contact details and closing time of the tender.

Preparing tender documents and budget estimation

We adopt a cost-plus pricing model in order to determine our tender price. When we are determining the estimated cost, we may conduct site visits and/or attend meetings if necessary to have a better understanding of the site conditions and constraints. It generally takes a period of 1 to 2 weeks for us to assess and finalise the tender price and the requisite tender documents. With a view to estimate costs more accurately, it is our practice to invite our approved suppliers and subcontractors to submit preliminary quotations to us when we are preparing our tender submissions. For further details on our pricing strategy, please refer to the paragraph headed “Pricing strategy” in this section.

Reviewing and submitting tender documents

Our executive Directors will review our tender documents before submitting to our potential customers. We may be invited to attend tender interviews to discuss and clarify the work scope and specifications as well as negotiating and finalising the contract terms and contract sum with our customers. If our customer accepts our tender proposal, we will receive a letter of acceptance specifying the commencement date of the project.

Award of contract

During the Track Record Period, our projects are secured through submitting tenders/quotations. The following table sets forth the statistics of our tenders during the Track Record Period:

	FY2015/16	FY2016/17	FY2017/18
Number of tenders/quotations
submitted	106	74	91
Number of successful
tenders/quotations	30	20	31
Success rate	28.3%	27.0%	38.3%

Note: In the above table, success rate for a financial year is calculated based on the number of contracts awarded (regardless of whether they were awarded in the same financial year or subsequently) in respect of the tenders/quotations submitted during that financial year. As at the Latest Practicable Date, 10 out of 91 tenders/quotations submitted in FY2017/18 had not expired and the results were pending. These tenders/quotations were excluded for the purpose of determining the success rate.

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The number of tenders/quotations we submitted dropped from 106 for FY2015/16 to 74 for FY2016/17 as a result of 2 fitting-out projects being awarded to us with a total contract sum of over HK$350 million in June 2016. As it was estimated that these sizeable fitting-out projects would tie up most of our resources, we therefore submitted less tenders/quotations for FY2016/17. The number of tenders/quotations subsequently rose to 91 for FY2017/18 as we hired more project managers and site supervisors during FY2017/18 to cater for our projects. We therefore submitted more tenders/quotations during such period. Our Directors are of the view that the higher tenders/quotations success rate recorded in FY2017/18 was mainly due to our more competitive pricing strategy for tenders/quotations submitted in FY2017/18 as compared to FY2016/17 in an attempt to secure more new projects as we were able to allocate more staff to our projects.

It is our strategy to be responsive to our customers’ tender/quotation invitations, and actively provide to our customers our tender submissions or reply to quotations upon receipt of their invitations. Our Directors believe that this can enable us to (i) maintain our relationship with customers; (ii) maintain our presence in the market; and (iii) be informed of the latest market developments and pricing trends which are useful for tendering projects in the future. Due to such strategy and subject to the tender/quotation strategy of our competitors from time to time, we may experience fluctuations in our overall tender/quotation success rates from period to period. Given our tender/quotation strategy and in view of our performance over the Track Record Period and our projects on hand as at the Latest Practicable Date (please refer to the paragraph headed “Our projects undertaken during the Track Record Period – Projects on hand” in this section), our Directors consider that our overall tender/quotation success rate during the Track Record Period has been satisfactory in general.

Forming a project management team

Upon securing a contract from our customer, we will form a specific project management team generally comprising a project manager and a safety officer/safety supervisor. Our project management team is responsible for overseeing the project execution, identifying on-site issues, taking possible remedial actions and reporting working progress. Our project managers will closely monitor our subcontractors in each project by having regular on-site meeting with our customer and subcontractors. These can ensure that we comply with our customer’s requirements and deliver quality work in accordance with the project timetable.

Reviewing and finalising specific project requirements

We are required to carry out fitting-out services according to the designs and work plans as set out in the tender documents as well as our customers’ requirements. We are generally not required to offer advice to our customers for their design and work plans. From time to time, our project management team reviews and clarifies the specific project requirements with our customers, gives feedback to our customers and resolves with our customers any problems encountered.

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Sourcing materials from suppliers and engaging subcontractors

We maintain our internal list of approved suppliers and subcontractors, which is updated on an ongoing basis. During the preparation of tendering documents, we obtain preliminary quotations from our fitting-out materials suppliers and subcontractors to facilitate our cost estimations. We generally do not maintain any inventory for fitting-out materials and place purchase orders with our suppliers based on the specific needs of each fitting-out project. Our suppliers would directly deliver and store the fitting-out materials in the corresponding project site. Before the fitting-out materials are delivered, our project managers will perform site visit at the respective factory for inspection.

Issuing progress payments

We submit monthly payment applications to our customers with reference to progress payment summaries certified by the consultants appointed by our customers which indicates the percentage of work done in the preceding month and the corresponding amount payable by our customers. For details of our principal terms of engagement with our customers, please refer to the paragraph headed “Our customers – Principal terms of engagement with our customers”.

Our subcontractors generally submit payment requests to us on a monthly basis based on percentage of work done under the subcontracted works. Taking into account the complexity of the works, our project manager will assess and verify the percentage of work done before settlement. Payments are generally made within 30 days after we approve the subcontractor’s payment request. For details of our principal terms of engagement with our subcontractors, please refer to the paragraph headed “Our suppliers – Principal terms of engagement with our subcontractors”.

Project completion, defects liability period and issuing final accounts by our customers

Upon completing our projects, we will hand over the project to our customers upon which the defects liability period will start. At the end of the defects liability period, our rectifications obligations will be completed and where there is retention money under the contract, our customers will release the remaining retention money to us. After the defects liability period, we will follow up with customers and reach agreement on the final accounts.

OUR PROJECTS UNDERTAKEN DURING THE TRACK RECORD PERIOD

All our fitting-out services are provided on a project basis and our fitting-out projects are generally awarded through tenders. The below paragraphs set forth particulars of our fitting-out projects undertaken during the Track Record Period.

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Number of fitting-out projects

The following table sets forth the number of fitting-out projects which contributed revenue to us during the Track Record Period:

		FY2015/16	FY2015/16	FY2016/17	FY2016/17	FY2017/18	FY2017/18
		Number of		Number of		Number of
		projects	HK$’000	projects	HK$’000	projects	HK$’000
Fitting-out	services	70	238,823	69	346,099	64	560,283

Movement in our number of fitting-out projects

The following table sets forth movement in our number of fitting-out projects with revenue contribution during the Track Record Period, with breakdown of new projects commenced during the year and projects completed during the relevant year:

Projects brought forward from previous year New projects commenced works during the year Less: Projects completed during the year Projects carried forward to next year	FY2015/16 Number of projects 41 29 29 41	FY2016/17 Number of projects 41 28 31 38	FY2017/18 Number of projects 38 26 41 23_(Note)_

Note: As at 31 March 2018, we had 27 fitting-out projects in our backlog, of which 4 had not yet commenced works. For details of our fitting-out projects in our backlog, please refer to the paragraph headed “Our projects undertaken during the Track Record Period – Backlog” in this section.

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Number of fitting-out projects by range of revenue recognised

For FY2015/16, FY2016/17 and FY2017/18, there were, respectively, 70, 69 and 64 fitting-out projects which contributed approximately HK$238.8 million, HK$346.1 million and HK$560.3 million, respectively to our revenue. The following table sets forth a breakdown of such projects based on their respective range of revenue recognised during the Track Record Period:

Revenue recognised HK$50 million or above HK$10 million to below HK$50 million HK$1 million to below HK$10 million Below HK$1 million Total	FY2015/16 Number of projects 1 7 11 51 70	FY2016/17 Number of projects 1 12 18 38 69	FY2017/18 Number of projects 3 9 17 35
			64

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Major projects

The following tables set forth particulars of our five largest fitting-out projects for FY2015/16, FY2016/17 and FY2017/18 in terms of revenue contribution:

FY2015/16

									Revenue	Percentage
						Actual/	Total		recognised	of our
						expected project	contract		for the	revenue for
Project		Customer		Location	Type of project	duration (Note 1)	sum	(Note 2)	year	the year
							(HK$’000)		(HK$’000)	%
Project	A	Customer	A	Yuen Long	Fitting-out services	December 2014 to	122,596		62,299	25.9
					for a residential	December 2017
					development
					project
Project	B	Customer	B	Sai Kung	Fitting-out services	August 2015 to	97,410		29,260	12.2
					for a residential	October 2017
					development
					project
Project	C	Customer	A	Yuen Long	Fitting-out services	September 2014 to	38,669		19,592	8.2
					for a residential	April 2018
					development
					project
Project	D	Customer	A	Kennedy	Fitting-out services	August 2014 to	24,712		17,968	7.5
				Town	for a residential	April 2018
					development
					project
Project	E	Customer	B	Central	Fitting-out services	March 2015 to	22,276		16,034	6.7
					for a commercial	April 2018
					building

Notes:

The project start date is determined based on the date of the letter of award or contract or first invoice to customer and the project completion date is determined based on the date we submitted our payment application to our customer for 100% of our work done or based on our Directors’ estimation and may be subject to change taking into account the actual work schedule and variation orders (if any) as at the Latest Practicable Date.

The total contract sum represents the original estimated contract sum stated in the contract taking into account subsequent adjustments due to variation orders.

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FY2016/17

									Revenue	Percentage
						Actual/	Total		recognised	of our
						expected project	contract		for the	revenue for
Project		Customer		Location	Type of project	duration (Note 1)	sum	(Note 2)	year	the year
							(HK$’000)		(HK$’000)	%
Project	B	Customer	B	Sai Kung	Fitting-out services	August 2015 to	97,410		55,401	16.0
					for a residential	October 2017
					development
					project
Project	A	Customer	A	Yuen Long	Fitting-out services	December 2014 to	122,596		41,981	12.1
					for a residential	December 2017
					development
					project
Project	F	Customer	B	Sai Kung	Fitting-out services	January 2016 to	26,849		26,849	7.8
					for a residential	October 2017
					development
					project
Project	G	Customer	A	Yuen Long	Fitting-out services	February 2016 to	30,727		26,434	7.6
					for a residential	August 2018
					development
					project
Project	H	Customer	A	Nam	Fitting-out services	June 2016 to	190,005		22,587	6.5
				Cheong	for a residential	December 2018
					development
					project

Notes:

The project start date is determined based on the date of the letter of award or contract or first invoice to customer and the project completion date is determined based on the date we submitted our payment application to our customer for 100% of our work done or based on our Directors’ estimation and may be subject to change taking into account the actual work schedule and variation orders (if any) as at the Latest Practicable Date.
The total contract sum represents the original estimated contract sum stated in the contract taking into account subsequent adjustments due to variation orders.

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FY2017/18

								Revenue	Percentage
					Actual/	Total		recognised	of our
					expected project	contract		for the	revenue for
Project		Customer	Location	Type of project	duration (Note 1)	sum	(Note 2)	year	the year
						(HK$’000)		(HK$’000)	%
Project	H	Customer A	Nam	Fitting-out services	June 2016 to	190,005		130,086	23.2
			Cheong	for a residential	December 2018
				development
				project
Project	I	Customer A	Nam	Fitting-out services	June 2016 to	179,261		122,730	21.9
			Cheong	for a residential	December 2018
				development
				project
Project	J	Customer H	Kau To	Fitting-out services	May 2017 to	140,300		83,202	14.8
			Shan	for a residential	March 2019
				development
				project
Project	K	Customer A	Nam	Fitting-out services	October 2015 to	63,097		35,684	6.4
			Cheong	for a residential	December 2018
				development
				project
Project	L	Customer I	Shatin	Fitting-out services	July 2017 to	23,702		23,702	4.2
				for a residential	December 2017
				care centre for
				the elderly

Notes:

The project start date is determined based on the date of the letter of award or contract or first invoice to customer and the project completion date is determined based on the date we submitted our payment application to our customer for 100% of our work done or based on our Directors’ estimation and may be subject to change taking into account the actual work schedule and variation orders (if any) as at the Latest Practicable Date.
The total contract sum represents the original estimated contract sum stated in the contract taking into account subsequent adjustments due to variation orders.

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Backlog

As at 31 March 2016, 2017 and 2018 and the Latest Practicable Date, we had a total of 41, 38, 27, and 29 fitting-out projects in our backlog (including projects that have commenced but not completed as well as projects that have been awarded to us but not yet commenced) with revenue derived or expected to be derived from such projects as follows:

Number of projects in our backlog Total estimated contract sum_(Note 4)_ Total revenue attributable to such projects: – recognised on or before the date indicated – yet to be recognised as at the date indicated	As at 31 March 2016(Note 1) 41 HK$’000 819,148 528,363 290,785 819,148	As at 31 March 2017(Note 2) 38 HK$’000 1,146,007 651,238 494,769 1,146,007	As at 31 March 2018(Note 3) 27 HK$’000 1,112,322 609,361 502,961 1,112,322	As at the Latest Practicable Date 29 HK$’000 1,183,226 680,318 502,908
				1,183,226

Notes:

Out of the 41 projects in our backlog as at 31 March 2016, 11 projects commenced in FY2015/16. The total contract sum of such projects was approximately HK$233.1 million.
Out of the 38 projects in our backlog as at 31 March 2017, 15 projects commenced in FY2016/17. The total contract sum of such projects was approximately HK$522.2 million.
Out of the 27 projects in our backlog as at 31 March 2018, 8 projects commenced in FY2017/18. The total contract sum of such projects was approximately HK$265.5 million.
The total contract sum represents the original estimated contract sum stated in the contract, or where applicable, subsequent adjustments due to variation orders.

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Projects on hand

Our projects on hand represent projects that have commenced but not completed and projects that have been awarded to us but works have not yet been commenced. As at the Latest Practicable Date, we had a total of 29 projects on hand among which 21 were major projects with total contract sum exceeding HK$10.0 million each and 8 were projects with total contract sum less than HK$10.0 million each. The aggregate total contract sum of these 8 projects each with total contract sum less than HK$10.0 million was approximately HK$34.7 million. The following table sets forth the details of our major projects on hand with total contract sum exceeding HK$10.0 million each as at the Latest Practicable Date (in descending order by contract sum):

						Total	Revenue recognised	Revenue recognised
					Expected project	contract	during the Track Record Period
Project	Customer		Location	Type of project	duration (Note 1)	sum (Note 2)	FY2015/16	FY2016/17	FY2017/18
						(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
1	Customer	A	Nam Cheong	Fitting-out services for	June 2016 to	190,005	–	22,587	130,086
				a residential	December 2018
				development project
2	Customer	A	Nam Cheong	Fitting-out services for	June 2016 to	179,261	–	22,587	122,730
				a residential	December 2018
				development project
3	Customer	A	Nam Cheong	Fitting-out services for	December 2017 to	177,033	–	–	–
				a residential	September 2019
				development project
4	Customer	H	Kau To Shan	Fitting-out services for	May 2017 to	140,300	–	–	83,202
				a residential	March 2019
				development project
5	Customer	A	Nam Cheong	Fitting-out services for	October 2015 to	63,097	3,468	10,366	35,684
				a residential	December 2018
				development project
6	Customer	B	Tsim Sha Tsui	Fitting-out services for	May 2018 to	55,103	–	–	–
				a shopping mall	November 2019
7	Customer	A	Ma On Shan	Fitting-out services for	July 2017 to	44,060	–	–	4,311
				a residential	March 2019
				development project
8	Customer	A	Nam Cheong	Fitting-out services for	July 2017 to	37,984	–	–	–
				a residential	December 2019
				development project
9	Customer	A	Yuen Long	Fitting-out services for	February 2016 to	30,727	–	26,434	3,808
				a residential	August 2018
				development project
10	Customer	B	North Point	Fitting-out services for	August 2016 to	26,991	–	7,167	15,567
				a residential	December 2018
				development project

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						Total	Revenue recognised	Revenue recognised
				Expected project	contract		during the Track Record Period
Project	Customer	Location	Type of project	duration (Note 1)	sum	(Note 2)	FY2015/16	FY2016/17	FY2017/18
					(HK$’000)		(HK$’000)	(HK$’000)	(HK$’000)
11	Customer C	Fanling	Fitting-out services for	September 2017 to	26,981		–	–	2,114
			a residential	March 2019
			development project
12	Customer B	Tai Wai	Fitting-out services for	February 2018 to	26,718		–	–	–
			a residential	June 2019
			development project
13	Customer A	Ma On Shan	Fitting-out services for	September 2017 to	24,357		–	–	2,383
			a residential	March 2019
			development project
14	Customer A	Sai Wan	Fitting-out services for	April 2016 to	23,503		–	14,203	7,429
			a residential	June 2018
			development project
15	Customer A	Tung Chung	Fitting-out services for	August 2014 to	18,132		5,827	11,039	492
			a residential	March 2019
			development project
16	Customer B	Ma On Shan	Fitting-out services for	October 2014 to	16,815		10,801	3,194	55
			a residential	August 2018
			development project
17	Customer A	Tuen Mun	Fitting-out services for	July 2017 to	16,043		–	–	10,476
			a residential	October 2018
			development project
18	Non top five	Lei Yue Mun	Fitting-out services for	May 2018 to	15,800		–	–	–
	customer		a residential	February 2019
			development project
19	Customer C	Ma On Shan	Fitting-out services for	April 2015 to	13,622		8,606	3,355	86
			a residential	August 2018
			development project
20	Customer A	Yuen Long	Fitting-out services for	September 2016 to	11,568		–	2,880	5,811
			a residential	March 2019
			development project
21	Customer C	Fanling	Fitting-out services for	October 2018 to	10,736		–	–	–
			a residential	March 2019
			development project

Notes:

The project start date is determined based on the date of the letter of award or contract or first invoice to customer or our Directors’ estimation and the project completion date is determined based on our Directors’ estimation and may be subject to change taking into account the actual work schedule and variation orders (if any) as at the Latest Practicable Date.
The total contract sum represents the original estimated contract sum stated in the contract taking into account subsequent adjustments due to variation orders.

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LICENCES AND QUALIFICATIONS

	Type of	Issuing
Registrant	registration	authority	Trade code	Trade specialty	Date of expiry
Hoi Sing	Registered	Construction	02.02 Marble,	Marble/	28 October 2018
Decoration	subcontractor	Industry	granite and	granite work
		Council	stone work
			02.05 Shutter/	Timber doors
			doors fabrication
			and installation
			02.05 Shutter/	Fire rated door
			doors fabrication
			and installation
			02.11 Renovation	Renovation and
			and fitting-out	fitting-out
Milieu	Registered	Construction	02.03 Joinery and	Wooden flooring	10 April 2019
	subcontractor	Industry	carpentry
		Council

Based on our Directors’ experience, some of our customers prefer to engage or would only engage subcontractors who are registered under the Subcontractor Registration Scheme of the Construction Industry Council. The Subcontractor Registration Scheme was introduced by the Construction Industry Council in order to build up a pool of capable and responsible subcontractors with specialised skills and strong professional ethics. The registration and the renewal of registration for the Subcontractor Registration Scheme are subject to the satisfaction of certain entry requirements which primarily concern the applicant’s experience and/or qualification in the relevant works. Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date, we had satisfied all requirements for the registration and the renewal of registration for the Subcontractor Registration Scheme. Renewal is required every two years. We successfully renewed our aforementioned registration since the registration was first obtained. Our HK Legal Counsel confirmed that he does not foresee any material legal impediment in the renewal of the aforesaid registration by us.

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OUR CUSTOMERS

Characteristics of our customers

Our customers are from the private sector and mainly include (i) property developers; (ii) contractors; and (iii) property owners. Our services are provided on a project basis and we do not enter into long-term agreements with our customers. Credit period with our customers generally ranges from 21 to 30 days after issuance of our invoice. Our customers generally settle our payments by bank transfer or cheque in Hong Kong dollars. During the Track Record Period and up to the Latest Practicable Date, we had not experienced any material dispute with our customers.

The following table sets forth a breakdown of our revenue by customer type during the Track Record Period:

Property developers_(Note 1) Contractors Property owners Others(Note 2)_ Total	FY2015/16 HK$’000 % 237,284 98.8 – – 1,539 0.6 1,326 0.6 240,149 100.0	FY2016/17 HK$’000 % 344,264 99.4 – – 1,835 0.5 292 0.1 346,391 100.0	FY2017/18 HK$’000 % 424,400 75.8 89,281 15.9 22,900 4.1 23,702 4.2 560,283 100.0	FY2017/18 HK$’000 % 424,400 75.8 89,281 15.9 22,900 4.1 23,702 4.2 560,283 100.0
				100.0

Note:

The category “Property developers” includes both property developers and their subsidiaries.
The category “Others” comprise transactions with Hoi Sing International which formerly engaged in retail trading of timber flooring and Customer I which engages in provision of residential care services for the elderly. For details, please refer to the paragraph headed “Our customers – Top customers” in this section.

Principal terms of engagement with our customers

The terms of our contracts vary across customers and projects. The major terms of our contracts for fitting-out services and contracts for the supply of fitting-out materials are set out in the below paragraphs.

Contracts for fitting-out services

Contract sum

The agreed contract sum varies across projects depending on the scale and complexity of the works. Depending on the contract terms, some of our customers pay us an advance payment of up to 5% of the total contract sum upon confirmation of award. For further details of our pricing strategy, please refer to the paragraph headed “Pricing strategy” in this section.

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Progress payment

We submit monthly payment application to our customers with reference to progress payment summaries certified by the consultants appointed by our customers which indicate the percentage of work done and the corresponding amount payable by our customers. Credit period with our customers under our fitting-out contracts generally ranges from 21 to 30 days after we issue our invoice.

Retention money

Some of our fitting-out contracts provide that our customers shall be entitled to retain up to 10% of each progress payment, in aggregate subject to maximum retention of 5% of the total contract sum as retention money. Where there is retention money, 50% of the retention money will be released upon completion of the project and the remaining retention money will be released upon expiry of the defects liability period. The completion date is generally agreed between us and our customers and our customers generally do not issue any formal certificate of completion. As at 31 March 2018, retention receivables held by our customers amounted to approximately HK$4.8 million.

Defects liability period

Our contracts generally provide that we offer a defects liability period of 12 to 36 months depending on the contract terms during which we are responsible for rectifying defects. The defects liability period starts to run once the completion date is agreed between us and our customers. Our Directors confirm that, during the Track Record Period and up to the Latest Practicable Date, we received no significant complaint or claim from our customers in the relevant defects liability period of our projects and the cost incurred for remedying defective works was not material.

Variation orders

Our customers may, in the course of project execution, place orders concerning variation to part of the fitting-out services that is necessary for the completion of the project. Such orders are commonly referred to as variation orders. Such orders seek to modify specifications, amount and scope of works stipulated in the original contracts. As a result, the final contract sum may be adjusted in accordance with the variation orders. The principal contract terms and settlement of the variation orders are generally in line with the original contract. Where the works under the variation order is the same or similar to the works prescribed in the contract, the rate of the works under the variation order usually accord with the bills of quantity in the original contract. If there was no equivalent or similar items under the original contract for reference, we will further agree on the rates with our customers.

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For FY2015/16, FY2016/17 and FY2017/18, our total revenue amounted to approximately HK$240.1 million, HK$346.4 million and HK$560.3 million, of which our revenue recognised for variation orders amounted to approximately HK$8.8 million, HK$21.1 million and HK$39.5 million respectively.

Liquidated damages

Our fitting-out contracts generally provide that we shall compensate our customers an amount of liquidated damages per day if we fail to complete the fitting-out services on schedule. To mitigate and minimise our liability in this regard, it is usually agreed that a time extension clause to be inserted into the contract to the effect that time may be extended if project delay is caused or expected as a result of uncontrollable events such as severe weather conditions. We have not been required to pay any material liquidated damages in our projects undertaken during the Track Record Period and up to the Latest Practicable Date.

Performance bonds

During the Track Record Period, we were not required to obtain performance bonds for our projects. As at the Latest Practicable Date, we had been awarded a contract at an original contract sum of approximately HK$15.8 million under which we would be required to obtain a performance bond from a bank in order to secure our due and timely performance. The amount of performance bond to be obtained amounted to 10% of the original contract sum and is expected to be obtained in or around August 2018 which will be financed by further drawdown of banking facilities.

Contracts for the supply of fitting-out materials

The agreed contract sum of contracts for the supply of fitting-out materials depends on the quantities and dimensions of the timber products supplied under the contracts. Some of our contracts provide that a 30% deposit shall be paid by our customer, 69% of the contract sum be paid after delivery and 1% of the contract sum shall be retained for a period of 12 months after delivery. Credit period granted to our customer under these contracts is generally 30 days.

Top customers

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The following tables set forth details of our five largest customers for FY2015/16, FY2016/17 and FY2017/18:

FY2015/16

Rank Customer Customer type Service provided by our Group Business relationship since Typical credit terms and payment method 1 Customer A_(Note 1) Property developer Fitting-out services 2005 30 days; Bank transfer 2 Customer B(Note 2) Property developer Fitting-out services 2012 21 to 30 days; Cheque 3 Customer C(Note 3) Property developer Fitting-out services 2013 30 days; Cheque 4 Hoi Sing International (Note 4) Other Supply of fitting-out materials 2015 30 days; Cheque 5 Customer E(Note 5)_ Property developer Fitting-out services 2014 30 days; Cheque Five largest customers combined All other customers Total revenue	Revenue HK$’000 162,677 64,960 8,972 926 675 238,210 1,939 240,149	% of total revenue 67.7 27.1 3.7 0.4 0.3
		99.2
		0.8
		100.0

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FY2016/17

Rank Customer Customer type Service provided by our Group Business relationship since Typical credit terms and payment method 1 Customer A_(Note 1) Property developer Fitting-out services 2005 30 days; Bank transfer 2 Customer B(Note 2) Property developer Fitting-out services 2012 21 to 30 days; Cheque 3 Customer C(Note 3) Property developer Fitting-out services 2013 30 days; Cheque 4 Customer F(Note 6) Property owner Fitting-out services 2016 30 days; Cheque 5 Hoi Sing International (Note 4)_ Other Supply of fitting-out materials 2015 30 days; Cheque Five largest customers combined All other customers Total revenue	Revenue HK$’000 228,119 112,757 3,388 352 261 344,877 1,514 346,391	% of total revenue 65.9 32.5 1.0 0.1 0.1
		99.6
		0.4
		100.0

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FY2017/18

Rank Customer Customer type Service provided by our Group Business relationship since Typical credit terms and payment method 1 Customer A_(Note 1) Property developer Fitting-out services 2005 30 days; Bank transfer 2 Customer H(Note 7) Contractor Fitting-out services 2017 30 days; Bank transfer 3 Customer B(Note 2) Property developer Fitting-out services 2012 21 to 30 days; Cheque 4 Customer I(Note 8) Other Fitting-out services 2017 30 days; Cheque 5 Customer J(Note 9)_ Property owner Fitting-out services 2017 30 days; Cheque Five largest customers combined All other customers Total revenue	Revenue HK$’000 366,322 83,202 55,878 23,702 14,398 543,502 16,781 560,283	% of total revenue 65.4 14.8 10.0 4.2 2.6
		97.0
		3.0
		100.0

Notes:

Customer A include subsidiary(ies)/related company(ies) of a company listed on the Stock Exchange, the principal activities of which include development of and investment in properties.
Customer B include subsidiary(ies)/related company(ies) of a company listed on the Stock Exchange, the principal activities of which include development of and investment in properties.
Customer C is a subsidiary of a company listed on the Stock Exchange, the principal activities of which include development of and investment in properties.
Hoi Sing International is a related party of our Group. For details of our transactions with Hoi Sing International, please refer to the section headed “Financial information – Related party transactions”.
Customer E is a subsidiary of a company listed on the Stock Exchange, with principal activities in the property, transportation, hospitality and investment sectors.
Customer F is an individual customer who engaged us for providing fitting-out services for a residential home.

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Customer H is a private company in Hong Kong which engages in provision of interior design and fitting-out services.
Customer I is a private company in Hong Kong which engages in provision of residential care services for the elderly.
Customer J is an individual customer who engaged us for providing fitting-out services for a residential home.

Customer concentration

Our Directors are of the view that based on the Ipsos Report, customer concentration within the fitting-out industry is not uncommon and that our business is sustainable despite our customer concentration during the Track Record Period for the following reasons:

A small number of projects can contribute to a substantial amount of our revenue

During the Track Record Period, revenue generated from Customer A, our largest customer amounted to approximately HK$162.7 million, HK$228.1 million and HK$366.3 million, representing approximately 67.7%, 65.9% and 65.4% of our revenue for FY2015/16, FY2016/17 and FY2017/18, respectively. Such revenue was attributable to 50 fitting-out projects from Customer A during the Track Record Period. As such, it is not uncommon for a single project to have a relatively large contract sum such that a small number of projects can contribute to a substantial amount of our revenue.

Sizeable fitting-out projects are concentrated among top 10 property development in Hong Kong

Three of our major customers during the Track Record Period are subsidiaries of reputable local property developers in Hong Kong. According to the Ipsos Report, the respective holding companies of Customer A, Customer B and Customer C are among the top 10 property developers in Hong Kong based on their revenue derived from property development in 2017. According to the Ipsos Report, sizeable fitting-out projects with large contract sums are concentrated among the top 10 property development in Hong Kong. Hence, if we decide to undertake a certain project with large contract sum, the relevant customer may easily become our largest customer in terms of revenue contribution to us.

Revenue concentration among our major customers was a result of careful selection of our projects from quality customers

We are an active player in the fitting-out industry. During the Track Record Period, we experienced a strong demand for our services from a range of customers including tender invitations from our three largest customers, as evidenced by the number of invitations for tenders/quotations that we received. For FY2015/16, FY2016/17, FY2017/18, we received over 500 invitations for tenders/quotations and we submitted tenders for approximately 55% of these invitations. Our Directors are of the view that our active participation in our potential customers’ tendering process may reinforce our presence in the industry. As we

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strive to maintain a good balance of the factors we consider under our pricing strategy as more detailed in the paragraph headed “Our customer – Pricing strategy” in this section when considering whether to submit a tender or reply to a quotation for a potential project, including in particular, (a) the size of the project; (b) reputation of the potential customer; (c) our past working relationship with the potential customer; and (d) the financial strength and repayment record of the potential customer, revenue concentration among our major customers during the Track Record Period reflects the result of careful selection of our projects from quality customers. Our Directors believe that in the event that project engagement with any of our major customers is substantially reduced, our Group would have the capacity to handle projects from other customers in view of the expected growth of demand for fitting-out services in Hong Kong according to the Ipsos Report.

Downward trend on reliance on our major customers

We have demonstrated a downward trend on reliance on our major customers and at the same time achieved business growth during the Track Record Period as we have taken steps to expand our customer base. Revenue contributed by our top five customers experienced slight drop from 99.6% for FY2016/17 to 97.0% for FY2017/18 amid our strong growth in total revenue from HK$346.4 million to HK$560.3 million during the same period. Revenue contributed by Customer A experienced a downward trend from 67.7% for FY2015/16 to 65.9% for FY2016/17 and to 65.4% for FY2017/18. Further, our revenue contribution from Customer B decreased from approximately 32.5% for FY2016/17 to 10.0% in FY2017/18. In addition, we were able to establish our initial business relationship with Customer H and Customer I in FY2017/18, who both became our top five customers during the same period. Our business relationship with major customers, industry experience and proven track record are essential to our major customers to ensure that we are capable of completing their projects on time and in accordance with their requirements. With our presence in the fitting-out industry, our Directors believe that we are able to extend our services to other customers.

Customers who were also our suppliers

Contra-charge arrangements with our customers

During the course of our business, there may be occasions where our customers pay on our behalf for fitting-out materials used under our projects and subsequently deduct such payments when settling our project payments. Such arrangements are commonly known as “contra-charge arrangement” and the amounts involved are known as “contra-charge”. According to the Ipsos Report, contra-charge arrangements are common in the industry.

During the Track Record Period, we had contra-charge arrangements with some of our customers. In this context, we regard such customers as our suppliers as well. Such contra-charge generally included purchase cost of fitting-out materials used under our fitting-out projects. Upon our request, or at the discretion of our customers, our customers may purchase fitting-out materials on our behalf, and such amounts are subsequently settled under

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contra-charge arrangements. Effectively, the payments due to us from our customers under our projects will be settled after netting off such contra-charge amounts. For FY2015/16, FY2016/17 and FY2017/18, our contra-charge incurred amounted to approximately HK$0.4 million, HK$1.1 million and HK$52.4 million, representing approximately 0.2%, 0.4% and 10.5% of our total direct costs for the same period, respectively.

During the Track Record Period, as confirmed by our Directors, we had no material dispute with our customers as regards the contra-charge arrangements and the contra-charge amounts involved. In addition, as we settled the contra-charge by netting off with the payments due from our customers, both cash inflows from the project work done and cash outflows from the purchase of fitting-out materials were reduced by the same amount. Therefore, the contra-charge arrangements had no material impact on our cashflow positions during the Track Record Period.

The following table sets forth the particulars of the material contra-charge arrangements we had with our top customers during the Track Record Period:

	FY2015/16		FY2016/17		FY2017/18
	HK$’000	%	HK$’000	%	HK$’000	%
Customer A
Revenue derived and percentage
of our total revenue	162,677	67.7	228,119	65.9	366,322	65.4
Contra-charge amounts and
percentage of our total direct
costs	407	0.2	842	0.3	847	0.2
Customer B
Revenue derived and percentage
of our total revenue	64,960	27.1	112,757	32.5	55,878	10.0
Contra-charge amounts and
percentage of our total direct
costs	26	0.0	262	0.1	793	0.2
Customer H
Revenue derived and percentage
of our total revenue	–(Note 1)	–(Note 1)	–(Note 1)	–(Note 1)	83,202	14.8
Contra-charge amounts and
percentage of our total direct
costs	–(Note 1)	–(Note 1)	–(Note 1)	–(Note 1)	50,779_(Note 2)_	10.2

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Notes:

We did not have contra-charge arrangements with Customer H for FY2015/16 and FY2016/17.
Customer H was one of our top customers and one of our top suppliers during the Track Record Period. Customer H engaged us as a subcontractor for providing fitting-out services for a new residential property under one project at a total contract sum of HK$120.0 million. For FY2017/18, revenue attributable to Customer H was approximately HK$83.2 million while our purchases from Customer H was approximately HK$50.8 million. The amount of purchases from Customer H was the result of payments made by Customer H on our behalf for (i) marble works performed by other subcontractors designated and engaged by Customer H; and (ii) fitting-out materials sourced by Customer H directly. We believe Customer H engaged those subcontractors directly as those subcontractors had previous business relationship with Customer H and were able to offer a more competitive price for performing the marble works. Nevertheless, we maintained the overall project management and implementation under the project. As the payments made by Customer H on our behalf under such project was substantial, Customer H became one of our major suppliers for FY2017/18.

Collection of trade receivables and retention receivables

We are exposed to risks in relation to collection of progress payments and retention money. For details of our credit risk in this connection, please refer to the section headed “Risk factors – If we are unable to receive progress payments on time and in full, or that retention money is not fully released to us after expiry of the defects liability period, our liquidity and financial position may be materially and adversely affected” in this document.

In order to minimise such credit risk and our financial loss, most of our customers are required to settle payment within 30 days after issuance of our invoice. We would monitor and evaluate overdue payments on a case-by-case basis and consider appropriate follow-up actions such as reissuing invoices.

As at 31 March 2016, 2017 and 2018, the aggregate amounts of trade and retention receivables amounted to approximately HK$24.4 million, HK$37.0 million and HK$26.5 million, respectively. Please also refer to the section “Financial information – Discussion on selected statement of financial position items – Trade and other receivables” for a further discussion and analysis on our trade receivables and retention receivables and our trade receivables turnover days during the Track Record Period” in this document.

Sales and marketing

Our Directors are of the view that tender/quotation invitations from potential customers within the private sector are largely based on reputation and proven track record of a contractor in the industry. We therefore do not actively promote ourselves through formal sales and marketing activities.

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Our executive Directors and senior management actively explore new business opportunities by identifying any new projects in Hong Kong through social discussion with other market participants. We also maintain stable business relationships and timely communication with our customers and the architect and consultants in the construction industry so as to keep abreast of market trend and potential business opportunities.

Pricing strategy

We adopt a cost-plus pricing model in order to determine our tender/quotation price. We take into account several factors such as (i) the cost; (ii) our overheads; (iii) the size of the project; (iv) our capacity; (v) our liquidity; (vi) our past working relationship with the potential customer; (vii) the reputation of the potential customer; and (viii) the financial strength and repayment record of the potential customer. We would then calculate the final cost estimation and price the bills of quantity.

In order to mitigate our exposure to risk of inaccurate estimation and cost overrun, the pricing of our projects is overseen by our executive Directors, whose background and experience are set out in the section headed “Directors, senior management and employees” in this document. Our Directors confirm that during the Track Record Period, we did not experience any material loss-making contracts.

Seasonality

Our Directors are of the view that our Group’s business operation is not subject to any significant seasonality.

OUR SUPPLIERS

Characteristics of our suppliers

Suppliers of goods and services which are specific to our business and are required on a regular basis to enable us to continue to carry on our business mainly include (i) our subcontractors who generally provide installation or other technical services such as plaster, ceiling, glass and metal works as well as installation of timber flooring, kitchen cabinetries and timber doors; (ii) suppliers of materials required for performing our fitting-out services such as finished furniture products, timber products, glass and metal; and (iii) suppliers of other miscellaneous services such as rental of machinery and equipment (which mainly include scaffold for use at our fitting-out worksites), transportation services and consultancy services (which mainly include outsourced safety consultancy services). While our subcontractors may during the course of performing their services supply certain materials, our material suppliers do not provide any installation or technical services and only supply materials directly sourced by us.

As at the Latest Practicable Date, we had over 140 suppliers and subcontractors on our internal approved suppliers and subcontractors list. Both potential and approved suppliers are

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shortlisted and reviewed from time to time with reference to certain criteria including, among other things, (i) price; (ii) product quality; (iii) punctuality in delivery; and (iv) past business relationship. We generally maintain multiple materials suppliers to avoid over-relying on a single or certain suppliers. When we place purchase orders for materials, unless our customers require us to source from specific suppliers, we select suppliers from our approved list based on factors such as the specific project requirements and the price quotation. When we receive tender documents or quotation invitations from our potential customers, we will seek preliminary quotations from our selected suppliers and, once being awarded the project, we will confirm the final price of materials with our suppliers. We engage our materials suppliers in the form of quotations and we do not enter into any long-term supply agreements with our suppliers.

Credit period with our suppliers generally ranges from 0 to 30 days from the date invoice is issued. We generally settle the payables to our suppliers by cheque and bank transfer in Hong Kong dollars. During the Track Record Period and up to the Latest Practicable Date, we had not experienced any material shortage or delay in our supplier’s delivery of materials which would significantly disrupt our works.

The following table sets forth a breakdown of our total purchases by type during the Track Record Period:

Subcontracting charges Materials Rental of machinery and equipment Other direct costs Total purchases	FY2015/16 HK$’000 % 134,512 65.1 69,263 33.5 954 0.5 1,859 0.9 206,588 100.0	FY2016/17 HK$’000 % 203,076 70.6 82,561 28.7 45 0.0 2,071 0.7 287,753 100.0	FY2017/18 HK$’000 % 276,886 58.7 192,740 40.8 55 0.0 2,224 0.5 471,905 100.0	FY2017/18 HK$’000 % 276,886 58.7 192,740 40.8 55 0.0 2,224 0.5 471,905 100.0
				100.0

Please refer to the section headed “Financial information” in this document for a discussion of the fluctuation in our purchases from our suppliers during the Track Record Period as shown in the above table as well as the relevant sensitivity analyses in this connection.

Top suppliers (including our subcontractors)

For FY2015/16, FY2016/17 and FY2017/18, our largest supplier accounted for 16.7%, 14.2% and 12.7% of our total purchases, respectively, while our five largest suppliers (including our subcontractors) in aggregate accounted for 55.1%, 60.3% and 43.5% of our total purchases, respectively. To the best of our Directors’ knowledge, save as disclosed below, none of our Directors or their respective close associates or our Shareholders who own more than 5% of the issued share capital of our Company had any interest in our five largest suppliers during the Track Record Period.

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The following tables set forth the breakdown of our five largest suppliers (including our subcontractors) in FY2015/16, FY2016/17 and FY2017/18:

FY2015/16

Rank Supplier Materials/ services supplied Business relationship since Typical credit terms and payment method 1 Supplier A_(Note 1) Subcontracting of ceiling and painting works 2009 30 days; Bank transfer, Cheque 2 Supplier B(Note 2) Subcontracting of fitting-out services 2015 30 days; Cheque 3 Haicheng Huizhou(Note 3) Supply of finished furniture products and timber products 2015 30 days; Bank transfer 4 Supplier D(Note 4) Supply of timber products and subcontracting of timber works 2015 30 days; Bank transfer 5 Supplier E(Note 5)_ Supply of finished furniture products and metal 2015 30 days; Bank transfer, Cheque Five largest suppliers combined All other suppliers Total purchases	Purchases HK$’000 34,407 20,500 20,274 19,617 18,973 113,771 92,817 206,588	% of total purchases 16.7 9.9 9.8 9.5 9.2
		55.1
		44.9
		100.0

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FY2016/17

Rank Supplier Materials/ services supplied Business relationship since Typical credit terms and payment method 1 Supplier B_(Note 2) Subcontracting of fitting-out services 2015 30 days; Cheque 2 Haicheng Huizhou(Note 3) Supply of finished furniture products and timber products 2015 30 days; Bank transfer 3 Supplier D(Note 4) Supply of timber products and subcontracting of timber works 2015 30 days; Bank transfer 4 Supplier A(Note 1) Subcontracting of ceiling and painting works 2009 30 days; Bank transfer, Cheque 5 Supplier F(Note 6)_ Supply of glass and subcontracting of glass works 2014 30 days; Bank transfer, Cheque Five largest suppliers combined All other suppliers Total purchases	Purchases HK$’000 40,956 39,744 35,087 35,087 22,599 173,473 114,280 287,753	% of total purchases 14.2 13.8 12.2 12.2 7.9
		60.3
		39.7
		100.0

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FY2017/18

Rank Supplier Materials/ services supplied Business relationship since Typical credit terms and payment method 1 Supplier A_(Note 1) Subcontracting of ceiling and painting works 2009 30 days; Bank transfer, Cheque 2 Customer H(Note 7) Contra-charge amounts for marble works and fitting-out materials paid on our behalf 2017 – 3 Supplier E(Note 5) Supply of finished furniture products and metal 2015 30 days; Bank transfer, Cheque 4 Supplier G(Note 8) Supply of finished furniture products and subcontracting of fitting-out services 2013 30 days; Bank transfer, Cheque 5 Supplier D(Note 4)_ Supply of timber products and subcontracting of timber works 2015 30 days; Bank transfer Five largest suppliers combined All other suppliers Total purchases	Purchases HK$’000 60,156 50,779 43,065 26,486 24,876 205,362 266,543 471,905	% of total purchases 12.7 10.8 9.1 5.6 5.3
		43.5
		56.5
		100.0

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Notes:

Supplier A is a private company in Hong Kong, the principal activities of which include provision of ceiling and painting works.
Supplier B is a private company in Hong Kong, the principal activities of which include provision of fitting-out services.
Haicheng Huizhou is a related party of our Group. For details of our transactions with Haicheng Huizhou, please refer to the section headed “Financial information – Related party transactions”.
Supplier D is a private company in Hong Kong, the principal activities of which include supply of timber products and provision of timber works.
Supplier E are private companies in the PRC, the principal activities of which include supply of finished furniture products and metal.
Supplier F is a private company in Hong Kong, the principal activities of which include supply of glass and provision of glass works.
Customer H is one of our top customers and one of our top suppliers during the Track Record Period. For details, please refer to the paragraph headed “Our customers – Customers who were also our suppliers” in this section.
Supplier G is a private company in Hong Kong, the principal activities of which include supply of finished furniture products and provision of fitting-out services.

Subcontracting arrangement

We pride ourselves in our project management capability and we strategically subcontract on-site labour intensive works to our subcontractors, while maintaining overall project management and implementation. Our Directors believe that it is not uncommon in the market for fitting-out contractors to engage subcontractors to perform all on-site labour intensive or skilled works as it allows for a low fixed cost overhead and allows us to more effectively manage our projects by making use of others’ established expertise and skill-set on a project basis.

As at the Latest Practicable Date, we had 50 subcontractors on our internal approved subcontractors list. Both potential and approved subcontractors are shortlisted and reviewed from time to time with reference to certain criteria including, among other things, (i) price; (ii) work quality; (iii) the reputation of the subcontractor; (iv) adherence to timetable; and (v) past business relationship. We generally maintain multiple subcontractors for our projects to avoid over-relying on a single or certain subcontractors. Our customers generally do not contractually restrict us in selecting our subcontractors. We select subcontractors from our approved list based on factors such as the specific project requirements and the price quotation. We engage our subcontractors in the form of quotations and we do not enter into any long-term subcontracting agreements with our subcontractors.

We are responsible to our customers for the performance of our subcontractors. We may also be liable to any potential employees’ compensation claims and personal injuries claims from

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the employees of our subcontractors. Therefore, when a project is in the stage of implementation, our project managers will closely supervise the progress and quality of works undertaken by our subcontractors. Furthermore, our safety officers and/or safety supervisors will ensure that our subcontractors comply with all applicable safety requirements.

Principal terms of engagement with our subcontractors

We generally enter into contracts with our subcontractors upon securing contracts from our customers. The terms of our contracts vary across subcontractors and projects but generally mirror the terms of the main contracts with our customers. The major terms of our fitting-out contracts with our subcontractors are set out in the below paragraphs.

Contract sum

The agreed contract sum varies across projects depending on the scale and complexity of the works we are required to perform under the main contract with our customers.

Progress payment

Our subcontractors submit payment request to us on a monthly basis according to percentage of work done under the subcontracted works. Credit period with our subcontractors is generally 30 days after their invoice is issued to us.

Retention money

Although some of our main contracts with our customers provide that our customers shall be entitled to retention money, we generally do not in turn retain any part of the progress payments made to our subcontractors as retention money.

Defects liability period

Depending on the terms of the main contracts with our customers, our subcontractors offer a defects liability period of 12 to 36 months during which our subcontractors are responsible for rectifying defects.

Variation orders

The principal contract terms and settlement of the variation orders are generally in line with those under the main contracts with our customers.

Basis of selecting subcontractors

We evaluate our subcontractors taking into account their quality of services, skills and technique, credit-worthiness, pricing, availability of resources in accommodating delivery requirement as well as their reputation and track records. Based on these factors, we select and

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maintain an internal list of approved subcontractors and such list is updated on an ongoing basis. When subcontractors are needed for a particular project, we select subcontractors from our list based on their experience relevant to the particular project as well as their availability and fee quotations.

Control over subcontractors

We are liable to our customers for the performance and the quality of work done by our subcontractors. In general, works performed by our subcontractors are inspected and monitored by our on-site personnel based on our quality management system, environmental management system and occupational health and safety management system. For further information on our measures and management systems in relation to work quality, occupational safety and environmental protection, please refer to the paragraphs headed “Quality control”, “Occupational health and safety”, and “Environmental compliance” in this section.

QUALITY CONTROL

Our fitting-out projects are monitored by a project management team comprising a project manager and a safety officer/safety supervisor, who are responsible for the overall quality assurance of the project. We generally only engage subcontractors on our approved list of subcontractors based on the nature and complexity of each project and the availability of our resources at the time. Our project management team in each project generally conducts regular on-site inspections and arranges for regular meetings with our subcontractors to address material issues such as quality issues, to ensure sufficient resources are allocated for each project, and that the works executed at each stage meet the requirements of our customers. During the Track Record Period and up to the Latest Practicable Date, we had not received any material complaint or request for any kind of material compensation from our customers due to quality issue of our performance and our subcontractors’ performance.

ENVIRONMENTAL COMPLIANCE

Our Group’s business is subject to the applicable laws and regulations relating to environmental protection. For details, please refer to the section headed “Regulatory overview” in this document.

Our Directors believe that it is essential for us to be environmentally responsible and to meet our customers’ demands in environmental protection and at the same time meeting the community’s expectation for a healthy living and working environment. Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date, our Group did not have any material violation of the relevant contract terms on environmental protection which led to claims by our customers.

In order to comply with the applicable environmental protection laws and regulations, we have established an environmental management policy to ensure proper management of environmental protection and compliance of environmental laws and regulations by both our

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employees and workers of the subcontractors on areas such as treatment of hazardous materials, noise control, waste management and dust and fumes management.

Set out below are our measures and work procedures required to be followed by our employees and workers of our subcontractors in respect of environmental protection compliance:

Environmental protection guidelines

Area Environmental protection guidelines Treatment of • Any hazardous chemical used shall be disposed of in hazardous materials accordance with the relevant laws and regulations such as the Air Pollution Control Ordinance, the Water Pollution Control Ordinance and the Waste Disposal Ordinance.
• Adequate ventilation shall be provided where chemicals or cleaning agents are used.
Noise control • Using powered mechanical equipment during the restricted hours is prohibited.
Waste management • Provision of collection points on the site at which all empty cans, packing and other receptacles capable of holding water shall be deposited and shall provide for frequent and regular collection and removal of such articles from the site.
Minimise the generation of waste.
The reuse and recycling of waste shall be practiced as far as possible. The recycled materials shall include paper/ cardboard, timber and metal.
Dust and fumes • Prevent dust nuisance and smoke. management • Ensure that there will be adequate water supply/storage for dust suppression.

During the Track Record Period, our compliance cost in relation to the applicable environmental laws and regulations in Hong Kong was immaterial. We estimate that the annual cost of compliance going forward will be at a level similar to that incurred during the Track Record Period and consistent with our scale of operation.

INSURANCE

During the Track Record Period, we have taken out insurance policies relating to employees’ compensation. Our Directors consider that our insurance coverage is adequate and consistent with industry norm having regard to our current operations and the prevailing industry practice. For FY2015/16, FY2016/17 and FY2017/18, our total insurances premium incurred were approximately HK$0.2 million, HK$0.2 million and HK$0.2 million, respectively.

Employees’ compensation insurance

Pursuant to section 40 of the Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong), all employers (including contractors and subcontractors) are required to

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take out insurance policies to cover their liabilities both under the Employees’ Compensation Ordinance and at common law for injuries at work in respect of all their employees (including full-time and part-time employees).

Under section 24 of the Employees’ Compensation Ordinance, a contractor will be liable for any accident of the workers of its subcontractors on the work sites. Therefore, where we engage subcontractors, our Group will be liable for any accident of workers of our subcontractors in addition to our own employees. In Hong Kong, the main contractor of a construction project would normally take out insurance policy covering its liabilities as well as the liabilities of all its subcontractors under the Employees’ Compensation Ordinance. During the Track Record Period, save for contracts entered into with property owners, all of our Group’s customers had taken out employees’ compensation insurance policies pursuant to section 40 of the Employees’ Compensation Ordinance covering the liabilities of itself and its subcontractors. In such cases, our liabilities as a subcontractor and the liabilities of our subcontractors are insured by our customer’s insurance policy, which has also been reflected in the contracts entered into between our Group and our customers. As advised by our HK Legal Counsel, as long as the relevant main contractors have taken out insurance policies on their own to cover all the workers on the work sites up to the applicable amount, there is no requirement under the Employees’ Compensation Ordinance that such insurance policy must be taken out by our Group as well.

During the Track Record Period and up to the Latest Practicable Date, we have taken out employees’ compensation insurance to cover our liabilities under the Employees’ Compensation Ordinance and at common law for injuries at work in respect of all our back-office employees as required under the Employees’ Compensation Ordinance for an amount of up to HK$100 million per event.

Other insurance coverage

We have also taken out comprehensive insurance on our motor vehicle.

Uninsured risks

Certain risks disclosed in the section headed “Risk factors” in this document, such as risks in relation to customer concentration, our ability to obtain new contracts, estimation and management of costs, our ability to retain and attract personnel, credit risk and liquidity risk are generally not covered by insurance because they are either uninsurable or it is not cost justifiable to insure against such risks. Please refer to the paragraph headed “Risk management and internal control systems” below in this section for further details regarding how our Group manages certain uninsured risks.

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EMPLOYEES

As at the Latest Practicable Date, we had 67 full-time employees who are directly employed by us in Hong Kong. The following table sets forth a breakdown of our full-time employees by function:

Directors and chief financial officer Administrative and accounting department Surveying department Safety supervising department Project department Drafting department Quality department Total	As at 31 March 2016 4 5 4 0 22 1 1 37	As at 31 March 2017 3 7 4 1 34 2 1 52	As at 31 March 2018 4 7 5 7 42 3 1 69	As at the Latest Practicable Date 4 7 7 6 39 3 1
				67

Relationship with staff

Our Directors are of the view that our management and employees have maintained an amicable relationships which is expected to remain the same or rather better in the future. During the Track Record Period and up to the Latest Practicable Date, we had not experienced any material labour dispute or claim involving and against us.

Recruitment, employees’ remuneration and benefits

We generally recruit employees with the appropriate skills, both technical and personal, in order to meet our current and future needs and ensure that the employees appointed are qualified and competent to carry out their duties.

We may remunerate our employees with a fixed salary and a discretionary bonus based on our Group’s performance. Our employees’ benefits also include a grant to fund further education which aims at enhancing our employees’ personal development or equipping them with necessary knowledge and skills to perform their job duties. Our employees are also entitled to participate in the Share Option Scheme, the principal terms of which are set out in the paragraph headed “D. Share Option Scheme” in Appendix IV to this document. Our ability to attract, retain and motivate qualified personnel is critical to our success. We believe that we are able to attract,

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retain and motivate qualified personnel by offering competitive remuneration and benefits. With a compact team of energetic employees, we endeavour to provide services that exceed our customers’ expectations, which we believe will help us secure new opportunities.

PROPERTIES

As at the Latest Practicable Date, we did not own any property and we leased the following property which was material to our business operation:

	Approximate
Location	Gross Floor Area	Rent	Usage	Duration
	(sq.ft.)	(HK$ per
		month)
Unit 8, 39/F	2,755	44,000	Office	From 1 April 2018
Cable TV Tower				to 31 March 2021
No. 9 Hoi Shing Road
Tsuen Wan
New Territories
Hong Kong
House 3	1,400	36,000	Directors’ quarter	From 6 February 2017
8 Yau Lai Road			for the	to 5 February 2019
Grandview Villa			accommodation
Yau Kom Tau			of Mr. Man and
Tsuen Wan			Mrs. Man
New Territories
Hong Kong

INTELLECTUAL PROPERTY RIGHTS

For the details of our intellectual property rights, please refer to the section headed “B. Further information about our business – 2. Intellectual property rights” in Appendix IV to this document.

As at the Latest Practicable Date, we were not aware of (a) any infringement which could have a material adverse effect on our business operations by our Group against any intellectual property rights of any third party or by any third party against any intellectual property rights of our Group; or (b) any disputes with third parties in relation to intellectual property rights.

RESEARCH AND DEVELOPMENT

During the Track Record Period and as at the Latest Practicable Date, we did not engage in any research and development activity.

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RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

Key risks relating to our business are set out in the section headed “Risk factors” in this document. The following sets out the key measures adopted by our Group under our risk management and internal control system for managing the more particular operational and financial risks relating to our business operation.

Customer concentration risk

Please refer to the paragraph headed “Our customers – Customer concentration”.

Credit risk relating to collection of trade receivables and retention receivables

Please refer to the paragraph headed “Our customers – Collection of trade receivables and retention receivables” in this section.

Risk of potential inaccurate cost estimation and cost overrun

Please refer to the paragraph headed “Our customers – pricing strategy” in this section.

Risks relating to subcontractors’ performance

Please refer to the paragraphs headed “Our suppliers – Basis of selecting subcontractors” and “Our suppliers – Control over subcontractors” in this section.

Quality control system

Please refer to the paragraph headed “Quality control”.

Environmental management system

Please refer to the paragraph headed “Environmental compliance”.

Occupational health and safety system

Please refer to the paragraph headed “Occupational health and safety” in this section.

Liquidity risk

We are exposed to liquidity risk due to the payment practice applied to our projects. For details of such risk, please refer to the section headed “Risk factors – Our liquidity may be materially and adversely affected due to the payment practice applied to our projects” in this document.

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We may experience net cash outflows at the early stage of a project as we are required to bear expenses upfront. Our customers make progress payments according to our work progress, and such payments need to be certified by our customers before we issue an invoice to them. In addition, where our contracts provide that our customers shall be entitled to retention money, 50% of the retention money will be released upon completion of the project and the remaining retention money will be released upon expiry of the defects liability period. Accordingly, our cash flow typically turn from net outflows at the early stage of a project into accumulative net inflows gradually as the project progresses. This results in a cash flow gap. To minimise our exposure to such liquidity risk, our administrative and accounting department regularly monitors our financial position. If there is any expected shortage of internal financial resources, we may refrain from undertaking new projects and/or consider different equity and/or debt financing alternatives, including but not limited to obtaining adequate committed lines of funding from banks and other financial institutions.

Corporate governance measures

We will comply with the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. We have established three board committees, namely the audit committee, the nomination committee, and the remuneration committee, with respective terms of reference in compliance with the Corporate Governance Code. For details, please refer to the section headed “Directors, senior management and employees – Board committees” in this document. In particular, one of the primary duties of our audit committee is to review the effectiveness of our internal audit activities, internal control and risk management systems. Our audit committee consists of all three of our independent non-executive Directors, whose background and profiles are set out in the section headed “Directors, senior management and employees” in this document. In addition, to avoid potential conflicts of interest, we will implement corporate governance measures as set out in the section headed “Relationship with our Controlling Shareholders – Corporate governance measures on compliance and enforcement of the Deed of Non-competition” in this document. Our Directors will review our corporate governance measures and our compliance with the Corporate Governance Code each financial year and comply with the “comply or explain” principle in our corporate governance reports to be included in our annual reports after [REDACTED] .

OCCUPATIONAL HEALTH AND SAFETY

It is our commitment to provide a safe and healthy working environment for our employees and our subcontractors’ employees. To minimise the risk and occurrence of workplace accidents and comply with the applicable work safety laws and regulations in Hong Kong, during the Track Record Period, we have either engaged external safety consultants or employed and designate our safety officers and safety supervisors for reviewing and improving safety at project sites.

During the Track Record Period, we engaged registered safety auditor for the purpose of conducting safety audit on our safety management system in accordance with the requirements of the Factories and Industrial Undertakings (Safety Management) Regulations. In the course of

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the safety audit, the safety auditor (i) conducted physical inspection on selected sites to assess if our established safety management system was implemented in accordance with the relevant laws and regulations in Hong Kong; (ii) obtained documents for review to assess the adequacy and effectiveness of our safety management system; and (iii) suggested areas of improvements and recommendations on our safety management system. Upon completion of the safety audit, the safety audit report was submitted to our safety supervising department and executive Directors for review and then submitted to the Labour Department. No material deficiencies in relation to workplace safety had been identified by the safety auditor and our safety management system had continually fulfilled the relevant safety regulations in all material respects.

During the Track Record Period and up to the Latest Practicable Date, there were a total number of 3 accidents which involved our employees and our subcontractors’ employees at our project sites in the ordinary course of our business, of which 1 accident involving injury when lifting or carrying and 1 accident involving slip or fell were reported during the calendar year of 2015 and 1 accident involving lifting or carrying was reported during the calendar year of 2016. There were no fatal accidents during the same period.

LEGAL PROCEEDINGS AND CLAIMS

Save as disclosed in this document, our Directors confirm that no member of our Group was engaged in any litigation, claim or arbitration of material importance and no litigation, claim or arbitration of material importance was known to our Directors to be pending or threatened against any member of our Group during the Track Record Period and up to the Latest Practicable Date.

Potential litigation in relation to employees’ compensation claims and personal injury claims

Potential claims refer to those accidents for which no claims have been commenced against us but are within the limitation period of two years (for employees’ compensation claims) or three years (for personal injury claims) from the dates of the relevant accidents pursuant to the Limitation Ordinance (Chapter 347 of the Laws of Hong Kong). These accidents occurred during the usual and ordinary course of our business and have not caused any material disruption to our business. Since no court proceedings have commenced, we are not in a position to assess the likely quantum of such potential claims should they be initiated against us. Our Directors are of the view that any potential claims arising from the work injury accidents will be covered by the relevant insurance policies and to the extent that such amount is not covered by the relevant insurance policies, it will be indemnified by our Controlling Shareholders, pursuant to the Deed of Indemnity. Accordingly, the aforementioned potential claims would not result in any material impact on the operations, financial results or financial position of our Group.

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As at the Latest Practicable Date, two of our recorded work injury accidents might give rise to potential employees’ compensation and/or personal injury claims. The table below sets out a summary of the expiry of limitation period of the aforesaid work injury accidents:

Year From the Latest Practicable Date to 31 December 2018 2019 2020 2021 Total	Number of employees’ compensation claims which limitation period will expire Nil Nil Nil Nil Nil	Number of personal injury claims which limitation period will expire 1 1 Nil Nil
		2

No provision for litigation claims

Insurance policies have been taken out in compliance with applicable laws and regulations with a view to providing sufficient coverage for such work-related injuries for employees and we have not incurred any material liabilities as a result thereof. As such, these incidents did not and are not expected to have a material impact on our Group’s operations. For further details on our insurance policies, please refer to the paragraph headed “Insurance” in this section.

Regarding the potential employees’ compensation claims and personal injury claims, no provision has been made in the financial statements of our Group having considered (i) the uncertainties as to whether such claims will be commenced; (ii) the coverage of liabilities under insurance policy; and (iii) the indemnity given by our Controlling Shareholders under the Deed of Indemnity.

COMPLIANCE

Our directors confirm that, during the Track Record Period and up to the Latest Practicable Date, our Group did not have any non-compliance that is material or systemic in nature.

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CONNECTED TRANSACTION

EXEMPT CONTINUING CONNECTED TRANSACTION

Prior to the [REDACTED] , we entered into the following transaction with a related party who will, upon [REDACTED] , become our connected person within the meaning given in Chapter 14A of the Listing Rules. After the [REDACTED] , we will continue to carry out the following transaction with such party and such transaction will constitute exempt continuing connected transaction of our Company for the purpose of Chapter 14A of the Listing Rules:

Headquarter Office Tenancy Agreement

Background of Hoi Sing Holdings (HK) Limited (“Hoi Sing Holdings”)

Hoi Sing Holdings is principally engaged in property investment. As at the Latest Practicable Date, Hoi Sing Holdings is directly owned as to 50% by Mr. Man and as to 50% by Mrs. Man, each a Director and Controlling Shareholder, and hence Hoi Sing Holdings is a connected person of our Company under Rule 14A.07 of the Listing Rules. For details, please see the section headed “Relationship with our Controlling Shareholders” in this document.

Nature of transaction

On [•] 2018, a tenancy agreement (the “ Headquarter Office Tenancy Agreement ”) was entered into between Hoi Sing Holdings as landlord, and our Company as tenant, under which Hoi Sing Holdings agreed to lease Unit 8, 39/F, Cable TV Tower, No. 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong with a gross floor area of 2,755 square feet, for a term ending on 31 March 2021 to our Company for office use. Pursuant to the Headquarter Office Tenancy Agreement, the monthly rental payable to Hoi Sing Holdings shall be in the sum of HK$44,000 (exclusive of government rent, management fees and other utilities outgoings which are payable by our Group).

The term of the Headquarter Office Tenancy Agreement may be renewed as the parties thereto mutually agree, subject to compliance with the requirements under Chapter 14A of the Listing Rules and all other applicable laws and regulations.

Reasons for and benefits for the transaction

Since 2011, our Group has been leasing the abovementioned properties from Hoi Sing Holdings for use as our office premise. As our office premise is well established and known to our business partners, we currently do not, and in a foreseeable future will not, have any plan to relocate to alternative properties, which we believe is in the interest of our Company and our Shareholders as a whole in terms of cost, time and operational stability.

Our Directors (including the independent non-executive Directors) consider that the terms of the Headquarter Office Tenancy Agreement are conducted on an arms’ length basis and on normal commercial terms that are fair and reasonable, and in the best interests of our Group and our Shareholders as a whole.

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CONNECTED TRANSACTION

Historical transaction value

For the years ended 31 March 2016, 2017 and 2018, the aggregate rentals paid by our Group to Hoi Sing Holdings were approximately HK$432,000, HK$432,000 and HK$432,000 respectively.

Pricing policy

The annual rental payable under the Headquarter Office Tenancy Agreement was determined after arms’ length negotiations between the parties thereto with reference to the prevailing market rates in respect of the same or similar properties in the same locality. An independent property valuer has reviewed the annual rental payable under the Headquarter Office Tenancy Agreement and has confirmed that the terms thereof are fair, reasonable and are consistent with the prevailing market rates for similar premises in similar locations in Hong Kong.

Proposed annual caps

Our Directors estimated that the aggregate annual rental payable by our Group to Hoi Sing Holdings under the Headquarter Office Tenancy Agreement is HK$528,000. Therefore, the proposed annual caps for the tenancy under the Headquarter Office Tenancy Agreement, for each of the years ending 31 March 2019, 2020 and 2021, are approximately HK$528,000, HK$528,000 and HK$528,000 respectively.

Basis of annual caps

The proposed annual caps set out above for the three years ending 31 March 2019, 2020 and 2021 in respect of the properties to be leased from Hoi Sing Holdings are determined with reference to annual rental payable under the Headquarter Office Tenancy Agreement.

The Sole Sponsor is of the view that the proposed annual caps for the rental payable by our Group to Hoi Sing Holdings under the Headquarter Office Tenancy Agreement are fair, reasonable and are consistent with the prevailing market rates for similar premises in similar locations as at the date of the Headquarter Office Tenancy Agreement.

Listing Rules implications

It is anticipated that on an annual basis, the annual rental to be paid by our Group under the Headquarter Office Tenancy Agreement for each of the three years ending 31 March 2019, 2020 and 2021 will not be more than HK$528,000 per annum, and each of the percentage ratios (other than the profits ratio) under Chapter 14 of the Listing Rules, where applicable, in respect of the Headquarter Office Tenancy Agreement is, on an annual basis, less than 5% and the total consideration is less than HK$3,000,000. Therefore, the transaction contemplated under the Headquarter Office Tenancy Agreement qualifies as a de

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CONNECTED TRANSACTION

minimis transaction, constitutes an exempt continuing connected transaction under Rule 14A.76(1)(c) of the Listing Rules and will be exempted from independent Shareholders’ approval, annual review and all disclosure requirements under the Listing Rules.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

BOARD OF DIRECTORS

Our Board consists of six Directors, comprising three executive Directors and three independent non-executive Directors.

The table below shows certain information with respect to our Directors:

Members of our Board

						Relationship with
		Date of	Date of			other Directors
		joining our	appointment		Roles and	and senior
Name	Age	Group	as Director	Position	Responsibilities	management
Executive Directors
Mr. MAN Hoi Yuen	56	September	9 May 2018	Executive Director,	Overall management,	Spouse of Mrs.
(文海源)		1995		and chairman of	strategic development	Man
				our Board	and major
					decision-making of
					our Group
Ms. NG Yuen Chun	52	September	9 May 2018	Executive Director	Overall management and	Spouse of Mr. Man
(吳婉珍)		1995			overseeing
					administrative matters
					of our Group
Mr. HO Chi Hong	42	May 2001	9 May 2018	Executive Director	Overseeing the tendering	Nil
(何志康)				and chief	activities and
				executive officer	participating in the
					day-to-day operation
					and management of
					our Group
Independent non-executive	Directors
Mr. CHAN Ka Yu	39	[•]	[•]	Independent	Overseeing the	Nil
(陳家宇)				non-executive	management
				Director	independently and
					providing independent
					judgment on our
					strategy, performance,
					resources and standard
					of conduct of our
					Group

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

						Relationship with
		Date of	Date of			other Directors
		joining our	appointment		Roles and	and senior
Name	Age	Group	as Director	Position	Responsibilities	management
Mr. LO Ki Chiu	33	[•]	[•]	Independent	Overseeing the	Nil
(盧其釗)				non-executive	management
				Director	independently and
					providing independent
					judgment on our
					strategy, performance,
					resources and standard
					of conduct of our
					Group
Mr. LEUNG Wai Lim	45	[•]	[•]	Independent	Overseeing the	Nil
(梁唯廉)				non-executive	management
				Director	independently and
					providing independent
					judgment on our
					strategy, performance,
					resources and standard
					of conduct of our
					Group

Executive Directors

Mr. MAN Hoi Yuen ( 文海源 ) , aged 56, was appointed as our Director on 9 May 2018, and re-designated as an executive Director on 7 June 2018. He was also appointed as chairman of our Board on [•] 2018. He is mainly responsible for overall management, strategic development and major decision-making of our Group. Mr. Man is also the chairman of the nomination committee of our Board. Mr. Man is the spouse of Mrs. Man. Prior to founding Hoi Sing Decoration with Mrs. Man in 1995, Mr. Man worked for a construction company since 1982. As one of the founders of our Group, Mr. Man has over 22 years of experience in the fitting-out industry. Mr. Man is also one of the directors of each of Link Shing, Hoi Sing Decoration, Hoi Sing Construction, Chun Shing Development and Milieu. Mr. Man attended secondary education.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Mr. Man was a director of the following companies in Hong Kong, which were dissolved due to cessation of business, with details as follows:

	Nature of
	business before	Date of
Name of Company	dissolution	dissolution	Nature of proceeding
Great Gold	Investment	29 October	Deregistration under
International	holding	2010	Section 291AA of the
Trading Limited	company		Companies (WUMP)
			Ordinance
Hoi Ho Engineering	Construction –	16 May 2003	Deregistration under
Limited	metal work		Section 291AA of the
			Companies (WUMP)
			Ordinance

Mr. Man confirmed that the above companies were solvent immediately prior to their respective dissolution and there is no wrongful act on his part leading to the dissolutions and he is not aware of any actual or potential claim that has been or will be made against him as a result of the dissolutions, and that no misconduct or misfeasance had been involved in the dissolutions of these companies.

Ms. NG Yuen Chun ( 吳婉珍 ) , aged 52, was appointed as our Director on 9 May 2018 and was re-designated as an executive Director on 7 June 2018. She is mainly responsible for overall management and overseeing administrative matters of our Group. Mrs. Man is one of the founders of our Group and the spouse of Mr. Man. Mrs. Man attended secondary education. Mrs. Man co-established Hoi Sing Decoration with Mr. Man in 1995 and has over 20 years of experience in the fitting-out industry. Mrs. Man is also one of the directors of each of Link Shing, Hoi Sing Decoration, Hoi Sing Construction, Chun Shing Development and Milieu.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Mrs. Man was a director of the following companies in Hong Kong, which were dissolved due to cessation of business, with details as follows:

	Nature of
	business before	Date of
Name of Company	dissolution	dissolution	Nature of proceeding
Great Gold	Investment	29 October	Deregistration under
International	holding	2010	Section 291AA of the
Trading Limited			Companies (WUMP)
			Ordinance
Wai Yang	Construction	15 July 2016	Deregistration under
Construction	engineering		Section 751 of the
Engineering			Companies Ordinance
Limited

Mrs. Man confirmed that the above companies were solvent immediately prior to their respective dissolution and there is no wrongful act on her part leading to the dissolutions and she is not aware of any actual or potential claim that has been or will be made against her as a result of the dissolutions, and that no misconduct or misfeasance had been involved in the dissolutions of these companies.

Mr. HO Chi Hong ( 何志康 ), aged 42, was appointed as our Director on 9 May 2018 and was re-designated as an executive Director on 7 June 2018. He is also our chief executive officer and mainly responsible for overseeing the tendering activities and participating in the day-to-day operation and management of our Group. Mr. Ho became one of the shareholders of Hoi Sing Decoration in August 2014 and one of the directors of Hoi Sing Decoration since October 2014.

Mr. Ho obtained a degree of Bachelor of Science in Quantity Surveying from the University of Greenwich in the United Kingdom in July 1998.

Mr. Ho has accumulated about 20 years of experience in the construction industry. Prior to joining our Group in May 2001, he was an assistant quantity surveyor in Hoo Cheong Building Construction Co., Ltd. from July 1998 to March 2001.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Mr. Ho was a director of the following companies in Hong Kong, which were dissolved due to cessation of business, with details as follows:

	Nature of
	business before	Date of
Name of Company	dissolution	dissolution	Nature of proceeding
Hoi Ho Engineering	Construction –	17 May 2003	Deregistration under
Limited	metal works		Section 291AA of the
			Companies (WUMP)
			Ordinance
Miracle Investment	Fashion retails	22 July 2011	Deregistration under
Development			Section 291AA of the
Limited			Companies (WUMP)
			Ordinance
Cornerstone	Trading	19 October	Deregistration under
Material &		2012	Section 291AA of the
Contracting Co.,			Companies (WUMP)
Limited			Ordinance
Kenwell	Bar	19 June 2015	Striking off under
Development			Section 746 of the
Limited			Companies Ordinance

Mr. Ho confirmed that the above companies were solvent immediately prior to their respective dissolution and there is no wrongful act on his part leading to the dissolutions and he is not aware of any actual or potential claim that has been or will be made against him as a result of the dissolutions, and that no misconduct or misfeasance had been involved in the dissolutions of these companies.

Independent non-executive Directors

Mr. CHAN Ka Yu ( 陳家宇 ) , aged 39, was appointed as our independent non-executive Director on [•]. He is mainly responsible for overseeing the management independently and providing independent judgment on our strategy, performance, resources and standard of conduct of our Group. He is the chairman of our audit committee, and a member of each of our remuneration committee and nomination committee.

Mr. Chan has over 10 years of professional accounting and financial reporting experience. From July 2004 to July 2007, Mr. Chan worked as an accountant at Kam & Cheung Certified Public Accountants. From July 2007 to August 2010, he was a senior auditor at World Link CPA Limited. From September 2010 to April 2012, he worked at

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

BDO Limited (which was formerly known as JBPB & Company), initially as a senior accountant and subsequently promoted as a senior associate. From May 2012 to April 2013, Mr. Chan was an investor relations officer at Fantasia Group (China) Company Limited, a subsidiary of Fantasia Holdings Group Co., Limited (花樣年控股集團有限公司) (stock code: 1777), the shares of which are listed on the Main Board of the Stock Exchange. Since June 2013, he has been working as the chief financial officer of CEFC Hong Kong Financial Investment Company Limited (香港華信金融投資有限公司) (formerly known as Runway Global Holdings Company Limited (時尚環球控股有限公司)) (stock code: 1520), the shares of which are listed on the Main Board of the Stock Exchange. Mr. Chan currently is an independent non-executive director of Dragon Rise Group Holdings Limited (龍昇集團控股有限公司) (stock code: 6829), the shares of which are listed on the Main Board of the Stock Exchange.

Mr. Chan obtained a degree of Bachelor of Commerce in Accounting from Hong Kong Shue Yan University in October 2009. He is a member of The Hong Kong Institute of Certified Public Accountants since March 2009.

Mr. LO Ki Chiu ( 盧其釗 ) , aged 33, was appointed as our independent non-executive Director on [•]. He is mainly responsible for overseeing the management independently and providing independent judgment on our strategy, performance, resources and standard of conduct of our Group. He is a member of each of our remuneration committee and audit committee.

Mr. Lo is currently the managing director of Wealth Property Agency Limited, which he joined in December 2007 first as an account executive. Mr. Lo was a guest lecturer of The Education University of Hong Kong from January 2017 to June 2017. He was also a part-time instructor and an assistant instructor of the Lingnan Institute of Further Education, Lingnan University from February 2017 to June 2017 and from September 2012 to August 2013, respectively. Mr. Lo currently is an independent non-executive director of Wang Yang Holdings Limited (泓盈控股有限公司) (stock code: 1735), the shares of which are listed on the Main Board of the Stock Exchange.

Mr. Lo obtained a degree of Bachelor of Arts in Physical Education and Recreation Management from the Hong Kong Baptist University in November 2007, as well as a degree of Master of Science in International Banking and Finance and a degree of Master of Philosophy in Economics from the Lingnan University in October 2009 and October 2011, respectively. Mr. Lo is a PhD candidate majoring in Physical Education in the Hong Kong Baptist University which was approved in September 2015.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Mr. LEUNG Wai Lim ( 梁唯廉 ) , aged 45, was appointed as our independent non-executive Director on [•]. He is mainly responsible for overseeing the management independently and providing independent judgment on our strategy, performance, resources and standard of conduct of our Group. He is the chairman of our remuneration committee, and a member of each of our audit committee and nomination committee.

Mr. Leung is an adjudicator appointed to the Panel of Adjudicators (Control of Obscene and Indecent Articles) (established under the Control of Obscene and Indecent Articles Ordinance (Chapter 390 of the Laws of Hong Kong)) and a member of the Board of Review (Inland Revenue Ordinance) in Hong Kong.

Mr. Leung has over 17 years of law related working experience. Mr. Leung was employed by DLA Piper Hong Kong from February 2001 to April 2009 at which his last position was partner. He was then employed by Eversheds Hong Kong from May 2009 to April 2015 at which his last position was partner. Since May 2015 up to the present, Mr. Leung has been a partner of Howse Williams Bowers. Mr. Leung is currently an independent non-executive director of Shun Wo Group Holdings Limited (汛和集團控股有限公司) (stock code: 1591), the shares of which are listed on the Main Board of the Stock Exchange.

Mr. Leung obtained a degree of Bachelor of Laws from University of Wales in the United Kingdom in July 1995. Mr. Leung was admitted to practice law as a solicitor in Hong Kong in August 1999 and in England and Wales in April 2001.

Disclosure required under Rule 13.51(2) of the Listing Rules

Save as disclosed above, each of our Directors confirm with respect to him/her that he/she (i) did not hold other positions in our Company or members of our Group as at the Latest Practicable Date; (ii) had no other relationship with any Directors, senior management or Substantial or Controlling Shareholders as at the Latest Practicable Date; (iii) did not hold any other directorships in the three years prior to the Latest Practicable Date in any public companies of which the securities are listed on any securities market in Hong Kong and/or overseas; and that there are no other matters concerning our Directors’ appointment that need to be brought to the attention of our Shareholders and the Stock Exchange or shall be disclosed pursuant to Rule 13.51(2) of the Listing Rules. As at the Latest Practicable Date, save as the interests of Mr. Man, Mrs. Man and Mr. Ho in our Shares which are disclosed in the paragraphs headed “Further Information about Substantial Shareholders, Directors and Experts” in Appendix IV to this document, each of our Directors did not have any interest in our Shares within the meaning of Part XV of the SFO.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

SENIOR MANAGEMENT

The following table sets forth certain information relating to the senior management members of our Group:

					Relationship with
					other Directors
		Date of joining		Roles and	and senior
Name	Age	our Group	Position	Responsibilities	management
Mr. SIU Wing Kin	47	November 2017	Financial Controller	Overall management	Nil
(蕭永健)				of financial matters
				and company
				secretarial matters
				of our Group
Mr. TANG Tai Cheung	48	December 2014	Quantity Surveyor	Overall management	Nil
(鄧帶祥)				of contract
				administration and
				payment related
				matters of our
				Group
Ms. CHEUNG Lai Yi	44	November 1997	Administration and	Overall management	Nil
(張麗儀)			Account Manager	of human resources
				and administrative
				matters of our
				Group

Mr. SIU Wing Kin ( 蕭永健 ) , aged 47, joined our Group in November 2017 and is our company secretary and financial controller. Mr. Siu is mainly responsible for overall management of financial matters and company secretarial matters of our Group. Mr. Siu has over 23 years of audit, accounting and financial management experience. Mr. Siu obtained a degree of Bachelor of Economics (major in accounting) from The University of Sydney in Australia in June 1996. He is also a member of The Hong Kong Institute of Certified Public Accountants.

From July 1996 to July 2001, Mr. Siu worked for S.N. Tsang & Co., at which his last position was audit manager. Mr. Siu joined Mayor Packaging Enterprises (1968) Ltd. as a finance and administration manager from June 2001 to January 2005. He then joined CCT Telecom (HK) Limited as a finance manager from August 2006 to October 2008. He worked for Hayco (Hong Kong) Limited as a finance manager from May 2013 to June 2014. From September 2014 to October 2017, Mr. Siu worked for Mega Precision Technology Limited at which his last position was deputy chief operation officer.

Mr. TANG Tai Cheung ( 鄧帶祥 ) , aged 48, joined our Group in December 2014 and is our quantity surveyor. Mr. Tang is responsible for overall management of contract administration and

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

payment related matters of our Group. Mr. Tang has over 20 years of quantity surveying experience. Mr. Tang obtained a degree of Bachelor of Science in Quantity Surveying from the University of Greenwich in the United Kingdom in June 2001.

Prior to joining our Group, Mr. Tang worked as site clerk and technician apprentice for Wah Hin & Co., Ltd. from March 1992 to October 1995. He then worked as technician apprentice for Yrong Zhing Construction Co., Ltd. from October 1995 to January 1996. From February 1996 to September 1996, he worked as site quantity surveyor for Shun Shing Construction & Engineering Co., Ltd.. Mr. Tang then worked for Paul Y. – ITC Management Limited as an assistant quantity surveyor from October 1996 to August 1997. He then worked for M & G Contracting Ltd. as a quantity surveyor from February 1998 to January 1999. Mr. Tang worked for Hip Hing Construction Co., Ltd. as quantity surveyor from September 2001 to November 2003. He then worked for China Overseas (Hong Kong) Limited as quantity surveyor from December 2003 to April 2005 and from June 2005 to July 2007. He worked for China State Construction Limited as quantity surveyor from November 2007 to October 2008. He then worked for Handy Construction Co., Ltd. as a project quantity surveyor from August 2010 to May 2013. Mr. Tang then joined Able Engineering Company Limited as a quantity surveyor from June 2013 to November 2014.

Ms. CHEUNG Lai Yi ( 張麗儀 ) , aged 44, joined our Group in November 1997 and is our administration and account manager. Ms. Cheung is mainly responsible for overall management of human resources and administrative matters of our Group. She has over 20 years of administrative experience. Ms. Cheung attended secondary education. Prior to joining our Group, Ms. Cheung worked as a QA inspector in AST Research (Far East) Limited from November 1994 to January 1996.

Each of the members of our senior management confirmed with respect to himself and herself that: (i) as at the Latest Practicable Date, he or she had no interests in our Shares within the meaning of Part XV of the SFO; (ii) he or she did not have any relationships with any Directors, members of our senior management, Substantial Shareholders or Controlling Shareholders as at the Latest Practicable Date; and (iii) he or she did not hold any directorships in any other public company the securities of which were listed on any securities market in Hong Kong and/or overseas in the last three years prior to the Latest Practicable Date.

COMPANY SECRETARY

Mr. SIU Wing Kin ( 蕭永健 ) , aged 47, was appointed as the company secretary of our Company on 7 June 2018. Please refer to the paragraph headed “Senior management” above for details of his background and qualifications.

BOARD COMMITTEES

Audit Committee

We have established an audit committee with written terms of reference in compliance with the Listing Rules. The audit committee consists of three independent non-executive Directors, namely Mr. Chan Ka Yu (being the chairman of the audit committee who has a professional

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

qualification in accountancy), Mr. Lo Ki Chiu and Mr. Leung Wai Lim. The primary duties of the audit committee include, but not limited to, assisting our Board by providing an independent view of the effectiveness of the financial reporting process, internal control and risk management system of our Group, overseeing the audit process, developing and reviewing our policies and performing other duties and responsibilities as assigned by our Board.

Remuneration Committee

We have established a remuneration committee with written terms of reference in compliance with the Listing Rules. The remuneration committee consists of three independent non-executive Directors, namely Mr. Leung Wai Lim (being the chairman of the remuneration committee), Mr. Chan Ka Yu and Mr. Lo Ki Chiu. The primary duties of the remuneration committee include, but not limited to, (i) making recommendations to our Directors regarding our policy and structure for the remuneration of all our Directors and senior management and on the establishment of a formal and transparent procedure for developing remuneration policies; (ii) making recommendations to our Board on the remuneration packages of our Directors and senior management; (iii) reviewing and approving the management’s remuneration proposals with reference to our Board’s corporate goals and objectives; and (iv) considering and approving the grant of share options to eligible participants pursuant to the Share Option Scheme.

During the Track Record Period, our remuneration policy for our Directors and senior management members was based on their experience, level of responsibility, performance, and the general market conditions. Any discretionary bonus and other merit payments are linked to the profit performance of our Group and the individual performance of our Directors and senior management members. We intend to adopt the same remuneration policy after the [REDACTED] , subject to the review by and the recommendations of our remuneration committee.

Nomination Committee

We have established a nomination committee with written terms of reference in compliance with the Listing Rules. The nomination committee consists of three members, namely Mr. Man (being the chairman of the nomination committee), and two of our independent non-executive Directors, namely Mr. Chan Ka Yu and Mr. Leung Wai Lim. The primary functions of the nomination committee include, but are not limited to, (i) reviewing the structure, size and composition (including the skills, knowledge and experience) of our Board at least annually and making recommendations on any proposed changes to our Board to complement our corporate strategy; (ii) identifying individuals suitably qualified to become our Board members and selecting or making recommendations to our Board on the selection of individuals nominated for directorships; and (iii) assessing the independence of our independent non-executive Directors.

CORPORATE GOVERNANCE

Our Directors recognise the importance of incorporating elements of good corporate governance in the management structures and internal control procedures of our Group so as to achieve effective accountability.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Our Company has adopted the code provisions stated in the Corporate Governance Code as set forth in Appendix 14 to the Listing Rules. Our Company is committed to the view that our Board should include a balanced composition of executive and independent non-executive Directors so that there is a strong independent element on our Board, which can effectively exercise independent judgment.

COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT

Our executive Directors, who are also our employees, receive, in their capacity as our employees, compensation in the form of salary and bonus.

The aggregate amount of remuneration including fee, salaries, allowances and other benefits in kind, discretionary bonuses and retirement scheme contributions which were paid by our Group to our Directors for the three years ended 31 March 2016, 2017 and 2018 was HK$2,412,000, HK$2,179,000, and HK$2,276,000, respectively.

The aggregate amount of remuneration including salaries, allowances and other benefits in kind, discretionary bonuses and retirement scheme contributions which were paid by our Group to the five highest paid individuals, excluding two Directors, for the three years ended 31 March 2016, 2017 and 2018 was HK$1,508,000, HK$1,468,000 and HK$1,524,000, respectively.

No remuneration was paid by us to our Directors or the five highest paid individuals as an inducement to join or upon joining our Group or as a compensation for loss of office for the three years ended 31 March 2016, 2017 and 2018. Further, none of our Directors waived any remuneration during the same periods.

Under our arrangements currently in force, the aggregate remuneration (including fee, salaries, allowances and other benefits in kind, retirement scheme contributions but excluding any discretionary benefits or bonus or other fringe benefits) payable by our Group to our Directors for the year ending 31 March 2019 is estimated to be no more than HK$2,900,000.

SHARE OPTION SCHEME

We have conditionally adopted the Share Option Scheme on [•] 2018. For details of the Share Option Scheme, please refer to the section headed “Statutory and general information – D. Share Option Scheme” in Appendix IV to this document.

RETIREMENT BENEFIT SCHEME

In Hong Kong, we participate in mandatory provident fund scheme prescribed by the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong). Save as the aforesaid, we have not participated in any other pension scheme.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

COMPLIANCE ADVISER

We have appointed Grande Capital Limited as our compliance adviser pursuant to Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, the compliance adviser will advise us in the following circumstances:

(a) before the publication of any regulatory announcement, circular or financial report;
(b) where a transaction, which might be a notifiable or connected transaction, is contemplated, including share issues and share repurchases;
(c) where we propose to use the [REDACTED] of the [REDACTED] in a manner different from that detailed in this document or where our business activities, developments or results deviate from any forecast, estimate or other information in this document; and
(d) where the Stock Exchange makes an inquiry of us regarding unusual movements in the [REDACTED] of our Shares.

The term of the appointment shall commence on the [REDACTED] and end on the date on which we distribute our annual report of our financial results for the first full financial year commencing after the [REDACTED] and such appointment may be subject to extension by mutual agreement.

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

OVERVIEW

Hoi Lang is a company incorporated in the BVI with limited liability and is owned by Mr. Man, Mrs. Man and Mr. Ho as to 50%, 30% and 20%, respectively. Immediately following completion of the [REDACTED] and the [REDACTED] and taking no account any Shares that may be allotted and issued pursuant to the exercise of the [REDACTED] and any option that may be granted under the Share Option Scheme, Hoi Lang will hold [REDACTED] of our Shares in issue. The principal business of Hoi Lang is investment holding. Further information on Hoi Lang is set forth in the section headed “History, development and reorganisation” in this document. On 4 June 2018, Mr. Man, Mrs. Man and Mr. Ho have entered into an acting in concert confirmation and undertaking, which they confirm and declare that, since 28 August 2014, the date of which Mr. Ho been a shareholder of Hoi Sing Decoration, (i) they have and shall continue to actively cooperate and communicate with each other, and have and shall continue to adopt a consensus building approach to reach decisions on a unanimous basis; (ii) they have and shall continue to vote as a group (by themselves and/or through companies controlled by them) in respect of all corporate matters relating to the financials and operations of the Group at the shareholder and board levels of each member company of the Group; and (iii) in relation to all corporate matters that require the decisions of them, they have been given and shall continue to give sufficient time and information to consider and discuss in order to reach consensus. Accordingly, Mr. Man, Mrs. Man, Mr. Ho and Hoi Lang are regarded as our Controlling Shareholders.

COMPANY OWNED BY THE CONTROLLING SHAREHOLDERS BUT NOT INCLUDED IN OUR GROUP

As at the Latest Practicable Date, our Controlling Shareholders had interests in Hoi Sing Holdings (HK) Limited (“ Hoi Sing Holdings ”) which did not form part of our Group. Hoi Sing Holdings is a company incorporated in Hong Kong on 29 January 2007. As at the Latest Practicable Date, Hoi Sing Holdings was owned as to 50% by Mr. Man and 50% by Mrs. Man, the spouse of Mr. Man. The principal business of Hoi Sing Holdings is property investment. During the Track Record Period, Hoi Sing Holdings has leased office premises in Hong Kong to our Group. We will continue to rent from Hoi Sing Holdings the Hong Kong office premises. After the [REDACTED] , the transaction between our Group and Hoi Sing Holdings will constitute exempt continuing connected transaction of our Company under the Listing Rules. Please refer to the section headed “Connected transaction” in this document for details.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Our Directors consider that we will be able to operate independently from our Controlling Shareholders and their respective close associates (other than our Group) upon the [REDACTED] for the following reasons:

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

Management independence

Our Company has a board of directors that functions independently from Hoi Lang which is an investment holding company with no business activities.

Our Board comprises three executive Directors and three independent non-executive Directors. Each of our Directors is aware of his/her fiduciary duties as a Director which require, among other things, that he/she acts for the benefit and in the best interests of our Company and does not allow any conflict between his/her duties as a Director and his/her personal interest. In the event that there is a potential conflict of interest arising out of any transaction to be entered into between our Group and our Directors or their respective close associates, the interested Directors shall abstain from voting at the relevant board meetings of our Company in respect of such transactions and shall not be counted in the quorum. Having considered the above factors, our Directors are satisfied that they are able to perform their roles in our Company independently, and our Directors are of the view that we are capable of managing our business independently from our Controlling Shareholders following the completion of the [REDACTED] and the [REDACTED] .

Operational independence

Although during the Track Record Period, there have been certain transactions between us and our related parties, details of which are set out in note 29 to the Accountants’ Report, the text of which is set out in Appendix I to this document, our Directors have confirmed that these related party transactions were conducted in the ordinary course of business and on normal commercial terms. The transaction between our Group and Hoi Sing holdings will continue after the [REDACTED] , and will constitute exempt continuing connected transaction under the Listing Rules, details of which are set out in the section headed “Connected transaction” in this document. As such transaction is entered into in the ordinary and usual course of business of our Group on terms which are fair and reasonable and in the interest of our Company and our Shareholders as a whole, we do not consider there are any material reliance by our Group on the Controlling Shareholders and/or their respective close associates.

Further, our Directors consider that our operations do not depend on our Controlling Shareholders for the following reasons:

(a) there is no competing business between our Group and any of our Controlling Shareholders;
(b) none of our Directors has an interest in any business which competes or is likely to compete, either directly or indirectly, with our business; and
(c) we have our own independent operation capabilities and independent access to customers and suppliers. Apart from the transaction set out in the section headed “Connected transaction” in this document, there will not be any significant

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

transaction between our Group and any of our Controlling Shareholders (and their respective associates) upon and shortly after [REDACTED] .

Our Group, our Controlling Shareholders and their respective close associates do not have any common, nor shared, facilities or resources during the Track Record Period and up to the Latest Practicable Date.

On the basis of the matters described above, we believe that we are capable of carrying on our business independently of our Controlling Shareholders and their respective close associates (other than our Group).

Financial independence

We make financial decisions according to our own business needs. Our Group has established a financial reporting system that operates independently, has established our own internal control and accounting system, has our own independent accounting department, and has a financial controller who is independent from our Controlling Shareholders who is responsible for overseeing our Group’s financial functions. Our Directors therefore consider that our Group is able to operate independently from the Controlling Shareholders from a financial perspective.

As at 31 March 2016, 2017 and 2018 and 30 April 2018, our Group had banking facilities amounting to approximately HK$25.0 million, HK$31.7 million, HK$43.2 million and HK$43.0 million respectively which were secured by (i) unlimited personal guarantee and indemnity granted by Mr. Man and Mrs. Man; (ii) unlimited corporate guarantee granted by Hoi Sing Holdings; (iii) personal property owned by Mr. Man; and (iv) proceeds in relation to all account receivables of one of our subsidiaries. The guarantees and securities in relation to the aforementioned items (i), (ii) and (iii) will be released and replaced by corporate guarantees of our Company upon [REDACTED] .

Our Group has sufficient capital to operate our business independently, and has adequate internal resources and available credit facilities to support our daily operations.

Our Directors are of the view that our Group is not financially dependent on our Controlling Shareholders or their respective associates in our Group’s business operations and our Group is able to obtain external financing on market terms and conditions for our business operations as and when required.

No competition and clear delineation of business

Our Directors, including our Independent Non-executive Directors, confirm that, none of our Controlling Shareholders, our Directors or any of their respective close associates have interests in any businesses other than our business which compete, or is likely to compete, either directly or indirectly, with our business and would require disclosure under Rule 8.10 of the Listing Rules.

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

Based on all of the above factors, our Directors are satisfied that we are capable of carrying on our business independently from our Controlling Shareholders and their respective close associates (other than our Group) after the [REDACTED] .

DEED OF NON-COMPETITION

To better safeguard our Group from any potential competition, each of our Controlling Shareholders and executive Directors has entered into the Deed of Non-Competition in favour of our Company (for itself and as trustee for its subsidiaries) pursuant to which each of our Controlling Shareholders and executive Directors (together, the “ Covenantors ”) has, amongst other matters, irrevocably and unconditionally undertaken with our Company on a joint and several basis that each of the Covenantors shall, and shall procure that their respective close associates (other than members of our Group):

(a) not, directly or indirectly, be interested, involved or engaged in or acquire or hold any right or interest (in each case whether as a shareholder, partner, agent or otherwise, and whether for profit, reward or otherwise) in any business which competes or is likely to complete directly or indirectly with the business currently engaged or possibly to be engaged by our Group in the future (including but not limited to the fitting-out business in Hong Kong and any other country or jurisdiction to which our Group provides such services and/or carries on business mentioned above from time to time) (the “ Restricted Activity ”);
(b) not take any direct or indirect action which constitutes an interference with or a disruption to the business activities of our Group including, but not limited to, solicitation of any existing customers, suppliers or employees of our Group;
(c) not, without the consent from our Company, make use of any information pertaining to the business of our Group which may have come to their knowledge in the capacity as our Controlling Shareholders or directors of any members of our Group for the purpose of engaging, investing or participating in any Restricted Activity;
(d) if there is any project or new business opportunity that relates to the Restricted Activity (the “ Business Opportunity ”) available to any of the Covenantors or their close associates (other than members of our Group), it/he/she shall:-
(i) direct such Business Opportunity to our Group with requisite information to enable our Group to evaluate the merits of the same;
(ii) the relevant person who plans to participate or engage in such Business Opportunity shall give our Company a first right of refusal to participate or engage therein and shall not participate or engage in those activities unless with the principal terms thereof disclosed to and prior written consent obtained from our Company;

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

(iii) not pursue such Business Opportunity until our Group has confirmed its rejection to pursue, involve or engage in the same because of commercial reasons. Any of our decisions on which will have to be approved by our independent non-executive Directors (at the exclusion of those with beneficial interests in such Business Opportunity), taking into account the prevailing business and financial resources of our Group, the financial resources required for such Business Opportunity and, where necessary, any expert opinion on the commercial viability of the same; and
(iv) on the condition that our Group rejects to pursue such Business Opportunity pursuant to sub-paragraph (d) (iii) above, that the principal terms on which the Covenantors and/or its/his/her close associates pursues such Business Opportunity shall be substantially the same as or not more favourable than those disclosed to our Company and that the terms of such pursuance, whether directly or indirectly, shall be disclosed to our Company and our Directors as soon as practicable;
(e) keep our Board informed of any matter of potential conflicts of interests between each of the Covenantors (including its/his/her close associates) and our Group, in particular a transaction between any of the Covenantors (including its/his/her close associates) and our Group; and
(f) provide as soon as practicable upon our Company’s request:
(i) a written confirmation on an annual basis in respect of compliance by it/him/her with the terms of the Deed of Non-Competition;
(ii) all information necessary for the review by the independent non-executive Directors for the enforcement of the Deed of Non-Competition; and
(iii) their respective consent to the inclusion of such confirmation in our Company’s annual report and all such information as may be reasonably requested by our Company for its review.

The Deed of Non-Competition is conditional on (i) the [REDACTED] granting [REDACTED] of, and permission to deal in, all our Shares in issue and to be issued under the [REDACTED] ; and (ii) the obligations of the [REDACTED] under the [REDACTED] having become unconditional (including, if relevant as a result of the waiver of any condition(s) by the [REDACTED] and that the [REDACTED] not being terminated in accordance with the terms of the respective agreements or otherwise.

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

Pursuant to the Deed of Non-Competition, the obligations of the Covenantors will cease on the earliest of the following dates on which:

(i) our Controlling Shareholders and their close associates (individually or taken as a whole) ceases to own an aggregate of 30% of the then issued share capital of our Company, directly or indirectly, or cease to be a controlling shareholder of the Company for the purpose of the Listing Rules and do not have power to control our Board;
(ii) our Shares cease to be listed on the Stock Exchange (except for temporary trading halt or suspension of trading of the Shares); or
(iii) our Company becomes wholly-owned by any of our Controlling Shareholders and/or their respective close associates.

CORPORATE GOVERNANCE MEASURES ON COMPLIANCE AND ENFORCEMENT OF THE DEED OF NON-COMPETITION

In order to properly manage any potential or actual conflict of interests between us on one hand and our Controlling Shareholders and executive Directors and their respective close associates on the other hand in relation to compliance and enforcement of the Deed of Non-Competition, we have adopted the following corporate governance measures:

(i) our independent non-executive Directors shall review, at least on an annual basis, compliance and enforcement of the terms of the Deed of Non-Competition to be complied with by our Controlling Shareholders and executive Directors;
(ii) we will disclose any decisions on matters reviewed and approved by our independent non-executive Directors relating to compliance and enforcement of the Deed of Non-Competition (including but not limited to the decision as to whether or not to pursue any Business Opportunity referred to under sub-paragraph (d) (iii) of the paragraph headed “Deed of Non-Competition” above in this section) either through our annual report or by way of announcement;
(iii) we will disclose in the corporate governance report of our annual report on how the terms of the Deed of Non-Competition have been complied with and enforced; and
(iv) in the event that any of our Directors and/or their respective close associates has material interest in any matter to be deliberated by our Board in relation to compliance and enforcement of the Deed of Non-Competition, he may not vote on the resolutions of the Board approving that matter and shall not be counted towards the quorum for the voting pursuant to the applicable provisions in the Articles of Association.

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

Our Directors consider that the above corporate governance measures are sufficient to manage any potential conflict of interests between our Controlling Shareholders and executive Directors and their respective close associates on one hand and our Group on the other hand, and to protect the interests of our Shareholders, in particular, the minority Shareholders.

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SUBSTANTIAL SHAREHOLDERS

So far as our Directors are aware, immediately following the completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be issued upon the exercise of the [REDACTED] or any option that may be granted under the Share Option Scheme), the following persons will have an interest or short position in Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who are, directly or indirectly, be 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 any other member of our Group:

		Immediately after completion	Immediately after completion
		of the [REDACTED] and
		the [REDACTED]
Name of	Capacity/	Number of	Percentage of
Shareholders	Nature of interest	Shares(1)	shareholding
Hoi Lang(2)	Beneficial owner	[REDACTED]	[REDACTED]
Mr. Man(3)	Interest in a controlled	[REDACTED]	[REDACTED]
	corporation
Mrs. Man(3)	Interest in a controlled	[REDACTED]	[REDACTED]
	corporation
Mr. Ho(3)	Interest in a controlled	[REDACTED]	[REDACTED]
	corporation
Ms. Tsoi Yuk Wah(4)	Interest of spouse	[REDACTED]	[REDACTED]

Notes:

(1) The letters “L” denotes the respective “long position” (as defined under Part XV of the SFO) of the relevant person/entity in such Shares.
(2) Hoi Lang held [REDACTED] % of the total issued share capital of our Company and Hoi Lang was in turn owned by Mr. Man (our executive Director, chief executive officer and chairman of our Board), Mrs. Man (our executive Director) and Mr. Ho (our executive Director) as to 50%, 30% and 20%, respectively.
(3) Mr. Man, Mrs. Man and Mr. Ho, acting in concert, together control [REDACTED] % in our Company through Hoi Lang. As such, each of them is deemed to be interested in such [REDACTED] % interest in the total issued share capital of the Company by virtue of SFO. For details, please refer to the section headed “Relationship with our Controlling Shareholders” in this document.
(4) Ms. Tsoi Yuk Wah is the spouse of Mr. Ho. Ms. Tsoi is deemed to be interested in all our Shares which are interested by Mr. Ho by virtue of the SFO.

Except as disclosed above, our Directors are not aware of any person who will, immediately following the [REDACTED] and [REDACTED] (without taking into account any Shares which may be issued upon the exercise of the [REDACTED] or any option that may be granted under the Share Option Scheme), have an interest or short position in Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who are, directly or indirectly, be 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 our Company.

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SHARE CAPITAL

SHARE CAPITAL

The authorised and issued share capital of our Company is as follows:

Authorised share capital: HK$ 1,000,000,000 Shares of par value HK$0.01 each 10,000,000

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

Assuming the [REDACTED] is not exercised, and without taking into account any Shares which may be issued upon the exercise of any option that may be granted under the Share Option Scheme, the issued share capital of our Company immediately following the completion of the [REDACTED] and the [REDACTED] will be as follows:

200 Shares in issue as at the date of this document [REDACTED] Shares to be issued under the [REDACTED] [REDACTED] Shares to be issued under the [REDACTED] [REDACTED] Shares in total	HK$ 2 [REDACTED] [REDACTED] [REDACTED]

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SHARE CAPITAL

Assuming the [REDACTED] is exercised in full, and without taking into account any Shares which may be issued upon the exercise of any option that may be granted under the Share Option Scheme, the issued share capital of our Company immediately following the completion of the [REDACTED] and the [REDACTED] will be as follows:

HK$

200 Shares in issue as at the date of this document 2 [REDACTED] Shares to be issued under the [REDACTED] [REDACTED] [REDACTED] Shares to be issued under the [REDACTED] [REDACTED] [REDACTED] Shares to be issued upon exercise of [REDACTED] [REDACTED] in full

[REDACTED] Shares in Total [REDACTED]

MINIMUM PUBLIC FLOAT

Pursuant to Rule 8.08 of the Listing Rules, at least 25% of the total issued share capital of our Company must at all times be held by the public. The [REDACTED] represent [REDACTED] % of the issued share capital of our Company upon the [REDACTED] .

RANKING

The [REDACTED] and our Shares which may be issued upon the exercise of any option that may be granted under the Share Option Scheme will rank equally in all respects with all other existing Shares in issue or to be issued as set forth in the above table, and will qualify for all dividends or other distributions declared, made or paid on our Shares in respect of a record date which falls after the date of this document except for the entitlement under the [REDACTED] .

[REDACTED]

Pursuant to the written resolutions of our sole Shareholder passed on [•] 2018, subject to the conditions set forth therein, our Directors are authorised to allot and issue a total of [REDACTED] Shares credited as fully paid at par to the Shareholders whose name appears on the register of members of our Company at the close of business on [•] 2018, (or as they may direct) in proportion to their respective shareholdings (save that no Shareholder shall be entitled to be allotted or issued by fraction of a Share) by way of capitalisation of the sum of HK$ [REDACTED] standing to the credit of the share premium account of our Company, and our Shares to be allotted and issued pursuant to this resolution shall rank equally in all respects with the existing issued Shares.

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SHARE CAPITAL

THE SHARE OPTION SCHEME

Our Company has conditionally adopted the Share Option Scheme. A summary of the principal terms of the Share Option Scheme is set forth in the paragraph headed “Statutory and general information – D. Share Option Scheme” in Appendix IV to this document.

GENERAL MANDATE

Conditional on the [REDACTED] becoming unconditional, our Directors have been granted a general unconditional mandate to allot, issue and deal with Shares with a total number of not more than the sum of:

(i) 20% of the total number of Shares in issue immediately following the completion of the [REDACTED] and the [REDACTED] (excluding any Share which may fall to be issued pursuant to the exercise of the [REDACTED] ); and
(ii) the total number of Shares repurchased by our Company (if any) under the general mandate to repurchase Shares referred to below.

The allotment and issue of Shares under a rights issue or pursuant to the exercise of any subscription rights, warrants which may be issued by our Company from time to time, scrip dividend scheme or similar arrangement providing for the allotment and issue of Shares in lieu of the whole or part of a dividend on Shares in accordance with the Articles, or on the exercise of options granted under the Share Option Scheme do not generally require the approval of Shareholders of our Company in general meeting and the aggregate nominal amount of Shares which our Directors were authorised to allot and issue pursuant to this mandate will not be compromised by the allotment and issue of such Shares.

This mandate will expire:

(i) at the conclusion of our Company’s next annual general meeting; or
(ii) upon the expiration of the period within which our Company is required by any applicable law or the Articles to hold its next annual general meeting; or
(iii) when varied, revoked or renewed by an ordinary resolution of our Shareholders in a general meeting.

whichever occurs first.

Further details of this general mandate are set forth in the paragraph headed “Statutory and general information – A. Further information about our Company – 3. Written resolutions of our sole Shareholder passed on [•] 2018” in Appendix IV to this document.

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SHARE CAPITAL

REPURCHASE OF SHARES

Conditional on the [REDACTED] becoming unconditional, our Directors have been granted a general unconditional mandate to exercise all of the powers of our Company to repurchase Shares with a total number of not more than 10% of the total number of Shares in issue or to be issued immediately following the completion of the [REDACTED] and the [REDACTED] (excluding any Shares which may fall to be issued upon the exercise of the [REDACTED] ).

This mandate only relates to repurchases made on the Stock Exchange, or any other approved stock exchange(s) on which the securities of our Company may be listed (and which is recognised by the SFC and the Stock Exchange for this purpose), and which are made in accordance with all applicable laws and/or requirements of the Listing Rules. A summary of the relevant Listing Rules is set forth in the section headed “Statutory and general information – A. Further information about Our Company – 6. Repurchase of our Shares by our Company” in Appendix IV to this document.

This mandate will expire:

(i) at the conclusion of our Company’s next annual general meeting; or
(ii) upon the expiration of the period within which our Company is required by any applicable law or Articles to hold its next annual general meeting; or
(iii) when varied, revoked or renewed by an ordinary resolution of our Shareholders in a general meeting.

whichever occurs first.

Further information on the Repurchase Mandate is set forth in the paragraphs under “Statutory and General Information – A. Further Information about Our Company – 3. Written resolutions our sole Shareholder passed on [•] 2018” in Appendix IV to this document.

CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE REQUIRED

Our Company has only one class of shares, namely ordinary Shares, each of which ranks pari passu with the other Shares. The circumstances under which general meetings are required are provided in the Articles. Detailed information on the Articles is set forth in the section headed “Summary of the constitution of our Company and the Cayman Islands Company Law” in Appendix III to this document.

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FINANCIAL INFORMATION

The following discussion of our Group’s financial condition and results of operations should be read in conjunction with our Group’s combined financial information as at the end of and for each of FY2015/16, FY2016/17 and FY2017/18, including the notes thereto, included in Appendix I to this document. The financial statements have been prepared in accordance with HKFRSs. The following discussion contains certain forward-looking statements that involve risks and uncertainties. Our Group’s future results could differ materially from those discussed below as a result of various factors, including those set forth under the section headed “Risk factors” and elsewhere in this document.

OVERVIEW

During the Track Record Period, our revenue represented income derived from (i) fitting-out services and (ii) supply of fitting-out materials. Suppliers of goods and services which are specific to our business and are required on regular basis to enable us to continue to carry on our business mainly include (i) our subcontractors; (ii) suppliers of fitting-out materials required for performing our fitting-out services such as finished furniture products, timber products, glass and metal; and (iii) suppliers of other miscellaneous services such as rental of machinery and equipment, transportation services and consultancy services.

KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Our results of operations and financial condition have been and will continue to be affected by a number of factors, including, in particular, the following:

The fitting-out industry is fragmented and competitive

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FINANCIAL INFORMATION

Our tender/quotation success rate on fitting-out services projects

During the Track Record Period, we secured new businesses through direct invitation for tender/quotation by customers. Our tender/quotation success rates for fitting-out services contracts were approximately 28.3%, 27.0% and 38.3% for FY2015/16, FY2016/17 and FY2017/18, respectively. Our tender/quotation success rate depends on various factors, such as our pricing and tender/quotation strategy, customers’ tender/quotation evaluation standards, our competitors’ pricing and tender/quotation strategy, and the level of competition. The number of tender/quotation invitations or contracts available for bidding in the future and our tender/quotation success rate will affect our financial position and performance.

Pricing of our projects

Our pricing is generally determined based on certain markups over our estimated costs. We need to estimate our time and costs involved in a project in order to determine our fee quotation or tender price and there is no assurance that the actual amount of time and costs would not exceed our estimation during the performance of our projects. The actual amount of time and costs incurred in completing a project may be adversely affected by many factors, including but not limited to unforeseen site conditions, adverse weather conditions, accidents, non-performance by our subcontractors, unexpected significant increase in costs of construction materials agreed to be borne by us, and other unforeseen problems and circumstances, etc. For further details, please refer to the section headed “Business – Pricing strategy” in this document. Our pricing directly affects our revenue and cash flows.

Fluctuation in our direct costs

Our direct costs mainly comprise (i) subcontracting charges; (ii) direct materials costs; and (iii) staff costs. We engage suppliers in Hong Kong and the PRC. Our main purchases include subcontracting services as well as finished furniture products, timber products, glass and metal. Please refer to the section headed “Business – Our suppliers” in this document for further details on our suppliers and subcontractors.

The following sensitivity analysis illustrates the impact of hypothetical fluctuations of subcontracting charges and direct materials costs (being the major components of our direct costs) on our profit before income tax during the Track Record Period. The hypothetical fluctuation rates for subcontracting charges are set at 3.1% and 14.7%, which correspond to the approximate minimum and maximum percentage changes in the average daily wages of fitting-out workers in Hong Kong from 2013 to 2017 as stated in the Ipsos Report (see “Industry overview – Price trend of major fitting-out cost components – Average wages of fitting-out workers in Hong Kong” in this document) and are therefore considered reasonable for the purpose of this sensitivity analysis. The hypothetical fluctuation rates for direct materials costs are set at 0.7% and 14.3%, which correspond to the approximate minimum and maximum percentage changes in the average import price of timber products and the average wholesale price of glass in Hong Kong from 2013 to 2017 as stated in the Ipsos Report (see “Industry overview – Price trend of major fitting-out cost components” in this document) and are therefore considered reasonable for the purpose of this sensitivity analysis.

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FINANCIAL INFORMATION

Hypothetical fluctuations in
our subcontracting charges	-3.1%	-14.7%	+3.1%	+14.7%
Increase/(decrease) in profit
before income tax(Note)
	HK$’000	HK$’000	HK$’000	HK$’000
FY2015/16	4,170	19,773	(4,170)	(19,773)
FY2016/17	6,295	29,852	(6,295)	(29,852)
FY2017/18	8,583	40,702	(8,583)	(40,702)
Hypothetical fluctuations in
our direct materials costs	-0.7%	-14.3%	+0.7%	+14.3%
Increase/(decrease) in profit
before income tax(Note)
	HK$’000	HK$’000	HK$’000	HK$’000
FY2015/16	485	9,905	(485)	(9,905)
FY2016/17	578	11,806	(578)	(11,806)
FY2017/18	1,349	27,562	(1,349)	(27,562)

Note: Our profit before income tax was approximately HK$14.4 million, approximately HK$33.0 million and approximately HK$46.9 million for each of FY2015/16, FY2016/17 and FY2017/18 respectively.

BASIS OF PRESENTATION OF FINANCIAL INFORMATION

Please refer to note 1 of the accountants’ report set out in Appendix I to this document.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The financial information of our Group has been prepared in accordance with accounting policies which conform with HKFRSs. The significant accounting policies adopted by our Group are set forth in detail in note 2 to the accountants’ report set out in Appendix I to this document.

Some of the accounting policies involve judgments, estimates, and assumptions made by our management. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Further information regarding the key judgements made in applying our accounting policies are set forth in note 4 to the accountants’ report set out in Appendix I to this document.

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FINANCIAL INFORMATION

Revenue recognition

Fitting-out services

Revenue of products and services transferred over time is recognised progressively based on the value of performance completed to date as a percentage of total transaction price to depict the transfer of control of the goods or services to the customer. The Group recognises revenue over time only if it can reasonably measure its progress toward complete satisfaction of the performance obligation. However, if the Group cannot reasonably measure the outcome but expects to recover the costs incurred in satisfying the performance obligation, then it recognises revenue to the extent of the costs incurred.

The Group recognises its contract revenue recognition on a project is dependent on management’s estimation of the progress of the satisfaction of performance obligations of a construction contract over time, measured by the value of performance completed to date of the individual contract as a percentage of total transaction price. Because of the nature of the activity undertaken by the Group, the Group reviews and revises the estimates of contract revenue, contract costs and variation order, prepared for each construction contract as the contract progresses. Budgeted construction costs are prepared by management on the basis of quotations from time to time provided by the major subcontractors, suppliers and vendors involved and the experience of management. In order to keep the budget accurate and up-to-date, management conducts periodic reviews of the budgeted construction costs and revises the budgeted construction costs as appropriate.

Significant judgement is required in estimating the contract revenue, contract costs and variation work which may have an impact on percentage of completion of the construction contracts and the corresponding profit taken. In addition, actual outcome in terms of total revenue or costs may be higher or lower than estimation at the end of the reporting period, which would affect the revenue and profit recognised in future years as an adjustments to the amounts recorded to date.

Supply of fitting-out materials

Revenue of products transferred at a point in time is recognised when goods are delivered at the customers’ premises which is taken to be the point in time when the Group transfers control over the products to the customer.

Impairment of receivables

Provision for expected credit loss is made when the Group will not collect all amounts due. The provision is determined by grouping together debtors with similar risk characteristics and collectively, or individually assessing them for likelihood of recovery. The provision reflects either 12-month expected credit losses, or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk. Judgement has been applied in determining the level of provision for expected credit losses, taking into account the credit risk

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FINANCIAL INFORMATION

characteristics of debtors and the likelihood of recovery assessed on a combination of collective and individual bases as relevant. While provisions are considered to be appropriate, changes in estimation basis or in economic conditions could lead to a change in the level of provisions recorded and consequently on the charge or credit to profit or loss.

SUMMARY OF RESULTS OF OPERATIONS

The combined statements of profit or loss and other comprehensive income during the Track Record Period are summarised below, which have been extracted from the accountants’ report set out in Appendix I to this document:

Revenue Direct costs Gross profit Other income and gains/(losses), net Administrative and other operating expenses Finance costs Profit before income tax Income tax expense Profit and total comprehensive income for the year attributable to owners of the Company	FY2015/16 HK$’000 240,149 (216,377) 23,772 94 (8,234) (1,205) 14,427 (2,567) 11,860	FY2016/17 HK$’000 346,391 (304,154) 42,237 (7) (8,220) (961) 33,049 (5,910) 27,139	FY2017/18 HK$’000 560,283 (498,849) 61,434 56 (12,912) (1,657) 46,921 (8,327) 38,594

PRINCIPAL COMPONENTS OF RESULTS OF OPERATIONS

Revenue

During the Track Record Period, our revenue was derived from (i) the provision of fitting-out services; and (ii) the supply of fitting-out materials. For detailed breakdowns of our revenue during the Track Record Period by our business operations, property type (residential or non-residential), customers type, number of fitting-out projects by range of revenue recognised, please refer to the sections headed “Business – Overview” and “Business – Our projects undertaken during the Track Record Period” in this document.

Please refer to the paragraph headed “Period-to-period comparison of results of operations” in this section for a discussion of the change in the amount of our revenue during the Track Record Period.

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FINANCIAL INFORMATION

Direct costs

The table below sets forth a breakdown of our direct costs during the Track Record Period:

Subcontracting charges Direct materials Staff costs Rental of machinery and equipment Other direct costs Total	FY2015/16 HK$’000 % 134,512 62.2 69,263 32.0 9,789 4.5 954 0.4 1,859 0.9 216,377 100.0	FY2016/17 HK$’000 % 203,076 66.8 82,561 27.1 16,401 5.4 45 0.0 2,071 0.7 304,154 100.0	FY2017/18 HK$’000 % 276,886 55.5 192,740 38.6 26,944 5.4 55 0.0 2,224 0.5 498,849 100.0	FY2017/18 HK$’000 % 276,886 55.5 192,740 38.6 26,944 5.4 55 0.0 2,224 0.5 498,849 100.0
				100.0

Our direct costs during the Track Record Period comprised:

(a) subcontracting charges, which are costs for engaging subcontractors for performing certain fitting-out services undertaken by us such as ceiling, painting, metal works, and installation of built-in furniture, timber flooring, kitchen cabinetries and timber doors;
(b) direct materials, which mainly represent costs for purchasing materials used for our fitting-out services and supply of fitting-out materials such as finished furniture products, timber products, glass and metal;
(c) staff costs, which are salaries and benefits provided to our staff who are directly involved in carrying out our fitting-out services;
(d) rental of machinery and equipment, which are rental expenses for scaffold used at our fitting-out works sites;
(e) other direct costs, which include various miscellaneous expenses such as transportation fee, safety consultancy fee and insurance premiums for certain of our fitting-out services projects.

Please refer to the paragraph headed “Period-to-period comparison of results of operations” in this section for a discussion of material fluctuations in our direct costs.

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Other income and gains/(losses), net

The table below sets forth a breakdown of our other income and gains/(losses), net during the Track Record Period:

Bank interest income Net foreign exchange gains/(losses), net Sundry income Total	FY2015/16 HK$’000 – 75 19 94	FY2016/17 HK$’000 – (7) – (7)	FY2017/18 HK$’000 2 22 32
			56

Our other income and gains/(losses), net during the Track Record Period mainly comprised:

(a) bank interest income, which represented interests earned on bank deposits during FY2017/18; and
(b) net foreign exchange gains/(losses), net, which mainly represented realised exchange differences arising from the purchase of fitting-out materials which were denominated in RMB.

Please refer to the paragraph headed “Period-to-period comparison of results of operations” in this section for a discussion of material fluctuations in our other income and gains/(losses), net.

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FINANCIAL INFORMATION

Administrative and other operating expenses

The table below sets forth a breakdown of our administrative and other operating expenses during the Track Record Period:

Auditors’ remuneration Bank charges Computer software expenses Depreciation Entertainment and travelling Insurance [REDACTED] Repair and maintenance Staff costs, including directors’ remuneration Rental of office premises Utilities and telecommunication expenses Other expenses	FY2015/16 HK$’000 % 60 0.7 115 1.4 154 1.9 326 4.0 647 7.9 176 2.1 – – 272 3.3 5,199 63.1 432 5.3 109 1.3 744 9.0 8,234 100.0	FY2016/17 HK$’000 % 246 3.0 182 2.2 259 3.2 435 5.3 680 8.3 183 2.2 – – 82 1.0 4,832 58.8 432 5.2 123 1.5 766 9.3 8,220 100.0	FY2017/18 HK$’000 % 246 1.9 202 1.6 446 3.5 436 3.4 1,189 9.2 248 1.9 3,533 27.4 308 2.4 5,247 40.6 432 3.3 148 1.1 477 3.7 12,912 100.0	FY2017/18 HK$’000 % 246 1.9 202 1.6 446 3.5 436 3.4 1,189 9.2 248 1.9 3,533 27.4 308 2.4 5,247 40.6 432 3.3 148 1.1 477 3.7 12,912 100.0
				100.0

Our administrative and other operating expenses during the Track Record Period comprised:

(a) auditors’ remuneration, which are fees to our auditors;
(b) bank charges, which are mainly annual renewal and handling fees for banking facilities maintained;
(c) computer software expenses, which represent expenses in relation to computer software used in our office;
(d) depreciation, which include depreciation of furniture and fixtures and motor vehicle;
(e) entertainment and travelling expenses, which mainly represent costs in relation to the relationship building with existing and potential customers;
(f) insurance, which represent insurance premiums for insurance policies that are not directly related to our fitting-out projects;

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(g) [REDACTED] expenses, which represent expenses in relation to the [REDACTED] ;
(h) repair and maintenance expenses, which mainly represent expenses incurred for general office maintenance and motor vehicle maintenance;
(i) staff costs (including directors’ remuneration), which include salaries and benefits provided to our Directors and our management, administrative and back office staff;
(j) rental of office premises, which represented operating lease payments for our office;
(k) utilities and telecommunication expenses, which mainly include costs of electricity, water and telephone, etc.; and
(l) other expenses, which mainly include expenses incurred for stationary and printing.

Finance costs

Our finance costs during the Track Record Period represented interest expenses on bank borrowings and finance leases of our motor vehicles, details of which are disclosed in the paragraph headed “Indebtedness” in this section.

Income tax expense

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profits arising in or derived from Hong Kong for the Track Record Period. The taxation for the Track Record Period can be reconciled to the profit before income tax as follows:

Profit before income tax Calculated at a tax rate of 16.5% Tax effect of: Expenses not deductible for tax purposes Tax losses not recognised Utilisation of previous unrecognised tax losses Temporary differences not recognised Tax concession Income tax expense for the year	FY2015/16 HK$’000 14,427 2,380 7 279 – (59) (40) 2,567	FY2016/17 HK$’000 33,049 5,453 6 466 – 5 (20) 5,910	FY2017/18 HK$’000 46,921 7,742 583 116 (80) 26 (60) 8,327

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FINANCIAL INFORMATION

Despite the respective amounts of income tax expense provided for each of FY2015/16, FY2016/17 and FY2017/18 as shown in the above table, we recorded cash outflow for tax payment of approximately HK$573,000, HK$1,862,000 and HK$12,908,000 during the respective years. This is because of (i) the timing difference between making tax provision and making actual tax payment as explained below; and (ii) the difference arising from the application of HKAS 11 and HKFRS 15, as the income tax expenses for each of FY2015/16, FY2016/17 and FY2017/18 as shown in the accountants’ report set out in Appendix I to this document were provided based on our Group’s accounts prepared with the early adoption of HKFRS 15, while the amounts of actual tax payments were determined based on our subsidiaries’ accounts which were prepared based on HKAS 11.

Pursuant to the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) and according to the information pamphlet titled “A Brief Guide to Taxes Administered by the Inland Revenue Department 2015–2016” published by the Inland Revenue Department of the Government, profits tax is charged on the assessable profits for a year of assessment (which refers to the period of 12 months commencing on 1 April in any year). The assessable profits for a business which makes up annual accounts are calculated on the profits of the year of account ending in the year of assessment. In addition, in the year of assessment itself, a provisional tax is to be paid based on the profits assessed for the preceding year.

As such, for our Group (whose annual accounts are made up to 31 March each year), after each year of assessment (for example, after the year of assessment of 1 April 2014 to 31 March 2015), our Group would file profits tax return for its financial year with the year-end date falling within that year of assessment (i.e., the financial year ended 31 March 2015 in this example). Actual tax payment is usually made a few months after the filing of the profits tax return. Therefore, the actual profits tax payment made during FY2015/16 were in relation to financial year prior to the Track Record Period.

During the Track Record Period, our effective tax rates (calculated as income tax expense for the year divided by profit before income tax) were as follows:

			FY2015/16	FY2016/17	FY2017/18
Effective	tax	rate	17.8%	17.9%	17.7%

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FINANCIAL INFORMATION

PERIOD-TO-PERIOD COMPARISON OF RESULTS OF OPERATIONS

FY2017/18 compared with FY2016/17

Revenue

Our revenue increased from approximately HK$346.4 million for FY2016/17 to approximately HK$560.3 million for FY2017/18, representing an increase of 61.7%. The increase in our total revenue was mainly attributable to the increase in revenue of our fitting-out services which contributed to approximately 99.9% and 100.0% of our total revenue for each of FY2016/17 and FY2017/18 and such increase was because:

(i) The increase in the number of sizeable fitting-out services projects with revenue contribution of HK$50 million or above in FY2017/18, as demonstrated in the below table:

Revenue recognised HK$50 million or above HK$10 million to below HK$50 million HK$1 million to below HK$10 million Below HK$1 million Total	FY2016/17 Number of projects 1 12 18 38 69	FY2017/18 Number of projects 3 9 17 35
		64

(ii) In particular, the increase in the revenue was mainly driven by the revenue contributed by some of our major fitting-out services projects undertaken or commenced during FY2017/18, included the fitting-out services for (i) residential properties of a private housing estate located in Nam Cheong, which contributed revenue of approximately HK$252.8 million (i.e. Project I and Project H under the table of “Business – Our projects undertaken during the Track Record Period – Major projects” for FY2017/18); and (ii) low density residential properties located in Kau To Shan, which contributed revenue of approximately HK$83.2 million (i.e. Project J under the table of “Business – Our projects undertaken during the Track Record Period – Major projects” for FY2017/18). Our Directors are of the view that the contract sum for these projects were higher than the previous residential properties projects as (a) the unit rate of the fitting-out materials used under these projects were higher; and (b) the number of residential units of Project I and Project H that are required for fitting-out services to be performed were higher.

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FINANCIAL INFORMATION

Direct costs

Our direct costs increased from approximately HK$304.2 million for FY2016/17 to approximately HK$498.8 million for FY2017/18, representing an increase of 64.0%, which was higher than the increase in our revenue by approximately 2.3 percentage points (and thus resulted in our slightly lower gross profit margin for FY2017/18). Our direct costs mainly include subcontracting charges, direct material costs, staff costs, rental of machinery and equipment, and others. These costs may fluctuate substantially from project to project, because depending on the scope of fitting-out services to be performed or the number of residential units required for fitting-out services to be performed, the volume and/or types of fitting-out materials used may fluctuate, resulting in substantial fluctuations in the proportions of direct costs from project to project.

The following is a discussion of the changes in the key components of our direct costs in FY2016/17 compared to FY2017/18:

(i) Our subcontracting charges increased from approximately HK$203.1 million for FY2016/17 to approximately HK$276.9 million for FY2017/18, representing an increase of approximately 36.3%. Such increase was mainly attributable to (a) several relatively sizeable projects that we undertook or commenced during FY2017/18 (i.e. Project I and Project H under the table of “Business – Our projects undertaken during the Track Record Period – Major projects” for FY2017/18); and (b) the contra-charge amounts for marble works paid on behalf by Customer H under Project J as referred to in the table of “Business – Our projects undertaken during the Track Record Period – Major projects” for FY2017/18.
(ii) Our direct materials costs increased from approximately HK$82.6 million for FY2016/17 to approximately HK$192.7 million for FY2017/18, representing an increase of approximately 133.3%. Such increase was mainly due to the increase in volume and different types of fitting-out materials used for projects in FY2017/18 as compared to that in FY2016/17. In respect of Project I and Project H that we undertook or commenced during FY2017/18, the direct material costs increased as a result of (a) additional types of fitting-out materials required such as wardrobes and shower cubicles; and (b) the higher number of residential units that required fitting-out services to be performed as compared to other projects.
(iii) Our staff costs increased from approximately HK$16.4 million for FY2016/17 to approximately HK$26.9 million for FY2017/18, representing an increase of approximately 64.0%. Such increase was mainly due to the increase in our project management and safety supervision personnel to cope with our increased workload in FY2017/18 compared to FY2016/17.

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FINANCIAL INFORMATION

Gross profit and gross profit margin

Our gross profit and gross profit margin for FY2016/17 and FY2017/18 respectively were as follows:

	FY2016/17	FY2017/18
Revenue (HK$’000)	346,391	560,283
Gross profit (HK$’000)	42,237	61,434
Gross profit margin	12.2%	11.0%

Our gross profit amounted to approximately HK$42.2 million and approximately HK$61.4 million for FY2016/17 and FY2017/18 respectively, representing an increase of approximately 45.5%, primarily due to the increase in revenue as discussed above. Our gross profit margin remained broadly stable at approximately 12.2% for FY2016/17 and approximately 11.0% for FY2017/18.

Other income and gains/(losses), net

Our other income and gains/(losses), net changed from a net loss of approximately HK$7,000 for FY2016/17 to a net gain of approximately HK$56,000 for FY2017/18. Such difference was mainly because net foreign exchange losses of HK$7,000 was recognised in FY2016/17 while gains of HK$22,000 was recognised in FY2017/18.

Administrative and other operating expenses

Our administrative and other operating expenses increased from approximately HK$8.2 million for FY2016/17 to approximately HK$12.9 million for FY2017/18, representing an increase of approximately 57.3%. Such increase was mainly due to (i) non-recurring [REDACTED] expenses of approximately HK$3.5 million incurred in FY2017/18 (FY2016/17: nil); and (ii) the increase in our staff costs as a result of the increase in salary and benefits paid to our Directors and the inclusion of salary and benefits of our financial controller who joined us in November 2017 during FY2017/18.

Finance costs

Our finance costs increased from approximately HK$1.0 million for FY2016/17 to approximately HK$1.7 million for FY2017/18, which was primarily due to the increase in the proceeds from the bank borrowings from approximately HK$113.4 million for FY2016/17 to approximately HK$124.8 million for FY2017/18 as shown under “Cash flows from financing activities”.

Income tax expense

Despite the recognition of [REDACTED] expenses for FY2017/18, our profit before tax increased from approximately HK$33.0 million for FY2016/17 to approximately HK$46.9 million for FY2017/18 as a result of all of the aforesaid and in particular the increase in revenue and gross profit as well as the expenses in relation to the [REDACTED] which were not deductible for tax purposes.

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FINANCIAL INFORMATION

Our income tax expense increased from approximately HK$5.9 million for FY2016/17 to approximately HK$8.3 million for FY2017/18 as a result of the combined effect of the increase in profit before tax and the tax effect of the non-deductible [REDACTED] expense incurred in FY2017/18.

Profit and total comprehensive income for the year

Despite the recognition of [REDACTED] expenses in FY2017/18 and the tax effect of the non-deductible [REDACTED] expenses as explained above, our profit and total comprehensive income increased from approximately HK$27.1 million for FY2016/17 to approximately HK$38.6 million for FY2017/18, representing an increase of approximately 42.4% as a result of all of the aforesaid and in particular the increase in revenue and gross profit.

FY2016/17 compared with FY2015/16

Revenue

Our revenue increased from approximately HK$240.1 million for FY2015/16 to approximately HK$346.4 million for FY2016/17, representing an increase of 44.3%. The increase in our total revenue was mainly attributable to the increase in revenue of our fitting-out services which contributed to approximately 99.4% and 99.9% of our total revenue for each of FY2015/16 and FY2016/17 and such increase in revenue was because:

(i) The increase in the number of relatively sizeable fitting-out services projects with revenue contribution of HK$1 million to below HK$50 million in FY2016/17, as demonstrated in the below table:

Revenue recognised HK$50 million or above HK$10 million to below HK$50 million HK$1 million to below HK$10 million Below HK$1 million Total	FY2015/16 Number of projects 1 7 11 51 70	FY2016/17 Number of projects 1 12 18 38
		69

(ii) In particular, the increase in the revenue was mainly driven by the revenue contributed by some of our major fitting-out works projects undertaken or commenced during FY2016/17, included the fitting-out services for (i) low density residential properties located in Clearwater Bay, Sai Kung, which contributed revenue of approximately HK$82.3 million (i.e. Project B and Project F under the table of “Business – Our

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FINANCIAL INFORMATION

projects undertaken during the Track Record Period - Major projects” for FY2016/17); and (ii) residential properties of a private housing estate located in Yuen Long, which contributed revenue of approximately HK$26.4 million (i.e. Project G under the table of “Business – Our projects undertaken during the Track Record Period – Major projects” for FY2016/17).

Direct costs

Our direct costs increased from approximately HK$216.4 million for FY2015/16 to approximately HK$304.2 million for FY2016/17, representing an increase of 40.6%, which was lower than the increase in our revenue by approximately 3.7 percentage points (and thus resulted in our higher gross profit margin). Our direct costs mainly include subcontracting charges, direct material costs, staff costs, rental of machinery and equipment, and others. These costs may fluctuate substantially from project to project, because depending on the scope of fitting-out services to be performed or the number of residential units required for fitting-out services to be performed, the volume and/or types of fitting-out materials used may fluctuate, resulting in substantial fluctuations in the proportions of direct costs from project to project.

The following is a discussion of the changes in the key components of our direct costs in FY2015/16 compared to FY2016/17:

(i) Our subcontracting charges increased from approximately HK$134.5 million for FY2015/16 to approximately HK$203.1 million for FY2016/17, representing an increase of approximately 51.0%. Such increase was mainly due to the increase in amount of works outsourced to subcontractors as a result of our growth in business in FY2016/17 as illustrated by the increase in our revenue as discussed above, in particular the increase in the number of relatively larger scale projects undertaken during FY2016/17.
(ii) Our direct materials costs increased from approximately HK$69.3 million for FY2015/16 to approximately HK$82.6 million for FY2016/17, representing an increase of approximately 19.2%. The less-than-proportionate increase in our direct material costs was mainly due to the increase in volume and types of fitting-out materials used for projects in FY2016/17 as compared to that in FY2015/16, as we benefited from our price bargaining power over our suppliers with the increase in our bulk purchase volume. In respect of Project B and Project F that we undertook during FY2016/17, low density residential properties generally required less direct materials such as wooden furniture and timber doors, which was mainly due to the number of units are lower as compared to other projects.
(iii) Our staff costs increased from approximately HK$9.8 million for FY2015/16 to approximately HK$16.4 million for FY2016/17, representing an increase of approximately 67.3%. Such increase was mainly due to the increase in our project management and safety supervision personnel to cope with our increased workload in FY2016/17 compared to FY2015/16.

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FINANCIAL INFORMATION

Gross profit and gross profit margin

Our gross profit and gross profit margin for FY2015/16 and FY2016/17 respectively were as follows:

	FY2015/16	FY2016/17
Revenue (HK$’000)	240,149	346,391
Gross profit (HK$’000)	23,772	42,237
Gross profit margin	9.9%	12.2%

Our gross profit amounted to approximately HK$23.8 million and approximately HK$42.2 million for FY2015/16 and FY2016/17 respectively, representing an increase of approximately 77.3%, and our gross profit margin increased from approximately 9.9% in FY2015/16 to approximately 12.2% in FY2016/17. Our Directors are of the view that our Group benefited from our price bargaining power over our suppliers with the increase in our bulk purchase volume which enabled us to achieve higher gross profit margin.

Other income and gains/(losses), net

Our other income and gains/(losses), net changed from a net income of approximately HK$94,000 for FY2015/16 to a net loss of approximately HK$7,000 for FY2016/17. Such difference was mainly because net foreign exchange gains of approximately HK$75,000 was recognised in FY2015/16 while losses of approximately HK$7,000 was recognised in FY2016/17.

Administrative and other operating expenses

Our administrative and other operating expenses amounted to approximately HK$8.2 million for FY2015/16 and approximately HK$8.2 million for FY2016/17 respectively, which remained relatively stable.

Finance costs

Our finance costs decreased from approximately HK$1.2 million for FY2015/16 to approximately HK$1.0 million for FY2016/17, which was primarily due to the decrease in effective interest rates of bank borrowings for FY2016/17 as compared to FY2015/16.

Income tax expense

For each of FY2015/16 and FY2016/17, our income tax expenses amounted to approximately HK$2.6 million and HK$5.9 million respectively, representing an increase of approximately 126.9%. Such increase was primarily due to the increase in our profit before tax from approximately HK$14.4 million in FY2015/16 to approximately HK$33.0 million in FY2016/17, representing an increase of approximately 129.2%, mainly due to our increases in revenue and gross profit as discussed above.

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FINANCIAL INFORMATION

Profit and total comprehensive income for the year

As a result of the aforesaid and in particular the increase in our revenue and gross profit as discussed above, our profit and total comprehensive income for the year attributable to owners of our Company increased from approximately HK$11.9 million in FY2015/16 to approximately HK$27.1 million in FY2016/17, representing an increase of approximately 127.7%.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of funds have historically been our equity capital, cash generated from our operations and borrowings. Our primary liquidity requirements are to finance our working capital needs, and fund our capital expenditures and growth of our operations. Going forward, we expect these sources to continue to be our principal sources of liquidity, and we may use a portion of the proceeds from the [REDACTED] to finance a portion of our liquidity requirements.

As at 30 April 2018, being the most recent practicable date for the purpose of the disclosure of our liquidity position, we had cash and bank balances of approximately HK$27.7 million and we had banking facilities of approximately HK$7.0 million available for cash drawdown.

Cash flows

The following table sets forth a summary of our cash flows for the periods indicated:

Net cash from operating activities Net cash used in investing activities Net cash (used in)/generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year	FY2015/16 HK$’000 20,234 – (13,611) 6,623 5,110 11,733	FY2016/17 HK$’000 4,610 (2) 13,819 18,427 11,733 30,160	FY2017/18 HK$’000 5,487 (6) (8,875) (3,394) 30,160 26,766

Cash flows from operating activities

Our operating cash inflows is primarily derived from our revenue from the provision of fitting-out services, whereas our operating cash outflows mainly includes payment for purchase of direct materials, subcontracting charges, staff costs, as well as other working capital needs.

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Net cash generated from operating activities primarily consisted of profit before income tax adjusted for depreciation, interest expenses and interest income and the effect of changes in working capital such as changes in contract assets, trade and other receivables, amount due from/to a director, amounts due from/to related companies, contract liabilities, trade and other payables, and income tax paid.

The following table sets forth a reconciliation of our profit before income tax to net cash from operating activities:

Profit before income tax Adjustments for: Depreciation Interest expenses Interest income Operating profit before changes in working capital Increase in contract assets Increase in trade and other receivables (Increase)/Decrease in amount due from a director (Increase)/Decrease in amounts due from related companies Increase in contract liabilities Increase/(Decrease) in trade and other payables (Decrease)/Increase in amount due to a director Cash generated from operations Tax paid Net cash from operating activities	FY2015/16 HK$’000 14,427 326 1,205 – 15,958 (17,914) (7,161) – (6,989) – 37,682 (769) 20,807 (573) 20,234	FY2016/17 HK$’000 33,049 435 961 – 34,445 (5,214) (13,338) (11,748) 20,199 – (9,820) (8,052) 6,472 (1,862) 4,610	FY2017/18 HK$’000 46,921 436 1,657 (2) 49,012 (26,733) (1,305) 11,748 – 16,009 (31,629) 1,293 18,395 (12,908) 5,487

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FINANCIAL INFORMATION

For FY2015/16, we recorded profit before income tax of approximately HK$14.4 million and net cash from operating activities of approximately HK$20.2 million. The difference was mainly due to the amount and timing of receipts from our customers as well as the amount and timing of payments to our suppliers as at 31 March 2016.

For FY2016/17, we recorded profit before income tax of approximately HK$33.0 million and net cash from operating activities of approximately HK$4.6 million. The difference was mainly due to (i) the cash advances by us to our Director (i.e. Mr. Man) for his personal use; and (ii) substantial net cash outflows for working capital needs due to major fitting-out projects undertaken or commenced during the year.

For FY2017/18, we recorded profit before income tax of approximately HK$46.9 million and net cash from operating activities of approximately HK$5.5 million. The difference was mainly due to substantial net cash outflows for working capital needs due to major fitting-out projects undertaken or commenced during the year, as well as substantial cash outflow for tax payment during the year.

Cash flows from investing activities

Interest received Purchases of property, plant and equipment Net cash used in investing activities	FY2015/16 HK$’000 – – –	FY2016/17 HK$’000 – (2) (2)	FY2017/18 HK$’000 2 (8) (6)

During the Track Record Period, our cash inflows from investing activities includes interest received, whereas our cash outflows from investing activities primarily include cash used in the purchase of property, plant and equipment.

For FY2015/16, there was no cash generated from or used in investing activities. For FY2016/17 and FY2017/18, we recorded net cash used in investing activities of approximately HK$2,000 and HK$6,000 respectively, which was primarily attributable to purchase of furniture and fixtures.

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FINANCIAL INFORMATION

Cash flows from financing activities

Interest paid Proceeds from bank borrowings Repayments of bank borrowings Repayments of finance leases liability Dividends paid Net cash (used in)/generated from financing activities	FY2015/16 HK$’000 (1,205) 82,671 (94,477) (600) – (13,611)	FY2016/17 HK$’000 (961) 113,393 (98,198) (415) – 13,819	FY2017/18 HK$’000 (1,657) 124,776 (121,565) (429) (10,000)
			(8,875)

During the Track Record Period, our cash outflows from financing activities includes interest paid, repayments of bank borrowings, repayments of finance leases liability and dividends paid.

For FY2015/16, we recorded net cash used in financing activities of approximately HK$13.6 million, which was mainly attributable to the repayments of bank borrowings, partially offset by the proceeds from bank borrowings.

For FY2016/17, we recorded net cash generated from financing activities of approximately HK$13.8 million, which was mainly attributable to the proceeds from bank borrowings, partially offset by the repayments of bank borrowings.

For 2017/18, we recorded net cash used in financing activities of approximately HK$8.9 million, which was primarily due to the dividends paid and the repayments of bank borrowings, partially offset by the proceeds from bank borrowings.

Capital expenditures

For each of FY2015/16, FY2016/17 and FY2017/18, our Group incurred capital expenditures of approximately HK$1.4 million, HK$2,000 and HK$8,000 respectively, as set out below:

Furniture and fixtures Motor vehicles	FY2015/16 HK$’000 – 1,444 1,444	FY2016/17 HK$’000 2 – 2	FY2017/18 HK$’000 8 –
			8

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FINANCIAL INFORMATION

WORKING CAPITAL

Our Directors are of the opinion that, taking into consideration our internal resources and banking facilities presently available to our Group, including our existing cash and cash equivalents, cash generated from our operations, available banking facilities, and the estimated [REDACTED] to be received by us from the [REDACTED] , our Group has sufficient working capital for our present requirements for at least 12 months from the date of this document.

NET CURRENT ASSETS

The following table sets forth a breakdown of our Group’s current assets and liabilities as at the dates indicated:

Current assets Contract assets Trade and other receivables Amount due from a director Amount due from related companies Cash and bank balances Total current assets Current liabilities Contract liabilities Trade and other payables Amount due to a director Bank borrowings Finance lease liability Current income tax liabilities Total current liabilities Net current assets	As at 31 March 2016 HK$’000 62,510 24,479 – 20,199 11,733 118,921 – 80,167 8,052 15,198 415 2,492 106,324 12,597	As at 31 March 2017 HK$’000 67,724 37,817 11,748 – 30,160 147,449 – 80,347 – 30,393 429 6,540 117,709 29,740	As at 31 March 2018 HK$’000 94,457 39,122 – – 26,766 160,345 16,009 38,718 1,293 33,604 – 1,959 91,583 68,762	As at 30 April 2018 HK$’000 (unaudited) 93,714 27,752 – 6 27,663
				149,135
				– 40,638 1,293 35,941 – 2,420
				80,292
				68,843

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FINANCIAL INFORMATION

As at 31 March 2016, 2017 and 2018, our net current assets amounted to approximately HK$12.6 million, approximately HK$29.7 million and approximately HK$68.8 million respectively. The increase in our net current assets was mainly due to the increase in our current assets as a result of our business growth and our profitable operation during the Track Record Period, with the combined effect of the decrease in our current liabilities.

As at 30 April 2018, being the latest practicable date for ascertaining our net current assets position, our net current assets amounted to approximately HK$68.8 million which was relatively stable as compared with our net current assets as at 31 March 2018.

DISCUSSION ON SELECTED STATEMENT OF FINANCIAL POSITION ITEMS

Further discussions of the fluctuations in the key components of our net current assets are set forth in the following paragraphs.

Contract assets and liabilities

The contract assets primarily relate to the Group’s rights to consideration for work completed but not yet billed at the reporting date. The contract assets are transferred to trade receivables when the rights become unconditional. The contract liabilities primarily relate to the advanced consideration received from customers, for which revenue is recognised based on the progress of the provision of related services.

The following table sets out the movement of contract assets and liabilities:

Contract costs incurred plus recognised profits less recognised losses Less: Progress billings received and receivables Contract assets Contract liabilities Balance at end of the year	As at 31 March 2016 HK$’000 604,000 (541,490) 62,510 62,510 – 62,510	As at 31 March 2017 HK$’000 738,155 (671,431) 67,724 67,724 – 67,724	As at 31 March 2018 HK$’000 768,865 (674,408) 94,457 94,457 (16,009) 78,448

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FINANCIAL INFORMATION

Trade and other receivables

Our trade and other receivables as at 31 March 2016, 2017 and 2018 amounted to approximately HK$24.5 million, approximately HK$37.8 million and approximately HK$39.1 million respectively. The following table sets forth a breakdown of our trade and other receivables:

Trade receivables Retention receivables Other receivables, deposits and prepayments	As at 31 March 2016 HK$’000 21,454 2,896 129 24,479	As at 31 March 2017 HK$’000 28,013 8,943 861 37,817	As at 31 March 2018 HK$’000 21,701 4,754 12,667
			39,122

Trade receivables

Our trade receivables increased from approximately HK$21.5 million as at 31 March 2016 to approximately HK$28.0 million as at 31 March 2017 and decreased to approximately HK$21.7 million as at 31 March 2018. Such fluctuation was primarily due to the fluctuation of the amount settled by different customers to us as at the respective reporting dates due to the different settlement practices of different customers as well as the different credit periods.

Retention receivables

When undertaking fitting-out services projects, some of our customers may, depending on the contract terms, hold up a certain percentage of each payment made to us as retention money. Retention money is normally equivalent to 10% of each progress payment and in aggregate subject to a maximum retention of 5% of the total contract sum. Normally, the retention money is released upon the expiry of the defects liability period. The fluctuation of our retention receivables as at 31 March 2016, 2017 and 2018 was mainly due to different duration and different size of the fitting-out services projects undertaken by us during the Track Record Period.

Other receivables, deposits and prepayments

Our other receivables, deposits and prepayments increased from approximately HK$0.1 million as at 31 March 2016 to approximately HK$0.9 million as at 31 March 2017, and further increase to approximately HK$12.7 million as at 31 March 2018. The relatively substantial increase to approximately HK$12.7 million as at 31 March 2018 was mainly due to (i) the prepayment of expenses in relation to the [REDACTED] of approximately HK$3.4 million; and (ii) deposit paid for the purchase of flooring materials of approximately HK$9.0 million.

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FINANCIAL INFORMATION

Concentration

As at 31 March 2016, 2017 and 2018, there were 2, 2 and 3 customer(s) which individually contributed over 10% of our trade and other receivables, respectively. The aggregate amounts of trade and other receivables from these customers amounted to 82.0%, 90.6% and 60.4% of our total trade and other receivables as at 31 March 2016, 2017 and 2018 respectively. For further information regarding our customer concentration risk and our Directors’ view as to the sustainability of our business model in view of our customer concentration, please refer to the section headed “Business – Our customers – Customer concentration” in this document.

Trade receivables turnover days

The following table sets forth our trade receivables turnover days during the Track Record Period:

	FY2015/16	FY2016/17	FY2017/18
Trade receivables turnover days
(Note)	29.2 days	26.1 days	16.2 days

Note: Trade receivables turnover days is calculated based on the average of the beginning and ending balance of trade receivables (not including retention receivables, other receivables, deposits and prepayments) divided by revenue during the year, then multiplied by the number of days of the year (i.e. 365 days for a full year).

The credit period that we granted to customers generally ranged from 21 to 30 days. Our trade receivables turnover days were approximately 29.2 days for FY2015/16, approximately 26.1 days for FY2016/17 and approximately 16.2 days for FY2017/18. Such fluctuation was mainly due to the fluctuation of the amounts settled by different customers to us as at the respective reporting dates due to the different settlement practices of different customers as well as the different credit periods granted by us.

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FINANCIAL INFORMATION

Trade receivables ageing analysis and subsequent settlement

The ageing analysis of our trade receivables based on invoice date is as follows:

0–30 days 31–60 days 61–90 days Over 90 days	As at 31 March 2016 HK$’000 15,753 – 174 5,527 21,454	As at 31 March 2017 HK$’000 23,199 330 36 4,448 28,013	As at 31 March 2018 HK$’000 16,389 450 2 4,860
			21,701

The ageing analysis of our trade receivables which were past due but not impaired is as follows:

Neither past due nor impaired 0–30 days past due 31–60 days past due 61–90 days past due Over 90 days past due	As at 31 March 2016 HK$’000 15,753 – 174 414 5,113 21,454	As at 31 March 2017 HK$’000 23,199 330 36 – 4,448 28,013	As at 31 March 2018 HK$’000 16,389 450 2 4,251 609
			21,701

As shown in the above table, approximately 73.4%, 82.8% and 75.5% of our trade receivables as at 31 March 2016, 2017 and 2018 were neither past due nor impaired.

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FINANCIAL INFORMATION

Up to the Latest Practicable Date, 68.0% of our trade receivables as at 31 March 2018 had been settled:

Neither past due nor impaired 0–30 days past due 31–60 days past due 61–90 days past due Over 90 days past due	Trade receivable as at 31 March 2018 HK$’000 16,389 450 2 4,251 609 21,701	Subsequent settlement up to the Latest Practicable Date HK$’000 % 10,482 64.0 11 2.4 – – 4,250 100.0 6 1.0 14,749 68.0

Approximately 98.5%, 99.4% and 75.7% of our revenue for each of FY2015/16, FY2016/17 and FY2017/18 was generated from the projects with Customer A, Customer B and Customer C, being our top five customers during the Track Record Period whose holding companies are among the top ten property developers in Hong Kong, the shares of which are listed on the Main Board of the Stock Exchange, which carries little risk of default in the opinion of our Directors. Our credit terms offered to customers generally ranged from 21 to 30 days. For our credit risk management, please refer to the section headed “Business – Risk management and internal controls systems – Credit risk management” in this document.

We assess at end of each reporting period whether there is any objective evidence that trade receivables are impaired. We determine the provision for impairment of trade receivables on a case-by-case basis having regard to a number of factors, including the ageing of the receivable balance, results of follow-up procedures, customers’ credit history, customers’ financial position, and the current market condition.

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FINANCIAL INFORMATION

No provision for impairment loss was recognised in respect of our trade receivables because our Directors are of the view that all trade receivables can be recovered having taken into account, among other factors, that:

(i) our Directors confirm that there has been no dispute or disagreement with regard to the value or stage of completion of projects between our Group and our customers;
(ii) with respect to trade receivables which were neither past due or past due within 60 days as at 31 March 2018, our Directors consider that the subsequent settlement rates as shown in the above table are in good standing and that the amounts that remain outstanding are recoverable; and
(iii) with respect to trade receivables which were past due over 60 days as at 31 March 2018, our Directors consider that the subsequent settlement rates as shown in the above table are in good standing. We had actively followed up with the relevant customers and our Directors consider that such trade receivables are recoverable having regard to our continuing business relationship with the relevant customers, their business scale, their past payment records and there was no apparent financial and cash flows issues of the relevant customers as indicated to our Directors. Our Directors confirm that there were no disputes from such customer on the outstanding amounts payable to us. Our Directors confirm that further active follow-up actions, including written payment reminders and active communications with those customers, will continue until full settlement of the outstanding balance.

Trade and other payables

Our trade and other payables as at 31 March 2016, 2017 and 2018 amounted to approximately HK$80.2 million, approximately HK$80.3 million and approximately HK$38.7 million respectively. The following table sets forth a breakdown of our trade and other payables:

Trade payables Dividend payables Accruals and other payables	As at 31 March 2016 HK$’000 78,739 – 1,428 80,167	As at 31 March 2017 HK$’000 67,851 10,000 2,496 80,347	As at 31 March 2018 HK$’000 34,856 – 3,862
			38,718

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FINANCIAL INFORMATION

Trade payables

Our trade payables mainly comprised payables to subcontractors and materials suppliers.

Our trade payables decreased from approximately HK$78.7 million as at 31 March 2016 to approximately HK$67.9 million as at 31 March 2017 and further decreased to approximately HK$34.9 million as at 31 March 2018. Such decrease was mainly because we expedited the process of settling our trade payables in order to enhance business relationship with various suppliers, which was evidenced by the decrease in trade payables turnover days below.

Accruals and other payables

Our accruals and other payables mainly include accruals for salaries and allowances of staff and audit fee.

Our accruals and other payables increased from approximately HK$1.4 million as at 31 March 2016 to approximately HK$2.5 million as at 31 March 2017 and further increased to approximately HK$3.9 million as at 31 March 2018. Such increase was mainly due to the increase in accruals for salaries and allowances of staff due to the increase in number of our employees across the Track Record Period.

Trade payables turnover days

The following table sets out our trade payables turnover days during the Track Record Period:

					FY2015/16	FY2016/17	FY2017/18
Trade	payables	turnover	days	(Note)	101.6 days	88.0 days	37.6 days

Note: Trade payables turnover days is calculated based on the average of the beginning and ending balance of trade payables (not including accruals and other payables) divided by cost of sales for the year, then multiplied by the number of days of the year (i.e. 365 days for a full year).

Our trade payables turnover days decreased from approximately 101.6 days for FY2015/16 to approximately 88.0 days for FY2016/17, and further decreased to approximately 37.6 days for FY2017/18, which was primarily because we expedited the process of settling our trade payables in order to enhance business relationship with various suppliers.

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FINANCIAL INFORMATION

Trade payables ageing analysis and subsequent

The following table sets forth an ageing analysis of trade payables based on the invoice dates:

0–30 days 31–60 days 61–90 days Over 90 days	As at 31 March 2016 HK$’000 55,620 7,546 10,325 5,248 78,739	As at 31 March 2017 HK$’000 54,770 4,236 1,431 7,414 67,851	As at 31 March 2018 HK$’000 27,475 9 4,704 2,668
			34,856

Up to the Latest Practicable Date, 82.0% of our trade payables as at 31 March 2018 had been settled.

Amount due from a director

Details of the amount due from a director are summarised in note 18 to the accountants’ report set out in Appendix I to this document.

The amount due from a director is non-trade in nature, unsecured, non-interest bearing and repayable on demand. During the Track Record Period, such amounts represented cash advanced by our Group to Mr. Man for his personal use.

Amounts due from related companies

Details of the amounts due from related companies are summarised in note 19 to the accountants’ report set out in Appendix I to this document.

Amounts due from related companies represented amounts due from Haicheng Huizhou and Haicheng Sichuan of approximately HK$16.1 million and 4.1 million, respectively as at 31 March 2016. All amounts due from related companies were settled during FY2016/17. For details of Haicheng Huizhou and Haicheng Sichuan, please refer to the paragraph headed “Related party transactions” in this section.

Amounts due from related companies are non-trade nature, unsecured, interest-free and repayable on demand. During the Track Record Period, such amounts represented cash advanced by our Group to the related companies for their working capital purpose.

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FINANCIAL INFORMATION

INDEBTEDNESS

The following table sets forth our Group’s indebtedness as at the respective dates indicated. As of 30 April 2018, being the latest practicable date for this indebtedness statement, save as disclosed in this subsection headed “Indebtedness”, we do not have any debt securities, term loans, borrowings or indebtedness in the nature of borrowing, mortgages, charges, contingent liabilities or guarantees. Our Directors confirmed that we had neither experienced any difficulties in obtaining or repaying, nor breached any major covenant or restriction of our bank loans or other bank facilities during the Track Record Period. As at the Latest Practicable Date, there are no material covenants related to our outstanding debts that would materially limit our ability to undertake additional debt or equity financing. Our Directors confirmed that there has not been any material change in our indebtedness or contingent liabilities since 30 April 2018 and up to the date of this document. Our Directors confirmed that as at the Latest Practicable Date, we did not have any immediate plan for additional material external debt financing.

Non-current liabilities Finance lease liability Current liabilities Bank borrowings Finance lease liability Amount due to a director	As at 31 March 2016 HK$’000 429 15,198 415 8,052 24,094	As at 31 March 2017 HK$’000 – 30,393 429 – 30,822	As at 31 March 2018 HK$’000 – 33,604 – 1,293 34,897	As at 30 April 2018 HK$’000 (unaudited) – 35,941 – 1,293
				37,234

Banking facilities

As at 31 March 2016, 2017 and 2018 and 30 April 2018, our Group had banking facilities with credit limit amounting to approximately HK$25.0 million, HK$31.7 million, HK$43.2 million and HK$43.0 million respectively which were secured by (i) unlimited personal guarantee and indemnity granted by Mr. Man and Mrs. Man; (ii) unlimited corporate guarantee granted by Hoi Sing Holdings; (iii) personal property owned by Mr. Man; and (iv) proceeds in relation to certain trade receivables of our subsidiaries. The guarantees and securities in relation to the aforementioned items (i), (ii) and (iii) will be released and replaced by corporate guarantees of our Company upon [REDACTED] .

These banking facilities include facilities for invoice financing, revolving loan facilities, term loan facilities and installment loan facilities.

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FINANCIAL INFORMATION

The unutilised banking facilities as at 31 March 2016, 2017 and 2018 and 30 April 2018 amounted to approximately HK$9.8 million, HK$1.3 million, HK$9.6 million and HK$7.0 million respectively.

Bank borrowings

As at 31 March 2016, 2017 and 2018 and 30 April 2018, our Group had bank borrowings repayable as follows:

			As at	As at	As at	As at
			31 March	31 March	31 March	30 April
			2016	2017	2018	2018
			HK$’000	HK$’000	HK$’000	HK$’000
						(unaudited)
Within	1	year	15,198	30,393	33,604	35,941

As at 31 March 2016, 2017 and 2018 and 30 April 2018, the effective interest rates of the bank borrowings ranged from HKD Prime Rate minus 0.5% to HKD Prime Rate plus 0.5% per annum, and flat rate of 4.2% and flat rate of 4.8%.

Finance lease liability

During the Track Record Period, we purchased motor vehicles by way of finance lease arrangements.

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FINANCIAL INFORMATION

At 31 March 2016, 2017 and 2018 and 30 April 2018, our Group had obligations under finance leases repayable as follows:

Within one year More than one year but not more than two years More than two years but not more than five years Less: total future interest expenses Present value of lease obligations	As at 31 March 2016 Present value of the minimum lease payment Total minimum lease payments HK$’000 HK$’000 415 437 429 437 – – 844 874 (30) 844	As at 31 March 2017 Present value of the minimum lease payment Total minimum lease payments HK$’000 HK$’000 429 437 – – – – 429 437 (8) 429	As at 31 March 2018 Present value of the minimum lease payment Total minimum lease payments HK$’000 HK$’000 – – – – – – – – – –	As at 30 April 2018 Present value of the minimum lease payment Total minimum lease payments HK$’000 HK$’000 (unaudited) (unaudited) – – – – – – – – – –	As at 30 April 2018 Present value of the minimum lease payment Total minimum lease payments HK$’000 HK$’000 (unaudited) (unaudited) – – – – – – – – – –
					– –
					–

As at 31 March 2016 and 2017, the effective interest rate was 1.79% per annum for our finance leases facilities.

Our finance leases were secured by motor vehicle. As at 31 March 2016 and 2017, the net book value of our motor vehicle under finance leases amounted to approximately HK$1.1 million and approximately HK$0.7 million respectively, representing 100% of the total net book value of our motor vehicles as at 31 March 2016 and 2017. As at 31 March 2018, the finance leases payables were fully settled and there were no new finance lease facilities drawn since then.

Amount due to a director

Our Group had an amount due to Mr. Man of approximately HK$8.1 million, nil, approximately HK$1.3 million and approximately HK$1.3 million as at 31 March 2016, 2017 and 2018 and 30 April 2018 respectively. The amount due to Mr. Man was cash advanced by Mr. Man to our Group for working capital purpose. The amount due to Mr. Man was non-trade nature, unsecured, non-interest bearing and repayable on demand. All outstanding balance will be fully settled upon the [REDACTED] .

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FINANCIAL INFORMATION

Operating lease commitments

Group as lessee

As at 31 March 2016, 2017 and 2018 and 30 April 2018, the total future minimum lease payments payable by our Group (as lessee) under non-cancellable operating lease is as follows:

Within one year In the second to firth years inclusive	As at 31 March 2016 HK$’000 435 828 1,263	As at 31 March 2017 HK$’000 468 396 864	As at 31 March 2018 HK$’000 432 – 432	As at 30 April 2018 HK$’000 (unaudited) 888 1,012
				1,900

The non-cancellable operating leases represented the lease of office premises located at Tsuen Wan from Hoi Sing Holdings, which was considered as a related party transaction during the Track Record Period. After the [REDACTED] , the lease will continue and such transaction will constitute exempt continuing connected transaction of our Company for the purpose of Chapter 14A of the Listing Rules. For details, please see the section headed “Connected transaction” in this document.

Contingent liabilities

Our Group had no significant contingent liabilities as at the end of the Track Record Period and as at the Latest Practicable Date.

Off-balance sheet arrangements and commitments

As at the Latest Practicable Date, we did not have any off-balance sheet arrangements or commitments.

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FINANCIAL INFORMATION

KEY FINANCIAL RATIOS

	FY2015/16 or	FY2016/17 or	FY2017/18 or
	as at	as at	as at
	31 March	31 March	31 March
	2016	2017	2018
Revenue growth	N/A	44.2%	61.7%
Net profit growth	N/A	128.8%	42.2%
Gross profit margin	9.9%	12.2%	11.0%
Net profit margin before interest and tax	6.5%	9.8%	8.7%
Net profit margin	4.9%	7.8%	6.9%
Return on equity	89.2%	89.2%	55.9%
Return on total assets	9.9%	18.3%	24.0%
Current ratio	1.1	1.3	1.8
Quick ratio	1.1	1.3	1.8
Inventories turnover days	N/A	N/A	N/A
Trade receivables turnover days	29.2	26.1	16.2
Trade payables turnover days	101.6	88.0	37.6
Gearing ratio	181.3%	101.3%	50.6%
Net debt to equity ratio	93.0%	2.2%	11.8%
Interest coverage	13.0	35.4	29.3

Revenue growth

Please refer to the paragraph headed “Period-to-period comparison of results of operations” in this section for the reasons for the fluctuation in our revenue.

Net profit growth

Please refer to the paragraph headed “Period-to-period comparison of results of operations” in this section for the reasons for the fluctuation in our net profit.

Gross profit margin

Please refer to the paragraph headed “Period-to-period comparison of results of operations” in this section for the reasons for the fluctuation in our gross profit margin.

Net profit margin before interest and tax

Our net profit margin before interest and tax increased from approximately 6.5% for FY2015/16 to approximately 9.8% for FY2016/17, which was mainly due to the increase in our gross profit margin as discussed in the paragraph headed “Period-to-period comparison of results of operations” in this section.

Our net profit margin before interest and tax decreased from approximately 9.8% for FY2016/17 to approximately 8.7% for FY2017/18, which was mainly due to the increase in our administrative and other operating expenses as discussed in the paragraph headed “Period-to-period comparison of results of operations” in this section.

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FINANCIAL INFORMATION

Net profit margin

Our net profit margin increased from approximately 4.9% for FY2015/16 to approximately 7.8% for FY2016/17, which was mainly due to (i) the increase in our net profit margin before interest and tax as mentioned above and (ii) the decrease in the finance costs.

Our net profit margin decreased from approximately 7.8% for FY2016/17 to approximately 6.9% for FY2017/18, which was mainly due to (i) the decrease in our net profit margin before interest and tax as mentioned above; (ii) the tax effect of the non-deductible [REDACTED] expenses recognised in FY2017/18; and (iii) the increase in the finance costs.

Return on equity

Return on equity is calculated as profit for the year divided by the ending total equity as at the respective reporting dates.

Our return on equity remained stable at approximately 89.2% for FY2015/16 and approximately 89.2% for FY2016/17 while decreased to approximately 55.9% for FY2017/18, which was mainly due to the increase in our total equity (by approximately 126.8%) outweighing the increase in profit for the year (by approximately 61.7%).

Return on total assets

Return on total assets is calculated as profit for the year divided by the ending total assets as at the respective reporting dates.

Our return on total assets increased from approximately 9.9% for FY2015/16 to approximately 18.3% for FY2016/17, and further increased to approximately 24.0% for FY2017/18. The increase in our return on total assets over the Track Record Period was mainly due to the increase in the profit for the year as discussed in the paragraph headed “Period-to-period comparison of results of operations” in this section.

Current ratio

Current ratio is calculated as current assets divided by current liabilities as at the respective reporting dates.

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FINANCIAL INFORMATION

Our current ratio increased from approximately 1.1 times as at 31 March 2016 to approximately 1.3 times as at 31 March 2017, which was mainly due to the increase in our current assets as a result of our profitable operations.

Our current ratio increased from approximately 1.3 times as at 31 March 2017 to approximately 1.8 times as at 31 March 2018. Such increase was mainly due to the increase in our current assets as a result of our profitable operations, as well as the decrease in trade and other payables as at 31 March 2018 as discussed in the paragraph headed “Trade and other payables” in this section.

Quick ratio

Quick ratio is calculated as current assets minus inventories, then divided by current liabilities as at the respective reporting dates. Due to our business nature, we did not have any inventories during the Track Record Period. As such, our quick ratio was the same as our current ratio.

Inventories turnover days

Due to the nature of our business model, we did not maintain any inventories during the Track Record Period. As such, analysis of inventories turnover days is not applicable.

Trade receivables turnover days

Trade receivables turnover days is calculated based on the average of the beginning and ending balance of trade receivables (not including retention receivables and other receivables, deposits and prepayments) divided by revenue for the year, then multiplied by the number of days of the year (i.e. 365 days for a full year).

Please refer to the section “Financial information – Net current assets – Trade and other receivables” for the reasons for the change in our trade receivables turnover days.

Trade payables turnover days

Trade payables turnover days is calculated based on the average of the beginning and ending balance of trade payables (not including trade accruals) divided by direct costs for the year, then multiplied by the number of days of the year (i.e. 365 days for a full year).

Please refer to the paragraph headed “Net current assets – Trade and other payables” in this section for the reasons for the change in our trade payables turnover days.

Gearing ratio

Gearing ratio is calculated as total borrowings (including bank borrowings, finance lease liabilities and amount due to a director) divided by the total equity as at the respective reporting dates.

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FINANCIAL INFORMATION

Our gearing ratio was approximately 181.3% as at 31 March 2016, approximately 101.3% as at 31 March 2017 and approximately 50.6% as at 31 March 2018. The decrease in our gearing ratio during the Track Record Period was mainly due to repayment of amount due to a director and the increase in our total equity, despite the increasing amount of total bank borrowings.

Net debt to equity ratio

Net debt to equity ratio is calculated as net debts (i.e. total borrowings, net of cash and cash equivalents) divided by total equity as at the respective reporting dates.

Our net debt to equity ratio decreased from approximately 93.0% as at 31 March 2016 to approximately 2.2% as at 31 March 2017, mainly due to the increase in our cash and bank balances as at 31 March 2017.

Our net debt to equity ratio increased from approximately 2.2% as at 31 March 2017 to approximately 11.8% as at 31 March 2018, mainly due to the increase in our bank borrowings as at 31 March 2018.

Interest coverage

Interest coverage is calculated as profit before finance costs and income tax divided by finance costs of the respective reporting years.

Our interest coverage increased from approximately 13.0 times as at 31 March 2016 to approximately 35.4 times as at 31 March 2017, mainly due to our increase in net profit margin before interest and tax for FY2016/17 as explained above and the decrease in our finance cost mainly due to the decrease in the effective interest rates of the bank borrowings for FY2016/17 as compared to FY2016/15.

Our interest coverage decreased from approximately 35.4 times as at 31 March 2017 to approximately 29.3 times as at 31 March 2018, mainly due to the increase in finance costs as a result of the increase in proceeds from bank borrowings during FY2017/18.

FINANCIAL RISK AND CAPITAL MANAGEMENT

Financial and capital risk management

Our Group is exposed to interest rate risk, credit risk and liquidity risk in the normal course of business. For further details of our financial risk management, please refer to “Business – Risk management and internal control systems” and note 3 of the accountants’ report set out in Appendix I to this document.

We manage our capital to ensure that entities in our Group will be able to continue as a going concern while maximising the return to our Shareholder through the optimisation of the debt and equity balance. Our Directors review the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, we may adjust the amount of dividends paid to Shareholders, conducting share buybacks, issue new Shares, and/or raising new debts, depending on our capital structure and needs from time to time.

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FINANCIAL INFORMATION

UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS

The unaudited pro forma adjusted net tangible assets, which was prepared to illustrate the effect of the [REDACTED] on the audited combined net tangible assets of our Group attributable to owners of our Company as of 31 March 2018 as if the [REDACTED] had taken place on 31 March 2018, was approximately HK$ [REDACTED] per Share and HK$ [REDACTED] per Share, respectively, based on the lower end and the upper end of the indicative [REDACTED] range of HK$ [REDACTED] per [REDACTED] to HK$ [REDACTED] per [REDACTED] . Please refer to Appendix II to this document for the bases and assumptions in calculating the unaudited pro forma adjusted net tangible assets figure.

[REDACTED] EXPENSES

Our Directors estimate that the total amount of expenses in relation to the [REDACTED] is approximately HK$ [REDACTED] . Out of the amount of approximately HK$ [REDACTED] , approximately HK$ [REDACTED] is directly attributable to the issue of the Shares and is expected to be accounted for as a deduction from equity upon [REDACTED] . The remaining amount of approximately HK$ [REDACTED] , which cannot be so deducted, shall be charged to profit or loss. Of the approximately HK$ [REDACTED] that shall be charged to profit or loss, nil, nil and approximately HK$ [REDACTED] million, has been charged for FY2015/16, FY2016/17 and FY2017/18 respectively, and approximately HK$ [REDACTED] is expected to be incurred for FY2018/19. Expenses in relation to the [REDACTED] are non-recurring in nature. Our Group’s financial performance and results of operations for FY2018/19 will be adversely affected by the estimated expenses in relation to the [REDACTED] .

DIVIDEND

For each of FY2015/16, FY2016/17 and FY2017/18, we declared dividends of nil, HK$10.0 million and nil respectively to our then shareholders. All such dividends had been fully paid and we financed the payment of such dividends by internal resources.

The declaration and payment of future dividends will be subject to the decision of the Board having regard to various factors, including but not limited to our operation and financial performance, profitability, business development, prospects, capital requirements, and economic outlook. It is also subject to any applicable laws. The historical dividend payments may not be indicative of future dividend trends. We do not have any predetermined dividend payout ratio.

DISTRIBUTABLE RESERVES

Our Company was incorporated on 9 May 2018. As at 31 March 2016, 2017 and 2018, our Company had no reserves available for distribution to our Shareholders.

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RELATED PARTY TRANSACTIONS

Our related party transactions during the Track Record Period are summarised in note 29 to the accountants’ report set out in Appendix I to this document. During the Track Record Period, material transactions with related parties mainly include the following:

a. Supply of materials to our Group by related party

		FY2015/16	FY2016/17	FY2017/18
		HK$’000	HK$’000	HK$’000
Haicheng	Huizhou	20,274	30,385	–

Haicheng Huizhou is a limited liability company established in the PRC on 15 December 2009. It is wholly owned by Great Gold Development, a limited liability company incorporated in Hong Kong on 12 May 2004. Great Gold Development was previously owned as to 70% by Mr. Man and 30% by Mrs. Man, respectively at the time of incorporation until March 2017.

Great Gold Development is an investment holding company which wholly-owns Haicheng Huizhou, Great Gold Huizhou and Haicheng Sichuan. Haicheng Huizhou, Great Gold Huizhou and Haicheng Sichuan were limited liability companies established in the PRC on 15 December 2009, 18 June 2007 and 28 January 2008, respectively. Great Gold Huizhou and Haicheng Huizhou were principally engaged in the supply of finished furniture products and timber products in the PRC while Haicheng Sichuan was principally engaged in provision of fitting-out services in the PRC.

Subsequently in early March 2017, the entire issued share capital of Great Gold Development was sold to an independent third party. Mr. Man and Mrs. Man disposed of Great Gold Development as they wished to focus on the Group’s business in Hong Kong and no longer wished to continue the furniture supply business undertaken by Great Gold Huizhou and Haicheng Huizhou and the fitting-out business undertaken by Haicheng Sichuan in the PRC.

b. Sales of materials to related party by our Group

			FY2015/16	FY2016/17	FY2017/18
			HK$’000	HK$’000	HK$’000
Hoi	Sing	International	926	261	–

Hoi Sing International is a limited liability company incorporated in Hong Kong on 25 March 2014. It was owned by Mr. Man, Mr. Ho and an independent third party as to 50%, 30% and 20% respectively at the time of incorporation. Mr. Man, Mr. Ho and the

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FINANCIAL INFORMATION

independent third party were also directors of Hoi Sing International. In March 2016, Mr. Ho transferred his entire interest in Hoi Sing International to Mr. Man Hoi Wang, Michael, the son of Mr. Man and Mrs. Man while the independent third party transferred his entire interest in Hoi Sing International to Mrs. Man. Mr. Ho and the independent third party subsequently resigned from their position as director of Hoi Sing International in August 2016 and Mr. Man Hoi Wang, Michael was appointed as a director of Hoi Sing International in August 2016. Mr. Man and Mrs. Man resigned from their position as director of Hoi Sing International in January 2017 and they transferred their entire interest in Hoi Sing International to Mr. Man Hoi Wang, Michael in February 2017.

Prior to Mr. Man Hoi Wang, Michael becoming the sole shareholder, the principal business activities of Hoi Sing International mainly included the retail trading of timber flooring. Subsequently, Mr. Man Hoi Wang, Michael redeveloped the business into retail trading of cosmetic products. Hoi Sing International was disposed to Mr. Man Hoi Wang Michael as its retail business was not in line with the Group’s business as a fitting-out contractor.

c. Provision of fitting-out services to related party by our Group

Mr. Man Mr. Chung Po Wang (Note)	FY2015/16 HK$’000 39 305 344	FY2016/17 HK$’000 – 52 52	FY2017/18 HK$’000 116 –
			116

Note: Mr. Chung Po Wang was a director of Hoi Sing Decoration and resigned in December 2016 due to personal reason.

Our Directors confirmed that the above-mentioned related party transactions under items (a), (b) and (c) above were conducted on arm’s length basis and would not distort our results during the Track Record Period, as supported by the fact that the fees charged to/by these related parties were comparable and within the range of fees charged to/by other independent customers or suppliers engaged by our Group for similar sales or purchases.

d. Rental of office premises to our Group by related party

			FY2015/16	FY2016/17	FY2017/18
			HK$’000	HK$’000	HK$’000
Hoi	Sing	Holdings	432	432	432

Hoi Sing Holdings is a limited liability company incorporated in Hong Kong on 29 January 2007 and is owned as to 50% by Mr. Man and 50% by Mrs. Man. The principal

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FINANCIAL INFORMATION

business of Hoi Sing Holdings is property investment. During the Track Record Period, we rented an office premises from Hoi Sing Holdings. The rental transactions with Hoi Sing Holdings is expected to continue following the [REDACTED] .

Having regard to the then prevailing market rent as assessed by an independent valuer, our rental of office premises before 1April 2018 was below the then prevailing market rent. During the Track Record Period, the annual rental based on the then prevailing market rates as assessed by the independent valuer was estimated to be HK$493,200, HK$502,800 and HK$511,200 for FY2015/16, FY2016/17 and FY2017/18, respectively. Our Directors consider that such differences between the actual annual rental expense (i.e. HK$423,000 for each FY2015/16, FY2016/17 and FY2017/18) and the amounts as assessed by the independent valuer were immaterial to our Group’s financial statements as a whole and therefore did not materially distort our financial results during the Track Record Period. Since 1 April 2018, the new monthly rental of HK$44,000 was arrived at between our Group and Hoi Sing International with regard to the prevailing market rent as assessed by the independent valuer. For further information, please refer to the section headed “Connected transaction” in this document.

RULES 13.13 TO 13.19 OF THE LISTING RULES

Our Directors confirmed that, as at the Latest Practicable Date, they were not aware of any circumstances which, had we been required to comply with Rules 13.13 to 13.19 of the Listing Rules, would have given rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.

MATERIAL ADVERSE CHANGE

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FUTURE PLANS AND [REDACTED]

For details of our business strategies, please refer to the section headed “Business – Business strategies and future plans” in this document.

REASONS FOR THE [REDACTED]

According to the Ipsos Report, the total gross output value of the fitting-out industry is forecasted to increase from approximately HK$31.3 billion to approximately HK$39.2 billion at a CAGR of 5.8% from 2018 to 2022 due to the expected growth in both residential and commercial fitting-out industry. In particular the gross output value generated from residential fitting-out works is forecasted to increase from approximately HK$10.1 billion in 2018 to approximately HK$12.6 billion in 2022 at a CAGR of 5.7%. Further, the demand and supply for micro residential units have been increasing in recent years due to its slightly more affordable price in a smaller size as compared to the high end large property units. This trend creates more residential units under the same developed gross floor area, which leads to an increase in the demand of fitting-out services, according to the Ipsos Report. During the Track Record Period, provision of fitting-services for residential properties constituted 93.3%, 98.8% and 94.7% of our total revenue for FY2015/16, FY2016/17 and FY2017/18, respectively. Driven by the anticipated increase in demand for fitting-out services and growth in the fitting-out industry, our Directors expect that our business will expand steadily going forward.

Taking advantage of the forecasted growth in the fitting-out industry, we aim to further strengthen our market position in the fitting-out industry in Hong Kong through (i) expanding our market share through undertaking more sizeable fitting-out projects; (ii) continuing to emphasise and maintain high standards of project planning, management and implementation; and (iii) adhering to prudent financial management to ensure sustainable growth and capital sufficiency. In particular, we intend to apply the net [REDACTED] from the [REDACTED] in strengthening our financial position and expanding our work force. For details, please refer to the paragraph headed “Use of [REDACTED] ” in this section.

Enhance our corporate profile, brand awareness and competitiveness among business stakeholders

Our Directors believe that the [REDACTED] will enhance our corporate profile and brand awareness among business stakeholders such as customers, contractors, project owners and government authorities. We believe that the [REDACTED] will strengthen our internal control and corporate governance practices, which in turn would bolster our customers’ and suppliers’ confidence in us and attract potential new customers, as well as quality suppliers and subcontractors.

Our Directors consider that the [REDACTED] enhances our competitiveness among competitors. Some of our major competitors in the fitting-out industry in Hong Kong are listed on the Stock Exchange. Customers would tend to give preference to contractors who have a

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FUTURE PLANS AND [REDACTED]

public [REDACTED] status with good reputation, transparent financial disclosures and regulatory supervision. In particular, the respective holding companies of some of our major customers are listed companies and are among the top 10 property developers in Hong Kong based on their revenue derived from property development in 2017 according to the Ipsos Report. They may prefer to engage listed fitting-out contractors. Our Directors believe that we will be able to maintain our competitiveness among the market leaders and differentiate ourselves from other competitors which are private companies during the tendering process, thus enhancing our success rate in securing sizeable projects.

Enhance work morale to nurture an integrated workforce

To effectively implement our business strategies, our Directors believe that a [REDACTED] status allows us to retain our existing staff more effectively, at both operational and administrative level. We believe that our staff will feel more stable and secured about their employment with us as compared to a non-listing group, hence strengthening their morale at work. In turn, an integrated workforce will improve the quality of our services and optimise our day-to-day operations to the benefit of our long-term development.

We have a genuine funding need in order to expand our business

As at 31 March 2016, 2017, 2018 and 30 April 2018, our cash and bank balances were approximately HK$11.7 million, HK$30.2 million, HK$26.8 million and HK$27.7 million, respectively. Our Directors consider that our available cash during the Track Record Period was just sufficient for maintaining our business operations. The total estimated contract sum of our backlog were approximately HK$819.1 million, HK$1,146.0 million and HK$1,112.3 million as at 31 March, 2016, 2017 and 2018, respectively. Our cash and bank balances as at the dates indicated only accounted for less than 3% of our total estimated contract sum of our fitting-out projects in our backlog as at the same date. For details of our fitting-out projects in our backlog, please refer to the section headed “Business – Our projects undertaken during the Track Record Period-Backlog” in this document.

Using contractors who undertake projects in the public sector as a comparison, contractors are required to meet certain financial criteria applicable to their appropriate category and group for admission and retention on the lists of approved contractors for public works maintained by the DEVB and for the award of public works contracts. For example, in order to carry out certain public works, a public works contractor may be required to maintain a minimum working capital of either (i) HK$8.6 million if there are no outstanding contracts or (ii) the higher of HK$8.6 million or 10% of the combined annual value of uncompleted works on outstanding contracts both in the public and private sectors. A tender will not be considered unless the public works contractor has met such working capital requirements.

Furthermore, our financial standing is one of the major considerations for our customers during the tender/quotation assessment process. According to the Ipsos Report, a large amount of upfront cost payment is often involved in fitting-out projects, which require substantial working capital and healthy cash flow. Hence, new entrants who do not have an adequate amount of

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FUTURE PLANS AND [REDACTED]

capital may face consequences of delayed project executions and ultimately, lose their reputation. Our Directors consider that customers generally assess whether a contractor has sufficient financial resources to undertake a fitting-out project and whether our financial resources are sufficient to manage new projects and other projects on hand. Taking into consideration certain working capital requirements for projects in the public sector as a reference, our Directors consider that we should have a comparable, if not more, working capital level for our business operations in order to sustain our business in the private sector.

In fact, as our business continue to grow during the Track Record Period, we have become increasingly more reliant on our bank borrowings, which for the reasons set out in the paragraph headed “Ease of raising funds in the capital market for future business development” in this section below, is not a desirable way of further supporting our business operations as compared to equity financing. As at 31 March 2016, 31 March 2017, 31 March 2018 and 30 April 2018, our bank borrowings were approximately HK$15.2 million, HK$30.4 million, HK$33.6 million and HK$35.9 million, respectively. Our bank borrowings increased steadily as we had to rely more on debt financing for our business operations. As at 30 April 2018, we had only approximately HK$7.0 million of unutilised banking facilities. As at the Latest Practicable Date, we had been awarded a contract at an original contract sum of approximately HK$15.8 million under which we would be required to obtain a performance bond from a bank in order to secure our due and timely performance. The amount of performance bond to be obtained amounted to 10% of the original contract sum and is expected to be obtained in or around August 2018 which will be financed by further drawdown of banking facilities. While our Directors consider that our current cash and bank balances may still be able to support our existing operations, they cannot provide any funding buffer for us to weather any material and unexpected adversities such as possible economic downturn, material adverse change in the fitting-out industry or severe disasters, nor can they support our growth through business expansion. We expect that the cash outflow for our business operation will further increase correspondingly when the number of sizeable projects we take up increases along with our expansion plan. If there is no additional funding from the [REDACTED] , our cash balance may not be sufficient to sustain our business should there be any adverse changes to our financial position.

Based on the above, our Directors consider that we have a genuine need for equity fund-raising in order to fully implement our expansion plan and business strategies, while at the same time maintaining a sufficient level of cash balance for our day-to-day operations, and a reasonable buffer for emergency situations or potential business opportunities.

Ease of raising funds in the capital market for future business development

Despite the fact that our Group was able to sustain our business using internally generated funds and bank borrowings during the Track Record Period and had been able to repay bank loans when they fell due in the past, we plan to seek equity financing as it would ease our cash flow as compared to debt financing from bank or financial institutions due to the following reasons:

(a) debt financing from banks or financial institutions normally requires collaterals, such as cash deposit, properties and/or personal guarantee from our Group and/or our Controlling Shareholders as security for our bank borrowings, which would increase

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FUTURE PLANS AND [REDACTED]

our reliance on our Controlling Shareholders and negatively affect our liquidity. On the other hand, our Directors consider that as a group of private companies usually does not have a large amount of fixed assets as collateral, it would be difficult for our Group, without a [REDACTED] status, to obtain bank borrowings at a competitive rate without guarantees provided by our Controlling Shareholders. Taking into account the fact that (i) our Group’s cash outflow exposure at the initial stage of each project; and (ii) it is necessary to maintain a disciplined financial strategy without exposing our Group to aggressive gearing in order to achieve sustainable growth in the long run, our Directors consider that the net [REDACTED] from the [REDACTED] are necessary for the implementation of our future business plans as opposed to debt financing given the interest expenses would impose additional cash flow burden to our Group; and

(b) heavy reliance on debt financing would subject our Group to the inherent risks of higher interest rate and finance costs. Our Group’s financial performance and liquidity may be negatively affected due to principal and interest payments if we proceed with debt financing to fund our business expansion.

The [REDACTED] will allow us to gain access to the capital market for fund raising, will assist our future business development and enhance our competitiveness. We will be able to use secondary fund raising after the [REDACTED] for our future expansion plans and when necessary, through the issuance of equity and/or debt securities. While we will continue to obtain certain amount of banking facilities after the [REDACTED] alongside with equity financing, our Directors believe that we would be in a better position to negotiate with banks and financial institutions if we are a listed company with enlarged capital structure. By strengthening our financial position through fund-raising, we will also have more bargaining power when negotiating terms with our suppliers and subcontractors. Our Directors therefore believe that the use of equity financing would avoid the risk of high interest rate generally associated with debt financing which exposes us to increasing financial costs in the future.

Diversifying our shareholder base

Our Directors believe that the [REDACTED] will enhance the liquidity of the Shares which will be freely traded on the Stock Exchange when compared to the limited liquidity of privately held shares before the [REDACTED] . Hence, our Directors consider that the [REDACTED] will enlarge and diversify our shareholder base and potentially lead to a more liquid market in the trading of our Shares.

USE OF [REDACTED]

We estimate the [REDACTED] from the [REDACTED] which we will receive, assuming an [REDACTED] of HK$ [REDACTED] (being the mid-point of the [REDACTED] range), will be approximately HK$ [REDACTED] , after deduction of [REDACTED] and commissions and estimated expenses payable by us in connection with the [REDACTED] and assuming the [REDACTED] is not exercised.

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FUTURE PLANS AND [REDACTED]

We intend to apply the net [REDACTED] from the [REDACTED] of approximately HK$ [REDACTED] for the following purposes assuming the [REDACTED] is not exercised and assuming an [REDACTED] of HK$ [REDACTED] per [REDACTED] , being the mid-point of the [REDACTED] range:

approximately [REDACTED] of the [REDACTED] (approximately HK$ [REDACTED] ) for payment of upfront costs for new projects such as payment of subcontracting fees and costs of materials;

We may experience net cash outflows at the early stage of a project as we are required to bear expenses upfront. Our customers make progress payments according to our work progress, and such payments need to be certified by our customers before we issue an invoice to them. In addition, where our contracts provide that our customers shall be entitled to retention money, 50% of the retention money will be released upon completion of the project and the remaining retention money will be released upon expiry of the defects liability period. Accordingly, our cash flow typically turn from net outflows at the early stage of a project into accumulative net inflows gradually as the project progresses. The upfront costs of our projects generally include subcontracting fees and costs of materials. We target to undertake more sizeable projects with contract sum ranging from approximately HK$100 million to HK$150 million per project with new customers. These sizeable projects are generally cash flow demanding. Based on our operation history during the Track Record Period, a sizeable project with total contract sum ranging from HK$100 million to HK$150 million with a new customer generally requires us to pay upfront costs representing approximately 10% of the total contract sum before such costs can be recovered from our customers after a period of approximately 3 to 4 months. This results in a cash flow gap. Limited by our available resources during the Track Record Period, we were unable to tender for more sizeable projects with contract sum in the HK$100 million to HK$150 million range.

Subsequent to the Track Record Period and up to the Latest Practicable Date, 2 new contracts, with an aggregate original contract sum of approximately HK$70.9 million were awarded to our Group. As at the Latest Practicable Date, we had a total of 29 projects on hand (including projects that have commenced but not completed and projects that have been awarded to us but works have not yet been commenced) among which 4 projects have total contract sum exceeding HK$100 million each. The aggregate total contract sum of these 4 projects with total contract sum exceeding HK$100 million each amounted to over HK$680 million. As at 13 June 2018, we had also submitted tender for a project with original contract sum amounting to over HK$180 million. These projects or our other potential projects would entail stronger revenue stream but at the same time, a substantive amount of upfront costs and a larger amount of retention moneys, which may tie up our resources during the term of the contract and thereby affect our liquidity. We therefore intend to apply the [REDACTED] for the upfront costs in respect of our projects on hand and potential projects.

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FUTURE PLANS AND [REDACTED]

approximately [REDACTED] of the net [REDACTED] (approximately HK$ [REDACTED] ) for obtaining performance bond;

As at the Latest Practicable Date, we had submitted a tender for a residential development fitting-out project with a new customer, being a subsidiary of a property development and investment group listed on the Stock Exchange, with original contract sum amounting to approximately HK$129.0 million. If our tender bid were successful, we would be required to obtain a performance bond amounting to approximately HK$12.9 million, representing approximately 10% of the original contract sum. Limited by our available financial resources and cash level as discussed in the paragraph headed “We have a genuine funding need in order to expand our business” in this section, we had difficulties from undertaking projects from new customers historically as it is our Directors’ experience that customers tend to require contractors whom they have not previously established business relationship to provide performance bond to secure their performance and obligations under the contracts. Due to the requirement of performance bonds, as part of our prudent financial management to ensure sustainable growth and capital sufficiency, our Directors were historically sceptical in submitting tenders for sizeable projects with new customers. Our revenue therefore concentrated among our top five customers during the Track Record Period as we were not required to obtain performance bonds under our contracts with these customers due to our long-term business relationship with them. Nevertheless, our Directors consider that customer diversification is imperative to nurturing a sustainable business. While we have demonstrated efforts in reducing our reliance on our top five customers as discussed in the section headed “Business – Our customers – Customer concentration” in this document, our Directors consider that it is desirable to reserve cash for current and future projects that require performance bonds and continue to enhance our available financial resources and strengthen our liquidity position in order to further diversify our customer base. The aforementioned potential project is expected to commence in September 2018 and expected to be completed in December 2019. We therefore intend to apply the [REDACTED] for obtaining performance bond under the aforementioned potential project to secure our due and timely performance of our obligations and for other potential projects should our tender bid for the aforementioned project become unsuccessful. Should our tender bid for this potential project become unsuccessful, we intend to allocate the portion of the proceeds for obtaining performance bond for other upcoming potential sizeable projects with original contract sum in the range of HK$100 million to HK$150 million.

approximately [REDACTED] of the net [REDACTED] (approximately HK$ [REDACTED] ) for repaying our bank borrowings:

As at 30 April 2018, our bank borrowings amounted to HK$35.9 million with effective interest rates of bank borrowings ranging from HKD Prime Rate minus 0.5% to HKD Prime Rate plus 0.5% per annum, and flat rate of 4.2% and flat rate of 4.8%. Such bank borrowings had been renewed and taken out on an ongoing basis since the

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FUTURE PLANS AND [REDACTED]

beginning of the Track Record Period for working capital purposes and have maturity periods ranging from repayment on demand to one year. Our Directors consider that in view of our expansion plan and historical rise in reliance on bank borrowings during the Track Record Period as well as the anticipated increase in interest rate going forward, it will be desirable for us to repay our bank borrowings taking into account the benefits of equity financing over debt financing as discussed in the paragraph headed “Reasons for the [REDACTED] – Ease of raising funds in the capital market for future business development” in this section above. It is anticipated that our financial position will improve to a healthier position by maintaining a low gearing level without disrupting our expansion plan to take on more sizeable fitting-out projects and at the same time diversifying our customer base. Our existing banking facilities can therefore be reserved to weather any material and unexpected adversities such as possible economic downturn, material adverse change in the fitting-out industry or severe disasters. We therefore intend to apply the net proceeds for repaying our bank borrowings to minimise our future interest cost expenses and to achieve the benefits as discussed.

approximately [REDACTED] of the net [REDACTED] (approximately HK$ [REDACTED] ) for expanding our workforce through hiring a total of 44 additional staff.

Although we strategically subcontract on-site labour intensive works to our subcontractors in order to optimise our business operation, our Directors consider that going forward, it may be beneficial for us to carry out the labour intensive works using our own direct labour resources rather than subcontracting since we have more control as to the profit markup. As at 13 June 2018, we had also submitted tender for a project with original contract sum amounting to over HK$180 million. Based on the scope of works and our available resources under some of our sizeable projects with approximate total contract sum ranging from HK$170 million to HK$190 million undertaken throughout the Track Record Period, it is estimated that if we were to proceed with our expansion plan to take up more sizeable fitting-out projects, such as the aforementioned project with original contract sum amounting to over HK$180 million, we may achieve a higher profit margin by gradually hiring additional direct workers to perform on-site fitting-out works rather than subcontracting the fitting-out services to our subcontractors. In addition, we may also need to hire additional project management and office staff to cope with our expansion plan. Therefore, we intend to apply the net proceeds for hiring both additional office staff and on-site direct workers as part of our expansion plan.

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FUTURE PLANS AND [REDACTED]

The table below sets forth particulars of the additional staff we intend to hire and the approximate expected annual salary range of the 44 additional staff:

	Number of staff	Approximate annual
Role	to be recruited	salary range per staff
		HK$
Accounting and finance	2	234,000 – 325,000
Administration and human resources	2	208,000 – 286,000
Quantity surveying	2	364,000 – 585,000
Drafting	1	390,000
Project management	8	325,000 – 780,000
Safety and occupational health	2	208,000 – 585,000
Direct workers	27	422,500 – 455,000

approximately [REDACTED] of the net [REDACTED] (approximately HK$ [REDACTED] ) for general working capital of our Group.

The above allocation of the net [REDACTED] will be adjusted on a pro-rata basis in the event that the [REDACTED] is fixed at the high-end or low-end compared to the mid-point of the [REDACTED] range. To the extent that the net [REDACTED] of the [REDACTED] are not immediately used for the purposes described above, they will be placed on short-term interest bearing deposits or treasury products with authorised financial institutions.

IMPLEMENTATION PLAN

The tables below set forth a summary of our implementation plan:

[REDACTED] to 31 March 2019 1 April 2019 to 31 March 2020 1 April 2020 to 31 March 2021 HK$’000 HK$’000 HK$’000 Payment of upfront costs for new projects [REDACTED] [REDACTED] [REDACTED] Obtaining performance bond [REDACTED] [REDACTED] [REDACTED] Repayment of bank borrowings [REDACTED] [REDACTED] [REDACTED] Expanding our workforce [REDACTED] [REDACTED] [REDACTED] General working capital [REDACTED] [REDACTED] [REDACTED] Total	[REDACTED] HK$’000 [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	[REDACTED] % [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
		100.0

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FUTURE PLANS AND [REDACTED]

From the [REDACTED] to 31 March 2019

Business strategy Implementation plan

[REDACTED] HK$’000

Strengthening our financial • Payment of upfront costs for new [REDACTED] position projects
Strengthening our financial • Obtaining performance bond [REDACTED] position
Strengthening our financial • Repayment of bank borrowings [REDACTED] position
Expanding our workforce • Hiring 1 additional accounting and [REDACTED] finance staff
• Hiring 1 administration and human [REDACTED] resource staff
• Hiring 2 project management staff [REDACTED] • Hiring 1 safety and occupational health [REDACTED] staff
• Hiring 12 additional direct workers [REDACTED]

From 1 April 2019 to 31 March 2020

Business strategy Implementation plan

[REDACTED] HK$’000

Expanding our workforce

Additional staff costs for retaining the [REDACTED] additional staff
• Hiring 1 additional accounting and [REDACTED] finance staff
• Hiring 1 additional administration and [REDACTED] human resource staff
• Hiring 2 additional quantity surveying [REDACTED] staff
• Hiring 1 draftsman [REDACTED] • Hiring 6 additional project management [REDACTED] staff
• Hiring 1 safety and occupational health [REDACTED] staff
• Hiring 10 additional direct workers [REDACTED]
Hiring 1 safety and occupational health staff
• Hiring 10 additional direct workers

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FUTURE PLANS AND [REDACTED]

From 1 April 2020 to 31	March	2021
Business strategies	Implementation plan		[REDACTED]
			HK$’000
Expanding our workforce	•	Additional staff costs for retaining the	[REDACTED]
		additional staff
	•	Hiring 5 additional direct workers	[REDACTED]

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[REDACTED]

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ACCOUNTANTS’ REPORT

APPENDIX I

The following is the text of a report set out on pages I-1 to I-42, received from the Company’s reporting accountants, HLB Hodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this document.

==> picture [232 x 47] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF YIELD GO HOLDINGS LTD. AND GRANDE CAPITAL LIMITED

Introduction

We report on the historical financial information of Yield Go Holdings Ltd. (the “ Company ”) and its subsidiaries (together, the “ Group ”) set out on pages I-4 to I-42, which comprises the combined statements of financial position as at 31 March 2016, 2017 and 2018 and the combined statements of profit or loss and other comprehensive income, the combined statements of changes in equity and the combined statements of cash flows for each of the three years ended 31 March 2016, 2017 and 2018 (the “ Track Record Period ”) and a summary of significant accounting policies and other explanatory information (together, the “ Historical Financial Information ”). The Historical Financial Information set out on pages I-4 to I-42 forms an integral part of this report, which has been prepared for inclusion in the document of the Company dated [•] (the “ Document ”) in connection with the [REDACTED] of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”).

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Notes 1 and 2 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 “Accountants’ Reports on Historical Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

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APPENDIX I

ACCOUNTANTS’ REPORT

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants’ judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation of Historical Financial Information that give a true and fair view in accordance with the basis of preparation and presentation set out in Notes 1 and 2 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

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

Opinion

In our opinion the Historical Financial Information gives, for the purposes of the accountants’ report, a true and fair view of the Group’s financial position as at 31 March 2016, 2017 and 2018 and of the Group’s financial performance and cash flows for the Track Record Period in accordance with the basis of preparation and presentation set out in Notes 1 and 2 to the Historical Financial Information.

REPORT ON MATTERS UNDER THE RULES GOVERNING THE LISTING OF SECURITIES ON THE STOCK EXCHANGE AND THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page I-4 have been made.

Dividends

We refer to Note 13 to the Historical Financial Information which states that no dividends have been paid by the Company in respect of the Track Record Period.

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ACCOUNTANTS’ REPORT

APPENDIX I

No historical financial statements for the Company

As at the date of this report, no statutory financial statements have been prepared for the Company since its date of incorporation.

HLB Hodgson Impey Cheng Limited

Certified Public Accountants

[•]

Practising Certificate Number: [•]

Hong Kong, [•]

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ACCOUNTANTS’ REPORT

APPENDIX I

HISTORICAL FINANCIAL INFORMATION OF THE GROUP

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The combined financial statements of the Group for the years ended 31 March 2016, 2017 and 2018 (the “ Track Record Period ”), on which the Historical Financial Information is based, were audited by HLB Hodgson Impey Cheng Limited in accordance with the Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) (the “ Underlying Financial Statements ”).

The Historical Financial Information is presented in Hong Kong dollars (“ HK$ ”) and all values are rounded to the nearest thousand (HK$’000) except when otherwise indicated.

Combined statements of profit or loss and other comprehensive income

Notes Revenue 5 Direct costs Gross profit Other income and gains/(losses)-net 6 Administrative and other operating expenses Finance costs 10 Profit before income tax 7 Income tax expense 11 Profit and total comprehensive income for the year attributable to owners of the Company	Year ended 31 March 2016 HK$’000 240,149 (216,377) 23,772 94 (8,234) (1,205) 14,427 (2,567) 11,860	Year ended 31 March 2017 HK$’000 346,391 (304,154) 42,237 (7) (8,220) (961) 33,049 (5,910) 27,139	Year ended 31 March 2018 HK$’000 560,283 (498,849) 61,434 56 (12,912) (1,657) 46,921 (8,327) 38,594

Details of dividends are disclosed in Note 13 to the Historical Financial Information.

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ACCOUNTANTS’ REPORT

APPENDIX I

Combined statements of financial position Notes Non-current assets Property, plant and equipment 15 Current assets Contract assets 16 Trade and other receivables 17 Amount due from a director 18 Amounts due from related companies 19 Cash and bank balances 20 Total assets Current liabilities Contract liabilities 16 Trade and other payables 21 Amount due to a director 22 Bank borrowings 23 Finance lease liability 25 Current income tax labilities Net current assets Total assets less current liabilities Non-current liabilities Finance lease liability 25 Net assets Capital and reserves Combined capital 26 Retained earnings Total equity	As at 31 March 2016 HK$’000 1,123 1,123 62,510 24,479 – 20,199 11,733 118,921 120,044 – 80,167 8,052 15,198 415 2,492 106,324 12,597 13,720 429 429 13,291 200 13,091 13,291	As at 31 March 2017 HK$’000 690 690 67,724 37,817 11,748 – 30,160 147,449 148,139 – 80,347 – 30,393 429 6,540 117,709 29,740 30,430 – – 30,430 200 30,230 30,430	As at 31 March 2018 HK$’000 262
			262
			94,457 39,122 – – 26,766
			160,345
			160,607
			16,009 38,718 1,293 33,604 – 1,959
			91,583
			68,762
			69,024
			–
			–
			69,024

			200 68,824
			69,024

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ACCOUNTANTS’ REPORT

APPENDIX I

Combined statements of changes in equity

Balance as at 1 April 2015 Profit and total comprehensive income for the year Balance as at 31 March 2016 Balance as at 1 April 2016 Profit and total comprehensive income for the year Dividends declared (Note 13) Balance as at 31 March 2017 Balance as at 1 April 2017 Profit and total comprehensive income for the year Balance as at 31 March 2018	Combined capital HK$’000 (Note 26) 200 – 200 200 – – 200 200 – 200	Retained earnings HK$’000 1,231 11,860 13,091 13,091 27,139 (10,000) 30,230 30,230 38,594 68,824	Total HK$’000 1,431 11,860 13,291 13,291 27,139 (10,000) 30,430 30,430 38,594 69,024

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ACCOUNTANTS’ REPORT

APPENDIX I

Combined statements of cash flows

Notes Cash flows from operating activities Cash generated from operations 27 Tax paid Net cash generated from operating activities Cash flows from investing activities Interest received Purchases of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Interest paid 27 Proceeds from bank borrowings 27 Repayments of bank borrowings 27 Repayments of finance leases liability 27 Dividends paid Net cash (used in)/generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 20	Year ended 31 March 2016 HK$’000 20,807 (573) 20,234 – – – (1,205) 82,671 (94,477) (600) – (13,611) 6,623 5,110 11,733	Year ended 31 March 2017 HK$’000 6,472 (1,862) 4,610 – (2) (2) (961) 113,393 (98,198) (415) – 13,819 18,427 11,733 30,160	Year ended 31 March 2018 HK$’000 18,395 (12,908) 5,487 2 (8) (6) (1,657) 124,776 (121,565) (429) (10,000) (8,875) (3,394) 30,160 26,766

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APPENDIX I — ACCOUNTANTS’ REPORT

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 GENERAL INFORMATION AND BASIS OF PRESENTATION OF HISTORICAL FINANCIAL INFORMATION

The Company was incorporated in the Cayman Islands on 9 May 2018 as an exempted company with limited liability. Its parent and ultimate holding company is Hoi Lang Holdings Ltd. (“ Hoi Lang ”), a company incorporated in the British Virgin Islands (the “ BVI ”) and owned by Mr. Man Hoi Yuen (“ Mr. Man ”), Ms. Ng Yuen Chun (“ Mrs. Man ”), spouse of Mr. Man and Mr. Ho Chi Hong (“ Mr. Ho ”).

The addresses of the registered office and the principal place of business of the Company are set out in the section headed “Corporate information” to the Document. The Company is an investment holding company. The subsidiaries of the Company are principally engaged in fitting-out services and supply of fitting-out materials.

Throughout the Track Record Period, the group entities were under the control of Mr. Man and Mrs. Man. Through a corporate reorganisation as more fully explained in the paragraph headed “Reorganisation” in “History, development and reorganisation” to the Document (the “ Reorganisation ”), the Company became the holding company of the companies now comprising the Group on [•] . Accordingly, for the purpose of the preparation of the Historical Financial Information of the Group, the Company has been considered as the holding company of the companies now comprising the Group throughout the Track Record Period.

The Historical Financial Information has been prepared as if the Company had been the holding company of the Group throughout the Track Record Period in accordance with Accounting Guideline 5 “ Merger Accounting for Common Control Combinations ” issued by the HKICPA. The combined statements of profit or loss and other comprehensive income, combined statements of changes in equity and combined statements of cash flows for the Track Record Period, which include the results, changes in equity and cash flows of the companies now comprising the Group, have been prepared to present as if the current group structure had been in existence throughout the Track Record Period, or since their respective dates of incorporation where this is a shorter period. The combined statements of financial position as at the respective reporting dates have been prepared to present the assets and liabilities of the companies now comprising the Group as if the current group structure had been in existence at those dates.

Upon completion of the Reorganisation and as of the date of this report, the Company has the direct and indirect interest in the following wholly-owned subsidiaries:

	Legal form,		Proportion
	date and place of	Issued and	ownership
	incorporation/	fully paid up	interest held
Name of subsidiary	operations	share capital	by the Company	Principal activities	Notes
Link Shing Holdings	Limited liability	United States	100% (direct)	Investment holding	1
Ltd. (“Link Shing”)	company incorporated	dollars
	on 11 May 2018, BVI	(“US$”)100
Chun Shing	Limited liability	HK$1.00	100% (indirect)	Provision of	2
Development Co.,	company incorporated			fitting-out services
Limited	on 29 January 2015,			and supply of
(“Chun Shing	Hong Kong			fitting-out
Development”)				materials
Hoi Sing Construction	Limited liability	HK$2.00	100% (indirect)	Provision of	3
(H.K.) Limited	company incorporated			fitting-out services
(“Hoi Sing	on 21 February 2001,
Construction”)	Hong Kong

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APPENDIX I

ACCOUNTANTS’ REPORT

	Legal form,		Proportion
	date and place of	Issued and	ownership
	incorporation/	fully paid up	interest held
Name of subsidiary	operations	share capital	by the Company	Principal activities	Notes
Hoi Sing Decoration	Limited liability	HK$100,000.00	100% (indirect)	Provision of	4
Engineering Company	company incorporated			fitting-out services
Limited (“Hoi Sing	on 21 September
Decoration”)	1995, Hong Kong
Milieu Wooden	Limited liability	HK$100,000.00	100% (indirect)	Provision of	5
Company Limited	company incorporated			fitting-out services
(“Milieu”)	on 16 December			and supply of
	2010, Hong Kong			fitting-out
				materials

Note 1: No audited statutory financial statements have been prepared for Link Shing since its date of incorporation as it was incorporated in a country where there is no statutory audit requirement.
Note 2: The statutory financial statements of Chun Shing Development for the period from 29 January 2015 (date of incorporation) to 31 March 2016, which were prepared in accordance with Small and Medium-sized Entity Financial Reporting Standard (“ SME-FRS ”) issued by the HKICPA, were audited by Richard S.K. Chan & Co., Certified Public Accountants (Practising), Hong Kong. The statutory financial statements of Chun Shing Development for the year ended 31 March 2017, which were prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the HKICPA, were audited by Global Vision CPA Limited, Certified Public Accountants (Practising), Hong Kong.
Note 3: The statutory financial statements of Hoi Sing Construction for the year ended 31 March 2016, which were prepared in accordance with SME-FRS issued by the HKICPA, were audited by Richard S.K. Chan & Co. Certified Public Accountants (Practising), Hong Kong. The statutory financial statements of Hoi Sing Construction for the year ended 31 March 2017, which were prepared in accordance with HKFRSs issued by the HKICPA, were audited by Global Vision CPA Limited, Certified Public Accountants (Practising), Hong Kong.
Note 4: The statutory financial statements of Hoi Sing Decoration for the year ended 31 March 2016, which were prepared in accordance with SME-FRS issued by the HKICPA, were audited by Richard S.K. Chan & Co. Certified Public Accountants (Practising), Hong Kong. The statutory financial statements of Hoi Sing Decoration for the year ended 31 March 2017, which were prepared in accordance with HKFRSs issued by the HKICPA, were audited by Global Vision CPA Limited, Certified Public Accountants (Practising), Hong Kong.
Note 5: The statutory financial statements of Milieu for the year ended 31 March 2016, which were prepared in accordance with SME-FRS issued by the HKICPA, were audited by Richard S.K. Chan & Co. Certified Public Accountants (Practising), Hong Kong. The statutory financial statements of Milieu for the year ended 31 March 2017, which were prepared in accordance with HKFRSs issued by the HKICPA, were audited by Global Vision CPA Limited, Certified Public Accountants (Practising), Hong Kong.

All companies now comprising the Group have adopted 31 March as their financial year end date.

The Historical Financial Information is presented in HK$, which is the same as the functional currency of the Company.

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ACCOUNTANTS’ REPORT

APPENDIX I

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the Historical Financial Information are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(a) Basis of preparation

The principal accounting policies applied in the preparation of the Historical Financial Information which are in accordance with the HKFRSs issued by the HKICPA are set out below. The Historical Financial Information set out in this report has been prepared under the historical cost convention, except as otherwise stated in the accounting policies below.

The preparation of the Historical Financial Information in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies of the Group. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Historical Financial Information, are disclosed in Note 4 below.

Early adoption of Hong Kong Financial Reporting Standard 15 “Revenue from contracts with customers” (“ HKFRS 15 ”)

HKFRS 15 issued by the HKICPA is mandatory effective for the financial year beginning on or after 1 January 2018.

The Group has elected to early adopt HKFRS 15 for the Track Record Period in the Underlying Financial Statements because the new accounting standard provides more reliable and relevant information for users to assess the amounts, timing and uncertainty of revenue and cash flows.

HKFRS 15 establishes a comprehensive framework for determining when to recognise revenue and how much revenue to be recognised through a 5-step approach: (i) identify the contract(s) with customer; (ii) identify separate performance obligations in the contract: (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognise revenue when a performance obligation is satisfied. The core principle is that a company should recognise revenue when control of a good and service transfers to customer.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

The following new or revised standards, amendments and interpretations to existing standards have been published but are not yet effective for the Track Record Period and which the Group has not early adopted:

		Effective for
		annual periods of
		the Group
		beginning on or
		after
HKFRS 9	Financial Instruments	1 January 2018
Amendments to HKFRS 2	Classification and Measurement of	1 January 2018
	Share-based Payment Transactions
Amendments to HKFRS 4	Applying HKFRS 9 Financial Instruments	1 January 2018
	with HKFRS 4 Insurance Contracts
Amendments to HKFRSs	Annual Improvements to HKFRSs	1 January 2018
	2014–2016 Cycle

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APPENDIX I

ACCOUNTANTS’ REPORT

		Effective for
		annual periods of
		the Group
		beginning on or
		after
Amendments to HKAS 28	As part of the Annual Improvements to	1 January 2018
	HKFRSs 2014–2016 Cycle
Amendments to HKAS 40	Transfers of Investment Property	1 January 2018
HK(IFRIC) −Interpretation 22	Foreign Currency Transactions and	1 January 2018
	Advance Consideration
HKFRS 16	Leases	1 January 2019
Amendments to HKFRS 9	Prepayment Features with Negative	1 January 2019
	Compensation
Amendments to HKAS 19	Plan Amendment, Curtailment or Settlement	1 January 2019
Amendments to HKFRSs	Annual Improvements to HKFRSs	1 January 2019
	2015–2017 Cycle
Amendments to HKAS 28	Long-term Interests in Associates and Joint	1 January 2019
	Ventures
HK(IFRIC) −Interpretation 23	Uncertainty over Income Tax Treatments	1 January 2019
HKFRS 17	Insurance Contracts	1 January 2021
Amendments to HKFRS 10	Sale or Contribution of Assets between an	A date to be
and HKAS 28	Investor and its Associate or Joint	determined
	Venture

The Group is in the process of making an assessment of what the impact of these new or revised standards, amendments and interpretations is expected to be in the period of initial application. So far the Group has not identified any aspects of the new standards which may have an impact on the combined financial statements. Further details of the expected impacts are discussed below.

(i) HKFRS 9 “Financial Instruments”

HKFRS 9 issued in 2009 introduced new requirements for the classification and measurement of financial assets. HKFRS 9 was subsequently amended in 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for general hedge accounting. Another revised version of HKFRS 9 was issued in 2014 mainly to include (a) impairment requirements for financial assets and (b) limited amendments to the classification and measurement requirements by introducing a fair value through other comprehensive income (“ FVTOCI ”) measurement category for certain simple debt instruments.

Key requirements of HKFRS 9 which are relevant to the Group are:

All recognised financial assets that are within the scope of HKAS 39 “ Financial Instruments: Recognition and Measurement ” are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

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ACCOUNTANTS’ REPORT

APPENDIX I

In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.

The directors of the Company do not anticipate that the application of HKFRS 9 in the future will have a material impact on the Historical Financial Information.

(ii) HKFRS 16 “Leases”

HKFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. HKFRS 16 will supersede HKAS 17 “ Leases ” and the related interpretations when it becomes effective.

HKFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Subject to limited exceptions for short-term leases and low value assets, distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees. However, the standard does not significantly change the accounting of lessors.

Application of HKFRS 16 will result in the Group’s recognition of right-of-use assets and corresponding liabilities in respect of many of the Group’s lease arrangements. These assets and liabilities are currently not required to be recognised but certain relevant information is disclosed as commitments to these Historical Financial Information.

Total operating lease commitment of the Group as at 31 March 2016, 2017 and 2018 amounted to approximately HK$1,263,000, HK$864,000 and HK$432,000 respectively (Note 28) . The directors of the Company do not expect the adoption of HKFRS 16 as compared with the current accounting policy would result in significant impact on the Group’s results but it is expected that certain portion of these lease commitments will be required to be recognised in the consolidated statements of financial position as right-of-use assets and lease liabilities.

(b) Consolidation and combination

The Historical Financial Information includes the financial information of the Company and all its subsidiaries made up to respective year end dates during the Track Record Period.

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Except for the Reorganisation, the Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquire and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the recognised amount of the acquiree’s identifiable net assets.

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ACCOUNTANTS’ REPORT

APPENDIX I

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the profit or loss.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(c) Transaction with non-controlling interests

The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

(d) Merger accounting for common control combinations

The Historical Financial Information incorporates the financial statements items of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party.

The net assets of the combining entities or businesses are consolidated using the existing book values from the controlling parties’ perspective. No amount is recognised in respect of goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest. The combined statements of profit or loss and other comprehensive income include the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where this is a shorter period, regardless of the date of the common control combination.

(e) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors that makes strategic decisions.

(f) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “ functional currency ”). The Historical Financial Information is presented in HK$, which is the Company’s functional and presentation currency.

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ACCOUNTANTS’ REPORT

APPENDIX I

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss.

All foreign exchange gains and losses are presented in the profit or loss on a net basis within other income and gains/(losses)-net.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

(g) Property, plant and equipment

The property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is 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. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred.

Depreciation on property, plant and equipment is calculated using the depreciation straight-line method to allocate their cost to their residual values over their estimated useful lives or lease term, where applicable, as follows:

Furniture and fixtures 20% Motor vehicle 30%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the combined statements of profit or loss and other comprehensive income.

(h) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

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ACCOUNTANTS’ REPORT

APPENDIX I

(i) Financial assets

The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period, which are classified as non-current assets. The Group’s loans and receivables comprise “trade and other receivables”, “amount due from a director”, “amounts due from related companies” and “cash and bank balances” in the combined statements of financial position.

(j) Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “ loss event ”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, 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. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

(k) Contracts with customers

Contracts with customers are contracts specifically negotiated with a customer. Its performance obligation is to construct an asset or a group of assets where its control is transferred over time. The accounting policy for contract revenue is set out in Note 2(v). When the outcome of a construction contract can be estimated reliably, contract revenue is recognised by reference to the stage of completion of the contract at the end of the reporting period. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred.

Contracts with customers in progress at the end of the reporting period are recorded at the net amount of costs incurred plus recognised profits less recognised losses and progress billings, and are presented in the combined statement of financial position as the “Contract assets” (as an asset) or the “Contract liabilities” (as a liability), as applicable. Progress billings not yet paid by the customer are included under “Trade and other receivables”.

(l) Trade and other receivables

Trade receivables are amounts due from customers for services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

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APPENDIX I — ACCOUNTANTS’ REPORT

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

(m) Cash and cash equivalents

In the combined statements of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.

(n) Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(o) Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if the payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(p) Borrowings

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of each of the reporting period.

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried 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.

(q) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(r) Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of each reporting period in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

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ACCOUNTANTS’ REPORT

APPENDIX I

Deferred income tax is recognised, using the liability method, on temporary differences, arising between the tax bases of assets and liabilities and their carrying amounts in the Historical Financial Information. However, the deferred tax liabilities are not recognised if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction neither accounting nor taxable profit or loss is affected. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of each reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred taxation liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

(s) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of each reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Retirement benefits

The Group operates defined contribution plans and pays contributions to privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(iii) Bonus plans

The Group recognises a liability and an expense for bonuses when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of such obligation can be made.

(t) Provisions

Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amounts have been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligations. The increase in the provision due to passage of time is recognised as interest expense.

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ACCOUNTANTS’ REPORT

APPENDIX I

(u) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resource will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the Historical Financial Information. When a change in the probability of an outflow occurs so that outflow is probable, it will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group.

Contingent assets are not recognised but are disclosed in the notes to the Historical Financial Information when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

(v) Revenue recognition

Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a product or service to a customer. “Control” refers to the customer’s ability to direct the use of and obtain substantially all of the remaining benefits from an asset.

(i) Contract revenue

When control of products and services are transferred over time, revenue is recognised progressively based on the value of performance completed to date as a percentage of total transaction price to depict the transfer of control of the goods or services to the customer. The Group recognises revenue over time only if it can reasonably measure its progress toward complete satisfaction of the performance obligation. However, if the Group cannot reasonably measure the outcome but expects to recover the costs incurred in satisfying the performance obligation, then it recognises revenue to the extent of the costs incurred.

When control of products is transferred at a point in time, revenue is recognised when goods are delivered at the customers’ premises which is taken to be the point in time when the Group transfers control over the products to the customer.

Incremental cost of obtaining a contract is capitalised if the Group expects to recover those costs, unless the amortisation period for such costs would be one year or less. Costs that will be incurred regardless of whether the contract is obtained are expensed as they are incurred.

The Group presents a contract liability or a contract asset in its combined statements of financial position when either party to the contract has performed. The Group performs by transferring goods or services to the customer, and the customer performs by paying consideration to the Group.

Any unconditional rights to consideration are presented separately as “Trade receivables”.

Contract liabilities are obligations to transfer goods or services to customer for which the Group has received consideration, or for which an amount of consideration is due from the customer.

Contract assets are rights to consideration in exchange for goods or services that the Group has transferred to a customer when that right is conditional on something other than the passage of time.

(ii) Interest income

Interest income is recognised as it accrues using the effective interest method.

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ACCOUNTANTS’ REPORT

APPENDIX I

(w) Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s and the Company’s financial information in the period in which the dividends are declared by the directors in case of interim dividends or approved by the Company’s shareholders in case of final dividends.

(x) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are charged to the combined statements of profit or loss and other comprehensive income on a straight-line basis over the period of the lease.

The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the combined statements of profit or loss and other comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

3 FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

The Group’s activities exposed it to a variety of financial risks: market risk (including foreign currency risk and cash flow and fair value interest rate risk), credit risk and liquidity risk.

The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

(a) Market risk

(i) Foreign currency risk

The assets and liabilities of each company within the Group are mainly denominated in their respective functional currencies. The directors are of the opinion that the volatility of the Groups profits against changes in exchange rates of foreign currencies arising from these assets and liabilities would not be significant. Accordingly, no sensitivity analysis is performed.

(ii) Cash flow and fair value interest rate risk

The Group’s fair value interest rate risk relates primarily to fixed-rate borrowings, while the Group’s cash flow interest rate risk relates primarily to variable-rate borrowings. It is the Group’s policy to keep its borrowings at floating rate of interests so as to minimise the fair value interest rate risk. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of the Hong Kong Dollar Prime Rate arising from the Group’s Hong Kong dollar denominated borrowings.

The Group currently does not have a formal interest rate hedging policy in relation to cash flow and fair value interest rate risks as the management considers that such risks are insignificant to the Group. The management monitors the Group’s exposure on an ongoing basis and will consider hedging the interest rate when the need arise.

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ACCOUNTANTS’ REPORT

APPENDIX I

As at 31 March 2016, 2017 and 2018, if interest rates had been 100 basis points higher/lower with all other variables held constant, the Group’s profit before tax for the years ended 31 March 2016, 2017 and 2018 would have been decreased/increased by approximately HK$152,000, HK$304,000 and HK$334,000, respectively. The sensitivity analysis has been determined assuming that the change in interest rates had occurred throughout the year end had been applied to the exposure to interest rate risk for variable-rate bank borrowings in existence at each reporting period. The 100 basis points decreased/increased represents management’s assessment of a reasonably possible change in those interest rates which have the most impact on the Group over the period until the end of next reporting period.

(b) Credit risk

Credit risk arises mainly from trade and other receivables, amount due from a director, amounts due from related companies and cash and bank balances. The Group’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations as at the reporting dates in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the combined statements of financial position.

The credit risk of bank balances is limited because the counterparties are banks with sound credit ratings assigned by international credit-rating agencies.

In respect of trade and other receivables, individual credit evaluations are performed on all customers and counterparties. These evaluations focus on the counterparty’s financial position, past history of making payments and take into account information specific to the counterparty as well as pertaining to the economic environment in which the counterparty operates. Monitoring procedures have been implemented to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade and other receivable balance at the end of each reporting period to ensure adequate impairment losses are made for irrecoverable amounts.

As at 31 March 2016, 2017 and 2018, there were 2, 2 and 3 customers which individually contributed over 10% of the Group’s trade and other receivables, respectively. The aggregate amounts of trade and other receivables from these customers amounted to 82.0%, 90.6% and 60.4% of the Group’s total trade and other receivables as at 31 March 2016, 2017 and 2018 respectively. The Group has set up long-term cooperative relationship with these debtors. In view of the history of business dealings with the debtors and the sound collection history of the receivables due from them, management believes that there is no material credit risk, inherent in the Group’s outstanding receivables balance due from these debtors.

(c) Liquidity risk

The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet their liquidity requirements in the short and long term. Management believes there is no significant liquidity risk as the Group has sufficient financial resources to fund their operations.

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

APPENDIX I — ACCOUNTANTS’ REPORT

The following table details the remaining contractual maturities at the year end dates during the Track Record Period of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating based on current rates at the reporting dates during the Track Record Period) and the earliest date the Group may be required to pay:

As at 31 March 2016 Trade and other payables excluding non-financial liabilities Amount due to a director Bank borrowings Finance lease liability As at 31 March 2017 Trade and other payables excluding non-financial liabilities Bank borrowings Finance lease liability As at 31 March 2018 Trade and other payables excluding non-financial liabilities Amount due to a director Bank borrowings	On demand or within one year HK$’000 80,167 8,052 15,347 437 104,003 70,347 30,759 437 101,543 38,718 1,293 34,151 74,162	Between one and two years HK$’000 – – – 437 437 – – – – – – – –	Between two and five years HK$’000 – – – – – – – – – – – – –	Total HK$’000 80,167 8,052 15,347 874
				104,440

				70,347 30,759 437
				101,543

				38,718 1,293 34,151
				74,162

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

APPENDIX I — ACCOUNTANTS’ REPORT

The following table summarises the maturity analysis of bank borrowings with a repayment on demand clause based on agreed scheduled repayments as set out in the loan agreements. Taking into account the Group’s financial position, the directors of the Company do not consider that it is probable that the bank will exercise its discretion to demand immediate repayment. The directors of the Company believe that such bank borrowings will be repaid in accordance with the scheduled repayment dates as set out in the loan agreements.

As at 31 March 2016 Bank borrowings subject to a repayable on demand clause As at 31 March 2017 Bank borrowings subject to a repayable on demand clause As at 31 March 2018 Bank borrowings subject to a repayable on demand clause	On demand or within one year HK$’000 15,347 30,759 34,151	Between one and two years HK$’000 – – –	Between two and five years HK$’000 – – –	Total HK$’000 15,347

				30,759

				34,151

3.2 Capital risk management

The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders, to support the Group’s stability and growth; to earn a margin commensurate with the level of business and market risks in the Group’s operations and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, obtain new borrowings or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as the total interest-bearing liabilities as at each year end divided by the total equity as at each year end.

The gearing ratios during the Track Record Period are as follows:

Total debt Total equity Gearing ratio	As at 31 March 2016 HK$’000 16,042 13,291 120.7%	As at 31 March 2017 HK$’000 30,822 30,430 101.3%	As at 31 March 2018 HK$’000 33,604 69,024
			48.7%

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ACCOUNTANTS’ REPORT

APPENDIX I

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements used in preparing the Historical Financial Information 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 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 addressed below.

Revenue

The contract revenue and profit recognised on a project is dependent on management’s estimation of the progress of the satisfaction of performance obligations of a construction contract over time, measured by the value of performance completed to date of the individual contract as a percentage of total transaction price. Because of the nature of the activity undertaken by the Group, the Group reviews and revises the estimates of contract revenue, contract costs and variation order, prepared for each construction contract as the contract progresses. Budgeted construction costs are prepared by management on the basis of quotations from time to time provided by the major subcontractors, suppliers and vendors involved and the experience of management. In order to keep the budget accurate and up-to-date, management conducts periodic reviews of the budgeted construction costs and revises the budgeted construction costs as appropriate.

Significant judgement is required in estimating the value of performance completed, contract revenue, contract costs and variation work which may have an impact on percentage of completion of the construction contracts and the corresponding contract revenue and profit to be recognised in an accounting period. In addition, actual outcome in terms of total revenue or costs may be higher or lower than estimation at the end of the reporting period, which would affect the revenue and profit recognised in future years as an adjustment to the amounts recorded to date.

5 REVENUE AND SEGMENT INFORMATION

Revenue, which is also the Group’s turnover, represents revenue from performance of construction contract works in the ordinary course of business. Revenue recognised during the respective years are as follows:

(a) Disaggregation of revenue from contracts with customers

By timing of revenue recognition: Control transferred over time Control transferred at a point of time By type of services: Fitting-out services Supply of fitting-out materials	Year ended 31 March 2016 HK$’000 238,823 1,326 240,149 Year ended 31 March 2016 HK$’000 238,823 1,326 240,149	Year ended 31 March 2017 HK$’000 346,099 292 346,391 Year ended 31 March 2017 HK$’000 346,099 292 346,391	Year ended 31 March 2018 HK$’000 560,283 –
			560,283

			Year ended 31 March 2018 HK$’000 560,283 –
			560,283

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

APPENDIX I — ACCOUNTANTS’ REPORT

The chief operating decision maker of the Group during the Track Record Period has been identified as the executive directors of the Company. The chief operating decision maker regards the Group’s business as a single operating segment and reviews the performance of the Group as a whole as reflect in the Historical Financial Information accordingly. During the Track Record Period, the Group only engages its business in Hong Kong. Therefore, no segment information is presented.

Information about major customers

Revenue from customers contributing over 10% of the total revenue of the Group are as follows:

			Year ended	Year ended	Year ended
		31	March 2016	31 March 2017	31 March 2018
			HK$’000	HK$’000	HK$’000
Customer	A		162,6771	228,1191	366,3221
Customer	B		64,9601	112,7571	55,8781
Customer	C		N/A2	N/A2	83,202

1 The customer represents a number of companies within a group.

2 The corresponding revenue did not contribute over 10% of total revenue of the Group.

(b) Transaction price allocated to the remaining performance obligations

The following table includes revenue expected to be recognised in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as at 31 March 2018.

Remaining performance obligations expected to be satisfied during the years ending: 31 March 2019 31 March 2020 After 31 March 2020	As at 31 March 2018 HK$’000 250,490 – –
	250,490

The Group applies the practical expedient in paragraph C5(d) of HKFRS 15 and does not disclose information about remaining performance obligations as at 31 March 2016 and 2017 expected to be satisfied in the future.

6 OTHER INCOME AND GAINS/(LOSSES) – NET

Bank interest income Net foreign exchange gains/(losses)-net Sundry income	Year ended 31 March 2016 HK$’000 – 75 19 94	Year ended 31 March 2017 HK$’000 – (7) – (7)	Year ended 31 March 2018 HK$’000 2 22 32
			56

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APPENDIX I — ACCOUNTANTS’ REPORT

7 PROFIT BEFORE INCOME TAX

Year ended Year ended 31 March 2016 31 March 2017 HK$’000 HK$’000 Profit before taxation has been arrived at after charging: Depreciation of assets under finance leases 325 433 Depreciation of owned assets 1 2 326 435 Auditors’ remuneration 60 246 Cost of materials and finished goods 69,263 82,561 [REDACTED] expenses – – Operating lease rental in respect of machinery and equipment 954 45 Operating lease rental in respect of premises 432 432 Staff costs, including directors’ emoluments (Note 8) 14,988 21,233 EMPLOYEE BENEFITS EXPENSES, INCLUDING DIRECTORS’ EMOLUMENTS Year ended Year ended 31 March 2016 31 March 2017 HK$’000 HK$’000 Salaries, allowances and other benefits in kind 14,490 20,369 Retirement scheme contributions – defined contribution plan 498 864 14,988 21,233	Year ended 31 March 2018 HK$’000 433 3
	436

	246 192,740 3,533 55 432 32,191

	Year ended 31 March 2018 HK$’000 30,937 1,254
	32,191

8 EMPLOYEE BENEFITS EXPENSES, INCLUDING DIRECTORS’ EMOLUMENTS

The Group operates a Mandatory Provident Fund Scheme (“ the MPF scheme ”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The total expenses recognised in the combined statements of profit or loss and other comprehensive income during the Track Record Period and represented contributions payable to these plans by the Group at rates specified in the rules of plans. Except for the voluntary contribution, no forfeited contribution under the MPF Scheme is available to reduce the contribution payable in future years.

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ACCOUNTANTS’ REPORT

APPENDIX I

9 DIRECTORS’ EMOLUMENTS

(a) Directors’ emoluments

The remuneration of each director for the Track Record Period is set out below:

Year ended 31 March 2016 Executive Directors Mr. Man Mrs. Man Mr. Ho Year ended 31 March 2017 Executive Directors Mr. Man Mrs. Man Mr. Ho Year ended 31 March 2018 Executive Directors Mr. Man Mrs. Man Mr. Ho	Fee HK$’000 – – – – – – – – – – – –	Salaries, allowances and other benefits in kind HK$’000 1,356 – 720 2,076 1,363 – 780 2,143 1,408 – 832 2,240	Discretionary bonuses HK$’000 – – 300 300 – – – – – – – –	Retirement scheme contributions HK$’000 18 – 18 36 18 – 18 36 18 – 18 36	Total HK$’000 1,374 – 1,038
					2,412

					1,381 – 798
					2,179

					1,426 – 850
					2,276

Mr. Man was appointed as director of the Company on 9 May 2018, and was re-designated as an executive director of the Company on 7 June 2018. He was also appointed as chairman of the board of the directors of the Company on [•] 2018. Mrs. Man was appointed as director of the Company on 9 May 2018, and was re-designated as an executive director of the Company on 7 June 2018. Mr. Ho was appointed as director of the Company on 9 May 2018, and was re-designated as an executive director of the Company on 7 June 2018. He is also the chief executive officer of the Company. They were also directors of certain subsidiaries of the Company and/or employees of the Group during the Track Record Period and the Group paid emoluments to them in their capacity as the directors of these subsidiaries and/or employees of the Group before their appointment as executive directors of the Company.

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APPENDIX I — ACCOUNTANTS’ REPORT

Mr. Chan Ka Yu, Mr. Lo Ki Chiu and Mr. Leung Wai Lim were appointed as independent non-executive directors of the Company on [•]. During the Track Record Period, the aforesaid independent non-executive directors have not yet been appointed and received no directors’ remuneration in their capacity as directors.

During the Track Record Period, no emoluments were paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office. No director has waived or agreed to waive any emoluments during the Track Record Period.

(b) Five highest paid individuals

Of the five individuals with the highest emoluments, two of them are directors for each of the three years ended 31 March 2016, 2017 and 2018, whose emoluments are disclosed above. The emoluments in respect of the remaining three individuals for each of the three years ended 31 March 2016, 2017 and 2018 are as follows:

Salaries, allowances and other benefits in kind Discretionary bonuses Retirement scheme contributions	Year ended 31 March 2016 HK$’000 1,268 187 53 1,508	Year ended 31 March 2017 HK$’000 1,222 195 51 1,468	Year ended 31 March 2018 HK$’000 1,302 168 54
			1,524

The emoluments of each of the above non-directors, highest paid individuals were below HK$1,000,000 for each of the three years. During the Track Record Period, no emoluments were paid by the Group to the above highest paid individuals as (i) an inducement to join or upon joining the Group or (ii) as compensation for loss of office as a director or management of any members of the Group.

10 FINANCE COSTS

Interest on bank borrowings Interest on finance leases	Year ended 31 March 2016 HK$’000 1,168 37 1,205	Year ended 31 March 2017 HK$’000 939 22 961	Year ended 31 March 2018 HK$’000 1,649 8
			1,657

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ACCOUNTANTS’ REPORT

APPENDIX I

11 INCOME TAX EXPENSE

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profits arising in or derived from Hong Kong for the Track Record Period.

	Year ended	Year ended	Year ended
	31 March 2016	31 March 2017	31 March 2018
	HK$’000	HK$’000	HK$’000
Hong Kong profits tax
– current tax on profits for the year	2,567	5,910	8,327

The taxation on the Group’s profit before income tax differs from the theoretical amount that would arise using the Hong Kong profits tax rate as follows:

Profit before income tax Calculated at a tax rate of 16.5% Tax effects of: Expenses not deductible for tax purposes Tax losses not recognised Utilisation of previous unrecognised tax losses Temporary differences not recognised Tax concession Income tax expense	Year ended 31 March 2016 HK$’000 14,427 2,380 7 279 – (59) (40) 2,567	Year ended 31 March 2017 HK$’000 33,049 5,453 6 466 – 5 (20) 5,910	Year ended 31 March 2018 HK$’000 46,921

			7,742 583 116 (80) 26 (60)
			8,327

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets in respect of the tax losses at the end of the reporting period as the directors of the Company consider that it is uncertain as to the extent that future profits will be available against which tax losses can be utilised in the foreseeable future.

The Group has unused tax losses of approximately HK$5,958,000, HK$8,784,000 and HK$9,005,000 as at 31 March 2016, 2017 and 2018 respectively, which are available for offset against future profits that may be carried forward indefinitely and are subject to approval from the Hong Kong Inland Revenue Department.

12 EARNINGS PER SHARE

No earnings per share information is presented for the purpose of this report as its inclusion is not considered meaningful having regard to the Reorganisation of the Group and the result of the Group for the Track Record Period that is prepared on a combined basis as set out in Notes 1 and 2.

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ACCOUNTANTS’ REPORT

APPENDIX I

13 DIVIDENDS

		Year ended	Year ended	Year ended
		31 March 2016	31 March 2017	31 March 2018
		HK$’000	HK$’000	HK$’000
Final	dividends declared by
Hoi	Sing Decoration	–	10,000	–

No dividend has been paid or declared by the Company since its incorporation.

The final dividends represented the dividends declared and paid by Hoi Sing Decoration, a subsidiary of the Company, to its then equity holders prior to the Reorganisation.

The rate of dividend and the number of shares ranking for dividend is not presented as such information is not meaningful having regard to the purpose of this report.

14 FINANCIAL INSTRUMENTS BY CATEGORY

Financial assets Loans and receivables Trade and other receivables excluding prepayments Amount due from a director Amounts due from related companies Cash and bank balances Financial liabilities Financial liabilities at amortised cost Trade and other payables excluding non-financial liabilities Amount due to a director Bank borrowings Finance lease liability	As at 31 March 2016 HK$’000 24,428 – 20,199 11,733 56,360 80,167 8,052 15,198 844 104,261	As at 31 March 2017 HK$’000 37,779 11,748 – 30,160 79,687 70,347 – 30,393 429 101,169	As at 31 March 2018 HK$’000 35,699 – – 26,766
			62,465

			38,718 1,293 33,604 –
			73,615

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ACCOUNTANTS’ REPORT

APPENDIX I

15 PROPERTY, PLANT AND EQUIPMENT

Cost As at 1 April 2015 Additions Disposals As at 31 March 2016 Accumulated depreciation As at 1 April 2015 Charge for the year Disposals As at 31 March 2016 Net book value As at 31 March 2016 Cost As at 1 April 2016 Additions As at 31 March 2017 Accumulated depreciation As at 1 April 2016 Charge for the year As at 31 March 2017 Net book value As at 31 March 2017 Cost As at 1 April 2017 Additions As at 31 March 2018 Accumulated depreciation As at 1 April 2017 Charge for the year As at 31 March 2018 Net book value As at 31 March 2018	Furniture and fixtures HK$’000 663 – – 663 658 1 – 659 4 663 2 665 659 2 661 4 665 8 673 661 3 664 9	Motor vehicle HK$’000 412 1,444 (412) 1,444 412 325 (412) 325 1,119 1,444 – 1,444 325 433 758 686 1,444 – 1,444 758 433 1,191 253	Total HK$’000 1,075 1,444 (412) 2,107 1,070 326 (412) 984 1,123 2,107 2 2,109 984 435 1,419 690 2,109 8 2,117 1,419 436 1,855 262

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APPENDIX I

ACCOUNTANTS’ REPORT

(a) Fixed asset held under finance leases

Motor vehicle includes the following amount where the Group is a lessee under finance leases.

Cost – capitalised finance lease Accumulated depreciation Net book value (Note 25)	As at 31 March 2016 HK$’000 1,444 (325) 1,119	As at 31 March 2017 HK$’000 1,444 (758) 686	As at 31 March 2018 HK$’000 – –
			–

16 CONTRACT ASSETS AND LIABILITIES

The Group has recognised the following revenue-related contract assets and liabilities:

Contract assets Contract liabilities Contract costs incurred plus recognised profits less recognised losses Less: Progress billings received and receivables	As at 31 March 2016 HK$’000 62,510 – 62,510 604,000 (541,490) 62,510	As at 31 March 2017 HK$’000 67,724 – 67,724 738,155 (670,431) 67,724	As at 31 March 2018 HK$’000 94,457 (16,009)
			78,448

			768,865 (674,408)
			94,457

As at 31 March 2016, 2017 and 2018, none of the Group’s contract assets were impaired.

The contract assets primarily relate to the Group’s rights to consideration for work completed but not yet billed at the reporting date. The contract assets are transferred to trade receivables when the rights become unconditional upon rending of the billings. The contract liabilities primarily relate to the advanced consideration received from customers, for which revenue is recognised based on the progress of the provision of related services.

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ACCOUNTANTS’ REPORT

APPENDIX I

(i) Revenue recognised in relation to contract assets and contract liabilities

The following table shows how much of the revenue recognised in the respective reporting period relates to carried-forward contract assets and contract liabilities.

	Year ended	Year ended	Year ended
	31 March 2016	31 March 2017	31 March 2018
	HK$’000	HK$’000	HK$’000
Revenue recognised that was included
in the contract liabilities balance at
the beginning of the year	–	–	–
Transfers from the contract assets
recognised at the beginning of the
year to trade receivables	(43,404)	(62,510)	(65,943)

(ii) Revenue recognised from performance obligation satisfied in previous periods

There was no significant amount of revenue recognised and reversed during the Track Record Period from performance obligations satisfied (or partially satisfied) in previous periods.

(iii) Assets recognised from incremental costs to obtain a contract or cost to fulfil a contract with a customer

During the Track Record Period, there was no significant incremental costs to obtain a contract or cost to fulfil a contract with a customer.

17 TRADE AND OTHER RECEIVABLES

Trade receivables Retention receivables (Note (c)) Other receivables, deposits and prepayments	As at 31 March 2016 HK$’000 21,454 2,896 129 24,479	As at 31 March 2017 HK$’000 28,013 8,943 861 37,817	As at 31 March 2018 HK$’000 21,701 4,754 12,667
			39,122

Notes:

(a) The credit period granted to customers are ranging from 21 to 30 days generally.

(b) The ageing analysis of the trade receivables based on invoice date is as follows:

0–30 days 31–60 days 61–90 days Over 90 days	As at 31 March 2016 HK$’000 15,753 – 174 5,527 21,454	As at 31 March 2017 HK$’000 23,199 330 36 4,448 28,013	As at 31 March 2018 HK$’000 16,389 450 2 4,860
			21,701

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ACCOUNTANTS’ REPORT

APPENDIX I

Trade receivables of approximately HK$15,753,000, HK$23,199,000 and HK$16,389,000 as at 31 March 2016, 2017 and 2018 respectively were not yet past due, and approximately HK$5,701,000, HK$4,814,000 and HK$5,312,000 as at 31 March 2016, 2017 and 2018 respectively were past due but not impaired. The ageing analysis of the past due but not impaired trade receivables, based on past due dates, is as follows:

0–30 days 31–60 days 61–90 days Over 90 days	As at 31 March 2016 HK$’000 – 174 414 5,113 5,701	As at 31 March 2017 HK$’000 330 36 – 4,448 4,814	As at 31 March 2018 HK$’000 450 2 4,251 609
			5,312

(c) Retention receivables were not past due as at 31 March 2016, 2017 and 2018, and were due for settlement in accordance with the terms of respective contract.
(d) As at 31 March 2016, 2017 and 2018, none of the Group’s trade receivables were impaired.
(e) All the trade and other receivables are measured at amortised cost. The carrying amounts of the trade and other receivables are denominated in HK$.
(f) The other classes within trade and other receivables do not contain impaired assets. The Group does not hold any collateral as security.

18 AMOUNT DUE FROM A DIRECTOR

	Maximum balance outstanding
	during the year ended 31 March		As at	As at	As at
Name of director	2016 2017	2018	31 March 2016	31 March 2017	31 March 2018
	HK$’000 HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Mr. Man	– 11,748	11,748	–	11,748	–

The balance is denominated in HK$. The amount due from a director is non-trade nature, unsecured, interest-free and repayable on demand.

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ACCOUNTANTS’ REPORT

APPENDIX I

19 AMOUNTS DUE FROM RELATED COMPANIES

Name of related company Maximum balance outstanding during the year ended 31 March 2016 2017 2018 HK$’000 HK$’000 HK$’000 海城五金家私製品 (惠州)有限公司 (“Haicheng Huizhou”) 19,427 16,063 – 海城(四川)裝飾工程有限公司(“Haicheng Sichuan”) 5,691 4,136 –	As at 31 March 2016 HK$’000 16,063 4,136 20,199	As at 31 March 2017 HK$’000 – – –	As at 31 March 2018 HK$’000 – –
			–

The balances are denominated in HK$ and the relationship with the Group is set out in Note 29(a).

The amounts due from related companies are non-trade nature, unsecured, interest-free and repayable on demand.

20 CASH AND BANK BALANCES

Cash at banks Cash on hand Cash and cash equivalents	As at 31 March 2016 HK$’000 11,580 153 11,733	As at 31 March 2017 HK$’000 30,012 148 30,160	As at 31 March 2018 HK$’000 26,645 121
			26,766

Notes:

(a) Cash at banks earns interest at floating rates based on daily bank deposit rates.

(b) The carrying amounts of the Group’s cash and bank balances are denominated in the following currencies:

HK$ RMB EURO US$	As at 31 March 2016 HK$’000 11,509 22 112 90 11,733	As at 31 March 2017 HK$’000 29,976 41 106 37 30,160	As at 31 March 2018 HK$’000 26,261 347 121 37
			26,766

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ACCOUNTANTS’ REPORT

APPENDIX I

21 TRADE AND OTHER PAYABLES

Trade payables Dividend payables Accruals and other payables	As at 31 March 2016 HK$’000 78,739 – 1,428 80,167	As at 31 March 2017 HK$’000 67,851 10,000 2,496 80,347	As at 31 March 2018 HK$’000 34,856 – 3,862
			38,718

Notes:

(a) Payment terms granted by suppliers of materials and subcontractors are ranging from 0 to 30 days generally.

The ageing analysis of trade payables based on the invoice date is as follows:

0–30 days 31–60 days 61–90 days Over 90 days	As at 31 March 2016 HK$’000 55,620 7,546 10,325 5,248 78,739	As at 31 March 2017 HK$’000 54,770 4,236 1,431 7,414 67,851	As at 31 March 2018 HK$’000 27,475 9 4,704 2,668
			34,856

(b) All the trade and other payables are measured at amortised cost. The carrying amounts of the trade and other payables are denominated in the following currencies:

HK$ RMB 22 AMOUNT DUE TO A DIRECTOR Name of director Mr. Man	As at 31 March 2016 HK$’000 80,167 – 80,167 As at 31 March 2016 HK$’000 8,052	As at 31 March 2017 HK$’000 78,479 1,868 80,347 As at 31 March 2017 HK$’000 –	As at 31 March 2018 HK$’000 38,091 627
			38,718

			As at 31 March 2018 HK$’000 1,293

The balance is denominated in HK$. The amount due to a director is non-trade nature, unsecured, interest-free and repayable on demand.

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

ACCOUNTANTS’ REPORT

APPENDIX I

23 BANK BORROWINGS

Current Bank borrowings All the bank borrowings are analysed as follows Within 1 year More than 1 year but not more than 2 years More than 2 years but not more than 5 years	As at 31 March 2016 HK$’000 15,198 (Note): As at 31 March 2016 HK$’000 15,198 – – 15,198	As at 31 March 2017 HK$’000 30,393 As at 31 March 2017 HK$’000 30,393 – – 30,393	As at 31 March 2018 HK$’000 33,604

			As at 31 March 2018 HK$’000 33,604 – –
			33,604

Note: The amounts due are based on the schedule repayment dates set out in the loan agreements and ignore the effect of any repayment on demand clause.

The carrying amounts of the bank borrowings approximately equal to their fair values, as the market interest rates are relatively stable.

As at 31 March 2016, 2017 and 2018, the interest rates of the bank borrowings are ranging from Hong Kong Dollar Prime Rate minus 0.5% to Hong Kong Dollar Prime Rate plus 0.5% per annum, flat rate of 4.2% and flat rate of 4.8%.

The carrying amounts of the Group’s bank borrowings are denominated in the following currencies:

HK$ EURO	As at 31 March 2016 HK$’000 14,329 869 15,198	As at 31 March 2017 HK$’000 30,393 – 30,393	As at 31 March 2018 HK$’000 33,604 –
			33,604

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

ACCOUNTANTS’ REPORT

APPENDIX I

24 BANKING FACILITIES

As at 31 March 2016, 2017 and 2018, the banking facilities for bank borrowings granted to the Group were secured by the followings:

(i) Unlimited personal guarantees and indemnity granted by Mr. Man and Mrs. Man;
(ii) Unlimited corporate guarantee granted by Hoi Sing Holdings (HK) Limited;
(iii) Personal property owned by Mr. Man; and
(iv) Proceeds in relation to all account receivables of one of the subsidiary of the Company.

The directors of the Company confirm that all of the guarantees and securities as set out in items (i), (ii) and (iii) above will be replaced by guarantees of the Company upon [REDACTED] shares of the Company in the Main Board of the Stock Exchange of Hong Kong Limited.

As at 31 March 2016, 2017 and 2018, the Group has unutilised banking facilities for bank borrowings amounting to approximately HK$9,802,000, HK$1,277,000 and HK$9,619,000 respectively.

25 FINANCE LEASE LIABILITY

As at 31 March 2016, 2017 and 2018, the Group had finance leases repayable as follows:

Within one year More than one year but not more than two years More than two years but not more than five years Less: total future interest expenses Present value of lease obligations	As at 31 March 2016 Present value of the minimum lease payments Total minimum lease payments HK$’000 HK$’000 415 437 429 437 – – 844 874 (30) 844	As at 31 March 2017 Present value of the minimum lease payments Total minimum lease payments HK$’000 HK$’000 429 437 – – – – 429 437 (8) 429	As at 31 March 2018 Present value of the minimum lease payments Total minimum lease payments HK$’000 HK$’000 – – – – – – – – – –	As at 31 March 2018 Present value of the minimum lease payments Total minimum lease payments HK$’000 HK$’000 – – – – – – – – – –
				– –
				– –
				–

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

APPENDIX I — ACCOUNTANTS’ REPORT

The Group’s motor vehicle with aggregate net book value of approximately HK$1,119,000, HK$686,000 and Nil as at 31 March 2016, 2017 and 2018 respectively ( Note 15 ) was secured as the rights to the leased asset revert to the lessors in the event of default and by the personal guarantee granted by Mr. Man.

The Group had committed finance lease facility which bore interest of 1.79% per annum as at 31 March 2016 and 2017.

The carrying amounts of all finance lease liability is denominated in HK$.

26 COMBINED CAPITAL

			As at	As at	As at
		31	March 2016	31 March 2017	31 March 2018
			HK$’000	HK$’000	HK$’000
Combined	capital		200	200	200

For the purpose of the preparation of the combined statements of financial position, the balance of combined capital as at 31 March 2016, 2017 and 2018 represents the aggregate of the paid up share capital of the subsidiaries comprising the Group held by the controlling shareholders of the Company prior to the Reorganisation.

The Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands on 9 May 2018 with an initial authorised share capital of HK$380,000 divided into 38,000,000 ordinary shares of HK$0.01 each and one subscribers share was issued thereafter.

27 NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS

(a) Reconciliation of profit before income tax to cash generated from operations

Profit before income tax Adjustments for: Depreciation Interest expenses Interest income Operating profit before changes in working capital Increase in contract assets Increase in trade and other receivables (Increase)/Decrease in amount due from a director (Increase)/Decrease in amounts due from related companies Increase in contract liabilities Increase/(Decrease) in trade and other payables (Decrease)/Increase in amount due to a director Cash generated from operations	Year ended 31 March 2016 HK$’000 14,427 326 1,205 – 15,958 (17,914) (7,161) – (6,989) – 37,682 (769) 20,807	Year ended 31 March 2017 HK$’000 33,049 435 961 – 34,445 (5,214) (13,338) (11,748) 20,199 – (9,820) (8,052) 6,472	Year ended 31 March 2018 HK$’000 46,921 436 1,657 (2)
			49,012 (26,733) (1,305) 11,748 – 16,009 (31,629) 1,293
			18,395

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

ACCOUNTANTS’ REPORT

APPENDIX I

(b) Non-cash transaction

The non-cash transaction is analysed as follows:

During the years ended 31 March 2016, 2017 and 2018, addition to motor vehicle of approximately HK$1,444,000, Nil and Nil was financed by finance lease arrangement respectively.

(c) Reconciliation of liabilities arising from financing activities

The table below details changes in the Group’s liabilities from financing activities. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flow will be, classified in the Group’s combined statements of cash flow as cash flows from financing activities.

As at 1 April 2015 Changes from financing cash flows: Proceeds from borrowings Repayments of borrowings Interest paid Non-cash transaction (Note 27(b)) Other changes Interest expenses As at 31 March 2016 As at 1 April 2016 Changes from financing cash flows: Proceeds from borrowings Repayments of borrowings Interest paid Other changes Interest expenses As at 31 March 2017 As at 1 April 2017 Changes from financing cash flows: Proceeds from borrowings Repayments of borrowings Interest paid Other changes Interest expenses As at 31 March 2018	Bank borrowings HK$’000 27,004 82,671 (94,477) (1,168) – 1,168 15,198 15,198 113,393 (98,198) (939) 939 30,393 30,393 124,776 (121,565) (1,649) 1,649 33,604	Finance lease liability HK$’000 – – (600) (37) 1,444 37 844 844 – (415) (22) 22 429 429 – (429) (8) 8 –	Total HK$’000 27,004 82,671 (95,077) (1,205) 1,444 1,205 16,042 16,042 113,393 (98,613) (961) 961 30,822 30,822 124,776 (121,994) (1,657) 1,657 33,604

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

ACCOUNTANTS’ REPORT

APPENDIX I

28 COMMITMENTS

Operating lease commitments – Group as lessee

At the end of each of the Track Record Period, the total future minimum lease payments under non-cancellable operating leases were payable as follows:

Within one year In the second to fifth years inclusive	As at 31 March 2016 HK$’000 435 828 1,263	As at 31 March 2017 HK$’000 468 396 864	As at 31 March 2018 HK$’000 432 –
			432

The Group is the lessee in respect of premises under operating leases. The leases typically run for initial periods of approximately 2 years.

29 RELATED PARTY TRANSACTIONS

Related parties are those parties that have the ability to control, jointly control or exert significant influence over the other party in making financial or operational decisions. Parties are also considered to be related if they are subject to common control or joint control. Related parties may be individuals or other entities.

Save as disclosed in Notes 18, 19, 22, 23, 24 and 25 the Historical Financial Information, management is of the view that the following entities/person are related parties of the Company and had transactions and balances with the Group during the Track Record Period.

(a) The directors of the Company are of the view that the following companies that had transactions or balances with the Group are related parties:

Name Relationship with the Group

Hoi Sing International (HK) Limited A related company which was mainly controlled and (“ Hoi Sing International ”) owned by Mr. Man and Mr. Ho for the year ended 31 March 2016 and up to February 2017, then this related company is controlled and owned by Mr. Man Hoi Wang, Michael (“ Mr. Michael Man ”), the son of Mr. Man and Mrs. Man.

Hoi Sing Holdings (HK) Limited A related company controlled and owned by Mr. Man (“ Hoi Sing Holdings ”) and Mrs. Man.

Haicheng Huizhou A related company was owned by Great Gold Development Limited which is owned and controlled by Mr. Man and Mrs. Man for the year ended 31 March 2016 and up to March 2017.

Haicheng Sichuan A related company was owned by Mr. Man for the year ended 31 March 2016 and up to March 2017.

Mr. Chung Po Wang (“ Mr. Chung ”) He was a director of Hoi Sing Decoration, a subsidiary of the Company and resigned in December 2016.

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

APPENDIX I

ACCOUNTANTS’ REPORT

(b) Transactions with related parties

			Year ended	Year ended	Year ended
			31 March 2016	31 March 2017	31 March 2018
		Notes	HK$’000	HK$’000	HK$’000
Hoi Sing Holdings	Rental expenses	(i)	432	432	432
Hoi Sing International	Supply of fitting-out	(ii)	926	261	–
	materials
	Staff costs	(ii)	–	31	25
	Provision of fitting-out		–	–	27
	services
Mr. Man	Provision of fitting-out	(ii)	39	–	116
	services
Mr. Chung	Provision of fitting-out	(ii)	305	52	–
	services
Haicheng Huizhou	Purchase of materials and	(ii)	20,274	30,385	–
	finished goods

Notes:

(i) The rental expenses for premises paid to Hoi Sing Holdings are based on the agreements entered into between the parties involved.
(ii) Supply of fitting-out materials, staff costs, provision of fitting-out services and purchase of materials and finished goods are based on terms mutually agreed between the parties involved.

(c) Outstanding balances with related parties

			As at	As at	As at
			31 March 2016	31 March 2017	31 March 2018
		Notes	HK$’000	HK$’000	HK$’000
Haicheng Huizhou	Trade payables	(i)	2,523	3,349	–
Hoi Sing International	Trade receivables	(ii)	763	146	146
	Trade payables	(i)	–	31	–
Mr. Man	Trade receivables	(ii)	39	–	116
Mr. Chung	Trade receivables	(ii)	39	–	–
Mr. Michael Man	Trade receivables	(ii)	220	–	–

Notes:

(i) The trade payables to related parties are arising from purchase of materials and finished goods and/or staff costs. These balances are unsecured and interest-free.
(ii) The trade receivables from related parties are arising from provision of fitting-out work and/or supply of fitting-out materials. These balances are unsecured and interest-free.
(d) The emoluments of the directors and senior executives (representing the key management personnel) during the Track Record Periods are disclosed in Note 9.

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

ACCOUNTANTS’ REPORT

APPENDIX I

30 CONTINGENT LIABILITIES

The Group, in the ordinary course of its business, is involved in various claims, suits, investigations, and legal proceedings that arise from time to time. Although the Company does not expect that the outcome in any of these legal proceedings, individually or collectively, will have a material adverse effect on its financial position or results of operations, litigation is inherently unpredictable. Therefore, the Group could incur judgements or enter into settlements of claims that could adversely affect its operating results or cash flows in a particular period.

The Group had no significant contingent liabilities at the end of each of the Track Record Period.

31 SUBSEQUENT EVENTS

The following significant events took place subsequent to 31 March 2018:

(a) The Reorganisation as set out in Note 1 was completed on [•]:
(b) The Company adopted a share option scheme on [•], a summary of the terms and conditions of which are set out in the paragraph headed “Share Option Scheme” in Appendix IV “Statutory and General Information” to the Document.
(c) On [•], the authorised share capital of the Company was increased from HK$[•] to HK$[•] by the creation of an additional of [•] shares of HK$[•] each.

32 SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or any of the companies comprising the Group in respect of any period subsequent to 31 March 2018.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION 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 forth in this appendix does not form part of the accountants’ report on the financial information of the Group for the three years ended 31 March 2016, 2017 and 2018 prepared by HLB Hodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong, the reporting accountants of our Company, as set forth in Appendix I of this document, and is included herein for illustrative purposes only. The unaudited pro forma financial information should be read in conjunction with the section headed “Financial information” in this document and the accountants’ report set forth in Appendix I of this document.

A. UNAUDITED PRO FORMA ADJUSTED COMBINED NET TANGIBLE ASSETS

The following is an illustrative unaudited pro forma statement of adjusted combined net tangible assets of the Group which has been prepared in accordance with paragraph 4.29 of the Listing Rules for the purpose of illustrating the effect of the [REDACTED] on the audited combined net tangible assets of the Group attributable to owners of the Company as of 31 March 2018, as if the [REDACTED] had taken place on that date.

The unaudited pro forma adjusted combined net tangible assets of the Group has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the combined net tangible assets of the Group attributable to owners of the Company had the [REDACTED] been completed as at 31 March 2018 or of any future dates. It is prepared based on the audited combined net tangible assets of the Group attributable to owners of the Company as at 31 March 2018 as set out in the Accountants’ Report in Appendix I to this document, and adjusted as described below.

Audited

Audited
combined net
tangible
assets of the
Group			Unaudited
attributable		Unaudited	pro forma
to owners of	Add:	pro forma	adjusted
the Company	Estimated	adjusted	combined net
as at	[REDACTED]	combined net	tangible
31 March	from the	tangible	assets per
2018	[REDACTED]	assets	Share
HK$’000	HK$’000	HK$’000	HK$
(Note 1)	(Note 2)		(Note 3)

Based on the [REDACTED] of HK$ [REDACTED] per Share [REDACTED] [REDACTED] [REDACTED] [REDACTED]

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

APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION

Notes:

The unadjusted audited combined net tangible assets attributable to the owners of the Company is based on the audited combined net assets of the Group attributable to the owners of the Company of approximately HK$69,024,000 as at 31 March 2018 as set out in the Accountants’ Report in Appendix I to this document.
The estimated net [REDACTED] from the [REDACTED] is based on the issue of [REDACTED] [REDACTED] at the [REDACTED] of lower limit and upper limit of HK$ [REDACTED] and HK$ [REDACTED] per [REDACTED] respectively, after deduction of the estimated [REDACTED] commissions and other [REDACTED] expenses.
The unaudited pro forma adjusted combined 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” in this document but does not take into account of any Shares which may be allotted and issued upon the exercise of the [REDACTED] and the exercise of any option which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by the Company pursuant to the general mandates granted to the Directors to allot and issue or repurchase. Shares referred to in the sections headed “Share capital – General mandate” or “Share capital – Repurchase of shares” in this document.
No adjustment has been made to the unaudited pro forma adjusted combined net tangible assets of the Group to owner of the Company as at 31 March 2018 to reflect any trading results or other transactions of the Group entered into subsequent to 31 March 2018.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION

B. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from the reporting accountants, HLB Hodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong, prepared for the purpose of incorporation in this document.

==> picture [232 x 46] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

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

TO THE DIRECTORS OF YIELD GO HOLDINGS LTD.

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Yield Go Holdings Ltd. (the “ Company ”) and its subsidiaries (hereinafter collectively referred to as the “ Group ”) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma adjusted net tangible assets as at 31 March 2018 (the “ Unaudited Pro Forma Financial Information ”) and related notes as set out in Section A of Appendix II to the document issued by the Company dated [•] (the “ Document ”). The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described in Section A of Appendix II to the Document.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the [REDACTED] (as defined in the Document) of the Company on the Group’s financial position as at 31 March 2018 as if the [REDACTED] had taken place at 31 March 2018. As part of this process, information about the Group’s financial information has been extracted by the directors from the Group’s financial information for the year ended 31 March 2018, on which an accountants’ report has been published.

Directors’ responsibility for the Unaudited Pro Forma Financial Information

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

– II-3 –

Our independence and quality control

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

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

Reporting accountants’ responsibility

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

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

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

The purpose of Unaudited Pro Forma Financial Information included in the Document is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 31 March 2018 would have been as presented.

– II-4 –

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

APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to those criteria; and
The Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgement, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

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

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully,

HLB Hodgson Impey Cheng Limited

Certified Public Accountants

[•] Practising Certificate Number: [•] Hong Kong, [•]

– II-5 –

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

APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND 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 company law.

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 9 May 2018 under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the “ Companies Law ”). The Company’s constitutional documents consist of its Memorandum of Association (the “ Memorandum ”) and its Articles of Association (the “ Articles ”).

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum states, inter alia, that the liability of members of the Company is limited to the amount, if any, for the time being unpaid on the shares respectively held by them and that the objects for which the Company is established are unrestricted (including acting as an investment company), and that the Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit, as provided in section 27(2) of the Companies Law and in view of the fact that 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) The Company may by special resolution alter its Memorandum with respect to any objects, powers or other matters specified therein.

2. ARTICLES OF ASSOCIATION

The Articles were conditionally adopted on [•] with effect from the [REDACTED] . 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) 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 the shares or any class of shares may (unless otherwise provided for by the terms of issue 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

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

APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

of the holders of the shares of that class. To every such separate general meeting the provisions of the Articles relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting two holders present in person or by proxy (whatever the number of shares held by them) shall be a quorum. Every holder of shares of the class shall be entitled to one vote for every such share held by him.

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.

(iii) Alteration of capital

The Company may by ordinary resolution of its members:

(i) increase its share capital by the creation of new shares;
(ii) consolidate all or any of its capital into shares of larger amount than its existing shares;
(iii) divide its shares into several classes and attach to such shares any preferential, deferred, qualified or special rights, privileges, conditions or restrictions as the Company in general meeting or as the directors may determine;
(iv) subdivide its shares or any of them into shares of smaller amount than is fixed by the Memorandum; or
(v) cancel any shares which, at the date of passing of the resolution, have not been taken and diminish the amount of its capital by the amount of the shares so cancelled.

The Company may reduce its share capital or any capital redemption reserve or other undistributable reserve in any way by special resolution.

(iv) Transfer of shares

All transfers of shares may be effected by an instrument of transfer in the usual or common form or in a form prescribed by The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) or in such other form as the board may approve and which may be under hand or, if the transferor or transferee is a clearing house or its

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

APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the board may approve from time to time.

The instrument of transfer shall be executed 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 transferee. 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 in respect of that share.

The board may, in its absolute discretion, at any time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

The board may decline to recognise any instrument of transfer unless a fee (not exceeding the maximum sum as the Stock Exchange may determine to be payable) determined by the Directors is paid to the Company, the instrument of transfer is properly stamped (if applicable), it is in respect of only one class of share and is lodged at the relevant registration office or registered office or such other place at which the principal register is kept 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 registration of transfers may be suspended and the register closed on giving notice by advertisement in any newspaper or by any other means in accordance with the requirements of the Stock Exchange, at such times and for such periods as the board may determine. The register of members must not be closed for periods exceeding in the whole thirty (30) days in any year.

Subject to the above, fully paid shares are free from any restriction on transfer and free of all liens in favour of the Company.

(v) 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 requirements imposed from time to time by the Stock Exchange.

Where the Company purchases for redemption a redeemable share, purchases not made through the market or by tender must be limited to a maximum price determined by the Company in general meeting. If purchases are by tender, tenders must be made available to all members alike.

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(vi) Power of any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to ownership of shares in the Company by a subsidiary.

(vii) Calls on shares and forfeiture of shares

The board may from time to time make such calls 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). A call may be made payable either in one lump sum or by installments. 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 twenty per cent. (20%) per annum as the board may agree to accept 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 monies uncalled and unpaid or installments payable upon any shares held by him, and upon all or any of the monies so advanced the Company may pay interest at such rate (if any) as the board may decide.

If a member fails to pay any call on the day appointed for payment thereof, the board may serve not less than fourteen (14) clear days’ notice on him requiring payment of so much of the call as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment and stating 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, notwithstanding, 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 the date of actual payment at such rate not exceeding twenty per cent. (20%) per annum as the board determines.

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(b) Directors

(i) Appointment, retirement and removal

At each annual general meeting, one third of the Directors for the time being (or if their number is not a multiple of three, then the number nearest to but not less than one third) shall retire from office by rotation provided that every Director shall be subject to retirement at an annual general meeting at least once every three years. The Directors to retire by rotation shall include any Director who wishes to retire and not offer himself for re-election. Any further Directors so to retire shall be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot.

Neither a Director nor an alternate Director is required to hold any shares in the Company by way of qualification. Further, there are no provisions in the Articles relating to retirement of Directors upon reaching any age limit.

The Directors have the power to appoint any person as a Director either to fill a casual vacancy on the board or as an addition to the existing board. Any Director appointed to fill a casual vacancy shall hold office until the first general meeting of members after his appointment and be subject to re-election at such meeting and any Director appointed 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.

A Director may be removed by an ordinary resolution of the Company before the expiration of his period 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 members of the Company may by ordinary resolution appoint another in his place. Unless otherwise determined by the Company in general meeting, the number of Directors shall not be less than two. There is no maximum number of Directors.

The office of director shall be vacated if:

(aa) he resigns by notice in writing delivered to the Company;
(bb) he becomes of unsound mind or dies;
(cc) 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;

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

(dd) he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors;
(ee) he is prohibited from being a director by law; or
(ff) he ceases to be a director by virtue of any provision of law or is removed from office pursuant to the Articles.

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 delegate any of its powers, authorities and discretions to committees consisting of such Director or Directors and other persons as the board thinks fit, and it may from time to time 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 must, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may from time to time be imposed upon it by the board.

(ii) Power to allot and issue shares and warrants

Subject to the provisions of the Companies Law and the Memorandum and Articles and to any special rights conferred on the holders of any shares or class of shares, any share may be issued (a) with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Directors may determine, or (b) on terms that, at the option of the Company or the holder thereof, it is liable to be redeemed.

The board may issue warrants conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of the Company on such terms as it may determine.

Subject to the provisions of the Companies Law and the Articles and, where applicable, the rules of the Stock Exchange 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 are 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.

Neither the Company nor the board is 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 with registered

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the board, be unlawful or impracticable. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever.

(iii) Power to dispose of the assets of the Company or any of its subsidiaries

There are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries. The Directors may, however, 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.

(iv) Borrowing powers

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 assets and uncalled capital of the Company and, subject to the Companies Law, to issue debentures, 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.

(v) Remuneration

The ordinary remuneration of the Directors is to be determined by the Company in general meeting, such sum (unless otherwise directed by the resolution by which it is voted) to be divided amongst the Directors in such proportions and in such manner as the board may agree or, failing agreement, equally, except that any Director holding office for part only 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 held office. The Directors are also entitled to be prepaid or repaid all travelling, hotel and incidental expenses reasonably expected to be incurred or incurred by them in attending any board meetings, committee meetings or general meetings or separate meetings of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties as Directors.

Any Director who, by request, goes or resides abroad for any purpose of the Company or who performs services which in the opinion of the board go beyond the ordinary duties of a Director may be paid such extra remuneration 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 and such other benefits and

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

allowances as the board may from time to time decide. Such remuneration may be either in addition to or in lieu of his remuneration as a Director.

The board may establish or concur or join with other companies (being subsidiary companies of the Company or companies with which it is associated in business) in establishing and making contributions out of the Company’s monies to any 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 ex-Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and ex-employees of the Company and their dependents or any class or classes of such persons.

The board may pay, enter into agreements to pay or make grants of revocable or irrevocable, and either subject or not subject to any terms or conditions, pensions or other benefits to employees and ex-employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or ex-employees or their dependents are or may become entitled under any such scheme or fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the board considers desirable, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

(vi) Compensation or payments for loss of office

Pursuant to the Articles, payments to any 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 entitled) must be approved by the Company in general meeting.

(vii) Loans and provision of security for loans to Directors

The Company must not make any loan, directly or indirectly, to a Director or his close associate(s) if and to the extent it would be prohibited by the Companies Ordinance (Chapter 622 of the laws of Hong Kong) as if the Company were a company incorporated in Hong Kong.

(viii) Disclosure of interests in contracts with the Company or any of its subsidiaries

A Director may hold any other office or place of profit with the Company (except that of the auditor of 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 in addition to any remuneration provided for by or pursuant to the Articles. A Director may be or become a director or other officer of, or otherwise interested in, any company promoted by the Company or any other company

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration, profits or other benefits received by him as a director, officer or member of, or from his interest in, 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, or voting or providing for the payment of remuneration to the directors or officers of such other company.

No Director or proposed or intended Director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, 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 or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company must declare the nature of his interest at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest then exists, or in any other case, at the first meeting of the board after he knows that he is or has become so interested.

A Director shall not vote (nor be counted in the quorum) on any resolution of the board approving any contract or arrangement or other proposal in which he or any of his close associates is materially interested, but this prohibition does not apply to any of the following matters, namely:

(aa) any contract or arrangement for giving to such Director or his close associate(s) any security or indemnity in respect of money lent by him or any of his close associates or obligations incurred or undertaken by him or any of his close associates at the request of or for the benefit of the Company or any of its subsidiaries;
(bb) any contract or arrangement for 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 close associate(s) has 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 contract or arrangement concerning an offer of shares or debentures or other securities of or by the Company or any other company which the

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

Company may promote or be interested in for subscription or purchase, where the Director or his close associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;

(dd) any contract or arrangement in which the Director or his close 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; or
(ee) 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 close associates and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his close associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.

(c) Proceedings of the Board

The board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it considers appropriate. 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 an additional or casting vote.

(d) Alterations to constitutional documents and the Company’s name

The Articles may be rescinded, altered or amended by the Company in general meeting by special resolution. The Articles state that a special resolution shall be required to alter the provisions of the Memorandum, to amend the Articles or to change the name of the Company.

(e) Meetings of members

(i) Special and ordinary resolutions

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, in the case of such members as are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given in accordance with the Articles.

Under the Companies Law, a copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within fifteen (15) days of being passed.

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

An ordinary resolution 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 corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given in accordance with the Articles.

(ii) Voting rights and right to demand a poll

Subject to any special rights or restrictions as to voting for the time being attached to any shares, at any general meeting 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 fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or installments is treated for the foregoing purposes as paid up on the share. A member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided by way of a poll save that the chairman of the meeting may in good faith, allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands in which case every member present in person (or being a corporation, is present by a duly authorized representative), or by proxy(ies) shall have one vote provided that where more than one proxy is appointed by a member which is a clearing house (or its nominee(s)), each such proxy shall have one vote on a show of hands.

If a recognised clearing house (or its nominee(s)) is a member of the Company it may authorise such person or persons 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 pursuant to this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) as if such person was the registered holder of the shares of the Company held by that clearing house (or its nominee(s)) including, where a show of hands is allowed, the right to vote individually on a show of hands.

Where the Company has any knowledge that any shareholder is, under the rules of the Stock Exchange, 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 shareholder in contravention of such requirement or restriction shall not be counted.

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

(iii) Annual general meetings

The Company must hold an annual general meeting of the Company every year within a period of not more than fifteen (15) months after the holding of the last preceding annual general meeting or a period of not more than eighteen (18) months from the date of adoption of the Articles, unless a longer period would not infringe the rules of the Stock Exchange.

(iv) Notices of meetings and business to be conducted

An annual general meeting must be called by notice of not less than twenty-one (21) clear days and not less than twenty (20) clear business days. All other general meetings must be called by notice of at least fourteen (14) clear days and not less than ten (10) clear business days. The notice is 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 and place of the meeting and particulars of resolutions to be considered at the meeting and, in the case of special business, the general nature of that business.

In addition, notice of every general meeting must be given to all members of the Company other than to such members as, under the provisions of the Articles or the terms of issue of the shares they hold, are not entitled to receive such notices from the Company, and also to, among others, the auditors for the time being of the Company.

Any notice to be given to or by any person pursuant to the Articles may be served on or delivered to any member of the Company personally, by post to such member’s registered address or by advertisement in newspapers in accordance with the requirements of the Stock Exchange. Subject to compliance with Cayman Islands law and the rules of the Stock Exchange, notice may also be served or delivered by the Company to any member by electronic means.

All business that is transacted at an extraordinary general meeting and at an annual general meeting is deemed special, save that in the case of an annual general meeting, each of the following business is deemed an 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 and other officers;
(ee) the fixing of the remuneration of the directors and of the auditors;

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

(ff) the granting of any mandate or authority to the directors to offer, allot, grant options over or otherwise dispose of the unissued shares of the Company representing not more than twenty per cent (20%) in nominal value of its existing issued share capital; and
(gg) the granting of any mandate or authority to the directors to repurchase securities of the Company.

(v) 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, but the absence of a quorum shall not preclude the appointment of a chairman.

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.

(vi) 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 at a class meeting. A proxy need not be a member of the Company and is 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 is 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. Votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy.

(f) Accounts and audit

The board shall cause true accounts 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 property, assets, credits and liabilities of the Company and of all other matters required by the Companies Law or necessary to give a true and fair view of the Company’s affairs and to explain its transactions.

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

The accounting records must be kept at the registered office 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 accounting record or book or document of the Company except as conferred by law or authorised by the board or the Company in general meeting. However, an exempted company must make available at its registered office in electronic form or any other medium, copies of its books of account or parts thereof 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 of the Cayman Islands.

A copy of every balance sheet and profit and loss account (including every document required by law to be annexed thereto) which is to be laid before the Company at its general meeting, together with a printed copy of the Directors’ report and a copy of the auditors’ report, shall not less than twenty-one (21) days before the date of the meeting and at the same time as the notice of annual general meeting be sent to every person entitled to receive notices of general meetings of the Company under the provisions of the Articles; however, subject to compliance with all applicable laws, including the rules of the Stock Exchange, the Company may send to such persons summarised financial statements derived from the Company’s annual accounts and the directors’ report instead provided that any such person may by notice in writing served on the Company, demand that the Company sends to him, in addition to summarised financial statements, a complete printed copy of the Company’s annual financial statement and the directors’ report thereon.

At the annual general meeting or at a subsequent extraordinary general meeting in each year, the members shall appoint an auditor to audit the accounts of the Company and such auditor shall hold office until the next annual general meeting. The remuneration of the auditors shall be fixed by the Company in general meeting or in such manner as the members may determine.

The financial statements of the Company shall be audited by the auditor in accordance with generally accepted auditing standards which may be those of a country or jurisdiction other than the Cayman Islands. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor must be submitted to the members in general meeting.

(g) 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.

The Articles provide dividends may be declared and paid out of the profits of the Company, realised or unrealised, or from any reserve set aside from profits which the directors determine is no longer needed. With the sanction of an ordinary resolution

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

dividends may also be declared and paid out of share premium account or any other fund or account which can be authorised for this purpose in accordance with the Companies Law.

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 but 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 according to the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. The Directors may deduct from any dividend or other monies payable to any member or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared on the share capital of the Company, the board may further resolve either (a) 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 shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders 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.

The Company may also upon the recommendation of the board by an ordinary resolution resolve in respect of any one particular dividend of the Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, interest 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, or in the case of joint holders, addressed to the holder whose name stands first in the register of the Company in respect of the shares at his address as appearing in the register or addressed to such person and at such addresses as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register in respect of such shares, and shall be sent at his or their 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 moneys 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.

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

All dividends or bonuses 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 or bonuses unclaimed for six years after having been declared may be forfeited by the board and 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.

(h) Inspection of corporate records

Pursuant to the Articles, the register and branch register of members shall be open to inspection for at least two (2) hours during business hours by members without charge, or by any other person upon a maximum payment of HK$2.50 or such lesser sum specified by the board, at the registered office or such other place at which the register is kept in accordance with the Companies Law or, upon a maximum payment of HK$1.00 or such lesser sum specified by the board, at the office where the branch register of members is kept, unless the register is closed in accordance with the Articles.

(i) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of the Company under Cayman Islands law, as summarised in paragraph 3(f) of this Appendix.

(j) 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 is 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, 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 is 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

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borne by the members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively.

If the Company is wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority 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. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.

(k) Subscription rights reserve

The Articles provide that to the extent that it is not prohibited by and is 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 a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants.

3. CAYMAN ISLANDS COMPANY LAW

The Company is incorporated in the Cayman Islands subject to the Companies Law and, therefore, operates subject to Cayman Islands law. Set out below is a summary of certain provisions of Cayman company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Cayman company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar:

(a) Company operations

As an exempted company, the Company’s operations must be conducted mainly outside the Cayman Islands. 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 authorised share capital.

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

(b) Share capital

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 of the 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 arrangement 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 (a) paying distributions or dividends to members; (b) paying up unissued shares of the company to be issued to members as fully paid bonus shares; (c) the redemption and repurchase of shares (subject to the provisions of section 37 of the Companies Law); (d) writing-off the preliminary expenses of the company; and (e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company.

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.

The Companies Law provides that, subject to confirmation by the Grand Court of the Cayman Islands (the “ Court ”), a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, by special resolution reduce its share capital in any way.

(c) Financial assistance to purchase shares of a company or its holding company

There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company to another person for the purchase of, or subscription for, its own or its holding company’s shares. Accordingly, a company may provide financial assistance if the directors of the company consider, in discharging their duties of care and acting in good faith, for a proper purpose and in the interests of the company, that such assistance can properly be given. 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 authorised 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 shareholder and the Companies Law expressly provides that 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

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

to provide that such shares are to be or are liable to be so redeemed. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares. However, if the articles of association do not authorise the manner and terms of purchase, a company cannot purchase any of its own shares unless the manner and terms of purchase have first been authorised by an ordinary resolution of the company. At no time may a company redeem or purchase its shares unless they are fully paid. 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. 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.

Shares purchased by a company is to be treated as cancelled unless, subject to the memorandum and articles of association of the company, the directors of the company resolve to hold such shares in the name of the company as treasury shares prior to the purchase. Where shares of a company are held as treasury shares, the company shall be entered in the register of members as holding those shares, however, notwithstanding the foregoing, the company is not be treated as a member for any purpose and must not exercise any right in respect of the treasury shares, and any purported exercise of such a right shall be void, and a treasury share must not be voted, directly or indirectly, at any meeting of the company and must not be counted in determining the total number of issued shares at any given time, whether for the purposes of the company’s articles of association or the Companies Law.

A company is not prohibited from purchasing and may purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Cayman Islands law that a company’s memorandum or articles of association contain a specific provision enabling such purchases and the directors of a company may rely upon the general power contained in its memorandum of association 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

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. With the exception of the foregoing, there are no statutory provisions relating to the payment of dividends. Based upon English case law, which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of profits.

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

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

The Courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a representative action against or derivative actions in the name of the company to challenge (a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of the company, and (c) an irregularity in the passing of a resolution which requires a qualified (or special) majority.

In the case of a company (not being a bank) having a share capital divided into shares, the Court may, on the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine into the affairs of the company and to report thereon in such manner as the Court shall direct.

Any shareholder 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 or, as an alternative to a winding up order, (a) an order regulating the conduct of the company’s affairs in the future, (b) an order requiring the company to refrain from doing or continuing an act complained of by the shareholder petitioner or to do an act which the shareholder petitioner has complained it has omitted to do, (c) an order authorising civil proceedings to be brought in the name and on behalf of the company by the shareholder petitioner on such terms as the Court may direct, or (d) an order providing for the purchase of the shares of any shareholders of the company by other shareholders or by the company itself and, in the case of a purchase by the company itself, a reduction of the company’s capital accordingly.

Generally claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by the company’s memorandum and articles of association.

(g) Disposal of assets

The Companies Law contains no specific restrictions on the power of directors to dispose of assets of a company. However, as a matter of general law, 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 interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

(h) Accounting and auditing requirements

A company must cause proper books of account to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of 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.

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.

An exempted company must make available at its registered office in electronic form or any other medium, copies of its books of account or parts thereof 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 of the Cayman Islands.

(i) Exchange control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

(j) Taxation

Pursuant to the Tax Concessions Law of the Cayman Islands, the Company has obtained an undertaking:

(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciation shall apply to the Company or its operations; and
(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on or in respect of the shares, debentures or other obligations of the Company.

The undertaking for the Company is for a period of twenty years from [•].

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 for certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the United Kingdom in 2010 but otherwise is not party to any double tax treaties.

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

(k) Stamp duty on transfers

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.

(l) Loans to directors

There is no express provision in the Companies Law prohibiting the making of loans by a company to any of its directors.

(m) 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. They will, however, have such rights as may be set out in the Company’s Articles.

(n) Register of members

An exempted company may maintain its principal register of members and any branch registers at such locations, whether within or without the Cayman Islands, as the directors may, from time to time, think fit. A branch register must be kept in the same manner in which a principal register is by the Companies Law required or permitted to be kept. The company shall cause to be kept at the place where the company’s principal register is kept a duplicate of any branch register duly entered up from time to time.

There is no requirement under the Companies Law for an exempted company to make any returns of members to the Registrar of Companies of 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 members, 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 of the Cayman Islands.

(o) Register of Directors and Officers

The Company is required to maintain at its registered office a register of 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 sixty (60) days of any change in such directors or officers.

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

(p) Beneficial Ownership Register

An exempted company is required to maintain a beneficial ownership register at its registered office that records details of the persons who ultimately own or control, directly or indirectly, more than 25% of the equity interests or voting rights of the company or have rights to appoint or remove a majority of the directors of the company. The beneficial ownership register is not a public document and is only accessible by a designated competent authority of the Cayman Islands. Such requirement does not, however, apply to an exempted company with its shares listed on an approved stock exchange, which includes the Stock Exchange. Accordingly, for so long as the shares of the Company are listed on the Stock Exchange, the Company is not required to maintain a beneficial ownership register.

(q) Winding up

A company may be wound up (a) compulsorily by order of the Court, (b) voluntarily, or (c) under the supervision of the Court.

The Court has authority to order winding up in a number of specified circumstances including where the members of the company have passed a special resolution requiring the company to be wound up by the Court, or where the company is unable to pay its debts, or where it is, in the opinion of the Court, just and equitable to do so. Where a petition is presented by members of the company as contributories on the ground that it is just and equitable that the company should be wound up, the Court has the jurisdiction to make certain other orders as an alternative to a winding-up order, such as making an order regulating the conduct of the company’s affairs in the future, making an order authorising civil proceedings to be brought in the name and on behalf of the company by the petitioner on such terms as the Court may direct, or making an order providing for the purchase of the shares of any of the members of the company by other members or by the company itself.

A company (save with respect to a limited duration company) may be wound up voluntarily when the company so resolves by special resolution or when the company in general meeting resolves by ordinary resolution that it be wound up voluntarily because it is unable to pay its debts as they fall due. In the case of a voluntary winding up, such company is obliged to cease to carry on its business (except so far as it may be beneficial for its winding up) from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above.

For the purpose of conducting the proceedings in winding up a company and assisting the Court therein, there may be appointed an official liquidator or official liquidators; and the court may appoint to such office such person, either provisionally or otherwise, as it thinks fit, and if more persons than one are appointed to such office, the Court must declare whether any act required or authorised to be done by the official liquidator is to be done by

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

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.

As soon as the affairs of the 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 how 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. This final general meeting must be called by at least 21 days’ notice to each contributory in any manner authorised by the company’s articles of association and published in the Gazette.

(r) Reconstructions

There are statutory provisions which facilitate reconstructions and amalgamations approved by a majority in number representing seventy-five per cent. (75%) in value of shareholders or class of shareholders or creditors, as the case may be, as are present at a meeting called for such purpose and thereafter sanctioned by the Court. Whilst a dissenting shareholder would have the right to express to the Court his view that the transaction for which approval is sought would not provide the shareholders with a fair value for their shares, the Court is unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management.

(s) Take-overs

Where an offer is made by a company for the shares of another company and, within four (4) months of the offer, the holders of not less than ninety per cent. (90%) of the shares which are the subject of the offer accept, the offeror may at any time within two (2) months after the expiration of the said four (4) months, by notice in the prescribed manner require the dissenting shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may apply to the Court within one (1) month of the notice objecting to the transfer. The burden is on the dissenting shareholder to show that the Court should exercise its 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 shareholders.

(t) 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, except to the extent any such provision may be held by the Court to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime).

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APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANY LAW

4. GENERAL

Conyers Dill & Pearman, the Company’s special legal counsel on Cayman Islands law, have sent to the Company a letter of advice summarising certain aspects of 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 “B. Documents available for inspection” in Appendix V to this document. 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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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

A. FURTHER INFORMATION ABOUT OUR COMPANY

1. Incorporation of our Company

Our Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on 9 May 2018. We have been registered as a non-Hong Kong company under Part 16 of the Companies Ordinance on [•] 2018 and our principal place of business in Hong Kong is Unit 8, 39/F, Cable TV Tower, No. 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong. Mr. Ho has been appointed as the authorised representative of our Company for the acceptance of service of process and notices in Hong Kong.

As our Company is incorporated in the Cayman Islands, we are subject to the relevant laws of the Cayman Islands and our constitution which comprises the Memorandum of Association and the Articles of Association. A summary of the relevant aspects of the Companies Law and certain provisions of the Articles of Association is set forth in Appendix III to this document.

2. Changes in share capital of our Company

As at the date of incorporation of our Company on 9 May 2018, our authorised share capital was HK$380,000 comprising 38,000,000 Shares of HK$0.01 each, of which one fully-paid Share was issued and allotted to the subscriber. On the same date, the initial subscribing shareholder transferred one Share to Hoi Lang, and subsequently 99 ordinary Shares were issued and allotted to Hoi Lang for cash at par.

On [•] 2018, the authorised share capital of our Company was increased from HK$380,000 comprising 38,000,000 Shares of HK$0.01 each to HK$10,000,000 comprising 1,000,000,000 Shares of HK$0.01 each by the creation of an additional 962,000,000 Shares of HK$0.01 each.

Immediately following completion of the [REDACTED] and the [REDACTED] but without taking into account any Shares which may be allotted and issued upon the exercise of the [REDACTED] or Share which may be issued upon exercise of any option 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.

Other than pursuant to the exercise of the [REDACTED] and the exercise of the options which may be granted under the Share Option Scheme, there is no present intention to issue any part of the authorised but unissued share capital of our Company and, without prior approval of our Shareholders in general meeting, no issue of Shares will be made which would effectively alter the control of our Company.

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APPENDIX IV — STATUTORY AND GENERAL INFORMATION

Save as disclosed therein and in the paragraph headed “3. Written resolutions of our sole Shareholder passed on [•] 2018” below, there has been no alteration in our Company’s share capital since its incorporation.

3. Written resolutions of our sole Shareholder passed on [•] 2018

By written resolutions of our sole Shareholder passed on [•] 2018:

(a) our Company approved and adopted the Memorandum and the Articles of Association conditional upon and with effect from the [REDACTED] ;
(b) the authorised share capital of our Company was increased from HK$380,000 comprising 38,000,000 Shares of HK$0.01 each to HK$10,000,000 comprising 1,000,000,000 Shares of HK$0.01 each by the creation of an additional of 962,000,000 Shares of HK$0.01 each, each ranking equally with the Shares then in issue in all respects (the “ Increase in Authorised Share Capital ”);
(c) conditional on (aa) the Listing Committee of the Stock Exchange granting the [REDACTED] of, and permission to deal in, our Shares in issue and Shares to be issued as mentioned in this document; (bb) the [REDACTED] having been determined; (cc) the execution and delivery of the [REDACTED] on or before the date as mentioned in this document; and (dd) the obligations of the [REDACTED] under the [REDACTED] becoming unconditional and not being terminated in accordance with the terms of the [REDACTED] or otherwise, in each case on or before the date falling 30 days after the date of this document:
(i) the terms and conditions of the [REDACTED] and the granting of the [REDACTED] were approved and our Directors were authorised to allot and issue the [REDACTED] pursuant to the [REDACTED] and such number of Shares as may be allotted and issued upon the exercise of the [REDACTED] ;
(ii) the rules of the Share Option Scheme, the principal terms of which are set forth in paragraph headed “D. Share Option Scheme” of this Appendix, were approved and adopted and our Directors were authorised to approve any amendments at the rules of the Share Option Scheme as may be acceptable or not objected to by the Stock Exchange, and at our Directors’ absolute discretion, to grant options to subscribe for Shares thereunder and to allot, issue and deal with our Shares pursuant to the exercise of subscription rights attaching to any options granted under the Share Option Scheme and to take all such steps as they consider necessary, desirable or expedient to implement the Share Option Scheme;

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STATUTORY AND GENERAL INFORMATION

(iii) following the increase in authorised share capital and conditional further on the share premium account of our Company being credited as a result of the [REDACTED] , our Directors were authorised to capitalise an amount of HK$ [REDACTED] standing to the credit of the share premium account of our Company by applying such sum in paying up in full at par [REDACTED] Shares for allotment and issue to the persons whose names appear on the principal register of members of our Company in the Cayman Islands at the close of business on [•] 2018 (as they may direct) in proportion (as nearly as possible without involving fractions so that no fraction of a Share shall be allotted and issued) to their then existing shareholdings in our Company, each ranking equally in all respects with the then existing issued Shares, and our Directors were authorised to give effect to such capitalisation and distributions;
(iv) a general unconditional mandate was given to our Directors to exercise all powers of our Company to allot, issue and deal with, otherwise than by way of rights issue, script dividend scheme or similar arrangements providing for allotment of Shares in lieu of the whole or in part of any dividend in accordance with the Articles, or on the exercise of options granted under the Share Option Scheme, or under the [REDACTED] or the [REDACTED] , Shares with a total number not exceeding the sum of (aa) 20% of the total number of Shares in issue immediately following completion of the [REDACTED] and the [REDACTED] (excluding any Share which may fall be issued pursuant to the exercise of the [REDACTED] ), and (bb) the total number of Shares which may be repurchased by our Company pursuant to the authority granted to our Directors as referred to on sub-paragraph (v) below, until the conclusion of the next annual general meeting of our Company, or the date by which the next annual general meeting of our Company is required by the Articles, the Cayman Companies Law or any other applicable Cayman Islands law to be held, or the passing of an ordinary resolution by the Shareholders revoking or varying the authority given to the Directors, whichever occurs first;
(v) a general unconditional mandate (the “ Repurchase Mandate ”) was given to our Directors to exercise all powers of our Company to repurchase Shares on the Stock Exchange or other stock exchange on which the securities of our Company may be listed and recognised by the SFC and the Stock Exchange for this purpose, with a total number of not exceeding 10% of the total number of Shares in issue immediately following the completion of the [REDACTED] and the [REDACTED] but excluding any Shares which may be issued pursuant to the exercise of the [REDACTED] until the conclusion of the next annual general meeting of our Company, or the date by which the next annual general meeting of our Company is required by the Articles or any applicable Cayman Islands law to be held, or the passing

– IV-3 –

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

of an ordinary resolution by the Shareholders revoking or varying the authority given to the Directors, whichever occurs first; and

(vi) the extension of the general mandate to allot, issue and deal with Shares pursuant to paragraph (iv) above to include the total number of Shares which may be repurchased pursuant to paragraph (v) above.

4. Changes in share capital of subsidiaries

The subsidiaries of our Company are listed in the Accountant’s Report set forth in Appendix I to this document.

Save as disclosed in the section headed “History, development and reorganisation” in this document, there has been no alteration in the share capital of any of the subsidiaries of our Company within the two years immediately preceding the date of this document.

5. Reorganisation

The companies comprising our Group underwent the Reorganisation to rationalise our Group’s structure in preparation for the [REDACTED] of our Shares on the Stock Exchange, pursuant to which our Company became the holding company of our Group. The Reorganisation included the following major steps:

(a) Hoi Lang was incorporated in the BVI on 8 May 2018 to act as an investment holding company of Mr. Man, Mrs. Man and Mr. Ho to hold their interests in the Company. Hoi Lang is authorised to issue a maximum of 50,000 ordinary shares of a single class with no par value. On 8 May 2018, 50, 30 and 20 shares of Hoi Lang, representing the entire issued share capital of Hoi Lang, were allotted and issued to Mr. Man, Mrs. Man and Mr. Ho, respectively.
(b) The Company was incorporated in the Cayman Islands on 9 May 2018 to act as the holding company of the Group. The initial authorised share capital of the Company was HK$380,000 divided into 38,000,000 ordinary shares with par value of HK$0.01 each. Upon incorporation, one fully-paid subscriber Share was allotted and issued to the initial subscriber according to the Memorandum and Articles of Association, which was then transferred to Hoi Lang on the same day at par value and the Company became wholly-owned by Hoi Lang. A further allotment and issuance of 99 Shares were made on 9 May 2018 to Hoi Lang.
(c) Link Shing was incorporated in the BVI on 11 May 2018 and was authorised to issue a maximum of 50,000 ordinary shares of a single class with no par value. Upon incorporation, one fully-paid subscriber share was allotted and issued to the Company according to the memorandum and articles of the association of Link Shing and Link Shing became wholly-owned by the Company.

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

APPENDIX IV — STATUTORY AND GENERAL INFORMATION

(d) On [•] 2018, the Company, Link Shing, Mr. Man, Mrs. Man and Mr. Ho entered into a sale and purchase agreement pursuant to which Link Shing agreed to acquire (a) 50,000, 30,000 and 20,000 shares, from Mr. Man, Mrs. Man and Mr. Ho, respectively, representing the entire issued share capital of Hoi Sing Decoration; (b) one share each from Mr. Man and Mrs. Man, representing the entire issued share capital of Hoi Sing Construction; (c) 70,000 and 30,000 shares from Mr. Man and Mrs. Man, respectively, representing the entire issued share capital of Milieu; and (d) one share from Mr. Man, representing the entire issued share capital of Chun Shing Development, in consideration of the Company allotting and issuing a total of 100 Shares, credited as fully paid, to Hoi Lang (as directed by Mr. Man, Mrs. Man and Mr. Ho). Upon completion of the acquisition, Hoi Sing Decoration, Hoi Sing Construction, Milieu and Chun Shing Development became direct wholly-owned subsidiaries of Link Shing and indirect wholly-owned subsidiaries of the Company.

The shareholding structure of the members of our Group upon completion of the Reorganisation is set out in the section headed “History, development and reorganisation” in this document.

6. Repurchase of our Shares by our Company

This paragraph includes the information required by the Stock Exchange to be included in this document concerning the repurchase by our Company of own securities.

(a) Shareholders’ approval

All proposed repurchases of securities (which must be fully paid up in the case of shares for the purpose of Rule 10.06(1)(b)(i) of the Listing Rules) by a company listed on the Stock Exchange 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 sole Shareholder on [•] 2018, the Repurchase Mandate was given to our Directors authorising any repurchase by our Company of Shares on the Stock Exchange or any other stock exchange on which the securities of our Company may be listed and which is recognised by the SFC of Hong Kong and the Stock Exchange for this purpose, of up to 10% of the aggregate nominal amount of the share capital of our Company in issue immediately following completion of the [REDACTED] and the [REDACTED] but excluding any Shares which may be issued pursuant to the exercise of the [REDACTED] and the Share Option Scheme, such mandate to expire at the conclusion of the next annual general meeting of our Company, or the date by which the next annual general meeting of our Company is required by the Articles or applicable Cayman Islands law to be held, or the passing of an ordinary resolution by Shareholders in general meeting revoking or varying the authority given to our Directors, whichever occurs first.

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(b) Source of funds

Repurchases must be paid out of funds legally available for the purpose in accordance with the Articles and the Cayman Companies Law. A listed company may not repurchase its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange. Under the Cayman Islands laws, any repurchases by our Company may be made out of profits of our Company, out of our Company’s share premium account or out of the [REDACTED] of a fresh issue of Shares made for the purpose of the repurchase. Any premium payable on a purchase over the par value of the Shares to be purchased must be provided for out of either or both of the profits of our Company or the share premium account of our Company. Subject to the provisions of the Cayman Companies Law, a repurchase may also be made out of the share capital of the Company.

(c) Reasons for repurchases

Our Directors believe that it is in the best interest of our Company and the Shareholders for our Directors to have general authority from the Shareholders to enable our 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 net asset value per Share and/or earnings per Share and will only be made if our Directors believe that such repurchases will benefit our Company and our Shareholders.

(d) Funding of repurchases

In repurchasing securities, our Company may only apply funds legally available for such purpose in accordance with the Articles, the Listing Rules and the applicable laws of the Cayman Islands.

On the basis of the current financial position of our Group as disclosed in this document and taking into account the current working capital position of our Group, our Directors consider that, if the Repurchase Mandate were to be exercised in full, it might have a material adverse effect on the working capital and/or the gearing position of our Group as compared with the position disclosed in this document. However, our Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of our Group or the gearing levels which in the opinion of our Directors are from time to time appropriate for our Group.

The exercise in full of the Repurchase Mandate, on the basis of [REDACTED] Shares in issue immediately after the [REDACTED] , would result in up to [REDACTED] Shares being repurchased by our Company during the period in which the Repurchase Mandate remains in force.

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(e) General

Neither our Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates currently intends to sell any Shares to our Company or our subsidiaries.

Our 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 Listing Rules, the Articles and the applicable laws of the Cayman Islands.

If, as a result of a securities repurchase, a Shareholder’s proportionate interest in the voting rights of our Company is increased, such increase will be treated as an acquisition for the purpose of the Takeovers Code. As a result, a Shareholder, a group of Shareholders acting in concert (within the meaning under the Takeover Code), depending on the level of increase of such Shareholders’ interest, could obtain or consolidate control of our Company and may become obliged under Rule 26 of the Takeovers Code to make a mandatory offer unless a whitewash waiver is obtained. Save as aforesaid, our Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate.

Our 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 Listing Rules).

No connected person (as defined in the Listing Rules) of our Company has notified us that he/she/it has a present intention to sell Shares to our Company, or has undertaken not to do so if the Repurchase Mandate is exercised.

B. FURTHER INFORMATION ABOUT OUR BUSINESS

1. Summary of material contracts

The following contracts (not being contracts in the ordinary course of business) have been entered into by members of our Group within the two years preceding the date of this document and are or may be material:

(a) the sale and purchase agreement dated [•] 2018 entered into among the Company, Link Shing, Mr. Man, Mrs. Man and Mr. Ho under which Link Shing agreed to acquire (a) 50,000, 30,000 and 20,000 shares, from Mr. Man, Mrs. Man and Mr. Ho, respectively, representing the entire issued share capital of Hoi Sing Decoration; (b) one share each from Mr. Man and Mrs. Man, respectively, representing the entire issued share capital of Hoi Sing Construction; (c) 70,000 and 30,000 shares from Mr. Man and Mrs. Man, representing the entire issued

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

APPENDIX IV — STATUTORY AND GENERAL INFORMATION

share capital of Milieu; and (d) one share from Mr. Man, representing the entire issued share capital of Chun Shing Development, in consideration of the Company allotting and issuing a total of 100 Shares, credited as fully paid, to Hoi Lang;

(b) the Deed of Indemnity;
(c) the Deed of Non-Competition; and
(d) the [REDACTED] .

2. Intellectual property rights

(a) Trademark

As at the Latest Practicable Date, our Group was the registered owner of the following trademark:

		Trademark
	Place of	Registration			Registered
Trademark	Registration	number	Class	Expiry Date	Owner
	Hong Kong	301842606	19	24 February	Milieu
				2021

(b) Domain Name

As at the Latest Practicable Date, our Group has registered the following domain name:

	Domain name		Registration Date	Expiry Date
	www.yield-go.com		11 April 2018	11 April 2020
C.	FURTHER INFORMATION	ABOUT	SUBSTANTIAL	SHAREHOLDERS,
	DIRECTORS AND EXPERTS

1. Disclosure of interests

(a) Immediately following the completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be issued upon the exercise of the [REDACTED] or any options that may be granted under the Share Option Scheme), the interests and short positions of our Directors or chief executive of our Company in our Shares, underlying shares and debentures of our Company or any of our associated corporations (within the meaning of

– IV-8 –

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

APPENDIX IV

STATUTORY AND GENERAL INFORMATION

Part XV of the SFO) which, once our Shares are listed on the Stock Exchange, will have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including any interests or short position which they are taken or deemed to have under such provisions of the SFO) or will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or will be required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, to be notified to our Company and the Stock Exchange, in each case once our Shares are listed on the Stock Exchange, will be as follows:

(i) Long position in our shares

Name of	Capacity/Nature of	Number of	Percentage of
Director	interest	Shares held(1)	shareholding
Mr. Man(2)	Interest in controlled	[REDACTED]	[REDACTED]%
	corporation
Mrs. Man(2)	Interest in controlled	[REDACTED]	[REDACTED]%
	corporation
Mr. Ho(2)	Interest in controlled	[REDACTED]	[REDACTED]%
	corporation

Notes:

(1). The letters “L” denotes the respective “long position” (as defined under Part XV of the SFO) of the relevant person/entity in such Shares.
(2). Hoi Lang held [REDACTED] % of the total issued share capital of our Company and was in turn owned by Mr. Man (our executive Director and our chairman), Mrs. Man (our executive Director) and Mr. Ho (our executive Director and our chief executive officer) as to 50%, 30% and 20%, respectively. Mr. Man, Mrs. Man and Mr. Ho, acting in concert, together control [REDACTED] % in our Company through Hoi Lang. As such, each of them is deemed to be interested in such [REDACTED] % interest in the total issued share capital of the Company by virtue of SFO. For details, please refer to the section headed “Relationship with our Controlling Shareholders” in this document.

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(ii) Long position in the ordinary shares of associated corporation

			Number of
	Name of		shares held in
Name of	associated	Capacity/Nature	the associated	Percentage of
Director	corporation	of interest	corporation(1)	shareholding
Mr. Man	Hoi Lang	Beneficial owner	50 shares (L)	50%
Mrs. Man	Hoi Lang	Beneficial owner	30 shares (L)	30%
Mr. Ho	Hoi Lang	Beneficial owner	20 shares (L)	20%

Note:

(1). The letters “L” denotes the respective “long position” (as defined under Part XV of the SFO) of the relevant person/entity in the shares of the relevant associated corporation.
(b) So far as is known to our Directors, immediately following the completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be issued upon the exercise of the [REDACTED] or any options that may be granted under the Share Option Scheme), the following persons (not being a Director or chief executive of our Company as disclosed in paragraph (a) above) will have interests or short positions in Shares or underlying Shares which would fall to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who are, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group:

Long position in our Shares

Name of substantial	Capacity/Nature of	Numbers of	Percentage of
shareholder	interest	Shares held(1)	shareholding
Hoi Lang(2)	Beneficial owner	[REDACTED]	[REDACTED]%
Ms. Tsoi Yuk Wah(3)	Interest of spouse	[REDACTED]	[REDACTED]%

Notes:

(1). The letters “L” denotes the respective “long position” (as defined under Part XV of the SFO) of the relevant person/entity in such Shares.
(2). Hoi Lang held [REDACTED] % of the total issued share capital of our Company and was in turn owned by Mr. Man (our executive Director and our chairman), Mrs. Man (our executive Director) and Mr. Ho (our executive Director and our chief executive officer) as to 50%, 30% and 20%, respectively.
(3) Ms. Tsoi Yuk Wah is the spouse of Mr. Ho. Ms. Tsoi is deemed to be interested in all of our Shares which are interested by Mr. Ho by virtue of SFO.

– IV-10 –

2. Particulars of service contracts

Each of our executive Directors [has entered] into a service contract with our Company. The service contracts are initially for a fixed term of three years commencing from the [REDACTED] (subject to termination in certain circumstances as stipulated in the relevant service contract). Each of these executive Directors is entitled to their respective basic salary set forth below.

The basic annual salaries of the executive Directors are as follows:

	Approximate
Name	annual salary
	(HK$)
Mr. Man	1,081,600
Mrs. Man	390,000
Mr. Ho	845,000

Each of the independent non-executive Directors [has entered] into a letter of appointment with our Company. The terms and conditions of each of such letter of appointment are similar in all material respects. Each of them is appointed with an initial term of two years commencing from the [REDACTED] (subject to termination in certain circumstances as stipulated in the relevant letter of appointment). The appointments are subject to the provisions of the Articles of Association with regard to vacation of office of Directors and removal and retirement by rotation of Directors. Each of Mr. Chan Ka Yu, Mr. Lo Ki Chiu and Mr. Leung Wai Lim is entitled to a director’s fee of HK$180,000, HK$180,000 and HK$180,000 per annum, respectively. Save for Directors’ fees, none of our independent non-executive Directors is expected to receive any other remuneration for holding their office as independent non-executive Director.

Save as disclosed aforesaid, none of our Directors has or is proposed to have a service contract with our Company or any of our subsidiaries other than contracts expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation).

3. Directors’ remuneration

(a) The aggregate amount of emoluments (including fees, salaries, allowances and other benefits in kind, discretionary bonuses and retirement scheme contributions) paid by our Group to our Directors in respect of the three financial years ended 31 March 2016, 2017 and 2018 were approximately HK$2,412,000, HK$2,179,000 and HK$2,276,000, respectively.
(b) Under the arrangements currently in force, the aggregate emoluments (including fees, salaries, allowances and other benefits in kind, retirement scheme

– IV-11 –

STATUTORY AND GENERAL INFORMATION

contributions but excluding any discretionary benefits or bonus or other fringe benefits) payable by our Group to our Directors for the year ending 31 March 2019 are expected to be no more than HK$2,900,000.

(c) None of our Directors or any past directors of any member of our Group has been paid any sum of money for the three years ended 31 March 2016, 2017 and 2018 (i) as an inducement to join or upon joining our Group or (ii) for loss of office as a director or management of any members of our Group.
(d) There has been no arrangement under which a Director has waived or agreed to waive any emoluments for each of the three years ended 31 March 2016, 2017 and 2018.

4. Fees or commission received

Save as disclosed in the section headed “ [REDACTED] ” in this document, none of our Directors or the experts named in the paragraph headed “Qualifications of experts” in this Appendix had received any agency fee or commissions from our Group within the two years preceding the date of this document.

5. Connected transactions and related party transactions

Save as disclosed in the sections headed “Connected transaction”, “Relationship with our Controlling Shareholders” and in note 29 to the Accountant’s Report, the text of which is set forth in Appendix I to this document, during the two years immediately preceding the date of this document, our Company has not engaged in any other material connected transactions or related party transactions.

6. Disclaimers

Save as disclosed in this document:

(a) and taking no account of any Shares which may be taken up or acquired under the [REDACTED] or upon the exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme, our Directors are not aware of any person (not being a Director or chief executive of our Company) who immediately following the completion of the [REDACTED] and the [REDACTED] will have an interest or a short position in the Shares and underlying Shares which would fall to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who will, either directly or indirectly, be 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 any other member of our Group;

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

APPENDIX IV — STATUTORY AND GENERAL INFORMATION

(b) none of our Directors has any interest or short position in any of the Shares, underlying shares or debentures of our Company or any associated corporations within the meaning of Part XV of the SFO, which will have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which any of them is deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which will be required to be notified to our Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, in each case once the Shares are listed;
(c) none of our Directors nor any of the parties listed in the paragraph headed “Qualifications of experts” in this Appendix has been interested in the promotion of, or has any direct or indirect interest in any assets which have been, within the two years immediately preceding the date of this document, acquired or disposed of by or leased to our Company or any of the subsidiaries of our Company, or are proposed to be acquired or disposed of by or leased to our Company or any other member of our Group nor will any Director apply for the [REDACTED] either in his own name or in the name of a nominee;
(d) none of the Directors nor any of the parties listed in the paragraph headed “Qualifications of experts” in this Appendix is materially interested in any contract or arrangement subsisting at the date of this document which is significant in relation to business of our Group; and
(e) save in connection with the [REDACTED] , none of the parties listed in the paragraph headed “Qualifications of experts” in this Appendix:
(i) is interested legally or beneficially in any securities of any member of our Group; or
(ii) has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group.

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

D. SHARE OPTION SCHEME

The following is a summary of principal terms of the Share Option Scheme. The terms of the Share Option Scheme are in accordance with the provision of Chapter 17 of the Listing Rules.

a. Purpose

The Share Option Scheme is a share incentive scheme and is established to recognise and acknowledge the contributions Eligible Participants (as defined in paragraph b below) had or may have made to our Group. The Share Option Scheme will provide Eligible Participants an opportunity to have a personal stake in our Company with the view to achieving the following objectives:

(i) motivate Eligible Participants to optimise their performance efficiency for the benefit of our Group; and
(ii) attract and retain or otherwise maintain on-going business relationship with Eligible Participants whose contributions are or will be beneficial to the long-term growth of our Group.

b. Who may join

The Board may, at its discretion and subject to such conditions as it thinks fit, offer to grant an option to subscribe for such number of new Shares as the Board may determine at an exercise price determined in accordance with paragraph e below to:

(i) any full-time or part-time employees, executives or officers of our Company or any of its subsidiaries;
(ii) any directors (including executive, non-executive directors and independent non-executive directors) of our Company or any of its subsidiaries;
(iii) any advisers (professional or otherwise), consultants, suppliers, customers and agents to our Company or any of its subsidiaries; and
(iv) related entities who, in the sole opinion of the Board, will contribute or have contributed to our Group.

(collectively, the “ Eligible Participants ”)

Upon acceptance of the option, the grantee shall pay HK$1.00 to our Company by way of consideration for the grant. Any offer to grant an option to subscribe for Shares may be accepted in respect of less than the number of Shares for which it is offered provided that it is accepted in respect of a board lot of dealing in Shares on the Stock Exchange or an

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

APPENDIX IV — STATUTORY AND GENERAL INFORMATION

integral multiple thereof and such number is clearly stated in the duplicate offer document constituting the acceptance of the option. To the extent that the offer to grant an option is not accepted by any prescribed acceptance date, it shall be deemed to have been irrevocably declined.

c. Maximum number of Shares

The maximum number of Shares in respect of which options may be granted under the Share Option Scheme and under any other share option schemes of our Company must not in aggregate exceed 10%, being 48,000,000 Shares, of the total number of Shares in issue immediately following completion of the [REDACTED] , excluding for this purpose Shares which would have been issuable pursuant to the [REDACTED] and options which have lapsed in accordance with the terms of the Share Option Scheme (or any other share option schemes of the Company, where applicable). Subject to the issue of a circular by our Company and the approval of the Shareholders in general meeting and/or such other requirements prescribed under the Listing Rules from time to time, the Board may:

(i) renew this limit at any time to 10% of the Shares in issue as at the date of the approval by the Shareholders in general meeting; and/or
(ii) grant options beyond the 10% limit to Eligible Participants specifically identified by the Board. The circular issued by our Company to the Shareholders shall contain a generic description of specified Eligible Participants who may be granted such options, the number and terms of the options to be granted, the purpose of granting options to specified Eligible Participants with an explanation as to how the options serve such purpose, the information required under Rule 17.02(2)(d) and the disclaimer required under Rule 17.02(4) of the Listing Rules.

Notwithstanding the foregoing, the 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 our Company at any time shall not exceed 30% of the Shares in issue from time to time. No options shall be granted under any schemes of our Company (including the Share Option Scheme) if this will result in the 30% limit being exceeded. The maximum number of Shares in respect of which options may be granted shall be adjusted, in such manner as the auditors of our Company or an approved independent financial adviser shall certify to be appropriate, fair and reasonable in the event of any alteration in the capital structure of our Company in accordance with paragraph q below whether by way of consolidation, capitalisation issue, rights issue, sub-division or reduction of the share capital of our Company but in no event shall exceed the limit prescribed in this paragraph.

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

d. Maximum number of options to any one individual

The total number of Shares issued and which may fall to be issued upon exercise of the options granted under the Share Option Scheme and any other share option schemes of our Company (including both exercised and outstanding options) to each Eligible Participant in any 12-month period up to the date of grant shall not exceed 1% of the Shares in issue as at the date of grant. Any further grant of Options in excess of this 1% limit shall be subject to:

(i) the issue of a circular by our Company containing the identity of the Eligible Participant, the numbers of and terms of the options to be granted (and options previously granted to such participant) the information as required under Rules 17.02(2)(d) and the disclaimer required under 17.02(4) of the Listing Rules; and
(ii) the approval of the Shareholders in general meeting and/or other requirements prescribed under the Listing Rules from time to time with such Eligible Participant and his associates (as defined in the Listing Rules) abstaining from voting. The numbers and terms (including the exercise price) of options to be granted to such participant must be fixed before the Shareholders’ approval and the date of the Board meeting at which the Board proposes to grant the options to such Eligible Participant shall be taken as the date of grant for the purpose of calculating the subscription price of the Shares. The Board shall forward to such Eligible Participant an offer document in such form as the Board may from time to time determine.

e. Price of Shares

The subscription price of a Share in respect of any particular option granted under the Share Option Scheme shall be such price as the Board in its absolute discretion shall determine, save that such price will not be less than the highest of:

(i) the official closing price of the Shares as stated in the Stock Exchange’s daily quotation sheets on the date of grant, which must be a day on which the Stock Exchange is open for the business of dealing in securities;
(ii) the average of the official closing prices of the Shares as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the date of grant; and
(iii) the nominal value of a Share.

– IV-16 –

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

f. Granting options to connected persons

Any grant of options to a director, chief executive or substantial shareholder (as defined in the Listing Rules) of our Company or any of their respective associates (as defined in the Listing Rules) is required to be approved by the independent non-executive Directors (excluding any independent non-executive Director who is the grantee of the Options). If the Board proposes to grant options to a substantial shareholder or any independent non-executive Director or their respective associates (as defined in the Listing Rules) which will result in the number of Shares issued and to be issued upon exercise of options granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:

(i) representing in aggregate over 0.1% or such other percentage as may be from time to time provided under the Listing Rules of the Shares in issue; and
(ii) having an aggregate value in excess of HK$5 million or such other sum as may be from time to time provided under the Listing Rules, based on the official closing price of the Shares at the date of each grant, such further grant of options will be subject to the issue of a circular by our Company and the approval of the Shareholders in general meeting on a poll at which all connected persons (as defined in the Listing Rules) of our Company shall abstain from voting in favour and/or such other requirements prescribed under the Listing Rules from time to time. Any vote taken at the meeting to approve the grant of such options shall be taken as a poll.

The circular to be issued by our Company to the Shareholders pursuant to the above paragraph shall contain the following information:

(i) the details of the number and terms (including the exercise price) of the options to be granted to each selected Eligible Participant which must be fixed before the Shareholders’ meeting and the date of Board meeting for proposing such further grant shall be taken as the date of grant for the purpose of calculating the exercise price of such options;
(ii) a recommendation from the independent non-executive Directors (excluding any independent non-executive Director who is the grantee of the options) to the independent Shareholders as to voting;
(iii) the information required under Rule 17.02(2)(c) and (d) and the disclaimer required under Rule 17.02(4) of the Listing Rules; and
(iv) the information required under Rule 2.17 of the Listing Rules.

– IV-17 –

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

g. Restrictions on the times of grant of Options

A grant of options may not be made after a price sensitive event has occurred or a price sensitive matter has been the subject of a decision until such price sensitive information has been published pursuant to the requirements of the Listing Rules. 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 (as such date to first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of our Company’s annual, half-year, quarterly or other interim period results (whether or not required under the Listing Rules); and
(ii) the deadline for our Company to publish an announcement of its annual or half-year, or quarterly or other interim period results (whether or not required under the Listing Rules)

and ending on the date of actual publication of the results announcement. Where the grant of Options is to a director:

(i) no options shall be granted 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 (if any) 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.

h. Rights are personal to grantee

An option is personal to the grantee and may be exercised or treated as exercised, as the case may be, in whole or in part. No grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interest (legal or beneficial) in favour of any third party over or in relation to any option or attempt so to do.

i. Time of exercise of Option and duration of the Share Option Scheme

An option may be exercised in accordance with the terms of the Share Option Scheme at any time after the date upon which the Option is deemed to be granted and accepted and prior to the expiry of 10 years from that date. The period during which an option may be exercised will be determined by the Board in its absolute discretion, save that no option may be exercised more than 10 years after it has been granted. No option may be granted more than 10 years after the date of approval of the Share Option Scheme. Subject to earlier termination by our Company in general meeting or by the Board, the Share Option

– IV-18 –

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

APPENDIX IV — STATUTORY AND GENERAL INFORMATION

Scheme shall be valid and effective for a period of 10 years from the date of its adoption. There is no minimum period for which an option must be held before it can be exercised.

j. Performance target

A grantee may be required to achieve any performance targets as the Board may then specify in the grant before any options granted under the Share Option Scheme can be exercised.

k. Rights on ceasing employment or death

If the grantee of an option ceases to be an employee of our Company or any of its subsidiaries:

(i) by any reason other than death or termination of his employment on the grounds specified in paragraph l below, his option to the extent not already exercised on the date of such cessation (which date shall be the last actual working day with our Group or the related entity whether salary is paid in lieu of notice or not) shall lapse automatically on the date of cessation; or
(ii) by reason of death, his personal representative(s) may exercise the option within a period of 12 months from such cessation, which date shall be the last actual working day with our Company or the relevant subsidiary whether salary is paid in lieu of notice or not, failing which it will lapse.

l. Rights on dismissal

If the grantee of an option ceases to be an employee of our Company or any of its subsidiaries on the grounds that he has been guilty of serious misconduct, or in relation to an employee of our Group (if so determined by the Board) on any other ground on which an employee would be entitled to terminate his employment at common law or pursuant to any applicable laws or under the grantee’s service contract with our Group, or has been convicted of any criminal offence involving his integrity or honesty or he has become insolvent, bankrupt or has made arrangements with creditors, his option will lapse and not be exercisable after the date of termination of his employment.

m. Rights on takeover

If a general offer is made to all the Shareholders (or all such Shareholders other than the offeror and/or any person controlled by the offeror and/or any person acting in concert with the offeror (as defined in the Takeovers Codes)) and such offer becomes or is declared unconditional during the option period of the relevant option, the grantee of an option shall be entitled to exercise the option in full (to the extent not already exercised) at any time within 14 days after the date on which the offer becomes or is declared unconditional.

– IV-19 –

STATUTORY AND GENERAL INFORMATION

n. Rights on winding-up

In the event a notice is given by our Company to its members to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up our Company, our Company shall forthwith give notice thereof to all grantees and thereupon, each grantee (or his legal personal representative(s)) shall be entitled to exercise all or any of his options (to the extent not already exercised) at any time not later than two business days prior to the proposed general meeting of our Company referred to above by giving notice in writing to our 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 our 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, allot the relevant Shares to the grantee credited as fully paid.

o. Rights on compromise or arrangement between our Company and its members or creditors

If a compromise or arrangement between our Company and its members or creditors is proposed for the purposes of a scheme for the reconstruction of our Company or its amalgamation with any other companies pursuant to the laws of jurisdictions in which our Company was incorporated, our Company shall give notice to all the grantees of the options on the same day as it gives notice of the meeting to its members or creditors summoning the meeting to consider such a scheme or arrangement and any grantee shall be entitled to exercise all or any of his options in whole or in part at any time prior to 12 noon (Hong Kong time) on the business day immediately preceding the date of the meeting directed to be convened by the relevant court for the purposes of considering such compromise or arrangement and if there are more than one meeting for such purpose, the date of the first meeting.

With effect from the date of such meeting, 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. If for any reason such compromise or arrangement does not become effective and is terminated or lapses, the rights of grantees to exercise their respective options shall with effect from such termination be restored in full but only upon the extent not already exercised and shall become exercisable.

p. Ranking of Shares

The Shares to be allotted upon the exercise of an option will not carry voting rights until completion of the registration of the grantee (or any other person) as the holder thereof. Subject to the aforesaid, Shares allotted and issued on the exercise of options will rank pari passu in all respects and shall have the same voting, dividend, transfer and other rights, including those arising on liquidation as attached to the other fully paid Shares in issue on the date of exercise.

– IV-20 –

STATUTORY AND GENERAL INFORMATION

q. Effect of alterations to capital

In the event of any alteration in the capital structure of our Company whilst any option may become or remains exercisable, whether by way of capitalisation issue, rights issue, open offer, consolidation, sub-division or reduction of share capital of our Company, or otherwise howsoever, such corresponding alterations (if any) shall be made in the number or nominal amount of Shares subject to any options so far as unexercised and/or the subscription price per Share of each outstanding option as the auditors of our Company or an independent financial adviser shall certify in writing to the Board to be in their/his opinion fair and reasonable in compliance with Rule 17.03(13) of the Listing Rules and the note thereto and the supplementary guidance issued by the Stock Exchange on 5 September 2005 and any future guidance and interpretation of the Listing Rules issued by the Stock Exchange from time to time.

Any such alterations will be made on the basis that a grantee shall have the same proportion of the issued share capital of our Company for which any grantee of an option is entitled to subscribe pursuant to options held by him before such alteration and the aggregate subscription price payable on full exercise of any option is to remain as nearly as possible the same (and in any event not greater than) as it was before such event. No such alteration will be made the effect of which would be to enable a Share to be issued at less than its nominal value. The issue of securities as consideration in a transaction is not to be regarded as a circumstance requiring any such alterations.

r. Expiry of option

An option shall lapse automatically and not be exercisable (to the extent not already exercised) on the earliest of:

(i) the date of expiry of the option as may be determined by the Board;
(ii) the expiry of any of the periods referred to in paragraphs k, l, m, n or o;
(iii) the date on which the scheme of arrangement of our Company referred to in paragraph o becomes effective;
(iv) subject to paragraph n, the date of commencement of the winding-up of our Company;
(v) the date on which the grantee ceases to be an Eligible Participant by reason of such grantee’s resignation from the employment of our Company or any of its subsidiaries or the termination of his or her employment or contract on any one or more of the grounds that he or she has been guilty of serious misconduct, or has been convicted of any criminal offence involving his or her integrity or honesty, or in relation to an employee of our Group (if so determined by the Board) or any other ground on which an employee would be entitled to terminate

– IV-21 –

his employment at common law or pursuant to any applicable laws or under the grantee’s service contract with our Group. A resolution of the Board to the effect that the employment of a grantee has or has not been terminated on one or more of the grounds specified in this paragraph shall be conclusive; or

(vi) the date on which the Board shall exercise our Company’s right to cancel the option at any time after the grantee commits a breach of paragraph h above or the options are cancelled in accordance with paragraph below.

s. Alteration of the Share Option Scheme

The Share Option Scheme may be altered in any respect by resolution of the Board except that:

(i) any alteration to the advantage of the grantees or Eligible Participants (as the case may be) in respect of matters contained in Rule 17.03 of the Listing Rules; and
(ii) any material alteration to the terms and conditions of the Share Option Scheme or any change to the terms of options granted, shall first be approved by the Shareholders in general meeting provided that the amended terms of the Share Option Scheme shall still comply with Chapter 17 of the Listing Rules. If the proposed alteration shall adversely affect any option granted or agreed to be granted prior to the date of alteration, such alteration shall be further subject to the grantees’ approval in accordance with the terms of the Share Option Scheme.

t. Cancellation of Options

Subject to paragraph i above, any cancellation of options granted but not exercised must be approved by the grantees of the relevant options in writing.

u. Termination of the Share Option Scheme

Our Company may by resolution in general meeting or the Board at any time terminate the Share Option Scheme and in such event no further option shall be offered but the provisions of the Share Option Scheme shall remain in force to the extent necessary to give effect to the exercise of any option granted prior thereto or otherwise as may be required in accordance with the provisions of the Share Option Scheme. Options granted prior to such termination but not yet exercised at the time of termination shall continue to be valid and exercisable in accordance with the Share Option Scheme.

– IV-22 –

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

v. Administration of the Board

The Share Option Scheme shall be subject to the administration of the Board whose decision as to all matters arising in relation to the Share Option Scheme or its interpretation or effect (save as otherwise provided herein) shall be final and binding on all parties.

w. Condition of the Share Option Scheme

The Share Option Scheme is conditional on:

(i) the Listing Committee of the Stock Exchange granting the [REDACTED] of and permission to deal in the Shares which may fall to be issued pursuant to the exercise of options to be granted under the Share Option Scheme;
(ii) the obligations of the [REDACTED] under the [REDACTED] becoming unconditional (including, if relevant, as result of the waiver of any such condition(s)) and not being terminated in accordance with the terms of the [REDACTED] or otherwise;
(iii) the approval of the rules of the Share Option Scheme by the Shareholders in general meeting; and
(iv) the commencement of dealings in Shares on the Stock Exchange.

x. Disclosure in annual and interim reports

Our Company will disclose details of the Share Option Scheme in its annual and interim reports including the number of options, date of grant, exercise price, exercise period and vesting period during the financial year/period in the annual/interim reports in accordance with the Listing Rules in force from time to time.

y. Present status of the Share Option Scheme

As at the Latest Practicable Date, no option had been granted or agreed to be granted under the Share Option Scheme. Application has been made to the Listing Committee of the Stock Exchange for the [REDACTED] of and permission to deal in Shares which may fall to be issued pursuant to the exercise of the options to be granted under the Share Option Scheme.

E. OTHER INFORMATION

1. Tax and other indemnities

Mr. Man, Ms. Man, Mr. Ho and Hoi Lang (the “ Indemnifiers ”) have entered into the Deed of Indemnity with and in favour of our Company (for itself and as trustee for its

– IV-23 –

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

APPENDIX IV — STATUTORY AND GENERAL INFORMATION

subsidiaries) (being the material contract referred to in paragraph headed “B. Further information about our business – 1. Summary of material contracts” above) to provide indemnities on a joint and several basis, in respect of, among other matters:

a. tax liabilities (including all fines, penalties, costs, charges, expenses and interests incidental or relating to taxation) which might be payable by any member of our Group in respect of any income, profits, gains, transactions, events, matters or things earned, accrued, received, entered into or occurring on or before the [REDACTED] , whether alone or in conjunction with any other circumstances whenever occurring and whether or not such tax liabilities are chargeable against or attributable to any other person, firm, company or corporation;
b. any expenses, payments, sums, outgoings, fees, demands, claims, damages, losses, costs (including but not limited to legal and other professional costs), charges, liabilities, fines, penalties in connection with any failure, delay or defects of corporate or regulatory compliance or errors, discrepancies or missing documents in the statutory records of any member of our Group under, or any breach of any provision of, the Companies Ordinance, the Companies (WUMP) Ordinance or any other applicable laws, rules or regulations on or before the date on which the [REDACTED] becomes unconditional; and
c. any claim to which our Company may be subject in respect of any disputes, arbitrations or legal proceedings occurring on or before the [REDACTED] .

The Indemnifiers are under no liability under the Deed of Indemnity in respect of any taxation:

(a) to the extent that provision or reserve has been made for such taxation in the audited accounts of any member of our Group for any accounting period up to 31 March 2018;
(b) to the extent that such taxation or liability falling on any of the members of our Group in respect of any accounting period commencing on or after 1 April 2018 and ending on the [REDACTED] , where such taxation or liability would not have arisen but for some act or omission of, or transaction voluntarily entered into by, any member of our Group (whether alone or in conjunction with some other act, omission or transaction, whenever occurring) without the prior written consent or agreement of the Indemnifier, other than any such act, omission or transaction:
i. carried out or effected in the ordinary course of business or in the ordinary course of acquiring and disposing of capital assets after 1 April 2018; and
ii. carried out, made or entered into pursuant to a legally binding commitment created on or before 31 March 2018 or pursuant to any statement of intention made in the document; or

– IV-24 –

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(c) to the extent that such taxation liabilities or claim arise or are incurred as a result of the imposition of taxation as a consequence of any retrospective change in the law, rules and regulations or the interpretation or practice thereof by the Hong Kong Inland Revenue Department, or any other relevant authority (whether in Hong Kong or any other part of the world) coming into force after the date of the Deed of Indemnity or to the extent such claim arises or is increased by an increase in rates of taxation or claim after the date of the Deed of Indemnity with retrospective effect; or
(d) to the extent that any provision or reserve made for taxation in the audited accounts of any member of our Group up to 31 March 2018 which is finally established to be an over-provision or an excessive reserve, in which case the Indemnifier’ liability (if any) in respect of taxation shall be reduced by an amount not exceeding such provision or reserve, provided that the amount of any such provision or reserve applied referred to in this paragraph to reduce the Indemnifier’ liability in respect of taxation shall not be available in respect of any such liability arising thereafter.

Under the Deed of Indemnity, the Indemnifier has also undertaken to us that it will indemnify and at all times keeps us fully indemnified, on a joint and several basis, from any depletion in or reduction in value of its assets or any loss (including all legal costs and suspension of operation), cost, expenses, damages or other liabilities which any member of our Group may incur or suffer arising from or in connection with the implementation of the Reorganisation.

2. Litigation

Save as disclosed in the section headed “Business – Legal proceedings and claims” in this document, as at the Latest Practicable Date neither our Company nor any of our subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to our Directors to be pending or threatened against any member of our Company or any of our subsidiaries, that would have a material adverse effect on the results of operations or financial condition of our Group.

3. Sole Sponsor

The Sole Sponsor has, on behalf of our Company, made an application to the Stock Exchange for the [REDACTED] of, and permission to [REDACTED] , our Shares in issue and to be issued as mentioned herein and any Shares which may be issued upon the exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme on the Stock Exchange. All necessary arrangements have been made to enable the securities to be admitted into CCASS.

The Sole Sponsor has confirmed to the Stock Exchange that it satisfies the independence test as stipulated under Rule 3A.07 of the Listing Rules.

– IV-25 –

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

APPENDIX IV — STATUTORY AND GENERAL INFORMATION

The Sole Sponsor will also receive a fee of HK$5,000,000 to act as the sponsor to our Company in connection with the [REDACTED] .

4. Preliminary expenses

The preliminary expenses incurred and paid by our Company were approximately HK$67,000.

5. Promoter

Our Company has no promoter for the purpose of the Listing Rules.

6. Qualifications of experts

The following are the qualifications of the experts who have given opinions and/or whose names are included in this document:

Name Qualifications

Grande Capital Limited A licensed corporation under the SFO to engage in type 1 (dealing in securities) and type 6 (advising on corporate finance) of the regulated activities as defined under the SFO

HLB Hodgson Impey Cheng Certified Public Accountants Limited Conyers Dill & Pearman Cayman Islands attorneys-at-law Mr. Chan Chung Barrister-at-law in Hong Kong Ipsos Limited Industry research consultant HLB Hodgson Impey Cheng Transfer pricing adviser Taxation Services Limited

7. Consents of experts

Each of the parties listed in the paragraph headed “Statutory and general information – E. Other information – 6. Qualifications of experts” in Appendix IV to this document has given and has not withdrawn its written consent to the issue of this document with the inclusion of its reports, letters or opinions (as the case may be) and the references to its names or summaries of opinions included herein in the form and context in which they respectively appear.

– IV-26 –

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

8. Binding effect

This document 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 (WUMP) Ordinance so far as applicable.

9. Taxation of holders of Shares

(a) Hong Kong

Dealings in Shares registered on our Company’s Hong Kong branch register of members will be subject to Hong Kong stamp duty. The sale, purchase and transfer of Shares are subject to Hong Kong stamp duty, the current rate of which is 0.2% of the consideration or, if higher, the value of our Shares being sold or transferred.

Profits from dealings in our 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 transfer of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands.

(c) Consultation with professional advisors

Intending holders of our Shares are recommended to consult their professional advisors if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or disposing of or dealing in our Shares. It is emphasised that none of our Company, our Directors or other parties involved in the [REDACTED] 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 or exercising any rights attaching to them.

10. Miscellaneous

(a) Save as disclosed herein:
(i) within two years preceding the date of this document:
- (aa) no share or loan capital of our Company or of any of our subsidiaries has been issued, agreed to be issued or is proposed to be issued fully or partly paid either for cash or for a consideration other than cash;

– IV-27 –

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

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

  - (bb) no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any share or loan capital of our Company or any of our subsidiaries; and

  - (cc) no commission has been paid or payable for subscribing or agreeing to subscribe, or procuring or agreeing to procure the subscriptions, for any shares in our Company or any of our subsidiaries;

(ii) no share or loan capital of our Company or any of our subsidiaries is under option or is agreed conditionally or unconditionally to be put under option;
(iii) our Company has no outstanding convertible debt securities; and
(iv) neither our Company nor any of its subsidiaries has issued or agreed to issue any founders shares, management shares, deferred shares or any debentures.
(b) Our Directors confirm that save for the expenses in connection with the [REDACTED] , up to the date of this document, there has been no material adverse change in the financial or trading position or prospects of our Group since 31 March 2018 (being the date to which the latest combined financial statements of our Group were made up).
(c) There has not been any interruption in the business of our Group which may have or has had a significant effect on the financial position of our Group in the 12 months preceding the date of this document.

11. Bilingual document

The English language and Chinese language versions of this document 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).

12. Others

The English text of the document shall prevail over the Chinese text.

– IV-28 –

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

APPENDIX V — DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION IN HONG KONG

A. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG

The documents attached to the copy of this document delivered to the Registrar of Companies in Hong Kong for registration were:

(a) copies of each of the [REDACTED] ;
(b) the written consents referred to under the paragraph headed “Statutory and general information – E. Other information – 7. Consents of experts” in Appendix IV to this document; and
(c) copies of each of the material contracts referred to under the paragraph headed “Statutory and general information – B. Further information about our business – 1. Summary of material contracts” in Appendix IV to this document.

B. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Sidley Austin at 39/F, Two Int’l Finance Centre, Central, Hong Kong, during normal business hours up to and including the date which is 14 days from the date of this document:

(a) the Memorandum of Association and the Articles of Association;
(b) the Accountant’s Report from HLB Hodgson Impey Cheng Limited in respect of the historical financial information for the years ended 31 March 2016, 2017 and 2018, the text of which is set forth in Appendix I to this document;
(c) the report on the unaudited pro forma financial information from HLB Hodgson Impey Cheng Limited, the text of which is set forth in Appendix II to this document;
(d) the audited combined financial statements of our Group for each of the three years ended 31 March 2016, 2017 and 2018;
(e) the Hong Kong legal opinion prepared by Mr. Chan Chung, barrister-at-law in Hong Kong, in respect of our Group’s operation in Hong Kong;
(f) a commissioned report prepared by Ipsos Limited;
(g) a transfer pricing memorandum prepared by HLB Hodgson Impey Cheng Taxation Services Limited;
(h) the Companies Law;

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

APPENDIX V — DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION IN HONG KONG

(i) the letter of advice prepared by Conyers Dill & Pearman summarising certain aspects of the Cayman Islands company law referred to in Appendix III to this document;
(j) the material contracts referred to in the paragraph headed “Statutory and general information – B. Further information about our business – 1. Summary of material contracts” in Appendix IV to this document;
(k) the service contracts referred to in the paragraph headed “Statutory and general information – B. Further information about Substantial Shareholders, Directors and experts – 2. Particulars of service contracts” in Appendix IV to this document;
(l) the rules of the Share Option Scheme; and
(m) the written consents referred to in the paragraph headed “Statutory and general information – E. Other information – 7. Consents of experts” in Appendix IV to this document.

– V-2 –

AI assistant

Metaspacex Limited — Capital/Financing Update 2018

50175_rns_2018-06-15_d892275e-b17a-4d17-b95d-d6c34f256f6e.pdf

Application Proof of